Minnesota Legislature
HF 785
1st Engrossment - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
1.1 A bill for an act 1.2 relating to financing and operation of government in 1.3 this state; modifying truth in taxation provisions and 1.4 adding a taxpayer satisfaction survey; changing 1.5 income, corporate franchise, withholding, estate, 1.6 property, sales and use, mortgage registry, health 1.7 care gross revenues, motor fuels, gambling, cigarette 1.8 and tobacco products, occupation, net proceeds, 1.9 production, liquor, insurance, and other taxes and 1.10 tax-related provisions; making technical, clarifying, 1.11 collection, enforcement, refund, and administrative 1.12 changes to certain taxes and tax-related provisions, 1.13 tax-forfeited lands, revenue recapture, unfair 1.14 cigarette sales, state debt collection, sustainable 1.15 forest incentive programs, and payments in lieu of 1.16 taxes; changing local government aids and credits; 1.17 providing for determination of population for certain 1.18 purposes; updating references to the Internal Revenue 1.19 Code, changing property tax exemptions, assessment, 1.20 valuation, classification, class rates, levies, 1.21 deferral, review and equalization, appeals, notices 1.22 and statements, and distribution provisions; changing 1.23 rent constituting property taxes and property tax 1.24 refunds; changing provisions relating to regional rail 1.25 authorities; authorizing special taxing districts; 1.26 requiring state contracts be with vendors registered 1.27 to collect use taxes; abolishing the political 1.28 contribution refund; authorizing certain local sales 1.29 taxes; providing for compliance with streamlined sales 1.30 tax agreement; changing the taxation of liquor and 1.31 cigarettes; authorizing income tax checkoffs; 1.32 requiring registration of tax shelters and providing 1.33 for a voluntary compliance initiative; changing job 1.34 opportunity building zones, border city development 1.35 zones, biotechnology and health sciences industry zone 1.36 provisions; limiting sales tax construction exemption 1.37 in job zones to businesses paying prevailing wage; 1.38 requiring a referendum for certain subsidies to 1.39 gambling enterprises; authorizing charges for certain 1.40 emergency services; imposing a franchise fee on card 1.41 clubs; defining the term "tax"; regulating tax 1.42 preparers; suspending appropriations or aids to public 1.43 employers who prohibit certain employees from wearing 1.44 a flag on a uniform; providing for training and 1.45 conduct of assessors; prohibiting purchases of 1.46 tax-forfeited lands by certain local officials; 2.1 providing for data classification and exchange of 2.2 data; establishing a tax reform commission; providing 2.3 and imposing powers and duties on the commissioner of 2.4 revenue and other state agencies and departments and 2.5 on certain political subdivisions and certain 2.6 officials; changing and imposing penalties; requiring 2.7 reports; transferring funds; appropriating money; 2.8 amending Minnesota Statutes 2004, sections 4A.02; 2.9 16C.03, by adding a subdivision; 16D.10; 168A.05, 2.10 subdivision 1a; 190.09, subdivision 2; 240.30, by 2.11 adding a subdivision; 270.02, subdivision 3; 270.11, 2.12 subdivision 2; 270.16, subdivision 2; 270.30, 2.13 subdivisions 1, 5, 6, 8, by adding subdivisions; 2.14 270.65; 270.67, subdivision 4; 270.69, subdivision 4; 2.15 270A.03, subdivisions 5, 7; 272.01, subdivision 2; 2.16 272.02, subdivisions 1a, 7, 47, 53, 64, by adding 2.17 subdivisions; 272.0211, subdivisions 1, 2; 272.0212, 2.18 subdivisions 1, 2; 272.029, subdivisions 4, 6; 2.19 273.055; 273.0755; 273.11, subdivisions 1a, 8, by 2.20 adding a subdivision; 273.111, by adding a 2.21 subdivision; 273.123, subdivision 7; 273.124, 2.22 subdivisions 3, 6, 8, 21; 273.125, subdivision 8; 2.23 273.13, subdivisions 22, 25, by adding a subdivision; 2.24 273.1315; 273.1384, subdivision 1; 273.19, subdivision 2.25 1a; 273.372; 274.01, subdivision 1; 274.014, 2.26 subdivisions 2, 3; 274.14; 275.025, subdivision 4; 2.27 275.065, subdivisions 1c, 3, 4, 7, by adding 2.28 subdivisions; 275.07, subdivisions 1, 4; 276.04, 2.29 subdivision 2; 276.112; 276A.01, subdivision 7; 2.30 282.016; 282.08; 282.15; 282.21; 282.224; 282.301; 2.31 287.04; 289A.02, subdivision 7; 289A.08, subdivisions 2.32 1, 3, 7, 13, 16; 289A.18, subdivision 1; 289A.19, 2.33 subdivision 4; 289A.20, subdivision 2; 289A.31, 2.34 subdivision 2; 289A.37, subdivision 5; 289A.38, 2.35 subdivisions 6, 7, by adding subdivisions; 289A.40, 2.36 subdivision 2, by adding subdivisions; 289A.50, 2.37 subdivisions 1, 1a; 289A.56, by adding a subdivision; 2.38 289A.60, subdivisions 2a, 4, 6, 7, 11, 13, 20, by 2.39 adding subdivisions; 290.01, subdivisions 6, 7, 7b, 2.40 19, as amended, 19a, 19b, 19c, 19d, 31; 290.032, 2.41 subdivisions 1, 2; 290.06, subdivisions 2c, 22, by 2.42 adding a subdivision; 290.067, subdivisions 1, 2a; 2.43 290.0671, subdivisions 1, 1a; 290.0672, subdivisions 2.44 1, 2; 290.0674, subdivisions 1, 2; 290.0675, 2.45 subdivision 1; 290.091, subdivisions 2, 3; 290.0922, 2.46 subdivision 2; 290.191, subdivisions 2, 3; 290.92, 2.47 subdivisions 1, 4b; 290A.03, subdivisions 3, 11, 13, 2.48 15, by adding subdivisions; 290A.07, by adding a 2.49 subdivision; 290A.19; 290B.05, subdivision 3; 290C.05; 2.50 290C.10; 291.005, subdivision 1; 291.03, subdivision 2.51 1; 295.52, subdivision 4; 295.53, subdivision 1; 2.52 295.582; 295.60, subdivision 3; 296A.22, by adding a 2.53 subdivision; 297A.61, subdivisions 3, 4, by adding a 2.54 subdivision; 297A.64, subdivision 4; 297A.668, 2.55 subdivisions 1, 5; 297A.67, subdivisions 2, 7, 9, 29, 2.56 by adding a subdivision; 297A.68, subdivisions 2, 5, 2.57 28, 35, 37, 38, 39, by adding subdivisions; 297A.70, 2.58 subdivision 10; 297A.71, subdivision 12, by adding a 2.59 subdivision; 297A.72, by adding a subdivision; 2.60 297A.75, subdivision 1; 297A.87, subdivisions 2, 3; 2.61 297A.99, subdivisions 1, 4, 9, by adding a 2.62 subdivision; 297E.01, subdivisions 5, 7, by adding 2.63 subdivisions; 297E.06, subdivision 2; 297E.07; 2.64 297F.08, subdivision 12, by adding a subdivision; 2.65 297F.09, subdivisions 1, 2; 297F.14, subdivision 4; 2.66 297G.09, by adding a subdivision; 297I.01, by adding 2.67 subdivisions; 297I.05, subdivisions 4, 5, by adding a 2.68 subdivision; 298.01, subdivisions 3, 4; 298.24, 2.69 subdivision 1; 298.75, by adding a subdivision; 2.70 325D.33, subdivision 6; 365.43, subdivision 1; 2.71 365.431; 366.011; 366.012; 373.45, subdivision 7; 3.1 398A.03, by adding a subdivision; 398A.04, subdivision 3.2 8; 469.169, by adding a subdivision; 469.1735, 3.3 subdivision 3; 469.176, subdivisions 4l, 7; 469.310, 3.4 subdivision 11, by adding a subdivision; 469.315; 3.5 469.316; 469.317; 469.319, subdivision 1, by adding a 3.6 subdivision; 469.320, subdivision 3; 469.330, 3.7 subdivision 11; 469.335; 469.337; 469.340, subdivision 3.8 1; 473.843, subdivision 5; 473F.02, subdivisions 2, 7; 3.9 477A.011, subdivisions 3, 34, 35, 36, 38; 477A.0124, 3.10 subdivisions 2, 4; 477A.013, subdivisions 8, 9, by 3.11 adding a subdivision; 477A.016; 477A.03, subdivisions 3.12 2a, 2b; 477A.11, subdivision 4, by adding a 3.13 subdivision; 477A.12, subdivisions 1, 2; 477A.14, 3.14 subdivision 1; 645.44, by adding a subdivision; Laws 3.15 1998, chapter 389, article 3, section 42, subdivision 3.16 2, as amended; Laws 1998, chapter 389, article 8, 3.17 section 43, subdivision 3; Laws 2001, First Special 3.18 Session chapter 5, article 3, section 8; Laws 2001, 3.19 First Special Session chapter 5, article 12, section 3.20 95, as amended; Laws 2002, chapter 377, article 3, 3.21 section 4; Laws 2003, chapter 127, article 5, section 3.22 27; Laws 2003, chapter 127, article 5, section 28; 3.23 Laws 2003, First Special Session chapter 21, article 3.24 5, section 13; Laws 2003, First Special Session 3.25 chapter 21, article 6, section 9; proposing coding for 3.26 new law in Minnesota Statutes, chapters 15; 270; 272; 3.27 273; 275; 280; 289A; 290; 290C; 295; 297A; 297F; 373; 3.28 459; 473; repealing Minnesota Statutes 2004, sections 3.29 10A.322, subdivision 4; 16A.1522, subdivision 4; 3.30 270.85; 270.88; 272.02, subdivision 65; 273.19, 3.31 subdivision 5; 273.37, subdivision 3; 274.05; 275.065, 3.32 subdivisions 5a, 6, 6b, 8; 275.15; 275.61, subdivision 3.33 2; 283.07; 290.06, subdivision 23; 297E.12, 3.34 subdivision 10; 469.1794, subdivision 6; 477A.08; Laws 3.35 1975, chapter 287, section 5; Laws 1998, chapter 389, 3.36 article 3, section 41; Laws 2003, chapter 127, article 3.37 9, section 9, subdivision 4; Minnesota Rules, parts 3.38 8093.2000; 8093.3000; 8130.0110, subpart 4; 8130.0200, 3.39 subparts 5, 6; 8130.0400, subpart 9; 8130.1200, 3.40 subparts 5, 6; 8130.2900; 8130.3100, subpart 1; 3.41 8130.4000, subparts 1, 2; 8130.4200, subpart 1; 3.42 8130.4400, subpart 3; 8130.5200; 8130.5600, subpart 3; 3.43 8130.5800, subpart 5; 8130.7300, subpart 5; 8130.8800, 3.44 subpart 4. 3.45 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 3.46 ARTICLE 1 3.47 TAXPAYER SATISFACTION SURVEY 3.48 Section 1. [275.063] [PROPOSED PROPERTY TAXES; TAXPAYER 3.49 SATISFACTION SURVEY; DEFINITIONS.] 3.50 Subdivision 1. [DEFINITIONS.] For the purposes of this 3.51 section and section 275.065, the following definitions apply. 3.52 Subd. 2. [BUDGET; COUNTIES.] For counties, "budget" means 3.53 total government fund expenditures, as defined by the state 3.54 auditor under section 375.169, less any expenditures for direct 3.55 payments to recipients or providers for the human service aids 3.56 listed below: 3.57 (1) Minnesota family investment program under chapters 256J 4.1 and 256K; 4.2 (2) medical assistance under sections 256B.041, subdivision 4.3 5, and 256B.19, subdivision 1; 4.4 (3) general assistance medical care under section 256D.03, 4.5 subdivision 6; 4.6 (4) general assistance under section 256D.03, subdivision 4.7 2; 4.8 (5) Minnesota supplemental aid under section 256D.36, 4.9 subdivision 1; 4.10 (6) preadmission screening under section 256B.0911, and 4.11 alternative care grants under section 256B.0913; 4.12 (7) general assistance medical care claims processing, 4.13 medical transportation, and related costs under section 256D.03, 4.14 subdivision 4; 4.15 (8) medical transportation and related costs under section 4.16 256B.0625, subdivisions 17 to 18a; 4.17 (9) group residential housing under section 256I.05, 4.18 subdivision 8, transferred from programs in clauses (4) and (5); 4.19 or 4.20 (10) any successor programs to those listed in clauses (1) 4.21 to (9). 4.22 Subd. 3. [BUDGET; CITIES.] For cities, "budget" means 4.23 total government fund expenditures, as defined by the state 4.24 auditor under section 471.6965, less any expenditures for 4.25 improvements or services that are specially assessed or charged 4.26 under chapter 429, 430, 435, or the provisions of any other law 4.27 or charter. 4.28 Subd. 4. [POPULATION.] "Population" of a city means the 4.29 most recent population as determined by the state demographer 4.30 under section 4A.02 or by the Metropolitan Council under section 4.31 477A.011, subdivision 3. 4.32 Subd. 5. [PROPERTY TAX LEVY SUBJECT TO APPROVAL; COUNTIES 4.33 AND CITIES.] For a county or a city, "property tax levy subject 4.34 to approval" means the jurisdiction's levy excluding any debt 4.35 levy and any levy previously approved by the voters. 4.36 Subd. 6. [DEBT LEVY.] "Debt levy" means a levy to: 5.1 (1) pay the costs of principal and interest on bonded 5.2 indebtedness; 5.3 (2) pay the costs of principal and interest on certificates 5.4 of indebtedness issued for any corporate purpose except: 5.5 (i) tax anticipation or aid anticipation certificates of 5.6 indebtedness; 5.7 (ii) certificates of indebtedness issued under sections 5.8 298.28 and 298.282; 5.9 (iii) certificates of indebtedness used to fund current 5.10 expenses; or 5.11 (iv) certificates of indebtedness used to fund an 5.12 insufficiency in tax receipts or an insufficiency in other 5.13 revenue sources. 5.14 (3) pay another city, town, county, or school district for 5.15 principal and interest on general obligation debt; or 5.16 (4) fund payments made to the Minnesota State Armory 5.17 Building Commission under section 193.145, subdivision 2, to 5.18 retire the principal and interest on armory construction bonds. 5.19 Subd. 7. [STATE PROPERTY TAX CREDITS.] "State property tax 5.20 credits" means any credits received under sections 273.119; 5.21 273.123; 273.135; 273.1384; 273.1391; 273.1398, subdivision 4; 5.22 469.171; and 473H.10. 5.23 Subd. 8. [JURISDICTION SUBJECT TO TAXPAYER SATISFACTION 5.24 SURVEY.] A "jurisdiction subject to the taxpayer satisfaction 5.25 survey" means any county or any city with a population of 500 or 5.26 greater. 5.27 [EFFECTIVE DATE.] This section is effective for taxes 5.28 payable in 2006 and subsequent years. 5.29 Sec. 2. Minnesota Statutes 2004, section 275.065, 5.30 subdivision 1c, is amended to read: 5.31 Subd. 1c. [LEVY; SHARED, MERGED, CONSOLIDATED SERVICES.] 5.32 If two or more taxing authorities are in the process of 5.33 negotiating an agreement for sharing, merging, or consolidating 5.34 services between those taxing authorities at the time the 5.35 proposed levy is to be certified under subdivision 1, each 5.36 taxing authority involved in the negotiation shall certify its 6.1 total proposed levy as provided in that subdivision, including a 6.2 notification to the county auditor of the specific service 6.3 involved in the agreement which is not yet finalized. The 6.4 affected taxing authorities may amend their proposed levies 6.5 under subdivision 1 until October101 for levy amounts relating 6.6 only to the specific service involved. 6.7 [EFFECTIVE DATE.] This section is effective for taxes 6.8 payable in 2006 and subsequent years. 6.9 Sec. 3. Minnesota Statutes 2004, section 275.065, 6.10 subdivision 3, is amended to read: 6.11 Subd. 3. [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 6.12 county auditor shall prepare and the county treasurer shall 6.13 deliver after November108 and on or before November2419 each 6.14 year, by first class mail to each taxpayer at the address listed 6.15 on the county's current year's assessment roll, a notice of 6.16 proposed property taxes. 6.17 (b) The commissioner of revenue shall prescribe the form of 6.18 the notice. The form must be in the form prescribed by the 6.19 commissioner. 6.20 (c) The notice must inform taxpayers that it contains the 6.21 amount of property taxes each taxing authority proposes to 6.22 collect for taxes payable the following year. In the case of a 6.23 town, or in the case of the state general tax, the final tax 6.24 amount will be its proposed tax unless the town changes its levy 6.25 at a special town meeting under section 365.52.In the case of6.26taxing authorities required to hold a public meeting under6.27subdivision 6, the notice must clearly state that each taxing6.28authority, including regional library districts established6.29under section 134.201, and including the metropolitan taxing6.30districts as defined in paragraph (i), but excluding all other6.31special taxing districts and towns, will hold a public meeting6.32to receive public testimony on the proposed budget and proposed6.33or final property tax levy, or, in case of a school district, on6.34the current budget and proposed property tax levy. It must6.35clearly state the time and place of each taxing authority's6.36meeting, a telephone number for the taxing authority that7.1taxpayers may call if they have questions related to the notice,7.2and an address where comments will be received by mail.7.3 (d) The notice must state for each parcel:7.4(1)the market value of the property as determined under 7.5 section 273.11, and used for computing property taxes payable in 7.6 the following year and for taxes payable in the current year as 7.7 each appears in the records of the county assessor on November 1 7.8 of the current year; and, in the case of residential property, 7.9 whether the property is classified as homestead or 7.10 nonhomestead. The notice must clearly inform taxpayers of the 7.11 years to which the market values apply and that the values are 7.12 final values;. 7.13(2)(e) Theitems listed below, shown separately bynotice 7.14 must state for each parcel, for both taxes payable in the 7.15 current year and the proposed taxes payable in the following 7.16 year each of the following tax amounts, net of state property 7.17 tax credits: county tax, city or town tax,andstategeneral7.18 tax,net of the residential and agricultural homestead credit7.19under section 273.1384,voter approved schoollevytax, 7.20 otherlocalschoollevytax,andthe sum of the tax amounts 7.21 for all special taxing districts, the sum of the tax increment 7.22 tax on captured tax capacity, if applicable, and the fiscal 7.23 disparities areawide tax under chapter 276A or 473F, if 7.24 applicable, andas athe totaloftax amount for all taxing 7.25 authorities:7.26(i) the actual tax for taxes payable in the current year;7.27and7.28(ii) the proposed tax amount. 7.29If the county levy under clause (2) includes an amount for7.30a lake improvement district as defined under sections 103B.5017.31to 103B.581, the amount attributable for that purpose must be7.32separately stated from the remaining county levy amount.7.33In the case of a town or the state general tax, the final7.34tax shall also be its proposed tax unless the town changes its7.35levy at a special town meeting under section 365.52. If a7.36school district has certified under section 126C.17, subdivision8.19, that a referendum will be held in the school district at the8.2November general election, the county auditor must note next to8.3the school district's proposed amount that a referendum is8.4pending and that, if approved by the voters, the tax amount may8.5be higher than shown on the notice. In the case of the city of8.6Minneapolis, the levy for the Minneapolis Library Board and the8.7levy for Minneapolis Park and Recreation shall be listed8.8separately from the remaining amount of the city's levy. In the8.9case of the city of St. Paul, the levy for the St. Paul Library8.10Agency must be listed separately from the remaining amount of8.11the city's levy. In the case of a parcel where tax increment or8.12the fiscal disparities areawide tax under chapter 276A or 473F8.13applies, the proposed tax levy on the captured value or the8.14proposed tax levy on the tax capacity subject to the areawide8.15tax must each be stated separately and not included in the sum8.16of the special taxing districts; and8.17(3) the increase or decrease between the total taxes8.18payable in the current year and the total proposed taxes,8.19expressed as a percentage.8.20 (f) The notice must state for each parcel the increase or 8.21 decrease between the total taxes payable in the current year and 8.22 the total proposed taxes, expressed as a percentage. 8.23 (g) The notice must state for each parcel an estimate of 8.24 any additional tax that would apply to the property under any 8.25 referenda pending at the November general election. Any amount 8.26 shown under this item should be indicated as pending the results 8.27 of referendum elections, and shall not be reflected in the total 8.28 proposed net tax amount. 8.29 (h) For purposes of this section, the amount of the tax on 8.30 homesteads qualifying under the senior citizens' property tax 8.31 deferral program under chapter 290B is the total amount of 8.32 property tax before subtraction of the deferred property tax 8.33 amount. 8.34(e)(i) The notice must clearly state that the proposed or 8.35 final taxes do not include the following: 8.36 (1) special assessments; 9.1 (2) levies approved by the voters after the date of the 9.2proposed taxes are certified, including bond referenda and9.3school district levy referendaNovember general election; 9.4 (3)a levy limit increase approved by the voters by the9.5first Tuesday after the first Monday in November of the levy9.6year as provided under section 275.73;9.7(4)amounts necessary to pay cleanup or other costs due to 9.8 a natural disaster occurring after the date the proposed taxes 9.9 are certified; 9.10(5)(4) amounts necessary to pay tort judgments against the 9.11 taxing authority that become final after the date the proposed 9.12 taxes are certified; and 9.13(6)(5) the contamination tax imposed on properties which 9.14 received market value reductions for contamination. 9.15(f)(j) Except as provided in subdivision 7, failure of the 9.16 county auditor to prepare or the county treasurer to deliver the 9.17 notice as required in this section does not invalidate the 9.18 proposed or final tax levy or the taxes payable pursuant to the 9.19 tax levy. 9.20(g) If the notice the taxpayer receives under this section9.21lists the property as nonhomestead, and satisfactory9.22documentation is provided to the county assessor by the9.23applicable deadline, and the property qualifies for the9.24homestead classification in that assessment year, the assessor9.25shall reclassify the property to homestead for taxes payable in9.26the following year.9.27(h)(k) In the case of class 4 residential property used as 9.28 a residence for lease or rental periods of 30 days or more, the 9.29 taxpayer must either: 9.30 (1) mail or deliver a copy of the notice of proposed 9.31 property taxes to each tenant, renter, or lessee; or 9.32 (2) post a copy of the notice in a conspicuous place on the 9.33 premises of the property. 9.34 The copy of the notice must be mailed or posted by the 9.35 taxpayer by November2722 or within three days of receipt of 9.36 the notice, whichever is later. A taxpayer may notify the 10.1 county treasurer of the address of the taxpayer, agent, 10.2 caretaker, or manager of the premises to which the notice must 10.3 be mailed in order to fulfill the requirements of this paragraph. 10.4(i)(l) For purposes ofthis subdivision, subdivisions 5a10.5and 6section 276.04, "metropolitan special taxing districts" 10.6 means the following taxing districts in the seven-county 10.7 metropolitan area that levy a property tax for any of the 10.8 specified purposes listed below: 10.9 (1) Metropolitan Council under section 473.132, 473.167, 10.10 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 10.11 (2) Metropolitan Airports Commission under section 473.667, 10.12 473.671, or 473.672; and 10.13 (3) Metropolitan Mosquito Control Commission under section 10.14 473.711. 10.15 (m) For purposes of this section, any levies made by the 10.16 regional rail authorities in the county of Anoka, Carver, 10.17 Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 10.18 398A shall be included with the appropriate county's levy and 10.19 shall be discussed at one of that county'spublic10.20hearingregularly scheduled board meetings. 10.21 (n) The governing body of a county, city, or school 10.22 district may, with the county auditor's consent, include 10.23 supplemental information with the statement of proposed property 10.24 taxes about the impact of state aid increases or decreases on 10.25 property tax increases or decreases and on the level of services 10.26 provided in the affected jurisdiction. This supplemental 10.27 information may include information for the following year, the 10.28 current year, and for as many consecutive preceding years as 10.29 deemed appropriate by the governing body of the county, city, or 10.30 school district. It may include only information regarding: 10.31 (1) the impact of inflation as measured by the implicit 10.32 price deflator for state and local government purchases; 10.33 (2) population growth and decline; 10.34 (3) state or federal government action; and 10.35 (4) other financial factors that affect the level of 10.36 property taxation and local services that the governing body of 11.1 the county, city, or school district may deem appropriate to 11.2 include. 11.3 The information may be presented using tables, written 11.4 narrative, and graphic representations and may contain 11.5 instruction toward further sources of information or opportunity 11.6 for comment. 11.7 The supplemental information for each jurisdiction must not 11.8 exceed one side of an 8.5 inch by 11 inch sheet of paper. 11.9 [EFFECTIVE DATE.] This section is effective for taxes 11.10 payable in 2006 and subsequent years. 11.11 Sec. 4. Minnesota Statutes 2004, section 275.065, is 11.12 amended by adding a subdivision to read: 11.13 Subd. 3b. [TAXPAYER SATISFACTION SURVEY.] (a) A taxpayer 11.14 satisfaction survey form must be attached to or enclosed with 11.15 each proposed property tax notice under subdivision 3. The form 11.16 must include a property description or a code number that allows 11.17 the property to be uniquely identified. 11.18 (b) The taxpayer satisfaction survey form shall present the 11.19 following question for each jurisdiction subject to the taxpayer 11.20 satisfaction survey: "Are you satisfied with the proposed 11.21 property tax levy for (name of jurisdiction)?" A space will be 11.22 provided for the respondent to answer "Yes" or "No" for each 11.23 jurisdiction. The form must also inform the taxpayer that if 11.24 the number of responses marked "No" exceeds the criteria 11.25 specified in subdivision 3e, a referendum will be held on the 11.26 question of the increase in the property tax levy subject to 11.27 approval unless a recertification is made under subdivision 9 11.28 reducing the levy. 11.29 (c) The mailing shall include a non-postage-paid envelope 11.30 preaddressed to the agency designated to process survey 11.31 results. A taxpayer may respond to the survey by returning the 11.32 completed survey form to the designated agency by December 1. 11.33 The responding taxpayer is responsible for the postage. 11.34 [EFFECTIVE DATE.] This section is effective for taxes 11.35 payable in 2006 and subsequent years, except that two provisions 11.36 are first effective for taxes payable in 2007: the requirement 12.1 that the survey form include a property description or code 12.2 number, and the requirement that the form notify taxpayers that 12.3 the results of the survey could cause a referendum election to 12.4 be held. 12.5 Sec. 5. Minnesota Statutes 2004, section 275.065, is 12.6 amended by adding a subdivision to read: 12.7 Subd. 3c. [TAXPAYER SATISFACTION SURVEY ADDITIONAL 12.8 INFORMATION.] The taxpayer satisfaction survey form must include 12.9 the following information for the current year and for the 12.10 proposed year, and show the percentage change between the years: 12.11 (1) the county government's (i) budget and (ii) property 12.12 tax levy subject to approval; and 12.13 (2) if the property is located in a city which is a 12.14 jurisdiction subject to the taxpayer satisfaction survey, the 12.15 city government's (i) budget and (ii) property tax levy subject 12.16 to approval. 12.17 [EFFECTIVE DATE.] This section is effective for taxes 12.18 payable in 2006 and subsequent years. 12.19 Sec. 6. Minnesota Statutes 2004, section 275.065, is 12.20 amended by adding a subdivision to read: 12.21 Subd. 3d. [FORMAT OF TAXPAYER SATISFACTION SURVEY.] The 12.22 commissioner of revenue shall prescribe the format of the survey 12.23 form required under subdivisions 3b to 3f and present the form 12.24 to the chairs of the house and senate tax committees for 12.25 review. The form must be in the format prescribed by the 12.26 commissioner. 12.27 [EFFECTIVE DATE.] This section is effective for taxes 12.28 payable in 2006 and subsequent years. 12.29 Sec. 7. Minnesota Statutes 2004, section 275.065, is 12.30 amended by adding a subdivision to read: 12.31 Subd. 3e. [RESULTS OF TAXPAYER SATISFACTION SURVEY.] Each 12.32 agency designated to receive taxpayer satisfaction surveys shall 12.33 verify the authenticity of each form received, to the extent 12.34 possible, and tabulate the results of the survey for each taxing 12.35 jurisdiction. If the number of survey responses indicating 12.36 dissatisfaction with the jurisdiction's proposed levy exceeds 20 13.1 percent of the total number of proposed tax notices distributed 13.2 in the jurisdiction, and the proposed property tax levy subject 13.3 to approval exceeds the property tax levy subject to approval 13.4 for taxes payable in the current year, a referendum must be held 13.5 on the last Tuesday in January. By December 8, the agency must 13.6 announce the results of the survey for each taxing jurisdiction, 13.7 including both the number of responses indicating that they are 13.8 satisfied with the proposed levy and the number indicating that 13.9 they are not satisfied. 13.10 [EFFECTIVE DATE.] This section is effective for taxes 13.11 payable in 2006 and subsequent years, except that the 13.12 requirement of an automatic referendum election is effective 13.13 beginning with taxes payable in 2007 and subsequent years. 13.14 Sec. 8. Minnesota Statutes 2004, section 275.065, is 13.15 amended by adding a subdivision to read: 13.16 Subd. 3f. [DESIGNATED AGENCY.] For taxpayer satisfaction 13.17 surveys pertaining to taxes payable in 2006, the designated 13.18 agency is the county. For taxing jurisdictions located in more 13.19 than one county, each county shall tabulate the results of the 13.20 survey for the portion of the jurisdiction in the county, and 13.21 forward the results to the jurisdiction's home county by 13.22 December 7. The home county shall make available the survey 13.23 results for the total jurisdiction. 13.24 By January 1, 2006, and each year thereafter, the 13.25 commissioner of revenue shall designate the agency or agencies 13.26 to receive and process taxpayer satisfaction surveys for taxes 13.27 payable in the following year. 13.28 [EFFECTIVE DATE.] This section is effective for taxes 13.29 payable in 2006 and subsequent years. 13.30 Sec. 9. Minnesota Statutes 2004, section 275.065, 13.31 subdivision 4, is amended to read: 13.32 Subd. 4. [COSTS.]If the reasonable cost ofThe county may 13.33 apportion the cost of the county auditor's services and the cost 13.34 of preparing and mailing the notice and survey required in this 13.35 sectionexceed the amount distributed to the county by the13.36commissioner of revenue to administer this section, the taxing14.1authority must reimburse the county for the excess cost. The14.2excess cost must be apportionedbetween taxing jurisdictions as 14.3 follows: 14.4 (1) one-third is allocated to the county; 14.5 (2) one-third is allocated to cities and towns within the 14.6 county; and 14.7 (3) one-third is allocated to school districts within the 14.8 county. 14.9 The amounts in clause (2) must be further apportioned among 14.10 the cities and towns in the proportion that the number of 14.11 parcels in the city and town bears to the number of parcels in 14.12 all the cities and towns within the county. The amount in 14.13 clause (3) must be further apportioned among the school 14.14 districts in the proportion that the number of parcels in the 14.15 school district bears to the number of parcels in all school 14.16 districts within the county. 14.17 [EFFECTIVE DATE.] This section is effective for taxes 14.18 payable in 2006 and subsequent years. 14.19 Sec. 10. Minnesota Statutes 2004, section 275.065, 14.20 subdivision 7, is amended to read: 14.21 Subd. 7. [CERTIFICATION OF COMPLIANCE.] At the time the 14.22 taxing authority certifies its tax levy under section 275.07, it 14.23 shall certify to the commissioner of revenue its compliance with 14.24 this section. The certification must contain the information 14.25 required by the commissioner of revenue to determine compliance 14.26 with this section. If the commissioner determines that the 14.27 taxing authority has failed to substantially comply with the 14.28 requirements of this section, the commissioner of revenue shall 14.29 notify the county auditor. The decision of the commissioner is 14.30 final. When fixing rates under section 275.08 for a taxing 14.31 authority that has not complied with this section, the county 14.32 auditor must use the taxing authority's previous year's levy, 14.33 plus any additional amounts necessary topay principal and14.34interest on general obligation bonds of the taxing authority for14.35which its taxing powers have been pledged if the bonds were14.36issued before 1989fund an increase in the authority's debt levy 15.1 for taxes payable in the following year. 15.2 [EFFECTIVE DATE.] This section is effective for taxes 15.3 payable in 2006 and subsequent years. 15.4 Sec. 11. Minnesota Statutes 2004, section 275.065, is 15.5 amended by adding a subdivision to read: 15.6 Subd. 9. [RECERTIFICATION OF PROPOSED LEVY.] By December 15.7 15, a jurisdiction subject to taxpayer satisfaction survey, that 15.8 has been notified under subdivision 3e that the criteria for a 15.9 referendum have been met, may elect to recertify its proposed 15.10 levy so that the proposed property tax levy subject to approval 15.11 is equal to the property tax levy subject to approval for taxes 15.12 payable in the current year. If the jurisdiction recertifies 15.13 its proposed levy to the county auditor according to the 15.14 provisions of this subdivision, the auditor must cancel the 15.15 referendum for that jurisdiction. 15.16 [EFFECTIVE DATE.] This section is effective for taxes 15.17 payable in 2007 and subsequent years. 15.18 Sec. 12. Minnesota Statutes 2004, section 275.065, is 15.19 amended by adding a subdivision to read: 15.20 Subd. 10. [LEVY APPROVAL; REFERENDUM.] (a) If the 15.21 designated agency has determined under subdivision 3e that a 15.22 referendum is required, the increase in the property tax levy 15.23 subject to approval shall not be effective until it has been 15.24 submitted to the voters at a special election to be held on the 15.25 last Tuesday in January, and a majority of votes cast on the 15.26 question of approving the levy increase are in the affirmative. 15.27 The commissioner of revenue shall prepare the form of the 15.28 question to be presented at the referendum, which must reference 15.29 only the amount of increase in the property tax levy subject to 15.30 approval. 15.31 (b) If the majority of the votes cast on the question are 15.32 in the affirmative, the proposed levy shall be certified as the 15.33 final levy. If the majority of the votes cast on the question 15.34 are in the negative, the levy shall be the property tax levy 15.35 amount subject to approval for the previous year, plus the 15.36 portion of the proposed levy that was not subject to referendum. 16.1 (c) A levy approved under this subdivision must be levied 16.2 against the net tax capacity of the jurisdiction. 16.3 [EFFECTIVE DATE.] This section is effective for taxes 16.4 payable in 2007 and subsequent years. 16.5 Sec. 13. Minnesota Statutes 2004, section 275.07, 16.6 subdivision 1, is amended to read: 16.7 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 16.8 provided under paragraph (b), the taxes voted by cities, 16.9 counties, school districts, and special districts shall be 16.10 certified by the proper authorities to the county auditor on or 16.11 beforefive working days afterDecember2028 in each year. A 16.12 jurisdiction whose levy is subject to a referendum under section 16.13 275.065, subdivision 10, shall at that time certify two levy 16.14 amounts, one if the referendum is successful, and another if the 16.15 referendum is not successful. A jurisdiction whose levy is 16.16 subject to a referendum must recertify its final levy the day 16.17 immediately following the election. A town must certify the 16.18 levy adopted by the town board to the county auditor by 16.19 September 15 each year. If the town board modifies the levy at 16.20 a special town meeting after September 15, the town board must 16.21 recertify its levy to the county auditor on or beforefive16.22working days afterDecember2028. The taxes certified shall be 16.23 reduced by the county auditor by the aid received under section 16.24 273.1398, subdivision 3. If a city, town, county, school 16.25 district, or special district fails to certify its levy by that 16.26 date, its levy shall be the amount levied by it for the 16.27 preceding year. 16.28 (b)(i) The taxes voted by counties under sections 103B.241, 16.29 103B.245, and 103B.251 shall be separately certified by the 16.30 county to the county auditor on or beforefive working days16.31afterDecember2028 in each year. The taxes certified shall 16.32 not be reduced by the county auditor by the aid received under 16.33 section 273.1398, subdivision 3. If a county fails to certify 16.34 its levy by that date, its levy shall be the amount levied by it 16.35 for the preceding year. 16.36 (ii) For purposes of the proposed property tax notice under 17.1 section 275.065 and the property tax statement under section 17.2 276.04, for the first year in which the county implements the 17.3 provisions of this paragraph, the county auditor shall reduce 17.4 the county's levy for the preceding year to reflect any amount 17.5 levied for water management purposes under clause (i) included 17.6 in the county's levy. 17.7 [EFFECTIVE DATE.] This section is effective for taxes 17.8 payable in 2007 and subsequent years. 17.9 Sec. 14. [REPEALER.] 17.10 Minnesota Statutes 2004, section 275.065, subdivisions 5a, 17.11 6, 6b, and 8, are repealed. 17.12 [EFFECTIVE DATE.] This section is effective for taxes 17.13 payable in 2006 and subsequent years. 17.14 ARTICLE 2 17.15 PROPERTY TAXES 17.16 Section 1. Minnesota Statutes 2004, section 272.02, 17.17 subdivision 47, is amended to read: 17.18 Subd. 47. [POULTRY LITTER BIOMASS GENERATION FACILITY; 17.19 PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 17.20 attached machinery and other personal property which is part of 17.21 an electrical generating facility that meets the requirements of 17.22 this subdivision is exempt. At the time of construction, the 17.23 facility must: 17.24 (1) be designed to utilize poultry litter as a primary fuel 17.25 source; and 17.26 (2) be constructed for the purpose of generating power at 17.27 the facility that will be sold pursuant to a contract approved 17.28 by the Public Utilities Commission in accordance with the 17.29 biomass mandate imposed under section 216B.2424. 17.30 Construction of the facility must be commenced after 17.31 January 1, 2003, and before December 31,20032005. Property 17.32 eligible for this exemption does not include electric 17.33 transmission lines and interconnections or gas pipelines and 17.34 interconnections appurtenant to the property or the facility. 17.35 [EFFECTIVE DATE.] This section is effective for taxes 17.36 levied in 2005, payable in 2006, and thereafter. 18.1 Sec. 2. Minnesota Statutes 2004, section 272.02, 18.2 subdivision 53, is amended to read: 18.3 Subd. 53. [ELECTRIC GENERATION FACILITY; PERSONAL 18.4 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 18.5 machinery and other personal property which is part of a 3.2 18.6 megawatt run-of-the-river hydroelectric generation facility and 18.7 that meets the requirements of this subdivision is exempt. At 18.8 the time of construction, the facility must: 18.9 (1) utilize two turbine generators at a dam site existing 18.10 on March 31, 1994; 18.11 (2) be located onpublicly ownedlandandwithin 1,500 feet 18.12 of a 13.8 kilovolt distribution substation; and 18.13 (3) be eligible to receive a renewable energy production 18.14 incentive payment under section 216C.41. 18.15 Construction of the facility must be commenced after 18.16January 1, 2002December 31, 2004, and before January 1,200518.17 2007. Property eligible for this exemption does not include 18.18 electric transmission lines and interconnections or gas 18.19 pipelines and interconnections appurtenant to the property or 18.20 the facility. 18.21 [EFFECTIVE DATE.] This section is effective for taxes 18.22 levied in 2005, payable in 2006 and thereafter. 18.23 Sec. 3. Minnesota Statutes 2004, section 272.02, is 18.24 amended by adding a subdivision to read: 18.25 Subd. 68. [ELECTRIC GENERATION FACILITY PERSONAL 18.26 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), and 18.27 section 453.54, subdivision 20, attached machinery and other 18.28 personal property which is part of an electric generation 18.29 facility that exceeds 150 megawatts of installed capacity and 18.30 meets the requirements of this subdivision is exempt. At the 18.31 time of construction, the facility must: 18.32 (1) be designed to utilize natural gas as a primary fuel; 18.33 (2) be owned and operated by a municipal power agency as 18.34 defined in section 453.52, subdivision 8; 18.35 (3) have received the certificate of need under section 18.36 216B.243; 19.1 (4) be located outside the metropolitan area as defined 19.2 under section 473.121, subdivision 2; and 19.3 (5) be designed to be a combined-cycle facility, although 19.4 initially the facility will be operated as a simple-cycle 19.5 combustion turbine. 19.6 (b) To qualify under this subdivision, an agreement must be 19.7 negotiated between the municipal power agency and the host city, 19.8 for a payment in lieu of property taxes to the host city. 19.9 (c) Construction of the facility must be commenced after 19.10 January 1, 2004, and before January 1, 2006. Property eligible 19.11 for this exemption does not include electric transmission lines 19.12 and interconnections or gas pipelines and interconnections 19.13 appurtenant to the property or the facility. 19.14 [EFFECTIVE DATE.] This section is effective for assessment 19.15 year 2005, taxes payable in 2006, and thereafter. 19.16 Sec. 4. Minnesota Statutes 2004, section 272.02, is 19.17 amended by adding a subdivision to read: 19.18 Subd. 69. [ELECTRIC GENERATION FACILITY; PERSONAL 19.19 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 19.20 attached machinery and other personal property which is part of 19.21 a simple-cycle combustion-turbine electric generation facility 19.22 that exceeds 290 megawatts of installed capacity and that meets 19.23 the requirements of this subdivision is exempt. At the time of 19.24 construction, the facility must: 19.25 (1) be designed to utilize natural gas as a primary fuel; 19.26 (2) not be owned by a public utility as defined in section 19.27 216B.02, subdivision 4; 19.28 (3) be located within 15 miles of the mainline existing 19.29 interstate natural gas pipeline and within five miles of an 19.30 existing electrical transmission substation; 19.31 (4) be located outside the metropolitan area as defined 19.32 under section 473.121, subdivision 2; and 19.33 (5) be designed to provide peaking capacity energy and 19.34 ancillary services and have satisfied all of the requirements 19.35 under section 216B.243. 19.36 (b) Construction of the facility must be commenced after 20.1 January 1, 2005, and before January 1, 2009. Property eligible 20.2 for this exemption does not include electric transmission lines 20.3 and interconnections or gas pipelines and interconnections 20.4 appurtenant to the property or the facility. 20.5 [EFFECTIVE DATE.] This section is effective for assessment 20.6 year 2006, taxes payable in 2007, and thereafter. 20.7 Sec. 5. Minnesota Statutes 2004, section 272.02, is 20.8 amended by adding a subdivision to read: 20.9 Subd. 70. [ELECTRIC GENERATION FACILITY; PERSONAL 20.10 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 20.11 machinery and other personal property which is part of an 20.12 existing simple-cycle, combustion-turbine electric generation 20.13 facility that exceeds 300 megawatts of installed capacity and 20.14 that meets the requirements of this subdivision is exempt. At 20.15 the time of the construction, the facility must: 20.16 (1) be designed to utilize natural gas as a primary fuel; 20.17 (2) be owned by a public utility as defined in section 20.18 216B.02, subdivision 4, and be located at or interconnected with 20.19 an existing generating plant of the utility; 20.20 (3) be designed to provide peaking, emergency backup, or 20.21 contingency services; 20.22 (4) satisfy a resource need identified in an approved 20.23 integrated resource plan filed under section 216B.2422; and 20.24 (5) have received, by resolution, the approval from the 20.25 governing body of the county and the city for the exemption of 20.26 personal property under this subdivision. 20.27 Construction of the facility expansion must be commenced 20.28 after January 1, 2004, and before January 1, 2005. Property 20.29 eligible for this exemption does not include electric 20.30 transmission lines and interconnections or gas pipelines and 20.31 interconnections appurtenant to the property or the facility. 20.32 [EFFECTIVE DATE.] This section is effective beginning with 20.33 assessment year 2005, for taxes payable in 2006 and thereafter. 20.34 Sec. 6. Minnesota Statutes 2004, section 272.02, is 20.35 amended by adding a subdivision to read: 20.36 Subd. 71. [ELECTRIC GENERATION FACILITY; PERSONAL 21.1 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 21.2 attached machinery and other personal property which is part of 21.3 a simple-cycle combustion-turbine electric generation facility 21.4 that exceeds 150 megawatts of installed capacity and that meets 21.5 the requirements of this subdivision is exempt. At the time of 21.6 construction, the facility must: 21.7 (1) utilize natural gas as a primary fuel; 21.8 (2) be owned by an electric generation and transmission 21.9 cooperative; 21.10 (3) be located within five miles of parallel existing 21.11 12-inch and 16-inch natural gas pipelines and a 69-kilovolt 21.12 high-voltage electric transmission line; 21.13 (4) be designed to provide peaking, emergency backup, or 21.14 contingency services; 21.15 (5) have received a certificate of need under section 21.16 216B.243 demonstrating demand for its capacity; and 21.17 (6) have received by resolution the approval from the 21.18 governing body of the county and township in which the proposed 21.19 facility is to be located for the exemption of personal property 21.20 under this subdivision. 21.21 (b) Construction of the facility must be commenced after 21.22 July 1, 2005, and before January 1, 2009. Property eligible for 21.23 this exemption does not include electric transmission lines and 21.24 interconnections or gas pipelines and interconnections 21.25 appurtenant to the property or the facility. 21.26 [EFFECTIVE DATE.] This section is effective for assessment 21.27 year 2006 and thereafter, for taxes payable in 2007 and 21.28 thereafter. 21.29 Sec. 7. Minnesota Statutes 2004, section 272.02, is 21.30 amended by adding a subdivision to read: 21.31 Subd. 72. [ELECTRIC GENERATION FACILITY PERSONAL 21.32 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 21.33 attached machinery and other personal property which is part of 21.34 either a simple-cycle, combustion-turbine electric generation 21.35 facility, or a combined-cycle, combustion-turbine electric 21.36 generation facility that does not exceed 325 megawatts of 22.1 installed capacity and that meets the requirements of this 22.2 subdivision is exempt. At the time of construction, the 22.3 facility must: 22.4 (1) utilize either a simple-cycle or a combined-cycle 22.5 combustion-turbine generator fueled by natural gas; 22.6 (2) be connected to an existing 115-kilovolt high-voltage 22.7 electric transmission line that is within two miles of the 22.8 facility; 22.9 (3) be located on an underground natural gas storage 22.10 aquifer; 22.11 (4) be designed as either a peaking or intermediate load 22.12 facility; and 22.13 (5) have received, by resolution, the approval from the 22.14 governing body of the county for the exemption of personal 22.15 property under this subdivision. 22.16 (b) Construction of the facility must be commenced after 22.17 January 1, 2006, and before January 1, 2008. Property eligible 22.18 for this exemption does not include electric transmission lines 22.19 and interconnections or gas pipelines and interconnections 22.20 appurtenant to the property or the facility. 22.21 [EFFECTIVE DATE.] This section is effective for assessment 22.22 year 2005, taxes payable in 2006, and thereafter. 22.23 Sec. 8. Minnesota Statutes 2004, section 272.0211, 22.24 subdivision 1, is amended to read: 22.25 Subdivision 1. [EFFICIENCY DETERMINATION AND 22.26 CERTIFICATION.] An owner or operator of a new or existing 22.27 electric power generation facility, excluding wind energy 22.28 conversion systems, may apply to the commissioner of revenue for 22.29 a market value exclusion on the property as provided for in this 22.30 section. This exclusion shall apply only to the market value of 22.31 the equipment of the facility, and shall not apply to the 22.32 structures and the land upon which the facility is located. The 22.33 commissioner of revenue shall prescribe the forms and procedures 22.34 for this application. Upon receiving the application, the 22.35 commissioner of revenue shall request the commissioner of 22.36 commerce to make a determination of the efficiency of the 23.1 applicant's electric power generation facility.In calculating23.2the efficiency of a facility,The commissioner of commerce shall 23.3use a definition ofcalculate efficiencywhich calculates23.4efficiency as the sum of:23.5(1) the useful electrical power output; plus23.6(2) the useful thermal energy output; plus23.7(3) the fuel energy of the useful chemical products,23.8all divided by the total energy input to the facility, expressed23.9as a percentageas the ratio of useful energy outputs to energy 23.10 inputs, expressed as a percentage, based on the performance of 23.11 the facility's equipment during normal full load operation. The 23.12 commissioner must include in this formula the energy used in any 23.13 on-site preparation of materials necessary to convert the 23.14 materials into the fuel used to generate electricity, such as a 23.15 process to gasify petroleum coke. The commissioner shall use 23.16 thehighHigher Heating Value (HHV) for all substances in the 23.17 commissioner's efficiency calculations, except for wood for fuel 23.18 in a biomass-eligible project under section 216B.2424; for these 23.19 instances, the commissioner shall adjust the heating value to 23.20 allow for energy consumed for evaporation of the moisture in the 23.21 wood. The applicant shall provide the commissioner of commerce 23.22 with whatever information the commissioner deems necessary to 23.23 make the determination. Within 30 days of the receipt of the 23.24 necessary information, the commissioner of commerce shall 23.25 certify the findings of the efficiency determination to the 23.26 commissioner of revenue and to the applicant. The commissioner 23.27 of commerce shall determine the efficiency of the facility and 23.28 certify the findings of that determination to the commissioner 23.29 of revenue every two years thereafter from the date of the 23.30 original certification. 23.31 [EFFECTIVE DATE.] This section is effective for assessment 23.32 year 2005 and thereafter, for taxes payable in 2006 and 23.33 thereafter. 23.34 Sec. 9. Minnesota Statutes 2004, section 272.0211, 23.35 subdivision 2, is amended to read: 23.36 Subd. 2. [SLIDING SCALE EXCLUSION.] Based upon the 24.1 efficiency determination provided by the commissioner of 24.2 commerce as described in subdivision 1, the commissioner of 24.3 revenue shall subtractfiveeight percent of the taxable market 24.4 value of the qualifying property for each percentage point that 24.5 the efficiency of the specific facility, as determined by the 24.6 commissioner of commerce, is above3540 percent. The reduction 24.7 in taxable market value shall be reflected in the taxable market 24.8 value of the facility beginning with the assessment year 24.9 immediately following the determination. For a facility that is 24.10 assessed by the county in which the facility is located, the 24.11 commissioner of revenue shall certify to the assessor of that 24.12 county the percentage of the taxable market value of the 24.13 facility to be excluded. 24.14 [EFFECTIVE DATE.] This section is effective for assessment 24.15 year 2005 and thereafter, for taxes payable in 2006 and 24.16 thereafter. 24.17 Sec. 10. [272.0275] [PERSONAL PROPERTY USED TO GENERATE 24.18 ELECTRICITY; EXEMPTION.] 24.19 Subdivision 1. [NEW PLANT CONSTRUCTION AFTER JANUARY 1, 24.20 2005.] For a new generating plant built and placed in service 24.21 after January 1, 2005, its personal property used to generate 24.22 electric power is exempt from property taxation, including under 24.23 section 453.54, subdivision 20, if an exemption of generation 24.24 personal property form, with an attached siting agreement, is 24.25 filed with the Department of Revenue. The form must be signed 24.26 by the utility, and the county and city or town where the 24.27 facility is proposed to be located. 24.28 Subd. 2. [EXISTING PLANT; INCREASE IN NAMEPLATE CAPACITY.] 24.29 For a plant existing or under construction on the day of final 24.30 enactment of this act, a partial exemption applies if the 24.31 nameplate capacity of the plant is increased from that existing 24.32 on the day of final enactment of this act, and if an exemption 24.33 of generation personal property form, with an attached siting 24.34 agreement is filed with the Department of Revenue. The form 24.35 must be signed by the utility, and the county and city or town 24.36 where the facility expansion is located. This partial exemption 25.1 must be computed by taking the increase in megawatts over the 25.2 total megawatt nameplate capacity after construction is 25.3 complete, multiplied by the market value of all taxable tools, 25.4 implements, and machinery of the generating plant as determined 25.5 by the commissioner of revenue. The resulting exemption is 25.6 effective beginning in the next assessment year. 25.7 Subd. 3. [IN-LIEU PAYMENT; LIMITATION.] If an in-lieu 25.8 payment or service fee is negotiated between a facility exempted 25.9 under this section and the county, city, or town where the 25.10 facility is located, the payment or fee in any year may not 25.11 exceed the property tax revenue that the jurisdiction would 25.12 receive from the facility if it were not exempt. 25.13 Subd. 4. [DEFINITION; APPLICABILITY.] For purposes of this 25.14 section, "personal property" means tools, implements, and 25.15 machinery of the generating plant. The exemption under this 25.16 section does not apply to transformers, transmission lines, 25.17 distribution lines, or any other tools, implements, and 25.18 machinery that are part of an electric substation, wherever 25.19 located. 25.20 [EFFECTIVE DATE.] This section is effective the day 25.21 following final enactment. 25.22 Sec. 11. Minnesota Statutes 2004, section 273.055, is 25.23 amended to read: 25.24 273.055 [RESOLUTION TO APPOINT ASSESSOR; TERMINATION OF 25.25 LOCAL ASSESSOR'S OFFICE.] 25.26 The election to provide for the assessment of property by 25.27 the county assessor as provided in section 273.052 shall be made 25.28 by the board of county commissioners by resolution with at least 25.29 a two-thirds majority vote. Such resolution shall be effective 25.30 at the second assessment date following the adoption of the 25.31 resolution. Notwithstanding any other provisions contained in 25.32 any other section of law or charter, the office of all township 25.33 and city assessors in such county shall be terminated 90 days 25.34 before the assessment date at which the election becomes 25.35 effective, except that if part of such taxing district is 25.36 located in a county not electing to have the county assessor 26.1 assess all property as provided in section 273.052, the office 26.2 will continue but shall apply only to such property in a 26.3 nonelecting county. 26.4 No township or city assessor in another county shall assess 26.5 any property in an electing county, but shall turn over all tax 26.6 records relating to property to the county assessor 90 days 26.7 before the assessment date at which the county's election 26.8 becomes effective. 26.9 [EFFECTIVE DATE.] This section is effective the day 26.10 following final enactment. 26.11 Sec. 12. Minnesota Statutes 2004, section 273.0755, is 26.12 amended to read: 26.13 273.0755 [TRAINING AND EDUCATION OF PROPERTY TAX 26.14 PERSONNEL.] 26.15 (a) Beginning with the four-year period starting on July 1, 26.16 2000, every person licensed by the state Board of Assessors at 26.17 the Accredited Minnesota Assessor level or higher, shall 26.18 successfully complete a week-long Minnesota laws course 26.19 sponsored by the Department of Revenue at least once in every 26.20 four-year period. An assessor need not attend the course if 26.21 they successfully pass the test for the course. 26.22 (b) The commissioner of revenue may require that each 26.23 county, and each city for which the city assessor performs the 26.24 duties of county assessor, have (i) a person on the assessor's 26.25 staff who is certified by the Department of Revenue in sales 26.26 ratio calculations, (ii) an officer or employee who is certified 26.27 by the Department of Revenue in tax calculations, and (iii) an 26.28 officer or employee who is certified by the Department of 26.29 Revenue in the proper preparation of abstracts of assessment. 26.30 The commissioner of revenue may require that each county have an 26.31 officer or employee who is certified by the Department of 26.32 Revenue in the proper preparation of abstracts of tax lists. 26.33 (c) Beginning with the four-year educational licensing 26.34 period starting on July 1, 2004, every Minnesota assessor 26.35 licensed by the State Board of Assessors must attend and 26.36 participate in a seminar that focuses on ethics, professional 27.1 conduct and the need for standardized assessment practices 27.2 developed and presented by the commissioner of revenue. This 27.3 requirement must be met at least once in every subsequent 27.4 four-year period. This requirement applies to all assessors 27.5 licensed for one year or more in the four-year period. 27.6 [EFFECTIVE DATE.] This section is effective the day 27.7 following final enactment. 27.8 Sec. 13. Minnesota Statutes 2004, section 273.11, 27.9 subdivision 1a, is amended to read: 27.10 Subd. 1a. [LIMITED MARKET VALUE.] In the case of all real 27.11 propertyclassified as agricultural homestead or nonhomestead,27.12residential homestead or nonhomestead, timber, or noncommercial27.13seasonal residential recreational, the assessor shall compare 27.14 the value with the taxable portion of the value determined in 27.15 the preceding assessment, except that for class 1c resort 27.16 property for assessment year 2005, the assessor shall determine 27.17 the limited market value as provided in subdivision 1b. 27.18For assessment year 2002, the amount of the increase shall27.19not exceed the greater of (1) ten percent of the value in the27.20preceding assessment, or (2) 15 percent of the difference27.21between the current assessment and the preceding assessment.27.22For assessment year 2003, the amount of the increase shall27.23not exceed the greater of (1) 12 percent of the value in the27.24preceding assessment, or (2) 20 percent of the difference27.25between the current assessment and the preceding assessment.27.26 For assessmentyearyears 2004, 2005, and 2006, the amount 27.27 of the increase shall not exceed the greater of (1) 15 percent 27.28 of the value in the preceding assessment, or (2) 25 percent of 27.29 the difference between the current assessment and the preceding 27.30 assessment. 27.31 For assessment year20052007, the amount of the increase 27.32 shall not exceed the greater of (1) 15 percent of the value in 27.33 the preceding assessment, or (2) 33 percent of the difference 27.34 between the current assessment and the preceding assessment. 27.35 For assessment year20062008, the amount of the increase 27.36 shall not exceed the greater of (1) 15 percent of the value in 28.1 the preceding assessment, or (2) 50 percent of the difference 28.2 between the current assessment and the preceding assessment. 28.3 This limitation shall not apply to increases in value due 28.4 to improvements. For purposes of this subdivision, the term 28.5 "assessment" means the value prior to any exclusion under 28.6 subdivision 16. 28.7 The provisions of this subdivision shall be in effect 28.8 through assessment year20062008 as provided in this 28.9 subdivision. 28.10 For purposes of the assessment/sales ratio study conducted 28.11 under section 127A.48, and the computation of state aids paid 28.12 under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 28.13 477A, market values and net tax capacities determined under this 28.14 subdivision and subdivision 16, shall be used. 28.15 [EFFECTIVE DATE.] This section is effective for assessment 28.16 years 2005 through 2008, for taxes payable in 2006 through 2009. 28.17 Sec. 14. Minnesota Statutes 2004, section 273.11, is 28.18 amended by adding a subdivision to read: 28.19 Subd. 1b. [CLASS 1C RESORTS; 2005 ASSESSMENT ONLY.] For 28.20 assessment year 2005, the valuation on class 1c resort property 28.21 shall not exceed the greater of (1) 130 percent of the value of 28.22 its 2003 assessment, or (2) its value for the 2003 assessment 28.23 year plus 40 percent of the difference in value between its 2005 28.24 assessment and its 2003 assessment. The valuation increase on 28.25 class 1c resort property for assessment years 2006 and 28.26 thereafter shall be determined as provided under subdivision 1a. 28.27 [EFFECTIVE DATE.] This section is effective the day 28.28 following final enactment. 28.29 Sec. 15. Minnesota Statutes 2004, section 273.111, is 28.30 amended by adding a subdivision to read: 28.31 Subd. 86. [APPLICATIONS; DENIED BY COUNTY.] Beginning with 28.32 applications filed for the 2005 assessment year, all 28.33 applications for deferment of taxes and assessment under this 28.34 section that have been denied by the county shall be forwarded 28.35 to the commissioner of revenue by the county assessor within 30 28.36 days of denial. For the purpose of monitoring compliance with 29.1 this section, the commissioner of revenue shall compile a report 29.2 identifying all denied applications, the reason for the denial 29.3 and any commissioner action or recommendation. This report will 29.4 be annually submitted to the chairs of the house and senate tax 29.5 committees on or before February 1. 29.6 [EFFECTIVE DATE.] This section is effective for 29.7 applications filed after the day following final enactment. 29.8 Sec. 16. Minnesota Statutes 2004, section 273.123, 29.9 subdivision 7, is amended to read: 29.10 Subd. 7. [LOCAL OPTION; OTHER PROPERTY.] The owner of 29.11 homestead property not qualifying for an adjustment in valuation 29.12 pursuant to subdivisions 1 to 5 or of nonhomestead property may 29.13 receive a reduction in the amount of taxes payable on the 29.14 property for the year in which the destruction occurs and in the 29.15 following year if: 29.16 (a) 50 percent or more of the homestead dwelling or other 29.17 structure, as established by the county assessor, is 29.18 unintentionally or accidentally destroyed or contaminated by 29.19 mold and the homestead is uninhabitable or the other structure 29.20 is not usable; 29.21 (b) the owner of the property makes written application to 29.22 the county assessor as soon as practical after the damage has 29.23 occurred; and 29.24 (c) the owner of the property makes written application to 29.25 the county board. 29.26 The county board may grant a reduction in the amount of 29.27 property tax which the owner must pay on the qualifying property 29.28 in the year of destruction and in the following year. Any 29.29 reduction in the amount of tax payable which is authorized by 29.30 county board action shall be calculated based upon the number of 29.31 months that the home is uninhabitable or the other structure is 29.32 unusable. The amount of net tax due from the taxpayer shall be 29.33 multiplied by a fraction, the numerator of which is the number 29.34 of months the dwelling was occupied by that taxpayer, or the 29.35 number of months the other structure was used by the taxpayer, 29.36 and the denominator of which is 12. For purposes of this 30.1 subdivision, if a structure is occupied or used for a fraction 30.2 of a month, it is considered a month. "Net tax" is defined as 30.3 the amount of tax after the subtraction of all of the state paid 30.4 property tax credits. If application is made following payment 30.5 of all property taxes due for the year of destruction, the 30.6 amount of the reduction granted by the county board shall be 30.7 refunded to the taxpayer by the county treasurer as soon as 30.8 practical. 30.9 Any reductions or refunds approved by the county board 30.10 shall not be subject to approval by the commissioner of revenue. 30.11 The county board may levy in the following year the amount 30.12 of tax dollars lost to the county government as a result of the 30.13 reductions granted pursuant to this subdivision. 30.14 [EFFECTIVE DATE.] This section is effective for property 30.15 taxes payable in 2005 and thereafter. 30.16 Sec. 17. Minnesota Statutes 2004, section 273.125, 30.17 subdivision 8, is amended to read: 30.18 Subd. 8. [MANUFACTURED HOMES; SECTIONAL STRUCTURES.] (a) 30.19 In this section, "manufactured home" means a structure 30.20 transportable in one or more sections, which is built on a 30.21 permanent chassis, and designed to be used as a dwelling with or 30.22 without a permanent foundation when connected to the required 30.23 utilities, and contains the plumbing, heating, air conditioning, 30.24 and electrical systems in it. Manufactured home includes any 30.25 accessory structure that is an addition or supplement to the 30.26 manufactured home and, when installed, becomes a part of the 30.27 manufactured home. 30.28 (b) Except as provided in paragraph (c), a manufactured 30.29 home that meets each of the following criteria must be valued 30.30 and assessed as an improvement to real property, the appropriate 30.31 real property classification applies, and the valuation is 30.32 subject to review and the taxes payable in the manner provided 30.33 for real property: 30.34 (1) the owner of the unit holds title to the land on which 30.35 it is situated; 30.36 (2) the unit is affixed to the land by a permanent 31.1 foundation or is installed at its location in accordance with 31.2 the Manufactured Home Building Code in sections 327.31 to 31.3 327.34, and rules adopted under those sections, or is affixed to 31.4 the land like other real property in the taxing district; and 31.5 (3) the unit is connected to public utilities, has a well 31.6 and septic tank system, or is serviced by water and sewer 31.7 facilities comparable to other real property in the taxing 31.8 district. 31.9 (c) A manufactured home that meets each of the following 31.10 criteria must be assessed at the rate provided by the 31.11 appropriate real property classification but must be treated as 31.12 personal property, and the valuation is subject to review and 31.13 the taxes payable in the manner provided in this section: 31.14 (1) the owner of the unit is a lessee of the land under the 31.15 terms of a lease, or the unit is located in a manufactured home 31.16 park, campground, or resort; 31.17 (2) the unit is affixed to the land by a permanent 31.18 foundation or is installed at its location in accordance with 31.19 the Manufactured Home Building Code contained in sections 327.31 31.20 to 327.34, and the rules adopted under those sections, or is 31.21 affixed to the land like other real property in the taxing 31.22 district; and 31.23 (3) the unit is connected to public utilities, has a well 31.24 and septic tank system, or is serviced by water and sewer 31.25 facilities comparable to other real property in the taxing 31.26 district. 31.27 (d) Sectional structures must be valued and assessed as an 31.28 improvement to real property if the owner of the structure holds 31.29 title to the land on which it is located or is a qualifying 31.30 lessee of the land under section 273.19. In this paragraph 31.31 "sectional structure" means a building or structural unit that 31.32 has been in whole or substantial part manufactured or 31.33 constructed at an off-site location to be wholly or partially 31.34 assembled on-site alone or with other units and attached to a 31.35 permanent foundation. 31.36 (e) The commissioner of revenue may adopt rules under the 32.1 Administrative Procedure Act to establish additional criteria 32.2 for the classification of manufactured homes and sectional 32.3 structures under this subdivision. 32.4 (f) A storage shed, deck, or similar improvement 32.5 constructed on property that is leased or rented as a site for a 32.6 manufactured home, sectional structure, park trailer, or travel 32.7 trailer is taxable as provided in this section. In the case of 32.8 property that is leased or rented as a site for a travel 32.9 trailer, a storage shed, deck, or similar improvement on the 32.10 site that is considered personal property under this paragraph 32.11 is taxable only if its total estimated market value is over 32.12 $500. The property is taxable as personal property to the 32.13 lessee of the site if it is not owned by the owner of the site. 32.14 The property is taxable as real estate if it is owned by the 32.15 owner of the site. As a condition of permitting the owner of 32.16 the manufactured home, sectional structure, park trailer, or 32.17 travel trailer to construct improvements on the leased or rented 32.18 site, the owner of the site must obtain the permanent home 32.19 address of the lessee or user of the site. The site owner must 32.20 provide the name and address to the assessor upon request. 32.21 [EFFECTIVE DATE.] For purposes of Minnesota Statutes, 32.22 sections 272.12 and 272.121, this section is effective the day 32.23 following final enactment. For all other purposes, this section 32.24 is effective beginning with taxes payable in 2006, except that 32.25 for any property treated as real property under this section for 32.26 the 2005 assessment that will be treated as personal property 32.27 under this section for the 2006 assessment, an adjustment must 32.28 be made to the 2005 assessment roll on or before July 1, 2005, 32.29 to reflect those changes. 32.30 Sec. 18. [273.126] [CERTIFICATION OF LOW-INCOME RENTAL 32.31 PROPERTY.] 32.32 Subdivision 1. [REQUIREMENT.] Low-income rental property 32.33 is entitled to classification as class 4d under section 273.13, 32.34 subdivision 25, paragraph (e), if at least 75 percent of the 32.35 units in the rental housing property meet any of the following 32.36 qualifications: 33.1 (1) the units are subject to a housing assistance payments 33.2 contract under Section 8 of the United States Housing Act of 33.3 1937, as amended; 33.4 (2) the units are rent-restricted and income-restricted 33.5 units of a qualified low-income housing project receiving tax 33.6 credits under section 42(g) of the Internal Revenue Code of 33.7 1986, as amended; or 33.8 (3) the units are financed by the Rural Housing Service of 33.9 the United States Department of Agriculture and receive payments 33.10 under the rental assistance program pursuant to Section 521(a) 33.11 of the Housing Act of 1949, as amended. 33.12 Subd. 2. [APPLICATION.] (a) Application for certification 33.13 under this section must be filed by March 31 of the levy year, 33.14 or at a later date if the Housing Finance Agency deems 33.15 practicable. The application must be filed with the Housing 33.16 Finance Agency, on a form prescribed by the agency, and must 33.17 contain the information required by the Housing Finance Agency. 33.18 (b) Each application must include: 33.19 (1) the property tax identification number; 33.20 (2) evidence that the property meets the requirements of 33.21 subdivision 1; and 33.22 (3) a true and correct copy of the financial statement 33.23 related to the property. 33.24 (c) The Housing Finance Agency may charge an application 33.25 fee approximately equal to the costs of processing and reviewing 33.26 the applications but not to exceed $10 per unit. If imposed, 33.27 the applicant must pay the application fee to the Housing 33.28 Finance Agency. The fee must be deposited in the housing 33.29 development fund. 33.30 Subd. 3. [CERTIFICATION.] By June 1 of each levy year, the 33.31 Housing Finance Agency must certify to local assessors the 33.32 properties that are qualified under this section and the number 33.33 of units in the building that qualify. In making the 33.34 certification, the Housing Finance Agency may rely on the 33.35 application and any other supporting information that the agency 33.36 deems necessary from the property owner. 34.1 [EFFECTIVE DATE.] This section is effective for taxes 34.2 payable in 2006 and subsequent years. 34.3 Sec. 19. Minnesota Statutes 2004, section 273.13, 34.4 subdivision 22, is amended to read: 34.5 Subd. 22. [CLASS 1.] (a) Except as provided in subdivision 34.6 23 and in paragraphs (b) and (c), real estate which is 34.7 residential and used for homestead purposes is class 1a. In the 34.8 case of a duplex or triplex in which one of the units is used 34.9 for homestead purposes, the entire property is deemed to be used 34.10 for homestead purposes. The market value of class 1a property 34.11 must be determined based upon the value of the house, garage, 34.12 and land. 34.13 The first $500,000 of market value of class 1a property has 34.14 a net class rate of one percent of its market value; and the 34.15 market value of class 1a property that exceeds $500,000 has a 34.16 class rate of 1.25 percent of its market value. 34.17 (b) Class 1b property includes homestead real estate or 34.18 homestead manufactured homes used for the purposes of a 34.19 homestead by 34.20 (1) any person who is blind as defined in section 256D.35, 34.21 or the blind person and the blind person's spouse; or 34.22 (2) any person, hereinafter referred to as "veteran," who: 34.23 (i) served in the active military or naval service of the 34.24 United States; and 34.25 (ii) is entitled to compensation under the laws and 34.26 regulations of the United States for permanent and total 34.27 service-connected disability due to the loss, or loss of use, by 34.28 reason of amputation, ankylosis, progressive muscular 34.29 dystrophies, or paralysis, of both lower extremities, such as to 34.30 preclude motion without the aid of braces, crutches, canes, or a 34.31 wheelchair; and 34.32 (iii) has acquired a special housing unit with special 34.33 fixtures or movable facilities made necessary by the nature of 34.34 the veteran's disability, or the surviving spouse of the 34.35 deceased veteran for as long as the surviving spouse retains the 34.36 special housing unit as a homestead; or 35.1 (3) any person who is permanently and totally disabled. 35.2 Property is classified and assessed under clause (3) only 35.3 if the government agency or income-providing source certifies, 35.4 upon the request of the homestead occupant, that the homestead 35.5 occupant satisfies the disability requirements of this paragraph. 35.6 Property is classified and assessed pursuant to clause (1) 35.7 only if the commissioner of revenue certifies to the assessor 35.8 that the homestead occupant satisfies the requirements of this 35.9 paragraph. 35.10 Permanently and totally disabled for the purpose of this 35.11 subdivision means a condition which is permanent in nature and 35.12 totally incapacitates the person from working at an occupation 35.13 which brings the person an income. The first$32,000$50,000 35.14 market value of class 1b property has a net class rate of .45 35.15 percent of its market value. The remaining market value of 35.16 class 1b property has a class rate using the rates for class 1a 35.17 or class 2a property, whichever is appropriate, of similar 35.18 market value. 35.19 (c) Class 1c property is commercial use real property that 35.20 abuts a lakeshore line and is devoted to temporary and seasonal 35.21 residential occupancy for recreational purposes but not devoted 35.22 to commercial purposes for more than 250 days in the year 35.23 preceding the year of assessment, and that includes a portion 35.24 used as a homestead by the owner, which includes a dwelling 35.25 occupied as a homestead by a shareholder of a corporation that 35.26 owns the resort, a partner in a partnership that owns the 35.27 resort, or a member of a limited liability company that owns the 35.28 resort even if the title to the homestead is held by the 35.29 corporation, partnership, or limited liability company. For 35.30 purposes of this clause, property is devoted to a commercial 35.31 purpose on a specific day if any portion of the property, 35.32 excluding the portion used exclusively as a homestead, is used 35.33 for residential occupancy and a fee is charged for residential 35.34 occupancy. The first$500,000$300,000 of market value of class 35.35 1c property has a class rate ofone0.55 percent, and the 35.36remainingnext $1,500,000 of market value of class 1c property 36.1 has a class rate of one percent, with the following limitation:36.2the area of the property must not exceed 100 feet of lakeshore36.3footage for each cabin or campsite located on the property up to36.4a total of 800 feet and 500 feet in depth, measured away from36.5the lakeshore. Any remaining market value is class 4c 36.6 property. If any portion of the class 1c resort property is 36.7 classified as class 4c under subdivision 25, the entire property 36.8 must meet the requirements of subdivision 25, paragraph (d), 36.9 clause (1), to qualify for class 1c treatment under this 36.10 paragraph. 36.11 (d) Class 1d property includes structures that meet all of 36.12 the following criteria: 36.13 (1) the structure is located on property that is classified 36.14 as agricultural property under section 273.13, subdivision 23; 36.15 (2) the structure is occupied exclusively by seasonal farm 36.16 workers during the time when they work on that farm, and the 36.17 occupants are not charged rent for the privilege of occupying 36.18 the property, provided that use of the structure for storage of 36.19 farm equipment and produce does not disqualify the property from 36.20 classification under this paragraph; 36.21 (3) the structure meets all applicable health and safety 36.22 requirements for the appropriate season; and 36.23 (4) the structure is not salable as residential property 36.24 because it does not comply with local ordinances relating to 36.25 location in relation to streets or roads. 36.26 The market value of class 1d property has the same class 36.27 rates as class 1a property under paragraph (a). 36.28 [EFFECTIVE DATE.] This section is effective for taxes 36.29 levied in 2005, payable in 2006, and thereafter. 36.30 Sec. 20. Minnesota Statutes 2004, section 273.13, 36.31 subdivision 25, is amended to read: 36.32 Subd. 25. [CLASS 4.] (a) Class 4a is residential real 36.33 estate containing four or more units and used or held for use by 36.34 the owner or by the tenants or lessees of the owner as a 36.35 residence for rental periods of 30 days or more, excluding 36.36 property qualifying for class 4d. Class 4a also includes 37.1 hospitals licensed under sections 144.50 to 144.56, other than 37.2 hospitals exempt under section 272.02, and contiguous property 37.3 used for hospital purposes, without regard to whether the 37.4 property has been platted or subdivided. The market value of 37.5 class 4a property has a class rate of1.8 percent for taxes37.6payable in 2002, 1.5 percent for taxes payable in 2003, and1.25 37.7 percentfor taxes payable in 2004 and thereafter, except that37.8class 4a property consisting of a structure for which37.9construction commenced after June 30, 2001, has a class rate of37.101.25 percent of market value for taxes payable in 2003 and37.11subsequent years. 37.12 (b) Class 4b includes: 37.13 (1) residential real estate containing less than four units 37.14 that does not qualify as class 4bb, other than seasonal 37.15 residential recreational property; 37.16 (2) manufactured homes not classified under any other 37.17 provision; 37.18 (3) a dwelling, garage, and surrounding one acre of 37.19 property on a nonhomestead farm classified under subdivision 23, 37.20 paragraph (b) containing two or three units; and 37.21 (4) unimproved property that is classified residential as 37.22 determined under subdivision 33. 37.23 The market value of class 4b property has a class rate of 37.241.5 percent for taxes payable in 2002, and1.25 percentfor37.25taxes payable in 2003 and thereafter. 37.26 (c) Class 4bb includes: 37.27 (1) nonhomestead residential real estate containing one 37.28 unit, other than seasonal residential recreational property; and 37.29 (2) a single family dwelling, garage, and surrounding one 37.30 acre of property on a nonhomestead farm classified under 37.31 subdivision 23, paragraph (b). 37.32 Class 4bb property has the same class rates as class 1a 37.33 property under subdivision 22. 37.34 Property that has been classified as seasonal residential 37.35 recreational property at any time during which it has been owned 37.36 by the current owner or spouse of the current owner does not 38.1 qualify for class 4bb. 38.2 (d) Class 4c property includes: 38.3 (1) except as provided in subdivision 22, paragraph (c), 38.4 real property devoted to temporary and seasonal residential 38.5 occupancy for recreation purposes, including real property 38.6 devoted to temporary and seasonal residential occupancy for 38.7 recreation purposes and not devoted to commercial purposes for 38.8 more than 250 days in the year preceding the year of 38.9 assessment. For purposes of this clause, property is devoted to 38.10 a commercial purpose on a specific day if any portion of the 38.11 property is used for residential occupancy, and a fee is charged 38.12 for residential occupancy. In order for a property to be 38.13 classified as class 4c, seasonal residential recreational for 38.14 commercial purposes, at least 40 percent of the annual gross 38.15 lodging receipts related to the property must be from business 38.16 conducted during 90 consecutive days and either (i) at least 60 38.17 percent of all paid bookings by lodging guests during the year 38.18 must be for periods of at least two consecutive nights; or (ii) 38.19 at least 20 percent of the annual gross receipts must be from 38.20 charges for rental of fish houses, boats and motors, 38.21 snowmobiles, downhill or cross-country ski equipment, or charges 38.22 for marina services, launch services, and guide services, or the 38.23 sale of bait and fishing tackle. For purposes of this 38.24 determination, a paid booking of five or more nights shall be 38.25 counted as two bookings. Class 4c also includes commercial use 38.26 real property used exclusively for recreational purposes in 38.27 conjunction with class 4c property devoted to temporary and 38.28 seasonal residential occupancy for recreational purposes, up to 38.29 a total of two acres, provided the property is not devoted to 38.30 commercial recreational use for more than 250 days in the year 38.31 preceding the year of assessment and is located within two miles 38.32 of the class 4c property with which it is used. Class 4c 38.33 property classified in this clause also includes the remainder 38.34 of class 1c resorts provided that the entire property including 38.35 that portion of the property classified as class 1c also meets 38.36 the requirements for class 4c under this clause; otherwise the 39.1 entire property is classified as class 3. Owners of real 39.2 property devoted to temporary and seasonal residential occupancy 39.3 for recreation purposes and all or a portion of which was 39.4 devoted to commercial purposes for not more than 250 days in the 39.5 year preceding the year of assessment desiring classification as 39.6 class 1c or 4c, must submit a declaration to the assessor 39.7 designating the cabins or units occupied for 250 days or less in 39.8 the year preceding the year of assessment by January 15 of the 39.9 assessment year. Those cabins or units and a proportionate 39.10 share of the land on which they are located will be designated 39.11 class 1c or 4c as otherwise provided. The remainder of the 39.12 cabins or units and a proportionate share of the land on which 39.13 they are located will be designated as class 3a. The owner of 39.14 property desiring designation as class 1c or 4c property must 39.15 provide guest registers or other records demonstrating that the 39.16 units for which class 1c or 4c designation is sought were not 39.17 occupied for more than 250 days in the year preceding the 39.18 assessment if so requested. The portion of a property operated 39.19 as a (1) restaurant, (2) bar, (3) gift shop, and (4) other 39.20 nonresidential facility operated on a commercial basis not 39.21 directly related to temporary and seasonal residential occupancy 39.22 for recreation purposes shall not qualify for class 1c or 4c; 39.23 (2) qualified property used as a golf course if: 39.24 (i) it is open to the public on a daily fee basis. It may 39.25 charge membership fees or dues, but a membership fee may not be 39.26 required in order to use the property for golfing, and its green 39.27 fees for golfing must be comparable to green fees typically 39.28 charged by municipal courses; and 39.29 (ii) it meets the requirements of section 273.112, 39.30 subdivision 3, paragraph (d). 39.31 A structure used as a clubhouse, restaurant, or place of 39.32 refreshment in conjunction with the golf course is classified as 39.33 class 3a property; 39.34 (3) real property up to a maximum of one acre of land owned 39.35 by a nonprofit community service oriented organization; provided 39.36 that the property is not used for a revenue-producing activity 40.1 for more than six days in the calendar year preceding the year 40.2 of assessment and the property is not used for residential 40.3 purposes on either a temporary or permanent basis. For purposes 40.4 of this clause, a "nonprofit community service oriented 40.5 organization" means any corporation, society, association, 40.6 foundation, or institution organized and operated exclusively 40.7 for charitable, religious, fraternal, civic, or educational 40.8 purposes, and which is exempt from federal income taxation 40.9 pursuant to section 501(c)(3), (10), or (19) of the Internal 40.10 Revenue Code of 1986, as amended through December 31, 1990. For 40.11 purposes of this clause, "revenue-producing activities" shall 40.12 include but not be limited to property or that portion of the 40.13 property that is used as an on-sale intoxicating liquor or 3.2 40.14 percent malt liquor establishment licensed under chapter 340A, a 40.15 restaurant open to the public, bowling alley, a retail store, 40.16 gambling conducted by organizations licensed under chapter 349, 40.17 an insurance business, or office or other space leased or rented 40.18 to a lessee who conducts a for-profit enterprise on the 40.19 premises. Any portion of the property which is used for 40.20 revenue-producing activities for more than six days in the 40.21 calendar year preceding the year of assessment shall be assessed 40.22 as class 3a. The use of the property for social events open 40.23 exclusively to members and their guests for periods of less than 40.24 24 hours, when an admission is not charged nor any revenues are 40.25 received by the organization shall not be considered a 40.26 revenue-producing activity; 40.27 (4) postsecondary student housing of not more than one acre 40.28 of land that is owned by a nonprofit corporation organized under 40.29 chapter 317A and is used exclusively by a student cooperative, 40.30 sorority, or fraternity for on-campus housing or housing located 40.31 within two miles of the border of a college campus; 40.32 (5) manufactured home parks as defined in section 327.14, 40.33 subdivision 3; 40.34 (6) real property that is actively and exclusively devoted 40.35 to indoor fitness, health, social, recreational, and related 40.36 uses, is owned and operated by a not-for-profit corporation, and 41.1 is located within the metropolitan area as defined in section 41.2 473.121, subdivision 2; 41.3 (7) a leased or privately owned noncommercial aircraft 41.4 storage hangar not exempt under section 272.01, subdivision 2, 41.5 and the land on which it is located, provided that: 41.6 (i) the land is on an airport owned or operated by a city, 41.7 town, county, Metropolitan Airports Commission, or group 41.8 thereof; and 41.9 (ii) the land lease, or any ordinance or signed agreement 41.10 restricting the use of the leased premise, prohibits commercial 41.11 activity performed at the hangar. 41.12 If a hangar classified under this clause is sold after June 41.13 30, 2000, a bill of sale must be filed by the new owner with the 41.14 assessor of the county where the property is located within 60 41.15 days of the sale;and41.16 (8) a privately owned noncommercial aircraft storage hangar 41.17 not exempt under section 272.01, subdivision 2, and the land on 41.18 which it is located, provided that: 41.19 (i) the land abuts a public airport; and 41.20 (ii) the owner of the aircraft storage hangar provides the 41.21 assessor with a signed agreement restricting the use of the 41.22 premises, prohibiting commercial use or activity performed at 41.23 the hangar; and 41.24 (9) residential real estate, a portion of which is used by 41.25 the owner for homestead purposes, and that is also a place of 41.26 lodging, if all of the following criteria are met: 41.27 (i) rooms are provided for rent to transient guests that 41.28 generally stay for periods of 14 or fewer days; 41.29 (ii) meals are provided to persons who rent rooms, the cost 41.30 of which is incorporated in the basic room rate; 41.31 (iii) meals are not provided to the general public except 41.32 for special events on fewer than seven days in the calendar year 41.33 preceding the year of the assessment; and 41.34 (iv) the owner is the operator of the property. 41.35 The market value subject to the 4c classification under this 41.36 clause is limited to five rental units. Any rental units on the 42.1 property in excess of five, must be valued and assessed as class 42.2 3a. The portion of the property used for purposes of a 42.3 homestead by the owner must be classified as class 1a property 42.4 under subdivision 22. 42.5 Class 4c property has a class rate of 1.5 percent of market 42.6 value, except that (i) each parcel of seasonal residential 42.7 recreational property not used for commercial purposes has the 42.8 same class rates as class 4bb property, (ii) manufactured home 42.9 parks assessed under clause (5) have the same class rate as 42.10 class 4b property, (iii) commercial-use seasonal residential 42.11 recreational property has a class rate of one percent for the 42.12 first $500,000 of market value, which includes any market value 42.13 receiving the one percent rate under subdivision 22, and 1.25 42.14 percent for the remaining market value, (iv) the market value of 42.15 property described in clause (4) has a class rate of one 42.16 percent, (v) the market value of property described in clauses 42.17 (2) and (6) has a class rate of 1.25 percent, and (vi) that 42.18 portion of the market value of property in clause (8) qualifying 42.19 for class 4c property has a class rate of 1.25 percent. 42.20 (e) Class 4d property is qualifying low-income rental 42.21 housing certified to the assessor by the Housing Finance Agency 42.22 under section 273.126, subdivision 3. If only a portion of the 42.23 units in the building qualify as low-income rental housing units 42.24 as certified under section 273.126, subdivision 3, only the 42.25 proportion of qualifying units to the total number of units in 42.26 the building qualify for class 4d. The remaining portion of the 42.27 building shall be classified by the assessor based upon its 42.28 use. Class 4d also includes the same proportion of land as the 42.29 qualifying low-income rental housing units are to the total 42.30 units in the building. For all properties qualifying as class 42.31 4d, the market value determined by the assessor must be based on 42.32 the normal approach to value using normal unrestricted rents. 42.33 Class 4d property has a class rate of 1.0 percent. 42.34 [EFFECTIVE DATE.] This section is effective for taxes 42.35 payable in 2006 and subsequent years. 42.36 Sec. 21. Minnesota Statutes 2004, section 273.13, is 43.1 amended by adding a subdivision to read: 43.2 Subd. 34. [HOMESTEAD OF DISABLED VETERAN OR SURVIVING 43.3 SPOUSE.] (a) The first $200,000 of market value of property 43.4 qualifying for homestead classification under subdivision 22 or 43.5 23 is excluded in determining the property's taxable market 43.6 value if it serves as the homestead of a military veteran, as 43.7 defined in section 197.447, who has a total and permanent 43.8 service-connected disability. To qualify for exclusion under 43.9 this subdivision, the veteran must have been honorably 43.10 discharged from the United States armed forces, as indicated by 43.11 United States Government Form DD214 or other official military 43.12 discharge papers, and must be certified by the United States 43.13 Veterans Administration as having a total (100 percent) and 43.14 permanent service-connected disability. 43.15 (b) If a disabled veteran qualifying for a valuation 43.16 exclusion under paragraph (a) predeceases the veteran's spouse, 43.17 and if upon the death of the veteran the spouse holds the legal 43.18 or beneficial title to the homestead and permanently resides 43.19 there, the exclusion shall carry over to the benefit of the 43.20 veteran's spouse until such time as the spouse remarries or 43.21 sells or otherwise disposes of the property. 43.22 (c) In the case of an agricultural homestead, only the 43.23 portion of the property consisting of the house and garage and 43.24 immediately surrounding one acre of land qualifies for the 43.25 valuation exclusion under this subdivision. 43.26 (d) A property owner attempting to first qualify for a 43.27 valuation exclusion under this subdivision must apply to the 43.28 assessor by July 1 of the assessment year, except that for 43.29 assessment year 2005 application may be made until September 1, 43.30 2005. The application must be accompanied by supporting 43.31 documentation as required by the assessor. Once a property has 43.32 been accepted for a valuation exclusion under this subdivision, 43.33 the property continues to qualify until there is a change in 43.34 ownership of the property. 43.35 (e) The value of any qualifying property in excess of 43.36 $200,000 must be treated exactly the same as if the first 44.1 $200,000 in value had not been excluded, for purposes of 44.2 determining the appropriate class rate. A property qualifying 44.3 for exclusion under this subdivision shall not be eligible for 44.4 the credit under section 273.1384, subdivision 1. 44.5 [EFFECTIVE DATE.] This section is effective for assessment 44.6 year 2005 and thereafter, for taxes payable in 2006 and 44.7 thereafter. 44.8 Sec. 22. Minnesota Statutes 2004, section 274.01, 44.9 subdivision 1, is amended to read: 44.10 Subdivision 1. [ORDINARY BOARD; MEETINGS, DEADLINES, 44.11 GRIEVANCES.] (a) The town board of a town, or the council or 44.12 other governing body of a city, is the board of appeal and 44.13 equalization except (1) in cities whose charters provide for a 44.14 board of equalization or (2) in any city or town that has 44.15 transferred its local board of review power and duties to the 44.16 county board as provided in subdivision 3. The county assessor 44.17 shall fix a day and time when the board or the board of 44.18 equalization shall meet in the assessment districts of the 44.19 county. Notwithstanding any law or city charter to the 44.20 contrary, a city board of equalization shall be referred to as a 44.21 board of appeal and equalization. On or before February 15 of 44.22 each year the assessor shall give written notice of the time to 44.23 the city or town clerk. Notwithstanding the provisions of any 44.24 charter to the contrary, the meetings must be held between April 44.25 1 and May 31 each year. The clerk shall give published and 44.26 posted notice of the meeting at least ten days before the date 44.27 of the meeting. 44.28 The board shall meet at the office of the clerk to review 44.29 the assessment and classification of property in the town or 44.30 city. No changes in valuation or classification which are 44.31 intended to correct errors in judgment by the county assessor 44.32 may be made by the county assessor after the board has adjourned 44.33 in those cities or towns that hold a local board of review; 44.34 however, corrections of errors that are merely clerical in 44.35 nature or changes that extend homestead treatment to property 44.36 are permitted after adjournment until the tax extension date for 45.1 that assessment year. The changes must be fully documented and 45.2 maintained in the assessor's office and must be available for 45.3 review by any person. A copy of the changes made during this 45.4 period in those cities or towns that hold a local board of 45.5 review must be sent to the county board no later than December 45.6 31 of the assessment year. 45.7 (b) The board shall determine whether the taxable property 45.8 in the town or city has been properly placed on the list and 45.9 properly valued by the assessor. If real or personal property 45.10 has been omitted, the board shall place it on the list with its 45.11 market value, and correct the assessment so that each tract or 45.12 lot of real property, and each article, parcel, or class of 45.13 personal property, is entered on the assessment list at its 45.14 market value. No assessment of the property of any person may 45.15 be raised unless the person has been duly notified of the intent 45.16 of the board to do so. On application of any person feeling 45.17 aggrieved, the board shall review the assessment or 45.18 classification, or both, and correct it as appears just.The45.19board may not make an individual market value adjustment or45.20classification change that would benefit the property in cases45.21where the owner or other person having control over the property45.22will not permit the assessor to inspect the property and the45.23interior of any buildings or structures.45.24 (c) A local board may reduce assessments upon petition of 45.25 the taxpayer but the total reductions must not reduce the 45.26 aggregate assessment made by the county assessor by more than 45.27 one percent. If the total reductions would lower the aggregate 45.28 assessments made by the county assessor by more than one 45.29 percent, none of the adjustments may be made. The assessor 45.30 shall correct any clerical errors or double assessments 45.31 discovered by the board without regard to the one percent 45.32 limitation. 45.33 (d) A local board does not have authority to grant an 45.34 exemption or to order property removed from the tax rolls. 45.35 (e) A majority of the members may act at the meeting, and 45.36 adjourn from day to day until they finish hearing the cases 46.1 presented. The assessor shall attend, with the assessment books 46.2 and papers, and take part in the proceedings, but must not 46.3 vote. The county assessor, or an assistant delegated by the 46.4 county assessor shall attend the meetings. The board shall list 46.5 separately, on a form appended to the assessment book, all 46.6 omitted property added to the list by the board and all items of 46.7 property increased or decreased, with the market value of each 46.8 item of property, added or changed by the board, placed opposite 46.9 the item. The county assessor shall enter all changes made by 46.10 the board in the assessment book. 46.11 (f) Except as provided in subdivision 3, if a person fails 46.12 to appear in person, by counsel, or by written communication 46.13 before the board after being duly notified of the board's intent 46.14 to raise the assessment of the property, or if a person feeling 46.15 aggrieved by an assessment or classification fails to apply for 46.16 a review of the assessment or classification, the person may not 46.17 appear before the county board of appeal and equalization for a 46.18 review of the assessment or classification. This paragraph does 46.19 not apply if an assessment was made after the local board 46.20 meeting, as provided in section 273.01, or if the person can 46.21 establish not having received notice of market value at least 46.22 five days before the local board meeting. 46.23 (g) The local board must complete its work and adjourn 46.24 within 20 days from the time of convening stated in the notice 46.25 of the clerk, unless a longer period is approved by the 46.26 commissioner of revenue. No action taken after that date is 46.27 valid. All complaints about an assessment or classification 46.28 made after the meeting of the board must be heard and determined 46.29 by the county board of equalization. A nonresident may, at any 46.30 time, before the meeting of the board file written objections to 46.31 an assessment or classification with the county assessor. The 46.32 objections must be presented to the board at its meeting by the 46.33 county assessor for its consideration. 46.34 Sec. 23. Minnesota Statutes 2004, section 275.025, 46.35 subdivision 4, is amended to read: 46.36 Subd. 4. [APPORTIONMENT AND LEVY OF STATE GENERAL TAX.] 47.1 Ninety-five percent of the state general tax must bedistributed47.2among the countieslevied by applying a uniform rate toeach47.3county'sall commercial-industrial tax capacity anditsfive 47.4 percent of the state general tax must be levied by applying a 47.5 uniform rate to all seasonal residential recreational tax 47.6 capacity.Within each county, the tax must be levied by47.7applying a uniform rate against commercial-industrial tax47.8capacity and seasonal residential recreational tax capacity.On 47.9 or before October 1 each year, the commissioner of revenue shall 47.10 certifyathe preliminary state general levyraterates to each 47.11 county auditor that must be used to prepare the notices of 47.12 proposed property taxes for taxes payable in the following 47.13 year. By January 1 of each year, the commissioner shall certify 47.14 the final state general levy rate to each county auditor that 47.15 shall be used in spreading taxes. 47.16 [EFFECTIVE DATE.] This section is effective for taxes 47.17 payable in 2006 and thereafter. 47.18 Sec. 24. Minnesota Statutes 2004, section 276.04, 47.19 subdivision 2, is amended to read: 47.20 Subd. 2. [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 47.21 shall provide for the printing of the tax statements. The 47.22 commissioner of revenue shall prescribe the form of the property 47.23 tax statement and its contents. The statement must contain a 47.24 tabulated statement of the dollar amount due to each taxing 47.25 authority and the amount of the state tax from the parcel of 47.26 real property for which a particular tax statement is prepared. 47.27 The dollar amounts attributable to the county, the state tax, 47.28 the voter approved school tax, the other local school tax, the 47.29 township or municipality, and the total of the metropolitan 47.30 special taxing districts as defined in section 275.065, 47.31 subdivision 3, paragraph (i), must be separately stated. The 47.32 amounts due all other special taxing districts, if any, may be 47.33 aggregated except that any levies made by the regional rail 47.34 authorities in the county of Anoka, Carver, Dakota, Hennepin, 47.35 Ramsey, Scott, or Washington under chapter 398A shall be listed 47.36 on a separate line directly under the appropriate county's 48.1 levy. If the county levy under this paragraph includes an 48.2 amount for a lake improvement district as defined under sections 48.3 103B.501 to 103B.581, the amount attributable for that purpose 48.4 must be separately stated from the remaining county levy 48.5 amount. In the case of Ramsey County, if the county levy under 48.6 this paragraph includes an amount for public library service 48.7 under section 134.07, the amount attributable for that purpose 48.8 may be separated from the remaining county levy amount. The 48.9 amount of the tax on homesteads qualifying under the senior 48.10 citizens' property tax deferral program under chapter 290B is 48.11 the total amount of property tax before subtraction of the 48.12 deferred property tax amount. The amount of the tax on 48.13 contamination value imposed under sections 270.91 to 270.98, if 48.14 any, must also be separately stated. The dollar amounts, 48.15 including the dollar amount of any special assessments, may be 48.16 rounded to the nearest even whole dollar. For purposes of this 48.17 section whole odd-numbered dollars may be adjusted to the next 48.18 higher even-numbered dollar. The amount of market value 48.19 excluded under section 273.11, subdivision 16, if any, must also 48.20 be listed on the tax statement. 48.21 (b) The property tax statements for manufactured homes and 48.22 sectional structures taxed as personal property shall contain 48.23 the same information that is required on the tax statements for 48.24 real property. 48.25 (c) Real and personal property tax statements must contain 48.26 the following information in the order given in this paragraph. 48.27 The information must contain the current year tax information in 48.28 the right column with the corresponding information for the 48.29 previous year in a column on the left: 48.30 (1) the property's estimated market value under section 48.31 273.11, subdivision 1; 48.32 (2) the property's taxable market value after reductions 48.33 under section 273.11, subdivisions 1a and 16; 48.34 (3) the property's gross tax, calculated by adding the 48.35 property's total property tax to the sum of the aids enumerated 48.36 in clause (4); 49.1 (4) a total of the following aids: 49.2 (i) education aids payable under chapters 122A, 123A, 123B, 49.3 124D, 125A, 126C, and 127A; 49.4 (ii) local government aids for cities, towns, and counties 49.5 underchapter 477Asections 477A.011 to 477A.04; and 49.6 (iii) disparity reduction aid under section 273.1398; 49.7 (5) for homestead residential and agricultural properties, 49.8 the credits under section 273.1384; 49.9 (6) any credits received under sections 273.119; 273.123; 49.10 273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 49.11 473H.10, except that the amount of credit received under section 49.12 273.135 must be separately stated and identified as "taconite 49.13 tax relief"; and 49.14 (7) the net tax payable in the manner required in paragraph 49.15 (a). 49.16 (d) If the county uses envelopes for mailing property tax 49.17 statements and if the county agrees, a taxing district may 49.18 include a notice with the property tax statement notifying 49.19 taxpayers when the taxing district will begin its budget 49.20 deliberations for the current year, and encouraging taxpayers to 49.21 attend the hearings. If the county allows notices to be 49.22 included in the envelope containing the property tax statement, 49.23 and if more than one taxing district relative to a given 49.24 property decides to include a notice with the tax statement, the 49.25 county treasurer or auditor must coordinate the process and may 49.26 combine the information on a single announcement. 49.27 The commissioner of revenue shall certify to the county 49.28 auditor the actual or estimated aids enumerated in clause (4) 49.29 that local governments will receive in the following year. The 49.30 commissioner must certify this amount by January 1 of each year. 49.31 [EFFECTIVE DATE.] This section is effective for property 49.32 tax statements for taxes payable in 2006 and thereafter. 49.33 Sec. 25. [280.44] [NOTIFICATION TO HOMESTEAD PROPERTY 49.34 OWNERS; TAX DELINQUENCY.] 49.35 In addition to other notices required under this chapter, 49.36 the county auditor shall notify all taxpayers owning homestead 50.1 property within the county whose real property taxes on that 50.2 homestead are currently delinquent and also were delinquent in 50.3 the preceding calendar year. The notification must be mailed 50.4 sometime between June 1 and August 1 in the year following the 50.5 second year that property taxes were not paid. The notification 50.6 must contain a telephone number and an e-mail address for the 50.7 county auditor's office to aid the taxpayer in contacting the 50.8 county to discuss any questions relating to the tax 50.9 delinquency. The notification must contain a list of the 50.10 various assistance programs and other options that might be 50.11 available to the taxpayer to pay the delinquent taxes including, 50.12 but not limited to, the senior citizens' property tax deferral 50.13 under chapter 290B, partial property tax payments, and a 50.14 confession of judgment under section 279.37. The notice must 50.15 inform the taxpayer of the state-paid property tax refund and 50.16 the additional property tax refund under chapter 290A which may 50.17 be available to the taxpayer once the delinquent taxes have been 50.18 satisfied. The notice must also state the number of years 50.19 before the property will forfeit if the taxes are not paid or 50.20 any installment plan initiated. For purposes of this section, 50.21 "homestead" property means property classified under section 50.22 273.13, subdivision 22 or 23, paragraph (a). 50.23 [EFFECTIVE DATE.] This section is effective for property 50.24 tax delinquencies beginning January 1, 2006, provided that for 50.25 calendar year 2006, the county auditor shall notify the owners 50.26 of each homestead property in the county that has been 50.27 delinquent for two or more years. 50.28 Sec. 26. Minnesota Statutes 2004, section 290A.03, 50.29 subdivision 11, is amended to read: 50.30 Subd. 11. [RENT CONSTITUTING PROPERTY TAXES.] "Rent 50.31 constituting property taxes" means19 percent of the gross rent50.32actually paid in cash, or its equivalent, or the portion of rent50.33 the amount of gross rent actually paid in cash, or its 50.34 equivalent, which is attributable (1) to the property tax paid 50.35 on the unit or (2) to the amount paid in lieu of property taxes, 50.36 in any calendar year by a claimant for the right of occupancy of 51.1 the claimant's Minnesota homestead in the calendar year, and 51.2 which rent constitutes the basis, in the succeeding calendar 51.3 year of a claim for relief under this chapter by the 51.4 claimant. The amount of rent attributable to property taxes 51.5 paid or payments in lieu made on the unit must be determined by 51.6 multiplying the gross rent paid by the claimant for the calendar 51.7 year for the unit by a fraction, the numerator of which is the 51.8 net tax on the property where the unit is located and the 51.9 denominator of which is the total scheduled rent. In no case 51.10 may the rent constituting property taxes exceed 50 percent of 51.11 the gross rent paid by the claimant during that calendar year. 51.12 In the case of a claimant who resides in a unit for which (1) a 51.13 rent subsidy is paid to, or for, the claimant based on the 51.14 income of the claimant or the claimant's family, or (2) a 51.15 subsidy is paid to a public housing authority that owns or 51.16 operates the claimant's rental unit, pursuant to United States 51.17 Code, title 42, section 1437c, 20 percent of gross rent actually 51.18 paid in cash or its equivalent shall be the claimant's "rent 51.19 constituting property taxes paid." For purposes of this 51.20 subdivision, "rent subsidy" does not include any housing 51.21 assistance received under the Minnesota family investment 51.22 program, general assistance, Minnesota supplemental assistance, 51.23 supplemental security income, or similar income maintenance 51.24 programs. 51.25 [EFFECTIVE DATE.] This section is effective for claims 51.26 based on rent paid in 2005 and following years. 51.27 Sec. 27. Minnesota Statutes 2004, section 290A.03, 51.28 subdivision 13, is amended to read: 51.29 Subd. 13. [PROPERTY TAXES PAYABLE.] "Property taxes 51.30 payable" means the property tax exclusive of special 51.31 assessments, penalties, and interest payable on a claimant's 51.32 homestead after deductions made under sections 273.135, 51.33 273.1384, 273.1391, 273.42, subdivision 2, and any other state 51.34 paid property tax credits in any calendar year, and after any 51.35 refund claimed and allowable under section 290A.04, subdivision 51.36 2h, that is first payable in the year that the property tax is 52.1 payable. In the case of a claimant who makes ground lease 52.2 payments, "property taxes payable" includes the amount of the 52.3 payments directly attributable to the property taxes assessed 52.4 against the parcel on which the house is located. No 52.5 apportionment or reduction of the "property taxes payable" shall 52.6 be required for the use of a portion of the claimant's homestead 52.7 for a business purpose if the claimant does not deduct any 52.8 business depreciation expenses for the use of a portion of the 52.9 homestead in the determination of federal adjusted gross 52.10 income. For homesteads which are manufactured homes as defined 52.11 in section 273.125, subdivision 8, and for homesteads which are 52.12 park trailers taxed as manufactured homes under section 168.012, 52.13 subdivision 9, "property taxes payable" shall also include1952.14percentthe amount of the gross rent paid in the preceding year 52.15 for the site on which the homestead is located, which is 52.16 attributable to the net tax paid on the site. The amount 52.17 attributable to property taxes must be determined by multiplying 52.18 the net tax on the parcel by a fraction, the numerator of which 52.19 is the gross rent paid for the calendar year for the site and 52.20 the denominator of which is the gross rent paid for the calendar 52.21 year for the parcel. When a homestead is owned by two or more 52.22 persons as joint tenants or tenants in common, such tenants 52.23 shall determine between them which tenant may claim the property 52.24 taxes payable on the homestead. If they are unable to agree, 52.25 the matter shall be referred to the commissioner of revenue 52.26 whose decision shall be final. Property taxes are considered 52.27 payable in the year prescribed by law for payment of the taxes. 52.28 In the case of a claim relating to "property taxes 52.29 payable," the claimant must have owned and occupied the 52.30 homestead on January 2 of the year in which the tax is payable 52.31 and (i) the property must have been classified as homestead 52.32 property pursuant to section 273.124, on or before December 15 52.33 of the assessment year to which the "property taxes payable" 52.34 relate; or (ii) the claimant must provide documentation from the 52.35 local assessor that application for homestead classification has 52.36 been made on or before December 15 of the year in which the 53.1 "property taxes payable" were payable and that the assessor has 53.2 approved the application. 53.3 [EFFECTIVE DATE.] This section is effective for claims 53.4 based on rent paid in 2005 and following years. 53.5 Sec. 28. Minnesota Statutes 2004, section 290A.03, is 53.6 amended by adding a subdivision to read: 53.7 Subd. 16. [TOTAL SCHEDULED RENT.] "Total scheduled rent" 53.8 means the sum of the monthly rents assigned to the residential 53.9 rental units in the property multiplied by 12. The rents must 53.10 be an arm's-length rental, including garage rents if any, but 53.11 not including charges for medical services furnished by the 53.12 landlord as a part of the rental agreement. In determining 53.13 total scheduled rent, no deduction is allowed for vacant units, 53.14 uncollected rent, or reduced cash rents in units occupied by 53.15 employees or agents of the owner. 53.16 [EFFECTIVE DATE.] This section is effective for claims 53.17 based on rent paid in 2005 and following years. 53.18 Sec. 29. Minnesota Statutes 2004, section 290A.03, is 53.19 amended by adding a subdivision to read: 53.20 Subd. 17. [NET TAX.] "Net tax" means: 53.21 (1) the property tax, exclusive of special assessments, 53.22 interest, and penalties, and after reduction for any state paid 53.23 property tax credits as required in subdivision 13 except for 53.24 the reduction under section 273.13, subdivisions 22 and 23; or 53.25 (2) the payments made in lieu of ad valorem taxes, 53.26 including payments of special assessments imposed in lieu of ad 53.27 valorem taxes, 53.28 for the calendar year in which the rent was paid. If a portion 53.29 of the property is occupied as a homestead or is used for other 53.30 than rental purposes, the net tax is the amount of tax reduced 53.31 by the percentage that the nonrental use comprises of the total 53.32 square footage of the building. If a portion of the property is 53.33 used for purposes other than for residential rental and none of 53.34 the property is occupied as a homestead, the net tax is the 53.35 amount of the tax of the parcel multiplied by a fraction, the 53.36 numerator of which is the total net tax capacity of the parcel. 54.1 If a portion of the property is used for other than rental 54.2 residential purposes, the county treasurer shall list on the 54.3 property tax statement the amount of net tax pertaining to the 54.4 rental residential portion of the property. 54.5 The amount of the net tax must not be reduced by an 54.6 abatement or a court-ordered reduction in the property tax on 54.7 the property made after the certificate of rent paid has been 54.8 provided to the renter. 54.9 [EFFECTIVE DATE.] This section is effective for claims 54.10 based on rent paid in 2005 and following years. 54.11 Sec. 30. Minnesota Statutes 2004, section 290A.07, is 54.12 amended by adding a subdivision to read: 54.13 Subd. 5. [EARLY PAYMENT; E-FILE CLAIMS.] The commissioner 54.14 may pay a claim up to 30 days earlier than the first permitted 54.15 date under subdivision 2a or 3 if the claim is submitted by 54.16 electronic means. 54.17 [EFFECTIVE DATE.] This section is effective the day 54.18 following final enactment. 54.19 Sec. 31. Minnesota Statutes 2004, section 290A.19, is 54.20 amended to read: 54.21 290A.19 [OWNER OR MANAGING AGENT TO FURNISH RENT 54.22 CERTIFICATE.] 54.23 (a) The owner or managing agent of any property for which 54.24 rent is paid for occupancy as a homestead must furnish a 54.25 certificate of rent paid to a person who is a renter on December 54.26 31, in the form prescribed by the commissioner. If the renter 54.27 moves before December 31, the owner or managing agent may give 54.28 the certificate to the renter at the time of moving, or mail the 54.29 certificate to the forwarding address if an address has been 54.30 provided by the renter. The certificate must be made available 54.31 to the renter before February 1 of the year following the year 54.32 in which the rent was paid. The owner or managing agent must 54.33 retain a duplicate of each certificate or an equivalent record 54.34 showing the same information for a period of three years. The 54.35 duplicate or other record must be made available to the 54.36 commissioner upon request. For the purposes of this section, 55.1 "owner" includes a park owner as defined under section 327C.01, 55.2 subdivision 6, and "property" includes a lot as defined under 55.3 section 327C.01, subdivision 3. 55.4 (b) If the owner or managing agent fails to provide the 55.5 renter with a certificate of rent constituting property taxes, 55.6 the commissioner shall allocate the net tax on the building to 55.7 the unit on a square footage basis or other appropriate basis as 55.8 the commissioner determines. The renter shall supply the 55.9 commissioner with a statement from the county treasurer that 55.10 gives the amount of property tax on the parcel, the address and 55.11 property tax parcel identification number of the property, and 55.12 the number of units in the building. 55.13 [EFFECTIVE DATE.] This section is effective for claims 55.14 based on rent paid in 2005 and following years. 55.15 Sec. 32. Minnesota Statutes 2004, section 365.43, 55.16 subdivision 1, is amended to read: 55.17 Subdivision 1. [LEVIED AMOUNT IS SPENDING LIMITTOTAL 55.18 REVENUE DEFINED.] A town must notcontract debts orspend more 55.19 money in a year thanthe taxes levied for the yearits total 55.20 revenue without a favorable vote of a majority of the town's 55.21 electors. In this section, "total revenue" means property taxes 55.22 payable in that year as well as amounts received from all other 55.23 sources and amounts carried forward from the last year. 55.24 Sec. 33. Minnesota Statutes 2004, section 365.431, is 55.25 amended to read: 55.26 365.431 [AMOUNT VOTED AT MEETING IS TAX LIMIT.] 55.27 Except as otherwise authorized by law, the tax for town 55.28 purposes must not be more than the amount voted to be raised at 55.29 the annual town meeting. 55.30 Sec. 34. Minnesota Statutes 2004, section 366.011, is 55.31 amended to read: 55.32 366.011 [CHARGES FOR EMERGENCY SERVICES; COLLECTION.] 55.33 A town may impose a reasonable service charge for emergency 55.34 services, including fire, rescue, medical, and related services 55.35 provided by the town or contracted for by the town. If the 55.36 service charge remains unpaid 30 days after a notice of 56.1 delinquency is sent to the recipient of the service or the 56.2 recipient's representative or estate, the town or its contractor 56.3 on behalf of the town may use any lawful means allowed to a 56.4 private party for the collection of an unsecured delinquent 56.5 debt. The town may also use the authority of section 366.012 to 56.6 collect unpaid service charges of this kind from delinquent 56.7 recipients of services who are owners of taxable real property 56.8 in thetownstate. 56.9 The powers conferred by this section are in addition and 56.10 supplemental to the powers conferred by any other law for a town 56.11 to impose a service charge or assessment for a service provided 56.12 by the town or contracted for by the town. 56.13 [EFFECTIVE DATE.] This section is effective the day 56.14 following final enactment. 56.15 Sec. 35. Minnesota Statutes 2004, section 366.012, is 56.16 amended to read: 56.17 366.012 [COLLECTION OF UNPAID SERVICE CHARGES.] 56.18 If a town is authorized to impose a service chargeon the56.19owner, lessee, or occupant of property, or any of them,for a 56.20 governmental service provided by the town, the town board may 56.21 certify to the county auditor of the county in which the 56.22 recipient of the services owns real property, on or before 56.23 October 15 for each year, any unpaid service charges which shall 56.24 then be collected together with property taxes levied against 56.25 the property. The county auditor shall remit to the town all 56.26 service charges collected by the auditor on behalf of the town. 56.27 A charge may be certified to the auditor only if, on or before 56.28 September 15, the town has given written notice to the property 56.29 owner of its intention to certify the charge to the auditor. 56.30 The service charges shall be subject to the same penalties, 56.31 interest, and other conditions provided for the collection of 56.32 property taxes. This section is in addition to other law 56.33 authorizing the collection of unpaid costs and service charges. 56.34 [EFFECTIVE DATE.] This section is effective the day 56.35 following final enactment. 56.36 Sec. 36. [373.251] [LEVY FOR NON-COUNTY-OWNED PUBLIC 57.1 NURSING HOMES.] 57.2 (a) If a county with a population of 150,000 or more, 57.3 according to the 2000 Federal Census, located outside the 57.4 metropolitan area as defined in section 473.121, subdivision 2, 57.5 owns a nursing home that is funded in whole or part with county 57.6 revenue, the county must levy an equal amount annually to be 57.7 distributed to all other nursing homes located within the county 57.8 that are owned by governmental units. 57.9 (b) The proceeds of the levy authorized by paragraph (a) 57.10 must be prorated among the government-owned nursing homes in the 57.11 proportion that the number of beds in each of the 57.12 government-owned nursing homes is to the total number of beds in 57.13 all of the government-owned nursing homes in the county. 57.14 (c) The levy authorized by paragraph (a) may be levied in 57.15 addition to all other county levies authorized by law. 57.16 [EFFECTIVE DATE.] This section is effective for taxes 57.17 levied in 2006, payable in 2007 and thereafter. 57.18 Sec. 37. Minnesota Statutes 2004, section 398A.03, is 57.19 amended by adding a subdivision to read: 57.20 Subd. 1a. [MUNICIPAL OPT-OUT PROVISION.] The governing 57.21 body of any municipality that is within a regional railroad 57.22 authority that has been organized under subdivision 1 may adopt 57.23 a resolution to opt-out of the regional rail authority in which 57.24 it is located. If a resolution to opt-out of the authority is 57.25 adopted by the governing body of the municipality and certified 57.26 to the board of commissioners prior to July 1, the exemption 57.27 from property tax under section 398A.04, subdivision 8, shall 57.28 take effect for property taxes payable in the following year. 57.29 [EFFECTIVE DATE.] This section is effective the day 57.30 following final enactment. 57.31 Sec. 38. Minnesota Statutes 2004, section 398A.04, 57.32 subdivision 8, is amended to read: 57.33 Subd. 8. [TAXATION.] Before deciding to exercise the power 57.34 to tax, the authority shall give six weeks' published notice in 57.35 all municipalities in the region. If a number of voters in the 57.36 region equal to five percent of those who voted for candidates 58.1 for governor at the last gubernatorial election present a 58.2 petition within nine weeks of the first published notice to the 58.3 secretary of state requesting that the matter be submitted to 58.4 popular vote, it shall be submitted at the next general 58.5 election. The question prepared shall be: 58.6 "Shall the regional rail authority have the power to impose 58.7 a property tax? 58.8 Yes ....... 58.9 No ........" 58.10 If a majority of those voting on the question approve or if 58.11 no petition is presented within the prescribed time the 58.12 authority may levy a tax at any annual rate not exceeding 58.13 0.04835 percent of market value of all taxable property situated 58.14 within the municipality or municipalities named in its 58.15 organization resolution, including the market value of any 58.16 municipalities that have opted-out of the authority under 58.17 subdivision 1a. Its recording officer shall file, on or before 58.18 September 15, in the office of the county auditor of each county 58.19 in which territory under the jurisdiction of the authority is 58.20 located a certified copy of the board of commissioners' 58.21 resolution levying the tax, and each county auditor shall assess 58.22 and extend upon the tax rolls of each municipality named in the 58.23 organization resolution, excluding any municipality that has 58.24 opted-out of the organization's resolution under subdivision 1a, 58.25 the portion of the tax that bears the same ratio to the whole 58.26 amount that the net tax capacity of taxable property in that 58.27 municipality bears to the net tax capacity of taxable property 58.28 in all municipalities named in the organization resolution, 58.29 excluding the net tax capacity of taxable property in any 58.30 municipality that has opted-out of the organization's resolution 58.31 under subdivision 1a. Collections of the tax shall be remitted 58.32 by each county treasurer to the treasurer of the authority. For 58.33 taxes levied in 1991, the amount levied for light rail transit 58.34 purposes under this subdivision shall not exceed 75 percent of 58.35 the amount levied in 1990 for light rail transit purposes under 58.36 this subdivision. 59.1 [EFFECTIVE DATE.] This section is effective beginning with 59.2 taxes levied in 2005, payable in 2006 and thereafter. 59.3 Sec. 39. [473.450] [SPECIAL TAXING DISTRICT FOR LRT.] 59.4 Subdivision 1. [CREATION.] The council shall establish a 59.5 special taxing district to pay for the cost of operating a light 59.6 rail transit line to the extent fare revenues are insufficient 59.7 to cover those costs. 59.8 Subd. 2. [AREA OF DISTRICT.] The special taxing district 59.9 consists of the area comprised of any parcel of property 59.10 located, in whole or part, within 1,000 feet of the right-of-way 59.11 for the light rail transit line and classified as class 3 59.12 property or class 4 property. 59.13 Subd. 3. [REVENUES.] (a) The revenues of the district are 59.14 the property tax increments attributable to the increase in the 59.15 net tax capacity of the district that occurs after its 59.16 certification. The tax increments must be computed in the 59.17 manner provided in this subdivision. 59.18 (b) Upon the request of the council, the county auditor 59.19 shall certify the net tax capacity of all taxable property 59.20 within the area of the special taxing district. Certification 59.21 of original net tax capacity, captured net tax capacity, and 59.22 computation of tax increment must be done following the 59.23 procedures and methods provided under section 469.177 with the 59.24 following exceptions: 59.25 (1) the current tax rate must be used, rather than the 59.26 original tax rate under section 469.177, subdivision 1a; 59.27 (2) computations of increment must be made using the option 59.28 under section 469.177, subdivision 3, paragraph (b); 59.29 (3) the county auditor shall annually adjust the original 59.30 tax capacity of the district by the average percentage change in 59.31 the tax capacity of class 3 property in the county over the 59.32 previous assessment year. 59.33 (c) The county auditor shall pay the tax increment to the 59.34 council. Revenues may only be used for the operating costs of 59.35 light rail transit. 59.36 (d) The restrictions on or requirements for tax increment 60.1 financing districts under sections 469.174 to 469.178 do not 60.2 apply to a special taxing district, except as provided in 60.3 paragraph (b) and as follows: 60.4 (1) the county may deduct its cost of administration as 60.5 permitted under section 469.176, subdivision 4h, paragraph (a); 60.6 and 60.7 (2) to the extent that revenues under this section exceed 60.8 the projected cost of light rail transit operations that exceed 60.9 fare and other revenues, the excess must be distributed as 60.10 provided under section 469.176, subdivision 2, paragraph (c), 60.11 clause (4). 60.12 Subd. 4. [TIF AND ABATEMENT.] (a) No tax increment 60.13 financing district may be created under sections 469.174 to 60.14 469.178 within the area of the special taxing district as 60.15 defined under subdivision 2. No abatement of the incremental 60.16 tax under subdivision 3 may be made under sections 469.1812 to 60.17 469.1815. 60.18 (b) Upon decertification of parcels of a tax increment 60.19 financing district that was certified before the effective date 60.20 of this section and that are located within the area defined in 60.21 subdivision 2, the council shall request certification of the 60.22 parcels to be included in the special taxing district under this 60.23 section. The auditor must certify the original net tax capacity 60.24 of the parcels based on their tax capacity for the current taxes 60.25 payable year. 60.26 [EFFECTIVE DATE.] This section is effective beginning for 60.27 property taxes payable in 2006. Subdivision 4 applies to 60.28 requests for certification of tax increment financing districts 60.29 made after the day following final enactment. 60.30 Sec. 40. Minnesota Statutes 2004, section 473F.02, 60.31 subdivision 2, is amended to read: 60.32 Subd. 2. [AREA.] "Area" means the territory included 60.33 within the boundaries of Anoka, Carver, Dakota excluding the 60.34 city of Northfield, Hennepin, Ramsey, Scott excluding the city 60.35 of New Prague, and Washington Counties, excluding lands 60.36 constituting a major or an intermediate airport as defined under 61.1 section 473.625. 61.2 [EFFECTIVE DATE.] This section is effective for taxes 61.3 payable in 2006 and subsequent years. 61.4 Sec. 41. Minnesota Statutes 2004, section 477A.11, 61.5 subdivision 4, is amended to read: 61.6 Subd. 4. [OTHER NATURAL RESOURCES LAND.] "Other natural 61.7 resources land" means:61.8(1)any other land presently owned in fee title by the 61.9 state and administered by the commissioner, or any tax-forfeited 61.10 land, other than platted lots within a city or those lands 61.11 described under subdivision 3, clause (2), which is owned by the 61.12 state and administered by the commissioner or by the county in 61.13 which it is located; and61.14(2) land leased by the state from the United States of61.15America through the United States Secretary of Agriculture61.16pursuant to Title III of the Bankhead Jones Farm Tenant Act,61.17which land is commonly referred to as land utilization project61.18land that is administered by the commissioner. 61.19 [EFFECTIVE DATE.] This section is effective for aids paid 61.20 in calendar year 2006 and thereafter. 61.21 Sec. 42. Minnesota Statutes 2004, section 477A.11, is 61.22 amended by adding a subdivision to read: 61.23 Subd. 5. [LAND UTILIZATION PROJECT LAND.] "Land 61.24 utilization project land" means land that is leased by the state 61.25 from the United States through the United States Secretary of 61.26 Agriculture according to Title III of the Bankhead Jones Farm 61.27 Tenant Act and that is administered by the commissioner. 61.28 [EFFECTIVE DATE.] This section is effective for aids paid 61.29 in calendar year 2006 and thereafter. 61.30 Sec. 43. Minnesota Statutes 2004, section 477A.12, 61.31 subdivision 1, is amended to read: 61.32 Subdivision 1. [TYPES OF LAND; PAYMENTS.] (a) As an offset 61.33 for expenses incurred by counties and towns in support of 61.34 natural resources lands, the following amounts are annually 61.35 appropriated to the commissioner of natural resources from the 61.36 general fund for transfer to the commissioner of revenue. The 62.1 commissioner of revenue shall pay the transferred funds to 62.2 counties as required by sections 477A.11 to 477A.145. The 62.3 amounts are: 62.4 (1) for acquired natural resources land, $3, as adjusted 62.5 for inflation under section 477A.145, multiplied by the total 62.6 number of acres of acquired natural resources land or, at the 62.7 county's option three-fourths of one percent of the appraised 62.8 value of all acquired natural resources land in the county, 62.9 whichever is greater; 62.10 (2) 75 cents, as adjusted for inflation under section 62.11 477A.145, multiplied by the number of acres of 62.12 county-administered other natural resources land; and 62.13 (3) 75 cents, as adjusted for inflation under section 62.14 477A.145, multiplied by the total number of acres of land 62.15 utilization project land; 62.16(3)(4) 37.5 cents, as adjusted for inflation under section 62.17 477A.145, multiplied by the number of acres of 62.18 commissioner-administered other natural resources land located 62.19 in each county as of July 1 of each year prior to the payment 62.20 year. 62.21 (b) The amount determined under paragraph (a), clause (1), 62.22 is payable for land that is acquired from a private owner and 62.23 owned by the Department of Transportation for the purpose of 62.24 replacing wetland losses caused by transportation projects, but 62.25 only if the county contains more than 500 acres of such land at 62.26 the time the certification is made under subdivision 2. 62.27 [EFFECTIVE DATE.] This section is effective for aids paid 62.28 in calendar year 2006 and thereafter. 62.29 Sec. 44. Minnesota Statutes 2004, section 477A.12, 62.30 subdivision 2, is amended to read: 62.31 Subd. 2. [PROCEDURE.] Lands for which payments in lieu are 62.32 made pursuant to section 97A.061, subdivision 3, and Laws 1973, 62.33 chapter 567, shall not be eligible for payments under this 62.34 section. Each county auditor shall certify to the Department of 62.35 Natural Resources during July of each year prior to the payment 62.36 year the number of acres of county-administered other natural 63.1 resources land within the county. The Department of Natural 63.2 resources may, in addition to the certification of acreage, 63.3 require descriptive lists of land so certified. The 63.4 commissioner of natural resources shall determine and certify to 63.5 the commissioner of revenue by March 1 of the payment year: 63.6 (1) the number of acres and most recent appraised value of 63.7 acquired natural resources land within each county; 63.8 (2) the number of acres of commissioner-administered 63.9 natural resources land within each county;and63.10 (3) the number of acres of county-administered other 63.11 natural resources land within each county, based on the reports 63.12 filed by each county auditor with the commissioner of natural 63.13 resources; and 63.14 (4) the number of acres of land utilization project land 63.15 within each county. 63.16 The commissioner of transportation shall determine and 63.17 certify to the commissioner of revenue by March 1 of the payment 63.18 year the number of acres of land and the appraised value of the 63.19 land described in subdivision 1, paragraph (b), but only if it 63.20 exceeds 500 acres. 63.21 The commissioner of revenue shall determine the 63.22 distributions provided for in this section using the number of 63.23 acres and appraised values certified by the commissioner of 63.24 natural resources and the commissioner of transportation by 63.25 March 1 of the payment year. 63.26 [EFFECTIVE DATE.] This section is effective for aids paid 63.27 in calendar year 2006 and thereafter. 63.28 Sec. 45. Minnesota Statutes 2004, section 477A.14, 63.29 subdivision 1, is amended to read: 63.30 Subdivision 1. [GENERAL DISTRIBUTION.] Except as provided 63.31 in subdivision 2 or in section 97A.061, subdivision 5, 40 63.32 percent of the total payment to the county shall be deposited in 63.33 the county general revenue fund to be used to provide property 63.34 tax levy reduction. The remainder shall be distributed by the 63.35 county in the following priority: 63.36 (a) 37.5 cents, as adjusted for inflation under section 64.1 477A.145, for each acre of county-administered other natural 64.2 resources land shall be deposited in a resource development fund 64.3 to be created within the county treasury for use in resource 64.4 development, forest management, game and fish habitat 64.5 improvement, and recreational development and maintenance of 64.6 county-administered other natural resources land. Any county 64.7 receiving less than $5,000 annually for the resource development 64.8 fund may elect to deposit that amount in the county general 64.9 revenue fund; 64.10 (b) From the funds remaining, within 30 days of receipt of 64.11 the payment to the county, the county treasurer shall pay each 64.12 organized township 30 cents, as adjusted for inflation under 64.13 section 477A.145, for each acre of acquired natural resources 64.14 land and each acre of land described in section 477A.12, 64.15 subdivision 1, paragraph (b), and 7.5 cents, as adjusted for 64.16 inflation under section 477A.145, for each acre of other natural 64.17 resources land and each acre of land utilization project land 64.18 located within its boundaries. Payments for natural resources 64.19 lands not located in an organized township shall be deposited in 64.20 the county general revenue fund. Payments to counties and 64.21 townships pursuant to this paragraph shall be used to provide 64.22 property tax levy reduction, except that of the payments for 64.23 natural resources lands not located in an organized township, 64.24 the county may allocate the amount determined to be necessary 64.25 for maintenance of roads in unorganized townships. Provided 64.26 that, if the total payment to the county pursuant to section 64.27 477A.12 is not sufficient to fully fund the distribution 64.28 provided for in this clause, the amount available shall be 64.29 distributed to each township and the county general revenue fund 64.30 on a pro rata basis; and 64.31 (c) Any remaining funds shall be deposited in the county 64.32 general revenue fund. Provided that, if the distribution to the 64.33 county general revenue fund exceeds $35,000, the excess shall be 64.34 used to provide property tax levy reduction. 64.35 [EFFECTIVE DATE.] This section is effective for aids paid 64.36 in calendar year 2006 and thereafter. 65.1 Sec. 46. Laws 1998, chapter 389, article 3, section 42, 65.2 subdivision 2, as amended by Laws 2002, chapter 377, article 4, 65.3 section 24, is amended to read: 65.4 Subd. 2. [RECAPTURE.] (a) Property or any portion thereof 65.5 qualifying under section 38 is subject to additional taxes if: 65.6 (1) ownership of the property is transferred to anyone 65.7 other than the spouse or child of the current owner; 65.8 (2) the current owner or the spouse or child of the current 65.9 owner has not conveyed or entered into a contract before July 1, 65.10 2007, to convey for ownership or public easement rights, (i) a 65.11 portion of the property toaone or more nonprofitfoundation65.12 foundations orcorporation operatingcorporations; and (ii) a 65.13 portion of the property to one or more local governments; and 65.14 those entities shall separately or jointly operate the property 65.15 as an art park providing the services included in section 38, 65.16 clauses (2) to (5), and may also use some of the property for 65.17 other public purposes as determined by the local governments; or 65.18 (3) the nonprofit foundation or corporation to which a 65.19 portion of the property was transferred ceases to provide the 65.20 services included in section 38, clauses (2) to (5), earlier 65.21 than ten years following the effective date of theconveyance65.22 conveyances or of the execution of thecontractcontracts to 65.23 convey. 65.24 (b) The additional taxes are imposed at the earlier of (1) 65.25 the year following transfer of ownership to anyone other than 65.26 the spouse or child of the current owner or a nonprofit 65.27 foundation or corporation or local government operating the 65.28 property as an art park and used for other public purposes, or 65.29 (2) for taxes payable in 2008, or (3) in the event the nonprofit 65.30 foundation or corporation to which a portion of the property was 65.31 conveyed ceases to provide the required services within ten 65.32 years after the conveyance, for taxes payable in the year 65.33 following the year when it ceased to do so. 65.34 The county board, with the approval of the city council, 65.35 shall determine the amount of the additional taxes due on the 65.36 portion of property which is no longer utilized as an art park; 66.1 provided, however, that the additional taxesare equal tomust 66.2 not be greater than the difference between the taxes determined 66.3 on that portion of the property utilized as an art park under 66.4 sections 39 and 40 and the amount determined under subdivision 1 66.5 for all years that the property qualified under section 38.The66.6additional taxes must be extended against the property on the66.7tax list for the current year; provided, however, thatNo 66.8 interest or penalties may be levied on the additionaltaxes if66.9timely paidamount provided that it is paid within 30 days of 66.10 the county's notice. 66.11 [EFFECTIVE DATE.] This section is effective March 1, 2005. 66.12 Sec. 47. Laws 2001, First Special Session chapter 5, 66.13 article 3, section 8, the effective date, is amended to read: 66.14 [EFFECTIVE DATE.] This section is effective for taxes 66.15 levied in 2002, payable in 2003, through taxes levied in200766.16 2009, payable in20082010. 66.17 Sec. 48. [REPORT; PROPOSED STANDARDIZED ASSESSMENT AND 66.18 CLASSIFICATION STANDARDS.] 66.19 Recognizing the importance of uniform and professional 66.20 property tax assessment practices, the commissioner of revenue, 66.21 in consultation with appropriate stakeholder groups shall 66.22 develop and issue a report to the chairs of the house and senate 66.23 tax committees by February 1, 2006. This report shall contain, 66.24 but not be limited to, recommendations and proposed requirements 66.25 for achieving standardized assessment and classification of 66.26 seasonal residential recreational property, residential 66.27 nonhomestead property, timber and woodland property, green acres 66.28 property, seasonal residential recreational commercial and 66.29 noncommercial property, and commercial/industrial property. 66.30 [EFFECTIVE DATE.] This section is effective the day 66.31 following final enactment. 66.32 Sec. 49. [CODE OF CONDUCT AND ETHICS; ASSESSORS.] 66.33 The commissioner of revenue is directed to develop a code 66.34 of conduct and ethics for Minnesota assessors to ensure public 66.35 confidence in property assessment. The commissioner shall 66.36 consult with representatives of the Minnesota Association of 67.1 Assessing Officers, the State Board of Assessors, and any other 67.2 groups that the commissioner deems appropriate. The code must 67.3 include language that promotes fairness and uniformity and 67.4 recommends assessment practices that do not promote the 67.5 perception of a conflict of interest. The code must be 67.6 completed and recommended to the Minnesota State Board of 67.7 Assessors for adopting by January 1, 2006. This code must be 67.8 presented as part of the course required by Minnesota Statutes, 67.9 section 273.0755, paragraph (c). 67.10 [EFFECTIVE DATE.] This section is effective the day 67.11 following final enactment. 67.12 Sec. 50. [LEVY AUTHORITY; CONDITIONS.] 67.13 A special taxing district organized under Minnesota 67.14 Statutes, chapter 398A, may not increase its property tax levy 67.15 over the amount levied for property taxes payable in 2005, 67.16 unless it has entered a contract or contracts as described in 67.17 Minnesota Statutes, section 398A.04, subdivision 11, clauses (a) 67.18 and (b). 67.19 Sec. 51. [SCHOOL DEBT SERVICE LEVIES; ALTERNATIVE TAX 67.20 BASE; PILOT PROJECT.] 67.21 Subdivision 1. [COMMISSIONER DESIGNATION.] The 67.22 commissioner of education may select up to three school 67.23 districts to participate in the pilot project under this 67.24 section. The commissioner must notify the selected school 67.25 districts by July 1, 2005. 67.26 Subd. 2. [ELECTION BY SCHOOL BOARD.] A school board 67.27 designated by the commissioner under subdivision 1 may by 67.28 resolution elect to levy the debt service for a bond issued 67.29 after July 1, 2005, and before July 1, 2007, against the 67.30 alternative net tax capacity of the district, as defined under 67.31 subdivision 6, rather than the net tax capacity of the 67.32 district. A resolution to levy against alternative net tax 67.33 capacity must be passed at an open meeting of the board, at 67.34 least 60 days prior to the referendum election. A district 67.35 electing to issue bonds with a levy against alternative net tax 67.36 capacity must notify the commissioner of that intention in 68.1 filing the proposal required by Minnesota Statutes, section 68.2 123B.71, subdivision 9. 68.3 Subd. 3. [DEBT SERVICE EQUALIZATION REVENUE.] For the 68.4 purposes of Minnesota Statutes, section 123B.53, subdivision 4, 68.5 debt service equalization revenue for a district that has issued 68.6 bonds under an election to levy against alternative net tax 68.7 capacity is the same as it would be if the levy were being made 68.8 against net tax capacity. 68.9 Subd. 4. [APPORTIONMENT OF DEBT SERVICE AID.] Equalization 68.10 aid for a district that has issued bonds under an election to 68.11 levy against alternative net tax capacity must be apportioned 68.12 between the net tax capacity debt service levy and the 68.13 alternative net tax capacity debt service levy in the same 68.14 proportions as eligible debt service revenues resulting from 68.15 bonds issued against net tax capacity are to eligible debt 68.16 service revenues resulting from bonds issued against alternative 68.17 net tax capacity. 68.18 Subd. 5. [ALTERNATIVE NET TAX CAPACITY DEBT SERVICE LEVY.] 68.19 The eligible debt service revenues resulting from bonds issued 68.20 against alternative net tax capacity, minus the debt service 68.21 equalization aid apportioned to the alternative net tax capacity 68.22 levy, must be levied against the alternative net tax capacity of 68.23 the district as defined in subdivision 6, and must be separately 68.24 certified to the county auditor under Minnesota Statutes, 68.25 section 275.07. 68.26 Subd. 6. [ALTERNATIVE NET TAX CAPACITY.] "Alternative net 68.27 tax capacity" means the net tax capacity of all taxable property 68.28 in a district, as defined in Minnesota Statutes, section 273.13, 68.29 except: 68.30 (1) the first tier of class 2a property, excluding the 68.31 portion of class 2a property consisting of the house, garage, 68.32 and surrounding one acre of land of an agricultural homestead, 68.33 has an alternative net tax capacity equal to 0.14 percent of its 68.34 taxable market value; 68.35 (2) the upper tier of class 2a property and all other class 68.36 2 property has an alternative net tax capacity equal to 0.25 69.1 percent of its taxable market value; 69.2 (3) noncommercial class 4c(1) property has an alternative 69.3 net tax capacity equal to 0.75 percent of its taxable market 69.4 value; 69.5 (4) class 4a and 4b property has an alternative net tax 69.6 capacity equal to one percent of its taxable market value; 69.7 (5) the first tier of class 3 property has an alternative 69.8 net tax capacity equal to 1.25 percent of its taxable market 69.9 value; and 69.10 (6) class 5 property and the upper tier of class 3 property 69.11 has an alternative net tax capacity equal to 1.5 percent of its 69.12 taxable market value. 69.13 [EFFECTIVE DATE.] This section is effective for taxes 69.14 payable in 2006 and thereafter. 69.15 Sec. 52. [SCHOOL PROPERTY; EXEMPTION 2005 ONLY.] 69.16 Notwithstanding Minnesota Statutes, section 272.02, 69.17 subdivision 38, paragraph (b), the following property is exempt 69.18 from taxation for assessment year 2004, for taxes payable in 69.19 2005, if it meets all the following criteria: 69.20 (1) is used to provide direct educational instruction for 69.21 grades 7 through 10; 69.22 (2) is located in a city of the first class that has a 69.23 population greater than 250,000 and less than 350,000; 69.24 (3) was purchased after July 1, 2004, by a nonprofit that 69.25 is exempt from federal income tax under section 501(c)(3) of the 69.26 Internal Revenue Code; and 69.27 (4) is leased and operated by two nonprofit corporations 69.28 organized under Minnesota Statutes, chapter 317A. 69.29 [EFFECTIVE DATE.] This section is effective the day 69.30 following final enactment. 69.31 Sec. 53. [REPEALER.] 69.32 Laws 1998, chapter 389, article 3, section 41, is repealed. 69.33 [EFFECTIVE DATE.] This section is effective the day 69.34 following final enactment. 69.35 ARTICLE 3 69.36 PROPERTY TAX AIDS AND CREDITS 70.1 Section 1. Minnesota Statutes 2004, section 4A.02, is 70.2 amended to read: 70.3 4A.02 [STATE DEMOGRAPHER.] 70.4 (a) The director shall appoint a state demographer. The 70.5 demographer must be professionally competent in demography and 70.6 must possess demonstrated ability based upon past performance. 70.7 (b) The demographer shall: 70.8 (1) continuously gather and develop demographic data 70.9 relevant to the state; 70.10 (2) design and test methods of research and data 70.11 collection; 70.12 (3) periodically prepare population projections for the 70.13 state and designated regions and periodically prepare 70.14 projections for each county or other political subdivision of 70.15 the state as necessary to carry out the purposes of this 70.16 section; 70.17 (4) review, comment on, and prepare analysis of population 70.18 estimates and projections made by state agencies, political 70.19 subdivisions, other states, federal agencies, or nongovernmental 70.20 persons, institutions, or commissions; 70.21 (5) serve as the state liaison with the United States 70.22 Bureau of the Census, coordinate state and federal demographic 70.23 activities to the fullest extent possible, and aid the 70.24 legislature in preparing a census data plan and form for each 70.25 decennial census; 70.26 (6) compile an annual study of population estimates on the 70.27 basis of county, regional, or other political or geographical 70.28 subdivisions as necessary to carry out the purposes of this 70.29 section and section 4A.03; 70.30 (7) by January 1 of each year, issue a report to the 70.31 legislature containing an analysis of the demographic 70.32 implications of the annual population study and population 70.33 projections; 70.34 (8) prepare maps for all counties in the state, all 70.35 municipalities with a population of 10,000 or more, and other 70.36 municipalities as needed for census purposes, according to scale 71.1 and detail recommended by the United States Bureau of the 71.2 Census, with the maps of cities showing precinct boundaries; 71.3 (9) prepare an estimate of population and of the number of 71.4 households for each governmental subdivision for which the 71.5 Metropolitan Council does not prepare an annual estimate, and 71.6 convey the estimates to the governing body of each political 71.7 subdivision byMayJune 1 of each year; 71.8 (10) direct, under section 414.01, subdivision 14, and 71.9 certify population and household estimates of annexed or 71.10 detached areas of municipalities or towns after being notified 71.11 of the order or letter of approval by the director; 71.12 (11) prepare, for any purpose for which a population 71.13 estimate is required by law or needed to implement a law, a 71.14 population estimate of a municipality or town whose population 71.15 is affected by action under section 379.02 or 414.01, 71.16 subdivision 14; and 71.17 (12) prepare an estimate of average household size for each 71.18 statutory or home rule charter city with a population of 2,500 71.19 or more byMayJune 1 of each year. 71.20 (c) A governing body may challenge an estimate made under 71.21 paragraph (b) by filing their specific objections in writing 71.22 with the state demographer by June1024. If the challenge does 71.23 not result in an acceptable estimateby June 24, the governing 71.24 body may have a special census conducted by the United States 71.25 Bureau of the Census. The political subdivision must notify the 71.26 state demographer by July 1 of its intent to have the special 71.27 census conducted. The political subdivision must bear all costs 71.28 of the special census. Results of the special census must be 71.29 received by the state demographer by the next April 15 to be 71.30 used in that year'sMayJune 1 estimate to the political 71.31 subdivision under paragraph (b). 71.32 (d) The state demographer shall certify the estimates of 71.33 population and household size to the commissioner of revenue by 71.34 July 15 each year, including any estimates still under objection. 71.35 [EFFECTIVE DATE.] This section is effective the day 71.36 following final enactment. 72.1 Sec. 2. Minnesota Statutes 2004, section 273.1384, 72.2 subdivision 1, is amended to read: 72.3 Subdivision 1. [RESIDENTIAL HOMESTEAD MARKET VALUE 72.4 CREDIT.] Each county auditor shall determine a homestead credit 72.5 for each class 1a, 1b, 1c, and 2a homestead property within the 72.6 county equal to 0.4 percent of the first $76,000 of market value 72.7 of the property. The amount of homestead credit for a homestead72.8may not exceed $304 and is reduced byminus .09 percent of the 72.9 market value in excess of $76,000. The credit amount may not be 72.10 less than zero. In the case of an agricultural or resort 72.11 homestead, only the market value of the house, garage, and 72.12 immediately surrounding one acre of land is eligible in 72.13 determining the property's homestead credit. In the case of a 72.14 property which is classified as part homestead and part 72.15 nonhomestead, (i) the credit shall apply only to the homestead 72.16 portion of the property., but (ii) if a portion of a property is 72.17 classified as nonhomestead solely because not all the owners 72.18 occupy the property, or solely because both spouses do not 72.19 occupy the property, the credit amount shall be initially 72.20 computed as if that nonhomestead portion were also in the 72.21 homestead class and then prorated to the owner-occupant's 72.22 percentage of ownership or prorated to one-half if both spouses 72.23 do not occupy the property. 72.24 [EFFECTIVE DATE.] This section is effective for taxes 72.25 payable in 2006 and thereafter. 72.26 Sec. 3. Minnesota Statutes 2004, section 276A.01, 72.27 subdivision 7, is amended to read: 72.28 Subd. 7. [POPULATION.] "Population" means the most recent 72.29 estimate of the population of a municipality made by the state 72.30 demographer and filed with the commissioner of revenue as of 72.31 July115 of the year in which a municipality's distribution net 72.32 tax capacity is calculated. The state demographer shall 72.33 annually estimate the population of each municipality and, in 72.34 the case of a municipality which is located partly within and 72.35 partly without the area, the proportion of the total which 72.36 resides within the area, and shall file the estimates with the 73.1 commissioner of revenue. 73.2 [EFFECTIVE DATE.] This section is effective the day 73.3 following final enactment. 73.4 Sec. 4. [473.24] [POPULATION ESTIMATES.] 73.5 (a) The Metropolitan Council shall annually prepare an 73.6 estimate of population for each county, city, and town in the 73.7 metropolitan area and an estimate of the number of households 73.8 and average household size for each city in the metropolitan 73.9 area with a population of 2,500 or more, and an estimate of 73.10 population over age 65 for each county in the metropolitan area, 73.11 and convey the estimates to the governing body of each county, 73.12 city, or town by June 1 each year. In the case of a city or 73.13 town that is located partly within and partly without the 73.14 metropolitan area, the Metropolitan Council shall estimate the 73.15 proportion of the total population and the average size of 73.16 households that reside within the area. The Metropolitan 73.17 Council may prepare an estimate of the population and of the 73.18 average household size for any other political subdivision 73.19 located in the metropolitan area. 73.20 (b) A governing body may challenge an estimate made under 73.21 this section by filing its specific objections in writing with 73.22 the Metropolitan Council by June 24. If the challenge does not 73.23 result in an acceptable estimate, the governing body may have a 73.24 special census conducted by the United States Bureau of the 73.25 Census. The political subdivision must notify the Metropolitan 73.26 Council on or before July 1 of its intent to have the special 73.27 census conducted. The political subdivision must bear all costs 73.28 of the special census. Results of the special census must be 73.29 received by the Metropolitan Council by the next April 15 to be 73.30 used in that year's June 1 estimate under this section. The 73.31 Metropolitan Council shall certify the estimates of population 73.32 and the average household size to the state demographer and to 73.33 the commissioner of revenue by July 15 each year, including any 73.34 estimates still under objection. 73.35 [EFFECTIVE DATE.] This section is effective the day 73.36 following final enactment. 74.1 Sec. 5. Minnesota Statutes 2004, section 473F.02, 74.2 subdivision 7, is amended to read: 74.3 Subd. 7. [POPULATION.] "Population" means the most recent 74.4 estimate of the population of a municipality made by the 74.5 Metropolitan Council under section 473.24 and filed with the 74.6 commissioner of revenue as of July115 of the year in which a 74.7 municipality's distribution net tax capacity is calculated.The74.8council shall annually estimate the population of each74.9municipality as of a date which it determines and, in the case74.10of a municipality which is located partly within and partly74.11without the area, the proportion of the total which resides74.12within the area, and shall promptly thereafter file its74.13estimates with the commissioner of revenue.74.14 [EFFECTIVE DATE.] This section is effective the day 74.15 following final enactment. 74.16 Sec. 6. Minnesota Statutes 2004, section 477A.011, 74.17 subdivision 3, is amended to read: 74.18 Subd. 3. [POPULATION.] "Population" means the 74.19 population estimated or established as of July115 in an aid 74.20 calculation year by the most recent federal census, by a special 74.21 census conducted under contract with the United States Bureau of 74.22 the Census, by a population estimate made by the Metropolitan 74.23 Council pursuant to section 473.24, or by a population estimate 74.24 of the state demographer made pursuant to section 4A.02, 74.25 whichever is the most recent as to the stated date of the count 74.26 or estimate for the preceding calendar year, and which has been 74.27 certified to the commissioner of revenue on or before July 15 of 74.28 the aid calculation year. The term "per capita" refers to 74.29 population as defined by this subdivision. A revision of an 74.30 estimate or count is effective for these purposes only if it is 74.31 certified to the commissioner on or before July 15 of the aid 74.32 calculation year. Clerical errors in the certification or use 74.33 of the estimates and counts established as of July 15 in the aid 74.34 calculation year are subject to correction within the time 74.35 periods allowed under section 477A.014. 74.36 [EFFECTIVE DATE.] This section is effective the day 75.1 following final enactment. 75.2 Sec. 7. Minnesota Statutes 2004, section 477A.011, 75.3 subdivision 34, is amended to read: 75.4 Subd. 34. [CITY REVENUE NEED.] (a) For a city with a 75.5 population equal to or greater than 2,500, "city revenue need" 75.6 is the sum of (1) 5.0734098 times the pre-1940 housing 75.7 percentage; plus (2) 19.141678 times the population decline 75.8 percentage; plus (3) 2504.06334 times the road accidents factor; 75.9 plus (4) 355.0547; minus (5) the metropolitan area factor; minus 75.10 (6) 49.10638 times the household size. 75.11 (b) For a city with a population less than 2,500, "city 75.12 revenue need" is the sum of (1) 2.387 times the pre-1940 housing 75.13 percentage; plus (2) 2.67591 times the commercial industrial 75.14 percentage; plus (3) 3.16042 times the population decline 75.15 percentage; plus (4) 1.206 times the transformed population; 75.16 minus (5) 62.772. 75.17 (c) For a city with a population of 2,500 or more and a 75.18 population in one of the most recently available five years that 75.19 was less than 2,500, "city revenue need" is the sum of (1) its 75.20 city revenue need calculated under paragraph (a) multiplied by 75.21 its transition factor; plus (2) its city revenue need calculated 75.22 under the formula in paragraph (b) multiplied by the difference 75.23 between one and its transition factor. For purposes of this 75.24 paragraph, a city's "transition factor" is equal to 0.2 75.25 multiplied by the number of years that the city's population 75.26 estimate has been 2,500 or more. This provision only applies 75.27 for aids payable in calendar years 2006 to 2008 to cities with a 75.28 2002 population of less than 2,500. It applies to any city for 75.29 aids payable in 2009 and thereafter. 75.30 (d) The city revenue need cannot be less than zero. 75.31(d)(e) For calendar year 2005 and subsequent years, the 75.32 city revenue need for a city, as determined in paragraphs (a) 75.33 to(c)(d), is multiplied by the ratio of the annual implicit 75.34 price deflator for government consumption expenditures and gross 75.35 investment for state and local governments as prepared by the 75.36 United States Department of Commerce, for the most recently 76.1 available year to the 2003 implicit price deflator for state and 76.2 local government purchases. 76.3 [EFFECTIVE DATE.] This section is effective beginning with 76.4 aids payable in 2006. 76.5 Sec. 8. Minnesota Statutes 2004, section 477A.011, 76.6 subdivision 35, is amended to read: 76.7 Subd. 35. [TAX EFFORT RATE.] "Tax effort rate" means the 76.8 net levy for all cities divided by the sum of the city net tax 76.9 capacity for all cities, unless the need increase percentage 76.10 determined under section 477A.013, subdivision 8, is 100 76.11 percent, in which case the tax effort rate is the rate needed so 76.12 that the total aid under section 477A.013, subdivision 9, equals 76.13 the total amount available for aid under section 477A.03, after 76.14 the subtractions in section 477A.014. For purposes of this 76.15 section, "net levy" means the city levy, after all adjustments, 76.16 used for calculating the local tax rate under section 275.08 for 76.17 taxes payable in the year prior to the aid distribution. The 76.18 fiscal disparity distribution levy under chapter 276A or 473F is 76.19 included in net levy. 76.20 [EFFECTIVE DATE.] This section is effective beginning with 76.21 aids payable in 2006. 76.22 Sec. 9. Minnesota Statutes 2004, section 477A.011, 76.23 subdivision 36, is amended to read: 76.24 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 76.25 provided in this subdivision, "city aid base" is zero. 76.26 (b) The city aid base for any city with a population less 76.27 than 500 is increased by $40,000 for aids payable in calendar 76.28 year 1995 and thereafter, and the maximum amount of total aid it 76.29 may receive under section 477A.013, subdivision 9, paragraph 76.30 (c), is also increased by $40,000 for aids payable in calendar 76.31 year 1995 only, provided that: 76.32 (i) the average total tax capacity rate for taxes payable 76.33 in 1995 exceeds 200 percent; 76.34 (ii) the city portion of the tax capacity rate exceeds 100 76.35 percent; and 76.36 (iii) its city aid base is less than $60 per capita. 77.1 (c) The city aid base for a city is increased by $20,000 in 77.2 1998 and thereafter and the maximum amount of total aid it may 77.3 receive under section 477A.013, subdivision 9, paragraph (c), is 77.4 also increased by $20,000 in calendar year 1998 only, provided 77.5 that: 77.6 (i) the city has a population in 1994 of 2,500 or more; 77.7 (ii) the city is located in a county, outside of the 77.8 metropolitan area, which contains a city of the first class; 77.9 (iii) the city's net tax capacity used in calculating its 77.10 1996 aid under section 477A.013 is less than $400 per capita; 77.11 and 77.12 (iv) at least four percent of the total net tax capacity, 77.13 for taxes payable in 1996, of property located in the city is 77.14 classified as railroad property. 77.15 (d) The city aid base for a city is increased by $200,000 77.16 in 1999 and thereafter and the maximum amount of total aid it 77.17 may receive under section 477A.013, subdivision 9, paragraph 77.18 (c), is also increased by $200,000 in calendar year 1999 only, 77.19 provided that: 77.20 (i) the city was incorporated as a statutory city after 77.21 December 1, 1993; 77.22 (ii) its city aid base does not exceed $5,600; and 77.23 (iii) the city had a population in 1996 of 5,000 or more. 77.24 (e) The city aid base for a city is increased by $450,000 77.25 in 1999 to 2008 and the maximum amount of total aid it may 77.26 receive under section 477A.013, subdivision 9, paragraph (c), is 77.27 also increased by $450,000 in calendar year 1999 only, provided 77.28 that: 77.29 (i) the city had a population in 1996 of at least 50,000; 77.30 (ii) its population had increased by at least 40 percent in 77.31 the ten-year period ending in 1996; and 77.32 (iii) its city's net tax capacity for aids payable in 1998 77.33 is less than $700 per capita. 77.34 (f) Beginning in 2004, the city aid base for a city is 77.35 equal to the sum of its city aid base in 2003 and the amount of 77.36 additional aid it was certified to receive under section 477A.06 78.1 in 2003. For 2004 only, the maximum amount of total aid a city 78.2 may receive under section 477A.013, subdivision 9, paragraph 78.3 (c), is also increased by the amount it was certified to receive 78.4 under section 477A.06 in 2003. 78.5 (g) The city aid base for a city is increased by $150,000 78.6 for aids payable in 2000 and thereafter, and the maximum amount 78.7 of total aid it may receive under section 477A.013, subdivision 78.8 9, paragraph (c), is also increased by $150,000 in calendar year 78.9 2000 only, provided that: 78.10 (1) the city has a population that is greater than 1,000 78.11 and less than 2,500; 78.12 (2) its commercial and industrial percentage for aids 78.13 payable in 1999 is greater than 45 percent; and 78.14 (3) the total market value of all commercial and industrial 78.15 property in the city for assessment year 1999 is at least 15 78.16 percent less than the total market value of all commercial and 78.17 industrial property in the city for assessment year 1998. 78.18 (h) The city aid base for a city is increased by $200,000 78.19 in 2000 and thereafter, and the maximum amount of total aid it 78.20 may receive under section 477A.013, subdivision 9, paragraph 78.21 (c), is also increased by $200,000 in calendar year 2000 only, 78.22 provided that: 78.23 (1) the city had a population in 1997 of 2,500 or more; 78.24 (2) the net tax capacity of the city used in calculating 78.25 its 1999 aid under section 477A.013 is less than $650 per 78.26 capita; 78.27 (3) the pre-1940 housing percentage of the city used in 78.28 calculating 1999 aid under section 477A.013 is greater than 12 78.29 percent; 78.30 (4) the 1999 local government aid of the city under section 78.31 477A.013 is less than 20 percent of the amount that the formula 78.32 aid of the city would have been if the need increase percentage 78.33 was 100 percent; and 78.34 (5) the city aid base of the city used in calculating aid 78.35 under section 477A.013 is less than $7 per capita. 78.36 (i) The city aid base for a city is increased by $102,000 79.1 in 2000 and thereafter, and the maximum amount of total aid it 79.2 may receive under section 477A.013, subdivision 9, paragraph 79.3 (c), is also increased by $102,000 in calendar year 2000 only, 79.4 provided that: 79.5 (1) the city has a population in 1997 of 2,000 or more; 79.6 (2) the net tax capacity of the city used in calculating 79.7 its 1999 aid under section 477A.013 is less than $455 per 79.8 capita; 79.9 (3) the net levy of the city used in calculating 1999 aid 79.10 under section 477A.013 is greater than $195 per capita; and 79.11 (4) the 1999 local government aid of the city under section 79.12 477A.013 is less than 38 percent of the amount that the formula 79.13 aid of the city would have been if the need increase percentage 79.14 was 100 percent. 79.15 (j) The city aid base for a city is increased by $32,000 in 79.16 2001 and thereafter, and the maximum amount of total aid it may 79.17 receive under section 477A.013, subdivision 9, paragraph (c), is 79.18 also increased by $32,000 in calendar year 2001 only, provided 79.19 that: 79.20 (1) the city has a population in 1998 that is greater than 79.21 200 but less than 500; 79.22 (2) the city's revenue need used in calculating aids 79.23 payable in 2000 was greater than $200 per capita; 79.24 (3) the city net tax capacity for the city used in 79.25 calculating aids available in 2000 was equal to or less than 79.26 $200 per capita; 79.27 (4) the city aid base of the city used in calculating aid 79.28 under section 477A.013 is less than $65 per capita; and 79.29 (5) the city's formula aid for aids payable in 2000 was 79.30 greater than zero. 79.31 (k) The city aid base for a city is increased by $7,200 in 79.32 2001 and thereafter, and the maximum amount of total aid it may 79.33 receive under section 477A.013, subdivision 9, paragraph (c), is 79.34 also increased by $7,200 in calendar year 2001 only, provided 79.35 that: 79.36 (1) the city had a population in 1998 that is greater than 80.1 200 but less than 500; 80.2 (2) the city's commercial industrial percentage used in 80.3 calculating aids payable in 2000 was less than ten percent; 80.4 (3) more than 25 percent of the city's population was 60 80.5 years old or older according to the 1990 census; 80.6 (4) the city aid base of the city used in calculating aid 80.7 under section 477A.013 is less than $15 per capita; and 80.8 (5) the city's formula aid for aids payable in 2000 was 80.9 greater than zero. 80.10 (l) The city aid base for a city is increased by $45,000 in 80.11 2001 and thereafter and by an additional $50,000 in calendar 80.12 years 2002 to 2011, and the maximum amount of total aid it may 80.13 receive under section 477A.013, subdivision 9, paragraph (c), is 80.14 also increased by $45,000 in calendar year 2001 only, and by 80.15 $50,000 in calendar year 2002 only, provided that: 80.16 (1) the net tax capacity of the city used in calculating 80.17 its 2000 aid under section 477A.013 is less than $810 per 80.18 capita; 80.19 (2) the population of the city declined more than two 80.20 percent between 1988 and 1998; 80.21 (3) the net levy of the city used in calculating 2000 aid 80.22 under section 477A.013 is greater than $240 per capita; and 80.23 (4) the city received less than $36 per capita in aid under 80.24 section 477A.013, subdivision 9, for aids payable in 2000. 80.25 (m) The city aid base for a city with a population of 80.26 10,000 or more which is located outside of the seven-county 80.27 metropolitan area is increased in 2002 and thereafter, and the 80.28 maximum amount of total aid it may receive under section 80.29 477A.013, subdivision 9, paragraph (b) or (c), is also increased 80.30 in calendar year 2002 only, by an amount equal to the lesser of: 80.31 (1)(i) the total population of the city, as determined by 80.32 the United States Bureau of the Census, in the 2000 census, (ii) 80.33 minus 5,000, (iii) times 60; or 80.34 (2) $2,500,000. 80.35 (n) The city aid base is increased by $50,000 in 2002 and 80.36 thereafter, and the maximum amount of total aid it may receive 81.1 under section 477A.013, subdivision 9, paragraph (c), is also 81.2 increased by $50,000 in calendar year 2002 only, provided that: 81.3 (1) the city is located in the seven-county metropolitan 81.4 area; 81.5 (2) its population in 2000 is between 10,000 and 20,000; 81.6 and 81.7 (3) its commercial industrial percentage, as calculated for 81.8 city aid payable in 2001, was greater than 25 percent. 81.9 (o) The city aid base for a city is increased by $150,000 81.10 in calendar years 2002 to 2011 and the maximum amount of total 81.11 aid it may receive under section 477A.013, subdivision 9, 81.12 paragraph (c), is also increased by $150,000 in calendar year 81.13 2002 only, provided that: 81.14 (1) the city had a population of at least 3,000 but no more 81.15 than 4,000 in 1999; 81.16 (2) its home county is located within the seven-county 81.17 metropolitan area; 81.18 (3) its pre-1940 housing percentage is less than 15 81.19 percent; and 81.20 (4) its city net tax capacity per capita for taxes payable 81.21 in 2000 is less than $900 per capita. 81.22 (p) The city aid base for a city is increased by $200,000 81.23 beginning in calendar year 2003 and the maximum amount of total 81.24 aid it may receive under section 477A.013, subdivision 9, 81.25 paragraph (c), is also increased by $200,000 in calendar year 81.26 2003 only, provided that the city qualified for an increase in 81.27 homestead and agricultural credit aid under Laws 1995, chapter 81.28 264, article 8, section 18. 81.29 (q) The city aid base for a city is increased by $200,000 81.30 in 2004 only and the maximum amount of total aid it may receive 81.31 under section 477A.013, subdivision 9, is also increased by 81.32 $200,000 in calendar year 2004 only, if the city is the site of 81.33 a nuclear dry cask storage facility. 81.34 (r) The city aid base for a city is increased by $10,000 in 81.35 2004 and thereafter and the maximum total aid it may receive 81.36 under section 477A.013, subdivision 9, is also increased by 82.1 $10,000 in calendar year 2004 only, if the city was included in 82.2 a federal major disaster designation issued on April 1, 1998, 82.3 and its pre-1940 housing stock was decreased by more than 40 82.4 percent between 1990 and 2000. 82.5 (s) The city aid base for a city is increased by $25,000 in 82.6 2006 and thereafter and the maximum total aid it may receive 82.7 under section 477A.013, subdivision 9, is also increased by 82.8 $25,000 in calendar year 2006 only if the city had a population 82.9 in 2003 of at least 1,000 and has a state park for which the 82.10 city provides rescue services and which comprised at least 14 82.11 percent of the total geographic area included within the city 82.12 boundaries in 2000. 82.13 [EFFECTIVE DATE.] This section is effective for aids 82.14 payable in 2006 and thereafter. 82.15 Sec. 10. Minnesota Statutes 2004, section 477A.011, 82.16 subdivision 38, is amended to read: 82.17 Subd. 38. [HOUSEHOLD SIZE.] "Household size" means the 82.18 average number of persons per household in the jurisdiction as 82.19 most recently estimated and reported by the state 82.20 demographer and Metropolitan Council as of July115 of the aid 82.21 calculation year. A revision to an estimate or enumeration is 82.22 effective for these purposes only if it is certified to the 82.23 commissioner on or before July 15 of the aid calculation year. 82.24 Clerical errors in the certification or use of estimates and 82.25 counts established as of July 15 in the aid calculation year are 82.26 subject to correction within the time periods allowed under 82.27 section 477A.014. 82.28 [EFFECTIVE DATE.] This section is effective the day 82.29 following final enactment. 82.30 Sec. 11. Minnesota Statutes 2004, section 477A.0124, 82.31 subdivision 2, is amended to read: 82.32 Subd. 2. [DEFINITIONS.] (a) For the purposes of this 82.33 section, the following terms have the meanings given them. 82.34 (b) "County program aid" means the sum of "county need aid," 82.35 "county tax base equalization aid," and "county transition aid." 82.36 (c) "Age-adjusted population" means a county's population 83.1 multiplied by the county age index. 83.2 (d) "County age index" means the percentage of the 83.3 population over age 65 within the county divided by the 83.4 percentage of the population over age 65 within the state, 83.5 except that the age index for any county may not be greater than 83.6 1.8 nor less than 0.8. 83.7 (e) "Population over age 65" means the population over age 83.8 65 established as of July115 in an aid calculation year by the 83.9 most recent federal census, by a special census conducted under 83.10 contract with the United States Bureau of the Census, by a 83.11 population estimate made by the Metropolitan Council, or by a 83.12 population estimate of the state demographer made pursuant to 83.13 section 4A.02, whichever is the most recent as to the stated 83.14 date of the count or estimate for the preceding calendar 83.15 year and which has been certified to the commissioner of revenue 83.16 on or before July 15 of the aid calculation year. A revision to 83.17 an estimate or count is effective for these purposes only if 83.18 certified to the commissioner on or before July 15 of the aid 83.19 calculation year. Clerical errors in the certification or use 83.20 of estimates and counts established as of July 15 in the aid 83.21 calculation year are subject to correction within the time 83.22 periods allowed under section 477A.014. 83.23 (f) "Part I crimes" means the three-year average annual 83.24 number of Part I crimes reported for each county by the 83.25 Department of Public Safety for the most recent years available. 83.26 By July 1 of each year, the commissioner of public safety shall 83.27 certify to the commissioner of revenue the number of Part I 83.28 crimes reported for each county for the three most recent 83.29 calendar years available. 83.30 (g) "Households receiving food stamps" means the average 83.31 monthly number of households receiving food stamps for the three 83.32 most recent years for which data is available. By July 1 of 83.33 each year, the commissioner of human services must certify to 83.34 the commissioner of revenue the average monthly number of 83.35 households in the state and in each county that receive food 83.36 stamps, for the three most recent calendar years available. 84.1 (h) "County net tax capacity" means the net tax capacity of 84.2 the county, computed analogously to city net tax capacity under 84.3 section 477A.011, subdivision 20. 84.4 [EFFECTIVE DATE.] This section is effective the day 84.5 following final enactment. 84.6 Sec. 12. Minnesota Statutes 2004, section 477A.0124, 84.7 subdivision 4, is amended to read: 84.8 Subd. 4. [COUNTY TAX-BASE EQUALIZATION AID.] (a) For 84.920052006 and subsequent years, the money appropriated to county 84.10 tax-base equalization aid each calendar year, after the payment 84.11 under paragraph (f), shall be apportioned among the counties 84.12 according to each county's tax-base equalization aid factor. 84.13 (b) A county's tax-base equalization aid factor is equal to 84.14 the amount by which (i) $185 times the county's population, 84.15 exceeds (ii) 9.45 percent of the county's net tax capacity. 84.16 (c) In the case of a county with a population less than 84.17 10,000, the factor determined in paragraph (b) shall be 84.18 multiplied by a factor of three. 84.19 (d) In the case of a county with a population greater than 84.20 or equal to 10,000, but less than 12,500, the factor determined 84.21 in paragraph (b) shall be multiplied by a factor of two. 84.22 (e) In the case of a county with a population greater than 84.23 500,000, the factor determined in paragraph (b) shall be 84.24 multiplied by a factor of 0.25. 84.25 (f) Before the money appropriated to county base 84.26 equalization aid is apportioned among the counties as provided 84.27 in paragraph (a), an amount up to $73,259 is allocated annually 84.28 to Anoka County and up to $59,664 is annually allocated to 84.29 Washington County for the county to pay postretirement costs of 84.30 health insurance premiums for court employees. The allocation 84.31 under this paragraph is in addition to the allocations under 84.32 paragraphs (a) to (e). 84.33 [EFFECTIVE DATE.] This section is effective for aids 84.34 payable in 2006 and thereafter. 84.35 Sec. 13. Minnesota Statutes 2004, section 477A.013, 84.36 subdivision 8, is amended to read: 85.1 Subd. 8. [CITY FORMULA AID.] In calendar year 2004 and 85.2 subsequent years, the formula aid for a city is equal to the 85.3 need increase percentage multiplied by the difference between 85.4 (1) the city's revenue need multiplied by its population, and 85.5 (2) the sum of the city's net tax capacity multiplied by the tax 85.6 effort rate, and; the taconite aids under sections 298.28 and 85.7 298.282, multiplied by the following percentages: 85.8 (i) zero percent for aids payable in 2004; 85.9 (ii) 25 percent for aids payable in 2005; 85.10 (iii) 50 percent for aids payable in 2006; 85.11 (iv) 75 percent for aids payable in 2007; and 85.12 (v) 100 percent for aids payable in 2008 and thereafter; 85.13 and 85.14 for first class cities only, the amount raised by a one-half of 85.15 one percent local sales and use tax imposed in the city in the 85.16 calendar year before the year in which the aid is being 85.17 calculated. 85.18 No city may have a formula aid amount less than zero. The need 85.19 increase percentage must be the same for all cities. 85.20 The applicable need increase percentage must be calculated 85.21 by the Department of Revenue so that the total of the aid under 85.22 subdivision 9 equals the total amount available for aid under 85.23 section 477A.03 after the subtraction under section 477A.014, 85.24 subdivisions 4 and 5. The need increase percentage may not 85.25 exceed 100 percent. 85.26 [EFFECTIVE DATE.] This section is effective beginning with 85.27 aids payable in 2006. 85.28 Sec. 14. Minnesota Statutes 2004, section 477A.013, 85.29 subdivision 9, is amended to read: 85.30 Subd. 9. [CITY AID DISTRIBUTION.] (a) In calendar year 85.31 2002 and thereafter, each city shall receive an aid distribution 85.32 equal to the sum of (1) the city formula aid under subdivision 85.33 8, and (2) its city aid base. 85.34 (b)The aid for a city in calendar year 2004 shall not85.35exceed the amount of its aid in calendar year 2003 after the85.36reductions under Laws 2003, First Special Session chapter 21,86.1article 5.86.2(c)For aids payable in 2005 and thereafter, the total aid 86.3 for any city shall not exceed the sum of (1) ten percent of the 86.4 city's net levy for the year prior to the aid distribution plus 86.5 (2) its total aid in the previous year. For aids payable in 86.620052006 and thereafter, the total aid for any city with a 86.7 population of 2,500 or more, except for a city of the first 86.8 class located within the seven-county metropolitan area, may not 86.9 decrease from its total aid under this section in the previous 86.10 year by an amount greater than ten percent of its net levy in 86.11 the year prior to the aid distribution. 86.12(d)(c)For aids payable in 2004 only, the total aid for a86.13city with a population less than 2,500 may not be less than the86.14amount it was certified to receive in 2003 minus the greater of86.15(1) the reduction to this aid payment in 2003 under Laws 2003,86.16First Special Session chapter 21, article 5, or (2) five percent86.17of its 2003 aid amount.For aids payable in 2005 and 86.18 thereafter, the total aid for a city with a population less than 86.19 2,500 must not be less than the amount it was certified to 86.20 receive in the previous year minus five percent of its 2003 86.21 certified aid amount. 86.22 [EFFECTIVE DATE.] This section is effective beginning with 86.23 aids payable in 2006. 86.24 Sec. 15. Minnesota Statutes 2004, section 477A.013, is 86.25 amended by adding a subdivision to read: 86.26 Subd. 10. [LEVY ADJUSTMENTS FOR AID 86.27 DECREASES.] Notwithstanding any local ordinance or charter 86.28 provision, a city whose certified aid under subdivision 9 is 86.29 less than the amount it received in the previous year under the 86.30 same subdivision may increase its levy payable in the same year 86.31 as the certified aid is paid by an amount equal to the aid 86.32 decrease for that year. 86.33 [EFFECTIVE DATE.] This section is effective beginning with 86.34 property tax levies payable in 2006 and thereafter. 86.35 Sec. 16. Minnesota Statutes 2004, section 477A.03, 86.36 subdivision 2a, is amended to read: 87.1 Subd. 2a. [CITIES.] For aids payable in 2004, the total 87.2 aids paid under section 477A.013, subdivision 9, are limited to 87.3 $429,000,000. For aids payable in 2005and thereafter, the 87.4 total aids paid under section 477A.013, subdivision 9, 87.5 areincreasedlimited to $437,052,000. For aids payable in 87.6 2006, the total aids paid under section 477A.013, subdivision 9, 87.7 is limited to $419,552,000. For aids payable in 2007 and 87.8 thereafter, the total aids paid under section 477A.013, 87.9 subdivision 9, is limited to $437,052,000 provided that the 87.10 taxpayer satisfaction survey in section 275.065 is in effect for 87.11 property taxes levied in the year in which the aid is 87.12 calculated, otherwise the amount is limited to $419,552,000. 87.13 [EFFECTIVE DATE.] This section is effective beginning with 87.14 aids payable in 2006. 87.15 Sec. 17. Minnesota Statutes 2004, section 477A.03, 87.16 subdivision 2b, is amended to read: 87.17 Subd. 2b. [COUNTIES.] (a) For aids payable in calendar 87.18 year 2005 and thereafter, the total aids paid to counties under 87.19 section 477A.0124, subdivision 3, are limited to $100,500,000. 87.20 Each calendar year, $500,000 shall be retained by the 87.21 commissioner of revenue to make reimbursements to the 87.22 commissioner of finance for payments made under section 611.27. 87.23 For calendar year 2004, the amount shall be in addition to the 87.24 payments authorized under section 477A.0124, subdivision 1. For 87.25 calendar year 2005 and subsequent years, the amount shall be 87.26 deducted from the appropriation under this paragraph. The 87.27 reimbursements shall be to defray the additional costs 87.28 associated with court-ordered counsel under section 611.27. Any 87.29 retained amounts not used for reimbursement in a year shall be 87.30 included in the next distribution of county need aid that is 87.31 certified to the county auditors for the purpose of property tax 87.32 reduction for the next taxes payable year. 87.33 (b) For aids payable in 2005 andthereafter2006, the total 87.34 aids under section 477A.0124, subdivision 4, are limited to 87.35 $105,000,000. For aids payable in 2007 and thereafter, the 87.36 total aid under section 477A.0124, subdivision 4, is limited to 88.1 $105,132,923. The commissioner of finance shall bill the 88.2 commissioner of revenue for the cost of preparation of local 88.3 impact notes as required by section 3.987, not to exceed 88.4 $207,000 in fiscal year 2004 and thereafter. The commissioner 88.5 of education shall bill the commissioner of revenue for the cost 88.6 of preparation of local impact notes for school districts as 88.7 required by section 3.987, not to exceed $7,000 in fiscal year 88.8 2004 and thereafter. The commissioner of revenue shall deduct 88.9 the amounts billed under this paragraph from the appropriation 88.10 under this paragraph. The amounts deducted are appropriated to 88.11 the commissioner of finance and the commissioner of education 88.12 for the preparation of local impact notes. 88.13 [EFFECTIVE DATE.] This section is effective for aids 88.14 payable in 2007 and thereafter. 88.15 Sec. 18. Laws 2003, First Special Session chapter 21, 88.16 article 5, section 13, is amended to read: 88.17 Sec. 13. [2004 CITY AID REDUCTIONS.] 88.18 The commissioner of revenue shall compute an aid reduction 88.19 amount for 2004 for each city as provided in this section. 88.20 The initial aid reduction amount for each city is the 88.21 amount by which the city's aid distribution under Minnesota 88.22 Statutes, section 477A.013, and related provisions payable in 88.23 2003 exceeds the city's 2004 distribution under those provisions. 88.24 The minimum aid reduction amount for a city is the amount 88.25 of its reduction in 2003 under section 12. If a city receives 88.26 an increase to its city aid base under Minnesota Statutes, 88.27 section 477A.011, subdivision 36, its minimum aid reduction is 88.28 reduced by an equal amount. 88.29 The maximum aid reduction amount for a city is an amount 88.30 equal to 14 percent of the city's total 2004 levy plus aid 88.31 revenue base, except that if the city has a city net tax 88.32 capacity for aids payable in 2004, as defined in Minnesota 88.33 Statutes, section 477A.011, subdivision 20, of $700 per capita 88.34 or less, the maximum aid reduction shall not exceed an amount 88.35 equal to 13 percent of the city's total 2004 levy plus aid 88.36 revenue base. 89.1 If the initial aid reduction amount for a city is less than 89.2 the minimum aid reduction amount for that city, the final aid 89.3 reduction amount for the city is the sum of the initial aid 89.4 reduction amount and the lesser of the amount of the city's 89.5 payable 2004 reimbursement under Minnesota Statutes, section 89.6 273.1384, or the difference between the minimum and initial aid 89.7 reduction amounts for the city, and the amount of the final aid 89.8 reduction in excess of the initial aid reduction is deducted 89.9 from the city's reimbursements pursuant to Minnesota Statutes, 89.10 section 273.1384. 89.11 If the initial aid reduction amount for a city is greater 89.12 than the maximum aid reduction amount for the city, the city 89.13 receives an additional distribution under this section equal to 89.14 the result of subtracting the maximum aid reduction amount from 89.15 the initial aid reduction amount. This distribution shall be 89.16 paid in equal installments in 2004 on the dates specified in 89.17 Minnesota Statutes, section 477A.015. The amount necessary for 89.18 these additional distributions is appropriated to the 89.19 commissioner of revenue from the general fund in fiscal year 89.20 2005. 89.21The initial aid reduction is applied to the city's89.22distribution pursuant to Minnesota Statutes, section 477A.013,89.23and any aid reduction in excess of the initial aid reduction is89.24applied to the city's reimbursements pursuant to Minnesota89.25Statutes, section 273.1384.89.26 To the extent that sufficient information is available on 89.27 each payment date in 2004, the commissioner of revenue shall pay 89.28 the reimbursements reduced under this section in equal 89.29 installments on the payment dates provided in law. 89.30 [EFFECTIVE DATE.] This section is effective for aids 89.31 payable in 2004. 89.32 Sec. 19. Laws 2003, First Special Session chapter 21, 89.33 article 6, section 9, is amended to read: 89.34 Sec. 9. [DEFINITIONS.] 89.35 (a) For purposes of sections 9 to 15, the following terms 89.36 have the meanings given them in this section. 90.1 (b) The 2003 and 2004 "levy plus aid revenue base" for a 90.2 county is the sum of that county's certified property tax levy 90.3 for taxes payable in 2003, plus the sum of the amounts the 90.4 county was certified to receive in the designated calendar year 90.5 as: 90.6 (1) homestead and agricultural credit aid under Minnesota 90.7 Statutes, section 273.1398, subdivision 2, plus any additional 90.8 aid under section 16, minus the amount calculated under section 90.9 273.1398, subdivision 4a, paragraph (b), for counties in 90.10 judicial districts one, three, six, and ten, and 25 percent of 90.11 the amount calculated under section 273.1398, subdivision 4a, 90.12 paragraph (b), for counties in judicial districts two and four; 90.13 (2) the amount of county manufactured home homestead and 90.14 agricultural credit aid computed for the county for payment in 90.15 2003 under section 273.166; 90.16 (3) criminal justice aid under Minnesota Statutes, section 90.17 477A.0121; 90.18 (4) family preservation aid under Minnesota Statutes, 90.19 section 477A.0122; 90.20 (5) taconite aids under Minnesota Statutes, sections 298.28 90.21 and 298.282, including any aid which was required to be placed 90.22 in a special fund for expenditure in the next succeeding year; 90.23 and 90.24 (6) county program aid under section 477A.0124, exclusive 90.25 of the attached machinery aid component. 90.26 [EFFECTIVE DATE.] This section is effective for aids 90.27 payable in 2004. 90.28 Sec. 20. [2005 AND 2006 CITY AID PAYMENTS.] 90.29 In 2005 and 2006, market value credit reimbursements for 90.30 each city payable under Minnesota Statutes, section 273.1384, 90.31 are reduced by the dollar amount of the 2003 reduction in market 90.32 value credit reimbursements for that city due to Laws 2003, 90.33 First Special Session chapter 21, article 5, section 12. No 90.34 city's 2005 or 2006 market value credit reimbursements are 90.35 reduced to less than zero under this section. To the extent 90.36 sufficient information is available on each payment date, the 91.1 commissioner shall pay the annual 2005 and 2006 market value 91.2 credit reimbursement amounts, after reduction under this 91.3 section, to cities in equal installments on the dates specified 91.4 in Minnesota Statutes, section 273.1384. 91.5 [EFFECTIVE DATE.] This section is effective the day 91.6 following final enactment. 91.7 Sec. 21. [COURT AID ADJUSTMENT.] 91.8 For aids payable in 2005 only, the amount of court aid paid 91.9 to Anoka County under Minnesota Statutes, section 273.1398, 91.10 subdivision 4a, is increased by $36,630 for aids payable in 2005 91.11 only and the amount paid to Washington County under Minnesota 91.12 Statutes, section 273.1398, subdivision 4a, is increased by 91.13 $29,832 for aids payable in 2005 only. 91.14 [EFFECTIVE DATE.] This section is effective for aids 91.15 payable in 2005 only. 91.16 Sec. 22. [SUPREME COURT BUDGET.] 91.17 The district courts general fund appropriation is reduced 91.18 by $66,462 in fiscal year 2006 and $132,923 beginning in fiscal 91.19 year 2007 to fund the amount transferred to county tax base 91.20 equalization aid to fund the payments under Minnesota Statutes, 91.21 section 477A.0124, subdivision 4, paragraph (f), and section 20. 91.22 [EFFECTIVE DATE.] This section is effective the day 91.23 following final enactment. 91.24 ARTICLE 4 91.25 DEPARTMENT OF REVENUE PROPERTY TAXES 91.26 Section 1. Minnesota Statutes 2004, section 168A.05, 91.27 subdivision 1a, is amended to read: 91.28 Subd. 1a. [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 91.29 PAYMENT.] In the case of a manufactured home as defined in 91.30 section 327.31, subdivision 6, the department shall not issue a 91.31 certificate of title unless the application under section 91.32 168A.04 is accompanied with a statement from the county auditor 91.33 or county treasurer where the manufactured home is presently 91.34 located, stating that all manufactured home personal property 91.35 taxes levied on the unit in the name of the current owner at the 91.36 time of transfer have been paid. For this purpose, manufactured 92.1 home personal property taxes are treated as levied on January 1 92.2 of the payable year. 92.3 [EFFECTIVE DATE.] This section is effective the day 92.4 following final enactment. 92.5 Sec. 2. Minnesota Statutes 2004, section 270.11, 92.6 subdivision 2, is amended to read: 92.7 Subd. 2. [COUNTY ASSESSOR'S REPORTS OF ASSESSMENT FILED 92.8 WITH COMMISSIONER.] Each county assessor shall file by April 1 92.9 with the commissioner of revenue a copy of the abstract that 92.10 will be acted upon by the local and county boards of review. 92.11 The abstract must list the real and personal property in the 92.12 county itemized by assessment districts. The assessor of each 92.13 county in the state shall file with the commissioner, within ten 92.14 working days following final action of the local board of review 92.15 or equalization and within five days following final action of 92.16 the county board of equalization, any changes made by the local 92.17 or county board. The information must be filed in the manner 92.18 prescribed by the commissioner. It must be accompanied by a 92.19 printed or typewritten copy of the proceedings of the 92.20 appropriate board. 92.21 The final abstract of assessments after adjustments by the 92.22 State Board of Equalization and inclusion of any omitted 92.23 property shall be submitted to the commissioner of revenue on or 92.24 before September 1 of each calendar year. The final abstract 92.25 must separately report the captured tax capacity of tax 92.26 increment financing districts under section 469.177, subdivision 92.27 2, themetropolitan revenueareawide net tax capacity 92.28 contributionvaluevalues determined undersectionsections 92.29 276A.05, subdivision 1, and 473F.07, subdivision 1, and the 92.30 value subject to the power line credit under section 273.42. 92.31 [EFFECTIVE DATE.] This section is effective the day 92.32 following final enactment. 92.33 Sec. 3. Minnesota Statutes 2004, section 270.16, 92.34 subdivision 2, is amended to read: 92.35 Subd. 2. [FAILURE TO APPRAISE.] When an assessor has 92.36 failed to properly appraise at leastone-quarterone-fifth of 93.1 the parcels of property in a district or county as provided in 93.2 section 273.01, the commissioner of revenue shall appoint a 93.3 special assessor and deputy assessor as necessary and cause a 93.4 reappraisal to be made of the property due for reassessment in 93.5 accordance with law. 93.6 [EFFECTIVE DATE.] This section is effective the day 93.7 following final enactment. 93.8 Sec. 4. Minnesota Statutes 2004, section 272.01, 93.9 subdivision 2, is amended to read: 93.10 Subd. 2. (a) When any real or personal property which is 93.11 exempt from ad valorem taxes, and taxes in lieu thereof, is 93.12 leased, loaned, or otherwise made available and used by a 93.13 private individual, association, or corporation in connection 93.14 with a business conducted for profit, there shall be imposed a 93.15 tax, for the privilege of so using or possessing such real or 93.16 personal property, in the same amount and to the same extent as 93.17 though the lessee or user was the owner of such property. 93.18 (b) The tax imposed by this subdivision shall not apply to: 93.19 (1) property leased or used as a concession in or relative 93.20 to the use in whole or part of a public park, market, 93.21 fairgrounds, port authority, economic development authority 93.22 established under chapter 469, municipal auditorium, municipal 93.23 parking facility, municipal museum, or municipal stadium; 93.24 (2) property of an airport owned by a city, town, county, 93.25 or group thereof which is: 93.26 (i) leased to or used by any person or entity including a 93.27 fixed base operator; and 93.28 (ii) used as a hangar for the storage or repair of aircraft 93.29 or to provide aviation goods, services, or facilities to the 93.30 airport or general public; 93.31 the exception from taxation provided in this clause does not 93.32 apply to: 93.33 (i) property located at an airport owned or operated by the 93.34 Metropolitan Airports Commission or by a city of over 50,000 93.35 population according to the most recent federal census or such a 93.36 city's airport authority; 94.1 (ii) hangars leased by a private individual, association, 94.2 or corporation in connection with a business conducted for 94.3 profit other than an aviation-related business; or 94.4 (iii) facilities leased by a private individual, 94.5 association, or corporation in connection with a business for 94.6 profit, that consists of a major jet engine repair facility 94.7 financed, in whole or part, with the proceeds of state bonds and 94.8 located in a tax increment financing district; 94.9 (3) property constituting or used as a public pedestrian 94.10 ramp or concourse in connection with a public airport;or94.11 (4) property constituting or used as a passenger check-in 94.12 area or ticket sale counter, boarding area, or luggage claim 94.13 area in connection with a public airport but not the airports 94.14 owned or operated by the Metropolitan Airports Commission or 94.15 cities of over 50,000 population or an airport authority 94.16 therein. Real estate owned by a municipality in connection with 94.17 the operation of a public airport and leased or used for 94.18 agricultural purposes is not exempt; 94.19 (5) property leased, loaned, or otherwise made available to 94.20 a private individual, corporation, or association under a 94.21 cooperative farming agreement made pursuant to section 97A.135; 94.22 or 94.23 (6) property leased, loaned, or otherwise made available to 94.24 a private individual, corporation, or association under section 94.25 272.68, subdivision 4. 94.26 (c) Taxes imposed by this subdivision are payable as in the 94.27 case of personal property taxes and shall be assessed to the 94.28 lessees or users of real or personal property in the same manner 94.29 as taxes assessed to owners of real or personal property, except 94.30 that such taxes shall not become a lien against the property. 94.31 When due, the taxes shall constitute a debt due from the lessee 94.32 or user to the state, township, city, county, and school 94.33 district for which the taxes were assessed and shall be 94.34 collected in the same manner as personal property taxes. If 94.35 property subject to the tax imposed by this subdivision is 94.36 leased or used jointly by two or more persons, each lessee or 95.1 user shall be jointly and severally liable for payment of the 95.2 tax. 95.3 (d) The tax on real property of the state or any of its 95.4 political subdivisions that is leased by a private individual, 95.5 association, or corporation and becomes taxable under this 95.6 subdivision or other provision of law must be assessed and 95.7 collected as a personal property assessment. The taxes do not 95.8 become a lien against the real property. 95.9 [EFFECTIVE DATE.] This section is effective the day 95.10 following final enactment. 95.11 Sec. 5. Minnesota Statutes 2004, section 272.02, 95.12 subdivision 1a, is amended to read: 95.13 Subd. 1a. [LIMITATIONS ON EXEMPTIONS.] The exemptions 95.14 granted by subdivision 1 are subject to the limits contained in 95.15 the other subdivisions of this section, section 272.025,or95.16273.13, subdivision 25, paragraph (c), clause (1) or (2), or95.17paragraph (d), clause (2)and all other provisions of applicable 95.18 law. 95.19 [EFFECTIVE DATE.] This section is effective the day 95.20 following final enactment. 95.21 Sec. 6. Minnesota Statutes 2004, section 272.02, 95.22 subdivision 7, is amended to read: 95.23 Subd. 7. [INSTITUTIONS OF PUBLIC CHARITY.] Institutions of 95.24 purely public charity are exemptexcept parcels of property95.25containing structures and the structures described in section95.26273.13, subdivision 25, paragraph (e), other than those that95.27qualify for exemption under subdivision 26. In determining 95.28 whether rental housing property qualifies for exemption under 95.29 this subdivision, the following are not gifts or donations to 95.30 the owner of the rental housing: 95.31 (1) rent assistance provided by the government to or on 95.32 behalf of tenants; and 95.33 (2) financing assistance or tax credits provided by the 95.34 government to the owner on condition that specific units or a 95.35 specific quantity of units be set aside for persons or families 95.36 with certain income characteristics. 96.1 [EFFECTIVE DATE.] This section is effective for taxes 96.2 payable in 2004 and thereafter. 96.3 Sec. 7. Minnesota Statutes 2004, section 272.02, is 96.4 amended by adding a subdivision to read: 96.5 Subd. 68. [PROPERTY SUBJECT TO TACONITE PRODUCTION TAX OR 96.6 NET PROCEEDS TAX.] (a) Real and personal property described in 96.7 section 298.25 is exempt to the extent the tax on taconite and 96.8 iron sulphides under section 298.24 is described in section 96.9 298.25 as being in lieu of other taxes on such property. This 96.10 exemption applies for taxes payable in each year that the tax 96.11 under section 298.24 is payable with respect to such property. 96.12 (b) Deposits of mineral, metal, or energy resources the 96.13 mining of which is subject to taxation under section 298.015 are 96.14 exempt. This exemption applies for taxes payable in each year 96.15 that the tax under section 298.015 is payable with respect to 96.16 such property. 96.17 [EFFECTIVE DATE.] This section is effective the day 96.18 following final enactment. 96.19 Sec. 8. Minnesota Statutes 2004, section 272.02, is 96.20 amended by adding a subdivision to read: 96.21 Subd. 69. [RELIGIOUS CORPORATIONS.] Personal and real 96.22 property that a religious corporation, formed under section 96.23 317A.909, necessarily uses for a religious purpose is exempt to 96.24 the extent provided in section 317A.909, subdivision 3. 96.25 [EFFECTIVE DATE.] This section is effective the day 96.26 following final enactment. 96.27 Sec. 9. Minnesota Statutes 2004, section 272.02, is 96.28 amended by adding a subdivision to read: 96.29 Subd. 70. [CHILDREN'S HOMES.] Personal and real property 96.30 owned by a corporation formed under section 317A.907 is exempt 96.31 to the extent provided in section 317A.907, subdivision 7. 96.32 [EFFECTIVE DATE.] This section is effective the day 96.33 following final enactment. 96.34 Sec. 10. Minnesota Statutes 2004, section 272.02, is 96.35 amended by adding a subdivision to read: 96.36 Subd. 71. [HOUSING AND REDEVELOPMENT AUTHORITY AND TRIBAL 97.1 HOUSING AUTHORITY PROPERTY.] Property owned by a housing and 97.2 redevelopment authority described in chapter 469, or by a 97.3 designated housing authority described in section 469.040, 97.4 subdivision 5, is exempt to the extent provided in chapter 469. 97.5 [EFFECTIVE DATE.] This section is effective the day 97.6 following final enactment. 97.7 Sec. 11. Minnesota Statutes 2004, section 272.02, is 97.8 amended by adding a subdivision to read: 97.9 Subd. 72. [PROPERTY OF HOUSING AND REDEVELOPMENT 97.10 AUTHORITIES.] Property of projects of housing and redevelopment 97.11 authorities are exempt to the extent permitted by sections 97.12 469.042, subdivision 1, and 469.043, subdivisions 2 and 5. 97.13 [EFFECTIVE DATE.] This section is effective the day 97.14 following final enactment. 97.15 Sec. 12. Minnesota Statutes 2004, section 272.02, is 97.16 amended by adding a subdivision to read: 97.17 Subd. 73. [PROPERTY OF REGIONAL RAIL AUTHORITY.] Property 97.18 of a regional rail authority as defined in chapter 398A is 97.19 exempt to the extent permitted by section 398A.05. 97.20 [EFFECTIVE DATE.] This section is effective the day 97.21 following final enactment. 97.22 Sec. 13. Minnesota Statutes 2004, section 272.02, is 97.23 amended by adding a subdivision to read: 97.24 Subd. 74. [SPIRIT MOUNTAIN RECREATION AREA 97.25 AUTHORITY.] Property owned by the Spirit Mountain Recreation 97.26 Area Authority is exempt from taxation to the extent provided in 97.27 Laws 1973, chapter 327, section 6. 97.28 Sec. 14. Minnesota Statutes 2004, section 272.02, is 97.29 amended by adding a subdivision to read: 97.30 Subd. 75. [INSTALLED CAPACITY DEFINED.] For purposes of 97.31 this section, the term "installed capacity" means generator 97.32 nameplate capacity. 97.33 [EFFECTIVE DATE.] This section is effective the day 97.34 following final enactment. 97.35 Sec. 15. Minnesota Statutes 2004, section 272.029, 97.36 subdivision 4, is amended to read: 98.1 Subd. 4. [REPORTS.] (a) An owner of a wind energy 98.2 conversion system subject to tax under subdivision 3 shall file 98.3 a report with the commissioner of revenue annually on or before 98.4MarchFebruary 1 detailing the amount of electricity in 98.5 kilowatt-hours that was produced by the wind energy conversion 98.6 system for the previous calendar year. The commissioner shall 98.7 prescribe the form of the report. The report must contain the 98.8 information required by the commissioner to determine the tax 98.9 due to each county under this section for the current year. If 98.10 an owner of a wind energy conversion system subject to taxation 98.11 under this section fails to file the report by the due date, the 98.12 commissioner of revenue shall determine the tax based upon the 98.13 nameplate capacity of the system multiplied by a capacity factor 98.14 of 40 percent. 98.15 (b) On or beforeMarch 31February 28, the commissioner of 98.16 revenue shall notify the owner of the wind energy conversion 98.17 systems of the tax due to each county for the current year and 98.18 shall certify to the county auditor of each county in which the 98.19 systems are located the tax due from each owner for the current 98.20 year. 98.21 [EFFECTIVE DATE.] This section is effective for reports and 98.22 certifications due in 2006 and thereafter. 98.23 Sec. 16. Minnesota Statutes 2004, section 272.029, 98.24 subdivision 6, is amended to read: 98.25 Subd. 6. [DISTRIBUTION OF REVENUES.] Revenues from the 98.26 taxes imposed under subdivision 5 must be part of the settlement 98.27 between the county treasurer and the county auditor under 98.28 section 276.09. The revenue must be distributed by the county 98.29 auditor or the county treasurer toalllocal taxing 98.30 jurisdictions in which the wind energy conversion system is 98.31 located,as follows: beginning with distributions in 2006, 80 98.32 percent to counties; 14 percent to cities and townships; and six 98.33 percent to school districts; and for distributions occurring in 98.34 2004 and 2005 in the same proportion that each of the local 98.35 taxing jurisdiction's current year's net tax capacity based tax 98.36 rate is to the current year's total local net tax capacity based 99.1 rate. 99.2 [EFFECTIVE DATE.] This section is effective the day 99.3 following final enactment. 99.4 Sec. 17. Minnesota Statutes 2004, section 273.11, 99.5 subdivision 8, is amended to read: 99.6 Subd. 8. [LIMITED EQUITY COOPERATIVE APARTMENTS.] For the 99.7 purposes of this subdivision, the terms defined in this 99.8 subdivision have the meanings given them. 99.9 A "limited equity cooperative" is a corporation organized 99.10 under chapter 308A or 308B, which has as its primary purpose the 99.11 provision of housing and related services to its members which 99.12 meets one of the following criteria with respect to the income 99.13 of its members: (1) a minimum of 75 percent of members must 99.14 have incomes at or less than 90 percent of area median income, 99.15 (2) a minimum of 40 percent of members must have incomes at or 99.16 less than 60 percent of area median income, or (3) a minimum of 99.17 20 percent of members must have incomes at or less than 50 99.18 percent of area median income. For purposes of this clause, 99.19 "member income" shall mean the income of a member existing at 99.20 the time the member acquires cooperative membership, and median 99.21 income shall mean the St. Paul-Minneapolis metropolitan area 99.22 median income as determined by the United States Department of 99.23 Housing and Urban Development. It must also meet the following 99.24 requirements: 99.25 (a) The articles of incorporation set the sale price of 99.26 occupancy entitling cooperative shares or memberships at no more 99.27 than a transfer value determined as provided in the articles. 99.28 That value may not exceed the sum of the following: 99.29 (1) the consideration paid for the membership or shares by 99.30 the first occupant of the unit, as shown in the records of the 99.31 corporation; 99.32 (2) the fair market value, as shown in the records of the 99.33 corporation, of any improvements to the real property that were 99.34 installed at the sole expense of the member with the prior 99.35 approval of the board of directors; 99.36 (3) accumulated interest, or an inflation allowance not to 100.1 exceed the greater of a ten percent annual noncompounded 100.2 increase on the consideration paid for the membership or share 100.3 by the first occupant of the unit, or the amount that would have 100.4 been paid on that consideration if interest had been paid on it 100.5 at the rate of the percentage increase in the revised Consumer 100.6 Price Index for All Urban Consumers for the Minneapolis-St. Paul 100.7 metropolitan area prepared by the United States Department of 100.8 Labor, provided that the amount determined pursuant to this 100.9 clause may not exceed $500 for each year or fraction of a year 100.10 the membership or share was owned; plus 100.11 (4) real property capital contributions shown in the 100.12 records of the corporation to have been paid by the transferor 100.13 member and previous holders of the same membership, or of 100.14 separate memberships that had entitled occupancy to the unit of 100.15 the member involved. These contributions include contributions 100.16 to a corporate reserve account the use of which is restricted to 100.17 real property improvements or acquisitions, contributions to the 100.18 corporation which are used for real property improvements or 100.19 acquisitions, and the amount of principal amortized by the 100.20 corporation on its indebtedness due to the financing of real 100.21 property acquisition or improvement or the averaging of 100.22 principal paid by the corporation over the term of its real 100.23 property-related indebtedness. 100.24 (b) The articles of incorporation require that the board of 100.25 directors limit the purchase price of stock or membership 100.26 interests for new member-occupants or resident shareholders to 100.27 an amount which does not exceed the transfer value for the 100.28 membership or stock as defined in clause (a). 100.29 (c) The articles of incorporation require that the total 100.30 distribution out of capital to a member shall not exceed that 100.31 transfer value. 100.32 (d) The articles of incorporation require that upon 100.33 liquidation of the corporation any assets remaining after 100.34 retirement of corporate debts and distribution to members will 100.35 be conveyed to a charitable organization described in section 100.36 501(c)(3) of the Internal Revenue Code of 1986, as amended 101.1 through December 31, 1992, or a public agency. 101.2 A "limited equity cooperative apartment" is a dwelling unit 101.3 owned by a limited equity cooperative. 101.4 "Occupancy entitling cooperative share or membership" is 101.5 the ownership interest in a cooperative organization which 101.6 entitles the holder to an exclusive right to occupy a dwelling 101.7 unit owned or leased by the cooperative. 101.8 For purposes of taxation, the assessor shall value a unit 101.9 owned by a limited equity cooperative at the lesser of its 101.10 market value or the value determined by capitalizing the net 101.11 operating income of a comparable apartment operated on a rental 101.12 basis at the capitalization rate used in valuing comparable 101.13 buildings that are not limited equity cooperatives. If a 101.14 cooperative fails to operate in accordance with the provisions 101.15 of clauses (a) to (d), the property shall be subject to 101.16 additional property taxes in the amount of the difference 101.17 between the taxes determined in accordance with this subdivision 101.18 for the last ten years that the property had been assessed 101.19 pursuant to this subdivision and the amount that would have been 101.20 paid if the provisions of this subdivision had not applied to 101.21 it. The additional taxes, plus interest at the rate specified 101.22 in section 549.09, shall be extended against the property on the 101.23 tax list for the current year. 101.24 [EFFECTIVE DATE.] This section is effective for taxes 101.25 payable in 2004 and thereafter. 101.26 Sec. 18. Minnesota Statutes 2004, section 273.124, 101.27 subdivision 3, is amended to read: 101.28 Subd. 3. [COOPERATIVES AND CHARITABLE CORPORATIONS; 101.29 HOMESTEAD AND OTHER PROPERTY.] (a) When property is owned by a 101.30 corporation or association organized under chapter 308A or 308B, 101.31 and each person who owns a share or shares in the corporation or 101.32 association is entitled to occupy a building on the property, or 101.33 a unit within a building on the property, the corporation or 101.34 association may claim homestead treatment for each dwelling, or 101.35 for each unit in the case of a building containing several 101.36 dwelling units, or for the part of the value of the building 102.1 occupied by a shareholder. Each building or unit must be 102.2 designated by legal description or number. The net tax capacity 102.3 of each building or unit that qualifies for assessment as a 102.4 homestead under this subdivision must include not more than 102.5 one-half acre of land, if platted, nor more than 80 acres if 102.6 unplatted. The net tax capacity of the property is the sum of 102.7 the net tax capacities of each of the respective buildings or 102.8 units comprising the property, including the net tax capacity of 102.9 each unit's or building's proportionate share of the land and 102.10 any common buildings. To qualify for the treatment provided by 102.11 this subdivision, the corporation or association must be wholly 102.12 owned by persons having a right to occupy a building or unit 102.13 owned by the corporation or association. A charitable 102.14 corporation organized under the laws of Minnesota and not 102.15 otherwise exempt thereunder with no outstanding stock qualifies 102.16 for homestead treatment with respect to member residents of the 102.17 dwelling units who have purchased and hold residential 102.18 participation warrants entitling them to occupy the units. 102.19 (b) To the extent provided in paragraph (a), a cooperative 102.20 or corporation organized under chapter 308A may obtain separate 102.21 assessment and valuation, and separate property tax statements 102.22 for each residential homestead, residential nonhomestead, or for 102.23 each seasonal residential recreational building or unit not used 102.24 for commercial purposes. The appropriate class rates under 102.25 section 273.13 shall be applicable as if each building or unit 102.26 were a separate tax parcel; provided, however, that the tax 102.27 parcel which exists at the time the cooperative or corporation 102.28 makes application under this subdivision shall be a single 102.29 parcel for purposes of property taxes or the enforcement and 102.30 collection thereof, other than as provided in paragraph (a) or 102.31 this paragraph. 102.32 (c) A member of a corporation or association may initially 102.33 obtain the separate assessment and valuation and separate 102.34 property tax statements, as provided in paragraph (b), by 102.35 applying to the assessor by June 30 of the assessment year. 102.36 (d) When a building, or dwelling units within a building, 103.1 no longer qualify under paragraph (a) or (b), the current owner 103.2 must notify the assessor within 30 days. Failure to notify the 103.3 assessor within 30 days shall result in the loss of benefits 103.4 under paragraph (a) or (b) for taxes payable in the year that 103.5 the failure is discovered. For these purposes, "benefits under 103.6 paragraph (a) or (b)" means the difference in the net tax 103.7 capacity of the building or units which no longer qualify as 103.8 computed under paragraph (a) or (b) and as computed under the 103.9 otherwise applicable law, times the local tax rate applicable to 103.10 the building for that taxes payable year. Upon discovery of a 103.11 failure to notify, the assessor shall inform the auditor of the 103.12 difference in net tax capacity for the building or buildings in 103.13 which units no longer qualify, and the auditor shall calculate 103.14 the benefits under paragraph (a) or (b). Such amount, plus a 103.15 penalty equal to 100 percent of that amount, shall then be 103.16 demanded of the building's owner. The property owner may appeal 103.17 the county's determination by serving copies of a petition for 103.18 review with county officials as provided in section 278.01 and 103.19 filing a proof of service as provided in section 278.01 with the 103.20 Minnesota Tax Court within 60 days of the date of the notice 103.21 from the county. The appeal shall be governed by the Tax Court 103.22 procedures provided in chapter 271, for cases relating to the 103.23 tax laws as defined in section 271.01, subdivision 5; 103.24 disregarding sections 273.125, subdivision 5, and 278.03, but 103.25 including section 278.05, subdivision 2. If the amount of the 103.26 benefits under paragraph (a) or (b) and penalty are not paid 103.27 within 60 days, and if no appeal has been filed, the county 103.28 auditor shall certify the amount of the benefit and penalty to 103.29 the succeeding year's tax list to be collected as part of the 103.30 property taxes on the affected property. 103.31 [EFFECTIVE DATE.] This section is effective for taxes 103.32 payable in 2004 and thereafter. 103.33 Sec. 19. Minnesota Statutes 2004, section 273.124, 103.34 subdivision 6, is amended to read: 103.35 Subd. 6. [LEASEHOLD COOPERATIVES.] When one or more 103.36 dwellings or one or more buildings which each contain several 104.1 dwelling units is owned by a nonprofit corporation subject to 104.2 the provisions of chapter 317A and qualifying under section 104.3 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as 104.4 amended through December 31, 1990, or a limited partnership 104.5 which corporation or partnership operates the property in 104.6 conjunction with a cooperative association, and has received 104.7 public financing, homestead treatment may be claimed by the 104.8 cooperative association on behalf of the members of the 104.9 cooperative for each dwelling unit occupied by a member of the 104.10 cooperative. The cooperative association must provide the 104.11 assessor with the Social Security numbers of those members. To 104.12 qualify for the treatment provided by this subdivision, the 104.13 following conditions must be met: 104.14 (a) the cooperative association must be organized under 104.15 chapter 308A or 308B and all voting members of the board of 104.16 directors must be resident tenants of the cooperative and must 104.17 be elected by the resident tenants of the cooperative; 104.18 (b) the cooperative association must have a lease for 104.19 occupancy of the property for a term of at least 20 years, which 104.20 permits the cooperative association, while not in default on the 104.21 lease, to participate materially in the management of the 104.22 property, including material participation in establishing 104.23 budgets, setting rent levels, and hiring and supervising a 104.24 management agent; 104.25 (c) to the extent permitted under state or federal law, the 104.26 cooperative association must have a right under a written 104.27 agreement with the owner to purchase the property if the owner 104.28 proposes to sell it; if the cooperative association does not 104.29 purchase the property it is offered for sale, the owner may not 104.30 subsequently sell the property to another purchaser at a price 104.31 lower than the price at which it was offered for sale to the 104.32 cooperative association unless the cooperative association 104.33 approves the sale; 104.34 (d) a minimum of 40 percent of the cooperative 104.35 association's members must have incomes at or less than 60 104.36 percent of area median gross income as determined by the United 105.1 States Secretary of Housing and Urban Development under section 105.2 142(d)(2)(B) of the Internal Revenue Code of 1986, as amended 105.3 through December 31, 1991. For purposes of this clause, "member 105.4 income" means the income of a member existing at the time the 105.5 member acquires cooperative membership; 105.6 (e) if a limited partnership owns the property, it must 105.7 include as the managing general partner a nonprofit organization 105.8 operating under the provisions of chapter 317A and qualifying 105.9 under section 501(c)(3) or 501(c)(4) of the Internal Revenue 105.10 Code of 1986, as amended through December 31, 1990, and the 105.11 limited partnership agreement must provide that the managing 105.12 general partner have sufficient powers so that it materially 105.13 participates in the management and control of the limited 105.14 partnership; 105.15 (f) prior to becoming a member of a leasehold cooperative 105.16 described in this subdivision, a person must have received 105.17 notice that (1) describes leasehold cooperative property in 105.18 plain language, including but not limited to the effects of 105.19 classification under this subdivision on rents, property taxes 105.20 and tax credits or refunds, and operating expenses, and (2) 105.21 states that copies of the articles of incorporation and bylaws 105.22 of the cooperative association, the lease between the owner and 105.23 the cooperative association, a sample sublease between the 105.24 cooperative association and a tenant, and, if the owner is a 105.25 partnership, a copy of the limited partnership agreement, can be 105.26 obtained upon written request at no charge from the owner, and 105.27 the owner must send or deliver the materials within seven days 105.28 after receiving any request; 105.29 (g) if a dwelling unit of a building was occupied on the 105.30 60th day prior to the date on which the unit became leasehold 105.31 cooperative property described in this subdivision, the notice 105.32 described in paragraph (f) must have been sent by first class 105.33 mail to the occupant of the unit at least 60 days prior to the 105.34 date on which the unit became leasehold cooperative property. 105.35 For purposes of the notice under this paragraph, the copies of 105.36 the documents referred to in paragraph (f) may be in proposed 106.1 version, provided that any subsequent material alteration of 106.2 those documents made after the occupant has requested a copy 106.3 shall be disclosed to any occupant who has requested a copy of 106.4 the document. Copies of the articles of incorporation and 106.5 certificate of limited partnership shall be filed with the 106.6 secretary of state after the expiration of the 60-day period 106.7 unless the change to leasehold cooperative status does not 106.8 proceed; 106.9 (h) the county attorney of the county in which the property 106.10 is located must certify to the assessor that the property meets 106.11 the requirements of this subdivision; 106.12 (i) the public financing received must be from at least one 106.13 of the following sources: 106.14 (1) tax increment financing proceeds used for the 106.15 acquisition or rehabilitation of the building or interest rate 106.16 write-downs relating to the acquisition of the building; 106.17 (2) government issued bonds exempt from taxes under section 106.18 103 of the Internal Revenue Code of 1986, as amended through 106.19 December 31, 1991, the proceeds of which are used for the 106.20 acquisition or rehabilitation of the building; 106.21 (3) programs under section 221(d)(3), 202, or 236, of Title 106.22 II of the National Housing Act; 106.23 (4) rental housing program funds under Section 8 of the 106.24 United States Housing Act of 1937 or the market rate family 106.25 graduated payment mortgage program funds administered by the 106.26 Minnesota Housing Finance Agency that are used for the 106.27 acquisition or rehabilitation of the building; 106.28 (5) low-income housing credit under section 42 of the 106.29 Internal Revenue Code of 1986, as amended through December 31, 106.30 1991; 106.31 (6) public financing provided by a local government used 106.32 for the acquisition or rehabilitation of the building, including 106.33 grants or loans from (i) federal community development block 106.34 grants; (ii) HOME block grants; or (iii) residential rental 106.35 bonds issued under chapter 474A; or 106.36 (7) other rental housing program funds provided by the 107.1 Minnesota Housing Finance Agency for the acquisition or 107.2 rehabilitation of the building; 107.3 (j) at the time of the initial request for homestead 107.4 classification or of any transfer of ownership of the property, 107.5 the governing body of the municipality in which the property is 107.6 located must hold a public hearing and make the following 107.7 findings: 107.8 (1) that the granting of the homestead treatment of the 107.9 apartment's units will facilitate safe, clean, affordable 107.10 housing for the cooperative members that would otherwise not be 107.11 available absent the homestead designation; 107.12 (2) that the owner has presented information satisfactory 107.13 to the governing body showing that the savings garnered from the 107.14 homestead designation of the units will be used to reduce 107.15 tenant's rents or provide a level of furnishing or maintenance 107.16 not possible absent the designation; and 107.17 (3) that the requirements of paragraphs (b), (d), and (i) 107.18 have been met. 107.19 Homestead treatment must be afforded to units occupied by 107.20 members of the cooperative association and the units must be 107.21 assessed as provided in subdivision 3, provided that any unit 107.22 not so occupied shall be classified and assessed pursuant to the 107.23 appropriate class. No more than three acres of land may, for 107.24 assessment purposes, be included with each dwelling unit that 107.25 qualifies for homestead treatment under this subdivision. 107.26 When dwelling units no longer qualify under this 107.27 subdivision, the current owner must notify the assessor within 107.28 60 days. Failure to notify the assessor within 60 days shall 107.29 result in the loss of benefits under this subdivision for taxes 107.30 payable in the year that the failure is discovered. For these 107.31 purposes, "benefits under this subdivision" means the difference 107.32 in the net tax capacity of the units which no longer qualify as 107.33 computed under this subdivision and as computed under the 107.34 otherwise applicable law, times the local tax rate applicable to 107.35 the building for that taxes payable year. Upon discovery of a 107.36 failure to notify, the assessor shall inform the auditor of the 108.1 difference in net tax capacity for the building or buildings in 108.2 which units no longer qualify, and the auditor shall calculate 108.3 the benefits under this subdivision. Such amount, plus a 108.4 penalty equal to 100 percent of that amount, shall then be 108.5 demanded of the building's owner. The property owner may appeal 108.6 the county's determination by serving copies of a petition for 108.7 review with county officials as provided in section 278.01 and 108.8 filing a proof of service as provided in section 278.01 with the 108.9 Minnesota Tax Court within 60 days of the date of the notice 108.10 from the county. The appeal shall be governed by the Tax Court 108.11 procedures provided in chapter 271, for cases relating to the 108.12 tax laws as defined in section 271.01, subdivision 5; 108.13 disregarding sections 273.125, subdivision 5, and 278.03, but 108.14 including section 278.05, subdivision 2. If the amount of the 108.15 benefits under this subdivision and penalty are not paid within 108.16 60 days, and if no appeal has been filed, the county auditor 108.17 shall certify the amount of the benefit and penalty to the 108.18 succeeding year's tax list to be collected as part of the 108.19 property taxes on the affected buildings. 108.20 [EFFECTIVE DATE.] This section is effective for taxes 108.21 payable in 2004 and thereafter. 108.22 Sec. 20. Minnesota Statutes 2004, section 273.124, 108.23 subdivision 8, is amended to read: 108.24 Subd. 8. [HOMESTEAD OWNED BY OR LEASED TO FAMILY FARM 108.25 CORPORATION, JOINT FARM VENTURE, LIMITED LIABILITY COMPANY, OR 108.26 PARTNERSHIP.] (a) Each family farm corporation, each; each joint 108.27 family farm venture,; and each limited liability company, and108.28eachor partnershipoperatingwhich operates a family farm; is 108.29 entitled to class 1b under section 273.13, subdivision 22, 108.30 paragraph (b), or class 2a assessment for one homestead occupied 108.31 by a shareholder, member, or partner thereof who is residing on 108.32 the land, and actively engaged in farming of the land owned by 108.33 the family farm corporation, joint family farm venture, limited 108.34 liability company, or partnershipoperating a family farm. 108.35 Homestead treatment applies even if legal title to the property 108.36 is in the name of the family farm corporation, joint family farm 109.1 venture, limited liability company, or partnershipoperating the109.2family farm, and not in the name of the person residing on it. 109.3 "Family farm corporation," "family farm," and "partnership 109.4 operating a family farm" have the meanings given in section 109.5 500.24, except that the number of allowable shareholders, 109.6 members, or partners under this subdivision shall not exceed 109.7 12. "Limited liability company" has the meaning contained in 109.8 sections 322B.03, subdivision 28, and 500.24, subdivision 2, 109.9 paragraphs (l) and (m). "Joint family farm venture" means a 109.10 cooperative agreement among two or more farm enterprises 109.11 authorized to operate a family farm under section 500.24. 109.12 (b) In addition to property specified in paragraph (a), any 109.13 other residences owned by family farm corporations, joint family 109.14 farm ventures, limited liability companies, or partnerships 109.15operating a family farmdescribed in paragraph (a) which are 109.16 located on agricultural land and occupied as homesteads by its 109.17 shareholders, members, or partners who are actively engaged in 109.18 farming on behalf of that corporation, joint farm venture, 109.19 limited liability company, or partnership must also be assessed 109.20 as class 2a property or as class 1b property under section 109.21 273.13. 109.22 (c) Agricultural property that is owned by a member, 109.23 partner, or shareholder of a family farm corporation or joint 109.24 family farm venture, limited liability company operating a 109.25 family farm, or by a partnership operating a family farm and 109.26 leased to the family farm corporation, limited liability 109.27 company,orpartnershipoperating a family farm, or joint farm 109.28 venture, as defined in paragraph (a), is eligible for 109.29 classification as class 1b or class 2a under section 273.13, if 109.30 the owner is actually residing on the property, and is actually 109.31 engaged in farming the land on behalf of that corporation, joint 109.32 farm venture, limited liability company, or partnership. This 109.33 paragraph applies without regard to any legal possession rights 109.34 of the family farm corporation, joint family farm venture, 109.35 limited liability company, or partnershipoperating a family109.36farmunder the lease. 110.1 [EFFECTIVE DATE.] This section is effective the day 110.2 following final enactment. 110.3 Sec. 21. Minnesota Statutes 2004, section 273.124, 110.4 subdivision 21, is amended to read: 110.5 Subd. 21. [TRUST PROPERTY; HOMESTEAD.] Real property held 110.6 by a trustee under a trust is eligible for classification as 110.7 homestead property if: 110.8 (1) the grantor or surviving spouse of the grantor of the 110.9 trust occupies and uses the property as a homestead; 110.10 (2) a relative or surviving relative of the grantor who 110.11 meets the requirements of subdivision 1, paragraph (c), in the 110.12 case of residential real estate; or subdivision 1, paragraph 110.13 (d), in the case of agricultural property, occupies and uses the 110.14 property as a homestead; 110.15 (3) a family farm corporation, joint farm venture, limited 110.16 liability company, or partnership operating a family farm rents 110.17 the property held by a trustee under a trust, and the grantor, 110.18 the spouse of the grantor, or the son or daughter of the 110.19 grantor, who is also a shareholder, member, or partner of the 110.20 corporation, joint farm venture, limited liability company, or 110.21 partnership occupies and uses the property as a homestead,and110.22 or is actively farming the property on behalf of the 110.23 corporation, joint farm venture, limited liability company, or 110.24 partnership; or 110.25 (4) a person who has received homestead classification for 110.26 property taxes payable in 2000 on the basis of an unqualified 110.27 legal right under the terms of the trust agreement to occupy the 110.28 property as that person's homestead and who continues to use the 110.29 property as a homestead or a person who received the homestead 110.30 classification for taxes payable in 2005 under clause (3) who 110.31 does not qualify under clause (3) for taxes payable in 2006 or 110.32 thereafter but who continues to qualify under clause (3) as it 110.33 existed for taxes payable in 2005. 110.34 For purposes of this subdivision, "grantor" is defined as 110.35 the person creating or establishing a testamentary, inter Vivos, 110.36 revocable or irrevocable trust by written instrument or through 111.1 the exercise of a power of appointment. 111.2 [EFFECTIVE DATE.] This section is effective for taxes 111.3 payable in 2006 and thereafter. 111.4 Sec. 22. Minnesota Statutes 2004, section 273.1315, is 111.5 amended to read: 111.6 273.1315 [CERTIFICATION OF 1B PROPERTY.] 111.7 Any property owner seeking classification and assessment of 111.8 the owner's homestead as class 1b property pursuant to section 111.9 273.13, subdivision 22, paragraph (b), shall file with the 111.10 commissioner of revenue a 1b homestead declaration, on a form 111.11 prescribed by the commissioner. The declaration shall contain 111.12 the following information: 111.13 (a) the information necessary to verify that on or before 111.14 June 30 of the filing year, the property owner or the owner's 111.15 spouse satisfies the requirements of section 273.13, subdivision 111.16 22, paragraph (b), for 1b classification; and 111.17 (b) any additional information prescribed by the 111.18 commissioner. 111.19 The declaration must be filed on or before October 1 to be 111.20 effective for property taxes payable during the succeeding 111.21 calendar year. The declaration and any supplementary 111.22 information received from the property owner pursuant to this 111.23 section shall be subject to chapter 270B. If approved by the 111.24 commissioner, the declaration remains in effect until the 111.25 property no longer qualifies under section 273.13, subdivision 111.26 22, paragraph (b). Failure to notify the commissioner within 30 111.27 days that the property no longer qualifies under that paragraph 111.28 because of a sale, change in occupancy, or change in the status 111.29 or condition of an occupant shall result in the penalty provided 111.30 in section 273.124, subdivision 13, computed on the basis of the 111.31 class 1b benefits for the property, and the property shall lose 111.32 its current class 1b classification. 111.33 The commissioner shall provide to the assessor on or before 111.34 November 1 a listing of the parcels of property qualifying for 111.35 1b classification. 111.36 [EFFECTIVE DATE.] This section is effective the day 112.1 following final enactment. 112.2 Sec. 23. Minnesota Statutes 2004, section 273.19, 112.3 subdivision 1a, is amended to read: 112.4 Subd. 1a. For purposes of this section, a lease includes 112.5 any agreement, except a cooperative farming agreement pursuant 112.6 to section 97A.135, subdivision 3, or a lease executed pursuant 112.7 to section 272.68, subdivision 4, permitting a nonexempt person 112.8 or entity to use the property, regardless of whether the 112.9 agreement is characterized as a lease. A lease has a "term of 112.10 at least one year" if the term is for a period of less than one 112.11 year and the lease permits the parties to renew the lease 112.12 without requiring that similar terms for leasing the property 112.13 will be offered to other applicants or bidders through a 112.14 competitive bidding or other form of offer to potential lessees 112.15 or users. 112.16 [EFFECTIVE DATE.] This section is effective the day 112.17 following final enactment. 112.18 Sec. 24. Minnesota Statutes 2004, section 273.372, is 112.19 amended to read: 112.20 273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 112.21 VALUATIONS.] 112.22 Subdivision 1. [SCOPE.] (a) As provided in this section, 112.23 an appeal by a utility or railroad company concerningthe112.24exemption, valuation, or classification ofproperty for which 112.25 the commissioner of revenue has provided the city or county 112.26 assessor with valuations by order, or for which the commissioner 112.27 has recommended values to the city or county assessor, must be 112.28 brought against the commissionerin Tax Court or in district112.29court of the county where the property is located, and not 112.30 against the county or taxing district where the property is 112.31 located. 112.32 (b) This section governs administrative appeals and appeals 112.33 to court of a claim that utility or railroad operating property 112.34 has been partially, unfairly, or unequally assessed, or assessed 112.35 at a valuation greater than its real or actual value, 112.36 misclassified, or that the property is exempt. This section 113.1 applies only to property described in sections 270.81, 113.2 subdivision 1, 273.33, 273.35, 273.36, and 273.37, and only with 113.3 regard to taxable net tax capacities that have been provided to 113.4 the city or county by the commissioner and which have not been 113.5 changed by city or county. If the taxable net tax capacity 113.6 being appealed is not the taxable net tax capacity established 113.7 by the commissioner, or if the appeal claims that the tax rate 113.8 applied against the parcel is incorrect, or that the tax has 113.9 been paid, this section does not apply. 113.10 Subd. 2. [CONTENTS AND FILING OF PETITION.] (a) In all 113.11 appeals to court that are required to be brought against the 113.12 commissioner under this section, the petition initiating the 113.13 appeal must be served on the commissioner and must be filed with 113.14 the Tax Court in Ramsey County, as provided in paragraph (b) or 113.15 (c). 113.16 (b) If the appeal to court is from an order of the 113.17 commissioner, it must be brought under chapter 271, except that 113.18 when the provisions of this section conflict with chapter 271, 113.19 this section prevails. In addition, the petition must include 113.20 all the parcels encompassed by that order which the petitioner 113.21 claims have been partially, unfairly, or unequally assessed, 113.22 assessed at a valuation greater than their real or actual value, 113.23 misclassified, or are exempt. For this purpose, an order of the 113.24 commissioner is either (1) a certification or notice of value by 113.25 the commissioner for property described in subdivision 1, or (2) 113.26 the final determination by the commissioner of either an 113.27 administrative appeal conference or informal administrative 113.28 appeal described in subdivision 4. 113.29 (c) If the appeal is from theexemption, valuation,113.30classification, ortax that results from implementation of the 113.31 commissioner's order, certification, or recommendation, it must 113.32 be brought under chapter 278, and the provisions in that chapter 113.33 apply, except that service shall be on the commissioner only and 113.34 not on thecountylocal officials specified in section 278.01, 113.35 subdivision 1, and if any other provision of this section 113.36 conflicts with chapter 278, this section prevails. In addition, 114.1 the petition must include either all the utility parcels or all 114.2 the railroad parcels in the state in which the petitioner claims 114.3 an interest and which the petitioner claims have been partially, 114.4 unfairly, or unequally assessed, assessed at a valuation greater 114.5 than their real or actual value, misclassified, or are 114.6 exempt.This provision applies to the property described in114.7sections 273.33, 273.35, 273.36, and 273.37, but only if the114.8appealed values have remained unchanged from those provided to114.9the city or county by the commissioner. If the exemption,114.10valuation, or classification being appealed has been changed by114.11the city or county, then the action must be brought under114.12chapter 278 in the county where the property is located and114.13proper service must be made upon the county officials as114.14specified in section 278.01, subdivision 1.114.15 Subd. 3. [NOTICE.] Upon filing of any appeal in court by a 114.16 utility company or railroad against the commissioner pursuant to 114.17 this section, the commissioner shall give notice by first class 114.18 mail to the county auditor of each countywhich would be114.19affected by the appealwhere property included in the petition 114.20 is located. 114.21 Subd. 4. [ADMINISTRATIVE APPEALS.] (a) Companies that 114.22 submit the reports under section 270.82 or 273.371 by the date 114.23 specified in that section, or by the date specified by the 114.24 commissioner in an extension, may appeal administratively to the 114.25 commissionerunder the procedures in section 270.11, subdivision114.266,prior to bringing an action inTax Court or in districtcourt 114.27, however, instituting an administrative appealby submitting a 114.28 written request with the commissionerdoes not change or114.29modifyfor a conference within ten days after the date of the 114.30 commissioner's valuation certification or notice to the company, 114.31 or by May 15, whichever is earlier. The commissioner shall 114.32 conduct the conference upon the commissioner's entire files and 114.33 records and such further information as may be offered. The 114.34 conference must be held no later than 20 days after the date of 114.35 the commissioner's valuation certification or notice to the 114.36 company, or by the date specified by the commissioner in an 115.1 extension. At a reasonable time after the conference the 115.2 commissioner shall make a final determination of the matter and 115.3 shall notify the company promptly of the determination. The 115.4 conference is not a contested case hearing. 115.5 (b) In addition to the opportunity for a conference under 115.6 paragraph (a), the commissioner shall make a more informal 115.7 procedure available to railroad and utility companies to 115.8 question values established by the commissioner through 115.9 certification or notice. The availability of the informal 115.10 procedure does not change or modify the deadline for requesting 115.11 a conference under paragraph (a), the deadline in section 271.06 115.12 for appealing an order of the commissionerin Tax Court, or the 115.13 deadline in section 278.01 forfiling a property tax claim or115.14objection in Tax Court or districtappealing property taxes in 115.15 court. 115.16 [EFFECTIVE DATE.] This section is effective September 1, 115.17 2005, and thereafter. 115.18 Sec. 25. Minnesota Statutes 2004, section 274.014, 115.19 subdivision 2, is amended to read: 115.20 Subd. 2. [APPEALS AND EQUALIZATION COURSE.]By no later115.21than January 1,Beginning in 2006, and each year thereafter, 115.22 there must be at least one member at each meeting of a local 115.23 board of appeal and equalization who has attended an appeals and 115.24 equalization course developed or approved by the commissioner 115.25 within the last four years, as certified by the commissioner. 115.26 The course may be offered in conjunction with a meeting of the 115.27 Minnesota League of Cities or the Minnesota Association of 115.28 Townships. The course content must include, but need not be 115.29 limited to, a review of the handbook developed by the 115.30 commissioner under subdivision 1. 115.31 [EFFECTIVE DATE.] This section is effective the day 115.32 following final enactment. 115.33 Sec. 26. Minnesota Statutes 2004, section 274.014, 115.34 subdivision 3, is amended to read: 115.35 Subd. 3. [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] (a) 115.36 Any city or town thatdoes notconducts local boards of appeal 116.1 and equalization meetings must provide proof to the county 116.2 assessor by December 1, 2006, and each year thereafter, that it 116.3 is in compliance with the requirements of subdivision 2, and116.4that it had. Beginning in 2006, this notice must also verify 116.5 that there was a quorum of voting members at each meeting of the 116.6 board of appeal and equalization in thepriorcurrent year,. A 116.7 city or town that does not comply with these requirements is 116.8 deemed to have transferred its board of appeal and equalization 116.9 powers to the countyunder section 274.01, subdivision 3,116.10forbeginning with the following year's assessment and 116.11 continuing unless the powers are reinstated under paragraph (c). 116.12 (b) The county shall notify the taxpayers when the board of 116.13 appeal and equalization for a city or town has been transferred 116.14 to the county under this subdivision and, prior to the meeting 116.15 time of the county board of equalization, the county shall make 116.16 available to those taxpayers a procedure for a review of the 116.17 assessments, including, but not limited to, open book meetings. 116.18 This alternate review process shall take place in April and May. 116.19 (c) A local board whose powers are transferred to the 116.20 county under this subdivision may be reinstated by resolution of 116.21 the governing body of the city or town and upon proof of 116.22 compliance with the requirements of subdivision 2. The 116.23 resolution and proofs must be provided to the county assessor by 116.24 December 1 in order to be effective for the following year's 116.25 assessment. 116.26 [EFFECTIVE DATE.] This section is effective the day 116.27 following final enactment. 116.28 Sec. 27. Minnesota Statutes 2004, section 274.14, is 116.29 amended to read: 116.30 274.14 [LENGTH OF SESSION; RECORD.] 116.31The county board of equalization or the special board of116.32equalization appointed by it shall meet during the last ten116.33meeting days in June. For this purpose, "meeting days" are116.34defined as any day of the week excluding Saturday and Sunday.116.35 The board may meet on any ten consecutive meeting days in June, 116.36 after the second Friday in June, if. The actual meeting dates 117.1aremust be contained on the valuation notices mailed to each 117.2 property owner in the countyunderas provided in section 117.3 273.121. For this purpose, "meeting days" is defined as any day 117.4 of the week excluding Saturday and Sunday. No action taken by 117.5 the county board of review after June 30 is valid, except for 117.6 corrections permitted in sections 273.01 and 274.01. The county 117.7 auditor shall keep an accurate record of the proceedings and 117.8 orders of the board. The record must be published like other 117.9 proceedings of county commissioners. A copy of the published 117.10 record must be sent to the commissioner of revenue, with the 117.11 abstract of assessment required by section 274.16. 117.12 [EFFECTIVE DATE.] This section is effective the day 117.13 following final enactment. 117.14 Sec. 28. Minnesota Statutes 2004, section 275.07, 117.15 subdivision 1, is amended to read: 117.16 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 117.17 provided under paragraph (b), the taxes voted by cities, 117.18 counties, school districts, and special districts shall be 117.19 certified by the proper authorities to the county auditor on or 117.20 before five working days after December 20 in each year. A town 117.21 must certify the levy adopted by the town board to the county 117.22 auditor by September 15 each year. If the town board modifies 117.23 the levy at a special town meeting after September 15, the town 117.24 board must recertify its levy to the county auditor on or before 117.25 five working days after December 20.The taxes certified shall117.26be reduced by the county auditor by the aid received under117.27section 273.1398, subdivision 3.If a city, town, county, 117.28 school district, or special district fails to certify its levy 117.29 by that date, its levy shall be the amount levied by it for the 117.30 preceding year. 117.31 (b)(i) The taxes voted by counties under sections 103B.241, 117.32 103B.245, and 103B.251 shall be separately certified by the 117.33 county to the county auditor on or before five working days 117.34 after December 20 in each year. The taxes certified shall not 117.35 be reduced by the county auditor by the aid received under 117.36 section 273.1398, subdivision 3. If a county fails to certify 118.1 its levy by that date, its levy shall be the amount levied by it 118.2 for the preceding year. 118.3 (ii) For purposes of the proposed property tax notice under 118.4 section 275.065 and the property tax statement under section 118.5 276.04, for the first year in which the county implements the 118.6 provisions of this paragraph, the county auditor shall reduce 118.7 the county's levy for the preceding year to reflect any amount 118.8 levied for water management purposes under clause (i) included 118.9 in the county's levy. 118.10 [EFFECTIVE DATE.] This section is effective the day 118.11 following final enactment. 118.12 Sec. 29. Minnesota Statutes 2004, section 275.07, 118.13 subdivision 4, is amended to read: 118.14 Subd. 4. [REPORT TO COMMISSIONER.] (a) On or before 118.15 October 8 of each year, the county auditor shall report to the 118.16 commissioner of revenue the proposed levy certified by local 118.17 units of government under section 275.065, subdivision 1. If 118.18 any taxing authorities have notified the county auditor that 118.19 they are in the process of negotiating an agreement for sharing, 118.20 merging, or consolidating services but that when the proposed 118.21 levy was certified under section 275.065, subdivision 1c, the 118.22 agreement was not yet finalized, the county auditor shall supply 118.23 that information to the commissioner when filing the report 118.24 under this section and shall recertify the affected levies as 118.25 soon as practical after October 10. 118.26 (b) On or before January 15 of each year, the county 118.27 auditor shall report to the commissioner of revenue the final 118.28 levy certified by local units of government under subdivision 1. 118.29 (c) The levies must be reported in the manner prescribed by 118.30 the commissioner.The reports must show a total levy and the118.31amount of each special levy.118.32 [EFFECTIVE DATE.] This section is effective the day 118.33 following final enactment. 118.34 Sec. 30. Minnesota Statutes 2004, section 276.112, is 118.35 amended to read: 118.36 276.112 [STATE PROPERTY TAXES; COUNTY TREASURER.] 119.1 On or before January 25 each year, for the period ending 119.2 December 31 of the prior year, and on or before June2928 each 119.3 year, for the period ending on the most recent settlement day 119.4 determined in section 276.09, and on or before December 2 each 119.5 year, for the period ending November 20, the county treasurer 119.6 must make full settlement with the county auditor according to 119.7 sections 276.09, 276.10, and 276.111 for all receipts of state 119.8 property taxes levied under section 275.025, and must transmit 119.9 those receipts to the commissioner of revenue by electronic 119.10 means. 119.11 [EFFECTIVE DATE.] This section is effective the day 119.12 following final enactment. 119.13 Sec. 31. Minnesota Statutes 2004, section 282.016, is 119.14 amended to read: 119.15 282.016 [PROHIBITED PURCHASERS.] 119.16No(a) A county auditor, county treasurer, county attorney, 119.17 court administrator of the district court,orcounty assessor 119.18or, supervisor of assessments,ordeputy or clerk or an employee 119.19 of such officer,and noa commissioner for tax-forfeited lands 119.20 or an assistant to such commissionermay, must not become a 119.21 purchaser, either personally or as an agent or attorney for 119.22 another person, of the properties offered for sale under the 119.23 provisions of this chapter, either personally, or as agent or119.24attorney for any other person, except thatin the county for 119.25 which the person performs duties. A person prohibited from 119.26 purchasing property under this section must not directly or 119.27 indirectly have another person purchase it on behalf of the 119.28 prohibited purchaser for the prohibited purchaser's benefit or 119.29 gain. 119.30 (b) Notwithstanding paragraph (a), such officer, deputy, 119.31court administratorclerk, or employee or commissioner for 119.32 tax-forfeited lands or assistant to such commissioner may (1) 119.33 purchase lands owned by that official at the time the state 119.34 became the absolute owner thereof or (2) bid upon and purchase 119.35 forfeited property offered for sale under the alternate sale 119.36 procedure described in section 282.01, subdivision 7a. 120.1 [EFFECTIVE DATE.] This section is effective the day 120.2 following final enactment. 120.3 Sec. 32. Minnesota Statutes 2004, section 282.08, is 120.4 amended to read: 120.5 282.08 [APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.] 120.6 The net proceeds from the sale or rental of any parcel of 120.7 forfeited land, or from the sale of products from the forfeited 120.8 land, must be apportioned by the county auditor to the taxing 120.9 districts interested in the land, as follows: 120.10 (1)the amounts necessary to pay the state general tax levy120.11against the parcel for taxes payable in the year for which the120.12tax judgment was entered, and for each subsequent payable year120.13up to and including the year of forfeiture, must be apportioned120.14to the state;120.15(2)the portion required to pay any amounts included in the 120.16 appraised value under section 282.01, subdivision 3, as 120.17 representing increased value due to any public improvement made 120.18 after forfeiture of the parcel to the state, but not exceeding 120.19 the amount certified by the clerk of the municipality must be 120.20 apportioned to the municipal subdivision entitled to it; 120.21(3)(2) the portion required to pay any amount included in 120.22 the appraised value under section 282.019, subdivision 5, 120.23 representing increased value due to response actions taken after 120.24 forfeiture of the parcel to the state, but not exceeding the 120.25 amount of expenses certified by the Pollution Control Agency or 120.26 the commissioner of agriculture, must be apportioned to the 120.27 agency or the commissioner of agriculture and deposited in the 120.28 fund from which the expenses were paid; 120.29(4)(3) the portion of the remainder required to discharge 120.30 any special assessment chargeable against the parcel for 120.31 drainage or other purpose whether due or deferred at the time of 120.32 forfeiture, must be apportioned to the municipal subdivision 120.33 entitled to it; and 120.34(5)(4) any balance must be apportioned as follows: 120.35 (i) The county board may annually by resolution set aside 120.36 no more than 30 percent of the receipts remaining to be used for 121.1 timber development on tax-forfeited land and dedicated memorial 121.2 forests, to be expended under the supervision of the county 121.3 board. It must be expended only on projects approved by the 121.4 commissioner of natural resources. 121.5 (ii) The county board may annually by resolution set aside 121.6 no more than 20 percent of the receipts remaining to be used for 121.7 the acquisition and maintenance of county parks or recreational 121.8 areas as defined in sections 398.31 to 398.36, to be expended 121.9 under the supervision of the county board. 121.10 (iii) Any balance remaining must be apportioned as 121.11 follows: county, 40 percent; town or city, 20 percent; and 121.12 school district, 40 percent, provided, however, that in 121.13 unorganized territory that portion which would have accrued to 121.14 the township must be administered by the county board of 121.15 commissioners. 121.16 [EFFECTIVE DATE.] This section is effective the day 121.17 following final enactment for state general tax levy amounts 121.18 payable in 2004 and thereafter. 121.19 Sec. 33. Minnesota Statutes 2004, section 282.15, is 121.20 amended to read: 121.21 282.15 [SALES OF FORFEITED AGRICULTURAL LANDS.] 121.22 The sale shall be conducted by the auditor of the county in 121.23 which the parcels lie. The parcels shall be sold to the highest 121.24 bidder but not for less than the appraised value. The sales 121.25 shall be for cash or on the following terms: The appraised 121.26 value of all merchantable timber on agricultural lands shall be 121.27 paid for in full at the date of sale. At least 15 percent of 121.28 the purchase price of the land shall be paid in cash at the time 121.29 of purchase. The balance shall be paid in not more than 20 121.30 equal annual installments, with interest at a rate equal to the 121.31 rate in effect at the time under section 549.09 on the unpaid 121.32 balance each year. Both principal and interest are due and 121.33 payable on December 31 each year following that in which the 121.34 purchase was made. The purchaser may pay any number of 121.35 installments of principal and interest on or before their due 121.36 date. When the sale is on terms other than for cash in full, 122.1 the purchaser shall receive from the county auditor a contract 122.2 for deed, in a form prescribed by the attorney general. The 122.3 county auditor shall make a report to the commissioner of 122.4 natural resources not more than 30 days after each public sale 122.5 showing the lands sold at the sales, and submit a copy of each 122.6 contract of sale. 122.7 All lands sold pursuant to this sectionshall, on the122.8second day of January following the date of the sale,must be 122.9 restored to the tax rolls and become subject to taxation in the 122.10 same manner as they were assessed and taxed before becoming the 122.11 absolute property of the state for the assessment year 122.12 determined under section 272.02, subdivision 38, paragraph (c). 122.13 [EFFECTIVE DATE.] This section is effective for sales 122.14 occurring on or after July 1, 2005. 122.15 Sec. 34. Minnesota Statutes 2004, section 282.21, is 122.16 amended to read: 122.17 282.21 [FORM OF CONVEYANCE.] 122.18 When any sale has been made under sections 282.14 to 122.19 282.22, upon payment in full of the purchase price, appropriate 122.20 conveyance in fee in such form as may be prescribed by the 122.21 attorney general shall be issued by the commissioner of finance 122.22 to the purchaser or the purchaser's assigns and this conveyance 122.23 shall have the force and effect of a patent from the state. 122.24 [EFFECTIVE DATE.] This section is effective the day 122.25 following final enactment. 122.26 Sec. 35. Minnesota Statutes 2004, section 282.224, is 122.27 amended to read: 122.28 282.224 [FORM OF CONVEYANCE.] 122.29 When any sale has been made under sections 282.221 to 122.30 282.226, upon payment in full of the purchase price, appropriate 122.31 conveyance in fee, in such form as may be prescribed by the 122.32 attorney general, shall be issued by the commissioner of natural 122.33 resources to the purchaser or the purchaser's assignee, and the 122.34 conveyance shall have the force and effect of a patent from the 122.35 state. 122.36 [EFFECTIVE DATE.] This section is effective the day 123.1 following final enactment. 123.2 Sec. 36. Minnesota Statutes 2004, section 282.301, is 123.3 amended to read: 123.4 282.301 [RECEIPTS FOR PAYMENTS.] 123.5 When any sale has been made under sections 282.012 and 123.6 282.241 to 282.324, the purchaser shall receive from the county 123.7 auditor at the time of repurchase a receipt, in such form as may 123.8 be prescribed by the attorney general. When the purchase price 123.9 of a parcel of land shall be paid in full, the following facts 123.10 shall be certified by the county auditor to the commissioner of 123.11 revenue of the state of Minnesota: the description of land, the 123.12 date of sale, the name of the purchaser or the purchaser's 123.13 assignee, and the date when the final installment of the 123.14 purchase price was paid. Upon payment in full of the purchase 123.15 price, the purchaser or the assignee shall receive a quitclaim 123.16 deed from the state, to be executed by the commissioner of 123.17 revenue. The deed must be sent to the county auditor who shall 123.18 have it recorded before it is forwarded to the purchaser. 123.19 Failure to make any payment herein required shall constitute 123.20 default and upon such default and cancellation in accord with 123.21 section 282.40, the right, title and interest of the purchaser 123.22 or the purchaser's heirs, representatives, or assigns in such 123.23 parcel shall terminate. 123.24 [EFFECTIVE DATE.] This section is effective the day 123.25 following final enactment. 123.26 Sec. 37. Minnesota Statutes 2004, section 290B.05, 123.27 subdivision 3, is amended to read: 123.28 Subd. 3. [CALCULATION OF DEFERRED PROPERTY TAX AMOUNT.] 123.29 When final property tax amounts for the following year have been 123.30 determined, the county auditor shall calculate the "deferred 123.31 property tax amount." The deferred property tax amount is equal 123.32 to the lesser of (1) the maximum allowable deferral for the 123.33 year; or (2) the difference between (i) the total amount of 123.34 property taxes and special assessments levied upon the 123.35 qualifying homestead by all taxing jurisdictions and (ii) the 123.36 maximum property tax amount.Any special assessments levied by124.1any local unit of government must not be included in the total124.2tax used to calculate the deferred tax amount.For this purpose 124.3 "special assessments" includes any assessment, fee, or other 124.4 charge that may by law, and which does, appear on the property 124.5 tax statement for the property for collection under the laws 124.6 applicable to the enforcement of real estate taxes. Any tax 124.7 attributable to new improvements made to the property after the 124.8 initial application has been approved under section 290B.04, 124.9 subdivision 2, must be excluded when determining any subsequent 124.10 deferred property tax amount. The county auditor shall 124.11 annually, on or before April 15, certify to the commissioner of 124.12 revenue the property tax deferral amounts determined under this 124.13 subdivision by property and by owner. 124.14 [EFFECTIVE DATE.] This section is effective for amounts 124.15 deferred in 2006 and thereafter. 124.16 Sec. 38. Minnesota Statutes 2004, section 290C.05, is 124.17 amended to read: 124.18 290C.05 [ANNUAL CERTIFICATION.] 124.19 On or before July 1 of each year, beginning with the year 124.20 after the claimant has received an approved application, the 124.21 commissioner shall send each claimant enrolled under the 124.22 sustainable forest incentive program a certification form. The 124.23 claimant must sign the certification, attesting that the 124.24 requirements and conditions for continued enrollment in the 124.25 program are currently being met, and must return the signed 124.26 certification form to the commissioner by August 15 of that same 124.27 year.Failure toIf the claimant does not return an annual 124.28 certification form by the due dateshall result in removal of124.29the lands from the provisions of the sustainable forest124.30incentive program, and the imposition of any applicable removal124.31penalty, the provisions in section 290C.11 apply.The claimant124.32may appeal the removal and any associated penalty according to124.33the procedures and within the time allowed under this chapter.124.34 [EFFECTIVE DATE.] This section is effective the day 124.35 following final enactment. 124.36 Sec. 39. [290C.055] [LENGTH OF COVENANT.] 125.1 The covenant remains in effect for a minimum of eight 125.2 years. If land is removed from the program before it has been 125.3 enrolled for four years, the covenant remains in effect for 125.4 eight years from the date recorded. 125.5 If land that has been enrolled for four years or more is 125.6 removed from the program for any reason, there is a waiting 125.7 period before the covenant terminates. The covenant terminates 125.8 on January 1 of the fifth calendar year that begins after the 125.9 date that: 125.10 (1) the commissioner receives notification from the 125.11 claimant that the claimant wishes to remove the land from the 125.12 program under section 290C.10; or 125.13 (2) the date that the land is removed from the program 125.14 under section 290C.11. 125.15 Notwithstanding the other provisions of this section, the 125.16 covenant is terminated at the same time that the land is removed 125.17 from the program due to acquisition of title or possession for a 125.18 public purpose under section 290C.10. 125.19 [EFFECTIVE DATE.] This section is effective the day 125.20 following final enactment. 125.21 Sec. 40. Minnesota Statutes 2004, section 290C.10, is 125.22 amended to read: 125.23 290C.10 [WITHDRAWAL PROCEDURES.] 125.24 An approved claimant under the sustainable forest incentive 125.25 program for a minimum of four years may notify the commissioner 125.26 of the intent to terminate enrollment. Within 90 days of 125.27 receipt of notice to terminate enrollment, the commissioner 125.28 shall inform the claimant in writing, acknowledging receipt of 125.29 this notice and indicating the effective date of termination 125.30 from the sustainable forest incentive program. Termination of 125.31 enrollment in the sustainable forest incentive program occurs on 125.32 January 1 of the fifth calendar year that begins after receipt 125.33 by the commissioner of the termination notice. After the 125.34 commissioner issues an effective date of termination, a claimant 125.35 wishing to continue the land's enrollment in the sustainable 125.36 forest incentive program beyond the termination date must apply 126.1 for enrollment as prescribed in section 290C.04. A claimant who 126.2 withdraws a parcel of land from this program may not reenroll 126.3 the parcel for a period of three years. Within 90 days after 126.4 the termination date, the commissioner shall execute and 126.5 acknowledge a document releasing the land from the covenant 126.6 required under this chapter. The document must be mailed to the 126.7 claimant and is entitled to be recorded. The commissioner may 126.8 allow early withdrawal from the Sustainable Forest Incentive Act 126.9 without penaltyin cases of condemnationwhen the state of 126.10 Minnesota, any local government unit, or any other entity which 126.11 has the right of eminent domain acquires title or possession to 126.12 the land for a public purpose notwithstanding the provisions of 126.13 this section. In the case of such acquisition, the commissioner 126.14 shall execute and acknowledge a document releasing the land 126.15 acquired by the state, local government unit, or other entity 126.16 from the covenant. All other enrolled land must remain in the 126.17 program. 126.18 [EFFECTIVE DATE.] This section is effective the day 126.19 following final enactment. 126.20 Sec. 41. Minnesota Statutes 2004, section 373.45, 126.21 subdivision 7, is amended to read: 126.22 Subd. 7. [AID REDUCTION FOR REPAYMENT.] (a) Except as 126.23 provided in paragraph (b), the commissioner may reduce, by the 126.24 amount paid by the state under this section on behalf of the 126.25 county, plus the interest due on the state payments, the 126.26following aids payable to the county:126.27(1) homestead and agricultural credit aid and disparity126.28reduction aid payable under section 273.1398;126.29(2) county criminal justice aid payable under section126.30477A.0121; and126.31(3) family preservation aid payable under section 477A.0122126.32 county program aid under section 477A.0124. 126.33 The amount of any aid reduction reverts from the appropriate 126.34 account to the state general fund. 126.35 (b) If, after review of the financial situation of the 126.36 county, the authority advises the commissioner that a total 127.1 reduction of the aids would cause an undue hardship on the 127.2 county, the authority, with the approval of the commissioner, 127.3 may establish a different schedule for reduction of aids to 127.4 repay the state. The amount of aids to be reduced are decreased 127.5 by any amounts repaid to the state by the county from other 127.6 revenue sources. 127.7 [EFFECTIVE DATE.] This section is effective for aid payable 127.8 in 2005 and thereafter. 127.9 Sec. 42. Minnesota Statutes 2004, section 469.1735, 127.10 subdivision 3, is amended to read: 127.11 Subd. 3. [TRANSFER AUTHORITY FOR PROPERTY TAX.] (a) A city 127.12 may elect to use all or part of its allocation under subdivision 127.13 2 to reimburse the city or county or both for property tax 127.14 reductions under section 272.0212. To elect this option, the 127.15 city must notify the commissioner of revenue by October 1 of 127.16 each calendar year of the amount of the property tax 127.17 reductions for which it seeks reimbursements for taxes payable 127.18 during thefollowingcurrent year and the governmental units to 127.19 which the amounts will be paid. The commissioner may require 127.20 the city to provide information substantiating the amount of the 127.21 reductions granted or any other information necessary to 127.22 administer this provision. The commissioner shall pay the 127.23 reimbursements by December 26 of the taxes payable year. Any 127.24 amount transferred under this authority reduces the amount of 127.25 tax credit certificates available under subdivisions 1 and 2. 127.26 (b) The amount elected by the city under paragraph (a) is 127.27 appropriated to the commissioner of revenue from the general 127.28 fund to reimburse the city or county for tax reductions under 127.29 section 272.0212. The amount appropriated may not exceed the 127.30 maximum amounts allocated to a city under subdivision 2, 127.31 paragraph (b), less the amount of certificates issued by the 127.32 city under subdivision 1, and is available until expended. 127.33 [EFFECTIVE DATE.] This section is effective for 127.34 reimbursements of taxes payable in 2005 and thereafter. 127.35 Sec. 43. Laws 2003, chapter 127, article 5, section 27, 127.36 the effective date, is amended to read: 128.1 [EFFECTIVE DATE.] This section is effective fortaxes128.2payable in 2004 and thereafterdistributions occurring on or 128.3 after June 10, 2003. 128.4 Sec. 44. Laws 2003, chapter 127, article 5, section 28, 128.5 the effective date, is amended to read: 128.6 [EFFECTIVE DATE.] This section is effective fortaxes128.7payable in 2004 and thereafterdistributions occurring on or 128.8 after June 10, 2003. 128.9 Sec. 45. [LINCOLN AND PIPESTONE COUNTIES; TOWN LEVY 128.10 ADJUSTMENT FOR WIND ENERGY PRODUCTION TAX.] 128.11 Notwithstanding the deadlines in Minnesota Statutes, 128.12 section 275.07, towns located in Lincoln or Pipestone County are 128.13 authorized to adjust their payable 2004 levy for all or a 128.14 portion of their estimated wind energy production tax amounts 128.15 for 2004, as computed by the commissioner of revenue from 128.16 reports filed under Minnesota Statutes, section 272.029, 128.17 subdivision 4. The Lincoln and Pipestone County auditors may 128.18 adjust the payable 2004 levy certifications under Minnesota 128.19 Statutes, section 275.07, subdivision 1, based upon the towns 128.20 that have recertified their levies under this section by March 128.21 15, 2004. 128.22 [EFFECTIVE DATE.] This section is effective for taxes 128.23 payable in 2004. 128.24 Sec. 46. [REPEALER.] 128.25 (a) Minnesota Statutes 2004, sections 273.19, subdivision 128.26 5; 274.05; 275.15; 275.61, subdivision 2; and 283.07, are 128.27 repealed effective the day following final enactment. 128.28 (b) Minnesota Statutes 2004, section 469.1794, subdivision 128.29 6, is repealed effective the day following final enactment and 128.30 applies to districts for which the request for certification was 128.31 made on, before, or after August 1, 1979, and before August 1, 128.32 2001. 128.33 (c) Laws 1975, chapter 287, section 5, and Laws 2003, 128.34 chapter 127, article 9, section 9, subdivision 4, are repealed 128.35 effective without local approval for taxes payable in 2006 and 128.36 thereafter. 129.1 (d) Minnesota Statutes 2004, sections 270.85; 270.88; and 129.2 273.37, subdivision 3, are repealed effective September 1, 2005. 129.3 ARTICLE 5 129.4 INCOME, CORPORATE FRANCHISE, AND ESTATE TAXES 129.5 Section 1. Minnesota Statutes 2004, section 190.09, 129.6 subdivision 2, is amended to read: 129.7 Subd. 2. [MISSION; EFFICIENCY.] It is part of the 129.8 department's mission that within the department's resources the 129.9 adjutant general shall endeavor to: 129.10 (1) prevent the waste or unnecessary spending of public 129.11 money; 129.12 (2) use innovative fiscal and human resource practices to 129.13 manage the state's resources and operate the department as 129.14 efficiently as possible; 129.15 (3) coordinate the department's activities wherever 129.16 appropriate with the activities of other governmental agencies; 129.17 (4) use technology where appropriate to increase agency 129.18 productivity, improve customer service, increase public access 129.19 to information about government, and increase public 129.20 participation in the business of government; 129.21 (5) utilize constructive and cooperative labor-management 129.22 practices to the extent otherwise required by chapters 43A and 129.23 179A; 129.24 (6) report to the legislature on the performance of agency 129.25 operations and the accomplishment of agency goals in the 129.26 agency's biennial budget according to section 16A.10, 129.27 subdivision 1;and129.28 (7) recommend to the legislature appropriate changes in law 129.29 necessary to carry out the mission and improve the performance 129.30 of the department; and 129.31 (8) administer checkoff funds as provided in section 129.32 290.433. 129.33 [EFFECTIVE DATE.] This section is effective for taxable 129.34 years beginning after December 31, 2004. 129.35 Sec. 2. Minnesota Statutes 2004, section 289A.08, 129.36 subdivision 1, is amended to read: 130.1 Subdivision 1. [GENERALLY; INDIVIDUALS.] (a) A taxpayer 130.2 must file a return for each taxable year the taxpayer is 130.3 required to file a return under section 6012 of the Internal 130.4 Revenue Code, except that: 130.5 (1) an individual who is not a Minnesota resident for any 130.6 part of the year is not required to file a Minnesota income tax 130.7 return if the individual's gross income derived from Minnesota 130.8 sources as determined under sections 290.081, paragraph (a), and 130.9 290.17, is less than the filing requirements for a single 130.10 individual who is a full year resident of Minnesota; and 130.11 (2) an individual who is a Minnesota resident is not 130.12 required to file a Minnesota income tax return if the 130.13 individual's gross income derived from Minnesota sources as 130.14 determined under section 290.17, less the amount of the 130.15 individual's gross income that consists of compensation paid to 130.16 members of the armed forces of the United States or United 130.17 Nations for active duty performed outside Minnesota, is less 130.18 than the filing requirements for a single individual who is a 130.19 full-year resident of Minnesota. 130.20 (b) The decedent's final income tax return, and other 130.21 income tax returns for prior years where the decedent had gross 130.22 income in excess of the minimum amount at which an individual is 130.23 required to file and did not file, must be filed by the 130.24 decedent's personal representative, if any. If there is no 130.25 personal representative, the return or returns must be filed by 130.26 the transferees, as defined in section 289A.38, subdivision 13, 130.27 who receive property of the decedent. 130.28 (c) The term "gross income," as it is used in this section, 130.29 has the same meaning given it in section 290.01, subdivision 20. 130.30 [EFFECTIVE DATE.] This section is effective for taxable 130.31 years beginning after December 31, 2004. 130.32 Sec. 3. Minnesota Statutes 2004, section 289A.08, 130.33 subdivision 3, is amended to read: 130.34 Subd. 3. [CORPORATIONS.] A corporation that is subject to 130.35 the state's jurisdiction to tax under section 290.014, 130.36 subdivision 5, must file a return, except that a foreign 131.1 operating corporation as defined in section 290.01, subdivision 131.2 6b, is not required to file a return. The commissioner shall 131.3 adopt rules for the filing of one return on behalf of the 131.4 members of an affiliated group of corporations that are required 131.5 to file a combined report. All members of an affiliated group 131.6 that are required to file a combined report must file one return 131.7 on behalf of the members of the group under rules adopted by the 131.8 commissioner. If a corporation claims on a return that it has 131.9 paid tax in excess of the amount of taxes lawfully due, that 131.10 corporation must include on that return information necessary 131.11 for payment of the tax in excess of the amount lawfully due by 131.12 electronic means. 131.13 [EFFECTIVE DATE.] This section is effective for returns 131.14 filed after December 31, 2005. 131.15 Sec. 4. Minnesota Statutes 2004, section 289A.08, 131.16 subdivision 7, is amended to read: 131.17 Subd. 7. [COMPOSITE INCOME TAX RETURNS FOR NONRESIDENT 131.18 PARTNERS, SHAREHOLDERS, AND BENEFICIARIES.] (a) The commissioner 131.19 may allow a partnership with nonresident partners to file a 131.20 composite return and to pay the tax on behalf of nonresident 131.21 partners who have no other Minnesota source income. This 131.22 composite return must include the names, addresses, Social 131.23 Security numbers, income allocation, and tax liability for the 131.24 nonresident partners electing to be covered by the composite 131.25 return. 131.26 (b) The computation of a partner's tax liability must be 131.27 determined by multiplying the income allocated to that partner 131.28 by the highest rate used to determine the tax liability for 131.29 individuals under section 290.06, subdivision 2c. Nonbusiness 131.30 deductions, standard deductions, or personal exemptions are not 131.31 allowed. 131.32 (c) The partnership must submit a request to use this 131.33 composite return filing method for nonresident partners. The 131.34 requesting partnership must file a composite return in the form 131.35 prescribed by the commissioner of revenue. The filing of a 131.36 composite return is considered a request to use the composite 132.1 return filing method. 132.2 (d) The electing partner must not have any Minnesota source 132.3 income other than the income from the partnership and other 132.4 electing partnerships. If it is determined that the electing 132.5 partner has other Minnesota source income, the inclusion of the 132.6 income and tax liability for that partner under this provision 132.7 will not constitute a return to satisfy the requirements of 132.8 subdivision 1. The tax paid for the individual as part of the 132.9 composite return is allowed as a payment of the tax by the 132.10 individual on the date on which the composite return payment was 132.11 made. If the electing nonresident partner has no other 132.12 Minnesota source income, filing of the composite return is a 132.13 return for purposes of subdivision 1. 132.14 (e) This subdivision does not negate the requirement that 132.15 an individual pay estimated tax if the individual's liability 132.16 would exceed the requirements set forth in section 289A.25. A 132.17 composite estimate may, however, be filed in a manner similar to 132.18 and containing the information required under paragraph (a). 132.19 (f) If an electing partner's share of the partnership's 132.20 gross income from Minnesota sources is less than the filing 132.21 requirements for a nonresident under this subdivision, the tax 132.22 liability is zero. However, a statement showing the partner's 132.23 share of gross income must be included as part of the composite 132.24 return. 132.25 (g) The election provided in this subdivision isnotonly 132.26 available toanya partnerother thanwho has no other Minnesota 132.27 source income and who is either (1) a full-year nonresident 132.28 individualwho has no other Minnesota source incomeor (2) a 132.29 trust or estate that does not claim a deduction under either 132.30 section 651 or 661 of the Internal Revenue Code. 132.31 (h) A corporation defined in section 290.9725 and its 132.32 nonresident shareholders may make an election under this 132.33 paragraph. The provisions covering the partnership apply to the 132.34 corporation and the provisions applying to the partner apply to 132.35 the shareholder. 132.36 (i) Estates and trusts distributing current income only and 133.1 the nonresident individual beneficiaries of the estates or 133.2 trusts may make an election under this paragraph. The 133.3 provisions covering the partnership apply to the estate or 133.4 trust. The provisions applying to the partner apply to the 133.5 beneficiary. 133.6 (j) For the purposes of this subdivision, "income" means 133.7 the partner's share of federal adjusted gross income from the 133.8 partnership modified by the additions provided in section 133.9 290.01, subdivision 19a, clauses (6) and (7), and the 133.10 subtractions provided in section 290.01, subdivision 19b, clause 133.11 (11), to the extent the amount is assignable or allocable to 133.12 Minnesota under section 290.17. The subtraction allowed under 133.13 section 290.01, subdivision 19b, clause (11), is only allowed on 133.14 the composite tax computation to the extent the electing partner 133.15 would have been allowed the subtraction. 133.16 [EFFECTIVE DATE.] This section is effective for tax years 133.17 beginning after December 31, 2004. 133.18 Sec. 5. Minnesota Statutes 2004, section 289A.08, 133.19 subdivision 13, is amended to read: 133.20 Subd. 13. [LONG AND SHORT FORMS.] The commissioner shall 133.21 provide a long form individual income tax return and may provide 133.22 a short form individual income tax return. The returns shall be 133.23 in a form that is consistent with the provisions of chapter 290, 133.24 notwithstanding any other law to the contrary. The nongame 133.25 wildlife checkoff provided in section 290.431 and the dependent 133.26 care credit provided in section 290.067 must be included on the 133.27 short form. The commissioner must provide information on local 133.28 use taxes in the individual income tax instruction booklet, 133.29 including a list of the jurisdictions with local use taxes. The 133.30 commissioner must provide this information in the same section 133.31 of the booklet that provides information on the state use tax. 133.32 [EFFECTIVE DATE.] This section is effective for taxable 133.33 years beginning after December 31, 2004. 133.34 Sec. 6. Minnesota Statutes 2004, section 289A.18, 133.35 subdivision 1, is amended to read: 133.36 Subdivision 1. [INDIVIDUAL INCOME, FIDUCIARY INCOME, 134.1 CORPORATE FRANCHISE, AND ENTERTAINMENT TAXES; PARTNERSHIP AND S 134.2 CORPORATION RETURNS; INFORMATION RETURNS; MINING COMPANY 134.3 RETURNS.] The returns required to be made under sections 289A.08 134.4 and 289A.12 must be filed at the following times: 134.5 (1) returns made on the basis of the calendar year must be 134.6 filed on April 15 following the close of the calendar year, 134.7 except that returns of corporations must be filed on March 15 134.8 following the close of the calendar year; 134.9 (2) returns made on the basis of the fiscal year must be 134.10 filed on the 15th day of the fourth month following the close of 134.11 the fiscal year, except that returns of corporations must be 134.12 filed on the 15th day of the third month following the close of 134.13 the fiscal year; 134.14 (3) returns for a fractional part of a year must be filed 134.15 on the 15th day of the fourth month following the end of the 134.16 month in which falls the last day of the period for which the 134.17 return is made, except that the returns of corporations must be 134.18 filed on the 15th day of the third month following the end of 134.19 themonthtax year of the unitary group in which falls the last 134.20 day of the period for which the return is made; 134.21 (4) in the case of a final return of a decedent for a 134.22 fractional part of a year, the return must be filed on the 15th 134.23 day of the fourth month following the close of the 12-month 134.24 period that began with the first day of that fractional part of 134.25 a year; 134.26 (5) in the case of the return of a cooperative association, 134.27 returns must be filed on or before the 15th day of the ninth 134.28 month following the close of the taxable year; 134.29 (6) if a corporation has been divested from a unitary group 134.30 and files a return for a fractional part of a year in which it 134.31 was a member of a unitary business that files a combined report 134.32 under section 290.34, subdivision 2, the divested corporation's 134.33 return must be filed on the 15th day of the third month 134.34 following the close of the common accounting period that 134.35 includes the fractional year; 134.36 (7) returns of entertainment entities must be filed on 135.1 April 15 following the close of the calendar year; 135.2 (8) returns required to be filed under section 289A.08, 135.3 subdivision 4, must be filed on the 15th day of the fifth month 135.4 following the close of the taxable year; 135.5 (9) returns of mining companies must be filed on May 1 135.6 following the close of the calendar year; and 135.7 (10) returns required to be filed with the commissioner 135.8 under section 289A.12, subdivision 2, 4 to 10, or 14, must be 135.9 filed within 30 days after being demanded by the commissioner. 135.10 [EFFECTIVE DATE.] This section is effective for fractional 135.11 years closing after December 31, 2004. 135.12 Sec. 7. Minnesota Statutes 2004, section 289A.19, 135.13 subdivision 4, is amended to read: 135.14 Subd. 4. [ESTATE TAX RETURNS.]When in the commissioner's135.15judgment good cause exists, the commissioner may extend the time135.16for filing an estate tax return for not more than six months.135.17 When an extension to file the federal estate tax return has been 135.18 granted under section 6081 of the Internal Revenue Code, the 135.19 time for filing the estate tax return is extended for that 135.20 period. If the estate requests an extension to file an estate 135.21 tax return within the time provided in section 289A.18, 135.22 subdivision 3, the commissioner shall extend the time for filing 135.23 the estate tax return for six months. 135.24 [EFFECTIVE DATE.] This section is effective for estates of 135.25 decedents dying after December 31, 2004. 135.26 Sec. 8. Minnesota Statutes 2004, section 289A.20, 135.27 subdivision 2, is amended to read: 135.28 Subd. 2. [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 135.29 WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 135.30 WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 135.31 (a) A tax required to be deducted and withheld during the 135.32 quarterly period must be paid on or before the last day of the 135.33 month following the close of the quarterly period, unless an 135.34 earlier time for payment is provided. A tax required to be 135.35 deducted and withheld from compensation of an entertainer and 135.36 from a payment to an out-of-state contractor must be paid on or 136.1 before the date the return for such tax must be filed under 136.2 section 289A.18, subdivision 2. Taxes required to be deducted 136.3 and withheld by partnershipsand, S corporations, and trusts 136.4 must be paid onor before the date the return must be filed136.5under section 289A.18, subdivision 2a quarterly basis as 136.6 estimated taxes under section 289A.25 for partnerships and 136.7 trusts and under section 289A.26 for S corporations. 136.8 (b) An employer who, during the previous quarter, withheld 136.9 more than $1,500 of tax under section 290.92, subdivision 2a or 136.10 3, or 290.923, subdivision 2, must deposit tax withheld under 136.11 those sections with the commissioner within the time allowed to 136.12 deposit the employer's federal withheld employment taxes under 136.13 Code of Federal Regulations, title 26, section 31.6302-1, as 136.14 amended through December 31, 2001, without regard to the safe 136.15 harbor or de minimis rules in subparagraph (f) or the one-day 136.16 rule in subsection (c), clause (3). Taxpayers must submit a 136.17 copy of their federal notice of deposit status to the 136.18 commissioner upon request by the commissioner. 136.19 (c) The commissioner may prescribe by rule other return 136.20 periods or deposit requirements. In prescribing the reporting 136.21 period, the commissioner may classify payors according to the 136.22 amount of their tax liability and may adopt an appropriate 136.23 reporting period for the class that the commissioner judges to 136.24 be consistent with efficient tax collection. In no event will 136.25 the duration of the reporting period be more than one year. 136.26 (d) If less than the correct amount of tax is paid to the 136.27 commissioner, proper adjustments with respect to both the tax 136.28 and the amount to be deducted must be made, without interest, in 136.29 the manner and at the times the commissioner prescribes. If the 136.30 underpayment cannot be adjusted, the amount of the underpayment 136.31 will be assessed and collected in the manner and at the times 136.32 the commissioner prescribes. 136.33 (e) If the aggregate amount of the tax withheld during a 136.34 fiscal year ending June 30 under section 290.92, subdivision 2a 136.35 or 3, is equal to or exceeds the amounts established for 136.36 remitting federal withheld taxes pursuant to the regulations 137.1 promulgated under section 6302(h) of the Internal Revenue Code, 137.2 the employer must remit each required deposit for wages paid in 137.3 the subsequent calendar year by electronic means. 137.4 (f) A third-party bulk filer as defined in section 290.92, 137.5 subdivision 30, paragraph (a), clause (2), who remits 137.6 withholding deposits must remit all deposits by electronic means 137.7 as provided in paragraph (e), regardless of the aggregate amount 137.8 of tax withheld during a fiscal year for all of the employers. 137.9 [EFFECTIVE DATE.] This section is effective for tax years 137.10 beginning after December 31, 2005. 137.11 Sec. 9. Minnesota Statutes 2004, section 289A.31, 137.12 subdivision 2, is amended to read: 137.13 Subd. 2. [JOINT INCOME TAX RETURNS.] (a) If a joint income 137.14 tax return is made by a husband and wife, the liability for the 137.15 tax is joint and several. A spouse who qualifies for relief 137.16 from a liability attributable to an underpayment under section 137.17 6015(b) of the Internal Revenue Code is relieved of the state 137.18 income tax liability on the underpayment. 137.19 (b) In the case of individuals who were a husband and wife 137.20 prior to the dissolution of their marriage or their legal 137.21 separation, or prior to the death of one of the individuals, for 137.22 tax liabilities reported on a joint or combined return, the 137.23 liability of each person is limited to the proportion of the tax 137.24 due on the return that equals that person's proportion of the 137.25 total tax due if the husband and wife filed separate returns for 137.26 the taxable year. This provision is effective only when the 137.27 commissioner receives written notice of the marriage 137.28 dissolution, legal separation, or death of a spouse from the 137.29 husband or wife. No refund may be claimed by an ex-spouse, 137.30 legally separated or widowed spouse for any taxes paid more than 137.31 60 days before receipt by the commissioner of the written notice. 137.32 (c) A request for calculation of separate liability 137.33 pursuant to paragraph (b) for taxes reported on a return must be 137.34 made within six years after the due date of the return. For 137.35 calculation of separate liability for taxes assessed by the 137.36 commissioner under section 289A.35 or 289A.37, the request must 138.1 be made within six years after the date of assessment. The 138.2 commissioner is not required to calculate separate liability if 138.3 the remaining unpaid liability for which recalculation is 138.4 requested is $100 or less. 138.5 [EFFECTIVE DATE.] This section is effective for requests 138.6 for relief made on or after the day following final enactment. 138.7 Sec. 10. Minnesota Statutes 2004, section 289A.38, 138.8 subdivision 7, is amended to read: 138.9 Subd. 7. [FEDERAL TAX CHANGES.] If the amount of income, 138.10 items of tax preference, deductions, or credits for any year of 138.11 a taxpayer as reported to the Internal Revenue Service is 138.12 changed or corrected by the commissioner of Internal Revenue or 138.13 other officer of the United States or other competent authority, 138.14 or where a renegotiation of a contract or subcontract with the 138.15 United States results in a change in income, items of tax 138.16 preference, deductions, credits, or withholding tax, or, in the 138.17 case of estate tax, where there are adjustments to the taxable 138.18 estate resulting in a change to the credit for state death 138.19 taxes, the taxpayer shall report the change or correction or 138.20 renegotiation results in writing to the commissioner. The 138.21 report must be submitted within 180 days after the final 138.22 determination and must be in the form of either an amended 138.23 Minnesota estate, withholding tax, corporate franchise tax, or 138.24 income tax return conceding the accuracy of the federal 138.25 determination or a letter detailing how the federal 138.26 determination is incorrect or does not change the Minnesota 138.27 tax. An amended Minnesota income tax return must be accompanied 138.28 by an amended property tax refund return, if necessary. A 138.29 taxpayer filing an amended federal tax return must also file a 138.30 copy of the amended return with the commissioner of revenue 138.31 within 180 days after filing the amended return. 138.32 [EFFECTIVE DATE.] This section is effective the day 138.33 following final enactment. 138.34 Sec. 11. Minnesota Statutes 2004, section 289A.50, 138.35 subdivision 1a, is amended to read: 138.36 Subd. 1a. [REFUND FORM.] On or before January 1, 2000, the 139.1 commissioner of revenue shall prepare and make available to 139.2 taxpayers a form for filing claims for refund of taxes paid in 139.3 excess of the amount due.If the commissioner fails to prepare139.4a form under this subdivision by January 1, 2000, any claims for139.5refund made after January 1, 2000, and up to ten days after the139.6form is made available to taxpayers are deemed to be made in139.7compliance with the requirement of the form.The commissioner 139.8 may require corporate franchise taxpayers claiming a refund of 139.9 corporate franchise taxes paid in excess of the amount lawfully 139.10 due to include on the claim for refund or amended return 139.11 information necessary for payment of the taxes paid in excess of 139.12 taxes lawfully due by electronic means. 139.13 [EFFECTIVE DATE.] This section is effective for claims for 139.14 refund filed after December 31, 2005. 139.15 Sec. 12. Minnesota Statutes 2004, section 289A.60, 139.16 subdivision 13, is amended to read: 139.17 Subd. 13. [PENALTIES FOR TAX RETURN PREPARERS.] (a) If an 139.18 understatement of liability with respect to a return or claim 139.19 for refund is due to a reckless disregard of laws and rules or 139.20 willful attempt in any manner to understate the liability for a 139.21 tax by a person who is a tax return preparer with respect to the 139.22 return or claim, the person shall pay to the commissioner a 139.23 penalty of $500. If a part of a property tax refund claim is 139.24 excessive due to a reckless disregard or willful attempt in any 139.25 manner to overstate the claim for relief allowed under chapter 139.26 290A by a person who is a tax refund or return preparer, the 139.27 person shall pay to the commissioner a penalty of $500 with 139.28 respect to the claim. These penalties may not be assessed 139.29 against the employer of a tax return preparer unless the 139.30 employer was actively involved in the reckless disregard or 139.31 willful attempt to understate the liability for a tax or to 139.32 overstate the claim for refund. These penalties are income tax 139.33 liabilities and may be assessed at any time as provided in 139.34 section 289A.38, subdivision 5. 139.35 (b) A civil action in the name of the state of Minnesota 139.36 may be commenced to enjoin any person who is a tax return 140.1 preparer doing business in this state from further engaging in 140.2 any conduct described in paragraph (c). An action under this 140.3 paragraph must be brought by the attorney general in the 140.4 district court for the judicial district of the tax return 140.5 preparer's residence or principal place of business, or in which 140.6 the taxpayer with respect to whose tax return the action is 140.7 brought resides. The court may exercise its jurisdiction over 140.8 the action separate and apart from any other action brought by 140.9 the state of Minnesota against the tax return preparer or any 140.10 taxpayer. 140.11 (c) In an action under paragraph (b), if the court finds 140.12 that a tax return preparer has: 140.13 (1) engaged in any conduct subject to a civil penalty under 140.14 section 289A.60 or a criminal penalty under section 289A.63; 140.15 (2) misrepresented the preparer's eligibility to practice 140.16 before the Department of Revenue, or otherwise misrepresented 140.17 the preparer's experience or education as a tax return preparer; 140.18 (3) guaranteed the payment of any tax refund or the 140.19 allowance of any tax credit; or 140.20 (4) engaged in any other fraudulent or deceptive conduct 140.21 that substantially interferes with the proper administration of 140.22 state tax law, and injunctive relief is appropriate to prevent 140.23 the recurrence of that conduct, 140.24 the court may enjoin the person from further engaging in that 140.25 conduct. 140.26 (d) If the court finds that a tax return preparer has 140.27 continually or repeatedly engaged in conduct described in 140.28 paragraph (c), and that an injunction prohibiting that conduct 140.29 would not be sufficient to prevent the person's interference 140.30 with the proper administration of state tax laws, the court may 140.31 enjoin the person from acting as a tax return preparer. The 140.32 court may not enjoin the employer of a tax return preparer for 140.33 conduct described in paragraph (c) engaged in by one or more of 140.34 the employer's employees unless the employer was also actively 140.35 involved in that conduct. 140.36 (e) For purposes of this subdivision, the term 141.1 "understatement of liability" means an understatement of the net 141.2 amount payable with respect to a tax imposed by state tax law, 141.3 or an overstatement of the net amount creditable or refundable 141.4 with respect to a tax. The determination of whether or not 141.5 there is an understatement of liability must be made without 141.6 regard to any administrative or judicial action involving the 141.7 taxpayer. For purposes of this subdivision, the amount 141.8 determined for underpayment of estimated tax under either 141.9 section 289A.25 or 289A.26 is not considered an understatement 141.10 of liability. 141.11 (f) For purposes of this subdivision, the term 141.12 "overstatement of claim" means an overstatement of the net 141.13 amount refundable with respect to a claim for property tax 141.14 relief provided by chapter 290A. The determination of whether 141.15 or not there is an overstatement of a claim must be made without 141.16 regard to administrative or judicial action involving the 141.17 claimant. 141.18 (g) For purposes of this section, the term "tax refund or 141.19 return preparer" means an individual who prepares for 141.20 compensation, or who employs one or more individuals to prepare 141.21 for compensation, a return of tax, or a claim for refund of 141.22 tax. The preparation of a substantial part of a return or claim 141.23 for refund is treated as if it were the preparation of the 141.24 entire return or claim for refund. An individual is not 141.25 considered a tax return preparer merely because the individual: 141.26 (1) gives typing, reproducing, or other mechanical 141.27 assistance; 141.28 (2) prepares a return or claim for refund of the employer, 141.29 or an officer or employee of the employer, by whom the 141.30 individual is regularly and continuously employed; 141.31 (3) prepares a return or claim for refund of any person as 141.32 a fiduciary for that person; or 141.33 (4) prepares a claim for refund for a taxpayer in response 141.34 to a tax order issued to the taxpayer. 141.35 [EFFECTIVE DATE.] This section is effective for returns 141.36 filed after December 31, 2005. 142.1 Sec. 13. Minnesota Statutes 2004, section 289A.60, is 142.2 amended by adding a subdivision to read: 142.3 Subd. 26. [RESTRICTIONS ON TAXPAYERS WHO IMPROPERLY CLAIM 142.4 REFUNDABLE CREDITS.] (a) If a person claims a credit or refund 142.5 under section 290.067, 290.0671, 290.0674, or chapter 290A and 142.6 the claimed credit or refund is determined to be claimed 142.7 fraudulently or with reckless or intentional disregard of the 142.8 applicable provisions for the credit or refund, the person is 142.9 barred from claiming that credit or refund for the disallowance 142.10 period. 142.11 (b) For the purposes of paragraph (a), the "disallowance 142.12 period" is (1) ten taxable years from the taxable year the 142.13 credit or refund is claimed if the credit or refund was 142.14 fraudulently claimed; and (2) two taxable years from the taxable 142.15 year the credit or refund is claimed if the credit or refund was 142.16 not fraudulent but was claimed with reckless or intentional 142.17 disregard of the applicable provisions. 142.18 [EFFECTIVE DATE.] This section is effective for credits or 142.19 refunds claimed after December 31, 2005. 142.20 Sec. 14. Minnesota Statutes 2004, section 290.01, 142.21 subdivision 7, is amended to read: 142.22 Subd. 7. [RESIDENT.] (a) The term "resident" means any 142.23 individual domiciled in Minnesota, except that an individual is 142.24 not a "resident" for the period of time that the individual is 142.25either:142.26(1) on active duty stationed outside of Minnesota while in142.27the armed forces of the United States or the United Nations; or142.28(2)a "qualified individual" as defined in section 142.29 911(d)(1) of the Internal Revenue Code, if the qualified 142.30 individual notifies the county within three months of moving out 142.31 of the country that homestead status be revoked for the 142.32 Minnesota residence of the qualified individual, and the 142.33 property is not classified as a homestead while the individual 142.34 remains a qualified individual. 142.35 (b) "Resident" also means any individual domiciled outside 142.36 the state who maintains a place of abode in the state and spends 143.1 in the aggregate more than one-half of the tax year in 143.2 Minnesota, unless: 143.3 (1) the individual or the spouse of the individual is in 143.4 the armed forces of the United States; or 143.5 (2) the individual is covered under the reciprocity 143.6 provisions in section 290.081. 143.7 For purposes of this subdivision, presence within the state 143.8 for any part of a calendar day constitutes a day spent in the 143.9 state. Individuals shall keep adequate records to substantiate 143.10 the days spent outside the state. 143.11 The term "abode" means a dwelling maintained by an 143.12 individual, whether or not owned by the individual and whether 143.13 or not occupied by the individual, and includes a dwelling place 143.14 owned or leased by the individual's spouse. 143.15 (c) Neither the commissioner nor any court shall consider 143.16charitable contributions made by an individual within or without143.17the statethe following factors in determining if the individual 143.18 is domiciled in Minnesota: 143.19 (1) charitable contributions made by an individual within 143.20 or without the state; 143.21 (2) the jurisdiction from which an individual's 143.22 professional licenses were issued; 143.23 (3) the location of an individual's union memberships; 143.24 (4) the location of accounts or transactions with financial 143.25 institutions; 143.26 (5) the location of the place of worship at which the 143.27 individual is a member; 143.28 (6) the location of business relationships and the place 143.29 where business is transacted; 143.30 (7) the location of social, fraternal, or athletic 143.31 organizations or clubs, lodges, or country clubs, in which the 143.32 individual is a member; and 143.33 (8) statements made to an insurance company, concerning the 143.34 individual's residence and on which insurance is based. 143.35 [EFFECTIVE DATE.] This section is effective for tax years 143.36 beginning after December 31, 2004. 144.1 Sec. 15. Minnesota Statutes 2004, section 290.01, 144.2 subdivision 7b, is amended to read: 144.3 Subd. 7b. [RESIDENT TRUST.] (a) Resident trust means a 144.4 trust, except a grantor type trust, which either (1) was created 144.5 by a will of a decedent who at death was domiciled in this state 144.6 or (2) is an irrevocable trust, the grantor of which was 144.7 domiciled in this state at the time the trust became 144.8 irrevocable. For the purpose of this subdivision, a trust is 144.9 considered irrevocable to the extent the grantor is not treated 144.10 as the owner thereof under sections 671 to 678 of the Internal 144.11 Revenue Code. The term "grantor type trust" means a trust where 144.12 the income or gains of the trust are taxable to the grantor or 144.13 others treated as substantial owners under sections 671 to 678 144.14 of the Internal Revenue Code. 144.15 (b)(1) A trust, other than a grantor type trust, that 144.16 became irrevocable before January 1, 1996, or that was 144.17 administered in Minnesota before January 1, 1996, is a resident 144.18 trust only if two or more of the following conditions are 144.19 satisfied: 144.20 (i) a majority of the discretionary decisions of the 144.21 trustees relative to the investment of trust assets are made in 144.22 Minnesota; 144.23 (ii) a majority of the discretionary decisions of the 144.24 trustees relative to the distributions of trust income and 144.25 principal are made in Minnesota; 144.26 (iii) the official books and records of the trust, 144.27 consisting of the original minutes of trustee meetings and the 144.28 original trust instruments, are located in Minnesota. 144.29 (2) For purposes of this paragraph, if the trustees 144.30 delegate decisions and actions to an agent or custodian, the 144.31 actions and decisions of the agent or custodian must not be 144.32 taken into account in determining whether the trust is 144.33 administered in Minnesota, if: 144.34 (i) the delegation was permitted under the trust agreement; 144.35 (ii) the trustees retain the power to revoke the delegation 144.36 on reasonable notice; and 145.1 (iii) the trustees monitor and evaluate the performance of 145.2 the agent or custodian on a regular basis as is reasonably 145.3 determined by the trustees. 145.4 [EFFECTIVE DATE.] This section is effective the day 145.5 following final enactment. 145.6 Sec. 16. Minnesota Statutes 2004, section 290.01, 145.7 subdivision 19a, is amended to read: 145.8 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 145.9 individuals, estates, and trusts, there shall be added to 145.10 federal taxable income: 145.11 (1)(i) interest income on obligations of any state other 145.12 than Minnesota or a political or governmental subdivision, 145.13 municipality, or governmental agency or instrumentality of any 145.14 state other than Minnesota exempt from federal income taxes 145.15 under the Internal Revenue Code or any other federal statute; 145.16 and 145.17 (ii) exempt-interest dividends as defined in section 145.18 852(b)(5) of the Internal Revenue Code, except the portion of 145.19 the exempt-interest dividends derived from interest income on 145.20 obligations of the state of Minnesota or its political or 145.21 governmental subdivisions, municipalities, governmental agencies 145.22 or instrumentalities, but only if the portion of the 145.23 exempt-interest dividends from such Minnesota sources paid to 145.24 all shareholders represents 95 percent or more of the 145.25 exempt-interest dividends that are paid by the regulated 145.26 investment company as defined in section 851(a) of the Internal 145.27 Revenue Code, or the fund of the regulated investment company as 145.28 defined in section 851(g) of the Internal Revenue Code, making 145.29 the payment; and 145.30 (iii) for the purposes of items (i) and (ii), interest on 145.31 obligations of an Indian tribal government described in section 145.32 7871(c) of the Internal Revenue Code shall be treated as 145.33 interest income on obligations of the state in which the tribe 145.34 is located; 145.35 (2) the amount of income taxes paid or accrued within the 145.36 taxable year under this chapter andincomethe amount of taxes 146.1 based on net income paid to any other state or to any province 146.2 or territory of Canada, to the extent allowed as a deduction 146.3 under section 63(d) of the Internal Revenue Code, but the 146.4 addition may not be more than the amount by which the itemized 146.5 deductions as allowed under section 63(d) of the Internal 146.6 Revenue Code exceeds the amount of the standard deduction as 146.7 defined in section 63(c) of the Internal Revenue Code. For the 146.8 purpose of this paragraph, the disallowance of itemized 146.9 deductions under section 68 of the Internal Revenue Code of 146.10 1986, income tax is the last itemized deduction disallowed; 146.11 (3) the capital gain amount of a lump sum distribution to 146.12 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 146.13 Reform Act of 1986, Public Law 99-514, applies; 146.14 (4) the amount of income taxes paid or accrued within the 146.15 taxable year under this chapter andincometaxes based on net 146.16 income paid to any other state or any province or territory of 146.17 Canada, to the extent allowed as a deduction in determining 146.18 federal adjusted gross income. For the purpose of this 146.19 paragraph, income taxes do not include the taxes imposed by 146.20 sections 290.0922, subdivision 1, paragraph (b), 290.9727, 146.21 290.9728, and 290.9729; 146.22 (5) the amount of expense, interest, or taxes disallowed 146.23 pursuant to section 290.10 other than expenses or interest used 146.24 in computing net interest income for the subtraction allowed 146.25 under subdivision 19b, clause (1); 146.26 (6) the amount of a partner's pro rata share of net income 146.27 which does not flow through to the partner because the 146.28 partnership elected to pay the tax on the income under section 146.29 6242(a)(2) of the Internal Revenue Code; and 146.30 (7) 80 percent of the depreciation deduction allowed under 146.31 section 168(k) of the Internal Revenue Code. For purposes of 146.32 this clause, if the taxpayer has an activity that in the taxable 146.33 year generates a deduction for depreciation under section 168(k) 146.34 and the activity generates a loss for the taxable year that the 146.35 taxpayer is not allowed to claim for the taxable year, "the 146.36 depreciation allowed under section 168(k)" for the taxable year 147.1 is limited to excess of the depreciation claimed by the activity 147.2 under section 168(k) over the amount of the loss from the 147.3 activity that is not allowed in the taxable year. In succeeding 147.4 taxable years when the losses not allowed in the taxable year 147.5 are allowed, the depreciation under section 168(k) is allowed. 147.6 [EFFECTIVE DATE.] This section is effective for tax years 147.7 beginning after December 31, 2004. 147.8 Sec. 17. Minnesota Statutes 2004, section 290.01, 147.9 subdivision 19b, is amended to read: 147.10 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 147.11 individuals, estates, and trusts, there shall be subtracted from 147.12 federal taxable income: 147.13 (1) net interest income on obligations of any authority, 147.14 commission, or instrumentality of the United States to the 147.15 extent includable in taxable income for federal income tax 147.16 purposes but exempt from state income tax under the laws of the 147.17 United States; 147.18 (2) if included in federal taxable income, the amount of 147.19 any overpayment of income tax to Minnesota or to any other 147.20 state, for any previous taxable year, whether the amount is 147.21 received as a refund or as a credit to another taxable year's 147.22 income tax liability; 147.23 (3) the amount paid to others, less the amount used to 147.24 claim the credit allowed under section 290.0674, not to exceed 147.25 $1,625 for each qualifying child in grades kindergarten to 6 and 147.26 $2,500 for each qualifying child in grades 7 to 12, for tuition, 147.27 textbooks, and transportation of each qualifying child in 147.28 attending an elementary or secondary school situated in 147.29 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 147.30 wherein a resident of this state may legally fulfill the state's 147.31 compulsory attendance laws, which is not operated for profit, 147.32 and which adheres to the provisions of the Civil Rights Act of 147.33 1964 and chapter 363A. For the purposes of this clause, 147.34 "tuition" includes fees or tuition as defined in section 147.35 290.0674, subdivision 1, clause (1). As used in this clause, 147.36 "textbooks" includes books and other instructional materials and 148.1 equipment purchased or leased for use in elementary and 148.2 secondary schools in teaching only those subjects legally and 148.3 commonly taught in public elementary and secondary schools in 148.4 this state. Equipment expenses qualifying for deduction 148.5 includes expenses as defined and limited in section 290.0674, 148.6 subdivision 1, clause (3). "Textbooks" does not include 148.7 instructional books and materials used in the teaching of 148.8 religious tenets, doctrines, or worship, the purpose of which is 148.9 to instill such tenets, doctrines, or worship, nor does it 148.10 include books or materials for, or transportation to, 148.11 extracurricular activities including sporting events, musical or 148.12 dramatic events, speech activities, driver's education, or 148.13 similar programs. For purposes of the subtraction provided by 148.14 this clause, "qualifying child" has the meaning given in section 148.15 32(c)(3) of the Internal Revenue Code; 148.16 (4) income as provided under section 290.0802; 148.17 (5) to the extent included in federal adjusted gross 148.18 income, income realized on disposition of property exempt from 148.19 tax under section 290.491; 148.20 (6)to the extent included in federal taxable income,148.21postservice benefits for youth community service under section148.22124D.42 for volunteer service under United States Code, title148.2342, sections 12601 to 12604;148.24(7)to the extent not deducted in determining federal 148.25 taxable income by an individual who does not itemize deductions 148.26 for federal income tax purposes for the taxable year, an amount 148.27 equal to 50 percent of the excess of charitable contributions 148.28 allowable as a deduction for the taxable year under section 148.29 170(a) of the Internal Revenue Code over $500 ; 148.30(8)(7) for taxable years beginning before January 1, 2008, 148.31 the amount of the federal small ethanol producer credit allowed 148.32 under section 40(a)(3) of the Internal Revenue Code which is 148.33 included in gross income under section 87 of the Internal 148.34 Revenue Code; 148.35(9)(8) for individuals who are allowed a federal foreign 148.36 tax credit for taxes that do not qualify for a credit under 149.1 section 290.06, subdivision 22, an amount equal to the carryover 149.2 of subnational foreign taxes for the taxable year, but not to 149.3 exceed the total subnational foreign taxes reported in claiming 149.4 the foreign tax credit. For purposes of this clause, "federal 149.5 foreign tax credit" means the credit allowed under section 27 of 149.6 the Internal Revenue Code, and "carryover of subnational foreign 149.7 taxes" equals the carryover allowed under section 904(c) of the 149.8 Internal Revenue Code minus national level foreign taxes to the 149.9 extent they exceed the federal foreign tax credit; 149.10(10)(9) in each of the five tax years immediately 149.11 following the tax year in which an addition is required under 149.12 subdivision 19a, clause (7), or 19c, clause (15), in the case of 149.13 a shareholder of a corporation that is an S corporation, an 149.14 amount equal to one-fifth of the delayed depreciation. For 149.15 purposes of this clause, "delayed depreciation" means the amount 149.16 of the addition made by the taxpayer under subdivision 19a, 149.17 clause (7), or subdivision 19c, clause (15), in the case of a 149.18 shareholder of an S corporation, minus the positive value of any 149.19 net operating loss under section 172 of the Internal Revenue 149.20 Code generated for the tax year of the addition. The resulting 149.21 delayed depreciation cannot be less than zero;and149.22(11)(10) job opportunity building zone income as provided 149.23 under section 469.316.; 149.24 (11) the amount of compensation paid to members of the 149.25 Minnesota National Guard or other reserve components of the 149.26 United States military for active service performed in 149.27 Minnesota, excluding compensation for services performed under 149.28 the Active Guard Reserve (AGR) program. For purposes of this 149.29 clause, "active service" means (i) state active service as 149.30 defined in section 190.05, subdivision 5a, clause (1); (ii) 149.31 federally funded state active service as defined in section 149.32 190.05, subdivision 5b; or (iii) federal active service as 149.33 defined in section 190.05, subdivision 5c, but "active service" 149.34 excludes services performed exclusively for purposes of basic 149.35 combat training, advanced individual training, annual training, 149.36 and periodic inactive duty training; special training 150.1 periodically made available to reserve members; and service 150.2 performed in accordance with section 190.08, subdivision 3; 150.3 (12) the amount of compensation paid to members of the 150.4 armed forces of the United States or United Nations for active 150.5 duty performed outside Minnesota; and 150.6 (13) to the extent not deducted in computing federal 150.7 taxable income, an amount, not to exceed $10,000, equal to 150.8 qualified expenses related to a qualified donor's donation, 150.9 while living, of one or more of the qualified donor's organs to 150.10 another person for human organ transplantation. For purposes of 150.11 determining the extent to which expenses are deducted in 150.12 computing federal taxable income, travel and lodging expenses 150.13 related to an organ donation are considered deducted by an 150.14 individual in determining federal taxable income to the extent 150.15 they exceed 7.5 percent of federal adjusted gross income as 150.16 defined in section 62 of the Internal Revenue Code. For 150.17 purposes of this clause, "organ" means all or part of an 150.18 individual's liver, pancreas, kidney, intestine, lung, or bone 150.19 marrow; "human organ transplantation" means the medical 150.20 procedure by which transfer of a human organ is made from the 150.21 body of one person to the body of another person; "qualified 150.22 expenses" means unreimbursed expenses for both the individual 150.23 and the qualified donor for (i) travel, (ii) lodging, and (iii) 150.24 lost wages net of sick pay, except that such expenses may be 150.25 subtracted under this clause only once; and "qualified donor" 150.26 means the individual or the individual's dependent, as defined 150.27 in section 152 of the Internal Revenue Code. An individual may 150.28 claim the subtraction in this clause only once for each instance 150.29 of organ donation for transplantation during the taxable year in 150.30 which the human organ donation and transplantation occurs. 150.31 [EFFECTIVE DATE.] The amendment to clause (9) is effective 150.32 retroactively for tax years beginning after December 31, 2001. 150.33 The rest of this section is effective for the tax years 150.34 beginning after December 31, 2004. 150.35 Sec. 18. Minnesota Statutes 2004, section 290.01, 150.36 subdivision 19c, is amended to read: 151.1 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 151.2 INCOME.] For corporations, there shall be added to federal 151.3 taxable income: 151.4 (1) the amount of any deduction taken for federal income 151.5 tax purposes for income, excise, or franchise taxes based on net 151.6 income or related minimum taxes, including but not limited to 151.7 the tax imposed under section 290.0922, paid by the corporation 151.8 to Minnesota, another state, a political subdivision of another 151.9 state, the District of Columbia, or any foreign country or 151.10 possession of the United States; 151.11 (2) interest not subject to federal tax upon obligations 151.12 of: the United States, its possessions, its agencies, or its 151.13 instrumentalities; the state of Minnesota or any other state, 151.14 any of its political or governmental subdivisions, any of its 151.15 municipalities, or any of its governmental agencies or 151.16 instrumentalities; the District of Columbia; or Indian tribal 151.17 governments; 151.18 (3) exempt-interest dividends received as defined in 151.19 section 852(b)(5) of the Internal Revenue Code; 151.20 (4) the amount of any net operating loss deduction taken 151.21 for federal income tax purposes under section 172 or 832(c)(10) 151.22 of the Internal Revenue Code or operations loss deduction under 151.23 section 810 of the Internal Revenue Code; 151.24 (5) the amount of any special deductions taken for federal 151.25 income tax purposes under sections 241 to 247 of the Internal 151.26 Revenue Code; 151.27 (6) losses from the business of mining, as defined in 151.28 section 290.05, subdivision 1, clause (a), that are not subject 151.29 to Minnesota income tax; 151.30 (7) the amount of any capital losses deducted for federal 151.31 income tax purposes under sections 1211 and 1212 of the Internal 151.32 Revenue Code; 151.33 (8) the exempt foreign trade income of a foreign sales 151.34 corporation under sections 921(a) and 291 of the Internal 151.35 Revenue Code; 151.36 (9) the amount of percentage depletion deducted under 152.1 sections 611 through 614 and 291 of the Internal Revenue Code; 152.2 (10) for certified pollution control facilities placed in 152.3 service in a taxable year beginning before December 31, 1986, 152.4 and for which amortization deductions were elected under section 152.5 169 of the Internal Revenue Code of 1954, as amended through 152.6 December 31, 1985, the amount of the amortization deduction 152.7 allowed in computing federal taxable income for those 152.8 facilities; 152.9 (11) the amount of any deemed dividend from a foreign 152.10 operating corporation determined pursuant to section 290.17, 152.11 subdivision 4, paragraph (g); 152.12 (12)the amount of any environmental tax paid under section152.1359(a) of the Internal Revenue Code;152.14(13)the amount of a partner's pro rata share of net income 152.15 which does not flow through to the partner because the 152.16 partnership elected to pay the tax on the income under section 152.17 6242(a)(2) of the Internal Revenue Code; 152.18(14)(13) the amount of net income excluded under section 152.19 114 of the Internal Revenue Code; 152.20(15)(14) any increase in subpart F income, as defined in 152.21 section 952(a) of the Internal Revenue Code, for the taxable 152.22 year when subpart F income is calculated without regard to the 152.23 provisions of section 614 of Public Law 107-147; and 152.24(16)(15) 80 percent of the depreciation deduction allowed 152.25 under section 168(k)(1)(A) and (k)(4)(A) of the Internal Revenue 152.26 Code. For purposes of this clause, if the taxpayer has an 152.27 activity that in the taxable year generates a deduction for 152.28 depreciation under section 168(k)(1)(A) and (k)(4)(A) and the 152.29 activity generates a loss for the taxable year that the taxpayer 152.30 is not allowed to claim for the taxable year, "the depreciation 152.31 allowed under section 168(k)(1)(A) and (k)(4)(A)" for the 152.32 taxable year is limited to excess of the depreciation claimed by 152.33 the activity under section 168(k)(1)(A) and (k)(4)(A) over the 152.34 amount of the loss from the activity that is not allowed in the 152.35 taxable year. In succeeding taxable years when the losses not 152.36 allowed in the taxable year are allowed, the depreciation under 153.1 section 168(k)(1)(A) and (k)(4)(A) is allowed. 153.2 [EFFECTIVE DATE.] This section is effective the day 153.3 following final enactment. 153.4 Sec. 19. Minnesota Statutes 2004, section 290.06, 153.5 subdivision 22, is amended to read: 153.6 Subd. 22. [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 153.7 taxpayer who is liable for taxes based onor measured bynet 153.8 income to another state, as provided in paragraphs (b) through 153.9 (f), upon income allocated or apportioned to Minnesota, is 153.10 entitled to a credit for the tax paid to another state if the 153.11 tax is actually paid in the taxable year or a subsequent taxable 153.12 year. A taxpayer who is a resident of this state pursuant to 153.13 section 290.01, subdivision 7,clause (2)paragraph (b), and who 153.14 is subject to income tax as a resident in the state of the 153.15 individual's domicile is not allowed this credit unless the 153.16 state of domicile does not allow a similar credit. 153.17 (b) For an individual, estate, or trust, the credit is 153.18 determined by multiplying the tax payable under this chapter by 153.19 the ratio derived by dividing the income subject to tax in the 153.20 other state that is also subject to tax in Minnesota while a 153.21 resident of Minnesota by the taxpayer's federal adjusted gross 153.22 income, as defined in section 62 of the Internal Revenue Code, 153.23 modified by the addition required by section 290.01, subdivision 153.24 19a, clause (1), and the subtraction allowed by section 290.01, 153.25 subdivision 19b, clause (1), to the extent the income is 153.26 allocated or assigned to Minnesota under sections 290.081 and 153.27 290.17. 153.28 (c) If the taxpayer is an athletic team that apportions all 153.29 of its income under section 290.17, subdivision 5, the credit is 153.30 determined by multiplying the tax payable under this chapter by 153.31 the ratio derived from dividing the total net income subject to 153.32 tax in the other state by the taxpayer's Minnesota taxable 153.33 income. 153.34 (d) The credit determined under paragraph (b) or (c) shall 153.35 not exceed the amount of tax so paid to the other state on the 153.36 gross income earned within the other state subject to tax under 154.1 this chapter, nor shall the allowance of the credit reduce the 154.2 taxes paid under this chapter to an amount less than what would 154.3 be assessed if such income amount was excluded from taxable net 154.4 income. 154.5 (e) In the case of the tax assessed on a lump sum 154.6 distribution under section 290.032, the credit allowed under 154.7 paragraph (a) is the tax assessed by the other state on the lump 154.8 sum distribution that is also subject to tax under section 154.9 290.032, and shall not exceed the tax assessed under section 154.10 290.032. To the extent the total lump sum distribution defined 154.11 in section 290.032, subdivision 1, includes lump sum 154.12 distributions received in prior years or is all or in part an 154.13 annuity contract, the reduction to the tax on the lump sum 154.14 distribution allowed under section 290.032, subdivision 2, 154.15 includes tax paid to another state that is properly apportioned 154.16 to that distribution. 154.17 (f) If a Minnesota resident reported an item of income to 154.18 Minnesota and is assessed tax in such other state on that same 154.19 income after the Minnesota statute of limitations has expired, 154.20 the taxpayer shall receive a credit for that year under 154.21 paragraph (a), notwithstanding any statute of limitations to the 154.22 contrary. The claim for the credit must be submitted within one 154.23 year from the date the taxes were paid to the other state. The 154.24 taxpayer must submit sufficient proof to show entitlement to a 154.25 credit. 154.26 (g) For the purposes of this subdivision, a resident 154.27 shareholder of a corporation treated as an "S" corporation under 154.28 section 290.9725, must be considered to have paid a tax imposed 154.29 on the shareholder in an amount equal to the shareholder's pro 154.30 rata share of any net income tax paid by the S corporation to 154.31 another state. For the purposes of the preceding sentence, the 154.32 term "net income tax" means any tax imposed on or measured by a 154.33 corporation's net income. 154.34 (h) For the purposes of this subdivision, a resident 154.35 partner of an entity taxed as a partnership under the Internal 154.36 Revenue Code must be considered to have paid a tax imposed on 155.1 the partner in an amount equal to the partner's pro rata share 155.2 of any net income tax paid by the partnership to another state. 155.3 For purposes of the preceding sentence, the term "net income" 155.4 tax means any tax imposed on or measured by a partnership's net 155.5 income. 155.6 (i) For the purposes of this subdivision, "another state": 155.7 (1) includes: 155.8 (i) the District of Columbia; and 155.9 (ii) a province or territory of Canada; but 155.10 (2) excludes Puerto Rico and the several territories 155.11 organized by Congress. 155.12 (j) The limitations on the credit in paragraphs (b), (c), 155.13 and (d), are imposed on a state by state basis. 155.14 (k) For a tax imposed by a province or territory of Canada, 155.15 the tax for purposes of this subdivision is the excess of the 155.16 tax over the amount of the foreign tax credit allowed under 155.17 section 27 of the Internal Revenue Code. In determining the 155.18 amount of the foreign tax credit allowed, the net income taxes 155.19 imposed by Canada on the income are deducted first. Any 155.20 remaining amount of the allowable foreign tax credit reduces the 155.21 provincial or territorial tax that qualifies for the credit 155.22 under this subdivision. 155.23 [EFFECTIVE DATE.] This section is effective for tax years 155.24 beginning after December 31, 2004. 155.25 Sec. 20. Minnesota Statutes 2004, section 290.06, is 155.26 amended by adding a subdivision to read: 155.27 Subd. 32. [DAIRY INVESTMENT CREDIT.] (a) A dairy 155.28 investment credit is allowed against the tax computed under this 155.29 chapter equal to the credit amount in the table, based on the 155.30 amount paid or incurred by the taxpayer in the tax year and 155.31 certified by the commissioner of agriculture under paragraph 155.32 (f), for qualifying expenditures: 155.33 Amount of 155.34 qualifying expenditures Credit amount 155.35 up to $500,000 ten percent of 155.36 qualifying expenditures 155.37 over $500,000, but not $50,000, plus nine percent 156.1 more than $600,000 of the amount of qualified 156.2 expenditures in excess of 156.3 $500,000 156.4 over $600,000, but not $59,000, plus seven percent 156.5 more than $700,000 of the amount of qualified 156.6 expenditures in excess of 156.7 $600,000 156.8 over $700,000, but not $66,000, plus five percent 156.9 more than $800,000 of the amount of qualified 156.10 expenditures in excess of 156.11 $700,000 156.12 over $800,000, but not $71,000, plus three percent 156.13 more than $900,000 of the amount of qualified 156.14 expenditures in excess of 156.15 $800,000 156.16 over $900,000, but not $74,000, plus one percent 156.17 more than $1,000,000 of the amount of qualified 156.18 expenditures in excess of 156.19 $900,000 156.20 $1,000,000 or more $75,000 156.21 (b) "Qualifying expenditures," for purposes of this 156.22 subdivision, means the expenses incurred for dairy animals for 156.23 the construction or improvement of buildings or facilities, or 156.24 the acquisition of equipment, for dairy animal housing, 156.25 confinement, animal feeding, milk production, and waste 156.26 management, including, but not limited to, the following: 156.27 (1) freestall barns; 156.28 (2) fences; 156.29 (3) watering facilities; 156.30 (4) feed storage and handling equipment; 156.31 (5) milking parlors; 156.32 (6) robotic equipment; 156.33 (7) scales; 156.34 (8) milk storage and cooling facilities; 156.35 (9) bulk tanks; 156.36 (10) manure handling equipment and storage facilities; 156.37 (11) digesters; 156.38 (12) equipment used to produce energy; and 156.39 (13) on-farm processing. 156.40 Qualifying expenditures only include amounts that are 156.41 capitalized and deducted under either section 167 or 179 of the 156.42 Internal Revenue Code in computing federal taxable income. 156.43 (c) The credit is limited to the liability for tax, as 157.1 computed under this section for the taxable year for which the 157.2 credit certificate is issued. If the amount of the credit 157.3 determined under this section for any taxable year exceeds this 157.4 limitation, the excess is a dairy investment credit carryover to 157.5 each of the 15 succeeding taxable years. The entire amount of 157.6 the excess unused credit for the taxable year is carried first 157.7 to the earliest of the taxable years to which the credit may be 157.8 carried and then to each successive year to which the credit may 157.9 be carried. The amount of the unused credit which may be added 157.10 under this paragraph shall not exceed the taxpayer's liability 157.11 for tax less the dairy investment credit for the taxable year. 157.12 (d) For a partnership or S corporation, the maximum amount 157.13 of the credit applies to the entity, not the individual partner 157.14 or shareholder. 157.15 (e) To be eligible for the dairy investment credit in this 157.16 subdivision, a taxpayer must apply to the commissioner of 157.17 agriculture for a tax credit certificate. The application must 157.18 be made on forms prescribed by the commissioner of agriculture 157.19 and must include a statement of the qualifying expenditures by 157.20 the taxpayer. 157.21 (f) The commissioner of agriculture shall certify credits 157.22 in the order the forms required under paragraph (e) are received 157.23 and approved by the commissioner of agriculture, until the 157.24 maximum credit amount for the taxable year has been reached. 157.25 The maximum credit amount is $900,000 for tax years beginning 157.26 after December 31, 2004, and before January 1, 2006; and 157.27 $1,000,000 per year for tax years beginning after December 31, 157.28 2005. 157.29 Any eligible applications for which certificates are not 157.30 issued in a tax year because the commissioner of agriculture has 157.31 issued certificates totaling the maximum credit amount for that 157.32 tax year remain eligible for a credit certificate in subsequent 157.33 tax years, in the order in which the forms were received by the 157.34 commissioner of agriculture. 157.35 [EFFECTIVE DATE.] This section is effective for assets 157.36 placed in service in taxable years beginning after December 31, 158.1 2004. 158.2 Sec. 21. Minnesota Statutes 2004, section 290.067, 158.3 subdivision 1, is amended to read: 158.4 Subdivision 1. [AMOUNT OF CREDIT.] (a) A taxpayer may take 158.5 as a credit against the tax due from the taxpayer and a spouse, 158.6 if any, under this chapter an amount equal to the dependent care 158.7 credit for which the taxpayer is eligible pursuant to the 158.8 provisions of section 21 of the Internal Revenue Code subject to 158.9 the limitations provided in subdivision 2 except that in 158.10 determining whether the child qualified as a dependent, income 158.11 received as a Minnesota family investment program grant or 158.12 allowance to or on behalf of the child must not be taken into 158.13 account in determining whether the child received more than half 158.14 of the child's support from the taxpayer, and the provisions of 158.15 section 32(b)(1)(D) of the Internal Revenue Code do not apply. 158.16 (b) If a child who has not attained the age of six years at 158.17 the close of the taxable year is cared for at a licensed family 158.18 day care home operated by the child's parent, the taxpayer is 158.19 deemed to have paid employment-related expenses. If the child 158.20 is 16 months old or younger at the close of the taxable year, 158.21 the amount of expenses deemed to have been paid equals the 158.22 maximum limit for one qualified individual under section 21(c) 158.23 and (d) of the Internal Revenue Code. If the child is older 158.24 than 16 months of age but has not attained the age of six years 158.25 at the close of the taxable year, the amount of expenses deemed 158.26 to have been paid equals the amount the licensee would charge 158.27 for the care of a child of the same age for the same number of 158.28 hours of care. 158.29 (c) If a married couple: 158.30 (1) has a child who has not attained the age of one year at 158.31 the close of the taxable year; 158.32 (2) files a joint tax return for the taxable year; and 158.33 (3) does not participate in a dependent care assistance 158.34 program as defined in section 129 of the Internal Revenue Code, 158.35 in lieu of the actual employment related expenses paid for that 158.36 child under paragraph (a) or the deemed amount under paragraph 159.1 (b), the lesser of (i) the combined earned income of the couple 159.2 or (ii) the amount of the maximum limit for one qualified 159.3 individual under section 21(c) and (d) of the Internal Revenue 159.4 Code will be deemed to be the employment related expense paid 159.5 for that child. The earned income limitation of section 21(d) 159.6 of the Internal Revenue Code shall not apply to this deemed 159.7 amount. These deemed amounts apply regardless of whether any 159.8 employment-related expenses have been paid. 159.9 (d) If the taxpayer is not required and does not file a 159.10 federal individual income tax return for the tax year, no credit 159.11 is allowed for any amount paid to any person unless: 159.12 (1) the name, address, and taxpayer identification number 159.13 of the person are included on the return claiming the credit; or 159.14 (2) if the person is an organization described in section 159.15 501(c)(3) of the Internal Revenue Code and exempt from tax under 159.16 section 501(a) of the Internal Revenue Code, the name and 159.17 address of the person are included on the return claiming the 159.18 credit. 159.19 In the case of a failure to provide the information required 159.20 under the preceding sentence, the preceding sentence does not 159.21 apply if it is shown that the taxpayer exercised due diligence 159.22 in attempting to provide the information required. 159.23 In the case of a nonresident, part-year resident, or a 159.24 person who has earned income not subject to tax under this 159.25 chapter including earned income excluded pursuant to section 159.26 290.01, subdivision 19b, clause (11), the credit determined 159.27 under section 21 of the Internal Revenue Code must be allocated 159.28 based on the ratio by which the earned income of the claimant 159.29 and the claimant's spouse from Minnesota sources bears to the 159.30 total earned income of the claimant and the claimant's spouse. 159.31 For residents of Minnesota, the subtractions for military 159.32 pay under section 290.01, subdivision 19b, clauses (11) and 159.33 (12), are not considered "earned income not subject to tax under 159.34 this chapter." 159.35 Sec. 22. Minnesota Statutes 2004, section 290.0671, 159.36 subdivision 1, is amended to read: 160.1 Subdivision 1. [CREDIT ALLOWED.] (a) An individual is 160.2 allowed a credit against the tax imposed by this chapter equal 160.3 to a percentage of earned income. To receive a credit, a 160.4 taxpayer must be eligible for a credit under section 32 of the 160.5 Internal Revenue Code. 160.6 (b) For individuals with no qualifying children, the credit 160.7 equals 1.9125 percent of the first $4,620 of earned income. The 160.8 credit is reduced by 1.9125 percent of earned income ormodified160.9 adjusted gross income, whichever is greater, in excess of 160.10 $5,770, but in no case is the credit less than zero. 160.11 (c) For individuals with one qualifying child, the credit 160.12 equals 8.5 percent of the first $6,920 of earned income and 8.5 160.13 percent of earned income over $12,080 but less than $13,450. 160.14 The credit is reduced by 5.73 percent of earned income or 160.15modifiedadjusted gross income, whichever is greater, in excess 160.16 of $15,080, but in no case is the credit less than zero. 160.17 (d) For individuals with two or more qualifying children, 160.18 the credit equals ten percent of the first $9,720 of earned 160.19 income and 20 percent of earned income over $14,860 but less 160.20 than $16,800. The credit is reduced by 10.3 percent of earned 160.21 income ormodifiedadjusted gross income, whichever is greater, 160.22 in excess of $17,890, but in no case is the credit less than 160.23 zero. 160.24 (e) For a nonresident or part-year resident, the credit 160.25 must be allocated based on the percentage calculated under 160.26 section 290.06, subdivision 2c, paragraph (e). 160.27 (f) For a person who was a resident for the entire tax year 160.28 and has earned income not subject to tax under this chapter, 160.29 including income excluded under section 290.01, subdivision 19b, 160.30 clause (11), the credit must be allocated based on the ratio of 160.31 federal adjusted gross income reduced by the earned income not 160.32 subject to tax under this chapter over federal adjusted gross 160.33 income. For purposes of this paragraph, the subtractions for 160.34 military pay under section 290.01, subdivision 19b, clauses (11) 160.35 and (12), are not considered "earned income not subject to tax 160.36 under this chapter." 161.1 (g) For tax years beginning after December 31, 2001, and 161.2 before December 31, 2004, the $5,770 in paragraph (b), the 161.3 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 161.4 after being adjusted for inflation under subdivision 7, are each 161.5 increased by $1,000 for married taxpayers filing joint returns. 161.6 (h) For tax years beginning after December 31, 2004, and 161.7 before December 31, 2007, the $5,770 in paragraph (b), the 161.8 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 161.9 after being adjusted for inflation under subdivision 7, are each 161.10 increased by $2,000 for married taxpayers filing joint returns. 161.11 (i) For tax years beginning after December 31, 2007, and 161.12 before December 31, 2010, the $5,770 in paragraph (b), the 161.13 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 161.14 after being adjusted for inflation under subdivision 7, are each 161.15 increased by $3,000 for married taxpayers filing joint returns. 161.16 For tax years beginning after December 31, 2008, the $3,000 is 161.17 adjusted annually for inflation under subdivision 7. 161.18 (j) The commissioner shall construct tables showing the 161.19 amount of the credit at various income levels and make them 161.20 available to taxpayers. The tables shall follow the schedule 161.21 contained in this subdivision, except that the commissioner may 161.22 graduate the transition between income brackets. 161.23 Sec. 23. Minnesota Statutes 2004, section 290.0671, 161.24 subdivision 1a, is amended to read: 161.25 Subd. 1a. [DEFINITIONS.] For purposes of this section, the 161.26 terms "qualifying child," and "earned income,"and "adjusted161.27gross income"have the meanings given in section 32(c) of the 161.28 Internal Revenue Code, and the term "adjusted gross income" has 161.29 the meaning given in section 62 of the Internal Revenue Code. 161.30 [EFFECTIVE DATE.] This section is effective for taxable 161.31 years beginning after December 31, 2004. 161.32 Sec. 24. Minnesota Statutes 2004, section 290.0672, 161.33 subdivision 1, is amended to read: 161.34 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 161.35 section, the following terms have the meanings given. 161.36 (b) "Long-term care insurance" means a policy that: 162.1 (1) qualifies for a deduction under section 213 of the 162.2 Internal Revenue Code, disregarding the 7.5 percent income test; 162.3 or meets the requirements given in section 62A.46; or provides 162.4 similar coverage issued under the laws of another jurisdiction; 162.5 and 162.6 (2) has a lifetime long-term care benefit limit of not less 162.7 than $100,000; and 162.8 (3) has been offered in compliance with the inflation 162.9 protection requirements of section 62S.23. 162.10 (c) "Qualified beneficiary" means the taxpayer or the 162.11 taxpayer's spouse. 162.12(d) "Premiums deducted in determining federal taxable162.13income" means the lesser of (1) long-term care insurance162.14premiums that qualify as deductions under section 213 of the162.15Internal Revenue Code; and (2) the total amount deductible for162.16medical care under section 213 of the Internal Revenue Code.162.17 [EFFECTIVE DATE.] This section is effective for tax years 162.18 beginning after December 31, 2004. 162.19 Sec. 25. Minnesota Statutes 2004, section 290.0672, 162.20 subdivision 2, is amended to read: 162.21 Subd. 2. [CREDIT.] A taxpayer is allowed a credit against 162.22 the tax imposed by this chapter for long-term care insurance 162.23 policy premiums paid during the tax year. The credit for each 162.24 policy equals 25 percent of premiums paidto the extent not162.25deducted in determining federal taxable income. A taxpayer may 162.26 claim a credit for only one policy for each qualified 162.27 beneficiary. A maximum of $100 applies to each qualified 162.28 beneficiary. The maximum total credit allowed per year is $200 162.29 for married couples filing joint returns and $100 for all other 162.30 filers. For a nonresident or part-year resident, the credit 162.31 determined under this section must be allocated based on the 162.32 percentage calculated under section 290.06, subdivision 2c, 162.33 paragraph (e). 162.34 [EFFECTIVE DATE.] This section is effective for tax years 162.35 beginning after December 31, 2004. 162.36 Sec. 26. Minnesota Statutes 2004, section 290.0674, 163.1 subdivision 1, is amended to read: 163.2 Subdivision 1. [CREDIT ALLOWED.] An individual is allowed 163.3 a credit against the tax imposed by this chapter in an amount 163.4 equal to 75 percent of the amount paid for education-related 163.5 expenses for a qualifying child in kindergarten through grade 163.6 12. For purposes of this section, "education-related expenses" 163.7 means: 163.8 (1) fees or tuition for instruction by an instructor under 163.9 section 120A.22, subdivision 10, clause (1), (2), (3), (4), or 163.10 (5), or a member of the Minnesota Music Teachers Association, 163.11 and who is not a lineal ancestor or sibling of the dependent for 163.12 instruction outside the regular school day or school year, 163.13 including tutoring, driver's education offered as part of school 163.14 curriculum, regardless of whether it is taken from a public or 163.15 private entity or summer camps, in grade or age appropriate 163.16 curricula that supplement curricula and instruction available 163.17 during the regular school year, that assists a dependent to 163.18 improve knowledge of core curriculum areas or to expand 163.19 knowledge and skills under thegraduation rule under section163.20120B.02, paragraph (e), clauses (1) to (7), (9), and (10)163.21 required academic standards under section 120B.021, subdivision 163.22 1, and the elective standard under section 120B.022, subdivision 163.23 1, clause (2), and that do not include the teaching of religious 163.24 tenets, doctrines, or worship, the purpose of which is to 163.25 instill such tenets, doctrines, or worship; 163.26 (2) expenses for textbooks, including books and other 163.27 instructional materials and equipment purchased or leased for 163.28 use in elementary and secondary schools in teaching only those 163.29 subjects legally and commonly taught in public elementary and 163.30 secondary schools in this state. "Textbooks" does not include 163.31 instructional books and materials used in the teaching of 163.32 religious tenets, doctrines, or worship, the purpose of which is 163.33 to instill such tenets, doctrines, or worship, nor does it 163.34 include books or materials for extracurricular activities 163.35 including sporting events, musical or dramatic events, speech 163.36 activities, driver's education, or similar programs; 164.1 (3) a maximum expense of $200 per family for personal 164.2 computer hardware, excluding single purpose processors, and 164.3 educational software that assists a dependent to improve 164.4 knowledge of core curriculum areas or to expand knowledge and 164.5 skills under thegraduation rule under section 120B.02required 164.6 academic standards under section 120B.021, subdivision 1, and 164.7 the elective standard under section 120B.022, subdivision 1, 164.8 clause (2), purchased for use in the taxpayer's home and not 164.9 used in a trade or business regardless of whether the computer 164.10 is required by the dependent's school; and 164.11 (4) the amount paid to others for transportation of a 164.12 qualifying child attending an elementary or secondary school 164.13 situated in Minnesota, North Dakota, South Dakota, Iowa, or 164.14 Wisconsin, wherein a resident of this state may legally fulfill 164.15 the state's compulsory attendance laws, which is not operated 164.16 for profit, and which adheres to the provisions of the Civil 164.17 Rights Act of 1964 and chapter 363A. 164.18 For purposes of this section, "qualifying child" has the 164.19 meaning given in section 32(c)(3) of the Internal Revenue Code. 164.20 [EFFECTIVE DATE.] This section is effective for tax years 164.21 beginning after December 31, 2004. 164.22 Sec. 27. Minnesota Statutes 2004, section 290.0674, 164.23 subdivision 2, is amended to read: 164.24 Subd. 2. [LIMITATIONS.] (a) For taxable years beginning 164.25 after December 31, 2004, and before January 1, 2006, for 164.26 claimants with income not greater than $33,500, the maximum 164.27 credit allowed for a family is $1,000per qualifying child and164.28$2,000 per familymultiplied by the number of qualifying 164.29 children in kindergarten through grade 12 in the family.No164.30credit is allowed for education-related expenses for claimants164.31with income greater than $37,500.The maximum creditper child164.32 for families with one qualifying child in kindergarten through 164.33 grade 12 is reduced by $1 for each $4 of household income over 164.34 $33,500, and the maximum creditper familyfor families with two 164.35 or more qualifying children in kindergarten through grade 12 is 164.36 reduced by $2 for each $4 of household income over $33,500, but 165.1 in no case is the credit less than zero. 165.2 (b) For taxable years beginning after December 31, 2005, 165.3 for claimants with income not greater than the greater of (i) 165.4 $33,500 or (ii) 185 percent of the federal poverty guidelines, 165.5 the maximum credit allowed for a family is $1,000 multiplied by 165.6 the number of qualifying children in the family in grades 165.7 kindergarten through 12. The maximum credit per family is 165.8 reduced by $1 multiplied by the number of qualifying children in 165.9 the family in grades kindergarten through 12 for each $4 of 165.10 household income over the greater of (i) $33,500 or (ii) 185 165.11 percent of the federal poverty guidelines, but in no case is the 165.12 credit less than zero. 165.13 (c) For purposes of this section "income" has the meaning 165.14 given in section 290.067, subdivision 2a. In the case of a 165.15 married claimant, a credit is not allowed unless a joint income 165.16 tax return is filed. For purposes of this section "federal 165.17 poverty guidelines" means the guidelines published in the 165.18 Federal Register in the tax year for which the credit is 165.19 claimed, adjusted for family size. 165.20(b)(d) For a nonresident or part-year resident, the credit 165.21 determined under subdivision 1 and the maximum credit amount in 165.22 paragraph (a) must be allocated using the percentage calculated 165.23 in section 290.06, subdivision 2c, paragraph (e). 165.24 [EFFECTIVE DATE.] This section is effective for taxable 165.25 years beginning after December 31, 2004. 165.26 Sec. 28. Minnesota Statutes 2004, section 290.091, 165.27 subdivision 2, is amended to read: 165.28 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 165.29 this section, the following terms have the meanings given: 165.30 (a) "Alternative minimum taxable income" means the sum of 165.31 the following for the taxable year: 165.32 (1) the taxpayer's federal alternative minimum taxable 165.33 income as defined in section 55(b)(2) of the Internal Revenue 165.34 Code; 165.35 (2) the taxpayer's itemized deductions allowed in computing 165.36 federal alternative minimum taxable income, but excluding: 166.1 (i) the charitable contribution deduction under section 170 166.2 of the Internal Revenue Code: 166.3 (A) for taxable years beginning before January 1, 2006, to 166.4 the extent that the deduction exceeds 1.0 percent of adjusted 166.5 gross income, as defined; 166.6 (B) for taxable years beginning after December 31, 2005, 166.7 and before January 1, 2007, to the extent the deduction exceeds 166.8 0.45 percent of adjusted gross income; and 166.9 (C) for taxable years beginning after December 31, 2006, to 166.10 the full extent of the deduction. 166.11 For purposes of this clause, "adjusted gross income" has 166.12 the meaning given in section 62 of the Internal Revenue Code; 166.13 (ii) the medical expense deduction; 166.14 (iii) the casualty, theft, and disaster loss deduction; and 166.15 (iv) the impairment-related work expenses of a disabled 166.16 person; 166.17 (3) for depletion allowances computed under section 613A(c) 166.18 of the Internal Revenue Code, with respect to each property (as 166.19 defined in section 614 of the Internal Revenue Code), to the 166.20 extent not included in federal alternative minimum taxable 166.21 income, the excess of the deduction for depletion allowable 166.22 under section 611 of the Internal Revenue Code for the taxable 166.23 year over the adjusted basis of the property at the end of the 166.24 taxable year (determined without regard to the depletion 166.25 deduction for the taxable year); 166.26 (4) to the extent not included in federal alternative 166.27 minimum taxable income, the amount of the tax preference for 166.28 intangible drilling cost under section 57(a)(2) of the Internal 166.29 Revenue Code determined without regard to subparagraph (E); 166.30 (5) to the extent not included in federal alternative 166.31 minimum taxable income, the amount of interest income as 166.32 provided by section 290.01, subdivision 19a, clause (1); and 166.33 (6) the amount of addition required by section 290.01, 166.34 subdivision 19a, clause (7); 166.35 less the sum of the amounts determined under the following: 166.36 (1) interest income as defined in section 290.01, 167.1 subdivision 19b, clause (1); 167.2 (2) an overpayment of state income tax as provided by 167.3 section 290.01, subdivision 19b, clause (2), to the extent 167.4 included in federal alternative minimum taxable income; 167.5 (3) the amount of investment interest paid or accrued 167.6 within the taxable year on indebtedness to the extent that the 167.7 amount does not exceed net investment income, as defined in 167.8 section 163(d)(4) of the Internal Revenue Code. Interest does 167.9 not include amounts deducted in computing federal adjusted gross 167.10 income; and 167.11 (4) amounts subtracted from federal taxable income as 167.12 provided by section 290.01, subdivision 19b, clauses(10) and167.13(11)(9) to (13). 167.14 In the case of an estate or trust, alternative minimum 167.15 taxable income must be computed as provided in section 59(c) of 167.16 the Internal Revenue Code. 167.17 (b) "Investment interest" means investment interest as 167.18 defined in section 163(d)(3) of the Internal Revenue Code. 167.19 (c) "Tentative minimum tax" equals 6.4 percent of 167.20 alternative minimum taxable income after subtracting the 167.21 exemption amount determined under subdivision 3. 167.22 (d) "Regular tax" means the tax that would be imposed under 167.23 this chapter (without regard to this section and section 167.24 290.032), reduced by the sum of the nonrefundable credits 167.25 allowed under this chapter. 167.26 (e) "Net minimum tax" means the minimum tax imposed by this 167.27 section. 167.28 [EFFECTIVE DATE.] This section is effective for taxable 167.29 years beginning after December 31, 2004. 167.30 Sec. 29. Minnesota Statutes 2004, section 290.091, 167.31 subdivision 3, is amended to read: 167.32 Subd. 3. [EXEMPTION AMOUNT.] (a) For purposes of computing 167.33 the alternative minimum tax, the exemption amount is: 167.34 (1) for taxable years beginning before January 1, 2005, the 167.35 exemption determined under section 55(d) of the Internal Revenue 167.36 Code, as amended through December 31, 1992; 168.1 (2) for taxable years beginning after December 31, 2004, 168.2 and before January 1, 2006, $42,000 for married couples filing 168.3 joint returns; $21,000 for married individuals filing separate 168.4 returns, estates, and trusts; and $31,500 for unmarried 168.5 individuals; 168.6 (3) for taxable years beginning after December 31, 2005, 168.7 and before January 1, 2007, $45,000 for married couples filing 168.8 joint returns; $22,500 for married individuals filing separate 168.9 returns, estates, and trusts; and $33,750 for unmarried 168.10 individuals; and 168.11 (4) for taxable years beginning after December 31, 2006, 168.12 and before January 1, 2008, $50,000 for married couples filing 168.13 joint returns; $25,000 for married individuals filing separate 168.14 returns, estates, and trusts; and $37,500 for unmarried 168.15 individuals. 168.16 (b) The exemption amount determined under this subdivision 168.17 is subject to the phase out under section 55(d)(3) of the 168.18 Internal Revenue Code, except that alternative minimum taxable 168.19 income as determined under this section must be substituted in 168.20 the computation of the phase outunder section 55(d)(3). 168.21 (c) For taxable years beginning after December 31, 2007, 168.22 the exemption amount under paragraph (a), clause (4), must be 168.23 adjusted for inflation. The commissioner shall make the 168.24 inflation adjustments in accordance with section 1(f) of the 168.25 Internal Revenue Code except that for the purposes of this 168.26 subdivision the percentage increase must be determined from the 168.27 year starting September 1, 2006, and ending August 31, 2007, as 168.28 the base year for adjusting for inflation for the tax year 168.29 beginning after December 31, 2007. The determination of the 168.30 commissioner under this subdivision is not a rule under the 168.31 Administrative Procedure Act. 168.32 [EFFECTIVE DATE.] This section is effective for taxable 168.33 years beginning after December 31, 2004. 168.34 Sec. 30. Minnesota Statutes 2004, section 290.0922, 168.35 subdivision 2, is amended to read: 168.36 Subd. 2. [EXEMPTIONS.] The following entities are exempt 169.1 from the tax imposed by this section: 169.2 (1) corporations exempt from tax under section 290.05; 169.3 (2) real estate investment trusts; 169.4 (3) regulated investment companies or a fund thereof; and 169.5 (4) entities having a valid election in effect under 169.6 section 860D(b) of the Internal Revenue Code; 169.7 (5) town and farmers' mutual insurance companies; 169.8 (6) cooperatives organized under chapter 308A or 308B that 169.9 provide housing exclusively to persons age 55 and over and are 169.10 classified as homesteads under section 273.124, subdivision 3; 169.11 and 169.12 (7) an entity, if for the taxable year all of its property 169.13 is located in a job opportunity building zone designated under 169.14 section 469.314 and all of its payroll is a job opportunity 169.15 building zone payroll under section 469.310. 169.16 Entities not specifically exempted by this subdivision are 169.17 subject to tax under this section, notwithstanding section 169.18 290.05. 169.19 [EFFECTIVE DATE.] This section is effective for tax years 169.20 beginning after December 31, 2004. 169.21 Sec. 31. Minnesota Statutes 2004, section 290.191, 169.22 subdivision 2, is amended to read: 169.23 Subd. 2. [APPORTIONMENT FORMULA OF GENERAL APPLICATION.] 169.24 (a) Except for those trades or businesses required to use a 169.25 different formula under subdivision 3 or section 290.36, and for 169.26 those trades or businesses that receive permission to use some 169.27 other method under section 290.20 or under subdivision 4, a 169.28 trade or business required to apportion its net income must 169.29 apportion its income to this state on the basis of the 169.30 percentage obtained by taking the sum of: 169.31 (1)75the percent for the sales factor under paragraph (b) 169.32 of the percentage which the sales made within this state in 169.33 connection with the trade or business during the tax period are 169.34 of the total sales wherever made in connection with the trade or 169.35 business during the tax period; 169.36 (2)12.5the percent for the property factor under 170.1 paragraph (b) of the percentage which the total tangible 170.2 property used by the taxpayer in this state in connection with 170.3 the trade or business during the tax period is of the total 170.4 tangible property, wherever located, used by the taxpayer in 170.5 connection with the trade or business during the tax period; and 170.6 (3)12.5the percent for the payroll factor under paragraph 170.7 (b) of the percentage which the taxpayer's total payrolls paid 170.8 or incurred in this state or paid in respect to labor performed 170.9 in this state in connection with the trade or business during 170.10 the tax period are of the taxpayer's total payrolls paid or 170.11 incurred in connection with the trade or business during the tax 170.12 period. 170.13 (b) For purposes of paragraph (a) and subdivision 3, the 170.14 following percentages apply for the taxable years specified: 170.15 Taxable years Sales factor Property Payroll 170.16 beginning percent factor factor 170.17 during calendar percent percent 170.18 year 170.19 2007 78 11 11 170.20 2008 95 2.5 2.5 170.21 2009 and later 100 0 0 170.22 calendar years 170.23 [EFFECTIVE DATE.] This section is effective for tax years 170.24 beginning after December 31, 2006. 170.25 Sec. 32. Minnesota Statutes 2004, section 290.191, 170.26 subdivision 3, is amended to read: 170.27 Subd. 3. [APPORTIONMENT FORMULA FOR FINANCIAL 170.28 INSTITUTIONS.] Except for an investment company required to 170.29 apportion its income under section 290.36, a financial 170.30 institution that is required to apportion its net income must 170.31 apportion its net income to this state on the basis of the 170.32 percentage obtained by taking the sum of: 170.33 (1)75the percent for the sales factor under subdivision 170.34 2, paragraph (b), of the percentage which the receipts from 170.35 within this state in connection with the trade or business 170.36 during the tax period are of the total receipts in connection 171.1 with the trade or business during the tax period, from wherever 171.2 derived; 171.3 (2)12.5the percent for the property factor under 171.4 subdivision 2, paragraph (b), of the percentage which the sum of 171.5 the total tangible property used by the taxpayer in this state 171.6 and the intangible property owned by the taxpayer and attributed 171.7 to this state in connection with the trade or business during 171.8 the tax period is of the sum of the total tangible property, 171.9 wherever located, used by the taxpayer and the intangible 171.10 property owned by the taxpayer and attributed to all states in 171.11 connection with the trade or business during the tax period; and 171.12 (3)12.5the percent for the payroll factor under 171.13 subdivision 2, paragraph (b), of the percentage which the 171.14 taxpayer's total payrolls paid or incurred in this state or paid 171.15 in respect to labor performed in this state in connection with 171.16 the trade or business during the tax period are of the 171.17 taxpayer's total payrolls paid or incurred in connection with 171.18 the trade or business during the tax period. 171.19 [EFFECTIVE DATE.] This section is effective for tax years 171.20 beginning after December 31, 2006. 171.21 Sec. 33. [290.433] [NATIONAL GUARD AND RESERVES CHECKOFF.] 171.22 Subdivision 1. [CHECKOFF ESTABLISHED.] (a) Every 171.23 individual who files an income tax return may designate on their 171.24 original return that $1 or more shall be added to the tax or 171.25 deducted from the refund that would otherwise be payable by or 171.26 to that individual and paid into a Minnesota military families 171.27 relief account established in the special revenue fund. The 171.28 commissioner of revenue shall, on the income tax return, notify 171.29 filers of their right to designate that a portion of their tax 171.30 or refund shall be paid into the Minnesota military families 171.31 relief account. Amounts so designated to be paid shall be 171.32 credited to the account as returns are processed, in as timely a 171.33 manner as practical. All interest earned on money accrued, 171.34 gifts to the program, contributions to the program, and 171.35 reimbursements of expenditures shall be credited to the 171.36 account. All money in the account is appropriated to the 172.1 adjutant general of the Department of Military Affairs for the 172.2 purpose of making grants as specified in subdivision 2. 172.3 (b) The checkoff under this section is subject to removal 172.4 from the income tax return as provided in section 290.439, 172.5 subdivision 2. 172.6 Subd. 2. [GRANTS.] (a) The adjutant general is authorized 172.7 to expend any money appropriated from the Minnesota military 172.8 families relief account in the special revenue fund for the 172.9 purpose of making grants: 172.10 (1) directly to eligible individuals; or 172.11 (2) to one or more eligible foundations for the purpose of 172.12 making grants to eligible individuals, as provided in this 172.13 section. 172.14 (b) The term, "eligible individual" includes any Minnesota 172.15 resident who is: 172.16 (1) a member of the Minnesota National Guard or other 172.17 United States armed forces reserves who has been ordered to 172.18 federal active service since September 11, 2001, and has a 172.19 financial need as a result of that service; 172.20 (2) the spouse or dependent child of a person described in 172.21 clause (1); or 172.22 (3) the surviving spouse or surviving dependent child of a 172.23 person described in clause (1). 172.24 To be an eligible individual, a person described in clause 172.25 (2) or (3) must be residing within the state of Minnesota. 172.26 (c) The term "eligible foundation" includes any 172.27 organization that: 172.28 (1) is a tax-exempt organization under section 501(c)(3) of 172.29 the Internal Revenue Code; 172.30 (2) has articles of incorporation under chapter 317A 172.31 specifying the purpose of the organization as including the 172.32 provision of financial assistance to members of the Minnesota 172.33 National Guard and other United States armed forces reserves and 172.34 their families and survivors; and 172.35 (3) agrees in writing to distribute any grant money 172.36 received from the adjutant general under this section to 173.1 eligible individuals as defined in this section and in 173.2 accordance with any written policies and rules the adjutant 173.3 general may impose as conditions of the grant to the foundation. 173.4 (d) The maximum grant awarded to an eligible individual in 173.5 a calendar year with funds from the Minnesota military families 173.6 relief account, either through an eligible institution or 173.7 directly from the adjutant general, may not exceed $2,000. 173.8 (e) The state pledges and agrees with all contributors to 173.9 the account to use the contributed funds solely for the purpose 173.10 of providing assistance to eligible individuals. 173.11 (f) The state further agrees that it will not impose 173.12 additional conditions or restrictions that will limit or 173.13 otherwise restrict the ability of the adjutant general to award 173.14 grants under this section. 173.15 (g) For purposes of this section, the term "federal active 173.16 service" has the meaning given in section 190.05, subdivision 173.17 5c, but excludes service performed exclusively for purposes of: 173.18 (1) basic combat training, advanced individual training, 173.19 annual training, and periodic inactive duty training; 173.20 (2) special training periodically made available to reserve 173.21 members; and 173.22 (3) service performed in accordance with section 190.08, 173.23 subdivision 3. 173.24 Subd. 3. [ANNUAL REPORT.] The adjutant general must report 173.25 by February 1, 2007, and each year thereafter, to the chairs and 173.26 ranking minority members of the legislative committees and 173.27 divisions with jurisdiction over military and veterans' affairs 173.28 on the number, amounts, and use of grants issued from the 173.29 Minnesota military families relief account in the previous year 173.30 and on the expenses related to administering the account. 173.31 [EFFECTIVE DATE.] This section is effective for income tax 173.32 returns for taxable years beginning after December 31, 2004. 173.33 Sec. 34. [290.434] [PUBLIC SAFETY OFFICER CHECKOFF.] 173.34 (a) Every individual who files an income tax return may 173.35 designate on their original return that $1 or more shall be 173.36 added to the tax or deducted from the refund that would 174.1 otherwise be payable by or to that individual and paid into a 174.2 public safety officer memorial and survivor account in the 174.3 special revenue fund. The commissioner of revenue shall, on the 174.4 income tax return, notify filers of their right to designate 174.5 that a portion of their tax or refund shall be paid into the 174.6 public safety officer memorial and survivor account. The sum of 174.7 the amounts so designated to be paid shall be credited to the 174.8 account. The account may be used by the commissioner of public 174.9 safety to make grants to public safety officer associations that 174.10 assist in building and preserving state memorial monuments, 174.11 assist the families of public safety officers killed in the line 174.12 of duty, award scholarships to surviving family members, and 174.13 otherwise provide services relating to public safety officers 174.14 killed in the line of duty. All interest earned on money 174.15 accrued, gifts to the program, contributions to the program, and 174.16 reimbursements of expenditures shall be credited to the 174.17 account. All money in the account is appropriated to the 174.18 commissioner of public safety for purposes of this section. 174.19 (b) The state pledges and agrees with all contributors to 174.20 the account to use the funds contributed solely for the 174.21 maintenance of public safety officer memorials and for the 174.22 benefit of survivors of Minnesota public safety officers killed 174.23 in the line of duty and further agrees that it will not impose 174.24 additional conditions or restrictions that will limit or 174.25 otherwise restrict the ability of the commissioner of public 174.26 safety, in consultation with the public safety officer memorial 174.27 and survivor account advisory council, to award grants from the 174.28 available funds in the most efficient and effective manner. 174.29 (c) The commissioner of public safety must report by 174.30 January 1, 2004, and each year thereafter to the chairs and 174.31 ranking minority members of the legislative committees and 174.32 divisions with jurisdiction over criminal justice policy and 174.33 funding on the number, amounts, and use of grants issued from 174.34 the account in the previous year. 174.35 (d) A public safety officer memorial and survivor account 174.36 advisory council is established to advise the commissioner of 175.1 public safety on the distribution of grants under this section. 175.2 The council must consist of eight members, one from each of the 175.3 following organizations: the Minnesota law enforcement memorial 175.4 association, the Minnesota police and peace officers 175.5 association, the Minnesota chiefs of police association, the 175.6 Minnesota sheriffs association, the Minnesota state fire 175.7 department association, the Minnesota state fire chiefs 175.8 association, the Minnesota ambulance association, and the 175.9 Minnesota emergency medical services association. The council 175.10 member is the executive director or president of the 175.11 organization, or that person's designee. Members must serve 175.12 without compensation. The commissioner must consider the 175.13 advisory council's recommendations before awarding grants under 175.14 this section. 175.15 (e) As used in this section, "killed in the line of duty" 175.16 and "public safety officer" have the meanings given in section 175.17 299A.41. 175.18 (f) The checkoff under this section is subject to removal 175.19 from the income tax return as provided in section 290.439, 175.20 subdivision 2. 175.21 [EFFECTIVE DATE.] This section is effective for income tax 175.22 returns for taxable years beginning after December 31, 2004. 175.23 Sec. 35. [290.435] [K-12 EDUCATION, HIGHER EDUCATION, 175.24 TRANSPORTATION, HEALTH CARE, NURSING HOME, AND CLEAN WATER 175.25 CHECKOFF.] 175.26 Subdivision 1. [CHECKOFFS.] (a) Every individual who files 175.27 an income tax return may designate on their original return that 175.28 $1 or more shall be added to the tax or deducted from the refund 175.29 that would otherwise be payable by or to that individual. 175.30 (b) The taxpayer shall designate that the added or deducted 175.31 amount shall be paid into one or more of the following accounts 175.32 and used for the stated purpose: 175.33 (1) K-12 education, for technology and/or capital 175.34 improvement grants to school districts; 175.35 (2) higher education, for state assistance to individual 175.36 students based on student need; 176.1 (3) transportation, for local road and bridge funds; 176.2 (4) health care, to provide funding for public health care 176.3 programs; 176.4 (5) nursing home assistance, for state reimbursement of 176.5 nursing home costs; or 176.6 (6) environmental clean water, for grants to cities for 176.7 wastewater treatment facilities. 176.8 (c) The taxpayer may not designate an amount less than $1 176.9 to be paid into any of the accounts. 176.10 Subd. 2. [APPROPRIATION; SPECIAL ACCOUNTS.] (a) All 176.11 amounts designated by taxpayers to be paid into the K-12 176.12 education account under subdivision 1, clause (1), must be 176.13 deposited in the state treasury and credited to a special K-12 176.14 education account. Money in the account is appropriated 176.15 annually to the commissioner of education to make onetime grants 176.16 to school districts for technology or capital improvements. 176.17 (b) All amounts designated by taxpayers to be paid into the 176.18 higher education account under subdivision 1, clause (2), must 176.19 be deposited in the state treasury and credited to a special 176.20 higher education account. Money in the account is appropriated 176.21 annually to the Minnesota Higher Education Services Office to 176.22 provide financial assistance to students, based on financial 176.23 needs, attending postsecondary educational institutions located 176.24 in and operated by this state. 176.25 (c) All amounts designated by taxpayers to be paid into the 176.26 transportation account under subdivision 1, clause (3), must be 176.27 deposited in the state treasury and credited to a special 176.28 transportation account. Money in the account is appropriated 176.29 annually to the commissioner of transportation for improvements 176.30 to local roads and bridges. 176.31 (d) All amounts designated by taxpayers to be paid into the 176.32 health care account under subdivision 1, clause (4), must be 176.33 deposited in the state treasury and credited to a special health 176.34 care account. Money in the account is appropriated annually to 176.35 the commissioner of human services to provide additional funds 176.36 for adult participation in MinnesotaCare. 177.1 (e) All amounts designated by taxpayers to be paid into the 177.2 nursing home assistance account under subdivision 1, clause (5), 177.3 must be deposited in the state treasury and credited to a 177.4 special nursing home assistance account. Money in the account 177.5 is appropriated annually to the commissioner of human services 177.6 to fund a onetime increase in state paid nursing home 177.7 reimbursement rates. 177.8 (f) All amounts designated by taxpayers to be paid into the 177.9 environmental clean water account under subdivision 1, clause 177.10 (6), must be deposited in the state treasury and credited to the 177.11 wastewater infrastructure fund, and annually appropriated to the 177.12 public facilities authority to make onetime grants to 177.13 municipalities for wastewater treatment facilities. 177.14 (g) All amounts appropriated from the special accounts 177.15 under this section are onetime appropriations and do not become 177.16 part of the base level funding for the 2006-2007 biennium. 177.17 (h) The checkoffs under this section are subject to removal 177.18 from the income tax return as provided in section 290.439, 177.19 subdivision 2. 177.20 [EFFECTIVE DATE.] This section is effective for taxable 177.21 years beginning after December 31, 2004. 177.22 Sec. 36. [290.439] [ADMINISTRATION OF CHECKOFFS.] 177.23 Subdivision 1. [FORMS.] The commissioner must provide a 177.24 separate form as part of the income tax return that lists the 177.25 nongame wildlife checkoff in section 290.432; the state election 177.26 campaign fund checkoff in section 10A.31; the National Guard and 177.27 Reserves checkoff in section 290.433; the public safety officer 177.28 checkoff in section 290.434; and the education, higher 177.29 education, transportation, health care, nursing home, and clean 177.30 water checkoffs in section 290.435. The commissioner must 177.31 provide a single line on form M-1 for entering the total amount 177.32 a taxpayer contributes to all the checkoffs listed on the 177.33 separate form. 177.34 Subd. 2. [REMOVAL OF CHECKOFFS.] The commissioner must 177.35 annually review usage of the income tax checkoffs in sections 177.36 290.433 to 290.435, and determine the number of returns making 178.1 contributions and the total amount contributed to each checkoff, 178.2 including each of the separate checkoffs provided in section 178.3 290.435. If any of the checkoffs subject to review fails, for 178.4 two consecutive tax years, to obtain contributions of at least 178.5 $100,000 from at least eight percent of all returns that make 178.6 contributions to any of the checkoffs in sections 10A.31 and 178.7 290.433 to 290.435, the commissioner must remove the checkoff 178.8 from the checkoff form and submit legislation proposing the 178.9 repeal of the checkoff to the legislature. 178.10 [EFFECTIVE DATE.] This section is effective for taxable 178.11 years beginning after December 31, 2004. 178.12 Sec. 37. Minnesota Statutes 2004, section 290.92, 178.13 subdivision 4b, is amended to read: 178.14 Subd. 4b. [WITHHOLDING BY PARTNERSHIPS.] (a) A partnership 178.15 shall deduct and withhold a tax as provided in paragraph (b) for 178.16 nonresident individual partners based on their distributive 178.17 shares of partnership income for a taxable year of the 178.18 partnership. 178.19 (b) The amount of tax withheld is determined by multiplying 178.20 the partner's distributive share allocable to Minnesota under 178.21 section 290.17, paid or credited during the taxable year by the 178.22 highest rate used to determine the income tax liability for an 178.23 individual under section 290.06, subdivision 2c, except that the 178.24 amount of tax withheld may be determined by the commissioner if 178.25 the partner submits a withholding exemption certificate under 178.26 subdivision 5. 178.27 (c) The commissioner may reduce or abate the tax withheld 178.28 under this subdivision if the partnership had reasonable cause 178.29 to believe that no tax was due under this section. 178.30 (d) Notwithstanding paragraph (a), a partnership is not 178.31 required to deduct and withhold tax for a nonresident partner if: 178.32 (1) the partner elects to have the tax due paid as part of 178.33 the partnership's composite return under section 289A.08, 178.34 subdivision 7; 178.35 (2) the partner has Minnesota assignable federal adjusted 178.36 gross income from the partnership of less than $1,000; or 179.1 (3) the partnership is liquidated or terminated, the income 179.2 was generated by a transaction related to the termination or 179.3 liquidation, and no cash or other property was distributed in 179.4 the current or prior taxable year;or179.5 (4) the distributive shares of partnership income are 179.6 attributable to: 179.7 (i) income required to be recognized because of discharge 179.8 of indebtedness; 179.9 (ii) income recognized because of a sale, exchange, or 179.10 other disposition of real estate, depreciable property, or 179.11 property described in section 179 of the Internal Revenue Code; 179.12 or 179.13 (iii) income recognized on the sale, exchange, or other 179.14 disposition of any property that has been the subject of a basis 179.15 reduction pursuant to section 108, 734, 743, 754, or 1017 of the 179.16 Internal Revenue Code 179.17 to the extent that the income does not include cash received or 179.18 receivable or, if there is cash received or receivable, to the 179.19 extent that the cash is required to be used to pay indebtedness 179.20 by the partnership or a secured debt on partnership property; or 179.21 (5) the partnership is a publicly traded partnership, as 179.22 defined in section 7704(b) of the Internal Revenue Code. 179.23 (e) For purposes of subdivision 6a, and sections 289A.09, 179.24 subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50, 179.25 289A.56, 289A.60, and 289A.63, a partnership is considered an 179.26 employer. 179.27 (f) To the extent that income is exempt from withholding 179.28 under paragraph (d), clause (4), the commissioner has a lien in 179.29 an amount up to the amount that would be required to be withheld 179.30 with respect to the income of the partner attributable to the 179.31 partnership interest, but for the application of paragraph (d), 179.32 clause (4). The lien arises under section 270.69 from the date 179.33 of assessment of the tax against the partner, and attaches to 179.34 that partner's share of the profits and any other money due or 179.35 to become due to that partner in respect of the partnership. 179.36 Notice of the lien may be sent by mail to the partnership, 180.1 without the necessity for recording the lien. The notice has 180.2 the force and effect of a levy under section 270.70, and is 180.3 enforceable against the partnership in the manner provided by 180.4 that section. Upon payment in full of the liability subsequent 180.5 to the notice of lien, the partnership must be notified that the 180.6 lien has been satisfied. 180.7 [EFFECTIVE DATE.] This section is effective for taxable 180.8 years beginning after December 31, 2004. 180.9 Sec. 38. Minnesota Statutes 2004, section 291.005, 180.10 subdivision 1, is amended to read: 180.11 Subdivision 1. [SCOPE.] Unless the context otherwise 180.12 clearly requires, the following terms used in this chapter shall 180.13 have the following meanings: 180.14 (1) "Federal gross estate" means the gross estate of a 180.15 decedent as valued and otherwise determined for federal estate 180.16 tax purposes by federal taxing authorities pursuant to the 180.17 provisions of the Internal Revenue Code. 180.18 (2) "Minnesota gross estate" means the federal gross estate 180.19 of a decedent after (a) excluding therefrom any property 180.20 included therein which has its situs outside Minnesota, and (b) 180.21 including therein any property omitted from the federal gross 180.22 estate which is includable therein, has its situs in Minnesota, 180.23 and was not disclosed to federal taxing authorities. 180.24 (3) "Personal representative" means the executor, 180.25 administrator or other person appointed by the court to 180.26 administer and dispose of the property of the decedent. If 180.27 there is no executor, administrator or other person appointed, 180.28 qualified, and acting within this state, then any person in 180.29 actual or constructive possession of any property having a situs 180.30 in this state which is included in the federal gross estate of 180.31 the decedent shall be deemed to be a personal representative to 180.32 the extent of the property and the Minnesota estate tax due with 180.33 respect to the property. 180.34 (4) "Resident decedent" means an individual whose domicile 180.35 at the time of death was in Minnesota. 180.36 (5) "Nonresident decedent" means an individual whose 181.1 domicile at the time of death was not in Minnesota. 181.2 (6) "Situs of property" means, with respect to real 181.3 property, the state or country in which it is located; with 181.4 respect to tangible personal property, the state or country in 181.5 which it was normally kept or located at the time of the 181.6 decedent's death; and with respect to intangible personal 181.7 property, the state or country in which the decedent was 181.8 domiciled at death. 181.9 (7) "Commissioner" means the commissioner of revenue or any 181.10 person to whom the commissioner has delegated functions under 181.11 this chapter. 181.12 (8) "Internal Revenue Code" means the United States 181.13 Internal Revenue Code of 1986, as amended throughDecember 31,181.142002April 15, 2005. 181.15 (9) "Minnesota adjusted taxable estate" means federal 181.16 adjusted taxable estate as defined by section 2011(b)(3) of the 181.17 Internal Revenue Code, increased by the amount of deduction for 181.18 state death taxes allowed under section 2058 of the Internal 181.19 Revenue Code. 181.20 [EFFECTIVE DATE.] This section is effective for estates of 181.21 decedents dying after December 31, 2004. 181.22 Sec. 39. Minnesota Statutes 2004, section 291.03, 181.23 subdivision 1, is amended to read: 181.24 Subdivision 1. [TAX AMOUNT.] (a) The tax imposed shall be 181.25 an amount equal to the proportion of the maximum credit for 181.26 state death taxes computed under section 2011 of the Internal 181.27 Revenue Code, as amended through December 31, 2000,for state181.28death taxesbut using Minnesota adjusted taxable estate instead 181.29 of federal adjusted taxable estate, as the Minnesota gross 181.30 estate bears to the value of the federal gross estate. The tax 181.31 determined under this paragraph shall not be greater than the 181.32federal estate taxamount computed by applying the rates and 181.33 brackets under section 2001(c) of the Internal Revenue Code 181.34after the allowance ofto the Minnesota adjusted gross estate 181.35 and subtracting the federalcreditscredit allowed under section 181.36 2010 of the Internal Revenue Code of 1986, as amended through 182.1 December 31, 2000. 182.2 (b) For the purposes of this section, expenses which are 182.3 deducted for federal income tax purposes under section 642(g) of 182.4 the Internal Revenue Code as amended through December 31, 2002, 182.5 are not allowable in computing the tax under this chapter. 182.6 (c) The executor may make a qualified terminable interest 182.7 property election, as defined in section 2056(b)(7) of the 182.8 Internal Revenue Code, for purposes of computing the marital 182.9 deduction under section 2056 of the Internal Revenue Code for 182.10 the tax under this chapter that differs from the amount elected 182.11 for federal estate tax purposes. The election may not exceed 182.12 the federal election by more than the difference between the 182.13 applicable exclusion amount under section 2010(c) of the 182.14 Internal Revenue Code and under section 2010(c) of the Internal 182.15 Revenue Code, as amended through December 31, 2000. The 182.16 election must be made on the tax return under this chapter and 182.17 is irrevocable. All tax under this chapter must be determined 182.18 using the qualified terminable interest election made on the 182.19 Minnesota return. For purposes of applying sections 2044 and 182.20 2207A of the Internal Revenue Code to the computation of the 182.21 federal and Minnesota gross estates of the surviving spouse, 182.22 amounts for which a qualified terminable interest property 182.23 election has been made under this section must be treated as 182.24 though a valid federal qualified terminable interest property 182.25 election under section 2056(b)(7) of the Internal Revenue Code 182.26 had been made. 182.27 [EFFECTIVE DATE.] This section is effective for estates of 182.28 decedents dying after December 31, 2004, except paragraph (c) 182.29 applies for estates of decedents dying after December 31, 2006. 182.30 Sec. 40. Minnesota Statutes 2004, section 298.01, 182.31 subdivision 3, is amended to read: 182.32 Subd. 3. [OCCUPATION TAX; OTHER ORES.] Every person 182.33 engaged in the business of mining or producing ores in this 182.34 state, except iron ore or taconite concentrates, shall pay an 182.35 occupation tax to the state of Minnesota as provided in this 182.36 subdivision. The tax is determined in the same manner as the 183.1 tax imposed by section 290.02, except that sections 290.05, 183.2 subdivision 1, clause (a),and290.17, subdivision 4, and 183.3 290.191, subdivision 2, do not apply. A person subject to 183.4 occupation tax under this section shall apportion its net income 183.5 on the basis of the percentage obtained by taking the sum of: 183.6 (1) 75 percent of the percentage which the sales made 183.7 within this state in connection with the trade or business 183.8 during the tax period are of the total sales wherever made in 183.9 connection with the trade or business during the tax period; 183.10 (2) 12.5 percent of the percentage which the total tangible 183.11 property used by the taxpayer in this state in connection with 183.12 the trade or business during the tax period is of the total 183.13 tangible property, wherever located, used by the taxpayer in 183.14 connection with the trade or business during the tax period; and 183.15 (3) 12.5 percent of the percentage which the taxpayer's 183.16 total payrolls paid or incurred in this state or paid in respect 183.17 to labor performed in this state in connection with the trade or 183.18 business during the tax period are of the taxpayer's total 183.19 payrolls paid or incurred in connection with the trade or 183.20 business during the tax period. 183.21 The tax is in addition to all other taxes. 183.22 [EFFECTIVE DATE.] This section is effective for tax years 183.23 beginning after December 31, 2006. 183.24 Sec. 41. Minnesota Statutes 2004, section 298.01, 183.25 subdivision 4, is amended to read: 183.26 Subd. 4. [OCCUPATION TAX; IRON ORE; TACONITE 183.27 CONCENTRATES.] A person engaged in the business of mining or 183.28 producing of iron ore, taconite concentrates or direct reduced 183.29 ore in this state shall pay an occupation tax to the state of 183.30 Minnesota. The tax is determined in the same manner as the tax 183.31 imposed by section 290.02, except that sections 290.05, 183.32 subdivision 1, clause (a),and290.17, subdivision 4, and 183.33 290.191, subdivision 2, do not apply. A person subject to 183.34 occupation tax under this section shall apportion its net income 183.35 on the basis of the percentage obtained by taking the sum of: 183.36 (1) 75 percent of the percentage which the sales made 184.1 within this state in connection with the trade or business 184.2 during the tax period are of the total sales wherever made in 184.3 connection with the trade or business during the tax period; 184.4 (2) 12.5 percent of the percentage which the total tangible 184.5 property used by the taxpayer in this state in connection with 184.6 the trade or business during the tax period is of the total 184.7 tangible property, wherever located, used by the taxpayer in 184.8 connection with the trade or business during the tax period; and 184.9 (3) 12.5 percent of the percentage which the taxpayer's 184.10 total payrolls paid or incurred in this state or paid in respect 184.11 to labor performed in this state in connection with the trade or 184.12 business during the tax period are of the taxpayer's total 184.13 payrolls paid or incurred in connection with the trade or 184.14 business during the tax period. 184.15 The tax is in addition to all other taxes. 184.16 [EFFECTIVE DATE.] This section is effective for tax years 184.17 beginning after December 31, 2006. 184.18 Sec. 42. [REPEALER.] 184.19 Minnesota Rules, parts 8093.2000; and 8093.3000, are 184.20 repealed effective the day following final enactment. 184.21 ARTICLE 6 184.22 FEDERAL UPDATE 184.23 Section 1. Minnesota Statutes 2004, section 289A.02, 184.24 subdivision 7, is amended to read: 184.25 Subd. 7. [INTERNAL REVENUE CODE.] Unless specifically 184.26 defined otherwise, "Internal Revenue Code" means the Internal 184.27 Revenue Code of 1986, as amended throughJune 15, 2003April 15, 184.28 2005. 184.29 [EFFECTIVE DATE.] This section is effective the day 184.30 following final enactment. 184.31 Sec. 2. Minnesota Statutes 2004, section 290.01, 184.32 subdivision 19, as amended by Laws 2005, chapter 1, section 1, 184.33 is amended to read: 184.34 Subd. 19. [NET INCOME.] The term "net income" means the 184.35 federal taxable income, as defined in section 63 of the Internal 184.36 Revenue Code of 1986, as amended through the date named in this 185.1 subdivision, incorporating the federal effective dates of 185.2 changes to the Internal Revenue Code and any elections made by 185.3 the taxpayer in accordance with the Internal Revenue Code in 185.4 determining federal taxable income for federal income tax 185.5 purposes, and with the modifications provided in subdivisions 185.6 19a to 19f. 185.7 In the case of a regulated investment company or a fund 185.8 thereof, as defined in section 851(a) or 851(g) of the Internal 185.9 Revenue Code, federal taxable income means investment company 185.10 taxable income as defined in section 852(b)(2) of the Internal 185.11 Revenue Code, except that: 185.12 (1) the exclusion of net capital gain provided in section 185.13 852(b)(2)(A) of the Internal Revenue Code does not apply; 185.14 (2) the deduction for dividends paid under section 185.15 852(b)(2)(D) of the Internal Revenue Code must be applied by 185.16 allowing a deduction for capital gain dividends and 185.17 exempt-interest dividends as defined in sections 852(b)(3)(C) 185.18 and 852(b)(5) of the Internal Revenue Code; and 185.19 (3) the deduction for dividends paid must also be applied 185.20 in the amount of any undistributed capital gains which the 185.21 regulated investment company elects to have treated as provided 185.22 in section 852(b)(3)(D) of the Internal Revenue Code. 185.23 The net income of a real estate investment trust as defined 185.24 and limited by section 856(a), (b), and (c) of the Internal 185.25 Revenue Code means the real estate investment trust taxable 185.26 income as defined in section 857(b)(2) of the Internal Revenue 185.27 Code. 185.28 The net income of a designated settlement fund as defined 185.29 in section 468B(d) of the Internal Revenue Code means the gross 185.30 income as defined in section 468B(b) of the Internal Revenue 185.31 Code. 185.32The provisions of sections 1113(a), 1117, 1206(a), 1313(a),185.331402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612,185.341616, 1617, 1704(l), and 1704(m) of the Small Business Job185.35Protection Act, Public Law 104-188, the provisions of Public Law185.36104-117, the provisions of sections 313(a) and (b)(1), 602(a),186.1913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013,186.21014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b)186.3and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and186.41604(d)(1) of the Taxpayer Relief Act of 1997, Public Law186.5105-34, the provisions of section 6010 of the Internal Revenue186.6Service Restructuring and Reform Act of 1998, Public Law186.7105-206, the provisions of section 4003 of the Omnibus186.8Consolidated and Emergency Supplemental Appropriations Act,186.91999, Public Law 105-277, and the provisions of section 318 of186.10the Consolidated Appropriation Act of 2001, Public Law 106-554,186.11shall become effective at the time they become effective for186.12federal purposes.186.13 The Internal Revenue Code of 1986, as amended through 186.14December 31, 1996April 15, 2005, shall be in effect for taxable 186.15 years beginning after December 31, 1996. 186.16The provisions of sections 202(a) and (b), 221(a), 225,186.17312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and186.18(c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306,186.191307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528,186.201530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e)186.21of the Taxpayer Relief Act of 1997, Public Law 105-34, the186.22provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002,186.23and 7003 of the Internal Revenue Service Restructuring and186.24Reform Act of 1998, Public Law 105-206, the provisions of186.25section 3001 of the Omnibus Consolidated and Emergency186.26Supplemental Appropriations Act, 1999, Public Law 105-277, the186.27provisions of section 3001 of the Miscellaneous Trade and186.28Technical Corrections Act of 1999, Public Law 106-36, and the186.29provisions of section 316 of the Consolidated Appropriation Act186.30of 2001, Public Law 106-554, shall become effective at the time186.31they become effective for federal purposes.186.32The Internal Revenue Code of 1986, as amended through186.33December 31, 1997, shall be in effect for taxable years186.34beginning after December 31, 1997.186.35The provisions of sections 5002, 6009, 6011, and 7001 of186.36the Internal Revenue Service Restructuring and Reform Act of187.11998, Public Law 105-206, the provisions of section 9010 of the187.2Transportation Equity Act for the 21st Century, Public Law187.3105-178, the provisions of sections 1004, 4002, and 5301 of the187.4Omnibus Consolidation and Emergency Supplemental Appropriations187.5Act, 1999, Public Law 105-277, the provision of section 303 of187.6the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law187.7105-369, the provisions of sections 532, 534, 536, 537, and 538187.8of the Ticket to Work and Work Incentives Improvement Act of187.91999, Public Law 106-170, the provisions of the Installment Tax187.10Correction Act of 2000, Public Law 106-573, and the provisions187.11of section 309 of the Consolidated Appropriation Act of 2001,187.12Public Law 106-554, shall become effective at the time they187.13become effective for federal purposes.187.14The Internal Revenue Code of 1986, as amended through187.15December 31, 1998, shall be in effect for taxable years187.16beginning after December 31, 1998.187.17The provisions of the FSC Repeal and Extraterritorial187.18Income Exclusion Act of 2000, Public Law 106-519, and the187.19provision of section 412 of the Job Creation and Worker187.20Assistance Act of 2002, Public Law 107-147, shall become187.21effective at the time it became effective for federal purposes.187.22The Internal Revenue Code of 1986, as amended through187.23December 31, 1999, shall be in effect for taxable years187.24beginning after December 31, 1999. The provisions of sections187.25306 and 401 of the Consolidated Appropriation Act of 2001,187.26Public Law 106-554, and the provision of section 632(b)(2)(A) of187.27the Economic Growth and Tax Relief Reconciliation Act of 2001,187.28Public Law 107-16, and provisions of sections 101 and 402 of the187.29Job Creation and Worker Assistance Act of 2002, Public Law187.30107-147, shall become effective at the same time it became187.31effective for federal purposes.187.32The Internal Revenue Code of 1986, as amended through187.33December 31, 2000, shall be in effect for taxable years187.34beginning after December 31, 2000. The provisions of sections187.35659a and 671 of the Economic Growth and Tax Relief187.36Reconciliation Act of 2001, Public Law 107-16, the provisions of188.1sections 104, 105, and 111 of the Victims of Terrorism Tax188.2Relief Act of 2001, Public Law 107-134, and the provisions of188.3sections 201, 403, 413, and 606 of the Job Creation and Worker188.4Assistance Act of 2002, Public Law 107-147, shall become188.5effective at the same time it became effective for federal188.6purposes.188.7The Internal Revenue Code of 1986, as amended through March188.815, 2002, shall be in effect for taxable years beginning after188.9December 31, 2001.188.10The provisions of sections 101 and 102 of the Victims of188.11Terrorism Tax Relief Act of 2001, Public Law 107-134, shall188.12become effective at the same time it becomes effective for188.13federal purposes.188.14The Internal Revenue Code of 1986, as amended through June188.1515, 2003, shall be in effect for taxable years beginning after188.16December 31, 2002. The provisions of section 201 of the Jobs188.17and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if188.18it is enacted into law, are effective at the same time it became188.19effective for federal purposes. The provisions of the Act of188.20January 7, 2005, Public Law 109-1, to accelerate the income tax188.21benefits for charitable cash contributions for the relief of188.22victims of the Indian Ocean tsunami, are effective at the same188.23time it became effective for federal purposes and apply to the188.24subtraction under subdivision 19b, clause (7).188.25 Except as otherwise provided, references to the Internal 188.26 Revenue Code in subdivisions19a19 to19g19f mean the code in 188.27 effect for purposes of determining net income for the applicable 188.28 year. 188.29 [EFFECTIVE DATE.] This section is effective the day 188.30 following final enactment. 188.31 Sec. 3. Minnesota Statutes 2004, section 290.01, 188.32 subdivision 19a, is amended to read: 188.33 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 188.34 individuals, estates, and trusts, there shall be added to 188.35 federal taxable income: 188.36 (1)(i) interest income on obligations of any state other 189.1 than Minnesota or a political or governmental subdivision, 189.2 municipality, or governmental agency or instrumentality of any 189.3 state other than Minnesota exempt from federal income taxes 189.4 under the Internal Revenue Code or any other federal statute; 189.5 and 189.6 (ii) exempt-interest dividends as defined in section 189.7 852(b)(5) of the Internal Revenue Code, except the portion of 189.8 the exempt-interest dividends derived from interest income on 189.9 obligations of the state of Minnesota or its political or 189.10 governmental subdivisions, municipalities, governmental agencies 189.11 or instrumentalities, but only if the portion of the 189.12 exempt-interest dividends from such Minnesota sources paid to 189.13 all shareholders represents 95 percent or more of the 189.14 exempt-interest dividends that are paid by the regulated 189.15 investment company as defined in section 851(a) of the Internal 189.16 Revenue Code, or the fund of the regulated investment company as 189.17 defined in section 851(g) of the Internal Revenue Code, making 189.18 the payment; and 189.19 (iii) for the purposes of items (i) and (ii), interest on 189.20 obligations of an Indian tribal government described in section 189.21 7871(c) of the Internal Revenue Code shall be treated as 189.22 interest income on obligations of the state in which the tribe 189.23 is located; 189.24 (2) the amount of income or sales and use taxes paid or 189.25 accrued within the taxable year under this chapter and income or 189.26 sales and use taxes paid to any other state or to any province 189.27 or territory of Canada, to the extent allowed as a deduction 189.28 under section 63(d) of the Internal Revenue Code, but the 189.29 addition may not be more than the amount by which the itemized 189.30 deductions as allowed under section 63(d) of the Internal 189.31 Revenue Code exceeds the amount of (i) the standard deduction as 189.32 defined in section 63(c) of the Internal Revenue Code minus (ii) 189.33 any addition required under clause (10). For the purpose of 189.34 this paragraph, the disallowance of itemized deductions under 189.35 section 68 of the Internal Revenue Code of 1986, income or sales 189.36 and use tax is the last itemized deduction disallowed; 190.1 (3) the capital gain amount of a lump sum distribution to 190.2 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 190.3 Reform Act of 1986, Public Law 99-514, applies; 190.4 (4) the amount of income taxes paid or accrued within the 190.5 taxable year under this chapter and income taxes paid to any 190.6 other state or any province or territory of Canada, to the 190.7 extent allowed as a deduction in determining federal adjusted 190.8 gross income. For the purpose of this paragraph, income taxes 190.9 do not include the taxes imposed by sections 290.0922, 190.10 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 190.11 (5) the amount of expense, interest, or taxes disallowed 190.12 pursuant to section 290.10; 190.13 (6) the amount of a partner's pro rata share of net income 190.14 which does not flow through to the partner because the 190.15 partnership elected to pay the tax on the income under section 190.16 6242(a)(2) of the Internal Revenue Code;and190.17 (7) 80 percent of the depreciation deduction allowed under 190.18 section 168(k) of the Internal Revenue Code. For purposes of 190.19 this clause, if the taxpayer has an activity that in the taxable 190.20 year generates a deduction for depreciation under section 168(k) 190.21 and the activity generates a loss for the taxable year that the 190.22 taxpayer is not allowed to claim for the taxable year, "the 190.23 depreciation allowed under section 168(k)" for the taxable year 190.24 is limited to excess of the depreciation claimed by the activity 190.25 under section 168(k) over the amount of the loss from the 190.26 activity that is not allowed in the taxable year. In succeeding 190.27 taxable years when the losses not allowed in the taxable year 190.28 are allowed, the depreciation under section 168(k) is allowed; 190.29 (8) 80 percent of the amount by which the deduction allowed 190.30 by section 179 of the Internal Revenue Code exceeds the 190.31 deduction allowable by section 179 of the Internal Revenue Code 190.32 of 1986, as amended through December 31, 2003; 190.33 (9) to the extent deducted in computing federal taxable 190.34 income, the amount of the deduction allowable under section 199 190.35 of the Internal Revenue Code; 190.36 (10) for tax years beginning after December 31, 2006, to 191.1 the extent deducted in computing federal taxable income, the 191.2 amount by which the standard deduction allowed under section 191.3 63(c) of the Internal Revenue Code exceeds the standard 191.4 deduction allowable under section 63(c) of the Internal Revenue 191.5 Code of 1986, as amended through December 31, 2003; and 191.6 (11) the exclusion allowed under section 139A of the 191.7 Internal Revenue Code for federal subsidies for prescription 191.8 drug plans. 191.9 [EFFECTIVE DATE.] This section is effective for tax years 191.10 beginning after December 31, 2004, except the changes in clause 191.11 (2) are effective for tax years beginning after December 31, 191.12 2003. 191.13 Sec. 4. Minnesota Statutes 2004, section 290.01, 191.14 subdivision 19b, is amended to read: 191.15 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 191.16 individuals, estates, and trusts, there shall be subtracted from 191.17 federal taxable income: 191.18 (1) interest income on obligations of any authority, 191.19 commission, or instrumentality of the United States to the 191.20 extent includable in taxable income for federal income tax 191.21 purposes but exempt from state income tax under the laws of the 191.22 United States; 191.23 (2) if included in federal taxable income, the amount of 191.24 any overpayment of income tax to Minnesota or to any other 191.25 state, for any previous taxable year, whether the amount is 191.26 received as a refund or as a credit to another taxable year's 191.27 income tax liability; 191.28 (3) the amount paid to others, less the amount used to 191.29 claim the credit allowed under section 290.0674, not to exceed 191.30 $1,625 for each qualifying child in grades kindergarten to 6 and 191.31 $2,500 for each qualifying child in grades 7 to 12, for tuition, 191.32 textbooks, and transportation of each qualifying child in 191.33 attending an elementary or secondary school situated in 191.34 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 191.35 wherein a resident of this state may legally fulfill the state's 191.36 compulsory attendance laws, which is not operated for profit, 192.1 and which adheres to the provisions of the Civil Rights Act of 192.2 1964 and chapter 363A. For the purposes of this clause, 192.3 "tuition" includes fees or tuition as defined in section 192.4 290.0674, subdivision 1, clause (1). As used in this clause, 192.5 "textbooks" includes books and other instructional materials and 192.6 equipment purchased or leased for use in elementary and 192.7 secondary schools in teaching only those subjects legally and 192.8 commonly taught in public elementary and secondary schools in 192.9 this state. Equipment expenses qualifying for deduction 192.10 includes expenses as defined and limited in section 290.0674, 192.11 subdivision 1, clause (3). "Textbooks" does not include 192.12 instructional books and materials used in the teaching of 192.13 religious tenets, doctrines, or worship, the purpose of which is 192.14 to instill such tenets, doctrines, or worship, nor does it 192.15 include books or materials for, or transportation to, 192.16 extracurricular activities including sporting events, musical or 192.17 dramatic events, speech activities, driver's education, or 192.18 similar programs. For purposes of the subtraction provided by 192.19 this clause, "qualifying child" has the meaning given in section 192.20 32(c)(3) of the Internal Revenue Code; 192.21 (4) income as provided under section 290.0802; 192.22 (5) to the extent included in federal adjusted gross 192.23 income, income realized on disposition of property exempt from 192.24 tax under section 290.491; 192.25 (6) to the extent included in federal taxable income, 192.26 postservice benefits for youth community service under section 192.27 124D.42 for volunteer service under United States Code, title 192.28 42, sections 12601 to 12604; 192.29 (7) to the extent not deducted in determining federal 192.30 taxable income by an individual who does not itemize deductions 192.31 for federal income tax purposes for the taxable year, an amount 192.32 equal to 50 percent of the excess of charitable contributions 192.33 over $500 allowable as a deduction for the taxable year under 192.34 section 170(a) of the Internal Revenue Codeover $500and under 192.35 the provisions of Public Law 109-1; 192.36 (8) for taxable years beginning before January 1, 2008, the 193.1 amount of the federal small ethanol producer credit allowed 193.2 under section 40(a)(3) of the Internal Revenue Code which is 193.3 included in gross income under section 87 of the Internal 193.4 Revenue Code; 193.5 (9) for individuals who are allowed a federal foreign tax 193.6 credit for taxes that do not qualify for a credit under section 193.7 290.06, subdivision 22, an amount equal to the carryover of 193.8 subnational foreign taxes for the taxable year, but not to 193.9 exceed the total subnational foreign taxes reported in claiming 193.10 the foreign tax credit. For purposes of this clause, "federal 193.11 foreign tax credit" means the credit allowed under section 27 of 193.12 the Internal Revenue Code, and "carryover of subnational foreign 193.13 taxes" equals the carryover allowed under section 904(c) of the 193.14 Internal Revenue Code minus national level foreign taxes to the 193.15 extent they exceed the federal foreign tax credit; 193.16 (10) in each of the five tax years immediately following 193.17 the tax year in which an addition is required under subdivision 193.18 19a, clause (7), an amount equal to one-fifth of the delayed 193.19 depreciation. For purposes of this clause, "delayed 193.20 depreciation" means the amount of the addition made by the 193.21 taxpayer under subdivision 19a, clause (7), minus the positive 193.22 value of any net operating loss under section 172 of the 193.23 Internal Revenue Code generated for the tax year of the 193.24 addition. The resulting delayed depreciation cannot be less 193.25 than zero;and193.26 (11) job opportunity building zone income as provided under 193.27 section 469.316.; 193.28 (12) in each of the five tax years immediately following 193.29 the tax year in which an addition is required under subdivision 193.30 19a, clause (8), or 19c, clause (17), in the case of a 193.31 shareholder of a corporation that is an S corporation, an amount 193.32 equal to one-fifth of the addition made by the taxpayer under 193.33 subdivision 19a, clause (8), or 19c, clause (17), in the case of 193.34 a shareholder of a corporation that is an S corporation, minus 193.35 the positive value of any net operating loss under section 172 193.36 of the Internal Revenue Code generated for the tax year of the 194.1 addition. If the net operating loss exceeds the addition for 194.2 the tax year, a subtraction is not allowed under this clause; 194.3 and 194.4 (13) to the extent included in federal taxable income, 194.5 compensation paid to a service member as defined in United 194.6 States Code, title 10, section 101(a)(5), for military service 194.7 as defined in the Service Member Civil Relief Act, Public Law 194.8 108-189, section 101(2). 194.9 [EFFECTIVE DATE.] This section is effective for tax years 194.10 beginning after December 31, 2004, except the change to clause 194.11 (7) is effective for tax years beginning after December 31, 2003. 194.12 Sec. 5. Minnesota Statutes 2004, section 290.01, 194.13 subdivision 19c, is amended to read: 194.14 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 194.15 INCOME.] For corporations, there shall be added to federal 194.16 taxable income: 194.17 (1) the amount of any deduction taken for federal income 194.18 tax purposes for income, excise, or franchise taxes based on net 194.19 income or related minimum taxes, including but not limited to 194.20 the tax imposed under section 290.0922, paid by the corporation 194.21 to Minnesota, another state, a political subdivision of another 194.22 state, the District of Columbia, or any foreign country or 194.23 possession of the United States; 194.24 (2) interest not subject to federal tax upon obligations 194.25 of: the United States, its possessions, its agencies, or its 194.26 instrumentalities; the state of Minnesota or any other state, 194.27 any of its political or governmental subdivisions, any of its 194.28 municipalities, or any of its governmental agencies or 194.29 instrumentalities; the District of Columbia; or Indian tribal 194.30 governments; 194.31 (3) exempt-interest dividends received as defined in 194.32 section 852(b)(5) of the Internal Revenue Code; 194.33 (4) the amount of any net operating loss deduction taken 194.34 for federal income tax purposes under section 172 or 832(c)(10) 194.35 of the Internal Revenue Code or operations loss deduction under 194.36 section 810 of the Internal Revenue Code; 195.1 (5) the amount of any special deductions taken for federal 195.2 income tax purposes under sections 241 to 247 of the Internal 195.3 Revenue Code; 195.4 (6) losses from the business of mining, as defined in 195.5 section 290.05, subdivision 1, clause (a), that are not subject 195.6 to Minnesota income tax; 195.7 (7) the amount of any capital losses deducted for federal 195.8 income tax purposes under sections 1211 and 1212 of the Internal 195.9 Revenue Code; 195.10 (8) the exempt foreign trade income of a foreign sales 195.11 corporation under sections 921(a) and 291 of the Internal 195.12 Revenue Code; 195.13 (9) the amount of percentage depletion deducted under 195.14 sections 611 through 614 and 291 of the Internal Revenue Code; 195.15 (10) for certified pollution control facilities placed in 195.16 service in a taxable year beginning before December 31, 1986, 195.17 and for which amortization deductions were elected under section 195.18 169 of the Internal Revenue Code of 1954, as amended through 195.19 December 31, 1985, the amount of the amortization deduction 195.20 allowed in computing federal taxable income for those 195.21 facilities; 195.22 (11) the amount of any deemed dividend from a foreign 195.23 operating corporation determined pursuant to section 290.17, 195.24 subdivision 4, paragraph (g); 195.25 (12) the amount of any environmental tax paid under section 195.26 59(a) of the Internal Revenue Code; 195.27 (13) the amount of a partner's pro rata share of net income 195.28 which does not flow through to the partner because the 195.29 partnership elected to pay the tax on the income under section 195.30 6242(a)(2) of the Internal Revenue Code; 195.31 (14) the amount of net income excluded under section 114 of 195.32 the Internal Revenue Code; 195.33 (15) any increase in subpart F income, as defined in 195.34 section 952(a) of the Internal Revenue Code, for the taxable 195.35 year when subpart F income is calculated without regard to the 195.36 provisions of section 614 of Public Law 107-147;and196.1 (16) 80 percent of the depreciation deduction allowed under 196.2 section 168(k) of the Internal Revenue Code. For purposes of 196.3 this clause, if the taxpayer has an activity that in the taxable 196.4 year generates a deduction for depreciation under section 168(k) 196.5 and the activity generates a loss for the taxable year that the 196.6 taxpayer is not allowed to claim for the taxable year, "the 196.7 depreciation allowed under section 168(k)" for the taxable year 196.8 is limited to excess of the depreciation claimed by the activity 196.9 under section 168(k) over the amount of the loss from the 196.10 activity that is not allowed in the taxable year. In succeeding 196.11 taxable years when the losses not allowed in the taxable year 196.12 are allowed, the depreciation under section 168(k) is allowed; 196.13 (17) 80 percent of the amount by which the deduction 196.14 allowed by section 179 of the Internal Revenue Code exceeds the 196.15 deduction allowable by section 179 of the Internal Revenue Code 196.16 of 1986, as amended through December 31, 2003; 196.17 (18) to the extent deducted in computing federal taxable 196.18 income, the amount of the deduction allowable under section 199 196.19 of the Internal Revenue Code; and 196.20 (19) the exclusion allowed under section 139A of the 196.21 Internal Revenue Code for federal subsidies for prescription 196.22 drug plans. 196.23 [EFFECTIVE DATE.] This section is effective for tax years 196.24 beginning after December 31, 2004. 196.25 Sec. 6. Minnesota Statutes 2004, section 290.01, 196.26 subdivision 19d, is amended to read: 196.27 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 196.28 TAXABLE INCOME.] For corporations, there shall be subtracted 196.29 from federal taxable income after the increases provided in 196.30 subdivision 19c: 196.31 (1) the amount of foreign dividend gross-up added to gross 196.32 income for federal income tax purposes under section 78 of the 196.33 Internal Revenue Code; 196.34 (2) the amount of salary expense not allowed for federal 196.35 income tax purposes due to claiming the federal jobs credit 196.36 under section 51 of the Internal Revenue Code; 197.1 (3) any dividend (not including any distribution in 197.2 liquidation) paid within the taxable year by a national or state 197.3 bank to the United States, or to any instrumentality of the 197.4 United States exempt from federal income taxes, on the preferred 197.5 stock of the bank owned by the United States or the 197.6 instrumentality; 197.7 (4) amounts disallowed for intangible drilling costs due to 197.8 differences between this chapter and the Internal Revenue Code 197.9 in taxable years beginning before January 1, 1987, as follows: 197.10 (i) to the extent the disallowed costs are represented by 197.11 physical property, an amount equal to the allowance for 197.12 depreciation under Minnesota Statutes 1986, section 290.09, 197.13 subdivision 7, subject to the modifications contained in 197.14 subdivision 19e; and 197.15 (ii) to the extent the disallowed costs are not represented 197.16 by physical property, an amount equal to the allowance for cost 197.17 depletion under Minnesota Statutes 1986, section 290.09, 197.18 subdivision 8; 197.19 (5) the deduction for capital losses pursuant to sections 197.20 1211 and 1212 of the Internal Revenue Code, except that: 197.21 (i) for capital losses incurred in taxable years beginning 197.22 after December 31, 1986, capital loss carrybacks shall not be 197.23 allowed; 197.24 (ii) for capital losses incurred in taxable years beginning 197.25 after December 31, 1986, a capital loss carryover to each of the 197.26 15 taxable years succeeding the loss year shall be allowed; 197.27 (iii) for capital losses incurred in taxable years 197.28 beginning before January 1, 1987, a capital loss carryback to 197.29 each of the three taxable years preceding the loss year, subject 197.30 to the provisions of Minnesota Statutes 1986, section 290.16, 197.31 shall be allowed; and 197.32 (iv) for capital losses incurred in taxable years beginning 197.33 before January 1, 1987, a capital loss carryover to each of the 197.34 five taxable years succeeding the loss year to the extent such 197.35 loss was not used in a prior taxable year and subject to the 197.36 provisions of Minnesota Statutes 1986, section 290.16, shall be 198.1 allowed; 198.2 (6) an amount for interest and expenses relating to income 198.3 not taxable for federal income tax purposes, if (i) the income 198.4 is taxable under this chapter and (ii) the interest and expenses 198.5 were disallowed as deductions under the provisions of section 198.6 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 198.7 federal taxable income; 198.8 (7) in the case of mines, oil and gas wells, other natural 198.9 deposits, and timber for which percentage depletion was 198.10 disallowed pursuant to subdivision 19c, clause (11), a 198.11 reasonable allowance for depletion based on actual cost. In the 198.12 case of leases the deduction must be apportioned between the 198.13 lessor and lessee in accordance with rules prescribed by the 198.14 commissioner. In the case of property held in trust, the 198.15 allowable deduction must be apportioned between the income 198.16 beneficiaries and the trustee in accordance with the pertinent 198.17 provisions of the trust, or if there is no provision in the 198.18 instrument, on the basis of the trust's income allocable to 198.19 each; 198.20 (8) for certified pollution control facilities placed in 198.21 service in a taxable year beginning before December 31, 1986, 198.22 and for which amortization deductions were elected under section 198.23 169 of the Internal Revenue Code of 1954, as amended through 198.24 December 31, 1985, an amount equal to the allowance for 198.25 depreciation under Minnesota Statutes 1986, section 290.09, 198.26 subdivision 7; 198.27 (9) amounts included in federal taxable income that are due 198.28 to refunds of income, excise, or franchise taxes based on net 198.29 income or related minimum taxes paid by the corporation to 198.30 Minnesota, another state, a political subdivision of another 198.31 state, the District of Columbia, or a foreign country or 198.32 possession of the United States to the extent that the taxes 198.33 were added to federal taxable income under section 290.01, 198.34 subdivision 19c, clause (1), in a prior taxable year; 198.35 (10) 80 percent of royalties, fees, or other like income 198.36 accrued or received from a foreign operating corporation or a 199.1 foreign corporation which is part of the same unitary business 199.2 as the receiving corporation; 199.3 (11) income or gains from the business of mining as defined 199.4 in section 290.05, subdivision 1, clause (a), that are not 199.5 subject to Minnesota franchise tax; 199.6 (12) the amount of handicap access expenditures in the 199.7 taxable year which are not allowed to be deducted or capitalized 199.8 under section 44(d)(7) of the Internal Revenue Code; 199.9 (13) the amount of qualified research expenses not allowed 199.10 for federal income tax purposes under section 280C(c) of the 199.11 Internal Revenue Code, but only to the extent that the amount 199.12 exceeds the amount of the credit allowed under section 290.068; 199.13 (14) the amount of salary expenses not allowed for federal 199.14 income tax purposes due to claiming the Indian employment credit 199.15 under section 45A(a) of the Internal Revenue Code; 199.16 (15) the amount of any refund of environmental taxes paid 199.17 under section 59A of the Internal Revenue Code; 199.18 (16) for taxable years beginning before January 1, 2008, 199.19 the amount of the federal small ethanol producer credit allowed 199.20 under section 40(a)(3) of the Internal Revenue Code which is 199.21 included in gross income under section 87 of the Internal 199.22 Revenue Code; 199.23 (17) for a corporation whose foreign sales corporation, as 199.24 defined in section 922 of the Internal Revenue Code, constituted 199.25 a foreign operating corporation during any taxable year ending 199.26 before January 1, 1995, and a return was filed by August 15, 199.27 1996, claiming the deduction under section 290.21, subdivision 199.28 4, for income received from the foreign operating corporation, 199.29 an amount equal to 1.23 multiplied by the amount of income 199.30 excluded under section 114 of the Internal Revenue Code, 199.31 provided the income is not income of a foreign operating 199.32 company; 199.33 (18) any decrease in subpart F income, as defined in 199.34 section 952(a) of the Internal Revenue Code, for the taxable 199.35 year when subpart F income is calculated without regard to the 199.36 provisions of section 614 of Public Law 107-147;and200.1 (19) in each of the five tax years immediately following 200.2 the tax year in which an addition is required under subdivision 200.3 19c, clause (16), an amount equal to one-fifth of the delayed 200.4 depreciation. For purposes of this clause, "delayed 200.5 depreciation" means the amount of the addition made by the 200.6 taxpayer under subdivision 19c, clause (16). The resulting 200.7 delayed depreciation cannot be less than zero; and 200.8 (20) in each of the five tax years immediately following 200.9 the tax year in which an addition is required under subdivision 200.10 19c, clause (17), an amount equal to one-fifth of the amount of 200.11 the addition. 200.12 [EFFECTIVE DATE.] This section is effective for tax years 200.13 beginning after December 31, 2004. 200.14 Sec. 7. Minnesota Statutes 2004, section 290.01, 200.15 subdivision 31, is amended to read: 200.16 Subd. 31. [INTERNAL REVENUE CODE.] Unless specifically 200.17 defined otherwise, "Internal Revenue Code" means the Internal 200.18 Revenue Code of 1986, as amended throughJune 15, 2003April 15, 200.19 2005. 200.20 [EFFECTIVE DATE.] This section is effective the day 200.21 following final enactment except the changes incorporated by 200.22 federal changes are effective at the same times as the changes 200.23 were effective for federal purposes. 200.24 Sec. 8. Minnesota Statutes 2004, section 290.032, 200.25 subdivision 1, is amended to read: 200.26 Subdivision 1. [IMPOSITION.] There is hereby imposed as an 200.27 addition to the annual income tax for a taxable year of a 200.28 taxpayer in the classes described in section 290.03 a tax with 200.29 respect to any distribution received by such taxpayer that is 200.30 treated as a lump sum distribution under section402(d) of the200.31Internal Revenue Code1401(c)(2) of the Small Business Job 200.32 Protection Act, Public Law 104-188 and that is subject to tax 200.33 for such taxable year under section402(d) of the Internal200.34Revenue Code1401(c)(2) of the Small Business Job Protection 200.35 Act, Public Law 104-188. 200.36 [EFFECTIVE DATE.] This section is effective for tax years 201.1 beginning after December 31, 1999. 201.2 Sec. 9. Minnesota Statutes 2004, section 290.032, 201.3 subdivision 2, is amended to read: 201.4 Subd. 2. [COMPUTATION.] The amount of tax imposed by 201.5 subdivision 1 shall be computed in the same way as the tax 201.6 imposed under section 402(d) of the Internal Revenue Code of 201.7 1986, as amended through December 31, 1995, except that the 201.8 initial separate tax shall be an amount equal to five times the 201.9 tax which would be imposed by section 290.06, subdivision 2c, if 201.10 the recipient was an unmarried individual, and the taxable net 201.11 income was an amount equal to one-fifth of the excess of 201.12 (i) the total taxable amount of the lump sum distribution 201.13 for the year, over 201.14 (ii) the minimum distribution allowance, and except that 201.15 references in section 402(d) of the Internal Revenue Code of 201.16 1986, as amended through December 31, 1995, to paragraph (1)(A) 201.17 thereof shall instead be references to subdivision 1, and the 201.18 excess, if any, of the subtraction base amount over federal 201.19 taxable income for a qualified individual as provided under 201.20 section 290.0802, subdivision 2. 201.21 [EFFECTIVE DATE.] This section is effective for tax years 201.22 beginning after December 31, 1999. 201.23 Sec. 10. Minnesota Statutes 2004, section 290.06, 201.24 subdivision 2c, is amended to read: 201.25 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 201.26 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 201.27 married individuals filing joint returns and surviving spouses 201.28 as defined in section 2(a) of the Internal Revenue Code must be 201.29 computed by applying to their taxable net income the following 201.30 schedule of rates: 201.31 (1) On the first $25,680, 5.35 percent; 201.32 (2) On all over $25,680, but not over $102,030, 7.05 201.33 percent; 201.34 (3) On all over $102,030, 7.85 percent. 201.35 Married individuals filing separate returns, estates, and 201.36 trusts must compute their income tax by applying the above rates 202.1 to their taxable income, except that the income brackets will be 202.2 one-half of the above amounts. 202.3 (b) The income taxes imposed by this chapter upon unmarried 202.4 individuals must be computed by applying to taxable net income 202.5 the following schedule of rates: 202.6 (1) On the first $17,570, 5.35 percent; 202.7 (2) On all over $17,570, but not over $57,710, 7.05 202.8 percent; 202.9 (3) On all over $57,710, 7.85 percent. 202.10 (c) The income taxes imposed by this chapter upon unmarried 202.11 individuals qualifying as a head of household as defined in 202.12 section 2(b) of the Internal Revenue Code must be computed by 202.13 applying to taxable net income the following schedule of rates: 202.14 (1) On the first $21,630, 5.35 percent; 202.15 (2) On all over $21,630, but not over $86,910, 7.05 202.16 percent; 202.17 (3) On all over $86,910, 7.85 percent. 202.18 (d) In lieu of a tax computed according to the rates set 202.19 forth in this subdivision, the tax of any individual taxpayer 202.20 whose taxable net income for the taxable year is less than an 202.21 amount determined by the commissioner must be computed in 202.22 accordance with tables prepared and issued by the commissioner 202.23 of revenue based on income brackets of not more than $100. The 202.24 amount of tax for each bracket shall be computed at the rates 202.25 set forth in this subdivision, provided that the commissioner 202.26 may disregard a fractional part of a dollar unless it amounts to 202.27 50 cents or more, in which case it may be increased to $1. 202.28 (e) An individual who is not a Minnesota resident for the 202.29 entire year must compute the individual's Minnesota income tax 202.30 as provided in this subdivision. After the application of the 202.31 nonrefundable credits provided in this chapter, the tax 202.32 liability must then be multiplied by a fraction in which: 202.33 (1) the numerator is the individual's Minnesota source 202.34 federal adjusted gross income as defined in section 62 of the 202.35 Internal Revenue Code and increased by the additions required 202.36 under section 290.01, subdivision 19a, clauses (1), (5),and203.1 (6), (7), (8), and (9), and reduced by the subtraction under 203.2 section 290.01, subdivision 19b, clause (11), and the Minnesota 203.3 assignable portion of the subtraction for United States 203.4 government interest under section 290.01, subdivision 19b, 203.5 clause (1), and the subtractions under clauses (10), (11), (12), 203.6 and (13), after applying the allocation and assignability 203.7 provisions of section 290.081, clause (a), or 290.17; and 203.8 (2) the denominator is the individual's federal adjusted 203.9 gross income as defined in section 62 of the Internal Revenue 203.10 Code of 1986, increased by the amounts specified in section 203.11 290.01, subdivision 19a, clauses (1), (5),and(6), (7), (8), 203.12 and (9), and reduced by the amounts specified in section 290.01, 203.13 subdivision 19b, clauses (1)and, (10), (11), (12), and (13). 203.14 [EFFECTIVE DATE.] This section is effective for tax years 203.15 beginning after December 31, 2004. 203.16 Sec. 11. Minnesota Statutes 2004, section 290.067, 203.17 subdivision 1, is amended to read: 203.18 Subdivision 1. [AMOUNT OF CREDIT.] (a) A taxpayer may take 203.19 as a credit against the tax due from the taxpayer and a spouse, 203.20 if any, under this chapter an amount equal to the dependent care 203.21 credit for which the taxpayer is eligible pursuant to the 203.22 provisions of section 21 of the Internal Revenue Code subject to 203.23 the limitations provided in subdivision 2 except that in 203.24 determining whether the child qualified as a dependent, income 203.25 received as a Minnesota family investment program grant or 203.26 allowance to or on behalf of the child must not be taken into 203.27 account in determining whether the child received more than half 203.28 of the child's support from the taxpayer, and the provisions of 203.29 section 32(b)(1)(D) of the Internal Revenue Code do not apply. 203.30 (b) If a child who has not attained the age of six years at 203.31 the close of the taxable year is cared for at a licensed family 203.32 day care home operated by the child's parent, the taxpayer is 203.33 deemed to have paid employment-related expenses. If the child 203.34 is 16 months old or younger at the close of the taxable year, 203.35 the amount of expenses deemed to have been paid equals the 203.36 maximum limit for one qualified individual under section 21(c) 204.1 and (d) of the Internal Revenue Code. If the child is older 204.2 than 16 months of age but has not attained the age of six years 204.3 at the close of the taxable year, the amount of expenses deemed 204.4 to have been paid equals the amount the licensee would charge 204.5 for the care of a child of the same age for the same number of 204.6 hours of care. 204.7 (c) If a married couple: 204.8 (1) has a child who has not attained the age of one year at 204.9 the close of the taxable year; 204.10 (2) files a joint tax return for the taxable year; and 204.11 (3) does not participate in a dependent care assistance 204.12 program as defined in section 129 of the Internal Revenue Code, 204.13 in lieu of the actual employment related expenses paid for that 204.14 child under paragraph (a) or the deemed amount under paragraph 204.15 (b), the lesser of (i) the combined earned income of the couple 204.16 or (ii) the amount of the maximum limit for one qualified 204.17 individual under section 21(c) and (d) of the Internal Revenue 204.18 Code will be deemed to be the employment related expense paid 204.19 for that child. The earned income limitation of section 21(d) 204.20 of the Internal Revenue Code shall not apply to this deemed 204.21 amount. These deemed amounts apply regardless of whether any 204.22 employment-related expenses have been paid. 204.23 (d) If the taxpayer is not required and does not file a 204.24 federal individual income tax return for the tax year, no credit 204.25 is allowed for any amount paid to any person unless: 204.26 (1) the name, address, and taxpayer identification number 204.27 of the person are included on the return claiming the credit; or 204.28 (2) if the person is an organization described in section 204.29 501(c)(3) of the Internal Revenue Code and exempt from tax under 204.30 section 501(a) of the Internal Revenue Code, the name and 204.31 address of the person are included on the return claiming the 204.32 credit. 204.33 In the case of a failure to provide the information required 204.34 under the preceding sentence, the preceding sentence does not 204.35 apply if it is shown that the taxpayer exercised due diligence 204.36 in attempting to provide the information required. 205.1 In the case of a nonresident, part-year resident, or a 205.2 person who has earned income not subject to tax under this 205.3 chapter including earned income excluded pursuant to section 205.4 290.01, subdivision 19b, clause (11), the credit determined 205.5 under section 21 of the Internal Revenue Code must be allocated 205.6 based on the ratio by which the earned income of the claimant 205.7 and the claimant's spouse from Minnesota sources bears to the 205.8 total earned income of the claimant and the claimant's spouse. 205.9 For residents of Minnesota, the exclusion of combat pay 205.10 under section 112 of the Internal Revenue Code is not considered 205.11 "earned income not subject to tax under this chapter." 205.12 [EFFECTIVE DATE.] This section is effective for tax years 205.13 beginning after December 31, 2003. 205.14 Sec. 12. Minnesota Statutes 2004, section 290.067, 205.15 subdivision 2a, is amended to read: 205.16 Subd. 2a. [INCOME.] (a) For purposes of this section, 205.17 "income" means the sum of the following: 205.18 (1) federal adjusted gross income as defined in section 62 205.19 of the Internal Revenue Code; and 205.20 (2) the sum of the following amounts to the extent not 205.21 included in clause (1): 205.22 (i) all nontaxable income; 205.23 (ii) the amount of a passive activity loss that is not 205.24 disallowed as a result of section 469, paragraph (i) or (m) of 205.25 the Internal Revenue Code and the amount of passive activity 205.26 loss carryover allowed under section 469(b) of the Internal 205.27 Revenue Code; 205.28 (iii) an amount equal to the total of any discharge of 205.29 qualified farm indebtedness of a solvent individual excluded 205.30 from gross income under section 108(g) of the Internal Revenue 205.31 Code; 205.32 (iv) cash public assistance and relief; 205.33 (v) any pension or annuity (including railroad retirement 205.34 benefits, all payments received under the federal Social 205.35 Security Act, supplemental security income, and veterans 205.36 benefits), which was not exclusively funded by the claimant or 206.1 spouse, or which was funded exclusively by the claimant or 206.2 spouse and which funding payments were excluded from federal 206.3 adjusted gross income in the years when the payments were made; 206.4 (vi) interest received from the federal or a state 206.5 government or any instrumentality or political subdivision 206.6 thereof; 206.7 (vii) workers' compensation; 206.8 (viii) nontaxable strike benefits; 206.9 (ix) the gross amounts of payments received in the nature 206.10 of disability income or sick pay as a result of accident, 206.11 sickness, or other disability, whether funded through insurance 206.12 or otherwise; 206.13 (x) a lump sum distribution under section 402(e)(3) of the 206.14 Internal Revenue Code of 1986, as amended through December 31, 206.15 1995; 206.16 (xi) contributions made by the claimant to an individual 206.17 retirement account, including a qualified voluntary employee 206.18 contribution; simplified employee pension plan; self-employed 206.19 retirement plan; cash or deferred arrangement plan under section 206.20 401(k) of the Internal Revenue Code; or deferred compensation 206.21 plan under section 457 of the Internal Revenue Code;and206.22 (xii) nontaxable scholarship or fellowship grants; 206.23 (xiii) the amount of deduction allowed under section 199 of 206.24 the Internal Revenue Code; and 206.25 (xiv) the amount of deduction allowed under section 220 or 206.26 223 of the Internal Revenue Code. 206.27 In the case of an individual who files an income tax return 206.28 on a fiscal year basis, the term "federal adjusted gross income" 206.29 means federal adjusted gross income reflected in the fiscal year 206.30 ending in the next calendar year. Federal adjusted gross income 206.31 may not be reduced by the amount of a net operating loss 206.32 carryback or carryforward or a capital loss carryback or 206.33 carryforward allowed for the year. 206.34 (b) "Income" does not include: 206.35 (1) amounts excluded pursuant to the Internal Revenue Code, 206.36 sections 101(a) and 102; 207.1 (2) amounts of any pension or annuity that were exclusively 207.2 funded by the claimant or spouse if the funding payments were 207.3 not excluded from federal adjusted gross income in the years 207.4 when the payments were made; 207.5 (3) surplus food or other relief in kind supplied by a 207.6 governmental agency; 207.7 (4) relief granted under chapter 290A; 207.8 (5) child support payments received under a temporary or 207.9 final decree of dissolution or legal separation; and 207.10 (6) restitution payments received by eligible individuals 207.11 and excludable interest as defined in section 803 of the 207.12 Economic Growth and Tax Relief Reconciliation Act of 2001, 207.13 Public Law 107-16. 207.14 [EFFECTIVE DATE.] This section is effective for tax years 207.15 beginning after December 31, 2003. 207.16 Sec. 13. Minnesota Statutes 2004, section 290.0671, 207.17 subdivision 1, is amended to read: 207.18 Subdivision 1. [CREDIT ALLOWED.] (a) An individual is 207.19 allowed a credit against the tax imposed by this chapter equal 207.20 to a percentage of earned income. To receive a credit, a 207.21 taxpayer must be eligible for a credit under section 32 of the 207.22 Internal Revenue Code. 207.23 (b) For individuals with no qualifying children, the credit 207.24 equals 1.9125 percent of the first $4,620 of earned income. The 207.25 credit is reduced by 1.9125 percent of earned income or modified 207.26 adjusted gross income, whichever is greater, in excess of 207.27 $5,770, but in no case is the credit less than zero. 207.28 (c) For individuals with one qualifying child, the credit 207.29 equals 8.5 percent of the first $6,920 of earned income and 8.5 207.30 percent of earned income over $12,080 but less than $13,450. 207.31 The credit is reduced by 5.73 percent of earned income or 207.32 modified adjusted gross income, whichever is greater, in excess 207.33 of $15,080, but in no case is the credit less than zero. 207.34 (d) For individuals with two or more qualifying children, 207.35 the credit equals ten percent of the first $9,720 of earned 207.36 income and 20 percent of earned income over $14,860 but less 208.1 than $16,800. The credit is reduced by 10.3 percent of earned 208.2 income or modified adjusted gross income, whichever is greater, 208.3 in excess of $17,890, but in no case is the credit less than 208.4 zero. 208.5 (e) For a nonresident or part-year resident, the credit 208.6 must be allocated based on the percentage calculated under 208.7 section 290.06, subdivision 2c, paragraph (e). 208.8 (f) For a person who was a resident for the entire tax year 208.9 and has earned income not subject to tax under this chapter, 208.10 including income excluded under section 290.01, subdivision 19b, 208.11 clause (11), the credit must be allocated based on the ratio of 208.12 federal adjusted gross income reduced by the earned income not 208.13 subject to tax under this chapter over federal adjusted gross 208.14 income. For the purposes of this paragraph, the exclusion of 208.15 combat pay under section 112 of the Internal Revenue Code is not 208.16 considered "earned income not subject to tax under this chapter." 208.17 (g) For tax years beginning after December 31, 2001, and 208.18 before December 31, 2004, the $5,770 in paragraph (b), the 208.19 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 208.20 after being adjusted for inflation under subdivision 7, are each 208.21 increased by $1,000 for married taxpayers filing joint returns. 208.22 (h) For tax years beginning after December 31, 2004, and 208.23 before December 31, 2007, the $5,770 in paragraph (b), the 208.24 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 208.25 after being adjusted for inflation under subdivision 7, are each 208.26 increased by $2,000 for married taxpayers filing joint returns. 208.27 (i) For tax years beginning after December 31, 2007, and 208.28 before December 31, 2010, the $5,770 in paragraph (b), the 208.29 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 208.30 after being adjusted for inflation under subdivision 7, are each 208.31 increased by $3,000 for married taxpayers filing joint returns. 208.32 For tax years beginning after December 31, 2008, the $3,000 is 208.33 adjusted annually for inflation under subdivision 7. 208.34 (j) The commissioner shall construct tables showing the 208.35 amount of the credit at various income levels and make them 208.36 available to taxpayers. The tables shall follow the schedule 209.1 contained in this subdivision, except that the commissioner may 209.2 graduate the transition between income brackets. 209.3 [EFFECTIVE DATE.] This section is effective for tax years 209.4 beginning after December 31, 2003. 209.5 Sec. 14. Minnesota Statutes 2004, section 290.0675, 209.6 subdivision 1, is amended to read: 209.7 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 209.8 section the following terms have the meanings given. 209.9 (b) "Earned income" means the sum of the following, to the 209.10 extent included in Minnesota taxable income: 209.11 (1) earned income as defined in section 32(c)(2) of the 209.12 Internal Revenue Code; 209.13 (2) income received from a retirement pension, 209.14 profit-sharing, stock bonus, or annuity plan; and 209.15 (3) Social Security benefits as defined in section 86(d)(1) 209.16 of the Internal Revenue Code. 209.17 (c) "Taxable income" means net income as defined in section 209.18 290.01, subdivision 19. 209.19 (d) "Earned income of lesser-earning spouse" means the 209.20 earned income of the spouse with the lesser amount of earned 209.21 income as defined in paragraph (b) for the taxable year minus 209.22 the sum of (i) the amount for one exemption under section 151(d) 209.23 of the Internal Revenue Code and (ii) one-half the amount of the 209.24 standard deduction under section 63(c)(2)(A) and (4) of the 209.25 Internal Revenue Code minus one-half of any addition required 209.26 under section 290.01, subdivision 19a, clause (10). 209.27 [EFFECTIVE DATE.] This section is effective for tax years 209.28 beginning after December 31, 2004. 209.29 Sec. 15. Minnesota Statutes 2004, section 290.091, 209.30 subdivision 2, is amended to read: 209.31 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 209.32 this section, the following terms have the meanings given: 209.33 (a) "Alternative minimum taxable income" means the sum of 209.34 the following for the taxable year: 209.35 (1) the taxpayer's federal alternative minimum taxable 209.36 income as defined in section 55(b)(2) of the Internal Revenue 210.1 Code; 210.2 (2) the taxpayer's itemized deductions allowed in computing 210.3 federal alternative minimum taxable income, but excluding: 210.4 (i) the charitable contribution deduction under section 170 210.5 of the Internal Revenue Code to the extent that the deduction 210.6 exceeds 1.0 percent of adjusted gross income, as defined in 210.7 section 62 of the Internal Revenue Code; 210.8 (ii) the medical expense deduction; 210.9 (iii) the casualty, theft, and disaster loss deduction; and 210.10 (iv) the impairment-related work expenses of a disabled 210.11 person; 210.12 (3) for depletion allowances computed under section 613A(c) 210.13 of the Internal Revenue Code, with respect to each property (as 210.14 defined in section 614 of the Internal Revenue Code), to the 210.15 extent not included in federal alternative minimum taxable 210.16 income, the excess of the deduction for depletion allowable 210.17 under section 611 of the Internal Revenue Code for the taxable 210.18 year over the adjusted basis of the property at the end of the 210.19 taxable year (determined without regard to the depletion 210.20 deduction for the taxable year); 210.21 (4) to the extent not included in federal alternative 210.22 minimum taxable income, the amount of the tax preference for 210.23 intangible drilling cost under section 57(a)(2) of the Internal 210.24 Revenue Code determined without regard to subparagraph (E); 210.25 (5) to the extent not included in federal alternative 210.26 minimum taxable income, the amount of interest income as 210.27 provided by section 290.01, subdivision 19a, clause (1); and 210.28 (6) the amount of addition required by section 290.01, 210.29 subdivision 19a,clauseclauses (7), (8), and (9); 210.30 less the sum of the amounts determined under the following: 210.31 (1) interest income as defined in section 290.01, 210.32 subdivision 19b, clause (1); 210.33 (2) an overpayment of state income tax as provided by 210.34 section 290.01, subdivision 19b, clause (2), to the extent 210.35 included in federal alternative minimum taxable income; 210.36 (3) the amount of investment interest paid or accrued 211.1 within the taxable year on indebtedness to the extent that the 211.2 amount does not exceed net investment income, as defined in 211.3 section 163(d)(4) of the Internal Revenue Code. Interest does 211.4 not include amounts deducted in computing federal adjusted gross 211.5 income; and 211.6 (4) amounts subtracted from federal taxable income as 211.7 provided by section 290.01, subdivision 19b, clauses (10)and, 211.8 (11), (12), and (13). 211.9 In the case of an estate or trust, alternative minimum 211.10 taxable income must be computed as provided in section 59(c) of 211.11 the Internal Revenue Code. 211.12 (b) "Investment interest" means investment interest as 211.13 defined in section 163(d)(3) of the Internal Revenue Code. 211.14 (c) "Tentative minimum tax" equals 6.4 percent of 211.15 alternative minimum taxable income after subtracting the 211.16 exemption amount determined under subdivision 3. 211.17 (d) "Regular tax" means the tax that would be imposed under 211.18 this chapter (without regard to this section and section 211.19 290.032), reduced by the sum of the nonrefundable credits 211.20 allowed under this chapter. 211.21 (e) "Net minimum tax" means the minimum tax imposed by this 211.22 section. 211.23 [EFFECTIVE DATE.] This section is effective for tax years 211.24 beginning after December 31, 2004. 211.25 Sec. 16. Minnesota Statutes 2004, section 290A.03, 211.26 subdivision 3, is amended to read: 211.27 Subd. 3. [INCOME.] (1) "Income" means the sum of the 211.28 following: 211.29 (a) federal adjusted gross income as defined in the 211.30 Internal Revenue Code; and 211.31 (b) the sum of the following amounts to the extent not 211.32 included in clause (a): 211.33 (i) all nontaxable income; 211.34 (ii) the amount of a passive activity loss that is not 211.35 disallowed as a result of section 469, paragraph (i) or (m) of 211.36 the Internal Revenue Code and the amount of passive activity 212.1 loss carryover allowed under section 469(b) of the Internal 212.2 Revenue Code; 212.3 (iii) an amount equal to the total of any discharge of 212.4 qualified farm indebtedness of a solvent individual excluded 212.5 from gross income under section 108(g) of the Internal Revenue 212.6 Code; 212.7 (iv) cash public assistance and relief; 212.8 (v) any pension or annuity (including railroad retirement 212.9 benefits, all payments received under the federal Social 212.10 Security Act, supplemental security income, and veterans 212.11 benefits), which was not exclusively funded by the claimant or 212.12 spouse, or which was funded exclusively by the claimant or 212.13 spouse and which funding payments were excluded from federal 212.14 adjusted gross income in the years when the payments were made; 212.15 (vi) interest received from the federal or a state 212.16 government or any instrumentality or political subdivision 212.17 thereof; 212.18 (vii) workers' compensation; 212.19 (viii) nontaxable strike benefits; 212.20 (ix) the gross amounts of payments received in the nature 212.21 of disability income or sick pay as a result of accident, 212.22 sickness, or other disability, whether funded through insurance 212.23 or otherwise; 212.24 (x) a lump sum distribution under section 402(e)(3) of the 212.25 Internal Revenue Code of 1986, as amended through December 31, 212.26 1995; 212.27 (xi) contributions made by the claimant to an individual 212.28 retirement account, including a qualified voluntary employee 212.29 contribution; simplified employee pension plan; self-employed 212.30 retirement plan; cash or deferred arrangement plan under section 212.31 401(k) of the Internal Revenue Code; or deferred compensation 212.32 plan under section 457 of the Internal Revenue Code;and212.33 (xii) nontaxable scholarship or fellowship grants; 212.34 (xiii) the amount of deduction allowed under section 199 of 212.35 the Internal Revenue Code; and 212.36 (xiv) the amount of deduction allowed under section 220 or 213.1 223 of the Internal Revenue Code. 213.2 In the case of an individual who files an income tax return 213.3 on a fiscal year basis, the term "federal adjusted gross income" 213.4 shall mean federal adjusted gross income reflected in the fiscal 213.5 year ending in the calendar year. Federal adjusted gross income 213.6 shall not be reduced by the amount of a net operating loss 213.7 carryback or carryforward or a capital loss carryback or 213.8 carryforward allowed for the year. 213.9 (2) "Income" does not include: 213.10 (a) amounts excluded pursuant to the Internal Revenue Code, 213.11 sections 101(a) and 102; 213.12 (b) amounts of any pension or annuity which was exclusively 213.13 funded by the claimant or spouse and which funding payments were 213.14 not excluded from federal adjusted gross income in the years 213.15 when the payments were made; 213.16 (c) surplus food or other relief in kind supplied by a 213.17 governmental agency; 213.18 (d) relief granted under this chapter; 213.19 (e) child support payments received under a temporary or 213.20 final decree of dissolution or legal separation; or 213.21 (f) restitution payments received by eligible individuals 213.22 and excludable interest as defined in section 803 of the 213.23 Economic Growth and Tax Relief Reconciliation Act of 2001, 213.24 Public Law 107-16. 213.25 (3) The sum of the following amounts may be subtracted from 213.26 income: 213.27 (a) for the claimant's first dependent, the exemption 213.28 amount multiplied by 1.4; 213.29 (b) for the claimant's second dependent, the exemption 213.30 amount multiplied by 1.3; 213.31 (c) for the claimant's third dependent, the exemption 213.32 amount multiplied by 1.2; 213.33 (d) for the claimant's fourth dependent, the exemption 213.34 amount multiplied by 1.1; 213.35 (e) for the claimant's fifth dependent, the exemption 213.36 amount; and 214.1 (f) if the claimant or claimant's spouse was disabled or 214.2 attained the age of 65 on or before December 31 of the year for 214.3 which the taxes were levied or rent paid, the exemption amount. 214.4 For purposes of this subdivision, the "exemption amount" 214.5 means the exemption amount under section 151(d) of the Internal 214.6 Revenue Code for the taxable year for which the income is 214.7 reported. 214.8 [EFFECTIVE DATE.] This section is effective for property 214.9 tax refunds based on household income for 2004 and thereafter. 214.10 Sec. 17. Minnesota Statutes 2004, section 290A.03, 214.11 subdivision 15, is amended to read: 214.12 Subd. 15. [INTERNAL REVENUE CODE.] "Internal Revenue Code" 214.13 means the Internal Revenue Code of 1986, as amended throughJune214.1415, 2003April 15, 2005. 214.15 [EFFECTIVE DATE.] This section is effective for property 214.16 tax refunds based on property taxes payable on or after December 214.17 31, 2004, and rent paid on or after December 31, 2003. 214.18 ARTICLE 7 214.19 SALES AND USE TAXES 214.20 Section 1. Minnesota Statutes 2004, section 16C.03, is 214.21 amended by adding a subdivision to read: 214.22 Subd. 18. [CONTRACTS WITH FOREIGN VENDORS.] (a) The 214.23 commissioner and other agencies to which this section applies 214.24 and the legislative branch of government shall, subject to 214.25 paragraph (d), cancel a contract for goods or services from a 214.26 vendor or an affiliate of a vendor or suspend or debar a vendor 214.27 or an affiliate of a vendor from future contracts upon 214.28 notification from the commissioner of revenue that the vendor or 214.29 an affiliate of the vendor has not registered to collect the 214.30 sales and use tax imposed under chapter 297A on its sales in 214.31 Minnesota or to a destination in Minnesota. This subdivision 214.32 shall not apply to state colleges and universities, the courts, 214.33 and any agency in the judicial branch of government. For 214.34 purposes of this subdivision, the term "affiliate" means any 214.35 person or entity that is controlled by, or is under common 214.36 control of, a vendor through stock ownership or other 215.1 affiliation. 215.2 (b) Beginning January 1, 2006, each vendor or affiliate of 215.3 a vendor selling goods or services, subject to tax under chapter 215.4 297A, to an agency or the legislature must provide its Minnesota 215.5 sales and use tax business identification number, upon request, 215.6 to show that the vendor is registered to collect Minnesota sales 215.7 or use tax. 215.8 (c) The commissioner of revenue shall periodically provide 215.9 to the commissioner and the legislative branch a list of vendors 215.10 who have not registered to collect Minnesota sales and use tax 215.11 and who are subject to being suspended or debarred as vendors or 215.12 having their contracts canceled. 215.13 (d) The provisions of this subdivision may be waived by the 215.14 commissioner or the legislative branch when the vendor is the 215.15 single source of such goods or services, in the event of an 215.16 emergency, or when it is in the best interests of the state as 215.17 determined by the commissioner in consultation with the 215.18 commissioner of revenue. Such consultation is not a disclosure 215.19 violation under chapter 270B. 215.20 [EFFECTIVE DATE.] This section is effective for all 215.21 contracts entered into after December 31, 2005. 215.22 Sec. 2. Minnesota Statutes 2004, section 289A.38, 215.23 subdivision 6, is amended to read: 215.24 Subd. 6. [OMISSION IN EXCESS OF 25 PERCENT.] Additional 215.25 taxes may be assessed within 6-1/2 years after the due date of 215.26 the return or the date the return was filed, whichever is later, 215.27 if: 215.28 (1) the taxpayer omits from gross income an amount properly 215.29 includable in it that is in excess of 25 percent of the amount 215.30 of gross income stated in the return; 215.31 (2) the taxpayer omits from a sales, use, or withholding 215.32 tax return an amount of taxes in excess of 25 percent of the 215.33 taxes reported in the return; or 215.34 (3) the taxpayer omits from the gross estate assets in 215.35 excess of 25 percent of the gross estate reported in the return. 215.36 [EFFECTIVE DATE.] This section is effective the day 216.1 following final enactment. 216.2 Sec. 3. Minnesota Statutes 2004, section 289A.38, is 216.3 amended by adding a subdivision to read: 216.4 Subd. 15. [PURCHASER FILED REFUND CLAIMS.] If a purchaser 216.5 refund claim is filed under section 289A.50, subdivision 2a, and 216.6 the basis for the claim is that the purchaser was improperly 216.7 charged tax on an improvement to real property or on the 216.8 purchase of nontaxable services, sales or use tax may be 216.9 assessed for the cost of materials used to make the real 216.10 property improvement or to perform the nontaxable service. The 216.11 assessment may be made against the person making the improvement 216.12 to real property or the sale of nontaxable services, within the 216.13 period prescribed in subdivision 1, or within one year after the 216.14 date of the refund order, whichever is later. 216.15 [EFFECTIVE DATE.] This section is effective for purchaser 216.16 refund claims filed on or after July 1, 2005. 216.17 Sec. 4. Minnesota Statutes 2004, section 289A.40, 216.18 subdivision 2, is amended to read: 216.19 Subd. 2. [BAD DEBT LOSS.] If a claim relates to an 216.20 overpayment because of a failure to deduct a loss due to a bad 216.21 debt or to a security becoming worthless, the claim is 216.22 considered timely if filed within seven years from the date 216.23 prescribed for the filing of the return. A claim relating to an 216.24 overpayment of taxes under chapter 297A must be filed within 216.25 3-1/2 years from the date prescribed for filing the return, plus 216.26 any extensions granted for filing the return, but only if filed 216.27 within the extended time. The refund or credit is limited to 216.28 the amount of overpayment attributable to the loss. "Bad debt" 216.29 for purposes of this subdivision, has the same meaning as that 216.30 term is used in United States Code, title 26, section 166, 216.31 except that for a claim relating to an overpayment of taxes 216.32 under chapter 297A the following are excluded from the 216.33 calculation of bad debt: financing charges or interest; sales 216.34 or use taxes charged on the purchase price; uncollectible 216.35 amounts on property that remain in the possession of the seller 216.36 until the full purchase price is paid; expenses incurred in 217.1 attempting to collect any debt; and repossessed property. 217.2 [EFFECTIVE DATE.] For claims relating to an overpayment of 217.3 taxes under chapter 297A, this section is effective for sales 217.4 and purchases made on or after January 1, 2004; for all other 217.5 bad debts or claims, this section is effective on or after July 217.6 1, 2003. 217.7 Sec. 5. Minnesota Statutes 2004, section 289A.40, is 217.8 amended by adding a subdivision to read: 217.9 Subd. 4. [PURCHASER FILED REFUND CLAIMS.] A claim for 217.10 refund of taxes paid on a transaction not subject to tax under 217.11 chapter 297A, where the purchaser may apply directly to the 217.12 commissioner under section 289A.50, subdivision 2a, must be 217.13 filed within 3-1/2 years from the 20th day of the month 217.14 following the month of the invoice date for the purchase. 217.15 [EFFECTIVE DATE.] This section is effective for claims 217.16 filed on or after the day following final enactment. 217.17 Sec. 6. Minnesota Statutes 2004, section 289A.40, is 217.18 amended by adding a subdivision to read: 217.19 Subd. 5. [CAPITAL EQUIPMENT REFUND CLAIMS.] A claim for 217.20 refund for taxes paid under chapter 297A on capital equipment 217.21 must be filed within 3-1/2 years from the 20th day of the month 217.22 following the month of the invoice date for the purchase of the 217.23 capital equipment. A claim for refund for taxes imposed on 217.24 capital equipment under section 297A.63 must be filed within 217.25 3-1/2 years from the date prescribed for filing the return, or 217.26 one year from the date of an order assessing tax under section 217.27 289A.37, subdivision 1, upon payment in full of the tax, 217.28 penalties, and interest shown on the order, whichever period 217.29 expires later. 217.30 [EFFECTIVE DATE.] This section is effective for claims 217.31 filed on or after the day following final enactment. 217.32 Sec. 7. Minnesota Statutes 2004, section 297A.61, 217.33 subdivision 3, is amended to read: 217.34 Subd. 3. [SALE AND PURCHASE.] (a) "Sale" and "purchase" 217.35 include, but are not limited to, each of the transactions listed 217.36 in this subdivision. 218.1 (b) Sale and purchase include: 218.2 (1) any transfer of title or possession, or both, of 218.3 tangible personal property, whether absolutely or conditionally, 218.4 for a consideration in money or by exchange or barter; and 218.5 (2) the leasing of or the granting of a license to use or 218.6 consume, for a consideration in money or by exchange or barter, 218.7 tangible personal property, other than a manufactured home used 218.8 for residential purposes for a continuous period of 30 days or 218.9 more. 218.10 (c) Sale and purchase include the production, fabrication, 218.11 printing, or processing of tangible personal property for a 218.12 consideration for consumers who furnish either directly or 218.13 indirectly the materials used in the production, fabrication, 218.14 printing, or processing. 218.15 (d) Sale and purchase include the preparing for a 218.16 consideration of food. Notwithstanding section 297A.67, 218.17 subdivision 2, taxable food includes, but is not limited to, the 218.18 following: 218.19 (1) prepared food sold by the retailer; 218.20 (2) soft drinks; 218.21 (3) candy;and218.22 (4) dietary supplements; and 218.23 (5) all food sold through vending machines, except milk. 218.24 (e) A sale and a purchase includes the furnishing for a 218.25 consideration of electricity, gas, water, or steam for use or 218.26 consumption within this state. 218.27 (f) A sale and a purchase includes the transfer for a 218.28 consideration of prewritten computer software whether delivered 218.29 electronically, by load and leave, or otherwise. 218.30 (g) A sale and a purchase includes the furnishing for a 218.31 consideration of the following services: 218.32 (1) the privilege of admission to places of amusement, 218.33 recreational areas, or athletic events, and the making available 218.34 of amusement devices, tanning facilities, reducing salons, steam 218.35 baths, turkish baths, health clubs, and spas or athletic 218.36 facilities; 219.1 (2) lodging and related services by a hotel, rooming house, 219.2 resort, campground, motel, or trailer camp and the granting of 219.3 any similar license to use real property in a specific facility, 219.4 other than the renting or leasing of it for a continuous period 219.5 of 30 days or more under an enforceable written agreement that 219.6 may not be terminated without prior notice; 219.7 (3) nonresidential parking services, whether on a 219.8 contractual, hourly, or other periodic basis, except for parking 219.9 at a meter; 219.10 (4) the granting of membership in a club, association, or 219.11 other organization if: 219.12 (i) the club, association, or other organization makes 219.13 available for the use of its members sports and athletic 219.14 facilities, without regard to whether a separate charge is 219.15 assessed for use of the facilities; and 219.16 (ii) use of the sports and athletic facility is not made 219.17 available to the general public on the same basis as it is made 219.18 available to members. 219.19 Granting of membership means both onetime initiation fees and 219.20 periodic membership dues. Sports and athletic facilities 219.21 include golf courses; tennis, racquetball, handball, and squash 219.22 courts; basketball and volleyball facilities; running tracks; 219.23 exercise equipment; swimming pools; and other similar athletic 219.24 or sports facilities; 219.25 (5) delivery of aggregate materials and concrete block by a 219.26 third party if the delivery would be subject to the sales tax if 219.27 provided by the seller of the aggregate material or concrete 219.28 block; and 219.29 (6) services as provided in this clause: 219.30 (i) laundry and dry cleaning services including cleaning, 219.31 pressing, repairing, altering, and storing clothes, linen 219.32 services and supply, cleaning and blocking hats, and carpet, 219.33 drapery, upholstery, and industrial cleaning. Laundry and dry 219.34 cleaning services do not include services provided by coin 219.35 operated facilities operated by the customer; 219.36 (ii) motor vehicle washing, waxing, and cleaning services, 220.1 including services provided by coin operated facilities operated 220.2 by the customer, and rustproofing, undercoating, and towing of 220.3 motor vehicles; 220.4 (iii) building and residential cleaning, maintenance, and 220.5 disinfecting and exterminating services; 220.6 (iv) detective, security, burglar, fire alarm, and armored 220.7 car services; but not including services performed within the 220.8 jurisdiction they serve by off-duty licensed peace officers as 220.9 defined in section 626.84, subdivision 1, or services provided 220.10 by a nonprofit organization for monitoring and electronic 220.11 surveillance of persons placed on in-home detention pursuant to 220.12 court order or under the direction of the Minnesota Department 220.13 of Corrections; 220.14 (v) pet grooming services; 220.15 (vi) lawn care, fertilizing, mowing, spraying and sprigging 220.16 services; garden planting and maintenance; tree, bush, and shrub 220.17 pruning, bracing, spraying, and surgery; indoor plant care; 220.18 tree, bush, shrub, and stump removal, except when performed as 220.19 part of a land clearing contract as defined in section 297A.68, 220.20 subdivision 40; and tree trimming for public utility lines. 220.21 Services performed under a construction contract for the 220.22 installation of shrubbery, plants, sod, trees, bushes, and 220.23 similar items are not taxable; 220.24 (vii) massages, except when provided by a licensed health 220.25 care facility or professional or upon written referral from a 220.26 licensed health care facility or professional for treatment of 220.27 illness, injury, or disease; and 220.28 (viii) the furnishing of lodging, board, and care services 220.29 for animals in kennels and other similar arrangements, but 220.30 excluding veterinary and horse boarding services. 220.31 In applying the provisions of this chapter, the terms 220.32 "tangible personal property" and "sales at retail" include 220.33 taxable services listed in clause (6), items (i) to (vi) and 220.34 (viii), and the provision of these taxable services, unless 220.35 specifically provided otherwise. Services performed by an 220.36 employee for an employer are not taxable. Services performed by 221.1 a partnership or association for another partnership or 221.2 association are not taxable if one of the entities owns or 221.3 controls more than 80 percent of the voting power of the equity 221.4 interest in the other entity. Services performed between 221.5 members of an affiliated group of corporations are not taxable. 221.6 For purposes of the preceding sentence, "affiliated group of 221.7 corporations" includes those entities that would be classified 221.8 as members of an affiliated group under United States Code, 221.9 title 26, section 1504, and that are eligible to file a 221.10 consolidated tax return for federal income tax purposes. 221.11 (h) A sale and a purchase includes the furnishing for a 221.12 consideration of tangible personal property or taxable services 221.13 by the United States or any of its agencies or 221.14 instrumentalities, or the state of Minnesota, its agencies, 221.15 instrumentalities, or political subdivisions. 221.16 (i) A sale and a purchase includes the furnishing for a 221.17 consideration of telecommunications services, including cable 221.18 television services and direct satellite services. 221.19 Telecommunications services are taxed to the extent allowed 221.20 under federal law. 221.21 (j) A sale and a purchase includes the furnishing for a 221.22 consideration of installation if the installation charges would 221.23 be subject to the sales tax if the installation were provided by 221.24 the seller of the item being installed. 221.25 (k) A sale and a purchase includes the rental of a vehicle 221.26 by a motor vehicle dealer to a customer when (1) the vehicle is 221.27 rented by the customer for a consideration, or (2) the motor 221.28 vehicle dealer is reimbursed pursuant to a service contract as 221.29 defined in section 65B.29, subdivision 1, clause (1). 221.30 [EFFECTIVE DATE.] This section is effective the day 221.31 following final enactment except that the amendment to paragraph 221.32 (d), clause (5), is effective for sales made after June 30, 221.33 2005, and the amendment to paragraph (g), clause (6)(vi), is 221.34 effective for sales and purchases made after October 28, 2002, 221.35 but for land clearing contracts entered into after October 28, 221.36 2002, no refunds may be claimed under Minnesota Statutes, 222.1 section 289A.50, for sales taxes collected and remitted to the 222.2 state on the land clearing contracts. 222.3 Sec. 8. Minnesota Statutes 2004, section 297A.61, 222.4 subdivision 4, is amended to read: 222.5 Subd. 4. [RETAIL SALE.] (a) A "retail sale" means any 222.6 sale, lease, or rental for any purpose, other than resale, 222.7 sublease, or subrent of items by the purchaser in the normal 222.8 course of business as defined in subdivision 21. 222.9 (b) A sale of property used by the owner only by leasing it 222.10 to others or by holding it in an effort to lease it, and put to 222.11 no use by the owner other than resale after the lease or effort 222.12 to lease, is a sale of property for resale. 222.13 (c) A sale of master computer software that is purchased 222.14 and used to make copies for sale or lease is a sale of property 222.15 for resale. 222.16 (d) A sale of building materials, supplies, and equipment 222.17 to owners, contractors, subcontractors, or builders for the 222.18 erection of buildings or the alteration, repair, or improvement 222.19 of real property is a retail sale in whatever quantity sold, 222.20 whether the sale is for purposes of resale in the form of real 222.21 property or otherwise. 222.22 (e) A sale of carpeting, linoleum, or similar floor 222.23 covering to a person who provides for installation of the floor 222.24 covering is a retail sale and not a sale for resale since a sale 222.25 of floor covering which includes installation is a contract for 222.26 the improvement of real property. 222.27 (f) A sale of shrubbery, plants, sod, trees, and similar 222.28 items to a person who provides for installation of the items is 222.29 a retail sale and not a sale for resale since a sale of 222.30 shrubbery, plants, sod, trees, and similar items that includes 222.31 installation is a contract for the improvement of real property. 222.32 (g) A sale of tangible personal property that is awarded as 222.33 prizes is a retail sale and is not considered a sale of property 222.34 for resale. 222.35 (h) A sale of tangible personal property utilized or 222.36 employed in the furnishing or providing of services under 223.1 subdivision 3, paragraph (g), clause (1), including, but not 223.2 limited to, property given as promotional items, is a retail 223.3 sale and is not considered a sale of property for resale. 223.4 (i) A sale of tangible personal property used in conducting 223.5 lawful gambling under chapter 349 or the state lottery under 223.6 chapter 349A, including, but not limited to, property given as 223.7 promotional items, is a retail sale and is not considered a sale 223.8 of property for resale. 223.9 (j) A sale of machines, equipment, or devices that are used 223.10 to furnish, provide, or dispense goods or services, including, 223.11 but not limited to, coin-operated devices, is a retail sale and 223.12 is not considered a sale of property for resale. 223.13 (k) In the case of a lease, a retail sale occurs (1) when 223.14 an obligation to make a lease payment becomes due under the 223.15 terms of the agreement or the trade practices of the lessor or 223.16 (2) in the case of a lease of a motor vehicle, as defined in 223.17 section 297B.01, subdivision 5, but excluding vehicles with a 223.18 manufacturer's gross vehicle weight rating greater than 11,000 223.19 pounds and rentals of vehicles for not more than 28 days, at the 223.20 time the lease is executed. 223.21 (l) In the case of a conditional sales contract, a retail 223.22 sale occurs upon the transfer of title or possession of the 223.23 tangible personal property. 223.24 [EFFECTIVE DATE.] This section is effective the day 223.25 following final enactment, except that the amendments to 223.26 paragraph (k) are effective for leases entered into after 223.27 September 30, 2005. 223.28 Sec. 9. Minnesota Statutes 2004, section 297A.61, is 223.29 amended by adding a subdivision to read: 223.30 Subd. 37. [PERSONAL RAPID TRANSIT SYSTEM.] "Personal rapid 223.31 transit system" means a transportation system of small, 223.32 computer-controlled vehicles, transporting one to three 223.33 passengers on elevated guideways in a transportation network 223.34 operating on demand and nonstop directly to any stations in the 223.35 network. 223.36 [EFFECTIVE DATE.] This section is effective for sales and 224.1 purchases made after June 30, 2005. 224.2 Sec. 10. Minnesota Statutes 2004, section 297A.64, 224.3 subdivision 4, is amended to read: 224.4 Subd. 4. [EXEMPTIONS.] (a) The tax and the fee imposed by 224.5 this section do not apply to a lease or rental of (1) a vehicle 224.6 to be used by the lessee to provide a licensed taxi service; (2) 224.7 a hearse or limousine used in connection with a burial or 224.8 funeral service; or (3) a van designed or adapted primarily for 224.9 transporting property rather than passengers. The tax and the 224.10 fee imposed under this section do not apply when the lease or 224.11 rental of a vehicle is exempt from the tax imposed under section 224.12 297A.62, subdivision 1. 224.13 (b) The lessor may elect not to charge the fee imposed in 224.14 subdivision 2 if in the previous calendar year the lessor had no 224.15 more than 20 vehicles available for lease that would have been 224.16 subject to tax under this section, or no more than $50,000 in 224.17 gross receipts that would have been subject to tax under this 224.18 section. 224.19 [EFFECTIVE DATE.] This section is effective the day 224.20 following final enactment. 224.21 Sec. 11. Minnesota Statutes 2004, section 297A.668, 224.22 subdivision 1, is amended to read: 224.23 Subdivision 1. [ APPLICABILITY.] The provisions of this 224.24 section apply regardless of the characterization of a product as 224.25 tangible personal property, a digital good, or a service; but do 224.26 not apply to telecommunications services,or the sales of motor 224.27 vehicles, watercraft, aircraft, modular homes, manufactured224.28homes, or mobile homes. These provisions only apply to 224.29 determine a seller's obligation to pay or collect and remit a 224.30 sales or use tax with respect to the seller's sale of a 224.31 product. These provisions do not affect the obligation of a 224.32 seller as purchaser to remit tax on the use of the product. 224.33 [EFFECTIVE DATE.] This section is effective the day 224.34 following final enactment. 224.35 Sec. 12. Minnesota Statutes 2004, section 297A.668, 224.36 subdivision 5, is amended to read: 225.1 Subd. 5. [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 225.2 including lease or rental, of transportation equipment shall be 225.3 sourced the same as a retail sale in accordance with the 225.4 provisions of subdivision 2, notwithstanding the exclusion of 225.5 lease or rental in subdivision 2. 225.6 (b) "Transportation equipment" means any of the following: 225.7 (1) locomotives and railcars that are utilized for the 225.8 carriage of persons or property in interstate commerce;and/or225.9 (2) trucks and truck-tractors with a gross vehicle weight 225.10 rating (GVWR) of 10,001 pounds or greater, trailers, 225.11 semitrailers, or passenger buses that are: 225.12 (i) registered through the international registration plan; 225.13 and 225.14 (ii) operated under authority of a carrier authorized and 225.15 certified by the United States Department of Transportation or 225.16 another federal authority to engage in the carriage of persons 225.17 or property in interstate commerce; 225.18 (3) aircraft that are operated by air carriers authorized 225.19 and certificated by the United States Department of 225.20 Transportation or another federal or a foreign authority to 225.21 engage in the carriage of persons or property in interstate 225.22 commerce; or 225.23 (4) containers designed for use on and component parts 225.24 attached or secured on the transportation equipment described in 225.25 items (1) through (3). 225.26 [EFFECTIVE DATE.] This section is effective for sales and 225.27 purchases made on or after January 1, 2004. 225.28 Sec. 13. Minnesota Statutes 2004, section 297A.67, 225.29 subdivision 2, is amended to read: 225.30 Subd. 2. [FOOD AND FOOD INGREDIENTS.] Except as otherwise 225.31 provided in this subdivision, food and food ingredients are 225.32 exempt. For purposes of this subdivision, "food" and "food 225.33 ingredients" mean substances, whether in liquid, concentrated, 225.34 solid, frozen, dried, or dehydrated form, that are sold for 225.35 ingestion or chewing by humans and are consumed for their taste 225.36 or nutritional value. Food and food ingredients exempt under 226.1 this subdivision do not include candy, soft drinks, food sold 226.2 through vending machines, dietary supplements, and prepared 226.3 foods. Food and food ingredients do not include alcoholic 226.4 beverages, dietary supplements,and tobacco. For purposes of 226.5 this subdivision, "alcoholic beverages" means beverages that are 226.6 suitable for human consumption and contain one-half of one 226.7 percent or more of alcohol by volume. For purposes of this 226.8 subdivision, "tobacco" means cigarettes, cigars, chewing or pipe 226.9 tobacco, or any other item that contains tobacco. For purposes 226.10 of this subdivision, "dietary supplements" means any product, 226.11 other than tobacco, intended to supplement the diet that: 226.12 (1) contains one or more of the following dietary 226.13 ingredients: 226.14 (i) a vitamin; 226.15 (ii) a mineral; 226.16 (iii) an herb or other botanical; 226.17 (iv) an amino acid; 226.18 (v) a dietary substance for use by humans to supplement the 226.19 diet by increasing the total dietary intake; and 226.20 (vi) a concentrate, metabolite, constituent, extract, or 226.21 combination of any ingredient described in items (i) to (v); 226.22 (2) is intended for ingestion in tablet, capsule, powder, 226.23 softgel, gelcap, or liquid form, or if not intended for 226.24 ingestion in such form, is not represented as conventional food 226.25 and is not represented for use as a sole item of a meal or of 226.26 the diet; and 226.27 (3) is required to be labeled as a dietary supplement, 226.28 identifiable by the supplement facts box found on the label and 226.29 as required pursuant to Code of Federal Regulations, title 21, 226.30 section 101.36. 226.31 [EFFECTIVE DATE.] This section is effective for sales made 226.32 on or after the day following final enactment. 226.33 Sec. 14. Minnesota Statutes 2004, section 297A.67, 226.34 subdivision 7, is amended to read: 226.35 Subd. 7. [MEDICINESDRUGS; MEDICAL DEVICES.] 226.36 (a)PrescribedSales of the following drugs and medical devices 227.1 are exempt: 227.2 (1) drugsand medicine, and insulin, intendedforinternal227.3or external use, in the cure, mitigation, treatment, or227.4prevention of illness or disease inhumanbeings are exempt.227.5"Prescribed drugs and medicine" includesuse, including 227.6 over-the-counter drugsor medicine prescribed by a licensed227.7health care professional.227.8(b) Nonprescription medicines consisting principally227.9(determined by the weight of all ingredients) of analgesics that227.10are approved by the United States Food and Drug Administration227.11for internal use by human beings are exempt. For purposes of227.12this subdivision, "principally" means greater than 50 percent227.13analgesics by weight.227.14(c) Prescription glasses, hospital beds, fever227.15thermometers, reusable; 227.16 (2) single-use finger-pricking devices for the extraction 227.17 of blood, blood glucose monitoring machines,and 227.18 other single-use devices and single-use diagnostic agents used 227.19 in diagnosing, monitoring, or treating diabetes, and therapeutic227.20and; 227.21 (3) insulin and medical oxygen for human use, regardless of 227.22 whether prescribed or sold over the counter; 227.23 (4) prosthetic devicesare exempt. "Therapeutic devices"227.24means devices that are attached or applied to the human body to227.25cure, heal, or alleviate injury, illness, or disease, either227.26directly or by administering a curative agent. "Prosthetic227.27devices" means devices that replace injured, diseased, or227.28missing parts of the human body, either temporarily or227.29permanently; 227.30 (5) durable medical equipment for home use only; 227.31 (6) mobility enhancing equipment; and 227.32 (7) prescription corrective eyeglasses. 227.33 (b) For purposes of this subdivision: 227.34 (1) "Drug" means a compound, substance, or preparation, and 227.35 any component of a compound, substance, or preparation, other 227.36 than food and food ingredients, dietary supplements, or 228.1 alcoholic beverages that is: 228.2 (i) recognized in the official United States Pharmacopoeia, 228.3 official Homeopathic Pharmacopoeia of the United States, or 228.4 official National Formulary, and supplement to any of them; 228.5 (ii) intended for use in the diagnosis, cure, mitigation, 228.6 treatment, or prevention of disease; or 228.7 (iii) intended to affect the structure or any function of 228.8 the body. 228.9 (2) "Durable medical equipment" means equipment, including 228.10 repair and replacement parts, but not including mobility 228.11 enhancing equipment, that: 228.12 (i) can withstand repeated use; 228.13 (ii) is primarily and customarily used to serve a medical 228.14 purpose; 228.15 (iii) generally is not useful to a person in the absence of 228.16 illness or injury; and 228.17 (iv) is not worn in or on the body. 228.18 (3) "Mobility enhancing equipment" means equipment, 228.19 including repair and replacement parts, but not including 228.20 durable medical equipment, that: 228.21 (i) is primarily and customarily used to provide or 228.22 increase the ability to move from one place to another and that 228.23 is appropriate for use either in a home or a motor vehicle; 228.24 (ii) is not generally used by persons with normal mobility; 228.25 and 228.26 (iii) does not include any motor vehicle or equipment on a 228.27 motor vehicle normally provided by a motor vehicle manufacturer. 228.28 (4) "Over-the-counter drug" means a drug that contains a 228.29 label that identifies the product as a drug as required by Code 228.30 of Federal Regulations, title 21, section 201.66. The label 228.31 must include a "drug facts" panel or a statement of the active 228.32 ingredients with a list of those ingredients contained in the 228.33 compound, substance, or preparation. Over-the-counter drugs do 228.34 not include grooming and hygiene products, regardless of whether 228.35 they otherwise meet the definition. "Grooming and hygiene 228.36 products" are soaps, cleaning solutions, shampoo, toothpaste, 229.1 mouthwash, antiperspirants, and suntan lotions and sunscreens. 229.2 (5) "Prescribed" and "prescription" means a direction in 229.3 the form of an order, formula, or recipe issued in any form of 229.4 oral, written, electronic, or other means of transmission by a 229.5 duly licensed health care professional. 229.6 (6) "Prosthetic device" means a replacement, corrective, or 229.7 supportive device, including repair and replacement parts, worn 229.8 on or in the body to: 229.9 (i) artificially replace a missing portion of the body; 229.10 (ii) prevent or correct physical deformity or malfunction; 229.11 or 229.12 (iii) support a weak or deformed portion of the body. 229.13 Prosthetic device does not include corrective eyeglasses. 229.14 [EFFECTIVE DATE.] This section is effective for sales and 229.15 purchases made after June 30, 2005. 229.16 Sec. 15. Minnesota Statutes 2004, section 297A.67, 229.17 subdivision 9, is amended to read: 229.18 Subd. 9. [BABY PRODUCTS.](a) Products such as lotion,229.19creams, ointments, oil, powder, or shampoo, and other articles229.20designed for application to the hair or skin of babies are229.21exempt.229.22(b)Baby bottles and nipples, pacifiers, teething rings, 229.23thumb sucking preventatives,and infant syringes are exempt. 229.24 [EFFECTIVE DATE.] This section is effective for sales and 229.25 purchases made after June 30, 2005. 229.26 Sec. 16. Minnesota Statutes 2004, section 297A.67, 229.27 subdivision 29, is amended to read: 229.28 Subd. 29. [SOLAR ENERGYEFFICIENTPRODUCTS.](a) A229.29residential lighting fixture or a compact fluorescent bulb is229.30exempt if it has an energy star label.229.31(b) The following products are exempt if they have an229.32energyguide label that indicates that the product meets or229.33exceeds the standards listed below:229.34(1) an electric heat pump hot water heater with an energy229.35factor of at least 1.9;229.36(2) a natural gas water heater with an energy factor of at230.1least 0.62;230.2(3) a propane gas or fuel oil water heater with an energy230.3factor of at least 0.62;230.4(4) a natural gas furnace with an annual fuel utilization230.5efficiency greater than 92 percent; and230.6(5) a propane gas or fuel oil furnace with an annual fuel230.7utilization efficiency greater than 92 percent.230.8(c)Aphotovoltaic devicesolar energy system, as defined 230.9 in section 216C.06, subdivision 17, is exempt.For purposes of230.10this subdivision, "photovoltaic device" means a solid-state230.11electrical device, such as a solar module, that converts light230.12directly into direct current electricity of voltage-current230.13characteristics that are a function of the characteristics of230.14the light source and the materials in and design of the device.230.15A "solar module" is a photovoltaic device that produces a230.16specified power output under defined test conditions, usually230.17composed of groups of solar cells connected in series, in230.18parallel, or in series-parallel combinations.230.19(d) For purposes of this subdivision, "energy star label"230.20means the label granted to certain products that meet United230.21States Environmental Protection Agency and United States230.22Department of Energy criteria for energy efficiency. For230.23purposes of this subdivision, "energyguide label" means the230.24label that the United States Federal Trade Commissioner requires230.25manufacturers to apply to certain appliances under United States230.26Code, title 16, part 305.230.27 [EFFECTIVE DATE.] This section is effective for sales and 230.28 purchases made on or after August 1, 2005. 230.29 Sec. 17. Minnesota Statutes 2004, section 297A.67, is 230.30 amended by adding a subdivision to read: 230.31 Subd. 32. [CIGARETTES.] Cigarettes upon which a tax has 230.32 been imposed under section 297F.25 are exempt. 230.33 [EFFECTIVE DATE.] This section is effective for sales and 230.34 purchases made after July 31, 2005. 230.35 Sec. 18. Minnesota Statutes 2004, section 297A.68, 230.36 subdivision 2, is amended to read: 231.1 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 231.2 (a) Materials stored, used, or consumed in industrial production 231.3 of personal property intended to be sold ultimately at retail 231.4 are exempt, whether or not the item so used becomes an 231.5 ingredient or constituent part of the property produced. 231.6 Materials that qualify for this exemption include, but are not 231.7 limited to, the following: 231.8 (1) chemicals, including chemicals used for cleaning food 231.9 processing machinery and equipment; 231.10 (2) materials, including chemicals, fuels, and electricity 231.11 purchased by persons engaged in industrial production to treat 231.12 waste generated as a result of the production process; 231.13 (3) fuels, electricity, gas, and steam used or consumed in 231.14 the production process, except that electricity, gas, or steam 231.15 used for space heating, cooling, or lighting is exempt if (i) it 231.16 is in excess of the average climate control or lighting for the 231.17 production area, and (ii) it is necessary to produce that 231.18 particular product; 231.19 (4) petroleum products and lubricants; 231.20 (5) packaging materials, including returnable containers 231.21 used in packaging food and beverage products; 231.22 (6) accessory tools, equipment, and other items that are 231.23 separate detachable units with an ordinary useful life of less 231.24 than 12 months used in producing a direct effect upon the 231.25 product; and 231.26 (7) the following materials, tools, and equipment used in 231.27 metalcasting: crucibles, thermocouple protection sheaths and 231.28 tubes, stalk tubes, refractory materials, molten metal filters 231.29 and filter boxes, degassing lances, and base blocks. 231.30 (b) This exemption does not include: 231.31 (1) machinery, equipment, implements, tools, accessories, 231.32 appliances, contrivances and furniture and fixtures, except 231.33 those listed in paragraph (a), clause (6); and 231.34 (2) petroleum and special fuels used in producing or 231.35 generating power for propelling ready-mixed concrete trucks on 231.36 the public highways of this state. 232.1 (c) Industrial production includes, but is not limited to, 232.2 research, development, design or production of any tangible 232.3 personal property, manufacturing, processing (other than by 232.4 restaurants and consumers) of agricultural products (whether 232.5 vegetable or animal), commercial fishing, refining, smelting, 232.6 reducing, brewing, distilling, printing, mining, quarrying, 232.7 lumbering, generating electricity, the production of road 232.8 building materials, and the research, development, design, or 232.9 production of computer software. Industrial production does not 232.10 include painting, cleaning, repairing or similar processing of 232.11 property except as part of the original manufacturing process. 232.12 (d) Industrial production does not include: 232.13 (1) the furnishing of services listed in section 297A.61, 232.14 subdivision 3, paragraph (g), clause (6), items (i) to (vi) and 232.15 (viii); or 232.16 (2) the transportation, transmission, or distribution of 232.17 petroleum, liquefied gas, natural gas, water, or steam, in, by, 232.18 or through pipes, lines, tanks, mains, or other means of 232.19 transporting those products. For purposes of this paragraph, 232.20 "transportation, transmission, or distribution" does not include 232.21 blending of petroleum or biodiesel fuel as defined in section 232.22 239.77. 232.23 [EFFECTIVE DATE.] This section is effective the day 232.24 following final enactment, except that the provision in 232.25 paragraph (d) is effective for sales and purchases made after 232.26 June 30, 2005. 232.27 Sec. 19. Minnesota Statutes 2004, section 297A.68, 232.28 subdivision 5, is amended to read: 232.29 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 232.30 exempt. The tax must be imposed and collected as if the rate 232.31 under section 297A.62, subdivision 1, applied, and then refunded 232.32 in the manner provided in section 297A.75, unless: 232.33 (1) the purchaser qualifies as a small business as defined 232.34 in section 645.445, subdivision 2, paragraphs (a) to (c); 232.35 (2) the business is located in the state; and 232.36 (3) the purchaser provides an exemption certificate as 233.1 required in section 297A.72, subdivision 3. 233.2 "Capital equipment" means machinery and equipment purchased 233.3 or leased, and used in this state by the purchaser or lessee 233.4 primarily for manufacturing, fabricating, mining, or refining 233.5 tangible personal property to be sold ultimately at retail if 233.6 the machinery and equipment are essential to the integrated 233.7 production process of manufacturing, fabricating, mining, or 233.8 refining. Capital equipment also includes machinery and 233.9 equipment used primarily to electronically transmit results 233.10 retrieved by a customer of an on-line computerized data 233.11 retrieval system. 233.12 (b) Capital equipment includes, but is not limited to: 233.13 (1) machinery and equipment used to operate, control, or 233.14 regulate the production equipment; 233.15 (2) machinery and equipment used for research and 233.16 development, design, quality control, and testing activities; 233.17 (3) environmental control devices that are used to maintain 233.18 conditions such as temperature, humidity, light, or air pressure 233.19 when those conditions are essential to and are part of the 233.20 production process; 233.21 (4) materials and supplies used to construct and install 233.22 machinery or equipment; 233.23 (5) repair and replacement parts, including accessories, 233.24 whether purchased as spare parts, repair parts, or as upgrades 233.25 or modifications to machinery or equipment; 233.26 (6) materials used for foundations that support machinery 233.27 or equipment; 233.28 (7) materials used to construct and install special purpose 233.29 buildings used in the production process; 233.30 (8) ready-mixed concrete equipment in which the ready-mixed 233.31 concrete is mixed as part of the delivery process regardless if 233.32 mounted on a chassis, repair parts for ready-mixed concrete 233.33 trucks, and leases of ready-mixed concrete trucks; and 233.34 (9) machinery or equipment used for research, development, 233.35 design, or production of computer software. 233.36 (c) Capital equipment does not include the following: 234.1 (1) motor vehicles taxed under chapter 297B; 234.2 (2) machinery or equipment used to receive or store raw 234.3 materials; 234.4 (3) building materials, except for materials included in 234.5 paragraph (b), clauses (6) and (7); 234.6 (4) machinery or equipment used for nonproduction purposes, 234.7 including, but not limited to, the following: plant security, 234.8 fire prevention, first aid, and hospital stations; support 234.9 operations or administration; pollution control; and plant 234.10 cleaning, disposal of scrap and waste, plant communications, 234.11 space heating, cooling, lighting, or safety; 234.12 (5) farm machinery and aquaculture production equipment as 234.13 defined by section 297A.61, subdivisions 12 and 13; 234.14 (6) machinery or equipment purchased and installed by a 234.15 contractor as part of an improvement to real property;or234.16 (7) machinery and equipment used by restaurants in the 234.17 furnishing, preparing, or serving of prepared foods as defined 234.18 in section 297A.61, subdivision 31; 234.19 (8) machinery and equipment used to furnish the services 234.20 listed in section 297A.61, subdivision 3, paragraph (g), clause 234.21 (6), items (i) to (vi) and (viii); 234.22 (9) machinery or equipment used in the transportation, 234.23 transmission, or distribution of petroleum, liquefied gas, 234.24 natural gas, water, or steam, in, by, or through pipes, lines, 234.25 tanks, mains, or other means of transporting those products. 234.26 This clause does not apply to machinery or equipment used to 234.27 blend petroleum or biodiesel fuel as defined in section 239.77; 234.28 or 234.29 (10) any other item that is not essential to the integrated 234.30 process of manufacturing, fabricating, mining, or refining. 234.31 (d) For purposes of this subdivision: 234.32 (1) "Equipment" means independent devices or tools separate 234.33 from machinery but essential to an integrated production 234.34 process, including computers and computer software, used in 234.35 operating, controlling, or regulating machinery and equipment; 234.36 and any subunit or assembly comprising a component of any 235.1 machinery or accessory or attachment parts of machinery, such as 235.2 tools, dies, jigs, patterns, and molds. 235.3 (2) "Fabricating" means to make, build, create, produce, or 235.4 assemble components or property to work in a new or different 235.5 manner. 235.6 (3) "Integrated production process" means a process or 235.7 series of operations through which tangible personal property is 235.8 manufactured, fabricated, mined, or refined. For purposes of 235.9 this clause, (i) manufacturing begins with the removal of raw 235.10 materials from inventory and ends when the last process prior to 235.11 loading for shipment has been completed; (ii) fabricating begins 235.12 with the removal from storage or inventory of the property to be 235.13 assembled, processed, altered, or modified and ends with the 235.14 creation or production of the new or changed product; (iii) 235.15 mining begins with the removal of overburden from the site of 235.16 the ores, minerals, stone, peat deposit, or surface materials 235.17 and ends when the last process before stockpiling is completed; 235.18 and (iv) refining begins with the removal from inventory or 235.19 storage of a natural resource and ends with the conversion of 235.20 the item to its completed form. 235.21 (4) "Machinery" means mechanical, electronic, or electrical 235.22 devices, including computers and computer software, that are 235.23 purchased or constructed to be used for the activities set forth 235.24 in paragraph (a), beginning with the removal of raw materials 235.25 from inventory through completion of the product, including 235.26 packaging of the product. 235.27 (5) "Machinery and equipment used for pollution control" 235.28 means machinery and equipment used solely to eliminate, prevent, 235.29 or reduce pollution resulting from an activity described in 235.30 paragraph (a). 235.31 (6) "Manufacturing" means an operation or series of 235.32 operations where raw materials are changed in form, composition, 235.33 or condition by machinery and equipment and which results in the 235.34 production of a new article of tangible personal property. For 235.35 purposes of this subdivision, "manufacturing" includes the 235.36 generation of electricity or steam to be sold at retail. 236.1 (7) "Mining" means the extraction of minerals, ores, stone, 236.2 or peat. 236.3 (8) "On-line data retrieval system" means a system whose 236.4 cumulation of information is equally available and accessible to 236.5 all its customers. 236.6 (9) "Primarily" means machinery and equipment used 50 236.7 percent or more of the time in an activity described in 236.8 paragraph (a). 236.9 (10) "Refining" means the process of converting a natural 236.10 resource to an intermediate or finished product, including the 236.11 treatment of water to be sold at retail. 236.12 [EFFECTIVE DATE.] This section is effective the day 236.13 following final enactment, except that the second sentence in 236.14 paragraph (a) is effective for sales and purchases made after 236.15 December 31, 2005, and paragraph (c), clause (9), is effective 236.16 for sales and purchases made after June 30, 2005. 236.17 Sec. 20. Minnesota Statutes 2004, section 297A.68, 236.18 subdivision 28, is amended to read: 236.19 Subd. 28. [MEDICAL SUPPLIES.] Medical supplies purchased 236.20 by a licensed health care facility or licensed health care 236.21 professional to provide medical treatment to residents or 236.22 patients are exempt. The exemption does not apply to durable 236.23 medical equipment or components of durable medical equipment, 236.24 laboratory supplies, radiological supplies, and other items used 236.25 in providing medical services. For purposes of this 236.26 subdivision, "medical supplies" means adhesive and nonadhesive 236.27 bandages, gauze pads and strips, cotton applicators, 236.28 antiseptics,nonprescription drugs,eye solution, and other 236.29 similar supplies used directly on the resident or patient in 236.30 providing medical services. 236.31 [EFFECTIVE DATE.] This section is effective for sales and 236.32 purchases made after June 30, 2005. 236.33 Sec. 21. Minnesota Statutes 2004, section 297A.68, 236.34 subdivision 35, is amended to read: 236.35 Subd. 35. [TELECOMMUNICATIONS EQUIPMENT.] (a) 236.36 Telecommunications machinery and equipment purchased or leased 237.1 for use directly by a telecommunications service provider 237.2 primarily in the provision of telecommunications services that 237.3 are ultimately to be sold at retail are exempt, regardless of 237.4 whether purchased by the owner, a contractor, or a subcontractor. 237.5 (b) For purposes of this subdivision, "telecommunications 237.6 machinery and equipment" includes, but is not limited to: 237.7 (1) machinery, equipment, and fixtures utilized in 237.8 receiving, initiating, amplifying, processing, transmitting, 237.9 retransmitting, recording, switching, or monitoring 237.10 telecommunications services, such as computers, transformers, 237.11 amplifiers, routers, bridges, repeaters, multiplexers, and other 237.12 items performing comparable functions; 237.13 (2) machinery, equipment, and fixtures used in the 237.14 transportation of telecommunications services, radio 237.15 transmitters and receivers, satellite equipment, microwave 237.16 equipment, and other transporting media, but not wire, cable, 237.17 fiber, poles, or conduit; 237.18 (3) ancillary machinery, equipment, and fixtures that 237.19 regulate, control, protect, or enable the machinery in clauses 237.20 (1) and (2) to accomplish its intended function, such as 237.21 auxiliary power supply, test equipment, towers, heating, 237.22 ventilating, and air conditioning equipment necessary to the 237.23 operation of the telecommunications equipment; and software 237.24 necessary to the operation of the telecommunications equipment; 237.25 and 237.26 (4) repair and replacement parts, including accessories, 237.27 whether purchased as spare parts, repair parts, or as upgrades 237.28 or modifications to qualified machinery or equipment. 237.29 (c) For purposes of this subdivision, "telecommunications 237.30 services" means telecommunications services as defined in 237.31 section 297A.61, subdivision 24,paragraphparagraphs (a),only237.32 (c), and (d). 237.33 [EFFECTIVE DATE.] This section is effective the day 237.34 following final enactment. 237.35 Sec. 22. Minnesota Statutes 2004, section 297A.68, 237.36 subdivision 39, is amended to read: 238.1 Subd. 39. [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 238.2 tangible personal property or services is exempt from tax or a 238.3 tax rate increase for a period of six months from the effective 238.4 date of the law change that results in the imposition of the tax 238.5 or the tax rate increase under this chapter if: 238.6 (1) the act imposing the tax or increasing the tax rate 238.7 does not have transitional effective date language for existing 238.8 construction contracts and construction bids; and 238.9 (2) the requirements of paragraph (b) are met. 238.10 (b) A sale is tax exempt under paragraph (a) if it meets 238.11 the requirements of either clause (1) or (2): 238.12 (1) For a construction contract: 238.13 (i) the goods or services sold must be used for the 238.14 performance of a bona fide written lump sum or fixed price 238.15 construction contract; 238.16 (ii) the contract must be entered into before the date the 238.17 goods or services become subject to the sales tax or the tax 238.18 rate was increased; 238.19 (iii) the contract must not provide for allocation of 238.20 future taxes; and 238.21 (iv) for each qualifying contract the contractor must give 238.22 the seller documentation of the contract on which an exemption 238.23 is to be claimed. 238.24 (2) For a construction bid: 238.25 (i) the goods or services sold must be used pursuant to an 238.26 obligation of a bid or bids; 238.27 (ii) the bid or bids must be submitted and accepted before 238.28 the date the goods or services became subject to the sales 238.29 tax or the tax rate was increased; 238.30 (iii) the bid or bids must not be able to be withdrawn, 238.31 modified, or changed without forfeiting a bond; and 238.32 (iv) for each qualifying bid, the contractor must give the 238.33 seller documentation of the bid on which an exemption is to be 238.34 claimed. 238.35 [EFFECTIVE DATE.] This section is effective the day 238.36 following final enactment. 239.1 Sec. 23. Minnesota Statutes 2004, section 297A.68, is 239.2 amended by adding a subdivision to read: 239.3 Subd. 40. [LAND CLEARING.] Tree, bush, shrub, and stump 239.4 removal are exempt when sold to contractors or subcontractors as 239.5 part of a land clearing contract. For purposes of this 239.6 subdivision, "land clearing contract" means a contract for the 239.7 removal of trees, bushes, and shrubs, including the removal of 239.8 roots and stumps, to develop a site. This exemption does not 239.9 apply to land clearing of a portion of a site to allow for 239.10 remodeling, improvement, or expansion of an existing structure. 239.11 [EFFECTIVE DATE.] This section is effective for sales and 239.12 purchases made after October 28, 2002, but for land clearing 239.13 contracts entered into after October 28, 2002, no refunds may be 239.14 claimed under Minnesota Statutes, section 289A.50, for sales 239.15 taxes collected and remitted to the state on the land clearing 239.16 contracts. 239.17 Sec. 24. Minnesota Statutes 2004, section 297A.68, is 239.18 amended by adding a subdivision to read: 239.19 Subd. 41. [PERSONAL RAPID TRANSIT SYSTEM.] (a) Machinery, 239.20 equipment, and supplies purchased or leased, and used by the 239.21 purchaser or lessee in this state directly in the provision of a 239.22 personal rapid transit system as defined in section 297A.61, 239.23 subdivision 37, which provides service to the public on a 239.24 regular and continuing basis, are exempt, provided that the 239.25 system is operated independent of any government subsidies. 239.26 Machinery, equipment, and supplies that qualify for this 239.27 exemption include, but are not limited to, the following: 239.28 (1) vehicles, guideways, and related parts used directly in 239.29 the transit system; 239.30 (2) computers and equipment used primarily for operating, 239.31 controlling, and regulating the system; 239.32 (3) machinery, equipment, furniture, and fixtures necessary 239.33 for the functioning of system stations; 239.34 (4) machinery, equipment, implements, tools, and supplies 239.35 used to maintain vehicles, guideways, and stations; and 239.36 (5) electricity and other fuels used in the provision of 240.1 the transit service, including heating, cooling, and lighting of 240.2 system stations. 240.3 (b) This exemption does not include machinery, equipment, 240.4 and supplies used for nonproduction purposes such as operations 240.5 support and administration. 240.6 [EFFECTIVE DATE.] This section is effective for sales and 240.7 purchases made after June 30, 2005. 240.8 Sec. 25. Minnesota Statutes 2004, section 297A.70, 240.9 subdivision 10, is amended to read: 240.10 Subd. 10. [NONPROFIT TICKETS OR ADMISSIONS.] (a) Tickets 240.11 or admissions to an event are exempt if all the gross receipts 240.12 are recorded as such, in accordance with generally accepted 240.13 accounting principles, on the books of one or more organizations 240.14 whose primary mission is to provide an opportunity for citizens 240.15 of the state to participate in the creation, performance, or 240.16 appreciation of the arts, and provided that each organization is: 240.17 (1) an organization described in section 501(c)(3) of the 240.18 Internal Revenue Code in which voluntary contributions make up 240.19 at least the following percent of the organization's annual 240.20 revenue in its most recently completed 12-month fiscal year, or 240.21 in the current year if the organization has not completed a 240.22 12-month fiscal year: 240.23 (i) for sales made after July 31, 2001, and before July 1, 240.24 2002, for the organization's fiscal year completed in calendar 240.25 year 2000, three percent; 240.26 (ii) for sales made on or after July 1, 2002, and on or 240.27 before June 30, 2003, for the organization's fiscal year 240.28 completed in calendar year 2001, three percent; 240.29 (iii) for sales made on or after July 1, 2003, and on or 240.30 before June 30, 2004, for the organization's fiscal year 240.31 completed in calendar year 2002, four percent; and 240.32 (iv) for sales made in each 12-month period, beginning on 240.33 July 1, 2004, and each subsequent year, for the organization's 240.34 fiscal year completed in the preceding calendar year, five 240.35 percent; 240.36 (2) a municipal board that promotes cultural and arts 241.1 activities; or 241.2 (3) the University of Minnesota, a state college and 241.3 university, or a private nonprofit college or university 241.4 provided that the event is held at auniversity-ownedfacility 241.5 owned by the educational institution holding the event. 241.6 The exemption only applies if the entire proceeds, after 241.7 reasonable expenses, are used solely to provide opportunities 241.8 for citizens of the state to participate in the creation, 241.9 performance, or appreciation of the arts. 241.10 (b) Tickets or admissions to the premises of the Minnesota 241.11 Zoological Garden are exempt, provided that the exemption under 241.12 this paragraph does not apply to tickets or admissions to 241.13 performances or events held on the premises unless the 241.14 performance or event is sponsored and conducted exclusively by 241.15 the Minnesota Zoological Board or employees of the Minnesota 241.16 Zoological Garden. 241.17 [EFFECTIVE DATE.] This section is effective for tickets and 241.18 admissions to events held on or after July 1, 2005, but does not 241.19 apply to events for which sales of tickets or admissions were 241.20 made prior to July 1, 2005. 241.21 Sec. 26. Minnesota Statutes 2004, section 297A.71, 241.22 subdivision 12, is amended to read: 241.23 Subd. 12. [CHAIR LIFTS, RAMPS, ELEVATORS.]Chair lifts,241.24ramps, andElevators and building materials used to install or 241.25 constructthemchair lifts, ramps, and elevators are exempt, if 241.26 they are authorized by a physician and installed in or attached 241.27 to the owner's homestead. The tax must be imposed and collected 241.28 as if the rate under section 297A.62, subdivision 1, applied and 241.29 then refunded in the manner provided in section 297A.75. 241.30 [EFFECTIVE DATE.] This section is effective for sales and 241.31 purchases made after June 30, 2005. 241.32 Sec. 27. Minnesota Statutes 2004, section 297A.71, is 241.33 amended by adding a subdivision to read: 241.34 Subd. 33. [PERSONAL RAPID TRANSIT SYSTEM.] Materials, 241.35 equipment, and supplies used in the construction, expansion, or 241.36 improvement of a personal rapid transit system as defined in 242.1 section 297A.61, subdivision 37, which provides service to the 242.2 public on a regular and continuing basis, are exempt, provided 242.3 that the system is operated independent of any government 242.4 subsidies. 242.5 [EFFECTIVE DATE.] This section is effective for sales and 242.6 purchases made after June 30, 2005. 242.7 Sec. 28. Minnesota Statutes 2004, section 297A.72, is 242.8 amended by adding a subdivision to read: 242.9 Subd. 3. [EXEMPTION CERTIFICATE FOR SMALL BUSINESSES.] A 242.10 small business, as defined in section 645.455, subdivision 2, 242.11 paragraphs (a) to (c), that is located in the state may apply to 242.12 the commissioner for an exemption certificate to purchase exempt 242.13 capital equipment without paying the sales tax at the time of 242.14 the sale. The business must provide information required by the 242.15 commissioner to verify that it meets the definition of small 242.16 business in the preceding calendar year, or in the case of a new 242.17 business, that it will meet the definition in the first full 242.18 year of operations. A decision by the commissioner on whether a 242.19 business qualifies for this exemption is final. The exemption 242.20 certificate must be in the form and meet the requirements 242.21 imposed under this chapter and chapter 289A on other sales and 242.22 use tax exemption certificates, but it shall only be in effect 242.23 for two years from the date of issuance. 242.24 [EFFECTIVE DATE.] This section is effective for 242.25 applications submitted to the commissioner of revenue after July 242.26 1, 2005. 242.27 Sec. 29. Minnesota Statutes 2004, section 297A.75, 242.28 subdivision 1, is amended to read: 242.29 Subdivision 1. [TAX COLLECTED.] The tax on the gross 242.30 receipts from the sale of the following exempt items must be 242.31 imposed and collected as if the sale were taxable and the rate 242.32 under section 297A.62, subdivision 1, applied. The exempt items 242.33 include: 242.34 (1) capital equipment exempt under section 297A.68, 242.35 subdivision 5; 242.36 (2) building materials for an agricultural processing 243.1 facility exempt under section 297A.71, subdivision 13; 243.2 (3) building materials for mineral production facilities 243.3 exempt under section 297A.71, subdivision 14; 243.4 (4) building materials for correctional facilities under 243.5 section 297A.71, subdivision 3; 243.6 (5) building materials used in a residence for disabled 243.7 veterans exempt under section 297A.71, subdivision 11; 243.8 (6)chair lifts, ramps,elevators,andassociatedbuilding 243.9 materials exempt under section 297A.71, subdivision 12; 243.10 (7) building materials for the Long Lake Conservation 243.11 Center exempt under section 297A.71, subdivision 17; 243.12 (8) materials, supplies, fixtures, furnishings, and 243.13 equipment for a county law enforcement and family service center 243.14 under section 297A.71, subdivision 26; and 243.15 (9) materials and supplies for qualified low-income housing 243.16 under section 297A.71, subdivision 23. 243.17 [EFFECTIVE DATE.] This section is effective for sales and 243.18 purchases made after June 30, 2005. 243.19 Sec. 30. [297A.82] [MOTOR VEHICLE LEASES.] 243.20 Subdivision 1. [MOTOR VEHICLE LEASE PRICE; PAYMENT.] (a) 243.21 In the case of a lease of a motor vehicle as provided in section 243.22 297A.61, subdivision 4, paragraph (k), clause (2), the tax is 243.23 imposed on the total amount to be paid by the lessee under the 243.24 lease agreement. The lessor shall collect the tax in full at 243.25 the time the lease is executed or, if the tax is included in the 243.26 lease and the lease is assigned, the tax is due from the 243.27 original lessor at the time the lease is assigned. The total 243.28 amount to be paid by the lessee under the lease agreement equals 243.29 the agreed-upon value of the vehicle less manufacturer's 243.30 rebates, the stated residual value of the leased vehicle, and 243.31 the total value allowed for a vehicle owned by the lessee taken 243.32 in trade by the lessor, plus the price of any taxable goods and 243.33 services included in the lease and the rent charge as provided 243.34 by Code of Federal Regulations, title 12, section 213.4, 243.35 excluding any rent charge related to the capitalization of the 243.36 tax. 244.1 (b) If the total amount paid by the lessee for use of the 244.2 leased vehicle includes amounts that are not calculated at the 244.3 time the lease is executed, the tax is imposed and must be 244.4 collected by the lessor at the time the amounts are paid by the 244.5 lessee. In the case of a lease which by its terms may be 244.6 renewed, the sales tax is due and payable on the total amount to 244.7 be paid during the initial term of the lease, and then for each 244.8 subsequent renewal period on the total amount to be paid during 244.9 the renewal period. 244.10 (c) If a lease is canceled or rescinded on or before 90 244.11 days of its execution or if a vehicle is returned to the 244.12 manufacturer under section 325F.665, the lessor may file a claim 244.13 for a refund of the total tax paid minus the amount of tax due 244.14 for the period the vehicle is used by the lessee. 244.15 (d) If a lessee's obligation to make payments on a lease is 244.16 canceled more than 90 days after its execution, a credit is 244.17 allowed against sales tax or motor vehicles sales tax due on a 244.18 subsequent lease or purchase of a motor vehicle if that lease or 244.19 purchase is consummated within 30 days of the date the prior 244.20 lease was canceled. The amount of the credit is equal to (1) 244.21 the sales tax paid at the inception of the lease, multiplied by 244.22 (2) the ratio of the number of full months remaining in the 244.23 lease at the time of termination compared to the term of the 244.24 lease used in calculating sales tax paid at the inception of the 244.25 lease. 244.26 Subd. 2. [LEASE ORIGINATING IN ANOTHER STATE.] When the 244.27 lease of a motor vehicle as defined in section 297A.61, 244.28 subdivision 4, paragraph (k), clause (2), originates in another 244.29 state, the sales tax under subdivision 1 shall be calculated by 244.30 the lessor on the total amount that is due under the lease 244.31 agreement after the vehicle is required to be registered in 244.32 Minnesota. If the total amount to be paid by the lessee under 244.33 the lease agreement has already been subjected to tax by another 244.34 state, a credit for taxes paid in the other state is allowed as 244.35 provided in section 297A.80. 244.36 [EFFECTIVE DATE.] Subdivision 1 of this section is 245.1 effective for leases entered into after September 30, 2005. 245.2 Subdivision 2 of this section is effective for vehicles 245.3 registering in Minnesota after September 30, 2005. 245.4 Sec. 31. Minnesota Statutes 2004, section 297A.87, 245.5 subdivision 2, is amended to read: 245.6 Subd. 2. [SELLER'S PERMIT OR ALTERNATE STATEMENT.] (a) The 245.7 operator of an event under subdivision 1 shall obtain one of the 245.8 following from a person who wishes to do business as a seller at 245.9 the event: 245.10 (1) evidence that the person holds a valid seller's permit 245.11 under section 297A.84;or245.12 (2) a written statement that the person is not offering for 245.13 sale any item that is taxable under this chapter; or 245.14 (3) a written statement that this is the only selling event 245.15 that the person will be participating in for that calendar year, 245.16 that the person will be participating for three or fewer days, 245.17 and that the person will make less than $500 in total sales at 245.18 the event. The written statement shall include the person's 245.19 name, address, and telephone number. 245.20 (b) The operator shall require the evidence or statement as 245.21 a prerequisite to participating in the event as a seller. 245.22 [EFFECTIVE DATE.] This section is effective for selling 245.23 events occurring after June 15, 2005. 245.24 Sec. 32. Minnesota Statutes 2004, section 297A.87, 245.25 subdivision 3, is amended to read: 245.26 Subd. 3. [OCCASIONAL SALE PROVISIONSNOTAPPLICABLE UNDER 245.27 LIMITED CIRCUMSTANCES.] The isolated and occasional 245.28 saleprovisionsprovision under section 297A.67, subdivision 23, 245.29orapplies, provided that the seller only participates for three 245.30 or fewer days in one event per calendar year, makes $500 or less 245.31 in sales at the event, and provides the written statement 245.32 required in subdivision 2, paragraph (a), clause (3). The 245.33 isolated and occasional sales provision under section 297A.68, 245.34 subdivision 25,dodoes not apply to a seller at an event under 245.35 this section. 245.36 [EFFECTIVE DATE.] This section is effective for selling 246.1 events occurring after June 15, 2005. 246.2 Sec. 33. [297A.981] [LOCAL SALES TAXES; CERTAIN CITIES OF 246.3 THE FIRST CLASS.] 246.4 Subdivision 1. [GENERAL AUTHORITY; CERTAIN CITIES.] (a) 246.5 Notwithstanding sections 297A.99 and 477A.016, or any other 246.6 contrary provision of law, ordinance, or charter, a city of the 246.7 first class located in the seven-county metropolitan area may 246.8 impose a local sales tax of one-half of one percent on sale 246.9 transactions taxable under this chapter that occur within the 246.10 city. The tax base is the same as defined in section 297A.99, 246.11 subdivision 4. This tax is in addition to any other local sales 246.12 tax imposed under other general or special law and must not be 246.13 included when calculating sales tax limits imposed under other 246.14 law, ordinance, or charter. 246.15 Subd. 2. [USE TAX.] If the city imposes the tax authorized 246.16 in subdivision 1, a compensating use tax also applies, at the 246.17 same rate as the sales tax, on the use, storage, distribution, 246.18 or consumption of tangible personal property or taxable services. 246.19 Subd. 3. [USE OF REVENUES.] (a) Revenues received from 246.20 taxes imposed under subdivisions 1 and 2, minus the reasonable 246.21 costs of collection, may be used by the city for any purpose for 246.22 which the city is authorized to make expenditures. 246.23 Subd. 4. [COLLECTION; ENFORCEMENT; ADMINISTRATION.] A tax 246.24 imposed under this section shall be administered, collected, and 246.25 enforced by the commissioner of revenue as provided for under 246.26 section 297A.99, subdivision 9. The commissioner shall remit 246.27 the proceeds, minus refunds and the costs of collection, as 246.28 provided for in section 297A.99, subdivision 11. 246.29 Subd. 5. [LOCAL APPROVAL.] The question of imposing the 246.30 local sales tax must be submitted to the voters at a general or 246.31 a special election held for this purpose. If the majority of 246.32 the votes cast on the question are in the affirmative, the tax 246.33 shall be imposed on the first day of the next calendar quarter 246.34 beginning at least 30 days after the day of local approval. 246.35 [EFFECTIVE DATE.] This section is effective July 1, 2005. 246.36 Sec. 34. Minnesota Statutes 2004, section 297A.99, 247.1 subdivision 1, is amended to read: 247.2 Subdivision 1. [AUTHORIZATION; SCOPE.] (a) A political 247.3 subdivision of this state may impose a general sales tax if 247.4 permitted by special law or if the political subdivision enacted 247.5 and imposed the tax before the effective date of section 247.6 477A.016 and its predecessor provision, or if the tax is allowed 247.7 under section 297A.981. 247.8 (b) This section governs the imposition of a general sales 247.9 tax by the political subdivision. The provisions of this 247.10 section preempt the provisions of any special law: 247.11 (1) enacted before June 2, 1997, or 247.12 (2) enacted on or after June 2, 1997, that does not 247.13 explicitly exempt the special law provision from this section's 247.14 rules by reference. 247.15 (c) This section does not apply to or preempt a sales tax 247.16 on motor vehicles or a special excise tax on motor vehicles. 247.17 [EFFECTIVE DATE.] This section is effective for local sales 247.18 taxes for which the authorizing referendum is held after June 247.19 30, 2005. 247.20 Sec. 35. Minnesota Statutes 2004, section 297A.99, 247.21 subdivision 4, is amended to read: 247.22 Subd. 4. [TAX BASE.] (a) The tax applies to sales taxable 247.23 under this chapter that occur within the political subdivision. 247.24 (b) Taxable goods or services are subject to a political 247.25 subdivision's sales tax, if they areperformed either:247.26(1) within the political subdivision, or247.27(2) partly within and partly without the political247.28subdivision and more of the service is performed within the247.29political subdivision, based on the cost of performancesourced 247.30 to the political subdivision pursuant to section 297A.668. 247.31 [EFFECTIVE DATE.] This section is effective for sales made 247.32 on or after January 1, 2004. 247.33 Sec. 36. Minnesota Statutes 2004, section 297A.99, 247.34 subdivision 9, is amended to read: 247.35 Subd. 9. [ENFORCEMENT; COLLECTION; AND ADMINISTRATION.] 247.36 (a) The commissioner of revenue shall collect the taxes subject 248.1 to this section. The commissioner may collect the tax with the 248.2 state sales and use tax. All taxes under this section are 248.3 subject to the same penalties, interest, and enforcement 248.4 provisions as apply to the state sales and use tax. 248.5 (b) A request for a refund of state sales tax paid in 248.6 excess of the amount of tax legally due includes a request for a 248.7 refund of the political subdivision taxes paid on the goods or 248.8 services. The commissioner shall refund to the taxpayer the 248.9 full amount of the political subdivision taxes paid on exempt 248.10 sales or use. 248.11 (c) A political subdivision shall incur a legal debt to the 248.12 state for refunds of local sales taxes made by the commissioner 248.13 after a tax has terminated when the amount of the refunds 248.14 exceeds the amount of local sales taxes collected for but not 248.15 remitted to the political subdivision. The commissioner of 248.16 revenue shall deduct the amount of the debt from the next 248.17 payment scheduled to be made to the political subdivision under 248.18 section 273.1384, 273.1398, or sections 477A.011 to 477A.014. 248.19 The commissioner shall deposit the money in the state treasury 248.20 and credit it to the general fund. 248.21 [EFFECTIVE DATE.] This section is effective for all refunds 248.22 made on or after the day following final enactment. 248.23 Sec. 37. Minnesota Statutes 2004, section 297A.99, is 248.24 amended by adding a subdivision to read: 248.25 Subd. 12a. [NOTIFICATION OF USE TAX.] Any city or county 248.26 imposing a local sales and use tax, which maintains an official 248.27 web site, must display on its main home page a notice that 248.28 residents and businesses in the city or county may owe a local 248.29 use tax on purchases of goods and services made outside of the 248.30 city or county limits. The notice must provide information, 248.31 including a link to any relevant Department of Revenue Web site, 248.32 on how the taxpayer may get information and forms necessary for 248.33 calculating and paying the tax. If the city or county provides 248.34 and bills for sewer, water, garbage collection, or other public 248.35 utility services, the billing statement must also include a 248.36 notice that residents and businesses may owe a local use tax on 249.1 purchases made outside of the city or county limits and provide 249.2 information on how the taxpayer may get information and forms 249.3 necessary for calculating and paying the tax. 249.4 [EFFECTIVE DATE.] This section is effective January 1, 2006. 249.5 Sec. 38. Minnesota Statutes 2004, section 477A.016, is 249.6 amended to read: 249.7 477A.016 [NEW TAXES PROHIBITED.] 249.8 No county, city, town or other taxing authority shall 249.9 increase a present tax or impose a new tax on sales or income, 249.10 except as provided in section 297A.981. 249.11 [EFFECTIVE DATE.] This section is effective July 1, 2005. 249.12 Sec. 39. Laws 1998, chapter 389, article 8, section 43, 249.13 subdivision 3, is amended to read: 249.14 Subd. 3. [USE OF REVENUES.] Revenues received from the 249.15 taxes authorized by subdivisions 1 and 2 must be used by the 249.16 city to pay for the cost of collecting and administering the 249.17 taxes and to pay for the following projects: 249.18 (1) transportation infrastructure improvements including 249.19 both highway and airport improvements; 249.20 (2) improvements to the civic center complex; 249.21 (3) a municipal water, sewer, and storm sewer project 249.22 necessary to improve regional ground water quality; and 249.23 (4) construction of a regional recreation and sports center 249.24 andassociatedother facilities available for both community and 249.25 student use, located at or adjacent to the Rochester center. 249.26 The total amount of capital expenditures or bonds for these 249.27 projects that may be paid from the revenues raised from the 249.28 taxes authorized in this section may not exceed $71,500,000. 249.29 The total amount of capital expenditures or bonds for the 249.30 project in clause (4) that may be paid from the revenues raised 249.31 from the taxes authorized in this section may not exceed 249.32 $20,000,000. 249.33 [EFFECTIVE DATE; LOCAL APPROVAL.] This section is effective 249.34 the day after the governing body of Rochester and its chief 249.35 clerical officer timely complete their compliance with Minnesota 249.36 Statutes, section 645.021, subdivisions 2 and 3. 250.1 Sec. 40. Laws 2001, First Special Session chapter 5, 250.2 article 12, section 95, as amended by Laws 2002, chapter 377, 250.3 article 3, section 24, and Laws 2003, First Special Session 250.4 chapter 21, article 8, section 15, is amended to read: 250.5 Sec. 95. [REPEALER.] 250.6 (a) Minnesota Statutes 2000, sections 297A.61, subdivision 250.7 16; 297A.68, subdivision 21; and 297A.71, subdivision 2, are 250.8 repealed effective for sales and purchases occurring after June 250.9 30, 2001, except that the repeal of section 297A.61, subdivision 250.10 16, paragraph (d), is effective for sales and purchases 250.11 occurring after July 31, 2001. 250.12 (b) Minnesota Statutes 2000,sectionssection 297A.62, 250.13 subdivision 2,and 297A.64, subdivision 1, areis repealed 250.14 effective for sales and purchases made after December 31, 2005. 250.15 (c) Minnesota Statutes 2000, section 297A.71, subdivision 250.16 15, is repealed effective for sales and purchases made after 250.17 June 30, 2002. 250.18 (d) Minnesota Statutes 2000, section 297A.71, subdivision 250.19 16, is repealed effective for sales and purchases occurring 250.20 after December 31, 2002. 250.21 [EFFECTIVE DATE.] This section is effective the day 250.22 following final enactment. 250.23 Sec. 41. Laws 2002, chapter 377, article 3, section 4, the 250.24 effective date, is amended to read: 250.25 [EFFECTIVE DATE.]With the exception of clause (2), item250.26(ii),This section is effective for sales and purchases made 250.27 after June 30, 2002.Clause (2), item (ii), is effective for250.28sales and purchases made after June 30, 2002, and before January250.291, 2006.250.30 Sec. 42. [REPEALER.] 250.31 Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, 250.32 subparts 5 and 6; 8130.0400, subpart 9; 8130.1200, subparts 5 250.33 and 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1 250.34 and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200; 250.35 8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 250.36 5; and 8130.8800, subpart 4, are repealed. 251.1 [EFFECTIVE DATE.] This section is effective the day 251.2 following final enactment. 251.3 ARTICLE 8 251.4 SPECIAL TAXES AND FEES 251.5 Section 1. Minnesota Statutes 2004, section 240.30, is 251.6 amended by adding a subdivision to read: 251.7 Subd. 11. [FRANCHISE FEE.] As a condition of operating a 251.8 card club under this section, the licensee must pay a fee to the 251.9 commission equal to 15 percent of the gross revenues, less any 251.10 refunds, for charges imposed under subdivision 4. Payment, 251.11 collection, and administration of the fee must be made in the 251.12 same manner and under the terms provided under section 240.15 251.13 for the tax on pari-mutuel pools. The commission shall deposit 251.14 all of the revenues from the fee in the state treasury and 251.15 amounts deposited must be credited to the general fund. The 251.16 amount of the fee under this subdivision does not reduce the 251.17 obligation to set aside revenues from the card club under 251.18 section 240.135. 251.19 [EFFECTIVE DATE.] This section is effective for charges and 251.20 revenues received after June 30, 2005. 251.21 Sec. 2. Minnesota Statutes 2004, section 287.04, is 251.22 amended to read: 251.23 287.04 [EXEMPTIONS.] 251.24 The tax imposed by section 287.035 does not apply to: 251.25 (a) A decree of marriage dissolution or an instrument made 251.26 pursuant to it. 251.27 (b) A mortgage given to correct a misdescription of the 251.28 mortgaged property. 251.29 (c) A mortgage or other instrument that adds additional 251.30 security for the same debt for which mortgage registry tax has 251.31 been paid. 251.32 (d) A contract for the conveyance of any interest in real 251.33 property, including a contract for deed. 251.34 (e) A mortgage secured by real property subject to the 251.35 minerals production tax of sections 298.24 to 298.28. 251.36 (f) The principal amount of a mortgage loan made under a 252.1 low and moderate income or other affordable housing program, if 252.2 the mortgagee is a federal, state, or local government agency. 252.3 (g) Mortgages granted by fraternal benefit societies 252.4 subject to section 64B.24. 252.5 (h) A mortgage amendment or extension, as defined in 252.6 section 287.01. 252.7 (i) An agricultural mortgage if the proceeds of the loan 252.8 secured by the mortgage are used to acquire or improve real 252.9 property classified under section 273.13, subdivision 23, 252.10 paragraph (a), or (b), clause (1), (2), or (3). 252.11 (j) A mortgage on an armory building as set forth in 252.12 section 193.147. 252.13 [EFFECTIVE DATE.] This section is effective the day 252.14 following final enactment. 252.15 Sec. 3. Minnesota Statutes 2004, section 295.52, 252.16 subdivision 4, is amended to read: 252.17 Subd. 4. [USE TAX; PRESCRIPTION DRUGS.] (a) A person that 252.18 receives prescription drugs for resale or use in Minnesota, 252.19 other than from a wholesale drug distributor that is subject to 252.20 tax under subdivision 3, is subject to a tax equal to the price 252.21 paid to the wholesale drug distributor multiplied by the tax 252.22 percentage specified in this section. Liability for the tax is 252.23 incurred when prescription drugs are received or delivered in 252.24 Minnesota by the person. 252.25 (b) A person that receives prescription drugs for use in 252.26 Minnesota from a nonresident pharmacy required to be registered 252.27 under section 151.19 is subject to a tax equal to the price paid 252.28 by the nonresident pharmacy to the wholesale drug distributor or 252.29 the price received by the nonresident pharmacy, whichever is 252.30 lower, multiplied by the tax percentage specified in this 252.31 section. Liability for the tax is incurred when prescription 252.32 drugs are received in Minnesota by the person. 252.33 (c) A tax imposed under this subdivision does not apply to 252.34 purchases by an individual for personal use or consumption. 252.35 [EFFECTIVE DATE.] This section is effective for purchases 252.36 made after June 30, 2005. 253.1 Sec. 4. Minnesota Statutes 2004, section 295.53, 253.2 subdivision 1, is amended to read: 253.3 Subdivision 1. [EXEMPTIONS.] (a) The following payments 253.4 are excluded from the gross revenues subject to the hospital, 253.5 surgical center, or health care provider taxes under sections 253.6 295.50 to 295.59: 253.7 (1) payments received for services provided under the 253.8 Medicare program, including payments received from the 253.9 government, and organizations governed by sections 1833 and 1876 253.10 of title XVIII of the federal Social Security Act, United States 253.11 Code, title 42, section 1395, and enrollee deductibles, 253.12 coinsurance, and co-payments, whether paid by the Medicare 253.13 enrollee or by a Medicare supplemental coverage as defined in 253.14 section 62A.011, subdivision 3, clause (10), or by Medicaid 253.15 payments under title XIX of the federal Social Security Act. 253.16 Payments for services not covered by Medicare are taxable; 253.17 (2) payments received for home health care services; 253.18 (3) payments received from hospitals or surgical centers 253.19 for goods and services on which liability for tax is imposed 253.20 under section 295.52 or the source of funds for the payment is 253.21 exempt under clause (1), (7), (10), or (14); 253.22 (4) payments received from health care providers for goods 253.23 and services on which liability for tax is imposed under this 253.24 chapter or the source of funds for the payment is exempt under 253.25 clause (1), (7), (10), or (14); 253.26 (5) amounts paid for legend drugs, other than nutritional 253.27 products, to a wholesale drug distributor who is subject to tax 253.28 under section 295.52, subdivision 3, reduced by reimbursements 253.29 received for legend drugs otherwise exempt under this chapter; 253.30 (6) payments received by a health care provider or the 253.31 wholly owned subsidiary of a health care provider for care 253.32 provided outside Minnesota; 253.33 (7) payments received from the chemical dependency fund 253.34 under chapter 254B; 253.35 (8) payments received in the nature of charitable donations 253.36 that are not designated for providing patient services to a 254.1 specific individual or group; 254.2 (9) payments received for providing patient services 254.3 incurred through a formal program of health care research 254.4 conducted in conformity with federal regulations governing 254.5 research on human subjects. Payments received from patients or 254.6 from other persons paying on behalf of the patients are subject 254.7 to tax; 254.8 (10) payments received from any governmental agency for 254.9 services benefiting the public, not including payments made by 254.10 the government in its capacity as an employer or insurer or 254.11 payments made by the government for services provided under 254.12 general assistance medical care, the MinnesotaCare program, or 254.13 the medical assistance program governed by title XIX of the 254.14 federal Social Security Act, United States Code, title 42, 254.15 sections 1396 to 1396v; 254.16 (11) government payments received by the commissioner of 254.17 human services for state-operated services; 254.18 (12) payments received by a health care provider for 254.19 hearing aids and related equipment or prescription eyewear 254.20 delivered outside of Minnesota; 254.21 (13) payments received by an educational institution from 254.22 student tuition, student activity fees, health care service 254.23 fees, government appropriations, donations, or grants, and for 254.24 services identified in and provided under an individualized 254.25 education plan as defined in section 256B.0625 or Code of 254.26 Federal Regulations, chapter 34, section 300.340(a). Fee for 254.27 service payments and payments for extended coverage are taxable; 254.28and254.29 (14) payments received under the federal Employees Health 254.30 Benefits Act, United States Code, title 5, section 8909(f), as 254.31 amended by the Omnibus Reconciliation Act of 1990. Enrollee 254.32 deductibles, coinsurance, and co-payments are subject to tax; 254.33 and 254.34 (15) payments received under the federal Tricare program, 254.35 Code of Federal Regulations, title 32, section 199.17(a)(7). 254.36 Enrollee deductibles, coinsurance, and co-payments are subject 255.1 to tax. 255.2 (b) Payments received by wholesale drug distributors for 255.3 legend drugs sold directly to veterinarians or veterinary bulk 255.4 purchasing organizations are excluded from the gross revenues 255.5 subject to the wholesale drug distributor tax under sections 255.6 295.50 to 295.59. 255.7 [EFFECTIVE DATE.] The change made to paragraph (a), clause 255.8 (14), of this section is effective for enrollee deductibles, 255.9 coinsurance, and co-payments received under the federal 255.10 Employees Health Benefits Act on or after the day following 255.11 final enactment. Paragraph (a), clause (15), is effective for 255.12 gross revenues received under the federal Tricare program after 255.13 December 31, 2004. 255.14 Sec. 5. Minnesota Statutes 2004, section 295.582, is 255.15 amended to read: 255.16 295.582 [AUTHORITY.] 255.17 Subdivision 1. [TRANSFER TO THIRD-PARTY PURCHASERS.] (a) A 255.18 hospital, surgical center, or health care provider that is 255.19 subject to a tax under section 295.52, or a pharmacy that has 255.20 paid additional expense transferred under this section by a 255.21 wholesale drug distributor, may transfer additional expense 255.22 generated by section 295.52 obligations on to all third-party 255.23 contracts for the purchase of health care services on behalf of 255.24 a patient or consumer. The additional expense transferred to 255.25 the third-party purchaser must not exceed the tax percentage 255.26 specified in section 295.52 multiplied against the gross 255.27 revenues received under the third-party contract, and the tax 255.28 percentage specified in section 295.52 multiplied against 255.29 co-payments and deductibles paid by the individual patient or 255.30 consumer. A health care provider who chooses to transfer the 255.31 tax specified in section 295.52 may itemize the tax on patient 255.32 billings. The expense must not be generated on revenues derived 255.33 from payments that are excluded from the tax under section 255.34 295.53. All third-party purchasers of health care services 255.35 including, but not limited to, third-party purchasers regulated 255.36 under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 256.1 or 79A, or under section 471.61 or 471.617, and a pharmacy 256.2 benefits manager must pay the transferred expense in addition to 256.3 any payments due under existing contracts with the hospital, 256.4 surgical center, pharmacy, or health care provider, to the 256.5 extent allowed under federal law. A third-party purchaser of 256.6 health care services includes, but is not limited to, a health 256.7 carrier or community integrated service network that pays for 256.8 health care services on behalf of patients or that reimburses, 256.9 indemnifies, compensates, or otherwise insures patients for 256.10 health care services and for purposes of this section, a 256.11 pharmacy benefits manager means an entity that performs pharmacy 256.12 benefits management. A third-party purchaser shall comply with 256.13 this section regardless of whether the third-party purchaser is 256.14 a for-profit, not-for-profit, or nonprofit entity or whether the 256.15 health care provider has chosen to itemize the tax on patient 256.16 billings. If the third-party purchaser's contract limits 256.17 provider payment to a specified amount, such as an usual and 256.18 customary fee schedule, the third-party purchaser must still pay 256.19 the tax transferred or itemized by a health care provider based 256.20 upon the contractual fee. A third-party purchaser is also 256.21 responsible for reimbursing providers for the percentage tax 256.22 levied on co-payments or deductibles paid by the insured. A 256.23 wholesale drug distributor may transfer additional expense 256.24 generated by section 295.52 obligations to entities that 256.25 purchase from the wholesaler, and the entities must pay the 256.26 additional expense. Nothing in this section limits the ability 256.27 of a hospital, surgical center, pharmacy, wholesale drug 256.28 distributor, or health care provider to recover all or part of 256.29 the section 295.52 obligation by other methods, including 256.30 increasing fees or charges. Nothing in this section prohibits a 256.31 pharmacy from passing on additional fees or charges to a 256.32 pharmacy benefits manager. 256.33 (b) Each third-party purchaser regulated under any chapter 256.34 cited in paragraph (a) shall include with its annual renewal for 256.35 certification of authority or licensure documentation indicating 256.36 compliance with paragraph (a). The documentation must include 257.1 information relating to a third-party purchaser's means for 257.2 compliance with paragraph (a) for health care providers who 257.3 itemize the tax on patient billings. 257.4 (c) Any hospital, surgical center, or health care provider 257.5 subject to a tax under section 295.52 or a pharmacy that has 257.6 paid additional expense transferred under this section by a 257.7 wholesale drug distributor may file a complaint with the 257.8 commissioner responsible for regulating the third-party 257.9 purchaser if at any time the third-party purchaser fails to 257.10 comply with paragraph (a). 257.11 (d) If the commissioner responsible for regulating the 257.12 third-party purchaser finds at any time that the third-party 257.13 purchaser has not complied with paragraph (a), the commissioner 257.14 may take enforcement action against a third-party purchaser 257.15 which is subject to the commissioner's regulatory jurisdiction 257.16 and which does not allow a hospital, surgical center, pharmacy, 257.17 or provider to pass-through the tax. The commissioner may by 257.18 order fine or censure the third-party purchaser or revoke or 257.19 suspend the certificate of authority or license of the 257.20 third-party purchaser to do business in this state if the 257.21 commissioner finds that the third-party purchaser has not 257.22 complied with this section. The third-party purchaser may 257.23 appeal the commissioner's order through a contested case hearing 257.24 in accordance with chapter 14. 257.25 Subd. 2. [WHOLESALE DRUG DISTRIBUTOR TAX; AGREEMENT.] A 257.26 contracting agreement between a health plan company or a 257.27 pharmacy benefits manager and a resident or nonresident pharmacy 257.28 registered under chapter 151, may not prohibit: 257.29 (1) a pharmacy that has paid additional expense transferred 257.30 under this section by a wholesale drug distributor from 257.31 exercising its option under this section to transfer such 257.32 additional expenses generated by the section 295.52 obligations 257.33 on to the health plan company, a pharmacy benefits manager, or a 257.34 third-party purchaser; or 257.35 (2) a pharmacy that is subject to tax under section 295.52, 257.36 subdivision 4, from exercising its option under this section to 258.1 recover all or part of the section 295.52 obligations from the 258.2 health plan company, a pharmacy benefits manager, or a 258.3 third-party purchaser by other methods, including increasing 258.4 fees or charges. 258.5 Sec. 6. Minnesota Statutes 2004, section 295.60, 258.6 subdivision 3, is amended to read: 258.7 Subd. 3. [PAYMENT.] (a) Each furrier shall make estimated 258.8 payments of the taxes for the calendar year in quarterly 258.9 installments to the commissioner by April 15, July 15, October 258.10 15, and January 15 of the following calendar year. 258.11 (b) Estimated tax payments are not required if: 258.12 (1) the tax for the current calendar year is less than 258.13 $500; or 258.14 (2) the tax for the previous calendar year is less than 258.15 $500, if the taxpayer had a tax liability and was doing business 258.16 the entire year. 258.17 (c) Underpayment of estimated installments bear interest at 258.18 the rate specified in section 270.75, from the due date of the 258.19 payment until paid or until the due date of the annual return, 258.20 whichever comes first. An underpayment of an estimated 258.21 installment is the difference between the amount paid and the 258.22 lesser of (1)90 percent of one-quarter of the tax for the258.23calendar yearthe tax for the actual gross revenues received 258.24 during the quarter, or (2) one-quarter of the total tax for the 258.25 previous calendar year if the taxpayer had a tax liability and 258.26 was doing business the entire year. 258.27 [EFFECTIVE DATE.] This section is effective for gross 258.28 revenues received after December 31, 2004. 258.29 Sec. 7. [295.75] [LIQUOR GROSS RECEIPTS TAX.] 258.30 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 258.31 section, the following terms have the meanings given. 258.32 (b) "Commissioner" means the commissioner of revenue. 258.33 (c) "Gross receipts" means the total amount received, in 258.34 money or by barter or exchange, for all liquor sales at retail 258.35 as measured by the sales price, but does not include any taxes 258.36 imposed directly on the consumer that are separately stated on 259.1 the invoice, bill of sale, or similar document given to the 259.2 purchaser. 259.3 (d) "Liquor" means: 259.4 (1) intoxicating liquor, as defined in section 340A.101, 259.5 subdivision 14; 259.6 (2) beverage containing intoxicating liquor; and 259.7 (3) 3.2 percent malt liquor, as defined in section 259.8 340A.101, subdivision 19, when sold at an on-sale or off-sale 259.9 municipal liquor store or other establishment licensed to sell 259.10 any type of intoxicating liquor. 259.11 (e) "Liquor retailer" means a retailer that sells liquor. 259.12 (f) "Retail sale" has the meaning given in section 297A.61, 259.13 subdivision 4. 259.14 Subd. 2. [GROSS RECEIPTS TAX IMPOSED.] A tax is imposed on 259.15 each liquor retailer equal to 2.5 percent of gross receipts from 259.16 retail sales in Minnesota of liquor. 259.17 Subd. 3. [USE TAX IMPOSED; CREDIT FOR TAXES PAID.] (a) A 259.18 person that receives liquor for use or storage in Minnesota, 259.19 other than from a liquor retailer that paid the tax under 259.20 subdivision 2, is subject to tax at the rate imposed under 259.21 subdivision 2. Liability for the tax is incurred when the 259.22 person has possession of the liquor in Minnesota. The tax must 259.23 be remitted to the commissioner in the same manner prescribed 259.24 for the taxes imposed under chapter 297A. 259.25 (b) A person that has paid taxes to another jurisdiction on 259.26 the same transaction and is subject to tax under this section is 259.27 entitled to a credit for the tax legally due and paid to another 259.28 jurisdiction to the extent of the lesser of (1) the tax actually 259.29 paid to the other jurisdiction, or (2) the amount of tax imposed 259.30 by Minnesota on the transaction subject to tax in the other 259.31 jurisdiction. 259.32 Subd. 4. [TAX COLLECTION REQUIRED.] A liquor retailer with 259.33 nexus in Minnesota, who is not subject to tax under subdivision 259.34 2, is required to collect the tax imposed under subdivision 3 259.35 from the purchaser of the liquor and give the purchaser a 259.36 receipt for the tax paid. The tax collected must be remitted to 260.1 the commissioner in the same manner prescribed for the taxes 260.2 imposed under chapter 297A. 260.3 Subd. 5. [TAXES PAID TO ANOTHER JURISDICTION; CREDIT.] A 260.4 liquor retailer that has paid taxes to another jurisdiction 260.5 measured by gross receipts and is subject to tax under this 260.6 section on the same gross receipts is entitled to a credit for 260.7 the tax legally due and paid to another jurisdiction to the 260.8 extent of the lesser of (1) the tax actually paid to the other 260.9 jurisdiction, or (2) the amount of tax imposed by Minnesota on 260.10 the gross receipts subject to tax in the other taxing 260.11 jurisdictions. 260.12 Subd. 6. [EXEMPTIONS.] All of the exemptions applicable to 260.13 the taxes imposed under chapter 297A are applicable to the taxes 260.14 imposed under this section. 260.15 Subd. 7. [SOURCING OF SALES.] All of the provisions of 260.16 section 297A.668 apply to the taxes imposed by this section. 260.17 Subd. 8. [PAYMENT; REPORTING.] A liquor retailer shall 260.18 report the tax on a return prescribed by the commissioner of 260.19 revenue, and shall remit the tax with the return. The return 260.20 and the tax must be filed and paid using the filing cycle and 260.21 due dates provided for taxes imposed under chapter 297A. 260.22 Subd. 9. [ADMINISTRATION.] Unless specifically provided 260.23 otherwise by this section, the audit, assessment, refund, 260.24 penalty, interest, enforcement, collection remedies, appeal, and 260.25 administrative provisions of chapters 270 and 289A that are 260.26 applicable to taxes imposed under chapter 297A apply to taxes 260.27 imposed under this section. 260.28 Subd. 10. [INTEREST ON OVERPAYMENTS.] Interest must be 260.29 paid on an overpayment refunded or credited to the taxpayer from 260.30 the date of payment of the tax until the date the refund is paid 260.31 or credited. For purposes of this subdivision, the date of 260.32 payment is the due date of the return or the date of actual 260.33 payment of the tax, whichever is later. 260.34 Subd. 11. [DEPOSIT OF REVENUES.] The commissioner shall 260.35 deposit all revenues, including penalties and interest, derived 260.36 from the tax imposed by this section in the general fund. 261.1 [EFFECTIVE DATE.] This section is effective for sales and 261.2 purchases occurring on or after January 1, 2006. 261.3 Sec. 8. Minnesota Statutes 2004, section 296A.22, is 261.4 amended by adding a subdivision to read: 261.5 Subd. 9. [ABATEMENT OF PENALTY.] (a) The commissioner may 261.6 by written order abate any penalty imposed under this section, 261.7 if in the commissioner's opinion there is reasonable cause to do 261.8 so. 261.9 (b) A request for abatement of penalty must be filed with 261.10 the commissioner within 60 days of the date the notice stating 261.11 that a penalty has been imposed was mailed to the taxpayer's 261.12 last known address. 261.13 (c) If the commissioner issues an order denying a request 261.14 for abatement of penalty, the taxpayer may file an 261.15 administrative appeal as provided in section 296A.25 or appeal 261.16 to Tax Court as provided in section 271.06. If the commissioner 261.17 does not issue an order on the abatement request within 60 days 261.18 from the date the request is received, the taxpayer may appeal 261.19 to Tax Court as provided in section 271.06. 261.20 [EFFECTIVE DATE.] This section is effective for penalties 261.21 imposed on or after the day following final enactment. 261.22 Sec. 9. Minnesota Statutes 2004, section 297E.01, 261.23 subdivision 5, is amended to read: 261.24 Subd. 5. [DISTRIBUTOR.] "Distributor" means a distributor 261.25 as defined in section 349.12, subdivision 11, or a person or 261.26 linked bingo game provider who markets, sells, or provides 261.27 gambling product to a person or entity for resale or use at the 261.28 retail level. 261.29 [EFFECTIVE DATE.] This section is effective the day 261.30 following final enactment. 261.31 Sec. 10. Minnesota Statutes 2004, section 297E.01, 261.32 subdivision 7, is amended to read: 261.33 Subd. 7. [GAMBLING PRODUCT.] "Gambling product" means 261.34 bingo hard cards, bingo paper, orsheets, or linked bingo paper 261.35 sheets; pull-tabs; tipboards; paddletickets and paddleticket 261.36 cards; raffle tickets; or any other ticket, card, board, 262.1 placard, device, or token that represents a chance, for which 262.2 consideration is paid, to win a prize. 262.3 [EFFECTIVE DATE.] This section is effective the day 262.4 following final enactment. 262.5 Sec. 11. Minnesota Statutes 2004, section 297E.01, is 262.6 amended by adding a subdivision to read: 262.7 Subd. 9a. [LINKED BINGO GAME.] "Linked bingo game" means a 262.8 bingo game played at two or more locations where licensed 262.9 organizations are authorized to conduct bingo, when there is a 262.10 common prize pool and a common selection of numbers or symbols 262.11 conducted at one location, and when the results of the selection 262.12 are transmitted to all participating locations by satellite, 262.13 telephone, or other means by a linked bingo game provider. 262.14 [EFFECTIVE DATE.] This section is effective the day 262.15 following final enactment. 262.16 Sec. 12. Minnesota Statutes 2004, section 297E.01, is 262.17 amended by adding a subdivision to read: 262.18 Subd. 9b. [LINKED BINGO GAME PROVIDER.] "Linked bingo game 262.19 provider" means any person who provides the means to link bingo 262.20 prizes in a linked bingo game, who provides linked bingo paper 262.21 sheets to the participating organizations, who provides linked 262.22 bingo prize management, and who provides the linked bingo game 262.23 system. 262.24 [EFFECTIVE DATE.] This section is effective the day 262.25 following final enactment. 262.26 Sec. 13. Minnesota Statutes 2004, section 297E.06, 262.27 subdivision 2, is amended to read: 262.28 Subd. 2. [BUSINESS RECORDS.] An organization shall 262.29 maintain records supporting the gambling activity reported to 262.30 the commissioner. Records include, but are not limited to, the 262.31 following items: 262.32 (1) all winning and unsold tickets, cards, or stubs for 262.33 pull-tab, tipboard, paddlewheel, and raffle games; 262.34 (2) all reports and statements, including checker's 262.35 records, for each bingo occasion; 262.36 (3) all cash journals and ledgers, deposit slips, register 263.1 tapes, and bank statements supporting gambling activity 263.2 receipts; 263.3 (4) all invoices that represent purchases of gambling 263.4 product; 263.5 (5) all canceled checks or copies of substitute checks as 263.6 defined in Public Law 108-100, section 3, check recorders, 263.7 journals and ledgers, vouchers, invoices, bank statements, and 263.8 other documents supporting gambling activity expenditures; and 263.9 (6) all organizational meeting minutes. 263.10 All records required to be kept by this section must be 263.11 preserved by the organization for at least 3-1/2 years and may 263.12 be inspected by the commissioner of revenue at any reasonable 263.13 time without notice or a search warrant. 263.14 [EFFECTIVE DATE.] This section is effective July 1, 2005. 263.15 Sec. 14. Minnesota Statutes 2004, section 297E.07, is 263.16 amended to read: 263.17 297E.07 [INSPECTION RIGHTS.] 263.18 At any reasonable time, without notice and without a search 263.19 warrant, the commissioner may enter a place of business of a 263.20 manufacturer, distributor,ororganization, or linked bingo game 263.21 provider; any site from which pull-tabs or tipboards or other 263.22 gambling equipment or gambling product are being manufactured, 263.23 stored, or sold; or any site at which lawful gambling is being 263.24 conducted, and inspect the premises, books, records, and other 263.25 documents required to be kept under this chapter to determine 263.26 whether or not this chapter is being fully complied with. If 263.27 the commissioner is denied free access to or is hindered or 263.28 interfered with in making an inspection of the place of 263.29 business, books, or records, the permit of the distributor may 263.30 be revoked by the commissioner, and the license of the 263.31 manufacturer, the distributor,orthe organization, or linked 263.32 bingo game provider may be revoked by the board. 263.33 [EFFECTIVE DATE.] This section is effective the day 263.34 following final enactment. 263.35 Sec. 15. Minnesota Statutes 2004, section 297F.08, 263.36 subdivision 12, is amended to read: 264.1 Subd. 12. [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 264.2 person may not transport or cause to be transported from this 264.3 state cigarettes for sale in another state without first 264.4 affixing to the cigarettes the stamp required by the state in 264.5 which the cigarettes are to be sold or paying any other excise 264.6 tax on the cigarettes imposed by the state in which the 264.7 cigarettes are to be sold. 264.8 (b) A person may not affix to cigarettes the stamp required 264.9 by another state or pay any other excise tax on the cigarettes 264.10 imposed by another state if the other state prohibits stamps 264.11 from being affixed to the cigarettes, prohibits the payment of 264.12 any other excise tax on the cigarettes, or prohibits the sale of 264.13 the cigarettes. 264.14 (c) Not later than 15 days after the end of each calendar 264.15 quarter, a person who transports or causes to be transported 264.16 from this state cigarettes for sale in another state shall 264.17 submit to the commissioner a report identifying the quantity and 264.18 style of each brand of the cigarettes transported or caused to 264.19 be transported in the preceding calendar quarter, and the name 264.20 and address of each recipient of the cigarettes. This reporting 264.21 requirement only applies to cigarettes manufactured by companies 264.22 that are not original or subsequent participating manufacturers 264.23 in the Master Settlement Agreement with other states. 264.24 (d) For purposes of this section, "person" has the meaning 264.25 given in section 297F.01, subdivision 12. Person does not 264.26 include any common or contract carrier, or public warehouse that 264.27 is not owned, in whole or in part, directly or indirectly by 264.28 such person, and does not include a manufacturer thathas264.29entered intois an original or subsequent participating 264.30 manufacturer in the Master Settlement Agreement with other 264.31 states. 264.32 [EFFECTIVE DATE.] This section is effective the day 264.33 following final enactment. 264.34 Sec. 16. Minnesota Statutes 2004, section 297F.08, is 264.35 amended by adding a subdivision to read: 264.36 Subd. 13. [BOND.] The commissioner may require the 265.1 furnishing of a corporate surety bond or a certified check in an 265.2 amount suitable to guarantee payment of the tax stamps purchased 265.3 by a distributor. The bond or certified check may be required 265.4 when the commissioner determines that a distributor is (1) 265.5 delinquent in the filing of any return required under this 265.6 chapter, or (2) delinquent in the payment of any uncontested tax 265.7 liability under this chapter. The distributor shall furnish the 265.8 bond or certified check for a period of two years, after which, 265.9 if the distributor has not been delinquent in the filing of any 265.10 returns required under this chapter, or delinquent in the paying 265.11 of any tax under this chapter, a bond or certified check is no 265.12 longer required. The commissioner at any time may apply the 265.13 bond or certified check to any unpaid taxes or fees, including 265.14 interest and penalties, owed to the department by the 265.15 distributor. 265.16 [EFFECTIVE DATE.] This section is effective the day 265.17 following final enactment. 265.18 Sec. 17. Minnesota Statutes 2004, section 297F.09, 265.19 subdivision 1, is amended to read: 265.20 Subdivision 1. [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 265.21 or before the 18th day of each calendar month, a distributor 265.22 with a place of business in this state shall file a return with 265.23 the commissioner showing the quantity of cigarettes manufactured 265.24 or brought in from outside the state or purchased during the 265.25 preceding calendar month and the quantity of cigarettes sold or 265.26 otherwise disposed of in this state and outside this state 265.27 during that month. A licensed distributor outside this state 265.28 shall in like manner file a return showing the quantity of 265.29 cigarettes shipped or transported into this state during the 265.30 preceding calendar month. Returns must be made in the form and 265.31 manner prescribed by the commissioner and must contain any other 265.32 information required by the commissioner. The return must be 265.33 accompanied by a remittance for the full unpaid tax liability 265.34 shown by it.The return for the May liability and 85 percent of265.35the estimated June liability is due on the date payment of the265.36tax is due.For distributors subject to the accelerated tax 266.1 payment requirements in subdivision 10, the return for the May 266.2 liability is due two business days before June 30th of the year 266.3 and the return for the June liability is due on or before August 266.4 18th of the year. 266.5 [EFFECTIVE DATE.] This section is effective the day 266.6 following final enactment. 266.7 Sec. 18. Minnesota Statutes 2004, section 297F.09, 266.8 subdivision 2, is amended to read: 266.9 Subd. 2. [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 266.10 On or before the 18th day of each calendar month, a distributor 266.11 with a place of business in this state shall file a return with 266.12 the commissioner showing the quantity and wholesale sales price 266.13 of each tobacco product: 266.14 (1) brought, or caused to be brought, into this state for 266.15 sale; and 266.16 (2) made, manufactured, or fabricated in this state for 266.17 sale in this state, during the preceding calendar month. 266.18 Every licensed distributor outside this state shall in like 266.19 manner file a return showing the quantity and wholesale sales 266.20 price of each tobacco product shipped or transported to 266.21 retailers in this state to be sold by those retailers, during 266.22 the preceding calendar month. Returns must be made in the form 266.23 and manner prescribed by the commissioner and must contain any 266.24 other information required by the commissioner. The return must 266.25 be accompanied by a remittance for the full tax liability 266.26 shown.The return for the May liability and 85 percent of the266.27estimated June liability is due on the date payment of the tax266.28is due.For distributors subject to the accelerated tax payment 266.29 requirements in subdivision 10, the return for the May liability 266.30 is due two business days before June 30th of the year and the 266.31 return for the June liability is due on or before August 18th of 266.32 the year. 266.33 [EFFECTIVE DATE.] This section is effective the day 266.34 following final enactment. 266.35 Sec. 19. Minnesota Statutes 2004, section 297F.14, 266.36 subdivision 4, is amended to read: 267.1 Subd. 4. [BAD DEBT.]The commissioner may adopt rules267.2providing a refund of the tax paid under this chapter if the tax267.3paid qualifies as a bad debt under section 166(a) of the267.4Internal Revenue Code.For any reporting period, a taxpayer may 267.5 offset against taxes payable under this chapter the amount of 267.6 taxes previously paid under this chapter that is attributable to 267.7 a bad debt. The taxes must have been included in a transaction 267.8 the consideration for which was a debt owed to the taxpayer and 267.9 which became uncollectible, but only in proportion to the 267.10 portion of debt that became uncollectible. To qualify for 267.11 offset under this subdivision, the debt must have qualified as a 267.12 bad debt under section 166(a) of the Internal Revenue Code. The 267.13 taxpayer may claim the offset within the time period prescribed 267.14 in section 297F.17, subdivision 6. If the taxpayer is no longer 267.15 liable for taxes imposed under this chapter, the commissioner 267.16 shall refund to the taxpayer the amount of the taxes 267.17 attributable to the bad debt. Any recovery of the tax claimed 267.18 as a refund or credit must be reported to the commissioner on 267.19 the tax return for the month in which the recovery is made. If 267.20 the taxpayer is no longer required to file returns under this 267.21 chapter, the taxpayer must reimburse the commissioner for tax 267.22 recovered in the month following the recovery. 267.23 [EFFECTIVE DATE.] This section is effective for claims 267.24 filed on or after July 1, 2005. 267.25 Sec. 20. [297F.25] [CIGARETTE SALES TAX.] 267.26 Subdivision 1. [IMPOSITION.] A tax is imposed on 267.27 distributors on the sale of cigarettes by a cigarette 267.28 distributor to a retailer or cigarette subjobber for resale in 267.29 this state. The tax is equal to 6.5 percent of the weighted 267.30 average retail price. The weighted average retail price must be 267.31 expressed in cents per pack when rounded to the nearest 267.32 one-tenth of a cent. The weighted average retail price must be 267.33 determined annually, with new rates published by May 1, and 267.34 effective for sales on or after August 1. The weighted average 267.35 retail price must be established by surveying cigarette 267.36 retailers statewide in a manner and time determined by the 268.1 commissioner. The determination of the commissioner pursuant to 268.2 this subdivision is not a "rule" and is not subject to the 268.3 Administrative Procedure Act contained in chapter 14. As of 268.4 August 1, 2005, the tax is 20 cents per pack of 20 cigarettes. 268.5 For packs of cigarettes with other than 20 cigarettes, the tax 268.6 must be adjusted proportionally. 268.7 Subd. 2. [PAYMENT.] Each taxpayer must remit payments of 268.8 the taxes to the commissioner on the same dates prescribed under 268.9 section 297F.09, subdivision 1, for cigarette tax returns, 268.10 including the accelerated remittance of the June liability. 268.11 Subd. 3. [RETURN.] A taxpayer must file a return with the 268.12 commissioner on the same dates prescribed under section 297F.09, 268.13 subdivision 1, for cigarette tax returns. Notwithstanding any 268.14 other provisions of this chapter, the tax due on the return is 268.15 based upon actual stamps purchased during the reporting period. 268.16 Subd. 4. [FORM OF RETURN.] The return must contain the 268.17 information and be in the form prescribed by the commissioner. 268.18 Subd. 5. [TAX AS DEBT.] The tax that is required to be 268.19 paid by the distributor is a debt from the retailer or cigarette 268.20 subjobber to the distributor recoverable at law in the same 268.21 manner as other debts. A cigarette retailer or subjobber must 268.22 pay the tax imposed under subdivision 1 to the distributor 268.23 before the 12th day of the month following the month in which 268.24 the cigarettes were purchased from the distributor. 268.25 Subd. 6. [SALES TAX STAMP.] Payment of the tax imposed 268.26 under section 297F.05 and by this section must be evidenced by a 268.27 dual-purpose single stamp affixed to each package. 268.28 Subd. 7. [ADMINISTRATION.] The stamping, audit, 268.29 assessment, interest, penalty, appeal, refund, and collection 268.30 provisions applicable to the taxes imposed under this chapter 268.31 apply to taxes imposed under this section. 268.32 Subd. 8. [DEPOSIT OF REVENUES.] Notwithstanding the 268.33 provisions of section 297F.10, the commissioner shall deposit 268.34 all revenues, including penalties and interest, derived from the 268.35 tax imposed by this section, in the general fund. 268.36 [EFFECTIVE DATE.] This section is effective for all sales 269.1 made on or after August 1, 2005. 269.2 Sec. 21. Minnesota Statutes 2004, section 297G.09, is 269.3 amended by adding a subdivision to read: 269.4 Subd. 9. [QUARTERLY AND ANNUAL PAYMENTS AND RETURNS.] (a) 269.5 If a manufacturer, wholesaler, brewer, or importer has an 269.6 average liquor tax liability equal to or less than $500 per 269.7 month in any quarter of a calendar year, and has substantially 269.8 complied with the state tax laws during the preceding four 269.9 calendar quarters, the manufacturer, wholesaler, brewer, or 269.10 importer may request authorization to file and pay the taxes 269.11 quarterly in subsequent calendar quarters. The authorization 269.12 remains in effect during the period in which the manufacturer's, 269.13 wholesaler's, brewer's, or importer's quarterly returns reflect 269.14 liquor tax liabilities of less than $1,500 and there is 269.15 continued compliance with state tax laws. 269.16 (b) If a manufacturer, wholesaler, brewer, or importer has 269.17 an average liquor tax liability equal to or less than $100 per 269.18 month during a calendar year, and has substantially complied 269.19 with the state tax laws during that period, the manufacturer, 269.20 wholesaler, brewer, or importer may request authorization to 269.21 file and pay the taxes annually in subsequent years. The 269.22 authorization remains in effect during the period in which the 269.23 manufacturer's, wholesaler's, brewer's, or importer's annual 269.24 returns reflect liquor tax liabilities of less than $1,200 and 269.25 there is continued compliance with state tax laws. 269.26 (c) The commissioner may also grant quarterly or annual 269.27 filing and payment authorizations to manufacturers, wholesalers, 269.28 brewers, or importers if the commissioner concludes that the 269.29 manufacturer's, wholesaler's, brewer's, or importer's future tax 269.30 liabilities will be less than the monthly totals identified in 269.31 paragraphs (a) and (b). An authorization granted under this 269.32 paragraph is subject to the same conditions as an authorization 269.33 granted under paragraphs (a) and (b). 269.34 (d) The annual tax return and payments must be filed and 269.35 paid on or before the 18th day of January following the calendar 269.36 year. The quarterly returns and payments must be filed and paid 270.1 on or before April 18 for the quarter ending March 31, on or 270.2 before July 18 for the quarter ending June 30, on or before 270.3 October 18 for the quarter ending September 30, and on or before 270.4 January 18 for the quarter ending December 31. 270.5 [EFFECTIVE DATE.] This section is effective for tax returns 270.6 and payments due on or after January 1, 2006. 270.7 Sec. 22. Minnesota Statutes 2004, section 297I.01, is 270.8 amended by adding a subdivision to read: 270.9 Subd. 6a. [DIRECT BUSINESS.] (a) "Direct business" means 270.10 all insurance provided by an insurance company or its agents, 270.11 and specifically includes stop-loss insurance purchased in 270.12 connection with a self-insurance plan for employee health 270.13 benefits or for other purposes, but excludes: 270.14 (1) reinsurance in which an insurance company assumes the 270.15 liability of another insurance company; and 270.16 (2) self-insurance. 270.17 (b) For purposes of this subdivision, an insurance company 270.18 includes a nonprofit health service corporation, health 270.19 maintenance organization, and community integrated service 270.20 network. 270.21 [EFFECTIVE DATE.] This section is effective for insurance 270.22 premiums received after December 31, 2005. 270.23 Sec. 23. Minnesota Statutes 2004, section 297I.01, is 270.24 amended by adding a subdivision to read: 270.25 Subd. 13a. [REINSURANCE.] "Reinsurance" is insurance 270.26 whereby an insurance company, for a consideration, agrees to 270.27 indemnify another insurance company against all or part of the 270.28 loss which the latter may sustain under the policy or policies 270.29 which it has issued. 270.30 [EFFECTIVE DATE.] This section is effective the day 270.31 following final enactment. 270.32 Sec. 24. Minnesota Statutes 2004, section 297I.05, 270.33 subdivision 4, is amended to read: 270.34 Subd. 4. [MUTUAL PROPERTY AND CASUALTY COMPANIES WITH 270.35 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 270.36 tax is imposed on mutual property and casualty companies that 271.1 had total assets greater than $5,000,000 at the end of the 271.2 calendar year but that had total assets less than $1,600,000,000 271.3 on December 31, 1989. The rate of tax is equal to: 271.4 (1)two percent of gross premiums less return premiums on271.5all direct business received by the insurer or agents of the271.6insurer in Minnesotathe tax under subdivision 14 for life 271.7 insurance, in cash or otherwise, during the year; and 271.8 (2) 1.26 percent of gross premiums less return premiums on 271.9 all other direct business received by the insurer or agents of 271.10 the insurer in Minnesota, in cash or otherwise, during the year. 271.11 [EFFECTIVE DATE.] This section is effective for premiums 271.12 received after December 31, 2007. 271.13 Sec. 25. Minnesota Statutes 2004, section 297I.05, 271.14 subdivision 5, is amended to read: 271.15 Subd. 5. [HEALTH MAINTENANCE ORGANIZATIONS, NONPROFIT 271.16 HEALTH SERVICE PLAN CORPORATIONS, AND COMMUNITY INTEGRATED 271.17 SERVICE NETWORKS.] (a)Health maintenance organizations,271.18community integrated service networks, and nonprofit health care271.19service plan corporations are exempt from the tax imposed under271.20this section for premiums received in calendar years 2001 to271.212003.271.22(b) For calendar years after 2003,A tax is imposed on 271.23 health maintenance organizations, community integrated service 271.24 networks, and nonprofit health care service plan corporations. 271.25 The rate of tax is equal to one percent of gross premiums less 271.26 return premiums on all direct business received by the 271.27 organization, network, or corporation or its agents in 271.28 Minnesota, in cash or otherwise, in the calendar year. 271.29(c) In approving the premium rates as required in sections271.3062L.08, subdivision 8, and 62A.65, subdivision 3, the271.31commissioners of health and commerce shall ensure that any271.32exemption from tax as described in paragraph (a) is reflected in271.33the premium rate.271.34(d)(b) The commissioner shall deposit all revenues, 271.35 including penalties and interest, collected under this chapter 271.36 from health maintenance organizations, community integrated 272.1 service networks, and nonprofit health service plan corporations 272.2 in the health care access fund. Refunds of overpayments of tax 272.3 imposed by this subdivision must be paid from the health care 272.4 access fund. There is annually appropriated from the health 272.5 care access fund to the commissioner the amount necessary to 272.6 make any refunds of the tax imposed under this subdivision. 272.7 [EFFECTIVE DATE.] This section is effective January 1, 2005. 272.8 Sec. 26. Minnesota Statutes 2004, section 297I.05, is 272.9 amended by adding a subdivision to read: 272.10 Subd. 14. [LIFE INSURANCE.] A tax is imposed on life 272.11 insurance. The rate of the tax equals 1.5 percent of gross 272.12 premiums less return premiums on all direct business received by 272.13 the insurer or agents of the insurer in Minnesota for life 272.14 insurance, in cash or otherwise, during the year. 272.15 [EFFECTIVE DATE.] This section is effective for premiums 272.16 received after December 31, 2007. 272.17 Sec. 27. Minnesota Statutes 2004, section 298.24, 272.18 subdivision 1, is amended to read: 272.19 Subdivision 1. (a) For concentrate produced in 2001, 2002, 272.20 and 2003, there is imposed upon taconite and iron sulphides, and 272.21 upon the mining and quarrying thereof, and upon the production 272.22 of iron ore concentrate therefrom, and upon the concentrate so 272.23 produced, a tax of $2.103 per gross ton of merchantable iron ore 272.24 concentrate produced therefrom. 272.25 (b) For concentrates produced in 2004 and subsequent years, 272.26 the tax rate shall be equal to the preceding year's tax rate 272.27 plus an amount equal to the preceding year's tax rate multiplied 272.28 by the percentage increase in the implicit price deflator from 272.29 the fourth quarter of the second preceding year to the fourth 272.30 quarter of the preceding year. "Implicit price deflator" means 272.31 the implicit price deflator for the gross domestic product 272.32 prepared by the Bureau of Economic Analysis of the United States 272.33 Department of Commerce. 272.34 (c) On concentrates produced in 1997 and thereafter, an 272.35 additional tax is imposed equal to three cents per gross ton of 272.36 merchantable iron ore concentrate for each one percent that the 273.1 iron content of the product exceeds 72 percent, when dried at 273.2 212 degrees Fahrenheit. 273.3 (d) The tax shall be imposed on the average of the 273.4 production for the current year and the previous two years. The 273.5 rate of the tax imposed will be the current year's tax rate. 273.6 This clause shall not apply in the case of the closing of a 273.7 taconite facility if the property taxes on the facility would be 273.8 higher if this clause and section 298.25 were not applicable. 273.9 (e) If the tax or any part of the tax imposed by this 273.10 subdivision is held to be unconstitutional, a tax of $2.103 per 273.11 gross ton of merchantable iron ore concentrate produced shall be 273.12 imposed. 273.13 (f) Consistent with the intent of this subdivision to 273.14 impose a tax based upon the weight of merchantable iron ore 273.15 concentrate, the commissioner of revenue may indirectly 273.16 determine the weight of merchantable iron ore concentrate 273.17 included in fluxed pellets by subtracting the weight of the 273.18 limestone, dolomite, or olivine derivatives or other basic flux 273.19 additives included in the pellets from the weight of the 273.20 pellets. For purposes of this paragraph, "fluxed pellets" are 273.21 pellets produced in a process in which limestone, dolomite, 273.22 olivine, or other basic flux additives are combined with 273.23 merchantable iron ore concentrate. No subtraction from the 273.24 weight of the pellets shall be allowed for binders, mineral and 273.25 chemical additives other than basic flux additives, or moisture. 273.26 (g)(1) Notwithstanding any other provision of this 273.27 subdivision, for the first two years of a plant's commercial 273.28 production of direct reduced ore, no tax is imposed under this 273.29 section. As used in this paragraph, "commercial production" is 273.30 production of more than 50,000 tons of direct reduced ore in the 273.31 current year or in any prior year, "noncommercial production" is 273.32 production of 50,000 tons or less of direct reduced ore in any 273.33 year, and "direct reduced ore" is ore that results in a product 273.34 that has an iron content of at least 75 percent. For the third 273.35 year of a plant's commercial production of direct reduced ore, 273.36 the rate to be applied to direct reduced ore is 25 percent of 274.1 the rate otherwise determined under this subdivision. For the 274.2 fourthsuchcommercial production year, the rate is 50 percent 274.3 of the rate otherwise determined under this subdivision; for the 274.4 fifthsuchcommercial production year, the rate is 75 percent of 274.5 the rate otherwise determined under this subdivision; and for 274.6 all subsequent commercial production years, the full rate is 274.7 imposed. 274.8 (2) Subject to clause (1), production of direct reduced ore 274.9 in this state is subject to the tax imposed by this section, but 274.10 if that production is not produced by a producer of taconite or 274.11 iron sulfides, the production of taconite or iron sulfides 274.12 consumed in the production of direct reduced iron in this state 274.13 is not subject to the tax imposed by this section on taconite or 274.14 iron sulfides. 274.15 (3) Notwithstanding any other provision of this 274.16 subdivision, no tax is imposed on direct reduced ore under this 274.17 section during the facility's noncommercial production of direct 274.18 reduced ore. The taconite or iron sulphides consumed in the 274.19 noncommercial production of direct reduced ore is subject to the 274.20 tax imposed by this section on taconite and iron sulphides. 274.21 [EFFECTIVE DATE.] This section is effective for direct 274.22 reduced ore produced after the day following final enactment. 274.23 Sec. 28. Minnesota Statutes 2004, section 298.75, is 274.24 amended by adding a subdivision to read: 274.25 Subd. 10. [TAX MAY BE IMPOSED, CASS COUNTY.] (a) If Cass 274.26 County does not impose a tax under this section, the town of 274.27 Sylvan in Cass County may impose the aggregate materials tax 274.28 under this section. 274.29 (b) For purposes of exercising the powers contained in this 274.30 section, the "town" is deemed to be the "county." 274.31 (c) All provisions in this section apply to the town of 274.32 Sylvan, except that in lieu of the distribution of the tax 274.33 proceeds under subdivision 7, all proceeds of the tax must be 274.34 retained by the town. 274.35 (d) If Cass County imposes an aggregate materials tax under 274.36 this section, the tax imposed by the town of Sylvan under this 275.1 subdivision is repealed on the effective date of the Cass County 275.2 tax. 275.3 [EFFECTIVE DATE.] This section is effective the day after 275.4 the governing body of the town of Sylvan and its chief clerical 275.5 officer comply with Minnesota Statutes, section 645.021, 275.6 subdivisions 2 and 3. 275.7 Sec. 29. Minnesota Statutes 2004, section 473.843, 275.8 subdivision 5, is amended to read: 275.9 Subd. 5. [PENALTIES; ENFORCEMENT.] The audit, penalty, and 275.10 enforcement provisions applicable to corporate franchise taxes 275.11 imposed under chapter 290 apply to the fees imposed under this 275.12 section. The commissioner of revenue shall administer the 275.13 provisions. 275.14 [EFFECTIVE DATE.] This section is effective the day 275.15 following final enactment. 275.16 Sec. 30. [FLOOR STOCKS TAX.] 275.17 Subdivision 1. [CIGARETTES.] A floor stocks cigarette 275.18 sales tax is imposed on every person engaged in the business in 275.19 this state as a distributor, retailer, subjobber, vendor, 275.20 manufacturer, or manufacturer's representative of cigarettes, on 275.21 the stamped cigarettes and unaffixed stamps in the person's 275.22 possession or under the person's control at 12:01 a.m. on August 275.23 1, 2005. The tax is imposed at the rate of 20 cents per pack of 275.24 20 cigarettes. For packs of cigarettes with other than 20 275.25 cigarettes, the tax shall be adjusted proportionally. 275.26 Each distributor, by August 10, 2005, shall file a return 275.27 with the commissioner, in the form the commissioner prescribes, 275.28 showing the stamped cigarettes and unaffixed stamps on hand at 275.29 12:01 a.m. on August 1, 2005, and the amount of tax due on the 275.30 cigarettes and unaffixed stamps. The tax imposed by this 275.31 section is due and payable by September 7, 2005, and after that 275.32 date bears interest at the rate of one percent a month. 275.33 Each retailer, subjobber, vendor, manufacturer, or 275.34 manufacturer's representative, by August 10, 2005, shall file a 275.35 return with the commissioner, in the form the commissioner 275.36 prescribes, showing the cigarettes on hand at 12:01 a.m. on 276.1 August 1, 2005, and the amount of tax due on the cigarettes. 276.2 The tax imposed by this section is due and payable by September 276.3 7, 2005, and after that date bears interest at the rate of one 276.4 percent a month. 276.5 Subd. 2. [AUDIT AND ENFORCEMENT.] The tax imposed by this 276.6 section is subject to the audit, assessment, penalty, and 276.7 collection provisions applicable to the taxes imposed under 276.8 Minnesota Statutes, chapter 297F. The commissioner may require 276.9 a distributor to receive and maintain copies of floor stocks tax 276.10 returns filed by all persons requesting a credit for returned 276.11 cigarettes. 276.12 Subd. 3. [DEPOSIT OF PROCEEDS.] The revenue from the tax 276.13 imposed under this section shall be deposited by the 276.14 commissioner in the state treasury and credited to the general 276.15 fund. 276.16 [EFFECTIVE DATE.] This section is effective August 1, 2005. 276.17 Sec. 31. [REPEALER.] 276.18 Minnesota Statutes 2004, section 297E.12, subdivision 10, 276.19 is repealed effective the day following final enactment. 276.20 ARTICLE 9 276.21 ECONOMIC DEVELOPMENT 276.22 Section 1. Minnesota Statutes 2004, section 272.02, 276.23 subdivision 64, is amended to read: 276.24 Subd. 64. [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 276.25 Improvements to real property, and personal property, classified 276.26 under section 273.13, subdivision 24, and located within a job 276.27 opportunity building zone, designated under section 469.314, are 276.28 exempt from ad valorem taxes levied under chapter 275. 276.29 (b) Improvements to real property, and tangible personal 276.30 property, of an agricultural production facility located within 276.31 an agricultural processing facility zone, designated under 276.32 section 469.314, is exempt from ad valorem taxes levied under 276.33 chapter 275. 276.34 (c) For property to qualify for exemption under paragraph 276.35 (a), the occupant must be a qualified business, as defined in 276.36 section 469.310. 277.1 (d) The exemption applies beginning for the first 277.2 assessment year after designation of the job opportunity 277.3 building zone by the commissioner of employment and economic 277.4 development. The exemption applies to each assessment year that 277.5 begins during the duration of the job opportunity building zone 277.6and to property. To be exempt, the property must be occupied by 277.7 July 1 of the assessment year by a qualified business that has 277.8 signed the business subsidy agreement and relocation agreement, 277.9 if required, by July 1 of the assessment year. This exemption 277.10 does not apply to: 277.11 (1) the levy under section 475.61 or similar levy 277.12 provisions under any other law to pay general obligation bonds; 277.13 or 277.14 (2) a levy under section 126C.17, if the levy was approved 277.15 by the voters before the designation of the job opportunity 277.16 building zone. 277.17 [EFFECTIVE DATE.] This section is effective for taxes 277.18 payable in 2006 and thereafter. 277.19 Sec. 2. Minnesota Statutes 2004, section 272.0212, 277.20 subdivision 1, is amended to read: 277.21 Subdivision 1. [EXEMPTION.] All qualified property in a 277.22 zone is exempt to the extent and for a period up to the duration 277.23 provided by the zone designation and under sections 469.1731 to 277.24 469.1735. 277.25 [EFFECTIVE DATE.] This section is effective for development 277.26 agreements approved after the day following final enactment and 277.27 beginning for property taxes payable in 2006. 277.28 Sec. 3. Minnesota Statutes 2004, section 272.0212, 277.29 subdivision 2, is amended to read: 277.30 Subd. 2. [LIMITS ON EXEMPTION.] (a) Property in a zone is 277.31 not exempt under this section from the following: 277.32 (1) special assessments; 277.33 (2) ad valorem property taxes specifically levied for the 277.34 payment of principal and interest on debt obligations; and 277.35 (3) all taxes levied by a school district, except school 277.36 referendum levies as defined in section 126C.17. 278.1 (b) The city may limit the property tax exemption to a 278.2 shorter period than the duration of the zone or to a percentage 278.3 of the property taxes payable or both. 278.4 [EFFECTIVE DATE.] This section is effective for development 278.5 agreements approved after the day following final enactment and 278.6 beginning for property taxes payable in 2006. 278.7 Sec. 4. Minnesota Statutes 2004, section 289A.56, is 278.8 amended by adding a subdivision to read: 278.9 Subd. 7. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 278.10 REFUNDS.] Notwithstanding subdivision 3, for refunds payable 278.11 under section 297A.68, subdivision 38, interest is computed from 278.12 90 days after the refund claim is filed with the commissioner. 278.13 [EFFECTIVE DATE.] This section is effective for refund 278.14 claims filed on or after July 1, 2005. 278.15 Sec. 5. Minnesota Statutes 2004, section 297A.68, 278.16 subdivision 37, is amended to read: 278.17 Subd. 37. [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 278.18 of tangible personal property or taxable services by a qualified 278.19 business, as defined in section 469.310, are exempt if the 278.20 property or services are primarily used or consumed in a job 278.21 opportunity building zone designated under section 469.314. 278.22 (b) Purchase and use of construction materials and supplies 278.23 for construction of improvements to real property in a job 278.24 opportunity building zone are exempt if the improvements after 278.25 completion of construction are to be used in the conduct of a 278.26 qualified business, as defined in section 469.310. This 278.27 exemption applies regardless of whether the purchases are made 278.28 by the business or a contractor. The exemption does not apply 278.29 unless the business subsidy agreement entered into pursuant to 278.30 section 469.313 requires the prevailing wage to be paid on the 278.31 construction project. 278.32 (c) The exemptions under this subdivision apply to a local 278.33 sales and use tax regardless of whether the local sales tax is 278.34 imposed on the sales taxable as defined under this chapter. 278.35 (d) This subdivision applies to sales, if the purchase was 278.36 made and delivery received during the duration of the zone. 279.1 Sec. 6. Minnesota Statutes 2004, section 297A.68, 279.2 subdivision 38, is amended to read: 279.3 Subd. 38. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 279.4 ZONE.] (a) Purchases of tangible personal property or taxable 279.5 services by a qualified business, as defined in section 469.330, 279.6 are exempt if the property or services are primarily used or 279.7 consumed in a biotechnology and health sciences industry zone 279.8 designated under section 469.334. 279.9 (b) Purchase and use of construction materialsand, 279.10 suppliesfor, or equipment used or consumed in the construction 279.11 of improvements to real property in a biotechnology and health 279.12 sciences industry zone are exempt if the improvements after 279.13 completion of construction are to be used in the conduct of a 279.14 qualified business, as defined in section 469.330. This 279.15 exemption applies regardless of whether the purchases are made 279.16 by the business or a contractor. 279.17 (c) The exemptions under this subdivision apply to a local 279.18 sales and use tax regardless of whether the local sales tax is 279.19 imposed on the sales taxable as defined under this chapter. 279.20 (d)(1) The tax on sales of goods or services exempted under 279.21 this subdivision are imposed and collected as if the applicable 279.22 rate under section 297A.62 applied. Upon application by the 279.23 purchaser, on forms prescribed by the commissioner, a refund 279.24 equal to the tax paid must be paid to the purchaser. The 279.25 application must include sufficient information to permit the 279.26 commissioner to verify the sales tax paid and the eligibility of 279.27 the claimant to receive the credit. No more than two 279.28 applications for refunds may be filed under this subdivision in 279.29 a calendar year. The provisions of section 289A.40 apply to the 279.30 refunds payable under this subdivision. 279.31 (2) The amount required to make the refunds is annually 279.32 appropriated to the commissioner of revenue. 279.33 (3) The aggregate amount refunded to a qualified business 279.34 must not exceed the amount allocated to the qualified business 279.35 under section 469.335. 279.36 (e) This subdivision applies only to sales made during the 280.1 duration of the designation of the zone. 280.2 [EFFECTIVE DATE.] This section is effective for sales made 280.3 after December 31, 2003. 280.4 Sec. 7. Minnesota Statutes 2004, section 469.169, is 280.5 amended by adding a subdivision to read: 280.6 Subd. 17. [ADDITIONAL BORDER CITY ALLOCATIONS.] (a) In 280.7 addition to tax reductions authorized in subdivisions 7 to 16, 280.8 the commissioner shall allocate $750,000 for tax reductions to 280.9 border city enterprise zones in cities located on the western 280.10 border of the state. The commissioner shall make allocations to 280.11 zones in cities on the western border on a per capita basis. 280.12 Allocations made under this subdivision may be used for tax 280.13 reductions as provided in section 469.171, or for other offsets 280.14 of taxes imposed on or remitted by businesses located in the 280.15 enterprise zone, but only if the municipality determines that 280.16 the granting of the tax reduction or offset is necessary in 280.17 order to retain a business within or attract a business to the 280.18 zone. Any portion of the allocation provided in this paragraph 280.19 may alternatively be used for tax reductions under section 280.20 469.1732 or 469.1734. 280.21 (b) The commissioner shall allocate $750,000 for tax 280.22 reductions under section 469.1732 or 469.1734 to cities with 280.23 border city enterprise zones located on the western border of 280.24 the state. The commissioner shall allocate this amount among 280.25 the cities on a per capita basis. Any portion of the allocation 280.26 provided in this paragraph may alternatively be used for tax 280.27 reductions as provided in section 469.171. 280.28 [EFFECTIVE DATE.] This section is effective the day 280.29 following final enactment. 280.30 Sec. 8. Minnesota Statutes 2004, section 469.176, 280.31 subdivision 4l, is amended to read: 280.32 Subd. 4l. [PROHIBITED FACILITIES.] (a) No tax increment 280.33 from any district may be used for: 280.34 (1) a commons area used as a public park;or280.35 (2) a facility used for social, recreational, or conference 280.36 purposes; or 281.1 (3) a property that includes a casino or other facility 281.2 conducting class III gaming as defined in United States Code, 281.3 title 25, section 2703, regardless of whether it is conducted by 281.4 an Indian tribe or tribal business. 281.5 (b) This subdivision does not apply to a privately owned 281.6 facility for conference purposes or a parking structure. 281.7 [EFFECTIVE DATE.] This section is effective for 281.8 expenditures of increment made after June 30, 2005, regardless 281.9 of when the request for certification of the district was made. 281.10 Sec. 9. Minnesota Statutes 2004, section 469.176, 281.11 subdivision 7, is amended to read: 281.12 Subd. 7. [PARCELS NOT INCLUDABLE IN DISTRICTS.] (a) The 281.13 authority may request inclusion in a tax increment financing 281.14 district and the county auditor may certify the original tax 281.15 capacity of a parcel or a part of a parcel that qualified under 281.16 the provisions of section 273.111 or 273.112 or chapter 473H for 281.17 taxes payable in any of the five calendar years before the 281.18 filing of the request for certification only for: 281.19 (1) a district in which 85 percent or more of the planned 281.20 buildings and facilities (determined on the basis of square 281.21 footage) are a qualified manufacturing facility or a qualified 281.22 distribution facility or a combination of both; or 281.23 (2) a qualified housing district. 281.24 (b)(1) A distribution facility means buildings and other 281.25 improvements to real property that are used to conduct 281.26 activities in at least each of the following categories: 281.27 (i) to store or warehouse tangible personal property; 281.28 (ii) to take orders for shipment, mailing, or delivery; 281.29 (iii) to prepare personal property for shipment, mailing, 281.30 or delivery; and 281.31 (iv) to ship, mail, or deliver property. 281.32 (2) A manufacturing facility includes space used for 281.33 manufacturing or producing tangible personal property, including 281.34 processing resulting in the change in condition of the property, 281.35 and space necessary for and related to the manufacturing 281.36 activities. 282.1 (3) To be a qualified facility, the owner or operator of a 282.2 manufacturing or distribution facility must agree to pay and pay 282.3 90 percent or more of the employees of the facility at a rate 282.4 equal to or greater than 160 percent of the federal minimum wage 282.5 for individuals over the age of 20. 282.6 (c) The authority may not request inclusion in a tax 282.7 increment financing district and the county auditor may not 282.8 certify the original tax capacity of a parcel or a part of a 282.9 parcel that contains or is expected to contain uses, facilities, 282.10 properties, or businesses containing class III gaming, as 282.11 defined in United States Code, title 25, section 2703, 282.12 regardless of whether it is conducted by an Indian tribe or 282.13 tribal business. 282.14 [EFFECTIVE DATE.] This section is effective for parcels for 282.15 which the request for certification is made after June 30, 2005. 282.16 Sec. 10. Minnesota Statutes 2004, section 469.310, 282.17 subdivision 11, is amended to read: 282.18 Subd. 11. [QUALIFIED BUSINESS.] (a)"Qualified business"282.19meansA person carrying on a trade or business at a place of 282.20 business located within a job opportunity building zone is a 282.21 qualified business for the purposes of sections 469.310 to 282.22 469.320 according to the criteria in paragraphs (b) to (f). 282.23 (b) A person is a qualified business only on those parcels 282.24 of land for which the person has entered into a business subsidy 282.25 agreement, as required under section 469.313, with the 282.26 appropriate local government unit in which the parcels are 282.27 located. 282.28 (c) Prior to execution of the business subsidy agreement, 282.29 the local government unit must consider the following factors: 282.30 (1) how wages plus benefits compare to 110 percent of the 282.31 statewide poverty rate for a family of four; 282.32 (2) how wages compare to the regional industry average; 282.33 (3) the number of jobs that will be provided relative to 282.34 overall employment in the community; 282.35 (4) the economic outlook for the industry the business will 282.36 engage in; 283.1 (5) sales that will be generated from outside the state of 283.2 Minnesota; 283.3 (6) how the business will build on existing regional 283.4 strengths or diversify the regional economy; 283.5 (7) how the business will increase capital investment in 283.6 the zone; and 283.7 (8) any other criteria the commissioner deems necessary. 283.8(b)(d) A person that relocates a trade or business from 283.9 outside a job opportunity building zone into a zone is not a 283.10 qualified business,unless the business meets all of the 283.11 requirements of paragraphs (b) and (c) and: 283.12 (1)(i)increases full-time employment in the first full 283.13 year of operation within the job opportunity building zone byat283.14leasta minimum of five jobs or 20 percent, whichever is 283.15 greater, measured relative to the operations that were relocated 283.16 and maintains the required level of employment for each year the 283.17 zone designation applies;or283.18(ii) makes a capital investment in the property located283.19within a zone equivalent to ten percent of the gross revenues of283.20operation that were relocated in the immediately preceding283.21taxable year;and 283.22 (2) enters a binding written agreement with the 283.23 commissioner that: 283.24 (i) pledges the business will meet the requirements of 283.25 clause (1); 283.26 (ii) provides for repayment of all tax benefits enumerated 283.27 under section 469.315 to the business under the procedures in 283.28 section 469.319, if the requirements of clause (1) are not met 283.29 for the taxable year or for taxes payable during the year in 283.30 which the requirements were not met; and 283.31 (iii) contains any other terms the commissioner determines 283.32 appropriate. 283.33 (e) The commissioner may waive the requirements under 283.34 paragraph (d), clause (1), if the commissioner determines that 283.35 the qualified business will substantially achieve the factors 283.36 under this subdivision. 284.1 (f) A business is not a qualified business if, at its 284.2 location or locations in the zone, the business is primarily 284.3 engaged in making retail sales to purchasers who are physically 284.4 present at the business's zone location. 284.5 [EFFECTIVE DATE.] This section is effective the day 284.6 following final enactment and applies to any business entering a 284.7 business subsidy agreement for a job opportunity development 284.8 zone after that date, except that paragraph (b) is effective 284.9 retroactively from June 9, 2003. 284.10 Sec. 11. Minnesota Statutes 2004, section 469.310, is 284.11 amended by adding a subdivision to read: 284.12 Subd. 13. [RELOCATION PAYROLL PERCENTAGE.] "Relocation 284.13 payroll percentage" is a fraction, the numerator of which is the 284.14 zone payroll of the business for the tax year minus the payroll 284.15 from the relocated operations in the last full year of 284.16 operations prior to the relocation, and the denominator of which 284.17 is the zone payroll of the business for the tax year. The 284.18 relocation payroll percentage of a business that is not a 284.19 relocating business is 100 percent. 284.20 [EFFECTIVE DATE.] This section is effective the day 284.21 following final enactment but applies only to qualified 284.22 businesses with business subsidy agreements that are fully 284.23 executed after June 30, 2005. 284.24 Sec. 12. Minnesota Statutes 2004, section 469.315, is 284.25 amended to read: 284.26 469.315 [TAX INCENTIVES AVAILABLE IN ZONES.] 284.27 Qualified businesses that operate in a job opportunity 284.28 building zone, individuals who invest in a qualified business 284.29 that operates in a job opportunity building zone, and property 284.30 located in a job opportunity building zone qualify for: 284.31 (1) exemption from individual income taxes as provided 284.32 under section 469.316; 284.33 (2) exemption from corporate franchise taxes as provided 284.34 under section 469.317; 284.35 (3) exemption from the state sales and use tax and any 284.36 local sales and use taxes on qualifying purchases as provided in 285.1 section 297A.68, subdivision 37; 285.2 (4) exemption from the state sales tax on motor vehicles 285.3 and any local sales tax on motor vehicles as provided under 285.4 section 297B.03; 285.5 (5) exemption from the property tax as provided in section 285.6 272.02, subdivision 64; 285.7 (6) exemption from the wind energy production tax under 285.8 section 272.029, subdivision 7; and 285.9 (7) the jobs credit allowed under section 469.318. 285.10 The sales tax exemption under section 297A.68, subdivision 37, 285.11 paragraph (b), is not "financial assistance" under section 285.12 116J.871 or a "business subsidy" under section 116J.993 unless 285.13 the business subsidy agreement entered into pursuant to section 285.14 469.313 requires the payment of the prevailing wage. 285.15 [EFFECTIVE DATE.] This section is effective retroactively 285.16 from January 1, 2004. 285.17 Sec. 13. Minnesota Statutes 2004, section 469.316, is 285.18 amended to read: 285.19 469.316 [INDIVIDUAL INCOME TAX EXEMPTION.] 285.20 Subdivision 1. [APPLICATION.] An individual, estate, or 285.21 trust operating a trade or business in a job opportunity 285.22 building zone, and an individual, estate, or trust making a 285.23 qualifying investment in a qualified business operating in a job 285.24 opportunity building zone qualifies for the exemptions from 285.25 taxes imposed under chapter 290, as provided in this section. 285.26 The exemptions provided under this section apply only to the 285.27 extent that the income otherwise would be taxable under chapter 285.28 290. Subtractions under this section from federal taxable 285.29 income, alternative minimum taxable income, or any other base 285.30 subject to tax are limited to the amount that otherwise would be 285.31 included in the tax base absent the exemption under this 285.32 section. This section applies only to taxable years beginning 285.33 during the duration of the job opportunity building zone. 285.34 Subd. 2. [RENTS.] An individual, estate, or trust is 285.35 exempt from the taxes imposed under chapter 290 on net rents 285.36 derived from real or tangible personal property used by a 286.1 qualified business and located in a zone for a taxable year in 286.2 which the zone was designated a job opportunity building zone. 286.3 If tangible personal property was used both within and outside 286.4 of the zone by the qualified business, the exemption amount for 286.5 the net rental income must be multiplied by a fraction, the 286.6 numerator of which is the number of days the property was used 286.7 in the zone and the denominator of which is the total days the 286.8 property is rented by the qualified business. 286.9 Subd. 3. [BUSINESS INCOME.] An individual, estate, or 286.10 trust is exempt from the taxes imposed under chapter 290 on net 286.11 income from the operation of a qualified business in a job 286.12 opportunity building zone. If the trade or business is carried 286.13 on within and without the zone and the individual is not a 286.14 resident of Minnesota, or the taxpayer is an estate or trust, 286.15 the exemption must be apportioned based on the zone percentage 286.16 and the relocation payroll percentage for the taxable year. If 286.17 the trade or business is carried on within and without the zone 286.18 and the individual is a resident of Minnesota, the exemption 286.19 must be apportioned based on the zone percentage and the 286.20 relocation payroll percentage for the taxable year, except the 286.21 ratios under section 469.310, subdivision 7, clause (1), items 286.22 (i) and (ii), must use the denominators of the property and 286.23 payroll factors determined under section 290.191. No 286.24 subtraction is allowed under this section in excess of 20 286.25 percent of the sum of the job opportunity building zone payroll 286.26 and the adjusted basis of the property at the time that the 286.27 property is first used in the job opportunity building zone by 286.28 the business. 286.29 Subd. 4. [CAPITAL GAINS.] (a) An individual, estate, or 286.30 trust is exempt from the taxes imposed under chapter 290 on: 286.31 (1) net gain derived on a sale or exchange of real property 286.32 located in the zone and used by a qualified business. If the 286.33 property was held by the individual, estate, or trust during a 286.34 period when the zone was not designated, the gain must be 286.35 prorated based on the percentage of time, measured in calendar 286.36 days, that the real property was held by the individual, estate, 287.1 or trust during the period the zone designation was in effect to 287.2 the total period of time the real property was held by the 287.3 individual; 287.4 (2) net gain derived on a sale or exchange of tangible 287.5 personal property used by a qualified business in the zone. If 287.6 the property was held by the individual, estate, or trust during 287.7 a period when the zone was not designated, the gain must be 287.8 prorated based on the percentage of time, measured in calendar 287.9 days, that the property was held by the individual, estate, or 287.10 trust during the period the zone designation was in effect to 287.11 the total period of time the property was held by the 287.12 individual. If the tangible personal property was used outside 287.13 of the zone during the period of the zone's designation, the 287.14 exemption must be multiplied by a fraction, the numerator of 287.15 which is the number of days the property was used in the zone 287.16 during the time of the designation and the denominator of which 287.17 is the total days the property was held during the time of the 287.18 designation; and 287.19 (3) net gain derived on a sale of an ownership interest in 287.20 a qualified business operating in the job opportunity building 287.21 zone, meeting the requirements of paragraph (b). The exemption 287.22 on the gain must be multiplied by the zone percentage of the 287.23 business for the taxable year prior to the sale. 287.24 (b) A qualified business meets the requirements of 287.25 paragraph (a), clause (3), if it is a corporation, an S 287.26 corporation, or a partnership, and for the taxable year its job 287.27 opportunity building zone percentage exceeds 25 percent. For 287.28 purposes of paragraph (a), clause (3), the zone percentage must 287.29 be calculated by modifying the ratios under section 469.310, 287.30 subdivision 7, clause (1), items (i) and (ii), to use the 287.31 denominators of the property and payroll factors determined 287.32 under section 290.191. Upon the request of an individual, 287.33 estate, or trust holding an ownership interest in the entity, 287.34 the entity must certify to the owner, in writing, the job 287.35 opportunity building zone percentage needed to determine the 287.36 exemption. 288.1 [EFFECTIVE DATE.] This section is effective for tax years 288.2 beginning after December 31, 2003, except that changes in 288.3 subdivision 3 relating to the relocation payroll percentage are 288.4 effective the day following final enactment and apply only to 288.5 qualified businesses with business subsidy agreements that are 288.6 fully executed after June 30, 2005. 288.7 Sec. 14. Minnesota Statutes 2004, section 469.317, is 288.8 amended to read: 288.9 469.317 [CORPORATE FRANCHISE TAX EXEMPTION.] 288.10 (a) A qualified business is exempt from taxation under 288.11 section 290.02, the alternative minimum tax under section 288.12 290.0921, and the minimum fee under section 290.0922, on the 288.13 portion of its income attributable to operations within the 288.14 zone. This exemption is determined as follows: 288.15 (1) for purposes of the tax imposed under section 290.02, 288.16 by multiplying its taxable net income by its zone percentage and 288.17 by its relocation payroll percentage and subtracting the result 288.18 in determining taxable income; 288.19 (2) for purposes of the alternative minimum tax under 288.20 section 290.0921, by multiplying its alternative minimum taxable 288.21 income by its zone percentage and by its relocation payroll 288.22 percentage and reducing alternative minimum taxable income by 288.23 this amount; and 288.24 (3) for purposes of the minimum fee under section 290.0922, 288.25 by excluding property and payroll in the zone from the 288.26 computations of the fee or by exempting the entity under section 288.27 290.0922, subdivision 2, clause (7). 288.28 (b) No subtraction is allowed under this section in excess 288.29 of 20 percent of the sum of the corporation's job opportunity 288.30 building zone payroll and the adjusted basis of the property at 288.31 the time that the property is first used in the job opportunity 288.32 building zone by the corporation. 288.33 (c) This section applies only to taxable years beginning 288.34 during the duration of the job opportunity building zone. 288.35 [EFFECTIVE DATE.] This section is effective the day 288.36 following final enactment but applies only to qualified 289.1 businesses with business subsidy agreements that are fully 289.2 executed after June 30, 2005. 289.3 Sec. 15. Minnesota Statutes 2004, section 469.319, 289.4 subdivision 1, is amended to read: 289.5 Subdivision 1. [REPAYMENT OBLIGATION.] A business must 289.6 repay the amount of the total tax reduction listed in section 289.7 469.315 and any refund under section 469.318 in excess of tax 289.8 liability, received during the two years immediately before it 289.9 ceased to operate in the zone, if the business: 289.10 (1) received tax reductions authorized by section 469.315; 289.11 and 289.12 (2)(i) did not meet the goals specified in an agreement 289.13 entered into with the applicant that states any obligation the 289.14 qualified business must fulfill in order to be eligible for tax 289.15 benefits. The commissioner of employment and economic 289.16 development may extend for up to one year the period for meeting 289.17 any goals provided in an agreement. The applicant may extend 289.18 the period for meeting other goals by documenting in writing the 289.19 reason for the extension and attaching a copy of the document to 289.20 its next annual report to the commissioner of employment and 289.21 economic development; or 289.22 (ii) ceased to operate its facility located within the job 289.23 opportunity building zone or otherwise ceases to be or is not a 289.24 qualified business. 289.25 [EFFECTIVE DATE.] This section is effective the day 289.26 following final enactment. 289.27 Sec. 16. Minnesota Statutes 2004, section 469.319, is 289.28 amended by adding a subdivision to read: 289.29 Subd. 6. [RECONCILIATION.] Where this section is 289.30 inconsistent with section 116J.994, subdivision 3, paragraph 289.31 (e), or 6, or any other provisions of sections 116J.993 to 289.32 116J.995, this section prevails. 289.33 [EFFECTIVE DATE.] This section is effective the day 289.34 following final enactment. 289.35 Sec. 17. Minnesota Statutes 2004, section 469.320, 289.36 subdivision 3, is amended to read: 290.1 Subd. 3. [REMEDIES.] If the commissioner determines, based 290.2 on a report filed under subdivision 1 or other available 290.3 information, that a zone or subzone is failing to meet its 290.4 performance goals, the commissioner may take any actions the 290.5 commissioner determines appropriate, including modification of 290.6 the boundaries of the zone or a subzone or termination of the 290.7 zone or a subzone. Before taking any action, the commissioner 290.8 shall consult with the applicant and the affected local 290.9 government units, including notifying them of the proposed 290.10 actions to be taken.The commissioner shall publish any order290.11modifying a zone in the State Register and on the Internet.The 290.12 applicant may appeal the commissioner's order under the 290.13 contested case procedures of chapter 14. 290.14 [EFFECTIVE DATE.] This section is effective the day 290.15 following final enactment. 290.16 Sec. 18. Minnesota Statutes 2004, section 469.330, 290.17 subdivision 11, is amended to read: 290.18 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 290.19 means a person carrying on a trade or business at a 290.20 biotechnology and health sciences industry facility located 290.21 within a biotechnology and health sciences industry zone. A 290.22 person is a qualified business only on those parcels of land for 290.23 which it has entered into a business subsidy agreement, as 290.24 required under section 469.333, with the appropriate local 290.25 government unit in which the parcels are located. 290.26 (b) A person that relocates a biotechnology and health 290.27 sciences industry facility from outside a biotechnology and 290.28 health sciences industry zone into a zone is not a qualified 290.29 business, unless the business: 290.30 (1)(i) increases full-time employment in the first full 290.31 year of operation within the biotechnology and health sciences 290.32 industry zone by at least 20 percent measured relative to the 290.33 operations that were relocated and maintains the required level 290.34 of employment for each year the zone designation applies; or 290.35 (ii) makes a capital investment in the property located 290.36 within a zone equivalent to ten percent of the gross revenues of 291.1 operation that were relocated in the immediately preceding 291.2 taxable year; and 291.3 (2) enters a binding written agreement with the 291.4 commissioner that: 291.5 (i) pledges the business will meet the requirements of 291.6 clause (1); 291.7 (ii) provides for repayment of all tax benefits enumerated 291.8 under section 469.336 to the business under the procedures in 291.9 section 469.340, if the requirements of clause (1) are not met; 291.10 and 291.11 (iii) contains any other terms the commissioner determines 291.12 appropriate. 291.13 [EFFECTIVE DATE.] This section is effective retroactively 291.14 from June 9, 2003. 291.15 Sec. 19. Minnesota Statutes 2004, section 469.335, is 291.16 amended to read: 291.17 469.335 [APPLICATION FOR TAX BENEFITS.] 291.18 (a) To claim a tax credit or exemption against a state tax 291.19 under section 469.336, clauses (2) through (5), a business must 291.20 apply to the commissioner for a tax credit certificate. As a 291.21 condition of its application, the business must agree to furnish 291.22 information to the commissioner that is sufficient to verify the 291.23 eligibility for any credits or exemptions claimed. The total 291.24 amount of the state tax credits and exemptions allowed for the 291.25 specified period may not exceed the amount of the tax credit 291.26 certificates provided by the commissioner to the business. The 291.27 commissioner must verify to the commissioner of revenue the 291.28 amount of tax exemptions or credits for which each business is 291.29 eligible. 291.30 (b) A tax credit certificate issued under this section may 291.31 specify the particular tax exemptions or credits against a state 291.32 tax that the qualified business is eligible to claim under 291.33 section 469.336, clauses (2) through (5), and the amount of each 291.34 exemption or credit allowed. 291.35 (c) The commissioner may issue $1,000,000 of tax credits or 291.36 exemptions in fiscal year 2004. Any tax credits or exemptions 292.1 not awarded in fiscal year 2004 may be awarded in fiscal year 292.2 2005. Any tax credits or exemptions not awarded in fiscal year 292.3 2004 or 2005 do not cancel and may be awarded in fiscal years 292.4 2006 and 2007. 292.5 (d) A qualified business must use the tax credits or tax 292.6 exemptions granted under this section by the later of the end of 292.7 the state fiscal year or the taxpayer's tax year in which the 292.8 credits or exemptions are granted. 292.9 [EFFECTIVE DATE.] This section is effective the day 292.10 following final enactment. 292.11 Sec. 20. Minnesota Statutes 2004, section 469.337, is 292.12 amended to read: 292.13 469.337 [CORPORATE FRANCHISE TAX EXEMPTION.] 292.14 (a) A qualified business is exempt from taxation under 292.15 section 290.02, the alternative minimum tax under section 292.16 290.0921, and the minimum fee under section 290.0922, on the 292.17 portion of its income attributable to operations of a qualified 292.18 business within the biotechnology and health sciences industry 292.19 zone. This exemption is determined as follows: 292.20 (1) for purposes of the tax imposed under section 290.02, 292.21 by multiplying its taxable net income by its zone percentage and 292.22 subtracting the result in determining taxable income; 292.23 (2) for purposes of the alternative minimum tax under 292.24 section 290.0921, by multiplying its alternative minimum taxable 292.25 income by its zone percentage and reducing alternative minimum 292.26 taxable income by this amount; and 292.27 (3) for purposes of the minimum fee under section 290.0922, 292.28 by excluding zone property and payrollin the zonefrom the 292.29 computations of the fee. The qualified business is exempt from 292.30 the minimum fee if all of its property is located in the zone 292.31 and all of its payroll is zone payroll. 292.32 (b) No subtraction is allowed under this section in excess 292.33 of 20 percent of the sum of the corporation's biotechnology and 292.34 health sciences industry zone payroll and the adjusted basis of 292.35 the property at the time that the property is first used in the 292.36 biotechnology and health sciences industry zone by the 293.1 corporation. 293.2 (c) No reduction in tax is allowed in excess of the amount 293.3 allocated under section 469.335. 293.4 [EFFECTIVE DATE.] This section is effective for tax years 293.5 beginning after December 31, 2003. 293.6 Sec. 21. Minnesota Statutes 2004, section 469.340, 293.7 subdivision 1, is amended to read: 293.8 Subdivision 1. [REPAYMENT OBLIGATION.] A business must 293.9 repay the amount of the tax reduction listed in section 469.336 293.10 and any refunds under sections 469.338 and 469.339 in excess of 293.11 tax liability, received during the two years immediately before 293.12 it ceased to operate in the zone, if the business: 293.13 (1) received tax reductions authorized by section 469.336; 293.14 and 293.15 (2)(i) did not meet the goals specified in an agreement 293.16 entered into with the applicant that states any obligation the 293.17 qualified business must fulfill in order to be eligible for tax 293.18 benefits. The commissioner of employment and economic 293.19 development may extend for up to one year the period for meeting 293.20 any goals provided in an agreement. The applicant may extend 293.21 the period for meeting other goals by documenting in writing the 293.22 reason for the extension and attaching a copy of the document to 293.23 its next annual report to the commissioner of employment and 293.24 economic development; or 293.25 (ii) ceased to operate its facility located within the 293.26 biotechnology and health sciences industry zone or otherwise 293.27 ceases to be or is not a qualified business. 293.28 [EFFECTIVE DATE.] This section is effective the day 293.29 following final enactment. 293.30 Sec. 22. [FERGUS FALLS; ECONOMIC DEVELOPMENT.] 293.31 Notwithstanding the time limits in Minnesota Statutes 2004, 293.32 section 272.02, subdivision 39, the holding of property by the 293.33 city of Fergus Falls for later resale for economic development 293.34 purposes is considered a public purpose for purposes of 293.35 Minnesota Statutes, section 272.02, subdivision 8, for a period 293.36 not to exceed 15 years. The other requirements of Minnesota 294.1 Statutes, section 272.02, subdivision 39, apply to property held 294.2 by the city under this section. 294.3 [EFFECTIVE DATE.] This section is effective the day after 294.4 approval by the governing body of the city of Fergus Falls and 294.5 compliance with Minnesota Statutes, section 645.021, subdivision 294.6 3. 294.7 Sec. 23. [CITY OF TAYLORS FALLS; BORDER CITY DEVELOPMENT 294.8 ZONE.] 294.9 Subdivision 1. [AUTHORIZATION.] The governing body of the 294.10 city of Taylors Falls may designate all or any part of the city 294.11 as a border city development zone. 294.12 Subd. 2. [APPLICATION OF GENERAL LAW.] (a) Minnesota 294.13 Statutes, sections 469.1731 to 469.1735, apply to the border 294.14 city development zones designated under this section. The 294.15 governing body of the city may exercise the powers granted under 294.16 Minnesota Statutes, sections 469.1731 to 469.1735, including 294.17 powers that apply outside of the zones. 294.18 (b) The allocation under subdivision 3 for purposes of 294.19 Minnesota Statutes, section 469.1735, subdivision 2, is 294.20 appropriated to the commissioner of revenue. 294.21 Subd. 3. [ALLOCATION OF STATE TAX REDUCTIONS.] (a) The 294.22 cumulative total amount of the state portion of the tax 294.23 reductions for all years of the program under Minnesota 294.24 Statutes, sections 469.1731 to 469.1735, for the city of Taylors 294.25 Falls, is limited to $100,000. 294.26 (b) This allocation may be used for tax reductions provided 294.27 in Minnesota Statutes, section 469.1732 or 469.1734, or for 294.28 reimbursements under Minnesota Statutes, section 469.1735, 294.29 subdivision 3, but only if the governing body of the city of 294.30 Taylors Falls determines that the tax reduction or offset is 294.31 necessary to enable a business to expand within the city or to 294.32 attract a business to the city. 294.33 (c) The commissioner of revenue may waive the limit under 294.34 this subdivision using the same rules and standards provided in 294.35 Minnesota Statutes, section 469.169, subdivision 12, paragraph 294.36 (b). 295.1 [EFFECTIVE DATE; LOCAL APPROVAL.] This section is effective 295.2 upon approval by a majority of the voters of the city of Taylors 295.3 Falls voting on the question at a general election. 295.4 Sec. 24. [REVISOR'S INSTRUCTION.] 295.5 The revisor shall renumber Minnesota Statutes, section 295.6 469.310, subdivision 11, as section 469.3135, and insert the 295.7 following definition of "qualified business" in Minnesota 295.8 Statutes, section 469.310: "'Qualified business' means the 295.9 entity described in section 469.3135." 295.10 Sec. 25. [REPEALER.] 295.11 Minnesota Statutes 2004, section 272.02, subdivision 65, is 295.12 repealed effective for taxes payable in 2006 and thereafter. 295.13 Minnesota Statutes 2004, section 477A.08, is repealed effective 295.14 for aid payable in 2005 and thereafter. 295.15 ARTICLE 10 295.16 TAX SHELTERS 295.17 Section 1. [270.103] [EQUITABLE ACTIONS.] 295.18 (a) The commissioner may bring a civil action to enjoin any 295.19 person from taking action or failing to take action that is 295.20 subject to penalty under section 289A.60, subdivisions 7, 20, 295.21 20a, 26, 27, and 28. 295.22 (b) In any action under paragraph (a), the court may enjoin 295.23 the person from engaging in the conduct, if the court finds that: 295.24 (1) the person has engaged in the specified conduct; and 295.25 (2) injunctive relief is appropriate to prevent recurrence 295.26 of the conduct. 295.27 [EFFECTIVE DATE.] This section is effective the day 295.28 following final enactment. 295.29 Sec. 2. [289A.121] [TAX SHELTERS SPECIAL RULES.] 295.30 Subdivision 1. [SCOPE.] The provisions of this section 295.31 apply to a tax shelter that: 295.32 (1) is organized in this state; 295.33 (2) is doing business in this state; 295.34 (3) is deriving income from sources in this state; or 295.35 (4) has one or more investors that are Minnesota taxpayers 295.36 under chapter 290. 296.1 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 296.2 the definitions under sections 6111 and 6112 of the Internal 296.3 Revenue Code, including the regulations under those sections, 296.4 apply. In applying the federal definitions, references to "tax," 296.5 "taxable income," and similar terms must be interpreted to 296.6 include those terms under chapter 290. 296.7 (b) The term "tax shelter" includes any reportable 296.8 transaction under subdivision 5. 296.9 Subd. 3. [REGISTRATION.] (a) Any tax shelter organizer 296.10 required to register a tax shelter under section 6111 of the 296.11 Internal Revenue Code must register the shelter with the 296.12 commissioner. 296.13 (b) A tax shelter organizer subject to this subdivision 296.14 must send a duplicate of the federal registration information, 296.15 along with any other information the commissioner requires, to 296.16 the commissioner not later than the day on which interests in 296.17 that tax shelter are first offered for sale. 296.18 (c) In addition to the requirements under paragraph (b), 296.19 any listed transactions must be registered with the commissioner 296.20 by the latest of: 296.21 (1) 60 days after entering into the transaction; 296.22 (2) 60 days after the transaction becomes a listed 296.23 transaction; or 296.24 (3) December 31, 2005. 296.25 Subd. 4. [REGISTRATION NUMBER.] (a) Any person required to 296.26 register under section 6111 of the Internal Revenue Code who 296.27 receives a tax registration number from the Secretary of the 296.28 Treasury must, within 30 days after requested by the 296.29 commissioner, file a statement of that registration number with 296.30 the commissioner. 296.31 (b) Any person who sells or otherwise transfers an interest 296.32 in a tax shelter must, in the same time and manner required 296.33 under section 6111(b) of the Internal Revenue Code, furnish to 296.34 each investor who purchases or otherwise acquires an interest in 296.35 the tax shelter the identification number assigned under federal 296.36 law to the tax shelter. 297.1 (c) Any person claiming any deduction, credit, or other tax 297.2 benefit by reason of a tax shelter must include on the return of 297.3 tax on which the deduction, credit, or other benefit is claimed 297.4 the identification number assigned under federal law to the tax 297.5 shelter. 297.6 Subd. 5. [REPORTABLE TRANSACTIONS.] (a) For each taxable 297.7 year in which a taxpayer must make a disclosure statement under 297.8 Code of Federal Regulations, title 26, section 1.6011-4, for a 297.9 reportable transaction, including a listed transaction, in which 297.10 the taxpayer participated in a taxable year for which a return 297.11 is required under chapter 290, the taxpayer must file a copy of 297.12 the disclosure with the commissioner. 297.13 (b) Any taxpayer that is a member of a unitary business 297.14 group that includes any person that must make a disclosure 297.15 statement under Code of Federal Regulations, title 26, section 297.16 1.6011-4, must file a disclosure under this subdivision. 297.17 (c) Disclosure under this subdivision is required for any 297.18 transaction entered into after December 31, 2001, that the 297.19 Internal Revenue Service determines is a listed transaction at 297.20 any time, and must be made in the manner prescribed by the 297.21 commissioner. For transactions in which the taxpayer 297.22 participated for taxable years ending before December 31, 2005, 297.23 disclosure must be made by the due date of the first return 297.24 required under chapter 290 after the enactment of this section. 297.25 With respect to transactions in which the taxpayer participated 297.26 for taxable years ending on and after December 31, 2005, 297.27 disclosure must be made in the time and manner prescribed in the 297.28 Code of Federal Regulations, title 26, section 1.6011-4(e). 297.29 (d) Notwithstanding paragraphs (a) to (c), no disclosure is 297.30 required for transactions entered into after December 31, 2001, 297.31 and before January 1, 2006, (1) if the taxpayer has filed an 297.32 amended income tax return which reverses the tax benefits of the 297.33 potential tax avoidance transaction, or (2) as a result of a 297.34 federal audit the Internal Revenue Service has determined the 297.35 tax treatment of the transaction and an amended return has been 297.36 filed to reflect the federal treatment. 298.1 Subd. 6. [ABUSIVE SHELTERS; LISTS OF INVESTORS.] (a) Any 298.2 person required to maintain a list under section 6112 of the 298.3 Internal Revenue Code with respect to a potentially abusive tax 298.4 shelter must furnish the list to the commissioner no later than 298.5 when required under federal law. The list required under this 298.6 subdivision must include the same information required with 298.7 respect to a potentially abusive tax shelter under Code of 298.8 Federal Regulations, title 26, section 301.6112-1, and any other 298.9 information the commissioner requires. 298.10 (b) For transactions entered into on or after December 31, 298.11 2001, that become listed transactions at any time, the list must 298.12 be furnished to the commissioner by the latest of: 298.13 (1) 60 days after entering into the transaction; 298.14 (2) 60 days after the transaction becomes a listed 298.15 transaction; or 298.16 (3) December 31, 2005. 298.17 [EFFECTIVE DATE.] This section is effective the day 298.18 following final enactment. 298.19 Sec. 3. Minnesota Statutes 2004, section 289A.38, is 298.20 amended by adding a subdivision to read: 298.21 Subd. 15. [REPORTABLE TRANSACTIONS.] If a taxpayer fails 298.22 to include on any return or statement for any taxable year any 298.23 information with respect to a reportable transaction, as 298.24 required by federal law and under section 289A.121, subdivision 298.25 5, the commissioner may recompute the tax, including a refund, 298.26 within eight years after the return is filed with respect to the 298.27 taxable year in which the taxpayer participated in the 298.28 reportable transaction. If tax is assessable solely because of 298.29 this section, the assessable deficiency is limited to the items 298.30 that were not disclosed as required under section 289A.121, 298.31 subdivision 5. 298.32 [EFFECTIVE DATE.] This section is effective the day 298.33 following final enactment. 298.34 Sec. 4. Minnesota Statutes 2004, section 289A.60, 298.35 subdivision 4, is amended to read: 298.36 Subd. 4. [SUBSTANTIAL UNDERSTATEMENT OF LIABILITY; 299.1 PENALTY.] (a) The commissioner of revenue shall impose a penalty 299.2 for substantial understatement of any tax payable to the 299.3 commissioner, except a tax imposed under chapter 297A. 299.4 (b) There must be added to the tax an amount equal to 20 299.5 percent of the amount of any underpayment attributable to the 299.6 understatement. There is a substantial understatement of tax 299.7 for the period if the amount of the understatement for the 299.8 period exceeds the greater of: 299.9 (1) ten percent of the tax required to be shown on the 299.10 return for the period; or 299.11 (2)(a)(i) $10,000 in the case of a mining company or a 299.12 corporation, other than an S corporation as defined in section 299.13 290.9725, when the tax is imposed by chapter 290 or section 299.14 298.01 or 298.015, or 299.15(b)(ii) $5,000 in the case of any other taxpayer, and in 299.16 the case of a mining company or a corporation any tax not 299.17 imposed by chapter 290 or section 298.01 or 298.015. 299.18 (c) For a corporation, other than an S corporation, that 299.19 has been contacted by the commissioner regarding the use of a 299.20 potentially abusive tax shelter, as defined under section 299.21 289A.121, there is also a substantial understatement of tax for 299.22 any taxable year if the amount of the understatement for the 299.23 taxable year exceeds the lesser of: 299.24 (1) ten percent of the tax required to be shown on the 299.25 return for the taxable year (or, if greater, $2,500); or 299.26 (2) $5,000,000. 299.27 (d) The term "understatement" means the excess of the 299.28 amount of the tax required to be shown on the return for the 299.29 period, over the amount of the tax imposed that is shown on the 299.30 return. The amount of the understatement shall be reduced by 299.31 that part of the understatement that is attributable to the tax 299.32 treatment of any item by the taxpayer if there is or was 299.33 substantial authority for the treatment, or any item with 299.34 respect to which the relevant facts affecting the item's tax 299.35 treatment are adequately disclosed in the return or in a 299.36 statement attached to the return. The special rules in cases 300.1 involving tax shelters provided in section 6662(d)(2)(C) of the 300.2 Internal Revenue Code shall apply and shall apply to a tax 300.3 shelter the principal purpose of which is the avoidance or 300.4 evasion of state taxes. The commissioner may abate all or any 300.5 part of the addition to the tax provided by this section on a 300.6 showing by the taxpayer that there was reasonable cause for the 300.7 understatement, or part of it, and that the taxpayer acted in 300.8 good faith. The additional tax and penalty shall bear interest 300.9 at the rate specified in section 270.75 from the time the tax 300.10 should have been paid until paid. 300.11 (e) For taxpayers that have been contacted by the 300.12 commissioner regarding the use of a potentially abusive tax 300.13 shelter within the meaning of section 298A.121, the amount of 300.14 the understatement is reduced by that part of the understatement 300.15 that is attributable to the tax treatment of any item by the 300.16 taxpayer if the taxpayer had reasonable belief that the tax 300.17 treatment was more likely than not the proper treatment or if 300.18 any item with respect to which the relevant facts affecting the 300.19 item's tax treatment are adequately disclosed in the return or 300.20 in a statement attached to the return. 300.21 [EFFECTIVE DATE.] This section is effective for taxpayers 300.22 contacted by the commissioner after the day following final 300.23 enactment. 300.24 Sec. 5. Minnesota Statutes 2004, section 289A.60, 300.25 subdivision 7, is amended to read: 300.26 Subd. 7. [PENALTY FOR FRIVOLOUS RETURN.] (a) If a taxpayer 300.27 files what purports to be a tax return or a claim for refund but 300.28 which does not contain information on which the substantial 300.29 correctness of the purported return or claim for refund may be 300.30 judged or contains information that on its face shows that the 300.31 purported return or claim for refund is substantially incorrect 300.32 and the conduct is due to a position that is frivolous or a 300.33 desire that appears on the purported return or claim for refund 300.34 to delay or impede the administration of Minnesota tax laws, 300.35 then the individual shall pay a penalty of the greater of $1,000 300.36 or 25 percent of the amount of tax required to be shown on the 301.1 return. In a proceeding involving the issue of whether or not a 301.2 person is liable for this penalty, the burden of proof is on the 301.3 commissioner. 301.4 (b) If the taxpayer has been contacted by the commissioner 301.5 of revenue regarding the use of a potentially abusive tax 301.6 shelter within the meaning of section 289A.121, the penalty 301.7 under this subdivision is the greater of $5,000 or 25 percent of 301.8 the amount of tax required to be shown on the return. 301.9 [EFFECTIVE DATE.] This section is effective for returns or 301.10 claims filed after the day following final enactment. 301.11 Sec. 6. Minnesota Statutes 2004, section 289A.60, 301.12 subdivision 20, is amended to read: 301.13 Subd. 20. [PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.] 301.14 Any person who: 301.15 (1)(i) organizes or assists in the organization of a 301.16 partnership or other entity, an investment plan or arrangement, 301.17 or any other plan or arrangement, or (ii) participates in the 301.18 sale of any interest in an entity or plan or arrangement 301.19 referred to in clause (i); and 301.20 (2) makes or furnishes in connection with the organization 301.21 or sale a statement with respect to the allowability of a 301.22 deduction or credit, the excludability of income, or the 301.23 securing of any other tax benefit by reason of holding an 301.24 interest in the entity or participating in the plan or 301.25 arrangement that the person knows or has reason to know is false 301.26 or fraudulent concerning any material matter, shall pay a 301.27 penalty equal to the greater of $1,000 or2050 percent of the 301.28 gross income derived or to be derived by the person from the 301.29 activity. 301.30 The penalty imposed by this subdivision is in addition to 301.31 any other penalty provided by this section. The penalty must be 301.32 collected in the same manner as any delinquent income tax. In a 301.33 proceeding involving the issue of whether or not any person is 301.34 liable for this penalty, the burden of proof is upon the 301.35 commissioner. 301.36 [EFFECTIVE DATE.] This section is effective for 302.1 transactions entered into after the day following final 302.2 enactment. 302.3 Sec. 7. Minnesota Statutes 2004, section 289A.60, is 302.4 amended by adding a subdivision to read: 302.5 Subd. 20a. [AIDING AND ABETTING UNDERSTATING OF TAX 302.6 LIABILITY.] (a) A penalty in the amount under paragraph (b) for 302.7 each document is imposed on each person who: 302.8 (1) aids or assists in, procures, or advises with respect 302.9 to, the preparation or presentation of any portion of a return, 302.10 affidavit, claim, or other document; 302.11 (2) knows or has reason to believe that the portion of a 302.12 return, affidavit, claim, or other document will be used in 302.13 connection with any material matter arising under the Minnesota 302.14 individual income or corporate franchise tax; and 302.15 (3) knows that the portion, if so used, would result in an 302.16 understatement of the liability for tax of another person. 302.17 (b)(1) Except as provided in clause (2), the amount of the 302.18 penalty imposed by this subdivision is $1,000. 302.19 (2) If the return, affidavit, claim, or other document 302.20 relates to the tax liability of a corporation, the amount of the 302.21 penalty imposed by paragraph (a) is $10,000. 302.22 (3) If any person is subject to a penalty under paragraph 302.23 (a) for any document relating to any taxpayer for any taxable 302.24 period or taxable event, the person is not subject to a penalty 302.25 under paragraph (a) for any other document relating to the 302.26 taxpayer for the taxable period or event. 302.27 (c) For purposes of this subdivision, "procures" includes 302.28 (i) ordering or otherwise causing any other person to do an act, 302.29 and (ii) knowing of, and not attempting to prevent, 302.30 participation by any other person in an act. 302.31 (d) The penalty under this subdivision applies whether or 302.32 not the understatement is with the knowledge or consent of the 302.33 persons authorized or required to present the return, affidavit, 302.34 claim, or other document. 302.35 (e) For purposes of paragraph (a), clause (1), a person 302.36 furnishing typing, reproducing, or other mechanical assistance 303.1 with respect to a document is not treated as having aided or 303.2 assisted in the preparation of the document by reason of the 303.3 assistance. 303.4 (f)(1) Except as provided by clause (2), the penalty 303.5 imposed by this section is in addition to any other penalty 303.6 provided by law. 303.7 (2) No penalty applies under subdivision 20 to any person 303.8 for any document for which a penalty is assessed on the person 303.9 under this subdivision. 303.10 [EFFECTIVE DATE.] This section is effective for documents 303.11 prepared after the day following final enactment. 303.12 Sec. 8. Minnesota Statutes 2004, section 289A.60, is 303.13 amended by adding a subdivision to read: 303.14 Subd. 26. [TAX SHELTER PENALTIES; REGISTRATION AND 303.15 LISTING.] (a) For purposes of this subdivision, "material 303.16 advisor" has the meaning given it under Code of Federal 303.17 Regulations, title 26, section 301.6112-1(c)(2). 303.18 (b) The penalties in this subdivision apply in connection 303.19 with the use of tax shelters, as defined under section 289A.121. 303.20 (c) A person who fails to register a tax shelter, including 303.21 providing all of the required information under section 303.22 289A.121, subdivision 3, is subject to a penalty of $15,000. If 303.23 the tax shelter is a listed shelter and disclosure is not made 303.24 as required by section 289A.121, subdivision 5, a penalty 303.25 applies equal to the greater of: 303.26 (1) $100,000; 303.27 (2) 50 percent of the gross income that the organizer or 303.28 material advisor derived from that activity; or 303.29 (3) 75 percent of the gross income that the organizer or 303.30 material advisor derived from that activity if the organizer or 303.31 material advisor intentionally failed to act. 303.32 (d) Any person who fails to supply a tax shelter 303.33 registration number required under section 289A.121, subdivision 303.34 4, paragraph (b), is subject to a penalty of $100 for each 303.35 failure. Any person who fails to include a tax shelter 303.36 registration number on a return as required under section 304.1 289A.121, subdivision 4, paragraph (c), is subject to a penalty 304.2 of $250 for each failure, unless the failure was due to 304.3 reasonable cause. The penalties under this paragraph are in 304.4 addition to any penalties under paragraph (c). 304.5 (e) The person required to maintain or provide a list under 304.6 section 289A.121, subdivision 6, is subject to a penalty equal 304.7 to: 304.8 (1) for reportable transactions, $10,000 for each day after 304.9 the 20th day that the organizer or material advisor failed to 304.10 make the list available to the commissioner after written 304.11 request for that list was made; and 304.12 (2) for listed transactions, the greater of: 304.13 (i) $100,000; or 304.14 (ii) 50 percent of the gross income that the organizer or 304.15 material advisor derived from that activity. 304.16 (f) The penalty imposed by this subdivision is in addition 304.17 to any penalty imposed under this section. 304.18 [EFFECTIVE DATE.] This section is effective for taxable 304.19 years beginning after December 31, 2000. 304.20 Sec. 9. Minnesota Statutes 2004, section 289A.60, is 304.21 amended by adding a subdivision to read: 304.22 Subd. 27. [FAILURE TO REPORT; REPORTABLE TRANSACTION.] (a) 304.23 Any large entity or high net worth individual who fails to 304.24 include on any return or statement any information with respect 304.25 to a reportable transaction that is required under section 6011 304.26 of the Internal Revenue Code and under section 289A.121, to be 304.27 included with that return or statement must pay a penalty for 304.28 each omission in the amount determined under paragraph (b). 304.29 (b) The penalty is $15,000, except for a listed transaction 304.30 the penalty is $30,000. 304.31 (c) For purposes of this subdivision: 304.32 (1) "High net worth individual" means, for a transaction, 304.33 an individual whose net worth exceeds $2,000,000 immediately 304.34 before the transaction. 304.35 (2) "Large entity" means, for any taxable year, a person, 304.36 other than an individual, with gross receipts in excess of 305.1 $10,000,000 for either the taxable year in which the reportable 305.2 transaction occurs or in the preceding taxable year. Rules 305.3 similar to the rules of section 448(c)(2) and 448(c)(3) of the 305.4 Internal Revenue Code, other than section 448(c)(3)(A) of the 305.5 Internal Revenue Code, apply. 305.6 (3) "Reportable transaction" means a reportable transaction 305.7 under section 289A.121, subdivision 5. 305.8 (4) Except as provided in regulations prescribed by the 305.9 Secretary of the Treasury, the term "listed transaction" means a 305.10 reportable transaction, as defined in clause (3), that is the 305.11 same as, or substantially similar to, a transaction specifically 305.12 identified by the Secretary of the Treasury for purposes of 305.13 section 6011 of the Internal Revenue Code for federal income tax 305.14 purposes as a tax avoidance transaction. 305.15 (d) The penalty imposed by this subdivision is in addition 305.16 to any penalty imposed under this section. 305.17 [EFFECTIVE DATE.] This section is effective for taxable 305.18 years beginning after December 31, 2000. 305.19 Sec. 10. Minnesota Statutes 2004, section 289A.60, is 305.20 amended by adding a subdivision to read: 305.21 Subd. 28. [REPORTABLE TRANSACTION UNDERSTATEMENT.] (a) If 305.22 a taxpayer has a reportable transaction understatement for any 305.23 taxable year, an amount equal to 20 percent of the amount of the 305.24 understatement must be added to the tax. 305.25 (b)(1) For purposes of this subdivision, "reportable 305.26 transaction understatement" means the product of: 305.27 (i) the amount of the increase, if any, in taxable income 305.28 that results from a difference between the proper tax treatment 305.29 of an item to which this section applies and the taxpayer's 305.30 treatment of that item as shown on the taxpayer's tax return; 305.31 and 305.32 (ii) the highest rate of tax imposed on the taxpayer under 305.33 section 290.06. 305.34 (2) For purposes of clause (1)(i), any reduction of the 305.35 excess of deductions allowed for the taxable year over gross 305.36 income for that year, and any reduction in the amount of capital 306.1 losses which would, without regard to section 1211 of the 306.2 Internal Revenue Code, be allowed for that year, must be treated 306.3 as an increase in taxable income. 306.4 (c) This subdivision applies to any item that is 306.5 attributable to: 306.6 (1) any listed transaction under section 289A.121; and 306.7 (2) any reportable transaction, other than a listed 306.8 transaction, if a significant purpose of that transaction is the 306.9 avoidance or evasion of tax imposed under chapter 290. 306.10 (d) The penalty imposed by this subdivision is in addition 306.11 to any penalty imposed under this section. 306.12 [EFFECTIVE DATE.] This section is effective for taxable 306.13 years beginning after December 31, 2000. 306.14 Sec. 11. Minnesota Statutes 2004, section 289A.60, is 306.15 amended by adding a subdivision to read: 306.16 Subd. 29. [ADDITION TO TAX.] (a) If a taxpayer has been 306.17 contacted by the commissioner regarding the use of a potentially 306.18 abusive tax shelter and has a deficiency, there must be added to 306.19 the tax an amount equal to 100 percent of the interest payable 306.20 under section 270.75 for the period beginning on the last date 306.21 prescribed by law for the payment of that tax, determined 306.22 without regard to extensions, and ending on the date the notice 306.23 of proposed assessment is mailed. 306.24 (b) "Potentially abusive tax shelter" means: 306.25 (1) any tax shelter, as defined in section 6111 of the 306.26 Internal Revenue Code, for which registration is required under 306.27 section 289A.121; or 306.28 (2) any entity, investment plan or arrangement, or other 306.29 plan or arrangement which is of a type that the Secretary of the 306.30 Treasury determines by regulations as having a potential for tax 306.31 avoidance or evasion. 306.32 (c) The penalty imposed by this subdivision is in addition 306.33 to any other penalty imposed under this section and to the 306.34 interest computation for purposes of section 270.75. 306.35 [EFFECTIVE DATE.] This section is effective for notices of 306.36 proposed assessments mailed after the day following final 307.1 enactment. 307.2 Sec. 12. Minnesota Statutes 2004, section 289A.60, is 307.3 amended by adding a subdivision to read: 307.4 Subd. 30. [AUTHORITY TO ABATE TAX SHELTER PENALTIES.] (a) 307.5 Notwithstanding section 270.07, the commissioner may abate all 307.6 or any portion of any penalty imposed by subdivisions 20, 20a, 307.7 and 26 to 29 for any violation, only if all of the following 307.8 apply: 307.9 (1) the violation is for a reportable transaction, other 307.10 than a listed transaction, as defined under Code of Federal 307.11 Regulations, title 26, section 6011-4; 307.12 (2) the person on whom the penalty is imposed has a history 307.13 of complying with the requirements of this chapter and chapter 307.14 290; 307.15 (3) the violation is due to an unintentional mistake of 307.16 fact; 307.17 (4) imposing the penalty would be against equity and good 307.18 conscience; and 307.19 (5) abating the penalty would promote compliance with the 307.20 requirements of chapter 290. 307.21 (b) The exercise of authority under paragraph (a) is at the 307.22 sole discretion of the commissioner and may not be delegated. 307.23 Notwithstanding any other law or rule, a determination under 307.24 this subdivision may not be reviewed in any administrative or 307.25 judicial proceeding. 307.26 Sec. 13. Minnesota Statutes 2004, section 289A.60, is 307.27 amended by adding a subdivision to read: 307.28 Subd. 31. [INTEREST COMPUTATION.] For an amended return 307.29 filed after December 31, 2005, and before the taxpayer is 307.30 contacted by the Internal Revenue Service or the commissioner 307.31 regarding a potentially abusive tax shelter, then, for taxable 307.32 years beginning after December 31, 2001, with respect to any 307.33 understatement of tax related to using reportable transactions 307.34 as defined in section 289A.121, the taxpayer is subject to 307.35 interest at a rate of 150 percent of the applicable rate under 307.36 section 270.75. 308.1 [EFFECTIVE DATE.] This section is effective for taxable 308.2 years beginning after December 31, 2005. 308.3 Sec. 14. [VOLUNTARY COMPLIANCE INITIATIVE.] 308.4 Subdivision 1. [ESTABLISHMENT.] The commissioner of 308.5 revenue shall establish and administer a voluntary compliance 308.6 initiative for taxpayers subject to Minnesota Statutes, section 308.7 289A.60, subdivision 26, 27, or 28. 308.8 Subd. 2. [TIME PERIOD; SCOPE.] (a) The commissioner shall 308.9 conduct the voluntary compliance initiative from July 1, 2005, 308.10 to December 31, 2005, under Minnesota Statutes, section 270.07. 308.11 (b) The voluntary compliance initiative applies to tax 308.12 liabilities and penalties attributable to an abusive tax 308.13 avoidance transaction for taxable years beginning before January 308.14 1, 2005. An abusive tax avoidance transaction means a listed 308.15 transaction, a potentially abusive tax shelter, or a reportable 308.16 transaction as those terms are used in Minnesota Statutes, 308.17 section 289A.121. 308.18 Subd. 3. [ELIGIBILITY.] (a) No person may participate in 308.19 the voluntary compliance initiative, if: 308.20 (1) the taxpayer was convicted of a crime in connection 308.21 with an abusive tax avoidance transaction or transactions; 308.22 (2) a criminal complaint was filed against the taxpayer in 308.23 connection with an abusive tax avoidance transaction or 308.24 transactions; 308.25 (3) the taxpayer is the subject of a criminal investigation 308.26 in connection with an abusive tax avoidance transaction or 308.27 transactions; or 308.28 (4) the taxpayer was eligible to participate in the 308.29 Internal Revenue Service's Offshore Voluntary Compliance 308.30 Initiative, as set forth in Revenue Procedure 2003-11. 308.31 (b) A person not disqualified under paragraph (a) may 308.32 participate in the voluntary compliance initiative. 308.33 Subd. 4. [ELECTION; COMMISSIONER AUTHORITY.] (a) An 308.34 eligible taxpayer that meets the requirements of subdivision 3 308.35 with respect to any taxable year may elect to participate in the 308.36 voluntary compliance program under either subdivision 5 or 6 for 309.1 a particular tax avoidance period. The election must be made 309.2 separately for each taxable year and in the form and manner 309.3 prescribed by the commissioner, and once made is irrevocable. 309.4 (b) The commissioner of revenue may issue forms and 309.5 instructions and take other actions necessary, including the use 309.6 of agreements under Minnesota Statutes, section 270.67, to 309.7 implement the voluntary compliance initiative. 309.8 Subd. 5. [PARTICIPATION WITHOUT RIGHT OF APPEAL.] (a) A 309.9 person participating in the voluntary compliance initiative 309.10 under this subdivision waives the right to an administrative 309.11 appeal, to a claim for refund, or to file an action in district 309.12 court or tax court. The person participating must: 309.13 (1) file an amended return for each taxable year for which 309.14 the taxpayer has filed a tax return using an abusive tax 309.15 avoidance transaction to underreport the taxpayer's tax 309.16 liability for the taxable year. Each amended return must report 309.17 all income from all sources, without regard to the abusive tax 309.18 avoidance transactions; and 309.19 (2) pay taxes and interest due in full, except that the 309.20 commissioner of revenue may enter into an installment payment 309.21 agreement under Minnesota Statutes, section 270.67, before the 309.22 taxpayer files an amended return. 309.23 (b) The commissioner of revenue shall abate all penalties 309.24 imposed under Minnesota Statutes, chapter 289A, which could have 309.25 been assessed in connection with the use of an abusive tax 309.26 avoidance transaction, for each taxable year for which the 309.27 taxpayer elects to participate in the voluntary compliance 309.28 initiative under this subdivision, to the extent those penalties 309.29 are a result of underreporting of tax liabilities attributable 309.30 to the use of abusive tax avoidance transactions, for which a 309.31 participating person files an amended return in compliance with 309.32 paragraph (a). 309.33 (c) No criminal action must be brought against a taxpayer 309.34 for the taxable years reported under the voluntary compliance 309.35 initiative with respect to the issues for which a taxpayer 309.36 voluntarily complies under this chapter. 310.1 (d) A person filing an amended return under this 310.2 subdivision of the voluntary compliance initiative may not file 310.3 a claim for refund, an administrative appeal, or an action in 310.4 district court with regard to the amount of taxes or interest 310.5 paid with the amended return. Nothing in this subdivision 310.6 precludes a taxpayer from filing a claim for credit or refund 310.7 for the same taxable year in which a tax avoidance transaction 310.8 was reported if the credit or refund is not attributable to the 310.9 tax avoidance transaction. 310.10 Subd. 6. [PARTICIPATION WITH RIGHT OF APPEAL.] (a) A 310.11 person participating in the voluntary compliance initiative who 310.12 does not waive the right to an administrative appeal, a claim 310.13 for refund, or an action in district court must: 310.14 (1) file an amended return for each taxable year for which 310.15 the taxpayer has filed a tax return using an abusive tax 310.16 avoidance transaction to underreport the taxpayer's tax 310.17 liability for that taxable year. Each amended return must 310.18 report all income from all sources, without regard to the 310.19 abusive tax avoidance transactions; and 310.20 (2) pay taxes and interest due in full, except that the 310.21 commissioner of revenue may enter into an installment payment 310.22 agreement pursuant to Minnesota Statutes, section 270.67, prior 310.23 to the taxpayer filing an amended return. 310.24 (b) The commissioner of revenue shall abate all penalties 310.25 imposed under Minnesota Statutes, chapter 289A, except for the 310.26 penalty for substantial understatement of tax liability under 310.27 Minnesota Statutes, section 289A.60, subdivision 4, determined 310.28 without regard to paragraph (e) of that section, which could 310.29 have been assessed in connection with the use of an abusive tax 310.30 avoidance transaction, for each taxable year for which the 310.31 taxpayer elects to participate in the voluntary compliance 310.32 initiative under this subdivision, to the extent those penalties 310.33 apply to underreporting of tax liabilities attributable to the 310.34 use of abusive tax avoidance transactions for which a 310.35 participating person files an amended return in compliance with 310.36 paragraph (a). 311.1 (c) No criminal action must be brought against a taxpayer 311.2 for the taxable years reported under the voluntary compliance 311.3 initiative with respect to the issues for which a taxpayer 311.4 voluntarily complies under this chapter. 311.5 (d) The taxpayer may file a claim for refund, an 311.6 administrative appeal, or an action in district court only after 311.7 the earlier of the following occurs: 311.8 (1) the date the commissioner of revenue takes action on 311.9 the claim for refund for the taxable year; 311.10 (2) the later of: 311.11 (i) 180 days after the date of a final determination by the 311.12 Internal Revenue Service with respect to the transaction or 311.13 transactions to which Minnesota Statutes, chapter 290, applies; 311.14 or 311.15 (ii) four years after the date the claim for refund was 311.16 filed, or one year after full payment of all tax was made, 311.17 including penalty and interest, whichever is later. 311.18 (e)(1) The taxpayer is subject to the substantial 311.19 understatement penalty under Minnesota Statutes, section 311.20 289A.60, subdivision 4. The penalty may be assessed: 311.21 (i) when the commissioner of revenue takes action on the 311.22 claim for refund; or 311.23 (ii) when a federal determination becomes final for the 311.24 same issue, in which case the penalty must be assessed, and may 311.25 not be abated, if the penalty was assessed at the federal level. 311.26 (2) In determining the amount of the underpayment of tax, 311.27 Code of Federal Regulations, title 26, section 1.6664-2(c)(2), 311.28 relating to qualified amended returns, applies. The 311.29 underpayment is the difference between the amount of tax on the 311.30 original return and the correct amount of tax for the taxable 311.31 year. The underpayment must not be less than the amount of the 311.32 claim for refund filed by the taxpayer under paragraph (d) that 311.33 was denied. 311.34 (3) The penalty is due and payable upon notice and demand 311.35 by the commissioner of revenue. Only after the taxpayer has 311.36 paid all amounts due, including the penalty, and the claim is 312.1 denied in whole or in part, may the taxpayer file an appeal 312.2 under Minnesota Statutes, section 270.07, in conjunction with 312.3 the appeal filed under paragraph (d). 312.4 Subd. 7. [COMMISSIONER ORDERS AND PENALTIES.] After 312.5 December 31, 2005, the commissioner of revenue may issue an 312.6 order of assessment within the time period permitted under 312.7 Minnesota Statutes, section 289A.38, upon an amended return 312.8 filed under this section for an underreported amount of tax, may 312.9 impose penalties on an underreported amount of tax on an amended 312.10 return filed under this chapter, or seek initiation of a 312.11 criminal action against any person based on any underreported 312.12 amount of tax on an amended return filed under this chapter. 312.13 Subd. 8. [PENALTY RELIEF; EXCEPTION.] For purposes of this 312.14 section, if the commissioner subsequently determines that the 312.15 correct amount of Minnesota income tax was not paid for the 312.16 taxable year for a participant in the voluntary compliance 312.17 initiative, then the penalty relief under this section does not 312.18 apply to any portion of the underpayment attributable to a tax 312.19 avoidance transaction not paid to the state. 312.20 [EFFECTIVE DATE.] This section is effective the day 312.21 following final enactment. 312.22 Sec. 15. [APPROPRIATION.] 312.23 For purposes of administering the voluntary compliance 312.24 initiative and the tax shelter registration and compliance 312.25 provisions of this act, $....... is appropriated from the 312.26 general fund for fiscal year 2006 and $....... for fiscal year 312.27 2007 to the commissioner of revenue. $....... is added to the 312.28 base budget. 312.29 ARTICLE 11 312.30 MISCELLANEOUS 312.31 Section 1. [15.60] [PUBLIC SAFETY OFFICERS; AMERICAN 312.32 FLAG.] 312.33 (a) A public employer may not forbid a peace officer or 312.34 firefighter from wearing a patch or pin depicting the flag of 312.35 the United States of America on the employee's uniform, 312.36 according to customary and standard flag etiquette. However, a 313.1 public employer may limit the size of a flag patch worn on a 313.2 uniform to no more than three inches by five inches. 313.3 (b) For purposes of this section: 313.4 (1) "peace officer" has the meaning given in section 313.5 626.84, subdivision 1, paragraph (c) or (f); 313.6 (2) "firefighter" means a person as defined in section 313.7 299A.41, subdivision 4, clause (3) or (4); and 313.8 (3) "public employer" has the meaning given in section 313.9 179A.03, subdivision 15, and also includes a municipal fire 313.10 department and an independent nonprofit firefighting corporation. 313.11 (c) The commissioner of finance or the commissioner of 313.12 revenue must suspend disbursement, not to exceed $10,000, of any 313.13 state appropriation or aid to any public employer whom the 313.14 commissioner determines is not complying with paragraph (a) 313.15 until the commissioner determines that the employer is in 313.16 compliance. 313.17 Sec. 2. Minnesota Statutes 2004, section 16D.10, is 313.18 amended to read: 313.19 16D.10 [CASE REVIEWER.] 313.20 Subdivision 1. [DUTIES.] The commissioner shall make a 313.21 case reviewer available to debtors. The reviewer must be 313.22 available to answer a debtor's questions concerning the 313.23 collection process and to review the collection activity taken. 313.24 If the reviewer reasonably believes that the particular action 313.25 being taken is unreasonable or unfair, the reviewer may make 313.26 recommendations to the commissioner in regard to the collection 313.27 action. 313.28 Subd. 2. [AUTHORITY TO ISSUE DEBTOR ASSISTANCE ORDER.] On 313.29 application filed by a debtor with the case reviewer, in the 313.30 form, manner, and in the time prescribed by the commissioner, 313.31 and after thorough investigation, the case reviewer may issue a 313.32 debtor assistance order if, in the determination of the case 313.33 reviewer, the manner in which the state debt collection laws are 313.34 being administered is creating or will create an unjust and 313.35 inequitable result for the debtor. Debtor assistance orders are 313.36 governed by the provisions relating to taxpayer assistance 314.1 orders under section 270.273. 314.2 Subd. 3. [TRANSFER OF DUTIES TO TAXPAYER RIGHTS ADVOCATE.] 314.3 All duties and authority of the case reviewer under subdivisions 314.4 1 and 2 are transferred to the taxpayer rights advocate. 314.5 [EFFECTIVE DATE.] This section is effective the day 314.6 following final enactment. 314.7 Sec. 3. Minnesota Statutes 2004, section 270.02, 314.8 subdivision 3, is amended to read: 314.9 Subd. 3. [POWERS, ORGANIZATION, ASSISTANTS.] Subject to 314.10 the provisions of this chapter and other applicable laws the 314.11 commissioner shall have power to organize the department with 314.12 such divisions and other agencies as the commissioner deems 314.13 necessary and to appoint one deputy commissioner, a department 314.14 secretary, directors of divisions, and such other officers, 314.15 employees, and agents as the commissioner may deem necessary to 314.16 discharge the functions of the department, define the duties of 314.17 such officers, employees, and agents, and delegate to them any 314.18 of the commissioner's powers or duties, subject to the 314.19 commissioner's control and under such conditions as the 314.20 commissioner may prescribe. Appointments to exercise delegated 314.21 power to sign documents which require the signature of the 314.22 commissioner or a delegate by law shall be by written order 314.23 filed with the secretary of state. The delegations of authority 314.24 granted by the commissioner remain in effect until revoked by 314.25 the commissioner or a successor commissioner. 314.26 [EFFECTIVE DATE.] This section is effective the day 314.27 following final enactment. 314.28 Sec. 4. Minnesota Statutes 2004, section 270.30, 314.29 subdivision 1, is amended to read: 314.30 Subdivision 1. [SCOPE.](a)This section applies to a 314.31 person whooffers,provides, or facilitates the provision of314.32refund anticipation loans, as part of or in connection with the314.33provision oftax preparation services. 314.34(b) This section does not apply to:314.35(1) a tax preparer who provides tax preparation services314.36for fewer than six clients in a calendar year;315.1(2) the provision by a person of tax preparation services315.2to a spouse, parent, grandparent, child, or sibling; and315.3(3) the provision of services by an employee for an315.4employer.315.5 Sec. 5. Minnesota Statutes 2004, section 270.30, 315.6 subdivision 5, is amended to read: 315.7 Subd. 5. [ITEMIZED BILL REQUIRED.] A tax preparer must 315.8 provide an itemized statement of the charges for services, at 315.9 least separately stating the charges for: 315.10 (1) return preparation; and 315.11 (2)electronic filing; and315.12(3)providing or facilitating a refund anticipation loan. 315.13 Sec. 6. Minnesota Statutes 2004, section 270.30, is 315.14 amended by adding a subdivision to read: 315.15 Subd. 5a. [NONGAME WILDLIFE CHECKOFF.] A tax preparer must 315.16 give written notice of the option to contribute $1 or more to 315.17 the nongame wildlife management account in section 290.431 to 315.18 corporate clients that file an income tax return and to 315.19 individual clients who file an income tax return or property tax 315.20 refund claim form. This notification must: 315.21 (1) include information on the nongame wildlife management 315.22 account, that the contribution may be made by adding to the tax 315.23 or deducting from the refund that would otherwise be payable by 315.24 or to that individual or corporation, and that a contribution 315.25 would be paid into an account established for the management of 315.26 nongame wildlife; and 315.27 (2) be included with information sent to the client at the 315.28 same time as the preliminary worksheets or other documents used 315.29 in preparing the client's return and must include a line for 315.30 displaying contributions. 315.31 [EFFECTIVE DATE.] This section is effective for returns 315.32 prepared for taxable years beginning after December 31, 2004. 315.33 Sec. 7. Minnesota Statutes 2004, section 270.30, 315.34 subdivision 6, is amended to read: 315.35 Subd. 6. [ENFORCEMENT; PENALTIES.] The commissioner may 315.36 impose an administrative penalty of not more than $1,000 per 316.1 violation of subdivision 3, 4, or 5. The commissioner may 316.2 terminate a tax preparer's authority to transmit returns 316.3 electronically to the state, if the commissioner determines the 316.4 tax preparer engaged in a pattern and practice of violating this 316.5 section. Imposition of a penalty under this subdivision is 316.6 subject to the contested case procedure under chapter 14. The 316.7 commissioner shall collect the penalty in the same manner as the 316.8 income tax. Penalties imposed under this subdivision are public 316.9 data. 316.10 Sec. 8. Minnesota Statutes 2004, section 270.30, is 316.11 amended by adding a subdivision to read: 316.12 Subd. 6a. [EXCHANGE OF DATA; STATE BOARD OF 316.13 ACCOUNTANCY.] The State Board of Accountancy shall refer to the 316.14 commissioner complaints it receives about tax preparers who are 316.15 not subject to the jurisdiction of the State Board of 316.16 Accountancy and who are alleged to have violated the provisions 316.17 of subdivisions 3 to 5. 316.18 Sec. 9. Minnesota Statutes 2004, section 270.30, is 316.19 amended by adding a subdivision to read: 316.20 Subd. 6b. [EXCHANGE OF DATA; LAWYERS BOARD OF PROFESSIONAL 316.21 RESPONSIBILITY.] The Lawyers Board of Professional 316.22 Responsibility may refer to the commissioner complaints it 316.23 receives about tax preparers who are not subject to its 316.24 jurisdiction and who are alleged to have violated the provisions 316.25 of subdivisions 3 to 5. 316.26 Sec. 10. Minnesota Statutes 2004, section 270.30, is 316.27 amended by adding a subdivision to read: 316.28 Subd. 6c. [EXCHANGE OF DATA; COMMISSIONER.] The 316.29 commissioner shall refer complaints about tax preparers who are 316.30 alleged to have violated the provisions of subdivisions 3 to 5 316.31 to: 316.32 (1) the State Board of Accountancy, if the tax preparer is 316.33 under its jurisdiction; and 316.34 (2) the Lawyers Board of Professional Responsibility, if 316.35 the tax preparer is under its jurisdiction. 316.36 Sec. 11. Minnesota Statutes 2004, section 270.30, is 317.1 amended by adding a subdivision to read: 317.2 Subd. 6d. [DATA PRIVATE.] Information exchanged on 317.3 individuals under subdivisions 6a to 6c are private data under 317.4 section 13.02, subdivision 12, until such time as a penalty is 317.5 imposed as provided in section 326A.08 or by the Lawyers Board 317.6 of Professional Responsibility. 317.7 Sec. 12. Minnesota Statutes 2004, section 270.30, 317.8 subdivision 8, is amended to read: 317.9 Subd. 8. [EXEMPTIONS; ENFORCEMENT PROVISIONS.] (a) The 317.10 provisions ofsubdivisions 6 and 7this section, except for 317.11 subdivision 4, do not apply to: 317.12 (1) an attorney admitted to practice under section 481.01; 317.13 (2) a certified public accountantholding a certificate317.14under section 326A.04 or a person issued a permit to practice317.15under section 326A.05or other person who is subject to the 317.16 jurisdiction of the State Board of Accountancy; 317.17 (3)a person designated as a registered accounting317.18practitioner under Minnesota Rules, part 1105.6600, or a317.19registered accounting practitioner firm issued a permit under317.20Minnesota Rules, part 1105.7100;317.21(4)an enrolled agent who has passed the special enrollment 317.22 examination administered by the Internal Revenue Service;and317.23(5)(4) any fiduciary, or the regular employees of a 317.24 fiduciary, while acting on behalf of the fiduciary estate, the 317.25 testator, trustor, grantor, or beneficiaries of them; 317.26 (5) a tax preparer who provides tax preparation services 317.27 for fewer than six clients in a calendar year; 317.28 (6) tax preparation services to a spouse, parent, 317.29 grandparent, child, or sibling of the tax preparer; and 317.30 (7) the preparation by an employee of the tax return of the 317.31 employee's employer. 317.32 Sec. 13. [270.301] [PUBLICATION OF NAMES OF TAX PREPARERS 317.33 SUBJECT TO PENALTIES.] 317.34 Subdivision 1. [PUBLICATION OF LIST.] Notwithstanding any 317.35 other law, the commissioner must publish as provided in this 317.36 section a list or lists of tax preparers subject to penalties. 318.1 Subd. 2. [REQUIRED AND EXCLUDED TAX PREPARERS.] (a) 318.2 Subject to the limitations of paragraph (b), the commissioner 318.3 must publish lists of tax preparers who have been convicted 318.4 under section 289A.63. 318.5 (b) For the purposes of this section, tax preparers are not 318.6 subject to publication if: 318.7 (1) an administrative or court action contesting the 318.8 penalty has been filed or served and is unresolved at the time 318.9 when notice would be given under subdivision 3; 318.10 (2) an appeal period to contest the penalty has not 318.11 expired; or 318.12 (3) the commissioner has been notified that the tax 318.13 preparer is deceased. 318.14 Subd. 3. [NOTICE TO TAX PREPARER.] (a) At least 30 days 318.15 before publishing the name of a tax preparer subject to penalty, 318.16 the commissioner shall mail a written notice to the tax 318.17 preparer, detailing the amount and nature of each penalty and 318.18 the intended publication of the information listed in 318.19 subdivision 4 related to the penalty. The notice must be mailed 318.20 by first class and certified mail addressed to the last known 318.21 address of the tax preparer. The notice must include 318.22 information regarding the exceptions listed in subdivision 2, 318.23 paragraph (b), and must state that the tax preparer's 318.24 information will not be published if the tax preparer provides 318.25 information establishing that subdivision 2, paragraph (b), 318.26 prohibits publication of the tax preparer's name. 318.27 (b) Thirty days after the notice is mailed and if the tax 318.28 preparer has not proved to the commissioner that subdivision 2, 318.29 paragraph (b), prohibits publication, the commissioner may 318.30 publish in a list of tax preparers subject to penalty the 318.31 information about the tax preparer that is listed in subdivision 318.32 4. 318.33 Subd. 4. [FORM OF LIST.] The list may be published by any 318.34 medium or method. The list must contain the name, associated 318.35 business name or names, address or addresses, and violation or 318.36 violations for which a penalty was imposed of each tax preparer 319.1 subject to penalty. 319.2 Subd. 5. [REMOVAL FROM LIST.] The commissioner shall 319.3 remove the name of a tax preparer from the list of tax preparers 319.4 published under this section: 319.5 (1) when the commissioner determines that the name was 319.6 included on the list in error; 319.7 (2) within 90 days after the preparer has fully paid all 319.8 fines imposed, served any suspension, and demonstrated to the 319.9 satisfaction of the commissioner that the preparer has 319.10 successfully completed any remedial actions required by the 319.11 commissioner, the State Board of Accountancy, or the Lawyers 319.12 Board of Professional Responsibility; or 319.13 (3) when the commissioner has been notified that the tax 319.14 preparer is deceased. 319.15 Subd. 6. [NAMES PUBLISHED IN ERROR.] If the commissioner 319.16 publishes a name under subdivision 1 in error, the tax preparer 319.17 whose name was erroneously published has a right to request a 319.18 retraction and apology. If the tax preparer so requests, the 319.19 commissioner shall publish a retraction and apology 319.20 acknowledging that the tax preparer's name was published in 319.21 error. The retraction and apology must appear in the same 319.22 medium and the same format as the original list that contained 319.23 the name listed in error. 319.24 Subd. 7. [PAYMENT OF DAMAGES.] Actions against the 319.25 commissioner of revenue or the state of Minnesota arising out of 319.26 the implementation of this program must be brought under section 319.27 270.276. 319.28 [EFFECTIVE DATE.] The provision of this section requiring 319.29 the commissioner to publish the names of tax preparers applies 319.30 only to publishing the names of those tax preparers who commit a 319.31 crime under section 289A.63 on or after August 1, 2005. 319.32 Sec. 14. Minnesota Statutes 2004, section 270.65, is 319.33 amended to read: 319.34 270.65 [DATE OF ASSESSMENT; DEFINITION.] 319.35 For purposes of taxes administered by the commissioner, the 319.36 term "date of assessment" means the date a liability reported on 320.1 a return was entered into the records of the commissioner or the 320.2 date a return should have been filed, whichever is later; or, in 320.3 the case of taxes determined by the commissioner, "date of 320.4 assessment" means the date of the order assessing taxes or date 320.5 of the return made by the commissioner; or, in the case of an 320.6 amended return filed by the taxpayer, the assessment date is the 320.7 date additional liability reported on the return, if any, was 320.8 entered into the records of the commissioner; or, in the case of 320.9 a consent agreement signed by the taxpayer under section 270.67, 320.10 subdivision 3, the assessment date is the notice date shown on 320.11 the agreement; or, in the case of a check from a taxpayer that 320.12 is dishonored and results in an erroneous refund being given to 320.13 the taxpayer, remittance of the check is deemed to be an 320.14 assessment and the "date of assessment" is the date the check 320.15 was received by the commissioner. 320.16 [EFFECTIVE DATE.] This section is effective the day 320.17 following final enactment. 320.18 Sec. 15. Minnesota Statutes 2004, section 270.67, 320.19 subdivision 4, is amended to read: 320.20 Subd. 4. [OFFER-IN-COMPROMISE AND INSTALLMENT PAYMENT 320.21 PROGRAM.] (a) In implementing the authority provided in 320.22 subdivision 2 or in sections 8.30 and 16D.15 to accept offers of 320.23 installment payments or offers-in-compromise of tax liabilities, 320.24 the commissioner of revenue shall prescribe guidelines for 320.25 employees of the Department of Revenue to determine whether an 320.26 offer-in-compromise or an offer to make installment payments is 320.27 adequate and should be accepted to resolve a dispute. In 320.28 prescribing the guidelines, the commissioner shall develop and 320.29 publish schedules of national and local allowances designed to 320.30 provide that taxpayers entering into a compromise or payment 320.31 agreement have an adequate means to provide for basic living 320.32 expenses. The guidelines must provide that the taxpayer's 320.33 ownership interest in a motor vehicle, to the extent of the 320.34 value allowed in section 550.37, will not be considered as an 320.35 asset; in the case of an offer related to a joint tax liability 320.36 of spouses, that value of two motor vehicles must be excluded. 321.1 The guidelines must provide that employees of the department 321.2 shall determine, on the basis of the facts and circumstances of 321.3 each taxpayer, whether the use of the schedules is appropriate 321.4 and that employees must not use the schedules to the extent the 321.5 use would result in the taxpayer not having adequate means to 321.6 provide for basic living expenses. The guidelines must provide 321.7 that: 321.8 (1) an employee of the department shall not reject an 321.9 offer-in-compromise or an offer to make installment payments 321.10 from a low-income taxpayer solely on the basis of the amount of 321.11 the offer; and 321.12 (2) in the case of an offer-in-compromise which relates 321.13 only to issues of liability of the taxpayer: 321.14 (i) the offer must not be rejected solely because the 321.15 commissioner is unable to locate the taxpayer's return or return 321.16 information for verification of the liability; and 321.17 (ii) the taxpayer shall not be required to provide an 321.18 audited, reviewed, or compiled financial statement. 321.19 (b) The commissioner shall establish procedures: 321.20 (1) that require presentation of a counteroffer or a 321.21 written rejection of the offer by the commissioner if the amount 321.22 offered by the taxpayer in an offer-in-compromise or an offer to 321.23 make installment payments is not accepted by the commissioner; 321.24 (2) for an administrative review of any written rejection 321.25 of a proposed offer-in-compromise or installment agreement made 321.26 by a taxpayer under this section before the rejection is 321.27 communicated to the taxpayer; 321.28 (3) that allow a taxpayer to request reconsideration of any 321.29 written rejection of the offer or agreement to the commissioner 321.30 of revenue to determine whether the rejection is reasonable and 321.31 appropriate under the circumstances; and 321.32 (4) that provide for notification to the taxpayer when an 321.33 offer-in-compromise has been accepted, and issuance of 321.34 certificates of release of any liens imposed under section 321.35 270.69 related to the liability which is the subject of the 321.36 compromise. 322.1 (c) Each compromise proposal must be accompanied by a 322.2 nonrefundable payment of $250. If the compromise proposal is 322.3 accepted, the payment must be applied to the accepted compromise 322.4 amount. If the compromise is rejected, the payment must be 322.5 applied to the outstanding tax debts of the taxpayer pursuant to 322.6 section 270.652. In cases of financial hardship, upon 322.7 presentation of information establishing an inability to make 322.8 the $250 payment, the commissioner may waive this requirement. 322.9 [EFFECTIVE DATE.] This section is effective for offers in 322.10 compromise submitted after August 31, 2005. 322.11 Sec. 16. Minnesota Statutes 2004, section 270.69, 322.12 subdivision 4, is amended to read: 322.13 Subd. 4. [PERIOD OF LIMITATIONS.] The lien imposed by this 322.14 section shall, notwithstanding any other provision of law to the 322.15 contrary, be enforceable from the time the lien arises and for 322.16 ten years from the date of filing the notice of lien, which must 322.17 be filed by the commissioner within five years after the date of 322.18 assessment of the tax or final administrative or judicial 322.19 determination of the assessment. A notice of lien filed in one 322.20 county may be transcribed to the secretary of state or to any 322.21 other county within ten years after the date of its filing, but 322.22 the transcription shall not extend the period during which the 322.23 lien is enforceable. A notice of lien may be renewed by the 322.24 commissioner before the expiration of the ten-year period for an 322.25 additional ten years. The taxpayer must receive written notice 322.26 of the renewal. 322.27 [EFFECTIVE DATE.] This section is effective the day 322.28 following final enactment. 322.29 Sec. 17. Minnesota Statutes 2004, section 270A.03, 322.30 subdivision 5, is amended to read: 322.31 Subd. 5. [DEBT.] "Debt" means a legal obligation of a 322.32 natural person to pay a fixed and certain amount of money, which 322.33 equals or exceeds $25 and which is due and payable to a claimant 322.34 agency. The term includes criminal fines imposed under section 322.35 609.10 or 609.125, fines imposed for petty misdemeanors as 322.36 defined in section 609.02, subdivision 4a, and restitution. The 323.1 term also includes the co-payment for the appointment of a 323.2 district public defender imposed under section 611.17, paragraph 323.3 (c). A debt may arise under a contractual or statutory 323.4 obligation, a court order, or other legal obligation, but need 323.5 not have been reduced to judgment. 323.6 A debt includes any legal obligation of a current recipient 323.7 of assistance which is based on overpayment of an assistance 323.8 grant where that payment is based on a client waiver or an 323.9 administrative or judicial finding of an intentional program 323.10 violation; or where the debt is owed to a program wherein the 323.11 debtor is not a client at the time notification is provided to 323.12 initiate recovery under this chapter and the debtor is not a 323.13 current recipient of food support, transitional child care, or 323.14 transitional medical assistance. 323.15 A debt does not include any legal obligation to pay a 323.16 claimant agency for medical care, including hospitalization if 323.17 the income of the debtor at the time when the medical care was 323.18 rendered does not exceed the following amount: 323.19 (1) for an unmarried debtor, an income of $8,800 or less; 323.20 (2) for a debtor with one dependent, an income of $11,270 323.21 or less; 323.22 (3) for a debtor with two dependents, an income of $13,330 323.23 or less; 323.24 (4) for a debtor with three dependents, an income of 323.25 $15,120 or less; 323.26 (5) for a debtor with four dependents, an income of $15,950 323.27 or less; and 323.28 (6) for a debtor with five or more dependents, an income of 323.29 $16,630 or less. 323.30 The income amounts in this subdivision shall be adjusted 323.31 for inflation for debts incurred in calendar years 2001 and 323.32 thereafter. The dollar amount of each income level that applied 323.33 to debts incurred in the prior year shall be increased in the 323.34 same manner as provided in section 1(f) of the Internal Revenue 323.35 Code of 1986, as amended through December 31, 2000, except that 323.36 for the purposes of this subdivision the percentage increase 324.1 shall be determined from the year starting September 1, 1999, 324.2 and ending August 31, 2000, as the base year for adjusting for 324.3 inflation for debts incurred after December 31, 2000. 324.4 Debt also includes an agreement to pay a MinnesotaCare 324.5 premium, regardless of the dollar amount of the premium 324.6 authorized under section 256L.15, subdivision 1a. 324.7 Sec. 18. Minnesota Statutes 2004, section 270A.03, 324.8 subdivision 7, is amended to read: 324.9 Subd. 7. [REFUND.] "Refund" means an individual income tax 324.10 refundor political contribution refund, pursuant to chapter324.11290, or a property tax credit or refund, pursuant to chapter 324.12 290A, or a sustainable forest tax payment to a claimant under 324.13 chapter 290C. 324.14 For purposes of this chapter, lottery prizes, as set forth 324.15 in section 349A.08, subdivision 8, and amounts granted to 324.16 persons by the legislature on the recommendation of the joint 324.17 senate-house of representatives Subcommittee on Claims shall be 324.18 treated as refunds. 324.19 In the case of a joint property tax refund payable to 324.20 spouses under chapter 290A, the refund shall be considered as 324.21 belonging to each spouse in the proportion of the total refund 324.22 that equals each spouse's proportion of the total income 324.23 determined under section 290A.03, subdivision 3. In the case of 324.24 a joint income tax refund under chapter 289A, the refund shall 324.25 be considered as belonging to each spouse in the proportion of 324.26 the total refund that equals each spouse's proportion of the 324.27 total taxable income determined under section 290.01, 324.28 subdivision 29. The commissioner shall remit the entire refund 324.29 to the claimant agency, which shall, upon the request of the 324.30 spouse who does not owe the debt, determine the amount of the 324.31 refund belonging to that spouse and refund the amount to that 324.32 spouse. For court fines, fees, and surcharges and court-ordered 324.33 restitution under section 611A.04, subdivision 2, the notice 324.34 provided by the commissioner of revenue under section 270A.07, 324.35 subdivision 2, paragraph (b), serves as the appropriate legal 324.36 notice to the spouse who does not owe the debt. 325.1 [EFFECTIVE DATE.] This section is effective for political 325.2 contribution refund claims based on contributions made on or 325.3 after July 1, 2005. 325.4 Sec. 19. Minnesota Statutes 2004, section 289A.08, 325.5 subdivision 16, is amended to read: 325.6 Subd. 16. [TAX REFUND OR RETURN PREPARERS; ELECTRONIC 325.7 FILING; PAPER FILING FEE IMPOSED.] (a) A "tax refund or return 325.8 preparer," as defined in section 289A.60, subdivision 13, 325.9 paragraph(g)(h), who prepared more than500100 Minnesota 325.10 individual income tax returns for the prior calendar year must 325.11 file all Minnesota individual income tax returns prepared for 325.12 the current calendar year by electronic means. 325.13 (b)For tax returns prepared for the tax year beginning in325.142001, the "500" in paragraph (a) is reduced to 250.325.15(c) For tax returns prepared for tax years beginning after325.16December 31, 2001, the "500" in paragraph (a) is reduced to 100.325.17(d)Paragraph (a) does not apply to a return if the 325.18 taxpayer has indicated on the return that the taxpayer did not 325.19 want the return filed by electronic means. 325.20(e)(c) For each return that is not filed electronically by 325.21 a tax refund or return preparer under this subdivision, 325.22 including returns filed under paragraph(d)(b), a paper filing 325.23 fee of $5 is imposed upon the preparer. The fee is collected 325.24 from the preparer in the same manner as income tax. The fee 325.25 does not apply to returns that the commissioner requires to be 325.26 filed in paper form. 325.27 Sec. 20. Minnesota Statutes 2004, section 289A.37, 325.28 subdivision 5, is amended to read: 325.29 Subd. 5. [SUFFICIENCY OF NOTICE.] An order of assessment, 325.30 sent postage prepaid by United States mail to the taxpayer at 325.31 the taxpayer's last known address, or sent by electronic mail to 325.32 the taxpayer's last known electronic mailing address as provided 325.33 for in section 325L.08, is sufficient even if the taxpayer is 325.34 deceased or is under a legal disability, or, in the case of a 325.35 corporation, has terminated its existence, unless the department 325.36 has been provided with a new address by a party authorized to 326.1 receive notices of assessment. 326.2 [EFFECTIVE DATE.] This section is effective the day 326.3 following final enactment. 326.4 Sec. 21. Minnesota Statutes 2004, section 289A.50, 326.5 subdivision 1, is amended to read: 326.6 Subdivision 1. [GENERAL RIGHT TO REFUND.] (a) Subject to 326.7 the requirements of this section and section 289A.40, a taxpayer 326.8 who has paid a tax in excess of the taxes lawfully due and who 326.9 files a written claim for refund will be refunded or credited 326.10 the overpayment of the tax determined by the commissioner to be 326.11 erroneously paid. 326.12 (b) The claim must specify the name of the taxpayer, the 326.13 date when and the period for which the tax was paid, the kind of 326.14 tax paid, the amount of the tax that the taxpayer claims was 326.15 erroneously paid, the grounds on which a refund is claimed, and 326.16 other information relative to the payment and in the form 326.17 required by the commissioner. An income tax, estate tax, or 326.18 corporate franchise tax return, or amended return claiming an 326.19 overpayment constitutes a claim for refund. 326.20 (c) When, in the course of an examination, and within the 326.21 time for requesting a refund, the commissioner determines that 326.22 there has been an overpayment of tax, the commissioner shall 326.23 refund or credit the overpayment to the taxpayer and no demand 326.24 is necessary. If the overpayment exceeds $1, the amount of the 326.25 overpayment must be refunded to the taxpayer. If the amount of 326.26 the overpayment is less than $1, the commissioner is not 326.27 required to refund. In these situations, the commissioner does 326.28 not have to make written findings or serve notice by mail to the 326.29 taxpayer. 326.30 (d) If the amount allowable as a credit for withholding, 326.31 estimated taxes, or dependent care exceeds the tax against which 326.32 the credit is allowable, the amount of the excess is considered 326.33 an overpayment.The refund allowed by section 290.06,326.34subdivision 23, is also considered an overpayment.The 326.35 requirements of section 270.10, subdivision 1, do not apply to 326.36 the refunding of such an overpayment shown on the original 327.1 return filed by a taxpayer. 327.2 (e) If the entertainment tax withheld at the source exceeds 327.3 by $1 or more the taxes, penalties, and interest reported in the 327.4 return of the entertainment entity or imposed by section 327.5 290.9201, the excess must be refunded to the entertainment 327.6 entity. If the excess is less than $1, the commissioner need 327.7 not refund that amount. 327.8 (f) If the surety deposit required for a construction 327.9 contract exceeds the liability of the out-of-state contractor, 327.10 the commissioner shall refund the difference to the contractor. 327.11 (g) An action of the commissioner in refunding the amount 327.12 of the overpayment does not constitute a determination of the 327.13 correctness of the return of the taxpayer. 327.14 (h) There is appropriated from the general fund to the 327.15 commissioner of revenue the amount necessary to pay refunds 327.16 allowed under this section. 327.17 [EFFECTIVE DATE.] This section is effective for political 327.18 contribution refund claims based on contributions made on or 327.19 after July 1, 2005. 327.20 Sec. 22. Minnesota Statutes 2004, section 289A.60, 327.21 subdivision 2a, is amended to read: 327.22 Subd. 2a. [PENALTIES FOR EXTENDED DELINQUENCY.] (a) If an 327.23 individual income tax is not paid within 180 days after the date 327.24 of filing of a return or, in the case of taxes assessed by the 327.25 commissioner, within 180 days after the assessment date or, if 327.26 appealed, within 180 days after final resolution of the appeal, 327.27 an extended delinquency penalty of five percent of the tax 327.28 remaining unpaid is added to the amount due. 327.29 (b) If acorporate franchise, fiduciary income, mining327.30company, estate, partnership, S corporation, or nonresident327.31entertainertax return is not filed within 30 days after written 327.32 demand for the filing of a delinquent return, an extended 327.33 delinquency penalty of five percent of the tax not paid prior to 327.34 the demandis added to the tax,orin the case of an individual327.35income tax return, a minimum penalty of$100or the five percent327.36penaltyis imposed, whichever amount is greater. 328.1 [EFFECTIVE DATE.] This section is effective for returns 328.2 originally due on or after August 1, 2005. 328.3 Sec. 23. Minnesota Statutes 2004, section 289A.60, 328.4 subdivision 6, is amended to read: 328.5 Subd. 6. [PENALTY FOR FAILURE TO FILE, FALSE OR FRAUDULENT 328.6 RETURN, EVASION.] If a person, with intent to evade or defeat a 328.7 tax or payment of tax, fails to file a return, files a false or 328.8 fraudulent return, or attempts in any other manner to evade or 328.9 defeat a tax or payment of tax, there is imposed on the person a 328.10 penalty equal to 50 percent of the tax, less amounts paid by the 328.11 person on the basis of the false or fraudulent return, if any, 328.12 due for the period to which the return related. 328.13 [EFFECTIVE DATE.] This section is effective the day 328.14 following final enactment. 328.15 Sec. 24. Minnesota Statutes 2004, section 289A.60, 328.16 subdivision 11, is amended to read: 328.17 Subd. 11. [PENALTIES RELATING TO INFORMATION REPORTS, 328.18 WITHHOLDING.] (a) When a person required under section 289A.09, 328.19 subdivision 2, to give a statement to an employee or payee and a 328.20 duplicate statement to the commissioner, or to give a 328.21 reconciliation of the statements and quarterly returns to the 328.22 commissioner, gives a false or fraudulent statement to an 328.23 employee or payee or a false or fraudulent duplicate statement 328.24 or reconciliation of statements and quarterly returns to the 328.25 commissioner, or fails to give a statement or the reconciliation 328.26 in the manner, when due, and showing the information required by 328.27 section 289A.09, subdivision 2, or rules prescribed by the 328.28 commissioner under that section, that person is liable for a 328.29 penalty of $50 for an act or failure to act. The total amount 328.30 imposed on the delinquent person for failures during a calendar 328.31 year must not exceed $25,000. 328.32 (b) In addition to any other penalty provided by law, an 328.33 employee who gives a withholding exemption certificate or a 328.34 residency affidavit to an employer thatthe employee has reason328.35to know contains a materially incorrect statementdecreases the 328.36 amount withheld under section 290.92 and as of the time the 329.1 certificate or affidavit was given to the employer there was no 329.2 reasonable basis for the statements in the certificate or 329.3 affidavit is liable to the commissioner of revenue for a penalty 329.4 of $500 for each instance. 329.5 (c) In addition to any other penalty provided by law, an 329.6 employer who fails to submit a copy of a withholding exemption 329.7 certificate or a residency affidavit required by section 290.92, 329.8 subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the 329.9 commissioner of revenue for a penalty of $50 for each instance. 329.10 (d) An employer or payor who fails to file an application 329.11 for a withholding account number, as required by section 290.92, 329.12 subdivision 24, is liable to the commissioner for a penalty of 329.13 $100. 329.14 [EFFECTIVE DATE.] This section is effective for 329.15 certificates and affidavits given to employers after December 329.16 31, 2005. 329.17 Sec. 25. Minnesota Statutes 2004, section 289A.60, 329.18 subdivision 13, is amended to read: 329.19 Subd. 13. [PENALTIES FOR TAX RETURN PREPARERS.] (a) If an 329.20 understatement of liability with respect to a return or claim 329.21 for refund is due to a willful attempt in any manner to 329.22 understate the liability for a tax by a person who is a tax 329.23 return preparer with respect to the return or claim, the person 329.24 shall pay to the commissioner a penalty of $500. If a part of a 329.25 property tax refund claim is excessive due to a willful attempt 329.26 in any manner to overstate the claim for relief allowed under 329.27 chapter 290A by a person who is a tax refund or return preparer, 329.28 the person shall pay to the commissioner a penalty of $500 with 329.29 respect to the claim. These penalties may not be assessed 329.30 against the employer of a tax return preparer unless the 329.31 employer was actively involved in the willful attempt to 329.32 understate the liability for a tax or to overstate the claim for 329.33 refund. These penalties are income tax liabilities and may be 329.34 assessed at any time as provided in section 289A.38, subdivision 329.35 5. 329.36 (b) A civil action in the name of the state of Minnesota 330.1 may be commenced to enjoin any person who is a tax return 330.2 preparer doing business in this state from further engaging in 330.3 any conduct described in paragraph (c). An action under this 330.4 paragraph must be brought by the attorney general in the 330.5 district court for the judicial district of the tax return 330.6 preparer's residence or principal place of business, or in which 330.7 the taxpayer with respect to whose tax return the action is 330.8 brought resides. The court may exercise its jurisdiction over 330.9 the action separate and apart from any other action brought by 330.10 the state of Minnesota against the tax return preparer or any 330.11 taxpayer. 330.12 (c) In an action under paragraph (b), if the court finds 330.13 that a tax return preparer has: 330.14 (1) engaged in any conduct subject to a civil penalty under 330.15 section 289A.60 or a criminal penalty under section 289A.63; 330.16 (2) misrepresented the preparer's eligibility to practice 330.17 before the Department of Revenue, or otherwise misrepresented 330.18 the preparer's experience or education as a tax return preparer; 330.19 (3) guaranteed the payment of any tax refund or the 330.20 allowance of any tax credit; or 330.21 (4) engaged in any other fraudulent or deceptive conduct 330.22 that substantially interferes with the proper administration of 330.23 state tax law, and injunctive relief is appropriate to prevent 330.24 the recurrence of that conduct, 330.25 the court may enjoin the person from further engaging in that 330.26 conduct. 330.27 (d) If the court finds that a tax return preparer has 330.28 continually or repeatedly engaged in conduct described in 330.29 paragraph (c), and that an injunction prohibiting that conduct 330.30 would not be sufficient to prevent the person's interference 330.31 with the proper administration of state tax laws, the court may 330.32 enjoin the person from acting as a tax return preparer. The 330.33 court may not enjoin the employer of a tax return preparer for 330.34 conduct described in paragraph (c) engaged in by one or more of 330.35 the employer's employees unless the employer was also actively 330.36 involved in that conduct. 331.1 (e) The commissioner may terminate or suspend a tax 331.2 preparer's authority to transmit returns electronically to the 331.3 state, if the commissioner determines that the tax preparer has 331.4 engaged in a pattern and practice of conduct in violation of 331.5 paragraph (a) of this subdivision or has been convicted under 331.6 section 289A.63. 331.7 (f) For purposes of this subdivision, the term 331.8 "understatement of liability" means an understatement of the net 331.9 amount payable with respect to a tax imposed by state tax law, 331.10 or an overstatement of the net amount creditable or refundable 331.11 with respect to a tax. The determination of whether or not 331.12 there is an understatement of liability must be made without 331.13 regard to any administrative or judicial action involving the 331.14 taxpayer. For purposes of this subdivision, the amount 331.15 determined for underpayment of estimated tax under either 331.16 section 289A.25 or 289A.26 is not considered an understatement 331.17 of liability. 331.18(f)(g) For purposes of this subdivision, the term 331.19 "overstatement of claim" means an overstatement of the net 331.20 amount refundable with respect to a claim for property tax 331.21 relief provided by chapter 290A. The determination of whether 331.22 or not there is an overstatement of a claim must be made without 331.23 regard to administrative or judicial action involving the 331.24 claimant. 331.25(g)(h) For purposes of this section, the term "tax refund 331.26 or return preparer" means an individual who prepares for 331.27 compensation, or who employs one or more individuals to prepare 331.28 for compensation, a return of tax, or a claim for refund of 331.29 tax. The preparation of a substantial part of a return or claim 331.30 for refund is treated as if it were the preparation of the 331.31 entire return or claim for refund. An individual is not 331.32 considered a tax return preparer merely because the individual: 331.33 (1) gives typing, reproducing, or other mechanical 331.34 assistance; 331.35 (2) prepares a return or claim for refund of the employer, 331.36 or an officer or employee of the employer, by whom the 332.1 individual is regularly and continuously employed; 332.2 (3) prepares a return or claim for refund of any person as 332.3 a fiduciary for that person; or 332.4 (4) prepares a claim for refund for a taxpayer in response 332.5 to a tax order issued to the taxpayer. 332.6 Sec. 26. Minnesota Statutes 2004, section 290.01, 332.7 subdivision 6, is amended to read: 332.8 Subd. 6. [TAXPAYER.] The term "taxpayer" means any person 332.9 or corporation subject to a tax imposed by this chapter.For332.10purposes of section 290.06, subdivision 23, the term "taxpayer"332.11means an individual eligible to vote in Minnesota under section332.12201.014.332.13 [EFFECTIVE DATE.] This section is effective for political 332.14 contribution refund claims based on contributions that are made 332.15 on or after July 1, 2005. 332.16 Sec. 27. Minnesota Statutes 2004, section 290.92, 332.17 subdivision 1, is amended to read: 332.18 Subdivision 1. [DEFINITIONS.] (1) [WAGES.] For purposes 332.19 of this section, the term "wages" means the same as that term is 332.20 defined in section 3401(a) and (f) of the Internal Revenue Code. 332.21 (2) [PAYROLL PERIOD.] For purposes of this section the 332.22 term "payroll period" means a period for which a payment of 332.23 wages is ordinarily made to the employee by the employee's 332.24 employer, and the term "miscellaneous payroll period" means a 332.25 payroll period other than a daily, weekly, biweekly, 332.26 semimonthly, monthly, quarterly, semiannual, or annual payroll 332.27 period. 332.28 (3) [EMPLOYEE.] For purposes of this section the term 332.29 "employee" means any resident individual performing services for 332.30 an employer, either within or without, or both within and 332.31 without the state of Minnesota, and every nonresident individual 332.32 performing services within the state of Minnesota, the 332.33 performance of which services constitute, establish, and 332.34 determine the relationship between the parties as that of 332.35 employer and employee. As used in the preceding sentence, the 332.36 term "employee" includes an officer of a corporation, and an 333.1 officer, employee, or elected official of the United States, a 333.2 state, or any political subdivision thereof, or the District of 333.3 Columbia, or any agency or instrumentality of any one or more of 333.4 the foregoing. 333.5 (4) [EMPLOYER.] For purposes of this section the term 333.6 "employer" means any person, including individuals, fiduciaries, 333.7 estates, trusts, partnerships, limited liability companies, and 333.8 corporations transacting business in or deriving any income from 333.9 sources within the state of Minnesota for whom an individual 333.10 performs or performed any service, of whatever nature, as the 333.11 employee of such person, except that if the person for whom the 333.12 individual performs or performed the services does not have 333.13legalcontrol of the payment of the wages for such services, the 333.14 term "employer," except for purposes of paragraph (1), means the 333.15 person havinglegalcontrol of the payment of such wages. As 333.16 used in the preceding sentence, the term "employer" includes any 333.17 corporation, individual, estate, trust, or organization which is 333.18 exempt from taxation under section 290.05 and further includes, 333.19 but is not limited to, officers of corporations who havelegal333.20 control, either individually or jointly with another or others, 333.21 of the payment of the wages. 333.22 (5) [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For 333.23 purposes of this section, the term "number of withholding 333.24 exemptions claimed" means the number of withholding exemptions 333.25 claimed in a withholding exemption certificate in effect under 333.26 subdivision 5, except that if no such certificate is in effect, 333.27 the number of withholding exemptions claimed shall be considered 333.28 to be zero. 333.29 [EFFECTIVE DATE.] This section is effective the day 333.30 following final enactment. 333.31 Sec. 28. Minnesota Statutes 2004, section 325D.33, 333.32 subdivision 6, is amended to read: 333.33 Subd. 6. [VIOLATIONS.] If the commissioner determines that 333.34 a distributor is violating any provision of this chapter, the 333.35 commissioner must give the distributor a written warning 333.36 explaining the violation and an explanation of what must be done 334.1 to comply with this chapter. Within ten days of issuance of the 334.2 warning, the distributor must notify the commissioner that the 334.3 distributor has complied with the commissioner's recommendation 334.4 or request that the commissioner set the issue for a hearing 334.5 pursuant to chapter 14. If a hearing is requested, the hearing 334.6 shall be scheduled within 20 days of the request and the 334.7 recommendation of the administrative law judge shall be issued 334.8 within five working days of the close of the hearing. The 334.9 commissioner's final determination shall be issued within five 334.10 working days of the receipt of the administrative law judge's 334.11 recommendation. If the commissioner's final determination is 334.12 adverse to the distributor and the distributor does not comply 334.13 within ten days of receipt of the commissioner's final 334.14 determination, the commissioner may order the distributor to 334.15 immediately cease the stamping of cigarettes. As soon as 334.16 practicable after the order, the commissioner must remove the 334.17 meter and any unapplied cigarette stamps from the premises of 334.18 the distributor. 334.19 If within ten days of issuance of the written warning the 334.20 distributor has not complied with the commissioner's 334.21 recommendation or requested a hearing, the commissioner may 334.22 order the distributor to immediately cease the stamping of 334.23 cigarettes and remove the meter and unapplied stamps from the 334.24 distributor's premises. 334.25If, within any 12-month period, the commissioner has issued334.26three written warnings to any distributor, even if the334.27distributor has complied within ten days, the commissioner shall334.28notify the distributor of the commissioner's intent to revoke334.29the distributor's license for a continuing course of conduct334.30contrary to this chapter. For purposes of this paragraph, a334.31written warning that was ultimately resolved by removal of the334.32warning by the commissioner is not deemed to be a warning. The334.33commissioner must notify the distributor of the date and time of334.34a hearing pursuant to chapter 14 at least 20 days before the334.35hearing is held. The hearing must provide an opportunity for334.36the distributor to show cause why the license should not be335.1revoked. If the commissioner revokes a distributor's license,335.2the commissioner shall not issue a new license to that335.3distributor for 180 days.335.4 [EFFECTIVE DATE.] This section is effective the day 335.5 following final enactment. 335.6 Sec. 29. [459.21] [GAMBLING SUBSIDIES; REFERENDUM 335.7 APPROVAL.] 335.8 No city or county may provide an exemption from a tax or 335.9 fee, an abatement of a tax, or fee or any other type of public 335.10 subsidy to an enterprise engaged in gambling, unless the 335.11 question of whether to provide the exemption, abatement, or 335.12 subsidy has been submitted to the voters at a special or general 335.13 election and a majority of the votes cast on the question are in 335.14 the affirmative. 335.15 For purposes of this section, "gambling" means conducting 335.16 class III gaming as defined in United States Code, title 25, 335.17 section 2703. 335.18 [EFFECTIVE DATE.] This section is effective the day 335.19 following enactment. 335.20 Sec. 30. Minnesota Statutes 2004, section 645.44, is 335.21 amended by adding a subdivision to read: 335.22 Subd. 19. [FEE AND TAX.] (a) "Tax" means any fee, charge, 335.23 exaction, or assessment imposed by a governmental entity on an 335.24 individual, person, entity, transaction, good, service, or other 335.25 thing. It excludes a price that an individual or entity chooses 335.26 voluntarily to pay in return for receipt of goods or services 335.27 provided by the governmental entity. A government good or 335.28 service does not include access to or the authority to engage in 335.29 private market transactions with a nongovernmental party, such 335.30 as licenses to engage in a trade, profession, or business or to 335.31 improve private property. 335.32 (b) For purposes of applying the laws of this state, a 335.33 "fee," "charge," or other similar term that satisfies the 335.34 functional requirements of paragraph (a) must be treated as a 335.35 tax for all purposes, regardless of whether the statute or law 335.36 names or describes it as a tax. The provisions of this 336.1 subdivision do not preempt or supersede limitations under 336.2 statute or law that apply to fees, charges, or assessments. 336.3 [EFFECTIVE DATE.] This section is effective the day 336.4 following final enactment. 336.5 Sec. 31. [TAX REFORM COMMISSION.] 336.6 Subdivision 1. [COMMISSION ESTABLISHED.] A tax reform 336.7 action commission is established in the legislative branch to 336.8 study the Minnesota tax and revenue system and to make 336.9 recommendations to the legislature. 336.10 Subd. 2. [MEMBERSHIP.] (a) The commission consists of 15 336.11 members, appointed as follows: 336.12 (1) three members appointed by the governor, two from the 336.13 executive branch and one from private life; 336.14 (2) four members appointed by the majority leader of the 336.15 senate, two members of the senate and two from private life; 336.16 (3) two members appointed by the minority leader of the 336.17 senate, one member of the senate and one from private life; 336.18 (4) four members appointed by the speaker of the house of 336.19 representatives, two members of the house of representatives and 336.20 two from private life; and 336.21 (5) two members appointed by the minority leader of the 336.22 house of representatives, one member of the house of 336.23 representatives and one from private life. 336.24 (b) The appointing authority shall select members who are 336.25 of recognized standing and distinction and who possess 336.26 demonstrated capacity to discharge the duties of the 336.27 commission. In making appointments, the appointing authorities 336.28 shall attempt to appoint some individuals to the commission who 336.29 have special experience or knowledge in taxation, economics, and 336.30 accounting. 336.31 (c) The governor shall designate a member of the commission 336.32 as its chair who shall determine its duties and supervise its 336.33 staff. 336.34 (d) The appointing authorities shall appoint members of the 336.35 commission not more than 30 days after enactment of this 336.36 section. Members serve for the life of the commission. A 337.1 vacancy in the commission membership does not affect the power 337.2 of the remaining members to execute the duties of the 337.3 commission. A vacancy in commission membership is filled in the 337.4 same manner in which the original appointment was made. 337.5 Subd. 3. [DUTIES; REPORT.] (a) The commission shall study 337.6 and evaluate the Minnesota state and local tax and revenue 337.7 system with a goal of making long-term improvements in the 337.8 system for the citizens of the state, given standard principles 337.9 of good tax policy and the background of expected demographic 337.10 and economic changes in the state, nation, and world. The 337.11 commission's recommendations must be done on a revenue neutral 337.12 basis. In particular, the commission shall examine: 337.13 (1) the mix of state revenues between tax revenues and fees 337.14 and charges for services used or benefits received; 337.15 (2) the implications of likely demographic and economic 337.16 changes, affecting both (i) the demands for state and local 337.17 government services and (ii) taxes and other revenues; and 337.18 (3) the extent to which the existing tax system and the 337.19 commission's proposal satisfy the following basic tax policy 337.20 principles: 337.21 (i) equity or fairness, including measures based on ability 337.22 to pay, equal treatment of equals, and payment for benefits 337.23 received; 337.24 (ii) neutrality or efficiency, the extent to which the 337.25 effects on private market decisions are minimized; 337.26 (iii) revenue adequacy, the extent to which the revenues 337.27 are stable and predictable and grow with increases in income or 337.28 economic activity; 337.29 (iv) competitiveness, the extent to which negative effects 337.30 on the state's attractiveness as a location for investment, 337.31 working, and living are minimized; 337.32 (v) simplicity, the extent to which it is easy to 337.33 understand; 337.34 (vi) ease of compliance and administration, the extent to 337.35 which taxpayers can easily comply and the government can easily 337.36 administer it; and 338.1 (vii) visibility or accountability, the extent to which the 338.2 taxes or other charges are clear and apparent to their payers as 338.3 a cost of government and that the government officials imposing 338.4 the tax are accountable, through election or otherwise, to the 338.5 principal payers of the tax. 338.6 (b) The commission shall report to the legislature as 338.7 provided in this paragraph. Each report must include the 338.8 commission's evaluation of the tax or taxes, its recommendations 338.9 for reform and improvement of the tax or taxes on a revenue 338.10 neutral basis, its rationale for the proposed changes, and a 338.11 draft bill implementing the commission's recommendation for 338.12 introduction in the legislature. The reports must be submitted 338.13 by the following dates: 338.14 (1) corporate and other business taxation, including the 338.15 credit for increasing research activities, by July 1, 2007; 338.16 (2) general sales and motor vehicle sales and special 338.17 excise taxes by July 1, 2008; 338.18 (3) individual income taxation by July 1, 2009; and 338.19 (4) estate, insurance premium, MinnesotaCare, and all other 338.20 taxes not covered by clauses (1) to (3) by July 1, 2010. 338.21 Subd. 4. [PER DIEM AND EXPENSES.] Members of the 338.22 commission may be compensated and receive reimbursement for 338.23 expenses, as provided for members of advisory councils under 338.24 Minnesota Statutes, section 15.059, subdivision 3. This 338.25 subdivision does not apply to members of the legislature or 338.26 state employees. 338.27 Subd 5. [STAFF.] The commission may employ staff as it 338.28 deems appropriate to carry out its duties or use existing 338.29 legislative and executive branch staff. All staff are in the 338.30 unclassified state service. Legislative staff and the 338.31 Department of Revenue staff must provide research, bill 338.32 drafting, and other services to the commission upon its 338.33 request. The commission may contract with consultants for 338.34 research and other services and enter other contracts, as it 338.35 deems necessary or appropriate to carry out its duties. These 338.36 contracts are not subject to the requirements of Minnesota 339.1 Statutes, chapter 16C. 339.2 Subd. 6. [EXPIRATION.] The commission terminates 30 days 339.3 after transmitting its final report to the legislature under 339.4 subdivision 3, paragraph (b). 339.5 [EFFECTIVE DATE.] This section is effective the day 339.6 following final enactment. 339.7 Sec. 32. [TRANSFER.] 339.8 On July 1, 2005, the commissioner of finance shall transfer 339.9 $3,408,000 and any additional amount from the tax relief account 339.10 under Minnesota Statutes, section 16A.1522, subdivision 4, to 339.11 the general fund. 339.12 Sec. 33. [APPROPRIATION.] 339.13 (a) $125,000 in fiscal year 2006 and $125,000 in fiscal 339.14 year 2007 are appropriated from the general fund to the 339.15 commissioner of revenue to make grants to one or more nonprofit 339.16 organizations, qualifying under section 501(c)(3) of the 339.17 Internal Revenue Code of 1986, to coordinate, facilitate, 339.18 encourage, and aid in the provision of taxpayer assistance 339.19 services. This is a onetime appropriation and is not added to 339.20 the base. 339.21 (b) "Taxpayer assistance services" mean accounting and tax 339.22 preparation services provided by volunteers to low-income and 339.23 disadvantaged Minnesota residents to help them file federal and 339.24 state income tax returns and Minnesota property tax refund 339.25 claims and to provide personal representation before the 339.26 Department of Revenue and Internal Revenue Service. 339.27 Sec. 34. [REPEALER.] 339.28 (a) Minnesota Statutes 2004, section 10A.322, subdivision 339.29 4, is repealed effective July 1, 2005. 339.30 (b) Minnesota Statutes 2004, section 16A.1522, subdivision 339.31 4, is repealed effective July 2, 2005. 339.32 (c) Minnesota Statutes 2004, section 290.06, subdivision 339.33 23, is repealed effective for contributions made after June 30, 339.34 2005.