1.1                          A bill for an act 
  1.2             relating to financing and operation of state and local 
  1.3             government; providing for job opportunity building 
  1.4             zones; providing for a biotechnology and health 
  1.5             services industry zone; changing income, corporate 
  1.6             franchise, estate, sales and use, motor vehicle sales, 
  1.7             property, minerals, gravel, cigarette and tobacco, 
  1.8             liquor, mortgage registry and deed, healthcare 
  1.9             provider, insurance premiums, hazardous waste 
  1.10            generator, and other taxes and tax provisions; 
  1.11            changing and providing powers and duties relating to 
  1.12            tax administration, collection, compliance, and 
  1.13            enforcement; updating provisions to the internal 
  1.14            revenue code;changing provisions relating to the state 
  1.15            elections campaign fund; changing June accelerated tax 
  1.16            liability provisions and extending the requirements to 
  1.17            other taxes; changing and providing for 
  1.18            intergovernmental aids; imposing levy limits; changing 
  1.19            truth in taxation provisions and providing for reverse 
  1.20            referenda; providing for economic development 
  1.21            incentives; changing tax increment financing 
  1.22            provisions; changing certain levy and other provisions 
  1.23            relating to the metropolitan council and the 
  1.24            metropolitan mosquito control district; authorizing 
  1.25            towns to impose certain charges; giving special powers 
  1.26            to the cities of Medford, Newport, Moorhead, Duluth, 
  1.27            and Hopkins; repealing certain local laws; 
  1.28            establishing a legislative commission on unnecessary 
  1.29            mandates; changing provisions relating to local impact 
  1.30            notes; abolishing or providing for the expiration of 
  1.31            certain funds and accounts; providing for cash flow 
  1.32            and budget reserve accounts; providing for deposit of 
  1.33            certain revenues in the general fund; providing for 
  1.34            data disclosure; requiring studies and reports; 
  1.35            providing for appointments; authorizing grants; 
  1.36            imposing penalties; appropriating money; amending 
  1.37            Minnesota Statutes 2002, sections 3.842, subdivision 
  1.38            4a; 3.843; 3.986, subdivision 4; 3.987, subdivision 1; 
  1.39            4A.02; 8.30; 10A.31, subdivisions 1, 3; 16A.152, 
  1.40            subdivisions 1, 1b, 2, 7; 62J.694, subdivision 4; 
  1.41            115B.24, subdivision 8; 144.395, subdivision 3; 
  1.42            161.465; 168.27, subdivision 4a; 168A.03; 168A.05, 
  1.43            subdivision 1a; 216B.2424, subdivision 5; 270.06; 
  1.44            270.10, subdivision 1a; 270.60, subdivision 4; 270.67, 
  1.45            subdivision 4; 270.69, by adding a subdivision; 
  1.46            270.701, subdivision 2, by adding a subdivision; 
  2.1             270.72, subdivision 2; 270A.03, subdivision 2; 
  2.2             270B.12, by adding a subdivision; 272.02, subdivisions 
  2.3             31, 47, 48, 53, by adding subdivisions; 272.029, by 
  2.4             adding a subdivision; 272.12; 273.01; 273.05, 
  2.5             subdivision 1; 273.061, by adding subdivisions; 
  2.6             273.08; 273.11, subdivision 1a; 273.112, subdivision 
  2.7             3; 273.124, subdivisions 1, 14; 273.13, subdivisions 
  2.8             22, 23, 25; 273.1398, subdivisions 4a, 4b, 4c, 6; 
  2.9             273.372; 273.42, subdivision 2; 274.01, subdivision 1; 
  2.10            274.13, subdivision 1; 275.025, subdivisions 1, 3, 4; 
  2.11            275.065, subdivisions 1, 1a, 1c, 3, 6, 8, by adding a 
  2.12            subdivision; 275.07, subdivision 1; 275.70, 
  2.13            subdivisions 3, 5; 275.71, subdivisions 2, 4, 5, 6; 
  2.14            275.73, subdivision 2; 275.74, subdivision 3; 276.10; 
  2.15            276.11, subdivision 1; 277.20, subdivision 2; 278.01, 
  2.16            subdivision 4; 278.05, subdivision 6; 279.06, 
  2.17            subdivision 1; 281.17; 282.01, subdivision 7a; 282.08; 
  2.18            287.12; 287.29, subdivision 1; 287.31, by adding a 
  2.19            subdivision; 289A.02, subdivision 7; 289A.10, 
  2.20            subdivision 1; 289A.18, subdivision 4; 289A.19, 
  2.21            subdivision 4; 289A.20, subdivision 4; 289A.31, 
  2.22            subdivisions 3, 4, 7, by adding a subdivision; 
  2.23            289A.36, subdivision 7, by adding subdivisions; 
  2.24            289A.40, subdivision 2; 289A.50, subdivision 2a, by 
  2.25            adding subdivisions; 289A.56, subdivisions 3, 4; 
  2.26            289A.60, subdivisions 7, 15, by adding a subdivision; 
  2.27            290.01, subdivisions 19, 19a, 19b, 19c, 19d, 29, 31; 
  2.28            290.05, subdivision 1; 290.06, subdivisions 2c, 23, 
  2.29            24, by adding subdivisions; 290.067, subdivision 1; 
  2.30            290.0671, subdivision 1; 290.0675, subdivisions 2, 3; 
  2.31            290.0679, subdivision 2; 290.0802, subdivision 1; 
  2.32            290.091, subdivision 2; 290.0921, subdivision 3; 
  2.33            290.0922, subdivisions 2, 3; 290.17, subdivision 4; 
  2.34            290.191, subdivision 1; 290A.03, subdivisions 8, 15; 
  2.35            290C.02, subdivisions 3, 7; 290C.03; 290C.07; 290C.09; 
  2.36            290C.10; 290C.11; 291.005, subdivision 1; 291.03, 
  2.37            subdivision 1; 295.50, subdivision 9b; 295.53, 
  2.38            subdivision 1; 295.58; 297A.61, subdivisions 3, 7, 10, 
  2.39            12, 17, 30, 31, 34, by adding subdivisions; 297A.66, 
  2.40            by adding a subdivision; 297A.665; 297A.668; 297A.67, 
  2.41            subdivisions 2, 7, 8, by adding a subdivision; 
  2.42            297A.68, subdivisions 2, 4, 5, 36, by adding 
  2.43            subdivisions; 297A.69, subdivisions 2, 3, 4; 297A.70, 
  2.44            subdivisions 8, 16; 297A.71, by adding a subdivision; 
  2.45            297A.75, subdivision 4; 297A.81; 297A.82, subdivision 
  2.46            4; 297A.85; 297A.99, subdivisions 5, 10, 12; 297A.995, 
  2.47            by adding a subdivision; 297B.01, subdivision 7; 
  2.48            297B.025, subdivisions 1, 2; 297B.03; 297B.035, 
  2.49            subdivision 1, by adding a subdivision; 297F.01, 
  2.50            subdivisions 21a, 23; 297F.05, subdivision 1; 297F.06, 
  2.51            subdivision 4; 297F.08, subdivision 7; 297F.09, 
  2.52            subdivisions 1, 2, by adding a subdivision; 297F.10, 
  2.53            subdivision 1; 297F.20, subdivisions 1, 2, 3, 6, 9; 
  2.54            297G.01, by adding a subdivision; 297G.03, subdivision 
  2.55            1; 297G.09, by adding a subdivision; 297I.01, 
  2.56            subdivision 9; 297I.20; 298.001, by adding a 
  2.57            subdivision; 298.01, subdivisions 3, 3a, 4; 298.015, 
  2.58            subdivisions 1, 2; 298.016, subdivision 4; 298.018; 
  2.59            298.24, subdivision 1; 298.27; 298.28, subdivisions 
  2.60            9a, 11; 298.75, subdivision 1; 325D.421, subdivision 
  2.61            2, by adding a subdivision; 349.16, by adding a 
  2.62            subdivision; 352.15, subdivision 1; 353.15, 
  2.63            subdivision 1; 354.10, subdivision 1; 354B.30; 
  2.64            354C.165; 366.011; 366.012; 469.169, by adding a 
  2.65            subdivision; 469.1731, subdivision 3; 469.174, 
  2.66            subdivisions 3, 6, 10, 25, by adding a subdivision; 
  2.67            469.175, subdivisions 1, 3, 4, 6; 469.176, 
  2.68            subdivisions 1c, 2, 3, 4d, 4l, 7; 469.1763, 
  2.69            subdivisions 1, 2, 3, 4, 6; 469.177, subdivisions 1, 
  2.70            12; 469.1771, subdivision 4, by adding a subdivision; 
  2.71            469.178, subdivision 7; 469.1791, subdivision 3; 
  3.1             469.1792, subdivisions 1, 2, 3; 469.1813, subdivision 
  3.2             8; 469.1815, subdivision 1; 473.167, subdivision 3; 
  3.3             473.246; 473.249, subdivision 1; 473.253, subdivision 
  3.4             1; 473.702; 473.711, subdivision 2a; 473F.07, 
  3.5             subdivision 4; 477A.011, subdivisions 34, 36, by 
  3.6             adding subdivisions; 477A.013, subdivisions 8, 9; 
  3.7             477A.03, subdivision 2; 515B.1-116; 611.27, 
  3.8             subdivisions 13, 15; Laws 1997, chapter 231, article 
  3.9             10, section 25; Laws 2001, First Special Session 
  3.10            chapter 5, article 3, section 61; Laws 2001, First 
  3.11            Special Session chapter 5, article 3, section 63; Laws 
  3.12            2001, First Special Session chapter 5, article 9, 
  3.13            section 12; Laws 2001, First Special Session chapter 
  3.14            5, article 12, section 95, as amended; Laws 2002, 
  3.15            chapter 377, article 6, section 4; Laws 2002, chapter 
  3.16            377, article 7, section 3; Laws 2002, chapter 377, 
  3.17            article 11, section 1; Laws 2002, chapter 377, article 
  3.18            12, section 17; proposing coding for new law in 
  3.19            Minnesota Statutes, chapters 3; 123A; 270; 273; 274; 
  3.20            275; 276; 290C; 297A; 297F; 469; 477A; repealing 
  3.21            Minnesota Statutes 2002, sections 37.13, subdivision 
  3.22            2; 270.691, subdivision 8; 273.138, subdivisions 2, 3, 
  3.23            6; 273.1398, subdivisions 2, 4, 4d; 273.166; 274.04; 
  3.24            275.065, subdivisions 3a, 4; 290.0671, subdivision 3; 
  3.25            290.0675, subdivision 5; 294.01; 294.02; 294.021; 
  3.26            294.03; 294.06; 294.07; 294.08; 294.09; 294.10; 
  3.27            294.11; 294.12; 297A.61, subdivisions 14, 15; 297A.69, 
  3.28            subdivision 5; 297A.72, subdivision 1; 297A.97; 
  3.29            298.01, subdivisions 3c, 3d, 4d, 4e; 298.017; 298.24, 
  3.30            subdivision 3; 298.28, subdivisions 9, 9b, 10; 
  3.31            298.2961; 298.297; 325E.112, subdivision 2a; 473.711, 
  3.32            subdivision 2b; 477A.011, subdivision 37; 477A.0121; 
  3.33            477A.0122; 477A.0123; 477A.0132; 477A.03, subdivisions 
  3.34            3, 4; 477A.06; 477A.065; 477A.07; Laws 1984, chapter 
  3.35            652, section 2; Laws 2002, chapter 390, sections 36, 
  3.36            37, 38; Minnesota Rules, parts 8007.0300, subpart 3; 
  3.37            8009.7100; 8009.7200; 8009.7300; 8009.7400; 8092.1000; 
  3.38            8106.0100, subparts 11, 15, 16; 8106.0200; 8125.1000; 
  3.39            8125.1300, subpart 1; 8125.1400; 8130.0800, subparts 
  3.40            5, 12; 8130.1300; 8130.1600, subpart 5; 8130.1700, 
  3.41            subparts 3, 4; 8130.4800, subpart 2; 8130.7500, 
  3.42            subpart 5; 8130.8000; 8130.8300. 
  3.43  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  3.44                             ARTICLE 1 
  3.45                   JOB OPPORTUNITY BUILDING ZONES 
  3.46     Section 1.  Minnesota Statutes 2002, section 272.02, is 
  3.47  amended by adding a subdivision to read: 
  3.48     Subd. 56.  [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 
  3.49  Improvements to real property, and personal property, classified 
  3.50  under section 273.13, subdivision 24, and located within a job 
  3.51  opportunity building zone, designated under section 469.314, are 
  3.52  exempt from ad valorem taxes levied under chapter 275. 
  3.53     (b) Improvements to real property, and tangible personal 
  3.54  property, of an agricultural production facility located within 
  3.55  an agricultural processing facility zone, designated under 
  3.56  section 469.314, is exempt from ad valorem taxes levied under 
  4.1   chapter 275. 
  4.2      (c) For property to qualify for exemption under paragraph 
  4.3   (a), the occupant must be a qualified business, as defined in 
  4.4   section 469.310. 
  4.5      (d) The exemption applies beginning for the first 
  4.6   assessment year after designation of the job opportunity 
  4.7   building zone by the commissioner of trade and economic 
  4.8   development.  The exemption applies to each assessment year that 
  4.9   begins during the duration of the job opportunity building zone 
  4.10  and to property occupied by July 1 of the assessment year by a 
  4.11  qualified business.  This exemption does not apply to: 
  4.12     (1) the levy under section 475.61 or similar levy 
  4.13  provisions under any other law to pay general obligation bonds; 
  4.14  or 
  4.15     (2) a levy under section 126C.17, if the levy was approved 
  4.16  by the voters before the designation of the job opportunity 
  4.17  building zone. 
  4.18     <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
  4.19  property taxes assessed in 2004, payable in 2005. 
  4.20     Sec. 2.  Minnesota Statutes 2002, section 272.029, is 
  4.21  amended by adding a subdivision to read: 
  4.22     Subd. 7.  [EXEMPTION.] The tax imposed under this section 
  4.23  does not apply to electricity produced by wind energy conversion 
  4.24  systems located in a job opportunity building zone, designated 
  4.25  under section 469.314, for the duration of the zone.  The 
  4.26  exemption applies beginning for the first calendar year after 
  4.27  designation of the zone and applies to each calendar year that 
  4.28  begins during the designation of the zone. 
  4.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  4.30  following final enactment. 
  4.31     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
  4.32  subdivision 19b, is amended to read: 
  4.33     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  4.34  individuals, estates, and trusts, there shall be subtracted from 
  4.35  federal taxable income: 
  4.36     (1) interest income on obligations of any authority, 
  5.1   commission, or instrumentality of the United States to the 
  5.2   extent includable in taxable income for federal income tax 
  5.3   purposes but exempt from state income tax under the laws of the 
  5.4   United States; 
  5.5      (2) if included in federal taxable income, the amount of 
  5.6   any overpayment of income tax to Minnesota or to any other 
  5.7   state, for any previous taxable year, whether the amount is 
  5.8   received as a refund or as a credit to another taxable year's 
  5.9   income tax liability; 
  5.10     (3) the amount paid to others, less the amount used to 
  5.11  claim the credit allowed under section 290.0674, not to exceed 
  5.12  $1,625 for each qualifying child in grades kindergarten to 6 and 
  5.13  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  5.14  textbooks, and transportation of each qualifying child in 
  5.15  attending an elementary or secondary school situated in 
  5.16  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  5.17  wherein a resident of this state may legally fulfill the state's 
  5.18  compulsory attendance laws, which is not operated for profit, 
  5.19  and which adheres to the provisions of the Civil Rights Act of 
  5.20  1964 and chapter 363.  For the purposes of this clause, 
  5.21  "tuition" includes fees or tuition as defined in section 
  5.22  290.0674, subdivision 1, clause (1).  As used in this clause, 
  5.23  "textbooks" includes books and other instructional materials and 
  5.24  equipment purchased or leased for use in elementary and 
  5.25  secondary schools in teaching only those subjects legally and 
  5.26  commonly taught in public elementary and secondary schools in 
  5.27  this state.  Equipment expenses qualifying for deduction 
  5.28  includes expenses as defined and limited in section 290.0674, 
  5.29  subdivision 1, clause (3).  "Textbooks" does not include 
  5.30  instructional books and materials used in the teaching of 
  5.31  religious tenets, doctrines, or worship, the purpose of which is 
  5.32  to instill such tenets, doctrines, or worship, nor does it 
  5.33  include books or materials for, or transportation to, 
  5.34  extracurricular activities including sporting events, musical or 
  5.35  dramatic events, speech activities, driver's education, or 
  5.36  similar programs.  For purposes of the subtraction provided by 
  6.1   this clause, "qualifying child" has the meaning given in section 
  6.2   32(c)(3) of the Internal Revenue Code; 
  6.3      (4) income as provided under section 290.0802; 
  6.4      (5) to the extent included in federal adjusted gross 
  6.5   income, income realized on disposition of property exempt from 
  6.6   tax under section 290.491; 
  6.7      (6) to the extent not deducted in determining federal 
  6.8   taxable income or used to claim the long-term care insurance 
  6.9   credit under section 290.0672, the amount paid for health 
  6.10  insurance of self-employed individuals as determined under 
  6.11  section 162(l) of the Internal Revenue Code, except that the 
  6.12  percent limit does not apply.  If the individual deducted 
  6.13  insurance payments under section 213 of the Internal Revenue 
  6.14  Code of 1986, the subtraction under this clause must be reduced 
  6.15  by the lesser of: 
  6.16     (i) the total itemized deductions allowed under section 
  6.17  63(d) of the Internal Revenue Code, less state, local, and 
  6.18  foreign income taxes deductible under section 164 of the 
  6.19  Internal Revenue Code and the standard deduction under section 
  6.20  63(c) of the Internal Revenue Code; or 
  6.21     (ii) the lesser of (A) the amount of insurance qualifying 
  6.22  as "medical care" under section 213(d) of the Internal Revenue 
  6.23  Code to the extent not deducted under section 162(1) of the 
  6.24  Internal Revenue Code or excluded from income or (B) the total 
  6.25  amount deductible for medical care under section 213(a); 
  6.26     (7) the exemption amount allowed under Laws 1995, chapter 
  6.27  255, article 3, section 2, subdivision 3; 
  6.28     (8) to the extent included in federal taxable income, 
  6.29  postservice benefits for youth community service under section 
  6.30  124D.42 for volunteer service under United States Code, title 
  6.31  42, sections 12601 to 12604; 
  6.32     (9) to the extent not deducted in determining federal 
  6.33  taxable income by an individual who does not itemize deductions 
  6.34  for federal income tax purposes for the taxable year, an amount 
  6.35  equal to 50 percent of the excess of charitable contributions 
  6.36  allowable as a deduction for the taxable year under section 
  7.1   170(a) of the Internal Revenue Code over $500; 
  7.2      (10) for taxable years beginning before January 1, 2008, 
  7.3   the amount of the federal small ethanol producer credit allowed 
  7.4   under section 40(a)(3) of the Internal Revenue Code which is 
  7.5   included in gross income under section 87 of the Internal 
  7.6   Revenue Code; 
  7.7      (11) for individuals who are allowed a federal foreign tax 
  7.8   credit for taxes that do not qualify for a credit under section 
  7.9   290.06, subdivision 22, an amount equal to the carryover of 
  7.10  subnational foreign taxes for the taxable year, but not to 
  7.11  exceed the total subnational foreign taxes reported in claiming 
  7.12  the foreign tax credit.  For purposes of this clause, "federal 
  7.13  foreign tax credit" means the credit allowed under section 27 of 
  7.14  the Internal Revenue Code, and "carryover of subnational foreign 
  7.15  taxes" equals the carryover allowed under section 904(c) of the 
  7.16  Internal Revenue Code minus national level foreign taxes to the 
  7.17  extent they exceed the federal foreign tax credit; and 
  7.18     (12) in each of the five tax years immediately following 
  7.19  the tax year in which an addition is required under subdivision 
  7.20  19a, clause (7), an amount equal to one-fifth of the delayed 
  7.21  depreciation.  For purposes of this clause, "delayed 
  7.22  depreciation" means the amount of the addition made by the 
  7.23  taxpayer under subdivision 19a, clause (7), minus the positive 
  7.24  value of any net operating loss under section 172 of the 
  7.25  Internal Revenue Code generated for the tax year of the 
  7.26  addition.  The resulting delayed depreciation cannot be less 
  7.27  than zero; and 
  7.28     (13) job opportunity building zone income as provided under 
  7.29  section 469.316. 
  7.30     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  7.31  years beginning after December 31, 2003. 
  7.32     Sec. 4.  Minnesota Statutes 2002, section 290.01, 
  7.33  subdivision 29, is amended to read: 
  7.34     Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
  7.35  means:  
  7.36     (1) for individuals, estates, and trusts, the same as 
  8.1   taxable net income; 
  8.2      (2) for corporations, the taxable net income less 
  8.3      (i) the net operating loss deduction under section 290.095; 
  8.4   and 
  8.5      (ii) the dividends received deduction under section 290.21, 
  8.6   subdivision 4; and 
  8.7      (iii) the exemption for operating in a job opportunity 
  8.8   building zone under section 469.317. 
  8.9      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  8.10  years beginning after December 31, 2003. 
  8.11     Sec. 5.  Minnesota Statutes 2002, section 290.06, 
  8.12  subdivision 2c, is amended to read: 
  8.13     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  8.14  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  8.15  married individuals filing joint returns and surviving spouses 
  8.16  as defined in section 2(a) of the Internal Revenue Code must be 
  8.17  computed by applying to their taxable net income the following 
  8.18  schedule of rates: 
  8.19     (1) On the first $25,680, 5.35 percent; 
  8.20     (2) On all over $25,680, but not over $102,030, 7.05 
  8.21  percent; 
  8.22     (3) On all over $102,030, 7.85 percent. 
  8.23     Married individuals filing separate returns, estates, and 
  8.24  trusts must compute their income tax by applying the above rates 
  8.25  to their taxable income, except that the income brackets will be 
  8.26  one-half of the above amounts.  
  8.27     (b) The income taxes imposed by this chapter upon unmarried 
  8.28  individuals must be computed by applying to taxable net income 
  8.29  the following schedule of rates: 
  8.30     (1) On the first $17,570, 5.35 percent; 
  8.31     (2) On all over $17,570, but not over $57,710, 7.05 
  8.32  percent; 
  8.33     (3) On all over $57,710, 7.85 percent. 
  8.34     (c) The income taxes imposed by this chapter upon unmarried 
  8.35  individuals qualifying as a head of household as defined in 
  8.36  section 2(b) of the Internal Revenue Code must be computed by 
  9.1   applying to taxable net income the following schedule of rates: 
  9.2      (1) On the first $21,630, 5.35 percent; 
  9.3      (2) On all over $21,630, but not over $86,910, 7.05 
  9.4   percent; 
  9.5      (3) On all over $86,910, 7.85 percent. 
  9.6      (d) In lieu of a tax computed according to the rates set 
  9.7   forth in this subdivision, the tax of any individual taxpayer 
  9.8   whose taxable net income for the taxable year is less than an 
  9.9   amount determined by the commissioner must be computed in 
  9.10  accordance with tables prepared and issued by the commissioner 
  9.11  of revenue based on income brackets of not more than $100.  The 
  9.12  amount of tax for each bracket shall be computed at the rates 
  9.13  set forth in this subdivision, provided that the commissioner 
  9.14  may disregard a fractional part of a dollar unless it amounts to 
  9.15  50 cents or more, in which case it may be increased to $1. 
  9.16     (e) An individual who is not a Minnesota resident for the 
  9.17  entire year must compute the individual's Minnesota income tax 
  9.18  as provided in this subdivision.  After the application of the 
  9.19  nonrefundable credits provided in this chapter, the tax 
  9.20  liability must then be multiplied by a fraction in which:  
  9.21     (1) the numerator is the individual's Minnesota source 
  9.22  federal adjusted gross income as defined in section 62 of the 
  9.23  Internal Revenue Code and increased by the additions required 
  9.24  under section 290.01, subdivision 19a, clauses (1) and (6), and 
  9.25  reduced by the subtraction under section 290.01, subdivision 
  9.26  19b, clause (13), and the Minnesota assignable portion of the 
  9.27  subtraction for United States government interest under section 
  9.28  290.01, subdivision 19b, clause (1), after applying the 
  9.29  allocation and assignability provisions of section 290.081, 
  9.30  clause (a), or 290.17; and 
  9.31     (2) the denominator is the individual's federal adjusted 
  9.32  gross income as defined in section 62 of the Internal Revenue 
  9.33  Code of 1986, increased by the amounts specified in section 
  9.34  290.01, subdivision 19a, clauses (1) and (6), and reduced by the 
  9.35  amounts specified in section 290.01, subdivision 19b, clause 
  9.36  clauses (1) and (13). 
 10.1      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 10.2   years beginning after December 31, 2003. 
 10.3      Sec. 6.  Minnesota Statutes 2002, section 290.06, is 
 10.4   amended by adding a subdivision to read: 
 10.5      Subd. 29.  [JOB OPPORTUNITY BUILDING ZONE JOB CREDIT.] A 
 10.6   taxpayer that is a qualified business, as defined in section 
 10.7   469.310, subdivision 11, is allowed a credit as determined under 
 10.8   section 469.318 against the tax imposed by this chapter. 
 10.9      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 10.10  following final enactment. 
 10.11     Sec. 7.  Minnesota Statutes 2002, section 290.067, 
 10.12  subdivision 1, is amended to read: 
 10.13     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
 10.14  as a credit against the tax due from the taxpayer and a spouse, 
 10.15  if any, under this chapter an amount equal to the dependent care 
 10.16  credit for which the taxpayer is eligible pursuant to the 
 10.17  provisions of section 21 of the Internal Revenue Code subject to 
 10.18  the limitations provided in subdivision 2 except that in 
 10.19  determining whether the child qualified as a dependent, income 
 10.20  received as a Minnesota family investment program grant or 
 10.21  allowance to or on behalf of the child must not be taken into 
 10.22  account in determining whether the child received more than half 
 10.23  of the child's support from the taxpayer, and the provisions of 
 10.24  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
 10.25     (b) If a child who has not attained the age of six years at 
 10.26  the close of the taxable year is cared for at a licensed family 
 10.27  day care home operated by the child's parent, the taxpayer is 
 10.28  deemed to have paid employment-related expenses.  If the child 
 10.29  is 16 months old or younger at the close of the taxable year, 
 10.30  the amount of expenses deemed to have been paid equals the 
 10.31  maximum limit for one qualified individual under section 21(c) 
 10.32  and (d) of the Internal Revenue Code.  If the child is older 
 10.33  than 16 months of age but has not attained the age of six years 
 10.34  at the close of the taxable year, the amount of expenses deemed 
 10.35  to have been paid equals the amount the licensee would charge 
 10.36  for the care of a child of the same age for the same number of 
 11.1   hours of care.  
 11.2      (c) If a married couple: 
 11.3      (1) has a child who has not attained the age of one year at 
 11.4   the close of the taxable year; 
 11.5      (2) files a joint tax return for the taxable year; and 
 11.6      (3) does not participate in a dependent care assistance 
 11.7   program as defined in section 129 of the Internal Revenue Code, 
 11.8   in lieu of the actual employment related expenses paid for that 
 11.9   child under paragraph (a) or the deemed amount under paragraph 
 11.10  (b), the lesser of (i) the combined earned income of the couple 
 11.11  or (ii) the amount of the maximum limit for one qualified 
 11.12  individual under section 21(c) and (d) of the Internal Revenue 
 11.13  Code will be deemed to be the employment related expense paid 
 11.14  for that child.  The earned income limitation of section 21(d) 
 11.15  of the Internal Revenue Code shall not apply to this deemed 
 11.16  amount.  These deemed amounts apply regardless of whether any 
 11.17  employment-related expenses have been paid.  
 11.18     (d) If the taxpayer is not required and does not file a 
 11.19  federal individual income tax return for the tax year, no credit 
 11.20  is allowed for any amount paid to any person unless: 
 11.21     (1) the name, address, and taxpayer identification number 
 11.22  of the person are included on the return claiming the credit; or 
 11.23     (2) if the person is an organization described in section 
 11.24  501(c)(3) of the Internal Revenue Code and exempt from tax under 
 11.25  section 501(a) of the Internal Revenue Code, the name and 
 11.26  address of the person are included on the return claiming the 
 11.27  credit.  
 11.28  In the case of a failure to provide the information required 
 11.29  under the preceding sentence, the preceding sentence does not 
 11.30  apply if it is shown that the taxpayer exercised due diligence 
 11.31  in attempting to provide the information required. 
 11.32     In the case of a nonresident, part-year resident, or a 
 11.33  person who has earned income not subject to tax under this 
 11.34  chapter including earned income excluded pursuant to section 
 11.35  290.01, subdivision 19b, clause (13), the credit determined 
 11.36  under section 21 of the Internal Revenue Code must be allocated 
 12.1   based on the ratio by which the earned income of the claimant 
 12.2   and the claimant's spouse from Minnesota sources bears to the 
 12.3   total earned income of the claimant and the claimant's spouse. 
 12.4      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 12.5   years beginning after December 31, 2003. 
 12.6      Sec. 8.  Minnesota Statutes 2002, section 290.0671, 
 12.7   subdivision 1, is amended to read: 
 12.8      Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
 12.9   allowed a credit against the tax imposed by this chapter equal 
 12.10  to a percentage of earned income.  To receive a credit, a 
 12.11  taxpayer must be eligible for a credit under section 32 of the 
 12.12  Internal Revenue Code.  
 12.13     (b) For individuals with no qualifying children, the credit 
 12.14  equals 1.9125 percent of the first $4,620 of earned income.  The 
 12.15  credit is reduced by 1.9125 percent of earned income or modified 
 12.16  adjusted gross income, whichever is greater, in excess of 
 12.17  $5,770, but in no case is the credit less than zero. 
 12.18     (c) For individuals with one qualifying child, the credit 
 12.19  equals 8.5 percent of the first $6,920 of earned income and 8.5 
 12.20  percent of earned income over $12,080 but less than $13,450.  
 12.21  The credit is reduced by 5.73 percent of earned income or 
 12.22  modified adjusted gross income, whichever is greater, in excess 
 12.23  of $15,080, but in no case is the credit less than zero. 
 12.24     (d) For individuals with two or more qualifying children, 
 12.25  the credit equals ten percent of the first $9,720 of earned 
 12.26  income and 20 percent of earned income over $14,860 but less 
 12.27  than $16,800.  The credit is reduced by 10.3 percent of earned 
 12.28  income or modified adjusted gross income, whichever is greater, 
 12.29  in excess of $17,890, but in no case is the credit less than 
 12.30  zero. 
 12.31     (e) For a nonresident or part-year resident, the credit 
 12.32  must be allocated based on the percentage calculated under 
 12.33  section 290.06, subdivision 2c, paragraph (e). 
 12.34     (f) For a person who was a resident for the entire tax year 
 12.35  and has earned income not subject to tax under this 
 12.36  chapter including income excluded under section 290.01, 
 13.1   subdivision 19b, clause (13), the credit must be allocated based 
 13.2   on the ratio of federal adjusted gross income reduced by the 
 13.3   earned income not subject to tax under this chapter over federal 
 13.4   adjusted gross income. 
 13.5      (g) For tax years beginning after December 31, 2001, and 
 13.6   before December 31, 2004, the $5,770 in paragraph (b) is 
 13.7   increased to $6,770, the $15,080 in paragraph (c) is increased 
 13.8   to $16,080, and the $17,890 in paragraph (d) is increased to 
 13.9   $18,890 for married taxpayers filing joint returns. 
 13.10     (h) For tax years beginning after December 31, 2004, and 
 13.11  before December 31, 2007, the $5,770 in paragraph (b) is 
 13.12  increased to $7,770, the $15,080 in paragraph (c) is increased 
 13.13  to $17,080, and the $17,890 in paragraph (d) is increased to 
 13.14  $19,890 for married taxpayers filing joint returns. 
 13.15     (i) For tax years beginning after December 31, 2007, and 
 13.16  before December 31, 2010, the $5,770 in paragraph (b) is 
 13.17  increased to $8,770, the $15,080 in paragraph (c) is increased 
 13.18  to $18,080 and the $17,890 in paragraph (d) is increased to 
 13.19  $20,890 for married taxpayers filing joint returns. 
 13.20     (j) The commissioner shall construct tables showing the 
 13.21  amount of the credit at various income levels and make them 
 13.22  available to taxpayers.  The tables shall follow the schedule 
 13.23  contained in this subdivision, except that the commissioner may 
 13.24  graduate the transition between income brackets. 
 13.25     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 13.26  years beginning after December 31, 2003. 
 13.27     Sec. 9.  Minnesota Statutes 2002, section 290.091, 
 13.28  subdivision 2, is amended to read: 
 13.29     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 13.30  this section, the following terms have the meanings given: 
 13.31     (a) "Alternative minimum taxable income" means the sum of 
 13.32  the following for the taxable year: 
 13.33     (1) the taxpayer's federal alternative minimum taxable 
 13.34  income as defined in section 55(b)(2) of the Internal Revenue 
 13.35  Code; 
 13.36     (2) the taxpayer's itemized deductions allowed in computing 
 14.1   federal alternative minimum taxable income, but excluding: 
 14.2      (i) the charitable contribution deduction under section 170 
 14.3   of the Internal Revenue Code to the extent that the deduction 
 14.4   exceeds 1.3 percent of adjusted gross income, as defined in 
 14.5   section 62 of the Internal Revenue Code; 
 14.6      (ii) the medical expense deduction; 
 14.7      (iii) the casualty, theft, and disaster loss deduction; and 
 14.8      (iv) the impairment-related work expenses of a disabled 
 14.9   person; 
 14.10     (3) for depletion allowances computed under section 613A(c) 
 14.11  of the Internal Revenue Code, with respect to each property (as 
 14.12  defined in section 614 of the Internal Revenue Code), to the 
 14.13  extent not included in federal alternative minimum taxable 
 14.14  income, the excess of the deduction for depletion allowable 
 14.15  under section 611 of the Internal Revenue Code for the taxable 
 14.16  year over the adjusted basis of the property at the end of the 
 14.17  taxable year (determined without regard to the depletion 
 14.18  deduction for the taxable year); 
 14.19     (4) to the extent not included in federal alternative 
 14.20  minimum taxable income, the amount of the tax preference for 
 14.21  intangible drilling cost under section 57(a)(2) of the Internal 
 14.22  Revenue Code determined without regard to subparagraph (E); 
 14.23     (5) to the extent not included in federal alternative 
 14.24  minimum taxable income, the amount of interest income as 
 14.25  provided by section 290.01, subdivision 19a, clause (1); and 
 14.26     (6) the amount of addition required by section 290.01, 
 14.27  subdivision 19a, clause (7); 
 14.28     less the sum of the amounts determined under the following: 
 14.29     (1) interest income as defined in section 290.01, 
 14.30  subdivision 19b, clause (1); 
 14.31     (2) an overpayment of state income tax as provided by 
 14.32  section 290.01, subdivision 19b, clause (2), to the extent 
 14.33  included in federal alternative minimum taxable income; 
 14.34     (3) the amount of investment interest paid or accrued 
 14.35  within the taxable year on indebtedness to the extent that the 
 14.36  amount does not exceed net investment income, as defined in 
 15.1   section 163(d)(4) of the Internal Revenue Code.  Interest does 
 15.2   not include amounts deducted in computing federal adjusted gross 
 15.3   income; and 
 15.4      (4) amounts subtracted from federal taxable income as 
 15.5   provided by section 290.01, subdivision 19b, clause clauses (12) 
 15.6   and (13). 
 15.7      In the case of an estate or trust, alternative minimum 
 15.8   taxable income must be computed as provided in section 59(c) of 
 15.9   the Internal Revenue Code. 
 15.10     (b) "Investment interest" means investment interest as 
 15.11  defined in section 163(d)(3) of the Internal Revenue Code. 
 15.12     (c) "Tentative minimum tax" equals 6.4 percent of 
 15.13  alternative minimum taxable income after subtracting the 
 15.14  exemption amount determined under subdivision 3. 
 15.15     (d) "Regular tax" means the tax that would be imposed under 
 15.16  this chapter (without regard to this section and section 
 15.17  290.032), reduced by the sum of the nonrefundable credits 
 15.18  allowed under this chapter.  
 15.19     (e) "Net minimum tax" means the minimum tax imposed by this 
 15.20  section. 
 15.21     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 15.22  years beginning after December 31, 2003. 
 15.23     Sec. 10.  Minnesota Statutes 2002, section 290.0921, 
 15.24  subdivision 3, is amended to read: 
 15.25     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 15.26  "Alternative minimum taxable income" is Minnesota net income as 
 15.27  defined in section 290.01, subdivision 19, and includes the 
 15.28  adjustments and tax preference items in sections 56, 57, 58, and 
 15.29  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 15.30  corporation files a separate company Minnesota tax return, the 
 15.31  minimum tax must be computed on a separate company basis.  If a 
 15.32  corporation is part of a tax group filing a unitary return, the 
 15.33  minimum tax must be computed on a unitary basis.  The following 
 15.34  adjustments must be made. 
 15.35     (1) For purposes of the depreciation adjustments under 
 15.36  section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 16.1   the basis for depreciable property placed in service in a 
 16.2   taxable year beginning before January 1, 1990, is the adjusted 
 16.3   basis for federal income tax purposes, including any 
 16.4   modification made in a taxable year under section 290.01, 
 16.5   subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 16.6   subdivision 7, paragraph (c). 
 16.7      For taxable years beginning after December 31, 2000, the 
 16.8   amount of any remaining modification made under section 290.01, 
 16.9   subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 16.10  subdivision 7, paragraph (c), not previously deducted is a 
 16.11  depreciation allowance in the first taxable year after December 
 16.12  31, 2000. 
 16.13     (2) The portion of the depreciation deduction allowed for 
 16.14  federal income tax purposes under section 168(k) of the Internal 
 16.15  Revenue Code that is required as an addition under section 
 16.16  290.01, subdivision 19c, clause (16), is disallowed in 
 16.17  determining alternative minimum taxable income. 
 16.18     (3) The subtraction for depreciation allowed under section 
 16.19  290.01, subdivision 19d, clause (19), is allowed as a 
 16.20  depreciation deduction in determining alternative minimum 
 16.21  taxable income. 
 16.22     (4) The alternative tax net operating loss deduction under 
 16.23  sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 16.24  not apply. 
 16.25     (5) The special rule for certain dividends under section 
 16.26  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 16.27     (6) The special rule for dividends from section 936 
 16.28  companies under section 56(g)(4)(C)(iii) does not apply. 
 16.29     (7) The tax preference for depletion under section 57(a)(1) 
 16.30  of the Internal Revenue Code does not apply. 
 16.31     (8) The tax preference for intangible drilling costs under 
 16.32  section 57(a)(2) of the Internal Revenue Code must be calculated 
 16.33  without regard to subparagraph (E) and the subtraction under 
 16.34  section 290.01, subdivision 19d, clause (4). 
 16.35     (9) The tax preference for tax exempt interest under 
 16.36  section 57(a)(5) of the Internal Revenue Code does not apply.  
 17.1      (10) The tax preference for charitable contributions of 
 17.2   appreciated property under section 57(a)(6) of the Internal 
 17.3   Revenue Code does not apply. 
 17.4      (11) For purposes of calculating the tax preference for 
 17.5   accelerated depreciation or amortization on certain property 
 17.6   placed in service before January 1, 1987, under section 57(a)(7) 
 17.7   of the Internal Revenue Code, the deduction allowable for the 
 17.8   taxable year is the deduction allowed under section 290.01, 
 17.9   subdivision 19e. 
 17.10     For taxable years beginning after December 31, 2000, the 
 17.11  amount of any remaining modification made under section 290.01, 
 17.12  subdivision 19e, not previously deducted is a depreciation or 
 17.13  amortization allowance in the first taxable year after December 
 17.14  31, 2004. 
 17.15     (12) For purposes of calculating the adjustment for 
 17.16  adjusted current earnings in section 56(g) of the Internal 
 17.17  Revenue Code, the term "alternative minimum taxable income" as 
 17.18  it is used in section 56(g) of the Internal Revenue Code, means 
 17.19  alternative minimum taxable income as defined in this 
 17.20  subdivision, determined without regard to the adjustment for 
 17.21  adjusted current earnings in section 56(g) of the Internal 
 17.22  Revenue Code. 
 17.23     (13) For purposes of determining the amount of adjusted 
 17.24  current earnings under section 56(g)(3) of the Internal Revenue 
 17.25  Code, no adjustment shall be made under section 56(g)(4) of the 
 17.26  Internal Revenue Code with respect to (i) the amount of foreign 
 17.27  dividend gross-up subtracted as provided in section 290.01, 
 17.28  subdivision 19d, clause (1), (ii) the amount of refunds of 
 17.29  income, excise, or franchise taxes subtracted as provided in 
 17.30  section 290.01, subdivision 19d, clause (10), or (iii) the 
 17.31  amount of royalties, fees or other like income subtracted as 
 17.32  provided in section 290.01, subdivision 19d, clause (11). 
 17.33     (14) Alternative minimum taxable income excludes the income 
 17.34  from operating in a job opportunity building zone as provided 
 17.35  under section 469.317. 
 17.36     Items of tax preference must not be reduced below zero as a 
 18.1   result of the modifications in this subdivision. 
 18.2      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 18.3   years beginning after December 31, 2003. 
 18.4      Sec. 11.  Minnesota Statutes 2002, section 290.0922, 
 18.5   subdivision 2, is amended to read: 
 18.6      Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
 18.7   from the tax imposed by this section: 
 18.8      (1) corporations exempt from tax under section 290.05; 
 18.9      (2) real estate investment trusts; 
 18.10     (3) regulated investment companies or a fund thereof; and 
 18.11     (4) entities having a valid election in effect under 
 18.12  section 860D(b) of the Internal Revenue Code; 
 18.13     (5) town and farmers' mutual insurance companies; and 
 18.14     (6) cooperatives organized under chapter 308A that provide 
 18.15  housing exclusively to persons age 55 and over and are 
 18.16  classified as homesteads under section 273.124, subdivision 3; 
 18.17  and 
 18.18     (7) an entity, if for the taxable year all of its property 
 18.19  is located in a job opportunity building zone designated under 
 18.20  section 469.314 and all of its payroll is a job opportunity 
 18.21  building zone payroll under section 469.310. 
 18.22     Entities not specifically exempted by this subdivision are 
 18.23  subject to tax under this section, notwithstanding section 
 18.24  290.05.  
 18.25     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 18.26  years beginning after December 31, 2003. 
 18.27     Sec. 12.  Minnesota Statutes 2002, section 290.0922, 
 18.28  subdivision 3, is amended to read: 
 18.29     Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 18.30  means the total sales apportioned to Minnesota pursuant to 
 18.31  section 290.191, subdivision 5, the total receipts attributed to 
 18.32  Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 18.33  and/or the total sales or receipts apportioned or attributed to 
 18.34  Minnesota pursuant to any other apportionment formula applicable 
 18.35  to the taxpayer. 
 18.36     (b) "Minnesota property" means total Minnesota tangible 
 19.1   property as provided in section 290.191, subdivisions 9 to 11, 
 19.2   and any other tangible property located in Minnesota, but does 
 19.3   not include property located in a job opportunity building zone 
 19.4   designated under section 469.314.  Intangible property shall not 
 19.5   be included in Minnesota property for purposes of this section.  
 19.6   Taxpayers who do not utilize tangible property to apportion 
 19.7   income shall nevertheless include Minnesota property for 
 19.8   purposes of this section.  On a return for a short taxable year, 
 19.9   the amount of Minnesota property owned, as determined under 
 19.10  section 290.191, shall be included in Minnesota property based 
 19.11  on a fraction in which the numerator is the number of days in 
 19.12  the short taxable year and the denominator is 365.  
 19.13     (c) "Minnesota payrolls" means total Minnesota payrolls as 
 19.14  provided in section 290.191, subdivision 12, but does not 
 19.15  include job opportunity building zone payrolls under section 
 19.16  469.310, subdivision 8.  Taxpayers who do not utilize payrolls 
 19.17  to apportion income shall nevertheless include Minnesota 
 19.18  payrolls for purposes of this section. 
 19.19     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 19.20  years beginning after December 31, 2003. 
 19.21     Sec. 13.  Minnesota Statutes 2002, section 297A.68, is 
 19.22  amended by adding a subdivision to read: 
 19.23     Subd. 37.  [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 
 19.24  of tangible personal property or taxable services by a qualified 
 19.25  business, as defined in section 469.310, are exempt if the 
 19.26  property or services are primarily used or consumed in a job 
 19.27  opportunity building zone designated under section 469.314. 
 19.28     (b) Purchase and use of construction materials and supplies 
 19.29  for construction of improvements to real property in a job 
 19.30  opportunity building zone are exempt if the improvements after 
 19.31  completion of construction are to be used in the conduct of a 
 19.32  qualified business, as defined in section 469.310.  This 
 19.33  exemption applies regardless of whether the purchases are made 
 19.34  by the business or a contractor. 
 19.35     (c) The exemptions under this subdivision apply to a local 
 19.36  sales and use tax regardless of whether the local sales tax is 
 20.1   imposed on the sales taxable as defined under this chapter. 
 20.2      (d) This subdivision applies to sales, if the purchase was 
 20.3   made and delivery received during the duration of the zone. 
 20.4      <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 20.5   on or after the day following final enactment. 
 20.6      Sec. 14.  Minnesota Statutes 2002, section 297B.03, is 
 20.7   amended to read: 
 20.8      297B.03 [EXEMPTIONS.] 
 20.9      There is specifically exempted from the provisions of this 
 20.10  chapter and from computation of the amount of tax imposed by it 
 20.11  the following:  
 20.12     (1) purchase or use, including use under a lease purchase 
 20.13  agreement or installment sales contract made pursuant to section 
 20.14  465.71, of any motor vehicle by the United States and its 
 20.15  agencies and instrumentalities and by any person described in 
 20.16  and subject to the conditions provided in section 297A.67, 
 20.17  subdivision 11; 
 20.18     (2) purchase or use of any motor vehicle by any person who 
 20.19  was a resident of another state or country at the time of the 
 20.20  purchase and who subsequently becomes a resident of Minnesota, 
 20.21  provided the purchase occurred more than 60 days prior to the 
 20.22  date such person began residing in the state of Minnesota and 
 20.23  the motor vehicle was registered in the person's name in the 
 20.24  other state or country; 
 20.25     (3) purchase or use of any motor vehicle by any person 
 20.26  making a valid election to be taxed under the provisions of 
 20.27  section 297A.90; 
 20.28     (4) purchase or use of any motor vehicle previously 
 20.29  registered in the state of Minnesota when such transfer 
 20.30  constitutes a transfer within the meaning of section 118, 331, 
 20.31  332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 20.32  1563(a) of the Internal Revenue Code of 1986, as amended through 
 20.33  December 31, 1999; 
 20.34     (5) purchase or use of any vehicle owned by a resident of 
 20.35  another state and leased to a Minnesota based private or for 
 20.36  hire carrier for regular use in the transportation of persons or 
 21.1   property in interstate commerce provided the vehicle is titled 
 21.2   in the state of the owner or secured party, and that state does 
 21.3   not impose a sales tax or sales tax on motor vehicles used in 
 21.4   interstate commerce; 
 21.5      (6) purchase or use of a motor vehicle by a private 
 21.6   nonprofit or public educational institution for use as an 
 21.7   instructional aid in automotive training programs operated by 
 21.8   the institution.  "Automotive training programs" includes motor 
 21.9   vehicle body and mechanical repair courses but does not include 
 21.10  driver education programs; 
 21.11     (7) purchase of a motor vehicle for use as an ambulance by 
 21.12  an ambulance service licensed under section 144E.10; 
 21.13     (8) purchase of a motor vehicle by or for a public library, 
 21.14  as defined in section 134.001, subdivision 2, as a bookmobile or 
 21.15  library delivery vehicle; 
 21.16     (9) purchase of a ready-mixed concrete truck; 
 21.17     (10) purchase or use of a motor vehicle by a town for use 
 21.18  exclusively for road maintenance, including snowplows and dump 
 21.19  trucks, but not including automobiles, vans, or pickup trucks; 
 21.20     (11) purchase or use of a motor vehicle by a corporation, 
 21.21  society, association, foundation, or institution organized and 
 21.22  operated exclusively for charitable, religious, or educational 
 21.23  purposes, except a public school, university, or library, but 
 21.24  only if the vehicle is: 
 21.25     (i) a truck, as defined in section 168.011, a bus, as 
 21.26  defined in section 168.011, or a passenger automobile, as 
 21.27  defined in section 168.011, if the automobile is designed and 
 21.28  used for carrying more than nine persons including the driver; 
 21.29  and 
 21.30     (ii) intended to be used primarily to transport tangible 
 21.31  personal property or individuals, other than employees, to whom 
 21.32  the organization provides service in performing its charitable, 
 21.33  religious, or educational purpose; 
 21.34     (12) purchase of a motor vehicle for use by a transit 
 21.35  provider exclusively to provide transit service is exempt if the 
 21.36  transit provider is either (i) receiving financial assistance or 
 22.1   reimbursement under section 174.24 or 473.384, or (ii) operating 
 22.2   under section 174.29, 473.388, or 473.405; 
 22.3      (13) purchase or use of a motor vehicle by a qualified 
 22.4   business, as defined in section 469.310, located in a job 
 22.5   opportunity building zone, if the motor vehicle is principally 
 22.6   garaged in the job opportunity building zone and is primarily 
 22.7   used as part of or in direct support of the person's operations 
 22.8   carried on in the job opportunity building zone.  The exemption 
 22.9   under this clause applies to sales, if the purchase was made and 
 22.10  delivery received during the duration of the job opportunity 
 22.11  building zone.  The exemption under this clause also applies to 
 22.12  any local sales and use tax. 
 22.13     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 22.14  after December 31, 2003. 
 22.15     Sec. 15.  [469.310] [DEFINITIONS.] 
 22.16     Subdivision 1.  [SCOPE.] For purposes of sections 469.310 
 22.17  to 469.320, the following terms have the meanings given. 
 22.18     Subd. 2.  [AGRICULTURAL PROCESSING FACILITY.] "Agricultural 
 22.19  processing facility" means one or more facilities or operations 
 22.20  that transform, package, sort, or grade livestock or livestock 
 22.21  products, agricultural commodities, or plants or plant products 
 22.22  into goods that are used for intermediate or final consumption 
 22.23  including goods for nonfood use, and surrounding property. 
 22.24     Subd. 3.  [APPLICANT.] "Applicant" means a local government 
 22.25  unit or units applying for designation of an area as a job 
 22.26  opportunity building zone or a joint powers board, established 
 22.27  under section 471.59, acting on behalf of two or more local 
 22.28  government units. 
 22.29     Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 22.30  commissioner of trade and economic development. 
 22.31     Subd. 5.  [DEVELOPMENT PLAN.] "Development plan" means a 
 22.32  plan meeting the requirements of section 469.311. 
 22.33     Subd. 6.  [JOB OPPORTUNITY BUILDING ZONE OR ZONE.] "Job 
 22.34  opportunity building zone" or "zone" means a zone designated by 
 22.35  the commissioner under section 469.314, and includes an 
 22.36  agricultural processing facility zone. 
 23.1      Subd. 7.  [JOB OPPORTUNITY BUILDING ZONE PERCENTAGE OR ZONE 
 23.2   PERCENTAGE.] "Job opportunity building zone percentage" or "zone 
 23.3   percentage" means the following fraction reduced to a percentage:
 23.4      (1) the numerator of the fraction is: 
 23.5      (i) the ratio of the taxpayer's property factor under 
 23.6   section 290.191 located in the zone for the taxable year over 
 23.7   the property factor numerator determined under section 290.191, 
 23.8   plus 
 23.9      (ii) the ratio of the taxpayer's job opportunity building 
 23.10  zone payroll factor under subdivision 8 over the payroll factor 
 23.11  numerator determined under section 290.191; and 
 23.12     (2) the denominator of the fraction is two. 
 23.13     When calculating the zone percentage for a business that is 
 23.14  part of a unitary business as defined under section 290.17, 
 23.15  subdivision 4, the denominator of the payroll and property 
 23.16  factors is the Minnesota payroll and property of the unitary 
 23.17  business as reported on the combined report under section 
 23.18  290.17, subdivision 4, paragraph (j). 
 23.19     Subd. 8.  [JOB OPPORTUNITY BUILDING ZONE PAYROLL 
 23.20  FACTOR.] "Job opportunity building zone payroll factor" or "job 
 23.21  opportunity building zone payroll" is that portion of the 
 23.22  payroll factor under section 290.191 that represents: 
 23.23     (1) wages or salaries paid to an individual for services 
 23.24  performed in a job opportunity building zone; or 
 23.25     (2) wages or salaries paid to individuals working from 
 23.26  offices within a job opportunity building zone if their 
 23.27  employment requires them to work outside the zone and the work 
 23.28  is incidental to the work performed by the individual within the 
 23.29  zone. 
 23.30     Subd. 9.  [LOCAL GOVERNMENT UNIT.] "Local government unit" 
 23.31  means a statutory or home rule charter city, county, town, iron 
 23.32  range resources and rehabilitation agency, regional development 
 23.33  commission, or a federally designated economic development 
 23.34  district. 
 23.35     Subd. 10.  [PERSON.] "Person" includes an individual, 
 23.36  corporation, partnership, limited liability company, 
 24.1   association, or any other entity. 
 24.2      Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
 24.3   means a person carrying on a trade or business at a place of 
 24.4   business located within a job opportunity building zone. 
 24.5      (b) A person that relocates a trade or business from 
 24.6   outside a job opportunity building zone into a zone is not a 
 24.7   qualified business, unless the business: 
 24.8      (1)(i) increases full-time employment in the first full 
 24.9   year of operation within the job opportunity building zone by at 
 24.10  least 20 percent measured relative to the operations that were 
 24.11  relocated and maintains the required level of employment for 
 24.12  each year the zone designation applies; or 
 24.13     (ii) makes a capital investment in the property located 
 24.14  within a zone equivalent to ten percent of the gross revenues of 
 24.15  operation that were relocated in the immediately preceding 
 24.16  taxable year; and 
 24.17     (2) enters a binding written agreement with the 
 24.18  commissioner that: 
 24.19     (i) pledges the business will meet the requirements of 
 24.20  clause (1); 
 24.21     (ii) provides for repayment of all tax benefits enumerated 
 24.22  under section 469.315 to the business under the procedures in 
 24.23  section 469.319, if the requirements of clause (1) are not met 
 24.24  for the taxable year or for taxes payable during the year in 
 24.25  which the requirements were not met; and 
 24.26     (iii) contains any other terms the commissioner determines 
 24.27  appropriate. 
 24.28     Subd. 12.  [RELOCATES.] (a) "Relocates" means that the 
 24.29  trade or business: 
 24.30     (1) ceases one or more operations or functions at another 
 24.31  location in Minnesota and begins performing substantially the 
 24.32  same operations or functions at a location in a job opportunity 
 24.33  building zone; or 
 24.34     (2) reduces employment at another location in Minnesota 
 24.35  during a period starting one year before and ending one year 
 24.36  after it begins operations in a job opportunity building zone 
 25.1   and its employees in the job opportunity building zone are 
 25.2   engaged in the same line of business as the employees at the 
 25.3   location where it reduced employment. 
 25.4      (b) "Relocate" does not include an expansion by a business 
 25.5   that establishes a new facility that does not replace or 
 25.6   supplant an existing operation or employment, in whole or in 
 25.7   part. 
 25.8      (c) "Trade or business" includes any business entity that 
 25.9   is substantially similar in operation or ownership to the 
 25.10  business entity seeking to be a qualified business under this 
 25.11  section. 
 25.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 25.13  following final enactment. 
 25.14     Sec. 16.  [469.311] [DEVELOPMENT PLAN.] 
 25.15     (a) An applicant for designation of a job opportunity 
 25.16  building zone must adopt a written development plan for the zone 
 25.17  before submitting the application to the commissioner. 
 25.18     (b) The development plan must contain, at least, the 
 25.19  following: 
 25.20     (1) a map of the proposed zone that indicates the 
 25.21  geographic boundaries of the zone, the total area, and present 
 25.22  use and conditions generally of the land and structures within 
 25.23  those boundaries; 
 25.24     (2) evidence of community support and commitment from local 
 25.25  government, local workforce investment boards, school districts, 
 25.26  and other education institutions, business groups, and the 
 25.27  public; 
 25.28     (3) a description of the methods proposed to increase 
 25.29  economic opportunity and expansion, facilitate infrastructure 
 25.30  improvement, reduce the local regulatory burden, and identify 
 25.31  job-training opportunities; 
 25.32     (4) current social, economic, and demographic 
 25.33  characteristics of the proposed zone and anticipated 
 25.34  improvements in education, health, human services, and 
 25.35  employment if the zone is created; 
 25.36     (5) a description of anticipated activity in the zone and 
 26.1   each subzone, including, but not limited to, industrial use, 
 26.2   industrial site reuse, commercial or retail use, and residential 
 26.3   use; and 
 26.4      (6) any other information required by the commissioner. 
 26.5      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 26.6   following final enactment. 
 26.7      Sec. 17.  [469.312] [JOB OPPORTUNITY BUILDING ZONES; 
 26.8   LIMITATIONS.] 
 26.9      Subdivision 1.  [MAXIMUM SIZE.] A job opportunity building 
 26.10  zone may not exceed 5,000 acres.  For a zone designated as an 
 26.11  agricultural processing facility zone, the zone also may not 
 26.12  exceed the size of a site necessary for the agricultural 
 26.13  processing facility, including ancillary operations and space 
 26.14  for expansion in the reasonably foreseeable future. 
 26.15     Subd. 2.  [SUBZONES.] The area of a job opportunity 
 26.16  building zone may consist of one or more noncontiguous areas or 
 26.17  subzones. 
 26.18     Subd. 3.  [OUTSIDE METROPOLITAN AREA.] The area of a job 
 26.19  opportunity building zone must be located outside of the 
 26.20  metropolitan area, as defined in section 473.121, subdivision 2. 
 26.21     Subd. 4.  [BORDER CITY DEVELOPMENT ZONES.] (a) The area of 
 26.22  a job opportunity building zone may not include the area of a 
 26.23  border city development zone designated under section 469.1731.  
 26.24  The city may remove property from a border city development zone 
 26.25  contingent upon the area being designated as a job opportunity 
 26.26  building zone.  Before removing a parcel of property from a 
 26.27  border city development zone, the city must obtain the written 
 26.28  consent to the removal from each recipient that is located on 
 26.29  the parcel and receives incentives under the border city 
 26.30  development zone.  Consent of any other property owner or 
 26.31  taxpayer in the border city development zone is not required. 
 26.32     (b) A city may not provide tax incentives under section 
 26.33  469.1734 to individuals or businesses for operations or activity 
 26.34  in a job opportunity building zone. 
 26.35     Subd. 5.  [DURATION LIMIT.] The maximum duration of a zone 
 26.36  is 12 years.  The applicant may request a shorter duration.  The 
 27.1   commissioner may specify a shorter duration, regardless of the 
 27.2   requested duration. 
 27.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 27.4   following final enactment. 
 27.5      Sec. 18.  [469.313] [APPLICATION FOR DESIGNATION.] 
 27.6      Subdivision 1.  [WHO MAY APPLY.] One or more local 
 27.7   government units, or a joint powers board under section 471.59, 
 27.8   acting on behalf of two or more units, may apply for designation 
 27.9   of an area as a job opportunity building zone.  All or part of 
 27.10  the area proposed for designation as a zone must be located 
 27.11  within the boundaries of each of the governmental units.  A 
 27.12  local government unit may not submit or have submitted on its 
 27.13  behalf more than one application for designation of a job 
 27.14  opportunity building zone. 
 27.15     Subd. 2.  [APPLICATION CONTENT.] The application must 
 27.16  include: 
 27.17     (1) a development plan meeting the requirements of section 
 27.18  469.311; 
 27.19     (2) the proposed duration of the zone, not to exceed 12 
 27.20  years; 
 27.21     (3) a resolution or ordinance adopted by each of the cities 
 27.22  or towns and the counties in which the zone is located, agreeing 
 27.23  to provide all of the local tax exemptions provided under 
 27.24  section 469.315; 
 27.25     (4) if the proposed zone includes area in a border city 
 27.26  development zone, written consent to removal of the property 
 27.27  from the border city development zone to the extent required by 
 27.28  section 469.312, subdivision 4; and 
 27.29     (5) supporting evidence to allow the commissioner to 
 27.30  evaluate the application under the criteria in section 469.314. 
 27.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 27.32  following final enactment. 
 27.33     Sec. 19.  [469.314] [DESIGNATION OF JOB OPPORTUNITY 
 27.34  BUILDING ZONES.] 
 27.35     Subdivision 1.  [COMMISSIONER TO DESIGNATE.] (a) The 
 27.36  commissioner, in consultation with the commissioner of revenue, 
 28.1   shall designate not more than ten job opportunity building 
 28.2   zones.  In making the designations, the commissioner shall 
 28.3   consider need and likelihood of success to yield the most 
 28.4   economic development and revitalization of economically 
 28.5   distressed rural areas of Minnesota. 
 28.6      (b) In addition to the designations under paragraph (a), 
 28.7   the commissioner may, in consultation with the commissioners of 
 28.8   agriculture and revenue, designate up to five agricultural 
 28.9   processing facility zones. 
 28.10     (c) The commissioner may, upon designation of a zone, 
 28.11  modify the development plan, including the boundaries of the 
 28.12  zone or subzones, if in the commissioner's opinion a modified 
 28.13  plan would better meet the objectives of the job opportunity 
 28.14  building zone program.  The commissioner shall notify the 
 28.15  applicant of the modification and provide a statement of the 
 28.16  reasons for the modifications. 
 28.17     Subd. 2.  [NEED INDICATORS.] (a) In evaluating applications 
 28.18  to determine the need for designation of a job opportunity 
 28.19  building zone, the commissioner shall consider the following 
 28.20  factors as indicators of need: 
 28.21     (1) the percentage of the population that is below 200 
 28.22  percent of the poverty rate, compared with the state as a whole; 
 28.23     (2) the extent to which the area's average weekly wage is 
 28.24  significantly lower than the state average weekly wage; 
 28.25     (3) the amount of property in or near the proposed zone 
 28.26  that is deteriorated or underutilized; 
 28.27     (4) the extent to which the median sale price of housing 
 28.28  units in the area is below the state median; 
 28.29     (5) the extent to which the median household income of the 
 28.30  area is lower than the state median household income; 
 28.31     (6) the extent to which the area experienced a population 
 28.32  loss during the 20-year period ending the year before the 
 28.33  application is made; 
 28.34     (7) the extent to which an area has experienced sudden or 
 28.35  severe job loss as a result of closing of businesses or other 
 28.36  employers; 
 29.1      (8) the extent to which property in the area would remain 
 29.2   underdeveloped or nonperforming due to physical characteristics; 
 29.3      (9) the extent to which the area has substantial real 
 29.4   property with adequate infrastructure and energy to support new 
 29.5   or expanded development; and 
 29.6      (10) the extent to which the business startup or expansion 
 29.7   rates are significantly lower than the respective rate for the 
 29.8   state.  
 29.9      (b) In applying the need indicators, the best available 
 29.10  data should be used.  If reported data are not available for the 
 29.11  proposed zone, data for the smallest area that is available and 
 29.12  includes the area of the proposed zone may be used.  The 
 29.13  commissioner may require applicants to provide data to 
 29.14  demonstrate how the area meets one or more of the indicators of 
 29.15  need. 
 29.16     Subd. 3.  [SUCCESS INDICATORS.] In determining the 
 29.17  likelihood of success of a proposed zone, the commissioner shall 
 29.18  consider: 
 29.19     (1) the strength and viability of the proposed development 
 29.20  goals, objectives, and strategies in the development plan; 
 29.21     (2) whether the development plan is creative and innovative 
 29.22  in comparison to other applications; 
 29.23     (3) local public and private commitment to development of 
 29.24  the proposed zone and the potential cooperation of surrounding 
 29.25  communities; 
 29.26     (4) existing resources available to the proposed zone; 
 29.27     (5) how the designation of the zone would relate to other 
 29.28  economic and community development projects and to regional 
 29.29  initiatives or programs; 
 29.30     (6) how the regulatory burden will be eased for businesses 
 29.31  operating in the proposed zone; 
 29.32     (7) proposals to establish and link job creation and job 
 29.33  training; and 
 29.34     (8) the extent to which the development is directed at 
 29.35  encouraging and that designation of the zone is likely to result 
 29.36  in the creation of high-paying jobs. 
 30.1      Subd. 4.  [DESIGNATION SCHEDULE.] (a) The schedule in 
 30.2   paragraphs (b) to (e) applies to the designation of job 
 30.3   opportunity building zones. 
 30.4      (b) The commissioner shall publish the form for 
 30.5   applications and any procedural, form, or content requirements 
 30.6   for applications by no later than August 1, 2003.  The 
 30.7   commissioner may publish these requirements on the Internet, in 
 30.8   the State Register, or by any other means the commissioner 
 30.9   determines appropriate to disseminate the information to 
 30.10  potential applicants for designation. 
 30.11     (c) Applications must be submitted by October 15, 2003. 
 30.12     (d) The commissioner shall designate the zones by no later 
 30.13  than December 31, 2003. 
 30.14     (e) The designation of the zones takes effect January 1, 
 30.15  2004. 
 30.16     Subd. 5.  [GEOGRAPHIC DISTRIBUTION.] The commissioner shall 
 30.17  have as a goal the geographic distribution of zones around the 
 30.18  state. 
 30.19     Subd. 6.  [RULEMAKING EXEMPTION.] The commissioner's 
 30.20  actions in establishing procedures, requirements, and making 
 30.21  determinations to administer sections 469.310 to 469.320 are not 
 30.22  a rule for purposes of chapter 14 and are not subject to the 
 30.23  Administrative Procedure Act contained in chapter 14 and are not 
 30.24  subject to section 14.386. 
 30.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 30.26  following final enactment. 
 30.27     Sec. 20.  [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 
 30.28     Qualified businesses that operate in a job opportunity 
 30.29  building zone, individuals who invest in a qualified business 
 30.30  that operates in a job opportunity building zone, and property 
 30.31  located in a job opportunity building zone qualify for: 
 30.32     (1) exemption from individual income taxes as provided 
 30.33  under section 469.316; 
 30.34     (2) exemption from corporate franchise taxes as provided 
 30.35  under section 469.317; 
 30.36     (3) exemption from the state sales and use tax and any 
 31.1   local sales and use taxes on qualifying purchases as provided in 
 31.2   section 297A.68, subdivision 37; 
 31.3      (4) exemption from the state sales tax on motor vehicles 
 31.4   and any local sales tax on motor vehicles as provided under 
 31.5   section 297B.03; 
 31.6      (5) exemption from the property tax as provided in section 
 31.7   272.02, subdivision 56; 
 31.8      (6) exemption from the wind energy production tax under 
 31.9   section 272.029, subdivision 7; and 
 31.10     (7) the jobs credit allowed under section 469.318. 
 31.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 31.12  following final enactment. 
 31.13     Sec. 21.  [469.316] [INDIVIDUAL INCOME TAX EXEMPTION.] 
 31.14     Subdivision 1.  [APPLICATION.] An individual operating a 
 31.15  trade or business in a job opportunity building zone, and an 
 31.16  individual making a qualifying investment in a qualified 
 31.17  business operating in a job opportunity building zone qualifies 
 31.18  for the exemptions from taxes imposed under chapter 290, as 
 31.19  provided in this section.  The exemptions provided under this 
 31.20  section apply only to the extent that the income otherwise would 
 31.21  be taxable under chapter 290.  Subtractions under this section 
 31.22  from federal taxable income, alternative minimum taxable income, 
 31.23  or any other base subject to tax are limited to the amount that 
 31.24  otherwise would be included in the tax base absent the exemption 
 31.25  under this section.  This section applies only to taxable years 
 31.26  beginning during the duration of the job opportunity building 
 31.27  zone. 
 31.28     Subd. 2.  [RENTS.] An individual is exempt from the taxes 
 31.29  imposed under chapter 290 on net rents derived from real or 
 31.30  tangible personal property located in a zone for a taxable year 
 31.31  in which the zone was designated a job opportunity building 
 31.32  zone.  If tangible personal property was used both within and 
 31.33  outside of the zone, the exemption amount for the net rental 
 31.34  income must be multiplied by a fraction, the numerator of which 
 31.35  is the number of days the property was used in the zone and the 
 31.36  denominator of which is the total days. 
 32.1      Subd. 3.  [BUSINESS INCOME.] An individual is exempt from 
 32.2   the taxes imposed under chapter 290 on net income from the 
 32.3   operation of a qualified business in a job opportunity building 
 32.4   zone.  If the trade or business is carried on within and without 
 32.5   the zone and the individual is not a resident of Minnesota, the 
 32.6   exemption must be apportioned based on the zone percentage for 
 32.7   the taxable year.  If the trade or business is carried on within 
 32.8   and without the zone and the individual is a resident of 
 32.9   Minnesota, the exemption must be apportioned based on the zone 
 32.10  percentage for the taxable year, except the ratios under section 
 32.11  469.310, subdivision 7, clause (1), items (i) and (ii), must use 
 32.12  the denominators of the property and payroll factors determined 
 32.13  under section 290.191.  No subtraction is allowed under this 
 32.14  section in excess of 20 percent of the sum of the job 
 32.15  opportunity building zone payroll and the adjusted basis of the 
 32.16  property at the time that the property is first used in the job 
 32.17  opportunity building zone by the business. 
 32.18     Subd. 4.  [CAPITAL GAINS.] (a) An individual is exempt from 
 32.19  the taxes imposed under chapter 290 on: 
 32.20     (1) net gain derived on a sale or exchange of real property 
 32.21  located in the zone and used by a qualified business.  If the 
 32.22  property was held by the individual during a period when the 
 32.23  zone was not designated, the gain must be prorated based on the 
 32.24  percentage of time, measured in calendar days, that the real 
 32.25  property was held by the individual during the period the zone 
 32.26  designation was in effect to the total period of time the real 
 32.27  property was held by the individual; 
 32.28     (2) net gain derived on a sale or exchange of tangible 
 32.29  personal property used by a qualified business in the zone.  If 
 32.30  the property was held by the individual during a period when the 
 32.31  zone was not designated, the gain must be prorated based on the 
 32.32  percentage of time, measured in calendar days, that the property 
 32.33  was held by the individual during the period the zone 
 32.34  designation was in effect to the total period of time the 
 32.35  property was held by the individual.  If the tangible personal 
 32.36  property was used outside of the zone during the period of the 
 33.1   zone's designation, the exemption must be multiplied by a 
 33.2   fraction, the numerator of which is the number of days the 
 33.3   property was used in the zone during the time of the designation 
 33.4   and the denominator of which is the total days the property was 
 33.5   held during the time of the designation; and 
 33.6      (3) net gain derived on a sale of an ownership interest in 
 33.7   a qualified business operating in the job opportunity building 
 33.8   zone, meeting the requirements of paragraph (b).  The exemption 
 33.9   on the gain must be multiplied by the zone percentage of the 
 33.10  business for the taxable year prior to the sale. 
 33.11     (b) A qualified business meets the requirements of 
 33.12  paragraph (a), clause (3), if it is a corporation, an S 
 33.13  corporation, or a partnership, and for the taxable year its job 
 33.14  opportunity building zone percentage exceeds 25 percent.  For 
 33.15  purposes of paragraph (a), clause (3), the zone percentage must 
 33.16  be calculated by modifying the ratios under section 469.310, 
 33.17  subdivision 7, clause (1), items (i) and (ii), to use the 
 33.18  denominators of the property and payroll factors determined 
 33.19  under section 290.191.  Upon the request of an individual 
 33.20  holding an ownership interest in the entity, the entity must 
 33.21  certify to the owner, in writing, the job opportunity building 
 33.22  zone percentage needed to determine the exemption. 
 33.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 33.24  years beginning after December 31, 2003. 
 33.25     Sec. 22.  [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 33.26     (a) A qualified business is exempt from taxation under 
 33.27  section 290.02, the alternative minimum tax under section 
 33.28  290.0921, and the minimum fee under section 290.0922, on the 
 33.29  portion of its income attributable to operations within the 
 33.30  zone.  This exemption is determined as follows: 
 33.31     (1) for purposes of the tax imposed under section 290.02, 
 33.32  by multiplying its taxable net income by its zone percentage and 
 33.33  subtracting the result in determining taxable income; 
 33.34     (2) for purposes of the alternative minimum tax under 
 33.35  section 290.0921, by multiplying its alternative minimum taxable 
 33.36  income by its zone percentage and reducing alternative minimum 
 34.1   taxable income by this amount; and 
 34.2      (3) for purposes of the minimum fee under section 290.0922, 
 34.3   by excluding property and payroll in the zone from the 
 34.4   computations of the fee or by exempting the entity under section 
 34.5   290.0922, subdivision 2, clause (7). 
 34.6      (b) No subtraction is allowed under this section in excess 
 34.7   of 20 percent of the sum of the corporation's job opportunity 
 34.8   building zone payroll and the adjusted basis of the property at 
 34.9   the time that the property is first used in the job opportunity 
 34.10  building zone by the corporation. 
 34.11     (c) This section applies only to taxable years beginning 
 34.12  during the duration of the job opportunity building zone. 
 34.13     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 34.14  years beginning after December 31, 2003. 
 34.15     Sec. 23.  [469.318] [JOBS CREDIT.] 
 34.16     Subdivision 1.  [CREDIT ALLOWED.] A qualified business is 
 34.17  allowed a credit against the taxes imposed under chapter 290.  
 34.18  The credit equals seven percent of the: 
 34.19     (1) lesser of: 
 34.20     (i) zone payroll for the taxable year, less the zone 
 34.21  payroll for the base year; or 
 34.22     (ii) total Minnesota payroll for the taxable year, less 
 34.23  total Minnesota payroll for the base year; minus 
 34.24     (2) $30,000 multiplied by (the number of full-time 
 34.25  equivalent employees that the qualified business employs in the 
 34.26  job opportunity building zone for the taxable year, minus the 
 34.27  number of full-time equivalent employees the business employed 
 34.28  in the zone in the base year, but not less than zero). 
 34.29     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 34.30  the following terms have the meanings given. 
 34.31     (b) "Base year" means the taxable year beginning during the 
 34.32  calendar year prior to the calendar year in which the zone 
 34.33  designation took effect. 
 34.34     (c) "Full-time equivalent employees" means the equivalent 
 34.35  of annualized expected hours of work equal to 2,080 hours. 
 34.36     (d) "Minnesota payroll" means the wages or salaries 
 35.1   attributed to Minnesota under section 290.191, subdivision 12, 
 35.2   for the qualified business or the unitary business of which the 
 35.3   qualified business is a part, whichever is greater. 
 35.4      (e) "Zone payroll" means wages or salaries used to 
 35.5   determine the zone payroll factor for the qualified business, 
 35.6   less the amount of compensation attributable to any employee 
 35.7   that exceeds $100,000. 
 35.8      Subd. 3.  [INFLATION ADJUSTMENT.] For taxable years 
 35.9   beginning after December 31, 2004, the dollar amounts in 
 35.10  subdivision 1, clause (2), and subdivision 2, paragraph (e), are 
 35.11  annually adjusted for inflation.  The commissioner of revenue 
 35.12  shall adjust the amounts by the percentage determined under 
 35.13  section 290.06, subdivision 2d, for the taxable year. 
 35.14     Subd. 4.  [REFUNDABLE.] If the amount of the credit exceeds 
 35.15  the liability for tax under chapter 290, the commissioner of 
 35.16  revenue shall refund the excess to the qualified business. 
 35.17     Subd. 5.  [APPROPRIATION.] An amount sufficient to pay the 
 35.18  refunds authorized by this section is appropriated to the 
 35.19  commissioner of revenue from the general fund. 
 35.20     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 35.21  years beginning after December 31, 2003. 
 35.22     Sec. 24.  [469.319] [REPAYMENT OF TAX BENEFITS.] 
 35.23     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
 35.24  repay the amount of the total tax reduction listed in section 
 35.25  469.315 and any refund under section 469.318 in excess of tax 
 35.26  liability, received during the two years immediately before it 
 35.27  ceased to operate in the zone, if the business: 
 35.28     (1) received tax reductions authorized by section 469.315; 
 35.29  and 
 35.30     (2)(i) did not meet the goals specified in an agreement 
 35.31  entered into with the applicant that states any obligation the 
 35.32  qualified business must fulfill in order to be eligible for tax 
 35.33  benefits.  The commissioner may extend for up to one year the 
 35.34  period for meeting any goals provided in an agreement.  The 
 35.35  applicant may extend the period for meeting other goals by 
 35.36  documenting in writing the reason for the extension and 
 36.1   attaching a copy of the document to its next annual report to 
 36.2   the commissioner; or 
 36.3      (ii) ceased to operate its facility located within the job 
 36.4   opportunity building zone or otherwise ceases to be or is not a 
 36.5   qualified business. 
 36.6      Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 36.7   the following terms have the meanings given. 
 36.8      (b) "Business" means any person who received tax benefits 
 36.9   enumerated in section 469.315. 
 36.10     (c) "Commissioner" means the commissioner of revenue. 
 36.11     Subd. 3.  [DISPOSITION OR REPAYMENT.] The repayment must be 
 36.12  paid to the state to the extent it represents a state tax 
 36.13  reduction and to the county to the extent it represents a 
 36.14  property tax reduction.  Any amount repaid to the state must be 
 36.15  deposited in the general fund.  Any amount repaid to the county 
 36.16  for the property tax exemption must be distributed to the local 
 36.17  governments with authority to levy taxes in the zone in the same 
 36.18  manner provided for distribution of payment of delinquent 
 36.19  property taxes.  Any repayment of local sales taxes must be 
 36.20  repaid to the city or county imposing the local sales tax. 
 36.21     Subd. 4.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 36.22  taxes imposed under chapter 290 or 297A or local taxes collected 
 36.23  pursuant to section 297A.99, a business must file an amended 
 36.24  return with the commissioner of revenue and pay any taxes 
 36.25  required to be repaid within 30 days after ceasing to do 
 36.26  business in the zone.  The amount required to be repaid is 
 36.27  determined by calculating the tax for the period or periods for 
 36.28  which repayment is required without regard to the exemptions and 
 36.29  credits allowed under section 469.315. 
 36.30     (b) For the repayment of taxes imposed under chapter 297B, 
 36.31  a business must pay any taxes required to be repaid to the motor 
 36.32  vehicle registrar, as agent for the commissioner of revenue, 
 36.33  within 30 days after ceasing to do business in the zone. 
 36.34     (c) For the repayment of property taxes, the county auditor 
 36.35  shall prepare a tax statement for the business, applying the 
 36.36  applicable tax extension rates for each payable year and provide 
 37.1   a copy to the business.  The business must pay the taxes to the 
 37.2   county treasurer within 30 days after receipt of the tax 
 37.3   statement.  The taxpayer may appeal the valuation and 
 37.4   determination of the property tax to the tax court within 30 
 37.5   days after receipt of the tax statement. 
 37.6      (d) The provisions of chapters 270 and 289A relating to the 
 37.7   commissioner's authority to audit, assess, and collect the tax 
 37.8   and to hear appeals are applicable to the repayment required 
 37.9   under paragraphs (a) and (b).  The commissioner may impose civil 
 37.10  penalties as provided in chapter 289A, and the additional tax 
 37.11  and penalties are subject to interest at the rate provided in 
 37.12  section 270.75, from 30 days after ceasing to do business in the 
 37.13  job opportunity building zone until the date the tax is paid. 
 37.14     (e) If a property tax is not repaid under paragraph (c), 
 37.15  the county treasurer shall add the amount required to be repaid 
 37.16  to the property taxes assessed against the property for payment 
 37.17  in the year following the year in which the treasurer discovers 
 37.18  that the business ceased to operate in the job opportunity 
 37.19  building zone. 
 37.20     (f) For determining the tax required to be repaid, a tax 
 37.21  reduction is deemed to have been received on the date that the 
 37.22  tax would have been due if the taxpayer had not been entitled to 
 37.23  the exemption or on the date a refund was issued for a 
 37.24  refundable tax credit. 
 37.25     (g) The commissioner may assess the repayment of taxes 
 37.26  under paragraph (d) any time within two years after the business 
 37.27  ceases to operate in the job opportunity building zone, or 
 37.28  within any period of limitations for the assessment of tax under 
 37.29  section 289A.38, whichever period is later. 
 37.30     Subd. 5.  [WAIVER AUTHORITY.] The commissioner may waive 
 37.31  all or part of a repayment, if the commissioner, in consultation 
 37.32  with the commissioner of trade and economic development and 
 37.33  appropriate officials from the local government units in which 
 37.34  the qualified business is located, determines that requiring 
 37.35  repayment of the tax is not in the best interest of the state or 
 37.36  the local government units and the business ceased operating as 
 38.1   a result of circumstances beyond its control including, but not 
 38.2   limited to: 
 38.3      (1) a natural disaster; 
 38.4      (2) unforeseen industry trends; or 
 38.5      (3) loss of a major supplier or customer. 
 38.6      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 38.7   following final enactment. 
 38.8      Sec. 25.  [469.320] [ZONE PERFORMANCE; REMEDIES.] 
 38.9      Subdivision 1.  [REPORTING REQUIREMENT.] An applicant 
 38.10  receiving designation of a job opportunity building zone under 
 38.11  section 469.314 must annually report to the commissioner on its 
 38.12  progress in meeting the zone performance goals under the 
 38.13  development plan for the zone. 
 38.14     Subd. 2.  [PROCEDURES.] For reports required by subdivision 
 38.15  1, the commissioner may prescribe: 
 38.16     (1) the required time or times by which the reports must be 
 38.17  filed; 
 38.18     (2) the form of the report; and 
 38.19     (3) the information required to be included in the report. 
 38.20     Subd. 3.  [REMEDIES.] If the commissioner determines, based 
 38.21  on a report filed under subdivision 1 or other available 
 38.22  information, that a zone or subzone is failing to meet its 
 38.23  performance goals, the commissioner may take any actions the 
 38.24  commissioner determines appropriate, including modification of 
 38.25  the boundaries of the zone or a subzone or termination of the 
 38.26  zone or a subzone.  Before taking any action, the commissioner 
 38.27  shall consult with the applicant and the affected local 
 38.28  government units, including notifying them of the proposed 
 38.29  actions to be taken.  The commissioner shall publish any order 
 38.30  modifying a zone in the State Register and on the Internet.  The 
 38.31  applicant may appeal the commissioner's order under the 
 38.32  contested case procedures of chapter 14. 
 38.33     Subd. 4.  [EXISTING BUSINESSES.] (a) An action to remove 
 38.34  area from a zone or to terminate a zone under this section does 
 38.35  not apply to: 
 38.36     (1) the property tax on improvements constructed before the 
 39.1   first January 2 following publication of the commissioner's 
 39.2   order; 
 39.3      (2) sales tax on purchases made before the first day of the 
 39.4   next calendar month beginning at least 30 days after publication 
 39.5   of the commissioner's order; and 
 39.6      (3) individual income tax or corporate franchise tax 
 39.7   attributable to a facility that was in operation before the 
 39.8   publication of the commissioner's order. 
 39.9      (b) The tax exemptions specified in paragraph (a) terminate 
 39.10  on the date on which the zone expires under the original 
 39.11  designation. 
 39.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 39.13  following final enactment. 
 39.14     Sec. 26.  [477A.08] [JOB OPPORTUNITY BUILDING ZONE AID.] 
 39.15     Subdivision 1.  [ELIGIBILITY.] (a) For each assessment year 
 39.16  that the exemption for job opportunity building zone property is 
 39.17  in effect under section 272.02, subdivision 56, the assessor 
 39.18  shall determine the difference between the actual net tax 
 39.19  capacity and the net tax capacity that would be determined for 
 39.20  the job opportunity building zone, including any property 
 39.21  removed from the zone that continues to qualify under section 
 39.22  469.320, subdivision 4, if the exemption were not in effect. 
 39.23     (b) Each city and county is eligible for aid equal to 
 39.24  one-half of: 
 39.25     (1) the amount by which the sum of the differences 
 39.26  determined in paragraph (a) for the corresponding assessment 
 39.27  year exceeds three percent of the city's or county's total 
 39.28  taxable net tax capacity for taxes payable in 2003, multiplied 
 39.29  by 
 39.30     (2) the city's or the county's, as applicable, average 
 39.31  local tax rate for taxes payable in 2003. 
 39.32     Subd. 2.  [CERTIFICATION.] The county assessor shall notify 
 39.33  the commissioner of revenue of the amount determined under 
 39.34  subdivision 1, paragraph (b), clause (1), for any city or county 
 39.35  that qualifies for aid under this section by June 30 of the 
 39.36  assessment year, in a form prescribed by the commissioner.  The 
 40.1   commissioner shall notify each city and county of its qualifying 
 40.2   aid amount by August 15 of the assessment year. 
 40.3      Subd. 3.  [APPROPRIATION; PAYMENT.] The commissioner shall 
 40.4   pay each city and county its qualifying aid amount by July 20 of 
 40.5   the following year.  An amount sufficient to pay the aid under 
 40.6   this section is appropriated to the commissioner of revenue from 
 40.7   the general fund. 
 40.8      <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
 40.9   aid based on property taxes assessed in 2004, payable in 2005. 
 40.10     Sec. 27.  [APPROPRIATION; COST OF ADMINISTRATION.] 
 40.11     $100,000 in fiscal year 2004 and $30,000 in fiscal year 
 40.12  2005 are appropriated to the commissioner of trade and economic 
 40.13  development for the cost of designating job opportunity building 
 40.14  zones. 
 40.15     $53,000 in fiscal year 2004 and $29,000 in fiscal year 2005 
 40.16  are appropriated to the commissioner of revenue for the cost of 
 40.17  administering the tax provisions of this act. 
 40.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 40.19  following final enactment. 
 40.20                             ARTICLE 2
 40.21          BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE
 40.22     Section 1.  [LEGISLATIVE FINDINGS.] 
 40.23     The legislature finds, as a matter of public policy, that 
 40.24  biotechnology and the health sciences hold immense promise in 
 40.25  improving the quality of our lives, including curing diseases, 
 40.26  making our foods safer and more abundant, reducing our 
 40.27  dependence on fossil fuels and foreign oil, making better use of 
 40.28  Minnesota agriculture products, and growing tens of thousands of 
 40.29  new, high-paying jobs. 
 40.30     The legislature further finds that there are hundreds of 
 40.31  discoveries made each year at the University of Minnesota, the 
 40.32  Mayo Clinic, and other research institutions that, if properly 
 40.33  commercialized, could help provide these benefits.  
 40.34     The legislature further finds that biotechnology and health 
 40.35  sciences companies benefit from location in proximity to these 
 40.36  research institutions and the many faculty, students, and other 
 41.1   intellectual and physical infrastructure these institutions 
 41.2   provide.  
 41.3      The legislature further finds that Minnesota's high-quality 
 41.4   workforce is attractive to biotechnology and health sciences 
 41.5   companies that would want to relocate, start up, or expand in 
 41.6   Minnesota. 
 41.7      The legislature further finds and declares that it is 
 41.8   appropriate and necessary, to improve our quality of life and as 
 41.9   a matter of economic development, that Minnesota take rapid and 
 41.10  affirmative steps to encourage the development of biotechnology 
 41.11  and the health sciences and the commercialization of important 
 41.12  discoveries, especially through expansion of business 
 41.13  opportunities in proximity to the research institutions where 
 41.14  those discoveries occur. 
 41.15     Sec. 2.  Minnesota Statutes 2002, section 272.02, is 
 41.16  amended by adding a subdivision to read: 
 41.17     Subd. 56.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 41.18  PROPERTY.] (a) Improvements to real property, and personal 
 41.19  property, classified under section 273.13, subdivision 24, and 
 41.20  located within a biotechnology and health sciences industry 
 41.21  zone, designated under section 469.314, are exempt from ad 
 41.22  valorem taxes levied under chapter 275. 
 41.23     (b) For property to qualify for exemption under paragraph 
 41.24  (a), the occupant must be a qualified business, as defined in 
 41.25  section 469.310. 
 41.26     (c) The exemption applies beginning for the first 
 41.27  assessment year after designation of the biotechnology and 
 41.28  health sciences industry zone, designated under section 469.314, 
 41.29  by the commissioner of trade and economic development.  The 
 41.30  exemption applies to each assessment year that begins during the 
 41.31  duration of the biotechnology and health sciences industry zone 
 41.32  and to property occupied by July 1 of the assessment year by a 
 41.33  qualified business.  This exemption does not apply to: 
 41.34     (1) a levy under section 475.61 or similar levy provisions 
 41.35  under any other law to pay general obligation bonds; or 
 41.36     (2) a levy under section 126C.17, if the levy was approved 
 42.1   by the voters before the designation of the biotechnology and 
 42.2   health sciences industry zone. 
 42.3      <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
 42.4   property taxes assessed in 2004, payable in 2005. 
 42.5      Sec. 3.  Minnesota Statutes 2002, section 290.01, 
 42.6   subdivision 19b, is amended to read: 
 42.7      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
 42.8   individuals, estates, and trusts, there shall be subtracted from 
 42.9   federal taxable income: 
 42.10     (1) interest income on obligations of any authority, 
 42.11  commission, or instrumentality of the United States to the 
 42.12  extent includable in taxable income for federal income tax 
 42.13  purposes but exempt from state income tax under the laws of the 
 42.14  United States; 
 42.15     (2) if included in federal taxable income, the amount of 
 42.16  any overpayment of income tax to Minnesota or to any other 
 42.17  state, for any previous taxable year, whether the amount is 
 42.18  received as a refund or as a credit to another taxable year's 
 42.19  income tax liability; 
 42.20     (3) the amount paid to others, less the amount used to 
 42.21  claim the credit allowed under section 290.0674, not to exceed 
 42.22  $1,625 for each qualifying child in grades kindergarten to 6 and 
 42.23  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
 42.24  textbooks, and transportation of each qualifying child in 
 42.25  attending an elementary or secondary school situated in 
 42.26  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
 42.27  wherein a resident of this state may legally fulfill the state's 
 42.28  compulsory attendance laws, which is not operated for profit, 
 42.29  and which adheres to the provisions of the Civil Rights Act of 
 42.30  1964 and chapter 363.  For the purposes of this clause, 
 42.31  "tuition" includes fees or tuition as defined in section 
 42.32  290.0674, subdivision 1, clause (1).  As used in this clause, 
 42.33  "textbooks" includes books and other instructional materials and 
 42.34  equipment purchased or leased for use in elementary and 
 42.35  secondary schools in teaching only those subjects legally and 
 42.36  commonly taught in public elementary and secondary schools in 
 43.1   this state.  Equipment expenses qualifying for deduction 
 43.2   includes expenses as defined and limited in section 290.0674, 
 43.3   subdivision 1, clause (3).  "Textbooks" does not include 
 43.4   instructional books and materials used in the teaching of 
 43.5   religious tenets, doctrines, or worship, the purpose of which is 
 43.6   to instill such tenets, doctrines, or worship, nor does it 
 43.7   include books or materials for, or transportation to, 
 43.8   extracurricular activities including sporting events, musical or 
 43.9   dramatic events, speech activities, driver's education, or 
 43.10  similar programs.  For purposes of the subtraction provided by 
 43.11  this clause, "qualifying child" has the meaning given in section 
 43.12  32(c)(3) of the Internal Revenue Code; 
 43.13     (4) income as provided under section 290.0802; 
 43.14     (5) to the extent included in federal adjusted gross 
 43.15  income, income realized on disposition of property exempt from 
 43.16  tax under section 290.491; 
 43.17     (6) to the extent not deducted in determining federal 
 43.18  taxable income or used to claim the long-term care insurance 
 43.19  credit under section 290.0672, the amount paid for health 
 43.20  insurance of self-employed individuals as determined under 
 43.21  section 162(l) of the Internal Revenue Code, except that the 
 43.22  percent limit does not apply.  If the individual deducted 
 43.23  insurance payments under section 213 of the Internal Revenue 
 43.24  Code of 1986, the subtraction under this clause must be reduced 
 43.25  by the lesser of: 
 43.26     (i) the total itemized deductions allowed under section 
 43.27  63(d) of the Internal Revenue Code, less state, local, and 
 43.28  foreign income taxes deductible under section 164 of the 
 43.29  Internal Revenue Code and the standard deduction under section 
 43.30  63(c) of the Internal Revenue Code; or 
 43.31     (ii) the lesser of (A) the amount of insurance qualifying 
 43.32  as "medical care" under section 213(d) of the Internal Revenue 
 43.33  Code to the extent not deducted under section 162(1) of the 
 43.34  Internal Revenue Code or excluded from income or (B) the total 
 43.35  amount deductible for medical care under section 213(a); 
 43.36     (7) the exemption amount allowed under Laws 1995, chapter 
 44.1   255, article 3, section 2, subdivision 3; 
 44.2      (8) to the extent included in federal taxable income, 
 44.3   postservice benefits for youth community service under section 
 44.4   124D.42 for volunteer service under United States Code, title 
 44.5   42, sections 12601 to 12604; 
 44.6      (9) to the extent not deducted in determining federal 
 44.7   taxable income by an individual who does not itemize deductions 
 44.8   for federal income tax purposes for the taxable year, an amount 
 44.9   equal to 50 percent of the excess of charitable contributions 
 44.10  allowable as a deduction for the taxable year under section 
 44.11  170(a) of the Internal Revenue Code over $500; 
 44.12     (10) for taxable years beginning before January 1, 2008, 
 44.13  the amount of the federal small ethanol producer credit allowed 
 44.14  under section 40(a)(3) of the Internal Revenue Code which is 
 44.15  included in gross income under section 87 of the Internal 
 44.16  Revenue Code; 
 44.17     (11) for individuals who are allowed a federal foreign tax 
 44.18  credit for taxes that do not qualify for a credit under section 
 44.19  290.06, subdivision 22, an amount equal to the carryover of 
 44.20  subnational foreign taxes for the taxable year, but not to 
 44.21  exceed the total subnational foreign taxes reported in claiming 
 44.22  the foreign tax credit.  For purposes of this clause, "federal 
 44.23  foreign tax credit" means the credit allowed under section 27 of 
 44.24  the Internal Revenue Code, and "carryover of subnational foreign 
 44.25  taxes" equals the carryover allowed under section 904(c) of the 
 44.26  Internal Revenue Code minus national level foreign taxes to the 
 44.27  extent they exceed the federal foreign tax credit; and 
 44.28     (12) in each of the five tax years immediately following 
 44.29  the tax year in which an addition is required under subdivision 
 44.30  19a, clause (7), an amount equal to one-fifth of the delayed 
 44.31  depreciation.  For purposes of this clause, "delayed 
 44.32  depreciation" means the amount of the addition made by the 
 44.33  taxpayer under subdivision 19a, clause (7), minus the positive 
 44.34  value of any net operating loss under section 172 of the 
 44.35  Internal Revenue Code generated for the tax year of the 
 44.36  addition.  The resulting delayed depreciation cannot be less 
 45.1   than zero; and 
 45.2      (13) biotechnology and health sciences industry zone income 
 45.3   as provided under section 469.316. 
 45.4      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 45.5   years beginning after December 31, 2003. 
 45.6      Sec. 4.  Minnesota Statutes 2002, section 290.01, 
 45.7   subdivision 29, is amended to read: 
 45.8      Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
 45.9   means:  
 45.10     (1) for individuals, estates, and trusts, the same as 
 45.11  taxable net income; 
 45.12     (2) for corporations, the taxable net income less 
 45.13     (i) the net operating loss deduction under section 290.095; 
 45.14  and 
 45.15     (ii) the dividends received deduction under section 290.21, 
 45.16  subdivision 4; and 
 45.17     (iii) the exemption for operating in a biotechnology and 
 45.18  health sciences industry zone under section 469.317. 
 45.19     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 45.20  years beginning after December 31, 2003. 
 45.21     Sec. 5.  Minnesota Statutes 2002, section 290.06, 
 45.22  subdivision 2c, is amended to read: 
 45.23     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
 45.24  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
 45.25  married individuals filing joint returns and surviving spouses 
 45.26  as defined in section 2(a) of the Internal Revenue Code must be 
 45.27  computed by applying to their taxable net income the following 
 45.28  schedule of rates: 
 45.29     (1) On the first $25,680, 5.35 percent; 
 45.30     (2) On all over $25,680, but not over $102,030, 7.05 
 45.31  percent; 
 45.32     (3) On all over $102,030, 7.85 percent. 
 45.33     Married individuals filing separate returns, estates, and 
 45.34  trusts must compute their income tax by applying the above rates 
 45.35  to their taxable income, except that the income brackets will be 
 45.36  one-half of the above amounts.  
 46.1      (b) The income taxes imposed by this chapter upon unmarried 
 46.2   individuals must be computed by applying to taxable net income 
 46.3   the following schedule of rates: 
 46.4      (1) On the first $17,570, 5.35 percent; 
 46.5      (2) On all over $17,570, but not over $57,710, 7.05 
 46.6   percent; 
 46.7      (3) On all over $57,710, 7.85 percent. 
 46.8      (c) The income taxes imposed by this chapter upon unmarried 
 46.9   individuals qualifying as a head of household as defined in 
 46.10  section 2(b) of the Internal Revenue Code must be computed by 
 46.11  applying to taxable net income the following schedule of rates: 
 46.12     (1) On the first $21,630, 5.35 percent; 
 46.13     (2) On all over $21,630, but not over $86,910, 7.05 
 46.14  percent; 
 46.15     (3) On all over $86,910, 7.85 percent. 
 46.16     (d) In lieu of a tax computed according to the rates set 
 46.17  forth in this subdivision, the tax of any individual taxpayer 
 46.18  whose taxable net income for the taxable year is less than an 
 46.19  amount determined by the commissioner must be computed in 
 46.20  accordance with tables prepared and issued by the commissioner 
 46.21  of revenue based on income brackets of not more than $100.  The 
 46.22  amount of tax for each bracket shall be computed at the rates 
 46.23  set forth in this subdivision, provided that the commissioner 
 46.24  may disregard a fractional part of a dollar unless it amounts to 
 46.25  50 cents or more, in which case it may be increased to $1. 
 46.26     (e) An individual who is not a Minnesota resident for the 
 46.27  entire year must compute the individual's Minnesota income tax 
 46.28  as provided in this subdivision.  After the application of the 
 46.29  nonrefundable credits provided in this chapter, the tax 
 46.30  liability must then be multiplied by a fraction in which:  
 46.31     (1) the numerator is the individual's Minnesota source 
 46.32  federal adjusted gross income as defined in section 62 of the 
 46.33  Internal Revenue Code and increased by the additions required 
 46.34  under section 290.01, subdivision 19a, clauses (1) and (6), and 
 46.35  reduced by the subtraction under section 290.01, subdivision 
 46.36  19b, clause (13), and the Minnesota assignable portion of the 
 47.1   subtraction for United States government interest under section 
 47.2   290.01, subdivision 19b, clause (1), after applying the 
 47.3   allocation and assignability provisions of section 290.081, 
 47.4   clause (a), or 290.17; and 
 47.5      (2) the denominator is the individual's federal adjusted 
 47.6   gross income as defined in section 62 of the Internal Revenue 
 47.7   Code of 1986, increased by the amounts specified in section 
 47.8   290.01, subdivision 19a, clauses (1) and (6), and reduced by the 
 47.9   amounts specified in section 290.01, subdivision 19b, clause 
 47.10  clauses (1) and (13). 
 47.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 47.12  years beginning after December 31, 2003. 
 47.13     Sec. 6.  Minnesota Statutes 2002, section 290.067, 
 47.14  subdivision 1, is amended to read: 
 47.15     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
 47.16  as a credit against the tax due from the taxpayer and a spouse, 
 47.17  if any, under this chapter an amount equal to the dependent care 
 47.18  credit for which the taxpayer is eligible pursuant to the 
 47.19  provisions of section 21 of the Internal Revenue Code subject to 
 47.20  the limitations provided in subdivision 2 except that in 
 47.21  determining whether the child qualified as a dependent, income 
 47.22  received as a Minnesota family investment program grant or 
 47.23  allowance to or on behalf of the child must not be taken into 
 47.24  account in determining whether the child received more than half 
 47.25  of the child's support from the taxpayer, and the provisions of 
 47.26  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
 47.27     (b) If a child who has not attained the age of six years at 
 47.28  the close of the taxable year is cared for at a licensed family 
 47.29  day care home operated by the child's parent, the taxpayer is 
 47.30  deemed to have paid employment-related expenses.  If the child 
 47.31  is 16 months old or younger at the close of the taxable year, 
 47.32  the amount of expenses deemed to have been paid equals the 
 47.33  maximum limit for one qualified individual under section 21(c) 
 47.34  and (d) of the Internal Revenue Code.  If the child is older 
 47.35  than 16 months of age but has not attained the age of six years 
 47.36  at the close of the taxable year, the amount of expenses deemed 
 48.1   to have been paid equals the amount the licensee would charge 
 48.2   for the care of a child of the same age for the same number of 
 48.3   hours of care.  
 48.4      (c) If a married couple: 
 48.5      (1) has a child who has not attained the age of one year at 
 48.6   the close of the taxable year; 
 48.7      (2) files a joint tax return for the taxable year; and 
 48.8      (3) does not participate in a dependent care assistance 
 48.9   program as defined in section 129 of the Internal Revenue Code, 
 48.10  in lieu of the actual employment related expenses paid for that 
 48.11  child under paragraph (a) or the deemed amount under paragraph 
 48.12  (b), the lesser of (i) the combined earned income of the couple 
 48.13  or (ii) the amount of the maximum limit for one qualified 
 48.14  individual under section 21(c) and (d) of the Internal Revenue 
 48.15  Code will be deemed to be the employment related expense paid 
 48.16  for that child.  The earned income limitation of section 21(d) 
 48.17  of the Internal Revenue Code shall not apply to this deemed 
 48.18  amount.  These deemed amounts apply regardless of whether any 
 48.19  employment-related expenses have been paid.  
 48.20     (d) If the taxpayer is not required and does not file a 
 48.21  federal individual income tax return for the tax year, no credit 
 48.22  is allowed for any amount paid to any person unless: 
 48.23     (1) the name, address, and taxpayer identification number 
 48.24  of the person are included on the return claiming the credit; or 
 48.25     (2) if the person is an organization described in section 
 48.26  501(c)(3) of the Internal Revenue Code and exempt from tax under 
 48.27  section 501(a) of the Internal Revenue Code, the name and 
 48.28  address of the person are included on the return claiming the 
 48.29  credit.  
 48.30  In the case of a failure to provide the information required 
 48.31  under the preceding sentence, the preceding sentence does not 
 48.32  apply if it is shown that the taxpayer exercised due diligence 
 48.33  in attempting to provide the information required. 
 48.34     In the case of a nonresident, part-year resident, or a 
 48.35  person who has earned income not subject to tax under this 
 48.36  chapter including earned income excluded pursuant to section 
 49.1   290.01, subdivision 19b, clause (13), the credit determined 
 49.2   under section 21 of the Internal Revenue Code must be allocated 
 49.3   based on the ratio by which the earned income of the claimant 
 49.4   and the claimant's spouse from Minnesota sources bears to the 
 49.5   total earned income of the claimant and the claimant's spouse. 
 49.6      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 49.7   years beginning after December 31, 2003. 
 49.8      Sec. 7.  Minnesota Statutes 2002, section 290.0671, 
 49.9   subdivision 1, is amended to read: 
 49.10     Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
 49.11  allowed a credit against the tax imposed by this chapter equal 
 49.12  to a percentage of earned income.  To receive a credit, a 
 49.13  taxpayer must be eligible for a credit under section 32 of the 
 49.14  Internal Revenue Code.  
 49.15     (b) For individuals with no qualifying children, the credit 
 49.16  equals 1.9125 percent of the first $4,620 of earned income.  The 
 49.17  credit is reduced by 1.9125 percent of earned income or modified 
 49.18  adjusted gross income, whichever is greater, in excess of 
 49.19  $5,770, but in no case is the credit less than zero. 
 49.20     (c) For individuals with one qualifying child, the credit 
 49.21  equals 8.5 percent of the first $6,920 of earned income and 8.5 
 49.22  percent of earned income over $12,080 but less than $13,450.  
 49.23  The credit is reduced by 5.73 percent of earned income or 
 49.24  modified adjusted gross income, whichever is greater, in excess 
 49.25  of $15,080, but in no case is the credit less than zero. 
 49.26     (d) For individuals with two or more qualifying children, 
 49.27  the credit equals ten percent of the first $9,720 of earned 
 49.28  income and 20 percent of earned income over $14,860 but less 
 49.29  than $16,800.  The credit is reduced by 10.3 percent of earned 
 49.30  income or modified adjusted gross income, whichever is greater, 
 49.31  in excess of $17,890, but in no case is the credit less than 
 49.32  zero. 
 49.33     (e) For a nonresident or part-year resident, the credit 
 49.34  must be allocated based on the percentage calculated under 
 49.35  section 290.06, subdivision 2c, paragraph (e). 
 49.36     (f) For a person who was a resident for the entire tax year 
 50.1   and has earned income not subject to tax under this 
 50.2   chapter including income excluded under section 290.01, 
 50.3   subdivision 19b, clause (13), the credit must be allocated based 
 50.4   on the ratio of federal adjusted gross income reduced by the 
 50.5   earned income not subject to tax under this chapter over federal 
 50.6   adjusted gross income. 
 50.7      (g) For tax years beginning after December 31, 2001, and 
 50.8   before December 31, 2004, the $5,770 in paragraph (b) is 
 50.9   increased to $6,770, the $15,080 in paragraph (c) is increased 
 50.10  to $16,080, and the $17,890 in paragraph (d) is increased to 
 50.11  $18,890 for married taxpayers filing joint returns. 
 50.12     (h) For tax years beginning after December 31, 2004, and 
 50.13  before December 31, 2007, the $5,770 in paragraph (b) is 
 50.14  increased to $7,770, the $15,080 in paragraph (c) is increased 
 50.15  to $17,080, and the $17,890 in paragraph (d) is increased to 
 50.16  $19,890 for married taxpayers filing joint returns. 
 50.17     (i) For tax years beginning after December 31, 2007, and 
 50.18  before December 31, 2010, the $5,770 in paragraph (b) is 
 50.19  increased to $8,770, the $15,080 in paragraph (c) is increased 
 50.20  to $18,080 and the $17,890 in paragraph (d) is increased to 
 50.21  $20,890 for married taxpayers filing joint returns. 
 50.22     (j) The commissioner shall construct tables showing the 
 50.23  amount of the credit at various income levels and make them 
 50.24  available to taxpayers.  The tables shall follow the schedule 
 50.25  contained in this subdivision, except that the commissioner may 
 50.26  graduate the transition between income brackets. 
 50.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 50.28  years beginning after December 31, 2003. 
 50.29     Sec. 8.  Minnesota Statutes 2002, section 290.091, 
 50.30  subdivision 2, is amended to read: 
 50.31     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 50.32  this section, the following terms have the meanings given: 
 50.33     (a) "Alternative minimum taxable income" means the sum of 
 50.34  the following for the taxable year: 
 50.35     (1) the taxpayer's federal alternative minimum taxable 
 50.36  income as defined in section 55(b)(2) of the Internal Revenue 
 51.1   Code; 
 51.2      (2) the taxpayer's itemized deductions allowed in computing 
 51.3   federal alternative minimum taxable income, but excluding: 
 51.4      (i) the charitable contribution deduction under section 170 
 51.5   of the Internal Revenue Code to the extent that the deduction 
 51.6   exceeds 1.3 percent of adjusted gross income, as defined in 
 51.7   section 62 of the Internal Revenue Code; 
 51.8      (ii) the medical expense deduction; 
 51.9      (iii) the casualty, theft, and disaster loss deduction; and 
 51.10     (iv) the impairment-related work expenses of a disabled 
 51.11  person; 
 51.12     (3) for depletion allowances computed under section 613A(c) 
 51.13  of the Internal Revenue Code, with respect to each property (as 
 51.14  defined in section 614 of the Internal Revenue Code), to the 
 51.15  extent not included in federal alternative minimum taxable 
 51.16  income, the excess of the deduction for depletion allowable 
 51.17  under section 611 of the Internal Revenue Code for the taxable 
 51.18  year over the adjusted basis of the property at the end of the 
 51.19  taxable year (determined without regard to the depletion 
 51.20  deduction for the taxable year); 
 51.21     (4) to the extent not included in federal alternative 
 51.22  minimum taxable income, the amount of the tax preference for 
 51.23  intangible drilling cost under section 57(a)(2) of the Internal 
 51.24  Revenue Code determined without regard to subparagraph (E); 
 51.25     (5) to the extent not included in federal alternative 
 51.26  minimum taxable income, the amount of interest income as 
 51.27  provided by section 290.01, subdivision 19a, clause (1); and 
 51.28     (6) the amount of addition required by section 290.01, 
 51.29  subdivision 19a, clause (7); 
 51.30     less the sum of the amounts determined under the following: 
 51.31     (1) interest income as defined in section 290.01, 
 51.32  subdivision 19b, clause (1); 
 51.33     (2) an overpayment of state income tax as provided by 
 51.34  section 290.01, subdivision 19b, clause (2), to the extent 
 51.35  included in federal alternative minimum taxable income; 
 51.36     (3) the amount of investment interest paid or accrued 
 52.1   within the taxable year on indebtedness to the extent that the 
 52.2   amount does not exceed net investment income, as defined in 
 52.3   section 163(d)(4) of the Internal Revenue Code.  Interest does 
 52.4   not include amounts deducted in computing federal adjusted gross 
 52.5   income; and 
 52.6      (4) amounts subtracted from federal taxable income as 
 52.7   provided by section 290.01, subdivision 19b, clause clauses (12) 
 52.8   and (13). 
 52.9      In the case of an estate or trust, alternative minimum 
 52.10  taxable income must be computed as provided in section 59(c) of 
 52.11  the Internal Revenue Code. 
 52.12     (b) "Investment interest" means investment interest as 
 52.13  defined in section 163(d)(3) of the Internal Revenue Code. 
 52.14     (c) "Tentative minimum tax" equals 6.4 percent of 
 52.15  alternative minimum taxable income after subtracting the 
 52.16  exemption amount determined under subdivision 3. 
 52.17     (d) "Regular tax" means the tax that would be imposed under 
 52.18  this chapter (without regard to this section and section 
 52.19  290.032), reduced by the sum of the nonrefundable credits 
 52.20  allowed under this chapter.  
 52.21     (e) "Net minimum tax" means the minimum tax imposed by this 
 52.22  section. 
 52.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 52.24  years beginning after December 31, 2003. 
 52.25     Sec. 9.  Minnesota Statutes 2002, section 290.0921, 
 52.26  subdivision 3, is amended to read: 
 52.27     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 52.28  "Alternative minimum taxable income" is Minnesota net income as 
 52.29  defined in section 290.01, subdivision 19, and includes the 
 52.30  adjustments and tax preference items in sections 56, 57, 58, and 
 52.31  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 52.32  corporation files a separate company Minnesota tax return, the 
 52.33  minimum tax must be computed on a separate company basis.  If a 
 52.34  corporation is part of a tax group filing a unitary return, the 
 52.35  minimum tax must be computed on a unitary basis.  The following 
 52.36  adjustments must be made. 
 53.1      (1) For purposes of the depreciation adjustments under 
 53.2   section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 53.3   the basis for depreciable property placed in service in a 
 53.4   taxable year beginning before January 1, 1990, is the adjusted 
 53.5   basis for federal income tax purposes, including any 
 53.6   modification made in a taxable year under section 290.01, 
 53.7   subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 53.8   subdivision 7, paragraph (c). 
 53.9      For taxable years beginning after December 31, 2000, the 
 53.10  amount of any remaining modification made under section 290.01, 
 53.11  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 53.12  subdivision 7, paragraph (c), not previously deducted is a 
 53.13  depreciation allowance in the first taxable year after December 
 53.14  31, 2000. 
 53.15     (2) The portion of the depreciation deduction allowed for 
 53.16  federal income tax purposes under section 168(k) of the Internal 
 53.17  Revenue Code that is required as an addition under section 
 53.18  290.01, subdivision 19c, clause (16), is disallowed in 
 53.19  determining alternative minimum taxable income. 
 53.20     (3) The subtraction for depreciation allowed under section 
 53.21  290.01, subdivision 19d, clause (19), is allowed as a 
 53.22  depreciation deduction in determining alternative minimum 
 53.23  taxable income. 
 53.24     (4) The alternative tax net operating loss deduction under 
 53.25  sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 53.26  not apply. 
 53.27     (5) The special rule for certain dividends under section 
 53.28  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 53.29     (6) The special rule for dividends from section 936 
 53.30  companies under section 56(g)(4)(C)(iii) does not apply. 
 53.31     (7) The tax preference for depletion under section 57(a)(1) 
 53.32  of the Internal Revenue Code does not apply. 
 53.33     (8) The tax preference for intangible drilling costs under 
 53.34  section 57(a)(2) of the Internal Revenue Code must be calculated 
 53.35  without regard to subparagraph (E) and the subtraction under 
 53.36  section 290.01, subdivision 19d, clause (4). 
 54.1      (9) The tax preference for tax exempt interest under 
 54.2   section 57(a)(5) of the Internal Revenue Code does not apply.  
 54.3      (10) The tax preference for charitable contributions of 
 54.4   appreciated property under section 57(a)(6) of the Internal 
 54.5   Revenue Code does not apply. 
 54.6      (11) For purposes of calculating the tax preference for 
 54.7   accelerated depreciation or amortization on certain property 
 54.8   placed in service before January 1, 1987, under section 57(a)(7) 
 54.9   of the Internal Revenue Code, the deduction allowable for the 
 54.10  taxable year is the deduction allowed under section 290.01, 
 54.11  subdivision 19e. 
 54.12     For taxable years beginning after December 31, 2000, the 
 54.13  amount of any remaining modification made under section 290.01, 
 54.14  subdivision 19e, not previously deducted is a depreciation or 
 54.15  amortization allowance in the first taxable year after December 
 54.16  31, 2004. 
 54.17     (12) For purposes of calculating the adjustment for 
 54.18  adjusted current earnings in section 56(g) of the Internal 
 54.19  Revenue Code, the term "alternative minimum taxable income" as 
 54.20  it is used in section 56(g) of the Internal Revenue Code, means 
 54.21  alternative minimum taxable income as defined in this 
 54.22  subdivision, determined without regard to the adjustment for 
 54.23  adjusted current earnings in section 56(g) of the Internal 
 54.24  Revenue Code. 
 54.25     (13) For purposes of determining the amount of adjusted 
 54.26  current earnings under section 56(g)(3) of the Internal Revenue 
 54.27  Code, no adjustment shall be made under section 56(g)(4) of the 
 54.28  Internal Revenue Code with respect to (i) the amount of foreign 
 54.29  dividend gross-up subtracted as provided in section 290.01, 
 54.30  subdivision 19d, clause (1), (ii) the amount of refunds of 
 54.31  income, excise, or franchise taxes subtracted as provided in 
 54.32  section 290.01, subdivision 19d, clause (10), or (iii) the 
 54.33  amount of royalties, fees or other like income subtracted as 
 54.34  provided in section 290.01, subdivision 19d, clause (11). 
 54.35     (14) Alternative minimum taxable income excludes the income 
 54.36  from operating in a biotechnology and health sciences industry 
 55.1   zone as provided under section 469.317. 
 55.2      Items of tax preference must not be reduced below zero as a 
 55.3   result of the modifications in this subdivision. 
 55.4      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 55.5   years beginning after December 31, 2003. 
 55.6      Sec. 10.  Minnesota Statutes 2002, section 290.0922, 
 55.7   subdivision 3, is amended to read: 
 55.8      Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 55.9   means the total sales apportioned to Minnesota pursuant to 
 55.10  section 290.191, subdivision 5, the total receipts attributed to 
 55.11  Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 55.12  and/or the total sales or receipts apportioned or attributed to 
 55.13  Minnesota pursuant to any other apportionment formula applicable 
 55.14  to the taxpayer. 
 55.15     (b) "Minnesota property" means total Minnesota tangible 
 55.16  property as provided in section 290.191, subdivisions 9 to 11, 
 55.17  and any other tangible property located in Minnesota, but does 
 55.18  not include property of a qualified business located in a 
 55.19  biotechnology and health sciences industry zone designated under 
 55.20  section 469.314.  Intangible property shall not be included in 
 55.21  Minnesota property for purposes of this section.  Taxpayers who 
 55.22  do not utilize tangible property to apportion income shall 
 55.23  nevertheless include Minnesota property for purposes of this 
 55.24  section.  On a return for a short taxable year, the amount of 
 55.25  Minnesota property owned, as determined under section 290.191, 
 55.26  shall be included in Minnesota property based on a fraction in 
 55.27  which the numerator is the number of days in the short taxable 
 55.28  year and the denominator is 365.  
 55.29     (c) "Minnesota payrolls"  means total Minnesota payrolls as 
 55.30  provided in section 290.191, subdivision 12, but does not 
 55.31  include biotechnology and health sciences industry zone payrolls 
 55.32  under section 469.310, subdivision 8.  Taxpayers who do not 
 55.33  utilize payrolls to apportion income shall nevertheless include 
 55.34  Minnesota payrolls for purposes of this section. 
 55.35     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 55.36  years beginning after December 31, 2003. 
 56.1      Sec. 11.  Minnesota Statutes 2002, section 297A.68, is 
 56.2   amended by adding a subdivision to read: 
 56.3      Subd. 37.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
 56.4   ZONE.] (a) Purchases of tangible personal property or taxable 
 56.5   services by a qualified business, as defined in section 469.310, 
 56.6   are exempt if the property or services are primarily used or 
 56.7   consumed in a biotechnology and health sciences industry zone 
 56.8   designated under section 469.314. 
 56.9      (b) Purchase and use of construction materials and supplies 
 56.10  for construction of improvements to real property in a 
 56.11  biotechnology and health sciences industry zone are exempt if 
 56.12  the improvements after completion of construction are to be used 
 56.13  in the conduct of a qualified business, as defined in section 
 56.14  469.310.  This exemption applies regardless of whether the 
 56.15  purchases are made by the business or a contractor. 
 56.16     (c) The exemptions under this subdivision apply to a local 
 56.17  sales and use tax regardless of whether the local sales tax is 
 56.18  imposed on the sales taxable as defined under this chapter. 
 56.19     (d) This subdivision applies to sales made during the 
 56.20  duration of the zone. 
 56.21     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 56.22  on or after the day following final enactment. 
 56.23     Sec. 12.  Minnesota Statutes 2002, section 297B.03, is 
 56.24  amended to read: 
 56.25     297B.03 [EXEMPTIONS.] 
 56.26     There is specifically exempted from the provisions of this 
 56.27  chapter and from computation of the amount of tax imposed by it 
 56.28  the following:  
 56.29     (1) purchase or use, including use under a lease purchase 
 56.30  agreement or installment sales contract made pursuant to section 
 56.31  465.71, of any motor vehicle by the United States and its 
 56.32  agencies and instrumentalities and by any person described in 
 56.33  and subject to the conditions provided in section 297A.67, 
 56.34  subdivision 11; 
 56.35     (2) purchase or use of any motor vehicle by any person who 
 56.36  was a resident of another state or country at the time of the 
 57.1   purchase and who subsequently becomes a resident of Minnesota, 
 57.2   provided the purchase occurred more than 60 days prior to the 
 57.3   date such person began residing in the state of Minnesota and 
 57.4   the motor vehicle was registered in the person's name in the 
 57.5   other state or country; 
 57.6      (3) purchase or use of any motor vehicle by any person 
 57.7   making a valid election to be taxed under the provisions of 
 57.8   section 297A.90; 
 57.9      (4) purchase or use of any motor vehicle previously 
 57.10  registered in the state of Minnesota when such transfer 
 57.11  constitutes a transfer within the meaning of section 118, 331, 
 57.12  332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 57.13  1563(a) of the Internal Revenue Code of 1986, as amended through 
 57.14  December 31, 1999; 
 57.15     (5) purchase or use of any vehicle owned by a resident of 
 57.16  another state and leased to a Minnesota based private or for 
 57.17  hire carrier for regular use in the transportation of persons or 
 57.18  property in interstate commerce provided the vehicle is titled 
 57.19  in the state of the owner or secured party, and that state does 
 57.20  not impose a sales tax or sales tax on motor vehicles used in 
 57.21  interstate commerce; 
 57.22     (6) purchase or use of a motor vehicle by a private 
 57.23  nonprofit or public educational institution for use as an 
 57.24  instructional aid in automotive training programs operated by 
 57.25  the institution.  "Automotive training programs" includes motor 
 57.26  vehicle body and mechanical repair courses but does not include 
 57.27  driver education programs; 
 57.28     (7) purchase of a motor vehicle for use as an ambulance by 
 57.29  an ambulance service licensed under section 144E.10; 
 57.30     (8) purchase of a motor vehicle by or for a public library, 
 57.31  as defined in section 134.001, subdivision 2, as a bookmobile or 
 57.32  library delivery vehicle; 
 57.33     (9) purchase of a ready-mixed concrete truck; 
 57.34     (10) purchase or use of a motor vehicle by a town for use 
 57.35  exclusively for road maintenance, including snowplows and dump 
 57.36  trucks, but not including automobiles, vans, or pickup trucks; 
 58.1      (11) purchase or use of a motor vehicle by a corporation, 
 58.2   society, association, foundation, or institution organized and 
 58.3   operated exclusively for charitable, religious, or educational 
 58.4   purposes, except a public school, university, or library, but 
 58.5   only if the vehicle is: 
 58.6      (i) a truck, as defined in section 168.011, a bus, as 
 58.7   defined in section 168.011, or a passenger automobile, as 
 58.8   defined in section 168.011, if the automobile is designed and 
 58.9   used for carrying more than nine persons including the driver; 
 58.10  and 
 58.11     (ii) intended to be used primarily to transport tangible 
 58.12  personal property or individuals, other than employees, to whom 
 58.13  the organization provides service in performing its charitable, 
 58.14  religious, or educational purpose; 
 58.15     (12) purchase of a motor vehicle for use by a transit 
 58.16  provider exclusively to provide transit service is exempt if the 
 58.17  transit provider is either (i) receiving financial assistance or 
 58.18  reimbursement under section 174.24 or 473.384, or (ii) operating 
 58.19  under section 174.29, 473.388, or 473.405; 
 58.20     (13) purchase or use of a motor vehicle by a qualified 
 58.21  business, as defined in section 469.310, located in a 
 58.22  biotechnology and health sciences industry zone, if the motor 
 58.23  vehicle is principally garaged in the zone and is primarily used 
 58.24  as part of or in direct support of the person's operations 
 58.25  carried on in the zone.  The exemption under this clause applies 
 58.26  to sales, if the purchase was made and delivery received during 
 58.27  the duration of the zone.  The exemption under this clause also 
 58.28  applies to any local sales and use tax. 
 58.29     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 58.30  after December 31, 2003. 
 58.31     Sec. 13.  [469.310] [DEFINITIONS.] 
 58.32     Subdivision 1.  [SCOPE.] For purposes of sections 469.310 
 58.33  to 469.320, the following terms have the meanings given. 
 58.34     Subd. 2.  [APPLICANT.] "Applicant" means a local government 
 58.35  unit or units applying for designation of an area as a 
 58.36  biotechnology and health sciences industry zone or a joint 
 59.1   powers board, established under section 471.59, acting on behalf 
 59.2   of two or more local government units. 
 59.3      Subd. 3.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
 59.4   FACILITY.] "Biotechnology and health sciences industry facility" 
 59.5   means one or more facilities or operations involved in:  (1) 
 59.6   researching, developing, and/or manufacturing a biotechnology 
 59.7   product, medical device, or service or a biotechnology-related 
 59.8   health sciences product, medical device, or service; or (2) 
 59.9   promoting, supplying, or servicing a facility or operation 
 59.10  involved in clause (1), if the business derives more than 50 
 59.11  percent of its gross receipts from those activities. 
 59.12     Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 59.13  commissioner of trade and economic development. 
 59.14     Subd. 5.  [DEVELOPMENT PLAN.] "Development plan" means a 
 59.15  plan meeting the requirements of section 469.311. 
 59.16     Subd. 6.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 59.17  OR ZONE.] "Biotechnology and health sciences industry zone" or 
 59.18  "zone" means a zone designated by the commissioner under section 
 59.19  469.314. 
 59.20     Subd. 7.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 59.21  PERCENTAGE OR ZONE PERCENTAGE.] "Biotechnology and health 
 59.22  sciences industry zone percentage" or "zone percentage" means 
 59.23  the following fraction reduced to a percentage: 
 59.24     (1) the numerator of the fraction is: 
 59.25     (i) the ratio of the taxpayer's property factor under 
 59.26  section 290.191 located in the zone for the taxable year over 
 59.27  the property factor numerator determined under section 290.191, 
 59.28  plus 
 59.29     (ii) the ratio of the taxpayer's biotechnology and health 
 59.30  sciences industry zone payroll factor under subdivision 8 over 
 59.31  the payroll factor numerator determined under section 290.191; 
 59.32  and 
 59.33     (2) the denominator of the fraction is two. 
 59.34     When calculating the zone percentage for a business that is 
 59.35  part of a unitary business as defined under section 290.17, 
 59.36  subdivision 4, the denominator of the payroll and property 
 60.1   factors is the Minnesota payroll and property of the unitary 
 60.2   business as reported on the combined report under section 
 60.3   290.17, subdivision 4, paragraph (j). 
 60.4      Subd. 8.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 60.5   PAYROLL FACTOR.] "Biotechnology and health sciences industry 
 60.6   zone payroll factor" or "biotechnology and health sciences 
 60.7   industry zone payroll" is that portion of the payroll factor 
 60.8   under section 290.191 that represents: 
 60.9      (1) wages or salaries paid to an individual for services 
 60.10  performed for a qualified business in a biotechnology and health 
 60.11  sciences industry zone; or 
 60.12     (2) wages or salaries paid to individuals working from 
 60.13  offices of a qualified business within a biotechnology and 
 60.14  health sciences industry zone if their employment requires them 
 60.15  to work outside the zone and the work is incidental to the work 
 60.16  performed by the individual within the zone. 
 60.17     Subd. 9.  [LOCAL GOVERNMENT UNIT.] "Local government unit" 
 60.18  means a statutory or home rule charter city, county, town, or 
 60.19  school district. 
 60.20     Subd. 10.  [PERSON.] "Person" includes an individual, 
 60.21  corporation, partnership, limited liability company, 
 60.22  association, or any other entity. 
 60.23     Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
 60.24  means a person carrying on a trade or business at a 
 60.25  biotechnology and health sciences industry facility located 
 60.26  within a biotechnology and health sciences industry zone. 
 60.27     (b) A person that relocates a biotechnology and health 
 60.28  sciences industry facility from outside a biotechnology and 
 60.29  health sciences industry zone into a zone is not a qualified 
 60.30  business, unless the business: 
 60.31     (1)(i) increases full-time employment in the first full 
 60.32  year of operation within the biotechnology and health sciences 
 60.33  industry zone by at least 20 percent measured relative to the 
 60.34  operations that were relocated and maintains the required level 
 60.35  of employment for each year the zone designation applies; or 
 60.36     (ii) makes a capital investment in the property located 
 61.1   within a zone equivalent to ten percent of the gross revenues of 
 61.2   operation that were relocated in the immediately preceding 
 61.3   taxable year; and 
 61.4      (2) enters a binding written agreement with the 
 61.5   commissioner that: 
 61.6      (i) pledges the business will meet the requirements of 
 61.7   clause (1); 
 61.8      (ii) provides for repayment of all tax benefits enumerated 
 61.9   under section 469.315 to the business under the procedures in 
 61.10  section 469.319, if the requirements of clause (1) are not met 
 61.11  for the taxable year or for taxes payable during the year in 
 61.12  which the requirements were not met; and 
 61.13     (iii) contains any other terms the commissioner determines 
 61.14  appropriate. 
 61.15     Subd. 12.  [RELOCATES.] (a) "Relocates" means that the 
 61.16  trade or business: 
 61.17     (1) ceases one or more operations or functions at another 
 61.18  location in Minnesota and begins performing substantially the 
 61.19  same operations or functions at a location in a biotechnology 
 61.20  and health sciences industry zone; or 
 61.21     (2) reduces employment at another location in Minnesota 
 61.22  during a period starting one year before and ending one year 
 61.23  after it begins operations in a biotechnology and health 
 61.24  sciences industry zone and its employees in the biotechnology 
 61.25  and health sciences industry zone are engaged in the same line 
 61.26  of business as the employees at the location where it reduced 
 61.27  employment. 
 61.28     (b) "Relocate" does not include an expansion by a business 
 61.29  that establishes a new facility that does not replace or 
 61.30  supplant an existing operation or employment, in whole or in 
 61.31  part. 
 61.32     (c) "Trade or business" includes any business entity that 
 61.33  is substantially similar in operation or ownership to the 
 61.34  business entity seeking to be a qualified business under this 
 61.35  section. 
 61.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 62.1   following final enactment. 
 62.2      Sec. 14.  [469.311] [DEVELOPMENT PLAN.] 
 62.3      (a) An applicant for designation of a biotechnology and 
 62.4   health sciences industry zone must adopt a written development 
 62.5   plan for the zone before submitting the application to the 
 62.6   commissioner. 
 62.7      (b) The development plan must contain, at least, the 
 62.8   following: 
 62.9      (1) a map of the proposed zone that indicates the 
 62.10  geographic boundaries of the zone, the total area, and present 
 62.11  use and conditions generally of the land and structures within 
 62.12  those boundaries; 
 62.13     (2) evidence of community support and commitment from local 
 62.14  government, local workforce investment boards, school districts, 
 62.15  and other education institutions, business groups, and the 
 62.16  public; 
 62.17     (3) a description of the methods proposed to increase 
 62.18  economic opportunity and expansion, facilitate infrastructure 
 62.19  improvement, reduce the local regulatory burden, and identify 
 62.20  job-training opportunities; 
 62.21     (4) current social, economic, and demographic 
 62.22  characteristics of the proposed zone and anticipated 
 62.23  improvements in education, health, human services, and 
 62.24  employment if the zone is created; 
 62.25     (5) a description of anticipated activity in the zone and 
 62.26  each subzone, including, but not limited to, industrial use and 
 62.27  industrial site reuse; and 
 62.28     (6) any other information required by the commissioner. 
 62.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 62.30  following final enactment. 
 62.31     Sec. 15.  [469.312] [BIOTECHNOLOGY AND HEALTH SCIENCES 
 62.32  INDUSTRY ZONE; LIMITATIONS.] 
 62.33     Subdivision 1.  [MAXIMUM SIZE.] A biotechnology and health 
 62.34  sciences industry zone may not exceed 5,000 acres.  
 62.35     Subd. 2.  [SUBZONES.] The area of a biotechnology and 
 62.36  health sciences industry zone may consist of one or more 
 63.1   noncontiguous areas or subzones. 
 63.2      Subd. 3.  [DURATION LIMIT.] The maximum duration of a zone 
 63.3   is 12 years.  The applicant may request a shorter duration.  The 
 63.4   commissioner may specify a shorter duration, regardless of the 
 63.5   requested duration. 
 63.6      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 63.7   following final enactment. 
 63.8      Sec. 16.  [469.313] [APPLICATION FOR DESIGNATION.] 
 63.9      Subdivision 1.  [WHO MAY APPLY.] One or more local 
 63.10  government units, or a joint powers board under section 471.59, 
 63.11  acting on behalf of two or more units, may apply for designation 
 63.12  of an area as a biotechnology and health sciences industry 
 63.13  zone.  All or part of the area proposed for designation as a 
 63.14  zone must be located within the boundaries of each of the 
 63.15  governmental units.  A local government unit may not submit or 
 63.16  have submitted on its behalf more than one application for 
 63.17  designation of a biotechnology and health sciences industry zone.
 63.18     Subd. 2.  [APPLICATION CONTENT.] The application must 
 63.19  include: 
 63.20     (1) a development plan meeting the requirements of section 
 63.21  469.311; 
 63.22     (2) the proposed duration of the zone, not to exceed 12 
 63.23  years; 
 63.24     (3) a resolution or ordinance adopted by each of the cities 
 63.25  or towns and the counties in which the zone is located, agreeing 
 63.26  to provide all of the local tax exemptions provided under 
 63.27  section 469.315; and 
 63.28     (4) supporting evidence to allow the commissioner to 
 63.29  evaluate the application under the criteria in section 469.314. 
 63.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 63.31  following final enactment. 
 63.32     Sec. 17.  [469.314] [DESIGNATION OF BIOTECHNOLOGY AND 
 63.33  HEALTH SCIENCES INDUSTRY ZONE.] 
 63.34     Subdivision 1.  [COMMISSIONER TO DESIGNATE.] (a) The 
 63.35  commissioner, in consultation with the commissioner of revenue, 
 63.36  shall designate not more than one biotechnology and health 
 64.1   sciences industry zone.  Priority must be given to applicants 
 64.2   with a development plan that links a higher education/research 
 64.3   institution with a biotechnology and health sciences industry 
 64.4   facility. 
 64.5      (b) The commissioner may, upon designation of a zone, 
 64.6   modify the development plan, including the boundaries of the 
 64.7   zone or subzones, if in the commissioner's opinion a modified 
 64.8   plan would better meet the objectives of the biotechnology and 
 64.9   health sciences industry zone program.  The commissioner shall 
 64.10  notify the applicant of the modification and provide a statement 
 64.11  of the reasons for the modifications. 
 64.12     Subd. 2.  [NEED INDICATORS.] (a) In evaluating applications 
 64.13  to determine the need for designation of a biotechnology and 
 64.14  health sciences industry zone, the commissioner shall consider 
 64.15  the following factors as indicators of need: 
 64.16     (1) the extent to which land in proximity to a significant 
 64.17  scientific research institution could be developed as a higher 
 64.18  and better use for biotechnology and health sciences industry 
 64.19  facilities; 
 64.20     (2) the amount of property in or near the zone that is 
 64.21  deteriorated or underutilized; and 
 64.22     (3) the extent to which property in the area would remain 
 64.23  underdeveloped or nonperforming due to physical characteristics. 
 64.24     (b) The commissioner may require applicants to provide data 
 64.25  to demonstrate how the area meets one or more of the indicators 
 64.26  of need. 
 64.27     Subd. 3.  [SUCCESS INDICATORS.] In determining the 
 64.28  likelihood of success of a proposed zone, the commissioner shall 
 64.29  consider: 
 64.30     (1) applicants that show a viable link between a higher 
 64.31  education/research institution, the biotechnology and/or medical 
 64.32  devices business sectors, and one or more units of local 
 64.33  government with a development plan; 
 64.34     (2) the extent to which the area has substantial real 
 64.35  property with adequate infrastructure and energy to support new 
 64.36  or expanded development; 
 65.1      (3) the strength and viability of the proposed development 
 65.2   goals, objectives, and strategies in the development plan; 
 65.3      (4) whether the development plan is creative and innovative 
 65.4   in comparison to other applications; 
 65.5      (5) local public and private commitment to development of a 
 65.6   biotechnology and health sciences industry facility or 
 65.7   facilities in the proposed zone and the potential cooperation of 
 65.8   surrounding communities; 
 65.9      (6) existing resources available to the proposed zone; 
 65.10     (7) how the designation of the zone would relate to other 
 65.11  economic and community development projects and to regional 
 65.12  initiatives or programs; 
 65.13     (8) how the regulatory burden will be eased for 
 65.14  biotechnology and health sciences industry facilities located in 
 65.15  the proposed zone; 
 65.16     (9) proposals to establish and link job creation and job 
 65.17  training in the biotechnology and health sciences industry with 
 65.18  research/educational institutions; and 
 65.19     (10) the extent to which the development is directed at 
 65.20  encouraging, and that designation of the zone is likely to 
 65.21  result in, the creation of high-paying jobs. 
 65.22     Subd. 4.  [DESIGNATION SCHEDULE.] (a) The schedule in 
 65.23  paragraphs (b) to (e) applies to the designation of the 
 65.24  biotechnology and health sciences industry zone. 
 65.25     (b) The commissioner shall publish the form for 
 65.26  applications and any procedural, form, or content requirements 
 65.27  for applications by no later than August 1, 2003.  The 
 65.28  commissioner may publish these requirements on the Internet, in 
 65.29  the State Register, or by any other means the commissioner 
 65.30  determines appropriate to disseminate the information to 
 65.31  potential applicants for designation. 
 65.32     (c) Applications must be submitted by October 15, 2003. 
 65.33     (d) The commissioner shall designate the zones by no later 
 65.34  than December 31, 2003. 
 65.35     (e) The designation of the zones takes effect January 1, 
 65.36  2004. 
 66.1      Subd. 5.  [RULEMAKING EXEMPTION.] The commissioner's 
 66.2   actions in establishing procedures, requirements, and making 
 66.3   determinations to administer sections 469.310 to 469.320 are not 
 66.4   a rule for purposes of chapter 14 and are not subject to the 
 66.5   Administrative Procedure Act contained in chapter 14, and not 
 66.6   subject to section 14.386. 
 66.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 66.8   following final enactment. 
 66.9      Sec. 18.  [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 
 66.10     Qualified businesses that operate in a biotechnology and 
 66.11  health sciences industry zone, individuals who invest in a 
 66.12  qualified business that operates in a biotechnology and health 
 66.13  sciences industry zone, and property of a qualified business 
 66.14  located in a biotechnology and health sciences industry zone 
 66.15  qualify for: 
 66.16     (1) exemption from individual income taxes as provided 
 66.17  under section 469.316; 
 66.18     (2) exemption from corporate franchise taxes as provided 
 66.19  under section 469.317; 
 66.20     (3) exemption from the state sales and use tax and any 
 66.21  local sales and use taxes on qualifying purchases as provided in 
 66.22  section 297A.68, subdivision 37; 
 66.23     (4) exemption from the state sales tax on motor vehicles 
 66.24  and any local sales tax on motor vehicles as provided under 
 66.25  section 297B.03; and 
 66.26     (5) exemption from the property tax as provided in section 
 66.27  272.02, subdivision 56. 
 66.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 66.29  following final enactment. 
 66.30     Sec. 19.  [469.316] [INDIVIDUAL INCOME TAX EXEMPTION.] 
 66.31     Subdivision 1.  [APPLICATION.] An individual operating a 
 66.32  qualified business in a biotechnology and health sciences 
 66.33  industry zone, and an individual making a qualifying investment 
 66.34  in a qualified business operating in a biotechnology and health 
 66.35  sciences industry zone qualifies for the exemptions from taxes 
 66.36  imposed under chapter 290, as provided in this section.  The 
 67.1   exemptions provided under this section apply only to the extent 
 67.2   that the income otherwise would be taxable under chapter 290.  
 67.3   Subtractions under this section from federal taxable income, 
 67.4   alternative minimum taxable income, or any other base subject to 
 67.5   tax are limited to the amount that otherwise would be included 
 67.6   in the tax base absent the exemption under this section. 
 67.7      Subd. 2.  [RENTS.] An individual is exempt from the taxes 
 67.8   imposed under chapter 290 on net rents derived from the rental 
 67.9   of real or tangible personal property located in a zone to a 
 67.10  qualified business for a taxable year in which the zone was 
 67.11  designated a biotechnology and health sciences industry zone.  
 67.12  If tangible personal property was used both within and outside 
 67.13  of the zone, the exemption amount for the net rental income must 
 67.14  be multiplied by a fraction, the numerator of which is the 
 67.15  number of days the property was used in the zone and the 
 67.16  denominator of which is the total days. 
 67.17     Subd. 3.  [BUSINESS INCOME.] An individual is exempt from 
 67.18  the taxes imposed under chapter 290 on net income from the 
 67.19  operation of a qualified business in a biotechnology and health 
 67.20  sciences industry zone.  If the trade or business is carried on 
 67.21  within and without the zone and the individual is not a resident 
 67.22  of Minnesota, the exemption must be apportioned based on the 
 67.23  zone percentage for the taxable year.  If the trade or business 
 67.24  is carried on within and without the zone and the individual is 
 67.25  a resident of Minnesota, the exemption must be apportioned based 
 67.26  on the zone percentage for the taxable year, except the ratios 
 67.27  under section 469.310, subdivision 7, clause (1), items (i) and 
 67.28  (ii), must use the denominators of the property and payroll 
 67.29  factors determined under section 290.191.  No subtraction is 
 67.30  allowed under this section in excess of 20 percent of the sum of 
 67.31  the biotechnology and health sciences industry zone payroll and 
 67.32  the adjusted basis of the property at the time that the property 
 67.33  is first used in the biotechnology and health sciences industry 
 67.34  zone by the business. 
 67.35     Subd. 4.  [CAPITAL GAINS.] (a) An individual is exempt from 
 67.36  the taxes imposed under chapter 290 on: 
 68.1      (1) net gain derived on a sale or exchange of real property 
 68.2   located in the zone to or with a qualified business.  If the 
 68.3   property was held by the individual during a period when the 
 68.4   zone was not designated, the gain must be prorated based on the 
 68.5   percentage of time, measured in calendar days, that the real 
 68.6   property was held by the individual during the period the zone 
 68.7   designation was in effect to the total period of time the real 
 68.8   property was held by the individual; 
 68.9      (2) net gain derived on a sale or exchange of tangible 
 68.10  personal property used by a qualified business in the zone.  If 
 68.11  the property was held by the individual during a period when the 
 68.12  zone was not designated, the gain must be prorated based on the 
 68.13  percentage of time, measured in calendar days, that the property 
 68.14  was held by the individual during the period the zone 
 68.15  designation was in effect to the total period of time the 
 68.16  property was held by the individual.  If the tangible personal 
 68.17  property was used outside of the zone during the period of the 
 68.18  zone's designation, the exemption must be multiplied by a 
 68.19  fraction, the numerator of which is the number of days the 
 68.20  property was used in the zone during the time of the designation 
 68.21  and the denominator of which is the total days the property was 
 68.22  held during the time of the designation; and 
 68.23     (3) net gain derived on a sale of an ownership interest in 
 68.24  a qualified business operating in the biotechnology and health 
 68.25  sciences industry zone, meeting the requirements of paragraph 
 68.26  (b).  The exemption on the gain must be multiplied by the zone 
 68.27  percentage of the business for the taxable year prior to the 
 68.28  sale. 
 68.29     (b) A qualified business meets the requirements of 
 68.30  paragraph (a), clause (3), if it is a corporation, an S 
 68.31  corporation, or a partnership, and for the taxable year its 
 68.32  biotechnology and health sciences industry zone percentage 
 68.33  exceeds 25 percent.  For purposes of paragraph (a), clause (3), 
 68.34  the zone percentage must be calculated by modifying the ratios 
 68.35  under section 469.310, subdivision 7, clause (1), items (i) and 
 68.36  (ii), to use the denominators of the property and payroll 
 69.1   factors determined under section 290.191.  Upon the request of 
 69.2   an individual holding an ownership interest in the entity, the 
 69.3   entity must certify to the owner, in writing, the biotechnology 
 69.4   and health sciences industry zone percentage needed to determine 
 69.5   the exemption. 
 69.6      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 69.7   years beginning after December 31, 2003. 
 69.8      Sec. 20.  [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 69.9      (a) A qualified business is exempt from taxation under 
 69.10  section 290.02, the alternative minimum tax under section 
 69.11  290.0921, and the minimum fee under section 290.0922, on the 
 69.12  portion of its income attributable to operations of a qualified 
 69.13  business within the biotechnology and health sciences industry 
 69.14  zone.  This exemption is determined as follows: 
 69.15     (1) for purposes of the tax imposed under section 290.02, 
 69.16  by multiplying its taxable net income by its zone percentage and 
 69.17  subtracting the result in determining taxable income; 
 69.18     (2) for purposes of the alternative minimum tax under 
 69.19  section 290.0921, by multiplying its alternative minimum taxable 
 69.20  income by its zone percentage and reducing alternative minimum 
 69.21  taxable income by this amount; and 
 69.22     (3) for purposes of the minimum fee under section 290.0922, 
 69.23  by excluding property and payroll in the zone from the 
 69.24  computations of the fee. 
 69.25     (b) No subtraction is allowed under this section in excess 
 69.26  of 20 percent of the sum of the corporation's biotechnology and 
 69.27  health sciences industry zone payroll and the adjusted basis of 
 69.28  the property at the time that the property is first used in the 
 69.29  biotechnology and health sciences industry zone by the 
 69.30  corporation. 
 69.31     (c) This section applies only to taxable years beginning 
 69.32  during the duration of the zone. 
 69.33     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 69.34  years beginning after December 31, 2003. 
 69.35     Sec. 21.  [469.319] [REPAYMENT OF TAX BENEFITS.] 
 69.36     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
 70.1   repay the amount of the tax reduction received during the two 
 70.2   years immediately before it ceased to operate in the zone, if 
 70.3   the business: 
 70.4      (1) received tax reductions authorized by section 469.315; 
 70.5   and 
 70.6      (2)(i) did not meet the goals specified in an agreement 
 70.7   entered into with the applicant that states any obligation the 
 70.8   qualified business must fulfill in order to be eligible for tax 
 70.9   benefits.  The commissioner may extend for up to one year the 
 70.10  period for meeting any goals provided in an agreement.  The 
 70.11  applicant may extend the period for meeting other goals by 
 70.12  documenting in writing the reason for the extension and 
 70.13  attaching a copy of the document to its next annual report to 
 70.14  the commissioner; or 
 70.15     (ii) ceased to operate its facility located within the 
 70.16  biotechnology and health sciences industry zone or otherwise 
 70.17  ceases to be or is not a qualified business. 
 70.18     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 70.19  the following terms have the meanings given. 
 70.20     (b) "Business" means any person who received tax benefits 
 70.21  enumerated in section 469.315. 
 70.22     (c) "Commissioner" means the commissioner of revenue. 
 70.23     Subd. 3.  [DISPOSITION OR REPAYMENT.] The repayment must be 
 70.24  paid to the state to the extent it represents a state tax 
 70.25  reduction and to the county to the extent it represents a 
 70.26  property tax reduction.  Any amount repaid to the state must be 
 70.27  deposited in the general fund.  Any amount repaid to the county 
 70.28  for the property tax exemption must be distributed to the local 
 70.29  governments with authority to levy taxes in the zone in the same 
 70.30  manner provided for distribution of payment of delinquent 
 70.31  property taxes.  Any repayment of local sales taxes must be 
 70.32  repaid to the city or county imposing the local sales tax. 
 70.33     Subd. 4.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 70.34  taxes imposed under chapter 290 or 297A or local taxes collected 
 70.35  pursuant to section 297A.99, a business must file an amended 
 70.36  return with the commissioner of revenue and pay any taxes 
 71.1   required to be repaid within 30 days after ceasing to do 
 71.2   business in the zone.  The amount required to be repaid is 
 71.3   determined by calculating the tax for the period or periods for 
 71.4   which repayment is required without regard to the exemptions and 
 71.5   credits allowed under section 469.315. 
 71.6      (b) For the repayment of taxes imposed under chapter 297B, 
 71.7   a business must pay any taxes required to be repaid to the motor 
 71.8   vehicle registrar, as agent for the commissioner of revenue, 
 71.9   within 30 days after ceasing to do business in the zone. 
 71.10     (c) For the repayment of property taxes, the county auditor 
 71.11  shall prepare a tax statement for the business, applying the 
 71.12  applicable tax extension rates for each payable year and provide 
 71.13  a copy to the business.  The business must pay the taxes to the 
 71.14  county treasurer within 30 days after receipt of the tax 
 71.15  statement.  The taxpayer may appeal the valuation and 
 71.16  determination of the property tax to the tax court within 30 
 71.17  days after receipt of the tax statement. 
 71.18     (d) The provisions of chapters 270 and 289A relating to the 
 71.19  commissioner's authority to audit, assess, and collect the tax 
 71.20  and to hear appeals are applicable to the repayment required 
 71.21  under paragraphs (a) and (b).  The commissioner may impose civil 
 71.22  penalties as provided in chapter 289A, and the additional tax 
 71.23  and penalties are subject to interest at the rate provided in 
 71.24  section 270.75, from 30 days after ceasing to do business in the 
 71.25  biotechnology and health sciences industry zone until the date 
 71.26  the tax is paid. 
 71.27     (e) If a property tax is not repaid under paragraph (c), 
 71.28  the county treasurer shall add the amount required to be repaid 
 71.29  to the property taxes assessed against the property for payment 
 71.30  in the year following the year in which the treasurer discovers 
 71.31  that the business ceased to operate in the biotechnology and 
 71.32  health sciences industry zone. 
 71.33     (f) For determining the tax required to be repaid, a tax 
 71.34  reduction is deemed to have been received on the date that the 
 71.35  tax would have been due if the taxpayer had not been entitled to 
 71.36  the exemption. 
 72.1      (g) The commissioner may assess the repayment of taxes 
 72.2   under paragraph (d) any time within two years after the business 
 72.3   ceases to operate in the biotechnology and health sciences 
 72.4   industry zone, or within any period of limitations for the 
 72.5   assessment of tax under section 289A.38, whichever period is 
 72.6   later. 
 72.7      Subd. 5.  [WAIVER AUTHORITY.] The commissioner may waive 
 72.8   all or part of a repayment, if the commissioner, in consultation 
 72.9   with the commissioner of trade and economic development and 
 72.10  appropriate officials from the local government units in which 
 72.11  the business is located, determines that requiring repayment of 
 72.12  the tax is not in the best interest of the state or the local 
 72.13  government units and the business ceased operating as a result 
 72.14  of circumstances beyond its control including, but not limited 
 72.15  to: 
 72.16     (1) a natural disaster; 
 72.17     (2) unforeseen industry trends; or 
 72.18     (3) loss of a major supplier or customer. 
 72.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 72.20  following final enactment. 
 72.21     Sec. 22.  [469.320] [ZONE PERFORMANCE; REMEDIES.] 
 72.22     Subdivision 1.  [REPORTING REQUIREMENT.] An applicant 
 72.23  receiving designation of a biotechnology and health sciences 
 72.24  industry zone under section 469.314 must annually report to the 
 72.25  commissioner on its progress in meeting the zone performance 
 72.26  goals under the development plan for the zone. 
 72.27     Subd. 2.  [PROCEDURES.] For reports required by subdivision 
 72.28  1, the commissioner may prescribe: 
 72.29     (1) the required time or times by which the reports must be 
 72.30  filed; 
 72.31     (2) the form of the report; and 
 72.32     (3) the information required to be included in the report. 
 72.33     Subd. 3.  [REMEDIES.] If the commissioner determines, based 
 72.34  on a report filed under subdivision 1 or other available 
 72.35  information, that a zone or subzone is failing to meet its 
 72.36  performance goals, the commissioner may take any actions the 
 73.1   commissioner determines appropriate, including modification of 
 73.2   the boundaries of the zone or a subzone or termination of the 
 73.3   zone or a subzone.  Before taking any action, the commissioner 
 73.4   shall consult with the applicant and the affected local 
 73.5   government units, including notifying them of the proposed 
 73.6   actions to be taken.  The commissioner shall publish any order 
 73.7   modifying a zone in the State Register and on the Internet.  The 
 73.8   applicant may appeal the commissioner's order under the 
 73.9   contested case procedures of chapter 14. 
 73.10     Subd. 4.  [EXISTING BUSINESSES.] (a) An action to remove 
 73.11  area from a zone or to terminate a zone under this section does 
 73.12  not apply to: 
 73.13     (1) the property tax on improvements constructed before the 
 73.14  first January 2 following publication of the commissioner's 
 73.15  order; 
 73.16     (2) sales tax on purchases made before the first day of the 
 73.17  next calendar month beginning at least 30 days after publication 
 73.18  of the commissioner's order; and 
 73.19     (3) individual income tax or corporate franchise tax 
 73.20  attributable to a facility that was in operation before the 
 73.21  publication of the commissioner's order. 
 73.22     (b) The tax exemptions specified in paragraph (a) terminate 
 73.23  on the date on which the zone expires under the original 
 73.24  designation. 
 73.25                             ARTICLE 3 
 73.26                INCOME, FRANCHISE, AND ESTATE TAXES 
 73.27     Section 1.  Minnesota Statutes 2002, section 10A.31, 
 73.28  subdivision 1, is amended to read: 
 73.29     Subdivision 1.  [DESIGNATION.] An individual resident of 
 73.30  this state who files an income tax return or a renter and 
 73.31  homeowner property tax refund return with the commissioner of 
 73.32  revenue may designate on their original return that $5 be paid 
 73.33  from the general fund of the state $1 to $25, or $1 to $50 if 
 73.34  the return is filed jointly, be added to the tax or deducted 
 73.35  from the refund that would otherwise be payable by or to the 
 73.36  individual and paid into the state elections campaign fund.  If 
 74.1   a husband and wife file a joint return, each spouse may 
 74.2   designate that $5 be paid.  No individual is allowed to 
 74.3   designate $5 more than once in any year.  The taxpayer may 
 74.4   designate that the amount be paid into the account of a 
 74.5   political party or into the general account.  Designations made 
 74.6   under this section are not eligible for refund under section 
 74.7   290.06, subdivision 23. 
 74.8      <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 74.9   designations made on income tax returns filed for tax years 
 74.10  beginning after December 31, 2002, and on property tax refund 
 74.11  returns based on property taxes payable in 2004 or rent 
 74.12  constituting property taxes paid in 2003. 
 74.13     Sec. 2.  Minnesota Statutes 2002, section 10A.31, 
 74.14  subdivision 3, is amended to read: 
 74.15     Subd. 3.  [FORM.] The commissioner of revenue must provide 
 74.16  on the first page of the income tax form and the renter and 
 74.17  homeowner property tax refund return a space for the individual 
 74.18  to indicate a wish to pay $5 $1 to $25 ($10 $50 if filing a 
 74.19  joint return) from the general fund of the state to finance 
 74.20  election campaigns.  The form must also contain language 
 74.21  prepared by the commissioner that permits the individual to 
 74.22  direct the state to pay the $5 (or $10 if filing a joint return) 
 74.23  designation to:  (1) one of the major political parties; (2) any 
 74.24  minor political party that qualifies under subdivision 3a; or 
 74.25  (3) all qualifying candidates as provided by subdivision 7.  The 
 74.26  renter and homeowner property tax refund return must include 
 74.27  instructions that the individual filing the return may designate 
 74.28  $5 on the return only if the individual has not designated $5 on 
 74.29  the income tax return. 
 74.30     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
 74.31  designations made on income tax returns filed for tax years 
 74.32  beginning after December 31, 2002, and on property tax refund 
 74.33  returns based on property taxes payable in 2004 or rent 
 74.34  constituting property taxes paid in 2003. 
 74.35     Sec. 3.  Minnesota Statutes 2002, section 289A.10, 
 74.36  subdivision 1, is amended to read: 
 75.1      Subdivision 1.  [RETURN REQUIRED.] In the case of a 
 75.2   decedent who has an interest in property with a situs in 
 75.3   Minnesota, the personal representative must submit a Minnesota 
 75.4   estate tax return to the commissioner, on a form prescribed by 
 75.5   the commissioner, if (i) the federal gross estate exceeds 
 75.6   $700,000 for estates of decedents dying after December 31, 2001, 
 75.7   and before January 1, 2004 July 1, 2003; $850,000 for estates of 
 75.8   decedents dying after December 31, 2003, and before January 1, 
 75.9   2005; $950,000 for estates of decedents dying after December 31, 
 75.10  2004, and before January 1, 2006; and $1,000,000 for estates of 
 75.11  decedents dying after December 31, 2005 June 30, 2003, or (ii) a 
 75.12  federal estate tax return is required to be filed. 
 75.13     The return must contain a computation of the Minnesota 
 75.14  estate tax due.  The return must be signed by the personal 
 75.15  representative. 
 75.16     <b>[EFFECTIVE DATE.]</b> This section is effective for decedents 
 75.17  dying after December 31, 2002. 
 75.18     Sec. 4.  Minnesota Statutes 2002, section 290.06, 
 75.19  subdivision 23, is amended to read: 
 75.20     Subd. 23.  [REFUND OF CONTRIBUTIONS TO POLITICAL PARTIES 
 75.21  AND CANDIDATES.] (a) A taxpayer may claim a refund equal 
 75.22  to one-half of the amount of the taxpayer's contributions made 
 75.23  in the calendar year to candidates and to a political party.  
 75.24  The maximum refund for an individual must not exceed $50 $25 and 
 75.25  for a married couple, filing jointly, must not exceed $100 $50.  
 75.26  A refund of a contribution is allowed only if the taxpayer files 
 75.27  a form required by the commissioner and attaches to the form a 
 75.28  copy of an official refund receipt form issued by the candidate 
 75.29  or party and signed by the candidate, the treasurer of the 
 75.30  candidate's principal campaign committee, or the chair or 
 75.31  treasurer of the party unit, after the contribution was 
 75.32  received.  The receipt forms must be numbered, and the data on 
 75.33  the receipt that are not public must be made available to the 
 75.34  campaign finance and public disclosure board upon its request.  
 75.35  A claim must be filed with the commissioner no sooner than 
 75.36  January 1 of the calendar year in which the contribution was 
 76.1   made and no later than April 15 of the calendar year following 
 76.2   the calendar year in which the contribution was made.  A 
 76.3   taxpayer may file only one claim per calendar year.  Amounts 
 76.4   paid by the commissioner after June 15 of the calendar year 
 76.5   following the calendar year in which the contribution was made 
 76.6   must include interest at the rate specified in section 270.76. 
 76.7      (b) No refund is allowed under this subdivision for a 
 76.8   contribution to a candidate unless the candidate: 
 76.9      (1) has signed an agreement to limit campaign expenditures 
 76.10  as provided in section 10A.322; 
 76.11     (2) is seeking an office for which voluntary spending 
 76.12  limits are specified in section 10A.25; and 
 76.13     (3) has designated a principal campaign committee.  
 76.14     This subdivision does not limit the campaign expenditures 
 76.15  of a candidate who does not sign an agreement but accepts a 
 76.16  contribution for which the contributor improperly claims a 
 76.17  refund.  
 76.18     (c) For purposes of this subdivision, "political party" 
 76.19  means a major political party as defined in section 200.02, 
 76.20  subdivision 7, or a minor political party qualifying for 
 76.21  inclusion on the income tax or property tax refund form under 
 76.22  section 10A.31, subdivision 3a.  
 76.23     A "major party" or "minor party" includes the aggregate of 
 76.24  that party's organization within each house of the legislature, 
 76.25  the state party organization, and the party organization within 
 76.26  congressional districts, counties, legislative districts, 
 76.27  municipalities, and precincts.  
 76.28     "Candidate" means a candidate as defined in section 10A.01, 
 76.29  subdivision 10, except a candidate for judicial office.  
 76.30     "Contribution" means a gift of money. 
 76.31     (d) The commissioner shall make copies of the form 
 76.32  available to the public and candidates upon request. 
 76.33     (e) The following data collected or maintained by the 
 76.34  commissioner under this subdivision are private:  the identities 
 76.35  of individuals claiming a refund, the identities of candidates 
 76.36  to whom those individuals have made contributions, and the 
 77.1   amount of each contribution.  
 77.2      (f) The commissioner shall report to the campaign finance 
 77.3   and public disclosure board by each August 1 a summary showing 
 77.4   the total number and aggregate amount of political contribution 
 77.5   refunds made on behalf of each candidate and each political 
 77.6   party.  These data are public. 
 77.7      (g) The amount necessary to pay claims for the refund 
 77.8   provided in this section is appropriated from the general fund 
 77.9   to the commissioner of revenue. 
 77.10     (h) For a taxpayer who files a claim for refund via the 
 77.11  Internet or other electronic means, the commissioner may accept 
 77.12  the number on the official receipt as documentation that a 
 77.13  contribution was made rather than the actual receipt as required 
 77.14  by paragraph (a). 
 77.15     <b>[EFFECTIVE DATE.]</b> This section is effective for that 
 77.16  portion of any refund claim based on contributions that are made 
 77.17  on or after the day following final enactment. 
 77.18     Sec. 5.  Minnesota Statutes 2002, section 290.06, 
 77.19  subdivision 24, is amended to read: 
 77.20     Subd. 24.  [CREDIT FOR JOB CREATION.] (a) A corporation 
 77.21  that leases and operates a heavy maintenance base for aircraft 
 77.22  that is owned by the state of Minnesota or one of its political 
 77.23  subdivisions, or an engine repair facility described in section 
 77.24  116R.02, subdivision 6, or both, may take a credit against the 
 77.25  tax due under this chapter.  
 77.26     (b) For the first taxable year when the facility has been 
 77.27  in operation for at least three consecutive months, the credit 
 77.28  is equal to $5,000 multiplied by the number of persons employed 
 77.29  by the corporation on a full-time basis at the facility on the 
 77.30  last day of the taxable year, not to exceed the number of 
 77.31  persons employed by the corporation on a full-time basis at the 
 77.32  facility on the date 90 days before the last day of the taxable 
 77.33  year.  For each of the succeeding four taxable years, the credit 
 77.34  is equal to $5,000 multiplied by the number of persons employed 
 77.35  by the corporation on a full-time basis at the facility on the 
 77.36  last day of the taxable year, not to exceed the number of 
 78.1   persons employed by the corporation on a full-time basis at the 
 78.2   facility on the date 90 days before the last day of the taxable 
 78.3   year.  
 78.4      (c) For the first taxable year in which the credit is 
 78.5   allowed for the facility, the credit must not exceed 80 percent 
 78.6   of the wages paid to or incurred for persons employed by the 
 78.7   taxpayer at the facility during the taxable year.  For the 
 78.8   succeeding four taxable years, the credit must not exceed 20 
 78.9   percent of the wages paid to or incurred for persons employed by 
 78.10  the taxpayer at the facility during the taxable year.  For 
 78.11  purposes of this section, "wages" has the meaning given under 
 78.12  section 3121(b) of the Internal Revenue Code, except the 
 78.13  limitation to the contribution and benefit base does not apply. 
 78.14     (d) If the credit provided under this subdivision exceeds 
 78.15  the tax liability of the corporation for the taxable year, the 
 78.16  excess amount of the credit may be carried over to each of the 
 78.17  ten 20 taxable years succeeding the taxable year.  The entire 
 78.18  amount of the credit must be carried to the earliest taxable 
 78.19  year to which the amount may be carried.  The unused portion of 
 78.20  the credit must be carried to the following taxable year.  No 
 78.21  credit may be carried to a taxable year more than ten 20 years 
 78.22  after the taxable year in which the credit was earned. 
 78.23     (e) if an unused portion of the credit remains at the end 
 78.24  of the carryover period under paragraph (d), the commissioner 
 78.25  shall refund the unused portion to the taxpayer.  The provisions 
 78.26  of this paragraph do not apply if the corporation that earned 
 78.27  the credit under this subdivision or a successor in interest to 
 78.28  the corporation filed for bankruptcy protection. 
 78.29     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 78.30  years beginning after December 31, 2003. 
 78.31     Sec. 6.  Minnesota Statutes 2002, section 290.06, is 
 78.32  amended by adding a subdivision to read: 
 78.33     Subd. 29.  [REGIONAL INVESTMENT CREDIT.] (a) A credit is 
 78.34  allowed against the tax imposed by this chapter for investment 
 78.35  in a qualifying regional angel investment network fund.  The 
 78.36  credit equals 25 percent of the taxpayer's investment made in 
 79.1   the fund for the taxable year, but not to exceed the lesser of: 
 79.2      (1) the liability for tax under this chapter, including the 
 79.3   applicable alternative minimum tax; or 
 79.4      (2) the amount of the certificate under paragraph (c) 
 79.5   provided to the taxpayer by the fund. 
 79.6      (b) For purposes of this subdivision, a regional angel 
 79.7   investment network fund means a pool investment fund that: 
 79.8      (1) is organized as a limited liability company and 
 79.9   consists of members who are accredited investors within the 
 79.10  meaning of Regulation D of the Securities and Exchange 
 79.11  Commission, Code of Federal Regulations, title 17, section 
 79.12  230.501(a) ; and 
 79.13     (2) primarily makes equity investments in emerging and 
 79.14  expanding small businesses as defined by the Small Business 
 79.15  Administration that are located in local communities in 
 79.16  Minnesota outside of the metropolitan area as defined in section 
 79.17  473.121, subdivision 2, and does not make investments in 
 79.18  residential real estate. 
 79.19     (c) Regional angel investment network funds may apply to 
 79.20  the commissioner of trade and economic development for 
 79.21  certification as a qualifying regional angel investment network 
 79.22  fund.  The application must be in the form and made under 
 79.23  procedures specified by the commissioner of trade and economic 
 79.24  development.  The commissioner of trade and economic development 
 79.25  may certify up to ten qualifying funds and provide certificates 
 79.26  entitling investors in the funds to credits under this 
 79.27  subdivision of up to $250,000 for each fund.  The commissioner 
 79.28  of trade and economic development must not issue a total amount 
 79.29  of certificates for all funds of more than $2,500,000. In 
 79.30  awarding certificates under this paragraph, the commissioner of 
 79.31  trade and economic development shall generally award them to 
 79.32  qualified applicants in the order in which the applications are 
 79.33  received, but shall also seek to certify funds that are broadly 
 79.34  dispersed across the entire state outside of the metropolitan 
 79.35  area, as defined in section 473.121, subdivision 2. 
 79.36     (d) The commissioner may require a taxpayer to provide a 
 80.1   copy of the credit certificate under paragraph (c) to verify the 
 80.2   taxpayer's entitlement to a credit under this subdivision. 
 80.3      (e) If the amount of the credit under this subdivision for 
 80.4   any taxable year exceeds the limitation under paragraph (a), 
 80.5   clause (1), the excess is a credit carryover to each of the 15 
 80.6   succeeding taxable years.  The entire amount of the excess 
 80.7   unused credit for the taxable year must be carried first to the 
 80.8   earliest of the taxable years to which the credit may be carried 
 80.9   and then to each successive year to which the credit may be 
 80.10  carried.  The amount of the unused credit which may be added 
 80.11  under this paragraph may not exceed the taxpayer's liability for 
 80.12  tax less the credit for the taxable year. 
 80.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 80.14  following final enactment and for taxable years beginning after 
 80.15  December 31, 2002.  It applies to investments made after the 
 80.16  fund has been certified by the commissioner of trade and 
 80.17  economic development under this section. 
 80.18     Sec. 7.  Minnesota Statutes 2002, section 290.091, 
 80.19  subdivision 2, is amended to read: 
 80.20     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 80.21  this section, the following terms have the meanings given: 
 80.22     (a) "Alternative minimum taxable income" means the sum of 
 80.23  the following for the taxable year: 
 80.24     (1) the taxpayer's federal alternative minimum taxable 
 80.25  income as defined in section 55(b)(2) of the Internal Revenue 
 80.26  Code; 
 80.27     (2) the taxpayer's itemized deductions allowed in computing 
 80.28  federal alternative minimum taxable income, but excluding: 
 80.29     (i) the charitable contribution deduction under section 170 
 80.30  of the Internal Revenue Code to the extent that the deduction 
 80.31  exceeds 1.3 percent of adjusted gross income, as defined in 
 80.32  section 62 of the Internal Revenue Code; 
 80.33     (ii) the medical expense deduction; 
 80.34     (iii) the casualty, theft, and disaster loss deduction; and 
 80.35     (iv) the impairment-related work expenses of a disabled 
 80.36  person; 
 81.1      (3) for depletion allowances computed under section 613A(c) 
 81.2   of the Internal Revenue Code, with respect to each property (as 
 81.3   defined in section 614 of the Internal Revenue Code), to the 
 81.4   extent not included in federal alternative minimum taxable 
 81.5   income, the excess of the deduction for depletion allowable 
 81.6   under section 611 of the Internal Revenue Code for the taxable 
 81.7   year over the adjusted basis of the property at the end of the 
 81.8   taxable year (determined without regard to the depletion 
 81.9   deduction for the taxable year); 
 81.10     (4) to the extent not included in federal alternative 
 81.11  minimum taxable income, the amount of the tax preference for 
 81.12  intangible drilling cost under section 57(a)(2) of the Internal 
 81.13  Revenue Code determined without regard to subparagraph (E); 
 81.14     (5) to the extent not included in federal alternative 
 81.15  minimum taxable income, the amount of interest income as 
 81.16  provided by section 290.01, subdivision 19a, clause (1); and 
 81.17     (6) the amount of addition required by section 290.01, 
 81.18  subdivision 19a, clause (7); 
 81.19     less the sum of the amounts determined under the following: 
 81.20     (1) interest income as defined in section 290.01, 
 81.21  subdivision 19b, clause (1); 
 81.22     (2) an overpayment of state income tax as provided by 
 81.23  section 290.01, subdivision 19b, clause (2), to the extent 
 81.24  included in federal alternative minimum taxable income; 
 81.25     (3) the amount of investment interest paid or accrued 
 81.26  within the taxable year on indebtedness to the extent that the 
 81.27  amount does not exceed net investment income, as defined in 
 81.28  section 163(d)(4) of the Internal Revenue Code.  Interest does 
 81.29  not include amounts deducted in computing federal adjusted gross 
 81.30  income; and 
 81.31     (4) amounts subtracted from federal taxable income as 
 81.32  provided by section 290.01, subdivision 19b, clause (12). 
 81.33     In the case of an estate or trust, alternative minimum 
 81.34  taxable income must be computed as provided in section 59(c) of 
 81.35  the Internal Revenue Code. 
 81.36     (b) "Investment interest" means investment interest as 
 82.1   defined in section 163(d)(3) of the Internal Revenue Code. 
 82.2      (c) "Tentative minimum tax" equals 6.4 percent of 
 82.3   alternative minimum taxable income after subtracting the 
 82.4   exemption amount determined under subdivision 3. 
 82.5      (d) "Regular tax" means the tax that would be imposed under 
 82.6   this chapter (without regard to this section and section 
 82.7   290.032), reduced by the sum of the nonrefundable credits 
 82.8   allowed under this chapter.  
 82.9      (e) "Net minimum tax" means the minimum tax imposed by this 
 82.10  section. 
 82.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 82.12  years beginning after December 31, 2002. 
 82.13     Sec. 8.  Minnesota Statutes 2002, section 291.03, 
 82.14  subdivision 1, is amended to read: 
 82.15     Subdivision 1.  [TAX AMOUNT.] The tax imposed shall be an 
 82.16  amount equal to the proportion of the maximum credit computed 
 82.17  under section 2011 of the Internal Revenue Code for state death 
 82.18  taxes as the Minnesota gross estate bears to the value of the 
 82.19  federal gross estate.  For a resident decedent, the tax shall be 
 82.20  the maximum credit computed under section 2011 of the Internal 
 82.21  Revenue Code reduced by the amount of the death tax paid the 
 82.22  other state and credited against the federal estate tax if this 
 82.23  results in a larger amount of tax than the proportionate amount 
 82.24  of the credit.  The tax determined maximum credit under this 
 82.25  paragraph shall not be greater than the federal estate tax 
 82.26  computed under section 2001 of the Internal Revenue Code after 
 82.27  the allowance of the federal credits allowed under section 2010 
 82.28  of the Internal Revenue Code of 1986, as amended through 
 82.29  December 31, 2000 determined as if the decedent died during 
 82.30  calendar year 2003. 
 82.31     <b>[EFFECTIVE DATE.]</b> This section is effective for decedents 
 82.32  dying after June 30, 2003. 
 82.33     Sec. 9.  [APPROPRIATION.] 
 82.34     (a) $100,000 is appropriated from the general fund to the 
 82.35  commissioner of revenue to make grants to one or more nonprofit 
 82.36  organizations, qualifying under section 501(c)(3) of the 
 83.1   Internal Revenue Code of 1986, to coordinate, facilitate, 
 83.2   encourage, and aid in the provision of taxpayer assistance 
 83.3   services.  This appropriation is available for fiscal years 2004 
 83.4   and 2005 and does not become a part of the base. 
 83.5      (b) "Taxpayer assistance services" mean accounting and tax 
 83.6   preparation services provided by volunteers to low-income and 
 83.7   disadvantaged Minnesota residents to help them file federal and 
 83.8   state income tax returns and Minnesota property tax refund 
 83.9   claims and to provide personal representation before the 
 83.10  department of revenue and Internal Revenue Service. 
 83.11                             ARTICLE 4 
 83.12                        SALES AND USE TAXES 
 83.13     Section 1.  Minnesota Statutes 2002, section 168.27, 
 83.14  subdivision 4a, is amended to read: 
 83.15     Subd. 4a.  [LIMITED USED VEHICLE LICENSE.] A limited used 
 83.16  vehicle license shall be provided to a nonprofit charitable 
 83.17  organization that qualifies for tax exemption under section 
 83.18  501(c)(3) of the Internal Revenue Code whose primary business in 
 83.19  the transfer of vehicles is to raise funds for the corporation, 
 83.20  who acquires vehicles for sale through donation, and who uses a 
 83.21  licensed motor vehicle auctioneer to sell vehicles to retail 
 83.22  customers.  This license does not apply to educational 
 83.23  institutions whose primary purpose is to train students in the 
 83.24  repair, maintenance, and sale of motor vehicles.  A limited used 
 83.25  vehicle license allows the organization to accept assignment of 
 83.26  vehicles without the requirement to transfer title as provided 
 83.27  in section 168A.10 until sold to a retail customer or licensed 
 83.28  motor vehicle dealer.  Limited used vehicle license holders are 
 83.29  not entitled to dealer plates, and shall report all vehicles 
 83.30  held for resale to the department of public safety in a manner 
 83.31  and time prescribed by the department. 
 83.32     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 83.33  after June 30, 2003. 
 83.34     Sec. 2.  Minnesota Statutes 2002, section 168A.03, is 
 83.35  amended to read: 
 83.36     168A.03 [EXEMPT VEHICLES.] 
 84.1      Subdivision 1.  [EXEMPTIONS.] The registrar shall not issue 
 84.2   a certificate of title for: 
 84.3      (1) a vehicle owned by the United States; 
 84.4      (2) a vehicle owned by a manufacturer or dealer and held 
 84.5   for sale, even though incidentally moved on the highway or used 
 84.6   pursuant to section 168.27 or 168.28, or a vehicle used by a 
 84.7   manufacturer solely for testing; 
 84.8      (3) a vehicle owned by a nonresident and not required by 
 84.9   law to be registered in this state; 
 84.10     (4) (3) a vehicle owned by a nonresident and regularly 
 84.11  engaged in the interstate transportation of persons or property 
 84.12  for which a currently effective certificate of title has been 
 84.13  issued in another state; 
 84.14     (5) (4) a vehicle moved solely by animal power; 
 84.15     (6) (5) an implement of husbandry; 
 84.16     (7) (6) special mobile equipment; 
 84.17     (8) (7) a self-propelled wheelchair or invalid tricycle; 
 84.18     (9) (8) a trailer (i) having a gross weight of 4,000 pounds 
 84.19  or less unless a secured party holds an interest in the trailer 
 84.20  or a certificate of title was previously issued by this state or 
 84.21  any other state or (ii) designed primarily for agricultural 
 84.22  purposes except recreational equipment or a manufactured home, 
 84.23  both as defined in section 168.011, subdivisions 8 and 25; 
 84.24     (10) (9) a snowmobile.  
 84.25     Subd. 2.  [DEALERS.] No certificate of title need be 
 84.26  obtained for a vehicle owned by a manufacturer or dealer and 
 84.27  held for sale, even though incidentally moved on the highway or 
 84.28  used pursuant to section 168.27 or 168.28, or a vehicle used by 
 84.29  a manufacturer solely for testing. 
 84.30     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 84.31  after June 30, 2003. 
 84.32     Sec. 3.  Minnesota Statutes 2002, section 289A.18, 
 84.33  subdivision 4, is amended to read: 
 84.34     Subd. 4.  [SALES AND USE TAX RETURNS.] (a) Sales and use 
 84.35  tax returns must be filed on or before the 20th day of the month 
 84.36  following the close of the preceding reporting period, except 
 85.1   that annual use tax returns provided for under section 289A.11, 
 85.2   subdivision 1, must be filed by April 15 following the close of 
 85.3   the calendar year, in the case of individuals.  Annual use tax 
 85.4   returns of businesses, including sole proprietorships, and 
 85.5   annual sales tax returns must be filed by February 5 following 
 85.6   the close of the calendar year.  
 85.7      (b) Returns for the June reporting period filed by 
 85.8   retailers required to remit their June liability under section 
 85.9   289A.20, subdivision 4, paragraph (b), are due on or before 
 85.10  August 20.  
 85.11     (c) If a retailer has an average sales and use tax 
 85.12  liability, including local sales and use taxes administered by 
 85.13  the commissioner, equal to or less than $500 per month in any 
 85.14  quarter of a calendar year, and has substantially complied with 
 85.15  the tax laws during the preceding four calendar quarters, the 
 85.16  retailer may request authorization to file and pay the taxes 
 85.17  quarterly in subsequent calendar quarters.  The authorization 
 85.18  remains in effect during the period in which the retailer's 
 85.19  quarterly returns reflect sales and use tax liabilities of less 
 85.20  than $1,500 and there is continued compliance with state tax 
 85.21  laws. 
 85.22     (d) If a retailer has an average sales and use tax 
 85.23  liability, including local sales and use taxes administered by 
 85.24  the commissioner, equal to or less than $100 per month during a 
 85.25  calendar year, and has substantially complied with the tax laws 
 85.26  during that period, the retailer may request authorization to 
 85.27  file and pay the taxes annually in subsequent years.  The 
 85.28  authorization remains in effect during the period in which the 
 85.29  retailer's annual returns reflect sales and use tax liabilities 
 85.30  of less than $1,200 and there is continued compliance with state 
 85.31  tax laws. 
 85.32     (e) The commissioner may also grant quarterly or annual 
 85.33  filing and payment authorizations to retailers if the 
 85.34  commissioner concludes that the retailers' future tax 
 85.35  liabilities will be less than the monthly totals identified in 
 85.36  paragraphs (c) and (d).  An authorization granted under this 
 86.1   paragraph is subject to the same conditions as an authorization 
 86.2   granted under paragraphs (c) and (d). 
 86.3      (f) A taxpayer who is a materials supplier may report gross 
 86.4   receipts either on: 
 86.5      (1) the cash basis as the consideration is received; or 
 86.6      (2) the accrual basis as sales are made.  
 86.7   As used in this paragraph, "materials supplier" means a person 
 86.8   who provides materials for the improvement of real property; who 
 86.9   is primarily engaged in the sale of lumber and building 
 86.10  materials-related products to owners, contractors, 
 86.11  subcontractors, repairers, or consumers; who is authorized to 
 86.12  file a mechanics lien upon real property and improvements under 
 86.13  chapter 514; and who files with the commissioner an election to 
 86.14  file sales and use tax returns on the basis of this paragraph.  
 86.15     (g) Notwithstanding paragraphs (a) to (f), a seller that is 
 86.16  not a Model 1, 2, or 3 seller, as those terms are used in the 
 86.17  Streamlined Sales and Use Tax Agreement, that does not have a 
 86.18  legal requirement to register in Minnesota, and that is 
 86.19  registered under the agreement, must file a return by February 5 
 86.20  following the close of the calendar year in which the seller 
 86.21  initially registers, and must file subsequent returns on 
 86.22  February 5 on an annual basis in succeeding years.  
 86.23  Additionally, a return must be submitted on or before the 20th 
 86.24  day of the month following any month by which sellers have 
 86.25  accumulated state and local tax funds for the state in the 
 86.26  amount of $1,000 or more.  
 86.27     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 86.28  purchases made on or after January 1, 2004. 
 86.29     Sec. 4.  Minnesota Statutes 2002, section 289A.20, 
 86.30  subdivision 4, is amended to read: 
 86.31     Subd. 4.  [SALES AND USE TAX.] (a) The taxes imposed by 
 86.32  chapter 297A are due and payable to the commissioner monthly on 
 86.33  or before the 20th day of the month following the month in which 
 86.34  the taxable event occurred, or following another reporting 
 86.35  period as the commissioner prescribes or as allowed under 
 86.36  section 289A.18, subdivision 4, paragraph (f) or (g), except 
 87.1   that use taxes due on an annual use tax return as provided under 
 87.2   section 289A.11, subdivision 1, are payable by April 15 
 87.3   following the close of the calendar year. 
 87.4      (b) For a fiscal year ending before July 1, 2002, A vendor 
 87.5   having a liability of $120,000 or more during a fiscal year 
 87.6   ending June 30 must remit the June liability for the next year 
 87.7   in the following manner: 
 87.8      (1) Two business days before June 30 of the year, the 
 87.9   vendor must remit 75 85 percent of the estimated June liability 
 87.10  to the commissioner.  
 87.11     (2) On or before August 20 of the year, the vendor must pay 
 87.12  any additional amount of tax not remitted in June. 
 87.13     (c) A vendor having a liability of $120,000 or more during 
 87.14  a fiscal year ending June 30 must remit all liabilities on 
 87.15  returns due for periods beginning in the subsequent calendar 
 87.16  year by electronic means on or before the 20th day of the month 
 87.17  following the month in which the taxable event occurred, or on 
 87.18  or before the 20th day of the month following the month in which 
 87.19  the sale is reported under section 289A.18, subdivision 4, 
 87.20  except for 75 85 percent of the estimated June liability, which 
 87.21  is due two business days before June 30.  The remaining amount 
 87.22  of the June liability is due on August 20.  
 87.23     <b>[EFFECTIVE DATE.]</b> This section, paragraph (a), is effective 
 87.24  for sales and purchases made on or after January 1, 2004.  The 
 87.25  rest of this section is effective for payments made after 
 87.26  December 31, 2003. 
 87.27     Sec. 5.  Minnesota Statutes 2002, section 289A.31, 
 87.28  subdivision 7, is amended to read: 
 87.29     Subd. 7.  [SALES AND USE TAX.] (a) The sales and use tax 
 87.30  required to be collected by the retailer under chapter 297A 
 87.31  constitutes a debt owed by the retailer to Minnesota, and the 
 87.32  sums collected must be held as a special fund in trust for the 
 87.33  state of Minnesota. 
 87.34     A retailer who does not maintain a place of business within 
 87.35  this state as defined by section 297A.66, subdivision 1, shall 
 87.36  not be indebted to Minnesota for amounts of tax that it was 
 88.1   required to collect but did not collect unless the retailer knew 
 88.2   or had been advised by the commissioner of its obligation to 
 88.3   collect the tax.  
 88.4      (b) The use tax required to be paid by a purchaser is a 
 88.5   debt owed by the purchaser to Minnesota. 
 88.6      (c) The tax imposed by chapter 297A, and interest and 
 88.7   penalties, is a personal debt of the individual required to file 
 88.8   a return from the time the liability arises, irrespective of 
 88.9   when the time for payment of that liability occurs.  The debt 
 88.10  is, in the case of the executor or administrator of the estate 
 88.11  of a decedent and in the case of a fiduciary, that of the 
 88.12  individual in an official or fiduciary capacity unless the 
 88.13  individual has voluntarily distributed the assets held in that 
 88.14  capacity without reserving sufficient assets to pay the tax, 
 88.15  interest, and penalties, in which case the individual is 
 88.16  personally liable for the deficiency. 
 88.17     (d) Liability for payment of sales and use taxes includes 
 88.18  any responsible person or entity described in the personal 
 88.19  liability provisions of section 270.101. 
 88.20     (e) Any amounts collected, even if erroneously or illegally 
 88.21  collected, from a purchaser under a representation that they are 
 88.22  taxes imposed under chapter 297A are state funds from the time 
 88.23  of collection and must be reported on a return filed with the 
 88.24  commissioner.  
 88.25     (f) The tax imposed under chapter 297A on sales of tickets 
 88.26  to the premises of or events sponsored by the state agricultural 
 88.27  society and conducted on the state fairgrounds during the period 
 88.28  of the annual state fair may be retained by the state 
 88.29  agricultural society if the funds are used and matched as 
 88.30  required under section 37.13, subdivision 2. 
 88.31     <b>[EFFECTIVE DATE.]</b> This section is effective for sales taxes 
 88.32  collected on sales occurring after June 30, 2003. 
 88.33     Sec. 6.  Minnesota Statutes 2002, section 289A.40, 
 88.34  subdivision 2, is amended to read: 
 88.35     Subd. 2.  [BAD DEBT LOSS.] If a claim relates to an 
 88.36  overpayment because of a failure to deduct a loss due to a bad 
 89.1   debt or to a security becoming worthless, the claim is 
 89.2   considered timely if filed within seven years from the date 
 89.3   prescribed for the filing of the return.  A claim relating to an 
 89.4   overpayment of taxes under chapter 297A must be filed within 
 89.5   3-1/2 years from the date prescribed for filing the return, plus 
 89.6   any extensions granted for filing the return, but only if filed 
 89.7   within the extended time, or within one year from the date the 
 89.8   taxpayer's federal income tax return is timely filed claiming 
 89.9   the bad debt deduction, whichever period expires later.  The 
 89.10  refund or credit is limited to the amount of overpayment 
 89.11  attributable to the loss.  "Bad debt" for purposes of this 
 89.12  subdivision, has the same meaning as that term is used in United 
 89.13  States Code, title 26, section 166, except that the following 
 89.14  are excluded from the calculation of bad debt:  financing 
 89.15  charges or interest; sales or use taxes charged on the purchase 
 89.16  price; uncollectible amounts on property that remain in the 
 89.17  possession of the seller until the full purchase price is paid; 
 89.18  expenses incurred in attempting to collect any debt; and 
 89.19  repossessed property. 
 89.20     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 89.21  purchases made on or after January 1, 2004. 
 89.22     Sec. 7.  Minnesota Statutes 2002, section 289A.50, is 
 89.23  amended by adding a subdivision to read: 
 89.24     Subd. 2b.  [CERTIFIED SERVICE PROVIDER; BAD DEBT CLAIM.] A 
 89.25  certified service provider, as defined in section 297A.995, 
 89.26  subdivision 2, may claim on behalf of a taxpayer that is its 
 89.27  client any bad debt allowance provided by section 297A.81.  The 
 89.28  certified service provider must credit or refund to its client 
 89.29  the full amount of any bad debt allowance or refund received. 
 89.30     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 89.31  purchases made on or after January 1, 2004. 
 89.32     Sec. 8.  Minnesota Statutes 2002, section 289A.50, is 
 89.33  amended by adding a subdivision to read: 
 89.34     Subd. 2c.  [NOTICE FROM PURCHASER TO VENDOR REQUESTING 
 89.35  REFUND.] (a) If a vendor has collected from a purchaser a tax on 
 89.36  a transaction that is not subject to the tax imposed by chapter 
 90.1   297A, the purchaser may seek from the vendor a return of 
 90.2   over-collected sales or use taxes as follows: 
 90.3      (1) the purchaser must provide written notice to the 
 90.4   vendor; 
 90.5      (2) the notice to the vendor must contain the information 
 90.6   necessary to determine the validity of the request; and 
 90.7      (3) no cause of action against the vendor accrues until the 
 90.8   vendor has had 60 days to respond to the written notice. 
 90.9      (b) In connection with a purchaser's request from a vendor 
 90.10  of over-collected sales or use taxes, a vendor is presumed to 
 90.11  have a reasonable business practice, if in the collection of 
 90.12  such sales or use taxes, the vendor:  (1) uses a certified 
 90.13  service provider as defined in section 297A.995, a certified 
 90.14  automated system, as defined in section 297A.995, or a 
 90.15  proprietary system that is certified by the state; and (2) has 
 90.16  remitted to the state all taxes collected less any deductions, 
 90.17  credits, or collection allowances. 
 90.18     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 90.19  purchases made on or after January 1, 2004. 
 90.20     Sec. 9.  Minnesota Statutes 2002, section 289A.56, 
 90.21  subdivision 4, is amended to read: 
 90.22     Subd. 4.  [CAPITAL EQUIPMENT AND CERTAIN BUILDING MATERIALS 
 90.23  REFUNDS; REFUNDS TO PURCHASERS.] Notwithstanding subdivision 3, 
 90.24  for refunds payable under section sections 297A.75, subdivision 
 90.25  1, clauses (1), (2), (3), and (5), interest is computed from the 
 90.26  date the refund claim is filed with the commissioner.  For 
 90.27  refunds payable under section and 289A.50, subdivision 2a, 
 90.28  interest is computed from the 20th day of the month following 
 90.29  the month of the invoice date for the purchase which is the 
 90.30  subject of the refund, if the refund claim includes a detailed 
 90.31  schedule of purchases made during each of the periods in the 
 90.32  claim.  If the refund claim submitted does not contain a 
 90.33  schedule reflecting purchases made in each period, interest is 
 90.34  computed from the date the claim was filed 90 days after the 
 90.35  refund claim is filed with the commissioner. 
 90.36     <b>[EFFECTIVE DATE.]</b> This section is effective for refund 
 91.1   claims filed on or after April 1, 2003. 
 91.2      Sec. 10.  Minnesota Statutes 2002, section 289A.60, 
 91.3   subdivision 15, is amended to read: 
 91.4      Subd. 15.  [ACCELERATED PAYMENT OF JUNE SALES TAX 
 91.5   LIABILITY; PENALTY FOR UNDERPAYMENT.] (a) For payments made 
 91.6   after December 31, 2003, if a vendor is required by law to 
 91.7   submit an estimation of June sales tax liabilities and 62 85 
 91.8   percent payment by a certain date, the vendor shall pay a 
 91.9   penalty equal to ten percent of the amount of actual June 
 91.10  liability required to be paid in June less the amount remitted 
 91.11  in June.  The penalty must not be imposed, however, if the 
 91.12  amount remitted in June equals the lesser of 62 85 percent of 
 91.13  the preceding May's liability or 62 85 percent of the average 
 91.14  monthly liability for the previous calendar year. 
 91.15     (b) For payments made after December 31, 2002, and before 
 91.16  January 1, 2004, if a vendor is required by law to submit an 
 91.17  estimation of June sales tax liabilities and 75 percent payment 
 91.18  by a certain date, the vendor shall pay a penalty equal to ten 
 91.19  percent of the amount of actual June liability required to be 
 91.20  paid in June less the amount remitted in June.  The penalty must 
 91.21  not be imposed, however, if the amount remitted in June equals 
 91.22  the lesser of 75 percent of the preceding May's liability or 75 
 91.23  percent of the average monthly liability for the previous 
 91.24  calendar year. 
 91.25     <b>[EFFECTIVE DATE.]</b> Paragraph (a) of this section is 
 91.26  effective for payments made after December 31, 2003.  Paragraph 
 91.27  (b) of this section is effective for payments made after 
 91.28  December 31, 2002, and before January 1, 2004. 
 91.29     Sec. 11.  Minnesota Statutes 2002, section 297A.61, 
 91.30  subdivision 3, is amended to read: 
 91.31     Subd. 3.  [SALE AND PURCHASE.] (a) "Sale" and "purchase" 
 91.32  include, but are not limited to, each of the transactions listed 
 91.33  in this subdivision. 
 91.34     (b) Sale and purchase include: 
 91.35     (1) any transfer of title or possession, or both, of 
 91.36  tangible personal property, whether absolutely or conditionally, 
 92.1   for a consideration in money or by exchange or barter; and 
 92.2      (2) the leasing of or the granting of a license to use or 
 92.3   consume, for a consideration in money or by exchange or barter, 
 92.4   tangible personal property, other than a manufactured home used 
 92.5   for residential purposes for a continuous period of 30 days or 
 92.6   more. 
 92.7      (c) Sale and purchase include the production, fabrication, 
 92.8   printing, or processing of tangible personal property for a 
 92.9   consideration for consumers who furnish either directly or 
 92.10  indirectly the materials used in the production, fabrication, 
 92.11  printing, or processing. 
 92.12     (d) Sale and purchase include the preparing for a 
 92.13  consideration of food.  Notwithstanding section 297A.67, 
 92.14  subdivision 2, taxable food includes, but is not limited to, the 
 92.15  following: 
 92.16     (1) prepared food sold by the retailer; 
 92.17     (2) soft drinks; 
 92.18     (3) candy; and 
 92.19     (4) all food sold through vending machines. 
 92.20     (e) A sale and a purchase includes the furnishing for a 
 92.21  consideration of electricity, gas, water, or steam for use or 
 92.22  consumption within this state. 
 92.23     (f) A sale and a purchase includes the transfer for a 
 92.24  consideration of prewritten computer software whether delivered 
 92.25  electronically, by load and leave, or otherwise.  
 92.26     (g) A sale and a purchase includes the furnishing for a 
 92.27  consideration of the following services: 
 92.28     (1) the privilege of admission to places of amusement, 
 92.29  recreational areas, or athletic events, and the making available 
 92.30  of amusement devices, tanning facilities, reducing salons, steam 
 92.31  baths, turkish baths, health clubs, and spas or athletic 
 92.32  facilities; but not including separately stated fees or charges 
 92.33  for pen-raised game or poultry at a game farm or hunting 
 92.34  preserve; 
 92.35     (2) lodging and related services by a hotel, rooming house, 
 92.36  resort, campground, motel, or trailer camp and the granting of 
 93.1   any similar license to use real property other than the renting 
 93.2   or leasing of it for a continuous period of 30 days or more; 
 93.3      (3) parking services, whether on a contractual, hourly, or 
 93.4   other periodic basis, except for parking at a meter; 
 93.5      (4) the granting of membership in a club, association, or 
 93.6   other organization if: 
 93.7      (i) the club, association, or other organization makes 
 93.8   available for the use of its members sports and athletic 
 93.9   facilities, without regard to whether a separate charge is 
 93.10  assessed for use of the facilities; and 
 93.11     (ii) use of the sports and athletic facility is not made 
 93.12  available to the general public on the same basis as it is made 
 93.13  available to members.  
 93.14  Granting of membership means both onetime initiation fees and 
 93.15  periodic membership dues but does not include separately stated 
 93.16  fees or charges for pen-raised game or poultry by a game farm or 
 93.17  hunting preserve.  Sports and athletic facilities include golf 
 93.18  courses; tennis, racquetball, handball, and squash courts; 
 93.19  basketball and volleyball facilities; running tracks; exercise 
 93.20  equipment; swimming pools; and other similar athletic or sports 
 93.21  facilities; 
 93.22     (5) delivery of aggregate materials and concrete block by a 
 93.23  third party if the delivery would be subject to the sales tax if 
 93.24  provided by the seller of the aggregate material or concrete 
 93.25  block; and 
 93.26     (6) services as provided in this clause: 
 93.27     (i) laundry and dry cleaning services including cleaning, 
 93.28  pressing, repairing, altering, and storing clothes, linen 
 93.29  services and supply, cleaning and blocking hats, and carpet, 
 93.30  drapery, upholstery, and industrial cleaning.  Laundry and dry 
 93.31  cleaning services do not include services provided by coin 
 93.32  operated facilities operated by the customer; 
 93.33     (ii) motor vehicle washing, waxing, and cleaning services, 
 93.34  including services provided by coin operated facilities operated 
 93.35  by the customer, and rustproofing, undercoating, and towing of 
 93.36  motor vehicles; 
 94.1      (iii) building and residential cleaning, maintenance, and 
 94.2   disinfecting and exterminating services; 
 94.3      (iv) detective, security, burglar, fire alarm, and armored 
 94.4   car services; but not including services performed within the 
 94.5   jurisdiction they serve by off-duty licensed peace officers as 
 94.6   defined in section 626.84, subdivision 1, or services provided 
 94.7   by a nonprofit organization for monitoring and electronic 
 94.8   surveillance of persons placed on in-home detention pursuant to 
 94.9   court order or under the direction of the Minnesota department 
 94.10  of corrections; 
 94.11     (v) pet grooming services; 
 94.12     (vi) lawn care, fertilizing, mowing, spraying and sprigging 
 94.13  services; garden planting and maintenance; tree, bush, and shrub 
 94.14  pruning, bracing, spraying, and surgery; indoor plant care; 
 94.15  tree, bush, shrub, and stump removal; and tree trimming for 
 94.16  public utility lines.  Services performed under a construction 
 94.17  contract for the installation of shrubbery, plants, sod, trees, 
 94.18  bushes, and similar items are not taxable; 
 94.19     (vii) massages, except when provided by a licensed health 
 94.20  care facility or professional or upon written referral from a 
 94.21  licensed health care facility or professional for treatment of 
 94.22  illness, injury, or disease; and 
 94.23     (viii) the furnishing of lodging, board, and care services 
 94.24  for animals in kennels and other similar arrangements, but 
 94.25  excluding veterinary and horse boarding services. 
 94.26     In applying the provisions of this chapter, the terms 
 94.27  "tangible personal property" and "sales at retail" include 
 94.28  taxable services and the provision of taxable services, unless 
 94.29  specifically provided otherwise.  Services performed by an 
 94.30  employee for an employer are not taxable.  Services performed by 
 94.31  a partnership or association for another partnership or 
 94.32  association are not taxable if one of the entities owns or 
 94.33  controls more than 80 percent of the voting power of the equity 
 94.34  interest in the other entity.  Services performed between 
 94.35  members of an affiliated group of corporations are not taxable.  
 94.36  For purposes of this section, "affiliated group of corporations" 
 95.1   includes those entities that would be classified as members of 
 95.2   an affiliated group under United States Code, title 26, section 
 95.3   1504, and that are eligible to file a consolidated tax return 
 95.4   for federal income tax purposes. 
 95.5      (h) A sale and a purchase includes the furnishing for a 
 95.6   consideration of tangible personal property or taxable services 
 95.7   by the United States or any of its agencies or 
 95.8   instrumentalities, or the state of Minnesota, its agencies, 
 95.9   instrumentalities, or political subdivisions. 
 95.10     (i) A sale and a purchase includes the furnishing for a 
 95.11  consideration of telecommunications services, including cable 
 95.12  television services and direct satellite services.  
 95.13  Telecommunications services are taxed to the extent allowed 
 95.14  under federal law if those services:. 
 95.15     (1) either (i) originate and terminate in this state; or 
 95.16  (ii) originate in this state and terminate outside the state and 
 95.17  the service is charged to a telephone number customer located in 
 95.18  this state or to the account of any transmission instrument in 
 95.19  this state; or (iii) originate outside this state and terminate 
 95.20  in this state and the service is charged to a telephone number 
 95.21  customer located in this state or to the account of any 
 95.22  transmission instrument in this state; or 
 95.23     (2) are rendered by providing a private communications 
 95.24  service for which the customer has one or more locations within 
 95.25  Minnesota connected to the service and the service is charged to 
 95.26  a telephone number customer located in this state or to the 
 95.27  account of any transmission instrument in this state. 
 95.28     All charges for mobile telecommunications services, as 
 95.29  defined in United States Code, title 4, section 124, are deemed 
 95.30  to be provided by the customer's home service provider and 
 95.31  sourced to the customer's place of primary use and are subject 
 95.32  to tax based upon the customer's place of primary use in 
 95.33  accordance with the Mobile Telecommunications Sourcing Act, 
 95.34  United States Code, title 4, sections 116 to 126.  All other 
 95.35  definitions and provisions of the Mobile Telecommunications 
 95.36  Sourcing Act as provided in United States Code, title 4, are 
 96.1   hereby adopted. 
 96.2      (j) A sale and a purchase includes the furnishing for a 
 96.3   consideration of installation if the installation charges would 
 96.4   be subject to the sales tax if the installation were provided by 
 96.5   the seller of the item being installed. 
 96.6      (k) A sale and a purchase includes the rental of a vehicle 
 96.7   by a motor vehicle dealer to a customer when (1) the vehicle is 
 96.8   rented by the customer for a consideration, or (2) the motor 
 96.9   vehicle dealer is reimbursed pursuant to a service contract as 
 96.10  defined in Minnesota Statutes, section 65B.29, subdivision 1, 
 96.11  clause (1). 
 96.12     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 96.13  purchases made on or after January 1, 2004, except that the 
 96.14  amendments in paragraph (g) and the addition of paragraph (k) 
 96.15  are effective for sales and purchases made after June 30, 2003. 
 96.16     Sec. 12.  Minnesota Statutes 2002, section 297A.61, 
 96.17  subdivision 7, is amended to read: 
 96.18     Subd. 7.  [SALES PRICE.] (a) "Sales price" means the 
 96.19  measure subject to sales tax, and means the total amount of 
 96.20  consideration, including cash, credit, personal property, and 
 96.21  services, for which personal property or services are sold, 
 96.22  leased, or rented, valued in money, whether received in money or 
 96.23  otherwise, without any deduction for the following: 
 96.24     (1) the seller's cost of the property sold; 
 96.25     (2) the cost of materials used, labor or service cost, 
 96.26  interest, losses, all costs of transportation to the seller, all 
 96.27  taxes imposed on the seller, and any other expenses of the 
 96.28  seller; 
 96.29     (3) charges by the seller for any services necessary to 
 96.30  complete the sale, other than delivery and installation charges; 
 96.31     (4) delivery charges; 
 96.32     (5) installation charges; and 
 96.33     (6) the value of exempt property given to the purchaser 
 96.34  when taxable and exempt personal property have been bundled 
 96.35  together and sold by the seller as a single product or piece of 
 96.36  merchandise. 
 97.1      (b) Sales price does not include: 
 97.2      (1) discounts, including cash, terms, or coupons, that are 
 97.3   not reimbursed by a third party and that are allowed by the 
 97.4   seller and taken by a purchaser on a sale; 
 97.5      (2) interest, financing, and carrying charges from credit 
 97.6   extended on the sale of personal property or services, if the 
 97.7   amount is separately stated on the invoice, bill of sale, or 
 97.8   similar document given to the purchaser; and 
 97.9      (3) any taxes legally imposed directly on the consumer that 
 97.10  are separately stated on the invoice, bill of sale, or similar 
 97.11  document given to the purchaser. 
 97.12     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 97.13  purchases made on or after January 1, 2004. 
 97.14     Sec. 13.  Minnesota Statutes 2002, section 297A.61, 
 97.15  subdivision 10, is amended to read: 
 97.16     Subd. 10.  [TANGIBLE PERSONAL PROPERTY.] (a) "Tangible 
 97.17  personal property" means corporeal personal property of any 
 97.18  kind, including property that is to become real property as a 
 97.19  result of incorporation, attachment, or installation following 
 97.20  its acquisition. 
 97.21     (b) Tangible personal property includes, but is not limited 
 97.22  to: 
 97.23     (1) computer software, whether contained on tape, discs, 
 97.24  cards, or other devices; and 
 97.25     (2) prepaid telephone calling cards.  
 97.26     (c) personal property that can be seen, weighed, measured, 
 97.27  felt, or touched, or that is in any other manner perceptible to 
 97.28  the senses.  "Tangible personal property" includes, but is not 
 97.29  limited to, electricity, water, gas, steam, prewritten computer 
 97.30  software, and prepaid calling cards. 
 97.31     (b) Tangible personal property does not include: 
 97.32     (1) large ponderous machinery and equipment used in a 
 97.33  business or production activity which at common law would be 
 97.34  considered to be real property; 
 97.35     (2) property which is subject to an ad valorem property 
 97.36  tax; 
 98.1      (3) property described in section 272.02, subdivision 9, 
 98.2   clauses (a) to (d); and 
 98.3      (4) property described in section 272.03, subdivision 2, 
 98.4   clauses (3) and (5). 
 98.5      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
 98.6   purchases made on or after January 1, 2004. 
 98.7      Sec. 14.  Minnesota Statutes 2002, section 297A.61, is 
 98.8   amended by adding a subdivision to read: 
 98.9      Subd. 14a.  [LEASE OR RENTAL.] (a) "Lease or rental" means 
 98.10  any transfer of possession or control of tangible personal 
 98.11  property for a fixed or indeterminate term for consideration.  A 
 98.12  lease or rental may include future options to purchase or extend.
 98.13     (b) Lease or rental does not include: 
 98.14     (1) a transfer of possession or control of property under a 
 98.15  security agreement or deferred payment plan that requires the 
 98.16  transfer of title upon completion of the required payments; 
 98.17     (2) a transfer of possession or control of property under 
 98.18  an agreement that requires the transfer of title upon completion 
 98.19  of required payments and payment of an option price does not 
 98.20  exceed the greater of $100 or one percent of the total required 
 98.21  payments; or 
 98.22     (3) providing tangible personal property along with an 
 98.23  operator for a fixed or indeterminate period of time.  A 
 98.24  condition of this exclusion is that the operator is necessary 
 98.25  for the equipment to perform as designed.  For the purpose of 
 98.26  this subdivision, an operator must do more than maintain, 
 98.27  inspect, or set up the tangible personal property. 
 98.28     (c) Lease or rental does include agreements covering motor 
 98.29  vehicles and trailers where the amount of consideration may be 
 98.30  increased or decreased by reference to the amount realized upon 
 98.31  sale or disposition of the property as defined in United States 
 98.32  Code, title 26, section 7701(h)(l). 
 98.33     (d) This definition must be used for sales and use tax 
 98.34  purposes regardless if a transaction is characterized as a lease 
 98.35  or rental under generally accepted accounting principles, the 
 98.36  Internal Revenue Code, chapter 336, or other provisions of 
 99.1   federal, state, or local law. 
 99.2      <b>[EFFECTIVE DATE.]</b> This section is effective for leases and 
 99.3   rentals entered into on or after January 1, 2004. 
 99.4      Sec. 15.  Minnesota Statutes 2002, section 297A.61, 
 99.5   subdivision 17, is amended to read: 
 99.6      Subd. 17.  [PREWRITTEN COMPUTER SOFTWARE.] "Prewritten 
 99.7   computer software" means a computer program, either in the form 
 99.8   of written procedures or contained on tapes, discs, cards, or 
 99.9   another device, or any required documentation or manuals 
 99.10  designed to facilitate the use of the computer program. computer 
 99.11  software, including prewritten upgrades, that is not designed 
 99.12  and developed by the author or other creator to the 
 99.13  specifications of a specific purchaser.  The combining of two or 
 99.14  more "prewritten computer software" programs or prewritten 
 99.15  portions of the programs does not cause the combination to be 
 99.16  other than "prewritten computer software."  "Prewritten computer 
 99.17  software" includes software designed and developed by the author 
 99.18  or other creator to the specifications of a specific purchaser 
 99.19  when it is sold to a person other than the purchaser.  If a 
 99.20  person modifies or enhances computer software of which the 
 99.21  person is not the author or creator, the person is deemed to be 
 99.22  the author or creator only of such person's modifications or 
 99.23  enhancements.  "Prewritten computer software" or a prewritten 
 99.24  portion of it that is modified or enhanced to any degree, if the 
 99.25  modification or enhancement is designed and developed to the 
 99.26  specifications of a specific purchaser, remains "prewritten 
 99.27  computer software"; provided, however, that if there is a 
 99.28  reasonable, separately stated charge or an invoice or other 
 99.29  statement of the price given to the purchaser for such 
 99.30  modification or enhancement, the modification or enhancement 
 99.31  does not constitute "prewritten computer software."  For 
 99.32  purposes of this subdivision: 
 99.33     (1) "computer" does not include tape-controlled automatic 
 99.34  drilling, milling, or other manufacturing machinery or equipment 
 99.35  means an electronic device that accepts information in digital 
 99.36  or similar form and manipulates it for a result based on a 
100.1   sequence of instructions; and 
100.2      (2) "computer program" means information and directions 
100.3   that dictate the function performed by data processing 
100.4   equipment.  It includes the complete plan for the solution of a 
100.5   problem, such as the complete sequence of automatic data 
100.6   processing equipment instructions necessary to solve a problem 
100.7   and includes both systems and application programs and 
100.8   subdivisions, such as assemblers, compilers, routines, 
100.9   generators, and utility programs.  Computer program includes a 
100.10  "canned" or prewritten computer program that is held or existing 
100.11  for general or repeated sale or lease, even if the prewritten or 
100.12  "canned" program was initially developed on a custom basis or 
100.13  for in-house use. "electronic" means relating to technology 
100.14  having electrical, digital, magnetic, wireless, optical, 
100.15  electromagnetic, or similar capabilities; and 
100.16     (3) "computer software" means a set of coded instructions 
100.17  designed to cause a "computer" or automatic data processing 
100.18  equipment to perform a task. 
100.19     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
100.20  purchases made on or after January 1, 2004. 
100.21     Sec. 16.  Minnesota Statutes 2002, section 297A.61, is 
100.22  amended by adding a subdivision to read: 
100.23     Subd. 17a.  [DELIVERED ELECTRONICALLY.] "Delivered 
100.24  electronically" means delivered to the purchaser by means other 
100.25  than tangible storage media. 
100.26     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
100.27  purchases made on or after January 1, 2004. 
100.28     Sec. 17.  Minnesota Statutes 2002, section 297A.61, is 
100.29  amended by adding a subdivision to read: 
100.30     Subd. 17b.  [LOAD AND LEAVE.] "Load and leave" means 
100.31  delivered to the purchaser by use of a tangible storage media 
100.32  where the tangible storage media is not physically transferred 
100.33  to the purchaser. 
100.34     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
100.35  purchases made on or after January 1, 2004. 
100.36     Sec. 18.  Minnesota Statutes 2002, section 297A.61, 
101.1   subdivision 30, is amended to read: 
101.2      Subd. 30.  [DELIVERY CHARGES.] "Delivery charges" means 
101.3   charges by the seller of personal property or services for 
101.4   preparation and delivery to a location designated by the 
101.5   purchaser of personal property or services including, but not 
101.6   limited to, transportation, shipping, postage, handling, 
101.7   crating, and packing. 
101.8      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
101.9   purchases made on or after January 1, 2004. 
101.10     Sec. 19.  Minnesota Statutes 2002, section 297A.61, 
101.11  subdivision 31, is amended to read: 
101.12     Subd. 31.  [PREPARED FOOD.] (a) "Prepared food" means food 
101.13  that meets either any of the following conditions: 
101.14     (1) the food is sold with eating utensils provided by the 
101.15  seller, including plates, knives, forks, spoons, glasses, cups, 
101.16  napkins, or straws.  A "plate" does not include a container or 
101.17  packaging used to transport the food; or 
101.18     (2) the food is sold in a heated state or heated by the 
101.19  seller; or 
101.20     (3) two or more food ingredients are mixed or combined by 
101.21  the seller for sale as a single item, except for:. 
101.22     (b) "Prepared food" does not include the following if sold 
101.23  without eating utensils provided by the seller: 
101.24     (i) (1) bakery items, including, but not limited to, bread, 
101.25  rolls, buns, biscuits, bagels, croissants, pastries, donuts, 
101.26  danish, cakes, tortes, pies, tarts, muffins, bars, cookies, 
101.27  tortillas; or 
101.28     (ii) (2) ready-to-eat meat and seafood food sold in an 
101.29  unheated state sold by weight; or volume as a single item. 
101.30     (c) "Prepared food" under paragraph (a), clause (3), does 
101.31  not include: 
101.32     (iii) (1) eggs, fish, meat, poultry, and foods containing 
101.33  these raw animal foods requiring cooking by the consumer as 
101.34  recommended by the Food and Drug Administration in chapter 3, 
101.35  part 401.11 of its food code so as to prevent food borne 
101.36  illnesses; or 
102.1      (iv) (2) food that is only sliced cut, repackaged, or 
102.2   pasteurized by the seller. 
102.3      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
102.4   purchases made on or after January 1, 2004. 
102.5      Sec. 20.  Minnesota Statutes 2002, section 297A.61, is 
102.6   amended by adding a subdivision to read: 
102.7      Subd. 35.  [DIRECT MAIL.] "Direct mail" means printed 
102.8   material delivered or distributed by United States mail or other 
102.9   delivery service to a mass audience or to addressees on a 
102.10  mailing list provided by the purchaser or at the direction of 
102.11  the purchaser when the cost of the items are not billed directly 
102.12  to the recipients.  "Direct mail" includes tangible personal 
102.13  property supplied directly or indirectly by the purchaser to the 
102.14  direct mail seller for inclusion in the package containing 
102.15  printed material.  "Direct mail" does not include multiple items 
102.16  of printed material delivered to a single address. 
102.17     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
102.18  purchases made on or after January 1, 2004. 
102.19     Sec. 21.  Minnesota Statutes 2002, section 297A.66, is 
102.20  amended by adding a subdivision to read: 
102.21     Subd. 5.  [WITHDRAWAL FROM STREAMLINED SALES AND USE TAX 
102.22  AGREEMENT.] If the state has withdrawn its membership or been 
102.23  expelled from the streamlined sales and use tax agreement, it 
102.24  shall not use a seller's registration with the central 
102.25  registration system and the collection of sales and use taxes in 
102.26  the state as a factor in determining whether the seller has 
102.27  nexus with that state for any tax at any time. 
102.28     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
102.29  purchases made on or after January 1, 2004. 
102.30     Sec. 22.  [297A.666] [AMNESTY FOR REGISTRATION.] 
102.31     Subdivision 1.  [AMNESTY PROVISIONS.] Subject to the 
102.32  limitations of subdivision 2: 
102.33     (1) this state shall provide amnesty for uncollected or 
102.34  unpaid sales or use tax to a seller who registers to pay or to 
102.35  collect and remit applicable sales or use tax on sales made to 
102.36  purchasers in this state in accordance with the terms of the 
103.1   streamlined sales and use tax agreement, provided that the 
103.2   seller was not so registered in this state in the 12-month 
103.3   period preceding the effective date of the state's participation 
103.4   in the agreement; and 
103.5      (2) the amnesty shall preclude assessment for uncollected 
103.6   or unpaid sales or use tax together with penalty or interest for 
103.7   sales made during the period the seller was not registered in 
103.8   this state, provided registration occurs within 12 months of the 
103.9   effective date of the state's participation in the agreement. 
103.10     Subd. 2.  [LIMITATIONS.] (a) The amnesty is not available 
103.11  to a seller with respect to any matter or matters for which the 
103.12  seller received notice of the commencement of an audit and the 
103.13  audit is not yet finally resolved, including any related 
103.14  administrative and judicial processes. 
103.15     (b) The amnesty is not available for sales or use taxes 
103.16  already paid or remitted to this state or to taxes collected by 
103.17  the seller. 
103.18     (c) The amnesty is fully effective, absent the seller's 
103.19  fraud or intentional misrepresentation of a material fact, as 
103.20  long as the seller continues registration and continues payment 
103.21  or collection and remittance of applicable sales or use taxes 
103.22  for a period of at least 36 months.  The statute of limitations 
103.23  provisions of chapter 289A applicable to asserting a sales or 
103.24  use tax liability must be tolled during this 36-month period. 
103.25     (d) The amnesty is applicable only to sales or use taxes 
103.26  due from a seller in its capacity as a seller and not to sales 
103.27  or use taxes due from a seller in its capacity as a buyer. 
103.28     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
103.29  purchases made on or after January 1, 2004. 
103.30     Sec. 23.  Minnesota Statutes 2002, section 297A.668, is 
103.31  amended to read: 
103.32     297A.668 [SOURCING OF SALE; SITUS IN THIS STATE.] 
103.33     Subdivision 1.  [SOURCING RULES APPLICABILITY.] (a) The 
103.34  following provisions of this section apply regardless of the 
103.35  characterization of a product as tangible personal property, a 
103.36  digital good, or a service; but do not apply to 
104.1   telecommunications services, or the sales of motor vehicles, 
104.2   watercraft, aircraft, modular homes, manufactured homes, or 
104.3   mobile homes.  These provisions only apply to determine a 
104.4   seller's obligation to pay or collect and remit a sales or use 
104.5   tax with respect to the seller's sale of a product.  These 
104.6   provisions do not affect the obligation of a seller as purchaser 
104.7   to remit tax on the use of the product. 
104.8      Subd. 2.  [SOURCING RULES.] (a) The retail sale, excluding 
104.9   lease or rental, of a product shall be sourced as required in 
104.10  paragraphs (b) through (f). 
104.11     (b) When the product is received by the purchaser at a 
104.12  business location of the seller, the sale is sourced to that 
104.13  business location. 
104.14     (c) When the product is not received by the purchaser at a 
104.15  business location of the seller, the sale is sourced to the 
104.16  location where receipt by the purchaser or the donee designated 
104.17  by the purchaser occurs, including the location indicated by 
104.18  instructions for delivery to the purchasers or the purchaser's 
104.19  donee, known to the seller. 
104.20     (d) When paragraphs (b) and (c) do not apply, the sale is 
104.21  sourced to the location indicated by an address for the 
104.22  purchaser that is available from the business records of the 
104.23  seller that are maintained in the ordinary course of the 
104.24  seller's business, when use of this address does not constitute 
104.25  bad faith. 
104.26     (e) When paragraphs (b), (c), and (d) do not apply, the 
104.27  sale is sourced to the location indicated by an address for the 
104.28  purchaser obtained during the consummation of the sale, 
104.29  including the address of a purchaser's payment instrument if no 
104.30  other address is available, when use of this address does not 
104.31  constitute bad faith. 
104.32     (f) When paragraphs (b), (c), (d), and (e) do not apply, 
104.33  including the circumstance where the seller is without 
104.34  sufficient information to apply the previous paragraphs, then 
104.35  the location is determined by the address from which tangible 
104.36  personal property was shipped, from which the digital good or 
105.1   the computer software delivered electronically was first 
105.2   available for transmission by the seller, or from which the 
105.3   service was provided.  For purposes of this paragraph, the 
105.4   seller must disregard any location that merely provided the 
105.5   digital transfer of the product sold. 
105.6      (g) For purposes of this subdivision, the terms "receive" 
105.7   and "receipt" mean taking possession of tangible personal 
105.8   property, making first use of services, or taking possession or 
105.9   making first use of digital goods or the computer software 
105.10  delivered electronically, whichever occurs first.  The terms 
105.11  receive and receipt do not include possession by a carrier for 
105.12  hire on behalf of the purchaser. 
105.13     Subd. 3.  [LEASE OR RENTAL OF TANGIBLE PERSONAL 
105.14  PROPERTY.] The lease or rental of tangible personal property, 
105.15  other than property identified in subdivision 4 or 5, shall be 
105.16  sourced as required in paragraphs (a) to (c). 
105.17     (a) For a lease or rental that requires recurring periodic 
105.18  payments, the first periodic payment is sourced the same as a 
105.19  retail sale in accordance with the provisions of subdivision 6.  
105.20  Periodic payments made subsequent to the first payment are 
105.21  sourced to the primary property location for each period covered 
105.22  by the payment.  The primary property location must be as 
105.23  indicated by an address for the property provided by the lessee 
105.24  that is available to the lessor from its records maintained in 
105.25  the ordinary course of business, when use of this address does 
105.26  not constitute bad faith.  The property location must not be 
105.27  altered by intermittent use at different locations, such as use 
105.28  of business property that accompanies employees on business 
105.29  trips and service calls. 
105.30     (b) For a lease or rental that does not require recurring 
105.31  periodic payments, the payment is sourced the same as a retail 
105.32  sale in accordance with the provisions of subdivision 2. 
105.33     (c) This subdivision does not affect the imposition or 
105.34  computation of sales or use tax on leases or rentals based on a 
105.35  lump sum or accelerated basis, or on the acquisition of property 
105.36  for lease. 
106.1      Subd. 4.  [LEASE OR RENTAL OF MOTOR VEHICLES, TRAILERS, 
106.2   SEMITRAILERS, OR AIRCRAFT THAT DO NOT QUALIFY AS TRANSPORTATION 
106.3   EQUIPMENT.] The lease or rental of motor vehicles, trailers, 
106.4   semitrailers, or aircraft that do not qualify as transportation 
106.5   equipment, as defined in subdivision 5, shall be sourced as 
106.6   required in paragraphs (a) to (c). 
106.7      (a) For a lease or rental that requires recurring periodic 
106.8   payments, each periodic payment is sourced to the primary 
106.9   property location.  The primary property location must be as 
106.10  indicated by an address for the property provided by the lessee 
106.11  that is available to the lessor from its records maintained in 
106.12  the ordinary course of business, when use of this address does 
106.13  not constitute bad faith.  This location must not be altered by 
106.14  intermittent use at different locations. 
106.15     (b) For a lease or rental that does not require recurring 
106.16  periodic payments, the payment is sourced the same as a retail 
106.17  sale in accordance with the provisions of subdivision 2. 
106.18     (c) This subdivision does not affect the imposition or 
106.19  computation of sales or use tax on leases or rentals based on a 
106.20  lump sum or accelerated basis, or on the acquisition of property 
106.21  for lease. 
106.22     Subd. 5.  [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 
106.23  including lease or rental, of transportation equipment shall be 
106.24  sourced the same as a retail sale in accordance with the 
106.25  provisions of subdivision 2, notwithstanding the exclusion of 
106.26  lease or rental in subdivision 2. 
106.27     (b) "Transportation equipment" means any of the following: 
106.28     (1) locomotives and railcars that are utilized for the 
106.29  carriage of persons or property in interstate commerce; and/or 
106.30     (2) trucks and truck-tractors with a gross vehicle weight 
106.31  rating (GVWR) of 10,001 pounds or greater, trailers, 
106.32  semitrailers, or passenger buses that are: 
106.33     (i) registered through the international registration plan; 
106.34  and 
106.35     (ii) operated under authority of a carrier authorized and 
106.36  certified by the United States Department of Transportation or 
107.1   another federal authority to engage in the carriage of persons 
107.2   or property in interstate commerce.  
107.3      Subd. 2. 6.  [MULTIPLE POINTS OF USE.] (a) Notwithstanding 
107.4   the provisions of subdivision 1 subdivisions 2 to 5, a business 
107.5   purchaser that is not a holder of a direct pay permit that knows 
107.6   at the time of its purchase of a digital good, computer software 
107.7   delivered electronically, or a service that the digital good, 
107.8   computer software delivered electronically, or service will be 
107.9   concurrently available for use in more than one taxing 
107.10  jurisdiction shall deliver to the seller in conjunction with its 
107.11  purchase a multiple points of use exemption certificate 
107.12  disclosing this fact.  
107.13     (b) Upon receipt of the multiple points of use exemption 
107.14  certificate, the seller is relieved of the obligation to 
107.15  collect, pay, or remit the applicable tax and the purchaser is 
107.16  obligated to collect, pay, or remit the applicable tax on a 
107.17  direct pay basis. 
107.18     (c) A purchaser delivering the multiple points of use 
107.19  exemption certificate may use any reasonable, but consistent and 
107.20  uniform, method of apportionment that is supported by the 
107.21  purchaser's business records as they exist at the time of the 
107.22  consummation of the sale. 
107.23     (d) The multiple points of use exemption certificate 
107.24  remains in effect for all future sales by the seller to the 
107.25  purchaser until it is revoked in writing, except as to the 
107.26  subsequent sale's specific apportionment that is governed by the 
107.27  principle of paragraph (c) and the facts existing at the time of 
107.28  the sale. 
107.29     (e) A holder of a direct pay permit is not required to 
107.30  deliver a multiple points or use exemption certificate to the 
107.31  seller.  A direct pay permit holder shall follow the provisions 
107.32  of paragraph (c) in apportioning the tax due on a digital good, 
107.33  computer software delivered electronically, or a service that 
107.34  will be concurrently available for use in more than one taxing 
107.35  jurisdiction. 
107.36     Subd. 3.  [DEFINITION OF TERMS.] For purposes of this 
108.1   section, the terms "receive" and "receipt" mean taking 
108.2   possession of tangible personal property, making first use of 
108.3   services, or taking possession or making first use of digital 
108.4   goods, whichever occurs first.  The terms receive and receipt do 
108.5   not include possession by a carrier for hire on behalf of the 
108.6   purchaser. 
108.7      Subd. 7.  [DIRECT MAIL.] (a) Notwithstanding other 
108.8   subdivisions of this section, a purchaser of direct mail that is 
108.9   not a holder of a direct pay permit shall provide to the seller, 
108.10  in conjunction with the purchase, either a direct mail form or 
108.11  information to show the jurisdictions to which the direct mail 
108.12  is delivered to recipients. 
108.13     (1) Upon receipt of the direct mail form, the seller is 
108.14  relieved of all obligations to collect, pay, or remit the 
108.15  applicable tax and the purchaser is obligated to pay or remit 
108.16  the applicable tax on a direct pay basis.  A direct mail form 
108.17  remains in effect for all future sales of direct mail by the 
108.18  seller to the purchaser until it is revoked in writing.  
108.19     (2) Upon receipt of information from the purchaser showing 
108.20  the jurisdictions to which the direct mail is delivered to 
108.21  recipients, the seller shall collect the tax according to the 
108.22  delivery information provided by the purchaser.  In the absence 
108.23  of bad faith, the seller is relieved of any further obligation 
108.24  to collect tax on any transaction for which the seller has 
108.25  collected tax pursuant to the delivery information provided by 
108.26  the purchaser. 
108.27     (b) If the purchaser of direct mail does not have a direct 
108.28  pay permit and does not provide the seller with either a direct 
108.29  mail form or delivery information, as required by paragraph (a), 
108.30  the seller shall collect the tax according to subdivision 2, 
108.31  paragraph (f).  Nothing in this paragraph limits a purchaser's 
108.32  obligation for sales or use tax to any state to which the direct 
108.33  mail is delivered. 
108.34     (c) If a purchaser of direct mail provides the seller with 
108.35  documentation of direct pay authority, the purchaser is not 
108.36  required to provide a direct mail form or delivery information 
109.1   to the seller. 
109.2      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
109.3   purchases made on or after January 1, 2004. 
109.4      Sec. 24.  [297A.669] [TELECOMMUNICATION SOURCING.] 
109.5      Subdivision 1.  [CALL-BY-CALL BASIS SOURCING.] Except for 
109.6   the defined telecommunication services in subdivision 3, the 
109.7   sale of telecommunication service sold on a call-by-call basis 
109.8   shall be sourced to (1) each level of taxing jurisdiction where 
109.9   the call originates and terminates in that jurisdiction; or (2) 
109.10  each level of taxing jurisdiction where the call either 
109.11  originates or terminates and in which the service address is 
109.12  also located. 
109.13     Subd. 2.  [OTHER THAN CALL-BY-CALL BASIS SOURCING.] Except 
109.14  for the defined telecommunication services in subdivision 3, a 
109.15  sale of telecommunications services sold on a basis other than a 
109.16  call-by-call basis is sourced to the customer's place of primary 
109.17  use. 
109.18     Subd. 3.  [DEFINED TELECOMMUNICATIONS SERVICES 
109.19  SOURCING.] The sale of the following telecommunication services 
109.20  shall be sourced to each level of taxing jurisdiction in 
109.21  paragraphs (a) to (d). 
109.22     (a) A sale of mobile telecommunications services, other 
109.23  than air-to-ground radiotelephone service and prepaid calling 
109.24  service, is sourced to the customer's place of primary use as 
109.25  required by the Mobile Telecommunications Sourcing Act. 
109.26     (b) A sale of postpaid calling service is sourced to the 
109.27  origination point of the telecommunications signal as first 
109.28  identified by either: 
109.29     (1) the seller's telecommunications system; or 
109.30     (2) information received by the seller from its service 
109.31  provider, where the system used to transport such signals is not 
109.32  that of the seller. 
109.33     (c) A sale of prepaid calling service is sourced in 
109.34  accordance with section 297A.668, subdivision 2.  However, in 
109.35  the case of a sale of mobile telecommunications service that is 
109.36  a prepaid telecommunications service, the rule provided in 
110.1   section 297A.668, subdivision 2, paragraph (f), shall include as 
110.2   an option the location associated with the mobile telephone 
110.3   number. 
110.4      (d) A sale of a private communication service is sourced as 
110.5   follows: 
110.6      (1) service for a separate charge related to a customer 
110.7   channel termination point is sourced to each level of 
110.8   jurisdiction in which the customer channel termination point is 
110.9   located; 
110.10     (2) service where all customer termination points are 
110.11  located entirely within one jurisdiction or levels of 
110.12  jurisdiction is sourced in such jurisdiction in which the 
110.13  customer channel termination points are located; 
110.14     (3) service for segments of a channel between two customer 
110.15  channel termination points located in different jurisdictions 
110.16  and which segment of channel are separately charged is sourced 
110.17  50 percent in each level of jurisdiction in which the customer 
110.18  channel termination points are located; and 
110.19     (4) service for segments of a channel located in more than 
110.20  one jurisdiction or levels of jurisdiction and which segments 
110.21  are not separately billed is sourced in each jurisdiction based 
110.22  on the percentage determined by dividing the number of customer 
110.23  channel termination points in the jurisdiction by the total 
110.24  number of customer channel termination points. 
110.25     Subd. 4.  [AIR-TO-GROUND RADIOTELEPHONE 
110.26  SERVICE.] "Air-to-ground radiotelephone service," for purposes 
110.27  of this section, means a radio service, as that term is defined 
110.28  in Code of Federal Regulations, title 47, section 22.99, in 
110.29  which common carriers are authorized to offer and provide radio 
110.30  telecommunications service for hire to subscribers in aircraft. 
110.31     Subd. 5.  [CALL-BY-CALL BASIS.] "Call-by-call basis," for 
110.32  purposes of this section, means any method of charging for 
110.33  telecommunications services where the price is measured by 
110.34  individual calls. 
110.35     Subd. 6.  [COMMUNICATIONS CHANNEL.] "Communications 
110.36  channel," for purposes of this section, means a physical or 
111.1   virtual path of communications over which signals are 
111.2   transmitted between or among customer channel termination points.
111.3      Subd. 7.  [CUSTOMER.] "Customer," for purposes of this 
111.4   section, means the person or entity that contracts with the 
111.5   seller of telecommunications services.  If the end user of 
111.6   telecommunications services is not the contracting party, the 
111.7   end user of the telecommunications service is the customer of 
111.8   the telecommunication service, but this sentence applies only 
111.9   for the purpose of sourcing sales of telecommunications services 
111.10  under this section.  Customer does not include a reseller of 
111.11  telecommunications service or for mobile telecommunications 
111.12  service of a serving carrier under an agreement to serve the 
111.13  customer outside the home service provider's licensed service 
111.14  area. 
111.15     Subd. 8.  [CUSTOMER CHANNEL TERMINATION POINT.] "Customer 
111.16  channel termination point," for purposes of this section, means 
111.17  the location where the customer either inputs or receives the 
111.18  communications. 
111.19     Subd. 9.  [END USER.] "End user," for purposes of this 
111.20  section, means the person who utilizes the telecommunication 
111.21  service.  In the case of an entity, end user means the 
111.22  individual who utilizes the service on behalf of the entity. 
111.23     Subd. 10.  [HOME SERVICE PROVIDER.] "Home service provider,"
111.24  for purposes of this section, means the same as that term is 
111.25  defined in Section 124(5) of Public Law 106-252 (Mobile 
111.26  Telecommunications Sourcing Act). 
111.27     Subd. 11.  [MOBILE TELECOMMUNICATIONS SERVICE.] "Mobile 
111.28  telecommunications service," for purposes of this section, means 
111.29  the same as that term is defined in Section 124(1) of Public Law 
111.30  106-252 (Mobile Telecommunications Sourcing Act). 
111.31     Subd. 12.  [PLACE OF PRIMARY USE.] "Place of primary use," 
111.32  for purposes of this section, means the street address 
111.33  representative of where the customer's use of the 
111.34  telecommunications service primarily occurs, which must be the 
111.35  residential street address or the primary business street 
111.36  address of the customer.  In the case of mobile 
112.1   telecommunications services, place of primary use must be within 
112.2   the licensed service area of the home service provider. 
112.3      Subd. 13.  [POSTPAID CALLING SERVICE.] "Postpaid calling 
112.4   service," for purposes of this section, means the 
112.5   telecommunications service obtained by making a payment on a 
112.6   call-by-call basis either through the use of a credit card or 
112.7   payment mechanism such as a bank card, travel card, credit card, 
112.8   or debit card, or by a charge made to a telephone number that is 
112.9   not associated with the origination or termination of the 
112.10  telecommunications service.  A postpaid calling service includes 
112.11  a telecommunications service that would be a prepaid calling 
112.12  service except it is not exclusively a telecommunication service.
112.13     Subd. 14.  [PREPAID CALLING SERVICE.] "Prepaid calling 
112.14  service," for purposes of this section, means the right to 
112.15  access exclusively telecommunications services, which must be 
112.16  paid for in advance and which enables the origination of calls 
112.17  using an access number or authorization code, whether manually 
112.18  or electronically dialed, and that is sold in predetermined 
112.19  units or dollars of which the number declines with use in a 
112.20  known amount. 
112.21     Subd. 15.  [PRIVATE COMMUNICATION SERVICES.] "Private 
112.22  communication services," for purposes of this section, means the 
112.23  same as that term is defined in section 297A.61, subdivision 26. 
112.24     Subd. 16.  [SERVICE ADDRESS.] "Service address," for 
112.25  purposes of this section, means: 
112.26     (1) the location of the telecommunications equipment to 
112.27  which a customer's call is charged and from which the call 
112.28  originates or terminates, regardless of where the call is billed 
112.29  or paid; 
112.30     (2) if the location in paragraph (a) is not known, service 
112.31  address means the origination point of the signal of the 
112.32  telecommunications services first identified by either the 
112.33  seller's telecommunications system or in information received by 
112.34  the seller from its service provider, where the system used to 
112.35  transport the signals is not that of the seller; or 
112.36     (3) if the location in paragraphs (a) and (b) is not known, 
113.1   the service address means the location of the customer's place 
113.2   of primary use. 
113.3      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
113.4   purchases made on or after January 1, 2004. 
113.5      Sec. 25.  Minnesota Statutes 2002, section 297A.67, 
113.6   subdivision 7, is amended to read: 
113.7      Subd. 7.  [MEDICINES; MEDICAL DEVICES.] (a) Sales of the 
113.8   following medicines and medical devices are exempt: 
113.9      (1) Prescribed drugs and medicine, and insulin, intended 
113.10  for internal or external use, in the cure, mitigation, 
113.11  treatment, or prevention of illness or disease in human beings 
113.12  are exempt.  "Prescribed drugs and medicine" includes use, 
113.13  including over-the-counter drugs or medicine prescribed by a 
113.14  licensed health care professional.; 
113.15     (b) Nonprescription medicines consisting principally 
113.16  (determined by the weight of all ingredients) of analgesics that 
113.17  are approved by the United States Food and Drug Administration 
113.18  for internal use by human beings are exempt.  For purposes of 
113.19  this subdivision, "principally" means greater than 50 percent 
113.20  analgesics by weight.  
113.21     (c) Prescription glasses, hospital beds, fever 
113.22  thermometers, reusable (2) single use finger-pricking devices 
113.23  for the extraction of blood, blood glucose monitoring machines, 
113.24  and other single use devices and diagnostic agents used in 
113.25  diagnosing, monitoring, or treating diabetes, and therapeutic 
113.26  and; 
113.27     (3) insulin and medical oxygen for human use are also 
113.28  exempt, regardless of whether it is prescribed or sold 
113.29  over-the-counter; 
113.30     (4) prosthetic devices are exempt.  "Therapeutic devices" 
113.31  means devices that are attached or applied to the human body to 
113.32  cure, heal, or alleviate injury, illness, or disease, either 
113.33  directly or by administering a curative agent.  "Prosthetic 
113.34  devices" means devices that replace injured, diseased, or 
113.35  missing parts of the human body, either temporarily or 
113.36  permanently., if prescribed by a licensed health care 
114.1   professional, or paid for by Medicare or Medicaid; 
114.2      (5) durable medical equipment for home use only; and 
114.3      (6) mobility enhancing equipment.  
114.4      (b) For purposes of this subdivision: 
114.5      (1) "Drug" means a compound, substance, or preparation, and 
114.6   any component of a compound, substance, or preparation, other 
114.7   than food and food ingredients, dietary supplements, or 
114.8   alcoholic beverages that is: 
114.9      (i) recognized in the official United States Pharmacopoeia, 
114.10  official Homeopathic Pharmacopoeia of the United States, or 
114.11  official National Formulary, and supplement to any of them; 
114.12     (ii) intended for use in the diagnosis, cure, mitigation, 
114.13  treatment, or prevention of disease; or 
114.14     (iii) intended to affect the structure or any function of 
114.15  the body. 
114.16     (2) "Durable medical equipment" means equipment, including 
114.17  repair and replacement parts, but not including mobility 
114.18  enhancing equipment, that: 
114.19     (i) can withstand repeated use; 
114.20     (ii) is primarily and customarily used to serve a medical 
114.21  purpose; 
114.22     (iii) generally is not useful to a person in the absence of 
114.23  illness or injury; and 
114.24     (iv) is not worn in or on the body. 
114.25     (3) "Mobility enhancing equipment" means equipment, 
114.26  including repair and replacement parts, but not including 
114.27  durable medical equipment, that: 
114.28     (i) is primarily and customarily used to provide or 
114.29  increase the ability to move from one place to another and that 
114.30  is appropriate for use either in a home or a motor vehicle; 
114.31     (ii) is not generally used by persons with normal mobility; 
114.32  and 
114.33     (iii) does not include any motor vehicle or equipment on a 
114.34  motor vehicle normally provided by a motor vehicle manufacturer. 
114.35     (4) "Over-the-counter drug" means a drug that contains a 
114.36  label that identifies the product as a drug as required by Code 
115.1   of Federal Regulations, title 21, section 201.66.  The label 
115.2   must include a "drug facts" panel or a statement of the active 
115.3   ingredients with a list of those ingredients contained in the 
115.4   compound, substance, or preparation.  Grooming and hygiene 
115.5   products such as soaps, cleaning solutions, shampoo, toothpaste, 
115.6   mouthwash, antiperspirants, and suntan lotions and sunscreens 
115.7   are not "over-the-counter drugs," regardless of whether they 
115.8   otherwise meet the definition. 
115.9      (5) "Prescribed" means a direction in the form of an order, 
115.10  formula, or recipe issued in any form of oral, written, 
115.11  electronic, or other means of transmission by a duly licensed 
115.12  health care professional. 
115.13     (6) "Prosthetic device" means a replacement, corrective, or 
115.14  supportive device, including repair and replacement parts, worn 
115.15  on or in the body to: 
115.16     (i) artificially replace a missing portion of the body; 
115.17     (ii) prevent or correct physical deformity or malfunction; 
115.18  or 
115.19     (iii) support a weak or deformed portion of the body. 
115.20     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
115.21  purchases made on or after January 1, 2004. 
115.22     Sec. 26.  Minnesota Statutes 2002, section 297A.67, 
115.23  subdivision 8, is amended to read: 
115.24     Subd. 8.  [CLOTHING.] (a) Clothing is exempt.  For purposes 
115.25  of this subdivision, "clothing" means all human wearing apparel 
115.26  suitable for general use. 
115.27     (b) Clothing includes, but is not limited to, aprons, 
115.28  household and shop; athletic supporters; baby receiving 
115.29  blankets; bathing suits and caps; beach capes and coats; belts 
115.30  and suspenders; boots; coats and jackets; costumes; children and 
115.31  adult diapers, including disposable; ear muffs; footlets; formal 
115.32  wear; garters and garter belts; girdles; gloves and mittens for 
115.33  general use; hats and caps; hosiery; insoles for shoes; lab 
115.34  coats; neckties; overshoes; pantyhose; rainwear; rubber pants; 
115.35  sandals; scarves; shoes and shoe laces; slippers; sneakers; 
115.36  socks and stockings; steel-toed boots; underwear; uniforms, 
116.1   athletic and nonathletic; and wedding apparel. 
116.2      (c) Clothing does not include the following: 
116.3      (1) belt buckles sold separately; 
116.4      (2) costume masks sold separately; 
116.5      (3) patches and emblems sold separately; 
116.6      (4) sewing equipment and supplies, including but not 
116.7   limited to, knitting needles, patterns, pins, scissors, sewing 
116.8   machines, sewing needles, tape measures, and thimbles; 
116.9      (5) sewing materials that become part of clothing, 
116.10  including but not limited to, buttons, fabric, lace, thread, 
116.11  yarn, and zippers; 
116.12     (6) clothing accessories or equipment; 
116.13     (7) sports or recreational equipment; and 
116.14     (8) protective equipment. 
116.15  Clothing also does not include apparel made from fur if a 
116.16  uniform definition of "apparel made from fur" is developed by 
116.17  the member states of the Streamlined Sales and Use Tax Agreement.
116.18     For purposes of this subdivision, "clothing accessories or 
116.19  equipment" means incidental items worn on the person or in 
116.20  conjunction with clothing.  Clothing accessories and equipment 
116.21  include, but are not limited to, briefcases; cosmetics; hair 
116.22  notions, including barrettes, hair bows, and hairnets; handbags; 
116.23  handkerchiefs; jewelry; nonprescription sunglasses; umbrellas; 
116.24  wallets; watches; and wigs and hairpieces.  "Sports or 
116.25  recreational equipment" means items designed for human use and 
116.26  worn in conjunction with an athletic or recreational activity 
116.27  that are not suitable for general use.  Sports and recreational 
116.28  equipment includes, but is not limited to, ballet and tap shoes; 
116.29  cleated or spiked athletic shoes; gloves, including, but not 
116.30  limited to, baseball, bowling, boxing, hockey, and golf gloves; 
116.31  goggles; hand and elbow guards; life preservers and vests; mouth 
116.32  guards; roller and ice skates; shin guards; shoulder pads; ski 
116.33  boots; waders; and wetsuits and fins.  "Protective equipment" 
116.34  means items for human wear and designed as protection of the 
116.35  wearer against injury or disease or as protection against damage 
116.36  or injury of other persons or property but not suitable for 
117.1   general use.  Protective equipment includes, but is not limited 
117.2   to, breathing masks; clean room apparel and equipment; ear and 
117.3   hearing protectors; face shields; finger guards; hard hats; 
117.4   helmets; paint or dust respirators; protective gloves; safety 
117.5   glasses and goggles; safety belts; tool belts; and welders 
117.6   gloves and masks. 
117.7      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
117.8   purchases made on or after January 1, 2004. 
117.9      Sec. 27.  Minnesota Statutes 2002, section 297A.67, is 
117.10  amended by adding a subdivision to read: 
117.11     Subd. 31.  [SERVICE LOANER VEHICLE COVERED BY 
117.12  WARRANTY.] The loan of a vehicle by a motor vehicle dealer to a 
117.13  customer as a replacement for a vehicle being serviced or 
117.14  repaired is exempt if the vehicle is loaned pursuant to a 
117.15  warranty included in the original purchase price of the vehicle 
117.16  being serviced or repaired. 
117.17     <b>[EFFECTIVE DATE.]</b> This section is effective for vehicle 
117.18  loans made after June 30, 2003. 
117.19     Sec. 28.  Minnesota Statutes 2002, section 297A.68, 
117.20  subdivision 2, is amended to read: 
117.21     Subd. 2.  [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 
117.22  (a) Materials stored, used, or consumed in industrial production 
117.23  of personal property intended to be sold ultimately at retail 
117.24  are exempt, whether or not the item so used becomes an 
117.25  ingredient or constituent part of the property produced.  
117.26  Materials that qualify for this exemption include, but are not 
117.27  limited to, the following: 
117.28     (1) chemicals, including chemicals used for cleaning food 
117.29  processing machinery and equipment; 
117.30     (2) materials, including chemicals, fuels, and electricity 
117.31  purchased by persons engaged in industrial production to treat 
117.32  waste generated as a result of the production process; 
117.33     (3) fuels, electricity, gas, and steam used or consumed in 
117.34  the production process, except that electricity, gas, or steam 
117.35  used for space heating, cooling, or lighting is exempt if (i) it 
117.36  is in excess of the average climate control or lighting for the 
118.1   production area, and (ii) it is necessary to produce that 
118.2   particular product; 
118.3      (4) petroleum products and lubricants; 
118.4      (5) packaging materials, including returnable containers 
118.5   used in packaging food and beverage products; 
118.6      (6) accessory tools, equipment, and other items that are 
118.7   separate detachable units with an ordinary useful life of less 
118.8   than 12 months used in producing a direct effect upon the 
118.9   product; and 
118.10     (7) the following materials, tools, and equipment used in 
118.11  metalcasting:  crucibles, thermocouple protection sheaths and 
118.12  tubes, stalk tubes, refractory materials, molten metal filters 
118.13  and filter boxes, degassing lances, and base blocks. 
118.14     (b) This exemption does not include: 
118.15     (1) machinery, equipment, implements, tools, accessories, 
118.16  appliances, contrivances and furniture and fixtures, except 
118.17  those listed in paragraph (a), clause (6); and 
118.18     (2) petroleum and special fuels used in producing or 
118.19  generating power for propelling ready-mixed concrete trucks on 
118.20  the public highways of this state. 
118.21     (c) Industrial production includes, but is not limited to, 
118.22  research, development, design or production of any tangible 
118.23  personal property, manufacturing, processing (other than by 
118.24  restaurants and consumers) of agricultural products (whether 
118.25  vegetable or animal), commercial fishing, refining, smelting, 
118.26  reducing, brewing, distilling, printing, mining, quarrying, 
118.27  lumbering, generating electricity and, the production of road 
118.28  building materials, and the research, development, design, or 
118.29  production of computer software.  Industrial production does not 
118.30  include painting, cleaning, repairing or similar processing of 
118.31  property except as part of the original manufacturing process.  
118.32     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
118.33  purchases made on or after January 1, 2004. 
118.34     Sec. 29.  Minnesota Statutes 2002, section 297A.68, 
118.35  subdivision 5, is amended to read: 
118.36     Subd. 5.  [CAPITAL EQUIPMENT.] (a) Capital equipment is 
119.1   exempt.  The tax must be imposed and collected as if the rate 
119.2   under section 297A.62, subdivision 1, applied, and then refunded 
119.3   in the manner provided in section 297A.75. 
119.4      "Capital equipment" means machinery and equipment purchased 
119.5   or leased, and used in this state by the purchaser or lessee 
119.6   primarily for manufacturing, fabricating, mining, or refining 
119.7   tangible personal property to be sold ultimately at retail if 
119.8   the machinery and equipment are essential to the integrated 
119.9   production process of manufacturing, fabricating, mining, or 
119.10  refining.  Capital equipment also includes machinery and 
119.11  equipment used to electronically transmit results retrieved by a 
119.12  customer of an online computerized data retrieval system. 
119.13     (b) Capital equipment includes, but is not limited to: 
119.14     (1) machinery and equipment used to operate, control, or 
119.15  regulate the production equipment; 
119.16     (2) machinery and equipment used for research and 
119.17  development, design, quality control, and testing activities; 
119.18     (3) environmental control devices that are used to maintain 
119.19  conditions such as temperature, humidity, light, or air pressure 
119.20  when those conditions are essential to and are part of the 
119.21  production process; 
119.22     (4) materials and supplies used to construct and install 
119.23  machinery or equipment; 
119.24     (5) repair and replacement parts, including accessories, 
119.25  whether purchased as spare parts, repair parts, or as upgrades 
119.26  or modifications to machinery or equipment; 
119.27     (6) materials used for foundations that support machinery 
119.28  or equipment; 
119.29     (7) materials used to construct and install special purpose 
119.30  buildings used in the production process; and 
119.31     (8) ready-mixed concrete trucks in which the ready-mixed 
119.32  concrete is mixed as part of the delivery process; and 
119.33     (9) machinery or equipment used for research, development, 
119.34  design, or production of computer software.  
119.35     (c) Capital equipment does not include the following: 
119.36     (1) motor vehicles taxed under chapter 297B; 
120.1      (2) machinery or equipment used to receive or store raw 
120.2   materials; 
120.3      (3) building materials, except for materials included in 
120.4   paragraph (b), clauses (6) and (7); 
120.5      (4) machinery or equipment used for nonproduction purposes, 
120.6   including, but not limited to, the following:  plant security, 
120.7   fire prevention, first aid, and hospital stations; support 
120.8   operations or administration; pollution control; and plant 
120.9   cleaning, disposal of scrap and waste, plant communications, 
120.10  space heating, cooling, lighting, or safety; 
120.11     (5) farm machinery and aquaculture production equipment as 
120.12  defined by section 297A.61, subdivisions 12 and 13; 
120.13     (6) machinery or equipment purchased and installed by a 
120.14  contractor as part of an improvement to real property; or 
120.15     (7) any other item that is not essential to the integrated 
120.16  process of manufacturing, fabricating, mining, or refining. 
120.17     (d) For purposes of this subdivision: 
120.18     (1) "Equipment" means independent devices or tools separate 
120.19  from machinery but essential to an integrated production 
120.20  process, including computers and computer software, used in 
120.21  operating, controlling, or regulating machinery and equipment; 
120.22  and any subunit or assembly comprising a component of any 
120.23  machinery or accessory or attachment parts of machinery, such as 
120.24  tools, dies, jigs, patterns, and molds.  
120.25     (2) "Fabricating" means to make, build, create, produce, or 
120.26  assemble components or property to work in a new or different 
120.27  manner. 
120.28     (3) "Machinery" means mechanical, electronic, or electrical 
120.29  devices, including computers and computer software, that are 
120.30  purchased or constructed to be used for the activities set forth 
120.31  in paragraph (a), beginning with the removal of raw materials 
120.32  from inventory through completion of the product, including 
120.33  packaging of the product. 
120.34     (4) "Machinery and equipment used for pollution control" 
120.35  means machinery and equipment used solely to eliminate, prevent, 
120.36  or reduce pollution resulting from an activity described in 
121.1   paragraph (a).  
121.2      (5) "Manufacturing" means an operation or series of 
121.3   operations where raw materials are changed in form, composition, 
121.4   or condition by machinery and equipment and which results in the 
121.5   production of a new article of tangible personal property.  For 
121.6   purposes of this subdivision, "manufacturing" includes the 
121.7   generation of electricity or steam to be sold at retail. 
121.8      (6) "Mining" means the extraction of minerals, ores, stone, 
121.9   or peat. 
121.10     (7) "Online data retrieval system" means a system whose 
121.11  cumulation of information is equally available and accessible to 
121.12  all its customers. 
121.13     (8) "Primarily" means machinery and equipment used 50 
121.14  percent or more of the time in an activity described in 
121.15  paragraph (a). 
121.16     (9) "Refining" means the process of converting a natural 
121.17  resource to a product, including the treatment of water to be 
121.18  sold at retail. 
121.19     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
121.20  purchases made on or after January 1, 2004. 
121.21     Sec. 30.  Minnesota Statutes 2002, section 297A.68, 
121.22  subdivision 36, is amended to read: 
121.23     Subd. 36.  [DELIVERY OR DISTRIBUTION CHARGES; PRINTED 
121.24  MATERIALS DIRECT MAIL.] Charges for the delivery or distribution 
121.25  of printed materials, including individual account 
121.26  information, direct mail are exempt if (1) the charges are 
121.27  separately stated, (2) the delivery or distribution is to a mass 
121.28  audience or to a mailing list provided at the direction of the 
121.29  customer, and (3) the cost of the materials is not billed 
121.30  directly to the recipients. 
121.31     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
121.32  purchases made on or after January 1, 2004. 
121.33     Sec. 31.  Minnesota Statutes 2002, section 297A.68, is 
121.34  amended by adding a subdivision to read: 
121.35     Subd. 37.  [DURABLE MEDICAL EQUIPMENT FOR NURSING 
121.36  HOMES.] The purchase of durable medical equipment by nursing 
122.1   homes is exempt.  For purposes of this subdivision, "durable 
122.2   medical equipment" has the meaning given in section 297A.67, 
122.3   subdivision 7. 
122.4      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
122.5   purchases made on or after January 1, 2004. 
122.6      Sec. 32.  Minnesota Statutes 2002, section 297A.70, 
122.7   subdivision 8, is amended to read: 
122.8      Subd. 8.  [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 
122.9   SYSTEM; PRODUCTS AND SERVICES.] Products and services including, 
122.10  but not limited to, end user equipment used for construction, 
122.11  ownership, operation, maintenance, and enhancement of the 
122.12  backbone system of the regionwide public safety radio 
122.13  communication system established under sections 473.891 to 
122.14  473.905, are exempt.  For purposes of this subdivision, backbone 
122.15  system is defined in section 473.891, subdivision 9.  This 
122.16  subdivision is effective for purchases, sales, storage, use, or 
122.17  consumption occurring before August 1, 2003 2005, in the 
122.18  counties of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and 
122.19  Washington. 
122.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
122.21  following final enactment. 
122.22     Sec. 33.  Minnesota Statutes 2002, section 297A.70, 
122.23  subdivision 16, is amended to read: 
122.24     Subd. 16.  [CAMP FEES.] Camp fees to camps or other 
122.25  recreation facilities owned and operated by an exempt 
122.26  organization under section 501(c)(3) of the Internal Revenue 
122.27  Code are exempt if when the camps or facilities provide either: 
122.28     (1) educational and, religious, or rehabilitative 
122.29  activities; or 
122.30     (2) sports or social activities for young people primarily 
122.31  age 18 and under. 
122.32     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
122.33  purchases made after June 30, 2003. 
122.34     Sec. 34.  Minnesota Statutes 2002, section 297A.75, 
122.35  subdivision 4, is amended to read: 
122.36     Subd. 4.  [INTEREST.] Interest must be paid on the refund 
123.1   at the rate in section 270.76 from the date the refund claim is 
123.2   filed for taxes paid under subdivision 1, clauses (1) to (3), 
123.3   and (5), and from 60 days after the date the refund claim is 
123.4   filed with the commissioner for claims filed under subdivision 
123.5   1, clauses (4), (6), (7), (8), and (9) 90 days after the refund 
123.6   claim is filed with the commissioner for taxes paid under 
123.7   subdivision 1. 
123.8      <b>[EFFECTIVE DATE.]</b> This section is effective for refund 
123.9   claims filed on or after April 1, 2003. 
123.10     Sec. 35.  Minnesota Statutes 2002, section 297A.81, is 
123.11  amended to read: 
123.12     297A.81 [UNCOLLECTIBLE DEBTS; OFFSET AGAINST OTHER TAXES.] 
123.13     Subdivision 1.  [GENERAL.] The taxpayer may offset against 
123.14  the taxes payable for any reporting period the amount of taxes 
123.15  imposed by this chapter previously paid as a result of any 
123.16  transaction the consideration for which became a debt owed to 
123.17  the taxpayer that became uncollectible during the reporting 
123.18  period, but only in proportion to the portion of the debt that 
123.19  became uncollectible.  Section 289A.40, subdivision 2, applies 
123.20  to an offset under this section. 
123.21     Subd. 2.  [MANNER OF ALLOWING DEDUCTION FOR UNCOLLECTIBLE 
123.22  DEBT.] (a) Uncollectible debt is allowed as a deduction in the 
123.23  manner provided in this subdivision. 
123.24     (b) If the uncollectible debt arose with respect to a sale 
123.25  required to be included in gross receipts, subject to a tax 
123.26  imposed under chapter 297A, the entire amount of the debt 
123.27  remaining uncollected is allowed as a deduction. 
123.28     (c) If the uncollectible debt arose with respect to a sale 
123.29  partly subject to the tax imposed under chapter 297A and partly 
123.30  exempt, the amount of the uncollectible debt allowed as a 
123.31  deduction is the amount derived by multiplying the uncollectible 
123.32  debt by the percentage that the taxable sale bears to the total 
123.33  sales. 
123.34     (d) If the uncollectible debt arose with respect to two or 
123.35  more sales made at successive intervals, payments made before 
123.36  the date the debt became uncollectible must be applied first to 
124.1   the earliest sale upon which there is an unpaid balance, and to 
124.2   following sales in successive order. 
124.3      (e) If the books and records of the taxpayer claiming the 
124.4   bad debt allowance support an allocation of the bad debts among 
124.5   the member states of the streamlined sales and use tax 
124.6   agreement, such an allocation shall be allowed. 
124.7      Subd. 3.  [CERTIFIED SERVICE PROVIDER.] A certified service 
124.8   provider, as defined in section 297A.995, subdivision 2, on 
124.9   behalf of a taxpayer who is its client, may offset against taxes 
124.10  as provided by this section. 
124.11     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
124.12  purchases made on or after January 1, 2004. 
124.13     Sec. 36.  Minnesota Statutes 2002, section 297A.82, 
124.14  subdivision 4, is amended to read: 
124.15     Subd. 4.  [EXEMPTIONS.] (a) The following transactions are 
124.16  exempt from the tax imposed in this chapter to the extent 
124.17  provided. 
124.18     (b) The purchase or use of aircraft previously registered 
124.19  in Minnesota by a corporation or partnership is exempt if the 
124.20  transfer constitutes a transfer within the meaning of section 
124.21  351 or 721 of the Internal Revenue Code. 
124.22     (c) The sale to or purchase, storage, use, or consumption 
124.23  by a licensed aircraft dealer of an aircraft for which a 
124.24  commercial use permit has been issued pursuant to section 
124.25  360.654 is exempt, if the aircraft is resold while the permit is 
124.26  in effect. 
124.27     (d) Airflight equipment when sold to, or purchased, stored, 
124.28  used, or consumed by airline companies, as defined in section 
124.29  270.071, subdivision 4, is exempt.  For purposes of this 
124.30  subdivision, "airflight equipment" includes airplanes and parts 
124.31  necessary for the repair and maintenance of such airflight 
124.32  equipment, and flight simulators, but does not include airplanes 
124.33  with a gross weight of less than 30,000 pounds that are used on 
124.34  intermittent or irregularly timed flights. 
124.35     (e) Sales of, and the storage, distribution, use, or 
124.36  consumption of aircraft, as defined in section 360.511 and 
125.1   approved by the Federal Aviation Administration, and which the 
125.2   seller delivers to a purchaser outside Minnesota or which, 
125.3   without intermediate use, is shipped or transported outside 
125.4   Minnesota by the purchaser are exempt, but only if the purchaser 
125.5   is not a resident of Minnesota and provided that the aircraft is 
125.6   not thereafter returned to a point within Minnesota, except in 
125.7   the course of interstate commerce or isolated and occasional 
125.8   use, and will be registered in another state or country upon its 
125.9   removal from Minnesota.  This exemption applies even if the 
125.10  purchaser takes possession of the aircraft in Minnesota and uses 
125.11  the aircraft in the state exclusively for training purposes for 
125.12  a period not to exceed ten days prior to removing the aircraft 
125.13  from this state. 
125.14     (f) The purchase, storage, use, or consumption by or the 
125.15  sale to an airline company, as defined in section 270.071, 
125.16  subdivision 4, of prepared food and beverages are exempt if the 
125.17  prepared food and beverages are: 
125.18     (1) prepared in Minnesota or shipped or brought into 
125.19  Minnesota by a for-hire carrier; and 
125.20     (2) kept, without use, for the purpose of being transported 
125.21  outside of Minnesota. 
125.22     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
125.23  purchases made after June 30, 2003. 
125.24     Sec. 37.  Minnesota Statutes 2002, section 297A.99, 
125.25  subdivision 5, is amended to read: 
125.26     Subd. 5.  [TAX RATE.] (a) The tax rate is as specified in 
125.27  the special law authorization and as imposed by the political 
125.28  subdivision. 
125.29     (b) The full political subdivision rate applies to any 
125.30  sales that are taxed at a state rate less than or more than the 
125.31  state general sales and use tax rate., and the political 
125.32  subdivision must not have more than one local sales tax rate or 
125.33  more than one local use tax rate.  This paragraph does not apply 
125.34  to sales or use taxes imposed on electricity, piped natural or 
125.35  artificial gas, or other heating fuels delivered by the seller, 
125.36  or the retail sale or transfer of motor vehicles, aircraft, 
126.1   watercraft, modular homes, manufactured homes, or mobile homes. 
126.2      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
126.3   purchases made on or after January 1, 2004. 
126.4      Sec. 38.  Minnesota Statutes 2002, section 297A.99, 
126.5   subdivision 10, is amended to read: 
126.6      Subd. 10.  [USE OF ZIP CODE IN DETERMINING LOCATION OF 
126.7   SALE.] To determine whether to impose the local tax, the 
126.8   retailer may use zip codes if the zip code area is entirely 
126.9   within the political subdivision.  When a zip code area is not 
126.10  entirely within a political subdivision, the retailer shall not 
126.11  collect the local tax if the purchaser notifies the retailer 
126.12  that the purchaser's delivery address is outside of the 
126.13  political subdivision, unless the retailer verifies that the 
126.14  delivery address is in the political subdivision using a means 
126.15  other than the zip code.  The lowest combined tax rate imposed 
126.16  in the zip code area applies if the area includes more than one 
126.17  tax rate in any level of taxing jurisdictions.  If a nine-digit 
126.18  zip code designation is not available for a street address or if 
126.19  a seller is unable to determine the nine-digit zip code 
126.20  designation of a purchaser after exercising due diligence to 
126.21  determine the designation, the seller may apply the rate for the 
126.22  five-digit zip code area.  For the purposes of this subdivision, 
126.23  there is a rebuttable presumption that a seller has exercised 
126.24  due diligence if the seller has attempted to determine the 
126.25  nine-digit zip code designation by utilizing software approved 
126.26  by the governing board that makes this designation from the 
126.27  street address and the five-digit zip code of the purchaser. 
126.28  Notwithstanding subdivision 13, this subdivision applies to all 
126.29  local sales taxes without regard to the date of 
126.30  authorization.  This subdivision does not apply when the 
126.31  purchased product is received by the purchaser at the business 
126.32  location of the seller. 
126.33     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
126.34  purchases made on or after January 1, 2004. 
126.35     Sec. 39.  Minnesota Statutes 2002, section 297A.99, 
126.36  subdivision 12, is amended to read: 
127.1      Subd. 12.  [EFFECTIVE DATES; NOTIFICATION.] (a) A political 
127.2   subdivision may impose a tax under this section starting only on 
127.3   the first day of a calendar quarter.  A political subdivision 
127.4   may repeal a tax under this section stopping only on the last 
127.5   day of a calendar quarter. 
127.6      (b) The political subdivision shall notify the commissioner 
127.7   of revenue at least 90 days before imposing, changing the rate 
127.8   of, or repealing a tax under this section. 
127.9      (c) The political subdivision shall change the rate of tax 
127.10  imposed under this section starting only on the first day of a 
127.11  calendar quarter, and only after the commissioner has notified 
127.12  sellers at least 60 days prior to the change. 
127.13     (d) The political subdivision shall apply the rate change 
127.14  for sales tax imposed under this section to purchases from 
127.15  printed catalogs, wherein the purchaser computed the tax based 
127.16  upon local tax rates published in the catalog, starting only on 
127.17  the first day of a calendar quarter, and only after the 
127.18  commissioner has notified sellers at least 120 days prior to the 
127.19  change. 
127.20     (e) The political subdivision shall apply local 
127.21  jurisdiction boundary changes to taxes imposed under this 
127.22  section starting only on the first day of a calendar quarter, 
127.23  and only after the commissioner has notified sellers at least 60 
127.24  days prior to the change. 
127.25     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
127.26  purchases made on or after January 1, 2004. 
127.27     Sec. 40.  Minnesota Statutes 2002, section 297A.995, is 
127.28  amended by adding a subdivision to read: 
127.29     Subd. 10.  [RELIEF FROM CERTAIN LIABILITY.] Notwithstanding 
127.30  subdivision 9, sellers and certified service providers are 
127.31  relieved from liability to the state for having charged and 
127.32  collected the incorrect amount of sales or use tax resulting 
127.33  from the seller or certified service provider (1) relying on 
127.34  erroneous data provided by this state on tax rates, boundaries, 
127.35  or taxing jurisdiction assignments, or (2) relying on erroneous 
127.36  data provided by the state in its taxability matrix concerning 
128.1   the taxability of products and services. 
128.2      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
128.3   purchases made on or after January 1, 2004. 
128.4      Sec. 41.  Minnesota Statutes 2002, section 297B.01, 
128.5   subdivision 7, is amended to read: 
128.6      Subd. 7.  [SALE, SELLS, SELLING, PURCHASE, PURCHASED, OR 
128.7   ACQUIRED.] (a) "Sale," "sells," "selling," "purchase," 
128.8   "purchased," or "acquired" means any transfer of title of any 
128.9   motor vehicle, whether absolutely or conditionally, for a 
128.10  consideration in money or by exchange or barter for any purpose 
128.11  other than resale in the regular course of business.  
128.12     (b) Any motor vehicle utilized by the owner only by leasing 
128.13  such vehicle to others or by holding it in an effort to so lease 
128.14  it, and which is put to no other use by the owner other than 
128.15  resale after such lease or effort to lease, shall be considered 
128.16  property purchased for resale.  
128.17     (c) The terms also shall include any transfer of title or 
128.18  ownership of a motor vehicle by other means, for or without 
128.19  consideration, except that these terms shall not include: 
128.20     (1) the acquisition of a motor vehicle by inheritance from 
128.21  or by bequest of, a decedent who owned it; 
128.22     (2) the transfer of a motor vehicle which was previously 
128.23  licensed in the names of two or more joint tenants and 
128.24  subsequently transferred without monetary consideration to one 
128.25  or more of the joint tenants; 
128.26     (3) the transfer of a motor vehicle by way of gift between 
128.27  individuals, or gift from a limited used vehicle dealer licensed 
128.28  under section 168.27, subdivision 4a, to an individual, when the 
128.29  transfer is with no monetary or other consideration or 
128.30  expectation of consideration and the parties to the transfer 
128.31  submit an affidavit to that effect at the time the title 
128.32  transfer is recorded; 
128.33     (4) the voluntary or involuntary transfer of a motor 
128.34  vehicle between a husband and wife in a divorce proceeding; or 
128.35     (5) the transfer of a motor vehicle by way of a gift to an 
128.36  organization that is exempt from federal income taxation under 
129.1   section 501(c)(3) of the Internal Revenue Code, as amended 
129.2   through December 31, 1996, when the motor vehicle will be used 
129.3   exclusively for religious, charitable, or educational purposes. 
129.4      <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
129.5   after June 30, 2003. 
129.6      Sec. 42.  Minnesota Statutes 2002, section 297B.035, is 
129.7   amended by adding a subdivision to read: 
129.8      Subd. 5.  [USE BY DEALER.] If a motor vehicle dealer uses a 
129.9   vehicle, purchased for resale in the ordinary course of 
129.10  business, other than for demonstration purposes, the dealer may 
129.11  elect to pay the motor vehicle sales tax under this chapter or 
129.12  the use tax under chapter 297A based on the reasonable rental 
129.13  value of the vehicle.  If the motor vehicle dealer fails to 
129.14  report the use tax under chapter 297A, it is presumed that the 
129.15  dealer elected to pay the motor vehicle sales tax under this 
129.16  chapter. 
129.17     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
129.18  after June 30, 2003. 
129.19     Sec. 43.  Laws 2001, First Special Session chapter 5, 
129.20  article 12, section 95, as amended by Laws 2002, chapter 377, 
129.21  article 3, section 24, is amended to read: 
129.22     Sec. 95.  [REPEALER.] 
129.23     (a) Minnesota Statutes 2000, sections 297A.61, subdivision 
129.24  16; 297A.68, subdivision 21; and 297A.71, subdivision 2, are 
129.25  repealed effective for sales and purchases occurring after June 
129.26  30, 2001, except that the repeal of section 297A.61, subdivision 
129.27  16, paragraph (d), is effective for sales and purchases 
129.28  occurring after July 31, 2001. 
129.29     (b) Minnesota Statutes 2000, sections 297A.62, subdivision 
129.30  2, and 297A.64, subdivision 1, are repealed effective for sales 
129.31  and purchases made after December 31, 2005. 
129.32     (c) Minnesota Statutes 2000, section 297A.71, subdivision 
129.33  15, is repealed effective for sales and purchases made after 
129.34  June 30, 2002. 
129.35     (d) Minnesota Statutes 2000, section 289A.60, subdivision 
129.36  15, is repealed effective for liabilities after January 1, 2004. 
130.1      (e) Minnesota Statutes 2000, section 297A.71, subdivision 
130.2   16, is repealed effective for sales and purchases occurring 
130.3   after December 31, 2002. 
130.4      Sec. 44.  [STATE CONVENTION CENTER.] 
130.5      Subdivision 1.  [EXEMPTION.] Building materials, supplies, 
130.6   or equipment used or consumed in constructing or equipping 
130.7   improvements to a state convention center located in a city 
130.8   outside the metropolitan area as defined in section 473.121, 
130.9   subdivision 2, and governed by an 11-person board of which four 
130.10  are appointed by the governor are exempt if the improvements are 
130.11  financed in whole or in part by nonstate resources including, 
130.12  but not limited to, revenue or general obligations issued by the 
130.13  state convention center board of the city in which the center is 
130.14  located.  This exemption applies regardless of whether the items 
130.15  are purchased by the owner or by a contractor, subcontractor, or 
130.16  builder. 
130.17     Subd. 2.  [LEGISLATIVE INTENT.] This section is intended to 
130.18  clarify the original intent of Minnesota Statutes, section 
130.19  297A.71, subdivision 2. 
130.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
130.21  following final enactment and applies retroactively to sales and 
130.22  purchases made after June 30, 1995, and before July 1, 2001. 
130.23     Sec. 45.  [CITY OF NEWPORT; LODGING TAX.] 
130.24     Subdivision 1.  [LODGING TAX.] Notwithstanding Minnesota 
130.25  Statutes, section 477A.016, or any ordinance, city charter, or 
130.26  other provision of law, the city of Newport may, by ordinance, 
130.27  impose a tax of up to four percent upon the gross receipts from 
130.28  the sale of lodging for periods of less than 30 days in hotels 
130.29  and motels located in the city.  The tax does not apply to the 
130.30  furnishing of lodging by a business having less than 25 lodging 
130.31  rooms.  The total amount of taxes imposed under this section and 
130.32  under Minnesota Statutes, section 469.190, shall not exceed four 
130.33  percent. 
130.34     Subd. 2.  [USE OF PROCEEDS.] The proceeds of any tax 
130.35  imposed in subdivision 1 shall be used by the city to fund 
130.36  economic development and redevelopment of the city.  Authorized 
131.1   expenses include, but are not limited to, acquisition and 
131.2   development costs of open space, parks, and trails. 
131.3      Subd. 3.  [ENFORCEMENT, COLLECTION, AND 
131.4   ADMINISTRATION.] The tax shall be collected and administered in 
131.5   the same manner as local lodging taxes under Minnesota Statutes, 
131.6   section 469.190. 
131.7      <b>[EFFECTIVE DATE.]</b> This section is effective upon approval 
131.8   by the Newport city council and compliance with Minnesota 
131.9   Statutes, section 645.021, subdivision 3. 
131.10     Sec. 46.  [STUDY OF LOCAL SALES TAX.] 
131.11     (a) The commissioner of revenue shall study the local sales 
131.12  taxes in Minnesota and provide a written report and 
131.13  recommendations to the legislature, in compliance with Minnesota 
131.14  Statutes, sections 3.195 and 3.197, by February 1, 2004.  The 
131.15  study must report on: 
131.16     (1) the authorized uses of revenue from local sales taxes 
131.17  in effect, and the proposed uses of revenue from local sales 
131.18  taxes recently proposed but not enacted; 
131.19     (2) the local approval requirements for local sales taxes; 
131.20     (3) the duration of local sales taxes and whether the full 
131.21  duration authorized in law was necessary to provide sufficient 
131.22  revenue for the authorized uses of the local sales tax; 
131.23     (4) if the authorized uses of the local sales tax revenues 
131.24  are regional in nature or limited in benefit to the jurisdiction 
131.25  in which the tax is imposed; 
131.26     (5) the estimated portion of revenue raised through the 
131.27  local sales taxes that comes from (i) residents of the 
131.28  jurisdiction in which the tax is imposed; (ii) Minnesota 
131.29  residents who live outside the jurisdiction; and (iii) 
131.30  non-Minnesota residents; 
131.31     (6) the ability of jurisdictions to raise revenue by other 
131.32  means, including the local property tax, and the extent to which 
131.33  the jurisdictions assess property taxes in comparison to other 
131.34  similar jurisdictions, and the state average, expressed in terms 
131.35  of levy as a percent of adjusted net tax capacity; 
131.36     (7) how jurisdictions that do not impose local sales taxes 
132.1   raise revenue to fund projects similar to those funded through 
132.2   local sales taxes; and 
132.3      (8) the compatibility of local sales taxes with the 
132.4   policies underlying the streamlined sales tax project. 
132.5      (b) The study must make recommendations on: 
132.6      (1) the appropriate role of local sales taxes as a part of 
132.7   Minnesota's state and local revenue system, including: 
132.8      (i) the appropriate uses of local sales taxes; and 
132.9      (ii) whether local sales taxes should be limited to 
132.10  jurisdictions that do not meet minimum thresholds of raising 
132.11  revenue through other means, including local property tax; 
132.12     (2) criteria to be used in evaluating local sales tax 
132.13  proposals, designed to direct the use of local sales taxes 
132.14  toward: 
132.15     (i) projects that are regional in nature; 
132.16     (ii) projects that require capital expenditures; and 
132.17     (iii) projects in jurisdictions with inadequate fiscal 
132.18  capacity to fund the projects through other means; and 
132.19     (3) the feasibility of authorizing the commissioner of 
132.20  revenue to approve or deny local sales taxes proposals based on 
132.21  a uniform set of criteria, including the advisability of 
132.22  requiring local approval by referendum or revocation by reverse 
132.23  referendum, and if the referendum should be a criterion 
132.24  necessary for a proposal to be considered for authorization or 
132.25  should occur after authorization but as a condition of the tax 
132.26  being implemented. 
132.27     Sec. 47.  [REPEALER.] 
132.28     (a) Minnesota Statutes 2002, section 297A.61, subdivisions 
132.29  14 and 15, are repealed and are effective for sales and 
132.30  purchases made on or after January 1, 2004. 
132.31     (b) Minnesota Statutes 2002, section 297A.69, subdivision 
132.32  5, is repealed effective January 1, 2006. 
132.33     (c) Minnesota Statutes 2002, section 37.13, subdivision 2, 
132.34  is repealed effective July 1, 2003, but the repealer does not 
132.35  apply to sales taxes retained on sales occurring before July 1, 
132.36  2003. 
133.1      (d) Minnesota Statutes 2002, section 325E.112, subdivision 
133.2   2a, is repealed effective July 1, 2003. 
133.3                              ARTICLE 5 
133.4                            PROPERTY TAXES 
133.5      Section 1.  [123A.455] [REALIGNING SPLIT RESIDENTIAL 
133.6   PARCELS.] 
133.7      Subdivision 1.  [DEFINITIONS.] "Split residential property 
133.8   parcel" means a parcel of real estate that is located within the 
133.9   boundaries of more than one school district and that is 
133.10  classified as residential property under: 
133.11     (1) section 273.13, subdivision 22, paragraph (a) or (b); 
133.12     (2) section 273.13, subdivision 25, paragraph (b), clause 
133.13  (1); or 
133.14     (3) section 273.13, subdivision 25, paragraph (c), clause 
133.15  (1). 
133.16     Subd. 2.  [PETITION.] The owner of a split residential 
133.17  property parcel may petition the auditor of the county where the 
133.18  split parcel is located to transfer that part into the adjoining 
133.19  school district so the entire property will be located in the 
133.20  same school district.  The petition must contain: 
133.21     (1) a correct description of the split parcel to be 
133.22  affected by the transfer including supporting data on location 
133.23  and title to the land; 
133.24     (2) a list of the school districts in which the split 
133.25  parcels currently lie; 
133.26     (3) the school district into which the petitioner desires 
133.27  to have the whole split parcel transferred; and 
133.28     (4) the district of attendance of any students currently 
133.29  residing on the property. 
133.30     Subd. 3.  [AUDITOR'S ORDER.] Within 60 days of receipt of 
133.31  the petition, the auditor of the county in which the petition 
133.32  was filed under subdivision 2 shall issue an order to transfer 
133.33  the affected parcel to the district determined by the county 
133.34  board.  Orders issued on or before July 1 will be effective for 
133.35  taxes payable in the following year.  The auditor must notify 
133.36  the affected school districts and the commissioner of the change 
134.1   in school district boundaries. 
134.2      Subd. 4.  [COMMISSIONER.] The commissioner shall modify the 
134.3   records of school district boundaries to conform to the order. 
134.4      Subd. 5.  [TAXABLE PROPERTY.] Upon the effective date of 
134.5   the order, the whole split property parcel is transferred into a 
134.6   single school district.  Beginning in the next subsequent taxes 
134.7   payable year, all taxable property in the whole split parcel is: 
134.8      (1) relieved of all school district taxes from the district 
134.9   in which the parcel is no longer located; and 
134.10     (2) subject to all school district taxes in the district in 
134.11  which the whole split parcel is now located. 
134.12     <b>[EFFECTIVE DATE.]</b> This section is effective for petitions 
134.13  filed on or after the day following final enactment.  Orders 
134.14  issued under subdivision 3 on or before September 15, 2003, are 
134.15  effective for taxes payable in 2004.  
134.16     Sec. 2.  Minnesota Statutes 2002, section 161.465, is 
134.17  amended to read: 
134.18     161.465 [REIMBURSEMENT FOR FIRE SERVICES.] 
134.19     (a) Subdivision 1.  [GRASS FIRES.] Ordinary expenses 
134.20  incurred by a municipal or volunteer fire department in 
134.21  extinguishing a grass fire within the right-of-way of a trunk 
134.22  highway must be reimbursed upon certification to the 
134.23  commissioner of transportation from the trunk highway fund.  In 
134.24  addition, ordinary expenses incurred by a municipal or volunteer 
134.25  fire department in extinguishing a fire outside the right-of-way 
134.26  of any trunk highway if the fire originated within the 
134.27  right-of-way, upon approval of a police officer or an officer or 
134.28  employee of the department of public safety must, upon 
134.29  certification to the commissioner of transportation by the 
134.30  proper official of the municipality or fire department within 60 
134.31  days after the completion of the service, be reimbursed to the 
134.32  municipality or fire department from funds in the trunk highway 
134.33  fund.  
134.34     Subd. 2.  [MOTOR VEHICLE FIRES.] Ordinary expenses incurred 
134.35  by a municipal or volunteer fire department in extinguishing a 
134.36  motor vehicle fire within the right-of-way of a trunk highway or 
135.1   interstate, to the extent these expenses are not reimbursed by 
135.2   insurance, some other reasonable method of reimbursement, or 
135.3   collected in accordance with section 366.012, may be reimbursed 
135.4   by the commissioner from the motor vehicle fire revolving 
135.5   account in the general fund up to $300 per fire call upon 
135.6   certification to the commissioner. 
135.7      Subd. 3.  [FUND REIMBURSEMENT.] The commissioner of 
135.8   transportation shall take action practicable to secure 
135.9   reimbursement to the trunk highway fund or to the general fund 
135.10  of money expended under this section from the person, firm, or 
135.11  corporation responsible for the fire or danger of fire.  A motor 
135.12  vehicle fire revolving account is created in the general fund.  
135.13  The commissioner shall deposit into the account all money 
135.14  received by the commissioner in reimbursements from persons, 
135.15  firms, or corporations for costs of extinguishing motor vehicle 
135.16  fires within trunk highway rights-of-way.  Money in the account 
135.17  is appropriated to the commissioner for the purpose of making 
135.18  reimbursements to municipal or volunteer fire departments under 
135.19  subdivision 2. 
135.20     (b) Subd. 4.  [NO ADMISSION OF LIABILITY.] The provisions 
135.21  of this section shall not be construed to admit state liability 
135.22  for damage or destruction to private property or for injury to 
135.23  persons resulting from a fire originating within a trunk highway 
135.24  or interstate right-of-way. 
135.25     <b>[EFFECTIVE DATE.]</b> This section is effective for motor 
135.26  vehicle fires after June 30, 2003. 
135.27     Sec. 3.  Minnesota Statutes 2002, section 168A.05, 
135.28  subdivision 1a, is amended to read: 
135.29     Subd. 1a.  [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 
135.30  PAYMENT.] In the case of a manufactured home as defined in 
135.31  section 327.31, subdivision 6, the department shall not issue a 
135.32  certificate of title unless the application under section 
135.33  168A.04 is accompanied with a statement from the county auditor 
135.34  or county treasurer where the manufactured home is presently 
135.35  located, stating that all manufactured home personal property 
135.36  taxes levied on the unit that are due from in the name of the 
136.1   current owner at the time of transfer for which the application 
136.2   applies, have been paid. 
136.3      <b>[EFFECTIVE DATE.]</b> This section is effective for 
136.4   certificates of title issued by the department on or after July 
136.5   1, 2003. 
136.6      Sec. 4.  Minnesota Statutes 2002, section 216B.2424, 
136.7   subdivision 5, is amended to read: 
136.8      Subd. 5.  [MANDATE.] (a) A public utility, as defined in 
136.9   section 216B.02, subdivision 4, that operates a nuclear-powered 
136.10  electric generating plant within this state must construct and 
136.11  operate, purchase, or contract to construct and operate (1) by 
136.12  December 31, 1998, 50 megawatts of electric energy installed 
136.13  capacity generated by farm-grown closed-loop biomass scheduled 
136.14  to be operational by December 31, 2001; and (2) by December 31, 
136.15  1998, an additional 75 megawatts of installed capacity so 
136.16  generated scheduled to be operational by December 31, 2002.  
136.17     (b) Of the 125 megawatts of biomass electricity installed 
136.18  capacity required under this subdivision, no more than 50 
136.19  megawatts of this capacity may be provided by a facility that 
136.20  uses poultry litter as its primary fuel source and any such 
136.21  facility:  
136.22     (1) need not use biomass that complies with the definition 
136.23  in subdivision 1; 
136.24     (2) must enter into a contract with the public utility for 
136.25  such capacity, that has an average purchase price per megawatt 
136.26  hour over the life of the contract that is equal to or less than 
136.27  the average purchase price per megawatt hour over the life of 
136.28  the contract in contracts approved by the public utilities 
136.29  commission before April 1, 2000, to satisfy the mandate of this 
136.30  section, and file that contract with the public utilities 
136.31  commission prior to September 1, 2000; and 
136.32     (3) must schedule such capacity to be operational by 
136.33  December 31, 2002.  
136.34     (c) Of the total 125 megawatts of biomass electric energy 
136.35  installed capacity required under this section, no more than 75 
136.36  megawatts may be provided by a single project.  
137.1      (d) Of the 75 megawatts of biomass electric energy 
137.2   installed capacity required under paragraph (a), clause (2), no 
137.3   more than 25 megawatts of this capacity may be provided by a St. 
137.4   Paul district heating and cooling system cogeneration facility 
137.5   utilizing waste wood as a primary fuel source.  The St. Paul 
137.6   district heating and cooling system cogeneration facility need 
137.7   not use biomass that complies with the definition in subdivision 
137.8   1.  
137.9      (e) The public utility must accept and consider on an equal 
137.10  basis with other biomass proposals: 
137.11     (1) a proposal to satisfy the requirements of this section 
137.12  that includes a project that exceeds the megawatt capacity 
137.13  requirements of either paragraph (a), clause (1) or (2), and 
137.14  that proposes to sell the excess capacity to the public utility 
137.15  or to other purchasers; and 
137.16     (2) a proposal for a new facility to satisfy more than ten 
137.17  but not more than 20 megawatts of the electrical generation 
137.18  requirements by a small business-sponsored independent power 
137.19  producer facility to be located within the northern quarter of 
137.20  the state, which means the area located north of Constitutional 
137.21  Route No. 8 as described in section 161.114, subdivision 2, and 
137.22  that utilizes biomass residue wood, sawdust, bark, chipped wood, 
137.23  or brush to generate electricity.  A facility described in this 
137.24  clause is not required to utilize biomass complying with the 
137.25  definition in subdivision 1, but must have the capacity required 
137.26  by this clause operational by December 31, 2002 be under 
137.27  construction by July 1, 2005. 
137.28     (f) If a public utility files a contract with the 
137.29  commission for electric energy installed capacity that uses 
137.30  poultry litter as its primary fuel source, the commission must 
137.31  do a preliminary review of the contract to determine if it meets 
137.32  the purchase price criteria provided in paragraph (b), clause 
137.33  (2), of this subdivision.  The commission shall perform its 
137.34  review and advise the parties of its determination within 30 
137.35  days of filing of such a contract by a public utility.  A public 
137.36  utility may submit by September 1, 2000, a revised contract to 
138.1   address the commission's preliminary determination.  
138.2      (g) The commission shall finally approve, modify, or 
138.3   disapprove no later than July 1, 2001, all contracts submitted 
138.4   by a public utility as of September 1, 2000, to meet the mandate 
138.5   set forth in this subdivision.  
138.6      (h) If a public utility subject to this section exercises 
138.7   an option to increase the generating capacity of a project in a 
138.8   contract approved by the commission prior to April 25, 2000, to 
138.9   satisfy the mandate in this subdivision, the public utility must 
138.10  notify the commission by September 1, 2000, that it has 
138.11  exercised the option and include in the notice the amount of 
138.12  additional megawatts to be generated under the option 
138.13  exercised.  Any review by the commission of the project after 
138.14  exercise of such an option shall be based on the same criteria 
138.15  used to review the existing contract. 
138.16     (i) A facility specified in this subdivision qualifies for 
138.17  exemption from property taxation under section 272.02, 
138.18  subdivision 43. 
138.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
138.20  following final enactment. 
138.21     Sec. 5.  Minnesota Statutes 2002, section 270B.12, is 
138.22  amended by adding a subdivision to read: 
138.23     Subd. 13.  [COUNTY ASSESSORS; CLASS 1B HOMESTEADS.] The 
138.24  commissioner may disclose to a county assessor, and to the 
138.25  assessor's designated agents or employees, a listing of persons 
138.26  and parcels of property qualifying for the class 1b property tax 
138.27  classification under section 273.13, subdivision 22.  
138.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
138.29  following final enactment. 
138.30     Sec. 6.  Minnesota Statutes 2002, section 272.02, 
138.31  subdivision 31, is amended to read: 
138.32     Subd. 31.  [BUSINESS INCUBATOR PROPERTY.] Property owned by 
138.33  a nonprofit charitable organization that qualifies for tax 
138.34  exemption under section 501(c)(3) of the Internal Revenue Code 
138.35  of 1986, as amended through December 31, 1997, that is intended 
138.36  to be used as a business incubator in a high-unemployment 
139.1   county, is exempt.  As used in this subdivision, a "business 
139.2   incubator" is a facility used for the development of nonretail 
139.3   businesses, offering access to equipment, space, services, and 
139.4   advice to the tenant businesses, for the purpose of encouraging 
139.5   economic development, diversification, and job creation in the 
139.6   area served by the organization, and "high-unemployment county" 
139.7   is a county that had an average annual unemployment rate of 7.9 
139.8   percent or greater in 1997.  Property that qualifies for the 
139.9   exemption under this subdivision is limited to no more than two 
139.10  contiguous parcels and structures that do not exceed in the 
139.11  aggregate 40,000 square feet.  This exemption expires after 
139.12  taxes payable in 2005 2011. 
139.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
139.14  following final enactment. 
139.15     Sec. 7.  Minnesota Statutes 2002, section 272.02, 
139.16  subdivision 47, is amended to read: 
139.17     Subd. 47.  [POULTRY LITTER BIOMASS GENERATION FACILITY; 
139.18  PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 
139.19  attached machinery and other personal property which is part of 
139.20  an electrical generating facility that meets the requirements of 
139.21  this subdivision is exempt.  At the time of construction, the 
139.22  facility must: 
139.23     (1) be designed to utilize poultry litter as a primary fuel 
139.24  source; and 
139.25     (2) be constructed for the purpose of generating power at 
139.26  the facility that will be sold pursuant to a contract approved 
139.27  by the public utilities commission in accordance with the 
139.28  biomass mandate imposed under section 216B.2424. 
139.29     Construction of the facility must be commenced after 
139.30  January 1, 2000 2003, and before December 31, 2002 2003.  
139.31  Property eligible for this exemption does not include electric 
139.32  transmission lines and interconnections or gas pipelines and 
139.33  interconnections appurtenant to the property or the facility. 
139.34     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
139.35  levied in 2004, payable in 2005, and thereafter. 
139.36     Sec. 8.  Minnesota Statutes 2002, section 272.02, 
140.1   subdivision 48, is amended to read: 
140.2      Subd. 48.  [WASTE TIRE COGENERATION FACILITY; PERSONAL 
140.3   PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
140.4   machinery and other personal property which is part of an 
140.5   electric generating facility that meets the requirements of this 
140.6   subdivision is exempt.  At the time of construction, the 
140.7   facility must: 
140.8      (1) be designed to utilize waste tires as a primary fuel 
140.9   source; and 
140.10     (2) be a cogeneration electric generating facility of 15 to 
140.11  25 megawatts of installed capacity. 
140.12     Construction of the facility must be commenced after 
140.13  January 1, 2000, and before January 1, 2004 2008.  Property 
140.14  eligible for this exemption does not include electric 
140.15  transmission lines and interconnections or gas pipelines and 
140.16  interconnections appurtenant to the property or the facility.  
140.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
140.18  following final enactment. 
140.19     Sec. 9.  Minnesota Statutes 2002, section 272.02, 
140.20  subdivision 53, is amended to read: 
140.21     Subd. 53.  [ELECTRIC GENERATION FACILITY; PERSONAL 
140.22  PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 
140.23  machinery and other personal property which is part of a 3.2 
140.24  megawatt run-of-the-river hydroelectric generation facility and 
140.25  that meets the requirements of this subdivision is exempt.  At 
140.26  the time of construction, the facility must: 
140.27     (1) utilize two turbine generators at a dam site existing 
140.28  on March 31, 1994; 
140.29     (2) be located on publicly owned land and within 1,500 feet 
140.30  of a 13.8 kilovolt distribution substation; and 
140.31     (3) be eligible to receive a renewable energy production 
140.32  incentive payment under section 216C.41. 
140.33     Construction of the facility must be commenced after 
140.34  January 1, 2002, and before January 1, 2004 2005.  Property 
140.35  eligible for this exemption does not include electric 
140.36  transmission lines and interconnections or gas pipelines and 
141.1   interconnections appurtenant to the property or the facility. 
141.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
141.3   following final enactment. 
141.4      Sec. 10.  Minnesota Statutes 2002, section 272.02, is 
141.5   amended by adding a subdivision to read: 
141.6      Subd. 56.  [ELECTRIC GENERATION FACILITY; PERSONAL 
141.7   PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
141.8   attached machinery and other personal property which is part of 
141.9   a combined-cycle combustion-turbine electric generation facility 
141.10  that exceeds 550 megawatts of installed capacity and that meets 
141.11  the requirements of this subdivision is exempt.  At the time of 
141.12  construction, the facility must: 
141.13     (1) be designed to utilize natural gas as a primary fuel; 
141.14     (2) not be owned by a public utility as defined in section 
141.15  216B.02, subdivision 4; 
141.16     (3) be located within five miles of an existing natural gas 
141.17  pipeline and within four miles of an existing electrical 
141.18  transmission substation; 
141.19     (4) be located outside the metropolitan area as defined 
141.20  under section 473.121, subdivision 2; and 
141.21     (5) be designed to provide energy and ancillary services 
141.22  and have received a certificate of need under section 216B.243. 
141.23     (b) Construction of the facility must be commenced after 
141.24  January 1, 2004, and before January 1, 2007.  Property eligible 
141.25  for this exemption does not include electric transmission lines 
141.26  and interconnections or gas pipelines and interconnections 
141.27  appurtenant to the property or the facility. 
141.28     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
141.29  year 2005, taxes payable in 2006, and thereafter. 
141.30     Sec. 11.  Minnesota Statutes 2002, section 272.02, is 
141.31  amended by adding a subdivision to read: 
141.32     Subd. 57.  [ELECTRIC GENERATION FACILITY; PERSONAL 
141.33  PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 
141.34  attached machinery and other personal property which is part of 
141.35  a combined-cycle combustion-turbine electric generation facility 
141.36  that exceeds 150 megawatts of installed capacity and that meets 
142.1   the requirements of this subdivision is exempt.  At the time of 
142.2   construction, the facility must: 
142.3      (1) utilize natural gas as a primary fuel; 
142.4      (2) be owned by an electric generation and transmission 
142.5   cooperative; 
142.6      (3) be located within ten miles of parallel existing 
142.7   24-inch and 30-inch natural gas pipelines and a 345-kilovolt 
142.8   high-voltage electric transmission line; 
142.9      (4) be designed to provide intermediate energy and 
142.10  ancillary services, and have received a certificate of need 
142.11  under section 216B.243, demonstrating demand for its capacity; 
142.12  and 
142.13     (5) have received by resolution, the approval from the 
142.14  governing body of the county and city in which the proposed 
142.15  facility is to be located for the exemption of personal property 
142.16  under this subdivision. 
142.17     (b) Construction of the facility must be commenced after 
142.18  January 1, 2004, and before January 1, 2009.  Property eligible 
142.19  for this exemption does not include electric transmission lines 
142.20  and interconnections or gas pipelines and interconnections 
142.21  appurtenant to the property or the facility. 
142.22     (c) The exemption under this section will take effect only 
142.23  if the owner of the facility enters into agreements with the 
142.24  governing bodies of the county and the city in which the 
142.25  facility is located.  The agreements may include a requirement 
142.26  that the facility must pay a host fee to compensate the county 
142.27  and city for hosting the facility. 
142.28     <b>[EFFECTIVE DATE.]</b> This section is effective for assessment 
142.29  year 2005, taxes payable in 2006, and thereafter. 
142.30     Sec. 12.  Minnesota Statutes 2002, section 273.01, is 
142.31  amended to read: 
142.32     273.01 [LISTING AND ASSESSMENT, TIME.] 
142.33     All real property subject to taxation shall be listed and 
142.34  at least one-fourth one-fifth of the parcels listed shall be 
142.35  appraised each year with reference to their value on January 2 
142.36  preceding the assessment so that each parcel shall be 
143.1   reappraised at maximum intervals of four five years.  All real 
143.2   property becoming taxable in any year shall be listed with 
143.3   reference to its value on January 2 of that year.  Except as 
143.4   provided in this section and section 274.01, subdivision 1, all 
143.5   real property assessments shall be completed two weeks prior to 
143.6   the date scheduled for the local board of review or 
143.7   equalization.  No changes in valuation or classification which 
143.8   are intended to correct errors in judgment by the county 
143.9   assessor may be made by the county assessor after the board of 
143.10  review or the county board of equalization has adjourned; 
143.11  however, corrections of errors that are merely clerical in 
143.12  nature or changes that extend homestead treatment to property 
143.13  are permitted after adjournment until the tax extension date for 
143.14  that assessment year.  Any changes made by the assessor after 
143.15  adjournment must be fully documented and maintained in a file in 
143.16  the assessor's office and shall be available for review by any 
143.17  person.  A copy of any changes made during this period shall be 
143.18  sent to the county board no later than December 31 of the 
143.19  assessment year.  In the event a valuation and classification is 
143.20  not placed on any real property by the dates scheduled for the 
143.21  local board of review or equalization the valuation and 
143.22  classification determined in the preceding assessment shall be 
143.23  continued in effect and the provisions of section 273.13 shall, 
143.24  in such case, not be applicable, except with respect to real 
143.25  estate which has been constructed since the previous 
143.26  assessment.  Real property containing iron ore, the fee to which 
143.27  is owned by the state of Minnesota, shall, if leased by the 
143.28  state after January 2 in any year, be subject to assessment for 
143.29  that year on the value of any iron ore removed under said lease 
143.30  prior to January 2 of the following year.  Personal property 
143.31  subject to taxation shall be listed and assessed annually with 
143.32  reference to its value on January 2; and, if acquired on that 
143.33  day, shall be listed by or for the person acquiring it.  
143.34     <b>[EFFECTIVE DATE.]</b> This section is effective for assessments 
143.35  on or after January 2, 2004. 
143.36     Sec. 13.  Minnesota Statutes 2002, section 273.08, is 
144.1   amended to read: 
144.2      273.08 [ASSESSOR'S DUTIES.] 
144.3      The assessor shall actually view, and determine the market 
144.4   value of each tract or lot of real property listed for taxation, 
144.5   including the value of all improvements and structures thereon, 
144.6   at maximum intervals of four five years and shall enter the 
144.7   value opposite each description. 
144.8      <b>[EFFECTIVE DATE.]</b> This section is effective for assessments 
144.9   on or after January 2, 2004. 
144.10     Sec. 14.  Minnesota Statutes 2002, section 273.112, 
144.11  subdivision 3, is amended to read: 
144.12     Subd. 3.  [REQUIREMENTS.] Real estate shall be entitled to 
144.13  valuation and tax deferment under this section only if it is: 
144.14     (a) actively and exclusively devoted to golf, skiing, lawn 
144.15  bowling, croquet, auto racing, or archery or firearms range 
144.16  recreational use or other recreational uses carried on at the 
144.17  establishment; 
144.18     (b) five acres in size or more, except in the case of a 
144.19  lawn bowling or croquet green or an archery or firearms range; 
144.20     (c)(1) operated by private individuals or, in the case of a 
144.21  lawn bowling green, or croquet green, or an auto racing track, 
144.22  by private individuals or corporations, and open to the public; 
144.23  or 
144.24     (2) operated by firms or corporations for the benefit of 
144.25  employees or guests; or 
144.26     (3) operated by private clubs having a membership of 50 or 
144.27  more or open to the public, provided that the club does not 
144.28  discriminate in membership requirements or selection on the 
144.29  basis of sex or marital status; and 
144.30     (d) made available for use in the case of real estate 
144.31  devoted to golf without discrimination on the basis of sex 
144.32  during the time when the facility is open to use by the public 
144.33  or by members, except that use for golf may be restricted on the 
144.34  basis of sex no more frequently than one, or part of one, 
144.35  weekend each calendar month for each sex and no more than two, 
144.36  or part of two, weekdays each week for each sex.  
145.1      If a golf club membership allows use of golf course 
145.2   facilities by more than one adult per membership, the use must 
145.3   be equally available to all adults entitled to use of the golf 
145.4   course under the membership, except that use may be restricted 
145.5   on the basis of sex as permitted in this section.  Memberships 
145.6   that permit play during restricted times may be allowed only if 
145.7   the restricted times apply to all adults using the membership.  
145.8   A golf club may not offer a membership or golfing privileges to 
145.9   a spouse of a member that provides greater or less access to the 
145.10  golf course than is provided to that person's spouse under the 
145.11  same or a separate membership in that club, except that the 
145.12  terms of a membership may provide that one spouse may have no 
145.13  right to use the golf course at any time while the other spouse 
145.14  may have either limited or unlimited access to the golf course.  
145.15     A golf club may have or create an individual membership 
145.16  category which entitles a member for a reduced rate to play 
145.17  during restricted hours as established by the club.  The club 
145.18  must have on record a written request by the member for such 
145.19  membership.  
145.20     A golf club that has food or beverage facilities or 
145.21  services must allow equal access to those facilities and 
145.22  services for both men and women members in all membership 
145.23  categories at all times.  Nothing in this paragraph shall be 
145.24  construed to require service or access to facilities to persons 
145.25  under the age of 21 years or require any act that would violate 
145.26  law or ordinance regarding sale, consumption, or regulation of 
145.27  alcoholic beverages. 
145.28     For purposes of this subdivision and subdivision 7a, 
145.29  discrimination means a pattern or course of conduct and not 
145.30  linked to an isolated incident. 
145.31     <b>[EFFECTIVE DATE.]</b> This section is effective beginning in 
145.32  assessment year 2003, except that for the 2003 assessment year, 
145.33  the application for deferment under this section must be filed 
145.34  with the county assessor in which the property is located within 
145.35  60 days after final enactment of this act. 
145.36     Sec. 15.  Minnesota Statutes 2002, section 273.124, 
146.1   subdivision 14, is amended to read: 
146.2      Subd. 14.  [AGRICULTURAL HOMESTEADS; SPECIAL PROVISIONS.] 
146.3   (a) Real estate of less than ten acres that is the homestead of 
146.4   its owner must be classified as class 2a under section 273.13, 
146.5   subdivision 23, paragraph (a), if:  
146.6      (1) the parcel on which the house is located is contiguous 
146.7   on at least two sides to (i) agricultural land, (ii) land owned 
146.8   or administered by the United States Fish and Wildlife Service, 
146.9   or (iii) land administered by the department of natural 
146.10  resources on which in lieu taxes are paid under sections 477A.11 
146.11  to 477A.14; 
146.12     (2) its owner also owns a noncontiguous parcel of 
146.13  agricultural land that is at least 20 acres; 
146.14     (3) the noncontiguous land is located not farther than four 
146.15  townships or cities, or a combination of townships or cities 
146.16  from the homestead; and 
146.17     (4) the agricultural use value of the noncontiguous land 
146.18  and farm buildings is equal to at least 50 percent of the market 
146.19  value of the house, garage, and one acre of land. 
146.20     Homesteads initially classified as class 2a under the 
146.21  provisions of this paragraph shall remain classified as class 
146.22  2a, irrespective of subsequent changes in the use of adjoining 
146.23  properties, as long as the homestead remains under the same 
146.24  ownership, the owner owns a noncontiguous parcel of agricultural 
146.25  land that is at least 20 acres, and the agricultural use value 
146.26  qualifies under clause (4).  Homestead classification under this 
146.27  paragraph is limited to property that qualified under this 
146.28  paragraph for the 1998 assessment. 
146.29     (b)(i) Agricultural property consisting of at least 40 
146.30  acres shall be classified as the owner's homestead, to the same 
146.31  extent as other agricultural homestead property, if all of the 
146.32  following criteria are met: 
146.33     (1) the owner, the owner's spouse, or the son or daughter 
146.34  of the owner or owner's spouse, is actively farming the 
146.35  agricultural property, either on the person's own behalf as an 
146.36  individual or on behalf of a partnership operating a family 
147.1   farm, family farm corporation, joint family farm venture, or 
147.2   limited liability company of which the person is a partner, 
147.3   shareholder, or member; 
147.4      (2) both the owner of the agricultural property and the 
147.5   person who is actively farming the agricultural property under 
147.6   clause (1), are Minnesota residents; 
147.7      (3) neither the owner nor the spouse of the owner claims 
147.8   another agricultural homestead in Minnesota; and 
147.9      (4) neither the owner nor the person actively farming the 
147.10  property lives farther than four townships or cities, or a 
147.11  combination of four townships or cities, from the agricultural 
147.12  property, except that if the owner or the owner's spouse is 
147.13  required to live in employer-provided housing, the owner or 
147.14  owner's spouse, whichever is actively farming the agricultural 
147.15  property, may live more than four townships or cities, or 
147.16  combination of four townships or cities from the agricultural 
147.17  property. 
147.18     The relationship under this paragraph may be either by 
147.19  blood or marriage. 
147.20     (ii) Real property held by a trustee under a trust is 
147.21  eligible for agricultural homestead classification under this 
147.22  paragraph if the qualifications in clause (i) are met, except 
147.23  that "owner" means the grantor of the trust. 
147.24     (iii) Property containing the residence of an owner who 
147.25  owns qualified property under clause (i) shall be classified as 
147.26  part of the owner's agricultural homestead, if that property is 
147.27  also used for noncommercial storage or drying of agricultural 
147.28  crops. 
147.29     (c) Noncontiguous land shall be included as part of a 
147.30  homestead under section 273.13, subdivision 23, paragraph (a), 
147.31  only if the homestead is classified as class 2a and the detached 
147.32  land is located in the same township or city, or not farther 
147.33  than four townships or cities or combination thereof from the 
147.34  homestead.  Any taxpayer of these noncontiguous lands must 
147.35  notify the county assessor that the noncontiguous land is part 
147.36  of the taxpayer's homestead, and, if the homestead is located in 
148.1   another county, the taxpayer must also notify the assessor of 
148.2   the other county. 
148.3      (d) Agricultural land used for purposes of a homestead and 
148.4   actively farmed by a person holding a vested remainder interest 
148.5   in it must be classified as a homestead under section 273.13, 
148.6   subdivision 23, paragraph (a).  If agricultural land is 
148.7   classified class 2a, any other dwellings on the land used for 
148.8   purposes of a homestead by persons holding vested remainder 
148.9   interests who are actively engaged in farming the property, and 
148.10  up to one acre of the land surrounding each homestead and 
148.11  reasonably necessary for the use of the dwelling as a home, must 
148.12  also be assessed class 2a. 
148.13     (e) Agricultural land and buildings that were class 2a 
148.14  homestead property under section 273.13, subdivision 23, 
148.15  paragraph (a), for the 1997 assessment shall remain classified 
148.16  as agricultural homesteads for subsequent assessments if:  
148.17     (1) the property owner abandoned the homestead dwelling 
148.18  located on the agricultural homestead as a result of the April 
148.19  1997 floods; 
148.20     (2) the property is located in the county of Polk, Clay, 
148.21  Kittson, Marshall, Norman, or Wilkin; 
148.22     (3) the agricultural land and buildings remain under the 
148.23  same ownership for the current assessment year as existed for 
148.24  the 1997 assessment year and continue to be used for 
148.25  agricultural purposes; 
148.26     (4) the dwelling occupied by the owner is located in 
148.27  Minnesota and is within 30 miles of one of the parcels of 
148.28  agricultural land that is owned by the taxpayer; and 
148.29     (5) the owner notifies the county assessor that the 
148.30  relocation was due to the 1997 floods, and the owner furnishes 
148.31  the assessor any information deemed necessary by the assessor in 
148.32  verifying the change in dwelling.  Further notifications to the 
148.33  assessor are not required if the property continues to meet all 
148.34  the requirements in this paragraph and any dwellings on the 
148.35  agricultural land remain uninhabited. 
148.36     (f) Agricultural land and buildings that were class 2a 
149.1   homestead property under section 273.13, subdivision 23, 
149.2   paragraph (a), for the 1998 assessment shall remain classified 
149.3   agricultural homesteads for subsequent assessments if: 
149.4      (1) the property owner abandoned the homestead dwelling 
149.5   located on the agricultural homestead as a result of damage 
149.6   caused by a March 29, 1998, tornado; 
149.7      (2) the property is located in the county of Blue Earth, 
149.8   Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice; 
149.9      (3) the agricultural land and buildings remain under the 
149.10  same ownership for the current assessment year as existed for 
149.11  the 1998 assessment year; 
149.12     (4) the dwelling occupied by the owner is located in this 
149.13  state and is within 50 miles of one of the parcels of 
149.14  agricultural land that is owned by the taxpayer; and 
149.15     (5) the owner notifies the county assessor that the 
149.16  relocation was due to a March 29, 1998, tornado, and the owner 
149.17  furnishes the assessor any information deemed necessary by the 
149.18  assessor in verifying the change in homestead dwelling.  For 
149.19  taxes payable in 1999, the owner must notify the assessor by 
149.20  December 1, 1998.  Further notifications to the assessor are not 
149.21  required if the property continues to meet all the requirements 
149.22  in this paragraph and any dwellings on the agricultural land 
149.23  remain uninhabited. 
149.24     (g) Agricultural property consisting of at least 40 acres 
149.25  of a family farm corporation, joint family farm venture, family 
149.26  farm limited liability company, or partnership operating a 
149.27  family farm as described under subdivision 8 shall be classified 
149.28  homestead, to the same extent as other agricultural homestead 
149.29  property, if all of the following criteria are met: 
149.30     (1) a shareholder, member, or partner of that entity is 
149.31  actively farming the agricultural property; 
149.32     (2) that shareholder, member, or partner who is actively 
149.33  farming the agricultural property is a Minnesota resident; 
149.34     (3) neither that shareholder, member, or partner, nor the 
149.35  spouse of that shareholder, member, or partner claims another 
149.36  agricultural homestead in Minnesota; and 
150.1      (4) that shareholder, member, or partner does not live 
150.2   farther than four townships or cities, or a combination of four 
150.3   townships or cities, from the agricultural property. 
150.4      Homestead treatment applies under this paragraph for 
150.5   property leased to a family farm corporation, joint farm 
150.6   venture, limited liability company, or partnership operating a 
150.7   family farm if legal title to the property is in the name of an 
150.8   individual who is a member, shareholder, or partner in the 
150.9   entity. 
150.10     (h) To be eligible for the special agricultural homestead 
150.11  under this subdivision, an initial full application must be 
150.12  submitted to the county assessor where the property is located.  
150.13  Owners and the persons who are actively farming the property 
150.14  shall be required to complete only a one-page abbreviated 
150.15  version of the application in each subsequent year provided that 
150.16  none of the following items have changed since the initial 
150.17  application: 
150.18     (1) the day-to-day operation, administration, and financial 
150.19  risks remain the same; 
150.20     (2) the owners and the persons actively farming the 
150.21  property continue to live within the four townships or city 
150.22  criteria and are Minnesota residents; 
150.23     (3) the same operator of the agricultural property is 
150.24  listed with the farm service agency; 
150.25     (4) a Schedule F or equivalent income tax form was filed 
150.26  for the most recent year; 
150.27     (5) the property's acreage is unchanged; and 
150.28     (6) none of the property's acres have been enrolled in a 
150.29  federal or state farm program since the initial application. 
150.30     The owners and any persons who are actively farming the 
150.31  property must include the appropriate social security numbers, 
150.32  and sign and date the application.  If any of the specified 
150.33  information has changed since the full application was filed, 
150.34  the owner must notify the assessor, and must complete a new 
150.35  application to determine if the property continues to qualify 
150.36  for the special agricultural homestead.  The commissioner of 
151.1   revenue shall prepare a standard reapplication form for use by 
151.2   the assessors. 
151.3      <b>[EFFECTIVE DATE.]</b> This section is effective for 
151.4   applications filed for the 2004 assessment and thereafter. 
151.5      Sec. 16.  Minnesota Statutes 2002, section 273.13, 
151.6   subdivision 22, is amended to read: 
151.7      Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
151.8   23 and in paragraphs (b) and (c), real estate which is 
151.9   residential and used for homestead purposes is class 1a.  In the 
151.10  case of a duplex or triplex in which one of the units is used 
151.11  for homestead purposes, the entire property is deemed to be used 
151.12  for homestead purposes.  The market value of class 1a property 
151.13  must be determined based upon the value of the house, garage, 
151.14  and land.  
151.15     The first $500,000 of market value of class 1a property has 
151.16  a net class rate of one percent of its market value; and the 
151.17  market value of class 1a property that exceeds $500,000 has a 
151.18  class rate of 1.25 percent of its market value. 
151.19     (b) Class 1b property includes homestead real estate or 
151.20  homestead manufactured homes used for the purposes of a 
151.21  homestead by 
151.22     (1) any blind person, or the blind person and the blind 
151.23  person's spouse; or 
151.24     (2) any person, hereinafter referred to as "veteran," who: 
151.25     (i) served in the active military or naval service of the 
151.26  United States; and 
151.27     (ii) is entitled to compensation under the laws and 
151.28  regulations of the United States for permanent and total 
151.29  service-connected disability due to the loss, or loss of use, by 
151.30  reason of amputation, ankylosis, progressive muscular 
151.31  dystrophies, or paralysis, of both lower extremities, such as to 
151.32  preclude motion without the aid of braces, crutches, canes, or a 
151.33  wheelchair; and 
151.34     (iii) has acquired a special housing unit with special 
151.35  fixtures or movable facilities made necessary by the nature of 
151.36  the veteran's disability, or the surviving spouse of the 
152.1   deceased veteran for as long as the surviving spouse retains the 
152.2   special housing unit as a homestead; or 
152.3      (3) any person who: 
152.4      (i) is permanently and totally disabled and 
152.5      (ii) receives 90 percent or more of total household income, 
152.6   as defined in section 290A.03, subdivision 5, from 
152.7      (A) aid from any state as a result of that disability; or 
152.8      (B) supplemental security income for the disabled; or 
152.9      (C) workers' compensation based on a finding of total and 
152.10  permanent disability; or 
152.11     (D) social security disability, including the amount of a 
152.12  disability insurance benefit which is converted to an old age 
152.13  insurance benefit and any subsequent cost of living increases; 
152.14  or 
152.15     (E) aid under the federal Railroad Retirement Act of 1937, 
152.16  United States Code Annotated, title 45, section 228b(a)5; or 
152.17     (F) a pension from any local government retirement fund 
152.18  located in the state of Minnesota as a result of that 
152.19  disability; or 
152.20     (G) pension, annuity, or other income paid as a result of 
152.21  that disability from a private pension or disability plan, 
152.22  including employer, employee, union, and insurance plans and 
152.23     (iii) has household income as defined in section 290A.03, 
152.24  subdivision 5, of $50,000 or less; or 
152.25     (4) any person who is permanently and totally disabled and 
152.26  whose household income as defined in section 290A.03, 
152.27  subdivision 5, is 275 percent or less of the federal poverty 
152.28  level. 
152.29     Property is classified and assessed under clause (4) only 
152.30  if the government agency or income-providing source certifies, 
152.31  upon the request of the homestead occupant, that the homestead 
152.32  occupant satisfies the disability requirements of this paragraph.
152.33     Property is classified and assessed pursuant to clause (1) 
152.34  only if the commissioner of economic security revenue certifies 
152.35  to the assessor that the homestead occupant satisfies the 
152.36  requirements of this paragraph.  Once the initial application is 
153.1   made and approved by the commissioner, no further applications 
153.2   are required, unless the property is sold, there is a change in 
153.3   occupancy, or the occupant's vision changes.  Failure to notify 
153.4   the commissioner within 60 days that the property no longer 
153.5   qualifies shall result in a penalty provided under section 
153.6   273.124, subdivision 13, computed on the basis of the class 1b 
153.7   benefits for the property, and the property shall lose its 
153.8   current class 1b classification.  If the commissioner determines 
153.9   that the homestead occupant no longer satisfies the requirements 
153.10  of this paragraph, the commissioner shall notify the county 
153.11  assessor. 
153.12     Permanently and totally disabled for the purpose of this 
153.13  subdivision means a condition which is permanent in nature and 
153.14  totally incapacitates the person from working at an occupation 
153.15  which brings the person an income.  The first $32,000 market 
153.16  value of class 1b property has a net class rate of .45 percent 
153.17  of its market value.  The remaining market value of class 1b 
153.18  property has a class rate using the rates for class 1a or class 
153.19  2a property, whichever is appropriate, of similar market value.  
153.20     (c) Class 1c property is commercial use real property that 
153.21  abuts a lakeshore line and is devoted to temporary and seasonal 
153.22  residential occupancy for recreational purposes but not devoted 
153.23  to commercial purposes for more than 250 days in the year 
153.24  preceding the year of assessment, and that includes a portion 
153.25  used as a homestead by the owner, which includes a dwelling 
153.26  occupied as a homestead by a shareholder of a corporation that 
153.27  owns the resort or, a partner in a partnership that owns the 
153.28  resort, or a member of a limited liability company that owns the 
153.29  resort even if the title to the homestead is held by the 
153.30  corporation or, partnership, or limited liability company.  For 
153.31  purposes of this clause, property is devoted to a commercial 
153.32  purpose on a specific day if any portion of the property, 
153.33  excluding the portion used exclusively as a homestead, is used 
153.34  for residential occupancy and a fee is charged for residential 
153.35  occupancy.  The first $500,000 of market value of class 1c 
153.36  property has a class rate of one percent, and the remaining 
154.1   market value of class 1c property has a class rate of one 
154.2   percent, with the following limitation:  the area of the 
154.3   property must not exceed 100 feet of lakeshore footage for each 
154.4   cabin or campsite located on the property up to a total of 800 
154.5   feet and 500 feet in depth, measured away from the lakeshore.  
154.6   If any portion of the class 1c resort property is classified as 
154.7   class 4c under subdivision 25, the entire property must meet the 
154.8   requirements of subdivision 25, paragraph (d), clause (1), to 
154.9   qualify for class 1c treatment under this paragraph. 
154.10     (d) Class 1d property includes structures that meet all of 
154.11  the following criteria: 
154.12     (1) the structure is located on property that is classified 
154.13  as agricultural property under section 273.13, subdivision 23; 
154.14     (2) the structure is occupied exclusively by seasonal farm 
154.15  workers during the time when they work on that farm, and the 
154.16  occupants are not charged rent for the privilege of occupying 
154.17  the property, provided that use of the structure for storage of 
154.18  farm equipment and produce does not disqualify the property from 
154.19  classification under this paragraph; 
154.20     (3) the structure meets all applicable health and safety 
154.21  requirements for the appropriate season; and 
154.22     (4) the structure is not salable as residential property 
154.23  because it does not comply with local ordinances relating to 
154.24  location in relation to streets or roads. 
154.25     The market value of class 1d property has the same class 
154.26  rates as class 1a property under paragraph (a). 
154.27     <b>[EFFECTIVE DATE.]</b> Paragraph (b) is effective for taxes 
154.28  payable in 2005 and thereafter. 
154.29     Paragraph (c) is effective for taxes payable in 2004 and 
154.30  thereafter. 
154.31     Sec. 17.  [273.1387] [TRANSITION PAYMENTS FOR PROPERTY TAX 
154.32  BASE LOSS.] 
154.33     Subdivision 1.  [DEFINITIONS.] (a) For the purposes of this 
154.34  section, the following terms have the meanings given them. 
154.35     (b) "State" means a state agency, board, commission, or 
154.36  authority. 
155.1      (c) "Political subdivision" means the metropolitan council 
155.2   or a metropolitan agency, county, statutory or home rule charter 
155.3   city, township, school district, or any other political 
155.4   subdivision with the authority to acquire real property. 
155.5      (d) "Acquire" includes acquisition by purchase, gift, or 
155.6   eminent domain. 
155.7      Subd. 2.  [PAYMENT REQUIRED.] (a) When the state or a 
155.8   political subdivision acquires taxable real property and that 
155.9   property becomes tax exempt upon acquisition, the state or 
155.10  political subdivision must pay to all other taxing jurisdictions 
155.11  levying property taxes on the property in the year in which it 
155.12  is acquired an amount as follows: 
155.13     (1) in the year in which the property is acquired, 100 
155.14  percent of the taxes payable for that year on the acquired 
155.15  property, less any amount of property taxes already collected 
155.16  for that year on the property before the acquisition; 
155.17     (2) in the first full year after acquisition, 80 percent of 
155.18  the total amount that was due and payable in the year of 
155.19  acquisition; 
155.20     (3) in the second year after acquisition, 60 percent of the 
155.21  total amount that was due and payable in the year of 
155.22  acquisition; 
155.23     (4) in the third year after acquisition, 40 percent of the 
155.24  total amount that was due and payable in the year of 
155.25  acquisition; and 
155.26     (5) in the fourth year after acquisition, 20 percent of the 
155.27  total amount that was due and payable in the year of acquisition.
155.28     (b) As an alternative to the payments required as provided 
155.29  in paragraph (a), clauses (2) to (5), the state or political 
155.30  subdivision may pay to any taxing jurisdiction a single payment 
155.31  equal to 150 percent of the total taxes payable on the acquired 
155.32  property in the year of acquisition. 
155.33     (c) Payment under paragraph (a), clause (1), and under 
155.34  paragraph (b) must be made at the time of acquisition and paid 
155.35  directly to each taxing jurisdiction.  Payments under paragraph 
155.36  (a), clauses (2) to (5), must be made annually on or before May 
156.1   15 of each year immediately following the year of acquisition.  
156.2      Subd. 3.  [WAIVER.] A statutory or home rule charter city, 
156.3   county, town, or school district may waive payments required 
156.4   under this section by resolution of the governing body.  A 
156.5   resolution to waive part or all of a payment must not be adopted 
156.6   unless the waiver is identified as an item of business in a 
156.7   meeting notice for the meeting at which the waiver will be 
156.8   discussed and voted on.  The notice must be provided at least 
156.9   ten days before the meeting. 
156.10     Subd. 4.  [PAYMENTS RECEIVED ARE OUTSIDE LEVY LIMITS.] Any 
156.11  payments received by a political subdivision under this section 
156.12  are not included in the calculation of its overall levy limit 
156.13  imposed under chapter 275. 
156.14     Subd. 5.  [COST OF ACQUISITION.] Payments made under this 
156.15  section are a cost of acquisition of the property. 
156.16     <b>[EFFECTIVE DATE.]</b> This section is effective for property 
156.17  acquired on or after July 1, 2005. 
156.18     Sec. 18.  [274.014] [LOCAL BOARDS; APPEALS AND EQUALIZATION 
156.19  COURSE AND MEETING REQUIREMENTS.] 
156.20     Subdivision 1.  [HANDBOOK FOR LOCAL BOARDS.] By no later 
156.21  than January 1, 2005, the commissioner of revenue must develop a 
156.22  handbook detailing procedures, responsibilities, and 
156.23  requirements for local boards of appeal and equalization.  The 
156.24  handbook must include, but need not be limited to, the role of 
156.25  the local board in the assessment process, the legal and policy 
156.26  reasons for fair and impartial appeal and equalization hearings, 
156.27  local board meeting procedures that foster fair and impartial 
156.28  assessment reviews and other best practices recommendations, 
156.29  quorum requirements for local boards, and explanations of 
156.30  alternate methods of appeal. 
156.31     Subd. 2.  [APPEALS AND EQUALIZATION COURSE.] By no later 
156.32  than January 1, 2006, and each year thereafter, there must be at 
156.33  least one member at each meeting of a local board of appeal and 
156.34  equalization who has attended an appeals and equalization course 
156.35  developed or approved by the commissioner within the last four 
156.36  years, as certified by the commissioner.  The course may be 
157.1   offered in conjunction with a meeting of the Minnesota League of 
157.2   Cities or the Minnesota Association of Townships.  The course 
157.3   content must include, but need not be limited to, a review of 
157.4   the handbook developed by the commissioner under subdivision 1. 
157.5      Subd. 3.  [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] Any 
157.6   city or town that does not provide proof to the county assessor 
157.7   by December 1, 2006, and each year thereafter, that it is in 
157.8   compliance with the requirements of subdivision 2, and that it 
157.9   had a quorum at each meeting of the board of appeal and 
157.10  equalization in the prior year, is deemed to have transferred 
157.11  its board of appeal and equalization powers to the county under 
157.12  section 274.01, subdivision 3, for the following year's 
157.13  assessment. 
157.14     The county shall notify the taxpayers when the board of 
157.15  appeal and equalization for a city or town has been transferred 
157.16  to the county under this subdivision and, prior to the meeting 
157.17  time of the county board of equalization, the county shall make 
157.18  available to those taxpayers a procedure for a review of the 
157.19  assessments, including, but not limited to, open book meetings.  
157.20  This alternate review process shall take place in April and May. 
157.21     A local board whose powers are transferred to the county 
157.22  under this subdivision may be reinstated by resolution of the 
157.23  governing body of the city or town and upon proof of compliance 
157.24  with the requirements of subdivision 2.  The resolution and 
157.25  proofs must be provided to the county assessor by December 1 in 
157.26  order to be effective for the following year's assessment. 
157.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
157.28  following final enactment. 
157.29     Sec. 19.  Minnesota Statutes 2002, section 275.025, 
157.30  subdivision 1, is amended to read: 
157.31     Subdivision 1.  [LEVY AMOUNT.] The state general levy is 
157.32  levied against commercial-industrial property and seasonal 
157.33  recreational property, as defined in this section.  The state 
157.34  general levy is $592,000,000 for taxes payable in 2002.  For 
157.35  taxes payable in subsequent years, the levy is increased each 
157.36  year by multiplying the amount for the prior year by the sum of 
158.1   one plus the rate of increase, if any, in the implicit price 
158.2   deflator for government consumption expenditures and gross 
158.3   investment for state and local governments prepared by the 
158.4   Bureau of Economic Analysts of the United States Department of 
158.5   Commerce for the 12-month period ending March 31 of the year 
158.6   prior to the year the taxes are payable.  The tax under this 
158.7   section is not treated as a local tax rate under section 469.177 
158.8   and is not the levy of a governmental unit under chapters 276A 
158.9   and 473F.  Beginning in fiscal year 2004, and in each year 
158.10  thereafter, the commissioner of finance shall deposit in an 
158.11  education reserve account, which account is hereby established, 
158.12  the increased amount of the state general levy received for 
158.13  deposit in the general fund for that year over the amount of the 
158.14  state general levy received for deposit in the general fund in 
158.15  fiscal year 2003.  The amounts in the education reserve account 
158.16  do not lapse or cancel each year, but remain until appropriated 
158.17  by law for education aid or higher education funding. 
158.18     The commissioner shall increase or decrease the preliminary 
158.19  or final rate for a year as necessary to account for errors and 
158.20  tax base changes that affected a preliminary or final rate for 
158.21  either of the two preceding years.  Adjustments are allowed to 
158.22  the extent that the necessary information is available to the 
158.23  commissioner at the time the rates for a year must be certified, 
158.24  and for the following reasons: 
158.25     (1) an erroneous report of taxable value by a local 
158.26  official; 
158.27     (2) an erroneous calculation by the commissioner; and 
158.28     (3) an increase or decrease in taxable value for 
158.29  commercial-industrial or seasonal residential recreational 
158.30  property reported on the abstracts of tax lists submitted under 
158.31  section 275.29 that was not reported on the abstracts of 
158.32  assessment submitted under section 270.11, subdivision 2, for 
158.33  the same year. 
158.34  The commissioner may, but need not, make adjustments if the 
158.35  total difference in the tax levied for the year would be less 
158.36  than $100,000. 
159.1      <b>[EFFECTIVE DATE.]</b> This section is effective June 30, 2003.  
159.2      Sec. 20.  Minnesota Statutes 2002, section 278.01, 
159.3   subdivision 4, is amended to read: 
159.4      Subd. 4.  [FILING OF APPEAL DEADLINE; EXCEPTION.] 
159.5   Notwithstanding the March 31 April 30 date in subdivision 1, 
159.6   whenever the exempt status, valuation, or classification of real 
159.7   or personal property is changed other than by an abatement or a 
159.8   court decision, and the owner responsible for payment of the tax 
159.9   is not given notice of the change until after January 31 
159.10  February 28 of the year the tax is payable or after July 1 in 
159.11  the case of property subject to section 273.125, subdivision 4, 
159.12  an eligible petitioner, as defined and limited in subdivision 1, 
159.13  has 60 days from the date of mailing of the notice to initiate 
159.14  an appeal of the property's exempt status, classification, or 
159.15  valuation change under this chapter. 
159.16     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
159.17  payable in 2003 and thereafter. 
159.18     Sec. 21.  Minnesota Statutes 2002, section 278.05, 
159.19  subdivision 6, is amended to read: 
159.20     Subd. 6.  [DISMISSAL OF PETITION; EXCLUSION OF CERTAIN 
159.21  EVIDENCE.] (a) Information, including income and expense 
159.22  figures, verified net rentable areas, and anticipated income and 
159.23  expenses, for income-producing property must be provided to the 
159.24  county assessor within 60 days after the petition has been filed 
159.25  under this chapter no later than 60 days after the applicable 
159.26  filing deadline contained in section 278.01, subdivision 1 or 
159.27  4.  Failure to provide the information required in this 
159.28  paragraph shall result in the dismissal of the petition, 
159.29  unless (1) the failure to provide it was due to the 
159.30  unavailability of the evidence at that the time that the 
159.31  information was due, or (2) the petitioner was not aware of or 
159.32  informed of the requirement to provide the information. 
159.33  If the petitioner proves that the requirements under clause (2) 
159.34  are met, the petitioner has an additional 30 days to provide the 
159.35  information from the time the petitioner became aware of or was 
159.36  informed of the requirement to provide the information, 
160.1   otherwise the petition shall be dismissed.  
160.2      (b) Provided that the information as contained in paragraph 
160.3   (a) is timely submitted to the county assessor, the county 
160.4   assessor shall furnish the petitioner at least five days before 
160.5   the hearing under this chapter with the property's appraisal, if 
160.6   any, which will be presented to the court at the hearing.  The 
160.7   petitioner shall furnish to the county assessor at least five 
160.8   days before the hearing under this chapter with the property's 
160.9   appraisal, if any, which will be presented to the court at the 
160.10  hearing.  An appraisal of the petitioner's property done by or 
160.11  for the county shall not be admissible as evidence if the county 
160.12  assessor does not comply with the provisions in this paragraph.  
160.13  The petition shall be dismissed if the petitioner does not 
160.14  comply with the provisions in this paragraph. 
160.15     <b>[EFFECTIVE DATE.]</b> This section is effective for petitions 
160.16  filed on or after July 1, 2003. 
160.17     Sec. 22.  Minnesota Statutes 2002, section 290A.03, 
160.18  subdivision 8, is amended to read: 
160.19     Subd. 8.  [CLAIMANT.] (a) "Claimant" means a person, other 
160.20  than a dependent, as defined under sections 151 and 152 of the 
160.21  Internal Revenue Code disregarding section 152(b)(3) of the 
160.22  Internal Revenue Code, who filed a claim authorized by this 
160.23  chapter and who was a resident of this state as provided in 
160.24  chapter 290 during the calendar year for which the claim for 
160.25  relief was filed. 
160.26     (b) In the case of a claim relating to rent constituting 
160.27  property taxes, the claimant shall have resided in a rented or 
160.28  leased unit on which ad valorem taxes or payments made in lieu 
160.29  of ad valorem taxes, including payments of special assessments 
160.30  imposed in lieu of ad valorem taxes, are payable at some time 
160.31  during the calendar year covered by the claim.  
160.32     (c) "Claimant" shall not include a resident of a nursing 
160.33  home, intermediate care facility, or long-term residential 
160.34  facility whose rent constituting property taxes is paid pursuant 
160.35  to the supplemental security income program under title XVI of 
160.36  the Social Security Act, the Minnesota supplemental aid program 
161.1   under sections 256D.35 to 256D.54, the medical assistance 
161.2   program pursuant to title XIX of the Social Security Act, or the 
161.3   general assistance medical care program pursuant to section 
161.4   256D.03, subdivision 3; or the group residential housing program 
161.5   under chapter 256I. 
161.6   If only a portion of the rent constituting property taxes is 
161.7   paid by these programs, the resident shall be a claimant for 
161.8   purposes of this chapter, but the refund calculated pursuant to 
161.9   section 290A.04 shall be multiplied by a fraction, the numerator 
161.10  of which is income as defined in subdivision 3, paragraphs (1) 
161.11  and (2), reduced by the total amount of income from the above 
161.12  sources other than vendor payments under the medical assistance 
161.13  program or the general assistance medical care program and the 
161.14  denominator of which is income as defined in subdivision 3, 
161.15  paragraphs (1) and (2), plus vendor payments under the medical 
161.16  assistance program or the general assistance medical care 
161.17  program, to determine the allowable refund pursuant to this 
161.18  chapter. 
161.19     (d) Notwithstanding paragraph (c), if the claimant was a 
161.20  resident of the nursing home, intermediate care facility or, 
161.21  long-term residential facility, or facility for which the rent 
161.22  was paid for the claimant by the group residential housing 
161.23  program for only a portion of the calendar year covered by the 
161.24  claim, the claimant may compute rent constituting property taxes 
161.25  by disregarding the rent constituting property taxes from the 
161.26  nursing home, intermediate care facility, or long-term 
161.27  residential facility and use only that amount of rent 
161.28  constituting property taxes or property taxes payable relating 
161.29  to that portion of the year when the claimant was not in the 
161.30  facility.  The claimant's household income is the income for the 
161.31  entire calendar year covered by the claim.  
161.32     (e) In the case of a claim for rent constituting property 
161.33  taxes of a part-year Minnesota resident, the income and rental 
161.34  reflected in this computation shall be for the period of 
161.35  Minnesota residency only.  Any rental expenses paid which may be 
161.36  reflected in arriving at federal adjusted gross income cannot be 
162.1   utilized for this computation.  When two individuals of a 
162.2   household are able to meet the qualifications for a claimant, 
162.3   they may determine among them as to who the claimant shall be. 
162.4   If they are unable to agree, the matter shall be referred to the 
162.5   commissioner of revenue whose decision shall be final.  If a 
162.6   homestead property owner was a part-year Minnesota resident, the 
162.7   income reflected in the computation made pursuant to section 
162.8   290A.04 shall be for the entire calendar year, including income 
162.9   not assignable to Minnesota. 
162.10     (f) If a homestead is occupied by two or more renters, who 
162.11  are not husband and wife, the rent shall be deemed to be paid 
162.12  equally by each, and separate claims shall be filed by each.  
162.13  The income of each shall be each renter's household income for 
162.14  purposes of computing the amount of credit to be allowed. 
162.15     <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
162.16  based on rent paid in 2003 and thereafter. 
162.17     Sec. 23.  Minnesota Statutes 2002, section 366.011, is 
162.18  amended to read: 
162.19     366.011 [CHARGES FOR EMERGENCY SERVICES; COLLECTION.] 
162.20     A town may impose a reasonable service charge for emergency 
162.21  services, including fire, rescue, medical, and related services 
162.22  provided by the town or contracted for by the town.  If the 
162.23  service charge remains unpaid 30 days after a notice of 
162.24  delinquency is sent to the recipient of the service or the 
162.25  recipient's representative or estate, the town or its contractor 
162.26  on behalf of the town may use any lawful means allowed to a 
162.27  private party for the collection of an unsecured delinquent 
162.28  debt.  The town may also use the authority of section 366.012 to 
162.29  collect unpaid service charges of this kind from delinquent 
162.30  recipients of services who are owners of taxable real property 
162.31  in the town. 
162.32     The powers conferred by this section are in addition and 
162.33  supplemental to the powers conferred by any other law for a town 
162.34  to impose a service charge or assessment for a service provided 
162.35  by the town or contracted for by the town. 
162.36     <b>[EFFECTIVE DATE.]</b> This section is effective for emergency 
163.1   services rendered after June 30, 2003. 
163.2      Sec. 24.  Minnesota Statutes 2002, section 366.012, is 
163.3   amended to read: 
163.4      366.012 [COLLECTION OF UNPAID SERVICE CHARGES.] 
163.5      If a town is authorized to impose a service charge on the 
163.6   owner, lessee, or occupant of property, or any of them, for a 
163.7   governmental service provided by the town, the town board may 
163.8   certify to the county auditor of the county in which the 
163.9   recipient of the services owns real property, on or before 
163.10  October 15 for each year, any unpaid service charges which shall 
163.11  then be collected together with property taxes levied against 
163.12  the property.  The county auditor shall remit to the town all 
163.13  service charges collected by the auditor on behalf of the town.  
163.14  Charges collected under this section for motor vehicle fires, as 
163.15  provided by section 161.465, subdivision 2, shall not exceed the 
163.16  amount authorized in that subdivision, but a town may recover 
163.17  expenses incurred for extinguishing a motor vehicle fire in 
163.18  excess of that amount by any other authorized method.  A charge 
163.19  may be certified to the auditor only if, on or before September 
163.20  15, the town has given written notice to the property owner of 
163.21  its intention to certify the charge to the auditor.  The service 
163.22  charges shall be subject to the same penalties, interest, and 
163.23  other conditions provided for the collection of property taxes.  
163.24  This section is in addition to other law authorizing the 
163.25  collection of unpaid costs and service charges. 
163.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
163.27  payable in 2004 and thereafter. 
163.28     Sec. 25.  Minnesota Statutes 2002, section 473.167, 
163.29  subdivision 3, is amended to read: 
163.30     Subd. 3.  [TAX.] The council may levy a tax on all taxable 
163.31  property in the metropolitan area, as defined in section 
163.32  473.121, to provide funds for loans made pursuant to 
163.33  subdivisions 2 and 2a.  This tax for the right-of-way 
163.34  acquisition loan fund shall be certified by the council, levied, 
163.35  and collected in the manner provided by section 473.13.  The tax 
163.36  shall be in addition to that authorized by section 473.249 and 
164.1   any other law and shall not affect the amount or rate of taxes 
164.2   which may be levied by the council or any metropolitan agency or 
164.3   local governmental unit.  The amount of the levy shall be as 
164.4   determined and certified by the council, provided that the tax 
164.5   levied by the metropolitan council for the right-of-way 
164.6   acquisition loan fund shall not exceed the product of (1) the 
164.7   metropolitan council's property tax levy under this subdivision 
164.8   for taxes payable in 1997 multiplied by (2) an index for market 
164.9   valuation changes equal to the total market valuation of all 
164.10  taxable property located within the metropolitan area for the 
164.11  current taxes payable year divided by the total market valuation 
164.12  of all taxable property located within the metropolitan area for 
164.13  taxes payable in 1997. 
164.14     For the purpose of determining the metropolitan council's 
164.15  property tax levy limitation for the right-of-way acquisition 
164.16  loan fund, "total market valuation" means the total market 
164.17  valuation of all taxable property within the metropolitan area 
164.18  without valuation adjustments for fiscal disparities (chapter 
164.19  473F), tax increment financing (sections 469.174 to 469.179), 
164.20  and high voltage transmission lines (section 273.425) $1,951,794 
164.21  for taxes payable in 2004 and $1,166,794 for taxes payable in 
164.22  2005.  The amount of the levy for taxes payable in 2006 and 
164.23  subsequent years shall not exceed the product of (1) the 
164.24  metropolitan council's property tax levy limitation under this 
164.25  subdivision for the previous year, multiplied by (2) one plus a 
164.26  percentage equal to the growth in the implicit price deflator as 
164.27  defined in section 275.70, subdivision 2. 
164.28     <b>[EFFECTIVE DATE; APPLICATION.]</b> This section is effective 
164.29  the day following final enactment and applies in the counties of 
164.30  Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
164.31     Sec. 26.  Minnesota Statutes 2002, section 473.246, is 
164.32  amended to read: 
164.33     473.246 [COUNCIL'S SUBMISSIONS TO LEGISLATIVE COMMISSION.] 
164.34     The metropolitan council shall submit to the legislative 
164.35  commission on metropolitan government information on the 
164.36  council's tax rates and dollar amounts levied for the current 
165.1   year, proposed property tax rates and levies, operating and 
165.2   capital budgets, work program, capital improvement program, and 
165.3   any other information requested by the commission, for review by 
165.4   the legislative commission, as provided in section 3.8841.  The 
165.5   council shall submit to the legislative commission a report on 
165.6   property tax levies as approved by the council, detailing any 
165.7   differences between the amounts originally proposed and the 
165.8   amounts finally approved by the council, and providing 
165.9   explanation where the approved levy amounts differ from 
165.10  recommendations of the legislative commission. 
165.11     <b>[EFFECTIVE DATE; APPLICATION.]</b> This section is effective 
165.12  the day following final enactment and applies in the counties of 
165.13  Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
165.14     Sec. 27.  Minnesota Statutes 2002, section 473.249, 
165.15  subdivision 1, is amended to read: 
165.16     Subdivision 1.  [INDEXED LIMIT.] (a) The metropolitan 
165.17  council may levy a tax on all taxable property in the 
165.18  metropolitan area defined in section 473.121 to provide funds 
165.19  for the purposes of sections 473.121 to 473.249 and for the 
165.20  purpose of carrying out other responsibilities of the council as 
165.21  provided by law.  This tax for general purposes shall be levied 
165.22  and collected in the manner provided by section 473.13. 
165.23     (b) The property tax levied by the metropolitan council for 
165.24  general purposes shall not exceed $10,522,329 each year for 
165.25  taxes payable in 2004 and 2005. 
165.26     (c) The property tax levy limitation for general purposes 
165.27  for taxes payable in 2006 and subsequent years shall not exceed 
165.28  the product of:  (1) the metropolitan council's property tax 
165.29  levy limitation for general purposes for the previous year 
165.30  determined under this subdivision multiplied by (2) the lesser 
165.31  of 
165.32     (i) an index for market valuation changes equal to the 
165.33  total market valuation of all taxable property located within 
165.34  the metropolitan area for the current taxes payable year divided 
165.35  by the total market valuation of all taxable property located 
165.36  within the metropolitan area for the previous taxes payable 
166.1   year; 
166.2      (ii) an index equal to the implicit price deflator for 
166.3   government consumption expenditures and gross investment for 
166.4   state and local governments for the most recent month for which 
166.5   data are available divided by the same implicit price deflator 
166.6   for the same month of the previous year; or 
166.7      (iii) 103 percent. 
166.8      (c) For the purpose of determining the metropolitan 
166.9   council's property tax levy limitation for general purposes, 
166.10  "total market valuation" means the total market valuation of all 
166.11  taxable property within the metropolitan area without valuation 
166.12  adjustments for fiscal disparities (chapter 473F), tax increment 
166.13  financing (sections 469.174 to 469.179), and high voltage 
166.14  transmission lines (section 273.425) one plus a percentage equal 
166.15  to the growth in the implicit price deflator as defined in 
166.16  section 275.70, subdivision 2. 
166.17     <b>[EFFECTIVE DATE; APPLICATION.]</b> This section is effective 
166.18  the day following final enactment and applies in the counties of 
166.19  Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
166.20     Sec. 28.  Minnesota Statutes 2002, section 473.253, 
166.21  subdivision 1, is amended to read: 
166.22     Subdivision 1.  [SOURCES OF FUNDS.] The council shall 
166.23  credit to the livable communities demonstration account the 
166.24  revenues provided in this subdivision.  This tax shall be levied 
166.25  and collected in the manner provided by section 473.13.  The 
166.26  levy shall not exceed the following amount for the years 
166.27  specified:  
166.28     (a)(1) for taxes payable in 1996, 50 percent of (i) the 
166.29  metropolitan mosquito control commission's property tax levy for 
166.30  taxes payable in 1995 multiplied by (ii) an index for market 
166.31  valuation changes equal to the total market valuation of all 
166.32  taxable property located within the metropolitan area for the 
166.33  current taxes payable year divided by the total market valuation 
166.34  of all taxable property located in the metropolitan area for the 
166.35  previous taxes payable year; and 
166.36     (2) for taxes payable in 1997 and subsequent years through 
167.1   2003, the product of (i) the property tax levy limit under this 
167.2   subdivision for the previous year multiplied by (ii) an index 
167.3   for market valuation changes equal to the total market valuation 
167.4   of all taxable property located within the metropolitan area for 
167.5   the current taxes payable year divided by the total market 
167.6   valuation of all taxable property located in the metropolitan 
167.7   area for the previous taxes payable year; 
167.8      (3) for taxes payable in 2004 and 2005, $8,259,070; and 
167.9      (4) for taxes payable in 2006 and subsequent years, the 
167.10  product of (i) the property tax levy limit under this 
167.11  subdivision for the previous year multiplied by (ii) one plus a 
167.12  percentage equal to the growth in the implicit price deflator as 
167.13  defined in section 275.70, subdivision 2. 
167.14     For the purposes of this subdivision, "total market 
167.15  valuation" means the total market valuation of all taxable 
167.16  property within the metropolitan area without valuation 
167.17  adjustments for fiscal disparities under chapter 473F, tax 
167.18  increment financing under sections 469.174 to 469.179, and high 
167.19  voltage transmission lines under section 273.425. 
167.20     (b) The metropolitan council, for the purposes of the fund, 
167.21  is considered a unique taxing jurisdiction for purposes of 
167.22  receiving aid pursuant to section 273.1398.  For aid to be 
167.23  received in 1996, the fund's homestead and agricultural credit 
167.24  base shall equal 50 percent of the metropolitan mosquito control 
167.25  commission's certified homestead and agricultural credit aid for 
167.26  1995, determined under section 273.1398, subdivision 2, less any 
167.27  permanent aid reduction under section 477A.0132.  For aid to be 
167.28  received under section 273.1398 in 1997 and subsequent years, 
167.29  the fund's homestead and agricultural credit base shall be 
167.30  determined in accordance with section 273.1398, subdivision 1. 
167.31     <b>[EFFECTIVE DATE; APPLICATION.]</b> This section is effective 
167.32  the day following final enactment and applies in the counties of 
167.33  Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 
167.34     Sec. 29.  Minnesota Statutes 2002, section 473.702, is 
167.35  amended to read: 
167.36     473.702 [ESTABLISHMENT OF DISTRICT; PURPOSE; AREA; 
168.1   GOVERNING BODY.] 
168.2      A metropolitan mosquito control district is created to 
168.3   control mosquitoes, disease vectoring ticks, and black gnats 
168.4   (Simuliidae) in the metropolitan area.  The area of the district 
168.5   is the metropolitan area defined in section 473.121.  The area 
168.6   of the district is the metropolitan area excluding the part of 
168.7   Carver county west of the west line of township 116N, range 24W, 
168.8   township 115N, range 24W, and township 114N, range 24W.  The 
168.9   metropolitan mosquito control commission is created as the 
168.10  governing body of the district, composed and exercising the 
168.11  powers as prescribed in sections 473.701 to 473.716. 
168.12     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
168.13  payable in 2004 and thereafter. 
168.14     Sec. 30.  Minnesota Statutes 2002, section 473.711, 
168.15  subdivision 2a, is amended to read: 
168.16     Subd. 2a.  [TAX LEVY.] (a) The commission may levy a tax on 
168.17  all taxable property in the district as defined in section 
168.18  473.702 to provide funds for the purposes of sections 473.701 to 
168.19  473.716.  The tax shall not exceed the property tax levy 
168.20  limitation determined in this subdivision.  A participating 
168.21  county may agree to levy an additional tax to be used by the 
168.22  commission for the purposes of sections 473.701 to 473.716 but 
168.23  the sum of the county's and commission's taxes may not exceed 
168.24  the county's proportionate share of the property tax levy 
168.25  limitation determined under this subdivision based on the ratio 
168.26  of its total net tax capacity to the total net tax capacity of 
168.27  the entire district as adjusted by section 270.12, subdivision 3.
168.28  The auditor of each county in the district shall add the amount 
168.29  of the levy made by the district to other taxes of the county 
168.30  for collection by the county treasurer with other taxes.  When 
168.31  collected, the county treasurer shall make settlement of the tax 
168.32  with the district in the same manner as other taxes are 
168.33  distributed to political subdivisions.  No county shall levy any 
168.34  tax for mosquito, disease vectoring tick, and black gnat 
168.35  (Simuliidae) control except under this section.  The levy shall 
168.36  be in addition to other taxes authorized by law. 
169.1      (b) The property tax levied by the metropolitan mosquito 
169.2   control commission shall not exceed the following amount for the 
169.3   years specified: 
169.4      (1) for taxes payable in 1996, the product of (i) the 
169.5   commission's property tax levy limitation for taxes payable in 
169.6   1995 determined under this subdivision minus 50 percent of the 
169.7   amount actually levied for taxes payable in 1995, multiplied by 
169.8   (ii) an index for market valuation changes equal to the total 
169.9   market valuation of all taxable property located within the 
169.10  district for the current taxes payable year divided by the total 
169.11  market valuation of all taxable property located within the 
169.12  district for the previous taxes payable year; 
169.13     (2) for taxes payable in 1997 and subsequent years, the 
169.14  product of (i) the commission's property tax levy limitation for 
169.15  the previous year determined under this subdivision multiplied 
169.16  by (ii) an index for market valuation changes equal to the total 
169.17  market valuation of all taxable property for the current tax 
169.18  payable year located within the district for the current taxes 
169.19  payable year plus any area that has been added to the district 
169.20  since the previous year, divided by the total market valuation 
169.21  of all taxable property located within the district for the 
169.22  previous taxes payable year; and. 
169.23     (3) (c) For the purpose of determining the commission's 
169.24  property tax levy limitation under this subdivision, "total 
169.25  market valuation" means the total market valuation of all 
169.26  taxable property within the district without valuation 
169.27  adjustments for fiscal disparities (chapter 473F), tax increment 
169.28  financing (sections 469.174 to 469.179), and high voltage 
169.29  transmission lines (section 273.425). 
169.30     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
169.31  payable in 2004 and thereafter. 
169.32     Sec. 31.  [CITY OF MEDFORD.] 
169.33     Subdivision 1.  [SPECIAL TAXING AUTHORITY.] After published 
169.34  notice and public hearing, the governing body of the city of 
169.35  Medford may, by resolution, establish a special taxing area 
169.36  within the boundaries of the city to finance a portion of the 
170.1   cost of an expansion and improvement of the city's wastewater 
170.2   treatment facility.  The city may annually impose a levy on the 
170.3   tax capacity of properties within the special taxing area. 
170.4      Subd. 2.  [TAXING AREA.] The city may include within the 
170.5   special taxing area, as it determines appropriate, one or more 
170.6   parcels of property classified under Minnesota Statutes, section 
170.7   273.13, subdivision 24. 
170.8      Subd. 3.  [LEVY LIMIT.] The amount of the levy for a year 
170.9   may not exceed 45 percent of the cost of principal and interest 
170.10  payments on the financing for the expansion and improvement of 
170.11  the wastewater treatment facility.  Any levy imposed under this 
170.12  section is not subject to any other levy limit that applies to 
170.13  the city, notwithstanding any law to the contrary. 
170.14     Subd. 4.  [EXPIRATION.] This section expires upon repayment 
170.15  of the financing, including any refinancing, for the wastewater 
170.16  treatment facility. 
170.17     Subd. 5.  [EFFECTIVE DATE.] This section is effective upon 
170.18  local approval under Minnesota Statutes, section 645.021 by the 
170.19  governing body of the city of Medford. 
170.20     Sec. 32.  [APPROPRIATION.] 
170.21     There is appropriated to the commissioner of revenue from 
170.22  the general fund $16,000 in fiscal year 2003 and $8,000 in 
170.23  fiscal year 2004 for printing and distributing the local boards 
170.24  of appeals and equalization handbook under section 18. 
170.25     Sec. 33.  [REPEALER.] 
170.26     Minnesota Statutes 2002, section 473.711, subdivision 2b, 
170.27  is repealed. 
170.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
170.29  following final enactment. 
170.30                             ARTICLE 6
170.31                       INTERGOVERNMENTAL AIDS
170.32     Section 1.  Minnesota Statutes 2002, section 4A.02, is 
170.33  amended to read: 
170.34     4A.02 [STATE DEMOGRAPHER.] 
170.35     (a) The director shall appoint a state demographer.  The 
170.36  demographer must be professionally competent in demography and 
171.1   must possess demonstrated ability based upon past performance.  
171.2      (b) The demographer shall: 
171.3      (1) continuously gather and develop demographic data 
171.4   relevant to the state; 
171.5      (2) design and test methods of research and data 
171.6   collection; 
171.7      (3) periodically prepare population projections for the 
171.8   state and designated regions and periodically prepare 
171.9   projections for each county or other political subdivision of 
171.10  the state as necessary to carry out the purposes of this 
171.11  section; 
171.12     (4) review, comment on, and prepare analysis of population 
171.13  estimates and projections made by state agencies, political 
171.14  subdivisions, other states, federal agencies, or nongovernmental 
171.15  persons, institutions, or commissions; 
171.16     (5) serve as the state liaison with the United States 
171.17  Bureau of the Census, coordinate state and federal demographic 
171.18  activities to the fullest extent possible, and aid the 
171.19  legislature in preparing a census data plan and form for each 
171.20  decennial census; 
171.21     (6) compile an annual study of population estimates on the 
171.22  basis of county, regional, or other political or geographical 
171.23  subdivisions as necessary to carry out the purposes of this 
171.24  section and section 4A.03; 
171.25     (7) by January 1 of each year, issue a report to the 
171.26  legislature containing an analysis of the demographic 
171.27  implications of the annual population study and population 
171.28  projections; 
171.29     (8) prepare maps for all counties in the state, all 
171.30  municipalities with a population of 10,000 or more, and other 
171.31  municipalities as needed for census purposes, according to scale 
171.32  and detail recommended by the United States Bureau of the 
171.33  Census, with the maps of cities showing precinct boundaries; 
171.34     (9) prepare an estimate of population and of the number of 
171.35  households for each governmental subdivision for which the 
171.36  metropolitan council does not prepare an annual estimate, and 
172.1   convey the estimates to the governing body of each political 
172.2   subdivision by May 1 of each year; 
172.3      (10) direct, under section 414.01, subdivision 14, and 
172.4   certify population and household estimates of annexed or 
172.5   detached areas of municipalities or towns after being notified 
172.6   of the order or letter of approval by the Minnesota municipal 
172.7   board; and 
172.8      (11) prepare, for any purpose for which a population 
172.9   estimate is required by law or needed to implement a law, a 
172.10  population estimate of a municipality or town whose population 
172.11  is affected by action under section 379.02 or 414.01, 
172.12  subdivision 14; and 
172.13     (12) prepare an estimate of average household size for each 
172.14  statutory or home rule charter city with a population of 2,500 
172.15  or more by May 1 of each year. 
172.16     (c) A governing body may challenge an estimate made under 
172.17  paragraph (b) by filing their specific objections in writing 
172.18  with the state demographer by June 10.  If the challenge does 
172.19  not result in an acceptable estimate by June 24, the governing 
172.20  body may have a special census conducted by the United States 
172.21  Bureau of the Census.  The political subdivision must notify the 
172.22  state demographer by July 1 of its intent to have the special 
172.23  census conducted.  The political subdivision must bear all costs 
172.24  of the special census.  Results of the special census must be 
172.25  received by the state demographer by the next April 15 to be 
172.26  used in that year's May 1 estimate to the political subdivision 
172.27  under paragraph (b). 
172.28     <b>[EFFECTIVE DATE.]</b> This section is effective beginning July 
172.29  1, 2003. 
172.30     Sec. 2.  Minnesota Statutes 2002, section 273.1398, 
172.31  subdivision 4a, is amended to read: 
172.32     Subd. 4a.  [AID OFFSET FOR COURT COSTS.] (a) In calendar 
172.33  years 2004 and 2005, the commissioner of revenue shall pay the 
172.34  amounts determined in this subdivision to the eligible counties 
172.35  on the dates specified in subdivision 6.  By July 15 of the year 
172.36  preceding the year in which the state assumes the cost of court 
173.1   administration in the judicial district as specified under 
173.2   section 480.183, 2003, the supreme court shall determine and 
173.3   certify to the commissioner of revenue for each county the 
173.4   county's share of the costs to be assumed in the judicial 
173.5   districts specified under section 480.183, subdivision 1, during 
173.6   each of the succeeding fiscal year years. 
173.7      (b) The amount certified in paragraph (a) shall be equal to 
173.8   the following: 
173.9      (1) 103 percent of the required court administration 
173.10  expenditures as defined under section 480.183, subdivision 3, 
173.11  for calendar year 2003, as determined under subdivision 4b, 
173.12  paragraph (a); plus 
173.13     (2) an adjustment for any cumulative percentage increase in 
173.14  salary expenditures as defined under section 480.183, 
173.15  subdivision 2, in excess of a maintenance of effort increase of 
173.16  six percent; less 
173.17     (3) an amount equal to the county's share of transferred 
173.18  fines collected by the district courts in the county during the 
173.19  calendar year preceding certification 2002, increased by two 
173.20  percent for counties in districts one and three, and by 4.04 
173.21  percent for counties in districts six and ten.  
173.22     The court and the county may, if both parties agree, 
173.23  negotiate and certify an amount higher than the amount 
173.24  calculated under this paragraph. 
173.25     (c) For purposes of this subdivision, the adjustment in 
173.26  paragraph (b), clause (2), shall be equal to: 
173.27     (1) the sum of the court administration expenditures as 
173.28  defined under section 480.183, subdivision 3, required under 
173.29  subdivision 4b, paragraph (a), plus the temporary aid payment 
173.30  under subdivision 4c; multiplied by 
173.31     (2) the difference between (i) the cumulative percentage 
173.32  increase in actual and anticipated salary settlements for court 
173.33  employees from July 1, 2001, until the date of the court 
173.34  transfer and (ii) the percentage specified in subdivision 4b, 
173.35  paragraph (a).  
173.36     (d) Payments to a county under subdivision 2 or section 
174.1   273.166 for the calendar year in which the state assumes the 
174.2   cost of court administration as defined under section 480.183, 
174.3   subdivision 3, in the judicial district must be permanently 
174.4   reduced by an amount equal to 75 percent of the net cost to the 
174.5   state for assumption of district court costs as certified in 
174.6   paragraph (a). For calendar year 2004, each county in judicial 
174.7   districts one and three shall receive an amount equal to 25 
174.8   percent of the amount certified under paragraph (b), and each 
174.9   county in judicial districts six and ten shall receive an amount 
174.10  equal to the amount certified under paragraph (b).  For calendar 
174.11  year 2005, each county in judicial districts six and ten shall 
174.12  receive an amount equal to 25 percent of the amount certified 
174.13  under paragraph (b), and each county in judicial districts one 
174.14  and three receives zero. 
174.15     (e) Payments to a county under subdivision 2 or section 
174.16  273.166 for the calendar year after the calendar year in which 
174.17  the state assumes the cost of court administration as defined 
174.18  under section 480.183, subdivision 3, in the judicial district 
174.19  must be permanently reduced by an amount equal to 25 percent of 
174.20  the net cost to the state for assumption of district court costs 
174.21  as certified in paragraph (a), provided that this amount must be 
174.22  increased or decreased by an amount equal to the positive or 
174.23  negative difference between the amount of fee and fine revenue 
174.24  certified under paragraph (b), clause (3), and the actual amount 
174.25  of fee and fine revenue of the county for the calendar year when 
174.26  certification takes place. 
174.27     (f) Payments to a county under subdivision 2 for calendar 
174.28  year 2001 are permanently increased by an amount equal to 7.5 
174.29  percent of the county's share of transferred fines collected by 
174.30  the district courts in the county during calendar year 1998, as 
174.31  determined under paragraph (a).  If the amount determined in 
174.32  paragraph (a) exceeds the amount of aid a county is scheduled to 
174.33  be paid under subdivision 2 in 2000, then the county shall not 
174.34  receive an aid increase under this paragraph. 
174.35     (g) Payments to a county under subdivision 2 or section 
174.36  273.166, for the cost of mandated services, as defined in 
175.1   section 480.183, subdivision 4, in the judicial district, must 
175.2   be permanently reduced in 2002 by an amount equal to the cost to 
175.3   the state for assumption of mandated court services as defined 
175.4   in section 480.183, subdivision 4.  The supreme court shall 
175.5   determine the amount for each county and certify it to the 
175.6   commissioner of revenue by July 15, 2001. 
175.7      <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
175.8   in 2004 and 2005. 
175.9      Sec. 3.  Minnesota Statutes 2002, section 273.1398, 
175.10  subdivision 4c, is amended to read: 
175.11     Subd. 4c.  [TEMPORARY AID; COURT ADMINISTRATION COSTS.] For 
175.12  calendar years 2004 and 2005, each county in a judicial district 
175.13  that has not been transferred to the state by January 1 of that 
175.14  year shall receive additional homestead and agricultural 
175.15  credit temporary court maintenance of effort cost aid.  This 
175.16  amount is in addition to the amount calculated under subdivision 
175.17  2 and must not be included in the definition of homestead and 
175.18  agricultural credit base under subdivision 1, paragraph (j).  
175.19  The amount of additional aid is equal to the difference between 
175.20  (1) the amount budgeted for court administration costs in 2001 
175.21  as determined under subdivision 4b, paragraph (b), multiplied by 
175.22  the maintenance of effort percent for the calendar year as 
175.23  determined under subdivision 4b, paragraph (a), and (2) the 
175.24  amount calculated under subdivision 4b, paragraph (a), for 
175.25  calendar year 2003.  This additional aid must be used only to 
175.26  fund court administration expenditures as defined in section 
175.27  480.183, subdivision 3.  This amount must be added to the state 
175.28  court's base budget in the year when the court in that judicial 
175.29  district in which the county is located is transferred to the 
175.30  state. 
175.31     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
175.32  in 2004 and 2005 for counties in judicial districts one, three, 
175.33  six, and ten. 
175.34     Sec. 4.  Minnesota Statutes 2002, section 273.1398, 
175.35  subdivision 6, is amended to read: 
175.36     Subd. 6.  [PAYMENT.] The commissioner shall certify the 
176.1   aids provided in subdivisions 2, 2b, 3, and 5 before September 1 
176.2   of the year preceding the distribution year to the county 
176.3   auditor of the affected local government.  The aids provided in 
176.4   subdivisions 2, 2b, 3, 4a, 4c, and 5 must be paid to local 
176.5   governments other than school districts at the times provided in 
176.6   section 477A.015 for payment of local government aid to taxing 
176.7   jurisdictions, except that the first one-half payment of 
176.8   disparity reduction aid provided in subdivision 3 must be paid 
176.9   on or before August 31.  The disparity reduction credit provided 
176.10  in subdivision 4 must be paid to taxing jurisdictions other than 
176.11  school districts at the time provided in section 473H.10, 
176.12  subdivision 3.  Aids and credit reimbursements to school 
176.13  districts must be certified to the commissioner of children, 
176.14  families, and learning and paid under section 273.1392.  In 
176.15  2004, the aid provided in subdivision 2 shall constitute a 
176.16  portion of program aid for counties and shall be paid as 
176.17  provided in section 477A.0124.  Payment shall not be made to any 
176.18  taxing jurisdiction that has ceased to levy a property tax.  
176.19     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
176.20  in 2004 and thereafter. 
176.21     Sec. 5.  Minnesota Statutes 2002, section 477A.011, 
176.22  subdivision 34, is amended to read: 
176.23     Subd. 34.  [CITY REVENUE NEED.] (a) For a city with a 
176.24  population equal to or greater than 2,500, "city revenue need" 
176.25  is the sum of (1) 3.462312 5.0734098 times the pre-1940 housing 
176.26  percentage; plus (2) 2.093826 times the commercial industrial 
176.27  percentage plus (3) 6.862552 19.141678 times the population 
176.28  decline percentage; plus (4) .00026 times the city 
176.29  population (3) 2504.06334 times the road accidents factor; 
176.30  plus (5) 152.0141 (4) 355.0547; minus (5) the metropolitan area 
176.31  factor; minus (6) 49.10638 times the household size. 
176.32     (b) For a city with a population less than 2,500, "city 
176.33  revenue need" is the sum of (1) 1.795919 2.387 times the 
176.34  pre-1940 housing percentage; plus (2) 1.562138 2.67591 times the 
176.35  commercial industrial percentage; plus (3) 4.177568 3.16042 
176.36  times the population decline percentage; plus (4) 1.04013 1.206 
177.1   times the transformed population; minus (5) 107.475 62.772. 
177.2      (c) The city revenue need cannot be less than zero. 
177.3      (d) For calendar year 1998 and subsequent years, the city 
177.4   revenue need for a city, as determined in paragraphs (a) to (c), 
177.5   is multiplied by the ratio of the annual implicit price deflator 
177.6   for government consumption expenditures and gross investment for 
177.7   state and local governments as prepared by the United States 
177.8   Department of Commerce, for the most recently available year to 
177.9   the 1993 implicit price deflator for state and local government 
177.10  purchases. 
177.11     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
177.12  in 2004 and thereafter. 
177.13     Sec. 6.  Minnesota Statutes 2002, section 477A.011, 
177.14  subdivision 36, is amended to read: 
177.15     Subd. 36.  [CITY AID BASE.] (a) Except as otherwise 
177.16  provided in this subdivision, "city aid base" means, for each 
177.17  city, the sum of the local government aid and equalization aid 
177.18  it was originally certified to receive in calendar year 1993 
177.19  under Minnesota Statutes 1992, section 477A.013, subdivisions 3 
177.20  and 5, and the amount of disparity reduction aid it received in 
177.21  calendar year 1993 under Minnesota Statutes 1992, section 
177.22  273.1398, subdivision 3 is zero. 
177.23     (b) For aids payable in 1996 and thereafter, a city that in 
177.24  1992 or 1993 transferred an amount from governmental funds to 
177.25  its sewer and water fund, which amount exceeded its net levy for 
177.26  taxes payable in the year in which the transfer occurred, has a 
177.27  "city aid base" equal to the sum of (i) its city aid base, as 
177.28  calculated under paragraph (a), and (ii) one-half of the 
177.29  difference between its city aid distribution under section 
177.30  477A.013, subdivision 9, for aids payable in 1995 and its city 
177.31  aid base for aids payable in 1995. 
177.32     (c) The city aid base for any city with a population less 
177.33  than 500 is increased by $40,000 for aids payable in calendar 
177.34  year 1995 and thereafter, and the maximum amount of total aid it 
177.35  may receive under section 477A.013, subdivision 9, paragraph 
177.36  (c), is also increased by $40,000 for aids payable in calendar 
178.1   year 1995 only, provided that: 
178.2      (i) the average total tax capacity rate for taxes payable 
178.3   in 1995 exceeds 200 percent; 
178.4      (ii) the city portion of the tax capacity rate exceeds 100 
178.5   percent; and 
178.6      (iii) its city aid base is less than $60 per capita. 
178.7      (d) (c) The city aid base for a city is increased by 
178.8   $20,000 in 1998 and thereafter and the maximum amount of total 
178.9   aid it may receive under section 477A.013, subdivision 9, 
178.10  paragraph (c), is also increased by $20,000 in calendar year 
178.11  1998 only, provided that: 
178.12     (i) the city has a population in 1994 of 2,500 or more; 
178.13     (ii) the city is located in a county, outside of the 
178.14  metropolitan area, which contains a city of the first class; 
178.15     (iii) the city's net tax capacity used in calculating its 
178.16  1996 aid under section 477A.013 is less than $400 per capita; 
178.17  and 
178.18     (iv) at least four percent of the total net tax capacity, 
178.19  for taxes payable in 1996, of property located in the city is 
178.20  classified as railroad property. 
178.21     (e) (d) The city aid base for a city is increased by 
178.22  $200,000 in 1999 and thereafter and the maximum amount of total 
178.23  aid it may receive under section 477A.013, subdivision 9, 
178.24  paragraph (c), is also increased by $200,000 in calendar year 
178.25  1999 only, provided that: 
178.26     (i) the city was incorporated as a statutory city after 
178.27  December 1, 1993; 
178.28     (ii) its city aid base does not exceed $5,600; and 
178.29     (iii) the city had a population in 1996 of 5,000 or more. 
178.30     (f) (e) The city aid base for a city is increased by 
178.31  $450,000 in 1999 to 2008 and the maximum amount of total aid it 
178.32  may receive under section 477A.013, subdivision 9, paragraph 
178.33  (c), is also increased by $450,000 in calendar year 1999 only, 
178.34  provided that: 
178.35     (i) the city had a population in 1996 of at least 50,000; 
178.36     (ii) its population had increased by at least 40 percent in 
179.1   the ten-year period ending in 1996; and 
179.2      (iii) its city's net tax capacity for aids payable in 1998 
179.3   is less than $700 per capita. 
179.4      (g) (f) Beginning in 2004, the city aid base for a city is 
179.5   equal to the sum of its city aid base in 2003 and the amount of 
179.6   additional aid it was certified to receive under section 477A.06 
179.7   in 2003.  For 2004 only, the maximum amount of total aid a city 
179.8   may receive under section 477A.013, subdivision 9, paragraph 
179.9   (c), is also increased by the amount it was certified to receive 
179.10  under section 477A.06 in 2003. 
179.11     (h) (g) The city aid base for a city is increased by 
179.12  $150,000 for aids payable in 2000 and thereafter, and the 
179.13  maximum amount of total aid it may receive under section 
179.14  477A.013, subdivision 9, paragraph (c), is also increased by 
179.15  $150,000 in calendar year 2000 only, provided that: 
179.16     (1) the city has a population that is greater than 1,000 
179.17  and less than 2,500; 
179.18     (2) its commercial and industrial percentage for aids 
179.19  payable in 1999 is greater than 45 percent; and 
179.20     (3) the total market value of all commercial and industrial 
179.21  property in the city for assessment year 1999 is at least 15 
179.22  percent less than the total market value of all commercial and 
179.23  industrial property in the city for assessment year 1998. 
179.24     (i) (h) The city aid base for a city is increased by 
179.25  $200,000 in 2000 and thereafter, and the maximum amount of total 
179.26  aid it may receive under section 477A.013, subdivision 9, 
179.27  paragraph (c), is also increased by $200,000 in calendar year 
179.28  2000 only, provided that: 
179.29     (1) the city had a population in 1997 of 2,500 or more; 
179.30     (2) the net tax capacity of the city used in calculating 
179.31  its 1999 aid under section 477A.013 is less than $650 per 
179.32  capita; 
179.33     (3) the pre-1940 housing percentage of the city used in 
179.34  calculating 1999 aid under section 477A.013 is greater than 12 
179.35  percent; 
179.36     (4) the 1999 local government aid of the city under section 
180.1   477A.013 is less than 20 percent of the amount that the formula 
180.2   aid of the city would have been if the need increase percentage 
180.3   was 100 percent; and 
180.4      (5) the city aid base of the city used in calculating aid 
180.5   under section 477A.013 is less than $7 per capita. 
180.6      (j) The city aid base for a city is increased by $225,000 
180.7   in calendar years 2000 to 2002 and the maximum amount of total 
180.8   aid it may receive under section 477A.013, subdivision 9, 
180.9   paragraph (c), is also increased by $225,000 in calendar year 
180.10  2000 only, provided that: 
180.11     (1) the city had a population of at least 5,000; 
180.12     (2) its population had increased by at least 50 percent in 
180.13  the ten-year period ending in 1997; 
180.14     (3) the city is located outside of the Minneapolis-St. Paul 
180.15  metropolitan statistical area as defined by the United States 
180.16  Bureau of the Census; and 
180.17     (4) the city received less than $30 per capita in aid under 
180.18  section 477A.013, subdivision 9, for aids payable in 1999. 
180.19     (k) (i) The city aid base for a city is increased by 
180.20  $102,000 in 2000 and thereafter, and the maximum amount of total 
180.21  aid it may receive under section 477A.013, subdivision 9, 
180.22  paragraph (c), is also increased by $102,000 in calendar year 
180.23  2000 only, provided that: 
180.24     (1) the city has a population in 1997 of 2,000 or more; 
180.25     (2) the net tax capacity of the city used in calculating 
180.26  its 1999 aid under section 477A.013 is less than $455 per 
180.27  capita; 
180.28     (3) the net levy of the city used in calculating 1999 aid 
180.29  under section 477A.013 is greater than $195 per capita; and 
180.30     (4) the 1999 local government aid of the city under section 
180.31  477A.013 is less than 38 percent of the amount that the formula 
180.32  aid of the city would have been if the need increase percentage 
180.33  was 100 percent. 
180.34     (l) (j) The city aid base for a city is increased by 
180.35  $32,000 in 2001 and thereafter, and the maximum amount of total 
180.36  aid it may receive under section 477A.013, subdivision 9, 
181.1   paragraph (c), is also increased by $32,000 in calendar year 
181.2   2001 only, provided that: 
181.3      (1) the city has a population in 1998 that is greater than 
181.4   200 but less than 500; 
181.5      (2) the city's revenue need used in calculating aids 
181.6   payable in 2000 was greater than $200 per capita; 
181.7      (3) the city net tax capacity for the city used in 
181.8   calculating aids available in 2000 was equal to or less than 
181.9   $200 per capita; 
181.10     (4) the city aid base of the city used in calculating aid 
181.11  under section 477A.013 is less than $65 per capita; and 
181.12     (5) the city's formula aid for aids payable in 2000 was 
181.13  greater than zero. 
181.14     (m) (k) The city aid base for a city is increased by $7,200 
181.15  in 2001 and thereafter, and the maximum amount of total aid it 
181.16  may receive under section 477A.013, subdivision 9, paragraph 
181.17  (c), is also increased by $7,200 in calendar year 2001 only, 
181.18  provided that: 
181.19     (1) the city had a population in 1998 that is greater than 
181.20  200 but less than 500; 
181.21     (2) the city's commercial industrial percentage used in 
181.22  calculating aids payable in 2000 was less than ten percent; 
181.23     (3) more than 25 percent of the city's population was 60 
181.24  years old or older according to the 1990 census; 
181.25     (4) the city aid base of the city used in calculating aid 
181.26  under section 477A.013 is less than $15 per capita; and 
181.27     (5) the city's formula aid for aids payable in 2000 was 
181.28  greater than zero. 
181.29     (n) (l) The city aid base for a city is increased by 
181.30  $45,000 in 2001 and thereafter and by an additional $50,000 in 
181.31  calendar years 2002 to 2011, and the maximum amount of total aid 
181.32  it may receive under section 477A.013, subdivision 9, paragraph 
181.33  (c), is also increased by $45,000 in calendar year 2001 only, 
181.34  and by $50,000 in calendar year 2002 only, provided that: 
181.35     (1) the net tax capacity of the city used in calculating 
181.36  its 2000 aid under section 477A.013 is less than $810 per 
182.1   capita; 
182.2      (2) the population of the city declined more than two 
182.3   percent between 1988 and 1998; 
182.4      (3) the net levy of the city used in calculating 2000 aid 
182.5   under section 477A.013 is greater than $240 per capita; and 
182.6      (4) the city received less than $36 per capita in aid under 
182.7   section 477A.013, subdivision 9, for aids payable in 2000. 
182.8      (o) (m) The city aid base for a city with a population of 
182.9   10,000 or more which is located outside of the seven-county 
182.10  metropolitan area is increased in 2002 and thereafter, and the 
182.11  maximum amount of total aid it may receive under section 
182.12  477A.013, subdivision 9, paragraph (b) or (c), is also increased 
182.13  in calendar year 2002 only, by an amount equal to the lesser of: 
182.14     (1)(i) the total population of the city, as determined by 
182.15  the United States Bureau of the Census, in the 2000 census, (ii) 
182.16  minus 5,000, (iii) times 60; or 
182.17     (2) $2,500,000. 
182.18     (p) (n) The city aid base is increased by $50,000 in 2002 
182.19  and thereafter, and the maximum amount of total aid it may 
182.20  receive under section 477A.013, subdivision 9, paragraph (c), is 
182.21  also increased by $50,000 in calendar year 2002 only, provided 
182.22  that: 
182.23     (1) the city is located in the seven-county metropolitan 
182.24  area; 
182.25     (2) its population in 2000 is between 10,000 and 20,000; 
182.26  and 
182.27     (3) its commercial industrial percentage, as calculated for 
182.28  city aid payable in 2001, was greater than 25 percent. 
182.29     (q) (o) The city aid base for a city is increased by 
182.30  $150,000 in calendar years 2002 to 2011 and the maximum amount 
182.31  of total aid it may receive under section 477A.013, subdivision 
182.32  9, paragraph (c), is also increased by $150,000 in calendar year 
182.33  2002 only, provided that: 
182.34     (1) the city had a population of at least 3,000 but no more 
182.35  than 4,000 in 1999; 
182.36     (2) its home county is located within the seven-county 
183.1   metropolitan area; 
183.2      (3) its pre-1940 housing percentage is less than 15 
183.3   percent; and 
183.4      (4) its city net tax capacity per capita for taxes payable 
183.5   in 2000 is less than $900 per capita. 
183.6      (r) (p) The city aid base for a city is increased by 
183.7   $200,000 beginning in calendar year 2003 and the maximum amount 
183.8   of total aid it may receive under section 477A.013, subdivision 
183.9   9, paragraph (c), is also increased by $200,000 in calendar year 
183.10  2003 only, provided that the city qualified for an increase in 
183.11  homestead and agricultural credit aid under Laws 1995, chapter 
183.12  264, article 8, section 18. 
183.13     (q) The city aid base for a city is increased by $200,000 
183.14  in 2004 and thereafter and the maximum amount of total aid it 
183.15  may receive under section 477A.013, subdivision 9, is also 
183.16  increased by $200,000 in calendar year 2004 only, if the city is 
183.17  the site of a nuclear dry cask storage facility. 
183.18     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
183.19  aids payable in 2004. 
183.20     Sec. 7.  Minnesota Statutes 2002, section 477A.011, is 
183.21  amended by adding a subdivision to read: 
183.22     Subd. 38.  [HOUSEHOLD SIZE.] "Household size" means the 
183.23  average number of persons per household in the jurisdiction as 
183.24  most recently estimated and reported by the state demographer as 
183.25  of July 1 of the aid calculation year. 
183.26     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
183.27  in 2004 and thereafter. 
183.28     Sec. 8.  Minnesota Statutes 2002, section 477A.011, is 
183.29  amended by adding a subdivision to read: 
183.30     Subd. 39.  [ROAD ACCIDENTS FACTOR.] "Road accidents factor" 
183.31  means the average annual number of vehicular accidents occurring 
183.32  on public roads, streets, and alleys in the jurisdiction as 
183.33  reported to the commissioner of revenue by the commissioner of 
183.34  public safety by July 1 of the aid calculation year using the 
183.35  most recent three-year period for which the commissioner of 
183.36  public safety has complete information, divided by the 
184.1   jurisdiction's population. 
184.2      <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
184.3   in 2004 and thereafter. 
184.4      Sec. 9.  Minnesota Statutes 2002, section 477A.011, is 
184.5   amended by adding a subdivision to read: 
184.6      Subd. 40.  [METROPOLITAN AREA FACTOR.] "Metropolitan area 
184.7   factor" means 35.20915 for cities located in the metropolitan 
184.8   area. 
184.9      <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
184.10  in 2004 and thereafter. 
184.11     Sec. 10.  [477A.0124] [COUNTY PROGRAM AID.] 
184.12     Subdivision 1.  [CALENDAR YEAR 2004.] In 2004, each county 
184.13  shall receive program aid in an amount equal to the sum of: 
184.14     (1) the amount of county attached machinery aid computed 
184.15  for the county for payment in 2003 under section 273.138 prior 
184.16  to any reduction under laws enacted in 2003; 
184.17     (2) the amount of county homestead and agricultural credit 
184.18  aid computed for the county for payment in 2003 under section 
184.19  273.1398, subdivision 2, prior to any reduction under laws 
184.20  enacted in 2003, minus the amount certified under section 
184.21  273.1398, subdivision 4b; and for counties located in judicial 
184.22  districts two and four, minus 25 percent of the amount 
184.23  calculated under section 273.1398, subdivision 4a; 
184.24     (3) the amount of county manufactured home homestead and 
184.25  agricultural credit aid computed for the county for payment in 
184.26  2003 under section 273.166 prior to any reduction under laws 
184.27  enacted in 2003; 
184.28     (4) the amount of county criminal justice aid computed for 
184.29  the county for payment in 2003 under section 477A.0121 prior to 
184.30  any reduction under laws enacted in 2003; and 
184.31     (5) the amount of county family preservation aid computed 
184.32  for the county for payment in 2003 under section 477A.0122 prior 
184.33  to any reduction under laws enacted in 2003. 
184.34     Subd. 2.  [DEFINITIONS.] (a) For the purposes of this 
184.35  section, the following terms have the meaning given. 
184.36     (b) "County program aid" means the sum of "county need aid" 
185.1   plus "county tax base equalization aid." 
185.2      (c) "Age adjusted population" means a county's population 
185.3   multiplied by the county age index. 
185.4      (d) "County age index" means the percentage of the 
185.5   population over age 65 within the county divided by the 
185.6   percentage of the population over age 65 within the state, 
185.7   except that the age index for any county may not be greater than 
185.8   1.8 nor less than 0.8. 
185.9      (e) "Population over age 65" means the population over age 
185.10  65 established as of July 1 in an aid calculation year by the 
185.11  most recent federal census, by a special census conducted under 
185.12  contract with the United States Bureau of the Census, by a 
185.13  population estimate made by the metropolitan council, or by a 
185.14  population estimate of the state demographer made pursuant to 
185.15  section 4A.02, whichever is the most recent as to the stated 
185.16  date of the count or estimate for the preceding calendar year. 
185.17     (f) "Part I crimes" means the three-year average annual 
185.18  number of Part I crimes reported for each county by the 
185.19  department of public safety for the most recent years available. 
185.20  By July 1 of each year the commissioner of public safety shall 
185.21  certify to the commissioner of revenue the number of Part I 
185.22  crimes reported for each county. 
185.23     (g) "Households receiving food stamps" means the average 
185.24  monthly number of households receiving food stamps for the three 
185.25  most recent years for which data is available.  By July 1 of 
185.26  each year, the commissioner of human services must certify to 
185.27  the commissioner of revenue the average monthly number of 
185.28  households in the state and in each county that receive food 
185.29  stamps, for the most recent calendar year. 
185.30     (h) "County net tax capacity" means the net tax capacity of 
185.31  the county, computed analogously to city net tax capacity under 
185.32  section 477A.011, subdivision 20. 
185.33     Subd. 3.  [COUNTY NEED AID.] For 2005 and subsequent years, 
185.34  the money appropriated to county need aid each calendar year 
185.35  shall be allocated as follows:  40 percent based on each 
185.36  county's share of age-adjusted population, 40 percent based on 
186.1   each county's share of the state total of households receiving 
186.2   food stamps, and 20 percent based on each county's share of the 
186.3   state total of Part I crimes. 
186.4      Subd. 4.  [COUNTY TAX-BASE EQUALIZATION AID.] (a) For 2005 
186.5   and subsequent years, the money appropriated to county tax-base 
186.6   equalization aid each calendar year shall be apportioned among 
186.7   the counties according to each county's tax-base equalization 
186.8   aid factor. 
186.9      (b) A county's tax-base equalization aid factor is equal to 
186.10  the amount by which (i) $185 times the county's population, 
186.11  exceeds (ii) 9.45 percent of the county's net tax capacity. 
186.12     (c) In the case of a county with a population less than 
186.13  10,000, the factor determined in paragraph (b) shall be 
186.14  multiplied by a factor of three. 
186.15     (d) In the case of a county with a population greater than 
186.16  500,000, the factor determined in paragraph (b) shall be 
186.17  multiplied by a factor of 0.3. 
186.18     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
186.19  payable in 2004 and subsequent years. 
186.20     Sec. 11.  Minnesota Statutes 2002, section 477A.013, 
186.21  subdivision 8, is amended to read: 
186.22     Subd. 8.  [CITY FORMULA AID.] In calendar year 1994 2004 
186.23  and subsequent years, the formula aid for a city is equal to the 
186.24  need increase percentage multiplied by the difference between 
186.25  (1) the city's revenue need multiplied by its population, and 
186.26  (2) the sum of the city's net tax capacity multiplied by the tax 
186.27  effort rate, the taconite aids under sections 298.28 and 
186.28  298.282, and 50 percent of the revenue raised in the city by a 
186.29  local general sales tax subject to section 297A.99 for the 
186.30  calendar year two years prior to the year in which the aid is 
186.31  being calculated, if the local sales tax is still in effect for 
186.32  the year in which the calculated aid will be paid.  No city may 
186.33  have a formula aid amount less than zero.  The need increase 
186.34  percentage must be the same for all cities.  
186.35     Notwithstanding the prior sentence, in 1995 only, the need 
186.36  increase percentage for a city shall be twice the need increase 
187.1   percentage applicable to other cities if:  
187.2      (1) the city, in 1992 or 1993, transferred an amount from 
187.3   governmental funds to their sewer and water fund, and 
187.4      (2) the amount transferred exceeded their net levy for 
187.5   taxes payable in the year in which the transfer occurred. 
187.6      The applicable need increase percentage or percentages must 
187.7   be calculated by the department of revenue so that the total of 
187.8   the aid under subdivision 9 equals the total amount available 
187.9   for aid under section 477A.03 after the subtraction under 
187.10  section 477A.014, subdivisions 4 and 5.  
187.11     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
187.12  in 2004 and thereafter. 
187.13     Sec. 12.  Minnesota Statutes 2002, section 477A.013, 
187.14  subdivision 9, is amended to read: 
187.15     Subd. 9.  [CITY AID DISTRIBUTION.] (a) In calendar year 
187.16  2002 and thereafter, each city shall receive an aid distribution 
187.17  equal to the sum of (1) the city formula aid under subdivision 
187.18  8, and (2) its city aid base. 
187.19     (b) The percentage increase aid for a first class city in 
187.20  calendar year 1995 and thereafter, except for 2002, 2004 shall 
187.21  not exceed the percentage increase in the sum of the aid to all 
187.22  cities under this section in the current calendar year compared 
187.23  to the sum of the aid to all cities in the previous year amount 
187.24  of its aid in calendar year 2003 after the reductions under this 
187.25  article.  For aids payable in 2002 only, the amount of the aid 
187.26  paid to a first class city shall not exceed the sum of its aid 
187.27  amount for calendar year 2001 under this section and its aid 
187.28  payment in calendar year 2001 under section 273.1398, 
187.29  subdivision 2, by more than 2.5 percent. 
187.30     (c) For aids payable in all years except 2002 2005 and 
187.31  thereafter, the total aid for any city, except a first class 
187.32  city, shall not exceed the sum of (1) ten percent of the city's 
187.33  net levy for the year prior to the aid distribution plus (2) its 
187.34  total aid in the previous year.  For aids payable in 2002 only, 
187.35  the total aid for any city, except a first class city, shall not 
187.36  exceed the sum of (1) 40 percent of the city's net levy for 
188.1   taxes payable in the year prior to the aid distribution plus (2) 
188.2   40 percent of its total aid in the previous year under section 
188.3   273.1398, subdivision 2, plus (3) its total aid in the previous 
188.4   year under this section. 
188.5      (d) For aids payable in 2004 only, the total aid for a city 
188.6   with a population less than 2,500 may not be less than the 
188.7   amount it was certified to receive in 2003 minus the greater of 
188.8   (1) the reduction to this aid payment in 2003 under this 
188.9   article, or (2) five percent of its 2003 aid amount.  For aids 
188.10  payable in 2005 and thereafter, the total aid for a city with a 
188.11  population less than 2,500 must not be less than the amount it 
188.12  was certified to receive in the previous year minus five percent 
188.13  of its 2003 certified aid amount. 
188.14     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
188.15  aids payable in 2004. 
188.16     Sec. 13.  Minnesota Statutes 2002, section 477A.03, 
188.17  subdivision 2, is amended to read: 
188.18     Subd. 2.  [ANNUAL APPROPRIATION.] (a) A sum sufficient to 
188.19  discharge the duties imposed by sections 477A.011 to 477A.014 is 
188.20  annually appropriated from the general fund to the commissioner 
188.21  of revenue.  
188.22     (b) Aid payments to counties under section 477A.0121 are 
188.23  limited to $20,265,000 in 1996.  Aid payments to counties under 
188.24  section 477A.0121 are limited to $27,571,625 in 1997.  For aid 
188.25  payable in 1998 and thereafter, the total aids paid under 
188.26  section 477A.0121 are the amounts certified to be paid in the 
188.27  previous year, adjusted for inflation as provided under 
188.28  subdivision 3. 
188.29     (c)(i) For aids payable in 1998 and thereafter, the total 
188.30  aids paid to counties under section 477A.0122 are the amounts 
188.31  certified to be paid in the previous year, adjusted for 
188.32  inflation as provided under subdivision 3. 
188.33     (ii) Aid payments to counties under section 477A.0122 in 
188.34  2000 are further increased by an additional $20,000,000 in 2000. 
188.35     (d) Aid payments to cities in 2002 under section 477A.013, 
188.36  subdivision 9, are limited to the amounts certified to be paid 
189.1   in the previous year, adjusted for inflation as provided in 
189.2   subdivision 3, and increased by $140,000,000.  For aids payable 
189.3   in 2003, the total aids paid under section 477A.013, subdivision 
189.4   9, are the amounts certified to be paid in the previous year, 
189.5   adjusted for inflation as provided under subdivision 3.  For 
189.6   aids payable in 2004, the total aids paid under section 
189.7   477A.013, subdivision 9, are the amounts certified to be paid in 
189.8   the previous year, adjusted for inflation as provided under 
189.9   subdivision 3, and increased by the amount certified to be paid 
189.10  in 2003 under section 477A.06.  For aids payable in 2005 and 
189.11  thereafter, the total aids paid under section 477A.013, 
189.12  subdivision 9, are the amounts certified to be paid in the 
189.13  previous year, adjusted for inflation as provided under 
189.14  subdivision 3.  The additional amount authorized under 
189.15  subdivision 4 is not included when calculating the appropriation 
189.16  limits under this paragraph limited to $390,000,000.  For aids 
189.17  payable in 2005 and thereafter, the total aids paid under 
189.18  section 477A.013, subdivision 9, are increased to $406,000,000. 
189.19     (e) Reimbursements made to counties under section 477A.0123 
189.20  in calendar year 2005 and thereafter are limited to an amount 
189.21  equal to the maximum allowed appropriation under this section in 
189.22  the previous year, multiplied by a percent to be established by 
189.23  law.  If no percent is established by law, the appropriation is 
189.24  limited to the total amount appropriated for this purpose in the 
189.25  previous year.  (c) For aids payable in calendar year 2005 and 
189.26  thereafter, the total aids paid to counties under section 
189.27  477A.0124, subdivision 3, are limited to $100,000,000.  Each 
189.28  calendar year, $500,000 of the total appropriation for this 
189.29  paragraph shall be retained by the commissioner of revenue to 
189.30  make reimbursements to the commissioner of finance for payments 
189.31  made under section 611.27.  The reimbursements shall be to 
189.32  defray the additional costs associated with court-ordered 
189.33  counsel under section 611.27.  Any retained amounts not used for 
189.34  reimbursement in a year shall be included in the next 
189.35  distribution of county need aid that is certified to the county 
189.36  auditors for the purpose of property tax reduction for the next 
190.1   taxes payable year. 
190.2      (d) For aids payable in 2005 and thereafter, the total aids 
190.3   under section 477A.0124, subdivision 4, are limited to 
190.4   $105,000,000.  The commissioner of finance shall bill the 
190.5   commissioner of revenue for the cost of preparation of local 
190.6   impact notes as required by section 3.987, not to exceed 
190.7   $207,000 in fiscal year 2004 and thereafter.  The commissioner 
190.8   of children, families, and learning shall bill the commissioner 
190.9   of revenue for the cost of preparation of local impact notes for 
190.10  school districts as required by section 3.987, not to exceed 
190.11  $7,000 in fiscal year 2004 and thereafter.  The commissioner of 
190.12  revenue shall deduct the amounts billed under this paragraph 
190.13  from the appropriation under this paragraph.  The amounts 
190.14  deducted are appropriated to the commissioner of finance and the 
190.15  commissioner of children, families, and learning for the 
190.16  preparation of local impact notes. 
190.17     <b>[EFFECTIVE DATE.]</b> This section is effective for aid payable 
190.18  in 2004 and thereafter. 
190.19     Sec. 14.  Minnesota Statutes 2002, section 611.27, 
190.20  subdivision 13, is amended to read: 
190.21     Subd. 13.  [PUBLIC DEFENSE SERVICES; CORRECTIONAL FACILITY 
190.22  INMATES.] All billings for services rendered and ordered under 
190.23  subdivision 7 shall require the approval of the chief district 
190.24  public defender before being forwarded on a monthly basis to the 
190.25  state public defender.  In cases where adequate representation 
190.26  cannot be provided by the district public defender and where 
190.27  counsel has been appointed under a court order, the state public 
190.28  defender shall forward to the commissioner of finance all 
190.29  billings for services rendered under the court order.  The 
190.30  commissioner shall pay for services from county criminal justice 
190.31  aid retained by the commissioner of revenue for that purpose 
190.32  under section 477A.0121, subdivision 4, or from county program 
190.33  aid retained by the commissioner of revenue for that purpose 
190.34  under section 477A.0124, subdivision 1, clause (4), or 477A.03, 
190.35  subdivision 2, paragraph (c). 
190.36     The costs of appointed counsel and associated services in 
191.1   cases arising from new criminal charges brought against indigent 
191.2   inmates who are incarcerated in a Minnesota state correctional 
191.3   facility are the responsibility of the state board of public 
191.4   defense.  In such cases the state public defender may follow the 
191.5   procedures outlined in this section for obtaining court-ordered 
191.6   counsel. 
191.7      <b>[EFFECTIVE DATE.]</b> This section is effective for payments in 
191.8   2004 and subsequent years. 
191.9      Sec. 15.  Minnesota Statutes 2002, section 611.27, 
191.10  subdivision 15, is amended to read: 
191.11     Subd. 15.  [COSTS OF TRANSCRIPTS.] In appeal cases and 
191.12  postconviction cases where the state public defender's office 
191.13  does not have sufficient funds to pay for transcripts and other 
191.14  necessary expenses because it has spent or committed all of the 
191.15  transcript funds in its annual budget, the state public defender 
191.16  may forward to the commissioner of finance all billings for 
191.17  transcripts and other necessary expenses.  The commissioner 
191.18  shall pay for these transcripts and other necessary expenses 
191.19  from county criminal justice aid retained by the commissioner of 
191.20  revenue under section 477A.0121, subdivision 4, or from county 
191.21  program aid retained by the commissioner of revenue for that 
191.22  purpose under section 477A.0124, subdivision 1, clause (4), or 
191.23  477A.03, subdivision 2, paragraph (c). 
191.24     <b>[EFFECTIVE DATE.]</b> This section is effective for payments in 
191.25  2004 and subsequent years. 
191.26     Sec. 16.  [DEFINITIONS.] 
191.27     (a) For purposes of sections 16 to 24, the following terms 
191.28  have the meanings given them in this section. 
191.29     (b) The 2003 and 2004 "levy plus aid revenue base" for a 
191.30  city is the sum of that city's certified property tax levy for 
191.31  taxes payable in 2003, plus the sum of the amounts the city was 
191.32  certified to receive in 2003 as: 
191.33     (1) local government aid under Minnesota Statutes, section 
191.34  477A.013; 
191.35     (2) existing low-income housing aid under Minnesota 
191.36  Statutes, section 477A.06; 
192.1      (3) new construction low-income housing aid under Minnesota 
192.2   Statutes, section 477A.065; and 
192.3      (4) taconite aids under Minnesota Statutes, sections 298.28 
192.4   and 298.282, including any aid which was required to be placed 
192.5   in a special fund for expenditure in the next succeeding year. 
192.6      (c) The 2003 and 2004 "levy plus aid revenue base" for a 
192.7   county is the sum of that county's certified property tax levy 
192.8   for taxes payable in 2003, plus the sum of the amounts the 
192.9   county was certified to receive in the designated calendar year 
192.10  as: 
192.11     (1) homestead and agricultural credit aid under Minnesota 
192.12  Statutes, sections 273.1398, subdivision 2, and 273.166; 
192.13     (2) criminal justice aid under Minnesota Statutes, section 
192.14  477A.0121; 
192.15     (3) family preservation aid under Minnesota Statutes, 
192.16  section 477A.0122; 
192.17     (4) taconite aids under Minnesota Statutes, sections 298.28 
192.18  and 298.282, including any aid which was required to be placed 
192.19  in a special fund for expenditure in the next succeeding year; 
192.20  and 
192.21     (5) county program aid under section 477A.0124. 
192.22     (d) "Total revenue" for a city or county for a particular 
192.23  year are the total revenue amount for that city or county, as 
192.24  reported by the state auditor for the same year, or for the most 
192.25  recent preceding year for which the state auditor has reported, 
192.26  excluding grants between political subdivisions and amounts 
192.27  borrowed by the city or county but including net transfers from 
192.28  an enterprise fund. 
192.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
192.30  following final enactment. 
192.31     Sec. 17.  [2003 CITY AID REDUCTIONS.] 
192.32     The commissioner of revenue shall compute an aid reduction 
192.33  amount for each city for 2003 equal to 9.3 percent of the city's 
192.34  levy plus aid revenue base for 2003. 
192.35     The reduction amount is limited to 3.7 percent of the 
192.36  city's total revenues for 2003 if a city has a population under 
193.1   1,000 or if the city has a three-year levy plus aid revenue base 
193.2   increase average of less than two percent.  For all other 
193.3   cities, the reduction amount is limited to 5.25 percent of the 
193.4   city's total revenues for 2003. 
193.5      The reduction is further limited to the sum of the city's 
193.6   payable 2003 distribution pursuant to Minnesota Statutes, 
193.7   section 477A.013, and related sections, and the city's payable 
193.8   2003 reimbursement under Minnesota Statutes, section 273.1384. 
193.9      The reduction is applied first to the city's distribution 
193.10  pursuant to Minnesota Statutes, section 477A.013, and then if 
193.11  necessary to the city's reimbursements pursuant to Minnesota 
193.12  Statutes, section 273.1384. 
193.13     To the extent that sufficient information is available on 
193.14  each successive payment date within the year, the commissioner 
193.15  of revenue shall pay any remaining 2003 distribution or 
193.16  reimbursement amount reduced under this section in equal 
193.17  installments on the payment dates provided in law. 
193.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
193.19  following final enactment. 
193.20     Sec. 18.  [2003 COUNTY AID REDUCTIONS.] 
193.21     The commissioner of revenue shall compute an aid reduction 
193.22  amount for each county for 2003 equal to 3.16 percent of the 
193.23  county's levy plus aid revenue base for 2003. 
193.24     The reduction is limited to the sum of the county's payable 
193.25  2003 distributions pursuant to Minnesota Statutes, sections 
193.26  273.138; 273.1384; 273.1398, subdivision 2; 273.166; 477A.0121; 
193.27  and 477A.0122. 
193.28     The aid reduction is applied first to reduce the county's 
193.29  2003 distribution pursuant to Minnesota Statutes, section 
193.30  273.138, then to reduce, in this sequence, the aid payable in 
193.31  2003 under Minnesota Statutes, sections 273.1398, subdivision 2; 
193.32  273.166; 477A.0121; and 477A.0122.  Then, if necessary, the 
193.33  county's reimbursements pursuant to Minnesota Statutes, section 
193.34  273.1384, are to be reduced. 
193.35     To the extent that sufficient information is available on 
193.36  each successive payment date within the year, the commissioner 
194.1   of revenue shall pay any remaining 2003 distribution or 
194.2   reimbursement amount reduced under this section in equal 
194.3   installments on the payment dates provided in law. 
194.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
194.5   following final enactment. 
194.6      Sec. 19.  [TOWNSHIP AID REDUCTIONS.] 
194.7      The commissioner of revenue shall compute an aid reduction 
194.8   amount for each township for 2003 equal to one percent of the 
194.9   town's certified levy for taxes payable in 2003. 
194.10     The reduction is limited to the amount of the town's 
194.11  payable 2003 reimbursement pursuant to Minnesota Statutes, 
194.12  section 273.1384.  
194.13     To the extent that sufficient information is available on 
194.14  each successive payment date within the year, the commissioner 
194.15  of revenue shall pay any remaining 2003 reimbursement amount for 
194.16  the town in equal installments on the payment dates provided in 
194.17  law. 
194.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
194.19  following final enactment. 
194.20     Sec. 20.  [2003 SPECIAL TAXING DISTRICT AID REDUCTIONS.] 
194.21     The commissioner of revenue shall compute an aid reduction 
194.22  amount for each special taxing district for 2003 equal to 0.75 
194.23  percent of the district's certified levy for taxes payable in 
194.24  2003. 
194.25     The reduction is limited to the amount of the district's 
194.26  payable 2003 reimbursement pursuant to Minnesota Statutes, 
194.27  section 237.1384. 
194.28     To the extent that sufficient information is available on 
194.29  each successive payment date within the year, the commissioner 
194.30  of revenue shall pay any remaining 2003 reimbursement amount for 
194.31  the district in equal installments on the payment dates provided 
194.32  in law. 
194.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
194.34  following final enactment. 
194.35     Sec. 21.  [2004 CITY AID REDUCTIONS.] 
194.36     The commissioner of revenue shall compute an aid reduction 
195.1   amount for 2004 for each city as provided in this section. 
195.2      The initial aid reduction amount for each city is the 
195.3   amount by which the city's aid distribution under Minnesota 
195.4   Statutes, section 477A.013, and related provisions payable in 
195.5   2003 exceeds the city's 2004 distribution under those provisions.
195.6      The minimum aid reduction amount for a city is the amount 
195.7   of its reduction in 2003 under section 17.  If a city receives 
195.8   an increase to its city aid base under section 477A.011, 
195.9   subdivision 36, its minimum aid reduction is reduced by an equal 
195.10  amount. 
195.11     The maximum aid reduction amount for a city is an amount 
195.12  equal to 18 percent of the city's total 2004 levy plus aid 
195.13  revenue base, except that if the city has a city net tax 
195.14  capacity for aids payable in 2004, as defined in section 
195.15  477A.011, subdivision 20, of $700 per capita or less, the 
195.16  maximum aid reduction shall not exceed an amount equal to 13 
195.17  percent of the city's total 2004 levy plus aid revenue base. 
195.18     If the initial aid reduction amount for a city is less than 
195.19  the minimum aid reduction amount for that city, the final aid 
195.20  reduction amount for the city is the sum of the initial aid 
195.21  reduction amount and the lesser of the amount of the city's 
195.22  payable 2004 reimbursement under Minnesota Statutes, section 
195.23  273.1384, or the difference between the minimum and initial aid 
195.24  reduction amounts for the city. 
195.25     If the initial aid reduction amount for a city is greater 
195.26  than the maximum aid reduction amount for the city, the city 
195.27  receives an additional distribution under this section equal to 
195.28  the result of subtracting the maximum aid reduction amount from 
195.29  the initial aid reduction amount.  This distribution shall be 
195.30  paid in equal installments in 2004 on the dates specified in 
195.31  Minnesota Statutes, section 477A.015.  The amount necessary for 
195.32  these additional distributions is appropriated to the 
195.33  commissioner of revenue from the general fund in fiscal year 
195.34  2005. 
195.35     The initial aid reduction is applied to the city's 
195.36  distribution pursuant to Minnesota Statutes, section 477A.013, 
196.1   and any aid reduction in excess of the initial aid reduction is 
196.2   applied to the city's reimbursements pursuant to Minnesota 
196.3   Statutes, section 273.1384. 
196.4      To the extent that sufficient information is available on 
196.5   each payment date in 2004, the commissioner of revenue shall pay 
196.6   the reimbursements reduced under this section in equal 
196.7   installments on the payment dates provided in law. 
196.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
196.9   following final enactment. 
196.10     Sec. 22.  [2004 COUNTY AID REDUCTIONS.] 
196.11     The commissioner of revenue shall compute an aid reduction 
196.12  amount for 2004 for each county as provided in this section. 
196.13     The commissioner of revenue shall compute an aid reduction 
196.14  amount for each county for 2004 equal to 5.27 percent of the 
196.15  county's levy plus aid revenue base for 2004. 
196.16     The reduction is further limited to the sum of the county's 
196.17  payable 2004 distributions under Minnesota Statutes, sections 
196.18  477A.0124 and 273.1384. 
196.19     The aid reduction is applied first to the county's 
196.20  distributions pursuant to Minnesota Statutes, section 477A.0124, 
196.21  and then, if necessary, to reduce the county's reimbursements 
196.22  pursuant to Minnesota Statutes, section 273.1384. 
196.23     To the extent that sufficient information is available on 
196.24  each payment date in 2004, the commissioner of revenue shall pay 
196.25  any remaining 2004 distribution or reimbursement amount reduced 
196.26  under this section in equal installments on the payment dates 
196.27  provided in law. 
196.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
196.29  following final enactment. 
196.30     Sec. 23.  [2004 TOWNSHIP AID REDUCTIONS.] 
196.31     The commissioner of revenue shall compute an aid reduction 
196.32  amount for each township for 2004 equal to 1.5 percent of the 
196.33  town's certified levy for taxes payable in 2003.  
196.34     The reduction is limited to the amount of the town's 
196.35  payable 2004 reimbursement pursuant to Minnesota Statutes, 
196.36  section 273.1384. 
197.1      To the extent that sufficient information is available on 
197.2   each successive payment date within the year, the commissioner 
197.3   of revenue shall pay any remaining 2004 reimbursement amount for 
197.4   the town in equal installments on the payment dates provided in 
197.5   law. 
197.6      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
197.7   following final enactment. 
197.8      Sec. 24.  [2004 SPECIAL TAXING DISTRICT AID REDUCTIONS.] 
197.9      The commissioner of revenue shall compute an aid reduction 
197.10  amount for each special taxing district for 2004 equal to one 
197.11  percent of the district's certified levy for taxes payable in 
197.12  2003.  
197.13     The reduction is limited to the amount of the district's 
197.14  payable 2004 reimbursement pursuant to Minnesota Statutes, 
197.15  section 273.1384. 
197.16     To the extent that sufficient information is available on 
197.17  each successive payment date within the year, the commissioner 
197.18  of revenue shall pay any remaining 2004 reimbursement amount for 
197.19  the district in equal installments on the payment dates provided 
197.20  in law. 
197.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
197.22  following final enactment. 
197.23     Sec. 25.  [HACA ADJUSTMENT; COURT TAKEOVER ERROR.] 
197.24     In calendar years 2003 and 2004, any county whose 2002 aid 
197.25  reduction, related to the state assumption of funding for 
197.26  mandated court services, was based on costs not assumed by the 
197.27  state shall receive the following aid adjustments; 
197.28     (1) in calendar year 2003, a permanent increase of $50,000 
197.29  in its aid payment under Minnesota Statutes, section 273.1398, 
197.30  subdivision 2, above its certified 2003 aid amount; and 
197.31     (2) in calendar year 2004, a permanent increase of an 
197.32  additional $50,000 in its county program aid payment under 
197.33  Minnesota Statutes, section 477A.0124, subdivision 1, clause (2).
197.34     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
197.35  payable in 2003 and 2004. 
197.36     Sec. 26.  [REPEALER.] 
198.1      (a) Minnesota Statutes 2002, sections 273.138, subdivision 
198.2   2, and the parts of subdivisions 5 and 7 relating to counties; 
198.3   273.1398, subdivisions 2, 4, and 4d; 273.166; 477A.011, 
198.4   subdivision 37; 477A.0121; 477A.0122; 477A.0123; 477A.0132; 
198.5   477A.03, subdivisions 3 and 4; 477A.06; 477A.065; and 477A.07, 
198.6   are repealed effective for aid payable in 2004 and thereafter. 
198.7      (b) Minnesota Statutes 2002, section 273.138, subdivisions 
198.8   3 and 6, and the parts of subdivisions 5 and 7 relating to 
198.9   school districts are repealed effective for calendar year 2003. 
198.10                             ARTICLE 7 
198.11                            LEVY LIMITS 
198.12     Section 1.  Minnesota Statutes 2002, section 275.70, 
198.13  subdivision 3, is amended to read: 
198.14     Subd. 3.  [LOCAL GOVERNMENTAL UNIT.] "Local governmental 
198.15  unit" means a county, or a statutory or home rule charter 
198.16  city with a population greater than 2,500. 
198.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
198.18  payable in 2004 and thereafter. 
198.19     Sec. 2.  Minnesota Statutes 2002, section 275.70, 
198.20  subdivision 5, is amended to read: 
198.21     Subd. 5.  [SPECIAL LEVIES.] "Special levies" means those 
198.22  portions of ad valorem taxes levied by a local governmental unit 
198.23  for the following purposes or in the following manner: 
198.24     (1) to pay the costs of the principal and interest on 
198.25  bonded indebtedness or to reimburse for the amount of liquor 
198.26  store revenues used to pay the principal and interest due on 
198.27  municipal liquor store bonds in the year preceding the year for 
198.28  which the levy limit is calculated; 
198.29     (2) to pay the costs of principal and interest on 
198.30  certificates of indebtedness issued for any corporate purpose 
198.31  except for the following: 
198.32     (i) tax anticipation or aid anticipation certificates of 
198.33  indebtedness; 
198.34     (ii) certificates of indebtedness issued under sections 
198.35  298.28 and 298.282; 
198.36     (iii) certificates of indebtedness used to fund current 
199.1   expenses or to pay the costs of extraordinary expenditures that 
199.2   result from a public emergency; or 
199.3      (iv) certificates of indebtedness used to fund an 
199.4   insufficiency in tax receipts or an insufficiency in other 
199.5   revenue sources; 
199.6      (3) to provide for the bonded indebtedness portion of 
199.7   payments made to another political subdivision of the state of 
199.8   Minnesota; 
199.9      (4) to fund payments made to the Minnesota state armory 
199.10  building commission under section 193.145, subdivision 2, to 
199.11  retire the principal and interest on armory construction bonds; 
199.12     (5) property taxes approved by voters which are levied 
199.13  against the referendum market value as provided under section 
199.14  275.61; 
199.15     (6) to fund matching requirements needed to qualify for 
199.16  federal or state grants or programs to the extent that either 
199.17  (i) the matching requirement exceeds the matching requirement in 
199.18  calendar year 2001, or (ii) it is a new matching requirement 
199.19  that did not exist prior to 2002; 
199.20     (7) to pay the expenses reasonably and necessarily incurred 
199.21  in preparing for or repairing the effects of natural disaster 
199.22  including the occurrence or threat of widespread or severe 
199.23  damage, injury, or loss of life or property resulting from 
199.24  natural causes, in accordance with standards formulated by the 
199.25  emergency services division of the state department of public 
199.26  safety, as allowed by the commissioner of revenue under section 
199.27  275.74, subdivision 2; 
199.28     (8) pay amounts required to correct an error in the levy 
199.29  certified to the county auditor by a city or county in a levy 
199.30  year, but only to the extent that when added to the preceding 
199.31  year's levy it is not in excess of an applicable statutory, 
199.32  special law or charter limitation, or the limitation imposed on 
199.33  the governmental subdivision by sections 275.70 to 275.74 in the 
199.34  preceding levy year; 
199.35     (9) to pay an abatement under section 469.1815; 
199.36     (10) to pay any costs attributable to increases in the 
200.1   employer contribution rates under chapter 353 that are effective 
200.2   after June 30, 2001; 
200.3      (11) to pay the operating or maintenance costs of a county 
200.4   jail as authorized in section 641.01 or 641.262, or of a 
200.5   correctional facility as defined in section 241.021, subdivision 
200.6   1, paragraph (5), to the extent that the county can demonstrate 
200.7   to the commissioner of revenue that the amount has been included 
200.8   in the county budget as a direct result of a rule, minimum 
200.9   requirement, minimum standard, or directive of the department of 
200.10  corrections, or to pay the operating or maintenance costs of a 
200.11  regional jail as authorized in section 641.262.  For purposes of 
200.12  this clause, a district court order is not a rule, minimum 
200.13  requirement, minimum standard, or directive of the department of 
200.14  corrections.  If the county utilizes this special levy, any 
200.15  amount levied by the county in the previous levy year for the 
200.16  purposes specified under this clause and included in the 
200.17  county's previous year's levy limitation computed under section 
200.18  275.71, shall be deducted from the levy limit base under section 
200.19  275.71, subdivision 2, when determining the county's current 
200.20  year levy limitation.  The county shall provide the necessary 
200.21  information to the commissioner of revenue for making this 
200.22  determination; 
200.23     (12) to pay for operation of a lake improvement district, 
200.24  as authorized under section 103B.555.  If the county utilizes 
200.25  this special levy, any amount levied by the county in the 
200.26  previous levy year for the purposes specified under this clause 
200.27  and included in the county's previous year's levy limitation 
200.28  computed under section 275.71 shall be deducted from the levy 
200.29  limit base under section 275.71, subdivision 2, when determining 
200.30  the county's current year levy limitation.  The county shall 
200.31  provide the necessary information to the commissioner of revenue 
200.32  for making this determination; 
200.33     (13) to repay a state or federal loan used to fund the 
200.34  direct or indirect required spending by the local government due 
200.35  to a state or federal transportation project or other state or 
200.36  federal capital project.  This authority may only be used if the 
201.1   project is not a local government initiative; 
201.2      (14) for counties only, to pay the costs reasonably 
201.3   expected to be incurred in 2002 related to the redistricting of 
201.4   election districts and establishment of election precincts under 
201.5   sections 204B.135 and 204B.14, the notice required by section 
201.6   204B.14, subdivision 4, and the reassignment of voters in the 
201.7   statewide registration system, not to exceed $1 per capita, 
201.8   provided that the county shall distribute a portion of the 
201.9   amount levied under this clause equal to 25 cents times the 
201.10  population of the city to all cities in the county with a 
201.11  population of 30,000 or more; 
201.12     (15) to pay for court administration costs as required 
201.13  under section 273.1398, subdivision 4b, less the (i) county's 
201.14  share of transferred fines and fees collected by the district 
201.15  courts in the county for calendar year 2001 and (ii) the aid 
201.16  amount certified to be paid to the county in 2004 under section 
201.17  273.1398, subdivision 4c; however, for taxes levied to pay for 
201.18  these costs in the year in which the court financing is 
201.19  transferred to the state, the amount under this section clause 
201.20  is limited to one-third of the aid reduction the amount of aid 
201.21  the county is certified to receive under section 273.1398, 
201.22  subdivision 4a; and 
201.23     (16) (15) to fund a police or firefighters relief 
201.24  association as required under section 69.77 to the extent that 
201.25  the required amount exceeds the amount levied for this purpose 
201.26  in 2001. 
201.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
201.28  payable in 2004 and thereafter. 
201.29     Sec. 3.  Minnesota Statutes 2002, section 275.71, 
201.30  subdivision 2, is amended to read: 
201.31     Subd. 2.  [LEVY LIMIT BASE.] (a) If a local government unit 
201.32  was not subject to levy limits under this section for taxes 
201.33  levied in 2002, the levy limit base for a the local governmental 
201.34  unit for taxes levied in 2001 is equal to the greater of: 
201.35     (1) the sum of its adjusted levy limit base for taxes 
201.36  levied in 1999 plus the amount it levied in 1999 under Minnesota 
202.1   Statutes 1999 Supplement, section 275.70, subdivision 5, clauses 
202.2   (8) and (13), multiplied by: 
202.3      (i) one plus the percentage growth in the implicit price 
202.4   deflator for the 12-month period ending March 30, 2000; 
202.5      (ii) one plus a percentage equal to the annual percentage 
202.6   increase in the estimated number of households, if any, for the 
202.7   most recent 12-month period that was available on July 1, 2000; 
202.8   and 
202.9      (iii) one plus a percentage equal to 50 percent of the 
202.10  percentage increase in the taxable market value of the 
202.11  jurisdiction due to new construction of class 3 property, as 
202.12  defined in section 273.13, subdivision 24, except for 
202.13  state-assessed utility and railroad operating property, for the 
202.14  most recent year for which data was available as of July 1, 
202.15  2000; or 
202.16     (2) 2003 is an amount equal to: 
202.17     (i) the sum of the amount it levied in 2000 2002 plus the 
202.18  amount of aids it was certified to receive in calendar year 2001 
202.19  2003 under sections 273.1398, 298.282, 477A.011 to 477A.03, 
202.20  prior to any aid reductions under section 273.1399, subdivision 
202.21  5, 477A.06, and 477A.065, after any reductions to these aids 
202.22  under article 6; less 
202.23     (ii) the amount it levied in 2000 2002 that would qualify 
202.24  as special levies under section 275.70, subdivision 6, for taxes 
202.25  levied in 2001.  The local governmental unit shall provide the 
202.26  commissioner of revenue with sufficient information to make this 
202.27  calculation. 
202.28     (b) If the governmental unit was not subject to levy limits 
202.29  for taxes levied in 1999, its levy limit base for taxes levied 
202.30  in 2001 is equal to the amount calculated under paragraph (a), 
202.31  clause (2). 
202.32     (c) The levy limit base for a local governmental unit not 
202.33  included in paragraph (a) for taxes levied in 2002 2003 is equal 
202.34  to its adjusted levy limit base in the previous year, plus the 
202.35  amount of tree growth tax it received in calendar year 2001 
202.36  under sections 270.31 to 270.39, and plus, in the case of a 
203.1   city, the amount it was certified to receive in calendar year 
203.2   2001 under section 273.166, subject to any adjustments under 
203.3   section 275.72, and less (1) any cuts in 2003 payments to aids 
203.4   under sections 273.1398 and 477A.011 to 477A.03, and (2) 70 
203.5   percent of the difference between its levy limit under 
203.6   subdivision 5 for taxes levied in 2002 and the amount it 
203.7   actually levied under that subdivision in that year. 
203.8      (c) The levy limit base for a local governmental unit for 
203.9   taxes levied in 2004 is equal to its adjusted levy limit base in 
203.10  the previous year, subject to any adjustments under section 
203.11  275.72. 
203.12     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
203.13  levied in 2003 and 2004. 
203.14     Sec. 4.  Minnesota Statutes 2002, section 275.71, 
203.15  subdivision 4, is amended to read: 
203.16     Subd. 4.  [ADJUSTED LEVY LIMIT BASE.] (a) For taxes levied 
203.17  in 2001 and 2002 2003 and 2004, the adjusted levy limit base is 
203.18  equal to the levy limit base computed under subdivisions 2 and 3 
203.19  or section 275.72, multiplied by: 
203.20     (1) one plus a percentage equal to the percentage growth in 
203.21  the implicit price deflator; 
203.22     (2) one plus a percentage equal to the percentage increase 
203.23  in number of households, if any, for the most recent 12-month 
203.24  period for which data is available; and 
203.25     (3) (2) one plus a percentage equal to 50 percent of the 
203.26  percentage increase in the taxable market value of the 
203.27  jurisdiction due to new construction of class 3 property, as 
203.28  defined in section 273.13, subdivision 24, except for 
203.29  state-assessed utility and railroad operating property, for the 
203.30  most recent year for which data is available. 
203.31     (b) For counties only, for taxes levied in 2001 and 2002, 
203.32  the adjusted levy limit base is also reduced by any amount of 
203.33  levy reduction required under section 275.07, subdivision 1, 
203.34  paragraph (b), clause (ii). 
203.35     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
203.36  payable in 2004 and thereafter. 
204.1      Sec. 5.  Minnesota Statutes 2002, section 275.71, 
204.2   subdivision 5, is amended to read: 
204.3      Subd. 5.  [PROPERTY TAX LEVY LIMIT.] Notwithstanding any 
204.4   other provision of a municipal charter which limits ad valorem 
204.5   taxes to a lesser amount, or which would require a separate 
204.6   voter approval for any increase, For taxes levied in 2001 and 
204.7   2002 2003 and 2004, the property tax levy limit for a local 
204.8   governmental unit is equal to its adjusted levy limit base 
204.9   determined under subdivision 4 plus any additional levy 
204.10  authorized under section 275.73, which is levied against net tax 
204.11  capacity, reduced by the sum of (i) the total amount of aids and 
204.12  reimbursements that the local governmental unit is certified to 
204.13  receive under sections 477A.011 to 477A.014, except for the 
204.14  increases in city aid bases in calendar year 2002 under section 
204.15  477A.011, subdivision 36, paragraphs (n), (p), and (q), (ii) 
204.16  homestead and agricultural aids it is certified to receive under 
204.17  section 273.1398, (iii) taconite aids under sections 298.28 and 
204.18  298.282 including any aid which was required to be placed in a 
204.19  special fund for expenditure in the next succeeding year, (iv) 
204.20  low-income housing aid under sections 477A.06 and 477A.065, and 
204.21  (v) property tax replacement aids under section 174.242 and (iv) 
204.22  estimated payments to the local governmental unit under section 
204.23  272.029, adjusted for any error in estimation in the preceding 
204.24  year. 
204.25     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
204.26  payable in 2004 and thereafter. 
204.27     Sec. 6.  Minnesota Statutes 2002, section 275.71, 
204.28  subdivision 6, is amended to read: 
204.29     Subd. 6.  [LEVIES IN EXCESS OF LEVY LIMITS.] (a) If the 
204.30  levy made by a city or county exceeds the levy limit provided in 
204.31  sections 275.70 to 275.74, except when the excess levy is due to 
204.32  the rounding of the rate in accordance with section 275.28, the 
204.33  county auditor shall only extend the amount of taxes permitted 
204.34  under sections 275.70 to 275.74, as provided for in section 
204.35  275.16. 
204.36     (b) For taxes levied in 2002, payable in 2003 only, if an 
205.1   error was made in calculating the levy limit adjustment related 
205.2   to a special levy for jails authorized under section 275.70, 
205.3   subdivision 5, clause (11), in the previous year, the following 
205.4   adjustments must be made: 
205.5      (1) the county's levy limit base for taxes levied in 2002 
205.6   must be based on the corrected adjusted levy limit base for 
205.7   taxes levied in 2001; and 
205.8      (2) the county's final levy limit for taxes levied in 2002, 
205.9   payable in 2003, must also be temporarily reduced by an amount 
205.10  equal to the amount of county levy spread in the previous year 
205.11  in excess of the total recalculated levy limit plus authorized 
205.12  special levies for taxes levied in 2001, payable in 2002. 
205.13     (c) The commissioner of revenue shall inform counties 
205.14  affected by paragraph (b) of the levy error and levy adjustments 
205.15  required under this provision by June 15, 2002.  The county may 
205.16  provide additional information to the commissioner indicating 
205.17  why these adjustments may be in error by July 15, 2002.  The 
205.18  commissioner shall certify the final levy adjustment to the 
205.19  affected counties by August 1, 2002.  The levy reduction imposed 
205.20  under paragraph (b), clause (2), may be spread over a period not 
205.21  to exceed three years, upon agreement between the county and the 
205.22  commissioner. 
205.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
205.24  payable in 2004 and thereafter. 
205.25     Sec. 7.  Minnesota Statutes 2002, section 275.73, 
205.26  subdivision 2, is amended to read:  
205.27     Subd. 2.  [LEVY EFFECTIVE DATE.] An additional levy 
205.28  approved under subdivision 1 at a general or special election 
205.29  held prior to September 1 on or before the first Tuesday in 
205.30  November in any levy year may be levied in that same levy year 
205.31  and subsequent levy years.  An additional levy approved under 
205.32  subdivision 1 at a general or special election held after August 
205.33  31 the first Tuesday in November in any levy year shall not be 
205.34  levied in that same levy but may be levied in subsequent levy 
205.35  years. 
205.36     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
206.1   payable in 2004 and thereafter. 
206.2      Sec. 8.  Minnesota Statutes 2002, section 275.74, 
206.3   subdivision 3, is amended to read: 
206.4      Subd. 3.  [INFORMATION NECESSARY TO CALCULATE THE 2001 LEVY 
206.5   LIMIT BASE.] A local governmental unit must provide the 
206.6   commissioner with the information required to calculate the 
206.7   alternative 2001 levy limit base amount under section 275.71, 
206.8   subdivision 2, paragraph (a), clause (2), by July 20, 2001 of 
206.9   the levy year.  If the information is not received by the 
206.10  commissioner by that date, or is not deemed sufficient to make 
206.11  the calculation under that clause, the commissioner has the 
206.12  discretion to set the local governmental unit's 2001 levy limit 
206.13  for all purposes including those purposes for which special 
206.14  levies may be made, base equal to the amount calculated under 
206.15  section 275.71, subdivision 2, paragraph (a), clause (1) of the 
206.16  local governmental unit's certified levy for the prior year. 
206.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
206.18  payable in 2004 and thereafter. 
206.19     Sec. 9.  [275.75] [CHARTER EXEMPTION FOR AID LOSS.] 
206.20     Notwithstanding any other provision of a municipal charter 
206.21  which limits ad valorem taxes to a lesser amount, or which would 
206.22  require voter approval for any increase, a municipality may 
206.23  increase its levy in any payable year by an amount equal to the 
206.24  reduction in the amount of aid it is certified to receive under 
206.25  sections 477A.011 to 477A.03 for that same payable year compared 
206.26  to the amount certified in the previous year.  The levy increase 
206.27  is a permanent increase in the municipality's levy authority. 
206.28     <b>[EFFECTIVE DATE.]</b> This section is effective for aids levied 
206.29  in calendar year 2003, payable in 2004, and thereafter. 
206.30                             ARTICLE 8 
206.31              TRUTH IN TAXATION AND REVERSE REFERENDUM 
206.32     Section 1.  Minnesota Statutes 2002, section 275.065, 
206.33  subdivision 1, is amended to read: 
206.34     Subdivision 1.  [PROPOSED LEVY.] (a) Notwithstanding any 
206.35  law or charter to the contrary, on or before September 15 1, 
206.36  each taxing authority, other than a school district, shall adopt 
207.1   a proposed budget and shall certify to the county auditor the 
207.2   proposed or, in the case of a town, the final property tax levy 
207.3   for taxes payable in the following year. 
207.4      (b) On or before September 30 1, each school district shall 
207.5   certify to the county auditor the proposed property tax levy for 
207.6   taxes payable in the following year.  The school district shall 
207.7   certify the proposed levy as: 
207.8      (1) the state determined school levy amount as prescribed 
207.9   under section 126C.13, subdivision 2; 
207.10     (2) voter approved referendum and debt levies; and 
207.11     (3) the sum of the remaining school levies, or the maximum 
207.12  levy limitation certified by the commissioner of children, 
207.13  families, and learning according to section 126C.48, subdivision 
207.14  1, less the amounts levied under clauses (1) and (2). 
207.15     (c) If the board of estimate and taxation or any similar 
207.16  board that establishes maximum tax levies for taxing 
207.17  jurisdictions within a first class city certifies the maximum 
207.18  property tax levies for funds under its jurisdiction by charter 
207.19  to the county auditor by September 15 1, the city shall be 
207.20  deemed to have certified its levies for those taxing 
207.21  jurisdictions. 
207.22     (d) For purposes of this section, "taxing authority" 
207.23  includes all home rule and statutory cities, towns, counties, 
207.24  school districts, and special taxing districts as defined in 
207.25  section 275.066.  Intermediate school districts that levy a tax 
207.26  under chapter 124 or 136D, joint powers boards established under 
207.27  sections 123A.44 to 123A.446, and common school districts No. 
207.28  323, Franconia, and No. 815, Prinsburg, are also special taxing 
207.29  districts for purposes of this section.  
207.30     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
207.31  payable in 2006 and thereafter. 
207.32     Sec. 2.  Minnesota Statutes 2002, section 275.065, 
207.33  subdivision 1a, is amended to read: 
207.34     Subd. 1a.  [OVERLAPPING JURISDICTIONS.] In the case of a 
207.35  taxing authority lying in two or more counties, the home county 
207.36  auditor shall certify the proposed levy and the proposed local 
208.1   tax rate to the other county auditor by September 20 5.  The 
208.2   home county auditor must estimate the levy or rate in preparing 
208.3   the notices required in subdivision 3, if the other county has 
208.4   not certified the appropriate information.  If requested by the 
208.5   home county auditor, the other county auditor must furnish an 
208.6   estimate to the home county auditor. 
208.7      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
208.8   payable in 2006 and thereafter. 
208.9      Sec. 3.  Minnesota Statutes 2002, section 275.065, 
208.10  subdivision 1c, is amended to read: 
208.11     Subd. 1c.  [LEVY; SHARED, MERGED, CONSOLIDATED SERVICES.] 
208.12  If two or more taxing authorities are in the process of 
208.13  negotiating an agreement for sharing, merging, or consolidating 
208.14  services between those taxing authorities at the time the 
208.15  proposed levy is to be certified under subdivision 1, each 
208.16  taxing authority involved in the negotiation shall certify its 
208.17  total proposed levy as provided in that subdivision, including a 
208.18  notification to the county auditor of the specific service 
208.19  involved in the agreement which is not yet finalized.  The 
208.20  affected taxing authorities may amend their proposed levies 
208.21  under subdivision 1 until October September 10 for levy amounts 
208.22  relating only to the specific service involved. 
208.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
208.24  payable in 2006 and thereafter. 
208.25     Sec. 4.  Minnesota Statutes 2002, section 275.065, 
208.26  subdivision 3, is amended to read: 
208.27     Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
208.28  county auditor shall prepare and the county treasurer shall 
208.29  deliver after November October 10 and on or before November 
208.30  October 24 each year, by first class mail to each taxpayer at 
208.31  the address listed on the county's current year's assessment 
208.32  roll, a notice of proposed property taxes.  
208.33     (b) The commissioner of revenue shall prescribe the form of 
208.34  the notice. 
208.35     (c) The notice must inform taxpayers that it contains the 
208.36  amount of property taxes each taxing authority proposes to 
209.1   collect for taxes payable the following year.  In the case of a 
209.2   town, or in the case of the state general tax, the final tax 
209.3   amount will be its proposed tax.  In the case of taxing 
209.4   authorities required to hold a public meeting under subdivision 
209.5   6, the notice must clearly state that each taxing authority, 
209.6   including regional library districts established under section 
209.7   134.201, and including the metropolitan taxing districts as 
209.8   defined in paragraph (i), but excluding all other special taxing 
209.9   districts and towns, will hold a public meeting to receive 
209.10  public testimony on the proposed budget and proposed or final 
209.11  property tax levy, or, in case of a school district, on the 
209.12  current budget and proposed property tax levy.  It must clearly 
209.13  state the time and place of each taxing authority's meeting, a 
209.14  telephone number for the taxing authority that taxpayers may 
209.15  call if they have questions related to the notice, and an 
209.16  address where comments will be received by mail.  
209.17     (d) The notice must state for each parcel: 
209.18     (1) the market value of the property as determined under 
209.19  section 273.11, and used for computing property taxes payable in 
209.20  the following year and for taxes payable in the current year as 
209.21  each appears in the records of the county assessor on November 
209.22  October 1 of the current year; and, in the case of residential 
209.23  property, whether the property is classified as homestead or 
209.24  nonhomestead.  The notice must clearly inform taxpayers of the 
209.25  years to which the market values apply and that the values are 
209.26  final values; 
209.27     (2) the items listed below, shown separately by county, 
209.28  city or town, and state general tax, net of the residential and 
209.29  agricultural homestead credit under section 273.1384, voter 
209.30  approved school levy, other local school levy, and the sum of 
209.31  the special taxing districts, and as a total of all taxing 
209.32  authorities:  
209.33     (i) the actual tax for taxes payable in the current year; 
209.34     (ii) the tax change due to spending factors, defined as the 
209.35  proposed tax minus the constant spending tax amount; 
209.36     (iii) the tax change due to other factors, defined as the 
210.1   constant spending tax amount minus the actual current year tax; 
210.2   and 
210.3      (iv) (ii) the proposed tax amount. 
210.4      If the county levy under clause (2) includes an amount for 
210.5   a lake improvement district as defined under sections 103B.501 
210.6   to 103B.581, the amount attributable for that purpose must be 
210.7   separately stated from the remaining county levy amount.  
210.8      In the case of a town or the state general tax, the final 
210.9   tax shall also be its proposed tax unless the town changes its 
210.10  levy at a special town meeting under section 365.52.  If a 
210.11  school district has certified under section 126C.17, subdivision 
210.12  9, that a referendum will be held in the school district at the 
210.13  November general election, the county auditor must note next to 
210.14  the school district's proposed amount that a referendum is 
210.15  pending and that, if approved by the voters, the tax amount may 
210.16  be higher than shown on the notice.  In the case of the city of 
210.17  Minneapolis, the levy for the Minneapolis library board and the 
210.18  levy for Minneapolis park and recreation shall be listed 
210.19  separately from the remaining amount of the city's levy.  In the 
210.20  case of the city of St. Paul, the levy for the St. Paul library 
210.21  agency must be listed separately from the remaining amount of 
210.22  the city's levy.  In the case of a parcel where tax increment or 
210.23  the fiscal disparities areawide tax under chapter 276A or 473F 
210.24  applies, the proposed tax levy on the captured value or the 
210.25  proposed tax levy on the tax capacity subject to the areawide 
210.26  tax must each be stated separately and not included in the sum 
210.27  of the special taxing districts; and 
210.28     (3) the increase or decrease between the total taxes 
210.29  payable in the current year and the total proposed taxes, 
210.30  expressed as a percentage. 
210.31     For purposes of this section, the amount of the tax on 
210.32  homesteads qualifying under the senior citizens' property tax 
210.33  deferral program under chapter 290B is the total amount of 
210.34  property tax before subtraction of the deferred property tax 
210.35  amount. 
210.36     (e) The notice must clearly state that the proposed or 
211.1   final taxes do not include the following: 
211.2      (1) special assessments; 
211.3      (2) levies approved by the voters after the date the 
211.4   proposed taxes are certified, including bond referenda, and 
211.5   school district levy referenda, and; 
211.6      (3) a levy limit increase referenda approved by the voters 
211.7   by the first Tuesday in November of the levy year as provided 
211.8   under section 275.73; 
211.9      (3) (4) amounts necessary to pay cleanup or other costs due 
211.10  to a natural disaster occurring after the date the proposed 
211.11  taxes are certified; 
211.12     (4) (5) amounts necessary to pay tort judgments against the 
211.13  taxing authority that become final after the date the proposed 
211.14  taxes are certified; and 
211.15     (5) (6) the contamination tax imposed on properties which 
211.16  received market value reductions for contamination. 
211.17     (f) Except as provided in subdivision 7, failure of the 
211.18  county auditor to prepare or the county treasurer to deliver the 
211.19  notice as required in this section does not invalidate the 
211.20  proposed or final tax levy or the taxes payable pursuant to the 
211.21  tax levy. 
211.22     (g) If the notice the taxpayer receives under this section 
211.23  lists the property as nonhomestead, and satisfactory 
211.24  documentation is provided to the county assessor by the 
211.25  applicable deadline, and the property qualifies for the 
211.26  homestead classification in that assessment year, the assessor 
211.27  shall reclassify the property to homestead for taxes payable in 
211.28  the following year. 
211.29     (h) In the case of class 4 residential property used as a 
211.30  residence for lease or rental periods of 30 days or more, the 
211.31  taxpayer must either: 
211.32     (1) mail or deliver a copy of the notice of proposed 
211.33  property taxes to each tenant, renter, or lessee; or 
211.34     (2) post a copy of the notice in a conspicuous place on the 
211.35  premises of the property.  
211.36     The notice must be mailed or posted by the taxpayer by 
212.1   November October 27 or within three days of receipt of the 
212.2   notice, whichever is later.  A taxpayer may notify the county 
212.3   treasurer of the address of the taxpayer, agent, caretaker, or 
212.4   manager of the premises to which the notice must be mailed in 
212.5   order to fulfill the requirements of this paragraph. 
212.6      (i) For purposes of this subdivision, subdivisions 5a and 
212.7   6, "metropolitan special taxing districts" means the following 
212.8   taxing districts in the seven-county metropolitan area that levy 
212.9   a property tax for any of the specified purposes listed below: 
212.10     (1) metropolitan council under section 473.132, 473.167, 
212.11  473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
212.12     (2) metropolitan airports commission under section 473.667, 
212.13  473.671, or 473.672; and 
212.14     (3) metropolitan mosquito control commission under section 
212.15  473.711. 
212.16     For purposes of this section, any levies made by the 
212.17  regional rail authorities in the county of Anoka, Carver, 
212.18  Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
212.19  398A shall be included with the appropriate county's levy and 
212.20  shall be discussed at that county's public hearing. 
212.21     (j) If a statutory or home rule charter city or a town has 
212.22  exercised the local levy option provided by section 473.388, 
212.23  subdivision 7, it may include in the notice of its proposed 
212.24  taxes the amount of its proposed taxes attributable to its 
212.25  exercise of the option.  In the first year of the city or town's 
212.26  exercise of this option, the statement shall include an estimate 
212.27  of the reduction of the metropolitan council's tax on the parcel 
212.28  due to exercise of that option.  The metropolitan council's levy 
212.29  shall be adjusted accordingly. 
212.30     <b>[EFFECTIVE DATE.]</b> This section is effective for notices 
212.31  prepared in 2005 for taxes payable in 2006, and thereafter, 
212.32  except that the changes made to paragraph (d), clause (2), and 
212.33  paragraphs (e) and (j) are effective for notices prepared in 
212.34  2003 for taxes payable in 2004, and thereafter. 
212.35     Sec. 5.  Minnesota Statutes 2002, section 275.065, 
212.36  subdivision 6, is amended to read: 
213.1      Subd. 6.  [PUBLIC HEARING; ADOPTION OF BUDGET AND LEVY.] 
213.2   (a) For purposes of this section, the following terms shall have 
213.3   the meanings given: 
213.4      (1) "Initial hearing" means the first and primary hearing 
213.5   held to discuss the taxing authority's proposed budget and 
213.6   proposed property tax levy for taxes payable in the following 
213.7   year, or, for school districts, the current budget and the 
213.8   proposed property tax levy for taxes payable in the following 
213.9   year. 
213.10     (2) "Continuation hearing" means a hearing held to complete 
213.11  the initial hearing, if the initial hearing is not completed on 
213.12  its scheduled date. 
213.13     (3) "Subsequent hearing" means the hearing held to adopt 
213.14  the taxing authority's final property tax levy, and, in the case 
213.15  of taxing authorities other than school districts, the final 
213.16  budget, for taxes payable in the following year. 
213.17     (b) Between November 29 9 and December 20 1, the governing 
213.18  bodies of a city that has a population over 500, county, 
213.19  metropolitan special taxing districts as defined in subdivision 
213.20  3, paragraph (i), and regional library districts shall each hold 
213.21  an initial public hearing to discuss and seek public comment on 
213.22  its final budget and property tax levy for taxes payable in the 
213.23  following year, and the governing body of the school district 
213.24  shall hold an initial public hearing to review its current 
213.25  budget and proposed property tax levy for taxes payable in the 
213.26  following year.  The metropolitan special taxing districts shall 
213.27  be required to hold only a single joint initial public hearing, 
213.28  the location of which will be determined by the affected 
213.29  metropolitan agencies.  A city, county, metropolitan special 
213.30  taxing district as defined in subdivision 3, paragraph (i), 
213.31  regional library district established under section 134.201, or 
213.32  school district is not required to hold a public hearing under 
213.33  this subdivision unless its proposed property tax levy for taxes 
213.34  payable in the following year, as certified under subdivision 1, 
213.35  has increased over its final property tax levy for taxes payable 
213.36  in the current year by a percentage that is greater than the 
214.1   percentage increase in the implicit price deflator for 
214.2   government consumption expenditures and gross investment for 
214.3   state and local governments prepared by the Bureau of Economic 
214.4   Analysts of the United States Department of Commerce for the 
214.5   12-month period ending March 31 of the current year. 
214.6      (c) The initial hearing must be held after 5:00 p.m. if 
214.7   scheduled on a day other than Saturday.  No initial hearing may 
214.8   be held on a Sunday.  
214.9      (d) At the initial hearing under this subdivision, the 
214.10  percentage increase in property taxes proposed by the taxing 
214.11  authority, if any, and the specific purposes for which property 
214.12  tax revenues are being increased must be discussed.  During the 
214.13  discussion, the governing body shall hear comments regarding a 
214.14  proposed increase and explain the reasons for the proposed 
214.15  increase.  The public shall be allowed to speak and to ask 
214.16  questions.  At the public hearing, the school district must also 
214.17  provide and discuss information on the distribution of its 
214.18  revenues by revenue source, and the distribution of its spending 
214.19  by program area.  
214.20     (e) If the initial hearing is not completed on its 
214.21  scheduled date, the taxing authority must announce, prior to 
214.22  adjournment of the hearing, the date, time, and place for the 
214.23  continuation of the hearing.  The continuation hearing must be 
214.24  held at least five business days but no more than 14 business 
214.25  days after the initial hearing.  A continuation hearing may not 
214.26  be held later than December 20 except as provided in paragraphs 
214.27  (f) and (g).  A continuation hearing must be held after 5:00 
214.28  p.m. if scheduled on a day other than Saturday.  No continuation 
214.29  hearing may be held on a Sunday. 
214.30     (f) The governing body of a county shall hold its initial 
214.31  hearing on the first second Thursday in December November each 
214.32  year, and may hold additional initial hearings on other dates on 
214.33  or before December 20 1 if necessary for the convenience of 
214.34  county residents.  If the county needs a continuation of its 
214.35  hearing, the continuation hearing shall be held on the third 
214.36  Tuesday in December.  If the third Tuesday in December falls on 
215.1   December 21, the county's continuation hearing shall be held on 
215.2   Monday, December 20 November.  
215.3      (g) The metropolitan special taxing districts shall hold a 
215.4   joint initial public hearing on the first second Wednesday of 
215.5   December November.  A continuation hearing, if necessary, shall 
215.6   be held on the second third Wednesday of December even if that 
215.7   second Wednesday is after December 10 November. 
215.8      (h) The county auditor shall provide for the coordination 
215.9   of initial and continuation hearing dates for all school 
215.10  districts and cities within the county to prevent conflicts 
215.11  under clauses (i) and (j). 
215.12     (i) By August 10, each school board and the board of the 
215.13  regional library district shall certify to the county auditors 
215.14  of the counties in which the school district or regional library 
215.15  district is located the dates on which it elects to hold its 
215.16  initial hearing and any continuation hearing.  If a school board 
215.17  or regional library district does not certify these dates by 
215.18  August 10, the auditor will assign the initial and continuation 
215.19  hearing dates.  The dates elected or assigned must not conflict 
215.20  with the initial and continuation hearing dates of the county or 
215.21  the metropolitan special taxing districts.  
215.22     (j) By August 20, the county auditor shall notify the 
215.23  clerks of the cities within the county of the dates on which 
215.24  school districts and regional library districts have elected to 
215.25  hold their initial and continuation hearings.  At the time a 
215.26  city certifies its proposed levy under subdivision 1 it shall 
215.27  certify the dates on which it elects to hold its initial hearing 
215.28  and any continuation hearing.  Until September 15, the first and 
215.29  second Mondays Monday of December are November is reserved for 
215.30  the use of the cities.  If a city does not certify its hearing 
215.31  dates by September 15, the auditor shall assign the initial and 
215.32  continuation hearing dates.  The dates elected or assigned for 
215.33  the initial hearing must not conflict with the initial hearing 
215.34  dates of the county, metropolitan special taxing districts, 
215.35  regional library districts, or school districts within which the 
215.36  city is located.  To the extent possible, the dates of the 
216.1   city's continuation hearing should not conflict with the 
216.2   continuation hearing dates of the county, metropolitan special 
216.3   taxing districts, regional library districts, or school 
216.4   districts within which the city is located.  This paragraph does 
216.5   not apply to cities of 500 population or less. 
216.6      (k) The county initial hearing date and the city, 
216.7   metropolitan special taxing district, regional library district, 
216.8   and school district initial hearing dates must be designated on 
216.9   the notices required under subdivision 3.  The continuation 
216.10  hearing dates need not be stated on the notices.  
216.11     (l) At a subsequent hearing, each county, school district, 
216.12  city over 500 population, and metropolitan special taxing 
216.13  district may amend its proposed property tax levy and must adopt 
216.14  a final property tax levy.  Each county, city over 500 
216.15  population, and metropolitan special taxing district may also 
216.16  amend its proposed budget and must adopt a final budget at the 
216.17  subsequent hearing.  The final property tax levy must be adopted 
216.18  prior to adopting the final budget.  A school district is not 
216.19  required to adopt its final budget at the subsequent hearing.  
216.20  The subsequent hearing of a taxing authority must be held on a 
216.21  date subsequent to the date of the taxing authority's initial 
216.22  public hearing.  If a continuation hearing is held, the 
216.23  subsequent hearing must be held either immediately following the 
216.24  continuation hearing or on a date subsequent to the continuation 
216.25  hearing.  The subsequent hearing may be held at a regularly 
216.26  scheduled board or council meeting or at a special meeting 
216.27  scheduled for the purposes of the subsequent hearing.  The 
216.28  subsequent hearing of a taxing authority does not have to be 
216.29  coordinated by the county auditor to prevent a conflict with an 
216.30  initial hearing, a continuation hearing, or a subsequent hearing 
216.31  of any other taxing authority.  All subsequent hearings must be 
216.32  held prior to five working days after December 20 1 of the levy 
216.33  year.  The date, time, and place of the subsequent hearing must 
216.34  be announced at the initial public hearing or at the 
216.35  continuation hearing. 
216.36     (m) The property tax levy certified under section 275.07 by 
217.1   a city of any population, county, metropolitan special taxing 
217.2   district, regional library district, or school district must not 
217.3   exceed the proposed levy determined under subdivision 1, except 
217.4   by an amount up to the sum of the following amounts: 
217.5      (1) the amount of a school district levy whose voters 
217.6   approved a referendum to increase taxes under section 123B.63, 
217.7   subdivision 3, or 126C.17, subdivision 9, after the proposed 
217.8   levy was certified; 
217.9      (2) the amount of a city or county levy approved by the 
217.10  voters after the proposed levy was certified; 
217.11     (3) the amount of a levy to pay principal and interest on 
217.12  bonds approved by the voters under section 475.58 after the 
217.13  proposed levy was certified; 
217.14     (4) the amount of a levy to pay costs due to a natural 
217.15  disaster occurring after the proposed levy was certified, if 
217.16  that amount is approved by the commissioner of revenue under 
217.17  subdivision 6a; 
217.18     (5) the amount of a levy to pay tort judgments against a 
217.19  taxing authority that become final after the proposed levy was 
217.20  certified, if the amount is approved by the commissioner of 
217.21  revenue under subdivision 6a; 
217.22     (6) the amount of an increase in levy limits certified to 
217.23  the taxing authority by the commissioner of children, families, 
217.24  and learning or the commissioner of revenue after the proposed 
217.25  levy was certified; and 
217.26     (7) the amount required under section 126C.55. 
217.27     (n) This subdivision does not apply to towns and special 
217.28  taxing districts other than regional library districts and 
217.29  metropolitan special taxing districts. 
217.30     (o) Notwithstanding the requirements of this section, the 
217.31  employer is required to meet and negotiate over employee 
217.32  compensation as provided for in chapter 179A.  
217.33     <b>[EFFECTIVE DATE.]</b> This section is effective for hearings 
217.34  held in 2005 for taxes payable in 2006, and thereafter. 
217.35     Sec. 6.  Minnesota Statutes 2002, section 275.065, 
217.36  subdivision 8, is amended to read: 
218.1      Subd. 8.  [HEARING.] Notwithstanding any other provision of 
218.2   law, Ramsey county, the city of St. Paul, and independent school 
218.3   district No. 625 are authorized to and shall hold their initial 
218.4   public hearing jointly.  The hearing must be held on the second 
218.5   Tuesday of December November each year.  The advertisement 
218.6   required in subdivision 5a may be a joint advertisement.  The 
218.7   hearing is otherwise subject to the requirements of this section.
218.8      Ramsey county is authorized to hold an additional initial 
218.9   hearing or hearings as provided under this section, provided 
218.10  that any additional hearings must not conflict with the initial 
218.11  or continuation hearing dates of the other taxing districts.  
218.12  However, if Ramsey county elects not to hold such additional 
218.13  initial hearing or hearings, the joint initial hearing required 
218.14  by this subdivision must be held in a St. Paul location 
218.15  convenient to residents of Ramsey county. 
218.16     <b>[EFFECTIVE DATE.]</b> This section is effective for hearings 
218.17  held in 2005 for property taxes payable in 2006, and thereafter. 
218.18     Sec. 7.  Minnesota Statutes 2002, section 275.065, is 
218.19  amended by adding a subdivision to read: 
218.20     Subd. 9.  [REVERSE REFERENDUM.] (a) The reverse referendum 
218.21  procedure in this subdivision applies only in the case of a 
218.22  county, or a city that has a population of more than 2,500, that 
218.23  has adopted a property tax levy increase over the property tax 
218.24  levy amount certified under section 275.07, subdivision 1, for 
218.25  the previous year. 
218.26     (b) If, within 21 days after the public hearing and 
218.27  adoption of a levy under subdivision 6, a petition signed by 
218.28  voters equal in number to five percent of the votes cast in the 
218.29  county or city in the last general state election requesting a 
218.30  referendum on the levy increase is filed with the county auditor 
218.31  or the city clerk, the levy increase shall not be effective 
218.32  until it has been submitted to the voters at a special election 
218.33  to be held on the second Tuesday in January, and a majority of 
218.34  votes cast on the question of approving the levy increase are in 
218.35  the affirmative.  The commissioner of revenue shall prepare the 
218.36  form of the question to be presented at the referendum, which 
219.1   shall reference only the amount of the property tax levy 
219.2   increase over the previous year. 
219.3      (c) The county or city shall notify the county auditor of 
219.4   the results of the referendum.  If the majority of the votes 
219.5   cast on the question are in the affirmative, the property tax 
219.6   levy adopted under subdivision 6 shall be certified to the 
219.7   county auditor under section 275.07, subdivision 1.  If the 
219.8   majority of the votes cast on the question are in the negative, 
219.9   an amount equal to the preceding year's property tax levy shall 
219.10  be certified to the county auditor for purposes of section 
219.11  275.07, subdivision 1; provided that if the current year adopted 
219.12  levy includes any levy for the payment of bonded indebtedness or 
219.13  judgments, such levies for bonded indebtedness and judgments 
219.14  shall be extended in full and the remainder of the levies shall 
219.15  be reduced so that the total, including levies for bonds and 
219.16  judgments, does not exceed the preceding year's levy. 
219.17     (d) For purposes of this subdivision "property tax levy" 
219.18  shall not include the levy required to pay any general 
219.19  obligation bonds.  
219.20     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
219.21  levied in 2005 for taxes payable in 2006, and thereafter. 
219.22     Sec. 8.  Minnesota Statutes 2002, section 275.07, 
219.23  subdivision 1, is amended to read: 
219.24     Subdivision 1.  [CERTIFICATION OF LEVY.] (a) Except as 
219.25  provided under paragraph (b) or (c), the taxes voted by cities, 
219.26  counties, school districts, and special districts shall be 
219.27  certified by the proper authorities to the county auditor on or 
219.28  before five working days after December 20 1 in each year.  A 
219.29  town must certify the levy adopted by the town board to the 
219.30  county auditor by September 15 1 each year.  If the town board 
219.31  modifies the levy at a special town meeting after September 15 
219.32  1, the town board must recertify its levy to the county auditor 
219.33  on or before five working days after December 20 1.  The taxes 
219.34  certified shall not be reduced by the county auditor by the aid 
219.35  received under section 273.1398, subdivision 2, but shall be 
219.36  reduced by the county auditor by the aid received under section 
220.1   273.1398, subdivision 3.  If a city, town, county, school 
220.2   district, or special district fails to certify its levy by that 
220.3   date, its levy shall be the amount levied by it for the 
220.4   preceding year. 
220.5      (b)(i) The taxes voted by counties under sections 103B.241, 
220.6   103B.245, and 103B.251 shall be separately certified by the 
220.7   county to the county auditor on or before five working days 
220.8   after December 20 1 in each year.  The taxes certified shall not 
220.9   be reduced by the county auditor by the aid received under 
220.10  section 273.1398, subdivisions 2 and 3.  If a county fails to 
220.11  certify its levy by that date, its levy shall be the amount 
220.12  levied by it for the preceding year.  
220.13     (ii) For purposes of the proposed property tax notice under 
220.14  section 275.065 and the property tax statement under section 
220.15  276.04, for the first year in which the county implements the 
220.16  provisions of this paragraph, the county auditor shall reduce 
220.17  the county's levy for the preceding year to reflect any amount 
220.18  levied for water management purposes under clause (i) included 
220.19  in the county's levy. 
220.20     (c) A county or city to which the reverse referendum 
220.21  provisions under section 275.065, subdivision 9, apply shall 
220.22  certify the taxes to the county auditor by December 10, except 
220.23  that any county or city for which a petition has been filed 
220.24  under section 275.065, subdivision 9, must certify the day 
220.25  immediately following the election under that subdivision. 
220.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
220.27  levied in 2005 for taxes payable in 2006, and thereafter. 
220.28     Sec. 9.  [REPEALER.] 
220.29     (a) Minnesota Statutes 2002, section 275.065, subdivision 
220.30  3a, is repealed effective for notices prepared in 2003, payable 
220.31  in 2004 and thereafter. 
220.32     (b) Minnesota Statutes 2002, section 275.065, subdivision 
220.33  4, is repealed the day following final enactment. 
220.34                             ARTICLE 9
220.35                     LOCAL ECONOMIC DEVELOPMENT
220.36     Section 1.  Minnesota Statutes 2002, section 469.169, is 
221.1   amended by adding a subdivision to read: 
221.2      Subd. 16.  [ADDITIONAL BORDER CITY ALLOCATIONS.] (a) In 
221.3   addition to tax reductions authorized in subdivisions 7 to 15, 
221.4   the commissioner shall allocate $750,000 for tax reductions to 
221.5   border city enterprise zones in cities located on the western 
221.6   border of the state.  The commissioner shall make allocations to 
221.7   zones in cities on the western border on a per capita basis.  
221.8   Allocations made under this subdivision may be used for tax 
221.9   reductions as provided in section 469.171, or for other offsets 
221.10  of taxes imposed on or remitted by businesses located in the 
221.11  enterprise zone, but only if the municipality determines that 
221.12  the granting of the tax reduction or offset is necessary in 
221.13  order to retain a business within or attract a business to the 
221.14  zone.  Any portion of the allocation provided in this paragraph 
221.15  may alternatively be used for tax reductions under section 
221.16  469.1732 or 469.1734. 
221.17     (b) The commissioner shall allocate $750,000 for tax 
221.18  reductions under section 469.1732 or 469.1734 to cities with 
221.19  border city enterprise zones located on the western border of 
221.20  the state.  The commissioner shall allocate this amount among 
221.21  the cities on a per capita basis.  Any portion of the allocation 
221.22  provided in this paragraph may alternatively be used for tax 
221.23  reductions as provided in section 469.171. 
221.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
221.25  following final enactment. 
221.26     Sec. 2.  Minnesota Statutes 2002, section 469.1731, 
221.27  subdivision 3, is amended to read: 
221.28     Subd. 3.  [FILING.] The city must file a copy of the 
221.29  resolution and development plan with the commissioner of trade 
221.30  and economic development.  The designation takes effect for the 
221.31  first calendar year that begins more than 90 30 days after the 
221.32  filing. 
221.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
221.34  following final enactment. 
221.35     Sec. 3.  Minnesota Statutes 2002, section 469.174, 
221.36  subdivision 3, is amended to read: 
222.1      Subd. 3.  [BONDS.] (a) "Bonds" means any bonds, including 
222.2   refunding bonds, notes, interim certificates, debentures, 
222.3   interfund loans or advances, or other obligations issued: 
222.4      (1) by an authority under section 469.178; or which were 
222.5   issued 
222.6      (2) in aid of a project under any other law, except revenue 
222.7   bonds issued pursuant to sections 469.152 to 469.165, prior to 
222.8   August 1, 1979. 
222.9      (b) Bonds or other obligations include: 
222.10     (1) refunding bonds; 
222.11     (2) notes; 
222.12     (3) interim certificates; 
222.13     (4) debentures; and 
222.14     (5) interfund loans or advances qualifying under section 
222.15  469.178, subdivision 7. 
222.16     <b>[EFFECTIVE DATE.]</b> This section is effective at the same 
222.17  time as provided by Laws 2001, First Special Session chapter 5, 
222.18  article 15, section 3. 
222.19     Sec. 4.  Minnesota Statutes 2002, section 469.174, 
222.20  subdivision 6, is amended to read: 
222.21     Subd. 6.  [MUNICIPALITY.] "Municipality" means any the 
222.22  city, however organized, and with respect to in which the 
222.23  district is located, with the following exceptions: 
222.24     (1) for a project undertaken pursuant to sections 469.152 
222.25  to 469.165, "municipality" has the meaning given in sections 
222.26  469.152 to 469.165, and with respect to; and 
222.27     (2) for a project undertaken pursuant to sections 469.142 
222.28  to 469.151, or a county or multicounty project undertaken 
222.29  pursuant to sections 469.004 to 469.008, "municipality" also 
222.30  includes any means the county in which the district is located. 
222.31     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
222.32  for which the request for certification was made after July 31, 
222.33  1979. 
222.34     Sec. 5.  Minnesota Statutes 2002, section 469.174, 
222.35  subdivision 10, is amended to read: 
222.36     Subd. 10.  [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 
223.1   district" means a type of tax increment financing district 
223.2   consisting of a project, or portions of a project, within which 
223.3   the authority finds by resolution that one or more of the 
223.4   following conditions, reasonably distributed throughout the 
223.5   district, exists: 
223.6      (1) parcels consisting of 70 percent of the area of the 
223.7   district are occupied by buildings, streets, utilities, paved or 
223.8   gravel parking lots, or other similar structures and more than 
223.9   50 percent of the buildings, not including outbuildings, are 
223.10  structurally substandard to a degree requiring substantial 
223.11  renovation or clearance; or 
223.12     (2) the property consists of vacant, unused, underused, 
223.13  inappropriately used, or infrequently used railyards, rail 
223.14  storage facilities, or excessive or vacated railroad 
223.15  rights-of-way; or 
223.16     (3) tank facilities, or property whose immediately previous 
223.17  use was for tank facilities, as defined in section 115C.02, 
223.18  subdivision 15, if the tank facilities: 
223.19     (i) have or had a capacity of more than 1,000,000 gallons; 
223.20     (ii) are located adjacent to rail facilities; and 
223.21     (iii) have been removed or are unused, underused, 
223.22  inappropriately used, or infrequently used. 
223.23     (b) For purposes of this subdivision, "structurally 
223.24  substandard" shall mean containing defects in structural 
223.25  elements or a combination of deficiencies in essential utilities 
223.26  and facilities, light and ventilation, fire protection including 
223.27  adequate egress, layout and condition of interior partitions, or 
223.28  similar factors, which defects or deficiencies are of sufficient 
223.29  total significance to justify substantial renovation or 
223.30  clearance. 
223.31     (c) A building is not structurally substandard if it is in 
223.32  compliance with the building code applicable to new buildings or 
223.33  could be modified to satisfy the building code at a cost of less 
223.34  than 15 percent of the cost of constructing a new structure of 
223.35  the same square footage and type on the site.  The municipality 
223.36  may find that a building is not disqualified as structurally 
224.1   substandard under the preceding sentence on the basis of 
224.2   reasonably available evidence, such as the size, type, and age 
224.3   of the building, the average cost of plumbing, electrical, or 
224.4   structural repairs, or other similar reliable evidence.  The 
224.5   municipality may not make such a determination without an 
224.6   interior inspection of the property, but need not have an 
224.7   independent, expert appraisal prepared of the cost of repair and 
224.8   rehabilitation of the building.  An interior inspection of the 
224.9   property is not required, if the municipality finds that (1) the 
224.10  municipality or authority is unable to gain access to the 
224.11  property after using its best efforts to obtain permission from 
224.12  the party that owns or controls the property; and (2) the 
224.13  evidence otherwise supports a reasonable conclusion that the 
224.14  building is structurally substandard.  Items of evidence that 
224.15  support such a conclusion include recent fire or police 
224.16  inspections, on-site property tax appraisals or housing 
224.17  inspections, exterior evidence of deterioration, or other 
224.18  similar reliable evidence.  Written documentation of the 
224.19  findings and reasons why an interior inspection was not 
224.20  conducted must be made and retained under section 469.175, 
224.21  subdivision 3, clause (1).  Failure of a building to be 
224.22  disqualified under the provisions of this paragraph is a 
224.23  necessary, but not a sufficient, condition to determining that 
224.24  the building is substandard.  
224.25     (d) A parcel is deemed to be occupied by a structurally 
224.26  substandard building for purposes of the finding under paragraph 
224.27  (a) if all of the following conditions are met: 
224.28     (1) the parcel was occupied by a substandard building 
224.29  within three years of the filing of the request for 
224.30  certification of the parcel as part of the district with the 
224.31  county auditor; 
224.32     (2) the substandard building was demolished or removed by 
224.33  the authority or the demolition or removal was financed by the 
224.34  authority or was done by a developer under a development 
224.35  agreement with the authority; 
224.36     (3) the authority found by resolution before the demolition 
225.1   or removal that the parcel was occupied by a structurally 
225.2   substandard building and that after demolition and clearance the 
225.3   authority intended to include the parcel within a district; and 
225.4      (4) upon filing the request for certification of the tax 
225.5   capacity of the parcel as part of a district, the authority 
225.6   notifies the county auditor that the original tax capacity of 
225.7   the parcel must be adjusted as provided by section 469.177, 
225.8   subdivision 1, paragraph (h) (f). 
225.9      (e) For purposes of this subdivision, a parcel is not 
225.10  occupied by buildings, streets, utilities, paved or gravel 
225.11  parking lots, or other similar structures unless 15 percent of 
225.12  the area of the parcel contains buildings, streets, utilities, 
225.13  paved or gravel parking lots, or other similar structures. 
225.14     (f) For districts consisting of two or more noncontiguous 
225.15  areas, each area must qualify as a redevelopment district under 
225.16  paragraph (a) to be included in the district, and the entire 
225.17  area of the district must satisfy paragraph (a). 
225.18     <b>[EFFECTIVE DATE.]</b> The amendment to Minnesota Statutes, 
225.19  section 469.174, subdivision 10, paragraph (c), confirms the 
225.20  intent of the legislature with regard to the original provisions 
225.21  of the language contained in Minnesota Statutes 2002, section 
225.22  469.174, subdivision 10, paragraph (c), and is retroactive to 
225.23  the effective date of the original language.  The amendment to 
225.24  Minnesota Statutes, section 469.174, subdivision 10, paragraph 
225.25  (d), is effective for districts for which the request for 
225.26  certification was received by the county after June 30, 2002. 
225.27     Sec. 6.  Minnesota Statutes 2002, section 469.174, 
225.28  subdivision 25, is amended to read: 
225.29     Subd. 25.  [INCREMENT.] "Increment," "tax increment," "tax 
225.30  increment revenues," "revenues derived from tax increment," and 
225.31  other similar terms for a district include: 
225.32     (1) taxes paid by the captured net tax capacity, but 
225.33  excluding any excess taxes, as computed under section 469.177; 
225.34     (2) the proceeds from the sale or lease of property, 
225.35  tangible or intangible, purchased by the authority with tax 
225.36  increments; 
226.1      (3) repayments of principal and interest received on loans 
226.2   or other advances made by the authority with tax increments; and 
226.3      (4) interest or other investment earnings on or from tax 
226.4   increments. 
226.5      <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
226.6   for which the request for certification was made after June 30, 
226.7   1982, and payments of principal and interest received on loans 
226.8   or other advances that were made after June 30, 1997. 
226.9      Sec. 7.  Minnesota Statutes 2002, section 469.174, is 
226.10  amended by adding a subdivision to read: 
226.11     Subd. 29.  [QUALIFIED HOUSING DISTRICT.] "Qualified housing 
226.12  district" means: 
226.13     (1) a housing district for a residential rental project or 
226.14  projects in which the only properties receiving assistance from 
226.15  revenues derived from tax increments from the district meet the 
226.16  rent restriction requirements and the low-income occupancy test 
226.17  for a qualified low-income housing project under section 42(g) 
226.18  of the Internal Revenue Code of 1986, as amended through 
226.19  December 31, 2002, regardless of whether the project actually 
226.20  receives a low-income housing credit; or 
226.21     (2) a housing district for a single-family homeownership 
226.22  project or projects, if 95 percent or more of the homes 
226.23  receiving assistance from tax increments from the district are 
226.24  purchased by qualified purchasers.  A qualified purchaser means 
226.25  the first purchaser of a home after the tax increment assistance 
226.26  is provided whose income is at or below 85 percent of the median 
226.27  gross income for a family of the same size as the purchaser.  
226.28  Median gross income is the greater of (i) area median gross 
226.29  income, or (ii) the statewide median gross income, as determined 
226.30  by the secretary of Housing and Urban Development. 
226.31     <b>[EFFECTIVE DATE.]</b> This section applies to all districts for 
226.32  which the request for certification was made on or after January 
226.33  1, 2002, and to all districts to which the definition of 
226.34  qualified housing districts under Minnesota Statutes 2000, 
226.35  section 273.1399, applied. 
226.36     Sec. 8.  Minnesota Statutes 2002, section 469.175, 
227.1   subdivision 1, is amended to read: 
227.2      Subdivision 1.  [TAX INCREMENT FINANCING PLAN.] A tax 
227.3   increment financing plan shall contain:  
227.4      (1) a statement of objectives of an authority for the 
227.5   improvement of a project; 
227.6      (2) a statement as to the development program for the 
227.7   project, including the property within the project, if any, that 
227.8   the authority intends to acquire; 
227.9      (3) a list of any development activities that the plan 
227.10  proposes to take place within the project, for which contracts 
227.11  have been entered into at the time of the preparation of the 
227.12  plan, including the names of the parties to the contract, the 
227.13  activity governed by the contract, the cost stated in the 
227.14  contract, and the expected date of completion of that activity; 
227.15     (4) identification or description of the type of any other 
227.16  specific development reasonably expected to take place within 
227.17  the project, and the date when the development is likely to 
227.18  occur; 
227.19     (5) estimates of the following:  
227.20     (i) cost of the project, including administration 
227.21  administrative expenses, except that if part of the cost of the 
227.22  project is paid or financed with increment from the tax 
227.23  increment financing district, the tax increment financing plan 
227.24  for the district must contain an estimate of the amount of the 
227.25  cost of the project, including administrative expenses, that 
227.26  will be paid or financed with tax increments from the district; 
227.27     (ii) amount of bonded indebtedness to be incurred; 
227.28     (iii) sources of revenue to finance or otherwise pay public 
227.29  costs; 
227.30     (iv) the most recent net tax capacity of taxable real 
227.31  property within the tax increment financing district and within 
227.32  any subdistrict; 
227.33     (v) the estimated captured net tax capacity of the tax 
227.34  increment financing district at completion; and 
227.35     (vi) the duration of the tax increment financing district's 
227.36  and any subdistrict's existence; 
228.1      (6) statements of the authority's alternate estimates of 
228.2   the impact of tax increment financing on the net tax capacities 
228.3   of all taxing jurisdictions in which the tax increment financing 
228.4   district is located in whole or in part.  For purposes of one 
228.5   statement, the authority shall assume that the estimated 
228.6   captured net tax capacity would be available to the taxing 
228.7   jurisdictions without creation of the district, and for purposes 
228.8   of the second statement, the authority shall assume that none of 
228.9   the estimated captured net tax capacity would be available to 
228.10  the taxing jurisdictions without creation of the district or 
228.11  subdistrict; 
228.12     (7) identification and description of studies and analyses 
228.13  used to make the determination set forth in subdivision 3, 
228.14  clause (2); and 
228.15     (8) identification of all parcels to be included in the 
228.16  district or any subdistrict. 
228.17     <b>[EFFECTIVE DATE.]</b> This section applies to districts for 
228.18  which the request for certification was made after July 31, 
228.19  1979, and is effective for tax increment financing plans and 
228.20  modifications approved after June 30, 2003. 
228.21     Sec. 9.  Minnesota Statutes 2002, section 469.175, 
228.22  subdivision 3, is amended to read: 
228.23     Subd. 3.  [MUNICIPALITY APPROVAL.] (a) A county auditor 
228.24  shall not certify the original net tax capacity of a tax 
228.25  increment financing district until the tax increment financing 
228.26  plan proposed for that district has been approved by the 
228.27  municipality in which the district is located.  If an authority 
228.28  that proposes to establish a tax increment financing district 
228.29  and the municipality are not the same, the authority shall apply 
228.30  to the municipality in which the district is proposed to be 
228.31  located and shall obtain the approval of its tax increment 
228.32  financing plan by the municipality before the authority may use 
228.33  tax increment financing.  The municipality shall approve the tax 
228.34  increment financing plan only after a public hearing thereon 
228.35  after published notice in a newspaper of general circulation in 
228.36  the municipality at least once not less than ten days nor more 
229.1   than 30 days prior to the date of the hearing.  The published 
229.2   notice must include a map of the area of the district from which 
229.3   increments may be collected and, if the project area includes 
229.4   additional area, a map of the project area in which the 
229.5   increments may be expended.  The hearing may be held before or 
229.6   after the approval or creation of the project or it may be held 
229.7   in conjunction with a hearing to approve the project.  
229.8      (b) Before or at the time of approval of the tax increment 
229.9   financing plan, the municipality shall make the following 
229.10  findings, and shall set forth in writing the reasons and 
229.11  supporting facts for each determination: 
229.12     (1) that the proposed tax increment financing district is a 
229.13  redevelopment district, a renewal or renovation district, a 
229.14  housing district, a soils condition district, or an economic 
229.15  development district; if the proposed district is a 
229.16  redevelopment district or a renewal or renovation district, the 
229.17  reasons and supporting facts for the determination that the 
229.18  district meets the criteria of section 469.174, subdivision 10, 
229.19  paragraph (a), clauses (1) and (2), or subdivision 10a, must be 
229.20  documented in writing and retained and made available to the 
229.21  public by the authority until the district has been terminated; 
229.22     (2) that the proposed development or redevelopment, in the 
229.23  opinion of the municipality,: 
229.24     (i) the proposed development or redevelopment would not 
229.25  reasonably be expected to occur solely through private 
229.26  investment within the reasonably foreseeable future; and that 
229.27     (ii) the increased market value of the site that could 
229.28  reasonably be expected to occur without the use of tax increment 
229.29  financing would be less than the increase in the market value 
229.30  estimated to result from the proposed development after 
229.31  subtracting the present value of the projected tax increments 
229.32  for the maximum duration of the district permitted by the plan.  
229.33  In computing present values for purposes of this subdivision, 
229.34  the municipality must use a discount rate that does not exceed 
229.35  the greater of the rate specified under section 270.75 or 549.09 
229.36  for the last business day of the calendar month ending before 
230.1   publication of the notice under this subdivision.  The 
230.2   requirements of this clause item do not apply if the district is 
230.3   a qualified housing district, as defined in section 273.1399, 
230.4   subdivision 1; 
230.5      (3) that the tax increment financing plan conforms to the 
230.6   general plan for the development or redevelopment of the 
230.7   municipality as a whole; 
230.8      (4) that the tax increment financing plan will afford 
230.9   maximum opportunity, consistent with the sound needs of the 
230.10  municipality as a whole, for the development or redevelopment of 
230.11  the project by private enterprise; 
230.12     (5) that the municipality elects the method of tax 
230.13  increment computation set forth in section 469.177, subdivision 
230.14  3, clause (b), if applicable. 
230.15     (c) When the municipality and the authority are not the 
230.16  same, the municipality shall approve or disapprove the tax 
230.17  increment financing plan within 60 days of submission by the 
230.18  authority.  When the municipality and the authority are not the 
230.19  same, the municipality may not amend or modify a tax increment 
230.20  financing plan except as proposed by the authority pursuant to 
230.21  subdivision 4.  Once approved, the determination of the 
230.22  authority to undertake the project through the use of tax 
230.23  increment financing and the resolution of the governing body 
230.24  shall be conclusive of the findings therein and of the public 
230.25  need for the financing is presumed valid.  The determination of 
230.26  the authority is subject to judicial review under section 
230.27  469.1771 as to whether it was: 
230.28     (1) in excess of or contrary to the statutory authority; or 
230.29     (2) arbitrary and capricious. 
230.30     (d) For a district that is subject to the requirements of 
230.31  paragraph (b), clause (2), item (ii), the municipality's 
230.32  statement of reasons and supporting facts must include all of 
230.33  the following: 
230.34     (1) an estimate of the amount by which the market value of 
230.35  the site will increase without the use of tax increment 
230.36  financing; 
231.1      (2) an estimate of the increase in the market value that 
231.2   will result from the development or redevelopment to be assisted 
231.3   with tax increment financing; and 
231.4      (3) the present value of the projected tax increments for 
231.5   the maximum duration of the district permitted by the tax 
231.6   increment financing plan. 
231.7      (e) For purposes of this subdivision, "site" means the 
231.8   parcels on which the development or redevelopment to be assisted 
231.9   with tax increment financing will be located. 
231.10     <b>[EFFECTIVE DATE.]</b> This section is effective for 
231.11  determinations made after June 30, 2003, except the provisions 
231.12  of paragraph (e) apply to requests for certification of tax 
231.13  increment districts made after June 30, 1995. 
231.14     Sec. 10.  Minnesota Statutes 2002, section 469.175, 
231.15  subdivision 4, is amended to read: 
231.16     Subd. 4.  [MODIFICATION OF PLAN.] (a) A tax increment 
231.17  financing plan may be modified by an authority, provided that. 
231.18     (b) The authority may make the following modifications only 
231.19  upon the notice and after the discussion, public hearing, and 
231.20  findings required for approval of the original plan: 
231.21     (1) any reduction or enlargement of geographic area of the 
231.22  project or tax increment financing district, that does not meet 
231.23  the requirements of paragraph (e); 
231.24     (2) increase in amount of bonded indebtedness to be 
231.25  incurred, including; 
231.26     (3) a determination to capitalize interest on the debt if 
231.27  that determination was not a part of the original plan, or to 
231.28  increase or decrease the amount of interest on the debt to be 
231.29  capitalized,; 
231.30     (4) increase in the portion of the captured net tax 
231.31  capacity to be retained by the authority,; 
231.32     (5) increase in total estimated tax increment 
231.33  expenditures the estimate of the cost of the project, including 
231.34  administrative expenses, that will be paid or financed with tax 
231.35  increment from the district; or 
231.36     (6) designation of additional property to be acquired by 
232.1   the authority shall be approved upon the notice and after the 
232.2   discussion, public hearing, and findings required for approval 
232.3   of the original plan; provided that. 
232.4      (c) If an authority changes the type of district from 
232.5   housing, redevelopment, or economic development to another type 
232.6   of district, this change shall is not be considered a 
232.7   modification but shall require requires the authority to follow 
232.8   the procedure set forth in sections 469.174 to 469.179 for 
232.9   adoption of a new plan, including certification of the net tax 
232.10  capacity of the district by the county auditor.  
232.11     (d) If a redevelopment district or a renewal and renovation 
232.12  district is enlarged, the reasons and supporting facts for the 
232.13  determination that the addition to the district meets the 
232.14  criteria of section 469.174, subdivision 10, paragraph (a), 
232.15  clauses (1) and (2), or subdivision 10a, must be documented.  
232.16     (e) The requirements of this paragraph (b) do not apply if 
232.17  (1) the only modification is elimination of parcels from the 
232.18  project or district and (2)(A) the current net tax capacity of 
232.19  the parcels eliminated from the district equals or exceeds the 
232.20  net tax capacity of those parcels in the district's original net 
232.21  tax capacity or (B) the authority agrees that, notwithstanding 
232.22  section 469.177, subdivision 1, the original net tax capacity 
232.23  will be reduced by no more than the current net tax capacity of 
232.24  the parcels eliminated from the district.  The authority must 
232.25  notify the county auditor of any modification that reduces or 
232.26  enlarges the geographic area of a district or a project area.  
232.27     (b) (f) The geographic area of a tax increment financing 
232.28  district may be reduced, but shall not be enlarged after five 
232.29  years following the date of certification of the original net 
232.30  tax capacity by the county auditor or after August 1, 1984, for 
232.31  tax increment financing districts authorized prior to August 1, 
232.32  1979. 
232.33     <b>[EFFECTIVE DATE.]</b> This section applies to districts for 
232.34  which the request for certification was made after June 30, 
232.35  2003.  The development authority may elect to have this section 
232.36  apply to a tax increment financing plan or modification that was 
233.1   approved before July 1, 2004, by adopting before January 1, 
233.2   2004, a modification of the plan that states the amount of the 
233.3   cost of the project, including administrative expenses, that 
233.4   will be paid or financed with tax increments from the district.  
233.5   Section 469.175, subdivision 4, paragraph (b), does not apply to 
233.6   a modification adopted under this section if the modification is 
233.7   exclusively for the purpose of stating the amount of the cost of 
233.8   the project, including administrative expenses, that will be 
233.9   paid or financed with tax increment from the district.  For 
233.10  districts for which the request for certification was made after 
233.11  July 31, 1979, and for which this section is not effective, the 
233.12  total estimated tax increment expenditures are determined by 
233.13  considering all of the information in the tax increment 
233.14  financing plan and exhibits to the plan about estimated sources 
233.15  and uses of funds. 
233.16     For districts for which certification was requested after 
233.17  June 30, 1982, and before July 1, 2003, and for which the plan 
233.18  has not been amended after July 1, 2003, the limit on 
233.19  administrative expenses equals the greater of (1) nine percent 
233.20  of the increments for the district or (2) the amount determined 
233.21  under section 469.176, subdivision 3, and the tax increment 
233.22  financing plan. 
233.23     Sec. 11.  Minnesota Statutes 2002, section 469.175, 
233.24  subdivision 6, is amended to read: 
233.25     Subd. 6.  [ANNUAL FINANCIAL REPORTING.] (a) The state 
233.26  auditor shall develop a uniform system of accounting and 
233.27  financial reporting for tax increment financing districts.  The 
233.28  system of accounting and financial reporting shall, as nearly as 
233.29  possible: 
233.30     (1) provide for full disclosure of the sources and uses of 
233.31  public funds in the district; 
233.32     (2) permit comparison and reconciliation with the affected 
233.33  local government's accounts and financial reports; 
233.34     (3) permit auditing of the funds expended on behalf of a 
233.35  district, including a single district that is part of a 
233.36  multidistrict project or that is funded in part or whole through 
234.1   the use of a development account funded with tax increments from 
234.2   other districts or with other public money; 
234.3      (4) be consistent with generally accepted accounting 
234.4   principles. 
234.5      (b) The authority must annually submit to the state auditor 
234.6   a financial report in compliance with paragraph (a).  Copies of 
234.7   the report must also be provided to the county auditor and to 
234.8   the governing body of the municipality, if the authority is not 
234.9   the municipality.  To the extent necessary to permit compliance 
234.10  with the requirement of financial reporting, the county and any 
234.11  other appropriate local government unit or private entity must 
234.12  provide the necessary records or information to the authority or 
234.13  the state auditor as provided by the system of accounting and 
234.14  financial reporting developed pursuant to paragraph (a).  The 
234.15  authority must submit the annual report for a year on or before 
234.16  August 1 of the next year. 
234.17     (c) The annual financial report must also include the 
234.18  following items: 
234.19     (1) the original net tax capacity of the district and any 
234.20  subdistrict under section 469.177, subdivision 1; 
234.21     (2) the net tax capacity for the reporting period of the 
234.22  district and any subdistrict; 
234.23     (3) the captured net tax capacity of the district; 
234.24     (4) any fiscal disparity deduction from the captured net 
234.25  tax capacity under section 469.177, subdivision 3; 
234.26     (5) the captured net tax capacity retained for tax 
234.27  increment financing under section 469.177, subdivision 2, 
234.28  paragraph (a), clause (1); 
234.29     (6) any captured net tax capacity distributed among 
234.30  affected taxing districts under section 469.177, subdivision 2, 
234.31  paragraph (a), clause (2); 
234.32     (7) the type of district; 
234.33     (8) the date the municipality approved the tax increment 
234.34  financing plan and the date of approval of any modification of 
234.35  the tax increment financing plan, the approval of which requires 
234.36  notice, discussion, a public hearing, and findings under 
235.1   subdivision 4, paragraph (a); 
235.2      (9) the date the authority first requested certification of 
235.3   the original net tax capacity of the district and the date of 
235.4   the request for certification regarding any parcel added to the 
235.5   district; 
235.6      (10) the date the county auditor first certified the 
235.7   original net tax capacity of the district and the date of 
235.8   certification of the original net tax capacity of any parcel 
235.9   added to the district; 
235.10     (11) the month and year in which the authority has received 
235.11  or anticipates it will receive the first increment from the 
235.12  district; 
235.13     (12) the date the district must be decertified; 
235.14     (13) for the reporting period and prior years of the 
235.15  district, the actual amount received from, at least, the 
235.16  following categories: 
235.17     (i) tax increments paid by the captured net tax capacity 
235.18  retained for tax increment financing under section 469.177, 
235.19  subdivision 2, paragraph (a), clause (1), but excluding any 
235.20  excess taxes; 
235.21     (ii) tax increments that are interest or other investment 
235.22  earnings on or from tax increments; 
235.23     (iii) tax increments that are proceeds from the sale or 
235.24  lease of property, tangible or intangible, purchased by the 
235.25  authority with tax increments; 
235.26     (iv) tax increments that are repayments of loans or other 
235.27  advances made by the authority with tax increments; 
235.28     (v) bond or loan proceeds; 
235.29     (vi) special assessments; 
235.30     (vii) grants; and 
235.31     (viii) transfers from funds not exclusively associated with 
235.32  the district; 
235.33     (14) for the reporting period and for the prior years of 
235.34  the district, the amount budgeted under the tax increment 
235.35  financing plan, and the actual amount expended for, at least, 
235.36  the following categories: 
236.1      (i) acquisition of land and buildings through condemnation 
236.2   or purchase; 
236.3      (ii)  site improvements or preparation costs; 
236.4      (iii) installation of public utilities, parking facilities, 
236.5   streets, roads, sidewalks, or other similar public improvements; 
236.6      (iv) administrative costs, including the allocated cost of 
236.7   the authority; 
236.8      (v) public park facilities, facilities for social, 
236.9   recreational, or conference purposes, or other similar public 
236.10  improvements; and 
236.11     (vi) transfers to funds not exclusively associated with the 
236.12  district; 
236.13     (15) for properties sold to developers, the total cost of 
236.14  the property to the authority and the price paid by the 
236.15  developer; 
236.16     (16) the amount of any payments and the value of any 
236.17  in-kind benefits, such as physical improvements and the use of 
236.18  building space, that are paid or financed with tax increments 
236.19  and are provided to another governmental unit other than the 
236.20  municipality during the reporting period; 
236.21     (17) the amount of any payments for activities and 
236.22  improvements located outside of the district that are paid for 
236.23  or financed with tax increments; 
236.24     (18) the amount of payments of principal and interest that 
236.25  are made during the reporting period on any nondefeased: 
236.26     (i) general obligation tax increment financing bonds; 
236.27     (ii) other tax increment financing bonds; and 
236.28     (iii) notes and pay-as-you-go contracts; 
236.29     (19) the principal amount, at the end of the reporting 
236.30  period, of any nondefeased: 
236.31     (i) general obligation tax increment financing bonds; 
236.32     (ii) other tax increment financing bonds; and 
236.33     (iii) notes and pay-as-you-go contracts; 
236.34     (20) the amount of principal and interest payments that are 
236.35  due for the current calendar year on any nondefeased: 
236.36     (i) general obligation tax increment financing bonds; 
237.1      (ii) other tax increment financing bonds; and 
237.2      (iii) notes and pay-as-you-go contracts; 
237.3      (21) if the fiscal disparities contribution under chapter 
237.4   276A or 473F for the district is computed under section 469.177, 
237.5   subdivision 3, paragraph (a), the amount of increased property 
237.6   taxes imposed on other properties in the municipality that 
237.7   approved the tax increment financing plan as a result of the 
237.8   fiscal disparities contribution; 
237.9      (22) whether the tax increment financing plan or other 
237.10  governing document permits increment revenues to be expended: 
237.11     (i) to pay bonds, the proceeds of which were or may be 
237.12  expended on activities outside of the district; 
237.13     (ii) for deposit into a common bond fund from which money 
237.14  may be expended on activities located outside of the district; 
237.15  or 
237.16     (iii) to otherwise finance activities located outside of 
237.17  the tax increment financing district; and 
237.18     (23) the estimate, if any, contained in the tax increment 
237.19  financing plan of the amount of the cost of the project, 
237.20  including administrative expenses, that will be paid or financed 
237.21  with tax increment; and 
237.22     (24) any additional information the state auditor may 
237.23  require. 
237.24     (d) The commissioner of revenue shall prescribe the method 
237.25  of calculating the increased property taxes under paragraph (c), 
237.26  clause (21), and the form of the statement disclosing this 
237.27  information on the annual statement under subdivision 5. 
237.28     (e) The reporting requirements imposed by this subdivision 
237.29  apply to districts certified before, on, and after August 1, 
237.30  1979. 
237.31     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
237.32  the reports due in calendar year 2004. 
237.33     Sec. 12.  Minnesota Statutes 2002, section 469.176, 
237.34  subdivision 1c, is amended to read: 
237.35     Subd. 1c.  [DURATION LIMITS; PRE-1979 DISTRICTS.] (a) For 
237.36  tax increment financing districts created prior to August 1, 
238.1   1979, no tax increment shall be paid to the authority after 
238.2   April 1, 2001, or the term of a nondefeased bond or obligation 
238.3   outstanding on April 1, 1990, secured by increments from the 
238.4   district or project area, whichever time is greater, provided 
238.5   that in no case will a tax increment be paid to an authority 
238.6   after August 1, 2009, from such a district.  If a district's 
238.7   termination date is extended beyond April 1, 2001, because bonds 
238.8   were outstanding on April 1, 1990, with maturities extending 
238.9   beyond April 1, 2001, the following restrictions apply.  No 
238.10  increment collected from the district may be expended after 
238.11  April 1, 2001, except to pay or defease (i): 
238.12     (1) bonds issued before April 1, 1990, or (ii); 
238.13     (2) bonds issued to refund the principal of the outstanding 
238.14  bonds and pay associated issuance costs, provided the average 
238.15  maturity of the refunding bonds does not exceed the bonds 
238.16  refunded; 
238.17     (3) administrative expenses of the district required to be 
238.18  paid under section 469.176, subdivision 4h, paragraph (a); 
238.19     (4) transfers of increment permitted under section 
238.20  469.1763, subdivision 6; and 
238.21     (5) to repay any advance or payment made by the 
238.22  municipality or the authority after June 1, 2002, to pay any 
238.23  bonds listed in clause (1) or (2). 
238.24     (b) Each year, any increments from a district subject to 
238.25  this subdivision must be first applied to pay or defease 
238.26  obligations listed under paragraph (a), clauses (1) and (2), and 
238.27  administrative expenses under paragraph (a), clause (3).  Any 
238.28  remaining increments may be used for transfers of increments 
238.29  permitted under section 469.1763, subdivision 6. 
238.30     (c) When sufficient money has been received to pay in full 
238.31  or defease bonds under paragraph (a), clauses (1) and (2), the 
238.32  tax increment project or district must be decertified. 
238.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
238.34  following final enactment and applies to tax increment financing 
238.35  districts for which the request for certification was made 
238.36  before August 1, 1979. 
239.1      Sec. 13.  Minnesota Statutes 2002, section 469.176, 
239.2   subdivision 2, is amended to read: 
239.3      Subd. 2.  [EXCESS TAX INCREMENTS.] In any year in which the 
239.4   tax increment exceeds the amount necessary to pay the costs 
239.5   authorized by the tax increment financing plan, including the 
239.6   amount necessary to cancel any tax levy as provided in section 
239.7   475.61, subdivision 3, (a) The authority shall annually 
239.8   determine the amount of excess increments for a district, if 
239.9   any.  This determination must be based on the tax increment 
239.10  financing plan in effect on December 31 of the year and the 
239.11  increments and other revenues received as of December 31 of the 
239.12  year. 
239.13     (b) For purposes of this subdivision, "excess increments" 
239.14  equals the excess of: 
239.15     (1) total increments collected from the district since its 
239.16  certification, reduced by any excess increments paid under 
239.17  paragraph (c), clause (4), for a prior year, over 
239.18     (2) the total costs authorized by the tax increment 
239.19  financing plan to be paid with increments from the district, 
239.20  reduced, but not below zero, by the sum of: 
239.21     (i) the amounts of those authorized costs that have been 
239.22  paid from sources other than tax increments from the district; 
239.23     (ii) revenues, other than tax increments from the district, 
239.24  that are dedicated for or otherwise required to be used to pay 
239.25  those authorized costs and that the authority has received and 
239.26  that are not included in item (i); and 
239.27     (iii) the amount of principal and interest obligations due 
239.28  on outstanding bonds after December 31 of the year and not 
239.29  prepaid under paragraph (c) in a prior year. 
239.30     (c) The authority shall use the excess amount to do any 
239.31  of excess increment only to do one or more of the following:  
239.32     (1) prepay any outstanding bonds,; 
239.33     (2) discharge the pledge of tax increment therefor, for any 
239.34  outstanding bonds; 
239.35     (3) pay into an escrow account dedicated to the payment of 
239.36  such bond,; or 
240.1      (4) return the excess amount to the county auditor who 
240.2   shall distribute the excess amount to the municipality city or 
240.3   town, county, and school district in which the tax increment 
240.4   financing district is located in direct proportion to their 
240.5   respective local tax rates.  
240.6      (d) The county auditor must report to the commissioner of 
240.7   children, families, and learning the amount of any excess tax 
240.8   increment distributed to a school district within 30 days of the 
240.9   distribution. 
240.10     <b>[EFFECTIVE DATE.]</b> This section is effective for all tax 
240.11  increment financing districts, regardless of whether the request 
240.12  for certification was made before, on, or after August 1, 1979, 
240.13  and applies after August 1, 2003, except the amendment to 
240.14  paragraph (c), clause (4), applies retroactively to August 1, 
240.15  1979. 
240.16     Sec. 14.  Minnesota Statutes 2002, section 469.176, 
240.17  subdivision 3, is amended to read: 
240.18     Subd. 3.  [LIMITATION ON ADMINISTRATIVE EXPENSES.] (a) For 
240.19  districts for which certification was requested before August 1, 
240.20  1979, or after June 30, 1982 and before August 1, 2001, no tax 
240.21  increment shall be used to pay any administrative expenses for a 
240.22  project which exceed ten percent of the total estimated tax 
240.23  increment expenditures authorized by the tax increment financing 
240.24  plan or the total tax increment expenditures for the project, 
240.25  whichever is less.  
240.26     (b) For districts for which certification was requested 
240.27  after July 31, 1979, and before July 1, 1982, no tax increment 
240.28  shall be used to pay administrative expenses, as defined in 
240.29  Minnesota Statutes 1980, section 273.73, for a district which 
240.30  exceeds five percent of the total tax increment expenditures 
240.31  authorized by the tax increment financing plan or the 
240.32  total estimated tax increment expenditures for the district, 
240.33  whichever is less. 
240.34     (c) For districts for which certification was requested 
240.35  after July 31, 2001, no tax increment may be used to pay any 
240.36  administrative expenses for a project which exceed ten percent 
241.1   of total estimated tax increment expenditures authorized by the 
241.2   tax increment financing plan or the total tax increments, as 
241.3   defined in section 469.174, subdivision 25, clause (1), from the 
241.4   district, whichever is less. 
241.5      <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
241.6   for which the request for certification was made before, on, or 
241.7   after August 1, 1979. 
241.8      Sec. 15.  Minnesota Statutes 2002, section 469.176, 
241.9   subdivision 4d, is amended to read: 
241.10     Subd. 4d.  [HOUSING DISTRICTS.] Revenue derived from tax 
241.11  increment from a housing district must be used solely to finance 
241.12  the cost of housing projects as defined in section 469.174, 
241.13  subdivision 11.  The cost of public improvements directly 
241.14  related to the housing projects and the allocated administrative 
241.15  expenses of the authority may be included in the cost of a 
241.16  housing project includes expenditures on: 
241.17     (1) public improvements directly related to a housing 
241.18  project; 
241.19     (2) public or private housing units, but not to exceed an 
241.20  amount equal to the average cost of all the units in the project 
241.21  multiplied by the number of units that are pledged to be income 
241.22  restricted; and 
241.23     (3) allocated administrative expenses of the authority. 
241.24     <b>[EFFECTIVE DATE.]</b> The provisions of this section apply to 
241.25  all districts, regardless of when the request for certification 
241.26  was made, and to expenditures of increments, regardless of 
241.27  whether they were made before or after the date of enactment. 
241.28     Sec. 16.  Minnesota Statutes 2002, section 469.176, 
241.29  subdivision 4l, is amended to read: 
241.30     Subd. 4l.  [PROHIBITED FACILITIES.] (a) No tax increment 
241.31  from any district may be used for: 
241.32     (1) for a commons area used as a public park; or 
241.33     (2) for a facility used for social, recreational, or 
241.34  conference purposes; or 
241.35     (3) to assist a development by paying costs the developer 
241.36  or owner otherwise would pay, if the developer or owner: 
242.1      (i) requested platting or subdivision of the parcel or 
242.2   parcels on which the development is located within two years 
242.3   before the authority approves the assistance; and 
242.4      (ii) did not disclose on or before making the request an 
242.5   intent to seek or accept assistance funded with tax increments. 
242.6      (b) This subdivision does Paragraph (a), clauses (1) and 
242.7   (2) do not apply to a privately owned facility for conference 
242.8   purposes or a parking structure. 
242.9      <b>[EFFECTIVE DATE.]</b> This section is effective for tax 
242.10  increment financing assistance provided under developer 
242.11  agreements entered into after June 30, 2003. 
242.12     Sec. 17.  Minnesota Statutes 2002, section 469.176, 
242.13  subdivision 7, is amended to read: 
242.14     Subd. 7.  [PARCELS NOT INCLUDABLE IN DISTRICTS.] (a) The 
242.15  authority may request inclusion in a tax increment financing 
242.16  district and the county auditor may certify the original tax 
242.17  capacity of a parcel or a part of a parcel that qualified under 
242.18  the provisions of section 273.111 or 273.112 or chapter 473H for 
242.19  taxes payable in any of the five calendar years before the 
242.20  filing of the request for certification only for: 
242.21     (1) a district in which 85 percent or more of the planned 
242.22  buildings and facilities (determined on the basis of square 
242.23  footage) are a qualified manufacturing facility or a qualified 
242.24  distribution facility or a combination of both; or 
242.25     (2) a qualified housing district as defined in section 
242.26  273.1399, subdivision 1. 
242.27     (b)(1) A distribution facility means buildings and other 
242.28  improvements to real property that are used to conduct 
242.29  activities in at least each of the following categories: 
242.30     (i) to store or warehouse tangible personal property; 
242.31     (ii) to take orders for shipment, mailing, or delivery; 
242.32     (iii) to prepare personal property for shipment, mailing, 
242.33  or delivery; and 
242.34     (iv) to ship, mail, or deliver property. 
242.35     (2) A manufacturing facility includes space used for 
242.36  manufacturing or producing tangible personal property, including 
243.1   processing resulting in the change in condition of the property, 
243.2   and space necessary for and related to the manufacturing 
243.3   activities. 
243.4      (3) To be a qualified facility, the owner or operator of a 
243.5   manufacturing or distribution facility must agree to pay and pay 
243.6   90 percent or more of the employees of the facility at a rate 
243.7   equal to or greater than 160 percent of the federal minimum wage 
243.8   for individuals over the age of 20. 
243.9      <b>[EFFECTIVE DATE.]</b> This section applies to all districts for 
243.10  which the request for certification was made on or after January 
243.11  1, 2002, and to all districts to which the definition of 
243.12  qualified housing districts under Minnesota Statutes 2000, 
243.13  section 273.1399, applied. 
243.14     Sec. 18.  Minnesota Statutes 2002, section 469.1763, 
243.15  subdivision 1, is amended to read: 
243.16     Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
243.17  section, the following terms have the meanings given. 
243.18     (b) "Activities" means acquisition of property, clearing of 
243.19  land, site preparation, soils correction, removal of hazardous 
243.20  waste or pollution, installation of utilities, construction of 
243.21  public or private improvements, and other similar activities, 
243.22  but only to the extent that tax increment revenues may be spent 
243.23  for such purposes under other law.  
243.24     (c) "Third party" means an entity other than (1) the person 
243.25  receiving the benefit of assistance financed with tax 
243.26  increments, or (2) the municipality or the development authority 
243.27  or other person substantially under the control of the 
243.28  municipality. 
243.29     (d) "Revenues derived from tax increments paid by 
243.30  properties in the district" means only tax increment as defined 
243.31  in section 469.174, subdivision 25, clause (1), and does not 
243.32  include tax increment as defined in section 469.174, subdivision 
243.33  25, clauses (2), (3), and (4). 
243.34     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
243.35  for which the request for certification was made after April 30, 
243.36  1990. 
244.1      Sec. 19.  Minnesota Statutes 2002, section 469.1763, 
244.2   subdivision 2, is amended to read: 
244.3      Subd. 2.  [EXPENDITURES OUTSIDE DISTRICT.] (a) For each tax 
244.4   increment financing district, an amount equal to at least 75 
244.5   percent of the total revenue derived from tax increments paid by 
244.6   properties in the district must be expended on activities in the 
244.7   district or to pay bonds, to the extent that the proceeds of the 
244.8   bonds were used to finance activities in the district or to pay, 
244.9   or secure payment of, debt service on credit enhanced bonds.  
244.10  For districts, other than redevelopment districts for which the 
244.11  request for certification was made after June 30, 1995, the 
244.12  in-district percentage for purposes of the preceding sentence is 
244.13  80 percent.  Not more than 25 percent of the total revenue 
244.14  derived from tax increments paid by properties in the district 
244.15  may be expended, through a development fund or otherwise, on 
244.16  activities outside of the district but within the defined 
244.17  geographic area of the project except to pay, or secure payment 
244.18  of, debt service on credit enhanced bonds.  For districts, other 
244.19  than redevelopment districts for which the request for 
244.20  certification was made after June 30, 1995, the pooling 
244.21  percentage for purposes of the preceding sentence is 20 
244.22  percent.  The revenue derived from tax increments for the 
244.23  district that are expended on costs under section 469.176, 
244.24  subdivision 4h, paragraph (b), may be deducted first before 
244.25  calculating the percentages that must be expended within and 
244.26  without the district.  
244.27     (b) In the case of a housing district, a housing project, 
244.28  as defined in section 469.174, subdivision 11, is an activity in 
244.29  the district.  
244.30     (c) All administrative expenses are for activities outside 
244.31  of the district. 
244.32     (d) The authority may elect, in the tax increment financing 
244.33  plan for the district, to increase by up to ten percentage 
244.34  points the permitted amount of expenditures for activities 
244.35  located outside the geographic area of the district under 
244.36  paragraph (a).  As permitted by section 469.176, subdivision 4k, 
245.1   the expenditures, including the permitted expenditures under 
245.2   paragraph (a), need not be made within the geographic area of 
245.3   the project.  Expenditures that meet the requirements of this 
245.4   paragraph are legally permitted expenditures of the district, 
245.5   notwithstanding section 469.176, subdivisions 4b, 4c, and 4j.  
245.6   To qualify for the increase under this paragraph, the 
245.7   expenditures must: 
245.8      (1) be used exclusively to assist housing that meets the 
245.9   requirement for a qualified low-income building, as that term is 
245.10  used in section 42 of the Internal Revenue Code; 
245.11     (2) not exceed the qualified basis of the housing, as 
245.12  defined under section 42(c) of the Internal Revenue Code, less 
245.13  the amount of any credit allowed under section 42 of the 
245.14  Internal Revenue Code; and 
245.15     (3) be used to: 
245.16     (i) acquire and prepare the site of the housing; 
245.17     (ii) acquire, construct, or rehabilitate the housing; or 
245.18     (iii) make public improvements directly related to the 
245.19  housing. 
245.20     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
245.21  for which the request for certification was made after April 30, 
245.22  1990. 
245.23     Sec. 20.  Minnesota Statutes 2002, section 469.1763, 
245.24  subdivision 3, is amended to read: 
245.25     Subd. 3.  [FIVE-YEAR RULE.] (a) Revenues derived from tax 
245.26  increments are considered to have been expended on an activity 
245.27  within the district under subdivision 2 only if one of the 
245.28  following occurs: 
245.29     (1) before or within five years after certification of the 
245.30  district, the revenues are actually paid to a third party with 
245.31  respect to the activity; 
245.32     (2) bonds, the proceeds of which must be used to finance 
245.33  the activity, are issued and sold to a third party before or 
245.34  within five years after certification, the revenues are spent to 
245.35  repay the bonds, and the proceeds of the bonds either are, on 
245.36  the date of issuance, reasonably expected to be spent before the 
246.1   end of the later of (i) the five-year period, or (ii) a 
246.2   reasonable temporary period within the meaning of the use of 
246.3   that term under section 148(c)(1) of the Internal Revenue Code, 
246.4   or are deposited in a reasonably required reserve or replacement 
246.5   fund; 
246.6      (3) binding contracts with a third party are entered into 
246.7   for performance of the activity before or within five years 
246.8   after certification of the district and the revenues are spent 
246.9   under the contractual obligation; or 
246.10     (4) costs with respect to the activity are paid before or 
246.11  within five years after certification of the district and the 
246.12  revenues are spent to reimburse a party for payment of the 
246.13  costs, including interest on unreimbursed costs; or 
246.14     (5) expenditures are made for housing purposes as permitted 
246.15  by subdivision 2, paragraph (b). 
246.16     (b) For purposes of this subdivision, bonds include 
246.17  subsequent refunding bonds if the original refunded bonds meet 
246.18  the requirements of paragraph (a), clause (2). 
246.19     <b>[EFFECTIVE DATE.]</b> This section is effective for 
246.20  expenditures made after June 30, 2003. 
246.21     Sec. 21.  Minnesota Statutes 2002, section 469.1763, 
246.22  subdivision 4, is amended to read: 
246.23     Subd. 4.  [USE OF REVENUES FOR DECERTIFICATION.] (a) In 
246.24  each year beginning with the sixth year following certification 
246.25  of the district, if the applicable in-district percent of the 
246.26  revenues derived from tax increments paid by properties in the 
246.27  district that remain after exceeds the amount of expenditures 
246.28  that have been made for costs permitted under subdivision 3, an 
246.29  amount equal to the difference between the in-district percent 
246.30  of the revenues derived from tax increments paid by properties 
246.31  in the district and the amount of expenditures that have been 
246.32  made for costs permitted under subdivision 3 must be used and 
246.33  only used to pay or defease the following or be set aside to pay 
246.34  the following: 
246.35     (1) outstanding bonds, as defined in subdivision 3, 
246.36  paragraphs (a), clause (2), and (b); 
247.1      (2) contracts, as defined in subdivision 3, paragraph (a), 
247.2   clauses (3) and (4); or 
247.3      (3) credit enhanced bonds to which the revenues derived 
247.4   from tax increments are pledged, but only to the extent that 
247.5   revenues of the district for which the credit enhanced bonds 
247.6   were issued are insufficient to pay the bonds and to the extent 
247.7   that the increments from the applicable pooling percent share 
247.8   for the district are insufficient. 
247.9      (b) When the outstanding bonds have been defeased and when 
247.10  sufficient money has been set aside to pay contractual 
247.11  obligations as defined in subdivision 3, paragraph (a), clauses 
247.12  (3) and (4), the district must be decertified and the pledge of 
247.13  tax increment discharged. 
247.14     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
247.15  for which the request for certification was made after April 30, 
247.16  1990. 
247.17     Sec. 22.  Minnesota Statutes 2002, section 469.1763, 
247.18  subdivision 6, is amended to read: 
247.19     Subd. 6.  [POOLING PERMITTED FOR DEFICITS.] (a) This 
247.20  subdivision applies only to districts for which the request for 
247.21  certification was made before August 1, 2001, and without regard 
247.22  to whether the request for certification was made prior to 
247.23  August 1, 1979. 
247.24     (b) The municipality for the district may transfer 
247.25  available increments from another tax increment financing 
247.26  district located in the municipality, if the transfer is 
247.27  necessary to eliminate a deficit in the district to which the 
247.28  increments are transferred.  A deficit in the district for 
247.29  purposes of this subdivision means the lesser of the following 
247.30  two amounts: 
247.31     (1)(i) the amount due during the calendar year to pay 
247.32  preexisting obligations of the district; minus 
247.33     (ii) the total increments collected or to be collected from 
247.34  properties located within the district that are available for 
247.35  the calendar year including amounts collected in prior years 
247.36  that are currently available; plus 
248.1      (iii) total increments from properties located in other 
248.2   districts in the municipality including amounts collected in 
248.3   prior years that are available to be used to meet the district's 
248.4   obligations under this section, excluding this subdivision, or 
248.5   other provisions of law (but excluding a special tax under 
248.6   section 469.1791 and the grant program under Laws 1997, chapter 
248.7   231, article 1, section 19, or Laws 2001, First Special Session 
248.8   chapter 5); or 
248.9      (2) the reduction in increments collected from properties 
248.10  located in the district for the calendar year as a result of the 
248.11  changes in class rates in Laws 1997, chapter 231, article 1; 
248.12  Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, 
248.13  and Laws 2001, First Special Session chapter 5, or the 
248.14  elimination of the general education tax levy under Laws 2001, 
248.15  First Special Session chapter 5. 
248.16     (c) A preexisting obligation means: 
248.17     (1) bonds issued and sold before August 1, 2001, or bonds 
248.18  issued pursuant to a binding contract requiring the issuance of 
248.19  bonds entered into before July 1, 2001, and bonds issued to 
248.20  refund such bonds or to reimburse expenditures made in 
248.21  conjunction with a signed contractual agreement entered into 
248.22  before August 1, 2001, to the extent that the bonds are secured 
248.23  by a pledge of increments from the tax increment financing 
248.24  district; and 
248.25     (2) binding contracts entered into before August 1, 2001, 
248.26  to the extent that the contracts require payments secured by a 
248.27  pledge of increments from the tax increment financing district. 
248.28     (d) The municipality may require a development authority, 
248.29  other than a seaway port authority, to transfer available 
248.30  increments including amounts collected in prior years that are 
248.31  currently available for any of its tax increment financing 
248.32  districts in the municipality to make up an insufficiency in 
248.33  another district in the municipality, regardless of whether the 
248.34  district was established by the development authority or another 
248.35  development authority.  This authority applies notwithstanding 
248.36  any law to the contrary, but applies only to a development 
249.1   authority that: 
249.2      (1) was established by the municipality; or 
249.3      (2) the governing body of which is appointed, in whole or 
249.4   part, by the municipality or an officer of the municipality or 
249.5   which consists, in whole or part, of members of the governing 
249.6   body of the municipality.  The municipality may use this 
249.7   authority only after it has first used all available increments 
249.8   of the receiving development authority to eliminate the 
249.9   insufficiency and exercised any permitted action under section 
249.10  469.1792, subdivision 3, for preexisting districts of the 
249.11  receiving development authority to eliminate the insufficiency. 
249.12     (e) The authority under this subdivision to spend tax 
249.13  increments outside of the area of the district from which the 
249.14  tax increments were collected: 
249.15     (1) may only be exercised after obtaining approval of the 
249.16  use of the increments, in writing, by the commissioner of 
249.17  revenue; 
249.18     (2) is an exception to the restrictions under section 
249.19  469.176, subdivision 4i, and the other provisions of this 
249.20  section, and the percentage restrictions under subdivision 2 
249.21  must be calculated after deducting increments spent under this 
249.22  subdivision from the total increments for the district; and 
249.23     (3) (2) applies notwithstanding the provisions of the Tax 
249.24  Increment Financing Act in effect for districts for which the 
249.25  request for certification was made before June 30, 1982, or any 
249.26  other law to the contrary. 
249.27     (f) If a preexisting obligation requires the development 
249.28  authority to pay an amount that is limited to the increment from 
249.29  the district or a specific development within the district and 
249.30  if the obligation requires paying a higher amount to the extent 
249.31  that increments are available, the municipality may determine 
249.32  that the amount due under the preexisting obligation equals the 
249.33  higher amount and may authorize the transfer of increments under 
249.34  this subdivision to pay up to the higher amount.  The existence 
249.35  of a guarantee of obligations by the individual or entity that 
249.36  would receive the payment under this paragraph is disregarded in 
250.1   the determination of eligibility to pool under this 
250.2   subdivision.  The authority to transfer increments under this 
250.3   paragraph may only be used to the extent that the payment of all 
250.4   other preexisting obligations in the municipality due during the 
250.5   calendar year have been satisfied. 
250.6      <b>[EFFECTIVE DATE.]</b> This section is effective retroactively 
250.7   to January 2, 2002, and thereafter. 
250.8      Sec. 23.  Minnesota Statutes 2002, section 469.177, 
250.9   subdivision 1, is amended to read: 
250.10     Subdivision 1.  [ORIGINAL NET TAX CAPACITY.] (a) Upon or 
250.11  after adoption of a tax increment financing plan, the auditor of 
250.12  any county in which the district is situated shall, upon request 
250.13  of the authority, certify the original net tax capacity of the 
250.14  tax increment financing district and that portion of the 
250.15  district overlying any subdistrict as described in the tax 
250.16  increment financing plan and shall certify in each year 
250.17  thereafter the amount by which the original net tax capacity has 
250.18  increased or decreased as a result of a change in tax exempt 
250.19  status of property within the district and any subdistrict, 
250.20  reduction or enlargement of the district or changes pursuant to 
250.21  subdivision 4.  
250.22     (b) For districts approved under section 469.175, 
250.23  subdivision 3, or parcels added to existing districts after May 
250.24  1, 1988, If the classification under section 273.13 of property 
250.25  located in a district changes to a classification that has a 
250.26  different assessment ratio, the original net tax capacity of 
250.27  that property must be redetermined at the time when its use is 
250.28  changed as if the property had originally been classified in the 
250.29  same class in which it is classified after its use is changed. 
250.30     (c) The amount to be added to the original net tax capacity 
250.31  of the district as a result of previously tax exempt real 
250.32  property within the district becoming taxable equals the net tax 
250.33  capacity of the real property as most recently assessed pursuant 
250.34  to section 273.18 or, if that assessment was made more than one 
250.35  year prior to the date of title transfer rendering the property 
250.36  taxable, the net tax capacity assessed by the assessor at the 
251.1   time of the transfer.  If improvements are made to tax exempt 
251.2   property after certification of the district and before the 
251.3   parcel becomes taxable, the assessor shall, at the request of 
251.4   the authority, separately assess the estimated market value of 
251.5   the improvements.  If the property becomes taxable, the county 
251.6   auditor shall add to original net tax capacity, the net tax 
251.7   capacity of the parcel, excluding the separately assessed 
251.8   improvements.  If substantial taxable improvements were made to 
251.9   a parcel after certification of the district and if the property 
251.10  later becomes tax exempt, in whole or part, as a result of the 
251.11  authority acquiring the property through foreclosure or exercise 
251.12  of remedies under a lease or other revenue agreement or as a 
251.13  result of tax forfeiture, the amount to be added to the original 
251.14  net tax capacity of the district as a result of the property 
251.15  again becoming taxable is the amount of the parcel's value that 
251.16  was included in original net tax capacity when the parcel was 
251.17  first certified.  The amount to be added to the original net tax 
251.18  capacity of the district as a result of enlargements equals the 
251.19  net tax capacity of the added real property as most recently 
251.20  certified by the commissioner of revenue as of the date of 
251.21  modification of the tax increment financing plan pursuant to 
251.22  section 469.175, subdivision 4. 
251.23     (d) For districts approved under section 469.175, 
251.24  subdivision 3, or parcels added to existing districts after May 
251.25  1, 1988, If the net tax capacity of a property increases because 
251.26  the property no longer qualifies under the Minnesota 
251.27  Agricultural Property Tax Law, section 273.111; the Minnesota 
251.28  Open Space Property Tax Law, section 273.112; or the 
251.29  Metropolitan Agricultural Preserves Act, chapter 473H, or 
251.30  because platted, unimproved property is improved or three years 
251.31  pass after approval of the plat under section 273.11, 
251.32  subdivision 1, the increase in net tax capacity must be added to 
251.33  the original net tax capacity.  
251.34     (e) The amount to be subtracted from the original net tax 
251.35  capacity of the district as a result of previously taxable real 
251.36  property within the district becoming tax exempt, or a reduction 
252.1   in the geographic area of the district, shall be the amount of 
252.2   original net tax capacity initially attributed to the property 
252.3   becoming tax exempt or being removed from the district.  If the 
252.4   net tax capacity of property located within the tax increment 
252.5   financing district is reduced by reason of a court-ordered 
252.6   abatement, stipulation agreement, voluntary abatement made by 
252.7   the assessor or auditor or by order of the commissioner of 
252.8   revenue, the reduction shall be applied to the original net tax 
252.9   capacity of the district when the property upon which the 
252.10  abatement is made has not been improved since the date of 
252.11  certification of the district and to the captured net tax 
252.12  capacity of the district in each year thereafter when the 
252.13  abatement relates to improvements made after the date of 
252.14  certification.  The county auditor may specify reasonable form 
252.15  and content of the request for certification of the authority 
252.16  and any modification thereof pursuant to section 469.175, 
252.17  subdivision 4.  
252.18     (f) If a parcel of property contained a substandard 
252.19  building that was demolished or removed and if the authority 
252.20  elects to treat the parcel as occupied by a substandard building 
252.21  under section 469.174, subdivision 10, paragraph (b), the 
252.22  auditor shall certify the original net tax capacity of the 
252.23  parcel using the greater of (1) the current net tax capacity of 
252.24  the parcel, or (2) the estimated market value of the parcel for 
252.25  the year in which the building was demolished or removed, but 
252.26  applying the class rates for the current year. 
252.27     <b>[EFFECTIVE DATE.]</b> The provisions of this section apply to 
252.28  all districts, regardless of when the request for certification 
252.29  was made, beginning for taxes payable in 2004.  The provisions 
252.30  only apply to classification changes enacted after January 1, 
252.31  2001, and for changes in use occurring after December 31, 2002. 
252.32     Sec. 24.  Minnesota Statutes 2002, section 469.177, 
252.33  subdivision 12, is amended to read: 
252.34     Subd. 12.  [DECERTIFICATION OF TAX INCREMENT FINANCING 
252.35  DISTRICT.] The county auditor shall decertify a tax increment 
252.36  financing district when the earliest of the following times is 
253.1   reached: 
253.2      (1) the applicable maximum duration limit under section 
253.3   469.176, subdivisions 1a to 1g; 
253.4      (2) the maximum duration limit, if any, provided by the 
253.5   municipality pursuant to section 469.176, subdivision 1; 
253.6      (3) the time of decertification specified in section 
253.7   469.1761, subdivision 4, if the commissioner of revenue issues 
253.8   an order of noncompliance and the maximum duration limit for 
253.9   economic development districts has been exceeded; 
253.10     (4) upon completion of the required actions to allow 
253.11  decertification under section 469.1763, subdivision 4; or 
253.12     (5) upon the later of receipt by the county auditor of a 
253.13  written request for decertification from the authority that 
253.14  requested certification of the original net tax capacity of the 
253.15  district or its successor or the decertification date specified 
253.16  in the request. 
253.17     <b>[EFFECTIVE DATE.]</b> This section is effective for all 
253.18  districts regardless of whether the request for certification 
253.19  was made before, on, or after August 1, 1979. 
253.20     Sec. 25.  Minnesota Statutes 2002, section 469.1771, 
253.21  subdivision 4, is amended to read: 
253.22     Subd. 4.  [LIMITATIONS.] (a) If the increments are pledged 
253.23  to repay bonds that were issued before the lawsuit was filed 
253.24  under this section, the damages under this section may not 
253.25  exceed the greater of (1) ten percent of the expenditures or 
253.26  revenues derived from increment, or (2) the amount of available 
253.27  revenues after paying debt services due on the bonds.  
253.28     (b) The court may abate all or part of the amount if it 
253.29  determines the unauthorized action or failure to perform the 
253.30  required action was taken in good faith and the payment would 
253.31  work an undue hardship on the authority or municipality. 
253.32     <b>[EFFECTIVE DATE.]</b> This section is effective for violations 
253.33  occurring after December 31, 1990. 
253.34     Sec. 26.  Minnesota Statutes 2002, section 469.1771, is 
253.35  amended by adding a subdivision to read: 
253.36     Subd. 7.  [LIMITATIONS ON ACTIONS.] An action under 
254.1   subdivision 1, paragraph (a), contesting the validity of a 
254.2   determination by an authority under section 469.175, subdivision 
254.3   3, must be commenced within the later of: 
254.4      (1) 180 days after the municipality's approval under 
254.5   section 469.175, subdivision 3; or 
254.6      (2) 90 days after the request for certification of the 
254.7   district is filed with the county auditor under section 469.177, 
254.8   subdivision 1. 
254.9      <b>[EFFECTIVE DATE.]</b> This section is effective for actions 
254.10  filed after the day following final enactment. 
254.11     Sec. 27.  Minnesota Statutes 2002, section 469.178, 
254.12  subdivision 7, is amended to read: 
254.13     Subd. 7.  [INTERFUND LOANS.] The authority or municipality 
254.14  may advance or loan money to finance expenditures under section 
254.15  469.176, subdivision 4, from its general fund or any other fund 
254.16  under which it has legal authority to do so.  The loan or 
254.17  advance must be approved authorized, by resolution of the 
254.18  governing body, before money is transferred, advanced, or spent, 
254.19  whichever is earliest.  The resolution may generally grant to 
254.20  the authority the power to make interfund loans under one or 
254.21  more tax increment financing plans or for one or more 
254.22  districts.  The terms and conditions for repayment of the loan 
254.23  must be provided in writing and include, at a minimum, the 
254.24  principal amount, the interest rate, and maximum term.  The 
254.25  maximum rate of interest permitted to be charged is limited to 
254.26  the greater of the rates specified under section 270.75 or 
254.27  549.09 as of the date or advance is made, unless the written 
254.28  agreement states that the maximum interest rate will fluctuate 
254.29  as the interest rates specified under section 270.75 or 549.09 
254.30  are from time to time adjusted. 
254.31     <b>[EFFECTIVE DATE.]</b> This section is effective for loans and 
254.32  advances made after July 31, 2001, and for districts for which 
254.33  the request for certification was made after July 31, 1979. 
254.34     Sec. 28.  Minnesota Statutes 2002, section 469.1791, 
254.35  subdivision 3, is amended to read: 
254.36     Subd. 3.  [PRECONDITIONS TO ESTABLISH DISTRICT.] (a) A city 
255.1   may establish a special taxing district within a tax increment 
255.2   financing district under this section only if the conditions 
255.3   under paragraphs (b) and (c) are met or if the city elects to 
255.4   exercise the authority under paragraph (d). 
255.5      (b) The city has determined that: 
255.6      (1) total tax increments from the district, including 
255.7   unspent increments from previous years and increments 
255.8   transferred under paragraph (c), will be insufficient to pay the 
255.9   amounts due in a year on preexisting obligations; and 
255.10     (2) this insufficiency of increments resulted from the 
255.11  reduction in property tax class rates enacted in the 1997 and 
255.12  1998 legislative sessions. 
255.13     (c) The city has agreed to transfer any available 
255.14  increments from other tax increment financing districts in the 
255.15  city to pay the preexisting obligations of the district under 
255.16  section 469.1763, subdivision 6.  This requirement does not 
255.17  apply to any available increments of a qualified housing 
255.18  district, as defined in section 273.1399, subdivision 1.  
255.19     (d) If a tax increment financing district does not qualify 
255.20  under paragraphs (b) and (c), the governing body may elect to 
255.21  establish a special taxing district under this section.  If the 
255.22  city elects to exercise this authority, increments from the tax 
255.23  increment financing district and the proceeds of the tax imposed 
255.24  under this section may only be used to pay preexisting 
255.25  obligations and reasonable administrative expenses of the 
255.26  authority for the tax increment financing district.  The tax 
255.27  increment financing district must be decertified when all 
255.28  preexisting obligations have been paid.  
255.29     <b>[EFFECTIVE DATE.]</b> This section applies to all districts for 
255.30  which the request for certification was made on or after January 
255.31  1, 2002, and to all districts to which the definition of 
255.32  qualified housing districts under Minnesota Statutes 2002, 
255.33  section 273.1399, applied. 
255.34     Sec. 29.  Minnesota Statutes 2002, section 469.1792, 
255.35  subdivision 1, is amended to read: 
255.36     Subdivision 1.  [SCOPE.] This section applies only to an 
256.1   authority with a preexisting district for which: 
256.2      (1) the increments from the district were insufficient to 
256.3   pay preexisting obligations as a result of the class rate 
256.4   changes or the elimination of the state-determined general 
256.5   education property tax levy under this act, or both; or 
256.6      (2)(i) the development authority has a binding contract, 
256.7   entered into before August 1, 2001, with a person requiring the 
256.8   authority to pay to the person an amount that may not exceed the 
256.9   increment from the district or a specific development within the 
256.10  district; and 
256.11     (ii) the authority is unable to pay the full amount under 
256.12  the contract from the pledged increments or other increments 
256.13  from the district that would have been due if the class rate 
256.14  changes or elimination of the state-determined general education 
256.15  property tax levy or both had not been made under Laws 2001, 
256.16  First Special Session chapter 5. 
256.17     <b>[EFFECTIVE DATE.]</b> This section is effective retroactively 
256.18  to the effective date of the original enactment of section 
256.19  469.1792, subdivision 1, and applies to all districts for which 
256.20  the request for certification was made after July 1, 1979. 
256.21     Sec. 30.  Minnesota Statutes 2002, section 469.1792, 
256.22  subdivision 2, is amended to read: 
256.23     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
256.24  the following terms have the meanings given. 
256.25     (b) "Preexisting district" means a tax increment financing 
256.26  district for which the request for certification was made before 
256.27  August 1, 2001. 
256.28     (c) "Preexisting obligation" means a bond or binding 
256.29  contract that: 
256.30     (1)(i) was issued or approved before August 1, 2001, or was 
256.31  issued pursuant to a binding contract entered into before August 
256.32  July 1, 2001; or 
256.33     (ii) was issued to refinance an obligation under item (i), 
256.34  if the refinancing does not increase the present value of the 
256.35  debt service; and 
256.36     (2) is secured by increments from a preexisting district. 
257.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
257.2   following final enactment and applies to districts for which the 
257.3   request for certification was made on, before, or after August 
257.4   1, 1979, and before August 1, 2001. 
257.5      Sec. 31.  Minnesota Statutes 2002, section 469.1792, 
257.6   subdivision 3, is amended to read: 
257.7      Subd. 3.  [ACTIONS AUTHORIZED.] (a) An authority with a 
257.8   district qualifying under this section may take either or both 
257.9   of the following actions for any or all of its preexisting 
257.10  districts: 
257.11     (1) the authority may elect that the original local tax 
257.12  rate under section 469.177, subdivision 1a, does not apply to 
257.13  the district; and 
257.14     (2) the authority may elect the fiscal disparities 
257.15  contribution will be computed under section 469.177, subdivision 
257.16  3, paragraph (a), regardless of the election that was made for 
257.17  the district or if the district is an economic development 
257.18  district for which the request for certification was made after 
257.19  June 30, 1997. 
257.20     (b) The authority may take action under this subdivision 
257.21  only after the municipality approves the action, by resolution, 
257.22  after notice and public hearing in the manner provided under 
257.23  section 469.175, subdivision 2 3. 
257.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
257.25  following final enactment and applies to districts for which the 
257.26  request for certification was made on, before, or after August 
257.27  1, 1979, and before August 1, 2001. 
257.28     Sec. 32.  [469.1794] [DURATION EXTENSION TO OFFSET 
257.29  DEFICITS.] 
257.30     Subdivision 1.  [AUTHORITY.] Subject to the conditions and 
257.31  limitations imposed by this section, an authority may, by 
257.32  resolution, extend the duration limit under section 469.176, 
257.33  subdivision 1b, 1c, 1e, or 1g, that applies to a preexisting 
257.34  district by up to the maximum number of years permitted under 
257.35  subdivision 5, plus any amount authorized by the commissioner of 
257.36  revenue under subdivision 6. 
258.1      Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
258.2   the following terms have the meanings given. 
258.3      (b) "Extended district" means a tax increment financing 
258.4   district whose duration limit is extended under this section. 
258.5      (c) "Preexisting district" has the meaning given in section 
258.6   469.1792, subdivision 2. 
258.7      (d) "Preexisting obligation" has the meaning given in 
258.8   section 469.1792, subdivision 2. 
258.9      (e) "Qualifying obligation" means: 
258.10     (1) a preexisting obligation that is: 
258.11     (i) a general obligation bond of the municipality; 
258.12     (ii) a general obligation bond of the authority; 
258.13     (iii) a revenue bond of the authority to which other 
258.14  revenues or money of the authority in addition to tax increments 
258.15  are pledged to pay; or 
258.16     (iv) an interfund loan, including an advance or payment 
258.17  made by the municipality or authority after June 1, 2002, to pay 
258.18  an obligation listed in items (i) to (iii); or 
258.19     (2) a bond issued to refinance a preexisting obligation 
258.20  under clause (1). 
258.21     Subd. 3.  [PRECONDITIONS.] Before an authority may extend 
258.22  the duration of district under this section, the following 
258.23  conditions must be met with regard to the district: 
258.24     (1) the original local tax rate under section 469.177, 
258.25  subdivision 1a, does not apply under an election made under 
258.26  section 469.1792, subdivision 3, or under other operation of 
258.27  law; 
258.28     (2) for a district in the metropolitan area or taconite tax 
258.29  relief area, the fiscal disparities contribution is computed 
258.30  under section 469.177, subdivision 3, paragraph (a); 
258.31     (3) the municipality has transferred any available 
258.32  increments in other districts to pay qualified obligations of 
258.33  the district or other districts in the municipality under 
258.34  section 469.1763, subdivision 6; and 
258.35     (4) the authority finds that, taking into account all of 
258.36  the increments that are available to pay qualifying obligations 
259.1   for the district, the increments from the district will be 
259.2   insufficient to pay the amount of qualifying obligations and 
259.3   that the insufficiency is a result of (i) the changes in the 
259.4   class rates and (ii) elimination of the state-determined general 
259.5   education property tax levy under Laws 2001, First Special 
259.6   Session chapter 5. 
259.7      Subd. 4.  [NOTICE; HEARING; AND APPROVALS.] The authority 
259.8   may extend the duration of a district under this section only 
259.9   after: 
259.10     (1) the municipality has approved the extension after 
259.11  providing public notice and holding a hearing in the manner 
259.12  provided under section 469.175, subdivision 3; and 
259.13     (2) the governing bodies of the county and school district 
259.14  in which the district is located have approved the extension by 
259.15  resolution. 
259.16     Subd. 5.  [MAXIMUM EXTENSION.] (a) The maximum extension 
259.17  for a district under this subdivision equals the lesser of: 
259.18     (1) four years; or 
259.19     (2) the tax reform percentage for the district, determined 
259.20  under paragraph (b), multiplied by the remaining duration of the 
259.21  district rounded to the nearest whole number.  Fractions in 
259.22  excess of one-third are rounded up. 
259.23     (b) The tax reform percentage for the district, as 
259.24  estimated by the county auditor, equals: 
259.25     (1)(i) the total taxes paid by the original tax capacity 
259.26  for the district for taxes payable in 2001, minus 
259.27     (ii) the average of the total taxes paid by the original 
259.28  tax capacity for the district for taxes payable in 2002 and in 
259.29  2003, divided by 
259.30     (2) the total taxes paid by the original tax capacity for 
259.31  the district for taxes payable in 2001. 
259.32     (c) In the resolution approving the extension, the 
259.33  municipality may elect to treat all preexisting obligations as 
259.34  qualified obligations for purposes of this section.  If the 
259.35  municipality makes an election under this paragraph, the maximum 
259.36  duration is reduced by one-half of the amount otherwise 
260.1   permitted under paragraph (a).  
260.2      (d) The remaining duration of a district is the number of 
260.3   calendar years, beginning after December 31, 2001, in which the 
260.4   district may collect increment under its duration limit under 
260.5   section 469.176, subdivision 1b, 1c, 1e, or 1g, or a special law 
260.6   approved before January 1, 2002, as applicable. 
260.7      (e) For purposes of this subdivision, "taxes" exclude taxes 
260.8   levied against market value, rather than tax capacity, and the 
260.9   state general tax under section 275.025. 
260.10     Subd. 6.  [COMMISSIONER AUTHORITY.] (a) If the municipality 
260.11  determines that the extension permitted under subdivision 5 will 
260.12  not provide sufficient revenue to pay in full the amount of 
260.13  qualifying obligations, the municipality may apply to the 
260.14  commissioner of revenue for an additional duration extension.  
260.15  The commissioner may authorize an extension of the duration of 
260.16  the district of up to two years after determining that: 
260.17     (1) the insufficiency of revenues to pay the qualifying 
260.18  obligations, which will be offset by the additional extension of 
260.19  the duration limit, result from (i) the changes in the class 
260.20  rates and (ii) elimination of the state-determined general 
260.21  education property tax levy under Laws 2001, First Special 
260.22  Session chapter 5; 
260.23     (2) the municipality has or is transferring all available 
260.24  increments from other preexisting districts and after August 1, 
260.25  2001, has not entered into new obligations or authorized new 
260.26  spending that reduced the amount of those increments that are 
260.27  available for transfer to pay qualifying obligations; and 
260.28     (3) increases in increments over the term of the district 
260.29  are unlikely to eliminate the insufficiency. 
260.30     (b) The commissioner may: 
260.31     (1) establish the form of and time for applications under 
260.32  this subdivision; and 
260.33     (2) require the municipality to provide the information 
260.34  that the commissioner determines is necessary or useful in 
260.35  evaluating the application. 
260.36     (c) This subdivision does not apply to a district if the 
261.1   authority has made an election under subdivision 5, paragraph 
261.2   (c).  
261.3      (d) Applications for extensions under this subdivision may 
261.4   not be made more than three calendar years before the end of the 
261.5   maximum duration limit under subdivision 5 for the district. 
261.6      Subd. 7.  [LIMITS ON USE OF INCREMENTS.] (a) Tax increments 
261.7   of an extended district may only be used to pay preexisting 
261.8   obligations of the district and administrative expenses, 
261.9   effective upon the final required approval of the extension 
261.10  under this section.  All tax increments that are attributable to 
261.11  an extension of the duration of a district under this section 
261.12  must be used only to pay qualified obligations of the district.  
261.13  If increments from a district subject to this subdivision are 
261.14  pledged to pay preexisting obligations that are not qualified 
261.15  obligations, increments received under the duration limit, 
261.16  determined without regard to this section, must be used to pay 
261.17  qualified obligations and preexisting obligations that are not 
261.18  qualified obligations in proportion to their relative shares of 
261.19  all payments due on all preexisting obligations. 
261.20     (b) If the authority elects to extend the duration of a 
261.21  district under this section and if increments from one or more 
261.22  other districts are pledged to pay preexisting obligations of 
261.23  the extended district, increments from all of the districts may 
261.24  only be used to pay preexisting obligations and administrative 
261.25  expenses. 
261.26     Subd. 8.  [DECERTIFICATION.] An extended district must be 
261.27  decertified at the end of the first calendar year when 
261.28  sufficient increments have been received to pay the qualified 
261.29  obligations of the extended district.  Any remaining unspent 
261.30  increments must be distributed as excess increments under 
261.31  section 469.176, subdivision 2, clause (4). 
261.32     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
261.33  following final enactment and applies to districts for which the 
261.34  request for certification was made on, before, or after August 
261.35  1, 1979, and before August 1, 2001. 
261.36     Sec. 33.  Minnesota Statutes 2002, section 469.1813, 
262.1   subdivision 8, is amended to read: 
262.2      Subd. 8.  [LIMITATION ON ABATEMENTS.] In any year, the 
262.3   total amount of property taxes abated by a political subdivision 
262.4   under this section may not exceed (1) five percent of the 
262.5   current levy, or (2) $100,000, whichever is greater.  The limit 
262.6   under this subdivision does not apply to an uncollected 
262.7   abatement from a prior year that is added to the abatement levy. 
262.8      <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
262.9   property taxes levied in 2003, payable in 2004. 
262.10     Sec. 34.  Minnesota Statutes 2002, section 469.1815, 
262.11  subdivision 1, is amended to read: 
262.12     Subdivision 1.  [INCLUSION IN PROPOSED AND FINAL LEVIES.] 
262.13  The political subdivision must add to its levy amount for the 
262.14  current year under sections 275.065 and 275.07 the total 
262.15  estimated amount of all current year abatements granted.  If all 
262.16  or a portion of an abatement levy for a prior year was 
262.17  uncollected, the political subdivision may add the uncollected 
262.18  amount to its abatement levy for the current year.  The tax 
262.19  amounts shown on the proposed notice under section 275.065, 
262.20  subdivision 3, and on the property tax statement under section 
262.21  276.04, subdivision 2, are the total amounts before the 
262.22  reduction of any abatements that will be granted on the property.
262.23     <b>[EFFECTIVE DATE.]</b> This section is effective beginning with 
262.24  property taxes levied in 2003, payable in 2004. 
262.25     Sec. 35.  Laws 1997, chapter 231, article 10, section 25, 
262.26  is amended to read: 
262.27     Sec. 25.  [EFFECTIVE DATE.] 
262.28     Sections 1, 3 to 6, 7, and 10, are effective for districts 
262.29  for which the requests for certification are made after June 30, 
262.30  1997. 
262.31     Section 2, clauses clause (1) and is effective for all 
262.32  districts, regardless of whether the request for certification 
262.33  was made before, on, or after August 1, 1979.  Section 2, 
262.34  clause (4), are is effective for districts for which the 
262.35  requests for certification were made after July 31, 1979, and 
262.36  for payments and investment earnings received after July 1, 
263.1   1997.  Section 2, clauses (2) and (3), are effective for 
263.2   districts for which the request for certification was made after 
263.3   June 30, 1982, and proceeds from sales and leases of properties 
263.4   purchased by the authority after June 30, 1997, and repayments 
263.5   of advances and loans that were made after June 30, 1997.  
263.6      Sections 8 and 9 apply to all tax increment districts, 
263.7   whenever certified, insofar as the underlying law applies to 
263.8   them, and any uses of tax increment expended prior to the date 
263.9   of enactment of this act which are in compliance with the 
263.10  provisions of those sections are deemed valid. 
263.11     Sections 12 and 13 are effective on the day the chief 
263.12  clerical officer of the city of Columbia Heights complies with 
263.13  Minnesota Statutes, sections 645.021, subdivision 3. 
263.14     Sections 17 to 20 are effective the day following final 
263.15  enactment and upon compliance by the governing body with 
263.16  Minnesota Statutes, section 645.021, subdivision 3. 
263.17     Section 24 is effective the day following final enactment. 
263.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
263.19  following final enactment. 
263.20     Sec. 36.  Laws 2002, chapter 377, article 7, section 3, the 
263.21  effective date, is amended to read: 
263.22     [EFFECTIVE DATE.] This section is effective for increments 
263.23  payable in 2002 deficits occurring in calendar year 2000 and 
263.24  thereafter. 
263.25     Sec. 37.  Laws 2002, chapter 377, article 11, section 1, is 
263.26  amended to read: 
263.27     Section 1.  [CITY OF MOORHEAD; TAX LEVY AUTHORIZED.] 
263.28     (a) Each year the city of Moorhead may impose a tax on all 
263.29  class 3a and class 3b property located in the city in an amount 
263.30  which the city determines is equal to the reduction in revenues 
263.31  from increment from all tax increment financing districts in the 
263.32  city resulting from the class rate changes and the elimination 
263.33  of the state-determined general education property levy under 
263.34  Laws 2001, First Special Session chapter 5.  The proceeds of 
263.35  this tax and increments from the district may only be used to 
263.36  pay preexisting obligations as defined in Minnesota Statutes, 
264.1   section 469.1763, subdivision 6, whether general obligations or 
264.2   payable wholly from tax increments.  The tax must be levied and 
264.3   collected in the same manner and as part of the property tax 
264.4   levied by the city and is subject to the same administrative, 
264.5   penalty, and enforcement provisions.  A tax imposed under this 
264.6   section is a special levy and is not subject to levy limitations 
264.7   under Minnesota Statutes, section 275.71. 
264.8      (b) This section expires December 31, 2005 2010. 
264.9      <b>[EFFECTIVE DATE.]</b> This section is effective upon approval 
264.10  by and compliance with Minnesota Statutes, section 645.021, 
264.11  subdivision 3, by the governing body of the city of Moorhead. 
264.12     Sec. 38.  [CITY OF DULUTH; TAX INCREMENT FINANCING 
264.13  DISTRICT.] 
264.14     Subdivision 1.  [AUTHORIZATION.] Upon approval of the 
264.15  governing body of the city of Duluth, the Duluth economic 
264.16  development authority may create an economic development tax 
264.17  increment financing district for aircraft related facilities.  
264.18  The authority may establish a district only after entering a 
264.19  development agreement, which provides for construction of an 
264.20  aircraft maintenance facility with a minimum square footage of 
264.21  150,000 and requires employment of a minimum of 200 individuals 
264.22  with average annual compensation in excess of $30,000.  Except 
264.23  as otherwise provided in this section, the provisions of 
264.24  Minnesota Statutes, sections 469.174 to 469.179 apply to the 
264.25  district. 
264.26     Subd. 2.  [SPECIAL RULES.] (a) Notwithstanding the 
264.27  provisions of Minnesota Statutes, section 469.176, subdivision 
264.28  1b, paragraph (a), clause (3), no tax increment shall in any 
264.29  event be paid to the authority after 25 years after receipt by 
264.30  the authority of the first tax increment for the district 
264.31  authorized by this section. 
264.32     (b) The development in the district authorized by this 
264.33  section shall be deemed to be a purpose authorized under 
264.34  Minnesota Statutes, section 469.176, subdivision 4c, paragraph 
264.35  (a). 
264.36     (c) For purposes of Minnesota Statutes, section 469.177, 
265.1   subdivision 12, the applicable maximum duration limit of the 
265.2   district authorized by this section is as set forth in paragraph 
265.3   (a). 
265.4      <b>[EFFECTIVE DATE.]</b> This section is effective upon compliance 
265.5   with the requirements of Minnesota Statutes, sections 469.1782 
265.6   and 645.021. 
265.7      Sec. 39.  [HOPKINS TAX INCREMENT FINANCING DISTRICT.] 
265.8      Subdivision 1.  [DISTRICT EXTENSION.] (a) The governing 
265.9   body of the city of Hopkins may elect to extend the duration of 
265.10  its redevelopment tax increment financing district 2-11 by up to 
265.11  four additional years. 
265.12     (b) Notwithstanding any law to the contrary, effective upon 
265.13  approval of this subdivision, no increments may be spent on 
265.14  activities located outside of the area of the district, other 
265.15  than to pay administrative expenses. 
265.16     Subd. 2.  [FIVE-YEAR RULE.] The requirements of Minnesota 
265.17  Statutes, section 469.1763, subdivision 3, that activities must 
265.18  be undertaken within a five-year period from the date of 
265.19  certification of tax increment financing district must be 
265.20  considered to be met for the city of Hopkins redevelopment tax 
265.21  increment district 2-11, if the activities are undertaken within 
265.22  nine years from the date of certification of the district. 
265.23     <b>[EFFECTIVE DATE.]</b> Subdivision 1 is effective upon 
265.24  compliance with the provisions of Minnesota Statutes, sections 
265.25  469.1782, subdivision 2, and 645.021.  Subdivision 2 is 
265.26  effective upon compliance by the governing body of the city of 
265.27  Hopkins with the provisions of Minnesota Statutes, section 
265.28  645.021. 
265.29                             ARTICLE 10 
265.30                              MINERALS 
265.31     Section 1.  Minnesota Statutes 2002, section 272.02, is 
265.32  amended by adding a subdivision to read: 
265.33     Subd. 56.  [PROPERTY USED IN THE BUSINESS OF MINING SUBJECT 
265.34  TO THE NET PROCEEDS TAX.] The following property used in the 
265.35  business of mining subject to the net proceeds tax under section 
265.36  298.015 is exempt: 
266.1      (1) deposits of ores, metals, and minerals and the lands in 
266.2   which they are contained; 
266.3      (2) all real and personal property used in mining, 
266.4   producing, or refining ores, minerals, or metals, including 
266.5   lands occupied by or used in connection with the mining, 
266.6   quarrying, production, or refining facilities; and 
266.7      (3) concentrate or direct reduced ore. 
266.8   This exemption applies for each year that a person subject to 
266.9   tax under section 298.015 uses the property for mining, 
266.10  quarrying, producing, or refining ores, metals, or minerals. 
266.11     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
266.12  payable in 2004 and thereafter. 
266.13     Sec. 2.  Minnesota Statutes 2002, section 290.05, 
266.14  subdivision 1, is amended to read: 
266.15     Subdivision 1.  [EXEMPT ENTITIES.] The following 
266.16  corporations, individuals, estates, trusts, and organizations 
266.17  shall be exempted from taxation under this chapter, provided 
266.18  that every such person or corporation claiming exemption under 
266.19  this chapter, in whole or in part, must establish to the 
266.20  satisfaction of the commissioner the taxable status of any 
266.21  income or activity: 
266.22     (a) corporations, individuals, estates, and trusts engaged 
266.23  in the business of mining or producing iron ore and mining, 
266.24  producing, or refining other ores, metals, and minerals, the 
266.25  mining or, production, or refining of which is subject to the 
266.26  occupation tax imposed by section 298.01; but if any such 
266.27  corporation, individual, estate, or trust engages in any other 
266.28  business or activity or has income from any property not used in 
266.29  such business it shall be subject to this tax computed on the 
266.30  net income from such property or such other business or 
266.31  activity.  Royalty shall not be considered as income from the 
266.32  business of mining or producing iron ore within the meaning of 
266.33  this section; 
266.34     (b) the United States of America, the state of Minnesota or 
266.35  any political subdivision of either agencies or 
266.36  instrumentalities, whether engaged in the discharge of 
267.1   governmental or proprietary functions; and 
267.2      (c) any insurance company. 
267.3      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
267.4   years beginning after December 31, 2002. 
267.5      Sec. 3.  Minnesota Statutes 2002, section 290.17, 
267.6   subdivision 4, is amended to read: 
267.7      Subd. 4.  [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 
267.8   business conducted wholly within this state or partly within and 
267.9   partly without this state is part of a unitary business, the 
267.10  entire income of the unitary business is subject to 
267.11  apportionment pursuant to section 290.191.  Notwithstanding 
267.12  subdivision 2, paragraph (c), none of the income of a unitary 
267.13  business is considered to be derived from any particular source 
267.14  and none may be allocated to a particular place except as 
267.15  provided by the applicable apportionment formula.  The 
267.16  provisions of this subdivision do not apply to business income 
267.17  subject to subdivision 5, income of an insurance company, or 
267.18  income of an investment company determined under section 290.36, 
267.19  or income of a mine or mineral processing facility subject to 
267.20  tax under section 298.01. 
267.21     (b) The term "unitary business" means business activities 
267.22  or operations which result in a flow of value between them.  The 
267.23  term may be applied within a single legal entity or between 
267.24  multiple entities and without regard to whether each entity is a 
267.25  sole proprietorship, a corporation, a partnership or a trust.  
267.26     (c) Unity is presumed whenever there is unity of ownership, 
267.27  operation, and use, evidenced by centralized management or 
267.28  executive force, centralized purchasing, advertising, 
267.29  accounting, or other controlled interaction, but the absence of 
267.30  these centralized activities will not necessarily evidence a 
267.31  nonunitary business.  Unity is also presumed when business 
267.32  activities or operations are of mutual benefit, dependent upon 
267.33  or contributory to one another, either individually or as a 
267.34  group. 
267.35     (d) Where a business operation conducted in Minnesota is 
267.36  owned by a business entity that carries on business activity 
268.1   outside the state different in kind from that conducted within 
268.2   this state, and the other business is conducted entirely outside 
268.3   the state, it is presumed that the two business operations are 
268.4   unitary in nature, interrelated, connected, and interdependent 
268.5   unless it can be shown to the contrary.  
268.6      (e) Unity of ownership is not deemed to exist when a 
268.7   corporation is involved unless that corporation is a member of a 
268.8   group of two or more business entities and more than 50 percent 
268.9   of the voting stock of each member of the group is directly or 
268.10  indirectly owned by a common owner or by common owners, either 
268.11  corporate or noncorporate, or by one or more of the member 
268.12  corporations of the group.  For this purpose, the term "voting 
268.13  stock" shall include membership interests of mutual insurance 
268.14  holding companies formed under section 60A.077.  
268.15     (f) The net income and apportionment factors under section 
268.16  290.191 or 290.20 of foreign corporations and other foreign 
268.17  entities which are part of a unitary business shall not be 
268.18  included in the net income or the apportionment factors of the 
268.19  unitary business.  A foreign corporation or other foreign entity 
268.20  which is required to file a return under this chapter shall file 
268.21  on a separate return basis.  The net income and apportionment 
268.22  factors under section 290.191 or 290.20 of foreign operating 
268.23  corporations shall not be included in the net income or the 
268.24  apportionment factors of the unitary business except as provided 
268.25  in paragraph (g). 
268.26     (g) The adjusted net income of a foreign operating 
268.27  corporation shall be deemed to be paid as a dividend on the last 
268.28  day of its taxable year to each shareholder thereof, in 
268.29  proportion to each shareholder's ownership, with which such 
268.30  corporation is engaged in a unitary business.  Such deemed 
268.31  dividend shall be treated as a dividend under section 290.21, 
268.32  subdivision 4. 
268.33     Dividends actually paid by a foreign operating corporation 
268.34  to a corporate shareholder which is a member of the same unitary 
268.35  business as the foreign operating corporation shall be 
268.36  eliminated from the net income of the unitary business in 
269.1   preparing a combined report for the unitary business.  The 
269.2   adjusted net income of a foreign operating corporation shall be 
269.3   its net income adjusted as follows: 
269.4      (1) any taxes paid or accrued to a foreign country, the 
269.5   commonwealth of Puerto Rico, or a United States possession or 
269.6   political subdivision of any of the foregoing shall be a 
269.7   deduction; and 
269.8      (2) the subtraction from federal taxable income for 
269.9   payments received from foreign corporations or foreign operating 
269.10  corporations under section 290.01, subdivision 19d, clause (10), 
269.11  shall not be allowed. 
269.12     If a foreign operating corporation incurs a net loss, 
269.13  neither income nor deduction from that corporation shall be 
269.14  included in determining the net income of the unitary business. 
269.15     (h) For purposes of determining the net income of a unitary 
269.16  business and the factors to be used in the apportionment of net 
269.17  income pursuant to section 290.191 or 290.20, there must be 
269.18  included only the income and apportionment factors of domestic 
269.19  corporations or other domestic entities other than foreign 
269.20  operating corporations that are determined to be part of the 
269.21  unitary business pursuant to this subdivision, notwithstanding 
269.22  that foreign corporations or other foreign entities might be 
269.23  included in the unitary business.  
269.24     (i) Deductions for expenses, interest, or taxes otherwise 
269.25  allowable under this chapter that are connected with or 
269.26  allocable against dividends, deemed dividends described in 
269.27  paragraph (g), or royalties, fees, or other like income 
269.28  described in section 290.01, subdivision 19d, clause (10), shall 
269.29  not be disallowed. 
269.30     (j) Each corporation or other entity, except a sole 
269.31  proprietorship, that is part of a unitary business must file 
269.32  combined reports as the commissioner determines.  On the 
269.33  reports, all intercompany transactions between entities included 
269.34  pursuant to paragraph (h) must be eliminated and the entire net 
269.35  income of the unitary business determined in accordance with 
269.36  this subdivision is apportioned among the entities by using each 
270.1   entity's Minnesota factors for apportionment purposes in the 
270.2   numerators of the apportionment formula and the total factors 
270.3   for apportionment purposes of all entities included pursuant to 
270.4   paragraph (h) in the denominators of the apportionment formula. 
270.5      (k) If a corporation has been divested from a unitary 
270.6   business and is included in a combined report for a fractional 
270.7   part of the common accounting period of the combined report:  
270.8      (1) its income includable in the combined report is its 
270.9   income incurred for that part of the year determined by 
270.10  proration or separate accounting; and 
270.11     (2) its sales, property, and payroll included in the 
270.12  apportionment formula must be prorated or accounted for 
270.13  separately. 
270.14     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
270.15  years beginning after December 31, 2002. 
270.16     Sec. 4.  Minnesota Statutes 2002, section 290.191, 
270.17  subdivision 1, is amended to read: 
270.18     Subdivision 1.  [GENERAL RULE.] (a) Except as otherwise 
270.19  provided in section 290.17, subdivision 5, the net income from a 
270.20  trade or business carried on partly within and partly without 
270.21  this state must be apportioned to this state as provided in this 
270.22  section.  To the extent that an entity is exempt from taxation 
270.23  under this chapter as provided in section 290.05, the 
270.24  apportionment factors associated with the entity's exempt 
270.25  activities are excluded from the apportionment formula under 
270.26  this section. 
270.27     (b) For purposes of this section, "state" means a state of 
270.28  the United States, the District of Columbia, the commonwealth of 
270.29  Puerto Rico, or any territory or possession of the United States 
270.30  or any foreign country. 
270.31     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
270.32  years beginning after December 31, 2002. 
270.33     Sec. 5.  Minnesota Statutes 2002, section 297A.68, 
270.34  subdivision 4, is amended to read: 
270.35     Subd. 4.  [TACONITE, OTHER ORES, METALS, OR MINERALS; 
270.36  PRODUCTION MATERIALS.] Mill liners, grinding rods, and grinding 
271.1   balls that are substantially consumed in the production of 
271.2   taconite or other ores, metals, or minerals are exempt when sold 
271.3   to or stored, used, or consumed by persons taxed under the 
271.4   in-lieu provisions of chapter 298.  
271.5      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
271.6   purchases made after June 30, 2005. 
271.7      Sec. 6.  Minnesota Statutes 2002, section 297A.71, is 
271.8   amended by adding a subdivision to read: 
271.9      Subd. 32.  [CONSTRUCTION MATERIALS AND EQUIPMENT; 
271.10  NONFERROUS METALS AND MINERALS FACILITY.] Materials and supplies 
271.11  used or consumed in, and equipment incorporated into, the 
271.12  improvement, construction, or expansion of an existing taconite 
271.13  ore processing facility to extract and refine nonferrous ores, 
271.14  metals, and minerals, including the construction, improvement, 
271.15  or expansion of a hydrometallurgical processing facility, are 
271.16  exempt.  This exemption includes any delivery or installation 
271.17  charges relating to materials, supplies, and equipment exempt 
271.18  under this section.  
271.19     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
271.20  purchases made after June 30, 2005, and before July 1, 2012. 
271.21     Sec. 7.  Minnesota Statutes 2002, section 298.001, is 
271.22  amended by adding a subdivision to read: 
271.23     Subd. 9.  [REFINING.] "Refining" means and is limited to 
271.24  refining: 
271.25     (1) of ores, metals, or mineral products, the mining, 
271.26  extraction, or quarrying of which were subject to tax under 
271.27  section 298.015; and 
271.28     (2) carried on by the entity, or an affiliated entity, that 
271.29  mined or extracted the metal or mineral products. 
271.30     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
271.31  years beginning after December 31, 2002. 
271.32     Sec. 8.  Minnesota Statutes 2002, section 298.01, 
271.33  subdivision 3, is amended to read: 
271.34     Subd. 3.  [OCCUPATION TAX; OTHER ORES.] Every person 
271.35  engaged in the business of mining, refining, or producing ores, 
271.36  metals, or minerals in this state, except iron ore or taconite 
272.1   concentrates, shall pay an occupation tax to the state of 
272.2   Minnesota as provided in this subdivision.  For purposes of this 
272.3   subdivision, mining includes the application of 
272.4   hydrometallurgical processes.  The tax is determined in the same 
272.5   manner as the tax imposed by section 290.02, except that 
272.6   sections 290.05, subdivision 1, clause (a), 290.0921, and 
272.7   290.17, subdivision 4, do not apply.  Except as provided in 
272.8   section 290.05, subdivision 1, paragraph (a), the tax is in 
272.9   addition to all other taxes. 
272.10     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
272.11  years beginning after December 31, 2002. 
272.12     Sec. 9.  Minnesota Statutes 2002, section 298.01, 
272.13  subdivision 3a, is amended to read: 
272.14     Subd. 3a.  [GROSS INCOME.] (a) For purposes of determining 
272.15  a person's taxable income under subdivision 3, gross income is 
272.16  determined by the amount of gross proceeds from mining in this 
272.17  state under section 298.016 and includes any gain or loss 
272.18  recognized from the sale or disposition of assets used in the 
272.19  business in this state. 
272.20     (b) In applying section 290.191, subdivision 5, transfers 
272.21  of ores, metals, or minerals that are subject to this chapter 
272.22  are deemed to be sales outside this state if the ores, metals, 
272.23  or minerals are transported out of this state after the ores 
272.24  have been converted to a commercially marketable quality. 
272.25     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
272.26  years beginning after December 31, 2002. 
272.27     Sec. 10.  Minnesota Statutes 2002, section 298.01, 
272.28  subdivision 4, is amended to read: 
272.29     Subd. 4.  [OCCUPATION TAX; IRON ORE; TACONITE 
272.30  CONCENTRATES.] A person engaged in the business of mining or 
272.31  producing of iron ore, taconite concentrates or direct reduced 
272.32  ore in this state shall pay an occupation tax to the state of 
272.33  Minnesota.  The tax is determined in the same manner as the tax 
272.34  imposed by section 290.02, except that sections 290.05, 
272.35  subdivision 1, clause (a), 290.0921, and 290.17, subdivision 4, 
272.36  do not apply.  The tax is in addition to all other taxes. 
273.1      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
273.2   years beginning after December 31, 2002. 
273.3      Sec. 11.  Minnesota Statutes 2002, section 298.015, 
273.4   subdivision 1, is amended to read: 
273.5      Subdivision 1.  [TAX IMPOSED.] A person engaged in the 
273.6   business of mining shall pay to the state of Minnesota for 
273.7   distribution as provided in section 298.018 a net proceeds tax 
273.8   equal to two percent of the net proceeds from mining in 
273.9   Minnesota.  The tax applies to all mineral and energy resources 
273.10  ores, metals, and minerals mined or, extracted, produced, or 
273.11  refined within the state of Minnesota except for sand, silica 
273.12  sand, gravel, building stone, crushed rock, limestone, granite, 
273.13  dimension granite, dimension stone, horticultural peat, clay, 
273.14  soil, iron ore, and taconite concentrates.  Except as provided 
273.15  in section 272.02, subdivision 56, the tax is in addition to all 
273.16  other taxes provided for by law.  
273.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
273.18  payable in 2004 and thereafter. 
273.19     Sec. 12.  Minnesota Statutes 2002, section 298.015, 
273.20  subdivision 2, is amended to read: 
273.21     Subd. 2.  [NET PROCEEDS.] For purposes of this section, the 
273.22  term "net proceeds" means the gross proceeds from mining, as 
273.23  defined in section 298.016, less the same deductions allowed in 
273.24  section 298.017 for purposes of determining taxable income under 
273.25  section 298.01, subdivision 3b.  No other credits or deductions 
273.26  shall apply to this tax except for those provided in section 
273.27  298.017.  
273.28     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
273.29  payable in 2004 and thereafter. 
273.30     Sec. 13.  Minnesota Statutes 2002, section 298.016, 
273.31  subdivision 4, is amended to read: 
273.32     Subd. 4.  [DEFINITIONS.] For the purposes of sections 
273.33  298.015 and 298.017, the terms defined in this subdivision have 
273.34  the meaning given them unless the context clearly indicates 
273.35  otherwise.  
273.36     (a) "Ores, metal, or mineral products" means all those 
274.1   mineral and energy resources ores, metals, and minerals subject 
274.2   to the tax provided in section 298.015. 
274.3      (b) "Exploration" means activities designed and engaged in 
274.4   to ascertain the existence, location, extent, or quality of any 
274.5   deposit of metal or mineral products prior to the development of 
274.6   a mining site.  
274.7      (c) "Development" means activities designed and engaged in 
274.8   to prepare or develop a potential mining site for mining after 
274.9   the existence of metal or mineral products in commercially 
274.10  marketable quantities has been disclosed including, but not 
274.11  limited to, the clearing of forestation, the building of roads, 
274.12  removal of overburden, or the sinking of shafts.  
274.13     (d) "Research" means activities designed and engaged in to 
274.14  create new or improved methods of mining, producing, processing, 
274.15  beneficiating, smelting, or refining metal or mineral products.  
274.16     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
274.17  years beginning after December 31, 2004. 
274.18     Sec. 14.  Minnesota Statutes 2002, section 298.018, is 
274.19  amended to read: 
274.20     298.018 [DISTRIBUTION OF PROCEEDS.] 
274.21     Subdivision 1.  [WITHIN TACONITE TAX RELIEF AREA GENERAL 
274.22  ALLOCATION.] (a) The commissioner of revenue shall deposit the 
274.23  proceeds of the tax paid under sections 298.015 to 298.017 on 
274.24  minerals and energy resources mined or extracted within the 
274.25  taconite tax relief area defined in section 273.134, paragraph 
274.26  (b), shall be allocated as follows: 
274.27     (1) five percent to the city or town within which the 
274.28  minerals or energy resources are mined or extracted; 
274.29     (2) ten percent to the taconite municipal aid account to be 
274.30  distributed as provided in section 298.282; 
274.31     (3) ten percent to the school district within which the 
274.32  minerals or energy resources are mined or extracted; 
274.33     (4) 20 percent to a group of school districts comprised of 
274.34  those school districts wherein the mineral or energy resource 
274.35  was mined or extracted or in which there is a qualifying 
274.36  municipality as defined by section 273.134, paragraph (b), in 
275.1   direct proportion to school district indexes as follows:  for 
275.2   each school district, its pupil units determined under section 
275.3   126C.05 for the prior school year shall be multiplied by the 
275.4   ratio of the average adjusted net tax capacity per pupil unit 
275.5   for school districts receiving aid under this clause as 
275.6   calculated pursuant to chapters 122A, 126C, and 127A for the 
275.7   school year ending prior to distribution to the adjusted net tax 
275.8   capacity per pupil unit of the district.  Each district shall 
275.9   receive that portion of the distribution which its index bears 
275.10  to the sum of the indices for all school districts that receive 
275.11  the distributions; 
275.12     (5) 20 percent to the county within which the minerals or 
275.13  energy resources are mined or extracted; 
275.14     (6) 20 percent to St. Louis county acting as the counties' 
275.15  fiscal agent to be distributed as provided in sections 273.134 
275.16  to 273.136; 
275.17     (7) five percent to the iron range resources and 
275.18  rehabilitation board for the purposes of section 298.22; 
275.19     (8) five percent to the northeast Minnesota economic 
275.20  protection trust fund; and 
275.21     (9) five percent to the taconite environmental protection 
275.22  fund in the general fund.  The proceeds of the tax must be 
275.23  allocated between the state general fund and local taxing 
275.24  districts as provided in this section. 
275.25     (b) The proceeds of the tax shall be distributed on July 15 
275.26  each year.  
275.27     Subd. 2.  [OUTSIDE TACONITE TAX RELIEF AREA GENERAL FUND 
275.28  SHARE.] The proceeds of the tax paid under sections 298.015 to 
275.29  298.017 on minerals and energy resources mined or extracted 
275.30  outside of the taconite tax relief area defined in section 
275.31  273.134, paragraph (b), shall be deposited in the general fund 
275.32  share equals the amount of the proceeds for the taxable year 
275.33  multiplied by a fraction, the numerator of which is the rate 
275.34  under the state general tax under section 275.025 and the 
275.35  denominator of which is the average total property tax rate 
275.36  applicable to property assessed under section 273.13, 
276.1   subdivision 24, for the unique areas in which the ores, metals, 
276.2   minerals, and processing facilities of the taxpayer are located. 
276.3      Subd. 3.  [FISCAL DISPARITIES SHARE.] If the ores, metals, 
276.4   minerals, or processing facility are located in the taconite tax 
276.5   relief area, as defined in section 276A.01, subdivision 2, or in 
276.6   the area, as defined in section 473F.02, subdivision 2, the 
276.7   commissioner of revenue shall pay 40 percent of the remainder of 
276.8   the proceeds after deducting the general fund share as a fiscal 
276.9   disparities share to the administrative auditor for the area 
276.10  under section 276A.02 or 473F.03.  The administrative auditor 
276.11  shall apportion the fiscal disparities share among the 
276.12  governmental units in proportion to each unit's distribution 
276.13  levy determined under section 276A.06, subdivision 3, paragraph 
276.14  (a), or 473F.08, subdivision 3, paragraph (a). 
276.15     Subd. 4.  [LOCAL TAXING DISTRICT SHARES.] (a) The 
276.16  commissioner shall pay the proceeds, less the general fund share 
276.17  under subdivision 2 and less any fiscal disparities share under 
276.18  subdivision 3, to the county auditor of the county in which the 
276.19  ores, metals, minerals, or processing facility are located.  If 
276.20  the ores, metals, minerals, or processing facilities of the 
276.21  taxpayer are located in two or more counties, the commissioner 
276.22  shall divide the proceeds between the counties based on their 
276.23  relative shares of the estimated market value of the ores, 
276.24  metals, minerals, and minerals processing facility, as 
276.25  determined under subdivision 5. 
276.26     (b) The county auditor shall allocate the proceeds of the 
276.27  tax among the taxing districts in which the ores, metals, 
276.28  minerals, and minerals processing facilities are located in the 
276.29  same proportions that property taxes are distributed.  If the 
276.30  ores, metals, minerals, or processing facilities are located 
276.31  within two or more unique taxing areas, the auditor shall use 
276.32  the estimated market values for the ores, metals, minerals, and 
276.33  property, determined under subdivision 5, to allocate the 
276.34  proceeds among the unique taxing areas. 
276.35     Subd. 5.  [MARKET VALUE ALLOCATION.] If the metals, 
276.36  minerals, and processing facilities of a taxpayer are located in 
277.1   two or more unique taxing areas, the commissioner shall 
277.2   determine the estimated market value of the taxpayer's ores, 
277.3   metals, minerals, and processing facilities that are in each 
277.4   taxing area.  In making this determination, the commissioner may 
277.5   use any data the commissioner determines is reliable, including 
277.6   information provided by the taxpayer. 
277.7      Subd. 6.  [TAX CAPACITY FOR STATE AID.] For each city, 
277.8   county, and school district that receives distributions under 
277.9   this section, the commissioner shall annually determine an 
277.10  adjusted net tax capacity equivalent amount, based on the 
277.11  distributions received under subdivisions 3 and 4 and its 
277.12  property tax rate.  These amounts must be used in the 
277.13  distribution of state aid under a formula using adjusted net tax 
277.14  capacity as a variable or factor in the distribution formula. 
277.15     Subd. 7.  [UNIQUE TAXING AREA.] For the purposes of this 
277.16  section, "unique taxing area" means the geographic area subject 
277.17  to the same set of local tax rates. 
277.18     <b>[EFFECTIVE DATE.]</b> This section is effective for 
277.19  distributions required to be made after July 15, 2003. 
277.20     Sec. 15.  Minnesota Statutes 2002, section 298.24, 
277.21  subdivision 1, is amended to read: 
277.22     Subdivision 1.  (a) For concentrate produced in 2001, 2002, 
277.23  and 2003, There is imposed upon taconite and iron sulphides, and 
277.24  upon the mining and quarrying thereof, and upon the production 
277.25  of iron ore concentrate therefrom, and upon the concentrate so 
277.26  produced, a tax of $2.103 $1.85 per gross ton of merchantable 
277.27  iron ore concentrate produced therefrom for concentrate produced 
277.28  in 2003, and $1.75 per gross ton for concentrate produced in 
277.29  2004 and thereafter.  
277.30     (b) For concentrates produced in 2004 and subsequent years, 
277.31  the tax rate shall be equal to the preceding year's tax rate 
277.32  plus an amount equal to the preceding year's tax rate multiplied 
277.33  by the percentage increase in the implicit price deflator from 
277.34  the fourth quarter of the second preceding year to the fourth 
277.35  quarter of the preceding year.  "Implicit price deflator" means 
277.36  the implicit price deflator for the gross domestic product 
278.1   prepared by the bureau of economic analysis of the United States 
278.2   Department of Commerce.  
278.3      (c) On concentrates produced in 1997 and thereafter, an 
278.4   additional tax is imposed equal to three cents per gross ton of 
278.5   merchantable iron ore concentrate for each one percent that the 
278.6   iron content of the product exceeds 72 percent, when dried at 
278.7   212 degrees Fahrenheit. 
278.8      (d) (c) The tax shall be imposed on the average of the 
278.9   production for the current year and the previous two years.  The 
278.10  rate of the tax imposed will be the current year's tax rate.  
278.11  This clause shall not apply in the case of the closing of a 
278.12  taconite facility if the property taxes on the facility would be 
278.13  higher if this clause and section 298.25 were not applicable.  
278.14     (e) (d) If the tax or any part of the tax imposed by this 
278.15  subdivision is held to be unconstitutional, a tax 
278.16  of $2.103 $1.85 per gross ton of merchantable iron ore 
278.17  concentrate produced for calendar year 2003, and $1.75 for 
278.18  calendar year 2004 and thereafter shall be imposed.  
278.19     (f) (e) Consistent with the intent of this subdivision to 
278.20  impose a tax based upon the weight of merchantable iron ore 
278.21  concentrate, the commissioner of revenue may indirectly 
278.22  determine the weight of merchantable iron ore concentrate 
278.23  included in fluxed pellets by subtracting the weight of the 
278.24  limestone, dolomite, or olivine derivatives or other basic flux 
278.25  additives included in the pellets from the weight of the 
278.26  pellets.  For purposes of this paragraph, "fluxed pellets" are 
278.27  pellets produced in a process in which limestone, dolomite, 
278.28  olivine, or other basic flux additives are combined with 
278.29  merchantable iron ore concentrate.  No subtraction from the 
278.30  weight of the pellets shall be allowed for binders, mineral and 
278.31  chemical additives other than basic flux additives, or moisture. 
278.32     (g) (f) (1) Notwithstanding any other provision of this 
278.33  subdivision, for the first two years of a plant's production of 
278.34  direct reduced ore, no tax is imposed under this section.  As 
278.35  used in this paragraph, "direct reduced ore" is ore that results 
278.36  in a product that has an iron content of at least 75 percent.  
279.1   For the third year of a plant's production of direct reduced 
279.2   ore, the rate to be applied to direct reduced ore is 25 percent 
279.3   of the rate otherwise determined under this subdivision.  For 
279.4   the fourth such production year, the rate is 50 percent of the 
279.5   rate otherwise determined under this subdivision; for the fifth 
279.6   such production year, the rate is 75 percent of the rate 
279.7   otherwise determined under this subdivision; and for all 
279.8   subsequent production years, the full rate is imposed. 
279.9      (2) Subject to clause (1), production of direct reduced ore 
279.10  in this state is subject to the tax imposed by this section, but 
279.11  if that production is not produced by a producer of taconite or 
279.12  iron sulfides, the production of taconite or iron sulfides 
279.13  consumed in the production of direct reduced iron in this state 
279.14  is not subject to the tax imposed by this section on taconite or 
279.15  iron sulfides. 
279.16     <b>[EFFECTIVE DATE.]</b> This section is effective for 
279.17  concentrates produced after January 1, 2003. 
279.18     Sec. 16.  Minnesota Statutes 2002, section 298.27, is 
279.19  amended to read: 
279.20     298.27 [COLLECTION AND PAYMENT OF TAX.] 
279.21     The taxes provided by section 298.24 shall be paid directly 
279.22  to each eligible county and the iron range resources and 
279.23  rehabilitation board.  The commissioner of revenue shall notify 
279.24  each producer of the amount to be paid each recipient prior to 
279.25  February 15.  Every person subject to taxes imposed by section 
279.26  298.24 shall file a correct report covering the preceding year.  
279.27  The report must contain the information required by the 
279.28  commissioner.  The report shall be filed by each producer on or 
279.29  before February 1.  A remittance equal to 50 percent of the 
279.30  total tax required to be paid hereunder in 2003 and 100 percent 
279.31  of the total tax required to be paid hereunder in 2004 and 
279.32  thereafter shall be paid on or before February 24.  A remittance 
279.33  equal to the remaining total tax required to be paid hereunder 
279.34  in 2003 shall be paid on or before August 24.  On or before 
279.35  February 25, and in 2003, August 25, the county auditor shall 
279.36  make distribution of the payments previously received by the 
280.1   county in the manner provided by section 298.28.  Reports shall 
280.2   be made and hearings held upon the determination of the tax in 
280.3   accordance with procedures established by the commissioner of 
280.4   revenue.  The commissioner of revenue shall have authority to 
280.5   make reasonable rules as to the form and manner of filing 
280.6   reports necessary for the determination of the tax hereunder, 
280.7   and by such rules may require the production of such information 
280.8   as may be reasonably necessary or convenient for the 
280.9   determination and apportionment of the tax.  All the provisions 
280.10  of the occupation tax law with reference to the assessment and 
280.11  determination of the occupation tax, including all provisions 
280.12  for appeals from or review of the orders of the commissioner of 
280.13  revenue relative thereto, but not including provisions for 
280.14  refunds, are applicable to the taxes imposed by section 298.24 
280.15  except in so far as inconsistent herewith.  If any person 
280.16  subject to section 298.24 shall fail to make the report provided 
280.17  for in this section at the time and in the manner herein 
280.18  provided, the commissioner of revenue shall in such case, upon 
280.19  information possessed or obtained, ascertain the kind and amount 
280.20  of ore mined or produced and thereon find and determine the 
280.21  amount of the tax due from such person.  There shall be added to 
280.22  the amount of tax due a penalty for failure to report on or 
280.23  before February 1, which penalty shall equal ten percent of the 
280.24  tax imposed and be treated as a part thereof. 
280.25     If any person responsible for making a tax payment at the 
280.26  time and in the manner herein provided fails to do so, there 
280.27  shall be imposed a penalty equal to ten percent of the amount so 
280.28  due, which penalty shall be treated as part of the tax due. 
280.29     In the case of any underpayment of the tax payment required 
280.30  herein, there may be added and be treated as part of the tax due 
280.31  a penalty equal to ten percent of the amount so underpaid. 
280.32     A person having a liability of $120,000 or more during a 
280.33  calendar year must remit all liabilities by means of a funds 
280.34  transfer as defined in section 336.4A-104, paragraph (a).  The 
280.35  funds transfer payment date, as defined in section 336.4A-401, 
280.36  must be on or before the date the tax is due.  If the date the 
281.1   tax is due is not a funds transfer business day, as defined in 
281.2   section 336.4A-105, paragraph (a), clause (4), the payment date 
281.3   must be on or before the funds transfer business day next 
281.4   following the date the tax is due. 
281.5      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
281.6   payable in 2004 and thereafter. 
281.7      Sec. 17.  Minnesota Statutes 2002, section 298.28, 
281.8   subdivision 9a, is amended to read: 
281.9      Subd. 9a.  [TACONITE ECONOMIC DEVELOPMENT FUND.] (a) 30.1 
281.10  cents per ton for distributions in 2002 and thereafter must be 
281.11  paid to the taconite economic development fund.  No distribution 
281.12  shall be made under this paragraph in 2004 or any subsequent 
281.13  year in which total industry production falls below 30 million 
281.14  tons.  Distribution shall only be made to a taconite producer's 
281.15  fund under section 298.227 if the producer timely pays its tax 
281.16  under section 298.24 by the dates provided under section 298.27, 
281.17  or pursuant to the due dates provided by an administrative 
281.18  agreement with the commissioner. 
281.19     (b) An amount equal to 50 percent of the tax under section 
281.20  298.24 for concentrate sold in the form of pellet chips and 
281.21  fines not exceeding 5/16 inch in size and not including crushed 
281.22  pellets shall be paid to the taconite economic development 
281.23  fund.  The amount paid shall not exceed $700,000 annually for 
281.24  all companies.  If the initial amount to be paid to the fund 
281.25  exceeds this amount, each company's payment shall be prorated so 
281.26  the total does not exceed $700,000. 
281.27     <b>[EFFECTIVE DATE.]</b> This section is effective for 
281.28  concentrates produced after January 1, 2003. 
281.29     Sec. 18.  Minnesota Statutes 2002, section 298.28, 
281.30  subdivision 11, is amended to read: 
281.31     Subd. 11.  [REMAINDER.] (a) The proceeds of the tax imposed 
281.32  by section 298.24 which remain after the distributions and 
281.33  payments in subdivisions 2 to 10a, as certified by the 
281.34  commissioner of revenue, and paragraphs (b), (c), (d), and (e) 
281.35  have been made, together with interest earned on all money 
281.36  distributed under this section prior to distribution, shall be 
282.1   divided between the taconite environmental protection fund 
282.2   created in section 298.223 and the northeast Minnesota economic 
282.3   protection trust fund created in section 298.292 as follows:  
282.4   Two-thirds to the taconite environmental protection fund and 
282.5   one-third to the northeast Minnesota economic protection trust 
282.6   fund.  The proceeds shall be placed in the respective special 
282.7   accounts. 
282.8      (b) There shall be distributed to each city, town, and 
282.9   county the amount that it received under section 294.26 in 
282.10  calendar year 1977; provided, however, that the amount 
282.11  distributed in 1981 to the unorganized territory number 2 of 
282.12  Lake county and the town of Beaver Bay based on the 
282.13  between-terminal trackage of Erie Mining Company will be 
282.14  distributed in 1982 and subsequent years to the unorganized 
282.15  territory number 2 of Lake county and the towns of Beaver Bay 
282.16  and Stony River based on the miles of track of Erie Mining 
282.17  Company in each taxing district. 
282.18     (c) There shall be distributed to the iron range resources 
282.19  and rehabilitation board the amounts it received in 1977 under 
282.20  section 298.22.  The amount distributed under this paragraph 
282.21  shall be expended within or for the benefit of the tax relief 
282.22  area defined in section 273.134. 
282.23     (d) There shall be distributed to each school district 62 
282.24  percent of the amount that it received under section 294.26 in 
282.25  calendar year 1977. 
282.26     (e) (d) In 2003 only, $100,000 must be distributed to a 
282.27  township located in a taconite tax relief area as defined in 
282.28  section 273.134, paragraph (a), that received $119,259 of 
282.29  homestead and agricultural credit aid and $182,014 in local 
282.30  government aid in 2001. 
282.31     <b>[EFFECTIVE DATE.]</b> This section is effective for 
282.32  concentrates produced after January 1, 2003. 
282.33     Sec. 19.  Minnesota Statutes 2002, section 298.75, 
282.34  subdivision 1, is amended to read: 
282.35     Subdivision 1.  [DEFINITIONS.] Except as may otherwise be 
282.36  provided, the following words, when used in this section, shall 
283.1   have the meanings herein ascribed to them.  
283.2      (1) "Aggregate material" shall mean nonmetallic natural 
283.3   mineral aggregate including, but not limited to sand, silica 
283.4   sand, gravel, crushed rock, limestone, granite, and borrow, but 
283.5   only if the borrow is transported on a public road, street, or 
283.6   highway.  Aggregate material shall not include dimension stone 
283.7   and dimension granite.  Aggregate material must be measured or 
283.8   weighed after it has been extracted from the pit, quarry, or 
283.9   deposit.  
283.10     (2) "Person" shall mean any individual, firm, partnership, 
283.11  corporation, organization, trustee, association, or other entity.
283.12     (3) "Operator" shall mean any person engaged in the 
283.13  business of removing aggregate material from the surface or 
283.14  subsurface of the soil, for the purpose of sale, either directly 
283.15  or indirectly, through the use of the aggregate material in a 
283.16  marketable product or service.  
283.17     (4) "Extraction site" shall mean a pit, quarry, or deposit 
283.18  containing aggregate material and any contiguous property to the 
283.19  pit, quarry, or deposit which is used by the operator for 
283.20  stockpiling the aggregate material.  
283.21     (5) "Importer" shall mean any person who buys aggregate 
283.22  material produced from a county not listed in paragraph (6) or 
283.23  another state and causes the aggregate material to be imported 
283.24  into a county in this state which imposes a tax on aggregate 
283.25  material.  
283.26     (6) "County" shall mean the counties of Pope, Stearns, 
283.27  Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 
283.28  Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 
283.29  Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 
283.30  Sibley, Hennepin, Washington, Chisago, and Ramsey.  County also 
283.31  means any other county whose board has voted after a public 
283.32  hearing to impose the tax under this section and has notified 
283.33  the commissioner of revenue of the imposition of the tax. 
283.34     (7) "Borrow" shall mean granular borrow, consisting of 
283.35  durable particles of gravel and sand, crushed quarry or mine 
283.36  rock, crushed gravel or stone, or any combination thereof, the 
284.1   ratio of the portion passing the (#200) sieve divided by the 
284.2   portion passing the (1 inch) sieve may not exceed 20 percent by 
284.3   mass. 
284.4      <b>[EFFECTIVE DATE.]</b> This section is effective for borrow 
284.5   removed and transported on a public road, street, or highway on 
284.6   or after July 1, 2003. 
284.7      Sec. 20.  [TRANSITION PROVISION.] 
284.8      Each person with an alternative minimum tax credit on 
284.9   December 31, 2002, pursuant to Minnesota Statutes 2002, section 
284.10  298.01, may take that credit against occupation tax under the 
284.11  provisions of Minnesota Statutes 2002, section 298.01, 
284.12  subdivision 3d or 4e. 
284.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
284.14  following final enactment. 
284.15     Sec. 21.  [REPEALER.] 
284.16     (a) Minnesota Statutes 2002, section 298.01, subdivisions 
284.17  3c, 3d, 4d, and 4e, are repealed effective for taxable years 
284.18  beginning after December 31, 2002. 
284.19     (b) Minnesota Statutes 2002, section 298.017, is repealed 
284.20  effective for taxes payable in 2004 and thereafter. 
284.21     (c) Minnesota Statutes 2002, sections 298.24, subdivision 
284.22  3; 298.28, subdivisions 9, 9b, and 10; 298.2961; and 298.297, 
284.23  are repealed effective for concentrates produced after January 
284.24  1, 2003. 
284.25     (d) Laws 1984, chapter 652, section 2, is repealed.  This 
284.26  paragraph is effective for Benton county the day after the 
284.27  governing body of Benton county and its chief clerical officer 
284.28  timely complete their compliance with Minnesota Statutes, 
284.29  section 645.021, subdivisions 2 and 3.  This paragraph is 
284.30  effective for Stearns county the day after the governing body of 
284.31  Stearns county and its chief clerical officer timely complete 
284.32  their compliance with Minnesota Statutes, section 645.021, 
284.33  subdivisions 2 and 3. 
284.34                             ARTICLE 11 
284.35                           SPECIAL TAXES 
284.36     Section 1.  Minnesota Statutes 2002, section 270.60, 
285.1   subdivision 4, is amended to read: 
285.2      Subd. 4.  [PAYMENTS TO COUNTIES.] (a) The commissioner 
285.3   shall pay to a county in which an Indian gaming casino is 
285.4   located: 
285.5      (1) ten percent of the state share of all taxes generated 
285.6   from activities on reservations and collected under a tax 
285.7   agreement under this section with the tribal government for the 
285.8   reservation located in the county; or 
285.9      (2) five percent of excise taxes collected by the state 
285.10  that are determined by the department of revenue to have been 
285.11  generated from activities on a reservation located in the 
285.12  county, the tribal government of which does not have a tax 
285.13  agreement under this section and did not have a tax agreement on 
285.14  June 30, 2003. 
285.15     If the tribe has casinos located in more than one county, 
285.16  the payment must be divided equally among the counties in which 
285.17  the casinos are located. 
285.18     (b) The commissioner shall make the payments required under 
285.19  this subdivision by February 28 of the year following the year 
285.20  the taxes are collected. 
285.21     (c) An amount sufficient to make the payments authorized by 
285.22  this subdivision is annually appropriated from the general fund 
285.23  to the commissioner.  
285.24     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
285.25  collected after June 30, 2003. 
285.26     Sec. 2.  Minnesota Statutes 2002, section 287.12, is 
285.27  amended to read: 
285.28     287.12 [TAXES, HOW APPORTIONED.] 
285.29     (a) All taxes paid to the county treasurer under the 
285.30  provisions of sections 287.01 to 287.12 must be apportioned, 97 
285.31  percent to the general fund of the state, and three percent to 
285.32  the county revenue fund. 
285.33     (b) On or before the 20th day of each month the county 
285.34  treasurer shall determine and pay to the commissioner of revenue 
285.35  for deposit in the state treasury and credit to the general fund 
285.36  the state's portion of the receipts from the mortgage registry 
286.1   tax during the preceding month subject to the electronic payment 
286.2   requirements of section 270.771.  The county treasurer shall 
286.3   provide any related reports requested by the commissioner of 
286.4   revenue. 
286.5      (c) Counties must remit the state's portion of the June 
286.6   receipts collected through June 25 and the estimated state's 
286.7   portion of the receipts to be collected during the remainder of 
286.8   the month to the commissioner of revenue two business days 
286.9   before June 30 of each year.  The remaining amount of the June 
286.10  receipts is due on August 20. 
286.11     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
286.12     Sec. 3.  Minnesota Statutes 2002, section 287.29, 
286.13  subdivision 1, is amended to read: 
286.14     Subdivision 1.  [APPOINTMENT AND PAYMENT OF TAX PROCEEDS.] 
286.15  (a) The proceeds of the taxes levied and collected under 
286.16  sections 287.21 to 287.39 must be apportioned, 97 percent to the 
286.17  general fund of the state, and three percent to the county 
286.18  revenue fund. 
286.19     (b) On or before the 20th day of each month, the county 
286.20  treasurer shall determine and pay to the commissioner of revenue 
286.21  for deposit in the state treasury and credit to the general fund 
286.22  the state's portion of the receipts for deed tax from the 
286.23  preceding month subject to the electronic transfer requirements 
286.24  of section 270.771.  The county treasurer shall provide any 
286.25  related reports requested by the commissioner of revenue. 
286.26     (c) Counties must remit the state's portion of the June 
286.27  receipts collected through June 25 and the estimated state's 
286.28  portion of the receipts to be collected during the remainder of 
286.29  the month to the commissioner of revenue two business days 
286.30  before June 30 of each year.  The remaining amount of the June 
286.31  receipts is due on August 20. 
286.32     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
286.33     Sec. 4.  Minnesota Statutes 2002, section 287.31, is 
286.34  amended by adding a subdivision to read: 
286.35     Subd. 3.  [UNDERPAYMENTS OF ACCELERATED PAYMENT OF JUNE TAX 
286.36  RECEIPTS.] If a county fails to timely remit the state portion 
287.1   of the actual June tax receipts at the time required by section 
287.2   287.12 or 287.29, the county shall pay a penalty equal to ten 
287.3   percent of the state portion of actual June receipts less the 
287.4   amount remitted to the commissioner of revenue in June.  The 
287.5   penalty must not be imposed, however, if the amount remitted in 
287.6   June equals either: 
287.7      (1) 90 percent of the state's portion of the preceding 
287.8   May's receipts; or 
287.9      (2) 90 percent of the average monthly amount of the state's 
287.10  portion for the previous calendar year. 
287.11     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
287.12     Sec. 5.  Minnesota Statutes 2002, section 295.58, is 
287.13  amended to read: 
287.14     295.58 [DEPOSIT OF REVENUES AND PAYMENT OF REFUNDS.] 
287.15     The commissioner shall deposit all revenues, including 
287.16  penalties and interest, derived from the taxes imposed by 
287.17  sections 295.50 to 295.57 and from the insurance premiums tax 
287.18  imposed by section 297I.05, subdivision 5, on health maintenance 
287.19  organizations, community integrated service networks, and 
287.20  nonprofit health service plan corporations in the health care 
287.21  access fund.  There is annually appropriated from the health 
287.22  care access fund to the commissioner of revenue the amount 
287.23  necessary to make refunds under this chapter.  Beginning July 1, 
287.24  2005, the commissioner shall deposit all revenues, including 
287.25  penalties and interest, derived from the taxes imposed by 
287.26  sections 295.50 to 295.57 and from the insurance premiums tax 
287.27  imposed by section 297I.05, subdivision 5, on health maintenance 
287.28  organizations, community integrated service networks, and 
287.29  nonprofit health service plan corporations in the general fund.  
287.30  There is annually appropriated from the general fund to the 
287.31  commissioner of revenue the amount necessary to make refunds 
287.32  under this chapter. 
287.33     Sec. 6.  Minnesota Statutes 2002, section 297F.05, 
287.34  subdivision 1, is amended to read: 
287.35     Subdivision 1.  [RATES; CIGARETTES.] A tax is imposed upon 
287.36  the sale of cigarettes in this state, upon having cigarettes in 
288.1   possession in this state with intent to sell, upon any person 
288.2   engaged in business as a distributor, and upon the use or 
288.3   storage by consumers, at the following rates, subject to the 
288.4   discount provided in this chapter: 
288.5      (1) on cigarettes weighing not more than three pounds per 
288.6   thousand, 24 mills on each such cigarette; and 
288.7      (2) on cigarettes weighing more than three pounds per 
288.8   thousand, 48 mills on each such cigarette. 
288.9      <b>[EFFECTIVE DATE.]</b> This section is effective for sales of 
288.10  stamps made after June 30, 2003. 
288.11     Sec. 7.  Minnesota Statutes 2002, section 297F.08, 
288.12  subdivision 7, is amended to read: 
288.13     Subd. 7.  [PRICE OF STAMPS.] The commissioner shall sell 
288.14  stamps to any person licensed as a distributor at a discount of 
288.15  1.0 percent from the face amount of the stamps for the first 
288.16  $1,500,000 of such stamps purchased in any fiscal year; and at a 
288.17  discount of 0.6 percent on the remainder of such stamps 
288.18  purchased in any fiscal year.  The commissioner shall not sell 
288.19  stamps to any other person.  The commissioner may prescribe the 
288.20  method of shipment of the stamps to the distributor as well as 
288.21  the quantities of stamps purchased. 
288.22     <b>[EFFECTIVE DATE.]</b> This section is effective for sales of 
288.23  stamps made after June 30, 2003. 
288.24     Sec. 8.  Minnesota Statutes 2002, section 297F.09, 
288.25  subdivision 1, is amended to read: 
288.26     Subdivision 1.  [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 
288.27  or before the 18th day of each calendar month, a distributor 
288.28  with a place of business in this state shall file a return with 
288.29  the commissioner showing the quantity of cigarettes manufactured 
288.30  or brought in from outside the state or purchased during the 
288.31  preceding calendar month and the quantity of cigarettes sold or 
288.32  otherwise disposed of in this state and outside this state 
288.33  during that month.  A licensed distributor outside this state 
288.34  shall in like manner file a return showing the quantity of 
288.35  cigarettes shipped or transported into this state during the 
288.36  preceding calendar month.  Returns must be made in the form and 
289.1   manner prescribed by the commissioner and must contain any other 
289.2   information required by the commissioner.  The return must be 
289.3   accompanied by a remittance for the full unpaid tax liability 
289.4   shown by it.  The return for the May liability and 85 percent of 
289.5   the estimated June liability is due on the date payment of the 
289.6   tax is due. 
289.7      <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
289.8      Sec. 9.  Minnesota Statutes 2002, section 297F.09, 
289.9   subdivision 2, is amended to read: 
289.10     Subd. 2.  [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 
289.11  On or before the 18th day of each calendar month, a distributor 
289.12  with a place of business in this state shall file a return with 
289.13  the commissioner showing the quantity and wholesale sales price 
289.14  of each tobacco product: 
289.15     (1) brought, or caused to be brought, into this state for 
289.16  sale; and 
289.17     (2) made, manufactured, or fabricated in this state for 
289.18  sale in this state, during the preceding calendar month.  
289.19  Every licensed distributor outside this state shall in like 
289.20  manner file a return showing the quantity and wholesale sales 
289.21  price of each tobacco product shipped or transported to 
289.22  retailers in this state to be sold by those retailers, during 
289.23  the preceding calendar month.  Returns must be made in the form 
289.24  and manner prescribed by the commissioner and must contain any 
289.25  other information required by the commissioner.  The return must 
289.26  be accompanied by a remittance for the full tax liability shown, 
289.27  less 1.5 percent of the liability as compensation to reimburse 
289.28  the distributor for expenses incurred in the administration of 
289.29  this chapter.  The return for the May liability and 85 percent 
289.30  of the estimated June liability is due on the date payment of 
289.31  the tax is due. 
289.32     <b>[EFFECTIVE DATE.]</b> The part of this section abolishing the 
289.33  1.5 percent reimbursement is effective for sales made after June 
289.34  30, 2003.  The rest of this section is effective January 1, 2004.
289.35     Sec. 10.  Minnesota Statutes 2002, section 297F.09, is 
289.36  amended by adding a subdivision to read: 
290.1      Subd. 10.  [ACCELERATED TAX PAYMENT; CIGARETTE OR TOBACCO 
290.2   PRODUCTS DISTRIBUTOR.] A cigarette or tobacco products 
290.3   distributor having a liability of $120,000 or more during a 
290.4   fiscal year ending June 30, shall remit the June liability for 
290.5   the next year in the following manner:  
290.6      (a) Two business days before June 30 of the year, the 
290.7   distributor shall remit the actual May liability and 85 percent 
290.8   of the estimated June liability to the commissioner and file the 
290.9   return in the form and manner prescribed by the commissioner. 
290.10     (b) On or before August 18 of the year, the distributor 
290.11  shall submit a return showing the actual June liability and pay 
290.12  any additional amount of tax not remitted in June.  A penalty is 
290.13  imposed equal to ten percent of the amount of June liability 
290.14  required to be paid in June, less the amount remitted in June.  
290.15  However, the penalty is not imposed if the amount remitted in 
290.16  June equals the lesser of:  
290.17     (1) 85 percent of the actual June liability; or 
290.18     (2) 85 percent of the preceding May's liability. 
290.19     <b>[EFFECTIVE DATE.]</b> This section is effective for taxpayers 
290.20  having a liability of $120,000 or more during the fiscal year 
290.21  ending June 30, 2003, and each fiscal year thereafter, and for 
290.22  accelerated payments becoming due in 2004 and thereafter. 
290.23     Sec. 11.  Minnesota Statutes 2002, section 297F.10, 
290.24  subdivision 1, is amended to read: 
290.25     Subdivision 1.  [TAX AND USE TAX ON CIGARETTES.] Revenue 
290.26  received from cigarette taxes, as well as related penalties, 
290.27  interest, license fees, and miscellaneous sources of revenue 
290.28  shall be deposited by the commissioner in the state treasury and 
290.29  credited as follows: 
290.30     (a) first to the general obligation special tax bond debt 
290.31  service account in each fiscal year the amount required to 
290.32  increase the balance on hand in the account on each December 1 
290.33  to an amount equal to the full amount of principal and interest 
290.34  to come due on all outstanding bonds whose debt service is 
290.35  payable primarily from the proceeds of the tax to and including 
290.36  the second following July 1; and 
291.1      (b) after the requirements of paragraph (a) have been met: 
291.2      (1) the revenue produced by one mill 3.25 mills of the tax 
291.3   on cigarettes weighing not more than three pounds a thousand and 
291.4   two 6.5 mills of the tax on cigarettes weighing more than three 
291.5   pounds a thousand must be credited to the Minnesota future 
291.6   resources fund academic health center special revenue fund 
291.7   hereby created; and 
291.8      (2) the revenue produced by 1.25 mills of the tax on 
291.9   cigarettes weighing not more than three pounds a thousand and 
291.10  2.5 mills of the tax on cigarettes weighing more than three 
291.11  pounds a thousand must be credited to the medical education and 
291.12  research costs account hereby created in the special revenue 
291.13  fund; and 
291.14     (3) the balance of the revenues derived from taxes, 
291.15  penalties, and interest (under this chapter) and from license 
291.16  fees and miscellaneous sources of revenue shall be credited to 
291.17  the general fund. 
291.18     <b>[EFFECTIVE DATE.]</b> This section is effective for all 
291.19  revenues received after June 30, 2003. 
291.20     Sec. 12.  [297F.24] [FEE IN LIEU OF SETTLEMENT.] 
291.21     Subdivision 1.  [FEE IMPOSED.] (a) A fee is imposed upon 
291.22  the sale of nonsettlement cigarettes in this state, upon having 
291.23  nonsettlement cigarettes in possession in this state with intent 
291.24  to sell, upon any person engaged in business as a distributor, 
291.25  and upon the use or storage by consumers of nonsettlement 
291.26  cigarettes.  The fee equals a rate of 1.75 cents per cigarette. 
291.27     (b) The purpose of this fee is to: 
291.28     (1) ensure that manufacturers of nonsettlement cigarettes 
291.29  pay fees to the state that are comparable to costs attributable 
291.30  to the use of the cigarettes; 
291.31     (2) prevent manufacturers of nonsettlement cigarettes from 
291.32  undermining the state's policy of discouraging underage smoking 
291.33  by offering nonsettlement cigarettes at prices substantially 
291.34  below the cigarettes of other manufacturers; and 
291.35     (3) fund such other purposes as the legislature determines 
291.36  appropriate. 
292.1      Subd. 2.  [NONSETTLEMENT CIGARETTES.] For purposes of this 
292.2   section, a "nonsettlement cigarette" means a cigarette 
292.3   manufactured by a person other than a manufacturer that: 
292.4      (1) is making annual payments to the state of Minnesota 
292.5   under a settlement of the lawsuit styled as State v. Philip 
292.6   Morris Inc., No. C1-94-8565 (Minnesota District Court, Second 
292.7   Judicial District), if the style of cigarettes is included in 
292.8   computation of the payments under the agreement; or 
292.9      (2) has voluntarily entered into an agreement with the 
292.10  state of Minnesota, approved by the attorney general, agreeing 
292.11  to terms similar to those contained in the settlement agreement, 
292.12  identified in clause (1) including making annual payments to the 
292.13  state, with respect to its national sales of the style of 
292.14  cigarettes, equal to at least 75 percent of the payments that 
292.15  would apply if the manufacturer was one of the four original 
292.16  parties to the settlement agreement required to make annual 
292.17  payments to the state. 
292.18     Subd. 3.  [COLLECTION AND ADMINISTRATION.] The commissioner 
292.19  shall administer the fee under this section in the same manner 
292.20  as the excise tax imposed under section 297F.05 and all of the 
292.21  provisions of this chapter apply as if the fee were a tax 
292.22  imposed under section 297F.05.  The commissioner shall deposit 
292.23  the proceeds of the fee in the general fund. 
292.24     <b>[EFFECTIVE DATE.]</b> This section is effective for sales of 
292.25  nonsettlement cigarettes made after June 30, 2003. 
292.26     Sec. 13.  Minnesota Statutes 2002, section 297G.01, is 
292.27  amended by adding a subdivision to read: 
292.28     Subd. 21.  [LOW-ALCOHOL DAIRY COCKTAIL.] "Low-alcohol dairy 
292.29  cocktail" means a premixed cocktail, or any other product except 
292.30  liqueur-filled candy, that: 
292.31     (1) consists primarily of milk products; 
292.32     (2) contains distilled spirits; 
292.33     (3) is drinkable as a beverage or is promoted as an 
292.34  alcoholic product; and 
292.35     (4) contains less than 3.2 percent alcohol by volume. 
292.36     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
293.1   after June 30, 2003. 
293.2      Sec. 14.  Minnesota Statutes 2002, section 297G.03, 
293.3   subdivision 1, is amended to read: 
293.4      Subdivision 1.  [GENERAL RATE; DISTILLED SPIRITS AND WINE.] 
293.5   The following excise tax is imposed on all distilled spirits and 
293.6   wine manufactured, imported, sold, or possessed in this state: 
293.7                                   Standard             Metric
293.8   (a) Distilled spirits,      $5.03 per gallon   $1.33 per liter
293.9   liqueurs, cordials, 
293.10  and specialties regardless 
293.11  of alcohol content 
293.12  (excluding ethyl alcohol) 
293.13  (b) Wine containing         $ .30 per gallon   $ .08 per liter 
293.14  14 percent or less
293.15  alcohol by volume 
293.16  (except cider as defined 
293.17  in section 297G.01, 
293.18  subdivision 3a) 
293.19  (c) Wine containing         $ .95 per gallon   $ .25 per liter
293.20  more than 14 percent 
293.21  but not more than 21
293.22  percent alcohol by volume 
293.23  (d) Wine containing more    $1.82 per gallon   $ .48 per liter
293.24  than 21 percent but not 
293.25  more than 24 percent
293.26  alcohol by volume 
293.27  (e) Wine containing more    $3.52 per gallon   $ .93 per liter
293.28  than 24 percent alcohol
293.29  by volume
293.30  (f) Natural and             $1.82 per gallon   $ .48 per liter
293.31  artificial sparkling wines
293.32  containing alcohol 
293.33  (g) Cider as defined in     $ .15 per gallon   $ .04 per liter
293.34  section 297G.01,
293.35  subdivision 3a
293.36  (h) Low alcohol dairy       $ .08 per gallon   $ .02 per liter
294.1   cocktails
294.2      In computing the tax on a package of distilled spirits or 
294.3   wine, a proportional tax at a like rate on all fractional parts 
294.4   of a gallon or liter must be paid, except that the tax on a 
294.5   fractional part of a gallon less than 1/16 of a gallon is the 
294.6   same as for 1/16 of a gallon. 
294.7      <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
294.8   after June 30, 2003. 
294.9      Sec. 15.  Minnesota Statutes 2002, section 297G.09, is 
294.10  amended by adding a subdivision to read: 
294.11     Subd. 9.  [ACCELERATED TAX PAYMENT; PENALTY.] A person 
294.12  liable for tax under this chapter having a liability of $120,000 
294.13  or more during a fiscal year ending June 30, shall remit the 
294.14  June liability for the next year in the following manner:  
294.15     (a) Two business days before June 30 of the year, the 
294.16  taxpayer shall remit the actual May liability and 85 percent of 
294.17  the estimated June liability to the commissioner and file the 
294.18  return in the form and manner prescribed by the commissioner. 
294.19     (b) On or before August 18 of the year, the taxpayer shall 
294.20  submit a return showing the actual June liability and pay any 
294.21  additional amount of tax not remitted in June.  A penalty is 
294.22  imposed equal to ten percent of the amount of June liability 
294.23  required to be paid in June less the amount remitted in June.  
294.24  However, the penalty is not imposed if the amount remitted in 
294.25  June equals the lesser of:  
294.26     (1) 85 percent of the actual June liability; or 
294.27     (2) 85 percent of the preceding May liability. 
294.28     <b>[EFFECTIVE DATE.]</b> This section is effective for taxpayers 
294.29  having a liability of $120,000 or more during the fiscal year 
294.30  ending June 30, 2003, and each fiscal year thereafter, and for 
294.31  accelerated payments becoming due in 2004 and thereafter. 
294.32     Sec. 16.  Minnesota Statutes 2002, section 325D.421, is 
294.33  amended by adding a subdivision to read: 
294.34     Subd. 1a.  [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 
294.35  person may not transport or cause to be transported from this 
294.36  state cigarettes for sale in another state without first 
295.1   affixing to the cigarettes the stamp required by the state in 
295.2   which the cigarettes are to be sold or paying any other excise 
295.3   tax on the cigarettes imposed by the state in which the 
295.4   cigarettes are to be sold. 
295.5      (b) A person may not affix to cigarettes the stamp required 
295.6   by another state or pay any other excise tax on the cigarettes 
295.7   imposed by another state if the other state prohibits stamps 
295.8   from being affixed to the cigarettes, prohibits the payment of 
295.9   any other excise tax on the cigarettes, or prohibits the sale of 
295.10  the cigarettes. 
295.11     (c) Not later than 15 days after the end of each calendar 
295.12  quarter, a person who transports or causes to be transported 
295.13  from this state cigarettes for sale in another state shall 
295.14  submit to the attorney general a report identifying the quantity 
295.15  and style of each brand of the cigarettes transported or caused 
295.16  to be transported in the preceding calendar quarter, and the 
295.17  name and address of each recipient of the cigarettes. 
295.18     (d) For purposes of this subdivision, "person" has the 
295.19  meaning given in section 297F.01, subdivision 12, and includes a 
295.20  common or contract carrier or a public warehouse only if the 
295.21  carrier or warehouse is owned, in whole or in part, directly or 
295.22  indirectly, by such a person. 
295.23     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
295.24  following final enactment. 
295.25     Sec. 17.  Minnesota Statutes 2002, section 325D.421, 
295.26  subdivision 2, is amended to read: 
295.27     Subd. 2.  [PRIVATE CAUSE OF ACTION.] (a) In addition to any 
295.28  other private remedy provided by law, any person that sustains 
295.29  economic damages or commercial injury as a result of any 
295.30  violation of subdivision 1 or 1a may bring an action for 
295.31  appropriate injunctive or other equitable relief, actual 
295.32  damages, if any, sustained by reason of the violation, and, as 
295.33  determined by the court, interest on the damages from the date 
295.34  of the complaint, taxable costs, and reasonable attorney fees.  
295.35     (b) If the trier of fact finds that the violation is 
295.36  egregious, it may increase the recovery to an amount not in 
296.1   excess of three times the actual damages sustained by reason of 
296.2   the violation.  The trier of fact may, in addition, award 
296.3   exemplary damages for violations of subdivision 1, paragraph 
296.4   (c), equal to the difference between the permitted legal price 
296.5   and the actual price for the sales. 
296.6      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
296.7   following final enactment. 
296.8      Sec. 18.  Minnesota Statutes 2002, section 349.16, is 
296.9   amended by adding a subdivision to read: 
296.10     Subd. 11.  [AGREEMENT TO PAY TAXES.] An organization which 
296.11  is recognized by federal law, regulation, or other ruling as a 
296.12  quasi-governmental organization that would otherwise be exempt 
296.13  from one or more taxes under chapter 297E must agree to pay all 
296.14  taxes under chapter 297E on lawful gambling conducted by the 
296.15  organization as a condition of receiving or renewing a license 
296.16  or premises permit. 
296.17                             ARTICLE 12 
296.18            DEPARTMENT INCOME, CORPORATE FRANCHISE, AND 
296.19                       ESTATE TAX INITIATIVES 
296.20     Section 1.  Minnesota Statutes 2002, section 289A.19, 
296.21  subdivision 4, is amended to read: 
296.22     Subd. 4.  [ESTATE TAX RETURNS.] When in the commissioner's 
296.23  judgment good cause exists, the commissioner may extend the time 
296.24  for filing an estate tax return for not more than six months.  
296.25  When an extension to file the federal estate tax return has been 
296.26  granted under section 6081 of the Internal Revenue Code, the 
296.27  time for filing the estate tax return is extended for that 
296.28  period.  
296.29     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
296.30  decedents dying after December 31, 2001. 
296.31     Sec. 2.  Minnesota Statutes 2002, section 289A.31, is 
296.32  amended by adding a subdivision to read: 
296.33     Subd. 8.  [LIABILITY OF VENDOR FOR REPAYMENT OF REFUND.] If 
296.34  an individual income tax refund resulting from claiming an 
296.35  education credit under section 290.0674 is paid by means of 
296.36  directly depositing the proceeds of the refund into a bank 
297.1   account controlled by the vendor of the product or service upon 
297.2   which the education credit is based, and the commissioner 
297.3   subsequently disallows the credit, the commissioner may seek 
297.4   repayment of the refund from the vendor.  The amount of the 
297.5   repayment must be assessed and collected in the same time and 
297.6   manner as an erroneous refund under section 289A.37, subdivision 
297.7   2. 
297.8      <b>[EFFECTIVE DATE.]</b> This section is effective for refunds 
297.9   paid to accounts controlled by a vendor on or after the day 
297.10  following final enactment. 
297.11     Sec. 3.  Minnesota Statutes 2002, section 289A.56, 
297.12  subdivision 3, is amended to read: 
297.13     Subd. 3.  [WITHHOLDING TAX, ENTERTAINER WITHHOLDING TAX, 
297.14  WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, ESTATE 
297.15  TAX, AND SALES TAX OVERPAYMENTS.] When a refund is due for 
297.16  overpayments of withholding tax, entertainer withholding tax, or 
297.17  withholding from payments to out-of-state contractors, or estate 
297.18  tax, interest is computed from the date of payment to the date 
297.19  the refund is paid or credited.  For purposes of this 
297.20  subdivision, the date of payment is the later of the date the 
297.21  tax was finally due or was paid. 
297.22     For the purposes of computing interest on estate tax 
297.23  refunds, interest is paid from the later of the date of 
297.24  overpayment, the date the estate tax return is due, or the date 
297.25  the original estate tax return is filed to the date the refund 
297.26  is paid. 
297.27     For purposes of computing interest on sales and use tax 
297.28  refunds, interest is paid from the date of payment to the date 
297.29  the refund is paid or credited, if the refund claim includes a 
297.30  detailed schedule reflecting the tax periods covered in the 
297.31  claim.  If the refund claim submitted does not include a 
297.32  detailed schedule reflecting the tax periods covered in the 
297.33  claim, interest is computed from the date the claim was filed. 
297.34     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
297.35  decedents dying after December 31, 2003. 
297.36     Sec. 4.  Minnesota Statutes 2002, section 289A.60, 
298.1   subdivision 7, is amended to read: 
298.2      Subd. 7.  [PENALTY FOR FRIVOLOUS RETURN.] If a taxpayer 
298.3   files what purports to be a tax return or a claim for refund but 
298.4   which does not contain information on which the substantial 
298.5   correctness of the purported return or claim for refund may be 
298.6   judged or contains information that on its face shows that the 
298.7   purported return or claim for refund is substantially incorrect 
298.8   and the conduct is due to a position that is frivolous or a 
298.9   desire that appears on the purported return or claim for refund 
298.10  to delay or impede the administration of Minnesota tax laws, 
298.11  then the individual shall pay a penalty of $500 the greater of 
298.12  $1,000 or 25 percent of the amount of tax required to be shown 
298.13  on the return.  In a proceeding involving the issue of whether 
298.14  or not a person is liable for this penalty, the burden of proof 
298.15  is on the commissioner.  
298.16     <b>[EFFECTIVE DATE.]</b> This section is effective for returns 
298.17  filed after December 31, 2003. 
298.18     Sec. 5.  Minnesota Statutes 2002, section 290.01, 
298.19  subdivision 19a, is amended to read: 
298.20     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
298.21  individuals, estates, and trusts, there shall be added to 
298.22  federal taxable income: 
298.23     (1)(i) interest income on obligations of any state other 
298.24  than Minnesota or a political or governmental subdivision, 
298.25  municipality, or governmental agency or instrumentality of any 
298.26  state other than Minnesota exempt from federal income taxes 
298.27  under the Internal Revenue Code or any other federal statute; 
298.28  and 
298.29     (ii) exempt-interest dividends as defined in section 
298.30  852(b)(5) of the Internal Revenue Code, except the portion of 
298.31  the exempt-interest dividends derived from interest income on 
298.32  obligations of the state of Minnesota or its political or 
298.33  governmental subdivisions, municipalities, governmental agencies 
298.34  or instrumentalities, but only if the portion of the 
298.35  exempt-interest dividends from such Minnesota sources paid to 
298.36  all shareholders represents 95 percent or more of the 
299.1   exempt-interest dividends that are paid by the regulated 
299.2   investment company as defined in section 851(a) of the Internal 
299.3   Revenue Code, or the fund of the regulated investment company as 
299.4   defined in section 851(g) of the Internal Revenue Code, making 
299.5   the payment; and 
299.6      (iii) for the purposes of items (i) and (ii), interest on 
299.7   obligations of an Indian tribal government described in section 
299.8   7871(c) of the Internal Revenue Code shall be treated as 
299.9   interest income on obligations of the state in which the tribe 
299.10  is located; 
299.11     (2) the amount of income taxes paid or accrued within the 
299.12  taxable year under this chapter and income taxes paid to any 
299.13  other state or to any province or territory of Canada, to the 
299.14  extent allowed as a deduction under section 63(d) of the 
299.15  Internal Revenue Code, but the addition may not be more than the 
299.16  amount by which the itemized deductions as allowed under section 
299.17  63(d) of the Internal Revenue Code exceeds the amount of the 
299.18  standard deduction as defined in section 63(c) of the Internal 
299.19  Revenue Code.  For the purpose of this paragraph, the 
299.20  disallowance of itemized deductions under section 68 of the 
299.21  Internal Revenue Code of 1986, income tax is the last itemized 
299.22  deduction disallowed; 
299.23     (3) the capital gain amount of a lump sum distribution to 
299.24  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
299.25  Reform Act of 1986, Public Law Number 99-514, applies; 
299.26     (4) the amount of income taxes paid or accrued within the 
299.27  taxable year under this chapter and income taxes paid to any 
299.28  other state or any province or territory of Canada, to the 
299.29  extent allowed as a deduction in determining federal adjusted 
299.30  gross income.  For the purpose of this paragraph, income taxes 
299.31  do not include the taxes imposed by sections 290.0922, 
299.32  subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
299.33     (5) the amount of expense, interest, or taxes disallowed 
299.34  pursuant to section 290.10; 
299.35     (6) the amount of a partner's pro rata share of net income 
299.36  which does not flow through to the partner because the 
300.1   partnership elected to pay the tax on the income under section 
300.2   6242(a)(2) of the Internal Revenue Code; and 
300.3      (7) 80 percent of the depreciation deduction allowed under 
300.4   section 168(k) of the Internal Revenue Code.  For purposes of 
300.5   this clause, if the taxpayer has an activity that in the taxable 
300.6   year generates a deduction for depreciation under section 168(k) 
300.7   and the activity generates a loss for the taxable year that the 
300.8   taxpayer is not allowed to claim for the taxable year, "the 
300.9   depreciation allowed under section 168(k)" for the taxable year 
300.10  is limited to excess of the depreciation claimed by the activity 
300.11  under section 168(k) over the amount of the loss from the 
300.12  activity that is not allowed in the taxable year.  In succeeding 
300.13  taxable years when the losses not allowed in the taxable year 
300.14  are allowed, the depreciation under section 168(k) is allowed. 
300.15     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
300.16  years ending after September 10, 2001. 
300.17     Sec. 6.  Minnesota Statutes 2002, section 290.01, 
300.18  subdivision 19b, is amended to read: 
300.19     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
300.20  individuals, estates, and trusts, there shall be subtracted from 
300.21  federal taxable income: 
300.22     (1) interest income on obligations of any authority, 
300.23  commission, or instrumentality of the United States to the 
300.24  extent includable in taxable income for federal income tax 
300.25  purposes but exempt from state income tax under the laws of the 
300.26  United States; 
300.27     (2) if included in federal taxable income, the amount of 
300.28  any overpayment of income tax to Minnesota or to any other 
300.29  state, for any previous taxable year, whether the amount is 
300.30  received as a refund or as a credit to another taxable year's 
300.31  income tax liability; 
300.32     (3) the amount paid to others, less the amount used to 
300.33  claim the credit allowed under section 290.0674, not to exceed 
300.34  $1,625 for each qualifying child in grades kindergarten to 6 and 
300.35  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
300.36  textbooks, and transportation of each qualifying child in 
301.1   attending an elementary or secondary school situated in 
301.2   Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
301.3   wherein a resident of this state may legally fulfill the state's 
301.4   compulsory attendance laws, which is not operated for profit, 
301.5   and which adheres to the provisions of the Civil Rights Act of 
301.6   1964 and chapter 363.  For the purposes of this clause, 
301.7   "tuition" includes fees or tuition as defined in section 
301.8   290.0674, subdivision 1, clause (1).  As used in this clause, 
301.9   "textbooks" includes books and other instructional materials and 
301.10  equipment purchased or leased for use in elementary and 
301.11  secondary schools in teaching only those subjects legally and 
301.12  commonly taught in public elementary and secondary schools in 
301.13  this state.  Equipment expenses qualifying for deduction 
301.14  includes expenses as defined and limited in section 290.0674, 
301.15  subdivision 1, clause (3).  "Textbooks" does not include 
301.16  instructional books and materials used in the teaching of 
301.17  religious tenets, doctrines, or worship, the purpose of which is 
301.18  to instill such tenets, doctrines, or worship, nor does it 
301.19  include books or materials for, or transportation to, 
301.20  extracurricular activities including sporting events, musical or 
301.21  dramatic events, speech activities, driver's education, or 
301.22  similar programs.  For purposes of the subtraction provided by 
301.23  this clause, "qualifying child" has the meaning given in section 
301.24  32(c)(3) of the Internal Revenue Code; 
301.25     (4) income as provided under section 290.0802; 
301.26     (5) to the extent included in federal adjusted gross 
301.27  income, income realized on disposition of property exempt from 
301.28  tax under section 290.491; 
301.29     (6) to the extent not deducted in determining federal 
301.30  taxable income or used to claim the long-term care insurance 
301.31  credit under section 290.0672, the amount paid for health 
301.32  insurance of self-employed individuals as determined under 
301.33  section 162(l) of the Internal Revenue Code, except that the 
301.34  percent limit does not apply.  If the individual deducted 
301.35  insurance payments under section 213 of the Internal Revenue 
301.36  Code of 1986, the subtraction under this clause must be reduced 
302.1   by the lesser of: 
302.2      (i) the total itemized deductions allowed under section 
302.3   63(d) of the Internal Revenue Code, less state, local, and 
302.4   foreign income taxes deductible under section 164 of the 
302.5   Internal Revenue Code and the standard deduction under section 
302.6   63(c) of the Internal Revenue Code; or 
302.7      (ii) the lesser of (A) the amount of insurance qualifying 
302.8   as "medical care" under section 213(d) of the Internal Revenue 
302.9   Code to the extent not deducted under section 162(1) of the 
302.10  Internal Revenue Code or excluded from income or (B) the total 
302.11  amount deductible for medical care under section 213(a); 
302.12     (7) the exemption amount allowed under Laws 1995, chapter 
302.13  255, article 3, section 2, subdivision 3; 
302.14     (8) to the extent included in federal taxable income, 
302.15  postservice benefits for youth community service under section 
302.16  124D.42 for volunteer service under United States Code, title 
302.17  42, sections 12601 to 12604; 
302.18     (9) (7) to the extent not deducted in determining federal 
302.19  taxable income by an individual who does not itemize deductions 
302.20  for federal income tax purposes for the taxable year, an amount 
302.21  equal to 50 percent of the excess of charitable contributions 
302.22  allowable as a deduction for the taxable year under section 
302.23  170(a) of the Internal Revenue Code over $500; 
302.24     (10) (8) for taxable years beginning before January 1, 
302.25  2008, the amount of the federal small ethanol producer credit 
302.26  allowed under section 40(a)(3) of the Internal Revenue Code 
302.27  which is included in gross income under section 87 of the 
302.28  Internal Revenue Code; 
302.29     (11) (9) for individuals who are allowed a federal foreign 
302.30  tax credit for taxes that do not qualify for a credit under 
302.31  section 290.06, subdivision 22, an amount equal to the carryover 
302.32  of subnational foreign taxes for the taxable year, but not to 
302.33  exceed the total subnational foreign taxes reported in claiming 
302.34  the foreign tax credit.  For purposes of this clause, "federal 
302.35  foreign tax credit" means the credit allowed under section 27 of 
302.36  the Internal Revenue Code, and "carryover of subnational foreign 
303.1   taxes" equals the carryover allowed under section 904(c) of the 
303.2   Internal Revenue Code minus national level foreign taxes to the 
303.3   extent they exceed the federal foreign tax credit; and 
303.4      (12) (10) in each of the five tax years immediately 
303.5   following the tax year in which an addition is required under 
303.6   subdivision 19a, clause (7), an amount equal to one-fifth of the 
303.7   delayed depreciation.  For purposes of this clause, "delayed 
303.8   depreciation" means the amount of the addition made by the 
303.9   taxpayer under subdivision 19a, clause (7), minus the positive 
303.10  value of any net operating loss under section 172 of the 
303.11  Internal Revenue Code generated for the tax year of the 
303.12  addition.  The resulting delayed depreciation cannot be less 
303.13  than zero. 
303.14     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
303.15  beginning after December 31, 2003. 
303.16     Sec. 7.  Minnesota Statutes 2002, section 290.01, 
303.17  subdivision 19c, is amended to read: 
303.18     Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
303.19  INCOME.] For corporations, there shall be added to federal 
303.20  taxable income: 
303.21     (1) the amount of any deduction taken for federal income 
303.22  tax purposes for income, excise, or franchise taxes based on net 
303.23  income or related minimum taxes, including but not limited to 
303.24  the tax imposed under section 290.0922, paid by the corporation 
303.25  to Minnesota, another state, a political subdivision of another 
303.26  state, the District of Columbia, or any foreign country or 
303.27  possession of the United States; 
303.28     (2) interest not subject to federal tax upon obligations 
303.29  of:  the United States, its possessions, its agencies, or its 
303.30  instrumentalities; the state of Minnesota or any other state, 
303.31  any of its political or governmental subdivisions, any of its 
303.32  municipalities, or any of its governmental agencies or 
303.33  instrumentalities; the District of Columbia; or Indian tribal 
303.34  governments; 
303.35     (3) exempt-interest dividends received as defined in 
303.36  section 852(b)(5) of the Internal Revenue Code; 
304.1      (4) the amount of any net operating loss deduction taken 
304.2   for federal income tax purposes under section 172 or 832(c)(10) 
304.3   of the Internal Revenue Code or operations loss deduction under 
304.4   section 810 of the Internal Revenue Code; 
304.5      (5) the amount of any special deductions taken for federal 
304.6   income tax purposes under sections 241 to 247 of the Internal 
304.7   Revenue Code; 
304.8      (6) losses from the business of mining, as defined in 
304.9   section 290.05, subdivision 1, clause (a), that are not subject 
304.10  to Minnesota income tax; 
304.11     (7) the amount of any capital losses deducted for federal 
304.12  income tax purposes under sections 1211 and 1212 of the Internal 
304.13  Revenue Code; 
304.14     (8) the exempt foreign trade income of a foreign sales 
304.15  corporation under sections 921(a) and 291 of the Internal 
304.16  Revenue Code; 
304.17     (9) the amount of percentage depletion deducted under 
304.18  sections 611 through 614 and 291 of the Internal Revenue Code; 
304.19     (10) for certified pollution control facilities placed in 
304.20  service in a taxable year beginning before December 31, 1986, 
304.21  and for which amortization deductions were elected under section 
304.22  169 of the Internal Revenue Code of 1954, as amended through 
304.23  December 31, 1985, the amount of the amortization deduction 
304.24  allowed in computing federal taxable income for those 
304.25  facilities; 
304.26     (11) the amount of any deemed dividend from a foreign 
304.27  operating corporation determined pursuant to section 290.17, 
304.28  subdivision 4, paragraph (g); 
304.29     (12) the amount of any environmental tax paid under section 
304.30  59(a) of the Internal Revenue Code; 
304.31     (13) the amount of a partner's pro rata share of net income 
304.32  which does not flow through to the partner because the 
304.33  partnership elected to pay the tax on the income under section 
304.34  6242(a)(2) of the Internal Revenue Code; 
304.35     (14) the amount of net income excluded under section 114 of 
304.36  the Internal Revenue Code; 
305.1      (15) any increase in subpart F income, as defined in 
305.2   section 952(a) of the Internal Revenue Code, for the taxable 
305.3   year when subpart F income is calculated without regard to the 
305.4   provisions of section 614 of Public Law Number 107-147; and 
305.5      (16) 80 percent of the depreciation deduction allowed under 
305.6   section 168(k) of the Internal Revenue Code.  For purposes of 
305.7   this clause, if the taxpayer has an activity that in the taxable 
305.8   year generates a deduction for depreciation under section 168(k) 
305.9   and the activity generates a loss for the taxable year that the 
305.10  taxpayer is not allowed to claim for the taxable year, "the 
305.11  depreciation allowed under section 168(k)" for the taxable year 
305.12  is limited to excess of the depreciation claimed by the activity 
305.13  under section 168(k) over the amount of the loss from the 
305.14  activity that is not allowed in the taxable year.  In succeeding 
305.15  taxable years when the losses not allowed in the taxable year 
305.16  are allowed, the depreciation under section 168(k) is allowed. 
305.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
305.18  years ending after September 10, 2001. 
305.19     Sec. 8.  Minnesota Statutes 2002, section 290.01, 
305.20  subdivision 19d, is amended to read: 
305.21     Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
305.22  TAXABLE INCOME.] For corporations, there shall be subtracted 
305.23  from federal taxable income after the increases provided in 
305.24  subdivision 19c:  
305.25     (1) the amount of foreign dividend gross-up added to gross 
305.26  income for federal income tax purposes under section 78 of the 
305.27  Internal Revenue Code; 
305.28     (2) the amount of salary expense not allowed for federal 
305.29  income tax purposes due to claiming the federal jobs credit 
305.30  under section 51 of the Internal Revenue Code; 
305.31     (3) any dividend (not including any distribution in 
305.32  liquidation) paid within the taxable year by a national or state 
305.33  bank to the United States, or to any instrumentality of the 
305.34  United States exempt from federal income taxes, on the preferred 
305.35  stock of the bank owned by the United States or the 
305.36  instrumentality; 
306.1      (4) amounts disallowed for intangible drilling costs due to 
306.2   differences between this chapter and the Internal Revenue Code 
306.3   in taxable years beginning before January 1, 1987, as follows: 
306.4      (i) to the extent the disallowed costs are represented by 
306.5   physical property, an amount equal to the allowance for 
306.6   depreciation under Minnesota Statutes 1986, section 290.09, 
306.7   subdivision 7, subject to the modifications contained in 
306.8   subdivision 19e; and 
306.9      (ii) to the extent the disallowed costs are not represented
306.10  by physical property, an amount equal to the allowance for cost 
306.11  depletion under Minnesota Statutes 1986, section 290.09, 
306.12  subdivision 8; 
306.13     (5) the deduction for capital losses pursuant to sections 
306.14  1211 and 1212 of the Internal Revenue Code, except that: 
306.15     (i) for capital losses incurred in taxable years beginning 
306.16  after December 31, 1986, capital loss carrybacks shall not be 
306.17  allowed; 
306.18     (ii) for capital losses incurred in taxable years beginning 
306.19  after December 31, 1986, a capital loss carryover to each of the 
306.20  15 taxable years succeeding the loss year shall be allowed; 
306.21     (iii) for capital losses incurred in taxable years 
306.22  beginning before January 1, 1987, a capital loss carryback to 
306.23  each of the three taxable years preceding the loss year, subject 
306.24  to the provisions of Minnesota Statutes 1986, section 290.16, 
306.25  shall be allowed; and 
306.26     (iv) for capital losses incurred in taxable years beginning 
306.27  before January 1, 1987, a capital loss carryover to each of the 
306.28  five taxable years succeeding the loss year to the extent such 
306.29  loss was not used in a prior taxable year and subject to the 
306.30  provisions of Minnesota Statutes 1986, section 290.16, shall be 
306.31  allowed; 
306.32     (6) an amount for interest and expenses relating to income 
306.33  not taxable for federal income tax purposes, if (i) the income 
306.34  is taxable under this chapter and (ii) the interest and expenses 
306.35  were disallowed as deductions under the provisions of section 
306.36  171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
307.1   federal taxable income; 
307.2      (7) in the case of mines, oil and gas wells, other natural 
307.3   deposits, and timber for which percentage depletion was 
307.4   disallowed pursuant to subdivision 19c, clause (11), a 
307.5   reasonable allowance for depletion based on actual cost.  In the 
307.6   case of leases the deduction must be apportioned between the 
307.7   lessor and lessee in accordance with rules prescribed by the 
307.8   commissioner.  In the case of property held in trust, the 
307.9   allowable deduction must be apportioned between the income 
307.10  beneficiaries and the trustee in accordance with the pertinent 
307.11  provisions of the trust, or if there is no provision in the 
307.12  instrument, on the basis of the trust's income allocable to 
307.13  each; 
307.14     (8) for certified pollution control facilities placed in 
307.15  service in a taxable year beginning before December 31, 1986, 
307.16  and for which amortization deductions were elected under section 
307.17  169 of the Internal Revenue Code of 1954, as amended through 
307.18  December 31, 1985, an amount equal to the allowance for 
307.19  depreciation under Minnesota Statutes 1986, section 290.09, 
307.20  subdivision 7; 
307.21     (9) amounts included in federal taxable income that are due 
307.22  to refunds of income, excise, or franchise taxes based on net 
307.23  income or related minimum taxes paid by the corporation to 
307.24  Minnesota, another state, a political subdivision of another 
307.25  state, the District of Columbia, or a foreign country or 
307.26  possession of the United States to the extent that the taxes 
307.27  were added to federal taxable income under section 290.01, 
307.28  subdivision 19c, clause (1), in a prior taxable year; 
307.29     (10) 80 percent of royalties, fees, or other like income 
307.30  accrued or received from a foreign operating corporation or a 
307.31  foreign corporation which is part of the same unitary business 
307.32  as the receiving corporation; 
307.33     (11) income or gains from the business of mining as defined 
307.34  in section 290.05, subdivision 1, clause (a), that are not 
307.35  subject to Minnesota franchise tax; 
307.36     (12) the amount of handicap access expenditures in the 
308.1   taxable year which are not allowed to be deducted or capitalized 
308.2   under section 44(d)(7) of the Internal Revenue Code; 
308.3      (13) the amount of qualified research expenses not allowed 
308.4   for federal income tax purposes under section 280C(c) of the 
308.5   Internal Revenue Code, but only to the extent that the amount 
308.6   exceeds the amount of the credit allowed under section 290.068; 
308.7      (14) the amount of salary expenses not allowed for federal 
308.8   income tax purposes due to claiming the Indian employment credit 
308.9   under section 45A(a) of the Internal Revenue Code; 
308.10     (15) the amount of any refund of environmental taxes paid 
308.11  under section 59A of the Internal Revenue Code; 
308.12     (16) for taxable years beginning before January 1, 2008, 
308.13  the amount of the federal small ethanol producer credit allowed 
308.14  under section 40(a)(3) of the Internal Revenue Code which is 
308.15  included in gross income under section 87 of the Internal 
308.16  Revenue Code; 
308.17     (17) for a corporation whose foreign sales corporation, as 
308.18  defined in section 922 of the Internal Revenue Code, constituted 
308.19  a foreign operating corporation during any taxable year ending 
308.20  before January 1, 1995, and a return was filed by August 15, 
308.21  1996, claiming the deduction under this section 290.21, 
308.22  subdivision 4, for income received from the foreign operating 
308.23  corporation, an amount equal to 1.23 multiplied by the amount of 
308.24  income excluded under section 114 of the Internal Revenue Code, 
308.25  provided the income is not income of a foreign operating 
308.26  company; 
308.27     (18) any decrease in subpart F income, as defined in 
308.28  section 952(a) of the Internal Revenue Code, for the taxable 
308.29  year when subpart F income is calculated without regard to the 
308.30  provisions of section 614 of Public Law Number 107-147; and 
308.31     (19) in each of the five tax years immediately following 
308.32  the tax year in which an addition is required under subdivision 
308.33  19c, clause (16), an amount equal to one-fifth of the delayed 
308.34  depreciation.  For purposes of this clause, "delayed 
308.35  depreciation" means the amount of the addition made by the 
308.36  taxpayer under subdivision 19c, clause (16).  The resulting 
309.1   delayed depreciation cannot be less than zero. 
309.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
309.3   following final enactment. 
309.4      Sec. 9.  Minnesota Statutes 2002, section 290.06, 
309.5   subdivision 2c, is amended to read: 
309.6      Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
309.7   AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
309.8   married individuals filing joint returns and surviving spouses 
309.9   as defined in section 2(a) of the Internal Revenue Code must be 
309.10  computed by applying to their taxable net income the following 
309.11  schedule of rates: 
309.12     (1) On the first $25,680, 5.35 percent; 
309.13     (2) On all over $25,680, but not over $102,030, 7.05 
309.14  percent; 
309.15     (3) On all over $102,030, 7.85 percent. 
309.16     Married individuals filing separate returns, estates, and 
309.17  trusts must compute their income tax by applying the above rates 
309.18  to their taxable income, except that the income brackets will be 
309.19  one-half of the above amounts.  
309.20     (b) The income taxes imposed by this chapter upon unmarried 
309.21  individuals must be computed by applying to taxable net income 
309.22  the following schedule of rates: 
309.23     (1) On the first $17,570, 5.35 percent; 
309.24     (2) On all over $17,570, but not over $57,710, 7.05 
309.25  percent; 
309.26     (3) On all over $57,710, 7.85 percent. 
309.27     (c) The income taxes imposed by this chapter upon unmarried 
309.28  individuals qualifying as a head of household as defined in 
309.29  section 2(b) of the Internal Revenue Code must be computed by 
309.30  applying to taxable net income the following schedule of rates: 
309.31     (1) On the first $21,630, 5.35 percent; 
309.32     (2) On all over $21,630, but not over $86,910, 7.05 
309.33  percent; 
309.34     (3) On all over $86,910, 7.85 percent. 
309.35     (d) In lieu of a tax computed according to the rates set 
309.36  forth in this subdivision, the tax of any individual taxpayer 
310.1   whose taxable net income for the taxable year is less than an 
310.2   amount determined by the commissioner must be computed in 
310.3   accordance with tables prepared and issued by the commissioner 
310.4   of revenue based on income brackets of not more than $100.  The 
310.5   amount of tax for each bracket shall be computed at the rates 
310.6   set forth in this subdivision, provided that the commissioner 
310.7   may disregard a fractional part of a dollar unless it amounts to 
310.8   50 cents or more, in which case it may be increased to $1. 
310.9      (e) An individual who is not a Minnesota resident for the 
310.10  entire year must compute the individual's Minnesota income tax 
310.11  as provided in this subdivision.  After the application of the 
310.12  nonrefundable credits provided in this chapter, the tax 
310.13  liability must then be multiplied by a fraction in which:  
310.14     (1) the numerator is the individual's Minnesota source 
310.15  federal adjusted gross income as defined in section 62 of the 
310.16  Internal Revenue Code and increased by the additions required 
310.17  under section 290.01, subdivision 19a, clauses (1), (5), and 
310.18  (6), and reduced by the Minnesota assignable portion of the 
310.19  subtraction for United States government interest under section 
310.20  290.01, subdivision 19b, clause (1), after applying the 
310.21  allocation and assignability provisions of section 290.081, 
310.22  clause (a), or 290.17; and 
310.23     (2) the denominator is the individual's federal adjusted 
310.24  gross income as defined in section 62 of the Internal Revenue 
310.25  Code of 1986, increased by the amounts specified in section 
310.26  290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 
310.27  by the amounts specified in section 290.01, subdivision 19b, 
310.28  clause (1). 
310.29     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
310.30  beginning after December 31, 2002. 
310.31     Sec. 10.  Minnesota Statutes 2002, section 290.0671, 
310.32  subdivision 1, is amended to read: 
310.33     Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
310.34  allowed a credit against the tax imposed by this chapter equal 
310.35  to a percentage of earned income.  To receive a credit, a 
310.36  taxpayer must be eligible for a credit under section 32 of the 
311.1   Internal Revenue Code.  
311.2      (b) For individuals with no qualifying children, the credit 
311.3   equals 1.9125 percent of the first $4,620 of earned income.  The 
311.4   credit is reduced by 1.9125 percent of earned income or modified 
311.5   adjusted gross income, whichever is greater, in excess of 
311.6   $5,770, but in no case is the credit less than zero. 
311.7      (c) For individuals with one qualifying child, the credit 
311.8   equals 8.5 percent of the first $6,920 of earned income and 8.5 
311.9   percent of earned income over $12,080 but less than $13,450.  
311.10  The credit is reduced by 5.73 percent of earned income or 
311.11  modified adjusted gross income, whichever is greater, in excess 
311.12  of $15,080, but in no case is the credit less than zero. 
311.13     (d) For individuals with two or more qualifying children, 
311.14  the credit equals ten percent of the first $9,720 of earned 
311.15  income and 20 percent of earned income over $14,860 but less 
311.16  than $16,800.  The credit is reduced by 10.3 percent of earned 
311.17  income or modified adjusted gross income, whichever is greater, 
311.18  in excess of $17,890, but in no case is the credit less than 
311.19  zero. 
311.20     (e) For a nonresident or part-year resident, the credit 
311.21  must be allocated based on the percentage calculated under 
311.22  section 290.06, subdivision 2c, paragraph (e). 
311.23     (f) For a person who was a resident for the entire tax year 
311.24  and has earned income not subject to tax under this chapter, the 
311.25  credit must be allocated based on the ratio of federal adjusted 
311.26  gross income reduced by the earned income not subject to tax 
311.27  under this chapter over federal adjusted gross income. 
311.28     (g) For tax years beginning after December 31, 2001, and 
311.29  before December 31, 2004, the $5,770 in paragraph (b) is 
311.30  increased to $6,770, the $15,080 in paragraph (c) is increased 
311.31  to $16,080, and the $17,890 in paragraph (d) is increased to 
311.32  $18,890, after being adjusted for inflation under subdivision 7, 
311.33  are each increased by $1,000 for married taxpayers filing joint 
311.34  returns. 
311.35     (h) For tax years beginning after December 31, 2004, and 
311.36  before December 31, 2007, the $5,770 in paragraph (b) is 
312.1   increased to $7,770, the $15,080 in paragraph (c) is increased 
312.2   to $17,080, and the $17,890 in paragraph (d) is increased to 
312.3   $19,890, after being adjusted for inflation under subdivision 7, 
312.4   are each increased by $2,000 for married taxpayers filing joint 
312.5   returns. 
312.6      (i) For tax years beginning after December 31, 2007, and 
312.7   before December 31, 2010, the $5,770 in paragraph (b) is 
312.8   increased to $8,770, the $15,080 in paragraph (c) is increased 
312.9   to $18,080, and the $17,890 in paragraph (d) is increased to 
312.10  $20,890, after being adjusted for inflation under subdivision 7, 
312.11  are each increased by $3,000 for married taxpayers filing joint 
312.12  returns.  For tax years beginning after December 31, 2008, the 
312.13  $3,000 is adjusted annually for inflation under subdivision 7. 
312.14     (j) The commissioner shall construct tables showing the 
312.15  amount of the credit at various income levels and make them 
312.16  available to taxpayers.  The tables shall follow the schedule 
312.17  contained in this subdivision, except that the commissioner may 
312.18  graduate the transition between income brackets. 
312.19     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
312.20  beginning after December 31, 2002. 
312.21     Sec. 11.  Minnesota Statutes 2002, section 290.0675, 
312.22  subdivision 2, is amended to read: 
312.23     Subd. 2.  [CREDIT ALLOWED.] A married couple filing a joint 
312.24  return is allowed a credit against the tax imposed under section 
312.25  290.06.  
312.26     The minimum taxable income for the married couple to be 
312.27  eligible for the credit is $25,680, and the minimum earned 
312.28  income in order for the couple to be eligible for the credit is 
312.29  $14,250 for each spouse. 
312.30     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
312.31  beginning after December 31, 2002. 
312.32     Sec. 12.  Minnesota Statutes 2002, section 290.0675, 
312.33  subdivision 3, is amended to read: 
312.34     Subd. 3.  [CREDIT AMOUNT.] The credit amount is the 
312.35  difference between the tax on the couple's joint Minnesota 
312.36  taxable income under the rates and income levels in section 
313.1   290.06, subdivision 2c, paragraph (a), as adjusted for the 
313.2   taxable year by section 290.06, subdivision 2d, and the sum of 
313.3   the tax under the rates and income levels of section 290.06, 
313.4   subdivision 2c, paragraph (b), as adjusted for the taxable year 
313.5   by section 290.06, subdivision 2d, on the earned income of the 
313.6   lesser-earning spouse, and the tax under the rates and income 
313.7   levels of section 290.06, subdivision 2c, paragraph (b), as 
313.8   adjusted for the taxable year by section 290.06, subdivision 2d, 
313.9   on the couple's joint Minnesota taxable income, minus the earned 
313.10  income of the lesser-earning spouse. 
313.11     The commissioner of revenue shall prepare and make 
313.12  available to taxpayers a comprehensive table showing the credit 
313.13  under this section at brackets of earnings of the lesser-earning 
313.14  spouse and joint taxable income.  The brackets of earnings shall 
313.15  not be more than $2,000. 
313.16     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
313.17  beginning after December 31, 2002. 
313.18     Sec. 13.  Minnesota Statutes 2002, section 290.0679, 
313.19  subdivision 2, is amended to read: 
313.20     Subd. 2.  [CONDITIONS FOR ASSIGNMENT.] A qualifying 
313.21  taxpayer may assign all or part of an anticipated refund for the 
313.22  current and future taxable years to a financial institution or a 
313.23  qualifying organization.  A financial institution or qualifying 
313.24  organization accepting assignment must pay the amount secured by 
313.25  the assignment to a third-party vendor.  The commissioner of 
313.26  children, families, and learning shall provide a list of 
313.27  categories of, upon request from a third-party vendor, certify 
313.28  that the vendor's products and services that qualify for the 
313.29  education credit to financial institutions and qualifying 
313.30  organizations.  A denial of a certification is subject to the 
313.31  contested case procedure under chapter 14.  A financial 
313.32  institution or qualifying organization that accepts assignments 
313.33  under this section must verify as part of the assignment 
313.34  documentation that the product or service to be provided by the 
313.35  third-party vendor qualifies has been certified by the 
313.36  commissioner of children, families, and learning as qualifying 
314.1   for the education credit.  The amount assigned for the current 
314.2   and future taxable years may not exceed the maximum allowable 
314.3   education credit for the current taxable year.  Both the 
314.4   taxpayer and spouse must consent to the assignment of a refund 
314.5   from a joint return. 
314.6      <b>[EFFECTIVE DATE.]</b> This section is effective for assignments 
314.7   made on or after the day following final enactment. 
314.8      Sec. 14.  Minnesota Statutes 2002, section 290.0802, 
314.9   subdivision 1, is amended to read: 
314.10     Subdivision 1.  [DEFINITIONS.] For purposes of this 
314.11  section, the following terms have the meanings given. 
314.12     (a) "Adjusted gross income" means federal adjusted gross 
314.13  income as used in section 22(d) of the Internal Revenue Code for 
314.14  the taxable year, plus a lump sum distribution as defined in 
314.15  section 402(e)(3) of the Internal Revenue Code, and less any 
314.16  pension, annuity, or disability benefits included in federal 
314.17  gross income but not subject to state taxation other than the 
314.18  subtraction allowed under section 290.01, subdivision 19b, 
314.19  clause (4). 
314.20     (b) "Disability income" means disability income as defined 
314.21  in section 22(c)(2)(B)(iii) of the Internal Revenue Code. 
314.22     (c) "Nontaxable retirement and disability benefits" means 
314.23  the amount of pension, annuity, or disability benefits that 
314.24  would be included in the reduction under section 22(c)(3) of the 
314.25  Internal Revenue Code and pension, annuity, or disability 
314.26  benefits included in federal gross income but not subject to 
314.27  state taxation other than the subtraction allowed under section 
314.28  290.01, subdivision 19b, clause (4). 
314.29     (d) "Qualified individual" means a qualified individual as 
314.30  defined in section 22(b) of the Internal Revenue Code. 
314.31     (e) "Social security benefits above the second federal 
314.32  threshold" means the amount of social security benefits included 
314.33  in federal taxable income due to the provisions of section 13215 
314.34  of the Omnibus Budget Reconciliation Act of 1993, Public Law 
314.35  Number 103-66. 
314.36     <b>[EFFECTIVE DATE.]</b> This section is effective for tax years 
315.1   beginning after December 31, 2002. 
315.2      Sec. 15.  Minnesota Statutes 2002, section 291.005, 
315.3   subdivision 1, is amended to read: 
315.4      Subdivision 1.  Unless the context otherwise clearly 
315.5   requires, the following terms used in this chapter shall have 
315.6   the following meanings: 
315.7      (1) "Federal gross estate" means the gross estate of a 
315.8   decedent as valued and otherwise determined for federal estate 
315.9   tax purposes by federal taxing authorities pursuant to the 
315.10  provisions of the Internal Revenue Code. 
315.11     (2) "Minnesota gross estate" means the federal gross estate 
315.12  of a decedent after (a) excluding therefrom any property 
315.13  included therein which has its situs outside Minnesota and 
315.14  pensions exempt from tax under this chapter pursuant to section 
315.15  352.15, subdivision 1; 353.15, subdivision 1; 354.10, 
315.16  subdivision 1; 354B.30; or 354C.165, and (b) including therein 
315.17  any property omitted from the federal gross estate which is 
315.18  includable therein, has its situs in Minnesota, and was not 
315.19  disclosed to federal taxing authorities.  
315.20     (3) "Personal representative" means the executor, 
315.21  administrator or other person appointed by the court to 
315.22  administer and dispose of the property of the decedent.  If 
315.23  there is no executor, administrator or other person appointed, 
315.24  qualified, and acting within this state, then any person in 
315.25  actual or constructive possession of any property having a situs 
315.26  in this state which is included in the federal gross estate of 
315.27  the decedent shall be deemed to be a personal representative to 
315.28  the extent of the property and the Minnesota estate tax due with 
315.29  respect to the property. 
315.30     (4) "Resident decedent" means an individual whose domicile 
315.31  at the time of death was in Minnesota. 
315.32     (5) "Nonresident decedent" means an individual whose 
315.33  domicile at the time of death was not in Minnesota. 
315.34     (6) "Situs of property" means, with respect to real 
315.35  property, the state or country in which it is located; with 
315.36  respect to tangible personal property, the state or country in 
316.1   which it was normally kept or located at the time of the 
316.2   decedent's death; and with respect to intangible personal 
316.3   property, the state or country in which the decedent was 
316.4   domiciled at death. 
316.5      (7) "Commissioner" means the commissioner of revenue or any 
316.6   person to whom the commissioner has delegated functions under 
316.7   this chapter. 
316.8      (8) "Internal Revenue Code" means the United States 
316.9   Internal Revenue Code of 1986, as amended through December 31, 
316.10  2000 2002. 
316.11     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
316.12  decedents dying after December 31, 2002. 
316.13     Sec. 16.  Minnesota Statutes 2002, section 291.03, 
316.14  subdivision 1, is amended to read: 
316.15     Subdivision 1.  [TAX AMOUNT.] The tax imposed shall be an 
316.16  amount equal to the proportion of the maximum credit computed 
316.17  under section 2011 of the Internal Revenue Code, as amended 
316.18  through December 31, 2000, for state death taxes as the 
316.19  Minnesota gross estate bears to the value of the federal gross 
316.20  estate.  For a resident decedent, the tax shall be the maximum 
316.21  credit computed under section 2011 of the Internal Revenue Code 
316.22  reduced by the amount of the death tax paid the other state and 
316.23  credited against the federal estate tax if this results in a 
316.24  larger amount of tax than the proportionate amount of the 
316.25  credit.  The tax determined under this paragraph shall not be 
316.26  greater than the federal estate tax computed under section 2001 
316.27  of the Internal Revenue Code after the allowance of the federal 
316.28  credits allowed under section 2010 of the Internal Revenue Code 
316.29  of 1986, as amended through December 31, 2000.  For the purposes 
316.30  of this section, expenses which are deducted for federal income 
316.31  tax purposes under section 642(g) of the Internal Revenue Code 
316.32  as amended through December 31, 2002, are not allowable in 
316.33  computing the tax under this chapter. 
316.34     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
316.35  decedents dying after December 31, 2002. 
316.36     Sec. 17.  Minnesota Statutes 2002, section 352.15, 
317.1   subdivision 1, is amended to read: 
317.2      Subdivision 1.  [EXEMPTION; EXCEPTIONS.] None of the money, 
317.3   annuities, or other benefits mentioned in this chapter is 
317.4   assignable either in law or in equity or subject to state estate 
317.5   tax, or to execution, levy, attachment, garnishment, or other 
317.6   legal process, except as provided in subdivision 1a or section 
317.7   518.58, 518.581, or 518.6111.  
317.8      <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
317.9   decedents dying after December 31, 2002. 
317.10     Sec. 18.  Minnesota Statutes 2002, section 353.15, 
317.11  subdivision 1, is amended to read: 
317.12     Subdivision 1.  [EXEMPTION; EXCEPTIONS.] No money, annuity, 
317.13  or benefit provided for in this chapter is assignable or subject 
317.14  to any state estate tax, or to execution, levy, attachment, 
317.15  garnishment, or legal process, except as provided in subdivision 
317.16  2 or section 518.58, 518.581, or 518.6111.  
317.17     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
317.18  decedents dying after December 31, 2002. 
317.19     Sec. 19.  Minnesota Statutes 2002, section 354.10, 
317.20  subdivision 1, is amended to read: 
317.21     Subdivision 1.  [EXEMPTION; EXCEPTIONS.] The right of a 
317.22  teacher to take advantage of the benefits provided by this 
317.23  chapter, is a personal right only and is not assignable.  All 
317.24  money to the credit of a teacher's account in the fund or any 
317.25  money payable to the teacher from the fund belongs to the state 
317.26  of Minnesota until actually paid to the teacher or a beneficiary 
317.27  under this chapter.  The association may acknowledge a properly 
317.28  completed power of attorney form.  An assignment or attempted 
317.29  assignment of a teacher's interest in the fund, or of the 
317.30  beneficiary's interest in the fund, by a teacher or a 
317.31  beneficiary is void and exempt from taxation under chapter 291 
317.32  and from garnishment or levy under attachment or execution, 
317.33  except as provided in subdivision 2 or 3, or section 518.58, 
317.34  518.581, or 518.6111.  
317.35     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
317.36  decedents dying after December 31, 2002. 
318.1      Sec. 20.  Minnesota Statutes 2002, section 354B.30, is 
318.2   amended to read: 
318.3      354B.30 [PROHIBITION ON LOANS OR PRETERMINATION 
318.4   DISTRIBUTIONS.] 
318.5      (a) No participant may obtain a loan from the plan or 
318.6   obtain any distribution from the plan at a time before the 
318.7   participant terminates the employment that gave rise to plan 
318.8   coverage. 
318.9      (b) No amounts to the credit of the plan are assignable 
318.10  either in law or in equity, are subject to state estate tax, or 
318.11  are subject to execution, levy, attachment, garnishment, or 
318.12  other legal process, except as provided in section 518.58, 
318.13  518.581, or 518.6111.  
318.14     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
318.15  decedents dying after December 31, 2002. 
318.16     Sec. 21.  Minnesota Statutes 2002, section 354C.165, is 
318.17  amended to read: 
318.18     354C.165 [PROHIBITION ON LOANS OR PRETERMINATION 
318.19  DISTRIBUTIONS.] 
318.20     (a) Except as provided in paragraph (c), no participant may 
318.21  obtain a loan or any distribution from the plan before the 
318.22  participant terminates the employment that gave rise to plan 
318.23  coverage. 
318.24     (b) No amounts to the credit of the plan are assignable 
318.25  either in law or in equity, are subject to state estate tax, or 
318.26  are subject to execution, levy, attachment, garnishment, or 
318.27  other legal process, except as provided in section 518.58, 
318.28  518.581, or 518.6111.  
318.29     (c) Unless prohibited by or subject to a penalty under 
318.30  federal law, a teacher who is a participant in the supplemental 
318.31  retirement plan may request, in writing, a transfer of all or a 
318.32  portion of the funds accumulated in the person's supplemental 
318.33  plan account to the teachers retirement association to purchase 
318.34  service credit under sections 354.53, 354.533, 354.534, 354.535, 
318.35  354.536, 354.537, and 354.538 or to the teachers retirement fund 
318.36  association to purchase service credit under sections 354A.097, 
319.1   354A.098, 354A.099, 354A.101, 354A.102, 354A.103, and 354A.104.  
319.2   Upon receipt of a valid request, the board shall execute the 
319.3   transfer.  The transfer must be a fund-to-fund transfer, and in 
319.4   no event shall the participant directly receive any of the funds 
319.5   while still employed by the board.  In no event may the board 
319.6   transfer more than the participant's account balance.  The 
319.7   board, in cooperation with the executive director of the 
319.8   teachers retirement association, shall develop the forms for 
319.9   requesting a transfer and the procedures for executing the 
319.10  requested transfers. 
319.11     <b>[EFFECTIVE DATE.]</b> This section is effective for estates of 
319.12  decedents dying after December 31, 2002. 
319.13     Sec. 22.  Laws 2001, First Special Session chapter 5, 
319.14  article 9, section 12, the effective date, is amended to read: 
319.15     <b>[EFFECTIVE DATE.]</b> This section is effective for assignment 
319.16  of refunds filed with the commissioner after December 31, 2001.  
319.17  The time period for filing assignments expires December 31, 
319.18  2003, but assignments filed on or before that date remain in 
319.19  effect until satisfied or canceled. 
319.20     Sec. 23.  [REPEALER.] 
319.21     (a) Minnesota Statutes 2002, sections 290.0671, subdivision 
319.22  3; and 290.0675, subdivision 5, are repealed effective for tax 
319.23  years beginning after December 31, 2002. 
319.24     (b) Minnesota Rules, parts 8007.0300, subpart 3; 8009.7100; 
319.25  8009.7200; 8009.7300; 8009.7400; and 8092.1000, are repealed 
319.26  effective the day following final enactment.  
319.27                             ARTICLE 13
319.28                           FEDERAL UPDATE 
319.29     Section 1.  Minnesota Statutes 2002, section 289A.02, 
319.30  subdivision 7, is amended to read: 
319.31     Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
319.32  defined otherwise, "Internal Revenue Code" means the Internal 
319.33  Revenue Code of 1986, as amended through March 15 December 31, 
319.34  2002. 
319.35     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
319.36  following final enactment. 
320.1      Sec. 2.  Minnesota Statutes 2002, section 290.01, 
320.2   subdivision 19, is amended to read: 
320.3      Subd. 19.  [NET INCOME.] The term "net income" means the 
320.4   federal taxable income, as defined in section 63 of the Internal 
320.5   Revenue Code of 1986, as amended through the date named in this 
320.6   subdivision, incorporating any elections made by the taxpayer in 
320.7   accordance with the Internal Revenue Code in determining federal 
320.8   taxable income for federal income tax purposes, and with the 
320.9   modifications provided in subdivisions 19a to 19f. 
320.10     In the case of a regulated investment company or a fund 
320.11  thereof, as defined in section 851(a) or 851(g) of the Internal 
320.12  Revenue Code, federal taxable income means investment company 
320.13  taxable income as defined in section 852(b)(2) of the Internal 
320.14  Revenue Code, except that:  
320.15     (1) the exclusion of net capital gain provided in section 
320.16  852(b)(2)(A) of the Internal Revenue Code does not apply; 
320.17     (2) the deduction for dividends paid under section 
320.18  852(b)(2)(D) of the Internal Revenue Code must be applied by 
320.19  allowing a deduction for capital gain dividends and 
320.20  exempt-interest dividends as defined in sections 852(b)(3)(C) 
320.21  and 852(b)(5) of the Internal Revenue Code; and 
320.22     (3) the deduction for dividends paid must also be applied 
320.23  in the amount of any undistributed capital gains which the 
320.24  regulated investment company elects to have treated as provided 
320.25  in section 852(b)(3)(D) of the Internal Revenue Code.  
320.26     The net income of a real estate investment trust as defined 
320.27  and limited by section 856(a), (b), and (c) of the Internal 
320.28  Revenue Code means the real estate investment trust taxable 
320.29  income as defined in section 857(b)(2) of the Internal Revenue 
320.30  Code.  
320.31     The net income of a designated settlement fund as defined 
320.32  in section 468B(d) of the Internal Revenue Code means the gross 
320.33  income as defined in section 468B(b) of the Internal Revenue 
320.34  Code. 
320.35     The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
320.36  1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
321.1   1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
321.2   Protection Act, Public Law Number 104-188, the provisions of 
321.3   Public Law Number 104-117, the provisions of sections 313(a) and 
321.4   (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and (b), 1002, 
321.5   1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 
321.6   1111(a), 1131(b) and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) 
321.7   and (h), and 1604(d)(1) of the Taxpayer Relief Act of 1997, 
321.8   Public Law Number 105-34, the provisions of section 6010 of the 
321.9   Internal Revenue Service Restructuring and Reform Act of 1998, 
321.10  Public Law Number 105-206, the provisions of section 4003 of the 
321.11  Omnibus Consolidated and Emergency Supplemental Appropriations 
321.12  Act, 1999, Public Law Number 105-277, and the provisions of 
321.13  section 318 of the Consolidated Appropriation Act of 2001, 
321.14  Public Law Number 106-554, shall become effective at the time 
321.15  they become effective for federal purposes. 
321.16     The Internal Revenue Code of 1986, as amended through 
321.17  December 31, 1996, shall be in effect for taxable years 
321.18  beginning after December 31, 1996. 
321.19     The provisions of sections 202(a) and (b), 221(a), 225, 
321.20  312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
321.21  (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
321.22  1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
321.23  1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
321.24  of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 
321.25  the provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 
321.26  7002, and 7003 of the Internal Revenue Service Restructuring and 
321.27  Reform Act of 1998, Public Law Number 105-206, the provisions of 
321.28  section 3001 of the Omnibus Consolidated and Emergency 
321.29  Supplemental Appropriations Act, 1999, Public Law Number 
321.30  105-277, the provisions of section 3001 of the Miscellaneous 
321.31  Trade and Technical Corrections Act of 1999, Public Law Number 
321.32  106-36, and the provisions of section 316 of the Consolidated 
321.33  Appropriation Act of 2001, Public Law Number 106-554, shall 
321.34  become effective at the time they become effective for federal 
321.35  purposes. 
321.36     The Internal Revenue Code of 1986, as amended through 
322.1   December 31, 1997, shall be in effect for taxable years 
322.2   beginning after December 31, 1997. 
322.3      The provisions of sections 5002, 6009, 6011, and 7001 of 
322.4   the Internal Revenue Service Restructuring and Reform Act of 
322.5   1998, Public Law Number 105-206, the provisions of section 9010 
322.6   of the Transportation Equity Act for the 21st Century, Public 
322.7   Law Number 105-178, the provisions of sections 1004, 4002, and 
322.8   5301 of the Omnibus Consolidation and Emergency Supplemental 
322.9   Appropriations Act, 1999, Public Law Number 105-277, the 
322.10  provision of section 303 of the Ricky Ray Hemophilia Relief Fund 
322.11  Act of 1998, Public Law Number 105-369, the provisions of 
322.12  sections 532, 534, 536, 537, and 538 of the Ticket to Work and 
322.13  Work Incentives Improvement Act of 1999, Public Law Number 
322.14  106-170, the provisions of the Installment Tax Correction Act of 
322.15  2000, Public Law Number 106-573, and the provisions of section 
322.16  309 of the Consolidated Appropriation Act of 2001, Public Law 
322.17  Number 106-554, shall become effective at the time they become 
322.18  effective for federal purposes. 
322.19     The Internal Revenue Code of 1986, as amended through 
322.20  December 31, 1998, shall be in effect for taxable years 
322.21  beginning after December 31, 1998.  
322.22     The provisions of the FSC Repeal and Extraterritorial 
322.23  Income Exclusion Act of 2000, Public Law Number 106-519, and the 
322.24  provision of section 412 of the Job Creation and Worker 
322.25  Assistance Act of 2002, Public Law Number 107-147, shall become 
322.26  effective at the time it became effective for federal purposes. 
322.27     The Internal Revenue Code of 1986, as amended through 
322.28  December 31, 1999, shall be in effect for taxable years 
322.29  beginning after December 31, 1999.  The provisions of sections 
322.30  306 and 401 of the Consolidated Appropriation Act of 2001, 
322.31  Public Law Number 106-554, and the provision of section 
322.32  632(b)(2)(A) of the Economic Growth and Tax Relief 
322.33  Reconciliation Act of 2001, Public Law Number 107-16, and 
322.34  provisions of sections 101 and 402 of the Job Creation and 
322.35  Worker Assistance Act of 2002, Public Law Number 107-147, shall 
322.36  become effective at the same time it became effective for 
323.1   federal purposes. 
323.2      The Internal Revenue Code of 1986, as amended through 
323.3   December 31, 2000, shall be in effect for taxable years 
323.4   beginning after December 31, 2000.  The provisions of sections 
323.5   659a and 671 of the Economic Growth and Tax Relief 
323.6   Reconciliation Act of 2001, Public Law Number 107-16, the 
323.7   provisions of sections 104, 105, and 111 of the Victims of 
323.8   Terrorism Tax Relief Act of 2001, Public Law Number 107-134, and 
323.9   the provisions of sections 201, 403, 413, and 606 of the Job 
323.10  Creation and Worker Assistance Act of 2002, Public Law Number 
323.11  107-147, shall become effective at the same time it became 
323.12  effective for federal purposes. 
323.13     The Internal Revenue Code of 1986, as amended through March 
323.14  15, 2002, shall be in effect for taxable years beginning after 
323.15  December 31, 2001. 
323.16     The provisions of sections 101 and 102 of the Victims of 
323.17  Terrorism Tax Relief Act of 2001, Public Law Number 107-134, 
323.18  shall become effective at the same time it becomes effective for 
323.19  federal purposes. 
323.20     The Internal Revenue Code of 1986, as amended through 
323.21  December 31, 2002, shall be in effect for taxable years 
323.22  beginning after December 31, 2002. 
323.23     Except as otherwise provided, references to the Internal 
323.24  Revenue Code in subdivisions 19a to 19g mean the code in effect 
323.25  for purposes of determining net income for the applicable year. 
323.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
323.27  following final enactment. 
323.28     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
323.29  subdivision 31, is amended to read: 
323.30     Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
323.31  defined otherwise, "Internal Revenue Code" means the Internal 
323.32  Revenue Code of 1986, as amended through March 15 December 31, 
323.33  2002. 
323.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
323.35  following final enactment. 
323.36     Sec. 4.  Minnesota Statutes 2002, section 290A.03, 
324.1   subdivision 15, is amended to read: 
324.2      Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
324.3   means the Internal Revenue Code of 1986, as amended 
324.4   through March 15 December 31, 2002. 
324.5      <b>[EFFECTIVE DATE.]</b> This section is effective for refunds 
324.6   payable for rents paid in 2003 and thereafter and property taxes 
324.7   payable in 2004 and thereafter. 
324.8                              ARTICLE 14
324.9                 DEPARTMENT PROPERTY TAX INITIATIVES 
324.10     Section 1.  Minnesota Statutes 2002, section 270.06, is 
324.11  amended to read: 
324.12     270.06 [POWERS AND DUTIES.] 
324.13     The commissioner of revenue shall: 
324.14     (1) have and exercise general supervision over the 
324.15  administration of the assessment and taxation laws of the state, 
324.16  over assessors, town, county, and city boards of review and 
324.17  equalization, and all other assessing officers in the 
324.18  performance of their duties, to the end that all assessments of 
324.19  property be made relatively just and equal in compliance with 
324.20  the laws of the state; 
324.21     (2) confer with, advise, and give the necessary 
324.22  instructions and directions to local assessors and local boards 
324.23  of review throughout the state as to their duties under the laws 
324.24  of the state; 
324.25     (3) direct proceedings, actions, and prosecutions to be 
324.26  instituted to enforce the laws relating to the liability and 
324.27  punishment of public officers and officers and agents of 
324.28  corporations for failure or negligence to comply with the 
324.29  provisions of the laws of this state governing returns of 
324.30  assessment and taxation of property, and cause complaints to be 
324.31  made against local assessors, members of boards of equalization, 
324.32  members of boards of review, or any other assessing or taxing 
324.33  officer, to the proper authority, for their removal from office 
324.34  for misconduct or negligence of duty; 
324.35     (4) require county attorneys to assist in the commencement 
324.36  of prosecutions in actions or proceedings for removal, 
325.1   forfeiture and punishment for violation of the laws of this 
325.2   state in respect to the assessment and taxation of property in 
325.3   their respective districts or counties; 
325.4      (5) require town, city, county, and other public officers 
325.5   to report information as to the assessment of property, 
325.6   collection of taxes received from licenses and other sources, 
325.7   and such other information as may be needful in the work of the 
325.8   department of revenue, in such form and upon such blanks as the 
325.9   commissioner may prescribe; 
325.10     (6) require individuals, copartnerships, companies, 
325.11  associations, and corporations to furnish information concerning 
325.12  their capital, funded or other debt, current assets and 
325.13  liabilities, earnings, operating expenses, taxes, as well as all 
325.14  other statements now required by law for taxation purposes; 
325.15     (7) subpoena witnesses, at a time and place reasonable 
325.16  under the circumstances, to appear and give testimony, and to 
325.17  produce books, records, papers and documents for inspection and 
325.18  copying relating to any matter which the commissioner may have 
325.19  authority to investigate or determine; 
325.20     (8) issue a subpoena which does not identify the person or 
325.21  persons with respect to whose liability the subpoena is issued, 
325.22  but only if (a) the subpoena relates to the investigation of a 
325.23  particular person or ascertainable group or class of persons, 
325.24  (b) there is a reasonable basis for believing that such person 
325.25  or group or class of persons may fail or may have failed to 
325.26  comply with any law administered by the commissioner, (c) the 
325.27  information sought to be obtained from the examination of the 
325.28  records (and the identity of the person or persons with respect 
325.29  to whose liability the subpoena is issued) is not readily 
325.30  available from other sources, (d) the subpoena is clear and 
325.31  specific as to the information sought to be obtained, and (e) 
325.32  the information sought to be obtained is limited solely to the 
325.33  scope of the investigation.  Provided further that the party 
325.34  served with a subpoena which does not identify the person or 
325.35  persons with respect to whose tax liability the subpoena is 
325.36  issued shall have the right, within 20 days after service of the 
326.1   subpoena, to petition the district court for the judicial 
326.2   district in which lies the county in which that party is located 
326.3   for a determination as to whether the commissioner of revenue 
326.4   has complied with all the requirements in (a) to (e), and thus, 
326.5   whether the subpoena is enforceable.  If no such petition is 
326.6   made by the party served within the time prescribed, the 
326.7   subpoena shall have the force and effect of a court order; 
326.8      (9) cause the deposition of witnesses residing within or 
326.9   without the state, or absent therefrom, to be taken, upon notice 
326.10  to the interested party, if any, in like manner that depositions 
326.11  of witnesses are taken in civil actions in the district court, 
326.12  in any matter which the commissioner may have authority to 
326.13  investigate or determine; 
326.14     (10) investigate the tax laws of other states and countries 
326.15  and to formulate and submit to the legislature such legislation 
326.16  as the commissioner may deem expedient to prevent evasions of 
326.17  assessment and taxing laws, and secure just and equal taxation 
326.18  and improvement in the system of assessment and taxation in this 
326.19  state; 
326.20     (11) consult and confer with the governor upon the subject 
326.21  of taxation, the administration of the laws in regard thereto, 
326.22  and the progress of the work of the department of revenue, and 
326.23  furnish the governor, from time to time, such assistance and 
326.24  information as the governor may require relating to tax matters; 
326.25     (12) transmit to the governor, on or before the third 
326.26  Monday in December of each even-numbered year, and to each 
326.27  member of the legislature, on or before November 15 of each 
326.28  even-numbered year, the report of the department of revenue for 
326.29  the preceding years, showing all the taxable property in the 
326.30  state and the value of the same, in tabulated form; 
326.31     (13) inquire into the methods of assessment and taxation 
326.32  and ascertain whether the assessors faithfully discharge their 
326.33  duties, particularly as to their compliance with the laws 
326.34  requiring the assessment of all property not exempt from 
326.35  taxation; 
326.36     (14) administer and enforce the assessment and collection 
327.1   of state taxes and fees, including the use of any remedy 
327.2   available to nongovernmental creditors, and, from time to time, 
327.3   make, publish, and distribute rules for the administration and 
327.4   enforcement of assessments and fees laws administered by the 
327.5   commissioner and state tax laws.  The rules have the force of 
327.6   law; 
327.7      (15) prepare blank forms for the returns required by state 
327.8   tax law and distribute them throughout the state, furnishing 
327.9   them subject to charge on application; 
327.10     (16) prescribe rules governing the qualification and 
327.11  practice of agents, attorneys, or other persons representing 
327.12  taxpayers before the commissioner.  The rules may require that 
327.13  those persons, agents, and attorneys show that they are of good 
327.14  character and in good repute, have the necessary qualifications 
327.15  to give taxpayers valuable services, and are otherwise competent 
327.16  to advise and assist taxpayers in the presentation of their case 
327.17  before being recognized as representatives of taxpayers.  After 
327.18  due notice and opportunity for hearing, the commissioner may 
327.19  suspend and bar from further practice before the commissioner 
327.20  any person, agent, or attorney who is shown to be incompetent or 
327.21  disreputable, who refuses to comply with the rules, or who with 
327.22  intent to defraud, willfully or knowingly deceives, misleads, or 
327.23  threatens a taxpayer or prospective taxpayer, by words, 
327.24  circular, letter, or by advertisement.  This clause does not 
327.25  curtail the rights of individuals to appear in their own behalf 
327.26  or partners or corporations' officers to appear in behalf of 
327.27  their respective partnerships or corporations; 
327.28     (17) appoint agents as the commissioner considers necessary 
327.29  to make examinations and determinations.  The agents have the 
327.30  rights and powers conferred on the commissioner to subpoena, 
327.31  examine, and copy books, records, papers, or memoranda, subpoena 
327.32  witnesses, administer oaths and affirmations, and take 
327.33  testimony.  In addition to administrative subpoenas of the 
327.34  commissioner and the agents, upon demand of the commissioner or 
327.35  an agent, the court administrator of any district court shall 
327.36  issue a subpoena for the attendance of a witness or the 
328.1   production of books, papers, records, or memoranda before the 
328.2   agent for inspection and copying.  Disobedience of a court 
328.3   administrator's subpoena shall be punished by the district court 
328.4   of the district in which the subpoena is issued, or in the case 
328.5   of a subpoena issued by the commissioner or an agent, by the 
328.6   district court of the district in which the party served with 
328.7   the subpoena is located, in the same manner as contempt of the 
328.8   district court; 
328.9      (18) appoint and employ additional help, purchase supplies 
328.10  or materials, or incur other expenditures in the enforcement of 
328.11  state tax laws as considered necessary.  The salaries of all 
328.12  agents and employees provided for in this chapter shall be fixed 
328.13  by the appointing authority, subject to the approval of the 
328.14  commissioner of administration; 
328.15     (19) execute and administer any agreement with the 
328.16  secretary of the treasury of the United States or a 
328.17  representative of another state regarding the exchange of 
328.18  information and administration of the tax laws; 
328.19     (20) authorize the use of unmarked motor vehicles to 
328.20  conduct seizures or criminal investigations pursuant to the 
328.21  commissioner's authority; and 
328.22     (21) exercise other powers and perform other duties 
328.23  required of or imposed upon the commissioner of revenue by law.  
328.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
328.25  following final enactment. 
328.26     Sec. 2.  Minnesota Statutes 2002, section 270.10, 
328.27  subdivision 1a, is amended to read: 
328.28     Subd. 1a.  [NOTIFICATION TO TAXPAYER.] At the same time 
328.29  that notice of the assessment, determination, or order of the 
328.30  commissioner is given to a taxpayer, the taxpayer must be 
328.31  notified in writing of the right to appeal to the tax court, and 
328.32  if applicable, to the small claims division.  Except in the case 
328.33  of mathematical or clerical errors, the notice must contain a 
328.34  description of the basis for, including applicable law and other 
328.35  factors considered in the determination, and a listing of the 
328.36  amounts of tax due, interest, additions to tax, and penalties.  
329.1   Failure to provide all the required information does not 
329.2   invalidate the notice for purposes of satisfying statutory 
329.3   notice requirements if the notice contains sufficient 
329.4   information to advise the taxpayer that an assessment, order, or 
329.5   other determination has been made.  The taxpayer may request 
329.6   further clarification within the time provided for appealing the 
329.7   determination.  In any notice of assessment, determination, or 
329.8   order dealing with property valuation or assessment for property 
329.9   tax purposes by the commissioner of revenue or a local unit of 
329.10  government, the taxpayer must be notified in writing that a 
329.11  taxpayer must appeal to the town or city board of equalization 
329.12  and to the county board of equalization before appealing to the 
329.13  small claims division of the tax court, except for those 
329.14  taxpayers whose original assessments are determined by the 
329.15  commissioner of revenue.  
329.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
329.17  following final enactment. 
329.18     Sec. 3.  Minnesota Statutes 2002, section 272.02, is 
329.19  amended by adding a subdivision to read: 
329.20     Subd. 56.  [COMPREHENSIVE HEALTH ASSOCIATION.] All property 
329.21  owned by the comprehensive health association is exempt to the 
329.22  extent provided in section 62E.10, subdivision 1. 
329.23     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
329.24  following final enactment. 
329.25     Sec. 4.  Minnesota Statutes 2002, section 272.02, is 
329.26  amended by adding a subdivision to read: 
329.27     Subd. 57.  [PRIVATE CEMETERIES.] All property owned by 
329.28  private cemeteries is exempt to the extent provided in section 
329.29  307.09. 
329.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
329.31  following final enactment. 
329.32     Sec. 5.  Minnesota Statutes 2002, section 272.02, is 
329.33  amended by adding a subdivision to read: 
329.34     Subd. 58.  [WESTERN LAKE SUPERIOR SANITARY BOARD.] All 
329.35  property owned, leased, controlled, used, or occupied for 
329.36  public, governmental, and municipal purposes by the Western Lake 
330.1   Superior Sanitary Board is exempt to the extent provided in 
330.2   section 458D.23. 
330.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
330.4   following final enactment. 
330.5      Sec. 6.  Minnesota Statutes 2002, section 272.02, is 
330.6   amended by adding a subdivision to read: 
330.7      Subd. 59.  [UNFINISHED SALE OR RENTAL PROJECTS.] Unfinished 
330.8   sale or rental projects are exempt to the extent provided in 
330.9   section 469.155, subdivision 17. 
330.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
330.11  following final enactment. 
330.12     Sec. 7.  Minnesota Statutes 2002, section 272.02, is 
330.13  amended by adding a subdivision to read: 
330.14     Subd. 60.  [SKYWAYS.] The pedestrian skyway system, 
330.15  underground pedestrian concourse, the people mover system, and 
330.16  publicly owned parking structures are exempt to the extent 
330.17  provided in section 469.127. 
330.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
330.19  following final enactment. 
330.20     Sec. 8.  Minnesota Statutes 2002, section 272.02, is 
330.21  amended by adding a subdivision to read: 
330.22     Subd. 61.  [MUNICIPAL RECREATION FACILITIES.] All property 
330.23  acquired and used by a city is exempt to the extent provided in 
330.24  section 471.191, subdivision 4. 
330.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
330.26  following final enactment. 
330.27     Sec. 9.  Minnesota Statutes 2002, section 272.02, is 
330.28  amended by adding a subdivision to read: 
330.29     Subd. 62.  [WATER AND WASTEWATER TREATMENT 
330.30  FACILITIES.] Related facilities owned by water and wastewater 
330.31  treatment providers who have contracted with a municipality to 
330.32  provide capital intensive public services to the municipality 
330.33  are exempt to the extent provided in section 471A.05. 
330.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
330.35  following final enactment. 
330.36     Sec. 10.  Minnesota Statutes 2002, section 272.12, is 
331.1   amended to read: 
331.2      272.12 [CONVEYANCES, TAXES PAID BEFORE RECORDING.] 
331.3      When: 
331.4      (a) a deed or other instrument conveying land, 
331.5      (b) a plat of any town site or addition thereto, 
331.6      (c) a survey required pursuant to section 508.47, 
331.7      (d) a condominium plat subject to chapter 515 or 515A or a 
331.8   declaration that contains such a plat, or 
331.9      (e) a common interest community plat subject to chapter 
331.10  515B or a declaration that contains such a plat, 
331.11  is presented to the county auditor for transfer, the auditor 
331.12  shall ascertain from the records if there be taxes delinquent 
331.13  upon the land described therein, or if it has been sold for 
331.14  taxes.  An assignment of a sheriff's or referee's certificate of 
331.15  sale, when the certificate of sale describes real estate, and 
331.16  certificates of redemption from mortgage or lien foreclosure 
331.17  sales, when the certificate of redemption encompasses real 
331.18  estate and is issued to a junior creditor, are considered 
331.19  instruments conveying land for the purposes of this section and 
331.20  section 272.121.  If there are taxes delinquent, the auditor 
331.21  shall certify to the same; and upon payment of such taxes, or in 
331.22  case no taxes are delinquent, shall transfer the land upon the 
331.23  books of the auditor's office, and note upon the instrument, 
331.24  over official signature, the words, "no delinquent taxes and 
331.25  transfer entered," or, if the land described has been sold or 
331.26  assigned to an actual purchaser for taxes, the words "paid by 
331.27  sale of land described within;" and, unless such statement is 
331.28  made upon such instrument, the county recorder or the registrar 
331.29  of titles shall refuse to receive or record the same; provided, 
331.30  that sheriff's or referees' certificates of sale on execution or 
331.31  foreclosure of a lien or mortgage, certificates of redemption 
331.32  from mortgage or lien foreclosure sales issued to the redeeming 
331.33  mortgagor or lienee, deeds of distribution made by a personal 
331.34  representative in probate proceedings, decrees and judgments, 
331.35  receivers receipts, patents, and copies of town or statutory 
331.36  city plats, in case the original plat filed in the office of the 
332.1   county recorder has been lost or destroyed, and the instruments 
332.2   releasing, removing and discharging reversionary and forfeiture 
332.3   provisions affecting title to land and instruments releasing, 
332.4   removing or discharging easement rights in land or building or 
332.5   other restrictions, may be recorded without such certificate; 
332.6   and, provided that instruments conveying land and, as 
332.7   appurtenant thereto an easement over adjacent tract or tracts of 
332.8   land, may be recorded without such certificate as to the land 
332.9   covered by such easement; and provided further, that any 
332.10  instrument granting an easement made in favor of any public 
332.11  utility or pipe line for conveying gas, liquids or solids in 
332.12  suspension, in the nature of a right-of-way over, along, across 
332.13  or under a tract of land may be recorded without such 
332.14  certificate as to the land covered by such easement.  Any 
332.15  instrument amending or restating the declarations, bylaws, 
332.16  plats, or other enabling Documents governing homeowners 
332.17  associations of condominiums, townhouses, common interest 
332.18  ownership communities, and other planned unit developments may 
332.19  be recorded without the auditor's certificate to the extent 
332.20  provided in section 515B.1-116(f). 
332.21     A deed of distribution made by a personal representative in 
332.22  a probate proceeding, a decree, or a judgment that conveys land 
332.23  shall be presented to the county auditor, who shall transfer the 
332.24  land upon the books of the auditor's office and note upon the 
332.25  instrument, over official signature, the words, "transfer 
332.26  entered", and the instrument may then be recorded.  A decree or 
332.27  judgment that affects title to land but does not convey land may 
332.28  be recorded without presentation to the auditor. 
332.29     A violation of this section by the county recorder or the 
332.30  registrar of titles shall be a gross misdemeanor, and, in 
332.31  addition to the punishment therefor, the recorder or registrar 
332.32  shall be liable to the grantee of any instrument so recorded for 
332.33  the amount of any damages sustained. 
332.34     When, as a condition to permitting the recording of deed or 
332.35  other instrument affecting the title to real estate previously 
332.36  forfeited to the state under the provisions of sections 281.16 
333.1   to 281.25, county officials, after such real estate has been 
333.2   purchased or repurchased, have required the payment of taxes 
333.3   erroneously assumed to have accrued against such real estate 
333.4   after forfeiture and before the date of purchase or repurchase, 
333.5   the sum required to be so paid shall be refunded to the persons 
333.6   entitled thereto out of moneys in the funds in which the sum so 
333.7   paid was placed.  Delinquent taxes are those taxes deemed 
333.8   delinquent under section 279.02. 
333.9      <b>[EFFECTIVE DATE.]</b> This section is effective for deeds or 
333.10  instruments accepted for recording or registration on or after 
333.11  July 1, 2003. 
333.12     Sec. 11.  Minnesota Statutes 2002, section 273.05, 
333.13  subdivision 1, is amended to read: 
333.14     Subdivision 1.  [APPOINTMENT OF TOWN AND CITY ASSESSORS.] 
333.15  Notwithstanding any other provision of law all town assessors 
333.16  shall be appointed by the town board, and notwithstanding any 
333.17  charter provisions to the contrary, all city assessors shall be 
333.18  appointed by the city council or other appointing authority as 
333.19  provided by law or charter.  Such assessors shall be residents 
333.20  of the state but need not be a resident of the town or city for 
333.21  which they are appointed.  They shall be selected and appointed 
333.22  because of their knowledge and training in the field of property 
333.23  taxation.  All town and statutory city assessors shall be 
333.24  appointed for indefinite terms.  A town or statutory city 
333.25  assessor who is an employee may be dismissed by the appointing 
333.26  authority for cause.  The term of the town or city assessors may 
333.27  be terminated at any time by the town board or city council on 
333.28  charges by the commissioner of revenue of inefficiency or 
333.29  neglect of duty.  Vacancies in the office of town or city 
333.30  assessor shall be filled within 90 days by appointment of the 
333.31  respective appointing authority indicated above.  If the vacancy 
333.32  is not filled within 90 days, the office shall be terminated.  
333.33  When a vacancy in the office of town or city assessor is not 
333.34  filled by appointment, and it is imperative that the office of 
333.35  assessor be filled, the county auditor shall appoint some 
333.36  resident of the county as assessor for such town or city.  The 
334.1   county auditor may appoint the county assessor as assessor for 
334.2   such town or city, in which case the town or city shall pay to 
334.3   the county treasurer the amount determined by the county auditor 
334.4   to be due for the services performed and expenses incurred by 
334.5   the county assessor in acting as assessor for such town or 
334.6   city.  The term of any town or statutory city assessor in a 
334.7   county electing in accordance with section 273.052 shall be 
334.8   terminated as provided in section 273.055. 
334.9      The commissioner of revenue may recommend to the state 
334.10  board of assessors the nonrenewal, suspension, or revocation of 
334.11  an assessor's license as provided in sections 270.41 to 270.53. 
334.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
334.13  following final enactment and applies to every town or city 
334.14  assessor whether that assessor was appointed before, on, or 
334.15  after the effective date. 
334.16     Sec. 12.  Minnesota Statutes 2002, section 273.061, is 
334.17  amended by adding a subdivision to read: 
334.18     Subd. 1a.  [COMPATIBLE OFFICES.] A person appointed as the 
334.19  county assessor also may serve as the county auditor, county 
334.20  treasurer, or county auditor-treasurer if those offices are 
334.21  appointive, provided that the person in the combined appointed 
334.22  office must not serve on the county board of appeal and 
334.23  equalization under section 274.13.  In a county in which the 
334.24  functions of the county assessor are combined with those of the 
334.25  county auditor or county auditor-treasurer, the county board may 
334.26  not delegate any authority, power, or responsibility under 
334.27  section 375.192, subdivision 4. 
334.28     <b>[EFFECTIVE DATE.]</b> This section is effective January 2, 2004.
334.29     Sec. 13.  Minnesota Statutes 2002, section 273.061, is 
334.30  amended by adding a subdivision to read: 
334.31     Subd. 1b.  [COMPATIBLE OFFICES IN COUNTIES CHANGING TO 
334.32  APPOINTED AUDITOR.] In a county in which the office of auditor, 
334.33  treasurer, or auditor-treasurer is an elective position, a 
334.34  person appointed as the county assessor also may serve as the 
334.35  county auditor, county treasurer, or county auditor-treasurer if 
334.36  a proposal to make the affected office appointive has been 
335.1   approved as required by other law and will be effective within 
335.2   five years. 
335.3      <b>[EFFECTIVE DATE.]</b> This section is effective January 2, 2004.
335.4      Sec. 14.  Minnesota Statutes 2002, section 273.061, is 
335.5   amended by adding a subdivision to read: 
335.6      Subd. 1c.  [INCOMPATIBLE OFFICES.] The person appointed as 
335.7   the county assessor must not also be the county attorney, a 
335.8   county board member, an elected county auditor, an elected 
335.9   county treasurer, an elected county auditor-treasurer, a town 
335.10  board supervisor for a town in the same county, or a city mayor 
335.11  or council member for a city in the same county.  The person 
335.12  appointed as the city assessor must not also be a city council 
335.13  member or mayor for the same city.  A person appointed as the 
335.14  town assessor must not also be a town board supervisor for the 
335.15  same town.  Except as provided in subdivision 1b, an assessor 
335.16  who accepts a position that is incompatible with the office of 
335.17  assessor is deemed to have resigned from the assessor position. 
335.18     <b>[EFFECTIVE DATE.]</b> This section is effective January 2, 2004.
335.19     Sec. 15.  Minnesota Statutes 2002, section 273.11, 
335.20  subdivision 1a, is amended to read: 
335.21     Subd. 1a.  [LIMITED MARKET VALUE.] In the case of all 
335.22  property classified as agricultural homestead or nonhomestead, 
335.23  residential homestead or nonhomestead, timber, or noncommercial 
335.24  seasonal residential recreational residential, the assessor 
335.25  shall compare the value with the taxable portion of the value 
335.26  determined in the preceding assessment.  
335.27     For assessment year 2002, the amount of the increase shall 
335.28  not exceed the greater of (1) ten percent of the value in the 
335.29  preceding assessment, or (2) 15 percent of the difference 
335.30  between the current assessment and the preceding assessment. 
335.31     For assessment year 2003, the amount of the increase shall 
335.32  not exceed the greater of (1) 12 percent of the value in the 
335.33  preceding assessment, or (2) 20 percent of the difference 
335.34  between the current assessment and the preceding assessment. 
335.35     For assessment year 2004, the amount of the increase shall 
335.36  not exceed the greater of (1) 15 percent of the value in the 
336.1   preceding assessment, or (2) 25 percent of the difference 
336.2   between the current assessment and the preceding assessment. 
336.3      For assessment year 2005, the amount of the increase shall 
336.4   not exceed the greater of (1) 15 percent of the value in the 
336.5   preceding assessment, or (2) 33 percent of the difference 
336.6   between the current assessment and the preceding assessment.  
336.7      For assessment year 2006, the amount of the increase shall 
336.8   not exceed the greater of (1) 15 percent of the value in the 
336.9   preceding assessment, or (2) 50 percent of the difference 
336.10  between the current assessment and the preceding assessment. 
336.11     This limitation shall not apply to increases in value due 
336.12  to improvements.  For purposes of this subdivision, the term 
336.13  "assessment" means the value prior to any exclusion under 
336.14  subdivision 16. 
336.15     The provisions of this subdivision shall be in effect 
336.16  through assessment year 2006 as provided in this subdivision. 
336.17     For purposes of the assessment/sales ratio study conducted 
336.18  under section 127A.48, and the computation of state aids paid 
336.19  under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 
336.20  477A, market values and net tax capacities determined under this 
336.21  subdivision and subdivision 16, shall be used. 
336.22     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
336.23  following final enactment. 
336.24     Sec. 16.  Minnesota Statutes 2002, section 273.124, 
336.25  subdivision 1, is amended to read: 
336.26     Subdivision 1.  [GENERAL RULE.] (a) Residential real estate 
336.27  that is occupied and used for the purposes of a homestead by its 
336.28  owner, who must be a Minnesota resident, is a residential 
336.29  homestead.  
336.30     Agricultural land, as defined in section 273.13, 
336.31  subdivision 23, that is occupied and used as a homestead by its 
336.32  owner, who must be a Minnesota resident, is an agricultural 
336.33  homestead. 
336.34     Dates for establishment of a homestead and homestead 
336.35  treatment provided to particular types of property are as 
336.36  provided in this section.  
337.1      Property held by a trustee under a trust is eligible for 
337.2   homestead classification if the requirements under this chapter 
337.3   are satisfied. 
337.4      The assessor shall require proof, as provided in 
337.5   subdivision 13, of the facts upon which classification as a 
337.6   homestead may be determined.  Notwithstanding any other law, the 
337.7   assessor may at any time require a homestead application to be 
337.8   filed in order to verify that any property classified as a 
337.9   homestead continues to be eligible for homestead status.  
337.10  Notwithstanding any other law to the contrary, the department of 
337.11  revenue may, upon request from an assessor, verify whether an 
337.12  individual who is requesting or receiving homestead 
337.13  classification has filed a Minnesota income tax return as a 
337.14  resident for the most recent taxable year for which the 
337.15  information is available. 
337.16     When there is a name change or a transfer of homestead 
337.17  property, the assessor may reclassify the property in the next 
337.18  assessment unless a homestead application is filed to verify 
337.19  that the property continues to qualify for homestead 
337.20  classification. 
337.21     (b) For purposes of this section, homestead property shall 
337.22  include property which is used for purposes of the homestead but 
337.23  is separated from the homestead by a road, street, lot, 
337.24  waterway, or other similar intervening property.  The term "used 
337.25  for purposes of the homestead" shall include but not be limited 
337.26  to uses for gardens, garages, or other outbuildings commonly 
337.27  associated with a homestead, but shall not include vacant land 
337.28  held primarily for future development.  In order to receive 
337.29  homestead treatment for the noncontiguous property, the owner 
337.30  must use the property for the purposes of the homestead, and 
337.31  must apply to the assessor, both by the deadlines given in 
337.32  subdivision 9.  After initial qualification for the homestead 
337.33  treatment, additional applications for subsequent years are not 
337.34  required. 
337.35     (c) Residential real estate that is occupied and used for 
337.36  purposes of a homestead by a relative of the owner is a 
338.1   homestead but only to the extent of the homestead treatment that 
338.2   would be provided if the related owner occupied the property.  
338.3   For purposes of this paragraph and paragraph (g), "relative" 
338.4   means a parent, stepparent, child, stepchild, grandparent, 
338.5   grandchild, brother, sister, uncle, aunt, nephew, or niece.  
338.6   This relationship may be by blood or marriage.  Property that 
338.7   has been classified as seasonal residential recreational 
338.8   residential property at any time during which it has been owned 
338.9   by the current owner or spouse of the current owner will not be 
338.10  reclassified as a homestead unless it is occupied as a homestead 
338.11  by the owner; this prohibition also applies to property that, in 
338.12  the absence of this paragraph, would have been classified as 
338.13  seasonal residential recreational residential property at the 
338.14  time when the residence was constructed.  Neither the related 
338.15  occupant nor the owner of the property may claim a property tax 
338.16  refund under chapter 290A for a homestead occupied by a 
338.17  relative.  In the case of a residence located on agricultural 
338.18  land, only the house, garage, and immediately surrounding one 
338.19  acre of land shall be classified as a homestead under this 
338.20  paragraph, except as provided in paragraph (d). 
338.21     (d) Agricultural property that is occupied and used for 
338.22  purposes of a homestead by a relative of the owner, is a 
338.23  homestead, only to the extent of the homestead treatment that 
338.24  would be provided if the related owner occupied the property, 
338.25  and only if all of the following criteria are met: 
338.26     (1) the relative who is occupying the agricultural property 
338.27  is a son, daughter, grandson, granddaughter, father, or mother 
338.28  of the owner of the agricultural property or a son, daughter, 
338.29  grandson, or granddaughter of the spouse of the owner of the 
338.30  agricultural property; 
338.31     (2) the owner of the agricultural property must be a 
338.32  Minnesota resident; 
338.33     (3) the owner of the agricultural property must not receive 
338.34  homestead treatment on any other agricultural property in 
338.35  Minnesota; and 
338.36     (4) the owner of the agricultural property is limited to 
339.1   only one agricultural homestead per family under this paragraph. 
339.2      Neither the related occupant nor the owner of the property 
339.3   may claim a property tax refund under chapter 290A for a 
339.4   homestead occupied by a relative qualifying under this 
339.5   paragraph.  For purposes of this paragraph, "agricultural 
339.6   property" means the house, garage, other farm buildings and 
339.7   structures, and agricultural land. 
339.8      Application must be made to the assessor by the owner of 
339.9   the agricultural property to receive homestead benefits under 
339.10  this paragraph.  The assessor may require the necessary proof 
339.11  that the requirements under this paragraph have been met. 
339.12     (e) In the case of property owned by a property owner who 
339.13  is married, the assessor must not deny homestead treatment in 
339.14  whole or in part if only one of the spouses occupies the 
339.15  property and the other spouse is absent due to:  (1) marriage 
339.16  dissolution proceedings, (2) legal separation, (3) employment or 
339.17  self-employment in another location, or (4) other personal 
339.18  circumstances causing the spouses to live separately, not 
339.19  including an intent to obtain two homestead classifications for 
339.20  property tax purposes.  To qualify under clause (3), the 
339.21  spouse's place of employment or self-employment must be at least 
339.22  50 miles distant from the other spouse's place of employment, 
339.23  and the homesteads must be at least 50 miles distant from each 
339.24  other.  Homestead treatment, in whole or in part, shall not be 
339.25  denied to the owner's spouse who previously occupied the 
339.26  residence with the owner if the absence of the owner is due to 
339.27  one of the exceptions provided in this paragraph. 
339.28     (f) The assessor must not deny homestead treatment in whole 
339.29  or in part if: 
339.30     (1) in the case of a property owner who is not married, the 
339.31  owner is absent due to residence in a nursing home, boarding 
339.32  care facility, or an elderly assisted living facility property 
339.33  as defined in section 273.13, subdivision 25a, and the property 
339.34  is not otherwise occupied; or 
339.35     (2) in the case of a property owner who is married, the 
339.36  owner or the owner's spouse or both are absent due to residence 
340.1   in a nursing home, boarding care facility, or an elderly 
340.2   assisted living facility property as defined in section 273.13, 
340.3   subdivision 25a, and the property is not occupied or is occupied 
340.4   only by the owner's spouse. 
340.5      (g) If an individual is purchasing property with the intent 
340.6   of claiming it as a homestead and is required by the terms of 
340.7   the financing agreement to have a relative shown on the deed as 
340.8   a coowner, the assessor shall allow a full homestead 
340.9   classification.  This provision only applies to first-time 
340.10  purchasers, whether married or single, or to a person who had 
340.11  previously been married and is purchasing as a single individual 
340.12  for the first time.  The application for homestead benefits must 
340.13  be on a form prescribed by the commissioner and must contain the 
340.14  data necessary for the assessor to determine if full homestead 
340.15  benefits are warranted. 
340.16     (h) If residential or agricultural real estate is occupied 
340.17  and used for purposes of a homestead by a child of a deceased 
340.18  owner and the property is subject to jurisdiction of probate 
340.19  court, the child shall receive relative homestead classification 
340.20  under paragraph (c) or (d) to the same extent they would be 
340.21  entitled to it if the owner was still living, until the probate 
340.22  is completed.  For purposes of this paragraph, "child" includes 
340.23  a relationship by blood or by marriage. 
340.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
340.25  following final enactment. 
340.26     Sec. 17.  Minnesota Statutes 2002, section 273.13, 
340.27  subdivision 25, is amended to read: 
340.28     Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
340.29  estate containing four or more units and used or held for use by 
340.30  the owner or by the tenants or lessees of the owner as a 
340.31  residence for rental periods of 30 days or more.  Class 4a also 
340.32  includes hospitals licensed under sections 144.50 to 144.56, 
340.33  other than hospitals exempt under section 272.02, and contiguous 
340.34  property used for hospital purposes, without regard to whether 
340.35  the property has been platted or subdivided.  The market value 
340.36  of class 4a property has a class rate of 1.8 percent for taxes 
341.1   payable in 2002, 1.5 percent for taxes payable in 2003, and 1.25 
341.2   percent for taxes payable in 2004 and thereafter, except that 
341.3   class 4a property consisting of a structure for which 
341.4   construction commenced after June 30, 2001, has a class rate of 
341.5   1.25 percent of market value for taxes payable in 2003 and 
341.6   subsequent years. 
341.7      (b) Class 4b includes: 
341.8      (1) residential real estate containing less than four units 
341.9   that does not qualify as class 4bb, other than seasonal 
341.10  residential, and recreational property; 
341.11     (2) manufactured homes not classified under any other 
341.12  provision; 
341.13     (3) a dwelling, garage, and surrounding one acre of 
341.14  property on a nonhomestead farm classified under subdivision 23, 
341.15  paragraph (b) containing two or three units; and 
341.16     (4) unimproved property that is classified residential as 
341.17  determined under subdivision 33.  
341.18     The market value of class 4b property has a class rate of 
341.19  1.5 percent for taxes payable in 2002, and 1.25 percent for 
341.20  taxes payable in 2003 and thereafter. 
341.21     (c) Class 4bb includes: 
341.22     (1) nonhomestead residential real estate containing one 
341.23  unit, other than seasonal residential, and recreational 
341.24  property; and 
341.25     (2) a single family dwelling, garage, and surrounding one 
341.26  acre of property on a nonhomestead farm classified under 
341.27  subdivision 23, paragraph (b). 
341.28     Class 4bb property has the same class rates as class 1a 
341.29  property under subdivision 22. 
341.30     Property that has been classified as seasonal recreational 
341.31  residential recreational property at any time during which it 
341.32  has been owned by the current owner or spouse of the current 
341.33  owner does not qualify for class 4bb. 
341.34     (d) Class 4c property includes: 
341.35     (1) except as provided in subdivision 22, paragraph (c), 
341.36  real property devoted to temporary and seasonal residential 
342.1   occupancy for recreation purposes, including real property 
342.2   devoted to temporary and seasonal residential occupancy for 
342.3   recreation purposes and not devoted to commercial purposes for 
342.4   more than 250 days in the year preceding the year of 
342.5   assessment.  For purposes of this clause, property is devoted to 
342.6   a commercial purpose on a specific day if any portion of the 
342.7   property is used for residential occupancy, and a fee is charged 
342.8   for residential occupancy.  In order for a property to be 
342.9   classified as class 4c, seasonal residential recreational 
342.10  residential for commercial purposes, at least 40 percent of the 
342.11  annual gross lodging receipts related to the property must be 
342.12  from business conducted during 90 consecutive days and either 
342.13  (i) at least 60 percent of all paid bookings by lodging guests 
342.14  during the year must be for periods of at least two consecutive 
342.15  nights; or (ii) at least 20 percent of the annual gross receipts 
342.16  must be from charges for rental of fish houses, boats and 
342.17  motors, snowmobiles, downhill or cross-country ski equipment, or 
342.18  charges for marina services, launch services, and guide 
342.19  services, or the sale of bait and fishing tackle.  For purposes 
342.20  of this determination, a paid booking of five or more nights 
342.21  shall be counted as two bookings.  Class 4c also includes 
342.22  commercial use real property used exclusively for recreational 
342.23  purposes in conjunction with class 4c property devoted to 
342.24  temporary and seasonal residential occupancy for recreational 
342.25  purposes, up to a total of two acres, provided the property is 
342.26  not devoted to commercial recreational use for more than 250 
342.27  days in the year preceding the year of assessment and is located 
342.28  within two miles of the class 4c property with which it is 
342.29  used.  Class 4c property classified in this clause also includes 
342.30  the remainder of class 1c resorts provided that the entire 
342.31  property including that portion of the property classified as 
342.32  class 1c also meets the requirements for class 4c under this 
342.33  clause; otherwise the entire property is classified as class 3.  
342.34  Owners of real property devoted to temporary and seasonal 
342.35  residential occupancy for recreation purposes and all or a 
342.36  portion of which was devoted to commercial purposes for not more 
343.1   than 250 days in the year preceding the year of assessment 
343.2   desiring classification as class 1c or 4c, must submit a 
343.3   declaration to the assessor designating the cabins or units 
343.4   occupied for 250 days or less in the year preceding the year of 
343.5   assessment by January 15 of the assessment year.  Those cabins 
343.6   or units and a proportionate share of the land on which they are 
343.7   located will be designated class 1c or 4c as otherwise 
343.8   provided.  The remainder of the cabins or units and a 
343.9   proportionate share of the land on which they are located will 
343.10  be designated as class 3a.  The owner of property desiring 
343.11  designation as class 1c or 4c property must provide guest 
343.12  registers or other records demonstrating that the units for 
343.13  which class 1c or 4c designation is sought were not occupied for 
343.14  more than 250 days in the year preceding the assessment if so 
343.15  requested.  The portion of a property operated as a (1) 
343.16  restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 
343.17  facility operated on a commercial basis not directly related to 
343.18  temporary and seasonal residential occupancy for recreation 
343.19  purposes shall not qualify for class 1c or 4c; 
343.20     (2) qualified property used as a golf course if: 
343.21     (i) it is open to the public on a daily fee basis.  It may 
343.22  charge membership fees or dues, but a membership fee may not be 
343.23  required in order to use the property for golfing, and its green 
343.24  fees for golfing must be comparable to green fees typically 
343.25  charged by municipal courses; and 
343.26     (ii) it meets the requirements of section 273.112, 
343.27  subdivision 3, paragraph (d). 
343.28     A structure used as a clubhouse, restaurant, or place of 
343.29  refreshment in conjunction with the golf course is classified as 
343.30  class 3a property; 
343.31     (3) real property up to a maximum of one acre of land owned 
343.32  by a nonprofit community service oriented organization; provided 
343.33  that the property is not used for a revenue-producing activity 
343.34  for more than six days in the calendar year preceding the year 
343.35  of assessment and the property is not used for residential 
343.36  purposes on either a temporary or permanent basis.  For purposes 
344.1   of this clause, a "nonprofit community service oriented 
344.2   organization" means any corporation, society, association, 
344.3   foundation, or institution organized and operated exclusively 
344.4   for charitable, religious, fraternal, civic, or educational 
344.5   purposes, and which is exempt from federal income taxation 
344.6   pursuant to section 501(c)(3), (10), or (19) of the Internal 
344.7   Revenue Code of 1986, as amended through December 31, 1990.  For 
344.8   purposes of this clause, "revenue-producing activities" shall 
344.9   include but not be limited to property or that portion of the 
344.10  property that is used as an on-sale intoxicating liquor or 3.2 
344.11  percent malt liquor establishment licensed under chapter 340A, a 
344.12  restaurant open to the public, bowling alley, a retail store, 
344.13  gambling conducted by organizations licensed under chapter 349, 
344.14  an insurance business, or office or other space leased or rented 
344.15  to a lessee who conducts a for-profit enterprise on the 
344.16  premises.  Any portion of the property which is used for 
344.17  revenue-producing activities for more than six days in the 
344.18  calendar year preceding the year of assessment shall be assessed 
344.19  as class 3a.  The use of the property for social events open 
344.20  exclusively to members and their guests for periods of less than 
344.21  24 hours, when an admission is not charged nor any revenues are 
344.22  received by the organization shall not be considered a 
344.23  revenue-producing activity; 
344.24     (4) post-secondary student housing of not more than one 
344.25  acre of land that is owned by a nonprofit corporation organized 
344.26  under chapter 317A and is used exclusively by a student 
344.27  cooperative, sorority, or fraternity for on-campus housing or 
344.28  housing located within two miles of the border of a college 
344.29  campus; 
344.30     (5) manufactured home parks as defined in section 327.14, 
344.31  subdivision 3; 
344.32     (6) real property that is actively and exclusively devoted 
344.33  to indoor fitness, health, social, recreational, and related 
344.34  uses, is owned and operated by a not-for-profit corporation, and 
344.35  is located within the metropolitan area as defined in section 
344.36  473.121, subdivision 2; 
345.1      (7) a leased or privately owned noncommercial aircraft 
345.2   storage hangar not exempt under section 272.01, subdivision 2, 
345.3   and the land on which it is located, provided that: 
345.4      (i) the land is on an airport owned or operated by a city, 
345.5   town, county, metropolitan airports commission, or group 
345.6   thereof; and 
345.7      (ii) the land lease, or any ordinance or signed agreement 
345.8   restricting the use of the leased premise, prohibits commercial 
345.9   activity performed at the hangar. 
345.10     If a hangar classified under this clause is sold after June 
345.11  30, 2000, a bill of sale must be filed by the new owner with the 
345.12  assessor of the county where the property is located within 60 
345.13  days of the sale; and 
345.14     (8) residential real estate, a portion of which is used by 
345.15  the owner for homestead purposes, and that is also a place of 
345.16  lodging, if all of the following criteria are met: 
345.17     (i) rooms are provided for rent to transient guests that 
345.18  generally stay for periods of 14 or fewer days; 
345.19     (ii) meals are provided to persons who rent rooms, the cost 
345.20  of which is incorporated in the basic room rate; 
345.21     (iii) meals are not provided to the general public except 
345.22  for special events on fewer than seven days in the calendar year 
345.23  preceding the year of the assessment; and 
345.24     (iv) the owner is the operator of the property. 
345.25  The market value subject to the 4c classification under this 
345.26  clause is limited to five rental units.  Any rental units on the 
345.27  property in excess of five, must be valued and assessed as class 
345.28  3a.  The portion of the property used for purposes of a 
345.29  homestead by the owner must be classified as class 1a property 
345.30  under subdivision 22. 
345.31     Class 4c property has a class rate of 1.5 percent of market 
345.32  value, except that (i) each parcel of seasonal residential 
345.33  recreational property not used for commercial purposes has the 
345.34  same class rates as class 4bb property, (ii) manufactured home 
345.35  parks assessed under clause (5) have the same class rate as 
345.36  class 4b property, (iii) commercial-use seasonal residential 
346.1   recreational property has a class rate of one percent for the 
346.2   first $500,000 of market value, which includes any market value 
346.3   receiving the one percent rate under subdivision 22, and 1.25 
346.4   percent for the remaining market value, (iv) the market value of 
346.5   property described in clause (4) has a class rate of one 
346.6   percent, (v) the market value of property described in clauses 
346.7   (2) and (6) has a class rate of 1.25 percent, and (vi) that 
346.8   portion of the market value of property in clause (8) qualifying 
346.9   for class 4c property has a class rate of 1.25 percent.  
346.10     (e) Class 4d property is qualifying low-income rental 
346.11  housing certified to the assessor by the housing finance agency 
346.12  under sections 273.126 and 462A.071.  Class 4d includes land in 
346.13  proportion to the total market value of the building that is 
346.14  qualifying low-income rental housing.  For all properties 
346.15  qualifying as class 4d, the market value determined by the 
346.16  assessor must be based on the normal approach to value using 
346.17  normal unrestricted rents. 
346.18     Class 4d property has a class rate of 0.9 percent for taxes 
346.19  payable in 2002, and one percent for taxes payable in 2003 and 
346.20  1.25 percent for taxes payable in 2004 and thereafter.  
346.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
346.22  following final enactment. 
346.23     Sec. 18.  Minnesota Statutes 2002, section 273.1398, 
346.24  subdivision 4b, is amended to read: 
346.25     Subd. 4b.  [COURT EXPENDITURES; MAINTENANCE OF EFFORT.] (a) 
346.26  Until the costs of court administration as defined under section 
346.27  480.183, subdivision 3, in a county have been transferred to the 
346.28  state, each county in a judicial district transferring court 
346.29  administration costs to state funding after July 1, 2001, shall 
346.30  budget for the funding of these costs an amount at least equal 
346.31  to the certified budget amount for calendar year 2001, increased 
346.32  by six percent for each year from 2001 to 2003 and by eight 
346.33  percent from 2004 to the year of the transfer.  The county shall 
346.34  budget, fund, and authorize expenditures not less than the 
346.35  amount calculated under this paragraph plus the temporary aid 
346.36  amount under subdivision 4c for maintenance of effort of 
347.1   administrative costs. 
347.2      (b) By July 15, 2001, the court shall certify to each 
347.3   county in the judicial district its cost of court administration 
347.4   as defined under section 480.183, subdivision 3, based on 2001 
347.5   budgets.  In making that determination, the court shall exclude 
347.6   the budget costs of the county for the following categories: 
347.7      (1) rent; 
347.8      (2) examiner of titles; 
347.9      (3) civil court appointed attorneys for civil matters; 
347.10     (4) hospitalization costs; and 
347.11     (5) cost of maintaining vital statistics. 
347.12     The amount of funding provided by a county for courts that 
347.13  is increased by the maintenance of effort requirement may not be 
347.14  used by a county to pay the costs described in clauses (1) to 
347.15  (5). 
347.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
347.17  following final enactment. 
347.18     Sec. 19.  Minnesota Statutes 2002, section 273.372, is 
347.19  amended to read: 
347.20     273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 
347.21  VALUATIONS.] 
347.22     An appeal by a utility or railroad company concerning the 
347.23  exemption, valuation, or classification on of property for which 
347.24  the commissioner of revenue has provided the city or county 
347.25  assessor with commissioner's orders valuations by order, or for 
347.26  which the commissioner has recommended values to the city or 
347.27  county assessor, must be brought against the commissioner in tax 
347.28  court or in district court of the county where the property is 
347.29  located, and not against the county or taxing district where the 
347.30  property is located.  If the appeal to a court is of from an 
347.31  order of the commissioner, it must be brought under chapter 
347.32  271.  If the appeal is from the exemption, valuation, 
347.33  classification, or tax that results from implementation of the 
347.34  commissioner's order or recommendation, it must be brought under 
347.35  chapter 278, and the procedures provisions in that chapter 
347.36  apply, except that service shall be on the commissioner only and 
348.1   not on the county officials specified in section 278.01, 
348.2   subdivision 1.  This provision applies to the property contained 
348.3   under described in sections 273.33, 273.35, 273.36, and 273.37, 
348.4   but only if the appealed values have remained unchanged from 
348.5   those provided to the city or county by the commissioner.  If 
348.6   the exemption, valuation, or classification being appealed has 
348.7   been changed by the city or county, then the action must be 
348.8   brought under chapter 278 in the county where the property is 
348.9   located and proper service must be made upon the county 
348.10  officials as specified in section 278.01, subdivision 1. 
348.11     Upon filing of any appeal by a utility company or railroad 
348.12  against the commissioner, the commissioner shall give notice by 
348.13  first class mail to each county which would be affected by the 
348.14  appeal. 
348.15     Companies that submit the reports under section 270.82 or 
348.16  273.371 by the date specified in that section, or by the date 
348.17  specified by the commissioner in an extension, may appeal 
348.18  administratively to the commissioner under the procedures in 
348.19  section 270.11, subdivision 6, prior to bringing an action in 
348.20  tax court or in district court, however, instituting an 
348.21  administrative appeal with the commissioner does not change or 
348.22  modify the deadline in section 271.06 for appealing an order of 
348.23  the commissioner in tax court or the deadline in section 278.01 
348.24  for bringing an action filing a property tax claim or objection 
348.25  in tax court or district court. 
348.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
348.27  following final enactment. 
348.28     Sec. 20.  Minnesota Statutes 2002, section 273.42, 
348.29  subdivision 2, is amended to read: 
348.30     Subd. 2.  Owners of land that is an agricultural or 
348.31  nonagricultural homestead, nonhomestead agricultural land, 
348.32  rental residential property, and both commercial and 
348.33  noncommercial seasonal residential recreational property, as 
348.34  those terms are defined in section 273.13 listed on records of 
348.35  the county auditor or county treasurer over which runs a high 
348.36  voltage transmission line as defined in section 116C.52, 
349.1   subdivision 3 with a capacity of 200 kilovolts or more, except a 
349.2   high voltage transmission line the construction of which was 
349.3   commenced prior to July 1, 1974, shall receive a property tax 
349.4   credit in an amount determined by multiplying a fraction, the 
349.5   numerator of which is the length of high voltage transmission 
349.6   line which runs over that parcel and the denominator of which is 
349.7   the total length of that particular line running over all 
349.8   property within the city or township by ten percent of the 
349.9   transmission line tax revenue derived from the tax on that 
349.10  portion of the line within the city or township pursuant to 
349.11  section 273.36.  In the case of property owners in unorganized 
349.12  townships, the property tax credit shall be determined by 
349.13  multiplying a fraction, the numerator of which is the length of 
349.14  the qualifying high voltage transmission line which runs over 
349.15  the parcel and the denominator of which is the total length of 
349.16  the qualifying high voltage transmission line running over all 
349.17  property within all the unorganized townships within the county, 
349.18  by the total utility property tax credit fund amount available 
349.19  within the county for that year pursuant to subdivision 1.  
349.20  Where a right-of-way width is shared by more than one property 
349.21  owner, the numerator shall be adjusted by multiplying the length 
349.22  of line on the parcel by the proportion of the total width on 
349.23  the parcel owned by that property owner.  The amount of credit 
349.24  for which the property qualifies shall not exceed 20 percent of 
349.25  the total gross tax on the parcel prior to deduction of the 
349.26  state paid agricultural credit and the state paid homestead 
349.27  credit, provided that, if the property containing the 
349.28  right-of-way is included in a parcel which exceeds 40 acres, the 
349.29  total gross tax on the parcel shall be multiplied by a fraction, 
349.30  the numerator of which is the sum of the number of acres in each 
349.31  quarter-quarter section or portion thereof which contains a 
349.32  right-of-way and the denominator of which is the total number of 
349.33  acres in the parcel set forth on the tax statement, and the 
349.34  maximum credit shall be 20 percent of the product of that 
349.35  computation, prior to deduction of those credits.  The auditor 
349.36  of the county in which the affected parcel is located shall 
350.1   calculate the amount of the credit due for each parcel and 
350.2   transmit that information to the county treasurer.  The county 
350.3   auditor, in computing the credit received pursuant to section 
350.4   273.135, shall reduce the gross tax by the amount of the credit 
350.5   received pursuant to this section, unless the amount of the 
350.6   credit would be less than $10. 
350.7      If, after the county auditor has computed the credit to 
350.8   those qualifying property owners in unorganized townships, there 
350.9   is money remaining in the utility property tax credit fund, then 
350.10  that excess amount in the fund shall be returned to the general 
350.11  school fund of the county. 
350.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
350.13  following final enactment. 
350.14     Sec. 21.  Minnesota Statutes 2002, section 274.01, 
350.15  subdivision 1, is amended to read: 
350.16     Subdivision 1.  [ORDINARY BOARD; MEETINGS, DEADLINES, 
350.17  GRIEVANCES.] (a) The town board of a town, or the council or 
350.18  other governing body of a city, is the board of appeal and 
350.19  equalization except (1) in cities whose charters provide for a 
350.20  board of equalization or (2) in any city or town that has 
350.21  transferred its local board of review power and duties to the 
350.22  county board as provided in subdivision 3.  The county assessor 
350.23  shall fix a day and time when the board or the board of 
350.24  equalization shall meet in the assessment districts of the 
350.25  county.  Notwithstanding any law or city charter to the 
350.26  contrary, a city board of equalization shall be referred to as a 
350.27  board of appeal and equalization.  On or before February 15 of 
350.28  each year the assessor shall give written notice of the time to 
350.29  the city or town clerk.  Notwithstanding the provisions of any 
350.30  charter to the contrary, the meetings must be held between April 
350.31  1 and May 31 each year.  The clerk shall give published and 
350.32  posted notice of the meeting at least ten days before the date 
350.33  of the meeting.  
350.34     The board shall meet at the office of the clerk to review 
350.35  the assessment and classification of property in the town or 
350.36  city.  No changes in valuation or classification which are 
351.1   intended to correct errors in judgment by the county assessor 
351.2   may be made by the county assessor after the board has adjourned 
351.3   in those cities or towns that hold a local board of review; 
351.4   however, corrections of errors that are merely clerical in 
351.5   nature or changes that extend homestead treatment to property 
351.6   are permitted after adjournment until the tax extension date for 
351.7   that assessment year.  The changes must be fully documented and 
351.8   maintained in the assessor's office and must be available for 
351.9   review by any person.  A copy of the changes made during this 
351.10  period in those cities or towns that hold a local board of 
351.11  review must be sent to the county board no later than December 
351.12  31 of the assessment year.  
351.13     (b) The board shall determine whether the taxable property 
351.14  in the town or city has been properly placed on the list and 
351.15  properly valued by the assessor.  If real or personal property 
351.16  has been omitted, the board shall place it on the list with its 
351.17  market value, and correct the assessment so that each tract or 
351.18  lot of real property, and each article, parcel, or class of 
351.19  personal property, is entered on the assessment list at its 
351.20  market value.  No assessment of the property of any person may 
351.21  be raised unless the person has been duly notified of the intent 
351.22  of the board to do so.  On application of any person feeling 
351.23  aggrieved, the board shall review the assessment or 
351.24  classification, or both, and correct it as appears just.  The 
351.25  board may not make an individual market value adjustment or 
351.26  classification change that would benefit the property in cases 
351.27  where the owner or other person having control over the property 
351.28  will not permit the assessor to inspect the property and the 
351.29  interior of any buildings or structures.  
351.30     (c) A local board may reduce assessments upon petition of 
351.31  the taxpayer but the total reductions must not reduce the 
351.32  aggregate assessment made by the county assessor by more than 
351.33  one percent.  If the total reductions would lower the aggregate 
351.34  assessments made by the county assessor by more than one 
351.35  percent, none of the adjustments may be made.  The assessor 
351.36  shall correct any clerical errors or double assessments 
352.1   discovered by the board without regard to the one percent 
352.2   limitation.  
352.3      (d) A local board does not have authority to grant an 
352.4   exemption or to order property removed from the tax rolls. 
352.5      (e) A majority of the members may act at the meeting, and 
352.6   adjourn from day to day until they finish hearing the cases 
352.7   presented.  The assessor shall attend, with the assessment books 
352.8   and papers, and take part in the proceedings, but must not 
352.9   vote.  The county assessor, or an assistant delegated by the 
352.10  county assessor shall attend the meetings.  The board shall list 
352.11  separately, on a form appended to the assessment book, all 
352.12  omitted property added to the list by the board and all items of 
352.13  property increased or decreased, with the market value of each 
352.14  item of property, added or changed by the board, placed opposite 
352.15  the item.  The county assessor shall enter all changes made by 
352.16  the board in the assessment book.  
352.17     (e) (f) Except as provided in subdivision 3, if a person 
352.18  fails to appear in person, by counsel, or by written 
352.19  communication before the board after being duly notified of the 
352.20  board's intent to raise the assessment of the property, or if a 
352.21  person feeling aggrieved by an assessment or classification 
352.22  fails to apply for a review of the assessment or classification, 
352.23  the person may not appear before the county board of appeal and 
352.24  equalization for a review of the assessment or classification.  
352.25  This paragraph does not apply if an assessment was made after 
352.26  the local board meeting, as provided in section 273.01, or if 
352.27  the person can establish not having received notice of market 
352.28  value at least five days before the local board meeting.  
352.29     (f) (g) The local board must complete its work and adjourn 
352.30  within 20 days from the time of convening stated in the notice 
352.31  of the clerk, unless a longer period is approved by the 
352.32  commissioner of revenue.  No action taken after that date is 
352.33  valid.  All complaints about an assessment or classification 
352.34  made after the meeting of the board must be heard and determined 
352.35  by the county board of equalization.  A nonresident may, at any 
352.36  time, before the meeting of the board file written objections to 
353.1   an assessment or classification with the county assessor.  The 
353.2   objections must be presented to the board at its meeting by the 
353.3   county assessor for its consideration. 
353.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
353.5   following final enactment. 
353.6      Sec. 22.  Minnesota Statutes 2002, section 274.13, 
353.7   subdivision 1, is amended to read: 
353.8      Subdivision 1.  [MEMBERS; MEETINGS; RULES FOR EQUALIZING 
353.9   ASSESSMENTS.] The county commissioners, or a majority of them, 
353.10  with the county auditor, or, if the auditor cannot be present, 
353.11  the deputy county auditor, or, if there is no deputy, the court 
353.12  administrator of the district court, shall form a board for the 
353.13  equalization of the assessment of the property of the county, 
353.14  including the property of all cities whose charters provide for 
353.15  a board of equalization.  This board shall be referred to as the 
353.16  county board of appeal and equalization.  The board shall meet 
353.17  annually, on the date specified in section 274.14, at the office 
353.18  of the auditor.  Each member shall take an oath to fairly and 
353.19  impartially perform duties as a member.  The board shall examine 
353.20  and compare the returns of the assessment of property of the 
353.21  towns or districts, and equalize them so that each tract or lot 
353.22  of real property and each article or class of personal property 
353.23  is entered on the assessment list at its market value, subject 
353.24  to the following rules: 
353.25     (1) The board shall raise the valuation of each tract or 
353.26  lot of real property which in its opinion is returned below its 
353.27  market value to the sum believed to be its market value.  The 
353.28  board must first give notice of intention to raise the valuation 
353.29  to the person in whose name it is assessed, if the person is a 
353.30  resident of the county.  The notice must fix a time and place 
353.31  for a hearing.  
353.32     (2) The board shall reduce the valuation of each tract or 
353.33  lot which in its opinion is returned above its market value to 
353.34  the sum believed to be its market value. 
353.35     (3) The board shall raise the valuation of each class of 
353.36  personal property which in its opinion is returned below its 
354.1   market value to the sum believed to be its market value.  It 
354.2   shall raise the aggregate value of the personal property of 
354.3   individuals, firms, or corporations, when it believes that the 
354.4   aggregate valuation, as returned, is less than the market value 
354.5   of the taxable personal property possessed by the individuals, 
354.6   firms, or corporations, to the sum it believes to be the market 
354.7   value.  The board must first give notice to the persons of 
354.8   intention to do so.  The notice must set a time and place for a 
354.9   hearing. 
354.10     (4) The board shall reduce the valuation of each class of 
354.11  personal property that is returned above its market value to the 
354.12  sum it believes to be its market value.  Upon complaint of a 
354.13  party aggrieved, the board shall reduce the aggregate valuation 
354.14  of the individual's personal property, or of any class of 
354.15  personal property for which the individual is assessed, which in 
354.16  its opinion has been assessed at too large a sum, to the sum it 
354.17  believes was the market value of the individual's personal 
354.18  property of that class.  
354.19     (5) The board must not reduce the aggregate value of all 
354.20  the property of its county, as submitted to the county board of 
354.21  equalization, with the additions made by the auditor under this 
354.22  chapter, by more than one percent of its whole valuation.  The 
354.23  board may raise the aggregate valuation of real property, and of 
354.24  each class of personal property, of the county, or of any town 
354.25  or district of the county, when it believes it is below the 
354.26  market value of the property, or class of property, to the 
354.27  aggregate amount it believes to be its market value. 
354.28     (6) The board shall change the classification of any 
354.29  property which in its opinion is not properly classified. 
354.30     (7) The board does not have the authority to grant an 
354.31  exemption or to order property removed from the tax rolls. 
354.32     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
354.33  following final enactment. 
354.34     Sec. 23.  Minnesota Statutes 2002, section 275.025, 
354.35  subdivision 1, is amended to read: 
354.36     Subdivision 1.  [LEVY AMOUNT.] The state general levy is 
355.1   levied against commercial-industrial property and 
355.2   seasonal residential recreational property, as defined in this 
355.3   section.  The state general levy base amount is $592,000,000 for 
355.4   taxes payable in 2002.  For taxes payable in subsequent years, 
355.5   the levy base amount is increased each year by multiplying the 
355.6   levy base amount for the prior year by the sum of one plus the 
355.7   rate of increase, if any, in the implicit price deflator for 
355.8   government consumption expenditures and gross investment for 
355.9   state and local governments prepared by the Bureau of Economic 
355.10  Analysts of the United States Department of Commerce for the 
355.11  12-month period ending March 31 of the year prior to the year 
355.12  the taxes are payable.  The tax under this section is not 
355.13  treated as a local tax rate under section 469.177 and is not the 
355.14  levy of a governmental unit under chapters 276A and 473F.  
355.15  Beginning in fiscal year 2004, and in each year thereafter, the 
355.16  commissioner of finance shall deposit in an education reserve 
355.17  account, which account is hereby established, the increased 
355.18  amount of the state general levy received for deposit in the 
355.19  general fund for that year over the amount of the state general 
355.20  levy received for deposit in the general fund in fiscal year 
355.21  2003.  The amounts in the education reserve account do not lapse 
355.22  or cancel each year, but remain until appropriated by law for 
355.23  education aid or higher education funding. 
355.24     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
355.25  payable in 2004 and thereafter, except that the change from 
355.26  "seasonal recreational property" to "seasonal residential 
355.27  recreational property" is effective the day following final 
355.28  enactment. 
355.29     Sec. 24.  Minnesota Statutes 2002, section 275.025, 
355.30  subdivision 3, is amended to read: 
355.31     Subd. 3.  [SEASONAL RESIDENTIAL RECREATIONAL TAX CAPACITY.] 
355.32  For the purposes of this section, "seasonal residential 
355.33  recreational tax capacity" means the tax capacity of all class 
355.34  4c(1) property under section 273.13, subdivision 25, except that 
355.35  the first $76,000 of market value of each noncommercial class 
355.36  4c(1) property has a tax capacity for this purpose equal to 40 
356.1   percent of its tax capacity under section 273.13. 
356.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
356.3   following final enactment. 
356.4      Sec. 25.  Minnesota Statutes 2002, section 275.025, 
356.5   subdivision 4, is amended to read: 
356.6      Subd. 4.  [APPORTIONMENT AND LEVY OF STATE GENERAL TAX.] 
356.7   The state general tax must be distributed among the counties by 
356.8   applying a uniform rate to each county's commercial-industrial 
356.9   tax capacity and its seasonal residential recreational tax 
356.10  capacity.  Within each county, the tax must be levied by 
356.11  applying a uniform rate against commercial-industrial tax 
356.12  capacity and seasonal residential recreational tax capacity.  By 
356.13  November 1 On or before October 10 each year, the commissioner 
356.14  of revenue shall certify the a preliminary state general levy 
356.15  rate to each county auditor that must be used to prepare the 
356.16  notices of proposed property taxes for taxes payable in the 
356.17  following year.  By January 1 of each year, the commissioner 
356.18  shall certify the final state general levy rate to each county 
356.19  auditor that shall be used in spreading taxes.  
356.20     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
356.21  payable in 2004 and thereafter, except that the change from 
356.22  "seasonal recreational tax capacity" to "seasonal residential 
356.23  recreational tax capacity" is effective the day following final 
356.24  enactment. 
356.25     Sec. 26.  Minnesota Statutes 2002, section 276.10, is 
356.26  amended to read: 
356.27     276.10 [APPORTIONMENT AND DISTRIBUTION OF FUNDS.] 
356.28     On the settlement day determined in section 276.09 for each 
356.29  year, the county auditor and county treasurer shall distribute 
356.30  all undistributed funds in the treasury.  The funds must be 
356.31  apportioned as provided by law, and credited to the state, town, 
356.32  city, school district, special district and each county fund.  
356.33  Within 20 days after the distribution is completed, the county 
356.34  auditor shall report to the state auditor in the form prescribed 
356.35  by the state auditor.  The county auditor shall issue a warrant 
356.36  for the payment of money in the county treasury to the credit of 
357.1   the state, town, city, school district, or special districts on 
357.2   application of the persons entitled to receive the payment.  The 
357.3   county auditor may apply the local tax rate from the year before 
357.4   the year of distribution when apportioning and distributing 
357.5   delinquent tax proceeds, if the composition of the previous 
357.6   year's local tax rate between taxing districts is not 
357.7   significantly different from the local tax rate that existed for 
357.8   the year of the delinquency.  
357.9      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
357.10  payable in 2004 and thereafter. 
357.11     Sec. 27.  Minnesota Statutes 2002, section 276.11, 
357.12  subdivision 1, is amended to read: 
357.13     Subdivision 1.  [GENERALLY.] As soon as practical after the 
357.14  settlement day determined in section 276.09, the county 
357.15  treasurer shall pay to the state treasurer or the treasurer of a 
357.16  town, city, school district, or special district, on the warrant 
357.17  of the county auditor, all receipts of taxes levied by the 
357.18  taxing district and deliver up all orders and other evidences of 
357.19  indebtedness of the taxing district, taking triplicate receipts 
357.20  for them.  The treasurer shall file one of the receipts with the 
357.21  county auditor, and shall return one by mail on the day of its 
357.22  receipt to the clerk of the town, city, school district, or 
357.23  special district to which payment was made.  The clerk shall 
357.24  keep the receipt in the clerk's office.  Upon written request of 
357.25  the taxing district, to the extent practicable, the county 
357.26  treasurer shall make partial payments of amounts collected 
357.27  periodically in advance of the next settlement and 
357.28  distribution.  A statement prepared by the county treasurer must 
357.29  accompany each payment.  It must state the years for which taxes 
357.30  included in the payment were collected and, for each year, the 
357.31  amount of the taxes and any penalties on the tax.  Upon written 
357.32  request of a taxing district, except school districts, the 
357.33  county treasurer shall pay at least 70 percent of the estimated 
357.34  collection within 30 days after the settlement date determined 
357.35  in section 276.09.  Within seven business days after the due 
357.36  date, or 28 calendar days after the postmark date on the 
358.1   envelopes containing real or personal property tax statements, 
358.2   whichever is latest, the county treasurer shall pay to the 
358.3   treasurer of the school districts 50 percent of the estimated 
358.4   collections arising from taxes levied by and belonging to the 
358.5   school district, unless the school district elects to receive 50 
358.6   percent of the estimated collections arising from taxes levied 
358.7   by and belonging to the school district after making a 
358.8   proportionate reduction to reflect any loss in collections as 
358.9   the result of any delay in mailing tax statements.  In that 
358.10  case, 50 percent of those adjusted, estimated collections shall 
358.11  be paid by the county treasurer to the treasurer of the school 
358.12  district within seven business days of the due date.  The 
358.13  remaining 50 percent of the estimated collections must be paid 
358.14  to the treasurer of the school district within the next seven 
358.15  business days of the later of the dates in the preceding 
358.16  sentence, unless the school district elects to receive the 
358.17  remainder of its estimated collections after a proportionate 
358.18  reduction has been made to reflect any loss in collections as 
358.19  the result of any delay in mailing tax statements.  In that 
358.20  case, the remaining 50 percent of those adjusted, estimated 
358.21  collections shall be paid by the county treasurer to the 
358.22  treasurer of the school district within 14 days of the due 
358.23  date.  The treasurer shall pay the balance of the amounts 
358.24  collected to the state before June 30, or to a municipal 
358.25  corporation or other body within 60 days after the settlement 
358.26  date determined in section 276.09.  After 45 days interest at an 
358.27  annual rate of eight percent accrues and must be paid to the 
358.28  taxing district.  Interest must be paid upon appropriation from 
358.29  the general revenue fund of the county.  If not paid, it may be 
358.30  recovered by the taxing district, in a civil action. 
358.31     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
358.32  payable in 2004 and thereafter. 
358.33     Sec. 28.  [276.112] [STATE PROPERTY TAXES; COUNTY 
358.34  TREASURER.] 
358.35     On or before January 25 each year, for the period ending 
358.36  December 31 of the prior year, and on or before June 29 each 
359.1   year, for the period ending on the most recent settlement day 
359.2   determined in section 276.09, the county treasurer must make 
359.3   full settlement with the county auditor according to sections 
359.4   276.09, 276.10, and 276.111 for all receipts of state property 
359.5   taxes levied under section 275.025, and must transmit those 
359.6   receipts to the commissioner of revenue by electronic means. 
359.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
359.8   following final enactment. 
359.9      Sec. 29.  Minnesota Statutes 2002, section 277.20, 
359.10  subdivision 2, is amended to read: 
359.11     Subd. 2.  [FILING OF LIEN FOR ENFORCEABILITY.] The lien 
359.12  imposed by subdivision 1 is not enforceable against any 
359.13  purchaser, mortgagee, pledgee, holder of a Uniform Commercial 
359.14  Code security interest, mechanic's lienor, or judgment lien 
359.15  creditor until a notice of lien has been filed by the county 
359.16  treasurer in the office of the county recorder of the county in 
359.17  which the property is situated, or, in the case of personal 
359.18  property belonging to an individual who is not a resident of 
359.19  this state, or that is a corporation, partnership, or other 
359.20  organization, in the office of the secretary of state.  Priority 
359.21  of a lien created under Laws 1991, chapter 291, article 15, 
359.22  shall be determined in accordance with the provisions of section 
359.23  507.34.  Liens filed in the office of the county recorder shall 
359.24  be filed with the state tax liens filed pursuant to section 
359.25  270.69, and the index shall indicate the name of the county for 
359.26  which the lien was filed.  If the land is registered, the notice 
359.27  of lien shall be filed in the office of the registrar of titles 
359.28  of the county in which the property is registered.  
359.29  Notwithstanding any other law to the contrary, the county 
359.30  treasurer is exempt from the payment of fees when the lien is 
359.31  offered for filing or recording; the fee for filing or recording 
359.32  the lien must be paid at the time the release of lien is offered 
359.33  for filing or recording.  Notwithstanding any law to the 
359.34  contrary, the fee for filing or recording the lien or the 
359.35  release of lien is $15.  
359.36     <b>[EFFECTIVE DATE.]</b> This section is effective for liens filed 
360.1   on or after the day following final enactment. 
360.2      Sec. 30.  Minnesota Statutes 2002, section 279.06, 
360.3   subdivision 1, is amended to read: 
360.4      Subdivision 1.  [LIST AND NOTICE.] Within five days after 
360.5   the filing of such list, the court administrator shall return a 
360.6   copy thereof to the county auditor, with a notice prepared and 
360.7   signed by the court administrator, and attached thereto, which 
360.8   may be substantially in the following form: 
360.9      State of Minnesota        )                            
360.10                               ) ss.                        
360.11     County of ............... )                            
360.12                                              District Court
360.13                               .......... Judicial District.
360.14     The state of Minnesota, to all persons, companies, or 
360.15  corporations who have or claim any estate, right, title, or 
360.16  interest in, claim to, or lien upon, any of the several parcels 
360.17  of land described in the list hereto attached: 
360.18     The list of taxes and penalties on real property for the 
360.19  county of ............................... remaining delinquent 
360.20  on the first Monday in January, ......., has been filed in the 
360.21  office of the court administrator of the district court of said 
360.22  county, of which that hereto attached is a copy.  Therefore, 
360.23  you, and each of you, are hereby required to file in the office 
360.24  of said court administrator, on or before the 20th day after the 
360.25  publication of this notice and list, your answer, in writing, 
360.26  setting forth any objection or defense you may have to the 
360.27  taxes, or any part thereof, upon any parcel of land described in 
360.28  the list, in, to, or on which you have or claim any estate, 
360.29  right, title, interest, claim, or lien, and, in default thereof, 
360.30  judgment will be entered against such parcel of land for the 
360.31  taxes on such list appearing against it, and for all penalties, 
360.32  interest, and costs.  Based upon said judgment, the land shall 
360.33  be sold to the state of Minnesota on the second Monday in May, 
360.34  .......  The period of redemption for all lands sold to the 
360.35  state at a tax judgment sale shall be three years from the date 
360.36  of sale to the state of Minnesota if the land is within an 
361.1   incorporated area unless it is: 
361.2      (a) nonagricultural homesteaded land as defined in section 
361.3   273.13, subdivision 22; 
361.4      (b) homesteaded agricultural land as defined in section 
361.5   273.13, subdivision 23, paragraph (a); 
361.6      (c) seasonal residential recreational land as defined in 
361.7   section 273.13, subdivisions 22, paragraph (c), and 25, 
361.8   paragraph (c) (d), clause (5) (1), in which event the period of 
361.9   redemption is five years from the date of sale to the state of 
361.10  Minnesota; 
361.11     (d) abandoned property and pursuant to section 281.173 a 
361.12  court order has been entered shortening the redemption period to 
361.13  five weeks; or 
361.14     (e) vacant property as described under section 281.174, 
361.15  subdivision 2, and for which a court order is entered shortening 
361.16  the redemption period under section 281.174. 
361.17     The period of redemption for all other lands sold to the 
361.18  state at a tax judgment sale shall be five years from the date 
361.19  of sale.  
361.20     Inquiries as to the proceedings set forth above can be made 
361.21  to the county auditor of ..... county whose address is ..... .  
361.22      (Signed) ............................................., 
361.23      Court Administrator of the District Court of the County 
361.24      of .................................................... 
361.25      (Here insert list.) 
361.26     The list referred to in the notice shall be substantially 
361.27  in the following form: 
361.28     List of real property for the county of 
361.29  ......................., on which taxes remain delinquent on the 
361.30  first Monday in January, .......: 
361.31                        Town of (Fairfield), 
361.32                     Township (40), Range (20), 
361.33   Names (and 
361.34   Current Filed 
361.35   Addresses) for 
361.36   the Taxpayers 
362.1    and Fee Owners 
362.2    and in Addition 
362.3    Those Parties 
362.4    Who Have Filed 
362.5    Their Addresses                            Tax 
362.6    Pursuant to     Subdivision of            Parcel   Total Tax 
362.7    section 276.041    Section       Section  Number  and Penalty
362.8                                                        $ cts.
362.9    John Jones  S.E. 1/4 of S.W. 1/4    10    23101       2.20  
362.10   (825 Fremont  
362.11   Fairfield, MN 
362.12   55000) 
362.13   Bruce Smith  That part of N.E. 1/4 
362.14   (2059 Hand   of S.W. 1/4 desc. as 
362.15   Fairfield,   follows:  Beg. at the 
362.16   MN 55000)    S.E. corner of said 
362.17   and          N.E. 1/4 of S.W. 1/4;  
362.18   Fairfield    thence N. along the E.  
362.19   State Bank   line of said N.E. 1/4 
362.20   (100 Main    of S.W. 1/4 a distance 
362.21   Street       of 600 ft.; thence W. 
362.22   Fairfield,   parallel with the S. 
362.23   MN 55000)    line of said N.E. 1/4 
362.24                of S.W. 1/4 a distance 
362.25                of 600 ft.; thence S. 
362.26                parallel with said E. 
362.27                line a distance of 600 
362.28                ft. to S. line of said 
362.29                N.E. 1/4 of S.W. 1/4;
362.30                thence E. along said S. 
362.31                line a distance of 600 
362.32                ft. to the point of 
362.33                beg. ...............    21    33211       3.15  
362.34     As to platted property, the form of heading shall conform 
362.35  to circumstances and be substantially in the following form:  
362.36                        City of (Smithtown) 
363.1                   Brown's Addition, or Subdivision 
363.2    Names (and 
363.3    Current Filed 
363.4    Addresses) for 
363.5    the Taxpayers 
363.6    and Fee Owners 
363.7    and in Addition 
363.8    Those Parties 
363.9    Who have Filed 
363.10   Their Addresses                         Tax 
363.11   Pursuant to                            Parcel      Total Tax 
363.12   section 276.041     Lot     Block      Number     and Penalty
363.13                                                       $ cts.
363.14   John Jones           15         9      58243          2.20 
363.15   (825 Fremont 
363.16   Fairfield, 
363.17   MN 55000) 
363.18   Bruce Smith          16         9      58244          3.15 
363.19   (2059 Hand 
363.20   Fairfield, 
363.21   MN 55000) 
363.22   and 
363.23   Fairfield 
363.24   State Bank 
363.25   (100 Main Street 
363.26   Fairfield, 
363.27   MN 55000) 
363.28     The names, descriptions, and figures employed in 
363.29  parentheses in the above forms are merely for purposes of 
363.30  illustration. 
363.31     The name of the town, township, range or city, and addition 
363.32  or subdivision, as the case may be, shall be repeated at the 
363.33  head of each column of the printed lists as brought forward from 
363.34  the preceding column.  
363.35     Errors in the list shall not be deemed to be a material 
363.36  defect to affect the validity of the judgment and sale. 
364.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
364.2   following final enactment. 
364.3      Sec. 31.  Minnesota Statutes 2002, section 281.17, is 
364.4   amended to read: 
364.5      281.17 [PERIOD FOR REDEMPTION.] 
364.6      Except for properties for which the period of redemption 
364.7   has been limited under sections 281.173 and 281.174, the 
364.8   following periods for redemption apply. 
364.9      The period of redemption for all lands sold to the state at 
364.10  a tax judgment sale shall be three years from the date of sale 
364.11  to the state of Minnesota if the land is within an incorporated 
364.12  area unless it is:  (a) nonagricultural homesteaded land as 
364.13  defined in section 273.13, subdivision 22; (b) homesteaded 
364.14  agricultural land as defined in section 273.13, subdivision 23, 
364.15  paragraph (a); or (c) seasonal residential recreational land as 
364.16  defined in section 273.13, subdivision 22, paragraph (c), or 25, 
364.17  paragraph (d), clause (1), for which the period of redemption is 
364.18  five years from the date of sale to the state of Minnesota. 
364.19     The period of redemption for homesteaded lands as defined 
364.20  in section 273.13, subdivision 22, located in a targeted 
364.21  neighborhood as defined in Laws 1987, chapter 386, article 6, 
364.22  section 4, and sold to the state at a tax judgment sale is three 
364.23  years from the date of sale.  The period of redemption for all 
364.24  lands located in a targeted neighborhood as defined in Laws 
364.25  1987, chapter 386, article 6, section 4, except (1) homesteaded 
364.26  lands as defined in section 273.13, subdivision 22, and (2) for 
364.27  periods of redemption beginning after June 30, 1991, but before 
364.28  July 1, 1996, lands located in the Loring Park targeted 
364.29  neighborhood on which a notice of lis pendens has been served, 
364.30  and sold to the state at a tax judgment sale is one year from 
364.31  the date of sale. 
364.32     The period of redemption for all real property constituting 
364.33  a mixed municipal solid waste disposal facility that is a 
364.34  qualified facility under section 115B.39, subdivision 1, is one 
364.35  year from the date of the sale to the state of Minnesota. 
364.36     The period of redemption for all other lands sold to the 
365.1   state at a tax judgment sale shall be five years from the date 
365.2   of sale, except that the period of redemption for nonhomesteaded 
365.3   agricultural land as defined in section 273.13, subdivision 23, 
365.4   paragraph (b), shall be two years from the date of sale if at 
365.5   that time that property is owned by a person who owns one or 
365.6   more parcels of property on which taxes are delinquent, and the 
365.7   delinquent taxes are more than 25 percent of the prior year's 
365.8   school district levy. 
365.9      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
365.10  following final enactment. 
365.11     Sec. 32.  Minnesota Statutes 2002, section 282.01, 
365.12  subdivision 7a, is amended to read: 
365.13     Subd. 7a.  [CITY SALES; ALTERNATE PROCEDURES.] Land located 
365.14  in a home rule charter or statutory city, or in a town which 
365.15  cannot be improved because of noncompliance with local 
365.16  ordinances regarding minimum area, shape, frontage or access may 
365.17  be sold by the county auditor pursuant to this subdivision if 
365.18  the auditor determines that a nonpublic sale will encourage the 
365.19  approval of sale of the land by the city or town and promote its 
365.20  return to the tax rolls.  If the physical characteristics of the 
365.21  land indicate that its highest and best use will be achieved by 
365.22  combining it with an adjoining parcel and the city or town has 
365.23  not adopted a local ordinance governing minimum area, shape, 
365.24  frontage, or access, the land may also be sold pursuant to this 
365.25  subdivision.  If the property consists of an undivided interest 
365.26  in land or land and improvements, the property may also be sold 
365.27  to the other owners under this subdivision.  The sale of land 
365.28  pursuant to this subdivision shall be subject to any conditions 
365.29  imposed by the county board pursuant to section 282.03.  The 
365.30  governing body of the city or town may recommend to the county 
365.31  board conditions to be imposed on the sale.  The county auditor 
365.32  may restrict the sale to owners of lands adjoining the land to 
365.33  be sold.  The county auditor shall conduct the sale by sealed 
365.34  bid or may select another means of sale.  The land shall be sold 
365.35  to the highest bidder but in no event shall the land be sold for 
365.36  less than its appraised value.  All owners of land adjoining the 
366.1   land to be sold shall be given a written notice at least 30 days 
366.2   prior to the sale.  
366.3      This subdivision shall be liberally construed to encourage 
366.4   the sale and utilization of tax-forfeited land, to eliminate 
366.5   nuisances and dangerous conditions and to increase compliance 
366.6   with land use ordinances. 
366.7      <b>[EFFECTIVE DATE.]</b> This section is effective for sales 
366.8   occurring on or after the day following final enactment. 
366.9      Sec. 33.  Minnesota Statutes 2002, section 282.08, is 
366.10  amended to read: 
366.11     282.08 [APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.] 
366.12     The net proceeds from the sale or rental of any parcel of 
366.13  forfeited land, or from the sale of products from the forfeited 
366.14  land, must be apportioned by the county auditor to the taxing 
366.15  districts interested in the land, as follows: 
366.16     (1) the amounts necessary to pay the state general tax levy 
366.17  against the parcel for taxes payable in the year for which the 
366.18  tax judgment was entered, and for each subsequent payable year 
366.19  up to and including the year of forfeiture, must be apportioned 
366.20  to the state; 
366.21     (2) the portion required to pay any amounts included in the 
366.22  appraised value under section 282.01, subdivision 3, as 
366.23  representing increased value due to any public improvement made 
366.24  after forfeiture of the parcel to the state, but not exceeding 
366.25  the amount certified by the clerk of the municipality must be 
366.26  apportioned to the municipal subdivision entitled to it; 
366.27     (2) (3) the portion required to pay any amount included in 
366.28  the appraised value under section 282.019, subdivision 5, 
366.29  representing increased value due to response actions taken after 
366.30  forfeiture of the parcel to the state, but not exceeding the 
366.31  amount of expenses certified by the pollution control agency or 
366.32  the commissioner of agriculture, must be apportioned to the 
366.33  agency or the commissioner of agriculture and deposited in the 
366.34  fund from which the expenses were paid; 
366.35     (3) (4) the portion of the remainder required to discharge 
366.36  any special assessment chargeable against the parcel for 
367.1   drainage or other purpose whether due or deferred at the time of 
367.2   forfeiture, must be apportioned to the municipal subdivision 
367.3   entitled to it; and 
367.4      (4) (5) any balance must be apportioned as follows: 
367.5      (i) The county board may annually by resolution set aside 
367.6   no more than 30 percent of the receipts remaining to be used for 
367.7   timber development on tax-forfeited land and dedicated memorial 
367.8   forests, to be expended under the supervision of the county 
367.9   board.  It must be expended only on projects approved by the 
367.10  commissioner of natural resources. 
367.11     (ii) The county board may annually by resolution set aside 
367.12  no more than 20 percent of the receipts remaining to be used for 
367.13  the acquisition and maintenance of county parks or recreational 
367.14  areas as defined in sections 398.31 to 398.36, to be expended 
367.15  under the supervision of the county board. 
367.16     (iii) Any balance remaining must be apportioned as 
367.17  follows:  county, 40 percent; town or city, 20 percent; and 
367.18  school district, 40 percent, provided, however, that in 
367.19  unorganized territory that portion which would have accrued to 
367.20  the township must be administered by the county board of 
367.21  commissioners. 
367.22     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
367.23  payable in 2004 and thereafter. 
367.24     Sec. 34.  Minnesota Statutes 2002, section 290C.02, 
367.25  subdivision 3, is amended to read: 
367.26     Subd. 3.  [CLAIMANT.] "Claimant" means a person, as that 
367.27  term is defined in section 290.01, subdivision 2, who owns 
367.28  forest land in Minnesota and files an application authorized by 
367.29  the Sustainable Forest Incentive Act.  For purposes of section 
367.30  290C.11, claimant also includes any person bound by the covenant 
367.31  required in section 290C.04.  No more than one claimant is 
367.32  entitled to a payment under this chapter with respect to any 
367.33  tract, parcel, or piece of land enrolled under this chapter that 
367.34  has been assigned the same parcel identification number.  When 
367.35  enrolled forest land is owned by two or more persons, the owners 
367.36  must determine between them which person may claim the payments 
368.1   provided under sections 290C.01 to 290C.11. 
368.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
368.3   following final enactment. 
368.4      Sec. 35.  Minnesota Statutes 2002, section 290C.02, 
368.5   subdivision 7, is amended to read: 
368.6      Subd. 7.  [FOREST MANAGEMENT PLAN.] "Forest management 
368.7   plan" means a written document providing a framework for 
368.8   site-specific healthy, productive, and sustainable forest 
368.9   resources.  A forest management plan must include at least the 
368.10  following:  (i) owner-specific forest management goals for the 
368.11  property land; (ii) a reliable field inventory of the individual 
368.12  forest cover types, their age, and density; (iii) a description 
368.13  of the soil type and quality; (iv) an aerial photo and/or map of 
368.14  the vegetation and other natural features of the property land 
368.15  clearly indicating the boundaries of the property land and of 
368.16  the forest land; (v) the proposed future conditions of the 
368.17  property land; (vi) prescriptions to meet proposed future 
368.18  conditions of the property land; (vii) a recommended timetable 
368.19  for implementing the prescribed activities; and (viii) a legal 
368.20  description of the parcels land encompassing the parcels 
368.21  included in the plan.  All management activities prescribed in a 
368.22  plan must be in accordance with the recommended timber 
368.23  harvesting and forest management guidelines.  The commissioner 
368.24  of natural resources shall provide a framework for plan content 
368.25  and updating and revising plans. 
368.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
368.27  following final enactment. 
368.28     Sec. 36.  Minnesota Statutes 2002, section 290C.03, is 
368.29  amended to read: 
368.30     290C.03 [ELIGIBILITY REQUIREMENTS.] 
368.31     (a) Property Land may be enrolled in the sustainable forest 
368.32  incentive program under this chapter if all of the following 
368.33  conditions are met: 
368.34     (1) property the land consists of at least 20 contiguous 
368.35  acres and at least 50 percent of the land must meet the 
368.36  definition of forest land in section 88.01, subdivision 7, 
369.1   during the enrollment; 
369.2      (2) a forest management plan for the property land must be 
369.3   prepared by an approved plan writer and implemented during the 
369.4   period in which the land is enrolled; 
369.5      (3) timber harvesting and forest management guidelines must 
369.6   be used in conjunction with any timber harvesting or forest 
369.7   management activities conducted on the land during the period in 
369.8   which the land is enrolled; 
369.9      (4) the property land must be enrolled for a minimum of 
369.10  eight years; 
369.11     (5) there are no delinquent property taxes on the property 
369.12  land; and 
369.13     (6) claimants enrolling more than 1,920 acres in the 
369.14  sustainable forest incentive program must allow year-round, 
369.15  nonmotorized access to fish and wildlife resources on enrolled 
369.16  land except within one-fourth mile of a permanent dwelling or 
369.17  during periods of high fire hazard as determined by the 
369.18  commissioner of natural resources. 
369.19     (b) Claimants required to allow access under paragraph (a), 
369.20  clause (6), do not by that action: 
369.21     (1) extend any assurance that the land is safe for any 
369.22  purpose; 
369.23     (2) confer upon the person the legal status of an invitee 
369.24  or licensee to whom a duty of care is owed; or 
369.25     (3) assume responsibility for or incur liability for any 
369.26  injury to the person or property caused by an act or omission of 
369.27  the person. 
369.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
369.29  following final enactment. 
369.30     Sec. 37.  Minnesota Statutes 2002, section 290C.07, is 
369.31  amended to read: 
369.32     290C.07 [CALCULATION OF INCENTIVE PAYMENT.] 
369.33     An approved claimant under the sustainable forest incentive 
369.34  program is eligible to receive an annual payment.  The payment 
369.35  shall equal the greater of: 
369.36     (1) the difference between the property tax that would be 
370.1   paid on the property land using the previous year's statewide 
370.2   average total township tax rate and the class rate for class 2b 
370.3   timberland under section 273.13, subdivision 23, paragraph (b), 
370.4   if the property land were valued at (i) the average statewide 
370.5   timberland market value per acre calculated under section 
370.6   290C.06, and (ii) the average statewide timberland current use 
370.7   value per acre calculated under section 290C.02, subdivision 5; 
370.8      (2) two-thirds of the property tax amount determined by 
370.9   using the previous year's statewide average total township tax 
370.10  rate, the estimated market value per acre as calculated in 
370.11  section 290C.06, and the class rate for 2b timberland under 
370.12  section 273.13, subdivision 23, paragraph (b); or 
370.13     (3) $1.50 per acre for each acre enrolled in the 
370.14  sustainable forest incentive program. 
370.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
370.16  following final enactment. 
370.17     Sec. 38.  Minnesota Statutes 2002, section 290C.09, is 
370.18  amended to read: 
370.19     290C.09 [REMOVAL FOR PROPERTY TAX DELINQUENCY.] 
370.20     The commissioner shall immediately remove any property land 
370.21  enrolled in the sustainable forest incentive program for which 
370.22  taxes are determined to be delinquent as provided in chapter 279 
370.23  and shall notify the claimant of such action.  Lands terminated 
370.24  from the sustainable forest incentive program under this section 
370.25  are not entitled to any payments provided in this chapter and 
370.26  are subject to removal penalties prescribed in section 290C.11.  
370.27  The claimant has 60 days from the receipt of notice from the 
370.28  commissioner under this section to pay the delinquent taxes.  If 
370.29  the delinquent taxes are paid within this 60-day period, the 
370.30  lands shall be reinstated in the program as if they had not been 
370.31  withdrawn and without the payment of a penalty. 
370.32     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
370.33  following final enactment. 
370.34     Sec. 39.  Minnesota Statutes 2002, section 290C.10, is 
370.35  amended to read: 
370.36     290C.10 [WITHDRAWAL PROCEDURES.] 
371.1      An approved claimant under the sustainable forest incentive 
371.2   program for a minimum of four years may notify the commissioner 
371.3   of the intent to terminate enrollment.  Within 90 days of 
371.4   receipt of notice to terminate enrollment, the commissioner 
371.5   shall inform the claimant in writing, acknowledging receipt of 
371.6   this notice and indicating the effective date of termination 
371.7   from the sustainable forest incentive program.  Termination of 
371.8   enrollment in the sustainable forest incentive program occurs on 
371.9   January 1 of the fifth calendar year that begins after receipt 
371.10  by the commissioner of the termination notice.  After the 
371.11  commissioner issues an effective date of termination, a claimant 
371.12  wishing to continue the property's land's enrollment in the 
371.13  sustainable forest incentive program beyond the termination date 
371.14  must apply for enrollment as prescribed in section 290C.04.  A 
371.15  claimant who withdraws a parcel of land from this program may 
371.16  not reenroll the parcel for a period of three years.  Within 90 
371.17  days after the termination date, the commissioner shall execute 
371.18  and acknowledge a document releasing the land from the covenant 
371.19  required under this chapter.  The document must be mailed to the 
371.20  claimant and is entitled to be recorded.  The commissioner may 
371.21  allow early withdrawal from the Sustainable Forest Incentive Act 
371.22  without penalty in cases of condemnation for a public purpose 
371.23  notwithstanding the provisions of this section. 
371.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
371.25  following final enactment. 
371.26     Sec. 40.  Minnesota Statutes 2002, section 290C.11, is 
371.27  amended to read: 
371.28     290C.11 [PENALTIES FOR REMOVAL.] 
371.29     (a) If the commissioner determines that property land 
371.30  enrolled in the sustainable forest incentive program is in 
371.31  violation of the conditions for enrollment as specified in 
371.32  section 290C.03, the commissioner shall notify the claimant of 
371.33  the intent to remove all enrolled land from the sustainable 
371.34  forest incentive program.  The claimant has 60 days to appeal 
371.35  this determination. The appeal must be made in writing to the 
371.36  commissioner, who shall, within 60 days, notify the claimant as 
372.1   to the outcome of the appeal.  Within 60 days after the 
372.2   commissioner denies an appeal, or within 120 days after the 
372.3   commissioner received a written appeal if the commissioner has 
372.4   not made a determination in that time, the owner may appeal to 
372.5   tax court under chapter 271 as if the appeal is from an order of 
372.6   the commissioner. 
372.7      (b) If the commissioner determines the property land is to 
372.8   be removed from the sustainable forest incentive program, the 
372.9   claimant is liable for payment to the commissioner in the amount 
372.10  equal to the payments received under this chapter for the 
372.11  previous four-year period, plus interest.  The claimant has 90 
372.12  days to satisfy the payment for removal of land from the 
372.13  sustainable forest incentive program under this section.  If the 
372.14  penalty is not paid within the 90-day period under this 
372.15  paragraph, the commissioner shall certify the amount to the 
372.16  county auditor for collection as a part of the general ad 
372.17  valorem real property taxes on the land in the following taxes 
372.18  payable year.  
372.19     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
372.20  following final enactment. 
372.21     Sec. 41.  [290C.12] [DEATH OF CLAIMANT.] 
372.22     Within one year after the death of the claimant, the 
372.23  claimant's heir, devisee, or estate must either: 
372.24     (1) notify the commissioner of election to terminate 
372.25  enrollment in the sustainable forest incentive program; or 
372.26     (2) make an application under this chapter to continue 
372.27  enrollment of the land in the program.  
372.28     Upon notification under clause (1), the commissioner shall 
372.29  terminate the enrollment and issue a document releasing the land 
372.30  from the covenant as provided in section 290C.04, paragraph 
372.31  (c).  Penalties under section 290C.11 shall not apply.  If the 
372.32  application under clause (2) is approved, the land is enrolled 
372.33  in the program without a break.  If the commissioner does not 
372.34  receive notification within one year after the date of death, 
372.35  enrollment in the program shall be terminated and penalties 
372.36  under section 290C.11 shall not apply. 
373.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
373.2   following final enactment, except in the case of claimants dying 
373.3   prior to the day following final enactment, heirs, devisees, or 
373.4   estates may make the election either six months after the 
373.5   effective date of this provision or one year after the death of 
373.6   the claimant, whichever is later. 
373.7      Sec. 42.  Minnesota Statutes 2002, section 469.1792, 
373.8   subdivision 3, is amended to read: 
373.9      Subd. 3.  [ACTIONS AUTHORIZED.] (a) An authority with a 
373.10  district qualifying under this section may take either or both 
373.11  of the following actions for any or all of its preexisting 
373.12  districts: 
373.13     (1) the authority may elect that the original local tax 
373.14  rate under section 469.177, subdivision 1a, does not apply to 
373.15  the district; and 
373.16     (2) the authority may elect the fiscal disparities 
373.17  contribution will be computed under section 469.177, subdivision 
373.18  3, paragraph (a), regardless of the election that was made for 
373.19  the district. 
373.20     (b) The authority may take action under this subdivision 
373.21  only after the municipality approves the action, by resolution, 
373.22  after notice and public hearing in the manner provided under 
373.23  section 469.175, subdivision 2.  To be effective for taxes 
373.24  payable in the following year, the resolution must be adopted 
373.25  and the county auditor must be notified of the adoption on or 
373.26  before July 1. 
373.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
373.28  payable in 2004 and thereafter. 
373.29     Sec. 43.  Minnesota Statutes 2002, section 473F.07, 
373.30  subdivision 4, is amended to read: 
373.31     Subd. 4.  [DISTRIBUTION NET TAX CAPACITY.] The 
373.32  administrative auditor shall determine the proportion which the 
373.33  index of each municipality bears to the sum of the indices of 
373.34  all municipalities and shall then multiply this proportion in 
373.35  the case of each municipality, by the areawide net tax capacity, 
373.36  provided that if the distribution net tax capacity for a 
374.1   municipality is less than 95 percent of the municipality's 
374.2   previous year distribution net tax capacity, and more than ten 
374.3   percent of the municipality's fiscal capacity consists of 
374.4   manufactured home property, the municipality's distribution net 
374.5   tax capacity will be increased to 95 percent of the previous 
374.6   year net tax capacity and the distribution net tax capacity of 
374.7   other municipalities in the area will be proportionately reduced.
374.8      <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
374.9   payable in 2004 and subsequent years. 
374.10     Sec. 44.  Minnesota Statutes 2002, section 515B.1-116, is 
374.11  amended to read: 
374.12     515B.1-116 [RECORDING.] 
374.13     (a) A declaration, bylaws, any amendment to a declaration 
374.14  or bylaws, and any other instrument affecting a common interest 
374.15  community shall be entitled to be recorded.  In those counties 
374.16  which have a tract index, the county recorder shall enter the 
374.17  declaration in the tract index for each unit affected.  The 
374.18  registrar of titles shall file the declaration in accordance 
374.19  with section 508.351 or 508A.351. 
374.20     (b) The recording officer shall upon request promptly 
374.21  assign a number (CIC number) to a common interest community to 
374.22  be formed or to a common interest community resulting from the 
374.23  merger of two or more common interest communities. 
374.24     (c) Documents recorded pursuant to this chapter shall in 
374.25  the case of registered land be filed, and references to the 
374.26  recording of documents shall mean filed in the case of 
374.27  registered land. 
374.28     (d) Subject to any specific requirements of this chapter, 
374.29  if a recorded document relating to a common interest community 
374.30  purports to require a certain vote or signatures approving any 
374.31  restatement or amendment of the document by a certain number or 
374.32  percentage of unit owners or secured parties, and if the 
374.33  amendment or restatement is to be recorded pursuant to this 
374.34  chapter, an affidavit of the president or secretary of the 
374.35  association stating that the required vote or signatures have 
374.36  been obtained shall be attached to the document to be recorded 
375.1   and shall constitute prima facie evidence of the representations 
375.2   contained therein. 
375.3      (e) If a common interest community is located on registered 
375.4   land, the recording fee for any document affecting two or more 
375.5   units shall be the then-current fee for registering the document 
375.6   on the certificates of title for the first ten affected 
375.7   certificates and one-third of the then-current fee for each 
375.8   additional affected certificate.  This provision shall not apply 
375.9   to recording fees for deeds of conveyance, with the exception of 
375.10  deeds given pursuant to sections 515B.2-119 and 515B.3-112. 
375.11     (f) Except as permitted under this subsection, a recording 
375.12  officer shall not file or record a declaration creating a new 
375.13  common interest community, unless the county treasurer has 
375.14  certified that the property taxes payable in the current year 
375.15  for the real estate included in the proposed common interest 
375.16  community have been paid.  This certification is in addition to 
375.17  the certification for delinquent taxes required by section 
375.18  272.12.  In the case of preexisting common interest communities, 
375.19  the recording officer shall accept, file, and record the 
375.20  following instruments, without requiring a certification as to 
375.21  the current or delinquent taxes on any of the units in the 
375.22  common interest community:  (i) a declaration subjecting the 
375.23  common interest community to this chapter; (ii) a declaration 
375.24  changing the form of a common interest community pursuant to 
375.25  section 515B.2-123; or (iii) an amendment to or restatement of 
375.26  the declaration, bylaws, or CIC plat.  In order for the 
375.27  instruments an instrument to be accepted and recorded under the 
375.28  preceding sentence, the assessor must certify or otherwise 
375.29  inform the recording officer that, for taxes payable in the 
375.30  current year, the assessor has allocated taxable values to each 
375.31  unit or has separately assessed each unit instrument must not 
375.32  create or change unit or common area boundaries. 
375.33     <b>[EFFECTIVE DATE.]</b> This section is effective for deeds or 
375.34  instruments accepted for recording or registration on or after 
375.35  July 1, 2003. 
375.36     Sec. 45.  Laws 2001, First Special Session chapter 5, 
376.1   article 3, section 61, the effective date, is amended to read: 
376.2      <b>[EFFECTIVE DATE.]</b> This section is effective August 1, 2001, 
376.3   for deeds issued on or after August 1, 2001.  This section is 
376.4   effective August 1, 2006, for deeds issued before August 1, 2001.
376.5      Sec. 46.  Laws 2001, First Special Session chapter 5, 
376.6   article 3, section 63, the effective date, is amended to read: 
376.7      <b>[EFFECTIVE DATE.]</b> This section is effective August 1, 2001, 
376.8   for deeds issued on or after August 1, 2001.  This section is 
376.9   effective August 1, 2006, for deeds issued before August 1, 2001.
376.10     Sec. 47.  Laws 2002, chapter 377, article 6, section 4, the 
376.11  effective date, is amended to read: 
376.12     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
376.13  payable in 2004 May 16, 2002, and thereafter. 
376.14     Sec. 48.  [PRE-1940 HOUSING PERCENTAGE.] 
376.15     For the purposes of determining local government aid 
376.16  payment amounts for aids payable in 2003, the "pre-1940 housing 
376.17  percentage" factor shall be based upon the 1990 federal census, 
376.18  notwithstanding Minnesota Statutes 2002, section 477A.011, 
376.19  subdivision 30. 
376.20     <b>[EFFECTIVE DATE.]</b> This section is effective for aids 
376.21  payable in 2003 only. 
376.22     Sec. 49.  [REPEALER.] 
376.23     (a) Minnesota Statutes 2002, section 274.04, is repealed. 
376.24     (b) Minnesota Statutes 2002, section 477A.065, is repealed 
376.25  effective for aid payable in 2004 and thereafter. 
376.26     (c) Minnesota Rules, parts 8106.0100, subparts 11, 15, and 
376.27  16; and 8106.0200, are repealed effective the day following 
376.28  final enactment. 
376.29                             ARTICLE 15 
376.30              DEPARTMENT SALES AND USE TAX INITIATIVES 
376.31     Section 1.  Minnesota Statutes 2002, section 289A.50, 
376.32  subdivision 2a, is amended to read: 
376.33     Subd. 2a.  [REFUND OF SALES TAX TO PURCHASERS.] (a) If a 
376.34  vendor has collected from a purchaser a tax on a transaction 
376.35  that is not subject to the tax imposed by chapter 297A, the 
376.36  purchaser may apply directly to the commissioner for a refund 
377.1   under this section if: 
377.2      (a) (1) the purchaser is currently registered or was 
377.3   registered during the period of the claim, to collect and remit 
377.4   the sales tax or to remit the use tax; and 
377.5      (2) either 
377.6      (b) (i) the amount of the refund to be applied for exceeds 
377.7   $500, or 
377.8      (ii) the amount of the refund to be applied for does not 
377.9   exceed $500, but the purchaser also applies for a capital 
377.10  equipment claim at the same time, and the total of the two 
377.11  refunds exceeds $500. 
377.12     (b) The purchaser may not file more than two applications 
377.13  for refund under this subdivision in a calendar year. 
377.14     <b>[EFFECTIVE DATE.]</b> This section is effective for claims 
377.15  filed on or after the day following final enactment. 
377.16     Sec. 2.  Minnesota Statutes 2002, section 289A.60, is 
377.17  amended by adding a subdivision to read: 
377.18     Subd. 25.  [PENALTY FOR FAILURE TO PROPERLY COMPLETE SALES 
377.19  TAX RETURN.] A person who fails to report local sales tax on a 
377.20  sales tax return or who fails to report local sales tax on 
377.21  separate tax lines on the sales tax return is subject to a 
377.22  penalty of five percent of the amount of tax not properly 
377.23  reported on the return.  A person who files a consolidated tax 
377.24  return but fails to report location information is subject to a 
377.25  $500 penalty for each return not containing location 
377.26  information.  In addition, the commissioner may revoke the 
377.27  privilege for a taxpayer to file consolidated returns and may 
377.28  require the taxpayer to separately register each location and to 
377.29  file a tax return for each location. 
377.30     <b>[EFFECTIVE DATE.]</b> This section is effective for returns 
377.31  filed after June 30, 2003. 
377.32     Sec. 3.  Minnesota Statutes 2002, section 297A.61, 
377.33  subdivision 3, is amended to read: 
377.34     Subd. 3.  [SALE AND PURCHASE.] (a) "Sale" and "purchase" 
377.35  include, but are not limited to, each of the transactions listed 
377.36  in this subdivision. 
378.1      (b) Sale and purchase include: 
378.2      (1) any transfer of title or possession, or both, of 
378.3   tangible personal property, whether absolutely or conditionally, 
378.4   for a consideration in money or by exchange or barter; and 
378.5      (2) the leasing of or the granting of a license to use or 
378.6   consume, for a consideration in money or by exchange or barter, 
378.7   tangible personal property, other than a manufactured home used 
378.8   for residential purposes for a continuous period of 30 days or 
378.9   more. 
378.10     (c) Sale and purchase include the production, fabrication, 
378.11  printing, or processing of tangible personal property for a 
378.12  consideration for consumers who furnish either directly or 
378.13  indirectly the materials used in the production, fabrication, 
378.14  printing, or processing. 
378.15     (d) Sale and purchase include the preparing for a 
378.16  consideration of food.  Notwithstanding section 297A.67, 
378.17  subdivision 2, taxable food includes, but is not limited to, the 
378.18  following: 
378.19     (1) prepared food sold by the retailer; 
378.20     (2) soft drinks; 
378.21     (3) candy; and 
378.22     (4) all food sold through vending machines. 
378.23     (e) A sale and a purchase includes the furnishing for a 
378.24  consideration of electricity, gas, water, or steam for use or 
378.25  consumption within this state. 
378.26     (f) A sale and a purchase includes the transfer for a 
378.27  consideration of computer software.  
378.28     (g) A sale and a purchase includes the furnishing for a 
378.29  consideration of the following services: 
378.30     (1) the privilege of admission to places of amusement, 
378.31  recreational areas, or athletic events, and the making available 
378.32  of amusement devices, tanning facilities, reducing salons, steam 
378.33  baths, turkish baths, health clubs, and spas or athletic 
378.34  facilities; 
378.35     (2) lodging and related services by a hotel, rooming house, 
378.36  resort, campground, motel, or trailer camp and the granting of 
379.1   any similar license to use real property other than the renting 
379.2   or leasing of it for a continuous period of 30 days or more; 
379.3      (3) nonresidential parking services, whether on a 
379.4   contractual, hourly, or other periodic basis, except for parking 
379.5   at a meter; 
379.6      (4) the granting of membership in a club, association, or 
379.7   other organization if: 
379.8      (i) the club, association, or other organization makes 
379.9   available for the use of its members sports and athletic 
379.10  facilities, without regard to whether a separate charge is 
379.11  assessed for use of the facilities; and 
379.12     (ii) use of the sports and athletic facility is not made 
379.13  available to the general public on the same basis as it is made 
379.14  available to members.  
379.15  Granting of membership means both onetime initiation fees and 
379.16  periodic membership dues.  Sports and athletic facilities 
379.17  include golf courses; tennis, racquetball, handball, and squash 
379.18  courts; basketball and volleyball facilities; running tracks; 
379.19  exercise equipment; swimming pools; and other similar athletic 
379.20  or sports facilities; 
379.21     (5) delivery of aggregate materials and concrete block by a 
379.22  third party if the delivery would be subject to the sales tax if 
379.23  provided by the seller of the aggregate material or concrete 
379.24  block; and 
379.25     (6) services as provided in this clause: 
379.26     (i) laundry and dry cleaning services including cleaning, 
379.27  pressing, repairing, altering, and storing clothes, linen 
379.28  services and supply, cleaning and blocking hats, and carpet, 
379.29  drapery, upholstery, and industrial cleaning.  Laundry and dry 
379.30  cleaning services do not include services provided by coin 
379.31  operated facilities operated by the customer; 
379.32     (ii) motor vehicle washing, waxing, and cleaning services, 
379.33  including services provided by coin operated facilities operated 
379.34  by the customer, and rustproofing, undercoating, and towing of 
379.35  motor vehicles; 
379.36     (iii) building and residential cleaning, maintenance, and 
380.1   disinfecting and exterminating services; 
380.2      (iv) detective, security, burglar, fire alarm, and armored 
380.3   car services; but not including services performed within the 
380.4   jurisdiction they serve by off-duty licensed peace officers as 
380.5   defined in section 626.84, subdivision 1, or services provided 
380.6   by a nonprofit organization for monitoring and electronic 
380.7   surveillance of persons placed on in-home detention pursuant to 
380.8   court order or under the direction of the Minnesota department 
380.9   of corrections; 
380.10     (v) pet grooming services; 
380.11     (vi) lawn care, fertilizing, mowing, spraying and sprigging 
380.12  services; garden planting and maintenance; tree, bush, and shrub 
380.13  pruning, bracing, spraying, and surgery; indoor plant care; 
380.14  tree, bush, shrub, and stump removal; and tree trimming for 
380.15  public utility lines.  Services performed under a construction 
380.16  contract for the installation of shrubbery, plants, sod, trees, 
380.17  bushes, and similar items are not taxable; 
380.18     (vii) massages, except when provided by a licensed health 
380.19  care facility or professional or upon written referral from a 
380.20  licensed health care facility or professional for treatment of 
380.21  illness, injury, or disease; and 
380.22     (viii) the furnishing of lodging, board, and care services 
380.23  for animals in kennels and other similar arrangements, but 
380.24  excluding veterinary and horse boarding services. 
380.25     In applying the provisions of this chapter, the terms 
380.26  "tangible personal property" and "sales at retail" include 
380.27  taxable services listed in clause (6), items (i) to (vi) and 
380.28  (viii) and the provision of these taxable services, unless 
380.29  specifically provided otherwise.  Services performed by an 
380.30  employee for an employer are not taxable.  Services performed by 
380.31  a partnership or association for another partnership or 
380.32  association are not taxable if one of the entities owns or 
380.33  controls more than 80 percent of the voting power of the equity 
380.34  interest in the other entity.  Services performed between 
380.35  members of an affiliated group of corporations are not taxable.  
380.36  For purposes of this section the preceding sentence, "affiliated 
381.1   group of corporations" includes those entities that would be 
381.2   classified as members of an affiliated group under United States 
381.3   Code, title 26, section 1504, and that are eligible to file a 
381.4   consolidated tax return for federal income tax purposes. 
381.5      (h) A sale and a purchase includes the furnishing for a 
381.6   consideration of tangible personal property or taxable services 
381.7   by the United States or any of its agencies or 
381.8   instrumentalities, or the state of Minnesota, its agencies, 
381.9   instrumentalities, or political subdivisions. 
381.10     (i) A sale and a purchase includes the furnishing for a 
381.11  consideration of telecommunications services, including cable 
381.12  television services and direct satellite services.  
381.13  Telecommunications services are taxed to the extent allowed 
381.14  under federal law if those services: 
381.15     (1) either (i) originate and terminate in this state; or 
381.16  (ii) originate in this state and terminate outside the state and 
381.17  the service is charged to a telephone number telecommunications 
381.18  customer located in this state or to the account of any 
381.19  transmission instrument in this state; or (iii) originate 
381.20  outside this state and terminate in this state and the service 
381.21  is charged to a telephone number telecommunications customer 
381.22  located in this state or to the account of any transmission 
381.23  instrument in this state; or 
381.24     (2) are rendered by providing a private communications 
381.25  service for which the customer has one or more locations within 
381.26  Minnesota connected to the service and the service is charged to 
381.27  a telephone number telecommunications customer located in this 
381.28  state or to the account of any transmission instrument in this 
381.29  state. 
381.30     All charges for mobile telecommunications services, as 
381.31  defined in United States Code, title 4, section 124, are deemed 
381.32  to be provided by the customer's home service provider and 
381.33  sourced to the customer's place of primary use and are subject 
381.34  to tax based upon the customer's place of primary use in 
381.35  accordance with the Mobile Telecommunications Sourcing Act, 
381.36  United States Code, title 4, sections 116 to 126.  All other 
382.1   definitions and provisions of the Mobile Telecommunications 
382.2   Sourcing Act as provided in United States Code, title 4, are 
382.3   hereby adopted. 
382.4      (j) A sale and a purchase includes the furnishing for a 
382.5   consideration of installation if the installation charges would 
382.6   be subject to the sales tax if the installation were provided by 
382.7   the seller of the item being installed. 
382.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
382.9   following final enactment. 
382.10     Sec. 4.  Minnesota Statutes 2002, section 297A.61, 
382.11  subdivision 12, is amended to read: 
382.12     Subd. 12.  [FARM MACHINERY.] (a) "Farm machinery" means new 
382.13  or used machinery, equipment, implements, accessories, and 
382.14  contrivances used directly and principally in the agricultural 
382.15  production for sale, but not including the processing, of 
382.16  livestock, dairy animals, dairy products, poultry and poultry 
382.17  products, fruits, vegetables, trees and shrubs, plants, forage, 
382.18  grains, and bees and apiary products.  
382.19     (b) Farm machinery includes including, but not limited to: 
382.20     (1) machinery for the preparation, seeding, or cultivation 
382.21  of soil for growing agricultural crops and sod, for the 
382.22  harvesting and threshing of agricultural products, or for the 
382.23  harvesting or mowing of sod; 
382.24     (2) barn cleaners, milking systems, grain dryers, feeding 
382.25  systems including stationary feed bunks, and similar 
382.26  installations, whether or not the equipment is installed by the 
382.27  seller and becomes part of the real property; and 
382.28     (3) irrigation equipment sold for exclusively agricultural 
382.29  use, including pumps, pipe fittings, valves, sprinklers, and 
382.30  other equipment necessary to the operation of an irrigation 
382.31  system when sold as part of an irrigation system, whether or not 
382.32  the equipment is installed by the seller and becomes part of the 
382.33  real property;. 
382.34     (4) logging equipment, including chain saws used for 
382.35  commercial logging; 
382.36     (5) fencing used for the containment of farmed cervidae, as 
383.1   defined in section 17.451, subdivision 2; 
383.2      (6) primary and backup generator units used to generate 
383.3   electricity for the purpose of operating farm machinery, as 
383.4   defined in this subdivision, or providing light or space heating 
383.5   necessary for the production of livestock, dairy animals, dairy 
383.6   products, or poultry and poultry products; 
383.7      (7) aquaculture production equipment as defined in 
383.8   subdivision 13; and 
383.9      (8) equipment used for maple syrup harvesting.  
383.10     (c) (b) Farm machinery does not include: 
383.11     (1) repair or replacement parts; 
383.12     (2) tools, shop equipment, grain bins, fencing material 
383.13  except fencing material covered by paragraph (b), clause (5), 
383.14  communication equipment, and other farm supplies; 
383.15     (3) motor vehicles taxed under chapter 297B; 
383.16     (4) snowmobiles or snow blowers; or 
383.17     (5) lawn mowers except those used in the production of sod 
383.18  for sale, or garden-type tractors or garden tillers; or 
383.19     (6) machinery, equipment, implements, accessories, and 
383.20  contrivances used directly in the production of horses not 
383.21  raised for slaughter, fur-bearing animals, or research animals. 
383.22     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
383.23  purchases made after June 30, 2003. 
383.24     Sec. 5.  Minnesota Statutes 2002, section 297A.61, 
383.25  subdivision 34, is amended to read: 
383.26     Subd. 34.  [FOOD SOLD THROUGH VENDING MACHINES.] "Food sold 
383.27  through vending machines" means food dispensed from a machine or 
383.28  other mechanical device that accepts payment including honor 
383.29  payments. 
383.30     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
383.31  purchases made on or after the day following final enactment. 
383.32     Sec. 6.  Minnesota Statutes 2002, section 297A.61, is 
383.33  amended by adding a subdivision to read: 
383.34     Subd. 35.  [AGRICULTURAL PRODUCTION.] "Agricultural 
383.35  production" includes, but is not limited to, horticulture, 
383.36  floriculture, maple syrup harvesting, and the raising of pets, 
384.1   livestock as defined in section 17A.03, subdivision 5, poultry, 
384.2   dairy and poultry products, bees and apiary products, 
384.3   agricultural crops, sod, fur-bearing animals, research animals, 
384.4   and horses. 
384.5      <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
384.6   purchases made after June 30, 2003. 
384.7      Sec. 7.  Minnesota Statutes 2002, section 297A.665, is 
384.8   amended to read: 
384.9      297A.665 [PRESUMPTION OF TAX; BURDEN OF PROOF.] 
384.10     (a) For the purpose of the proper administration of this 
384.11  chapter and to prevent evasion of the tax, until the contrary is 
384.12  established, it is presumed that:  
384.13     (1) all gross receipts are subject to the tax; and 
384.14     (2) all retail sales for delivery in Minnesota are for 
384.15  storage, use, or other consumption in Minnesota.  
384.16     (b) The burden of proving that a sale is not a taxable 
384.17  retail sale is on the seller.  However, the seller may take from 
384.18  the purchaser at the time of the sale an a fully completed 
384.19  exemption certificate claiming that the property purchased is 
384.20  for resale or that the sale is otherwise exempt from the tax 
384.21  imposed by this chapter which conclusively relieves the seller 
384.22  from collecting and remitting the tax.  This relief from 
384.23  liability does not apply to a seller who fraudulently fails to 
384.24  collect the tax or solicits purchasers to participate in the 
384.25  unlawful claim of an exemption.  If a seller claiming that 
384.26  certain sales are exempt, who does is not possess in possession 
384.27  of the required exemption certificates, must acquire the 
384.28  certificates within 60 days after receiving written notice from 
384.29  the commissioner that the certificates are required, deductions 
384.30  claimed by the seller that required delivery of the certificates 
384.31  must be disallowed.  If the certificates are not 
384.32  obtained delivered to the commissioner within the 60-day period, 
384.33  the sales are considered taxable sales under this 
384.34  chapter. commissioner may verify the reason or basis for the 
384.35  exemption claimed in the certificates before allowing any 
384.36  deductions.  A deduction must not be granted on the basis of 
385.1   certificates delivered to the commissioner after the 60-day 
385.2   period. 
385.3      (c) A purchaser of tangible personal property or any items 
385.4   listed in section 297A.63 that are shipped or brought to 
385.5   Minnesota by the purchaser has the burden of proving that the 
385.6   property was not purchased from a retailer for storage, use, or 
385.7   consumption in Minnesota.  
385.8      <b>[EFFECTIVE DATE.]</b> This section is effective for exemption 
385.9   certificates received for sales occurring after June 30, 2003. 
385.10     Sec. 8.  Minnesota Statutes 2002, section 297A.67, 
385.11  subdivision 2, is amended to read: 
385.12     Subd. 2.  [FOOD AND FOOD INGREDIENTS.] Food and food 
385.13  ingredients are exempt.  For purposes of this subdivision, 
385.14  "food" and "food ingredients" mean substances, whether in 
385.15  liquid, concentrated, solid, frozen, dried, or dehydrated form, 
385.16  that are sold for ingestion or chewing by humans and are 
385.17  consumed for their taste or nutritional value.  Food and food 
385.18  ingredients exempt under this subdivision do not include candy, 
385.19  soft drinks, food sold through vending machines, and prepared 
385.20  foods.  Food and food ingredients do not include alcoholic 
385.21  beverages, dietary supplements, and tobacco.  For purposes of 
385.22  this subdivision, "alcoholic beverages" means beverages that are 
385.23  suitable for human consumption and contain one-half of one 
385.24  percent or more of alcohol by volume.  For purposes of this 
385.25  subdivision, "tobacco" means cigarettes, cigars, chewing or pipe 
385.26  tobacco, or any other item that contains tobacco.  For purposes 
385.27  of this subdivision, "dietary supplements" means any product, 
385.28  other than tobacco, intended to supplement the diet that: 
385.29     (1) contains one or more of the following dietary 
385.30  ingredients: 
385.31     (i) a vitamin; 
385.32     (ii) a mineral; 
385.33     (iii) an herb or other botanical; 
385.34     (iv) an amino acid; 
385.35     (v) a dietary substance for use by humans to supplement the 
385.36  diet by increasing the total dietary intake; and 
386.1      (vi) a concentrate, metabolite, constituent, extract, or 
386.2   combination of any ingredient described in items (i) to (v); 
386.3      (2) is intended for ingestion in tablet, capsule, powder, 
386.4   softgel, gelcap, or liquid form, or if not intended for 
386.5   ingestion in such form, is not represented as conventional food 
386.6   and is not represented for use as a sole item of a meal or of 
386.7   the diet; and 
386.8      (3) is required to be labeled as a dietary supplement, 
386.9   identifiable by the supplement facts box found on the label and 
386.10  as required pursuant to Code of Federal Regulations, title 21, 
386.11  section 101.36. 
386.12     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
386.13  following final enactment. 
386.14     Sec. 9.  Minnesota Statutes 2002, section 297A.68, 
386.15  subdivision 5, is amended to read: 
386.16     Subd. 5.  [CAPITAL EQUIPMENT.] (a) Capital equipment is 
386.17  exempt.  The tax must be imposed and collected as if the rate 
386.18  under section 297A.62, subdivision 1, applied, and then refunded 
386.19  in the manner provided in section 297A.75. 
386.20     "Capital equipment" means machinery and equipment purchased 
386.21  or leased, and used in this state by the purchaser or lessee 
386.22  primarily for manufacturing, fabricating, mining, or refining 
386.23  tangible personal property to be sold ultimately at retail if 
386.24  the machinery and equipment are essential to the integrated 
386.25  production process of manufacturing, fabricating, mining, or 
386.26  refining.  Capital equipment also includes machinery and 
386.27  equipment used to electronically transmit results retrieved by a 
386.28  customer of an online computerized data retrieval system. 
386.29     (b) Capital equipment includes, but is not limited to: 
386.30     (1) machinery and equipment used to operate, control, or 
386.31  regulate the production equipment; 
386.32     (2) machinery and equipment used for research and 
386.33  development, design, quality control, and testing activities; 
386.34     (3) environmental control devices that are used to maintain 
386.35  conditions such as temperature, humidity, light, or air pressure 
386.36  when those conditions are essential to and are part of the 
387.1   production process; 
387.2      (4) materials and supplies used to construct and install 
387.3   machinery or equipment; 
387.4      (5) repair and replacement parts, including accessories, 
387.5   whether purchased as spare parts, repair parts, or as upgrades 
387.6   or modifications to machinery or equipment; 
387.7      (6) materials used for foundations that support machinery 
387.8   or equipment; 
387.9      (7) materials used to construct and install special purpose 
387.10  buildings used in the production process; and 
387.11     (8) ready-mixed concrete trucks equipment in which the 
387.12  ready-mixed concrete is mixed as part of the delivery 
387.13  process regardless if mounted on a chassis and leases of 
387.14  ready-mixed concrete trucks. 
387.15     (c) Capital equipment does not include the following: 
387.16     (1) motor vehicles taxed under chapter 297B; 
387.17     (2) machinery or equipment used to receive or store raw 
387.18  materials; 
387.19     (3) building materials, except for materials included in 
387.20  paragraph (b), clauses (6) and (7); 
387.21     (4) machinery or equipment used for nonproduction purposes, 
387.22  including, but not limited to, the following:  plant security, 
387.23  fire prevention, first aid, and hospital stations; support 
387.24  operations or administration; pollution control; and plant 
387.25  cleaning, disposal of scrap and waste, plant communications, 
387.26  space heating, cooling, lighting, or safety; 
387.27     (5) farm machinery and aquaculture production equipment as 
387.28  defined by section 297A.61, subdivisions 12 and 13; 
387.29     (6) machinery or equipment purchased and installed by a 
387.30  contractor as part of an improvement to real property; or 
387.31     (7) any other item that is not essential to the integrated 
387.32  process of manufacturing, fabricating, mining, or refining. 
387.33     (d) For purposes of this subdivision: 
387.34     (1) "Equipment" means independent devices or tools separate 
387.35  from machinery but essential to an integrated production 
387.36  process, including computers and computer software, used in 
388.1   operating, controlling, or regulating machinery and equipment; 
388.2   and any subunit or assembly comprising a component of any 
388.3   machinery or accessory or attachment parts of machinery, such as 
388.4   tools, dies, jigs, patterns, and molds.  
388.5      (2) "Fabricating" means to make, build, create, produce, or 
388.6   assemble components or property to work in a new or different 
388.7   manner. 
388.8      (3) "Integrated production process" means a process or 
388.9   series of operations through which tangible personal property is 
388.10  manufactured, fabricated, mined, or refined.  For purposes of 
388.11  this clause, (i) manufacturing begins with the removal of raw 
388.12  materials from inventory and ends when the last process prior to 
388.13  loading for shipment has been completed; (ii) fabricating begins 
388.14  with the removal from storage or inventory of the property to be 
388.15  assembled, processed, altered, or modified and ends with the 
388.16  creation or production of the new or changed product; (iii) 
388.17  mining begins with the removal of overburden from the site of 
388.18  the ores, minerals, stone, peat deposit, or surface materials 
388.19  and ends when the last process before stockpiling is completed; 
388.20  and (iv) refining begins with the removal from inventory or 
388.21  storage of a natural resource and ends with the conversion of 
388.22  the item to its completed form. 
388.23     (4) "Machinery" means mechanical, electronic, or electrical 
388.24  devices, including computers and computer software, that are 
388.25  purchased or constructed to be used for the activities set forth 
388.26  in paragraph (a), beginning with the removal of raw materials 
388.27  from inventory through completion of the product, including 
388.28  packaging of the product. 
388.29     (4) (5) "Machinery and equipment used for pollution control"
388.30  means machinery and equipment used solely to eliminate, prevent, 
388.31  or reduce pollution resulting from an activity described in 
388.32  paragraph (a).  
388.33     (5) (6) "Manufacturing" means an operation or series of 
388.34  operations where raw materials are changed in form, composition, 
388.35  or condition by machinery and equipment and which results in the 
388.36  production of a new article of tangible personal property.  For 
389.1   purposes of this subdivision, "manufacturing" includes the 
389.2   generation of electricity or steam to be sold at retail. 
389.3      (6) (7) "Mining" means the extraction of minerals, ores, 
389.4   stone, or peat. 
389.5      (7) (8) "Online data retrieval system" means a system whose 
389.6   cumulation of information is equally available and accessible to 
389.7   all its customers. 
389.8      (8) (9) "Primarily" means machinery and equipment used 50 
389.9   percent or more of the time in an activity described in 
389.10  paragraph (a). 
389.11     (9) (10) "Refining" means the process of converting a 
389.12  natural resource to a an intermediate or finished product, 
389.13  including the treatment of water to be sold at retail. 
389.14     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
389.15  purchases made after December 31, 2003. 
389.16     Sec. 10.  Minnesota Statutes 2002, section 297A.68, is 
389.17  amended by adding a subdivision to read: 
389.18     Subd. 39.  [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 
389.19  tangible personal property or services is exempt from tax for a 
389.20  period of six months from the effective date of the law change 
389.21  that results in the imposition of the tax under this chapter if: 
389.22     (1) the act imposing the tax does not have transitional 
389.23  effective date language for existing construction contracts and 
389.24  construction bids; and 
389.25     (2) the requirements of paragraph (b) are met. 
389.26     (b) A sale is tax exempt under paragraph (a) if it meets 
389.27  the requirements of either clause (1) or (2): 
389.28     (1) For a construction contract: 
389.29     (i) the goods or services sold must be used for the 
389.30  performance of a bona fide written lump sum or fixed price 
389.31  construction contract; 
389.32     (ii) the contract must be entered into before the date the 
389.33  goods or services become subject to the sales tax; 
389.34     (iii) the contract must not provide for allocation of 
389.35  future taxes; and 
389.36     (iv) for each qualifying contract the contractor must give 
390.1   the seller documentation of the contract on which an exemption 
390.2   is to be claimed. 
390.3      (2) For a bid: 
390.4      (i) the goods or services sold must be used pursuant to an 
390.5   obligation of a bid or bids; 
390.6      (ii) the bid or bids must be submitted and accepted before 
390.7   the date the goods or services became subject to the sales tax; 
390.8      (iii) the bid or bids must not be able to be withdrawn, 
390.9   modified, or changed without forfeiting a bond; and 
390.10     (iv) for each qualifying bid, the contractor must give the 
390.11  seller documentation of the bid on which an exemption is to be 
390.12  claimed. 
390.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
390.14  following final enactment. 
390.15     Sec. 11.  Minnesota Statutes 2002, section 297A.69, 
390.16  subdivision 2, is amended to read: 
390.17     Subd. 2.  [MATERIALS CONSUMED IN AGRICULTURAL PRODUCTION.] 
390.18  (a) Materials stored, used, or consumed in agricultural 
390.19  production of personal property intended to be sold ultimately 
390.20  at retail are exempt, whether or not the item becomes an 
390.21  ingredient or constituent part of the property produced.  
390.22  Materials that qualify for this exemption include, but are not 
390.23  limited to, the following: 
390.24     (1) feeds, seeds, trees, fertilizers, and herbicides, 
390.25  including when purchased for use by farmers in a federal or 
390.26  state farm or conservation program; 
390.27     (2) materials sold to a veterinarian to be used or consumed 
390.28  in the care, medication, and treatment of agricultural 
390.29  production animals and horses; 
390.30     (3) chemicals, including chemicals used for cleaning food 
390.31  processing machinery and equipment; 
390.32     (4) materials, including chemicals, fuels, and electricity 
390.33  purchased by persons engaged in agricultural production to treat 
390.34  waste generated as a result of the production process; 
390.35     (5) fuels, electricity, gas, and steam used or consumed in 
390.36  the production process, except that electricity, gas, or steam 
391.1   used for space heating, cooling, or lighting is exempt if (i) it 
391.2   is in excess of the average climate control or lighting for the 
391.3   production area, and (ii) it is necessary to produce that 
391.4   particular product; 
391.5      (6) petroleum products and lubricants; 
391.6      (7) packaging materials, including returnable containers 
391.7   used in packaging food and beverage products; and 
391.8      (8) accessory tools and equipment that are separate 
391.9   detachable units with an ordinary useful life of less than 12 
391.10  months used in producing a direct effect upon the product. 
391.11  Machinery, equipment, implements, tools, accessories, 
391.12  appliances, contrivances, and furniture and fixtures, except 
391.13  those listed in this clause are not included within this 
391.14  exemption. 
391.15     (b) For purposes of this subdivision, "agricultural 
391.16  production" includes, but is not limited to, horticulture, 
391.17  floriculture, maple syrup harvesting, and the raising of pets, 
391.18  fur-bearing animals, research animals, horses, farmed cervidae 
391.19  as defined in section 17.451, subdivision 2, llamas as defined 
391.20  in section 17.455, subdivision 2, and ratitae as defined in 
391.21  section 17.453, subdivision 3. 
391.22     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
391.23  purchases made after December 31, 2003. 
391.24     Sec. 12.  Minnesota Statutes 2002, section 297A.69, 
391.25  subdivision 3, is amended to read: 
391.26     Subd. 3.  [FARM MACHINERY REPAIR AND REPLACEMENT PARTS.] 
391.27  Repair and replacement parts, except tires, used for maintenance 
391.28  or repair of farm machinery, logging equipment, and aquaculture 
391.29  production equipment are exempt, if the part replaces a farm 
391.30  machinery part assigned a specific or generic part number by the 
391.31  manufacturer of the farm machinery.  
391.32     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
391.33  purchases made after June 30, 2003. 
391.34     Sec. 13.  Minnesota Statutes 2002, section 297A.69, 
391.35  subdivision 4, is amended to read: 
391.36     Subd. 4.  [FARM MACHINERY, EQUIPMENT, AND FENCING.] The 
392.1   following machinery, equipment, and fencing is exempt: 
392.2      (1) farm machinery is exempt.; 
392.3      (2) logging equipment, including chain saws used for 
392.4   commercial logging; 
392.5      (3) fencing used for the containment of farmed cervidae, as 
392.6   defined in section 17.451, subdivision 2; 
392.7      (4) primary and backup generator units used to generate 
392.8   electricity for the purpose of operating farm machinery, 
392.9   aquacultural production equipment, or logging equipment, or 
392.10  providing light or space heating necessary for the production of 
392.11  livestock, dairy animals, dairy products, or poultry and poultry 
392.12  products; and 
392.13     (5) aquaculture production equipment.  
392.14     <b>[EFFECTIVE DATE.]</b> This section is effective for sales and 
392.15  purchases made after June 30, 2003. 
392.16     Sec. 14.  Minnesota Statutes 2002, section 297B.025, 
392.17  subdivision 1, is amended to read: 
392.18     Subdivision 1.  [NONCOLLECTOR VEHICLE.] Purchase or use of 
392.19  a passenger automobile as defined in section 168.011, 
392.20  subdivision 7, shall be taxed pursuant to section 297B.02, 
392.21  subdivision 2, if the passenger automobile is (1) is in the 
392.22  tenth or subsequent year of vehicle life, and (2) is not an 
392.23  above-market automobile as designated by the registrar of motor 
392.24  vehicles does not have a resale value of $3,000 or more, as 
392.25  determined using nationally recognized sources of information on 
392.26  automobile resale values, as designated by the registrar of 
392.27  motor vehicles. 
392.28     The registrar of motor vehicles shall prepare, and 
392.29  distribute to all deputy motor vehicle registrars by July 15, 
392.30  1985, a listing by make, model, and year of above-market 
392.31  automobiles.  Except as provided by subdivision 2, the registrar 
392.32  must include in the list all automobiles with a resale value of 
392.33  $3,000 or more, as determined using nationally recognized 
392.34  sources of information on automobile resale values.  The 
392.35  registrar shall revise the list by February 1 of each year.  The 
392.36  initial list and all subsequent revisions must include only 
393.1   those automobiles which are in the tenth or subsequent year of 
393.2   vehicle life.  
393.3      <b>[EFFECTIVE DATE.]</b> This section is effective for vehicles 
393.4   purchased after June 30, 2003. 
393.5      Sec. 15.  Minnesota Statutes 2002, section 297B.025, 
393.6   subdivision 2, is amended to read: 
393.7      Subd. 2.  [COLLECTOR VEHICLE.] A passenger automobile that 
393.8   is registered under section 168.10, subdivision 1a, 1b, 1c, 1d, 
393.9   or 1h, or a fire truck registered under section 168.10, 
393.10  subdivision 1c, shall be taxed under section 297B.02, 
393.11  subdivision 3, and the registrar shall not designate as an 
393.12  above-market automobile a passenger automobile or a fire truck 
393.13  registered under those subdivisions.  If the vehicle is 
393.14  subsequently registered in another class not under section 
393.15  168.10, subdivision 1a, 1b, 1c, 1d, or 1h, within one year of 
393.16  the date of registration under those subdivisions, it shall be 
393.17  subject to the full excise tax imposed under subdivision 1. 
393.18     <b>[EFFECTIVE DATE.]</b> This section is effective for vehicles 
393.19  purchased after December 31, 2003. 
393.20     Sec. 16.  Minnesota Statutes 2002, section 297B.035, 
393.21  subdivision 1, is amended to read: 
393.22     Subdivision 1.  [ORDINARY COURSE OF BUSINESS.] Except as 
393.23  provided in this section, motor vehicles purchased for resale in 
393.24  the ordinary course of business or used by any motor vehicle 
393.25  dealer, as defined in section 168.011, subdivision 21, who is 
393.26  licensed under section 168.27, subdivision 2 or 3, which bear 
393.27  dealer plates as authorized by section 168.27, subdivision 16, 
393.28  shall be exempt from the provisions of this chapter. 
393.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
393.30  following final enactment. 
393.31     Sec. 17.  [REPEALER.] 
393.32     (a) Minnesota Statutes 2002, section 297A.72, subdivision 
393.33  1, is repealed effective for exemption certificates received for 
393.34  sales occurring after June 30, 2003. 
393.35     (b) Minnesota Statutes 2002, section 297A.97, is repealed 
393.36  effective for sales and purchases occurring after December 31, 
394.1   2003. 
394.2      (c) Minnesota Rules, parts 8130.0800, subparts 5 and 12; 
394.3   8130.1300; 8130.1600, subpart 5; 8130.1700, subparts 3 and 4; 
394.4   8130.4800, subpart 2; 8130.7500, subpart 5; 8130.8000; and 
394.5   8130.8300, are repealed effective the day following final 
394.6   enactment. 
394.7                              ARTICLE 16 
394.8                 DEPARTMENT SPECIAL TAXES INITIATIVES 
394.9      Section 1.  Minnesota Statutes 2002, section 115B.24, 
394.10  subdivision 8, is amended to read: 
394.11     Subd. 8.  [PENALTIES; ENFORCEMENT.] The audit, penalty and 
394.12  enforcement provisions applicable to corporate franchise taxes 
394.13  imposed under chapter 290 apply to the taxes imposed under 
394.14  section 115B.22 and those provisions shall be administered by 
394.15  the commissioner.  
394.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
394.17  following final enactment. 
394.18     Sec. 2.  Minnesota Statutes 2002, section 295.50, 
394.19  subdivision 9b, is amended to read: 
394.20     Subd. 9b.  [PATIENT SERVICES.] (a) "Patient services" means 
394.21  inpatient and outpatient services and other goods and services 
394.22  provided by hospitals, surgical centers, or health care 
394.23  providers.  They include the following health care goods and 
394.24  services provided to a patient or consumer: 
394.25     (1) bed and board; 
394.26     (2) nursing services and other related services; 
394.27     (3) use of hospitals, surgical centers, or health care 
394.28  provider facilities; 
394.29     (4) medical social services; 
394.30     (5) drugs, biologicals, supplies, appliances, and 
394.31  equipment; 
394.32     (6) other diagnostic or therapeutic items or services; 
394.33     (7) medical or surgical services; 
394.34     (8) items and services furnished to ambulatory patients not 
394.35  requiring emergency care; 
394.36     (9) emergency services; and 
395.1      (10) covered services listed in section 256B.0625 and in 
395.2   Minnesota Rules, parts 9505.0170 to 9505.0475. 
395.3      (b) "Patient services" does not include:  
395.4      (1) services provided to nursing homes licensed under 
395.5   chapter 144A; and 
395.6      (2) examinations for purposes of utilization reviews, 
395.7   insurance claims or eligibility, litigation, and employment, 
395.8   including reviews of medical records for those purposes; 
395.9      (3) services provided by community residential mental 
395.10  health facilities licensed under Minnesota Rules, parts 
395.11  9520.0500 to 9520.0690; 
395.12     (4) services provided by community support programs and 
395.13  family community support programs approved under Minnesota 
395.14  Rules, parts 9535.1700 to 9535.1760; 
395.15     (5) services provided by community mental health centers as 
395.16  defined in section 245.62, subdivision 2; 
395.17     (6) services provided by assisted living programs and 
395.18  congregate housing programs; and 
395.19     (7) hospice care services. 
395.20     <b>[EFFECTIVE DATE.]</b> This section is effective for gross 
395.21  revenues received after December 31, 2002. 
395.22     Sec. 3.  Minnesota Statutes 2002, section 295.53, 
395.23  subdivision 1, is amended to read: 
395.24     Subdivision 1.  [EXEMPTIONS.] (a) The following payments 
395.25  are excluded from the gross revenues subject to the hospital, 
395.26  surgical center, or health care provider taxes under sections 
395.27  295.50 to 295.57 295.59: 
395.28     (1) payments received for services provided under the 
395.29  Medicare program, including payments received from the 
395.30  government, and organizations governed by sections 1833 and 1876 
395.31  of title XVIII of the federal Social Security Act, United States 
395.32  Code, title 42, section 1395, and enrollee deductibles, 
395.33  coinsurance, and copayments, whether paid by the Medicare 
395.34  enrollee or by a Medicare supplemental coverage as defined in 
395.35  section 62A.011, subdivision 3, clause (10).  Payments for 
395.36  services not covered by Medicare are taxable; 
396.1      (2) medical assistance payments including payments received 
396.2   directly from the government or from a prepaid plan; 
396.3      (3) payments received for home health care services; 
396.4      (4) payments received from hospitals or surgical centers 
396.5   for goods and services on which liability for tax is imposed 
396.6   under section 295.52 or the source of funds for the payment is 
396.7   exempt under clause (1), (2), (7), (8), (10), (13), 
396.8   or (20) (17); 
396.9      (5) payments received from health care providers for goods 
396.10  and services on which liability for tax is imposed under this 
396.11  chapter or the source of funds for the payment is exempt under 
396.12  clause (1), (2), (7), (8), (10), (13), or (20) (17); 
396.13     (6) amounts paid for legend drugs, other than nutritional 
396.14  products, to a wholesale drug distributor who is subject to tax 
396.15  under section 295.52, subdivision 3, reduced by reimbursements 
396.16  received for legend drugs otherwise exempt under this chapter; 
396.17     (7) payments received under the general assistance medical 
396.18  care program including payments received directly from the 
396.19  government or from a prepaid plan; 
396.20     (8) payments received for providing services under the 
396.21  MinnesotaCare program including payments received directly from 
396.22  the government or from a prepaid plan and enrollee deductibles, 
396.23  coinsurance, and copayments.  For purposes of this clause, 
396.24  coinsurance means the portion of payment that the enrollee is 
396.25  required to pay for the covered service; 
396.26     (9) payments received by a health care provider or the 
396.27  wholly owned subsidiary of a health care provider for care 
396.28  provided outside Minnesota; 
396.29     (10) payments received from the chemical dependency fund 
396.30  under chapter 254B; 
396.31     (11) payments received in the nature of charitable 
396.32  donations that are not designated for providing patient services 
396.33  to a specific individual or group; 
396.34     (12) payments received for providing patient services 
396.35  incurred through a formal program of health care research 
396.36  conducted in conformity with federal regulations governing 
397.1   research on human subjects.  Payments received from patients or 
397.2   from other persons paying on behalf of the patients are subject 
397.3   to tax; 
397.4      (13) payments received from any governmental agency for 
397.5   services benefiting the public, not including payments made by 
397.6   the government in its capacity as an employer or insurer; 
397.7      (14) payments received for services provided by community 
397.8   residential mental health facilities licensed under Minnesota 
397.9   Rules, parts 9520.0500 to 9520.0690, community support programs 
397.10  and family community support programs approved under Minnesota 
397.11  Rules, parts 9535.1700 to 9535.1760, and community mental health 
397.12  centers as defined in section 245.62, subdivision 2; 
397.13     (15) (14) government payments received by a regional 
397.14  treatment center; 
397.15     (16) payments received for hospice care services; 
397.16     (17) (15) payments received by a health care provider for 
397.17  hearing aids and related equipment or prescription eyewear 
397.18  delivered outside of Minnesota; 
397.19     (18) (16) payments received by an educational institution 
397.20  from student tuition, student activity fees, health care service 
397.21  fees, government appropriations, donations, or grants.  Fee for 
397.22  service payments and payments for extended coverage are taxable; 
397.23  and 
397.24     (19) payments received for services provided by:  assisted 
397.25  living programs and congregate housing programs; and 
397.26     (20) (17) payments received under the federal Employees 
397.27  Health Benefits Act, United States Code, title 5, section 
397.28  8909(f), as amended by the Omnibus Reconciliation Act of 1990. 
397.29     (b) Payments received by wholesale drug distributors for 
397.30  legend drugs sold directly to veterinarians or veterinary bulk 
397.31  purchasing organizations are excluded from the gross revenues 
397.32  subject to the wholesale drug distributor tax under sections 
397.33  295.50 to 295.59. 
397.34     <b>[EFFECTIVE DATE.]</b> This section is effective for gross 
397.35  revenues received after December 31, 2002. 
397.36     Sec. 4.  Minnesota Statutes 2002, section 297F.01, 
398.1   subdivision 21a, is amended to read: 
398.2      Subd. 21a.  [UNLICENSED SELLER.] "Unlicensed seller" means 
398.3   anyone who is not licensed under section 297F.03 or 461.12 to 
398.4   sell the particular product to the purchaser or possessor of the 
398.5   product. 
398.6      <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
398.7      Sec. 5.  Minnesota Statutes 2002, section 297F.01, 
398.8   subdivision 23, is amended to read: 
398.9      Subd. 23.  [WHOLESALE SALES PRICE.] "Wholesale sales price" 
398.10  means the established price stated on the price list in effect 
398.11  at the time of sale for which a manufacturer or person sells a 
398.12  tobacco product to a distributor, exclusive of any discount, 
398.13  promotional offer, or other reduction.  For purposes of this 
398.14  subdivision, "price list" means the manufacturer's price at 
398.15  which tobacco products are made available for sale to all 
398.16  distributors on an ongoing basis. 
398.17     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
398.18     Sec. 6.  Minnesota Statutes 2002, section 297F.06, 
398.19  subdivision 4, is amended to read: 
398.20     Subd. 4.  [TOBACCO PRODUCTS USE TAX.] The tobacco products 
398.21  use tax does not apply to the possession, use, or storage of 
398.22  tobacco products in quantities of: that have an aggregate cost 
398.23  in any calendar month to the consumer of $100 or less. 
398.24     (1) not more than 50 cigars; 
398.25     (2) not more than ten ounces snuff or snuff powder; 
398.26     (3) not more than one pound smoking or chewing tobacco or 
398.27  any other tobacco product in the possession of any one consumer. 
398.28     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
398.29     Sec. 7.  Minnesota Statutes 2002, section 297F.20, 
398.30  subdivision 1, is amended to read: 
398.31     Subdivision 1.  [PENALTIES FOR FAILURE TO FILE OR PAY.] (a) 
398.32  A person or consumer required to file a return, report, or other 
398.33  document with the commissioner who fails to do so is guilty of a 
398.34  misdemeanor. 
398.35     (b) A person or consumer required to pay or to collect and 
398.36  remit a tax under this chapter, who fails to do so when 
399.1   required, is guilty of a misdemeanor. 
399.2      <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
399.3   committed on or after July 1, 2003. 
399.4      Sec. 8.  Minnesota Statutes 2002, section 297F.20, 
399.5   subdivision 2, is amended to read: 
399.6      Subd. 2.  [PENALTIES FOR KNOWING FAILURE TO FILE OR PAY.] 
399.7   (a) A person or consumer required to file a return, report, or 
399.8   other document with the commissioner, who knowingly, rather than 
399.9   accidentally, inadvertently, or negligently, fails to file it 
399.10  when required, is guilty of a gross misdemeanor.  
399.11     (b) A person or consumer required to pay or to collect and 
399.12  remit a tax under this chapter, who knowingly, rather than 
399.13  accidentally, inadvertently, or negligently, fails to file it 
399.14  when required, is guilty of a gross misdemeanor. 
399.15     <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
399.16  committed on or after July 1, 2003. 
399.17     Sec. 9.  Minnesota Statutes 2002, section 297F.20, 
399.18  subdivision 3, is amended to read: 
399.19     Subd. 3.  [FALSE OR FRAUDULENT RETURNS; PENALTIES.] (a) A 
399.20  person or consumer who files with the commissioner a return, 
399.21  report, or other document, or who maintains or provides invoices 
399.22  subject to review by the commissioner under this chapter, known 
399.23  by the person or consumer to be fraudulent or false concerning a 
399.24  material matter, is guilty of a felony. 
399.25     (b) A person or consumer who knowingly aids or assists in, 
399.26  or advises in the preparation or presentation of a return, 
399.27  report, invoice, or other document that is fraudulent or false 
399.28  concerning a material matter, whether or not the falsity or 
399.29  fraud is committed with the knowledge or consent of the 
399.30  person or consumer authorized or required to present the return, 
399.31  report, invoice, or other document, is guilty of a felony. 
399.32     <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
399.33  committed on or after July 1, 2003. 
399.34     Sec. 10.  Minnesota Statutes 2002, section 297F.20, 
399.35  subdivision 6, is amended to read: 
399.36     Subd. 6.  [UNSTAMPED CIGARETTES; UNTAXED TOBACCO PRODUCTS.] 
400.1   (a) A person, other than a licensed distributor or a consumer, 
400.2   who possesses, receives, or transports more than 200 but fewer 
400.3   than 5,000 unstamped cigarettes, or up to $100 $350 worth of 
400.4   untaxed tobacco products is guilty of a misdemeanor. 
400.5      (b) A person, other than a licensed distributor or a 
400.6   consumer, who possesses, receives, or transports 5,000 or more, 
400.7   but fewer than 20,001 unstamped cigarettes, or up to $500 more 
400.8   than $350 but less than $1,400 worth of untaxed tobacco products 
400.9   is guilty of a gross misdemeanor. 
400.10     (c) A person, other than a licensed distributor or a 
400.11  consumer, who possesses, receives, or transports more than 
400.12  20,000 unstamped cigarettes, or $500 $1,400 or more worth of 
400.13  untaxed tobacco products is guilty of a felony. 
400.14     (d) For purposes of this subdivision, an individual in 
400.15  possession of more than 4,999 unstamped cigarettes, or more than 
400.16  $350 worth of untaxed tobacco products, is presumed not to be a 
400.17  consumer. 
400.18     <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
400.19  committed on or after July 1, 2003. 
400.20     Sec. 11.  Minnesota Statutes 2002, section 297F.20, 
400.21  subdivision 9, is amended to read: 
400.22     Subd. 9.  [PURCHASES FROM UNLICENSED SELLERS.] (a) No 
400.23  retailer or subjobber shall purchase cigarettes or tobacco 
400.24  products from any person who is not licensed under section 
400.25  297F.03 as a licensed distributor or subjobber. 
400.26     (b) A retailer, or subjobber, or consumer who purchases 
400.27  from an unlicensed seller more than 200 but fewer than 5,000 
400.28  cigarettes or up to $100 $350 worth of tobacco products is 
400.29  guilty of a misdemeanor. 
400.30     (b) (c) A retailer, or subjobber, or consumer who 
400.31  purchases from an unlicensed seller 5,000 or more, but fewer 
400.32  than 20,001 cigarettes or up to $500 more than $350 but less 
400.33  than $1,400 worth of untaxed tobacco products is guilty of a 
400.34  gross misdemeanor. 
400.35     (c) (d) A retailer, or subjobber, or consumer who 
400.36  purchases from an unlicensed seller more than 20,000 cigarettes 
401.1   or $500 $1,400 or more worth of tobacco products is guilty of a 
401.2   felony. 
401.3      <b>[EFFECTIVE DATE.]</b> This section is effective for acts 
401.4   committed on or after July 1, 2003. 
401.5      Sec. 12.  Minnesota Statutes 2002, section 297I.01, 
401.6   subdivision 9, is amended to read: 
401.7      Subd. 9.  [GROSS PREMIUMS.] "Gross premiums" means total 
401.8   premiums paid by policyholders and applicants of policies, 
401.9   whether received in the form of money or other valuable 
401.10  consideration, on property, persons, lives, interests and other 
401.11  risks located, resident, or to be performed in this state, but 
401.12  excluding consideration and premiums for reinsurance assumed 
401.13  from other insurance companies.  The term "gross premiums" 
401.14  includes the total consideration paid to bail bond agents for 
401.15  bail bonds.  For title insurance companies, "gross premiums" 
401.16  means the charge for title insurance made by a title insurance 
401.17  company or its agents according to the company's rate filing 
401.18  approved by the commissioner of commerce without a deduction for 
401.19  commissions paid to or retained by the agent.  Gross premiums of 
401.20  a title insurance company does not include any other charge or 
401.21  fee for abstracting, searching, or examining the title, or 
401.22  escrow, closing, or other related services.  The term "gross 
401.23  premiums" includes any workers' compensation special 
401.24  compensation fund premium surcharge pursuant to section 176.129. 
401.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
401.26  following final enactment. 
401.27     Sec. 13.  Minnesota Statutes 2002, section 297I.20, is 
401.28  amended to read: 
401.29     297I.20 [GUARANTY ASSOCIATION ASSESSMENT OFFSET OFFSETS 
401.30  AGAINST PREMIUM TAXES.] 
401.31     Subdivision 1.  [GUARANTY ASSOCIATION ASSESSMENT OFFSETS.] 
401.32  (a) An insurance company may offset against its premium tax 
401.33  liability to this state any amount paid for assessments made for 
401.34  insolvencies which occur after July 31, 1994, under sections 
401.35  60C.01 to 60C.22; and any amount paid for assessments made after 
401.36  July 31, 1994, under Minnesota Statutes 1992, sections 61B.01 to 
402.1   61B.16, or under sections 61B.18 to 61B.32 as follows: 
402.2      (1) Each such assessment shall give rise to an amount of 
402.3   offset equal to 20 percent of the amount of the assessment for 
402.4   each of the five calendar years following the year in which the 
402.5   assessment was paid. 
402.6      (2) The amount of offset initially determined for each 
402.7   taxable year is the sum of the amounts determined under clause 
402.8   (1) for that taxable year. 
402.9      (b)(1) Each year the commissioner shall compare total 
402.10  guaranty association assessments levied over the preceding five 
402.11  calendar years to the sum of all premium tax and corporate 
402.12  franchise tax revenues collected from insurance companies, 
402.13  without reduction for any guaranty association assessment offset 
402.14  in the preceding calendar year, referred to in this subdivision 
402.15  as "preceding year insurance tax revenues." 
402.16     (2) If total guaranty association assessments levied over 
402.17  the preceding five years exceed the preceding year insurance tax 
402.18  revenues, insurance companies must be allowed only a 
402.19  proportionate part of the premium tax offset calculated under 
402.20  paragraph (a) for the current calendar year. 
402.21     (3) The proportionate part of the premium tax offset 
402.22  allowed in the current calendar year is determined by 
402.23  multiplying the amount calculated under paragraph (a) by a 
402.24  fraction.  The numerator of the fraction equals the preceding 
402.25  year insurance tax revenues, and its denominator equals total 
402.26  guaranty association assessments levied over the preceding 
402.27  five-year period. 
402.28     (4) The proportionate part of the premium tax offset that 
402.29  is not allowed must be carried forward to subsequent tax years 
402.30  and added to the amount of premium tax offset calculated under 
402.31  paragraph (a) prior to application of the limitation imposed by 
402.32  this paragraph. 
402.33     (5) Any amount carried forward from prior years must be 
402.34  allowed before allowance of the offset for the current year 
402.35  calculated under paragraph (a). 
402.36     (6) The premium tax offset limitation must be calculated 
403.1   separately for (i) insurance companies subject to assessment 
403.2   under sections 60C.01 to 60C.22, and (ii) insurance companies 
403.3   subject to assessment under Minnesota Statutes 1992, sections 
403.4   61B.01 to 61B.16, or 61B.18 to 61B.32. 
403.5      (7) When the premium tax offset is limited by this 
403.6   provision, the commissioner shall notify affected insurance 
403.7   companies on a timely basis for purposes of completing premium 
403.8   and corporate franchise tax returns.  
403.9      (8) The guaranty associations created under sections 60C.01 
403.10  to 60C.22, Minnesota Statutes 1992, sections 61B.01 to 61B.16, 
403.11  and 61B.18 to 61B.32, shall provide the commissioner with the 
403.12  necessary information on guaranty association assessments. 
403.13     (c)(1) If the offset determined by the application of 
403.14  paragraphs (a) and (b) exceeds the insurance company's premium 
403.15  tax liability under this section prior to allowance of the 
403.16  credit for premium taxes, then the insurance company may carry 
403.17  forward the excess, referred to in this subdivision as the 
403.18  "carryforward credit" to subsequent taxable years. 
403.19     (2) The carryforward credit is allowed as an offset against 
403.20  premium tax liability for the first succeeding year to the 
403.21  extent that the premium tax liability for that year exceeds the 
403.22  amount of the allowable offset for the year determined under 
403.23  paragraphs (a) and (b). 
403.24     (3) The carryforward credit must be reduced, but not below 
403.25  zero, by the amount of the carryforward credit allowed as an 
403.26  offset against the premium tax under this paragraph.  The 
403.27  remainder, if any, of the carryforward credit must be carried 
403.28  forward to succeeding taxable years until the entire 
403.29  carryforward credit has been credited against the insurance 
403.30  company's liability for premium tax under this chapter if 
403.31  applicable for that taxable year. 
403.32     (d) When an insurer has offset against taxes its payment of 
403.33  an assessment of the Minnesota life and health guaranty 
403.34  association, and the association pays the insurer a refund with 
403.35  respect to the assessment under Minnesota Statutes 1992, section 
403.36  61B.07, subdivision 6, or 61B.24, subdivision 6, then the refund 
404.1   reduces the insurer's carryforward credit under paragraph (c).  
404.2   If the refund exceeds the amount of the carryforward credit, the 
404.3   excess amount must be repaid to the state by the insurers to the 
404.4   extent of the offset in the manner the commissioner requires. 
404.5      Subd. 2.  [JOINT UNDERWRITING ASSOCIATION OFFSET.] An 
404.6   assessment made pursuant to section 62I.06, subdivision 6, shall 
404.7   be deductible by the member from past or future premium taxes 
404.8   due the state. 
404.9      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
404.10  following final enactment. 
404.11     Sec. 14.  [REVISOR'S INSTRUCTION.] 
404.12     In the next edition of Minnesota Rules, the revisor shall 
404.13  delete any references to the sections repealed in section 15, 
404.14  paragraph (a). 
404.15     Sec. 15.  [REPEALER.] 
404.16     (a) Minnesota Statutes 2002, sections 294.01; 294.02; 
404.17  294.021; 294.03; 294.06; 294.07; 294.08; 294.09; 294.10; 294.11; 
404.18  and 294.12, are repealed effective the day following final 
404.19  enactment. 
404.20     (b) Minnesota Rules, parts 8125.1000; 8125.1300, subpart 1; 
404.21  and 8125.1400, are repealed effective the day following final 
404.22  enactment. 
404.23                             ARTICLE 17 
404.24         DEPARTMENT COLLECTIONS AND COMPLIANCE INITIATIVES 
404.25     Section 1.  [270.278] [PENALTY FOR FILING CERTAIN DOCUMENTS 
404.26  AGAINST DEPARTMENT OF REVENUE EMPLOYEES.] 
404.27     Subdivision 1.  [DEFINITIONS.] (a) "Recording office" means 
404.28  a county recorder, registrar of titles, or secretary of state in 
404.29  this state or another state. 
404.30     (b) "Filing party" means the person or persons requesting 
404.31  or causing another person to request that the recording office 
404.32  accept documents or instruments for recording or filing. 
404.33     Subd. 2.  [INVALID DOCUMENTS NAMING THE COMMISSIONER OR 
404.34  DEPARTMENT OF REVENUE EMPLOYEES.] Filing a document, including a 
404.35  nonconsensual common law lien under section 514.99, that 
404.36  purports to create a claim against the commissioner of revenue 
405.1   or an employee of the department of revenue based on performance 
405.2   or nonperformance of duties by the commissioner or employee is 
405.3   invalid unless accompanied by a specific order from a court of 
405.4   competent jurisdiction authorizing the filing of the document or 
405.5   unless a specific statute authorizes the filing of the document. 
405.6      Subd. 3.  [CIVIL PENALTY.] If a filing party causes a 
405.7   document described in subdivision 2 to be recorded in a 
405.8   recording office, the commissioner may assess a penalty against 
405.9   the filing party of $1,000 per document filed, payable to the 
405.10  general fund.  An order assessing a penalty under this section 
405.11  is reviewable administratively under section 289A.65 and is 
405.12  appealable to tax court under chapter 271.  The penalty is 
405.13  collected and paid in the same manner as income tax.  The 
405.14  penalty is in addition to any other remedy available to the 
405.15  commissioner of revenue or to an employee of the department of 
405.16  revenue against whom the document has been filed.  
405.17     <b>[EFFECTIVE DATE.]</b> This section is effective for documents 
405.18  filed on or after July 1, 2003. 
405.19     Sec. 2.  Minnesota Statutes 2002, section 270.69, is 
405.20  amended by adding a subdivision to read: 
405.21     Subd. 16.  [ATTACHMENT TO PROCEEDS OF PROPERTY.] Any lien 
405.22  imposed under this section attaches to the proceeds of property 
405.23  with the same priority that the lien has with respect to the 
405.24  property itself.  "Proceeds of property" means proceeds from the 
405.25  sale, lease, license, exchange, or other disposition of the 
405.26  property, including insurance proceeds arising from the loss or 
405.27  destruction of the property. 
405.28     <b>[EFFECTIVE DATE.]</b> This section is effective for all liens, 
405.29  whether imposed prior to, on, or after the day following final 
405.30  enactment. 
405.31     Sec. 3.  Minnesota Statutes 2002, section 270.701, 
405.32  subdivision 2, is amended to read: 
405.33     Subd. 2.  [NOTICE OF SALE.] The commissioner shall as soon 
405.34  as practicable after the seizure of the property give notice of 
405.35  sale of the property to the owner, in the manner of service 
405.36  prescribed in subdivision 1.  In the case of personal property, 
406.1   the notice shall be served at least 10 days prior to the sale.  
406.2   In the case of real property, the notice shall be served at 
406.3   least four weeks prior to the sale.  The commissioner shall also 
406.4   cause public notice of each sale to be made.  In the case of 
406.5   personal property, notice shall be posted at least 10 days prior 
406.6   to the sale at the county courthouse for the county where the 
406.7   seizure is made, and in not less than two other public 
406.8   places.  For purposes of this requirement, the Internet is a 
406.9   public place for posting the information.  In the case of real 
406.10  property, six weeks' published notice shall be given prior to 
406.11  the sale, in a newspaper published or generally circulated in 
406.12  the county.  The notice of sale provided in this subdivision 
406.13  shall specify the property to be sold, and the time, place, 
406.14  manner and conditions of the sale.  Whenever levy is made 
406.15  without regard to the 30-day period provided in section 270.70, 
406.16  subdivision 2, public notice of sale of the property seized 
406.17  shall not be made within the 30-day period unless section 
406.18  270.702 (relating to sale of perishable goods) is applicable.  
406.19     <b>[EFFECTIVE DATE.]</b> This section is effective for notices of 
406.20  sales posted on or after the day following final enactment. 
406.21     Sec. 4.  Minnesota Statutes 2002, section 270.701, is 
406.22  amended by adding a subdivision to read: 
406.23     Subd. 7.  [SALE OF SEIZED SECURITIES.] (a) At the time of 
406.24  levy on securities, the commissioner shall provide notice to the 
406.25  taxpayer that the securities may be sold after ten days from the 
406.26  date of seizure.  
406.27     (b) If the commissioner levies upon nonexempt publicly 
406.28  traded securities and the value of the securities is less than 
406.29  or equal to the total obligation for which the levy is done, 
406.30  after ten days the person who possesses or controls the 
406.31  securities shall liquidate the securities in a commercially 
406.32  reasonable manner.  After liquidation, the person shall transfer 
406.33  the proceeds to the commissioner, less any applicable 
406.34  commissions or fees, or both, which are charged in the normal 
406.35  course of business.  
406.36     (c) If the commissioner levies upon nonexempt publicly 
407.1   traded securities and the value of the securities exceeds the 
407.2   total amount of the levy, the owner of the securities may, 
407.3   within seven days after receipt of the department's notice of 
407.4   levy given pursuant to subdivision 1, instruct the person who 
407.5   possesses or controls the securities which securities are to be 
407.6   sold to satisfy the obligation.  If the owner does not provide 
407.7   instructions for liquidation, the person who possesses or 
407.8   controls the securities shall liquidate the securities in an 
407.9   amount sufficient to pay the obligation, plus any applicable 
407.10  commissions or fees, or both, which are charged in the normal 
407.11  course of business, beginning with the nonexempt securities 
407.12  purchased most recently.  After liquidation, the person who 
407.13  possesses or controls the securities shall transfer to the 
407.14  commissioner the amount of money needed to satisfy the levy. 
407.15     <b>[EFFECTIVE DATE.]</b> This section is effective for sales of 
407.16  securities seized on or after the day following final enactment. 
407.17     Sec. 5.  Minnesota Statutes 2002, section 270.72, 
407.18  subdivision 2, is amended to read: 
407.19     Subd. 2.  [DEFINITIONS.] For purposes of this section, the 
407.20  following terms have the meanings given.  
407.21     (a) "Taxes" are mean all taxes payable to the commissioner 
407.22  including penalties and interest due on the taxes. 
407.23     (b) "Delinquent taxes" do not include a tax liability if 
407.24  (i) an administrative or court action which contests the amount 
407.25  or validity of the liability has been filed or served, (ii) the 
407.26  appeal period to contest the tax liability has not expired, or 
407.27  (iii) the applicant has entered into a payment agreement and is 
407.28  current with the payments.  
407.29     (c) "Applicant" means an individual if the license is 
407.30  issued to or in the name of an individual or the corporation or 
407.31  partnership if the license is issued to or in the name of a 
407.32  corporation or partnership.  "Applicant" also means an officer 
407.33  of a corporation, a member of a partnership, or an individual 
407.34  who is liable for delinquent taxes, either for the entity for 
407.35  which the license is at issue or for another entity for which 
407.36  the liability was incurred, or personally as a licensee.  In the 
408.1   case of a license transfer, "applicant" also means both the 
408.2   transferor and the transferee of the license.  "Applicant" also 
408.3   means any holder of a license. 
408.4      (d) "License" includes means any permit, registration, 
408.5   certification, or other form of approval authorized by statute 
408.6   or rule to be issued by the state or a political subdivision of 
408.7   the state as a condition of doing business or conducting a 
408.8   trade, profession, or occupation in Minnesota, specifically 
408.9   including, but not limited to, a contract for space rental at 
408.10  the Minnesota state fair and authorization to operate 
408.11  concessions or rides at county and local fairs, festivals, or 
408.12  events. 
408.13     (e) "Licensing authority" includes the Minnesota state fair 
408.14  board and county and local boards or governing bodies. 
408.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
408.16  following final enactment. 
408.17     Sec. 6.  Minnesota Statutes 2002, section 270A.03, 
408.18  subdivision 2, is amended to read: 
408.19     Subd. 2.  [CLAIMANT AGENCY.] "Claimant agency" means any 
408.20  state agency, as defined by section 14.02, subdivision 2, the 
408.21  regents of the University of Minnesota, any district court of 
408.22  the state, any county, any statutory or home rule charter city 
408.23  presenting a claim for a municipal hospital or a public library 
408.24  or a municipal ambulance service, a hospital district, a private 
408.25  nonprofit hospital that leases its building from the county in 
408.26  which it is located, any public agency responsible for child 
408.27  support enforcement, any public agency responsible for the 
408.28  collection of court-ordered restitution, and any public agency 
408.29  established by general or special law that is responsible for 
408.30  the administration of a low-income housing program, and the 
408.31  Minnesota collection enterprise as defined in section 16D.02, 
408.32  subdivision 8, for the purpose of collecting the costs imposed 
408.33  under section 16D.11. 
408.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
408.35  following final enactment. 
408.36     Sec. 7.  Minnesota Statutes 2002, section 289A.31, 
409.1   subdivision 3, is amended to read: 
409.2      Subd. 3.  [TRANSFEREES AND FIDUCIARIES.] The amounts of the 
409.3   following liabilities are, except as otherwise provided in 
409.4   section 289A.38, subdivision 13, assessed, collected, and paid 
409.5   in the same manner and subject to the same provisions and 
409.6   limitations as a deficiency in a tax imposed by chapter 290, 
409.7   including any provisions of law for the collection of taxes: 
409.8      (1) the liability, at law or in equity, of a transferee of 
409.9   property of a taxpayer for tax or overpayment of a refund, 
409.10  including interest, additional amounts, and additions to the tax 
409.11  or overpayment provided by law, imposed upon the taxpayer by 
409.12  chapter 290 or provided for in chapter 290A; and 
409.13     (2) the liability of a fiduciary under subdivision 4 for 
409.14  the payment of tax from the estate of the taxpayer.  The 
409.15  liability may reflect the amount of tax shown on the return or 
409.16  any deficiency in tax.  
409.17     <b>[EFFECTIVE DATE.]</b> This section is effective for refunds 
409.18  paid on or after the day following final enactment. 
409.19     Sec. 8.  Minnesota Statutes 2002, section 289A.31, 
409.20  subdivision 4, is amended to read: 
409.21     Subd. 4.  [TAX AS A PERSONAL DEBT OF A FIDUCIARY.] The A 
409.22  tax imposed by chapter 290 and an overpayment of a refund 
409.23  provided for in chapter 290A, and interest and penalties, is a 
409.24  personal debt of the taxpayer from the time the liability 
409.25  arises, regardless of when the time for discharging the 
409.26  liability by payment occurs.  The debt is, in the case of the 
409.27  personal representative of the estate of a decedent and in the 
409.28  case of any fiduciary, that of the individual in the 
409.29  individual's official or fiduciary capacity only, unless the 
409.30  individual has voluntarily distributed the assets held in that 
409.31  capacity without reserving sufficient assets to pay the tax, 
409.32  interest, and penalties, in which event the individual is 
409.33  personally liable for the deficiency.  
409.34     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
409.35  imposed and property tax refunds claimed on or after the day 
409.36  following final enactment. 
410.1      Sec. 9.  Minnesota Statutes 2002, section 289A.36, 
410.2   subdivision 7, is amended to read: 
410.3      Subd. 7.  [APPLICATION TO COURT FOR ENFORCEMENT OF 
410.4   SUBPOENA.] (a) Disobedience of subpoenas issued under this 
410.5   section shall be punished by the district court of the district 
410.6   in which the party served with the subpoena is located, in the 
410.7   same manner as contempt of the district court.  
410.8      (b) Disobedience of a subpoena issued under subdivision 9 
410.9   shall be punished by the district court for Ramsey County in the 
410.10  same manner as contempt of the district court.  In addition to 
410.11  contempt remedies, the court may issue any order the court deems 
410.12  reasonably necessary to enforce compliance with the subpoena. 
410.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
410.14  following final enactment. 
410.15     Sec. 10.  Minnesota Statutes 2002, section 289A.36, is 
410.16  amended by adding a subdivision to read: 
410.17     Subd. 9.  [ACCESS TO RECORDS IN CONNECTION WITH EXAMINATION 
410.18  OF BUSINESSES LOCATED OUTSIDE THE STATE.] (a) In order to 
410.19  determine whether a business located outside the state of 
410.20  Minnesota is required to file a return under this chapter, the 
410.21  commissioner may examine the relevant records and files of the 
410.22  business. 
410.23     (b) To the full extent permitted by the Minnesota and 
410.24  United States constitutions, the commissioner may compel 
410.25  production of those relevant records and files by subpoena.  The 
410.26  subpoena may be served on the secretary of state along with the 
410.27  address to which service of the subpoena is to be sent and a fee 
410.28  of $50.  The secretary of state shall forward a copy of the 
410.29  subpoena to the business using the procedures for service of 
410.30  process in section 5.25, subdivision 6.  
410.31     (c) The commissioner shall pay the reasonable cost of 
410.32  producing records subject to subpoena under this subdivision if: 
410.33     (1) the subpoenaed party cannot produce the records without 
410.34  undue burden; and 
410.35     (2) the examination made pursuant to paragraph (a) shows 
410.36  that the subpoenaed party is not required to file a return under 
411.1   this chapter. 
411.2      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
411.3   following final enactment. 
411.4      Sec. 11.  Minnesota Statutes 2002, section 289A.36, is 
411.5   amended by adding a subdivision to read: 
411.6      Subd. 10.  [PENALTY.] In addition to sanctions imposed 
411.7   under subdivision 7, a penalty of $250 per day is imposed on any 
411.8   business that is in violation of a court order to comply with a 
411.9   subpoena that is seeking information necessary for the 
411.10  commissioner to be able to determine whether the business is 
411.11  required to file a return or pay a tax.  The maximum penalty is 
411.12  $25,000.  Upon the request of the commissioner, the court shall 
411.13  determine the amount of the penalty and enter it as a judgment 
411.14  in favor of the commissioner.  The penalty is not payable until 
411.15  the judgment is entered. 
411.16     <b>[EFFECTIVE DATE.]</b> This section is effective for violations 
411.17  of court orders to enforce subpoenas issued on or after the day 
411.18  following final enactment. 
411.19     Sec. 12.  Minnesota Statutes 2002, section 297A.85, is 
411.20  amended to read: 
411.21     297A.85 [CANCELLATION OF PERMITS.] 
411.22     The commissioner may cancel a permit if one of the 
411.23  following conditions occurs: 
411.24     (1) the permit holder has not filed a sales or use tax 
411.25  return for at least one year; 
411.26     (2) the permit holder has not reported any sales or use tax 
411.27  liability on the permit holder's returns for at least two years; 
411.28  or 
411.29     (3) the permit holder requests cancellation of the permit; 
411.30  or 
411.31     (4) the permit is subject to cancellation pursuant to 
411.32  section 297A.86, subdivision 2, paragraph (a). 
411.33     <b>[EFFECTIVE DATE.]</b> This section is effective for 
411.34  cancellations of permits done on or after the day following 
411.35  final enactment. 
411.36     Sec. 13.  [REPEALER.] 
412.1      Minnesota Statutes 2002, section 270.691, subdivision 8, is 
412.2   repealed effective the day following final enactment. 
412.3                              ARTICLE 18 
412.4                             BLUE WATERS 
412.5      Section 1.  Minnesota Statutes 2002, section 273.13, 
412.6   subdivision 23, is amended to read: 
412.7      Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
412.8   land including any improvements that is homesteaded.  The market 
412.9   value of the house and garage and immediately surrounding one 
412.10  acre of land has the same class rates as class 1a property under 
412.11  subdivision 22.  The value of the remaining land including 
412.12  improvements up to and including $600,000 market value has a net 
412.13  class rate of 0.55 percent of market value.  The remaining 
412.14  property over $600,000 market value has a class rate of one 
412.15  percent of market value. 
412.16     (b) Class 2b property is (1) real estate, rural in 
412.17  character and used exclusively for growing trees for timber, 
412.18  lumber, and wood and wood products; (2) real estate that is not 
412.19  improved with a structure and is used exclusively for growing 
412.20  trees for timber, lumber, and wood and wood products, if the 
412.21  owner has participated or is participating in a cost-sharing 
412.22  program for afforestation, reforestation, or timber stand 
412.23  improvement on that particular property, administered or 
412.24  coordinated by the commissioner of natural resources; (3) real 
412.25  estate that is nonhomestead agricultural land; or (4) a landing 
412.26  area or public access area of a privately owned public use 
412.27  airport.  Class 2b property has a net class rate of one percent 
412.28  of market value. 
412.29     (c) Agricultural land as used in this section means 
412.30  contiguous acreage of ten acres or more, used during the 
412.31  preceding year for agricultural purposes.  "Agricultural 
412.32  purposes" as used in this section means the raising or 
412.33  cultivation of agricultural products or enrollment in the 
412.34  Reinvest in Minnesota program under sections 103F.501 to 
412.35  103F.535 or the federal Conservation Reserve Program as 
412.36  contained in Public Law Number 99-198.  Contiguous acreage on 
413.1   the same parcel, or contiguous acreage on an immediately 
413.2   adjacent parcel under the same ownership, may also qualify as 
413.3   agricultural land, but only if it is pasture, timber, waste, 
413.4   unusable wild land, or land included in state or federal farm 
413.5   programs.  Agricultural classification for property shall be 
413.6   determined excluding the house, garage, and immediately 
413.7   surrounding one acre of land, and shall not be based upon the 
413.8   market value of any residential structures on the parcel or 
413.9   contiguous parcels under the same ownership. 
413.10     (d) Real estate, excluding the house, garage, and 
413.11  immediately surrounding one acre of land, of less than ten acres 
413.12  which is exclusively and intensively used for raising or 
413.13  cultivating agricultural products, shall be considered as 
413.14  agricultural land.  
413.15     Land shall be classified as agricultural even if all or a 
413.16  portion of the agricultural use of that property is the leasing 
413.17  to, or use by another person for agricultural purposes. 
413.18     Classification under this subdivision is not determinative 
413.19  for qualifying under section 273.111. 
413.20     The property classification under this section supersedes, 
413.21  for property tax purposes only, any locally administered 
413.22  agricultural policies or land use restrictions that define 
413.23  minimum or maximum farm acreage. 
413.24     (e) The term "agricultural products" as used in this 
413.25  subdivision includes production for sale of:  
413.26     (1) livestock, dairy animals, dairy products, poultry and 
413.27  poultry products, fur-bearing animals, horticultural and nursery 
413.28  stock described in sections 18.44 to 18.61, fruit of all kinds, 
413.29  vegetables, forage, grains, bees, and apiary products by the 
413.30  owner; 
413.31     (2) fish bred for sale and consumption if the fish breeding 
413.32  occurs on land zoned for agricultural use; 
413.33     (3) the commercial boarding of horses if the boarding is 
413.34  done in conjunction with raising or cultivating agricultural 
413.35  products as defined in clause (1); 
413.36     (4) property which is owned and operated by nonprofit 
414.1   organizations used for equestrian activities, excluding racing; 
414.2      (5) game birds and waterfowl bred and raised for use on a 
414.3   shooting preserve licensed under section 97A.115; 
414.4      (6) insects primarily bred to be used as food for animals; 
414.5      (7) trees, grown for sale as a crop, and not sold for 
414.6   timber, lumber, wood, or wood products; and 
414.7      (8) maple syrup taken from trees grown by a person licensed 
414.8   by the Minnesota department of agriculture under chapter 28A as 
414.9   a food processor. 
414.10     (f) If a parcel used for agricultural purposes is also used 
414.11  for commercial or industrial purposes, including but not limited 
414.12  to:  
414.13     (1) wholesale and retail sales; 
414.14     (2) processing of raw agricultural products or other goods; 
414.15     (3) warehousing or storage of processed goods; and 
414.16     (4) office facilities for the support of the activities 
414.17  enumerated in clauses (1), (2), and (3), 
414.18  the assessor shall classify the part of the parcel used for 
414.19  agricultural purposes as class 1b, 2a, or 2b, whichever is 
414.20  appropriate, and the remainder in the class appropriate to its 
414.21  use.  The grading, sorting, and packaging of raw agricultural 
414.22  products for first sale is considered an agricultural purpose.  
414.23  A greenhouse or other building where horticultural or nursery 
414.24  products are grown that is also used for the conduct of retail 
414.25  sales must be classified as agricultural if it is primarily used 
414.26  for the growing of horticultural or nursery products from seed, 
414.27  cuttings, or roots and occasionally as a showroom for the retail 
414.28  sale of those products.  Use of a greenhouse or building only 
414.29  for the display of already grown horticultural or nursery 
414.30  products does not qualify as an agricultural purpose.  
414.31     The assessor shall determine and list separately on the 
414.32  records the market value of the homestead dwelling and the one 
414.33  acre of land on which that dwelling is located.  If any farm 
414.34  buildings or structures are located on this homesteaded acre of 
414.35  land, their market value shall not be included in this separate 
414.36  determination.  
415.1      (g) To qualify for classification under paragraph (b), 
415.2   clause (4), a privately owned public use airport must be 
415.3   licensed as a public airport under section 360.018.  For 
415.4   purposes of paragraph (b), clause (4), "landing area" means that 
415.5   part of a privately owned public use airport properly cleared, 
415.6   regularly maintained, and made available to the public for use 
415.7   by aircraft and includes runways, taxiways, aprons, and sites 
415.8   upon which are situated landing or navigational aids.  A landing 
415.9   area also includes land underlying both the primary surface and 
415.10  the approach surfaces that comply with all of the following:  
415.11     (i) the land is properly cleared and regularly maintained 
415.12  for the primary purposes of the landing, taking off, and taxiing 
415.13  of aircraft; but that portion of the land that contains 
415.14  facilities for servicing, repair, or maintenance of aircraft is 
415.15  not included as a landing area; 
415.16     (ii) the land is part of the airport property; and 
415.17     (iii) the land is not used for commercial or residential 
415.18  purposes. 
415.19  The land contained in a landing area under paragraph (b), clause 
415.20  (4), must be described and certified by the commissioner of 
415.21  transportation.  The certification is effective until it is 
415.22  modified, or until the airport or landing area no longer meets 
415.23  the requirements of paragraph (b), clause (4).  For purposes of 
415.24  paragraph (b), clause (4), "public access area" means property 
415.25  used as an aircraft parking ramp, apron, or storage hangar, or 
415.26  an arrival and departure building in connection with the airport.
415.27     (h) Class 2c property consists of any parcel or contiguous 
415.28  parcels of unimproved real estate, excluding agricultural land 
415.29  classified under this subdivision, that meets all the criteria 
415.30  in clauses (1) to (5): 
415.31     (1) the property consists of at least 200 contiguous feet 
415.32  of unimproved real estate that borders a meandered lake as 
415.33  defined in section 103G.005, subdivision 15, paragraph (a), 
415.34  clause (3); 
415.35     (2) the unimproved real estate is located within 400 feet 
415.36  from the ordinary high water elevation of the public waters.  
416.1   For purposes of this clause, "unimproved" means that the 
416.2   property, or that portion of the property qualifying under this 
416.3   paragraph, contains no structures, that there are no docks or 
416.4   landings on its shoreline, and that the natural terrain and 
416.5   vegetation has not been disturbed, or has been restored to 
416.6   native vegetation; 
416.7      (3) the property is either (i) the homestead of the owner, 
416.8   the owner's spouse, or the owner or spouse's son or daughter, or 
416.9   (ii) has been in possession of the owner, the owner's spouse, or 
416.10  the owner's or spouse's son or daughter for a period of at least 
416.11  seven years prior to application for benefits under this 
416.12  section; 
416.13     (4) the owner files an application with the county assessor 
416.14  by July 1 for classification under this paragraph for the 
416.15  subsequent assessment year; and 
416.16     (5) the owner of the property signs a covenant agreement 
416.17  and files the covenant with the county assessor in the county 
416.18  where the property is located.  The covenant agreement must 
416.19  include all of the following: 
416.20     (i) legal description of the area to which the covenant 
416.21  applies; 
416.22     (ii) name and address of the owner; 
416.23     (iii) a statement that the land described in the covenant 
416.24  must be kept as undeveloped land for the duration of the 
416.25  covenant; 
416.26     (iv) a statement that the landowner may initiate expiration 
416.27  of the covenant agreement by notifying the county assessor, in 
416.28  writing, with the date of expiration which must be at least 
416.29  eight years from the date of the expiration notice; 
416.30     (v) a statement that the covenant is binding on the owner 
416.31  or owner's successor or assignee and runs with the land; and 
416.32     (vi) a witnessed signature of the owner covenanting to keep 
416.33  the land in its undeveloped state as it existed on the date the 
416.34  covenant was signed. 
416.35     Upon expiration of a covenant agreement in clause (5), the 
416.36  property which is sold is subject to additional taxes.  The 
417.1   amount of additional taxes due on the property equals the 
417.2   difference between the taxes actually levied and the taxes that 
417.3   would have been imposed if the property had been valued and 
417.4   classified as if class 2c did not apply.  The additional taxes 
417.5   must be extended against the property on the tax list for the 
417.6   current year.  No interest or penalties may be levied on the 
417.7   additional taxes if timely paid, and the additional taxes must 
417.8   be levied only with respect to the last seven years that the 
417.9   property was valued and assessed under this paragraph.  For 
417.10  purposes of this paragraph, "timely paid" means paid (A) within 
417.11  60 days after notification from the county that the property no 
417.12  longer qualifies, or (B) prior to the recording of the 
417.13  conveyance of the property, whichever is earlier. 
417.14     The tax imposed under this paragraph is a lien on the 
417.15  property assessed to the same extent and for the same duration 
417.16  as other real property taxes.  The tax must be extended by the 
417.17  county auditor and, when payable, be collected and distributed 
417.18  in the same manner provided by law for the collection and 
417.19  distribution of other property taxes. 
417.20     Class 2c has a class rate of 0.8 percent of market value. 
417.21     <b>[EFFECTIVE DATE.]</b> This section is effective for the 2004 
417.22  assessment and thereafter, for taxes payable in 2005 and 
417.23  thereafter. 
417.24                             ARTICLE 19 
417.25                           MISCELLANEOUS  
417.26     Section 1.  Minnesota Statutes 2002, section 3.842, 
417.27  subdivision 4a, is amended to read: 
417.28     Subd. 4a.  [OBJECTIONS TO RULES.] (a) For purposes of this 
417.29  subdivision, "committee" means the house of representatives 
417.30  policy committee or senate policy committee with primary 
417.31  jurisdiction over state governmental operations.  The 
417.32  commission, the legislative commission on unnecessary mandates, 
417.33  or a committee may object to a rule as provided in this 
417.34  subdivision.  If the commission, the legislative commission on 
417.35  unnecessary mandates, or a committee objects to all or some 
417.36  portion of a rule because the commission, the legislative 
418.1   commission on unnecessary mandates, or a committee considers it 
418.2   to be beyond the procedural or substantive authority delegated 
418.3   to the agency, including a proposed rule submitted under section 
418.4   14.15, subdivision 4, or 14.26, subdivision 3, paragraph (c), 
418.5   the commission, the legislative commission on unnecessary 
418.6   mandates, or a committee may file that objection in the office 
418.7   of the secretary of state.  The filed objection must contain a 
418.8   concise statement of the commission's, the legislative 
418.9   commission on unnecessary mandates', or a committee's reasons 
418.10  for its action.  An objection to a proposed rule submitted by 
418.11  the commission, the legislative commission on unnecessary 
418.12  mandates, or a committee under section 14.15, subdivision 4, or 
418.13  14.26, subdivision 3, paragraph (c), may not be filed before the 
418.14  rule is adopted. 
418.15     (b) The secretary of state shall affix to each objection a 
418.16  certification of the date and time of its filing and as soon 
418.17  after the objection is filed as practicable shall transmit a 
418.18  certified copy of it to the agency issuing the rule in question 
418.19  and to the revisor of statutes.  The secretary of state shall 
418.20  also maintain a permanent register open to public inspection of 
418.21  all objections by the commission, the legislative commission on 
418.22  unnecessary mandates, or a committee.  
418.23     (c) The commission, the legislative commission on 
418.24  unnecessary mandates, or a committee shall publish and index an 
418.25  objection filed under this section in the next issue of the 
418.26  State Register.  The revisor of statutes shall indicate the 
418.27  existence of the objection adjacent to the rule in question when 
418.28  that rule is published in Minnesota Rules. 
418.29     (d) Within 14 days after the filing of an objection by the 
418.30  commission, the legislative commission on unnecessary mandates, 
418.31  or a committee to a rule, the issuing agency shall respond in 
418.32  writing to the objecting entity.  After receipt of the response, 
418.33  the commission, the legislative commission on unnecessary 
418.34  mandates, or a committee may withdraw or modify its objection.  
418.35     (e) After the filing of an objection by the commission, the 
418.36  legislative commission on unnecessary mandates, or a committee 
419.1   that is not subsequently withdrawn, the burden is upon the 
419.2   agency in any proceeding for judicial review or for enforcement 
419.3   of the rule to establish that the whole or portion of the rule 
419.4   objected to is valid.  
419.5      (f) The failure of the commission, the legislative 
419.6   commission on unnecessary mandates, or a committee to object to 
419.7   a rule is not an implied legislative authorization of its 
419.8   validity. 
419.9      (g) In accordance with sections 14.44 and 14.45, the 
419.10  commission, the legislative commission on unnecessary mandates, 
419.11  or a committee may petition for a declaratory judgment to 
419.12  determine the validity of a rule objected to by the commission, 
419.13  the legislative commission on unnecessary mandates, or a 
419.14  committee.  The action must be started within two years after an 
419.15  objection is filed in the office of the secretary of state.  
419.16     (h) The commission, the legislative commission on 
419.17  unnecessary mandates, or a committee may intervene in litigation 
419.18  arising from agency action.  For purposes of this paragraph, 
419.19  agency action means the whole or part of a rule, or the failure 
419.20  to issue a rule. 
419.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
419.22  following final enactment.  
419.23     Sec. 2.  Minnesota Statutes 2002, section 3.843, is amended 
419.24  to read: 
419.25     3.843 [PUBLIC HEARINGS BY STATE AGENCIES.] 
419.26     By a vote of a majority of its members, the commission or 
419.27  the legislative commission on unnecessary mandates may request 
419.28  any agency issuing rules to hold a public hearing in respect to 
419.29  recommendations made under section 3.842, including 
419.30  recommendations made by the commission or the legislative 
419.31  commission on unnecessary mandates to promote adequate and 
419.32  proper rules by that agency and recommendations contained in the 
419.33  commission's biennial report.  The agency shall give notice as 
419.34  provided in section 14.14, subdivision 1, of a hearing under 
419.35  this section, to be conducted in accordance with sections 14.05 
419.36  to 14.28.  The hearing must be held not more than 60 days after 
420.1   receipt of the request or within any other longer time period 
420.2   specified by the commission or the legislative commission on 
420.3   unnecessary mandates in the request. 
420.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
420.5   following final enactment. 
420.6      Sec. 3.  Minnesota Statutes 2002, section 3.986, 
420.7   subdivision 4, is amended to read: 
420.8      Subd. 4.  [POLITICAL SUBDIVISION.] A "political 
420.9   subdivision" is a school district, county, or home rule charter 
420.10  or statutory city. 
420.11     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
420.12     Sec. 4.  Minnesota Statutes 2002, section 3.987, 
420.13  subdivision 1, is amended to read: 
420.14     Subdivision 1.  [LOCAL IMPACT NOTES.] The commissioner of 
420.15  finance shall coordinate the development of a local impact note 
420.16  for any proposed legislation introduced after June 30, 1997, or 
420.17  any rule proposed after December 31, 1999, upon request of the 
420.18  chair or the ranking minority member of either legislative tax 
420.19  committee, the chair or the ranking minority member of the house 
420.20  ways and means committee, or the chair or the ranking minority 
420.21  member of the senate finance committee.  Upon receipt of a 
420.22  request to prepare a local impact note, the commissioner must 
420.23  notify the authors of the proposed legislation or, for an 
420.24  administrative rule, the head of the relevant executive agency 
420.25  or department, that the request has been made.  The local impact 
420.26  note must be made available to the public upon request.  If the 
420.27  action is among the exceptions listed in section 3.988, a local 
420.28  impact note need not be requested nor prepared.  The 
420.29  commissioner shall make a reasonable and timely estimate of the 
420.30  local fiscal impact on each type of political subdivision that 
420.31  would result from the proposed legislation.  The commissioner of 
420.32  finance may require any political subdivision or the 
420.33  commissioner of an administrative agency of the state to supply 
420.34  in a timely manner any information determined to be necessary to 
420.35  determine local fiscal impact.  The political subdivision, its 
420.36  representative association, or commissioner shall convey the 
421.1   requested information to the commissioner of finance with a 
421.2   signed statement to the effect that the information is accurate 
421.3   and complete to the best of its ability.  The political 
421.4   subdivision, its representative association, or commissioner, 
421.5   when requested, shall update its determination of local fiscal 
421.6   impact based on actual cost or revenue figures, improved 
421.7   estimates, or both.  Upon completion of the note, the 
421.8   commissioner must provide a copy to the authors of the proposed 
421.9   legislation or, for an administrative rule, to the head of the 
421.10  relevant executive agency or department. 
421.11     <b>[EFFECTIVE DATE.]</b> This section is effective July 1, 2003. 
421.12     Sec. 5.  [3.99] [LEGISLATIVE COMMISSION ON UNNECESSARY 
421.13  MANDATES; ESTABLISHED.] 
421.14     Subdivision 1.  [ESTABLISHED.] The legislative commission 
421.15  on unnecessary mandates for local governments is established as 
421.16  provided in this section, with the powers and duties given it in 
421.17  sections 3.842, subdivision 4a; 3.843; and 3.99 to 3.993. 
421.18     Subd. 2.  [MEMBERSHIP.] The commission consists of four 
421.19  senators appointed by the senate subcommittee on committees of 
421.20  the committee on rules and administration, three senators 
421.21  appointed by the senate minority leader, four state 
421.22  representatives appointed by the speaker of the house, and three 
421.23  state representatives appointed by the house minority leader.  
421.24  The appointing authorities must ensure balanced geographic 
421.25  representation and consider the background and knowledge of the 
421.26  appointees to provide for a range of expertise in the mandate 
421.27  areas that may be reviewed.  Each appointing authority must make 
421.28  appointments as soon as possible after the opening of the next 
421.29  regular session of the legislature in each odd-numbered year. 
421.30     Subd. 3.  [TERMS; VACANCIES.] Members of the commission 
421.31  serve for a two-year term beginning upon appointment and 
421.32  expiring upon appointment of a successor after the opening of 
421.33  the next regular session of the legislature in the odd-numbered 
421.34  year.  A vacancy in the membership of the commission must be 
421.35  filled for the unexpired term in a manner that will preserve the 
421.36  representation established by this section. 
422.1      Subd. 4.  [CHAIR.] The commission must meet as soon as 
422.2   practicable after members are appointed in each odd-numbered 
422.3   year to elect its chair and other officers as it may determine 
422.4   necessary.  A chair serves a two-year term, expiring in the 
422.5   odd-numbered year after a successor is elected.  The chair must 
422.6   alternate biennially between the senate and the house. 
422.7      Subd. 5.  [COMPENSATION.] Members serve without 
422.8   compensation but may be reimbursed for their reasonable expenses 
422.9   as members of the legislature. 
422.10     Subd. 6.  [STAFF.] The legislative coordinating commission 
422.11  must provide administrative support to the commission, including 
422.12  secretarial services, record keeping, and grants administration. 
422.13     Subd. 7.  [MEETINGS; PROCEDURES; TIE VOTES.] The first 
422.14  meeting of the biennium must be convened by the member 
422.15  designated by the senate majority leader if a senator is to 
422.16  chair the commission for the biennium, or by the speaker of the 
422.17  house if a state representative is to chair the commission for 
422.18  the biennium.  The commission meets at the call of the chair.  
422.19  Commission action requires a positive vote of at least four 
422.20  house members and at least four senate members. 
422.21     Subd. 8.  [FUNDING.] The legislative coordinating 
422.22  commission shall annually bill the commissioner of revenue for 
422.23  costs incurred by the legislative coordinating commission in 
422.24  providing administrative support and to make the grants 
422.25  authorized by the legislative commission on unnecessary 
422.26  mandates, in an amount not to exceed $100,000 per year.  The 
422.27  commissioner of revenue shall deduct one-half of the certified 
422.28  costs from payments to counties under section 273.1398, 
422.29  subdivision 2, and one-half of the certified costs from payments 
422.30  to cities under section 477A.03.  The amounts billed under this 
422.31  subdivision are appropriated to the legislative coordinating 
422.32  commission. 
422.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
422.34  following final enactment.  
422.35     Sec. 6.  [3.991] [LEGISLATIVE COMMISSION ON UNNECESSARY 
422.36  MANDATES; REVIEW AND RECOMMENDATIONS TO LEGISLATURE.] 
423.1      The legislative commission on unnecessary mandates for 
423.2   local governments must solicit from local governments 
423.3   information on state laws and rules that local governments 
423.4   consider to be unnecessary mandates.  Among other issues, the 
423.5   commission must review unnecessary mandates that affect local 
423.6   government property taxes.  The commission must review the 
423.7   mandates identified and consider why each mandate was enacted or 
423.8   adopted, whether the reason for it still exists, the costs to 
423.9   local governments to comply with the mandate, and whether repeal 
423.10  or modification of the mandate is appropriate.  Before the 
423.11  beginning of each legislative session, the commission must 
423.12  prepare for introduction a bill to repeal or modify those laws 
423.13  or rules the commission determines are unnecessary. 
423.14     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
423.15  following final enactment.  
423.16     Sec. 7.  [3.992] [LEGISLATIVE COMMISSION ON UNNECESSARY 
423.17  MANDATES; GRANTS.] 
423.18     Upon recommendation of the legislative commission on 
423.19  unnecessary mandates, the commissioner of revenue may make 
423.20  grants to the league of Minnesota cities, the association of 
423.21  Minnesota counties, other organizations representing local 
423.22  governments, the board of regents of the University of 
423.23  Minnesota, the board of trustees of Minnesota state colleges and 
423.24  universities, or other accredited postsecondary institutions to 
423.25  research and make recommendations on eliminating unnecessary 
423.26  mandates.  A grant may be in any amount up to $.......  The 
423.27  commissioner must specify the work to be done, the completion 
423.28  date, and the maximum grant amount, and may specify any other 
423.29  conditions the commissioner deems necessary or useful.  
423.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
423.31  following final enactment.  
423.32     Sec. 8.  [3.993] [LEGISLATIVE COMMISSION ON UNNECESSARY 
423.33  MANDATES; TEMPORARY RULE SUSPENSION.] 
423.34     The legislative commission on unnecessary mandates may 
423.35  suspend any rule on which the commission received negative 
423.36  testimony at a public hearing.  If any rule is suspended, the 
424.1   commission must, as soon as possible, place before the 
424.2   legislature, at the next year's session, a bill to repeal the 
424.3   suspended rule.  If the bill is not enacted in that year's 
424.4   session, the rule is effective upon adjournment of the session 
424.5   unless the agency has repealed it.  If the bill is enacted, the 
424.6   rule is repealed. 
424.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
424.8   following final enactment.  
424.9      Sec. 9.  [3.994] [REPEALER.] 
424.10     Sections 3.99 to 3.993 are repealed June 30, 2007. 
424.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
424.12  following final enactment. 
424.13     Sec. 10.  Minnesota Statutes 2002, section 8.30, is amended 
424.14  to read: 
424.15     8.30 [COMPROMISE OF TAX AND FEE CLAIMS.] 
424.16     Notwithstanding any other provisions of law to the 
424.17  contrary, the attorney general shall have authority to 
424.18  compromise taxes, fees, surcharges, assessments, penalties, and 
424.19  interest in any case referred to the attorney general by the 
424.20  commissioner of revenue all cases, whether reduced to judgment 
424.21  or not, where the debt is being reduced by an amount exceeding 
424.22  $50,000 and, in the attorney general's opinion, it shall be in 
424.23  the best interests of the state to do so.  Such a compromise 
424.24  must be in a form prescribed by the attorney general and shall 
424.25  be in writing signed by the attorney general, the taxpayer or 
424.26  taxpayer's representative, and the commissioner of 
424.27  revenue.  Compromises of such debts in cases where the debt is 
424.28  being reduced by an amount of $50,000 or less are governed by 
424.29  section 16D.15.  
424.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
424.31  following final enactment. 
424.32     Sec. 11.  Minnesota Statutes 2002, section 16A.152, 
424.33  subdivision 1, is amended to read: 
424.34     Subdivision 1.  [CASH FLOW ACCOUNT ESTABLISHED.] (a) A cash 
424.35  flow account is created in the general fund in the state 
424.36  treasury.  Beginning July 1, 2003, the commissioner of finance 
425.1   shall restrict part or all of the balance before reserves in the 
425.2   general fund as may be necessary to fund the cash flow account, 
425.3   up to $350,000,000. 
425.4      (b) The Amounts restricted are transferred to in the cash 
425.5   flow account and shall remain in the account until drawn down 
425.6   and used to meet cash flow deficiencies resulting from uneven 
425.7   distribution of revenue collections and required expenditures 
425.8   during a fiscal year. 
425.9      Sec. 12.  Minnesota Statutes 2002, section 16A.152, 
425.10  subdivision 1b, is amended to read: 
425.11     Subd. 1b.  [BUDGET RESERVE INCREASE.] On June 30 July 1, 
425.12  2003, the commissioner of finance shall 
425.13  transfer $3,900,000 $300,000,000 to the budget reserve account 
425.14  in the general fund.  On June 30 July 1, 2004, the commissioner 
425.15  of finance shall transfer $12,300,000 $230,000,000 to the budget 
425.16  reserve account in the general fund.  On June 30, 2005, the 
425.17  commissioner of finance shall transfer $12,000,000 to the budget 
425.18  reserve account in the general fund.  The amounts necessary for 
425.19  this purpose are appropriated from the general fund. 
425.20     Sec. 13.  Minnesota Statutes 2002, section 16A.152, 
425.21  subdivision 2, is amended to read: 
425.22     Subd. 2.  [ADDITIONAL REVENUES; PRIORITY.] If on the basis 
425.23  of a forecast of general fund revenues and expenditures, the 
425.24  commissioner of finance determines that there will be a positive 
425.25  unrestricted budgetary general fund balance at the close of the 
425.26  biennium, the commissioner of finance must allocate money to the 
425.27  budget reserve until the total amount in the account equals 
425.28  $653,000,000 the following accounts and purposes in priority 
425.29  order: 
425.30     (1) the cash flow account established in subdivision 1 
425.31  until that account reaches $350,000,000; and 
425.32     (2) the budget reserve account established in subdivision 
425.33  1a until that account reaches five percent of the forecasted 
425.34  expenditures in the odd-numbered fiscal year of the most 
425.35  recently enacted biennial budget. 
425.36     The amounts necessary to meet the requirements of this 
426.1   section are appropriated from the general fund within two weeks 
426.2   after the forecast is released. 
426.3      Sec. 14.  Minnesota Statutes 2002, section 16A.152, 
426.4   subdivision 7, is amended to read: 
426.5      Subd. 7.  [DELAY; REDUCTION.] The commissioner may delay 
426.6   paying up to 15 percent of an appropriation to a statutory or 
426.7   home rule charter city, county, special taxing district, or a 
426.8   system of higher education in that entity's fiscal year for up 
426.9   to 60 days after the start of its next fiscal year.  The delayed 
426.10  amount is subject to allotment reduction under subdivision 4. 
426.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
426.12  following final enactment. 
426.13     Sec. 15.  Minnesota Statutes 2002, section 62J.694, 
426.14  subdivision 4, is amended to read: 
426.15     Subd. 4.  [SUNSET.] The medical education endowment fund 
426.16  expires June 30, 2015 July 1, 2003.  Upon expiration, the 
426.17  commissioner of finance shall transfer the principal and any 
426.18  remaining interest to the general fund. 
426.19     Sec. 16.  Minnesota Statutes 2002, section 144.395, 
426.20  subdivision 3, is amended to read: 
426.21     Subd. 3.  [SUNSET.] The tobacco use prevention and local 
426.22  public health endowment fund expires June 30, 2015 July 1, 2003. 
426.23  Upon expiration, the commissioner of finance shall transfer the 
426.24  principal and any remaining interest to the general fund.  
426.25     Sec. 17.  Minnesota Statutes 2002, section 270.67, 
426.26  subdivision 4, is amended to read: 
426.27     Subd. 4.  [OFFER-IN-COMPROMISE AND INSTALLMENT PAYMENT 
426.28  PROGRAM.] (a) In implementing the authority provided in 
426.29  subdivision 2 or in section sections 8.30 and 16D.15 to accept 
426.30  offers of installment payments or offers-in-compromise of tax 
426.31  liabilities, the commissioner of revenue shall prescribe 
426.32  guidelines for employees of the department of revenue to 
426.33  determine whether an offer-in-compromise or an offer to make 
426.34  installment payments is adequate and should be accepted to 
426.35  resolve a dispute.  In prescribing the guidelines, the 
426.36  commissioner shall develop and publish schedules of national and 
427.1   local allowances designed to provide that taxpayers entering 
427.2   into a compromise or payment agreement have an adequate means to 
427.3   provide for basic living expenses.  The guidelines must provide 
427.4   that the taxpayer's ownership interest in a motor vehicle, to 
427.5   the extent of the value allowed in section 550.37, will not be 
427.6   considered as an asset; in the case of an offer related to a 
427.7   joint tax liability of spouses, that value of two motor vehicles 
427.8   must be excluded.  The guidelines must provide that employees of 
427.9   the department shall determine, on the basis of the facts and 
427.10  circumstances of each taxpayer, whether the use of the schedules 
427.11  is appropriate and that employees must not use the schedules to 
427.12  the extent the use would result in the taxpayer not having 
427.13  adequate means to provide for basic living expenses.  The 
427.14  guidelines must provide that: 
427.15     (1) an employee of the department shall not reject an 
427.16  offer-in-compromise or an offer to make installment payments 
427.17  from a low-income taxpayer solely on the basis of the amount of 
427.18  the offer; and 
427.19     (2) in the case of an offer-in-compromise which relates 
427.20  only to issues of liability of the taxpayer: 
427.21     (i) the offer must not be rejected solely because the 
427.22  commissioner is unable to locate the taxpayer's return or return 
427.23  information for verification of the liability; and 
427.24     (ii) the taxpayer shall not be required to provide an 
427.25  audited, reviewed, or compiled financial statement. 
427.26     (b) The commissioner shall establish procedures: 
427.27     (1) that require presentation of a counteroffer or a 
427.28  written rejection of the offer by the commissioner if the amount 
427.29  offered by the taxpayer in an offer-in-compromise or an offer to 
427.30  make installment payments is not accepted by the commissioner; 
427.31     (2) for an administrative review of any written rejection 
427.32  of a proposed offer-in-compromise or installment agreement made 
427.33  by a taxpayer under this section before the rejection is 
427.34  communicated to the taxpayer; 
427.35     (3) that allow a taxpayer to request reconsideration of any 
427.36  written rejection of the offer or agreement to the commissioner 
428.1   of revenue to determine whether the rejection is reasonable and 
428.2   appropriate under the circumstances; and 
428.3      (4) that provide for notification to the taxpayer when an 
428.4   offer-in-compromise has been accepted, and issuance of 
428.5   certificates of release of any liens imposed under section 
428.6   270.69 related to the liability which is the subject of the 
428.7   compromise. 
428.8      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
428.9   following final enactment. 
428.10     Sec. 18.  Laws 2002, chapter 377, article 12, section 17, 
428.11  is amended to read: 
428.12     Sec. 17.  [APPROPRIATION.] 
428.13     (a) $585,000 in fiscal year 2002 and $7,015,000 in fiscal 
428.14  year 2003 are appropriated to the commissioner of revenue from 
428.15  the general fund for tax compliance activities, including 
428.16  identification and collection of tax liabilities from 
428.17  individuals and businesses that currently do not pay all taxes 
428.18  owed, and audit and collection activity in the income tax, sales 
428.19  tax, lawful gambling, insurance, and corporate areas.  The base 
428.20  funding for these activities in fiscal years 2004 and 2005 is 
428.21  increased by $4,750,000 each year. 
428.22     (b) The commissioner must include these tax compliance 
428.23  activities in the report required by Laws 2001, First Special 
428.24  Session chapter 10, article 1, section 16, subdivision 2, 
428.25  paragraph (c). 
428.26     (c) Laws 2002, chapter 220, article 10, section 38, does 
428.27  not apply to the positions necessary to carry out the compliance 
428.28  activities identified in this section. 
428.29     (d) If the legislative auditor determines that: 
428.30     (1) actual revenue collections generated from tax 
428.31  compliance activities funded by Laws 2001, First Special Session 
428.32  chapter 10, article 1, section 16, subdivision 2, paragraphs (a) 
428.33  and (b), will not generate at least $52,000,000 in additional 
428.34  general fund revenue for the biennium ending June 30, 2003; or 
428.35     (2) actual revenue collections generated from new tax 
428.36  compliance activities funded by the appropriation in this 
429.1   section will not generate at least $7,600,000 in additional 
429.2   general fund revenue for the biennium ending June 30, 2003; 
429.3   then the commissioner of finance must cancel from the budget 
429.4   reserve account to the general fund the difference between the 
429.5   $52,000,000 or the $7,600,000 and the actual additional general 
429.6   fund revenue.  The legislative auditor's determination under 
429.7   this paragraph must be made in the February 1, 2003, report to 
429.8   the legislature required by Laws 2001, First Special Session 
429.9   chapter 10, article 1, section 16. 
429.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
429.11  following final enactment. 
429.12     Sec. 19.  [ADVANCE COLLECTION PROGRAM.] 
429.13     Subdivision 1.  [PROGRAM ESTABLISHED.] The commissioner of 
429.14  revenue shall establish an advance collection program to collect 
429.15  tax, interest, and penalty obligations that otherwise would not 
429.16  be collected. 
429.17     Subd. 2.  [POLICIES.] The commissioner of revenue shall 
429.18  implement and operate the program in a manner that: 
429.19     (1) minimizes the impact of the program on the incentive 
429.20  for taxpayers to comply with Minnesota taxes; and 
429.21     (2) emphasizes collecting as large a portion of the 
429.22  department's account receivables that are unlikely otherwise to 
429.23  be collected. 
429.24     Subd. 3.  [AUTHORITY.] (a) The authority under this section 
429.25  applies only to obligations on the department of revenue's 
429.26  accounts receivable system for which the original debt was more 
429.27  than two years old on the date of enactment of this section.  
429.28  The commissioner of revenue shall select the debts on the 
429.29  accounts receivable system to which this program applies and may 
429.30  exclude any debt or debts as the commissioner deems appropriate, 
429.31  because inclusion, in the sole opinion of the commissioner, may: 
429.32     (1) adversely affect tax compliance; 
429.33     (2) reduce the amount the state likely will collect in the 
429.34  future; 
429.35     (3) delay resolution of an issue of the meaning or 
429.36  application of the tax or other law; 
430.1      (4) be inconsistent with tax administration and collection 
430.2   policies; 
430.3      (5) not be justified because of the taxpayer's conduct or 
430.4   past actions; or 
430.5      (6) not be in the interest of the state for any reason the 
430.6   commissioner solely determines. 
430.7      (b) To implement this program, the commissioner shall 
430.8   exercise authority under Minnesota Statutes, section 270.67, to 
430.9   accept as a partial or discounted payment of the obligation as 
430.10  full payment.  The commissioner shall set the discount rate for 
430.11  each debt at the level the commissioner determines appropriate, 
430.12  given the provisions of this section.  For obligations that are 
430.13  four or more years old on the date of enactment, the 
430.14  commissioner may offer a reduction or discount of up to 50 
430.15  percent; for obligations that are more than two years old upon 
430.16  the date of enactment, the commissioner may offer a reduction or 
430.17  discount of up to 35 percent.  The commissioner may apply the 
430.18  appropriate discount to all or part of an obligation, regardless 
430.19  of the age of the obligation, if the taxpayer has an obligation 
430.20  that meets the minimum age requirement on the date of 
430.21  enactment.  The commissioner shall notify taxpayers or other 
430.22  debtors qualifying under the program established under this 
430.23  section in any way the commissioner determines appropriate. 
430.24     (c) This section does not limit the commissioner's 
430.25  authority under Minnesota Statutes, section 270.67. 
430.26     Sec. 20.  [FIRST MEETING OF LEGISLATIVE COMMISSION ON 
430.27  UNNECESSARY MANDATES.] 
430.28     The first meeting of the legislative commission on 
430.29  unnecessary mandates must be held as soon as practicable after 
430.30  all appointments are made.  The speaker of the house must 
430.31  designate a commission member to convene the first meeting.  The 
430.32  first commission serves until a new commission is appointed at 
430.33  the beginning of the next biennium. 
430.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
430.35  following final enactment.  
430.36     Sec. 21.  [REPEALER.] 
431.1      Laws 2002, chapter 390, sections 36, 37, and 38, are 
431.2   repealed. 
431.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
431.4   following final enactment and is retroactive from January 1, 
431.5   2003. 
431.6      Sec. 22.  [APPROPRIATION; REVENUE COMPLIANCE.] 
431.7      $1,900,000 in fiscal year 2004 and $3,700,000 in fiscal 
431.8   year 2005 is appropriated to the commissioner of revenue from 
431.9   the general fund for additional activities to identify and 
431.10  collect tax liabilities from individuals and businesses that 
431.11  currently do not pay all taxes owed.  This initiative is 
431.12  expected to result in new general fund revenue of $20,700,000 
431.13  for the biennium ending June 30, 2005.  This initiative is a 
431.14  supplement to and part of the initiative funded in a bill styled 
431.15  as H.F. No. 749 and is subject to the reporting requirements in 
431.16  that bill, if it is enacted into law.  This is a permanent 
431.17  appropriation to be added to the budget base.