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HF 677

4th Engrossment - 88th Legislature (2013 - 2014) Posted on 08/26/2013 02:07pm

KEY: stricken = removed, old language. underscored = added, new language.

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Bill Text Versions

Engrossments

Introduction Pdf Posted on 02/18/2013
1st Engrossment Pdf Posted on 04/18/2013
2nd Engrossment Pdf Posted on 04/20/2013
3rd Engrossment Pdf Posted on 04/24/2013
4th Engrossment Pdf Posted on 05/21/2013

Unofficial Engrossments

1st Unofficial Engrossment Pdf Posted on 04/30/2013

Conference Committee Reports

LS88-CCR-HF0677 Pdf Posted on 05/19/2013

Current Version - 4th Engrossment

A bill for an act
relating to financing and operation of state and local government; making
changes to individual income, corporate franchise, property, sales and use,
estate, mineral, tobacco, alcohol, special, local, and other taxes and tax-related
provisions modifying the property tax refund; changing property tax aids and
credits; modifying the Sustainable Forest Incentive Act; modifying education
aids and levies; providing additional pension funding; modifying definitions and
distributions for property taxes; providing for property tax exemptions; modifying
the payment in lieu of tax provisions; modifying education aids and levies;
modifying tobacco tax provisions; making changes to additions and subtractions
from federal taxable income; providing for federal conformity; changing income
tax rates for individuals, estates, and trusts; providing income tax credits;
modifying estate tax provisions; providing for a state gift tax; expanding the sales
tax base; modifying the duty to collect and remit sales taxes for certain sellers;
imposing the sales tax on digital products and selected services; modifying the
definition of sale and purchase; modifying provisions for the rental motor vehicle
tax rate; providing for multiple points of use certificates; modifying sales tax
exemptions; authorizing local sales taxes; authorizing economic development
powers; modifying tax increment financing rules; providing authority,
organization, powers, duties, and requiring a prevailing wage for development
of a Destination Medical Center; authorizing state infrastructure aid; modifying
the distribution of taconite production taxes; authorizing taconite production tax
bonds for grants to school districts; modifying and providing provisions for
public finance; providing funding for legislative office facilities; modifying the
definition of market value for tax, debt, and other purposes; making conforming,
policy, and technical changes to tax provisions; requiring studies and reports;
appropriating money;amending Minnesota Statutes 2012, sections 13.792;
16A.46; 16A.727; 38.18; 40A.15, subdivision 2; 69.011, subdivision 1; 69.021,
subdivisions 7, 8; 88.51, subdivision 3; 103B.102, subdivision 3; 103B.245,
subdivision 3; 103B.251, subdivision 8; 103B.335; 103B.3369, subdivision 5;
103B.635, subdivision 2; 103B.691, subdivision 2; 103C.501, subdivision 4;
103D.905, subdivisions 2, 3, 8; 103F.405, subdivision 1; 116J.8737, subdivisions
1, 2, 8; 117.025, subdivision 7; 118A.04, subdivision 3; 118A.05, subdivision
5; 123A.455, subdivision 1; 126C.10, subdivision 1, by adding a subdivision;
126C.13, subdivision 4; 126C.17; 126C.48, subdivision 8; 127A.48, subdivision
1; 138.053; 144F.01, subdivision 4; 162.07, subdivisions 3, 4; 163.04, subdivision
3; 163.06, subdivision 6; 165.10, subdivision 1; 168.012, subdivision 9, by
adding a subdivision; 216C.436, subdivision 7; 237.52, subdivision 3, by adding
a subdivision; 270.077; 270.41, subdivisions 3, 5, by adding a subdivision;
270.45; 270B.01, subdivision 8; 270B.03, subdivision 1; 270B.12, subdivision
4; 270C.03, subdivision 1; 270C.34, subdivision 1; 270C.38, subdivision 1;
270C.42, subdivision 2; 270C.56, subdivision 1; 271.06, subdivision 2a, as added;
272.01, subdivision 2; 272.02, subdivisions 39, 97, by adding subdivisions;
272.03, subdivision 9, by adding subdivisions; 273.032; 273.061, subdivision
2; 273.0645; 273.11, subdivision 1; 273.114, subdivision 6; 273.117; 273.124,
subdivisions 3a, 13; 273.13, subdivisions 21b, 23, 25; 273.1398, subdivisions 3,
4; 273.19, subdivision 1; 273.372, subdivision 4; 273.39; 275.011, subdivision 1;
275.077, subdivision 2; 275.71, subdivision 4; 276.04, subdivision 2; 276A.01,
subdivisions 10, 12, 13, 15; 276A.06, subdivision 10; 279.01, subdivision 1, by
adding a subdivision; 279.02; 279.06, subdivision 1; 279.37, subdivisions 1a, 2;
281.14; 281.17; 287.05, by adding a subdivision; 287.08; 287.20, by adding a
subdivision; 287.23, subdivision 1; 287.385, subdivision 7; 289A.08, subdivision
3; 289A.10, subdivision 1, by adding a subdivision; 289A.12, subdivision 14, by
adding a subdivision; 289A.18, by adding a subdivision; 289A.20, subdivisions
3, 4, by adding a subdivision; 289A.26, subdivisions 3, 4, 7, 9; 289A.55,
subdivision 9; 289A.60, subdivision 4; 290.01, subdivisions 19, as amended,
19b, 19c, 19d; 290.06, subdivisions 2c, 2d, by adding a subdivision; 290.0677,
subdivision 2; 290.068, subdivisions 3, 6a; 290.0681, subdivisions 1, 3, 4, 5, 10;
290.091, subdivisions 1, 2, 6; 290.0921, subdivision 3; 290.0922, subdivision 1;
290.095, subdivision 2; 290.10, subdivision 1; 290.17, subdivision 4; 290.191,
subdivision 5; 290.21, subdivision 4; 290.9705, subdivision 1; 290A.03,
subdivision 3; 290A.04, subdivisions 2, 2a, 4; 290B.04, subdivision 2; 290C.02,
subdivision 6; 290C.03; 290C.055; 290C.07; 291.005, subdivision 1; 291.03,
subdivisions 1, 8, 9, 10, 11, by adding a subdivision; 296A.01, subdivisions 7, 8,
14, 19, 20, 23, 24, 26, by adding a subdivision; 296A.09, subdivision 2; 296A.17,
subdivision 3; 296A.22, subdivisions 1, 3; 297A.61, subdivisions 3, 4, 10, 25,
38, 45, by adding subdivisions; 297A.64, subdivision 1; 297A.66, subdivision
3, by adding a subdivision; 297A.665; 297A.668, by adding a subdivision;
297A.67, subdivisions 7, 13, by adding a subdivision; 297A.68, subdivisions
2, 5, 42, by adding a subdivision; 297A.70, subdivisions 2, 4, 5, 7, 13, 14, by
adding subdivisions; 297A.71, by adding subdivisions; 297A.75, subdivisions
1, 2, 3; 297A.82, subdivision 4, by adding a subdivision; 297A.99, subdivision
1; 297B.11; 297E.021, subdivision 3; 297E.14, subdivision 7; 297F.01,
subdivisions 3, 19, 23, by adding subdivisions; 297F.05, subdivisions 1, 3, 4, by
adding subdivisions; 297F.09, subdivision 9; 297F.18, subdivision 7; 297F.24,
subdivision 1; 297F.25, subdivision 1; 297G.04, subdivision 2; 297G.09,
subdivision 8; 297G.17, subdivision 7; 297I.05, subdivisions 7, 11, 12; 297I.30,
subdivisions 1, 2; 297I.80, subdivision 1; 298.01, subdivisions 3, 3b; 298.018;
298.17; 298.227, as amended; 298.24, subdivision 1; 298.28, subdivisions 4, 6,
9c, 10; 325D.32, subdivision 2; 325F.781, subdivision 1; 349.166, subdivision
1; 353G.08, subdivision 2; 360.531; 360.66; 365.025, subdivision 4; 366.095,
subdivision 1; 366.27; 368.01, subdivision 23; 368.47; 370.01; 373.01,
subdivisions 1, 3; 373.40, subdivisions 1, 2, 4; 375.167, subdivision 1; 375.18,
subdivision 3; 375.555; 383A.80, subdivision 4; 383B.152; 383B.245; 383B.73,
subdivision 1; 383B.80, subdivision 4; 383D.41, by adding a subdivision;
383E.20; 383E.23; 385.31; 394.36, subdivision 1; 398A.04, subdivision 8;
401.05, subdivision 3; 403.02, subdivision 21, by adding subdivisions; 403.06,
subdivision 1a; 403.11, subdivision 1, by adding subdivisions; 410.32; 412.221,
subdivision 2; 412.301; 428A.02, subdivision 1; 428A.101; 428A.21; 430.102,
subdivision 2; 447.10; 450.19; 450.25; 458A.10; 458A.31, subdivision 1; 465.04;
469.033, subdivision 6; 469.034, subdivision 2; 469.053, subdivisions 4, 4a, 6;
469.071, subdivision 5; 469.107, subdivision 1; 469.169, by adding a subdivision;
469.176, subdivisions 4c, 4g, 6; 469.177, subdivisions 1a, 9, by adding
subdivisions; 469.180, subdivision 2; 469.187; 469.206; 469.319, subdivision
4; 469.340, subdivision 4; 471.24; 471.571, subdivisions 1, 2; 471.73; 473.325,
subdivision 2; 473.39, by adding a subdivision; 473.606, subdivision 3; 473.629;
473.661, subdivision 3; 473.667, subdivision 9; 473.671; 473.711, subdivision
2a; 473F.02, subdivisions 12, 14, 15, 23; 473F.08, subdivisions 3a, 10, by adding
a subdivision; 474A.04, subdivision 1a; 474A.062; 474A.091, subdivision 3a;
475.521, subdivisions 1, 2, 4; 475.53, subdivisions 1, 3, 4; 475.58, subdivisions
2, 3b; 475.73, subdivision 1; 477A.011, subdivisions 20, 30, 34, 42, by adding
subdivisions; 477A.0124, subdivision 2; 477A.013, subdivisions 1, 8, 9, by
adding a subdivision; 477A.015; 477A.03, subdivisions 2a, 2b, by adding a
subdivision; 477A.11, subdivisions 3, 4, by adding subdivisions; 477A.12,
subdivisions 1, 2, 3; 477A.14, subdivision 1, by adding a subdivision; 641.23;
641.24; 645.44, by adding a subdivision; Laws 1971, chapter 773, section 1,
subdivision 2, as amended; Laws 1988, chapter 645, section 3, as amended;
Laws 1993, chapter 375, article 9, section 46, subdivisions 2, as amended, 5, as
amended; Laws 1998, chapter 389, article 8, section 43, subdivisions 1, 3, as
amended, 5, as amended; Laws 1999, chapter 243, article 6, section 11; Laws
2002, chapter 377, article 3, section 25, as amended; Laws 2005, First Special
Session chapter 3, article 5, section 37, subdivisions 2, 4; Laws 2006, chapter
259, article 11, section 3, as amended; Laws 2008, chapter 366, article 5, sections
26; 33; 34, as amended; article 7, section 19, subdivision 3, as amended; Laws
2009, chapter 88, article 2, section 46, subdivisions 1, 3; Laws 2010, chapter 216,
sections 11; 55; Laws 2010, chapter 389, article 1, section 12; article 5, section 6,
subdivision 6; proposing coding for new law in Minnesota Statutes, chapters 116J;
116V; 124D; 136A; 270C; 287; 290A; 292; 403; 423A; 469; 477A; repealing
Minnesota Statutes 2012, sections 16A.725; 97A.061; 256.9658; 272.69; 273.11,
subdivisions 1a, 22; 276A.01, subdivision 11; 289A.60, subdivision 31; 290.01,
subdivision 6b; 290.06, subdivision 22a; 290.0921, subdivision 7; 290.171;
290.173; 290.174; 297A.61, subdivision 27; 297A.68, subdivision 35; 473F.02,
subdivision 13; 477A.011, subdivisions 2a, 19, 21, 29, 31, 32, 33, 36, 39, 40, 41;
477A.013, subdivisions 11, 12; 477A.0133; 477A.0134; Laws 1973, chapter 567,
section 7, as amended; Laws 2009, chapter 88, article 4, section 23, as amended.

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

ARTICLE 1

HOMESTEAD CREDIT REFUND AND RENTER PROPERTY TAX REFUND

Section 1.

Minnesota Statutes 2012, 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 of
1986, as amended through December 31, 1995;

(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, to the extent the sum of amounts exceeds the retirement base
amount for the claimant and spouse
;

(xii) to the extent not included in federal adjusted gross income, distributions received
by the claimant or spouse from a traditional or Roth style retirement account or plan;

(xiii) nontaxable scholarship or fellowship grants;

(xiii) (xiv) the amount of deduction allowed under section 199 of the Internal
Revenue Code;

(xiv) (xv) the amount of deduction allowed under section 220 or 223 of the Internal
Revenue Code;

(xv) (xvi) the amount of deducted for tuition expenses required to be added to
income under section 290.01, subdivision 19a, clause (12);
under section 222 of the
Internal Revenue Code; and

(xvi) (xvii) the amount deducted for certain expenses of elementary and secondary
school teachers under section 62(a)(2)(D) of the Internal Revenue Code; and.

(xvii) unemployment compensation.

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) to the extent included in federal adjusted gross income, amounts contributed by
the claimant or spouse to a traditional or Roth style retirement account or plan, but not
to exceed the retirement base amount reduced by the amount of contributions excluded
from federal adjusted gross income, but not less than zero;

(d) surplus food or other relief in kind supplied by a governmental agency;

(d) (e) relief granted under this chapter;

(e) (f) child support payments received under a temporary or final decree of
dissolution or legal separation; or

(f) (g) 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; "retirement base amount" means the deductible amount for the
taxable year for the claimant and spouse under section 219(b)(5)(A) of the Internal
Revenue Code, adjusted for inflation as provided in section 219(b)(5)(D) of the Internal
Revenue Code, without regard to whether the claimant or spouse claimed a deduction;
and "traditional or Roth style retirement account or plan" means retirement plans under
sections 401, 403, 408, 408A, and 457 of the Internal Revenue Code
.

EFFECTIVE DATE.

This section is effective beginning with refunds based on
property taxes payable in 2014 and rent paid in 2013.

Sec. 2.

Minnesota Statutes 2012, section 290A.04, subdivision 2, is amended to read:


Subd. 2.

Homeowners; homestead credit refund.

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 1,549
1.0 percent
15 percent
$
2,460
1,550 to 3,089
1.1 percent
15 percent
$
2,460
3,090 to 4,669
1.2 percent
15 percent
$
2,460
4,670 to 6,229
1.3 percent
20 percent
$
2,460
6,230 to 7,769
1.4 percent
20 percent
$
2,460
7,770 to 10,879
1.5 percent
20 percent
$
2,460
10,880 to 12,429
1.6 percent
20 percent
$
2,460
12,430 to 13,989
1.7 percent
20 percent
$
2,460
13,990 to 15,539
1.8 percent
20 percent
$
2,460
15,540 to 17,079
1.9 percent
25 percent
$
2,460
17,080 to 18,659
2.0 percent
25 percent
$
2,460
18,660 to 21,759
2.1 percent
25 percent
$
2,460
21,760 to 23,309
2.2 percent
30 percent
$
2,460
23,310 to 24,859
2.3 percent
30 percent
$
2,460
24,860 to 26,419
2.4 percent
30 percent
$
2,460
26,420 to 32,629
2.5 percent
35 percent
$
2,460
32,630 to 37,279
2.6 percent
35 percent
$
2,460
37,280 to 46,609
2.7 percent
35 percent
$
2,000
46,610 to 54,369
2.8 percent
35 percent
$
2,000
54,370 to 62,139
2.8 percent
40 percent
$
1,750
62,140 to 69,909
3.0 percent
40 percent
$
1,440
69,910 to 77,679
3.0 percent
40 percent
$
1,290
77,680 to 85,449
3.0 percent
40 percent
$
1,130
85,450 to 90,119
3.5 percent
45 percent
$
960
90,120 to 93,239
3.5 percent
45 percent
$
790
93,240 to 97,009
3.5 percent
50 percent
$
650
97,010 to 100,779
3.5 percent
50 percent
$
480
Household Income
Percent of Income
Percent Paid by
Claimant
Maximum
State
Refund
$0 to 1,619
1.0 percent
15 percent
$
2,580
1,620 to 3,229
1.1 percent
15 percent
$
2,580
3,230 to 4,889
1.2 percent
15 percent
$
2,580
4,890 to 6,519
1.3 percent
20 percent
$
2,580
6,520 to 8,129
1.4 percent
20 percent
$
2,580
8,130 to 11,389
1.5 percent
20 percent
$
2,580
11,390 to 13,009
1.6 percent
20 percent
$
2,580
13,010 to 14,649
1.7 percent
20 percent
$
2,580
14,650 to 16,269
1.8 percent
20 percent
$
2,580
16,270 to 17,879
1.9 percent
25 percent
$
2,580
17,880 to 22,779
2.0 percent
25 percent
$
2,580
22,780 to 24,399
2.0 percent
30 percent
$
2,580
24,400 to 27,659
2.0 percent
30 percent
$
2,580
27,660 to 39,029
2.0 percent
35 percent
$
2,580
39,030 to 56,919
2.0 percent
35 percent
$
2,090
56,920 to 65,049
2.0 percent
40 percent
$
1,830
65,050 to 73,189
2.1 percent
40 percent
$
1,510
73,190 to 81,319
2.2 percent
40 percent
$
1,350
81,320 to 89,449
2.3 percent
40 percent
$
1,180
89,450 to 94,339
2.4 percent
45 percent
$
1,000
94,340 to 97,609
2.5 percent
45 percent
$
830
97,610 to 101,559
2.5 percent
50 percent
$
680
101,560 to 105,499
2.5 percent
50 percent
$
500

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
$100,780 $105,500 or more.

EFFECTIVE DATE.

This section is effective for refund claims based on taxes
payable in 2014 and thereafter.

Sec. 3.

Minnesota Statutes 2012, section 290A.04, subdivision 2a, is amended to read:


Subd. 2a.

Renters.

A claimant whose rent constituting property taxes exceeds the
percentage of the household income stated below must 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 rent constituting property taxes. The
state refund equals the amount of rent constituting property taxes that remain, up to the
maximum state refund amount shown below.

Household Income
Percent of Income
Percent Paid by
Claimant
Maximum
State
Refund
$0 to 3,589
1.0 percent
5 percent
$
1,190
3,590 to 4,779
1.0 percent
10 percent
$
1,190
4,780 to 5,969
1.1 percent
10 percent
$
1,190
5,970 to 8,369
1.2 percent
10 percent
$
1,190
8,370 to 10,759
1.3 percent
15 percent
$
1,190
10,760 to 11,949
1.4 percent
15 percent
$
1,190
11,950 to 13,139
1.4 percent
20 percent
$
1,190
13,140 to 15,539
1.5 percent
20 percent
$
1,190
15,540 to 16,729
1.6 percent
20 percent
$
1,190
16,730 to 17,919
1.7 percent
25 percent
$
1,190
17,920 to 20,319
1.8 percent
25 percent
$
1,190
20,320 to 21,509
1.9 percent
30 percent
$
1,190
21,510 to 22,699
2.0 percent
30 percent
$
1,190
22,700 to 23,899
2.2 percent
30 percent
$
1,190
23,900 to 25,089
2.4 percent
30 percent
$
1,190
25,090 to 26,289
2.6 percent
35 percent
$
1,190
26,290 to 27,489
2.7 percent
35 percent
$
1,190
27,490 to 28,679
2.8 percent
35 percent
$
1,190
28,680 to 29,869
2.9 percent
40 percent
$
1,190
29,870 to 31,079
3.0 percent
40 percent
$
1,190
31,080 to 32,269
3.1 percent
40 percent
$
1,190
32,270 to 33,459
3.2 percent
40 percent
$
1,190
33,460 to 34,649
3.3 percent
45 percent
$
1,080
34,650 to 35,849
3.4 percent
45 percent
$
960
35,850 to 37,049
3.5 percent
45 percent
$
830
37,050 to 38,239
3.5 percent
50 percent
$
720
38,240 to 39,439
3.5 percent
50 percent
$
600
38,440 to 40,629
3.5 percent
50 percent
$
360
40,630 to 41,819
3.5 percent
50 percent
$
120
$0 to 4,909
1.0 percent
5 percent
$
2,000
4,910 to 6,529
1.0 percent
10 percent
$
2,000
6,530 to 8,159
1.1 percent
10 percent
$
1,950
8,160 to 11,439
1.2 percent
10 percent
$
1,900
11,440 to 14,709
1.3 percent
15 percent
$
1,850
14,710 to 16,339
1.4 percent
15 percent
$
1,800
16,340 to 17,959
1.4 percent
20 percent
$
1,750
17,960 to 21,239
1.5 percent
20 percent
$
1,700
21,240 to 22,869
1.6 percent
20 percent
$
1,650
22,870 to 24,499
1.7 percent
25 percent
$
1,650
24,500 to 27,779
1.8 percent
25 percent
$
1,650
27,780 to 29,399
1.9 percent
30 percent
$
1,650
29,400 to 34,299
2.0 percent
30 percent
$
1,650
34,300 to 39,199
2.0 percent
35 percent
$
1,650
39,200 to 45,739
2.0 percent
40 percent
$
1,650
45,740 to 47,369
2.0 percent
45 percent
$
1,500
47,370 to 49,009
2.0 percent
45 percent
$
1,350
49,010 to 50,649
2.0 percent
45 percent
$
1,150
50,650 to 52,269
2.0 percent
50 percent
$
1,000
52,270 to 53,909
2.0 percent
50 percent
$
900
53,910 to 55,539
2.0 percent
50 percent
$
500
55,540 to 57,169
2.0 percent
50 percent
$
200

The payment made to a claimant is the amount of the state refund calculated under
this subdivision. No payment is allowed if the claimant's household income is $41,820
$57,170 or more.

EFFECTIVE DATE.

This section is effective for claims based on rent paid in
2013 and following years.

Sec. 4.

Minnesota Statutes 2012, section 290A.04, subdivision 4, is amended to read:


Subd. 4.

Inflation adjustment.

(a) Beginning for property tax refunds payable in
calendar year 2002, the commissioner shall annually adjust the dollar amounts of the
income thresholds and the maximum refunds under subdivisions 2 and 2a for inflation.
The commissioner shall make the inflation adjustments in accordance with section 1(f) of
the Internal Revenue Code, except that for purposes of this subdivision the percentage
increase shall be determined as provided in this subdivision.

(b) In adjusting the dollar amounts of the income thresholds and the maximum
refunds under subdivision 2 for inflation, the percentage increase shall be determined
from the year ending on June 30, 2011 2013, to the year ending on June 30 of the year
preceding that in which the refund is payable.

(c) In adjusting the dollar amounts of the income thresholds and the maximum
refunds under subdivision 2a for inflation, the percentage increase shall be determined
from the year ending on June 30, 2000 2013, to the year ending on June 30 of the year
preceding that in which the refund is payable.

(d) The commissioner shall use the appropriate percentage increase to annually
adjust the income thresholds and maximum refunds under subdivisions 2 and 2a for
inflation without regard to whether or not the income tax brackets are adjusted for inflation
in that year. The commissioner shall round the thresholds and the maximum amounts,
as adjusted to the nearest $10 amount. If the amount ends in $5, the commissioner shall
round it up to the next $10 amount.

(e) The commissioner shall annually announce the adjusted refund schedule at the
same time provided under section 290.06. The determination of the commissioner under
this subdivision is not a rule under the Administrative Procedure Act.

EFFECTIVE DATE.

This section is effective for refund claims based on taxes
payable in 2014 and rent paid in 2013 and following years.

Sec. 5.

[290A.28] NOTIFICATION OF POTENTIAL ELIGIBILITY.

Subdivision 1.

Notification of eligibility.

(a) By September 1, 2014, the
commissioner shall notify, in writing or electronically, individual homeowners whom the
commissioner determines may be eligible for a homestead credit refund under this chapter
for that property taxes payable year as provided in this section. In determining whether
to notify a homeowner, the commissioner shall consider the property tax information
available to the commissioner under paragraph (b) for the homeowner and must estimate
the homeowner's household income using the most recent income information available to
the commissioner from filing under this chapter for the prior year, under chapter 290 for
the current or prior year, and any other income information available to the commissioner.
For each homeowner, the commissioner must estimate the homestead credit refund
amount under the schedule in section 290A.04, subdivision 2, using the homeowner's
property tax amount and estimated household income. If the estimated homestead credit
refund is at least $1,000, the commissioner must notify the homeowner of potential
eligibility for the homestead credit refund. The notification must include information
on how to file for the homestead credit refund. The notification requirement under this
section does not apply to a homeowner who has already filed for the homestead credit
refund for the current or prior year.

(b) By May 15, 2014, each county auditor shall transmit to the commissioner
of revenue the following information for each property classified as a residential or
agricultural homestead under section 273.13, subdivision 22 or 23:

(1) the property taxes payable;

(2) the name and address of the owner;

(3) the Social Security number or numbers of the owners; and

(4) any other information the commissioner deems necessary or useful to carry
out the provisions of this section.

The information must be provided in the form and manner prescribed by the commissioner.

Subd. 2.

Reports.

(a) By March 15, 2015, the commissioner must provide a written
report to the chairs and ranking minority members of the legislative committees with
jurisdiction over taxes, in compliance with sections 3.195 and 3.197. The report must
provide information on the number and dollar amount of homeowner property tax refund
claims based on taxes payable in 2014, including:

(1) the number and dollar amount of claims projected for homestead credit refunds
based on taxes payable in 2014 prior to enactment of the notification requirement in
this section;

(2) the number of notifications issued as provided in this section, including the
number issued by county;

(3) preliminary information on the number and dollar amount of claims for
homestead credit refunds based on taxes payable in 2014; and

(4) a description of any outreach efforts undertaken by the commissioner for
homestead credit refunds based on taxes payable in 2014, in addition to the notification
required in this section.

(b) By February 1, 2016, the commissioner must provide a written report to the chairs
and ranking minority members of the legislative committees with jurisdiction over taxes,
in compliance with sections 3.195 and 3.197. The report must include the information
required in paragraph (a) and must also include final information on the number and dollar
amount of claims for homestead credit refunds based on taxes payable in 2014.

EFFECTIVE DATE.

This section is effective for refund claims based on property
taxes payable in 2014.

ARTICLE 2

PROPERTY TAX AIDS AND CREDITS

Section 1.

Minnesota Statutes 2012, section 273.1398, subdivision 4, is amended to read:


Subd. 4.

Disparity reduction credit.

(a) Beginning with taxes payable in 1989,
class 4a and class 3a property qualifies for a disparity reduction credit if: (1) the property
is located in a border city that has an enterprise zone, as defined in section 469.166; (2)
the property is located in a city with a population greater than 2,500 and less than 35,000
according to the 1980 decennial census; (3) the city is adjacent to a city in another state or
immediately adjacent to a city adjacent to a city in another state; and (4) the adjacent city
in the other state has a population of greater than 5,000 and less than 75,000 according to
the 1980 decennial census.

(b) The credit is an amount sufficient to reduce (i) the taxes levied on class 4a
property to 2.3 1.9 percent of the property's market value and (ii) the tax on class 3a
property to 2.3 1.9 percent of market value.

(c) The county auditor shall annually certify the costs of the credits to the
Department of Revenue. The department shall reimburse local governments for the
property taxes forgone as the result of the credits in proportion to their total levies.

EFFECTIVE DATE.

This section is effective beginning with taxes payable in 2014.

Sec. 2.

Minnesota Statutes 2012, section 290C.02, subdivision 6, is amended to read:


Subd. 6.

Forest land.

"Forest land" means land containing a minimum of 20
contiguous acres for which the owner has implemented a forest management plan that was
prepared or updated within the past ten years by an approved plan writer. For purposes of
this subdivision, acres are considered to be contiguous even if they are separated by a road,
waterway, railroad track, or other similar intervening property. At least 50 percent of the
contiguous acreage must meet the definition of forest land in section 88.01, subdivision
7
. For the purposes of sections 290C.01 to 290C.11, forest land does not include (i)
land used for residential or agricultural purposes, (ii) land enrolled in the reinvest in
Minnesota program, a state or federal conservation reserve or easement reserve program
under sections 103F.501 to 103F.531, the Minnesota agricultural property tax law under
section 273.111, or land subject to agricultural land preservation controls or restrictions
as defined in section 40A.02 or under the Metropolitan Agricultural Preserves Act under
chapter 473H, or (iii) land exceeding 60,000 acres that is subject to a single conservation
easement funded under section 97A.056 or a comparable permanent easement conveyed
to a governmental or nonprofit entity; (iv) any land that becomes subject to a conservation
easement funded under section 97A.056 or a comparable permanent easement conveyed
to a governmental or nonprofit entity after May 30, 2013; or (v)
land improved with a
structure, pavement, sewer, campsite, or any road, other than a township road, used for
purposes not prescribed in the forest management plan.

EFFECTIVE DATE.

This section is effective for certifications and applications
due in 2013 and thereafter.

Sec. 3.

Minnesota Statutes 2012, section 290C.03, is amended to read:


290C.03 ELIGIBILITY REQUIREMENTS.

(a) Land may be enrolled in the sustainable forest incentive program under this
chapter if all of the following conditions are met:

(1) the land consists of at least 20 contiguous acres and at least 50 percent of the
land must meet the definition of forest land in section 88.01, subdivision 7, during the
enrollment;

(2) a forest management plan for the land must be prepared by an approved plan
writer and implemented during the period in which the land is enrolled;

(3) timber harvesting and forest management guidelines must be used in conjunction
with any timber harvesting or forest management activities conducted on the land during
the period in which the land is enrolled;

(4) the land must be enrolled for a minimum of eight years;

(5) there are no delinquent property taxes on the land; and

(6) claimants enrolling more than 1,920 acres in the sustainable forest incentive
program must allow year-round, nonmotorized access to fish and wildlife resources and
motorized access on established and maintained roads and trails, unless the road or trail is
temporarily closed for safety, natural resource, or road damage reasons
on enrolled land
except within one-fourth mile of a permanent dwelling or during periods of high fire
hazard as determined by the commissioner of natural resources.

(b) Claimants required to allow access under paragraph (a), clause (6), do not by
that action:

(1) extend any assurance that the land is safe for any purpose;

(2) confer upon the person the legal status of an invitee or licensee to whom a duty
of care is owed; or

(3) assume responsibility for or incur liability for any injury to the person or property
caused by an act or omission of the person.

EFFECTIVE DATE.

This section is effective for calculations made in 2013 and
thereafter.

Sec. 4.

Minnesota Statutes 2012, section 290C.055, is amended to read:


290C.055 LENGTH OF COVENANT.

(a) 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.

(b) 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:

(1) the commissioner receives notification from the claimant that the claimant wishes
to remove the land from the program under section 290C.10; or

(2) the date that the land is removed from the program under section 290C.11.

(c) Notwithstanding the other provisions of this section, the covenant is terminated:

(1) 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; or

(2) at the request of the claimant after a reduction in payments due to changes in the
payment formula under section 290C.07
.

EFFECTIVE DATE.

This section is effective for calculations made in 2013 and
thereafter.

Sec. 5.

Minnesota Statutes 2012, section 290C.07, is amended to read:


290C.07 CALCULATION OF INCENTIVE PAYMENT.

(a) An approved claimant under the sustainable forest incentive program is eligible
to receive an annual payment. The payment shall equal $7 per acre for each acre enrolled
in the sustainable forest incentive program.

(b) The annual payment for each Social Security number or state or federal business
tax identification number must not exceed $100,000.

EFFECTIVE DATE.

This section is effective for calculations made in 2013 and
thereafter.

Sec. 6.

[423A.022] POLICE AND FIREFIGHTER RETIREMENT
SUPPLEMENTAL STATE AID.

Subdivision 1.

Supplemental state aid.

Annually, the commissioner of revenue
shall allocate police and firefighter retirement supplemental state aid appropriated under
subdivision 6 as provided in subdivision 2 and paid as provided in subdivision 4.

Subd. 2.

Allocation.

Of the total amount appropriated as supplemental state aid:

(1) 58.065 percent must be paid to the executive director of the Public Employees
Retirement Association for deposit in the public employees police and fire retirement fund
established by section 353.65, subdivision 1;

(2) 35.484 percent must be paid to municipalities other than municipalities solely
employing firefighters with retirement coverage provided by the public employees police
and fire retirement plan which qualified to receive fire state aid in that calendar year,
allocated in proportion to the most recent amount of fire state aid paid under section
69.021, subdivision 7, for the municipality bears to the most recent total fire state aid
for all municipalities other than the municipalities solely employing firefighters with
retirement coverage provided by the public employees police and fire retirement plan
paid under section 69.021, subdivision 7, with the allocated amount for fire departments
participating in the voluntary statewide lump-sum volunteer firefighter retirement plan
paid to the executive director of the Public Employees Retirement Association for deposit
in the fund established by section 353G.02, subdivision 3, and credited to the respective
account and with the balance paid to the treasurer of each municipality for transmittal
within 30 days of receipt to the treasurer of the applicable volunteer firefighter relief
association for deposit in its special fund; and

(3) 6.452 percent must be paid to the executive director of the Minnesota State
Retirement System for deposit in the state patrol retirement fund.

Subd. 3.

Reporting; definitions.

(a) On or before September 1, annually, the
executive director of the Public Employees Retirement Association shall report to the
commissioner of revenue the following:

(1) the municipalities which employ firefighters with retirement coverage by the
public employees police and fire retirement plan;

(2) the number of firefighters with public employees police and fire retirement plan
coverage employed by each municipality;

(3) the fire departments covered by the voluntary statewide lump-sum volunteer
firefighter retirement plan; and

(4) any other information requested by the commissioner to administer the police
and firefighter retirement supplemental state aid program.

(b) For this subdivision, (i) the number of firefighters employed by a municipality
who have public employees police and fire retirement plan coverage means the number
of firefighters with public employees police and fire retirement plan coverage that were
employed by the municipality for not less than 30 hours per week for a minimum of six
months prior to December 31 preceding the date of the payment under this section and, if
the person was employed for less than the full year, prorated to the number of full months
employed; and (ii) the number of active police officers certified for police state aid receipt
under section 69.011, subdivisions 2 and 2b, means, for each municipality, the number of
police officers meeting the definition of peace officer in section 69.011, subdivision 1,
counted as provided and limited by section 69.011, subdivisions 2 and 2b.

Subd. 4.

Payments; conditions prerequisite.

(a) The payments under this section
must be made on October 1 each year, with interest at one percent for each month, or
portion of a month, that the amount remains unpaid after October 1. Any necessary
adjustments must be made to subsequent payments.

(b) The provisions of sections 69.011 to 69.051 that prevent municipalities and relief
associations from being eligible for, or receiving fire state aid under sections 69.011 to
69.051 until the applicable financial reporting requirements have been complied with,
apply to the amounts payable to municipalities and relief associations under this section.

Subd. 5.

Aid termination.

The aid program under this section ends on the
December 1 next following the actuarial valuation date on which the assets of the
retirement plan on a market value basis equals or exceeds 90 percent of the total
actuarial accrued liabilities of the retirement plan as disclosed in an actuarial valuation
prepared under section 356.215 and the Standards for Actuarial Work promulgated by the
Legislative Commission on Pensions and Retirement, for the State Patrol retirement plan
or the public employees police and fire retirement plan, whichever occurs last.

Subd. 6.

Appropriation.

$15,500,000 is appropriated annually to the commissioner
of revenue for this aid program.

EFFECTIVE DATE.

This section is effective beginning in the fiscal year beginning
July 1, 2013.

Sec. 7.

Minnesota Statutes 2012, section 477A.011, subdivision 30, is amended to read:


Subd. 30.

Pre-1940 housing percentage.

(a) Except as provided in paragraph (b),
"pre-1940 housing percentage" for a city is 100 times the most recent federal census count
by the United States Bureau of the Census of all housing units in the city built before
1940, divided by the total number of all housing units in the city. Housing units includes
both occupied and vacant housing units as defined by the federal census. For aids payable
in 2014, "pre-1940 housing percentage" shall be based on 2010 housing data.

(b) For the city of East Grand Forks only, "pre-1940 housing percentage" is equal
to 100 times the 1990 federal census count of all housing units in the city built before
1940, divided by the most recent count by the United States Bureau of the Census of all
housing units in the city. Housing units includes both occupied and vacant housing units
as defined by the federal census.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 8.

Minnesota Statutes 2012, section 477A.011, is amended by adding a
subdivision to read:


Subd. 30a.

Percent of housing built between 1940 and 1970.

"Percent of housing
built between 1940 and 1970" is equal to 100 times the most recent count by the United
States Bureau of the Census of all housing units in the city built after 1939 but before
1970, divided by the total number of all housing units in the city. Housing units includes
both occupied and vacant housing units as defined by the federal census. For aids payable
in 2014, "percent of housing built between 1940 and 1970" shall be based on 2010
housing data.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 9.

Minnesota Statutes 2012, 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 10,000, "city revenue need" is the greater of 285 or 1.15 times the sum of (1)
5.0734098 4.59 times the pre-1940 housing percentage; plus (2) 19.141678 times the
population decline percentage
0.622 times the percent of housing built between 1940 and
1970
; plus (3) 2504.06334 times the road accidents factor 169.415 times the jobs per
capita
; plus (4) 355.0547; minus (5) the metropolitan area factor; minus (6) 49.10638
times the household size
the sparsity adjustment; plus (5) 307.664.

(b) For a city with a population equal to or greater than 2,500 and less than 10,000,
"city revenue need" is 1.15 times the sum of (1) 572.62; plus (2) 5.026 times the pre-1940
housing percentage; minus (3) 53.768 times household size; plus (4) 14.022 times peak
population decline.

(b) (c) 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
410 plus 0.367 times the city's
population over 100. The city revenue need under this paragraph shall not exceed 630
.

(c) (d) For a city with a population of at least 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
but less than 3,000, the "city
revenue need" equals (1) the transition factor times the city's revenue need calculated in
paragraph (b) plus (2) 630 times the difference between one and the transition factor. For
a city with a population of at least 10,000 but less than 10,500, the "city revenue need"
equals (1) the transition factor times the city's revenue need calculated in paragraph (a)
plus (2) the city's revenue need calculated under the formula in paragraph (b) times the
difference between one and the transition factor. For purposes of this paragraph "transition
factor" is 0.2 percent times the amount that the city's population exceeds the minimum
threshold in either of the first two sentences
.

(d) (e) The city revenue need cannot be less than zero.

(e) (f) For calendar year 2005 2015 and subsequent years, the city revenue need for
a city, as determined in paragraphs (a) to (d) (e), 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 2013 implicit price deflator for state
and local government purchases.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 10.

Minnesota Statutes 2012, section 477A.011, subdivision 42, is amended to read:


Subd. 42.

City jobs base Jobs per capita.

(a) "City jobs base" for a city with a
population of 5,000 or more is equal to the product of (1) $25.20, (2) the number of
jobs per capita in the city, and (3) its population. For cities with a population less than
5,000, the city jobs base is equal to zero. For a city receiving aid under subdivision 36,
paragraph (k), its city jobs base is reduced by the lesser of 36 percent of the amount of
aid received under that paragraph or $1,000,000. No city's city jobs base may exceed
$4,725,000 under this paragraph.

(b) For calendar year 2010 and subsequent years, the city jobs base for a city, as
determined in paragraph (a), is multiplied by the ratio of the appropriation under section
477A.03, subdivision 2a, for the year in which the aid is paid to the appropriation under
that section for aids payable in 2009.

(c) For purposes of this subdivision, "Jobs per capita in the city" means (1) the
average annual number of employees in the city based on the data from the Quarterly
Census of Employment and Wages, as reported by the Department of Employment and
Economic Development, for the most recent calendar year available as of May 1, 2008
November 1 of every odd-numbered year, divided by (2) the city's population for the
same calendar year as the employment data. The commissioner of the Department of
Employment and Economic Development shall certify to the city the average annual
number of employees for each city by June 1, 2008 January 1, of every even-numbered
year beginning with January 1, 2014
. A city may challenge an estimate under this
paragraph by filing its specific objection, including the names of employers that it feels
may have misreported data, in writing with the commissioner by June 20, 2008 December
1 of every odd-numbered year
. The commissioner shall make every reasonable effort
to address the specific objection and adjust the data as necessary. The commissioner
shall certify the estimates of the annual employment to the commissioner of revenue by
July 15, 2008 January 1 of all even-numbered years, including any estimates still under
objection. For aids payable in 2014, "jobs per capita" shall be based on the annual number
of employees and population for calendar year 2010 without additional review.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 11.

Minnesota Statutes 2012, section 477A.011, is amended by adding a
subdivision to read:


Subd. 44.

Peak population decline.

"Peak population decline" is equal to 100
times the difference between one and the ratio of the city's current population, to the
highest city population reported in a federal census from the 1970 census or later. "Peak
population decline" shall not be less than zero.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 12.

Minnesota Statutes 2012, section 477A.011, is amended by adding a
subdivision to read:


Subd. 45.

Sparsity adjustment.

For a city with a population of 10,000 or more, the
sparsity adjustment is 100 for any city with an average population density less than 150
per square mile, according to the most recent federal census, and the sparsity adjustment is
zero for all other cities.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 13.

Minnesota Statutes 2012, section 477A.013, subdivision 1, is amended to read:


Subdivision 1.

Towns.

In 2002, no town is eligible for a distribution under this
subdivision.
In 2014 and thereafter, each town is eligible for a distribution under this
subdivision equal to the product of (i) its agricultural property factor, (ii) its town area
factor, (iii) its population factor, and (iv) 0.0045. As used in this subdivision, the following
terms have the meanings given them:

(1) "agricultural property factor" means the ratio of the adjusted net tax capacity of
agricultural property located in a town, divided by the adjusted net tax capacity of all other
property located in the town. The agricultural property factor cannot exceed eight;

(2) "agricultural property" means property classified under section 273.13, as
homestead and nonhomestead agricultural property, rural vacant land, and noncommercial
seasonal recreational property;

(3) "town area factor" means the most recent estimate of total acreage, not to exceed
50,000 acres, located in the township available as of July 1 in the aid calculation year,
estimated or established by:

(i) the United States Bureau of the Census;

(ii) the State Land Management Information Center; or

(iii) the secretary of state; and

(4) "population factor" means the square root of the towns' population.

If the sum of the aids payable to all towns under this subdivision exceeds the limit
under section 477A.03, subdivision 2c, the distribution to each town must be reduced
proportionately so that the total amount of aids distributed under this section does not
exceed the limit in section 477A.03, subdivision 2c.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 14.

Minnesota Statutes 2012, section 477A.013, subdivision 8, is amended to read:


Subd. 8.

City formula aid.

(a) For aids payable in 2014 only, the formula aid for a
city is equal to the sum of (1) its 2013 certified aid and (2) the product of (i) the difference
between its unmet need and its 2013 certified aid and (ii) the aid gap percentage.

(b) For aids payable in 2015 and thereafter, the formula aid for a city is equal to
the sum of (1) its city jobs base, (2) its small city aid base, and (3) the need increase
percentage multiplied by the average of its unmet need for the most recently available two
years
formula aid in the previous year and (2) the product of (i) the difference between
its unmet need and its certified aid in the previous year under subdivision 9, and (ii)
the aid gap percentage
.

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

The applicable need increase aid gap 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. Data used in calculating aids to cities
under sections 477A.011 to 477A.013 shall be the most recently available data as of
January 1 in the year in which the aid is calculated except that the data used to compute "net
levy" in subdivision 9 is the data most recently available at the time of the aid computation
.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 15.

Minnesota Statutes 2012, section 477A.013, subdivision 9, is amended to read:


Subd. 9.

City aid distribution.

(a) In calendar year 2013 2014 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 aid adjustment under subdivision 13.

(b) For aids payable in 2013 and 2014 only, the total aid in the previous year for
any city shall mean the amount of aid it was certified to receive for aids payable in 2012
under this section. For aids payable in 2015 and thereafter, the total aid in the previous
year for any city means the amount of aid it was certified to receive under this section in
the previous payable year.

(c) For aids payable in 2010 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 2009 and thereafter, the total
aid for any city with a population of 2,500 or more may not be less than its total aid under
this section in the previous year minus the lesser of $10 multiplied by its population, or ten
percent of its net levy in the year prior to the aid distribution.

(d) (b) For aids payable in 2014 only, the total aid for a city may not be less than the
amount it was certified to receive in 2013.
For aids payable in 2010 2015 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 the lesser of $10 multiplied by its
population, or five percent of its 2003 certified aid amount. For aids payable in 2009 only,
the total aid for a city with a population less than 2,500 must not be less than what it
received under this section in the previous year unless its total aid in calendar year 2008
was aid under section 477A.011, subdivision 36, paragraph (s), in which case its minimum
aid is zero
its net levy in the year prior to the aid distribution.

(e) A city's aid loss under this section may not exceed $300,000 in any year in
which the total city aid appropriation under section 477A.03, subdivision 2a, is equal or
greater than the appropriation under that subdivision in the previous year, unless the
city has an adjustment in its city net tax capacity under the process described in section
469.174, subdivision 28.

(f) 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 (c) 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.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 16.

Minnesota Statutes 2012, section 477A.013, is amended by adding a
subdivision to read:


Subd. 13.

Certified aid adjustments.

(a) A city that received an aid base increase
under Minnesota Statutes 2012, section 477A.011, subdivision 36, paragraph (e), shall
have its total aid under subdivision 9 increased by an amount equal to $150,000 for aids
payable in 2014 through 2018.

(b) A city that received an aid base increase under section 477A.011, subdivision 36,
paragraph (r), shall have its total aid under subdivision 9 increased by an amount equal to
$160,000 for aids payable in 2014 and thereafter.

(c) A city that received a temporary aid increase under Minnesota Statutes 2012,
section 477A.011, subdivision 36, paragraph (o), shall have its total aid under subdivision
9 increased by an amount equal to $1,000,000 for aids payable in 2014 only.

Sec. 17.

Minnesota Statutes 2012, section 477A.015, is amended to read:


477A.015 PAYMENT DATES.

The commissioner of revenue shall make the payments of local government aid to
affected taxing authorities in two installments on July 20 and December 26 annually.

When the commissioner of public safety determines that a local government has
suffered financial hardship due to a natural disaster, the commissioner of public safety
shall notify the commissioner of revenue, who shall make payments of aids under sections
477A.011 to 477A.014, which are otherwise due on December 26, as soon as is practical
after the determination is made but not before July 20.

The commissioner may pay all or part of the payments of aids under sections
477A.011 to 477A.014, which are due on December 26 at any time after August 15 if a
local government requests such payment as being necessary for meeting its cash flow
needs. For aids payable in 2013 only, a city that is located in an area deemed a disaster
area during the month of April 2013, as defined in section 12A.02, subdivision 5, shall
receive its December 26, 2013 payment with its July 20, 2013 payment.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 18.

Minnesota Statutes 2012, section 477A.03, subdivision 2a, is amended to read:


Subd. 2a.

Cities.

For aids payable in 2013 2014 and thereafter, the total aid paid
under section 477A.013, subdivision 9, is $426,438,012 $507,598,012. The total aid paid
under section 477A.013, subdivision 9, is $509,098,012 for aids payable in 2015. For aids
payable in 2016 and thereafter, the total aid paid under section 477A.013, subdivision
9, is $511,598,012
.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 19.

Minnesota Statutes 2012, section 477A.03, subdivision 2b, is amended to read:


Subd. 2b.

Counties.

(a) For aids payable in 2013 2014 and thereafter, the total aid
payable under section 477A.0124, subdivision 3, is $80,795,000 $100,795,000. Each
calendar year, $500,000 of this appropriation shall be retained by the commissioner
of revenue to make reimbursements to the commissioner of management and budget
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 2013 2014 and thereafter, the total aid under section
477A.0124, subdivision 4, is $84,909,575 $104,909,575. The commissioner of
management and budget shall bill the
commissioner of revenue shall transfer to the
commissioner of management and budget $207,000 annually
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
and other local government activities. 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
shall transfer to the commissioner of education $7,000 annually for the cost of
preparation of local impact notes for school districts as required by section 3.987
. The
commissioner of revenue shall deduct the amounts billed transferred under this paragraph
from the appropriation under this paragraph. The amounts deducted transferred are
appropriated to the commissioner of management and budget and the commissioner of
education for the preparation of local impact notes respectively.

EFFECTIVE DATE.

This section is effective for aid payable in 2014 and thereafter.

Sec. 20.

Minnesota Statutes 2012, section 477A.03, is amended by adding a
subdivision to read:


Subd. 2c.

Towns.

For aids payable in 2014, the total aids paid under section
477A.013, subdivision 1, is limited to $10,000,000. For aids payable in 2015 and
thereafter, the total aids paid under section 477A.013, subdivision 1, is limited to the
amount certified to be paid in the previous year.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

Sec. 21.

[477A.085] DEBT SERVICE AID; CITY OF MINNEAPOLIS.

On or before November 1, 2016, and the first day of each November thereafter, the
commissioner shall pay to the city of Minneapolis an amount equal to 40 percent of the
city's otherwise required levy to pay its general obligation library referendum bonds for
the following calendar year. The levy excludes any amount to pay bonds, other than
refunding bonds, issued after May 1, 2013. An amount sufficient to pay the aid under this
section is appropriated from the general fund to the commissioner of revenue.

Sec. 22.

[477A.10] NATURAL RESOURCES LAND PAYMENTS IN LIEU;
PURPOSE.

The purposes of sections 477A.11 to 477A.14 are:

(1) to compensate local units of government for the loss of tax base from state
ownership of land and the need to provide services for state land;

(2) to address the disproportionate impact of state land ownership on local units of
government with a large proportion of state land; and

(3) to address the need to manage state lands held in trust for the local taxing districts.

Sec. 23.

Minnesota Statutes 2012, section 477A.11, subdivision 3, is amended to read:


Subd. 3.

Acquired natural resources land.

"Acquired natural resources land"
means:

(1) any land, other than wildlife management land, presently administered by the
commissioner in which the state acquired by purchase, condemnation, or gift, a fee title
interest in lands which were previously privately owned; and

(2) lands acquired by the state under chapter 84A that are designated as state parks,
state recreation areas, scientific and natural areas, or wildlife management areas.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 24.

Minnesota Statutes 2012, section 477A.11, subdivision 4, is amended to read:


Subd. 4.

Other natural resources land.

"Other natural resources land" means
any other land, other than acquired natural resource land or wildlife management 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.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 25.

Minnesota Statutes 2012, section 477A.11, is amended by adding a
subdivision to read:


Subd. 6.

Military game refuge.

"Military game refuge" means land owned in
fee by another state agency for military purposes and designated as a state game refuge
under section 97A.085.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 26.

Minnesota Statutes 2012, section 477A.11, is amended by adding a
subdivision to read:


Subd. 7.

Transportation wetland.

"Transportation wetland" means land
administered by the Department of Transportation in which the state acquired, by purchase
from a private owner, a fee title interest in over 500 acres of land within a county to
replace wetland losses from transportation projects.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 27.

Minnesota Statutes 2012, section 477A.11, is amended by adding a
subdivision to read:


Subd. 8.

Wildlife management land.

"Wildlife management land" means land
administered by the commissioner in which the state acquired, from a private owner by
purchase, condemnation, or gift, a fee interest under the authority granted in chapter 94 or
97A for wildlife management purposes and actually used as a wildlife management area.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 28.

Minnesota Statutes 2012, 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.14. The amounts,
based on the acreage as of July 1 of each year prior to the payment year,
are:

(1) for acquired natural resources land, $5.133 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) $5.133, multiplied by the total number of acres of transportation wetland 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;

(3) three-fourths of one percent of the appraised value of all wildlife management
land in the county;

(4) 50 percent of the dollar amount as determined under clause (1), multiplied by
the number of acres of military refuge land in the county;

$1.283 (5) $1.50, multiplied by the number of acres of county-administered other
natural resources land in the county;

(3) $1.283 (6) $5.133, multiplied by the total number of acres of land utilization
project land in the county; and

(4) 64.2 cents (7) $1.50, multiplied by the number of acres of
commissioner-administered other natural resources land located in each the county as of
July 1 of each year prior to the payment year.
; and

(8) without regard to acreage, $300,000 for local assessments under section 84A.55,
subdivision 9.

(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.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 29.

Minnesota Statutes 2012, 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, wildlife management land, and military refuge land within each county;

(2) the number of acres of commissioner-administered natural resources land within
each county;

(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; and

(4) the number of acres of land utilization project land within each county.

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 transportation
wetland
and the appraised value of the land described in subdivision 1, paragraph (b), but
only if it exceeds 500 acres in a county.

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.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 30.

Minnesota Statutes 2012, section 477A.12, subdivision 3, is amended to read:


Subd. 3.

Determination of appraised value.

For the purposes of this section, the
appraised value of acquired natural resources land is the purchase price for the first five
years after acquisition
until the next six-year appraisal required under this subdivision.
The appraised value of acquired natural resources land received as a donation is the value
determined for the commissioner of natural resources by a licensed appraiser, or the
county assessor's estimated market value if no appraisal is done. The appraised value must
be determined by the county assessor every five six years after the land is acquired. All
reappraisals shall be done in the same year as county assessors are required to assess
exempt land under section 273.18.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 31.

Minnesota Statutes 2012, 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
subdivisions 2 and 3, 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) 64.2 cents, 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 51.3 cents for each acre of acquired
natural resources land and each acre of land described in section 477A.12, subdivision 1,
paragraph (b), and 12.8 cents for each acre of other natural resources land and each acre of
land utilization project land located within its boundaries
ten percent of the amount received
under section 477A.12, subdivision 1, clauses (1), (2), and (5) to (7)
. 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.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 32.

Minnesota Statutes 2012, section 477A.14, is amended by adding a
subdivision to read:


Subd. 3.

Distribution for wildlife management lands and military refuge lands.

(a) The county treasurer shall allocate the payment for wildlife management land and
military game refuge land among the county, towns, and school districts on the same basis
as if the payments were taxes on the land received in the year. Payment of a town's or a
school district's allocation must be made by the county treasurer to the town or school
district within 30 days of receipt of the payment to the county. The county's share of the
payment shall be deposited in the county general revenue fund.

(b) The county treasurer of a county with a population over 39,000, but less than
42,000, in the 1950 federal census shall allocate the payment only among the towns and
school districts on the same basis as if the payments were taxes on the lands received
in the current year.

(c) If a town received a payment in calendar year 2006 or thereafter under this
subdivision, and subsequently incorporated as a city, the city shall continue to receive any
future year's allocations of wildlife land payments that would have been made to the town
had it not incorporated, provided that the payments shall terminate if the governing body
of the city passes an ordinance that prohibits hunting within the boundaries of the city.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 33.

Laws 2006, chapter 259, article 11, section 3, as amended by Laws 2008,
chapter 154, article 1, section 4, is amended to read:


Sec. 3. MAHNOMEN COUNTY; COUNTY, CITY, SCHOOL DISTRICT,
PROPERTY TAX REIMBURSEMENT.

Subdivision 1.

Aid appropriation.

$600,000 $1,200,000 is appropriated annually
from the general fund to the commissioner of revenue to be used to make payments to
compensate for the loss of property tax revenue related to the trust conversion application
of the Shooting Star Casino. The commissioner shall pay the county of Mahnomen,
$450,000 $900,000; the city of Mahnomen, $80,000 $160,000; and Independent School
District No. 432, Mahnomen, $70,000 $140,000. The payments shall be made on July 20,
of 2008 2013 and each subsequent year.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2013 and thereafter.

Sec. 34. INELIGIBILITY; SUSTAINABLE FOREST INCENTIVE PROGRAM.

Lands that no longer qualify as forest land under Minnesota Statutes, section
290C.02, subdivision 6, item (iii), are released from the covenant required under
Minnesota Statutes, section 290C.04.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 35. REENROLLMENT; SUSTAINABLE FOREST INCENTIVE
PROGRAM.

A person who elected to terminate participation in the sustainable forest incentive
program, as provided in Laws 2011, First Special Session chapter 7, article 6, section 12,
may reenroll lands for which the claimant terminated participation and be eligible for a
payment in October 2013. A person must apply for reenrollment under this section within
60 days after the effective date of this section.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 36. REPEALER.

(a) Minnesota Statutes 2012, sections 477A.011, subdivisions 2a, 19, 29, 31, 32, 33,
36, 39, 40, and 41; 477A.013, subdivisions 11 and 12; 477A.0133; and 477A.0134,
are
repealed.

(b) Minnesota Statutes 2012, section 97A.061, and

Laws 1973, chapter 567, section
7, as amended by Laws 1977, chapter 403, section 12,
are repealed on July 1, 2013.

EFFECTIVE DATE.

This section is effective for aids payable in calendar year
2014 and thereafter.

ARTICLE 3

EDUCATION AIDS AND LEVIES

Section 1.

[124D.862] ACHIEVEMENT AND INTEGRATION REVENUE.

Subdivision 1.

Initial achievement and integration revenue.

(a) An eligible
district's initial achievement and integration revenue equals the sum of (1) $350 times
the district's adjusted pupil units for that year times the ratio of the district's enrollment
of protected students for the previous school year to total enrollment for the previous
school year and (2) the greater of zero or 66 percent of the difference between the district's
integration revenue for fiscal year 2013 and the district's integration revenue for fiscal
year 2014 under clause (1).

(b) In each year, 0.3 percent of each district's initial achievement and integration
revenue is transferred to the department for the oversight and accountability activities
required under this section and section 124D.861.

Subd. 2.

Incentive revenue.

An eligible school district's maximum incentive
revenue equals $10 per adjusted pupil unit. In order to receive this revenue, a district must
be implementing a voluntary plan to reduce racial and economic enrollment disparities
through intradistrict and interdistrict activities that have been approved as a part of the
district's achievement and integration plan.

Subd. 3.

Achievement and integration revenue.

Achievement and integration
revenue equals the sum of initial achievement and integration revenue and incentive
revenue.

Subd. 4.

Achievement and integration aid.

For fiscal year 2015 and later,
a district's achievement and integration aid equals 70 percent of its achievement and
integration revenue.

Subd. 5.

Achievement and integration levy.

A district's achievement and
integration levy equals its achievement and integration revenue times 30 percent. For
Special School District No. 1, Minneapolis; Independent School District No. 625, St.
Paul; and Independent School District No. 709, Duluth, 100 percent of the levy certified
under this subdivision is shifted into the prior calendar year for purposes of sections
123B.75, subdivision 5, and 127A.441.

Subd. 6.

Revenue uses.

(a) At least 80 percent of a district's achievement and
integration revenue received under this section must be used for innovative and integrated
learning environments, school enrollment choices, family engagement activities, and other
approved programs providing direct services to students.

(b) Up to 20 percent of the revenue may be used for professional development and
staff development activities and placement services.

(c) No more than ten percent of the total amount of revenue may be spent on
administrative services.

Subd. 7.

Revenue reserved.

Integration revenue received under this section must
be reserved and used only for the programs authorized in subdivision 2.

Subd. 8.

Commissioner authority to withhold revenue.

(a) The commissioner
must review the results of each district's integration and achievement plan by August 1 at
the end of the third year of implementing the plan and determine if the district met its goals.

(b) If a district met its goals, it may submit a new three-year plan to the commissioner
for review.

(c) If a district has not met its goals, the commissioner must:

(1) develop a district improvement plan and timeline, in consultation with the
affected district, that identifies strategies and practices designed to meet the district's goals
under this section and section 120B.11; and

(2) use up to 20 percent of the district's integration revenue, until the district's goals
are reached, to implement the improvement plan.

EFFECTIVE DATE.

This section is effective for revenue for fiscal year 2014 and
later. Subdivision 5 is effective for taxes payable in 2014 only.

Sec. 2.

Minnesota Statutes 2012, section 126C.10, subdivision 1, is amended to read:


Subdivision 1.

General education revenue.

(a) For fiscal years 2013 and 2014, the
general education revenue for each district equals the sum of the district's basic revenue,
extended time revenue, gifted and talented revenue, small schools revenue, basic skills
revenue, training and experience revenue, secondary sparsity revenue, elementary sparsity
revenue, transportation sparsity revenue, total operating capital revenue, equity revenue,
alternative teacher compensation revenue, and transition revenue.

(b) For fiscal year 2015 and later, the general education revenue for each district
equals the sum of the district's basic revenue, extended time revenue, gifted and
talented revenue, declining enrollment revenue, location equity revenue, small schools
revenue, basic skills revenue, secondary sparsity revenue, elementary sparsity revenue,
transportation sparsity revenue, total operating capital revenue, equity revenue, pension
adjustment revenue, and transition revenue.

Sec. 3.

Minnesota Statutes 2012, section 126C.10, is amended by adding a subdivision
to read:


Subd. 2d.

Location equity revenue.

(a) For a school district with any of its area
located within the seven-county metropolitan area, location equity revenue equals $424
times the adjusted pupil units of the district for that school year.

(b) For all other school districts with more than 2,000 pupils in adjusted average
daily membership for the fiscal year ending in the year before the levy is certified, location
equity revenue equals $212 times the adjusted pupil units of the district for that year.

(c) A district's location equity levy equals its location equity revenue times the lesser
of one or the ratio of its referendum market value per resident pupil unit to $510,000. The
location equity revenue levy must be spread on referendum market value.

(d) A district's location equity aid equals its location equity revenue less its location
equity levy, times the ratio of the actual amount levied to the permitted levy.

(e) A school district may elect not to participate in the location equity revenue
program by a board vote taken prior to September 1 of the fiscal year before the fiscal year
for which the decision not to participate becomes effective. The board resolution must
state which fiscal years the district will not participate. A copy of the board resolution
to not participate must be submitted to the commissioner.

EFFECTIVE DATE.

This section is effective for revenue for fiscal year 2015
and later.

Sec. 4.

Minnesota Statutes 2012, section 126C.13, subdivision 4, is amended to read:


Subd. 4.

General education aid.

(a) For fiscal years 2007 2013 and later 2014 only,
a district's general education aid is the sum of the following amounts:

(1) general education revenue, excluding equity revenue, total operating capital
revenue, alternative teacher compensation revenue, and transition revenue;

(2) operating capital aid under section 126C.10, subdivision 13b;

(3) equity aid under section 126C.10, subdivision 30;

(4) alternative teacher compensation aid under section 126C.10, subdivision 36;

(5) transition aid under section 126C.10, subdivision 33;

(6) shared time aid under section 126C.01, subdivision 7;

(7) referendum aid under section 126C.17, subdivisions 7 and 7a; and

(8) online learning aid according to section 124D.096.

(b) For fiscal year 2015 and later, a district's general education aid equals:

(1) general education revenue, excluding operating capital revenue, equity revenue,
location equity revenue, and transition revenue, minus the student achievement levy,
multiplied times the ratio of the actual amount of student achievement levy levied to the
permitted student achievement levy; plus

(2) equity aid under section 126C.10, subdivision 30; plus

(3) transition aid under section 126C.10, subdivision 33; plus

(4) shared time aid under section 126C.10, subdivision 7; plus

(5) referendum aid under section 126C.17, subdivisions 7 and 7a;

(6) online learning aid under section 124D.096; plus

(7) location equity aid according to section 126C.10, subdivision 2d, paragraph (d).

Sec. 5.

Minnesota Statutes 2012, section 126C.17, is amended to read:


126C.17 REFERENDUM REVENUE.

Subdivision 1.

Referendum allowance.

(a) For fiscal year 2003 and later, a district's
initial referendum revenue allowance equals the sum of the allowance under section
126C.16, subdivision 2, plus any additional allowance per resident marginal cost pupil
unit authorized under subdivision 9 before May 1, 2001, for fiscal year 2002 and later,
plus the referendum conversion allowance approved under subdivision 13, minus $415.
For districts with more than one referendum authority, the reduction must be computed
separately for each authority. The reduction must be applied first to the referendum
conversion allowance and next to the authority with the earliest expiration date. A
district's initial referendum revenue allowance may not be less than zero.

(b) For fiscal year 2003, a district's referendum revenue allowance equals the initial
referendum allowance plus any additional allowance per resident marginal cost pupil unit
authorized under subdivision 9 between April 30, 2001, and December 30, 2001, for
fiscal year 2003 and later.

(c) For fiscal year 2004 and later, a district's referendum revenue allowance equals
the sum of:

(1) the product of (i) the ratio of the resident marginal cost pupil units the district
would have counted for fiscal year 2004 under Minnesota Statutes 2002, section 126C.05,
to the district's resident marginal cost pupil units for fiscal year 2004, times (ii) the initial
referendum allowance plus any additional allowance per resident marginal cost pupil unit
authorized under subdivision 9 between April 30, 2001, and May 30, 2003, for fiscal
year 2003 and later, plus

(2) any additional allowance per resident marginal cost pupil unit authorized under
subdivision 9 after May 30, 2003, for fiscal year 2005 and later.

(a) A district's initial referendum allowance for fiscal year 2015 equals the result of
the following calculations:

(1) multiply the referendum allowance the district would have received for fiscal
year 2015 under Minnesota Statutes 2012, section 126C.17, subdivision 1, based on
elections held before July 1, 2013, by the resident marginal cost pupil units the district
would have counted for fiscal year 2015 under Minnesota Statutes 2012, section 126C.05;

(2) add to the result of clause (1) the adjustment the district would have received
under Minnesota Statutes 2012, section 127A.47, subdivision 7, paragraphs (a), (b), and
(c), based on elections held before July 1, 2013;

(3) divide the result of clause (2) by the district's adjusted pupil units for fiscal
year 2015; and

(4) if the result of clause (3) is less than zero, set the allowance to zero.

(b) A district's referendum allowance equals the sum of the district's initial
referendum allowance for fiscal year 2015, plus any additional referendum allowance per
adjusted pupil unit authorized after June 30, 2013, minus (i) the location equity revenue
subtraction, and (ii) any allowances expiring in fiscal year 2016 or later, provided that
the allowance may not be less than zero. For a district with more than one referendum
allowance for fiscal year 2015 under Minnesota Statutes 2012, section 126C.17, the
allowance calculated under paragraph (a) must be divided into components such that the
same percentage of the district's allowance expires at the same time as the old allowances
would have expired under Minnesota Statutes 2012, section 126C.17.

(c) For purposes of this subdivision, a district's location equity revenue subtraction
equals $424 for a district receiving location equity revenue under section 126C.10,
subdivision 2d, paragraph (a), $212 for a district receiving location equity revenue under
section 126C.10, subdivision 2d, paragraph (b), and zero for all other school districts.

Subd. 2.

Referendum allowance limit.

(a) Notwithstanding subdivision 1, for fiscal
year 2007 2015 and later, a district's referendum allowance must not exceed the greater of:

(1) the sum of: (i) a district's referendum allowance for fiscal year 1994 times 1.177
times the annual inflationary increase as calculated under paragraph (b) plus (ii) its
referendum conversion allowance for fiscal year 2003, minus (iii) $215;

(2) the greater of (i): 26 percent of the formula allowance or (ii) $1,294 times the
annual inflationary increase as calculated under paragraph (b); or times the greatest of:

(1) $1,845;

(2) the sum of the referendum revenue the district would have received for fiscal
year 2015 under Minnesota Statutes 2012, section 126C.17, subdivision 4, based on
elections held before July 1, 2013, and the adjustment the district would have received
under Minnesota Statutes 2012, section 127A.47, subdivision 7, paragraphs (a), (b), and
(c), based on elections held before July 1, 2013, divided by the district's adjusted pupil
units for fiscal year 2015; or

(3) the product of the referendum allowance limit the district would have received
for fiscal year 2015 under Minnesota Statutes 2012, section 126C.17, subdivision 2, and
the resident marginal cost pupil units the district would have received for fiscal year 2015
under Minnesota Statutes 2012, section 126C.05, subdivision 6, plus the adjustment the
district would have received under Minnesota Statutes 2012, section 127A.47, subdivision
7, paragraphs (a), (b), and (c), based on elections held before July 1, 2013, divided by
the district's adjusted pupil units for fiscal year 2015; minus $424 for a district receiving
location equity revenue under section 126C.10, subdivision 2d, paragraph (a), minus
$212 for a district receiving location equity revenue under section 126C.10, subdivision
2d, paragraph (b), or

(3) (4) for a newly reorganized district created after July 1, 2006 2013, the referendum
revenue authority for each reorganizing district in the year preceding reorganization divided
by its resident marginal cost adjusted pupil units for the year preceding reorganization.

(b) For purposes of this subdivision, for fiscal year 2005 2016 and later, "inflationary
increase" means one plus the percentage change in the Consumer Price Index for urban
consumers, as prepared by the United States Bureau of Labor Standards, for the current
fiscal year to fiscal year 2004 2015. For fiscal years 2009 year 2016 and later, for purposes
of paragraph (a), clause (1) (3), the inflationary increase equals the inflationary increase
for fiscal year 2008 plus
one-fourth of the percentage increase in the formula allowance
for that year compared with the formula allowance for fiscal year 2008 2015.

Subd. 3.

Sparsity exception.

A district that qualifies for sparsity revenue under
section 126C.10 is not subject to a referendum allowance limit.

Subd. 4.

Total referendum revenue.

The total referendum revenue for each district
equals the district's referendum allowance times the resident marginal cost adjusted pupil
units for the school year.

Subd. 5.

Referendum equalization revenue.

(a) For fiscal year 2003 and later,
A district's referendum equalization revenue equals the sum of the first tier referendum
equalization revenue and the second tier referendum equalization revenue, and the third
tier referendum equalization revenue
.

(b) A district's first tier referendum equalization revenue equals the district's first
tier referendum equalization allowance times the district's resident marginal cost adjusted
pupil units for that year.

(c) For fiscal year 2006, a district's first tier referendum equalization allowance
equals the lesser of the district's referendum allowance under subdivision 1 or $500. For
fiscal year 2007, a district's first tier referendum equalization allowance equals the lesser
of the district's referendum allowance under subdivision 1 or $600.

For fiscal year 2008 and later, A district's first tier referendum equalization allowance
equals the lesser of the district's referendum allowance under subdivision 1 or $700 $300.

(d) A district's second tier referendum equalization revenue equals the district's
second tier referendum equalization allowance times the district's resident marginal cost
adjusted pupil units for that year.

(e) For fiscal year 2006, a district's second tier referendum equalization allowance
equals the lesser of the district's referendum allowance under subdivision 1 or 18.6
percent of the formula allowance, minus the district's first tier referendum equalization
allowance. For fiscal year 2007 and later,
A district's second tier referendum equalization
allowance equals the lesser of the district's referendum allowance under subdivision 1
or 26 percent of the formula allowance $760, minus the district's first tier referendum
equalization allowance.

(f) Notwithstanding paragraph (e), the second tier referendum allowance for a
district qualifying for secondary sparsity revenue under section 126C.10, subdivision 7, or
elementary sparsity revenue under section 126C.10, subdivision 8, equals the district's
referendum allowance under subdivision 1 minus the district's first tier referendum
equalization allowance.
A district's third tier referendum equalization revenue equals the
district's third tier referendum equalization allowance times the district's adjusted pupil
units for that year.

(g) A district's third tier referendum equalization allowance equals the lesser of
the district's referendum allowance under subdivision 1 or 25 percent of the formula
allowance, minus the sum of the district's first tier referendum equalization allowance and
second tier referendum equalization allowance.

(h) Notwithstanding paragraph (g), the third tier referendum allowance for a district
qualifying for secondary sparsity revenue under section 126C.10, subdivision 7, or
elementary sparsity revenue under section 126C.10, subdivision 8, equals the district's
referendum allowance under subdivision 1 minus the sum of the district's first tier
referendum equalization allowance and second tier referendum equalization allowance.

Subd. 6.

Referendum equalization levy.

(a) For fiscal year 2003 and later,
a district's referendum equalization levy equals the sum of the first tier referendum
equalization levy and the second tier referendum equalization levy, and the third tier
referendum equalization levy
.

(b) A district's first tier referendum equalization levy equals the district's first tier
referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident marginal cost pupil unit to $476,000 $880,000.

(c) A district's second tier referendum equalization levy equals the district's second
tier referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident marginal cost pupil unit to $270,000 $510,000.

(d) A district's third tier referendum equalization levy equals the district's third
tier referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident pupil unit to $290,000.

Subd. 7.

Referendum equalization aid.

(a) A district's referendum equalization aid
equals the difference between its referendum equalization revenue and levy.

(b) If a district's actual levy for first or, second, or third tier referendum equalization
revenue is less than its maximum levy limit for that tier, aid shall be proportionately
reduced.

(c) Notwithstanding paragraph (a), the referendum equalization aid for a district,
where the referendum equalization aid under paragraph (a) exceeds 90 percent of the
referendum revenue, must not exceed 26 25 percent of the formula allowance times the
district's resident marginal cost adjusted pupil units. A district's referendum levy is
increased by the amount of any reduction in referendum aid under this paragraph.

Subd. 7a.

Referendum tax base replacement aid.

For each school district that
had a referendum allowance for fiscal year 2002 exceeding $415, for each separately
authorized referendum levy, the commissioner of revenue, in consultation with the
commissioner of education, shall certify the amount of the referendum levy in taxes
payable year 2001 attributable to the portion of the referendum allowance exceeding $415
levied against property classified as class 2, noncommercial 4c(1), or 4c(4), under section
273.13, excluding the portion of the tax paid by the portion of class 2a property consisting
of the house, garage, and surrounding one acre of land. The resulting amount must be
used to reduce the district's referendum levy amount otherwise determined, and must be
paid to the district each year that the referendum authority remains in effect, is renewed,
or new referendum authority is approved. The aid payable under this subdivision must
be subtracted from the district's referendum equalization aid under subdivision 7. The
referendum equalization aid after the subtraction must not be less than zero.

Subd. 7b.

Referendum aid guarantee.

(a) Notwithstanding subdivision 7, a
district's referendum equalization aid for fiscal year 2015 must not be less than the sum
of the referendum equalization aid the district would have received for fiscal year 2015
under Minnesota Statutes 2012, section 126C.17, subdivision 7, and the adjustment the
district would have received under Minnesota Statutes 2012, section 127A.47, subdivision
7, paragraphs (a), (b), and (c).

(b) Notwithstanding subdivision 7, referendum equalization aid for fiscal year 2016
and later, for a district qualifying for additional aid under paragraph (a) for fiscal year
2015, must not be less than the product of (1) the district's referendum equalization aid
for fiscal year 2015, times (2) the lesser of one or the ratio of the district's referendum
revenue for that school year to the district's referendum revenue for fiscal year 2015, times
(3) the lesser of one or the ratio of the district's referendum market value used for fiscal
year 2015 referendum equalization calculations to the district's referendum market value
used for that year's referendum equalization calculations.

Subd. 8.

Unequalized referendum levy.

Each year, a district may levy an amount
equal to the difference between its total referendum revenue according to subdivision 4
and its referendum equalization revenue according to subdivision 5.

Subd. 9.

Referendum revenue.

(a) The revenue authorized by section 126C.10,
subdivision 1
, may be increased in the amount approved by the voters of the district
at a referendum called for the purpose. The referendum may be called by the board.
The referendum must be conducted one or two calendar years before the increased levy
authority, if approved, first becomes payable. Only one election to approve an increase
may be held in a calendar year. Unless the referendum is conducted by mail under
subdivision 11, paragraph (a), the referendum must be held on the first Tuesday after the
first Monday in November. The ballot must state the maximum amount of the increased
revenue per resident marginal cost adjusted pupil unit. The ballot may state a schedule,
determined by the board, of increased revenue per resident marginal cost adjusted pupil
unit that differs from year to year over the number of years for which the increased revenue
is authorized or may state that the amount shall increase annually by the rate of inflation.
For this purpose, the rate of inflation shall be the annual inflationary increase calculated
under subdivision 2, paragraph (b). The ballot may state that existing referendum levy
authority is expiring. In this case, the ballot may also compare the proposed levy authority
to the existing expiring levy authority, and express the proposed increase as the amount, if
any, over the expiring referendum levy authority. The ballot must designate the specific
number of years, not to exceed ten, for which the referendum authorization applies. The
ballot, including a ballot on the question to revoke or reduce the increased revenue amount
under paragraph (c), must abbreviate the term "per resident marginal cost adjusted pupil
unit" as "per pupil." The notice required under section 275.60 may be modified to read, in
cases of renewing existing levies at the same amount per pupil as in the previous year:

"BY VOTING "YES" ON THIS BALLOT QUESTION, YOU ARE VOTING
TO EXTEND AN EXISTING PROPERTY TAX REFERENDUM THAT IS
SCHEDULED TO EXPIRE."

The ballot may contain a textual portion with the information required in this
subdivision and a question stating substantially the following:

"Shall the increase in the revenue proposed by (petition to) the board of .........,
School District No. .., be approved?"

If approved, an amount equal to the approved revenue per resident marginal cost
adjusted pupil unit times the resident marginal cost adjusted pupil units for the school
year beginning in the year after the levy is certified shall be authorized for certification
for the number of years approved, if applicable, or until revoked or reduced by the voters
of the district at a subsequent referendum.

(b) The board must prepare and deliver by first class mail at least 15 days but no more
than 30 days before the day of the referendum to each taxpayer a notice of the referendum
and the proposed revenue increase. The board need not mail more than one notice to any
taxpayer. For the purpose of giving mailed notice under this subdivision, owners must be
those shown to be owners on the records of the county auditor or, in any county where
tax statements are mailed by the county treasurer, on the records of the county treasurer.
Every property owner whose name does not appear on the records of the county auditor
or the county treasurer is deemed to have waived this mailed notice unless the owner
has requested in writing that the county auditor or county treasurer, as the case may be,
include the name on the records for this purpose. The notice must project the anticipated
amount of tax increase in annual dollars for typical residential homesteads, agricultural
homesteads, apartments, and commercial-industrial property within the school district.

The notice for a referendum may state that an existing referendum levy is expiring
and project the anticipated amount of increase over the existing referendum levy in
the first year, if any, in annual dollars for typical residential homesteads, agricultural
homesteads, apartments, and commercial-industrial property within the district.

The notice must include the following statement: "Passage of this referendum will
result in an increase in your property taxes." However, in cases of renewing existing levies,
the notice may include the following statement: "Passage of this referendum extends an
existing operating referendum at the same amount per pupil as in the previous year."

(c) A referendum on the question of revoking or reducing the increased revenue
amount authorized pursuant to paragraph (a) may be called by the board. A referendum to
revoke or reduce the revenue amount must state the amount per resident marginal cost
pupil unit by which the authority is to be reduced. Revenue authority approved by the
voters of the district pursuant to paragraph (a) must be available to the school district at
least once before it is subject to a referendum on its revocation or reduction for subsequent
years. Only one revocation or reduction referendum may be held to revoke or reduce
referendum revenue for any specific year and for years thereafter.

(d) The approval of 50 percent plus one of those voting on the question is required to
pass a referendum authorized by this subdivision.

(e) At least 15 days before the day of the referendum, the district must submit a
copy of the notice required under paragraph (b) to the commissioner and to the county
auditor of each county in which the district is located. Within 15 days after the results
of the referendum have been certified by the board, or in the case of a recount, the
certification of the results of the recount by the canvassing board, the district must notify
the commissioner of the results of the referendum.

Subd. 9a.

Board-approved referendum allowance.

Notwithstanding subdivision
9, a school district may convert up to $300 per adjusted pupil unit of referendum authority
from voter approved to board approved by a board vote. A district with less than $300
per adjusted pupil unit of referendum authority may authorize new referendum authority
up to the difference between $300 per adjusted pupil unit and the district's referendum
authority. The board may authorize this levy for up to five years and may subsequently
reauthorize that authority in increments of up to five years.

Subd. 10.

School referendum levy; market value.

A school referendum levy must
be levied against the referendum market value of all taxable property as defined in section
126C.01, subdivision 3. Any referendum levy amount subject to the requirements of this
subdivision must be certified separately to the county auditor under section 275.07.

Subd. 11.

Referendum date.

(a) Except for a referendum held under paragraph (b),
any referendum under this section held on a day other than the first Tuesday after the first
Monday in November must be conducted by mail in accordance with section 204B.46.
Notwithstanding subdivision 9, paragraph (b), to the contrary, in the case of a referendum
conducted by mail under this paragraph, the notice required by subdivision 9, paragraph (b),
must be prepared and delivered by first-class mail at least 20 days before the referendum.

(b) In addition to the referenda allowed in subdivision 9, clause (a), the commissioner
may grant authority to a district to hold a referendum on a different day if the district is in
statutory operating debt and has an approved plan or has received an extension from the
department to file a plan to eliminate the statutory operating debt.

(c) The commissioner must approve, deny, or modify each district's request for a
referendum levy on a different day within 60 days of receiving the request from a district.

Subd. 13.

Referendum conversion allowance.

A school district that received
supplemental or transition revenue in fiscal year 2002 may convert its supplemental
revenue conversion allowance and transition revenue conversion allowance to additional
referendum allowance under subdivision 1 for fiscal year 2003 and thereafter. A majority
of the school board must approve the conversion at a public meeting before November 1,
2001. For a district with other referendum authority, the referendum conversion allowance
approved by the board continues until the portion of the district's other referendum
authority with the earliest expiration date after June 30, 2006, expires. For a district
with no other referendum authority, the referendum conversion allowance approved by
the board continues until June 30, 2012.

EFFECTIVE DATE.

This section is effective for revenue for fiscal year 2015
and later.

Sec. 6. OPERATING REFERENDUM FREEZE, FISCAL YEAR 2015.

(a) Notwithstanding Minnesota Statutes, section 126C.17, subdivision 9, a school
district may not authorize an increase to its operating referendum in fiscal year 2015. A
school district may reauthorize an operating referendum that is expiring in fiscal year 2015.

(b) Paragraph (a) shall not apply to a district if, prior to June 30, 2013, the board
adopted a resolution to conduct a referendum in 2013.

(c) Paragraph (a) shall not apply to a district if the district did not authorize an
operating referendum in fiscal year 2014.

(d) Paragraph (a) shall not apply to a district if the district is in statutory operating
debt under Minnesota Statutes, section 123B.81, as of June 30, 2013, and has an approved
plan with the Department of Education.

ARTICLE 4

PROPERTY TAXES

Section 1.

Minnesota Statutes 2012, section 103B.102, subdivision 3, is amended to
read:


Subd. 3.

Evaluation and report.

The Board of Water and Soil Resources shall
evaluate performance, financial, and activity information for each local water management
entity. The board shall evaluate the entities' progress in accomplishing their adopted plans
on a regular basis as determined by the board based on budget and operations of the local
water management entity
, but not less than once every five ten years. The board shall
maintain a summary of local water management entity performance on the board's Web site.
Beginning February 1, 2008, and annually thereafter, the board shall provide an analysis
of local water management entity performance to the chairs of the house of representatives
and senate committees having jurisdiction over environment and natural resources policy.

Sec. 2.

Minnesota Statutes 2012, section 103B.335, is amended to read:


103B.335 TAX LEVY AUTHORITY.

Subdivision 1.

Local water planning and management.

The governing body of
any county, municipality, or township may levy a tax in an amount required to implement
sections 103B.301 to 103B.355 or a comprehensive watershed management plan as
defined in section 103B.3363
.

Subd. 2.

Priority programs; conservation and watershed districts.

A county
may levy amounts necessary to pay the reasonable increased costs to soil and water
conservation districts and watershed districts of administering and implementing priority
programs identified in an approved and adopted plan or a comprehensive watershed
management plan as defined in section 103B.3363
.

Sec. 3.

Minnesota Statutes 2012, section 103B.3369, subdivision 5, is amended to read:


Subd. 5.

Financial assistance.

A base grant may be awarded to a county that
provides a match utilizing a water implementation tax or other local source. A water
implementation tax that a county intends to use as a match to the base grant must be
levied at a rate sufficient to generate a minimum amount determined by the board.
The board may award performance-based grants to local units of government that are
responsible for implementing elements of applicable portions of watershed management
plans, comprehensive plans, local water management plans, or comprehensive watershed
management plans, developed or amended, adopted and approved, according to chapter
103B, 103C, or 103D. Upon request by a local government unit, the board may also
award performance-based grants to local units of government to carry out TMDL
implementation plans as provided in chapter 114D, if the TMDL implementation plan has
been incorporated into the local water management plan according to the procedures for
approving comprehensive plans, watershed management plans, local water management
plans, or comprehensive watershed management plans under chapter 103B, 103C, or
103D, or if the TMDL implementation plan has undergone a public review process.
Notwithstanding section 16A.41, the board may award performance-based grants on an
advanced basis. The fee authorized in section 40A.152 may be used as a local match
or as a supplement to state funding to accomplish implementation of comprehensive
plans, watershed management plans, local water management plans, or comprehensive
watershed management plans under chapter 103B, 103C, or 103D.

Sec. 4.

Minnesota Statutes 2012, section 103C.501, subdivision 4, is amended to read:


Subd. 4.

Cost-sharing funds.

(a) The state board shall allocate at least 70 percent
of
cost-sharing funds to areas with high priority erosion, sedimentation, or water quality
problems or water quantity problems due to altered hydrology. The areas must be selected
based on the statewide priorities established by the state board.

(b) The allocated funds must be used for conservation practices for high priority
problems identified in the comprehensive and annual work plans of the districts, for
the technical assistance portion of the grant funds to leverage federal or other nonstate
funds, or to address high-priority needs identified in local water management plans or
comprehensive watershed management plans
.

(b) The remaining cost-sharing funds may be allocated to districts as follows:

(1) for technical and administrative assistance, not more than 20 percent of the
funds; and

(2) for conservation practices for lower priority erosion, sedimentation, or water
quality problems.

Sec. 5.

Minnesota Statutes 2012, section 103F.405, subdivision 1, is amended to read:


Subdivision 1.

Authority.

Each statutory or home rule charter city, town, or
county that has planning and zoning authority under sections 366.10 to 366.19, 394.21
to 394.37, or 462.351 to 462.365 is encouraged to adopt a soil loss ordinance. The soil
loss ordinance must use the soil loss tolerance for each soil series described in the United
States Soil Natural Resources Conservation Service Field Office Technical Guide, or
another method approved by the Board of Water and Soil Resources,
to determine the
soil loss limits, but the soil loss limits must be attainable by the best practicable soil
conservation practice. Ordinances adopted by local governments within the metropolitan
area defined in section 473.121
must be consistent with local water management plans
adopted under section 103B.235
a comprehensive plan, local water management plan, or
watershed management plan developed or amended, adopted, and approved according
to chapter 103B, 103C, or 103D
.

Sec. 6.

Minnesota Statutes 2012, section 168.012, subdivision 9, is amended to read:


Subd. 9.

Manufactured homes and park trailers.

Manufactured homes and park
trailers shall not be taxed as motor vehicles using the public streets and highways and shall
be exempt from the motor vehicle tax provisions of this chapter. Except as provided in
section 273.125, manufactured homes and park trailers shall be taxed as personal property.
The provisions of Minnesota Statutes 1957, section 272.02 or any other act providing for
tax exemption shall be inapplicable to manufactured homes and park trailers, except
such manufactured homes as are held by a licensed dealer or limited dealer, as defined
in section 327B.04,
and exempted as inventory under subdivision 9a. Travel trailers not
conspicuously displaying current registration plates on the property tax assessment date
shall be taxed as manufactured homes if occupied as human dwelling places.

EFFECTIVE DATE.

This section is effective for taxes payable in 2014 and
thereafter.

Sec. 7.

Minnesota Statutes 2012, section 168.012, is amended by adding a subdivision
to read:


Subd. 9a.

Manufactured home as dealer inventory.

Manufactured homes as
defined in section 327.31, subdivision 6, shall be considered as dealer inventory, on the
January 2 assessment date, if the home is:

(1) listed as inventory and held by a licensed or limited dealer;

(2) unoccupied and not available for rent;

(3) connected or not connected to utilities when located in a manufactured home
park; and

(4) connected or not connected to utilities when located at a dealer's sales center.

The exemption under this subdivision is allowable for up to five assessment years after
the date a home is initially claimed as dealer inventory.

EFFECTIVE DATE.

This section is effective for taxes payable in 2014 and
thereafter.

Sec. 8.

Minnesota Statutes 2012, section 270.41, subdivision 3, is amended to read:


Subd. 3.

Licenses; refusal or revocation Assessor sanctions; refusal to license.

(a) The board may (i) refuse to grant or renew, or may suspend or revoke, a license
of an applicant or licensee, or (ii) censure, warn, or fine any licensed assessor, or any
other person employed by an assessment jurisdiction or contracting with an assessment
jurisdiction for the purpose of valuing or classifying property for property tax purposes,
for any of the following causes or acts:

(1) failure to complete required training;

(2) inefficiency or neglect of duty;

(3) failure to comply with the Code of Conduct and Ethics for Licensed Minnesota
Assessors adopted by the board pursuant to Laws 2005, First Special Session chapter 3,
article 1, section 38;

(4) conviction of a crime involving moral turpitude; or

(5) failure to faithfully and fully perform his or her duties through malfeasance,
misfeasance, or nonfeasance; or

(5) (6) any other cause or act that in the board's opinion warrants a refusal to issue
or suspension or revocation of a license or the imposition of a sanction provided under
this subdivision
.

(b) When appropriate for the level of infraction, a written warning must be given
to assessors who have no prior identified infractions. The warning must identify the
infraction and, as appropriate, detail future expectations of performance and behavior.
Fines must not exceed $1,000 for the first occurrence and must not exceed $3,000 for each
occurrence thereafter, and suspensions must not exceed one year for each occurrence,
depending in each case upon the severity of the infraction and the level of negligence or
intent. An action by the board to impose a sanction is subject to review in a contested
case hearing under chapter 14.

EFFECTIVE DATE.

This section is effective beginning July 1, 2013.

Sec. 9.

Minnesota Statutes 2012, section 270.41, is amended by adding a subdivision
to read:


Subd. 3a.

Report on disciplinary actions.

Each odd-numbered year, the board
must publish a report detailing the number and types of disciplinary actions recommended
by the commissioner of revenue under section 273.0645, subdivision 2, and the disposition
of those recommendations by the board. The report must be presented to the house of
representatives and senate committees with jurisdiction over property taxes by February 1
of each odd-numbered year.

EFFECTIVE DATE.

This section is effective beginning July 1, 2013.

Sec. 10.

Minnesota Statutes 2012, section 270.45, is amended to read:


270.45 DISPOSITION OF FEES AND FINES.

All fees and fines so established and collected shall be paid to the commissioner of
management and budget for deposit in the general fund. The expenses of carrying out the
provisions of sections 270.41 to 270.50 shall be paid from appropriations made to the board.

EFFECTIVE DATE.

This section is effective beginning July 1, 2013.

Sec. 11.

[270C.9901] ASSESSOR ACCREDITATION.

Every individual who appraises or physically inspects real property for the purpose
of determining its valuation or classification for property tax purposes must obtain
licensure as an accredited Minnesota assessor from the State Board of Assessors by July 1,
2019, or within four years of that person having become licensed as a certified Minnesota
assessor, whichever is later.

EFFECTIVE DATE.

This section is effective beginning January 1, 2014.

Sec. 12.

Minnesota Statutes 2012, section 272.02, subdivision 39, is amended to read:


Subd. 39.

Economic development; public purpose.

The holding of property by a
political subdivision of the state for later resale for economic development purposes
shall be considered a public purpose in accordance with subdivision 8 for a period not to
exceed nine years, except that:

(1) for property located in a city of 5,000 20,000 population or under that is located
outside of the metropolitan area as defined in section 473.121, subdivision 2, the period
must not exceed 15 years.; and

(2) for any property that was acquired on or after January 1, 2000, and on or before
December 31, 2010, and is located in a city, the period must not exceed 15 years.

The holding of property by a political subdivision of the state for later resale (1)
which is purchased or held for housing purposes, or (2) which meets the conditions
described in section 469.174, subdivision 10, shall be considered a public purpose in
accordance with subdivision 8.

The governing body of the political subdivision which acquires property which is
subject to this subdivision shall after the purchase of the property certify to the city or
county assessor whether the property is held for economic development purposes or
housing purposes, or whether it meets the conditions of section 469.174, subdivision 10.
If the property is acquired for economic development purposes and buildings or other
improvements are constructed after acquisition of the property, and if more than one-half
of the floor space of the buildings or improvements which is available for lease to or use
by a private individual, corporation, or other entity is leased to or otherwise used by
a private individual, corporation, or other entity the provisions of this subdivision shall
not apply to the property. This subdivision shall not create an exemption from section
272.01, subdivision 2; 272.68; 273.19; or 469.040, subdivision 3; or other provision of
law providing for the taxation of or for payments in lieu of taxes for publicly held property
which is leased, loaned, or otherwise made available and used by a private person.

EFFECTIVE DATE.

This section is effective for assessment year 2013 and
thereafter and for taxes payable in 2014 and thereafter.

Sec. 13.

Minnesota Statutes 2012, section 272.02, is amended by adding a subdivision
to read:


Subd. 98.

Certain property owned by an Indian tribe.

(a) Property is exempt that:

(1) was classified as 3a under section 273.13, subdivision 24, for taxes payable
in 2013;

(2) is located in a city of the first class with a population greater than 300,000 as of
the 2010 federal census;

(3) was on January 2, 2012, and is for the current assessment owned by a federally
recognized Indian tribe, or its instrumentality, that is located within the state of Minnesota;
and

(4) is used exclusively for tribal purposes or institutions of purely public charity as
defined in subdivision 7.

(b) For purposes of this subdivision, a "tribal purpose" means a public purpose
as defined in subdivision 8 and includes noncommercial tribal government activities.
Property that qualifies for the exemption under this subdivision is limited to no more than
two contiguous parcels and structures that do not exceed in the aggregate 20,000 square
feet. Property acquired for single-family housing, market-rate apartments, agriculture, or
forestry does not qualify for this exemption. The exemption created by this subdivision
expires with taxes payable in 2024.

EFFECTIVE DATE.

This section is effective beginning with taxes payable in 2014.

Sec. 14.

Minnesota Statutes 2012, section 272.02, is amended by adding a subdivision
to read:


Subd. 99.

Electric generation facility; personal property.

(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 five
megawatts of installed capacity and meets the requirements of this subdivision is exempt.
At the time of construction, the facility must be:

(1) designed to utilize natural gas as a primary fuel;

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

(3) designed to utilize reciprocating engines paired with generators to produce
electrical power;

(4) located within the service territory of a municipal power agency's electrical
municipal utility that serves load exclusively in a metropolitan county as defined in
section 473.121, subdivision 4; and

(5) designed to connect directly with a municipality's substation.

(b) Construction of the facility must be commenced after June 1, 2013, and before
June 1, 2017. 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.

EFFECTIVE DATE.

This section is effective for assessment year 2013, taxes
payable in 2014, and thereafter.

Sec. 15.

Minnesota Statutes 2012, section 273.061, subdivision 2, is amended to read:


Subd. 2.

Term; vacancy.

(a) The terms of county assessors appointed under this
section shall be four years. A new term shall begin on January 1 of every fourth year
after 1973. When any vacancy in the office occurs, the board of county commissioners,
within 90 days thereafter, shall fill the same by appointment for the remainder of the term,
following the procedure prescribed in subdivision 1. The term of the county assessor
may be terminated by the board of county commissioners at any time, on charges of
malfeasance, misfeasance, or nonfeasance by the commissioner of revenue. If the board
of county commissioners does not intend to reappoint a county assessor who has been
certified by the state Board of Assessors, the board shall present written notice to the
county assessor not later than 90 days prior to the termination of the assessor's term, that it
does not intend to reappoint the assessor. If written notice is not timely made, the county
assessor will automatically be reappointed by the board of county commissioners.

The commissioner of revenue may recommend to the state Board of Assessors the
nonrenewal, suspension, or revocation of an assessor's license as provided in sections
270.41 to 270.50.

(b) In the event of a vacancy in the office of county assessor, through death,
resignation or other reasons, the deputy (or chief deputy, if more than one) shall perform
the functions of the office. If there is no deputy, the county auditor shall designate a person
to perform the duties of the office until an appointment is made as provided in clause (a).
Such person shall perform the duties of the office for a period not exceeding 90 days
during which the county board must appoint a county assessor. Such 90-day period may,
however, be extended by written approval of the commissioner of revenue.

(c) In the case of the first appointment under paragraph (a) of a county assessor who
is accredited but who does not have senior accreditation, an approval of the appointment
by the commissioner shall be provisional, provided that a county assessor appointed to
a provisional term under this paragraph must reapply to the commissioner at the end of
the provisional term. A provisional term may not exceed two years. The commissioner
shall not approve the appointment for the remainder of the four-year term unless the
assessor has obtained senior accreditation.

EFFECTIVE DATE.

This section is effective beginning July 1, 2013.

Sec. 16.

Minnesota Statutes 2012, section 273.0645, is amended to read:


273.0645 COMMISSIONER REVIEW OF LOCAL ASSESSMENT
PRACTICES.

Subdivision 1.

Local assessment practices.

The commissioner of revenue must
review the assessment practices in a taxing jurisdiction if requested in writing by a
qualifying number of property owners in that taxing jurisdiction. The request must be
signed by the greater of:

(1) ten percent of the registered voters who voted in the last general election; or

(2) five property owners.

The request must identify the city, town, or county and describe why a review is
sought for that taxing jurisdiction. The commissioner must conduct the review in a
reasonable amount of time and report the findings to the county board of the affected
county, to the affected city council or town board, if the review is for a specific city or
town, and to the property owner designated in the request as the person to receive the
report on behalf of all the property owners who signed the request. The commissioner
must also provide the report electronically to all property owners who signed the request
and provided an e-mail address in order to receive the report electronically.

Subd. 2.

Nonfeasance, misfeasance, and malfeasance.

County assessors may file a
written complaint with the commissioner of revenue detailing allegations of nonfeasance,
misfeasance, or malfeasance by a local assessor. After receiving a complaint from a county
assessor, the commissioner must complete an investigation and recommend an appropriate
action to the State Board of Assessors. The commissioner is not required to have a written
complaint from a county assessor in order to conduct an investigation and recommend an
action to the board. Active investigative data relating to the investigation of complaints
against an assessor by the commissioner of revenue are subject to section 13.39.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 17.

Minnesota Statutes 2012, section 273.117, is amended to read:


273.117 CONSERVATION PROPERTY TAX VALUATION.

The value of real property which is subject to a conservation restriction or easement
may be adjusted shall not be reduced by the assessor if:

(a) the restriction or easement is for a conservation purpose as defined in section
84.64, subdivision 2, and is recorded on the property; and

(b) the property is being used in accordance with the terms of the conservation
restriction or easement.

This section does not apply to (1) conservation restrictions or easements covering
riparian buffers along lakes, rivers, and streams that are used for water quantity or quality
control; or (2) to easements in a county that has adopted, by referendum, a program to
protect farmland and natural areas since 1999.

EFFECTIVE DATE.

This section is effective for assessment year 2013 and
thereafter, and for taxes payable in 2014 and thereafter.

Sec. 18.

Minnesota Statutes 2012, 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, excluding property qualifying for
class 4d. 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 1.25 percent.

(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 1.25 percent.

(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 and personal property
devoted to commercial temporary and seasonal residential occupancy for recreation
purposes, for not 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. Class 4c property under this clause must contain three or more
rental units. A "rental unit" is defined as a cabin, condominium, townhouse, sleeping room,
or individual camping site equipped with water and electrical hookups for recreational
vehicles. A camping pad offered for rent by a property that otherwise qualifies for class
4c under this clause is also class 4c under this clause regardless of the term of the rental
agreement, as long as the use of the camping pad does not exceed 250 days. In order for a
property to be classified under this clause, either (i) the business located on the property
must provide recreational activities, 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 (A) 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 (B) at least 20 percent of the
annual gross receipts must be from charges for providing recreational activities, or (ii) the
business must contain 20 or fewer rental units, and must be located in a township or a city
with a population of 2,500 or less located outside the metropolitan area, as defined under
section 473.121, subdivision 2, that contains a portion of a state trail administered by the
Department of Natural Resources. For purposes of item (i)(A), a paid booking of five or
more nights shall be counted as two bookings. Class 4c property also includes commercial
use real property used exclusively for recreational purposes in conjunction with other class
4c property classified under this clause and 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. In order for a property to qualify for classification under this clause, the owner
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
must be designated class 4c under this clause 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 4c property
under this clause must provide guest registers or other records demonstrating that the units
for which class 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, (4) conference center or meeting room, and (5) other
nonresidential facility operated on a commercial basis not directly related to temporary and
seasonal residential occupancy for recreation purposes does not qualify for class 4c. For
the purposes of this paragraph, "recreational activities" means renting ice fishing houses,
boats and motors, snowmobiles, downhill or cross-country ski equipment; providing
marina services, launch services, or guide services; or selling bait and fishing tackle;

(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 three acres of land owned and used by a
nonprofit community service oriented organization and not used for residential purposes
on either a temporary or permanent basis, provided that:

(i) the property is not used for a revenue-producing activity for more than six days
in the calendar year preceding the year of assessment; or

(ii) the organization makes annual charitable contributions and donations at least
equal to the property's previous year's property taxes and the property is allowed to be
used for public and community meetings or events for no charge, as appropriate to the
size of the facility.

For purposes of this clause:

(A) "charitable contributions and donations" has the same meaning as lawful
gambling purposes under section 349.12, subdivision 25, excluding those purposes
relating to the payment of taxes, assessments, fees, auditing costs, and utility payments;

(B) "property taxes" excludes the state general tax;

(C) 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), (8), (10), or (19) of the Internal
Revenue Code; and

(D) "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 not qualifying under either item (i) or (ii) is 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.

The organization shall maintain records of its charitable contributions and donations
and of public meetings and events held on the property and make them available upon
request any time to the assessor to ensure eligibility. An organization meeting the
requirement under item (ii) must file an application by May 1 with the assessor for
eligibility for the current year's assessment. The commissioner shall prescribe a uniform
application form and instructions;

(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)(i) manufactured home parks as defined in section 327.14, subdivision 3,
excluding manufactured home parks described in section 273.124, subdivision 3a, and (ii)
manufactured home parks as defined in section 327.14, subdivision 3, that are described in
section 273.124, subdivision 3a;

(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;

(8) 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:

(i) the land abuts a public airport; and

(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

(9) 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;

(10) real property up to a maximum of three acres and operated as a restaurant
as defined under section 157.15, subdivision 12, provided it: (A) is located on a lake
as defined under section 103G.005, subdivision 15, paragraph (a), clause (3); and (B)
is either devoted to commercial purposes for not more than 250 consecutive days, or
receives at least 60 percent of its annual gross receipts from business conducted during
four consecutive months. Gross receipts from the sale of alcoholic beverages must be
included in determining the property's qualification under subitem (B). The property's
primary business must be as a restaurant and not as a bar. Gross receipts from gift shop
sales located on the premises must be excluded. Owners of real property desiring 4c
classification under this clause must submit an annual declaration to the assessor by
February 1 of the current assessment year, based on the property's relevant information for
the preceding assessment year;

(11) lakeshore and riparian property and adjacent land, not to exceed six acres, used
as a marina, as defined in section 86A.20, subdivision 5, which is made accessible to
the public and devoted to recreational use for marina services. The marina owner must
annually provide evidence to the assessor that it provides services, including lake or river
access to the public by means of an access ramp or other facility that is either located on
the property of the marina or at a publicly owned site that abuts the property of the marina.
No more than 800 feet of lakeshore may be included in this classification. Buildings used
in conjunction with a marina for marina services, including but not limited to buildings
used to provide food and beverage services, fuel, boat repairs, or the sale of bait or fishing
tackle, are classified as class 3a property; and

(12) real and personal property devoted to noncommercial temporary and seasonal
residential occupancy for recreation purposes.

Class 4c property has a class rate of 1.5 percent of market value, except that (i) each
parcel of noncommercial seasonal residential recreational property under clause (12)
has the same class rates as class 4bb property, (ii) manufactured home parks assessed
under clause (5), item (i), have the same class rate as class 4b property, and the market
value of manufactured home parks assessed under clause (5), item (ii), has the same class
rate as class 4d property if more than 50 percent of the lots in the park are occupied by
shareholders in the cooperative corporation or association and a class rate of one percent if
50 percent or less of the lots are so occupied, (iii) commercial-use seasonal residential
recreational property and marina recreational land as described in clause (11), has a
class rate of one percent for the first $500,000 of market value, 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), (6), and
(10) has a class rate of 1.25 percent, and (vi) that portion of the market value of property
in clause (9) qualifying for class 4c property has a class rate of 1.25 percent.

(e) Class 4d property is qualifying low-income rental housing certified to the assessor
by the Housing Finance Agency under section 273.128, subdivision 3. If only a portion
of the units in the building qualify as low-income rental housing units as certified under
section 273.128, 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.

(f) The first tier of market value of class 4d property has a class rate of 0.75 percent.
The remaining value of class 4d property has a class rate of 0.25 percent. For the purposes
of this paragraph, the "first tier of market value of class 4d property" means the market
value of each housing unit up to the first tier limit. For the purposes of this paragraph, all
class 4d property value must be assigned to individual housing units. The first tier limit is
$100,000 for assessment year 2014. For subsequent years, the limit is adjusted each year
by the average statewide change in estimated market value of property classified as class 4a
and 4d under this section for the previous assessment year, excluding valuation change due
to new construction, rounded to the nearest $1,000, provided, however, that the limit may
never be less than $100,000. Beginning with assessment year 2015, the commissioner of
revenue must certify the limit for each assessment year by November 1 of the previous year.

EFFECTIVE DATE.

This section is effective beginning with assessment year 2014.

Sec. 19.

Minnesota Statutes 2012, section 279.01, subdivision 1, is amended to read:


Subdivision 1.

Due dates; penalties.

Except as provided in subdivision subdivisions
3 or 4 to 5, on May 16 or 21 days after the postmark date on the envelope containing the
property tax statement, whichever is later, a penalty accrues and thereafter is charged upon
all unpaid taxes on real estate on the current lists in the hands of the county treasurer. The
penalty is at a rate of two percent on homestead property until May 31 and four percent on
June 1. The penalty on nonhomestead property is at a rate of four percent until May 31 and
eight percent on June 1. This penalty does not accrue until June 1 of each year, or 21 days
after the postmark date on the envelope containing the property tax statements, whichever
is later, on commercial use real property used for seasonal residential recreational purposes
and classified as class 1c or 4c, and on other commercial use real property classified as
class 3a, provided that over 60 percent of the gross income earned by the enterprise on the
class 3a property is earned during the months of May, June, July, and August. In order for
the first half of the tax due on class 3a property to be paid after May 15 and before June 1,
or 21 days after the postmark date on the envelope containing the property tax statement,
whichever is later, without penalty, the owner of the property must attach an affidavit
to the payment attesting to compliance with the income provision of this subdivision.
Thereafter, for both homestead and nonhomestead property, on the first day of each month
beginning July 1, up to and including October 1 following, an additional penalty of one
percent for each month accrues and is charged on all such unpaid taxes provided that if the
due date was extended beyond May 15 as the result of any delay in mailing property tax
statements no additional penalty shall accrue if the tax is paid by the extended due date. If
the tax is not paid by the extended due date, then all penalties that would have accrued if
the due date had been May 15 shall be charged. When the taxes against any tract or lot
exceed $100, one-half thereof may be paid prior to May 16 or 21 days after the postmark
date on the envelope containing the property tax statement, whichever is later; and, if so
paid, no penalty attaches; the remaining one-half may be paid at any time prior to October
16 following, without penalty; but, if not so paid, then a penalty of two percent accrues
thereon for homestead property and a penalty of four percent on nonhomestead property.
Thereafter, for homestead property, on the first day of November an additional penalty of
four percent accrues and on the first day of December following, an additional penalty of
two percent accrues and is charged on all such unpaid taxes. Thereafter, for nonhomestead
property, on the first day of November and December following, an additional penalty of
four percent for each month accrues and is charged on all such unpaid taxes. If one-half of
such taxes are not paid prior to May 16 or 21 days after the postmark date on the envelope
containing the property tax statement, whichever is later, the same may be paid at any time
prior to October 16, with accrued penalties to the date of payment added, and thereupon
no penalty attaches to the remaining one-half until October 16 following.

This section applies to payment of personal property taxes assessed against
improvements to leased property, except as provided by section 277.01, subdivision 3.

A county may provide by resolution that in the case of a property owner that has
multiple tracts or parcels with aggregate taxes exceeding $100, payments may be made in
installments as provided in this subdivision.

The county treasurer may accept payments of more or less than the exact amount of
a tax installment due. Payments must be applied first to the oldest installment that is due
but which has not been fully paid. If the accepted payment is less than the amount due,
payments must be applied first to the penalty accrued for the year or the installment being
paid. Acceptance of partial payment of tax does not constitute a waiver of the minimum
payment required as a condition for filing an appeal under section 278.03 or any other law,
nor does it affect the order of payment of delinquent taxes under section 280.39.

Sec. 20.

Minnesota Statutes 2012, section 279.01, is amended by adding a subdivision
to read:


Subd. 5.

Federal active service exception.

In the case of a homestead property
owned by an individual who is on federal active service, as defined in section 190.05,
subdivision 5c, as a member of the National Guard or a reserve component, a four-month
grace period is granted for complying with the due dates imposed by subdivision 1. During
this period, no late fees or penalties shall accrue against the property. The due date for
property taxes owed under this chapter for an individual covered by this subdivision shall
be September 15 for taxes due on May 15, and February 15 of the following year for taxes
due on October 15. A taxpayer making a payment under this subdivision must accompany
the payment with a signed copy of the taxpayer's orders or form DD214 showing the
dates of active service which clearly indicate that the taxpayer was in active service as a
member of the National Guard or a reserve component on the date the payment was due.
This grace period applies to all homestead property owned by individuals on federal active
service, as herein defined, for all of that property's due dates which fall on a day that is
included in the taxpayer's federal active service.

Sec. 21.

Minnesota Statutes 2012, section 279.02, is amended to read:


279.02 DUTIES OF COUNTY AUDITOR AND TREASURER.

Subdivision 1.

Delinquent property; rates.

On the first business day in January, of
each year, the county treasurer shall return the tax lists on hand to the county auditor, who
shall compare the same with the statements receipted for by the treasurer on file in the
auditor's office and each tract or lot of real property against which the taxes, or any part
thereof, remain unpaid, shall be deemed delinquent, and thereupon an additional penalty
of two percent on the amount of the original tax remaining unpaid shall immediately
accrue and thereafter be charged upon all such delinquent taxes; and any auditor who
shall make out and deliver any statement of delinquent taxes without including therein
the penalties imposed by law, and any treasurer who shall receive payment of such taxes
without including in such payment all items as shown on the auditor's statement, shall be
liable to the county for the amounts of any items omitted.

Subd. 2.

Federal active service exception.

Notwithstanding subdivision 1, a
homestead property owned by an individual who is on federal active service, as defined
in section 190.05, subdivision 5c, as a member of the National Guard or a reserve
component, shall not be deemed delinquent under this section if the due dates imposed
under section 279.01 fall on a day in which the individual was on federal active service.

Sec. 22.

Minnesota Statutes 2012, section 279.37, subdivision 1a, is amended to read:


Subd. 1a.

Class 3a property.

(a) The delinquent taxes upon a parcel of property
which was classified class 3a, for the previous year's assessment and had a total market
value of $500,000 or less for that same assessment
shall be eligible to be composed into a
confession of judgment with the approval of the county auditor. Property qualifying under
this subdivision shall be subject to the same provisions as provided in this section except
as provided in paragraphs (b) to (d) (f).

(b) Current year taxes and penalty due at the time the confession of judgment
is entered must be paid.

(c) The down payment must include all special assessments due in the current tax
year, all delinquent special assessments, and 20 percent of the ad valorem tax, penalties,
and interest accrued against the parcel. The balance remaining is payable in four equal
annual installments. A municipality as defined in section 429.011, cities of the first class,
and other special assessment authorities, that have certified special assessments against
any parcel of property, may, through resolution, waive the requirement of payment of all
current and delinquent special assessments at the time the confession is entered. If the
municipality, city, or authority grants the waiver, 100 percent of all current year taxes,
special assessments, and penalties due at the time, along with 20 percent of all delinquent
taxes, special assessments, penalties, interest, and fees must be paid. The balance
remaining shall be subject to and included in the installment plan.

(d) When there are current and delinquent special assessments certified and billed
against a parcel, the assessment authority or municipality as defined in section 429.011
may abate under section 375.192, subdivision 2, all special assessments and the penalty
and interest affiliated with the special assessments, and reassess the special assessments,
penalties, and interest accrued thereon, under section 429.071, subdivision 2. The
municipality shall notify the county auditor of its intent to reassess as a precondition
to the entry of the confession of judgment. Upon the notice to abate and reassess, the
municipality shall, through resolution, notify the county auditor to remove all current
and delinquent special assessments and the accrued penalty and interest on the special
assessments, and the payment of all or a portion of the current and delinquent assessments
shall not be required as part of the down payment due at the time the confession of
judgment is entered in accordance with paragraph (c).

(d) (e) The amounts entered in judgment bear interest at the rate provided in section
279.03, subdivision 1a, commencing with the date the judgment is entered. The interest
rate is subject to change each year on the unpaid balance in the manner provided in section
279.03, subdivision 1a.

(f) The county auditor may require conditions on properties including, but not
limited to, environmental remediation action plan requirements, restrictions, or covenants,
when considering a request for approval of eligibility for composition into a confession of
judgment for delinquent taxes upon a parcel of property which was classified class 3a for
the previous year's assessment.

Sec. 23.

Minnesota Statutes 2012, section 279.37, subdivision 2, is amended to read:


Subd. 2.

Installment payments.

The owner of any such parcel, or any person to
whom the right to pay taxes has been given by statute, mortgage, or other agreement, may
make and file with the county auditor of the county in which the parcel is located a written
offer to pay the current taxes each year before they become delinquent, or to contest the
taxes under Minnesota Statutes 1941, sections 278.01 to 278.13, and agree to confess
judgment for the amount provided, as determined by the county auditor. By filing the
offer, the owner waives all irregularities in connection with the tax proceedings affecting
the parcel and any defense or objection which the owner may have to the proceedings, and
also waives the requirements of any notice of default in the payment of any installment or
interest to become due pursuant to the composite judgment to be so entered. Unless the
property is subject to subdivision 1a,
with the offer, the owner shall (i) tender one-tenth of
the amount of the delinquent taxes, costs, penalty, and interest, and shall (ii) tender all
current year taxes and penalty due at the time the confession of judgment is entered. In the
offer, the owner shall agree to pay the balance in nine equal installments, with interest as
provided in section 279.03, payable annually on installments remaining unpaid from time
to time, on or before December 31 of each year following the year in which judgment
was confessed. The offer must be substantially as follows:

"To the court administrator of the district court of ........... county, I, .....................,
am the owner of the following described parcel of real estate located in ....................
county, Minnesota:

.............................. Upon that real estate there are delinquent taxes for the year ........., and
prior years, as follows: (here insert year of delinquency and the total amount of delinquent
taxes, costs, interest, and penalty). By signing this document I offer to confess judgment in
the sum of $...... and waive all irregularities in the tax proceedings affecting these taxes and
any defense or objection which I may have to them, and direct judgment to be entered for
the amount stated above, minus the sum of $............, to be paid with this document, which
is one-tenth or one-fifth of the amount of the taxes, costs, penalty, and interest stated above.
I agree to pay the balance of the judgment in nine or four equal, annual installments, with
interest as provided in section 279.03, payable annually, on the installments remaining
unpaid. I agree to pay the installments and interest on or before December 31 of each year
following the year in which this judgment is confessed and current taxes each year before
they become delinquent, or within 30 days after the entry of final judgment in proceedings
to contest the taxes under Minnesota Statutes, sections 278.01 to 278.13.

Dated .............., ......."

Sec. 24.

Minnesota Statutes 2012, section 281.14, is amended to read:


281.14 EXPIRATION OF TIME FOR REDEMPTION.

The time for redemption from any tax sale, whether made to the state or to a private
person, shall not expire until notice of expiration of redemption, as provided in section
281.13 281.17, shall have been given.

Sec. 25.

Minnesota Statutes 2012, section 281.17, is amended to read:


281.17 PERIOD FOR REDEMPTION.

Except for properties for which the period of redemption has been limited under
sections 281.173 and 281.174, the following periods for redemption apply.

The period of redemption for all lands sold to the state at a tax judgment sale shall
be three years from the date of sale to the state of Minnesota if the land is within an
incorporated area unless it is: (a) nonagricultural homesteaded land as defined in section
273.13, subdivision 22; (b) homesteaded agricultural land as defined in section 273.13,
subdivision 23
, paragraph (a); or (c) seasonal residential recreational land as defined in
section 273.13, subdivision 22, paragraph (c), or 25, paragraph (d), clause (1), for which
the period of redemption is five years from the date of sale to the state of Minnesota
.

The period of redemption for homesteaded lands as defined in section 273.13,
subdivision 22
, located in a targeted neighborhood as defined in Laws 1987, chapter 386,
article 6, section 4, and sold to the state at a tax judgment sale is three years from the date
of sale. The period of redemption for all lands located in a targeted neighborhood as
defined in Laws 1987, chapter 386, article 6, section 4, except (1) homesteaded lands as
defined in section 273.13, subdivision 22, and (2) for periods of redemption beginning
after June 30, 1991, but before July 1, 1996, lands located in the Loring Park targeted
neighborhood on which a notice of lis pendens has been served, and sold to the state at a
tax judgment sale is one year from the date of sale.

The period of redemption for all real property constituting a mixed municipal solid
waste disposal facility that is a qualified facility under section 115B.39, subdivision 1, is
one year from the date of the sale to the state of Minnesota.

The period of redemption for all other lands sold to the state at a tax judgment
sale shall be five years from the date of sale, except that the period of redemption for
nonhomesteaded agricultural land as defined in section 273.13, subdivision 23, paragraph
(b), shall be two years from the date of sale if at that time that property is owned by a
person who owns one or more parcels of property on which taxes are delinquent, and the
delinquent taxes are more than 25 percent of the prior year's school district levy.

Sec. 26.

Minnesota Statutes 2012, section 287.05, is amended by adding a subdivision
to read:


Subd. 10.

Hennepin and Ramsey Counties.

For properties located in Hennepin
and Ramsey Counties, the county may impose an additional mortgage registry tax as
defined in sections 383A.80 and 383B.80.

EFFECTIVE DATE.

This section is effective for deeds and mortgages
acknowledged on or after July 1, 2013.

Sec. 27.

[287.40] HENNEPIN AND RAMSEY COUNTIES.

For properties located in Hennepin and Ramsey Counties, the county may impose an
additional deed tax as defined in sections 383A.80 and 383B.80.

EFFECTIVE DATE.

This section is effective for deeds and mortgages
acknowledged on or after July 1, 2013.

Sec. 28.

Minnesota Statutes 2012, section 383A.80, subdivision 4, is amended to read:


Subd. 4.

Expiration.

The authority to impose the tax under this section expires
January 1, 2013 2028.

EFFECTIVE DATE.

This section is effective for all deeds and mortgages
acknowledged on or after July 1, 2013.

Sec. 29.

Minnesota Statutes 2012, section 383B.80, subdivision 4, is amended to read:


Subd. 4.

Expiration.

The authority to impose the tax under this section expires
January 1, 2013 2028.

EFFECTIVE DATE.

This section is effective for all deeds and mortgages
acknowledged on or after July 1, 2013.

Sec. 30.

Minnesota Statutes 2012, section 428A.101, is amended to read:


428A.101 DEADLINE FOR SPECIAL SERVICE DISTRICT UNDER
GENERAL LAW.

The establishment of a new special service district after June 30, 2013 2028, requires
enactment of a special law authorizing the establishment.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 31.

Minnesota Statutes 2012, section 428A.21, is amended to read:


428A.21 DEADLINE FOR HOUSING IMPROVEMENT DISTRICTS UNDER
GENERAL LAW.

The establishment of a new housing improvement area after June 30, 2013 2028,
requires enactment of a special law authorizing the establishment of the area.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 32.

Minnesota Statutes 2012, section 473F.08, subdivision 3a, is amended to read:


Subd. 3a.

Bloomington computation.

(a) Beginning in 1987 and each subsequent
year through 1998, the city of Bloomington shall determine the interest payments for that
year for the bonds which have been sold for the highway improvements pursuant to Laws
1986, chapter 391, section 2, paragraph (g). Effective for property taxes payable in 1988
through property taxes payable in 1999, after the Hennepin County auditor has computed
the areawide portion of the levy for the city of Bloomington pursuant to subdivision 3,
clause (a), the auditor shall annually add a dollar amount to the city of Bloomington's
areawide portion of the levy equal to the amount which has been certified to the auditor
by the city of Bloomington for the interest payments for that year for the bonds which
were sold for highway improvements. The total areawide portion of the levy for the city
of Bloomington including the additional amount for interest repayment certified pursuant
to this subdivision shall be certified by the Hennepin County auditor to the administrative
auditor pursuant to subdivision 5. The Hennepin County auditor shall distribute to the
city of Bloomington the additional areawide portion of the levy computed pursuant to this
subdivision at the same time that payments are made to the other counties pursuant to
subdivision 7a. For property taxes payable from the year 2009 through 2018 2014, the
Hennepin County auditor shall adjust Bloomington's contribution to the areawide gross tax
capacity upward each year by a value equal to ten percent of the total additional areawide
levy distributed to Bloomington under this subdivision from 1988 to 1999, divided by the
areawide tax rate for taxes payable in the previous year.

(b) For property taxes payable from 2015 through 2018, the administrative auditor
shall increase the areawide net tax capacity each year by an amount equal to ten percent of
the total additional areawide levy distributed to Bloomington under this subdivision from
1988 to 1999, divided by the areawide tax rate for taxes payable in the previous year. The
administrative auditor must notify the commissioner of revenue of the amount determined
by multiplying the increase in the areawide net tax capacity by the areawide tax rate
determined under subdivision 5. The commissioner of revenue must pay the amount
determined each payable year to the administrative auditor in two installments on July 10
and November 10, for distribution and settlement as provided in subdivision 7a.

(c) A sum sufficient to meet the obligations under this subdivision is annually
appropriated from the general fund to the commissioner of revenue.

EFFECTIVE DATE.

This section is effective beginning with taxes payable in 2015.

Sec. 33.

Laws 1988, chapter 645, section 3, as amended by Laws 1999, chapter 243,
article 6, section 9, Laws 2000, chapter 490, article 6, section 15, and Laws 2008, chapter
154, article 2, section 30, is amended to read:


Sec. 3. TAX; PAYMENT OF EXPENSES.

(a) The tax levied by the hospital district under Minnesota Statutes, section 447.34,
must not be levied at a rate that exceeds the amount authorized to be levied under that
section. The proceeds of the tax may be used for all purposes of the hospital district,
except as provided in paragraph (b).

(b) 0.015 percent of taxable market value of the tax in paragraph (a) may be used
solely by the Cook ambulance service and the Orr ambulance service for the purpose of
capital expenditures as it relates to:

(1) ambulance acquisitions for the Cook ambulance service and the Orr ambulance
service and not;

(2) attached and portable equipment for use in and for the ambulances; and

(3) parts and replacement parts for maintenance and repair of the ambulances.

The money may not be used for administrative, operation, or salary expenses.

(c) The part of the levy referred to in paragraph (b) must be administered by the
Cook Hospital and passed on in equal amounts directly to the Cook area ambulance
service board and the city of Orr to be held in trust until funding for a new ambulance is
needed by either the Cook ambulance service or the Orr ambulance service
used for the
purposes in paragraph (b)
.

Sec. 34.

Laws 1999, chapter 243, article 6, section 11, is amended to read:


Sec. 11. CEMETERY LEVY FOR SAWYER BY CARLTON COUNTY.

Subdivision 1.

Levy authorized.

Notwithstanding other law to the contrary, the
Carlton county board of commissioners may annually levy in and for the unorganized
township territory of Sawyer an amount up to $1,000 annually for cemetery purposes,
beginning with taxes payable in 2000 and ending with taxes payable in 2009
.

Subd. 2.

Effective date.

This section is effective June 1, 1999, without local
approval.

EFFECTIVE DATE; LOCAL APPROVAL.

This section applies to taxes
payable in 2014 and thereafter, and is effective the day after the Carlton County Board
of Commissioners and its chief clerical officer timely complete their compliance with
Minnesota Statutes, section 645.021, subdivisions 2 and 3.

Sec. 35.

Laws 2008, chapter 366, article 5, section 33, the effective date, is amended to
read:


EFFECTIVE DATE.

This section is effective for taxes levied in 2008, payable in
2009, and is repealed effective for taxes levied in 2013 2018, payable in 2014 2019,
and thereafter.

EFFECTIVE DATE.

This section is effective beginning with taxes payable in 2014.

Sec. 36.

Laws 2009, chapter 88, article 2, section 46, subdivision 1, is amended to read:


Subdivision 1.

Agreement.

The city of Cloquet and Perch Lake Township, by
resolution of each of their governing bodies, may establish the Cloquet Area Fire and
Ambulance Taxing District for the purpose of providing fire and or ambulance services,
or both,
throughout the district. In this section, "municipality" means home rule charter
and statutory cities, towns, and Indian tribes. The district may exercise all the powers
relating to fire and ambulance services of the municipalities that receive fire and or
ambulance services, or both, from the district. Upon application, any other municipality
that is contiguous to a municipality that is a member of the district may join the district
with the agreement of the municipalities that comprise the district at the time of its
application to join.

Sec. 37.

Laws 2009, chapter 88, article 2, section 46, subdivision 3, is amended to read:


Subd. 3.

Tax.

The district board may impose a property tax on taxable property in
the district
as provided in this subdivision. This The board shall annually determine the
total amount of the levy that is attributable to the cost of providing fire services and the cost
of providing ambulance services within the primary service area. For those municipalities
that only receive ambulance services, the costs for the provision of ambulance services
shall be levied against taxable property within those municipalities at a rate necessary not
to exceed 0.019 percent of the estimated market value. For those municipalities that
receive both fire and ambulance services, the
tax shall be imposed at a rate that does not
exceed 0.2835 percent of taxable estimated market value for taxes payable in 2010. The
board shall annually determine the separate amounts of the levy that are attributable to the
cost of providing fire services and the cost of providing ambulance services. Costs for the
provision of ambulance services shall be levied against taxable property within the area of
the district that receive the services. Costs for the provision of fire services shall be levied
against taxable property within the area of the district that receive the services
.

When a member municipality opts to receive fire service from the district or an
additional municipality becomes a member of the district, the additional cost of providing
ambulance and fire services to that municipality will community shall be determined by
the board and added to the maximum levy amount.

Each county auditor of a county that contains a municipality subject to the tax under
this section must collect the tax and pay it to the Fire and Ambulance Special Taxing
District. The district may also impose other fees or charges as allowed by law for the
provision of fire and ambulance services.

Sec. 38.

Laws 2010, chapter 389, article 1, section 12, the effective date, is amended to
read:


EFFECTIVE DATE.

This section is effective for assessment years year 2010 and
2011, for taxes payable in 2011 and 2012 thereafter.

EFFECTIVE DATE.

This section is effective for assessment year 2012 and
thereafter.

Sec. 39. MINNEAPOLIS AND ST. PAUL ENTERTAINMENT FACILITIES
COORDINATION STUDY; APPROPRIATION.

Subdivision 1.

Statement of purpose.

The legislature finds that the national
economic structure of professional sports financing, as directly or indirectly sanctioned by
federal law, compels state and local governments in smaller metropolitan areas, such as
Minneapolis and St. Paul, to help finance the construction and operation of venues for
professional sports franchises as a condition of hosting these franchises. The burden and
risk associated with providing this assistance justifies authorizing and directing the cities
and any associated private entities to enter into arrangements that attempt to maximize
the combined revenues of these facilities from direct users, including those unrelated to
professional sports, such as, but not limited to, joint booking of concerts and other events,
to minimize the cost and risk to general taxpayers. Any efforts to put in place such joint
marketing, promotion, and scheduling arrangements by the cities or associated private
entities, in the view of the legislature, is a petition for enactment of this or subsequent
enabling legislation under the Noerr-Pennington doctrine or state action under the Parker
antitrust doctrine. This legislation and any resulting arrangements are intended to minimize
the potential burden on general taxpayers of financing and operation of the arenas.

Subd. 2.

Study and report.

On or before February 1, 2014, the cities of
Minneapolis and St. Paul, in consultation with representatives of the primary professional
sports team tenant of each arena, shall study and report to the legislature on establishing
a joint governing structure to be responsible for the joint administration, financing, and
operations of the facilities and the possible effects of joint governance on the finances of
each arena and each city. The commissioner of administration, in consultation with the
two cities, shall contract with an independent consultant to conduct all or a portion of the
study. The cities of Minneapolis and St. Paul together shall pay one-half of the cost of the
consultant contract. The commissioner may accept funding from other public entities and
private organizations to pay for the contract. The study must:

(1) examine the current finances of each arena including past and projected costs and
revenues, projected capital improvements, and the current and projected impact of each
arena on each city's general fund;

(2) determine the impact of joint governance on the future finances of each city;

(3) examine joint scheduling, marketing, and promotion of events at the arenas,
either within a joint governance structure or as separate entities; and

(4) estimate the amount of funding, if any, that would be required to operate and
maintain the arenas under a joint governing structure.

Subd. 3.

Appropriation.

Up to $50,000 is appropriated to the commissioner of
administration from the general fund for fiscal year 2014 to pay up to one-half of the costs
of the consultant contract under subdivision 2.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 40. REIMBURSEMENT FOR PROPERTY TAX ABATEMENTS;
APPROPRIATION.

Subdivision 1.

Reimbursement.

The commissioner of revenue shall reimburse
taxing jurisdictions for property tax abatements granted in Hennepin County under Laws
2011, First Special Session chapter 7, article 5, section 13, notwithstanding the time limits
contained in that section. The reimbursements must be made to each taxing jurisdiction
pursuant to the certification of the Hennepin County auditor.

Subd. 2.

Appropriation.

In fiscal year 2014 only, $336,000 is appropriated to the
commissioner of revenue from the general fund to make the payments required in this
section.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 41. ST. PAUL BALLPARK PROPERTY TAX EXEMPTION; SPECIAL
ASSESSMENT.

Any real or personal property acquired, owned, leased, controlled, used, or occupied
by the city of St. Paul for the primary purpose of providing a ballpark for a minor league
baseball team is declared to be acquired, owned, leased, controlled, used, and occupied for
public, governmental, and municipal purposes, and is exempt from ad valorem taxation
by the state or any political subdivision of the state, provided that the properties are
subject to special assessments levied by a political subdivision for a local improvement in
amounts proportionate to and not exceeding the special benefit received by the properties
from the improvement. In determining the special benefit received by the properties, no
possible use of any of the properties in any manner different from their intended use
for providing a minor league ballpark at the time may be considered. Notwithstanding
Minnesota Statutes, section 272.01, subdivision 2, or 273.19, real or personal property
subject to a lease or use agreement between the city and another person for uses related to
the purposes of the operation of the ballpark and related parking facilities is exempt from
taxation regardless of the length of the lease or use agreement. This section, insofar as it
provides an exemption or special treatment, does not apply to any real property that is
leased for residential, business, or commercial development or other purposes different
from those necessary to the provision and operation of the ballpark.

EFFECTIVE DATE.

This section is effective the day after compliance by the
governing body of the city of St. Paul with Minnesota Statutes, section 645.021,
subdivisions 2 and 3.

Sec. 42. PUBLIC ENTERTAINMENT FACILITY; PROPERTY TAX
EXEMPTION; SPECIAL ASSESSMENT.

Any real or personal property acquired, owned, leased, controlled, used, or occupied
by the city of Minneapolis for the primary purpose of providing an arena for a professional
basketball team is declared to be acquired, owned, leased, controlled, used, and occupied
for public, governmental, and municipal purposes, and is exempt from ad valorem taxation
by the state or any political subdivision of the state, provided that the properties are
subject to special assessments levied by a political subdivision for a local improvement in
amounts proportionate to and not exceeding the special benefit received by the properties
from the improvement. In determining the special benefit received by the properties, no
possible use of any of the properties in any manner different from their intended use for
providing a professional basketball arena at the time may be considered. Notwithstanding
Minnesota Statutes, section 272.01, subdivision 2, or 273.19, real or personal property
subject to a lease or use agreement between the city and another person for uses related to
the purposes of the operation of the arena and related parking facilities is exempt from
taxation regardless of the length of the lease or use agreement. This section, insofar as
it provides an exemption or special treatment, does not apply to any real property that
is leased for residential, business, or commercial development, or for other purposes
different from those necessary to the provision and operation of the arena.

EFFECTIVE DATE.

This section is effective the day after compliance by the
governing body of the city of Minneapolis with Minnesota Statutes, section 645.021,
subdivisions 2 and 3.

Sec. 43. PUBLIC ENTERTAINMENT FACILITY; CONSTRUCTION
MANAGER AT RISK.

(a) For any real or personal property acquired, owned, leased, controlled, used, or
occupied by the city of Minneapolis for the primary purpose of providing an arena for
a professional basketball team, the city of Minneapolis may contract for construction,
materials, supplies, and equipment in accordance with Minnesota Statutes, section
471.345, except that the city may employ or contract with persons, firms, or corporations
to perform one or more or all of the functions of an engineer, architect, construction
manager, or program manager with respect to all or any part of a project to renovate,
refurbish, and remodel the arena under either the traditional design-bid-build plan or
construction manager at risk plan, or a combination thereof.

(b) The city may prepare a request for proposals for one or more of the functions
described in paragraph (a). The request must be published in a newspaper of general
circulation. The city may prequalify offerors by issuing a request for qualifications, in
advance of the request for proposals, and select a short list of responsible offerors to
submit proposals.

(c) As provided in the request for proposals, the city may conduct discussions and
negotiations with responsible offerors in order to determine which proposal is most
advantageous to the city and to negotiate the terms of an agreement. In conducting
discussions, there shall be no disclosure of any information derived from proposals
submitted by competing offerors and the content of all proposals is nonpublic data under
Minnesota Statutes, chapter 13, until such time as a notice to award a contract is given
by the city.

(d) Upon agreement on the guaranteed maximum price, the construction manager
or program manager may enter into contracts with subcontractors for labor, materials,
supplies, and equipment for the renovation project through the process of public bidding,
except that the construction manager or program manager may, with the consent of the city:

(1) narrow the listing of eligible bidders to those that the construction manager
or program manager determines to possess sufficient expertise to perform the intended
functions;

(2) award contracts to the subcontractors that the construction manager or program
manager determines provide the best value under a request for proposals, as described in
Minnesota Statutes, section 16C.28, subdivision 1, paragraph (a), clause (2), that are not
required to be the lowest responsible bidder; and

(3) for work the construction manager or program manager determines to be
critical to the completion schedule, perform work with its own forces without soliciting
competitive bids or proposals, if the construction manager or program manager provides
evidence of competitive pricing.

EFFECTIVE DATE.

This section is effective the day after compliance by the
governing body of the city of Minneapolis with Minnesota Statutes, section 645.021,
subdivisions 2 and 3.

Sec. 44. EXTENSION OF PROPERTY TAX DUE DATE; COMMERCIAL
SEASONAL RECREATIONAL PROPERTIES.

Notwithstanding the provisions of Minnesota Statutes, section 279.01, subdivision
1, for taxes payable in 2013 only, the penalty on first-half property taxes does not accrue
until June 15 on commercial use real property used for seasonal residential recreational
purposes and classified as class 1c or 4c, and on other commercial use real property
classified as class 3a, provided that over 60 percent of the gross income earned by the
enterprise on the class 3a property is earned during the months of May, June, July, and
August. In order for the first half of the tax due on class 3a property to be paid after May
15 and before June 15 without penalty, the owner of the property must attach an affidavit
to the payment attesting to compliance with the income provision of this subdivision.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 45. REPORT ON CLASS 4D TIER STRUCTURE.

The commissioners of revenue and housing finance shall report to the legislature
by January 31, 2015, on the implementation of a second tier of market value for class 4d
property under Minnesota Statutes, section 273.13, subdivision 25, paragraph (f). The
report shall include the number of class 4d properties subject to the second tier of market
value for taxes payable in 2015 and the tax impact of the application of the second tier
of market value. The report shall also include an analysis of the characteristics of the
properties to which the second tier of market value applies, such as location, building
type, and number of units.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 46. REPORT AND STUDY ON CERTAIN PROPERTY USED IN
BUSINESS AND PRODUCTION; ASSESSMENT MORATORIUM.

Subdivision 1.

Study and report.

(a) In order to facilitate a legislative review of
property tax assessment procedures for facilities used in the production of biofuels, wine,
beer, distilled beverages, and dairy products, and the development of standards and criteria
for determining the taxable status of these facilities, the commissioner of revenue must
conduct a study and report the findings of the study. The study must:

(1) include a detailed survey of counties identifying the components and tax status
of biofuel facilities;

(2) identify the function of components in facilities of the affected industries;

(3) consider the taxability for certain components related to size, function, and use;

(4) develop recommendations for assessment guidelines and policies for facilities of
the affected industries; and

(5) identify possible impacts to state and local taxes resulting from study
recommendations.

(b) The commissioner shall request the involvement and participation of
stakeholders, including the affected industries, the assessment community, and others
identified by the commissioner.

(c) The commissioner shall report the findings to the chairs of the house of
representatives and senate committees with jurisdiction over taxes, agriculture, and
economic development as well as the commissioners of agriculture and employment and
economic development by February 1, 2014.

Subd. 2.

Moratorium on changes in assessment practices.

(a) For the 2013 and
2014 assessments, assessors must continue to use assessment practices or policies in effect
in that county on January 2, 2012, for determining the taxable status of property used in
the production of biofuels, wine, beer, distilled beverages, or dairy products.

(b) An assessor must not change the taxable status of any existing property described
in paragraph (a) from its status on January 2, 2012, unless the change is due to a change in
the use of property, or to correct an error. For taxable properties, the assessor may change
the estimated market value of the property and add value for any new construction that
would have been taxable under practices and policies in place on January 2, 2012.

(c) This subdivision expires on December 31, 2014. Any changes to the taxable
status of the properties in paragraph (a) resulting from the study will not be effective
until the 2015 assessment.

Sec. 47. PROPERTY TAX SAVINGS REPORT.

(a) In addition to the certification of its proposed property tax levy under Minnesota
Statutes, section 275.065, each city that has a population over 500 and each county shall
also include the amount of sales and use tax paid, or was estimated to be paid, in 2012.

(b) At the time the notice of the proposed property taxes is mailed as required under
Minnesota Statutes, section 275.065, subdivision 3, the county treasurer shall also include
a separate statement providing a list of sales and use tax certified by the county and cities
within their jurisdiction.

(c) At the public hearing required under Minnesota Statutes, section 275.065,
subdivision 3, the county and city must discuss the estimated savings realized to their
budgets that resulted from the sales tax exemption authorized under Minnesota Statutes,
section 297A.70, subdivision 2, and how those savings will be used for property tax levy
reductions, fee reductions, and other purposes as deemed appropriate.

Reasonable costs of preparing the notice required in this section must be apportioned
between taxing jurisdictions as follows:

(1) one-half is allocated to the county; and

(2) one-half is allocated among the cities.

The amount allocated in clause (2) must be further apportioned among all the cities
in the proportion that the number of parcels in the city bears to the number of parcels in all
the cities that have populations over 500.

EFFECTIVE DATE.

This section is effective the day following final enactment,
for taxes levied in 2013 and payable in 2014.

Sec. 48. LEVY LIMITS FOR TAXES LEVIED IN 2013.

Subdivision 1.

Population.

"Population" means the population for the local
governmental unit as established by the last federal census, by a census taken under
section Minnesota Statutes, section 275.14, or by an estimate made by the metropolitan
council or by the state demographer under Minnesota Statutes, section 4A.02, whichever
is most recent as to the stated date of the count or estimate up to and including June 1
of the current levy year.

Subd. 2.

Local government unit.

"Local governmental unit" means a county with a
population greater than 5,000, or a statutory or home rule charter city with a population
greater than 2,500.

Subd. 3.

Levy limit base.

"Levy limit base" for a local governmental unit for levy
year 2013 means the sum of its certified net tax capacity levy plus the total of aids and
reimbursements that the local governmental unit is certified to receive under Minnesota
Statutes, sections 477A.011 to 477A.014, minus any amounts that would qualify as a
special levy under Minnesota Statutes, section 275.70, subdivision 5, clauses (1) to (4) and
(7), for taxes levied in 2011 or 2012, whichever is greater. The levy limit base must be
increased by three percent.

Subd. 4.

Property tax levy limit.

For taxes levied in 2013, the net tax capacity
levy limit for a local governmental unit is equal to its levy limit base determined under
subdivision 3 plus any additional levy authorized under Minnesota Statutes, section
275.73, which is levied against net tax capacity, reduced by the total amount of aids and
reimbursements that the local governmental unit is certified to receive under Minnesota
Statutes, sections 477A.011 to 477A.014. The property tax levy limit for any local
government cannot be less than the greater of its certified net tax capacity levies for taxes
levied in 2011 or 2012.

Subd. 5.

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 this section, the provisions of this section apply to local governmental units for all
purposes other than those for which special levies under Minnesota Statutes, section
275.70, subdivision 5, clauses (1) to (5) and (7), and special assessments are made.

Subd. 6.

Levies in excess of levy limits.

If the levy made by a city or county
exceeds the levy limit provided in this section, except when the excess levy is due to the
rounding of the rate in accordance with Minnesota Statutes, section 275.28, the county
auditor shall only extend the amount of taxes permitted under this section as provided
for in Minnesota Statutes, section 275.16.

Subd. 7.

Calculation and notification.

The commissioner of revenue shall make
all necessary calculations for determining levy limits for local governmental units and
notify the affected governmental units of their levy limits directly by September 1, 2013.
The local governmental units shall, upon request, provide the commissioner with any
information needed to make the calculations. The local governmental unit shall report
by September 30, in a manner prescribed by the commissioner, the maximum amount of
taxes it plans to levy for each of the purposes listed under special levies and any additional
levy authorized under Minnesota Statutes, section 275.73, along with any necessary
documentation. The commissioner shall review the proposed special levies and make any
adjustments needed. The commissioner's decision is final. The final allowed special levy
amounts and any levy limit adjustments must be certified back to the local governments by
December 10. In addition, the commissioner of revenue shall notify all county auditors on
or before five working days after December 20 of the sum of the levy limit plus the total of
allowed special levies for each local governmental unit located within their boundaries so
that they may fix the levies as required in Minnesota Statutes, section 275.16. The local
governmental units shall provide the commissioner of revenue with all information that
the commissioner deems necessary to make the calculations provided for in this section.

Subd. 8.

Information necessary to calculate levy limit base.

A local governmental
unit must provide the commissioner with the information required to calculate the
amount under subdivision 3, by July 20, 2013. If the information is not received by the
commissioner by that date, or is not deemed sufficient to make the calculation under that
clause, the commissioner has the discretion to set the local governmental unit's levy limit
for all purposes including those purposes for which special levies may be made, equal to
the amount of the local governmental unit's certified levy for the prior year.

EFFECTIVE DATE.

This section is effective for taxes levied in 2013, payable
in 2014, only.

Sec. 49. APPROPRIATION.

$2,000,000 in fiscal year 2014 only is appropriated from the general fund to the
commissioner of revenue for a grant to the city of Moose Lake to reimburse for costs
related to connection of state facilities to the sewer line.

EFFECTIVE DATE.

This section is effective July 1, 2013.

ARTICLE 5

SPECIAL TAXES

Section 1.

Minnesota Statutes 2012, section 270C.56, subdivision 1, is amended to read:


Subdivision 1.

Liability imposed.

A person who, either singly or jointly with
others, has the control of, supervision of, or responsibility for filing returns or reports,
paying taxes, or collecting or withholding and remitting taxes and who fails to do so, or a
person who is liable under any other law, is liable for the payment of taxes arising under
chapters 295, 296A, 297A, 297F, and 297G, or sections 256.9658, 290.92, and 297E.02,
and the applicable penalties and interest on those taxes.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 2.

Minnesota Statutes 2012, section 296A.09, subdivision 2, is amended to read:


Subd. 2.

Jet fuel and special fuel tax imposed.

There is imposed an excise tax
of the same rate 15 cents per gallon as the aviation gasoline on all jet fuel or special
fuel received, sold, stored, or withdrawn from storage in this state, for use as substitutes
for aviation gasoline and not otherwise taxed as gasoline. Jet fuel is defined in section
296A.01, subdivision 8.

EFFECTIVE DATE.

This section is effective July 1, 2014, and applied to sales
and purchases made on or after that date.

Sec. 3.

Minnesota Statutes 2012, section 296A.17, subdivision 3, is amended to read:


Subd. 3.

Refund on graduated basis.

Any person who has directly or indirectly
paid the excise tax on aviation gasoline or special fuel for aircraft use provided for by this
chapter and the airflight property tax under section 270.72, shall, as to all such aviation
gasoline and special fuel received, stored, or withdrawn from storage by the person in
this state in any calendar year and not sold or otherwise disposed of to others, or intended
for sale or other disposition to others, on which such tax has been so paid, be entitled to
the following graduated reductions in such tax for that calendar year, to be obtained by
means of the following refunds:

(1) on each gallon of such aviation gasoline or special fuel up to 50,000 gallons, all
but five cents per gallon;

(2) on each gallon of such aviation gasoline or special fuel above 50,000 gallons and
not more than 150,000 gallons, all but two cents per gallon;

(3) on each gallon of such aviation gasoline or special fuel above 150,000 gallons
and not more than 200,000 gallons, all but one cent per gallon;

(4) on each gallon of such aviation gasoline or special fuel above 200,000, all but
one-half cent per gallon.

EFFECTIVE DATE.

This section is effective July 1, 2014, and applied to sales
and purchases made on or after that date.

Sec. 4.

Minnesota Statutes 2012, section 297A.82, subdivision 4, is amended to read:


Subd. 4.

Exemptions.

(a) The following transactions are exempt from the tax
imposed in this chapter to the extent provided.

(b) The purchase or use of aircraft previously registered in Minnesota by a
corporation or partnership is exempt if the transfer constitutes a transfer within the
meaning of section 351 or 721 of the Internal Revenue Code.

(c) The sale to or purchase, storage, use, or consumption by a licensed aircraft dealer
of an aircraft for which a commercial use permit has been issued pursuant to section
360.654 is exempt, if the aircraft is resold while the permit is in effect.

(d) Air flight equipment when sold to, or purchased, stored, used, or consumed by
airline companies, as defined in section 270.071, subdivision 4, is exempt. For purposes
of this subdivision, "air flight equipment" includes airplanes and parts necessary for the
repair and maintenance of such air flight equipment, and flight simulators, but does
not include airplanes with a gross weight of less than 30,000 pounds that are used on
intermittent or irregularly timed flights.

(e) Sales of, and the storage, distribution, use, or consumption of aircraft, as defined
in section 360.511 and approved by the Federal Aviation Administration, and which the
seller delivers to a purchaser outside Minnesota or which, without intermediate use, is
shipped or transported outside Minnesota by the purchaser are exempt, but only if the
purchaser is not a resident of Minnesota and provided that the aircraft is not thereafter
returned to a point within Minnesota, except in the course of interstate commerce or
isolated and occasional use, and will be registered in another state or country upon its
removal from Minnesota. This exemption applies even if the purchaser takes possession of
the aircraft in Minnesota and uses the aircraft in the state exclusively for training purposes
for a period not to exceed ten days prior to removing the aircraft from this state.

(f) The sale or purchase of the following items that relate to aircraft operated under
Federal Aviation Regulations, Parts 91 and 135, and associated installation charges:
equipment and parts necessary for repair and maintenance of aircraft; and equipment
and parts to upgrade and improve aircraft.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 5.

Minnesota Statutes 2012, section 297A.82, is amended by adding a subdivision
to read:


Subd. 4a.

Deposit in state airports fund.

Tax revenue collected from the sale or
purchase of an aircraft taxable under this chapter must be deposited in the state airports
fund, established in section 360.017.

EFFECTIVE DATE.

This section is effective July 1, 2013, and applied to sales
and purchases made on or after that date.

Sec. 6.

Minnesota Statutes 2012, section 297F.01, subdivision 3, is amended to read:


Subd. 3.

Cigarette.

"Cigarette" means any roll for smoking made wholly or in part
of tobacco, that weighs 4.5 pounds or less per thousand:

(1) the wrapper or cover of which is made of paper or another substance or material
except tobacco; or

(2) wrapped in any substance containing tobacco, however labeled or named, which,
because of its appearance, size, the type of tobacco used in the filler, or its packaging,
pricing, marketing, or labeling, is likely to be offered to or purchased by consumers as
a cigarette, as defined in clause (1), unless it is wrapped in whole tobacco leaf and does
not have a cellulose acetate or other cigarette-like filter
.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 7.

Minnesota Statutes 2012, section 297F.01, is amended by adding a subdivision
to read:


Subd. 10b.

Moist snuff.

"Moist snuff" means any finely cut, ground, or powdered
smokeless tobacco that is intended to be placed or dipped in the mouth.

EFFECTIVE DATE.

This section is effective January 1, 2014.

Sec. 8.

Minnesota Statutes 2012, section 297F.01, is amended by adding a subdivision
to read:


Subd. 13a.

Premium cigar.

"Premium cigar" means any cigar that is
hand-constructed and hand-rolled, has a wrapper that is made entirely from whole tobacco
leaf, has a filler and binder that is made entirely of tobacco, except for adhesives or other
materials used to maintain size, texture, or flavor, and has a wholesale price of no less
than $2.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 9.

Minnesota Statutes 2012, section 297F.01, subdivision 19, is amended to read:


Subd. 19.

Tobacco products.

(a) "Tobacco products" means any product
containing, made, or derived from tobacco that is intended for human consumption,
whether chewed, smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by
any other means, or any component, part, or accessory of a tobacco product, including,
but not limited to, cigars; little cigars; cheroots; stogies; periques; granulated, plug cut,
crimp cut, ready rubbed, and other smoking tobacco; snuff; snuff flour; cavendish; plug
and twist tobacco; fine-cut and other chewing tobacco; shorts; refuse scraps, clippings,
cuttings and sweepings of tobacco, and other kinds and forms of tobacco; but does not
include cigarettes as defined in this section. Tobacco products excludes any tobacco
product that has been approved by the United States Food and Drug Administration for
sale as a tobacco cessation product, as a tobacco dependence product, or for other medical
purposes, and is being marketed and sold solely for such an approved purpose.

(b) Except for the imposition of tax under section 297F.05, subdivisions 3 and 4,
tobacco products includes a premium cigar, as defined in subdivision 13a.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 10.

Minnesota Statutes 2012, section 297F.05, subdivision 1, is amended to read:


Subdivision 1.

Rates; cigarettes.

A tax is imposed upon the sale of cigarettes in
this state, upon having cigarettes in possession in this state with intent to sell, upon any
person engaged in business as a distributor, and upon the use or storage by consumers, at
the following rates:

(1) on cigarettes weighing not more than three pounds per thousand, 24 141.5 mills
on each such cigarette; and

(2) on cigarettes weighing more than three pounds per thousand, 48 283 mills on
each such cigarette.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 11.

Minnesota Statutes 2012, section 297F.05, is amended by adding a subdivision
to read:


Subd. 1a.

Annual indexing.

(a) Each year the commissioner shall adjust the
tax rates under subdivision 1, including any adjustment made in prior years under this
subdivision, by multiplying the mill rates for the current calendar year by an adjustment
factor and rounding the result to the nearest mill. The adjustment factor equals the in-lieu
sales tax rate that applies to the following calendar year divided by the in-lieu sales tax
rate for the current calendar year. For purposes of this subdivision, "in-lieu sales tax rate"
means the tax rate established under section 297F.25, subdivision 1. For purposes of the
calculations under this subdivision to be made in any year in which an increase in the
federal or state excise tax on cigarettes is implemented, the commissioner shall exclude
from the calculated average price for the current year an amount equal to any increase in
the state or federal excise tax rate.

(b) The commissioner shall publish the resulting rate by November 1 and the rate
applies to sales made on or after January 1 of the following year.

(c) The determination of the commissioner under this subdivision is not a rule and is
not subject to the Administrative Procedure Act in chapter 14.

EFFECTIVE DATE.

This section is effective July 1, 2014.

Sec. 12.

Minnesota Statutes 2012, section 297F.05, subdivision 3, is amended to read:


Subd. 3.

Rates; tobacco products.

(a) Except as provided in subdivision 3a, a tax is
imposed upon all tobacco products in this state and upon any person engaged in business
as a distributor, at the rate of 35 95 percent of the wholesale sales price of the tobacco
products. The tax is imposed at the time the distributor:

(1) brings, or causes to be brought, into this state from outside the state tobacco
products for sale;

(2) makes, manufactures, or fabricates tobacco products in this state for sale in
this state; or

(3) ships or transports tobacco products to retailers in this state, to be sold by those
retailers.

(b) Notwithstanding paragraph (a), a minimum tax equal to the rate imposed on a
pack of 20 cigarettes weighing not more than three pounds per thousand, as established
under subdivision 1, is imposed on each container of moist snuff.

For purposes of this subdivision, a "container" means the smallest consumer-size can,
package, or other container that is marketed or packaged by the manufacturer, distributor,
or retailer for separate sale to a retail purchaser. When more than one container is
packaged together, each container is subject to tax.

EFFECTIVE DATE.

This section is effective July 1, 2013, except the minimum
tax under paragraph (b) is effective January 1, 2014.

Sec. 13.

Minnesota Statutes 2012, section 297F.05, is amended by adding a subdivision
to read:


Subd. 3a.

Rates; tobacco.

(a) A tax is imposed upon all premium cigars in this state
and upon any person engaged in business as a tobacco product distributor, at the lesser of:

(1) the rate of 95 percent of the wholesale sales price of the premium cigars; or

(2) $3.50 per premium cigar.

(b) The tax imposed under paragraph (a) is imposed at the time the tobacco products
distributor:

(1) brings, or causes to be brought, into this state from outside the state premium
cigars for sale;

(2) makes, manufactures, or fabricates premium cigars in this state for sale in this
state; or

(3) ships or transports premium cigars to retailers in this state, to be sold by those
retailers.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 14.

Minnesota Statutes 2012, section 297F.05, subdivision 4, is amended to read:


Subd. 4.

Use tax; tobacco products.

Except as provided in subdivision 4a, a tax is
imposed upon the use or storage by consumers of tobacco products in this state, and upon
such consumers, at the rate of 35 95 percent of the cost to the consumer of the tobacco
products or the minimum tax under subdivision 3, paragraph (b), whichever is greater.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 15.

Minnesota Statutes 2012, section 297F.05, is amended by adding a subdivision
to read:


Subd. 4a.

Use tax; premium cigars.

A tax is imposed upon the use or storage by
consumers of all premium cigars in this state, and upon such consumers, at the lesser of:

(1) the rate of 95 percent of the cost to the consumer of the premium cigars; or

(2) $3.50 per premium cigar.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 16.

Minnesota Statutes 2012, section 297F.24, subdivision 1, is amended to read:


Subdivision 1.

Fee imposed.

(a) A fee is imposed upon the sale of nonsettlement
cigarettes in this state, upon having nonsettlement cigarettes in possession in this state
with intent to sell, upon any person engaged in business as a distributor, and upon the use
or storage by consumers of nonsettlement cigarettes. The fee equals a rate of 1.75 2.5
cents per cigarette.

(b) The purpose of this fee is to:

(1) ensure that manufacturers of nonsettlement cigarettes pay fees to the state that
are comparable to costs attributable to the use of the cigarettes;

(2) prevent manufacturers of nonsettlement cigarettes from undermining the state's
policy of discouraging underage smoking by offering nonsettlement cigarettes at prices
substantially below the cigarettes of other manufacturers; and

(3) fund such other purposes as the legislature determines appropriate.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 17.

Minnesota Statutes 2012, section 297F.25, subdivision 1, is amended to read:


Subdivision 1.

Imposition.

(a) 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 combined tax rate under section 297A.62,
multiplied by
the weighted average retail price and must be expressed in cents per pack
rounded to the nearest one-tenth of a cent. The weighted average retail price must be
determined annually, with new rates published by November 1, and effective for sales
on or after January 1 of the following year. The weighted average retail price must be
established by surveying cigarette retailers statewide in a manner and time determined by
the commissioner. The commissioner shall make an inflation adjustment in accordance
with the Consumer Price Index for all urban consumers inflation indicator as published in
the most recent state budget forecast. The commissioner shall use the inflation factor for
the calendar year in which the new tax rate takes effect. If the survey indicates that the
average retail price of cigarettes has not increased relative to the average retail price in
the previous year's survey, then the commissioner shall not make an inflation adjustment.
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. For packs of
cigarettes with other than 20 cigarettes, the tax must be adjusted proportionally.

(b) Notwithstanding paragraph (a), and in lieu of a survey of cigarette retailers, the
tax calculation of the weighted average retail price for the sales of cigarettes from August
1, 2011, through December 31, 2011, shall be calculated by: (1) increasing the average
retail price per pack of 20 cigarettes from the most recent survey by the percentage change
in a weighted average of the presumed legal prices for cigarettes during the year after
completion of that survey, as reported and published by the Department of Commerce
under section 325D.371; (2) subtracting the sales tax included in the retail price; and (3)
adjusting for expected inflation. The rate must be published by May 1 and is effective for
sales after July 31. If the weighted average of the presumed legal prices indicates that the
average retail price of cigarettes has not increased relative to the average retail price in the
most recent survey, then no inflation adjustment must be made. For packs of cigarettes
with other than 20 cigarettes, the tax must be adjusted proportionally.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 18.

Minnesota Statutes 2012, section 297G.04, subdivision 2, is amended to read:


Subd. 2.

Tax credit.

A qualified brewer producing fermented malt beverages
is entitled to a tax credit of $4.60 per barrel on 25,000 barrels sold in any fiscal year
beginning July 1, regardless of the alcohol content of the product. Qualified brewers may
take the credit on the 18th day of each month, but the total credit allowed may not exceed
in any fiscal year the lesser of:

(1) the liability for tax; or

(2) $115,000.

For purposes of this subdivision, a "qualified brewer" means a brewer, whether or
not located in this state, manufacturing less than 100,000 250,000 barrels of fermented
malt beverages in the calendar year immediately preceding the calendar year for which
the credit under this subdivision is claimed. In determining the number of barrels, all
brands or labels of a brewer must be combined. All facilities for the manufacture of
fermented malt beverages owned or controlled by the same person, corporation, or other
entity must be treated as a single brewer.

EFFECTIVE DATE.

This section is effective for determinations based on calendar
year 2012 production and thereafter.

Sec. 19.

Minnesota Statutes 2012, section 325D.32, subdivision 2, is amended to read:


Subd. 2.

Cigarettes.

"Cigarettes" means and includes any roll for smoking, made
wholly or in part of tobacco, irrespective of size and shape and whether or not such
tobacco is flavored, adulterated or mixed with any other ingredient, the wrapper or cover
of which is made of paper or any other substance or material except whole tobacco leaf,
and includes any cigarette as defined in section 297F.01, subdivision 3
.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 20.

Minnesota Statutes 2012, section 325F.781, subdivision 1, is amended to read:


Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms
have the meanings given, unless the language or context clearly provides otherwise.

(b) "Consumer" means an individual who purchases, receives, or possesses tobacco
products for personal consumption and not for resale.

(c) "Delivery sale" means:

(1) a sale of tobacco products to a consumer in this state when:

(i) the purchaser submits the order for the sale by means of a telephonic or other
method of voice transmission, the mail or any other delivery service, or the Internet or
other online service; or

(ii) the tobacco products are delivered by use of the mail or other delivery service; or

(2) a sale of tobacco products that satisfies the criteria in clause (1), item (i),
regardless of whether the seller is located inside or outside of the state.

A sale of tobacco products to an individual in this state must be treated as a sale to a
consumer, unless the individual is licensed as a distributor or retailer of tobacco products.

(d) "Delivery service" means a person, including the United States Postal Service,
that is engaged in the commercial delivery of letters, packages, or other containers.

(e) "Distributor" means a person, whether located inside or outside of this state,
other than a retailer, who sells or distributes tobacco products in the state. Distributor does
not include a tobacco products manufacturer, export warehouse proprietor, or importer
with a valid permit under United States Code, title 26, section 5712 (1997), if the person
sells or distributes tobacco products in this state only to distributors who hold valid and
current licenses under the laws of a state, or to an export warehouse proprietor or another
manufacturer. Distributor does not include a common or contract carrier that is transporting
tobacco products under a proper bill of lading or freight bill that states the quantity, source,
and destination of tobacco products, or a person who ships tobacco products through this
state by common or contract carrier under a bill of lading or freight bill.

(f) "Retailer" means a person, whether located inside or outside this state, who sells
or distributes tobacco products to a consumer in this state.

(g) "Tobacco products" means:

(1) cigarettes, as defined in section 297F.01, subdivision 3; and

(2) smokeless tobacco as defined in section 325F.76.; and

(3) premium cigars as defined in section 297F.01, subdivision 13a.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 21.

Minnesota Statutes 2012, section 349.166, subdivision 1, is amended to read:


Subdivision 1.

Exclusions.

(a) Bingo, with the exception of linked bingo games, may
be conducted without a license and without complying with sections 349.168, subdivisions
1 and 2; 349.17, subdivisions 4 and 5; 349.18, subdivision 1; and 349.19, if it is conducted:

(1) by an organization in connection with a county fair, the state fair, or a civic
celebration and is not conducted for more than 12 consecutive days and is limited to no more
than four separate applications for activities applied for and approved in a calendar year; or

(2) by an organization that conducts bingo on four or fewer days in a calendar year.

An organization that holds a license to conduct lawful gambling under this chapter
may not conduct bingo under this subdivision.

(b) Bingo may be conducted within a nursing home or a senior citizen housing
project or by a senior citizen organization if the prizes for a single bingo game do not
exceed $10, total prizes awarded at a single bingo occasion do not exceed $200, no more
than two bingo occasions are held by the organization or at the facility each week, only
members of the organization or residents of the nursing home or housing project are
allowed to play in a bingo game, no compensation is paid for any persons who conduct the
bingo, and a manager is appointed to supervise the bingo. Bingo conducted under this
paragraph is exempt from sections 349.11 to 349.23, and the board may not require an
organization that conducts bingo under this paragraph, or the manager who supervises the
bingo, to register or file a report with the board. The gross receipts from bingo conducted
under the limitations of this subdivision are exempt from taxation under chapter 297A.

(c) Raffles may be conducted by an organization without registering with the board
if the value of all raffle prizes awarded by the organization in a calendar year does not
exceed $1,500 or, if the organization is a 501(c)(3) organization, if the value of all raffle
prizes awarded by the organization at one event in a calendar year does not exceed $5,000
.

(d) Except as provided in paragraph (b), the organization must maintain all required
records of excluded gambling activity for 3-1/2 years.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 22.

Minnesota Statutes 2012, section 360.531, is amended to read:


360.531 TAXATION.

Subdivision 1.

In lieu tax.

All aircraft using the air space overlying the state of
Minnesota or the airports thereof, except as set forth in section 360.55, shall be taxed in
lieu of all other taxes thereon, on the basis and at the rate for the period January 1, 1966, to
June 30, 1967, and for each fiscal year as follows.

Subd. 2.

Rate.

The tax shall be at the rate of one percent of value; provided that
the minimum tax on an aircraft subject to the provisions of sections 360.511 to 360.67
shall not be less than 25 percent of the tax on said aircraft computed on its base price or
$50 whichever is the higher.
as follows:

Base Price
Tax
Under $499,999
$100
$500,000 to $999,999
$200
$1,000,000 to $2,499,999
$2,000
$2,500,000 to $4,999,999
$4,000
$5,000,000 to $7,499,999
$7,500
$7,500,000 to $9,999,999
$10,000
$10,000,000 to $12,499,999
$12,500
$12,500,000 to $14,999,999
$15,000
$15,000,000 to $17,499,999
$17,500
$17,500,000 to $19,999,999
$20,000
$20,000,000 to $22,499,999
$22,500
$22,500,000 to $24,999,999
$25,000
$25,000,000 to $27,499,999
$27,500
$27,500,000 to $29,999,999
$30,000
$30,000,000 to $39,999,999
$50,000
$40,000,000 and over
$75,000

Subd. 3.

First year of life.

"First year of life" means the year the aircraft was
manufactured.

Subd. 4.

Base price for taxation.

For the purpose of fixing a base price for taxation
from which depreciation in value at a fixed percent per annum can be counted, such , the
base
price is defined as follows:

(a) The base price for taxation of an aircraft shall be the manufacturer's list price.

(b) The commissioner shall have authority to fix the base value for taxation purposes
of any aircraft of which no such similar or corresponding model has been manufactured,
and of any rebuilt or foreign aircraft, any aircraft on which a record of the list price is not
available, or any military aircraft converted for civilian use, using as a basis for such
valuation the list price of aircraft with comparable performance characteristics, and taking
into consideration the age and condition of the aircraft.

Subd. 5.

Similarity of corresponding model.

Models shall be deemed similar if
substantially alike and of the same make. Models shall be deemed to be corresponding
models for the purpose of taxation under sections 360.54 to 360.67 if of the same make
and having approximately the same weight and type of frame and the same style and
size of motor.

Subd. 6.

Depreciation.

After the first year of aircraft life the base value for taxation
purposes shall be reduced as follows: ten percent the second year, and 15 percent the third
and each succeeding year thereafter, but in no event shall such tax be reduced below
the minimum.

Subd. 7.

Prorating tax.

When an aircraft first becomes subject to taxation during the
period for which the tax is to be paid, the tax on it shall be for the remainder of that period,
prorated on a monthly basis of 1/12 of the annual tax for each calendar month counting the
month during which it becomes subject to the tax as the first month of such period.

Subd. 8.

Tax, fiscal year.

Every aircraft subject to the provisions of sections
360.511 to 360.67 which has at any time since April 19, 1945, used the air space overlying
the state of Minnesota or the airports thereof shall be taxed for the period from January 1,
1966, through June 30, 1967, and for each fiscal year thereafter in which it is so used. Any
aircraft which does not use the air space overlying the state of Minnesota or the airports
thereof at any time during the period of January 1, 1966, to and including June 30, 1967,
or at any time during any fiscal year thereafter shall not be subject to the tax provided by
sections 360.511 to 360.67 for such period. Rebuilt aircraft shall be subject to the tax
provided by sections 360.511 to 360.67 for that portion of the aforesaid periods remaining
after the aircraft has been rebuilt, prorated on a monthly basis.

Subd. 9.

Assessed as personal property in certain cases.

Aircraft subject to
taxation under the provisions of sections 360.54 to 360.67 shall not be assessed as personal
property and shall be subject to no tax except as provided for by these sections. Aircraft
not subject to taxation as provided in these sections, but subject to taxation as personal
property within the state of Minnesota shall be assessed and valued at 33-1/3 percent of
the market value thereof and taxed at the rate and in the manner provided by law for the
taxation of ordinary personal property. If the person against whom any tax has been levied
on the ad valorem basis because of any aircraft shall, during the calendar year for which
such ad valorem tax is levied, be also taxed under provisions of these sections, then and in
that event, upon proper showing, the commissioner of revenue shall grant to the person
against whom said ad valorem tax was levied, such reduction or abatement of net tax
capacity or taxes as was occasioned by the so-called ad valorem tax imposed. If the ad
valorem tax upon any aircraft has been assessed against a dealer in new and used aircraft,
and the tax imposed by these sections for the required period is thereafter paid by the
owner, then and in that event, upon proper showing, the commissioner of revenue, upon
the application of said dealer, shall grant to such dealer against whom said ad valorem tax
was levied such reduction or abatement of net tax capacity or taxes as was occasioned
by the so-called ad valorem tax imposed.

EFFECTIVE DATE.

This section is effective July 1, 2014, and applies to aircraft
tax due on or after that date.

Sec. 23.

Minnesota Statutes 2012, section 360.66, is amended to read:


360.66 STATE AIRPORTS FUND.

Subdivision 1.

Tax credited to fund.

The proceeds of the tax imposed on aircraft
under sections 360.54 360.531 to 360.67 and all fees and penalties provided for therein
shall be collected by the commissioner and paid into the state treasury and credited to the
state airports fund created by other statutes of this state.

Subd. 2.

Reimbursement for expenses.

There shall be transferred by the
commissioner of management and budget each year from the state airports fund to the
general fund in the state treasury the amount expended from the latter fund for expenses of
administering the provisions of sections 360.54 360.531 to 360.67.

EFFECTIVE DATE.

This section is effective July 1, 2014, and applies to aircraft
tax due on or after that date.

Sec. 24. REPORT.

On or before June 30, 2016, and every four years thereafter, the commissioner of
transportation, in consultation with the commissioner of revenue, shall prepare and submit
to the chairs and ranking minority members of the senate and house of representatives
committees with jurisdiction over transportation policy and budget, a report that identifies
the amount and sources of annual revenues attributable to each type of aviation tax, along
with annual expenditures from the state airports fund, and any other transfers out of the
fund, during the previous four years. The report must include draft legislation for any
recommended statutory changes to ensure the future adequacy of the state airports fund.

EFFECTIVE DATE.

This section is effective July 1, 2014, and applies to aircraft
tax due on or after that date.

Sec. 25. FLOOR STOCKS TAX.

Subdivision 1.

Cigarettes.

(a) A floor stocks 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 July 1, 2013. The tax is imposed at the rate of 80 mills on each cigarette plus the
additional cigarette sales tax determined by an adjustment to the weighted average retail
price which reflects the price including the increased tax.

(b) Each distributor, on or before July 11, 2013, shall file a return with the
commissioner of revenue, in the form the commissioner prescribes, showing the stamped
cigarettes and unaffixed stamps on hand at 12:01 a.m. on July 1, 2013, and the amount
of tax due on the cigarettes and unaffixed stamps. Each retailer, subjobber, vendor,
manufacturer, or manufacturer's representative, on or before July 11, 2013, shall file
a return with the commissioner, in the form the commissioner prescribes, showing the
cigarettes on hand at 12:01 a.m. on July 1, 2013, and the amount of tax due on the
cigarettes. The tax imposed by this section is due and payable on or before September 4,
2013, and after that date bears interest at the rate of one percent per month.

Subd. 2.

Audit and enforcement.

The tax imposed by this section is subject to
the audit, assessment, interest, appeal, refund, penalty, enforcement, administrative, and
collection provisions of Minnesota Statutes, chapters 270C and 297F. The commissioner
of revenue may require a distributor to receive and maintain copies of floor stocks fee
returns filed by all persons requesting a credit for returned cigarettes.

Subd. 3.

Deposit of proceeds.

(a) The commissioner of revenue shall deposit
$26,500,000 of the revenues from the tax under this section in the state treasury and credit
them to the general reserve account established under Minnesota Statutes 297E.021,
subdivision 4.

(b) The commissioner of revenue shall deposit any revenue remaining after the
transfer under paragraph (a) to the general fund.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 26. INTERIM SALES TAX RATE.

Notwithstanding the provisions of Minnesota Statutes, section 297F.25, the
commissioner shall adjust the weighted average retail price in section 297F.25, subdivision
1, on July 1, 2013, to reflect the price changes under this act. This weighted average
shall be used to compute cigarette sales tax under Minnesota Statutes, section 297F.25,
subdivision 1, until December 31, 2013, when the commissioner shall resume annual
adjustments to the weighted average sales price. The commissioner's determination of
the adjustment that takes effect on January 1, 2014, must be limited to the change in the
weighted average retail price that occurs during calendar year 2013 but after July 15, 2013.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 27. TOBACCO TAX COLLECTION REPORT.

Subdivision 1.

Report to legislature.

(a) The commissioner of revenue shall report
to the 2014 legislature on the tobacco tax collection system, including recommendations
to improve compliance under the excise tax for both cigarettes and other tobacco products.
The purpose of the report is to provide information and guidance to the legislature on
improvements to the tobacco tax collection system to:

(1) provide a unified system of collecting both the cigarette and other tobacco
taxes, regardless of category, size, or shape, that ensures the highest reasonable rates of
tax collection;

(2) discourage tax evasion; and

(3) help to prevent illegal sale of tobacco products, which may make these products
more accessible to youth.

(b) In the report, the commissioner shall:

(1) provide a detailed review of the present excise tax collection and compliance
system as it applies to both cigarettes and other tobacco products. This must include
an assessment of the levels of compliance for each category of products and the effect
of the stamping requirement on compliance for each category of products and the effect
of the stamping requirement on compliance rates for cigarettes relative to other tobacco
products. It also must identify any weaknesses in the system;

(2) survey the methods of collection and enforcement used by other states or nations,
including identifying and discussing emerging best practices that ensure tracking of both
cigarettes and other tobacco products and result in the highest rates of tax collection and
compliance. These best practices must consider high-technology alternatives, such as use
of bar codes, radio-frequency identification tags, or similar mechanisms for tracking
compliance;

(3) evaluate the adequacy and effectiveness of the existing penalties and other
sanctions for noncompliance;

(4) evaluate the adequacy of the resources allocated by the state to enforce the
tobacco tax and prevention laws; and

(5) make recommendations on implementation of a comprehensive tobacco tax
collection system for Minnesota that can be implemented by January 1, 2014, including:

(i) recommendations on the specific steps needed to institute and implement the new
system, including estimates of the state's costs of doing so and any additional personnel
requirements;

(ii) recommendations on methods to recover the cost of implementing the system
from the industry;

(iii) evaluation of the extent to which the proposed system is sufficiently flexible
and adaptable to adjust to modifications in the construction, packaging, formatting, and
marketing of tobacco products by the industry; and

(iv) recommendations to modify existing penalties or to impose new penalties or
other sanctions to ensure compliance with the system.

Subd. 2.

Due date.

The report required by subdivision 1 is due February 15, 2014.

Subd. 3.

Procedure.

The report required under this section must be made in the
manner provided under Minnesota Statutes, section 3.195. In addition, copies must be
provided to the chairs and ranking minority members of the legislative committees and
divisions with jurisdiction over taxation.

Subd. 4.

Appropriation.

(a) $100,000 is appropriated from the general fund to the
commissioner of revenue for fiscal year 2014 for the cost of preparing the report under
subdivision 1.

(b) The appropriation under this subdivision is a onetime appropriation and is not
included in the base budget.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 28. REPEALER.

Minnesota Statutes 2012, sections 16A.725; and 256.9658, are repealed.

EFFECTIVE DATE.

This section is effective July 1, 2013.

ARTICLE 6

INDIVIDUAL INCOME AND CORPORATE FRANCHISE TAXES

Section 1.

Minnesota Statutes 2012, section 116J.8737, subdivision 1, is amended to
read:


Subdivision 1.

Definitions.

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

(b) "Qualified small business" means a business that has been certified by the
commissioner under subdivision 2.

(c) "Qualified investor" means an investor who has been certified by the
commissioner under subdivision 3.

(d) "Qualified fund" means a pooled angel investment network fund that has been
certified by the commissioner under subdivision 4.

(e) "Qualified investment" means a cash investment in a qualified small business
of a minimum of:

(1) $10,000 in a calendar year by a qualified investor; or

(2) $30,000 in a calendar year by a qualified fund.

A qualified investment must be made in exchange for common stock, a partnership
or membership interest, preferred stock, debt with mandatory conversion to equity, or an
equivalent ownership interest as determined by the commissioner.

(f) "Family" means a family member within the meaning of the Internal Revenue
Code, section 267(c)(4).

(g) "Pass-through entity" means a corporation that for the applicable taxable year is
treated as an S corporation or a general partnership, limited partnership, limited liability
partnership, trust, or limited liability company and which for the applicable taxable year is
not taxed as a corporation under chapter 290.

(h) "Intern" means a student of an accredited institution of higher education, or a
former student who has graduated in the past six months from an accredited institution
of higher education, who is employed by a qualified small business in a nonpermanent
position for a duration of nine months or less that provides training and experience in the
primary business activity of the business.

(i) "Liquidation event" means a conversion of qualified investment for cash, cash
and other consideration, or any other form of equity or debt interest.

EFFECTIVE DATE.

This section is effective for qualified small businesses
certified after June 30, 2013.

Sec. 2.

Minnesota Statutes 2012, section 116J.8737, subdivision 2, is amended to read:


Subd. 2.

Certification of qualified small businesses.

(a) Businesses may apply
to the commissioner for certification as a qualified small business for a calendar year.
The application must be in the form and be made under the procedures specified by the
commissioner, accompanied by an application fee of $150. Application fees are deposited
in the small business investment tax credit administration account in the special revenue
fund. The application for certification for 2010 must be made available on the department's
Web site by August 1, 2010. Applications for subsequent years' certification must be made
available on the department's Web site by November 1 of the preceding year.

(b) Within 30 days of receiving an application for certification under this subdivision,
the commissioner must either certify the business as satisfying the conditions required of a
qualified small business, request additional information from the business, or reject the
application for certification. If the commissioner requests additional information from the
business, the commissioner must either certify the business or reject the application within
30 days of receiving the additional information. If the commissioner neither certifies the
business nor rejects the application within 30 days of receiving the original application or
within 30 days of receiving the additional information requested, whichever is later, then
the application is deemed rejected, and the commissioner must refund the $150 application
fee. A business that applies for certification and is rejected may reapply.

(c) To receive certification, a business must satisfy all of the following conditions:

(1) the business has its headquarters in Minnesota;

(2) at least 51 percent of the business's employees are employed in Minnesota, and
51 percent of the business's total payroll is paid or incurred in the state;

(3) the business is engaged in, or is committed to engage in, innovation in Minnesota
in one of the following as its primary business activity:

(i) using proprietary technology to add value to a product, process, or service in a
qualified high-technology field;

(ii) researching or developing a proprietary product, process, or service in a qualified
high-technology field; or

(iii) researching, developing, or producing a new proprietary technology for use in
the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;

(4) other than the activities specifically listed in clause (3), the business is not
engaged in real estate development, insurance, banking, lending, lobbying, political
consulting, information technology consulting, wholesale or retail trade, leisure,
hospitality, transportation, construction, ethanol production from corn, or professional
services provided by attorneys, accountants, business consultants, physicians, or health
care consultants;

(5) the business has fewer than 25 employees;

(6) the business must pay its employees annual wages of at least 175 percent of the
federal poverty guideline for the year for a family of four and must pay its interns annual
wages of at least 175 percent of the federal minimum wage used for federally covered
employers, except that this requirement must be reduced proportionately for employees
and interns who work less than full-time, and does not apply to an executive, officer, or
member of the board of the business, or to any employee who owns, controls, or holds
power to vote more than 20 percent of the outstanding securities of the business;

(7) the business has (i) not been in operation for more than ten years, or (ii) the
business has not been in operation for more than 20 years if the business is engaged
in the research, development, or production of medical devices or pharmaceuticals for
which United States Food and Drug Administration approval is required for use in the
treatment or diagnosis of a disease or condition
;

(8) the business has not previously received private equity investments of more
than $4,000,000; and

(9) the business is not an entity disqualified under section 80A.50, paragraph (b),
clause (3).; and

(10) the business has not issued securities that are traded on a public exchange.

(d) In applying the limit under paragraph (c), clause (5), the employees in all members
of the unitary business, as defined in section 290.17, subdivision 4, must be included.

(e) In order for a qualified investment in a business to be eligible for tax credits,:

(1) the business must have applied for and received certification for the calendar
year in which the investment was made prior to the date on which the qualified investment
was made.;

(2) the business must not have issued securities that are traded on a public exchange;

(3) the business must not issue securities that are traded on a public exchange within
180 days after the date on which the qualified investment was made; and

(4) the business must not have a liquidation event within 180 days after the date on
which the qualified investment was made.

(f) The commissioner must maintain a list of businesses certified under this
subdivision for the calendar year and make the list accessible to the public on the
department's Web site.

(g) For purposes of this subdivision, the following terms have the meanings given:

(1) "qualified high-technology field" includes aerospace, agricultural processing,
renewable energy, energy efficiency and conservation, environmental engineering, food
technology, cellulosic ethanol, information technology, materials science technology,
nanotechnology, telecommunications, biotechnology, medical device products,
pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar
fields; and

(2) "proprietary technology" means the technical innovations that are unique and
legally owned or licensed by a business and includes, without limitation, those innovations
that are patented, patent pending, a subject of trade secrets, or copyrighted.

EFFECTIVE DATE.

This section is effective for qualified small businesses
certified after June 30, 2013, except the amendments to paragraph (c), clause (7), are
effective the day following final enactment.

Sec. 3.

Minnesota Statutes 2012, section 116J.8737, subdivision 8, is amended to read:


Subd. 8.

Data privacy.

(a) Data contained in an application submitted to the
commissioner under subdivision 2, 3, or 4 are nonpublic data, or private data on
individuals, as defined in section 13.02, subdivision 9 or 12, except that the following
data items are public:

(1) the name, mailing address, telephone number, e-mail address, contact person's
name, and industry type
of a qualified small business upon approval of the application
and certification by the commissioner under subdivision 2;

(2) the name of a qualified investor upon approval of the application and certification
by the commissioner under subdivision 3;

(3) the name of a qualified fund upon approval of the application and certification
by the commissioner under subdivision 4;

(4) for credit certificates issued under subdivision 5, the amount of the credit
certificate issued, amount of the qualifying investment, the name of the qualifying investor
or qualifying fund that received the certificate, and the name of the qualifying small
business in which the qualifying investment was made;

(5) for credits revoked under subdivision 7, paragraph (a), the amount revoked and
the name of the qualified investor or qualified fund; and

(6) for credits revoked under subdivision 7, paragraphs (b) and (c), the amount
revoked and the name of the qualified small business.

(b) The following data, including data classified as nonpublic or private, must be
provided to the consultant for use in conducting the program evaluation under subdivision
10:

(1) the commissioner of employment and economic development shall provide data
contained in an application for certification received from a qualified small business,
qualified investor, or qualified fund, and any annual reporting information received on a
qualified small business, qualified investor, or qualified fund; and

(2) the commissioner of revenue shall provide data contained in any applicable tax
returns of a qualified small business, qualified investor, or qualified fund.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 4.

[136A.129] GREATER MINNESOTA INTERNSHIP PROGRAM.

Subdivision 1.

Definitions.

(a) For the purposes of this section, the terms defined in
this subdivision have the meanings given to them.

(b) "Eligible employer" means a taxpayer under section 290.01 with employees
located in greater Minnesota.

(c) "Eligible institution" means a Minnesota public postsecondary institution or a
Minnesota private, nonprofit, baccalaureate degree-granting college or university.

(d) "Eligible student" means a student enrolled in an eligible institution who has
completed one-half of the credits necessary for the respective degree or certification.

(e) "Greater Minnesota" means the area of the state outside of the counties of Anoka,
Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Scott, Sherburne, Washington, and
Wright.

Subd. 2.

Program established.

The Office of Higher Education shall administer
a greater Minnesota internship program through eligible institutions to provide credit at
the eligible institution for internships and tax credits for eligible employers who hire
interns for employment in greater Minnesota.

Subd. 3.

Program components.

(a) An intern must be an eligible student who has
been admitted to a major program that is related to the intern experience as determined
by the eligible institution.

(b) To participate in the program, an eligible institution must:

(1) enter into written agreements with eligible employers to provide internships that
are at least 12 weeks long and located in greater Minnesota;

(2) determine that the work experience of the internship is related to the eligible
student's course of study; and

(3) provide academic credit for the successful completion of the internship or ensure
that it fulfills requirements necessary to complete a vocational technical education program.

(c) To participate in the program, an eligible employer must enter into a written
agreement with an eligible institution specifying that the intern:

(1) would not have been hired without the tax credit described in subdivision 4;

(2) did not work for the employer in the same or a similar job prior to entering
the agreement;

(3) does not replace an existing employee;

(4) has not previously participated in the program;

(5) will be employed at a location in greater Minnesota;

(6) will be paid at least minimum wage for a minimum of 16 hours per week for a
period of at least 12 weeks; and

(7) will be supervised and evaluated by the employer.

(d) The written agreement between the eligible institution and the eligible employer
must certify a credit amount to the employer, not to exceed $2,000 per intern. The total
dollar amount of credits that an eligible institution certifies to eligible employers in a
calendar year may not exceed the amount of its allocation under subdivision 4.

(e) Participating eligible institutions and eligible employers must report annually to
the office. The report must include at least the following:

(1) the number of interns hired;

(2) the number of hours and weeks worked by interns; and

(3) the compensation paid to interns.

(f) An internship required to complete an academic program does not qualify for the
greater Minnesota internship program under this section.

Subd. 4.

Tax credit allowed.

An employer is entitled to a tax credit as provided in
section 290.06, subdivision 36. The total amount of credits allocated in a calendar year
must not exceed $2,000,000. The office shall determine relevant criteria to allocate the
tax credits including the geographic distribution of credits to work locations outside the
metropolitan area, and shall allocate credits to eligible institutions that meet the criteria on
a first come, first served basis. Any credits allocated to an institution but not used may be
reallocated to eligible institutions. The office shall allocate a portion of the administrative
fee under section 290.06, subdivision 36, to participating eligible institutions for their
administrative costs.

Subd. 5.

Reports to the legislature.

(a) By February 1, 2015, the office and the
Department of Revenue shall report to the legislature on the greater Minnesota internship
program. The report must include at least the following:

(1) the number and dollar amount of credits allowed;

(2) the number of interns employed under the program; and

(3) the cost of administering the program.

(b) By February 1, 2016, the office and the Department of Revenue shall report to the
legislature with an analysis of the effectiveness of the program in stimulating businesses
to hire interns and in assisting participating interns in finding permanent career positions.
This report must include the number of students who participated in the program who
were subsequently employed full-time by the employer.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2013.

Sec. 5.

Minnesota Statutes 2012, section 289A.08, subdivision 3, is amended to read:


Subd. 3.

Corporations.

(a) 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
.

(b) Members of a unitary business that are required to file a combined report on one
return must designate a member of the unitary business to be responsible for tax matters,
including the filing of returns, the payment of taxes, additions to tax, penalties, interest,
or any other payment, and for the receipt of refunds of taxes or interest paid in excess of
taxes lawfully due. The designated member must be a member of the unitary business that
is filing the single combined report and either:

(1) a corporation that is subject to the taxes imposed by chapter 290; or

(2) a corporation that is not subject to the taxes imposed by chapter 290:

(i) Such corporation consents by filing the return as a designated member under this
clause to remit taxes, penalties, interest, or additions to tax due from the members of the
unitary business subject to tax, and receive refunds or other payments on behalf of other
members of the unitary business. The member designated under this clause is a "taxpayer"
for the purposes of this chapter and chapter 270C, and is liable for any liability imposed
on the unitary business under this chapter and chapter 290.

(ii) If the state does not otherwise have the jurisdiction to tax the member designated
under this clause, consenting to be the designated member does not create the jurisdiction
to impose tax on the designated member, other than as described in item (i).

(iii) The member designated under this clause must apply for a business tax account
identification number.

(c) 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.

(d) 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.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 6.

Minnesota Statutes 2012, section 290.01, subdivision 19, as amended by Laws
2013, chapter 3, section 3, 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 April 14, 2011, shall be in
effect for taxable years beginning after December 31, 1996, and before January 1, 2012,
and for taxable years beginning after December 31, 2012. The Internal Revenue Code of
1986, as amended through January 3, 2013, is in effect for taxable years beginning after
December 31, 2011, and before January 1, 2013.

The provisions of sections 315 and 331 of the American Taxpayer Relief Act of
2012, Public Law 112-240, extension of increased expensing limitations and treatment
of certain real property as section 179 property and extension and modification of bonus
depreciation, are effective at the same time they become effective for federal purposes.

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.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 7.

Minnesota Statutes 2012, 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. No
deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
the qualifying child's vehicle to provide such transportation for a qualifying child. 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 or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code 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,
under the provisions of Public Law 109-1 and Public Law 111-126;

(7) 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;

(8) 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) (12), 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) (12), 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;

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

(10) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service, 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); or (ii) federally funded state active service as defined in section 190.05, subdivision
5b
, but "active service" excludes service performed in accordance with section 190.08,
subdivision 3
;

(11) to the extent included in federal taxable income, 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 under United States Code, title 10; or the
authority of the United Nations;

(12) 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;

(13) 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) (13), 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)
(13), 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;

(14) to the extent included in the federal taxable income of a nonresident of
Minnesota, 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 Servicemembers Civil Relief
Act, Public Law 108-189, section 101(2);

(15) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program;

(16) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19a, clause (16); and

(17) the amount of the net operating loss allowed under section 290.095, subdivision
11
, paragraph (c); and

(18) the amount of expenses not allowed for federal income tax purposes due
to claiming the railroad track maintenance credit under section 45G(a) of the Internal
Revenue Code
.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 8.

Minnesota Statutes 2012, 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 and 965 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) (8) the amount of percentage depletion deducted under sections 611 through
614 and 291 of the Internal Revenue Code;

(10) (9) 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). The deemed dividend
shall be reduced by the amount of the addition to income required by clauses (20), (21),
(22), and (23);

(12) (10) 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;

(13) the amount of net income excluded under section 114 of the Internal Revenue
Code;

(14) (11) 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 Division C, title III, section 303(b) of Public Law 110-343;

(15) (12) 80 percent of the depreciation deduction allowed under section
168(k)(1)(A) and (k)(4)(A) 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)(1)(A) and (k)(4)(A) 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)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess
of the depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A)
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)(1)(A) and (k)(4)(A) is allowed;

(16) (13) 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;

(17) (14) to the extent deducted in computing federal taxable income, the amount of
the deduction allowable under section 199 of the Internal Revenue Code;

(18) for taxable years beginning before January 1, 2013, the exclusion allowed under
section 139A of the Internal Revenue Code for federal subsidies for prescription drug plans;

(19) (15) the amount of expenses disallowed under section 290.10, subdivision 2; and

(20) an amount equal to the interest and intangible expenses, losses, and costs paid,
accrued, or incurred by any member of the taxpayer's unitary group to or for the benefit
of a corporation that is a member of the taxpayer's unitary business group that qualifies
as a foreign operating corporation. For purposes of this clause, intangible expenses and
costs include:

(i) expenses, losses, and costs for, or related to, the direct or indirect acquisition,
use, maintenance or management, ownership, sale, exchange, or any other disposition of
intangible property;

(ii) losses incurred, directly or indirectly, from factoring transactions or discounting
transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar expenses and costs.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible expenses or costs paid,
accrued, or incurred, directly or indirectly, to a foreign operating corporation with respect
to such item of income to the extent that the income to the foreign operating corporation
is income from sources without the United States as defined in subtitle A, chapter 1,
subchapter N, part 1, of the Internal Revenue Code;

(21) except as already included in the taxpayer's taxable income pursuant to clause
(20), any interest income and income generated from intangible property received or
accrued by a foreign operating corporation that is a member of the taxpayer's unitary
group. For purposes of this clause, income generated from intangible property includes:

(i) income related to the direct or indirect acquisition, use, maintenance or
management, ownership, sale, exchange, or any other disposition of intangible property;

(ii) income from factoring transactions or discounting transactions;

(iii) royalty, patent, technical, and copyright fees;

(iv) licensing fees; and

(v) other similar income.

For purposes of this clause, "intangible property" includes stocks, bonds, patents, patent
applications, trade names, trademarks, service marks, copyrights, mask works, trade
secrets, and similar types of intangible assets.

This clause does not apply to any item of interest or intangible income received or accrued
by a foreign operating corporation with respect to such item of income to the extent that
the income is income from sources without the United States as defined in subtitle A,
chapter 1, subchapter N, part 1, of the Internal Revenue Code;

(22) the dividends attributable to the income of a foreign operating corporation that
is a member of the taxpayer's unitary group in an amount that is equal to the dividends
paid deduction of a real estate investment trust under section 561(a) of the Internal
Revenue Code for amounts paid or accrued by the real estate investment trust to the
foreign operating corporation;

(23) the income of a foreign operating corporation that is a member of the taxpayer's
unitary group in an amount that is equal to gains derived from the sale of real or personal
property located in the United States;

(24) for taxable years beginning before January 1, 2010, the additional amount
allowed as a deduction for donation of computer technology and equipment under section
170(e)(6) of the Internal Revenue Code, to the extent deducted from taxable income; and

(25) (16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 9.

Minnesota Statutes 2012, 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 work opportunity 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 (9) (8), 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, unless the income resulting from such payments or
accruals is income from sources within the United States as defined in subtitle A, chapter
1, subchapter N, part 1, of the Internal Revenue Code;

(11) (10) 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) (11) the amount of disability 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) (12) 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) (13) 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) 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;

(16) (14) 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 Division C, title III, section 303(b) of Public Law 110-343;

(17) (15) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (15) (12), 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 (15) (12). The
resulting delayed depreciation cannot be less than zero;

(18) (16) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19c, clause (16) (13), an amount equal to one-fifth
of the amount of the addition; and

(19) (17) to the extent included in federal taxable income, discharge of indebtedness
income resulting from reacquisition of business indebtedness included in federal taxable
income under section 108(i) of the Internal Revenue Code. This subtraction applies only
to the extent that the income was included in net income in a prior year as a result of the
addition under section 290.01, subdivision 19c, clause (25). (16); and

(18) the amount of expenses not allowed for federal income tax purposes due
to claiming the railroad track maintenance credit under section 45G(a) of the Internal
Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 10.

Minnesota Statutes 2012, 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 $35,480, 5.35 percent;

(2) On all over $25,680 $35,480, but not over $102,030 $140,960, 7.05 percent;

(3) On all over $102,030 $140,960, but not over $250,000, 7.85 percent.;

(4) On all over $250,000, 9.85 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 $24,270, 5.35 percent;

(2) On all over $17,570 $24,270, but not over $57,710 $79,730, 7.05 percent;

(3) On all over $57,710 $79,730, but not over $150,000, 7.85 percent.;

(4) On all over $150,000, 9.85 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 $29,880, 5.35 percent;

(2) On all over $21,630 $29,880, but not over $86,910 $120,070, 7.05 percent;

(3) On all over $86,910 $120,070, but not over $200,000, 7.85 percent.;

(4) On all over $200,000, 9.85 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), (6), (7), (8), (9), (12),
(13), and (16) to (18), and reduced by the Minnesota assignable portion of the subtraction
for United States government interest under section 290.01, subdivision 19b, clause
(1), and the subtractions under section 290.01, subdivision 19b, clauses (8), (9), (13),
(14), (16), and (17), 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), (6), (7), (8), (9), (12), (13), and (16) to
(18), and reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1),
(8), (9), (13), (14), (16), and (17).

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 11.

Minnesota Statutes 2012, section 290.06, subdivision 2d, is amended to read:


Subd. 2d.

Inflation adjustment of brackets.

(a) For taxable years beginning after
December 31, 2000 2013, the minimum and maximum dollar amounts for each rate
bracket for which a tax is imposed in subdivision 2c shall be adjusted for inflation by the
percentage determined under paragraph (b). For the purpose of making the adjustment as
provided in this subdivision all of the rate brackets provided in subdivision 2c shall be the
rate brackets as they existed for taxable years beginning after December 31, 1999 2012,
and before January 1, 2001 2014. The rate applicable to any rate bracket must not be
changed. The dollar amounts setting forth the tax shall be adjusted to reflect the changes
in the rate brackets. The rate brackets as adjusted must be rounded to the nearest $10
amount. If the rate bracket ends in $5, it must be rounded up to the nearest $10 amount.

(b) The commissioner shall adjust the rate brackets and by the percentage determined
pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
section 1(f)(3)(B) the word "1999" "2012" shall be substituted for the word "1992." For
2001 2014, the commissioner shall then determine the percent change from the 12 months
ending on August 31, 1999 2012, to the 12 months ending on August 31, 2000 2013, and
in each subsequent year, from the 12 months ending on August 31, 1999 2012, to the 12
months ending on August 31 of the year preceding the taxable year. The determination of
the commissioner pursuant to this subdivision shall not be considered a "rule" and shall
not be subject to the Administrative Procedure Act contained in chapter 14.

No later than December 15 of each year, the commissioner shall announce the
specific percentage that will be used to adjust the tax rate brackets.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 12.

Minnesota Statutes 2012, section 290.06, is amended by adding a subdivision
to read:


Subd. 36.

Greater Minnesota internship credit.

(a) A taxpayer who is an eligible
employer may take a credit against the tax due under this chapter equal to the lesser of:

(1) 40 percent of the compensation paid to an intern qualifying under the program
established under section 136A.129, but not to exceed $2,000 per intern; or

(2) the amount certified to the taxpayer by an eligible institution out of the
institution's allocation of credits for the calendar year, as provided in section 136A.129.

(b) Credits allowed to a partnership, a limited liability company taxed as a
partnership, an S corporation, or multiple owners of property are passed through to the
partners, members, shareholders, or owners, respectively, pro rata to each partner, member,
shareholder, or owner based on their share of the entity's income for the taxable year.

(c) If the amount of credit which the taxpayer is eligible to receive under this
subdivision exceeds the taxpayer's tax liability under this chapter, the commissioner of
revenue shall refund the excess to the taxpayer.

(d) An amount necessary to pay claims for refund provided in this subdivision is
appropriated from the general fund to the commissioner of revenue.

(e) An amount equal to one percent of the total amount of the credits authorized
under section 136A.129, subdivision 4, for an administrative fee for the Office of Higher
Education and participating eligible institutions is appropriated from the general fund to
the commissioner of revenue, for a transfer to the Office of Higher Education.

(f) For purposes of this subdivision, the terms "eligible employer" and "eligible
institution" have the meanings given in section 136A.129.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2013.

Sec. 13.

Minnesota Statutes 2012, section 290.0677, subdivision 2, is amended to read:


Subd. 2.

Definitions.

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

(b) "Designated area" means a:

(1) combat zone designated by Executive Order from the President of the United
States;

(2) qualified hazardous duty area, designated in Public Law; or

(3) location certified by the U. S. Department of Defense as eligible for combat zone
tax benefits due to the location's direct support of military operations.

(c) "Active military service" means active duty service in any of the United States
armed forces, the National Guard, or reserves.

(d) "Qualified individual" means an individual who has:

(1) either (i) met one of the following criteria:

(i) has served at least 20 years in the military or;

(ii) has a service-connected disability rating of 100 percent for a total and permanent
disability; or

(iii) has been determined by the military to be eligible for compensation from a
pension or other retirement pay from the federal government for service in the military,
as computed under United States Code, title 10, sections 1401 to 1414, 1447 to 1455,
or 12733;
and

(2) separated from military service before the end of the taxable year.

(e) "Adjusted gross income" has the meaning given in section 61 of the Internal
Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 14.

Minnesota Statutes 2012, section 290.068, subdivision 3, is amended to read:


Subd. 3.

Limitation; carryover.

(a)(1) The credit for a taxable year beginning
before January 1, 2010, and after December 31, 2012, shall not exceed the liability for tax.
"Liability for tax" for purposes of this section means the sum of the tax imposed under
section 290.06, subdivision subdivisions 1 and 2c, for the taxable year reduced by the sum
of the nonrefundable credits allowed under this chapter, on all of the entities required to
be included on the combined report of the unitary business. If the amount of the credit
allowed exceeds the liability for tax of the taxpayer, but is allowed as a result of the
liability for tax of other members of the unitary group for the taxable year, the taxpayer
must allocate the excess as a research credit to another member of the unitary group
.

(2) In the case of a corporation which is a partner in a partnership, the credit allowed
for the taxable year shall not exceed the lesser of the amount determined under clause (1)
for the taxable year or an amount (separately computed with respect to the corporation's
interest in the trade or business or entity) equal to the amount of tax attributable to that
portion of taxable income which is allocable or apportionable to the corporation's interest
in the trade or business or entity.

(b) If the amount of the credit determined under this section for any taxable year
exceeds the limitation under clause (a) including amounts allocated to other members
of the unitary group
, the excess shall be a research credit carryover to each of the 15
succeeding taxable years. The entire amount of the excess unused credit for the taxable
year shall 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 clause shall not exceed the taxpayer's
liability for tax less the research credit for the taxable year.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 15.

Minnesota Statutes 2012, section 290.068, subdivision 6a, is amended to read:


Subd. 6a.

Credit to be refundable.

If the amount of credit allowed in this section
for qualified research expenses incurred in taxable years beginning after December 31,
2009, and before January 1, 2013, exceeds the taxpayer's tax liability under this chapter,
the commissioner shall refund the excess amount. The credit allowed for qualified research
expenses incurred in taxable years beginning after December 31, 2009, and before January
1, 2013,
must be used before any research credit earned under subdivision 3.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 16.

Minnesota Statutes 2012, section 290.0681, subdivision 1, is amended to read:


Subdivision 1.

Definitions.

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

(b) "Account" means the historic credit administration account in the special
revenue fund.

(c) "Office" means the State Historic Preservation Office of the Minnesota Historical
Society.

(d) "Project" means rehabilitation of a certified historic structure, as defined in
section 47(c)(3)(A) of the Internal Revenue Code, that is located in Minnesota and is
allowed a federal credit under section 47(a)(2) of the Internal Revenue Code.

(e) "Society" means the Minnesota Historical Society.

(f) "Federal credit" means the credit allowed under section 47(a)(2) of the Internal
Revenue Code.

(g) "Placed in service" has the meaning used in section 47 of the Internal Revenue
Code.

(h) "Qualified rehabilitation expenditures" has the meaning given in section 47 of
the Internal Revenue Code.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 17.

Minnesota Statutes 2012, section 290.0681, subdivision 3, is amended to read:


Subd. 3.

Applications; allocations.

(a) To qualify for a credit or grant under this
section, the developer of a project must apply to the office before the rehabilitation begins.
The application must contain the information and be in the form prescribed by the office.
The office may collect a fee for application of up to $5,000 0.5 percent of qualified
rehabilitation expenditures, up to $40,000
, based on estimated qualified rehabilitation
expenses expenditures, to offset costs associated with personnel and administrative
expenses related to administering the credit and preparing the economic impact report
in subdivision 9. Application fees are deposited in the account. The application must
indicate if the application is for a credit or a grant in lieu of the credit or a combination of
the two and designate the taxpayer qualifying for the credit or the recipient of the grant.

(b) Upon approving an application for credit, the office shall issue allocation
certificates that:

(1) verify eligibility for the credit or grant;

(2) state the amount of credit or grant anticipated with the project, with the credit
amount equal to 100 percent and the grant amount equal to 90 percent of the federal
credit anticipated in the application;

(3) state that the credit or grant allowed may increase or decrease if the federal
credit the project receives at the time it is placed in service is different than the amount
anticipated at the time the allocation certificate is issued; and

(4) state the fiscal year in which the credit or grant is allocated, and that the taxpayer
or grant recipient is entitled to receive the credit or grant at the time the project is placed
in service, provided that date is within three calendar years following the issuance of
the allocation certificate.

(c) The office, in consultation with the commissioner of revenue, shall determine
if the project is eligible for a credit or a grant under this section and must notify the
developer in writing of its determination
. Eligibility for the credit is subject to review
and audit by the commissioner of revenue.

(d) The federal credit recapture and repayment requirements under section 50 of the
Internal Revenue Code do not apply to the credit allowed under this section.

(e) Any decision of the office under paragraph (c) may be challenged as a contested
case under chapter 14. The contested case proceeding must be initiated within 45 days of
the date of written notification by the office.

EFFECTIVE DATE.

This section is effective the day following final enactment
and the change in paragraph (a) applies to applications first received on or after the day
following final enactment.

Sec. 18.

Minnesota Statutes 2012, section 290.0681, subdivision 4, is amended to read:


Subd. 4.

Credit certificates; grants.

(a)(1) The developer of a project for which the
office has issued an allocation certificate must notify the office when the project is placed
in service. Upon verifying that the project has been placed in service, and was allowed a
federal credit, the office must issue a credit certificate to the taxpayer designated in the
application or must issue a grant to the recipient designated in the application. The credit
certificate must state the amount of the credit.

(2) The credit amount equals the federal credit allowed for the project.

(3) The grant amount equals 90 percent of the federal credit allowed for the project.

(b) The recipient of a credit certificate may assign the certificate to another taxpayer,
which is then allowed the credit under this section or section 297I.20, subdivision 3. An
assignment is not valid unless the assignee notifies the commissioner within 30 days of the
date that the assignment is made.
The commissioner shall prescribe the forms necessary
for notifying the commissioner of the assignment of a credit certificate and for claiming
a credit by assignment.

(c) Credits passed through to partners, members, shareholders, or owners pursuant to
subdivision 5 are not an assignment of a credit certificate under this subdivision.

(d) A grant agreement between the office and the recipient of a grant may allow the
grant to be issued to another individual or entity.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 19.

Minnesota Statutes 2012, section 290.0681, subdivision 5, is amended to read:


Subd. 5.

Partnerships; multiple owners.

Credits granted to a partnership, a limited
liability company taxed as a partnership, S corporation, or multiple owners of property
are passed through to the partners, members, shareholders, or owners, respectively, pro
rata to each partner, member, shareholder, or owner based on their share of the entity's
assets or as specially allocated in their organizational documents or any other executed
agreement
, as of the last day of the taxable year.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 20.

Minnesota Statutes 2012, section 290.0681, subdivision 10, is amended to read:


Subd. 10.

Sunset.

This section expires after fiscal year 2015 2021, except that
the office's authority to issue credit certificates under subdivision 4 based on allocation
certificates that were issued before fiscal year 2016 2022 remains in effect through 2018
2024, and the reporting requirements in subdivision 9 remain in effect through the year
following the year in which all allocation certificates have either been canceled or resulted
in issuance of credit certificates, or 2019 2025, whichever is earlier.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 21.

Minnesota Statutes 2012, section 290.091, subdivision 1, is amended to read:


Subdivision 1.

Imposition of tax.

In addition to all other taxes imposed by this
chapter a tax is imposed on individuals, estates, and trusts equal to the excess (if any) of

(a) an amount equal to 6.4 6.75 percent of alternative minimum taxable income after
subtracting the exemption amount, over

(b) the regular tax for the taxable year.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 22.

Minnesota Statutes 2012, 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;

(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)
to (9), (12), (13), and (16) to (18);

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;

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b
, clauses (6), (8) to (14), and (16); and

(5) the amount of the net operating loss allowed under section 290.095, subdivision
11
, paragraph (c).

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) "Net minimum tax" means the minimum tax imposed by this section.

(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) "Tentative minimum tax" equals 6.4 6.75 percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 23.

Minnesota Statutes 2012, section 290.091, subdivision 6, is amended to read:


Subd. 6.

Credit for prior years' liability.

(a) A credit is allowed against the tax
imposed by this chapter on individuals, trusts, and estates equal to the minimum tax
credit for the taxable year. The minimum tax credit equals the adjusted net minimum
tax for taxable years beginning after December 31, 1988, reduced by the minimum tax
credits allowed in a prior taxable year. The credit may not exceed the excess (if any) for
the taxable year of

(1) the regular tax, over

(2) the greater of (i) the tentative alternative minimum tax, or (ii) zero.

(b) The adjusted net minimum tax for a taxable year equals the lesser of the net
minimum tax or the excess (if any) of

(1) the tentative minimum tax, over

(2) 6.4 6.75 percent of the sum of

(i) adjusted gross income as defined in section 62 of the Internal Revenue Code,

(ii) interest income as defined in section 290.01, subdivision 19a, clause (1),

(iii) interest on specified private activity bonds, as defined in section 57(a)(5) of the
Internal Revenue Code, to the extent not included under clause (ii),

(iv) depletion as defined in section 57(a)(1), determined without regard to the last
sentence of paragraph (1), of the Internal Revenue Code, less

(v) the deductions allowed in computing alternative minimum taxable income
provided in subdivision 2, paragraph (a), clause (2) of the first series of clauses and clauses
(1), (2), and (3) of the second series of clauses, and

(vi) the exemption amount determined under subdivision 3.

In the case of an individual who is not a Minnesota resident for the entire year,
adjusted net minimum tax must be multiplied by the fraction defined in section 290.06,
subdivision 2c
, paragraph (e). In the case of a trust or estate, adjusted net minimum tax
must be multiplied by the fraction defined under subdivision 4, paragraph (b).

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 24.

Minnesota Statutes 2012, section 290.0921, subdivision 3, is amended to read:


Subd. 3.

Alternative minimum taxable income.

"Alternative minimum taxable
income" is Minnesota net income as defined in section 290.01, subdivision 19, and
includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
Minnesota tax return, the minimum tax must be computed on a separate company basis.
If a corporation is part of a tax group filing a unitary return, the minimum tax must be
computed on a unitary basis. The following adjustments must be made.

(1) For purposes of the depreciation adjustments under section 56(a)(1) and
56(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
income tax purposes, including any modification made in a taxable year under section
290.01, subdivision 19e, or Minnesota Statutes 1986, section 290.09, subdivision 7,
paragraph (c).

For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986,
section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation
allowance in the first taxable year after December 31, 2000.

(2) The portion of the depreciation deduction allowed for federal income tax
purposes under section 168(k) of the Internal Revenue Code that is required as an addition
under section 290.01, subdivision 19c, clause (15) (12), is disallowed in determining
alternative minimum taxable income.

(3) The subtraction for depreciation allowed under section 290.01, subdivision
19d
, clause (17) (15), is allowed as a depreciation deduction in determining alternative
minimum taxable income.

(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
of the Internal Revenue Code does not apply.

(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
Revenue Code does not apply.

(6) The special rule for dividends from section 936 companies under section
56(g)(4)(C)(iii) does not apply.

(7) (6) The tax preference for depletion under section 57(a)(1) of the Internal
Revenue Code does not apply.

(8) (7) The tax preference for intangible drilling costs under section 57(a)(2) of the
Internal Revenue Code must be calculated without regard to subparagraph (E) and the
subtraction under section 290.01, subdivision 19d, clause (4).

(9) (8) The tax preference for tax exempt interest under section 57(a)(5) of the
Internal Revenue Code does not apply.

(10) (9) The tax preference for charitable contributions of appreciated property
under section 57(a)(6) of the Internal Revenue Code does not apply.

(11) (10) For purposes of calculating the tax preference for accelerated depreciation
or amortization on certain property placed in service before January 1, 1987, under section
57(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
deduction allowed under section 290.01, subdivision 19e.

For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, not previously deducted is a
depreciation or amortization allowance in the first taxable year after December 31, 2004.

(12) (11) For purposes of calculating the adjustment for adjusted current earnings
in section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
minimum taxable income as defined in this subdivision, determined without regard to the
adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.

(13) (12) For purposes of determining the amount of adjusted current earnings under
section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), or (ii) the
amount of refunds of income, excise, or franchise taxes subtracted as provided in section
290.01, subdivision 19d, clause (9), or (iii) the amount of royalties, fees or other like
income subtracted as provided in section 290.01, subdivision 19d, clause (10)
.

(14) (13) Alternative minimum taxable income excludes the income from operating
in a job opportunity building zone as provided under section 469.317.

(15) (14) Alternative minimum taxable income excludes the income from operating
in a biotechnology and health sciences industry zone as provided under section 469.337.

Items of tax preference must not be reduced below zero as a result of the
modifications in this subdivision.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 25.

Minnesota Statutes 2012, section 290.0922, subdivision 1, is amended to read:


Subdivision 1.

Imposition.

(a) In addition to the tax imposed by this chapter without
regard to this section, the franchise tax imposed on a corporation required to file under
section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation
under section 290.9725 for the taxable year includes a tax equal to the following amounts:

If the sum of the corporation's Minnesota
property, payrolls, and sales or receipts is:
the tax equals:
less than
$
500,000
$
0
$
500,000
to
$
999,999
$
100
$
1,000,000
to
$
4,999,999
$
300
$
5,000,000
to
$
9,999,999
$
1,000
$
10,000,000
to
$
19,999,999
$
2,000
$
20,000,000
or
more
$
5,000
less than
$
930,000
$
0
$
930,000
to
$
1,869,999
$
190
$
1,870,000
to
$
9,339,999
$
560
$
9,340,000
to
$
18,679,999
$
1,870
$
18,680,000
to
$
37,359,999
$
3,740
$
37,360,000
or
more
$
9,340

(b) A tax is imposed for each taxable year on a corporation required to file a return
under section 289A.12, subdivision 3, that is treated as an "S" corporation under section
290.9725 and on a partnership required to file a return under section 289A.12, subdivision
3
, other than a partnership that derives over 80 percent of its income from farming. The
tax imposed under this paragraph is due on or before the due date of the return for the
taxpayer due under section 289A.18, subdivision 1. The commissioner shall prescribe
the return to be used for payment of this tax. The tax under this paragraph is equal to
the following amounts:

If the sum of the S corporation's
or partnership's Minnesota
property, payrolls, and sales or
receipts is:
the tax equals:
less than
$
500,000
$
0
$
500,000
to
$
999,999
$
100
$
1,000,000
to
$
4,999,999
$
300
$
5,000,000
to
$
9,999,999
$
1,000
$
10,000,000
to
$
19,999,999
$
2,000
$
20,000,000
or
more
$
5,000
less than
$
930,000
$
0
$
930,000
to
$
1,869,999
$
190
$
1,870,000
to
$
9,339,999
$
560
$
9,340,000
to
$
18,679,999
$
1,870
$
18,680,000
to
$
37,359,999
$
3,740
$
37,360,000
or
more
$
9,340

(c) The commissioner shall adjust the dollar amounts of both the tax and the property,
payrolls, and sales or receipts thresholds in paragraphs (a) and (b) by the percentage
determined pursuant to the provisions of section 1(f) of the Internal Revenue Code, except
that in section 1(f)(3)(B) the word "2012" must be substituted for the word "1992." For
2014, the commissioner shall determine the percentage change from the 12 months ending
on August 31, 2012, to the 12 months ending on August 31, 2013, and in each subsequent
year, from the 12 months ending on August 31, 2012, to the 12 months ending on August
31 of the year preceding the taxable year. The determination of the commissioner pursuant
to this subdivision is not a "rule" subject to the Administrative Procedure Act contained in
chapter 14. The tax amounts as adjusted must be rounded to the nearest $10 amount and
the threshold amounts must be adjusted to the nearest $10,000 amount. For tax amounts
that end in $5, the amount is rounded up to the nearest $10 amount and for the threshold
amounts that end in $5,000, the amount is rounded up to the nearest $10,000.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 26.

Minnesota Statutes 2012, section 290.095, subdivision 2, is amended to read:


Subd. 2.

Defined and limited.

(a) The term "net operating loss" as used in this
section shall mean a net operating loss as defined in section 172(c) of the Internal Revenue
Code, with the modifications specified in subdivision 4. The deductions provided in
section 290.21 and the modification provided in section 290.01, subdivision 19d, clause
(10),
cannot be used in the determination of a net operating loss.

(b) The term "net operating loss deduction" as used in this section means the
aggregate of the net operating loss carryovers to the taxable year, computed in accordance
with subdivision 3. The provisions of section 172(b) of the Internal Revenue Code relating
to the carryback of net operating losses, do not apply.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 27.

Minnesota Statutes 2012, section 290.10, subdivision 1, is amended to read:


Subdivision 1.

Expenses, interest, and taxes.

Except as provided in section 290.17,
subdivision 4
, paragraph (i),
In computing the net income of a taxpayer no deduction shall
in any case be allowed for expenses, interest and taxes connected with or allocable against
the production or receipt of all income not included in the measure of the tax imposed by
this chapter, except that for corporations engaged in the business of mining or producing
iron ore, the mining of which is subject to the occupation tax imposed by section 298.01,
subdivision 4
, this shall not prevent the deduction of expenses and other items to the extent
that the expenses and other items are allowable under this chapter and are not deductible,
capitalizable, retainable in basis, or taken into account by allowance or otherwise in
computing the occupation tax and do not exceed the amounts taken for federal income tax
purposes for that year. Occupation taxes imposed under chapter 298, royalty taxes imposed
under chapter 299, or depletion expenses may not be deducted under this subdivision.

Sec. 28.

Minnesota Statutes 2012, section 290.17, subdivision 4, is amended to read:


Subd. 4.

Unitary business principle.

(a) If a trade or business conducted wholly
within this state or partly within and partly without this state is part of a unitary business,
the entire income of the unitary business is subject to apportionment pursuant to section
290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
business is considered to be derived from any particular source and none may be allocated
to a particular place except as provided by the applicable apportionment formula. The
provisions of this subdivision do not apply to business income subject to subdivision 5,
income of an insurance company, or income of an investment company determined under
section 290.36.

(b) The term "unitary business" means business activities or operations which
result in a flow of value between them. The term may be applied within a single legal
entity or between multiple entities and without regard to whether each entity is a sole
proprietorship, a corporation, a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use,
evidenced by centralized management or executive force, centralized purchasing,
advertising, accounting, or other controlled interaction, but the absence of these
centralized activities will not necessarily evidence a nonunitary business. Unity is also
presumed when business activities or operations are of mutual benefit, dependent upon or
contributory to one another, either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business
entity that carries on business activity outside the state different in kind from that
conducted within this state, and the other business is conducted entirely outside the state, it
is presumed that the two business operations are unitary in nature, interrelated, connected,
and interdependent unless it can be shown to the contrary.

(e) Unity of ownership is not deemed to does not exist when a corporation is two or
more corporations are
involved unless that corporation is a member of a group of two or
more business entities and
more than 50 percent of the voting stock of each member of
the group
corporation is directly or indirectly owned by a common owner or by common
owners, either corporate or noncorporate, or by one or more of the member corporations
of the group. For this purpose, the term "voting stock" shall include membership interests
of mutual insurance holding companies formed under section 66A.40.

(f) The net income and apportionment factors under section 290.191 or 290.20 of
foreign corporations and other foreign entities which are part of a unitary business shall
not be included in the net income or the apportionment factors of the unitary business;
except that the income and apportionment factors of a foreign entity, other than an entity
treated as a C corporation for federal income tax purposes, that are included in the federal
taxable income, as defined in section 63 of the Internal Revenue Code as amended through
the date named in section 290.01, subdivision 19, of a domestic corporation, domestic
entity, or individual must be included in determining net income and the factors to be used
in the apportionment of net income pursuant to section 290.191 or 290.20
. A foreign
corporation or other foreign entity which is not included on a combined report and which
is
required to file a return under this chapter shall file on a separate return basis. The net
income and apportionment factors under section 290.191 or 290.20 of foreign operating
corporations shall not be included in the net income or the apportionment factors of the
unitary business except as provided in paragraph (g).

(g) The adjusted net income of a foreign operating corporation shall be deemed to
be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
proportion to each shareholder's ownership, with which such corporation is engaged in
a unitary business. Such deemed dividend shall be treated as a dividend under section
290.21, subdivision 4.

Dividends actually paid by a foreign operating corporation to a corporate shareholder
which is a member of the same unitary business as the foreign operating corporation shall
be eliminated from the net income of the unitary business in preparing a combined report
for the unitary business. The adjusted net income of a foreign operating corporation
shall be its net income adjusted as follows:

(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
Rico, or a United States possession or political subdivision of any of the foregoing shall
be a deduction; and

(2) the subtraction from federal taxable income for payments received from foreign
corporations or foreign operating corporations under section 290.01, subdivision 19d,
clause (10), shall not be allowed.

If a foreign operating corporation incurs a net loss, neither income nor deduction from
that corporation shall be included in determining the net income of the unitary business.

(h) (g) For purposes of determining the net income of a unitary business and the
factors to be used in the apportionment of net income pursuant to section 290.191 or
290.20, there must be included only the income and apportionment factors of domestic
corporations or other domestic entities other than foreign operating corporations that are
determined to be part of the unitary business pursuant to this subdivision, notwithstanding
that foreign corporations or other foreign entities might be included in the unitary
business; except that the income and apportionment factors of a foreign entity, other than
an entity treated as a C corporation for federal income tax purposes, that is included in the
federal taxable income, as defined in section 63 of the Internal Revenue Code as amended
through the date named in section 290.01, subdivision 19, of a domestic corporation,
domestic entity, or individual must be included in determining net income and the factors
to be used in the apportionment of net income pursuant to section 290.191 or 290.20
.

(i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter
that are connected with or allocable against dividends, deemed dividends described
in paragraph (g), or royalties, fees, or other like income described in section 290.01,
subdivision 19d
, clause (10), shall not be disallowed.

(j) (h) Each corporation or other entity, except a sole proprietorship, that is part of
a unitary business must file combined reports as the commissioner determines. On the
reports, all intercompany transactions between entities included pursuant to paragraph (h)
(g) must be eliminated and the entire net income of the unitary business determined in
accordance with this subdivision is apportioned among the entities by using each entity's
Minnesota factors for apportionment purposes in the numerators of the apportionment
formula and the total factors for apportionment purposes of all entities included pursuant
to paragraph (h) (g) in the denominators of the apportionment formula. Except as
otherwise provided by paragraph (f), all sales of the unitary business made within this
state pursuant to section 290.191 or 290.20 must be included on the combined report of a
corporation or other entity that is a member of the unitary business and is subject to the
jurisdiction of this state to impose tax under this chapter.

(k) (i) If a corporation has been divested from a unitary business and is included in a
combined report for a fractional part of the common accounting period of the combined
report:

(1) its income includable in the combined report is its income incurred for that part
of the year determined by proration or separate accounting; and

(2) its sales, property, and payroll included in the apportionment formula must
be prorated or accounted for separately.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 29.

Minnesota Statutes 2012, section 290.191, subdivision 5, is amended to read:


Subd. 5.

Determination of sales factor.

For purposes of this section, the following
rules apply in determining the sales factor.

(a) The sales factor includes all sales, gross earnings, or receipts received in the
ordinary course of the business, except that the following types of income are not included
in the sales factor:

(1) interest;

(2) dividends;

(3) sales of capital assets as defined in section 1221 of the Internal Revenue Code;

(4) sales of property used in the trade or business, except sales of leased property of
a type which is regularly sold as well as leased; and

(5) sales of debt instruments as defined in section 1275(a)(1) of the Internal Revenue
Code or sales of stock; and.

(6) royalties, fees, or other like income of a type which qualify for a subtraction from
federal taxable income under section 290.01, subdivision 19d, clause (10).

(b) Sales of tangible personal property are made within this state if the property is
received by a purchaser at a point within this state, and the taxpayer is taxable in this state,
regardless of the f.o.b. point, other conditions of the sale, or the ultimate destination
of the property.

(c) Tangible personal property delivered to a common or contract carrier or foreign
vessel for delivery to a purchaser in another state or nation is a sale in that state or nation,
regardless of f.o.b. point or other conditions of the sale.

(d) Notwithstanding paragraphs (b) and (c), when intoxicating liquor, wine,
fermented malt beverages, cigarettes, or tobacco products are sold to a purchaser who is
licensed by a state or political subdivision to resell this property only within the state of
ultimate destination, the sale is made in that state.

(e) Sales made by or through a corporation that is qualified as a domestic
international sales corporation under section 992 of the Internal Revenue Code are not
considered to have been made within this state.

(f) Sales, rents, royalties, and other income in connection with real property is
attributed to the state in which the property is located.

(g) Receipts from the lease or rental of tangible personal property, including finance
leases and true leases, must be attributed to this state if the property is located in this
state and to other states if the property is not located in this state. Receipts from the
lease or rental of moving property including, but not limited to, motor vehicles, rolling
stock, aircraft, vessels, or mobile equipment are included in the numerator of the receipts
factor to the extent that the property is used in this state. The extent of the use of moving
property is determined as follows:

(1) A motor vehicle is used wholly in the state in which it is registered.

(2) The extent that rolling stock is used in this state is determined by multiplying
the receipts from the lease or rental of the rolling stock by a fraction, the numerator of
which is the miles traveled within this state by the leased or rented rolling stock and the
denominator of which is the total miles traveled by the leased or rented rolling stock.

(3) The extent that an aircraft is used in this state is determined by multiplying the
receipts from the lease or rental of the aircraft by a fraction, the numerator of which is
the number of landings of the aircraft in this state and the denominator of which is the
total number of landings of the aircraft.

(4) The extent that a vessel, mobile equipment, or other mobile property is used in
the state is determined by multiplying the receipts from the lease or rental of the property
by a fraction, the numerator of which is the number of days during the taxable year the
property was in this state and the denominator of which is the total days in the taxable year.

(h) Royalties and other income not described in paragraph (a), clause (6), received
for the use of or for the privilege of using intangible property, including patents,
know-how, formulas, designs, processes, patterns, copyrights, trade names, service names,
franchises, licenses, contracts, customer lists, or similar items, must be attributed to the
state in which the property is used by the purchaser. If the property is used in more
than one state, the royalties or other income must be apportioned to this state pro rata
according to the portion of use in this state. If the portion of use in this state cannot be
determined, the royalties or other income must be excluded from both the numerator
and the denominator. Intangible property is used in this state if the purchaser uses the
intangible property or the rights therein in the regular course of its business operations in
this state, regardless of the location of the purchaser's customers.

(i) Sales of intangible property are made within the state in which the property is
used by the purchaser. If the property is used in more than one state, the sales must be
apportioned to this state pro rata according to the portion of use in this state. If the
portion of use in this state cannot be determined, the sale must be excluded from both the
numerator and the denominator of the sales factor. Intangible property is used in this
state if the purchaser used the intangible property in the regular course of its business
operations in this state.

(j) Receipts from the performance of services must be attributed to the state where
the services are received. For the purposes of this section, receipts from the performance
of services provided to a corporation, partnership, or trust may only be attributed to a state
where it has a fixed place of doing business. If the state where the services are received is
not readily determinable or is a state where the corporation, partnership, or trust receiving
the service does not have a fixed place of doing business, the services shall be deemed
to be received at the location of the office of the customer from which the services were
ordered in the regular course of the customer's trade or business. If the ordering office
cannot be determined, the services shall be deemed to be received at the office of the
customer to which the services are billed.

(k) For the purposes of this subdivision and subdivision 6, paragraph (l), receipts
from management, distribution, or administrative services performed by a corporation
or trust for a fund of a corporation or trust regulated under United States Code, title 15,
sections 80a-1 through 80a-64, must be attributed to the state where the shareholder of
the fund resides. Under this paragraph, receipts for services attributed to shareholders are
determined on the basis of the ratio of: (1) the average of the outstanding shares in the
fund owned by shareholders residing within Minnesota at the beginning and end of each
year; and (2) the average of the total number of outstanding shares in the fund at the
beginning and end of each year. Residence of the shareholder, in the case of an individual,
is determined by the mailing address furnished by the shareholder to the fund. Residence
of the shareholder, when the shares are held by an insurance company as a depositor for
the insurance company policyholders, is the mailing address of the policyholders. In
the case of an insurance company holding the shares as a depositor for the insurance
company policyholders, if the mailing address of the policyholders cannot be determined
by the taxpayer, the receipts must be excluded from both the numerator and denominator.
Residence of other shareholders is the mailing address of the shareholder.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 30.

Minnesota Statutes 2012, section 290.21, subdivision 4, is amended to read:


Subd. 4.

Dividends received from another corporation.

(a)(1) Eighty percent
of dividends received by a corporation during the taxable year from another corporation,
in which the recipient owns 20 percent or more of the stock, by vote and value, not
including stock described in section 1504(a)(4) of the Internal Revenue Code when the
corporate stock with respect to which dividends are paid does not constitute the stock in
trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not
constitute property held by the taxpayer primarily for sale to customers in the ordinary
course of the taxpayer's trade or business, or when the trade or business of the taxpayer
does not consist principally of the holding of the stocks and the collection of the income
and gains therefrom; and

(2)(i) the remaining 20 percent of dividends if the dividends received are the stock in
an affiliated company transferred in an overall plan of reorganization and the dividend
is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
amended through December 31, 1989;

(ii) the remaining 20 percent of dividends if the dividends are received from a
corporation which is subject to tax under section 290.36 and which is a member of an
affiliated group of corporations as defined by the Internal Revenue Code and the dividend
is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
amended through December 31, 1989, or is deducted under an election under section
243(b) of the Internal Revenue Code; or

(iii) the remaining 20 percent of the dividends if the dividends are received from a
property and casualty insurer as defined under section 60A.60, subdivision 8, which is a
member of an affiliated group of corporations as defined by the Internal Revenue Code
and either: (A) the dividend is eliminated in consolidation under Treasury Regulation
1.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted
under an election under section 243(b) of the Internal Revenue Code.

(b) Seventy percent of dividends received by a corporation during the taxable year
from another corporation in which the recipient owns less than 20 percent of the stock,
by vote or value, not including stock described in section 1504(a)(4) of the Internal
Revenue Code when the corporate stock with respect to which dividends are paid does not
constitute the stock in trade of the taxpayer, or does not constitute property held by the
taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or
business, or when the trade or business of the taxpayer does not consist principally of the
holding of the stocks and the collection of income and gain therefrom.

(c) The dividend deduction provided in this subdivision shall be allowed only with
respect to dividends that are included in a corporation's Minnesota taxable net income
for the taxable year.

The dividend deduction provided in this subdivision does not apply to a dividend
from a corporation which, for the taxable year of the corporation in which the distribution
is made or for the next preceding taxable year of the corporation, is a corporation exempt
from tax under section 501 of the Internal Revenue Code.

The dividend deduction provided in this subdivision does not apply to a dividend
received from a real estate investment trust as defined in section 856 of the Internal
Revenue Code.

The dividend deduction provided in this subdivision applies to the amount of
regulated investment company dividends only to the extent determined under section
854(b) of the Internal Revenue Code.

The dividend deduction provided in this subdivision shall not be allowed with
respect to any dividend for which a deduction is not allowed under the provisions of
section 246(c) of the Internal Revenue Code.

(d) If dividends received by a corporation that does not have nexus with Minnesota
under the provisions of Public Law 86-272 are included as income on the return of
an affiliated corporation permitted or required to file a combined report under section
290.17, subdivision 4, or 290.34, subdivision 2, then for purposes of this subdivision the
determination as to whether the trade or business of the corporation consists principally
of the holding of stocks and the collection of income and gains therefrom shall be made
with reference to the trade or business of the affiliated corporation having a nexus with
Minnesota.

(e) The deduction provided by this subdivision does not apply if the dividends are
paid by a FSC as defined in section 922 of the Internal Revenue Code.

(f) If one or more of the members of the unitary group whose income is included on
the combined report received a dividend, the deduction under this subdivision for each
member of the unitary business required to file a return under this chapter is the product
of: (1) 100 percent of the dividends received by members of the group; (2) the percentage
allowed pursuant to paragraph (a) or (b); and (3) the percentage of the taxpayer's business
income apportionable to this state for the taxable year under section 290.191 or 290.20.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 31.

Minnesota Statutes 2012, section 298.01, subdivision 3b, is amended to read:


Subd. 3b.

Deductions.

(a) For purposes of determining taxable income under
subdivision 3, the deductions from gross income include only those expenses necessary
to convert raw ores to marketable quality. Such expenses include costs associated with
refinement but do not include expenses such as transportation, stockpiling, marketing, or
marine insurance that are incurred after marketable ores are produced, unless the expenses
are included in gross income. The allowable deductions from a mine or plant that mines
and produces more than one mineral, metal, or energy resource must be determined
separately for the purposes of computing the deduction in section 290.01, subdivision 19c,
clause (9) (8). These deductions may be combined on one occupation tax return to arrive
at the deduction from gross income for all production.

(b) The provisions of section 290.01, subdivisions 19c, clauses (6) and (9), and 19d,
clauses (7) and (11) (10), are not used to determine taxable income.

Sec. 32.

Laws 2010, chapter 216, section 11, the effective date, is amended to read:


EFFECTIVE DATE.

This section is effective for taxable years beginning
after December 31, 2009, for certified historic structures for which qualified costs of
rehabilitation are first paid under construction contracts entered into after May 1, 2010
rehabilitation expenditures are first paid by the developer or taxpayer after May 1, 2010,
for rehabilitation that occurs after May 1, 2010, provided that the application under
subdivision 3 is submitted before the project is placed in service
.

EFFECTIVE DATE.

This section is effective the day following final enactment
and applies retroactively for taxable years beginning after December 31, 2009, and for
certified historic structures placed in service after May 1, 2010, but the office may not
issue certificates allowed under the change to this section until July 1, 2013.

Sec. 33. ESTIMATED TAXES; EXCEPTIONS.

No addition to tax, penalties, or interest may be made under Minnesota Statutes,
section 289A.25, for any period before September 15, 2013, with respect to an
underpayment of estimated tax, to the extent that the underpayment was created or
increased by the increase in income tax rates under this article.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

Sec. 34. REPEALER.

Minnesota Statutes 2012, sections 290.01, subdivision 6b; 290.06, subdivision 22a;
and 290.0921, subdivision 7,
are repealed.

EFFECTIVE DATE.

This section is effective for taxable years beginning after
December 31, 2012.

ARTICLE 7

ESTATE AND GIFT TAXES

Section 1.

Minnesota Statutes 2012, section 270B.01, subdivision 8, is amended to read:


Subd. 8.

Minnesota tax laws.

For purposes of this chapter only, unless expressly
stated otherwise, "Minnesota tax laws" means:

(1) the taxes, refunds, and fees administered by or paid to the commissioner under
chapters 115B, 289A (except taxes imposed under sections 298.01, 298.015, and 298.24),
290, 290A, 291, 292, 295, 297A, 297B, and 297H, or any similar Indian tribal tax
administered by the commissioner pursuant to any tax agreement between the state and
the Indian tribal government, and includes any laws for the assessment, collection, and
enforcement of those taxes, refunds, and fees; and

(2) section 273.1315.

EFFECTIVE DATE.

This section is effective for gifts made after December 31,
2012.

Sec. 2.

Minnesota Statutes 2012, section 270B.03, subdivision 1, is amended to read:


Subdivision 1.

Who may inspect.

Returns and return information must, on request,
be made open to inspection by or disclosure to the data subject. The request must be made
in writing or in accordance with written procedures of the chief disclosure officer of the
department that have been approved by the commissioner to establish the identification
of the person making the request as the data subject. For purposes of this chapter, the
following are the data subject:

(1) in the case of an individual return, that individual;

(2) in the case of an income tax return filed jointly, either of the individuals with
respect to whom the return is filed;

(3) in the case of a return filed by a business entity, an officer of a corporation,
a shareholder owning more than one percent of the stock, or any shareholder of an S
corporation; a general partner in a partnership; the owner of a sole proprietorship; a
member or manager of a limited liability company; a participant in a joint venture; the
individual who signed the return on behalf of the business entity; or an employee who is
responsible for handling the tax matters of the business entity, such as the tax manager,
bookkeeper, or managing agent;

(4) in the case of an estate return:

(i) the personal representative or trustee of the estate; and

(ii) any beneficiary of the estate as shown on the federal estate tax return;

(5) in the case of a trust return:

(i) the trustee or trustees, jointly or separately; and

(ii) any beneficiary of the trust as shown in the trust instrument;

(6) if liability has been assessed to a transferee under section 270C.58, subdivision
1
, the transferee is the data subject with regard to the returns and return information
relating to the assessed liability;

(7) in the case of an Indian tribal government or an Indian tribal government-owned
entity,

(i) the chair of the tribal government, or

(ii) any person authorized by the tribal government; and

(8) in the case of a successor as defined in section 270C.57, subdivision 1, paragraph
(b), the successor is the data subject and information may be disclosed as provided by
section 270C.57, subdivision 4.; and

(9) in the case of a gift return, the donor.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 3.

Minnesota Statutes 2012, section 289A.10, subdivision 1, is amended to read:


Subdivision 1.

Return required.

In the case of a decedent who has an interest in
property with a situs in Minnesota, the personal representative must submit a Minnesota
estate tax return to the commissioner, on a form prescribed by the commissioner, if:

(1) a federal estate tax return is required to be filed; or

(2) the sum of the federal gross estate and federal adjusted taxable gifts made within
three years of the date of the decedent's death
exceeds $1,000,000.

The return must contain a computation of the Minnesota estate tax due. The return
must be signed by the personal representative.

EFFECTIVE DATE.

This section is effective for estates of decedents dying after
December 31, 2012.

Sec. 4.

Minnesota Statutes 2012, 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) "Commissioner" means the commissioner of revenue or any person to whom the
commissioner has delegated functions under this chapter.

(2) "Federal gross estate" means the gross estate of a decedent as required to be valued
and otherwise determined for federal estate tax purposes under the Internal Revenue Code.

(3) "Internal Revenue Code" means the United States Internal Revenue Code of
1986, as amended through April 14, 2011 January 3, 2013, but without regard to the
provisions of sections 501 and 901 of Public Law 107-16, as amended by Public Law
111-312, and section 301(c) of Public Law 111-312
section 2011, paragraph (f), of the
Internal Revenue Code
.

(4) "Minnesota adjusted taxable estate" means federal adjusted taxable estate as
defined by section 2011(b)(3) of the Internal Revenue Code, plus

(i) the amount of deduction for state death taxes allowed under section 2058 of the
Internal Revenue Code;

(ii) the amount of taxable gifts, as defined in section 292.16, and made by the
decedent within three years of the decedent's date of death;
less

(ii) (iii)(A) the value of qualified small business property under section 291.03,
subdivision 9
, and the value of qualified farm property under section 291.03, subdivision
10
, or (B) $4,000,000, whichever is less.

(5) "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.

(6) "Nonresident decedent" means an individual whose domicile at the time of
death was not in Minnesota.

(7) "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.

(8) "Resident decedent" means an individual whose domicile at the time of death
was in Minnesota.

(9) "Situs of property" means, with respect to:

(i) real property, the state or country in which it is located; with respect to

(ii) tangible personal property, the state or country in which it was normally kept or
located at the time of the decedent's death or for a gift of tangible personal property within
three years of death, the state or country in which it was normally kept or located when
the gift was executed
; and with respect to

(iii) intangible personal property, the state or country in which the decedent was
domiciled at death or for a gift of intangible personal property within three years of death,
the state or country in which the decedent was domiciled when the gift was executed
.

For a nonresident decedent with an ownership interest in a pass-through entity
with assets that include real or tangible personal property, situs of the real or tangible
personal property is determined as if the pass-through entity does not exist and the real
or tangible personal property is personally owned by the decedent. If the pass-through
entity is owned by a person or persons in addition to the decedent, ownership of the
property is attributed to the decedent in proportion to the decedent's capital ownership
share of the pass-through entity.

(10) "Pass-through entity" includes the following:

(i) an entity electing S corporation status under section 1362 of the Internal Revenue
Code;

(ii) an entity taxed as a partnership under subchapter K of the Internal Revenue Code;

(iii) a single-member limited liability company or similar entity, regardless of
whether it is taxed as an association or is disregarded for federal income tax purposes
under Code of Federal Regulations, title 26, section 301.7701-3; or

(iv) a trust to the extent the property is includible in the decedent's federal gross estate.

EFFECTIVE DATE.

This section is effective for decedents dying after December
31, 2012.

Sec. 5.

Minnesota Statutes 2012, section 291.03, subdivision 1, is amended to read:


Subdivision 1.

Tax amount.

(a) The tax imposed shall be an amount equal to the
proportion of the maximum credit for state death taxes computed under section 2011 of
the Internal Revenue Code, but using Minnesota adjusted taxable estate instead of federal
adjusted taxable estate, as the Minnesota gross estate bears to the value of the federal
gross estate. The tax is reduced by:

(1) the gift tax paid by the decedent under section 292.17 on gifts included in the
Minnesota adjusted taxable estate and not subtracted as qualified farm or small business
property; and

(2) any credit allowed under subdivision 1c.

(b) The tax determined under this subdivision must not be greater than the sum of
the following amounts multiplied by a fraction, the numerator of which is the Minnesota
gross estate and the denominator of which is the federal gross estate:

(1) the rates and brackets under section 2001(c) of the Internal Revenue Code
multiplied by the sum of:

(i) the taxable estate, as defined under section 2051 of the Internal Revenue Code; plus

(ii) adjusted taxable gifts, as defined in section 2001(b) of the Internal Revenue
Code; less

(iii) the lesser of (A) the sum of the value of qualified small business property
under subdivision 9, and the value of qualified farm property under subdivision 10, or
(B) $4,000,000; less

(2) the amount of tax allowed under section 2001(b)(2) of the Internal Revenue
Code; and less

(3) the federal credit allowed under section 2010 of the Internal Revenue Code.

(c) For purposes of this subdivision, "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended through December 31, 2000.

EFFECTIVE DATE.

This section is effective for decedents dying after December
31, 2012.

Sec. 6.

Minnesota Statutes 2012, section 291.03, is amended by adding a subdivision
to read:


Subd. 1c.

Nonresident decedent tax credit.

(a) The estate of a nonresident
decedent that is subject to tax under this chapter on the value of Minnesota situs property
held in a pass-through entity is allowed a credit against the tax due under this section
equal to the lesser of:

(1) the amount of estate or inheritance tax paid to another state that is attributable to
the Minnesota situs property held in the pass-through entity; or

(2) the amount of tax paid under this section attributable to the Minnesota situs
property held in the pass-through entity.

(b) The amount of tax attributable to the Minnesota situs property held in the
pass-through entity must be determined by the increase in the estate or inheritance tax that
results from including the market value of the property in the estate or treating the value
as a taxable inheritance to the recipient of the property.

EFFECTIVE DATE.

This section is effective for decedents dying after December
31, 2012.

Sec. 7.

Minnesota Statutes 2012, section 291.03, subdivision 8, is amended to read:


Subd. 8.

Definitions.

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

(b) "Family member" means a family member as defined in section 2032A(e)(2) of
the Internal Revenue Code, or a trust whose present beneficiaries are all family members
as defined in section 2032A(e)(2) of the Internal Revenue Code
.

(c) "Qualified heir" means a family member who acquired qualified property from
upon the death of the decedent and satisfies the requirement under subdivision 9, clause
(6) (7), or subdivision 10, clause (4) (5), for the property.

(d) "Qualified property" means qualified small business property under subdivision
9 and qualified farm property under subdivision 10.

EFFECTIVE DATE.

This section is effective retroactively for estates of decedents
dying after June 30, 2011.

Sec. 8.

Minnesota Statutes 2012, section 291.03, subdivision 9, is amended to read:


Subd. 9.

Qualified small business property.

Property satisfying all of the following
requirements is qualified small business property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of the assets of a trade or business or shares of stock or
other ownership interests in a corporation or other entity engaged in a trade or business.
The decedent or the decedent's spouse must have materially participated in the trade or
business within the meaning of section 469 of the Internal Revenue Code during the
taxable year that ended before the date of the decedent's death.
Shares of stock in a
corporation or an ownership interest in another type of entity do not qualify under this
subdivision if the shares or ownership interests are traded on a public stock exchange at
any time during the three-year period ending on the decedent's date of death. For purposes
of this subdivision, an ownership interest includes the interest the decedent is deemed to
own under sections 2036, 2037, and 2038 of the Internal Revenue Code.

(3) During the taxable year that ended before the decedent's death, the trade or
business must not have been a passive activity within the meaning of section 469(c) of the
Internal Revenue Code, and the decedent or the decedent's spouse must have materially
participated in the trade or business within the meaning of section 469(h) of the Internal
Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and any other
provision provided by United States Treasury Department regulation that substitutes
material participation in prior taxable years for material participation in the taxable year
that ended before the decedent's death.

(4) The gross annual sales of the trade or business were $10,000,000 or less for the
last taxable year that ended before the date of the death of the decedent.

(4) (5) The property does not consist of cash or, cash equivalents, publicly traded
securities, or assets not used in the operation of the trade or business
. For property
consisting of shares of stock or other ownership interests in an entity, the amount value of
cash or, cash equivalents, publicly traded securities, or assets not used in the operation of
the trade or business
held by the corporation or other entity must be deducted from the
value of the property qualifying under this subdivision in proportion to the decedent's
share of ownership of the entity on the date of death.

(5) (6) The decedent continuously owned the property, including property the
decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
Code,
for the three-year period ending on the date of death of the decedent. In the case of
a sole proprietor, if the property replaced similar property within the three-year period,
the replacement property will be treated as having been owned for the three-year period
ending on the date of death of the decedent.

(6) A family member continuously uses the property in the operation of the trade or
business for three years following the date of death of the decedent.

(7) For three years following the date of death of the decedent, the trade or business
is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code,
and a family member materially participates in the operation of the trade or business within
the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
of the Internal Revenue Code and any other provision provided by United States Treasury
Department regulation that substitutes material participation in prior taxable years for
material participation in the three years following the date of death of the decedent.

(8) The estate and the qualified heir elect to treat the property as qualified small
business property and agree, in the form prescribed by the commissioner, to pay the
recapture tax under subdivision 11, if applicable.

EFFECTIVE DATE.

This section is effective retroactively for estates of decedents
dying after June 30, 2011.

Sec. 9.

Minnesota Statutes 2012, section 291.03, subdivision 10, is amended to read:


Subd. 10.

Qualified farm property.

Property satisfying all of the following
requirements is qualified farm property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of a farm meeting the requirements of agricultural land and
is owned by a person or entity that is either not subject to or is in compliance with
section
500.24, and was classified for property tax purposes as the homestead of the decedent
or the decedent's spouse or both under section 273.124, and as class 2a property under
section 273.13, subdivision 23
.

(3) For property taxes payable in the taxable year of the decedent's death, the
property is classified as class 2a property under section 273.13, subdivision 23, and is
classified as agricultural homestead, agricultural relative homestead, or special agricultural
homestead under section 273.124.

(4) The decedent continuously owned the property, including property the decedent
is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code,
for
the three-year period ending on the date of death of the decedent either by ownership of
the agricultural land or pursuant to holding an interest in an entity that is not subject to
or is in compliance with section 500.24
.

(4) A family member continuously uses the property in the operation of the trade or
business
(5) The property is classified for property tax purposes as class 2a property under
section 273.13, subdivision 23,
for three years following the date of death of the decedent.

(5) (6) The estate and the qualified heir elect to treat the property as qualified farm
property and agree, in a form prescribed by the commissioner, to pay the recapture tax
under subdivision 11, if applicable.

EFFECTIVE DATE.

This section is effective retroactively for estates of decedents
dying after June 30, 2011.

Sec. 10.

Minnesota Statutes 2012, section 291.03, subdivision 11, is amended to read:


Subd. 11.

Recapture tax.

(a) If, within three years after the decedent's death and
before the death of the qualified heir, the qualified heir disposes of any interest in the
qualified property, other than by a disposition to a family member, or a family member
ceases to use the qualified property which was acquired or passed from the decedent
satisfy the requirement under subdivision 9, clause (7); or 10, clause (5), an additional
estate tax is imposed on the property. In the case of a sole proprietor, if the qualified heir
replaces qualified small business property excluded under subdivision 9 with similar
property, then the qualified heir will not be treated as having disposed of an interest in the
qualified property.

(b) The amount of the additional tax equals the amount of the exclusion claimed by
the estate under subdivision 8, paragraph (d), multiplied by 16 percent.

(c) The additional tax under this subdivision is due on the day which is six months
after the date of the disposition or cessation in paragraph (a).

EFFECTIVE DATE.

This section is effective retroactively for estates of decedents
dying after June 30, 2011.

Sec. 11.

[292.16] DEFINITIONS.

(a) For purposes of this chapter, the following definitions apply.

(b) The definitions of terms defined in section 291.005 apply.

(c) "Resident" has the meaning given in section 290.01, subdivision 7, paragraph (a).

(d) "Taxable gifts" means:

(1) the transfers by gift which are included in taxable gifts for federal gift tax
purposes under the following sections of the Internal Revenue Code:

(i) section 2503;

(ii) sections 2511 to 2514; and

(iii) sections 2516 to 2519; less

(2) the deductions allowed in sections 2522 to 2524 of the Internal Revenue Code.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 12.

[292.17] GIFT TAX.

Subdivision 1.

Imposition.

(a) A tax is imposed on the transfer of property by gift
by any individual resident or nonresident in an amount equal to ten percent of the amount
of the taxable gift.

(b) The donor is liable for payment of the tax. If the gift tax is not paid when due,
the donee of any gift is personally liable for the tax to the extent of the value of the gift.

Subd. 2.

Lifetime credit.

A credit is allowed against the tax imposed under this
section equal to $100,000. This credit applies to the cumulative amount of taxable gifts
made by the donor during the donor's lifetime.

Subd. 3.

Out-of-state gifts.

Taxable gifts exclude the transfer of:

(1) real property located outside of this state;

(2) tangible personal property that was normally kept at a location outside of the
state on the date the gift was executed; and

(3) intangible personal property made by an individual who is not a resident at
the time the gift was executed.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 13.

[292.18] RETURNS.

(a) Any individual who makes a taxable gift during the taxable year shall file a gift
tax return in the form and manner prescribed by the commissioner.

(b) If the donor dies before filing the return, the executor of the donor's will or
the administrator of the donor's estate shall file the return. If the donor becomes legally
incompetent before filing the return, the guardian or conservator shall file the return.

(c) The return must include:

(1) each gift made during the calendar year which is to be included in computing the
taxable gifts;

(2) the deductions claimed and allowable under section 292.16, paragraph (d),
clause (2);

(3) a description of the gift, and the donee's name, address, and Social Security
number;

(4) the fair market value of gifts not made in money; and

(5) any other information the commissioner requires to administer the gift tax.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 14.

[292.19] FILING REQUIREMENTS.

Gift tax returns must be filed by the April 15 following the close of the calendar
year, except if a gift is made during the calendar year in which the donor dies, the return
for the donor must be filed by the last date, including extensions, for filing the gift tax
return for federal gift tax purposes for the donor.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 15.

[292.20] APPRAISAL OF PROPERTY; DECLARATION BY DONOR.

The commissioner may require the donor or the donee to show the property subject to
the tax under section 292.17 to the commissioner upon demand and may employ a suitable
person to appraise the property. The donor shall submit a declaration, in a form prescribed
by the commissioner and including any certification required by the commissioner, that the
property shown by the donor on the gift tax return includes all of the property transferred by
gift for the calendar year and not deductible under section 292.16, paragraph (d), clause (2).

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

Sec. 16.

[292.21] ADMINISTRATIVE PROVISIONS.

Subdivision 1.

Payment of tax; penalty for late payment.

The tax imposed under
section 292.17 is due and payable to the commissioner by the April 15 following the close
of the calendar year during which the gift was made. The return required under section
292.19 must be included with the payment. If a taxable gift is made during the calendar
year in which the donor dies, the due date is the last date, including extensions, for filing
the gift tax return for federal gift tax purposes for the donor. If any person fails to pay the
tax due within the time specified under this section, a penalty applies equal to ten percent
of the amount due and unpaid or $100, whichever is greater. The unpaid tax and penalty
bear interest at the rate under section 270C.40 from the due date of the return.

Subd. 2.

Extensions.

The commissioner may, for good cause, extend the time for
filing a gift tax return, if a written request is filed with a tentative return accompanied by a
payment of the tax, which is estimated in the tentative return, on or before the last day for
filing the return. Any person to whom an extension is granted must pay, in addition to the
tax, interest at the rate under section 270C.40 from the date on which the tax would have
been due without the extension.

Subd. 3.

Changes in federal gift tax.

If the amount of a taxpayer's taxable gifts
for federal gift tax purposes, as reported on the taxpayer's federal gift tax return for any
calendar year, is changed or corrected by the Internal Revenue Service or other officer
of the United States or other competent authority, the taxpayer shall report the change or
correction in federal taxable gifts within 180 days after the final determination of the change
or correction, and concede the accuracy of the determination or provide a letter detailing
how the federal determination is incorrect or does not change the Minnesota gift tax. Any
taxpayer filing an amended federal gift tax return shall also file within 180 days an amended
return under this chapter and shall include any information the commissioner requires. The
time for filing the report or amended return may be extended by the commissioner upon due
cause shown. Notwithstanding any limitation of time in this chapter, if, upon examination,
the commissioner finds that the taxpayer is liable for the payment of an additional tax, the
commissioner shall, within a reasonable time from the receipt of the report or amended
return, notify the taxpayer of the amount of additional tax, together with interest computed
at the rate under section 270C.40 from the date when the original tax was due and payable.
Within 30 days of the mailing of the notice, the taxpayer shall pay the commissioner the
amount of the additional tax and interest. If, upon examination of the report or amended
return and related information, the commissioner finds that the taxpayer has overpaid the
tax due the state, the commissioner shall refund the overpayment to the taxpayer.

Subd. 4.

Application of federal rules.

In administering the tax under this chapter,
the commissioner shall apply the provisions of sections 2701 to 2704 of the Internal
Revenue Code. The words "secretary or his delegate," as used in those sections of the
Internal Revenue Code, mean the commissioner.

EFFECTIVE DATE.

This section is effective for taxable gifts made after June
30, 2013.

ARTICLE 8

SALES AND USE TAXES; LOCAL SALES TAXES

Section 1.

[116J.3738] QUALIFIED EXPANSIONS OF GREATER MINNESOTA
BUSINESSES.

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms
have the meanings given unless the context clearly indicates otherwise.

(b) "Agricultural processing facility" means one or more facilities or operations
that transform, package, sort, or grade livestock or livestock products, agricultural
commodities, or plants or plant products into goods that are used for intermediate or final
consumption including goods for nonfood use, and surrounding property.

(c) "Business" means an individual, corporation, partnership, limited liability
company, association, or any other entity engaged in operating a trade or business located
in greater Minnesota.

(d) "City" means a statutory or home rule charter city.

(e) "Greater Minnesota" means the area of the state that excludes the metropolitan
area, as defined in section 473.121, subdivision 2.

(f) "Qualified business" means a business that satisfies the requirements of subdivision
2, has been certified under subdivision 3, and has not been terminated under subdivision 5.

Subd. 2.

Qualified business.

(a) A business is a qualified business if it satisfies the
requirement of this paragraph and is not disqualified under the provisions of paragraph
(b). To qualify, the business must:

(1) have operated its trade or business in a city or cities in greater Minnesota for at
least one year before applying under subdivision 3;

(2) pay or agree to pay in the future each employee compensation, including benefits
not mandated by law, that on an annualized basis equal at least 120 percent of the federal
poverty level for a family of four;

(3) plan and agree to expand its employment in one or more cities in greater Minnesota
by the minimum number of employees required under subdivision 3, paragraph (c); and

(4) received certification from the commissioner under subdivision 3 that it is a
qualified business.

(b) A business is not a qualified business if it is either:

(1) primarily engaged in making retail sales to purchasers who are physically present
at the business's location or locations in greater Minnesota; or

(2) a public utility, as defined in section 336B.01.

(c) The requirements in paragraph (a) that the business' operations and expansion be
located in a city do not apply to an agricultural processing facility.

Subd. 3.

Certification of qualified business.

(a) A business may apply to the
commissioner for certification as a qualified business under this section. The commissioner
shall specify the form of the application, the manner and times for applying, and the
information required to be included in the application. The commissioner may impose an
application fee in an amount sufficient to defray the commissioner's cost of processing
certifications. A business must file a copy of its application with the chief clerical officer
of the city at the same time it applies to the commissioner. For an agricultural processing
facility located outside the boundaries of a city, the business must file a copy of the
application with the county auditor.

(b) The commissioner shall certify each business as a qualified business that:

(1) satisfies the requirements of subdivision 2;

(2) the commissioner determines would not expand its operations in greater
Minnesota without the tax incentives available under subdivision 4; and

(3) enters a business subsidy agreement with the commissioner that pledges to
satisfy the minimum expansion requirements of paragraph (c) within three years or less
following execution of the agreement.

The commissioner must act on an application within 60 days after its filing. Failure
by the commissioner to take action within the 60-day period is deemed approval of the
application.

(c) The following minimum expansion requirements apply, based on the number of
employees of the business at locations in greater Minnesota:

(1) a business that employees 50 or fewer full-time equivalent employees in greater
Minnesota when the agreement is executed must increase its employment by five or more
full-time equivalent employees;

(2) a business that employees more than 50 but fewer than 200 full-time equivalent
employees in greater Minnesota when the agreement is executed must increase the number
of its full-time equivalent employees in greater Minnesota by at least ten percent; or

(3) a business that employees 200 or more full-time equivalent employees in greater
Minnesota when the agreement is executed must increase its employment by at least 21
full-time equivalent employees.

(d) The city, or a county for an agricultural processing facility located outside the
boundaries of a city, in which the business proposes to expand its operations may file
comments supporting or opposing the application with the commissioner. The comments
must be filed within 30 days after receipt by the city of the application and may include a
notice of any contribution the city or county intends to make to encourage or support the
business expansion, such as the use of tax increment financing, property tax abatement,
additional city or county services, or other financial assistance.

(e) Certification of a qualified business is effective for the 12-year period beginning
on the first day of the calendar month immediately following execution of the business
subsidy agreement.

Subd. 4.

Available tax incentives.

A qualified business is entitled to a sales tax
exemption, as provided in section 297A.68, subdivision 49, for purchases made during the
period the business was certified as a qualified business under this section.

Subd. 5.

Termination of status as a qualified business.

(a) The commissioner shall
put in place a system for monitoring and ensuring that each certified business meets within
three years or less the minimum expansion requirement in its business subsidy agreement
and continues to satisfy those requirements for the rest of the duration of the certification
under subdivision 3. This system must include regular reporting by the business to the
commissioner of its baseline and current employment levels and any other information
the commissioner determines may be useful to ensure compliance and for legislative
evaluation of the effectiveness of the tax incentives.

(b) A business ceases to be a qualified business and to qualify for the sales tax
exemption under section 297A.68, subdivision 49, under this subdivision upon the earlier
of the following dates:

(1) the end of the duration of its designation under subdivision 3, paragraph (e),
effective as provided under this subdivision or other provision of law for the tax incentive;
or

(2) the date the commissioner finds that the business has breached its business
subsidy agreement and failed to satisfy the minimum expansion required by subdivision 3
and its agreement.

(c) A business may contest the commissioner's finding that it breached its business
subsidy agreement under paragraph (b), clause (2), under the contested case procedures in
the Administrative Procedure Act, chapter 14.

(d) The commissioner, after consulting with the commissioner of revenue, may
waive a breach of the business subsidy agreement and permit continued receipt of tax
incentives, if the commissioner determines that termination of the tax incentives is not in
the best interest of the state or the local government units and the business' breach of the
agreement is a result of circumstances beyond its control including, but not limited to:

(1) a natural disaster;

(2) unforeseen industry trends;

(3) a decline in economic activity in the overall or greater Minnesota economy; or

(4) loss of a major supplier or customer of the business.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 2.

Minnesota Statutes 2012, 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. In applying the provisions of this
chapter, the terms "tangible personal property" and "retail sale" include the taxable
services listed in paragraph (g), 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" means
those entities that would be classified as members of an affiliated group as defined under
United States Code, title 26, section 1504, disregarding the exclusions in section 1504(b).

(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;

(4) dietary supplements; and

(5) all food sold through vending machines.

(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, including furnishing the guest of the facility with access to
telecommunication services, and the granting of any similar license to use real property in
a specific facility, other than the renting or leasing of it for a continuous period of 30 days
or more under an enforceable written agreement that may not be terminated without prior
notice and including accommodations intermediary services provided in connection with
other services provided under this clause;

(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 by a third party, excluding delivery of aggregate
material used in road construction; and delivery of concrete block by a third party if the
delivery would be subject to the sales tax if provided by the seller of the concrete block.
For purposes of this clause, "road construction" means construction of:

(i) public roads;

(ii) cartways; and

(iii) private roads in townships located outside of the seven-county metropolitan area
up to the point of the emergency response location sign
; 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 services and
pest control 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 or any organization at the direction of a county 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, except when performed as part of a land
clearing contract as defined in section 297A.68, subdivision 40; 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 "retail sale" 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" means those entities that would be classified as members of an
affiliated group as defined under United States Code, title 26, section 1504, disregarding
the exclusions in section 1504(b).

For purposes of clause (5), "road construction" means construction of (1) public
roads, (2) cartways, and (3) private roads in townships located outside of the seven-county
metropolitan area up to the point of the emergency response location sign.

(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, ancillary services associated with telecommunication
services, cable and pay television services, and direct satellite services. Telecommunication
services include, but are not limited to, the following services, as defined in section
297A.669: air-to-ground radiotelephone service, mobile telecommunication service,
postpaid calling service, prepaid calling service, prepaid wireless calling service, and
private communication services. The services in this paragraph 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
59B.02, subdivision 11.

(l) A sale and a purchase includes furnishing for a consideration of specified digital
products or other digital products or granting the right for a consideration to use specified
digital products or other digital products on a temporary or permanent basis and regardless
of whether the purchaser is required to make continued payments for such right. Wherever
the term "tangible personal property" is used in this chapter, other than in subdivisions 10
and 38, the provisions also apply to specified digital products, or other digital products,
unless specifically provided otherwise or the context indicates otherwise.

(m) A sale and purchase includes the furnishing for consideration of the following
services:

(1) repairing and maintaining electronic and precision equipment, which service can
be deducted as a business expense under the Internal Revenue Code. This includes, but
is not limited to, repair or maintenance of electronic devices, computers and computer
peripherals, monitors, computer terminals, storage devices, and CD-ROM drives; other
office equipment such as photocopying machines, printers, and facsimile machines;
televisions, stereos, sound systems, video or digital recorders and players; two-way radios
and other communications equipment; radar and sonar equipment, scientific instruments,
microscopes, and medical equipment;

(2) repairing and maintaining commercial and industrial machinery and equipment.
For purposes of this subdivision, the following items are not commercial or industrial
machinery and equipment: (i) motor vehicles; (ii) furniture and fixtures; (iii) ships; (iv)
railroad stock; and (v) aircraft; and

(3) warehousing or storage services for tangible personal property, excluding:

(i) agricultural products;

(ii) refrigerated storage;

(iii) electronic data; and

(iv) self-storage services and storage of motor vehicles, recreational vehicles, and
boats, not eligible to be deducted as a business expense under the Internal Revenue Code.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013, except that paragraph (m), clause (3), is effective for sales and purchases
made after March 31, 2014.

Sec. 3.

Minnesota Statutes 2012, section 297A.61, subdivision 4, is amended to read:


Subd. 4.

Retail sale.

(a) A "retail sale" means:

(1) any sale, lease, or rental of tangible personal property for any purpose, other than
resale, sublease, or subrent of items by the purchaser in the normal course of business
as defined in subdivision 21; and

(2) any sale of a service enumerated in subdivision 3, for any purpose other than
resale by the purchaser in the normal course of business as defined in subdivision 21
.

(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 (1) when an obligation to make a lease
payment becomes due under the terms of the agreement or the trade practices of the
lessor or (2) in the case of a lease of a motor vehicle, as defined in section 297B.01,
subdivision 11
, but excluding vehicles with a manufacturer's gross vehicle weight rating
greater than 10,000 pounds and rentals of vehicles for not more than 28 days, at the time
the lease is executed.

(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.

(m) A sale of a bundled transaction in which one or more of the products included
in the bundle is a taxable product is a retail sale, except that if one of the products
is a telecommunication service, ancillary service, Internet access, or audio or video
programming service, and the seller has maintained books and records identifying through
reasonable and verifiable standards the portions of the price that are attributable to the
distinct and separately identifiable products, then the products are not considered part of a
bundled transaction. For purposes of this paragraph:

(1) the books and records maintained by the seller must be maintained in the regular
course of business, and do not include books and records created and maintained by the
seller primarily for tax purposes;

(2) books and records maintained in the regular course of business include, but are
not limited to, financial statements, general ledgers, invoicing and billing systems and
reports, and reports for regulatory tariffs and other regulatory matters; and

(3) books and records are maintained primarily for tax purposes when the books
and records identify taxable and nontaxable portions of the price, but the seller maintains
other books and records that identify different prices attributable to the distinct products
included in the same bundled transaction.

(n) A sale of motor vehicle repair paint and materials by a motor vehicle repair or
body shop business is a retail sale and the sales tax is imposed on the gross receipts from the
retail sale of the paint and materials. The motor vehicle repair or body shop that purchases
motor vehicle repair paint and motor vehicle repair materials for resale must either:

(1) separately state each item of paint and each item of materials, and the sales price
of each, on the invoice to the purchaser; or

(2) in order to calculate the sales price of the paint and materials, use a method
which estimates the amount and monetary value of the paint and materials used in
the repair of the motor vehicle by multiplying the number of labor hours by a rate of
consideration for the paint and materials used in the repair of the motor vehicle following
industry standard practices that fairly calculate the gross receipts from the retail sale of
the motor vehicle repair paint and motor vehicle repair materials. An industry standard
practice fairly calculates the gross receipts if the sales price of the paint and materials used
or consumed in the repair of a motor vehicle equals or exceeds the purchase price paid
by the motor vehicle repair or body shop business. Under this clause, the invoice must
either separately state the "paint and materials" as a single taxable item, or separately state
"paint" as a taxable item and "materials" as a taxable item. This clause does not apply to
wholesale transactions at an auto auction facility.

(o) A sale of specified digital products or other digital products to an end user with
or without rights of permanent use and regardless of whether rights of use are conditioned
upon payment by the purchaser is a retail sale. When a digital code has been purchased that
relates to specified digital products or other digital products, the subsequent receipt of or
access to the related specified digital products or other digital products is not a retail sale.

(p) A payment made to a cooperative electric association or public utility as a
contribution in aid of construction is a contract for improvement to real property and
is not a retail sale.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 4.

Minnesota Statutes 2012, section 297A.61, subdivision 10, is amended to read:


Subd. 10.

Tangible personal property.

(a) "Tangible personal property" means
personal property that can be seen, weighed, measured, felt, or touched, or that is in any
other manner perceptible to the senses. "Tangible personal property" includes, but is not
limited to, electricity, water, gas, steam, and prewritten computer software.

(b) Tangible personal property does not include:

(1) large ponderous machinery and equipment used in a business or production
activity which at common law would be considered to be real property;

(2) property which is subject to an ad valorem property tax;

(3) property described in section 272.02, subdivision 9, clauses (a) to (d); and

(4) property described in section 272.03, subdivision 2, clauses (3) and (5).; and

(5) specified digital products, or other digital products, transferred electronically.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 5.

Minnesota Statutes 2012, section 297A.61, subdivision 25, is amended to read:


Subd. 25.

Cable Pay television service.

"Cable Pay television service" means
the transmission of video, audio, or other programming service to purchasers, and the
subscriber interaction, if any, required for the selection or use of the programming service,
regardless of whether the programming is transmitted over facilities owned or operated
by the cable service provider or over facilities owned or operated by one or more dealers
of communications services. The term includes point-to-multipoint distribution direct to
home satellite
services by which programming is transmitted or broadcast by microwave
or other equipment directly to the subscriber's premises, or any similar or comparable
method of service
. The term includes basic, extended, premium, all programming services,
including subscriptions, digital video recorders,
pay-per-view, digital, and music services.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 6.

Minnesota Statutes 2012, section 297A.61, subdivision 38, is amended to read:


Subd. 38.

Bundled transaction.

(a) "Bundled transaction" means the retail sale
of two or more products when the products are otherwise distinct and identifiable, and
the products are sold for one nonitemized price. As used in this subdivision, "product"
includes tangible personal property, services, intangibles, and digital goods, including
specified digital products or other digital products
, but does not include real property or
services to real property. A bundled transaction does not include the sale of any products
in which the sales price varies, or is negotiable, based on the selection by the purchaser of
the products included in the transaction.

(b) For purposes of this subdivision, "distinct and identifiable" products does not
include:

(1) packaging and other materials, such as containers, boxes, sacks, bags, and
bottles, wrapping, labels, tags, and instruction guides, that accompany the retail sale of the
products and are incidental or immaterial to the retail sale. Examples of packaging that are
incidental or immaterial include grocery sacks, shoe boxes, dry cleaning garment bags,
and express delivery envelopes and boxes;

(2) a promotional product provided free of charge with the required purchase of
another product. A promotional product is provided free of charge if the sales price of
another product, which is required to be purchased in order to receive the promotional
product, does not vary depending on the inclusion of the promotional product; and

(3) items included in the definition of sales price.

(c) For purposes of this subdivision, the term "one nonitemized price" does not
include a price that is separately identified by product on binding sales or other supporting
sales-related documentation made available to the customer in paper or electronic form
including but not limited to an invoice, bill of sale, receipt, contract, service agreement,
lease agreement, periodic notice of rates and services, rate card, or price list.

(d) A transaction that otherwise meets the definition of a bundled transaction is
not a bundled transaction if it is:

(1) the retail sale of tangible personal property and a service and the tangible
personal property is essential to the use of the service, and is provided exclusively in
connection with the service, and the true object of the transaction is the service;

(2) the retail sale of services if one service is provided that is essential to the use or
receipt of a second service and the first service is provided exclusively in connection with
the second service and the true object of the transaction is the second service;

(3) a transaction that includes taxable products and nontaxable products and the
purchase price or sales price of the taxable products is de minimis; or

(4) the retail sale of exempt tangible personal property and taxable tangible personal
property if:

(i) the transaction includes food and food ingredients, drugs, durable medical
equipment, mobility enhancing equipment, over-the-counter drugs, prosthetic devices,
or medical supplies; and

(ii) the seller's purchase price or sales price of the taxable tangible personal property is
50 percent or less of the total purchase price or sales price of the bundled tangible personal
property. Sellers must not use a combination of the purchase price and sales price of the
tangible personal property when making the 50 percent determination for a transaction.

(e) For purposes of this subdivision, "purchase price" means the measure subject to
use tax on purchases made by the seller, and "de minimis" means that the seller's purchase
price or sales price of the taxable products is ten percent or less of the total purchase
price or sales price of the bundled products. Sellers shall use either the purchase price
or the sales price of the products to determine if the taxable products are de minimis.
Sellers must not use a combination of the purchase price and sales price of the products
to determine if the taxable products are de minimis. Sellers shall use the full term of a
service contract to determine if the taxable products are de minimis.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 7.

Minnesota Statutes 2012, section 297A.61, subdivision 45, is amended to read:


Subd. 45.

Ring tone.

"Ring tone" means a digitized sound file that is downloaded
onto a device and that may be used to alert the customer of a telecommunication service
with respect to a communication. A ring tone does not include ring back tones or other
digital audio files that are not stored on the purchaser's communication device.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 8.

Minnesota Statutes 2012, section 297A.61, is amended by adding a subdivision
to read:


Subd. 49.

Motor vehicle repair paint and motor vehicle repair materials.

"Motor
vehicle repair paint" means a substance composed of solid matter suspended in a liquid
medium and applied as a protective or decorative coating to the surface of a motor vehicle in
order to restore the motor vehicle to its original condition, and includes primer, body paint,
clear coat, and paint thinner used to paint motor vehicles, as defined in section 297B.01.

"Motor vehicle repair materials" means items, other than motor vehicle repair paint
or motor vehicle parts, that become a part of a repaired motor vehicle or are consumed in
repairing the motor vehicle at retail, and include abrasives, battery water, body filler or
putty, bolts and nuts, brake fluid, buffing pads, chamois, cleaning compounds, degreasing
compounds, glaze, grease, grinding discs, hydraulic jack oil, lubricants, masking tape,
oxygen and acetylene, polishes, rags, razor blades, sandpaper, sanding discs, scuff pads,
sealer, solder, solvents, striping tape, tack cloth, thinner, waxes, and welding rods. Motor
vehicle repair materials do not include items that are not used directly on the motor vehicle,
such as floor dry that is used to clean the shop, or cleaning compounds and rags that are
used to clean tools, equipment, or the shop and are not used to clean the motor vehicle.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 9.

Minnesota Statutes 2012, section 297A.61, is amended by adding a subdivision
to read:


Subd. 50.

Digital audio works.

"Digital audio works" means works that result from
a fixation of a series of musical, spoken, or other sounds, that are transferred electronically.
Digital audio works includes such items as the following which may either be prerecorded
or live: songs, music, readings of books or other written materials, speeches, ring tones, or
other sound recordings. Digital audio works does not include audio greeting cards sent by
electronic mail. Unless the context provides otherwise, in this chapter digital audio works
includes the digital code, or a subscription to or access to a digital code, for receiving,
accessing, or otherwise obtaining digital audio works.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 10.

Minnesota Statutes 2012, section 297A.61, is amended by adding a
subdivision to read:


Subd. 51.

Digital audiovisual works.

"Digital audiovisual works" means a series
of related images which, when shown in succession, impart an impression of motion,
together with accompanying sounds, if any, that are transferred electronically. Digital
audiovisual works includes such items as motion pictures, movies, musical videos, news
and entertainment, and live events. Digital audiovisual works does not include video
greeting cards sent by electronic mail. Unless the context provides otherwise, in this
chapter digital audiovisual works includes the digital code, or a subscription to or access to
a digital code, for receiving, accessing, or otherwise obtaining digital audiovisual works.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 11.

Minnesota Statutes 2012, section 297A.61, is amended by adding a
subdivision to read:


Subd. 52.

Digital books.

"Digital books" means any literary works, other than
digital audiovisual works or digital audio works, expressed in words, numbers, or other
verbal or numerical symbols or indicia so long as the product is generally recognized in
the ordinary and usual sense as a "book." It includes works of fiction and nonfiction and
short stories. It does not include periodicals, magazines, newspapers, or other news or
information products, chat rooms, or weblogs. Unless the context provides otherwise, in
this chapter digital books includes the digital code, or a subscription to or access to a
digital code, for receiving, accessing, or otherwise obtaining digital books.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 12.

Minnesota Statutes 2012, section 297A.61, is amended by adding a
subdivision to read:


Subd. 53.

Digital code.

"Digital code" means a code which provides a purchaser
with a right to obtain one or more specified digital products or other digital products.
A digital code may be transferred electronically, such as through electronic mail, or it
may be transferred on a tangible medium, such as on a plastic card, a piece of paper or
invoice, or imprinted on another product. A digital code is not a code that represents a
stored monetary value that is deducted from a total as it is used by the purchaser, and it
is not a code that represents a redeemable card, gift card, or gift certificate that entitles
the holder to select a digital product of an indicated cash value. The end user of a digital
code is any purchaser except one who receives the contractual right to redistribute a digital
product which is the subject of the transaction.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 13.

Minnesota Statutes 2012, section 297A.61, is amended by adding a
subdivision to read:


Subd. 54.

Other digital products.

"Other digital products" means the following
items when transferred electronically:

(1) greeting cards; and

(2) online video or electronic games.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 14.

Minnesota Statutes 2012, section 297A.61, is amended by adding a
subdivision to read:


Subd. 55.

Specified digital products.

"Specified digital products" means digital
audio works, digital audiovisual works, and digital books that are transferred electronically
to a customer.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 15.

Minnesota Statutes 2012, section 297A.61, is amended by adding a
subdivision to read:


Subd. 56.

Transferred electronically.

"Transferred electronically" means obtained
by the purchaser by means other than tangible storage media. For purposes of this
subdivision, it is not necessary that a copy of the product be physically transferred to
the purchaser. A product will be considered to have been transferred electronically to a
purchaser if the purchaser has access to the product.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 16.

Minnesota Statutes 2012, section 297A.61, is amended by adding a
subdivision to read:


Subd. 58.

Self-storage service.

"Self-storage service" means a storage service that
provides secure areas, such as rooms, units, compartments or containers, whether accessible
from outside or from within a building, that are designated for the use of a purchaser,
where the purchaser retains the care custody and control of their property, including
self-storage units, mini-storage units, and areas by any other name to which the purchaser
retains either unlimited free access or free access within reasonable business hours or upon
reasonable notice to the service provider to add or remove property, but does not mean the
rental of an entire building, such as a warehouse. Self-storage service does not include
general warehousing and storage services where the warehouse typically handles, stores,
and retrieves a purchaser's property using the warehouse's staff and equipment, and does
not allow the purchaser free access to the storage space and does not include bailments.

EFFECTIVE DATE.

This section is effective July 1, 2013.

Sec. 17.

Minnesota Statutes 2012, section 297A.64, subdivision 1, is amended to read:


Subdivision 1.

Tax imposed.

A tax is imposed on the lease or rental in this state
for not more than 28 days of a passenger automobile as defined in section 168.002,
subdivision 24
, a van as defined in section 168.002, subdivision 40, or a pickup truck as
defined in section 168.002, subdivision 26. The rate of tax is 6.2 9.2 percent of the sales
price. The tax applies whether or not the vehicle is licensed in the state.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 18.

Minnesota Statutes 2012, section 297A.66, subdivision 3, is amended to read:


Subd. 3.

Retailer not maintaining place of business in this state.

(a) To the extent
allowed by the United States Constitution and the laws of the United States in accordance
with the terms and conditions of federal remote seller law
, a retailer making retail sales
from outside this state to a destination within this state and not maintaining a place of
business in this state shall collect sales and use taxes and remit them to the commissioner
under section 297A.77,.

(b) To the extent allowed by the United States Constitution and the laws of the
United States, a retailer making retail sales from outside this state to a destination within
this state and not maintaining a place of business in this state shall collect sales and use
taxes and remit them to the commissioner under section 297A.77,
if the retailer engages in
the regular or systematic soliciting of sales from potential customers in this state by:

(1) distribution, by mail or otherwise, of catalogs, periodicals, advertising flyers, or
other written solicitations of business to customers in this state;

(2) display of advertisements on billboards or other outdoor advertising in this state;

(3) advertisements in newspapers published in this state;

(4) advertisements in trade journals or other periodicals the circulation of which is
primarily within this state;

(5) advertisements in a Minnesota edition of a national or regional publication or
a limited regional edition in which this state is included as part of a broader regional or
national publication which are not placed in other geographically defined editions of the
same issue of the same publication;

(6) advertisements in regional or national publications in an edition which is not
by its contents geographically targeted to Minnesota but which is sold over the counter
in Minnesota or by subscription to Minnesota residents;

(7) advertisements broadcast on a radio or television station located in Minnesota; or

(8) any other solicitation by telegraphy, telephone, computer database, cable, optic,
microwave, or other communication system.

This paragraph (a) must be construed without regard to the state from which
distribution of the materials originated or in which they were prepared.

(b) The location within or without this state of independent vendors that provide
products or services to the retailer in connection with its solicitation of customers within this
state, including such products and services as creation of copy, printing, distribution, and
recording, is not considered in determining whether the retailer is required to collect tax.

(c) A retailer not maintaining a place of business in this state is presumed, subject to
rebuttal, to be engaged in regular solicitation within this state if it engages in any of the
activities in paragraph (a) and:

(1) makes 100 or more retail sales from outside this state to destinations in this state
during a period of 12 consecutive months; or

(2) makes ten or more retail sales totaling more than $100,000 from outside this state
to destinations in this state during a period of 12 consecutive months.

EFFECTIVE DATE.

This section is effective the day after final enactment.

Sec. 19.

Minnesota Statutes 2012, section 297A.66, is amended by adding a
subdivision to read:


Subd. 4a.

Solicitor.

(a) "Solicitor," for purposes of subdivision 1, paragraph (a),
means a person, whether an independent contractor or other representative, who directly
or indirectly solicits business for the retailer.

(b) A retailer is presumed to have a solicitor in this state if it enters into an agreement
with a resident under which the resident, for a commission or other substantially similar
consideration, directly or indirectly refers potential customers, whether by a link on an
Internet Web site, or otherwise, to the seller. This paragraph only applies if the total gross
receipts are at least $10,000 in the 12-month period ending on the last day of the most recent
calendar quarter before the calendar quarter in which the sale is made. For purposes of this
paragraph, gross receipts means receipts from sales to customers located in the state who
were referred to the retailer by all residents with this type of agreement with the retailer.

(c) The presumption under paragraph (b) may be rebutted by proof that the resident
with whom the seller has an agreement did not engage in any solicitation in the state
on behalf of the retailer that would satisfy the nexus requirement of the United States
Constitution during the 12-month period in question. Nothing in this section shall be
construed to narrow the scope of the terms affiliate, agent, salesperson, canvasser, or other
representative for purposes of subdivision 1, paragraph (a).

(d) For purposes of this paragraph, "resident" includes an individual who is a
resident of this state, as defined in section 290.01, or a business that owns tangible
personal property located in this state or has one or more employees providing services for
the business in this state.

(e) This subdivision does not apply to chapter 290 and does not expand or contract
the jurisdiction to tax a trade or business under chapter 290.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 20.

Minnesota Statutes 2012, section 297A.665, is amended to read:


297A.665 PRESUMPTION OF TAX; BURDEN OF PROOF.

(a) For the purpose of the proper administration of this chapter and to prevent
evasion of the tax, until the contrary is established, it is presumed that:

(1) all gross receipts are subject to the tax; and

(2) all retail sales for delivery in Minnesota are for storage, use, or other consumption
in Minnesota.

(b) The burden of proving that a sale is not a taxable retail sale is on the seller.
However, a seller is relieved of liability if:

(1) the seller obtains a fully completed exemption certificate or all the relevant
information required by section 297A.72, subdivision 2, at the time of the sale or within
90 days after the date of the sale; or

(2) if the seller has not obtained a fully completed exemption certificate or all the
relevant information required by section 297A.72, subdivision 2, within the time provided
in clause (1), within 120 days after a request for substantiation by the commissioner,
the seller either:

(i) obtains in good faith a fully completed exemption certificate or all the relevant
information required by section 297A.72, subdivision 2, from the purchaser; or

(ii) proves by other means that the transaction was not subject to tax;

(3) in the case of drop shipment sales, a seller engaged in drop shipping may claim a
resale exemption based on an exemption certificate provided by its customer or reseller,
or any other acceptable information available to the seller engaged in drop shipping
evidencing qualification for a resale exemption, regardless of whether the customer or
reseller is registered to collect and remit sales and use tax in the state
.

(c) Notwithstanding paragraph (b), relief from liability does not apply to a seller who:

(1) fraudulently fails to collect the tax; or

(2) solicits purchasers to participate in the unlawful claim of an exemption.

(d) A certified service provider, as defined in section 297A.995, subdivision 2, is
relieved of liability under this section to the extent a seller who is its client is relieved of
liability.

(e) A purchaser of tangible personal property or any items listed in section 297A.63
that are shipped or brought to Minnesota by the purchaser has the burden of proving that the
property was not purchased from a retailer for storage, use, or consumption in Minnesota.

(f) If a seller claims that certain sales are exempt and does not provide the certificate,
information, or proof required by paragraph (b), clause (2), within 120 days after the date
of the commissioner's request for substantiation, then the exemptions claimed by the seller
that required substantiation are disallowed.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 21.

Minnesota Statutes 2012, section 297A.668, is amended by adding a
subdivision to read:


Subd. 6a.

Multiple points of use.

(a) Notwithstanding the provisions of subdivisions
2 and 3, a business purchaser that has not received authorization to pay the tax directly to
the commissioner may use an exemption certificate indicating multiple points of use if:

(1) the purchaser knows at the time of its purchase of a digital good, computer
software delivered electronically, or a service that the good or service will be concurrently
available for use in more than one taxing jurisdiction; and

(2) the purchaser delivers to the seller the exemption certificate indicating multiple
points of use at the time of purchase.

(b) Upon receipt of the fully completed exemption certificate indicating multiple
points of use, the seller is relieved of the obligation to collect, pay, or remit the applicable
tax and the purchaser is obligated to collect, pay, or remit the applicable tax on a direct
pay basis. The provisions of section 297A.665 apply to this paragraph.

(c) The purchaser delivering the exemption certificate indicating multiple points
of use may use any reasonable but consistent and uniform method of apportionment
that is supported by the purchaser's business records as they exist at the time of the
consummation of the sale.

(d) The purchaser shall provide the exemption certificate indicating multiple points
of use to the seller at the time of purchase.

(e) A purchaser that has received authorization to pay the tax directly to the
commissioner is not required to deliver to the seller an exemption certificate indicating
multiple points of use. A purchaser that has received authorization to pay the tax directly
to the commissioner shall follow the provisions of paragraph (c) in apportioning the tax
due on a digital good, computer software delivered electronically, or a service that will be
concurrently available for use in more than one taxing jurisdiction.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 22.

Minnesota Statutes 2012, section 297A.67, subdivision 7, is amended to read:


Subd. 7.

Drugs; medical devices.

(a) Sales of the following drugs and medical
devices for human use are exempt:

(1) drugs, including over-the-counter drugs;

(2) single-use finger-pricking devices for the extraction of blood and other single-use
devices and single-use diagnostic agents used in diagnosing, monitoring, or treating
diabetes;

(3) insulin and medical oxygen for human use, regardless of whether prescribed
or sold over the counter;

(4) prosthetic devices;

(5) durable medical equipment for home use only;

(6) mobility enhancing equipment;

(7) prescription corrective eyeglasses; and

(8) kidney dialysis equipment, including repair and replacement parts.

(b) Items purchased in transactions covered by:

(1) Medicare as defined under title XVIII of the Social Security Act, United States
Code, title 42, section 1395, et seq.; or

(2) Medicaid as defined under title XIX of the Social Security Act, United States
Code, title 42, section 1396, et seq.

(b) (c) For purposes of this subdivision:

(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:

(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;

(ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention
of disease; or

(iii) intended to affect the structure or any function of the body.

(2) "Durable medical equipment" means equipment, including repair and
replacement parts, including single-patient use items, but not including mobility enhancing
equipment, that:

(i) can withstand repeated use;

(ii) is primarily and customarily used to serve a medical purpose;

(iii) generally is not useful to a person in the absence of illness or injury; and

(iv) is not worn in or on the body.

For purposes of this clause, "repair and replacement parts" includes all components
or attachments used in conjunction with the durable medical equipment, but does not
include
including repair and replacement parts which are for single patient use only.

(3) "Mobility enhancing equipment" means equipment, including repair and
replacement parts, but not including durable medical equipment, that:

(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;

(ii) is not generally used by persons with normal mobility; and

(iii) does not include any motor vehicle or equipment on a motor vehicle normally
provided by a motor vehicle manufacturer.

(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.

(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.

(6) "Prosthetic device" means a replacement, corrective, or supportive device,
including repair and replacement parts, worn on or in the body to:

(i) artificially replace a missing portion of the body;

(ii) prevent or correct physical deformity or malfunction; or

(iii) support a weak or deformed portion of the body.

Prosthetic device does not include corrective eyeglasses.

(7) "Kidney dialysis equipment" means equipment that:

(i) is used to remove waste products that build up in the blood when the kidneys are
not able to do so on their own; and

(ii) can withstand repeated use, including multiple use by a single patient,
notwithstanding the provisions of clause (2).

(8) A transaction is covered by Medicare or Medicaid if any portion of the cost of
the item purchased in the transaction is paid for or reimbursed by the federal government
or the state of Minnesota pursuant to the Medicare or Medicaid program, by a private
insurance company administering the Medicare or Medicaid program on behalf of the
federal government or the state of Minnesota, or by a managed care organization for the
benefit of a patient enrolled in a prepaid program that furnishes medical services in lieu
of conventional Medicare or Medicaid coverage pursuant to agreement with the federal
government or the state of Minnesota.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 23.

Minnesota Statutes 2012, section 297A.67, is amended by adding a
subdivision to read:


Subd. 7a.

Accessories and supplies.

Accessories and supplies required for the
effective use of durable medical equipment for home use only or purchased in a transaction
covered by medicare or Medicaid, that are not already exempt under section 297A.67,
subdivision 7, are exempt. Accessories and supplies for the effective use of a prosthetic
device that are not already exempt under section 297A.67, subdivision 7, are exempt.
For purposes of this subdivision "durable medical equipment," "prosthetic device,"
"Medicare," and "Medicaid" have the definitions given in section 297A.67, subdivision 7.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 24.

Minnesota Statutes 2012, section 297A.67, subdivision 13, is amended to read:


Subd. 13.

Textbooks.

Textbooks, including digital books, that are prescribed for use
in conjunction with a course of study in a school, college, university, and private career
school to students who are regularly enrolled at such institutions are exempt. For purposes
of this subdivision (1) a "school" is as defined in section 120A.22, subdivision 4; and (2)
"private career school" means a school licensed under section 141.25.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 25.

Minnesota Statutes 2012, 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 tangible 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 metal-casting: 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.

(d) Industrial production does not include:

(1) the furnishing of services listed in section 297A.61, subdivision 3, paragraph (g),
clause (6), items (i) to (vi) and (viii), or paragraph (m); or

(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.

EFFECTIVE DATE.

This section is effective for sales and purchases made after
June 30, 2013.

Sec. 26.

Minnesota Statutes 2012, 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.

"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.

(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 heati