HF 107

as introduced - 84th Legislature, 2005 1st Special Session (2005 - 2005) Posted on 12/15/2009 12:00am

A bill for an act
relating to financing and operation of government in
this state; modifying truth in taxation provisions and
adding a taxpayer satisfaction survey; changing
income, corporate franchise, withholding, estate,
property, sales and use, mortgage registry, health
care gross revenues, motor fuels, gambling, cigarette
and tobacco products, occupation, net proceeds,
production, liquor, insurance, and other taxes and
tax-related provisions; making technical, clarifying,
collection, enforcement, refund, and administrative
changes to certain taxes and tax-related provisions,
tax-forfeited lands, revenue recapture, unfair
cigarette sales, state debt collection, sustainable
forest incentive programs, and payments in lieu of
taxes; changing local government aids and credits;
providing for determination of population for certain
purposes; updating references to the Internal Revenue
Code, changing property tax exemptions, homesteads,
assessment, valuation, classification, class rates,
levies, deferral, review and equalization, appeals,
notices and statements, and distribution provisions;
changing rent constituting property taxes and property
tax refunds; requiring state contracts be with vendors
registered to collect use taxes; abolishing the
political contribution refund; authorizing local sales
taxes; extending a sales tax expiration; providing for
compliance with streamlined sales tax agreement;
changing the taxation of liquor and cigarettes;
authorizing income tax checkoffs; requiring
registration of tax shelters and providing for a
voluntary compliance initiative; changing job
opportunity building zones, border city development
zones, biotechnology and health sciences industry zone
provisions; setting minimum employee compensation for
qualifying business in a JOBZ; limiting sales tax
construction exemption in job zones to businesses
paying prevailing wage; requiring a referendum for
certain subsidies to gambling enterprises; authorizing
charges for certain emergency services; imposing a
franchise fee on card clubs; defining the term "tax";
regulating tax preparers; suspending appropriations or
aids to public employers who prohibit certain
employees from wearing a flag on a uniform; providing
for training and conduct of assessors; prohibiting
purchases of tax-forfeited lands by certain local
officials; providing for data classification and
exchange of data; establishing a tax reform
commission; providing and imposing powers and duties
on the commissioner of revenue and other state
agencies and departments and on certain political
subdivisions and certain officials; changing and
imposing penalties; requiring reports; transferring
funds; appropriating money; amending Minnesota
Statutes 2004, sections 4A.02; 16C.03, by adding a
subdivision; 16D.10; 168A.05, subdivision 1a; 190.09,
subdivision 2; 240.30, by adding a subdivision;
270.02, subdivision 3; 270.11, subdivision 2; 270.16,
subdivision 2; 270.30, subdivisions 1, 5, 6, 8, by
adding subdivisions; 270.65; 270.67, subdivision 4;
270.69, subdivision 4; 270A.03, subdivisions 5, 7;
272.01, subdivision 2; 272.02, subdivisions 1a, 7, 47,
53, 64, by adding subdivisions; 272.0211, subdivisions
1, 2; 272.0212, subdivisions 1, 2; 272.029,
subdivisions 4, 6; 273.055; 273.0755; 273.11,
subdivisions 1a, 8, by adding subdivisions; 273.111,
by adding a subdivision; 273.123, subdivision 7;
273.124, subdivisions 3, 6, 8, 14, 21; 273.125,
subdivision 8; 273.13, subdivisions 22, 23, 25, by
adding a subdivision; 273.1315; 273.1384, subdivision
1; 273.19, subdivision 1a; 273.372; 274.01,
subdivision 1; 274.014, subdivisions 2, 3; 274.14;
275.025, subdivision 4; 275.065, subdivisions 1c, 3,
4, 7, by adding subdivisions; 275.07, subdivisions 1,
4; 276.04, subdivision 2; 276.112; 276A.01,
subdivision 7; 282.016; 282.08; 282.15; 282.21;
282.224; 282.301; 287.04; 289A.02, subdivision 7;
289A.08, subdivisions 1, 3, 7, 13, 16; 289A.18,
subdivision 1; 289A.19, subdivision 4; 289A.20,
subdivision 2; 289A.31, subdivision 2; 289A.37,
subdivision 5; 289A.38, subdivisions 6, 7, by adding
subdivisions; 289A.40, subdivision 2, by adding
subdivisions; 289A.50, subdivisions 1, 1a; 289A.56, by
adding a subdivision; 289A.60, subdivisions 2a, 4, 6,
7, 11, 13, 20, by adding subdivisions; 290.01,
subdivisions 6, 7, 7b, 19, as amended, 19a, 19b, 19c,
19d, 31; 290.032, subdivisions 1, 2; 290.06,
subdivisions 2c, 22, by adding a subdivision; 290.067,
subdivisions 1, 2a; 290.0671, subdivisions 1, 1a;
290.0672, subdivisions 1, 2; 290.0674, subdivisions 1,
2; 290.0675, subdivision 1; 290.091, subdivisions 2,
3; 290.0922, subdivision 2; 290.191, subdivisions 2,
3; 290.92, subdivisions 1, 4b; 290A.03, subdivisions
3, 11, 13, 15, by adding subdivisions; 290A.07, by
adding a subdivision; 290A.19; 290B.05, subdivision 3;
290C.05; 290C.10; 291.005, subdivision 1; 291.03,
subdivision 1; 295.52, subdivision 4; 295.53,
subdivision 1; 295.582; 295.60, subdivision 3;
296A.22, by adding a subdivision; 297A.61,
subdivisions 3, 4, by adding a subdivision; 297A.64,
subdivision 4; 297A.668, subdivisions 1, 5; 297A.67,
subdivisions 2, 7, 9, 29, by adding a subdivision;
297A.68, subdivisions 2, 5, 28, 35, 37, 38, 39, by
adding subdivisions; 297A.70, subdivision 10; 297A.71,
subdivision 12, by adding a subdivision; 297A.72, by
adding a subdivision; 297A.75, subdivision 1; 297A.87,
subdivisions 2, 3; 297A.99, subdivisions 1, 3, 4, 9,
by adding subdivisions; 297E.01, subdivisions 5, 7, by
adding subdivisions; 297E.06, subdivision 2; 297E.07;
297F.08, subdivision 12, by adding a subdivision;
297F.09, subdivisions 1, 2; 297F.14, subdivision 4;
297G.09, by adding a subdivision; 297I.01, by adding
subdivisions; 297I.05, subdivisions 4, 5, by adding a
subdivision; 298.01, subdivisions 3, 4; 298.24,
subdivision 1; 298.75, by adding a subdivision;
325D.33, subdivision 6; 365.43, subdivision 1;
365.431; 366.011; 366.012; 373.45, subdivision 7;
469.169, by adding a subdivision; 469.1735,
subdivision 3; 469.176, subdivisions 4l, 7; 469.310,
subdivision 11, by adding a subdivision; 469.315;
469.316; 469.317; 469.319, subdivision 1, by adding a
subdivision; 469.320, subdivision 3; 469.330,
subdivision 11; 469.335; 469.337; 469.340, subdivision
1; 473.843, subdivision 5; 473F.02, subdivisions 2, 7;
477A.011, subdivisions 3, 34, 35, 36, 38; 477A.0124,
subdivisions 2, 4; 477A.013, subdivisions 8, 9, by
adding a subdivision; 477A.016; 477A.03, subdivisions
2a, 2b; 477A.11, subdivision 4, by adding a
subdivision; 477A.12, subdivisions 1, 2; 477A.14,
subdivision 1; 645.44, by adding a subdivision; Laws
1998, chapter 389, article 3, section 42, subdivision
2, as amended; Laws 1998, chapter 389, article 8,
section 43, subdivision 3; Laws 2001, First Special
Session chapter 5, article 3, section 8; Laws 2001,
First Special Session chapter 5, article 12, section
95, as amended; Laws 2002, chapter 377, article 3,
section 4; Laws 2003, chapter 127, article 5, section
27; Laws 2003, chapter 127, article 5, section 28;
Laws 2003, First Special Session chapter 21, article
5, section 13; Laws 2003, First Special Session
chapter 21, article 6, section 9; Laws 2005, chapter
43, section 1; proposing coding for new law in
Minnesota Statutes, chapters 15; 270; 272; 273; 275;
280; 289A; 290; 290C; 295; 297A; 297F; 373; 459; 473;
repealing Minnesota Statutes 2004, sections 10A.322,
subdivision 4; 16A.1522, subdivision 4; 270.85;
270.88; 272.02, subdivision 65; 273.19, subdivision 5;
273.37, subdivision 3; 274.05; 275.065, subdivisions
5a, 6, 6b, 8; 275.15; 275.61, subdivision 2; 283.07;
290.06, subdivision 23; 297E.12, subdivision 10;
469.1794, subdivision 6; 477A.08; Laws 1975, chapter
287, section 5; Laws 1998, chapter 389, article 3,
section 41; Laws 2003, chapter 127, article 9, section
9, subdivision 4; Minnesota Rules, parts 8093.2000;
8093.3000; 8130.0110, subpart 4; 8130.0200, subparts
5, 6; 8130.0400, subpart 9; 8130.1200, subparts 5, 6;
8130.2900; 8130.3100, subpart 1; 8130.4000, subparts
1, 2; 8130.4200, subpart 1; 8130.4400, subpart 3;
8130.5200; 8130.5600, subpart 3; 8130.5800, subpart 5;
8130.7300, subpart 5; 8130.8800, subpart 4.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

TAXPAYER SATISFACTION SURVEY

Section 1.

new text begin [275.063] PROPOSED PROPERTY TAXES; TAXPAYER
SATISFACTION SURVEY; DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For the purposes of this
section and section 275.065, the following definitions apply.
new text end

new text begin Subd. 2. new text end

new text begin Budget; counties. new text end

new text begin For counties, "budget" means
total government fund expenditures, as defined by the state
auditor under section 375.169, less any expenditures for direct
payments to recipients or providers for the human service aids
listed below:
new text end

new text begin (1) Minnesota family investment program under chapters 256J
and 256K;
new text end

new text begin (2) medical assistance under sections 256B.041, subdivision
5, and 256B.19, subdivision 1;
new text end

new text begin (3) general assistance medical care under section 256D.03,
subdivision 6;
new text end

new text begin (4) general assistance under section 256D.03, subdivision
2;
new text end

new text begin (5) Minnesota supplemental aid under section 256D.36,
subdivision 1;
new text end

new text begin (6) preadmission screening under section 256B.0911, and
alternative care grants under section 256B.0913;
new text end

new text begin (7) general assistance medical care claims processing,
medical transportation, and related costs under section 256D.03,
subdivision 4;
new text end

new text begin (8) medical transportation and related costs under section
256B.0625, subdivisions 17 to 18a;
new text end

new text begin (9) group residential housing under section 256I.05,
subdivision 8, transferred from programs in clauses (4) and (5);
or
new text end

new text begin (10) any successor programs to those listed in clauses (1)
to (9).
new text end

new text begin Subd. 3. new text end

new text begin Budget; cities. new text end

new text begin For cities, "budget" means
total government fund expenditures, as defined by the state
auditor under section 471.6965, less any expenditures for
improvements or services that are specially assessed or charged
under chapter 429, 430, 435, or the provisions of any other law
or charter.
new text end

new text begin Subd. 4. new text end

new text begin Population. new text end

new text begin "Population" of a city means the
most recent population as determined by the state demographer
under section 4A.02 or by the Metropolitan Council under section
477A.011, subdivision 3.
new text end

new text begin Subd. 5. new text end

new text begin Property tax levy subject to approval; counties
and cities. new text end

new text begin For a county or a city, "property tax levy subject
to approval" means the jurisdiction's levy excluding any debt
levy and any levy previously approved by the voters.
new text end

new text begin Subd. 6. new text end

new text begin Debt levy. new text end

new text begin "Debt levy" means a levy to:
new text end

new text begin (1) pay the costs of principal and interest on bonded
indebtedness;
new text end

new text begin (2) pay the costs of principal and interest on certificates
of indebtedness issued for any corporate purpose except:
new text end

new text begin (i) tax anticipation or aid anticipation certificates of
indebtedness;
new text end

new text begin (ii) certificates of indebtedness issued under sections
298.28 and 298.282;
new text end

new text begin (iii) certificates of indebtedness used to fund current
expenses; or
new text end

new text begin (iv) certificates of indebtedness used to fund an
insufficiency in tax receipts or an insufficiency in other
revenue sources.
new text end

new text begin (3) pay another city, town, county, or school district for
principal and interest on general obligation debt; or
new text end

new text begin (4) fund payments made to the Minnesota State Armory
Building Commission under section 193.145, subdivision 2, to
retire the principal and interest on armory construction bonds.
new text end

new text begin Subd. 7. new text end

new text begin State property tax credits. new text end

new text begin "State property tax
credits" means any credits received under sections 273.119;
273.123; 273.135; 273.1384; 273.1391; 273.1398, subdivision 4;
469.171; and 473H.10.
new text end

new text begin Subd. 8. new text end

new text begin Jurisdiction subject to taxpayer satisfaction
survey. new text end

new text begin A "jurisdiction subject to the taxpayer satisfaction
survey" means any county or any city with a population of 500 or
greater.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 2.

Minnesota Statutes 2004, section 275.065,
subdivision 1c, is amended to read:

Subd. 1c.

Levy; shared, merged, consolidated services.

If two or more taxing authorities are in the process of
negotiating an agreement for sharing, merging, or consolidating
services between those taxing authorities at the time the
proposed levy is to be certified under subdivision 1, each
taxing authority involved in the negotiation shall certify its
total proposed levy as provided in that subdivision, including a
notification to the county auditor of the specific service
involved in the agreement which is not yet finalized. The
affected taxing authorities may amend their proposed levies
under subdivision 1 until October deleted text begin 10 deleted text end new text begin 1 new text end for levy amounts relating
only to the specific service involved.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 3.

Minnesota Statutes 2004, section 275.065,
subdivision 3, is amended to read:

Subd. 3.

Notice of proposed property taxes.

(a) The
county auditor shall prepare and the county treasurer shall
deliver after November deleted text begin 10 deleted text end new text begin 8 new text end and on or before November deleted text begin 24 deleted text end new text begin 19 new text end each
year, by first class mail to each taxpayer at the address listed
on the county's current year's assessment roll, a notice of
proposed property taxes.

(b) The commissioner of revenue shall prescribe the form of
the notice. new text begin The form must be in the form prescribed by the
commissioner.
new text end

(c) The notice must inform taxpayers that it contains the
amount of property taxes each taxing authority proposes to
collect for taxes payable the following year. In the case of a
town, or in the case of the state general tax, the final tax
amount will be its proposed tax new text begin unless the town changes its levy
at a special town meeting under section 365.52 new text end . deleted text begin In the case of
taxing authorities required to hold a public meeting under
subdivision 6, the notice must clearly state that each taxing
authority, including regional library districts established
under section 134.201, and including the metropolitan taxing
districts as defined in paragraph (i), but excluding all other
special taxing districts and towns, will hold a public meeting
to receive public testimony on the proposed budget and proposed
or final property tax levy, or, in case of a school district, on
the current budget and proposed property tax levy. It must
clearly state the time and place of each taxing authority's
meeting, a telephone number for the taxing authority that
taxpayers may call if they have questions related to the notice,
and an address where comments will be received by mail.
deleted text end

(d) The notice must state for each parcel deleted text begin :
deleted text end

deleted text begin (1) deleted text end the market value of the property as determined under
section 273.11, and used for computing property taxes payable in
the following year and for taxes payable in the current year as
each appears in the records of the county assessor on November 1
of the current year; and, in the case of residential property,
whether the property is classified as homestead or
nonhomestead. The notice must clearly inform taxpayers of the
years to which the market values apply and that the values are
final values deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (2) deleted text end new text begin (e) new text end The deleted text begin items listed below, shown separately by deleted text end new text begin notice
must state for each parcel, for both taxes payable in the
current year and the proposed taxes payable in the following
year each of the following tax amounts, net of state property
tax credits: new text end county new text begin tax new text end , city or town new text begin tax new text end , deleted text begin and deleted text end state deleted text begin general
deleted text end tax, deleted text begin net of the residential and agricultural homestead credit
under section 273.1384, deleted text end voter approved school deleted text begin levy deleted text end new text begin tax new text end ,
other deleted text begin local deleted text end school deleted text begin levy deleted text end new text begin tax new text end , deleted text begin and deleted text end the sum of the new text begin tax amounts
for all new text end special taxing districts, new text begin the sum of the tax increment
tax on captured tax capacity, if applicable, and the fiscal
disparities areawide tax under chapter 276A or 473F, if
applicable, new text end and deleted text begin as a deleted text end new text begin the new text end total deleted text begin of deleted text end new text begin tax amount for new text end all taxing
authorities deleted text begin :
deleted text end

deleted text begin (i) the actual tax for taxes payable in the current year;
and
deleted text end

deleted text begin (ii) the proposed tax amount deleted text end .

deleted text begin If the county levy under clause (2) includes an amount for
a lake improvement district as defined under sections 103B.501
to 103B.581, the amount attributable for that purpose must be
separately stated from the remaining county levy amount.
deleted text end

deleted text begin In the case of a town or the state general tax, the final
tax shall also be its proposed tax unless the town changes its
levy at a special town meeting under section 365.52. If a
school district has certified under section 126C.17, subdivision
9, that a referendum will be held in the school district at the
November general election, the county auditor must note next to
the school district's proposed amount that a referendum is
pending and that, if approved by the voters, the tax amount may
be higher than shown on the notice. In the case of the city of
Minneapolis, the levy for the Minneapolis Library Board and the
levy for Minneapolis Park and Recreation shall be listed
separately from the remaining amount of the city's levy. In the
case of the city of St. Paul, the levy for the St. Paul Library
Agency must be listed separately from the remaining amount of
the city's levy. In the case of a parcel where tax increment or
the fiscal disparities areawide tax under chapter 276A or 473F
applies, the proposed tax levy on the captured value or the
proposed tax levy on the tax capacity subject to the areawide
tax must each be stated separately and not included in the sum
of the special taxing districts; and
deleted text end

deleted text begin (3) the increase or decrease between the total taxes
payable in the current year and the total proposed taxes,
expressed as a percentage.
deleted text end

new text begin (f) The notice must state for each parcel the increase or
decrease between the total taxes payable in the current year and
the total proposed taxes, expressed as a percentage.
new text end

new text begin (g) The notice must state for each parcel an estimate of
any additional tax that would apply to the property under any
referenda pending at the November general election. Any amount
shown under this item should be indicated as pending the results
of referendum elections, and shall not be reflected in the total
proposed net tax amount.
new text end

new text begin (h) new text end For purposes of this section, the amount of the tax on
homesteads qualifying under the senior citizens' property tax
deferral program under chapter 290B is the total amount of
property tax before subtraction of the deferred property tax
amount.

deleted text begin (e) deleted text end new text begin (i) new text end The notice must clearly state that the proposed or
final taxes do not include the following:

(1) special assessments;

(2) levies approved by the voters after the date new text begin of new text end the
deleted text begin proposed taxes are certified, including bond referenda and
school district levy referenda deleted text end new text begin November general election new text end ;

(3) deleted text begin a levy limit increase approved by the voters by the
first Tuesday after the first Monday in November of the levy
year as provided under section 275.73;
deleted text end

deleted text begin (4) deleted text end amounts necessary to pay cleanup or other costs due to
a natural disaster occurring after the date the proposed taxes
are certified;

deleted text begin (5) deleted text end new text begin (4) new text end amounts necessary to pay tort judgments against the
taxing authority that become final after the date the proposed
taxes are certified; and

deleted text begin (6) deleted text end new text begin (5) new text end the contamination tax imposed on properties which
received market value reductions for contamination.

deleted text begin (f) deleted text end new text begin (j) new text end Except as provided in subdivision 7, failure of the
county auditor to prepare or the county treasurer to deliver the
notice as required in this section does not invalidate the
proposed or final tax levy or the taxes payable pursuant to the
tax levy.

deleted text begin (g) If the notice the taxpayer receives under this section
lists the property as nonhomestead, and satisfactory
documentation is provided to the county assessor by the
applicable deadline, and the property qualifies for the
homestead classification in that assessment year, the assessor
shall reclassify the property to homestead for taxes payable in
the following year.
deleted text end

deleted text begin (h) deleted text end new text begin (k) new text end In the case of class 4 residential property used as
a residence for lease or rental periods of 30 days or more, the
taxpayer must deleted text begin either: (1) deleted text end mail or deliver a copy of the notice
of proposed property taxes new text begin and the taxpayer satisfaction survey
new text end to each tenant, renter, or lessee deleted text begin ; or deleted text end new text begin .
new text end

deleted text begin (2) post a copy of the notice in a conspicuous place on the
premises of the property.
deleted text end

The new text begin copy of the new text end notice must be mailed deleted text begin or posted deleted text end by the
taxpayer by November deleted text begin 27 deleted text end new text begin 22 new text end or within three days of receipt of
the notice, whichever is later. A taxpayer may notify the
county treasurer of the address of the taxpayer, agent,
caretaker, or manager of the premises to which the notice must
be mailed in order to fulfill the requirements of this paragraph.

deleted text begin (i) deleted text end new text begin (l) new text end For purposes of deleted text begin this subdivision, subdivisions 5a
and 6 deleted text end new text begin section 276.04 new text end , "metropolitan special taxing districts"
means the following taxing districts in the seven-county
metropolitan area that levy a property tax for any of the
specified purposes listed below:

(1) Metropolitan Council under section 473.132, 473.167,
473.249, 473.325, 473.446, 473.521, 473.547, or 473.834;

(2) Metropolitan Airports Commission under section 473.667,
473.671, or 473.672; and

(3) Metropolitan Mosquito Control Commission under section
473.711.

new text begin (m) new text end For purposes of this section, any levies made by the
regional rail authorities in the county of Anoka, Carver,
Dakota, Hennepin, Ramsey, Scott, or Washington under chapter
398A shall be included with the appropriate county's levy and
shall be discussed at new text begin one of new text end that county's deleted text begin public
hearing deleted text end new text begin regularly scheduled board meetings new text end .

new text begin (n) The governing body of a county, city, or school
district may, with the county auditor's consent, include
supplemental information with the statement of proposed property
taxes about the impact of state aid increases or decreases on
property tax increases or decreases and on the level of services
provided in the affected jurisdiction. This supplemental
information may include information for the following year, the
current year, and for as many consecutive preceding years as
deemed appropriate by the governing body of the county, city, or
school district. It may include only information regarding:
new text end

new text begin (1) the impact of inflation as measured by the implicit
price deflator for state and local government purchases;
new text end

new text begin (2) population growth and decline;
new text end

new text begin (3) state or federal government action; and
new text end

new text begin (4) other financial factors that affect the level of
property taxation and local services that the governing body of
the county, city, or school district may deem appropriate to
include.
new text end

new text begin The information may be presented using tables, written
narrative, and graphic representations and may contain
instruction toward further sources of information or opportunity
for comment.
new text end

new text begin The supplemental information for each jurisdiction must not
exceed one side of an 8.5 inch by 11 inch sheet of paper.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 4.

Minnesota Statutes 2004, section 275.065, is
amended by adding a subdivision to read:

new text begin Subd. 3b. new text end

new text begin Taxpayer satisfaction survey. new text end

new text begin (a) A taxpayer
satisfaction survey form must be attached to or enclosed with
each proposed property tax notice under subdivision 3. The form
must include a property description or a code number that allows
the property to be uniquely identified.
new text end

new text begin (b) The taxpayer satisfaction survey form shall present the
following question for each jurisdiction subject to the taxpayer
satisfaction survey: "Are you satisfied with the proposed
property tax levy for (name of jurisdiction)?" A space will be
provided for the respondent to answer "Yes" or "No" for each
jurisdiction. The form must also inform the taxpayer that if
the number of responses marked "No" exceeds the criteria
specified in subdivision 3e, a referendum will be held on the
question of the increase in the property tax levy subject to
approval unless a recertification is made under subdivision 9
reducing the levy.
new text end

new text begin (c) The mailing shall include a non-postage-paid envelope
preaddressed to the agency designated to process survey
results. A taxpayer, including a tenant, renter, or lessee who
is entitled to receive a copy of the notice and survey form
under subdivision 3, paragraph (k), may respond to the survey by
returning the completed survey form to the designated agency by
December 1. The responding taxpayer is responsible for the
postage.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

Minnesota Statutes 2004, section 275.065, is
amended by adding a subdivision to read:

new text begin Subd. 3c. new text end

new text begin Taxpayer satisfaction survey additional
information. new text end

new text begin The taxpayer satisfaction survey form must include
the following information for the current year and for the
proposed year, and show the percentage change between the years:
new text end

new text begin (1) the county government's (i) budget and (ii) property
tax levy subject to approval; and
new text end

new text begin (2) if the property is located in a city which is a
jurisdiction subject to the taxpayer satisfaction survey, the
city government's (i) budget and (ii) property tax levy subject
to approval.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 6.

Minnesota Statutes 2004, section 275.065, is
amended by adding a subdivision to read:

new text begin Subd. 3d. new text end

new text begin Format of taxpayer satisfaction survey. new text end

new text begin The
commissioner of revenue shall prescribe the format of the survey
form required under subdivisions 3b to 3f and present the form
to the chairs of the house and senate tax committees for
review. The form must be in the format prescribed by the
commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 7.

Minnesota Statutes 2004, section 275.065, is
amended by adding a subdivision to read:

new text begin Subd. 3e. new text end

new text begin Results of taxpayer satisfaction survey. new text end

new text begin (a)
Each agency designated to receive taxpayer satisfaction surveys
shall verify the authenticity of each form received, to the
extent possible, and tabulate the results of the survey for each
taxing jurisdiction. If the number of survey responses
indicating dissatisfaction with the jurisdiction's proposed levy
exceeds 20 percent of the total number of proposed tax notices
distributed in the jurisdiction, and the proposed property tax
levy subject to approval exceeds the property tax levy subject
to approval for taxes payable in the current year, a referendum
must be held on the last Tuesday in January. By December 8, the
agency must announce the results of the survey for each taxing
jurisdiction, including both the number of responses indicating
that they are satisfied with the proposed levy and the number
indicating that they are not satisfied.
new text end

new text begin (b) If the county auditor determines that a single person
or entity owns more than ten percent of the parcels of property
within a jurisdiction subject to taxpayer satisfaction survey,
then the number of responses indicating dissatisfaction with the
proposed levy must exceed the percentage owed by the single
person or entity plus 20 percent of the total number of proposed
tax notices distributed in the jurisdiction in order to initiate
the referendum process described in paragraph (a).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years, except that the
requirement of an automatic referendum election is effective
beginning with taxes payable in 2007 and subsequent years.
new text end

Sec. 8.

Minnesota Statutes 2004, section 275.065, is
amended by adding a subdivision to read:

new text begin Subd. 3f. new text end

new text begin Designated agency. new text end

new text begin For taxpayer satisfaction
surveys pertaining to taxes payable in 2006, the designated
agency is the county. For taxing jurisdictions located in more
than one county, each county shall tabulate the results of the
survey for the portion of the jurisdiction in the county, and
forward the results to the jurisdiction's home county by
December 7. The home county shall make available the survey
results for the total jurisdiction.
new text end

new text begin By January 1, 2006, and each year thereafter, the
commissioner of revenue shall designate the agency or agencies
to receive and process taxpayer satisfaction surveys for taxes
payable in the following year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 9.

Minnesota Statutes 2004, section 275.065,
subdivision 4, is amended to read:

Subd. 4.

Costs.

deleted text begin If the reasonable cost of deleted text end The county new text begin may
apportion the cost of the county new text end auditor's services and the cost
of preparing and mailing the notice new text begin and survey new text end required in this
section deleted text begin exceed the amount distributed to the county by the
commissioner of revenue to administer this section, the taxing
authority must reimburse the county for the excess cost. The
excess cost must be apportioned deleted text end between taxing jurisdictions as
follows:

(1) one-third is allocated to the county;

(2) one-third is allocated to cities and towns within the
county; and

(3) one-third is allocated to school districts within the
county.

The amounts in clause (2) must be further apportioned among
the cities and towns in the proportion that the number of
parcels in the city and town bears to the number of parcels in
all the cities and towns within the county. The amount in
clause (3) must be further apportioned among the school
districts in the proportion that the number of parcels in the
school district bears to the number of parcels in all school
districts within the county.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 10.

Minnesota Statutes 2004, section 275.065,
subdivision 7, is amended to read:

Subd. 7.

Certification of compliance.

At the time the
taxing authority certifies its tax levy under section 275.07, it
shall certify to the commissioner of revenue its compliance with
this section. The certification must contain the information
required by the commissioner of revenue to determine compliance
with this section. If the commissioner determines that the
taxing authority has failed to substantially comply with the
requirements of this section, the commissioner of revenue shall
notify the county auditor. The decision of the commissioner is
final. When fixing rates under section 275.08 for a taxing
authority that has not complied with this section, the county
auditor must use the taxing authority's previous year's levy,
plus any additional amounts necessary to deleted text begin pay principal and
interest on general obligation bonds of the taxing authority for
which its taxing powers have been pledged if the bonds were
issued before 1989 deleted text end new text begin fund an increase in the authority's debt levy
for taxes payable in the following year new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 11.

Minnesota Statutes 2004, section 275.065, is
amended by adding a subdivision to read:

new text begin Subd. 9. new text end

new text begin Recertification of proposed levy. new text end

new text begin By December
15, a jurisdiction subject to taxpayer satisfaction survey, that
has been notified under subdivision 3e that the criteria for a
referendum have been met, may elect to recertify its proposed
levy so that the proposed property tax levy subject to approval
is equal to the property tax levy subject to approval for taxes
payable in the current year. If the jurisdiction recertifies
its proposed levy to the county auditor according to the
provisions of this subdivision, the auditor must cancel the
referendum for that jurisdiction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2007 and subsequent years.
new text end

Sec. 12.

Minnesota Statutes 2004, section 275.065, is
amended by adding a subdivision to read:

new text begin Subd. 10. new text end

new text begin Levy approval; referendum. new text end

new text begin (a) If the
designated agency has determined under subdivision 3e that a
referendum is required, the increase in the property tax levy
subject to approval shall not be effective until it has been
submitted to the voters at a special election to be held on the
last Tuesday in January, and a majority of votes cast on the
question of approving the levy increase are in the affirmative.
The commissioner of revenue shall prepare the form of the
question to be presented at the referendum, which must reference
only the amount of increase in the property tax levy subject to
approval.
new text end

new text begin (b) If the majority of the votes cast on the question are
in the affirmative, the proposed levy shall be certified as the
final levy. If the majority of the votes cast on the question
are in the negative, the levy shall be the property tax levy
amount subject to approval for the previous year, plus the
portion of the proposed levy that was not subject to referendum.
new text end

new text begin (c) A levy approved under this subdivision must be levied
against the net tax capacity of the jurisdiction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2007 and subsequent years.
new text end

Sec. 13.

Minnesota Statutes 2004, section 275.07,
subdivision 1, is amended to read:

Subdivision 1.

Certification of levy.

(a) Except as
provided under paragraph (b), the taxes voted by cities,
counties, school districts, and special districts shall be
certified by the proper authorities to the county auditor on or
before deleted text begin five working days after deleted text end December deleted text begin 20 deleted text end new text begin 28 new text end in each year. new text begin A
jurisdiction whose levy is subject to a referendum under section
275.065, subdivision 10, shall at that time certify two levy
amounts, one if the referendum is successful, and another if the
referendum is not successful. A jurisdiction whose levy is
subject to a referendum must recertify its final levy the day
immediately following the election. new text end A town must certify the
levy adopted by the town board to the county auditor by
September 15 each year. If the town board modifies the levy at
a special town meeting after September 15, the town board must
recertify its levy to the county auditor on or before deleted text begin five
working days after deleted text end December deleted text begin 20 deleted text end new text begin 28 new text end . The taxes certified shall be
reduced by the county auditor by the aid received under section
273.1398, subdivision 3. If a city, town, county, school
district, or special district fails to certify its levy by that
date, its levy shall be the amount levied by it for the
preceding year.

(b)(i) The taxes voted by counties under sections 103B.241,
103B.245, and 103B.251 shall be separately certified by the
county to the county auditor on or before deleted text begin five working days
after deleted text end December deleted text begin 20 deleted text end new text begin 28 new text end in each year. The taxes certified shall
not be reduced by the county auditor by the aid received under
section 273.1398, subdivision 3. If a county fails to certify
its levy by that date, its levy shall be the amount levied by it
for the preceding year.

(ii) For purposes of the proposed property tax notice under
section 275.065 and the property tax statement under section
276.04, for the first year in which the county implements the
provisions of this paragraph, the county auditor shall reduce
the county's levy for the preceding year to reflect any amount
levied for water management purposes under clause (i) included
in the county's levy.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2007 and subsequent years.
new text end

Sec. 14. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2004, section 275.065, subdivisions 5a,
6, 6b, and 8, are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

ARTICLE 2

PROPERTY TAXES

Section 1.

Minnesota Statutes 2004, section 272.02,
subdivision 47, is amended to read:

Subd. 47.

Poultry litter biomass generation facility;
personal property.

Notwithstanding subdivision 9, clause (a),
attached machinery and other personal property which is part of
an electrical generating facility that meets the requirements of
this subdivision is exempt. At the time of construction, the
facility must:

(1) be designed to utilize poultry litter as a primary fuel
source; and

(2) be constructed for the purpose of generating power at
the facility that will be sold pursuant to a contract approved
by the Public Utilities Commission in accordance with the
biomass mandate imposed under section 216B.2424.

Construction of the facility must be commenced after
January 1, 2003, and before December 31, deleted text begin 2003 deleted text end new text begin 2005 new text end . Property
eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and
interconnections appurtenant to the property or the facility.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
levied in 2005, payable in 2006, and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2004, section 272.02,
subdivision 53, is amended to read:

Subd. 53.

Electric generation facility; personal
property.

Notwithstanding subdivision 9, clause (a), attached
machinery and other personal property which is part of a 3.2
megawatt run-of-the-river hydroelectric generation facility and
that meets the requirements of this subdivision is exempt. At
the time of construction, the facility must:

(1) utilize two turbine generators at a dam site existing
on March 31, 1994;

(2) be located on deleted text begin publicly owned deleted text end land deleted text begin and deleted text end within 1,500 feet
of a 13.8 kilovolt distribution substation; and

(3) be eligible to receive a renewable energy production
incentive payment under section 216C.41.

Construction of the facility must be commenced after
deleted text begin January 1, 2002 deleted text end new text begin December 31, 2004 new text end , and before January 1, deleted text begin 2005
deleted text end new text begin 2007 new text end . Property eligible for this exemption does not include
electric transmission lines and interconnections or gas
pipelines and interconnections appurtenant to the property or
the facility.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
levied in 2005, payable in 2006 and thereafter.
new text end

Sec. 3.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 68. new text end

new text begin Electric generation facility personal
property. new text end

new text begin (a) Notwithstanding subdivision 9, clause (a), and
section 453.54, subdivision 20, attached machinery and other
personal property which is part of an electric generation
facility that exceeds 150 megawatts of installed capacity and
meets the requirements of this subdivision is exempt. At the
time of construction, the facility must:
new text end

new text begin (1) be designed to utilize natural gas as a primary fuel;
new text end

new text begin (2) be owned and operated by a municipal power agency as
defined in section 453.52, subdivision 8;
new text end

new text begin (3) have received the certificate of need under section
216B.243;
new text end

new text begin (4) be located outside the metropolitan area as defined
under section 473.121, subdivision 2; and
new text end

new text begin (5) be designed to be a combined-cycle facility, although
initially the facility will be operated as a simple-cycle
combustion turbine.
new text end

new text begin (b) To qualify under this subdivision, an agreement must be
negotiated between the municipal power agency and the host city,
for a payment in lieu of property taxes to the host city.
new text end

new text begin (c) Construction of the facility must be commenced after
January 1, 2004, and before January 1, 2006. Property eligible
for this exemption does not include electric transmission lines
and interconnections or gas pipelines and interconnections
appurtenant to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2005, taxes payable in 2006, and thereafter.
new text end

Sec. 4.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 69. new text end

new text begin Electric generation facility; personal
property. new text end

new text begin (a) Notwithstanding subdivision 9, clause (a),
attached machinery and other personal property which is part of
a simple-cycle combustion-turbine electric generation facility
that exceeds 290 megawatts of installed capacity and that meets
the requirements of this subdivision is exempt. At the time of
construction, the facility must:
new text end

new text begin (1) be designed to utilize natural gas as a primary fuel;
new text end

new text begin (2) not be owned by a public utility as defined in section
216B.02, subdivision 4;
new text end

new text begin (3) be located within 15 miles of the mainline existing
interstate natural gas pipeline and within five miles of an
existing electrical transmission substation;
new text end

new text begin (4) be located outside the metropolitan area as defined
under section 473.121, subdivision 2; and
new text end

new text begin (5) be designed to provide peaking capacity energy and
ancillary services and have satisfied all of the requirements
under section 216B.243.
new text end

new text begin (b) Construction of the facility must be commenced after
January 1, 2005, and before January 1, 2009. Property eligible
for this exemption does not include electric transmission lines
and interconnections or gas pipelines and interconnections
appurtenant to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2006, taxes payable in 2007, and thereafter.
new text end

Sec. 5.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 70. new text end

new text begin Electric generation facility; personal
property. new text end

new text begin Notwithstanding subdivision 9, clause (a), attached
machinery and other personal property which is part of an
existing simple-cycle, combustion-turbine electric generation
facility that exceeds 300 megawatts of installed capacity and
that meets the requirements of this subdivision is exempt. At
the time of the construction, the facility must:
new text end

new text begin (1) be designed to utilize natural gas as a primary fuel;
new text end

new text begin (2) be owned by a public utility as defined in section
216B.02, subdivision 4, and be located at or interconnected with
an existing generating plant of the utility;
new text end

new text begin (3) be designed to provide peaking, emergency backup, or
contingency services;
new text end

new text begin (4) satisfy a resource need identified in an approved
integrated resource plan filed under section 216B.2422; and
new text end

new text begin (5) have received, by resolution, the approval from the
governing body of the county and the city for the exemption of
personal property under this subdivision.
new text end

new text begin Construction of the facility expansion must be commenced
after January 1, 2004, and before January 1, 2005. Property
eligible for this exemption does not include electric
transmission lines and interconnections or gas pipelines and
interconnections appurtenant to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with
assessment year 2005, for taxes payable in 2006 and thereafter.
new text end

Sec. 6.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 71. new text end

new text begin Electric generation facility; personal
property. new text end

new text begin (a) Notwithstanding subdivision 9, clause (a),
attached machinery and other personal property which is part of
a simple-cycle combustion-turbine electric generation facility
that exceeds 150 megawatts of installed capacity and that meets
the requirements of this subdivision is exempt. At the time of
construction, the facility must:
new text end

new text begin (1) utilize natural gas as a primary fuel;
new text end

new text begin (2) be owned by an electric generation and transmission
cooperative;
new text end

new text begin (3) be located within five miles of parallel existing
12-inch and 16-inch natural gas pipelines and a 69-kilovolt
high-voltage electric transmission line;
new text end

new text begin (4) be designed to provide peaking, emergency backup, or
contingency services;
new text end

new text begin (5) have received a certificate of need under section
216B.243 demonstrating demand for its capacity; and
new text end

new text begin (6) have received by resolution the approval from the
governing body of the county and township in which the proposed
facility is to be located for the exemption of personal property
under this subdivision.
new text end

new text begin (b) Construction of the facility must be commenced after
July 1, 2005, and before January 1, 2009. Property eligible for
this exemption does not include electric transmission lines and
interconnections or gas pipelines and interconnections
appurtenant to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2006 and thereafter, for taxes payable in 2007 and
thereafter.
new text end

Sec. 7.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 72. new text end

new text begin Electric generation facility personal
property. new text end

new text begin (a) Notwithstanding subdivision 9, clause (a),
attached machinery and other personal property which is part of
either a simple-cycle, combustion-turbine electric generation
facility, or a combined-cycle, combustion-turbine electric
generation facility that does not exceed 325 megawatts of
installed capacity and that meets the requirements of this
subdivision is exempt. At the time of construction, the
facility must:
new text end

new text begin (1) utilize either a simple-cycle or a combined-cycle
combustion-turbine generator fueled by natural gas;
new text end

new text begin (2) be connected to an existing 115-kilovolt high-voltage
electric transmission line that is within two miles of the
facility;
new text end

new text begin (3) be located on an underground natural gas storage
aquifer;
new text end

new text begin (4) be designed as either a peaking or intermediate load
facility; and
new text end

new text begin (5) have received, by resolution, the approval from the
governing body of the county for the exemption of personal
property under this subdivision.
new text end

new text begin (b) Construction of the facility must be commenced after
January 1, 2006, and before January 1, 2008. Property eligible
for this exemption does not include electric transmission lines
and interconnections or gas pipelines and interconnections
appurtenant to the property or the facility.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2005, taxes payable in 2006, and thereafter.
new text end

Sec. 8.

Minnesota Statutes 2004, section 272.0211,
subdivision 1, is amended to read:

Subdivision 1.

Efficiency determination and
certification.

An owner or operator of a new or existing
electric power generation facility, excluding wind energy
conversion systems, may apply to the commissioner of revenue for
a market value exclusion on the property as provided for in this
section. This exclusion shall apply only to the market value of
the equipment of the facility, and shall not apply to the
structures and the land upon which the facility is located. The
commissioner of revenue shall prescribe the forms and procedures
for this application. Upon receiving the application, the
commissioner of revenue shall request the commissioner of
commerce to make a determination of the efficiency of the
applicant's electric power generation facility. deleted text begin In calculating
the efficiency of a facility, deleted text end The commissioner of commerce shall
deleted text begin use a definition of deleted text end new text begin calculate new text end efficiency deleted text begin which calculates
efficiency as the sum of:
deleted text end

deleted text begin (1) the useful electrical power output; plus
deleted text end

deleted text begin (2) the useful thermal energy output; plus
deleted text end

deleted text begin (3) the fuel energy of the useful chemical products,
deleted text end

deleted text begin all divided by the total energy input to the facility, expressed
as a percentage deleted text end new text begin as the ratio of useful energy outputs to energy
inputs, expressed as a percentage, based on the performance of
the facility's equipment during normal full load operation new text end . The
commissioner must include in this formula the energy used in any
on-site preparation of materials necessary to convert the
materials into the fuel used to generate electricity, such as a
process to gasify petroleum coke. The commissioner shall use
the deleted text begin high deleted text end new text begin Higher new text end Heating Value new text begin (HHV) new text end for all substances in the
commissioner's efficiency calculations, except for wood for fuel
in a biomass-eligible project under section 216B.2424; for these
instances, the commissioner shall adjust the heating value to
allow for energy consumed for evaporation of the moisture in the
wood. The applicant shall provide the commissioner of commerce
with whatever information the commissioner deems necessary to
make the determination. Within 30 days of the receipt of the
necessary information, the commissioner of commerce shall
certify the findings of the efficiency determination to the
commissioner of revenue and to the applicant. The commissioner
of commerce shall determine the efficiency of the facility and
certify the findings of that determination to the commissioner
of revenue every two years thereafter from the date of the
original certification.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2005 and thereafter, for taxes payable in 2006 and
thereafter.
new text end

Sec. 9.

Minnesota Statutes 2004, section 272.0211,
subdivision 2, is amended to read:

Subd. 2.

Sliding scale exclusion.

Based upon the
efficiency determination provided by the commissioner of
commerce as described in subdivision 1, the commissioner of
revenue shall subtract deleted text begin five deleted text end new text begin eight new text end percent of the taxable market
value of the qualifying property for each percentage point that
the efficiency of the specific facility, as determined by the
commissioner of commerce, is above deleted text begin 35 deleted text end new text begin 40 new text end percent. The reduction
in taxable market value shall be reflected in the taxable market
value of the facility beginning with the assessment year
immediately following the determination. For a facility that is
assessed by the county in which the facility is located, the
commissioner of revenue shall certify to the assessor of that
county the percentage of the taxable market value of the
facility to be excluded.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2005 and thereafter, for taxes payable in 2006 and
thereafter.
new text end

Sec. 10.

new text begin [272.0275] PERSONAL PROPERTY USED TO GENERATE
ELECTRICITY; EXEMPTION.
new text end

new text begin Subdivision 1. new text end

new text begin New plant construction after january 1,
2005. new text end

new text begin For a new generating plant built and placed in service
after January 1, 2005, its personal property used to generate
electric power is exempt from property taxation, including under
section 453.54, subdivision 20, if an exemption of generation
personal property form, with an attached siting agreement, is
filed with the Department of Revenue. The form must be signed
by the utility, and the county and city or town where the
facility is proposed to be located.
new text end

new text begin Subd. 2. new text end

new text begin Existing plant; increase in nameplate capacity.
new text end

new text begin For a plant existing or under construction on the day of final
enactment of this act, a partial exemption applies if the
nameplate capacity of the plant is increased from that existing
on the day of final enactment of this act, and if an exemption
of generation personal property form, with an attached siting
agreement is filed with the Department of Revenue. The form
must be signed by the utility, and the county and city or town
where the facility expansion is located. This partial exemption
must be computed by taking the increase in megawatts over the
total megawatt nameplate capacity after construction is
complete, multiplied by the market value of all taxable tools,
implements, and machinery of the generating plant as determined
by the commissioner of revenue. The resulting exemption is
effective beginning in the next assessment year.
new text end

new text begin Subd. 3. new text end

new text begin In-lieu payment; limitation. new text end

new text begin If an in-lieu
payment or service fee is negotiated between a facility exempted
under this section and the county, city, or town where the
facility is located, the payment or fee in any year may not
exceed the property tax revenue that the jurisdiction would
receive from the facility if it were not exempt.
new text end

new text begin Subd. 4. new text end

new text begin Definition; applicability. new text end

new text begin For purposes of this
section, "personal property" means tools, implements, and
machinery of the generating plant. The exemption under this
section does not apply to transformers, transmission lines,
distribution lines, or any other tools, implements, and
machinery that are part of an electric substation, wherever
located.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2004, section 273.055, is
amended to read:

273.055 RESOLUTION TO APPOINT ASSESSOR; TERMINATION OF
LOCAL ASSESSOR'S OFFICE.

The election to provide for the assessment of property by
the county assessor as provided in section 273.052 shall be made
by the board of county commissioners by resolution new text begin with at least
a two-thirds majority vote new text end . Such resolution shall be effective
at the second assessment date following the adoption of the
resolution. Notwithstanding any other provisions contained in
any other section of law or charter, the office of all township
and city assessors in such county shall be terminated 90 days
before the assessment date at which the election becomes
effective, except that if part of such taxing district is
located in a county not electing to have the county assessor
assess all property as provided in section 273.052, the office
will continue but shall apply only to such property in a
nonelecting county.

No township or city assessor in another county shall assess
any property in an electing county, but shall turn over all tax
records relating to property to the county assessor 90 days
before the assessment date at which the county's election
becomes effective.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 12.

Minnesota Statutes 2004, section 273.0755, is
amended to read:

273.0755 TRAINING AND EDUCATION OF PROPERTY TAX
PERSONNEL.

(a) Beginning with the four-year period starting on July 1,
2000, every person licensed by the state Board of Assessors at
the Accredited Minnesota Assessor level or higher, shall
successfully complete a week-long Minnesota laws course
sponsored by the Department of Revenue at least once in every
four-year period. An assessor need not attend the course if
they successfully pass the test for the course.

(b) The commissioner of revenue may require that each
county, and each city for which the city assessor performs the
duties of county assessor, have (i) a person on the assessor's
staff who is certified by the Department of Revenue in sales
ratio calculations, (ii) an officer or employee who is certified
by the Department of Revenue in tax calculations, and (iii) an
officer or employee who is certified by the Department of
Revenue in the proper preparation of abstracts of assessment.
The commissioner of revenue may require that each county have an
officer or employee who is certified by the Department of
Revenue in the proper preparation of abstracts of tax lists.

new text begin (c) Beginning with the four-year educational licensing
period starting on July 1, 2004, every Minnesota assessor
licensed by the State Board of Assessors must attend and
participate in a seminar that focuses on ethics, professional
conduct and the need for standardized assessment practices
developed and presented by the commissioner of revenue. This
requirement must be met at least once in every subsequent
four-year period. This requirement applies to all assessors
licensed for one year or more in the four-year period.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 13.

Minnesota Statutes 2004, section 273.11,
subdivision 1a, is amended to read:

Subd. 1a.

Limited market value.

In the case of all new text begin real
new text end property deleted text begin classified as agricultural homestead or nonhomestead,
residential homestead or nonhomestead, timber, or noncommercial
seasonal residential recreational deleted text end , the assessor shall compare
the value with the taxable portion of the value determined in
the preceding assessment new text begin , except that for class 1c resort
property for assessment year 2005, the assessor shall determine
the limited market value as provided in subdivision 1b new text end .

deleted text begin For assessment year 2002, the amount of the increase shall
not exceed the greater of (1) ten percent of the value in the
preceding assessment, or (2) 15 percent of the difference
between the current assessment and the preceding assessment.
deleted text end

deleted text begin For assessment year 2003, the amount of the increase shall
not exceed the greater of (1) 12 percent of the value in the
preceding assessment, or (2) 20 percent of the difference
between the current assessment and the preceding assessment.
deleted text end

For assessment deleted text begin year deleted text end new text begin years new text end 2004 new text begin , 2005, and 2006 new text end , the amount
of the increase shall not exceed the greater of (1) 15 percent
of the value in the preceding assessment, or (2) 25 percent of
the difference between the current assessment and the preceding
assessment.

For assessment year deleted text begin 2005 deleted text end new text begin 2007 new text end , the amount of the increase
shall not exceed the greater of (1) 15 percent of the value in
the preceding assessment, or (2) 33 percent of the difference
between the current assessment and the preceding assessment.

For assessment year deleted text begin 2006 deleted text end new text begin 2008 new text end , the amount of the increase
shall not exceed the greater of (1) 15 percent of the value in
the preceding assessment, or (2) 50 percent of the difference
between the current assessment and the preceding assessment.

This limitation shall not apply to increases in value due
to improvements. For purposes of this subdivision, the term
"assessment" means the value prior to any exclusion under
subdivision 16.

The provisions of this subdivision shall be in effect
through assessment year deleted text begin 2006 deleted text end new text begin 2008 new text end as provided in this
subdivision.

For purposes of the assessment/sales ratio study conducted
under section 127A.48, and the computation of state aids paid
under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and
477A, market values and net tax capacities determined under this
subdivision and subdivision 16, shall be used.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
years 2005 through 2008, for taxes payable in 2006 through 2009.
new text end

Sec. 14.

Minnesota Statutes 2004, section 273.11, is
amended by adding a subdivision to read:

new text begin Subd. 1b. new text end

new text begin Class 1c resorts; 2005 assessment only. new text end

new text begin For
assessment year 2005, the valuation on class 1c resort property
shall not exceed the greater of (1) 130 percent of the value of
its 2003 assessment, or (2) its value for the 2003 assessment
year plus 40 percent of the difference in value between its 2005
assessment and its 2003 assessment. The valuation increase on
class 1c resort property for assessment years 2006 and
thereafter shall be determined as provided under subdivision 1a.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 15.

Minnesota Statutes 2004, section 273.11, is
amended by adding a subdivision to read:

new text begin Subd. 21. new text end

new text begin Valuation exclusion for lead hazard reduction.
new text end

new text begin Owners of property classified as class 1a, 1b, 1c, 2a, 4b, or
4bb under section 273.13 may apply for a valuation exclusion for
lead hazard reduction, provided that the property is located in
a city which has authorized valuation exclusions under this
subdivision. A city may by resolution authorize valuation
exclusions under this subdivision and must establish guidelines
for qualifying lead hazard reduction projects and must designate
an agency within the city to issue certificates of completion of
qualifying projects. For purposes of this subdivision, "lead
hazard reduction" has the same meaning as in section 144.9501,
subdivision 17.
new text end

new text begin The property owner must obtain a certificate from the city
stating that the project has been completed and stating the cost
incurred by the owner in completing the project. Only projects
originating after April 1, 2004, may qualify for exclusion under
this subdivision. The property owner shall apply for a
valuation exclusion to the assessor on a form prescribed by the
assessor.
new text end

new text begin A qualifying property is eligible for a valuation exclusion
equal to 50 percent of the actual costs incurred, to a maximum
exclusion of $15,000, for a period of five years. The valuation
exclusion shall terminate upon the sale of the property. If a
property owner applies for exclusion under this subdivision
between January 1 and June 30 of any year, the exclusion shall
first apply for taxes payable in the following year. If a
property owner applies for exclusion under this subdivision
between July 1 and December 31 of any year, the exclusion shall
first apply for taxes payable in the second following year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 16.

Minnesota Statutes 2004, section 273.111, is
amended by adding a subdivision to read:

new text begin Subd. 86. new text end

new text begin Applications; denied by county. new text end

new text begin Beginning with
applications filed for the 2005 assessment year, all
applications for deferment of taxes and assessment under this
section that have been denied by the county shall be forwarded
to the commissioner of revenue by the county assessor within 30
days of denial. For the purpose of monitoring compliance with
this section, the commissioner of revenue shall compile a report
identifying all denied applications, the reason for the denial
and any commissioner action or recommendation. This report will
be annually submitted to the chairs of the house and senate tax
committees on or before February 1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for
applications filed after the day following final enactment.
new text end

Sec. 17.

Minnesota Statutes 2004, section 273.123,
subdivision 7, is amended to read:

Subd. 7.

Local option; other property.

The owner of
homestead property not qualifying for an adjustment in valuation
pursuant to subdivisions 1 to 5 or of nonhomestead property may
receive a reduction in the amount of taxes payable on the
property for the year in which the destruction occurs and in the
following year if:

(a) 50 percent or more of the homestead dwelling or other
structure, as established by the county assessor, is
unintentionally or accidentally destroyed new text begin or contaminated by
mold new text end and the homestead is uninhabitable or the other structure
is not usable;

(b) the owner of the property makes written application to
the county assessor as soon as practical after the damage has
occurred; and

(c) the owner of the property makes written application to
the county board.

The county board may grant a reduction in the amount of
property tax which the owner must pay on the qualifying property
in the year of destruction and in the following year. Any
reduction in the amount of tax payable which is authorized by
county board action shall be calculated based upon the number of
months that the home is uninhabitable or the other structure is
unusable. The amount of net tax due from the taxpayer shall be
multiplied by a fraction, the numerator of which is the number
of months the dwelling was occupied by that taxpayer, or the
number of months the other structure was used by the taxpayer,
and the denominator of which is 12. For purposes of this
subdivision, if a structure is occupied or used for a fraction
of a month, it is considered a month. "Net tax" is defined as
the amount of tax after the subtraction of all of the state paid
property tax credits. If application is made following payment
of all property taxes due for the year of destruction, the
amount of the reduction granted by the county board shall be
refunded to the taxpayer by the county treasurer as soon as
practical.

Any reductions or refunds approved by the county board
shall not be subject to approval by the commissioner of revenue.

The county board may levy in the following year the amount
of tax dollars lost to the county government as a result of the
reductions granted pursuant to this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property
taxes payable in 2005 and thereafter.
new text end

Sec. 18.

Minnesota Statutes 2004, section 273.124,
subdivision 14, is amended to read:

Subd. 14.

Agricultural homesteads; special provisions.

(a) Real estate of less than ten acres that is the homestead of
its owner must be classified as class 2a under section 273.13,
subdivision 23, paragraph (a), if:

(1) the parcel on which the house is located is contiguous
on at least two sides to (i) agricultural land, (ii) land owned
or administered by the United States Fish and Wildlife Service,
or (iii) land administered by the Department of Natural
Resources on which in lieu taxes are paid under sections 477A.11
to 477A.14;

(2) its owner also owns a noncontiguous parcel of
agricultural land that is at least 20 acres;

(3) the noncontiguous land is located not farther than four
townships or cities, or a combination of townships or cities
from the homestead; and

(4) the agricultural use value of the noncontiguous land
and farm buildings is equal to at least 50 percent of the market
value of the house, garage, and one acre of land.

Homesteads initially classified as class 2a under the
provisions of this paragraph shall remain classified as class
2a, irrespective of subsequent changes in the use of adjoining
properties, as long as the homestead remains under the same
ownership, the owner owns a noncontiguous parcel of agricultural
land that is at least 20 acres, and the agricultural use value
qualifies under clause (4). Homestead classification under this
paragraph is limited to property that qualified under this
paragraph for the 1998 assessment.

(b)(i) Agricultural property consisting of at least 40
acres shall be classified as the owner's homestead, to the same
extent as other agricultural homestead property, if all of the
following criteria are met:

(1) the owner, the owner's spouse, deleted text begin or deleted text end the son or daughter
of the owner or owner's spouse, new text begin or the grandson or granddaughter
of the owner or the owner's spouse, new text end is actively farming the
agricultural property, either on the person's own behalf as an
individual or on behalf of a partnership operating a family
farm, family farm corporation, joint family farm venture, or
limited liability company of which the person is a partner,
shareholder, or member;

(2) both the owner of the agricultural property and the
person who is actively farming the agricultural property under
clause (1), are Minnesota residents;

(3) neither the owner nor the spouse of the owner claims
another agricultural homestead in Minnesota; and

(4) neither the owner nor the person actively farming the
property lives farther than four townships or cities, or a
combination of four townships or cities, from the agricultural
property, except that if the owner or the owner's spouse is
required to live in employer-provided housing, the owner or
owner's spouse, whichever is actively farming the agricultural
property, may live more than four townships or cities, or
combination of four townships or cities from the agricultural
property.

The relationship under this paragraph may be either by
blood or marriage.

(ii) Real property held by a trustee under a trust is
eligible for agricultural homestead classification under this
paragraph if the qualifications in clause (i) are met, except
that "owner" means the grantor of the trust.

(iii) Property containing the residence of an owner who
owns qualified property under clause (i) shall be classified as
part of the owner's agricultural homestead, if that property is
also used for noncommercial storage or drying of agricultural
crops.

(c) Noncontiguous land shall be included as part of a
homestead under section 273.13, subdivision 23, paragraph (a),
only if the homestead is classified as class 2a and the detached
land is located in the same township or city, or not farther
than four townships or cities or combination thereof from the
homestead. Any taxpayer of these noncontiguous lands must
notify the county assessor that the noncontiguous land is part
of the taxpayer's homestead, and, if the homestead is located in
another county, the taxpayer must also notify the assessor of
the other county.

(d) Agricultural land used for purposes of a homestead and
actively farmed by a person holding a vested remainder interest
in it must be classified as a homestead under section 273.13,
subdivision 23, paragraph (a). If agricultural land is
classified class 2a, any other dwellings on the land used for
purposes of a homestead by persons holding vested remainder
interests who are actively engaged in farming the property, and
up to one acre of the land surrounding each homestead and
reasonably necessary for the use of the dwelling as a home, must
also be assessed class 2a.

(e) Agricultural land and buildings that were class 2a
homestead property under section 273.13, subdivision 23,
paragraph (a), for the 1997 assessment shall remain classified
as agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling
located on the agricultural homestead as a result of the April
1997 floods;

(2) the property is located in the county of Polk, Clay,
Kittson, Marshall, Norman, or Wilkin;

(3) the agricultural land and buildings remain under the
same ownership for the current assessment year as existed for
the 1997 assessment year and continue to be used for
agricultural purposes;

(4) the dwelling occupied by the owner is located in
Minnesota and is within 30 miles of one of the parcels of
agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the
relocation was due to the 1997 floods, and the owner furnishes
the assessor any information deemed necessary by the assessor in
verifying the change in dwelling. Further notifications to the
assessor are not required if the property continues to meet all
the requirements in this paragraph and any dwellings on the
agricultural land remain uninhabited.

(f) Agricultural land and buildings that were class 2a
homestead property under section 273.13, subdivision 23,
paragraph (a), for the 1998 assessment shall remain classified
agricultural homesteads for subsequent assessments if:

(1) the property owner abandoned the homestead dwelling
located on the agricultural homestead as a result of damage
caused by a March 29, 1998, tornado;

(2) the property is located in the county of Blue Earth,
Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice;

(3) the agricultural land and buildings remain under the
same ownership for the current assessment year as existed for
the 1998 assessment year;

(4) the dwelling occupied by the owner is located in this
state and is within 50 miles of one of the parcels of
agricultural land that is owned by the taxpayer; and

(5) the owner notifies the county assessor that the
relocation was due to a March 29, 1998, tornado, and the owner
furnishes the assessor any information deemed necessary by the
assessor in verifying the change in homestead dwelling. For
taxes payable in 1999, the owner must notify the assessor by
December 1, 1998. Further notifications to the assessor are not
required if the property continues to meet all the requirements
in this paragraph and any dwellings on the agricultural land
remain uninhabited.

(g) Agricultural property consisting of at least 40 acres
of a family farm corporation, joint family farm venture, family
farm limited liability company, or partnership operating a
family farm as described under subdivision 8 shall be classified
homestead, to the same extent as other agricultural homestead
property, if all of the following criteria are met:

(1) a shareholder, member, or partner of that entity is
actively farming the agricultural property;

(2) that shareholder, member, or partner who is actively
farming the agricultural property is a Minnesota resident;

(3) neither that shareholder, member, or partner, nor the
spouse of that shareholder, member, or partner claims another
agricultural homestead in Minnesota; and

(4) that shareholder, member, or partner does not live
farther than four townships or cities, or a combination of four
townships or cities, from the agricultural property.

Homestead treatment applies under this paragraph for
property leased to a family farm corporation, joint farm
venture, limited liability company, or partnership operating a
family farm if legal title to the property is in the name of an
individual who is a member, shareholder, or partner in the
entity.

(h) To be eligible for the special agricultural homestead
under this subdivision, an initial full application must be
submitted to the county assessor where the property is located.
Owners and the persons who are actively farming the property
shall be required to complete only a one-page abbreviated
version of the application in each subsequent year provided that
none of the following items have changed since the initial
application:

(1) the day-to-day operation, administration, and financial
risks remain the same;

(2) the owners and the persons actively farming the
property continue to live within the four townships or city
criteria and are Minnesota residents;

(3) the same operator of the agricultural property is
listed with the Farm Service Agency;

(4) a Schedule F or equivalent income tax form was filed
for the most recent year;

(5) the property's acreage is unchanged; and

(6) none of the property's acres have been enrolled in a
federal or state farm program since the initial application.

The owners and any persons who are actively farming the
property must include the appropriate Social Security numbers,
and sign and date the application. If any of the specified
information has changed since the full application was filed,
the owner must notify the assessor, and must complete a new
application to determine if the property continues to qualify
for the special agricultural homestead. The commissioner of
revenue shall prepare a standard reapplication form for use by
the assessors.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2005 and thereafter, for taxes payable in 2006 and
thereafter.
new text end

Sec. 19.

Minnesota Statutes 2004, section 273.125,
subdivision 8, is amended to read:

Subd. 8.

Manufactured homes; sectional structures.

(a)
In this section, "manufactured home" means a structure
transportable in one or more sections, which is built on a
permanent chassis, and designed to be used as a dwelling with or
without a permanent foundation when connected to the required
utilities, and contains the plumbing, heating, air conditioning,
and electrical systems in it. Manufactured home includes any
accessory structure that is an addition or supplement to the
manufactured home and, when installed, becomes a part of the
manufactured home.

(b) new text begin Except as provided in paragraph (c), new text end a manufactured
home that meets each of the following criteria must be valued
and assessed as an improvement to real property, the appropriate
real property classification applies, and the valuation is
subject to review and the taxes payable in the manner provided
for real property:

(1) the owner of the unit holds title to the land on which
it is situated;

(2) the unit is affixed to the land by a permanent
foundation or is installed at its location in accordance with
the Manufactured Home Building Code in sections 327.31 to
327.34, and rules adopted under those sections, or is affixed to
the land like other real property in the taxing district; and

(3) the unit is connected to public utilities, has a well
and septic tank system, or is serviced by water and sewer
facilities comparable to other real property in the taxing
district.

(c) A manufactured home that meets each of the following
criteria must be assessed at the rate provided by the
appropriate real property classification but must be treated as
personal property, and the valuation is subject to review and
the taxes payable in the manner provided in this section:

(1) the owner of the unit is a lessee of the land under the
terms of a lease new text begin , or the unit is located in a manufactured home
park, campground, or resort new text end ;

(2) the unit is affixed to the land by a permanent
foundation or is installed at its location in accordance with
the Manufactured Home Building Code contained in sections 327.31
to 327.34, and the rules adopted under those sections, or is
affixed to the land like other real property in the taxing
district; and

(3) the unit is connected to public utilities, has a well
and septic tank system, or is serviced by water and sewer
facilities comparable to other real property in the taxing
district.

(d) Sectional structures must be valued and assessed as an
improvement to real property if the owner of the structure holds
title to the land on which it is located or is a qualifying
lessee of the land under section 273.19. In this paragraph
"sectional structure" means a building or structural unit that
has been in whole or substantial part manufactured or
constructed at an off-site location to be wholly or partially
assembled on-site alone or with other units and attached to a
permanent foundation.

(e) The commissioner of revenue may adopt rules under the
Administrative Procedure Act to establish additional criteria
for the classification of manufactured homes and sectional
structures under this subdivision.

(f) A storage shed, deck, or similar improvement
constructed on property that is leased or rented as a site for a
manufactured home, sectional structure, park trailer, or travel
trailer is taxable as provided in this section. In the case of
property that is leased or rented as a site for a travel
trailer, a storage shed, deck, or similar improvement on the
site that is considered personal property under this paragraph
is taxable only if its total estimated market value is over
$500. The property is taxable as personal property to the
lessee of the site if it is not owned by the owner of the site.
The property is taxable as real estate if it is owned by the
owner of the site. As a condition of permitting the owner of
the manufactured home, sectional structure, park trailer, or
travel trailer to construct improvements on the leased or rented
site, the owner of the site must obtain the permanent home
address of the lessee or user of the site. The site owner must
provide the name and address to the assessor upon request.

new text begin EFFECTIVE DATE. new text end

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

Sec. 20.

new text begin [273.126] CERTIFICATION OF LOW-INCOME RENTAL
PROPERTY.
new text end

new text begin Subdivision 1. new text end

new text begin Requirement. new text end

new text begin Low-income rental property
is entitled to classification as class 4d under section 273.13,
subdivision 25, paragraph (e), for a maximum period of five
years if at least 75 percent of the units in the rental housing
property meet any of the following qualifications:
new text end

new text begin (1) the units are subject to a housing assistance payments
contract under Section 8 of the United States Housing Act of
1937, as amended;
new text end

new text begin (2) the units are rent-restricted and income-restricted
units of a qualified low-income housing project receiving tax
credits under section 42(g) of the Internal Revenue Code of
1986, as amended; or
new text end

new text begin (3) the units are financed by the Rural Housing Service of
the United States Department of Agriculture and receive payments
under the rental assistance program pursuant to Section 521(a)
of the Housing Act of 1949, as amended.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin (a) Application for certification
under this section must be filed by March 31 of the levy year,
or at a later date if the Housing Finance Agency deems
practicable. The application must be filed with the Housing
Finance Agency, on a form prescribed by the agency, and must
contain the information required by the Housing Finance Agency.
new text end

new text begin (b) Each application must include:
new text end

new text begin (1) the property tax identification number;
new text end

new text begin (2) evidence that the property meets the requirements of
subdivision 1; and
new text end

new text begin (3) a true and correct copy of the financial statement
related to the property.
new text end

new text begin (c) The Housing Finance Agency may charge an application
fee approximately equal to the costs of processing and reviewing
the applications but not to exceed $10 per unit. If imposed,
the applicant must pay the application fee to the Housing
Finance Agency. The fee must be deposited in the housing
development fund.
new text end

new text begin (d) An owner of low-income rental property certified under
this section must reapply under this subdivision for
certification every five years.
new text end

new text begin Subd. 3. new text end

new text begin Certification. new text end

new text begin By June 1 of each levy year, the
Housing Finance Agency must certify to local assessors the
properties that are qualified under this section and the number
of units in the building that qualify. In making the
certification, the Housing Finance Agency may rely on the
application and any other supporting information that the agency
deems necessary from the property owner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 21.

Minnesota Statutes 2004, section 273.13,
subdivision 22, is amended to read:

Subd. 22.

Class 1.

(a) Except as provided in subdivision
23 and in paragraphs (b) and (c), real estate which is
residential and used for homestead purposes is class 1a. In the
case of a duplex or triplex in which one of the units is used
for homestead purposes, the entire property is deemed to be used
for homestead purposes. The market value of class 1a property
must be determined based upon the value of the house, garage,
and land.

The first $500,000 of market value of class 1a property has
a net class rate of one percent of its market value; and the
market value of class 1a property that exceeds $500,000 has a
class rate of 1.25 percent of its market value.

(b) Class 1b property includes homestead real estate or
homestead manufactured homes used for the purposes of a
homestead by

(1) any person who is blind as defined in section 256D.35,
or the blind person and the blind person's spouse; or

(2) any person, hereinafter referred to as "veteran," who:

(i) served in the active military or naval service of the
United States; and

(ii) is entitled to compensation under the laws and
regulations of the United States for permanent and total
service-connected disability due to the loss, or loss of use, by
reason of amputation, ankylosis, progressive muscular
dystrophies, or paralysis, of both lower extremities, such as to
preclude motion without the aid of braces, crutches, canes, or a
wheelchair; and

(iii) has acquired a special housing unit with special
fixtures or movable facilities made necessary by the nature of
the veteran's disability, or the surviving spouse of the
deceased veteran for as long as the surviving spouse retains the
special housing unit as a homestead; or

(3) any person who is permanently and totally disabled.

Property is classified and assessed under clause (3) only
if the government agency or income-providing source certifies,
upon the request of the homestead occupant, that the homestead
occupant satisfies the disability requirements of this paragraph.

Property is classified and assessed pursuant to clause (1)
only if the commissioner of revenue certifies to the assessor
that the homestead occupant satisfies the requirements of this
paragraph.

Permanently and totally disabled for the purpose of this
subdivision means a condition which is permanent in nature and
totally incapacitates the person from working at an occupation
which brings the person an income. The first deleted text begin $32,000 deleted text end new text begin $50,000
new text end market value of class 1b property has a net class rate of .45
percent of its market value. The remaining market value of
class 1b property has a class rate using the rates for class 1a
or class 2a property, whichever is appropriate, of similar
market value.

(c) Class 1c property is commercial use real property that
abuts a lakeshore line and is devoted to temporary and seasonal
residential occupancy for recreational purposes but not devoted
to commercial purposes for more than 250 days in the year
preceding the year of assessment, and that includes a portion
used as a homestead by the owner, which includes a dwelling
occupied as a homestead by a shareholder of a corporation that
owns the resort, a partner in a partnership that owns the
resort, or a member of a limited liability company that owns the
resort even if the title to the homestead is held by the
corporation, partnership, or limited liability company. For
purposes of this clause, property is devoted to a commercial
purpose on a specific day if any portion of the property,
excluding the portion used exclusively as a homestead, is used
for residential occupancy and a fee is charged for residential
occupancy. The first deleted text begin $500,000 deleted text end new text begin $300,000 new text end of market value of class
1c property has a class rate of deleted text begin one deleted text end new text begin 0.55 new text end percent, and the
deleted text begin remaining deleted text end new text begin next $1,500,000 of new text end market value of class 1c property
has a class rate of one percent deleted text begin , with the following limitation:
the area of the property must not exceed 100 feet of lakeshore
footage for each cabin or campsite located on the property up to
a total of 800 feet and 500 feet in depth, measured away from
the lakeshore deleted text end . new text begin Any remaining market value is class 4c
property. new text end If any portion of the class 1c resort property is
classified as class 4c under subdivision 25, the entire property
must meet the requirements of subdivision 25, paragraph (d),
clause (1), to qualify for class 1c treatment under this
paragraph.

(d) Class 1d property includes structures that meet all of
the following criteria:

(1) the structure is located on property that is classified
as agricultural property under section 273.13, subdivision 23;

(2) the structure is occupied exclusively by seasonal farm
workers during the time when they work on that farm, and the
occupants are not charged rent for the privilege of occupying
the property, provided that use of the structure for storage of
farm equipment and produce does not disqualify the property from
classification under this paragraph;

(3) the structure meets all applicable health and safety
requirements for the appropriate season; and

(4) the structure is not salable as residential property
because it does not comply with local ordinances relating to
location in relation to streets or roads.

The market value of class 1d property has the same class
rates as class 1a property under paragraph (a).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
levied in 2005, payable in 2006, and thereafter.
new text end

Sec. 22.

Minnesota Statutes 2004, section 273.13,
subdivision 23, is amended to read:

Subd. 23.

Class 2.

(a) Class 2a property is agricultural
land including any improvements that is homesteaded. The market
value of the house and garage and immediately surrounding one
acre of land has the same class rates as class 1a property under
subdivision 22. The value of the remaining land including
improvements up to deleted text begin and including $600,000 market value deleted text end new text begin $750,000
new text end has a net class rate of 0.55 percent of market value. The
remaining deleted text begin property deleted text end new text begin value new text end over deleted text begin $600,000 market value deleted text end new text begin $750,000 new text end has
a class rate of one percent of market value.

(b) Class 2b property is (1) real estate, rural in
character and used exclusively for growing trees for timber,
lumber, and wood and wood products; (2) real estate that is not
improved with a structure and is used exclusively for growing
trees for timber, lumber, and wood and wood products, if the
owner has participated or is participating in a cost-sharing
program for afforestation, reforestation, or timber stand
improvement on that particular property, administered or
coordinated by the commissioner of natural resources; (3) real
estate that is nonhomestead agricultural land; or (4) a landing
area or public access area of a privately owned public use
airport. Class 2b property has a net class rate of one percent
of market value.

(c) Agricultural land as used in this section means
contiguous acreage of ten acres or more, used during the
preceding year for agricultural purposes. "Agricultural
purposes" as used in this section means the raising or
cultivation of agricultural products. "Agricultural purposes"
also includes enrollment in the Reinvest in Minnesota program
under sections 103F.501 to 103F.535 or the federal Conservation
Reserve Program as contained in Public Law 99-198 if the
property was classified as agricultural (i) under this
subdivision for the assessment year 2002 or (ii) in the year
prior to its enrollment. Contiguous acreage on the same parcel,
or contiguous acreage on an immediately adjacent parcel under
the same ownership, may also qualify as agricultural land, but
only if it is pasture, timber, waste, unusable wild land, or
land included in state or federal farm programs. Agricultural
classification for property shall be determined excluding the
house, garage, and immediately surrounding one acre of land, and
shall not be based upon the market value of any residential
structures on the parcel or contiguous parcels under the same
ownership.

(d) Real estate, excluding the house, garage, and
immediately surrounding one acre of land, of less than ten acres
which is exclusively and intensively used for raising or
cultivating agricultural products, shall be considered as
agricultural land.

Land shall be classified as agricultural even if all or a
portion of the agricultural use of that property is the leasing
to, or use by another person for agricultural purposes.

Classification under this subdivision is not determinative
for qualifying under section 273.111.

The property classification under this section supersedes,
for property tax purposes only, any locally administered
agricultural policies or land use restrictions that define
minimum or maximum farm acreage.

(e) The term "agricultural products" as used in this
subdivision includes production for sale of:

(1) livestock, dairy animals, dairy products, poultry and
poultry products, fur-bearing animals, horticultural and nursery
stock, fruit of all kinds, vegetables, forage, grains, bees, and
apiary products by the owner;

(2) fish bred for sale and consumption if the fish breeding
occurs on land zoned for agricultural use;

(3) the commercial boarding of horses if the boarding is
done in conjunction with raising or cultivating agricultural
products as defined in clause (1);

(4) property which is owned and operated by nonprofit
organizations used for equestrian activities, excluding racing;

(5) game birds and waterfowl bred and raised for use on a
shooting preserve licensed under section 97A.115;

(6) insects primarily bred to be used as food for animals;

(7) trees, grown for sale as a crop, and not sold for
timber, lumber, wood, or wood products; and

(8) maple syrup taken from trees grown by a person licensed
by the Minnesota Department of Agriculture under chapter 28A as
a food processor.

(f) If a parcel used for agricultural purposes is also used
for commercial or industrial purposes, including but not limited
to:

(1) wholesale and retail sales;

(2) processing of raw agricultural products or other goods;

(3) warehousing or storage of processed goods; and

(4) office facilities for the support of the activities
enumerated in clauses (1), (2), and (3),

the assessor shall classify the part of the parcel used for
agricultural purposes as class 1b, 2a, or 2b, whichever is
appropriate, and the remainder in the class appropriate to its
use. The grading, sorting, and packaging of raw agricultural
products for first sale is considered an agricultural purpose.
A greenhouse or other building where horticultural or nursery
products are grown that is also used for the conduct of retail
sales must be classified as agricultural if it is primarily used
for the growing of horticultural or nursery products from seed,
cuttings, or roots and occasionally as a showroom for the retail
sale of those products. Use of a greenhouse or building only
for the display of already grown horticultural or nursery
products does not qualify as an agricultural purpose.

The assessor shall determine and list separately on the
records the market value of the homestead dwelling and the one
acre of land on which that dwelling is located. If any farm
buildings or structures are located on this homesteaded acre of
land, their market value shall not be included in this separate
determination.

(g) To qualify for classification under paragraph (b),
clause (4), a privately owned public use airport must be
licensed as a public airport under section 360.018. For
purposes of paragraph (b), clause (4), "landing area" means that
part of a privately owned public use airport properly cleared,
regularly maintained, and made available to the public for use
by aircraft and includes runways, taxiways, aprons, and sites
upon which are situated landing or navigational aids. A landing
area also includes land underlying both the primary surface and
the approach surfaces that comply with all of the following:

(i) the land is properly cleared and regularly maintained
for the primary purposes of the landing, taking off, and taxiing
of aircraft; but that portion of the land that contains
facilities for servicing, repair, or maintenance of aircraft is
not included as a landing area;

(ii) the land is part of the airport property; and

(iii) the land is not used for commercial or residential
purposes.

The land contained in a landing area under paragraph (b), clause
(4), must be described and certified by the commissioner of
transportation. The certification is effective until it is
modified, or until the airport or landing area no longer meets
the requirements of paragraph (b), clause (4). For purposes of
paragraph (b), clause (4), "public access area" means property
used as an aircraft parking ramp, apron, or storage hangar, or
an arrival and departure building in connection with the airport.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and thereafter.
new text end

Sec. 23.

Minnesota Statutes 2004, section 273.13,
subdivision 25, is amended to read:

Subd. 25.

Class 4.

(a) Class 4a is residential real
estate containing four or more units and used or held for use by
the owner or by the tenants or lessees of the owner as a
residence for rental periods of 30 days or more new text begin , excluding
property qualifying for class 4d new text end . Class 4a also includes
hospitals licensed under sections 144.50 to 144.56, other than
hospitals exempt under section 272.02, and contiguous property
used for hospital purposes, without regard to whether the
property has been platted or subdivided. The market value of
class 4a property has a class rate of deleted text begin 1.8 percent for taxes
payable in 2002, 1.5 percent for taxes payable in 2003, and deleted text end 1.25
percent deleted text begin for taxes payable in 2004 and thereafter, except that
class 4a property consisting of a structure for which
construction commenced after June 30, 2001, has a class rate of
1.25 percent of market value for taxes payable in 2003 and
subsequent years deleted text end .

(b) Class 4b includes:

(1) residential real estate containing less than four units
that does not qualify as class 4bb, other than seasonal
residential recreational property;

(2) manufactured homes not classified under any other
provision;

(3) a dwelling, garage, and surrounding one acre of
property on a nonhomestead farm classified under subdivision 23,
paragraph (b) containing two or three units; and

(4) unimproved property that is classified residential as
determined under subdivision 33.

The market value of class 4b property has a class rate of
deleted text begin 1.5 percent for taxes payable in 2002, and deleted text end 1.25 percent deleted text begin for
taxes payable in 2003 and thereafter deleted text end .

(c) Class 4bb includes:

(1) nonhomestead residential real estate containing one
unit, other than seasonal residential recreational property; and

(2) a single family dwelling, garage, and surrounding one
acre of property on a nonhomestead farm classified under
subdivision 23, paragraph (b).

Class 4bb property has the same class rates as class 1a
property under subdivision 22.

Property that has been classified as seasonal residential
recreational property at any time during which it has been owned
by the current owner or spouse of the current owner does not
qualify for class 4bb.

(d) Class 4c property includes:

(1) except as provided in subdivision 22, paragraph (c),
real property devoted to temporary and seasonal residential
occupancy for recreation purposes, including real property
devoted to temporary and seasonal residential occupancy for
recreation purposes and not devoted to commercial purposes for
more than 250 days in the year preceding the year of
assessment. For purposes of this clause, property is devoted to
a commercial purpose on a specific day if any portion of the
property is used for residential occupancy, and a fee is charged
for residential occupancy. In order for a property to be
classified as class 4c, seasonal residential recreational for
commercial purposes, at least 40 percent of the annual gross
lodging receipts related to the property must be from business
conducted during 90 consecutive days and either (i) at least 60
percent of all paid bookings by lodging guests during the year
must be for periods of at least two consecutive nights; or (ii)
at least 20 percent of the annual gross receipts must be from
charges for rental of fish houses, boats and motors,
snowmobiles, downhill or cross-country ski equipment, or charges
for marina services, launch services, and guide services, or the
sale of bait and fishing tackle. For purposes of this
determination, a paid booking of five or more nights shall be
counted as two bookings. Class 4c also includes commercial use
real property used exclusively for recreational purposes in
conjunction with class 4c property devoted to temporary and
seasonal residential occupancy for recreational purposes, up to
a total of two acres, provided the property is not devoted to
commercial recreational use for more than 250 days in the year
preceding the year of assessment and is located within two miles
of the class 4c property with which it is used. Class 4c
property classified in this clause also includes the remainder
of class 1c resorts provided that the entire property including
that portion of the property classified as class 1c also meets
the requirements for class 4c under this clause; otherwise the
entire property is classified as class 3. Owners of real
property devoted to temporary and seasonal residential occupancy
for recreation purposes and all or a portion of which was
devoted to commercial purposes for not more than 250 days in the
year preceding the year of assessment desiring classification as
class 1c or 4c, must submit a declaration to the assessor
designating the cabins or units occupied for 250 days or less in
the year preceding the year of assessment by January 15 of the
assessment year. Those cabins or units and a proportionate
share of the land on which they are located will be designated
class 1c or 4c as otherwise provided. The remainder of the
cabins or units and a proportionate share of the land on which
they are located will be designated as class 3a. The owner of
property desiring designation as class 1c or 4c property must
provide guest registers or other records demonstrating that the
units for which class 1c or 4c designation is sought were not
occupied for more than 250 days in the year preceding the
assessment if so requested. The portion of a property operated
as a (1) restaurant, (2) bar, (3) gift shop, and (4) other
nonresidential facility operated on a commercial basis not
directly related to temporary and seasonal residential occupancy
for recreation purposes shall not qualify for class 1c or 4c;

(2) qualified property used as a golf course if:

(i) it is open to the public on a daily fee basis. It may
charge membership fees or dues, but a membership fee may not be
required in order to use the property for golfing, and its green
fees for golfing must be comparable to green fees typically
charged by municipal courses; and

(ii) it meets the requirements of section 273.112,
subdivision 3, paragraph (d).

A structure used as a clubhouse, restaurant, or place of
refreshment in conjunction with the golf course is classified as
class 3a property;

(3) real property up to a maximum of one acre of land owned
by a nonprofit community service oriented organization; provided
that the property is not used for a revenue-producing activity
for more than six days in the calendar year preceding the year
of assessment and the property is not used for residential
purposes on either a temporary or permanent basis. For purposes
of this clause, a "nonprofit community service oriented
organization" means any corporation, society, association,
foundation, or institution organized and operated exclusively
for charitable, religious, fraternal, civic, or educational
purposes, and which is exempt from federal income taxation
pursuant to section 501(c)(3), (10), or (19) of the Internal
Revenue Code of 1986, as amended through December 31, 1990. For
purposes of this clause, "revenue-producing activities" shall
include but not be limited to property or that portion of the
property that is used as an on-sale intoxicating liquor or 3.2
percent malt liquor establishment licensed under chapter 340A, a
restaurant open to the public, bowling alley, a retail store,
gambling conducted by organizations licensed under chapter 349,
an insurance business, or office or other space leased or rented
to a lessee who conducts a for-profit enterprise on the
premises. Any portion of the property which is used for
revenue-producing activities for more than six days in the
calendar year preceding the year of assessment shall be assessed
as class 3a. The use of the property for social events open
exclusively to members and their guests for periods of less than
24 hours, when an admission is not charged nor any revenues are
received by the organization shall not be considered a
revenue-producing activity;

(4) postsecondary student housing of not more than one acre
of land that is owned by a nonprofit corporation organized under
chapter 317A and is used exclusively by a student cooperative,
sorority, or fraternity for on-campus housing or housing located
within two miles of the border of a college campus;

(5) manufactured home parks as defined in section 327.14,
subdivision 3;

(6) real property that is actively and exclusively devoted
to indoor fitness, health, social, recreational, and related
uses, is owned and operated by a not-for-profit corporation, and
is located within the metropolitan area as defined in section
473.121, subdivision 2;

(7) a leased or privately owned noncommercial aircraft
storage hangar not exempt under section 272.01, subdivision 2,
and the land on which it is located, provided that:

(i) the land is on an airport owned or operated by a city,
town, county, Metropolitan Airports Commission, or group
thereof; and

(ii) the land lease, or any ordinance or signed agreement
restricting the use of the leased premise, prohibits commercial
activity performed at the hangar.

If a hangar classified under this clause is sold after June
30, 2000, a bill of sale must be filed by the new owner with the
assessor of the county where the property is located within 60
days of the sale; deleted text begin and
deleted text end

(8) new text begin a privately owned noncommercial aircraft storage hangar
not exempt under section 272.01, subdivision 2, and the land on
which it is located, provided that:
new text end

new text begin (i) the land abuts a public airport; and
new text end

new text begin (ii) the owner of the aircraft storage hangar provides the
assessor with a signed agreement restricting the use of the
premises, prohibiting commercial use or activity performed at
the hangar; and
new text end

new text begin (9) new text end residential real estate, a portion of which is used by
the owner for homestead purposes, and that is also a place of
lodging, if all of the following criteria are met:

(i) rooms are provided for rent to transient guests that
generally stay for periods of 14 or fewer days;

(ii) meals are provided to persons who rent rooms, the cost
of which is incorporated in the basic room rate;

(iii) meals are not provided to the general public except
for special events on fewer than seven days in the calendar year
preceding the year of the assessment; and

(iv) the owner is the operator of the property.

The market value subject to the 4c classification under this
clause is limited to five rental units. Any rental units on the
property in excess of five, must be valued and assessed as class
3a. The portion of the property used for purposes of a
homestead by the owner must be classified as class 1a property
under subdivision 22.

Class 4c property has a class rate of 1.5 percent of market
value, except that (i) each parcel of seasonal residential
recreational property not used for commercial purposes has the
same class rates as class 4bb property, (ii) manufactured home
parks assessed under clause (5) have the same class rate as
class 4b property, (iii) commercial-use seasonal residential
recreational property has a class rate of one percent for the
first $500,000 of market value, which includes any market value
receiving the one percent rate under subdivision 22, and 1.25
percent for the remaining market value, (iv) the market value of
property described in clause (4) has a class rate of one
percent, (v) the market value of property described in clauses
(2) and (6) has a class rate of 1.25 percent, and (vi) that
portion of the market value of property in clause (8) qualifying
for class 4c property has a class rate of 1.25 percent.

new text begin (e) Class 4d property is qualifying low-income rental
housing certified to the assessor by the Housing Finance Agency
under section 273.126, subdivision 3. If only a portion of the
units in the building qualify as low-income rental housing units
as certified under section 273.126, subdivision 3, only the
proportion of qualifying units to the total number of units in
the building qualify for class 4d. The remaining portion of the
building shall be classified by the assessor based upon its
use. Class 4d also includes the same proportion of land as the
qualifying low-income rental housing units are to the total
units in the building. For all properties qualifying as class
4d, the market value determined by the assessor must be based on
the normal approach to value using normal unrestricted rents.
new text end

new text begin Class 4d property has a class rate of 1.0 percent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 24.

Minnesota Statutes 2004, section 273.13, is
amended by adding a subdivision to read:

new text begin Subd. 34. new text end

new text begin Homestead of disabled veteran or surviving
spouse. new text end

new text begin (a) The first $200,000 of market value of property
qualifying for homestead classification under subdivision 22 or
23 is excluded in determining the property's taxable market
value if it serves as the homestead of a military veteran, as
defined in section 197.447, who has a total and permanent
service-connected disability. To qualify for exclusion under
this subdivision, the veteran must have been honorably
discharged from the United States armed forces, as indicated by
United States Government Form DD214 or other official military
discharge papers, and must be certified by the United States
Veterans Administration as having a total (100 percent) and
permanent service-connected disability.
new text end

new text begin (b) If a disabled veteran qualifying for a valuation
exclusion under paragraph (a) predeceases the veteran's spouse,
and if upon the death of the veteran the spouse holds the legal
or beneficial title to the homestead and permanently resides
there, the exclusion shall carry over to the benefit of the
veteran's spouse until such time as the spouse remarries or
sells or otherwise disposes of the property.
new text end

new text begin (c) In the case of an agricultural homestead, only the
portion of the property consisting of the house and garage and
immediately surrounding one acre of land qualifies for the
valuation exclusion under this subdivision.
new text end

new text begin (d) A property owner attempting to first qualify for a
valuation exclusion under this subdivision must apply to the
assessor by July 1 of the assessment year, except that for
assessment year 2005 application may be made until September 1,
2005. The application must be accompanied by supporting
documentation as required by the assessor. Once a property has
been accepted for a valuation exclusion under this subdivision,
the property continues to qualify until there is a change in
ownership of the property.
new text end

new text begin (e) The value of any qualifying property in excess of
$200,000 must be treated exactly the same as if the first
$200,000 in value had not been excluded, for purposes of
determining the appropriate class rate. A property qualifying
for exclusion under this subdivision shall not be eligible for
the credit under section 273.1384, subdivision 1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessment
year 2005 and thereafter, for taxes payable in 2006 and
thereafter.
new text end

Sec. 25.

Minnesota Statutes 2004, section 274.01,
subdivision 1, is amended to read:

Subdivision 1.

Ordinary board; meetings, deadlines,
grievances.

(a) The town board of a town, or the council or
other governing body of a city, is the board of appeal and
equalization except (1) in cities whose charters provide for a
board of equalization or (2) in any city or town that has
transferred its local board of review power and duties to the
county board as provided in subdivision 3. The county assessor
shall fix a day and time when the board or the board of
equalization shall meet in the assessment districts of the
county. Notwithstanding any law or city charter to the
contrary, a city board of equalization shall be referred to as a
board of appeal and equalization. On or before February 15 of
each year the assessor shall give written notice of the time to
the city or town clerk. Notwithstanding the provisions of any
charter to the contrary, the meetings must be held between April
1 and May 31 each year. The clerk shall give published and
posted notice of the meeting at least ten days before the date
of the meeting.

The board shall meet at the office of the clerk to review
the assessment and classification of property in the town or
city. No changes in valuation or classification which are
intended to correct errors in judgment by the county assessor
may be made by the county assessor after the board has adjourned
in those cities or towns that hold a local board of review;
however, corrections of errors that are merely clerical in
nature or changes that extend homestead treatment to property
are permitted after adjournment until the tax extension date for
that assessment year. The changes must be fully documented and
maintained in the assessor's office and must be available for
review by any person. A copy of the changes made during this
period in those cities or towns that hold a local board of
review must be sent to the county board no later than December
31 of the assessment year.

(b) The board shall determine whether the taxable property
in the town or city has been properly placed on the list and
properly valued by the assessor. If real or personal property
has been omitted, the board shall place it on the list with its
market value, and correct the assessment so that each tract or
lot of real property, and each article, parcel, or class of
personal property, is entered on the assessment list at its
market value. No assessment of the property of any person may
be raised unless the person has been duly notified of the intent
of the board to do so. On application of any person feeling
aggrieved, the board shall review the assessment or
classification, or both, and correct it as appears just. deleted text begin The
board may not make an individual market value adjustment or
classification change that would benefit the property in cases
where the owner or other person having control over the property
will not permit the assessor to inspect the property and the
interior of any buildings or structures.
deleted text end

(c) A local board may reduce assessments upon petition of
the taxpayer but the total reductions must not reduce the
aggregate assessment made by the county assessor by more than
one percent. If the total reductions would lower the aggregate
assessments made by the county assessor by more than one
percent, none of the adjustments may be made. The assessor
shall correct any clerical errors or double assessments
discovered by the board without regard to the one percent
limitation.

(d) A local board does not have authority to grant an
exemption or to order property removed from the tax rolls.

(e) A majority of the members may act at the meeting, and
adjourn from day to day until they finish hearing the cases
presented. The assessor shall attend, with the assessment books
and papers, and take part in the proceedings, but must not
vote. The county assessor, or an assistant delegated by the
county assessor shall attend the meetings. The board shall list
separately, on a form appended to the assessment book, all
omitted property added to the list by the board and all items of
property increased or decreased, with the market value of each
item of property, added or changed by the board, placed opposite
the item. The county assessor shall enter all changes made by
the board in the assessment book.

(f) Except as provided in subdivision 3, if a person fails
to appear in person, by counsel, or by written communication
before the board after being duly notified of the board's intent
to raise the assessment of the property, or if a person feeling
aggrieved by an assessment or classification fails to apply for
a review of the assessment or classification, the person may not
appear before the county board of appeal and equalization for a
review of the assessment or classification. This paragraph does
not apply if an assessment was made after the local board
meeting, as provided in section 273.01, or if the person can
establish not having received notice of market value at least
five days before the local board meeting.

(g) The local board must complete its work and adjourn
within 20 days from the time of convening stated in the notice
of the clerk, unless a longer period is approved by the
commissioner of revenue. No action taken after that date is
valid. All complaints about an assessment or classification
made after the meeting of the board must be heard and determined
by the county board of equalization. A nonresident may, at any
time, before the meeting of the board file written objections to
an assessment or classification with the county assessor. The
objections must be presented to the board at its meeting by the
county assessor for its consideration.

Sec. 26.

Minnesota Statutes 2004, section 275.025,
subdivision 4, is amended to read:

Subd. 4.

Apportionment and levy of state general tax.

new text begin Ninety-five percent of new text end the state general tax must be deleted text begin distributed
among the counties deleted text end new text begin levied new text end by applying a uniform rate to deleted text begin each
county's deleted text end new text begin all new text end commercial-industrial tax capacity and deleted text begin its deleted text end new text begin five
percent of the state general tax must be levied by applying a
uniform rate to all new text end seasonal residential recreational tax
capacity. deleted text begin Within each county, the tax must be levied by
applying a uniform rate against commercial-industrial tax
capacity and seasonal residential recreational tax capacity. deleted text end On
or before October 1 each year, the commissioner of revenue shall
certify deleted text begin a deleted text end new text begin the new text end preliminary state general levy deleted text begin rate deleted text end new text begin rates new text end to each
county auditor that must be used to prepare the notices of
proposed property taxes for taxes payable in the following
year. By January 1 of each year, the commissioner shall certify
the final state general levy rate to each county auditor that
shall be used in spreading taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and thereafter.
new text end

Sec. 27.

Minnesota Statutes 2004, section 276.04,
subdivision 2, is amended to read:

Subd. 2.

Contents of tax statements.

(a) The treasurer
shall provide for the printing of the tax statements. The
commissioner of revenue shall prescribe the form of the property
tax statement and its contents. The statement must contain a
tabulated statement of the dollar amount due to each taxing
authority and the amount of the state tax from the parcel of
real property for which a particular tax statement is prepared.
The dollar amounts attributable to the county, the state tax,
the voter approved school tax, the other local school tax, the
township or municipality, and the total of the metropolitan
special taxing districts as defined in section 275.065,
subdivision 3, paragraph (i), must be separately stated. The
amounts due all other special taxing districts, if any, may be
aggregated new text begin except that any levies made by the regional rail
authorities in the county of Anoka, Carver, Dakota, Hennepin,
Ramsey, Scott, or Washington under chapter 398A shall be listed
on a separate line directly under the appropriate county's
levy new text end . If the county levy under this paragraph includes an
amount for a lake improvement district as defined under sections
103B.501 to 103B.581, the amount attributable for that purpose
must be separately stated from the remaining county levy
amount. new text begin In the case of Ramsey County, if the county levy under
this paragraph includes an amount for public library service
under section 134.07, the amount attributable for that purpose
may be separated from the remaining county levy amount. new text end The
amount of the tax on homesteads qualifying under the senior
citizens' property tax deferral program under chapter 290B is
the total amount of property tax before subtraction of the
deferred property tax amount. The amount of the tax on
contamination value imposed under sections 270.91 to 270.98, if
any, must also be separately stated. The dollar amounts,
including the dollar amount of any special assessments, may be
rounded to the nearest even whole dollar. For purposes of this
section whole odd-numbered dollars may be adjusted to the next
higher even-numbered dollar. The amount of market value
excluded under section 273.11, subdivision 16, if any, must also
be listed on the tax statement.

(b) The property tax statements for manufactured homes and
sectional structures taxed as personal property shall contain
the same information that is required on the tax statements for
real property.

(c) Real and personal property tax statements must contain
the following information in the order given in this paragraph.
The information must contain the current year tax information in
the right column with the corresponding information for the
previous year in a column on the left:

(1) the property's estimated market value under section
273.11, subdivision 1;

(2) the property's taxable market value after reductions
under section 273.11, subdivisions 1a and 16;

(3) the property's gross tax, calculated by adding the
property's total property tax to the sum of the aids enumerated
in clause (4);

(4) a total of the following aids:

(i) education aids payable under chapters 122A, 123A, 123B,
124D, 125A, 126C, and 127A;

(ii) local government aids for cities, towns, and counties
under deleted text begin chapter 477A deleted text end new text begin sections 477A.011 to 477A.04 new text end ; and

(iii) disparity reduction aid under section 273.1398;

(5) for homestead residential and agricultural properties,
the credits under section 273.1384;

(6) any credits received under sections 273.119; 273.123;
273.135; 273.1391; 273.1398, subdivision 4; 469.171; and
473H.10, except that the amount of credit received under section
273.135 must be separately stated and identified as "taconite
tax relief"; and

(7) the net tax payable in the manner required in paragraph
(a).

(d) If the county uses envelopes for mailing property tax
statements and if the county agrees, a taxing district may
include a notice with the property tax statement notifying
taxpayers when the taxing district will begin its budget
deliberations for the current year, and encouraging taxpayers to
attend the hearings. If the county allows notices to be
included in the envelope containing the property tax statement,
and if more than one taxing district relative to a given
property decides to include a notice with the tax statement, the
county treasurer or auditor must coordinate the process and may
combine the information on a single announcement.

The commissioner of revenue shall certify to the county
auditor the actual or estimated aids enumerated in clause (4)
that local governments will receive in the following year. The
commissioner must certify this amount by January 1 of each year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property
tax statements for taxes payable in 2006 and thereafter.
new text end

Sec. 28.

new text begin [280.44] NOTIFICATION TO HOMESTEAD PROPERTY
OWNERS; TAX DELINQUENCY.
new text end

new text begin In addition to other notices required under this chapter,
the county auditor shall notify all taxpayers owning homestead
property within the county whose real property taxes on that
homestead are currently delinquent and also were delinquent in
the preceding calendar year. The notification must be mailed
sometime between June 1 and August 1 in the year following the
second year that property taxes were not paid. The notification
must contain a telephone number and an e-mail address for the
county auditor's office to aid the taxpayer in contacting the
county to discuss any questions relating to the tax
delinquency. The notification must contain a list of the
various assistance programs and other options that might be
available to the taxpayer to pay the delinquent taxes including,
but not limited to, the senior citizens' property tax deferral
under chapter 290B, partial property tax payments, and a
confession of judgment under section 279.37. The notice must
inform the taxpayer of the state-paid property tax refund and
the additional property tax refund under chapter 290A which may
be available to the taxpayer once the delinquent taxes have been
satisfied. The notice must also state the number of years
before the property will forfeit if the taxes are not paid or
any installment plan initiated. For purposes of this section,
"homestead" property means property classified under section
273.13, subdivision 22 or 23, paragraph (a).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property
tax delinquencies beginning January 1, 2006, provided that for
calendar year 2006, the county auditor shall notify the owners
of each homestead property in the county that has been
delinquent for two or more years.
new text end

Sec. 29.

Minnesota Statutes 2004, section 290A.03,
subdivision 11, is amended to read:

Subd. 11.

Rent constituting property taxes.

"Rent
constituting property taxes" means deleted text begin 19 percent of the gross rent
actually paid in cash, or its equivalent, or the portion of rent
deleted text end new text begin the amount of gross rent actually paid in cash, or its
equivalent, which is attributable (1) to the property tax paid
on the unit or (2) to the amount new text end paid in lieu of property taxes,
in any calendar year by a claimant for the right of occupancy of
the claimant's Minnesota homestead in the calendar year, and
which rent constitutes the basis, in the succeeding calendar
year of a claim for relief under this chapter by the
claimant. new text begin The amount of rent attributable to property taxes
paid or payments in lieu made on the unit must be determined by
multiplying the gross rent paid by the claimant for the calendar
year for the unit by a fraction, the numerator of which is the
net tax on the property where the unit is located and the
denominator of which is the total scheduled rent. In no case
may the rent constituting property taxes exceed 50 percent of
the gross rent paid by the claimant during that calendar year.
In the case of a claimant who resides in a unit for which (1) a
rent subsidy is paid to, or for, the claimant based on the
income of the claimant or the claimant's family, or (2) a
subsidy is paid to a public housing authority that owns or
operates the claimant's rental unit, pursuant to United States
Code, title 42, section 1437c, 20 percent of gross rent actually
paid in cash or its equivalent shall be the claimant's "rent
constituting property taxes paid." For purposes of this
subdivision, "rent subsidy" does not include any housing
assistance received under the Minnesota family investment
program, general assistance, Minnesota supplemental assistance,
supplemental security income, or similar income maintenance
programs.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims
based on rent paid in 2005 and following years.
new text end

Sec. 30.

Minnesota Statutes 2004, section 290A.03,
subdivision 13, is amended to read:

Subd. 13.

Property taxes payable.

"Property taxes
payable" means the property tax exclusive of special
assessments, penalties, and interest payable on a claimant's
homestead after deductions made under sections 273.135,
273.1384, 273.1391, 273.42, subdivision 2, and any other state
paid property tax credits in any calendar year, and after any
refund claimed and allowable under section 290A.04, subdivision
2h, that is first payable in the year that the property tax is
payable. In the case of a claimant who makes ground lease
payments, "property taxes payable" includes the amount of the
payments directly attributable to the property taxes assessed
against the parcel on which the house is located. No
apportionment or reduction of the "property taxes payable" shall
be required for the use of a portion of the claimant's homestead
for a business purpose if the claimant does not deduct any
business depreciation expenses for the use of a portion of the
homestead in the determination of federal adjusted gross
income. For homesteads which are manufactured homes as defined
in section 273.125, subdivision 8, and for homesteads which are
park trailers taxed as manufactured homes under section 168.012,
subdivision 9, "property taxes payable" shall also include deleted text begin 19
percent deleted text end new text begin the amount new text end of the gross rent paid in the preceding year
for the site on which the homestead is located new text begin , which is
attributable to the net tax paid on the site. The amount
attributable to property taxes must be determined by multiplying
the net tax on the parcel by a fraction, the numerator of which
is the gross rent paid for the calendar year for the site and
the denominator of which is the gross rent paid for the calendar
year for the parcel new text end . When a homestead is owned by two or more
persons as joint tenants or tenants in common, such tenants
shall determine between them which tenant may claim the property
taxes payable on the homestead. If they are unable to agree,
the matter shall be referred to the commissioner of revenue
whose decision shall be final. Property taxes are considered
payable in the year prescribed by law for payment of the taxes.

In the case of a claim relating to "property taxes
payable," the claimant must have owned and occupied the
homestead on January 2 of the year in which the tax is payable
and (i) the property must have been classified as homestead
property pursuant to section 273.124, on or before December 15
of the assessment year to which the "property taxes payable"
relate; or (ii) the claimant must provide documentation from the
local assessor that application for homestead classification has
been made on or before December 15 of the year in which the
"property taxes payable" were payable and that the assessor has
approved the application.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims
based on rent paid in 2005 and following years.
new text end

Sec. 31.

Minnesota Statutes 2004, section 290A.03, is
amended by adding a subdivision to read:

new text begin Subd. 16. new text end

new text begin Total scheduled rent. new text end

new text begin "Total scheduled rent"
means the sum of the monthly rents assigned to the residential
rental units in the property multiplied by 12. The rents must
be an arm's-length rental, including garage rents if any, but
not including charges for medical services furnished by the
landlord as a part of the rental agreement. In determining
total scheduled rent, no deduction is allowed for vacant units,
uncollected rent, or reduced cash rents in units occupied by
employees or agents of the owner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims
based on rent paid in 2005 and following years.
new text end

Sec. 32.

Minnesota Statutes 2004, section 290A.03, is
amended by adding a subdivision to read:

new text begin Subd. 17. new text end

new text begin Net tax. new text end

new text begin "Net tax" means:
new text end

new text begin (1) the property tax, exclusive of special assessments,
interest, and penalties, and after reduction for any state paid
property tax credits as required in subdivision 13 except for
the reduction under section 273.13, subdivisions 22 and 23; or
new text end

new text begin (2) the payments made in lieu of ad valorem taxes,
including payments of special assessments imposed in lieu of ad
valorem taxes,
new text end

new text begin for the calendar year in which the rent was paid. If a portion
of the property is occupied as a homestead or is used for other
than rental purposes, the net tax is the amount of tax reduced
by the percentage that the nonrental use comprises of the total
square footage of the building. If a portion of the property is
used for purposes other than for residential rental and none of
the property is occupied as a homestead, the net tax is the
amount of the tax of the parcel multiplied by a fraction, the
numerator of which is the net tax capacity of the residential
rental portion and the denominator of which is the total net tax
capacity of the parcel. If a portion of the property is used
for other than rental residential purposes, the county treasurer
shall list on the property tax statement the amount of net tax
pertaining to the rental residential portion of the property.
new text end

new text begin The amount of the net tax must not be reduced by an
abatement or a court-ordered reduction in the property tax on
the property made after the certificate of rent paid has been
provided to the renter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims
based on rent paid in 2005 and following years.
new text end

Sec. 33.

Minnesota Statutes 2004, section 290A.07, is
amended by adding a subdivision to read:

new text begin Subd. 5. new text end

new text begin Early payment; e-file claims. new text end

new text begin The commissioner
may pay a claim up to 30 days earlier than the first permitted
date under subdivision 2a or 3 if the claim is submitted by
electronic means.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 34.

Minnesota Statutes 2004, section 290A.19, is
amended to read:

290A.19 OWNER OR MANAGING AGENT TO FURNISH RENT
CERTIFICATE.

new text begin (a) new text end The owner or managing agent of any property for which
rent is paid for occupancy as a homestead must furnish a
certificate of rent paid to a person who is a renter on December
31, in the form prescribed by the commissioner. If the renter
moves before December 31, the owner or managing agent may give
the certificate to the renter at the time of moving, or mail the
certificate to the forwarding address if an address has been
provided by the renter. The certificate must be made available
to the renter before February 1 of the year following the year
in which the rent was paid. The owner or managing agent must
retain a duplicate of each certificate or an equivalent record
showing the same information for a period of three years. The
duplicate or other record must be made available to the
commissioner upon request. For the purposes of this section,
"owner" includes a park owner as defined under section 327C.01,
subdivision 6, and "property" includes a lot as defined under
section 327C.01, subdivision 3.

new text begin (b) If the owner or managing agent fails to provide the
renter with a certificate of rent constituting property taxes,
the commissioner shall allocate the net tax on the building to
the unit on a square footage basis or other appropriate basis as
the commissioner determines. The renter shall supply the
commissioner with a statement from the county treasurer that
gives the amount of property tax on the parcel, the address and
property tax parcel identification number of the property, and
the number of units in the building.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims
based on rent paid in 2005 and following years.
new text end

Sec. 35.

Minnesota Statutes 2004, section 365.43,
subdivision 1, is amended to read:

Subdivision 1.

deleted text begin levied amount is spending limit deleted text end new text begin total
revenue defined new text end .

A town must not deleted text begin contract debts or deleted text end spend more
money in a year than deleted text begin the taxes levied for the year deleted text end new text begin its total
revenue new text end without a favorable vote of a majority of the town's
electors. new text begin In this section, "total revenue" means property taxes
payable in that year as well as amounts received from all other
sources and amounts carried forward from the last year.
new text end

Sec. 36.

Minnesota Statutes 2004, section 365.431, is
amended to read:

365.431 AMOUNT VOTED AT MEETING IS TAX LIMIT.

new text begin Except as otherwise authorized by law, new text end the tax for town
purposes must not be more than the amount voted to be raised at
the annual town meeting.

Sec. 37.

Minnesota Statutes 2004, section 366.011, is
amended to read:

366.011 CHARGES FOR EMERGENCY SERVICES; COLLECTION.

A town may impose a reasonable service charge for emergency
services, including fire, rescue, medical, and related services
provided by the town or contracted for by the town. If the
service charge remains unpaid 30 days after a notice of
delinquency is sent to the recipient of the service or the
recipient's representative or estate, the town or its contractor
on behalf of the town may use any lawful means allowed to a
private party for the collection of an unsecured delinquent
debt. The town may also use the authority of section 366.012 to
collect unpaid service charges of this kind from delinquent
recipients of services who are owners of taxable real property
in the deleted text begin town deleted text end new text begin state new text end .

The powers conferred by this section are in addition and
supplemental to the powers conferred by any other law for a town
to impose a service charge or assessment for a service provided
by the town or contracted for by the town.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 38.

Minnesota Statutes 2004, section 366.012, is
amended to read:

366.012 COLLECTION OF UNPAID SERVICE CHARGES.

If a town is authorized to impose a service charge deleted text begin on the
owner, lessee, or occupant of property, or any of them, deleted text end for a
governmental service provided by the town, the town board may
certify to the county auditor new text begin of the county in which the
recipient of the services owns real property new text end , on or before
October 15 for each year, any unpaid service charges which shall
then be collected together with property taxes levied against
the property. new text begin The county auditor shall remit to the town all
service charges collected by the auditor on behalf of the town.
new text end A charge may be certified to the auditor only if, on or before
September 15, the town has given written notice to the property
owner of its intention to certify the charge to the auditor.
The service charges shall be subject to the same penalties,
interest, and other conditions provided for the collection of
property taxes. This section is in addition to other law
authorizing the collection of unpaid costs and service charges.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 39.

new text begin [373.251] LEVY FOR NON-COUNTY-OWNED PUBLIC
NURSING HOMES.
new text end

new text begin (a) If a county with a population of 150,000 or more,
according to the 2000 Federal Census, located outside the
metropolitan area as defined in section 473.121, subdivision 2,
owns a nursing home that is funded in whole or part with county
revenue, the county must levy an equal amount annually to be
distributed to all other nursing homes located within the county
that are owned by governmental units.
new text end

new text begin (b) The proceeds of the levy authorized by paragraph (a)
must be prorated among the government-owned nursing homes in the
proportion that the number of beds in each of the
government-owned nursing homes is to the total number of beds in
all of the government-owned nursing homes in the county.
new text end

new text begin (c) The levy authorized by paragraph (a) may be levied in
addition to all other county levies authorized by law.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
levied in 2006, payable in 2007 and thereafter.
new text end

Sec. 40.

Minnesota Statutes 2004, section 473F.02,
subdivision 2, is amended to read:

Subd. 2.

Area.

"Area" means the territory included
within the boundaries of Anoka, Carver, Dakota excluding the
city of Northfield, Hennepin, Ramsey, Scott excluding the city
of New Prague, and Washington Counties new text begin , excluding lands
constituting a major or an intermediate airport as defined under
section 473.625 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and subsequent years.
new text end

Sec. 41.

Minnesota Statutes 2004, section 477A.11,
subdivision 4, is amended to read:

Subd. 4.

Other natural resources land.

"Other natural
resources land" means deleted text begin :
deleted text end

deleted text begin (1) deleted text end any other land presently owned in fee title by the
state and administered by the commissioner, or any tax-forfeited
land, other than platted lots within a city or those lands
described under subdivision 3, clause (2), which is owned by the
state and administered by the commissioner or by the county in
which it is located deleted text begin ; and
deleted text end

deleted text begin (2) land leased by the state from the United States of
America through the United States Secretary of Agriculture
pursuant to Title III of the Bankhead Jones Farm Tenant Act,
which land is commonly referred to as land utilization project
land that is administered by the commissioner deleted text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids paid
in calendar year 2006 and thereafter.
new text end

Sec. 42.

Minnesota Statutes 2004, section 477A.11, is
amended by adding a subdivision to read:

new text begin Subd. 5. new text end

new text begin Land utilization project land. new text end

new text begin "Land
utilization project land" means land that is leased by the state
from the United States through the United States Secretary of
Agriculture according to Title III of the Bankhead Jones Farm
Tenant Act and that is administered by the commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids paid
in calendar year 2006 and thereafter.
new text end

Sec. 43.

Minnesota Statutes 2004, section 477A.12,
subdivision 1, is amended to read:

Subdivision 1.

Types of land; payments.

(a) As an offset
for expenses incurred by counties and towns in support of
natural resources lands, the following amounts are annually
appropriated to the commissioner of natural resources from the
general fund for transfer to the commissioner of revenue. The
commissioner of revenue shall pay the transferred funds to
counties as required by sections 477A.11 to 477A.145. The
amounts are:

(1) for acquired natural resources land, $3, as adjusted
for inflation under section 477A.145, multiplied by the total
number of acres of acquired natural resources land or, at the
county's option three-fourths of one percent of the appraised
value of all acquired natural resources land in the county,
whichever is greater;

(2) 75 cents, as adjusted for inflation under section
477A.145, multiplied by the number of acres of
county-administered other natural resources land; and

new text begin (3) 75 cents, as adjusted for inflation under section
477A.145, multiplied by the total number of acres of land
utilization project land;
new text end

deleted text begin (3) deleted text end new text begin (4) new text end 37.5 cents, as adjusted for inflation under section
477A.145, multiplied by the number of acres of
commissioner-administered other natural resources land located
in each county as of July 1 of each year prior to the payment
year.

(b) The amount determined under paragraph (a), clause (1),
is payable for land that is acquired from a private owner and
owned by the Department of Transportation for the purpose of
replacing wetland losses caused by transportation projects, but
only if the county contains more than 500 acres of such land at
the time the certification is made under subdivision 2.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids paid
in calendar year 2006 and thereafter.
new text end

Sec. 44.

Minnesota Statutes 2004, section 477A.12,
subdivision 2, is amended to read:

Subd. 2.

Procedure.

Lands for which payments in lieu are
made pursuant to section 97A.061, subdivision 3, and Laws 1973,
chapter 567, shall not be eligible for payments under this
section. Each county auditor shall certify to the Department of
Natural Resources during July of each year prior to the payment
year the number of acres of county-administered other natural
resources land within the county. The Department of Natural
resources may, in addition to the certification of acreage,
require descriptive lists of land so certified. The
commissioner of natural resources shall determine and certify to
the commissioner of revenue by March 1 of the payment year:

(1) the number of acres and most recent appraised value of
acquired natural resources land within each county;

(2) the number of acres of commissioner-administered
natural resources land within each county; deleted text begin and
deleted text end

(3) the number of acres of county-administered other
natural resources land within each county, based on the reports
filed by each county auditor with the commissioner of natural
resources new text begin ; and
new text end

new text begin (4) the number of acres of land utilization project land
within each county new text end .

The commissioner of transportation shall determine and
certify to the commissioner of revenue by March 1 of the payment
year the number of acres of land and the appraised value of the
land described in subdivision 1, paragraph (b), but only if it
exceeds 500 acres.

The commissioner of revenue shall determine the
distributions provided for in this section using the number of
acres and appraised values certified by the commissioner of
natural resources and the commissioner of transportation by
March 1 of the payment year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids paid
in calendar year 2006 and thereafter.
new text end

Sec. 45.

Minnesota Statutes 2004, section 477A.14,
subdivision 1, is amended to read:

Subdivision 1.

General distribution.

Except as provided
in subdivision 2 or in section 97A.061, subdivision 5, 40
percent of the total payment to the county shall be deposited in
the county general revenue fund to be used to provide property
tax levy reduction. The remainder shall be distributed by the
county in the following priority:

(a) 37.5 cents, as adjusted for inflation under section
477A.145, for each acre of county-administered other natural
resources land shall be deposited in a resource development fund
to be created within the county treasury for use in resource
development, forest management, game and fish habitat
improvement, and recreational development and maintenance of
county-administered other natural resources land. Any county
receiving less than $5,000 annually for the resource development
fund may elect to deposit that amount in the county general
revenue fund;

(b) From the funds remaining, within 30 days of receipt of
the payment to the county, the county treasurer shall pay each
organized township 30 cents, as adjusted for inflation under
section 477A.145, for each acre of acquired natural resources
land and each acre of land described in section 477A.12,
subdivision 1, paragraph (b), and 7.5 cents, as adjusted for
inflation under section 477A.145, for each acre of other natural
resources land new text begin and each acre of land utilization project land
new text end located within its boundaries. Payments for natural resources
lands not located in an organized township shall be deposited in
the county general revenue fund. Payments to counties and
townships pursuant to this paragraph shall be used to provide
property tax levy reduction, except that of the payments for
natural resources lands not located in an organized township,
the county may allocate the amount determined to be necessary
for maintenance of roads in unorganized townships. Provided
that, if the total payment to the county pursuant to section
477A.12 is not sufficient to fully fund the distribution
provided for in this clause, the amount available shall be
distributed to each township and the county general revenue fund
on a pro rata basis; and

(c) Any remaining funds shall be deposited in the county
general revenue fund. Provided that, if the distribution to the
county general revenue fund exceeds $35,000, the excess shall be
used to provide property tax levy reduction.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids paid
in calendar year 2006 and thereafter.
new text end

Sec. 46.

Laws 1998, chapter 389, article 3, section 42,
subdivision 2, as amended by Laws 2002, chapter 377, article 4,
section 24, is amended to read:

Subd. 2.

Recapture.

(a) Property or any portion thereof
qualifying under section 38 is subject to additional taxes if:

(1) ownership of the property is transferred to anyone
other than the spouse or child of the current owner;

(2) the current owner or the spouse or child of the current
owner has not conveyed or entered into a contract before July 1,
2007, to convey new text begin for ownership or public easement rights, (i) a
portion of new text end the property to deleted text begin a deleted text end new text begin one or more new text end nonprofit deleted text begin foundation
deleted text end new text begin foundations new text end or deleted text begin corporation operating deleted text end new text begin corporations; and (ii) a
portion of the property to one or more local governments; and
those entities shall separately or jointly operate new text end the property
as an art park providing the services included in section 38,
clauses (2) to (5) new text begin , and may also use some of the property for
other public purposes as determined by the local governments new text end ; or

(3) the nonprofit foundation or corporation to which new text begin a
portion of new text end the property was transferred ceases to provide the
services included in section 38, clauses (2) to (5), earlier
than ten years following the effective date of the deleted text begin conveyance
deleted text end new text begin conveyances new text end or of the execution of the deleted text begin contract deleted text end new text begin contracts new text end to
convey.

(b) The additional taxes are imposed at the earlier of (1)
the year following transfer of ownership to anyone other than
the spouse or child of the current owner or a nonprofit
foundation or corporation new text begin or local government new text end operating the
property as an art park new text begin and used for other public purposes new text end , or
(2) for taxes payable in 2008, or new text begin (3) new text end in the event the nonprofit
foundation or corporation to which new text begin a portion of new text end the property was
conveyed ceases to provide the required services within ten
years after the conveyance, for taxes payable in the year
following the year when it ceased to do so.

new text begin The county board, with the approval of the city council,
shall determine the amount of the additional taxes due on the
portion of property which is no longer utilized as an art park;
provided, however, that new text end the additional taxes deleted text begin are equal to deleted text end new text begin must
not be greater than new text end the difference between the taxes determined
new text begin on that portion of the property utilized as an art park new text end under
sections 39 and 40 and the amount determined under subdivision 1
for all years that the property qualified under section 38. deleted text begin The
additional taxes must be extended against the property on the
tax list for the current year; provided, however, that deleted text end No
interest or penalties may be levied on the additional deleted text begin taxes if
timely paid deleted text end new text begin amount provided that it is paid within 30 days of
the county's notice new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective March 1, 2005.
new text end

Sec. 47.

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

new text begin EFFECTIVE DATE. new text end

This section is effective for taxes
levied in 2002, payable in 2003, through taxes levied in deleted text begin 2007
deleted text end new text begin 2009 new text end , payable in deleted text begin 2008 deleted text end new text begin 2010 new text end .

Sec. 48.

Laws 2005, chapter 43, section 1, the effective
date, if enacted, is amended to read:

new text begin EFFECTIVE DATE. new text end

This section is effective for taxes
levied in deleted text begin 2005 deleted text end new text begin 2004 new text end , payable in deleted text begin 2006 deleted text end new text begin 2005 new text end , and thereafter.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 49. new text begin REPORT; PROPOSED STANDARDIZED ASSESSMENT AND
CLASSIFICATION STANDARDS.
new text end

new text begin Recognizing the importance of uniform and professional
property tax assessment practices, the commissioner of revenue,
in consultation with appropriate stakeholder groups shall
develop and issue a report to the chairs of the house and senate
tax committees by February 1, 2006. This report shall contain,
but not be limited to, recommendations and proposed requirements
for achieving standardized assessment and classification of
seasonal residential recreational property, residential
nonhomestead property, timber and woodland property, green acres
property, seasonal residential recreational commercial and
noncommercial property, and commercial/industrial property.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 50. new text begin CODE OF CONDUCT AND ETHICS; ASSESSORS.
new text end

new text begin The commissioner of revenue is directed to develop a code
of conduct and ethics for Minnesota assessors to ensure public
confidence in property assessment. The commissioner shall
consult with representatives of the Minnesota Association of
Assessing Officers, the State Board of Assessors, and any other
groups that the commissioner deems appropriate. The code must
include language that promotes fairness and uniformity and
recommends assessment practices that do not promote the
perception of a conflict of interest. The code must be
completed and recommended to the Minnesota State Board of
Assessors for adopting by January 1, 2006. This code must be
presented as part of the course required by Minnesota Statutes,
section 273.0755, paragraph (c).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 51. new text begin SCHOOL DEBT SERVICE LEVIES; ALTERNATIVE TAX
BASE; PILOT PROJECT.
new text end

new text begin Subdivision 1. new text end

new text begin Commissioner designation. new text end

new text begin The
commissioner of education may select up to three school
districts to participate in the pilot project under this
section. The commissioner must notify the selected school
districts by July 1, 2005.
new text end

new text begin Subd. 2. new text end

new text begin Election by school board. new text end

new text begin A school board
designated by the commissioner under subdivision 1 may by
resolution elect to levy the debt service for a bond issued
after July 1, 2005, and before July 1, 2007, against the
alternative net tax capacity of the district, as defined under
subdivision 6, rather than the net tax capacity of the
district. A resolution to levy against alternative net tax
capacity must be passed at an open meeting of the board, at
least 60 days prior to the referendum election. A district
electing to issue bonds with a levy against alternative net tax
capacity must notify the commissioner of that intention in
filing the proposal required by Minnesota Statutes, section
123B.71, subdivision 9.
new text end

new text begin Subd. 3. new text end

new text begin Debt service equalization revenue. new text end

new text begin For the
purposes of Minnesota Statutes, section 123B.53, subdivision 4,
debt service equalization revenue for a district that has issued
bonds under an election to levy against alternative net tax
capacity is the same as it would be if the levy were being made
against net tax capacity.
new text end

new text begin Subd. 4. new text end

new text begin Apportionment of debt service aid. new text end

new text begin Equalization
aid for a district that has issued bonds under an election to
levy against alternative net tax capacity must be apportioned
between the net tax capacity debt service levy and the
alternative net tax capacity debt service levy in the same
proportions as eligible debt service revenues resulting from
bonds issued against net tax capacity are to eligible debt
service revenues resulting from bonds issued against alternative
net tax capacity.
new text end

new text begin Subd. 5. new text end

new text begin Alternative net tax capacity debt service levy.
new text end

new text begin The eligible debt service revenues resulting from bonds issued
against alternative net tax capacity, minus the debt service
equalization aid apportioned to the alternative net tax capacity
levy, must be levied against the alternative net tax capacity of
the district as defined in subdivision 6, and must be separately
certified to the county auditor under Minnesota Statutes,
section 275.07.
new text end

new text begin Subd. 6. new text end

new text begin Alternative net tax capacity. new text end

new text begin "Alternative net
tax capacity" means the net tax capacity of all taxable property
in a district, as defined in Minnesota Statutes, section 273.13,
except:
new text end

new text begin (1) the first tier of class 2a property, excluding the
portion of class 2a property consisting of the house, garage,
and surrounding one acre of land of an agricultural homestead,
has an alternative net tax capacity equal to 0.14 percent of its
taxable market value;
new text end

new text begin (2) the upper tier of class 2a property and all other class
2 property has an alternative net tax capacity equal to 0.25
percent of its taxable market value;
new text end

new text begin (3) noncommercial class 4c(1) property has an alternative
net tax capacity equal to 0.75 percent of its taxable market
value;
new text end

new text begin (4) class 4a and 4b property has an alternative net tax
capacity equal to one percent of its taxable market value;
new text end

new text begin (5) the first tier of class 3 property has an alternative
net tax capacity equal to 1.25 percent of its taxable market
value; and
new text end

new text begin (6) class 5 property and the upper tier of class 3 property
has an alternative net tax capacity equal to 1.5 percent of its
taxable market value.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and thereafter.
new text end

Sec. 52. new text begin SCHOOL PROPERTY; EXEMPTION 2005 ONLY.
new text end

new text begin Notwithstanding Minnesota Statutes, section 272.02,
subdivision 38, paragraph (b), the following property is exempt
from taxation for assessment year 2004, for taxes payable in
2005, if it meets all the following criteria:
new text end

new text begin (1) is used to provide direct educational instruction for
grades 7 through 10;
new text end

new text begin (2) is located in a city of the first class that has a
population greater than 250,000 and less than 350,000;
new text end

new text begin (3) was purchased after July 1, 2004, by a nonprofit that
is exempt from federal income tax under section 501(c)(3) of the
Internal Revenue Code; and
new text end

new text begin (4) is leased and operated by two nonprofit corporations
organized under Minnesota Statutes, chapter 317A.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 53. new text begin REPEALER.
new text end

new text begin Laws 1998, chapter 389, article 3, section 41, is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

ARTICLE 3

PROPERTY TAX AIDS AND CREDITS

Section 1.

Minnesota Statutes 2004, section 4A.02, is
amended to read:

4A.02 STATE DEMOGRAPHER.

(a) The director shall appoint a state demographer. The
demographer must be professionally competent in demography and
must possess demonstrated ability based upon past performance.

(b) The demographer shall:

(1) continuously gather and develop demographic data
relevant to the state;

(2) design and test methods of research and data
collection;

(3) periodically prepare population projections for the
state and designated regions and periodically prepare
projections for each county or other political subdivision of
the state as necessary to carry out the purposes of this
section;

(4) review, comment on, and prepare analysis of population
estimates and projections made by state agencies, political
subdivisions, other states, federal agencies, or nongovernmental
persons, institutions, or commissions;

(5) serve as the state liaison with the United States
Bureau of the Census, coordinate state and federal demographic
activities to the fullest extent possible, and aid the
legislature in preparing a census data plan and form for each
decennial census;

(6) compile an annual study of population estimates on the
basis of county, regional, or other political or geographical
subdivisions as necessary to carry out the purposes of this
section and section 4A.03;

(7) by January 1 of each year, issue a report to the
legislature containing an analysis of the demographic
implications of the annual population study and population
projections;

(8) prepare maps for all counties in the state, all
municipalities with a population of 10,000 or more, and other
municipalities as needed for census purposes, according to scale
and detail recommended by the United States Bureau of the
Census, with the maps of cities showing precinct boundaries;

(9) prepare an estimate of population and of the number of
households for each governmental subdivision for which the
Metropolitan Council does not prepare an annual estimate, and
convey the estimates to the governing body of each political
subdivision by deleted text begin May deleted text end new text begin June new text end 1 of each year;

(10) direct, under section 414.01, subdivision 14, and
certify population and household estimates of annexed or
detached areas of municipalities or towns after being notified
of the order or letter of approval by the director;

(11) prepare, for any purpose for which a population
estimate is required by law or needed to implement a law, a
population estimate of a municipality or town whose population
is affected by action under section 379.02 or 414.01,
subdivision 14; and

(12) prepare an estimate of average household size for each
statutory or home rule charter city with a population of 2,500
or more by deleted text begin May deleted text end new text begin June new text end 1 of each year.

(c) A governing body may challenge an estimate made under
paragraph (b) by filing their specific objections in writing
with the state demographer by June deleted text begin 10 deleted text end new text begin 24 new text end . If the challenge does
not result in an acceptable estimate deleted text begin by June 24 deleted text end , the governing
body may have a special census conducted by the United States
Bureau of the Census. The political subdivision must notify the
state demographer by July 1 of its intent to have the special
census conducted. The political subdivision must bear all costs
of the special census. Results of the special census must be
received by the state demographer by the next April 15 to be
used in that year's deleted text begin May deleted text end new text begin June new text end 1 estimate to the political
subdivision under paragraph (b).

new text begin (d) The state demographer shall certify the estimates of
population and household size to the commissioner of revenue by
July 15 each year, including any estimates still under objection.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2004, section 273.1384,
subdivision 1, is amended to read:

Subdivision 1.

Residential homestead market value
credit.

Each county auditor shall determine a homestead credit
for each class 1a, 1b, 1c, and 2a homestead property within the
county equal to 0.4 percent of the new text begin first $76,000 of new text end market value
of the property deleted text begin . The amount of homestead credit for a homestead
may not exceed $304 and is reduced by deleted text end new text begin minus new text end .09 percent of the
market value in excess of $76,000. new text begin The credit amount may not be
less than zero. new text end In the case of an agricultural or resort
homestead, only the market value of the house, garage, and
immediately surrounding one acre of land is eligible in
determining the property's homestead credit. In the case of a
property which is classified as part homestead and part
nonhomestead, new text begin (i) new text end the credit shall apply only to the homestead
portion of the property deleted text begin . deleted text end new text begin , but (ii) if a portion of a property is
classified as nonhomestead solely because not all the owners
occupy the property, or solely because both spouses do not
occupy the property, the credit amount shall be initially
computed as if that nonhomestead portion were also in the
homestead class and then prorated to the owner-occupant's
percentage of ownership or prorated to one-half if both spouses
do not occupy the property.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and thereafter.
new text end

Sec. 3.

Minnesota Statutes 2004, section 276A.01,
subdivision 7, is amended to read:

Subd. 7.

Population.

"Population" means the most recent
estimate of the population of a municipality made by the state
demographer and filed with the commissioner of revenue as of
July deleted text begin 1 deleted text end new text begin 15 new text end of the year in which a municipality's distribution net
tax capacity is calculated. The state demographer shall
annually estimate the population of each municipality and, in
the case of a municipality which is located partly within and
partly without the area, the proportion of the total which
resides within the area, and shall file the estimates with the
commissioner of revenue.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 4.

new text begin [473.24] POPULATION ESTIMATES.
new text end

new text begin (a) The Metropolitan Council shall annually prepare an
estimate of population for each county, city, and town in the
metropolitan area and an estimate of the number of households
and average household size for each city in the metropolitan
area with a population of 2,500 or more, and an estimate of
population over age 65 for each county in the metropolitan area,
and convey the estimates to the governing body of each county,
city, or town by June 1 each year. In the case of a city or
town that is located partly within and partly without the
metropolitan area, the Metropolitan Council shall estimate the
proportion of the total population and the average size of
households that reside within the area. The Metropolitan
Council may prepare an estimate of the population and of the
average household size for any other political subdivision
located in the metropolitan area.
new text end

new text begin (b) A governing body may challenge an estimate made under
this section by filing its specific objections in writing with
the Metropolitan Council by June 24. If the challenge does not
result in an acceptable estimate, the governing body may have a
special census conducted by the United States Bureau of the
Census. The political subdivision must notify the Metropolitan
Council on or before July 1 of its intent to have the special
census conducted. The political subdivision must bear all costs
of the special census. Results of the special census must be
received by the Metropolitan Council by the next April 15 to be
used in that year's June 1 estimate under this section. The
Metropolitan Council shall certify the estimates of population
and the average household size to the state demographer and to
the commissioner of revenue by July 15 each year, including any
estimates still under objection.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2004, section 473F.02,
subdivision 7, is amended to read:

Subd. 7.

Population.

"Population" means the most recent
estimate of the population of a municipality made by the
Metropolitan Council new text begin under section 473.24 new text end and filed with the
commissioner of revenue as of July deleted text begin 1 deleted text end new text begin 15 new text end of the year in which a
municipality's distribution net tax capacity is calculated. deleted text begin The
council shall annually estimate the population of each
municipality as of a date which it determines and, in the case
of a municipality which is located partly within and partly
without the area, the proportion of the total which resides
within the area, and shall promptly thereafter file its
estimates with the commissioner of revenue.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2004, section 477A.011,
subdivision 3, is amended to read:

Subd. 3.

Population.

"Population" means the
population new text begin estimated or new text end established as of July deleted text begin 1 deleted text end new text begin 15 new text end in an aid
calculation year by the most recent federal census, by a special
census conducted under contract with the United States Bureau of
the Census, by a population estimate made by the Metropolitan
Council new text begin pursuant to section 473.24 new text end , or by a population estimate
of the state demographer made pursuant to section 4A.02,
whichever is the most recent as to the stated date of the count
or estimate for the preceding calendar year new text begin , and which has been
certified to the commissioner of revenue on or before July 15 of
the aid calculation year new text end . The term "per capita" refers to
population as defined by this subdivision. new text begin A revision of an
estimate or count is effective for these purposes only if it is
certified to the commissioner on or before July 15 of the aid
calculation year. Clerical errors in the certification or use
of the estimates and counts established as of July 15 in the aid
calculation year are subject to correction within the time
periods allowed under section 477A.014.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2004, section 477A.011,
subdivision 34, is amended to read:

Subd. 34.

City revenue need.

(a) For a city with a
population equal to or greater than 2,500, "city revenue need"
is the sum of (1) 5.0734098 times the pre-1940 housing
percentage; plus (2) 19.141678 times the population decline
percentage; plus (3) 2504.06334 times the road accidents factor;
plus (4) 355.0547; minus (5) the metropolitan area factor; minus
(6) 49.10638 times the household size.

(b) For a city with a population less than 2,500, "city
revenue need" is the sum of (1) 2.387 times the pre-1940 housing
percentage; plus (2) 2.67591 times the commercial industrial
percentage; plus (3) 3.16042 times the population decline
percentage; plus (4) 1.206 times the transformed population;
minus (5) 62.772.

(c) new text begin For a city with a population of 2,500 or more and a
population in one of the most recently available five years that
was less than 2,500, "city revenue need" is the sum of (1) its
city revenue need calculated under paragraph (a) multiplied by
its transition factor; plus (2) its city revenue need calculated
under the formula in paragraph (b) multiplied by the difference
between one and its transition factor. For purposes of this
paragraph, a city's "transition factor" is equal to 0.2
multiplied by the number of years that the city's population
estimate has been 2,500 or more. This provision only applies
for aids payable in calendar years 2006 to 2008 to cities with a
2002 population of less than 2,500. It applies to any city for
aids payable in 2009 and thereafter.
new text end

new text begin (d) new text end The city revenue need cannot be less than zero.

deleted text begin (d) deleted text end new text begin (e) new text end For calendar year 2005 and subsequent years, the
city revenue need for a city, as determined in paragraphs (a)
to deleted text begin (c) deleted text end new text begin (d) new text end , is multiplied by the ratio of the annual implicit
price deflator for government consumption expenditures and gross
investment for state and local governments as prepared by the
United States Department of Commerce, for the most recently
available year to the 2003 implicit price deflator for state and
local government purchases.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with
aids payable in 2006.
new text end

Sec. 8.

Minnesota Statutes 2004, section 477A.011,
subdivision 35, is amended to read:

Subd. 35.

Tax effort rate.

"Tax effort rate" means the
net levy for all cities divided by the sum of the city net tax
capacity for all cities new text begin , unless the need increase percentage
determined under section 477A.013, subdivision 8, is 100
percent, in which case the tax effort rate is the rate needed so
that the total aid under section 477A.013, subdivision 9, equals
the total amount available for aid under section 477A.03, after
the subtractions in section 477A.014 new text end . For purposes of this
section, "net levy" means the city levy, after all adjustments,
used for calculating the local tax rate under section 275.08 for
taxes payable in the year prior to the aid distribution. The
fiscal disparity distribution levy under chapter 276A or 473F is
included in net levy.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with
aids payable in 2006.
new text end

Sec. 9.

Minnesota Statutes 2004, section 477A.011,
subdivision 36, is amended to read:

Subd. 36.

City aid base.

(a) Except as otherwise
provided in this subdivision, "city aid base" is zero.

(b) The city aid base for any city with a population less
than 500 is increased by $40,000 for aids payable in calendar
year 1995 and thereafter, and the maximum amount of total aid it
may receive under section 477A.013, subdivision 9, paragraph
(c), is also increased by $40,000 for aids payable in calendar
year 1995 only, provided that:

(i) the average total tax capacity rate for taxes payable
in 1995 exceeds 200 percent;

(ii) the city portion of the tax capacity rate exceeds 100
percent; and

(iii) its city aid base is less than $60 per capita.

(c) The city aid base for a city is increased by $20,000 in
1998 and thereafter and the maximum amount of total aid it may
receive under section 477A.013, subdivision 9, paragraph (c), is
also increased by $20,000 in calendar year 1998 only, provided
that:

(i) the city has a population in 1994 of 2,500 or more;

(ii) the city is located in a county, outside of the
metropolitan area, which contains a city of the first class;

(iii) the city's net tax capacity used in calculating its
1996 aid under section 477A.013 is less than $400 per capita;
and

(iv) at least four percent of the total net tax capacity,
for taxes payable in 1996, of property located in the city is
classified as railroad property.

(d) The city aid base for a city is increased by $200,000
in 1999 and thereafter and the maximum amount of total aid it
may receive under section 477A.013, subdivision 9, paragraph
(c), is also increased by $200,000 in calendar year 1999 only,
provided that:

(i) the city was incorporated as a statutory city after
December 1, 1993;

(ii) its city aid base does not exceed $5,600; and

(iii) the city had a population in 1996 of 5,000 or more.

(e) The city aid base for a city is increased by $450,000
in 1999 to 2008 and the maximum amount of total aid it may
receive under section 477A.013, subdivision 9, paragraph (c), is
also increased by $450,000 in calendar year 1999 only, provided
that:

(i) the city had a population in 1996 of at least 50,000;

(ii) its population had increased by at least 40 percent in
the ten-year period ending in 1996; and

(iii) its city's net tax capacity for aids payable in 1998
is less than $700 per capita.

(f) Beginning in 2004, the city aid base for a city is
equal to the sum of its city aid base in 2003 and the amount of
additional aid it was certified to receive under section 477A.06
in 2003. For 2004 only, the maximum amount of total aid a city
may receive under section 477A.013, subdivision 9, paragraph
(c), is also increased by the amount it was certified to receive
under section 477A.06 in 2003.

(g) The city aid base for a city is increased by $150,000
for aids payable in 2000 and thereafter, and the maximum amount
of total aid it may receive under section 477A.013, subdivision
9, paragraph (c), is also increased by $150,000 in calendar year
2000 only, provided that:

(1) the city has a population that is greater than 1,000
and less than 2,500;

(2) its commercial and industrial percentage for aids
payable in 1999 is greater than 45 percent; and

(3) the total market value of all commercial and industrial
property in the city for assessment year 1999 is at least 15
percent less than the total market value of all commercial and
industrial property in the city for assessment year 1998.

(h) The city aid base for a city is increased by $200,000
in 2000 and thereafter, and the maximum amount of total aid it
may receive under section 477A.013, subdivision 9, paragraph
(c), is also increased by $200,000 in calendar year 2000 only,
provided that:

(1) the city had a population in 1997 of 2,500 or more;

(2) the net tax capacity of the city used in calculating
its 1999 aid under section 477A.013 is less than $650 per
capita;

(3) the pre-1940 housing percentage of the city used in
calculating 1999 aid under section 477A.013 is greater than 12
percent;

(4) the 1999 local government aid of the city under section
477A.013 is less than 20 percent of the amount that the formula
aid of the city would have been if the need increase percentage
was 100 percent; and

(5) the city aid base of the city used in calculating aid
under section 477A.013 is less than $7 per capita.

(i) The city aid base for a city is increased by $102,000
in 2000 and thereafter, and the maximum amount of total aid it
may receive under section 477A.013, subdivision 9, paragraph
(c), is also increased by $102,000 in calendar year 2000 only,
provided that:

(1) the city has a population in 1997 of 2,000 or more;

(2) the net tax capacity of the city used in calculating
its 1999 aid under section 477A.013 is less than $455 per
capita;

(3) the net levy of the city used in calculating 1999 aid
under section 477A.013 is greater than $195 per capita; and

(4) the 1999 local government aid of the city under section
477A.013 is less than 38 percent of the amount that the formula
aid of the city would have been if the need increase percentage
was 100 percent.

(j) The city aid base for a city is increased by $32,000 in
2001 and thereafter, and the maximum amount of total aid it may
receive under section 477A.013, subdivision 9, paragraph (c), is
also increased by $32,000 in calendar year 2001 only, provided
that:

(1) the city has a population in 1998 that is greater than
200 but less than 500;

(2) the city's revenue need used in calculating aids
payable in 2000 was greater than $200 per capita;

(3) the city net tax capacity for the city used in
calculating aids available in 2000 was equal to or less than
$200 per capita;

(4) the city aid base of the city used in calculating aid
under section 477A.013 is less than $65 per capita; and

(5) the city's formula aid for aids payable in 2000 was
greater than zero.

(k) The city aid base for a city is increased by $7,200 in
2001 and thereafter, and the maximum amount of total aid it may
receive under section 477A.013, subdivision 9, paragraph (c), is
also increased by $7,200 in calendar year 2001 only, provided
that:

(1) the city had a population in 1998 that is greater than
200 but less than 500;

(2) the city's commercial industrial percentage used in
calculating aids payable in 2000 was less than ten percent;

(3) more than 25 percent of the city's population was 60
years old or older according to the 1990 census;

(4) the city aid base of the city used in calculating aid
under section 477A.013 is less than $15 per capita; and

(5) the city's formula aid for aids payable in 2000 was
greater than zero.

(l) The city aid base for a city is increased by $45,000 in
2001 and thereafter and by an additional $50,000 in calendar
years 2002 to 2011, and the maximum amount of total aid it may
receive under section 477A.013, subdivision 9, paragraph (c), is
also increased by $45,000 in calendar year 2001 only, and by
$50,000 in calendar year 2002 only, provided that:

(1) the net tax capacity of the city used in calculating
its 2000 aid under section 477A.013 is less than $810 per
capita;

(2) the population of the city declined more than two
percent between 1988 and 1998;

(3) the net levy of the city used in calculating 2000 aid
under section 477A.013 is greater than $240 per capita; and

(4) the city received less than $36 per capita in aid under
section 477A.013, subdivision 9, for aids payable in 2000.

(m) The city aid base for a city with a population of
10,000 or more which is located outside of the seven-county
metropolitan area is increased in 2002 and thereafter, and the
maximum amount of total aid it may receive under section
477A.013, subdivision 9, paragraph (b) or (c), is also increased
in calendar year 2002 only, by an amount equal to the lesser of:

(1)(i) the total population of the city, as determined by
the United States Bureau of the Census, in the 2000 census, (ii)
minus 5,000, (iii) times 60; or

(2) $2,500,000.

(n) The city aid base is increased by $50,000 in 2002 and
thereafter, and the maximum amount of total aid it may receive
under section 477A.013, subdivision 9, paragraph (c), is also
increased by $50,000 in calendar year 2002 only, provided that:

(1) the city is located in the seven-county metropolitan
area;

(2) its population in 2000 is between 10,000 and 20,000;
and

(3) its commercial industrial percentage, as calculated for
city aid payable in 2001, was greater than 25 percent.

(o) The city aid base for a city is increased by $150,000
in calendar years 2002 to 2011 and the maximum amount of total
aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $150,000 in calendar year
2002 only, provided that:

(1) the city had a population of at least 3,000 but no more
than 4,000 in 1999;

(2) its home county is located within the seven-county
metropolitan area;

(3) its pre-1940 housing percentage is less than 15
percent; and

(4) its city net tax capacity per capita for taxes payable
in 2000 is less than $900 per capita.

(p) The city aid base for a city is increased by $200,000
beginning in calendar year 2003 and the maximum amount of total
aid it may receive under section 477A.013, subdivision 9,
paragraph (c), is also increased by $200,000 in calendar year
2003 only, provided that the city qualified for an increase in
homestead and agricultural credit aid under Laws 1995, chapter
264, article 8, section 18.

(q) The city aid base for a city is increased by $200,000
in 2004 only and the maximum amount of total aid it may receive
under section 477A.013, subdivision 9, is also increased by
$200,000 in calendar year 2004 only, if the city is the site of
a nuclear dry cask storage facility.

(r) The city aid base for a city is increased by $10,000 in
2004 and thereafter and the maximum total aid it may receive
under section 477A.013, subdivision 9, is also increased by
$10,000 in calendar year 2004 only, if the city was included in
a federal major disaster designation issued on April 1, 1998,
and its pre-1940 housing stock was decreased by more than 40
percent between 1990 and 2000.

new text begin (s) The city aid base for a city is increased by $25,000 in
2006 and thereafter and the maximum total aid it may receive
under section 477A.013, subdivision 9, is also increased by
$25,000 in calendar year 2006 only if the city had a population
in 2003 of at least 1,000 and has a state park for which the
city provides rescue services and which comprised at least 14
percent of the total geographic area included within the city
boundaries in 2000.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids
payable in 2006 and thereafter.
new text end

Sec. 10.

Minnesota Statutes 2004, section 477A.011,
subdivision 38, is amended to read:

Subd. 38.

Household size.

"Household size" means the
average number of persons per household in the jurisdiction as
most recently estimated and reported by the state
demographer new text begin and Metropolitan Council new text end as of July deleted text begin 1 deleted text end new text begin 15 new text end of the aid
calculation year. new text begin A revision to an estimate or enumeration is
effective for these purposes only if it is certified to the
commissioner on or before July 15 of the aid calculation year.
Clerical errors in the certification or use of estimates and
counts established as of July 15 in the aid calculation year are
subject to correction within the time periods allowed under
section 477A.014.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2004, section 477A.0124,
subdivision 2, is amended to read:

Subd. 2.

Definitions.

(a) For the purposes of this
section, the following terms have the meanings given them.

(b) "County program aid" means the sum of "county need aid,"
"county tax base equalization aid," and "county transition aid."

(c) "Age-adjusted population" means a county's population
multiplied by the county age index.

(d) "County age index" means the percentage of the
population over age 65 within the county divided by the
percentage of the population over age 65 within the state,
except that the age index for any county may not be greater than
1.8 nor less than 0.8.

(e) "Population over age 65" means the population over age
65 established as of July deleted text begin 1 deleted text end new text begin 15 new text end in an aid calculation year by the
most recent federal census, by a special census conducted under
contract with the United States Bureau of the Census, by a
population estimate made by the Metropolitan Council, or by a
population estimate of the state demographer made pursuant to
section 4A.02, whichever is the most recent as to the stated
date of the count or estimate for the preceding calendar
year new text begin and which has been certified to the commissioner of revenue
on or before July 15 of the aid calculation year new text end . new text begin A revision to
an estimate or count is effective for these purposes only if
certified to the commissioner on or before July 15 of the aid
calculation year. Clerical errors in the certification or use
of estimates and counts established as of July 15 in the aid
calculation year are subject to correction within the time
periods allowed under section 477A.014.
new text end

(f) "Part I crimes" means the three-year average annual
number of Part I crimes reported for each county by the
Department of Public Safety for the most recent years available.
By July 1 of each year, the commissioner of public safety shall
certify to the commissioner of revenue the number of Part I
crimes reported for each county for the three most recent
calendar years available.

(g) "Households receiving food stamps" means the average
monthly number of households receiving food stamps for the three
most recent years for which data is available. By July 1 of
each year, the commissioner of human services must certify to
the commissioner of revenue the average monthly number of
households in the state and in each county that receive food
stamps, for the three most recent calendar years available.

(h) "County net tax capacity" means the net tax capacity of
the county, computed analogously to city net tax capacity under
section 477A.011, subdivision 20.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 12.

Minnesota Statutes 2004, section 477A.0124,
subdivision 4, is amended to read:

Subd. 4.

County tax-base equalization aid.

(a) For
deleted text begin 2005 deleted text end new text begin 2006 new text end and subsequent years, the money appropriated to county
tax-base equalization aid each calendar year new text begin , after the payment
under paragraph (f), new text end shall be apportioned among the counties
according to each county's tax-base equalization aid factor.

(b) A county's tax-base equalization aid factor is equal to
the amount by which (i) $185 times the county's population,
exceeds (ii) 9.45 percent of the county's net tax capacity.

(c) In the case of a county with a population less than
10,000, the factor determined in paragraph (b) shall be
multiplied by a factor of three.

(d) In the case of a county with a population greater than
or equal to 10,000, but less than 12,500, the factor determined
in paragraph (b) shall be multiplied by a factor of two.

(e) In the case of a county with a population greater than
500,000, the factor determined in paragraph (b) shall be
multiplied by a factor of 0.25.

new text begin (f) Before the money appropriated to county base
equalization aid is apportioned among the counties as provided
in paragraph (a), an amount up to $73,259 is allocated annually
to Anoka County and up to $59,664 is annually allocated to
Washington County for the county to pay postretirement costs of
health insurance premiums for court employees. The allocation
under this paragraph is in addition to the allocations under
paragraphs (a) to (e).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids
payable in 2006 and thereafter.
new text end

Sec. 13.

Minnesota Statutes 2004, section 477A.013,
subdivision 8, is amended to read:

Subd. 8.

City formula aid.

In calendar year 2004 and
subsequent years, the formula aid for a city is equal to the
need increase percentage multiplied by the difference between
(1) the city's revenue need multiplied by its population, and
(2) the sum of the city's net tax capacity multiplied by the tax
effort rate deleted text begin , and deleted text end new text begin ; new text end the taconite aids under sections 298.28 and
298.282, multiplied by the following percentages:

(i) zero percent for aids payable in 2004;

(ii) 25 percent for aids payable in 2005;

(iii) 50 percent for aids payable in 2006;

(iv) 75 percent for aids payable in 2007; and

(v) 100 percent for aids payable in 2008 and thereafter new text begin ;
and
new text end

new text begin for first class cities only, the amount raised by a one-half of
one percent local sales and use tax imposed in the city in the
calendar year before the year in which the aid is being
calculated new text end .

No city may have a formula aid amount less than zero. The need
increase percentage must be the same for all cities.

The applicable need increase percentage must be calculated
by the Department of Revenue so that the total of the aid under
subdivision 9 equals the total amount available for aid under
section 477A.03 after the subtraction under section 477A.014,
subdivisions 4 and 5. new text begin The need increase percentage may not
exceed 100 percent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with
aids payable in 2006.
new text end

Sec. 14.

Minnesota Statutes 2004, section 477A.013,
subdivision 9, is amended to read:

Subd. 9.

City aid distribution.

(a) In calendar year
2002 and thereafter, each city shall receive an aid distribution
equal to the sum of (1) the city formula aid under subdivision
8, and (2) its city aid base.

(b) deleted text begin The aid for a city in calendar year 2004 shall not
exceed the amount of its aid in calendar year 2003 after the
reductions under Laws 2003, First Special Session chapter 21,
article 5.
deleted text end

deleted text begin (c) deleted text end For aids payable in 2005 and thereafter, the total aid
for any city shall not exceed the sum of (1) ten percent of the
city's net levy for the year prior to the aid distribution plus
(2) its total aid in the previous year. For aids payable in
deleted text begin 2005 deleted text end new text begin 2006 new text end and thereafter, the total aid for any city with a
population of 2,500 or more new text begin , except for a city of the first
class located within the seven-county metropolitan area, new text end may not
decrease from its total aid under this section in the previous
year by an amount greater than ten percent of its net levy in
the year prior to the aid distribution.

deleted text begin (d) deleted text end new text begin (c) new text end deleted text begin For aids payable in 2004 only, the total aid for a
city with a population less than 2,500 may not be less than the
amount it was certified to receive in 2003 minus the greater of
(1) the reduction to this aid payment in 2003 under Laws 2003,
First Special Session chapter 21, article 5, or (2) five percent
of its 2003 aid amount. deleted text end For aids payable in 2005 and
thereafter, the total aid for a city with a population less than
2,500 must not be less than the amount it was certified to
receive in the previous year minus five percent of its 2003
certified aid amount.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with
aids payable in 2006.
new text end

Sec. 15.

Minnesota Statutes 2004, section 477A.013, is
amended by adding a subdivision to read:

new text begin Subd. 10. new text end

new text begin Levy adjustments for aid
decreases. new text end

new text begin Notwithstanding any local ordinance or charter
provision, a city whose certified aid under subdivision 9 is
less than the amount it received in the previous year under the
same subdivision may increase its levy payable in the same year
as the certified aid is paid by an amount equal to the aid
decrease for that year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with
property tax levies payable in 2006 and thereafter.
new text end

Sec. 16.

Minnesota Statutes 2004, section 477A.03,
subdivision 2a, is amended to read:

Subd. 2a.

Cities.

For aids payable in 2004, the total
aids paid under section 477A.013, subdivision 9, are limited to
$429,000,000. For aids payable in 2005 deleted text begin and thereafter deleted text end , the
total aids paid under section 477A.013, subdivision 9,
are deleted text begin increased deleted text end new text begin limited new text end to $437,052,000. new text begin For aids payable in
2006, the total aids paid under section 477A.013, subdivision 9,
is limited to $419,552,000. For aids payable in 2007 and
thereafter, the total aids paid under section 477A.013,
subdivision 9, is limited to $437,052,000 provided that the
taxpayer satisfaction survey in section 275.065 is in effect for
property taxes levied in the year in which the aid is
calculated, otherwise the amount is limited to $419,552,000.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with
aids payable in 2006.
new text end

Sec. 17.

Minnesota Statutes 2004, section 477A.03,
subdivision 2b, is amended to read:

Subd. 2b.

Counties.

(a) For aids payable in calendar
year 2005 and thereafter, the total aids paid to counties under
section 477A.0124, subdivision 3, are limited to $100,500,000.
Each calendar year, $500,000 shall be retained by the
commissioner of revenue to make reimbursements to the
commissioner of finance for payments made under section 611.27.
For calendar year 2004, the amount shall be in addition to the
payments authorized under section 477A.0124, subdivision 1. For
calendar year 2005 and subsequent years, the amount shall be
deducted from the appropriation under this paragraph. The
reimbursements shall be to defray the additional costs
associated with court-ordered counsel under section 611.27. Any
retained amounts not used for reimbursement in a year shall be
included in the next distribution of county need aid that is
certified to the county auditors for the purpose of property tax
reduction for the next taxes payable year.

(b) For aids payable in 2005 and deleted text begin thereafter deleted text end new text begin 2006 new text end , the total
aids under section 477A.0124, subdivision 4, are limited to
$105,000,000. new text begin For aids payable in 2007 and thereafter, the
total aid under section 477A.0124, subdivision 4, is limited to
$105,132,923. new text end The commissioner of finance shall bill the
commissioner of revenue for the cost of preparation of local
impact notes as required by section 3.987, not to exceed
$207,000 in fiscal year 2004 and thereafter. The commissioner
of education shall bill the commissioner of revenue for the cost
of preparation of local impact notes for school districts as
required by section 3.987, not to exceed $7,000 in fiscal year
2004 and thereafter. The commissioner of revenue shall deduct
the amounts billed under this paragraph from the appropriation
under this paragraph. The amounts deducted are appropriated to
the commissioner of finance and the commissioner of education
for the preparation of local impact notes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids
payable in 2007 and thereafter.
new text end

Sec. 18.

Laws 2003, First Special Session chapter 21,
article 5, section 13, is amended to read:

Sec. 13 new text begin 2004 CITY AID REDUCTIONS.
new text end

The commissioner of revenue shall compute an aid reduction
amount for 2004 for each city as provided in this section.

The initial aid reduction amount for each city is the
amount by which the city's aid distribution under Minnesota
Statutes, section 477A.013, and related provisions payable in
2003 exceeds the city's 2004 distribution under those provisions.

The minimum aid reduction amount for a city is the amount
of its reduction in 2003 under section 12. If a city receives
an increase to its city aid base under Minnesota Statutes,
section 477A.011, subdivision 36, its minimum aid reduction is
reduced by an equal amount.

The maximum aid reduction amount for a city is an amount
equal to 14 percent of the city's total 2004 levy plus aid
revenue base, except that if the city has a city net tax
capacity for aids payable in 2004, as defined in Minnesota
Statutes, section 477A.011, subdivision 20, of $700 per capita
or less, the maximum aid reduction shall not exceed an amount
equal to 13 percent of the city's total 2004 levy plus aid
revenue base.

If the initial aid reduction amount for a city is less than
the minimum aid reduction amount for that city, the final aid
reduction amount for the city is the sum of the initial aid
reduction amount and the lesser of the amount of the city's
payable 2004 reimbursement under Minnesota Statutes, section
273.1384, or the difference between the minimum and initial aid
reduction amounts for the city new text begin , and the amount of the final aid
reduction in excess of the initial aid reduction is deducted
from the city's reimbursements pursuant to Minnesota Statutes,
section 273.1384 new text end .

If the initial aid reduction amount for a city is greater
than the maximum aid reduction amount for the city, the city
receives an additional distribution under this section equal to
the result of subtracting the maximum aid reduction amount from
the initial aid reduction amount. This distribution shall be
paid in equal installments in 2004 on the dates specified in
Minnesota Statutes, section 477A.015. The amount necessary for
these additional distributions is appropriated to the
commissioner of revenue from the general fund in fiscal year
2005.

deleted text begin The initial aid reduction is applied to the city's
distribution pursuant to Minnesota Statutes, section 477A.013,
and any aid reduction in excess of the initial aid reduction is
applied to the city's reimbursements pursuant to Minnesota
Statutes, section 273.1384.
deleted text end

To the extent that sufficient information is available on
each payment date in 2004, the commissioner of revenue shall pay
the reimbursements reduced under this section in equal
installments on the payment dates provided in law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids
payable in 2004.
new text end

Sec. 19.

Laws 2003, First Special Session chapter 21,
article 6, section 9, is amended to read:

Sec. 9 new text begin DEFINITIONS.
new text end

(a) For purposes of sections 9 to 15, the following terms
have the meanings given them in this section.

(b) The 2003 and 2004 "levy plus aid revenue base" for a
county is the sum of that county's certified property tax levy
for taxes payable in 2003, plus the sum of the amounts the
county was certified to receive in the designated calendar year
as:

(1) homestead and agricultural credit aid under Minnesota
Statutes, section 273.1398, subdivision 2, plus any additional
aid under section 16, minus the amount calculated under section
273.1398, subdivision 4a, paragraph (b), for counties in
judicial districts one, three, six, and ten, and 25 percent of
the amount calculated under section 273.1398, subdivision 4a,
paragraph (b), for counties in judicial districts two and four;

(2) the amount of county manufactured home homestead and
agricultural credit aid computed for the county for payment in
2003 under section 273.166;

(3) criminal justice aid under Minnesota Statutes, section
477A.0121;

(4) family preservation aid under Minnesota Statutes,
section 477A.0122;

(5) taconite aids under Minnesota Statutes, sections 298.28
and 298.282, including any aid which was required to be placed
in a special fund for expenditure in the next succeeding year;
and

(6) county program aid under section 477A.0124 new text begin , exclusive
of the attached machinery aid component new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids
payable in 2004.
new text end

Sec. 20. new text begin 2005 AND 2006 CITY AID PAYMENTS.
new text end

new text begin In 2005 and 2006, market value credit reimbursements for
each city payable under Minnesota Statutes, section 273.1384,
are reduced by the dollar amount of the 2003 reduction in market
value credit reimbursements for that city due to Laws 2003,
First Special Session chapter 21, article 5, section 12. No
city's 2005 or 2006 market value credit reimbursements are
reduced to less than zero under this section. To the extent
sufficient information is available on each payment date, the
commissioner shall pay the annual 2005 and 2006 market value
credit reimbursement amounts, after reduction under this
section, to cities in equal installments on the dates specified
in Minnesota Statutes, section 273.1384.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 21. new text begin COURT AID ADJUSTMENT.
new text end

new text begin For aids payable in 2005 only, the amount of court aid paid
to Anoka County under Minnesota Statutes, section 273.1398,
subdivision 4a, is increased by $36,630 for aids payable in 2005
only and the amount paid to Washington County under Minnesota
Statutes, section 273.1398, subdivision 4a, is increased by
$29,832 for aids payable in 2005 only.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids
payable in 2005 only.
new text end

Sec. 22. new text begin DISTRICT COURTS BUDGET.
new text end

new text begin The district courts general fund appropriation is reduced
by $66,462 in fiscal year 2006 and $132,923 beginning in fiscal
year 2007 to fund the amount transferred to county tax base
equalization aid to fund the payments under Minnesota Statutes,
section 477A.0124, subdivision 4, paragraph (f), and section 21.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

ARTICLE 4

DEPARTMENT OF REVENUE PROPERTY TAXES

Section 1.

Minnesota Statutes 2004, section 168A.05,
subdivision 1a, is amended to read:

Subd. 1a.

Manufactured home; statement of property tax
payment.

In the case of a manufactured home as defined in
section 327.31, subdivision 6, the department shall not issue a
certificate of title unless the application under section
168A.04 is accompanied with a statement from the county auditor
or county treasurer where the manufactured home is presently
located, stating that all manufactured home personal property
taxes levied on the unit in the name of the current owner at the
time of transfer have been paid. new text begin For this purpose, manufactured
home personal property taxes are treated as levied on January 1
of the payable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2004, section 270.11,
subdivision 2, is amended to read:

Subd. 2.

County assessor's reports of assessment filed
with commissioner.

Each county assessor shall file by April 1
with the commissioner of revenue a copy of the abstract that
will be acted upon by the local and county boards of review.
The abstract must list the real and personal property in the
county itemized by assessment districts. The assessor of each
county in the state shall file with the commissioner, within ten
working days following final action of the local board of review
or equalization and within five days following final action of
the county board of equalization, any changes made by the local
or county board. The information must be filed in the manner
prescribed by the commissioner. It must be accompanied by a
printed or typewritten copy of the proceedings of the
appropriate board.

The final abstract of assessments after adjustments by the
State Board of Equalization and inclusion of any omitted
property shall be submitted to the commissioner of revenue on or
before September 1 of each calendar year. The final abstract
must separately report the captured tax capacity of tax
increment financing districts under section 469.177, subdivision
2, the deleted text begin metropolitan revenue deleted text end new text begin areawide net tax capacity
new text end contribution deleted text begin value deleted text end new text begin values determined new text end under deleted text begin section deleted text end new text begin sections
276A.05, subdivision 1, and new text end 473F.07, new text begin subdivision 1, new text end and the
value subject to the power line credit under section 273.42.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2004, section 270.16,
subdivision 2, is amended to read:

Subd. 2.

Failure to appraise.

When an assessor has
failed to properly appraise at least deleted text begin one-quarter deleted text end new text begin one-fifth new text end of
the parcels of property in a district or county as provided in
section 273.01, the commissioner of revenue shall appoint a
special assessor and deputy assessor as necessary and cause a
reappraisal to be made of the property due for reassessment in
accordance with law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2004, section 272.01,
subdivision 2, is amended to read:

Subd. 2.

Effective date.

new text begin This section is effective the day
following final enactment.
new text end

Sec. 5. Minnesota Statutes 2004, section 272.02,
subdivision 1a, is amended to read:

Subd. 1a.

Limitations on exemptions.

The exemptions
granted by subdivision 1 are subject to the limits contained in
the other subdivisions of this section, section 272.025, deleted text begin or
273.13, subdivision 25, paragraph (c), clause (1) or (2), or
paragraph (d), clause (2) deleted text end new text begin and all other provisions of applicable
law new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 6. Minnesota Statutes 2004, section 272.02,
subdivision 7, is amended to read:

Subd. 7.

Institutions of public charity.

Institutions of
purely public charity are exempt deleted text begin except parcels of property
containing structures and the structures described in section
273.13, subdivision 25, paragraph (e), other than those that
qualify for exemption under subdivision 26 deleted text end . new text begin In determining
whether rental housing property qualifies for exemption under
this subdivision, the following are not gifts or donations to
the owner of the rental housing:
new text end

new text begin (1) rent assistance provided by the government to or on
behalf of tenants; and
new text end

new text begin (2) financing assistance or tax credits provided by the
government to the owner on condition that specific units or a
specific quantity of units be set aside for persons or families
with certain income characteristics.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2004 and thereafter.
new text end

Sec. 7. Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 68. new text end

new text begin Property subject to taconite production tax or
net proceeds tax. new text end

new text begin (a) Real and personal property described in
section 298.25 is exempt to the extent the tax on taconite and
iron sulphides under section 298.24 is described in section
298.25 as being in lieu of other taxes on such property. This
exemption applies for taxes payable in each year that the tax
under section 298.24 is payable with respect to such property.
new text end

new text begin (b) Deposits of mineral, metal, or energy resources the
mining of which is subject to taxation under section 298.015 are
exempt. This exemption applies for taxes payable in each year
that the tax under section 298.015 is payable with respect to
such property.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 8. Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 69. new text end

new text begin Religious corporations. new text end

new text begin Personal and real
property that a religious corporation, formed under section
317A.909, necessarily uses for a religious purpose is exempt to
the extent provided in section 317A.909, subdivision 3.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 9. Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 70. new text end [CHILDREN'S HOMES.] new text begin Personal and real property
owned by a corporation formed under section 317A.907 is exempt
to the extent provided in section 317A.907, subdivision 7.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 10. Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 71. new text end

new text begin Housing and redevelopment authority and tribal
housing authority property. new text end

new text begin Property owned by a housing and
redevelopment authority described in chapter 469, or by a
designated housing authority described in section 469.040,
subdivision 5, is exempt to the extent provided in chapter 469.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 72. new text end

new text begin Property of housing and redevelopment
authorities. new text end

new text begin Property of projects of housing and redevelopment
authorities are exempt to the extent permitted by sections
469.042, subdivision 1, and 469.043, subdivisions 2 and 5.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 12.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 73. new text end

new text begin Property of regional rail authority. new text end

new text begin Property
of a regional rail authority as defined in chapter 398A is
exempt to the extent permitted by section 398A.05.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 13.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 74. new text end

new text begin Spirit mountain recreation area
authority. new text end

new text begin Property owned by the Spirit Mountain Recreation
Area Authority is exempt from taxation to the extent provided in
Laws 1973, chapter 327, section 6.
new text end

Sec. 14.

Minnesota Statutes 2004, section 272.02, is
amended by adding a subdivision to read:

new text begin Subd. 75. new text end

new text begin Installed capacity defined. new text end

new text begin For purposes of
this section, the term "installed capacity" means generator
nameplate capacity.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 15.

Minnesota Statutes 2004, section 272.029,
subdivision 4, is amended to read:

Subd. 4.

Reports.

(a) An owner of a wind energy
conversion system subject to tax under subdivision 3 shall file
a report with the commissioner of revenue annually on or before
deleted text begin March deleted text end new text begin February new text end 1 detailing the amount of electricity in
kilowatt-hours that was produced by the wind energy conversion
system for the previous calendar year. The commissioner shall
prescribe the form of the report. The report must contain the
information required by the commissioner to determine the tax
due to each county under this section for the current year. If
an owner of a wind energy conversion system subject to taxation
under this section fails to file the report by the due date, the
commissioner of revenue shall determine the tax based upon the
nameplate capacity of the system multiplied by a capacity factor
of 40 percent.

(b) On or before deleted text begin March 31 deleted text end new text begin February 28 new text end , the commissioner of
revenue shall notify the owner of the wind energy conversion
systems of the tax due to each county for the current year and
shall certify to the county auditor of each county in which the
systems are located the tax due from each owner for the current
year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for reports and
certifications due in 2006 and thereafter.
new text end

Sec. 16.

Minnesota Statutes 2004, section 272.029,
subdivision 6, is amended to read:

Subd. 6.

Distribution of revenues.

Revenues from the
taxes imposed under subdivision 5 must be part of the settlement
between the county treasurer and the county auditor under
section 276.09. The revenue must be distributed by the county
auditor or the county treasurer to deleted text begin all deleted text end new text begin local new text end taxing
jurisdictions in which the wind energy conversion system is
located deleted text begin , deleted text end new text begin as follows: beginning with distributions in 2006, 80
percent to counties; 14 percent to cities and townships; and six
percent to school districts; and for distributions occurring in
2004 and 2005 new text end in the same proportion that each of the new text begin local
new text end taxing jurisdiction's current year's net tax capacity based tax
rate is to the current year's total new text begin local new text end net tax capacity based
rate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 17.

Minnesota Statutes 2004, section 273.11,
subdivision 8, is amended to read:

Subd. 8.

Limited equity cooperative apartments.

For the
purposes of this subdivision, the terms defined in this
subdivision have the meanings given them.

A "limited equity cooperative" is a corporation organized
under chapter 308A new text begin or 308B new text end , which has as its primary purpose the
provision of housing and related services to its members which
meets one of the following criteria with respect to the income
of its members: (1) a minimum of 75 percent of members must
have incomes at or less than 90 percent of area median income,
(2) a minimum of 40 percent of members must have incomes at or
less than 60 percent of area median income, or (3) a minimum of
20 percent of members must have incomes at or less than 50
percent of area median income. For purposes of this clause,
"member income" shall mean the income of a member existing at
the time the member acquires cooperative membership, and median
income shall mean the St. Paul-Minneapolis metropolitan area
median income as determined by the United States Department of
Housing and Urban Development. It must also meet the following
requirements:

(a) The articles of incorporation set the sale price of
occupancy entitling cooperative shares or memberships at no more
than a transfer value determined as provided in the articles.
That value may not exceed the sum of the following:

(1) the consideration paid for the membership or shares by
the first occupant of the unit, as shown in the records of the
corporation;

(2) the fair market value, as shown in the records of the
corporation, of any improvements to the real property that were
installed at the sole expense of the member with the prior
approval of the board of directors;

(3) accumulated interest, or an inflation allowance not to
exceed the greater of a ten percent annual noncompounded
increase on the consideration paid for the membership or share
by the first occupant of the unit, or the amount that would have
been paid on that consideration if interest had been paid on it
at the rate of the percentage increase in the revised Consumer
Price Index for All Urban Consumers for the Minneapolis-St. Paul
metropolitan area prepared by the United States Department of
Labor, provided that the amount determined pursuant to this
clause may not exceed $500 for each year or fraction of a year
the membership or share was owned; plus

(4) real property capital contributions shown in the
records of the corporation to have been paid by the transferor
member and previous holders of the same membership, or of
separate memberships that had entitled occupancy to the unit of
the member involved. These contributions include contributions
to a corporate reserve account the use of which is restricted to
real property improvements or acquisitions, contributions to the
corporation which are used for real property improvements or
acquisitions, and the amount of principal amortized by the
corporation on its indebtedness due to the financing of real
property acquisition or improvement or the averaging of
principal paid by the corporation over the term of its real
property-related indebtedness.

(b) The articles of incorporation require that the board of
directors limit the purchase price of stock or membership
interests for new member-occupants or resident shareholders to
an amount which does not exceed the transfer value for the
membership or stock as defined in clause (a).

(c) The articles of incorporation require that the total
distribution out of capital to a member shall not exceed that
transfer value.

(d) The articles of incorporation require that upon
liquidation of the corporation any assets remaining after
retirement of corporate debts and distribution to members will
be conveyed to a charitable organization described in section
501(c)(3) of the Internal Revenue Code of 1986, as amended
through December 31, 1992, or a public agency.

A "limited equity cooperative apartment" is a dwelling unit
owned by a limited equity cooperative.

"Occupancy entitling cooperative share or membership" is
the ownership interest in a cooperative organization which
entitles the holder to an exclusive right to occupy a dwelling
unit owned or leased by the cooperative.

For purposes of taxation, the assessor shall value a unit
owned by a limited equity cooperative at the lesser of its
market value or the value determined by capitalizing the net
operating income of a comparable apartment operated on a rental
basis at the capitalization rate used in valuing comparable
buildings that are not limited equity cooperatives. If a
cooperative fails to operate in accordance with the provisions
of clauses (a) to (d), the property shall be subject to
additional property taxes in the amount of the difference
between the taxes determined in accordance with this subdivision
for the last ten years that the property had been assessed
pursuant to this subdivision and the amount that would have been
paid if the provisions of this subdivision had not applied to
it. The additional taxes, plus interest at the rate specified
in section 549.09, shall be extended against the property on the
tax list for the current year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2004 and thereafter.
new text end

Sec. 18.

Minnesota Statutes 2004, section 273.124,
subdivision 3, is amended to read:

Subd. 3.

Cooperatives and charitable corporations;
homestead and other property.

(a) When property is owned by a
corporation or association organized under chapter 308A new text begin or 308B new text end ,
and each person who owns a share or shares in the corporation or
association is entitled to occupy a building on the property, or
a unit within a building on the property, the corporation or
association may claim homestead treatment for each dwelling, or
for each unit in the case of a building containing several
dwelling units, or for the part of the value of the building
occupied by a shareholder. Each building or unit must be
designated by legal description or number. The net tax capacity
of each building or unit that qualifies for assessment as a
homestead under this subdivision must include not more than
one-half acre of land, if platted, nor more than 80 acres if
unplatted. The net tax capacity of the property is the sum of
the net tax capacities of each of the respective buildings or
units comprising the property, including the net tax capacity of
each unit's or building's proportionate share of the land and
any common buildings. To qualify for the treatment provided by
this subdivision, the corporation or association must be wholly
owned by persons having a right to occupy a building or unit
owned by the corporation or association. A charitable
corporation organized under the laws of Minnesota and not
otherwise exempt thereunder with no outstanding stock qualifies
for homestead treatment with respect to member residents of the
dwelling units who have purchased and hold residential
participation warrants entitling them to occupy the units.

(b) To the extent provided in paragraph (a), a cooperative
or corporation organized under chapter 308A may obtain separate
assessment and valuation, and separate property tax statements
for each residential homestead, residential nonhomestead, or for
each seasonal residential recreational building or unit not used
for commercial purposes. The appropriate class rates under
section 273.13 shall be applicable as if each building or unit
were a separate tax parcel; provided, however, that the tax
parcel which exists at the time the cooperative or corporation
makes application under this subdivision shall be a single
parcel for purposes of property taxes or the enforcement and
collection thereof, other than as provided in paragraph (a) or
this paragraph.

(c) A member of a corporation or association may initially
obtain the separate assessment and valuation and separate
property tax statements, as provided in paragraph (b), by
applying to the assessor by June 30 of the assessment year.

(d) When a building, or dwelling units within a building,
no longer qualify under paragraph (a) or (b), the current owner
must notify the assessor within 30 days. Failure to notify the
assessor within 30 days shall result in the loss of benefits
under paragraph (a) or (b) for taxes payable in the year that
the failure is discovered. For these purposes, "benefits under
paragraph (a) or (b)" means the difference in the net tax
capacity of the building or units which no longer qualify as
computed under paragraph (a) or (b) and as computed under the
otherwise applicable law, times the local tax rate applicable to
the building for that taxes payable year. Upon discovery of a
failure to notify, the assessor shall inform the auditor of the
difference in net tax capacity for the building or buildings in
which units no longer qualify, and the auditor shall calculate
the benefits under paragraph (a) or (b). Such amount, plus a
penalty equal to 100 percent of that amount, shall then be
demanded of the building's owner. The property owner may appeal
the county's determination by serving copies of a petition for
review with county officials as provided in section 278.01 and
filing a proof of service as provided in section 278.01 with the
Minnesota Tax Court within 60 days of the date of the notice
from the county. The appeal shall be governed by the Tax Court
procedures provided in chapter 271, for cases relating to the
tax laws as defined in section 271.01, subdivision 5;
disregarding sections 273.125, subdivision 5, and 278.03, but
including section 278.05, subdivision 2. If the amount of the
benefits under paragraph (a) or (b) and penalty are not paid
within 60 days, and if no appeal has been filed, the county
auditor shall certify the amount of the benefit and penalty to
the succeeding year's tax list to be collected as part of the
property taxes on the affected property.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2004 and thereafter.
new text end

Sec. 19.

Minnesota Statutes 2004, section 273.124,
subdivision 6, is amended to read:

Subd. 6.

Leasehold cooperatives.

When one or more
dwellings or one or more buildings which each contain several
dwelling units is owned by a nonprofit corporation subject to
the provisions of chapter 317A and qualifying under section
501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as
amended through December 31, 1990, or a limited partnership
which corporation or partnership operates the property in
conjunction with a cooperative association, and has received
public financing, homestead treatment may be claimed by the
cooperative association on behalf of the members of the
cooperative for each dwelling unit occupied by a member of the
cooperative. The cooperative association must provide the
assessor with the Social Security numbers of those members. To
qualify for the treatment provided by this subdivision, the
following conditions must be met:

(a) the cooperative association must be organized under
chapter 308A new text begin or 308B new text end and all voting members of the board of
directors must be resident tenants of the cooperative and must
be elected by the resident tenants of the cooperative;

(b) the cooperative association must have a lease for
occupancy of the property for a term of at least 20 years, which
permits the cooperative association, while not in default on the
lease, to participate materially in the management of the
property, including material participation in establishing
budgets, setting rent levels, and hiring and supervising a
management agent;

(c) to the extent permitted under state or federal law, the
cooperative association must have a right under a written
agreement with the owner to purchase the property if the owner
proposes to sell it; if the cooperative association does not
purchase the property it is offered for sale, the owner may not
subsequently sell the property to another purchaser at a price
lower than the price at which it was offered for sale to the
cooperative association unless the cooperative association
approves the sale;

(d) a minimum of 40 percent of the cooperative
association's members must have incomes at or less than 60
percent of area median gross income as determined by the United
States Secretary of Housing and Urban Development under section
142(d)(2)(B) of the Internal Revenue Code of 1986, as amended
through December 31, 1991. For purposes of this clause, "member
income" means the income of a member existing at the time the
member acquires cooperative membership;

(e) if a limited partnership owns the property, it must
include as the managing general partner a nonprofit organization
operating under the provisions of chapter 317A and qualifying
under section 501(c)(3) or 501(c)(4) of the Internal Revenue
Code of 1986, as amended through December 31, 1990, and the
limited partnership agreement must provide that the managing
general partner have sufficient powers so that it materially
participates in the management and control of the limited
partnership;

(f) prior to becoming a member of a leasehold cooperative
described in this subdivision, a person must have received
notice that (1) describes leasehold cooperative property in
plain language, including but not limited to the effects of
classification under this subdivision on rents, property taxes
and tax credits or refunds, and operating expenses, and (2)
states that copies of the articles of incorporation and bylaws
of the cooperative association, the lease between the owner and
the cooperative association, a sample sublease between the
cooperative association and a tenant, and, if the owner is a
partnership, a copy of the limited partnership agreement, can be
obtained upon written request at no charge from the owner, and
the owner must send or deliver the materials within seven days
after receiving any request;

(g) if a dwelling unit of a building was occupied on the
60th day prior to the date on which the unit became leasehold
cooperative property described in this subdivision, the notice
described in paragraph (f) must have been sent by first class
mail to the occupant of the unit at least 60 days prior to the
date on which the unit became leasehold cooperative property.
For purposes of the notice under this paragraph, the copies of
the documents referred to in paragraph (f) may be in proposed
version, provided that any subsequent material alteration of
those documents made after the occupant has requested a copy
shall be disclosed to any occupant who has requested a copy of
the document. Copies of the articles of incorporation and
certificate of limited partnership shall be filed with the
secretary of state after the expiration of the 60-day period
unless the change to leasehold cooperative status does not
proceed;

(h) the county attorney of the county in which the property
is located must certify to the assessor that the property meets
the requirements of this subdivision;

(i) the public financing received must be from at least one
of the following sources:

(1) tax increment financing proceeds used for the
acquisition or rehabilitation of the building or interest rate
write-downs relating to the acquisition of the building;

(2) government issued bonds exempt from taxes under section
103 of the Internal Revenue Code of 1986, as amended through
December 31, 1991, the proceeds of which are used for the
acquisition or rehabilitation of the building;

(3) programs under section 221(d)(3), 202, or 236, of Title
II of the National Housing Act;

(4) rental housing program funds under Section 8 of the
United States Housing Act of 1937 or the market rate family
graduated payment mortgage program funds administered by the
Minnesota Housing Finance Agency that are used for the
acquisition or rehabilitation of the building;

(5) low-income housing credit under section 42 of the
Internal Revenue Code of 1986, as amended through December 31,
1991;

(6) public financing provided by a local government used
for the acquisition or rehabilitation of the building, including
grants or loans from (i) federal community development block
grants; (ii) HOME block grants; or (iii) residential rental
bonds issued under chapter 474A; or

(7) other rental housing program funds provided by the
Minnesota Housing Finance Agency for the acquisition or
rehabilitation of the building;

(j) at the time of the initial request for homestead
classification or of any transfer of ownership of the property,
the governing body of the municipality in which the property is
located must hold a public hearing and make the following
findings:

(1) that the granting of the homestead treatment of the
apartment's units will facilitate safe, clean, affordable
housing for the cooperative members that would otherwise not be
available absent the homestead designation;

(2) that the owner has presented information satisfactory
to the governing body showing that the savings garnered from the
homestead designation of the units will be used to reduce
tenant's rents or provide a level of furnishing or maintenance
not possible absent the designation; and

(3) that the requirements of paragraphs (b), (d), and (i)
have been met.

Homestead treatment must be afforded to units occupied by
members of the cooperative association and the units must be
assessed as provided in subdivision 3, provided that any unit
not so occupied shall be classified and assessed pursuant to the
appropriate class. No more than three acres of land may, for
assessment purposes, be included with each dwelling unit that
qualifies for homestead treatment under this subdivision.

When dwelling units no longer qualify under this
subdivision, the current owner must notify the assessor within
60 days. Failure to notify the assessor within 60 days shall
result in the loss of benefits under this subdivision for taxes
payable in the year that the failure is discovered. For these
purposes, "benefits under this subdivision" means the difference
in the net tax capacity of the units which no longer qualify as
computed under this subdivision and as computed under the
otherwise applicable law, times the local tax rate applicable to
the building for that taxes payable year. Upon discovery of a
failure to notify, the assessor shall inform the auditor of the
difference in net tax capacity for the building or buildings in
which units no longer qualify, and the auditor shall calculate
the benefits under this subdivision. Such amount, plus a
penalty equal to 100 percent of that amount, shall then be
demanded of the building's owner. The property owner may appeal
the county's determination by serving copies of a petition for
review with county officials as provided in section 278.01 and
filing a proof of service as provided in section 278.01 with the
Minnesota Tax Court within 60 days of the date of the notice
from the county. The appeal shall be governed by the Tax Court
procedures provided in chapter 271, for cases relating to the
tax laws as defined in section 271.01, subdivision 5;
disregarding sections 273.125, subdivision 5, and 278.03, but
including section 278.05, subdivision 2. If the amount of the
benefits under this subdivision and penalty are not paid within
60 days, and if no appeal has been filed, the county auditor
shall certify the amount of the benefit and penalty to the
succeeding year's tax list to be collected as part of the
property taxes on the affected buildings.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2004 and thereafter.
new text end

Sec. 20.

Minnesota Statutes 2004, section 273.124,
subdivision 8, is amended to read:

Subd. 8.

Homestead owned by or leased to family farm
corporation, joint farm venture, limited liability company, or
partnership.

(a) Each family farm corporation deleted text begin , each deleted text end new text begin ; each new text end joint
family farm venture deleted text begin , deleted text end new text begin ; and new text end each limited liability company deleted text begin , and
each deleted text end new text begin or new text end partnership deleted text begin operating deleted text end new text begin which operates new text end a family farm new text begin ; new text end is
entitled to class 1b under section 273.13, subdivision 22,
paragraph (b), or class 2a assessment for one homestead occupied
by a shareholder, member, or partner thereof who is residing on
the land, and actively engaged in farming of the land owned by
the family farm corporation, joint family farm venture, limited
liability company, or partnership deleted text begin operating a family farm deleted text end .
Homestead treatment applies even if legal title to the property
is in the name of the family farm corporation, joint family farm
venture, limited liability company, or partnership deleted text begin operating the
family farm deleted text end , and not in the name of the person residing on it.

"Family farm corporation," "family farm," and "partnership
operating a family farm" have the meanings given in section
500.24, except that the number of allowable shareholders,
members, or partners under this subdivision shall not exceed
12. "Limited liability company" has the meaning contained in
sections 322B.03, subdivision 28, and 500.24, subdivision 2,
paragraphs (l) and (m). "Joint family farm venture" means a
cooperative agreement among two or more farm enterprises
authorized to operate a family farm under section 500.24.

(b) In addition to property specified in paragraph (a), any
other residences owned by family farm corporations, joint family
farm ventures, limited liability companies, or partnerships
deleted text begin operating a family farm deleted text end described in paragraph (a) which are
located on agricultural land and occupied as homesteads by its
shareholders, members, or partners who are actively engaged in
farming on behalf of that corporation, joint farm venture,
limited liability company, or partnership must also be assessed
as class 2a property or as class 1b property under section
273.13.

(c) Agricultural property that is owned by a member,
partner, or shareholder of a family farm corporation or joint
family farm venture, limited liability company new text begin operating a
family farm new text end , or by a partnership operating a family farm and
leased to the family farm corporation, limited liability
company, deleted text begin or deleted text end partnership deleted text begin operating a family farm deleted text end , or joint farm
venture, as defined in paragraph (a), is eligible for
classification as class 1b or class 2a under section 273.13, if
the owner is actually residing on the property, and is actually
engaged in farming the land on behalf of that corporation, joint
farm venture, limited liability company, or partnership. This
paragraph applies without regard to any legal possession rights
of the family farm corporation, joint family farm venture,
limited liability company, or partnership deleted text begin operating a family
farm deleted text end under the lease.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 21.

Minnesota Statutes 2004, section 273.124,
subdivision 21, is amended to read:

Subd. 21.

Trust property; homestead.

Real property held
by a trustee under a trust is eligible for classification as
homestead property if:

(1) the grantor or surviving spouse of the grantor of the
trust occupies and uses the property as a homestead;

(2) a relative or surviving relative of the grantor who
meets the requirements of subdivision 1, paragraph (c), in the
case of residential real estate; or subdivision 1, paragraph
(d), in the case of agricultural property, occupies and uses the
property as a homestead;

(3) a family farm corporation, joint farm venture, limited
liability company, or partnership operating a family farm rents
the property held by a trustee under a trust, and new text begin the grantor,
the spouse of the grantor, or the son or daughter of the
grantor, who is also new text end a shareholder, member, or partner of the
corporation, joint farm venture, limited liability company, or
partnership occupies and uses the property as a homestead, deleted text begin and
deleted text end new text begin or new text end is actively farming the property on behalf of the
corporation, joint farm venture, limited liability company, or
partnership; or

(4) a person who has received homestead classification for
property taxes payable in 2000 on the basis of an unqualified
legal right under the terms of the trust agreement to occupy the
property as that person's homestead and who continues to use the
property as a homestead new text begin or a person who received the homestead
classification for taxes payable in 2005 under clause (3) who
does not qualify under clause (3) for taxes payable in 2006 or
thereafter but who continues to qualify under clause (3) as it
existed for taxes payable in 2005 new text end .

For purposes of this subdivision, "grantor" is defined as
the person creating or establishing a testamentary, inter Vivos,
revocable or irrevocable trust by written instrument or through
the exercise of a power of appointment.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and thereafter.
new text end

Sec. 22.

Minnesota Statutes 2004, section 273.1315, is
amended to read:

273.1315 CERTIFICATION OF 1B PROPERTY.

Any property owner seeking classification and assessment of
the owner's homestead as class 1b property pursuant to section
273.13, subdivision 22, paragraph (b), shall file with the
commissioner of revenue a 1b homestead declaration, on a form
prescribed by the commissioner. The declaration shall contain
the following information:

(a) the information necessary to verify that new text begin on or before
June 30 of the filing year, new text end the property owner or the owner's
spouse satisfies the requirements of section 273.13, subdivision
22, paragraph (b), for 1b classification; and

(b) any additional information prescribed by the
commissioner.

The declaration must be filed on or before October 1 to be
effective for property taxes payable during the succeeding
calendar year. The declaration and any supplementary
information received from the property owner pursuant to this
section shall be subject to chapter 270B. If approved by the
commissioner, the declaration remains in effect until the
property no longer qualifies under section 273.13, subdivision
22, paragraph (b). Failure to notify the commissioner within 30
days that the property no longer qualifies under that paragraph
because of a sale, change in occupancy, or change in the status
or condition of an occupant shall result in the penalty provided
in section 273.124, subdivision 13, computed on the basis of the
class 1b benefits for the property, and the property shall lose
its current class 1b classification.

The commissioner shall provide to the assessor on or before
November 1 a listing of the parcels of property qualifying for
1b classification.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 23.

Minnesota Statutes 2004, section 273.19,
subdivision 1a, is amended to read:

Subd. 1a.

Effective date.

new text begin This section is effective the day
following final enactment.
new text end

Sec. 24. Minnesota Statutes 2004, section 273.372, is
amended to read:

273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD
VALUATIONS.]

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin (a) As provided in this section,
new text end an appeal by a utility or railroad company concerning deleted text begin the
exemption, valuation, or classification of deleted text end property for which
the commissioner of revenue has provided the city or county
assessor with valuations by order, or for which the commissioner
has recommended values to the city or county assessor, must be
brought against the commissioner deleted text begin in Tax Court or in district
court of the county where the property is located deleted text end , and not
against the county or taxing district where the property is
located.

new text begin (b) This section governs administrative appeals and appeals
to court of a claim that utility or railroad operating property
has been partially, unfairly, or unequally assessed, or assessed
at a valuation greater than its real or actual value,
misclassified, or that the property is exempt. This section
applies only to property described in sections 270.81,
subdivision 1, 273.33, 273.35, 273.36, and 273.37, and only with
regard to taxable net tax capacities that have been provided to
the city or county by the commissioner and which have not been
changed by city or county. If the taxable net tax capacity
being appealed is not the taxable net tax capacity established
by the commissioner, or if the appeal claims that the tax rate
applied against the parcel is incorrect, or that the tax has
been paid, this section does not apply.
new text end

new text begin Subd. 2. new text end

new text begin Contents and filing of petition. new text end

new text begin (a) In all
appeals to court that are required to be brought against the
commissioner under this section, the petition initiating the
appeal must be served on the commissioner and must be filed with
the Tax Court in Ramsey County, as provided in paragraph (b) or
(c).
new text end

new text begin (b) new text end If the appeal to court is from an order of the
commissioner, it must be brought under chapter 271 new text begin , except that
when the provisions of this section conflict with chapter 271,
this section prevails. In addition, the petition must include
all the parcels encompassed by that order which the petitioner
claims have been partially, unfairly, or unequally assessed,
assessed at a valuation greater than their real or actual value,
misclassified, or are exempt. For this purpose, an order of the
commissioner is either (1) a certification or notice of value by
the commissioner for property described in subdivision 1, or (2)
the final determination by the commissioner of either an
administrative appeal conference or informal administrative
appeal described in subdivision 4 new text end .

new text begin (c) new text end If the appeal is from the deleted text begin exemption, valuation,
classification, or deleted text end tax that results from implementation of the
commissioner's order new text begin , certification, new text end or recommendation, it must
be brought under chapter 278, and the provisions in that chapter
apply, except that service shall be on the commissioner only and
not on the deleted text begin county deleted text end new text begin local new text end officials specified in section 278.01,
subdivision 1 new text begin , and if any other provision of this section
conflicts with chapter 278, this section prevails. In addition,
the petition must include either all the utility parcels or all
the railroad parcels in the state in which the petitioner claims
an interest and which the petitioner claims have been partially,
unfairly, or unequally assessed, assessed at a valuation greater
than their real or actual value, misclassified, or are
exempt new text end . deleted text begin This provision applies to the property described in
sections 273.33, 273.35, 273.36, and 273.37, but only if the
appealed values have remained unchanged from those provided to
the city or county by the commissioner. If the exemption,
valuation, or classification being appealed has been changed by
the city or county, then the action must be brought under
chapter 278 in the county where the property is located and
proper service must be made upon the county officials as
specified in section 278.01, subdivision 1.
deleted text end

new text begin Subd. 3. new text end

new text begin Notice. new text end

Upon filing of any appeal new text begin in court new text end by a
utility company or railroad against the commissioner new text begin pursuant to
this section new text end , the commissioner shall give notice by first class
mail to new text begin the county auditor of new text end each county deleted text begin which would be
affected by the appeal deleted text end new text begin where property included in the petition
is located new text end .

new text begin Subd. 4. new text end

new text begin Administrative appeals. new text end

new text begin (a) new text end Companies that
submit the reports under section 270.82 or 273.371 by the date
specified in that section, or by the date specified by the
commissioner in an extension, may appeal administratively to the
commissioner deleted text begin under the procedures in section 270.11, subdivision
6, deleted text end prior to bringing an action in deleted text begin Tax Court or in district deleted text end court
deleted text begin , however, instituting an administrative appeal deleted text end new text begin by submitting a
written request new text end with the commissioner deleted text begin does not change or
modify deleted text end new text begin for a conference within ten days after the date of the
commissioner's valuation certification or notice to the company,
or by May 15, whichever is earlier. The commissioner shall
conduct the conference upon the commissioner's entire files and
records and such further information as may be offered. The
conference must be held no later than 20 days after the date of
the commissioner's valuation certification or notice to the
company, or by the date specified by the commissioner in an
extension. Within 60 days after the conference the commissioner
shall make a final determination of the matter and shall notify
the company promptly of the determination. The conference is
not a contested case hearing.
new text end

new text begin (b) In addition to the opportunity for a conference under
paragraph (a), the commissioner shall make a more informal
procedure available to railroad and utility companies to
question values established by the commissioner through
certification or notice. The availability of the informal
procedure does not change or modify the deadline for requesting
a conference under paragraph (a), new text end the deadline in section 271.06
for appealing an order of the commissioner deleted text begin in Tax Court deleted text end new text begin , new text end or the
deadline in section 278.01 for deleted text begin filing a property tax claim or
objection in Tax Court or district deleted text end new text begin appealing property taxes in
new text end court.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective September 1,
2005, and thereafter.
new text end

Sec. 25.

Minnesota Statutes 2004, section 274.014,
subdivision 2, is amended to read:

Subd. 2.

Appeals and equalization course.

deleted text begin By no later
than January 1, deleted text end new text begin Beginning in new text end 2006, and each year thereafter,
there must be at least one member at each meeting of a local
board of appeal and equalization who has attended an appeals and
equalization course developed or approved by the commissioner
within the last four years, as certified by the commissioner.
The course may be offered in conjunction with a meeting of the
Minnesota League of Cities or the Minnesota Association of
Townships. The course content must include, but need not be
limited to, a review of the handbook developed by the
commissioner under subdivision 1.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 26.

Minnesota Statutes 2004, section 274.014,
subdivision 3, is amended to read:

Subd. 3.

Proof of compliance; transfer of duties.

new text begin (a)
new text end Any city or town that deleted text begin does not deleted text end new text begin conducts local boards of appeal
and equalization meetings must new text end provide proof to the county
assessor by December 1, 2006, and each year thereafter, that it
is in compliance with the requirements of subdivision 2 deleted text begin , and
that it had deleted text end new text begin . Beginning in 2006, this notice must also verify
that there was new text end a quorum new text begin of voting members new text end at each meeting of the
board of appeal and equalization in the deleted text begin prior deleted text end new text begin current new text end year deleted text begin , deleted text end new text begin . A
city or town that does not comply with these requirements new text end is
deemed to have transferred its board of appeal and equalization
powers to the county deleted text begin under section 274.01, subdivision 3,
for deleted text end new text begin beginning with new text end the following year's assessment new text begin and
continuing unless the powers are reinstated under paragraph (c) new text end .

new text begin (b) new text end The county shall notify the taxpayers when the board of
appeal and equalization for a city or town has been transferred
to the county under this subdivision and, prior to the meeting
time of the county board of equalization, the county shall make
available to those taxpayers a procedure for a review of the
assessments, including, but not limited to, open book meetings.
This alternate review process shall take place in April and May.

new text begin (c) new text end A local board whose powers are transferred to the
county under this subdivision may be reinstated by resolution of
the governing body of the city or town and upon proof of
compliance with the requirements of subdivision 2. The
resolution and proofs must be provided to the county assessor by
December 1 in order to be effective for the following year's
assessment.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 27.

Minnesota Statutes 2004, section 274.14, is
amended to read:

274.14 LENGTH OF SESSION; RECORD.

deleted text begin The county board of equalization or the special board of
equalization appointed by it shall meet during the last ten
meeting days in June. For this purpose, "meeting days" are
defined as any day of the week excluding Saturday and Sunday.
deleted text end The board may meet on any ten consecutive meeting days in June,
after the second Friday in June deleted text begin , if deleted text end new text begin . new text end The actual meeting dates
deleted text begin are deleted text end new text begin must be new text end contained on the valuation notices mailed to each
property owner in the county deleted text begin under deleted text end new text begin as provided in new text end section
273.121. new text begin For this purpose, "meeting days" is defined as any day
of the week excluding Saturday and Sunday. new text end No action taken by
the county board of review after June 30 is valid, except for
corrections permitted in sections 273.01 and 274.01. The county
auditor shall keep an accurate record of the proceedings and
orders of the board. The record must be published like other
proceedings of county commissioners. A copy of the published
record must be sent to the commissioner of revenue, with the
abstract of assessment required by section 274.16.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 28.

Minnesota Statutes 2004, section 275.07,
subdivision 1, is amended to read:

Subdivision 1.

Certification of levy.

(a) Except as
provided under paragraph (b), the taxes voted by cities,
counties, school districts, and special districts shall be
certified by the proper authorities to the county auditor on or
before five working days after December 20 in each year. A town
must certify the levy adopted by the town board to the county
auditor by September 15 each year. If the town board modifies
the levy at a special town meeting after September 15, the town
board must recertify its levy to the county auditor on or before
five working days after December 20. deleted text begin The taxes certified shall
be reduced by the county auditor by the aid received under
section 273.1398, subdivision 3. deleted text end If a city, town, county,
school district, or special district fails to certify its levy
by that date, its levy shall be the amount levied by it for the
preceding year.

(b)(i) The taxes voted by counties under sections 103B.241,
103B.245, and 103B.251 shall be separately certified by the
county to the county auditor on or before five working days
after December 20 in each year. The taxes certified shall not
be reduced by the county auditor by the aid received under
section 273.1398, subdivision 3. If a county fails to certify
its levy by that date, its levy shall be the amount levied by it
for the preceding year.

(ii) For purposes of the proposed property tax notice under
section 275.065 and the property tax statement under section
276.04, for the first year in which the county implements the
provisions of this paragraph, the county auditor shall reduce
the county's levy for the preceding year to reflect any amount
levied for water management purposes under clause (i) included
in the county's levy.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 29.

Minnesota Statutes 2004, section 275.07,
subdivision 4, is amended to read:

Subd. 4.

Report to commissioner.

(a) On or before
October 8 of each year, the county auditor shall report to the
commissioner of revenue the proposed levy certified by local
units of government under section 275.065, subdivision 1. If
any taxing authorities have notified the county auditor that
they are in the process of negotiating an agreement for sharing,
merging, or consolidating services but that when the proposed
levy was certified under section 275.065, subdivision 1c, the
agreement was not yet finalized, the county auditor shall supply
that information to the commissioner when filing the report
under this section and shall recertify the affected levies as
soon as practical after October 10.

(b) On or before January 15 of each year, the county
auditor shall report to the commissioner of revenue the final
levy certified by local units of government under subdivision 1.

(c) The levies must be reported in the manner prescribed by
the commissioner. deleted text begin The reports must show a total levy and the
amount of each special levy.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 30.

Minnesota Statutes 2004, section 276.112, is
amended to read:

276.112 STATE PROPERTY TAXES; COUNTY TREASURER.

On or before January 25 each year, for the period ending
December 31 of the prior year, and on or before June deleted text begin 29 deleted text end new text begin 28 new text end each
year, for the period ending on the most recent settlement day
determined in section 276.09, and on or before December 2 each
year, for the period ending November 20, the county treasurer
must make full settlement with the county auditor according to
sections 276.09, 276.10, and 276.111 for all receipts of state
property taxes levied under section 275.025, and must transmit
those receipts to the commissioner of revenue by electronic
means.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 31.

Minnesota Statutes 2004, section 282.016, is
amended to read:

282.016 PROHIBITED PURCHASERS.

deleted text begin No deleted text end new text begin (a) A new text end county auditor, county treasurer, new text begin county attorney,
new text end court administrator of the district court, deleted text begin or deleted text end county assessor
deleted text begin or deleted text end new text begin , new text end supervisor of assessments, deleted text begin or deleted text end deputy or clerk or new text begin an new text end employee
of such officer, deleted text begin and no deleted text end new text begin a new text end commissioner for tax-forfeited lands
or new text begin an new text end assistant to such commissioner deleted text begin may deleted text end new text begin , must not new text end become a
purchaser new text begin , either personally or as an agent or attorney for
another person, new text end of the properties offered for sale under the
provisions of this chapter deleted text begin , either personally, or as agent or
attorney for any other person, except that deleted text end new text begin in the county for
which the person performs duties. A person prohibited from
purchasing property under this section must not directly or
indirectly have another person purchase it on behalf of the
prohibited purchaser for the prohibited purchaser's benefit or
gain.
new text end

new text begin (b) Notwithstanding paragraph (a), new text end such officer, deputy,
deleted text begin court administrator deleted text end new text begin clerk new text end , new text begin or new text end employee or commissioner for
tax-forfeited lands or assistant to such commissioner may (1)
purchase lands owned by that official at the time the state
became the absolute owner thereof or (2) bid upon and purchase
forfeited property offered for sale under the alternate sale
procedure described in section 282.01, subdivision 7a.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 32.

Minnesota Statutes 2004, section 282.08, is
amended to read:

282.08 APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.

The net proceeds from the sale or rental of any parcel of
forfeited land, or from the sale of products from the forfeited
land, must be apportioned by the county auditor to the taxing
districts interested in the land, as follows:

(1) deleted text begin the amounts necessary to pay the state general tax levy
against the parcel for taxes payable in the year for which the
tax judgment was entered, and for each subsequent payable year
up to and including the year of forfeiture, must be apportioned
to the state;
deleted text end

deleted text begin (2) deleted text end the portion required to pay any amounts included in the
appraised value under section 282.01, subdivision 3, as
representing increased value due to any public improvement made
after forfeiture of the parcel to the state, but not exceeding
the amount certified by the clerk of the municipality must be
apportioned to the municipal subdivision entitled to it;

deleted text begin (3) deleted text end new text begin (2) new text end the portion required to pay any amount included in
the appraised value under section 282.019, subdivision 5,
representing increased value due to response actions taken after
forfeiture of the parcel to the state, but not exceeding the
amount of expenses certified by the Pollution Control Agency or
the commissioner of agriculture, must be apportioned to the
agency or the commissioner of agriculture and deposited in the
fund from which the expenses were paid;

deleted text begin (4) deleted text end new text begin (3) new text end the portion of the remainder required to discharge
any special assessment chargeable against the parcel for
drainage or other purpose whether due or deferred at the time of
forfeiture, must be apportioned to the municipal subdivision
entitled to it; and

deleted text begin (5) deleted text end new text begin (4) new text end any balance must be apportioned as follows:

(i) The county board may annually by resolution set aside
no more than 30 percent of the receipts remaining to be used for
timber development on tax-forfeited land and dedicated memorial
forests, to be expended under the supervision of the county
board. It must be expended only on projects approved by the
commissioner of natural resources.

(ii) The county board may annually by resolution set aside
no more than 20 percent of the receipts remaining to be used for
the acquisition and maintenance of county parks or recreational
areas as defined in sections 398.31 to 398.36, to be expended
under the supervision of the county board.

(iii) Any balance remaining must be apportioned as
follows: county, 40 percent; town or city, 20 percent; and
school district, 40 percent, provided, however, that in
unorganized territory that portion which would have accrued to
the township must be administered by the county board of
commissioners.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment for state general tax levy amounts
payable in 2004 and thereafter.
new text end

Sec. 33.

Minnesota Statutes 2004, section 282.15, is
amended to read:

282.15 SALES OF FORFEITED AGRICULTURAL LANDS.

The sale shall be conducted by the auditor of the county in
which the parcels lie. The parcels shall be sold to the highest
bidder but not for less than the appraised value. The sales
shall be for cash or on the following terms: The appraised
value of all merchantable timber on agricultural lands shall be
paid for in full at the date of sale. At least 15 percent of
the purchase price of the land shall be paid in cash at the time
of purchase. The balance shall be paid in not more than 20
equal annual installments, with interest at a rate equal to the
rate in effect at the time under section 549.09 on the unpaid
balance each year. Both principal and interest are due and
payable on December 31 each year following that in which the
purchase was made. The purchaser may pay any number of
installments of principal and interest on or before their due
date. When the sale is on terms other than for cash in full,
the purchaser shall receive from the county auditor a contract
for deed, in a form prescribed by the attorney general. The
county auditor shall make a report to the commissioner of
natural resources not more than 30 days after each public sale
showing the lands sold at the sales, and submit a copy of each
contract of sale.

All lands sold pursuant to this section deleted text begin shall, on the
second day of January following the date of the sale, deleted text end new text begin must new text end be
restored to the tax rolls and become subject to taxation in the
same manner as they were assessed and taxed before becoming the
absolute property of the state new text begin for the assessment year
determined under section 272.02, subdivision 38, paragraph (c) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales
occurring on or after July 1, 2005.
new text end

Sec. 34.

Minnesota Statutes 2004, section 282.21, is
amended to read:

282.21 FORM OF CONVEYANCE.

new text begin When any sale has been made under sections 282.14 to
282.22, new text end upon payment in full of the purchase price, appropriate
conveyance in fee in such form as may be prescribed by the
attorney general shall be issued by the commissioner of finance
to the purchaser or the purchaser's assigns and this conveyance
shall have the force and effect of a patent from the state.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 35.

Minnesota Statutes 2004, section 282.224, is
amended to read:

282.224 FORM OF CONVEYANCE.

new text begin When any sale has been made under sections 282.221 to
282.226, new text end upon payment in full of the purchase price new text begin , new text end appropriate
conveyance in fee, in such form as may be prescribed by the
attorney general, shall be issued by the commissioner of natural
resources to the purchaser or the purchaser's assignee, and the
conveyance shall have the force and effect of a patent from the
state.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 36.

Minnesota Statutes 2004, section 282.301, is
amended to read:

282.301 RECEIPTS FOR PAYMENTS.

new text begin When any sale has been made under sections 282.012 and
282.241 to 282.324, new text end the purchaser shall receive from the county
auditor at the time of repurchase a receipt, in such form as may
be prescribed by the attorney general. When the purchase price
of a parcel of land shall be paid in full, the following facts
shall be certified by the county auditor to the commissioner of
revenue of the state of Minnesota: the description of land, the
date of sale, the name of the purchaser or the purchaser's
assignee, and the date when the final installment of the
purchase price was paid. Upon payment in full of the purchase
price, the purchaser or the assignee shall receive a quitclaim
deed from the state, to be executed by the commissioner of
revenue. The deed must be sent to the county auditor who shall
have it recorded before it is forwarded to the purchaser.
Failure to make any payment herein required shall constitute
default and upon such default and cancellation in accord with
section 282.40, the right, title and interest of the purchaser
or the purchaser's heirs, representatives, or assigns in such
parcel shall terminate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 37.

Minnesota Statutes 2004, section 290B.05,
subdivision 3, is amended to read:

Subd. 3.

Calculation of deferred property tax amount.

When final property tax amounts for the following year have been
determined, the county auditor shall calculate the "deferred
property tax amount." The deferred property tax amount is equal
to the lesser of (1) the maximum allowable deferral for the
year; or (2) the difference between new text begin (i) new text end the total amount of
property taxes new text begin and special assessments new text end levied upon the
qualifying homestead by all taxing jurisdictions and new text begin (ii) new text end the
maximum property tax amount. deleted text begin Any special assessments levied by
any local unit of government must not be included in the total
tax used to calculate the deferred tax amount. deleted text end new text begin For this purpose
"special assessments" includes any assessment, fee, or other
charge that may by law, and which does, appear on the property
tax statement for the property for collection under the laws
applicable to the enforcement of real estate taxes. new text end Any tax
attributable to new improvements made to the property after the
initial application has been approved under section 290B.04,
subdivision 2, must be excluded when determining any subsequent
deferred property tax amount. The county auditor shall
annually, on or before April 15, certify to the commissioner of
revenue the property tax deferral amounts determined under this
subdivision by property and by owner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for amounts
deferred in 2006 and thereafter.
new text end

Sec. 38.

Minnesota Statutes 2004, section 290C.05, is
amended to read:

290C.05 ANNUAL CERTIFICATION.

On or before July 1 of each year, beginning with the year
after the claimant has received an approved application, the
commissioner shall send each claimant enrolled under the
sustainable forest incentive program a certification form. The
claimant must sign the certification, attesting that the
requirements and conditions for continued enrollment in the
program are currently being met, and must return the signed
certification form to the commissioner by August 15 of that same
year. deleted text begin Failure to deleted text end new text begin If the claimant does not new text end return an annual
certification form by the due date deleted text begin shall result in removal of
the lands from the provisions of the sustainable forest
incentive program, and the imposition of any applicable removal
penalty deleted text end new text begin , the provisions in section 290C.11 apply new text end . deleted text begin The claimant
may appeal the removal and any associated penalty according to
the procedures and within the time allowed under this chapter.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 39.

new text begin [290C.055] LENGTH OF COVENANT.
new text end

new text begin The covenant remains in effect for a minimum of eight
years. If land is removed from the program before it has been
enrolled for four years, the covenant remains in effect for
eight years from the date recorded.
new text end

new text begin If land that has been enrolled for four years or more is
removed from the program for any reason, there is a waiting
period before the covenant terminates. The covenant terminates
on January 1 of the fifth calendar year that begins after the
date that:
new text end

new text begin (1) the commissioner receives notification from the
claimant that the claimant wishes to remove the land from the
program under section 290C.10; or
new text end

new text begin (2) the date that the land is removed from the program
under section 290C.11.
new text end

new text begin Notwithstanding the other provisions of this section, the
covenant is terminated at the same time that the land is removed
from the program due to acquisition of title or possession for a
public purpose under section 290C.10.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 40.

Minnesota Statutes 2004, section 290C.10, is
amended to read:

290C.10 WITHDRAWAL PROCEDURES.

An approved claimant under the sustainable forest incentive
program for a minimum of four years may notify the commissioner
of the intent to terminate enrollment. Within 90 days of
receipt of notice to terminate enrollment, the commissioner
shall inform the claimant in writing, acknowledging receipt of
this notice and indicating the effective date of termination
from the sustainable forest incentive program. Termination of
enrollment in the sustainable forest incentive program occurs on
January 1 of the fifth calendar year that begins after receipt
by the commissioner of the termination notice. After the
commissioner issues an effective date of termination, a claimant
wishing to continue the land's enrollment in the sustainable
forest incentive program beyond the termination date must apply
for enrollment as prescribed in section 290C.04. A claimant who
withdraws a parcel of land from this program may not reenroll
the parcel for a period of three years. Within 90 days after
the termination date, the commissioner shall execute and
acknowledge a document releasing the land from the covenant
required under this chapter. The document must be mailed to the
claimant and is entitled to be recorded. The commissioner may
allow early withdrawal from the Sustainable Forest Incentive Act
without penalty deleted text begin in cases of condemnation deleted text end new text begin when the state of
Minnesota, any local government unit, or any other entity which
has the right of eminent domain acquires title or possession to
the land new text end for a public purpose notwithstanding the provisions of
this section. new text begin In the case of such acquisition, the commissioner
shall execute and acknowledge a document releasing the land
acquired by the state, local government unit, or other entity
from the covenant. All other enrolled land must remain in the
program.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 41.

Minnesota Statutes 2004, section 373.45,
subdivision 7, is amended to read:

Subd. 7.

Aid reduction for repayment.

(a) Except as
provided in paragraph (b), the commissioner may reduce, by the
amount paid by the state under this section on behalf of the
county, plus the interest due on the state payments, the
deleted text begin following aids payable to the county:
deleted text end

deleted text begin (1) homestead and agricultural credit aid and disparity
reduction aid payable under section 273.1398;
deleted text end

deleted text begin (2) county criminal justice aid payable under section
477A.0121; and
deleted text end

deleted text begin (3) family preservation aid payable under section 477A.0122
deleted text end new text begin county program aid under section 477A.0124 new text end .

The amount of any aid reduction reverts from the appropriate
account to the state general fund.

(b) If, after review of the financial situation of the
county, the authority advises the commissioner that a total
reduction of the aids would cause an undue hardship on the
county, the authority, with the approval of the commissioner,
may establish a different schedule for reduction of aids to
repay the state. The amount of aids to be reduced are decreased
by any amounts repaid to the state by the county from other
revenue sources.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aid payable
in 2005 and thereafter.
new text end

Sec. 42.

Minnesota Statutes 2004, section 469.1735,
subdivision 3, is amended to read:

Subd. 3.

Transfer authority for property tax.

(a) A city
may elect to use all or part of its allocation under subdivision
2 to reimburse the city or county or both for property tax
reductions under section 272.0212. To elect this option, the
city must notify the commissioner of revenue by October 1 of
each calendar year of the amount of the property tax
reductions new text begin for which new text end it seeks reimbursements for taxes payable
during the deleted text begin following deleted text end new text begin current new text end year and the governmental units to
which the amounts will be paid. The commissioner may require
the city to provide information substantiating the amount of the
reductions granted or any other information necessary to
administer this provision. The commissioner shall pay the
reimbursements by December 26 new text begin of the taxes payable year new text end . Any
amount transferred under this authority reduces the amount of
tax credit certificates available under subdivisions 1 and 2.

(b) The amount elected by the city under paragraph (a) is
appropriated to the commissioner of revenue from the general
fund to reimburse the city or county for tax reductions under
section 272.0212. The amount appropriated may not exceed the
maximum amounts allocated to a city under subdivision 2,
paragraph (b), less the amount of certificates issued by the
city under subdivision 1, and is available until expended.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for
reimbursements of taxes payable in 2005 and thereafter.
new text end

Sec. 43.

Laws 2003, chapter 127, article 5, section 27,
the effective date, is amended to read:

new text begin EFFECTIVE DATE. new text end

This section is effective for deleted text begin taxes
payable in 2004 and thereafter deleted text end new text begin distributions occurring on or
after June 10, 2003 new text end .

Sec. 44.

Laws 2003, chapter 127, article 5, section 28,
the effective date, is amended to read:

new text begin EFFECTIVE DATE. new text end

This section is effective for deleted text begin taxes
payable in 2004 and thereafter deleted text end new text begin distributions occurring on or
after June 10, 2003 new text end .

Sec. 45. new text begin LINCOLN AND PIPESTONE COUNTIES; TOWN LEVY
ADJUSTMENT FOR WIND ENERGY PRODUCTION TAX.
new text end

new text begin Notwithstanding the deadlines in Minnesota Statutes,
section 275.07, towns located in Lincoln or Pipestone County are
authorized to adjust their payable 2004 levy for all or a
portion of their estimated wind energy production tax amounts
for 2004, as computed by the commissioner of revenue from
reports filed under Minnesota Statutes, section 272.029,
subdivision 4. The Lincoln and Pipestone County auditors may
adjust the payable 2004 levy certifications under Minnesota
Statutes, section 275.07, subdivision 1, based upon the towns
that have recertified their levies under this section by March
15, 2004.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2004.
new text end

Sec. 46. new text begin REPEALER.
new text end

new text begin (a) Minnesota Statutes 2004, sections 273.19, subdivision
5; 274.05; 275.15; 275.61, subdivision 2; and 283.07, are
repealed effective the day following final enactment.
new text end

new text begin (b) Minnesota Statutes 2004, section 469.1794, subdivision
6, is repealed effective the day following final enactment and
applies to districts for which the request for certification was
made on, before, or after August 1, 1979, and before August 1,
2001.
new text end

new text begin (c) Laws 1975, chapter 287, section 5, and Laws 2003,
chapter 127, article 9, section 9, subdivision 4, are repealed
effective without local approval for taxes payable in 2006 and
thereafter.
new text end

new text begin (d) Minnesota Statutes 2004, sections 270.85; 270.88; and
273.37, subdivision 3, are repealed effective September 1, 2005.
new text end

ARTICLE 5

INCOME, CORPORATE FRANCHISE, AND ESTATE TAXES

Section 1.

Minnesota Statutes 2004, section 190.09,
subdivision 2, is amended to read:

Subd. 2.

Mission; efficiency.

It is part of the
department's mission that within the department's resources the
adjutant general shall endeavor to:

(1) prevent the waste or unnecessary spending of public
money;

(2) use innovative fiscal and human resource practices to
manage the state's resources and operate the department as
efficiently as possible;

(3) coordinate the department's activities wherever
appropriate with the activities of other governmental agencies;

(4) use technology where appropriate to increase agency
productivity, improve customer service, increase public access
to information about government, and increase public
participation in the business of government;

(5) utilize constructive and cooperative labor-management
practices to the extent otherwise required by chapters 43A and
179A;

(6) report to the legislature on the performance of agency
operations and the accomplishment of agency goals in the
agency's biennial budget according to section 16A.10,
subdivision 1; deleted text begin and
deleted text end

(7) recommend to the legislature appropriate changes in law
necessary to carry out the mission and improve the performance
of the department new text begin ; and
new text end

new text begin (8) administer checkoff funds as provided in section
290.433 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 2.

Minnesota Statutes 2004, section 289A.08,
subdivision 1, is amended to read:

Subdivision 1.

Generally; individuals.

(a) A taxpayer
must file a return for each taxable year the taxpayer is
required to file a return under section 6012 of the Internal
Revenue Code, except that new text begin :
new text end

new text begin (1) new text end an individual who is not a Minnesota resident for any
part of the year is not required to file a Minnesota income tax
return if the individual's gross income derived from Minnesota
sources as determined under sections 290.081, paragraph (a), and
290.17, is less than the filing requirements for a single
individual who is a full year resident of Minnesota new text begin ; and
new text end

new text begin (2) an individual who is a Minnesota resident is not
required to file a Minnesota income tax return if the
individual's gross income derived from Minnesota sources as
determined under section 290.17, less the amount of the
individual's gross income that consists of compensation paid to
members of the armed forces of the United States or United
Nations for active duty performed outside Minnesota, is less
than the filing requirements for a single individual who is a
full-year resident of Minnesota new text end .

(b) The decedent's final income tax return, and other
income tax returns for prior years where the decedent had gross
income in excess of the minimum amount at which an individual is
required to file and did not file, must be filed by the
decedent's personal representative, if any. If there is no
personal representative, the return or returns must be filed by
the transferees, as defined in section 289A.38, subdivision 13,
who receive property of the decedent.

(c) The term "gross income," as it is used in this section,
has the same meaning given it in section 290.01, subdivision 20.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 3.

Minnesota Statutes 2004, section 289A.08,
subdivision 3, is amended to read:

Subd. 3.

Corporations.

A corporation that is subject to
the state's jurisdiction to tax under section 290.014,
subdivision 5, must file a return, except that a foreign
operating corporation as defined in section 290.01, subdivision
6b, is not required to file a return. The commissioner shall
adopt rules for the filing of one return on behalf of the
members of an affiliated group of corporations that are required
to file a combined report. All members of an affiliated group
that are required to file a combined report must file one return
on behalf of the members of the group under rules adopted by the
commissioner. new text begin If a corporation claims on a return that it has
paid tax in excess of the amount of taxes lawfully due, that
corporation must include on that return information necessary
for payment of the tax in excess of the amount lawfully due by
electronic means.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns
filed after December 31, 2005.
new text end

Sec. 4.

Minnesota Statutes 2004, section 289A.08,
subdivision 7, is amended to read:

Subd. 7.

Composite income tax returns for nonresident
partners, shareholders, and beneficiaries.

(a) The commissioner
may allow a partnership with nonresident partners to file a
composite return and to pay the tax on behalf of nonresident
partners who have no other Minnesota source income. This
composite return must include the names, addresses, Social
Security numbers, income allocation, and tax liability for the
nonresident partners electing to be covered by the composite
return.

(b) The computation of a partner's tax liability must be
determined by multiplying the income allocated to that partner
by the highest rate used to determine the tax liability for
individuals under section 290.06, subdivision 2c. Nonbusiness
deductions, standard deductions, or personal exemptions are not
allowed.

(c) The partnership must submit a request to use this
composite return filing method for nonresident partners. The
requesting partnership must file a composite return in the form
prescribed by the commissioner of revenue. The filing of a
composite return is considered a request to use the composite
return filing method.

(d) The electing partner must not have any Minnesota source
income other than the income from the partnership and other
electing partnerships. If it is determined that the electing
partner has other Minnesota source income, the inclusion of the
income and tax liability for that partner under this provision
will not constitute a return to satisfy the requirements of
subdivision 1. The tax paid for the individual as part of the
composite return is allowed as a payment of the tax by the
individual on the date on which the composite return payment was
made. If the electing nonresident partner has no other
Minnesota source income, filing of the composite return is a
return for purposes of subdivision 1.

(e) This subdivision does not negate the requirement that
an individual pay estimated tax if the individual's liability
would exceed the requirements set forth in section 289A.25. A
composite estimate may, however, be filed in a manner similar to
and containing the information required under paragraph (a).

(f) If an electing partner's share of the partnership's
gross income from Minnesota sources is less than the filing
requirements for a nonresident under this subdivision, the tax
liability is zero. However, a statement showing the partner's
share of gross income must be included as part of the composite
return.

(g) The election provided in this subdivision is deleted text begin not deleted text end new text begin only
new text end available to deleted text begin any deleted text end new text begin a new text end partner deleted text begin other than deleted text end new text begin who has no other Minnesota
source income and who is either (1) new text end a full-year nonresident
individual deleted text begin who has no other Minnesota source income deleted text end new text begin or (2) a
trust or estate that does not claim a deduction under either
section 651 or 661 of the Internal Revenue Code new text end .

(h) A corporation defined in section 290.9725 and its
nonresident shareholders may make an election under this
paragraph. The provisions covering the partnership apply to the
corporation and the provisions applying to the partner apply to
the shareholder.

(i) Estates and trusts distributing current income only and
the nonresident individual beneficiaries of the estates or
trusts may make an election under this paragraph. The
provisions covering the partnership apply to the estate or
trust. The provisions applying to the partner apply to the
beneficiary.

new text begin (j) For the purposes of this subdivision, "income" means
the partner's share of federal adjusted gross income from the
partnership modified by the additions provided in section
290.01, subdivision 19a, clauses (6) and (7), and the
subtractions provided in section 290.01, subdivision 19b, clause
(11), to the extent the amount is assignable or allocable to
Minnesota under section 290.17. The subtraction allowed under
section 290.01, subdivision 19b, clause (11), is only allowed on
the composite tax computation to the extent the electing partner
would have been allowed the subtraction.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 5.

Minnesota Statutes 2004, section 289A.08,
subdivision 13, is amended to read:

Subd. 13.

Long and short forms.

The commissioner shall
provide a long form individual income tax return and may provide
a short form individual income tax return. The returns shall be
in a form that is consistent with the provisions of chapter 290,
notwithstanding any other law to the contrary. The nongame
wildlife checkoff provided in section 290.431 and the dependent
care credit provided in section 290.067 must be included on the
short form. new text begin The commissioner must provide information on local
use taxes in the individual income tax instruction booklet,
including a list of the jurisdictions with local use taxes. The
commissioner must provide this information in the same section
of the booklet that provides information on the state use tax.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 6.

Minnesota Statutes 2004, section 289A.18,
subdivision 1, is amended to read:

Subdivision 1.

Individual income, fiduciary income,
corporate franchise, and entertainment taxes; partnership and s
corporation returns; information returns; mining company
returns.

The returns required to be made under sections 289A.08
and 289A.12 must be filed at the following times:

(1) returns made on the basis of the calendar year must be
filed on April 15 following the close of the calendar year,
except that returns of corporations must be filed on March 15
following the close of the calendar year;

(2) returns made on the basis of the fiscal year must be
filed on the 15th day of the fourth month following the close of
the fiscal year, except that returns of corporations must be
filed on the 15th day of the third month following the close of
the fiscal year;

(3) returns for a fractional part of a year must be filed
on the 15th day of the fourth month following the end of the
month in which falls the last day of the period for which the
return is made, except that the returns of corporations must be
filed on the 15th day of the third month following the end of
the deleted text begin month deleted text end new text begin tax year of the unitary group new text end in which falls the last
day of the period for which the return is made;

(4) in the case of a final return of a decedent for a
fractional part of a year, the return must be filed on the 15th
day of the fourth month following the close of the 12-month
period that began with the first day of that fractional part of
a year;

(5) in the case of the return of a cooperative association,
returns must be filed on or before the 15th day of the ninth
month following the close of the taxable year;

(6) if a corporation has been divested from a unitary group
and files a return for a fractional part of a year in which it
was a member of a unitary business that files a combined report
under section 290.34, subdivision 2, the divested corporation's
return must be filed on the 15th day of the third month
following the close of the common accounting period that
includes the fractional year;

(7) returns of entertainment entities must be filed on
April 15 following the close of the calendar year;

(8) returns required to be filed under section 289A.08,
subdivision 4, must be filed on the 15th day of the fifth month
following the close of the taxable year;

(9) returns of mining companies must be filed on May 1
following the close of the calendar year; and

(10) returns required to be filed with the commissioner
under section 289A.12, subdivision 2, 4 to 10, or 14, must be
filed within 30 days after being demanded by the commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for fractional
years closing after December 31, 2004.
new text end

Sec. 7.

Minnesota Statutes 2004, section 289A.19,
subdivision 4, is amended to read:

Subd. 4.

Estate tax returns.

deleted text begin When in the commissioner's
judgment good cause exists, the commissioner may extend the time
for filing an estate tax return for not more than six months.
deleted text end When an extension to file the federal estate tax return has been
granted under section 6081 of the Internal Revenue Code, the
time for filing the estate tax return is extended for that
period. new text begin If the estate requests an extension to file an estate
tax return within the time provided in section 289A.18,
subdivision 3, the commissioner shall extend the time for filing
the estate tax return for six months.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of
decedents dying after December 31, 2004.
new text end

Sec. 8.

Minnesota Statutes 2004, section 289A.20,
subdivision 2, is amended to read:

Subd. 2.

Withholding from wages, entertainer withholding,
withholding from payments to out-of-state contractors, and
withholding by partnerships and small business corporations.

(a) A tax required to be deducted and withheld during the
quarterly period must be paid on or before the last day of the
month following the close of the quarterly period, unless an
earlier time for payment is provided. A tax required to be
deducted and withheld from compensation of an entertainer and
from a payment to an out-of-state contractor must be paid on or
before the date the return for such tax must be filed under
section 289A.18, subdivision 2. Taxes required to be deducted
and withheld by partnerships deleted text begin and deleted text end new text begin , new text end S corporations new text begin , and trusts
new text end must be paid on deleted text begin or before the date the return must be filed
under section 289A.18, subdivision 2 deleted text end new text begin a quarterly basis as
estimated taxes under section 289A.25 for partnerships and
trusts and under section 289A.26 for S corporations new text end .

(b) An employer who, during the previous quarter, withheld
more than $1,500 of tax under section 290.92, subdivision 2a or
3, or 290.923, subdivision 2, must deposit tax withheld under
those sections with the commissioner within the time allowed to
deposit the employer's federal withheld employment taxes under
Code of Federal Regulations, title 26, section 31.6302-1, as
amended through December 31, 2001, without regard to the safe
harbor or de minimis rules in subparagraph (f) or the one-day
rule in subsection (c), clause (3). Taxpayers must submit a
copy of their federal notice of deposit status to the
commissioner upon request by the commissioner.

(c) The commissioner may prescribe by rule other return
periods or deposit requirements. In prescribing the reporting
period, the commissioner may classify payors according to the
amount of their tax liability and may adopt an appropriate
reporting period for the class that the commissioner judges to
be consistent with efficient tax collection. In no event will
the duration of the reporting period be more than one year.

(d) If less than the correct amount of tax is paid to the
commissioner, proper adjustments with respect to both the tax
and the amount to be deducted must be made, without interest, in
the manner and at the times the commissioner prescribes. If the
underpayment cannot be adjusted, the amount of the underpayment
will be assessed and collected in the manner and at the times
the commissioner prescribes.

(e) If the aggregate amount of the tax withheld during a
fiscal year ending June 30 under section 290.92, subdivision 2a
or 3, is equal to or exceeds the amounts established for
remitting federal withheld taxes pursuant to the regulations
promulgated under section 6302(h) of the Internal Revenue Code,
the employer must remit each required deposit for wages paid in
the subsequent calendar year by electronic means.

(f) A third-party bulk filer as defined in section 290.92,
subdivision 30, paragraph (a), clause (2), who remits
withholding deposits must remit all deposits by electronic means
as provided in paragraph (e), regardless of the aggregate amount
of tax withheld during a fiscal year for all of the employers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2005.
new text end

Sec. 9.

Minnesota Statutes 2004, section 289A.31,
subdivision 2, is amended to read:

Subd. 2.

Joint income tax returns.

(a) If a joint income
tax return is made by a husband and wife, the liability for the
tax is joint and several. A spouse who qualifies for relief
from a liability attributable to an underpayment under section
6015(b) of the Internal Revenue Code is relieved of the state
income tax liability on the underpayment.

(b) In the case of individuals who were a husband and wife
prior to the dissolution of their marriage or their legal
separation, or prior to the death of one of the individuals, for
tax liabilities reported on a joint or combined return, the
liability of each person is limited to the proportion of the tax
due on the return that equals that person's proportion of the
total tax due if the husband and wife filed separate returns for
the taxable year. This provision is effective only when the
commissioner receives written notice of the marriage
dissolution, legal separation, or death of a spouse from the
husband or wife. No refund may be claimed by an ex-spouse,
legally separated or widowed spouse for any taxes paid more than
60 days before receipt by the commissioner of the written notice.

new text begin (c) A request for calculation of separate liability
pursuant to paragraph (b) for taxes reported on a return must be
made within six years after the due date of the return. For
calculation of separate liability for taxes assessed by the
commissioner under section 289A.35 or 289A.37, the request must
be made within six years after the date of assessment. The
commissioner is not required to calculate separate liability if
the remaining unpaid liability for which recalculation is
requested is $100 or less.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for requests
for relief made on or after the day following final enactment.
new text end

Sec. 10.

Minnesota Statutes 2004, section 289A.38,
subdivision 7, is amended to read:

Subd. 7.

Federal tax changes.

If the amount of income,
items of tax preference, deductions, or credits for any year of
a taxpayer as reported to the Internal Revenue Service is
changed or corrected by the commissioner of Internal Revenue or
other officer of the United States or other competent authority,
or where a renegotiation of a contract or subcontract with the
United States results in a change in income, items of tax
preference, deductions, credits, or withholding tax, or, in the
case of estate tax, where there are adjustments to the taxable
estate resulting in a change to the credit for state death
taxes, the taxpayer shall report the change or correction or
renegotiation results in writing to the commissioner. The
report must be submitted within 180 days after the final
determination and must be in the form of either an amended
Minnesota estate, withholding tax, new text begin corporate franchise tax, new text end or
income tax return conceding the accuracy of the federal
determination or a letter detailing how the federal
determination is incorrect or does not change the Minnesota
tax. An amended Minnesota income tax return must be accompanied
by an amended property tax refund return, if necessary. A
taxpayer filing an amended federal tax return must also file a
copy of the amended return with the commissioner of revenue
within 180 days after filing the amended return.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2004, section 289A.50,
subdivision 1a, is amended to read:

Subd. 1a.

Refund form.

On or before January 1, 2000, the
commissioner of revenue shall prepare and make available to
taxpayers a form for filing claims for refund of taxes paid in
excess of the amount due. deleted text begin If the commissioner fails to prepare
a form under this subdivision by January 1, 2000, any claims for
refund made after January 1, 2000, and up to ten days after the
form is made available to taxpayers are deemed to be made in
compliance with the requirement of the form. deleted text end new text begin The commissioner
may require corporate franchise taxpayers claiming a refund of
corporate franchise taxes paid in excess of the amount lawfully
due to include on the claim for refund or amended return
information necessary for payment of the taxes paid in excess of
taxes lawfully due by electronic means.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims for
refund filed after December 31, 2005.
new text end

Sec. 12.

Minnesota Statutes 2004, section 289A.60,
subdivision 13, is amended to read:

Subd. 13.

Penalties for tax return preparers.

(a) If an
understatement of liability with respect to a return or claim
for refund is due to a new text begin reckless disregard of laws and rules or
new text end willful attempt in any manner to understate the liability for a
tax by a person who is a tax return preparer with respect to the
return or claim, the person shall pay to the commissioner a
penalty of $500. If a part of a property tax refund claim is
excessive due to a new text begin reckless disregard or new text end willful attempt in any
manner to overstate the claim for relief allowed under chapter
290A by a person who is a tax refund or return preparer, the
person shall pay to the commissioner a penalty of $500 with
respect to the claim. These penalties may not be assessed
against the employer of a tax return preparer unless the
employer was actively involved in the new text begin reckless disregard or
new text end willful attempt to understate the liability for a tax or to
overstate the claim for refund. These penalties are income tax
liabilities and may be assessed at any time as provided in
section 289A.38, subdivision 5.

(b) A civil action in the name of the state of Minnesota
may be commenced to enjoin any person who is a tax return
preparer doing business in this state from further engaging in
any conduct described in paragraph (c). An action under this
paragraph must be brought by the attorney general in the
district court for the judicial district of the tax return
preparer's residence or principal place of business, or in which
the taxpayer with respect to whose tax return the action is
brought resides. The court may exercise its jurisdiction over
the action separate and apart from any other action brought by
the state of Minnesota against the tax return preparer or any
taxpayer.

(c) In an action under paragraph (b), if the court finds
that a tax return preparer has:

(1) engaged in any conduct subject to a civil penalty under
section 289A.60 or a criminal penalty under section 289A.63;

(2) misrepresented the preparer's eligibility to practice
before the Department of Revenue, or otherwise misrepresented
the preparer's experience or education as a tax return preparer;

(3) guaranteed the payment of any tax refund or the
allowance of any tax credit; or

(4) engaged in any other fraudulent or deceptive conduct
that substantially interferes with the proper administration of
state tax law, and injunctive relief is appropriate to prevent
the recurrence of that conduct,

the court may enjoin the person from further engaging in that
conduct.

(d) If the court finds that a tax return preparer has
continually or repeatedly engaged in conduct described in
paragraph (c), and that an injunction prohibiting that conduct
would not be sufficient to prevent the person's interference
with the proper administration of state tax laws, the court may
enjoin the person from acting as a tax return preparer. The
court may not enjoin the employer of a tax return preparer for
conduct described in paragraph (c) engaged in by one or more of
the employer's employees unless the employer was also actively
involved in that conduct.

(e) For purposes of this subdivision, the term
"understatement of liability" means an understatement of the net
amount payable with respect to a tax imposed by state tax law,
or an overstatement of the net amount creditable or refundable
with respect to a tax. The determination of whether or not
there is an understatement of liability must be made without
regard to any administrative or judicial action involving the
taxpayer. For purposes of this subdivision, the amount
determined for underpayment of estimated tax under either
section 289A.25 or 289A.26 is not considered an understatement
of liability.

(f) For purposes of this subdivision, the term
"overstatement of claim" means an overstatement of the net
amount refundable with respect to a claim for property tax
relief provided by chapter 290A. The determination of whether
or not there is an overstatement of a claim must be made without
regard to administrative or judicial action involving the
claimant.

(g) For purposes of this section, the term "tax refund or
return preparer" means an individual who prepares for
compensation, or who employs one or more individuals to prepare
for compensation, a return of tax, or a claim for refund of
tax. The preparation of a substantial part of a return or claim
for refund is treated as if it were the preparation of the
entire return or claim for refund. An individual is not
considered a tax return preparer merely because the individual:

(1) gives typing, reproducing, or other mechanical
assistance;

(2) prepares a return or claim for refund of the employer,
or an officer or employee of the employer, by whom the
individual is regularly and continuously employed;

(3) prepares a return or claim for refund of any person as
a fiduciary for that person; or

(4) prepares a claim for refund for a taxpayer in response
to a tax order issued to the taxpayer.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns
filed after December 31, 2005.
new text end

Sec. 13.

Minnesota Statutes 2004, section 289A.60, is
amended by adding a subdivision to read:

new text begin Subd. 26. new text end

new text begin Restrictions on taxpayers who improperly claim
refundable credits. new text end

new text begin (a) If a person claims a credit or refund
under section 290.067, 290.0671, 290.0674, or chapter 290A and
the claimed credit or refund is determined to be claimed
fraudulently or with reckless or intentional disregard of the
applicable provisions for the credit or refund, the person is
barred from claiming that credit or refund for the disallowance
period.
new text end

new text begin (b) For the purposes of paragraph (a), the "disallowance
period" is (1) ten taxable years from the taxable year the
credit or refund is claimed if the credit or refund was
fraudulently claimed; and (2) two taxable years from the taxable
year the credit or refund is claimed if the credit or refund was
not fraudulent but was claimed with reckless or intentional
disregard of the applicable provisions.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for credits or
refunds claimed after December 31, 2005.
new text end

Sec. 14.

Minnesota Statutes 2004, section 290.01,
subdivision 7, is amended to read:

Subd. 7.

Resident.

(a) The term "resident" means any
individual domiciled in Minnesota, except that an individual is
not a "resident" for the period of time that the individual is
deleted text begin either:
deleted text end

deleted text begin (1) on active duty stationed outside of Minnesota while in
the armed forces of the United States or the United Nations; or
deleted text end

deleted text begin (2) deleted text end a "qualified individual" as defined in section
911(d)(1) of the Internal Revenue Code, if the qualified
individual notifies the county within three months of moving out
of the country that homestead status be revoked for the
Minnesota residence of the qualified individual, and the
property is not classified as a homestead while the individual
remains a qualified individual.

(b) "Resident" also means any individual domiciled outside
the state who maintains a place of abode in the state and spends
in the aggregate more than one-half of the tax year in
Minnesota, unless:

(1) the individual or the spouse of the individual is in
the armed forces of the United States; or

(2) the individual is covered under the reciprocity
provisions in section 290.081.

For purposes of this subdivision, presence within the state
for any part of a calendar day constitutes a day spent in the
state. Individuals shall keep adequate records to substantiate
the days spent outside the state.

The term "abode" means a dwelling maintained by an
individual, whether or not owned by the individual and whether
or not occupied by the individual, and includes a dwelling place
owned or leased by the individual's spouse.

(c) Neither the commissioner nor any court shall consider
deleted text begin charitable contributions made by an individual within or without
the state deleted text end new text begin the following factors new text end in determining if the individual
is domiciled in Minnesota new text begin :
new text end

new text begin (1) charitable contributions made by an individual within
or without the state;
new text end

new text begin (2) the jurisdiction from which an individual's
professional licenses were issued;
new text end

new text begin (3) the location of an individual's union memberships;
new text end

new text begin (4) the location of accounts or transactions with financial
institutions;
new text end

new text begin (5) the location of the place of worship at which the
individual is a member;
new text end

new text begin (6) the location of business relationships and the place
where business is transacted;
new text end

new text begin (7) the location of social, fraternal, or athletic
organizations or clubs, lodges, or country clubs, in which the
individual is a member; and
new text end

new text begin (8) statements made to an insurance company, concerning the
individual's residence and on which insurance is based new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 15.

Minnesota Statutes 2004, section 290.01,
subdivision 7b, is amended to read:

Subd. 7b.

Resident trust.

new text begin (a) new text end Resident trust means a
trust, except a grantor type trust, which either (1) was created
by a will of a decedent who at death was domiciled in this state
or (2) is an irrevocable trust, the grantor of which was
domiciled in this state at the time the trust became
irrevocable. For the purpose of this subdivision, a trust is
considered irrevocable to the extent the grantor is not treated
as the owner thereof under sections 671 to 678 of the Internal
Revenue Code. The term "grantor type trust" means a trust where
the income or gains of the trust are taxable to the grantor or
others treated as substantial owners under sections 671 to 678
of the Internal Revenue Code.

new text begin (b)(1) A trust, other than a grantor type trust, that
became irrevocable before January 1, 1996, or that was
administered in Minnesota before January 1, 1996, is a resident
trust only if two or more of the following conditions are
satisfied:
new text end

new text begin (i) a majority of the discretionary decisions of the
trustees relative to the investment of trust assets are made in
Minnesota;
new text end

new text begin (ii) a majority of the discretionary decisions of the
trustees relative to the distributions of trust income and
principal are made in Minnesota;
new text end

new text begin (iii) the official books and records of the trust,
consisting of the original minutes of trustee meetings and the
original trust instruments, are located in Minnesota.
new text end

new text begin (2) For purposes of this paragraph, if the trustees
delegate decisions and actions to an agent or custodian, the
actions and decisions of the agent or custodian must not be
taken into account in determining whether the trust is
administered in Minnesota, if:
new text end

new text begin (i) the delegation was permitted under the trust agreement;
new text end

new text begin (ii) the trustees retain the power to revoke the delegation
on reasonable notice; and
new text end

new text begin (iii) the trustees monitor and evaluate the performance of
the agent or custodian on a regular basis as is reasonably
determined by the trustees.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 16.

Minnesota Statutes 2004, section 290.01,
subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For
individuals, estates, and trusts, there shall be added to
federal taxable income:

(1)(i) interest income on obligations of any state other
than Minnesota or a political or governmental subdivision,
municipality, or governmental agency or instrumentality of any
state other than Minnesota exempt from federal income taxes
under the Internal Revenue Code or any other federal statute;
and

(ii) exempt-interest dividends as defined in section
852(b)(5) of the Internal Revenue Code, except the portion of
the exempt-interest dividends derived from interest income on
obligations of the state of Minnesota or its political or
governmental subdivisions, municipalities, governmental agencies
or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to
all shareholders represents 95 percent or more of the
exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal
Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making
the payment; and

(iii) for the purposes of items (i) and (ii), interest on
obligations of an Indian tribal government described in section
7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe
is located;

(2) the amount of income taxes paid or accrued within the
taxable year under this chapter and deleted text begin income deleted text end new text begin the amount of new text end taxes
new text begin based on net income new text end paid to any other state or to any province
or territory of Canada, to the extent allowed as a deduction
under section 63(d) of the Internal Revenue Code, but the
addition may not be more than the amount by which the itemized
deductions as allowed under section 63(d) of the Internal
Revenue Code exceeds the amount of the standard deduction as
defined in section 63(c) of the Internal Revenue Code. For the
purpose of this paragraph, the disallowance of itemized
deductions under section 68 of the Internal Revenue Code of
1986, income tax is the last itemized deduction disallowed;

(3) the capital gain amount of a lump sum distribution to
which the special tax under section 1122(h)(3)(B)(ii) of the Tax
Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the
taxable year under this chapter and deleted text begin income deleted text end taxes new text begin based on net
income new text end paid to any other state or any province or territory of
Canada, to the extent allowed as a deduction in determining
federal adjusted gross income. For the purpose of this
paragraph, income taxes do not include the taxes imposed by
sections 290.0922, subdivision 1, paragraph (b), 290.9727,
290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed
pursuant to section 290.10 new text begin other than expenses or interest used
in computing net interest income for the subtraction allowed
under subdivision 19b, clause (1) new text end ;

(6) the amount of a partner's pro rata share of net income
which does not flow through to the partner because the
partnership elected to pay the tax on the income under section
6242(a)(2) of the Internal Revenue Code; and

(7) 80 percent of the depreciation deduction allowed under
section 168(k) of the Internal Revenue Code. For purposes of
this clause, if the taxpayer has an activity that in the taxable
year generates a deduction for depreciation under section 168(k)
and the activity generates a loss for the taxable year that the
taxpayer is not allowed to claim for the taxable year, "the
depreciation allowed under section 168(k)" for the taxable year
is limited to excess of the depreciation claimed by the activity
under section 168(k) over the amount of the loss from the
activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year
are allowed, the depreciation under section 168(k) is allowed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 17.

Minnesota Statutes 2004, section 290.01,
subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For
individuals, estates, and trusts, there shall be subtracted from
federal taxable income:

(1) new text begin net new text end interest income on obligations of any authority,
commission, or instrumentality of the United States to the
extent includable in taxable income for federal income tax
purposes but exempt from state income tax under the laws of the
United States;

(2) if included in federal taxable income, the amount of
any overpayment of income tax to Minnesota or to any other
state, for any previous taxable year, whether the amount is
received as a refund or as a credit to another taxable year's
income tax liability;

(3) the amount paid to others, less the amount used to
claim the credit allowed under section 290.0674, not to exceed
$1,625 for each qualifying child in grades kindergarten to 6 and
$2,500 for each qualifying child in grades 7 to 12, for tuition,
textbooks, and transportation of each qualifying child in
attending an elementary or secondary school situated in
Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin,
wherein a resident of this state may legally fulfill the state's
compulsory attendance laws, which is not operated for profit,
and which adheres to the provisions of the Civil Rights Act of
1964 and chapter 363A. For the purposes of this clause,
"tuition" includes fees or tuition as defined in section
290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and
equipment purchased or leased for use in elementary and
secondary schools in teaching only those subjects legally and
commonly taught in public elementary and secondary schools in
this state. Equipment expenses qualifying for deduction
includes expenses as defined and limited in section 290.0674,
subdivision 1, clause (3). "Textbooks" does not include
instructional books and materials used in the teaching of
religious tenets, doctrines, or worship, the purpose of which is
to instill such tenets, doctrines, or worship, nor does it
include books or materials for, or transportation to,
extracurricular activities including sporting events, musical or
dramatic events, speech activities, driver's education, or
similar programs. For purposes of the subtraction provided by
this clause, "qualifying child" has the meaning given in section
32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross
income, income realized on disposition of property exempt from
tax under section 290.491;

(6) deleted text begin to the extent included in federal taxable income,
postservice benefits for youth community service under section
124D.42 for volunteer service under United States Code, title
42, sections 12601 to 12604;
deleted text end

deleted text begin (7) deleted text end to the extent not deducted in determining federal
taxable income by an individual who does not itemize deductions
for federal income tax purposes for the taxable year, an amount
equal to 50 percent of the excess of charitable contributions
allowable as a deduction for the taxable year under section
170(a) of the Internal Revenue Code over $500 ;

deleted text begin (8) deleted text end new text begin (7) new text end for taxable years beginning before January 1, 2008,
the amount of the federal small ethanol producer credit allowed
under section 40(a)(3) of the Internal Revenue Code which is
included in gross income under section 87 of the Internal
Revenue Code;

deleted text begin (9) deleted text end new text begin (8) new text end for individuals who are allowed a federal foreign
tax credit for taxes that do not qualify for a credit under
section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to
exceed the total subnational foreign taxes reported in claiming
the foreign tax credit. For purposes of this clause, "federal
foreign tax credit" means the credit allowed under section 27 of
the Internal Revenue Code, and "carryover of subnational foreign
taxes" equals the carryover allowed under section 904(c) of the
Internal Revenue Code minus national level foreign taxes to the
extent they exceed the federal foreign tax credit;

deleted text begin (10) deleted text end new text begin (9) new text end in each of the five tax years immediately
following the tax year in which an addition is required under
subdivision 19a, clause (7), new text begin or 19c, clause (15), in the case of
a shareholder of a corporation that is an S corporation, new text end an
amount equal to one-fifth of the delayed depreciation. For
purposes of this clause, "delayed depreciation" means the amount
of the addition made by the taxpayer under subdivision 19a,
clause (7), new text begin or subdivision 19c, clause (15), in the case of a
shareholder of an S corporation, new text end minus the positive value of any
net operating loss under section 172 of the Internal Revenue
Code generated for the tax year of the addition. The resulting
delayed depreciation cannot be less than zero; deleted text begin and
deleted text end

deleted text begin (11) deleted text end new text begin (10) new text end job opportunity building zone income as provided
under section 469.316 deleted text begin . deleted text end new text begin ;
new text end

new text begin (11) the amount of compensation paid to members of the
Minnesota National Guard or other reserve components of the
United States military for active service performed in
Minnesota, excluding compensation for services performed under
the Active Guard Reserve (AGR) program. For purposes of this
clause, "active service" means (i) state active service as
defined in section 190.05, subdivision 5a, clause (1); (ii)
federally funded state active service as defined in section
190.05, subdivision 5b; or (iii) federal active service as
defined in section 190.05, subdivision 5c, but "active service"
excludes services performed exclusively for purposes of basic
combat training, advanced individual training, annual training,
and periodic inactive duty training; special training
periodically made available to reserve members; and service
performed in accordance with section 190.08, subdivision 3;
new text end

new text begin (12) the amount of compensation paid to members of the
armed forces of the United States or United Nations for active
duty performed outside Minnesota; and
new text end

new text begin (13) to the extent not deducted in computing federal
taxable income, an amount, not to exceed $10,000, equal to
qualified expenses related to a qualified donor's donation,
while living, of one or more of the qualified donor's organs to
another person for human organ transplantation. For purposes of
determining the extent to which expenses are deducted in
computing federal taxable income, travel and lodging expenses
related to an organ donation are considered deducted by an
individual in determining federal taxable income to the extent
they exceed 7.5 percent of federal adjusted gross income as
defined in section 62 of the Internal Revenue Code. For
purposes of this clause, "organ" means all or part of an
individual's liver, pancreas, kidney, intestine, lung, or bone
marrow; "human organ transplantation" means the medical
procedure by which transfer of a human organ is made from the
body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual
and the qualified donor for (i) travel, (ii) lodging, and (iii)
lost wages net of sick pay, except that such expenses may be
subtracted under this clause only once; and "qualified donor"
means the individual or the individual's dependent, as defined
in section 152 of the Internal Revenue Code. An individual may
claim the subtraction in this clause only once for each instance
of organ donation for transplantation during the taxable year in
which the human organ donation and transplantation occurs.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin The amendment to clause (9) is effective
retroactively for tax years beginning after December 31, 2001.
The rest of this section is effective for the tax years
beginning after December 31, 2004.
new text end

Sec. 18.

Minnesota Statutes 2004, section 290.01,
subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable
income.

For corporations, there shall be added to federal
taxable income:

(1) the amount of any deduction taken for federal income
tax purposes for income, excise, or franchise taxes based on net
income or related minimum taxes, including but not limited to
the tax imposed under section 290.0922, paid by the corporation
to Minnesota, another state, a political subdivision of another
state, the District of Columbia, or any foreign country or
possession of the United States;

(2) interest not subject to federal tax upon obligations
of: the United States, its possessions, its agencies, or its
instrumentalities; the state of Minnesota or any other state,
any of its political or governmental subdivisions, any of its
municipalities, or any of its governmental agencies or
instrumentalities; the District of Columbia; or Indian tribal
governments;

(3) exempt-interest dividends received as defined in
section 852(b)(5) of the Internal Revenue Code;

(4) the amount of any net operating loss deduction taken
for federal income tax purposes under section 172 or 832(c)(10)
of the Internal Revenue Code or operations loss deduction under
section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal
income tax purposes under sections 241 to 247 of the Internal
Revenue Code;

(6) losses from the business of mining, as defined in
section 290.05, subdivision 1, clause (a), that are not subject
to Minnesota income tax;

(7) the amount of any capital losses deducted for federal
income tax purposes under sections 1211 and 1212 of the Internal
Revenue Code;

(8) the exempt foreign trade income of a foreign sales
corporation under sections 921(a) and 291 of the Internal
Revenue Code;

(9) the amount of percentage depletion deducted under
sections 611 through 614 and 291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in
service in a taxable year beginning before December 31, 1986,
and for which amortization deductions were elected under section
169 of the Internal Revenue Code of 1954, as amended through
December 31, 1985, the amount of the amortization deduction
allowed in computing federal taxable income for those
facilities;

(11) the amount of any deemed dividend from a foreign
operating corporation determined pursuant to section 290.17,
subdivision 4, paragraph (g);

(12) deleted text begin the amount of any environmental tax paid under section
59(a) of the Internal Revenue Code;
deleted text end

deleted text begin (13) deleted text end the amount of a partner's pro rata share of net income
which does not flow through to the partner because the
partnership elected to pay the tax on the income under section
6242(a)(2) of the Internal Revenue Code;

deleted text begin (14) deleted text end new text begin (13) new text end the amount of net income excluded under section
114 of the Internal Revenue Code;

deleted text begin (15) deleted text end new text begin (14) new text end any increase in subpart F income, as defined in
section 952(a) of the Internal Revenue Code, for the taxable
year when subpart F income is calculated without regard to the
provisions of section 614 of Public Law 107-147; and

deleted text begin (16) deleted text end new text begin (15) new text end 80 percent of the depreciation deduction allowed
under section 168(k) new text begin (1)(A) and (k)(4)(A) new text end of the Internal Revenue
Code. For purposes of this clause, if the taxpayer has an
activity that in the taxable year generates a deduction for
depreciation under section 168(k) new text begin (1)(A) and (k)(4)(A) new text end and the
activity generates a loss for the taxable year that the taxpayer
is not allowed to claim for the taxable year, "the depreciation
allowed under section 168(k) new text begin (1)(A) and (k)(4)(A) new text end " for the
taxable year is limited to excess of the depreciation claimed by
the activity under section 168(k) new text begin (1)(A) and (k)(4)(A) new text end over the
amount of the loss from the activity that is not allowed in the
taxable year. In succeeding taxable years when the losses not
allowed in the taxable year are allowed, the depreciation under
section 168(k) new text begin (1)(A) and (k)(4)(A) new text end is allowed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 19.

Minnesota Statutes 2004, section 290.06,
subdivision 22, is amended to read:

Subd. 22.

Credit for taxes paid to another state.

(a) A
taxpayer who is liable for taxes new text begin based new text end on deleted text begin or measured by deleted text end net
income to another state, as provided in paragraphs (b) through
(f), upon income allocated or apportioned to Minnesota, is
entitled to a credit for the tax paid to another state if the
tax is actually paid in the taxable year or a subsequent taxable
year. A taxpayer who is a resident of this state pursuant to
section 290.01, subdivision 7, deleted text begin clause (2) deleted text end new text begin paragraph (b) new text end , and who
is subject to income tax as a resident in the state of the
individual's domicile is not allowed this credit unless the
state of domicile does not allow a similar credit.

(b) For an individual, estate, or trust, the credit is
determined by multiplying the tax payable under this chapter by
the ratio derived by dividing the income subject to tax in the
other state that is also subject to tax in Minnesota while a
resident of Minnesota by the taxpayer's federal adjusted gross
income, as defined in section 62 of the Internal Revenue Code,
modified by the addition required by section 290.01, subdivision
19a, clause (1), and the subtraction allowed by section 290.01,
subdivision 19b, clause (1), to the extent the income is
allocated or assigned to Minnesota under sections 290.081 and
290.17.

(c) If the taxpayer is an athletic team that apportions all
of its income under section 290.17, subdivision 5, the credit is
determined by multiplying the tax payable under this chapter by
the ratio derived from dividing the total net income subject to
tax in the other state by the taxpayer's Minnesota taxable
income.

(d) The credit determined under paragraph (b) or (c) shall
not exceed the amount of tax so paid to the other state on the
gross income earned within the other state subject to tax under
this chapter, nor shall the allowance of the credit reduce the
taxes paid under this chapter to an amount less than what would
be assessed if such income amount was excluded from taxable net
income.

(e) In the case of the tax assessed on a lump sum
distribution under section 290.032, the credit allowed under
paragraph (a) is the tax assessed by the other state on the lump
sum distribution that is also subject to tax under section
290.032, and shall not exceed the tax assessed under section
290.032. To the extent the total lump sum distribution defined
in section 290.032, subdivision 1, includes lump sum
distributions received in prior years or is all or in part an
annuity contract, the reduction to the tax on the lump sum
distribution allowed under section 290.032, subdivision 2,
includes tax paid to another state that is properly apportioned
to that distribution.

(f) If a Minnesota resident reported an item of income to
Minnesota and is assessed tax in such other state on that same
income after the Minnesota statute of limitations has expired,
the taxpayer shall receive a credit for that year under
paragraph (a), notwithstanding any statute of limitations to the
contrary. The claim for the credit must be submitted within one
year from the date the taxes were paid to the other state. The
taxpayer must submit sufficient proof to show entitlement to a
credit.

(g) For the purposes of this subdivision, a resident
shareholder of a corporation treated as an "S" corporation under
section 290.9725, must be considered to have paid a tax imposed
on the shareholder in an amount equal to the shareholder's pro
rata share of any net income tax paid by the S corporation to
another state. For the purposes of the preceding sentence, the
term "net income tax" means any tax imposed on or measured by a
corporation's net income.

(h) For the purposes of this subdivision, a resident
partner of an entity taxed as a partnership under the Internal
Revenue Code must be considered to have paid a tax imposed on
the partner in an amount equal to the partner's pro rata share
of any net income tax paid by the partnership to another state.
For purposes of the preceding sentence, the term "net income"
tax means any tax imposed on or measured by a partnership's net
income.

(i) For the purposes of this subdivision, "another state":

(1) includes:

(i) the District of Columbia; and

(ii) a province or territory of Canada; but

(2) excludes Puerto Rico and the several territories
organized by Congress.

(j) The limitations on the credit in paragraphs (b), (c),
and (d), are imposed on a state by state basis.

(k) For a tax imposed by a province or territory of Canada,
the tax for purposes of this subdivision is the excess of the
tax over the amount of the foreign tax credit allowed under
section 27 of the Internal Revenue Code. In determining the
amount of the foreign tax credit allowed, the net income taxes
imposed by Canada on the income are deducted first. Any
remaining amount of the allowable foreign tax credit reduces the
provincial or territorial tax that qualifies for the credit
under this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 20.

Minnesota Statutes 2004, section 290.06, is
amended by adding a subdivision to read:

new text begin Subd. 32. new text end

new text begin Dairy investment credit. new text end

new text begin (a) A dairy
investment credit is allowed against the tax computed under this
chapter equal to the credit amount in the table, based on the
amount paid or incurred by the taxpayer in the tax year and
certified by the commissioner of agriculture under paragraph
(f), for qualifying expenditures:
new text end

new text begin Amount of
qualifying expenditures new text end new text begin Credit amount
new text end

new text begin up to $500,000 new text end new text begin ten percent of
qualifying expenditures
new text end

new text begin over $500,000, but not new text end new text begin $50,000, plus nine percent
more than $600,000 new text end new text begin of the amount of qualified
expenditures in excess of
$500,000
new text end

new text begin over $600,000, but not new text end new text begin $59,000, plus seven percent
more than $700,000 new text end new text begin of the amount of qualified
expenditures in excess of
$600,000
new text end

new text begin over $700,000, but not new text end new text begin $66,000, plus five percent
more than $800,000 new text end new text begin of the amount of qualified
expenditures in excess of
$700,000
new text end

new text begin over $800,000, but not new text end new text begin $71,000, plus three percent
more than $900,000 new text end new text begin of the amount of qualified
expenditures in excess of
$800,000
new text end

new text begin over $900,000, but not new text end new text begin $74,000, plus one percent
more than $1,000,000 new text end new text begin of the amount of qualified
expenditures in excess of
$900,000
new text end

new text begin $1,000,000 or more new text end new text begin $75,000
new text end

new text begin (b) "Qualifying expenditures," for purposes of this
subdivision, means the expenses incurred for dairy animals for
the construction or improvement of buildings or facilities, or
the acquisition of equipment, for dairy animal housing,
confinement, animal feeding, milk production, and waste
management, including, but not limited to, the following:
new text end

new text begin (1) freestall barns;
new text end

new text begin (2) fences;
new text end

new text begin (3) watering facilities;
new text end

new text begin (4) feed storage and handling equipment;
new text end

new text begin (5) milking parlors;
new text end

new text begin (6) robotic equipment;
new text end

new text begin (7) scales;
new text end

new text begin (8) milk storage and cooling facilities;
new text end

new text begin (9) bulk tanks;
new text end

new text begin (10) manure handling equipment and storage facilities;
new text end

new text begin (11) digesters;
new text end

new text begin (12) equipment used to produce energy;
new text end

new text begin (13) on-farm processing; and
new text end

new text begin (14) development of pasture other than land acquisition.
new text end

new text begin Qualifying expenditures only include amounts that are
capitalized and deducted under either section 167 or 179 of the
Internal Revenue Code in computing federal taxable income.
new text end

new text begin (c) The credit is limited to the liability for tax, as
computed under this section for the taxable year for which the
credit certificate is issued. If the amount of the credit
determined under this section for any taxable year exceeds this
limitation, the excess is a dairy investment credit carryover to
each of the 15 succeeding taxable years. The entire amount of
the excess unused credit for the taxable year is carried first
to the earliest of the taxable years to which the credit may be
carried and then to each successive year to which the credit may
be carried. The amount of the unused credit which may be added
under this paragraph shall not exceed the taxpayer's liability
for tax less the dairy investment credit for the taxable year.
new text end

new text begin (d) For a partnership or S corporation, the maximum amount
of the credit applies to the entity, not the individual partner
or shareholder.
new text end

new text begin (e) To be eligible for the dairy investment credit in this
subdivision, a taxpayer must apply to the commissioner of
agriculture for a tax credit certificate. The application must
be made on forms prescribed by the commissioner of agriculture
and must include a statement of the qualifying expenditures by
the taxpayer.
new text end

new text begin (f) The commissioner of agriculture shall certify credits
in the order the forms required under paragraph (e) are received
and approved by the commissioner of agriculture, until the
maximum credit amount for the taxable year has been reached.
The maximum credit amount is $900,000 for tax years beginning
after December 31, 2004, and before January 1, 2006; and
$1,000,000 per year for tax years beginning after December 31,
2005.
new text end

new text begin Any eligible applications for which certificates are not
issued in a tax year because the commissioner of agriculture has
issued certificates totaling the maximum credit amount for that
tax year remain eligible for a credit certificate in subsequent
tax years, in the order in which the forms were received by the
commissioner of agriculture.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assets
placed in service in taxable years beginning after December 31,
2004.
new text end

Sec. 21.

Minnesota Statutes 2004, section 290.067,
subdivision 1, is amended to read:

Subdivision 1.

Amount of credit.

(a) A taxpayer may take
as a credit against the tax due from the taxpayer and a spouse,
if any, under this chapter an amount equal to the dependent care
credit for which the taxpayer is eligible pursuant to the
provisions of section 21 of the Internal Revenue Code subject to
the limitations provided in subdivision 2 except that in
determining whether the child qualified as a dependent, income
received as a Minnesota family investment program grant or
allowance to or on behalf of the child must not be taken into
account in determining whether the child received more than half
of the child's support from the taxpayer, and the provisions of
section 32(b)(1)(D) of the Internal Revenue Code do not apply.

(b) If a child who has not attained the age of six years at
the close of the taxable year is cared for at a licensed family
day care home operated by the child's parent, the taxpayer is
deemed to have paid employment-related expenses. If the child
is 16 months old or younger at the close of the taxable year,
the amount of expenses deemed to have been paid equals the
maximum limit for one qualified individual under section 21(c)
and (d) of the Internal Revenue Code. If the child is older
than 16 months of age but has not attained the age of six years
at the close of the taxable year, the amount of expenses deemed
to have been paid equals the amount the licensee would charge
for the care of a child of the same age for the same number of
hours of care.

(c) If a married couple:

(1) has a child who has not attained the age of one year at
the close of the taxable year;

(2) files a joint tax return for the taxable year; and

(3) does not participate in a dependent care assistance
program as defined in section 129 of the Internal Revenue Code,
in lieu of the actual employment related expenses paid for that
child under paragraph (a) or the deemed amount under paragraph
(b), the lesser of (i) the combined earned income of the couple
or (ii) the amount of the maximum limit for one qualified
individual under section 21(c) and (d) of the Internal Revenue
Code will be deemed to be the employment related expense paid
for that child. The earned income limitation of section 21(d)
of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any
employment-related expenses have been paid.

(d) If the taxpayer is not required and does not file a
federal individual income tax return for the tax year, no credit
is allowed for any amount paid to any person unless:

(1) the name, address, and taxpayer identification number
of the person are included on the return claiming the credit; or

(2) if the person is an organization described in section
501(c)(3) of the Internal Revenue Code and exempt from tax under
section 501(a) of the Internal Revenue Code, the name and
address of the person are included on the return claiming the
credit.

In the case of a failure to provide the information required
under the preceding sentence, the preceding sentence does not
apply if it is shown that the taxpayer exercised due diligence
in attempting to provide the information required.

In the case of a nonresident, part-year resident, or a
person who has earned income not subject to tax under this
chapter including earned income excluded pursuant to section
290.01, subdivision 19b, clause (11), the credit determined
under section 21 of the Internal Revenue Code must be allocated
based on the ratio by which the earned income of the claimant
and the claimant's spouse from Minnesota sources bears to the
total earned income of the claimant and the claimant's spouse.

new text begin For residents of Minnesota, the subtractions for military
pay under section 290.01, subdivision 19b, clauses (11) and
(12), are not considered "earned income not subject to tax under
this chapter."
new text end

Sec. 22.

Minnesota Statutes 2004, section 290.067,
subdivision 2a, is amended to read:

Subd. 2a.

Income.

(a) For purposes of this section,
"income" means the sum of the following:

(1) federal adjusted gross income as defined in section 62
of the Internal Revenue Code; deleted text begin and deleted text end new text begin plus
new text end

(2) the sum of the following amounts to the extent not
included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not
disallowed as a result of section 469, paragraph (i) or (m) of
the Internal Revenue Code and the amount of passive activity
loss carryover allowed under section 469(b) of the Internal
Revenue Code;

(iii) an amount equal to the total of any discharge of
qualified farm indebtedness of a solvent individual excluded
from gross income under section 108(g) of the Internal Revenue
Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement
benefits, all payments received under the federal Social
Security Act, supplemental security income, and veterans
benefits), which was not exclusively funded by the claimant or
spouse, or which was funded exclusively by the claimant or
spouse and which funding payments were excluded from federal
adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state
government or any instrumentality or political subdivision
thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature
of disability income or sick pay as a result of accident,
sickness, or other disability, whether funded through insurance
or otherwise;

(x) a lump sum distribution under section 402(e)(3) of the
Internal Revenue Code;

(xi) contributions made by the claimant to an individual
retirement account, including a qualified voluntary employee
contribution; simplified employee pension plan; self-employed
retirement plan; cash or deferred arrangement plan under section
401(k) of the Internal Revenue Code; or deferred compensation
plan under section 457 of the Internal Revenue Code; and

(xii) nontaxable scholarship or fellowship grants new text begin ; minus
new text end

new text begin (3) in the case of a married couple filing a joint return,
the earned income of the lesser-earning spouse, as defined in
section 290.0675, subdivision 1, paragraph (d) new text end .

In the case of an individual who files an income tax return
on a fiscal year basis, the term "federal adjusted gross income"
means federal adjusted gross income reflected in the fiscal year
ending in the next calendar year. Federal adjusted gross income
may not be reduced by the amount of a net operating loss
carryback or carryforward or a capital loss carryback or
carryforward allowed for the year.

(b) "Income" does not include:

(1) amounts excluded pursuant to the Internal Revenue Code,
sections 101(a) and 102;

(2) amounts of any pension or annuity that were exclusively
funded by the claimant or spouse if the funding payments were
not excluded from federal adjusted gross income in the years
when the payments were made;

(3) surplus food or other relief in kind supplied by a
governmental agency;

(4) relief granted under chapter 290A;

(5) child support payments received under a temporary or
final decree of dissolution or legal separation; and

(6) restitution payments received by eligible individuals
and excludable interest as defined in section 803 of the
Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2005.
new text end

Sec. 23.

Minnesota Statutes 2004, section 290.0671,
subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

(a) An individual is
allowed a credit against the tax imposed by this chapter equal
to a percentage of earned income. To receive a credit, a
taxpayer must be eligible for a credit under section 32 of the
Internal Revenue Code. new text begin An individual who would have been
eligible for a credit under section 32 of the Internal Revenue
Code if the phaseout in section 32(b) were calculated based on
the income thresholds provided in paragraphs (b) through (d) as
adjusted in paragraphs (i) through (k) is also eligible for a
credit under this section.
new text end

(b) For individuals with no qualifying children, the credit
equals 1.9125 percent of the first $4,620 of earned income. The
credit is reduced by 1.9125 percent of earned income or deleted text begin modified
deleted text end adjusted gross income, whichever is greater, in excess of
$5,770, but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit
equals 8.5 percent of the first $6,920 of earned income and 8.5
percent of earned income over $12,080 but less than $13,450.
The credit is reduced by 5.73 percent of earned income or
deleted text begin modified deleted text end adjusted gross income, whichever is greater, in excess
of $15,080, but in no case is the credit less than zero.

(d) For individuals with two or more qualifying children,
the credit equals ten percent of the first $9,720 of earned
income and 20 percent of earned income over $14,860 but less
than $16,800. The credit is reduced by 10.3 percent of earned
income or deleted text begin modified deleted text end adjusted gross income, whichever is greater,
in excess of $17,890, but in no case is the credit less than
zero.

(e) For a nonresident or part-year resident, the credit
must be allocated based on the percentage calculated under
section 290.06, subdivision 2c, paragraph (e).

(f) For a person who was a resident for the entire tax year
and has earned income not subject to tax under this chapter,
including income excluded under section 290.01, subdivision 19b,
clause (11), the credit must be allocated based on the ratio of
federal adjusted gross income reduced by the earned income not
subject to tax under this chapter over federal adjusted gross
income. new text begin For purposes of this paragraph, the subtractions for
military pay under section 290.01, subdivision 19b, clauses (11)
and (12), are not considered "earned income not subject to tax
under this chapter."
new text end

(g) For tax years beginning after December 31, 2001, and
before December 31, 2004, the $5,770 in paragraph (b), the
$15,080 in paragraph (c), and the $17,890 in paragraph (d),
after being adjusted for inflation under subdivision 7, are each
increased by $1,000 for married taxpayers filing joint returns.

(h) For tax years beginning after December 31, 2004, and
before December 31, deleted text begin 2007 deleted text end new text begin 2005 new text end , the $5,770 in paragraph (b), the
$15,080 in paragraph (c), and the $17,890 in paragraph (d),
after being adjusted for inflation under subdivision 7, are each
increased by $2,000 for married taxpayers filing joint returns.

new text begin (i) For tax years beginning after December 31, 2005, and
before December 31, 2007, the $5,770 in paragraph (b), the
$15,080 in paragraph (c), and the $17,890 in paragraph (d),
after being adjusted for inflation under subdivision 7, are each
increased by the greater of (i) $2,000 or (ii) the earned income
of the lesser-earning spouse, for married taxpayers filing joint
returns.
new text end

deleted text begin (i) deleted text end new text begin (j) new text end For tax years beginning after December 31, 2007,
and before December 31, 2010, the $5,770 in paragraph (b), the
$15,080 in paragraph (c), and the $17,890 in paragraph (d),
after being adjusted for inflation under subdivision 7, are each
increased by deleted text begin $3,000 deleted text end new text begin the greater of (i) $3,000 or (ii) the earned
income of the lesser-earning spouse, new text end for married taxpayers
filing joint returns. For tax years beginning after December
31, 2008, new text begin and before December 31, 2010, new text end the $3,000 is adjusted
annually for inflation under subdivision 7.

new text begin (k) For tax years beginning after December 31, 2010, the
$5,770 in paragraph (b), the $15,080 in paragraph (c), and the
$17,890 in paragraph (d), after being adjusted for inflation
under subdivision 7, are each increased by the earned income of
the lesser-earning spouse, for married taxpayers filing joint
returns.
new text end

deleted text begin (j) deleted text end new text begin (l) new text end The commissioner shall construct tables showing the
amount of the credit at various income levels and make them
available to taxpayers. The tables shall follow the schedule
contained in this subdivision, except that the commissioner may
graduate the transition between income brackets.

Sec. 24.

Minnesota Statutes 2004, section 290.0671,
subdivision 1a, is amended to read:

Subd. 1a.

Definitions.

For purposes of this section, the
terms "qualifying child," new text begin and new text end "earned income," deleted text begin and "adjusted
gross income" deleted text end have the meanings given in section 32(c) of the
Internal Revenue Code new text begin , and the term "adjusted gross income" has
the meaning given in section 62 of the Internal Revenue Code new text end .

new text begin "Earned income of the lesser-earning spouse" has the
meaning given in section 290.0675, subdivision 1, paragraph (d).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 25.

Minnesota Statutes 2004, section 290.0672,
subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this
section, the following terms have the meanings given.

(b) "Long-term care insurance" means a policy that:

(1) qualifies for a deduction under section 213 of the
Internal Revenue Code, disregarding the 7.5 percent income test;
or meets the requirements given in section 62A.46; or provides
similar coverage issued under the laws of another jurisdiction;
and

(2) has a lifetime long-term care benefit limit of not less
than $100,000; and

(3) has been offered in compliance with the inflation
protection requirements of section 62S.23.

(c) "Qualified beneficiary" means the taxpayer or the
taxpayer's spouse.

deleted text begin (d) "Premiums deducted in determining federal taxable
income" means the lesser of (1) long-term care insurance
premiums that qualify as deductions under section 213 of the
Internal Revenue Code; and (2) the total amount deductible for
medical care under section 213 of the Internal Revenue Code.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 26.

Minnesota Statutes 2004, section 290.0672,
subdivision 2, is amended to read:

Subd. 2.

Credit.

A taxpayer is allowed a credit against
the tax imposed by this chapter for long-term care insurance
policy premiums paid during the tax year. The credit for each
policy equals 25 percent of premiums paid deleted text begin to the extent not
deducted in determining federal taxable income deleted text end . A taxpayer may
claim a credit for only one policy for each qualified
beneficiary. A maximum of $100 applies to each qualified
beneficiary. The maximum total credit allowed per year is $200
for married couples filing joint returns and $100 for all other
filers. For a nonresident or part-year resident, the credit
determined under this section must be allocated based on the
percentage calculated under section 290.06, subdivision 2c,
paragraph (e).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 27.

Minnesota Statutes 2004, section 290.0674,
subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

An individual is allowed
a credit against the tax imposed by this chapter in an amount
equal to 75 percent of the amount paid for education-related
expenses for a qualifying child in kindergarten through grade
12. For purposes of this section, "education-related expenses"
means:

(1) fees or tuition for instruction by an instructor under
section 120A.22, subdivision 10, clause (1), (2), (3), (4), or
(5), or a member of the Minnesota Music Teachers Association,
and who is not a lineal ancestor or sibling of the dependent for
instruction outside the regular school day or school year,
including tutoring, driver's education offered as part of school
curriculum, regardless of whether it is taken from a public or
private entity or summer camps, in grade or age appropriate
curricula that supplement curricula and instruction available
during the regular school year, that assists a dependent to
improve knowledge of core curriculum areas or to expand
knowledge and skills under the deleted text begin graduation rule under section
120B.02, paragraph (e), clauses (1) to (7), (9), and (10)
deleted text end new text begin required academic standards under section 120B.021, subdivision
1, and the elective standard under section 120B.022, subdivision
1, clause (2) new text end , and that do not include the teaching of religious
tenets, doctrines, or worship, the purpose of which is to
instill such tenets, doctrines, or worship;

(2) expenses for textbooks, including books and other
instructional materials and equipment purchased or leased for
use in elementary and secondary schools in teaching only those
subjects legally and commonly taught in public elementary and
secondary schools in this state. "Textbooks" does not include
instructional books and materials used in the teaching of
religious tenets, doctrines, or worship, the purpose of which is
to instill such tenets, doctrines, or worship, nor does it
include books or materials for extracurricular activities
including sporting events, musical or dramatic events, speech
activities, driver's education, or similar programs;

(3) a maximum expense of $200 per family for personal
computer hardware, excluding single purpose processors, and
educational software that assists a dependent to improve
knowledge of core curriculum areas or to expand knowledge and
skills under the deleted text begin graduation rule under section 120B.02 deleted text end new text begin required
academic standards under section 120B.021, subdivision 1, and
the elective standard under section 120B.022, subdivision 1,
clause (2), new text end purchased for use in the taxpayer's home and not
used in a trade or business regardless of whether the computer
is required by the dependent's school; and

(4) the amount paid to others for transportation of a
qualifying child attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or
Wisconsin, wherein a resident of this state may legally fulfill
the state's compulsory attendance laws, which is not operated
for profit, and which adheres to the provisions of the Civil
Rights Act of 1964 and chapter 363A.

For purposes of this section, "qualifying child" has the
meaning given in section 32(c)(3) of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 28.

Minnesota Statutes 2004, section 290.0674,
subdivision 2, is amended to read:

Subd. 2.

Limitations.

(a) new text begin For taxable years beginning
after December 31, 2004, and before January 1, 2006, new text end for
claimants with income not greater than $33,500, the maximum
credit allowed new text begin for a family new text end is $1,000 deleted text begin per qualifying child and
$2,000 per family deleted text end new text begin multiplied by the number of qualifying
children in kindergarten through grade 12 in the family new text end . deleted text begin No
credit is allowed for education-related expenses for claimants
with income greater than $37,500. deleted text end The maximum credit deleted text begin per child
deleted text end new text begin for families with one qualifying child in kindergarten through
grade 12 new text end is reduced by $1 for each $4 of household income over
$33,500, and the maximum credit deleted text begin per family deleted text end new text begin for families with two
or more qualifying children in kindergarten through grade 12 new text end is
reduced by $2 for each $4 of household income over $33,500, but
in no case is the credit less than zero.

new text begin (b) For taxable years beginning after December 31, 2005,
for claimants with income not greater than the greater of (i)
$33,500 or (ii) 185 percent of the federal poverty guidelines,
the maximum credit allowed for a family is $1,000 multiplied by
the number of qualifying children in the family in grades
kindergarten through 12. The maximum credit per family is
reduced by $1 multiplied by the number of qualifying children in
the family in grades kindergarten through 12 for each $4 of
household income over the greater of (i) $33,500 or (ii) 185
percent of the federal poverty guidelines, but in no case is the
credit less than zero.
new text end

new text begin (c) new text end For purposes of this section "income" has the meaning
given in section 290.067, subdivision 2a new text begin , but disregarding the
subtraction in clause (3) new text end . In the case of a married claimant, a
credit is not allowed unless a joint income tax return is
filed new text begin . For purposes of this section "federal poverty
guidelines" means the guidelines published in the Federal
Register in the tax year for which the credit is claimed,
adjusted for family size new text end .

deleted text begin (b) deleted text end new text begin (d) new text end For a nonresident or part-year resident, the credit
determined under subdivision 1 and the maximum credit amount in
paragraph (a) must be allocated using the percentage calculated
in section 290.06, subdivision 2c, paragraph (e).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 29.

Minnesota Statutes 2004, section 290.091,
subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by
this section, the following terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of
the following for the taxable year:

(1) the taxpayer's federal alternative minimum taxable
income as defined in section 55(b)(2) of the Internal Revenue
Code;

(2) the taxpayer's itemized deductions allowed in computing
federal alternative minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170
of the Internal Revenue Code new text begin :
new text end

new text begin (A) for taxable years beginning before January 1, 2006, new text end to
the extent that the deduction exceeds 1.0 percent of adjusted
gross income deleted text begin , as defined deleted text end new text begin ;
new text end

new text begin (B) for taxable years beginning after December 31, 2005, to
the full extent of the deduction.
new text end

new text begin For purposes of this clause, "adjusted gross income" has
the meaning given new text end in section 62 of the Internal Revenue Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled
person;

(3) for depletion allowances computed under section 613A(c)
of the Internal Revenue Code, with respect to each property (as
defined in section 614 of the Internal Revenue Code), to the
extent not included in federal alternative minimum taxable
income, the excess of the deduction for depletion allowable
under section 611 of the Internal Revenue Code for the taxable
year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion
deduction for the taxable year);

(4) to the extent not included in federal alternative
minimum taxable income, the amount of the tax preference for
intangible drilling cost under section 57(a)(2) of the Internal
Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative
minimum taxable income, the amount of interest income as
provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01,
subdivision 19a, clause (7);

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01,
subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by
section 290.01, subdivision 19b, clause (2), to the extent
included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued
within the taxable year on indebtedness to the extent that the
amount does not exceed net investment income, as defined in
section 163(d)(4) of the Internal Revenue Code. Interest does
not include amounts deducted in computing federal adjusted gross
income; and

(4) amounts subtracted from federal taxable income as
provided by section 290.01, subdivision 19b, clauses deleted text begin (10) and
(11) deleted text end new text begin (9) to (13) new text end .

In the case of an estate or trust, alternative minimum
taxable income must be computed as provided in section 59(c) of
the Internal Revenue Code.

(b) "Investment interest" means investment interest as
defined in section 163(d)(3) of the Internal Revenue Code.

(c) "Tentative minimum tax" equals 6.4 percent of
alternative minimum taxable income after subtracting the
exemption amount determined under subdivision 3.

(d) "Regular tax" means the tax that would be imposed under
this chapter (without regard to this section and section
290.032), reduced by the sum of the nonrefundable credits
allowed under this chapter.

(e) "Net minimum tax" means the minimum tax imposed by this
section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 30.

Minnesota Statutes 2004, section 290.091,
subdivision 3, is amended to read:

Subd. 3.

Exemption amount.

new text begin (a) new text end For purposes of computing
the alternative minimum tax, the exemption amount is new text begin :
new text end

new text begin (1) for taxable years beginning before January 1, 2005, new text end the
exemption determined under section 55(d) of the Internal Revenue
Code, as amended through December 31, 1992 new text begin ;
new text end

new text begin (2) for taxable years beginning after December 31, 2004,
and before January 1, 2006, $42,000 for married couples filing
joint returns; $21,000 for married individuals filing separate
returns, estates, and trusts; and $31,500 for unmarried
individuals;
new text end

new text begin (3) for taxable years beginning after December 31, 2005,
and before January 1, 2007, $45,000 for married couples filing
joint returns; $22,500 for married individuals filing separate
returns, estates, and trusts; and $33,750 for unmarried
individuals; and
new text end

new text begin (4) for taxable years beginning after December 31, 2006,
and before January 1, 2008, $50,000 for married couples filing
joint returns; $25,000 for married individuals filing separate
returns, estates, and trusts; and $37,500 for unmarried
individuals.
new text end

new text begin (b) The exemption amount determined under this subdivision
is subject to the phase out under section 55(d)(3) of the
Internal Revenue Code new text end , except that alternative minimum taxable
income as determined under this section must be substituted in
the computation of the phase out deleted text begin under section 55(d)(3) deleted text end .

new text begin (c) For taxable years beginning after December 31, 2007,
the exemption amount under paragraph (a), clause (4), must be
adjusted for inflation. The commissioner shall make the
inflation adjustments in accordance with section 1(f) of the
Internal Revenue Code except that for the purposes of this
subdivision the percentage increase must be determined from the
year starting September 1, 2006, and ending August 31, 2007, as
the base year for adjusting for inflation for the tax year
beginning after December 31, 2007. The determination of the
commissioner under this subdivision is not a rule under the
Administrative Procedure Act.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 31.

Minnesota Statutes 2004, section 290.0922,
subdivision 2, is amended to read:

Subd. 2.

Exemptions.

The following entities are exempt
from the tax imposed by this section:

(1) corporations exempt from tax under section 290.05;

(2) real estate investment trusts;

(3) regulated investment companies or a fund thereof; and

(4) entities having a valid election in effect under
section 860D(b) of the Internal Revenue Code;

(5) town and farmers' mutual insurance companies;

(6) cooperatives organized under chapter 308A new text begin or 308B new text end that
provide housing exclusively to persons age 55 and over and are
classified as homesteads under section 273.124, subdivision 3;
and

(7) an entity, if for the taxable year all of its property
is located in a job opportunity building zone designated under
section 469.314 and all of its payroll is a job opportunity
building zone payroll under section 469.310.

Entities not specifically exempted by this subdivision are
subject to tax under this section, notwithstanding section
290.05.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 32.

Minnesota Statutes 2004, section 290.191,
subdivision 2, is amended to read:

Subd. 2.

Apportionment formula of general application.

new text begin (a) new text end Except for those trades or businesses required to use a
different formula under subdivision 3 or section 290.36, and for
those trades or businesses that receive permission to use some
other method under section 290.20 or under subdivision 4, a
trade or business required to apportion its net income must
apportion its income to this state on the basis of the
percentage obtained by taking the sum of:

(1) deleted text begin 75 deleted text end new text begin the new text end percent new text begin for the sales factor under paragraph (b)
new text end of the percentage which the sales made within this state in
connection with the trade or business during the tax period are
of the total sales wherever made in connection with the trade or
business during the tax period;

(2) deleted text begin 12.5 deleted text end new text begin the new text end percent new text begin for the property factor under
paragraph (b) new text end of the percentage which the total tangible
property used by the taxpayer in this state in connection with
the trade or business during the tax period is of the total
tangible property, wherever located, used by the taxpayer in
connection with the trade or business during the tax period; and

(3) deleted text begin 12.5 deleted text end new text begin the new text end percent new text begin for the payroll factor under paragraph
(b) new text end of the percentage which the taxpayer's total payrolls paid
or incurred in this state or paid in respect to labor performed
in this state in connection with the trade or business during
the tax period are of the taxpayer's total payrolls paid or
incurred in connection with the trade or business during the tax
period.

new text begin (b) For purposes of paragraph (a) and subdivision 3, the
following percentages apply for the taxable years specified:
new text end

new text begin Taxable years new text end new text begin Sales factor new text end new text begin Property new text end new text begin Payroll
beginning new text end new text begin percent new text end new text begin factor new text end new text begin factor
during calendar new text end new text begin percent new text end new text begin percent
year
2007 new text end new text begin 78 new text end new text begin 11 new text end new text begin 11
2008 new text end new text begin 95 new text end new text begin 2.5 new text end new text begin 2.5
2009 and later new text end new text begin 100 new text end new text begin 0 new text end new text begin 0
calendar years
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2006.
new text end

Sec. 33.

Minnesota Statutes 2004, section 290.191,
subdivision 3, is amended to read:

Subd. 3.

Apportionment formula for financial
institutions.

Except for an investment company required to
apportion its income under section 290.36, a financial
institution that is required to apportion its net income must
apportion its net income to this state on the basis of the
percentage obtained by taking the sum of:

(1) deleted text begin 75 deleted text end new text begin the new text end percent new text begin for the sales factor under subdivision
2, paragraph (b), new text end of the percentage which the receipts from
within this state in connection with the trade or business
during the tax period are of the total receipts in connection
with the trade or business during the tax period, from wherever
derived;

(2) deleted text begin 12.5 deleted text end new text begin the new text end percent new text begin for the property factor under
subdivision 2, paragraph (b), new text end of the percentage which the sum of
the total tangible property used by the taxpayer in this state
and the intangible property owned by the taxpayer and attributed
to this state in connection with the trade or business during
the tax period is of the sum of the total tangible property,
wherever located, used by the taxpayer and the intangible
property owned by the taxpayer and attributed to all states in
connection with the trade or business during the tax period; and

(3) deleted text begin 12.5 deleted text end new text begin the new text end percent new text begin for the payroll factor under
subdivision 2, paragraph (b), new text end of the percentage which the
taxpayer's total payrolls paid or incurred in this state or paid
in respect to labor performed in this state in connection with
the trade or business during the tax period are of the
taxpayer's total payrolls paid or incurred in connection with
the trade or business during the tax period.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2006.
new text end

Sec. 34.

new text begin [290.433] NATIONAL GUARD AND RESERVES CHECKOFF.
new text end

new text begin Subdivision 1. new text end

new text begin Checkoff established. new text end

new text begin (a) Every
individual who files an income tax return may designate on their
original return that $1 or more shall be added to the tax or
deducted from the refund that would otherwise be payable by or
to that individual and paid into a Minnesota military families
relief account established in the special revenue fund. The
commissioner of revenue shall, on the income tax return, notify
filers of their right to designate that a portion of their tax
or refund shall be paid into the Minnesota military families
relief account. Amounts so designated to be paid shall be
credited to the account as returns are processed, in as timely a
manner as practical. All interest earned on money accrued,
gifts to the program, contributions to the program, and
reimbursements of expenditures shall be credited to the
account. All money in the account is appropriated to the
adjutant general of the Department of Military Affairs for the
purpose of making grants as specified in subdivision 2.
new text end

new text begin (b) The checkoff under this section is subject to removal
from the income tax return as provided in section 290.439,
subdivision 2.
new text end

new text begin Subd. 2. new text end

new text begin Grants. new text end

new text begin (a) The adjutant general is authorized
to expend any money appropriated from the Minnesota military
families relief account in the special revenue fund for the
purpose of making grants:
new text end

new text begin (1) directly to eligible individuals; or
new text end

new text begin (2) to one or more eligible foundations for the purpose of
making grants to eligible individuals, as provided in this
section.
new text end

new text begin (b) The term, "eligible individual" includes any Minnesota
resident who is:
new text end

new text begin (1) a member of the Minnesota National Guard or other
United States armed forces reserves who has been ordered to
federal active service since September 11, 2001, and has a
financial need as a result of that service;
new text end

new text begin (2) the spouse or dependent child of a person described in
clause (1); or
new text end

new text begin (3) the surviving spouse or surviving dependent child of a
person described in clause (1).
new text end

new text begin To be an eligible individual, a person described in clause
(2) or (3) must be residing within the state of Minnesota.
new text end

new text begin (c) The term "eligible foundation" includes any
organization that:
new text end

new text begin (1) is a tax-exempt organization under section 501(c)(3) of
the Internal Revenue Code;
new text end

new text begin (2) has articles of incorporation under chapter 317A
specifying the purpose of the organization as including the
provision of financial assistance to members of the Minnesota
National Guard and other United States armed forces reserves and
their families and survivors; and
new text end

new text begin (3) agrees in writing to distribute any grant money
received from the adjutant general under this section to
eligible individuals as defined in this section and in
accordance with any written policies and rules the adjutant
general may impose as conditions of the grant to the foundation.
new text end

new text begin (d) The maximum grant awarded to an eligible individual in
a calendar year with funds from the Minnesota military families
relief account, either through an eligible institution or
directly from the adjutant general, may not exceed $2,000.
new text end

new text begin (e) The state pledges and agrees with all contributors to
the account to use the contributed funds solely for the purpose
of providing assistance to eligible individuals.
new text end

new text begin (f) The state further agrees that it will not impose
additional conditions or restrictions that will limit or
otherwise restrict the ability of the adjutant general to award
grants under this section.
new text end

new text begin (g) For purposes of this section, the term "federal active
service" has the meaning given in section 190.05, subdivision
5c, but excludes service performed exclusively for purposes of:
new text end

new text begin (1) basic combat training, advanced individual training,
annual training, and periodic inactive duty training;
new text end

new text begin (2) special training periodically made available to reserve
members; and
new text end

new text begin (3) service performed in accordance with section 190.08,
subdivision 3.
new text end

new text begin Subd. 3. new text end

new text begin Annual report. new text end

new text begin The adjutant general must report
by February 1, 2007, and each year thereafter, to the chairs and
ranking minority members of the legislative committees and
divisions with jurisdiction over military and veterans' affairs
on the number, amounts, and use of grants issued from the
Minnesota military families relief account in the previous year
and on the expenses related to administering the account.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for income tax
returns for taxable years beginning after December 31, 2004.
new text end

Sec. 35.

new text begin [290.434] PUBLIC SAFETY OFFICER CHECKOFF.
new text end

new text begin (a) Every individual who files an income tax return may
designate on their original return that $1 or more shall be
added to the tax or deducted from the refund that would
otherwise be payable by or to that individual and paid into a
public safety officer memorial and survivor account in the
special revenue fund. The commissioner of revenue shall, on the
income tax return, notify filers of their right to designate
that a portion of their tax or refund shall be paid into the
public safety officer memorial and survivor account. The sum of
the amounts so designated to be paid shall be credited to the
account. The account may be used by the commissioner of public
safety to make grants to public safety officer associations that
assist in building and preserving state memorial monuments,
assist the families of public safety officers killed in the line
of duty, award scholarships to surviving family members, and
otherwise provide services relating to public safety officers
killed in the line of duty. All interest earned on money
accrued, gifts to the program, contributions to the program, and
reimbursements of expenditures shall be credited to the
account. All money in the account is appropriated to the
commissioner of public safety for purposes of this section.
new text end

new text begin (b) The state pledges and agrees with all contributors to
the account to use the funds contributed solely for the
maintenance of public safety officer memorials and for the
benefit of survivors of Minnesota public safety officers killed
in the line of duty and further agrees that it will not impose
additional conditions or restrictions that will limit or
otherwise restrict the ability of the commissioner of public
safety, in consultation with the public safety officer memorial
and survivor account advisory council, to award grants from the
available funds in the most efficient and effective manner.
new text end

new text begin (c) The commissioner of public safety must report by
January 1, 2004, and each year thereafter to the chairs and
ranking minority members of the legislative committees and
divisions with jurisdiction over criminal justice policy and
funding on the number, amounts, and use of grants issued from
the account in the previous year.
new text end

new text begin (d) A public safety officer memorial and survivor account
advisory council is established to advise the commissioner of
public safety on the distribution of grants under this section.
The council must consist of eight members, one from each of the
following organizations: the Minnesota law enforcement memorial
association, the Minnesota police and peace officers
association, the Minnesota chiefs of police association, the
Minnesota sheriffs association, the Minnesota state fire
department association, the Minnesota state fire chiefs
association, the Minnesota ambulance association, and the
Minnesota emergency medical services association. The council
member is the executive director or president of the
organization, or that person's designee. Members must serve
without compensation. The commissioner must consider the
advisory council's recommendations before awarding grants under
this section.
new text end

new text begin (e) As used in this section, "killed in the line of duty"
and "public safety officer" have the meanings given in section
299A.41.
new text end

new text begin (f) The checkoff under this section is subject to removal
from the income tax return as provided in section 290.439,
subdivision 2.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for income tax
returns for taxable years beginning after December 31, 2004.
new text end

Sec. 36.

new text begin [290.435] K-12 EDUCATION, HIGHER EDUCATION,
TRANSPORTATION, HEALTH CARE, NURSING HOME, AND CLEAN WATER
CHECKOFF.
new text end

new text begin Subdivision 1. new text end

new text begin Checkoffs. new text end

new text begin (a) Every individual who files
an income tax return may designate on their original return that
$1 or more shall be added to the tax or deducted from the refund
that would otherwise be payable by or to that individual.
new text end

new text begin (b) The taxpayer shall designate that the added or deducted
amount shall be paid into one or more of the following accounts
and used for the stated purpose:
new text end

new text begin (1) K-12 education, for technology and/or capital
improvement grants to school districts;
new text end

new text begin (2) higher education, for state assistance to individual
students based on student need;
new text end

new text begin (3) transportation, for local road and bridge funds;
new text end

new text begin (4) health care, to provide funding for public health care
programs;
new text end

new text begin (5) nursing home assistance, for state reimbursement of
nursing home costs; or
new text end

new text begin (6) environmental clean water, for grants to cities for
wastewater treatment facilities.
new text end

new text begin (c) The taxpayer may not designate an amount less than $1
to be paid into any of the accounts.
new text end

new text begin Subd. 2. new text end

new text begin Appropriation; special accounts. new text end

new text begin (a) All
amounts designated by taxpayers to be paid into the K-12
education account under subdivision 1, clause (1), must be
deposited in the state treasury and credited to a special K-12
education account. Money in the account is appropriated
annually to the commissioner of education to make onetime grants
to school districts for technology or capital improvements.
new text end

new text begin (b) All amounts designated by taxpayers to be paid into the
higher education account under subdivision 1, clause (2), must
be deposited in the state treasury and credited to a special
higher education account. Money in the account is appropriated
annually to the Minnesota Higher Education Services Office to
provide financial assistance to students, based on financial
needs, attending postsecondary educational institutions located
in and operated by this state.
new text end

new text begin (c) All amounts designated by taxpayers to be paid into the
transportation account under subdivision 1, clause (3), must be
deposited in the state treasury and credited to a special
transportation account. Money in the account is appropriated
annually to the commissioner of transportation for improvements
to local roads and bridges.
new text end

new text begin (d) All amounts designated by taxpayers to be paid into the
health care account under subdivision 1, clause (4), must be
deposited in the state treasury and credited to a special health
care account. Money in the account is appropriated annually to
the commissioner of human services to provide additional funds
for adult participation in MinnesotaCare.
new text end

new text begin (e) All amounts designated by taxpayers to be paid into the
nursing home assistance account under subdivision 1, clause (5),
must be deposited in the state treasury and credited to a
special nursing home assistance account. Money in the account
is appropriated annually to the commissioner of human services
to fund a onetime increase in state paid nursing home
reimbursement rates.
new text end

new text begin (f) All amounts designated by taxpayers to be paid into the
environmental clean water account under subdivision 1, clause
(6), must be deposited in the state treasury and credited to the
wastewater infrastructure fund, and annually appropriated to the
public facilities authority to make onetime grants to
municipalities for wastewater treatment facilities.
new text end

new text begin (g) All amounts appropriated from the special accounts
under this section are onetime appropriations and do not become
part of the base level funding for the 2006-2007 biennium.
new text end

new text begin (h) The checkoffs under this section are subject to removal
from the income tax return as provided in section 290.439,
subdivision 2.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 37.

new text begin [290.439] ADMINISTRATION OF CHECKOFFS.
new text end

new text begin Subdivision 1. new text end

new text begin Forms. new text end

new text begin The commissioner must provide a
separate form as part of the income tax return that lists the
nongame wildlife checkoff in section 290.432; the state election
campaign fund checkoff in section 10A.31; the National Guard and
Reserves checkoff in section 290.433; the public safety officer
checkoff in section 290.434; and the education, higher
education, transportation, health care, nursing home, and clean
water checkoffs in section 290.435. The commissioner must
provide a single line on form M-1 for entering the total amount
a taxpayer contributes to all the checkoffs listed on the
separate form.
new text end

new text begin Subd. 2. new text end

new text begin Removal of checkoffs. new text end

new text begin The commissioner must
annually review usage of the income tax checkoffs in sections
290.433 to 290.435, and determine the number of returns making
contributions and the total amount contributed to each checkoff,
including each of the separate checkoffs provided in section
290.435. If any of the checkoffs subject to review fails, for
two consecutive tax years, to obtain contributions of at least
$100,000 from at least eight percent of all returns that make
contributions to any of the checkoffs in sections 10A.31 and
290.433 to 290.435, the commissioner must remove the checkoff
from the checkoff form and submit legislation proposing the
repeal of the checkoff to the legislature.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 38.

Minnesota Statutes 2004, section 290.92,
subdivision 4b, is amended to read:

Subd. 4b.

Withholding by partnerships.

(a) A partnership
shall deduct and withhold a tax as provided in paragraph (b) for
nonresident individual partners based on their distributive
shares of partnership income for a taxable year of the
partnership.

(b) The amount of tax withheld is determined by multiplying
the partner's distributive share allocable to Minnesota under
section 290.17, paid or credited during the taxable year by the
highest rate used to determine the income tax liability for an
individual under section 290.06, subdivision 2c, except that the
amount of tax withheld may be determined by the commissioner if
the partner submits a withholding exemption certificate under
subdivision 5.

(c) The commissioner may reduce or abate the tax withheld
under this subdivision if the partnership had reasonable cause
to believe that no tax was due under this section.

(d) Notwithstanding paragraph (a), a partnership is not
required to deduct and withhold tax for a nonresident partner if:

(1) the partner elects to have the tax due paid as part of
the partnership's composite return under section 289A.08,
subdivision 7;

(2) the partner has Minnesota assignable federal adjusted
gross income from the partnership of less than $1,000; or

(3) the partnership is liquidated or terminated, the income
was generated by a transaction related to the termination or
liquidation, and no cash or other property was distributed in
the current or prior taxable year; deleted text begin or
deleted text end

(4) the distributive shares of partnership income are
attributable to:

(i) income required to be recognized because of discharge
of indebtedness;

(ii) income recognized because of a sale, exchange, or
other disposition of real estate, depreciable property, or
property described in section 179 of the Internal Revenue Code;
or

(iii) income recognized on the sale, exchange, or other
disposition of any property that has been the subject of a basis
reduction pursuant to section 108, 734, 743, 754, or 1017 of the
Internal Revenue Code

to the extent that the income does not include cash received or
receivable or, if there is cash received or receivable, to the
extent that the cash is required to be used to pay indebtedness
by the partnership or a secured debt on partnership property new text begin ; or
new text end

new text begin (5) the partnership is a publicly traded partnership, as
defined in section 7704(b) of the Internal Revenue Code new text end .

(e) For purposes of subdivision 6a, and sections 289A.09,
subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50,
289A.56, 289A.60, and 289A.63, a partnership is considered an
employer.

(f) To the extent that income is exempt from withholding
under paragraph (d), clause (4), the commissioner has a lien in
an amount up to the amount that would be required to be withheld
with respect to the income of the partner attributable to the
partnership interest, but for the application of paragraph (d),
clause (4). The lien arises under section 270.69 from the date
of assessment of the tax against the partner, and attaches to
that partner's share of the profits and any other money due or
to become due to that partner in respect of the partnership.
Notice of the lien may be sent by mail to the partnership,
without the necessity for recording the lien. The notice has
the force and effect of a levy under section 270.70, and is
enforceable against the partnership in the manner provided by
that section. Upon payment in full of the liability subsequent
to the notice of lien, the partnership must be notified that the
lien has been satisfied.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end

Sec. 39.

Minnesota Statutes 2004, section 291.005,
subdivision 1, is amended to read:

Subdivision 1.

Scope.

Unless the context otherwise
clearly requires, the following terms used in this chapter shall
have the following meanings:

(1) "Federal gross estate" means the gross estate of a
decedent as valued and otherwise determined for federal estate
tax purposes by federal taxing authorities pursuant to the
provisions of the Internal Revenue Code.

(2) "Minnesota gross estate" means the federal gross estate
of a decedent after (a) excluding therefrom any property
included therein which has its situs outside Minnesota, and (b)
including therein any property omitted from the federal gross
estate which is includable therein, has its situs in Minnesota,
and was not disclosed to federal taxing authorities.

(3) "Personal representative" means the executor,
administrator or other person appointed by the court to
administer and dispose of the property of the decedent. If
there is no executor, administrator or other person appointed,
qualified, and acting within this state, then any person in
actual or constructive possession of any property having a situs
in this state which is included in the federal gross estate of
the decedent shall be deemed to be a personal representative to
the extent of the property and the Minnesota estate tax due with
respect to the property.

(4) "Resident decedent" means an individual whose domicile
at the time of death was in Minnesota.

(5) "Nonresident decedent" means an individual whose
domicile at the time of death was not in Minnesota.

(6) "Situs of property" means, with respect to real
property, the state or country in which it is located; with
respect to tangible personal property, the state or country in
which it was normally kept or located at the time of the
decedent's death; and with respect to intangible personal
property, the state or country in which the decedent was
domiciled at death.

(7) "Commissioner" means the commissioner of revenue or any
person to whom the commissioner has delegated functions under
this chapter.

(8) "Internal Revenue Code" means the United States
Internal Revenue Code of 1986, as amended through deleted text begin December 31,
2002 deleted text end new text begin April 15, 2005 new text end .

new text begin (9) "Minnesota adjusted taxable estate" means federal
adjusted taxable estate as defined by section 2011(b)(3) of the
Internal Revenue Code, increased by the amount of deduction for
state death taxes allowed under section 2058 of the Internal
Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin The change to clause (8) is effective for
estates of decedents dying after January 31, 2003, and the new
clause (9) is effective for estates of decedents dying after
December 31, 2004.
new text end

Sec. 40.

Minnesota Statutes 2004, section 291.03,
subdivision 1, is amended to read:

Subdivision 1.

Tax amount.

new text begin (a) new text end The tax imposed shall be
an amount equal to the proportion of the maximum credit new text begin for
state death taxes new text end computed under section 2011 of the Internal
Revenue Code, as amended through December 31, 2000, deleted text begin for state
death taxes deleted text end new text begin but using Minnesota adjusted taxable estate instead
of federal adjusted taxable estate, new text end as the Minnesota gross
estate bears to the value of the federal gross estate. The tax
determined under this paragraph shall not be greater than the
deleted text begin federal estate tax deleted text end new text begin amount new text end computed new text begin by applying the rates and
brackets new text end under section 2001 new text begin (c) new text end of the Internal Revenue Code
deleted text begin after the allowance of deleted text end new text begin to the Minnesota adjusted gross estate
and subtracting new text end the federal deleted text begin credits deleted text end new text begin credit new text end allowed under section
2010 of the Internal Revenue Code of 1986, as amended through
December 31, 2000.

new text begin (b) new text end For the purposes of this section, expenses which are
deducted for federal income tax purposes under section 642(g) of
the Internal Revenue Code as amended through December 31, 2002,
are not allowable in computing the tax under this chapter.

new text begin (c) The executor may make a qualified terminable interest
property election, as defined in section 2056(b)(7) of the
Internal Revenue Code, for purposes of computing the marital
deduction under section 2056 of the Internal Revenue Code for
the tax under this chapter that differs from the amount elected
for federal estate tax purposes. The election may not exceed
the federal election by more than the difference between the
applicable exclusion amount under section 2010(c) of the
Internal Revenue Code and under section 2010(c) of the Internal
Revenue Code, as amended through December 31, 2000. The
election must be made on the tax return under this chapter and
is irrevocable. All tax under this chapter must be determined
using the qualified terminable interest election made on the
Minnesota return. For purposes of applying sections 2044 and
2207A of the Internal Revenue Code to the computation of the
federal and Minnesota gross estates of the surviving spouse,
amounts for which a qualified terminable interest property
election has been made under this section must be treated as
though a valid federal qualified terminable interest property
election under section 2056(b)(7) of the Internal Revenue Code
had been made.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for estates of
decedents dying after December 31, 2004, except paragraph (c)
applies for estates of decedents dying after December 31, 2006.
new text end

Sec. 41.

Minnesota Statutes 2004, section 298.01,
subdivision 3, is amended to read:

Subd. 3.

Occupation tax; other ores.

Every person
engaged in the business of mining or producing ores in this
state, except iron ore or taconite concentrates, shall pay an
occupation tax to the state of Minnesota as provided in this
subdivision. The tax is determined in the same manner as the
tax imposed by section 290.02, except that sections 290.05,
subdivision 1, clause (a), deleted text begin and deleted text end 290.17, subdivision 4, new text begin and
290.191, subdivision 2, new text end do not apply. new text begin A person subject to
occupation tax under this section shall apportion its net income
on the basis of the percentage obtained by taking the sum of:
new text end

new text begin (1) 75 percent of the percentage which the sales made
within this state in connection with the trade or business
during the tax period are of the total sales wherever made in
connection with the trade or business during the tax period;
new text end

new text begin (2) 12.5 percent of the percentage which the total tangible
property used by the taxpayer in this state in connection with
the trade or business during the tax period is of the total
tangible property, wherever located, used by the taxpayer in
connection with the trade or business during the tax period; and
new text end

new text begin (3) 12.5 percent of the percentage which the taxpayer's
total payrolls paid or incurred in this state or paid in respect
to labor performed in this state in connection with the trade or
business during the tax period are of the taxpayer's total
payrolls paid or incurred in connection with the trade or
business during the tax period.
new text end

The tax is in addition to all other taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2006.
new text end

Sec. 42.

Minnesota Statutes 2004, section 298.01,
subdivision 4, is amended to read:

Subd. 4.

Occupation tax; iron ore; taconite
concentrates.

A person engaged in the business of mining or
producing of iron ore, taconite concentrates or direct reduced
ore in this state shall pay an occupation tax to the state of
Minnesota. The tax is determined in the same manner as the tax
imposed by section 290.02, except that sections 290.05,
subdivision 1, clause (a), deleted text begin and deleted text end 290.17, subdivision 4, new text begin and
290.191, subdivision 2, new text end do not apply. new text begin A person subject to
occupation tax under this section shall apportion its net income
on the basis of the percentage obtained by taking the sum of:
new text end

new text begin (1) 75 percent of the percentage which the sales made
within this state in connection with the trade or business
during the tax period are of the total sales wherever made in
connection with the trade or business during the tax period;
new text end

new text begin (2) 12.5 percent of the percentage which the total tangible
property used by the taxpayer in this state in connection with
the trade or business during the tax period is of the total
tangible property, wherever located, used by the taxpayer in
connection with the trade or business during the tax period; and
new text end

new text begin (3) 12.5 percent of the percentage which the taxpayer's
total payrolls paid or incurred in this state or paid in respect
to labor performed in this state in connection with the trade or
business during the tax period are of the taxpayer's total
payrolls paid or incurred in connection with the trade or
business during the tax period.
new text end

The tax is in addition to all other taxes.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2006.
new text end

Sec. 43. new text begin REPEALER.
new text end

new text begin Minnesota Rules, parts 8093.2000; and 8093.3000, are
repealed effective the day following final enactment.
new text end

ARTICLE 6

FEDERAL UPDATE

Section 1.

Minnesota Statutes 2004, section 289A.02,
subdivision 7, is amended to read:

Subd. 7.

Internal revenue code.

Unless specifically
defined otherwise, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through deleted text begin June 15, 2003 deleted text end new text begin April 15,
2005 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2004, section 290.01,
subdivision 19, as amended by Laws 2005, chapter 1, section 1,
is amended to read:

Subd. 19.

Net income.

The term "net income" means the
federal taxable income, as defined in section 63 of the Internal
Revenue Code of 1986, as amended through the date named in this
subdivision, incorporating new text begin the federal effective dates of
changes to the Internal Revenue Code and new text end any elections made by
the taxpayer in accordance with the Internal Revenue Code in
determining federal taxable income for federal income tax
purposes, and with the modifications provided in subdivisions
19a to 19f.

In the case of a regulated investment company or a fund
thereof, as defined in section 851(a) or 851(g) of the Internal
Revenue Code, federal taxable income means investment company
taxable income as defined in section 852(b)(2) of the Internal
Revenue Code, except that:

(1) the exclusion of net capital gain provided in section
852(b)(2)(A) of the Internal Revenue Code does not apply;

(2) the deduction for dividends paid under section
852(b)(2)(D) of the Internal Revenue Code must be applied by
allowing a deduction for capital gain dividends and
exempt-interest dividends as defined in sections 852(b)(3)(C)
and 852(b)(5) of the Internal Revenue Code; and

(3) the deduction for dividends paid must also be applied
in the amount of any undistributed capital gains which the
regulated investment company elects to have treated as provided
in section 852(b)(3)(D) of the Internal Revenue Code.

The net income of a real estate investment trust as defined
and limited by section 856(a), (b), and (c) of the Internal
Revenue Code means the real estate investment trust taxable
income as defined in section 857(b)(2) of the Internal Revenue
Code.

The net income of a designated settlement fund as defined
in section 468B(d) of the Internal Revenue Code means the gross
income as defined in section 468B(b) of the Internal Revenue
Code.

deleted text begin The provisions of sections 1113(a), 1117, 1206(a), 1313(a),
1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612,
1616, 1617, 1704(l), and 1704(m) of the Small Business Job
Protection Act, Public Law 104-188, the provisions of Public Law
104-117, the provisions of sections 313(a) and (b)(1), 602(a),
913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013,
1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b)
and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and
1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law
105-34, the provisions of section 6010 of the Internal Revenue
Service Restructuring and Reform Act of 1998, Public Law
105-206, the provisions of section 4003 of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act,
1999, Public Law 105-277, and the provisions of section 318 of
the Consolidated Appropriation Act of 2001, Public Law 106-554,
shall become effective at the time they become effective for
federal purposes.
deleted text end

The Internal Revenue Code of 1986, as amended through
deleted text begin December 31, 1996 deleted text end new text begin April 15, 2005 new text end , shall be in effect for taxable
years beginning after December 31, 1996.

deleted text begin The provisions of sections 202(a) and (b), 221(a), 225,
312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and
(c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306,
1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528,
1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e)
of the Taxpayer Relief Act of 1997, Public Law 105-34, the
provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002,
and 7003 of the Internal Revenue Service Restructuring and
Reform Act of 1998, Public Law 105-206, the provisions of
section 3001 of the Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999, Public Law 105-277, the
provisions of section 3001 of the Miscellaneous Trade and
Technical Corrections Act of 1999, Public Law 106-36, and the
provisions of section 316 of the Consolidated Appropriation Act
of 2001, Public Law 106-554, shall become effective at the time
they become effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through
December 31, 1997, shall be in effect for taxable years
beginning after December 31, 1997.
deleted text end

deleted text begin The provisions of sections 5002, 6009, 6011, and 7001 of
the Internal Revenue Service Restructuring and Reform Act of
1998, Public Law 105-206, the provisions of section 9010 of the
Transportation Equity Act for the 21st Century, Public Law
105-178, the provisions of sections 1004, 4002, and 5301 of the
Omnibus Consolidation and Emergency Supplemental Appropriations
Act, 1999, Public Law 105-277, the provision of section 303 of
the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law
105-369, the provisions of sections 532, 534, 536, 537, and 538
of the Ticket to Work and Work Incentives Improvement Act of
1999, Public Law 106-170, the provisions of the Installment Tax
Correction Act of 2000, Public Law 106-573, and the provisions
of section 309 of the Consolidated Appropriation Act of 2001,
Public Law 106-554, shall become effective at the time they
become effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through
December 31, 1998, shall be in effect for taxable years
beginning after December 31, 1998.
deleted text end

deleted text begin The provisions of the FSC Repeal and Extraterritorial
Income Exclusion Act of 2000, Public Law 106-519, and the
provision of section 412 of the Job Creation and Worker
Assistance Act of 2002, Public Law 107-147, shall become
effective at the time it became effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through
December 31, 1999, shall be in effect for taxable years
beginning after December 31, 1999. The provisions of sections
306 and 401 of the Consolidated Appropriation Act of 2001,
Public Law 106-554, and the provision of section 632(b)(2)(A) of
the Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16, and provisions of sections 101 and 402 of the
Job Creation and Worker Assistance Act of 2002, Public Law
107-147, shall become effective at the same time it became
effective for federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through
December 31, 2000, shall be in effect for taxable years
beginning after December 31, 2000. The provisions of sections
659a and 671 of the Economic Growth and Tax Relief
Reconciliation Act of 2001, Public Law 107-16, the provisions of
sections 104, 105, and 111 of the Victims of Terrorism Tax
Relief Act of 2001, Public Law 107-134, and the provisions of
sections 201, 403, 413, and 606 of the Job Creation and Worker
Assistance Act of 2002, Public Law 107-147, shall become
effective at the same time it became effective for federal
purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through March
15, 2002, shall be in effect for taxable years beginning after
December 31, 2001.
deleted text end

deleted text begin The provisions of sections 101 and 102 of the Victims of
Terrorism Tax Relief Act of 2001, Public Law 107-134, shall
become effective at the same time it becomes effective for
federal purposes.
deleted text end

deleted text begin The Internal Revenue Code of 1986, as amended through June
15, 2003, shall be in effect for taxable years beginning after
December 31, 2002. The provisions of section 201 of the Jobs
and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if
it is enacted into law, are effective at the same time it became
effective for federal purposes. The provisions of the Act of
January 7, 2005, Public Law 109-1, to accelerate the income tax
benefits for charitable cash contributions for the relief of
victims of the Indian Ocean tsunami, are effective at the same
time it became effective for federal purposes and apply to the
subtraction under subdivision 19b, clause (7).
deleted text end

Except as otherwise provided, references to the Internal
Revenue Code in subdivisions deleted text begin 19a deleted text end new text begin 19 new text end to deleted text begin 19g deleted text end new text begin 19f new text end mean the code in
effect for purposes of determining net income for the applicable
year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2004, section 290.01,
subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For
individuals, estates, and trusts, there shall be added to
federal taxable income:

(1)(i) interest income on obligations of any state other
than Minnesota or a political or governmental subdivision,
municipality, or governmental agency or instrumentality of any
state other than Minnesota exempt from federal income taxes
under the Internal Revenue Code or any other federal statute;
and

(ii) exempt-interest dividends as defined in section
852(b)(5) of the Internal Revenue Code, except the portion of
the exempt-interest dividends derived from interest income on
obligations of the state of Minnesota or its political or
governmental subdivisions, municipalities, governmental agencies
or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to
all shareholders represents 95 percent or more of the
exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal
Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making
the payment; and

(iii) for the purposes of items (i) and (ii), interest on
obligations of an Indian tribal government described in section
7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe
is located;

(2) the amount of income new text begin or sales and use new text end taxes paid or
accrued within the taxable year under this chapter and income new text begin or
sales and use new text end taxes paid to any other state or to any province
or territory of Canada, to the extent allowed as a deduction
under section 63(d) of the Internal Revenue Code, but the
addition may not be more than the amount by which the itemized
deductions as allowed under section 63(d) of the Internal
Revenue Code exceeds the amount of new text begin (i) new text end the standard deduction as
defined in section 63(c) of the Internal Revenue Code new text begin minus (ii)
any addition required under clause (10) new text end . For the purpose of
this paragraph, the disallowance of itemized deductions under
section 68 of the Internal Revenue Code of 1986, income new text begin or sales
and use new text end tax is the last itemized deduction disallowed;

(3) the capital gain amount of a lump sum distribution to
which the special tax under section 1122(h)(3)(B)(ii) of the Tax
Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the
taxable year under this chapter and income taxes paid to any
other state or any province or territory of Canada, to the
extent allowed as a deduction in determining federal adjusted
gross income. For the purpose of this paragraph, income taxes
do not include the taxes imposed by sections 290.0922,
subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed
pursuant to section 290.10;

(6) the amount of a partner's pro rata share of net income
which does not flow through to the partner because the
partnership elected to pay the tax on the income under section
6242(a)(2) of the Internal Revenue Code; deleted text begin and
deleted text end

(7) 80 percent of the depreciation deduction allowed under
section 168(k) of the Internal Revenue Code. For purposes of
this clause, if the taxpayer has an activity that in the taxable
year generates a deduction for depreciation under section 168(k)
and the activity generates a loss for the taxable year that the
taxpayer is not allowed to claim for the taxable year, "the
depreciation allowed under section 168(k)" for the taxable year
is limited to excess of the depreciation claimed by the activity
under section 168(k) over the amount of the loss from the
activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year
are allowed, the depreciation under section 168(k) is allowed new text begin ;
new text end

new text begin (8) 80 percent of the amount by which the deduction allowed
by section 179 of the Internal Revenue Code exceeds the
deduction allowable by section 179 of the Internal Revenue Code
of 1986, as amended through December 31, 2003;
new text end

new text begin (9) to the extent deducted in computing federal taxable
income, the amount of the deduction allowable under section 199
of the Internal Revenue Code;
new text end

new text begin (10) for tax years beginning after December 31, 2006, to
the extent deducted in computing federal taxable income, the
amount by which the standard deduction allowed under section
63(c) of the Internal Revenue Code exceeds the standard
deduction allowable under section 63(c) of the Internal Revenue
Code of 1986, as amended through December 31, 2003; and
new text end

new text begin (11) the exclusion allowed under section 139A of the
Internal Revenue Code for federal subsidies for prescription
drug plans new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004, except the changes in clause
(2) are effective for tax years beginning after December 31,
2003.
new text end

Sec. 4.

Minnesota Statutes 2004, section 290.01,
subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For
individuals, estates, and trusts, there shall be subtracted from
federal taxable income:

(1) interest income on obligations of any authority,
commission, or instrumentality of the United States to the
extent includable in taxable income for federal income tax
purposes but exempt from state income tax under the laws of the
United States;

(2) if included in federal taxable income, the amount of
any overpayment of income tax to Minnesota or to any other
state, for any previous taxable year, whether the amount is
received as a refund or as a credit to another taxable year's
income tax liability;

(3) the amount paid to others, less the amount used to
claim the credit allowed under section 290.0674, not to exceed
$1,625 for each qualifying child in grades kindergarten to 6 and
$2,500 for each qualifying child in grades 7 to 12, for tuition,
textbooks, and transportation of each qualifying child in
attending an elementary or secondary school situated in
Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin,
wherein a resident of this state may legally fulfill the state's
compulsory attendance laws, which is not operated for profit,
and which adheres to the provisions of the Civil Rights Act of
1964 and chapter 363A. For the purposes of this clause,
"tuition" includes fees or tuition as defined in section
290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and
equipment purchased or leased for use in elementary and
secondary schools in teaching only those subjects legally and
commonly taught in public elementary and secondary schools in
this state. Equipment expenses qualifying for deduction
includes expenses as defined and limited in section 290.0674,
subdivision 1, clause (3). "Textbooks" does not include
instructional books and materials used in the teaching of
religious tenets, doctrines, or worship, the purpose of which is
to instill such tenets, doctrines, or worship, nor does it
include books or materials for, or transportation to,
extracurricular activities including sporting events, musical or
dramatic events, speech activities, driver's education, or
similar programs. For purposes of the subtraction provided by
this clause, "qualifying child" has the meaning given in section
32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross
income, income realized on disposition of property exempt from
tax under section 290.491;

(6) to the extent included in federal taxable income,
postservice benefits for youth community service under section
124D.42 for volunteer service under United States Code, title
42, sections 12601 to 12604;

(7) to the extent not deducted in determining federal
taxable income by an individual who does not itemize deductions
for federal income tax purposes for the taxable year, an amount
equal to 50 percent of the excess of charitable contributions
new text begin over $500 new text end allowable as a deduction for the taxable year under
section 170(a) of the Internal Revenue Code deleted text begin over $500 deleted text end new text begin and under
the provisions of Public Law 109-1 new text end ;

(8) for taxable years beginning before January 1, 2008, the
amount of the federal small ethanol producer credit allowed
under section 40(a)(3) of the Internal Revenue Code which is
included in gross income under section 87 of the Internal
Revenue Code;

(9) for individuals who are allowed a federal foreign tax
credit for taxes that do not qualify for a credit under section
290.06, subdivision 22, an amount equal to the carryover of
subnational foreign taxes for the taxable year, but not to
exceed the total subnational foreign taxes reported in claiming
the foreign tax credit. For purposes of this clause, "federal
foreign tax credit" means the credit allowed under section 27 of
the Internal Revenue Code, and "carryover of subnational foreign
taxes" equals the carryover allowed under section 904(c) of the
Internal Revenue Code minus national level foreign taxes to the
extent they exceed the federal foreign tax credit;

(10) in each of the five tax years immediately following
the tax year in which an addition is required under subdivision
19a, clause (7), an amount equal to one-fifth of the delayed
depreciation. For purposes of this clause, "delayed
depreciation" means the amount of the addition made by the
taxpayer under subdivision 19a, clause (7), minus the positive
value of any net operating loss under section 172 of the
Internal Revenue Code generated for the tax year of the
addition. The resulting delayed depreciation cannot be less
than zero; deleted text begin and
deleted text end

(11) job opportunity building zone income as provided under
section 469.316 deleted text begin . deleted text end new text begin ;
new text end

new text begin (12) in each of the five tax years immediately following
the tax year in which an addition is required under subdivision
19a, clause (8), or 19c, clause (17), in the case of a
shareholder of a corporation that is an S corporation, an amount
equal to one-fifth of the addition made by the taxpayer under
subdivision 19a, clause (8), or 19c, clause (17), in the case of
a shareholder of a corporation that is an S corporation, minus
the positive value of any net operating loss under section 172
of the Internal Revenue Code generated for the tax year of the
addition. If the net operating loss exceeds the addition for
the tax year, a subtraction is not allowed under this clause;
and
new text end

new text begin (13) to the extent included in federal taxable income,
compensation paid to a service member as defined in United
States Code, title 10, section 101(a)(5), for military service
as defined in the Service Member Civil Relief Act, Public Law
108-189, section 101(2).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004, except the change to clause
(7) is effective for tax years beginning after December 31, 2003.
new text end

Sec. 5.

Minnesota Statutes 2004, section 290.01,
subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable
income.

For corporations, there shall be added to federal
taxable income:

(1) the amount of any deduction taken for federal income
tax purposes for income, excise, or franchise taxes based on net
income or related minimum taxes, including but not limited to
the tax imposed under section 290.0922, paid by the corporation
to Minnesota, another state, a political subdivision of another
state, the District of Columbia, or any foreign country or
possession of the United States;

(2) interest not subject to federal tax upon obligations
of: the United States, its possessions, its agencies, or its
instrumentalities; the state of Minnesota or any other state,
any of its political or governmental subdivisions, any of its
municipalities, or any of its governmental agencies or
instrumentalities; the District of Columbia; or Indian tribal
governments;

(3) exempt-interest dividends received as defined in
section 852(b)(5) of the Internal Revenue Code;

(4) the amount of any net operating loss deduction taken
for federal income tax purposes under section 172 or 832(c)(10)
of the Internal Revenue Code or operations loss deduction under
section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal
income tax purposes under sections 241 to 247 of the Internal
Revenue Code;

(6) losses from the business of mining, as defined in
section 290.05, subdivision 1, clause (a), that are not subject
to Minnesota income tax;

(7) the amount of any capital losses deducted for federal
income tax purposes under sections 1211 and 1212 of the Internal
Revenue Code;

(8) the exempt foreign trade income of a foreign sales
corporation under sections 921(a) and 291 of the Internal
Revenue Code;

(9) the amount of percentage depletion deducted under
sections 611 through 614 and 291 of the Internal Revenue Code;

(10) for certified pollution control facilities placed in
service in a taxable year beginning before December 31, 1986,
and for which amortization deductions were elected under section
169 of the Internal Revenue Code of 1954, as amended through
December 31, 1985, the amount of the amortization deduction
allowed in computing federal taxable income for those
facilities;

(11) the amount of any deemed dividend from a foreign
operating corporation determined pursuant to section 290.17,
subdivision 4, paragraph (g);

(12) the amount of any environmental tax paid under section
59(a) of the Internal Revenue Code;

(13) the amount of a partner's pro rata share of net income
which does not flow through to the partner because the
partnership elected to pay the tax on the income under section
6242(a)(2) of the Internal Revenue Code;

(14) the amount of net income excluded under section 114 of
the Internal Revenue Code;

(15) any increase in subpart F income, as defined in
section 952(a) of the Internal Revenue Code, for the taxable
year when subpart F income is calculated without regard to the
provisions of section 614 of Public Law 107-147; deleted text begin and
deleted text end

(16) 80 percent of the depreciation deduction allowed under
section 168(k) of the Internal Revenue Code. For purposes of
this clause, if the taxpayer has an activity that in the taxable
year generates a deduction for depreciation under section 168(k)
and the activity generates a loss for the taxable year that the
taxpayer is not allowed to claim for the taxable year, "the
depreciation allowed under section 168(k)" for the taxable year
is limited to excess of the depreciation claimed by the activity
under section 168(k) over the amount of the loss from the
activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year
are allowed, the depreciation under section 168(k) is allowed new text begin ;
new text end

new text begin (17) 80 percent of the amount by which the deduction
allowed by section 179 of the Internal Revenue Code exceeds the
deduction allowable by section 179 of the Internal Revenue Code
of 1986, as amended through December 31, 2003;
new text end

new text begin (18) to the extent deducted in computing federal taxable
income, the amount of the deduction allowable under section 199
of the Internal Revenue Code; and
new text end

new text begin (19) the exclusion allowed under section 139A of the
Internal Revenue Code for federal subsidies for prescription
drug plans new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 6.

Minnesota Statutes 2004, section 290.01,
subdivision 19d, is amended to read:

Subd. 19d.

Corporations; modifications decreasing federal
taxable income.

For corporations, there shall be subtracted
from federal taxable income after the increases provided in
subdivision 19c:

(1) the amount of foreign dividend gross-up added to gross
income for federal income tax purposes under section 78 of the
Internal Revenue Code;

(2) the amount of salary expense not allowed for federal
income tax purposes due to claiming the federal jobs credit
under section 51 of the Internal Revenue Code;

(3) any dividend (not including any distribution in
liquidation) paid within the taxable year by a national or state
bank to the United States, or to any instrumentality of the
United States exempt from federal income taxes, on the preferred
stock of the bank owned by the United States or the
instrumentality;

(4) amounts disallowed for intangible drilling costs due to
differences between this chapter and the Internal Revenue Code
in taxable years beginning before January 1, 1987, as follows:

(i) to the extent the disallowed costs are represented by
physical property, an amount equal to the allowance for
depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7, subject to the modifications contained in
subdivision 19e; and

(ii) to the extent the disallowed costs are not represented
by physical property, an amount equal to the allowance for cost
depletion under Minnesota Statutes 1986, section 290.09,
subdivision 8;

(5) the deduction for capital losses pursuant to sections
1211 and 1212 of the Internal Revenue Code, except that:

(i) for capital losses incurred in taxable years beginning
after December 31, 1986, capital loss carrybacks shall not be
allowed;

(ii) for capital losses incurred in taxable years beginning
after December 31, 1986, a capital loss carryover to each of the
15 taxable years succeeding the loss year shall be allowed;

(iii) for capital losses incurred in taxable years
beginning before January 1, 1987, a capital loss carryback to
each of the three taxable years preceding the loss year, subject
to the provisions of Minnesota Statutes 1986, section 290.16,
shall be allowed; and

(iv) for capital losses incurred in taxable years beginning
before January 1, 1987, a capital loss carryover to each of the
five taxable years succeeding the loss year to the extent such
loss was not used in a prior taxable year and subject to the
provisions of Minnesota Statutes 1986, section 290.16, shall be
allowed;

(6) an amount for interest and expenses relating to income
not taxable for federal income tax purposes, if (i) the income
is taxable under this chapter and (ii) the interest and expenses
were disallowed as deductions under the provisions of section
171(a)(2), 265 or 291 of the Internal Revenue Code in computing
federal taxable income;

(7) in the case of mines, oil and gas wells, other natural
deposits, and timber for which percentage depletion was
disallowed pursuant to subdivision 19c, clause (11), a
reasonable allowance for depletion based on actual cost. In the
case of leases the deduction must be apportioned between the
lessor and lessee in accordance with rules prescribed by the
commissioner. In the case of property held in trust, the
allowable deduction must be apportioned between the income
beneficiaries and the trustee in accordance with the pertinent
provisions of the trust, or if there is no provision in the
instrument, on the basis of the trust's income allocable to
each;

(8) for certified pollution control facilities placed in
service in a taxable year beginning before December 31, 1986,
and for which amortization deductions were elected under section
169 of the Internal Revenue Code of 1954, as amended through
December 31, 1985, an amount equal to the allowance for
depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7;

(9) amounts included in federal taxable income that are due
to refunds of income, excise, or franchise taxes based on net
income or related minimum taxes paid by the corporation to
Minnesota, another state, a political subdivision of another
state, the District of Columbia, or a foreign country or
possession of the United States to the extent that the taxes
were added to federal taxable income under section 290.01,
subdivision 19c, clause (1), in a prior taxable year;

(10) 80 percent of royalties, fees, or other like income
accrued or received from a foreign operating corporation or a
foreign corporation which is part of the same unitary business
as the receiving corporation;

(11) income or gains from the business of mining as defined
in section 290.05, subdivision 1, clause (a), that are not
subject to Minnesota franchise tax;

(12) the amount of handicap access expenditures in the
taxable year which are not allowed to be deducted or capitalized
under section 44(d)(7) of the Internal Revenue Code;

(13) the amount of qualified research expenses not allowed
for federal income tax purposes under section 280C(c) of the
Internal Revenue Code, but only to the extent that the amount
exceeds the amount of the credit allowed under section 290.068;

(14) the amount of salary expenses not allowed for federal
income tax purposes due to claiming the Indian employment credit
under section 45A(a) of the Internal Revenue Code;

(15) the amount of any refund of environmental taxes paid
under section 59A of the Internal Revenue Code;

(16) for taxable years beginning before January 1, 2008,
the amount of the federal small ethanol producer credit allowed
under section 40(a)(3) of the Internal Revenue Code which is
included in gross income under section 87 of the Internal
Revenue Code;

(17) for a corporation whose foreign sales corporation, as
defined in section 922 of the Internal Revenue Code, constituted
a foreign operating corporation during any taxable year ending
before January 1, 1995, and a return was filed by August 15,
1996, claiming the deduction under section 290.21, subdivision
4, for income received from the foreign operating corporation,
an amount equal to 1.23 multiplied by the amount of income
excluded under section 114 of the Internal Revenue Code,
provided the income is not income of a foreign operating
company;

(18) any decrease in subpart F income, as defined in
section 952(a) of the Internal Revenue Code, for the taxable
year when subpart F income is calculated without regard to the
provisions of section 614 of Public Law 107-147; deleted text begin and
deleted text end

(19) in each of the five tax years immediately following
the tax year in which an addition is required under subdivision
19c, clause (16), an amount equal to one-fifth of the delayed
depreciation. For purposes of this clause, "delayed
depreciation" means the amount of the addition made by the
taxpayer under subdivision 19c, clause (16). The resulting
delayed depreciation cannot be less than zero new text begin ; and
new text end

new text begin (20) in each of the five tax years immediately following
the tax year in which an addition is required under subdivision
19c, clause (17), an amount equal to one-fifth of the amount of
the addition new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 7.

Minnesota Statutes 2004, section 290.01,
subdivision 31, is amended to read:

Subd. 31.

Internal revenue code.

Unless specifically
defined otherwise, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through deleted text begin June 15, 2003 deleted text end new text begin April 15,
2005 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment except the changes incorporated by
federal changes are effective at the same times as the changes
were effective for federal purposes.
new text end

Sec. 8.

Minnesota Statutes 2004, section 290.032,
subdivision 1, is amended to read:

Subdivision 1.

Imposition.

There is hereby imposed as an
addition to the annual income tax for a taxable year of a
taxpayer in the classes described in section 290.03 a tax with
respect to any distribution received by such taxpayer that is
treated as a lump sum distribution under section deleted text begin 402(d) of the
Internal Revenue Code deleted text end new text begin 1401(c)(2) of the Small Business Job
Protection Act, Public Law 104-188 new text end and that is subject to tax
for such taxable year under section deleted text begin 402(d) of the Internal
Revenue Code deleted text end new text begin 1401(c)(2) of the Small Business Job Protection
Act, Public Law 104-188 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 1999.
new text end

Sec. 9.

Minnesota Statutes 2004, section 290.032,
subdivision 2, is amended to read:

Subd. 2.

Computation.

The amount of tax imposed by
subdivision 1 shall be computed in the same way as the tax
imposed under section 402(d) of the Internal Revenue Code new text begin of
1986, as amended through December 31, 1995 new text end , except that the
initial separate tax shall be an amount equal to five times the
tax which would be imposed by section 290.06, subdivision 2c, if
the recipient was an unmarried individual, and the taxable net
income was an amount equal to one-fifth of the excess of

(i) the total taxable amount of the lump sum distribution
for the year, over

(ii) the minimum distribution allowance, and except that
references in section 402(d) of the Internal Revenue Code new text begin of
1986, as amended through December 31, 1995, new text end to paragraph (1)(A)
thereof shall instead be references to subdivision 1, and the
excess, if any, of the subtraction base amount over federal
taxable income for a qualified individual as provided under
section 290.0802, subdivision 2.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 1999.
new text end

Sec. 10.

Minnesota Statutes 2004, section 290.06,
subdivision 2c, is amended to read:

Subd. 2c.

Schedules of rates for individuals, estates,
and trusts.

(a) The income taxes imposed by this chapter upon
married individuals filing joint returns and surviving spouses
as defined in section 2(a) of the Internal Revenue Code must be
computed by applying to their taxable net income the following
schedule of rates:

(1) On the first $25,680, 5.35 percent;

(2) On all over $25,680, but not over $102,030, 7.05
percent;

(3) On all over $102,030, 7.85 percent.

Married individuals filing separate returns, estates, and
trusts must compute their income tax by applying the above rates
to their taxable income, except that the income brackets will be
one-half of the above amounts.

(b) The income taxes imposed by this chapter upon unmarried
individuals must be computed by applying to taxable net income
the following schedule of rates:

(1) On the first $17,570, 5.35 percent;

(2) On all over $17,570, but not over $57,710, 7.05
percent;

(3) On all over $57,710, 7.85 percent.

(c) The income taxes imposed by this chapter upon unmarried
individuals qualifying as a head of household as defined in
section 2(b) of the Internal Revenue Code must be computed by
applying to taxable net income the following schedule of rates:

(1) On the first $21,630, 5.35 percent;

(2) On all over $21,630, but not over $86,910, 7.05
percent;

(3) On all over $86,910, 7.85 percent.

(d) In lieu of a tax computed according to the rates set
forth in this subdivision, the tax of any individual taxpayer
whose taxable net income for the taxable year is less than an
amount determined by the commissioner must be computed in
accordance with tables prepared and issued by the commissioner
of revenue based on income brackets of not more than $100. The
amount of tax for each bracket shall be computed at the rates
set forth in this subdivision, provided that the commissioner
may disregard a fractional part of a dollar unless it amounts to
50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the
entire year must compute the individual's Minnesota income tax
as provided in this subdivision. After the application of the
nonrefundable credits provided in this chapter, the tax
liability must then be multiplied by a fraction in which:

(1) the numerator is the individual's Minnesota source
federal adjusted gross income as defined in section 62 of the
Internal Revenue Code and increased by the additions required
under section 290.01, subdivision 19a, clauses (1), (5), deleted text begin and
deleted text end (6), new text begin (7), (8), and (9), new text end and reduced by the subtraction under
section 290.01, subdivision 19b, clause (11), and the Minnesota
assignable portion of the subtraction for United States
government interest under section 290.01, subdivision 19b,
clause (1), new text begin and the subtractions under clauses (10), (11), (12),
and (13), new text end after applying the allocation and assignability
provisions of section 290.081, clause (a), or 290.17; and

(2) the denominator is the individual's federal adjusted
gross income as defined in section 62 of the Internal Revenue
Code of 1986, increased by the amounts specified in section
290.01, subdivision 19a, clauses (1), (5), deleted text begin and deleted text end (6), new text begin (7), (8),
and (9), new text end and reduced by the amounts specified in section 290.01,
subdivision 19b, clauses (1) deleted text begin and deleted text end new text begin , (10), new text end (11) new text begin , (12), and (13) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 11.

Minnesota Statutes 2004, section 290.067,
subdivision 1, is amended to read:

Subdivision 1.

Amount of credit.

(a) A taxpayer may take
as a credit against the tax due from the taxpayer and a spouse,
if any, under this chapter an amount equal to the dependent care
credit for which the taxpayer is eligible pursuant to the
provisions of section 21 of the Internal Revenue Code subject to
the limitations provided in subdivision 2 except that in
determining whether the child qualified as a dependent, income
received as a Minnesota family investment program grant or
allowance to or on behalf of the child must not be taken into
account in determining whether the child received more than half
of the child's support from the taxpayer, and the provisions of
section 32(b)(1)(D) of the Internal Revenue Code do not apply.

(b) If a child who has not attained the age of six years at
the close of the taxable year is cared for at a licensed family
day care home operated by the child's parent, the taxpayer is
deemed to have paid employment-related expenses. If the child
is 16 months old or younger at the close of the taxable year,
the amount of expenses deemed to have been paid equals the
maximum limit for one qualified individual under section 21(c)
and (d) of the Internal Revenue Code. If the child is older
than 16 months of age but has not attained the age of six years
at the close of the taxable year, the amount of expenses deemed
to have been paid equals the amount the licensee would charge
for the care of a child of the same age for the same number of
hours of care.

(c) If a married couple:

(1) has a child who has not attained the age of one year at
the close of the taxable year;

(2) files a joint tax return for the taxable year; and

(3) does not participate in a dependent care assistance
program as defined in section 129 of the Internal Revenue Code,
in lieu of the actual employment related expenses paid for that
child under paragraph (a) or the deemed amount under paragraph
(b), the lesser of (i) the combined earned income of the couple
or (ii) the amount of the maximum limit for one qualified
individual under section 21(c) and (d) of the Internal Revenue
Code will be deemed to be the employment related expense paid
for that child. The earned income limitation of section 21(d)
of the Internal Revenue Code shall not apply to this deemed
amount. These deemed amounts apply regardless of whether any
employment-related expenses have been paid.

(d) If the taxpayer is not required and does not file a
federal individual income tax return for the tax year, no credit
is allowed for any amount paid to any person unless:

(1) the name, address, and taxpayer identification number
of the person are included on the return claiming the credit; or

(2) if the person is an organization described in section
501(c)(3) of the Internal Revenue Code and exempt from tax under
section 501(a) of the Internal Revenue Code, the name and
address of the person are included on the return claiming the
credit.

In the case of a failure to provide the information required
under the preceding sentence, the preceding sentence does not
apply if it is shown that the taxpayer exercised due diligence
in attempting to provide the information required.

In the case of a nonresident, part-year resident, or a
person who has earned income not subject to tax under this
chapter including earned income excluded pursuant to section
290.01, subdivision 19b, clause (11), the credit determined
under section 21 of the Internal Revenue Code must be allocated
based on the ratio by which the earned income of the claimant
and the claimant's spouse from Minnesota sources bears to the
total earned income of the claimant and the claimant's spouse.

new text begin For residents of Minnesota, the exclusion of combat pay
under section 112 of the Internal Revenue Code is not considered
"earned income not subject to tax under this chapter."
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2003.
new text end

Sec. 12.

Minnesota Statutes 2004, section 290.067,
subdivision 2a, is amended to read:

Subd. 2a.

Income.

(a) For purposes of this section,
"income" means the sum of the following:

(1) federal adjusted gross income as defined in section 62
of the Internal Revenue Code; and

(2) the sum of the following amounts to the extent not
included in clause (1):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not
disallowed as a result of section 469, paragraph (i) or (m) of
the Internal Revenue Code and the amount of passive activity
loss carryover allowed under section 469(b) of the Internal
Revenue Code;

(iii) an amount equal to the total of any discharge of
qualified farm indebtedness of a solvent individual excluded
from gross income under section 108(g) of the Internal Revenue
Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement
benefits, all payments received under the federal Social
Security Act, supplemental security income, and veterans
benefits), which was not exclusively funded by the claimant or
spouse, or which was funded exclusively by the claimant or
spouse and which funding payments were excluded from federal
adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state
government or any instrumentality or political subdivision
thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature
of disability income or sick pay as a result of accident,
sickness, or other disability, whether funded through insurance
or otherwise;

(x) a lump sum distribution under section 402(e)(3) of the
Internal Revenue Code new text begin of 1986, as amended through December 31,
1995 new text end ;

(xi) contributions made by the claimant to an individual
retirement account, including a qualified voluntary employee
contribution; simplified employee pension plan; self-employed
retirement plan; cash or deferred arrangement plan under section
401(k) of the Internal Revenue Code; or deferred compensation
plan under section 457 of the Internal Revenue Code; deleted text begin and
deleted text end

(xii) nontaxable scholarship or fellowship grants new text begin ;
new text end

new text begin (xiii) the amount of deduction allowed under section 199 of
the Internal Revenue Code; and
new text end

new text begin (xiv) the amount of deduction allowed under section 220 or
223 of the Internal Revenue Code new text end .

In the case of an individual who files an income tax return
on a fiscal year basis, the term "federal adjusted gross income"
means federal adjusted gross income reflected in the fiscal year
ending in the next calendar year. Federal adjusted gross income
may not be reduced by the amount of a net operating loss
carryback or carryforward or a capital loss carryback or
carryforward allowed for the year.

(b) "Income" does not include:

(1) amounts excluded pursuant to the Internal Revenue Code,
sections 101(a) and 102;

(2) amounts of any pension or annuity that were exclusively
funded by the claimant or spouse if the funding payments were
not excluded from federal adjusted gross income in the years
when the payments were made;

(3) surplus food or other relief in kind supplied by a
governmental agency;

(4) relief granted under chapter 290A;

(5) child support payments received under a temporary or
final decree of dissolution or legal separation; and

(6) restitution payments received by eligible individuals
and excludable interest as defined in section 803 of the
Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2003.
new text end

Sec. 13.

Minnesota Statutes 2004, section 290.0671,
subdivision 1, is amended to read:

Subdivision 1.

Credit allowed.

(a) An individual is
allowed a credit against the tax imposed by this chapter equal
to a percentage of earned income. To receive a credit, a
taxpayer must be eligible for a credit under section 32 of the
Internal Revenue Code.

(b) For individuals with no qualifying children, the credit
equals 1.9125 percent of the first $4,620 of earned income. The
credit is reduced by 1.9125 percent of earned income or modified
adjusted gross income, whichever is greater, in excess of
$5,770, but in no case is the credit less than zero.

(c) For individuals with one qualifying child, the credit
equals 8.5 percent of the first $6,920 of earned income and 8.5
percent of earned income over $12,080 but less than $13,450.
The credit is reduced by 5.73 percent of earned income or
modified adjusted gross income, whichever is greater, in excess
of $15,080, but in no case is the credit less than zero.

(d) For individuals with two or more qualifying children,
the credit equals ten percent of the first $9,720 of earned
income and 20 percent of earned income over $14,860 but less
than $16,800. The credit is reduced by 10.3 percent of earned
income or modified adjusted gross income, whichever is greater,
in excess of $17,890, but in no case is the credit less than
zero.

(e) For a nonresident or part-year resident, the credit
must be allocated based on the percentage calculated under
section 290.06, subdivision 2c, paragraph (e).

(f) For a person who was a resident for the entire tax year
and has earned income not subject to tax under this chapter,
including income excluded under section 290.01, subdivision 19b,
clause (11), the credit must be allocated based on the ratio of
federal adjusted gross income reduced by the earned income not
subject to tax under this chapter over federal adjusted gross
income. new text begin For the purposes of this paragraph, the exclusion of
combat pay under section 112 of the Internal Revenue Code is not
considered "earned income not subject to tax under this chapter."
new text end

(g) For tax years beginning after December 31, 2001, and
before December 31, 2004, the $5,770 in paragraph (b), the
$15,080 in paragraph (c), and the $17,890 in paragraph (d),
after being adjusted for inflation under subdivision 7, are each
increased by $1,000 for married taxpayers filing joint returns.

(h) For tax years beginning after December 31, 2004, and
before December 31, 2007, the $5,770 in paragraph (b), the
$15,080 in paragraph (c), and the $17,890 in paragraph (d),
after being adjusted for inflation under subdivision 7, are each
increased by $2,000 for married taxpayers filing joint returns.

(i) For tax years beginning after December 31, 2007, and
before December 31, 2010, the $5,770 in paragraph (b), the
$15,080 in paragraph (c), and the $17,890 in paragraph (d),
after being adjusted for inflation under subdivision 7, are each
increased by $3,000 for married taxpayers filing joint returns.
For tax years beginning after December 31, 2008, the $3,000 is
adjusted annually for inflation under subdivision 7.

(j) The commissioner shall construct tables showing the
amount of the credit at various income levels and make them
available to taxpayers. The tables shall follow the schedule
contained in this subdivision, except that the commissioner may
graduate the transition between income brackets.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2003.
new text end

Sec. 14.

Minnesota Statutes 2004, section 290.0675,
subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this
section the following terms have the meanings given.

(b) "Earned income" means the sum of the following, to the
extent included in Minnesota taxable income:

(1) earned income as defined in section 32(c)(2) of the
Internal Revenue Code;

(2) income received from a retirement pension,
profit-sharing, stock bonus, or annuity plan; and

(3) Social Security benefits as defined in section 86(d)(1)
of the Internal Revenue Code.

(c) "Taxable income" means net income as defined in section
290.01, subdivision 19.

(d) "Earned income of lesser-earning spouse" means the
earned income of the spouse with the lesser amount of earned
income as defined in paragraph (b) for the taxable year minus
the sum of (i) the amount for one exemption under section 151(d)
of the Internal Revenue Code and (ii) one-half the amount of the
standard deduction under section 63(c)(2)(A) and (4) of the
Internal Revenue Code new text begin minus one-half of any addition required
under section 290.01, subdivision 19a, clause (10) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 15.

Minnesota Statutes 2004, section 290.091,
subdivision 2, is amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by
this section, the following terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of
the following for the taxable year:

(1) the taxpayer's federal alternative minimum taxable
income as defined in section 55(b)(2) of the Internal Revenue
Code;

(2) the taxpayer's itemized deductions allowed in computing
federal alternative minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170
of the Internal Revenue Code to the extent that the deduction
exceeds 1.0 percent of adjusted gross income, as defined in
section 62 of the Internal Revenue Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled
person;

(3) for depletion allowances computed under section 613A(c)
of the Internal Revenue Code, with respect to each property (as
defined in section 614 of the Internal Revenue Code), to the
extent not included in federal alternative minimum taxable
income, the excess of the deduction for depletion allowable
under section 611 of the Internal Revenue Code for the taxable
year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion
deduction for the taxable year);

(4) to the extent not included in federal alternative
minimum taxable income, the amount of the tax preference for
intangible drilling cost under section 57(a)(2) of the Internal
Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative
minimum taxable income, the amount of interest income as
provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01,
subdivision 19a, deleted text begin clause deleted text end new text begin clauses new text end (7) new text begin , (8), and (9) new text end ;

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01,
subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by
section 290.01, subdivision 19b, clause (2), to the extent
included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued
within the taxable year on indebtedness to the extent that the
amount does not exceed net investment income, as defined in
section 163(d)(4) of the Internal Revenue Code. Interest does
not include amounts deducted in computing federal adjusted gross
income; and

(4) amounts subtracted from federal taxable income as
provided by section 290.01, subdivision 19b, clauses (10) deleted text begin and deleted text end new text begin ,
new text end (11) new text begin , (12), and (13) new text end .

In the case of an estate or trust, alternative minimum
taxable income must be computed as provided in section 59(c) of
the Internal Revenue Code.

(b) "Investment interest" means investment interest as
defined in section 163(d)(3) of the Internal Revenue Code.

(c) "Tentative minimum tax" equals 6.4 percent of
alternative minimum taxable income after subtracting the
exemption amount determined under subdivision 3.

(d) "Regular tax" means the tax that would be imposed under
this chapter (without regard to this section and section
290.032), reduced by the sum of the nonrefundable credits
allowed under this chapter.

(e) "Net minimum tax" means the minimum tax imposed by this
section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2004.
new text end

Sec. 16.

Minnesota Statutes 2004, section 290A.03,
subdivision 3, is amended to read:

Subd. 3.

Income.

(1) "Income" means the sum of the
following:

(a) federal adjusted gross income as defined in the
Internal Revenue Code; and

(b) the sum of the following amounts to the extent not
included in clause (a):

(i) all nontaxable income;

(ii) the amount of a passive activity loss that is not
disallowed as a result of section 469, paragraph (i) or (m) of
the Internal Revenue Code and the amount of passive activity
loss carryover allowed under section 469(b) of the Internal
Revenue Code;

(iii) an amount equal to the total of any discharge of
qualified farm indebtedness of a solvent individual excluded
from gross income under section 108(g) of the Internal Revenue
Code;

(iv) cash public assistance and relief;

(v) any pension or annuity (including railroad retirement
benefits, all payments received under the federal Social
Security Act, supplemental security income, and veterans
benefits), which was not exclusively funded by the claimant or
spouse, or which was funded exclusively by the claimant or
spouse and which funding payments were excluded from federal
adjusted gross income in the years when the payments were made;

(vi) interest received from the federal or a state
government or any instrumentality or political subdivision
thereof;

(vii) workers' compensation;

(viii) nontaxable strike benefits;

(ix) the gross amounts of payments received in the nature
of disability income or sick pay as a result of accident,
sickness, or other disability, whether funded through insurance
or otherwise;

(x) a lump sum distribution under section 402(e)(3) of the
Internal Revenue Code new text begin of 1986, as amended through December 31,
1995 new text end ;

(xi) contributions made by the claimant to an individual
retirement account, including a qualified voluntary employee
contribution; simplified employee pension plan; self-employed
retirement plan; cash or deferred arrangement plan under section
401(k) of the Internal Revenue Code; or deferred compensation
plan under section 457 of the Internal Revenue Code; deleted text begin and
deleted text end

(xii) nontaxable scholarship or fellowship grants new text begin ;
new text end

new text begin (xiii) the amount of deduction allowed under section 199 of
the Internal Revenue Code; and
new text end

new text begin (xiv) the amount of deduction allowed under section 220 or
223 of the Internal Revenue Code new text end .

In the case of an individual who files an income tax return
on a fiscal year basis, the term "federal adjusted gross income"
shall mean federal adjusted gross income reflected in the fiscal
year ending in the calendar year. Federal adjusted gross income
shall not be reduced by the amount of a net operating loss
carryback or carryforward or a capital loss carryback or
carryforward allowed for the year.

(2) "Income" does not include:

(a) amounts excluded pursuant to the Internal Revenue Code,
sections 101(a) and 102;

(b) amounts of any pension or annuity which was exclusively
funded by the claimant or spouse and which funding payments were
not excluded from federal adjusted gross income in the years
when the payments were made;

(c) surplus food or other relief in kind supplied by a
governmental agency;

(d) relief granted under this chapter;

(e) child support payments received under a temporary or
final decree of dissolution or legal separation; or

(f) restitution payments received by eligible individuals
and excludable interest as defined in section 803 of the
Economic Growth and Tax Relief Reconciliation Act of 2001,
Public Law 107-16.

(3) The sum of the following amounts may be subtracted from
income:

(a) for the claimant's first dependent, the exemption
amount multiplied by 1.4;

(b) for the claimant's second dependent, the exemption
amount multiplied by 1.3;

(c) for the claimant's third dependent, the exemption
amount multiplied by 1.2;

(d) for the claimant's fourth dependent, the exemption
amount multiplied by 1.1;

(e) for the claimant's fifth dependent, the exemption
amount; and

(f) if the claimant or claimant's spouse was disabled or
attained the age of 65 on or before December 31 of the year for
which the taxes were levied or rent paid, the exemption amount.

For purposes of this subdivision, the "exemption amount"
means the exemption amount under section 151(d) of the Internal
Revenue Code for the taxable year for which the income is
reported.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property
tax refunds based on household income for 2004 and thereafter.
new text end

Sec. 17.

Minnesota Statutes 2004, section 290A.03,
subdivision 15, is amended to read:

Subd. 15.

Internal revenue code.

"Internal Revenue Code"
means the Internal Revenue Code of 1986, as amended through deleted text begin June
15, 2003 deleted text end new text begin April 15, 2005 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property
tax refunds based on property taxes payable on or after December
31, 2004, and rent paid on or after December 31, 2003.
new text end

ARTICLE 7

SALES AND USE TAXES

Section 1.

Minnesota Statutes 2004, section 16C.03, is
amended by adding a subdivision to read:

new text begin Subd. 18. new text end

new text begin Contracts with foreign vendors. new text end

new text begin (a) The
commissioner and other agencies to which this section applies
and the legislative branch of government shall, subject to
paragraph (d), cancel a contract for goods or services from a
vendor or an affiliate of a vendor or suspend or debar a vendor
or an affiliate of a vendor from future contracts upon
notification from the commissioner of revenue that the vendor or
an affiliate of the vendor has not registered to collect the
sales and use tax imposed under chapter 297A on its sales in
Minnesota or to a destination in Minnesota. This subdivision
shall not apply to state colleges and universities, the courts,
and any agency in the judicial branch of government. For
purposes of this subdivision, the term "affiliate" means any
person or entity that is controlled by, or is under common
control of, a vendor through stock ownership or other
affiliation.
new text end

new text begin (b) Beginning January 1, 2006, each vendor or affiliate of
a vendor selling goods or services, subject to tax under chapter
297A, to an agency or the legislature must provide its Minnesota
sales and use tax business identification number, upon request,
to show that the vendor is registered to collect Minnesota sales
or use tax.
new text end

new text begin (c) The commissioner of revenue shall periodically provide
to the commissioner and the legislative branch a list of vendors
who have not registered to collect Minnesota sales and use tax
and who are subject to being suspended or debarred as vendors or
having their contracts canceled.
new text end

new text begin (d) The provisions of this subdivision may be waived by the
commissioner or the legislative branch when the vendor is the
single source of such goods or services, in the event of an
emergency, or when it is in the best interests of the state as
determined by the commissioner in consultation with the
commissioner of revenue. Such consultation is not a disclosure
violation under chapter 270B.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for all
contracts entered into after December 31, 2005.
new text end

Sec. 2.

Minnesota Statutes 2004, section 289A.38,
subdivision 6, is amended to read:

Subd. 6.

Omission in excess of 25 percent.

Additional
taxes may be assessed within 6-1/2 years after the due date of
the return or the date the return was filed, whichever is later,
if:

(1) the taxpayer omits from gross income an amount properly
includable in it that is in excess of 25 percent of the amount
of gross income stated in the return;

(2) the taxpayer omits from a sales new text begin , use, new text end or withholding
tax return an amount new text begin of taxes new text end in excess of 25 percent of the
taxes reported in the return; or

(3) the taxpayer omits from the gross estate assets in
excess of 25 percent of the gross estate reported in the return.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2004, section 289A.38, is
amended by adding a subdivision to read:

new text begin Subd. 15. new text end

new text begin Purchaser filed refund claims. new text end

new text begin If a purchaser
refund claim is filed under section 289A.50, subdivision 2a, and
the basis for the claim is that the purchaser was improperly
charged tax on an improvement to real property or on the
purchase of nontaxable services, sales or use tax may be
assessed for the cost of materials used to make the real
property improvement or to perform the nontaxable service. The
assessment may be made against the person making the improvement
to real property or the sale of nontaxable services, within the
period prescribed in subdivision 1, or within one year after the
date of the refund order, whichever is later.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchaser
refund claims filed on or after July 1, 2005.
new text end

Sec. 4.

Minnesota Statutes 2004, section 289A.40,
subdivision 2, is amended to read:

Subd. 2.

Bad debt loss.

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

Minnesota Statutes 2004, section 289A.40, is
amended by adding a subdivision to read:

new text begin Subd. 4. new text end

new text begin Purchaser filed refund claims. new text end

new text begin A claim for
refund of taxes paid on a transaction not subject to tax under
chapter 297A, where the purchaser may apply directly to the
commissioner under section 289A.50, subdivision 2a, must be
filed within 3-1/2 years from the 20th day of the month
following the month of the invoice date for the purchase.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims
filed on or after the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2004, section 289A.40, is
amended by adding a subdivision to read:

new text begin Subd. 5. new text end

new text begin Capital equipment refund claims. new text end

new text begin A claim for
refund for taxes paid under chapter 297A on capital equipment
must be filed within 3-1/2 years from the 20th day of the month
following the month of the invoice date for the purchase of the
capital equipment. A claim for refund for taxes imposed on
capital equipment under section 297A.63 must be filed within
3-1/2 years from the date prescribed for filing the return, or
one year from the date of an order assessing tax under section
289A.37, subdivision 1, upon payment in full of the tax,
penalties, and interest shown on the order, whichever period
expires later.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims
filed on or after the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2004, section 297A.61,
subdivision 3, is amended to read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase"
include, but are not limited to, each of the transactions listed
in this subdivision.

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of
tangible personal property, whether absolutely or conditionally,
for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or
consume, for a consideration in money or by exchange or barter,
tangible personal property, other than a manufactured home used
for residential purposes for a continuous period of 30 days or
more.

(c) Sale and purchase include the production, fabrication,
printing, or processing of tangible personal property for a
consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication,
printing, or processing.

(d) Sale and purchase include the preparing for a
consideration of food. Notwithstanding section 297A.67,
subdivision 2, taxable food includes, but is not limited to, the
following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy; deleted text begin and
deleted text end

(4) new text begin dietary supplements; and
new text end

new text begin (5) new text end all food sold through vending machines new text begin , except milk new text end .

(e) A sale and a purchase includes the furnishing for a
consideration of electricity, gas, water, or steam for use or
consumption within this state.

(f) A sale and a purchase includes the transfer for a
consideration of prewritten computer software whether delivered
electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a
consideration of the following services:

(1) the privilege of admission to places of amusement,
recreational areas, or athletic events, and the making available
of amusement devices, tanning facilities, reducing salons, steam
baths, turkish baths, health clubs, and spas or athletic
facilities;

(2) lodging and related services by a hotel, rooming house,
resort, campground, motel, or trailer camp and the granting of
any similar license to use real property new text begin in a specific facility,
new text end other than the renting or leasing of it for a continuous period
of 30 days or more new text begin under an enforceable written agreement that
may not be terminated without prior notice new text end ;

(3) nonresidential parking services, whether on a
contractual, hourly, or other periodic basis, except for parking
at a meter;

(4) the granting of membership in a club, association, or
other organization if:

(i) the club, association, or other organization makes
available for the use of its members sports and athletic
facilities, without regard to whether a separate charge is
assessed for use of the facilities; and

(ii) use of the sports and athletic facility is not made
available to the general public on the same basis as it is made
available to members.

Granting of membership means both onetime initiation fees and
periodic membership dues. Sports and athletic facilities
include golf courses; tennis, racquetball, handball, and squash
courts; basketball and volleyball facilities; running tracks;
exercise equipment; swimming pools; and other similar athletic
or sports facilities;

(5) delivery of aggregate materials and concrete block by a
third party if the delivery would be subject to the sales tax if
provided by the seller of the aggregate material or concrete
block; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning,
pressing, repairing, altering, and storing clothes, linen
services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry
cleaning services do not include services provided by coin
operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services,
including services provided by coin operated facilities operated
by the customer, and rustproofing, undercoating, and towing of
motor vehicles;

(iii) building and residential cleaning, maintenance, and
disinfecting and exterminating services;

(iv) detective, security, burglar, fire alarm, and armored
car services; but not including services performed within the
jurisdiction they serve by off-duty licensed peace officers as
defined in section 626.84, subdivision 1, or services provided
by a nonprofit organization for monitoring and electronic
surveillance of persons placed on in-home detention pursuant to
court order or under the direction of the Minnesota Department
of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging
services; garden planting and maintenance; tree, bush, and shrub
pruning, bracing, spraying, and surgery; indoor plant care;
tree, bush, shrub, and stump removal new text begin , except when performed as
part of a land clearing contract as defined in section 297A.68,
subdivision 40 new text end ; and tree trimming for public utility lines.
Services performed under a construction contract for the
installation of shrubbery, plants, sod, trees, bushes, and
similar items are not taxable;

(vii) massages, except when provided by a licensed health
care facility or professional or upon written referral from a
licensed health care facility or professional for treatment of
illness, injury, or disease; and

(viii) the furnishing of lodging, board, and care services
for animals in kennels and other similar arrangements, but
excluding veterinary and horse boarding services.

In applying the provisions of this chapter, the terms
"tangible personal property" and "sales at retail" include
taxable services listed in clause (6), items (i) to (vi) and
(viii), and the provision of these taxable services, unless
specifically provided otherwise. Services performed by an
employee for an employer are not taxable. Services performed by
a partnership or association for another partnership or
association are not taxable if one of the entities owns or
controls more than 80 percent of the voting power of the equity
interest in the other entity. Services performed between
members of an affiliated group of corporations are not taxable.
For purposes of the preceding sentence, "affiliated group of
corporations" includes those entities that would be classified
as members of an affiliated group under United States Code,
title 26, section 1504, and that are eligible to file a
consolidated tax return for federal income tax purposes.

(h) A sale and a purchase includes the furnishing for a
consideration of tangible personal property or taxable services
by the United States or any of its agencies or
instrumentalities, or the state of Minnesota, its agencies,
instrumentalities, or political subdivisions.

(i) A sale and a purchase includes the furnishing for a
consideration of telecommunications services, including cable
television services and direct satellite services.
Telecommunications services are taxed to the extent allowed
under federal law.

(j) A sale and a purchase includes the furnishing for a
consideration of installation if the installation charges would
be subject to the sales tax if the installation were provided by
the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle
by a motor vehicle dealer to a customer when (1) the vehicle is
rented by the customer for a consideration, or (2) the motor
vehicle dealer is reimbursed pursuant to a service contract as
defined in section 65B.29, subdivision 1, clause (1).

new text begin EFFECTIVE DATE. new text end

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

Sec. 8.

Minnesota Statutes 2004, section 297A.61,
subdivision 4, is amended to read:

Subd. 4.

Retail sale.

(a) A "retail sale" means any
sale, lease, or rental for any purpose new text begin , new text end other than resale,
sublease, or subrent new text begin of items by the purchaser in the normal
course of business as defined in subdivision 21 new text end .

(b) A sale of property used by the owner only by leasing it
to others or by holding it in an effort to lease it, and put to
no use by the owner other than resale after the lease or effort
to lease, is a sale of property for resale.

(c) A sale of master computer software that is purchased
and used to make copies for sale or lease is a sale of property
for resale.

(d) A sale of building materials, supplies, and equipment
to owners, contractors, subcontractors, or builders for the
erection of buildings or the alteration, repair, or improvement
of real property is a retail sale in whatever quantity sold,
whether the sale is for purposes of resale in the form of real
property or otherwise.

(e) A sale of carpeting, linoleum, or similar floor
covering to a person who provides for installation of the floor
covering is a retail sale and not a sale for resale since a sale
of floor covering which includes installation is a contract for
the improvement of real property.

(f) A sale of shrubbery, plants, sod, trees, and similar
items to a person who provides for installation of the items is
a retail sale and not a sale for resale since a sale of
shrubbery, plants, sod, trees, and similar items that includes
installation is a contract for the improvement of real property.

(g) A sale of tangible personal property that is awarded as
prizes is a retail sale and is not considered a sale of property
for resale.

(h) A sale of tangible personal property utilized or
employed in the furnishing or providing of services under
subdivision 3, paragraph (g), clause (1), including, but not
limited to, property given as promotional items, is a retail
sale and is not considered a sale of property for resale.

(i) A sale of tangible personal property used in conducting
lawful gambling under chapter 349 or the state lottery under
chapter 349A, including, but not limited to, property given as
promotional items, is a retail sale and is not considered a sale
of property for resale.

(j) A sale of machines, equipment, or devices that are used
to furnish, provide, or dispense goods or services, including,
but not limited to, coin-operated devices, is a retail sale and
is not considered a sale of property for resale.

(k) In the case of a lease, a retail sale occurs new text begin (1) new text end when
an obligation to make a lease payment becomes due under the
terms of the agreement or the trade practices of the lessor new text begin or
(2) in the case of a lease of a motor vehicle, as defined in
section 297B.01, subdivision 5, but excluding vehicles with a
manufacturer's gross vehicle weight rating greater than 11,000
pounds and rentals of vehicles for not more than 28 days, at the
time the lease is executed new text end .

(l) In the case of a conditional sales contract, a retail
sale occurs upon the transfer of title or possession of the
tangible personal property.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment, except that the amendments to
paragraph (k) are effective for leases entered into after
September 30, 2005.
new text end

Sec. 9.

Minnesota Statutes 2004, section 297A.61, is
amended by adding a subdivision to read:

new text begin Subd. 37. new text end

new text begin Personal rapid transit system. new text end

new text begin "Personal rapid
transit system" means a transportation system of small,
computer-controlled vehicles, transporting one to three
passengers on elevated guideways in a transportation network
operating on demand and nonstop directly to any stations in the
network.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after June 30, 2005.
new text end

Sec. 10.

Minnesota Statutes 2004, section 297A.64,
subdivision 4, is amended to read:

Subd. 4.

Exemptions.

(a) The tax and the fee imposed by
this section do not apply to a lease or rental of (1) a vehicle
to be used by the lessee to provide a licensed taxi service; (2)
a hearse or limousine used in connection with a burial or
funeral service; or (3) a van designed or adapted primarily for
transporting property rather than passengers. new text begin The tax and the
fee imposed under this section do not apply when the lease or
rental of a vehicle is exempt from the tax imposed under section
297A.62, subdivision 1.
new text end

(b) The lessor may elect not to charge the fee imposed in
subdivision 2 if in the previous calendar year the lessor had no
more than 20 vehicles available for lease that would have been
subject to tax under this section, or no more than $50,000 in
gross receipts that would have been subject to tax under this
section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2004, section 297A.668,
subdivision 1, is amended to read:

Subdivision 1.

applicability.

The provisions of this
section apply regardless of the characterization of a product as
tangible personal property, a digital good, or a service; but do
not apply to telecommunications services deleted text begin , deleted text end or the sales of motor
vehicles deleted text begin , watercraft, aircraft, modular homes, manufactured
homes, or mobile homes deleted text end . These provisions only apply to
determine a seller's obligation to pay or collect and remit a
sales or use tax with respect to the seller's sale of a
product. These provisions do not affect the obligation of a
seller as purchaser to remit tax on the use of the product.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 12.

Minnesota Statutes 2004, section 297A.668,
subdivision 5, is amended to read:

Subd. 5.

Transportation equipment.

(a) The retail sale,
including lease or rental, of transportation equipment shall be
sourced the same as a retail sale in accordance with the
provisions of subdivision 2, notwithstanding the exclusion of
lease or rental in subdivision 2.

(b) "Transportation equipment" means any of the following:

(1) locomotives and railcars that are utilized for the
carriage of persons or property in interstate commerce; deleted text begin and/or
deleted text end

(2) trucks and truck-tractors with a gross vehicle weight
rating (GVWR) of 10,001 pounds or greater, trailers,
semitrailers, or passenger buses that are:

(i) registered through the international registration plan;
and

(ii) operated under authority of a carrier authorized and
certified by the United States Department of Transportation or
another federal authority to engage in the carriage of persons
or property in interstate commerce new text begin ;
new text end

new text begin (3) aircraft that are operated by air carriers authorized
and certificated by the United States Department of
Transportation or another federal or a foreign authority to
engage in the carriage of persons or property in interstate
commerce; or
new text end

new text begin (4) containers designed for use on and component parts
attached or secured on the transportation equipment described in
items (1) through (3) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made on or after January 1, 2004.
new text end

Sec. 13.

Minnesota Statutes 2004, section 297A.67,
subdivision 2, is amended to read:

Subd. 2.

Food and food ingredients.

new text begin Except as otherwise
provided in this subdivision, new text end food and food ingredients are
exempt. For purposes of this subdivision, "food" and "food
ingredients" mean substances, whether in liquid, concentrated,
solid, frozen, dried, or dehydrated form, that are sold for
ingestion or chewing by humans and are consumed for their taste
or nutritional value. Food and food ingredients exempt under
this subdivision do not include candy, soft drinks, food sold
through vending machines, new text begin dietary supplements, new text end and prepared
foods. Food and food ingredients do not include alcoholic
beverages deleted text begin , dietary supplements, deleted text end and tobacco. For purposes of
this subdivision, "alcoholic beverages" means beverages that are
suitable for human consumption and contain one-half of one
percent or more of alcohol by volume. For purposes of this
subdivision, "tobacco" means cigarettes, cigars, chewing or pipe
tobacco, or any other item that contains tobacco. For purposes
of this subdivision, "dietary supplements" means any product,
other than tobacco, intended to supplement the diet that:

(1) contains one or more of the following dietary
ingredients:

(i) a vitamin;

(ii) a mineral;

(iii) an herb or other botanical;

(iv) an amino acid;

(v) a dietary substance for use by humans to supplement the
diet by increasing the total dietary intake; and

(vi) a concentrate, metabolite, constituent, extract, or
combination of any ingredient described in items (i) to (v);

(2) is intended for ingestion in tablet, capsule, powder,
softgel, gelcap, or liquid form, or if not intended for
ingestion in such form, is not represented as conventional food
and is not represented for use as a sole item of a meal or of
the diet; and

(3) is required to be labeled as a dietary supplement,
identifiable by the supplement facts box found on the label and
as required pursuant to Code of Federal Regulations, title 21,
section 101.36.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales made
on or after the day following final enactment.
new text end

Sec. 14.

Minnesota Statutes 2004, section 297A.67,
subdivision 7, is amended to read:

Subd. 7.

deleted text begin medicines deleted text end new text begin drugs new text end ; medical devices.

(a) deleted text begin Prescribed deleted text end new text begin Sales of the following drugs and medical devices
are exempt:
new text end

new text begin (1) new text end drugs deleted text begin and medicine, and insulin, intended deleted text end for deleted text begin internal
or external use, in the cure, mitigation, treatment, or
prevention of illness or disease in deleted text end human deleted text begin beings are exempt.
"Prescribed drugs and medicine" includes deleted text end new text begin use, including
new text end over-the-counter drugs deleted text begin or medicine prescribed by a licensed
health care professional.
deleted text end

deleted text begin (b) Nonprescription medicines consisting principally
(determined by the weight of all ingredients) of analgesics that
are approved by the United States Food and Drug Administration
for internal use by human beings are exempt. For purposes of
this subdivision, "principally" means greater than 50 percent
analgesics by weight.
deleted text end

deleted text begin (c) Prescription glasses, hospital beds, fever
thermometers, reusable deleted text end new text begin ;
new text end

new text begin (2) single-use new text end finger-pricking devices for the extraction
of blood deleted text begin , blood glucose monitoring machines, deleted text end and
other new text begin single-use devices and single-use new text end diagnostic agents used
in diagnosing, monitoring, or treating diabetes deleted text begin , and therapeutic
and deleted text end new text begin ;
new text end

new text begin (3) insulin and medical oxygen for human use, regardless of
whether prescribed or sold over the counter;
new text end

new text begin (4) new text end prosthetic devices deleted text begin are exempt. "Therapeutic devices"
means devices that are attached or applied to the human body to
cure, heal, or alleviate injury, illness, or disease, either
directly or by administering a curative agent. "Prosthetic
devices" means devices that replace injured, diseased, or
missing parts of the human body, either temporarily or
permanently deleted text end new text begin ;
new text end

new text begin (5) durable medical equipment for home use only;
new text end

new text begin (6) mobility enhancing equipment; and
new text end

new text begin (7) prescription corrective eyeglasses new text end .

new text begin (b) For purposes of this subdivision:
new text end

new text begin (1) "Drug" means a compound, substance, or preparation, and
any component of a compound, substance, or preparation, other
than food and food ingredients, dietary supplements, or
alcoholic beverages that is:
new text end

new text begin (i) recognized in the official United States Pharmacopoeia,
official Homeopathic Pharmacopoeia of the United States, or
official National Formulary, and supplement to any of them;
new text end

new text begin (ii) intended for use in the diagnosis, cure, mitigation,
treatment, or prevention of disease; or
new text end

new text begin (iii) intended to affect the structure or any function of
the body.
new text end

new text begin (2) "Durable medical equipment" means equipment, including
repair and replacement parts, but not including mobility
enhancing equipment, that:
new text end

new text begin (i) can withstand repeated use;
new text end

new text begin (ii) is primarily and customarily used to serve a medical
purpose;
new text end

new text begin (iii) generally is not useful to a person in the absence of
illness or injury; and
new text end

new text begin (iv) is not worn in or on the body.
new text end

new text begin (3) "Mobility enhancing equipment" means equipment,
including repair and replacement parts, but not including
durable medical equipment, that:
new text end

new text begin (i) is primarily and customarily used to provide or
increase the ability to move from one place to another and that
is appropriate for use either in a home or a motor vehicle;
new text end

new text begin (ii) is not generally used by persons with normal mobility;
and
new text end

new text begin (iii) does not include any motor vehicle or equipment on a
motor vehicle normally provided by a motor vehicle manufacturer.
new text end

new text begin (4) "Over-the-counter drug" means a drug that contains a
label that identifies the product as a drug as required by Code
of Federal Regulations, title 21, section 201.66. The label
must include a "drug facts" panel or a statement of the active
ingredients with a list of those ingredients contained in the
compound, substance, or preparation. Over-the-counter drugs do
not include grooming and hygiene products, regardless of whether
they otherwise meet the definition. "Grooming and hygiene
products" are soaps, cleaning solutions, shampoo, toothpaste,
mouthwash, antiperspirants, and suntan lotions and sunscreens.
new text end

new text begin (5) "Prescribed" and "prescription" means a direction in
the form of an order, formula, or recipe issued in any form of
oral, written, electronic, or other means of transmission by a
duly licensed health care professional.
new text end

new text begin (6) "Prosthetic device" means a replacement, corrective, or
supportive device, including repair and replacement parts, worn
on or in the body to:
new text end

new text begin (i) artificially replace a missing portion of the body;
new text end

new text begin (ii) prevent or correct physical deformity or malfunction;
or
new text end

new text begin (iii) support a weak or deformed portion of the body.
new text end

new text begin Prosthetic device does not include corrective eyeglasses.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after June 30, 2005.
new text end

Sec. 15.

Minnesota Statutes 2004, section 297A.67,
subdivision 9, is amended to read:

Subd. 9.

Baby products.

deleted text begin (a) Products such as lotion,
creams, ointments, oil, powder, or shampoo, and other articles
designed for application to the hair or skin of babies are
exempt.
deleted text end

deleted text begin (b) deleted text end Baby bottles and nipples, pacifiers, teething rings,
deleted text begin thumb sucking preventatives, deleted text end and infant syringes are exempt.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after June 30, 2005.
new text end

Sec. 16.

Minnesota Statutes 2004, section 297A.67,
subdivision 29, is amended to read:

Subd. 29.

new text begin solar new text end energy deleted text begin efficient deleted text end products.

deleted text begin (a) A
residential lighting fixture or a compact fluorescent bulb is
exempt if it has an energy star label.
deleted text end

deleted text begin (b) The following products are exempt if they have an
energyguide label that indicates that the product meets or
exceeds the standards listed below:
deleted text end

deleted text begin (1) an electric heat pump hot water heater with an energy
factor of at least 1.9;
deleted text end

deleted text begin (2) a natural gas water heater with an energy factor of at
least 0.62;
deleted text end

deleted text begin (3) a propane gas or fuel oil water heater with an energy
factor of at least 0.62;
deleted text end

deleted text begin (4) a natural gas furnace with an annual fuel utilization
efficiency greater than 92 percent; and
deleted text end

deleted text begin (5) a propane gas or fuel oil furnace with an annual fuel
utilization efficiency greater than 92 percent.
deleted text end

deleted text begin (c) deleted text end A deleted text begin photovoltaic device deleted text end new text begin solar energy system, as defined
in section 216C.06, subdivision 17, new text end is exempt. deleted text begin For purposes of
this subdivision, "photovoltaic device" means a solid-state
electrical device, such as a solar module, that converts light
directly into direct current electricity of voltage-current
characteristics that are a function of the characteristics of
the light source and the materials in and design of the device.
A "solar module" is a photovoltaic device that produces a
specified power output under defined test conditions, usually
composed of groups of solar cells connected in series, in
parallel, or in series-parallel combinations.
deleted text end

deleted text begin (d) For purposes of this subdivision, "energy star label"
means the label granted to certain products that meet United
States Environmental Protection Agency and United States
Department of Energy criteria for energy efficiency. For
purposes of this subdivision, "energyguide label" means the
label that the United States Federal Trade Commissioner requires
manufacturers to apply to certain appliances under United States
Code, title 16, part 305.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made on or after August 1, 2005.
new text end

Sec. 17.

Minnesota Statutes 2004, section 297A.67, is
amended by adding a subdivision to read:

new text begin Subd. 32. new text end

new text begin Cigarettes. new text end

new text begin Cigarettes upon which a tax has
been imposed under section 297F.25 are exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after July 31, 2005.
new text end

Sec. 18.

Minnesota Statutes 2004, section 297A.68,
subdivision 2, is amended to read:

Subd. 2.

Materials consumed in industrial production.

(a) Materials stored, used, or consumed in industrial production
of personal property intended to be sold ultimately at retail
are exempt, whether or not the item so used becomes an
ingredient or constituent part of the property produced.
Materials that qualify for this exemption include, but are not
limited to, the following:

(1) chemicals, including chemicals used for cleaning food
processing machinery and equipment;

(2) materials, including chemicals, fuels, and electricity
purchased by persons engaged in industrial production to treat
waste generated as a result of the production process;

(3) fuels, electricity, gas, and steam used or consumed in
the production process, except that electricity, gas, or steam
used for space heating, cooling, or lighting is exempt if (i) it
is in excess of the average climate control or lighting for the
production area, and (ii) it is necessary to produce that
particular product;

(4) petroleum products and lubricants;

(5) packaging materials, including returnable containers
used in packaging food and beverage products;

(6) accessory tools, equipment, and other items that are
separate detachable units with an ordinary useful life of less
than 12 months used in producing a direct effect upon the
product; and

(7) the following materials, tools, and equipment used in
metalcasting: crucibles, thermocouple protection sheaths and
tubes, stalk tubes, refractory materials, molten metal filters
and filter boxes, degassing lances, and base blocks.

(b) This exemption does not include:

(1) machinery, equipment, implements, tools, accessories,
appliances, contrivances and furniture and fixtures, except
those listed in paragraph (a), clause (6); and

(2) petroleum and special fuels used in producing or
generating power for propelling ready-mixed concrete trucks on
the public highways of this state.

(c) Industrial production includes, but is not limited to,
research, development, design or production of any tangible
personal property, manufacturing, processing (other than by
restaurants and consumers) of agricultural products (whether
vegetable or animal), commercial fishing, refining, smelting,
reducing, brewing, distilling, printing, mining, quarrying,
lumbering, generating electricity, the production of road
building materials, and the research, development, design, or
production of computer software. Industrial production does not
include painting, cleaning, repairing or similar processing of
property except as part of the original manufacturing process.

new text begin (d) Industrial production does not include:
new text end

new text begin (1) the furnishing of services listed in section 297A.61,
subdivision 3, paragraph (g), clause (6), items (i) to (vi) and
(viii); or
new text end

new text begin (2) the transportation, transmission, or distribution of
petroleum, liquefied gas, natural gas, water, or steam, in, by,
or through pipes, lines, tanks, mains, or other means of
transporting those products. For purposes of this paragraph,
"transportation, transmission, or distribution" does not include
blending of petroleum or biodiesel fuel as defined in section
239.77.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment, except that the provision in
paragraph (d) is effective for sales and purchases made after
June 30, 2005.
new text end

Sec. 19.

Minnesota Statutes 2004, section 297A.68,
subdivision 5, is amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is
exempt. The tax must be imposed and collected as if the rate
under section 297A.62, subdivision 1, applied, and then refunded
in the manner provided in section 297A.75 new text begin , unless:
new text end

new text begin (1) the purchaser qualifies as a small business as defined
in section 645.445, subdivision 2, paragraphs (a) to (c);
new text end

new text begin (2) the business is located in the state; and
new text end

new text begin (3) the purchaser provides an exemption certificate as
required in section 297A.72, subdivision 3 new text end .

"Capital equipment" means machinery and equipment purchased
or leased, and used in this state by the purchaser or lessee
primarily for manufacturing, fabricating, mining, or refining
tangible personal property to be sold ultimately at retail if
the machinery and equipment are essential to the integrated
production process of manufacturing, fabricating, mining, or
refining. Capital equipment also includes machinery and
equipment used new text begin primarily new text end to electronically transmit results
retrieved by a customer of an on-line computerized data
retrieval system.

(b) Capital equipment includes, but is not limited to:

(1) machinery and equipment used to operate, control, or
regulate the production equipment;

(2) machinery and equipment used for research and
development, design, quality control, and testing activities;

(3) environmental control devices that are used to maintain
conditions such as temperature, humidity, light, or air pressure
when those conditions are essential to and are part of the
production process;

(4) materials and supplies used to construct and install
machinery or equipment;

(5) repair and replacement parts, including accessories,
whether purchased as spare parts, repair parts, or as upgrades
or modifications to machinery or equipment;

(6) materials used for foundations that support machinery
or equipment;

(7) materials used to construct and install special purpose
buildings used in the production process;

(8) ready-mixed concrete equipment in which the ready-mixed
concrete is mixed as part of the delivery process regardless if
mounted on a chassis new text begin , repair parts for ready-mixed concrete
trucks, new text end and leases of ready-mixed concrete trucks; and

(9) machinery or equipment used for research, development,
design, or production of computer software.

(c) Capital equipment does not include the following:

(1) motor vehicles taxed under chapter 297B;

(2) machinery or equipment used to receive or store raw
materials;

(3) building materials, except for materials included in
paragraph (b), clauses (6) and (7);

(4) machinery or equipment used for nonproduction purposes,
including, but not limited to, the following: plant security,
fire prevention, first aid, and hospital stations; support
operations or administration; pollution control; and plant
cleaning, disposal of scrap and waste, plant communications,
space heating, cooling, lighting, or safety;

(5) farm machinery and aquaculture production equipment as
defined by section 297A.61, subdivisions 12 and 13;

(6) machinery or equipment purchased and installed by a
contractor as part of an improvement to real property; deleted text begin or
deleted text end

(7) new text begin machinery and equipment used by restaurants in the
furnishing, preparing, or serving of prepared foods as defined
in section 297A.61, subdivision 31;
new text end

new text begin (8) machinery and equipment used to furnish the services
listed in section 297A.61, subdivision 3, paragraph (g), clause
(6), items (i) to (vi) and (viii);
new text end

new text begin (9) machinery or equipment used in the transportation,
transmission, or distribution of petroleum, liquefied gas,
natural gas, water, or steam, in, by, or through pipes, lines,
tanks, mains, or other means of transporting those products.
This clause does not apply to machinery or equipment used to
blend petroleum or biodiesel fuel as defined in section 239.77;
or
new text end

new text begin (10) new text end any other item that is not essential to the integrated
process of manufacturing, fabricating, mining, or refining.

(d) For purposes of this subdivision:

(1) "Equipment" means independent devices or tools separate
from machinery but essential to an integrated production
process, including computers and computer software, used in
operating, controlling, or regulating machinery and equipment;
and any subunit or assembly comprising a component of any
machinery or accessory or attachment parts of machinery, such as
tools, dies, jigs, patterns, and molds.

(2) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different
manner.

(3) "Integrated production process" means a process or
series of operations through which tangible personal property is
manufactured, fabricated, mined, or refined. For purposes of
this clause, (i) manufacturing begins with the removal of raw
materials from inventory and ends when the last process prior to
loading for shipment has been completed; (ii) fabricating begins
with the removal from storage or inventory of the property to be
assembled, processed, altered, or modified and ends with the
creation or production of the new or changed product; (iii)
mining begins with the removal of overburden from the site of
the ores, minerals, stone, peat deposit, or surface materials
and ends when the last process before stockpiling is completed;
and (iv) refining begins with the removal from inventory or
storage of a natural resource and ends with the conversion of
the item to its completed form.

(4) "Machinery" means mechanical, electronic, or electrical
devices, including computers and computer software, that are
purchased or constructed to be used for the activities set forth
in paragraph (a), beginning with the removal of raw materials
from inventory through completion of the product, including
packaging of the product.

(5) "Machinery and equipment used for pollution control"
means machinery and equipment used solely to eliminate, prevent,
or reduce pollution resulting from an activity described in
paragraph (a).

(6) "Manufacturing" means an operation or series of
operations where raw materials are changed in form, composition,
or condition by machinery and equipment and which results in the
production of a new article of tangible personal property. For
purposes of this subdivision, "manufacturing" includes the
generation of electricity or steam to be sold at retail.

(7) "Mining" means the extraction of minerals, ores, stone,
or peat.

(8) "On-line data retrieval system" means a system whose
cumulation of information is equally available and accessible to
all its customers.

(9) "Primarily" means machinery and equipment used 50
percent or more of the time in an activity described in
paragraph (a).

(10) "Refining" means the process of converting a natural
resource to an intermediate or finished product, including the
treatment of water to be sold at retail.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment, except that the second sentence in
paragraph (a) is effective for sales and purchases made after
December 31, 2005, and paragraph (c), clause (9), is effective
for sales and purchases made after June 30, 2005.
new text end

Sec. 20.

Minnesota Statutes 2004, section 297A.68,
subdivision 28, is amended to read:

Subd. 28.

Medical supplies.

Medical supplies purchased
by a licensed health care facility or licensed health care
professional to provide medical treatment to residents or
patients are exempt. The exemption does not apply to new text begin durable
new text end medical equipment or components of new text begin durable new text end medical equipment,
laboratory supplies, radiological supplies, and other items used
in providing medical services. For purposes of this
subdivision, "medical supplies" means adhesive and nonadhesive
bandages, gauze pads and strips, cotton applicators,
antiseptics, deleted text begin nonprescription drugs, deleted text end eye solution, and other
similar supplies used directly on the resident or patient in
providing medical services.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after June 30, 2005.
new text end

Sec. 21.

Minnesota Statutes 2004, section 297A.68,
subdivision 35, is amended to read:

Subd. 35.

Telecommunications equipment.

(a)
Telecommunications machinery and equipment purchased or leased
for use directly by a telecommunications service provider
primarily in the provision of telecommunications services that
are ultimately to be sold at retail are exempt, regardless of
whether purchased by the owner, a contractor, or a subcontractor.

(b) For purposes of this subdivision, "telecommunications
machinery and equipment" includes, but is not limited to:

(1) machinery, equipment, and fixtures utilized in
receiving, initiating, amplifying, processing, transmitting,
retransmitting, recording, switching, or monitoring
telecommunications services, such as computers, transformers,
amplifiers, routers, bridges, repeaters, multiplexers, and other
items performing comparable functions;

(2) machinery, equipment, and fixtures used in the
transportation of telecommunications services, radio
transmitters and receivers, satellite equipment, microwave
equipment, and other transporting media, but not wire, cable,
fiber, poles, or conduit;

(3) ancillary machinery, equipment, and fixtures that
regulate, control, protect, or enable the machinery in clauses
(1) and (2) to accomplish its intended function, such as
auxiliary power supply, test equipment, towers, heating,
ventilating, and air conditioning equipment necessary to the
operation of the telecommunications equipment; and software
necessary to the operation of the telecommunications equipment;
and

(4) repair and replacement parts, including accessories,
whether purchased as spare parts, repair parts, or as upgrades
or modifications to qualified machinery or equipment.

(c) For purposes of this subdivision, "telecommunications
services" means telecommunications services as defined in
section 297A.61, subdivision 24, deleted text begin paragraph deleted text end new text begin paragraphs new text end (a), deleted text begin only
deleted text end new text begin (c), and (d) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 22.

Minnesota Statutes 2004, section 297A.68,
subdivision 39, is amended to read:

Subd. 39.

Preexisting bids or contracts.

(a) The sale of
tangible personal property or services is exempt from tax new text begin or a
tax rate increase new text end for a period of six months from the effective
date of the law change that results in the imposition of the tax
new text begin or the tax rate increase new text end under this chapter if:

(1) the act imposing the tax new text begin or increasing the tax rate
new text end does not have transitional effective date language for existing
construction contracts and construction bids; and

(2) the requirements of paragraph (b) are met.

(b) A sale is tax exempt under paragraph (a) if it meets
the requirements of either clause (1) or (2):

(1) For a construction contract:

(i) the goods or services sold must be used for the
performance of a bona fide written lump sum or fixed price
construction contract;

(ii) the contract must be entered into before the date the
goods or services become subject to the sales tax new text begin or the tax
rate was increased new text end ;

(iii) the contract must not provide for allocation of
future taxes; and

(iv) for each qualifying contract the contractor must give
the seller documentation of the contract on which an exemption
is to be claimed.

(2) For a new text begin construction new text end bid:

(i) the goods or services sold must be used pursuant to an
obligation of a bid or bids;

(ii) the bid or bids must be submitted and accepted before
the date the goods or services became subject to the sales
tax new text begin or the tax rate was increased new text end ;

(iii) the bid or bids must not be able to be withdrawn,
modified, or changed without forfeiting a bond; and

(iv) for each qualifying bid, the contractor must give the
seller documentation of the bid on which an exemption is to be
claimed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 23.

Minnesota Statutes 2004, section 297A.68, is
amended by adding a subdivision to read:

new text begin Subd. 40. new text end

new text begin Land clearing. new text end

new text begin Tree, bush, shrub, and stump
removal are exempt when sold to contractors or subcontractors as
part of a land clearing contract. For purposes of this
subdivision, "land clearing contract" means a contract for the
removal of trees, bushes, and shrubs, including the removal of
roots and stumps, to develop a site. This exemption does not
apply to land clearing of a portion of a site to allow for
remodeling, improvement, or expansion of an existing structure.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after October 28, 2002, but for land clearing
contracts entered into after October 28, 2002, no refunds may be
claimed under Minnesota Statutes, section 289A.50, for sales
taxes collected and remitted to the state on the land clearing
contracts.
new text end

Sec. 24.

Minnesota Statutes 2004, section 297A.68, is
amended by adding a subdivision to read:

new text begin Subd. 41. new text end

new text begin Personal rapid transit system. new text end

new text begin (a) Machinery,
equipment, and supplies purchased or leased, and used by the
purchaser or lessee in this state directly in the provision of a
personal rapid transit system as defined in section 297A.61,
subdivision 37, which provides service to the public on a
regular and continuing basis, are exempt, provided that the
system is operated independent of any government subsidies.
Machinery, equipment, and supplies that qualify for this
exemption include, but are not limited to, the following:
new text end

new text begin (1) vehicles, guideways, and related parts used directly in
the transit system;
new text end

new text begin (2) computers and equipment used primarily for operating,
controlling, and regulating the system;
new text end

new text begin (3) machinery, equipment, furniture, and fixtures necessary
for the functioning of system stations;
new text end

new text begin (4) machinery, equipment, implements, tools, and supplies
used to maintain vehicles, guideways, and stations; and
new text end

new text begin (5) electricity and other fuels used in the provision of
the transit service, including heating, cooling, and lighting of
system stations.
new text end

new text begin (b) This exemption does not include machinery, equipment,
and supplies used for nonproduction purposes such as operations
support and administration.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after June 30, 2005.
new text end

Sec. 25.

Minnesota Statutes 2004, section 297A.70,
subdivision 10, is amended to read:

Subd. 10.

Nonprofit tickets or admissions.

(a) Tickets
or admissions to an event are exempt if all the gross receipts
are recorded as such, in accordance with generally accepted
accounting principles, on the books of one or more organizations
whose primary mission is to provide an opportunity for citizens
of the state to participate in the creation, performance, or
appreciation of the arts, and provided that each organization is:

(1) an organization described in section 501(c)(3) of the
Internal Revenue Code in which voluntary contributions make up
at least the following percent of the organization's annual
revenue in its most recently completed 12-month fiscal year, or
in the current year if the organization has not completed a
12-month fiscal year:

(i) for sales made after July 31, 2001, and before July 1,
2002, for the organization's fiscal year completed in calendar
year 2000, three percent;

(ii) for sales made on or after July 1, 2002, and on or
before June 30, 2003, for the organization's fiscal year
completed in calendar year 2001, three percent;

(iii) for sales made on or after July 1, 2003, and on or
before June 30, 2004, for the organization's fiscal year
completed in calendar year 2002, four percent; and

(iv) for sales made in each 12-month period, beginning on
July 1, 2004, and each subsequent year, for the organization's
fiscal year completed in the preceding calendar year, five
percent;

(2) a municipal board that promotes cultural and arts
activities; or

(3) the University of Minnesota, new text begin a state college and
university, or a private nonprofit college or university
new text end provided that the event is held at a deleted text begin university-owned deleted text end facility
new text begin owned by the educational institution holding the event new text end .

The exemption only applies if the entire proceeds, after
reasonable expenses, are used solely to provide opportunities
for citizens of the state to participate in the creation,
performance, or appreciation of the arts.

(b) Tickets or admissions to the premises of the Minnesota
Zoological Garden are exempt, provided that the exemption under
this paragraph does not apply to tickets or admissions to
performances or events held on the premises unless the
performance or event is sponsored and conducted exclusively by
the Minnesota Zoological Board or employees of the Minnesota
Zoological Garden.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tickets and
admissions to events held on or after July 1, 2005, but does not
apply to events for which sales of tickets or admissions were
made prior to July 1, 2005.
new text end

Sec. 26.

Minnesota Statutes 2004, section 297A.71,
subdivision 12, is amended to read:

Subd. 12.

Chair lifts, ramps, elevators.

deleted text begin Chair lifts,
ramps, and deleted text end Elevators and building materials used to install or
construct deleted text begin them deleted text end new text begin chair lifts, ramps, and elevators new text end are exempt, if
they are authorized by a physician and installed in or attached
to the owner's homestead. The tax must be imposed and collected
as if the rate under section 297A.62, subdivision 1, applied and
then refunded in the manner provided in section 297A.75.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after June 30, 2005.
new text end

Sec. 27.

Minnesota Statutes 2004, section 297A.71, is
amended by adding a subdivision to read:

new text begin Subd. 33. new text end

new text begin Personal rapid transit system. new text end

new text begin Materials,
equipment, and supplies used in the construction, expansion, or
improvement of a personal rapid transit system as defined in
section 297A.61, subdivision 37, which provides service to the
public on a regular and continuing basis, are exempt, provided
that the system is operated independent of any government
subsidies.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after June 30, 2005.
new text end

Sec. 28.

Minnesota Statutes 2004, section 297A.72, is
amended by adding a subdivision to read:

new text begin Subd. 3. new text end

new text begin Exemption certificate for small businesses. new text end

new text begin A
small business, as defined in section 645.455, subdivision 2,
paragraphs (a) to (c), that is located in the state may apply to
the commissioner for an exemption certificate to purchase exempt
capital equipment without paying the sales tax at the time of
the sale. The business must provide information required by the
commissioner to verify that it meets the definition of small
business in the preceding calendar year, or in the case of a new
business, that it will meet the definition in the first full
year of operations. A decision by the commissioner on whether a
business qualifies for this exemption is final. The exemption
certificate must be in the form and meet the requirements
imposed under this chapter and chapter 289A on other sales and
use tax exemption certificates, but it shall only be in effect
for two years from the date of issuance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for
applications submitted to the commissioner of revenue after July
1, 2005.
new text end

Sec. 29.

Minnesota Statutes 2004, section 297A.75,
subdivision 1, is amended to read:

Subdivision 1.

Tax collected.

The tax on the gross
receipts from the sale of the following exempt items must be
imposed and collected as if the sale were taxable and the rate
under section 297A.62, subdivision 1, applied. The exempt items
include:

(1) capital equipment exempt under section 297A.68,
subdivision 5;

(2) building materials for an agricultural processing
facility exempt under section 297A.71, subdivision 13;

(3) building materials for mineral production facilities
exempt under section 297A.71, subdivision 14;

(4) building materials for correctional facilities under
section 297A.71, subdivision 3;

(5) building materials used in a residence for disabled
veterans exempt under section 297A.71, subdivision 11;

(6) deleted text begin chair lifts, ramps, deleted text end elevators deleted text begin , deleted text end and deleted text begin associated deleted text end building
materials exempt under section 297A.71, subdivision 12;

(7) building materials for the Long Lake Conservation
Center exempt under section 297A.71, subdivision 17;

(8) materials, supplies, fixtures, furnishings, and
equipment for a county law enforcement and family service center
under section 297A.71, subdivision 26; and

(9) materials and supplies for qualified low-income housing
under section 297A.71, subdivision 23.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases made after June 30, 2005.
new text end

Sec. 30.

new text begin [297A.82] MOTOR VEHICLE LEASES.
new text end

new text begin Subdivision 1. new text end

new text begin Motor vehicle lease price; payment. new text end

new text begin (a)
In the case of a lease of a motor vehicle as provided in section
297A.61, subdivision 4, paragraph (k), clause (2), the tax is
imposed on the total amount to be paid by the lessee under the
lease agreement. The lessor shall collect the tax in full at
the time the lease is executed or, if the tax is included in the
lease and the lease is assigned, the tax is due from the
original lessor at the time the lease is assigned. The total
amount to be paid by the lessee under the lease agreement equals
the agreed-upon value of the vehicle less manufacturer's
rebates, the stated residual value of the leased vehicle, and
the total value allowed for a vehicle owned by the lessee taken
in trade by the lessor, plus the price of any taxable goods and
services included in the lease and the rent charge as provided
by Code of Federal Regulations, title 12, section 213.4,
excluding any rent charge related to the capitalization of the
tax.
new text end

new text begin (b) If the total amount paid by the lessee for use of the
leased vehicle includes amounts that are not calculated at the
time the lease is executed, the tax is imposed and must be
collected by the lessor at the time the amounts are paid by the
lessee. In the case of a lease which by its terms may be
renewed, the sales tax is due and payable on the total amount to
be paid during the initial term of the lease, and then for each
subsequent renewal period on the total amount to be paid during
the renewal period.
new text end

new text begin (c) If a lease is canceled or rescinded on or before 90
days of its execution or if a vehicle is returned to the
manufacturer under section 325F.665, the lessor may file a claim
for a refund of the total tax paid minus the amount of tax due
for the period the vehicle is used by the lessee.
new text end

new text begin (d) If a lessee's obligation to make payments on a lease is
canceled more than 90 days after its execution, a credit is
allowed against sales tax or motor vehicles sales tax due on a
subsequent lease or purchase of a motor vehicle if that lease or
purchase is consummated within 30 days of the date the prior
lease was canceled. The amount of the credit is equal to (1)
the sales tax paid at the inception of the lease, multiplied by
(2) the ratio of the number of full months remaining in the
lease at the time of termination compared to the term of the
lease used in calculating sales tax paid at the inception of the
lease.
new text end

new text begin Subd. 2. new text end

new text begin Lease originating in another state. new text end

new text begin When the
lease of a motor vehicle as defined in section 297A.61,
subdivision 4, paragraph (k), clause (2), originates in another
state, the sales tax under subdivision 1 shall be calculated by
the lessor on the total amount that is due under the lease
agreement after the vehicle is required to be registered in
Minnesota. If the total amount to be paid by the lessee under
the lease agreement has already been subjected to tax by another
state, a credit for taxes paid in the other state is allowed as
provided in section 297A.80.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Subdivision 1 of this section is
effective for leases entered into after September 30, 2005.
Subdivision 2 of this section is effective for vehicles
registering in Minnesota after September 30, 2005.
new text end

Sec. 31.

Minnesota Statutes 2004, section 297A.87,
subdivision 2, is amended to read:

Subd. 2.

Seller's permit or alternate statement.

(a) The
operator of an event under subdivision 1 shall obtain one of the
following from a person who wishes to do business as a seller at
the event:

(1) evidence that the person holds a valid seller's permit
under section 297A.84; deleted text begin or
deleted text end

(2) a written statement that the person is not offering for
sale any item that is taxable under this chapter new text begin ; or
new text end

new text begin (3) a written statement that this is the only selling event
that the person will be participating in for that calendar year,
that the person will be participating for three or fewer days,
and that the person will make less than $500 in total sales at
the event. The written statement shall include the person's
name, address, and telephone number new text end .

(b) The operator shall require the evidence or statement as
a prerequisite to participating in the event as a seller.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for selling
events occurring after June 15, 2005.
new text end

Sec. 32.

Minnesota Statutes 2004, section 297A.87,
subdivision 3, is amended to read:

Subd. 3.

Occasional sale provisions deleted text begin not deleted text end applicable new text begin under
limited circumstances new text end .

The isolated and occasional
sale deleted text begin provisions deleted text end new text begin provision new text end under section 297A.67, subdivision 23,
deleted text begin or deleted text end new text begin applies, provided that the seller only participates for three
or fewer days in one event per calendar year, makes $500 or less
in sales at the event, and provides the written statement
required in subdivision 2, paragraph (a), clause (3). The
isolated and occasional sales provision new text end under section 297A.68,
subdivision 25, deleted text begin do deleted text end new text begin does new text end not apply to a seller at an event under
this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for selling
events occurring after June 15, 2005.
new text end

Sec. 33.

new text begin [297A.981] LOCAL SALES TAXES; CERTAIN CITIES OF
THE FIRST CLASS.
new text end

new text begin Subdivision 1. new text end

new text begin General authority; certain cities. new text end

new text begin (a)
Notwithstanding sections 297A.99 and 477A.016, or any other
contrary provision of law, ordinance, or charter, a city of the
first class located in the seven-county metropolitan area may
impose a local sales tax of one-half of one percent on sale
transactions taxable under this chapter that occur within the
city. The tax base is the same as defined in section 297A.99,
subdivision 4. This tax is in addition to any other local sales
tax imposed under other general or special law and must not be
included when calculating sales tax limits imposed under other
law, ordinance, or charter.
new text end

new text begin Subd. 2. new text end

new text begin Use tax. new text end

new text begin If the city imposes the tax authorized
in subdivision 1, a compensating use tax also applies, at the
same rate as the sales tax, on the use, storage, distribution,
or consumption of tangible personal property or taxable services.
new text end

new text begin Subd. 3. new text end

new text begin Use of revenues. new text end

new text begin (a) Revenues received from
taxes imposed under subdivisions 1 and 2, minus the reasonable
costs of collection, may be used by the city for any purpose for
which the city is authorized to make expenditures.
new text end

new text begin Subd. 4. new text end

new text begin Collection; enforcement; administration. new text end

new text begin A tax
imposed under this section shall be administered, collected, and
enforced by the commissioner of revenue as provided for under
section 297A.99, subdivision 9. The commissioner shall remit
the proceeds, minus refunds and the costs of collection, as
provided for in section 297A.99, subdivision 11.
new text end

new text begin Subd. 5 new text end . [LOCAL APPROVAL.] new text begin The question of imposing the
local sales tax must be submitted to the voters at a general or
a special election held for this purpose. If the majority of
the votes cast on the question are in the affirmative, the tax
shall be imposed on the first day of the next calendar quarter
beginning at least 30 days after the day of local approval.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 34.

Minnesota Statutes 2004, section 297A.99,
subdivision 1, is amended to read:

Subdivision 1.

Authorization; scope.

(a) A political
subdivision of this state may impose a general sales tax if
permitted by special law or if the political subdivision enacted
and imposed the tax before the effective date of section
477A.016 and its predecessor provision new text begin , or if the tax is allowed
under section 297A.981 or subdivision 1a new text end .

(b) This section governs the imposition of a general sales
tax by the political subdivision. The provisions of this
section preempt the provisions of any special law:

(1) enacted before June 2, 1997, or

(2) enacted on or after June 2, 1997, that does not
explicitly exempt the special law provision from this section's
rules by reference.

(c) This section does not apply to or preempt a sales tax
on motor vehicles or a special excise tax on motor vehicles.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for local sales
taxes for which the authorizing referendum is held after June
30, 2005.
new text end

Sec. 35.

Minnesota Statutes 2004, section 297A.99, is
amended by adding a subdivision to read:

new text begin Subd. 1a. new text end

new text begin General authority; certain cities. new text end

new text begin (a) A city
or a group of cities acting under a joint powers agreement, may
impose a local sales tax of one-half of one percent without
authorization under a special law provided that:
new text end

new text begin (1) the city or cities are located outside of the
metropolitan counties, as defined in section 473.121,
subdivision 4;
new text end

new text begin (2) imposition of the tax is approved by the voters of each
city pursuant to subdivision 3, paragraph (a);
new text end

new text begin (3) all the conditions for adoption, use, and termination
of the tax contained in this subdivision and subdivisions 3 to
12 are met;
new text end

new text begin (4) if the tax is imposed by a group of cities, the cities
shall be within five miles of each other; and
new text end

new text begin (5) imposition of tax under this authority would not
increase the total local tax imposed in the city to a rate
greater than one-half of one percent.
new text end

new text begin (b) The proceeds of a tax imposed under this subdivision
must be dedicated exclusively to pay for specific regional
capital projects that provide benefit to persons outside of the
city boundaries, as defined in paragraph (c), as well as to the
city, and is approved by the voters in the authorizing
referendum. No proceeds may be used for normal maintenance or
operating costs of a facility. The proceeds may be used to pay
for collecting and administering the tax, to pay all or part of
the capital and administrative costs of the development, design,
acquisition, construction, expansion, and improvement, and to
secure and pay debt service on bonds or other obligations issued
to finance capital costs of any of the following regional
projects:
new text end

new text begin (1) regional convention or civic center;
new text end

new text begin (2) regional airport;
new text end

new text begin (3) regional public libraries, regional history centers,
and performing arts centers;
new text end

new text begin (4) parks, trails, regional recreational centers, and open
space;
new text end

new text begin (5) flood control and protection;
new text end

new text begin (6) regional wastewater project to mitigate surface or
groundwater pollution;
new text end

new text begin (7) regional government center or jail owned and operated
by two or more local government jurisdictions;
new text end

new text begin (8) lake improvement projects included in a watershed plan;
new text end

new text begin (9) overpasses, arterial and collector roads, or bridges,
on, adjacent to, or connecting to a Minnesota state highway; or
new text end

new text begin (10) railroad overpasses or crossing safety improvements
where the road is adjacent to or connecting to a Minnesota state
highway.
new text end

new text begin (c) A capital project is considered to be a "regional
capital project that provides benefits to persons outside the
city boundaries" if it meets one of the following criteria:
new text end

new text begin (1) the project is one of the projects listed in paragraph
(b), clauses (8) to (10);
new text end

new text begin (2) the project is funded by more than one city under a
joint powers agreement and no more than 80 percent of the
revenues for the project will be provided by one city;
new text end

new text begin (3) at least 20 percent of the direct users of the
facility, except for a convention or civic center, will be
persons from outside of the city; or
new text end

new text begin (4) at least 20 percent of the benefit derived from the
project will accrue to persons residing or businesses located
outside of the city boundaries.
new text end

new text begin (d) At least three months prior to holding a referendum to
impose the tax, a city must provide to the commissioner of
revenue a resolution approved by the city that shows that the
tax will fund a project that meets the requirements of
paragraphs (a) to (c), the date on which the referendum will be
held, the maximum amount raised by the tax that may be used for
the specified project, excluding issuance and interest costs for
any related bonds, and the maximum time that the tax may be
imposed. The commissioner shall certify that the requirements
under this subdivision are met and the city shall provide any
additional information the commissioner requests in order to
make that determination. The commissioner's decision is final.
new text end

new text begin (e) The question put to the voters at the referendum
authorizing the vote must include information on the specific
project to be funded by the proceeds of the tax, the maximum
amount of sales tax revenues that will be used to fund each
project, not including any issuance and interest costs for
related bonds, and the maximum length of time that the tax will
be imposed. The referendum must also include a statement that
the sales tax revenues are pledged to pay for the specific
capital improvement but the improvement costs and any related
bonds are a general obligation of the political subdivision and
will be guaranteed by the political subdivision's property tax
levy. If the referendum is not held on the date contained in
the resolution, the authority for imposing the tax expires.
new text end

new text begin (f) A city may hold a referendum for more than one project
at the same election provided that:
new text end

new text begin (1) all the requirements under this subdivision are met by
each project;
new text end

new text begin (2) the question, with information on amount to be raised
and the years needed to raise the amount, is stated separately
for each project; and
new text end

new text begin (3) the total amount needed to fund all projects listed on
the ballot does not exceed the amount of revenue that can be
raised by the imposition of the tax under this subdivision in a
12-year period.
new text end

new text begin (g) A city may issue general obligation bonds to pay the
costs of projects specified in the referendum authorizing
imposition of the tax. The approval of the question under
paragraph (e) meets the requirement for elector approval for
issuance of bonds under section 475.58, subdivision 1. The debt
represented by the bonds must not be included in computing any
debt limitations applicable to the city, and the levy of taxes
required by section 475.61 to pay the principal or any interest
on the bonds must not be subject to any levy limitations or be
included in computing or applying any levy limitation to the
city.
new text end

new text begin (h) The tax, if enacted, expires when the specified revenue
has been raised or the maximum time in which the tax is in
effect under the resolution is reached, whichever is sooner.
Any tax imposed under this subdivision must expire no later than
12 years after imposition. The governing board of the city may,
by ordinance, terminate the tax at an earlier date.
new text end

new text begin (i) Except as specifically authorized by this section, a
city must not use public funds to prepare or disseminate
material regarding the passage of a ballot question under
section 297A.99, subdivision 1a, including but not limited to
billboards or other signs, newspaper advertising, advertising
messages broadcast on radio or television, programming on cable
television, except for any legal requirements regarding notice
of election. A city may allow meetings in a public building of
proponents of a question involving imposing a local sales tax
under section 297A.99, subdivision 1a, if opponents of the
question who so request are allowed to meet in a public building
on similar terms to those applicable to the proponents. A city
must not allow proponents or opponents of a ballot question on
imposition of a local sales tax under section 297A.99,
subdivision 1a, to place campaign signs on public property.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 36.

Minnesota Statutes 2004, section 297A.99,
subdivision 3, is amended to read:

Subd. 3.

Requirements for adoption, use, termination.

(a) Imposition of a local sales tax is subject to approval by
voters of the political subdivision at a general election.

(b) The proceeds of the tax must be dedicated exclusively
to payment of the cost of a specific capital improvement which
is designated at least 90 days before the referendum on
imposition of the tax is conducted.

(c) The tax must terminate after the improvement designated
under paragraph (b) has been completed.

deleted text begin (d) After a sales tax imposed by a political subdivision
has expired or been terminated, the political subdivision is
prohibited from imposing a local sales tax for a period of one
year. Notwithstanding subdivision 13, this paragraph applies to
all local sales taxes in effect at the time of or imposed after
May 26, 1999.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 37.

Minnesota Statutes 2004, section 297A.99,
subdivision 4, is amended to read:

Subd. 4.

Tax base.

(a) The tax applies to sales taxable
under this chapter that occur within the political subdivision.

(b) Taxable new text begin goods or new text end services are subject to a political
subdivision's sales tax, if they are deleted text begin performed either:
deleted text end

deleted text begin (1) within the political subdivision, or
deleted text end

deleted text begin (2) partly within and partly without the political
subdivision and more of the service is performed within the
political subdivision, based on the cost of performance deleted text end new text begin sourced
to the political subdivision pursuant to section 297A.668 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales made
on or after January 1, 2004.
new text end

Sec. 38.

Minnesota Statutes 2004, section 297A.99,
subdivision 9, is amended to read:

Subd. 9.

Enforcement; collection; and administration.

(a) The commissioner of revenue shall collect the taxes subject
to this section. The commissioner may collect the tax with the
state sales and use tax. All taxes under this section are
subject to the same penalties, interest, and enforcement
provisions as apply to the state sales and use tax.

(b) A request for a refund of state sales tax paid in
excess of the amount of tax legally due includes a request for a
refund of the political subdivision taxes paid on the goods or
services. The commissioner shall refund to the taxpayer the
full amount of the political subdivision taxes paid on exempt
sales or use.

new text begin (c) A political subdivision shall incur a legal debt to the
state for refunds of local sales taxes made by the commissioner
after a tax has terminated when the amount of the refunds
exceeds the amount of local sales taxes collected for but not
remitted to the political subdivision. The commissioner of
revenue shall deduct the amount of the debt from the next
payment scheduled to be made to the political subdivision under
section 273.1384, 273.1398, or sections 477A.011 to 477A.014.
The commissioner shall deposit the money in the state treasury
and credit it to the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for all refunds
made on or after the day following final enactment.
new text end

Sec. 39.

Minnesota Statutes 2004, section 297A.99, is
amended by adding a subdivision to read:

new text begin Subd. 12a. new text end

new text begin Notification of use tax. new text end

new text begin Any city or county
imposing a local sales and use tax, which maintains an official
web site, must display on its main home page a notice that
residents and businesses in the city or county may owe a local
use tax on purchases of goods and services made outside of the
city or county limits. The notice must provide information,
including a link to any relevant Department of Revenue Web site,
on how the taxpayer may get information and forms necessary for
calculating and paying the tax. If the city or county provides
and bills for sewer, water, garbage collection, or other public
utility services, the billing statement must also include a
notice that residents and businesses may owe a local use tax on
purchases made outside of the city or county limits and provide
information on how the taxpayer may get information and forms
necessary for calculating and paying the tax.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2006.
new text end

Sec. 40.

Minnesota Statutes 2004, section 477A.016, is
amended to read:

477A.016 NEW TAXES PROHIBITED.

No county, city, town or other taxing authority shall
increase a present tax or impose a new tax on sales or income new text begin ,
except as provided in section 297A.981 or section 297A.99,
subdivision 1a new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 41.

Laws 1998, chapter 389, article 8, section 43,
subdivision 3, is amended to read:

Subd. 3.

Use of revenues.

Revenues received from the
taxes authorized by subdivisions 1 and 2 must be used by the
city to pay for the cost of collecting and administering the
taxes and to pay for the following projects:

(1) transportation infrastructure improvements including
both highway and airport improvements;

(2) improvements to the civic center complex;

(3) a municipal water, sewer, and storm sewer project
necessary to improve regional ground water quality; and

(4) construction of a regional recreation and sports center
and deleted text begin associated deleted text end new text begin other new text end facilities available for both community and
student use deleted text begin , located at or adjacent to the Rochester center deleted text end .

The total amount of capital expenditures or bonds for these
projects that may be paid from the revenues raised from the
taxes authorized in this section may not exceed $71,500,000.
The total amount of capital expenditures or bonds for the
project in clause (4) that may be paid from the revenues raised
from the taxes authorized in this section may not exceed
$20,000,000.

[EFFECTIVE DATE; LOCAL APPROVAL.] new text begin This section is effective
the day after the governing body of Rochester and its chief
clerical officer timely complete their compliance with Minnesota
Statutes, section 645.021, subdivisions 2 and 3.
new text end

Sec. 42.

Laws 2001, First Special Session chapter 5,
article 12, section 95, as amended by Laws 2002, chapter 377,
article 3, section 24, and Laws 2003, First Special Session
chapter 21, article 8, section 15, is amended to read:

Sec. 95 new text begin REPEALER.
new text end

(a) Minnesota Statutes 2000, sections 297A.61, subdivision
16; 297A.68, subdivision 21; and 297A.71, subdivision 2, are
repealed effective for sales and purchases occurring after June
30, 2001, except that the repeal of section 297A.61, subdivision
16, paragraph (d), is effective for sales and purchases
occurring after July 31, 2001.

(b) Minnesota Statutes 2000, deleted text begin sections deleted text end new text begin section new text end 297A.62,
subdivision 2, deleted text begin and 297A.64, subdivision 1, are deleted text end new text begin is new text end repealed
effective for sales and purchases made after December 31, 2005.

(c) Minnesota Statutes 2000, section 297A.71, subdivision
15, is repealed effective for sales and purchases made after
June 30, 2002.

(d) Minnesota Statutes 2000, section 297A.71, subdivision
16, is repealed effective for sales and purchases occurring
after December 31, 2002.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 43.

Laws 2002, chapter 377, article 3, section 4, the
effective date, is amended to read:

new text begin EFFECTIVE DATE. new text end

deleted text begin With the exception of clause (2), item
(ii), deleted text end This section is effective for sales and purchases made
after June 30, 2002. deleted text begin Clause (2), item (ii), is effective for
sales and purchases made after June 30, 2002, and before January
1, 2006.
deleted text end

Sec. 44. new text begin CITY OF MANKATO; LOCAL SALES TAX EXPIRATION
DATE.
new text end

new text begin Notwithstanding any other provision of law or municipal
charter to the contrary, the city of Mankato may by resolution
extend the imposition of the taxes imposed under Laws 1991,
chapter 291, article 8, section 27, subdivisions 1 and 2, as
needed to pay off existing bonds but no later than December 31,
2018. The proceeds of the tax must be used only to pay off
previously issued bonds authorized under Laws 1991, chapter 291,
article 8, section 27, and Laws 1996, chapter 471, article 2,
section 25, and for renovations and capital improvements of the
original projects funded by the sales tax under these laws.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after
compliance by the city of Mankato with Minnesota Statutes,
section 645.021, subdivision 3.
new text end

Sec. 45. new text begin ST. CLOUD AREA CITIES; SALES AND USE TAX
AUTHORIZED.
new text end

new text begin Subdivision 1. new text end

new text begin Sales and use tax
authorized. new text end

new text begin Notwithstanding Minnesota Statutes, sections
297A.99, subdivision 3, paragraph (d), and 477A.016, or any
other provision of law, ordinance, or city charter, the
following cities may, by ordinance, impose a sales and use tax
of one-half of one percent for the purposes specified in
subdivision 2:
new text end

new text begin (1) the city of St. Cloud, pursuant to the approval of the
city voters at the general election held on November 2, 2004;
new text end

new text begin (2) the city of St. Joseph, pursuant to the approval of the
city voters at the general election on November 2, 2004;
new text end

new text begin (3) the city of Waite Park, pursuant to the approval of the
city voters at the general election held on November 4, 2003;
new text end

new text begin (4) the city of Sartell, pursuant to the approval of the
voters of that city at the general election held on November 2,
1999; and
new text end

new text begin (5) the city of St. Augusta, pursuant to the approval of
the voters of that city at the next general election.
new text end

new text begin The provisions of Minnesota Statutes, section 297A.99,
except subdivision 3, paragraph (d), govern the imposition,
administration, collection, and enforcement of the tax
authorized under this section, unless specifically provided for
otherwise in another subdivision.
new text end

new text begin Subd. 2. new text end

new text begin Use of revenues. new text end

new text begin (a) Revenues received from the
tax authorized by subdivision 1 by the city of St. Cloud must be
used for the cost of collecting and administering the tax and to
pay all or part of the capital or administrative costs of the
development, acquisition, construction, improvement, and
securing and paying debt service on bonds or other obligations
issued to finance the following regional projects as approved by
the voters and specifically detailed in the referendum
authorizing the tax:
new text end

new text begin (1) St. Cloud Regional Airport;
new text end

new text begin (2) regional transportation improvements;
new text end

new text begin (3) community and aquatics centers;
new text end

new text begin (4) regional public libraries; and
new text end

new text begin (5) acquisition and improvement of regional park land and
open space.
new text end

new text begin (b) Revenues received from the tax authorized by
subdivision 1 by the cities of Waite Park, Sartell, and St.
Augusta must be used for the cost of collecting and
administering the tax and to pay all or part of the capital or
administrative costs of the development, acquisition,
construction, improvement, and securing and paying debt service
on bonds or other obligations issued to fund the projects
specifically approved by the voters at the referendum
authorizing the tax. The portion of revenues from the city
going to fund the regional airport or regional library located
in the city of St. Cloud will be as required under the
applicable joint powers agreement.
new text end

new text begin (c) The use of revenues received from the taxes authorized
in subdivision 1 for projects allowed under paragraphs (a) and
(b) are limited to the amount authorized for each project under
the enabling referendum.
new text end

new text begin Subd. 3. new text end [ST. CLOUD BONDING AUTHORIZED.] new text begin (a) The city of
St. Cloud may issue general obligation bonds of up to
$30,000,000 to pay for the costs of the regional public library
pursuant to the approval of the projects by the city voters at
the election held on November 2, 2004.
new text end

new text begin (b) Each city may issue general obligation bonds for
another project authorized under subdivision 2 without separate
bonding approval at a referendum only if the issuance of bonds
for that project was included in the authorizing question. The
amount of bonds issued for a project is limited to the maximum
amount of local sales tax revenues that may be spent on the
project under the authorizing question.
new text end

new text begin (c) The debt represented by the bonds authorized under this
subdivision must not be included in computing any debt
limitations applicable to the city, and the levy of taxes
required by Minnesota Statutes, section 475.61, to pay the
principal or any interest on the bonds must not be subject to
any levy limitations or be included in computing or applying any
levy limitation applicable to the city.
new text end

new text begin Subd. 4. new text end

new text begin Termination of tax. new text end

new text begin (a) The tax imposed in the
cities of St. Joseph and St. Cloud under subdivision 1 expires
when the city council determines that sufficient funds have been
collected from the tax to retire or redeem the bonds and
obligations authorized under subdivision 2, paragraph (a), but
no later than 11 years after the date the tax is first imposed.
new text end

new text begin (b) The tax imposed in the city of Waite Park expires July
1, 2007. Any funds remaining after completion of the projects
specified in subdivision 2 and retirement or redemption of the
bonds may be placed in the general fund of the city. The tax
imposed in the city of St. Augusta expires five years after it
is first imposed. Any funds remaining after completion of the
projects specified in subdivision 2 and retirement or redemption
of the bonds may be placed in the general fund of the city.
Each tax imposed under subdivision 1 may expire at an earlier
time if the city so determines by ordinance. The cities may
extend the tax beyond the dates in this paragraph upon
additional approval of the voters at a subsequent referendum.
The tax may not be extended beyond the number of years allowed
in paragraph (a). The tax imposed in the city of Sartell
expires December 31, 2006.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 46. new text begin CITY OF BEMIDJI; LOCAL SALES TAX.
new text end

new text begin Notwithstanding Minnesota Statutes, sections 297A.99 and
477A.03, or any other provision of law, ordinance, or charter to
the contrary, the city of Bemidji may impose a sales tax
pursuant to the approval of the city voters at a general
election on November 5, 2002. Revenues from the tax must be
used for the cost of collecting and administering the tax and to
pay all or part of the capital and administrative costs of the
acquisition, construction, improvement, and development of parks
and trails within the city, as provided for in the city of
Bemidji's parks, open space, and trail system plan, adopted by
the Bemidji city council on November 21, 2001. Authorized
expenses include, but are not limited to, acquiring property,
paying construction expenses related to the development of these
facilities and improvements, and securing and paying any debt
service on bonds or other obligations issued to finance
acquisition, construction, improvement, or development of parks
and trails within the city of Bemidji. All other provisions of
section 297A.99 not in conflict with the provisions of this
section shall apply to the imposition, collection,
administration, and use of revenues from this tax.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after
compliance by the city of Bemidji with Minnesota Statutes,
section 645.021, subdivision 3.
new text end

Sec. 47. new text begin CITY OF ROCHESTER; LOCAL SALES TAX EXPIRATION
DATE.
new text end

new text begin Notwithstanding Minnesota Statutes, section 297A.99, or any
other provision of law or municipal charter to the contrary, the
city of Rochester may by resolution extend the taxes imposed
under Laws 1998, chapter 389, article 8, section 43, until
December 31, 2014. This extension of the imposition of taxes
shall occur notwithstanding either of the total amount
limitations on capital expenditures or bonds specified in Laws
1998, chapter 389, article 8, section 43. The proceeds of the
tax must be used for the purposes authorized under that law and
for regional highway infrastructure improvements jointly
undertaken with Olmsted County. The city and the county may
issue general obligation bonds for the purposes authorized under
this section. The county may issue general obligation bonds in
an amount not exceeding the amount of sales tax revenue
anticipated to be received from the city. The city may issue
additional general obligation bonds, above the amount allowed
under Laws 1988, chapter 389, article 8, section 43, equal to
the difference between the amount of additional local sales tax
raised under this section and the amount anticipated to be given
to the county. No election is required for the issuance of
bonds under this subdivision, other than the election held by
the city on June 23, 1998. The bonds shall not be included as
net debt of the city or the county.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after
compliance by the city of Rochester with Minnesota Statutes,
section 645.021, subdivisions 2 and 3.
new text end

Sec. 48. new text begin REPEALER.
new text end

new text begin Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200,
subparts 5 and 6; 8130.0400, subpart 9; 8130.1200, subparts 5
and 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1
and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200;
8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart
5; and 8130.8800, subpart 4, are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

ARTICLE 8

SPECIAL TAXES AND FEES

Section 1.

Minnesota Statutes 2004, section 240.30, is
amended by adding a subdivision to read:

new text begin Subd. 11. new text end

new text begin Franchise fee. new text end

new text begin As a condition of operating a
card club under this section, the licensee must pay a fee to the
commission equal to 15 percent of the gross revenues, less any
refunds, for charges imposed under subdivision 4. Payment,
collection, and administration of the fee must be made in the
same manner and under the terms provided under section 240.15
for the tax on pari-mutuel pools. The commission shall deposit
all of the revenues from the fee in the state treasury and
amounts deposited must be credited to the general fund. The
amount of the fee under this subdivision does not reduce the
obligation to set aside revenues from the card club under
section 240.135.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for charges and
revenues received after June 30, 2005.
new text end

Sec. 2.

Minnesota Statutes 2004, section 287.04, is
amended to read:

287.04 EXEMPTIONS.

The tax imposed by section 287.035 does not apply to:

(a) A decree of marriage dissolution or an instrument made
pursuant to it.

(b) A mortgage given to correct a misdescription of the
mortgaged property.

(c) A mortgage or other instrument that adds additional
security for the same debt for which mortgage registry tax has
been paid.

(d) A contract for the conveyance of any interest in real
property, including a contract for deed.

(e) A mortgage secured by real property subject to the
minerals production tax of sections 298.24 to 298.28.

(f) The principal amount of a mortgage loan made under a
low and moderate income or other affordable housing program, if
the mortgagee is a federal, state, or local government agency.

(g) Mortgages granted by fraternal benefit societies
subject to section 64B.24.

(h) A mortgage amendment or extension, as defined in
section 287.01.

(i) An agricultural mortgage if the proceeds of the loan
secured by the mortgage are used to acquire or improve real
property classified under section 273.13, subdivision 23,
paragraph (a), or (b), clause (1), (2), or (3).

new text begin (j) A mortgage on an armory building as set forth in
section 193.147.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2004, section 295.52,
subdivision 4, is amended to read:

Subd. 4.

Use tax; prescription drugs.

(a) A person that
receives prescription drugs for resale or use in Minnesota,
other than from a wholesale drug distributor that is subject to
tax under subdivision 3, is subject to a tax equal to the price
paid to the wholesale drug distributor multiplied by the tax
percentage specified in this section. Liability for the tax is
incurred when prescription drugs are received or delivered in
Minnesota by the person.

(b) A person that receives prescription drugs for use in
Minnesota from a nonresident pharmacy required to be registered
under section 151.19 is subject to a tax equal to the price paid
by the nonresident pharmacy to the wholesale drug distributor or
the price received by the nonresident pharmacy, whichever is
lower, multiplied by the tax percentage specified in this
section. Liability for the tax is incurred when prescription
drugs are received in Minnesota by the person.

new text begin (c) A tax imposed under this subdivision does not apply to
purchases by an individual for personal use or consumption.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases
made after June 30, 2005.
new text end

Sec. 4.

Minnesota Statutes 2004, section 295.53,
subdivision 1, is amended to read:

Subdivision 1.

Exemptions.

(a) The following payments
are excluded from the gross revenues subject to the hospital,
surgical center, or health care provider taxes under sections
295.50 to 295.59:

(1) payments received for services provided under the
Medicare program, including payments received from the
government, and organizations governed by sections 1833 and 1876
of title XVIII of the federal Social Security Act, United States
Code, title 42, section 1395, and enrollee deductibles,
coinsurance, and co-payments, whether paid by the Medicare
enrollee or by a Medicare supplemental coverage as defined in
section 62A.011, subdivision 3, clause (10), or by Medicaid
payments under title XIX of the federal Social Security Act.
Payments for services not covered by Medicare are taxable;

(2) payments received for home health care services;

(3) payments received from hospitals or surgical centers
for goods and services on which liability for tax is imposed
under section 295.52 or the source of funds for the payment is
exempt under clause (1), (7), (10), or (14);

(4) payments received from health care providers for goods
and services on which liability for tax is imposed under this
chapter or the source of funds for the payment is exempt under
clause (1), (7), (10), or (14);

(5) amounts paid for legend drugs, other than nutritional
products, to a wholesale drug distributor who is subject to tax
under section 295.52, subdivision 3, reduced by reimbursements
received for legend drugs otherwise exempt under this chapter;

(6) payments received by a health care provider or the
wholly owned subsidiary of a health care provider for care
provided outside Minnesota;

(7) payments received from the chemical dependency fund
under chapter 254B;

(8) payments received in the nature of charitable donations
that are not designated for providing patient services to a
specific individual or group;

(9) payments received for providing patient services
incurred through a formal program of health care research
conducted in conformity with federal regulations governing
research on human subjects. Payments received from patients or
from other persons paying on behalf of the patients are subject
to tax;

(10) payments received from any governmental agency for
services benefiting the public, not including payments made by
the government in its capacity as an employer or insurer or
payments made by the government for services provided under
general assistance medical care, the MinnesotaCare program, or
the medical assistance program governed by title XIX of the
federal Social Security Act, United States Code, title 42,
sections 1396 to 1396v;

(11) government payments received by the commissioner of
human services for state-operated services;

(12) payments received by a health care provider for
hearing aids and related equipment or prescription eyewear
delivered outside of Minnesota;

(13) payments received by an educational institution from
student tuition, student activity fees, health care service
fees, government appropriations, donations, or grants, and for
services identified in and provided under an individualized
education plan as defined in section 256B.0625 or Code of
Federal Regulations, chapter 34, section 300.340(a). Fee for
service payments and payments for extended coverage are taxable;
deleted text begin and
deleted text end

(14) payments received under the federal Employees Health
Benefits Act, United States Code, title 5, section 8909(f), as
amended by the Omnibus Reconciliation Act of 1990. new text begin Enrollee
deductibles, coinsurance, and co-payments are subject to tax;
and
new text end

new text begin (15) payments received under the federal Tricare program,
Code of Federal Regulations, title 32, section 199.17(a)(7).
Enrollee deductibles, coinsurance, and co-payments are subject
to tax.
new text end

(b) Payments received by wholesale drug distributors for
legend drugs sold directly to veterinarians or veterinary bulk
purchasing organizations are excluded from the gross revenues
subject to the wholesale drug distributor tax under sections
295.50 to 295.59.

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

Minnesota Statutes 2004, section 295.582, is
amended to read:

295.582 AUTHORITY.

new text begin Subdivision 1. new text end

new text begin Transfer to third-party purchasers. new text end

(a) A
hospital, surgical center, or health care provider that is
subject to a tax under section 295.52, or a pharmacy that has
paid additional expense transferred under this section by a
wholesale drug distributor, may transfer additional expense
generated by section 295.52 obligations on to all third-party
contracts for the purchase of health care services on behalf of
a patient or consumer. The additional expense transferred to
the third-party purchaser must not exceed the tax percentage
specified in section 295.52 multiplied against the gross
revenues received under the third-party contract, and the tax
percentage specified in section 295.52 multiplied against
co-payments and deductibles paid by the individual patient or
consumer. new text begin A health care provider who chooses to transfer the
tax specified in section 295.52 may itemize the tax on patient
billings. new text end The expense must not be generated on revenues derived
from payments that are excluded from the tax under section
295.53. All third-party purchasers of health care services
including, but not limited to, third-party purchasers regulated
under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79,
or 79A, or under section 471.61 or 471.617, new text begin and a pharmacy
benefits manager new text end must pay the transferred expense in addition to
any payments due under existing contracts with the hospital,
surgical center, pharmacy, or health care provider, to the
extent allowed under federal law. A third-party purchaser of
health care services includes, but is not limited to, a health
carrier or community integrated service network that pays for
health care services on behalf of patients or that reimburses,
indemnifies, compensates, or otherwise insures patients for
health care services new text begin and for purposes of this section, a
pharmacy benefits manager means an entity that performs pharmacy
benefits management new text end . A third-party purchaser shall comply with
this section regardless of whether the third-party purchaser is
a for-profit, not-for-profit, or nonprofit entity new text begin or whether the
health care provider has chosen to itemize the tax on patient
billings. If the third-party purchaser's contract limits
provider payment to a specified amount, such as an usual and
customary fee schedule, the third-party purchaser must still pay
the tax transferred or itemized by a health care provider based
upon the contractual fee. A third-party purchaser is also
responsible for reimbursing providers for the percentage tax
levied on co-payments or deductibles paid by the insured new text end . A
wholesale drug distributor may transfer additional expense
generated by section 295.52 obligations to entities that
purchase from the wholesaler, and the entities must pay the
additional expense. Nothing in this section limits the ability
of a hospital, surgical center, pharmacy, wholesale drug
distributor, or health care provider to recover all or part of
the section 295.52 obligation by other methods, including
increasing fees or charges. new text begin Nothing in this section prohibits a
pharmacy from passing on additional fees or charges to a
pharmacy benefits manager.
new text end

(b) Each third-party purchaser regulated under any chapter
cited in paragraph (a) shall include with its annual renewal for
certification of authority or licensure documentation indicating
compliance with paragraph (a). new text begin The documentation must include
information relating to a third-party purchaser's means for
compliance with paragraph (a) for health care providers who
itemize the tax on patient billings.
new text end

(c) Any hospital, surgical center, or health care provider
subject to a tax under section 295.52 or a pharmacy that has
paid additional expense transferred under this section by a
wholesale drug distributor may file a complaint with the
commissioner responsible for regulating the third-party
purchaser if at any time the third-party purchaser fails to
comply with paragraph (a).

(d) If the commissioner responsible for regulating the
third-party purchaser finds at any time that the third-party
purchaser has not complied with paragraph (a), the commissioner
may take enforcement action against a third-party purchaser
which is subject to the commissioner's regulatory jurisdiction
and which does not allow a hospital, surgical center, pharmacy,
or provider to pass-through the tax. The commissioner may by
order fine or censure the third-party purchaser or revoke or
suspend the certificate of authority or license of the
third-party purchaser to do business in this state if the
commissioner finds that the third-party purchaser has not
complied with this section. The third-party purchaser may
appeal the commissioner's order through a contested case hearing
in accordance with chapter 14.

new text begin Subd. 2. new text end

new text begin Wholesale drug distributor tax; agreement. new text end

new text begin A
contracting agreement between a health plan company or a
pharmacy benefits manager and a resident or nonresident pharmacy
registered under chapter 151, may not prohibit:
new text end

new text begin (1) a pharmacy that has paid additional expense transferred
under this section by a wholesale drug distributor from
exercising its option under this section to transfer such
additional expenses generated by the section 295.52 obligations
on to the health plan company, a pharmacy benefits manager, or a
third-party purchaser; or
new text end

new text begin (2) a pharmacy that is subject to tax under section 295.52,
subdivision 4, from exercising its option under this section to
recover all or part of the section 295.52 obligations from the
health plan company, a pharmacy benefits manager, or a
third-party purchaser by other methods, including increasing
fees or charges.
new text end

Sec. 6.

Minnesota Statutes 2004, section 295.60,
subdivision 3, is amended to read:

Subd. 3.

Payment.

(a) Each furrier shall make estimated
payments of the taxes for the calendar year in quarterly
installments to the commissioner by April 15, July 15, October
15, and January 15 of the following calendar year.

(b) Estimated tax payments are not required if:

(1) the tax for the current calendar year is less than
$500; or

(2) the tax for the previous calendar year is less than
$500, if the taxpayer had a tax liability and was doing business
the entire year.

(c) Underpayment of estimated installments bear interest at
the rate specified in section 270.75, from the due date of the
payment until paid or until the due date of the annual return,
whichever comes first. An underpayment of an estimated
installment is the difference between the amount paid and the
lesser of (1) deleted text begin 90 percent of one-quarter of the tax for the
calendar year deleted text end new text begin the tax for the actual gross revenues received
during the quarter new text end , or (2) one-quarter of the total tax for the
previous calendar year if the taxpayer had a tax liability and
was doing business the entire year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for gross
revenues received after December 31, 2004.
new text end

Sec. 7.

new text begin [295.75] LIQUOR GROSS RECEIPTS TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this
section, the following terms have the meanings given.
new text end

new text begin (b) "Commissioner" means the commissioner of revenue.
new text end

new text begin (c) "Gross receipts" means the total amount received, in
money or by barter or exchange, for all liquor sales at retail
as measured by the sales price, but does not include any taxes
imposed directly on the consumer that are separately stated on
the invoice, bill of sale, or similar document given to the
purchaser.
new text end

new text begin (d) "Liquor" means:
new text end

new text begin (1) intoxicating liquor, as defined in section 340A.101,
subdivision 14;
new text end

new text begin (2) beverage containing intoxicating liquor; and
new text end

new text begin (3) 3.2 percent malt liquor, as defined in section
340A.101, subdivision 19, when sold at an on-sale or off-sale
municipal liquor store or other establishment licensed to sell
any type of intoxicating liquor.
new text end

new text begin (e) "Liquor retailer" means a retailer that sells liquor.
new text end

new text begin (f) "Retail sale" has the meaning given in section 297A.61,
subdivision 4.
new text end

new text begin Subd. 2. new text end

new text begin Gross receipts tax imposed. new text end

new text begin A tax is imposed on
each liquor retailer equal to 2.5 percent of gross receipts from
retail sales in Minnesota of liquor.
new text end

new text begin Subd. 3. new text end

new text begin Use tax imposed; credit for taxes paid. new text end

new text begin (a) A
person that receives liquor for use or storage in Minnesota,
other than from a liquor retailer that paid the tax under
subdivision 2, is subject to tax at the rate imposed under
subdivision 2. Liability for the tax is incurred when the
person has possession of the liquor in Minnesota. The tax must
be remitted to the commissioner in the same manner prescribed
for the taxes imposed under chapter 297A.
new text end

new text begin (b) A person that has paid taxes to another jurisdiction on
the same transaction and is subject to tax under this section is
entitled to a credit for the tax legally due and paid to another
jurisdiction to the extent of the lesser of (1) the tax actually
paid to the other jurisdiction, or (2) the amount of tax imposed
by Minnesota on the transaction subject to tax in the other
jurisdiction.
new text end

new text begin Subd. 4. new text end

new text begin Tax collection required. new text end

new text begin A liquor retailer with
nexus in Minnesota, who is not subject to tax under subdivision
2, is required to collect the tax imposed under subdivision 3
from the purchaser of the liquor and give the purchaser a
receipt for the tax paid. The tax collected must be remitted to
the commissioner in the same manner prescribed for the taxes
imposed under chapter 297A.
new text end

new text begin Subd. 5. new text end

new text begin Taxes paid to another jurisdiction; credit. new text end

new text begin A
liquor retailer that has paid taxes to another jurisdiction
measured by gross receipts and is subject to tax under this
section on the same gross receipts is entitled to a credit for
the tax legally due and paid to another jurisdiction to the
extent of the lesser of (1) the tax actually paid to the other
jurisdiction, or (2) the amount of tax imposed by Minnesota on
the gross receipts subject to tax in the other taxing
jurisdictions.
new text end

new text begin Subd. 6. new text end

new text begin Exemptions. new text end

new text begin All of the exemptions applicable to
the taxes imposed under chapter 297A are applicable to the taxes
imposed under this section.
new text end

new text begin Subd. 7. new text end

new text begin Sourcing of sales. new text end

new text begin All of the provisions of
section 297A.668 apply to the taxes imposed by this section.
new text end

new text begin Subd. 8. new text end

new text begin Payment; reporting. new text end

new text begin A liquor retailer shall
report the tax on a return prescribed by the commissioner of
revenue, and shall remit the tax with the return. The return
and the tax must be filed and paid using the filing cycle and
due dates provided for taxes imposed under chapter 297A.
new text end

new text begin Subd. 9. new text end

new text begin Administration. new text end

new text begin Unless specifically provided
otherwise by this section, the audit, assessment, refund,
penalty, interest, enforcement, collection remedies, appeal, and
administrative provisions of chapters 270 and 289A that are
applicable to taxes imposed under chapter 297A apply to taxes
imposed under this section.
new text end

new text begin Subd. 10. new text end

new text begin Interest on overpayments. new text end

new text begin Interest must be
paid on an overpayment refunded or credited to the taxpayer from
the date of payment of the tax until the date the refund is paid
or credited. For purposes of this subdivision, the date of
payment is the due date of the return or the date of actual
payment of the tax, whichever is later.
new text end

new text begin Subd. 11. new text end

new text begin Deposit of revenues. new text end

new text begin The commissioner shall
deposit all revenues, including penalties and interest, derived
from the tax imposed by this section in the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and
purchases occurring on or after January 1, 2006.
new text end

Sec. 8.

Minnesota Statutes 2004, section 296A.22, is
amended by adding a subdivision to read:

new text begin Subd. 9. new text end

new text begin Abatement of penalty. new text end

new text begin (a) The commissioner may
by written order abate any penalty imposed under this section,
if in the commissioner's opinion there is reasonable cause to do
so.
new text end

new text begin (b) A request for abatement of penalty must be filed with
the commissioner within 60 days of the date the notice stating
that a penalty has been imposed was mailed to the taxpayer's
last known address.
new text end

new text begin (c) If the commissioner issues an order denying a request
for abatement of penalty, the taxpayer may file an
administrative appeal as provided in section 296A.25 or appeal
to Tax Court as provided in section 271.06. If the commissioner
does not issue an order on the abatement request within 60 days
from the date the request is received, the taxpayer may appeal
to Tax Court as provided in section 271.06.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for penalties
imposed on or after the day following final enactment.
new text end

Sec. 9.

Minnesota Statutes 2004, section 297E.01,
subdivision 5, is amended to read:

Subd. 5.

Distributor.

"Distributor" means a distributor
as defined in section 349.12, subdivision 11, or a person new text begin or
linked bingo game provider new text end who markets, sells, or provides
gambling product to a person or entity for resale or use at the
retail level.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 10.

Minnesota Statutes 2004, section 297E.01,
subdivision 7, is amended to read:

Subd. 7.

Gambling product.

"Gambling product" means
bingo new text begin hard new text end cards, new text begin bingo new text end paper deleted text begin , or deleted text end sheets new text begin , or linked bingo paper
sheets new text end ; pull-tabs; tipboards; paddletickets and paddleticket
cards; raffle tickets; or any other ticket, card, board,
placard, device, or token that represents a chance, for which
consideration is paid, to win a prize.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2004, section 297E.01, is
amended by adding a subdivision to read:

new text begin Subd. 9a. new text end

new text begin Linked bingo game. new text end

new text begin "Linked bingo game" means a
bingo game played at two or more locations where licensed
organizations are authorized to conduct bingo, when there is a
common prize pool and a common selection of numbers or symbols
conducted at one location, and when the results of the selection
are transmitted to all participating locations by satellite,
telephone, or other means by a linked bingo game provider.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 12.

Minnesota Statutes 2004, section 297E.01, is
amended by adding a subdivision to read:

new text begin Subd. 9b. new text end

new text begin Linked bingo game provider. new text end

new text begin "Linked bingo game
provider" means any person who provides the means to link bingo
prizes in a linked bingo game, who provides linked bingo paper
sheets to the participating organizations, who provides linked
bingo prize management, and who provides the linked bingo game
system.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 13.

Minnesota Statutes 2004, section 297E.06,
subdivision 2, is amended to read:

Subd. 2.

Business records.

An organization shall
maintain records supporting the gambling activity reported to
the commissioner. Records include, but are not limited to, the
following items:

(1) all winning and unsold tickets, cards, or stubs for
pull-tab, tipboard, paddlewheel, and raffle games;

(2) all reports and statements, including checker's
records, for each bingo occasion;

(3) all cash journals and ledgers, deposit slips, register
tapes, and bank statements supporting gambling activity
receipts;

(4) all invoices that represent purchases of gambling
product;

(5) all canceled checks new text begin or copies of substitute checks as
defined in Public Law 108-100, section 3 new text end , check recorders,
journals and ledgers, vouchers, invoices, bank statements, and
other documents supporting gambling activity expenditures; and

(6) all organizational meeting minutes.

All records required to be kept by this section must be
preserved by the organization for at least 3-1/2 years and may
be inspected by the commissioner of revenue at any reasonable
time without notice or a search warrant.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2005.
new text end

Sec. 14.

Minnesota Statutes 2004, section 297E.07, is
amended to read:

297E.07 INSPECTION RIGHTS.

At any reasonable time, without notice and without a search
warrant, the commissioner may enter a place of business of a
manufacturer, distributor, deleted text begin or deleted text end organization new text begin , or linked bingo game
provider new text end ; any site from which pull-tabs or tipboards or other
gambling equipment or gambling product are being manufactured,
stored, or sold; or any site at which lawful gambling is being
conducted, and inspect the premises, books, records, and other
documents required to be kept under this chapter to determine
whether or not this chapter is being fully complied with. If
the commissioner is denied free access to or is hindered or
interfered with in making an inspection of the place of
business, books, or records, the permit of the distributor may
be revoked by the commissioner, and the license of the
manufacturer, the distributor, deleted text begin or deleted text end the organization new text begin , or linked
bingo game provider new text end may be revoked by the board.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 15.

Minnesota Statutes 2004, section 297F.08,
subdivision 12, is amended to read:

Subd. 12.

Cigarettes in interstate commerce.

(a) A
person may not transport or cause to be transported from this
state cigarettes for sale in another state without first
affixing to the cigarettes the stamp required by the state in
which the cigarettes are to be sold or paying any other excise
tax on the cigarettes imposed by the state in which the
cigarettes are to be sold.

(b) A person may not affix to cigarettes the stamp required
by another state or pay any other excise tax on the cigarettes
imposed by another state if the other state prohibits stamps
from being affixed to the cigarettes, prohibits the payment of
any other excise tax on the cigarettes, or prohibits the sale of
the cigarettes.

(c) Not later than 15 days after the end of each calendar
quarter, a person who transports or causes to be transported
from this state cigarettes for sale in another state shall
submit to the commissioner a report identifying the quantity and
style of each brand of the cigarettes transported or caused to
be transported in the preceding calendar quarter, and the name
and address of each recipient of the cigarettes. new text begin This reporting
requirement only applies to cigarettes manufactured by companies
that are not original or subsequent participating manufacturers
in the Master Settlement Agreement with other states.
new text end

(d) For purposes of this section, "person" has the meaning
given in section 297F.01, subdivision 12. Person does not
include any common or contract carrier, or public warehouse that
is not owned, in whole or in part, directly or indirectly by
such person, and does not include a manufacturer that deleted text begin has
entered into deleted text end new text begin is an original or subsequent participating
manufacturer in new text end the Master Settlement Agreement with other
states.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 16.

Minnesota Statutes 2004, section 297F.08, is
amended by adding a subdivision to read:

new text begin Subd. 13. new text end

new text begin Bond. new text end

new text begin The commissioner may require the
furnishing of a corporate surety bond or a certified check in an
amount suitable to guarantee payment of the tax stamps purchased
by a distributor. The bond or certified check may be required
when the commissioner determines that a distributor is (1)
delinquent in the filing of any return required under this
chapter, or (2) delinquent in the payment of any uncontested tax
liability under this chapter. The distributor shall furnish the
bond or certified check for a period of two years, after which,
if the distributor has not been delinquent in the filing of any
returns required under this chapter, or delinquent in the paying
of any tax under this chapter, a bond or certified check is no
longer required. The commissioner at any time may apply the
bond or certified check to any unpaid taxes or fees, including
interest and penalties, owed to the department by the
distributor.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 17.

Minnesota Statutes 2004, section 297F.09,
subdivision 1, is amended to read:

Subdivision 1.

Monthly return; cigarette distributor.

On
or before the 18th day of each calendar month, a distributor
with a place of business in this state shall file a return with
the commissioner showing the quantity of cigarettes manufactured
or brought in from outside the state or purchased during the
preceding calendar month and the quantity of cigarettes sold or
otherwise disposed of in this state and outside this state
during that month. A licensed distributor outside this state
shall in like manner file a return showing the quantity of
cigarettes shipped or transported into this state during the
preceding calendar month. Returns must be made in the form and
manner prescribed by the commissioner and must contain any other
information required by the commissioner. The return must be
accompanied by a remittance for the full unpaid tax liability
shown by it. deleted text begin The return for the May liability and 85 percent of
the estimated June liability is due on the date payment of the
tax is due. deleted text end new text begin For distributors subject to the accelerated tax
payment requirements in subdivision 10, the return for the May
liability is due two business days before June 30th of the year
and the return for the June liability is due on or before August
18th of the year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 18.

Minnesota Statutes 2004, section 297F.09,
subdivision 2, is amended to read:

Subd. 2.

Monthly return; tobacco products distributor.

On or before the 18th day of each calendar month, a distributor
with a place of business in this state shall file a return with
the commissioner showing the quantity and wholesale sales price
of each tobacco product:

(1) brought, or caused to be brought, into this state for
sale; and

(2) made, manufactured, or fabricated in this state for
sale in this state, during the preceding calendar month.

Every licensed distributor outside this state shall in like
manner file a return showing the quantity and wholesale sales
price of each tobacco product shipped or transported to
retailers in this state to be sold by those retailers, during
the preceding calendar month. Returns must be made in the form
and manner prescribed by the commissioner and must contain any
other information required by the commissioner. The return must
be accompanied by a remittance for the full tax liability
shown. deleted text begin The return for the May liability and 85 percent of the
estimated June liability is due on the date payment of the tax
is due. deleted text end new text begin For distributors subject to the accelerated tax payment
requirements in subdivision 10, the return for the May liability
is due two business days before June 30th of the year and the
return for the June liability is due on or before August 18th of
the year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 19.

Minnesota Statutes 2004, section 297F.14,
subdivision 4, is amended to read:

Subd. 4.

Bad debt.

deleted text begin The commissioner may adopt rules
providing a refund of the tax paid under this chapter if the tax
paid qualifies as a bad debt under section 166(a) of the
Internal Revenue Code. deleted text end new text begin For any reporting period, a taxpayer may
offset against taxes payable under this chapter the amount of
taxes previously paid under this chapter that is attributable to
a bad debt. The taxes must have been included in a transaction
the consideration for which was a debt owed to the taxpayer and
which became uncollectible, but only in proportion to the
portion of debt that became uncollectible. To qualify for
offset under this subdivision, the debt must have qualified as a
bad debt under section 166(a) of the Internal Revenue Code. The
taxpayer may claim the offset within the time period prescribed
in section 297F.17, subdivision 6. If the taxpayer is no longer
liable for taxes imposed under this chapter, the commissioner
shall refund to the taxpayer the amount of the taxes
attributable to the bad debt. Any recovery of the tax claimed
as a refund or credit must be reported to the commissioner on
the tax return for the month in which the recovery is made. If
the taxpayer is no longer required to file returns under this
chapter, the taxpayer must reimburse the commissioner for tax
recovered in the month following the recovery.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims
filed on or after July 1, 2005.
new text end

Sec. 20.

new text begin [297F.25] CIGARETTE SALES TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Imposition. new text end

new text begin A tax is imposed on
distributors on the sale of cigarettes by a cigarette
distributor to a retailer or cigarette subjobber for resale in
this state. The tax is equal to 6.5 percent of the weighted
average retail price. The weighted average retail price must be
expressed in cents per pack when rounded to the nearest
one-tenth of a cent. The weighted average retail price must be
determined annually, with new rates published by May 1, and
effective for sales on or after August 1. The weighted average
retail price must be established by surveying cigarette
retailers statewide in a manner and time determined by the
commissioner. The determination of the commissioner pursuant to
this subdivision is not a "rule" and is not subject to the
Administrative Procedure Act contained in chapter 14. As of
August 1, 2005, the tax is 20 cents per pack of 20 cigarettes.
For packs of cigarettes with other than 20 cigarettes, the tax
must be adjusted proportionally.
new text end

new text begin Subd. 2. new text end

new text begin Payment. new text end

new text begin Each taxpayer must remit payments of
the taxes to the commissioner on the same dates prescribed under
section 297F.09, subdivision 1, for cigarette tax returns,
including the accelerated remittance of the June liability.
new text end

new text begin Subd. 3. new text end

new text begin Return. new text end

new text begin A taxpayer must file a return with the
commissioner on the same dates prescribed under section 297F.09,
subdivision 1, for cigarette tax returns. Notwithstanding any
other provisions of this chapter, the tax due on the return is
based upon actual stamps purchased during the reporting period.
new text end

new text begin Subd. 4. new text end

new text begin Form of return. new text end

new text begin The return must contain the
information and be in the form prescribed by the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Tax as debt. new text end

new text begin The tax that is required to be
paid by the distributor is a debt from the retailer or cigarette
subjobber to the distributor recoverable at law in the same
manner as other debts. A cigarette retailer or subjobber must
pay the tax imposed under subdivision 1 to the distributor
before the 12th day of the month following the month in which
the cigarettes were purchased from the distributor.
new text end

new text begin Subd. 6. new text end

new text begin Sales tax stamp. new text end

new text begin Payment of the tax imposed
under section 297F.05 and by this section must be evidenced by a
dual-purpose single stamp affixed to each package.
new text end

new text begin Subd. 7. new text end

new text begin Administration. new text end

new text begin The stamping, audit,
assessment, interest, penalty, appeal, refund, and collection
provisions applicable to the taxes imposed under this chapter
apply to taxes imposed under this section.
new text end

new text begin Subd. 8. new text end

new text begin Deposit of revenues. new text end

new text begin Notwithstanding the
provisions of section 297F.10, the commissioner shall deposit
all revenues, including penalties and interest, derived from the
tax imposed by this section, in the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for all sales
made on or after August 1, 2005.
new text end

Sec. 21.

Minnesota Statutes 2004, section 297G.09, is
amended by adding a subdivision to read:

new text begin Subd. 9. new text end

new text begin Quarterly and annual payments and returns. new text end

new text begin (a)
If a manufacturer, wholesaler, brewer, or importer has an
average liquor tax liability equal to or less than $500 per
month in any quarter of a calendar year, and has substantially
complied with the state tax laws during the preceding four
calendar quarters, the manufacturer, wholesaler, brewer, or
importer may request authorization to file and pay the taxes
quarterly in subsequent calendar quarters. The authorization
remains in effect during the period in which the manufacturer's,
wholesaler's, brewer's, or importer's quarterly returns reflect
liquor tax liabilities of less than $1,500 and there is
continued compliance with state tax laws.
new text end

new text begin (b) If a manufacturer, wholesaler, brewer, or importer has
an average liquor tax liability equal to or less than $100 per
month during a calendar year, and has substantially complied
with the state tax laws during that period, the manufacturer,
wholesaler, brewer, or importer may request authorization to
file and pay the taxes annually in subsequent years. The
authorization remains in effect during the period in which the
manufacturer's, wholesaler's, brewer's, or importer's annual
returns reflect liquor tax liabilities of less than $1,200 and
there is continued compliance with state tax laws.
new text end

new text begin (c) The commissioner may also grant quarterly or annual
filing and payment authorizations to manufacturers, wholesalers,
brewers, or importers if the commissioner concludes that the
manufacturer's, wholesaler's, brewer's, or importer's future tax
liabilities will be less than the monthly totals identified in
paragraphs (a) and (b). An authorization granted under this
paragraph is subject to the same conditions as an authorization
granted under paragraphs (a) and (b).
new text end

new text begin (d) The annual tax return and payments must be filed and
paid on or before the 18th day of January following the calendar
year. The quarterly returns and payments must be filed and paid
on or before April 18 for the quarter ending March 31, on or
before July 18 for the quarter ending June 30, on or before
October 18 for the quarter ending September 30, and on or before
January 18 for the quarter ending December 31.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax returns
and payments due on or after January 1, 2006.
new text end

Sec. 22.

Minnesota Statutes 2004, section 297I.01, is
amended by adding a subdivision to read:

new text begin Subd. 6a. new text end

new text begin Direct business. new text end

new text begin (a) "Direct business" means
all insurance provided by an insurance company or its agents,
and specifically includes stop-loss insurance purchased in
connection with a self-insurance plan for employee health
benefits or for other purposes, but excludes:
new text end

new text begin (1) reinsurance in which an insurance company assumes the
liability of another insurance company; and
new text end

new text begin (2) self-insurance.
new text end

new text begin (b) For purposes of this subdivision, an insurance company
includes a nonprofit health service corporation, health
maintenance organization, and community integrated service
network.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for insurance
premiums received after December 31, 2005.
new text end

Sec. 23.

Minnesota Statutes 2004, section 297I.01, is
amended by adding a subdivision to read:

new text begin Subd. 13a. new text end

new text begin Reinsurance. new text end

new text begin "Reinsurance" is insurance
whereby an insurance company, for a consideration, agrees to
indemnify another insurance company against all or part of the
loss which the latter may sustain under the policy or policies
which it has issued.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 24.

Minnesota Statutes 2004, section 297I.05,
subdivision 4, is amended to read:

Subd. 4.

Mutual property and casualty companies with
total assets less than $1,600,000,000 on december 31, 1989.

A
tax is imposed on mutual property and casualty companies that
had total assets greater than $5,000,000 at the end of the
calendar year but that had total assets less than $1,600,000,000
on December 31, 1989. The rate of tax is equal to:

(1) deleted text begin two percent of gross premiums less return premiums on
all direct business received by the insurer or agents of the
insurer in Minnesota deleted text end new text begin the tax under subdivision 14 new text end for life
insurance deleted text begin , in cash or otherwise, during the year deleted text end ; and

(2) 1.26 percent of gross premiums less return premiums on
all other direct business received by the insurer or agents of
the insurer in Minnesota, in cash or otherwise, during the year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for premiums
received after December 31, 2007.
new text end

Sec. 25.

Minnesota Statutes 2004, section 297I.05,
subdivision 5, is amended to read:

Subd. 5.

Health maintenance organizations, nonprofit
health service plan corporations, and community integrated
service networks.

(a) deleted text begin Health maintenance organizations,
community integrated service networks, and nonprofit health care
service plan corporations are exempt from the tax imposed under
this section for premiums received in calendar years 2001 to
2003.
deleted text end

deleted text begin (b) For calendar years after 2003, deleted text end A tax is imposed on
health maintenance organizations, community integrated service
networks, and nonprofit health care service plan corporations.
The rate of tax is equal to one percent of gross premiums less
return premiums new text begin on all direct business new text end received new text begin by the
organization, network, or corporation or its agents in
Minnesota, in cash or otherwise, new text end in the calendar year.

deleted text begin (c) In approving the premium rates as required in sections
62L.08, subdivision 8, and 62A.65, subdivision 3, the
commissioners of health and commerce shall ensure that any
exemption from tax as described in paragraph (a) is reflected in
the premium rate.
deleted text end

deleted text begin (d) deleted text end new text begin (b) new text end The commissioner shall deposit all revenues,
including penalties and interest, collected under this chapter
from health maintenance organizations, community integrated
service networks, and nonprofit health service plan corporations
in the health care access fund. Refunds of overpayments of tax
imposed by this subdivision must be paid from the health care
access fund. There is annually appropriated from the health
care access fund to the commissioner the amount necessary to
make any refunds of the tax imposed under this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2005.
new text end

Sec. 26.

Minnesota Statutes 2004, section 297I.05, is
amended by adding a subdivision to read:

new text begin Subd. 14. new text end

new text begin Life insurance. new text end

new text begin A tax is imposed on life
insurance. The rate of the tax equals 1.5 percent of gross
premiums less return premiums on all direct business received by
the insurer or agents of the insurer in Minnesota for life
insurance, in cash or otherwise, during the year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for premiums
received after December 31, 2007.
new text end

Sec. 27.

Minnesota Statutes 2004, section 298.24,
subdivision 1, is amended to read:

Subdivision 1.

Effective date.

new text begin This section is effective for direct
reduced ore produced after the day following final enactment.
new text end

Sec. 28. Minnesota Statutes 2004, section 298.75, is
amended by adding a subdivision to read:

new text begin Subd. 10. new text end

new text begin Tax may be imposed, cass county. new text end

new text begin (a) If Cass
County does not impose a tax under this section, the town of
Sylvan in Cass County may impose the aggregate materials tax
under this section.
new text end

new text begin (b) For purposes of exercising the powers contained in this
section, the "town" is deemed to be the "county."
new text end

new text begin (c) All provisions in this section apply to the town of
Sylvan, except that in lieu of the distribution of the tax
proceeds under subdivision 7, all proceeds of the tax must be
retained by the town.
new text end

new text begin (d) If Cass County imposes an aggregate materials tax under
this section, the tax imposed by the town of Sylvan under this
subdivision is repealed on the effective date of the Cass County
tax.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after
the governing body of the town of Sylvan and its chief clerical
officer comply with Minnesota Statutes, section 645.021,
subdivisions 2 and 3.
new text end

Sec. 29. Minnesota Statutes 2004, section 473.843,
subdivision 5, is amended to read:

Subd. 5.

Penalties; enforcement.

The audit, penalty, and
enforcement provisions applicable to new text begin corporate franchise new text end taxes
imposed under chapter 290 apply to the fees imposed under this
section. The commissioner of revenue shall administer the
provisions.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 30. [FLOOR STOCKS TAX.]

new text begin Subdivision 1. new text end

new text begin Cigarettes. new text end

new text begin A floor stocks cigarette
sales tax is imposed on every person engaged in the business in
this state as a distributor, retailer, subjobber, vendor,
manufacturer, or manufacturer's representative of cigarettes, on
the stamped cigarettes and unaffixed stamps in the person's
possession or under the person's control at 12:01 a.m. on August
1, 2005. The tax is imposed at the rate of 20 cents per pack of
20 cigarettes. For packs of cigarettes with other than 20
cigarettes, the tax shall be adjusted proportionally.
new text end

new text begin Each distributor, by August 10, 2005, shall file a return
with the commissioner, in the form the commissioner prescribes,
showing the stamped cigarettes and unaffixed stamps on hand at
12:01 a.m. on August 1, 2005, and the amount of tax due on the
cigarettes and unaffixed stamps. The tax imposed by this
section is due and payable by September 7, 2005, and after that
date bears interest at the rate of one percent a month.
new text end

new text begin Each retailer, subjobber, vendor, manufacturer, or
manufacturer's representative, by August 10, 2005, shall file a
return with the commissioner, in the form the commissioner
prescribes, showing the cigarettes on hand at 12:01 a.m. on
August 1, 2005, and the amount of tax due on the cigarettes.
The tax imposed by this section is due and payable by September
7, 2005, and after that date bears interest at the rate of one
percent a month.
new text end

new text begin Subd. 2. new text end

new text begin Audit and enforcement. new text end

new text begin The tax imposed by this
section is subject to the audit, assessment, penalty, and
collection provisions applicable to the taxes imposed under
Minnesota Statutes, chapter 297F. The commissioner may require
a distributor to receive and maintain copies of floor stocks tax
returns filed by all persons requesting a credit for returned
cigarettes.
new text end

new text begin Subd. 3. new text end

new text begin Deposit of proceeds. new text end

new text begin The revenue from the tax
imposed under this section shall be deposited by the
commissioner in the state treasury and credited to the general
fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2005.
new text end

Sec. 31. [REPEALER.]

new text begin Minnesota Statutes 2004, section 297E.12, subdivision 10,
is repealed effective the day following final enactment.
new text end

ARTICLE 9

ECONOMIC DEVELOPMENT

Section 1.

Minnesota Statutes 2004, section 272.02,
subdivision 64, is amended to read:

Subd. 64.

Job opportunity building zone property.

(a)
Improvements to real property, and personal property, classified
under section 273.13, subdivision 24, and located within a job
opportunity building zone, designated under section 469.314, are
exempt from ad valorem taxes levied under chapter 275.

(b) Improvements to real property, and tangible personal
property, of an agricultural production facility located within
an agricultural processing facility zone, designated under
section 469.314, is exempt from ad valorem taxes levied under
chapter 275.

(c) For property to qualify for exemption under paragraph
(a), the occupant must be a qualified business, as defined in
section 469.310.

(d) The exemption applies beginning for the first
assessment year after designation of the job opportunity
building zone by the commissioner of employment and economic
development. The exemption applies to each assessment year that
begins during the duration of the job opportunity building zone
deleted text begin and to property deleted text end new text begin . To be exempt, the property must be new text end occupied by
July 1 of the assessment year by a qualified business new text begin that has
signed the business subsidy agreement and relocation agreement,
if required, by July 1 of the assessment year new text end . This exemption
does not apply to:

(1) the levy under section 475.61 or similar levy
provisions under any other law to pay general obligation bonds;
or

(2) a levy under section 126C.17, if the levy was approved
by the voters before the designation of the job opportunity
building zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2004, section 272.0212,
subdivision 1, is amended to read:

Subdivision 1.

Exemption.

All qualified property in a
zone is exempt to the extent and for new text begin a period up to new text end the duration
provided by the zone designation and under sections 469.1731 to
469.1735.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for development
agreements approved after the day following final enactment and
beginning for property taxes payable in 2006.
new text end

Sec. 3.

Minnesota Statutes 2004, section 272.0212,
subdivision 2, is amended to read:

Subd. 2.

Limits on exemption.

new text begin (a) new text end Property in a zone is
not exempt under this section from the following:

(1) special assessments;

(2) ad valorem property taxes specifically levied for the
payment of principal and interest on debt obligations; and

(3) all taxes levied by a school district, except school
referendum levies as defined in section 126C.17.

new text begin (b) The city may limit the property tax exemption to a
shorter period than the duration of the zone or to a percentage
of the property taxes payable or both.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for development
agreements approved after the day following final enactment and
beginning for property taxes payable in 2006.
new text end

Sec. 4.

Minnesota Statutes 2004, section 289A.56, is
amended by adding a subdivision to read:

new text begin Subd. 7. new text end

new text begin Biotechnology and health sciences industry zone
refunds. new text end

new text begin Notwithstanding subdivision 3, for refunds payable
under section 297A.68, subdivision 38, interest is computed from
90 days after the refund claim is filed with the commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for refund
claims filed on or after July 1, 2005.
new text end

Sec. 5.

Minnesota Statutes 2004, section 297A.68,
subdivision 37, is amended to read:

Subd. 37.

Job opportunity building zones.

(a) Purchases
of tangible personal property or taxable services by a qualified
business, as defined in section 469.310, are exempt if the
property or services are primarily used or consumed in a job
opportunity building zone designated under section 469.314. new text begin For
purposes of this subdivision, aircraft that are operated under a
Federal Aviation Administration Restricted Airworthiness
Certificate according to Code of Federal Regulations, title 14,
part 21, section 21.25(b)(3), relating to aerial surveying, and
that are based, maintained, and dispatched from a job
opportunity building zone, and any aerial camera package,
including any camera, computer, and navigation device contained
in the package, that is used in the aircraft, qualify as
primarily used or consumed in a job opportunity building zone if
the imagery acquired from the aerial camera package is returned
to the job opportunity building zone for processing.
new text end

(b) Purchase and use of construction materials and supplies
for construction of improvements to real property in a job
opportunity building zone are exempt if the improvements after
completion of construction are to be used in the conduct of a
qualified business, as defined in section 469.310. This
exemption applies regardless of whether the purchases are made
by the business or a contractor. new text begin The exemption does not apply
unless the business subsidy agreement entered into pursuant to
section 469.313 requires the prevailing wage to be paid on the
construction project.
new text end

(c) The exemptions under this subdivision apply to a local
sales and use tax regardless of whether the local sales tax is
imposed on the sales taxable as defined under this chapter.

(d) This subdivision applies to sales, if the purchase was
made and delivery received during the duration of the zone.

new text begin EFFECTIVE DATE. new text end

new text begin The amendment to paragraph (a) is
effective for sales made after June 30, 2005.
new text end

Sec. 6.

Minnesota Statutes 2004, section 297A.68,
subdivision 38, is amended to read:

Subd. 38.

Biotechnology and health sciences industry
zone.

(a) Purchases of tangible personal property or taxable
services by a qualified business, as defined in section 469.330,
are exempt if the property or services are primarily used or
consumed in a biotechnology and health sciences industry zone
designated under section 469.334.

(b) Purchase and use of construction materials deleted text begin and deleted text end new text begin ,
new text end supplies deleted text begin for deleted text end new text begin , or equipment used or consumed in the new text end construction
of improvements to real property in a biotechnology and health
sciences industry zone are exempt if the improvements after
completion of construction are to be used in the conduct of a
qualified business, as defined in section 469.330. This
exemption applies regardless of whether the purchases are made
by the business or a contractor.

(c) The exemptions under this subdivision apply to a local
sales and use tax regardless of whether the local sales tax is
imposed on the sales taxable as defined under this chapter.

(d)(1) The tax on sales of goods or services exempted under
this subdivision are imposed and collected as if the applicable
rate under section 297A.62 applied. Upon application by the
purchaser, on forms prescribed by the commissioner, a refund
equal to the tax paid must be paid to the purchaser. The
application must include sufficient information to permit the
commissioner to verify the sales tax paid and the eligibility of
the claimant to receive the credit. No more than two
applications for refunds may be filed under this subdivision in
a calendar year. The provisions of section 289A.40 apply to the
refunds payable under this subdivision.

(2) The amount required to make the refunds is annually
appropriated to the commissioner of revenue.

(3) The aggregate amount refunded to a qualified business
must not exceed the amount allocated to the qualified business
under section 469.335.

(e) This subdivision applies only to sales made during the
duration of the designation of the zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales made
after December 31, 2003.
new text end

Sec. 7.

Minnesota Statutes 2004, section 469.169, is
amended by adding a subdivision to read:

new text begin Subd. 17. new text end

new text begin Additional border city allocations. new text end

new text begin (a) In
addition to tax reductions authorized in subdivisions 7 to 16,
the commissioner shall allocate $750,000 for tax reductions to
border city enterprise zones in cities located on the western
border of the state. The commissioner shall make allocations to
zones in cities on the western border on a per capita basis.
Allocations made under this subdivision may be used for tax
reductions as provided in section 469.171, or for other offsets
of taxes imposed on or remitted by businesses located in the
enterprise zone, but only if the municipality determines that
the granting of the tax reduction or offset is necessary in
order to retain a business within or attract a business to the
zone. Any portion of the allocation provided in this paragraph
may alternatively be used for tax reductions under section
469.1732 or 469.1734.
new text end

new text begin (b) The commissioner shall allocate $750,000 for tax
reductions under section 469.1732 or 469.1734 to cities with
border city enterprise zones located on the western border of
the state. The commissioner shall allocate this amount among
the cities on a per capita basis. Any portion of the allocation
provided in this paragraph may alternatively be used for tax
reductions as provided in section 469.171.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2004, section 469.176,
subdivision 4l, is amended to read:

Subd. 4l.

Prohibited facilities.

(a) No tax increment
from any district may be used for:

(1) a commons area used as a public park; deleted text begin or
deleted text end

(2) a facility used for social, recreational, or conference
purposes new text begin ; or
new text end

new text begin (3) a property that includes a casino or other facility
conducting class III gaming as defined in United States Code,
title 25, section 2703, regardless of whether it is conducted by
an Indian tribe or tribal business new text end .

(b) This subdivision does not apply to a privately owned
facility for conference purposes or a parking structure.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for
expenditures of increment made after June 30, 2005, regardless
of when the request for certification of the district was made.
new text end

Sec. 9.

Minnesota Statutes 2004, section 469.176,
subdivision 7, is amended to read:

Subd. 7.

Parcels not includable in districts.

(a) The
authority may request inclusion in a tax increment financing
district and the county auditor may certify the original tax
capacity of a parcel or a part of a parcel that qualified under
the provisions of section 273.111 or 273.112 or chapter 473H for
taxes payable in any of the five calendar years before the
filing of the request for certification only for:

(1) a district in which 85 percent or more of the planned
buildings and facilities (determined on the basis of square
footage) are a qualified manufacturing facility or a qualified
distribution facility or a combination of both; or

(2) a qualified housing district.

(b)(1) A distribution facility means buildings and other
improvements to real property that are used to conduct
activities in at least each of the following categories:

(i) to store or warehouse tangible personal property;

(ii) to take orders for shipment, mailing, or delivery;

(iii) to prepare personal property for shipment, mailing,
or delivery; and

(iv) to ship, mail, or deliver property.

(2) A manufacturing facility includes space used for
manufacturing or producing tangible personal property, including
processing resulting in the change in condition of the property,
and space necessary for and related to the manufacturing
activities.

(3) To be a qualified facility, the owner or operator of a
manufacturing or distribution facility must agree to pay and pay
90 percent or more of the employees of the facility at a rate
equal to or greater than 160 percent of the federal minimum wage
for individuals over the age of 20.

new text begin (c) The authority may not request inclusion in a tax
increment financing district and the county auditor may not
certify the original tax capacity of a parcel or a part of a
parcel that contains or is expected to contain uses, facilities,
properties, or businesses containing class III gaming, as
defined in United States Code, title 25, section 2703,
regardless of whether it is conducted by an Indian tribe or
tribal business.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for parcels for
which the request for certification is made after June 30, 2005.
new text end

Sec. 10.

Minnesota Statutes 2004, section 469.310,
subdivision 11, is amended to read:

Subd. 11.

Qualified business.

(a) deleted text begin "Qualified business"
means deleted text end A person carrying on a trade or business at a place of
business located within a job opportunity building zone new text begin is a
qualified business for the purposes of sections 469.310 to
469.320 according to the criteria in paragraphs (b) to (f) new text end .

new text begin (b) A person is a qualified business only on those parcels
of land for which the person has entered into a business subsidy
agreement, as required under section 469.313, with the
appropriate local government unit in which the parcels are
located.
new text end

new text begin (c) Prior to execution of the business subsidy agreement,
the local government unit must consider the following factors:
new text end

new text begin (1) how wages plus benefits compare to 110 percent of the
statewide poverty rate for a family of four;
new text end

new text begin (2) how wages compare to the regional industry average;
new text end

new text begin (3) the number of jobs that will be provided relative to
overall employment in the community;
new text end

new text begin (4) the economic outlook for the industry the business will
engage in;
new text end

new text begin (5) sales that will be generated from outside the state of
Minnesota;
new text end

new text begin (6) how the business will build on existing regional
strengths or diversify the regional economy;
new text end

new text begin (7) how the business will increase capital investment in
the zone; and
new text end

new text begin (8) any other criteria the commissioner deems necessary.
new text end

deleted text begin (b) deleted text end new text begin (d) new text end A person that relocates a trade or business from
outside a job opportunity building zone into a zone is not a
qualified business deleted text begin , deleted text end unless the business new text begin meets all of the
requirements of paragraphs (b) and (c) and new text end :

(1) deleted text begin (i) deleted text end increases full-time employment in the first full
year of operation within the job opportunity building zone by deleted text begin at
least deleted text end new text begin a minimum of five jobs or new text end 20 percent new text begin , whichever is
greater, new text end measured relative to the operations that were relocated
and maintains the required level of employment for each year the
zone designation applies; deleted text begin or
deleted text end

deleted text begin (ii) makes a capital investment in the property located
within a zone equivalent to ten percent of the gross revenues of
operation that were relocated in the immediately preceding
taxable year; deleted text end and

(2) enters a binding written agreement with the
commissioner that:

(i) pledges the business will meet the requirements of
clause (1);

(ii) provides for repayment of all tax benefits enumerated
under section 469.315 to the business under the procedures in
section 469.319, if the requirements of clause (1) are not met
for the taxable year or for taxes payable during the year in
which the requirements were not met; and

(iii) contains any other terms the commissioner determines
appropriate.

new text begin (e) The commissioner may waive the requirements under
paragraph (d), clause (1), if the commissioner determines that
the qualified business will substantially achieve the factors
under this subdivision.
new text end

new text begin (f) A business is not a qualified business if, at its
location or locations in the zone, the business is primarily
engaged in making retail sales to purchasers who are physically
present at the business's zone location.
new text end

new text begin (g) A qualifying business must pay each employee
compensation, including benefits not mandated by law, that on an
annualized basis is equal to at least 110 percent of the federal
poverty level for a family of four.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment and applies to any business entering a
business subsidy agreement for a job opportunity development
zone after that date, except that paragraph (b) is effective
retroactively from June 9, 2003.
new text end

Sec. 11.

Minnesota Statutes 2004, section 469.310, is
amended by adding a subdivision to read:

new text begin Subd. 13. new text end

new text begin Relocation payroll percentage. new text end

new text begin "Relocation
payroll percentage" is a fraction, the numerator of which is the
zone payroll of the business for the tax year minus the payroll
from the relocated operations in the last full year of
operations prior to the relocation, and the denominator of which
is the zone payroll of the business for the tax year. The
relocation payroll percentage of a business that is not a
relocating business is 100 percent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment but applies only to qualified
businesses with business subsidy agreements that are fully
executed after June 30, 2005.
new text end

Sec. 12.

Minnesota Statutes 2004, section 469.315, is
amended to read:

469.315 TAX INCENTIVES AVAILABLE IN ZONES.

Qualified businesses that operate in a job opportunity
building zone, individuals who invest in a qualified business
that operates in a job opportunity building zone, and property
located in a job opportunity building zone qualify for:

(1) exemption from individual income taxes as provided
under section 469.316;

(2) exemption from corporate franchise taxes as provided
under section 469.317;

(3) exemption from the state sales and use tax and any
local sales and use taxes on qualifying purchases as provided in
section 297A.68, subdivision 37;

(4) exemption from the state sales tax on motor vehicles
and any local sales tax on motor vehicles as provided under
section 297B.03;

(5) exemption from the property tax as provided in section
272.02, subdivision 64;

(6) exemption from the wind energy production tax under
section 272.029, subdivision 7; and

(7) the jobs credit allowed under section 469.318.

new text begin The sales tax exemption under section 297A.68, subdivision 37,
paragraph (b), is not "financial assistance" under section
116J.871 or a "business subsidy" under section 116J.993 unless
the business subsidy agreement entered into pursuant to section
469.313 requires the payment of the prevailing wage.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively
from January 1, 2004.
new text end

Sec. 13.

Minnesota Statutes 2004, section 469.316, is
amended to read:

469.316 INDIVIDUAL INCOME TAX EXEMPTION.

Subdivision 1.

Application.

An individual new text begin , estate, or
trust new text end operating a trade or business in a job opportunity
building zone, and an individual new text begin , estate, or trust new text end making a
qualifying investment in a qualified business operating in a job
opportunity building zone qualifies for the exemptions from
taxes imposed under chapter 290, as provided in this section.
The exemptions provided under this section apply only to the
extent that the income otherwise would be taxable under chapter
290. Subtractions under this section from federal taxable
income, alternative minimum taxable income, or any other base
subject to tax are limited to the amount that otherwise would be
included in the tax base absent the exemption under this
section. This section applies only to taxable years beginning
during the duration of the job opportunity building zone.

Subd. 2.

Rents.

An individual new text begin , estate, or trust new text end is
exempt from the taxes imposed under chapter 290 on net rents
derived from real or tangible personal property new text begin used by a
qualified business and new text end located in a zone for a taxable year in
which the zone was designated a job opportunity building zone.
If tangible personal property was used both within and outside
of the zone new text begin by the qualified business new text end , the exemption amount for
the net rental income must be multiplied by a fraction, the
numerator of which is the number of days the property was used
in the zone and the denominator of which is the total days new text begin the
property is rented by the qualified business new text end .

Subd. 3.

Business income.

An individual new text begin , estate, or
trust new text end is exempt from the taxes imposed under chapter 290 on net
income from the operation of a qualified business in a job
opportunity building zone. If the trade or business is carried
on within and without the zone and the individual is not a
resident of Minnesota, new text begin or the taxpayer is an estate or trust,
new text end the exemption must be apportioned based on the zone percentage
new text begin and the relocation payroll percentage new text end for the taxable year. If
the trade or business is carried on within and without the zone
and the individual is a resident of Minnesota, the exemption
must be apportioned based on the zone percentage new text begin and the
relocation payroll percentage new text end for the taxable year, except the
ratios under section 469.310, subdivision 7, clause (1), items
(i) and (ii), must use the denominators of the property and
payroll factors determined under section 290.191. No
subtraction is allowed under this section in excess of 20
percent of the sum of the job opportunity building zone payroll
and the adjusted basis of the property at the time that the
property is first used in the job opportunity building zone by
the business.

Subd. 4.

Capital gains.

(a) An individual new text begin , estate, or
trust new text end is exempt from the taxes imposed under chapter 290 on:

(1) net gain derived on a sale or exchange of real property
located in the zone and used by a qualified business. If the
property was held by the individual new text begin , estate, or trust new text end during a
period when the zone was not designated, the gain must be
prorated based on the percentage of time, measured in calendar
days, that the real property was held by the individual new text begin , estate,
or trust new text end during the period the zone designation was in effect to
the total period of time the real property was held by the
individual;

(2) net gain derived on a sale or exchange of tangible
personal property used by a qualified business in the zone. If
the property was held by the individual new text begin , estate, or trust new text end during
a period when the zone was not designated, the gain must be
prorated based on the percentage of time, measured in calendar
days, that the property was held by the individual new text begin , estate, or
trust new text end during the period the zone designation was in effect to
the total period of time the property was held by the
individual. If the tangible personal property was used outside
of the zone during the period of the zone's designation, the
exemption must be multiplied by a fraction, the numerator of
which is the number of days the property was used in the zone
during the time of the designation and the denominator of which
is the total days the property was held during the time of the
designation; and

(3) net gain derived on a sale of an ownership interest in
a qualified business operating in the job opportunity building
zone, meeting the requirements of paragraph (b). The exemption
on the gain must be multiplied by the zone percentage of the
business for the taxable year prior to the sale.

(b) A qualified business meets the requirements of
paragraph (a), clause (3), if it is a corporation, an S
corporation, or a partnership, and for the taxable year its job
opportunity building zone percentage exceeds 25 percent. For
purposes of paragraph (a), clause (3), the zone percentage must
be calculated by modifying the ratios under section 469.310,
subdivision 7, clause (1), items (i) and (ii), to use the
denominators of the property and payroll factors determined
under section 290.191. Upon the request of an individual new text begin ,
estate, or trust new text end holding an ownership interest in the entity,
the entity must certify to the owner, in writing, the job
opportunity building zone percentage needed to determine the
exemption.

new text begin EFFECTIVE DATE. new text end

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

Sec. 14.

Minnesota Statutes 2004, section 469.317, is
amended to read:

469.317 CORPORATE FRANCHISE TAX EXEMPTION.

(a) A qualified business is exempt from taxation under
section 290.02, the alternative minimum tax under section
290.0921, and the minimum fee under section 290.0922, on the
portion of its income attributable to operations within the
zone. This exemption is determined as follows:

(1) for purposes of the tax imposed under section 290.02,
by multiplying its taxable net income by its zone percentage and
new text begin by its relocation payroll percentage and new text end subtracting the result
in determining taxable income;

(2) for purposes of the alternative minimum tax under
section 290.0921, by multiplying its alternative minimum taxable
income by its zone percentage and new text begin by its relocation payroll
percentage and new text end reducing alternative minimum taxable income by
this amount; and

(3) for purposes of the minimum fee under section 290.0922,
by excluding property and payroll in the zone from the
computations of the fee or by exempting the entity under section
290.0922, subdivision 2, clause (7).

(b) No subtraction is allowed under this section in excess
of 20 percent of the sum of the corporation's job opportunity
building zone payroll and the adjusted basis of the property at
the time that the property is first used in the job opportunity
building zone by the corporation.

(c) This section applies only to taxable years beginning
during the duration of the job opportunity building zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment but applies only to qualified
businesses with business subsidy agreements that are fully
executed after June 30, 2005.
new text end

Sec. 15.

Minnesota Statutes 2004, section 469.319,
subdivision 1, is amended to read:

Subdivision 1.

Repayment obligation.

A business must
repay the amount of the total tax reduction listed in section
469.315 and any refund under section 469.318 in excess of tax
liability, received during the two years immediately before it
ceased to operate in the zone, if the business:

(1) received tax reductions authorized by section 469.315;
and

(2)(i) did not meet the goals specified in an agreement
entered into with the applicant that states any obligation the
qualified business must fulfill in order to be eligible for tax
benefits. The commissioner new text begin of employment and economic
development new text end may extend for up to one year the period for meeting
any goals provided in an agreement. The applicant may extend
the period for meeting other goals by documenting in writing the
reason for the extension and attaching a copy of the document to
its next annual report to the commissioner new text begin of employment and
economic development new text end ; or

(ii) ceased to operate its facility located within the job
opportunity building zone or otherwise ceases to be or is not a
qualified business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 16.

Minnesota Statutes 2004, section 469.319, is
amended by adding a subdivision to read:

new text begin Subd. 6. new text end

new text begin Reconciliation. new text end

new text begin Where this section is
inconsistent with section 116J.994, subdivision 3, paragraph
(e), or 6, or any other provisions of sections 116J.993 to
116J.995, this section prevails.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 17.

Minnesota Statutes 2004, section 469.320,
subdivision 3, is amended to read:

Subd. 3.

Remedies.

If the commissioner determines, based
on a report filed under subdivision 1 or other available
information, that a zone or subzone is failing to meet its
performance goals, the commissioner may take any actions the
commissioner determines appropriate, including modification of
the boundaries of the zone or a subzone or termination of the
zone or a subzone. Before taking any action, the commissioner
shall consult with the applicant and the affected local
government units, including notifying them of the proposed
actions to be taken. deleted text begin The commissioner shall publish any order
modifying a zone in the State Register and on the Internet. deleted text end The
applicant may appeal the commissioner's order under the
contested case procedures of chapter 14.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 18.

Minnesota Statutes 2004, section 469.330,
subdivision 11, is amended to read:

Subd. 11.

Qualified business.

(a) "Qualified business"
means a person carrying on a trade or business at a
biotechnology and health sciences industry facility located
within a biotechnology and health sciences industry zone. new text begin A
person is a qualified business only on those parcels of land for
which it has entered into a business subsidy agreement, as
required under section 469.333, with the appropriate local
government unit in which the parcels are located.
new text end

(b) A person that relocates a biotechnology and health
sciences industry facility from outside a biotechnology and
health sciences industry zone into a zone is not a qualified
business, unless the business:

(1)(i) increases full-time employment in the first full
year of operation within the biotechnology and health sciences
industry zone by at least 20 percent measured relative to the
operations that were relocated and maintains the required level
of employment for each year the zone designation applies; or

(ii) makes a capital investment in the property located
within a zone equivalent to ten percent of the gross revenues of
operation that were relocated in the immediately preceding
taxable year; and

(2) enters a binding written agreement with the
commissioner that:

(i) pledges the business will meet the requirements of
clause (1);

(ii) provides for repayment of all tax benefits enumerated
under section 469.336 to the business under the procedures in
section 469.340, if the requirements of clause (1) are not met;
and

(iii) contains any other terms the commissioner determines
appropriate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively
from June 9, 2003.
new text end

Sec. 19.

Minnesota Statutes 2004, section 469.335, is
amended to read:

469.335 APPLICATION FOR TAX BENEFITS.

(a) To claim a tax credit or exemption against a state tax
under section 469.336, clauses (2) through (5), a business must
apply to the commissioner for a tax credit certificate. As a
condition of its application, the business must agree to furnish
information to the commissioner that is sufficient to verify the
eligibility for any credits or exemptions claimed. The total
amount of the state tax credits and exemptions allowed for the
specified period may not exceed the amount of the tax credit
certificates provided by the commissioner to the business. The
commissioner must verify to the commissioner of revenue the
amount of tax exemptions or credits for which each business is
eligible.

(b) A tax credit certificate issued under this section may
specify the particular tax exemptions or credits against a state
tax that the qualified business is eligible to claim under
section 469.336, clauses (2) through (5), and the amount of each
exemption or credit allowed.

(c) The commissioner may issue $1,000,000 of tax credits or
exemptions in fiscal year 2004. Any tax credits or exemptions
not awarded in fiscal year 2004 may be awarded in fiscal year
2005. new text begin Any tax credits or exemptions not awarded in fiscal year
2004 or 2005 do not cancel and may be awarded in fiscal years
2006 and 2007.
new text end

(d) A qualified business must use the tax credits or tax
exemptions granted under this section by the later of the end of
the state fiscal year or the taxpayer's tax year in which the
credits or exemptions are granted.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 20.

Minnesota Statutes 2004, section 469.337, is
amended to read:

469.337 CORPORATE FRANCHISE TAX EXEMPTION.

(a) A qualified business is exempt from taxation under
section 290.02, the alternative minimum tax under section
290.0921, and the minimum fee under section 290.0922, on the
portion of its income attributable to operations of a qualified
business within the biotechnology and health sciences industry
zone. This exemption is determined as follows:

(1) for purposes of the tax imposed under section 290.02,
by multiplying its taxable net income by its zone percentage and
subtracting the result in determining taxable income;

(2) for purposes of the alternative minimum tax under
section 290.0921, by multiplying its alternative minimum taxable
income by its zone percentage and reducing alternative minimum
taxable income by this amount; and

(3) for purposes of the minimum fee under section 290.0922,
by excluding new text begin zone new text end property and payroll deleted text begin in the zone deleted text end from the
computations of the fee. new text begin The qualified business is exempt from
the minimum fee if all of its property is located in the zone
and all of its payroll is zone payroll.
new text end

(b) No subtraction is allowed under this section in excess
of 20 percent of the sum of the corporation's biotechnology and
health sciences industry zone payroll and the adjusted basis of
the property at the time that the property is first used in the
biotechnology and health sciences industry zone by the
corporation.

(c) No reduction in tax is allowed in excess of the amount
allocated under section 469.335.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2003.
new text end

Sec. 21.

Minnesota Statutes 2004, section 469.340,
subdivision 1, is amended to read:

Subdivision 1.

Repayment obligation.

A business must
repay the amount of the tax reduction listed in section 469.336
and any refunds under sections 469.338 and 469.339 in excess of
tax liability, received during the two years immediately before
it ceased to operate in the zone, if the business:

(1) received tax reductions authorized by section 469.336;
and

(2)(i) did not meet the goals specified in an agreement
entered into with the applicant that states any obligation the
qualified business must fulfill in order to be eligible for tax
benefits. The commissioner new text begin of employment and economic
development new text end may extend for up to one year the period for meeting
any goals provided in an agreement. The applicant may extend
the period for meeting other goals by documenting in writing the
reason for the extension and attaching a copy of the document to
its next annual report to the commissioner new text begin of employment and
economic development new text end ; or

(ii) ceased to operate its facility located within the
biotechnology and health sciences industry zone or otherwise
ceases to be or is not a qualified business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 22. new text begin FERGUS FALLS; ECONOMIC DEVELOPMENT.
new text end

new text begin Notwithstanding the time limits in Minnesota Statutes 2004,
section 272.02, subdivision 39, the holding of property by the
city of Fergus Falls for later resale for economic development
purposes is considered a public purpose for purposes of
Minnesota Statutes, section 272.02, subdivision 8, for a period
not to exceed 15 years. The other requirements of Minnesota
Statutes, section 272.02, subdivision 39, apply to property held
by the city under this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after
approval by the governing body of the city of Fergus Falls and
compliance with Minnesota Statutes, section 645.021, subdivision
3.
new text end

Sec. 23. new text begin CITY OF TAYLORS FALLS; BORDER CITY DEVELOPMENT
ZONE.
new text end

new text begin Subdivision 1. new text end

new text begin Authorization. new text end

new text begin The governing body of the
city of Taylors Falls may designate all or any part of the city
as a border city development zone.
new text end

new text begin Subd. 2. new text end

new text begin Application of general law. new text end

new text begin (a) Minnesota
Statutes, sections 469.1731 to 469.1735, apply to the border
city development zones designated under this section. The
governing body of the city may exercise the powers granted under
Minnesota Statutes, sections 469.1731 to 469.1735, including
powers that apply outside of the zones.
new text end

new text begin (b) The allocation under subdivision 3 for purposes of
Minnesota Statutes, section 469.1735, subdivision 2, is
appropriated to the commissioner of revenue.
new text end

new text begin Subd. 3. new text end

new text begin Allocation of state tax reductions. new text end

new text begin (a) The
cumulative total amount of the state portion of the tax
reductions for all years of the program under Minnesota
Statutes, sections 469.1731 to 469.1735, for the city of Taylors
Falls, is limited to $100,000.
new text end

new text begin (b) This allocation may be used for tax reductions provided
in Minnesota Statutes, section 469.1732 or 469.1734, or for
reimbursements under Minnesota Statutes, section 469.1735,
subdivision 3, but only if the governing body of the city of
Taylors Falls determines that the tax reduction or offset is
necessary to enable a business to expand within the city or to
attract a business to the city.
new text end

new text begin (c) The commissioner of revenue may waive the limit under
this subdivision using the same rules and standards provided in
Minnesota Statutes, section 469.169, subdivision 12, paragraph
(b).
new text end

[EFFECTIVE DATE; LOCAL APPROVAL.] new text begin This section is effective
upon approval by a majority of the voters of the city of Taylors
Falls voting on the question at a general election.
new text end

Sec. 24. new text begin REVISOR'S INSTRUCTION.
new text end

new text begin The revisor shall renumber Minnesota Statutes, section
469.310, subdivision 11, as section 469.3135, and insert the
following definition of "qualified business" in Minnesota
Statutes, section 469.310: "'Qualified business' means the
entity described in section 469.3135."
new text end

Sec. 25. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2004, section 272.02, subdivision 65, is
repealed effective for taxes payable in 2006 and thereafter.
Minnesota Statutes 2004, section 477A.08, is repealed effective
for aid payable in 2005 and thereafter.
new text end

ARTICLE 10

TAX SHELTERS

Section 1.

new text begin [270.103] EQUITABLE ACTIONS.
new text end

new text begin (a) The commissioner may bring a civil action to enjoin any
person from taking action or failing to take action that is
subject to penalty under section 289A.60, subdivisions 7, 20,
20a, 26, 27, and 28.
new text end

new text begin (b) In any action under paragraph (a), the court may enjoin
the person from engaging in the conduct, if the court finds that:
new text end

new text begin (1) the person has engaged in the specified conduct; and
new text end

new text begin (2) injunctive relief is appropriate to prevent recurrence
of the conduct.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 2.

new text begin [289A.121] TAX SHELTERS SPECIAL RULES.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin The provisions of this section
apply to a tax shelter that:
new text end

new text begin (1) is organized in this state;
new text end

new text begin (2) is doing business in this state;
new text end

new text begin (3) is deriving income from sources in this state; or
new text end

new text begin (4) has one or more investors that are Minnesota taxpayers
under chapter 290.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section,
the definitions under sections 6111 and 6112 of the Internal
Revenue Code, including the regulations under those sections,
apply.
new text end

new text begin (b) The term "tax shelter" includes any reportable
transaction under subdivision 5.
new text end

new text begin Subd. 3. new text end

new text begin Registration. new text end

new text begin (a) Any tax shelter organizer
required to register a tax shelter under section 6111 of the
Internal Revenue Code must register the shelter with the
commissioner.
new text end

new text begin (b) A tax shelter organizer subject to this subdivision
must send a duplicate of the federal registration information,
along with any other information the commissioner requires, to
the commissioner not later than the day on which interests in
that tax shelter are first offered for sale.
new text end

new text begin (c) In addition to the requirements under paragraph (b),
any listed transactions must be registered with the commissioner
by the latest of:
new text end

new text begin (1) 60 days after entering into the transaction;
new text end

new text begin (2) 60 days after the transaction becomes a listed
transaction; or
new text end

new text begin (3) December 31, 2005.
new text end

new text begin Subd. 4. new text end

new text begin Registration number. new text end

new text begin (a) Any person required to
register under section 6111 of the Internal Revenue Code who
receives a tax registration number from the Secretary of the
Treasury must, within 30 days after requested by the
commissioner, file a statement of that registration number with
the commissioner.
new text end

new text begin (b) Any person who sells or otherwise transfers an interest
in a tax shelter must, in the same time and manner required
under section 6111(b) of the Internal Revenue Code, furnish to
each investor who purchases or otherwise acquires an interest in
the tax shelter the identification number assigned under federal
law to the tax shelter.
new text end

new text begin (c) Any person claiming any deduction, credit, or other tax
benefit by reason of a tax shelter must include on the return of
tax on which the deduction, credit, or other benefit is claimed
the identification number assigned under federal law to the tax
shelter.
new text end

new text begin Subd. 5. new text end

new text begin Reportable transactions. new text end

new text begin (a) For each taxable
year in which a taxpayer must make a disclosure statement under
Code of Federal Regulations, title 26, section 1.6011-4, for a
reportable transaction, including a listed transaction, in which
the taxpayer participated in a taxable year for which a return
is required under chapter 290, the taxpayer must file a copy of
the disclosure with the commissioner.
new text end

new text begin (b) Any taxpayer that is a member of a unitary business
group that includes any person that must make a disclosure
statement under Code of Federal Regulations, title 26, section
1.6011-4, must file a disclosure under this subdivision.
new text end

new text begin (c) Disclosure under this subdivision is required for any
transaction entered into after December 31, 2001, that the
Internal Revenue Service determines is a listed transaction at
any time, and must be made in the manner prescribed by the
commissioner. For transactions in which the taxpayer
participated for taxable years ending before December 31, 2005,
disclosure must be made by the due date of the first return
required under chapter 290 after the enactment of this section.
With respect to transactions in which the taxpayer participated
for taxable years ending on and after December 31, 2005,
disclosure must be made in the time and manner prescribed in the
Code of Federal Regulations, title 26, section 1.6011-4(e).
new text end

new text begin (d) Notwithstanding paragraphs (a) to (c), no disclosure is
required for transactions entered into after December 31, 2001,
and before January 1, 2006, (1) if the taxpayer has filed an
amended income tax return which reverses the tax benefits of the
potential tax avoidance transaction, or (2) as a result of a
federal audit the Internal Revenue Service has determined the
tax treatment of the transaction and an amended return has been
filed to reflect the federal treatment.
new text end

new text begin Subd. 6. new text end

new text begin Abusive shelters; lists of investors. new text end

new text begin (a) Any
person required to maintain a list under section 6112 of the
Internal Revenue Code with respect to a potentially abusive tax
shelter must furnish the list to the commissioner no later than
when required under federal law. The list required under this
subdivision must include the same information required with
respect to a potentially abusive tax shelter under Code of
Federal Regulations, title 26, section 301.6112-1, and any other
information the commissioner requires.
new text end

new text begin (b) For transactions entered into on or after December 31,
2001, that become listed transactions at any time, the list must
be furnished to the commissioner by the latest of:
new text end

new text begin (1) 60 days after entering into the transaction;
new text end

new text begin (2) 60 days after the transaction becomes a listed
transaction; or
new text end

new text begin (3) December 31, 2005.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2004, section 289A.38, is
amended by adding a subdivision to read:

new text begin Subd. 15. new text end

new text begin Reportable transactions. new text end

new text begin If a taxpayer fails
to include on any return or statement for any taxable year any
information with respect to a reportable transaction, as
required by federal law and under section 289A.121, subdivision
5, the commissioner may recompute the tax, including a refund,
within six years after the return is filed with respect to the
taxable year in which the taxpayer participated in the
reportable transaction. If tax is assessable solely because of
this section, the assessable deficiency is limited to the items
that were not disclosed as required under section 289A.121,
subdivision 5.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2004, section 289A.60,
subdivision 4, is amended to read:

Subd. 4.

Substantial understatement of liability;
penalty.

new text begin (a) new text end The commissioner of revenue shall impose a penalty
for substantial understatement of any tax payable to the
commissioner, except a tax imposed under chapter 297A.

new text begin (b) new text end There must be added to the tax an amount equal to 20
percent of the amount of any underpayment attributable to the
understatement. There is a substantial understatement of tax
for the period if the amount of the understatement for the
period exceeds the greater of:

(1) ten percent of the tax required to be shown on the
return for the period; or

(2) deleted text begin (a) deleted text end new text begin (i) new text end $10,000 in the case of a mining company or a
corporation, other than an S corporation as defined in section
290.9725, when the tax is imposed by chapter 290 new text begin or section
298.01 or 298.015 new text end , or

deleted text begin (b) deleted text end new text begin (ii) new text end $5,000 in the case of any other taxpayer, and in
the case of a mining company or a corporation any tax not
imposed by chapter 290 or section 298.01 or 298.015.

new text begin (c) For a corporation, other than an S corporation, that
has been contacted by the commissioner regarding the use of a
potentially abusive tax shelter, as defined under section
289A.121, there is also a substantial understatement of tax for
any taxable year if the amount of the understatement for the
taxable year exceeds the lesser of:
new text end

new text begin (1) ten percent of the tax required to be shown on the
return for the taxable year (or, if greater, $2,500); or
new text end

new text begin (2) $5,000,000.
new text end

new text begin (d) new text end The term "understatement" means the excess of the
amount of the tax required to be shown on the return for the
period, over the amount of the tax imposed that is shown on the
return. The amount of the understatement shall be reduced by
that part of the understatement that is attributable to the tax
treatment of any item by the taxpayer if there is or was
substantial authority for the treatment, or any item with
respect to which the relevant facts affecting the item's tax
treatment are adequately disclosed in the return or in a
statement attached to the return. The special rules in cases
involving tax shelters provided in section 6662(d)(2)(C) of the
Internal Revenue Code shall apply and shall apply to a tax
shelter the principal purpose of which is the avoidance or
evasion of state taxes. The commissioner may abate all or any
part of the addition to the tax provided by this section on a
showing by the taxpayer that there was reasonable cause for the
understatement, or part of it, and that the taxpayer acted in
good faith. The additional tax and penalty shall bear interest
at the rate specified in section 270.75 from the time the tax
should have been paid until paid.

new text begin (e) For taxpayers that have been contacted by the
commissioner regarding the use of a potentially abusive tax
shelter within the meaning of section 298A.121, the amount of
the understatement is reduced by that part of the understatement
that is attributable to the tax treatment of any item by the
taxpayer if the taxpayer had reasonable belief that the tax
treatment was more likely than not the proper treatment or if
any item with respect to which the relevant facts affecting the
item's tax treatment are adequately disclosed in the return or
in a statement attached to the return.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxpayers
contacted by the commissioner after the day following final
enactment.
new text end

Sec. 5.

Minnesota Statutes 2004, section 289A.60,
subdivision 7, is amended to read:

Subd. 7.

Penalty for frivolous return.

new text begin (a) new text end If a taxpayer
files what purports to be a tax return or a claim for refund but
which does not contain information on which the substantial
correctness of the purported return or claim for refund may be
judged or contains information that on its face shows that the
purported return or claim for refund is substantially incorrect
and the conduct is due to a position that is frivolous or a
desire that appears on the purported return or claim for refund
to delay or impede the administration of Minnesota tax laws,
then the individual shall pay a penalty of the greater of $1,000
or 25 percent of the amount of tax required to be shown on the
return. In a proceeding involving the issue of whether or not a
person is liable for this penalty, the burden of proof is on the
commissioner.

new text begin (b) If the taxpayer has been contacted by the commissioner
of revenue regarding the use of a potentially abusive tax
shelter within the meaning of section 289A.121, the penalty
under this subdivision is the greater of $5,000 or 25 percent of
the amount of tax required to be shown on the return.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns or
claims filed after the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2004, section 289A.60,
subdivision 20, is amended to read:

Subd. 20.

Penalty for promoting abusive tax shelters.

Any person who:

(1)(i) organizes or assists in the organization of a
partnership or other entity, an investment plan or arrangement,
or any other plan or arrangement, or (ii) participates in the
sale of any interest in an entity or plan or arrangement
referred to in clause (i); and

(2) makes or furnishes in connection with the organization
or sale a statement with respect to the allowability of a
deduction or credit, the excludability of income, or the
securing of any other tax benefit by reason of holding an
interest in the entity or participating in the plan or
arrangement that the person knows or has reason to know is false
or fraudulent concerning any material matter, shall pay a
penalty equal to the greater of $1,000 or deleted text begin 20 deleted text end new text begin 50 new text end percent of the
gross income derived or to be derived by the person from the
activity.

The penalty imposed by this subdivision is in addition to
any other penalty provided by this section. The penalty must be
collected in the same manner as any delinquent income tax. In a
proceeding involving the issue of whether or not any person is
liable for this penalty, the burden of proof is upon the
commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for
transactions entered into after the day following final
enactment.
new text end

Sec. 7.

Minnesota Statutes 2004, section 289A.60, is
amended by adding a subdivision to read:

new text begin Subd. 20a. new text end

new text begin Aiding and abetting understating of tax
liability. new text end

new text begin (a) A penalty in the amount under paragraph (b) for
each document is imposed on each person who:
new text end

new text begin (1) aids or assists in, procures, or advises with respect
to, the preparation or presentation of any portion of a return,
affidavit, claim, or other document;
new text end

new text begin (2) knows or has reason to believe that the portion of a
return, affidavit, claim, or other document will be used in
connection with any material matter arising under the Minnesota
individual income or corporate franchise tax; and
new text end

new text begin (3) knows that the portion, if so used, would result in an
understatement of the liability for tax of another person.
new text end

new text begin (b)(1) Except as provided in clause (2), the amount of the
penalty imposed by this subdivision is $1,000.
new text end

new text begin (2) If the return, affidavit, claim, or other document
relates to the tax liability of a corporation, the amount of the
penalty imposed by paragraph (a) is $10,000.
new text end

new text begin (3) If any person is subject to a penalty under paragraph
(a) for any document relating to any taxpayer for any taxable
period or taxable event, the person is not subject to a penalty
under paragraph (a) for any other document relating to the
taxpayer for the taxable period or event.
new text end

new text begin (c) For purposes of this subdivision, "procures" includes
(i) ordering or otherwise causing any other person to do an act,
and (ii) knowing of, and not attempting to prevent,
participation by any other person in an act.
new text end

new text begin (d) The penalty under this subdivision applies whether or
not the understatement is with the knowledge or consent of the
persons authorized or required to present the return, affidavit,
claim, or other document.
new text end

new text begin (e) For purposes of paragraph (a), clause (1), a person
furnishing typing, reproducing, or other mechanical assistance
with respect to a document is not treated as having aided or
assisted in the preparation of the document by reason of the
assistance.
new text end

new text begin (f)(1) Except as provided by clause (2), the penalty
imposed by this section is in addition to any other penalty
provided by law.
new text end

new text begin (2) No penalty applies under subdivision 20 to any person
for any document for which a penalty is assessed on the person
under this subdivision.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for documents
prepared after the day following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2004, section 289A.60, is
amended by adding a subdivision to read:

new text begin Subd. 26. new text end

new text begin Tax shelter penalties; registration and
listing. new text end

new text begin (a) For purposes of this subdivision, "material
advisor" has the meaning given it under Code of Federal
Regulations, title 26, section 301.6112-1(c)(2).
new text end

new text begin (b) The penalties in this subdivision apply in connection
with the use of tax shelters, as defined under section 289A.121.
new text end

new text begin (c) A person who fails to register a tax shelter, including
providing all of the required information under section
289A.121, subdivision 3, is subject to a penalty of $15,000. If
the tax shelter is a listed shelter and disclosure is not made
as required by section 289A.121, subdivision 5, a penalty
applies equal to the greater of:
new text end

new text begin (1) $100,000;
new text end

new text begin (2) 50 percent of the gross income that the organizer or
material advisor derived from that activity; or
new text end

new text begin (3) 75 percent of the gross income that the organizer or
material advisor derived from that activity if the organizer or
material advisor intentionally failed to act.
new text end

new text begin (d) Any person who fails to supply a tax shelter
registration number required under section 289A.121, subdivision
4, paragraph (b), is subject to a penalty of $100 for each
failure. Any person who fails to include a tax shelter
registration number on a return as required under section
289A.121, subdivision 4, paragraph (c), is subject to a penalty
of $250 for each failure, unless the failure was due to
reasonable cause. The penalties under this paragraph are in
addition to any penalties under paragraph (c).
new text end

new text begin (e) The person required to maintain or provide a list under
section 289A.121, subdivision 6, is subject to a penalty equal
to:
new text end

new text begin (1) for reportable transactions, $10,000 for each day after
the 20th day that the organizer or material advisor failed to
make the list available to the commissioner after written
request for that list was made; and
new text end

new text begin (2) for listed transactions, the greater of:
new text end

new text begin (i) $100,000; or
new text end

new text begin (ii) 50 percent of the gross income that the organizer or
material advisor derived from that activity.
new text end

new text begin (f) The penalty imposed by this subdivision is in addition
to any penalty imposed under this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2000.
new text end

Sec. 9.

Minnesota Statutes 2004, section 289A.60, is
amended by adding a subdivision to read:

new text begin Subd. 27. new text end

new text begin Failure to report; reportable transaction. new text end

new text begin (a)
Any large entity or high net worth individual who fails to
include on any return or statement any information with respect
to a reportable transaction that is required under section 6011
of the Internal Revenue Code and under section 289A.121, to be
included with that return or statement must pay a penalty for
each omission in the amount determined under paragraph (b).
new text end

new text begin (b) The penalty is $15,000, except for a listed transaction
the penalty is $30,000.
new text end

new text begin (c) For purposes of this subdivision:
new text end

new text begin (1) "High net worth individual" means, for a transaction,
an individual whose net worth exceeds $2,000,000 immediately
before the transaction.
new text end

new text begin (2) "Large entity" means, for any taxable year, a person,
other than an individual, with gross receipts in excess of
$10,000,000 for either the taxable year in which the reportable
transaction occurs or in the preceding taxable year. Rules
similar to the rules of section 448(c)(2) and 448(c)(3) of the
Internal Revenue Code, other than section 448(c)(3)(A) of the
Internal Revenue Code, apply.
new text end

new text begin (3) "Reportable transaction" means a reportable transaction
under section 289A.121, subdivision 5.
new text end

new text begin (4) Except as provided in regulations prescribed by the
Secretary of the Treasury, the term "listed transaction" means a
reportable transaction, as defined in clause (3), that is the
same as, or substantially similar to, a transaction specifically
identified by the Secretary of the Treasury for purposes of
section 6011 of the Internal Revenue Code for federal income tax
purposes as a tax avoidance transaction.
new text end

new text begin (d) The penalty imposed by this subdivision is in addition
to any penalty imposed under this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2000.
new text end

Sec. 10.

Minnesota Statutes 2004, section 289A.60, is
amended by adding a subdivision to read:

new text begin Subd. 28. new text end

new text begin Reportable transaction understatement. new text end

new text begin (a) If
a taxpayer has a reportable transaction understatement for any
taxable year, an amount equal to 20 percent of the amount of the
understatement must be added to the tax.
new text end

new text begin (b)(1) For purposes of this subdivision, "reportable
transaction understatement" means the product of:
new text end

new text begin (i) the amount of the increase, if any, in taxable income
that results from a difference between the proper tax treatment
of an item to which this section applies and the taxpayer's
treatment of that item as shown on the taxpayer's tax return;
and
new text end

new text begin (ii) the highest rate of tax imposed on the taxpayer under
section 290.06.
new text end

new text begin (2) For purposes of clause (1)(i), any reduction of the
excess of deductions allowed for the taxable year over gross
income for that year, and any reduction in the amount of capital
losses which would, without regard to section 1211 of the
Internal Revenue Code, be allowed for that year, must be treated
as an increase in taxable income.
new text end

new text begin (c) This subdivision applies to any item that is
attributable to:
new text end

new text begin (1) any listed transaction under section 289A.121; and
new text end

new text begin (2) any reportable transaction, other than a listed
transaction, if a significant purpose of that transaction is the
avoidance or evasion of federal income tax liability.
new text end

new text begin (d) The penalty imposed by this subdivision is in addition
to any penalty imposed under this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2000.
new text end

Sec. 11.

Minnesota Statutes 2004, section 289A.60, is
amended by adding a subdivision to read:

new text begin Subd. 29. new text end

new text begin Addition to tax. new text end

new text begin (a) If a taxpayer has been
contacted by the commissioner regarding the use of a potentially
abusive tax shelter and has a deficiency, there must be added to
the tax an amount equal to 100 percent of the interest payable
under section 270.75 for the period beginning on the last date
prescribed by law for the payment of that tax, determined
without regard to extensions, and ending on the date the notice
of proposed assessment is mailed.
new text end

new text begin (b) "Potentially abusive tax shelter" means:
new text end

new text begin (1) any tax shelter, as defined in section 6111 of the
Internal Revenue Code, for which registration is required under
section 289A.121; or
new text end

new text begin (2) any entity, investment plan or arrangement, or other
plan or arrangement which is of a type that the Secretary of the
Treasury determines by regulations as having a potential for tax
avoidance or evasion.
new text end

new text begin (c) The penalty imposed by this subdivision is in addition
to any other penalty imposed under this section and to the
interest computation for purposes of section 270.75.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for notices of
proposed assessments mailed after the day following final
enactment.
new text end

Sec. 12.

Minnesota Statutes 2004, section 289A.60, is
amended by adding a subdivision to read:

new text begin Subd. 30. new text end

new text begin Authority to abate tax shelter penalties. new text end

new text begin (a)
Notwithstanding section 270.07, the commissioner may abate all
or any portion of any penalty imposed by subdivisions 20, 20a,
and 26 to 29 for any violation, only if all of the following
apply:
new text end

new text begin (1) the violation is for a reportable transaction, other
than a listed transaction, as defined under Code of Federal
Regulations, title 26, section 6011-4;
new text end

new text begin (2) the person on whom the penalty is imposed has a history
of complying with the requirements of this chapter and chapter
290;
new text end

new text begin (3) the violation is due to an unintentional mistake of
fact;
new text end

new text begin (4) imposing the penalty would be against equity and good
conscience; and
new text end

new text begin (5) abating the penalty would promote compliance with the
requirements of chapter 290.
new text end

new text begin (b) The exercise of authority under paragraph (a) is at the
sole discretion of the commissioner and may not be delegated.
Notwithstanding any other law or rule, a determination under
this subdivision may not be reviewed in any administrative or
judicial proceeding.
new text end

Sec. 13.

Minnesota Statutes 2004, section 289A.60, is
amended by adding a subdivision to read:

new text begin Subd. 31. new text end

new text begin Interest computation. new text end

new text begin For an amended return
filed after December 31, 2005, and before the taxpayer is
contacted by the Internal Revenue Service or the commissioner
regarding a potentially abusive tax shelter, then, for taxable
years beginning after December 31, 2001, with respect to any
understatement of tax related to using reportable transactions
as defined in section 289A.121, the taxpayer is subject to
interest at a rate of 150 percent of the applicable rate under
section 270.75.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2005.
new text end

Sec. 14. new text begin VOLUNTARY COMPLIANCE INITIATIVE.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment. new text end

new text begin The commissioner of
revenue shall establish and administer a voluntary compliance
initiative for taxpayers subject to Minnesota Statutes, section
289A.60, subdivision 26, 27, or 28.
new text end

new text begin Subd. 2. new text end

new text begin Time period; scope. new text end

new text begin (a) The commissioner shall
conduct the voluntary compliance initiative from July 1, 2005,
to December 31, 2005, under Minnesota Statutes, section 270.07.
new text end

new text begin (b) The voluntary compliance initiative applies to tax
liabilities and penalties attributable to an abusive tax
avoidance transaction for taxable years beginning before January
1, 2005. An abusive tax avoidance transaction means a listed
transaction, a potentially abusive tax shelter, or a reportable
transaction as those terms are used in Minnesota Statutes,
section 289A.121.
new text end

new text begin Subd. 3. new text end

new text begin Eligibility. new text end

new text begin (a) No person may participate in
the voluntary compliance initiative, if:
new text end

new text begin (1) the taxpayer was convicted of a crime in connection
with an abusive tax avoidance transaction or transactions;
new text end

new text begin (2) a criminal complaint was filed against the taxpayer in
connection with an abusive tax avoidance transaction or
transactions;
new text end

new text begin (3) the taxpayer is the subject of a criminal investigation
in connection with an abusive tax avoidance transaction or
transactions; or
new text end

new text begin (4) the taxpayer was eligible to participate in the
Internal Revenue Service's Offshore Voluntary Compliance
Initiative, as set forth in Revenue Procedure 2003-11.
new text end

new text begin (b) A person not disqualified under paragraph (a) may
participate in the voluntary compliance initiative.
new text end

new text begin Subd. 4. new text end

new text begin Election; commissioner authority. new text end

new text begin (a) An
eligible taxpayer that meets the requirements of subdivision 3
with respect to any taxable year may elect to participate in the
voluntary compliance program under either subdivision 5 or 6 for
a particular tax avoidance period. The election must be made
separately for each taxable year and in the form and manner
prescribed by the commissioner, and once made is irrevocable.
new text end

new text begin (b) The commissioner of revenue may issue forms and
instructions and take other actions necessary, including the use
of agreements under Minnesota Statutes, section 270.67, to
implement the voluntary compliance initiative.
new text end

new text begin Subd. 5. new text end

new text begin Participation without right of appeal. new text end

new text begin (a) A
person participating in the voluntary compliance initiative
under this subdivision waives the right to an administrative
appeal, to a claim for refund, or to file an action in district
court or tax court. The person participating must:
new text end

new text begin (1) file an amended return for each taxable year for which
the taxpayer has filed a tax return using an abusive tax
avoidance transaction to underreport the taxpayer's tax
liability for the taxable year. Each amended return must report
all income from all sources, without regard to the abusive tax
avoidance transactions; and
new text end

new text begin (2) pay taxes and interest due in full, except that the
commissioner of revenue may enter into an installment payment
agreement under Minnesota Statutes, section 270.67, before the
taxpayer files an amended return.
new text end

new text begin (b) The commissioner of revenue shall abate all penalties
imposed under Minnesota Statutes, chapter 289A, which could have
been assessed in connection with the use of an abusive tax
avoidance transaction, for each taxable year for which the
taxpayer elects to participate in the voluntary compliance
initiative under this subdivision, to the extent those penalties
are a result of underreporting of tax liabilities attributable
to the use of abusive tax avoidance transactions, for which a
participating person files an amended return in compliance with
paragraph (a).
new text end

new text begin (c) No criminal action must be brought against a taxpayer
for the taxable years reported under the voluntary compliance
initiative with respect to the issues for which a taxpayer
voluntarily complies under this chapter.
new text end

new text begin (d) A person filing an amended return under this
subdivision of the voluntary compliance initiative may not file
a claim for refund, an administrative appeal, or an action in
district court with regard to the amount of taxes or interest
paid with the amended return. Nothing in this subdivision
precludes a taxpayer from filing a claim for credit or refund
for the same taxable year in which a tax avoidance transaction
was reported if the credit or refund is not attributable to the
tax avoidance transaction.
new text end

new text begin Subd. 6. new text end

new text begin Participation with right of appeal. new text end

new text begin (a) A
person participating in the voluntary compliance initiative who
does not waive the right to an administrative appeal, a claim
for refund, or an action in district court must:
new text end

new text begin (1) file an amended return for each taxable year for which
the taxpayer has filed a tax return using an abusive tax
avoidance transaction to underreport the taxpayer's tax
liability for that taxable year. Each amended return must
report all income from all sources, without regard to the
abusive tax avoidance transactions; and
new text end

new text begin (2) pay taxes and interest due in full, except that the
commissioner of revenue may enter into an installment payment
agreement pursuant to Minnesota Statutes, section 270.67, prior
to the taxpayer filing an amended return.
new text end

new text begin (b) The commissioner of revenue shall abate all penalties
imposed under Minnesota Statutes, chapter 289A, except for the
penalty for substantial understatement of tax liability under
Minnesota Statutes, section 289A.60, subdivision 4, determined
without regard to paragraph (e) of that section, which could
have been assessed in connection with the use of an abusive tax
avoidance transaction, for each taxable year for which the
taxpayer elects to participate in the voluntary compliance
initiative under this subdivision, to the extent those penalties
apply to underreporting of tax liabilities attributable to the
use of abusive tax avoidance transactions for which a
participating person files an amended return in compliance with
paragraph (a).
new text end

new text begin (c) No criminal action must be brought against a taxpayer
for the taxable years reported under the voluntary compliance
initiative with respect to the issues for which a taxpayer
voluntarily complies under this chapter.
new text end

new text begin (d) The taxpayer may file a claim for refund, an
administrative appeal, or an action in district court only after
the earlier of the following occurs:
new text end

new text begin (1) the date the commissioner of revenue takes action on
the claim for refund for the taxable year;
new text end

new text begin (2) the later of:
new text end

new text begin (i) 180 days after the date of a final determination by the
Internal Revenue Service with respect to the transaction or
transactions to which Minnesota Statutes, chapter 290, applies;
or
new text end

new text begin (ii) four years after the date the claim for refund was
filed, or one year after full payment of all tax was made,
including penalty and interest, whichever is later.
new text end

new text begin (e)(1) The taxpayer is subject to the substantial
understatement penalty under Minnesota Statutes, section
289A.60, subdivision 4. The penalty may be assessed:
new text end

new text begin (i) when the commissioner of revenue takes action on the
claim for refund; or
new text end

new text begin (ii) when a federal determination becomes final for the
same issue, in which case the penalty must be assessed, and may
not be abated, if the penalty was assessed at the federal level.
new text end

new text begin (2) In determining the amount of the underpayment of tax,
Code of Federal Regulations, title 26, section 1.6664-2(c)(2),
relating to qualified amended returns, applies. The
underpayment is the difference between the amount of tax on the
original return and the correct amount of tax for the taxable
year. The underpayment must not be less than the amount of the
claim for refund filed by the taxpayer under paragraph (d) that
was denied.
new text end

new text begin (3) The penalty is due and payable upon notice and demand
by the commissioner of revenue. Only after the taxpayer has
paid all amounts due, including the penalty, and the claim is
denied in whole or in part, may the taxpayer file an appeal
under Minnesota Statutes, section 270.07, in conjunction with
the appeal filed under paragraph (d).
new text end

new text begin Subd. 7. new text end

new text begin Commissioner orders and penalties. new text end

new text begin After
December 31, 2005, the commissioner of revenue may issue an
order of assessment within the time period permitted under
Minnesota Statutes, section 289A.38, upon an amended return
filed under this section for an underreported amount of tax, may
impose penalties on an underreported amount of tax on an amended
return filed under this chapter, or seek initiation of a
criminal action against any person based on any underreported
amount of tax on an amended return filed under this chapter.
new text end

new text begin Subd. 8. new text end

new text begin Penalty relief; exception. new text end

new text begin For purposes of this
section, if the commissioner subsequently determines that the
correct amount of Minnesota income tax was not paid for the
taxable year for a participant in the voluntary compliance
initiative, then the penalty relief under this section does not
apply to any portion of the underpayment attributable to a tax
avoidance transaction not paid to the state.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 15. new text begin APPROPRIATION.
new text end

new text begin For purposes of administering the voluntary compliance
initiative and the tax shelter registration and compliance
provisions of this act, $....... is appropriated from the
general fund for fiscal year 2006 and $....... for fiscal year
2007 to the commissioner of revenue. $....... is added to the
base budget.
new text end

ARTICLE 11

MISCELLANEOUS

Section 1.

new text begin [15.60] PUBLIC SAFETY OFFICERS; AMERICAN
FLAG.
new text end

new text begin (a) A public employer may not forbid a peace officer or
firefighter from wearing a patch or pin depicting the flag of
the United States of America on the employee's uniform,
according to customary and standard flag etiquette. However, a
public employer may limit the size of a flag patch worn on a
uniform to no more than three inches by five inches.
new text end

new text begin (b) For purposes of this section:
new text end

new text begin (1) "peace officer" has the meaning given in section
626.84, subdivision 1, paragraph (c) or (f);
new text end

new text begin (2) "firefighter" means a person as defined in section
299A.41, subdivision 4, clause (3) or (4); and
new text end

new text begin (3) "public employer" has the meaning given in section
179A.03, subdivision 15, and also includes a municipal fire
department and an independent nonprofit firefighting corporation.
new text end

new text begin (c) The commissioner of finance or the commissioner of
revenue must suspend disbursement, not to exceed $10,000, of any
state appropriation or aid to any public employer whom the
commissioner determines is not complying with paragraph (a)
until the commissioner determines that the employer is in
compliance.
new text end

Sec. 2.

Minnesota Statutes 2004, section 16D.10, is
amended to read:

16D.10 CASE REVIEWER.

new text begin Subdivision 1. new text end

new text begin Duties. new text end

The commissioner shall make a
case reviewer available to debtors. The reviewer must be
available to answer a debtor's questions concerning the
collection process and to review the collection activity taken.
If the reviewer reasonably believes that the particular action
being taken is unreasonable or unfair, the reviewer may make
recommendations to the commissioner in regard to the collection
action.

new text begin Subd. 2. new text end

new text begin Authority to issue debtor assistance order. new text end

new text begin On
application filed by a debtor with the case reviewer, in the
form, manner, and in the time prescribed by the commissioner,
and after thorough investigation, the case reviewer may issue a
debtor assistance order if, in the determination of the case
reviewer, the manner in which the state debt collection laws are
being administered is creating or will create an unjust and
inequitable result for the debtor. Debtor assistance orders are
governed by the provisions relating to taxpayer assistance
orders under section 270.273.
new text end

new text begin Subd. 3. new text end

new text begin Transfer of duties to taxpayer rights advocate.
new text end

new text begin All duties and authority of the case reviewer under subdivisions
1 and 2 are transferred to the taxpayer rights advocate.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2004, section 270.02,
subdivision 3, is amended to read:

Subd. 3.

Powers, organization, assistants.

Subject to
the provisions of this chapter and other applicable laws the
commissioner shall have power to organize the department with
such divisions and other agencies as the commissioner deems
necessary and to appoint one deputy commissioner, a department
secretary, directors of divisions, and such other officers,
employees, and agents as the commissioner may deem necessary to
discharge the functions of the department, define the duties of
such officers, employees, and agents, and delegate to them any
of the commissioner's powers or duties, subject to the
commissioner's control and under such conditions as the
commissioner may prescribe. Appointments to exercise delegated
power to sign documents which require the signature of the
commissioner or a delegate by law shall be by written order
filed with the secretary of state. new text begin The delegations of authority
granted by the commissioner remain in effect until revoked by
the commissioner or a successor commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2004, section 270.30,
subdivision 1, is amended to read:

Subdivision 1.

Scope.

deleted text begin (a) deleted text end This section applies to a
person who deleted text begin offers, deleted text end provides deleted text begin , or facilitates the provision of
refund anticipation loans, as part of or in connection with the
provision of deleted text end tax preparation services.

deleted text begin (b) This section does not apply to:
deleted text end

deleted text begin (1) a tax preparer who provides tax preparation services
for fewer than six clients in a calendar year;
deleted text end

deleted text begin (2) the provision by a person of tax preparation services
to a spouse, parent, grandparent, child, or sibling; and
deleted text end

deleted text begin (3) the provision of services by an employee for an
employer.
deleted text end

Sec. 5.

Minnesota Statutes 2004, section 270.30,
subdivision 5, is amended to read:

Subd. 5.

Itemized bill required.

A tax preparer must
provide an itemized statement of the charges for services, at
least separately stating the charges for:

(1) return preparation; new text begin and
new text end

(2) deleted text begin electronic filing; and
deleted text end

deleted text begin (3) deleted text end providing or facilitating a refund anticipation loan.

Sec. 6.

Minnesota Statutes 2004, section 270.30, is
amended by adding a subdivision to read:

new text begin Subd. 5a. new text end

new text begin Nongame wildlife checkoff. new text end

new text begin A tax preparer must
give written notice of the option to contribute to the nongame
wildlife management account in section 290.431 to corporate
clients that file an income tax return and to individual clients
who file an income tax return or property tax refund claim
form. This notification must:
new text end

new text begin (1) state substantially the following: "You can help
preserve Minnesota's nongame wildlife, such as bald eagles and
loons, by donating to the nongame wildlife fund. If you wish to
donate, enter the amount on the appropriate line provided by
your tax preparer or otherwise notify your tax preparer. This
amount will decrease your refund or increase the amount you
owe"; and
new text end

new text begin (2) be included with information sent to the client at the
same time as the preliminary worksheets or other documents used
in preparing the client's return and must include a line for
displaying contributions.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns
prepared for taxable years beginning after December 31, 2004.
new text end

Sec. 7.

Minnesota Statutes 2004, section 270.30,
subdivision 6, is amended to read:

Subd. 6.

Enforcement; penalties.

The commissioner may
impose an administrative penalty of not more than $1,000 per
violation of subdivision 3, 4, or 5. The commissioner may
terminate a tax preparer's authority to transmit returns
electronically to the state, if the commissioner determines the
tax preparer engaged in a pattern and practice of violating this
section. Imposition of a penalty under this subdivision is
subject to the contested case procedure under chapter 14. The
commissioner shall collect the penalty in the same manner as the
income tax. new text begin Penalties imposed under this subdivision are public
data.
new text end

Sec. 8.

Minnesota Statutes 2004, section 270.30, is
amended by adding a subdivision to read:

new text begin Subd. 6a. new text end

new text begin Exchange of data; state board of
accountancy. new text end

new text begin The State Board of Accountancy shall refer to the
commissioner complaints it receives about tax preparers who are
not subject to the jurisdiction of the State Board of
Accountancy and who are alleged to have violated the provisions
of subdivisions 3 to 5.
new text end

Sec. 9.

Minnesota Statutes 2004, section 270.30, is
amended by adding a subdivision to read:

new text begin Subd. 6b. new text end

new text begin Exchange of data; lawyers board of professional
responsibility. new text end

new text begin The Lawyers Board of Professional
Responsibility may refer to the commissioner complaints it
receives about tax preparers who are not subject to its
jurisdiction and who are alleged to have violated the provisions
of subdivisions 3 to 5.
new text end

Sec. 10.

Minnesota Statutes 2004, section 270.30, is
amended by adding a subdivision to read:

new text begin Subd. 6c. new text end

new text begin Exchange of data; commissioner. new text end

new text begin The
commissioner shall refer complaints about tax preparers who are
alleged to have violated the provisions of subdivisions 3 to 5
to:
new text end

new text begin (1) the State Board of Accountancy, if the tax preparer is
under its jurisdiction; and
new text end

new text begin (2) the Lawyers Board of Professional Responsibility, if
the tax preparer is under its jurisdiction.
new text end

Sec. 11.

Minnesota Statutes 2004, section 270.30, is
amended by adding a subdivision to read:

new text begin Subd. 6d. new text end

new text begin Data private. new text end

new text begin Information exchanged on
individuals under subdivisions 6a to 6c are private data under
section 13.02, subdivision 12, until such time as a penalty is
imposed as provided in section 326A.08 or by the Lawyers Board
of Professional Responsibility.
new text end

Sec. 12.

Minnesota Statutes 2004, section 270.30,
subdivision 8, is amended to read:

Subd. 8.

Exemptions; enforcement provisions.

new text begin (a) new text end The
provisions of deleted text begin subdivisions 6 and 7 deleted text end new text begin this section, except for
subdivision 4, new text end do not apply to:

(1) an attorney admitted to practice under section 481.01;

(2) a certified public accountant deleted text begin holding a certificate
under section 326A.04 or a person issued a permit to practice
under section 326A.05 deleted text end new text begin or other person who is subject to the
jurisdiction of the State Board of Accountancy new text end ;

(3) deleted text begin a person designated as a registered accounting
practitioner under Minnesota Rules, part 1105.6600, or a
registered accounting practitioner firm issued a permit under
Minnesota Rules, part 1105.7100;
deleted text end

deleted text begin (4) deleted text end an enrolled agent who has passed the special enrollment
examination administered by the Internal Revenue Service; deleted text begin and
deleted text end

deleted text begin (5) deleted text end new text begin (4) new text end any fiduciary, or the regular employees of a
fiduciary, while acting on behalf of the fiduciary estate, the
testator, trustor, grantor, or beneficiaries of them new text begin ;
new text end

new text begin (5) a tax preparer who provides tax preparation services
for fewer than six clients in a calendar year;
new text end

new text begin (6) tax preparation services to a spouse, parent,
grandparent, child, or sibling of the tax preparer; and
new text end

new text begin (7) the preparation by an employee of the tax return of the
employee's employer new text end .

Sec. 13.

new text begin [270.301] PUBLICATION OF NAMES OF TAX PREPARERS
SUBJECT TO PENALTIES.
new text end

new text begin Subdivision 1. new text end

new text begin Publication of list. new text end

new text begin Notwithstanding any
other law, the commissioner must publish as provided in this
section a list or lists of tax preparers subject to penalties.
new text end

new text begin Subd. 2. new text end

new text begin Required and excluded tax preparers. new text end

new text begin (a)
Subject to the limitations of paragraph (b), the commissioner
must publish lists of tax preparers who have been convicted
under section 289A.63.
new text end

new text begin (b) For the purposes of this section, tax preparers are not
subject to publication if:
new text end

new text begin (1) an administrative or court action contesting the
penalty has been filed or served and is unresolved at the time
when notice would be given under subdivision 3;
new text end

new text begin (2) an appeal period to contest the penalty has not
expired; or
new text end

new text begin (3) the commissioner has been notified that the tax
preparer is deceased.
new text end

new text begin Subd. 3. new text end

new text begin Notice to tax preparer. new text end

new text begin (a) At least 30 days
before publishing the name of a tax preparer subject to penalty,
the commissioner shall mail a written notice to the tax
preparer, detailing the amount and nature of each penalty and
the intended publication of the information listed in
subdivision 4 related to the penalty. The notice must be mailed
by first class and certified mail addressed to the last known
address of the tax preparer. The notice must include
information regarding the exceptions listed in subdivision 2,
paragraph (b), and must state that the tax preparer's
information will not be published if the tax preparer provides
information establishing that subdivision 2, paragraph (b),
prohibits publication of the tax preparer's name.
new text end

new text begin (b) Thirty days after the notice is mailed and if the tax
preparer has not proved to the commissioner that subdivision 2,
paragraph (b), prohibits publication, the commissioner may
publish in a list of tax preparers subject to penalty the
information about the tax preparer that is listed in subdivision
4.
new text end

new text begin Subd. 4. new text end

new text begin Form of list. new text end

new text begin The list may be published by any
medium or method. The list must contain the name, associated
business name or names, address or addresses, and violation or
violations for which a penalty was imposed of each tax preparer
subject to penalty.
new text end

new text begin Subd. 5. new text end

new text begin Removal from list. new text end

new text begin The commissioner shall
remove the name of a tax preparer from the list of tax preparers
published under this section:
new text end

new text begin (1) when the commissioner determines that the name was
included on the list in error;
new text end

new text begin (2) within 90 days after the preparer has fully paid all
fines imposed, served any suspension, and demonstrated to the
satisfaction of the commissioner that the preparer has
successfully completed any remedial actions required by the
commissioner, the State Board of Accountancy, or the Lawyers
Board of Professional Responsibility; or
new text end

new text begin (3) when the commissioner has been notified that the tax
preparer is deceased.
new text end

new text begin Subd. 6. new text end

new text begin Names published in error. new text end

new text begin If the commissioner
publishes a name under subdivision 1 in error, the tax preparer
whose name was erroneously published has a right to request a
retraction and apology. If the tax preparer so requests, the
commissioner shall publish a retraction and apology
acknowledging that the tax preparer's name was published in
error. The retraction and apology must appear in the same
medium and the same format as the original list that contained
the name listed in error.
new text end

new text begin Subd. 7. new text end

new text begin Payment of damages. new text end

new text begin Actions against the
commissioner of revenue or the state of Minnesota arising out of
the implementation of this program must be brought under section
270.276.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin The provision of this section requiring
the commissioner to publish the names of tax preparers applies
only to publishing the names of those tax preparers who commit a
crime under section 289A.63 on or after August 1, 2005.
new text end

Sec. 14.

Minnesota Statutes 2004, section 270.65, is
amended to read:

270.65 DATE OF ASSESSMENT; DEFINITION.

For purposes of taxes administered by the commissioner, the
term "date of assessment" means the date a liability reported on
a return was entered into the records of the commissioner or the
date a return should have been filed, whichever is later; or, in
the case of taxes determined by the commissioner, "date of
assessment" means the date of the order assessing taxes or date
of the return made by the commissioner; or, in the case of an
amended return filed by the taxpayer, the assessment date is the
date additional liability reported on the return, if any, was
entered into the records of the commissioner; new text begin or, in the case of
a consent agreement signed by the taxpayer under section 270.67,
subdivision 3, the assessment date is the notice date shown on
the agreement; new text end or, in the case of a check from a taxpayer that
is dishonored and results in an erroneous refund being given to
the taxpayer, remittance of the check is deemed to be an
assessment and the "date of assessment" is the date the check
was received by the commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 15.

Minnesota Statutes 2004, section 270.67,
subdivision 4, is amended to read:

Subd. 4.

Offer-in-compromise and installment payment
program.

(a) In implementing the authority provided in
subdivision 2 or in sections 8.30 and 16D.15 to accept offers of
installment payments or offers-in-compromise of tax liabilities,
the commissioner of revenue shall prescribe guidelines for
employees of the Department of Revenue to determine whether an
offer-in-compromise or an offer to make installment payments is
adequate and should be accepted to resolve a dispute. In
prescribing the guidelines, the commissioner shall develop and
publish schedules of national and local allowances designed to
provide that taxpayers entering into a compromise or payment
agreement have an adequate means to provide for basic living
expenses. The guidelines must provide that the taxpayer's
ownership interest in a motor vehicle, to the extent of the
value allowed in section 550.37, will not be considered as an
asset; in the case of an offer related to a joint tax liability
of spouses, that value of two motor vehicles must be excluded.
The guidelines must provide that employees of the department
shall determine, on the basis of the facts and circumstances of
each taxpayer, whether the use of the schedules is appropriate
and that employees must not use the schedules to the extent the
use would result in the taxpayer not having adequate means to
provide for basic living expenses. The guidelines must provide
that:

(1) an employee of the department shall not reject an
offer-in-compromise or an offer to make installment payments
from a low-income taxpayer solely on the basis of the amount of
the offer; and

(2) in the case of an offer-in-compromise which relates
only to issues of liability of the taxpayer:

(i) the offer must not be rejected solely because the
commissioner is unable to locate the taxpayer's return or return
information for verification of the liability; and

(ii) the taxpayer shall not be required to provide an
audited, reviewed, or compiled financial statement.

(b) The commissioner shall establish procedures:

(1) that require presentation of a counteroffer or a
written rejection of the offer by the commissioner if the amount
offered by the taxpayer in an offer-in-compromise or an offer to
make installment payments is not accepted by the commissioner;

(2) for an administrative review of any written rejection
of a proposed offer-in-compromise or installment agreement made
by a taxpayer under this section before the rejection is
communicated to the taxpayer;

(3) that allow a taxpayer to request reconsideration of any
written rejection of the offer or agreement to the commissioner
of revenue to determine whether the rejection is reasonable and
appropriate under the circumstances; and

(4) that provide for notification to the taxpayer when an
offer-in-compromise has been accepted, and issuance of
certificates of release of any liens imposed under section
270.69 related to the liability which is the subject of the
compromise.

new text begin (c) Each compromise proposal must be accompanied by a
nonrefundable payment of $250. If the compromise proposal is
accepted, the payment must be applied to the accepted compromise
amount. If the compromise is rejected, the payment must be
applied to the outstanding tax debts of the taxpayer pursuant to
section 270.652. In cases of financial hardship, upon
presentation of information establishing an inability to make
the $250 payment, the commissioner may waive this requirement.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for offers in
compromise submitted after August 31, 2005.
new text end

Sec. 16.

Minnesota Statutes 2004, section 270.69,
subdivision 4, is amended to read:

Subd. 4.

Period of limitations.

The lien imposed by this
section shall, notwithstanding any other provision of law to the
contrary, be enforceable from the time the lien arises and for
ten years from the date of filing the notice of lien, which must
be filed by the commissioner within five years after the date of
assessment of the tax or final administrative or judicial
determination of the assessment. A notice of lien filed in one
county may be transcribed to new text begin the secretary of state or to new text end any
other county within ten years after the date of its filing, but
the transcription shall not extend the period during which the
lien is enforceable. A notice of lien may be renewed by the
commissioner before the expiration of the ten-year period for an
additional ten years. The taxpayer must receive written notice
of the renewal.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 17.

Minnesota Statutes 2004, section 270A.03,
subdivision 5, is amended to read:

Subd. 5.

Debt.

"Debt" means a legal obligation of a
natural person to pay a fixed and certain amount of money, which
equals or exceeds $25 and which is due and payable to a claimant
agency. The term includes criminal fines imposed under section
609.10 or 609.125 new text begin , fines imposed for petty misdemeanors as
defined in section 609.02, subdivision 4a, new text end and restitution. The
term also includes the co-payment for the appointment of a
district public defender imposed under section 611.17, paragraph
(c). A debt may arise under a contractual or statutory
obligation, a court order, or other legal obligation, but need
not have been reduced to judgment.

A debt includes any legal obligation of a current recipient
of assistance which is based on overpayment of an assistance
grant where that payment is based on a client waiver or an
administrative or judicial finding of an intentional program
violation; or where the debt is owed to a program wherein the
debtor is not a client at the time notification is provided to
initiate recovery under this chapter and the debtor is not a
current recipient of food support, transitional child care, or
transitional medical assistance.

A debt does not include any legal obligation to pay a
claimant agency for medical care, including hospitalization if
the income of the debtor at the time when the medical care was
rendered does not exceed the following amount:

(1) for an unmarried debtor, an income of $8,800 or less;

(2) for a debtor with one dependent, an income of $11,270
or less;

(3) for a debtor with two dependents, an income of $13,330
or less;

(4) for a debtor with three dependents, an income of
$15,120 or less;

(5) for a debtor with four dependents, an income of $15,950
or less; and

(6) for a debtor with five or more dependents, an income of
$16,630 or less.

The income amounts in this subdivision shall be adjusted
for inflation for debts incurred in calendar years 2001 and
thereafter. The dollar amount of each income level that applied
to debts incurred in the prior year shall be increased in the
same manner as provided in section 1(f) of the Internal Revenue
Code of 1986, as amended through December 31, 2000, except that
for the purposes of this subdivision the percentage increase
shall be determined from the year starting September 1, 1999,
and ending August 31, 2000, as the base year for adjusting for
inflation for debts incurred after December 31, 2000.

Debt also includes an agreement to pay a MinnesotaCare
premium, regardless of the dollar amount of the premium
authorized under section 256L.15, subdivision 1a.

Sec. 18.

Minnesota Statutes 2004, section 270A.03,
subdivision 7, is amended to read:

Subd. 7.

Refund.

"Refund" means an individual income tax
refund deleted text begin or political contribution refund, pursuant to chapter
290 deleted text end , or a property tax credit or refund, pursuant to chapter
290A, or a sustainable forest tax payment to a claimant under
chapter 290C.

For purposes of this chapter, lottery prizes, as set forth
in section 349A.08, subdivision 8, and amounts granted to
persons by the legislature on the recommendation of the joint
senate-house of representatives Subcommittee on Claims shall be
treated as refunds.

In the case of a joint property tax refund payable to
spouses under chapter 290A, the refund shall be considered as
belonging to each spouse in the proportion of the total refund
that equals each spouse's proportion of the total income
determined under section 290A.03, subdivision 3. In the case of
a joint income tax refund under chapter 289A, the refund shall
be considered as belonging to each spouse in the proportion of
the total refund that equals each spouse's proportion of the
total taxable income determined under section 290.01,
subdivision 29. The commissioner shall remit the entire refund
to the claimant agency, which shall, upon the request of the
spouse who does not owe the debt, determine the amount of the
refund belonging to that spouse and refund the amount to that
spouse. For court fines, fees, and surcharges and court-ordered
restitution under section 611A.04, subdivision 2, the notice
provided by the commissioner of revenue under section 270A.07,
subdivision 2, paragraph (b), serves as the appropriate legal
notice to the spouse who does not owe the debt.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for political
contribution refund claims based on contributions made on or
after July 1, 2005.
new text end

Sec. 19.

Minnesota Statutes 2004, section 289A.08,
subdivision 16, is amended to read:

Subd. 16.

Tax refund or return preparers; electronic
filing; paper filing fee imposed.

(a) A "tax refund or return
preparer," as defined in section 289A.60, subdivision 13,
paragraph deleted text begin (g) deleted text end new text begin (h) new text end , who prepared more than deleted text begin 500 deleted text end new text begin 100 new text end Minnesota
individual income tax returns for the prior calendar year must
file all Minnesota individual income tax returns prepared for
the current calendar year by electronic means.

(b) deleted text begin For tax returns prepared for the tax year beginning in
2001, the "500" in paragraph (a) is reduced to 250.
deleted text end

deleted text begin (c) For tax returns prepared for tax years beginning after
December 31, 2001, the "500" in paragraph (a) is reduced to 100.
deleted text end

deleted text begin (d) deleted text end Paragraph (a) does not apply to a return if the
taxpayer has indicated on the return that the taxpayer did not
want the return filed by electronic means.

deleted text begin (e) deleted text end new text begin (c) new text end For each return that is not filed electronically by
a tax refund or return preparer under this subdivision,
including returns filed under paragraph deleted text begin (d) deleted text end new text begin (b) new text end , a paper filing
fee of $5 is imposed upon the preparer. The fee is collected
from the preparer in the same manner as income tax. The fee
does not apply to returns that the commissioner requires to be
filed in paper form.

Sec. 20.

Minnesota Statutes 2004, section 289A.37,
subdivision 5, is amended to read:

Subd. 5.

Sufficiency of notice.

An order of assessment,
sent postage prepaid by United States mail to the taxpayer at
the taxpayer's last known address, new text begin or sent by electronic mail to
the taxpayer's last known electronic mailing address as provided
for in section 325L.08, new text end is sufficient even if the taxpayer is
deceased or is under a legal disability, or, in the case of a
corporation, has terminated its existence, unless the department
has been provided with a new address by a party authorized to
receive notices of assessment.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 21.

Minnesota Statutes 2004, section 289A.50,
subdivision 1, is amended to read:

Subdivision 1.

General right to refund.

(a) Subject to
the requirements of this section and section 289A.40, a taxpayer
who has paid a tax in excess of the taxes lawfully due and who
files a written claim for refund will be refunded or credited
the overpayment of the tax determined by the commissioner to be
erroneously paid.

(b) The claim must specify the name of the taxpayer, the
date when and the period for which the tax was paid, the kind of
tax paid, the amount of the tax that the taxpayer claims was
erroneously paid, the grounds on which a refund is claimed, and
other information relative to the payment and in the form
required by the commissioner. An income tax, estate tax, or
corporate franchise tax return, or amended return claiming an
overpayment constitutes a claim for refund.

(c) When, in the course of an examination, and within the
time for requesting a refund, the commissioner determines that
there has been an overpayment of tax, the commissioner shall
refund or credit the overpayment to the taxpayer and no demand
is necessary. If the overpayment exceeds $1, the amount of the
overpayment must be refunded to the taxpayer. If the amount of
the overpayment is less than $1, the commissioner is not
required to refund. In these situations, the commissioner does
not have to make written findings or serve notice by mail to the
taxpayer.

(d) If the amount allowable as a credit for withholding,
estimated taxes, or dependent care exceeds the tax against which
the credit is allowable, the amount of the excess is considered
an overpayment. deleted text begin The refund allowed by section 290.06,
subdivision 23, is also considered an overpayment. deleted text end The
requirements of section 270.10, subdivision 1, do not apply to
the refunding of such an overpayment shown on the original
return filed by a taxpayer.

(e) If the entertainment tax withheld at the source exceeds
by $1 or more the taxes, penalties, and interest reported in the
return of the entertainment entity or imposed by section
290.9201, the excess must be refunded to the entertainment
entity. If the excess is less than $1, the commissioner need
not refund that amount.

(f) If the surety deposit required for a construction
contract exceeds the liability of the out-of-state contractor,
the commissioner shall refund the difference to the contractor.

(g) An action of the commissioner in refunding the amount
of the overpayment does not constitute a determination of the
correctness of the return of the taxpayer.

(h) There is appropriated from the general fund to the
commissioner of revenue the amount necessary to pay refunds
allowed under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for political
contribution refund claims based on contributions made on or
after July 1, 2005.
new text end

Sec. 22.

Minnesota Statutes 2004, section 289A.60,
subdivision 2a, is amended to read:

Subd. 2a.

Penalties for extended delinquency.

(a) If an
individual income tax is not paid within 180 days after the date
of filing of a return or, in the case of taxes assessed by the
commissioner, within 180 days after the assessment date or, if
appealed, within 180 days after final resolution of the appeal,
an extended delinquency penalty of five percent of the tax
remaining unpaid is added to the amount due.

(b) If a deleted text begin corporate franchise, fiduciary income, mining
company, estate, partnership, S corporation, or nonresident
entertainer deleted text end tax return is not filed within 30 days after written
demand for the filing of a delinquent return, an extended
delinquency penalty of five percent of the tax not paid prior to
the demand deleted text begin is added to the tax, deleted text end or deleted text begin in the case of an individual
income tax return, a minimum penalty of deleted text end $100 deleted text begin or the five percent
penalty deleted text end is imposed, whichever amount is greater.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns
originally due on or after August 1, 2005.
new text end

Sec. 23.

Minnesota Statutes 2004, section 289A.60,
subdivision 6, is amended to read:

Subd. 6.

Penalty for new text begin failure to file, new text end false or fraudulent
return, evasion.

If a person new text begin , with intent to evade or defeat a
tax or payment of tax, fails to file a return, new text end files a false or
fraudulent return, or attempts in any new text begin other new text end manner to evade or
defeat a tax or payment of tax, there is imposed on the person a
penalty equal to 50 percent of the tax, less amounts paid by the
person on the basis of the false or fraudulent return, new text begin if any,
new text end due for the period to which the return related.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 24.

Minnesota Statutes 2004, section 289A.60,
subdivision 11, is amended to read:

Subd. 11.

Penalties relating to information reports,
withholding.

(a) When a person required under section 289A.09,
subdivision 2, to give a statement to an employee or payee and a
duplicate statement to the commissioner, or to give a
reconciliation of the statements and quarterly returns to the
commissioner, gives a false or fraudulent statement to an
employee or payee or a false or fraudulent duplicate statement
or reconciliation of statements and quarterly returns to the
commissioner, or fails to give a statement or the reconciliation
in the manner, when due, and showing the information required by
section 289A.09, subdivision 2, or rules prescribed by the
commissioner under that section, that person is liable for a
penalty of $50 for an act or failure to act. The total amount
imposed on the delinquent person for failures during a calendar
year must not exceed $25,000.

(b) In addition to any other penalty provided by law, an
employee who gives a withholding exemption certificate or a
residency affidavit to an employer that deleted text begin the employee has reason
to know contains a materially incorrect statement deleted text end new text begin decreases the
amount withheld under section 290.92 and as of the time the
certificate or affidavit was given to the employer there was no
reasonable basis for the statements in the certificate or
affidavit new text end is liable to the commissioner of revenue for a penalty
of $500 for each instance.

(c) In addition to any other penalty provided by law, an
employer who fails to submit a copy of a withholding exemption
certificate or a residency affidavit required by section 290.92,
subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the
commissioner of revenue for a penalty of $50 for each instance.

(d) An employer or payor who fails to file an application
for a withholding account number, as required by section 290.92,
subdivision 24, is liable to the commissioner for a penalty of
$100.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for
certificates and affidavits given to employers after December
31, 2005.
new text end

Sec. 25.

Minnesota Statutes 2004, section 289A.60,
subdivision 13, is amended to read:

Subd. 13.

Penalties for tax return preparers.

(a) If an
understatement of liability with respect to a return or claim
for refund is due to a willful attempt in any manner to
understate the liability for a tax by a person who is a tax
return preparer with respect to the return or claim, the person
shall pay to the commissioner a penalty of $500. If a part of a
property tax refund claim is excessive due to a willful attempt
in any manner to overstate the claim for relief allowed under
chapter 290A by a person who is a tax refund or return preparer,
the person shall pay to the commissioner a penalty of $500 with
respect to the claim. These penalties may not be assessed
against the employer of a tax return preparer unless the
employer was actively involved in the willful attempt to
understate the liability for a tax or to overstate the claim for
refund. These penalties are income tax liabilities and may be
assessed at any time as provided in section 289A.38, subdivision
5.

(b) A civil action in the name of the state of Minnesota
may be commenced to enjoin any person who is a tax return
preparer doing business in this state from further engaging in
any conduct described in paragraph (c). An action under this
paragraph must be brought by the attorney general in the
district court for the judicial district of the tax return
preparer's residence or principal place of business, or in which
the taxpayer with respect to whose tax return the action is
brought resides. The court may exercise its jurisdiction over
the action separate and apart from any other action brought by
the state of Minnesota against the tax return preparer or any
taxpayer.

(c) In an action under paragraph (b), if the court finds
that a tax return preparer has:

(1) engaged in any conduct subject to a civil penalty under
section 289A.60 or a criminal penalty under section 289A.63;

(2) misrepresented the preparer's eligibility to practice
before the Department of Revenue, or otherwise misrepresented
the preparer's experience or education as a tax return preparer;

(3) guaranteed the payment of any tax refund or the
allowance of any tax credit; or

(4) engaged in any other fraudulent or deceptive conduct
that substantially interferes with the proper administration of
state tax law, and injunctive relief is appropriate to prevent
the recurrence of that conduct,

the court may enjoin the person from further engaging in that
conduct.

(d) If the court finds that a tax return preparer has
continually or repeatedly engaged in conduct described in
paragraph (c), and that an injunction prohibiting that conduct
would not be sufficient to prevent the person's interference
with the proper administration of state tax laws, the court may
enjoin the person from acting as a tax return preparer. The
court may not enjoin the employer of a tax return preparer for
conduct described in paragraph (c) engaged in by one or more of
the employer's employees unless the employer was also actively
involved in that conduct.

(e) new text begin The commissioner may terminate or suspend a tax
preparer's authority to transmit returns electronically to the
state, if the commissioner determines that the tax preparer has
engaged in a pattern and practice of conduct in violation of
paragraph (a) of this subdivision or has been convicted under
section 289A.63.
new text end

new text begin (f) new text end For purposes of this subdivision, the term
"understatement of liability" means an understatement of the net
amount payable with respect to a tax imposed by state tax law,
or an overstatement of the net amount creditable or refundable
with respect to a tax. The determination of whether or not
there is an understatement of liability must be made without
regard to any administrative or judicial action involving the
taxpayer. For purposes of this subdivision, the amount
determined for underpayment of estimated tax under either
section 289A.25 or 289A.26 is not considered an understatement
of liability.

deleted text begin (f) deleted text end new text begin (g) new text end For purposes of this subdivision, the term
"overstatement of claim" means an overstatement of the net
amount refundable with respect to a claim for property tax
relief provided by chapter 290A. The determination of whether
or not there is an overstatement of a claim must be made without
regard to administrative or judicial action involving the
claimant.

deleted text begin (g) deleted text end new text begin (h) new text end For purposes of this section, the term "tax refund
or return preparer" means an individual who prepares for
compensation, or who employs one or more individuals to prepare
for compensation, a return of tax, or a claim for refund of
tax. The preparation of a substantial part of a return or claim
for refund is treated as if it were the preparation of the
entire return or claim for refund. An individual is not
considered a tax return preparer merely because the individual:

(1) gives typing, reproducing, or other mechanical
assistance;

(2) prepares a return or claim for refund of the employer,
or an officer or employee of the employer, by whom the
individual is regularly and continuously employed;

(3) prepares a return or claim for refund of any person as
a fiduciary for that person; or

(4) prepares a claim for refund for a taxpayer in response
to a tax order issued to the taxpayer.

Sec. 26.

Minnesota Statutes 2004, section 290.01,
subdivision 6, is amended to read:

Subd. 6.

Taxpayer.

The term "taxpayer" means any person
or corporation subject to a tax imposed by this chapter. deleted text begin For
purposes of section 290.06, subdivision 23, the term "taxpayer"
means an individual eligible to vote in Minnesota under section
201.014.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for political
contribution refund claims based on contributions that are made
on or after July 1, 2005.
new text end

Sec. 27.

Minnesota Statutes 2004, section 290.92,
subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(1) [WAGES.] For purposes
of this section, the term "wages" means the same as that term is
defined in section 3401(a) and (f) of the Internal Revenue Code.

(2) [PAYROLL PERIOD.] For purposes of this section the
term "payroll period" means a period for which a payment of
wages is ordinarily made to the employee by the employee's
employer, and the term "miscellaneous payroll period" means a
payroll period other than a daily, weekly, biweekly,
semimonthly, monthly, quarterly, semiannual, or annual payroll
period.

(3) [EMPLOYEE.] For purposes of this section the term
"employee" means any resident individual performing services for
an employer, either within or without, or both within and
without the state of Minnesota, and every nonresident individual
performing services within the state of Minnesota, the
performance of which services constitute, establish, and
determine the relationship between the parties as that of
employer and employee. As used in the preceding sentence, the
term "employee" includes an officer of a corporation, and an
officer, employee, or elected official of the United States, a
state, or any political subdivision thereof, or the District of
Columbia, or any agency or instrumentality of any one or more of
the foregoing.

(4) [EMPLOYER.] For purposes of this section the term
"employer" means any person, including individuals, fiduciaries,
estates, trusts, partnerships, limited liability companies, and
corporations transacting business in or deriving any income from
sources within the state of Minnesota for whom an individual
performs or performed any service, of whatever nature, as the
employee of such person, except that if the person for whom the
individual performs or performed the services does not have
deleted text begin legal deleted text end control of the payment of the wages for such services, the
term "employer," except for purposes of paragraph (1), means the
person having deleted text begin legal deleted text end control of the payment of such wages. As
used in the preceding sentence, the term "employer" includes any
corporation, individual, estate, trust, or organization which is
exempt from taxation under section 290.05 and further includes,
but is not limited to, officers of corporations who have deleted text begin legal
deleted text end control, either individually or jointly with another or others,
of the payment of the wages.

(5) [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For
purposes of this section, the term "number of withholding
exemptions claimed" means the number of withholding exemptions
claimed in a withholding exemption certificate in effect under
subdivision 5, except that if no such certificate is in effect,
the number of withholding exemptions claimed shall be considered
to be zero.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 28.

Minnesota Statutes 2004, section 325D.33,
subdivision 6, is amended to read:

Subd. 6.

Violations.

If the commissioner determines that
a distributor is violating any provision of this chapter, the
commissioner must give the distributor a written warning
explaining the violation and an explanation of what must be done
to comply with this chapter. Within ten days of issuance of the
warning, the distributor must notify the commissioner that the
distributor has complied with the commissioner's recommendation
or request that the commissioner set the issue for a hearing
pursuant to chapter 14. If a hearing is requested, the hearing
shall be scheduled within 20 days of the request and the
recommendation of the administrative law judge shall be issued
within five working days of the close of the hearing. The
commissioner's final determination shall be issued within five
working days of the receipt of the administrative law judge's
recommendation. If the commissioner's final determination is
adverse to the distributor and the distributor does not comply
within ten days of receipt of the commissioner's final
determination, the commissioner may order the distributor to
immediately cease the stamping of cigarettes. As soon as
practicable after the order, the commissioner must remove the
meter and any unapplied cigarette stamps from the premises of
the distributor.

If within ten days of issuance of the written warning the
distributor has not complied with the commissioner's
recommendation or requested a hearing, the commissioner may
order the distributor to immediately cease the stamping of
cigarettes and remove the meter and unapplied stamps from the
distributor's premises.

deleted text begin If, within any 12-month period, the commissioner has issued
three written warnings to any distributor, even if the
distributor has complied within ten days, the commissioner shall
notify the distributor of the commissioner's intent to revoke
the distributor's license for a continuing course of conduct
contrary to this chapter. For purposes of this paragraph, a
written warning that was ultimately resolved by removal of the
warning by the commissioner is not deemed to be a warning. The
commissioner must notify the distributor of the date and time of
a hearing pursuant to chapter 14 at least 20 days before the
hearing is held. The hearing must provide an opportunity for
the distributor to show cause why the license should not be
revoked. If the commissioner revokes a distributor's license,
the commissioner shall not issue a new license to that
distributor for 180 days.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 29.

new text begin [459.21] GAMBLING SUBSIDIES; REFERENDUM
APPROVAL.
new text end

new text begin No city or county may provide an exemption from a tax or
fee, an abatement of a tax, or fee or any other type of public
subsidy to an enterprise engaged in gambling, unless the
question of whether to provide the exemption, abatement, or
subsidy has been submitted to the voters at a special or general
election and a majority of the votes cast on the question are in
the affirmative.
new text end

new text begin For purposes of this section, the following terms have the
meanings given:
new text end

new text begin (1) "Gambling" means conducting class III gaming as defined
in United States Code, title 25, section 2703.
new text end

new text begin (2) "Public subsidy" does not include (i) construction of
public infrastructure unless the predominant use of the
infrastructure is to serve an enterprise engaged in gambling or
(ii) the use, maintenance, or reconstruction (without expansion)
of preexisting infrastructure.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following enactment.
new text end

Sec. 30.

Minnesota Statutes 2004, section 645.44, is
amended by adding a subdivision to read:

new text begin Subd. 19. new text end

new text begin Fee and tax. new text end

new text begin (a) "Tax" means any fee, charge,
exaction, or assessment imposed by a governmental entity on an
individual, person, entity, transaction, good, service, or other
thing. It excludes a price that an individual or entity chooses
voluntarily to pay in return for receipt of goods or services
provided by the governmental entity. A government good or
service does not include access to or the authority to engage in
private market transactions with a nongovernmental party, such
as licenses to engage in a trade, profession, or business or to
improve private property.
new text end

new text begin (b) For purposes of applying the laws of this state, a
"fee," "charge," or other similar term that satisfies the
functional requirements of paragraph (a) must be treated as a
tax for all purposes, regardless of whether the statute or law
names or describes it as a tax. The provisions of this
subdivision do not preempt or supersede limitations under
statute or law that apply to fees, charges, or assessments.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 31. new text begin TAX REFORM COMMISSION.
new text end

new text begin Subdivision 1. new text end

new text begin Commission established. new text end

new text begin A tax reform
action commission is established in the legislative branch to
study the Minnesota tax and revenue system and to make
recommendations to the legislature.
new text end

new text begin Subd. 2. new text end

new text begin Membership. new text end

new text begin (a) The commission consists of 15
members, appointed as follows:
new text end

new text begin (1) three members appointed by the governor, two from the
executive branch and one from private life;
new text end

new text begin (2) four members appointed by the majority leader of the
senate, two members of the senate and two from private life;
new text end

new text begin (3) two members appointed by the minority leader of the
senate, one member of the senate and one from private life;
new text end

new text begin (4) four members appointed by the speaker of the house of
representatives, two members of the house of representatives and
two from private life; and
new text end

new text begin (5) two members appointed by the minority leader of the
house of representatives, one member of the house of
representatives and one from private life.
new text end

new text begin (b) The appointing authority shall select members who are
of recognized standing and distinction and who possess
demonstrated capacity to discharge the duties of the
commission. In making appointments, the appointing authorities
shall attempt to appoint some individuals to the commission who
have special experience or knowledge in taxation, economics, and
accounting.
new text end

new text begin (c) The governor shall designate a member of the commission
as its chair who shall determine its duties and supervise its
staff.
new text end

new text begin (d) The appointing authorities shall appoint members of the
commission not more than 30 days after enactment of this
section. Members serve for the life of the commission. A
vacancy in the commission membership does not affect the power
of the remaining members to execute the duties of the
commission. A vacancy in commission membership is filled in the
same manner in which the original appointment was made.
new text end

new text begin Subd. 3. new text end

new text begin Duties; report. new text end

new text begin (a) The commission shall study
and evaluate the Minnesota state and local tax and revenue
system with a goal of making long-term improvements in the
system for the citizens of the state, given standard principles
of good tax policy and the background of expected demographic
and economic changes in the state, nation, and world. The
commission's recommendations must be done on a revenue neutral
basis. In particular, the commission shall examine:
new text end

new text begin (1) the mix of state revenues between tax revenues and fees
and charges for services used or benefits received;
new text end

new text begin (2) the implications of likely demographic and economic
changes, affecting both (i) the demands for state and local
government services and (ii) taxes and other revenues; and
new text end

new text begin (3) the extent to which the existing tax system and the
commission's proposal satisfy the following basic tax policy
principles:
new text end

new text begin (i) equity or fairness, including measures based on ability
to pay, equal treatment of equals, and payment for benefits
received;
new text end

new text begin (ii) neutrality or efficiency, the extent to which the
effects on private market decisions are minimized;
new text end

new text begin (iii) revenue adequacy, the extent to which the revenues
are stable and predictable and grow with increases in income or
economic activity;
new text end

new text begin (iv) competitiveness, the extent to which negative effects
on the state's attractiveness as a location for investment,
working, and living are minimized;
new text end

new text begin (v) simplicity, the extent to which it is easy to
understand;
new text end

new text begin (vi) ease of compliance and administration, the extent to
which taxpayers can easily comply and the government can easily
administer it; and
new text end

new text begin (vii) visibility or accountability, the extent to which the
taxes or other charges are clear and apparent to their payers as
a cost of government and that the government officials imposing
the tax are accountable, through election or otherwise, to the
principal payers of the tax.
new text end

new text begin (b) The commission shall report to the legislature as
provided in this paragraph. Each report must include the
commission's evaluation of the tax or taxes, its recommendations
for reform and improvement of the tax or taxes on a revenue
neutral basis, its rationale for the proposed changes, and a
draft bill implementing the commission's recommendation for
introduction in the legislature. The reports must be submitted
by the following dates:
new text end

new text begin (1) corporate and other business taxation, including the
credit for increasing research activities, by July 1, 2007;
new text end

new text begin (2) general sales and motor vehicle sales and special
excise taxes by July 1, 2008;
new text end

new text begin (3) individual income taxation by July 1, 2009; and
new text end

new text begin (4) estate, insurance premium, MinnesotaCare, and all other
taxes not covered by clauses (1) to (3) by July 1, 2010.
new text end

new text begin Subd. 4. new text end

new text begin Per diem and expenses. new text end

new text begin Members of the
commission may be compensated and receive reimbursement for
expenses, as provided for members of advisory councils under
Minnesota Statutes, section 15.059, subdivision 3. This
subdivision does not apply to members of the legislature or
state employees.
new text end

new text begin Subd 5. new text end [STAFF.] new text begin The commission may employ staff as it
deems appropriate to carry out its duties or use existing
legislative and executive branch staff. All staff are in the
unclassified state service. Legislative staff and the
Department of Revenue staff must provide research, bill
drafting, and other services to the commission upon its
request. The commission may contract with consultants for
research and other services and enter other contracts, as it
deems necessary or appropriate to carry out its duties. These
contracts are not subject to the requirements of Minnesota
Statutes, chapter 16C.
new text end

new text begin Subd. 6. new text end

new text begin Expiration. new text end

new text begin The commission terminates 30 days
after transmitting its final report to the legislature under
subdivision 3, paragraph (b).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment.
new text end

Sec. 32. new text begin TRANSFER.
new text end

new text begin On July 1, 2005, the commissioner of finance shall transfer
$3,408,000 and any additional amount from the tax relief account
under Minnesota Statutes, section 16A.1522, subdivision 4, to
the general fund.
new text end

Sec. 33. new text begin APPROPRIATION.
new text end

new text begin (a) $125,000 in fiscal year 2006 and $125,000 in fiscal
year 2007 are appropriated from the general fund to the
commissioner of revenue to make grants to one or more nonprofit
organizations, qualifying under section 501(c)(3) of the
Internal Revenue Code of 1986, to coordinate, facilitate,
encourage, and aid in the provision of taxpayer assistance
services. This is a onetime appropriation and is not added to
the base.
new text end

new text begin (b) "Taxpayer assistance services" mean accounting and tax
preparation services provided by volunteers to low-income and
disadvantaged Minnesota residents to help them file federal and
state income tax returns and Minnesota property tax refund
claims and to provide personal representation before the
Department of Revenue and Internal Revenue Service.
new text end

Sec. 34. new text begin REPEALER.
new text end

new text begin (a) Minnesota Statutes 2004, section 10A.322, subdivision
4, is repealed effective July 1, 2005.
new text end

new text begin (b) Minnesota Statutes 2004, section 16A.1522, subdivision
4, is repealed effective July 2, 2005.
new text end

new text begin (c) Minnesota Statutes 2004, section 290.06, subdivision
23, is repealed effective for contributions made after June 30,
2005.
new text end