Engrossments
Introduction		Posted on 01/24/2007

ARTICLE 1

GOVERNOR'S INITIATIVES

Section 1.

Minnesota Statutes 2006, section 16A.152, subdivision 1b, is amended to
read:

Subd. 1b.

Budget reserve increase.

On July 1, deleted text begin 2003deleted text end new text begin 2007new text end , the commissioner of
finance shall transfer deleted text begin $300,000,000deleted text end new text begin $47,000,000 new text end to the budget reserve account in the
general fund. deleted text begin On July 1, 2004, the commissioner of finance shall transfer $296,000,000 to
the budget reserve account in the general fund.deleted text end The amounts necessary for this purpose
are appropriated from the general fund.

Sec. 2.

Minnesota Statutes 2006, section 16A.152, subdivision 2, is amended to read:

Subd. 2.

new text begin Reserve goal; new text end additional revenues; priority.

deleted text begin (a)deleted text end If on the basis of
a forecast of general fund revenues and expenditures, the commissioner of finance
determines that there will be a positive unrestricted budgetary general fund balance at the
close of the bienniumnew text begin that exceeds $125,000,000new text end , the commissioner of finance deleted text begin must
allocate moneydeleted text end new text begin shall transfer up to $50,000,000 new text end to the following accounts and purposes in
priority order:

(1) the cash flow account established in subdivision 1 until that account reaches
$350,000,000;

(2) the budget reserve account established in subdivision 1a until that account
reaches deleted text begin $653,000,000;deleted text end new text begin an amount equal to five percent of forecast general fund spending
for the second year of the biennium.
new text end

deleted text begin (3) the amount necessary to increase the aid payment schedule for school district
aids and credits payments in section to not more than 90 percent rounded to the
nearest tenth of a percent without exceeding the amount available and with any remaining
funds deposited in the budget reserve; and
deleted text end

deleted text begin (4) the amount necessary to restore all or a portion of the net aid reductions under
section and to reduce the property tax revenue recognition shift under section
deleted text begin 123B.75, subdivision 5deleted text end , paragraph (c), and Laws 2003, First Special Session chapter 9,
article 5, section 34, as amended by Laws 2003, First Special Session chapter 23, section
20, by the same amount.
deleted text end

deleted text begin (b) The amounts necessary to meet the requirements of this section are appropriated
from the general fund within two weeks after the forecast is released or, in the case of
transfers under paragraph (a), clauses (3) and (4), as necessary to meet the appropriations
schedules otherwise established in statute.
deleted text end

deleted text begin (c) To the extent that a positive unrestricted budgetary general fund balance is
projected, appropriations under this section must be made before section takes
effect.
deleted text end

deleted text begin (d) The commissioner of finance shall certify the total dollar amount of the
reductions under paragraph (a), clauses (3) and (4), to the commissioner of education. The
commissioner of education shall increase the aid payment percentage and reduce the
property tax shift percentage by these amounts and apply those reductions to the current
fiscal year and thereafter.
deleted text end

Sec. 3.

Minnesota Statutes 2006, section 126C.10, subdivision 13a, is amended to read:

Subd. 13a.

Operating capital levy.

To obtain operating capital revenue for fiscal
year 2007 and later, a district may levy an amount not more than the product of its
operating capital revenue for the fiscal year times the lesser of one or the ratio of its
adjusted net tax capacity per adjusted marginal cost pupil unit to the operating capital
equalizing factor. The operating capital equalizing factor equals deleted text begin $22,222 for fiscal year
2006, anddeleted text end $10,700 for fiscal year deleted text begin 2007deleted text end new text begin 2008 and $17,590 for fiscal year 2009 new text end and later.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for revenue for fiscal year 2009.
new text end

Sec. 4.

Minnesota Statutes 2006, 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, and 2a homestead property within
the county equal to 0.4 percent of the first $76,000 of market value of the property minus
.09 percent of the market value in excess of deleted text begin $76,000deleted text end new text begin $118,000new text end . The credit amount may
not be less than zero. 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 that is classified as
part homestead and part nonhomestead, (i) the credit shall apply only to the homestead
portion of the property, but (ii) if a portion of a property is classified as nonhomestead
solely because not all the owners occupy the property, not all the owners have qualifying
relatives occupying the property, or solely because not all the spouses of owners 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. For the purpose of this section, when an owner-occupant's spouse does
not occupy the property, the percentage of ownership for the owner-occupant spouse is
one-half of the couple's ownership percentage.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2008 and
thereafter.
new text end

Sec. 5.

Minnesota Statutes 2006, section 275.70, subdivision 3, is amended to read:

Subd. 3.

Local governmental unit.

"Local governmental unit" means a county,
or a statutory or home rule charter city with a population greater than 2,500new text begin for which
more than 33 percent of the county's or city's levy plus aid base including special levies
consists of aidnew text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2008 and
thereafter.
new text end

Sec. 6.

Minnesota Statutes 2006, section 275.70, subdivision 5, is amended to read:

Subd. 5.

Special levies.

"Special levies" means those portions of ad valorem taxes
levied by a local governmental unit for the following purposes or in the following manner:

(1) to pay the costs of the principal and interest on bonded indebtedness or to
reimburse for the amount of liquor store revenues used to pay the principal and interest
due on municipal liquor store bonds in the year preceding the year for which the levy
limit is calculated;

(2) to pay the costs of principal and interest on certificates of indebtedness issued for
any corporate purpose except for the following:

(i) tax anticipation or aid anticipation certificates of indebtedness;

(ii) certificates of indebtedness issued under sections 298.28 and 298.282;

(iii) certificates of indebtedness used to fund current expenses or to pay the costs of
extraordinary expenditures that result from a public emergency; or

(iv) certificates of indebtedness used to fund an insufficiency in tax receipts or
an insufficiency in other revenue sources;

(3) to provide for the bonded indebtedness portion of payments made to another
political subdivision of the state of Minnesota;

(4) to 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;

(5) property taxes approved by voters which are levied against the referendum
market value as provided under section 275.61;

(6) to fund matching requirements needed to qualify for federal or state grants or
programs to the extent that either (i) the matching requirement exceeds the matching
requirement in calendar year deleted text begin 2001deleted text end new text begin 2007new text end , or (ii) it is a new matching requirement that
did not exist prior to deleted text begin 2002deleted text end new text begin 2008new text end ;

(7) to pay the expenses reasonably and necessarily incurred in preparing for or
repairing the effects of natural disaster including the occurrence or threat of widespread
or severe damage, injury, or loss of life or property resulting from natural causes, in
accordance with standards formulated by the Emergency Services Division of the state
Department of Public Safety, as allowed by the commissioner of revenue under section
275.74, subdivision 2;

(8) pay amounts required to correct an error in the levy certified to the county
auditor by a city or county in a levy year, but only to the extent that when added to the
preceding year's levy it is not in excess of an applicable statutory, special law or charter
limitation, or the limitation imposed on the governmental subdivision by sections 275.70
to 275.74 in the preceding levy year;

(9) to pay an abatement under section 469.1815;

(10) to pay any costs attributable to increases in the employer contribution rates
under chapter 353 that are effective after June 30, deleted text begin 2001deleted text end new text begin 2006new text end ;

(11) to pay the operating or maintenance costs of a county jail as authorized in
section 641.01 or 641.262, or of a correctional facility as defined in section 241.021,
subdivision 1, paragraph (f), to the extent that the county can demonstrate to the
commissioner of revenue that the amount has been included in the county budget as
a direct result of a rule, minimum requirement, minimum standard, or directive of the
Department of Corrections, or to pay the operating or maintenance costs of a regional jail
as authorized in section 641.262. For purposes of this clause, a district court order is
not a rule, minimum requirement, minimum standard, or directive of the Department of
Corrections. If the county utilizes this special levy, except to pay operating or maintenance
costs of a new regional jail facility under sections 641.262 to 641.264 which will not
replace an existing jail facility, any amount levied by the county in the previous levy year
for the purposes specified under this clause and included in the county's previous year's
levy limitation computed under section 275.71, shall be deducted from the levy limit
base under section 275.71, subdivision 2, when determining the county's current year
levy limitation. The county shall provide the necessary information to the commissioner
of revenue for making this determination;

(12) to pay for operation of a lake improvement district, as authorized under section
103B.555. If the county utilizes this special levy, any amount levied by the county in the
previous levy year for the purposes specified under this clause and included in the county's
previous year's levy limitation computed under section 275.71 shall be deducted from
the levy limit base under section 275.71, subdivision 2, when determining the county's
current year levy limitation. The county shall provide the necessary information to the
commissioner of revenue for making this determination;

(13) to repay a state or federal loan used to fund the direct or indirect required
spending by the local government due to a state or federal transportation project or other
state or federal capital project. This authority may only be used if the project is not a
local government initiative;

(14) to pay for court administration costs as required under section 273.1398,
subdivision 4b, less the deleted text begin (i)deleted text end county's share of transferred fines and fees collected by the
district courts in the county deleted text begin fordeleted text end new text begin in the priornew text end calendar year deleted text begin 2001 and (ii) the aid amount
certified to be paid to the county in 2004 under section 273.1398, subdivision 4c; however,
for taxes levied to pay for these costs in the year in which the court financing is transferred
to the state, the amount under this clause is limited to the amount of aid the county is
certified to receive under section 273.1398, subdivision 4adeleted text end ;

(15) to fund a police or firefighters relief association as required under section 69.77
to the extent that the required amount exceeds the amount levied for this purpose in deleted text begin 2001deleted text end new text begin
the prior yearnew text end ;

(16) for purposes of a storm sewer improvement district under section 444.20; deleted text begin and
deleted text end

(17) to pay for the maintenance and support of a city or county society for the
prevention of cruelty to animals under section 343.11. If the city or county uses this special
levy, any amount levied by the city or county in the previous levy year for the purposes
specified in this clause and included in the city's or county's previous year's levy limit
computed under section 275.71, must be deducted from the levy limit base under section
275.71, subdivision 2, in determining the city's or county's current year levy limitnew text begin ; and
new text end

new text begin (18) to pay the increase in unreimbursed targeted case management costs over the
unreimbursed costs for 2006new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2008 and
thereafter.
new text end

Sec. 7.

Minnesota Statutes 2006, section 275.70, is amended by adding a subdivision
to read:

new text begin Subd. 7. new text end

new text begin Levy year. new text end

new text begin A reference in sections 275.70 to 275.74 to a "levy year," or a
year in which taxes are levied, refers to the year in which property tax levies are certified
under section 275.07 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 2008 and
thereafter.
new text end

Sec. 8.

Minnesota Statutes 2006, section 275.71, subdivision 1, is amended to read:

Subdivision 1.

Limit on levies.

Notwithstanding any other provision of law or
municipal charter to the contrary which authorize ad valorem taxes in excess of the limits
established by sections 275.70 to 275.74, the provisions of deleted text begin this sectiondeleted text end new text begin sections 275.70
to 275.74new text end apply to local governmental units for all purposes other than those for which
special levies and special assessments are made.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2008 and
thereafter.
new text end

Sec. 9.

Minnesota Statutes 2006, section 275.71, subdivision 2, is amended to read:

Subd. 2.

Levy limit base.

The levy limit base for a local governmental unit for taxes
levied in deleted text begin 2003deleted text end new text begin 2007 and thereafternew text end is equal to deleted text begin its adjusted levy limit base in the previous
year,deleted text end new text begin (i) the amount it levied in the prior year; plus (ii) the sum of the aids it was certified to
receive in the current year under sections 298.28, 298.282, and 477A.011 to 477A.03, plus
any state aid for federally unreimbursed targeted case management costs, new text end subject to any
adjustments under section 275.72deleted text begin , plus any aid amounts received in 2003 under section
273.138 or 273.166, minus the difference between its levy limit under subdivision 5 for
taxes levied in 2002 and the amount it actually levied under that subdivision in that year,
and certified property tax replacement aid payable in 2003 under section 174.242deleted text end new text begin ; less (iii)
the amount it levied in the prior year as special levies. For taxes levied in 2007, the amount
under clause (iii) may include amounts that could have been levied as special leviesnew text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2008 and
thereafter.
new text end

Sec. 10.

Minnesota Statutes 2006, section 275.71, subdivision 4, is amended to read:

Subd. 4.

Adjusted levy limit base.

deleted text begin (a)deleted text end For taxes levied in deleted text begin 2003deleted text end new text begin 2007 and thereafternew text end ,
the adjusted levy limit base new text begin for a local government unit new text end is equal to the levy limit base
computed under deleted text begin subdivisionsdeleted text end new text begin subdivisionnew text end 2 deleted text begin and 3deleted text end or section 275.72, deleted text begin reduced by 40 percent
of the difference between (1) the sum of 2003 certified aid payments, under sections
273.138, 273.1398 except for amounts certified under subdivision 4a, paragraph (b),
273.166, 477A.011 to 477A.03, 477A.06, and 477A.07, before any reduction under Laws
2003, First Special Session chapter 21, articles 5 and 6, and (2) the sum of the aids paid
in 2004 under those same sections, after any reductions in 2004 under Laws 2003, First
Special Session chapter 21, articles 5 and 6.
deleted text end

deleted text begin (b) For taxes levied in 2003 only, the adjusted levy limit base is increased by 60
percent of the difference between a jurisdiction's market value credit in 2003 before any
reductions under Laws 2003, First Special Session chapter 21, articles 5 and 6, and its
market value credit in 2004 after reductions in Laws 2003, First Special Session chapter
21, articles 5 and 6.deleted text end new text begin for that government unit for the same levy year, multiplied by:
new text end

new text begin (1) 100 percent plus a percentage equal to the percentage growth in the implicit
price deflator; and
new text end

new text begin (2) 100 percent plus a percentage equal to the percentage increase in the number of
households, if any, for the most recent 12-month period for which data is available.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2008 and
thereafter.
new text end

Sec. 11.

Minnesota Statutes 2006, section 275.71, subdivision 5, is amended to read:

Subd. 5.

Property tax levy limit.

For taxes levied in deleted text begin 2003deleted text end new text begin 2007 and thereafternew text end , the
property tax levy limit for a local governmental unit is equal to its adjusted levy limit base
determined under subdivision 4 plus any additional levy authorized under section 275.73,
which is levied against net tax capacity, reduced by the sum of

(i) the total amount of aids and reimbursements that the local governmental unit is
certified to receive under sections 477A.011 to deleted text begin 477A.014, except for the increases in city
aid bases in calendar year 2002 under section 477A.011, subdivision 36, paragraphs
(l), (n), and (o)deleted text end new text begin 477A.03new text end ,

deleted text begin (ii) homestead and agricultural aids it is certified to receive under section 273.1398,deleted text end

deleted text begin (iii)deleted text end new text begin (ii)new text end taconite aids under 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,

deleted text begin (iv) temporary court aid under section deleted text begin 273.1398, subdivision 4adeleted text end , and
deleted text end

deleted text begin (v)deleted text end new text begin (iii)new text end estimated payments to the local governmental unit under section 272.029,
adjusted for any error in estimation in the preceding yearnew text begin , and
new text end

new text begin (iv) state aid for targeted case management costsnew text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2008 and
thereafter.
new text end

Sec. 12.

Minnesota Statutes 2006, 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) net 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 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 over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
under the provisions of Public Law 109-1;

(7) 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;

(8) 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;

(9) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, 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), or
subdivision 19c, clause (15), in the case of a shareholder of 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. The resulting delayed depreciation cannot be
less than zero;

(10) job opportunity building zone income as provided under section 469.316;

(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 deleted text begin performed
in Minnesota, excluding compensation for services performed under the Active Guard
Reserve (AGR) programdeleted text end . 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 5cdeleted text begin , 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 3deleted text end ;

(12) the amount of compensation paid to Minnesota residents who are members
of the armed forces of the United States or United Nations for active duty deleted text begin performed
outside Minnesotadeleted text end ;

(13) 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 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 for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(14) 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 (16), 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 (16), 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;

(15) to the extent included in federal taxable income, compensation paid to a
nonresident who is 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); deleted text begin and
deleted text end

(16) international economic development zone income as provided under section
469.325deleted text begin .deleted text end new text begin ; and
new text end

new text begin (17) to the extent included in federal taxable income, a percentage of compensation
received from a pension or other retirement pay from the government for service in the
armed forces of the United States, up to a maximum amount. For taxable years beginning
after December 31, 2006, and before January 1, 2008, the percentage is 25 percent and
the maximum amount is $7,500; for taxable years beginning after December 31, 2007,
and before January 1, 2009, the percentage is 50 percent and the maximum amount is
$15,000; for taxable years beginning after December 31, 2008, and before January 1,
2010, the percentage is 75 percent and the maximum amount is $22,500; and for taxable
years beginning after December 31, 2009, the percentage is 100 percent and there is no
maximum amount.
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, except that the changes in clauses (11) and (12) are phased in over
the tax years beginning after December 31, 2006, and before December 31, 2009. For
tax years beginning after December 31, 2006, and before January 1, 2008, 25 percent
of the compensation affected by the changes in clauses (11) and (12) are an allowable
subtraction. For the tax year beginning after December 31, 2007, and before January 1,
2009, 50 percent is allowed. For the tax year beginning after December 31, 2008, and
before January 1, 2010, 75 percent is allowed. For tax years beginning after December
31, 2009, 100 percent is allowed.
new text end

Sec. 13.

Minnesota Statutes 2006, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 34. 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 due under this chapter equal to ten percent of the amount paid or incurred by the
taxpayer, on the first $500,000 of qualifying expenditures made in the qualifying period.
new text end

new text begin (b) "Qualifying expenditures" means for purposes of this subdivision the amount
spent for the acquisition, 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 the following, if related to dairy animals in
this state:
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 pumping and storage facilities;
new text end

new text begin (11) digesters; and
new text end

new text begin (12) equipment used to produce energy.
new text end

new text begin Qualified 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 chapter for the
taxable year. 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) The qualifying period is that time after December 31, 2006, and before January
1, 2013.
new text end

new text begin (e) The $50,000 maximum credit applies at the entity level for partnerships, S
corporations, trusts, and estates as well as at the individual level. In the case of married
individuals, the credit is limited to $50,000 for a married couple.
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. 14.

Minnesota Statutes 2006, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 35. new text end

new text begin Regional investment credit. new text end

new text begin (a) A credit is allowed against the tax
imposed by this chapter for investment in a qualified regional angel investment network
fund. The credit equals 25 percent of the taxpayer's investment made in the fund, but not
to exceed the lesser of:
new text end

new text begin (1) the liability for tax under this chapter, including the applicable alternative
minimum tax; or
new text end

new text begin (2) the taxpayer's share of the amount of the certificate issued to the fund by the
commissioner of employment and economic development under paragraph (c).
new text end

new text begin The taxpayer must claim the credit in the same tax year in which the investment
to the fund is made. The credit is allowed only for investments made to a fund that are
made after the fund has been certified by the commissioner of employment and economic
development under paragraph (c).
new text end

new text begin (b) For purposes of this subdivision, a regional angel investment network fund
means a pool investment fund that:
new text end

new text begin (1) is organized as a limited liability company and consists of members who are
accredited investors within the meaning of Regulation D of the Securities and Exchange
Commission, Code of Federal Regulations, title 17, section 230.501(a); or consists of
members that are not accredited investors that make equity investments or investments in
notes that pay interest or other fixed amounts or any combination of both;
new text end

new text begin (2) primarily makes investments in qualified small business ventures as defined in
paragraph (f);
new text end

new text begin (3) has no fewer than five separate investors and no investor owns more than 25
percent of the outstanding ownership interests in the fund. For purposes of determining
the number of investors and the ownership interest of an investor under this clause, the
ownership interests of an investor include those of:
new text end

new text begin (i) the investor's spouse, a child, and sibling; and
new text end

new text begin (ii) a corporation, partnership, or trust in which the investor has a controlling equity
interest or in which the investor exercises management control.
new text end

new text begin (c) Regional angel investment network funds may apply to the commissioner
of employment and economic development for certification as a qualifying regional
angel investment network fund. The application must be in the form and made under
procedures specified by the commissioner of employment and economic development.
The commissioner of employment and economic development may certify up to 20
funds and may provide certificates entitling investors in each fund to tax credits under
this subdivision of up to $600,000 for each fund. The commissioner of employment
and economic development must not issue a total amount of certificates for all funds of
more than $6,000,000. In awarding certificates under this paragraph, the commissioner
of employment and economic development shall generally award them to qualified
applicants in the order in which the applications are received, but shall also seek to certify
funds that are broadly dispersed across the entire state.
new text end

new text begin (d) Each fund must provide each investor a statement indicating the investor's share
of the credit amount certified to the fund under paragraph (c) based on the order in which
that investor's investment is made to the fund.
new text end

new text begin (e) If the amount of the credit under this subdivision for any taxable year exceeds
the limitation under paragraph (a), clause (1), the excess is a credit carryover to each of
the ten succeeding taxable years. The entire amount of the excess unused credit for the
taxable year must be 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 may not exceed the
taxpayer's liability for tax less the credit for the taxable year.
new text end

new text begin (f) A business is a qualified small business venture for purposes of this subdivision
only if the business satisfies the following conditions:
new text end

new text begin (1) the business is engaged in, or is committed to engage in, manufacturing,
agriculture, processing or assembling products, conducting research and development, or
developing a new product or business process;
new text end

new text begin (2) the business is not engaged in real estate development, insurance, banking,
lending, lobbying, political consulting, wholesale or retail trade, leisure, hospitality,
transportation, construction, or professional services provided by attorneys, accountants,
business consultants, physicians, or health care consultants;
new text end

new text begin (3) the business has its headquarters in Minnesota;
new text end

new text begin (4) at least 51 percent of the business's employees are employed in Minnesota;
new text end

new text begin (5) the business has less than 100 employees;
new text end

new text begin (6) the business has not been in operation for more than ten consecutive years;
new text end

new text begin (7) the business has not received more than $1,000,000 in investments that have
qualified for and received tax credits under this subdivision; and
new text end

new text begin (8) the business is not part of a unitary business that employs more than 100
employees.
new text end

new text begin A business that does not meet all of the conditions in clauses (3) through (8) is
not a qualified small business venture unless the commissioner of employment and
economic development determines, prior to the investment by the fund, that the business
is a small business as defined by the small business administration, or by other criteria
in Minnesota 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. 15.

Minnesota Statutes 2006, 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:

(A) for taxable years beginning before January 1, 2006, to the extent that the
deduction exceeds 1.0 percent of adjusted gross income;

(B) for taxable years beginning after December 31, 2005, to the full extent of the
deduction.

For purposes of this clause, "adjusted gross income" has the meaning given 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, clauses
(7), (8), and (9);

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 (9) to deleted text begin (16)deleted text end new text begin (17)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, 2006.
new text end

Sec. 16.

Minnesota Statutes 2006, section 290.191, subdivision 2, is amended to read:

Subd. 2.

Apportionment formula of general application.

(a) 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) the percent for the sales factor under paragraph (b) 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) the percent for the property factor under paragraph (b) 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) the percent for the payroll factor under paragraph (b) 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.

(b) For purposes of paragraph (a) and subdivision 3, the following percentages apply
for the taxable years specified:

Taxable years beginning during calendar year	Sales factor percent	Property factor percent	Payroll factor percent
2007	78	11	11
2008	deleted text begin 81 deleted text end new text begin 85 new text end	deleted text begin 9.5 deleted text end new text begin 7.5 new text end	deleted text begin 9.5 deleted text end new text begin 7.5 new text end
2009	deleted text begin 84 deleted text end new text begin 90 new text end	deleted text begin 8 deleted text end new text begin 5 new text end	deleted text begin 8 deleted text end new text begin 5 new text end
2010	deleted text begin 87 deleted text end new text begin 95 new text end	deleted text begin 6.5 deleted text end new text begin 2.5 new text end	deleted text begin 6.5 deleted text end new text begin 2.5 new text end
2011	deleted text begin 90 deleted text end	deleted text begin 5 deleted text end	deleted text begin 5 deleted text end
deleted text begin 2012 deleted text end	deleted text begin 93 deleted text end	deleted text begin 3.5 deleted text end	deleted text begin 3.5 deleted text end
deleted text begin 2013 deleted text end	deleted text begin 96 deleted text end	deleted text begin 2 deleted text end	deleted text begin 2 deleted text end
deleted text begin 2014deleted text end and later calendar years	100	0	0

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. 17.

Minnesota Statutes 2006, section 290A.04, subdivision 2, is amended to read:

Subd. 2.

Homeowners.

A claimant whose property taxes payable are in excess
of the percentage of the household income stated below shall pay an amount equal to
the percent of income shown for the appropriate household income level along with the
percent to be paid by the claimant of the remaining amount of property taxes payable.
The state refund equals the amount of property taxes payable that remain, up to the state
refund amount shown below.

Household Income

Percent of Income

Percent Paid by
Claimant

Maximum State
Refund

$0 to 1,189	1.0 percent	15 percent	deleted text begin $1,450 deleted text end new text begin $1,810 new text end
1,190 to 2,379	1.1 percent	15 percent	deleted text begin $1,450 deleted text end new text begin $1,810 new text end
2,380 to 3,589	1.2 percent	15 percent	deleted text begin $1,410 deleted text end new text begin $1,760 new text end
3,590 to 4,789	1.3 percent	20 percent	deleted text begin $1,410 deleted text end new text begin $1,760 new text end
4,790 to 5,979	1.4 percent	20 percent	deleted text begin $1,360 deleted text end new text begin $1,700 new text end
5,980 to 8,369	1.5 percent	20 percent	deleted text begin $1,360 deleted text end new text begin $1,700 new text end
8,370 to 9,559	1.6 percent	25 percent	deleted text begin $1,310 deleted text end new text begin $1,570 new text end
9,560 to 10,759	1.7 percent	25 percent	deleted text begin $1,310 deleted text end new text begin $1,570 new text end
10,760 to 11,949	1.8 percent	25 percent	deleted text begin $1,260 deleted text end new text begin $1,520 new text end
11,950 to 13,139	1.9 percent	30 percent	deleted text begin $1,260 deleted text end new text begin $1,520 new text end
13,140 to 14,349	2.0 percent	30 percent	deleted text begin $1,210 deleted text end new text begin $1,450 new text end
14,350 to 16,739	2.1 percent	30 percent	deleted text begin $1,210 deleted text end new text begin $1,450 new text end
16,740 to 17,929	2.2 percent	35 percent	deleted text begin $1,160 deleted text end new text begin $1,330 new text end
17,930 to 19,119	2.3 percent	35 percent	deleted text begin $1,160 deleted text end new text begin $1,330 new text end
19,120 to 20,319	2.4 percent	35 percent	deleted text begin $1,110 deleted text end new text begin $1,280 new text end
20,320 to 25,099	2.5 percent	40 percent	deleted text begin $1,110 deleted text end new text begin $1,280 new text end
25,100 to 28,679	2.6 percent	40 percent	deleted text begin $1,070 deleted text end new text begin $1,230 new text end
28,680 to 35,849	2.7 percent	40 percent	deleted text begin $1,070 deleted text end new text begin $1,230 new text end
35,850 to 41,819	2.8 percent	45 percent	deleted text begin $ 970 deleted text end new text begin $1,070new text end
41,820 to 47,799	3.0 percent	45 percent	deleted text begin $ 970 deleted text end new text begin $1,070new text end
47,800 to 53,779	3.2 percent	45 percent	deleted text begin $ 870 deleted text end new text begin $960new text end
53,780 to 59,749	3.5 percent	50 percent	deleted text begin $ 780 deleted text end new text begin $860new text end
59,750 to 65,729	4.0 percent	50 percent	deleted text begin $ 680 deleted text end new text begin $750new text end
65,730 to 69,319	4.0 percent	50 percent	deleted text begin $ 580 deleted text end new text begin $640new text end
69,320 to 71,719	4.0 percent	50 percent	deleted text begin $ 480 deleted text end new text begin $530new text end
71,720 to 74,619	4.0 percent	50 percent	deleted text begin $ 390 deleted text end new text begin $430new text end
74,620 to 77,519	4.0 percent	50 percent	deleted text begin $ 290 deleted text end new text begin $320new text end

The payment made to a claimant shall be the amount of the state refund calculated
under this subdivision. No payment is allowed if the claimant's household income is
$77,520 or more.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with refunds based on
property taxes payable in 2008.
new text end

Sec. 18.

Minnesota Statutes 2006, section 297A.68, subdivision 5, is amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is exemptnew text begin as follows:
new text end

new text begin (1) For sales and purchases of capital equipment by the wood products industry, the
tax is not imposed.
new text end

new text begin (2) For sales and purchases of capital equipment by a small business, the tax is
not imposed. For purposes of this subdivision, "small business" is as defined in section
645.455, subdivision 2new text end .

new text begin (3) For all other sales and purchases of capital equipment, new text end 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.

"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 primarily to electronically transmit results retrieved by a customer of an online
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, repair parts for
ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and

(9) machinery or equipment used for research, development, design, or production
of computer software.

(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;

(7) machinery and equipment used by restaurants in the furnishing, preparing, or
serving of prepared foods as defined in section 297A.61, subdivision 31;

(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);

(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

(10) 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) "Online 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 (11) "Wood products industry" means manufacturers of pulp, paper, and paperboard;
sawmills and planing mills; manufacturers of panel board including veneer, plywood, and
reconstituted wood products such as particleboard, waferboard, and oriented strandboard;
manufacturers of fabricated wood millwork; manufacturers of structural wood members;
and manufacturers of prefabricated wood buildings and components. For purposes of this
subdivision, "wood products industry" does not include logging; manufacturers of wood
cabinets, furniture, office or store fixtures, toys and playground equipment, caskets, or
miscellaneous wood products; manufacturers of wood containers; businesses engaged in
wood preserving; the operation of timber tracts or tree farms; forest nurseries and the
gathering of forest products; and forestry services related to timber production.
new text end

deleted text begin (11)deleted text end new text begin (12)new text end This subdivision does not apply to telecommunications equipment as
provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
for telecommunications services.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 19.

Minnesota Statutes 2006, section 297A.70, subdivision 2, is amended to read:

Subd. 2.

Sales to government.

(a) All sales, except those listed in paragraph (b),
to the following governments and political subdivisions, or to the listed agencies or
instrumentalities of governments and political subdivisions, are exempt:

(1) the United States and its agencies and instrumentalities;

(2) school districts, the University of Minnesota, state universities, community
colleges, technical colleges, state academies, the Perpich Minnesota Center for Arts
Education, and an instrumentality of a political subdivision that is accredited as an
optional/special function school by the North Central Association of Colleges and Schools;

(3) hospitals and nursing homes owned and operated by political subdivisions of
the state of tangible personal property and taxable services used at or by hospitals and
nursing homes;

(4) the Metropolitan Council, for its purchases of vehicles and repair parts to equip
operations provided for in section 473.4051;

(5) other states or political subdivisions of other states, if the sale would be exempt
from taxation if it occurred in that state; deleted text begin and
deleted text end

(6) sales to public libraries, public library systems, multicounty, multitype library
systems as defined in section 134.001, county law libraries under chapter 134A, state
agency libraries, the state library under section 480.09, and the Legislative Reference
Librarydeleted text begin .deleted text end new text begin ; andnew text end

new text begin (7) Department of Transportation purchases that are made from the trunk highway
fund.
new text end

(b) This exemption does not apply to the sales of the following products and services:

(1) building, construction, or reconstruction materials purchased by a contractor
or a subcontractor as a part of a lump-sum contract or similar type of contract with a
guaranteed maximum price covering both labor and materials for use in the construction,
alteration, or repair of a building or facility;

(2) construction materials purchased by tax exempt entities or their contractors to
be used in constructing buildings or facilities which will not be used principally by the
tax exempt entities;

(3) the leasing of a motor vehicle as defined in section 297B.01, subdivision 5,
except for leases entered into by the United States or its agencies or instrumentalities; or

(4) lodging as defined under section 297A.61, subdivision 3, paragraph (g), clause
(2), and prepared food, candy, and soft drinks, except for lodging, prepared food, candy,
and soft drinks purchased directly by the United States or its agencies or instrumentalities.

(c) As used in this subdivision, "school districts" means public school entities and
districts of every kind and nature organized under the laws of the state of Minnesota, and
any instrumentality of a school district, as defined in section 471.59.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 20.

Minnesota Statutes 2006, section 297A.71, is amended by adding a
subdivision to read:

new text begin Subd. 40. new text end

new text begin Legal reference office and data center facility. new text end

new text begin Materials and supplies
used or consumed in, and equipment incorporated into, the construction, improvement, or
expansion of a legal reference office and data center facility is exempt if:
new text end

new text begin (1) the facility is engaged in the development or provision of print or online versions
of legal reference products and services; and
new text end

new text begin (2) the total capital investment made in the facility is at least $60,000,000.
new text end

new text begin Except for equipment owned or leased by a contractor, all machinery, equipment,
appliances, furniture, fixtures, and technical equipment, including data processing, data
storage, and telecommunications hardware and software, necessary to the construction and
equipping of the facility to provide those services are also 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
December 31, 2006, and before January 1, 2012.
new text end

Sec. 21.

Minnesota Statutes 2006, section 297A.71, is amended by adding a
subdivision to read:

new text begin Subd. 41. new text end

new text begin Commuter rail; material, supplies, and equipment. new text end

new text begin Materials and
supplies used or consumed in, and equipment incorporated into, the construction or
improvement of a commuter rail transportation system operated under sections 174.80
to 174.90 are exempt. This exemption includes railroad cars and engines and related
equipment.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
December 31, 2006.
new text end

Sec. 22.

Minnesota Statutes 2006, 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 deleted text begin exemptdeleted text end new text begin on which the tax is imposed and collectednew text end 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) elevators and 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;

(9) materials and supplies for qualified low-income housing under section 297A.71,
subdivision 23;

(10) materials, supplies, and equipment for municipal electric utility facilities under
section 297A.71, subdivision 35;

(11) equipment and materials used for the generation, transmission, and distribution
of electrical energy and an aerial camera package exempt under section 297A.68,
subdivision 37; and

(12) tangible personal property and taxable services and construction materials,
supplies, and equipment exempt under section 297A.68, subdivision 41.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 23.

Minnesota Statutes 2006, section 297A.75, subdivision 3, is amended to read:

Subd. 3.

Application.

(a) The application must include sufficient information
to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
subcontractor, or builder, under subdivision 1, clause (4), (5), (6), (7), (8), (9), (10), (11),
or (12), the contractor, subcontractor, or builder must furnish to the refund applicant a
statement including the cost of the exempt items and the taxes paid on the items unless
otherwise specifically provided by this subdivision. The provisions of sections 289A.40
and 289A.50 apply to refunds under this section.

(b) An applicant may not file more than two applications per calendar year for
refunds for taxes paid on capital equipment deleted text begin exemptdeleted text end new text begin on which the tax is imposed and
collectednew text end under section 297A.68, subdivision 5.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 24.

Minnesota Statutes 2006, section 469.312, subdivision 5, is amended to read:

Subd. 5.

Duration limit.

(a) The maximum duration of a zone is 12 years. The
applicant may request a shorter duration. The commissioner may specify a shorter
duration, regardless of the requested duration.

(b) The duration limit under this subdivision and the duration of the zone for
purposes of allowance of tax incentives described in section 469.315 is extended by three
calendar years for each parcel of property that meets the following requirements:

(1) the qualified business operates an ethanol plant, as defined in section 41A.09, on
the site that includes the parcel; and

(2) the business subsidy agreement was executed after April 30, 2006.

new text begin (c)(1) Notwithstanding the 12-year zone limitation, all qualified businesses that sign
a business subsidy agreement, as required under sections 469.310, subdivision 11, and
469.313, before December 31, 2015, are entitled to claim the tax benefits for which they
qualify under section 469.315 for the year in which the business subsidy agreement is
signed and ten additional years.
new text end

new text begin (2) This paragraph does not apply to:
new text end

new text begin (i) any acreage designated as a job opportunity building zone for which any person
has fully executed a business subsidy agreement before this paragraph became effective; or
new text end

new text begin (ii) any trade or business that relocates as defined in section 469.310, subdivision 12,
and received benefits under section 463.315 prior to the relocation.
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. 25.

Minnesota Statutes 2006, section 477A.013, subdivision 9, is amended to read:

Subd. 9.

City aid distribution.

(a) Innew text begin eachnew text end calendar year deleted text begin 2002 and thereafterdeleted text end , each
city shall receive an aid distribution equal to the sum of (1) new text begin 50 percent of the sum of new text end the
deleted text begin citydeleted text end new text begin city'snew text end formula aid under subdivision 8, and deleted text begin (2)deleted text end its city aid basenew text begin , each as computed
under the laws applicable to aid distributed in the prior year but without the limits in
paragraphs (b) through (d), and (2) 50 percent of the sum of the city's formula aid under
subdivision 8, and its city aid base, each as computed under the laws applicable to aid to
be distributed in the current year but without the limits in paragraphs (b) through (d)new text end .

(b) deleted text begin For aids payable in 2005 and thereafter, the totaldeleted text end new text begin The citynew text end aid new text begin distribution new text end 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. deleted text begin For aids payable in
2005 and thereafter,
deleted text end

new text begin (c)new text end The deleted text begin totaldeleted text end new text begin city new text end aid new text begin distribution new text end for any city with a population of 2,500 or more
may not decrease from its deleted text begin totaldeleted text end aid new text begin distribution new text end 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 (c) 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. For aids payable
in 2005 and thereafter,
deleted text end

new text begin (d)new text end The deleted text begin totaldeleted text end aid new text begin distribution new text end 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.

deleted text begin (d)deleted text end new text begin (e)new text end If a city's net tax capacity used in calculating aid under this section has
decreased in any year by more than 25 percent from its net tax capacity in the previous
year due to property becoming tax-exempt Indian land, the city's maximum allowed aid
increase under paragraph (b) shall be increased by an amount equal to (1) the city's tax
rate in the year of the aid calculation, multiplied by (2) the amount of its net tax capacity
decrease resulting from the property becoming tax exempt.

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 2006, section 477A.013, is amended by adding a
subdivision to read:

new text begin Subd. 11. new text end

new text begin Use of revenues. new text end

new text begin Beginning with aids payable in 2007, any city of over
100,000 population receiving additional aid under this section due to an increase in the
appropriation over the amount appropriated for aid paid in 2006 must use the additional
aid it receives to increase spending on police services and prosecutors in the city attorney's
office above the level funded by the city in calendar year 2006.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 27.

Minnesota Statutes 2006, section 477A.03, subdivision 2a, is amended to read:

Subd. 2a.

Cities.

deleted text begin 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, the total
aids paid under section 477A.013, subdivision 9, are limited to $437,052,000. For aids
payable in 2006 and thereafter,deleted text end The total aids paid under section 477A.013, subdivision 9,
deleted text begin isdeleted text end new text begin each year arenew text end limited to deleted text begin $485,052,000deleted text end new text begin $495,052,000new 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 2

FEDERAL UPDATE

Section 1.

Minnesota Statutes 2006, 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 May
18deleted text end new text begin December 31new text end , 2006.

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 2006, section 290.01, subdivision 19, 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 the federal effective dates of changes to the
Internal Revenue Code and 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.

The Internal Revenue Code of 1986, as amended through deleted text begin May 18deleted text end new text begin December 31new text end ,
2006, shall be in effect for taxable years beginning after December 31, 1996.

Except as otherwise provided, references to the Internal Revenue Code in
subdivisions 19 to 19f 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 2006, 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:

(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 not deducted new text begin or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code new text end 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 over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code deleted text begin and
under the provisions of Public Law 109-1deleted text end ;

(10) job opportunity building zone income as provided under section 469.316;

(11) new text begin to the extent included in federal adjusted gross income, new text end 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;

(12) new text begin to the extent included in federal adjusted gross income, new text end the amount of
compensation paid to Minnesota residents who are members of the armed forces of the
United States or United Nations for active duty performed outside Minnesota;

(16) international economic development zone income as provided under section
469.325.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for tax years beginning
after December 31, 2005.
new text end

Sec. 4.

Minnesota Statutes 2006, section 290.01, subdivision 31, is amended to read:

Subd. 31.

Internal Revenue Code.

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. 5.

Minnesota Statutes 2006, 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 May 18deleted text end new text begin December 31new text end , 2006.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for property tax refunds
based on property taxes payable on or after December 31, 2005, and rent paid on or after
December 31, 2004.
new text end

Sec. 6.

Minnesota Statutes 2006, 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 May 18deleted text end new text begin December 31new text end , 2006.

(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 begin EFFECTIVE DATE. new text end

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

HF 304

Bill Text Versions

Current Version - as introduced

ARTICLE 1

GOVERNOR'S INITIATIVES

Section 1.

Subd. 1b.

Budget reserve increase.

Sec. 2.

Subd. 2.

new text begin Reserve goal; new text end additional revenues; priority.

Sec. 3.

Subd. 13a.

Operating capital levy.

new text begin EFFECTIVE DATE. new text end

Sec. 4.

Subdivision 1.

Residential homestead market value credit.

new text begin EFFECTIVE DATE. new text end

Sec. 5.

Subd. 3.

Local governmental unit.

new text begin EFFECTIVE DATE. new text end

Sec. 6.

Subd. 5.

Special levies.

new text begin EFFECTIVE DATE. new text end

Sec. 7.

new text begin Subd. 7. new text end

new text begin Levy year. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 8.

Subdivision 1.

Limit on levies.

new text begin EFFECTIVE DATE. new text end

Sec. 9.

Subd. 2.

Levy limit base.

new text begin EFFECTIVE DATE. new text end

Sec. 10.

Subd. 4.

Adjusted levy limit base.

new text begin EFFECTIVE DATE. new text end

Sec. 11.

Subd. 5.

Property tax levy limit.

new text begin EFFECTIVE DATE. new text end

Sec. 12.

Subd. 19b.

Subtractions from federal taxable income.

new text begin EFFECTIVE DATE. new text end

Sec. 13.

new text begin Subd. 34. new text end

new text begin Dairy investment credit. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 14.

new text begin Subd. 35. new text end

new text begin Regional investment credit. new text end

new text begin EFFECTIVE DATE. new text end

Sec. 15.

Subd. 2.

Definitions.

new text begin EFFECTIVE DATE. new text end

Sec. 16.

Subd. 2.

Apportionment formula of general application.

new text begin EFFECTIVE DATE. new text end

Sec. 17.

Subd. 2.

Homeowners.

new text begin EFFECTIVE DATE. new text end

Sec. 18.

Subd. 5.

Capital equipment.

new text begin EFFECTIVE DATE. new text end

Sec. 19.

Subd. 2.

Sales to government.

new text begin EFFECTIVE DATE. new text end

Sec. 20.