Minnesota Legislature
HF 1597
2nd Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
1.1 A bill for an act 1.2 relating to financing and operation of 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; providing for funding adjustments for 1.30 certain state mandated programs; changing provisions 1.31 relating to local impact notes; abolishing or 1.32 providing for the expiration of certain funds and 1.33 accounts; providing for cash flow and budget reserve 1.34 accounts; providing for deposit of certain revenues in 1.35 the general fund; providing for data disclosure; 1.36 requiring studies and reports; providing for 1.37 appointments; authorizing grants; imposing penalties; 1.38 appropriating money; amending Minnesota Statutes 2002, 1.39 sections 3.842, subdivision 4a; 3.843; 3.986, 1.40 subdivision 4; 3.987, subdivision 1; 4A.02; 8.30; 1.41 10A.31, subdivisions 1, 3; 16A.152, subdivisions 1, 1.42 1b, 2, 7; 62J.694, subdivision 4; 115B.24, subdivision 1.43 8; 144.395, subdivision 3; 161.465; 168.27, 1.44 subdivision 4a; 168A.03; 168A.05, subdivision 1a; 1.45 216B.2424, subdivision 5; 270.06; 270.10, subdivision 1.46 1a; 270.60, subdivision 4; 270.67, subdivision 4; 2.1 270.69, by adding a subdivision; 270.701, subdivision 2.2 2, by adding a subdivision; 270.72, subdivision 2; 2.3 270A.03, subdivision 2; 270B.12, by adding a 2.4 subdivision; 272.02, subdivisions 31, 47, 48, 53, by 2.5 adding subdivisions; 272.029, by adding a subdivision; 2.6 272.12; 273.01; 273.05, subdivision 1; 273.061, by 2.7 adding subdivisions; 273.08; 273.11, subdivision 1a; 2.8 273.112, subdivision 3; 273.124, subdivisions 1, 14; 2.9 273.13, subdivisions 22, 23, 25; 273.1398, 2.10 subdivisions 4a, 4b, 4c, 6, 8; 273.372; 273.42, 2.11 subdivision 2; 274.01, subdivision 1; 274.13, 2.12 subdivision 1; 275.025, subdivisions 1, 3, 4; 275.065, 2.13 subdivisions 1, 1a, 1c, 3, 6, 8, by adding a 2.14 subdivision; 275.07, subdivision 1; 275.70, 2.15 subdivision 5; 275.71, subdivisions 2, 4, 5, 6; 2.16 275.72, subdivision 3; 275.73, subdivision 2; 275.74, 2.17 subdivision 3; 276.10; 276.11, subdivision 1; 277.20, 2.18 subdivision 2; 278.01, subdivision 4; 278.05, 2.19 subdivision 6; 279.06, subdivision 1; 281.17; 282.01, 2.20 subdivision 7a; 282.08; 287.12; 287.29, subdivision 1; 2.21 287.31, by adding a subdivision; 289A.02, subdivision 2.22 7; 289A.10, subdivision 1; 289A.18, subdivision 4; 2.23 289A.19, subdivision 4; 289A.20, subdivision 4; 2.24 289A.31, subdivisions 3, 4, 7, by adding a 2.25 subdivision; 289A.36, subdivision 7, by adding 2.26 subdivisions; 289A.40, subdivision 2; 289A.50, 2.27 subdivision 2a, by adding subdivisions; 289A.56, 2.28 subdivisions 3, 4; 289A.60, subdivisions 7, 15, by 2.29 adding a subdivision; 290.01, subdivisions 19, 19a, 2.30 19b, 19c, 19d, 29, 31; 290.05, subdivision 1; 290.06, 2.31 subdivisions 2c, 23, 24, by adding subdivisions; 2.32 290.067, subdivision 1; 290.0671, subdivision 1; 2.33 290.0675, subdivisions 2, 3; 290.0679, subdivision 2; 2.34 290.0802, subdivision 1; 290.091, subdivision 2; 2.35 290.0921, subdivision 3; 290.0922, subdivisions 2, 3; 2.36 290.17, subdivision 4; 290.191, subdivision 1; 2.37 290A.03, subdivisions 8, 15; 290C.02, subdivisions 3, 2.38 7; 290C.03; 290C.07; 290C.09; 290C.10; 290C.11; 2.39 291.005, subdivision 1; 291.03, subdivision 1; 295.50, 2.40 subdivision 9b; 295.53, subdivision 1; 295.58; 2.41 297A.61, subdivisions 3, 7, 10, 12, 17, 30, 31, 34, by 2.42 adding subdivisions; 297A.66, by adding a subdivision; 2.43 297A.665; 297A.668; 297A.67, subdivisions 2, 7, 8, by 2.44 adding a subdivision; 297A.68, subdivisions 2, 4, 5, 2.45 36, by adding subdivisions; 297A.69, subdivisions 2, 2.46 3, 4; 297A.70, subdivisions 8, 16; 297A.71, by adding 2.47 a subdivision; 297A.75, subdivision 4; 297A.81; 2.48 297A.82, subdivision 4; 297A.85; 297A.99, subdivisions 2.49 5, 10, 12; 297A.995, by adding a subdivision; 297B.01, 2.50 subdivision 7; 297B.025, subdivisions 1, 2; 297B.03; 2.51 297B.035, subdivision 1, by adding a subdivision; 2.52 297F.01, subdivisions 21a, 23; 297F.05, subdivision 1; 2.53 297F.06, subdivision 4; 297F.08, subdivision 7; 2.54 297F.09, subdivisions 1, 2, by adding a subdivision; 2.55 297F.10, subdivision 1; 297F.20, subdivisions 1, 2, 3, 2.56 6, 9; 297G.01, by adding a subdivision; 297G.03, 2.57 subdivision 1; 297G.09, by adding a subdivision; 2.58 297I.01, subdivision 9; 297I.20; 298.001, by adding a 2.59 subdivision; 298.01, subdivisions 3, 3a, 4; 298.015, 2.60 subdivisions 1, 2; 298.016, subdivision 4; 298.018; 2.61 298.24, subdivision 1; 298.27; 298.28, subdivisions 2.62 9a, 11; 298.75, subdivision 1; 325D.421, subdivision 2.63 2, by adding a subdivision; 349.16, by adding a 2.64 subdivision; 352.15, subdivision 1; 353.15, 2.65 subdivision 1; 354.10, subdivision 1; 354B.30; 2.66 354C.165; 366.011; 366.012; 469.169, by adding a 2.67 subdivision; 469.1731, subdivision 3; 469.174, 2.68 subdivisions 3, 6, 10, 25, by adding a subdivision; 2.69 469.175, subdivisions 1, 3, 4, 6; 469.176, 2.70 subdivisions 1c, 2, 3, 4d, 4l, 7; 469.1763, 2.71 subdivisions 1, 2, 3, 4, 6; 469.177, subdivisions 1, 3.1 12; 469.1771, subdivision 4, by adding a subdivision; 3.2 469.178, subdivision 7; 469.1791, subdivision 3; 3.3 469.1792, subdivisions 1, 2, 3; 469.1813, subdivision 3.4 8; 469.1815, subdivision 1; 473.167, subdivision 3; 3.5 473.246; 473.249, subdivision 1; 473.253, subdivision 3.6 1; 473.702; 473.711, subdivision 2a; 473F.07, 3.7 subdivision 4; 477A.011, subdivisions 34, 36, by 3.8 adding subdivisions; 477A.013, subdivisions 8, 9; 3.9 477A.03, subdivision 2; 515B.1-116; 611.27, 3.10 subdivisions 13, 15; Laws 1997, chapter 231, article 3.11 10, section 25; Laws 2001, First Special Session 3.12 chapter 5, article 3, section 61; Laws 2001, First 3.13 Special Session chapter 5, article 3, section 63; Laws 3.14 2001, First Special Session chapter 5, article 9, 3.15 section 12; Laws 2001, First Special Session chapter 3.16 5, article 12, section 95, as amended; Laws 2002, 3.17 chapter 377, article 6, section 4; Laws 2002, chapter 3.18 377, article 7, section 3; Laws 2002, chapter 377, 3.19 article 11, section 1; Laws 2002, chapter 377, article 3.20 12, section 17; proposing coding for new law in 3.21 Minnesota Statutes, chapters 3; 123A; 126C; 270; 273; 3.22 274; 275; 276; 290C; 297A; 297F; 469; 477A; repealing 3.23 Minnesota Statutes 2002, sections 270.691, subdivision 3.24 8; 273.138, subdivisions 2, 3, 6; 273.1398, 3.25 subdivisions 2, 2c, 4, 4d; 273.166; 274.04; 275.065, 3.26 subdivisions 3a, 4; 290.0671, subdivision 3; 290.0675, 3.27 subdivision 5; 294.01; 294.02; 294.021; 294.03; 3.28 294.06; 294.07; 294.08; 294.09; 294.10; 294.11; 3.29 294.12; 297A.61, subdivisions 14, 15; 297A.69, 3.30 subdivision 5; 297A.72, subdivision 1; 297A.97; 3.31 298.01, subdivisions 3c, 3d, 4d, 4e; 298.017; 298.24, 3.32 subdivision 3; 298.28, subdivisions 9, 9b, 10; 3.33 298.2961; 298.297; 325E.112, subdivision 2a; 473.711, 3.34 subdivision 2b; 477A.011, subdivision 37; 477A.0121; 3.35 477A.0122; 477A.0123; 477A.0132; 477A.03, subdivisions 3.36 3, 4; 477A.06; 477A.065; 477A.07; Laws 1984, chapter 3.37 652, section 2; Laws 2002, chapter 390, sections 36, 3.38 37, 38; Minnesota Rules, parts 8007.0300, subpart 3; 3.39 8009.7100; 8009.7200; 8009.7300; 8009.7400; 8092.1000; 3.40 8106.0100, subparts 11, 15, 16; 8106.0200; 8125.1000; 3.41 8125.1300, subpart 1; 8125.1400; 8130.0800, subparts 3.42 5, 12; 8130.1300; 8130.1600, subpart 5; 8130.1700, 3.43 subparts 3, 4; 8130.4800, subpart 2; 8130.7500, 3.44 subpart 5; 8130.8000; 8130.8300. 3.45 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 3.46 ARTICLE 1 3.47 JOB OPPORTUNITY BUILDING ZONES 3.48 Section 1. Minnesota Statutes 2002, section 272.02, is 3.49 amended by adding a subdivision to read: 3.50 Subd. 56. [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 3.51 Improvements to real property, and personal property, classified 3.52 under section 273.13, subdivision 24, and located within a job 3.53 opportunity building zone, designated under section 469.314, are 3.54 exempt from ad valorem taxes levied under chapter 275. 3.55 (b) Improvements to real property, and tangible personal 3.56 property, of an agricultural production facility located within 3.57 an agricultural processing facility zone, designated under 4.1 section 469.314, is exempt from ad valorem taxes levied under 4.2 chapter 275. 4.3 (c) For property to qualify for exemption under paragraph 4.4 (a), the occupant must be a qualified business, as defined in 4.5 section 469.310. 4.6 (d) The exemption applies beginning for the first 4.7 assessment year after designation of the job opportunity 4.8 building zone by the commissioner of trade and economic 4.9 development. The exemption applies to each assessment year that 4.10 begins during the duration of the job opportunity building zone 4.11 and to property occupied by July 1 of the assessment year by a 4.12 qualified business. This exemption does not apply to: 4.13 (1) the levy under section 475.61 or similar levy 4.14 provisions under any other law to pay general obligation bonds; 4.15 or 4.16 (2) a levy under section 126C.17, if the levy was approved 4.17 by the voters before the designation of the job opportunity 4.18 building zone. 4.19 [EFFECTIVE DATE.] This section is effective beginning for 4.20 property taxes assessed in 2004, payable in 2005. 4.21 Sec. 2. Minnesota Statutes 2002, section 272.029, is 4.22 amended by adding a subdivision to read: 4.23 Subd. 7. [EXEMPTION.] The tax imposed under this section 4.24 does not apply to electricity produced by wind energy conversion 4.25 systems located in a job opportunity building zone, designated 4.26 under section 469.314, for the duration of the zone. The 4.27 exemption applies beginning for the first calendar year after 4.28 designation of the zone and applies to each calendar year that 4.29 begins during the designation of the zone. 4.30 [EFFECTIVE DATE.] This section is effective the day 4.31 following final enactment. 4.32 Sec. 3. Minnesota Statutes 2002, section 290.01, 4.33 subdivision 19b, is amended to read: 4.34 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 4.35 individuals, estates, and trusts, there shall be subtracted from 4.36 federal taxable income: 5.1 (1) interest income on obligations of any authority, 5.2 commission, or instrumentality of the United States to the 5.3 extent includable in taxable income for federal income tax 5.4 purposes but exempt from state income tax under the laws of the 5.5 United States; 5.6 (2) if included in federal taxable income, the amount of 5.7 any overpayment of income tax to Minnesota or to any other 5.8 state, for any previous taxable year, whether the amount is 5.9 received as a refund or as a credit to another taxable year's 5.10 income tax liability; 5.11 (3) the amount paid to others, less the amount used to 5.12 claim the credit allowed under section 290.0674, not to exceed 5.13 $1,625 for each qualifying child in grades kindergarten to 6 and 5.14 $2,500 for each qualifying child in grades 7 to 12, for tuition, 5.15 textbooks, and transportation of each qualifying child in 5.16 attending an elementary or secondary school situated in 5.17 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 5.18 wherein a resident of this state may legally fulfill the state's 5.19 compulsory attendance laws, which is not operated for profit, 5.20 and which adheres to the provisions of the Civil Rights Act of 5.21 1964 and chapter 363. For the purposes of this clause, 5.22 "tuition" includes fees or tuition as defined in section 5.23 290.0674, subdivision 1, clause (1). As used in this clause, 5.24 "textbooks" includes books and other instructional materials and 5.25 equipment purchased or leased for use in elementary and 5.26 secondary schools in teaching only those subjects legally and 5.27 commonly taught in public elementary and secondary schools in 5.28 this state. Equipment expenses qualifying for deduction 5.29 includes expenses as defined and limited in section 290.0674, 5.30 subdivision 1, clause (3). "Textbooks" does not include 5.31 instructional books and materials used in the teaching of 5.32 religious tenets, doctrines, or worship, the purpose of which is 5.33 to instill such tenets, doctrines, or worship, nor does it 5.34 include books or materials for, or transportation to, 5.35 extracurricular activities including sporting events, musical or 5.36 dramatic events, speech activities, driver's education, or 6.1 similar programs. For purposes of the subtraction provided by 6.2 this clause, "qualifying child" has the meaning given in section 6.3 32(c)(3) of the Internal Revenue Code; 6.4 (4) income as provided under section 290.0802; 6.5 (5) to the extent included in federal adjusted gross 6.6 income, income realized on disposition of property exempt from 6.7 tax under section 290.491; 6.8 (6) to the extent not deducted in determining federal 6.9 taxable income or used to claim the long-term care insurance 6.10 credit under section 290.0672, the amount paid for health 6.11 insurance of self-employed individuals as determined under 6.12 section 162(l) of the Internal Revenue Code, except that the 6.13 percent limit does not apply. If the individual deducted 6.14 insurance payments under section 213 of the Internal Revenue 6.15 Code of 1986, the subtraction under this clause must be reduced 6.16 by the lesser of: 6.17 (i) the total itemized deductions allowed under section 6.18 63(d) of the Internal Revenue Code, less state, local, and 6.19 foreign income taxes deductible under section 164 of the 6.20 Internal Revenue Code and the standard deduction under section 6.21 63(c) of the Internal Revenue Code; or 6.22 (ii) the lesser of (A) the amount of insurance qualifying 6.23 as "medical care" under section 213(d) of the Internal Revenue 6.24 Code to the extent not deducted under section 162(1) of the 6.25 Internal Revenue Code or excluded from income or (B) the total 6.26 amount deductible for medical care under section 213(a); 6.27 (7) the exemption amount allowed under Laws 1995, chapter 6.28 255, article 3, section 2, subdivision 3; 6.29 (8) to the extent included in federal taxable income, 6.30 postservice benefits for youth community service under section 6.31 124D.42 for volunteer service under United States Code, title 6.32 42, sections 12601 to 12604; 6.33 (9) to the extent not deducted in determining federal 6.34 taxable income by an individual who does not itemize deductions 6.35 for federal income tax purposes for the taxable year, an amount 6.36 equal to 50 percent of the excess of charitable contributions 7.1 allowable as a deduction for the taxable year under section 7.2 170(a) of the Internal Revenue Code over $500; 7.3 (10) for taxable years beginning before January 1, 2008, 7.4 the amount of the federal small ethanol producer credit allowed 7.5 under section 40(a)(3) of the Internal Revenue Code which is 7.6 included in gross income under section 87 of the Internal 7.7 Revenue Code; 7.8 (11) for individuals who are allowed a federal foreign tax 7.9 credit for taxes that do not qualify for a credit under section 7.10 290.06, subdivision 22, an amount equal to the carryover of 7.11 subnational foreign taxes for the taxable year, but not to 7.12 exceed the total subnational foreign taxes reported in claiming 7.13 the foreign tax credit. For purposes of this clause, "federal 7.14 foreign tax credit" means the credit allowed under section 27 of 7.15 the Internal Revenue Code, and "carryover of subnational foreign 7.16 taxes" equals the carryover allowed under section 904(c) of the 7.17 Internal Revenue Code minus national level foreign taxes to the 7.18 extent they exceed the federal foreign tax credit;and7.19 (12) in each of the five tax years immediately following 7.20 the tax year in which an addition is required under subdivision 7.21 19a, clause (7), an amount equal to one-fifth of the delayed 7.22 depreciation. For purposes of this clause, "delayed 7.23 depreciation" means the amount of the addition made by the 7.24 taxpayer under subdivision 19a, clause (7), minus the positive 7.25 value of any net operating loss under section 172 of the 7.26 Internal Revenue Code generated for the tax year of the 7.27 addition. The resulting delayed depreciation cannot be less 7.28 than zero; and 7.29 (13) job opportunity building zone income as provided under 7.30 section 469.316. 7.31 [EFFECTIVE DATE.] This section is effective for taxable 7.32 years beginning after December 31, 2003. 7.33 Sec. 4. Minnesota Statutes 2002, section 290.01, 7.34 subdivision 29, is amended to read: 7.35 Subd. 29. [TAXABLE INCOME.] The term "taxable income" 7.36 means: 8.1 (1) for individuals, estates, and trusts, the same as 8.2 taxable net income; 8.3 (2) for corporations, the taxable net income less 8.4 (i) the net operating loss deduction under section 290.095; 8.5and8.6 (ii) the dividends received deduction under section 290.21, 8.7 subdivision 4; and 8.8 (iii) the exemption for operating in a job opportunity 8.9 building zone under section 469.317. 8.10 [EFFECTIVE DATE.] This section is effective for taxable 8.11 years beginning after December 31, 2003. 8.12 Sec. 5. Minnesota Statutes 2002, section 290.06, 8.13 subdivision 2c, is amended to read: 8.14 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 8.15 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 8.16 married individuals filing joint returns and surviving spouses 8.17 as defined in section 2(a) of the Internal Revenue Code must be 8.18 computed by applying to their taxable net income the following 8.19 schedule of rates: 8.20 (1) On the first $25,680, 5.35 percent; 8.21 (2) On all over $25,680, but not over $102,030, 7.05 8.22 percent; 8.23 (3) On all over $102,030, 7.85 percent. 8.24 Married individuals filing separate returns, estates, and 8.25 trusts must compute their income tax by applying the above rates 8.26 to their taxable income, except that the income brackets will be 8.27 one-half of the above amounts. 8.28 (b) The income taxes imposed by this chapter upon unmarried 8.29 individuals must be computed by applying to taxable net income 8.30 the following schedule of rates: 8.31 (1) On the first $17,570, 5.35 percent; 8.32 (2) On all over $17,570, but not over $57,710, 7.05 8.33 percent; 8.34 (3) On all over $57,710, 7.85 percent. 8.35 (c) The income taxes imposed by this chapter upon unmarried 8.36 individuals qualifying as a head of household as defined in 9.1 section 2(b) of the Internal Revenue Code must be computed by 9.2 applying to taxable net income the following schedule of rates: 9.3 (1) On the first $21,630, 5.35 percent; 9.4 (2) On all over $21,630, but not over $86,910, 7.05 9.5 percent; 9.6 (3) On all over $86,910, 7.85 percent. 9.7 (d) In lieu of a tax computed according to the rates set 9.8 forth in this subdivision, the tax of any individual taxpayer 9.9 whose taxable net income for the taxable year is less than an 9.10 amount determined by the commissioner must be computed in 9.11 accordance with tables prepared and issued by the commissioner 9.12 of revenue based on income brackets of not more than $100. The 9.13 amount of tax for each bracket shall be computed at the rates 9.14 set forth in this subdivision, provided that the commissioner 9.15 may disregard a fractional part of a dollar unless it amounts to 9.16 50 cents or more, in which case it may be increased to $1. 9.17 (e) An individual who is not a Minnesota resident for the 9.18 entire year must compute the individual's Minnesota income tax 9.19 as provided in this subdivision. After the application of the 9.20 nonrefundable credits provided in this chapter, the tax 9.21 liability must then be multiplied by a fraction in which: 9.22 (1) the numerator is the individual's Minnesota source 9.23 federal adjusted gross income as defined in section 62 of the 9.24 Internal Revenue Code and increased by the additions required 9.25 under section 290.01, subdivision 19a, clauses (1) and (6), and 9.26 reduced by the subtraction under section 290.01, subdivision 9.27 19b, clause (13), and the Minnesota assignable portion of the 9.28 subtraction for United States government interest under section 9.29 290.01, subdivision 19b, clause (1), after applying the 9.30 allocation and assignability provisions of section 290.081, 9.31 clause (a), or 290.17; and 9.32 (2) the denominator is the individual's federal adjusted 9.33 gross income as defined in section 62 of the Internal Revenue 9.34 Code of 1986, increased by the amounts specified in section 9.35 290.01, subdivision 19a, clauses (1) and (6), and reduced by the 9.36 amounts specified in section 290.01, subdivision 19b,clause10.1 clauses (1) and (13). 10.2 [EFFECTIVE DATE.] This section is effective for taxable 10.3 years beginning after December 31, 2003. 10.4 Sec. 6. Minnesota Statutes 2002, section 290.06, is 10.5 amended by adding a subdivision to read: 10.6 Subd. 29. [JOB OPPORTUNITY BUILDING ZONE JOB CREDIT.] A 10.7 taxpayer that is a qualified business, as defined in section 10.8 469.310, subdivision 11, is allowed a credit as determined under 10.9 section 469.318 against the tax imposed by this chapter. 10.10 [EFFECTIVE DATE.] This section is effective the day 10.11 following final enactment. 10.12 Sec. 7. Minnesota Statutes 2002, section 290.067, 10.13 subdivision 1, is amended to read: 10.14 Subdivision 1. [AMOUNT OF CREDIT.] (a) A taxpayer may take 10.15 as a credit against the tax due from the taxpayer and a spouse, 10.16 if any, under this chapter an amount equal to the dependent care 10.17 credit for which the taxpayer is eligible pursuant to the 10.18 provisions of section 21 of the Internal Revenue Code subject to 10.19 the limitations provided in subdivision 2 except that in 10.20 determining whether the child qualified as a dependent, income 10.21 received as a Minnesota family investment program grant or 10.22 allowance to or on behalf of the child must not be taken into 10.23 account in determining whether the child received more than half 10.24 of the child's support from the taxpayer, and the provisions of 10.25 section 32(b)(1)(D) of the Internal Revenue Code do not apply. 10.26 (b) If a child who has not attained the age of six years at 10.27 the close of the taxable year is cared for at a licensed family 10.28 day care home operated by the child's parent, the taxpayer is 10.29 deemed to have paid employment-related expenses. If the child 10.30 is 16 months old or younger at the close of the taxable year, 10.31 the amount of expenses deemed to have been paid equals the 10.32 maximum limit for one qualified individual under section 21(c) 10.33 and (d) of the Internal Revenue Code. If the child is older 10.34 than 16 months of age but has not attained the age of six years 10.35 at the close of the taxable year, the amount of expenses deemed 10.36 to have been paid equals the amount the licensee would charge 11.1 for the care of a child of the same age for the same number of 11.2 hours of care. 11.3 (c) If a married couple: 11.4 (1) has a child who has not attained the age of one year at 11.5 the close of the taxable year; 11.6 (2) files a joint tax return for the taxable year; and 11.7 (3) does not participate in a dependent care assistance 11.8 program as defined in section 129 of the Internal Revenue Code, 11.9 in lieu of the actual employment related expenses paid for that 11.10 child under paragraph (a) or the deemed amount under paragraph 11.11 (b), the lesser of (i) the combined earned income of the couple 11.12 or (ii) the amount of the maximum limit for one qualified 11.13 individual under section 21(c) and (d) of the Internal Revenue 11.14 Code will be deemed to be the employment related expense paid 11.15 for that child. The earned income limitation of section 21(d) 11.16 of the Internal Revenue Code shall not apply to this deemed 11.17 amount. These deemed amounts apply regardless of whether any 11.18 employment-related expenses have been paid. 11.19 (d) If the taxpayer is not required and does not file a 11.20 federal individual income tax return for the tax year, no credit 11.21 is allowed for any amount paid to any person unless: 11.22 (1) the name, address, and taxpayer identification number 11.23 of the person are included on the return claiming the credit; or 11.24 (2) if the person is an organization described in section 11.25 501(c)(3) of the Internal Revenue Code and exempt from tax under 11.26 section 501(a) of the Internal Revenue Code, the name and 11.27 address of the person are included on the return claiming the 11.28 credit. 11.29 In the case of a failure to provide the information required 11.30 under the preceding sentence, the preceding sentence does not 11.31 apply if it is shown that the taxpayer exercised due diligence 11.32 in attempting to provide the information required. 11.33 In the case of a nonresident, part-year resident, or a 11.34 person who has earned income not subject to tax under this 11.35 chapter including earned income excluded pursuant to section 11.36 290.01, subdivision 19b, clause (13), the credit determined 12.1 under section 21 of the Internal Revenue Code must be allocated 12.2 based on the ratio by which the earned income of the claimant 12.3 and the claimant's spouse from Minnesota sources bears to the 12.4 total earned income of the claimant and the claimant's spouse. 12.5 [EFFECTIVE DATE.] This section is effective for taxable 12.6 years beginning after December 31, 2003. 12.7 Sec. 8. Minnesota Statutes 2002, section 290.0671, 12.8 subdivision 1, is amended to read: 12.9 Subdivision 1. [CREDIT ALLOWED.] (a) An individual is 12.10 allowed a credit against the tax imposed by this chapter equal 12.11 to a percentage of earned income. To receive a credit, a 12.12 taxpayer must be eligible for a credit under section 32 of the 12.13 Internal Revenue Code. 12.14 (b) For individuals with no qualifying children, the credit 12.15 equals 1.9125 percent of the first $4,620 of earned income. The 12.16 credit is reduced by 1.9125 percent of earned income or modified 12.17 adjusted gross income, whichever is greater, in excess of 12.18 $5,770, but in no case is the credit less than zero. 12.19 (c) For individuals with one qualifying child, the credit 12.20 equals 8.5 percent of the first $6,920 of earned income and 8.5 12.21 percent of earned income over $12,080 but less than $13,450. 12.22 The credit is reduced by 5.73 percent of earned income or 12.23 modified adjusted gross income, whichever is greater, in excess 12.24 of $15,080, but in no case is the credit less than zero. 12.25 (d) For individuals with two or more qualifying children, 12.26 the credit equals ten percent of the first $9,720 of earned 12.27 income and 20 percent of earned income over $14,860 but less 12.28 than $16,800. The credit is reduced by 10.3 percent of earned 12.29 income or modified adjusted gross income, whichever is greater, 12.30 in excess of $17,890, but in no case is the credit less than 12.31 zero. 12.32 (e) For a nonresident or part-year resident, the credit 12.33 must be allocated based on the percentage calculated under 12.34 section 290.06, subdivision 2c, paragraph (e). 12.35 (f) For a person who was a resident for the entire tax year 12.36 and has earned income not subject to tax under this 13.1 chapter including income excluded under section 290.01, 13.2 subdivision 19b, clause (13), the credit must be allocated based 13.3 on the ratio of federal adjusted gross income reduced by the 13.4 earned income not subject to tax under this chapter over federal 13.5 adjusted gross income. 13.6 (g) For tax years beginning after December 31, 2001, and 13.7 before December 31, 2004, the $5,770 in paragraph (b) is 13.8 increased to $6,770, the $15,080 in paragraph (c) is increased 13.9 to $16,080, and the $17,890 in paragraph (d) is increased to 13.10 $18,890 for married taxpayers filing joint returns. 13.11 (h) For tax years beginning after December 31, 2004, and 13.12 before December 31, 2007, the $5,770 in paragraph (b) is 13.13 increased to $7,770, the $15,080 in paragraph (c) is increased 13.14 to $17,080, and the $17,890 in paragraph (d) is increased to 13.15 $19,890 for married taxpayers filing joint returns. 13.16 (i) For tax years beginning after December 31, 2007, and 13.17 before December 31, 2010, the $5,770 in paragraph (b) is 13.18 increased to $8,770, the $15,080 in paragraph (c) is increased 13.19 to $18,080 and the $17,890 in paragraph (d) is increased to 13.20 $20,890 for married taxpayers filing joint returns. 13.21 (j) The commissioner shall construct tables showing the 13.22 amount of the credit at various income levels and make them 13.23 available to taxpayers. The tables shall follow the schedule 13.24 contained in this subdivision, except that the commissioner may 13.25 graduate the transition between income brackets. 13.26 [EFFECTIVE DATE.] This section is effective for taxable 13.27 years beginning after December 31, 2003. 13.28 Sec. 9. Minnesota Statutes 2002, section 290.091, 13.29 subdivision 2, is amended to read: 13.30 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 13.31 this section, the following terms have the meanings given: 13.32 (a) "Alternative minimum taxable income" means the sum of 13.33 the following for the taxable year: 13.34 (1) the taxpayer's federal alternative minimum taxable 13.35 income as defined in section 55(b)(2) of the Internal Revenue 13.36 Code; 14.1 (2) the taxpayer's itemized deductions allowed in computing 14.2 federal alternative minimum taxable income, but excluding: 14.3 (i) the charitable contribution deduction under section 170 14.4 of the Internal Revenue Code to the extent that the deduction 14.5 exceeds 1.3 percent of adjusted gross income, as defined in 14.6 section 62 of the Internal Revenue Code; 14.7 (ii) the medical expense deduction; 14.8 (iii) the casualty, theft, and disaster loss deduction; and 14.9 (iv) the impairment-related work expenses of a disabled 14.10 person; 14.11 (3) for depletion allowances computed under section 613A(c) 14.12 of the Internal Revenue Code, with respect to each property (as 14.13 defined in section 614 of the Internal Revenue Code), to the 14.14 extent not included in federal alternative minimum taxable 14.15 income, the excess of the deduction for depletion allowable 14.16 under section 611 of the Internal Revenue Code for the taxable 14.17 year over the adjusted basis of the property at the end of the 14.18 taxable year (determined without regard to the depletion 14.19 deduction for the taxable year); 14.20 (4) to the extent not included in federal alternative 14.21 minimum taxable income, the amount of the tax preference for 14.22 intangible drilling cost under section 57(a)(2) of the Internal 14.23 Revenue Code determined without regard to subparagraph (E); 14.24 (5) to the extent not included in federal alternative 14.25 minimum taxable income, the amount of interest income as 14.26 provided by section 290.01, subdivision 19a, clause (1); and 14.27 (6) the amount of addition required by section 290.01, 14.28 subdivision 19a, clause (7); 14.29 less the sum of the amounts determined under the following: 14.30 (1) interest income as defined in section 290.01, 14.31 subdivision 19b, clause (1); 14.32 (2) an overpayment of state income tax as provided by 14.33 section 290.01, subdivision 19b, clause (2), to the extent 14.34 included in federal alternative minimum taxable income; 14.35 (3) the amount of investment interest paid or accrued 14.36 within the taxable year on indebtedness to the extent that the 15.1 amount does not exceed net investment income, as defined in 15.2 section 163(d)(4) of the Internal Revenue Code. Interest does 15.3 not include amounts deducted in computing federal adjusted gross 15.4 income; and 15.5 (4) amounts subtracted from federal taxable income as 15.6 provided by section 290.01, subdivision 19b,clauseclauses (12) 15.7 and (13). 15.8 In the case of an estate or trust, alternative minimum 15.9 taxable income must be computed as provided in section 59(c) of 15.10 the Internal Revenue Code. 15.11 (b) "Investment interest" means investment interest as 15.12 defined in section 163(d)(3) of the Internal Revenue Code. 15.13 (c) "Tentative minimum tax" equals 6.4 percent of 15.14 alternative minimum taxable income after subtracting the 15.15 exemption amount determined under subdivision 3. 15.16 (d) "Regular tax" means the tax that would be imposed under 15.17 this chapter (without regard to this section and section 15.18 290.032), reduced by the sum of the nonrefundable credits 15.19 allowed under this chapter. 15.20 (e) "Net minimum tax" means the minimum tax imposed by this 15.21 section. 15.22 [EFFECTIVE DATE.] This section is effective for taxable 15.23 years beginning after December 31, 2003. 15.24 Sec. 10. Minnesota Statutes 2002, section 290.0921, 15.25 subdivision 3, is amended to read: 15.26 Subd. 3. [ALTERNATIVE MINIMUM TAXABLE INCOME.] 15.27 "Alternative minimum taxable income" is Minnesota net income as 15.28 defined in section 290.01, subdivision 19, and includes the 15.29 adjustments and tax preference items in sections 56, 57, 58, and 15.30 59(d), (e), (f), and (h) of the Internal Revenue Code. If a 15.31 corporation files a separate company Minnesota tax return, the 15.32 minimum tax must be computed on a separate company basis. If a 15.33 corporation is part of a tax group filing a unitary return, the 15.34 minimum tax must be computed on a unitary basis. The following 15.35 adjustments must be made. 15.36 (1) For purposes of the depreciation adjustments under 16.1 section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 16.2 the basis for depreciable property placed in service in a 16.3 taxable year beginning before January 1, 1990, is the adjusted 16.4 basis for federal income tax purposes, including any 16.5 modification made in a taxable year under section 290.01, 16.6 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 16.7 subdivision 7, paragraph (c). 16.8 For taxable years beginning after December 31, 2000, the 16.9 amount of any remaining modification made under section 290.01, 16.10 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 16.11 subdivision 7, paragraph (c), not previously deducted is a 16.12 depreciation allowance in the first taxable year after December 16.13 31, 2000. 16.14 (2) The portion of the depreciation deduction allowed for 16.15 federal income tax purposes under section 168(k) of the Internal 16.16 Revenue Code that is required as an addition under section 16.17 290.01, subdivision 19c, clause (16), is disallowed in 16.18 determining alternative minimum taxable income. 16.19 (3) The subtraction for depreciation allowed under section 16.20 290.01, subdivision 19d, clause (19), is allowed as a 16.21 depreciation deduction in determining alternative minimum 16.22 taxable income. 16.23 (4) The alternative tax net operating loss deduction under 16.24 sections 56(a)(4) and 56(d) of the Internal Revenue Code does 16.25 not apply. 16.26 (5) The special rule for certain dividends under section 16.27 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 16.28 (6) The special rule for dividends from section 936 16.29 companies under section 56(g)(4)(C)(iii) does not apply. 16.30 (7) The tax preference for depletion under section 57(a)(1) 16.31 of the Internal Revenue Code does not apply. 16.32 (8) The tax preference for intangible drilling costs under 16.33 section 57(a)(2) of the Internal Revenue Code must be calculated 16.34 without regard to subparagraph (E) and the subtraction under 16.35 section 290.01, subdivision 19d, clause (4). 16.36 (9) The tax preference for tax exempt interest under 17.1 section 57(a)(5) of the Internal Revenue Code does not apply. 17.2 (10) The tax preference for charitable contributions of 17.3 appreciated property under section 57(a)(6) of the Internal 17.4 Revenue Code does not apply. 17.5 (11) For purposes of calculating the tax preference for 17.6 accelerated depreciation or amortization on certain property 17.7 placed in service before January 1, 1987, under section 57(a)(7) 17.8 of the Internal Revenue Code, the deduction allowable for the 17.9 taxable year is the deduction allowed under section 290.01, 17.10 subdivision 19e. 17.11 For taxable years beginning after December 31, 2000, the 17.12 amount of any remaining modification made under section 290.01, 17.13 subdivision 19e, not previously deducted is a depreciation or 17.14 amortization allowance in the first taxable year after December 17.15 31, 2004. 17.16 (12) For purposes of calculating the adjustment for 17.17 adjusted current earnings in section 56(g) of the Internal 17.18 Revenue Code, the term "alternative minimum taxable income" as 17.19 it is used in section 56(g) of the Internal Revenue Code, means 17.20 alternative minimum taxable income as defined in this 17.21 subdivision, determined without regard to the adjustment for 17.22 adjusted current earnings in section 56(g) of the Internal 17.23 Revenue Code. 17.24 (13) For purposes of determining the amount of adjusted 17.25 current earnings under section 56(g)(3) of the Internal Revenue 17.26 Code, no adjustment shall be made under section 56(g)(4) of the 17.27 Internal Revenue Code with respect to (i) the amount of foreign 17.28 dividend gross-up subtracted as provided in section 290.01, 17.29 subdivision 19d, clause (1), (ii) the amount of refunds of 17.30 income, excise, or franchise taxes subtracted as provided in 17.31 section 290.01, subdivision 19d, clause (10), or (iii) the 17.32 amount of royalties, fees or other like income subtracted as 17.33 provided in section 290.01, subdivision 19d, clause (11). 17.34 (14) Alternative minimum taxable income excludes the income 17.35 from operating in a job opportunity building zone as provided 17.36 under section 469.317. 18.1 Items of tax preference must not be reduced below zero as a 18.2 result of the modifications in this subdivision. 18.3 [EFFECTIVE DATE.] This section is effective for taxable 18.4 years beginning after December 31, 2003. 18.5 Sec. 11. Minnesota Statutes 2002, section 290.0922, 18.6 subdivision 2, is amended to read: 18.7 Subd. 2. [EXEMPTIONS.] The following entities are exempt 18.8 from the tax imposed by this section: 18.9 (1) corporations exempt from tax under section 290.05; 18.10 (2) real estate investment trusts; 18.11 (3) regulated investment companies or a fund thereof; and 18.12 (4) entities having a valid election in effect under 18.13 section 860D(b) of the Internal Revenue Code; 18.14 (5) town and farmers' mutual insurance companies;and18.15 (6) cooperatives organized under chapter 308A that provide 18.16 housing exclusively to persons age 55 and over and are 18.17 classified as homesteads under section 273.124, subdivision 3; 18.18 and 18.19 (7) an entity, if for the taxable year all of its property 18.20 is located in a job opportunity building zone designated under 18.21 section 469.314 and all of its payroll is a job opportunity 18.22 building zone payroll under section 469.310. 18.23 Entities not specifically exempted by this subdivision are 18.24 subject to tax under this section, notwithstanding section 18.25 290.05. 18.26 [EFFECTIVE DATE.] This section is effective for taxable 18.27 years beginning after December 31, 2003. 18.28 Sec. 12. Minnesota Statutes 2002, section 290.0922, 18.29 subdivision 3, is amended to read: 18.30 Subd. 3. [DEFINITIONS.] (a) "Minnesota sales or receipts" 18.31 means the total sales apportioned to Minnesota pursuant to 18.32 section 290.191, subdivision 5, the total receipts attributed to 18.33 Minnesota pursuant to section 290.191, subdivisions 6 to 8, 18.34 and/or the total sales or receipts apportioned or attributed to 18.35 Minnesota pursuant to any other apportionment formula applicable 18.36 to the taxpayer. 19.1 (b) "Minnesota property" means total Minnesota tangible 19.2 property as provided in section 290.191, subdivisions 9 to 11, 19.3 and any other tangible property located in Minnesota, but does 19.4 not include property located in a job opportunity building zone 19.5 designated under section 469.314. Intangible property shall not 19.6 be included in Minnesota property for purposes of this section. 19.7 Taxpayers who do not utilize tangible property to apportion 19.8 income shall nevertheless include Minnesota property for 19.9 purposes of this section. On a return for a short taxable year, 19.10 the amount of Minnesota property owned, as determined under 19.11 section 290.191, shall be included in Minnesota property based 19.12 on a fraction in which the numerator is the number of days in 19.13 the short taxable year and the denominator is 365. 19.14 (c) "Minnesota payrolls" means total Minnesota payrolls as 19.15 provided in section 290.191, subdivision 12, but does not 19.16 include job opportunity building zone payrolls under section 19.17 469.310, subdivision 8. Taxpayers who do not utilize payrolls 19.18 to apportion income shall nevertheless include Minnesota 19.19 payrolls for purposes of this section. 19.20 [EFFECTIVE DATE.] This section is effective for taxable 19.21 years beginning after December 31, 2003. 19.22 Sec. 13. Minnesota Statutes 2002, section 297A.68, is 19.23 amended by adding a subdivision to read: 19.24 Subd. 37. [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 19.25 of tangible personal property or taxable services by a qualified 19.26 business, as defined in section 469.310, are exempt if the 19.27 property or services are primarily used or consumed in a job 19.28 opportunity building zone designated under section 469.314. 19.29 (b) Purchase and use of construction materials and supplies 19.30 for construction of improvements to real property in a job 19.31 opportunity building zone are exempt if the improvements after 19.32 completion of construction are to be used in the conduct of a 19.33 qualified business, as defined in section 469.310. This 19.34 exemption applies regardless of whether the purchases are made 19.35 by the business or a contractor. 19.36 (c) The exemptions under this subdivision apply to a local 20.1 sales and use tax regardless of whether the local sales tax is 20.2 imposed on the sales taxable as defined under this chapter. 20.3 (d) This subdivision applies to sales, if the purchase was 20.4 made and delivery received during the duration of the zone. 20.5 [EFFECTIVE DATE.] This section is effective for sales made 20.6 on or after the day following final enactment. 20.7 Sec. 14. Minnesota Statutes 2002, section 297B.03, is 20.8 amended to read: 20.9 297B.03 [EXEMPTIONS.] 20.10 There is specifically exempted from the provisions of this 20.11 chapter and from computation of the amount of tax imposed by it 20.12 the following: 20.13 (1) purchase or use, including use under a lease purchase 20.14 agreement or installment sales contract made pursuant to section 20.15 465.71, of any motor vehicle by the United States and its 20.16 agencies and instrumentalities and by any person described in 20.17 and subject to the conditions provided in section 297A.67, 20.18 subdivision 11; 20.19 (2) purchase or use of any motor vehicle by any person who 20.20 was a resident of another state or country at the time of the 20.21 purchase and who subsequently becomes a resident of Minnesota, 20.22 provided the purchase occurred more than 60 days prior to the 20.23 date such person began residing in the state of Minnesota and 20.24 the motor vehicle was registered in the person's name in the 20.25 other state or country; 20.26 (3) purchase or use of any motor vehicle by any person 20.27 making a valid election to be taxed under the provisions of 20.28 section 297A.90; 20.29 (4) purchase or use of any motor vehicle previously 20.30 registered in the state of Minnesota when such transfer 20.31 constitutes a transfer within the meaning of section 118, 331, 20.32 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 20.33 1563(a) of the Internal Revenue Code of 1986, as amended through 20.34 December 31, 1999; 20.35 (5) purchase or use of any vehicle owned by a resident of 20.36 another state and leased to a Minnesota based private or for 21.1 hire carrier for regular use in the transportation of persons or 21.2 property in interstate commerce provided the vehicle is titled 21.3 in the state of the owner or secured party, and that state does 21.4 not impose a sales tax or sales tax on motor vehicles used in 21.5 interstate commerce; 21.6 (6) purchase or use of a motor vehicle by a private 21.7 nonprofit or public educational institution for use as an 21.8 instructional aid in automotive training programs operated by 21.9 the institution. "Automotive training programs" includes motor 21.10 vehicle body and mechanical repair courses but does not include 21.11 driver education programs; 21.12 (7) purchase of a motor vehicle for use as an ambulance by 21.13 an ambulance service licensed under section 144E.10; 21.14 (8) purchase of a motor vehicle by or for a public library, 21.15 as defined in section 134.001, subdivision 2, as a bookmobile or 21.16 library delivery vehicle; 21.17 (9) purchase of a ready-mixed concrete truck; 21.18 (10) purchase or use of a motor vehicle by a town for use 21.19 exclusively for road maintenance, including snowplows and dump 21.20 trucks, but not including automobiles, vans, or pickup trucks; 21.21 (11) purchase or use of a motor vehicle by a corporation, 21.22 society, association, foundation, or institution organized and 21.23 operated exclusively for charitable, religious, or educational 21.24 purposes, except a public school, university, or library, but 21.25 only if the vehicle is: 21.26 (i) a truck, as defined in section 168.011, a bus, as 21.27 defined in section 168.011, or a passenger automobile, as 21.28 defined in section 168.011, if the automobile is designed and 21.29 used for carrying more than nine persons including the driver; 21.30 and 21.31 (ii) intended to be used primarily to transport tangible 21.32 personal property or individuals, other than employees, to whom 21.33 the organization provides service in performing its charitable, 21.34 religious, or educational purpose; 21.35 (12) purchase of a motor vehicle for use by a transit 21.36 provider exclusively to provide transit service is exempt if the 22.1 transit provider is either (i) receiving financial assistance or 22.2 reimbursement under section 174.24 or 473.384, or (ii) operating 22.3 under section 174.29, 473.388, or 473.405; 22.4 (13) purchase or use of a motor vehicle by a qualified 22.5 business, as defined in section 469.310, located in a job 22.6 opportunity building zone, if the motor vehicle is principally 22.7 garaged in the job opportunity building zone and is primarily 22.8 used as part of or in direct support of the person's operations 22.9 carried on in the job opportunity building zone. The exemption 22.10 under this clause applies to sales, if the purchase was made and 22.11 delivery received during the duration of the job opportunity 22.12 building zone. The exemption under this clause also applies to 22.13 any local sales and use tax. 22.14 [EFFECTIVE DATE.] This section is effective for sales made 22.15 after December 31, 2003. 22.16 Sec. 15. [469.310] [DEFINITIONS.] 22.17 Subdivision 1. [SCOPE.] For purposes of sections 469.310 22.18 to 469.320, the following terms have the meanings given. 22.19 Subd. 2. [AGRICULTURAL PROCESSING FACILITY.] "Agricultural 22.20 processing facility" means one or more facilities or operations 22.21 that transform, package, sort, or grade livestock or livestock 22.22 products, agricultural commodities, or plants or plant products 22.23 into goods that are used for intermediate or final consumption 22.24 including goods for nonfood use, and surrounding property. 22.25 Subd. 3. [APPLICANT.] "Applicant" means a local government 22.26 unit or units applying for designation of an area as a job 22.27 opportunity building zone or a joint powers board, established 22.28 under section 471.59, acting on behalf of two or more local 22.29 government units. 22.30 Subd. 4. [COMMISSIONER.] "Commissioner" means the 22.31 commissioner of trade and economic development. 22.32 Subd. 5. [DEVELOPMENT PLAN.] "Development plan" means a 22.33 plan meeting the requirements of section 469.311. 22.34 Subd. 6. [JOB OPPORTUNITY BUILDING ZONE OR ZONE.] "Job 22.35 opportunity building zone" or "zone" means a zone designated by 22.36 the commissioner under section 469.314, and includes an 23.1 agricultural processing facility zone. 23.2 Subd. 7. [JOB OPPORTUNITY BUILDING ZONE PERCENTAGE OR ZONE 23.3 PERCENTAGE.] "Job opportunity building zone percentage" or "zone 23.4 percentage" means the following fraction reduced to a percentage: 23.5 (1) the numerator of the fraction is: 23.6 (i) the ratio of the taxpayer's property factor under 23.7 section 290.191 located in the zone for the taxable year over 23.8 the property factor numerator determined under section 290.191, 23.9 plus 23.10 (ii) the ratio of the taxpayer's job opportunity building 23.11 zone payroll factor under subdivision 8 over the payroll factor 23.12 numerator determined under section 290.191; and 23.13 (2) the denominator of the fraction is two. 23.14 When calculating the zone percentage for a business that is 23.15 part of a unitary business as defined under section 290.17, 23.16 subdivision 4, the denominator of the payroll and property 23.17 factors is the Minnesota payroll and property of the unitary 23.18 business as reported on the combined report under section 23.19 290.17, subdivision 4, paragraph (j). 23.20 Subd. 8. [JOB OPPORTUNITY BUILDING ZONE PAYROLL 23.21 FACTOR.] "Job opportunity building zone payroll factor" or "job 23.22 opportunity building zone payroll" is that portion of the 23.23 payroll factor under section 290.191 that represents: 23.24 (1) wages or salaries paid to an individual for services 23.25 performed in a job opportunity building zone; or 23.26 (2) wages or salaries paid to individuals working from 23.27 offices within a job opportunity building zone if their 23.28 employment requires them to work outside the zone and the work 23.29 is incidental to the work performed by the individual within the 23.30 zone. 23.31 Subd. 9. [LOCAL GOVERNMENT UNIT.] "Local government unit" 23.32 means a statutory or home rule charter city, county, town, iron 23.33 range resources and rehabilitation agency, regional development 23.34 commission, or a federally designated economic development 23.35 district. 23.36 Subd. 10. [PERSON.] "Person" includes an individual, 24.1 corporation, partnership, limited liability company, 24.2 association, or any other entity. 24.3 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 24.4 means a person carrying on a trade or business at a place of 24.5 business located within a job opportunity building zone. 24.6 (b) A person that relocates a trade or business from 24.7 outside a job opportunity building zone into a zone is not a 24.8 qualified business, unless the business: 24.9 (1)(i) increases full-time employment in the first full 24.10 year of operation within the job opportunity building zone by at 24.11 least 20 percent measured relative to the operations that were 24.12 relocated and maintains the required level of employment for 24.13 each year the zone designation applies; or 24.14 (ii) makes a capital investment in the property located 24.15 within a zone equivalent to ten percent of the gross revenues of 24.16 operation that were relocated in the immediately preceding 24.17 taxable year; and 24.18 (2) enters a binding written agreement with the 24.19 commissioner that: 24.20 (i) pledges the business will meet the requirements of 24.21 clause (1); 24.22 (ii) provides for repayment of all tax benefits enumerated 24.23 under section 469.315 to the business under the procedures in 24.24 section 469.319, if the requirements of clause (1) are not met 24.25 for the taxable year or for taxes payable during the year in 24.26 which the requirements were not met; and 24.27 (iii) contains any other terms the commissioner determines 24.28 appropriate. 24.29 Subd. 12. [RELOCATES.] (a) "Relocates" means that the 24.30 trade or business: 24.31 (1) ceases one or more operations or functions at another 24.32 location in Minnesota and begins performing substantially the 24.33 same operations or functions at a location in a job opportunity 24.34 building zone; or 24.35 (2) reduces employment at another location in Minnesota 24.36 during a period starting one year before and ending one year 25.1 after it begins operations in a job opportunity building zone 25.2 and its employees in the job opportunity building zone are 25.3 engaged in the same line of business as the employees at the 25.4 location where it reduced employment. 25.5 (b) "Relocate" does not include an expansion by a business 25.6 that establishes a new facility that does not replace or 25.7 supplant an existing operation or employment, in whole or in 25.8 part. 25.9 (c) "Trade or business" includes any business entity that 25.10 is substantially similar in operation or ownership to the 25.11 business entity seeking to be a qualified business under this 25.12 section. 25.13 [EFFECTIVE DATE.] This section is effective the day 25.14 following final enactment. 25.15 Sec. 16. [469.311] [DEVELOPMENT PLAN.] 25.16 (a) An applicant for designation of a job opportunity 25.17 building zone must adopt a written development plan for the zone 25.18 before submitting the application to the commissioner. 25.19 (b) The development plan must contain, at least, the 25.20 following: 25.21 (1) a map of the proposed zone that indicates the 25.22 geographic boundaries of the zone, the total area, and present 25.23 use and conditions generally of the land and structures within 25.24 those boundaries; 25.25 (2) evidence of community support and commitment from local 25.26 government, local workforce investment boards, school districts, 25.27 and other education institutions, business groups, and the 25.28 public; 25.29 (3) a description of the methods proposed to increase 25.30 economic opportunity and expansion, facilitate infrastructure 25.31 improvement, reduce the local regulatory burden, and identify 25.32 job-training opportunities; 25.33 (4) current social, economic, and demographic 25.34 characteristics of the proposed zone and anticipated 25.35 improvements in education, health, human services, and 25.36 employment if the zone is created; 26.1 (5) a description of anticipated activity in the zone and 26.2 each subzone, including, but not limited to, industrial use, 26.3 industrial site reuse, commercial or retail use, and residential 26.4 use; and 26.5 (6) any other information required by the commissioner. 26.6 [EFFECTIVE DATE.] This section is effective the day 26.7 following final enactment. 26.8 Sec. 17. [469.312] [JOB OPPORTUNITY BUILDING ZONES; 26.9 LIMITATIONS.] 26.10 Subdivision 1. [MAXIMUM SIZE.] A job opportunity building 26.11 zone may not exceed 5,000 acres. For a zone designated as an 26.12 agricultural processing facility zone, the zone also may not 26.13 exceed the size of a site necessary for the agricultural 26.14 processing facility, including ancillary operations and space 26.15 for expansion in the reasonably foreseeable future. 26.16 Subd. 2. [SUBZONES.] The area of a job opportunity 26.17 building zone may consist of one or more noncontiguous areas or 26.18 subzones. 26.19 Subd. 3. [OUTSIDE METROPOLITAN AREA.] The area of a job 26.20 opportunity building zone must be located outside of the 26.21 metropolitan area, as defined in section 473.121, subdivision 2. 26.22 Subd. 4. [BORDER CITY DEVELOPMENT ZONES.] (a) The area of 26.23 a job opportunity building zone may not include the area of a 26.24 border city development zone designated under section 469.1731. 26.25 The city may remove property from a border city development zone 26.26 contingent upon the area being designated as a job opportunity 26.27 building zone. Before removing a parcel of property from a 26.28 border city development zone, the city must obtain the written 26.29 consent to the removal from each recipient that is located on 26.30 the parcel and receives incentives under the border city 26.31 development zone. Consent of any other property owner or 26.32 taxpayer in the border city development zone is not required. 26.33 (b) A city may not provide tax incentives under section 26.34 469.1734 to individuals or businesses for operations or activity 26.35 in a job opportunity building zone. 26.36 Subd. 5. [DURATION LIMIT.] The maximum duration of a zone 27.1 is 12 years. The applicant may request a shorter duration. The 27.2 commissioner may specify a shorter duration, regardless of the 27.3 requested duration. 27.4 [EFFECTIVE DATE.] This section is effective the day 27.5 following final enactment. 27.6 Sec. 18. [469.313] [APPLICATION FOR DESIGNATION.] 27.7 Subdivision 1. [WHO MAY APPLY.] One or more local 27.8 government units, or a joint powers board under section 471.59, 27.9 acting on behalf of two or more units, may apply for designation 27.10 of an area as a job opportunity building zone. All or part of 27.11 the area proposed for designation as a zone must be located 27.12 within the boundaries of each of the governmental units. A 27.13 local government unit may not submit or have submitted on its 27.14 behalf more than one application for designation of a job 27.15 opportunity building zone. 27.16 Subd. 2. [APPLICATION CONTENT.] The application must 27.17 include: 27.18 (1) a development plan meeting the requirements of section 27.19 469.311; 27.20 (2) the proposed duration of the zone, not to exceed 12 27.21 years; 27.22 (3) a resolution or ordinance adopted by each of the cities 27.23 or towns and the counties in which the zone is located, agreeing 27.24 to provide all of the local tax exemptions provided under 27.25 section 469.315; 27.26 (4) if the proposed zone includes area in a border city 27.27 development zone, written consent to removal of the property 27.28 from the border city development zone to the extent required by 27.29 section 469.312, subdivision 4; and 27.30 (5) supporting evidence to allow the commissioner to 27.31 evaluate the application under the criteria in section 469.314. 27.32 [EFFECTIVE DATE.] This section is effective the day 27.33 following final enactment. 27.34 Sec. 19. [469.314] [DESIGNATION OF JOB OPPORTUNITY 27.35 BUILDING ZONES.] 27.36 Subdivision 1. [COMMISSIONER TO DESIGNATE.] (a) The 28.1 commissioner, in consultation with the commissioner of revenue, 28.2 shall designate not more than ten job opportunity building 28.3 zones. In making the designations, the commissioner shall 28.4 consider need and likelihood of success to yield the most 28.5 economic development and revitalization of economically 28.6 distressed rural areas of Minnesota. 28.7 (b) In addition to the designations under paragraph (a), 28.8 the commissioner may, in consultation with the commissioners of 28.9 agriculture and revenue, designate up to five agricultural 28.10 processing facility zones. 28.11 (c) The commissioner may, upon designation of a zone, 28.12 modify the development plan, including the boundaries of the 28.13 zone or subzones, if in the commissioner's opinion a modified 28.14 plan would better meet the objectives of the job opportunity 28.15 building zone program. The commissioner shall notify the 28.16 applicant of the modification and provide a statement of the 28.17 reasons for the modifications. 28.18 Subd. 2. [NEED INDICATORS.] (a) In evaluating applications 28.19 to determine the need for designation of a job opportunity 28.20 building zone, the commissioner shall consider the following 28.21 factors as indicators of need: 28.22 (1) the percentage of the population that is below 200 28.23 percent of the poverty rate, compared with the state as a whole; 28.24 (2) the extent to which the area's average weekly wage is 28.25 significantly lower than the state average weekly wage; 28.26 (3) the amount of property in or near the proposed zone 28.27 that is deteriorated or underutilized; 28.28 (4) the extent to which the median sale price of housing 28.29 units in the area is below the state median; 28.30 (5) the extent to which the median household income of the 28.31 area is lower than the state median household income; 28.32 (6) the extent to which the area experienced a population 28.33 loss during the 20-year period ending the year before the 28.34 application is made; 28.35 (7) the extent to which an area has experienced sudden or 28.36 severe job loss as a result of closing of businesses or other 29.1 employers; 29.2 (8) the extent to which property in the area would remain 29.3 underdeveloped or nonperforming due to physical characteristics; 29.4 (9) the extent to which the area has substantial real 29.5 property with adequate infrastructure and energy to support new 29.6 or expanded development; and 29.7 (10) the extent to which the business startup or expansion 29.8 rates are significantly lower than the respective rate for the 29.9 state. 29.10 (b) In applying the need indicators, the best available 29.11 data should be used. If reported data are not available for the 29.12 proposed zone, data for the smallest area that is available and 29.13 includes the area of the proposed zone may be used. The 29.14 commissioner may require applicants to provide data to 29.15 demonstrate how the area meets one or more of the indicators of 29.16 need. 29.17 Subd. 3. [SUCCESS INDICATORS.] In determining the 29.18 likelihood of success of a proposed zone, the commissioner shall 29.19 consider: 29.20 (1) the strength and viability of the proposed development 29.21 goals, objectives, and strategies in the development plan; 29.22 (2) whether the development plan is creative and innovative 29.23 in comparison to other applications; 29.24 (3) local public and private commitment to development of 29.25 the proposed zone and the potential cooperation of surrounding 29.26 communities; 29.27 (4) existing resources available to the proposed zone; 29.28 (5) how the designation of the zone would relate to other 29.29 economic and community development projects and to regional 29.30 initiatives or programs; 29.31 (6) how the regulatory burden will be eased for businesses 29.32 operating in the proposed zone; 29.33 (7) proposals to establish and link job creation and job 29.34 training; and 29.35 (8) the extent to which the development is directed at 29.36 encouraging and that designation of the zone is likely to result 30.1 in the creation of high-paying jobs. 30.2 Subd. 4. [DESIGNATION SCHEDULE.] (a) The schedule in 30.3 paragraphs (b) to (e) applies to the designation of job 30.4 opportunity building zones. 30.5 (b) The commissioner shall publish the form for 30.6 applications and any procedural, form, or content requirements 30.7 for applications by no later than August 1, 2003. The 30.8 commissioner may publish these requirements on the Internet, in 30.9 the State Register, or by any other means the commissioner 30.10 determines appropriate to disseminate the information to 30.11 potential applicants for designation. 30.12 (c) Applications must be submitted by October 15, 2003. 30.13 (d) The commissioner shall designate the zones by no later 30.14 than December 31, 2003. 30.15 (e) The designation of the zones takes effect January 1, 30.16 2004. 30.17 Subd. 5. [GEOGRAPHIC DISTRIBUTION.] The commissioner shall 30.18 have as a goal the geographic distribution of zones around the 30.19 state. 30.20 Subd. 6. [RULEMAKING EXEMPTION.] The commissioner's 30.21 actions in establishing procedures, requirements, and making 30.22 determinations to administer sections 469.310 to 469.320 are not 30.23 a rule for purposes of chapter 14 and are not subject to the 30.24 Administrative Procedure Act contained in chapter 14 and are not 30.25 subject to section 14.386. 30.26 [EFFECTIVE DATE.] This section is effective the day 30.27 following final enactment. 30.28 Sec. 20. [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 30.29 Qualified businesses that operate in a job opportunity 30.30 building zone, individuals who invest in a qualified business 30.31 that operates in a job opportunity building zone, and property 30.32 located in a job opportunity building zone qualify for: 30.33 (1) exemption from individual income taxes as provided 30.34 under section 469.316; 30.35 (2) exemption from corporate franchise taxes as provided 30.36 under section 469.317; 31.1 (3) exemption from the state sales and use tax and any 31.2 local sales and use taxes on qualifying purchases as provided in 31.3 section 297A.68, subdivision 37; 31.4 (4) exemption from the state sales tax on motor vehicles 31.5 and any local sales tax on motor vehicles as provided under 31.6 section 297B.03; 31.7 (5) exemption from the property tax as provided in section 31.8 272.02, subdivision 56; 31.9 (6) exemption from the wind energy production tax under 31.10 section 272.029, subdivision 7; and 31.11 (7) the jobs credit allowed under section 469.318. 31.12 [EFFECTIVE DATE.] This section is effective the day 31.13 following final enactment. 31.14 Sec. 21. [469.316] [INDIVIDUAL INCOME TAX EXEMPTION.] 31.15 Subdivision 1. [APPLICATION.] An individual operating a 31.16 trade or business in a job opportunity building zone, and an 31.17 individual making a qualifying investment in a qualified 31.18 business operating in a job opportunity building zone qualifies 31.19 for the exemptions from taxes imposed under chapter 290, as 31.20 provided in this section. The exemptions provided under this 31.21 section apply only to the extent that the income otherwise would 31.22 be taxable under chapter 290. Subtractions under this section 31.23 from federal taxable income, alternative minimum taxable income, 31.24 or any other base subject to tax are limited to the amount that 31.25 otherwise would be included in the tax base absent the exemption 31.26 under this section. This section applies only to taxable years 31.27 beginning during the duration of the job opportunity building 31.28 zone. 31.29 Subd. 2. [RENTS.] An individual is exempt from the taxes 31.30 imposed under chapter 290 on net rents derived from real or 31.31 tangible personal property located in a zone for a taxable year 31.32 in which the zone was designated a job opportunity building 31.33 zone. If tangible personal property was used both within and 31.34 outside of the zone, the exemption amount for the net rental 31.35 income must be multiplied by a fraction, the numerator of which 31.36 is the number of days the property was used in the zone and the 32.1 denominator of which is the total days. 32.2 Subd. 3. [BUSINESS INCOME.] An individual is exempt from 32.3 the taxes imposed under chapter 290 on net income from the 32.4 operation of a qualified business in a job opportunity building 32.5 zone. If the trade or business is carried on within and without 32.6 the zone and the individual is not a resident of Minnesota, the 32.7 exemption must be apportioned based on the zone percentage for 32.8 the taxable year. If the trade or business is carried on within 32.9 and without the zone and the individual is a resident of 32.10 Minnesota, the exemption must be apportioned based on the zone 32.11 percentage for the taxable year, except the ratios under section 32.12 469.310, subdivision 7, clause (1), items (i) and (ii), must use 32.13 the denominators of the property and payroll factors determined 32.14 under section 290.191. No subtraction is allowed under this 32.15 section in excess of 20 percent of the sum of the job 32.16 opportunity building zone payroll and the adjusted basis of the 32.17 property at the time that the property is first used in the job 32.18 opportunity building zone by the business. 32.19 Subd. 4. [CAPITAL GAINS.] (a) An individual is exempt from 32.20 the taxes imposed under chapter 290 on: 32.21 (1) net gain derived on a sale or exchange of real property 32.22 located in the zone and used by a qualified business. If the 32.23 property was held by the individual during a period when the 32.24 zone was not designated, the gain must be prorated based on the 32.25 percentage of time, measured in calendar days, that the real 32.26 property was held by the individual during the period the zone 32.27 designation was in effect to the total period of time the real 32.28 property was held by the individual; 32.29 (2) net gain derived on a sale or exchange of tangible 32.30 personal property used by a qualified business in the zone. If 32.31 the property was held by the individual during a period when the 32.32 zone was not designated, the gain must be prorated based on the 32.33 percentage of time, measured in calendar days, that the property 32.34 was held by the individual during the period the zone 32.35 designation was in effect to the total period of time the 32.36 property was held by the individual. If the tangible personal 33.1 property was used outside of the zone during the period of the 33.2 zone's designation, the exemption must be multiplied by a 33.3 fraction, the numerator of which is the number of days the 33.4 property was used in the zone during the time of the designation 33.5 and the denominator of which is the total days the property was 33.6 held during the time of the designation; and 33.7 (3) net gain derived on a sale of an ownership interest in 33.8 a qualified business operating in the job opportunity building 33.9 zone, meeting the requirements of paragraph (b). The exemption 33.10 on the gain must be multiplied by the zone percentage of the 33.11 business for the taxable year prior to the sale. 33.12 (b) A qualified business meets the requirements of 33.13 paragraph (a), clause (3), if it is a corporation, an S 33.14 corporation, or a partnership, and for the taxable year its job 33.15 opportunity building zone percentage exceeds 25 percent. For 33.16 purposes of paragraph (a), clause (3), the zone percentage must 33.17 be calculated by modifying the ratios under section 469.310, 33.18 subdivision 7, clause (1), items (i) and (ii), to use the 33.19 denominators of the property and payroll factors determined 33.20 under section 290.191. Upon the request of an individual 33.21 holding an ownership interest in the entity, the entity must 33.22 certify to the owner, in writing, the job opportunity building 33.23 zone percentage needed to determine the exemption. 33.24 [EFFECTIVE DATE.] This section is effective for taxable 33.25 years beginning after December 31, 2003. 33.26 Sec. 22. [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 33.27 (a) A qualified business is exempt from taxation under 33.28 section 290.02, the alternative minimum tax under section 33.29 290.0921, and the minimum fee under section 290.0922, on the 33.30 portion of its income attributable to operations within the 33.31 zone. This exemption is determined as follows: 33.32 (1) for purposes of the tax imposed under section 290.02, 33.33 by multiplying its taxable net income by its zone percentage and 33.34 subtracting the result in determining taxable income; 33.35 (2) for purposes of the alternative minimum tax under 33.36 section 290.0921, by multiplying its alternative minimum taxable 34.1 income by its zone percentage and reducing alternative minimum 34.2 taxable income by this amount; and 34.3 (3) for purposes of the minimum fee under section 290.0922, 34.4 by excluding property and payroll in the zone from the 34.5 computations of the fee or by exempting the entity under section 34.6 290.0922, subdivision 2, clause (7). 34.7 (b) No subtraction is allowed under this section in excess 34.8 of 20 percent of the sum of the corporation's job opportunity 34.9 building zone payroll and the adjusted basis of the property at 34.10 the time that the property is first used in the job opportunity 34.11 building zone by the corporation. 34.12 (c) This section applies only to taxable years beginning 34.13 during the duration of the job opportunity building zone. 34.14 [EFFECTIVE DATE.] This section is effective for taxable 34.15 years beginning after December 31, 2003. 34.16 Sec. 23. [469.318] [JOBS CREDIT.] 34.17 Subdivision 1. [CREDIT ALLOWED.] A qualified business is 34.18 allowed a credit against the taxes imposed under chapter 290. 34.19 The credit equals seven percent of the: 34.20 (1) lesser of: 34.21 (i) zone payroll for the taxable year, less the zone 34.22 payroll for the base year; or 34.23 (ii) total Minnesota payroll for the taxable year, less 34.24 total Minnesota payroll for the base year; minus 34.25 (2) $30,000 multiplied by (the number of full-time 34.26 equivalent employees that the qualified business employs in the 34.27 job opportunity building zone for the taxable year, minus the 34.28 number of full-time equivalent employees the business employed 34.29 in the zone in the base year, but not less than zero). 34.30 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 34.31 the following terms have the meanings given. 34.32 (b) "Base year" means the taxable year beginning during the 34.33 calendar year prior to the calendar year in which the zone 34.34 designation took effect. 34.35 (c) "Full-time equivalent employees" means the equivalent 34.36 of annualized expected hours of work equal to 2,080 hours. 35.1 (d) "Minnesota payroll" means the wages or salaries 35.2 attributed to Minnesota under section 290.191, subdivision 12, 35.3 for the qualified business or the unitary business of which the 35.4 qualified business is a part, whichever is greater. 35.5 (e) "Zone payroll" means wages or salaries used to 35.6 determine the zone payroll factor for the qualified business, 35.7 less the amount of compensation attributable to any employee 35.8 that exceeds $100,000. 35.9 Subd. 3. [INFLATION ADJUSTMENT.] For taxable years 35.10 beginning after December 31, 2004, the dollar amounts in 35.11 subdivision 1, clause (2), and subdivision 2, paragraph (e), are 35.12 annually adjusted for inflation. The commissioner of revenue 35.13 shall adjust the amounts by the percentage determined under 35.14 section 290.06, subdivision 2d, for the taxable year. 35.15 Subd. 4. [REFUNDABLE.] If the amount of the credit exceeds 35.16 the liability for tax under chapter 290, the commissioner of 35.17 revenue shall refund the excess to the qualified business. 35.18 Subd. 5. [APPROPRIATION.] An amount sufficient to pay the 35.19 refunds authorized by this section is appropriated to the 35.20 commissioner of revenue from the general fund. 35.21 [EFFECTIVE DATE.] This section is effective for taxable 35.22 years beginning after December 31, 2003. 35.23 Sec. 24. [469.319] [REPAYMENT OF TAX BENEFITS.] 35.24 Subdivision 1. [REPAYMENT OBLIGATION.] A business must 35.25 repay the amount of the total tax reduction listed in section 35.26 469.315 and any refund under section 469.318 in excess of tax 35.27 liability, received during the two years immediately before it 35.28 ceased to operate in the zone, if the business: 35.29 (1) received tax reductions authorized by section 469.315; 35.30 and 35.31 (2)(i) did not meet the goals specified in an agreement 35.32 entered into with the applicant that states any obligation the 35.33 qualified business must fulfill in order to be eligible for tax 35.34 benefits. The commissioner may extend for up to one year the 35.35 period for meeting any goals provided in an agreement. The 35.36 applicant may extend the period for meeting other goals by 36.1 documenting in writing the reason for the extension and 36.2 attaching a copy of the document to its next annual report to 36.3 the commissioner; or 36.4 (ii) ceased to operate its facility located within the job 36.5 opportunity building zone or otherwise ceases to be or is not a 36.6 qualified business. 36.7 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 36.8 the following terms have the meanings given. 36.9 (b) "Business" means any person who received tax benefits 36.10 enumerated in section 469.315. 36.11 (c) "Commissioner" means the commissioner of revenue. 36.12 Subd. 3. [DISPOSITION OR REPAYMENT.] The repayment must be 36.13 paid to the state to the extent it represents a state tax 36.14 reduction and to the county to the extent it represents a 36.15 property tax reduction. Any amount repaid to the state must be 36.16 deposited in the general fund. Any amount repaid to the county 36.17 for the property tax exemption must be distributed to the local 36.18 governments with authority to levy taxes in the zone in the same 36.19 manner provided for distribution of payment of delinquent 36.20 property taxes. Any repayment of local sales taxes must be 36.21 repaid to the city or county imposing the local sales tax. 36.22 Subd. 4. [REPAYMENT PROCEDURES.] (a) For the repayment of 36.23 taxes imposed under chapter 290 or 297A or local taxes collected 36.24 pursuant to section 297A.99, a business must file an amended 36.25 return with the commissioner of revenue and pay any taxes 36.26 required to be repaid within 30 days after ceasing to do 36.27 business in the zone. The amount required to be repaid is 36.28 determined by calculating the tax for the period or periods for 36.29 which repayment is required without regard to the exemptions and 36.30 credits allowed under section 469.315. 36.31 (b) For the repayment of taxes imposed under chapter 297B, 36.32 a business must pay any taxes required to be repaid to the motor 36.33 vehicle registrar, as agent for the commissioner of revenue, 36.34 within 30 days after ceasing to do business in the zone. 36.35 (c) For the repayment of property taxes, the county auditor 36.36 shall prepare a tax statement for the business, applying the 37.1 applicable tax extension rates for each payable year and provide 37.2 a copy to the business. The business must pay the taxes to the 37.3 county treasurer within 30 days after receipt of the tax 37.4 statement. The taxpayer may appeal the valuation and 37.5 determination of the property tax to the tax court within 30 37.6 days after receipt of the tax statement. 37.7 (d) The provisions of chapters 270 and 289A relating to the 37.8 commissioner's authority to audit, assess, and collect the tax 37.9 and to hear appeals are applicable to the repayment required 37.10 under paragraphs (a) and (b). The commissioner may impose civil 37.11 penalties as provided in chapter 289A, and the additional tax 37.12 and penalties are subject to interest at the rate provided in 37.13 section 270.75, from 30 days after ceasing to do business in the 37.14 job opportunity building zone until the date the tax is paid. 37.15 (e) If a property tax is not repaid under paragraph (c), 37.16 the county treasurer shall add the amount required to be repaid 37.17 to the property taxes assessed against the property for payment 37.18 in the year following the year in which the treasurer discovers 37.19 that the business ceased to operate in the job opportunity 37.20 building zone. 37.21 (f) For determining the tax required to be repaid, a tax 37.22 reduction is deemed to have been received on the date that the 37.23 tax would have been due if the taxpayer had not been entitled to 37.24 the exemption or on the date a refund was issued for a 37.25 refundable tax credit. 37.26 (g) The commissioner may assess the repayment of taxes 37.27 under paragraph (d) any time within two years after the business 37.28 ceases to operate in the job opportunity building zone, or 37.29 within any period of limitations for the assessment of tax under 37.30 section 289A.38, whichever period is later. 37.31 Subd. 5. [WAIVER AUTHORITY.] The commissioner may waive 37.32 all or part of a repayment, if the commissioner, in consultation 37.33 with the commissioner of trade and economic development and 37.34 appropriate officials from the local government units in which 37.35 the qualified business is located, determines that requiring 37.36 repayment of the tax is not in the best interest of the state or 38.1 the local government units and the business ceased operating as 38.2 a result of circumstances beyond its control including, but not 38.3 limited to: 38.4 (1) a natural disaster; 38.5 (2) unforeseen industry trends; or 38.6 (3) loss of a major supplier or customer. 38.7 [EFFECTIVE DATE.] This section is effective the day 38.8 following final enactment. 38.9 Sec. 25. [469.320] [ZONE PERFORMANCE; REMEDIES.] 38.10 Subdivision 1. [REPORTING REQUIREMENT.] An applicant 38.11 receiving designation of a job opportunity building zone under 38.12 section 469.314 must annually report to the commissioner on its 38.13 progress in meeting the zone performance goals under the 38.14 development plan for the zone. 38.15 Subd. 2. [PROCEDURES.] For reports required by subdivision 38.16 1, the commissioner may prescribe: 38.17 (1) the required time or times by which the reports must be 38.18 filed; 38.19 (2) the form of the report; and 38.20 (3) the information required to be included in the report. 38.21 Subd. 3. [REMEDIES.] If the commissioner determines, based 38.22 on a report filed under subdivision 1 or other available 38.23 information, that a zone or subzone is failing to meet its 38.24 performance goals, the commissioner may take any actions the 38.25 commissioner determines appropriate, including modification of 38.26 the boundaries of the zone or a subzone or termination of the 38.27 zone or a subzone. Before taking any action, the commissioner 38.28 shall consult with the applicant and the affected local 38.29 government units, including notifying them of the proposed 38.30 actions to be taken. The commissioner shall publish any order 38.31 modifying a zone in the State Register and on the Internet. The 38.32 applicant may appeal the commissioner's order under the 38.33 contested case procedures of chapter 14. 38.34 Subd. 4. [EXISTING BUSINESSES.] (a) An action to remove 38.35 area from a zone or to terminate a zone under this section does 38.36 not apply to: 39.1 (1) the property tax on improvements constructed before the 39.2 first January 2 following publication of the commissioner's 39.3 order; 39.4 (2) sales tax on purchases made before the first day of the 39.5 next calendar month beginning at least 30 days after publication 39.6 of the commissioner's order; and 39.7 (3) individual income tax or corporate franchise tax 39.8 attributable to a facility that was in operation before the 39.9 publication of the commissioner's order. 39.10 (b) The tax exemptions specified in paragraph (a) terminate 39.11 on the date on which the zone expires under the original 39.12 designation. 39.13 [EFFECTIVE DATE.] This section is effective the day 39.14 following final enactment. 39.15 Sec. 26. [477A.08] [JOB OPPORTUNITY BUILDING ZONE AID.] 39.16 Subdivision 1. [ELIGIBILITY.] (a) For each assessment year 39.17 that the exemption for job opportunity building zone property is 39.18 in effect under section 272.02, subdivision 56, the assessor 39.19 shall determine the difference between the actual net tax 39.20 capacity and the net tax capacity that would be determined for 39.21 the job opportunity building zone, including any property 39.22 removed from the zone that continues to qualify under section 39.23 469.320, subdivision 4, if the exemption were not in effect. 39.24 (b) Each city and county is eligible for aid equal to 39.25 one-half of: 39.26 (1) the amount by which the sum of the differences 39.27 determined in paragraph (a) for the corresponding assessment 39.28 year exceeds three percent of the city's or county's total 39.29 taxable net tax capacity for taxes payable in 2003, multiplied 39.30 by 39.31 (2) the city's or the county's, as applicable, average 39.32 local tax rate for taxes payable in 2003. 39.33 Subd. 2. [CERTIFICATION.] The county assessor shall notify 39.34 the commissioner of revenue of the amount determined under 39.35 subdivision 1, paragraph (b), clause (1), for any city or county 39.36 that qualifies for aid under this section by June 30 of the 40.1 assessment year, in a form prescribed by the commissioner. The 40.2 commissioner shall notify each city and county of its qualifying 40.3 aid amount by August 15 of the assessment year. 40.4 Subd. 3. [APPROPRIATION; PAYMENT.] The commissioner shall 40.5 pay each city and county its qualifying aid amount by July 20 of 40.6 the following year. An amount sufficient to pay the aid under 40.7 this section is appropriated to the commissioner of revenue from 40.8 the general fund. 40.9 [EFFECTIVE DATE.] This section is effective beginning for 40.10 aid based on property taxes assessed in 2004, payable in 2005. 40.11 Sec. 27. [APPROPRIATION; COST OF ADMINISTRATION.] 40.12 $100,000 in fiscal year 2004 and $30,000 in fiscal year 40.13 2005 are appropriated to the commissioner of trade and economic 40.14 development for the cost of designating job opportunity building 40.15 zones. 40.16 $53,000 in fiscal year 2004 and $29,000 in fiscal year 2005 40.17 are appropriated to the commissioner of revenue for the cost of 40.18 administering the tax provisions of this act. 40.19 [EFFECTIVE DATE.] This section is effective the day 40.20 following final enactment. 40.21 ARTICLE 2 40.22 BIOTECHNOLOGY AND HEALTH SCIENCE ZONES 40.23 Section 1. [LEGISLATIVE FINDINGS.] 40.24 The legislature finds, as a matter of public policy, that 40.25 biotechnology and the health sciences hold immense promise in 40.26 improving the quality of our lives, including curing diseases, 40.27 making our foods safer and more abundant, reducing our 40.28 dependence on fossil fuels and foreign oil, making better use of 40.29 Minnesota agriculture products, and growing tens of thousands of 40.30 new, high-paying jobs. 40.31 The legislature further finds that there are hundreds of 40.32 discoveries made each year at the University of Minnesota, the 40.33 Mayo Clinic, and other research institutions that, if properly 40.34 commercialized, could help provide these benefits. 40.35 The legislature further finds that biotechnology and health 40.36 sciences companies benefit from location in proximity to these 41.1 research institutions and the many faculty, students, and other 41.2 intellectual and physical infrastructure these institutions 41.3 provide. 41.4 The legislature further finds that Minnesota's high-quality 41.5 workforce is attractive to biotechnology and health sciences 41.6 companies that would want to relocate, start up, or expand in 41.7 Minnesota. 41.8 The legislature further finds and declares that it is 41.9 appropriate and necessary, to improve our quality of life and as 41.10 a matter of economic development, that Minnesota take rapid and 41.11 affirmative steps to encourage the development of biotechnology 41.12 and the health sciences and the commercialization of important 41.13 discoveries, especially through expansion of business 41.14 opportunities in proximity to the research institutions where 41.15 those discoveries occur. This must include attention to the 41.16 ethical, legal, and societal impacts of the industry, including 41.17 risk assessment and environmental protection. 41.18 Sec. 2. Minnesota Statutes 2002, section 272.02, is 41.19 amended by adding a subdivision to read: 41.20 Subd. 56. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 41.21 PROPERTY.] (a) Improvements to real property, and personal 41.22 property, classified under section 273.13, subdivision 24, and 41.23 located within a biotechnology and health sciences industry zone 41.24 are exempt from ad valorem taxes levied under chapter 275. 41.25 (b) For property to qualify for exemption under paragraph 41.26 (a), the occupant must be a qualified business, as defined in 41.27 section 469.310. 41.28 (c) The exemption applies beginning for the first 41.29 assessment year after designation of the biotechnology and 41.30 health sciences industry zone by the commissioner of trade and 41.31 economic development. The exemption applies to each assessment 41.32 year that begins during the duration of the biotechnology and 41.33 health sciences industry zone. 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 (d) This subdivision does not apply to any taxes payable to 42.4 a city, town, or county that chose not to provide property tax 42.5 exemptions to qualified businesses in the biotechnology and 42.6 health sciences industry zone in the application submitted under 42.7 section 469.313. 42.8 [EFFECTIVE DATE.] This section is effective beginning for 42.9 property taxes assessed in 2004, payable in 2005. 42.10 Sec. 3. Minnesota Statutes 2002, section 290.01, 42.11 subdivision 29, is amended to read: 42.12 Subd. 29. [TAXABLE INCOME.] The term "taxable income" 42.13 means: 42.14 (1) for individuals, estates, and trusts, the same as 42.15 taxable net income; 42.16 (2) for corporations, the taxable net income less 42.17 (i) the net operating loss deduction under section 290.095; 42.18and42.19 (ii) the dividends received deduction under section 290.21, 42.20 subdivision 4; and 42.21 (iii) the exemption for operating in a biotechnology and 42.22 health sciences industry zone under section 469.317. 42.23 [EFFECTIVE DATE.] This section is effective for taxable 42.24 years beginning after December 31, 2003. 42.25 Sec. 4. Minnesota Statutes 2002, section 290.06, is 42.26 amended by adding a subdivision to read: 42.27 Subd. 29. [BIOTECHNOLOGY AND HEALTH SCIENCE INDUSTRY ZONE 42.28 JOB CREDIT.] A taxpayer that is a qualified business, as defined 42.29 in section 469.310, subdivision 11, is allowed a credit as 42.30 determined under section 469.318 against the franchise tax 42.31 imposed under section 290.06, subdivision 1, or the alternative 42.32 minimum tax imposed under section 290.0921. 42.33 [EFFECTIVE DATE.] This section is effective the day 42.34 following final enactment. 42.35 Sec. 5. Minnesota Statutes 2002, section 290.06, is 42.36 amended by adding a subdivision to read: 43.1 Subd. 30. [BIOTECHNOLOGY AND HEALTH SCIENCE INDUSTRY ZONE 43.2 RESEARCH AND DEVELOPMENT CREDIT.] A taxpayer that is a qualified 43.3 business, as defined in section 469.310, subdivision 11, is 43.4 allowed a credit as determined under section 469.3181 against 43.5 the franchise tax imposed under section 290.06, subdivision 1, 43.6 or the alternative minimum tax imposed under section 290.0921. 43.7 [EFFECTIVE DATE.] This section is effective the day 43.8 following final enactment. 43.9 Sec. 6. Minnesota Statutes 2002, section 290.0921, 43.10 subdivision 3, is amended to read: 43.11 Subd. 3. [ALTERNATIVE MINIMUM TAXABLE INCOME.] 43.12 "Alternative minimum taxable income" is Minnesota net income as 43.13 defined in section 290.01, subdivision 19, and includes the 43.14 adjustments and tax preference items in sections 56, 57, 58, and 43.15 59(d), (e), (f), and (h) of the Internal Revenue Code. If a 43.16 corporation files a separate company Minnesota tax return, the 43.17 minimum tax must be computed on a separate company basis. If a 43.18 corporation is part of a tax group filing a unitary return, the 43.19 minimum tax must be computed on a unitary basis. The following 43.20 adjustments must be made. 43.21 (1) For purposes of the depreciation adjustments under 43.22 section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 43.23 the basis for depreciable property placed in service in a 43.24 taxable year beginning before January 1, 1990, is the adjusted 43.25 basis for federal income tax purposes, including any 43.26 modification made in a taxable year under section 290.01, 43.27 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 43.28 subdivision 7, paragraph (c). 43.29 For taxable years beginning after December 31, 2000, the 43.30 amount of any remaining modification made under section 290.01, 43.31 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 43.32 subdivision 7, paragraph (c), not previously deducted is a 43.33 depreciation allowance in the first taxable year after December 43.34 31, 2000. 43.35 (2) The portion of the depreciation deduction allowed for 43.36 federal income tax purposes under section 168(k) of the Internal 44.1 Revenue Code that is required as an addition under section 44.2 290.01, subdivision 19c, clause (16), is disallowed in 44.3 determining alternative minimum taxable income. 44.4 (3) The subtraction for depreciation allowed under section 44.5 290.01, subdivision 19d, clause (19), is allowed as a 44.6 depreciation deduction in determining alternative minimum 44.7 taxable income. 44.8 (4) The alternative tax net operating loss deduction under 44.9 sections 56(a)(4) and 56(d) of the Internal Revenue Code does 44.10 not apply. 44.11 (5) The special rule for certain dividends under section 44.12 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 44.13 (6) The special rule for dividends from section 936 44.14 companies under section 56(g)(4)(C)(iii) does not apply. 44.15 (7) The tax preference for depletion under section 57(a)(1) 44.16 of the Internal Revenue Code does not apply. 44.17 (8) The tax preference for intangible drilling costs under 44.18 section 57(a)(2) of the Internal Revenue Code must be calculated 44.19 without regard to subparagraph (E) and the subtraction under 44.20 section 290.01, subdivision 19d, clause (4). 44.21 (9) The tax preference for tax exempt interest under 44.22 section 57(a)(5) of the Internal Revenue Code does not apply. 44.23 (10) The tax preference for charitable contributions of 44.24 appreciated property under section 57(a)(6) of the Internal 44.25 Revenue Code does not apply. 44.26 (11) For purposes of calculating the tax preference for 44.27 accelerated depreciation or amortization on certain property 44.28 placed in service before January 1, 1987, under section 57(a)(7) 44.29 of the Internal Revenue Code, the deduction allowable for the 44.30 taxable year is the deduction allowed under section 290.01, 44.31 subdivision 19e. 44.32 For taxable years beginning after December 31, 2000, the 44.33 amount of any remaining modification made under section 290.01, 44.34 subdivision 19e, not previously deducted is a depreciation or 44.35 amortization allowance in the first taxable year after December 44.36 31, 2004. 45.1 (12) For purposes of calculating the adjustment for 45.2 adjusted current earnings in section 56(g) of the Internal 45.3 Revenue Code, the term "alternative minimum taxable income" as 45.4 it is used in section 56(g) of the Internal Revenue Code, means 45.5 alternative minimum taxable income as defined in this 45.6 subdivision, determined without regard to the adjustment for 45.7 adjusted current earnings in section 56(g) of the Internal 45.8 Revenue Code. 45.9 (13) For purposes of determining the amount of adjusted 45.10 current earnings under section 56(g)(3) of the Internal Revenue 45.11 Code, no adjustment shall be made under section 56(g)(4) of the 45.12 Internal Revenue Code with respect to (i) the amount of foreign 45.13 dividend gross-up subtracted as provided in section 290.01, 45.14 subdivision 19d, clause (1), (ii) the amount of refunds of 45.15 income, excise, or franchise taxes subtracted as provided in 45.16 section 290.01, subdivision 19d, clause (10), or (iii) the 45.17 amount of royalties, fees or other like income subtracted as 45.18 provided in section 290.01, subdivision 19d, clause (11). 45.19 (14) Alternative minimum taxable income excludes the income 45.20 from operating in a biotechnology and health sciences industry 45.21 zone as provided under section 469.317. 45.22 Items of tax preference must not be reduced below zero as a 45.23 result of the modifications in this subdivision. 45.24 [EFFECTIVE DATE.] This section is effective for taxable 45.25 years beginning after December 31, 2003. 45.26 Sec. 7. Minnesota Statutes 2002, section 290.0922, 45.27 subdivision 3, is amended to read: 45.28 Subd. 3. [DEFINITIONS.] (a) "Minnesota sales or receipts" 45.29 means the total sales apportioned to Minnesota pursuant to 45.30 section 290.191, subdivision 5, the total receipts attributed to 45.31 Minnesota pursuant to section 290.191, subdivisions 6 to 8, 45.32 and/or the total sales or receipts apportioned or attributed to 45.33 Minnesota pursuant to any other apportionment formula applicable 45.34 to the taxpayer. 45.35 (b) "Minnesota property" means total Minnesota tangible 45.36 property as provided in section 290.191, subdivisions 9 to 11, 46.1andany other tangible property located in Minnesota, and 46.2 Minnesota property of a corporation, other than a corporation 46.3 treated as an "S" corporation under section 290.9725, but does 46.4 not include property of a qualified business located in a 46.5 biotechnology and health sciences zone designated under section 46.6 469.314. Intangible property shall not be included in Minnesota 46.7 property for purposes of this section. Taxpayers who do not 46.8 utilize tangible property to apportion income shall nevertheless 46.9 include Minnesota property for purposes of this section. On a 46.10 return for a short taxable year, the amount of Minnesota 46.11 property owned, as determined under section 290.191, shall be 46.12 included in Minnesota property based on a fraction in which the 46.13 numerator is the number of days in the short taxable year and 46.14 the denominator is 365. 46.15 (c) "Minnesota payrolls" means total Minnesota payrolls as 46.16 provided in section 290.191, subdivision 12, and Minnesota 46.17 payroll of a corporation, other than a corporation treated as an 46.18 "S" corporation under section 290.9725, but does not include 46.19 biotechnology and health sciences zone payroll under section 46.20 469.310, subdivision 8. Taxpayers who do not utilize payrolls 46.21 to apportion income shall nevertheless include Minnesota 46.22 payrolls for purposes of this section. 46.23 [EFFECTIVE DATE.] This section is effective for taxable 46.24 years beginning after December 31, 2003. 46.25 Sec. 8. Minnesota Statutes 2002, section 297A.68, is 46.26 amended by adding a subdivision to read: 46.27 Subd. 37. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 46.28 ZONE.] (a) Purchases of tangible personal property or taxable 46.29 services by a qualified business, as defined in section 469.310, 46.30 are exempt if the property or services are primarily used or 46.31 consumed in a biotechnology and health sciences industry zone 46.32 designated under section 469.314. 46.33 (b) Purchase and use of construction materials and supplies 46.34 for construction of improvements to real property in a 46.35 biotechnology and health sciences industry zone are exempt if 46.36 the improvements after completion of construction are to be used 47.1 in the conduct of a qualified business, as defined in section 47.2 469.310. This exemption applies regardless of whether the 47.3 purchases are made by the business or a contractor. 47.4 (c) The exemptions under this subdivision apply to a local 47.5 sales and use tax regardless of whether the local sales tax is 47.6 imposed on the sales taxable as defined under this chapter. 47.7 (d)(1) The tax on sales of goods or services exempted under 47.8 this subdivision shall be imposed and collected as if the 47.9 applicable rate under section 297A.62 applied. Upon application 47.10 by the purchaser, on forms prescribed by the commissioner, a 47.11 refund equal to the tax paid shall be paid to the purchaser. 47.12 The application must include sufficient information to permit 47.13 the commissioner to verify the sales tax paid and the 47.14 eligibility of the claimant to receive the credit. No more than 47.15 two applications for refunds may be filed under this subdivision 47.16 in a calendar year. The provisions of section 289A.40 apply to 47.17 the refunds payable under this subdivision. 47.18 (2) There is annually appropriated to the commissioner of 47.19 revenue the amount required to make the refunds. 47.20 (3) The aggregate amount refunded to a qualified business 47.21 cannot exceed the amount allocated to the qualified business 47.22 under section 469.3141. 47.23 (e) This subdivision applies to sales made during the 47.24 duration of the designation of the zone. 47.25 [EFFECTIVE DATE.] This section is effective for sales made 47.26 on or after the day following final enactment. 47.27 Sec. 9. [469.310] [DEFINITIONS.] 47.28 Subdivision 1. [SCOPE.] For purposes of sections 469.310 47.29 to 469.320, the following terms have the meanings given. 47.30 Subd. 2. [APPLICANT.] "Applicant" means a local government 47.31 unit or units applying for designation of an area as a 47.32 biotechnology and health sciences industry zone or a joint 47.33 powers board, established under section 471.59, acting on behalf 47.34 of two or more local government units. 47.35 Subd. 3. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 47.36 FACILITY.] "Biotechnology and health sciences industry facility" 48.1 means one or more facilities or operations involved in: (1) 48.2 researching, developing, and/or manufacturing a biotechnology 48.3 product or service or a biotechnology-related health sciences 48.4 product or service; (2) researching, developing, and/or 48.5 manufacturing a biotechnology medical device product or service 48.6 or a biotechnology-related medical device product or service; or 48.7 (3) promoting, supplying, or servicing a facility or operation 48.8 involved in clause (1) or (2), if the business derives more than 48.9 50 percent of its gross receipts from those activities. 48.10 Subd. 4. [COMMISSIONER.] "Commissioner" means the 48.11 commissioner of trade and economic development. 48.12 Subd. 5. [DEVELOPMENT PLAN.] "Development plan" means a 48.13 plan meeting the requirements of section 469.311. 48.14 Subd. 6. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 48.15 OR ZONE.] "Biotechnology and health sciences industry zone" or 48.16 "zone" means a zone designated by the commissioner under section 48.17 469.314. 48.18 Subd. 7. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 48.19 PERCENTAGE OR ZONE PERCENTAGE.] "Biotechnology and health 48.20 sciences industry zone percentage" or "zone percentage" means 48.21 the following fraction reduced to a percentage: 48.22 (1) the numerator of the fraction is: 48.23 (i) the ratio of the taxpayer's property factor under 48.24 section 290.191 located in the zone for the taxable year over 48.25 the property factor numerator determined under section 290.191, 48.26 plus 48.27 (ii) the ratio of the taxpayer's biotechnology and health 48.28 sciences industry zone payroll factor under subdivision 8 over 48.29 the payroll factor numerator determined under section 290.191; 48.30 and 48.31 (2) the denominator of the fraction is two. 48.32 When calculating the zone percentage for a business that is 48.33 part of a unitary business as defined under section 290.17, 48.34 subdivision 4, the denominator of the payroll and property 48.35 factors is the Minnesota payroll and property of the unitary 48.36 business as reported on the combined report under section 49.1 290.17, subdivision 4, paragraph (j). 49.2 Subd. 8. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 49.3 PAYROLL FACTOR.] "Biotechnology and health sciences industry 49.4 zone payroll factor" or "biotechnology and health sciences 49.5 industry zone payroll" is that portion of the payroll factor 49.6 under section 290.191 that represents: 49.7 (1) wages or salaries paid to an individual for services 49.8 performed for a qualified business in a biotechnology and health 49.9 sciences industry zone; or 49.10 (2) wages or salaries paid to individuals working from 49.11 offices of a qualified business within a biotechnology and 49.12 health sciences industry zone if their employment requires them 49.13 to work outside the zone and the work is incidental to the work 49.14 performed by the individual within the zone. 49.15 Subd. 9. [LOCAL GOVERNMENT UNIT.] "Local government unit" 49.16 means a statutory or home rule charter city, county, town, or 49.17 school district. 49.18 Subd. 10. [PERSON.] "Person" includes an individual, 49.19 corporation, partnership, limited liability company, 49.20 association, or any other entity. 49.21 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 49.22 means a person carrying on a trade or business at a 49.23 biotechnology and health sciences industry facility located 49.24 within a biotechnology and health sciences industry zone. 49.25 (b) A person that relocates a biotechnology and health 49.26 sciences industry facility from outside a biotechnology and 49.27 health sciences industry zone into a zone is not a qualified 49.28 business, unless the business: 49.29 (1)(i) increases full-time employment in the first full 49.30 year of operation within the biotechnology and health sciences 49.31 industry zone by at least 20 percent measured relative to the 49.32 operations that were relocated; or 49.33 (ii) makes a capital investment in the property located 49.34 within a zone equivalent to ten percent of the gross revenues of 49.35 operation that were relocated in the immediately preceding 49.36 taxable year; and 50.1 (2) enters a binding written agreement with the 50.2 commissioner that: 50.3 (i) pledges the business will meet the requirements of 50.4 clause (1); 50.5 (ii) provides for repayment of all tax benefits enumerated 50.6 under section 469.315 to the business under the procedures in 50.7 section 469.319, if the requirements of clause (1) are not met; 50.8 and 50.9 (iii) contains any other terms the commissioner determines 50.10 appropriate. 50.11 Subd. 12. [RELOCATES.] (a) "Relocates" means that the 50.12 trade or business: 50.13 (1) ceases one or more operations or functions at another 50.14 location in Minnesota and begins performing substantially the 50.15 same operations or functions at a location in a biotechnology 50.16 and health sciences industry zone; or 50.17 (2) reduces employment at another location in Minnesota 50.18 during a period starting one year before and ending one year 50.19 after it begins operations in a biotechnology and health 50.20 sciences industry zone and its employees in the biotechnology 50.21 and health sciences industry zone are engaged in the same line 50.22 of business as the employees at the location where it reduced 50.23 employment. 50.24 (b) "Relocate" does not include an expansion by a business 50.25 that establishes a new facility that does not replace or 50.26 supplant an existing operation or employment, in whole or in 50.27 part. 50.28 [EFFECTIVE DATE.] This section is effective the day 50.29 following final enactment. 50.30 Sec. 10. [469.311] [DEVELOPMENT PLAN.] 50.31 (a) An applicant for designation of a biotechnology and 50.32 health sciences industry zone must adopt a written development 50.33 plan for the zone before submitting the application to the 50.34 commissioner. 50.35 (b) The development plan must contain, at least, the 50.36 following: 51.1 (1) a map of the proposed zone that indicates the 51.2 geographic boundaries of the zone, the total area, and present 51.3 use and conditions generally of the land and structures within 51.4 those boundaries; 51.5 (2) evidence of community support and commitment from local 51.6 government, local workforce investment boards, school districts, 51.7 and other education institutions, business groups, and the 51.8 public; 51.9 (3) a description of the methods proposed to increase 51.10 economic opportunity and expansion, facilitate infrastructure 51.11 improvement, reduce the local regulatory burden, and identify 51.12 job-training opportunities; 51.13 (4) current social, economic, and demographic 51.14 characteristics of the proposed zone and anticipated 51.15 improvements in education, health, human services, and 51.16 employment if the zone is created; 51.17 (5) a description of anticipated activity in the zone and 51.18 each subzone, including, but not limited to, industrial use and 51.19 industrial site reuse; and 51.20 (6) any other information required by the commissioner. 51.21 [EFFECTIVE DATE.] This section is effective the day 51.22 following final enactment. 51.23 Sec. 11. [469.312] [BIOTECHNOLOGY AND HEALTH SCIENCES 51.24 INDUSTRY ZONE; LIMITATIONS.] 51.25 Subdivision 1. [MAXIMUM SIZE.] A biotechnology and health 51.26 sciences industry zone may not exceed 5,000 acres. 51.27 Subd. 2. [SUBZONES.] The area of a biotechnology and 51.28 health sciences industry zone may consist of one or more 51.29 noncontiguous areas or subzones. 51.30 Subd. 3. [DURATION LIMIT.] The maximum duration of a zone 51.31 is 12 years. The applicant may request a shorter duration. The 51.32 commissioner may specify a shorter duration, regardless of the 51.33 requested duration. 51.34 [EFFECTIVE DATE.] This section is effective the day 51.35 following final enactment. 51.36 Sec. 12. [469.313] [APPLICATION FOR DESIGNATION.] 52.1 Subdivision 1. [WHO MAY APPLY.] One or more local 52.2 government units, or a joint powers board under section 471.59, 52.3 acting on behalf of two or more units, may apply for designation 52.4 of an area as a biotechnology and health sciences industry 52.5 zone. All or part of the area proposed for designation as a 52.6 zone must be located within the boundaries of each of the 52.7 governmental units. A local government unit may not submit or 52.8 have submitted on its behalf more than one application for 52.9 designation of a biotechnology and health sciences industry zone. 52.10 Subd. 2. [APPLICATION CONTENT.] The application must 52.11 include: 52.12 (1) a development plan meeting the requirements of section 52.13 469.311; 52.14 (2) the proposed duration of the zone, not to exceed 12 52.15 years; 52.16 (3)(i) a resolution or ordinance adopted by each of the 52.17 cities or towns and the counties in which the zone is located, 52.18 agreeing to provide all of the local sales and use tax 52.19 exemptions provided under section 469.315; (ii) a resolution or 52.20 ordinance adopted by each of the cities or towns and the 52.21 counties in which the zone is located that declares whether it 52.22 will provide property tax exemptions under section 469.315; and 52.23 (4) supporting evidence to allow the commissioner to 52.24 evaluate the application under the criteria in section 469.314. 52.25 [EFFECTIVE DATE.] This section is effective the day 52.26 following final enactment. 52.27 Sec. 13. [469.314] [DESIGNATION OF BIOTECHNOLOGY AND 52.28 HEALTH SCIENCES INDUSTRY ZONE.] 52.29 Subdivision 1. [COMMISSIONER TO DESIGNATE.] (a) The 52.30 commissioner, in consultation with the commissioner of revenue 52.31 and the director of the office of strategic and long-range 52.32 planning, shall designate not more than one biotechnology and 52.33 health sciences industry zone. Priority must be given to 52.34 applicants with a development plan that links a higher 52.35 education/research institution with a biotechnology and health 52.36 sciences industry facility. 53.1 (b) The commissioner may, upon designation of a zone, 53.2 modify the development plan, including the boundaries of the 53.3 zone or subzones, if in the commissioner's opinion a modified 53.4 plan would better meet the objectives of the biotechnology and 53.5 health sciences industry zone program. The commissioner shall 53.6 notify the applicant of the modification and provide a statement 53.7 of the reasons for the modifications. 53.8 Subd. 2. [NEED INDICATORS.] (a) In evaluating applications 53.9 to determine the need for designation of a biotechnology and 53.10 health sciences industry zone, the commissioner shall consider 53.11 the following factors as indicators of need: 53.12 (1) the extent to which land in proximity to a significant 53.13 scientific research institution could be developed as a higher 53.14 and better use for biotechnology and health sciences industry 53.15 facilities; 53.16 (2) the amount of property in or near the zone that is 53.17 deteriorated or underutilized; and 53.18 (3) the extent to which property in the area would remain 53.19 underdeveloped or nonperforming due to physical characteristics. 53.20 (b) The commissioner may require applicants to provide data 53.21 to demonstrate how the area meets one or more of the indicators 53.22 of need. 53.23 Subd. 3. [SUCCESS INDICATORS.] In determining the 53.24 likelihood of success of a proposed zone, the commissioner shall 53.25 consider: 53.26 (1) applicants that show a viable link between a higher 53.27 education/research institution, the biotechnology and/or medical 53.28 devices business sectors, and one or more units of local 53.29 government with a development plan; 53.30 (2) the extent to which the area has substantial real 53.31 property with adequate infrastructure and energy to support new 53.32 or expanded development; 53.33 (3) the strength and viability of the proposed development 53.34 goals, objectives, and strategies in the development plan; 53.35 (4) whether the development plan is creative and innovative 53.36 in comparison to other applications; 54.1 (5) local public and private commitment to development of a 54.2 biotechnology and health sciences industry facility or 54.3 facilities in the proposed zone and the potential cooperation of 54.4 surrounding communities; 54.5 (6) existing resources available to the proposed zone; 54.6 (7) how the designation of the zone would relate to other 54.7 economic and community development projects and to regional 54.8 initiatives or programs; 54.9 (8) how the regulatory burden will be eased for 54.10 biotechnology and health sciences industry facilities located in 54.11 the proposed zone; 54.12 (9) proposals to establish and link job creation and job 54.13 training in the biotechnology and health sciences industry with 54.14 research/educational institutions; and 54.15 (10) the extent to which the development is directed at 54.16 encouraging, and that designation of the zone is likely to 54.17 result in, the creation of high-paying jobs. 54.18 Subd. 4. [DESIGNATION SCHEDULE.] (a) The schedule in 54.19 paragraphs (b) to (e) applies to the designation of the 54.20 biotechnology and health sciences industry zone. 54.21 (b) The commissioner shall publish the form for 54.22 applications and any procedural, form, or content requirements 54.23 for applications by no later than August 1, 2003. The 54.24 commissioner may publish these requirements on the Internet, in 54.25 the State Register, or by any other means the commissioner 54.26 determines appropriate to disseminate the information to 54.27 potential applicants for designation. 54.28 (c) Applications must be submitted by October 15, 2003. 54.29 (d) The commissioner shall designate the zones by no later 54.30 than December 31, 2003. 54.31 (e) The designation of the zones takes effect January 1, 54.32 2004. 54.33 [EFFECTIVE DATE.] This section is effective the day 54.34 following final enactment. 54.35 Sec. 14. [469.3141] [APPLICATION FOR TAX BENEFITS.] 54.36 (a) To claim a tax credit or exemption under section 55.1 469.315, clauses (2) through (5), a business must apply to the 55.2 commissioner for a tax credit certificate. As a condition of 55.3 its application, the business must agree to furnish information 55.4 to the commissioner that is sufficient to verify the eligibility 55.5 for any credits or exemptions claimed. The total amount of the 55.6 state tax credits and exemptions allowed for the specified 55.7 period may not exceed the amount of the tax credit certificates 55.8 provided by the commissioner to the business. The commissioner 55.9 must verify to the commissioner of revenue the amount of tax 55.10 exemptions or credits for which each business is eligible. 55.11 (b) A tax credit certificate issued under this section may 55.12 specify the particular tax exemptions or credits that the 55.13 qualified business is eligible to claim under section 469.315, 55.14 clauses (2) through (5), and the amount of each exemption or 55.15 credit allowed. 55.16 (c) The commissioner may issue $1,000,000 of tax credits or 55.17 exemptions in fiscal year 2004. Any tax credits or exemptions 55.18 not awarded in fiscal year 2004 may be awarded in fiscal year 55.19 2005. 55.20 (d) A qualified business must use the tax credits or tax 55.21 exemptions granted under this section by the later of the end of 55.22 the state fiscal year or the taxpayer's tax year in which the 55.23 credits or exemptions are granted. 55.24 [EFFECTIVE DATE.] This section is effective the day 55.25 following final enactment. 55.26 Sec. 15. [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 55.27 Qualified businesses that operate in a biotechnology and 55.28 health sciences industry zone, individuals who invest in a 55.29 qualified business that operates in a biotechnology and health 55.30 sciences industry zone, and property of a qualified business 55.31 located in a biotechnology and health sciences industry zone 55.32 qualify for: 55.33 (1) exemption from the property tax as provided in section 55.34 272.02, subdivision 56; 55.35 (2) exemption from corporate franchise taxes as provided 55.36 under section 469.317; 56.1 (3) exemption from the state sales and use tax and any 56.2 local sales and use taxes on qualifying purchases as provided in 56.3 section 297A.68, subdivision 37; 56.4 (4) research and development credits as provided under 56.5 section 469.3181; 56.6 (5) jobs credits as provided under section 469.318. 56.7 [EFFECTIVE DATE.] This section is effective the day 56.8 following final enactment. 56.9 Sec. 16. [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 56.10 (a) A qualified business is exempt from taxation under 56.11 section 290.02, the alternative minimum tax under section 56.12 290.0921, and the minimum fee under section 290.0922, on the 56.13 portion of its income attributable to operations of a qualified 56.14 business within the biotechnology and health sciences industry 56.15 zone. This exemption is determined as follows: 56.16 (1) for purposes of the tax imposed under section 290.02, 56.17 by multiplying its taxable net income by its zone percentage and 56.18 subtracting the result in determining taxable income; 56.19 (2) for purposes of the alternative minimum tax under 56.20 section 290.0921, by multiplying its alternative minimum taxable 56.21 income by its zone percentage and reducing alternative minimum 56.22 taxable income by this amount; and 56.23 (3) for purposes of the minimum fee under section 290.0922, 56.24 by excluding property and payroll in the zone from the 56.25 computations of the fee. 56.26 (b) No subtraction is allowed under this section in excess 56.27 of 20 percent of the sum of the corporation's biotechnology and 56.28 health sciences industry zone payroll and the adjusted basis of 56.29 the property at the time that the property is first used in the 56.30 biotechnology and health sciences industry zone by the 56.31 corporation. 56.32 (c) No reduction in tax is allowed in excess of the amount 56.33 allocated under section 469.3141. 56.34 [EFFECTIVE DATE.] This section is effective for taxable 56.35 years beginning after December 31, 2003. 56.36 Sec. 17. [469.318] [JOBS CREDIT.] 57.1 Subdivision 1. [CREDIT ALLOWED.] A qualified business is 57.2 allowed a credit against the taxes imposed under chapter 290. 57.3 The credit equals seven percent of the (1) lesser of (i) 57.4 zone payroll for the taxable year, less the zone payroll for the 57.5 base year; or (ii) total Minnesota payroll for the taxable year, 57.6 less total Minnesota payroll for the base year; minus (2) 57.7 $30,000 multiplied by the number of full-time equivalent 57.8 employee positions that the qualified business employs in the 57.9 biotechnology and health sciences industry zone for the taxable 57.10 year, minus the number of full-time equivalent employees the 57.11 business employed in the zone in the base year, but not less 57.12 than zero. 57.13 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 57.14 the following terms have the meaning given. 57.15 (b) "Base year" means the taxable year beginning during the 57.16 calendar year in which the commissioner designated the zone. 57.17 (c) "Full-time equivalent employee position" means the 57.18 equivalent of annualized expected hours of work equal to 2,080 57.19 hours. 57.20 (d) "Minnesota payroll" means the wages or salaries 57.21 attributed to Minnesota under section 290.191, subdivision 12, 57.22 for the qualified business or the unitary business of which the 57.23 qualified business is a part, whichever is greater. 57.24 (e) "Zone payroll" means wages or salaries used to 57.25 determine the zone payroll factor for the qualified business. 57.26 Subd. 3. [INFLATION ADJUSTMENT.] For taxable years 57.27 beginning after December 31, 2004, the dollar amount in 57.28 subdivision 1, clause (2), is annually adjusted for inflation. 57.29 The commissioner of revenue shall adjust the amount by the 57.30 percentage determined under section 290.06, subdivision 2d, for 57.31 the taxable year. 57.32 Subd. 4. [REFUNDABLE.] If the amount of the credit 57.33 calculated under this section and allocated to the qualified 57.34 business under section 14 exceeds the liability for tax under 57.35 chapter 290, the commissioner of revenue shall refund the excess 57.36 to the qualified business. 58.1 [EFFECTIVE DATE.] This section is effective the day 58.2 following final enactment. 58.3 Sec. 18. [469.3181] [CREDIT FOR INCREASING RESEARCH 58.4 ACTIVITIES IN A BIOTECHNOLOGY AND HEALTH SCIENCES ZONE.] 58.5 Subdivision 1. [CREDIT ALLOWED.] A corporation, other than 58.6 a corporation treated as an "S" corporation under section 58.7 290.9725, is allowed a credit against the portion of the 58.8 franchise tax computed under section 290.06, subdivision 1, for 58.9 the taxable year equal to: (1) five percent of the first 58.10 $2,000,000 of the excess (if any) of (i) the qualified research 58.11 expenses for the taxable year, over (ii) the base amount; and 58.12 (2) 2.5 percent of all such excess expenses over $2,000,000. 58.13 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 58.14 the following terms have the meanings given. 58.15 (b) "Qualified research expenses" means qualified research 58.16 expenses and basic research payments as defined in section 41(b) 58.17 and (e) of the Internal Revenue Code. 58.18 (c) "Qualified research" means activities in the fields of 58.19 biotechnology or health sciences that are "qualified research" 58.20 as defined in section 41(d) of the Internal Revenue Code, except 58.21 that the term does not include qualified research conducted 58.22 outside the biotechnology and health sciences industry zone. 58.23 (d) "Base amount" means base amount as defined in section 58.24 4(c) of the Internal Revenue Code, except that the average 58.25 annual gross receipts must be calculated using Minnesota sales 58.26 or receipts under section 290.191 and the definitions contained 58.27 in paragraphs (b) and (c) shall apply. 58.28 (e) "Liability for tax" for purposes of this section means 58.29 the tax imposed under this chapter for the taxable year reduced 58.30 by the sum of the nonrefundable credits allowed under this 58.31 chapter. 58.32 Subd. 3. [REFUNDABLE CREDIT.] If the credit determined 58.33 under this section and allocated to the taxpayer under section 58.34 469.3141 for the taxable year exceeds the taxpayer's liability 58.35 for tax for the year, the commissioner shall refund the 58.36 difference to the taxpayer. 59.1 Subd. 4. [PARTNERSHIPS.] In the case of partnerships the 59.2 credit shall be allocated in the same manner provided by section 59.3 41(f)(2) of the Internal Revenue Code. 59.4 Subd. 5. [ADJUSTMENTS; ACQUISITIONS AND DISPOSITIONS.] If 59.5 a taxpayer acquires or disposes of the major portion of a trade 59.6 or business or the major portion of a separate unit of a trade 59.7 or business in a transaction with another taxpayer, the 59.8 taxpayer's qualified research expenses and base amount are 59.9 adjusted in the same manner provided by section 41(f)(3) of the 59.10 Internal Revenue Code. 59.11 Subd. 6. Any amount used to calculate a credit under this 59.12 section may not be used to generate a credit under section 59.13 290.068. 59.14 [EFFECTIVE DATE.] This section is effective the day 59.15 following final enactment. 59.16 Sec. 19. [469.319] [REPAYMENT OF TAX BENEFITS.] 59.17 Subdivision 1. [REPAYMENT OBLIGATION.] A business must 59.18 repay the amount of the tax reduction listed in section 469.315 59.19 and any refunds under sections 469.318 and 469.3181 in excess of 59.20 tax liability, received during the two years immediately before 59.21 it ceased to operate in the zone, if the business: 59.22 (1) received tax reductions authorized by section 469.315; 59.23 and 59.24 (2)(i) did not meet the goals specified in an agreement 59.25 entered into with the applicant that states any obligation the 59.26 qualified business must fulfill in order to be eligible for tax 59.27 benefits. The commissioner may extend for up to one year the 59.28 period for meeting any goals provided in an agreement. The 59.29 applicant may extend the period for meeting other goals by 59.30 documenting in writing the reason for the extension and 59.31 attaching a copy of the document to its next annual report to 59.32 the commissioner; or 59.33 (ii) ceased to operate its facility located within the 59.34 biotechnology and health sciences industry zone or otherwise 59.35 ceases to be or is not a qualified business. 59.36 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 60.1 the following terms have the meanings given. 60.2 (b) "Business" means any person who received tax benefits 60.3 enumerated in section 469.315. 60.4 (c) "Commissioner" means the commissioner of revenue. 60.5 Subd. 3. [DISPOSITION OR REPAYMENT.] The repayment must be 60.6 paid to the state to the extent it represents a state tax 60.7 reduction and to the county to the extent it represents a 60.8 property tax reduction. Any amount repaid to the state must be 60.9 deposited in the general fund. Any amount repaid to the county 60.10 for the property tax exemption must be distributed to the local 60.11 governments with authority to levy taxes in the zone in the same 60.12 manner provided for distribution of payment of delinquent 60.13 property taxes. Any repayment of local sales taxes must be 60.14 repaid to the city or county imposing the local sales tax. 60.15 Subd. 4. [REPAYMENT PROCEDURES.] (a) For the repayment of 60.16 taxes imposed under chapter 290 or 297A or local taxes collected 60.17 pursuant to section 297A.99, a business must file an amended 60.18 return with the commissioner of revenue and pay any taxes 60.19 required to be repaid within 30 days after ceasing to do 60.20 business in the zone. The amount required to be repaid is 60.21 determined by calculating the tax for the period or periods for 60.22 which repayment is required without regard to the exemptions and 60.23 credits allowed under section 469.315. 60.24 (b) For the repayment of property taxes, the county auditor 60.25 shall prepare a tax statement for the business, applying the 60.26 applicable tax extension rates for each payable year and provide 60.27 a copy to the business. The business must pay the taxes to the 60.28 county treasurer within 30 days after receipt of the tax 60.29 statement. The taxpayer may appeal the valuation and 60.30 determination of the property tax to the tax court within 30 60.31 days after receipt of the tax statement. 60.32 (c) The provisions of chapters 270 and 289A relating to the 60.33 commissioner's authority to audit, assess, and collect the tax 60.34 and to hear appeals are applicable to the repayment required 60.35 under paragraph (a). The commissioner may impose civil 60.36 penalties as provided in chapter 289A, and the additional tax 61.1 and penalties are subject to interest at the rate provided in 61.2 section 270.75, from 30 days after ceasing to do business in the 61.3 biotechnology and health sciences industry zone until the date 61.4 the tax is paid. 61.5 (d) If a property tax is not repaid under paragraph (b), 61.6 the county treasurer shall add the amount required to be repaid 61.7 to the property taxes assessed against the property for payment 61.8 in the year following the year in which the treasurer discovers 61.9 that the business ceased to operate in the biotechnology and 61.10 health sciences industry zone. 61.11 (e) For determining the tax required to be repaid, a tax 61.12 reduction is deemed to have been received on the date that the 61.13 tax would have been due if the taxpayer had not been entitled to 61.14 the exemption, or on the date a refund was issued for a 61.15 refundable credit. 61.16 (f) The commissioner may assess the repayment of taxes 61.17 under paragraph (c) any time within two years after the business 61.18 ceases to operate in the biotechnology and health sciences 61.19 industry zone, or within any period of limitations for the 61.20 assessment of tax under section 289A.38, whichever period is 61.21 later. 61.22 Subd. 5. [WAIVER AUTHORITY.] The commissioner may waive 61.23 all or part of a repayment, if the commissioner, in consultation 61.24 with the commissioner of trade and economic development and 61.25 appropriate officials from the local government units in which 61.26 the business is located, determines that requiring repayment of 61.27 the tax is not in the best interest of the state or the local 61.28 government units and the business ceased operating as a result 61.29 of circumstances beyond its control including, but not limited 61.30 to: 61.31 (1) a natural disaster; 61.32 (2) unforeseen industry trends; or 61.33 (3) loss of a major supplier or customer. 61.34 [EFFECTIVE DATE.] This section is effective the day 61.35 following final enactment. 61.36 Sec. 20. [469.320] [ZONE PERFORMANCE; REMEDIES.] 62.1 Subdivision 1. [REPORTING REQUIREMENT.] An applicant 62.2 receiving designation of a biotechnology and health sciences 62.3 industry zone under section 469.314 must annually report to the 62.4 commissioner on its progress in meeting the zone performance 62.5 goals under the development plan for the zone. 62.6 Subd. 2. [PROCEDURES.] For reports required by subdivision 62.7 1, the commissioner may prescribe: 62.8 (1) the required time or times by which the reports must be 62.9 filed; 62.10 (2) the form of the report; and 62.11 (3) the information required to be included in the report. 62.12 Subd. 3. [REMEDIES.] If the commissioner determines, based 62.13 on a report filed under subdivision 1 or other available 62.14 information, that a zone or subzone is failing to meet its 62.15 performance goals, the commissioner may take any actions the 62.16 commissioner determines appropriate, including modification of 62.17 the boundaries of the zone or a subzone or termination of the 62.18 zone or a subzone. Before taking any action, the commissioner 62.19 shall consult with the applicant and the affected local 62.20 government units, including notifying them of the proposed 62.21 actions to be taken. The commissioner shall publish any order 62.22 modifying a zone in the State Register and on the Internet. The 62.23 applicant may appeal the commissioner's order under the 62.24 contested case procedures of chapter 14. 62.25 Subd. 4. [EXISTING BUSINESSES.] (a) An action to remove 62.26 area from a zone or to terminate a zone under this section does 62.27 not apply to: 62.28 (1) the property tax on improvements constructed before the 62.29 first January 2 following publication of the commissioner's 62.30 order; 62.31 (2) sales tax on purchases made before the first day of the 62.32 next calendar month beginning at least 30 days after publication 62.33 of the commissioner's order; and 62.34 (3) individual income tax or corporate franchise tax 62.35 attributable to a facility that was in operation before the 62.36 publication of the commissioner's order. 63.1 (b) The tax exemptions specified in paragraph (a) terminate 63.2 on the date on which the zone expires under the original 63.3 designation. 63.4 ARTICLE 3 63.5 INCOME, FRANCHISE, AND ESTATE TAXES 63.6 Section 1. Minnesota Statutes 2002, section 10A.31, 63.7 subdivision 1, is amended to read: 63.8 Subdivision 1. [DESIGNATION.] An individual resident of 63.9 this state who files an income tax return ora renter and63.10homeownerproperty tax refund return with the commissioner of 63.11 revenue may designate on their original return that$5 be paid63.12from the general fund of the state$1 to $25, or $1 to $50 if 63.13 the return is filed jointly, be added to the tax or deducted 63.14 from the refund that would otherwise be payable by or to the 63.15 individual and paid into the state elections campaign fund.If63.16a husband and wife file a joint return, each spouse may63.17designate that $5 be paid. No individual is allowed to63.18designate $5 more than once in any year.The taxpayer may 63.19 designate that the amount be paid into the account of a 63.20 political party or into the general account. Designations made 63.21 under this section are not eligible for refund under section 63.22 290.06, subdivision 23. 63.23 [EFFECTIVE DATE.] This section is effective beginning with 63.24 designations made on income tax returns filed for tax years 63.25 beginning after December 31, 2002, and on property tax refund 63.26 returns based on property taxes payable in 2004 or rent 63.27 constituting property taxes paid in 2003. 63.28 Sec. 2. Minnesota Statutes 2002, section 10A.31, 63.29 subdivision 3, is amended to read: 63.30 Subd. 3. [FORM.] The commissioner of revenue must provide 63.31 onthe first page ofthe income tax form and the renter and 63.32 homeowner property tax refund return a space for the individual 63.33 to indicate a wish to pay$5$1 to $25 ($10$50 if filing a 63.34 joint return)from the general fund of the stateto finance 63.35 election campaigns. The form must also contain language 63.36 prepared by the commissioner that permits the individual to 64.1 direct thestate to pay the $5 (or $10 if filing a joint return)64.2 designation to: (1) one of the major political parties; (2) any 64.3 minor political party that qualifies under subdivision 3a; or 64.4 (3) all qualifying candidates as provided by subdivision 7.The64.5renter and homeowner property tax refund return must include64.6instructions that the individual filing the return may designate64.7$5 on the return only if the individual has not designated $5 on64.8the income tax return.64.9 [EFFECTIVE DATE.] This section is effective beginning with 64.10 designations made on income tax returns filed for tax years 64.11 beginning after December 31, 2002, and on property tax refund 64.12 returns based on property taxes payable in 2004 or rent 64.13 constituting property taxes paid in 2003. 64.14 Sec. 3. Minnesota Statutes 2002, section 289A.10, 64.15 subdivision 1, is amended to read: 64.16 Subdivision 1. [RETURN REQUIRED.] In the case of a 64.17 decedent who has an interest in property with a situs in 64.18 Minnesota, the personal representative must submit a Minnesota 64.19 estate tax return to the commissioner, on a form prescribed by 64.20 the commissioner, if (i) the federal gross estate exceeds 64.21 $700,000 for estates of decedents dying after December 31, 2001, 64.22 and beforeJanuary 1, 2004July 1, 2003;$850,000 for estates of64.23decedents dying after December 31, 2003, and before January 1,64.242005; $950,000 for estates of decedents dying after December 31,64.252004, and before January 1, 2006;and $1,000,000 for estates of 64.26 decedents dying afterDecember 31, 2005June 30, 2003, or (ii) a 64.27 federal estate tax return is required to be filed. 64.28 The return must contain a computation of the Minnesota 64.29 estate tax due. The return must be signed by the personal 64.30 representative. 64.31 [EFFECTIVE DATE.] This section is effective for decedents 64.32 dying after December 31, 2002. 64.33 Sec. 4. Minnesota Statutes 2002, section 290.06, 64.34 subdivision 23, is amended to read: 64.35 Subd. 23. [REFUND OF CONTRIBUTIONS TO POLITICAL PARTIES 64.36 AND CANDIDATES.] (a) A taxpayer may claim a refund equal 65.1 to one-half of the amount of the taxpayer's contributions made 65.2 in the calendar year to candidates and to a political party. 65.3 The maximum refund for an individual must not exceed$50$25 and 65.4 for a married couple, filing jointly, must not exceed$100$50. 65.5 A refund of a contribution is allowed only if the taxpayer files 65.6 a form required by the commissioner and attaches to the form a 65.7 copy of an official refund receipt form issued by the candidate 65.8 or party and signed by the candidate, the treasurer of the 65.9 candidate's principal campaign committee, or the chair or 65.10 treasurer of the party unit, after the contribution was 65.11 received. The receipt forms must be numbered, and the data on 65.12 the receipt that are not public must be made available to the 65.13 campaign finance and public disclosure board upon its request. 65.14 A claim must be filed with the commissioner no sooner than 65.15 January 1 of the calendar year in which the contribution was 65.16 made and no later than April 15 of the calendar year following 65.17 the calendar year in which the contribution was made. A 65.18 taxpayer may file only one claim per calendar year. Amounts 65.19 paid by the commissioner after June 15 of the calendar year 65.20 following the calendar year in which the contribution was made 65.21 must include interest at the rate specified in section 270.76. 65.22 (b) No refund is allowed under this subdivision for a 65.23 contribution to a candidate unless the candidate: 65.24 (1) has signed an agreement to limit campaign expenditures 65.25 as provided in section 10A.322; 65.26 (2) is seeking an office for which voluntary spending 65.27 limits are specified in section 10A.25; and 65.28 (3) has designated a principal campaign committee. 65.29 This subdivision does not limit the campaign expenditures 65.30 of a candidate who does not sign an agreement but accepts a 65.31 contribution for which the contributor improperly claims a 65.32 refund. 65.33 (c) For purposes of this subdivision, "political party" 65.34 means a major political party as defined in section 200.02, 65.35 subdivision 7, or a minor political party qualifying for 65.36 inclusion on the income tax or property tax refund form under 66.1 section 10A.31, subdivision 3a. 66.2 A "major party" or "minor party" includes the aggregate of 66.3 that party's organization within each house of the legislature, 66.4 the state party organization, and the party organization within 66.5 congressional districts, counties, legislative districts, 66.6 municipalities, and precincts. 66.7 "Candidate" means a candidate as defined in section 10A.01, 66.8 subdivision 10, except a candidate for judicial office. 66.9 "Contribution" means a gift of money. 66.10 (d) The commissioner shall make copies of the form 66.11 available to the public and candidates upon request. 66.12 (e) The following data collected or maintained by the 66.13 commissioner under this subdivision are private: the identities 66.14 of individuals claiming a refund, the identities of candidates 66.15 to whom those individuals have made contributions, and the 66.16 amount of each contribution. 66.17 (f) The commissioner shall report to the campaign finance 66.18 and public disclosure board by each August 1 a summary showing 66.19 the total number and aggregate amount of political contribution 66.20 refunds made on behalf of each candidate and each political 66.21 party. These data are public. 66.22 (g) The amount necessary to pay claims for the refund 66.23 provided in this section is appropriated from the general fund 66.24 to the commissioner of revenue. 66.25 (h) For a taxpayer who files a claim for refund via the 66.26 Internet or other electronic means, the commissioner may accept 66.27 the number on the official receipt as documentation that a 66.28 contribution was made rather than the actual receipt as required 66.29 by paragraph (a). 66.30 [EFFECTIVE DATE.] This section is effective for that 66.31 portion of any refund claim based on contributions that are made 66.32 on or after the day following final enactment. 66.33 Sec. 5. Minnesota Statutes 2002, section 290.06, 66.34 subdivision 24, is amended to read: 66.35 Subd. 24. [CREDIT FOR JOB CREATION.] (a) A corporation 66.36 that leases and operates a heavy maintenance base for aircraft 67.1 that is owned by the state of Minnesota or one of its political 67.2 subdivisions, or an engine repair facility described in section 67.3 116R.02, subdivision 6, or both, may take a credit against the 67.4 tax due under this chapter. 67.5 (b) For the first taxable year when the facility has been 67.6 in operation for at least three consecutive months, the credit 67.7 is equal to $5,000 multiplied by the number of persons employed 67.8 by the corporation on a full-time basis at the facility on the 67.9 last day of the taxable year, not to exceed the number of 67.10 persons employed by the corporation on a full-time basis at the 67.11 facility on the date 90 days before the last day of the taxable 67.12 year. For each of the succeeding four taxable years, the credit 67.13 is equal to $5,000 multiplied by the number of persons employed 67.14 by the corporation on a full-time basis at the facility on the 67.15 last day of the taxable year, not to exceed the number of 67.16 persons employed by the corporation on a full-time basis at the 67.17 facility on the date 90 days before the last day of the taxable 67.18 year. 67.19 (c) For the first taxable year in which the credit is 67.20 allowed for the facility, the credit must not exceed 80 percent 67.21 of the wages paid to or incurred for persons employed by the 67.22 taxpayer at the facility during the taxable year. For the 67.23 succeeding four taxable years, the credit must not exceed 20 67.24 percent of the wages paid to or incurred for persons employed by 67.25 the taxpayer at the facility during the taxable year. For 67.26 purposes of this section, "wages" has the meaning given under 67.27 section 3121(b) of the Internal Revenue Code, except the 67.28 limitation to the contribution and benefit base does not apply. 67.29 (d) If the credit provided under this subdivision exceeds 67.30 the tax liability of the corporation for the taxable year, the 67.31 excess amount of the credit may be carried over to each of the 67.32ten20 taxable years succeeding the taxable year. The entire 67.33 amount of the credit must be carried to the earliest taxable 67.34 year to which the amount may be carried. The unused portion of 67.35 the credit must be carried to the following taxable year. No 67.36 credit may be carried to a taxable year more thanten20 years 68.1 after the taxable year in which the credit was earned. 68.2 (e) if an unused portion of the credit remains at the end 68.3 of the carryover period under paragraph (d), the commissioner 68.4 shall refund the unused portion to the taxpayer. The provisions 68.5 of this paragraph do not apply if the corporation that earned 68.6 the credit under this subdivision or a successor in interest to 68.7 the corporation filed for bankruptcy protection. 68.8 [EFFECTIVE DATE.] This section is effective for taxable 68.9 years beginning after December 31, 2003. 68.10 Sec. 6. Minnesota Statutes 2002, section 290.06, is 68.11 amended by adding a subdivision to read: 68.12 Subd. 29. [REGIONAL INVESTMENT CREDIT.] (a) A credit is 68.13 allowed against the tax imposed by this chapter for investment 68.14 in a qualifying regional angel investment network fund. The 68.15 credit equals 25 percent of the taxpayer's investment made in 68.16 the fund for the taxable year, but not to exceed the lesser of: 68.17 (1) the liability for tax under this chapter, including the 68.18 applicable alternative minimum tax; or 68.19 (2) the amount of the certificate under paragraph (c) 68.20 provided to the taxpayer by the fund. 68.21 (b) For purposes of this subdivision, a regional angel 68.22 investment network fund means a pool investment fund that: 68.23 (1) is organized as a limited liability company and 68.24 consists of members who are accredited investors within the 68.25 meaning of Regulation D of the Securities and Exchange 68.26 Commission, Code of Federal Regulations, title 17, section 68.27 230.501(a); and 68.28 (2) primarily makes equity investments in emerging and 68.29 expanding small businesses as defined by the Small Business 68.30 Administration that are located in local communities in 68.31 Minnesota outside of the metropolitan area as defined in section 68.32 473.121, subdivision 2, and does not make investments in 68.33 residential real estate. 68.34 (c) Regional angel investment network funds may apply to 68.35 the commissioner of trade and economic development for 68.36 certification as a qualifying regional angel investment network 69.1 fund. The application must be in the form and made under 69.2 procedures specified by the commissioner of trade and economic 69.3 development. The commissioner of trade and economic development 69.4 may certify up to ten qualifying funds and provide certificates 69.5 entitling investors in the funds to credits under this 69.6 subdivision of up to $250,000 for each fund. The commissioner 69.7 of trade and economic development must not issue a total amount 69.8 of certificates for all funds of more than $2,500,000. In 69.9 awarding certificates under this paragraph, the commissioner of 69.10 trade and economic development shall generally award them to 69.11 qualified applicants in the order in which the applications are 69.12 received, but shall also seek to certify funds that are broadly 69.13 dispersed across the entire state outside of the metropolitan 69.14 area, as defined in section 473.121, subdivision 2. 69.15 (d) The commissioner may require a taxpayer to provide a 69.16 copy of the credit certificate under paragraph (c) to verify the 69.17 taxpayer's entitlement to a credit under this subdivision. 69.18 (e) If the amount of the credit under this subdivision for 69.19 any taxable year exceeds the limitation under paragraph (a), 69.20 clause (1), the excess is a credit carryover to each of the 15 69.21 succeeding taxable years. The entire amount of the excess 69.22 unused credit for the taxable year must be carried first to the 69.23 earliest of the taxable years to which the credit may be carried 69.24 and then to each successive year to which the credit may be 69.25 carried. The amount of the unused credit which may be added 69.26 under this paragraph may not exceed the taxpayer's liability for 69.27 tax less the credit for the taxable year. 69.28 [EFFECTIVE DATE.] This section is effective the day 69.29 following final enactment and for taxable years beginning after 69.30 December 31, 2002. It applies to investments made after the 69.31 fund has been certified by the commissioner of trade and 69.32 economic development under this section. 69.33 Sec. 7. Minnesota Statutes 2002, section 290.091, 69.34 subdivision 2, is amended to read: 69.35 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 69.36 this section, the following terms have the meanings given: 70.1 (a) "Alternative minimum taxable income" means the sum of 70.2 the following for the taxable year: 70.3 (1) the taxpayer's federal alternative minimum taxable 70.4 income as defined in section 55(b)(2) of the Internal Revenue 70.5 Code; 70.6 (2) the taxpayer's itemized deductions allowed in computing 70.7 federal alternative minimum taxable income, but excluding: 70.8 (i) the charitable contribution deduction under section 170 70.9 of the Internal Revenue Codeto the extent that the deduction70.10exceeds 1.3 percent of adjusted gross income, as defined in70.11section 62 of the Internal Revenue Code; 70.12 (ii) the medical expense deduction; 70.13 (iii) the casualty, theft, and disaster loss deduction; and 70.14 (iv) the impairment-related work expenses of a disabled 70.15 person; 70.16 (3) for depletion allowances computed under section 613A(c) 70.17 of the Internal Revenue Code, with respect to each property (as 70.18 defined in section 614 of the Internal Revenue Code), to the 70.19 extent not included in federal alternative minimum taxable 70.20 income, the excess of the deduction for depletion allowable 70.21 under section 611 of the Internal Revenue Code for the taxable 70.22 year over the adjusted basis of the property at the end of the 70.23 taxable year (determined without regard to the depletion 70.24 deduction for the taxable year); 70.25 (4) to the extent not included in federal alternative 70.26 minimum taxable income, the amount of the tax preference for 70.27 intangible drilling cost under section 57(a)(2) of the Internal 70.28 Revenue Code determined without regard to subparagraph (E); 70.29 (5) to the extent not included in federal alternative 70.30 minimum taxable income, the amount of interest income as 70.31 provided by section 290.01, subdivision 19a, clause (1); and 70.32 (6) the amount of addition required by section 290.01, 70.33 subdivision 19a, clause (7); 70.34 less the sum of the amounts determined under the following: 70.35 (1) interest income as defined in section 290.01, 70.36 subdivision 19b, clause (1); 71.1 (2) an overpayment of state income tax as provided by 71.2 section 290.01, subdivision 19b, clause (2), to the extent 71.3 included in federal alternative minimum taxable income; 71.4 (3) the amount of investment interest paid or accrued 71.5 within the taxable year on indebtedness to the extent that the 71.6 amount does not exceed net investment income, as defined in 71.7 section 163(d)(4) of the Internal Revenue Code. Interest does 71.8 not include amounts deducted in computing federal adjusted gross 71.9 income; and 71.10 (4) amounts subtracted from federal taxable income as 71.11 provided by section 290.01, subdivision 19b, clause (12). 71.12 In the case of an estate or trust, alternative minimum 71.13 taxable income must be computed as provided in section 59(c) of 71.14 the Internal Revenue Code. 71.15 (b) "Investment interest" means investment interest as 71.16 defined in section 163(d)(3) of the Internal Revenue Code. 71.17 (c) "Tentative minimum tax" equals 6.4 percent of 71.18 alternative minimum taxable income after subtracting the 71.19 exemption amount determined under subdivision 3. 71.20 (d) "Regular tax" means the tax that would be imposed under 71.21 this chapter (without regard to this section and section 71.22 290.032), reduced by the sum of the nonrefundable credits 71.23 allowed under this chapter. 71.24 (e) "Net minimum tax" means the minimum tax imposed by this 71.25 section. 71.26 [EFFECTIVE DATE.] This section is effective for taxable 71.27 years beginning after December 31, 2002. 71.28 Sec. 8. Minnesota Statutes 2002, section 291.03, 71.29 subdivision 1, is amended to read: 71.30 Subdivision 1. [TAX AMOUNT.] The tax imposed shall be an 71.31 amount equal to the proportion of the maximum credit computed 71.32 under section 2011 of the Internal Revenue Code for state death 71.33 taxes as the Minnesota gross estate bears to the value of the 71.34 federal gross estate. For a resident decedent, the tax shall be 71.35 the maximum credit computed under section 2011 of the Internal 71.36 Revenue Code reduced by the amount of the death tax paid the 72.1 other state and credited against the federal estate tax if this 72.2 results in a larger amount of tax than the proportionate amount 72.3 of the credit. Thetax determinedmaximum credit under this 72.4 paragraph shall not be greater than the federal estate tax 72.5 computed under section 2001 of the Internal Revenue Code after 72.6 the allowance of the federal credits allowed under section 2010 72.7 of the Internal Revenue Code of 1986,as amended through72.8December 31, 2000determined as if the decedent died during 72.9 calendar year 2003. 72.10 [EFFECTIVE DATE.] This section is effective for decedents 72.11 dying after June 30, 2003. 72.12 Sec. 9. [APPROPRIATION.] 72.13 (a) $100,000 is appropriated from the general fund to the 72.14 commissioner of revenue to make grants to one or more nonprofit 72.15 organizations, qualifying under section 501(c)(3) of the 72.16 Internal Revenue Code of 1986, to coordinate, facilitate, 72.17 encourage, and aid in the provision of taxpayer assistance 72.18 services. This appropriation is available for fiscal years 2004 72.19 and 2005 and does not become a part of the base. 72.20 (b) "Taxpayer assistance services" mean accounting and tax 72.21 preparation services provided by volunteers to low-income and 72.22 disadvantaged Minnesota residents to help them file federal and 72.23 state income tax returns and Minnesota property tax refund 72.24 claims and to provide personal representation before the 72.25 department of revenue and Internal Revenue Service. 72.26 ARTICLE 4 72.27 SALES AND USE TAXES 72.28 Section 1. Minnesota Statutes 2002, section 168.27, 72.29 subdivision 4a, is amended to read: 72.30 Subd. 4a. [LIMITED USED VEHICLE LICENSE.] A limited used 72.31 vehicle license shall be provided to a nonprofit charitable 72.32 organization that qualifies for tax exemption under section 72.33 501(c)(3) of the Internal Revenue Code whose primary business in 72.34 the transfer of vehicles is to raise funds for the corporation, 72.35 who acquires vehicles for sale through donation, and who uses a 72.36 licensed motor vehicle auctioneer to sell vehicles to retail 73.1 customers. This license does not apply to educational 73.2 institutions whose primary purpose is to train students in the 73.3 repair, maintenance, and sale of motor vehicles. A limited used 73.4 vehicle license allows the organization to accept assignment of 73.5 vehicles without the requirement to transfer title as provided 73.6 in section 168A.10 until sold to a retail customer or licensed 73.7 motor vehicle dealer. Limited used vehicle license holders are 73.8 not entitled to dealer plates, and shall report all vehicles 73.9 held for resale to the department of public safety in a manner 73.10 and time prescribed by the department. 73.11 [EFFECTIVE DATE.] This section is effective for sales made 73.12 after June 30, 2003. 73.13 Sec. 2. Minnesota Statutes 2002, section 168A.03, is 73.14 amended to read: 73.15 168A.03 [EXEMPT VEHICLES.] 73.16 Subdivision 1. [EXEMPTIONS.] The registrar shall not issue 73.17 a certificate of title for: 73.18 (1) a vehicle owned by the United States; 73.19 (2)a vehicle owned by a manufacturer or dealer and held73.20for sale, even though incidentally moved on the highway or used73.21pursuant to section 168.27 or 168.28, or a vehicle used by a73.22manufacturer solely for testing;73.23(3)a vehicle owned by a nonresident and not required by 73.24 law to be registered in this state; 73.25(4)(3) a vehicle owned by a nonresident and regularly 73.26 engaged in the interstate transportation of persons or property 73.27 for which a currently effective certificate of title has been 73.28 issued in another state; 73.29(5)(4) a vehicle moved solely by animal power; 73.30(6)(5) an implement of husbandry; 73.31(7)(6) special mobile equipment; 73.32(8)(7) a self-propelled wheelchair or invalid tricycle; 73.33(9)(8) a trailer (i) having a gross weight of 4,000 pounds 73.34 or less unless a secured party holds an interest in the trailer 73.35 or a certificate of title was previously issued by this state or 73.36 any other state or (ii) designed primarily for agricultural 74.1 purposes except recreational equipment or a manufactured home, 74.2 both as defined in section 168.011, subdivisions 8 and 25; 74.3(10)(9) a snowmobile. 74.4 Subd. 2. [DEALERS.] No certificate of title need be 74.5 obtained for a vehicle owned by a manufacturer or dealer and 74.6 held for sale, even though incidentally moved on the highway or 74.7 used pursuant to section 168.27 or 168.28, or a vehicle used by 74.8 a manufacturer solely for testing. 74.9 [EFFECTIVE DATE.] This section is effective for sales made 74.10 after June 30, 2003. 74.11 Sec. 3. Minnesota Statutes 2002, section 289A.18, 74.12 subdivision 4, is amended to read: 74.13 Subd. 4. [SALES AND USE TAX RETURNS.] (a) Sales and use 74.14 tax returns must be filed on or before the 20th day of the month 74.15 following the close of the preceding reporting period, except 74.16 that annual use tax returns provided for under section 289A.11, 74.17 subdivision 1, must be filed by April 15 following the close of 74.18 the calendar year, in the case of individuals. Annual use tax 74.19 returns of businesses, including sole proprietorships, and 74.20 annual sales tax returns must be filed by February 5 following 74.21 the close of the calendar year. 74.22 (b) Returns for the June reporting period filed by 74.23 retailers required to remit their June liability under section 74.24 289A.20, subdivision 4, paragraph (b), are due on or before 74.25 August 20. 74.26 (c) If a retailer has an average sales and use tax 74.27 liability, including local sales and use taxes administered by 74.28 the commissioner, equal to or less than $500 per month in any 74.29 quarter of a calendar year, and has substantially complied with 74.30 the tax laws during the preceding four calendar quarters, the 74.31 retailer may request authorization to file and pay the taxes 74.32 quarterly in subsequent calendar quarters. The authorization 74.33 remains in effect during the period in which the retailer's 74.34 quarterly returns reflect sales and use tax liabilities of less 74.35 than $1,500 and there is continued compliance with state tax 74.36 laws. 75.1 (d) If a retailer has an average sales and use tax 75.2 liability, including local sales and use taxes administered by 75.3 the commissioner, equal to or less than $100 per month during a 75.4 calendar year, and has substantially complied with the tax laws 75.5 during that period, the retailer may request authorization to 75.6 file and pay the taxes annually in subsequent years. The 75.7 authorization remains in effect during the period in which the 75.8 retailer's annual returns reflect sales and use tax liabilities 75.9 of less than $1,200 and there is continued compliance with state 75.10 tax laws. 75.11 (e) The commissioner may also grant quarterly or annual 75.12 filing and payment authorizations to retailers if the 75.13 commissioner concludes that the retailers' future tax 75.14 liabilities will be less than the monthly totals identified in 75.15 paragraphs (c) and (d). An authorization granted under this 75.16 paragraph is subject to the same conditions as an authorization 75.17 granted under paragraphs (c) and (d). 75.18 (f) A taxpayer who is a materials supplier may report gross 75.19 receipts either on: 75.20 (1) the cash basis as the consideration is received; or 75.21 (2) the accrual basis as sales are made. 75.22 As used in this paragraph, "materials supplier" means a person 75.23 who provides materials for the improvement of real property; who 75.24 is primarily engaged in the sale of lumber and building 75.25 materials-related products to owners, contractors, 75.26 subcontractors, repairers, or consumers; who is authorized to 75.27 file a mechanics lien upon real property and improvements under 75.28 chapter 514; and who files with the commissioner an election to 75.29 file sales and use tax returns on the basis of this paragraph. 75.30 (g) Notwithstanding paragraphs (a) to (f), a seller that is 75.31 not a Model 1, 2, or 3 seller, as those terms are used in the 75.32 Streamlined Sales and Use Tax Agreement, that does not have a 75.33 legal requirement to register in Minnesota, and that is 75.34 registered under the agreement, must file a return by February 5 75.35 following the close of the calendar year in which the seller 75.36 initially registers, and must file subsequent returns on 76.1 February 5 on an annual basis in succeeding years. 76.2 Additionally, a return must be submitted on or before the 20th 76.3 day of the month following any month by which sellers have 76.4 accumulated state and local tax funds for the state in the 76.5 amount of $1,000 or more. 76.6 [EFFECTIVE DATE.] This section is effective for sales and 76.7 purchases made on or after January 1, 2004. 76.8 Sec. 4. Minnesota Statutes 2002, section 289A.20, 76.9 subdivision 4, is amended to read: 76.10 Subd. 4. [SALES AND USE TAX.] (a) The taxes imposed by 76.11 chapter 297A are due and payable to the commissioner monthly on 76.12 or before the 20th day of the month following the month in which 76.13 the taxable event occurred, or following another reporting 76.14 period as the commissioner prescribes or as allowed under 76.15 section 289A.18, subdivision 4, paragraph (f) or (g), except 76.16 that use taxes due on an annual use tax return as provided under 76.17 section 289A.11, subdivision 1, are payable by April 15 76.18 following the close of the calendar year. 76.19 (b)For a fiscal year ending before July 1, 2002,A vendor 76.20 having a liability of $120,000 or more during a fiscal year 76.21 ending June 30 must remit the June liability for the next year 76.22 in the following manner: 76.23 (1) Two business days before June 30 of the year, the 76.24 vendor must remit7585 percent of the estimated June liability 76.25 to the commissioner. 76.26 (2) On or before August 20 of the year, the vendor must pay 76.27 any additional amount of tax not remitted in June. 76.28 (c) A vendor having a liability of $120,000 or more during 76.29 a fiscal year ending June 30 must remit all liabilities on 76.30 returns due for periods beginning in the subsequent calendar 76.31 year by electronic means on or before the 20th day of the month 76.32 following the month in which the taxable event occurred, or on 76.33 or before the 20th day of the month following the month in which 76.34 the sale is reported under section 289A.18, subdivision 4, 76.35 except for7585 percent of the estimated June liability, which 76.36 is due two business days before June 30. The remaining amount 77.1 of the June liability is due on August 20. 77.2 [EFFECTIVE DATE.] This section, paragraph (a), is effective 77.3 for sales and purchases made on or after January 1, 2004. The 77.4 rest of this section is effective for payments made after 77.5 December 31, 2003. 77.6 Sec. 5. Minnesota Statutes 2002, section 289A.31, 77.7 subdivision 7, is amended to read: 77.8 Subd. 7. [SALES AND USE TAX.] (a) The sales and use tax 77.9 required to be collected by the retailer under chapter 297A 77.10 constitutes a debt owed by the retailer to Minnesota, and the 77.11 sums collected must be held as a special fund in trust for the 77.12 state of Minnesota. 77.13 A retailer who does not maintain a place of business within 77.14 this state as defined by section 297A.66, subdivision 1, shall 77.15 not be indebted to Minnesota for amounts of tax that it was 77.16 required to collect but did not collect unless the retailer knew 77.17 or had been advised by the commissioner of its obligation to 77.18 collect the tax. 77.19 (b) The use tax required to be paid by a purchaser is a 77.20 debt owed by the purchaser to Minnesota. 77.21 (c) The tax imposed by chapter 297A, and interest and 77.22 penalties, is a personal debt of the individual required to file 77.23 a return from the time the liability arises, irrespective of 77.24 when the time for payment of that liability occurs. The debt 77.25 is, in the case of the executor or administrator of the estate 77.26 of a decedent and in the case of a fiduciary, that of the 77.27 individual in an official or fiduciary capacity unless the 77.28 individual has voluntarily distributed the assets held in that 77.29 capacity without reserving sufficient assets to pay the tax, 77.30 interest, and penalties, in which case the individual is 77.31 personally liable for the deficiency. 77.32 (d) Liability for payment of sales and use taxes includes 77.33 any responsible person or entity described in the personal 77.34 liability provisions of section 270.101. 77.35 (e) Any amounts collected, even if erroneously or illegally 77.36 collected, from a purchaser under a representation that they are 78.1 taxes imposed under chapter 297A are state funds from the time 78.2 of collection and must be reported on a return filed with the 78.3 commissioner. 78.4 (f) Effective for sales made before July 1, 2003, and after 78.5 June 30, 2009, the tax imposed under chapter 297A on sales of 78.6 tickets to the premises of or events sponsored by the state 78.7 agricultural society and conducted on the state fairgrounds 78.8 during the period of the annual state fair may be retained by 78.9 the state agricultural society if the funds are used and matched 78.10 as required under section 37.13, subdivision 2. 78.11 [EFFECTIVE DATE.] This section is effective for sales taxes 78.12 collected on sales occurring after June 30, 2003. 78.13 Sec. 6. Minnesota Statutes 2002, section 289A.40, 78.14 subdivision 2, is amended to read: 78.15 Subd. 2. [BAD DEBT LOSS.] If a claim relates to an 78.16 overpayment because of a failure to deduct a loss due to a bad 78.17 debt or to a security becoming worthless, the claim is 78.18 considered timely if filed within seven years from the date 78.19 prescribed for the filing of the return. A claim relating to an 78.20 overpayment of taxes under chapter 297A must be filed within 78.21 3-1/2 years from the date prescribed for filing the return, plus 78.22 any extensions granted for filing the return, but only if filed 78.23 within the extended time, or within one year from the date the78.24taxpayer's federal income tax return is timely filed claiming78.25the bad debt deduction, whichever period expires later. The 78.26 refund or credit is limited to the amount of overpayment 78.27 attributable to the loss. "Bad debt" for purposes of this 78.28 subdivision, has the same meaning as that term is used in United 78.29 States Code, title 26, section 166, except that the following 78.30 are excluded from the calculation of bad debt: financing 78.31 charges or interest; sales or use taxes charged on the purchase 78.32 price; uncollectible amounts on property that remain in the 78.33 possession of the seller until the full purchase price is paid; 78.34 expenses incurred in attempting to collect any debt; and 78.35 repossessed property. 78.36 [EFFECTIVE DATE.] This section is effective for sales and 79.1 purchases made on or after January 1, 2004. 79.2 Sec. 7. Minnesota Statutes 2002, section 289A.50, is 79.3 amended by adding a subdivision to read: 79.4 Subd. 2b. [CERTIFIED SERVICE PROVIDER; BAD DEBT CLAIM.] A 79.5 certified service provider, as defined in section 297A.995, 79.6 subdivision 2, may claim on behalf of a taxpayer that is its 79.7 client any bad debt allowance provided by section 297A.81. The 79.8 certified service provider must credit or refund to its client 79.9 the full amount of any bad debt allowance or refund received. 79.10 [EFFECTIVE DATE.] This section is effective for sales and 79.11 purchases made on or after January 1, 2004. 79.12 Sec. 8. Minnesota Statutes 2002, section 289A.50, is 79.13 amended by adding a subdivision to read: 79.14 Subd. 2c. [NOTICE FROM PURCHASER TO VENDOR REQUESTING 79.15 REFUND.] (a) If a vendor has collected from a purchaser a tax on 79.16 a transaction that is not subject to the tax imposed by chapter 79.17 297A, the purchaser may seek from the vendor a return of 79.18 over-collected sales or use taxes as follows: 79.19 (1) the purchaser must provide written notice to the 79.20 vendor; 79.21 (2) the notice to the vendor must contain the information 79.22 necessary to determine the validity of the request; and 79.23 (3) no cause of action against the vendor accrues until the 79.24 vendor has had 60 days to respond to the written notice. 79.25 (b) In connection with a purchaser's request from a vendor 79.26 of over-collected sales or use taxes, a vendor is presumed to 79.27 have a reasonable business practice, if in the collection of 79.28 such sales or use taxes, the vendor: (1) uses a certified 79.29 service provider as defined in section 297A.995, a certified 79.30 automated system, as defined in section 297A.995, or a 79.31 proprietary system that is certified by the state; and (2) has 79.32 remitted to the state all taxes collected less any deductions, 79.33 credits, or collection allowances. 79.34 [EFFECTIVE DATE.] This section is effective for sales and 79.35 purchases made on or after January 1, 2004. 79.36 Sec. 9. Minnesota Statutes 2002, section 289A.56, 80.1 subdivision 4, is amended to read: 80.2 Subd. 4. [CAPITAL EQUIPMENT AND CERTAIN BUILDING MATERIALS 80.3 REFUNDS; REFUNDS TO PURCHASERS.] Notwithstanding subdivision 3, 80.4 for refunds payable undersectionsections 297A.75, subdivision 80.5 1,clauses (1), (2), (3), and (5), interest is computed from the80.6date the refund claim is filed with the commissioner. For80.7refunds payable under sectionand 289A.50, subdivision 2a, 80.8 interest is computed fromthe 20th day of the month following80.9the month of the invoice date for the purchase which is the80.10subject of the refund, if the refund claim includes a detailed80.11schedule of purchases made during each of the periods in the80.12claim. If the refund claim submitted does not contain a80.13schedule reflecting purchases made in each period, interest is80.14computed from the date the claim was filed90 days after the 80.15 refund claim is filed with the commissioner. 80.16 [EFFECTIVE DATE.] This section is effective for refund 80.17 claims filed on or after April 1, 2003. 80.18 Sec. 10. Minnesota Statutes 2002, section 289A.60, 80.19 subdivision 15, is amended to read: 80.20 Subd. 15. [ACCELERATED PAYMENT OF JUNE SALES TAX 80.21 LIABILITY; PENALTY FOR UNDERPAYMENT.] (a) For payments made 80.22 after December 31, 2003, if a vendor is required by law to 80.23 submit an estimation of June sales tax liabilities and6285 80.24 percent payment by a certain date, the vendor shall pay a 80.25 penalty equal to ten percent of the amount of actual June 80.26 liability required to be paid in June less the amount remitted 80.27 in June. The penalty must not be imposed, however, if the 80.28 amount remitted in June equals the lesser of6285 percent of 80.29 the preceding May's liability or6285 percent of the average 80.30 monthly liability for the previous calendar year. 80.31 (b) For payments made after December 31, 2002, and before 80.32 January 1, 2004, if a vendor is required by law to submit an 80.33 estimation of June sales tax liabilities and 75 percent payment 80.34 by a certain date, the vendor shall pay a penalty equal to ten 80.35 percent of the amount of actual June liability required to be 80.36 paid in June less the amount remitted in June. The penalty must 81.1 not be imposed, however, if the amount remitted in June equals 81.2 the lesser of 75 percent of the preceding May's liability or 75 81.3 percent of the average monthly liability for the previous 81.4 calendar year. 81.5 [EFFECTIVE DATE.] Paragraph (a) of this section is 81.6 effective for payments made after December 31, 2003. Paragraph 81.7 (b) of this section is effective for payments made after 81.8 December 31, 2002, and before January 1, 2004. 81.9 Sec. 11. Minnesota Statutes 2002, section 297A.61, 81.10 subdivision 3, is amended to read: 81.11 Subd. 3. [SALE AND PURCHASE.] (a) "Sale" and "purchase" 81.12 include, but are not limited to, each of the transactions listed 81.13 in this subdivision. 81.14 (b) Sale and purchase include: 81.15 (1) any transfer of title or possession, or both, of 81.16 tangible personal property, whether absolutely or conditionally, 81.17 for a consideration in money or by exchange or barter; and 81.18 (2) the leasing of or the granting of a license to use or 81.19 consume, for a consideration in money or by exchange or barter, 81.20 tangible personal property, other than a manufactured home used 81.21 for residential purposes for a continuous period of 30 days or 81.22 more. 81.23 (c) Sale and purchase include the production, fabrication, 81.24 printing, or processing of tangible personal property for a 81.25 consideration for consumers who furnish either directly or 81.26 indirectly the materials used in the production, fabrication, 81.27 printing, or processing. 81.28 (d) Sale and purchase include the preparing for a 81.29 consideration of food. Notwithstanding section 297A.67, 81.30 subdivision 2, taxable food includes, but is not limited to, the 81.31 following: 81.32 (1) prepared food sold by the retailer; 81.33 (2) soft drinks; 81.34 (3) candy; and 81.35 (4) all food sold through vending machines. 81.36 (e) A sale and a purchase includes the furnishing for a 82.1 consideration of electricity, gas, water, or steam for use or 82.2 consumption within this state. 82.3 (f) A sale and a purchase includes the transfer for a 82.4 consideration of prewritten computer software whether delivered 82.5 electronically, by load and leave, or otherwise. 82.6 (g) A sale and a purchase includes the furnishing for a 82.7 consideration of the following services: 82.8 (1) the privilege of admission to places of amusement, 82.9 recreational areas, or athletic events, and the making available 82.10 of amusement devices, tanning facilities, reducing salons, steam 82.11 baths, turkish baths, health clubs, and spas or athletic 82.12 facilities; but not including separately stated fees or charges 82.13 for pen-raised game or poultry at a game farm or hunting 82.14 preserve; 82.15 (2) lodging and related services by a hotel, rooming house, 82.16 resort, campground, motel, or trailer camp and the granting of 82.17 any similar license to use real property other than the renting 82.18 or leasing of it for a continuous period of 30 days or more; 82.19 (3) parking services, whether on a contractual, hourly, or 82.20 other periodic basis, except for parking at a meter; 82.21 (4) the granting of membership in a club, association, or 82.22 other organization if: 82.23 (i) the club, association, or other organization makes 82.24 available for the use of its members sports and athletic 82.25 facilities, without regard to whether a separate charge is 82.26 assessed for use of the facilities; and 82.27 (ii) use of the sports and athletic facility is not made 82.28 available to the general public on the same basis as it is made 82.29 available to members. 82.30 Granting of membership means both onetime initiation fees and 82.31 periodic membership dues but does not include separately stated 82.32 fees or charges for pen-raised game or poultry by a game farm or 82.33 hunting preserve. Sports and athletic facilities include golf 82.34 courses; tennis, racquetball, handball, and squash courts; 82.35 basketball and volleyball facilities; running tracks; exercise 82.36 equipment; swimming pools; and other similar athletic or sports 83.1 facilities; 83.2 (5) delivery of aggregate materials and concrete block by a 83.3 third party if the delivery would be subject to the sales tax if 83.4 provided by the seller of the aggregate material or concrete 83.5 block; and 83.6 (6) services as provided in this clause: 83.7 (i) laundry and dry cleaning services including cleaning, 83.8 pressing, repairing, altering, and storing clothes, linen 83.9 services and supply, cleaning and blocking hats, and carpet, 83.10 drapery, upholstery, and industrial cleaning. Laundry and dry 83.11 cleaning services do not include services provided by coin 83.12 operated facilities operated by the customer; 83.13 (ii) motor vehicle washing, waxing, and cleaning services, 83.14 including services provided by coin operated facilities operated 83.15 by the customer, and rustproofing, undercoating, and towing of 83.16 motor vehicles; 83.17 (iii) building and residential cleaning, maintenance, and 83.18 disinfecting and exterminating services; 83.19 (iv) detective, security, burglar, fire alarm, and armored 83.20 car services; but not including services performed within the 83.21 jurisdiction they serve by off-duty licensed peace officers as 83.22 defined in section 626.84, subdivision 1, or services provided 83.23 by a nonprofit organization for monitoring and electronic 83.24 surveillance of persons placed on in-home detention pursuant to 83.25 court order or under the direction of the Minnesota department 83.26 of corrections; 83.27 (v) pet grooming services; 83.28 (vi) lawn care, fertilizing, mowing, spraying and sprigging 83.29 services; garden planting and maintenance; tree, bush, and shrub 83.30 pruning, bracing, spraying, and surgery; indoor plant care; 83.31 tree, bush, shrub, and stump removal; and tree trimming for 83.32 public utility lines. Services performed under a construction 83.33 contract for the installation of shrubbery, plants, sod, trees, 83.34 bushes, and similar items are not taxable; 83.35 (vii) massages, except when provided by a licensed health 83.36 care facility or professional or upon written referral from a 84.1 licensed health care facility or professional for treatment of 84.2 illness, injury, or disease; and 84.3 (viii) the furnishing of lodging, board, and care services 84.4 for animals in kennels and other similar arrangements, but 84.5 excluding veterinary and horse boarding services. 84.6 In applying the provisions of this chapter, the terms 84.7 "tangible personal property" and "sales at retail" include 84.8 taxable services and the provision of taxable services, unless 84.9 specifically provided otherwise. Services performed by an 84.10 employee for an employer are not taxable. Services performed by 84.11 a partnership or association for another partnership or 84.12 association are not taxable if one of the entities owns or 84.13 controls more than 80 percent of the voting power of the equity 84.14 interest in the other entity. Services performed between 84.15 members of an affiliated group of corporations are not taxable. 84.16 For purposes of this section, "affiliated group of corporations" 84.17 includes those entities that would be classified as members of 84.18 an affiliated group under United States Code, title 26, section 84.19 1504, and that are eligible to file a consolidated tax return 84.20 for federal income tax purposes. 84.21 (h) A sale and a purchase includes the furnishing for a 84.22 consideration of tangible personal property or taxable services 84.23 by the United States or any of its agencies or 84.24 instrumentalities, or the state of Minnesota, its agencies, 84.25 instrumentalities, or political subdivisions. 84.26 (i) A sale and a purchase includes the furnishing for a 84.27 consideration of telecommunications services, including cable 84.28 television services and direct satellite services. 84.29 Telecommunications services are taxed to the extent allowed 84.30 under federal lawif those services:. 84.31(1) either (i) originate and terminate in this state; or84.32(ii) originate in this state and terminate outside the state and84.33the service is charged to a telephone number customer located in84.34this state or to the account of any transmission instrument in84.35this state; or (iii) originate outside this state and terminate84.36in this state and the service is charged to a telephone number85.1customer located in this state or to the account of any85.2transmission instrument in this state; or85.3(2) are rendered by providing a private communications85.4service for which the customer has one or more locations within85.5Minnesota connected to the service and the service is charged to85.6a telephone number customer located in this state or to the85.7account of any transmission instrument in this state.85.8All charges for mobile telecommunications services, as85.9defined in United States Code, title 4, section 124, are deemed85.10to be provided by the customer's home service provider and85.11sourced to the customer's place of primary use and are subject85.12to tax based upon the customer's place of primary use in85.13accordance with the Mobile Telecommunications Sourcing Act,85.14United States Code, title 4, sections 116 to 126. All other85.15definitions and provisions of the Mobile Telecommunications85.16Sourcing Act as provided in United States Code, title 4, are85.17hereby adopted.85.18 (j) A sale and a purchase includes the furnishing for a 85.19 consideration of installation if the installation charges would 85.20 be subject to the sales tax if the installation were provided by 85.21 the seller of the item being installed. 85.22 (k) A sale and a purchase includes the rental of a vehicle 85.23 by a motor vehicle dealer to a customer when (1) the vehicle is 85.24 rented by the customer for a consideration, or (2) the motor 85.25 vehicle dealer is reimbursed pursuant to a service contract as 85.26 defined in Minnesota Statutes, section 65B.29, subdivision 1, 85.27 clause (1). 85.28 [EFFECTIVE DATE.] This section is effective for sales and 85.29 purchases made on or after January 1, 2004, except that the 85.30 amendments in paragraph (g) and the addition of paragraph (k) 85.31 are effective for sales and purchases made after June 30, 2003. 85.32 Sec. 12. Minnesota Statutes 2002, section 297A.61, 85.33 subdivision 7, is amended to read: 85.34 Subd. 7. [SALES PRICE.] (a) "Sales price" means the 85.35 measure subject to sales tax, and means the total amount of 85.36 consideration, including cash, credit, personal property, and 86.1 services, for which personal property or services are sold, 86.2 leased, or rented, valued in money, whether received in money or 86.3 otherwise, without any deduction for the following: 86.4 (1) the seller's cost of the property sold; 86.5 (2) the cost of materials used, labor or service cost, 86.6 interest, losses, all costs of transportation to the seller, all 86.7 taxes imposed on the seller, and any other expenses of the 86.8 seller; 86.9 (3) charges by the seller for any services necessary to 86.10 complete the sale, other than delivery and installation charges; 86.11 (4) delivery charges; 86.12 (5) installation charges; and 86.13 (6) the value of exempt property given to the purchaser 86.14 when taxable and exempt personal property have been bundled 86.15 together and sold by the seller as a single product or piece of 86.16 merchandise. 86.17 (b) Sales price does not include: 86.18 (1) discounts, including cash, terms, or coupons, that are 86.19 not reimbursed by a third party and that are allowed by the 86.20 seller and taken by a purchaser on a sale; 86.21 (2) interest, financing, and carrying charges from credit 86.22 extended on the sale of personal property or services, if the 86.23 amount is separately stated on the invoice, bill of sale, or 86.24 similar document given to the purchaser; and 86.25 (3) any taxes legally imposed directly on the consumer that 86.26 are separately stated on the invoice, bill of sale, or similar 86.27 document given to the purchaser. 86.28 [EFFECTIVE DATE.] This section is effective for sales and 86.29 purchases made on or after January 1, 2004. 86.30 Sec. 13. Minnesota Statutes 2002, section 297A.61, 86.31 subdivision 10, is amended to read: 86.32 Subd. 10. [TANGIBLE PERSONAL PROPERTY.] (a) "Tangible 86.33 personal property" meanscorporeal personal property of any86.34kind, including property that is to become real property as a86.35result of incorporation, attachment, or installation following86.36its acquisition.87.1(b) Tangible personal property includes, but is not limited87.2to:87.3(1) computer software, whether contained on tape, discs,87.4cards, or other devices; and87.5(2) prepaid telephone calling cards.87.6(c)personal property that can be seen, weighed, measured, 87.7 felt, or touched, or that is in any other manner perceptible to 87.8 the senses. "Tangible personal property" includes, but is not 87.9 limited to, electricity, water, gas, steam, prewritten computer 87.10 software, and prepaid calling cards. 87.11 (b) Tangible personal property does not include: 87.12 (1) large ponderous machinery and equipment used in a 87.13 business or production activity which at common law would be 87.14 considered to be real property; 87.15 (2) property which is subject to an ad valorem property 87.16 tax; 87.17 (3) property described in section 272.02, subdivision 9, 87.18 clauses (a) to (d); and 87.19 (4) property described in section 272.03, subdivision 2, 87.20 clauses (3) and (5). 87.21 [EFFECTIVE DATE.] This section is effective for sales and 87.22 purchases made on or after January 1, 2004. 87.23 Sec. 14. Minnesota Statutes 2002, section 297A.61, is 87.24 amended by adding a subdivision to read: 87.25 Subd. 14a. [LEASE OR RENTAL.] (a) "Lease or rental" means 87.26 any transfer of possession or control of tangible personal 87.27 property for a fixed or indeterminate term for consideration. A 87.28 lease or rental may include future options to purchase or extend. 87.29 (b) Lease or rental does not include: 87.30 (1) a transfer of possession or control of property under a 87.31 security agreement or deferred payment plan that requires the 87.32 transfer of title upon completion of the required payments; 87.33 (2) a transfer of possession or control of property under 87.34 an agreement that requires the transfer of title upon completion 87.35 of required payments and payment of an option price does not 87.36 exceed the greater of $100 or one percent of the total required 88.1 payments; or 88.2 (3) providing tangible personal property along with an 88.3 operator for a fixed or indeterminate period of time. A 88.4 condition of this exclusion is that the operator is necessary 88.5 for the equipment to perform as designed. For the purpose of 88.6 this subdivision, an operator must do more than maintain, 88.7 inspect, or set up the tangible personal property. 88.8 (c) Lease or rental does include agreements covering motor 88.9 vehicles and trailers where the amount of consideration may be 88.10 increased or decreased by reference to the amount realized upon 88.11 sale or disposition of the property as defined in United States 88.12 Code, title 26, section 7701(h)(l). 88.13 (d) This definition must be used for sales and use tax 88.14 purposes regardless if a transaction is characterized as a lease 88.15 or rental under generally accepted accounting principles, the 88.16 Internal Revenue Code, chapter 336, or other provisions of 88.17 federal, state, or local law. 88.18 [EFFECTIVE DATE.] This section is effective for leases and 88.19 rentals entered into on or after January 1, 2004. 88.20 Sec. 15. Minnesota Statutes 2002, section 297A.61, 88.21 subdivision 17, is amended to read: 88.22 Subd. 17. [PREWRITTEN COMPUTER SOFTWARE.] "Prewritten 88.23 computer software" meansa computer program, either in the form88.24of written procedures or contained on tapes, discs, cards, or88.25another device, or any required documentation or manuals88.26designed to facilitate the use of the computer program.computer 88.27 software, including prewritten upgrades, that is not designed 88.28 and developed by the author or other creator to the 88.29 specifications of a specific purchaser. The combining of two or 88.30 more "prewritten computer software" programs or prewritten 88.31 portions of the programs does not cause the combination to be 88.32 other than "prewritten computer software." "Prewritten computer 88.33 software" includes software designed and developed by the author 88.34 or other creator to the specifications of a specific purchaser 88.35 when it is sold to a person other than the purchaser. If a 88.36 person modifies or enhances computer software of which the 89.1 person is not the author or creator, the person is deemed to be 89.2 the author or creator only of such person's modifications or 89.3 enhancements. "Prewritten computer software" or a prewritten 89.4 portion of it that is modified or enhanced to any degree, if the 89.5 modification or enhancement is designed and developed to the 89.6 specifications of a specific purchaser, remains "prewritten 89.7 computer software"; provided, however, that if there is a 89.8 reasonable, separately stated charge or an invoice or other 89.9 statement of the price given to the purchaser for such 89.10 modification or enhancement, the modification or enhancement 89.11 does not constitute "prewritten computer software." For 89.12 purposes of this subdivision: 89.13 (1) "computer"does not include tape-controlled automatic89.14drilling, milling, or other manufacturing machinery or equipment89.15 means an electronic device that accepts information in digital 89.16 or similar form and manipulates it for a result based on a 89.17 sequence of instructions;and89.18 (2)"computer program" means information and directions89.19that dictate the function performed by data processing89.20equipment. It includes the complete plan for the solution of a89.21problem, such as the complete sequence of automatic data89.22processing equipment instructions necessary to solve a problem89.23and includes both systems and application programs and89.24subdivisions, such as assemblers, compilers, routines,89.25generators, and utility programs. Computer program includes a89.26"canned" or prewritten computer program that is held or existing89.27for general or repeated sale or lease, even if the prewritten or89.28"canned" program was initially developed on a custom basis or89.29for in-house use."electronic" means relating to technology 89.30 having electrical, digital, magnetic, wireless, optical, 89.31 electromagnetic, or similar capabilities; and 89.32 (3) "computer software" means a set of coded instructions 89.33 designed to cause a "computer" or automatic data processing 89.34 equipment to perform a task. 89.35 [EFFECTIVE DATE.] This section is effective for sales and 89.36 purchases made on or after January 1, 2004. 90.1 Sec. 16. Minnesota Statutes 2002, section 297A.61, is 90.2 amended by adding a subdivision to read: 90.3 Subd. 17a. [DELIVERED ELECTRONICALLY.] "Delivered 90.4 electronically" means delivered to the purchaser by means other 90.5 than tangible storage media. 90.6 [EFFECTIVE DATE.] This section is effective for sales and 90.7 purchases made on or after January 1, 2004. 90.8 Sec. 17. Minnesota Statutes 2002, section 297A.61, is 90.9 amended by adding a subdivision to read: 90.10 Subd. 17b. [LOAD AND LEAVE.] "Load and leave" means 90.11 delivered to the purchaser by use of a tangible storage media 90.12 where the tangible storage media is not physically transferred 90.13 to the purchaser. 90.14 [EFFECTIVE DATE.] This section is effective for sales and 90.15 purchases made on or after January 1, 2004. 90.16 Sec. 18. Minnesota Statutes 2002, section 297A.61, 90.17 subdivision 30, is amended to read: 90.18 Subd. 30. [DELIVERY CHARGES.] "Delivery charges" means 90.19 charges by the seller of personal property or services for 90.20 preparation and delivery to a location designated by the 90.21 purchaser of personal property or services including, but not 90.22 limited to, transportation, shipping, postage, handling, 90.23 crating, and packing. 90.24 [EFFECTIVE DATE.] This section is effective for sales and 90.25 purchases made on or after January 1, 2004. 90.26 Sec. 19. Minnesota Statutes 2002, section 297A.61, 90.27 subdivision 31, is amended to read: 90.28 Subd. 31. [PREPARED FOOD.] (a) "Prepared food" means food 90.29 that meetseitherany of the following conditions: 90.30 (1)thefoodissold with eating utensils provided by the 90.31 seller, including plates, knives, forks, spoons, glasses, cups, 90.32 napkins, or straws. A "plate" does not include a container or 90.33 packaging used to transport the food; or 90.34 (2)thefoodissold in a heated state or heated by the 90.35 seller; or 90.36 (3) two or more food ingredientsaremixed or combined by 91.1 the seller for sale as a single item, except for:. 91.2 (b) "Prepared food" does not include the following if sold 91.3 without eating utensils provided by the seller: 91.4(i)(1) bakery items, including, but not limited to, bread, 91.5 rolls, buns, biscuits, bagels, croissants, pastries, donuts, 91.6 danish, cakes, tortes, pies, tarts, muffins, bars, cookies, 91.7 tortillas; or 91.8(ii)(2)ready-to-eat meat and seafoodfood sold in an 91.9 unheated state sold by weight;or volume as a single item. 91.10 (c) "Prepared food" under paragraph (a), clause (3), does 91.11 not include: 91.12(iii)(1) eggs, fish, meat, poultry, and foods containing 91.13 these raw animal foods requiring cooking by the consumer as 91.14 recommended by the Food and Drug Administration in chapter 3, 91.15 part 401.11 of its food code so as to prevent food borne 91.16 illnesses; or 91.17(iv)(2) food that is onlyslicedcut, repackaged, or 91.18 pasteurized by the seller. 91.19 [EFFECTIVE DATE.] This section is effective for sales and 91.20 purchases made on or after January 1, 2004. 91.21 Sec. 20. Minnesota Statutes 2002, section 297A.61, is 91.22 amended by adding a subdivision to read: 91.23 Subd. 35. [DIRECT MAIL.] "Direct mail" means printed 91.24 material delivered or distributed by United States mail or other 91.25 delivery service to a mass audience or to addressees on a 91.26 mailing list provided by the purchaser or at the direction of 91.27 the purchaser when the cost of the items are not billed directly 91.28 to the recipients. "Direct mail" includes tangible personal 91.29 property supplied directly or indirectly by the purchaser to the 91.30 direct mail seller for inclusion in the package containing 91.31 printed material. "Direct mail" does not include multiple items 91.32 of printed material delivered to a single address. 91.33 [EFFECTIVE DATE.] This section is effective for sales and 91.34 purchases made on or after January 1, 2004. 91.35 Sec. 21. Minnesota Statutes 2002, section 297A.66, is 91.36 amended by adding a subdivision to read: 92.1 Subd. 5. [WITHDRAWAL FROM STREAMLINED SALES AND USE TAX 92.2 AGREEMENT.] If the state has withdrawn its membership or been 92.3 expelled from the streamlined sales and use tax agreement, it 92.4 shall not use a seller's registration with the central 92.5 registration system and the collection of sales and use taxes in 92.6 the state as a factor in determining whether the seller has 92.7 nexus with that state for any tax at any time. 92.8 [EFFECTIVE DATE.] This section is effective for sales and 92.9 purchases made on or after January 1, 2004. 92.10 Sec. 22. [297A.666] [AMNESTY FOR REGISTRATION.] 92.11 Subdivision 1. [AMNESTY PROVISIONS.] Subject to the 92.12 limitations of subdivision 2: 92.13 (1) this state shall provide amnesty for uncollected or 92.14 unpaid sales or use tax to a seller who registers to pay or to 92.15 collect and remit applicable sales or use tax on sales made to 92.16 purchasers in this state in accordance with the terms of the 92.17 streamlined sales and use tax agreement, provided that the 92.18 seller was not so registered in this state in the 12-month 92.19 period preceding the effective date of the state's participation 92.20 in the agreement; and 92.21 (2) the amnesty shall preclude assessment for uncollected 92.22 or unpaid sales or use tax together with penalty or interest for 92.23 sales made during the period the seller was not registered in 92.24 this state, provided registration occurs within 12 months of the 92.25 effective date of the state's participation in the agreement. 92.26 Subd. 2. [LIMITATIONS.] (a) The amnesty is not available 92.27 to a seller with respect to any matter or matters for which the 92.28 seller received notice of the commencement of an audit and the 92.29 audit is not yet finally resolved, including any related 92.30 administrative and judicial processes. 92.31 (b) The amnesty is not available for sales or use taxes 92.32 already paid or remitted to this state or to taxes collected by 92.33 the seller. 92.34 (c) The amnesty is fully effective, absent the seller's 92.35 fraud or intentional misrepresentation of a material fact, as 92.36 long as the seller continues registration and continues payment 93.1 or collection and remittance of applicable sales or use taxes 93.2 for a period of at least 36 months. The statute of limitations 93.3 provisions of chapter 289A applicable to asserting a sales or 93.4 use tax liability must be tolled during this 36-month period. 93.5 (d) The amnesty is applicable only to sales or use taxes 93.6 due from a seller in its capacity as a seller and not to sales 93.7 or use taxes due from a seller in its capacity as a buyer. 93.8 [EFFECTIVE DATE.] This section is effective for sales and 93.9 purchases made on or after January 1, 2004. 93.10 Sec. 23. Minnesota Statutes 2002, section 297A.668, is 93.11 amended to read: 93.12 297A.668 [SOURCING OF SALE; SITUS IN THIS STATE.] 93.13 Subdivision 1. [SOURCING RULESAPPLICABILITY.](a)The 93.14followingprovisions of this section apply regardless of the 93.15 characterization of a product as tangible personal property, a 93.16 digital good, or a service; but do not apply to 93.17 telecommunications services, or the sales of motor vehicles, 93.18 watercraft, aircraft, modular homes, manufactured homes, or 93.19 mobile homes. These provisions only apply to determine a 93.20 seller's obligation to pay or collect and remit a sales or use 93.21 tax with respect to the seller's sale of a product. These 93.22 provisions do not affect the obligation of a seller as purchaser 93.23 to remit tax on the use of the product. 93.24 Subd. 2. [SOURCING RULES.] (a) The retail sale, excluding 93.25 lease or rental, of a product shall be sourced as required in 93.26 paragraphs (b) through (f). 93.27 (b) When the product is received by the purchaser at a 93.28 business location of the seller, the sale is sourced to that 93.29 business location. 93.30 (c) When the product is not received by the purchaser at a 93.31 business location of the seller, the sale is sourced to the 93.32 location where receipt by the purchaser or the donee designated 93.33 by the purchaser occurs, including the location indicated by 93.34 instructions for delivery to the purchasers or the purchaser's 93.35 donee, known to the seller. 93.36 (d) When paragraphs (b) and (c) do not apply, the sale is 94.1 sourced to the location indicated by an address for the 94.2 purchaser that is available from the business records of the 94.3 seller that are maintained in the ordinary course of the 94.4 seller's business, when use of this address does not constitute 94.5 bad faith. 94.6 (e) When paragraphs (b), (c), and (d) do not apply, the 94.7 sale is sourced to the location indicated by an address for the 94.8 purchaser obtained during the consummation of the sale, 94.9 including the address of a purchaser's payment instrument if no 94.10 other address is available, when use of this address does not 94.11 constitute bad faith. 94.12 (f) When paragraphs (b), (c), (d), and (e) do not apply, 94.13 including the circumstance where the seller is without 94.14 sufficient information to apply the previous paragraphs, then 94.15 the location is determined by the address from which tangible 94.16 personal property was shipped, from which the digital good or 94.17 the computer software delivered electronically was first 94.18 available for transmission by the seller, or from which the 94.19 service was provided. For purposes of this paragraph, the 94.20 seller must disregard any location that merely provided the 94.21 digital transfer of the product sold. 94.22 (g) For purposes of this subdivision, the terms "receive" 94.23 and "receipt" mean taking possession of tangible personal 94.24 property, making first use of services, or taking possession or 94.25 making first use of digital goods or the computer software 94.26 delivered electronically, whichever occurs first. The terms 94.27 receive and receipt do not include possession by a carrier for 94.28 hire on behalf of the purchaser. 94.29 Subd. 3. [LEASE OR RENTAL OF TANGIBLE PERSONAL 94.30 PROPERTY.] The lease or rental of tangible personal property, 94.31 other than property identified in subdivision 4 or 5, shall be 94.32 sourced as required in paragraphs (a) to (c). 94.33 (a) For a lease or rental that requires recurring periodic 94.34 payments, the first periodic payment is sourced the same as a 94.35 retail sale in accordance with the provisions of subdivision 6. 94.36 Periodic payments made subsequent to the first payment are 95.1 sourced to the primary property location for each period covered 95.2 by the payment. The primary property location must be as 95.3 indicated by an address for the property provided by the lessee 95.4 that is available to the lessor from its records maintained in 95.5 the ordinary course of business, when use of this address does 95.6 not constitute bad faith. The property location must not be 95.7 altered by intermittent use at different locations, such as use 95.8 of business property that accompanies employees on business 95.9 trips and service calls. 95.10 (b) For a lease or rental that does not require recurring 95.11 periodic payments, the payment is sourced the same as a retail 95.12 sale in accordance with the provisions of subdivision 2. 95.13 (c) This subdivision does not affect the imposition or 95.14 computation of sales or use tax on leases or rentals based on a 95.15 lump sum or accelerated basis, or on the acquisition of property 95.16 for lease. 95.17 Subd. 4. [LEASE OR RENTAL OF MOTOR VEHICLES, TRAILERS, 95.18 SEMITRAILERS, OR AIRCRAFT THAT DO NOT QUALIFY AS TRANSPORTATION 95.19 EQUIPMENT.] The lease or rental of motor vehicles, trailers, 95.20 semitrailers, or aircraft that do not qualify as transportation 95.21 equipment, as defined in subdivision 5, shall be sourced as 95.22 required in paragraphs (a) to (c). 95.23 (a) For a lease or rental that requires recurring periodic 95.24 payments, each periodic payment is sourced to the primary 95.25 property location. The primary property location must be as 95.26 indicated by an address for the property provided by the lessee 95.27 that is available to the lessor from its records maintained in 95.28 the ordinary course of business, when use of this address does 95.29 not constitute bad faith. This location must not be altered by 95.30 intermittent use at different locations. 95.31 (b) For a lease or rental that does not require recurring 95.32 periodic payments, the payment is sourced the same as a retail 95.33 sale in accordance with the provisions of subdivision 2. 95.34 (c) This subdivision does not affect the imposition or 95.35 computation of sales or use tax on leases or rentals based on a 95.36 lump sum or accelerated basis, or on the acquisition of property 96.1 for lease. 96.2 Subd. 5. [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 96.3 including lease or rental, of transportation equipment shall be 96.4 sourced the same as a retail sale in accordance with the 96.5 provisions of subdivision 2, notwithstanding the exclusion of 96.6 lease or rental in subdivision 2. 96.7 (b) "Transportation equipment" means any of the following: 96.8 (1) locomotives and railcars that are utilized for the 96.9 carriage of persons or property in interstate commerce; and/or 96.10 (2) trucks and truck-tractors with a gross vehicle weight 96.11 rating (GVWR) of 10,001 pounds or greater, trailers, 96.12 semitrailers, or passenger buses that are: 96.13 (i) registered through the international registration plan; 96.14 and 96.15 (ii) operated under authority of a carrier authorized and 96.16 certified by the United States Department of Transportation or 96.17 another federal authority to engage in the carriage of persons 96.18 or property in interstate commerce. 96.19 Subd.2.6. [MULTIPLE POINTS OF USE.] (a) Notwithstanding 96.20 the provisions ofsubdivision 1subdivisions 2 to 5, a business 96.21 purchaser that is not a holder of a direct pay permit that knows 96.22 at the time of its purchase of a digital good, computer software 96.23 delivered electronically, or a service that the digital good, 96.24 computer software delivered electronically, or service will be 96.25 concurrently available for use in more than one taxing 96.26 jurisdiction shall deliver to the seller in conjunction with its 96.27 purchase a multiple points of use exemption certificate 96.28 disclosing this fact. 96.29 (b) Upon receipt of the multiple points of use exemption 96.30 certificate, the seller is relieved of the obligation to 96.31 collect, pay, or remit the applicable tax and the purchaser is 96.32 obligated to collect, pay, or remit the applicable tax on a 96.33 direct pay basis. 96.34 (c) A purchaser delivering the multiple points of use 96.35 exemption certificate may use any reasonable, but consistent and 96.36 uniform, method of apportionment that is supported by the 97.1 purchaser's business records as they exist at the time of the 97.2 consummation of the sale. 97.3 (d) The multiple points of use exemption certificate 97.4 remains in effect for all future sales by the seller to the 97.5 purchaser until it is revoked in writing, except as to the 97.6 subsequent sale's specific apportionment that is governed by the 97.7 principle of paragraph (c) and the facts existing at the time of 97.8 the sale. 97.9 (e) A holder of a direct pay permit is not required to 97.10 deliver a multiple points or use exemption certificate to the 97.11 seller. A direct pay permit holder shall follow the provisions 97.12 of paragraph (c) in apportioning the tax due on a digital good, 97.13 computer software delivered electronically, or a service that 97.14 will be concurrently available for use in more than one taxing 97.15 jurisdiction. 97.16Subd. 3. [DEFINITION OF TERMS.] For purposes of this97.17section, the terms "receive" and "receipt" mean taking97.18possession of tangible personal property, making first use of97.19services, or taking possession or making first use of digital97.20goods, whichever occurs first. The terms receive and receipt do97.21not include possession by a carrier for hire on behalf of the97.22purchaser.97.23 Subd. 7. [DIRECT MAIL.] (a) Notwithstanding other 97.24 subdivisions of this section, a purchaser of direct mail that is 97.25 not a holder of a direct pay permit shall provide to the seller, 97.26 in conjunction with the purchase, either a direct mail form or 97.27 information to show the jurisdictions to which the direct mail 97.28 is delivered to recipients. 97.29 (1) Upon receipt of the direct mail form, the seller is 97.30 relieved of all obligations to collect, pay, or remit the 97.31 applicable tax and the purchaser is obligated to pay or remit 97.32 the applicable tax on a direct pay basis. A direct mail form 97.33 remains in effect for all future sales of direct mail by the 97.34 seller to the purchaser until it is revoked in writing. 97.35 (2) Upon receipt of information from the purchaser showing 97.36 the jurisdictions to which the direct mail is delivered to 98.1 recipients, the seller shall collect the tax according to the 98.2 delivery information provided by the purchaser. In the absence 98.3 of bad faith, the seller is relieved of any further obligation 98.4 to collect tax on any transaction for which the seller has 98.5 collected tax pursuant to the delivery information provided by 98.6 the purchaser. 98.7 (b) If the purchaser of direct mail does not have a direct 98.8 pay permit and does not provide the seller with either a direct 98.9 mail form or delivery information, as required by paragraph (a), 98.10 the seller shall collect the tax according to subdivision 2, 98.11 paragraph (f). Nothing in this paragraph limits a purchaser's 98.12 obligation for sales or use tax to any state to which the direct 98.13 mail is delivered. 98.14 (c) If a purchaser of direct mail provides the seller with 98.15 documentation of direct pay authority, the purchaser is not 98.16 required to provide a direct mail form or delivery information 98.17 to the seller. 98.18 [EFFECTIVE DATE.] This section is effective for sales and 98.19 purchases made on or after January 1, 2004. 98.20 Sec. 24. [297A.669] [TELECOMMUNICATION SOURCING.] 98.21 Subdivision 1. [CALL-BY-CALL BASIS SOURCING.] Except for 98.22 the defined telecommunication services in subdivision 3, the 98.23 sale of telecommunication service sold on a call-by-call basis 98.24 shall be sourced to (1) each level of taxing jurisdiction where 98.25 the call originates and terminates in that jurisdiction; or (2) 98.26 each level of taxing jurisdiction where the call either 98.27 originates or terminates and in which the service address is 98.28 also located. 98.29 Subd. 2. [OTHER THAN CALL-BY-CALL BASIS SOURCING.] Except 98.30 for the defined telecommunication services in subdivision 3, a 98.31 sale of telecommunications services sold on a basis other than a 98.32 call-by-call basis is sourced to the customer's place of primary 98.33 use. 98.34 Subd. 3. [DEFINED TELECOMMUNICATIONS SERVICES 98.35 SOURCING.] The sale of the following telecommunication services 98.36 shall be sourced to each level of taxing jurisdiction in 99.1 paragraphs (a) to (d). 99.2 (a) A sale of mobile telecommunications services, other 99.3 than air-to-ground radiotelephone service and prepaid calling 99.4 service, is sourced to the customer's place of primary use as 99.5 required by the Mobile Telecommunications Sourcing Act. 99.6 (b) A sale of postpaid calling service is sourced to the 99.7 origination point of the telecommunications signal as first 99.8 identified by either: 99.9 (1) the seller's telecommunications system; or 99.10 (2) information received by the seller from its service 99.11 provider, where the system used to transport such signals is not 99.12 that of the seller. 99.13 (c) A sale of prepaid calling service is sourced in 99.14 accordance with section 297A.668, subdivision 2. However, in 99.15 the case of a sale of mobile telecommunications service that is 99.16 a prepaid telecommunications service, the rule provided in 99.17 section 297A.668, subdivision 2, paragraph (f), shall include as 99.18 an option the location associated with the mobile telephone 99.19 number. 99.20 (d) A sale of a private communication service is sourced as 99.21 follows: 99.22 (1) service for a separate charge related to a customer 99.23 channel termination point is sourced to each level of 99.24 jurisdiction in which the customer channel termination point is 99.25 located; 99.26 (2) service where all customer termination points are 99.27 located entirely within one jurisdiction or levels of 99.28 jurisdiction is sourced in such jurisdiction in which the 99.29 customer channel termination points are located; 99.30 (3) service for segments of a channel between two customer 99.31 channel termination points located in different jurisdictions 99.32 and which segment of channel are separately charged is sourced 99.33 50 percent in each level of jurisdiction in which the customer 99.34 channel termination points are located; and 99.35 (4) service for segments of a channel located in more than 99.36 one jurisdiction or levels of jurisdiction and which segments 100.1 are not separately billed is sourced in each jurisdiction based 100.2 on the percentage determined by dividing the number of customer 100.3 channel termination points in the jurisdiction by the total 100.4 number of customer channel termination points. 100.5 Subd. 4. [AIR-TO-GROUND RADIOTELEPHONE 100.6 SERVICE.] "Air-to-ground radiotelephone service," for purposes 100.7 of this section, means a radio service, as that term is defined 100.8 in Code of Federal Regulations, title 47, section 22.99, in 100.9 which common carriers are authorized to offer and provide radio 100.10 telecommunications service for hire to subscribers in aircraft. 100.11 Subd. 5. [CALL-BY-CALL BASIS.] "Call-by-call basis," for 100.12 purposes of this section, means any method of charging for 100.13 telecommunications services where the price is measured by 100.14 individual calls. 100.15 Subd. 6. [COMMUNICATIONS CHANNEL.] "Communications 100.16 channel," for purposes of this section, means a physical or 100.17 virtual path of communications over which signals are 100.18 transmitted between or among customer channel termination points. 100.19 Subd. 7. [CUSTOMER.] "Customer," for purposes of this 100.20 section, means the person or entity that contracts with the 100.21 seller of telecommunications services. If the end user of 100.22 telecommunications services is not the contracting party, the 100.23 end user of the telecommunications service is the customer of 100.24 the telecommunication service, but this sentence applies only 100.25 for the purpose of sourcing sales of telecommunications services 100.26 under this section. Customer does not include a reseller of 100.27 telecommunications service or for mobile telecommunications 100.28 service of a serving carrier under an agreement to serve the 100.29 customer outside the home service provider's licensed service 100.30 area. 100.31 Subd. 8. [CUSTOMER CHANNEL TERMINATION POINT.] "Customer 100.32 channel termination point," for purposes of this section, means 100.33 the location where the customer either inputs or receives the 100.34 communications. 100.35 Subd. 9. [END USER.] "End user," for purposes of this 100.36 section, means the person who utilizes the telecommunication 101.1 service. In the case of an entity, end user means the 101.2 individual who utilizes the service on behalf of the entity. 101.3 Subd. 10. [HOME SERVICE PROVIDER.] "Home service provider," 101.4 for purposes of this section, means the same as that term is 101.5 defined in Section 124(5) of Public Law 106-252 (Mobile 101.6 Telecommunications Sourcing Act). 101.7 Subd. 11. [MOBILE TELECOMMUNICATIONS SERVICE.] "Mobile 101.8 telecommunications service," for purposes of this section, means 101.9 the same as that term is defined in Section 124(1) of Public Law 101.10 106-252 (Mobile Telecommunications Sourcing Act). 101.11 Subd. 12. [PLACE OF PRIMARY USE.] "Place of primary use," 101.12 for purposes of this section, means the street address 101.13 representative of where the customer's use of the 101.14 telecommunications service primarily occurs, which must be the 101.15 residential street address or the primary business street 101.16 address of the customer. In the case of mobile 101.17 telecommunications services, place of primary use must be within 101.18 the licensed service area of the home service provider. 101.19 Subd. 13. [POSTPAID CALLING SERVICE.] "Postpaid calling 101.20 service," for purposes of this section, means the 101.21 telecommunications service obtained by making a payment on a 101.22 call-by-call basis either through the use of a credit card or 101.23 payment mechanism such as a bank card, travel card, credit card, 101.24 or debit card, or by a charge made to a telephone number that is 101.25 not associated with the origination or termination of the 101.26 telecommunications service. A postpaid calling service includes 101.27 a telecommunications service that would be a prepaid calling 101.28 service except it is not exclusively a telecommunication service. 101.29 Subd. 14. [PREPAID CALLING SERVICE.] "Prepaid calling 101.30 service," for purposes of this section, means the right to 101.31 access exclusively telecommunications services, which must be 101.32 paid for in advance and which enables the origination of calls 101.33 using an access number or authorization code, whether manually 101.34 or electronically dialed, and that is sold in predetermined 101.35 units or dollars of which the number declines with use in a 101.36 known amount. 102.1 Subd. 15. [PRIVATE COMMUNICATION SERVICES.] "Private 102.2 communication services," for purposes of this section, means the 102.3 same as that term is defined in section 297A.61, subdivision 26. 102.4 Subd. 16. [SERVICE ADDRESS.] "Service address," for 102.5 purposes of this section, means: 102.6 (1) the location of the telecommunications equipment to 102.7 which a customer's call is charged and from which the call 102.8 originates or terminates, regardless of where the call is billed 102.9 or paid; 102.10 (2) if the location in paragraph (a) is not known, service 102.11 address means the origination point of the signal of the 102.12 telecommunications services first identified by either the 102.13 seller's telecommunications system or in information received by 102.14 the seller from its service provider, where the system used to 102.15 transport the signals is not that of the seller; or 102.16 (3) if the location in paragraphs (a) and (b) is not known, 102.17 the service address means the location of the customer's place 102.18 of primary use. 102.19 [EFFECTIVE DATE.] This section is effective for sales and 102.20 purchases made on or after January 1, 2004. 102.21 Sec. 25. Minnesota Statutes 2002, section 297A.67, 102.22 subdivision 7, is amended to read: 102.23 Subd. 7. [MEDICINES; MEDICAL DEVICES.] (a) Sales of the 102.24 following medicines and medical devices are exempt: 102.25 (1) Prescribed drugsand medicine, and insulin,intended 102.26 forinternal or external use, in the cure, mitigation,102.27treatment, or prevention of illness or disease inhumanbeings102.28are exempt. "Prescribed drugs and medicine" includesuse, 102.29 including over-the-counter drugsor medicineprescribed by a 102.30 licensed health care professional.; 102.31(b) Nonprescription medicines consisting principally102.32(determined by the weight of all ingredients) of analgesics that102.33are approved by the United States Food and Drug Administration102.34for internal use by human beings are exempt. For purposes of102.35this subdivision, "principally" means greater than 50 percent102.36analgesics by weight.103.1(c) Prescription glasses, hospital beds, fever103.2thermometers, reusable(2) single use finger-pricking devices 103.3 for the extraction of blood, blood glucose monitoring machines,103.4 and other single use devices and diagnostic agents used in 103.5 diagnosing, monitoring, or treating diabetes, and therapeutic103.6and; 103.7 (3) insulin and medical oxygen for human use are also 103.8 exempt, regardless of whether it is prescribed or sold 103.9 over-the-counter; 103.10 (4) prosthetic devicesare exempt. "Therapeutic devices"103.11means devices that are attached or applied to the human body to103.12cure, heal, or alleviate injury, illness, or disease, either103.13directly or by administering a curative agent. "Prosthetic103.14devices" means devices that replace injured, diseased, or103.15missing parts of the human body, either temporarily or103.16permanently., if prescribed by a licensed health care 103.17 professional, or paid for by Medicare or Medicaid; 103.18 (5) durable medical equipment for home use only; and 103.19 (6) mobility enhancing equipment. 103.20 (b) For purposes of this subdivision: 103.21 (1) "Drug" means a compound, substance, or preparation, and 103.22 any component of a compound, substance, or preparation, other 103.23 than food and food ingredients, dietary supplements, or 103.24 alcoholic beverages that is: 103.25 (i) recognized in the official United States Pharmacopoeia, 103.26 official Homeopathic Pharmacopoeia of the United States, or 103.27 official National Formulary, and supplement to any of them; 103.28 (ii) intended for use in the diagnosis, cure, mitigation, 103.29 treatment, or prevention of disease; or 103.30 (iii) intended to affect the structure or any function of 103.31 the body. 103.32 (2) "Durable medical equipment" means equipment, including 103.33 repair and replacement parts, but not including mobility 103.34 enhancing equipment, that: 103.35 (i) can withstand repeated use; 103.36 (ii) is primarily and customarily used to serve a medical 104.1 purpose; 104.2 (iii) generally is not useful to a person in the absence of 104.3 illness or injury; and 104.4 (iv) is not worn in or on the body. 104.5 (3) "Mobility enhancing equipment" means equipment, 104.6 including repair and replacement parts, but not including 104.7 durable medical equipment, that: 104.8 (i) is primarily and customarily used to provide or 104.9 increase the ability to move from one place to another and that 104.10 is appropriate for use either in a home or a motor vehicle; 104.11 (ii) is not generally used by persons with normal mobility; 104.12 and 104.13 (iii) does not include any motor vehicle or equipment on a 104.14 motor vehicle normally provided by a motor vehicle manufacturer. 104.15 (4) "Over-the-counter drug" means a drug that contains a 104.16 label that identifies the product as a drug as required by Code 104.17 of Federal Regulations, title 21, section 201.66. The label 104.18 must include a "drug facts" panel or a statement of the active 104.19 ingredients with a list of those ingredients contained in the 104.20 compound, substance, or preparation. Grooming and hygiene 104.21 products such as soaps, cleaning solutions, shampoo, toothpaste, 104.22 mouthwash, antiperspirants, and suntan lotions and sunscreens 104.23 are not "over-the-counter drugs," regardless of whether they 104.24 otherwise meet the definition. 104.25 (5) "Prescribed" means a direction in the form of an order, 104.26 formula, or recipe issued in any form of oral, written, 104.27 electronic, or other means of transmission by a duly licensed 104.28 health care professional. 104.29 (6) "Prosthetic device" means a replacement, corrective, or 104.30 supportive device, including repair and replacement parts, worn 104.31 on or in the body to: 104.32 (i) artificially replace a missing portion of the body; 104.33 (ii) prevent or correct physical deformity or malfunction; 104.34 or 104.35 (iii) support a weak or deformed portion of the body. 104.36 [EFFECTIVE DATE.] This section is effective for sales and 105.1 purchases made on or after January 1, 2004. 105.2 Sec. 26. Minnesota Statutes 2002, section 297A.67, 105.3 subdivision 8, is amended to read: 105.4 Subd. 8. [CLOTHING.] (a) Clothing is exempt. For purposes 105.5 of this subdivision, "clothing" means all human wearing apparel 105.6 suitable for general use. 105.7 (b) Clothing includes, but is not limited to, aprons, 105.8 household and shop; athletic supporters; baby receiving 105.9 blankets; bathing suits and caps; beach capes and coats; belts 105.10 and suspenders; boots; coats and jackets; costumes; children and 105.11 adult diapers, including disposable; ear muffs; footlets; formal 105.12 wear; garters and garter belts; girdles; gloves and mittens for 105.13 general use; hats and caps; hosiery; insoles for shoes; lab 105.14 coats; neckties; overshoes; pantyhose; rainwear; rubber pants; 105.15 sandals; scarves; shoes and shoe laces; slippers; sneakers; 105.16 socks and stockings; steel-toed boots; underwear; uniforms, 105.17 athletic and nonathletic; and wedding apparel. 105.18 (c) Clothing does not include the following: 105.19 (1) belt buckles sold separately; 105.20 (2) costume masks sold separately; 105.21 (3) patches and emblems sold separately; 105.22 (4) sewing equipment and supplies, including but not 105.23 limited to, knitting needles, patterns, pins, scissors, sewing 105.24 machines, sewing needles, tape measures, and thimbles; 105.25 (5) sewing materials that become part of clothing, 105.26 including but not limited to, buttons, fabric, lace, thread, 105.27 yarn, and zippers; 105.28 (6) clothing accessories or equipment; 105.29 (7) sports or recreational equipment; and 105.30 (8) protective equipment. 105.31 Clothing also does not include apparel made from fur if a 105.32 uniform definition of "apparel made from fur" is developed by 105.33 the member states of the Streamlined Sales and Use Tax Agreement. 105.34 For purposes of this subdivision, "clothing accessories or 105.35 equipment" means incidental items worn on the person or in 105.36 conjunction with clothing. Clothing accessories and equipment 106.1 include, but are not limited to, briefcases; cosmetics; hair 106.2 notions, including barrettes, hair bows, and hairnets; handbags; 106.3 handkerchiefs; jewelry; nonprescription sunglasses; umbrellas; 106.4 wallets; watches; and wigs and hairpieces. "Sports or 106.5 recreational equipment" means items designed for human use and 106.6 worn in conjunction with an athletic or recreational activity 106.7 that are not suitable for general use. Sports and recreational 106.8 equipment includes, but is not limited to, ballet and tap shoes; 106.9 cleated or spiked athletic shoes; gloves, including, but not 106.10 limited to, baseball, bowling, boxing, hockey, and golf gloves; 106.11 goggles; hand and elbow guards; life preservers and vests; mouth 106.12 guards; roller and ice skates; shin guards; shoulder pads; ski 106.13 boots; waders; and wetsuits and fins. "Protective equipment" 106.14 means items for human wear and designed as protection of the 106.15 wearer against injury or disease or as protection against damage 106.16 or injury of other persons or property but not suitable for 106.17 general use. Protective equipment includes, but is not limited 106.18 to, breathing masks; clean room apparel and equipment; ear and 106.19 hearing protectors; face shields; finger guards; hard hats; 106.20 helmets; paint or dust respirators; protective gloves; safety 106.21 glasses and goggles; safety belts; tool belts; and welders 106.22 gloves and masks. 106.23 [EFFECTIVE DATE.] This section is effective for sales and 106.24 purchases made on or after January 1, 2004. 106.25 Sec. 27. Minnesota Statutes 2002, section 297A.67, is 106.26 amended by adding a subdivision to read: 106.27 Subd. 31. [SERVICE LOANER VEHICLE COVERED BY 106.28 WARRANTY.] The loan of a vehicle by a motor vehicle dealer to a 106.29 customer as a replacement for a vehicle being serviced or 106.30 repaired is exempt if the vehicle is loaned pursuant to a 106.31 warranty included in the original purchase price of the vehicle 106.32 being serviced or repaired. 106.33 [EFFECTIVE DATE.] This section is effective for vehicle 106.34 loans made after June 30, 2003. 106.35 Sec. 28. Minnesota Statutes 2002, section 297A.68, 106.36 subdivision 2, is amended to read: 107.1 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 107.2 (a) Materials stored, used, or consumed in industrial production 107.3 of personal property intended to be sold ultimately at retail 107.4 are exempt, whether or not the item so used becomes an 107.5 ingredient or constituent part of the property produced. 107.6 Materials that qualify for this exemption include, but are not 107.7 limited to, the following: 107.8 (1) chemicals, including chemicals used for cleaning food 107.9 processing machinery and equipment; 107.10 (2) materials, including chemicals, fuels, and electricity 107.11 purchased by persons engaged in industrial production to treat 107.12 waste generated as a result of the production process; 107.13 (3) fuels, electricity, gas, and steam used or consumed in 107.14 the production process, except that electricity, gas, or steam 107.15 used for space heating, cooling, or lighting is exempt if (i) it 107.16 is in excess of the average climate control or lighting for the 107.17 production area, and (ii) it is necessary to produce that 107.18 particular product; 107.19 (4) petroleum products and lubricants; 107.20 (5) packaging materials, including returnable containers 107.21 used in packaging food and beverage products; 107.22 (6) accessory tools, equipment, and other items that are 107.23 separate detachable units with an ordinary useful life of less 107.24 than 12 months used in producing a direct effect upon the 107.25 product; and 107.26 (7) the following materials, tools, and equipment used in 107.27 metalcasting: crucibles, thermocouple protection sheaths and 107.28 tubes, stalk tubes, refractory materials, molten metal filters 107.29 and filter boxes, degassing lances, and base blocks. 107.30 (b) This exemption does not include: 107.31 (1) machinery, equipment, implements, tools, accessories, 107.32 appliances, contrivances and furniture and fixtures, except 107.33 those listed in paragraph (a), clause (6); and 107.34 (2) petroleum and special fuels used in producing or 107.35 generating power for propelling ready-mixed concrete trucks on 107.36 the public highways of this state. 108.1 (c) Industrial production includes, but is not limited to, 108.2 research, development, design or production of any tangible 108.3 personal property, manufacturing, processing (other than by 108.4 restaurants and consumers) of agricultural products (whether 108.5 vegetable or animal), commercial fishing, refining, smelting, 108.6 reducing, brewing, distilling, printing, mining, quarrying, 108.7 lumbering, generating electricityand, the production of road 108.8 building materials, and the research, development, design, or 108.9 production of computer software. Industrial production does not 108.10 include painting, cleaning, repairing or similar processing of 108.11 property except as part of the original manufacturing process. 108.12 [EFFECTIVE DATE.] This section is effective for sales and 108.13 purchases made on or after January 1, 2004. 108.14 Sec. 29. Minnesota Statutes 2002, section 297A.68, 108.15 subdivision 5, is amended to read: 108.16 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 108.17 exempt. The tax must be imposed and collected as if the rate 108.18 under section 297A.62, subdivision 1, applied, and then refunded 108.19 in the manner provided in section 297A.75. 108.20 "Capital equipment" means machinery and equipment purchased 108.21 or leased, and used in this state by the purchaser or lessee 108.22 primarily for manufacturing, fabricating, mining, or refining 108.23 tangible personal property to be sold ultimately at retail if 108.24 the machinery and equipment are essential to the integrated 108.25 production process of manufacturing, fabricating, mining, or 108.26 refining. Capital equipment also includes machinery and 108.27 equipment used to electronically transmit results retrieved by a 108.28 customer of an online computerized data retrieval system. 108.29 (b) Capital equipment includes, but is not limited to: 108.30 (1) machinery and equipment used to operate, control, or 108.31 regulate the production equipment; 108.32 (2) machinery and equipment used for research and 108.33 development, design, quality control, and testing activities; 108.34 (3) environmental control devices that are used to maintain 108.35 conditions such as temperature, humidity, light, or air pressure 108.36 when those conditions are essential to and are part of the 109.1 production process; 109.2 (4) materials and supplies used to construct and install 109.3 machinery or equipment; 109.4 (5) repair and replacement parts, including accessories, 109.5 whether purchased as spare parts, repair parts, or as upgrades 109.6 or modifications to machinery or equipment; 109.7 (6) materials used for foundations that support machinery 109.8 or equipment; 109.9 (7) materials used to construct and install special purpose 109.10 buildings used in the production process;and109.11 (8) ready-mixed concrete trucks in which the ready-mixed 109.12 concrete is mixed as part of the delivery process; and 109.13 (9) machinery or equipment used for research, development, 109.14 design, or production of computer software. 109.15 (c) Capital equipment does not include the following: 109.16 (1) motor vehicles taxed under chapter 297B; 109.17 (2) machinery or equipment used to receive or store raw 109.18 materials; 109.19 (3) building materials, except for materials included in 109.20 paragraph (b), clauses (6) and (7); 109.21 (4) machinery or equipment used for nonproduction purposes, 109.22 including, but not limited to, the following: plant security, 109.23 fire prevention, first aid, and hospital stations; support 109.24 operations or administration; pollution control; and plant 109.25 cleaning, disposal of scrap and waste, plant communications, 109.26 space heating, cooling, lighting, or safety; 109.27 (5) farm machinery and aquaculture production equipment as 109.28 defined by section 297A.61, subdivisions 12 and 13; 109.29 (6) machinery or equipment purchased and installed by a 109.30 contractor as part of an improvement to real property; or 109.31 (7) any other item that is not essential to the integrated 109.32 process of manufacturing, fabricating, mining, or refining. 109.33 (d) For purposes of this subdivision: 109.34 (1) "Equipment" means independent devices or tools separate 109.35 from machinery but essential to an integrated production 109.36 process, including computers and computer software, used in 110.1 operating, controlling, or regulating machinery and equipment; 110.2 and any subunit or assembly comprising a component of any 110.3 machinery or accessory or attachment parts of machinery, such as 110.4 tools, dies, jigs, patterns, and molds. 110.5 (2) "Fabricating" means to make, build, create, produce, or 110.6 assemble components or property to work in a new or different 110.7 manner. 110.8 (3) "Machinery" means mechanical, electronic, or electrical 110.9 devices, including computers and computer software, that are 110.10 purchased or constructed to be used for the activities set forth 110.11 in paragraph (a), beginning with the removal of raw materials 110.12 from inventory through completion of the product, including 110.13 packaging of the product. 110.14 (4) "Machinery and equipment used for pollution control" 110.15 means machinery and equipment used solely to eliminate, prevent, 110.16 or reduce pollution resulting from an activity described in 110.17 paragraph (a). 110.18 (5) "Manufacturing" means an operation or series of 110.19 operations where raw materials are changed in form, composition, 110.20 or condition by machinery and equipment and which results in the 110.21 production of a new article of tangible personal property. For 110.22 purposes of this subdivision, "manufacturing" includes the 110.23 generation of electricity or steam to be sold at retail. 110.24 (6) "Mining" means the extraction of minerals, ores, stone, 110.25 or peat. 110.26 (7) "Online data retrieval system" means a system whose 110.27 cumulation of information is equally available and accessible to 110.28 all its customers. 110.29 (8) "Primarily" means machinery and equipment used 50 110.30 percent or more of the time in an activity described in 110.31 paragraph (a). 110.32 (9) "Refining" means the process of converting a natural 110.33 resource to a product, including the treatment of water to be 110.34 sold at retail. 110.35 [EFFECTIVE DATE.] This section is effective for sales and 110.36 purchases made on or after January 1, 2004. 111.1 Sec. 30. Minnesota Statutes 2002, section 297A.68, 111.2 subdivision 36, is amended to read: 111.3 Subd. 36. [DELIVERY OR DISTRIBUTION CHARGES;PRINTED111.4MATERIALSDIRECT MAIL.] Charges for the delivery or distribution 111.5 ofprinted materials, including individual account111.6information,direct mail are exempt if(1)the charges are 111.7 separately stated, (2) the delivery or distribution is to a mass111.8audience or to a mailing list provided at the direction of the111.9customer, and (3) the cost of the materials is not billed111.10directly to the recipients. 111.11 [EFFECTIVE DATE.] This section is effective for sales and 111.12 purchases made on or after January 1, 2004. 111.13 Sec. 31. Minnesota Statutes 2002, section 297A.68, is 111.14 amended by adding a subdivision to read: 111.15 Subd. 37. [DURABLE MEDICAL EQUIPMENT FOR NURSING 111.16 HOMES.] The purchase of durable medical equipment by nursing 111.17 homes is exempt. For purposes of this subdivision, "durable 111.18 medical equipment" has the meaning given in section 297A.67, 111.19 subdivision 7. 111.20 [EFFECTIVE DATE.] This section is effective for sales and 111.21 purchases made on or after January 1, 2004. 111.22 Sec. 32. Minnesota Statutes 2002, section 297A.70, 111.23 subdivision 8, is amended to read: 111.24 Subd. 8. [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 111.25 SYSTEM; PRODUCTS AND SERVICES.] Products and services including, 111.26 but not limited to, end user equipment used for construction, 111.27 ownership, operation, maintenance, and enhancement of the 111.28 backbone system of the regionwide public safety radio 111.29 communication system established under sections 473.891 to 111.30 473.905, are exempt. For purposes of this subdivision, backbone 111.31 system is defined in section 473.891, subdivision 9. This 111.32 subdivision is effective for purchases, sales, storage, use, or 111.33 consumption occurring before August 1,20032005, in the 111.34 counties of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and 111.35 Washington. 111.36 [EFFECTIVE DATE.] This section is effective the day 112.1 following final enactment. 112.2 Sec. 33. Minnesota Statutes 2002, section 297A.70, 112.3 subdivision 16, is amended to read: 112.4 Subd. 16. [CAMP FEES.] Camp fees to camps or other 112.5 recreation facilities owned and operated by an exempt 112.6 organization under section 501(c)(3) of the Internal Revenue 112.7 Code are exemptifwhen the camps or facilities provide either: 112.8 (1) educationaland, religious, or rehabilitative 112.9 activities; or 112.10 (2) sports or social activities for young people primarily 112.11 age 18 and under. 112.12 [EFFECTIVE DATE.] This section is effective for sales and 112.13 purchases made after June 30, 2003. 112.14 Sec. 34. Minnesota Statutes 2002, section 297A.75, 112.15 subdivision 4, is amended to read: 112.16 Subd. 4. [INTEREST.] Interest must be paid on the refund 112.17 at the rate in section 270.76 fromthe date the refund claim is112.18filed for taxes paid under subdivision 1, clauses (1) to (3),112.19and (5), and from 60 days after the date the refund claim is112.20filed with the commissioner for claims filed under subdivision112.211, clauses (4), (6), (7), (8), and (9)90 days after the refund 112.22 claim is filed with the commissioner for taxes paid under 112.23 subdivision 1. 112.24 [EFFECTIVE DATE.] This section is effective for refund 112.25 claims filed on or after April 1, 2003. 112.26 Sec. 35. Minnesota Statutes 2002, section 297A.81, is 112.27 amended to read: 112.28 297A.81 [UNCOLLECTIBLE DEBTS; OFFSET AGAINST OTHER TAXES.] 112.29 Subdivision 1. [GENERAL.] The taxpayer may offset against 112.30 the taxes payable for any reporting period the amount of taxes 112.31 imposed by this chapter previously paid as a result of any 112.32 transaction the consideration for which became a debt owed to 112.33 the taxpayer that became uncollectible during the reporting 112.34 period, but only in proportion to the portion of the debt that 112.35 became uncollectible. Section 289A.40, subdivision 2, applies 112.36 to an offset under this section. 113.1 Subd. 2. [MANNER OF ALLOWING DEDUCTION FOR UNCOLLECTIBLE 113.2 DEBT.] (a) Uncollectible debt is allowed as a deduction in the 113.3 manner provided in this subdivision. 113.4 (b) If the uncollectible debt arose with respect to a sale 113.5 required to be included in gross receipts, subject to a tax 113.6 imposed under chapter 297A, the entire amount of the debt 113.7 remaining uncollected is allowed as a deduction. 113.8 (c) If the uncollectible debt arose with respect to a sale 113.9 partly subject to the tax imposed under chapter 297A and partly 113.10 exempt, the amount of the uncollectible debt allowed as a 113.11 deduction is the amount derived by multiplying the uncollectible 113.12 debt by the percentage that the taxable sale bears to the total 113.13 sales. 113.14 (d) If the uncollectible debt arose with respect to two or 113.15 more sales made at successive intervals, payments made before 113.16 the date the debt became uncollectible must be applied first to 113.17 the earliest sale upon which there is an unpaid balance, and to 113.18 following sales in successive order. 113.19 (e) If the books and records of the taxpayer claiming the 113.20 bad debt allowance support an allocation of the bad debts among 113.21 the member states of the streamlined sales and use tax 113.22 agreement, such an allocation shall be allowed. 113.23 Subd. 3. [CERTIFIED SERVICE PROVIDER.] A certified service 113.24 provider, as defined in section 297A.995, subdivision 2, on 113.25 behalf of a taxpayer who is its client, may offset against taxes 113.26 as provided by this section. 113.27 [EFFECTIVE DATE.] This section is effective for sales and 113.28 purchases made on or after January 1, 2004. 113.29 Sec. 36. Minnesota Statutes 2002, section 297A.82, 113.30 subdivision 4, is amended to read: 113.31 Subd. 4. [EXEMPTIONS.] (a) The following transactions are 113.32 exempt from the tax imposed in this chapter to the extent 113.33 provided. 113.34 (b) The purchase or use of aircraft previously registered 113.35 in Minnesota by a corporation or partnership is exempt if the 113.36 transfer constitutes a transfer within the meaning of section 114.1 351 or 721 of the Internal Revenue Code. 114.2 (c) The sale to or purchase, storage, use, or consumption 114.3 by a licensed aircraft dealer of an aircraft for which a 114.4 commercial use permit has been issued pursuant to section 114.5 360.654 is exempt, if the aircraft is resold while the permit is 114.6 in effect. 114.7 (d) Airflight equipment when sold to, or purchased, stored, 114.8 used, or consumed by airline companies, as defined in section 114.9 270.071, subdivision 4, is exempt. For purposes of this 114.10 subdivision, "airflight equipment" includes airplanes and parts 114.11 necessary for the repair and maintenance of such airflight 114.12 equipment, and flight simulators, but does not include airplanes 114.13 with a gross weight of less than 30,000 pounds that are used on 114.14 intermittent or irregularly timed flights. 114.15 (e) Sales of, and the storage, distribution, use, or 114.16 consumption of aircraft, as defined in section 360.511 and 114.17 approved by the Federal Aviation Administration, and which the 114.18 seller delivers to a purchaser outside Minnesota or which, 114.19 without intermediate use, is shipped or transported outside 114.20 Minnesota by the purchaser are exempt, but only if the purchaser 114.21 is not a resident of Minnesota and provided that the aircraft is 114.22 not thereafter returned to a point within Minnesota, except in 114.23 the course of interstate commerce or isolated and occasional 114.24 use, and will be registered in another state or country upon its 114.25 removal from Minnesota. This exemption applies even if the 114.26 purchaser takes possession of the aircraft in Minnesota and uses 114.27 the aircraft in the state exclusively for training purposes for 114.28 a period not to exceed ten days prior to removing the aircraft 114.29 from this state. 114.30 (f) The purchase, storage, use, or consumption by or the 114.31 sale to an airline company, as defined in section 270.071, 114.32 subdivision 4, of prepared food and beverages are exempt if the 114.33 prepared food and beverages are: 114.34 (1) prepared in Minnesota or shipped or brought into 114.35 Minnesota by a for-hire carrier; and 114.36 (2) kept, without use, for the purpose of being transported 115.1 outside of Minnesota. 115.2 [EFFECTIVE DATE.] This section is effective for sales and 115.3 purchases made after June 30, 2003. 115.4 Sec. 37. Minnesota Statutes 2002, section 297A.99, 115.5 subdivision 5, is amended to read: 115.6 Subd. 5. [TAX RATE.] (a) The tax rate is as specified in 115.7 the special law authorization and as imposed by the political 115.8 subdivision. 115.9 (b) The full political subdivision rate applies to any 115.10 sales that are taxed at a state rateless than or more than the115.11state general sales and use tax rate., and the political 115.12 subdivision must not have more than one local sales tax rate or 115.13 more than one local use tax rate. This paragraph does not apply 115.14 to sales or use taxes imposed on electricity, piped natural or 115.15 artificial gas, or other heating fuels delivered by the seller, 115.16 or the retail sale or transfer of motor vehicles, aircraft, 115.17 watercraft, modular homes, manufactured homes, or mobile homes. 115.18 [EFFECTIVE DATE.] This section is effective for sales and 115.19 purchases made on or after January 1, 2004. 115.20 Sec. 38. Minnesota Statutes 2002, section 297A.99, 115.21 subdivision 10, is amended to read: 115.22 Subd. 10. [USE OF ZIP CODE IN DETERMINING LOCATION OF 115.23 SALE.]To determine whether to impose the local tax, the115.24retailer may use zip codes if the zip code area is entirely115.25within the political subdivision. When a zip code area is not115.26entirely within a political subdivision, the retailer shall not115.27collect the local tax if the purchaser notifies the retailer115.28that the purchaser's delivery address is outside of the115.29political subdivision, unless the retailer verifies that the115.30delivery address is in the political subdivision using a means115.31other than the zip code.The lowest combined tax rate imposed 115.32 in the zip code area applies if the area includes more than one 115.33 tax rate in any level of taxing jurisdictions. If a nine-digit 115.34 zip code designation is not available for a street address or if 115.35 a seller is unable to determine the nine-digit zip code 115.36 designation of a purchaser after exercising due diligence to 116.1 determine the designation, the seller may apply the rate for the 116.2 five-digit zip code area. For the purposes of this subdivision, 116.3 there is a rebuttable presumption that a seller has exercised 116.4 due diligence if the seller has attempted to determine the 116.5 nine-digit zip code designation by utilizing software approved 116.6 by the governing board that makes this designation from the 116.7 street address and the five-digit zip code of the purchaser. 116.8 Notwithstanding subdivision 13, this subdivision applies to all 116.9 local sales taxes without regard to the date of 116.10 authorization. This subdivision does not apply when the 116.11 purchased product is received by the purchaser at the business 116.12 location of the seller. 116.13 [EFFECTIVE DATE.] This section is effective for sales and 116.14 purchases made on or after January 1, 2004. 116.15 Sec. 39. Minnesota Statutes 2002, section 297A.99, 116.16 subdivision 12, is amended to read: 116.17 Subd. 12. [EFFECTIVE DATES; NOTIFICATION.] (a) A political 116.18 subdivision may impose a tax under this section starting only on 116.19 the first day of a calendar quarter. A political subdivision 116.20 may repeal a tax under this section stopping only on the last 116.21 day of a calendar quarter. 116.22 (b) The political subdivision shall notify the commissioner 116.23 of revenue at least 90 days before imposing, changing the rate 116.24 of, or repealing a tax under this section. 116.25 (c) The political subdivision shall change the rate of tax 116.26 imposed under this section starting only on the first day of a 116.27 calendar quarter, and only after the commissioner has notified 116.28 sellers at least 60 days prior to the change. 116.29 (d) The political subdivision shall apply the rate change 116.30 for sales tax imposed under this section to purchases from 116.31 printed catalogs, wherein the purchaser computed the tax based 116.32 upon local tax rates published in the catalog, starting only on 116.33 the first day of a calendar quarter, and only after the 116.34 commissioner has notified sellers at least 120 days prior to the 116.35 change. 116.36 (e) The political subdivision shall apply local 117.1 jurisdiction boundary changes to taxes imposed under this 117.2 section starting only on the first day of a calendar quarter, 117.3 and only after the commissioner has notified sellers at least 60 117.4 days prior to the change. 117.5 [EFFECTIVE DATE.] This section is effective for sales and 117.6 purchases made on or after January 1, 2004. 117.7 Sec. 40. Minnesota Statutes 2002, section 297A.995, is 117.8 amended by adding a subdivision to read: 117.9 Subd. 10. [RELIEF FROM CERTAIN LIABILITY.] Notwithstanding 117.10 subdivision 9, sellers and certified service providers are 117.11 relieved from liability to the state for having charged and 117.12 collected the incorrect amount of sales or use tax resulting 117.13 from the seller or certified service provider (1) relying on 117.14 erroneous data provided by this state on tax rates, boundaries, 117.15 or taxing jurisdiction assignments, or (2) relying on erroneous 117.16 data provided by the state in its taxability matrix concerning 117.17 the taxability of products and services. 117.18 [EFFECTIVE DATE.] This section is effective for sales and 117.19 purchases made on or after January 1, 2004. 117.20 Sec. 41. Minnesota Statutes 2002, section 297B.01, 117.21 subdivision 7, is amended to read: 117.22 Subd. 7. [SALE, SELLS, SELLING, PURCHASE, PURCHASED, OR 117.23 ACQUIRED.] (a) "Sale," "sells," "selling," "purchase," 117.24 "purchased," or "acquired" means any transfer of title of any 117.25 motor vehicle, whether absolutely or conditionally, for a 117.26 consideration in money or by exchange or barter for any purpose 117.27 other than resale in the regular course of business. 117.28 (b) Any motor vehicle utilized by the owner only by leasing 117.29 such vehicle to others or by holding it in an effort to so lease 117.30 it, and which is put to no other use by the owner other than 117.31 resale after such lease or effort to lease, shall be considered 117.32 property purchased for resale. 117.33 (c) The terms also shall include any transfer of title or 117.34 ownership of a motor vehicle by other means, for or without 117.35 consideration, except that these terms shall not include: 117.36 (1) the acquisition of a motor vehicle by inheritance from 118.1 or by bequest of, a decedent who owned it; 118.2 (2) the transfer of a motor vehicle which was previously 118.3 licensed in the names of two or more joint tenants and 118.4 subsequently transferred without monetary consideration to one 118.5 or more of the joint tenants; 118.6 (3) the transfer of a motor vehicle by way of gift between 118.7 individuals, or gift from a limited used vehicle dealer licensed 118.8 under section 168.27, subdivision 4a, to an individual, when the 118.9 transfer is with no monetary or other consideration or 118.10 expectation of consideration and the parties to the transfer 118.11 submit an affidavit to that effect at the time the title 118.12 transfer is recorded; 118.13 (4) the voluntary or involuntary transfer of a motor 118.14 vehicle between a husband and wife in a divorce proceeding; or 118.15 (5) the transfer of a motor vehicle by way of a gift to an 118.16 organization that is exempt from federal income taxation under 118.17 section 501(c)(3) of the Internal Revenue Code, as amended 118.18 through December 31, 1996, when the motor vehicle will be used 118.19 exclusively for religious, charitable, or educational purposes. 118.20 [EFFECTIVE DATE.] This section is effective for sales made 118.21 after June 30, 2003. 118.22 Sec. 42. Minnesota Statutes 2002, section 297B.035, is 118.23 amended by adding a subdivision to read: 118.24 Subd. 5. [USE BY DEALER.] If a motor vehicle dealer uses a 118.25 vehicle, purchased for resale in the ordinary course of 118.26 business, other than for demonstration purposes, the dealer may 118.27 elect to pay the motor vehicle sales tax under this chapter or 118.28 the use tax under chapter 297A based on the reasonable rental 118.29 value of the vehicle. If the motor vehicle dealer fails to 118.30 report the use tax under chapter 297A, it is presumed that the 118.31 dealer elected to pay the motor vehicle sales tax under this 118.32 chapter. 118.33 [EFFECTIVE DATE.] This section is effective for sales made 118.34 after June 30, 2003. 118.35 Sec. 43. Laws 2001, First Special Session chapter 5, 118.36 article 12, section 95, as amended by Laws 2002, chapter 377, 119.1 article 3, section 24, is amended to read: 119.2 Sec. 95. [REPEALER.] 119.3 (a) Minnesota Statutes 2000, sections 297A.61, subdivision 119.4 16; 297A.68, subdivision 21; and 297A.71, subdivision 2, are 119.5 repealed effective for sales and purchases occurring after June 119.6 30, 2001, except that the repeal of section 297A.61, subdivision 119.7 16, paragraph (d), is effective for sales and purchases 119.8 occurring after July 31, 2001. 119.9 (b) Minnesota Statutes 2000, sections 297A.62, subdivision 119.10 2, and 297A.64, subdivision 1, are repealed effective for sales 119.11 and purchases made after December 31, 2005. 119.12 (c) Minnesota Statutes 2000, section 297A.71, subdivision 119.13 15, is repealed effective for sales and purchases made after 119.14 June 30, 2002. 119.15 (d)Minnesota Statutes 2000, section 289A.60, subdivision119.1615, is repealed effective for liabilities after January 1, 2004.119.17(e)Minnesota Statutes 2000, section 297A.71, subdivision 119.18 16, is repealed effective for sales and purchases occurring 119.19 after December 31, 2002. 119.20 Sec. 44. [STATE CONVENTION CENTER.] 119.21 Subdivision 1. [EXEMPTION.] Building materials, supplies, 119.22 or equipment used or consumed in constructing or equipping 119.23 improvements to a state convention center located in a city 119.24 outside the metropolitan area as defined in section 473.121, 119.25 subdivision 2, and governed by an 11-person board of which four 119.26 are appointed by the governor are exempt if the improvements are 119.27 financed in whole or in part by nonstate resources including, 119.28 but not limited to, revenue or general obligations issued by the 119.29 state convention center board of the city in which the center is 119.30 located. This exemption applies regardless of whether the items 119.31 are purchased by the owner or by a contractor, subcontractor, or 119.32 builder. 119.33 Subd. 2. [LEGISLATIVE INTENT.] This section is intended to 119.34 clarify the original intent of Minnesota Statutes, section 119.35 297A.71, subdivision 2. 119.36 [EFFECTIVE DATE.] This section is effective the day 120.1 following final enactment and applies retroactively to sales and 120.2 purchases made after June 30, 1995, and before July 1, 2001. 120.3 Sec. 45. [CITY OF NEWPORT; LODGING TAX.] 120.4 Subdivision 1. [LODGING TAX.] Notwithstanding Minnesota 120.5 Statutes, section 477A.016, or any ordinance, city charter, or 120.6 other provision of law, the city of Newport may, by ordinance, 120.7 impose a tax of up to four percent upon the gross receipts from 120.8 the sale of lodging for periods of less than 30 days in hotels 120.9 and motels located in the city. The tax does not apply to the 120.10 furnishing of lodging by a business having less than 25 lodging 120.11 rooms. The total amount of taxes imposed under this section and 120.12 under Minnesota Statutes, section 469.190, shall not exceed four 120.13 percent. 120.14 Subd. 2. [USE OF PROCEEDS.] The proceeds of any tax 120.15 imposed in subdivision 1 shall be used by the city to fund 120.16 economic development and redevelopment of the city. Authorized 120.17 expenses include, but are not limited to, acquisition and 120.18 development costs of open space, parks, and trails. 120.19 Subd. 3. [ENFORCEMENT, COLLECTION, AND 120.20 ADMINISTRATION.] The tax shall be collected and administered in 120.21 the same manner as local lodging taxes under Minnesota Statutes, 120.22 section 469.190. 120.23 [EFFECTIVE DATE.] This section is effective upon approval 120.24 by the Newport city council and compliance with Minnesota 120.25 Statutes, section 645.021, subdivision 3. 120.26 Sec. 46. [STUDY OF LOCAL SALES TAX.] 120.27 (a) The commissioner of revenue shall study the local sales 120.28 taxes in Minnesota and provide a written report and 120.29 recommendations to the legislature, in compliance with Minnesota 120.30 Statutes, sections 3.195 and 3.197, by February 1, 2004. The 120.31 study must report on: 120.32 (1) the authorized uses of revenue from local sales taxes 120.33 in effect, and the proposed uses of revenue from local sales 120.34 taxes recently proposed but not enacted; 120.35 (2) the local approval requirements for local sales taxes; 120.36 (3) the duration of local sales taxes and whether the full 121.1 duration authorized in law was necessary to provide sufficient 121.2 revenue for the authorized uses of the local sales tax; 121.3 (4) if the authorized uses of the local sales tax revenues 121.4 are regional in nature or limited in benefit to the jurisdiction 121.5 in which the tax is imposed; 121.6 (5) the estimated portion of revenue raised through the 121.7 local sales taxes that comes from (i) residents of the 121.8 jurisdiction in which the tax is imposed; (ii) Minnesota 121.9 residents who live outside the jurisdiction; and (iii) 121.10 non-Minnesota residents; 121.11 (6) the ability of jurisdictions to raise revenue by other 121.12 means, including the local property tax, and the extent to which 121.13 the jurisdictions assess property taxes in comparison to other 121.14 similar jurisdictions, and the state average, expressed in terms 121.15 of levy as a percent of adjusted net tax capacity; 121.16 (7) how jurisdictions that do not impose local sales taxes 121.17 raise revenue to fund projects similar to those funded through 121.18 local sales taxes; and 121.19 (8) the compatibility of local sales taxes with the 121.20 policies underlying the streamlined sales tax project. 121.21 (b) The study must make recommendations on: 121.22 (1) the appropriate role of local sales taxes as a part of 121.23 Minnesota's state and local revenue system, including: 121.24 (i) the appropriate uses of local sales taxes; and 121.25 (ii) whether local sales taxes should be limited to 121.26 jurisdictions that do not meet minimum thresholds of raising 121.27 revenue through other means, including local property tax; 121.28 (2) criteria to be used in evaluating local sales tax 121.29 proposals, designed to direct the use of local sales taxes 121.30 toward: 121.31 (i) projects that are regional in nature; 121.32 (ii) projects that require capital expenditures; and 121.33 (iii) projects in jurisdictions with inadequate fiscal 121.34 capacity to fund the projects through other means; and 121.35 (3) the feasibility of authorizing the commissioner of 121.36 revenue to approve or deny local sales taxes proposals based on 122.1 a uniform set of criteria, including the advisability of 122.2 requiring local approval by referendum or revocation by reverse 122.3 referendum, and if the referendum should be a criterion 122.4 necessary for a proposal to be considered for authorization or 122.5 should occur after authorization but as a condition of the tax 122.6 being implemented. 122.7 Sec. 47. [APPROPRIATION.] 122.8 $259,000 in fiscal year 2004 is appropriated to the 122.9 commissioner of revenue from the general fund for the cost of 122.10 administering the streamlined sales tax project provisions of 122.11 this article. 122.12 Sec. 48. [REPEALER.] 122.13 (a) Minnesota Statutes 2002, section 297A.61, subdivisions 122.14 14 and 15, are repealed and are effective for sales and 122.15 purchases made on or after January 1, 2004. 122.16 (b) Minnesota Statutes 2002, section 297A.69, subdivision 122.17 5, is repealed effective January 1, 2006. 122.18 (c) Minnesota Statutes 2002, section 325E.112, subdivision 122.19 2a, is repealed effective July 1, 2003. 122.20 ARTICLE 5 122.21 PROPERTY TAXES 122.22 Section 1. [123A.455] [REALIGNING SPLIT RESIDENTIAL 122.23 PARCELS.] 122.24 Subdivision 1. [DEFINITIONS.] "Split residential property 122.25 parcel" means a parcel of real estate that is located within the 122.26 boundaries of more than one school district and that is 122.27 classified as residential property under: 122.28 (1) section 273.13, subdivision 22, paragraph (a) or (b); 122.29 (2) section 273.13, subdivision 25, paragraph (b), clause 122.30 (1); or 122.31 (3) section 273.13, subdivision 25, paragraph (c), clause 122.32 (1). 122.33 Subd. 2. [PETITION.] The owner of a split residential 122.34 property parcel may petition the auditor of the county where the 122.35 split parcel is located to transfer that part into the adjoining 122.36 school district so the entire property will be located in the 123.1 same school district. The petition must contain: 123.2 (1) a correct description of the split parcel to be 123.3 affected by the transfer including supporting data on location 123.4 and title to the land; 123.5 (2) a list of the school districts in which the split 123.6 parcels currently lie; 123.7 (3) the school district into which the petitioner desires 123.8 to have the whole split parcel transferred; and 123.9 (4) the district of attendance of any students currently 123.10 residing on the property. 123.11 Subd. 3. [AUDITOR'S ORDER.] Within 60 days of receipt of 123.12 the petition, the auditor of the county in which the petition 123.13 was filed under subdivision 2 shall issue an order to transfer 123.14 the affected parcel to the district determined by the county 123.15 board. Orders issued on or before July 1 will be effective for 123.16 taxes payable in the following year. The auditor must notify 123.17 the affected school districts and the commissioner of the change 123.18 in school district boundaries. 123.19 Subd. 4. [COMMISSIONER.] The commissioner shall modify the 123.20 records of school district boundaries to conform to the order. 123.21 Subd. 5. [TAXABLE PROPERTY.] Upon the effective date of 123.22 the order, the whole split property parcel is transferred into a 123.23 single school district. Beginning in the next subsequent taxes 123.24 payable year, all taxable property in the whole split parcel is: 123.25 (1) relieved of all school district taxes from the district 123.26 in which the parcel is no longer located; and 123.27 (2) subject to all school district taxes in the district in 123.28 which the whole split parcel is now located. 123.29 [EFFECTIVE DATE.] This section is effective for petitions 123.30 filed on or after the day following final enactment. Orders 123.31 issued under subdivision 3 on or before September 15, 2003, are 123.32 effective for taxes payable in 2004. 123.33 Sec. 2. [126C.446] [TREE GROWTH REPLACEMENT REVENUE.] 123.34 Beginning with taxes payable in 2004, a school district may 123.35 levy an amount not to exceed its miscellaneous revenue for tree 123.36 growth revenue for taxes payable in 2002. 124.1 [EFFECTIVE DATE.] This section is effective the day 124.2 following final enactment and supersedes any change made to this 124.3 specific revenue contained in Laws 2003, H.F. 1404, regardless 124.4 of order of enactment. 124.5 Sec. 3. Minnesota Statutes 2002, section 161.465, is 124.6 amended to read: 124.7 161.465 [REIMBURSEMENT FOR FIRE SERVICES.] 124.8(a)Subdivision 1. [GRASS FIRES.] Ordinary expenses 124.9 incurred by a municipal or volunteer fire department in 124.10 extinguishing a grass fire within the right-of-way of a trunk 124.11 highway must be reimbursed upon certification to the 124.12 commissioner of transportation from the trunk highway fund. In 124.13 addition, ordinary expenses incurred by a municipal or volunteer 124.14 fire department in extinguishing a fire outside the right-of-way 124.15 of any trunk highway if the fire originated within the 124.16 right-of-way, upon approval of a police officer or an officer or 124.17 employee of the department of public safety must, upon 124.18 certification to the commissioner of transportation by the 124.19 proper official of the municipality or fire department within 60 124.20 days after the completion of the service, be reimbursed to the 124.21 municipality or fire department from funds in the trunk highway 124.22 fund. 124.23 Subd. 2. [MOTOR VEHICLE FIRES.] Ordinary expenses incurred 124.24 by a municipal or volunteer fire department in extinguishing a 124.25 motor vehicle fire within the right-of-way of a trunk highway or 124.26 interstate, to the extent these expenses are not reimbursed by 124.27 insurance, some other reasonable method of reimbursement, or 124.28 collected in accordance with section 366.012, may be reimbursed 124.29 by the commissioner from the motor vehicle fire revolving 124.30 account in the general fund up to $300 per fire call upon 124.31 certification to the commissioner. 124.32 Subd. 3. [FUND REIMBURSEMENT.] The commissioner of 124.33 transportation shall take action practicable to secure 124.34 reimbursement to the trunk highway fund or to the general fund 124.35 of money expended under this section from the person, firm, or 124.36 corporation responsible for the fire or danger of fire. A motor 125.1 vehicle fire revolving account is created in the general fund. 125.2 The commissioner shall deposit into the account all money 125.3 received by the commissioner in reimbursements from persons, 125.4 firms, or corporations for costs of extinguishing motor vehicle 125.5 fires within trunk highway rights-of-way. Money in the account 125.6 is appropriated to the commissioner for the purpose of making 125.7 reimbursements to municipal or volunteer fire departments under 125.8 subdivision 2. 125.9(b)Subd. 4. [NO ADMISSION OF LIABILITY.] The provisions 125.10 of this section shall not be construed to admit state liability 125.11 for damage or destruction to private property or for injury to 125.12 persons resulting from a fire originating within a trunk highway 125.13 or interstate right-of-way. 125.14 [EFFECTIVE DATE.] This section is effective for motor 125.15 vehicle fires after June 30, 2003. 125.16 Sec. 4. Minnesota Statutes 2002, section 168A.05, 125.17 subdivision 1a, is amended to read: 125.18 Subd. 1a. [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 125.19 PAYMENT.] In the case of a manufactured home as defined in 125.20 section 327.31, subdivision 6, the department shall not issue a 125.21 certificate of title unless the application under section 125.22 168A.04 is accompanied with a statement from the county auditor 125.23 or county treasurer where the manufactured home is presently 125.24 located, stating that all manufactured home personal property 125.25 taxes levied on the unitthat are due fromin the name of the 125.26 current owner at the time of transferfor which the application125.27applies,have been paid. 125.28 [EFFECTIVE DATE.] This section is effective for 125.29 certificates of title issued by the department on or after July 125.30 1, 2003. 125.31 Sec. 5. Minnesota Statutes 2002, section 216B.2424, 125.32 subdivision 5, is amended to read: 125.33 Subd. 5. [MANDATE.] (a) A public utility, as defined in 125.34 section 216B.02, subdivision 4, that operates a nuclear-powered 125.35 electric generating plant within this state must construct and 125.36 operate, purchase, or contract to construct and operate (1) by 126.1 December 31, 1998, 50 megawatts of electric energy installed 126.2 capacity generated by farm-grown closed-loop biomass scheduled 126.3 to be operational by December 31, 2001; and (2) by December 31, 126.4 1998, an additional 75 megawatts of installed capacity so 126.5 generated scheduled to be operational by December 31, 2002. 126.6 (b) Of the 125 megawatts of biomass electricity installed 126.7 capacity required under this subdivision, no more than 50 126.8 megawatts of this capacity may be provided by a facility that 126.9 uses poultry litter as its primary fuel source and any such 126.10 facility: 126.11 (1) need not use biomass that complies with the definition 126.12 in subdivision 1; 126.13 (2) must enter into a contract with the public utility for 126.14 such capacity, that has an average purchase price per megawatt 126.15 hour over the life of the contract that is equal to or less than 126.16 the average purchase price per megawatt hour over the life of 126.17 the contract in contracts approved by the public utilities 126.18 commission before April 1, 2000, to satisfy the mandate of this 126.19 section, and file that contract with the public utilities 126.20 commission prior to September 1, 2000; and 126.21 (3) must schedule such capacity to be operational by 126.22 December 31, 2002. 126.23 (c) Of the total 125 megawatts of biomass electric energy 126.24 installed capacity required under this section, no more than 75 126.25 megawatts may be provided by a single project. 126.26 (d) Of the 75 megawatts of biomass electric energy 126.27 installed capacity required under paragraph (a), clause (2), no 126.28 more than 25 megawatts of this capacity may be provided by a St. 126.29 Paul district heating and cooling system cogeneration facility 126.30 utilizing waste wood as a primary fuel source. The St. Paul 126.31 district heating and cooling system cogeneration facility need 126.32 not use biomass that complies with the definition in subdivision 126.33 1. 126.34 (e) The public utility must accept and consider on an equal 126.35 basis with other biomass proposals: 126.36 (1) a proposal to satisfy the requirements of this section 127.1 that includes a project that exceeds the megawatt capacity 127.2 requirements of either paragraph (a), clause (1) or (2), and 127.3 that proposes to sell the excess capacity to the public utility 127.4 or to other purchasers; and 127.5 (2) a proposal for a new facility to satisfy more than ten 127.6 but not more than 20 megawatts of the electrical generation 127.7 requirements by a small business-sponsored independent power 127.8 producer facility to be located within the northern quarter of 127.9 the state, which means the area located north of Constitutional 127.10 Route No. 8 as described in section 161.114, subdivision 2, and 127.11 that utilizes biomass residue wood, sawdust, bark, chipped wood, 127.12 or brush to generate electricity. A facility described in this 127.13 clause is not required to utilize biomass complying with the 127.14 definition in subdivision 1, but musthave the capacity required127.15by this clause operational by December 31, 2002be under 127.16 construction by July 1, 2005. 127.17 (f) If a public utility files a contract with the 127.18 commission for electric energy installed capacity that uses 127.19 poultry litter as its primary fuel source, the commission must 127.20 do a preliminary review of the contract to determine if it meets 127.21 the purchase price criteria provided in paragraph (b), clause 127.22 (2), of this subdivision. The commission shall perform its 127.23 review and advise the parties of its determination within 30 127.24 days of filing of such a contract by a public utility. A public 127.25 utility may submit by September 1, 2000, a revised contract to 127.26 address the commission's preliminary determination. 127.27 (g) The commission shall finally approve, modify, or 127.28 disapprove no later than July 1, 2001, all contracts submitted 127.29 by a public utility as of September 1, 2000, to meet the mandate 127.30 set forth in this subdivision. 127.31 (h) If a public utility subject to this section exercises 127.32 an option to increase the generating capacity of a project in a 127.33 contract approved by the commission prior to April 25, 2000, to 127.34 satisfy the mandate in this subdivision, the public utility must 127.35 notify the commission by September 1, 2000, that it has 127.36 exercised the option and include in the notice the amount of 128.1 additional megawatts to be generated under the option 128.2 exercised. Any review by the commission of the project after 128.3 exercise of such an option shall be based on the same criteria 128.4 used to review the existing contract. 128.5 (i) A facility specified in this subdivision qualifies for 128.6 exemption from property taxation under section 272.02, 128.7 subdivision 43. 128.8 [EFFECTIVE DATE.] This section is effective the day 128.9 following final enactment. 128.10 Sec. 6. Minnesota Statutes 2002, section 270B.12, is 128.11 amended by adding a subdivision to read: 128.12 Subd. 13. [COUNTY ASSESSORS; CLASS 1B HOMESTEADS.] The 128.13 commissioner may disclose to a county assessor, and to the 128.14 assessor's designated agents or employees, a listing of persons 128.15 and parcels of property qualifying for the class 1b property tax 128.16 classification under section 273.13, subdivision 22. 128.17 [EFFECTIVE DATE.] This section is effective the day 128.18 following final enactment. 128.19 Sec. 7. Minnesota Statutes 2002, section 272.02, 128.20 subdivision 31, is amended to read: 128.21 Subd. 31. [BUSINESS INCUBATOR PROPERTY.] Property owned by 128.22 a nonprofit charitable organization that qualifies for tax 128.23 exemption under section 501(c)(3) of the Internal Revenue Code 128.24 of 1986, as amended through December 31, 1997, that is intended 128.25 to be used as a business incubator in a high-unemployment 128.26 county, is exempt. As used in this subdivision, a "business 128.27 incubator" is a facility used for the development of nonretail 128.28 businesses, offering access to equipment, space, services, and 128.29 advice to the tenant businesses, for the purpose of encouraging 128.30 economic development, diversification, and job creation in the 128.31 area served by the organization, and "high-unemployment county" 128.32 is a county that had an average annual unemployment rate of 7.9 128.33 percent or greater in 1997. Property that qualifies for the 128.34 exemption under this subdivision is limited to no more than two 128.35 contiguous parcels and structures that do not exceed in the 128.36 aggregate 40,000 square feet. This exemption expires after 129.1 taxes payable in20052011. 129.2 [EFFECTIVE DATE.] This section is effective the day 129.3 following final enactment. 129.4 Sec. 8. Minnesota Statutes 2002, section 272.02, 129.5 subdivision 47, is amended to read: 129.6 Subd. 47. [POULTRY LITTER BIOMASS GENERATION FACILITY; 129.7 PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 129.8 attached machinery and other personal property which is part of 129.9 an electrical generating facility that meets the requirements of 129.10 this subdivision is exempt. At the time of construction, the 129.11 facility must: 129.12 (1) be designed to utilize poultry litter as a primary fuel 129.13 source; and 129.14 (2) be constructed for the purpose of generating power at 129.15 the facility that will be sold pursuant to a contract approved 129.16 by the public utilities commission in accordance with the 129.17 biomass mandate imposed under section 216B.2424. 129.18 Construction of the facility must be commenced after 129.19 January 1,20002003, and before December 31,20022003. 129.20 Property eligible for this exemption does not include electric 129.21 transmission lines and interconnections or gas pipelines and 129.22 interconnections appurtenant to the property or the facility. 129.23 [EFFECTIVE DATE.] This section is effective for taxes 129.24 levied in 2004, payable in 2005, and thereafter. 129.25 Sec. 9. Minnesota Statutes 2002, section 272.02, 129.26 subdivision 48, is amended to read: 129.27 Subd. 48. [WASTE TIRE COGENERATION FACILITY; PERSONAL 129.28 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 129.29 machinery and other personal property which is part of an 129.30 electric generating facility that meets the requirements of this 129.31 subdivision is exempt. At the time of construction, the 129.32 facility must: 129.33 (1) be designed to utilize waste tires as a primary fuel 129.34 source; and 129.35 (2) be a cogeneration electric generating facility of 15 to 129.36 25 megawatts of installed capacity. 130.1 Construction of the facility must be commenced after 130.2 January 1, 2000, and before January 1,20042008. Property 130.3 eligible for this exemption does not include electric 130.4 transmission lines and interconnections or gas pipelines and 130.5 interconnections appurtenant to the property or the facility. 130.6 [EFFECTIVE DATE.] This section is effective the day 130.7 following final enactment. 130.8 Sec. 10. Minnesota Statutes 2002, section 272.02, 130.9 subdivision 53, is amended to read: 130.10 Subd. 53. [ELECTRIC GENERATION FACILITY; PERSONAL 130.11 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 130.12 machinery and other personal property which is part of a 3.2 130.13 megawatt run-of-the-river hydroelectric generation facility and 130.14 that meets the requirements of this subdivision is exempt. At 130.15 the time of construction, the facility must: 130.16 (1) utilize two turbine generators at a dam site existing 130.17 on March 31, 1994; 130.18 (2) be located on publicly owned land and within 1,500 feet 130.19 of a 13.8 kilovolt distribution substation; and 130.20 (3) be eligible to receive a renewable energy production 130.21 incentive payment under section 216C.41. 130.22 Construction of the facility must be commenced after 130.23 January 1, 2002, and before January 1,20042005. Property 130.24 eligible for this exemption does not include electric 130.25 transmission lines and interconnections or gas pipelines and 130.26 interconnections appurtenant to the property or the facility. 130.27 [EFFECTIVE DATE.] This section is effective the day 130.28 following final enactment. 130.29 Sec. 11. Minnesota Statutes 2002, section 272.02, is 130.30 amended by adding a subdivision to read: 130.31 Subd. 56. [ELECTRIC GENERATION FACILITY; PERSONAL 130.32 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 130.33 attached machinery and other personal property which is part of 130.34 a combined-cycle combustion-turbine electric generation facility 130.35 that exceeds 550 megawatts of installed capacity and that meets 130.36 the requirements of this subdivision is exempt. At the time of 131.1 construction, the facility must: 131.2 (1) be designed to utilize natural gas as a primary fuel; 131.3 (2) not be owned by a public utility as defined in section 131.4 216B.02, subdivision 4; 131.5 (3) be located within five miles of an existing natural gas 131.6 pipeline and within four miles of an existing electrical 131.7 transmission substation; 131.8 (4) be located outside the metropolitan area as defined 131.9 under section 473.121, subdivision 2; and 131.10 (5) be designed to provide energy and ancillary services 131.11 and have received a certificate of need under section 216B.243. 131.12 (b) Construction of the facility must be commenced after 131.13 January 1, 2004, and before January 1, 2007. Property eligible 131.14 for this exemption does not include electric transmission lines 131.15 and interconnections or gas pipelines and interconnections 131.16 appurtenant to the property or the facility. 131.17 [EFFECTIVE DATE.] This section is effective for assessment 131.18 year 2005, taxes payable in 2006, and thereafter. 131.19 Sec. 12. Minnesota Statutes 2002, section 272.02, is 131.20 amended by adding a subdivision to read: 131.21 Subd. 57. [ELECTRIC GENERATION FACILITY; PERSONAL 131.22 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 131.23 attached machinery and other personal property which is part of 131.24 a combined-cycle combustion-turbine electric generation facility 131.25 that exceeds 150 megawatts of installed capacity and that meets 131.26 the requirements of this subdivision is exempt. At the time of 131.27 construction, the facility must: 131.28 (1) utilize natural gas as a primary fuel; 131.29 (2) be owned by an electric generation and transmission 131.30 cooperative; 131.31 (3) be located within ten miles of parallel existing 131.32 24-inch and 30-inch natural gas pipelines and a 345-kilovolt 131.33 high-voltage electric transmission line; 131.34 (4) be designed to provide intermediate energy and 131.35 ancillary services, and have received a certificate of need 131.36 under section 216B.243, demonstrating demand for its capacity; 132.1 and 132.2 (5) have received by resolution, the approval from the 132.3 governing body of the county and city in which the proposed 132.4 facility is to be located for the exemption of personal property 132.5 under this subdivision. 132.6 (b) Construction of the facility must be commenced after 132.7 January 1, 2004, and before January 1, 2009. Property eligible 132.8 for this exemption does not include electric transmission lines 132.9 and interconnections or gas pipelines and interconnections 132.10 appurtenant to the property or the facility. 132.11 (c) The exemption under this section will take effect only 132.12 if the owner of the facility enters into agreements with the 132.13 governing bodies of the county and the city in which the 132.14 facility is located. The agreements may include a requirement 132.15 that the facility must pay a host fee to compensate the county 132.16 and city for hosting the facility. 132.17 [EFFECTIVE DATE.] This section is effective for assessment 132.18 year 2005, taxes payable in 2006, and thereafter. 132.19 Sec. 13. Minnesota Statutes 2002, section 273.01, is 132.20 amended to read: 132.21 273.01 [LISTING AND ASSESSMENT, TIME.] 132.22 All real property subject to taxation shall be listed and 132.23 at leastone-fourthone-fifth of the parcels listed shall be 132.24 appraised each year with reference to their value on January 2 132.25 preceding the assessment so that each parcel shall be 132.26 reappraised at maximum intervals offourfive years. All real 132.27 property becoming taxable in any year shall be listed with 132.28 reference to its value on January 2 of that year. Except as 132.29 provided in this section and section 274.01, subdivision 1, all 132.30 real property assessments shall be completed two weeks prior to 132.31 the date scheduled for the local board of review or 132.32 equalization. No changes in valuation or classification which 132.33 are intended to correct errors in judgment by the county 132.34 assessor may be made by the county assessor after the board of 132.35 review or the county board of equalization has adjourned; 132.36 however, corrections of errors that are merely clerical in 133.1 nature or changes that extend homestead treatment to property 133.2 are permitted after adjournment until the tax extension date for 133.3 that assessment year. Any changes made by the assessor after 133.4 adjournment must be fully documented and maintained in a file in 133.5 the assessor's office and shall be available for review by any 133.6 person. A copy of any changes made during this period shall be 133.7 sent to the county board no later than December 31 of the 133.8 assessment year. In the event a valuation and classification is 133.9 not placed on any real property by the dates scheduled for the 133.10 local board of review or equalization the valuation and 133.11 classification determined in the preceding assessment shall be 133.12 continued in effect and the provisions of section 273.13 shall, 133.13 in such case, not be applicable, except with respect to real 133.14 estate which has been constructed since the previous 133.15 assessment. Real property containing iron ore, the fee to which 133.16 is owned by the state of Minnesota, shall, if leased by the 133.17 state after January 2 in any year, be subject to assessment for 133.18 that year on the value of any iron ore removed under said lease 133.19 prior to January 2 of the following year. Personal property 133.20 subject to taxation shall be listed and assessed annually with 133.21 reference to its value on January 2; and, if acquired on that 133.22 day, shall be listed by or for the person acquiring it. 133.23 [EFFECTIVE DATE.] This section is effective for assessments 133.24 on or after January 2, 2004. 133.25 Sec. 14. Minnesota Statutes 2002, section 273.08, is 133.26 amended to read: 133.27 273.08 [ASSESSOR'S DUTIES.] 133.28 The assessor shall actually view, and determine the market 133.29 value of each tract or lot of real property listed for taxation, 133.30 including the value of all improvements and structures thereon, 133.31 at maximum intervals offourfive years and shall enter the 133.32 value opposite each description. 133.33 [EFFECTIVE DATE.] This section is effective for assessments 133.34 on or after January 2, 2004. 133.35 Sec. 15. Minnesota Statutes 2002, section 273.112, 133.36 subdivision 3, is amended to read: 134.1 Subd. 3. [REQUIREMENTS.] Real estate shall be entitled to 134.2 valuation and tax deferment under this section only if it is: 134.3 (a) actively and exclusively devoted to golf, skiing, lawn 134.4 bowling, croquet, auto racing, or archery or firearms range 134.5 recreational use or other recreational uses carried on at the 134.6 establishment; 134.7 (b) five acres in size or more, except in the case of a 134.8 lawn bowling or croquet green or an archery or firearms range; 134.9 (c)(1) operated by private individuals or, in the case of a 134.10 lawn bowling green,orcroquet green, or an auto racing track, 134.11 by private individuals or corporations, and open to the public; 134.12 or 134.13 (2) operated by firms or corporations for the benefit of 134.14 employees or guests; or 134.15 (3) operated by private clubs having a membership of 50 or 134.16 more or open to the public, provided that the club does not 134.17 discriminate in membership requirements or selection on the 134.18 basis of sex or marital status; and 134.19 (d) made available for use in the case of real estate 134.20 devoted to golf without discrimination on the basis of sex 134.21 during the time when the facility is open to use by the public 134.22 or by members, except that use for golf may be restricted on the 134.23 basis of sex no more frequently than one, or part of one, 134.24 weekend each calendar month for each sex and no more than two, 134.25 or part of two, weekdays each week for each sex. 134.26 If a golf club membership allows use of golf course 134.27 facilities by more than one adult per membership, the use must 134.28 be equally available to all adults entitled to use of the golf 134.29 course under the membership, except that use may be restricted 134.30 on the basis of sex as permitted in this section. Memberships 134.31 that permit play during restricted times may be allowed only if 134.32 the restricted times apply to all adults using the membership. 134.33 A golf club may not offer a membership or golfing privileges to 134.34 a spouse of a member that provides greater or less access to the 134.35 golf course than is provided to that person's spouse under the 134.36 same or a separate membership in that club, except that the 135.1 terms of a membership may provide that one spouse may have no 135.2 right to use the golf course at any time while the other spouse 135.3 may have either limited or unlimited access to the golf course. 135.4 A golf club may have or create an individual membership 135.5 category which entitles a member for a reduced rate to play 135.6 during restricted hours as established by the club. The club 135.7 must have on record a written request by the member for such 135.8 membership. 135.9 A golf club that has food or beverage facilities or 135.10 services must allow equal access to those facilities and 135.11 services for both men and women members in all membership 135.12 categories at all times. Nothing in this paragraph shall be 135.13 construed to require service or access to facilities to persons 135.14 under the age of 21 years or require any act that would violate 135.15 law or ordinance regarding sale, consumption, or regulation of 135.16 alcoholic beverages. 135.17 For purposes of this subdivision and subdivision 7a, 135.18 discrimination means a pattern or course of conduct and not 135.19 linked to an isolated incident. 135.20 [EFFECTIVE DATE.] This section is effective beginning in 135.21 assessment year 2003, except that for the 2003 assessment year, 135.22 the application for deferment under this section must be filed 135.23 with the county assessor in which the property is located within 135.24 60 days after final enactment of this act. 135.25 Sec. 16. Minnesota Statutes 2002, section 273.124, 135.26 subdivision 14, is amended to read: 135.27 Subd. 14. [AGRICULTURAL HOMESTEADS; SPECIAL PROVISIONS.] 135.28 (a) Real estate of less than ten acres that is the homestead of 135.29 its owner must be classified as class 2a under section 273.13, 135.30 subdivision 23, paragraph (a), if: 135.31 (1) the parcel on which the house is located is contiguous 135.32 on at least two sides to (i) agricultural land, (ii) land owned 135.33 or administered by the United States Fish and Wildlife Service, 135.34 or (iii) land administered by the department of natural 135.35 resources on which in lieu taxes are paid under sections 477A.11 135.36 to 477A.14; 136.1 (2) its owner also owns a noncontiguous parcel of 136.2 agricultural land that is at least 20 acres; 136.3 (3) the noncontiguous land is located not farther than four 136.4 townships or cities, or a combination of townships or cities 136.5 from the homestead; and 136.6 (4) the agricultural use value of the noncontiguous land 136.7 and farm buildings is equal to at least 50 percent of the market 136.8 value of the house, garage, and one acre of land. 136.9 Homesteads initially classified as class 2a under the 136.10 provisions of this paragraph shall remain classified as class 136.11 2a, irrespective of subsequent changes in the use of adjoining 136.12 properties, as long as the homestead remains under the same 136.13 ownership, the owner owns a noncontiguous parcel of agricultural 136.14 land that is at least 20 acres, and the agricultural use value 136.15 qualifies under clause (4). Homestead classification under this 136.16 paragraph is limited to property that qualified under this 136.17 paragraph for the 1998 assessment. 136.18 (b)(i) Agricultural property consisting of at least 40 136.19 acres shall be classified as the owner's homestead, to the same 136.20 extent as other agricultural homestead property, if all of the 136.21 following criteria are met: 136.22 (1) the owner, the owner's spouse, or the son or daughter 136.23 of the owner or owner's spouse, is actively farming the 136.24 agricultural property, either on the person's own behalf as an 136.25 individual or on behalf of a partnership operating a family 136.26 farm, family farm corporation, joint family farm venture, or 136.27 limited liability company of which the person is a partner, 136.28 shareholder, or member; 136.29 (2) both the owner of the agricultural property and the 136.30 person who is actively farming the agricultural property under 136.31 clause (1), are Minnesota residents; 136.32 (3) neither the owner nor the spouse of the owner claims 136.33 another agricultural homestead in Minnesota; and 136.34 (4) neither the owner nor the person actively farming the 136.35 property lives farther than four townships or cities, or a 136.36 combination of four townships or cities, from the agricultural 137.1 property, except that if the owner or the owner's spouse is 137.2 required to live in employer-provided housing, the owner or 137.3 owner's spouse, whichever is actively farming the agricultural 137.4 property, may live more than four townships or cities, or 137.5 combination of four townships or cities from the agricultural 137.6 property. 137.7 The relationship under this paragraph may be either by 137.8 blood or marriage. 137.9 (ii) Real property held by a trustee under a trust is 137.10 eligible for agricultural homestead classification under this 137.11 paragraph if the qualifications in clause (i) are met, except 137.12 that "owner" means the grantor of the trust. 137.13 (iii) Property containing the residence of an owner who 137.14 owns qualified property under clause (i) shall be classified as 137.15 part of the owner's agricultural homestead, if that property is 137.16 also used for noncommercial storage or drying of agricultural 137.17 crops. 137.18 (c) Noncontiguous land shall be included as part of a 137.19 homestead under section 273.13, subdivision 23, paragraph (a), 137.20 only if the homestead is classified as class 2a and the detached 137.21 land is located in the same township or city, or not farther 137.22 than four townships or cities or combination thereof from the 137.23 homestead. Any taxpayer of these noncontiguous lands must 137.24 notify the county assessor that the noncontiguous land is part 137.25 of the taxpayer's homestead, and, if the homestead is located in 137.26 another county, the taxpayer must also notify the assessor of 137.27 the other county. 137.28 (d) Agricultural land used for purposes of a homestead and 137.29 actively farmed by a person holding a vested remainder interest 137.30 in it must be classified as a homestead under section 273.13, 137.31 subdivision 23, paragraph (a). If agricultural land is 137.32 classified class 2a, any other dwellings on the land used for 137.33 purposes of a homestead by persons holding vested remainder 137.34 interests who are actively engaged in farming the property, and 137.35 up to one acre of the land surrounding each homestead and 137.36 reasonably necessary for the use of the dwelling as a home, must 138.1 also be assessed class 2a. 138.2 (e) Agricultural land and buildings that were class 2a 138.3 homestead property under section 273.13, subdivision 23, 138.4 paragraph (a), for the 1997 assessment shall remain classified 138.5 as agricultural homesteads for subsequent assessments if: 138.6 (1) the property owner abandoned the homestead dwelling 138.7 located on the agricultural homestead as a result of the April 138.8 1997 floods; 138.9 (2) the property is located in the county of Polk, Clay, 138.10 Kittson, Marshall, Norman, or Wilkin; 138.11 (3) the agricultural land and buildings remain under the 138.12 same ownership for the current assessment year as existed for 138.13 the 1997 assessment year and continue to be used for 138.14 agricultural purposes; 138.15 (4) the dwelling occupied by the owner is located in 138.16 Minnesota and is within 30 miles of one of the parcels of 138.17 agricultural land that is owned by the taxpayer; and 138.18 (5) the owner notifies the county assessor that the 138.19 relocation was due to the 1997 floods, and the owner furnishes 138.20 the assessor any information deemed necessary by the assessor in 138.21 verifying the change in dwelling. Further notifications to the 138.22 assessor are not required if the property continues to meet all 138.23 the requirements in this paragraph and any dwellings on the 138.24 agricultural land remain uninhabited. 138.25 (f) Agricultural land and buildings that were class 2a 138.26 homestead property under section 273.13, subdivision 23, 138.27 paragraph (a), for the 1998 assessment shall remain classified 138.28 agricultural homesteads for subsequent assessments if: 138.29 (1) the property owner abandoned the homestead dwelling 138.30 located on the agricultural homestead as a result of damage 138.31 caused by a March 29, 1998, tornado; 138.32 (2) the property is located in the county of Blue Earth, 138.33 Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice; 138.34 (3) the agricultural land and buildings remain under the 138.35 same ownership for the current assessment year as existed for 138.36 the 1998 assessment year; 139.1 (4) the dwelling occupied by the owner is located in this 139.2 state and is within 50 miles of one of the parcels of 139.3 agricultural land that is owned by the taxpayer; and 139.4 (5) the owner notifies the county assessor that the 139.5 relocation was due to a March 29, 1998, tornado, and the owner 139.6 furnishes the assessor any information deemed necessary by the 139.7 assessor in verifying the change in homestead dwelling. For 139.8 taxes payable in 1999, the owner must notify the assessor by 139.9 December 1, 1998. Further notifications to the assessor are not 139.10 required if the property continues to meet all the requirements 139.11 in this paragraph and any dwellings on the agricultural land 139.12 remain uninhabited. 139.13 (g) Agricultural property consisting of at least 40 acres 139.14 of a family farm corporation, joint family farm venture, family 139.15 farm limited liability company, or partnership operating a 139.16 family farm as described under subdivision 8 shall be classified 139.17 homestead, to the same extent as other agricultural homestead 139.18 property, if all of the following criteria are met: 139.19 (1) a shareholder, member, or partner of that entity is 139.20 actively farming the agricultural property; 139.21 (2) that shareholder, member, or partner who is actively 139.22 farming the agricultural property is a Minnesota resident; 139.23 (3) neither that shareholder, member, or partner, nor the 139.24 spouse of that shareholder, member, or partner claims another 139.25 agricultural homestead in Minnesota; and 139.26 (4) that shareholder, member, or partner does not live 139.27 farther than four townships or cities, or a combination of four 139.28 townships or cities, from the agricultural property. 139.29 Homestead treatment applies under this paragraph for 139.30 property leased to a family farm corporation, joint farm 139.31 venture, limited liability company, or partnership operating a 139.32 family farm if legal title to the property is in the name of an 139.33 individual who is a member, shareholder, or partner in the 139.34 entity. 139.35 (h) To be eligible for the special agricultural homestead 139.36 under this subdivision, an initial full application must be 140.1 submitted to the county assessor where the property is located. 140.2 Owners and the persons who are actively farming the property 140.3 shall be required to complete only a one-page abbreviated 140.4 version of the application in each subsequent year provided that 140.5 none of the following items have changed since the initial 140.6 application: 140.7 (1) the day-to-day operation, administration, and financial 140.8 risks remain the same; 140.9 (2) the owners and the persons actively farming the 140.10 property continue to live within the four townships or city 140.11 criteria and are Minnesota residents; 140.12 (3) the same operator of the agricultural property is 140.13 listed with the farm service agency; 140.14 (4) a Schedule F or equivalent income tax form was filed 140.15 for the most recent year; 140.16 (5) the property's acreage is unchanged; and 140.17 (6) none of the property's acres have been enrolled in a 140.18 federal or state farm program since the initial application. 140.19 The owners and any persons who are actively farming the 140.20 property must include the appropriate social security numbers, 140.21 and sign and date the application. If any of the specified 140.22 information has changed since the full application was filed, 140.23 the owner must notify the assessor, and must complete a new 140.24 application to determine if the property continues to qualify 140.25 for the special agricultural homestead. The commissioner of 140.26 revenue shall prepare a standard reapplication form for use by 140.27 the assessors. 140.28 [EFFECTIVE DATE.] This section is effective for 140.29 applications filed for the 2004 assessment and thereafter. 140.30 Sec. 17. Minnesota Statutes 2002, section 273.13, 140.31 subdivision 22, is amended to read: 140.32 Subd. 22. [CLASS 1.] (a) Except as provided in subdivision 140.33 23 and in paragraphs (b) and (c), real estate which is 140.34 residential and used for homestead purposes is class 1a. In the 140.35 case of a duplex or triplex in which one of the units is used 140.36 for homestead purposes, the entire property is deemed to be used 141.1 for homestead purposes. The market value of class 1a property 141.2 must be determined based upon the value of the house, garage, 141.3 and land. 141.4 The first $500,000 of market value of class 1a property has 141.5 a net class rate of one percent of its market value; and the 141.6 market value of class 1a property that exceeds $500,000 has a 141.7 class rate of 1.25 percent of its market value. 141.8 (b) Class 1b property includes homestead real estate or 141.9 homestead manufactured homes used for the purposes of a 141.10 homestead by 141.11 (1) any blind person, or the blind person and the blind 141.12 person's spouse; or 141.13 (2) any person, hereinafter referred to as "veteran," who: 141.14 (i) served in the active military or naval service of the 141.15 United States; and 141.16 (ii) is entitled to compensation under the laws and 141.17 regulations of the United States for permanent and total 141.18 service-connected disability due to the loss, or loss of use, by 141.19 reason of amputation, ankylosis, progressive muscular 141.20 dystrophies, or paralysis, of both lower extremities, such as to 141.21 preclude motion without the aid of braces, crutches, canes, or a 141.22 wheelchair; and 141.23 (iii) has acquired a special housing unit with special 141.24 fixtures or movable facilities made necessary by the nature of 141.25 the veteran's disability, or the surviving spouse of the 141.26 deceased veteran for as long as the surviving spouse retains the 141.27 special housing unit as a homestead; or 141.28 (3) any person who: 141.29 (i) is permanently and totally disabled and 141.30 (ii) receives 90 percent or more of total household income, 141.31 as defined in section 290A.03, subdivision 5, from 141.32 (A) aid from any state as a result of that disability; or 141.33 (B) supplemental security income for the disabled; or 141.34 (C) workers' compensation based on a finding of total and 141.35 permanent disability; or 141.36 (D) social security disability, including the amount of a 142.1 disability insurance benefit which is converted to an old age 142.2 insurance benefit and any subsequent cost of living increases; 142.3 or 142.4 (E) aid under the federal Railroad Retirement Act of 1937, 142.5 United States Code Annotated, title 45, section 228b(a)5; or 142.6 (F) a pension from any local government retirement fund 142.7 located in the state of Minnesota as a result of that 142.8 disability; or 142.9 (G) pension, annuity, or other income paid as a result of 142.10 that disability from a private pension or disability plan, 142.11 including employer, employee, union, and insurance plans and 142.12 (iii) has household income as defined in section 290A.03, 142.13 subdivision 5, of $50,000 or less; or 142.14 (4) any person who is permanently and totally disabled and 142.15 whose household income as defined in section 290A.03, 142.16 subdivision 5, is 275 percent or less of the federal poverty 142.17 level. 142.18 Property is classified and assessed under clause (4) only 142.19 if the government agency or income-providing source certifies, 142.20 upon the request of the homestead occupant, that the homestead 142.21 occupant satisfies the disability requirements of this paragraph. 142.22 Property is classified and assessed pursuant to clause (1) 142.23 only if the commissioner ofeconomic securityrevenue certifies 142.24 to the assessor that the homestead occupant satisfies the 142.25 requirements of this paragraph. Once the initial application is 142.26 made and approved by the commissioner, no further applications 142.27 are required, unless the property is sold, there is a change in 142.28 occupancy, or the occupant's vision changes. Failure to notify 142.29 the commissioner within 60 days that the property no longer 142.30 qualifies shall result in a penalty provided under section 142.31 273.124, subdivision 13, computed on the basis of the class 1b 142.32 benefits for the property, and the property shall lose its 142.33 current class 1b classification. If the commissioner determines 142.34 that the homestead occupant no longer satisfies the requirements 142.35 of this paragraph, the commissioner shall notify the county 142.36 assessor. 143.1 Permanently and totally disabled for the purpose of this 143.2 subdivision means a condition which is permanent in nature and 143.3 totally incapacitates the person from working at an occupation 143.4 which brings the person an income. The first $32,000 market 143.5 value of class 1b property has a net class rate of .45 percent 143.6 of its market value. The remaining market value of class 1b 143.7 property has a class rate using the rates for class 1a or class 143.8 2a property, whichever is appropriate, of similar market value. 143.9 (c) Class 1c property is commercial use real property that 143.10 abuts a lakeshore line and is devoted to temporary and seasonal 143.11 residential occupancy for recreational purposes but not devoted 143.12 to commercial purposes for more than 250 days in the year 143.13 preceding the year of assessment, and that includes a portion 143.14 used as a homestead by the owner, which includes a dwelling 143.15 occupied as a homestead by a shareholder of a corporation that 143.16 owns the resortor, a partner in a partnership that owns the 143.17 resort, or a member of a limited liability company that owns the 143.18 resort even if the title to the homestead is held by the 143.19 corporationor, partnership, or limited liability company. For 143.20 purposes of this clause, property is devoted to a commercial 143.21 purpose on a specific day if any portion of the property, 143.22 excluding the portion used exclusively as a homestead, is used 143.23 for residential occupancy and a fee is charged for residential 143.24 occupancy. The first $500,000 of market value of class 1c 143.25 property has a class rate of one percent, and the remaining 143.26 market value of class 1c property has a class rate of one 143.27 percent, with the following limitation: the area of the 143.28 property must not exceed 100 feet of lakeshore footage for each 143.29 cabin or campsite located on the property up to a total of 800 143.30 feet and 500 feet in depth, measured away from the lakeshore. 143.31 If any portion of the class 1c resort property is classified as 143.32 class 4c under subdivision 25, the entire property must meet the 143.33 requirements of subdivision 25, paragraph (d), clause (1), to 143.34 qualify for class 1c treatment under this paragraph. 143.35 (d) Class 1d property includes structures that meet all of 143.36 the following criteria: 144.1 (1) the structure is located on property that is classified 144.2 as agricultural property under section 273.13, subdivision 23; 144.3 (2) the structure is occupied exclusively by seasonal farm 144.4 workers during the time when they work on that farm, and the 144.5 occupants are not charged rent for the privilege of occupying 144.6 the property, provided that use of the structure for storage of 144.7 farm equipment and produce does not disqualify the property from 144.8 classification under this paragraph; 144.9 (3) the structure meets all applicable health and safety 144.10 requirements for the appropriate season; and 144.11 (4) the structure is not salable as residential property 144.12 because it does not comply with local ordinances relating to 144.13 location in relation to streets or roads. 144.14 The market value of class 1d property has the same class 144.15 rates as class 1a property under paragraph (a). 144.16 [EFFECTIVE DATE.] Paragraph (b) is effective for taxes 144.17 payable in 2005 and thereafter. 144.18 Paragraph (c) is effective for taxes payable in 2004 and 144.19 thereafter. 144.20 Sec. 18. [273.1387] [TRANSITION PAYMENTS FOR PROPERTY TAX 144.21 BASE LOSS.] 144.22 Subdivision 1. [DEFINITIONS.] (a) For the purposes of this 144.23 section, the following terms have the meanings given them. 144.24 (b) "State" means a state agency, board, commission, or 144.25 authority. 144.26 (c) "Political subdivision" means the metropolitan council 144.27 or a metropolitan agency, county, statutory or home rule charter 144.28 city, township, school district, or any other political 144.29 subdivision with the authority to acquire real property. 144.30 (d) "Acquire" includes acquisition by purchase, gift, or 144.31 eminent domain. 144.32 Subd. 2. [PAYMENT REQUIRED.] (a) When the state or a 144.33 political subdivision acquires taxable real property and that 144.34 property becomes tax exempt upon acquisition, the state or 144.35 political subdivision must pay to all other taxing jurisdictions 144.36 levying property taxes on the property in the year in which it 145.1 is acquired an amount as follows: 145.2 (1) in the year in which the property is acquired, 100 145.3 percent of the taxes payable for that year on the acquired 145.4 property, less any amount of property taxes already collected 145.5 for that year on the property before the acquisition; 145.6 (2) in the first full year after acquisition, 80 percent of 145.7 the total amount that was due and payable in the year of 145.8 acquisition; 145.9 (3) in the second year after acquisition, 60 percent of the 145.10 total amount that was due and payable in the year of 145.11 acquisition; 145.12 (4) in the third year after acquisition, 40 percent of the 145.13 total amount that was due and payable in the year of 145.14 acquisition; and 145.15 (5) in the fourth year after acquisition, 20 percent of the 145.16 total amount that was due and payable in the year of acquisition. 145.17 (b) As an alternative to the payments required as provided 145.18 in paragraph (a), clauses (2) to (5), the state or political 145.19 subdivision may pay to any taxing jurisdiction a single payment 145.20 equal to 150 percent of the total taxes payable on the acquired 145.21 property in the year of acquisition. 145.22 (c) Any payment under paragraph (a), clause (1), must be 145.23 made at the time of acquisition and must be paid to the county 145.24 treasurer of the county where the property is located. The 145.25 payment under paragraph (b) must be made at the time of 145.26 acquisition and must be paid directly to each affected taxing 145.27 jurisdiction. Payments under paragraph (a), clauses (2) to (5), 145.28 must be made annually on or before May 15 of each year 145.29 immediately following the year of acquisition and must be paid 145.30 directly to the affected taxing jurisdictions. 145.31 Subd. 3. [WAIVER.] A statutory or home rule charter city, 145.32 county, town, or school district may waive payments required 145.33 under this section by resolution of the governing body. A 145.34 resolution to waive part or all of a payment must not be adopted 145.35 unless the waiver is identified as an item of business in a 145.36 meeting notice for the meeting at which the waiver will be 146.1 discussed and voted on. The notice must be provided at least 146.2 ten days before the meeting. 146.3 Subd. 4. [PAYMENTS RECEIVED ARE OUTSIDE LEVY LIMITS.] Any 146.4 payments received by a political subdivision under this section 146.5 are not included in the calculation of its overall levy limit 146.6 imposed under chapter 275. 146.7 Subd. 5. [COST OF ACQUISITION.] Payments made under this 146.8 section are a cost of acquisition of the property. 146.9 [EFFECTIVE DATE.] This section is effective for property 146.10 acquired on or after July 1, 2005. 146.11 Sec. 19. [274.014] [LOCAL BOARDS; APPEALS AND EQUALIZATION 146.12 COURSE AND MEETING REQUIREMENTS.] 146.13 Subdivision 1. [HANDBOOK FOR LOCAL BOARDS.] By no later 146.14 than January 1, 2005, the commissioner of revenue must develop a 146.15 handbook detailing procedures, responsibilities, and 146.16 requirements for local boards of appeal and equalization. The 146.17 handbook must include, but need not be limited to, the role of 146.18 the local board in the assessment process, the legal and policy 146.19 reasons for fair and impartial appeal and equalization hearings, 146.20 local board meeting procedures that foster fair and impartial 146.21 assessment reviews and other best practices recommendations, 146.22 quorum requirements for local boards, and explanations of 146.23 alternate methods of appeal. 146.24 Subd. 2. [APPEALS AND EQUALIZATION COURSE.] By no later 146.25 than January 1, 2006, and each year thereafter, there must be at 146.26 least one member at each meeting of a local board of appeal and 146.27 equalization who has attended an appeals and equalization course 146.28 developed or approved by the commissioner within the last four 146.29 years, as certified by the commissioner. The course may be 146.30 offered in conjunction with a meeting of the Minnesota League of 146.31 Cities or the Minnesota Association of Townships. The course 146.32 content must include, but need not be limited to, a review of 146.33 the handbook developed by the commissioner under subdivision 1. 146.34 Subd. 3. [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] Any 146.35 city or town that does not provide proof to the county assessor 146.36 by December 1, 2006, and each year thereafter, that it is in 147.1 compliance with the requirements of subdivision 2, and that it 147.2 had a quorum at each meeting of the board of appeal and 147.3 equalization in the prior year, is deemed to have transferred 147.4 its board of appeal and equalization powers to the county under 147.5 section 274.01, subdivision 3, for the following year's 147.6 assessment. 147.7 The county shall notify the taxpayers when the board of 147.8 appeal and equalization for a city or town has been transferred 147.9 to the county under this subdivision and, prior to the meeting 147.10 time of the county board of equalization, the county shall make 147.11 available to those taxpayers a procedure for a review of the 147.12 assessments, including, but not limited to, open book meetings. 147.13 This alternate review process shall take place in April and May. 147.14 A local board whose powers are transferred to the county 147.15 under this subdivision may be reinstated by resolution of the 147.16 governing body of the city or town and upon proof of compliance 147.17 with the requirements of subdivision 2. The resolution and 147.18 proofs must be provided to the county assessor by December 1 in 147.19 order to be effective for the following year's assessment. 147.20 [EFFECTIVE DATE.] This section is effective the day 147.21 following final enactment. 147.22 Sec. 20. Minnesota Statutes 2002, section 275.025, 147.23 subdivision 1, is amended to read: 147.24 Subdivision 1. [LEVY AMOUNT.] The state general levy is 147.25 levied against commercial-industrial property and seasonal 147.26 recreational property, as defined in this section. The state 147.27 general levy is $592,000,000 for taxes payable in 2002. For 147.28 taxes payable in subsequent years, the levy is increased each 147.29 year by multiplying the amount for the prior year by the sum of 147.30 one plus the rate of increase, if any, in the implicit price 147.31 deflator for government consumption expenditures and gross 147.32 investment for state and local governments prepared by the 147.33 Bureau of Economic Analysts of the United States Department of 147.34 Commerce for the 12-month period ending March 31 of the year 147.35 prior to the year the taxes are payable. The tax under this 147.36 section is not treated as a local tax rate under section 469.177 148.1 and is not the levy of a governmental unit under chapters 276A 148.2 and 473F.Beginning in fiscal year 2004, and in each year148.3thereafter, the commissioner of finance shall deposit in an148.4education reserve account, which account is hereby established,148.5the increased amount of the state general levy received for148.6deposit in the general fund for that year over the amount of the148.7state general levy received for deposit in the general fund in148.8fiscal year 2003. The amounts in the education reserve account148.9do not lapse or cancel each year, but remain until appropriated148.10by law for education aid or higher education funding.148.11 The commissioner shall increase or decrease the preliminary 148.12 or final rate for a year as necessary to account for errors and 148.13 tax base changes that affected a preliminary or final rate for 148.14 either of the two preceding years. Adjustments are allowed to 148.15 the extent that the necessary information is available to the 148.16 commissioner at the time the rates for a year must be certified, 148.17 and for the following reasons: 148.18 (1) an erroneous report of taxable value by a local 148.19 official; 148.20 (2) an erroneous calculation by the commissioner; and 148.21 (3) an increase or decrease in taxable value for 148.22 commercial-industrial or seasonal residential recreational 148.23 property reported on the abstracts of tax lists submitted under 148.24 section 275.29 that was not reported on the abstracts of 148.25 assessment submitted under section 270.11, subdivision 2, for 148.26 the same year. 148.27 The commissioner may, but need not, make adjustments if the 148.28 total difference in the tax levied for the year would be less 148.29 than $100,000. 148.30 [EFFECTIVE DATE.] This section is effective June 30, 2003. 148.31 Sec. 21. Minnesota Statutes 2002, section 278.01, 148.32 subdivision 4, is amended to read: 148.33 Subd. 4. [FILING OF APPEAL DEADLINE; EXCEPTION.] 148.34 Notwithstanding theMarch 31April 30 date in subdivision 1, 148.35 whenever the exempt status, valuation, or classification of real 148.36 or personal property is changed other than by an abatement or a 149.1 court decision, and the owner responsible for payment of the tax 149.2 is not given notice of the change until afterJanuary 31149.3 February 28 of the year the tax is payable or after July 1 in 149.4 the case of property subject to section 273.125, subdivision 4, 149.5 an eligible petitioner, as defined and limited in subdivision 1, 149.6 has 60 days from the date of mailing of the notice to initiate 149.7 an appeal of the property's exempt status, classification, or 149.8 valuation change under this chapter. 149.9 [EFFECTIVE DATE.] This section is effective for taxes 149.10 payable in 2003 and thereafter. 149.11 Sec. 22. Minnesota Statutes 2002, section 278.05, 149.12 subdivision 6, is amended to read: 149.13 Subd. 6. [DISMISSAL OF PETITION; EXCLUSION OF CERTAIN 149.14 EVIDENCE.] (a) Information, including income and expense 149.15 figures, verified net rentable areas, and anticipated income and 149.16 expenses, for income-producing property must be provided to the 149.17 county assessorwithin 60 days after the petition has been filed149.18under this chapterno later than 60 days after the applicable 149.19 filing deadline contained in section 278.01, subdivision 1 or 149.20 4. Failure to provide the information required in this 149.21 paragraph shall result in the dismissal of the petition, 149.22 unless (1) the failure to provide it was due to the 149.23 unavailability of the evidence atthatthe time that the 149.24 information was due, or (2) the petitioner was not aware of or 149.25 informed of the requirement to provide the information. 149.26 If the petitioner proves that the requirements under clause (2) 149.27 are met, the petitioner has an additional 30 days to provide the 149.28 information from the time the petitioner became aware of or was 149.29 informed of the requirement to provide the information, 149.30 otherwise the petition shall be dismissed. 149.31 (b) Provided that the information as contained in paragraph 149.32 (a) is timely submitted to the county assessor, the county 149.33 assessor shall furnish the petitioner at least five days before 149.34 the hearing under this chapter with the property's appraisal, if 149.35 any, which will be presented to the court at the hearing. The 149.36 petitioner shall furnish to the county assessor at least five 150.1 days before the hearing under this chapter with the property's 150.2 appraisal, if any, which will be presented to the court at the 150.3 hearing. An appraisal of the petitioner's property done by or 150.4 for the county shall not be admissible as evidence if the county 150.5 assessor does not comply with the provisions in this paragraph. 150.6 The petition shall be dismissed if the petitioner does not 150.7 comply with the provisions in this paragraph. 150.8 [EFFECTIVE DATE.] This section is effective for petitions 150.9 filed on or after July 1, 2003. 150.10 Sec. 23. Minnesota Statutes 2002, section 290A.03, 150.11 subdivision 8, is amended to read: 150.12 Subd. 8. [CLAIMANT.] (a) "Claimant" means a person, other 150.13 than a dependent, as defined under sections 151 and 152 of the 150.14 Internal Revenue Code disregarding section 152(b)(3) of the 150.15 Internal Revenue Code, who filed a claim authorized by this 150.16 chapter and who was a resident of this state as provided in 150.17 chapter 290 during the calendar year for which the claim for 150.18 relief was filed. 150.19 (b) In the case of a claim relating to rent constituting 150.20 property taxes, the claimant shall have resided in a rented or 150.21 leased unit on which ad valorem taxes or payments made in lieu 150.22 of ad valorem taxes, including payments of special assessments 150.23 imposed in lieu of ad valorem taxes, are payable at some time 150.24 during the calendar year covered by the claim. 150.25 (c) "Claimant" shall not include a resident of a nursing 150.26 home, intermediate care facility, or long-term residential 150.27 facility whose rent constituting property taxes is paid pursuant 150.28 to the supplemental security income program under title XVI of 150.29 the Social Security Act, the Minnesota supplemental aid program 150.30 under sections 256D.35 to 256D.54, the medical assistance 150.31 program pursuant to title XIX of the Social Security Act,orthe 150.32 general assistance medical care program pursuant to section 150.33 256D.03, subdivision 3; or the group residential housing program 150.34 under chapter 256I. 150.35 If only a portion of the rent constituting property taxes is 150.36 paid by these programs, the resident shall be a claimant for 151.1 purposes of this chapter, but the refund calculated pursuant to 151.2 section 290A.04 shall be multiplied by a fraction, the numerator 151.3 of which is income as defined in subdivision 3, paragraphs (1) 151.4 and (2), reduced by the total amount of income from the above 151.5 sources other than vendor payments under the medical assistance 151.6 program or the general assistance medical care program and the 151.7 denominator of which is income as defined in subdivision 3, 151.8 paragraphs (1) and (2), plus vendor payments under the medical 151.9 assistance program or the general assistance medical care 151.10 program, to determine the allowable refund pursuant to this 151.11 chapter. 151.12 (d) Notwithstanding paragraph (c), if the claimant was a 151.13 resident of the nursing home, intermediate care facilityor, 151.14 long-term residential facility, or facility for which the rent 151.15 was paid for the claimant by the group residential housing 151.16 program for only a portion of the calendar year covered by the 151.17 claim, the claimant may compute rent constituting property taxes 151.18 by disregarding the rent constituting property taxes from the 151.19 nursing home, intermediate care facility,orlong-term151.20residentialfacility and use only that amount of rent 151.21 constituting property taxes or property taxes payable relating 151.22 to that portion of the year when the claimant was not in the 151.23 facility. The claimant's household income is the income for the 151.24 entire calendar year covered by the claim. 151.25 (e) In the case of a claim for rent constituting property 151.26 taxes of a part-year Minnesota resident, the income and rental 151.27 reflected in this computation shall be for the period of 151.28 Minnesota residency only. Any rental expenses paid which may be 151.29 reflected in arriving at federal adjusted gross income cannot be 151.30 utilized for this computation. When two individuals of a 151.31 household are able to meet the qualifications for a claimant, 151.32 they may determine among them as to who the claimant shall be. 151.33 If they are unable to agree, the matter shall be referred to the 151.34 commissioner of revenue whose decision shall be final. If a 151.35 homestead property owner was a part-year Minnesota resident, the 151.36 income reflected in the computation made pursuant to section 152.1 290A.04 shall be for the entire calendar year, including income 152.2 not assignable to Minnesota. 152.3 (f) If a homestead is occupied by two or more renters, who 152.4 are not husband and wife, the rent shall be deemed to be paid 152.5 equally by each, and separate claims shall be filed by each. 152.6 The income of each shall be each renter's household income for 152.7 purposes of computing the amount of credit to be allowed. 152.8 [EFFECTIVE DATE.] This section is effective for claims 152.9 based on rent paid in 2003 and thereafter. 152.10 Sec. 24. Minnesota Statutes 2002, section 366.011, is 152.11 amended to read: 152.12 366.011 [CHARGES FOR EMERGENCY SERVICES; COLLECTION.] 152.13 A town may impose a reasonable service charge for emergency 152.14 services, including fire, rescue, medical, and related services 152.15 provided by the town or contracted for by the town. If the 152.16 service charge remains unpaid 30 days after a notice of 152.17 delinquency is sent to the recipient of the service or the 152.18 recipient's representative or estate, the town or its contractor 152.19 on behalf of the town may use any lawful means allowed to a 152.20 private party for the collection of an unsecured delinquent 152.21 debt. The town may also use the authority of section 366.012 to 152.22 collect unpaid service charges of this kind from delinquent 152.23 recipients of serviceswho are owners of taxable real property152.24in the town. 152.25 The powers conferred by this section are in addition and 152.26 supplemental to the powers conferred by any other law for a town 152.27 to impose a service charge or assessment for a service provided 152.28 by the town or contracted for by the town. 152.29 [EFFECTIVE DATE.] This section is effective for emergency 152.30 services rendered after June 30, 2003. 152.31 Sec. 25. Minnesota Statutes 2002, section 366.012, is 152.32 amended to read: 152.33 366.012 [COLLECTION OF UNPAID SERVICE CHARGES.] 152.34 If a town is authorized to impose a service chargeon the152.35owner, lessee, or occupant of property, or any of them,for a 152.36 governmental service provided by the town, the town board may 153.1 certify to the county auditor of the county in which the 153.2 recipient of the services owns real property, on or before 153.3 October 15 for each year, any unpaid service charges which shall 153.4 then be collected together with property taxes levied against 153.5 the property. The county auditor shall remit to the town all 153.6 service charges collected by the auditor on behalf of the town. 153.7 Charges collected under this section for motor vehicle fires, as 153.8 provided by section 161.465, subdivision 2, shall not exceed the 153.9 amount authorized in that subdivision, but a town may recover 153.10 expenses incurred for extinguishing a motor vehicle fire in 153.11 excess of that amount by any other authorized method. A charge 153.12 may be certified to the auditor only if, on or before September 153.13 15, the town has given written notice to the property owner of 153.14 its intention to certify the charge to the auditor. The service 153.15 charges shall be subject to the same penalties, interest, and 153.16 other conditions provided for the collection of property taxes. 153.17 This section is in addition to other law authorizing the 153.18 collection of unpaid costs and service charges. 153.19 [EFFECTIVE DATE.] This section is effective for taxes 153.20 payable in 2004 and thereafter. 153.21 Sec. 26. Minnesota Statutes 2002, section 473.167, 153.22 subdivision 3, is amended to read: 153.23 Subd. 3. [TAX.] The council may levy a tax on all taxable 153.24 property in the metropolitan area, as defined in section 153.25 473.121, to provide funds for loans made pursuant to 153.26 subdivisions 2 and 2a. This tax for the right-of-way 153.27 acquisition loan fund shall be certified by the council, levied, 153.28 and collected in the manner provided by section 473.13. The tax 153.29 shall be in addition to that authorized by section 473.249 and 153.30 any other law and shall not affect the amount or rate of taxes 153.31 which may be levied by the council or any metropolitan agency or 153.32 local governmental unit. The amount of the levy shall be as 153.33 determined and certified by the council, provided that the tax 153.34 levied by the metropolitan council for the right-of-way 153.35 acquisition loan fund shall not exceedthe product of (1) the153.36metropolitan council's property tax levy under this subdivision154.1for taxes payable in 1997 multiplied by (2) an index for market154.2valuation changes equal to the total market valuation of all154.3taxable property located within the metropolitan area for the154.4current taxes payable year divided by the total market valuation154.5of all taxable property located within the metropolitan area for154.6taxes payable in 1997.154.7For the purpose of determining the metropolitan council's154.8property tax levy limitation for the right-of-way acquisition154.9loan fund, "total market valuation" means the total market154.10valuation of all taxable property within the metropolitan area154.11without valuation adjustments for fiscal disparities (chapter154.12473F), tax increment financing (sections 469.174 to 469.179),154.13and high voltage transmission lines (section 273.425)$2,828,379 154.14 for taxes payable in 2004 and $2,828,379 for taxes payable in 154.15 2005. The amount of the levy for taxes payable in 2006 and 154.16 subsequent years shall not exceed the product of (1) the 154.17 metropolitan council's property tax levy limitation under this 154.18 subdivision for the previous year, multiplied by (2) one plus a 154.19 percentage equal to the growth in the implicit price deflator as 154.20 defined in section 275.70, subdivision 2. 154.21 [EFFECTIVE DATE; APPLICATION.] This section is effective 154.22 the day following final enactment and applies in the counties of 154.23 Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 154.24 Sec. 27. Minnesota Statutes 2002, section 473.246, is 154.25 amended to read: 154.26 473.246 [COUNCIL'S SUBMISSIONS TO LEGISLATIVE COMMISSION.] 154.27 The metropolitan council shall submit to the legislative 154.28 commission on metropolitan government information on the 154.29 council's tax rates and dollar amounts levied for the current 154.30 year, proposed property tax rates and levies, operating and 154.31 capital budgets, work program, capital improvement program, and 154.32 any other information requested by the commission, for review by 154.33 the legislative commission, as provided in section 3.8841. The 154.34 council shall submit to the legislative commission a report on 154.35 property tax levies as approved by the council, detailing any 154.36 differences between the amounts originally proposed and the 155.1 amounts finally approved by the council, and providing 155.2 explanation where the approved levy amounts differ from 155.3 recommendations of the legislative commission. 155.4 [EFFECTIVE DATE; APPLICATION.] This section is effective 155.5 the day following final enactment and applies in the counties of 155.6 Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 155.7 Sec. 28. Minnesota Statutes 2002, section 473.249, 155.8 subdivision 1, is amended to read: 155.9 Subdivision 1. [INDEXED LIMIT.] (a) The metropolitan 155.10 council may levy a tax on all taxable property in the 155.11 metropolitan area defined in section 473.121 to provide funds 155.12 for the purposes of sections 473.121 to 473.249 and for the 155.13 purpose of carrying out other responsibilities of the council as 155.14 provided by law. This tax for general purposes shall be levied 155.15 and collected in the manner provided by section 473.13. 155.16 (b) The property tax levied by the metropolitan council for 155.17 general purposes shall not exceed $10,117,123 for taxes payable 155.18 in 2004 and $9,331,123 for taxes payable in 2005. 155.19 (c) The property tax levy limitation for general purposes 155.20 for taxes payable in 2006 and subsequent years shall not exceed 155.21 the product of: (1) the metropolitan council's property tax 155.22 levy limitation for general purposes for the previous year 155.23 determined under this subdivision multiplied by (2)the lesser155.24of155.25(i) an index for market valuation changes equal to the155.26total market valuation of all taxable property located within155.27the metropolitan area for the current taxes payable year divided155.28by the total market valuation of all taxable property located155.29within the metropolitan area for the previous taxes payable155.30year;155.31(ii) an index equal to the implicit price deflator for155.32government consumption expenditures and gross investment for155.33state and local governments for the most recent month for which155.34data are available divided by the same implicit price deflator155.35for the same month of the previous year; or155.36(iii) 103 percent.156.1(c) For the purpose of determining the metropolitan156.2council's property tax levy limitation for general purposes,156.3"total market valuation" means the total market valuation of all156.4taxable property within the metropolitan area without valuation156.5adjustments for fiscal disparities (chapter 473F), tax increment156.6financing (sections 469.174 to 469.179), and high voltage156.7transmission lines (section 273.425)one plus a percentage equal 156.8 to the growth in the implicit price deflator as defined in 156.9 section 275.70, subdivision 2. 156.10 [EFFECTIVE DATE; APPLICATION.] This section is effective 156.11 the day following final enactment and applies in the counties of 156.12 Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 156.13 Sec. 29. Minnesota Statutes 2002, section 473.253, 156.14 subdivision 1, is amended to read: 156.15 Subdivision 1. [SOURCES OF FUNDS.] The council shall 156.16 credit to the livable communities demonstration account the 156.17 revenues provided in this subdivision. This tax shall be levied 156.18 and collected in the manner provided by section 473.13. The 156.19 levy shall not exceed the following amount for the years 156.20 specified: 156.21 (a)(1) for taxes payable in 1996, 50 percent of (i) the 156.22 metropolitan mosquito control commission's property tax levy for 156.23 taxes payable in 1995 multiplied by (ii) an index for market 156.24 valuation changes equal to the total market valuation of all 156.25 taxable property located within the metropolitan area for the 156.26 current taxes payable year divided by the total market valuation 156.27 of all taxable property located in the metropolitan area for the 156.28 previous taxes payable year;and156.29 (2) for taxes payable in 1997and subsequent yearsthrough 156.30 2003, the product of (i) the property tax levy limit under this 156.31 subdivision for the previous year multiplied by (ii) an index 156.32 for market valuation changes equal to the total market valuation 156.33 of all taxable property located within the metropolitan area for 156.34 the current taxes payable year divided by the total market 156.35 valuation of all taxable property located in the metropolitan 156.36 area for the previous taxes payable year; 157.1 (3) for taxes payable in 2004 and 2005, $6,933,163; and 157.2 (4) for taxes payable in 2006 and subsequent years, the 157.3 product of (i) the property tax levy limit under this 157.4 subdivision for the previous year multiplied by (ii) one plus a 157.5 percentage equal to the growth in the implicit price deflator as 157.6 defined in section 275.70, subdivision 2. 157.7For the purposes of this subdivision, "total market157.8valuation" means the total market valuation of all taxable157.9property within the metropolitan area without valuation157.10adjustments for fiscal disparities under chapter 473F, tax157.11increment financing under sections 469.174 to 469.179, and high157.12voltage transmission lines under section 273.425.157.13 (b) The metropolitan council, for the purposes of the fund, 157.14 is considered a unique taxing jurisdiction for purposes of 157.15 receiving aid pursuant to section 273.1398. For aid to be 157.16 received in 1996, the fund's homestead and agricultural credit 157.17 base shall equal 50 percent of the metropolitan mosquito control 157.18 commission's certified homestead and agricultural credit aid for 157.19 1995, determined under section 273.1398, subdivision 2, less any 157.20 permanent aid reduction under section 477A.0132. For aid to be 157.21 received under section 273.1398 in 1997 and subsequent years, 157.22 the fund's homestead and agricultural credit base shall be 157.23 determined in accordance with section 273.1398, subdivision 1. 157.24 [EFFECTIVE DATE; APPLICATION.] This section is effective 157.25 the day following final enactment and applies in the counties of 157.26 Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington. 157.27 Sec. 30. Minnesota Statutes 2002, section 473.702, is 157.28 amended to read: 157.29 473.702 [ESTABLISHMENT OF DISTRICT; PURPOSE; AREA; 157.30 GOVERNING BODY.] 157.31 A metropolitan mosquito control district is created to 157.32 control mosquitoes, disease vectoring ticks, and black gnats 157.33 (Simuliidae) in the metropolitan area. The area of the district 157.34 is the metropolitan area defined in section 473.121.The area157.35of the district is the metropolitan area excluding the part of157.36Carver county west of the west line of township 116N, range 24W,158.1township 115N, range 24W, and township 114N, range 24W.The 158.2 metropolitan mosquito control commission is created as the 158.3 governing body of the district, composed and exercising the 158.4 powers as prescribed in sections 473.701 to 473.716. 158.5 [EFFECTIVE DATE.] This section is effective for taxes 158.6 payable in 2004 and thereafter. 158.7 Sec. 31. Minnesota Statutes 2002, section 473.711, 158.8 subdivision 2a, is amended to read: 158.9 Subd. 2a. [TAX LEVY.] (a) The commission may levy a tax on 158.10 all taxable property in the district as defined in section 158.11 473.702 to provide funds for the purposes of sections 473.701 to 158.12 473.716. The tax shall not exceed the property tax levy 158.13 limitation determined in this subdivision. A participating 158.14 county may agree to levy an additional tax to be used by the 158.15 commission for the purposes of sections 473.701 to 473.716 but 158.16 the sum of the county's and commission's taxes may not exceed 158.17 the county's proportionate share of the property tax levy 158.18 limitation determined under this subdivision based on the ratio 158.19 of its total net tax capacity to the total net tax capacity of 158.20 the entire district as adjusted by section 270.12, subdivision 3. 158.21 The auditor of each county in the district shall add the amount 158.22 of the levy made by the district to other taxes of the county 158.23 for collection by the county treasurer with other taxes. When 158.24 collected, the county treasurer shall make settlement of the tax 158.25 with the district in the same manner as other taxes are 158.26 distributed to political subdivisions. No county shall levy any 158.27 tax for mosquito, disease vectoring tick, and black gnat 158.28 (Simuliidae) control except under this section. The levy shall 158.29 be in addition to other taxes authorized by law. 158.30 (b) The property tax levied by the metropolitan mosquito 158.31 control commission shall not exceedthe following amount for the158.32years specified:158.33(1) for taxes payable in 1996, the product of (i) the158.34commission's property tax levy limitation for taxes payable in158.351995 determined under this subdivision minus 50 percent of the158.36amount actually levied for taxes payable in 1995, multiplied by159.1(ii) an index for market valuation changes equal to the total159.2market valuation of all taxable property located within the159.3district for the current taxes payable year divided by the total159.4market valuation of all taxable property located within the159.5district for the previous taxes payable year;159.6(2) for taxes payable in 1997 and subsequent years,the 159.7 product of (i) the commission's property tax levy limitation for 159.8 the previous year determined under this subdivision multiplied 159.9 by (ii) an index for market valuation changes equal to the total 159.10 market valuation of all taxable property for the current tax 159.11 payable year located within the districtfor the current taxes159.12payable yearplus any area that has been added to the district 159.13 since the previous year, divided by the total market valuation 159.14 of all taxable property located within the district for the 159.15 previous taxes payable year; and. 159.16(3)(c) For the purpose of determining the commission's 159.17 property tax levy limitation under this subdivision, "total 159.18 market valuation" means the total market valuation of all 159.19 taxable property within the district without valuation 159.20 adjustments for fiscal disparities (chapter 473F), tax increment 159.21 financing (sections 469.174 to 469.179), and high voltage 159.22 transmission lines (section 273.425). 159.23 [EFFECTIVE DATE.] This section is effective for taxes 159.24 payable in 2004 and thereafter. 159.25 Sec. 32. [CITY OF MEDFORD.] 159.26 Subdivision 1. [SPECIAL TAXING AUTHORITY.] After published 159.27 notice and public hearing, the governing body of the city of 159.28 Medford may, by resolution, establish a special taxing area 159.29 within the boundaries of the city to finance a portion of the 159.30 cost of an expansion and improvement of the city's wastewater 159.31 treatment facility. The city may annually impose a levy on the 159.32 tax capacity of properties within the special taxing area. 159.33 Subd. 2. [TAXING AREA.] The city may include within the 159.34 special taxing area, as it determines appropriate, one or more 159.35 parcels of property classified under Minnesota Statutes, section 159.36 273.13, subdivision 24. 160.1 Subd. 3. [LEVY LIMIT.] The amount of the levy for a year 160.2 may not exceed 45 percent of the cost of principal and interest 160.3 payments on the financing for the expansion and improvement of 160.4 the wastewater treatment facility. Any levy imposed under this 160.5 section is not subject to any other levy limit that applies to 160.6 the city, notwithstanding any law to the contrary. 160.7 Subd. 4. [EXPIRATION.] This section expires upon repayment 160.8 of the financing, including any refinancing, for the wastewater 160.9 treatment facility. 160.10 Subd. 5. [EFFECTIVE DATE.] This section is effective upon 160.11 local approval under Minnesota Statutes, section 645.021 by the 160.12 governing body of the city of Medford. 160.13 Sec. 33. [APPROPRIATION.] 160.14 There is appropriated to the commissioner of revenue from 160.15 the general fund $16,000 in fiscal year 2003 and $8,000 in 160.16 fiscal year 2004 for printing and distributing the local boards 160.17 of appeals and equalization handbook under section 19. 160.18 Sec. 34. [REPEALER.] 160.19 Minnesota Statutes 2002, section 473.711, subdivision 2b, 160.20 is repealed. 160.21 [EFFECTIVE DATE.] This section is effective the day 160.22 following final enactment. 160.23 ARTICLE 6 160.24 INTERGOVERNMENTAL AIDS 160.25 Section 1. Minnesota Statutes 2002, section 4A.02, is 160.26 amended to read: 160.27 4A.02 [STATE DEMOGRAPHER.] 160.28 (a) The director shall appoint a state demographer. The 160.29 demographer must be professionally competent in demography and 160.30 must possess demonstrated ability based upon past performance. 160.31 (b) The demographer shall: 160.32 (1) continuously gather and develop demographic data 160.33 relevant to the state; 160.34 (2) design and test methods of research and data 160.35 collection; 160.36 (3) periodically prepare population projections for the 161.1 state and designated regions and periodically prepare 161.2 projections for each county or other political subdivision of 161.3 the state as necessary to carry out the purposes of this 161.4 section; 161.5 (4) review, comment on, and prepare analysis of population 161.6 estimates and projections made by state agencies, political 161.7 subdivisions, other states, federal agencies, or nongovernmental 161.8 persons, institutions, or commissions; 161.9 (5) serve as the state liaison with the United States 161.10 Bureau of the Census, coordinate state and federal demographic 161.11 activities to the fullest extent possible, and aid the 161.12 legislature in preparing a census data plan and form for each 161.13 decennial census; 161.14 (6) compile an annual study of population estimates on the 161.15 basis of county, regional, or other political or geographical 161.16 subdivisions as necessary to carry out the purposes of this 161.17 section and section 4A.03; 161.18 (7) by January 1 of each year, issue a report to the 161.19 legislature containing an analysis of the demographic 161.20 implications of the annual population study and population 161.21 projections; 161.22 (8) prepare maps for all counties in the state, all 161.23 municipalities with a population of 10,000 or more, and other 161.24 municipalities as needed for census purposes, according to scale 161.25 and detail recommended by the United States Bureau of the 161.26 Census, with the maps of cities showing precinct boundaries; 161.27 (9) prepare an estimate of population and of the number of 161.28 households for each governmental subdivision for which the 161.29 metropolitan council does not prepare an annual estimate, and 161.30 convey the estimates to the governing body of each political 161.31 subdivision by May 1 of each year; 161.32 (10) direct, under section 414.01, subdivision 14, and 161.33 certify population and household estimates of annexed or 161.34 detached areas of municipalities or towns after being notified 161.35 of the order or letter of approval by the Minnesota municipal 161.36 board;and162.1 (11) prepare, for any purpose for which a population 162.2 estimate is required by law or needed to implement a law, a 162.3 population estimate of a municipality or town whose population 162.4 is affected by action under section 379.02 or 414.01, 162.5 subdivision 14; and 162.6 (12) prepare an estimate of average household size for each 162.7 statutory or home rule charter city with a population of 2,500 162.8 or more by May 1 of each year. 162.9 (c) A governing body may challenge an estimate made under 162.10 paragraph (b) by filing their specific objections in writing 162.11 with the state demographer by June 10. If the challenge does 162.12 not result in an acceptable estimate by June 24, the governing 162.13 body may have a special census conducted by the United States 162.14 Bureau of the Census. The political subdivision must notify the 162.15 state demographer by July 1 of its intent to have the special 162.16 census conducted. The political subdivision must bear all costs 162.17 of the special census. Results of the special census must be 162.18 received by the state demographer by the next April 15 to be 162.19 used in that year's May 1 estimate to the political subdivision 162.20 under paragraph (b). 162.21 [EFFECTIVE DATE.] This section is effective beginning July 162.22 1, 2003. 162.23 Sec. 2. Minnesota Statutes 2002, section 273.1398, 162.24 subdivision 4a, is amended to read: 162.25 Subd. 4a. [AID OFFSET FOR COURT COSTS.] (a) In calendar 162.26 years 2004 and 2005, the commissioner of revenue shall pay the 162.27 amounts determined in this subdivision to the eligible counties 162.28 on the dates specified in subdivision 6. By July 15of the year162.29preceding the year in which the state assumes the cost of court162.30administration in the judicial district as specified under162.31section 480.183, 2003, the supreme court shall determine and 162.32 certify to the commissioner of revenue for each county the 162.33 county's share of the costs to be assumed in the judicial 162.34 districts specified under section 480.183, subdivision 1, during 162.35 each of the succeeding fiscalyearyears. 162.36 (b) The amount certified in paragraph (a) shall be equal to 163.1 the following: 163.2 (1) 103 percent of the required court administration 163.3 expenditures as defined under section 480.183, subdivision 3, 163.4 for calendar year 2003, as determined under subdivision 4b, 163.5 paragraph (a); plus 163.6 (2) an adjustment for any cumulative percentage increase in 163.7 salary expenditures as defined under section 480.183, 163.8 subdivision 2, in excess of a maintenance of effort increase of 163.9 six percent; less 163.10 (3) an amount equal to the county's share of transferred 163.11 fines collected by the district courts in the county duringthe163.12calendar year preceding certification2002, increased by two 163.13 percent for counties in districts one and three, and by 4.04 163.14 percent for counties in districts six and ten. 163.15 The court and the county may, if both parties agree, 163.16 negotiate and certify an amount higher than the amount 163.17 calculated under this paragraph. 163.18 (c) For purposes of this subdivision, the adjustment in 163.19 paragraph (b), clause (2), shall be equal to: 163.20 (1) the sum of the court administration expenditures as 163.21 defined under section 480.183, subdivision 3, required under 163.22 subdivision 4b, paragraph (a), plus the temporary aid payment 163.23 under subdivision 4c; multiplied by 163.24 (2) the difference between (i) the cumulative percentage 163.25 increase in actual and anticipated salary settlements for court 163.26 employees from July 1, 2001, until the date of the court 163.27 transfer and (ii) the percentage specified in subdivision 4b, 163.28 paragraph (a). 163.29 (d)Payments to a county under subdivision 2 or section163.30273.166 for the calendar year in which the state assumes the163.31cost of court administration as defined under section 480.183,163.32subdivision 3, in the judicial district must be permanently163.33reduced by an amount equal to 75 percent of the net cost to the163.34state for assumption of district court costs as certified in163.35paragraph (a).For calendar year 2004, each county in judicial 163.36 districts one and three shall receive an amount equal to 25 164.1 percent of the amount certified under paragraph (b), and each 164.2 county in judicial districts six and ten shall receive an amount 164.3 equal to the amount certified under paragraph (b). For calendar 164.4 year 2005, each county in judicial districts six and ten shall 164.5 receive an amount equal to 25 percent of the amount certified 164.6 under paragraph (b), and each county in judicial districts one 164.7 and three receives zero. 164.8(e) Payments to a county under subdivision 2 or section164.9273.166 for the calendar year after the calendar year in which164.10the state assumes the cost of court administration as defined164.11under section 480.183, subdivision 3, in the judicial district164.12must be permanently reduced by an amount equal to 25 percent of164.13the net cost to the state for assumption of district court costs164.14as certified in paragraph (a), provided that this amount must be164.15increased or decreased by an amount equal to the positive or164.16negative difference between the amount of fee and fine revenue164.17certified under paragraph (b), clause (3), and the actual amount164.18of fee and fine revenue of the county for the calendar year when164.19certification takes place.164.20(f) Payments to a county under subdivision 2 for calendar164.21year 2001 are permanently increased by an amount equal to 7.5164.22percent of the county's share of transferred fines collected by164.23the district courts in the county during calendar year 1998, as164.24determined under paragraph (a). If the amount determined in164.25paragraph (a) exceeds the amount of aid a county is scheduled to164.26be paid under subdivision 2 in 2000, then the county shall not164.27receive an aid increase under this paragraph.164.28(g) Payments to a county under subdivision 2 or section164.29273.166, for the cost of mandated services, as defined in164.30section 480.183, subdivision 4, in the judicial district, must164.31be permanently reduced in 2002 by an amount equal to the cost to164.32the state for assumption of mandated court services as defined164.33in section 480.183, subdivision 4. The supreme court shall164.34determine the amount for each county and certify it to the164.35commissioner of revenue by July 15, 2001.164.36 [EFFECTIVE DATE.] This section is effective for aid payable 165.1 in 2004 and 2005. 165.2 Sec. 3. Minnesota Statutes 2002, section 273.1398, 165.3 subdivision 4c, is amended to read: 165.4 Subd. 4c. [TEMPORARY AID; COURT ADMINISTRATION COSTS.] For 165.5 calendar years 2004 and 2005, each county in a judicial district 165.6 that has not been transferred to the state by January 1 of that 165.7 year shall receiveadditional homestead and agricultural165.8credittemporary court maintenance of effort cost aid. This 165.9 amount is in addition to the amount calculated under subdivision 165.10 2 and must not be included in the definition of homestead and 165.11 agricultural credit base under subdivision 1, paragraph (j). 165.12 The amount ofadditionalaid is equal to the difference between 165.13 (1) the amount budgeted for court administration costs in 2001 165.14 as determined under subdivision 4b, paragraph (b), multiplied by 165.15 the maintenance of effort percent for the calendar year as 165.16 determined under subdivision 4b, paragraph (a), and (2) the 165.17 amount calculated under subdivision 4b, paragraph (a), for 165.18 calendar year 2003, except that the payment under this section 165.19 is reduced by 50 percent in the calendar year in which the 165.20 district is transferred to the state. This additional aid must 165.21 be used only to fund court administration expenditures as 165.22 defined in section 480.183, subdivision 3. This amount must be 165.23 added to the state court's base budget in the year when the 165.24 court in that judicial district in which the county is located 165.25 is transferred to the state. 165.26 [EFFECTIVE DATE.] This section is effective for aid payable 165.27 in 2004 and 2005 for counties in judicial districts one, three, 165.28 six, and ten. 165.29 Sec. 4. Minnesota Statutes 2002, section 273.1398, 165.30 subdivision 6, is amended to read: 165.31 Subd. 6. [PAYMENT.] The commissioner shall certify the 165.32 aids provided in subdivisions2, 2b, 3,3 and 5 before September 165.33 1 of the year preceding the distribution year to the county 165.34 auditor of the affected local government. The aids provided in 165.35 subdivisions2, 2b,3, 4a, 4c, and 5 must be paid to local 165.36 governments other than school districts at the times provided in 166.1 section 477A.015 for payment of local government aid to taxing 166.2 jurisdictions, except that the first one-half payment of 166.3 disparity reduction aid provided in subdivision 3 must be paid 166.4 on or before August 31. The disparity reduction credit provided 166.5 in subdivision 4 must be paid to taxing jurisdictions other than 166.6 school districts at the time provided in section 473H.10, 166.7 subdivision 3. Aids and credit reimbursements to school 166.8 districts must be certified to the commissioner of children, 166.9 families, and learning and paid under section 273.1392. Payment 166.10 shall not be made to any taxing jurisdiction that has ceased to 166.11 levy a property tax. 166.12 [EFFECTIVE DATE.] This section is effective for aid payable 166.13 in 2004 and thereafter. 166.14 Sec. 5. Minnesota Statutes 2002, section 273.1398, 166.15 subdivision 8, is amended to read: 166.16 Subd. 8. [APPROPRIATION.](a)An amount sufficient to pay 166.17 the aids and credits provided under this section for school 166.18 districts, intermediate school districts, or any group of school 166.19 districts levying as a single taxing entity, is annually 166.20 appropriated from the general fund to the commissioner of 166.21 children, families, and learning. An amount sufficient to pay 166.22 the aids and credits provided under this section for counties, 166.23 cities, towns, and special taxing districts is annually 166.24 appropriated from the general fund to the commissioner of 166.25 revenue. A jurisdiction's aid amount may be increased or 166.26 decreased based on any prior year adjustments for homestead 166.27 credit or other property tax credit or aid programs. 166.28(b) The commissioner of finance shall bill the commissioner166.29of revenue for the cost of preparation of local impact notes as166.30required by section 3.987 only to the extent to which those166.31costs exceed those costs incurred in fiscal year 1997 and for166.32any other new costs attributable to the local impact note166.33function required by section 3.987, not to exceed $100,000 in166.34fiscal years 1998 and 1999 and $200,000 in fiscal year 2000 and166.35thereafter.166.36The commissioner of revenue shall deduct the amount billed167.1under this paragraph from aid payments to be made to cities and167.2counties under subdivision 2 on a pro rata basis. The amount167.3deducted under this paragraph is appropriated to the167.4commissioner of finance for the preparation of local impact167.5notes.167.6 [EFFECTIVE DATE.] This section is effective for aid payable 167.7 in 2004 and thereafter. 167.8 Sec. 6. Minnesota Statutes 2002, section 477A.011, 167.9 subdivision 34, is amended to read: 167.10 Subd. 34. [CITY REVENUE NEED.] (a) For a city with a 167.11 population equal to or greater than 2,500, "city revenue need" 167.12 is the sum of (1)3.4623125.0734098 times the pre-1940 housing 167.13 percentage; plus (2)2.093826 times the commercial industrial167.14percentage plus (3) 6.86255219.141678 times the population 167.15 decline percentage; plus(4) .00026 times the city167.16population(3) 2504.06334 times the road accidents factor; 167.17 plus(5) 152.0141(4) 355.0547; minus (5) the metropolitan area 167.18 factor; minus (6) 49.10638 times the household size. 167.19 (b) For a city with a population less than 2,500, "city 167.20 revenue need" is the sum of (1)1.7959192.387 times the 167.21 pre-1940 housing percentage; plus (2)1.5621382.67591 times the 167.22 commercial industrial percentage; plus (3)4.1775683.16042 167.23 times the population decline percentage; plus (4)1.040131.206 167.24 times the transformed population; minus (5)107.47562.772. 167.25 (c) The city revenue need cannot be less than zero. 167.26(d) For calendar year 1998 and subsequent years, the city167.27revenue need for a city, as determined in paragraphs (a) to (c),167.28is multiplied by the ratio of the annual implicit price deflator167.29for government consumption expenditures and gross investment for167.30state and local governments as prepared by the United States167.31Department of Commerce, for the most recently available year to167.32the 1993 implicit price deflator for state and local government167.33purchases.167.34 [EFFECTIVE DATE.] This section is effective for aid payable 167.35 in 2004 and thereafter. 167.36 Sec. 7. Minnesota Statutes 2002, section 477A.011, 168.1 subdivision 36, is amended to read: 168.2 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 168.3 provided in this subdivision, "city aid base"means, for each168.4city, the sum of the local government aid and equalization aid168.5it was originally certified to receive in calendar year 1993168.6under Minnesota Statutes 1992, section 477A.013, subdivisions 3168.7and 5, and the amount of disparity reduction aid it received in168.8calendar year 1993 under Minnesota Statutes 1992, section168.9273.1398, subdivision 3is zero. 168.10 (b)For aids payable in 1996 and thereafter, a city that in168.111992 or 1993 transferred an amount from governmental funds to168.12its sewer and water fund, which amount exceeded its net levy for168.13taxes payable in the year in which the transfer occurred, has a168.14"city aid base" equal to the sum of (i) its city aid base, as168.15calculated under paragraph (a), and (ii) one-half of the168.16difference between its city aid distribution under section168.17477A.013, subdivision 9, for aids payable in 1995 and its city168.18aid base for aids payable in 1995.168.19(c)The city aid base for any city with a population less 168.20 than 500 is increased by $40,000 for aids payable in calendar 168.21 year 1995 and thereafter, and the maximum amount of total aid it 168.22 may receive under section 477A.013, subdivision 9, paragraph 168.23 (c), is also increased by $40,000 for aids payable in calendar 168.24 year 1995 only, provided that: 168.25 (i) the average total tax capacity rate for taxes payable 168.26 in 1995 exceeds 200 percent; 168.27 (ii) the city portion of the tax capacity rate exceeds 100 168.28 percent; and 168.29 (iii) its city aid base is less than $60 per capita. 168.30(d)(c) The city aid base for a city is increased by 168.31 $20,000 in 1998 and thereafter and the maximum amount of total 168.32 aid it may receive under section 477A.013, subdivision 9, 168.33 paragraph (c), is also increased by $20,000 in calendar year 168.34 1998 only, provided that: 168.35 (i) the city has a population in 1994 of 2,500 or more; 168.36 (ii) the city is located in a county, outside of the 169.1 metropolitan area, which contains a city of the first class; 169.2 (iii) the city's net tax capacity used in calculating its 169.3 1996 aid under section 477A.013 is less than $400 per capita; 169.4 and 169.5 (iv) at least four percent of the total net tax capacity, 169.6 for taxes payable in 1996, of property located in the city is 169.7 classified as railroad property. 169.8(e)(d) The city aid base for a city is increased by 169.9 $200,000 in 1999 and thereafter and the maximum amount of total 169.10 aid it may receive under section 477A.013, subdivision 9, 169.11 paragraph (c), is also increased by $200,000 in calendar year 169.12 1999 only, provided that: 169.13 (i) the city was incorporated as a statutory city after 169.14 December 1, 1993; 169.15 (ii) its city aid base does not exceed $5,600; and 169.16 (iii) the city had a population in 1996 of 5,000 or more. 169.17(f)(e) The city aid base for a city is increased by 169.18 $450,000 in 1999 to 2008 and the maximum amount of total aid it 169.19 may receive under section 477A.013, subdivision 9, paragraph 169.20 (c), is also increased by $450,000 in calendar year 1999 only, 169.21 provided that: 169.22 (i) the city had a population in 1996 of at least 50,000; 169.23 (ii) its population had increased by at least 40 percent in 169.24 the ten-year period ending in 1996; and 169.25 (iii) its city's net tax capacity for aids payable in 1998 169.26 is less than $700 per capita. 169.27(g)(f) Beginning in 2004, the city aid base for a city is 169.28 equal to the sum of its city aid base in 2003 and the amount of 169.29 additional aid it was certified to receive under section 477A.06 169.30 in 2003. For 2004 only, the maximum amount of total aid a city 169.31 may receive under section 477A.013, subdivision 9, paragraph 169.32 (c), is also increased by the amount it was certified to receive 169.33 under section 477A.06 in 2003. 169.34(h)(g) The city aid base for a city is increased by 169.35 $150,000 for aids payable in 2000 and thereafter, and the 169.36 maximum amount of total aid it may receive under section 170.1 477A.013, subdivision 9, paragraph (c), is also increased by 170.2 $150,000 in calendar year 2000 only, provided that: 170.3 (1) the city has a population that is greater than 1,000 170.4 and less than 2,500; 170.5 (2) its commercial and industrial percentage for aids 170.6 payable in 1999 is greater than 45 percent; and 170.7 (3) the total market value of all commercial and industrial 170.8 property in the city for assessment year 1999 is at least 15 170.9 percent less than the total market value of all commercial and 170.10 industrial property in the city for assessment year 1998. 170.11(i)(h) The city aid base for a city is increased by 170.12 $200,000 in 2000 and thereafter, and the maximum amount of total 170.13 aid it may receive under section 477A.013, subdivision 9, 170.14 paragraph (c), is also increased by $200,000 in calendar year 170.15 2000 only, provided that: 170.16 (1) the city had a population in 1997 of 2,500 or more; 170.17 (2) the net tax capacity of the city used in calculating 170.18 its 1999 aid under section 477A.013 is less than $650 per 170.19 capita; 170.20 (3) the pre-1940 housing percentage of the city used in 170.21 calculating 1999 aid under section 477A.013 is greater than 12 170.22 percent; 170.23 (4) the 1999 local government aid of the city under section 170.24 477A.013 is less than 20 percent of the amount that the formula 170.25 aid of the city would have been if the need increase percentage 170.26 was 100 percent; and 170.27 (5) the city aid base of the city used in calculating aid 170.28 under section 477A.013 is less than $7 per capita. 170.29(j) The city aid base for a city is increased by $225,000170.30in calendar years 2000 to 2002 and the maximum amount of total170.31aid it may receive under section 477A.013, subdivision 9,170.32paragraph (c), is also increased by $225,000 in calendar year170.332000 only, provided that:170.34(1) the city had a population of at least 5,000;170.35(2) its population had increased by at least 50 percent in170.36the ten-year period ending in 1997;171.1(3) the city is located outside of the Minneapolis-St. Paul171.2metropolitan statistical area as defined by the United States171.3Bureau of the Census; and171.4(4) the city received less than $30 per capita in aid under171.5section 477A.013, subdivision 9, for aids payable in 1999.171.6(k)(i) The city aid base for a city is increased by 171.7 $102,000 in 2000 and thereafter, and the maximum amount of total 171.8 aid it may receive under section 477A.013, subdivision 9, 171.9 paragraph (c), is also increased by $102,000 in calendar year 171.10 2000 only, provided that: 171.11 (1) the city has a population in 1997 of 2,000 or more; 171.12 (2) the net tax capacity of the city used in calculating 171.13 its 1999 aid under section 477A.013 is less than $455 per 171.14 capita; 171.15 (3) the net levy of the city used in calculating 1999 aid 171.16 under section 477A.013 is greater than $195 per capita; and 171.17 (4) the 1999 local government aid of the city under section 171.18 477A.013 is less than 38 percent of the amount that the formula 171.19 aid of the city would have been if the need increase percentage 171.20 was 100 percent. 171.21(l)(j) The city aid base for a city is increased by 171.22 $32,000 in 2001 and thereafter, and the maximum amount of total 171.23 aid it may receive under section 477A.013, subdivision 9, 171.24 paragraph (c), is also increased by $32,000 in calendar year 171.25 2001 only, provided that: 171.26 (1) the city has a population in 1998 that is greater than 171.27 200 but less than 500; 171.28 (2) the city's revenue need used in calculating aids 171.29 payable in 2000 was greater than $200 per capita; 171.30 (3) the city net tax capacity for the city used in 171.31 calculating aids available in 2000 was equal to or less than 171.32 $200 per capita; 171.33 (4) the city aid base of the city used in calculating aid 171.34 under section 477A.013 is less than $65 per capita; and 171.35 (5) the city's formula aid for aids payable in 2000 was 171.36 greater than zero. 172.1(m)(k) The city aid base for a city is increased by $7,200 172.2 in 2001 and thereafter, and the maximum amount of total aid it 172.3 may receive under section 477A.013, subdivision 9, paragraph 172.4 (c), is also increased by $7,200 in calendar year 2001 only, 172.5 provided that: 172.6 (1) the city had a population in 1998 that is greater than 172.7 200 but less than 500; 172.8 (2) the city's commercial industrial percentage used in 172.9 calculating aids payable in 2000 was less than ten percent; 172.10 (3) more than 25 percent of the city's population was 60 172.11 years old or older according to the 1990 census; 172.12 (4) the city aid base of the city used in calculating aid 172.13 under section 477A.013 is less than $15 per capita; and 172.14 (5) the city's formula aid for aids payable in 2000 was 172.15 greater than zero. 172.16(n)(l) The city aid base for a city is increased by 172.17 $45,000 in 2001 and thereafter and by an additional $50,000 in 172.18 calendar years 2002 to 2011, and the maximum amount of total aid 172.19 it may receive under section 477A.013, subdivision 9, paragraph 172.20 (c), is also increased by $45,000 in calendar year 2001 only, 172.21 and by $50,000 in calendar year 2002 only, provided that: 172.22 (1) the net tax capacity of the city used in calculating 172.23 its 2000 aid under section 477A.013 is less than $810 per 172.24 capita; 172.25 (2) the population of the city declined more than two 172.26 percent between 1988 and 1998; 172.27 (3) the net levy of the city used in calculating 2000 aid 172.28 under section 477A.013 is greater than $240 per capita; and 172.29 (4) the city received less than $36 per capita in aid under 172.30 section 477A.013, subdivision 9, for aids payable in 2000. 172.31(o)(m) The city aid base for a city with a population of 172.32 10,000 or more which is located outside of the seven-county 172.33 metropolitan area is increased in 2002 and thereafter, and the 172.34 maximum amount of total aid it may receive under section 172.35 477A.013, subdivision 9, paragraph (b) or (c), is also increased 172.36 in calendar year 2002 only, by an amount equal to the lesser of: 173.1 (1)(i) the total population of the city, as determined by 173.2 the United States Bureau of the Census, in the 2000 census, (ii) 173.3 minus 5,000, (iii) times 60; or 173.4 (2) $2,500,000. 173.5(p)(n) The city aid base is increased by $50,000 in 2002 173.6 and thereafter, and the maximum amount of total aid it may 173.7 receive under section 477A.013, subdivision 9, paragraph (c), is 173.8 also increased by $50,000 in calendar year 2002 only, provided 173.9 that: 173.10 (1) the city is located in the seven-county metropolitan 173.11 area; 173.12 (2) its population in 2000 is between 10,000 and 20,000; 173.13 and 173.14 (3) its commercial industrial percentage, as calculated for 173.15 city aid payable in 2001, was greater than 25 percent. 173.16(q)(o) The city aid base for a city is increased by 173.17 $150,000 in calendar years 2002 to 2011 and the maximum amount 173.18 of total aid it may receive under section 477A.013, subdivision 173.19 9, paragraph (c), is also increased by $150,000 in calendar year 173.20 2002 only, provided that: 173.21 (1) the city had a population of at least 3,000 but no more 173.22 than 4,000 in 1999; 173.23 (2) its home county is located within the seven-county 173.24 metropolitan area; 173.25 (3) its pre-1940 housing percentage is less than 15 173.26 percent; and 173.27 (4) its city net tax capacity per capita for taxes payable 173.28 in 2000 is less than $900 per capita. 173.29(r)(p) The city aid base for a city is increased by 173.30 $200,000 beginning in calendar year 2003 and the maximum amount 173.31 of total aid it may receive under section 477A.013, subdivision 173.32 9, paragraph (c), is also increased by $200,000 in calendar year 173.33 2003 only, provided that the city qualified for an increase in 173.34 homestead and agricultural credit aid under Laws 1995, chapter 173.35 264, article 8, section 18. 173.36 (q) The city aid base for a city is increased by $200,000 174.1 in 2004 and thereafter and the maximum amount of total aid it 174.2 may receive under section 477A.013, subdivision 9, is also 174.3 increased by $200,000 in calendar year 2004 only, if the city is 174.4 the site of a nuclear dry cask storage facility. 174.5 (r) The city aid base for a city is increased by $10,000 in 174.6 2004 and thereafter and the maximum total aid it may receive 174.7 under section 477A.013, subdivision 9, is also increased by 174.8 $10,000 in calendar year 2004 only, if the city was included in 174.9 a federal major disaster designation issued on April 1, 1998 and 174.10 its pre-1940 housing stock was decreased by more than 40 percent 174.11 between 1990 and 2000. 174.12 [EFFECTIVE DATE.] This section is effective beginning with 174.13 aids payable in 2004. 174.14 Sec. 8. Minnesota Statutes 2002, section 477A.011, is 174.15 amended by adding a subdivision to read: 174.16 Subd. 38. [HOUSEHOLD SIZE.] "Household size" means the 174.17 average number of persons per household in the jurisdiction as 174.18 most recently estimated and reported by the state demographer as 174.19 of July 1 of the aid calculation year. 174.20 [EFFECTIVE DATE.] This section is effective for aid payable 174.21 in 2004 and thereafter. 174.22 Sec. 9. Minnesota Statutes 2002, section 477A.011, is 174.23 amended by adding a subdivision to read: 174.24 Subd. 39. [ROAD ACCIDENTS FACTOR.] "Road accidents factor" 174.25 means the average annual number of vehicular accidents occurring 174.26 on public roads, streets, and alleys in the jurisdiction as 174.27 reported to the commissioner of revenue by the commissioner of 174.28 public safety by July 1 of the aid calculation year using the 174.29 most recent three-year period for which the commissioner of 174.30 public safety has complete information, divided by the 174.31 jurisdiction's population. 174.32 [EFFECTIVE DATE.] This section is effective for aid payable 174.33 in 2004 and thereafter. 174.34 Sec. 10. Minnesota Statutes 2002, section 477A.011, is 174.35 amended by adding a subdivision to read: 174.36 Subd. 40. [METROPOLITAN AREA FACTOR.] "Metropolitan area 175.1 factor" means 35.20915 for cities located in the metropolitan 175.2 area. 175.3 [EFFECTIVE DATE.] This section is effective for aid payable 175.4 in 2004 and thereafter. 175.5 Sec. 11. [477A.0124] [COUNTY PROGRAM AID.] 175.6 Subdivision 1. [CALENDAR YEAR 2004.] In 2004, each county 175.7 shall receive program aid in an amount equal to the sum of: 175.8 (1) the amount of county attached machinery aid computed 175.9 for the county for payment in 2003 under section 273.138 prior 175.10 to any reduction under laws enacted in 2003; 175.11 (2) the amount of county homestead and agricultural credit 175.12 aid computed for the county for payment in 2003 under section 175.13 273.1398, subdivision 2, prior to any reduction under laws 175.14 enacted in 2003, minus the amount certified under section 175.15 273.1398, subdivision 4a; and for counties located in judicial 175.16 districts two and four, minus 25 percent of the amount 175.17 calculated under section 273.1398, subdivision 4a; 175.18 (3) the amount of county manufactured home homestead and 175.19 agricultural credit aid computed for the county for payment in 175.20 2003 under section 273.166 prior to any reduction under laws 175.21 enacted in 2003; 175.22 (4) the amount of county criminal justice aid computed for 175.23 the county for payment in 2003 under section 477A.0121 prior to 175.24 any reduction under laws enacted in 2003; and 175.25 (5) the amount of county family preservation aid computed 175.26 for the county for payment in 2003 under section 477A.0122 prior 175.27 to any reduction under laws enacted in 2003. 175.28 Subd. 2. [DEFINITIONS.] (a) For the purposes of this 175.29 section, the following terms have the meaning given. 175.30 (b) "County program aid" means the sum of "county need aid" 175.31 plus "county tax base equalization aid." 175.32 (c) "Age adjusted population" means a county's population 175.33 multiplied by the county age index. 175.34 (d) "County age index" means the percentage of the 175.35 population over age 65 within the county divided by the 175.36 percentage of the population over age 65 within the state, 176.1 except that the age index for any county may not be greater than 176.2 1.8 nor less than 0.8. 176.3 (e) "Population over age 65" means the population over age 176.4 65 established as of July 1 in an aid calculation year by the 176.5 most recent federal census, by a special census conducted under 176.6 contract with the United States Bureau of the Census, by a 176.7 population estimate made by the metropolitan council, or by a 176.8 population estimate of the state demographer made pursuant to 176.9 section 4A.02, whichever is the most recent as to the stated 176.10 date of the count or estimate for the preceding calendar year. 176.11 (f) "Part I crimes" means the three-year average annual 176.12 number of Part I crimes reported for each county by the 176.13 department of public safety for the most recent years available. 176.14 By July 1 of each year the commissioner of public safety shall 176.15 certify to the commissioner of revenue the number of Part I 176.16 crimes reported for each county. 176.17 (g) "Households receiving food stamps" means the average 176.18 monthly number of households receiving food stamps for the three 176.19 most recent years for which data is available. By July 1 of 176.20 each year, the commissioner of human services must certify to 176.21 the commissioner of revenue the average monthly number of 176.22 households in the state and in each county that receive food 176.23 stamps, for the most recent calendar year. 176.24 (h) "County net tax capacity" means the net tax capacity of 176.25 the county, computed analogously to city net tax capacity under 176.26 section 477A.011, subdivision 20. 176.27 Subd. 3. [COUNTY NEED AID.] For 2005 and subsequent years, 176.28 the money appropriated to county need aid each calendar year 176.29 shall be allocated as follows: 40 percent based on each 176.30 county's share of age-adjusted population, 40 percent based on 176.31 each county's share of the state total of households receiving 176.32 food stamps, and 20 percent based on each county's share of the 176.33 state total of Part I crimes. 176.34 Subd. 4. [COUNTY TAX-BASE EQUALIZATION AID.] (a) For 2005 176.35 and subsequent years, the money appropriated to county tax-base 176.36 equalization aid each calendar year shall be apportioned among 177.1 the counties according to each county's tax-base equalization 177.2 aid factor. 177.3 (b) A county's tax-base equalization aid factor is equal to 177.4 the amount by which (i) $185 times the county's population, 177.5 exceeds (ii) 9.45 percent of the county's net tax capacity. 177.6 (c) In the case of a county with a population less than 177.7 10,000, the factor determined in paragraph (b) shall be 177.8 multiplied by a factor of three. 177.9 (d) In the case of a county with a population greater than 177.10 500,000, the factor determined in paragraph (b) shall be 177.11 multiplied by a factor of 0.3. 177.12 [EFFECTIVE DATE.] This section is effective for aids 177.13 payable in 2004 and subsequent years. 177.14 Sec. 12. Minnesota Statutes 2002, section 477A.013, 177.15 subdivision 8, is amended to read: 177.16 Subd. 8. [CITY FORMULA AID.] In calendar year19942004 177.17 and subsequent years, the formula aid for a city is equal to the 177.18 need increase percentage multiplied by the difference between 177.19 (1) the city's revenue need multiplied by its population, and 177.20 (2) the sum of the city's net tax capacity multiplied by the tax 177.21 effort rate, the taconite aids under sections 298.28 and 177.22 298.282, and 50 percent of the revenue raised in the city by a 177.23 local general sales tax subject to section 297A.99 for the 177.24 calendar year two years prior to the year in which the aid is 177.25 being calculated, if the local sales tax is still in effect for 177.26 the year in which the calculated aid will be paid. No city may 177.27 have a formula aid amount less than zero. The need increase 177.28 percentage must be the same for all cities. 177.29Notwithstanding the prior sentence, in 1995 only, the need177.30increase percentage for a city shall be twice the need increase177.31percentage applicable to other cities if:177.32(1) the city, in 1992 or 1993, transferred an amount from177.33governmental funds to their sewer and water fund, and177.34(2) the amount transferred exceeded their net levy for177.35taxes payable in the year in which the transfer occurred.177.36 The applicable need increase percentageor percentagesmust 178.1 be calculated by the department of revenue so that the total of 178.2 the aid under subdivision 9 equals the total amount available 178.3 for aid under section 477A.03 after the subtraction under 178.4 section 477A.014, subdivisions 4 and 5. 178.5 [EFFECTIVE DATE.] This section is effective for aid payable 178.6 in 2004 and thereafter. 178.7 Sec. 13. Minnesota Statutes 2002, section 477A.013, 178.8 subdivision 9, is amended to read: 178.9 Subd. 9. [CITY AID DISTRIBUTION.] (a) In calendar year 178.10 2002 and thereafter, each city shall receive an aid distribution 178.11 equal to the sum of (1) the city formula aid under subdivision 178.12 8, and (2) its city aid base. 178.13 (b) Thepercentage increaseaid for afirst classcity in 178.14 calendar year1995 and thereafter, except for 2002,2004 shall 178.15 not exceed thepercentage increase in the sum of the aid to all178.16cities under this section in the current calendar year compared178.17to the sum of the aid to all cities in the previous yearamount 178.18 of its aid in calendar year 2003 after the reductions under this 178.19 article.For aids payable in 2002 only, the amount of the aid178.20paid to a first class city shall not exceed the sum of its aid178.21amount for calendar year 2001 under this section and its aid178.22payment in calendar year 2001 under section 273.1398,178.23subdivision 2, by more than 2.5 percent.178.24 (c) For aids payable inall years except 20022005 and 178.25 thereafter, the total aid for any city,except a first class178.26city,shall not exceed the sum of (1) ten percent of the city's 178.27 net levy for the year prior to the aid distribution plus (2) its 178.28 total aid in the previous year.For aids payable in 2002 only,178.29the total aid for any city, except a first class city, shall not178.30exceed the sum of (1) 40 percent of the city's net levy for178.31taxes payable in the year prior to the aid distribution plus (2)178.3240 percent of its total aid in the previous year under section178.33273.1398, subdivision 2, plus (3) its total aid in the previous178.34year under this section.For aids payable in 2005 and 178.35 thereafter, the total aid for any city with a population of 178.36 2,500 or more may not decrease from its total aid under this 179.1 section in the previous year by an amount greater than ten 179.2 percent of its net levy in the year prior to the aid 179.3 distribution. 179.4 (d) For aids payable in 2004 only, the total aid for a city 179.5 with a population less than 2,500 may not be less than the 179.6 amount it was certified to receive in 2003 minus the greater of 179.7 (1) the reduction to this aid payment in 2003 under this 179.8 article, or (2) five percent of its 2003 aid amount. For aids 179.9 payable in 2005 and thereafter, the total aid for a city with a 179.10 population less than 2,500 must not be less than the amount it 179.11 was certified to receive in the previous year minus five percent 179.12 of its 2003 certified aid amount. 179.13 [EFFECTIVE DATE.] This section is effective beginning with 179.14 aids payable in 2004. 179.15 Sec. 14. Minnesota Statutes 2002, section 477A.03, 179.16 subdivision 2, is amended to read: 179.17 Subd. 2. [ANNUAL APPROPRIATION.] (a) A sum sufficient to 179.18 discharge the duties imposed by sections 477A.011 to 477A.014 is 179.19 annually appropriated from the general fund to the commissioner 179.20 of revenue. 179.21 (b)Aid payments to counties under section 477A.0121 are179.22limited to $20,265,000 in 1996. Aid payments to counties under179.23section 477A.0121 are limited to $27,571,625 in 1997. For aid179.24payable in 1998 and thereafter, the total aids paid under179.25section 477A.0121 are the amounts certified to be paid in the179.26previous year, adjusted for inflation as provided under179.27subdivision 3.179.28(c)(i) For aids payable in 1998 and thereafter, the total179.29aids paid to counties under section 477A.0122 are the amounts179.30certified to be paid in the previous year, adjusted for179.31inflation as provided under subdivision 3.179.32(ii) Aid payments to counties under section 477A.0122 in179.332000 are further increased by an additional $20,000,000 in 2000.179.34(d) Aid payments to cities in 2002 under section 477A.013,179.35subdivision 9, are limited to the amounts certified to be paid179.36in the previous year, adjusted for inflation as provided in180.1subdivision 3, and increased by $140,000,000. For aids payable180.2in 2003, the total aids paid under section 477A.013, subdivision180.39, are the amounts certified to be paid in the previous year,180.4adjusted for inflation as provided under subdivision 3.For 180.5 aids payable in 2004,the total aids paid under section180.6477A.013, subdivision 9, are the amounts certified to be paid in180.7the previous year, adjusted for inflation as provided under180.8subdivision 3, and increased by the amount certified to be paid180.9in 2003 under section 477A.06. For aids payable in 2005 and180.10thereafter,the total aids paid under section 477A.013, 180.11 subdivision 9, arethe amounts certified to be paid in the180.12previous year, adjusted for inflation as provided under180.13subdivision 3. The additional amount authorized under180.14subdivision 4 is not included when calculating the appropriation180.15limits under this paragraphlimited to $390,000,000. For aids 180.16 payable in 2005 and thereafter, the total aids paid under 180.17 section 477A.013, subdivision 9, are increased to $406,602,000. 180.18(e) Reimbursements made to counties under section 477A.0123180.19in calendar year 2005 and thereafter are limited to an amount180.20equal to the maximum allowed appropriation under this section in180.21the previous year, multiplied by a percent to be established by180.22law. If no percent is established by law, the appropriation is180.23limited to the total amount appropriated for this purpose in the180.24previous year.(c) For aids payable in calendar year 2005 and 180.25 thereafter, the total aids paid to counties under section 180.26 477A.0124, subdivision 3, are limited to $100,500,000. Each 180.27 calendar year, $500,000 shall be retained by the commissioner of 180.28 revenue to make reimbursements to the commissioner of finance 180.29 for payments made under section 611.27. For calendar year 2004, 180.30 the amount shall be in addition to the payments authorized under 180.31 section 477A.0124, subdivision 1. For calendar year 2005 and 180.32 subsequent years, the amount shall be deducted from the 180.33 appropriation under this paragraph. The reimbursements shall be 180.34 to defray the additional costs associated with court-ordered 180.35 counsel under section 611.27. Any retained amounts not used for 180.36 reimbursement in a year shall be included in the next 181.1 distribution of county need aid that is certified to the county 181.2 auditors for the purpose of property tax reduction for the next 181.3 taxes payable year. 181.4 (d) For aids payable in 2005 and thereafter, the total aids 181.5 under section 477A.0124, subdivision 4, are limited to 181.6 $105,000,000. The commissioner of finance shall bill the 181.7 commissioner of revenue for the cost of preparation of local 181.8 impact notes as required by section 3.987, not to exceed 181.9 $207,000 in fiscal year 2004 and thereafter. The commissioner 181.10 of children, families, and learning shall bill the commissioner 181.11 of revenue for the cost of preparation of local impact notes for 181.12 school districts as required by section 3.987, not to exceed 181.13 $7,000 in fiscal year 2004 and thereafter. The commissioner of 181.14 revenue shall deduct the amounts billed under this paragraph 181.15 from the appropriation under this paragraph. The amounts 181.16 deducted are appropriated to the commissioner of finance and the 181.17 commissioner of children, families, and learning for the 181.18 preparation of local impact notes. 181.19 [EFFECTIVE DATE.] This section is effective for aid payable 181.20 in 2004 and thereafter. 181.21 Sec. 15. Minnesota Statutes 2002, section 611.27, 181.22 subdivision 13, is amended to read: 181.23 Subd. 13. [PUBLIC DEFENSE SERVICES; CORRECTIONAL FACILITY 181.24 INMATES.] All billings for services rendered and ordered under 181.25 subdivision 7 shall require the approval of the chief district 181.26 public defender before being forwarded on a monthly basis to the 181.27 state public defender. In cases where adequate representation 181.28 cannot be provided by the district public defender and where 181.29 counsel has been appointed under a court order, the state public 181.30 defender shall forward to the commissioner of finance all 181.31 billings for services rendered under the court order. The 181.32 commissioner shall pay for services from county criminal justice 181.33 aid retained by the commissioner of revenue for that purpose 181.34 under section 477A.0121, subdivision 4, or from county program 181.35 aid retained by the commissioner of revenue for that purpose 181.36 under section 477A.0124, subdivision 1, clause (4), or 477A.03, 182.1 subdivision 2, paragraph (c). 182.2 The costs of appointed counsel and associated services in 182.3 cases arising from new criminal charges brought against indigent 182.4 inmates who are incarcerated in a Minnesota state correctional 182.5 facility are the responsibility of the state board of public 182.6 defense. In such cases the state public defender may follow the 182.7 procedures outlined in this section for obtaining court-ordered 182.8 counsel. 182.9 [EFFECTIVE DATE.] This section is effective for payments in 182.10 2004 and subsequent years. 182.11 Sec. 16. Minnesota Statutes 2002, section 611.27, 182.12 subdivision 15, is amended to read: 182.13 Subd. 15. [COSTS OF TRANSCRIPTS.] In appeal cases and 182.14 postconviction cases where the state public defender's office 182.15 does not have sufficient funds to pay for transcripts and other 182.16 necessary expenses because it has spent or committed all of the 182.17 transcript funds in its annual budget, the state public defender 182.18 may forward to the commissioner of finance all billings for 182.19 transcripts and other necessary expenses. The commissioner 182.20 shall pay for these transcripts and other necessary expenses 182.21 from county criminal justice aid retained by the commissioner of 182.22 revenue under section 477A.0121, subdivision 4, or from county 182.23 program aid retained by the commissioner of revenue for that 182.24 purpose under section 477A.0124, subdivision 1, clause (4), or 182.25 477A.03, subdivision 2, paragraph (c). 182.26 [EFFECTIVE DATE.] This section is effective for payments in 182.27 2004 and subsequent years. 182.28 Sec. 17. [DEFINITIONS.] 182.29 (a) For purposes of sections 17 to 25, the following terms 182.30 have the meanings given them in this section. 182.31 (b) The 2003 and 2004 "levy plus aid revenue base" for a 182.32 city is the sum of that city's certified property tax levy for 182.33 taxes payable in 2003, plus the sum of the amounts the city was 182.34 certified to receive in 2003 as: 182.35 (1) local government aid under Minnesota Statutes, section 182.36 477A.013; 183.1 (2) existing low-income housing aid under Minnesota 183.2 Statutes, section 477A.06; 183.3 (3) new construction low-income housing aid under Minnesota 183.4 Statutes, section 477A.065; and 183.5 (4) taconite aids under Minnesota Statutes, sections 298.28 183.6 and 298.282, including any aid which was required to be placed 183.7 in a special fund for expenditure in the next succeeding year. 183.8 (c) The 2003 and 2004 "levy plus aid revenue base" for a 183.9 county is the sum of that county's certified property tax levy 183.10 for taxes payable in 2003, plus the sum of the amounts the 183.11 county was certified to receive in the designated calendar year 183.12 as: 183.13 (1) homestead and agricultural credit aid under Minnesota 183.14 Statutes, section 273.1398, subdivision 2, minus the amount 183.15 calculated under section 273.1398, subdivision 4a, paragraph 183.16 (b), for counties in judicial districts one, three, six, and 183.17 ten, and 25 percent of the amount calculated under section 183.18 273.1398, subdivision 4a, paragraph (b), for counties in 183.19 judicial districts two and four; 183.20 (2) the amount of county manufactured home homestead and 183.21 agricultural credit aid computed for the county for payment in 183.22 2003 under section 273.166 prior to any reduction under laws 183.23 enacted in 2003; 183.24 (3) criminal justice aid under Minnesota Statutes, section 183.25 477A.0121; 183.26 (4) family preservation aid under Minnesota Statutes, 183.27 section 477A.0122; 183.28 (5) taconite aids under Minnesota Statutes, sections 298.28 183.29 and 298.282, including any aid which was required to be placed 183.30 in a special fund for expenditure in the next succeeding year; 183.31 and 183.32 (6) county program aid under section 477A.0124. 183.33 (d) "Total revenue" for a city or county for a particular 183.34 year are the total revenue amount for that city or county, as 183.35 reported by the state auditor for the same year, or for the most 183.36 recent preceding year for which the state auditor has reported, 184.1 excluding grants between political subdivisions and amounts 184.2 borrowed by the city or county but including net transfers from 184.3 an enterprise fund. 184.4 [EFFECTIVE DATE.] This section is effective the day 184.5 following final enactment. 184.6 Sec. 18. [2003 CITY AID REDUCTIONS.] 184.7 The commissioner of revenue shall compute an aid reduction 184.8 amount for each city for 2003 equal to 9.3 percent of the city's 184.9 levy plus aid revenue base for 2003. 184.10 The reduction amount is limited to 3.7 percent of the 184.11 city's total revenues for 2003 if a city has a population under 184.12 1,000 or if the city has a three-year levy plus aid revenue base 184.13 increase average of less than two percent. For all other 184.14 cities, the reduction amount is limited to 5.25 percent of the 184.15 city's total revenues for 2003. 184.16 The reduction is further limited to the sum of the city's 184.17 payable 2003 distribution pursuant to Minnesota Statutes, 184.18 section 477A.013, and related sections, and the city's payable 184.19 2003 reimbursement under Minnesota Statutes, section 273.1384. 184.20 The reduction is applied first to the city's distribution 184.21 pursuant to Minnesota Statutes, section 477A.013, and then if 184.22 necessary to the city's reimbursements pursuant to Minnesota 184.23 Statutes, section 273.1384. 184.24 To the extent that sufficient information is available on 184.25 each successive payment date within the year, the commissioner 184.26 of revenue shall pay any remaining 2003 distribution or 184.27 reimbursement amount reduced under this section in equal 184.28 installments on the payment dates provided in law. 184.29 [EFFECTIVE DATE.] This section is effective the day 184.30 following final enactment. 184.31 Sec. 19. [2003 COUNTY AID REDUCTIONS.] 184.32 The commissioner of revenue shall compute an aid reduction 184.33 amount for each county for 2003 equal to 3.16 percent of the 184.34 county's levy plus aid revenue base for 2003. 184.35 The reduction is limited to the sum of the county's payable 184.36 2003 distributions pursuant to Minnesota Statutes, sections 185.1 273.138; 273.1384; 273.1398, subdivision 2; 273.166; 477A.0121; 185.2 and 477A.0122. 185.3 The aid reduction is applied first to reduce the county's 185.4 2003 distribution pursuant to Minnesota Statutes, section 185.5 273.138, then to reduce, in this sequence, the aid payable in 185.6 2003 under Minnesota Statutes, sections 273.1398, subdivision 2; 185.7 273.166; 477A.0121; and 477A.0122. Then, if necessary, the 185.8 county's reimbursements pursuant to Minnesota Statutes, section 185.9 273.1384, are to be reduced. 185.10 To the extent that sufficient information is available on 185.11 each successive payment date within the year, the commissioner 185.12 of revenue shall pay any remaining 2003 distribution or 185.13 reimbursement amount reduced under this section in equal 185.14 installments on the payment dates provided in law. 185.15 [EFFECTIVE DATE.] This section is effective the day 185.16 following final enactment. 185.17 Sec. 20. [2003 TOWNSHIP AID REDUCTIONS.] 185.18 The commissioner of revenue shall compute an aid reduction 185.19 amount for each township for 2003 equal to one percent of the 185.20 town's certified levy for taxes payable in 2003. 185.21 The reduction is limited to the amount of the town's 185.22 payable 2003 reimbursement pursuant to Minnesota Statutes, 185.23 section 273.1384. 185.24 To the extent that sufficient information is available on 185.25 each successive payment date within the year, the commissioner 185.26 of revenue shall pay any remaining 2003 reimbursement amount for 185.27 the town in equal installments on the payment dates provided in 185.28 law. 185.29 [EFFECTIVE DATE.] This section is effective the day 185.30 following final enactment. 185.31 Sec. 21. [2003 SPECIAL TAXING DISTRICT AID REDUCTIONS.] 185.32 The commissioner of revenue shall compute an aid reduction 185.33 amount for each special taxing district for 2003 equal to 0.75 185.34 percent of the district's certified levy for taxes payable in 185.35 2003. 185.36 The reduction is limited to the amount of the district's 186.1 payable 2003 reimbursement pursuant to Minnesota Statutes, 186.2 section 237.1384. 186.3 To the extent that sufficient information is available on 186.4 each successive payment date within the year, the commissioner 186.5 of revenue shall pay any remaining 2003 reimbursement amount for 186.6 the district in equal installments on the payment dates provided 186.7 in law. 186.8 [EFFECTIVE DATE.] This section is effective the day 186.9 following final enactment. 186.10 Sec. 22. [2004 CITY AID REDUCTIONS.] 186.11 The commissioner of revenue shall compute an aid reduction 186.12 amount for 2004 for each city as provided in this section. 186.13 The initial aid reduction amount for each city is the 186.14 amount by which the city's aid distribution under Minnesota 186.15 Statutes, section 477A.013, and related provisions payable in 186.16 2003 exceeds the city's 2004 distribution under those provisions. 186.17 The minimum aid reduction amount for a city is the amount 186.18 of its reduction in 2003 under section 18. If a city receives 186.19 an increase to its city aid base under section 477A.011, 186.20 subdivision 36, its minimum aid reduction is reduced by an equal 186.21 amount. 186.22 The maximum aid reduction amount for a city is an amount 186.23 equal to 18 percent of the city's total 2004 levy plus aid 186.24 revenue base, except that if the city has a city net tax 186.25 capacity for aids payable in 2004, as defined in section 186.26 477A.011, subdivision 20, of $700 per capita or less, the 186.27 maximum aid reduction shall not exceed an amount equal to 13 186.28 percent of the city's total 2004 levy plus aid revenue base. 186.29 If the initial aid reduction amount for a city is less than 186.30 the minimum aid reduction amount for that city, the final aid 186.31 reduction amount for the city is the sum of the initial aid 186.32 reduction amount and the lesser of the amount of the city's 186.33 payable 2004 reimbursement under Minnesota Statutes, section 186.34 273.1384, or the difference between the minimum and initial aid 186.35 reduction amounts for the city. 186.36 If the initial aid reduction amount for a city is greater 187.1 than the maximum aid reduction amount for the city, the city 187.2 receives an additional distribution under this section equal to 187.3 the result of subtracting the maximum aid reduction amount from 187.4 the initial aid reduction amount. This distribution shall be 187.5 paid in equal installments in 2004 on the dates specified in 187.6 Minnesota Statutes, section 477A.015. The amount necessary for 187.7 these additional distributions is appropriated to the 187.8 commissioner of revenue from the general fund in fiscal year 187.9 2005. 187.10 The initial aid reduction is applied to the city's 187.11 distribution pursuant to Minnesota Statutes, section 477A.013, 187.12 and any aid reduction in excess of the initial aid reduction is 187.13 applied to the city's reimbursements pursuant to Minnesota 187.14 Statutes, section 273.1384. 187.15 To the extent that sufficient information is available on 187.16 each payment date in 2004, the commissioner of revenue shall pay 187.17 the reimbursements reduced under this section in equal 187.18 installments on the payment dates provided in law. 187.19 [EFFECTIVE DATE.] This section is effective the day 187.20 following final enactment. 187.21 Sec. 23. [2004 COUNTY AID REDUCTIONS.] 187.22 The commissioner of revenue shall compute an aid reduction 187.23 amount for 2004 for each county as provided in this section. 187.24 The commissioner of revenue shall compute an aid reduction 187.25 amount for each county for 2004 equal to 5.27 percent of the 187.26 county's levy plus aid revenue base for 2004. 187.27 The reduction is further limited to the sum of the county's 187.28 payable 2004 distributions under Minnesota Statutes, sections 187.29 477A.0124 and 273.1384. 187.30 The aid reduction is applied first to the county's 187.31 distributions pursuant to Minnesota Statutes, section 477A.0124, 187.32 and then, if necessary, to reduce the county's reimbursements 187.33 pursuant to Minnesota Statutes, section 273.1384. 187.34 To the extent that sufficient information is available on 187.35 each payment date in 2004, the commissioner of revenue shall pay 187.36 any remaining 2004 distribution or reimbursement amount reduced 188.1 under this section in equal installments on the payment dates 188.2 provided in law. 188.3 [EFFECTIVE DATE.] This section is effective the day 188.4 following final enactment. 188.5 Sec. 24. [2004 TOWNSHIP AID REDUCTIONS.] 188.6 The commissioner of revenue shall compute an aid reduction 188.7 amount for each township for 2004 equal to 1.5 percent of the 188.8 town's certified levy for taxes payable in 2003. 188.9 The reduction is limited to the amount of the town's 188.10 payable 2004 reimbursement pursuant to Minnesota Statutes, 188.11 section 273.1384. 188.12 To the extent that sufficient information is available on 188.13 each successive payment date within the year, the commissioner 188.14 of revenue shall pay any remaining 2004 reimbursement amount for 188.15 the town in equal installments on the payment dates provided in 188.16 law. 188.17 [EFFECTIVE DATE.] This section is effective the day 188.18 following final enactment. 188.19 Sec. 25. [2004 SPECIAL TAXING DISTRICT AID REDUCTIONS.] 188.20 The commissioner of revenue shall compute an aid reduction 188.21 amount for each special taxing district for 2004 equal to one 188.22 percent of the district's certified levy for taxes payable in 188.23 2003. 188.24 The reduction is limited to the amount of the district's 188.25 payable 2004 reimbursement pursuant to Minnesota Statutes, 188.26 section 273.1384. 188.27 To the extent that sufficient information is available on 188.28 each successive payment date within the year, the commissioner 188.29 of revenue shall pay any remaining 2004 reimbursement amount for 188.30 the district in equal installments on the payment dates provided 188.31 in law. 188.32 [EFFECTIVE DATE.] This section is effective the day 188.33 following final enactment. 188.34 Sec. 26. [HACA ADJUSTMENT; COURT TAKEOVER ERROR.] 188.35 In calendar years 2003 and 2004, any county whose 2002 aid 188.36 reduction, related to the state assumption of funding for 189.1 mandated court services, was based on costs not assumed by the 189.2 state shall receive the following aid adjustments; 189.3 (1) in calendar year 2003, a permanent increase of $50,000 189.4 in its aid payment under Minnesota Statutes, section 273.1398, 189.5 subdivision 2, above its certified 2003 aid amount; and 189.6 (2) in calendar year 2004, a permanent increase of an 189.7 additional $50,000 in its county program aid payment under 189.8 Minnesota Statutes, section 477A.0124, subdivision 1, clause (2). 189.9 [EFFECTIVE DATE.] This section is effective for aids 189.10 payable in 2003 and 2004. 189.11 Sec. 27. [REPEALER.] 189.12 (a) Minnesota Statutes 2002, sections 273.138, subdivision 189.13 2, and the parts of subdivisions 5 and 7 relating to counties; 189.14 273.1398, subdivisions 2, 2c, 4, and 4d; 273.166; 477A.011, 189.15 subdivision 37; 477A.0121; 477A.0122; 477A.0123; 477A.0132; 189.16 477A.03, subdivisions 3 and 4; 477A.06; 477A.065; and 477A.07, 189.17 are repealed effective for aid payable in 2004 and thereafter. 189.18 (b) Minnesota Statutes 2002, section 273.138, subdivisions 189.19 3 and 6, and the parts of subdivisions 5 and 7 relating to 189.20 school districts are repealed effective for calendar year 2003. 189.21 ARTICLE 7 189.22 LEVY LIMITS 189.23 Section 1. Minnesota Statutes 2002, section 275.70, 189.24 subdivision 5, is amended to read: 189.25 Subd. 5. [SPECIAL LEVIES.] "Special levies" means those 189.26 portions of ad valorem taxes levied by a local governmental unit 189.27 for the following purposes or in the following manner: 189.28 (1) to pay the costs of the principal and interest on 189.29 bonded indebtedness or to reimburse for the amount of liquor 189.30 store revenues used to pay the principal and interest due on 189.31 municipal liquor store bonds in the year preceding the year for 189.32 which the levy limit is calculated; 189.33 (2) to pay the costs of principal and interest on 189.34 certificates of indebtedness issued for any corporate purpose 189.35 except for the following: 189.36 (i) tax anticipation or aid anticipation certificates of 190.1 indebtedness; 190.2 (ii) certificates of indebtedness issued under sections 190.3 298.28 and 298.282; 190.4 (iii) certificates of indebtedness used to fund current 190.5 expenses or to pay the costs of extraordinary expenditures that 190.6 result from a public emergency; or 190.7 (iv) certificates of indebtedness used to fund an 190.8 insufficiency in tax receipts or an insufficiency in other 190.9 revenue sources; 190.10 (3) to provide for the bonded indebtedness portion of 190.11 payments made to another political subdivision of the state of 190.12 Minnesota; 190.13 (4) to fund payments made to the Minnesota state armory 190.14 building commission under section 193.145, subdivision 2, to 190.15 retire the principal and interest on armory construction bonds; 190.16 (5) property taxes approved by voters which are levied 190.17 against the referendum market value as provided under section 190.18 275.61; 190.19 (6) to fund matching requirements needed to qualify for 190.20 federal or state grants or programs to the extent that either 190.21 (i) the matching requirement exceeds the matching requirement in 190.22 calendar year 2001, or (ii) it is a new matching requirement 190.23 that did not exist prior to 2002; 190.24 (7) to pay the expenses reasonably and necessarily incurred 190.25 in preparing for or repairing the effects of natural disaster 190.26 including the occurrence or threat of widespread or severe 190.27 damage, injury, or loss of life or property resulting from 190.28 natural causes, in accordance with standards formulated by the 190.29 emergency services division of the state department of public 190.30 safety, as allowed by the commissioner of revenue under section 190.31 275.74, subdivision 2; 190.32 (8) pay amounts required to correct an error in the levy 190.33 certified to the county auditor by a city or county in a levy 190.34 year, but only to the extent that when added to the preceding 190.35 year's levy it is not in excess of an applicable statutory, 190.36 special law or charter limitation, or the limitation imposed on 191.1 the governmental subdivision by sections 275.70 to 275.74 in the 191.2 preceding levy year; 191.3 (9) to pay an abatement under section 469.1815; 191.4 (10) to pay any costs attributable to increases in the 191.5 employer contribution rates under chapter 353 that are effective 191.6 after June 30, 2001; 191.7 (11) to pay the operating or maintenance costs of a county 191.8 jail as authorized in section 641.01 or 641.262, or of a 191.9 correctional facility as defined in section 241.021, subdivision 191.10 1, paragraph (5), to the extent that the county can demonstrate 191.11 to the commissioner of revenue that the amount has been included 191.12 in the county budget as a direct result of a rule, minimum 191.13 requirement, minimum standard, or directive of the department of 191.14 corrections, or to pay the operating or maintenance costs of a 191.15 regional jail as authorized in section 641.262. For purposes of 191.16 this clause, a district court order is not a rule, minimum 191.17 requirement, minimum standard, or directive of the department of 191.18 corrections. If the county utilizes this special levy, except 191.19 to pay operating or maintenance costs of a new regional jail 191.20 facility under sections 641.262 to 641.264 which will not 191.21 replace an existing jail facility, any amount levied by the 191.22 county in the previous levy year for the purposes specified 191.23 under this clause and included in the county's previous year's 191.24 levy limitation computed under section 275.71, shall be deducted 191.25 from the levy limit base under section 275.71, subdivision 2, 191.26 when determining the county's current year levy limitation. The 191.27 county shall provide the necessary information to the 191.28 commissioner of revenue for making this determination; 191.29 (12) to pay for operation of a lake improvement district, 191.30 as authorized under section 103B.555. If the county utilizes 191.31 this special levy, any amount levied by the county in the 191.32 previous levy year for the purposes specified under this clause 191.33 and included in the county's previous year's levy limitation 191.34 computed under section 275.71 shall be deducted from the levy 191.35 limit base under section 275.71, subdivision 2, when determining 191.36 the county's current year levy limitation. The county shall 192.1 provide the necessary information to the commissioner of revenue 192.2 for making this determination; 192.3 (13) to repay a state or federal loan used to fund the 192.4 direct or indirect required spending by the local government due 192.5 to a state or federal transportation project or other state or 192.6 federal capital project. This authority may only be used if the 192.7 project is not a local government initiative; 192.8 (14)for counties only, to pay the costs reasonably192.9expected to be incurred in 2002 related to the redistricting of192.10election districts and establishment of election precincts under192.11sections 204B.135 and 204B.14, the notice required by section192.12204B.14, subdivision 4, and the reassignment of voters in the192.13statewide registration system, not to exceed $1 per capita,192.14provided that the county shall distribute a portion of the192.15amount levied under this clause equal to 25 cents times the192.16population of the city to all cities in the county with a192.17population of 30,000 or more;192.18(15)to pay for court administration costs as required 192.19 under section 273.1398, subdivision 4b, less the (i) county's 192.20 share of transferred fines and fees collected by the district 192.21 courts in the county for calendar year 2001 and (ii) the aid 192.22 amount certified to be paid to the county in 2004 under section 192.23 273.1398, subdivision 4c; however, for taxes levied to pay for 192.24 these costs in the year in which the court financing is 192.25 transferred to the state, the amount under thissectionclause 192.26 is limited toone-third of the aid reductionthe amount of aid 192.27 the county is certified to receive under section 273.1398, 192.28 subdivision 4a; and 192.29(16)(15) to fund a police or firefighters relief 192.30 association as required under section 69.77 to the extent that 192.31 the required amount exceeds the amount levied for this purpose 192.32 in 2001. 192.33 [EFFECTIVE DATE.] This section is effective for taxes 192.34 payable in 2004 and thereafter. 192.35 Sec. 2. Minnesota Statutes 2002, section 275.71, 192.36 subdivision 2, is amended to read: 193.1 Subd. 2. [LEVY LIMIT BASE.] (a) If a local government unit 193.2 was not subject to levy limits under this section for taxes 193.3 levied in 2002, the levy limit base forathe local governmental 193.4 unit for taxes levied in2001 is equal to the greater of:193.5(1) the sum of its adjusted levy limit base for taxes193.6levied in 1999 plus the amount it levied in 1999 under Minnesota193.7Statutes 1999 Supplement, section 275.70, subdivision 5, clauses193.8(8) and (13), multiplied by:193.9(i) one plus the percentage growth in the implicit price193.10deflator for the 12-month period ending March 30, 2000;193.11(ii) one plus a percentage equal to the annual percentage193.12increase in the estimated number of households, if any, for the193.13most recent 12-month period that was available on July 1, 2000;193.14and193.15(iii) one plus a percentage equal to 50 percent of the193.16percentage increase in the taxable market value of the193.17jurisdiction due to new construction of class 3 property, as193.18defined in section 273.13, subdivision 24, except for193.19state-assessed utility and railroad operating property, for the193.20most recent year for which data was available as of July 1,193.212000; or193.22(2)2003 is an amount equal to: 193.23 (i) the sum of the amount it levied in20002002 plus the 193.24 amount of aids it was certified to receive in calendar year2001193.25 2003 under sections 273.1398, 298.282, 477A.011 to 477A.03, 193.26 prior to any aid reductions under section 273.1399, subdivision 193.27 5, 477A.06, and 477A.065, after any reductions to these aids 193.28 under article 6; less 193.29 (ii) the amount it levied in20002002 that would qualify 193.30 as special levies under section 275.70, subdivision 6, for taxes 193.31 levied in 2001. The local governmental unit shall provide the 193.32 commissioner of revenue with sufficient information to make this 193.33 calculation. 193.34 (b)If the governmental unit was not subject to levy limits193.35for taxes levied in 1999, its levy limit base for taxes levied193.36in 2001 is equal to the amount calculated under paragraph (a),194.1clause (2).194.2(c)The levy limit base for a local governmental unit not 194.3 included in paragraph (a) for taxes levied in20022003 is equal 194.4 to its adjusted levy limit base in the previous year,plus the194.5amount of tree growth tax it received in calendar year 2001194.6under sections 270.31 to 270.39, and plus, in the case of a194.7city, the amount it was certified to receive in calendar year194.82001 under section 273.166,subject to any adjustments under 194.9 section 275.72, and less (1) any cuts in 2003 payments to aids 194.10 under sections 273.1398 and 477A.011 to 477A.03, (2) 65 percent 194.11 of the difference between its levy limit under subdivision 5 for 194.12 taxes levied in 2002 and the amount it actually levied under 194.13 that subdivision in that year, and (3) certified property tax 194.14 replacement aid payable in 2003 under section 174.242. 194.15 (c) The levy limit base for a local governmental unit for 194.16 taxes levied in 2004 is equal to its adjusted levy limit base in 194.17 the previous year, subject to any adjustments under section 194.18 275.72. 194.19 [EFFECTIVE DATE.] This section is effective for taxes 194.20 levied in 2003 and 2004. 194.21 Sec. 3. Minnesota Statutes 2002, section 275.71, 194.22 subdivision 4, is amended to read: 194.23 Subd. 4. [ADJUSTED LEVY LIMIT BASE.](a)For taxes levied 194.24 in2001 and 20022003 and 2004, the adjusted levy limit base is 194.25 equal to the levy limit base computed under subdivisions 2 and 3 194.26 or section 275.72, multiplied by:194.27 (1)one plus a percentage equal to the percentage growth in194.28the implicit price deflator;194.29(2)one plus a percentage equal to the percentage increase 194.30 in number of households, if any, for the most recent 12-month 194.31 period for which data is available; and 194.32(3)(2) one plus a percentage equal to 50 percent of the 194.33 percentage increase in the taxable market value of the 194.34 jurisdiction due to new construction of class 3 property, as 194.35 defined in section 273.13, subdivision 24,except for194.36state-assessed utility and railroad operating property,for the 195.1 most recent year for which data is available. 195.2(b) For counties only, for taxes levied in 2001 and 2002,195.3the adjusted levy limit base is also reduced by any amount of195.4levy reduction required under section 275.07, subdivision 1,195.5paragraph (b), clause (ii).195.6 [EFFECTIVE DATE.] This section is effective for taxes 195.7 payable in 2004 and thereafter. 195.8 Sec. 4. Minnesota Statutes 2002, section 275.71, 195.9 subdivision 5, is amended to read: 195.10 Subd. 5. [PROPERTY TAX LEVY LIMIT.]Notwithstanding any195.11other provision of a municipal charter which limits ad valorem195.12taxes to a lesser amount, or which would require a separate195.13voter approval for any increase,For taxes levied in2001 and195.1420022003 and 2004, the property tax levy limit for a local 195.15 governmental unit is equal to its adjusted levy limit base 195.16 determined under subdivision 4 plus any additional levy 195.17 authorized under section 275.73, which is levied against net tax 195.18 capacity, reduced by the sum of (i) the total amount of aids and 195.19 reimbursements that the local governmental unit is certified to 195.20 receive under sections 477A.011 to 477A.014, except for the 195.21 increases in city aid bases in calendar year 2002 under section 195.22 477A.011, subdivision 36, paragraphs (n), (p), and (q), (ii) 195.23 homestead and agricultural aids it is certified to receive under 195.24 section 273.1398, (iii) taconite aids under sections 298.28 and 195.25 298.282 including any aid which was required to be placed in a 195.26 special fund for expenditure in the next succeeding year,(iv)195.27low-income housing aid under sections 477A.06 and 477A.065, and195.28(v) property tax replacement aids under section 174.242and (iv) 195.29 estimated payments to the local governmental unit under section 195.30 272.029, adjusted for any error in estimation in the preceding 195.31 year. 195.32 [EFFECTIVE DATE.] This section is effective for taxes 195.33 payable in 2004 and thereafter. 195.34 Sec. 5. Minnesota Statutes 2002, section 275.71, 195.35 subdivision 6, is amended to read: 195.36 Subd. 6. [LEVIES IN EXCESS OF LEVY LIMITS.](a)If the 196.1 levy made by a city or county exceeds the levy limit provided in 196.2 sections 275.70 to 275.74, except when the excess levy is due to 196.3 the rounding of the rate in accordance with section 275.28, the 196.4 county auditor shall only extend the amount of taxes permitted 196.5 under sections 275.70 to 275.74, as provided for in section 196.6 275.16. 196.7(b) For taxes levied in 2002, payable in 2003 only, if an196.8error was made in calculating the levy limit adjustment related196.9to a special levy for jails authorized under section 275.70,196.10subdivision 5, clause (11), in the previous year, the following196.11adjustments must be made:196.12(1) the county's levy limit base for taxes levied in 2002196.13must be based on the corrected adjusted levy limit base for196.14taxes levied in 2001; and196.15(2) the county's final levy limit for taxes levied in 2002,196.16payable in 2003, must also be temporarily reduced by an amount196.17equal to the amount of county levy spread in the previous year196.18in excess of the total recalculated levy limit plus authorized196.19special levies for taxes levied in 2001, payable in 2002.196.20(c) The commissioner of revenue shall inform counties196.21affected by paragraph (b) of the levy error and levy adjustments196.22required under this provision by June 15, 2002. The county may196.23provide additional information to the commissioner indicating196.24why these adjustments may be in error by July 15, 2002. The196.25commissioner shall certify the final levy adjustment to the196.26affected counties by August 1, 2002. The levy reduction imposed196.27under paragraph (b), clause (2), may be spread over a period not196.28to exceed three years, upon agreement between the county and the196.29commissioner.196.30 [EFFECTIVE DATE.] This section is effective for taxes 196.31 payable in 2004 and thereafter. 196.32 Sec. 6. Minnesota Statutes 2002, section 275.72, 196.33 subdivision 3, is amended to read: 196.34 Subd. 3. [ADJUSTMENTS FOR CHANGES IN SERVICE LEVELS.] If a 196.35 local governmental unit, as a result of an annexation 196.36 agreementprior to January 1, 1999,has different tax rates in 197.1 various parts of the jurisdiction due to different service 197.2 levels, it may petition the commissioner of revenue to adjust 197.3 its levy limits established under section 275.71. The 197.4 commissioner shall adjust the levy limits to reflect scheduled 197.5 changes in tax rates related to increasing service levels in 197.6 areas currently receiving less city services. The local 197.7 governmental unit shall provide the commissioner with any 197.8 information the commissioner deems necessary in making the levy 197.9 limit adjustment. 197.10 [EFFECTIVE DATE.] This section is effective for taxes 197.11 levied in 2003, payable in 2004 and thereafter. 197.12 Sec. 7. Minnesota Statutes 2002, section 275.73, 197.13 subdivision 2, is amended to read: 197.14 Subd. 2. [LEVY EFFECTIVE DATE.] An additional levy 197.15 approved under subdivision 1 at a general or special election 197.16 heldprior to September 1on or before the first Tuesday in 197.17 November in any levy year may be levied in that same levy year 197.18 and subsequent levy years. An additional levy approved under 197.19 subdivision 1 at a general or special election held afterAugust197.2031the first Tuesday in November in any levy year shall not be 197.21 levied in that same levy but may be levied in subsequent levy 197.22 years. 197.23 [EFFECTIVE DATE.] This section is effective for taxes 197.24 payable in 2004 and thereafter. 197.25 Sec. 8. Minnesota Statutes 2002, section 275.74, 197.26 subdivision 3, is amended to read: 197.27 Subd. 3. [INFORMATION NECESSARY TO CALCULATETHE 2001LEVY 197.28 LIMIT BASE.] A local governmental unit must provide the 197.29 commissioner with the information required to calculate the 197.30alternative 2001 levy limit baseamount under section 275.71, 197.31 subdivision 2, paragraph (a),clause (2),by July 20, 2001of 197.32 the levy year. If the information is not received by the 197.33 commissioner by that date, or is not deemed sufficient to make 197.34 the calculation under that clause, the commissioner has the 197.35 discretion to set the local governmental unit's2001levy limit 197.36 for all purposes including those purposes for which special 198.1 levies may be made,baseequal to the amountcalculated under198.2section 275.71, subdivision 2, paragraph (a), clause (1)of the 198.3 local governmental unit's certified levy for the prior year. 198.4 [EFFECTIVE DATE.] This section is effective for taxes 198.5 payable in 2004 and thereafter. 198.6 Sec. 9. [275.75] [CHARTER EXEMPTION FOR AID LOSS.] 198.7 Notwithstanding any other provision of a municipal charter 198.8 which limits ad valorem taxes to a lesser amount, or which would 198.9 require voter approval for any increase, a municipality may 198.10 increase its levy in any payable year by an amount equal to the 198.11 reduction in the amount of aid it is certified to receive under 198.12 sections 477A.011 to 477A.03 for that same payable year compared 198.13 to the amount certified in the previous year. The levy increase 198.14 is a permanent increase in the municipality's levy authority. 198.15 [EFFECTIVE DATE.] This section is effective for aids levied 198.16 in calendar year 2003, payable in 2004, and thereafter. 198.17 ARTICLE 8 198.18 TRUTH IN TAXATION AND REVERSE REFERENDUM 198.19 Section 1. Minnesota Statutes 2002, section 275.065, 198.20 subdivision 1, is amended to read: 198.21 Subdivision 1. [PROPOSED LEVY.] (a) Notwithstanding any 198.22 law or charter to the contrary, on or before September151, 198.23 each taxing authority, other than a school district, shall adopt 198.24 a proposed budget and shall certify to the county auditor the 198.25 proposed or, in the case of a town, the final property tax levy 198.26 for taxes payable in the following year. 198.27 (b) On or before September301, each school district shall 198.28 certify to the county auditor the proposed property tax levy for 198.29 taxes payable in the following year. The school district shall 198.30 certify the proposed levy as: 198.31 (1) the state determined school levy amount as prescribed 198.32 under section 126C.13, subdivision 2; 198.33 (2) voter approved referendum and debt levies; and 198.34 (3) the sum of the remaining school levies, or the maximum 198.35 levy limitation certified by the commissioner of children, 198.36 families, and learning according to section 126C.48, subdivision 199.1 1, less the amounts levied under clauses (1) and (2). 199.2 (c) If the board of estimate and taxation or any similar 199.3 board that establishes maximum tax levies for taxing 199.4 jurisdictions within a first class city certifies the maximum 199.5 property tax levies for funds under its jurisdiction by charter 199.6 to the county auditor by September151, the city shall be 199.7 deemed to have certified its levies for those taxing 199.8 jurisdictions. 199.9 (d) For purposes of this section, "taxing authority" 199.10 includes all home rule and statutory cities, towns, counties, 199.11 school districts, and special taxing districts as defined in 199.12 section 275.066. Intermediate school districts that levy a tax 199.13 under chapter 124 or 136D, joint powers boards established under 199.14 sections 123A.44 to 123A.446, and common school districts No. 199.15 323, Franconia, and No. 815, Prinsburg, are also special taxing 199.16 districts for purposes of this section. 199.17 [EFFECTIVE DATE.] This section is effective for taxes 199.18 payable in 2006 and thereafter. 199.19 Sec. 2. Minnesota Statutes 2002, section 275.065, 199.20 subdivision 1a, is amended to read: 199.21 Subd. 1a. [OVERLAPPING JURISDICTIONS.] In the case of a 199.22 taxing authority lying in two or more counties, the home county 199.23 auditor shall certify the proposed levy and the proposed local 199.24 tax rate to the other county auditor by September205. The 199.25 home county auditor must estimate the levy or rate in preparing 199.26 the notices required in subdivision 3, if the other county has 199.27 not certified the appropriate information. If requested by the 199.28 home county auditor, the other county auditor must furnish an 199.29 estimate to the home county auditor. 199.30 [EFFECTIVE DATE.] This section is effective for taxes 199.31 payable in 2006 and thereafter. 199.32 Sec. 3. Minnesota Statutes 2002, section 275.065, 199.33 subdivision 1c, is amended to read: 199.34 Subd. 1c. [LEVY; SHARED, MERGED, CONSOLIDATED SERVICES.] 199.35 If two or more taxing authorities are in the process of 199.36 negotiating an agreement for sharing, merging, or consolidating 200.1 services between those taxing authorities at the time the 200.2 proposed levy is to be certified under subdivision 1, each 200.3 taxing authority involved in the negotiation shall certify its 200.4 total proposed levy as provided in that subdivision, including a 200.5 notification to the county auditor of the specific service 200.6 involved in the agreement which is not yet finalized. The 200.7 affected taxing authorities may amend their proposed levies 200.8 under subdivision 1 untilOctoberSeptember 10 for levy amounts 200.9 relating only to the specific service involved. 200.10 [EFFECTIVE DATE.] This section is effective for taxes 200.11 payable in 2006 and thereafter. 200.12 Sec. 4. Minnesota Statutes 2002, section 275.065, 200.13 subdivision 3, is amended to read: 200.14 Subd. 3. [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 200.15 county auditor shall prepare and the county treasurer shall 200.16 deliver afterNovemberOctober 10 and on or beforeNovember200.17 October 24 each year, by first class mail to each taxpayer at 200.18 the address listed on the county's current year's assessment 200.19 roll, a notice of proposed property taxes. 200.20 (b) The commissioner of revenue shall prescribe the form of 200.21 the notice. 200.22 (c) The notice must inform taxpayers that it contains the 200.23 amount of property taxes each taxing authority proposes to 200.24 collect for taxes payable the following year. In the case of a 200.25 town, or in the case of the state general tax, the final tax 200.26 amount will be its proposed tax. In the case of taxing 200.27 authorities required to hold a public meeting under subdivision 200.28 6, the notice must clearly state that each taxing authority, 200.29 including regional library districts established under section 200.30 134.201, and including the metropolitan taxing districts as 200.31 defined in paragraph (i), but excluding all other special taxing 200.32 districts and towns, will hold a public meeting to receive 200.33 public testimony on the proposed budget and proposed or final 200.34 property tax levy, or, in case of a school district, on the 200.35 current budget and proposed property tax levy. It must clearly 200.36 state the time and place of each taxing authority's meeting, a 201.1 telephone number for the taxing authority that taxpayers may 201.2 call if they have questions related to the notice, and an 201.3 address where comments will be received by mail. 201.4 (d) The notice must state for each parcel: 201.5 (1) the market value of the property as determined under 201.6 section 273.11, and used for computing property taxes payable in 201.7 the following year and for taxes payable in the current year as 201.8 each appears in the records of the county assessor onNovember201.9 October 1 of the current year; and, in the case of residential 201.10 property, whether the property is classified as homestead or 201.11 nonhomestead. The notice must clearly inform taxpayers of the 201.12 years to which the market values apply and that the values are 201.13 final values; 201.14 (2) the items listed below, shown separately by county, 201.15 city or town, and state general tax, net of the residential and 201.16 agricultural homestead credit under section 273.1384, voter 201.17 approved school levy, other local school levy, and the sum of 201.18 the special taxing districts, and as a total of all taxing 201.19 authorities: 201.20 (i) the actual tax for taxes payable in the current year; 201.21(ii) the tax change due to spending factors, defined as the201.22proposed tax minus the constant spending tax amount;201.23(iii) the tax change due to other factors, defined as the201.24constant spending tax amount minus the actual current year tax;201.25 and 201.26(iv)(ii) the proposed tax amount. 201.27 If the county levy under clause (2) includes an amount for 201.28 a lake improvement district as defined under sections 103B.501 201.29 to 103B.581, the amount attributable for that purpose must be 201.30 separately stated from the remaining county levy amount. 201.31 In the case of a town or the state general tax, the final 201.32 tax shall also be its proposed tax unless the town changes its 201.33 levy at a special town meeting under section 365.52. If a 201.34 school district has certified under section 126C.17, subdivision 201.35 9, that a referendum will be held in the school district at the 201.36 November general election, the county auditor must note next to 202.1 the school district's proposed amount that a referendum is 202.2 pending and that, if approved by the voters, the tax amount may 202.3 be higher than shown on the notice. In the case of the city of 202.4 Minneapolis, the levy for the Minneapolis library board and the 202.5 levy for Minneapolis park and recreation shall be listed 202.6 separately from the remaining amount of the city's levy.In the202.7case of the city of St. Paul, the levy for the St. Paul library202.8agency must be listed separately from the remaining amount of202.9the city's levy.In the case of a parcel where tax increment or 202.10 the fiscal disparities areawide tax under chapter 276A or 473F 202.11 applies, the proposed tax levy on the captured value or the 202.12 proposed tax levy on the tax capacity subject to the areawide 202.13 tax must each be stated separately and not included in the sum 202.14 of the special taxing districts; and 202.15 (3) the increase or decrease between the total taxes 202.16 payable in the current year and the total proposed taxes, 202.17 expressed as a percentage. 202.18 For purposes of this section, the amount of the tax on 202.19 homesteads qualifying under the senior citizens' property tax 202.20 deferral program under chapter 290B is the total amount of 202.21 property tax before subtraction of the deferred property tax 202.22 amount. 202.23 (e) The notice must clearly state that the proposed or 202.24 final taxes do not include the following: 202.25 (1) special assessments; 202.26 (2) levies approved by the voters after the date the 202.27 proposed taxes are certified, including bond referenda,and 202.28 school district levy referenda, and; 202.29 (3) a levy limit increasereferendaapproved by the voters 202.30 by the first Tuesday in November of the levy year as provided 202.31 under section 275.73; 202.32(3)(4) amounts necessary to pay cleanup or other costs due 202.33 to a natural disaster occurring after the date the proposed 202.34 taxes are certified; 202.35(4)(5) amounts necessary to pay tort judgments against the 202.36 taxing authority that become final after the date the proposed 203.1 taxes are certified; and 203.2(5)(6) the contamination tax imposed on properties which 203.3 received market value reductions for contamination. 203.4 (f) Except as provided in subdivision 7, failure of the 203.5 county auditor to prepare or the county treasurer to deliver the 203.6 notice as required in this section does not invalidate the 203.7 proposed or final tax levy or the taxes payable pursuant to the 203.8 tax levy. 203.9 (g) If the notice the taxpayer receives under this section 203.10 lists the property as nonhomestead, and satisfactory 203.11 documentation is provided to the county assessor by the 203.12 applicable deadline, and the property qualifies for the 203.13 homestead classification in that assessment year, the assessor 203.14 shall reclassify the property to homestead for taxes payable in 203.15 the following year. 203.16 (h) In the case of class 4 residential property used as a 203.17 residence for lease or rental periods of 30 days or more, the 203.18 taxpayer must either: 203.19 (1) mail or deliver a copy of the notice of proposed 203.20 property taxes to each tenant, renter, or lessee; or 203.21 (2) post a copy of the notice in a conspicuous place on the 203.22 premises of the property. 203.23 The notice must be mailed or posted by the taxpayer by 203.24NovemberOctober 27 or within three days of receipt of the 203.25 notice, whichever is later. A taxpayer may notify the county 203.26 treasurer of the address of the taxpayer, agent, caretaker, or 203.27 manager of the premises to which the notice must be mailed in 203.28 order to fulfill the requirements of this paragraph. 203.29 (i) For purposes of this subdivision, subdivisions 5a and 203.30 6, "metropolitan special taxing districts" means the following 203.31 taxing districts in the seven-county metropolitan area that levy 203.32 a property tax for any of the specified purposes listed below: 203.33 (1) metropolitan council under section 473.132, 473.167, 203.34 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 203.35 (2) metropolitan airports commission under section 473.667, 203.36 473.671, or 473.672; and 204.1 (3) metropolitan mosquito control commission under section 204.2 473.711. 204.3 For purposes of this section, any levies made by the 204.4 regional rail authorities in the county of Anoka, Carver, 204.5 Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 204.6 398A shall be included with the appropriate county's levy and 204.7 shall be discussed at that county's public hearing. 204.8(j) If a statutory or home rule charter city or a town has204.9exercised the local levy option provided by section 473.388,204.10subdivision 7, it may include in the notice of its proposed204.11taxes the amount of its proposed taxes attributable to its204.12exercise of the option. In the first year of the city or town's204.13exercise of this option, the statement shall include an estimate204.14of the reduction of the metropolitan council's tax on the parcel204.15due to exercise of that option. The metropolitan council's levy204.16shall be adjusted accordingly.204.17 [EFFECTIVE DATE.] This section is effective for notices 204.18 prepared in 2005 for taxes payable in 2006, and thereafter, 204.19 except that the changes made to paragraph (d), clause (2), and 204.20 paragraphs (e) and (j) are effective for notices prepared in 204.21 2003 for taxes payable in 2004, and thereafter. 204.22 Sec. 5. Minnesota Statutes 2002, section 275.065, 204.23 subdivision 6, is amended to read: 204.24 Subd. 6. [PUBLIC HEARING; ADOPTION OF BUDGET AND LEVY.] 204.25 (a) For purposes of this section, the following terms shall have 204.26 the meanings given: 204.27 (1) "Initial hearing" means the first and primary hearing 204.28 held to discuss the taxing authority's proposed budget and 204.29 proposed property tax levy for taxes payable in the following 204.30 year, or, for school districts, the current budget and the 204.31 proposed property tax levy for taxes payable in the following 204.32 year. 204.33 (2) "Continuation hearing" means a hearing held to complete 204.34 the initial hearing, if the initial hearing is not completed on 204.35 its scheduled date. 204.36 (3) "Subsequent hearing" means the hearing held to adopt 205.1 the taxing authority's final property tax levy, and, in the case 205.2 of taxing authorities other than school districts, the final 205.3 budget, for taxes payable in the following year. 205.4 (b) Between November299 and December201, the governing 205.5 bodies of a city that has a population over 500, county, 205.6 metropolitan special taxing districts as defined in subdivision 205.7 3, paragraph (i), and regional library districts shall each hold 205.8 an initial public hearing to discuss and seek public comment on 205.9 its final budget and property tax levy for taxes payable in the 205.10 following year, and the governing body of the school district 205.11 shall hold an initial public hearing to review its current 205.12 budget and proposed property tax levy for taxes payable in the 205.13 following year. The metropolitan special taxing districts shall 205.14 be required to hold only a single joint initial public hearing, 205.15 the location of which will be determined by the affected 205.16 metropolitan agencies. A city, county, metropolitan special 205.17 taxing district as defined in subdivision 3, paragraph (i), 205.18 regional library district established under section 134.201, or 205.19 school district is not required to hold a public hearing under 205.20 this subdivision unless its proposed property tax levy for taxes 205.21 payable in the following year, as certified under subdivision 1, 205.22 has increased over its final property tax levy for taxes payable 205.23 in the current year by a percentage that is greater than the 205.24 percentage increase in the implicit price deflator for 205.25 government consumption expenditures and gross investment for 205.26 state and local governments prepared by the Bureau of Economic 205.27 Analysts of the United States Department of Commerce for the 205.28 12-month period ending March 31 of the current year. 205.29 (c) The initial hearing must be held after 5:00 p.m. if 205.30 scheduled on a day other than Saturday. No initial hearing may 205.31 be held on a Sunday. 205.32 (d) At the initial hearing under this subdivision, the 205.33 percentage increase in property taxes proposed by the taxing 205.34 authority, if any, and the specific purposes for which property 205.35 tax revenues are being increased must be discussed. During the 205.36 discussion, the governing body shall hear comments regarding a 206.1 proposed increase and explain the reasons for the proposed 206.2 increase. The public shall be allowed to speak and to ask 206.3 questions. At the public hearing, the school district must also 206.4 provide and discuss information on the distribution of its 206.5 revenues by revenue source, and the distribution of its spending 206.6 by program area. 206.7 (e) If the initial hearing is not completed on its 206.8 scheduled date, the taxing authority must announce, prior to 206.9 adjournment of the hearing, the date, time, and place for the 206.10 continuation of the hearing. The continuation hearing must be 206.11 held at least five business days but no more than 14 business 206.12 days after the initial hearing. A continuation hearing may not 206.13 be held later than December 20 except as provided in paragraphs 206.14 (f) and (g). A continuation hearing must be held after 5:00 206.15 p.m. if scheduled on a day other than Saturday. No continuation 206.16 hearing may be held on a Sunday. 206.17 (f) The governing body of a county shall hold its initial 206.18 hearing on thefirstsecond Thursday inDecemberNovember each 206.19 year, and may hold additional initial hearings on other dates on 206.20 or before December201 if necessary for the convenience of 206.21 county residents. If the county needs a continuation of its 206.22 hearing, the continuation hearing shall be held on the third 206.23 Tuesday inDecember. If the third Tuesday in December falls on206.24December 21, the county's continuation hearing shall be held on206.25Monday, December 20November. 206.26 (g) The metropolitan special taxing districts shall hold a 206.27 joint initial public hearing on thefirstsecond Wednesday of 206.28DecemberNovember. A continuation hearing, if necessary, shall 206.29 be held on thesecondthird Wednesday ofDecember even if that206.30second Wednesday is after December 10November. 206.31 (h) The county auditor shall provide for the coordination 206.32 of initial and continuation hearing dates for all school 206.33 districts and cities within the county to prevent conflicts 206.34 under clauses (i) and (j). 206.35 (i) By August 10, each school board and the board of the 206.36 regional library district shall certify to the county auditors 207.1 of the counties in which the school district or regional library 207.2 district is located the dates on which it elects to hold its 207.3 initial hearing and any continuation hearing. If a school board 207.4 or regional library district does not certify these dates by 207.5 August 10, the auditor will assign the initial and continuation 207.6 hearing dates. The dates elected or assigned must not conflict 207.7 with the initial and continuation hearing dates of the county or 207.8 the metropolitan special taxing districts. 207.9 (j) By August 20, the county auditor shall notify the 207.10 clerks of the cities within the county of the dates on which 207.11 school districts and regional library districts have elected to 207.12 hold their initial and continuation hearings. At the time a 207.13 city certifies its proposed levy under subdivision 1 it shall 207.14 certify the dates on which it elects to hold its initial hearing 207.15 and any continuation hearing. Until September 15, thefirst and207.16 secondMondaysMonday ofDecember areNovember is reserved for 207.17 the use of the cities. If a city does not certify its hearing 207.18 dates by September 15, the auditor shall assign the initial and 207.19 continuation hearing dates. The dates elected or assigned for 207.20 the initial hearing must not conflict with the initial hearing 207.21 dates of the county, metropolitan special taxing districts, 207.22 regional library districts, or school districts within which the 207.23 city is located. To the extent possible, the dates of the 207.24 city's continuation hearing should not conflict with the 207.25 continuation hearing dates of the county, metropolitan special 207.26 taxing districts, regional library districts, or school 207.27 districts within which the city is located. This paragraph does 207.28 not apply to cities of 500 population or less. 207.29 (k) The county initial hearing date and the city, 207.30 metropolitan special taxing district, regional library district, 207.31 and school district initial hearing dates must be designated on 207.32 the notices required under subdivision 3. The continuation 207.33 hearing dates need not be stated on the notices. 207.34 (l) At a subsequent hearing, each county, school district, 207.35 city over 500 population, and metropolitan special taxing 207.36 district may amend its proposed property tax levy and must adopt 208.1 a final property tax levy. Each county, city over 500 208.2 population, and metropolitan special taxing district may also 208.3 amend its proposed budget and must adopt a final budget at the 208.4 subsequent hearing. The final property tax levy must be adopted 208.5 prior to adopting the final budget. A school district is not 208.6 required to adopt its final budget at the subsequent hearing. 208.7 The subsequent hearing of a taxing authority must be held on a 208.8 date subsequent to the date of the taxing authority's initial 208.9 public hearing. If a continuation hearing is held, the 208.10 subsequent hearing must be held either immediately following the 208.11 continuation hearing or on a date subsequent to the continuation 208.12 hearing. The subsequent hearing may be held at a regularly 208.13 scheduled board or council meeting or at a special meeting 208.14 scheduled for the purposes of the subsequent hearing. The 208.15 subsequent hearing of a taxing authority does not have to be 208.16 coordinated by the county auditor to prevent a conflict with an 208.17 initial hearing, a continuation hearing, or a subsequent hearing 208.18 of any other taxing authority. All subsequent hearings must be 208.19 held prior to five working days after December201 of the levy 208.20 year. The date, time, and place of the subsequent hearing must 208.21 be announced at the initial public hearing or at the 208.22 continuation hearing. 208.23 (m) The property tax levy certified under section 275.07 by 208.24 a city of any population, county, metropolitan special taxing 208.25 district, regional library district, or school district must not 208.26 exceed the proposed levy determined under subdivision 1, except 208.27 by an amount up to the sum of the following amounts: 208.28 (1) the amount of a school district levy whose voters 208.29 approved a referendum to increase taxes under section 123B.63, 208.30 subdivision 3, or 126C.17, subdivision 9, after the proposed 208.31 levy was certified; 208.32 (2) the amount of a city or county levy approved by the 208.33 voters after the proposed levy was certified; 208.34 (3) the amount of a levy to pay principal and interest on 208.35 bonds approved by the voters under section 475.58 after the 208.36 proposed levy was certified; 209.1 (4) the amount of a levy to pay costs due to a natural 209.2 disaster occurring after the proposed levy was certified, if 209.3 that amount is approved by the commissioner of revenue under 209.4 subdivision 6a; 209.5 (5) the amount of a levy to pay tort judgments against a 209.6 taxing authority that become final after the proposed levy was 209.7 certified, if the amount is approved by the commissioner of 209.8 revenue under subdivision 6a; 209.9 (6) the amount of an increase in levy limits certified to 209.10 the taxing authority by the commissioner of children, families, 209.11 and learning or the commissioner of revenue after the proposed 209.12 levy was certified; and 209.13 (7) the amount required under section 126C.55. 209.14 (n) This subdivision does not apply to towns and special 209.15 taxing districts other than regional library districts and 209.16 metropolitan special taxing districts. 209.17 (o) Notwithstanding the requirements of this section, the 209.18 employer is required to meet and negotiate over employee 209.19 compensation as provided for in chapter 179A. 209.20 [EFFECTIVE DATE.] This section is effective for hearings 209.21 held in 2005 for taxes payable in 2006, and thereafter. 209.22 Sec. 6. Minnesota Statutes 2002, section 275.065, 209.23 subdivision 8, is amended to read: 209.24 Subd. 8. [HEARING.] Notwithstanding any other provision of 209.25 law, Ramsey county, the city of St. Paul, and independent school 209.26 district No. 625 are authorized to and shall hold their initial 209.27 public hearing jointly. The hearing must be held on the second 209.28 Tuesday ofDecemberNovember each year. The advertisement 209.29 required in subdivision 5a may be a joint advertisement. The 209.30 hearing is otherwise subject to the requirements of this section. 209.31 Ramsey county is authorized to hold an additional initial 209.32 hearing or hearings as provided under this section, provided 209.33 that any additional hearings must not conflict with the initial 209.34 or continuation hearing dates of the other taxing districts. 209.35 However, if Ramsey county elects not to hold such additional 209.36 initial hearing or hearings, the joint initial hearing required 210.1 by this subdivision must be held in a St. Paul location 210.2 convenient to residents of Ramsey county. 210.3 [EFFECTIVE DATE.] This section is effective for hearings 210.4 held in 2005 for property taxes payable in 2006, and thereafter. 210.5 Sec. 7. Minnesota Statutes 2002, section 275.065, is 210.6 amended by adding a subdivision to read: 210.7 Subd. 9. [REVERSE REFERENDUM.] (a) The reverse referendum 210.8 procedure in this subdivision applies only in the case of a 210.9 county, or a city that has a population of more than 2,500, that 210.10 has adopted a property tax levy increase over the property tax 210.11 levy amount certified under section 275.07, subdivision 1, for 210.12 the previous year. 210.13 (b) If, within 21 days after the public hearing and 210.14 adoption of a levy under subdivision 6, a petition signed by 210.15 voters equal in number to five percent of the votes cast in the 210.16 county or city in the last general state election requesting a 210.17 referendum on the levy increase is filed with the county auditor 210.18 or the city clerk, the levy increase shall not be effective 210.19 until it has been submitted to the voters at a special election 210.20 to be held on the second Tuesday in January, and a majority of 210.21 votes cast on the question of approving the levy increase are in 210.22 the affirmative. The commissioner of revenue shall prepare the 210.23 form of the question to be presented at the referendum, which 210.24 shall reference only the amount of the property tax levy 210.25 increase over the previous year. 210.26 (c) The county or city shall notify the county auditor of 210.27 the results of the referendum. If the majority of the votes 210.28 cast on the question are in the affirmative, the property tax 210.29 levy adopted under subdivision 6 shall be certified to the 210.30 county auditor under section 275.07, subdivision 1. If the 210.31 majority of the votes cast on the question are in the negative, 210.32 an amount equal to the preceding year's property tax levy shall 210.33 be certified to the county auditor for purposes of section 210.34 275.07, subdivision 1; provided that if the current year adopted 210.35 levy includes any levy for the payment of bonded indebtedness or 210.36 judgments, such levies for bonded indebtedness and judgments 211.1 shall be extended in full and the remainder of the levies shall 211.2 be reduced so that the total, including levies for bonds and 211.3 judgments, does not exceed the preceding year's levy. 211.4 (d) For purposes of this subdivision "property tax levy" 211.5 shall not include the levy required to pay any general 211.6 obligation bonds. 211.7 [EFFECTIVE DATE.] This section is effective for taxes 211.8 levied in 2005 for taxes payable in 2006, and thereafter. 211.9 Sec. 8. Minnesota Statutes 2002, section 275.07, 211.10 subdivision 1, is amended to read: 211.11 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 211.12 provided under paragraph (b) or (c), the taxes voted by cities, 211.13 counties, school districts, and special districts shall be 211.14 certified by the proper authorities to the county auditor on or 211.15 before five working days after December201 in each year. A 211.16 town must certify the levy adopted by the town board to the 211.17 county auditor by September151 each year. If the town board 211.18 modifies the levy at a special town meeting after September15211.19 1, the town board must recertify its levy to the county auditor 211.20 on or before five working days after December201. The taxes 211.21 certified shall not be reduced by the county auditor by the aid 211.22 received under section 273.1398, subdivision 2, but shall be 211.23 reduced by the county auditor by the aid received under section 211.24 273.1398, subdivision 3. If a city, town, county, school 211.25 district, or special district fails to certify its levy by that 211.26 date, its levy shall be the amount levied by it for the 211.27 preceding year. 211.28 (b)(i) The taxes voted by counties under sections 103B.241, 211.29 103B.245, and 103B.251 shall be separately certified by the 211.30 county to the county auditor on or before five working days 211.31 after December201 in each year. The taxes certified shall not 211.32 be reduced by the county auditor by the aid received under 211.33 section 273.1398, subdivisions 2 and 3. If a county fails to 211.34 certify its levy by that date, its levy shall be the amount 211.35 levied by it for the preceding year. 211.36 (ii) For purposes of the proposed property tax notice under 212.1 section 275.065 and the property tax statement under section 212.2 276.04, for the first year in which the county implements the 212.3 provisions of this paragraph, the county auditor shall reduce 212.4 the county's levy for the preceding year to reflect any amount 212.5 levied for water management purposes under clause (i) included 212.6 in the county's levy. 212.7 (c) A county or city to which the reverse referendum 212.8 provisions under section 275.065, subdivision 9, apply shall 212.9 certify the taxes to the county auditor by December 10, except 212.10 that any county or city for which a petition has been filed 212.11 under section 275.065, subdivision 9, must certify the day 212.12 immediately following the election under that subdivision. 212.13 [EFFECTIVE DATE.] This section is effective for taxes 212.14 levied in 2005 for taxes payable in 2006, and thereafter. 212.15 Sec. 9. [REPEALER.] 212.16 (a) Minnesota Statutes 2002, section 275.065, subdivision 212.17 3a, is repealed effective for notices prepared in 2003, payable 212.18 in 2004 and thereafter. 212.19 (b) Minnesota Statutes 2002, section 275.065, subdivision 212.20 4, is repealed the day following final enactment. 212.21 ARTICLE 9 212.22 LOCAL ECONOMIC DEVELOPMENT 212.23 Section 1. Minnesota Statutes 2002, section 469.169, is 212.24 amended by adding a subdivision to read: 212.25 Subd. 16. [ADDITIONAL BORDER CITY ALLOCATIONS.] (a) In 212.26 addition to tax reductions authorized in subdivisions 7 to 15, 212.27 the commissioner shall allocate $750,000 for tax reductions to 212.28 border city enterprise zones in cities located on the western 212.29 border of the state. The commissioner shall make allocations to 212.30 zones in cities on the western border on a per capita basis. 212.31 Allocations made under this subdivision may be used for tax 212.32 reductions as provided in section 469.171, or for other offsets 212.33 of taxes imposed on or remitted by businesses located in the 212.34 enterprise zone, but only if the municipality determines that 212.35 the granting of the tax reduction or offset is necessary in 212.36 order to retain a business within or attract a business to the 213.1 zone. Any portion of the allocation provided in this paragraph 213.2 may alternatively be used for tax reductions under section 213.3 469.1732 or 469.1734. 213.4 (b) The commissioner shall allocate $750,000 for tax 213.5 reductions under section 469.1732 or 469.1734 to cities with 213.6 border city enterprise zones located on the western border of 213.7 the state. The commissioner shall allocate this amount among 213.8 the cities on a per capita basis. Any portion of the allocation 213.9 provided in this paragraph may alternatively be used for tax 213.10 reductions as provided in section 469.171. 213.11 [EFFECTIVE DATE.] This section is effective the day 213.12 following final enactment. 213.13 Sec. 2. Minnesota Statutes 2002, section 469.1731, 213.14 subdivision 3, is amended to read: 213.15 Subd. 3. [FILING.] The city must file a copy of the 213.16 resolution and development plan with the commissioner of trade 213.17 and economic development. The designation takes effectfor the213.18first calendar year that begins more than 9030 days after the 213.19 filing. 213.20 [EFFECTIVE DATE.] This section is effective the day 213.21 following final enactment. 213.22 Sec. 3. Minnesota Statutes 2002, section 469.174, 213.23 subdivision 3, is amended to read: 213.24 Subd. 3. [BONDS.] (a) "Bonds" means any bonds, including213.25refunding bonds, notes, interim certificates, debentures,213.26interfund loans or advances,or other obligations issued: 213.27 (1) by an authority under section 469.178; orwhich were213.28issued213.29 (2) in aid of a project under any other law, except revenue 213.30 bonds issued pursuant to sections 469.152 to 469.165, prior to 213.31 August 1, 1979. 213.32 (b) Bonds or other obligations include: 213.33 (1) refunding bonds; 213.34 (2) notes; 213.35 (3) interim certificates; 213.36 (4) debentures; and 214.1 (5) interfund loans or advances qualifying under section 214.2 469.178, subdivision 7. 214.3 [EFFECTIVE DATE.] This section is effective at the same 214.4 time as provided by Laws 2001, First Special Session chapter 5, 214.5 article 15, section 3. 214.6 Sec. 4. Minnesota Statutes 2002, section 469.174, 214.7 subdivision 6, is amended to read: 214.8 Subd. 6. [MUNICIPALITY.] "Municipality" meansanythe 214.9 city, however organized,and with respect toin which the 214.10 district is located, with the following exceptions: 214.11 (1) for a project undertaken pursuant to sections 469.152 214.12 to 469.165, "municipality" has the meaning given in sections 214.13 469.152 to 469.165, and with respect to; and 214.14 (2) for a project undertaken pursuant to sections 469.142 214.15 to 469.151, or a county or multicounty project undertaken 214.16 pursuant to sections 469.004 to 469.008, "municipality"also214.17includes anymeans the county in which the district is located. 214.18 [EFFECTIVE DATE.] This section is effective for districts 214.19 for which the request for certification was made after July 31, 214.20 1979. 214.21 Sec. 5. Minnesota Statutes 2002, section 469.174, 214.22 subdivision 10, is amended to read: 214.23 Subd. 10. [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 214.24 district" means a type of tax increment financing district 214.25 consisting of a project, or portions of a project, within which 214.26 the authority finds by resolution that one or more of the 214.27 following conditions, reasonably distributed throughout the 214.28 district, exists: 214.29 (1) parcels consisting of 70 percent of the area of the 214.30 district are occupied by buildings, streets, utilities, paved or 214.31 gravel parking lots, or other similar structures and more than 214.32 50 percent of the buildings, not including outbuildings, are 214.33 structurally substandard to a degree requiring substantial 214.34 renovation or clearance; or 214.35 (2) the property consists of vacant, unused, underused, 214.36 inappropriately used, or infrequently used railyards, rail 215.1 storage facilities, or excessive or vacated railroad 215.2 rights-of-way; or 215.3 (3) tank facilities, or property whose immediately previous 215.4 use was for tank facilities, as defined in section 115C.02, 215.5 subdivision 15, if the tank facilities: 215.6 (i) have or had a capacity of more than 1,000,000 gallons; 215.7 (ii) are located adjacent to rail facilities; and 215.8 (iii) have been removed or are unused, underused, 215.9 inappropriately used, or infrequently used. 215.10 (b) For purposes of this subdivision, "structurally 215.11 substandard" shall mean containing defects in structural 215.12 elements or a combination of deficiencies in essential utilities 215.13 and facilities, light and ventilation, fire protection including 215.14 adequate egress, layout and condition of interior partitions, or 215.15 similar factors, which defects or deficiencies are of sufficient 215.16 total significance to justify substantial renovation or 215.17 clearance. 215.18 (c) A building is not structurally substandard if it is in 215.19 compliance with the building code applicable to new buildings or 215.20 could be modified to satisfy the building code at a cost of less 215.21 than 15 percent of the cost of constructing a new structure of 215.22 the same square footage and type on the site. The municipality 215.23 may find that a building is not disqualified as structurally 215.24 substandard under the preceding sentence on the basis of 215.25 reasonably available evidence, such as the size, type, and age 215.26 of the building, the average cost of plumbing, electrical, or 215.27 structural repairs, or other similar reliable evidence. The 215.28 municipality may not make such a determination without an 215.29 interior inspection of the property, but need not have an 215.30 independent, expert appraisal prepared of the cost of repair and 215.31 rehabilitation of the building. An interior inspection of the 215.32 property is not required, if the municipality finds that (1) the 215.33 municipality or authority is unable to gain access to the 215.34 property after using its best efforts to obtain permission from 215.35 the party that owns or controls the property; and (2) the 215.36 evidence otherwise supports a reasonable conclusion that the 216.1 building is structurally substandard. Items of evidence that 216.2 support such a conclusion include recent fire or police 216.3 inspections, on-site property tax appraisals or housing 216.4 inspections, exterior evidence of deterioration, or other 216.5 similar reliable evidence. Written documentation of the 216.6 findings and reasons why an interior inspection was not 216.7 conducted must be made and retained under section 469.175, 216.8 subdivision 3, clause (1). Failure of a building to be 216.9 disqualified under the provisions of this paragraph is a 216.10 necessary, but not a sufficient, condition to determining that 216.11 the building is substandard. 216.12 (d) A parcel is deemed to be occupied by a structurally 216.13 substandard building for purposes of the finding under paragraph 216.14 (a) if all of the following conditions are met: 216.15 (1) the parcel was occupied by a substandard building 216.16 within three years of the filing of the request for 216.17 certification of the parcel as part of the district with the 216.18 county auditor; 216.19 (2) the substandard building was demolished or removed by 216.20 the authority or the demolition or removal was financed by the 216.21 authority or was done by a developer under a development 216.22 agreement with the authority; 216.23 (3) the authority found by resolution before the demolition 216.24 or removal that the parcel was occupied by a structurally 216.25 substandard building and that after demolition and clearance the 216.26 authority intended to include the parcel within a district; and 216.27 (4) upon filing the request for certification of the tax 216.28 capacity of the parcel as part of a district, the authority 216.29 notifies the county auditor that the original tax capacity of 216.30 the parcel must be adjusted as provided by section 469.177, 216.31 subdivision 1, paragraph(h)(f). 216.32 (e) For purposes of this subdivision, a parcel is not 216.33 occupied by buildings, streets, utilities, paved or gravel 216.34 parking lots, or other similar structures unless 15 percent of 216.35 the area of the parcel contains buildings, streets, utilities, 216.36 paved or gravel parking lots, or other similar structures. 217.1 (f) For districts consisting of two or more noncontiguous 217.2 areas, each area must qualify as a redevelopment district under 217.3 paragraph (a) to be included in the district, and the entire 217.4 area of the district must satisfy paragraph (a). 217.5 [EFFECTIVE DATE.] The amendment to Minnesota Statutes, 217.6 section 469.174, subdivision 10, paragraph (c), confirms the 217.7 intent of the legislature with regard to the original provisions 217.8 of the language contained in Minnesota Statutes 2002, section 217.9 469.174, subdivision 10, paragraph (c), and is retroactive to 217.10 the effective date of the original language. The amendment to 217.11 Minnesota Statutes, section 469.174, subdivision 10, paragraph 217.12 (d), is effective for districts for which the request for 217.13 certification was received by the county after June 30, 2002. 217.14 Sec. 6. Minnesota Statutes 2002, section 469.174, 217.15 subdivision 25, is amended to read: 217.16 Subd. 25. [INCREMENT.] "Increment," "tax increment," "tax 217.17 increment revenues," "revenues derived from tax increment," and 217.18 other similar terms for a district include: 217.19 (1) taxes paid by the captured net tax capacity, but 217.20 excluding any excess taxes, as computed under section 469.177; 217.21 (2) the proceeds from the sale or lease of property, 217.22 tangible or intangible, purchased by the authority with tax 217.23 increments; 217.24 (3)repayments ofprincipal and interest received on loans 217.25 or other advances made by the authority with tax increments; and 217.26 (4) interest or other investment earnings on or from tax 217.27 increments. 217.28 [EFFECTIVE DATE.] This section is effective for districts 217.29 for which the request for certification was made after June 30, 217.30 1982, and payments of principal and interest received on loans 217.31 or other advances that were made after June 30, 1997. 217.32 Sec. 7. Minnesota Statutes 2002, section 469.174, is 217.33 amended by adding a subdivision to read: 217.34 Subd. 29. [QUALIFIED HOUSING DISTRICT.] "Qualified housing 217.35 district" means: 217.36 (1) a housing district for a residential rental project or 218.1 projects in which the only properties receiving assistance from 218.2 revenues derived from tax increments from the district meet the 218.3 rent restriction requirements and the low-income occupancy test 218.4 for a qualified low-income housing project under section 42(g) 218.5 of the Internal Revenue Code of 1986, as amended through 218.6 December 31, 2002, regardless of whether the project actually 218.7 receives a low-income housing credit; or 218.8 (2) a housing district for a single-family homeownership 218.9 project or projects, if 95 percent or more of the homes 218.10 receiving assistance from tax increments from the district are 218.11 purchased by qualified purchasers. A qualified purchaser means 218.12 the first purchaser of a home after the tax increment assistance 218.13 is provided whose income is at or below 85 percent of the median 218.14 gross income for a family of the same size as the purchaser. 218.15 Median gross income is the greater of (i) area median gross 218.16 income, or (ii) the statewide median gross income, as determined 218.17 by the secretary of Housing and Urban Development. 218.18 [EFFECTIVE DATE.] This section applies to all districts for 218.19 which the request for certification was made on or after January 218.20 1, 2002, and to all districts to which the definition of 218.21 qualified housing districts under Minnesota Statutes 2000, 218.22 section 273.1399, applied. 218.23 Sec. 8. Minnesota Statutes 2002, section 469.175, 218.24 subdivision 1, is amended to read: 218.25 Subdivision 1. [TAX INCREMENT FINANCING PLAN.] A tax 218.26 increment financing plan shall contain: 218.27 (1) a statement of objectives of an authority for the 218.28 improvement of a project; 218.29 (2) a statement as to the development program for the 218.30 project, including the property within the project, if any, that 218.31 the authority intends to acquire; 218.32 (3) a list of any development activities that the plan 218.33 proposes to take place within the project, for which contracts 218.34 have been entered into at the time of the preparation of the 218.35 plan, including the names of the parties to the contract, the 218.36 activity governed by the contract, the cost stated in the 219.1 contract, and the expected date of completion of that activity; 219.2 (4) identification or description of the type of any other 219.3 specific development reasonably expected to take place within 219.4 the project, and the date when the development is likely to 219.5 occur; 219.6 (5) estimates of the following: 219.7 (i) cost of the project, includingadministration219.8 administrative expenses, except that if part of the cost of the 219.9 project is paid or financed with increment from the tax 219.10 increment financing district, the tax increment financing plan 219.11 for the district must contain an estimate of the amount of the 219.12 cost of the project, including administrative expenses, that 219.13 will be paid or financed with tax increments from the district; 219.14 (ii) amount of bonded indebtedness to be incurred; 219.15 (iii) sources of revenue to finance or otherwise pay public 219.16 costs; 219.17 (iv) the most recent net tax capacity of taxable real 219.18 property within the tax increment financing district and within 219.19 any subdistrict; 219.20 (v) the estimated captured net tax capacity of the tax 219.21 increment financing district at completion; and 219.22 (vi) the duration of the tax increment financing district's 219.23 and any subdistrict's existence; 219.24 (6) statements of the authority's alternate estimates of 219.25 the impact of tax increment financing on the net tax capacities 219.26 of all taxing jurisdictions in which the tax increment financing 219.27 district is located in whole or in part. For purposes of one 219.28 statement, the authority shall assume that the estimated 219.29 captured net tax capacity would be available to the taxing 219.30 jurisdictions without creation of the district, and for purposes 219.31 of the second statement, the authority shall assume that none of 219.32 the estimated captured net tax capacity would be available to 219.33 the taxing jurisdictions without creation of the district or 219.34 subdistrict; 219.35 (7) identification and description of studies and analyses 219.36 used to make the determination set forth in subdivision 3, 220.1 clause (2); and 220.2 (8) identification of all parcels to be included in the 220.3 district or any subdistrict. 220.4 [EFFECTIVE DATE.] This section applies to districts for 220.5 which the request for certification was made after July 31, 220.6 1979, and is effective for tax increment financing plans and 220.7 modifications approved after June 30, 2003. 220.8 Sec. 9. Minnesota Statutes 2002, section 469.175, 220.9 subdivision 3, is amended to read: 220.10 Subd. 3. [MUNICIPALITY APPROVAL.] (a) A county auditor 220.11 shall not certify the original net tax capacity of a tax 220.12 increment financing district until the tax increment financing 220.13 plan proposed for that district has been approved by the 220.14 municipality in which the district is located. If an authority 220.15 that proposes to establish a tax increment financing district 220.16 and the municipality are not the same, the authority shall apply 220.17 to the municipality in which the district is proposed to be 220.18 located and shall obtain the approval of its tax increment 220.19 financing plan by the municipality before the authority may use 220.20 tax increment financing. The municipality shall approve the tax 220.21 increment financing plan only after a public hearing thereon 220.22 after published notice in a newspaper of general circulation in 220.23 the municipality at least once not less than ten days nor more 220.24 than 30 days prior to the date of the hearing. The published 220.25 notice must include a map of the area of the district from which 220.26 increments may be collected and, if the project area includes 220.27 additional area, a map of the project area in which the 220.28 increments may be expended. The hearing may be held before or 220.29 after the approval or creation of the project or it may be held 220.30 in conjunction with a hearing to approve the project. 220.31 (b) Before or at the time of approval of the tax increment 220.32 financing plan, the municipality shall make the following 220.33 findings, and shall set forth in writing the reasons and 220.34 supporting facts for each determination: 220.35 (1) that the proposed tax increment financing district is a 220.36 redevelopment district, a renewal or renovation district, a 221.1 housing district, a soils condition district, or an economic 221.2 development district; if the proposed district is a 221.3 redevelopment district or a renewal or renovation district, the 221.4 reasons and supporting facts for the determination that the 221.5 district meets the criteria of section 469.174, subdivision 10, 221.6 paragraph (a), clauses (1) and (2), or subdivision 10a, must be 221.7 documented in writing and retained and made available to the 221.8 public by the authority until the district has been terminated; 221.9 (2) thatthe proposed development or redevelopment, in the 221.10 opinion of the municipality,: 221.11 (i) the proposed development or redevelopment would not 221.12 reasonably be expected to occur solely through private 221.13 investment within the reasonably foreseeable future; andthat221.14 (ii) the increased market value of the site that could 221.15 reasonably be expected to occur without the use of tax increment 221.16 financing would be less than the increase in the market value 221.17 estimated to result from the proposed development after 221.18 subtracting the present value of the projected tax increments 221.19 for the maximum duration of the district permitted by the plan. 221.20 In computing present values for purposes of this subdivision, 221.21 the municipality must use a discount rate that does not exceed 221.22 the greater of the rate specified under section 270.75 or 549.09 221.23 for the last business day of the calendar month ending before 221.24 publication of the notice under this subdivision. The 221.25 requirements of thisclauseitem do not apply if the district is 221.26 a qualified housing district, as defined in section 273.1399,221.27subdivision 1; 221.28 (3) that the tax increment financing plan conforms to the 221.29 general plan for the development or redevelopment of the 221.30 municipality as a whole; 221.31 (4) that the tax increment financing plan will afford 221.32 maximum opportunity, consistent with the sound needs of the 221.33 municipality as a whole, for the development or redevelopment of 221.34 the project by private enterprise; 221.35 (5) that the municipality elects the method of tax 221.36 increment computation set forth in section 469.177, subdivision 222.1 3, clause (b), if applicable. 222.2 (c) When the municipality and the authority are not the 222.3 same, the municipality shall approve or disapprove the tax 222.4 increment financing plan within 60 days of submission by the 222.5 authority. When the municipality and the authority are not the 222.6 same, the municipality may not amend or modify a tax increment 222.7 financing plan except as proposed by the authority pursuant to 222.8 subdivision 4. Once approved, the determination of the 222.9 authority to undertake the project through the use of tax 222.10 increment financing and the resolution of the governing body 222.11shall be conclusive of the findings therein and of the public222.12need for the financingis presumed valid. The determination of 222.13 the authority is subject to judicial review under section 222.14 469.1771 as to whether it was: 222.15 (1) in excess of or contrary to the statutory authority; or 222.16 (2) arbitrary and capricious. 222.17 (d) For a district that is subject to the requirements of 222.18 paragraph (b), clause (2), item (ii), the municipality's 222.19 statement of reasons and supporting facts must include all of 222.20 the following: 222.21 (1) an estimate of the amount by which the market value of 222.22 the site will increase without the use of tax increment 222.23 financing; 222.24 (2) an estimate of the increase in the market value that 222.25 will result from the development or redevelopment to be assisted 222.26 with tax increment financing; and 222.27 (3) the present value of the projected tax increments for 222.28 the maximum duration of the district permitted by the tax 222.29 increment financing plan. 222.30 (e) For purposes of this subdivision, "site" means the 222.31 parcels on which the development or redevelopment to be assisted 222.32 with tax increment financing will be located. 222.33 [EFFECTIVE DATE.] This section is effective for 222.34 determinations made after June 30, 2003, except the provisions 222.35 of paragraph (e) apply to requests for certification of tax 222.36 increment districts made after June 30, 1995. 223.1 Sec. 10. Minnesota Statutes 2002, section 469.175, 223.2 subdivision 4, is amended to read: 223.3 Subd. 4. [MODIFICATION OF PLAN.] (a) A tax increment 223.4 financing plan may be modified by an authority, provided that. 223.5 (b) The authority may make the following modifications only 223.6 upon the notice and after the discussion, public hearing, and 223.7 findings required for approval of the original plan: 223.8 (1) any reduction or enlargement of geographic area of the 223.9 project or tax increment financing district,that does not meet 223.10 the requirements of paragraph (e); 223.11 (2) increase in amount of bonded indebtedness to be 223.12 incurred, including; 223.13 (3) a determination to capitalize interest on the debt if 223.14 that determination was not a part of the original plan, or to 223.15 increase or decrease the amount of interest on the debt to be 223.16 capitalized,; 223.17 (4) increase in the portion of the captured net tax 223.18 capacity to be retained by the authority,; 223.19 (5) increase intotal estimated tax increment223.20expendituresthe estimate of the cost of the project, including 223.21 administrative expenses, that will be paid or financed with tax 223.22 increment from the district; or 223.23 (6) designation of additional property to be acquired by 223.24 the authorityshall be approved upon the notice and after the223.25discussion, public hearing, and findings required for approval223.26of the original plan; provided that. 223.27 (c) If an authority changes the type of districtfrom223.28housing, redevelopment, or economic developmentto another type 223.29 of district, this changeshallis notbe considereda 223.30 modification butshall requirerequires the authority to follow 223.31 the procedure set forth in sections 469.174 to 469.179 for 223.32 adoption of a new plan, including certification of the net tax 223.33 capacity of the district by the county auditor. 223.34 (d) If a redevelopment district or a renewal and renovation 223.35 district is enlarged, the reasons and supporting facts for the 223.36 determination that the addition to the district meets the 224.1 criteria of section 469.174, subdivision 10, paragraph (a), 224.2 clauses (1) and (2), or subdivision 10a, must be documented. 224.3 (e) The requirements ofthisparagraph (b) do not apply if 224.4 (1) the only modification is elimination of parcels from the 224.5 project or district and (2)(A) the current net tax capacity of 224.6 the parcels eliminated from the district equals or exceeds the 224.7 net tax capacity of those parcels in the district's original net 224.8 tax capacity or (B) the authority agrees that, notwithstanding 224.9 section 469.177, subdivision 1, the original net tax capacity 224.10 will be reduced by no more than the current net tax capacity of 224.11 the parcels eliminated from the district. The authority must 224.12 notify the county auditor of any modification that reduces or 224.13 enlarges the geographic area of a district or a project area. 224.14(b)(f) The geographic area of a tax increment financing 224.15 district may be reduced, but shall not be enlarged after five 224.16 years following the date of certification of the original net 224.17 tax capacity by the county auditor or after August 1, 1984, for 224.18 tax increment financing districts authorized prior to August 1, 224.19 1979. 224.20 [EFFECTIVE DATE.] This section applies to districts for 224.21 which the request for certification was made after June 30, 224.22 2003. The development authority may elect to have this section 224.23 apply to a tax increment financing plan or modification that was 224.24 approved before July 1, 2004, by adopting before January 1, 224.25 2004, a modification of the plan that states the amount of the 224.26 cost of the project, including administrative expenses, that 224.27 will be paid or financed with tax increments from the district. 224.28 Section 469.175, subdivision 4, paragraph (b), does not apply to 224.29 a modification adopted under this section if the modification is 224.30 exclusively for the purpose of stating the amount of the cost of 224.31 the project, including administrative expenses, that will be 224.32 paid or financed with tax increment from the district. For 224.33 districts for which the request for certification was made after 224.34 July 31, 1979, and for which this section is not effective, the 224.35 total estimated tax increment expenditures are determined by 224.36 considering all of the information in the tax increment 225.1 financing plan and exhibits to the plan about estimated sources 225.2 and uses of funds. 225.3 For districts for which certification was requested after 225.4 June 30, 1982, and before July 1, 2003, and for which the plan 225.5 has not been amended after July 1, 2003, the limit on 225.6 administrative expenses equals the greater of (1) nine percent 225.7 of the increments for the district or (2) the amount determined 225.8 under section 469.176, subdivision 3, and the tax increment 225.9 financing plan. 225.10 Sec. 11. Minnesota Statutes 2002, section 469.175, 225.11 subdivision 6, is amended to read: 225.12 Subd. 6. [ANNUAL FINANCIAL REPORTING.] (a) The state 225.13 auditor shall develop a uniform system of accounting and 225.14 financial reporting for tax increment financing districts. The 225.15 system of accounting and financial reporting shall, as nearly as 225.16 possible: 225.17 (1) provide for full disclosure of the sources and uses of 225.18 public funds in the district; 225.19 (2) permit comparison and reconciliation with the affected 225.20 local government's accounts and financial reports; 225.21 (3) permit auditing of the funds expended on behalf of a 225.22 district, including a single district that is part of a 225.23 multidistrict project or that is funded in part or whole through 225.24 the use of a development account funded with tax increments from 225.25 other districts or with other public money; 225.26 (4) be consistent with generally accepted accounting 225.27 principles. 225.28 (b) The authority must annually submit to the state auditor 225.29 a financial report in compliance with paragraph (a). Copies of 225.30 the report must also be provided to the county auditor and to 225.31 the governing body of the municipality, if the authority is not 225.32 the municipality. To the extent necessary to permit compliance 225.33 with the requirement of financial reporting, the county and any 225.34 other appropriate local government unit or private entity must 225.35 provide the necessary records or information to the authority or 225.36 the state auditor as provided by the system of accounting and 226.1 financial reporting developed pursuant to paragraph (a). The 226.2 authority must submit the annual report for a year on or before 226.3 August 1 of the next year. 226.4 (c) The annual financial report must also include the 226.5 following items: 226.6 (1) the original net tax capacity of the district and any 226.7 subdistrict under section 469.177, subdivision 1; 226.8 (2) the net tax capacity for the reporting period of the 226.9 district and any subdistrict; 226.10 (3) the captured net tax capacity of the district; 226.11 (4) any fiscal disparity deduction from the captured net 226.12 tax capacity under section 469.177, subdivision 3; 226.13 (5) the captured net tax capacity retained for tax 226.14 increment financing under section 469.177, subdivision 2, 226.15 paragraph (a), clause (1); 226.16 (6) any captured net tax capacity distributed among 226.17 affected taxing districts under section 469.177, subdivision 2, 226.18 paragraph (a), clause (2); 226.19 (7) the type of district; 226.20 (8) the date the municipality approved the tax increment 226.21 financing plan and the date of approval of any modification of 226.22 the tax increment financing plan, the approval of which requires 226.23 notice, discussion, a public hearing, and findings under 226.24 subdivision 4, paragraph (a); 226.25 (9) the date the authority first requested certification of 226.26 the original net tax capacity of the district and the date of 226.27 the request for certification regarding any parcel added to the 226.28 district; 226.29 (10) the date the county auditor first certified the 226.30 original net tax capacity of the district and the date of 226.31 certification of the original net tax capacity of any parcel 226.32 added to the district; 226.33 (11) the month and year in which the authority has received 226.34 or anticipates it will receive the first increment from the 226.35 district; 226.36 (12) the date the district must be decertified; 227.1 (13) for the reporting period and prior years of the 227.2 district, the actual amount received from, at least, the 227.3 following categories: 227.4 (i) tax increments paid by the captured net tax capacity 227.5 retained for tax increment financing under section 469.177, 227.6 subdivision 2, paragraph (a), clause (1), but excluding any 227.7 excess taxes; 227.8 (ii) tax increments that are interest or other investment 227.9 earnings on or from tax increments; 227.10 (iii) tax increments that are proceeds from the sale or 227.11 lease of property, tangible or intangible, purchased by the 227.12 authority with tax increments; 227.13 (iv) tax increments that are repayments of loans or other 227.14 advances made by the authority with tax increments; 227.15 (v) bond or loan proceeds; 227.16 (vi) special assessments; 227.17 (vii) grants; and 227.18 (viii) transfers from funds not exclusively associated with 227.19 the district; 227.20 (14) for the reporting period and for the prior years of 227.21 the district,the amount budgeted under the tax increment227.22financing plan, andthe actual amount expended for, at least, 227.23 the following categories: 227.24 (i) acquisition of land and buildings through condemnation 227.25 or purchase; 227.26 (ii) site improvements or preparation costs; 227.27 (iii) installation of public utilities, parking facilities, 227.28 streets, roads, sidewalks, or other similar public improvements; 227.29 (iv) administrative costs, including the allocated cost of 227.30 the authority; 227.31 (v) public park facilities, facilities for social, 227.32 recreational, or conference purposes, or other similar public 227.33 improvements; and 227.34 (vi) transfers to funds not exclusively associated with the 227.35 district; 227.36 (15) for properties sold to developers, the total cost of 228.1 the property to the authority and the price paid by the 228.2 developer; 228.3 (16) the amount of any payments and the value of any 228.4 in-kind benefits, such as physical improvements and the use of 228.5 building space, that are paid or financed with tax increments 228.6 and are provided to another governmental unit other than the 228.7 municipality during the reporting period; 228.8 (17) the amount of any payments for activities and 228.9 improvements located outside of the district that are paid for 228.10 or financed with tax increments; 228.11 (18) the amount of payments of principal and interest that 228.12 are made during the reporting period on any nondefeased: 228.13 (i) general obligation tax increment financing bonds; 228.14 (ii) other tax increment financing bonds; and 228.15 (iii) notes and pay-as-you-go contracts; 228.16 (19) the principal amount, at the end of the reporting 228.17 period, of any nondefeased: 228.18 (i) general obligation tax increment financing bonds; 228.19 (ii) other tax increment financing bonds; and 228.20 (iii) notes and pay-as-you-go contracts; 228.21 (20) the amount of principal and interest payments that are 228.22 due for the current calendar year on any nondefeased: 228.23 (i) general obligation tax increment financing bonds; 228.24 (ii) other tax increment financing bonds; and 228.25 (iii) notes and pay-as-you-go contracts; 228.26 (21) if the fiscal disparities contribution under chapter 228.27 276A or 473F for the district is computed under section 469.177, 228.28 subdivision 3, paragraph (a), the amount of increased property 228.29 taxes imposed on other properties in the municipality that 228.30 approved the tax increment financing plan as a result of the 228.31 fiscal disparities contribution; 228.32 (22) whether the tax increment financing plan or other 228.33 governing document permits increment revenues to be expended: 228.34 (i) to pay bonds, the proceeds of which were or may be 228.35 expended on activities outside of the district; 228.36 (ii) for deposit into a common bond fund from which money 229.1 may be expended on activities located outside of the district; 229.2 or 229.3 (iii) to otherwise finance activities located outside of 229.4 the tax increment financing district;and229.5 (23) the estimate, if any, contained in the tax increment 229.6 financing plan of the amount of the cost of the project, 229.7 including administrative expenses, that will be paid or financed 229.8 with tax increment; and 229.9 (24) any additional information the state auditor may 229.10 require. 229.11 (d) The commissioner of revenue shall prescribe the method 229.12 of calculating the increased property taxes under paragraph (c), 229.13 clause (21), and the form of the statement disclosing this 229.14 information on the annual statement under subdivision 5. 229.15 (e) The reporting requirements imposed by this subdivision 229.16 apply to districts certified before, on, and after August 1, 229.17 1979. 229.18 [EFFECTIVE DATE.] This section is effective beginning with 229.19 the reports due in calendar year 2004. 229.20 Sec. 12. Minnesota Statutes 2002, section 469.176, 229.21 subdivision 1c, is amended to read: 229.22 Subd. 1c. [DURATION LIMITS; PRE-1979 DISTRICTS.] (a) For 229.23 tax increment financing districts created prior to August 1, 229.24 1979, no tax increment shall be paid to the authority after 229.25 April 1, 2001, or the term of a nondefeased bond or obligation 229.26 outstanding on April 1, 1990, secured by increments from the 229.27 district or project area, whichever time is greater, provided 229.28 that in no case will a tax increment be paid to an authority 229.29 after August 1, 2009, from such a district. If a district's 229.30 termination date is extended beyond April 1, 2001, because bonds 229.31 were outstanding on April 1, 1990, with maturities extending 229.32 beyond April 1, 2001, the following restrictions apply. No 229.33 increment collected from the district may be expended after 229.34 April 1, 2001, except to pay or defease(i): 229.35 (1) bonds issued before April 1, 1990, or (ii); 229.36 (2) bonds issued to refund the principal of the outstanding 230.1 bonds and pay associated issuance costs, provided the average230.2maturity of the refunding bonds does not exceed the bonds230.3refunded; 230.4 (3) administrative expenses of the district required to be 230.5 paid under section 469.176, subdivision 4h, paragraph (a); 230.6 (4) transfers of increment permitted under section 230.7 469.1763, subdivision 6; and 230.8 (5) to repay any advance or payment made by the 230.9 municipality or the authority after June 1, 2002, to pay any 230.10 bonds listed in clause (1) or (2). 230.11 (b) Each year, any increments from a district subject to 230.12 this subdivision must be first applied to pay or defease 230.13 obligations listed under paragraph (a), clauses (1) and (2), and 230.14 administrative expenses under paragraph (a), clause (3). Any 230.15 remaining increments may be used for transfers of increments 230.16 permitted under section 469.1763, subdivision 6. 230.17 (c) When sufficient money has been received to pay in full 230.18 or defease bonds under paragraph (a), clauses (1) and (2), the 230.19 tax increment project or district must be decertified. 230.20 [EFFECTIVE DATE.] This section is effective the day 230.21 following final enactment and applies to tax increment financing 230.22 districts for which the request for certification was made 230.23 before August 1, 1979. 230.24 Sec. 13. Minnesota Statutes 2002, section 469.176, 230.25 subdivision 2, is amended to read: 230.26 Subd. 2. [EXCESSTAXINCREMENTS.]In any year in which the230.27tax increment exceeds the amount necessary to pay the costs230.28authorized by the tax increment financing plan, including the230.29amount necessary to cancel any tax levy as provided in section230.30475.61, subdivision 3,(a) The authority shall annually 230.31 determine the amount of excess increments for a district, if 230.32 any. This determination must be based on the tax increment 230.33 financing plan in effect on December 31 of the year and the 230.34 increments and other revenues received as of December 31 of the 230.35 year. 230.36 (b) For purposes of this subdivision, "excess increments" 231.1 equals the excess of: 231.2 (1) total increments collected from the district since its 231.3 certification, reduced by any excess increments paid under 231.4 paragraph (c), clause (4), for a prior year, over 231.5 (2) the total costs authorized by the tax increment 231.6 financing plan to be paid with increments from the district, 231.7 reduced, but not below zero, by the sum of: 231.8 (i) the amounts of those authorized costs that have been 231.9 paid from sources other than tax increments from the district; 231.10 (ii) revenues, other than tax increments from the district, 231.11 that are dedicated for or otherwise required to be used to pay 231.12 those authorized costs and that the authority has received and 231.13 that are not included in item (i); and 231.14 (iii) the amount of principal and interest obligations due 231.15 on outstanding bonds after December 31 of the year and not 231.16 prepaid under paragraph (c) in a prior year. 231.17 (c) The authority shall usethe excess amount to do any231.18ofexcess increment only to do one or more of the following: 231.19 (1) prepay any outstanding bonds,; 231.20 (2) discharge the pledge of tax incrementtherefor,for any 231.21 outstanding bonds; 231.22 (3) pay into an escrow account dedicated to the paymentof231.23such bond,; or 231.24 (4) return the excess amount to the county auditor who 231.25 shall distribute the excess amount to themunicipalitycity or 231.26 town, county, and school district in which the tax increment 231.27 financing district is located in direct proportion to their 231.28 respective local tax rates. 231.29 (d) The county auditor must report to the commissioner of 231.30 children, families, and learning the amount of any excess tax 231.31 increment distributed to a school district within 30 days of the 231.32 distribution. 231.33 [EFFECTIVE DATE.] This section is effective for all tax 231.34 increment financing districts, regardless of whether the request 231.35 for certification was made before, on, or after August 1, 1979, 231.36 and applies after August 1, 2003, except the amendment to 232.1 paragraph (c), clause (4), applies retroactively to August 1, 232.2 1979. 232.3 Sec. 14. Minnesota Statutes 2002, section 469.176, 232.4 subdivision 3, is amended to read: 232.5 Subd. 3. [LIMITATION ON ADMINISTRATIVE EXPENSES.] (a) For 232.6 districts for which certification was requested before August 1, 232.7 1979, or after June 30, 1982 and before August 1, 2001, no tax 232.8 increment shall be used to pay any administrative expenses for a 232.9 project which exceed ten percent of the total estimated tax 232.10 increment expenditures authorized by the tax increment financing 232.11 plan or the total tax increment expenditures for the project, 232.12 whichever is less. 232.13 (b) For districts for which certification was requested 232.14 after July 31, 1979, and before July 1, 1982, no tax increment 232.15 shall be used to pay administrative expenses, as defined in 232.16 Minnesota Statutes 1980, section 273.73, for a district which 232.17 exceeds five percent of the total tax increment expenditures 232.18 authorized by the tax increment financing plan or the 232.19 total estimated tax increment expenditures for the district, 232.20 whichever is less. 232.21 (c) For districts for which certification was requested 232.22 after July 31, 2001, no tax increment may be used to pay any 232.23 administrative expenses for a project which exceed ten percent 232.24 of total estimated tax increment expenditures authorized by the 232.25 tax increment financing plan or the total tax increments, as 232.26 defined in section 469.174, subdivision 25, clause (1), from the 232.27 district, whichever is less. 232.28 [EFFECTIVE DATE.] This section is effective for districts 232.29 for which the request for certification was made before, on, or 232.30 after August 1, 1979. 232.31 Sec. 15. Minnesota Statutes 2002, section 469.176, 232.32 subdivision 4d, is amended to read: 232.33 Subd. 4d. [HOUSING DISTRICTS.] Revenue derived from tax 232.34 increment from a housing district must be used solely to finance 232.35 the cost of housing projects as defined in section 469.174, 232.36 subdivision 11. The cost ofpublic improvements directly233.1related to the housing projects and the allocated administrative233.2expenses of the authority may be included in the cost ofa 233.3 housing project includes expenditures on: 233.4 (1) public improvements directly related to a housing 233.5 project; 233.6 (2) public or private housing units, but not to exceed an 233.7 amount equal to the average cost of all the units in the project 233.8 multiplied by the number of units that are pledged to be income 233.9 restricted; and 233.10 (3) allocated administrative expenses of the authority. 233.11 [EFFECTIVE DATE.] The provisions of this section apply to 233.12 all districts, regardless of when the request for certification 233.13 was made, and to expenditures of increments, regardless of 233.14 whether they were made before or after the date of enactment. 233.15 Sec. 16. Minnesota Statutes 2002, section 469.176, 233.16 subdivision 4l, is amended to read: 233.17 Subd. 4l. [PROHIBITED FACILITIES.] (a) No tax increment 233.18 from any district may be usedfor: 233.19 (1) for a commons area used as a public park;or233.20 (2) for a facility used for social, recreational, or 233.21 conference purposes; or 233.22 (3) to assist a development by paying costs the developer 233.23 or owner otherwise would pay, if the developer or owner: 233.24 (i) requested platting or subdivision of the parcel or 233.25 parcels on which the development is located within two years 233.26 before the authority approves the assistance; and 233.27 (ii) did not disclose on or before making the request an 233.28 intent to seek or accept assistance funded with tax increments. 233.29 (b)This subdivision doesParagraph (a), clauses (1) and 233.30 (2) do not apply to a privately owned facility for conference 233.31 purposes or a parking structure. 233.32 [EFFECTIVE DATE.] This section is effective for tax 233.33 increment financing assistance provided under developer 233.34 agreements entered into after June 30, 2003. 233.35 Sec. 17. Minnesota Statutes 2002, section 469.176, 233.36 subdivision 7, is amended to read: 234.1 Subd. 7. [PARCELS NOT INCLUDABLE IN DISTRICTS.] (a) The 234.2 authority may request inclusion in a tax increment financing 234.3 district and the county auditor may certify the original tax 234.4 capacity of a parcel or a part of a parcel that qualified under 234.5 the provisions of section 273.111 or 273.112 or chapter 473H for 234.6 taxes payable in any of the five calendar years before the 234.7 filing of the request for certification only for: 234.8 (1) a district in which 85 percent or more of the planned 234.9 buildings and facilities (determined on the basis of square 234.10 footage) are a qualified manufacturing facility or a qualified 234.11 distribution facility or a combination of both; or 234.12 (2) a qualified housing districtas defined in section234.13273.1399, subdivision 1. 234.14 (b)(1) A distribution facility means buildings and other 234.15 improvements to real property that are used to conduct 234.16 activities in at least each of the following categories: 234.17 (i) to store or warehouse tangible personal property; 234.18 (ii) to take orders for shipment, mailing, or delivery; 234.19 (iii) to prepare personal property for shipment, mailing, 234.20 or delivery; and 234.21 (iv) to ship, mail, or deliver property. 234.22 (2) A manufacturing facility includes space used for 234.23 manufacturing or producing tangible personal property, including 234.24 processing resulting in the change in condition of the property, 234.25 and space necessary for and related to the manufacturing 234.26 activities. 234.27 (3) To be a qualified facility, the owner or operator of a 234.28 manufacturing or distribution facility must agree to pay and pay 234.29 90 percent or more of the employees of the facility at a rate 234.30 equal to or greater than 160 percent of the federal minimum wage 234.31 for individuals over the age of 20. 234.32 [EFFECTIVE DATE.] This section applies to all districts for 234.33 which the request for certification was made on or after January 234.34 1, 2002, and to all districts to which the definition of 234.35 qualified housing districts under Minnesota Statutes 2000, 234.36 section 273.1399, applied. 235.1 Sec. 18. Minnesota Statutes 2002, section 469.1763, 235.2 subdivision 1, is amended to read: 235.3 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 235.4 section, the following terms have the meanings given. 235.5 (b) "Activities" means acquisition of property, clearing of 235.6 land, site preparation, soils correction, removal of hazardous 235.7 waste or pollution, installation of utilities, construction of 235.8 public or private improvements, and other similar activities, 235.9 but only to the extent that tax increment revenues may be spent 235.10 for such purposes under other law. 235.11 (c) "Third party" means an entity other than (1) the person 235.12 receiving the benefit of assistance financed with tax 235.13 increments, or (2) the municipality or the development authority 235.14 or other person substantially under the control of the 235.15 municipality. 235.16 (d) "Revenues derived from tax increments paid by 235.17 properties in the district" means only tax increment as defined 235.18 in section 469.174, subdivision 25, clause (1), and does not 235.19 include tax increment as defined in section 469.174, subdivision 235.20 25, clauses (2), (3), and (4). 235.21 [EFFECTIVE DATE.] This section is effective for districts 235.22 for which the request for certification was made after April 30, 235.23 1990. 235.24 Sec. 19. Minnesota Statutes 2002, section 469.1763, 235.25 subdivision 2, is amended to read: 235.26 Subd. 2. [EXPENDITURES OUTSIDE DISTRICT.] (a) For each tax 235.27 increment financing district, an amount equal to at least 75 235.28 percent of the total revenue derived from tax increments paid by 235.29 properties in the district must be expended on activities in the 235.30 district or to pay bonds, to the extent that the proceeds of the 235.31 bonds were used to finance activities in the district or to pay, 235.32 or secure payment of, debt service on credit enhanced bonds. 235.33 For districts, other than redevelopment districts for which the 235.34 request for certification was made after June 30, 1995, the 235.35 in-district percentage for purposes of the preceding sentence is 235.36 80 percent. Not more than 25 percent of the total revenue 236.1 derived from tax increments paid by properties in the district 236.2 may be expended, through a development fund or otherwise, on 236.3 activities outside of the district but within the defined 236.4 geographic area of the project except to pay, or secure payment 236.5 of, debt service on credit enhanced bonds. For districts, other 236.6 than redevelopment districts for which the request for 236.7 certification was made after June 30, 1995, the pooling 236.8 percentage for purposes of the preceding sentence is 20 236.9 percent. The revenue derived from tax increments for the 236.10 district that are expended on costs under section 469.176, 236.11 subdivision 4h, paragraph (b), may be deducted first before 236.12 calculating the percentages that must be expended within and 236.13 without the district. 236.14 (b) In the case of a housing district, a housing project, 236.15 as defined in section 469.174, subdivision 11, is an activity in 236.16 the district. 236.17 (c) All administrative expenses are for activities outside 236.18 of the district. 236.19 (d) The authority may elect, in the tax increment financing 236.20 plan for the district, to increase by up to ten percentage 236.21 points the permitted amount of expenditures for activities 236.22 located outside the geographic area of the district under 236.23 paragraph (a). As permitted by section 469.176, subdivision 4k, 236.24 the expenditures, including the permitted expenditures under 236.25 paragraph (a), need not be made within the geographic area of 236.26 the project. Expenditures that meet the requirements of this 236.27 paragraph are legally permitted expenditures of the district, 236.28 notwithstanding section 469.176, subdivisions 4b, 4c, and 4j. 236.29 To qualify for the increase under this paragraph, the 236.30 expenditures must: 236.31 (1) be used exclusively to assist housing that meets the 236.32 requirement for a qualified low-income building, as that term is 236.33 used in section 42 of the Internal Revenue Code; 236.34 (2) not exceed the qualified basis of the housing, as 236.35 defined under section 42(c) of the Internal Revenue Code, less 236.36 the amount of any credit allowed under section 42 of the 237.1 Internal Revenue Code; and 237.2 (3) be used to: 237.3 (i) acquire and prepare the site of the housing; 237.4 (ii) acquire, construct, or rehabilitate the housing; or 237.5 (iii) make public improvements directly related to the 237.6 housing. 237.7 [EFFECTIVE DATE.] This section is effective for districts 237.8 for which the request for certification was made after April 30, 237.9 1990. 237.10 Sec. 20. Minnesota Statutes 2002, section 469.1763, 237.11 subdivision 3, is amended to read: 237.12 Subd. 3. [FIVE-YEAR RULE.] (a) Revenues derived from tax 237.13 increments are considered to have been expended on an activity 237.14 within the district under subdivision 2 only if one of the 237.15 following occurs: 237.16 (1) before or within five years after certification of the 237.17 district, the revenues are actually paid to a third party with 237.18 respect to the activity; 237.19 (2) bonds, the proceeds of which must be used to finance 237.20 the activity, are issued and sold to a third party before or 237.21 within five years after certification, the revenues are spent to 237.22 repay the bonds, and the proceeds of the bonds either are, on 237.23 the date of issuance, reasonably expected to be spent before the 237.24 end of the later of (i) the five-year period, or (ii) a 237.25 reasonable temporary period within the meaning of the use of 237.26 that term under section 148(c)(1) of the Internal Revenue Code, 237.27 or are deposited in a reasonably required reserve or replacement 237.28 fund; 237.29 (3) binding contracts with a third party are entered into 237.30 for performance of the activity before or within five years 237.31 after certification of the district and the revenues are spent 237.32 under the contractual obligation;or237.33 (4) costs with respect to the activity are paid before or 237.34 within five years after certification of the district and the 237.35 revenues are spent to reimburse a party for payment of the 237.36 costs, including interest on unreimbursed costs; or 238.1 (5) expenditures are made for housing purposes as permitted 238.2 by subdivision 2, paragraph (b). 238.3 (b) For purposes of this subdivision, bonds include 238.4 subsequent refunding bonds if the original refunded bonds meet 238.5 the requirements of paragraph (a), clause (2). 238.6 [EFFECTIVE DATE.] This section is effective for 238.7 expenditures made after June 30, 2003. 238.8 Sec. 21. Minnesota Statutes 2002, section 469.1763, 238.9 subdivision 4, is amended to read: 238.10 Subd. 4. [USE OF REVENUES FOR DECERTIFICATION.] (a) In 238.11 each year beginning with the sixth year following certification 238.12 of the district, if the applicable in-district percent of the 238.13 revenues derived from tax increments paid by properties in the 238.14 districtthat remain afterexceeds the amount of expenditures 238.15 that have been made for costs permitted under subdivision 3, an 238.16 amount equal to the difference between the in-district percent 238.17 of the revenues derived from tax increments paid by properties 238.18 in the district and the amount of expenditures that have been 238.19 made for costs permitted under subdivision 3 must be used and 238.20 only used to pay or defease the following or be set aside to pay 238.21 the following: 238.22 (1) outstanding bonds, as defined in subdivision 3, 238.23 paragraphs (a), clause (2), and (b); 238.24 (2) contracts, as defined in subdivision 3, paragraph (a), 238.25 clauses (3) and (4); or 238.26 (3) credit enhanced bonds to which the revenues derived 238.27 from tax increments are pledged, but only to the extent that 238.28 revenues of the district for which the credit enhanced bonds 238.29 were issued are insufficient to pay the bonds and to the extent 238.30 that the increments from the applicable pooling percent share 238.31 for the district are insufficient. 238.32 (b) When the outstanding bonds have been defeased and when 238.33 sufficient money has been set aside to pay contractual 238.34 obligations as defined in subdivision 3, paragraph (a), clauses 238.35 (3) and (4), the district must be decertified and the pledge of 238.36 tax increment discharged. 239.1 [EFFECTIVE DATE.] This section is effective for districts 239.2 for which the request for certification was made after April 30, 239.3 1990. 239.4 Sec. 22. Minnesota Statutes 2002, section 469.1763, 239.5 subdivision 6, is amended to read: 239.6 Subd. 6. [POOLING PERMITTED FOR DEFICITS.] (a) This 239.7 subdivision applies only to districts for which the request for 239.8 certification was made before August 1, 2001, and without regard 239.9 to whether the request for certification was made prior to 239.10 August 1, 1979. 239.11 (b) The municipality for the district may transfer 239.12 available increments from another tax increment financing 239.13 district located in the municipality, if the transfer is 239.14 necessary to eliminate a deficit in the district to which the 239.15 increments are transferred. A deficit in the district for 239.16 purposes of this subdivision means the lesser of the following 239.17 two amounts: 239.18 (1)(i) the amount due during the calendar year to pay 239.19 preexisting obligations of the district; minus 239.20 (ii) the total increments collected or to be collected from 239.21 properties located within the district that are available for 239.22 the calendar year including amounts collected in prior years 239.23 that are currently available; plus 239.24 (iii) total increments from properties located in other 239.25 districts in the municipality including amounts collected in 239.26 prior years that are available to be used to meet the district's 239.27 obligations under this section, excluding this subdivision, or 239.28 other provisions of law (but excluding a special tax under 239.29 section 469.1791 and the grant program under Laws 1997, chapter 239.30 231, article 1, section 19, or Laws 2001, First Special Session 239.31 chapter 5); or 239.32 (2) the reduction in increments collected from properties 239.33 located in the district for the calendar year as a result of the 239.34 changes in class rates in Laws 1997, chapter 231, article 1; 239.35 Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, 239.36 and Laws 2001, First Special Session chapter 5, or the 240.1 elimination of the general education tax levy under Laws 2001, 240.2 First Special Session chapter 5. 240.3 (c) A preexisting obligation means: 240.4 (1) bonds issued and sold before August 1, 2001, or bonds 240.5 issued pursuant to a binding contract requiring the issuance of 240.6 bonds entered into before July 1, 2001, and bonds issued to 240.7 refund such bonds or to reimburse expenditures made in 240.8 conjunction with a signed contractual agreement entered into 240.9 before August 1, 2001, to the extent that the bonds are secured 240.10 by a pledge of increments from the tax increment financing 240.11 district; and 240.12 (2) binding contracts entered into before August 1, 2001, 240.13 to the extent that the contracts require payments secured by a 240.14 pledge of increments from the tax increment financing district. 240.15 (d) The municipality may require a development authority, 240.16 other than a seaway port authority, to transfer available 240.17 increments including amounts collected in prior years that are 240.18 currently available for any of its tax increment financing 240.19 districts in the municipality to make up an insufficiency in 240.20 another district in the municipality, regardless of whether the 240.21 district was established by the development authority or another 240.22 development authority. This authority applies notwithstanding 240.23 any law to the contrary, but applies only to a development 240.24 authority that: 240.25 (1) was established by the municipality; or 240.26 (2) the governing body of which is appointed, in whole or 240.27 part, by the municipality or an officer of the municipality or 240.28 which consists, in whole or part, of members of the governing 240.29 body of the municipality. The municipality may use this 240.30 authority only after it has first used all available increments 240.31 of the receiving development authority to eliminate the 240.32 insufficiency and exercised any permitted action under section 240.33 469.1792, subdivision 3, for preexisting districts of the 240.34 receiving development authority to eliminate the insufficiency. 240.35 (e) The authority under this subdivision to spend tax 240.36 increments outside of the area of the district from which the 241.1 tax increments were collected: 241.2 (1)may only be exercised after obtaining approval of the241.3use of the increments, in writing, by the commissioner of241.4revenue;241.5(2)is an exception to the restrictions under section 241.6 469.176, subdivision 4i, and the other provisions of this 241.7 section, and the percentage restrictions under subdivision 2 241.8 must be calculated after deducting increments spent under this 241.9 subdivision from the total increments for the district; and 241.10(3)(2) applies notwithstanding the provisions of the Tax 241.11 Increment Financing Act in effect for districts for which the 241.12 request for certification was made before June 30, 1982, or any 241.13 other law to the contrary. 241.14 (f) If a preexisting obligation requires the development 241.15 authority to pay an amount that is limited to the increment from 241.16 the district or a specific development within the district and 241.17 if the obligation requires paying a higher amount to the extent 241.18 that increments are available, the municipality may determine 241.19 that the amount due under the preexisting obligation equals the 241.20 higher amount and may authorize the transfer of increments under 241.21 this subdivision to pay up to the higher amount. The existence 241.22 of a guarantee of obligations by the individual or entity that 241.23 would receive the payment under this paragraph is disregarded in 241.24 the determination of eligibility to pool under this 241.25 subdivision. The authority to transfer increments under this 241.26 paragraph may only be used to the extent that the payment of all 241.27 other preexisting obligations in the municipality due during the 241.28 calendar year have been satisfied. 241.29 [EFFECTIVE DATE.] This section is effective retroactively 241.30 to January 2, 2002, and thereafter. 241.31 Sec. 23. Minnesota Statutes 2002, section 469.177, 241.32 subdivision 1, is amended to read: 241.33 Subdivision 1. [ORIGINAL NET TAX CAPACITY.] (a) Upon or 241.34 after adoption of a tax increment financing plan, the auditor of 241.35 any county in which the district is situated shall, upon request 241.36 of the authority, certify the original net tax capacity of the 242.1 tax increment financing district and that portion of the 242.2 district overlying any subdistrict as described in the tax 242.3 increment financing plan and shall certify in each year 242.4 thereafter the amount by which the original net tax capacity has 242.5 increased or decreased as a result of a change in tax exempt 242.6 status of property within the district and any subdistrict, 242.7 reduction or enlargement of the district or changes pursuant to 242.8 subdivision 4. 242.9 (b)For districts approved under section 469.175,242.10subdivision 3, or parcels added to existing districts after May242.111, 1988,If the classification under section 273.13 of property 242.12 located in a district changes to a classification that has a 242.13 different assessment ratio, the original net tax capacity of 242.14 that property must be redetermined at the time when its use is 242.15 changed as if the property had originally been classified in the 242.16 same class in which it is classified after its use is changed. 242.17 (c) The amount to be added to the original net tax capacity 242.18 of the district as a result of previously tax exempt real 242.19 property within the district becoming taxable equals the net tax 242.20 capacity of the real property as most recently assessed pursuant 242.21 to section 273.18 or, if that assessment was made more than one 242.22 year prior to the date of title transfer rendering the property 242.23 taxable, the net tax capacity assessed by the assessor at the 242.24 time of the transfer. If improvements are made to tax exempt 242.25 property after certification of the district and before the 242.26 parcel becomes taxable, the assessor shall, at the request of 242.27 the authority, separately assess the estimated market value of 242.28 the improvements. If the property becomes taxable, the county 242.29 auditor shall add to original net tax capacity, the net tax 242.30 capacity of the parcel, excluding the separately assessed 242.31 improvements. If substantial taxable improvements were made to 242.32 a parcel after certification of the district and if the property 242.33 later becomes tax exempt, in whole or part, as a result of the 242.34 authority acquiring the property through foreclosure or exercise 242.35 of remedies under a lease or other revenue agreement or as a 242.36 result of tax forfeiture, the amount to be added to the original 243.1 net tax capacity of the district as a result of the property 243.2 again becoming taxable is the amount of the parcel's value that 243.3 was included in original net tax capacity when the parcel was 243.4 first certified. The amount to be added to the original net tax 243.5 capacity of the district as a result of enlargements equals the 243.6 net tax capacity of the added real property as most recently 243.7 certified by the commissioner of revenue as of the date of 243.8 modification of the tax increment financing plan pursuant to 243.9 section 469.175, subdivision 4. 243.10 (d)For districts approved under section 469.175,243.11subdivision 3, or parcels added to existing districts after May243.121, 1988,If the net tax capacity of a property increases because 243.13 the property no longer qualifies under the Minnesota 243.14 Agricultural Property Tax Law, section 273.111; the Minnesota 243.15 Open Space Property Tax Law, section 273.112; or the 243.16 Metropolitan Agricultural Preserves Act, chapter 473H, or 243.17 because platted, unimproved property is improved or three years 243.18 pass after approval of the plat under section 273.11, 243.19 subdivision 1, the increase in net tax capacity must be added to 243.20 the original net tax capacity. 243.21 (e) The amount to be subtracted from the original net tax 243.22 capacity of the district as a result of previously taxable real 243.23 property within the district becoming tax exempt, or a reduction 243.24 in the geographic area of the district, shall be the amount of 243.25 original net tax capacity initially attributed to the property 243.26 becoming tax exempt or being removed from the district. If the 243.27 net tax capacity of property located within the tax increment 243.28 financing district is reduced by reason of a court-ordered 243.29 abatement, stipulation agreement, voluntary abatement made by 243.30 the assessor or auditor or by order of the commissioner of 243.31 revenue, the reduction shall be applied to the original net tax 243.32 capacity of the district when the property upon which the 243.33 abatement is made has not been improved since the date of 243.34 certification of the district and to the captured net tax 243.35 capacity of the district in each year thereafter when the 243.36 abatement relates to improvements made after the date of 244.1 certification. The county auditor may specify reasonable form 244.2 and content of the request for certification of the authority 244.3 and any modification thereof pursuant to section 469.175, 244.4 subdivision 4. 244.5 (f) If a parcel of property contained a substandard 244.6 building that was demolished or removed and if the authority 244.7 elects to treat the parcel as occupied by a substandard building 244.8 under section 469.174, subdivision 10, paragraph (b), the 244.9 auditor shall certify the original net tax capacity of the 244.10 parcel using the greater of (1) the current net tax capacity of 244.11 the parcel, or (2) the estimated market value of the parcel for 244.12 the year in which the building was demolished or removed, but 244.13 applying the class rates for the current year. 244.14 [EFFECTIVE DATE.] The provisions of this section apply to 244.15 all districts, regardless of when the request for certification 244.16 was made, beginning for taxes payable in 2004. The provisions 244.17 only apply to classification changes enacted after January 1, 244.18 2001, and for changes in use occurring after December 31, 2002. 244.19 Sec. 24. Minnesota Statutes 2002, section 469.177, 244.20 subdivision 12, is amended to read: 244.21 Subd. 12. [DECERTIFICATION OF TAX INCREMENT FINANCING 244.22 DISTRICT.] The county auditor shall decertify a tax increment 244.23 financing district when the earliest of the following times is 244.24 reached: 244.25 (1) the applicable maximum duration limit under section 244.26 469.176, subdivisions 1a to 1g; 244.27 (2) the maximum duration limit, if any, provided by the 244.28 municipality pursuant to section 469.176, subdivision 1; 244.29 (3) the time of decertification specified in section 244.30 469.1761, subdivision 4, if the commissioner of revenue issues 244.31 an order of noncompliance and the maximum duration limit for 244.32 economic development districts has been exceeded; 244.33 (4) upon completion of the required actions to allow 244.34 decertification under section 469.1763, subdivision 4; or 244.35 (5) upon the later of receipt by the county auditor of a 244.36 written request for decertification from the authority that 245.1 requested certification of the original net tax capacity of the 245.2 district or its successor or the decertification date specified 245.3 in the request. 245.4 [EFFECTIVE DATE.] This section is effective for all 245.5 districts regardless of whether the request for certification 245.6 was made before, on, or after August 1, 1979. 245.7 Sec. 25. Minnesota Statutes 2002, section 469.1771, 245.8 subdivision 4, is amended to read: 245.9 Subd. 4. [LIMITATIONS.] (a) If the increments are pledged 245.10 to repay bonds that were issued before the lawsuit was filed 245.11 under this section, the damages under this section may not 245.12 exceed the greater of (1) ten percent of the expenditures or 245.13 revenues derived from increment, or (2) the amount of available 245.14 revenues after paying debt services due on the bonds. 245.15 (b) The court may abate all or part of the amount if it 245.16 determines the unauthorized action or failure to perform the 245.17 required action was taken in good faith and the payment would 245.18 work an undue hardship on the authority or municipality. 245.19 [EFFECTIVE DATE.] This section is effective for violations 245.20 occurring after December 31, 1990. 245.21 Sec. 26. Minnesota Statutes 2002, section 469.1771, is 245.22 amended by adding a subdivision to read: 245.23 Subd. 7. [LIMITATIONS ON ACTIONS.] An action under 245.24 subdivision 1, paragraph (a), contesting the validity of a 245.25 determination by an authority under section 469.175, subdivision 245.26 3, must be commenced within the later of: 245.27 (1) 180 days after the municipality's approval under 245.28 section 469.175, subdivision 3; or 245.29 (2) 90 days after the request for certification of the 245.30 district is filed with the county auditor under section 469.177, 245.31 subdivision 1. 245.32 [EFFECTIVE DATE.] This section is effective for actions 245.33 filed after the day following final enactment. 245.34 Sec. 27. Minnesota Statutes 2002, section 469.178, 245.35 subdivision 7, is amended to read: 245.36 Subd. 7. [INTERFUND LOANS.] The authority or municipality 246.1 may advance or loan money to finance expenditures under section 246.2 469.176, subdivision 4, from its general fund or any other fund 246.3 under which it has legal authority to do so. The loan or 246.4 advance must beapprovedauthorized, by resolution of the 246.5 governing body, before money is transferred, advanced, or spent, 246.6 whichever is earliest. The resolution may generally grant to 246.7 the authority the power to make interfund loans under one or 246.8 more tax increment financing plans or for one or more 246.9 districts. The terms and conditions for repayment of the loan 246.10 must be provided in writing and include, at a minimum, the 246.11 principal amount, the interest rate, and maximum term. The 246.12 maximum rate of interest permitted to be charged is limited to 246.13 the greater of the rates specified under section 270.75 or 246.14 549.09 as of the date or advance is made, unless the written 246.15 agreement states that the maximum interest rate will fluctuate 246.16 as the interest rates specified under section 270.75 or 549.09 246.17 are from time to time adjusted. 246.18 [EFFECTIVE DATE.] This section is effective for loans and 246.19 advances made after July 31, 2001, and for districts for which 246.20 the request for certification was made after July 31, 1979. 246.21 Sec. 28. Minnesota Statutes 2002, section 469.1791, 246.22 subdivision 3, is amended to read: 246.23 Subd. 3. [PRECONDITIONS TO ESTABLISH DISTRICT.] (a) A city 246.24 may establish a special taxing district within a tax increment 246.25 financing district under this section only if the conditions 246.26 under paragraphs (b) and (c) are met or if the city elects to 246.27 exercise the authority under paragraph (d). 246.28 (b) The city has determined that: 246.29 (1) total tax increments from the district, including 246.30 unspent increments from previous years and increments 246.31 transferred under paragraph (c), will be insufficient to pay the 246.32 amounts due in a year on preexisting obligations; and 246.33 (2) this insufficiency of increments resulted from the 246.34 reduction in property tax class rates enacted in the 1997 and 246.35 1998 legislative sessions. 246.36 (c) The city has agreed to transfer any available 247.1 increments from other tax increment financing districts in the 247.2 city to pay the preexisting obligations of the district under 247.3 section 469.1763, subdivision 6. This requirement does not 247.4 apply to any available increments of a qualified housing 247.5 district, as defined in section 273.1399, subdivision 1. 247.6 (d) If a tax increment financing district does not qualify 247.7 under paragraphs (b) and (c), the governing body may elect to 247.8 establish a special taxing district under this section. If the 247.9 city elects to exercise this authority, increments from the tax 247.10 increment financing district and the proceeds of the tax imposed 247.11 under this section may only be used to pay preexisting 247.12 obligations and reasonable administrative expenses of the 247.13 authority for the tax increment financing district. The tax 247.14 increment financing district must be decertified when all 247.15 preexisting obligations have been paid. 247.16 [EFFECTIVE DATE.] This section applies to all districts for 247.17 which the request for certification was made on or after January 247.18 1, 2002, and to all districts to which the definition of 247.19 qualified housing districts under Minnesota Statutes 2002, 247.20 section 273.1399, applied. 247.21 Sec. 29. Minnesota Statutes 2002, section 469.1792, 247.22 subdivision 1, is amended to read: 247.23 Subdivision 1. [SCOPE.] This section applies only to an 247.24 authority with a preexisting district for which: 247.25 (1) the increments from the district were insufficient to 247.26 pay preexisting obligations as a result of the class rate 247.27 changes or the elimination of the state-determined general 247.28 education property tax levy under this act, or both; or 247.29 (2)(i) the development authority has a binding contract, 247.30 entered into before August 1, 2001, with a person requiring the 247.31 authority to pay to the person an amount that may not exceed the 247.32 increment from the district or a specific development within the 247.33 district; and 247.34 (ii) the authority is unable to pay the full amount under 247.35 the contract from the pledged increments or other increments 247.36 from the district that would have been due if the class rate 248.1 changes or elimination of the state-determined general education 248.2 property tax levy or both had not been made under Laws 2001, 248.3 First Special Session chapter 5. 248.4 [EFFECTIVE DATE.] This section is effective retroactively 248.5 to the effective date of the original enactment of section 248.6 469.1792, subdivision 1, and applies to all districts for which 248.7 the request for certification was made after July 1, 1979. 248.8 Sec. 30. Minnesota Statutes 2002, section 469.1792, 248.9 subdivision 2, is amended to read: 248.10 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 248.11 the following terms have the meanings given. 248.12 (b) "Preexisting district" means a tax increment financing 248.13 district for which the request for certification was made before 248.14 August 1, 2001. 248.15 (c) "Preexisting obligation" means a bond or binding 248.16 contract that: 248.17 (1)(i) was issued or approved before August 1, 2001, or was 248.18 issued pursuant to a binding contract entered into beforeAugust248.19 July 1, 2001; or 248.20 (ii) was issued to refinance an obligation under item (i), 248.21 if the refinancing does not increase the present value of the 248.22 debt service; and 248.23 (2) is secured by increments from a preexisting district. 248.24 [EFFECTIVE DATE.] This section is effective the day 248.25 following final enactment and applies to districts for which the 248.26 request for certification was made on, before, or after August 248.27 1, 1979, and before August 1, 2001. 248.28 Sec. 31. Minnesota Statutes 2002, section 469.1792, 248.29 subdivision 3, is amended to read: 248.30 Subd. 3. [ACTIONS AUTHORIZED.] (a) An authority with a 248.31 district qualifying under this section may take either or both 248.32 of the following actions for any or all of its preexisting 248.33 districts: 248.34 (1) the authority may elect that the original local tax 248.35 rate under section 469.177, subdivision 1a, does not apply to 248.36 the district; and 249.1 (2) the authority may elect the fiscal disparities 249.2 contribution will be computed under section 469.177, subdivision 249.3 3, paragraph (a), regardless of the election that was made for 249.4 the district or if the district is an economic development 249.5 district for which the request for certification was made after 249.6 June 30, 1997. 249.7 (b) The authority may take action under this subdivision 249.8 only after the municipality approves the action, by resolution, 249.9 after notice and public hearing in the manner provided under 249.10 section 469.175, subdivision23. 249.11 [EFFECTIVE DATE.] This section is effective the day 249.12 following final enactment and applies to districts for which the 249.13 request for certification was made on, before, or after August 249.14 1, 1979, and before August 1, 2001. 249.15 Sec. 32. [469.1794] [DURATION EXTENSION TO OFFSET 249.16 DEFICITS.] 249.17 Subdivision 1. [AUTHORITY.] Subject to the conditions and 249.18 limitations imposed by this section, an authority may, by 249.19 resolution, extend the duration limit under section 469.176, 249.20 subdivision 1b, 1c, 1e, or 1g, that applies to a preexisting 249.21 district by up to the maximum number of years permitted under 249.22 subdivision 5, plus any amount authorized by the commissioner of 249.23 revenue under subdivision 6. 249.24 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 249.25 the following terms have the meanings given. 249.26 (b) "Extended district" means a tax increment financing 249.27 district whose duration limit is extended under this section. 249.28 (c) "Preexisting district" has the meaning given in section 249.29 469.1792, subdivision 2. 249.30 (d) "Preexisting obligation" has the meaning given in 249.31 section 469.1792, subdivision 2. 249.32 (e) "Qualifying obligation" means: 249.33 (1) a preexisting obligation that is: 249.34 (i) a general obligation bond of the municipality; 249.35 (ii) a general obligation bond of the authority; 249.36 (iii) a revenue bond of the authority to which other 250.1 revenues or money of the authority in addition to tax increments 250.2 are pledged to pay; or 250.3 (iv) an interfund loan, including an advance or payment 250.4 made by the municipality or authority after June 1, 2002, to pay 250.5 an obligation listed in items (i) to (iii); or 250.6 (2) a bond issued to refinance a preexisting obligation 250.7 under clause (1). 250.8 Subd. 3. [PRECONDITIONS.] Before an authority may extend 250.9 the duration of district under this section, the following 250.10 conditions must be met with regard to the district: 250.11 (1) the original local tax rate under section 469.177, 250.12 subdivision 1a, does not apply under an election made under 250.13 section 469.1792, subdivision 3, or under other operation of 250.14 law; 250.15 (2) for a district in the metropolitan area or taconite tax 250.16 relief area, the fiscal disparities contribution is computed 250.17 under section 469.177, subdivision 3, paragraph (a); 250.18 (3) the municipality has transferred any available 250.19 increments in other districts to pay qualified obligations of 250.20 the district or other districts in the municipality under 250.21 section 469.1763, subdivision 6; and 250.22 (4) the authority finds that, taking into account all of 250.23 the increments that are available to pay qualifying obligations 250.24 for the district, the increments from the district will be 250.25 insufficient to pay the amount of qualifying obligations and 250.26 that the insufficiency is a result of (i) the changes in the 250.27 class rates and (ii) elimination of the state-determined general 250.28 education property tax levy under Laws 2001, First Special 250.29 Session chapter 5. 250.30 Subd. 4. [NOTICE; HEARING; AND APPROVALS.] The authority 250.31 may extend the duration of a district under this section only 250.32 after: 250.33 (1) the municipality has approved the extension after 250.34 providing public notice and holding a hearing in the manner 250.35 provided under section 469.175, subdivision 3; and 250.36 (2) the governing bodies of the county and school district 251.1 in which the district is located have approved the extension by 251.2 resolution. 251.3 Subd. 5. [MAXIMUM EXTENSION.] (a) The maximum extension 251.4 for a district under this subdivision equals the lesser of: 251.5 (1) four years; or 251.6 (2) the tax reform percentage for the district, determined 251.7 under paragraph (b), multiplied by the remaining duration of the 251.8 district rounded to the nearest whole number. Fractions in 251.9 excess of one-third are rounded up. 251.10 (b) The tax reform percentage for the district, as 251.11 estimated by the county auditor, equals: 251.12 (1)(i) the total taxes paid by the original tax capacity 251.13 for the district for taxes payable in 2001, minus 251.14 (ii) the average of the total taxes paid by the original 251.15 tax capacity for the district for taxes payable in 2002 and in 251.16 2003, divided by 251.17 (2) the total taxes paid by the original tax capacity for 251.18 the district for taxes payable in 2001. 251.19 (c) In the resolution approving the extension, the 251.20 municipality may elect to treat all preexisting obligations as 251.21 qualified obligations for purposes of this section. If the 251.22 municipality makes an election under this paragraph, the maximum 251.23 duration is reduced by one-half of the amount otherwise 251.24 permitted under paragraph (a). 251.25 (d) The remaining duration of a district is the number of 251.26 calendar years, beginning after December 31, 2001, in which the 251.27 district may collect increment under its duration limit under 251.28 section 469.176, subdivision 1b, 1c, 1e, or 1g, or a special law 251.29 approved before January 1, 2002, as applicable. 251.30 (e) For purposes of this subdivision, "taxes" exclude taxes 251.31 levied against market value, rather than tax capacity, and the 251.32 state general tax under section 275.025. 251.33 Subd. 6. [COMMISSIONER AUTHORITY.] (a) If the municipality 251.34 determines that the extension permitted under subdivision 5 will 251.35 not provide sufficient revenue to pay in full the amount of 251.36 qualifying obligations, the municipality may apply to the 252.1 commissioner of revenue for an additional duration extension. 252.2 The commissioner may authorize an extension of the duration of 252.3 the district of up to two years after determining that: 252.4 (1) the insufficiency of revenues to pay the qualifying 252.5 obligations, which will be offset by the additional extension of 252.6 the duration limit, result from (i) the changes in the class 252.7 rates and (ii) elimination of the state-determined general 252.8 education property tax levy under Laws 2001, First Special 252.9 Session chapter 5; 252.10 (2) the municipality has or is transferring all available 252.11 increments from other preexisting districts and after August 1, 252.12 2001, has not entered into new obligations or authorized new 252.13 spending that reduced the amount of those increments that are 252.14 available for transfer to pay qualifying obligations; and 252.15 (3) increases in increments over the term of the district 252.16 are unlikely to eliminate the insufficiency. 252.17 (b) The commissioner may: 252.18 (1) establish the form of and time for applications under 252.19 this subdivision; and 252.20 (2) require the municipality to provide the information 252.21 that the commissioner determines is necessary or useful in 252.22 evaluating the application. 252.23 (c) This subdivision does not apply to a district if the 252.24 authority has made an election under subdivision 5, paragraph 252.25 (c). 252.26 (d) Applications for extensions under this subdivision may 252.27 not be made more than three calendar years before the end of the 252.28 maximum duration limit under subdivision 5 for the district. 252.29 Subd. 7. [LIMITS ON USE OF INCREMENTS.] (a) Tax increments 252.30 of an extended district may only be used to pay preexisting 252.31 obligations of the district and administrative expenses, 252.32 effective upon the final required approval of the extension 252.33 under this section. All tax increments that are attributable to 252.34 an extension of the duration of a district under this section 252.35 must be used only to pay qualified obligations of the district. 252.36 If increments from a district subject to this subdivision are 253.1 pledged to pay preexisting obligations that are not qualified 253.2 obligations, increments received under the duration limit, 253.3 determined without regard to this section, must be used to pay 253.4 qualified obligations and preexisting obligations that are not 253.5 qualified obligations in proportion to their relative shares of 253.6 all payments due on all preexisting obligations. 253.7 (b) If the authority elects to extend the duration of a 253.8 district under this section and if increments from one or more 253.9 other districts are pledged to pay preexisting obligations of 253.10 the extended district, increments from all of the districts may 253.11 only be used to pay preexisting obligations and administrative 253.12 expenses. 253.13 Subd. 8. [DECERTIFICATION.] An extended district must be 253.14 decertified at the end of the first calendar year when 253.15 sufficient increments have been received to pay the qualified 253.16 obligations of the extended district. Any remaining unspent 253.17 increments must be distributed as excess increments under 253.18 section 469.176, subdivision 2, clause (4). 253.19 [EFFECTIVE DATE.] This section is effective the day 253.20 following final enactment and applies to districts for which the 253.21 request for certification was made on, before, or after August 253.22 1, 1979, and before August 1, 2001. 253.23 Sec. 33. Minnesota Statutes 2002, section 469.1813, 253.24 subdivision 8, is amended to read: 253.25 Subd. 8. [LIMITATION ON ABATEMENTS.] In any year, the 253.26 total amount of property taxes abated by a political subdivision 253.27 under this section may not exceed (1) five percent of the 253.28 current levy, or (2) $100,000, whichever is greater. The limit 253.29 under this subdivision does not apply to an uncollected 253.30 abatement from a prior year that is added to the abatement levy. 253.31 [EFFECTIVE DATE.] This section is effective beginning with 253.32 property taxes levied in 2003, payable in 2004. 253.33 Sec. 34. Minnesota Statutes 2002, section 469.1815, 253.34 subdivision 1, is amended to read: 253.35 Subdivision 1. [INCLUSION IN PROPOSED AND FINAL LEVIES.] 253.36 The political subdivision must add to its levy amount for the 254.1 current year under sections 275.065 and 275.07 the total 254.2 estimated amount of all current year abatements granted. If all 254.3 or a portion of an abatement levy for a prior year was 254.4 uncollected, the political subdivision may add the uncollected 254.5 amount to its abatement levy for the current year. The tax 254.6 amounts shown on the proposed notice under section 275.065, 254.7 subdivision 3, and on the property tax statement under section 254.8 276.04, subdivision 2, are the total amounts before the 254.9 reduction of any abatements that will be granted on the property. 254.10 [EFFECTIVE DATE.] This section is effective beginning with 254.11 property taxes levied in 2003, payable in 2004. 254.12 Sec. 35. Laws 1997, chapter 231, article 10, section 25, 254.13 is amended to read: 254.14 Sec. 25. [EFFECTIVE DATE.] 254.15 Sections 1, 3 to 6, 7, and 10, are effective for districts 254.16 for which the requests for certification are made after June 30, 254.17 1997. 254.18 Section 2,clausesclause (1)andis effective for all 254.19 districts, regardless of whether the request for certification 254.20 was made before, on, or after August 1, 1979. Section 2, 254.21 clause (4),areis effective for districts for which the 254.22 requests for certification were made after July 31, 1979, and 254.23 for payments and investment earnings received after July 1, 254.24 1997. Section 2, clauses (2) and (3), are effective for 254.25 districts for which the request for certification was made after 254.26 June 30, 1982, and proceeds from sales and leases of properties 254.27 purchased by the authority after June 30, 1997, and repayments 254.28 of advances and loans that were made after June 30, 1997. 254.29 Sections 8 and 9 apply to all tax increment districts, 254.30 whenever certified, insofar as the underlying law applies to 254.31 them, and any uses of tax increment expended prior to the date 254.32 of enactment of this act which are in compliance with the 254.33 provisions of those sections are deemed valid. 254.34 Sections 12 and 13 are effective on the day the chief 254.35 clerical officer of the city of Columbia Heights complies with 254.36 Minnesota Statutes, sections 645.021, subdivision 3. 255.1 Sections 17 to 20 are effective the day following final 255.2 enactment and upon compliance by the governing body with 255.3 Minnesota Statutes, section 645.021, subdivision 3. 255.4 Section 24 is effective the day following final enactment. 255.5 [EFFECTIVE DATE.] This section is effective the day 255.6 following final enactment. 255.7 Sec. 36. Laws 2002, chapter 377, article 7, section 3, the 255.8 effective date, is amended to read: 255.9 [EFFECTIVE DATE.] This section is effective forincrements255.10payable in 2002deficits occurring in calendar year 2000 and 255.11 thereafter. 255.12 Sec. 37. Laws 2002, chapter 377, article 11, section 1, is 255.13 amended to read: 255.14 Section 1. [CITY OF MOORHEAD; TAX LEVY AUTHORIZED.] 255.15 (a) Each year the city of Moorhead may impose a tax on all 255.16 class 3a and class 3b property located in the city in an amount 255.17 which the city determines is equal to the reduction in revenues 255.18 from increment from all tax increment financing districts in the 255.19 city resulting from the class rate changes and the elimination 255.20 of the state-determined general education property levy under 255.21 Laws 2001, First Special Session chapter 5. The proceeds of 255.22 this tax and increments from the district may only be used to 255.23 pay preexisting obligations as defined in Minnesota Statutes, 255.24 section 469.1763, subdivision 6, whether general obligations or 255.25 payable wholly from tax increments. The tax must be levied and 255.26 collected in the same manner and as part of the property tax 255.27 levied by the city and is subject to the same administrative, 255.28 penalty, and enforcement provisions. A tax imposed under this 255.29 section is a special levy and is not subject to levy limitations 255.30 under Minnesota Statutes, section 275.71. 255.31 (b) This section expires December 31,20052010. 255.32 [EFFECTIVE DATE.] This section is effective upon approval 255.33 by and compliance with Minnesota Statutes, section 645.021, 255.34 subdivision 3, by the governing body of the city of Moorhead. 255.35 Sec. 38. [CITY OF DULUTH; TAX INCREMENT FINANCING 255.36 DISTRICT.] 256.1 Subdivision 1. [AUTHORIZATION.] Upon approval of the 256.2 governing body of the city of Duluth, the Duluth economic 256.3 development authority may create an economic development tax 256.4 increment financing district for aircraft related facilities. 256.5 The authority may establish a district only after entering a 256.6 development agreement, which provides for construction of an 256.7 aircraft maintenance facility with a minimum square footage of 256.8 150,000 and requires employment of a minimum of 200 individuals 256.9 with average annual compensation in excess of $30,000. Except 256.10 as otherwise provided in this section, the provisions of 256.11 Minnesota Statutes, sections 469.174 to 469.179 apply to the 256.12 district. 256.13 Subd. 2. [SPECIAL RULES.] (a) Notwithstanding the 256.14 provisions of Minnesota Statutes, section 469.176, subdivision 256.15 1b, paragraph (a), clause (3), no tax increment shall in any 256.16 event be paid to the authority after 25 years after receipt by 256.17 the authority of the first tax increment for the district 256.18 authorized by this section. 256.19 (b) The development in the district authorized by this 256.20 section shall be deemed to be a purpose authorized under 256.21 Minnesota Statutes, section 469.176, subdivision 4c, paragraph 256.22 (a). 256.23 (c) For purposes of Minnesota Statutes, section 469.177, 256.24 subdivision 12, the applicable maximum duration limit of the 256.25 district authorized by this section is as set forth in paragraph 256.26 (a). 256.27 [EFFECTIVE DATE.] This section is effective upon compliance 256.28 with the requirements of Minnesota Statutes, sections 469.1782 256.29 and 645.021. 256.30 Sec. 39. [HOPKINS TAX INCREMENT FINANCING DISTRICT.] 256.31 Subdivision 1. [DISTRICT EXTENSION.] (a) The governing 256.32 body of the city of Hopkins may elect to extend the duration of 256.33 its redevelopment tax increment financing district 2-11 by up to 256.34 four additional years. 256.35 (b) Notwithstanding any law to the contrary, effective upon 256.36 approval of this subdivision, no increments may be spent on 257.1 activities located outside of the area of the district, other 257.2 than to pay administrative expenses. 257.3 Subd. 2. [FIVE-YEAR RULE.] The requirements of Minnesota 257.4 Statutes, section 469.1763, subdivision 3, that activities must 257.5 be undertaken within a five-year period from the date of 257.6 certification of tax increment financing district must be 257.7 considered to be met for the city of Hopkins redevelopment tax 257.8 increment district 2-11, if the activities are undertaken within 257.9 nine years from the date of certification of the district. 257.10 [EFFECTIVE DATE.] Subdivision 1 is effective upon 257.11 compliance with the provisions of Minnesota Statutes, sections 257.12 469.1782, subdivision 2, and 645.021. Subdivision 2 is 257.13 effective upon compliance by the governing body of the city of 257.14 Hopkins with the provisions of Minnesota Statutes, section 257.15 645.021. 257.16 ARTICLE 10 257.17 MINERALS 257.18 Section 1. Minnesota Statutes 2002, section 272.02, is 257.19 amended by adding a subdivision to read: 257.20 Subd. 56. [PROPERTY USED IN THE BUSINESS OF MINING SUBJECT 257.21 TO THE NET PROCEEDS TAX.] The following property used in the 257.22 business of mining subject to the net proceeds tax under section 257.23 298.015 is exempt: 257.24 (1) deposits of ores, metals, and minerals and the lands in 257.25 which they are contained; 257.26 (2) all real and personal property used in mining, 257.27 producing, or refining ores, minerals, or metals, including 257.28 lands occupied by or used in connection with the mining, 257.29 quarrying, production, or refining facilities; and 257.30 (3) concentrate or direct reduced ore. 257.31 This exemption applies for each year that a person subject to 257.32 tax under section 298.015 uses the property for mining, 257.33 quarrying, producing, or refining ores, metals, or minerals. 257.34 [EFFECTIVE DATE.] This section is effective for taxes 257.35 payable in 2004 and thereafter. 257.36 Sec. 2. Minnesota Statutes 2002, section 290.05, 258.1 subdivision 1, is amended to read: 258.2 Subdivision 1. [EXEMPT ENTITIES.] The following 258.3 corporations, individuals, estates, trusts, and organizations 258.4 shall be exempted from taxation under this chapter, provided 258.5 that every such person or corporation claiming exemption under 258.6 this chapter, in whole or in part, must establish to the 258.7 satisfaction of the commissioner the taxable status of any 258.8 income or activity: 258.9 (a) corporations, individuals, estates, and trusts engaged 258.10 in the business of mining or producing iron ore and mining, 258.11 producing, or refining other ores, metals, and minerals, the 258.12 miningor, production, or refining of which is subject to the 258.13 occupation tax imposed by section 298.01; but if any such 258.14 corporation, individual, estate, or trust engages in any other 258.15 business or activity or has income from any property not used in 258.16 such business it shall be subject to this tax computed on the 258.17 net income from such property or such other business or 258.18 activity. Royalty shall not be considered as income from the 258.19 business of mining or producing iron ore within the meaning of 258.20 this section; 258.21 (b) the United States of America, the state of Minnesota or 258.22 any political subdivision of either agencies or 258.23 instrumentalities, whether engaged in the discharge of 258.24 governmental or proprietary functions; and 258.25 (c) any insurance company. 258.26 [EFFECTIVE DATE.] This section is effective for taxable 258.27 years beginning after December 31, 2002. 258.28 Sec. 3. Minnesota Statutes 2002, section 290.17, 258.29 subdivision 4, is amended to read: 258.30 Subd. 4. [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 258.31 business conducted wholly within this state or partly within and 258.32 partly without this state is part of a unitary business, the 258.33 entire income of the unitary business is subject to 258.34 apportionment pursuant to section 290.191. Notwithstanding 258.35 subdivision 2, paragraph (c), none of the income of a unitary 258.36 business is considered to be derived from any particular source 259.1 and none may be allocated to a particular place except as 259.2 provided by the applicable apportionment formula. The 259.3 provisions of this subdivision do not apply to business income 259.4 subject to subdivision 5, income of an insurance company,or259.5 income of an investment company determined under section 290.36, 259.6 or income of a mine or mineral processing facility subject to 259.7 tax under section 298.01. 259.8 (b) The term "unitary business" means business activities 259.9 or operations which result in a flow of value between them. The 259.10 term may be applied within a single legal entity or between 259.11 multiple entities and without regard to whether each entity is a 259.12 sole proprietorship, a corporation, a partnership or a trust. 259.13 (c) Unity is presumed whenever there is unity of ownership, 259.14 operation, and use, evidenced by centralized management or 259.15 executive force, centralized purchasing, advertising, 259.16 accounting, or other controlled interaction, but the absence of 259.17 these centralized activities will not necessarily evidence a 259.18 nonunitary business. Unity is also presumed when business 259.19 activities or operations are of mutual benefit, dependent upon 259.20 or contributory to one another, either individually or as a 259.21 group. 259.22 (d) Where a business operation conducted in Minnesota is 259.23 owned by a business entity that carries on business activity 259.24 outside the state different in kind from that conducted within 259.25 this state, and the other business is conducted entirely outside 259.26 the state, it is presumed that the two business operations are 259.27 unitary in nature, interrelated, connected, and interdependent 259.28 unless it can be shown to the contrary. 259.29 (e) Unity of ownership is not deemed to exist when a 259.30 corporation is involved unless that corporation is a member of a 259.31 group of two or more business entities and more than 50 percent 259.32 of the voting stock of each member of the group is directly or 259.33 indirectly owned by a common owner or by common owners, either 259.34 corporate or noncorporate, or by one or more of the member 259.35 corporations of the group. For this purpose, the term "voting 259.36 stock" shall include membership interests of mutual insurance 260.1 holding companies formed under section 60A.077. 260.2 (f) The net income and apportionment factors under section 260.3 290.191 or 290.20 of foreign corporations and other foreign 260.4 entities which are part of a unitary business shall not be 260.5 included in the net income or the apportionment factors of the 260.6 unitary business. A foreign corporation or other foreign entity 260.7 which is required to file a return under this chapter shall file 260.8 on a separate return basis. The net income and apportionment 260.9 factors under section 290.191 or 290.20 of foreign operating 260.10 corporations shall not be included in the net income or the 260.11 apportionment factors of the unitary business except as provided 260.12 in paragraph (g). 260.13 (g) The adjusted net income of a foreign operating 260.14 corporation shall be deemed to be paid as a dividend on the last 260.15 day of its taxable year to each shareholder thereof, in 260.16 proportion to each shareholder's ownership, with which such 260.17 corporation is engaged in a unitary business. Such deemed 260.18 dividend shall be treated as a dividend under section 290.21, 260.19 subdivision 4. 260.20 Dividends actually paid by a foreign operating corporation 260.21 to a corporate shareholder which is a member of the same unitary 260.22 business as the foreign operating corporation shall be 260.23 eliminated from the net income of the unitary business in 260.24 preparing a combined report for the unitary business. The 260.25 adjusted net income of a foreign operating corporation shall be 260.26 its net income adjusted as follows: 260.27 (1) any taxes paid or accrued to a foreign country, the 260.28 commonwealth of Puerto Rico, or a United States possession or 260.29 political subdivision of any of the foregoing shall be a 260.30 deduction; and 260.31 (2) the subtraction from federal taxable income for 260.32 payments received from foreign corporations or foreign operating 260.33 corporations under section 290.01, subdivision 19d, clause (10), 260.34 shall not be allowed. 260.35 If a foreign operating corporation incurs a net loss, 260.36 neither income nor deduction from that corporation shall be 261.1 included in determining the net income of the unitary business. 261.2 (h) For purposes of determining the net income of a unitary 261.3 business and the factors to be used in the apportionment of net 261.4 income pursuant to section 290.191 or 290.20, there must be 261.5 included only the income and apportionment factors of domestic 261.6 corporations or other domestic entities other than foreign 261.7 operating corporations that are determined to be part of the 261.8 unitary business pursuant to this subdivision, notwithstanding 261.9 that foreign corporations or other foreign entities might be 261.10 included in the unitary business. 261.11 (i) Deductions for expenses, interest, or taxes otherwise 261.12 allowable under this chapter that are connected with or 261.13 allocable against dividends, deemed dividends described in 261.14 paragraph (g), or royalties, fees, or other like income 261.15 described in section 290.01, subdivision 19d, clause (10), shall 261.16 not be disallowed. 261.17 (j) Each corporation or other entity, except a sole 261.18 proprietorship, that is part of a unitary business must file 261.19 combined reports as the commissioner determines. On the 261.20 reports, all intercompany transactions between entities included 261.21 pursuant to paragraph (h) must be eliminated and the entire net 261.22 income of the unitary business determined in accordance with 261.23 this subdivision is apportioned among the entities by using each 261.24 entity's Minnesota factors for apportionment purposes in the 261.25 numerators of the apportionment formula and the total factors 261.26 for apportionment purposes of all entities included pursuant to 261.27 paragraph (h) in the denominators of the apportionment formula. 261.28 (k) If a corporation has been divested from a unitary 261.29 business and is included in a combined report for a fractional 261.30 part of the common accounting period of the combined report: 261.31 (1) its income includable in the combined report is its 261.32 income incurred for that part of the year determined by 261.33 proration or separate accounting; and 261.34 (2) its sales, property, and payroll included in the 261.35 apportionment formula must be prorated or accounted for 261.36 separately. 262.1 [EFFECTIVE DATE.] This section is effective for taxable 262.2 years beginning after December 31, 2002. 262.3 Sec. 4. Minnesota Statutes 2002, section 290.191, 262.4 subdivision 1, is amended to read: 262.5 Subdivision 1. [GENERAL RULE.] (a) Except as otherwise 262.6 provided in section 290.17, subdivision 5, the net income from a 262.7 trade or business carried on partly within and partly without 262.8 this state must be apportioned to this state as provided in this 262.9 section. To the extent that an entity is exempt from taxation 262.10 under this chapter as provided in section 290.05, the 262.11 apportionment factors associated with the entity's exempt 262.12 activities are excluded from the apportionment formula under 262.13 this section. 262.14 (b) For purposes of this section, "state" means a state of 262.15 the United States, the District of Columbia, the commonwealth of 262.16 Puerto Rico, or any territory or possession of the United States 262.17 or any foreign country. 262.18 [EFFECTIVE DATE.] This section is effective for taxable 262.19 years beginning after December 31, 2002. 262.20 Sec. 5. Minnesota Statutes 2002, section 297A.68, 262.21 subdivision 4, is amended to read: 262.22 Subd. 4. [TACONITE, OTHER ORES, METALS, OR MINERALS; 262.23 PRODUCTION MATERIALS.] Mill liners, grinding rods, and grinding 262.24 balls that are substantially consumed in the production of 262.25 taconite or other ores, metals, or minerals are exempt when sold 262.26 to or stored, used, or consumed by persons taxed under the 262.27 in-lieu provisions of chapter 298. 262.28 [EFFECTIVE DATE.] This section is effective for sales and 262.29 purchases made after June 30, 2005. 262.30 Sec. 6. Minnesota Statutes 2002, section 297A.71, is 262.31 amended by adding a subdivision to read: 262.32 Subd. 32. [CONSTRUCTION MATERIALS AND EQUIPMENT; 262.33 NONFERROUS METALS AND MINERALS FACILITY.] Materials and supplies 262.34 used or consumed in, and equipment incorporated into, the 262.35 improvement or construction of an existing taconite ore 262.36 processing facility to extract and refine nonferrous ores, 263.1 metals, and minerals, including the construction, improvement, 263.2 or expansion of a hydrometallurgical processing facility, are 263.3 exempt. This exemption includes any delivery or installation 263.4 charges relating to materials, supplies, and equipment exempt 263.5 under this section. 263.6 [EFFECTIVE DATE.] This section is effective for sales and 263.7 purchases made after June 30, 2005, and before July 1, 2012. 263.8 Sec. 7. Minnesota Statutes 2002, section 298.001, is 263.9 amended by adding a subdivision to read: 263.10 Subd. 9. [REFINING.] "Refining" means and is limited to 263.11 refining: 263.12 (1) of ores, metals, or mineral products, the mining, 263.13 extraction, or quarrying of which were subject to tax under 263.14 section 298.015; and 263.15 (2) carried on by the entity, or an affiliated entity, that 263.16 mined or extracted the metal or mineral products. 263.17 [EFFECTIVE DATE.] This section is effective for taxable 263.18 years beginning after December 31, 2002. 263.19 Sec. 8. Minnesota Statutes 2002, section 298.01, 263.20 subdivision 3, is amended to read: 263.21 Subd. 3. [OCCUPATION TAX; OTHER ORES.] Every person 263.22 engaged in the business of mining, refining, or producing ores, 263.23 metals, or minerals in this state, except iron ore or taconite 263.24 concentrates, shall pay an occupation tax to the state of 263.25 Minnesota as provided in this subdivision. For purposes of this 263.26 subdivision, mining includes the application of 263.27 hydrometallurgical processes. The tax is determined in the same 263.28 manner as the tax imposed by section 290.02, except that 263.29 sections 290.05, subdivision 1, clause (a), 290.0921, and 263.30 290.17, subdivision 4, do not apply. Except as provided in 263.31 section 290.05, subdivision 1, paragraph (a), the tax is in 263.32 addition to all other taxes. 263.33 [EFFECTIVE DATE.] This section is effective for taxable 263.34 years beginning after December 31, 2002. 263.35 Sec. 9. Minnesota Statutes 2002, section 298.01, 263.36 subdivision 3a, is amended to read: 264.1 Subd. 3a. [GROSS INCOME.] (a) For purposes of determining 264.2 a person's taxable income under subdivision 3, gross income is 264.3 determined by the amount of gross proceeds from mining in this 264.4 state under section 298.016 and includes any gain or loss 264.5 recognized from the sale or disposition of assets used in the 264.6 business in this state. 264.7 (b) In applying section 290.191, subdivision 5, transfers 264.8 of ores, metals, or minerals that are subject to this chapter 264.9 are deemed to be sales outside this state if the ores, metals, 264.10 or minerals are transported out of this state after the ores 264.11 have been converted to a commercially marketable quality. 264.12 [EFFECTIVE DATE.] This section is effective for taxable 264.13 years beginning after December 31, 2002. 264.14 Sec. 10. Minnesota Statutes 2002, section 298.01, 264.15 subdivision 4, is amended to read: 264.16 Subd. 4. [OCCUPATION TAX; IRON ORE; TACONITE 264.17 CONCENTRATES.] A person engaged in the business of mining or 264.18 producing of iron ore, taconite concentrates or direct reduced 264.19 ore in this state shall pay an occupation tax to the state of 264.20 Minnesota. The tax is determined in the same manner as the tax 264.21 imposed by section 290.02, except that sections 290.05, 264.22 subdivision 1, clause (a), 290.0921, and 290.17, subdivision 4, 264.23 do not apply. The tax is in addition to all other taxes. 264.24 [EFFECTIVE DATE.] This section is effective for taxable 264.25 years beginning after December 31, 2002. 264.26 Sec. 11. Minnesota Statutes 2002, section 298.015, 264.27 subdivision 1, is amended to read: 264.28 Subdivision 1. [TAX IMPOSED.] A person engaged in the 264.29 business of mining shall pay to the state of Minnesota for 264.30 distribution as provided in section 298.018 a net proceeds tax 264.31 equal to two percent of the net proceeds from mining in 264.32 Minnesota. The tax applies to allmineral and energy resources264.33 ores, metals, and minerals minedor, extracted, produced, or 264.34 refined within the state of Minnesota except for sand, silica 264.35 sand, gravel, building stone, crushed rock, limestone, granite, 264.36 dimension granite, dimension stone, horticultural peat, clay, 265.1 soil, iron ore, and taconite concentrates. Except as provided 265.2 in section 272.02, subdivision 56, the tax is in addition to all 265.3 other taxes provided for by law. 265.4 [EFFECTIVE DATE.] This section is effective for taxes 265.5 payable in 2004 and thereafter. 265.6 Sec. 12. Minnesota Statutes 2002, section 298.015, 265.7 subdivision 2, is amended to read: 265.8 Subd. 2. [NET PROCEEDS.] For purposes of this section, the 265.9 term "net proceeds" means the gross proceeds from mining, as 265.10 defined in section 298.016, less the same deductions allowedin265.11section 298.017for purposes of determining taxable income under 265.12 section 298.01, subdivision 3b. No other credits or deductions 265.13 shall apply to this taxexcept for those provided in section265.14298.017. 265.15 [EFFECTIVE DATE.] This section is effective for taxes 265.16 payable in 2004 and thereafter. 265.17 Sec. 13. Minnesota Statutes 2002, section 298.016, 265.18 subdivision 4, is amended to read: 265.19 Subd. 4. [DEFINITIONS.] For the purposes of sections 265.20 298.015 and 298.017, the terms defined in this subdivision have 265.21 the meaning given them unless the context clearly indicates 265.22 otherwise. 265.23 (a) "Ores, metal, or mineral products" means all those 265.24mineral and energy resourcesores, metals, and minerals subject 265.25 to the tax provided in section 298.015. 265.26 (b) "Exploration" means activities designed and engaged in 265.27 to ascertain the existence, location, extent, or quality of any 265.28 deposit of metal or mineral products prior to the development of 265.29 a mining site. 265.30 (c) "Development" means activities designed and engaged in 265.31 to prepare or develop a potential mining site for mining after 265.32 the existence of metal or mineral products in commercially 265.33 marketable quantities has been disclosed including, but not 265.34 limited to, the clearing of forestation, the building of roads, 265.35 removal of overburden, or the sinking of shafts. 265.36 (d) "Research" means activities designed and engaged in to 266.1 create new or improved methods of mining, producing, processing, 266.2 beneficiating, smelting, or refining metal or mineral products. 266.3 [EFFECTIVE DATE.] This section is effective for taxable 266.4 years beginning after December 31, 2004. 266.5 Sec. 14. Minnesota Statutes 2002, section 298.018, is 266.6 amended to read: 266.7 298.018 [DISTRIBUTION OF PROCEEDS.] 266.8 Subdivision 1. [WITHIN TACONITE TAX RELIEF AREAGENERAL 266.9 ALLOCATION.] (a) The commissioner of revenue shall deposit the 266.10 proceeds of the tax paid under sections 298.015 to 298.017on266.11minerals and energy resources mined or extracted within the266.12taconite tax relief area defined in section 273.134, paragraph266.13(b), shall be allocated as follows:266.14(1) five percent to the city or town within which the266.15minerals or energy resources are mined or extracted;266.16(2) ten percent to the taconite municipal aid account to be266.17distributed as provided in section 298.282;266.18(3) ten percent to the school district within which the266.19minerals or energy resources are mined or extracted;266.20(4) 20 percent to a group of school districts comprised of266.21those school districts wherein the mineral or energy resource266.22was mined or extracted or in which there is a qualifying266.23municipality as defined by section 273.134, paragraph (b), in266.24direct proportion to school district indexes as follows: for266.25each school district, its pupil units determined under section266.26126C.05 for the prior school year shall be multiplied by the266.27ratio of the average adjusted net tax capacity per pupil unit266.28for school districts receiving aid under this clause as266.29calculated pursuant to chapters 122A, 126C, and 127A for the266.30school year ending prior to distribution to the adjusted net tax266.31capacity per pupil unit of the district. Each district shall266.32receive that portion of the distribution which its index bears266.33to the sum of the indices for all school districts that receive266.34the distributions;266.35(5) 20 percent to the county within which the minerals or266.36energy resources are mined or extracted;267.1(6) 20 percent to St. Louis county acting as the counties'267.2fiscal agent to be distributed as provided in sections 273.134267.3to 273.136;267.4(7) five percent to the iron range resources and267.5rehabilitation board for the purposes of section 298.22;267.6(8) five percent to the northeast Minnesota economic267.7protection trust fund; and267.8(9) five percent to the taconite environmental protection267.9fundin the general fund. The proceeds of the tax must be 267.10 allocated between the state general fund and local taxing 267.11 districts as provided in this section. 267.12 (b) The proceeds of the tax shall be distributed on July 15 267.13 each year. 267.14 Subd. 2. [OUTSIDE TACONITE TAX RELIEF AREAGENERAL FUND 267.15 SHARE.] Theproceeds of the tax paid under sections 298.015 to267.16298.017 on minerals and energy resources mined or extracted267.17outside of the taconite tax relief area defined in section267.18273.134, paragraph (b), shall be deposited in thegeneral fund 267.19 share equals the amount of the proceeds for the taxable year 267.20 multiplied by a fraction, the numerator of which is the rate 267.21 under the state general tax under section 275.025 and the 267.22 denominator of which is the average total property tax rate 267.23 applicable to property assessed under section 273.13, 267.24 subdivision 24, for the unique areas in which the ores, metals, 267.25 minerals, and processing facilities of the taxpayer are located. 267.26 Subd. 3. [FISCAL DISPARITIES SHARE.] If the ores, metals, 267.27 minerals, or processing facility are located in the taconite tax 267.28 relief area, as defined in section 276A.01, subdivision 2, or in 267.29 the area, as defined in section 473F.02, subdivision 2, the 267.30 commissioner of revenue shall pay 40 percent of the remainder of 267.31 the proceeds after deducting the general fund share as a fiscal 267.32 disparities share to the administrative auditor for the area 267.33 under section 276A.02 or 473F.03. The administrative auditor 267.34 shall apportion the fiscal disparities share among the 267.35 governmental units in proportion to each unit's distribution 267.36 levy determined under section 276A.06, subdivision 3, paragraph 268.1 (a), or 473F.08, subdivision 3, paragraph (a). 268.2 Subd. 4. [LOCAL TAXING DISTRICT SHARES.] (a) The 268.3 commissioner shall pay the proceeds, less the general fund share 268.4 under subdivision 2 and less any fiscal disparities share under 268.5 subdivision 3, to the county auditor of the county in which the 268.6 ores, metals, minerals, or processing facility are located. If 268.7 the ores, metals, minerals, or processing facilities of the 268.8 taxpayer are located in two or more counties, the commissioner 268.9 shall divide the proceeds between the counties based on their 268.10 relative shares of the estimated market value of the ores, 268.11 metals, minerals, and minerals processing facility, as 268.12 determined under subdivision 5. 268.13 (b) The county auditor shall allocate the proceeds of the 268.14 tax among the taxing districts in which the ores, metals, 268.15 minerals, and minerals processing facilities are located in the 268.16 same proportions that property taxes are distributed. If the 268.17 ores, metals, minerals, or processing facilities are located 268.18 within two or more unique taxing areas, the auditor shall use 268.19 the estimated market values for the ores, metals, minerals, and 268.20 property, determined under subdivision 5, to allocate the 268.21 proceeds among the unique taxing areas. 268.22 Subd. 5. [MARKET VALUE ALLOCATION.] If the metals, 268.23 minerals, and processing facilities of a taxpayer are located in 268.24 two or more unique taxing areas, the commissioner shall 268.25 determine the estimated market value of the taxpayer's ores, 268.26 metals, minerals, and processing facilities that are in each 268.27 taxing area. In making this determination, the commissioner may 268.28 use any data the commissioner determines is reliable, including 268.29 information provided by the taxpayer. 268.30 Subd. 6. [TAX CAPACITY FOR STATE AID.] For each city, 268.31 county, and school district that receives distributions under 268.32 this section, the commissioner shall annually determine an 268.33 adjusted net tax capacity equivalent amount, based on the 268.34 distributions received under subdivisions 3 and 4 and its 268.35 property tax rate. These amounts must be used in the 268.36 distribution of state aid under a formula using adjusted net tax 269.1 capacity as a variable or factor in the distribution formula. 269.2 Subd. 7. [UNIQUE TAXING AREA.] For the purposes of this 269.3 section, "unique taxing area" means the geographic area subject 269.4 to the same set of local tax rates. 269.5 [EFFECTIVE DATE.] This section is effective for 269.6 distributions required to be made after July 15, 2003. 269.7 Sec. 15. Minnesota Statutes 2002, section 298.24, 269.8 subdivision 1, is amended to read: 269.9 Subdivision 1. (a)For concentrate produced in 2001, 2002,269.10and 2003,There is imposed upon taconite and iron sulphides, and 269.11 upon the mining and quarrying thereof, and upon the production 269.12 of iron ore concentrate therefrom, and upon the concentrate so 269.13 produced, a tax of$2.103$1.85 per gross ton of merchantable 269.14 iron ore concentrate producedtherefromfor concentrate produced 269.15 in 2003, and $1.75 per gross ton for concentrate produced in 269.16 2004 and thereafter. 269.17 (b)For concentrates produced in 2004 and subsequent years,269.18the tax rate shall be equal to the preceding year's tax rate269.19plus an amount equal to the preceding year's tax rate multiplied269.20by the percentage increase in the implicit price deflator from269.21the fourth quarter of the second preceding year to the fourth269.22quarter of the preceding year. "Implicit price deflator" means269.23the implicit price deflator for the gross domestic product269.24prepared by the bureau of economic analysis of the United States269.25Department of Commerce.269.26(c)On concentrates produced in 1997 and thereafter, an 269.27 additional tax is imposed equal to three cents per gross ton of 269.28 merchantable iron ore concentrate for each one percent that the 269.29 iron content of the product exceeds 72 percent, when dried at 269.30 212 degrees Fahrenheit. 269.31(d)(c) The tax shall be imposed on the average of the 269.32 production for the current year and the previous two years. The 269.33 rate of the tax imposed will be the current year's tax rate. 269.34 This clause shall not apply in the case of the closing of a 269.35 taconite facility if the property taxes on the facility would be 269.36 higher if this clause and section 298.25 were not applicable. 270.1(e)(d) If the tax or any part of the tax imposed by this 270.2 subdivision is held to be unconstitutional, a tax 270.3 of$2.103$1.85 per gross ton of merchantable iron ore 270.4 concentrate produced for calendar year 2003, and $1.75 for 270.5 calendar year 2004 and thereafter shall be imposed. 270.6(f)(e) Consistent with the intent of this subdivision to 270.7 impose a tax based upon the weight of merchantable iron ore 270.8 concentrate, the commissioner of revenue may indirectly 270.9 determine the weight of merchantable iron ore concentrate 270.10 included in fluxed pellets by subtracting the weight of the 270.11 limestone, dolomite, or olivine derivatives or other basic flux 270.12 additives included in the pellets from the weight of the 270.13 pellets. For purposes of this paragraph, "fluxed pellets" are 270.14 pellets produced in a process in which limestone, dolomite, 270.15 olivine, or other basic flux additives are combined with 270.16 merchantable iron ore concentrate. No subtraction from the 270.17 weight of the pellets shall be allowed for binders, mineral and 270.18 chemical additives other than basic flux additives, or moisture. 270.19(g)(f) (1) Notwithstanding any other provision of this 270.20 subdivision, for the first two years of a plant's production of 270.21 direct reduced ore, no tax is imposed under this section. As 270.22 used in this paragraph, "direct reduced ore" is ore that results 270.23 in a product that has an iron content of at least 75 percent. 270.24 For the third year of a plant's production of direct reduced 270.25 ore, the rate to be applied to direct reduced ore is 25 percent 270.26 of the rate otherwise determined under this subdivision. For 270.27 the fourth such production year, the rate is 50 percent of the 270.28 rate otherwise determined under this subdivision; for the fifth 270.29 such production year, the rate is 75 percent of the rate 270.30 otherwise determined under this subdivision; and for all 270.31 subsequent production years, the full rate is imposed. 270.32 (2) Subject to clause (1), production of direct reduced ore 270.33 in this state is subject to the tax imposed by this section, but 270.34 if that production is not produced by a producer of taconite or 270.35 iron sulfides, the production of taconite or iron sulfides 270.36 consumed in the production of direct reduced iron in this state 271.1 is not subject to the tax imposed by this section on taconite or 271.2 iron sulfides. 271.3 [EFFECTIVE DATE.] This section is effective for 271.4 concentrates produced after January 1, 2003. 271.5 Sec. 16. Minnesota Statutes 2002, section 298.27, is 271.6 amended to read: 271.7 298.27 [COLLECTION AND PAYMENT OF TAX.] 271.8 The taxes provided by section 298.24 shall be paid directly 271.9 to each eligible county and the iron range resources and 271.10 rehabilitation board. The commissioner of revenue shall notify 271.11 each producer of the amount to be paid each recipient prior to 271.12 February 15. Every person subject to taxes imposed by section 271.13 298.24 shall file a correct report covering the preceding year. 271.14 The report must contain the information required by the 271.15 commissioner. The report shall be filed by each producer on or 271.16 before February 1. A remittance equal to 50 percent of the 271.17 total tax required to be paid hereunderin 2003 and 100 percent271.18of the total tax required to be paid hereunder in 2004 and271.19thereaftershall be paid on or before February 24. A remittance 271.20 equal to the remaining total tax required to be paid hereunder 271.21in 2003shall be paid on or before August 24. On or before 271.22 February 25,andin 2003,August 25, the county auditor shall 271.23 make distribution of the payments previously received by the 271.24 county in the manner provided by section 298.28. Reports shall 271.25 be made and hearings held upon the determination of the tax in 271.26 accordance with procedures established by the commissioner of 271.27 revenue. The commissioner of revenue shall have authority to 271.28 make reasonable rules as to the form and manner of filing 271.29 reports necessary for the determination of the tax hereunder, 271.30 and by such rules may require the production of such information 271.31 as may be reasonably necessary or convenient for the 271.32 determination and apportionment of the tax. All the provisions 271.33 of the occupation tax law with reference to the assessment and 271.34 determination of the occupation tax, including all provisions 271.35 for appeals from or review of the orders of the commissioner of 271.36 revenue relative thereto, but not including provisions for 272.1 refunds, are applicable to the taxes imposed by section 298.24 272.2 except in so far as inconsistent herewith. If any person 272.3 subject to section 298.24 shall fail to make the report provided 272.4 for in this section at the time and in the manner herein 272.5 provided, the commissioner of revenue shall in such case, upon 272.6 information possessed or obtained, ascertain the kind and amount 272.7 of ore mined or produced and thereon find and determine the 272.8 amount of the tax due from such person. There shall be added to 272.9 the amount of tax due a penalty for failure to report on or 272.10 before February 1, which penalty shall equal ten percent of the 272.11 tax imposed and be treated as a part thereof. 272.12 If any person responsible for making a tax payment at the 272.13 time and in the manner herein provided fails to do so, there 272.14 shall be imposed a penalty equal to ten percent of the amount so 272.15 due, which penalty shall be treated as part of the tax due. 272.16 In the case of any underpayment of the tax payment required 272.17 herein, there may be added and be treated as part of the tax due 272.18 a penalty equal to ten percent of the amount so underpaid. 272.19 A person having a liability of $120,000 or more during a 272.20 calendar year must remit all liabilities by means of a funds 272.21 transfer as defined in section 336.4A-104, paragraph (a). The 272.22 funds transfer payment date, as defined in section 336.4A-401, 272.23 must be on or before the date the tax is due. If the date the 272.24 tax is due is not a funds transfer business day, as defined in 272.25 section 336.4A-105, paragraph (a), clause (4), the payment date 272.26 must be on or before the funds transfer business day next 272.27 following the date the tax is due. 272.28 [EFFECTIVE DATE.] This section is effective for taxes 272.29 payable in 2004 and thereafter. 272.30 Sec. 17. Minnesota Statutes 2002, section 298.28, 272.31 subdivision 9a, is amended to read: 272.32 Subd. 9a. [TACONITE ECONOMIC DEVELOPMENT FUND.] (a) 30.1 272.33 cents per ton for distributions in 2002 and thereafter must be 272.34 paid to the taconite economic development fund.No distribution272.35shall be made under this paragraph in 2004 or any subsequent272.36year in which total industry production falls below 30 million273.1tons.Distribution shall only be made to a taconite producer's 273.2 fund under section 298.227 if the producer timely pays its tax 273.3 under section 298.24 by the dates provided under section 298.27, 273.4 or pursuant to the due dates provided by an administrative 273.5 agreement with the commissioner. 273.6 (b) An amount equal to 50 percent of the tax under section 273.7 298.24 for concentrate sold in the form of pellet chips and 273.8 fines not exceeding 5/16 inch in size and not including crushed 273.9 pellets shall be paid to the taconite economic development 273.10 fund. The amount paid shall not exceed $700,000 annually for 273.11 all companies. If the initial amount to be paid to the fund 273.12 exceeds this amount, each company's payment shall be prorated so 273.13 the total does not exceed $700,000. 273.14 [EFFECTIVE DATE.] This section is effective for 273.15 concentrates produced after January 1, 2003. 273.16 Sec. 18. Minnesota Statutes 2002, section 298.28, 273.17 subdivision 11, is amended to read: 273.18 Subd. 11. [REMAINDER.] (a) The proceeds of the tax imposed 273.19 by section 298.24 which remain after the distributions and 273.20 payments in subdivisions 2 to 10a, as certified by the 273.21 commissioner of revenue, and paragraphs (b), (c), (d), and (e) 273.22 have been made, together with interest earned on all money 273.23 distributed under this section prior to distribution, shall be 273.24 divided between the taconite environmental protection fund 273.25 created in section 298.223 and the northeast Minnesota economic 273.26 protection trust fund created in section 298.292 as follows: 273.27 Two-thirds to the taconite environmental protection fund and 273.28 one-third to the northeast Minnesota economic protection trust 273.29 fund. The proceeds shall be placed in the respective special 273.30 accounts. 273.31 (b) There shall be distributed to each city, town, and 273.32 county the amount that it received under section 294.26 in 273.33 calendar year 1977; provided, however, that the amount 273.34 distributed in 1981 to the unorganized territory number 2 of 273.35 Lake county and the town of Beaver Bay based on the 273.36 between-terminal trackage of Erie Mining Company will be 274.1 distributed in 1982 and subsequent years to the unorganized 274.2 territory number 2 of Lake county and the towns of Beaver Bay 274.3 and Stony River based on the miles of track of Erie Mining 274.4 Company in each taxing district. 274.5 (c)There shall be distributed to the iron range resources274.6and rehabilitation board the amounts it received in 1977 under274.7section 298.22. The amount distributed under this paragraph274.8shall be expended within or for the benefit of the tax relief274.9area defined in section 273.134.274.10(d)There shall be distributed to each school district 62 274.11 percent of the amount that it received under section 294.26 in 274.12 calendar year 1977. 274.13(e)(d) In 2003 only, $100,000 must be distributed to a 274.14 township located in a taconite tax relief area as defined in 274.15 section 273.134, paragraph (a), that received $119,259 of 274.16 homestead and agricultural credit aid and $182,014 in local 274.17 government aid in 2001. 274.18 [EFFECTIVE DATE.] This section is effective for 274.19 concentrates produced after January 1, 2003. 274.20 Sec. 19. Minnesota Statutes 2002, section 298.75, 274.21 subdivision 1, is amended to read: 274.22 Subdivision 1. [DEFINITIONS.] Except as may otherwise be 274.23 provided, the following words, when used in this section, shall 274.24 have the meanings herein ascribed to them. 274.25 (1) "Aggregate material" shall mean nonmetallic natural 274.26 mineral aggregate including, but not limited to sand, silica 274.27 sand, gravel, crushed rock, limestone, granite, and borrow, but 274.28 only if the borrow is transported on a public road, street, or 274.29 highway. Aggregate material shall not include dimension stone 274.30 and dimension granite. Aggregate material must be measured or 274.31 weighed after it has been extracted from the pit, quarry, or 274.32 deposit. 274.33 (2) "Person" shall mean any individual, firm, partnership, 274.34 corporation, organization, trustee, association, or other entity. 274.35 (3) "Operator" shall mean any person engaged in the 274.36 business of removing aggregate material from the surface or 275.1 subsurface of the soil, for the purpose of sale, either directly 275.2 or indirectly, through the use of the aggregate material in a 275.3 marketable product or service. 275.4 (4) "Extraction site" shall mean a pit, quarry, or deposit 275.5 containing aggregate material and any contiguous property to the 275.6 pit, quarry, or deposit which is used by the operator for 275.7 stockpiling the aggregate material. 275.8 (5) "Importer" shall mean any person who buys aggregate 275.9 material produced from a county not listed in paragraph (6) or 275.10 another state and causes the aggregate material to be imported 275.11 into a county in this state which imposes a tax on aggregate 275.12 material. 275.13 (6) "County" shall mean the counties of Pope, Stearns, 275.14 Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 275.15 Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 275.16 Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 275.17 Sibley, Hennepin, Washington, Chisago, and Ramsey. County also 275.18 means any other county whose board has voted after a public 275.19 hearing to impose the tax under this section and has notified 275.20 the commissioner of revenue of the imposition of the tax. 275.21 (7) "Borrow" shall mean granular borrow, consisting of 275.22 durable particles of gravel and sand, crushed quarry or mine 275.23 rock, crushed gravel or stone, or any combination thereof, the 275.24 ratio of the portion passing the (#200) sieve divided by the 275.25 portion passing the (1 inch) sieve may not exceed 20 percent by 275.26 mass. 275.27 [EFFECTIVE DATE.] This section is effective for borrow 275.28 removed and transported on a public road, street, or highway on 275.29 or after July 1, 2003. 275.30 Sec. 20. [TRANSITION PROVISION.] 275.31 Each person with an alternative minimum tax credit on 275.32 December 31, 2002, pursuant to Minnesota Statutes 2002, section 275.33 298.01, may take that credit against occupation tax under the 275.34 provisions of Minnesota Statutes 2002, section 298.01, 275.35 subdivision 3d or 4e. 275.36 [EFFECTIVE DATE.] This section is effective the day 276.1 following final enactment. 276.2 Sec. 21. [REPEALER.] 276.3 (a) Minnesota Statutes 2002, section 298.01, subdivisions 276.4 3c, 3d, 4d, and 4e, are repealed effective for taxable years 276.5 beginning after December 31, 2002. 276.6 (b) Minnesota Statutes 2002, section 298.017, is repealed 276.7 effective for taxes payable in 2004 and thereafter. 276.8 (c) Minnesota Statutes 2002, sections 298.24, subdivision 276.9 3; 298.28, subdivisions 9, 9b, and 10; 298.2961; and 298.297, 276.10 are repealed effective for concentrates produced after January 276.11 1, 2003. 276.12 (d) Laws 1984, chapter 652, section 2, is repealed. This 276.13 paragraph is effective for Benton county the day after the 276.14 governing body of Benton county and its chief clerical officer 276.15 timely complete their compliance with Minnesota Statutes, 276.16 section 645.021, subdivisions 2 and 3. This paragraph is 276.17 effective for Stearns county the day after the governing body of 276.18 Stearns county and its chief clerical officer timely complete 276.19 their compliance with Minnesota Statutes, section 645.021, 276.20 subdivisions 2 and 3. 276.21 ARTICLE 11 276.22 SPECIAL TAXES 276.23 Section 1. Minnesota Statutes 2002, section 270.60, 276.24 subdivision 4, is amended to read: 276.25 Subd. 4. [PAYMENTS TO COUNTIES.] (a) The commissioner 276.26 shall pay to a county in which an Indian gaming casino is 276.27 located: 276.28 (1) ten percent of the state share of all taxes generated 276.29 from activities on reservations and collected under a tax 276.30 agreement under this section with the tribal government for the 276.31 reservation located in the county; or 276.32 (2) five percent of excise taxes collected by the state 276.33 that are determined by the department of revenue to have been 276.34 generated from activities on a reservation located in the 276.35 county, the tribal government of which does not have a tax 276.36 agreement under this section and did not have a tax agreement on 277.1 June 30, 2003. 277.2 If the tribe has casinos located in more than one county, 277.3 the payment must be divided equally among the counties in which 277.4 the casinos are located. 277.5 (b) The commissioner shall make the payments required under 277.6 this subdivision by February 28 of the year following the year 277.7 the taxes are collected. 277.8 (c) An amount sufficient to make the payments authorized by 277.9 this subdivision is annually appropriated from the general fund 277.10 to the commissioner. 277.11 [EFFECTIVE DATE.] This section is effective for taxes 277.12 collected after June 30, 2003. 277.13 Sec. 2. Minnesota Statutes 2002, section 287.12, is 277.14 amended to read: 277.15 287.12 [TAXES, HOW APPORTIONED.] 277.16 (a) All taxes paid to the county treasurer under the 277.17 provisions of sections 287.01 to 287.12 must be apportioned, 97 277.18 percent to the general fund of the state, and three percent to 277.19 the county revenue fund. 277.20 (b) On or before the 20th day of each month the county 277.21 treasurer shall determine and pay to the commissioner of revenue 277.22 for deposit in the state treasury and credit to the general fund 277.23 the state's portion of the receipts from the mortgage registry 277.24 tax during the preceding month subject to the electronic payment 277.25 requirements of section 270.771. The county treasurer shall 277.26 provide any related reports requested by the commissioner of 277.27 revenue. 277.28 (c) Counties must remit the state's portion of the June 277.29 receipts collected through June 25 and the estimated state's 277.30 portion of the receipts to be collected during the remainder of 277.31 the month to the commissioner of revenue two business days 277.32 before June 30 of each year. The remaining amount of the June 277.33 receipts is due on August 20. 277.34 [EFFECTIVE DATE.] This section is effective January 1, 2004. 277.35 Sec. 3. Minnesota Statutes 2002, section 287.29, 277.36 subdivision 1, is amended to read: 278.1 Subdivision 1. [APPOINTMENT AND PAYMENT OF TAX PROCEEDS.] 278.2 (a) The proceeds of the taxes levied and collected under 278.3 sections 287.21 to 287.39 must be apportioned, 97 percent to the 278.4 general fund of the state, and three percent to the county 278.5 revenue fund. 278.6 (b) On or before the 20th day of each month, the county 278.7 treasurer shall determine and pay to the commissioner of revenue 278.8 for deposit in the state treasury and credit to the general fund 278.9 the state's portion of the receipts for deed tax from the 278.10 preceding month subject to the electronic transfer requirements 278.11 of section 270.771. The county treasurer shall provide any 278.12 related reports requested by the commissioner of revenue. 278.13 (c) Counties must remit the state's portion of the June 278.14 receipts collected through June 25 and the estimated state's 278.15 portion of the receipts to be collected during the remainder of 278.16 the month to the commissioner of revenue two business days 278.17 before June 30 of each year. The remaining amount of the June 278.18 receipts is due on August 20. 278.19 [EFFECTIVE DATE.] This section is effective January 1, 2004. 278.20 Sec. 4. Minnesota Statutes 2002, section 287.31, is 278.21 amended by adding a subdivision to read: 278.22 Subd. 3. [UNDERPAYMENTS OF ACCELERATED PAYMENT OF JUNE TAX 278.23 RECEIPTS.] If a county fails to timely remit the state portion 278.24 of the actual June tax receipts at the time required by section 278.25 287.12 or 287.29, the county shall pay a penalty equal to ten 278.26 percent of the state portion of actual June receipts less the 278.27 amount remitted to the commissioner of revenue in June. The 278.28 penalty must not be imposed, however, if the amount remitted in 278.29 June equals either: 278.30 (1) 90 percent of the state's portion of the preceding 278.31 May's receipts; or 278.32 (2) 90 percent of the average monthly amount of the state's 278.33 portion for the previous calendar year. 278.34 [EFFECTIVE DATE.] This section is effective January 1, 2004. 278.35 Sec. 5. Minnesota Statutes 2002, section 295.58, is 278.36 amended to read: 279.1 295.58 [DEPOSIT OF REVENUES AND PAYMENT OF REFUNDS.] 279.2 The commissioner shall deposit all revenues, including 279.3 penalties and interest, derived from the taxes imposed by 279.4 sections 295.50 to 295.57 and from the insurance premiums tax 279.5 imposed by section 297I.05, subdivision 5, on health maintenance 279.6 organizations, community integrated service networks, and 279.7 nonprofit health service plan corporations in the health care 279.8 access fund. There is annually appropriated from the health 279.9 care access fund to the commissioner of revenue the amount 279.10 necessary to make refunds under this chapter. Beginning July 1, 279.11 2005, the commissioner shall deposit all revenues, including 279.12 penalties and interest, derived from the taxes imposed by 279.13 sections 295.50 to 295.57 and from the insurance premiums tax 279.14 imposed by section 297I.05, subdivision 5, on health maintenance 279.15 organizations, community integrated service networks, and 279.16 nonprofit health service plan corporations in the general fund. 279.17 There is annually appropriated from the general fund to the 279.18 commissioner of revenue the amount necessary to make refunds 279.19 under this chapter. 279.20 Sec. 6. Minnesota Statutes 2002, section 297F.05, 279.21 subdivision 1, is amended to read: 279.22 Subdivision 1. [RATES; CIGARETTES.] A tax is imposed upon 279.23 the sale of cigarettes in this state, upon having cigarettes in 279.24 possession in this state with intent to sell, upon any person 279.25 engaged in business as a distributor, and upon the use or 279.26 storage by consumers, at the following rates, subject to the279.27discount provided in this chapter: 279.28 (1) on cigarettes weighing not more than three pounds per 279.29 thousand, 24 mills on each such cigarette; and 279.30 (2) on cigarettes weighing more than three pounds per 279.31 thousand, 48 mills on each such cigarette. 279.32 [EFFECTIVE DATE.] This section is effective for sales of 279.33 stamps made after June 30, 2003. 279.34 Sec. 7. Minnesota Statutes 2002, section 297F.08, 279.35 subdivision 7, is amended to read: 279.36 Subd. 7. [PRICE OF STAMPS.] The commissioner shall sell 280.1 stamps to any person licensed as a distributorat a discount of280.21.0 percent from the face amount of the stamps for the first280.3$1,500,000 of such stamps purchased in any fiscal year; and at a280.4discount of 0.6 percent on the remainder of such stamps280.5purchased in any fiscal year. The commissioner shall not sell 280.6 stamps to any other person. The commissioner may prescribe the 280.7 method of shipment of the stamps to the distributor as well as 280.8 the quantities of stamps purchased. 280.9 [EFFECTIVE DATE.] This section is effective for sales of 280.10 stamps made after June 30, 2003. 280.11 Sec. 8. Minnesota Statutes 2002, section 297F.09, 280.12 subdivision 1, is amended to read: 280.13 Subdivision 1. [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 280.14 or before the 18th day of each calendar month, a distributor 280.15 with a place of business in this state shall file a return with 280.16 the commissioner showing the quantity of cigarettes manufactured 280.17 or brought in from outside the state or purchased during the 280.18 preceding calendar month and the quantity of cigarettes sold or 280.19 otherwise disposed of in this state and outside this state 280.20 during that month. A licensed distributor outside this state 280.21 shall in like manner file a return showing the quantity of 280.22 cigarettes shipped or transported into this state during the 280.23 preceding calendar month. Returns must be made in the form and 280.24 manner prescribed by the commissioner and must contain any other 280.25 information required by the commissioner. The return must be 280.26 accompanied by a remittance for the full unpaid tax liability 280.27 shown by it. The return for the May liability and 85 percent of 280.28 the estimated June liability is due on the date payment of the 280.29 tax is due. 280.30 [EFFECTIVE DATE.] This section is effective January 1, 2004. 280.31 Sec. 9. Minnesota Statutes 2002, section 297F.09, 280.32 subdivision 2, is amended to read: 280.33 Subd. 2. [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 280.34 On or before the 18th day of each calendar month, a distributor 280.35 with a place of business in this state shall file a return with 280.36 the commissioner showing the quantity and wholesale sales price 281.1 of each tobacco product: 281.2 (1) brought, or caused to be brought, into this state for 281.3 sale; and 281.4 (2) made, manufactured, or fabricated in this state for 281.5 sale in this state, during the preceding calendar month. 281.6 Every licensed distributor outside this state shall in like 281.7 manner file a return showing the quantity and wholesale sales 281.8 price of each tobacco product shipped or transported to 281.9 retailers in this state to be sold by those retailers, during 281.10 the preceding calendar month. Returns must be made in the form 281.11 and manner prescribed by the commissioner and must contain any 281.12 other information required by the commissioner. The return must 281.13 be accompanied by a remittance for the full tax liability shown,281.14less 1.5 percent of the liability as compensation to reimburse281.15the distributor for expenses incurred in the administration of281.16this chapter. The return for the May liability and 85 percent 281.17 of the estimated June liability is due on the date payment of 281.18 the tax is due. 281.19 [EFFECTIVE DATE.] The part of this section abolishing the 281.20 1.5 percent reimbursement is effective for sales made after June 281.21 30, 2003. The rest of this section is effective January 1, 2004. 281.22 Sec. 10. Minnesota Statutes 2002, section 297F.09, is 281.23 amended by adding a subdivision to read: 281.24 Subd. 10. [ACCELERATED TAX PAYMENT; CIGARETTE OR TOBACCO 281.25 PRODUCTS DISTRIBUTOR.] A cigarette or tobacco products 281.26 distributor having a liability of $120,000 or more during a 281.27 fiscal year ending June 30, shall remit the June liability for 281.28 the next year in the following manner: 281.29 (a) Two business days before June 30 of the year, the 281.30 distributor shall remit the actual May liability and 85 percent 281.31 of the estimated June liability to the commissioner and file the 281.32 return in the form and manner prescribed by the commissioner. 281.33 (b) On or before August 18 of the year, the distributor 281.34 shall submit a return showing the actual June liability and pay 281.35 any additional amount of tax not remitted in June. A penalty is 281.36 imposed equal to ten percent of the amount of June liability 282.1 required to be paid in June, less the amount remitted in June. 282.2 However, the penalty is not imposed if the amount remitted in 282.3 June equals the lesser of: 282.4 (1) 85 percent of the actual June liability; or 282.5 (2) 85 percent of the preceding May's liability. 282.6 [EFFECTIVE DATE.] This section is effective for taxpayers 282.7 having a liability of $120,000 or more during the fiscal year 282.8 ending June 30, 2003, and each fiscal year thereafter, and for 282.9 accelerated payments becoming due in 2004 and thereafter. 282.10 Sec. 11. Minnesota Statutes 2002, section 297F.10, 282.11 subdivision 1, is amended to read: 282.12 Subdivision 1. [TAX AND USE TAX ON CIGARETTES.] Revenue 282.13 received from cigarette taxes, as well as related penalties, 282.14 interest, license fees, and miscellaneous sources of revenue 282.15 shall be deposited by the commissioner in the state treasury and 282.16 credited as follows: 282.17 (a) first to the general obligation special tax bond debt 282.18 service account in each fiscal year the amount required to 282.19 increase the balance on hand in the account on each December 1 282.20 to an amount equal to the full amount of principal and interest 282.21 to come due on all outstanding bonds whose debt service is 282.22 payable primarily from the proceeds of the tax to and including 282.23 the second following July 1; and 282.24 (b) after the requirements of paragraph (a) have been met: 282.25 (1) the revenue produced byone mill3.25 mills of the tax 282.26 on cigarettes weighing not more than three pounds a thousand and 282.27two6.5 mills of the tax on cigarettes weighing more than three 282.28 pounds a thousand must be credited to theMinnesota future282.29resources fundacademic health center special revenue fund 282.30 hereby created; and 282.31 (2) the revenue produced by 1.25 mills of the tax on 282.32 cigarettes weighing not more than three pounds a thousand and 282.33 2.5 mills of the tax on cigarettes weighing more than three 282.34 pounds a thousand must be credited to the medical education and 282.35 research costs account hereby created in the special revenue 282.36 fund; and 283.1 (3) the balance of the revenues derived from taxes, 283.2 penalties, and interest (under this chapter) and from license 283.3 fees and miscellaneous sources of revenue shall be credited to 283.4 the general fund. 283.5 [EFFECTIVE DATE.] This section is effective for all 283.6 revenues received after June 30, 2003. 283.7 Sec. 12. [297F.24] [FEE IN LIEU OF SETTLEMENT.] 283.8 Subdivision 1. [FEE IMPOSED.] (a) A fee is imposed upon 283.9 the sale of nonsettlement cigarettes in this state, upon having 283.10 nonsettlement cigarettes in possession in this state with intent 283.11 to sell, upon any person engaged in business as a distributor, 283.12 and upon the use or storage by consumers of nonsettlement 283.13 cigarettes. The fee equals a rate of 1.75 cents per cigarette. 283.14 (b) The purpose of this fee is to: 283.15 (1) ensure that manufacturers of nonsettlement cigarettes 283.16 pay fees to the state that are comparable to costs attributable 283.17 to the use of the cigarettes; 283.18 (2) prevent manufacturers of nonsettlement cigarettes from 283.19 undermining the state's policy of discouraging underage smoking 283.20 by offering nonsettlement cigarettes at prices substantially 283.21 below the cigarettes of other manufacturers; and 283.22 (3) fund such other purposes as the legislature determines 283.23 appropriate. 283.24 Subd. 2. [NONSETTLEMENT CIGARETTES.] For purposes of this 283.25 section, a "nonsettlement cigarette" means a cigarette 283.26 manufactured by a person other than a manufacturer that: 283.27 (1) is making annual payments to the state of Minnesota 283.28 under a settlement of the lawsuit styled as State v. Philip 283.29 Morris Inc., No. C1-94-8565 (Minnesota District Court, Second 283.30 Judicial District), if the style of cigarettes is included in 283.31 computation of the payments under the agreement; or 283.32 (2) has voluntarily entered into an agreement with the 283.33 state of Minnesota, approved by the attorney general, agreeing 283.34 to terms similar to those contained in the settlement agreement, 283.35 identified in clause (1) including making annual payments to the 283.36 state, with respect to its national sales of the style of 284.1 cigarettes, equal to at least 75 percent of the payments that 284.2 would apply if the manufacturer was one of the four original 284.3 parties to the settlement agreement required to make annual 284.4 payments to the state. 284.5 Subd. 3. [COLLECTION AND ADMINISTRATION.] The commissioner 284.6 shall administer the fee under this section in the same manner 284.7 as the excise tax imposed under section 297F.05 and all of the 284.8 provisions of this chapter apply as if the fee were a tax 284.9 imposed under section 297F.05. The commissioner shall deposit 284.10 the proceeds of the fee in the general fund. 284.11 [EFFECTIVE DATE.] This section is effective for sales of 284.12 nonsettlement cigarettes made after June 30, 2003. 284.13 Sec. 13. Minnesota Statutes 2002, section 297G.01, is 284.14 amended by adding a subdivision to read: 284.15 Subd. 21. [LOW-ALCOHOL DAIRY COCKTAIL.] "Low-alcohol dairy 284.16 cocktail" means a premixed cocktail, or any other product except 284.17 liqueur-filled candy, that: 284.18 (1) consists primarily of milk products; 284.19 (2) contains distilled spirits; 284.20 (3) is drinkable as a beverage or is promoted as an 284.21 alcoholic product; and 284.22 (4) contains less than 3.2 percent alcohol by volume. 284.23 [EFFECTIVE DATE.] This section is effective for sales made 284.24 after June 30, 2003. 284.25 Sec. 14. Minnesota Statutes 2002, section 297G.03, 284.26 subdivision 1, is amended to read: 284.27 Subdivision 1. [GENERAL RATE; DISTILLED SPIRITS AND WINE.] 284.28 The following excise tax is imposed on all distilled spirits and 284.29 wine manufactured, imported, sold, or possessed in this state: 284.30 Standard Metric 284.31 (a) Distilled spirits, $5.03 per gallon $1.33 per liter 284.32 liqueurs, cordials, 284.33 and specialties regardless 284.34 of alcohol content 284.35 (excluding ethyl alcohol) 284.36 (b) Wine containing $ .30 per gallon $ .08 per liter 285.1 14 percent or less 285.2 alcohol by volume 285.3 (except cider as defined 285.4 in section 297G.01, 285.5 subdivision 3a) 285.6 (c) Wine containing $ .95 per gallon $ .25 per liter 285.7 more than 14 percent 285.8 but not more than 21 285.9 percent alcohol by volume 285.10 (d) Wine containing more $1.82 per gallon $ .48 per liter 285.11 than 21 percent but not 285.12 more than 24 percent 285.13 alcohol by volume 285.14 (e) Wine containing more $3.52 per gallon $ .93 per liter 285.15 than 24 percent alcohol 285.16 by volume 285.17 (f) Natural and $1.82 per gallon $ .48 per liter 285.18 artificial sparkling wines 285.19 containing alcohol 285.20 (g) Cider as defined in $ .15 per gallon $ .04 per liter 285.21 section 297G.01, 285.22 subdivision 3a 285.23 (h) Low alcohol dairy $ .08 per gallon $ .02 per liter 285.24 cocktails 285.25 In computing the tax on a package of distilled spirits or 285.26 wine, a proportional tax at a like rate on all fractional parts 285.27 of a gallon or liter must be paid, except that the tax on a 285.28 fractional part of a gallon less than 1/16 of a gallon is the 285.29 same as for 1/16 of a gallon. 285.30 [EFFECTIVE DATE.] This section is effective for sales made 285.31 after June 30, 2003. 285.32 Sec. 15. Minnesota Statutes 2002, section 297G.09, is 285.33 amended by adding a subdivision to read: 285.34 Subd. 9. [ACCELERATED TAX PAYMENT; PENALTY.] A person 285.35 liable for tax under this chapter having a liability of $120,000 285.36 or more during a fiscal year ending June 30, shall remit the 286.1 June liability for the next year in the following manner: 286.2 (a) Two business days before June 30 of the year, the 286.3 taxpayer shall remit the actual May liability and 85 percent of 286.4 the estimated June liability to the commissioner and file the 286.5 return in the form and manner prescribed by the commissioner. 286.6 (b) On or before August 18 of the year, the taxpayer shall 286.7 submit a return showing the actual June liability and pay any 286.8 additional amount of tax not remitted in June. A penalty is 286.9 imposed equal to ten percent of the amount of June liability 286.10 required to be paid in June less the amount remitted in June. 286.11 However, the penalty is not imposed if the amount remitted in 286.12 June equals the lesser of: 286.13 (1) 85 percent of the actual June liability; or 286.14 (2) 85 percent of the preceding May liability. 286.15 [EFFECTIVE DATE.] This section is effective for taxpayers 286.16 having a liability of $120,000 or more during the fiscal year 286.17 ending June 30, 2003, and each fiscal year thereafter, and for 286.18 accelerated payments becoming due in 2004 and thereafter. 286.19 Sec. 16. Minnesota Statutes 2002, section 325D.421, is 286.20 amended by adding a subdivision to read: 286.21 Subd. 1a. [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 286.22 person may not transport or cause to be transported from this 286.23 state cigarettes for sale in another state without first 286.24 affixing to the cigarettes the stamp required by the state in 286.25 which the cigarettes are to be sold or paying any other excise 286.26 tax on the cigarettes imposed by the state in which the 286.27 cigarettes are to be sold. 286.28 (b) A person may not affix to cigarettes the stamp required 286.29 by another state or pay any other excise tax on the cigarettes 286.30 imposed by another state if the other state prohibits stamps 286.31 from being affixed to the cigarettes, prohibits the payment of 286.32 any other excise tax on the cigarettes, or prohibits the sale of 286.33 the cigarettes. 286.34 (c) Not later than 15 days after the end of each calendar 286.35 quarter, a person who transports or causes to be transported 286.36 from this state cigarettes for sale in another state shall 287.1 submit to the attorney general a report identifying the quantity 287.2 and style of each brand of the cigarettes transported or caused 287.3 to be transported in the preceding calendar quarter, and the 287.4 name and address of each recipient of the cigarettes. 287.5 (d) For purposes of this subdivision, "person" has the 287.6 meaning given in section 297F.01, subdivision 12, and includes a 287.7 common or contract carrier or a public warehouse only if the 287.8 carrier or warehouse is owned, in whole or in part, directly or 287.9 indirectly, by such a person. 287.10 [EFFECTIVE DATE.] This section is effective the day 287.11 following final enactment. 287.12 Sec. 17. Minnesota Statutes 2002, section 325D.421, 287.13 subdivision 2, is amended to read: 287.14 Subd. 2. [PRIVATE CAUSE OF ACTION.] (a) In addition to any 287.15 other private remedy provided by law, any person that sustains 287.16 economic damages or commercial injury as a result of any 287.17 violation of subdivision 1 or 1a may bring an action for 287.18 appropriate injunctive or other equitable relief, actual 287.19 damages, if any, sustained by reason of the violation, and, as 287.20 determined by the court, interest on the damages from the date 287.21 of the complaint, taxable costs, and reasonable attorney fees. 287.22 (b) If the trier of fact finds that the violation is 287.23 egregious, it may increase the recovery to an amount not in 287.24 excess of three times the actual damages sustained by reason of 287.25 the violation. The trier of fact may, in addition, award 287.26 exemplary damages for violations of subdivision 1, paragraph 287.27 (c), equal to the difference between the permitted legal price 287.28 and the actual price for the sales. 287.29 [EFFECTIVE DATE.] This section is effective the day 287.30 following final enactment. 287.31 Sec. 18. Minnesota Statutes 2002, section 349.16, is 287.32 amended by adding a subdivision to read: 287.33 Subd. 11. [AGREEMENT TO PAY TAXES.] An organization which 287.34 is recognized by federal law, regulation, or other ruling as a 287.35 quasi-governmental organization that would otherwise be exempt 287.36 from one or more taxes under chapter 297E must agree to pay all 288.1 taxes under chapter 297E on lawful gambling conducted by the 288.2 organization as a condition of receiving or renewing a license 288.3 or premises permit. 288.4 ARTICLE 12 288.5 DEPARTMENT INCOME, CORPORATE FRANCHISE, AND 288.6 ESTATE TAX INITIATIVES 288.7 Section 1. Minnesota Statutes 2002, section 289A.19, 288.8 subdivision 4, is amended to read: 288.9 Subd. 4. [ESTATE TAX RETURNS.] When in the commissioner's 288.10 judgment good cause exists, the commissioner may extend the time 288.11 for filing an estate tax return for not more than six months. 288.12 When an extension to file the federal estate tax return has been 288.13 granted under section 6081 of the Internal Revenue Code, the 288.14 time for filing the estate tax return is extended for that 288.15 period. 288.16 [EFFECTIVE DATE.] This section is effective for estates of 288.17 decedents dying after December 31, 2001. 288.18 Sec. 2. Minnesota Statutes 2002, section 289A.31, is 288.19 amended by adding a subdivision to read: 288.20 Subd. 8. [LIABILITY OF VENDOR FOR REPAYMENT OF REFUND.] If 288.21 an individual income tax refund resulting from claiming an 288.22 education credit under section 290.0674 is paid by means of 288.23 directly depositing the proceeds of the refund into a bank 288.24 account controlled by the vendor of the product or service upon 288.25 which the education credit is based, and the commissioner 288.26 subsequently disallows the credit, the commissioner may seek 288.27 repayment of the refund from the vendor. The amount of the 288.28 repayment must be assessed and collected in the same time and 288.29 manner as an erroneous refund under section 289A.37, subdivision 288.30 2. 288.31 [EFFECTIVE DATE.] This section is effective for refunds 288.32 paid to accounts controlled by a vendor on or after the day 288.33 following final enactment. 288.34 Sec. 3. Minnesota Statutes 2002, section 289A.56, 288.35 subdivision 3, is amended to read: 288.36 Subd. 3. [WITHHOLDING TAX, ENTERTAINER WITHHOLDING TAX, 289.1 WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, ESTATE 289.2 TAX, AND SALES TAX OVERPAYMENTS.] When a refund is due for 289.3 overpayments of withholding tax, entertainer withholding tax, or 289.4 withholding from payments to out-of-state contractors,or estate289.5tax,interest is computed from the date of payment to the date 289.6 the refund is paid or credited. For purposes of this 289.7 subdivision, the date of payment is the later of the date the 289.8 tax was finally due or was paid. 289.9 For the purposes of computing interest on estate tax 289.10 refunds, interest is paid from the later of the date of 289.11 overpayment, the date the estate tax return is due, or the date 289.12 the original estate tax return is filed to the date the refund 289.13 is paid. 289.14 For purposes of computing interest on sales and use tax 289.15 refunds, interest is paid from the date of payment to the date 289.16 the refund is paid or credited, if the refund claim includes a 289.17 detailed schedule reflecting the tax periods covered in the 289.18 claim. If the refund claim submitted does not include a 289.19 detailed schedule reflecting the tax periods covered in the 289.20 claim, interest is computed from the date the claim was filed. 289.21 [EFFECTIVE DATE.] This section is effective for estates of 289.22 decedents dying after December 31, 2003. 289.23 Sec. 4. Minnesota Statutes 2002, section 289A.60, 289.24 subdivision 7, is amended to read: 289.25 Subd. 7. [PENALTY FOR FRIVOLOUS RETURN.] If a taxpayer 289.26 files what purports to be a tax return or a claim for refund but 289.27 which does not contain information on which the substantial 289.28 correctness of the purported return or claim for refund may be 289.29 judged or contains information that on its face shows that the 289.30 purported return or claim for refund is substantially incorrect 289.31 and the conduct is due to a position that is frivolous or a 289.32 desire that appears on the purported return or claim for refund 289.33 to delay or impede the administration of Minnesota tax laws, 289.34 then the individual shall pay a penalty of$500the greater of 289.35 $1,000 or 25 percent of the amount of tax required to be shown 289.36 on the return. In a proceeding involving the issue of whether 290.1 or not a person is liable for this penalty, the burden of proof 290.2 is on the commissioner. 290.3 [EFFECTIVE DATE.] This section is effective for returns 290.4 filed after December 31, 2003. 290.5 Sec. 5. Minnesota Statutes 2002, section 290.01, 290.6 subdivision 19a, is amended to read: 290.7 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 290.8 individuals, estates, and trusts, there shall be added to 290.9 federal taxable income: 290.10 (1)(i) interest income on obligations of any state other 290.11 than Minnesota or a political or governmental subdivision, 290.12 municipality, or governmental agency or instrumentality of any 290.13 state other than Minnesota exempt from federal income taxes 290.14 under the Internal Revenue Code or any other federal statute; 290.15 and 290.16 (ii) exempt-interest dividends as defined in section 290.17 852(b)(5) of the Internal Revenue Code, except the portion of 290.18 the exempt-interest dividends derived from interest income on 290.19 obligations of the state of Minnesota or its political or 290.20 governmental subdivisions, municipalities, governmental agencies 290.21 or instrumentalities, but only if the portion of the 290.22 exempt-interest dividends from such Minnesota sources paid to 290.23 all shareholders represents 95 percent or more of the 290.24 exempt-interest dividends that are paid by the regulated 290.25 investment company as defined in section 851(a) of the Internal 290.26 Revenue Code, or the fund of the regulated investment company as 290.27 defined in section 851(g) of the Internal Revenue Code, making 290.28 the payment; and 290.29 (iii) for the purposes of items (i) and (ii), interest on 290.30 obligations of an Indian tribal government described in section 290.31 7871(c) of the Internal Revenue Code shall be treated as 290.32 interest income on obligations of the state in which the tribe 290.33 is located; 290.34 (2) the amount of income taxes paid or accrued within the 290.35 taxable year under this chapter and income taxes paid to any 290.36 other state or to any province or territory of Canada, to the 291.1 extent allowed as a deduction under section 63(d) of the 291.2 Internal Revenue Code, but the addition may not be more than the 291.3 amount by which the itemized deductions as allowed under section 291.4 63(d) of the Internal Revenue Code exceeds the amount of the 291.5 standard deduction as defined in section 63(c) of the Internal 291.6 Revenue Code. For the purpose of this paragraph, the 291.7 disallowance of itemized deductions under section 68 of the 291.8 Internal Revenue Code of 1986, income tax is the last itemized 291.9 deduction disallowed; 291.10 (3) the capital gain amount of a lump sum distribution to 291.11 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 291.12 Reform Act of 1986, Public Law Number 99-514, applies; 291.13 (4) the amount of income taxes paid or accrued within the 291.14 taxable year under this chapter and income taxes paid to any 291.15 other state or any province or territory of Canada, to the 291.16 extent allowed as a deduction in determining federal adjusted 291.17 gross income. For the purpose of this paragraph, income taxes 291.18 do not include the taxes imposed by sections 290.0922, 291.19 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 291.20 (5) the amount of expense, interest, or taxes disallowed 291.21 pursuant to section 290.10; 291.22 (6) the amount of a partner's pro rata share of net income 291.23 which does not flow through to the partner because the 291.24 partnership elected to pay the tax on the income under section 291.25 6242(a)(2) of the Internal Revenue Code; and 291.26 (7) 80 percent of the depreciation deduction allowed under 291.27 section 168(k) of the Internal Revenue Code. For purposes of 291.28 this clause, if the taxpayer has an activity that in the taxable 291.29 year generates a deduction for depreciation under section 168(k) 291.30 and the activity generates a loss for the taxable year that the 291.31 taxpayer is not allowed to claim for the taxable year, "the 291.32 depreciation allowed under section 168(k)" for the taxable year 291.33 is limited to excess of the depreciation claimed by the activity 291.34 under section 168(k) over the amount of the loss from the 291.35 activity that is not allowed in the taxable year. In succeeding 291.36 taxable years when the losses not allowed in the taxable year 292.1 are allowed, the depreciation under section 168(k) is allowed. 292.2 [EFFECTIVE DATE.] This section is effective for taxable 292.3 years ending after September 10, 2001. 292.4 Sec. 6. Minnesota Statutes 2002, section 290.01, 292.5 subdivision 19b, is amended to read: 292.6 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 292.7 individuals, estates, and trusts, there shall be subtracted from 292.8 federal taxable income: 292.9 (1) interest income on obligations of any authority, 292.10 commission, or instrumentality of the United States to the 292.11 extent includable in taxable income for federal income tax 292.12 purposes but exempt from state income tax under the laws of the 292.13 United States; 292.14 (2) if included in federal taxable income, the amount of 292.15 any overpayment of income tax to Minnesota or to any other 292.16 state, for any previous taxable year, whether the amount is 292.17 received as a refund or as a credit to another taxable year's 292.18 income tax liability; 292.19 (3) the amount paid to others, less the amount used to 292.20 claim the credit allowed under section 290.0674, not to exceed 292.21 $1,625 for each qualifying child in grades kindergarten to 6 and 292.22 $2,500 for each qualifying child in grades 7 to 12, for tuition, 292.23 textbooks, and transportation of each qualifying child in 292.24 attending an elementary or secondary school situated in 292.25 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 292.26 wherein a resident of this state may legally fulfill the state's 292.27 compulsory attendance laws, which is not operated for profit, 292.28 and which adheres to the provisions of the Civil Rights Act of 292.29 1964 and chapter 363. For the purposes of this clause, 292.30 "tuition" includes fees or tuition as defined in section 292.31 290.0674, subdivision 1, clause (1). As used in this clause, 292.32 "textbooks" includes books and other instructional materials and 292.33 equipment purchased or leased for use in elementary and 292.34 secondary schools in teaching only those subjects legally and 292.35 commonly taught in public elementary and secondary schools in 292.36 this state. Equipment expenses qualifying for deduction 293.1 includes expenses as defined and limited in section 290.0674, 293.2 subdivision 1, clause (3). "Textbooks" does not include 293.3 instructional books and materials used in the teaching of 293.4 religious tenets, doctrines, or worship, the purpose of which is 293.5 to instill such tenets, doctrines, or worship, nor does it 293.6 include books or materials for, or transportation to, 293.7 extracurricular activities including sporting events, musical or 293.8 dramatic events, speech activities, driver's education, or 293.9 similar programs. For purposes of the subtraction provided by 293.10 this clause, "qualifying child" has the meaning given in section 293.11 32(c)(3) of the Internal Revenue Code; 293.12 (4) income as provided under section 290.0802; 293.13 (5) to the extent included in federal adjusted gross 293.14 income, income realized on disposition of property exempt from 293.15 tax under section 290.491; 293.16 (6)to the extent not deducted in determining federal293.17taxable income or used to claim the long-term care insurance293.18credit under section 290.0672, the amount paid for health293.19insurance of self-employed individuals as determined under293.20section 162(l) of the Internal Revenue Code, except that the293.21percent limit does not apply. If the individual deducted293.22insurance payments under section 213 of the Internal Revenue293.23Code of 1986, the subtraction under this clause must be reduced293.24by the lesser of:293.25(i) the total itemized deductions allowed under section293.2663(d) of the Internal Revenue Code, less state, local, and293.27foreign income taxes deductible under section 164 of the293.28Internal Revenue Code and the standard deduction under section293.2963(c) of the Internal Revenue Code; or293.30(ii) the lesser of (A) the amount of insurance qualifying293.31as "medical care" under section 213(d) of the Internal Revenue293.32Code to the extent not deducted under section 162(1) of the293.33Internal Revenue Code or excluded from income or (B) the total293.34amount deductible for medical care under section 213(a);293.35(7) the exemption amount allowed under Laws 1995, chapter293.36255, article 3, section 2, subdivision 3;294.1(8)to the extent included in federal taxable income, 294.2 postservice benefits for youth community service under section 294.3 124D.42 for volunteer service under United States Code, title 294.4 42, sections 12601 to 12604; 294.5(9)(7) to the extent not deducted in determining federal 294.6 taxable income by an individual who does not itemize deductions 294.7 for federal income tax purposes for the taxable year, an amount 294.8 equal to 50 percent of the excess of charitable contributions 294.9 allowable as a deduction for the taxable year under section 294.10 170(a) of the Internal Revenue Code over $500; 294.11(10)(8) for taxable years beginning before January 1, 294.12 2008, the amount of the federal small ethanol producer credit 294.13 allowed under section 40(a)(3) of the Internal Revenue Code 294.14 which is included in gross income under section 87 of the 294.15 Internal Revenue Code; 294.16(11)(9) for individuals who are allowed a federal foreign 294.17 tax credit for taxes that do not qualify for a credit under 294.18 section 290.06, subdivision 22, an amount equal to the carryover 294.19 of subnational foreign taxes for the taxable year, but not to 294.20 exceed the total subnational foreign taxes reported in claiming 294.21 the foreign tax credit. For purposes of this clause, "federal 294.22 foreign tax credit" means the credit allowed under section 27 of 294.23 the Internal Revenue Code, and "carryover of subnational foreign 294.24 taxes" equals the carryover allowed under section 904(c) of the 294.25 Internal Revenue Code minus national level foreign taxes to the 294.26 extent they exceed the federal foreign tax credit; and 294.27(12)(10) in each of the five tax years immediately 294.28 following the tax year in which an addition is required under 294.29 subdivision 19a, clause (7), an amount equal to one-fifth of the 294.30 delayed depreciation. For purposes of this clause, "delayed 294.31 depreciation" means the amount of the addition made by the 294.32 taxpayer under subdivision 19a, clause (7), minus the positive 294.33 value of any net operating loss under section 172 of the 294.34 Internal Revenue Code generated for the tax year of the 294.35 addition. The resulting delayed depreciation cannot be less 294.36 than zero. 295.1 [EFFECTIVE DATE.] This section is effective for tax years 295.2 beginning after December 31, 2003. 295.3 Sec. 7. Minnesota Statutes 2002, section 290.01, 295.4 subdivision 19c, is amended to read: 295.5 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 295.6 INCOME.] For corporations, there shall be added to federal 295.7 taxable income: 295.8 (1) the amount of any deduction taken for federal income 295.9 tax purposes for income, excise, or franchise taxes based on net 295.10 income or related minimum taxes, including but not limited to 295.11 the tax imposed under section 290.0922, paid by the corporation 295.12 to Minnesota, another state, a political subdivision of another 295.13 state, the District of Columbia, or any foreign country or 295.14 possession of the United States; 295.15 (2) interest not subject to federal tax upon obligations 295.16 of: the United States, its possessions, its agencies, or its 295.17 instrumentalities; the state of Minnesota or any other state, 295.18 any of its political or governmental subdivisions, any of its 295.19 municipalities, or any of its governmental agencies or 295.20 instrumentalities; the District of Columbia; or Indian tribal 295.21 governments; 295.22 (3) exempt-interest dividends received as defined in 295.23 section 852(b)(5) of the Internal Revenue Code; 295.24 (4) the amount of any net operating loss deduction taken 295.25 for federal income tax purposes under section 172 or 832(c)(10) 295.26 of the Internal Revenue Code or operations loss deduction under 295.27 section 810 of the Internal Revenue Code; 295.28 (5) the amount of any special deductions taken for federal 295.29 income tax purposes under sections 241 to 247 of the Internal 295.30 Revenue Code; 295.31 (6) losses from the business of mining, as defined in 295.32 section 290.05, subdivision 1, clause (a), that are not subject 295.33 to Minnesota income tax; 295.34 (7) the amount of any capital losses deducted for federal 295.35 income tax purposes under sections 1211 and 1212 of the Internal 295.36 Revenue Code; 296.1 (8) the exempt foreign trade income of a foreign sales 296.2 corporation under sections 921(a) and 291 of the Internal 296.3 Revenue Code; 296.4 (9) the amount of percentage depletion deducted under 296.5 sections 611 through 614 and 291 of the Internal Revenue Code; 296.6 (10) for certified pollution control facilities placed in 296.7 service in a taxable year beginning before December 31, 1986, 296.8 and for which amortization deductions were elected under section 296.9 169 of the Internal Revenue Code of 1954, as amended through 296.10 December 31, 1985, the amount of the amortization deduction 296.11 allowed in computing federal taxable income for those 296.12 facilities; 296.13 (11) the amount of any deemed dividend from a foreign 296.14 operating corporation determined pursuant to section 290.17, 296.15 subdivision 4, paragraph (g); 296.16 (12) the amount of any environmental tax paid under section 296.17 59(a) of the Internal Revenue Code; 296.18 (13) the amount of a partner's pro rata share of net income 296.19 which does not flow through to the partner because the 296.20 partnership elected to pay the tax on the income under section 296.21 6242(a)(2) of the Internal Revenue Code; 296.22 (14) the amount of net income excluded under section 114 of 296.23 the Internal Revenue Code; 296.24 (15) any increase in subpart F income, as defined in 296.25 section 952(a) of the Internal Revenue Code, for the taxable 296.26 year when subpart F income is calculated without regard to the 296.27 provisions of section 614 of Public Law Number 107-147; and 296.28 (16) 80 percent of the depreciation deduction allowed under 296.29 section 168(k) of the Internal Revenue Code. For purposes of 296.30 this clause, if the taxpayer has an activity that in the taxable 296.31 year generates a deduction for depreciation under section 168(k) 296.32 and the activity generates a loss for the taxable year that the 296.33 taxpayer is not allowed to claim for the taxable year, "the 296.34 depreciation allowed under section 168(k)" for the taxable year 296.35 is limited to excess of the depreciation claimed by the activity 296.36 under section 168(k) over the amount of the loss from the 297.1 activity that is not allowed in the taxable year. In succeeding 297.2 taxable years when the losses not allowed in the taxable year 297.3 are allowed, the depreciation under section 168(k) is allowed. 297.4 [EFFECTIVE DATE.] This section is effective for taxable 297.5 years ending after September 10, 2001. 297.6 Sec. 8. Minnesota Statutes 2002, section 290.01, 297.7 subdivision 19d, is amended to read: 297.8 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 297.9 TAXABLE INCOME.] For corporations, there shall be subtracted 297.10 from federal taxable income after the increases provided in 297.11 subdivision 19c: 297.12 (1) the amount of foreign dividend gross-up added to gross 297.13 income for federal income tax purposes under section 78 of the 297.14 Internal Revenue Code; 297.15 (2) the amount of salary expense not allowed for federal 297.16 income tax purposes due to claiming the federal jobs credit 297.17 under section 51 of the Internal Revenue Code; 297.18 (3) any dividend (not including any distribution in 297.19 liquidation) paid within the taxable year by a national or state 297.20 bank to the United States, or to any instrumentality of the 297.21 United States exempt from federal income taxes, on the preferred 297.22 stock of the bank owned by the United States or the 297.23 instrumentality; 297.24 (4) amounts disallowed for intangible drilling costs due to 297.25 differences between this chapter and the Internal Revenue Code 297.26 in taxable years beginning before January 1, 1987, as follows: 297.27 (i) to the extent the disallowed costs are represented by 297.28 physical property, an amount equal to the allowance for 297.29 depreciation under Minnesota Statutes 1986, section 290.09, 297.30 subdivision 7, subject to the modifications contained in 297.31 subdivision 19e; and 297.32 (ii) to the extent the disallowed costs are not represented 297.33 by physical property, an amount equal to the allowance for cost 297.34 depletion under Minnesota Statutes 1986, section 290.09, 297.35 subdivision 8; 297.36 (5) the deduction for capital losses pursuant to sections 298.1 1211 and 1212 of the Internal Revenue Code, except that: 298.2 (i) for capital losses incurred in taxable years beginning 298.3 after December 31, 1986, capital loss carrybacks shall not be 298.4 allowed; 298.5 (ii) for capital losses incurred in taxable years beginning 298.6 after December 31, 1986, a capital loss carryover to each of the 298.7 15 taxable years succeeding the loss year shall be allowed; 298.8 (iii) for capital losses incurred in taxable years 298.9 beginning before January 1, 1987, a capital loss carryback to 298.10 each of the three taxable years preceding the loss year, subject 298.11 to the provisions of Minnesota Statutes 1986, section 290.16, 298.12 shall be allowed; and 298.13 (iv) for capital losses incurred in taxable years beginning 298.14 before January 1, 1987, a capital loss carryover to each of the 298.15 five taxable years succeeding the loss year to the extent such 298.16 loss was not used in a prior taxable year and subject to the 298.17 provisions of Minnesota Statutes 1986, section 290.16, shall be 298.18 allowed; 298.19 (6) an amount for interest and expenses relating to income 298.20 not taxable for federal income tax purposes, if (i) the income 298.21 is taxable under this chapter and (ii) the interest and expenses 298.22 were disallowed as deductions under the provisions of section 298.23 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 298.24 federal taxable income; 298.25 (7) in the case of mines, oil and gas wells, other natural 298.26 deposits, and timber for which percentage depletion was 298.27 disallowed pursuant to subdivision 19c, clause (11), a 298.28 reasonable allowance for depletion based on actual cost. In the 298.29 case of leases the deduction must be apportioned between the 298.30 lessor and lessee in accordance with rules prescribed by the 298.31 commissioner. In the case of property held in trust, the 298.32 allowable deduction must be apportioned between the income 298.33 beneficiaries and the trustee in accordance with the pertinent 298.34 provisions of the trust, or if there is no provision in the 298.35 instrument, on the basis of the trust's income allocable to 298.36 each; 299.1 (8) for certified pollution control facilities placed in 299.2 service in a taxable year beginning before December 31, 1986, 299.3 and for which amortization deductions were elected under section 299.4 169 of the Internal Revenue Code of 1954, as amended through 299.5 December 31, 1985, an amount equal to the allowance for 299.6 depreciation under Minnesota Statutes 1986, section 290.09, 299.7 subdivision 7; 299.8 (9) amounts included in federal taxable income that are due 299.9 to refunds of income, excise, or franchise taxes based on net 299.10 income or related minimum taxes paid by the corporation to 299.11 Minnesota, another state, a political subdivision of another 299.12 state, the District of Columbia, or a foreign country or 299.13 possession of the United States to the extent that the taxes 299.14 were added to federal taxable income under section 290.01, 299.15 subdivision 19c, clause (1), in a prior taxable year; 299.16 (10) 80 percent of royalties, fees, or other like income 299.17 accrued or received from a foreign operating corporation or a 299.18 foreign corporation which is part of the same unitary business 299.19 as the receiving corporation; 299.20 (11) income or gains from the business of mining as defined 299.21 in section 290.05, subdivision 1, clause (a), that are not 299.22 subject to Minnesota franchise tax; 299.23 (12) the amount of handicap access expenditures in the 299.24 taxable year which are not allowed to be deducted or capitalized 299.25 under section 44(d)(7) of the Internal Revenue Code; 299.26 (13) the amount of qualified research expenses not allowed 299.27 for federal income tax purposes under section 280C(c) of the 299.28 Internal Revenue Code, but only to the extent that the amount 299.29 exceeds the amount of the credit allowed under section 290.068; 299.30 (14) the amount of salary expenses not allowed for federal 299.31 income tax purposes due to claiming the Indian employment credit 299.32 under section 45A(a) of the Internal Revenue Code; 299.33 (15) the amount of any refund of environmental taxes paid 299.34 under section 59A of the Internal Revenue Code; 299.35 (16) for taxable years beginning before January 1, 2008, 299.36 the amount of the federal small ethanol producer credit allowed 300.1 under section 40(a)(3) of the Internal Revenue Code which is 300.2 included in gross income under section 87 of the Internal 300.3 Revenue Code; 300.4 (17) for a corporation whose foreign sales corporation, as 300.5 defined in section 922 of the Internal Revenue Code, constituted 300.6 a foreign operating corporation during any taxable year ending 300.7 before January 1, 1995, and a return was filed by August 15, 300.8 1996, claiming the deduction underthissection 290.21, 300.9 subdivision 4, for income received from the foreign operating 300.10 corporation, an amount equal to 1.23 multiplied by the amount of 300.11 income excluded under section 114 of the Internal Revenue Code, 300.12 provided the income is not income of a foreign operating 300.13 company; 300.14 (18) any decrease in subpart F income, as defined in 300.15 section 952(a) of the Internal Revenue Code, for the taxable 300.16 year when subpart F income is calculated without regard to the 300.17 provisions of section 614 of Public Law Number 107-147; and 300.18 (19) in each of the five tax years immediately following 300.19 the tax year in which an addition is required under subdivision 300.20 19c, clause (16), an amount equal to one-fifth of the delayed 300.21 depreciation. For purposes of this clause, "delayed 300.22 depreciation" means the amount of the addition made by the 300.23 taxpayer under subdivision 19c, clause (16). The resulting 300.24 delayed depreciation cannot be less than zero. 300.25 [EFFECTIVE DATE.] This section is effective the day 300.26 following final enactment. 300.27 Sec. 9. Minnesota Statutes 2002, section 290.06, 300.28 subdivision 2c, is amended to read: 300.29 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 300.30 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 300.31 married individuals filing joint returns and surviving spouses 300.32 as defined in section 2(a) of the Internal Revenue Code must be 300.33 computed by applying to their taxable net income the following 300.34 schedule of rates: 300.35 (1) On the first $25,680, 5.35 percent; 300.36 (2) On all over $25,680, but not over $102,030, 7.05 301.1 percent; 301.2 (3) On all over $102,030, 7.85 percent. 301.3 Married individuals filing separate returns, estates, and 301.4 trusts must compute their income tax by applying the above rates 301.5 to their taxable income, except that the income brackets will be 301.6 one-half of the above amounts. 301.7 (b) The income taxes imposed by this chapter upon unmarried 301.8 individuals must be computed by applying to taxable net income 301.9 the following schedule of rates: 301.10 (1) On the first $17,570, 5.35 percent; 301.11 (2) On all over $17,570, but not over $57,710, 7.05 301.12 percent; 301.13 (3) On all over $57,710, 7.85 percent. 301.14 (c) The income taxes imposed by this chapter upon unmarried 301.15 individuals qualifying as a head of household as defined in 301.16 section 2(b) of the Internal Revenue Code must be computed by 301.17 applying to taxable net income the following schedule of rates: 301.18 (1) On the first $21,630, 5.35 percent; 301.19 (2) On all over $21,630, but not over $86,910, 7.05 301.20 percent; 301.21 (3) On all over $86,910, 7.85 percent. 301.22 (d) In lieu of a tax computed according to the rates set 301.23 forth in this subdivision, the tax of any individual taxpayer 301.24 whose taxable net income for the taxable year is less than an 301.25 amount determined by the commissioner must be computed in 301.26 accordance with tables prepared and issued by the commissioner 301.27 of revenue based on income brackets of not more than $100. The 301.28 amount of tax for each bracket shall be computed at the rates 301.29 set forth in this subdivision, provided that the commissioner 301.30 may disregard a fractional part of a dollar unless it amounts to 301.31 50 cents or more, in which case it may be increased to $1. 301.32 (e) An individual who is not a Minnesota resident for the 301.33 entire year must compute the individual's Minnesota income tax 301.34 as provided in this subdivision. After the application of the 301.35 nonrefundable credits provided in this chapter, the tax 301.36 liability must then be multiplied by a fraction in which: 302.1 (1) the numerator is the individual's Minnesota source 302.2 federal adjusted gross income as defined in section 62 of the 302.3 Internal Revenue Code and increased by the additions required 302.4 under section 290.01, subdivision 19a, clauses (1), (5), and 302.5 (6), and reduced by the Minnesota assignable portion of the 302.6 subtraction for United States government interest under section 302.7 290.01, subdivision 19b, clause (1), after applying the 302.8 allocation and assignability provisions of section 290.081, 302.9 clause (a), or 290.17; and 302.10 (2) the denominator is the individual's federal adjusted 302.11 gross income as defined in section 62 of the Internal Revenue 302.12 Code of 1986, increased by the amounts specified in section 302.13 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 302.14 by the amounts specified in section 290.01, subdivision 19b, 302.15 clause (1). 302.16 [EFFECTIVE DATE.] This section is effective for tax years 302.17 beginning after December 31, 2002. 302.18 Sec. 10. Minnesota Statutes 2002, section 290.0671, 302.19 subdivision 1, is amended to read: 302.20 Subdivision 1. [CREDIT ALLOWED.] (a) An individual is 302.21 allowed a credit against the tax imposed by this chapter equal 302.22 to a percentage of earned income. To receive a credit, a 302.23 taxpayer must be eligible for a credit under section 32 of the 302.24 Internal Revenue Code. 302.25 (b) For individuals with no qualifying children, the credit 302.26 equals 1.9125 percent of the first $4,620 of earned income. The 302.27 credit is reduced by 1.9125 percent of earned income or modified 302.28 adjusted gross income, whichever is greater, in excess of 302.29 $5,770, but in no case is the credit less than zero. 302.30 (c) For individuals with one qualifying child, the credit 302.31 equals 8.5 percent of the first $6,920 of earned income and 8.5 302.32 percent of earned income over $12,080 but less than $13,450. 302.33 The credit is reduced by 5.73 percent of earned income or 302.34 modified adjusted gross income, whichever is greater, in excess 302.35 of $15,080, but in no case is the credit less than zero. 302.36 (d) For individuals with two or more qualifying children, 303.1 the credit equals ten percent of the first $9,720 of earned 303.2 income and 20 percent of earned income over $14,860 but less 303.3 than $16,800. The credit is reduced by 10.3 percent of earned 303.4 income or modified adjusted gross income, whichever is greater, 303.5 in excess of $17,890, but in no case is the credit less than 303.6 zero. 303.7 (e) For a nonresident or part-year resident, the credit 303.8 must be allocated based on the percentage calculated under 303.9 section 290.06, subdivision 2c, paragraph (e). 303.10 (f) For a person who was a resident for the entire tax year 303.11 and has earned income not subject to tax under this chapter, the 303.12 credit must be allocated based on the ratio of federal adjusted 303.13 gross income reduced by the earned income not subject to tax 303.14 under this chapter over federal adjusted gross income. 303.15 (g) For tax years beginning after December 31, 2001, and 303.16 before December 31, 2004, the $5,770 in paragraph (b)is303.17increased to $6,770, the $15,080 in paragraph (c)is increased303.18to $16,080, and the $17,890 in paragraph (d)is increased to303.19$18,890, after being adjusted for inflation under subdivision 7, 303.20 are each increased by $1,000 for married taxpayers filing joint 303.21 returns. 303.22 (h) For tax years beginning after December 31, 2004, and 303.23 before December 31, 2007, the $5,770 in paragraph (b)is303.24increased to $7,770, the $15,080 in paragraph (c)is increased303.25to $17,080, and the $17,890 in paragraph (d)is increased to303.26$19,890, after being adjusted for inflation under subdivision 7, 303.27 are each increased by $2,000 for married taxpayers filing joint 303.28 returns. 303.29 (i) For tax years beginning after December 31, 2007, and 303.30 before December 31, 2010, the $5,770 in paragraph (b)is303.31increased to $8,770, the $15,080 in paragraph (c)is increased303.32to $18,080, and the $17,890 in paragraph (d)is increased to303.33$20,890, after being adjusted for inflation under subdivision 7, 303.34 are each increased by $3,000 for married taxpayers filing joint 303.35 returns. For tax years beginning after December 31, 2008, the 303.36 $3,000 is adjusted annually for inflation under subdivision 7. 304.1 (j) The commissioner shall construct tables showing the 304.2 amount of the credit at various income levels and make them 304.3 available to taxpayers. The tables shall follow the schedule 304.4 contained in this subdivision, except that the commissioner may 304.5 graduate the transition between income brackets. 304.6 [EFFECTIVE DATE.] This section is effective for tax years 304.7 beginning after December 31, 2002. 304.8 Sec. 11. Minnesota Statutes 2002, section 290.0675, 304.9 subdivision 2, is amended to read: 304.10 Subd. 2. [CREDIT ALLOWED.] A married couple filing a joint 304.11 return is allowed a credit against the tax imposed under section 304.12 290.06. 304.13The minimum taxable income for the married couple to be304.14eligible for the credit is $25,680, and the minimum earned304.15income in order for the couple to be eligible for the credit is304.16$14,250 for each spouse.304.17 [EFFECTIVE DATE.] This section is effective for tax years 304.18 beginning after December 31, 2002. 304.19 Sec. 12. Minnesota Statutes 2002, section 290.0675, 304.20 subdivision 3, is amended to read: 304.21 Subd. 3. [CREDIT AMOUNT.] The credit amount is the 304.22 difference between the tax on the couple's joint Minnesota 304.23 taxable income under the rates and income levels in section 304.24 290.06, subdivision 2c, paragraph (a), as adjusted for the 304.25 taxable year by section 290.06, subdivision 2d, and the sum of 304.26 the tax under the rates and income levels of section 290.06, 304.27 subdivision 2c, paragraph (b), as adjusted for the taxable year 304.28 by section 290.06, subdivision 2d, on the earned income of the 304.29 lesser-earning spouse, and the tax under the rates and income 304.30 levels of section 290.06, subdivision 2c, paragraph (b), as 304.31 adjusted for the taxable year by section 290.06, subdivision 2d, 304.32 on the couple's joint Minnesota taxable income, minus the earned 304.33 income of the lesser-earning spouse. 304.34 The commissioner of revenue shall prepare and make 304.35 available to taxpayers a comprehensive table showing the credit 304.36 under this section at brackets of earnings of the lesser-earning 305.1 spouse and joint taxable income. The brackets of earnings shall 305.2 not be more than $2,000. 305.3 [EFFECTIVE DATE.] This section is effective for tax years 305.4 beginning after December 31, 2002. 305.5 Sec. 13. Minnesota Statutes 2002, section 290.0679, 305.6 subdivision 2, is amended to read: 305.7 Subd. 2. [CONDITIONS FOR ASSIGNMENT.] A qualifying 305.8 taxpayer may assign all or part of an anticipated refund for the 305.9 current and future taxable years to a financial institution or a 305.10 qualifying organization. A financial institution or qualifying 305.11 organization accepting assignment must pay the amount secured by 305.12 the assignment to a third-party vendor. The commissioner of 305.13 children, families, and learning shallprovide a list of305.14categories of, upon request from a third-party vendor, certify 305.15 that the vendor's products and servicesthatqualify for the 305.16 education creditto financial institutions and qualifying305.17organizations. A denial of a certification is subject to the 305.18 contested case procedure under chapter 14. A financial 305.19 institution or qualifying organization that accepts assignments 305.20 under this section must verify as part of the assignment 305.21 documentation that the product or service to be provided by the 305.22 third-party vendorqualifieshas been certified by the 305.23 commissioner of children, families, and learning as qualifying 305.24 for the education credit. The amount assigned for the current 305.25 and future taxable years may not exceed the maximum allowable 305.26 education credit for the current taxable year. Both the 305.27 taxpayer and spouse must consent to the assignment of a refund 305.28 from a joint return. 305.29 [EFFECTIVE DATE.] This section is effective for assignments 305.30 made on or after the day following final enactment. 305.31 Sec. 14. Minnesota Statutes 2002, section 290.0802, 305.32 subdivision 1, is amended to read: 305.33 Subdivision 1. [DEFINITIONS.] For purposes of this 305.34 section, the following terms have the meanings given. 305.35 (a) "Adjusted gross income" means federal adjusted gross 305.36 income as used in section 22(d) of the Internal Revenue Code for 306.1 the taxable year, plus a lump sum distribution as defined in 306.2 section 402(e)(3) of the Internal Revenue Code, and less any 306.3 pension, annuity, or disability benefits included in federal 306.4 gross income but not subject to state taxation other than the 306.5 subtraction allowed under section 290.01, subdivision 19b, 306.6 clause (4). 306.7 (b) "Disability income" means disability income as defined 306.8 in section 22(c)(2)(B)(iii) of the Internal Revenue Code. 306.9 (c) "Nontaxable retirement and disability benefits" means 306.10 the amount of pension, annuity, or disability benefits that 306.11 would be included in the reduction under section 22(c)(3) of the 306.12 Internal Revenue Code and pension, annuity, or disability 306.13 benefits included in federal gross income but not subject to 306.14 state taxationother than the subtraction allowed under section306.15290.01, subdivision 19b, clause (4). 306.16 (d) "Qualified individual" means a qualified individual as 306.17 defined in section 22(b) of the Internal Revenue Code. 306.18(e) "Social security benefits above the second federal306.19threshold" means the amount of social security benefits included306.20in federal taxable income due to the provisions of section 13215306.21of the Omnibus Budget Reconciliation Act of 1993, Public Law306.22Number 103-66.306.23 [EFFECTIVE DATE.] This section is effective for tax years 306.24 beginning after December 31, 2002. 306.25 Sec. 15. Minnesota Statutes 2002, section 291.005, 306.26 subdivision 1, is amended to read: 306.27 Subdivision 1. Unless the context otherwise clearly 306.28 requires, the following terms used in this chapter shall have 306.29 the following meanings: 306.30 (1) "Federal gross estate" means the gross estate of a 306.31 decedent as valued and otherwise determined for federal estate 306.32 tax purposes by federal taxing authorities pursuant to the 306.33 provisions of the Internal Revenue Code. 306.34 (2) "Minnesota gross estate" means the federal gross estate 306.35 of a decedent after (a) excluding therefrom any property 306.36 included therein which has its situs outside Minnesotaand307.1pensions exempt from tax under this chapter pursuant to section307.2352.15, subdivision 1; 353.15, subdivision 1; 354.10,307.3subdivision 1; 354B.30; or 354C.165, and (b) including therein 307.4 any property omitted from the federal gross estate which is 307.5 includable therein, has its situs in Minnesota, and was not 307.6 disclosed to federal taxing authorities. 307.7 (3) "Personal representative" means the executor, 307.8 administrator or other person appointed by the court to 307.9 administer and dispose of the property of the decedent. If 307.10 there is no executor, administrator or other person appointed, 307.11 qualified, and acting within this state, then any person in 307.12 actual or constructive possession of any property having a situs 307.13 in this state which is included in the federal gross estate of 307.14 the decedent shall be deemed to be a personal representative to 307.15 the extent of the property and the Minnesota estate tax due with 307.16 respect to the property. 307.17 (4) "Resident decedent" means an individual whose domicile 307.18 at the time of death was in Minnesota. 307.19 (5) "Nonresident decedent" means an individual whose 307.20 domicile at the time of death was not in Minnesota. 307.21 (6) "Situs of property" means, with respect to real 307.22 property, the state or country in which it is located; with 307.23 respect to tangible personal property, the state or country in 307.24 which it was normally kept or located at the time of the 307.25 decedent's death; and with respect to intangible personal 307.26 property, the state or country in which the decedent was 307.27 domiciled at death. 307.28 (7) "Commissioner" means the commissioner of revenue or any 307.29 person to whom the commissioner has delegated functions under 307.30 this chapter. 307.31 (8) "Internal Revenue Code" means the United States 307.32 Internal Revenue Code of 1986, as amended through December 31, 307.3320002002. 307.34 [EFFECTIVE DATE.] This section is effective for estates of 307.35 decedents dying after December 31, 2002. 307.36 Sec. 16. Minnesota Statutes 2002, section 291.03, 308.1 subdivision 1, is amended to read: 308.2 Subdivision 1. [TAX AMOUNT.] The tax imposed shall be an 308.3 amount equal to the proportion of the maximum credit computed 308.4 under section 2011 of the Internal Revenue Code, as amended 308.5 through December 31, 2000, for state death taxes as the 308.6 Minnesota gross estate bears to the value of the federal gross 308.7 estate.For a resident decedent, the tax shall be the maximum308.8credit computed under section 2011 of the Internal Revenue Code308.9reduced by the amount of the death tax paid the other state and308.10credited against the federal estate tax if this results in a308.11larger amount of tax than the proportionate amount of the308.12credit.The tax determined under this paragraph shall not be 308.13 greater than the federal estate tax computed under section 2001 308.14 of the Internal Revenue Code after the allowance of the federal 308.15 credits allowed under section 2010 of the Internal Revenue Code 308.16 of 1986, as amended through December 31, 2000. For the purposes 308.17 of this section, expenses which are deducted for federal income 308.18 tax purposes under section 642(g) of the Internal Revenue Code 308.19 as amended through December 31, 2002, are not allowable in 308.20 computing the tax under this chapter. 308.21 [EFFECTIVE DATE.] This section is effective for estates of 308.22 decedents dying after December 31, 2002. 308.23 Sec. 17. Minnesota Statutes 2002, section 352.15, 308.24 subdivision 1, is amended to read: 308.25 Subdivision 1. [EXEMPTION; EXCEPTIONS.] None of the money, 308.26 annuities, or other benefits mentioned in this chapter is 308.27 assignable either in law or in equity or subject tostate estate308.28tax, or toexecution, levy, attachment, garnishment, or other 308.29 legal process, except as provided in subdivision 1a or section 308.30 518.58, 518.581, or 518.6111. 308.31 [EFFECTIVE DATE.] This section is effective for estates of 308.32 decedents dying after December 31, 2002. 308.33 Sec. 18. Minnesota Statutes 2002, section 353.15, 308.34 subdivision 1, is amended to read: 308.35 Subdivision 1. [EXEMPTION; EXCEPTIONS.] No money, annuity, 308.36 or benefit provided for in this chapter is assignable or subject 309.1to any state estate tax, orto execution, levy, attachment, 309.2 garnishment, or legal process, except as provided in subdivision 309.3 2 or section 518.58, 518.581, or 518.6111. 309.4 [EFFECTIVE DATE.] This section is effective for estates of 309.5 decedents dying after December 31, 2002. 309.6 Sec. 19. Minnesota Statutes 2002, section 354.10, 309.7 subdivision 1, is amended to read: 309.8 Subdivision 1. [EXEMPTION; EXCEPTIONS.] The right of a 309.9 teacher to take advantage of the benefits provided by this 309.10 chapter, is a personal right only and is not assignable. All 309.11 money to the credit of a teacher's account in the fund or any 309.12 money payable to the teacher from the fund belongs to the state 309.13 of Minnesota until actually paid to the teacher or a beneficiary 309.14 under this chapter. The association may acknowledge a properly 309.15 completed power of attorney form. An assignment or attempted 309.16 assignment of a teacher's interest in the fund, or of the 309.17 beneficiary's interest in the fund, by a teacher or a 309.18 beneficiary is void and exemptfrom taxation under chapter 291309.19andfrom garnishment or levy under attachment or execution, 309.20 except as provided in subdivision 2 or 3, or section 518.58, 309.21 518.581, or 518.6111. 309.22 [EFFECTIVE DATE.] This section is effective for estates of 309.23 decedents dying after December 31, 2002. 309.24 Sec. 20. Minnesota Statutes 2002, section 354B.30, is 309.25 amended to read: 309.26 354B.30 [PROHIBITION ON LOANS OR PRETERMINATION 309.27 DISTRIBUTIONS.] 309.28 (a) No participant may obtain a loan from the plan or 309.29 obtain any distribution from the plan at a time before the 309.30 participant terminates the employment that gave rise to plan 309.31 coverage. 309.32 (b) No amounts to the credit of the plan are assignable 309.33 either in law or in equity,are subject to state estate tax,or 309.34 are subject to execution, levy, attachment, garnishment, or 309.35 other legal process, except as provided in section 518.58, 309.36 518.581, or 518.6111. 310.1 [EFFECTIVE DATE.] This section is effective for estates of 310.2 decedents dying after December 31, 2002. 310.3 Sec. 21. Minnesota Statutes 2002, section 354C.165, is 310.4 amended to read: 310.5 354C.165 [PROHIBITION ON LOANS OR PRETERMINATION 310.6 DISTRIBUTIONS.] 310.7 (a) Except as provided in paragraph (c), no participant may 310.8 obtain a loan or any distribution from the plan before the 310.9 participant terminates the employment that gave rise to plan 310.10 coverage. 310.11 (b) No amounts to the credit of the plan are assignable 310.12 either in law or in equity,are subject to state estate tax,or 310.13 are subject to execution, levy, attachment, garnishment, or 310.14 other legal process, except as provided in section 518.58, 310.15 518.581, or 518.6111. 310.16 (c) Unless prohibited by or subject to a penalty under 310.17 federal law, a teacher who is a participant in the supplemental 310.18 retirement plan may request, in writing, a transfer of all or a 310.19 portion of the funds accumulated in the person's supplemental 310.20 plan account to the teachers retirement association to purchase 310.21 service credit under sections 354.53, 354.533, 354.534, 354.535, 310.22 354.536, 354.537, and 354.538 or to the teachers retirement fund 310.23 association to purchase service credit under sections 354A.097, 310.24 354A.098, 354A.099, 354A.101, 354A.102, 354A.103, and 354A.104. 310.25 Upon receipt of a valid request, the board shall execute the 310.26 transfer. The transfer must be a fund-to-fund transfer, and in 310.27 no event shall the participant directly receive any of the funds 310.28 while still employed by the board. In no event may the board 310.29 transfer more than the participant's account balance. The 310.30 board, in cooperation with the executive director of the 310.31 teachers retirement association, shall develop the forms for 310.32 requesting a transfer and the procedures for executing the 310.33 requested transfers. 310.34 [EFFECTIVE DATE.] This section is effective for estates of 310.35 decedents dying after December 31, 2002. 310.36 Sec. 22. Laws 2001, First Special Session chapter 5, 311.1 article 9, section 12, the effective date, is amended to read: 311.2 [EFFECTIVE DATE.] This section is effective for assignment 311.3 of refunds filed with the commissioner after December 31, 2001. 311.4The time period for filing assignments expires December 31,311.52003, but assignments filed on or before that date remain in311.6effect until satisfied or canceled.311.7 Sec. 23. [REPEALER.] 311.8 (a) Minnesota Statutes 2002, sections 290.0671, subdivision 311.9 3; and 290.0675, subdivision 5, are repealed effective for tax 311.10 years beginning after December 31, 2002. 311.11 (b) Minnesota Rules, parts 8007.0300, subpart 3; 8009.7100; 311.12 8009.7200; 8009.7300; 8009.7400; and 8092.1000, are repealed 311.13 effective the day following final enactment. 311.14 ARTICLE 13 311.15 FEDERAL UPDATE 311.16 Section 1. Minnesota Statutes 2002, section 289A.02, 311.17 subdivision 7, is amended to read: 311.18 Subd. 7. [INTERNAL REVENUE CODE.] Unless specifically 311.19 defined otherwise, "Internal Revenue Code" means the Internal 311.20 Revenue Code of 1986, as amended throughMarch 15December 31, 311.21 2002. 311.22 [EFFECTIVE DATE.] This section is effective the day 311.23 following final enactment. 311.24 Sec. 2. Minnesota Statutes 2002, section 290.01, 311.25 subdivision 19, is amended to read: 311.26 Subd. 19. [NET INCOME.] The term "net income" means the 311.27 federal taxable income, as defined in section 63 of the Internal 311.28 Revenue Code of 1986, as amended through the date named in this 311.29 subdivision, incorporating any elections made by the taxpayer in 311.30 accordance with the Internal Revenue Code in determining federal 311.31 taxable income for federal income tax purposes, and with the 311.32 modifications provided in subdivisions 19a to 19f. 311.33 In the case of a regulated investment company or a fund 311.34 thereof, as defined in section 851(a) or 851(g) of the Internal 311.35 Revenue Code, federal taxable income means investment company 311.36 taxable income as defined in section 852(b)(2) of the Internal 312.1 Revenue Code, except that: 312.2 (1) the exclusion of net capital gain provided in section 312.3 852(b)(2)(A) of the Internal Revenue Code does not apply; 312.4 (2) the deduction for dividends paid under section 312.5 852(b)(2)(D) of the Internal Revenue Code must be applied by 312.6 allowing a deduction for capital gain dividends and 312.7 exempt-interest dividends as defined in sections 852(b)(3)(C) 312.8 and 852(b)(5) of the Internal Revenue Code; and 312.9 (3) the deduction for dividends paid must also be applied 312.10 in the amount of any undistributed capital gains which the 312.11 regulated investment company elects to have treated as provided 312.12 in section 852(b)(3)(D) of the Internal Revenue Code. 312.13 The net income of a real estate investment trust as defined 312.14 and limited by section 856(a), (b), and (c) of the Internal 312.15 Revenue Code means the real estate investment trust taxable 312.16 income as defined in section 857(b)(2) of the Internal Revenue 312.17 Code. 312.18 The net income of a designated settlement fund as defined 312.19 in section 468B(d) of the Internal Revenue Code means the gross 312.20 income as defined in section 468B(b) of the Internal Revenue 312.21 Code. 312.22 The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 312.23 1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 312.24 1616, 1617, 1704(l), and 1704(m) of the Small Business Job 312.25 Protection Act, Public Law Number 104-188, the provisions of 312.26 Public Law Number 104-117, the provisions of sections 313(a) and 312.27 (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and (b), 1002, 312.28 1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 312.29 1111(a), 1131(b) and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) 312.30 and (h), and 1604(d)(1) of the Taxpayer Relief Act of 1997, 312.31 Public Law Number 105-34, the provisions of section 6010 of the 312.32 Internal Revenue Service Restructuring and Reform Act of 1998, 312.33 Public Law Number 105-206, the provisions of section 4003 of the 312.34 Omnibus Consolidated and Emergency Supplemental Appropriations 312.35 Act, 1999, Public Law Number 105-277, and the provisions of 312.36 section 318 of the Consolidated Appropriation Act of 2001, 313.1 Public Law Number 106-554, shall become effective at the time 313.2 they become effective for federal purposes. 313.3 The Internal Revenue Code of 1986, as amended through 313.4 December 31, 1996, shall be in effect for taxable years 313.5 beginning after December 31, 1996. 313.6 The provisions of sections 202(a) and (b), 221(a), 225, 313.7 312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 313.8 (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 313.9 1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 313.10 1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 313.11 of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 313.12 the provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 313.13 7002, and 7003 of the Internal Revenue Service Restructuring and 313.14 Reform Act of 1998, Public Law Number 105-206, the provisions of 313.15 section 3001 of the Omnibus Consolidated and Emergency 313.16 Supplemental Appropriations Act, 1999, Public Law Number 313.17 105-277, the provisions of section 3001 of the Miscellaneous 313.18 Trade and Technical Corrections Act of 1999, Public Law Number 313.19 106-36, and the provisions of section 316 of the Consolidated 313.20 Appropriation Act of 2001, Public Law Number 106-554, shall 313.21 become effective at the time they become effective for federal 313.22 purposes. 313.23 The Internal Revenue Code of 1986, as amended through 313.24 December 31, 1997, shall be in effect for taxable years 313.25 beginning after December 31, 1997. 313.26 The provisions of sections 5002, 6009, 6011, and 7001 of 313.27 the Internal Revenue Service Restructuring and Reform Act of 313.28 1998, Public Law Number 105-206, the provisions of section 9010 313.29 of the Transportation Equity Act for the 21st Century, Public 313.30 Law Number 105-178, the provisions of sections 1004, 4002, and 313.31 5301 of the Omnibus Consolidation and Emergency Supplemental 313.32 Appropriations Act, 1999, Public Law Number 105-277, the 313.33 provision of section 303 of the Ricky Ray Hemophilia Relief Fund 313.34 Act of 1998, Public Law Number 105-369, the provisions of 313.35 sections 532, 534, 536, 537, and 538 of the Ticket to Work and 313.36 Work Incentives Improvement Act of 1999, Public Law Number 314.1 106-170, the provisions of the Installment Tax Correction Act of 314.2 2000, Public Law Number 106-573, and the provisions of section 314.3 309 of the Consolidated Appropriation Act of 2001, Public Law 314.4 Number 106-554, shall become effective at the time they become 314.5 effective for federal purposes. 314.6 The Internal Revenue Code of 1986, as amended through 314.7 December 31, 1998, shall be in effect for taxable years 314.8 beginning after December 31, 1998. 314.9 The provisions of the FSC Repeal and Extraterritorial 314.10 Income Exclusion Act of 2000, Public Law Number 106-519, and the 314.11 provision of section 412 of the Job Creation and Worker 314.12 Assistance Act of 2002, Public Law Number 107-147, shall become 314.13 effective at the time it became effective for federal purposes. 314.14 The Internal Revenue Code of 1986, as amended through 314.15 December 31, 1999, shall be in effect for taxable years 314.16 beginning after December 31, 1999. The provisions of sections 314.17 306 and 401 of the Consolidated Appropriation Act of 2001, 314.18 Public Law Number 106-554, and the provision of section 314.19 632(b)(2)(A) of the Economic Growth and Tax Relief 314.20 Reconciliation Act of 2001, Public Law Number 107-16, and 314.21 provisions of sections 101 and 402 of the Job Creation and 314.22 Worker Assistance Act of 2002, Public Law Number 107-147, shall 314.23 become effective at the same time it became effective for 314.24 federal purposes. 314.25 The Internal Revenue Code of 1986, as amended through 314.26 December 31, 2000, shall be in effect for taxable years 314.27 beginning after December 31, 2000. The provisions of sections 314.28 659a and 671 of the Economic Growth and Tax Relief 314.29 Reconciliation Act of 2001, Public Law Number 107-16, the 314.30 provisions of sections 104, 105, and 111 of the Victims of 314.31 Terrorism Tax Relief Act of 2001, Public Law Number 107-134, and 314.32 the provisions of sections 201, 403, 413, and 606 of the Job 314.33 Creation and Worker Assistance Act of 2002, Public Law Number 314.34 107-147, shall become effective at the same time it became 314.35 effective for federal purposes. 314.36 The Internal Revenue Code of 1986, as amended through March 315.1 15, 2002, shall be in effect for taxable years beginning after 315.2 December 31, 2001. 315.3 The provisions of sections 101 and 102 of the Victims of 315.4 Terrorism Tax Relief Act of 2001, Public Law Number 107-134, 315.5 shall become effective at the same time it becomes effective for 315.6 federal purposes. 315.7 The Internal Revenue Code of 1986, as amended through 315.8 December 31, 2002, shall be in effect for taxable years 315.9 beginning after December 31, 2002. 315.10 Except as otherwise provided, references to the Internal 315.11 Revenue Code in subdivisions 19a to 19g mean the code in effect 315.12 for purposes of determining net income for the applicable year. 315.13 [EFFECTIVE DATE.] This section is effective the day 315.14 following final enactment. 315.15 Sec. 3. Minnesota Statutes 2002, section 290.01, 315.16 subdivision 31, is amended to read: 315.17 Subd. 31. [INTERNAL REVENUE CODE.] Unless specifically 315.18 defined otherwise, "Internal Revenue Code" means the Internal 315.19 Revenue Code of 1986, as amended throughMarch 15December 31, 315.20 2002. 315.21 [EFFECTIVE DATE.] This section is effective the day 315.22 following final enactment. 315.23 Sec. 4. Minnesota Statutes 2002, section 290A.03, 315.24 subdivision 15, is amended to read: 315.25 Subd. 15. [INTERNAL REVENUE CODE.] "Internal Revenue Code" 315.26 means the Internal Revenue Code of 1986, as amended 315.27 throughMarch 15December 31, 2002. 315.28 [EFFECTIVE DATE.] This section is effective for refunds 315.29 payable for rents paid in 2003 and thereafter and property taxes 315.30 payable in 2004 and thereafter. 315.31 ARTICLE 14 315.32 DEPARTMENT PROPERTY TAX INITIATIVES 315.33 Section 1. Minnesota Statutes 2002, section 270.06, is 315.34 amended to read: 315.35 270.06 [POWERS AND DUTIES.] 315.36 The commissioner of revenue shall: 316.1 (1) have and exercise general supervision over the 316.2 administration of the assessment and taxation laws of the state, 316.3 over assessors, town, county, and city boards of review and 316.4 equalization, and all other assessing officers in the 316.5 performance of their duties, to the end that all assessments of 316.6 property be made relatively just and equal in compliance with 316.7 the laws of the state; 316.8 (2) confer with, advise, and give the necessary 316.9 instructions and directions to local assessors and local boards 316.10 of review throughout the state as to their duties under the laws 316.11 of the state; 316.12 (3) direct proceedings, actions, and prosecutions to be 316.13 instituted to enforce the laws relating to the liability and 316.14 punishment of public officers and officers and agents of 316.15 corporations for failure or negligence to comply with the 316.16 provisions of the laws of this state governing returns of 316.17 assessment and taxation of property, and cause complaints to be 316.18 made against local assessors, members of boards of equalization, 316.19 members of boards of review, or any other assessing or taxing 316.20 officer, to the proper authority, for their removal from office 316.21 for misconduct or negligence of duty; 316.22 (4) require county attorneys to assist in the commencement 316.23 of prosecutions in actions or proceedings for removal, 316.24 forfeiture and punishment for violation of the laws of this 316.25 state in respect to the assessment and taxation of property in 316.26 their respective districts or counties; 316.27 (5) require town, city, county, and other public officers 316.28 to report information as to the assessment of property, 316.29 collection of taxes received from licenses and other sources, 316.30 and such other information as may be needful in the work of the 316.31 department of revenue, in such form and upon such blanks as the 316.32 commissioner may prescribe; 316.33 (6) require individuals, copartnerships, companies, 316.34 associations, and corporations to furnish information concerning 316.35 their capital, funded or other debt, current assets and 316.36 liabilities, earnings, operating expenses, taxes, as well as all 317.1 other statements now required by law for taxation purposes; 317.2 (7) subpoena witnesses, at a time and place reasonable 317.3 under the circumstances, to appear and give testimony, and to 317.4 produce books, records, papers and documents for inspection and 317.5 copying relating to any matter which the commissioner may have 317.6 authority to investigate or determine; 317.7 (8) issue a subpoena which does not identify the person or 317.8 persons with respect to whose liability the subpoena is issued, 317.9 but only if (a) the subpoena relates to the investigation of a 317.10 particular person or ascertainable group or class of persons, 317.11 (b) there is a reasonable basis for believing that such person 317.12 or group or class of persons may fail or may have failed to 317.13 comply with any law administered by the commissioner, (c) the 317.14 information sought to be obtained from the examination of the 317.15 records (and the identity of the person or persons with respect 317.16 to whose liability the subpoena is issued) is not readily 317.17 available from other sources, (d) the subpoena is clear and 317.18 specific as to the information sought to be obtained, and (e) 317.19 the information sought to be obtained is limited solely to the 317.20 scope of the investigation. Provided further that the party 317.21 served with a subpoena which does not identify the person or 317.22 persons with respect to whose tax liability the subpoena is 317.23 issued shall have the right, within 20 days after service of the 317.24 subpoena, to petition the district court for the judicial 317.25 district in which lies the county in which that party is located 317.26 for a determination as to whether the commissioner of revenue 317.27 has complied with all the requirements in (a) to (e), and thus, 317.28 whether the subpoena is enforceable. If no such petition is 317.29 made by the party served within the time prescribed, the 317.30 subpoena shall have the force and effect of a court order; 317.31 (9) cause the deposition of witnesses residing within or 317.32 without the state, or absent therefrom, to be taken, upon notice 317.33 to the interested party, if any, in like manner that depositions 317.34 of witnesses are taken in civil actions in the district court, 317.35 in any matter which the commissioner may have authority to 317.36 investigate or determine; 318.1 (10) investigate the tax laws of other states and countries 318.2 and to formulate and submit to the legislature such legislation 318.3 as the commissioner may deem expedient to prevent evasions of 318.4 assessment and taxing laws, and secure just and equal taxation 318.5 and improvement in the system of assessment and taxation in this 318.6 state; 318.7 (11) consult and confer with the governor upon the subject 318.8 of taxation, the administration of the laws in regard thereto, 318.9 and the progress of the work of the department of revenue, and 318.10 furnish the governor, from time to time, such assistance and 318.11 information as the governor may require relating to tax matters; 318.12 (12) transmit to the governor, on or before the third 318.13 Monday in December of each even-numbered year, and to each 318.14 member of the legislature, on or before November 15 of each 318.15 even-numbered year, the report of the department of revenue for 318.16 the preceding years, showing all the taxable property in the 318.17 state and the value of the same, in tabulated form; 318.18 (13) inquire into the methods of assessment and taxation 318.19 and ascertain whether the assessors faithfully discharge their 318.20 duties, particularly as to their compliance with the laws 318.21 requiring the assessment of all property not exempt from 318.22 taxation; 318.23 (14) administer and enforce the assessment and collection 318.24 of state taxes and fees, including the use of any remedy 318.25 available to nongovernmental creditors, and, from time to time, 318.26 make, publish, and distribute rules for the administration and 318.27 enforcement ofassessments and feeslaws administered by the 318.28 commissioner and state tax laws. The rules have the force of 318.29 law; 318.30 (15) prepare blank forms for the returns required by state 318.31 tax law and distribute them throughout the state, furnishing 318.32 them subject to charge on application; 318.33 (16) prescribe rules governing the qualification and 318.34 practice of agents, attorneys, or other persons representing 318.35 taxpayers before the commissioner. The rules may require that 318.36 those persons, agents, and attorneys show that they are of good 319.1 character and in good repute, have the necessary qualifications 319.2 to give taxpayers valuable services, and are otherwise competent 319.3 to advise and assist taxpayers in the presentation of their case 319.4 before being recognized as representatives of taxpayers. After 319.5 due notice and opportunity for hearing, the commissioner may 319.6 suspend and bar from further practice before the commissioner 319.7 any person, agent, or attorney who is shown to be incompetent or 319.8 disreputable, who refuses to comply with the rules, or who with 319.9 intent to defraud, willfully or knowingly deceives, misleads, or 319.10 threatens a taxpayer or prospective taxpayer, by words, 319.11 circular, letter, or by advertisement. This clause does not 319.12 curtail the rights of individuals to appear in their own behalf 319.13 or partners or corporations' officers to appear in behalf of 319.14 their respective partnerships or corporations; 319.15 (17) appoint agents as the commissioner considers necessary 319.16 to make examinations and determinations. The agents have the 319.17 rights and powers conferred on the commissioner to subpoena, 319.18 examine, and copy books, records, papers, or memoranda, subpoena 319.19 witnesses, administer oaths and affirmations, and take 319.20 testimony. In addition to administrative subpoenas of the 319.21 commissioner and the agents, upon demand of the commissioner or 319.22 an agent, the court administrator of any district court shall 319.23 issue a subpoena for the attendance of a witness or the 319.24 production of books, papers, records, or memoranda before the 319.25 agent for inspection and copying. Disobedience of a court 319.26 administrator's subpoena shall be punished by the district court 319.27 of the district in which the subpoena is issued, or in the case 319.28 of a subpoena issued by the commissioner or an agent, by the 319.29 district court of the district in which the party served with 319.30 the subpoena is located, in the same manner as contempt of the 319.31 district court; 319.32 (18) appoint and employ additional help, purchase supplies 319.33 or materials, or incur other expenditures in the enforcement of 319.34 state tax laws as considered necessary. The salaries of all 319.35 agents and employees provided for in this chapter shall be fixed 319.36 by the appointing authority, subject to the approval of the 320.1 commissioner of administration; 320.2 (19) execute and administer any agreement with the 320.3 secretary of the treasury of the United States or a 320.4 representative of another state regarding the exchange of 320.5 information and administration of the tax laws; 320.6 (20) authorize the use of unmarked motor vehicles to 320.7 conduct seizures or criminal investigations pursuant to the 320.8 commissioner's authority; and 320.9 (21) exercise other powers and perform other duties 320.10 required of or imposed upon the commissioner of revenue by law. 320.11 [EFFECTIVE DATE.] This section is effective the day 320.12 following final enactment. 320.13 Sec. 2. Minnesota Statutes 2002, section 270.10, 320.14 subdivision 1a, is amended to read: 320.15 Subd. 1a. [NOTIFICATION TO TAXPAYER.] At the same time 320.16 that notice of the assessment, determination, or order of the 320.17 commissioner is given to a taxpayer, the taxpayer must be 320.18 notified in writing of the right to appeal to the tax court, and 320.19 if applicable, to the small claims division. Except in the case 320.20 of mathematical or clerical errors, the notice must contain a 320.21 description of the basis for, including applicable law and other 320.22 factors considered in the determination, and a listing of the 320.23 amounts of tax due, interest, additions to tax, and penalties. 320.24 Failure to provide all the required information does not 320.25 invalidate the notice for purposes of satisfying statutory 320.26 notice requirements if the notice contains sufficient 320.27 information to advise the taxpayer that an assessment, order, or 320.28 other determination has been made. The taxpayer may request 320.29 further clarification within the time provided for appealing the 320.30 determination.In any notice of assessment, determination, or320.31order dealing with property valuation or assessment for property320.32tax purposes by the commissioner of revenue or a local unit of320.33government, the taxpayer must be notified in writing that a320.34taxpayer must appeal to the town or city board of equalization320.35and to the county board of equalization before appealing to the320.36small claims division of the tax court, except for those321.1taxpayers whose original assessments are determined by the321.2commissioner of revenue.321.3 [EFFECTIVE DATE.] This section is effective the day 321.4 following final enactment. 321.5 Sec. 3. Minnesota Statutes 2002, section 272.02, is 321.6 amended by adding a subdivision to read: 321.7 Subd. 56. [COMPREHENSIVE HEALTH ASSOCIATION.] All property 321.8 owned by the comprehensive health association is exempt to the 321.9 extent provided in section 62E.10, subdivision 1. 321.10 [EFFECTIVE DATE.] This section is effective the day 321.11 following final enactment. 321.12 Sec. 4. Minnesota Statutes 2002, section 272.02, is 321.13 amended by adding a subdivision to read: 321.14 Subd. 57. [PRIVATE CEMETERIES.] All property owned by 321.15 private cemeteries is exempt to the extent provided in section 321.16 307.09. 321.17 [EFFECTIVE DATE.] This section is effective the day 321.18 following final enactment. 321.19 Sec. 5. Minnesota Statutes 2002, section 272.02, is 321.20 amended by adding a subdivision to read: 321.21 Subd. 58. [WESTERN LAKE SUPERIOR SANITARY BOARD.] All 321.22 property owned, leased, controlled, used, or occupied for 321.23 public, governmental, and municipal purposes by the Western Lake 321.24 Superior Sanitary Board is exempt to the extent provided in 321.25 section 458D.23. 321.26 [EFFECTIVE DATE.] This section is effective the day 321.27 following final enactment. 321.28 Sec. 6. Minnesota Statutes 2002, section 272.02, is 321.29 amended by adding a subdivision to read: 321.30 Subd. 59. [UNFINISHED SALE OR RENTAL PROJECTS.] Unfinished 321.31 sale or rental projects are exempt to the extent provided in 321.32 section 469.155, subdivision 17. 321.33 [EFFECTIVE DATE.] This section is effective the day 321.34 following final enactment. 321.35 Sec. 7. Minnesota Statutes 2002, section 272.02, is 321.36 amended by adding a subdivision to read: 322.1 Subd. 60. [SKYWAYS.] The pedestrian skyway system, 322.2 underground pedestrian concourse, the people mover system, and 322.3 publicly owned parking structures are exempt to the extent 322.4 provided in section 469.127. 322.5 [EFFECTIVE DATE.] This section is effective the day 322.6 following final enactment. 322.7 Sec. 8. Minnesota Statutes 2002, section 272.02, is 322.8 amended by adding a subdivision to read: 322.9 Subd. 61. [MUNICIPAL RECREATION FACILITIES.] All property 322.10 acquired and used by a city is exempt to the extent provided in 322.11 section 471.191, subdivision 4. 322.12 [EFFECTIVE DATE.] This section is effective the day 322.13 following final enactment. 322.14 Sec. 9. Minnesota Statutes 2002, section 272.02, is 322.15 amended by adding a subdivision to read: 322.16 Subd. 62. [WATER AND WASTEWATER TREATMENT 322.17 FACILITIES.] Related facilities owned by water and wastewater 322.18 treatment providers who have contracted with a municipality to 322.19 provide capital intensive public services to the municipality 322.20 are exempt to the extent provided in section 471A.05. 322.21 [EFFECTIVE DATE.] This section is effective the day 322.22 following final enactment. 322.23 Sec. 10. Minnesota Statutes 2002, section 272.12, is 322.24 amended to read: 322.25 272.12 [CONVEYANCES, TAXES PAID BEFORE RECORDING.] 322.26 When: 322.27 (a) a deed or other instrument conveying land, 322.28 (b) a plat of any town site or addition thereto, 322.29 (c) a survey required pursuant to section 508.47, 322.30 (d) a condominium plat subject to chapter 515 or 515A or a 322.31 declaration that contains such a plat, or 322.32 (e) a common interest community plat subject to chapter 322.33 515B or a declaration that contains such a plat, 322.34 is presented to the county auditor for transfer, the auditor 322.35 shall ascertain from the records if there be taxes delinquent 322.36 upon the land described therein, or if it has been sold for 323.1 taxes. An assignment of a sheriff's or referee's certificate of 323.2 sale, when the certificate of sale describes real estate, and 323.3 certificates of redemption from mortgage or lien foreclosure 323.4 sales, when the certificate of redemption encompasses real 323.5 estate and is issued to a junior creditor, are considered 323.6 instruments conveying land for the purposes of this section and 323.7 section 272.121. If there are taxes delinquent, the auditor 323.8 shall certify to the same; and upon payment of such taxes, or in 323.9 case no taxes are delinquent, shall transfer the land upon the 323.10 books of the auditor's office, and note upon the instrument, 323.11 over official signature, the words, "no delinquent taxes and 323.12 transfer entered," or, if the land described has been sold or 323.13 assigned to an actual purchaser for taxes, the words "paid by 323.14 sale of land described within;" and, unless such statement is 323.15 made upon such instrument, the county recorder or the registrar 323.16 of titles shall refuse to receive or record the same; provided, 323.17 that sheriff's or referees' certificates of sale on execution or 323.18 foreclosure of a lien or mortgage, certificates of redemption 323.19 from mortgage or lien foreclosure sales issued to the redeeming 323.20 mortgagor or lienee, deeds of distribution made by a personal 323.21 representative in probate proceedings, decrees and judgments, 323.22 receivers receipts, patents, and copies of town or statutory 323.23 city plats, in case the original plat filed in the office of the 323.24 county recorder has been lost or destroyed, and the instruments 323.25 releasing, removing and discharging reversionary and forfeiture 323.26 provisions affecting title to land and instruments releasing, 323.27 removing or discharging easement rights in land or building or 323.28 other restrictions, may be recorded without such certificate; 323.29 and, provided that instruments conveying land and, as 323.30 appurtenant thereto an easement over adjacent tract or tracts of 323.31 land, may be recorded without such certificate as to the land 323.32 covered by such easement; and provided further, that any 323.33 instrument granting an easement made in favor of any public 323.34 utility or pipe line for conveying gas, liquids or solids in 323.35 suspension, in the nature of a right-of-way over, along, across 323.36 or under a tract of land may be recorded without such 324.1 certificate as to the land covered by such easement.Any324.2instrument amending or restating the declarations, bylaws,324.3plats, or other enablingDocuments governing homeowners 324.4 associations of condominiums, townhouses, common interest 324.5 ownership communities, and other planned unit developments may 324.6 be recorded without the auditor's certificate to the extent 324.7 provided in section 515B.1-116(f). 324.8 A deed of distribution made by a personal representative in 324.9 a probate proceeding, a decree, or a judgment that conveys land 324.10 shall be presented to the county auditor, who shall transfer the 324.11 land upon the books of the auditor's office and note upon the 324.12 instrument, over official signature, the words, "transfer 324.13 entered", and the instrument may then be recorded. A decree or 324.14 judgment that affects title to land but does not convey land may 324.15 be recorded without presentation to the auditor. 324.16 A violation of this section by the county recorder or the 324.17 registrar of titles shall be a gross misdemeanor, and, in 324.18 addition to the punishment therefor, the recorder or registrar 324.19 shall be liable to the grantee of any instrument so recorded for 324.20 the amount of any damages sustained. 324.21 When, as a condition to permitting the recording of deed or 324.22 other instrument affecting the title to real estate previously 324.23 forfeited to the state under the provisions of sections 281.16 324.24 to 281.25, county officials, after such real estate has been 324.25 purchased or repurchased, have required the payment of taxes 324.26 erroneously assumed to have accrued against such real estate 324.27 after forfeiture and before the date of purchase or repurchase, 324.28 the sum required to be so paid shall be refunded to the persons 324.29 entitled thereto out of moneys in the funds in which the sum so 324.30 paid was placed. Delinquent taxes are those taxes deemed 324.31 delinquent under section 279.02. 324.32 [EFFECTIVE DATE.] This section is effective for deeds or 324.33 instruments accepted for recording or registration on or after 324.34 July 1, 2003. 324.35 Sec. 11. Minnesota Statutes 2002, section 273.05, 324.36 subdivision 1, is amended to read: 325.1 Subdivision 1. [APPOINTMENT OF TOWN AND CITY ASSESSORS.] 325.2 Notwithstanding any other provision of law all town assessors 325.3 shall be appointed by the town board, and notwithstanding any 325.4 charter provisions to the contrary, all city assessors shall be 325.5 appointed by the city council or other appointing authority as 325.6 provided by law or charter.Such assessors shall be residents325.7of the state but need not be a resident of the town or city for325.8which they are appointed.They shall be selected and appointed 325.9 because of their knowledge and training in the field of property 325.10 taxation. All town and statutory city assessors shall be 325.11 appointed for indefinite terms. A town or statutory city 325.12 assessor who is an employee may be dismissed by the appointing 325.13 authority for cause. The term of the town or city assessors may 325.14 be terminated at any time by the town board or city council on 325.15 charges by the commissioner of revenue of inefficiency or 325.16 neglect of duty. Vacancies in the office of town or city 325.17 assessor shall be filled within 90 days by appointment of the 325.18 respective appointing authority indicated above. If the vacancy 325.19 is not filled within 90 days, the office shall be terminated. 325.20 When a vacancy in the office of town or city assessor is not 325.21 filled by appointment, and it is imperative that the office of 325.22 assessor be filled, the county auditor shall appoint some 325.23 resident of the county as assessor for such town or city. The 325.24 county auditor may appoint the county assessor as assessor for 325.25 such town or city, in which case the town or city shall pay to 325.26 the county treasurer the amount determined by the county auditor 325.27 to be due for the services performed and expenses incurred by 325.28 the county assessor in acting as assessor for such town or 325.29 city. The term of any town or statutory city assessor in a 325.30 county electing in accordance with section 273.052 shall be 325.31 terminated as provided in section 273.055. 325.32 The commissioner of revenue may recommend to the state 325.33 board of assessors the nonrenewal, suspension, or revocation of 325.34 an assessor's license as provided in sections 270.41 to 270.53. 325.35 [EFFECTIVE DATE.] This section is effective the day 325.36 following final enactment and applies to every town or city 326.1 assessor whether that assessor was appointed before, on, or 326.2 after the effective date. 326.3 Sec. 12. Minnesota Statutes 2002, section 273.061, is 326.4 amended by adding a subdivision to read: 326.5 Subd. 1a. [COMPATIBLE OFFICES.] A person appointed as the 326.6 county assessor also may serve as the county auditor, county 326.7 treasurer, or county auditor-treasurer if those offices are 326.8 appointive, provided that the person in the combined appointed 326.9 office must not serve on the county board of appeal and 326.10 equalization under section 274.13. In a county in which the 326.11 functions of the county assessor are combined with those of the 326.12 county auditor or county auditor-treasurer, the county board may 326.13 not delegate any authority, power, or responsibility under 326.14 section 375.192, subdivision 4. 326.15 [EFFECTIVE DATE.] This section is effective January 2, 2004. 326.16 Sec. 13. Minnesota Statutes 2002, section 273.061, is 326.17 amended by adding a subdivision to read: 326.18 Subd. 1b. [COMPATIBLE OFFICES IN COUNTIES CHANGING TO 326.19 APPOINTED AUDITOR.] In a county in which the office of auditor, 326.20 treasurer, or auditor-treasurer is an elective position, a 326.21 person appointed as the county assessor also may serve as the 326.22 county auditor, county treasurer, or county auditor-treasurer if 326.23 a proposal to make the affected office appointive has been 326.24 approved as required by other law and will be effective within 326.25 five years. 326.26 [EFFECTIVE DATE.] This section is effective January 2, 2004. 326.27 Sec. 14. Minnesota Statutes 2002, section 273.061, is 326.28 amended by adding a subdivision to read: 326.29 Subd. 1c. [INCOMPATIBLE OFFICES.] The person appointed as 326.30 the county assessor must not also be the county attorney, a 326.31 county board member, an elected county auditor, an elected 326.32 county treasurer, an elected county auditor-treasurer, a town 326.33 board supervisor for a town in the same county, or a city mayor 326.34 or council member for a city in the same county. The person 326.35 appointed as the city assessor must not also be a city council 326.36 member or mayor for the same city. A person appointed as the 327.1 town assessor must not also be a town board supervisor for the 327.2 same town. Except as provided in subdivision 1b, an assessor 327.3 who accepts a position that is incompatible with the office of 327.4 assessor is deemed to have resigned from the assessor position. 327.5 [EFFECTIVE DATE.] This section is effective January 2, 2004. 327.6 Sec. 15. Minnesota Statutes 2002, section 273.11, 327.7 subdivision 1a, is amended to read: 327.8 Subd. 1a. [LIMITED MARKET VALUE.] In the case of all 327.9 property classified as agricultural homestead or nonhomestead, 327.10 residential homestead or nonhomestead, timber, or noncommercial 327.11 seasonal residential recreationalresidential, the assessor 327.12 shall compare the value with the taxable portion of the value 327.13 determined in the preceding assessment. 327.14 For assessment year 2002, the amount of the increase shall 327.15 not exceed the greater of (1) ten percent of the value in the 327.16 preceding assessment, or (2) 15 percent of the difference 327.17 between the current assessment and the preceding assessment. 327.18 For assessment year 2003, the amount of the increase shall 327.19 not exceed the greater of (1) 12 percent of the value in the 327.20 preceding assessment, or (2) 20 percent of the difference 327.21 between the current assessment and the preceding assessment. 327.22 For assessment year 2004, the amount of the increase shall 327.23 not exceed the greater of (1) 15 percent of the value in the 327.24 preceding assessment, or (2) 25 percent of the difference 327.25 between the current assessment and the preceding assessment. 327.26 For assessment year 2005, the amount of the increase shall 327.27 not exceed the greater of (1) 15 percent of the value in the 327.28 preceding assessment, or (2) 33 percent of the difference 327.29 between the current assessment and the preceding assessment. 327.30 For assessment year 2006, the amount of the increase shall 327.31 not exceed the greater of (1) 15 percent of the value in the 327.32 preceding assessment, or (2) 50 percent of the difference 327.33 between the current assessment and the preceding assessment. 327.34 This limitation shall not apply to increases in value due 327.35 to improvements. For purposes of this subdivision, the term 327.36 "assessment" means the value prior to any exclusion under 328.1 subdivision 16. 328.2 The provisions of this subdivision shall be in effect 328.3 through assessment year 2006 as provided in this subdivision. 328.4 For purposes of the assessment/sales ratio study conducted 328.5 under section 127A.48, and the computation of state aids paid 328.6 under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 328.7 477A, market values and net tax capacities determined under this 328.8 subdivision and subdivision 16, shall be used. 328.9 [EFFECTIVE DATE.] This section is effective the day 328.10 following final enactment. 328.11 Sec. 16. Minnesota Statutes 2002, section 273.124, 328.12 subdivision 1, is amended to read: 328.13 Subdivision 1. [GENERAL RULE.] (a) Residential real estate 328.14 that is occupied and used for the purposes of a homestead by its 328.15 owner, who must be a Minnesota resident, is a residential 328.16 homestead. 328.17 Agricultural land, as defined in section 273.13, 328.18 subdivision 23, that is occupied and used as a homestead by its 328.19 owner, who must be a Minnesota resident, is an agricultural 328.20 homestead. 328.21 Dates for establishment of a homestead and homestead 328.22 treatment provided to particular types of property are as 328.23 provided in this section. 328.24 Property held by a trustee under a trust is eligible for 328.25 homestead classification if the requirements under this chapter 328.26 are satisfied. 328.27 The assessor shall require proof, as provided in 328.28 subdivision 13, of the facts upon which classification as a 328.29 homestead may be determined. Notwithstanding any other law, the 328.30 assessor may at any time require a homestead application to be 328.31 filed in order to verify that any property classified as a 328.32 homestead continues to be eligible for homestead status. 328.33 Notwithstanding any other law to the contrary, the department of 328.34 revenue may, upon request from an assessor, verify whether an 328.35 individual who is requesting or receiving homestead 328.36 classification has filed a Minnesota income tax return as a 329.1 resident for the most recent taxable year for which the 329.2 information is available. 329.3 When there is a name change or a transfer of homestead 329.4 property, the assessor may reclassify the property in the next 329.5 assessment unless a homestead application is filed to verify 329.6 that the property continues to qualify for homestead 329.7 classification. 329.8 (b) For purposes of this section, homestead property shall 329.9 include property which is used for purposes of the homestead but 329.10 is separated from the homestead by a road, street, lot, 329.11 waterway, or other similar intervening property. The term "used 329.12 for purposes of the homestead" shall include but not be limited 329.13 to uses for gardens, garages, or other outbuildings commonly 329.14 associated with a homestead, but shall not include vacant land 329.15 held primarily for future development. In order to receive 329.16 homestead treatment for the noncontiguous property, the owner 329.17 must use the property for the purposes of the homestead, and 329.18 must apply to the assessor, both by the deadlines given in 329.19 subdivision 9. After initial qualification for the homestead 329.20 treatment, additional applications for subsequent years are not 329.21 required. 329.22 (c) Residential real estate that is occupied and used for 329.23 purposes of a homestead by a relative of the owner is a 329.24 homestead but only to the extent of the homestead treatment that 329.25 would be provided if the related owner occupied the property. 329.26 For purposes of this paragraph and paragraph (g), "relative" 329.27 means a parent, stepparent, child, stepchild, grandparent, 329.28 grandchild, brother, sister, uncle, aunt, nephew, or niece. 329.29 This relationship may be by blood or marriage. Property that 329.30 has been classified as seasonal residential recreational 329.31residentialproperty at any time during which it has been owned 329.32 by the current owner or spouse of the current owner will not be 329.33 reclassified as a homestead unless it is occupied as a homestead 329.34 by the owner; this prohibition also applies to property that, in 329.35 the absence of this paragraph, would have been classified as 329.36 seasonal residential recreationalresidentialproperty at the 330.1 time when the residence was constructed. Neither the related 330.2 occupant nor the owner of the property may claim a property tax 330.3 refund under chapter 290A for a homestead occupied by a 330.4 relative. In the case of a residence located on agricultural 330.5 land, only the house, garage, and immediately surrounding one 330.6 acre of land shall be classified as a homestead under this 330.7 paragraph, except as provided in paragraph (d). 330.8 (d) Agricultural property that is occupied and used for 330.9 purposes of a homestead by a relative of the owner, is a 330.10 homestead, only to the extent of the homestead treatment that 330.11 would be provided if the related owner occupied the property, 330.12 and only if all of the following criteria are met: 330.13 (1) the relative who is occupying the agricultural property 330.14 is a son, daughter, grandson, granddaughter, father, or mother 330.15 of the owner of the agricultural property or a son, daughter, 330.16 grandson, or granddaughter of the spouse of the owner of the 330.17 agricultural property; 330.18 (2) the owner of the agricultural property must be a 330.19 Minnesota resident; 330.20 (3) the owner of the agricultural property must not receive 330.21 homestead treatment on any other agricultural property in 330.22 Minnesota; and 330.23 (4) the owner of the agricultural property is limited to 330.24 only one agricultural homestead per family under this paragraph. 330.25 Neither the related occupant nor the owner of the property 330.26 may claim a property tax refund under chapter 290A for a 330.27 homestead occupied by a relative qualifying under this 330.28 paragraph. For purposes of this paragraph, "agricultural 330.29 property" means the house, garage, other farm buildings and 330.30 structures, and agricultural land. 330.31 Application must be made to the assessor by the owner of 330.32 the agricultural property to receive homestead benefits under 330.33 this paragraph. The assessor may require the necessary proof 330.34 that the requirements under this paragraph have been met. 330.35 (e) In the case of property owned by a property owner who 330.36 is married, the assessor must not deny homestead treatment in 331.1 whole or in part if only one of the spouses occupies the 331.2 property and the other spouse is absent due to: (1) marriage 331.3 dissolution proceedings, (2) legal separation, (3) employment or 331.4 self-employment in another location, or (4) other personal 331.5 circumstances causing the spouses to live separately, not 331.6 including an intent to obtain two homestead classifications for 331.7 property tax purposes. To qualify under clause (3), the 331.8 spouse's place of employment or self-employment must be at least 331.9 50 miles distant from the other spouse's place of employment, 331.10 and the homesteads must be at least 50 miles distant from each 331.11 other. Homestead treatment, in whole or in part, shall not be 331.12 denied to the owner's spouse who previously occupied the 331.13 residence with the owner if the absence of the owner is due to 331.14 one of the exceptions provided in this paragraph. 331.15 (f) The assessor must not deny homestead treatment in whole 331.16 or in part if: 331.17 (1) in the case of a property owner who is not married, the 331.18 owner is absent due to residence in a nursing home, boarding 331.19 care facility, or an elderly assisted living facility property 331.20 as defined in section 273.13, subdivision 25a, and the property 331.21 is not otherwise occupied; or 331.22 (2) in the case of a property owner who is married, the 331.23 owner or the owner's spouse or both are absent due to residence 331.24 in a nursing home, boarding care facility, or an elderly 331.25 assisted living facility property as defined in section 273.13, 331.26 subdivision 25a, and the property is not occupied or is occupied 331.27 only by the owner's spouse. 331.28 (g) If an individual is purchasing property with the intent 331.29 of claiming it as a homestead and is required by the terms of 331.30 the financing agreement to have a relative shown on the deed as 331.31 a coowner, the assessor shall allow a full homestead 331.32 classification. This provision only applies to first-time 331.33 purchasers, whether married or single, or to a person who had 331.34 previously been married and is purchasing as a single individual 331.35 for the first time. The application for homestead benefits must 331.36 be on a form prescribed by the commissioner and must contain the 332.1 data necessary for the assessor to determine if full homestead 332.2 benefits are warranted. 332.3 (h) If residential or agricultural real estate is occupied 332.4 and used for purposes of a homestead by a child of a deceased 332.5 owner and the property is subject to jurisdiction of probate 332.6 court, the child shall receive relative homestead classification 332.7 under paragraph (c) or (d) to the same extent they would be 332.8 entitled to it if the owner was still living, until the probate 332.9 is completed. For purposes of this paragraph, "child" includes 332.10 a relationship by blood or by marriage. 332.11 [EFFECTIVE DATE.] This section is effective the day 332.12 following final enactment. 332.13 Sec. 17. Minnesota Statutes 2002, section 273.13, 332.14 subdivision 25, is amended to read: 332.15 Subd. 25. [CLASS 4.] (a) Class 4a is residential real 332.16 estate containing four or more units and used or held for use by 332.17 the owner or by the tenants or lessees of the owner as a 332.18 residence for rental periods of 30 days or more. Class 4a also 332.19 includes hospitals licensed under sections 144.50 to 144.56, 332.20 other than hospitals exempt under section 272.02, and contiguous 332.21 property used for hospital purposes, without regard to whether 332.22 the property has been platted or subdivided. The market value 332.23 of class 4a property has a class rate of 1.8 percent for taxes 332.24 payable in 2002, 1.5 percent for taxes payable in 2003, and 1.25 332.25 percent for taxes payable in 2004 and thereafter, except that 332.26 class 4a property consisting of a structure for which 332.27 construction commenced after June 30, 2001, has a class rate of 332.28 1.25 percent of market value for taxes payable in 2003 and 332.29 subsequent years. 332.30 (b) Class 4b includes: 332.31 (1) residential real estate containing less than four units 332.32 that does not qualify as class 4bb, other than seasonal 332.33 residential, andrecreational property; 332.34 (2) manufactured homes not classified under any other 332.35 provision; 332.36 (3) a dwelling, garage, and surrounding one acre of 333.1 property on a nonhomestead farm classified under subdivision 23, 333.2 paragraph (b) containing two or three units; and 333.3 (4) unimproved property that is classified residential as 333.4 determined under subdivision 33. 333.5 The market value of class 4b property has a class rate of 333.6 1.5 percent for taxes payable in 2002, and 1.25 percent for 333.7 taxes payable in 2003 and thereafter. 333.8 (c) Class 4bb includes: 333.9 (1) nonhomestead residential real estate containing one 333.10 unit, other than seasonal residential, andrecreational 333.11 property; and 333.12 (2) a single family dwelling, garage, and surrounding one 333.13 acre of property on a nonhomestead farm classified under 333.14 subdivision 23, paragraph (b). 333.15 Class 4bb property has the same class rates as class 1a 333.16 property under subdivision 22. 333.17 Property that has been classified as seasonalrecreational333.18 residential recreational property at any time during which it 333.19 has been owned by the current owner or spouse of the current 333.20 owner does not qualify for class 4bb. 333.21 (d) Class 4c property includes: 333.22 (1) except as provided in subdivision 22, paragraph (c), 333.23 real property devoted to temporary and seasonal residential 333.24 occupancy for recreation purposes, including real property 333.25 devoted to temporary and seasonal residential occupancy for 333.26 recreation purposes and not devoted to commercial purposes for 333.27 more than 250 days in the year preceding the year of 333.28 assessment. For purposes of this clause, property is devoted to 333.29 a commercial purpose on a specific day if any portion of the 333.30 property is used for residential occupancy, and a fee is charged 333.31 for residential occupancy. In order for a property to be 333.32 classified as class 4c, seasonal residential recreational 333.33residentialfor commercial purposes, at least 40 percent of the 333.34 annual gross lodging receipts related to the property must be 333.35 from business conducted during 90 consecutive days and either 333.36 (i) at least 60 percent of all paid bookings by lodging guests 334.1 during the year must be for periods of at least two consecutive 334.2 nights; or (ii) at least 20 percent of the annual gross receipts 334.3 must be from charges for rental of fish houses, boats and 334.4 motors, snowmobiles, downhill or cross-country ski equipment, or 334.5 charges for marina services, launch services, and guide 334.6 services, or the sale of bait and fishing tackle. For purposes 334.7 of this determination, a paid booking of five or more nights 334.8 shall be counted as two bookings. Class 4c also includes 334.9 commercial use real property used exclusively for recreational 334.10 purposes in conjunction with class 4c property devoted to 334.11 temporary and seasonal residential occupancy for recreational 334.12 purposes, up to a total of two acres, provided the property is 334.13 not devoted to commercial recreational use for more than 250 334.14 days in the year preceding the year of assessment and is located 334.15 within two miles of the class 4c property with which it is 334.16 used. Class 4c property classified in this clause also includes 334.17 the remainder of class 1c resorts provided that the entire 334.18 property including that portion of the property classified as 334.19 class 1c also meets the requirements for class 4c under this 334.20 clause; otherwise the entire property is classified as class 3. 334.21 Owners of real property devoted to temporary and seasonal 334.22 residential occupancy for recreation purposes and all or a 334.23 portion of which was devoted to commercial purposes for not more 334.24 than 250 days in the year preceding the year of assessment 334.25 desiring classification as class 1c or 4c, must submit a 334.26 declaration to the assessor designating the cabins or units 334.27 occupied for 250 days or less in the year preceding the year of 334.28 assessment by January 15 of the assessment year. Those cabins 334.29 or units and a proportionate share of the land on which they are 334.30 located will be designated class 1c or 4c as otherwise 334.31 provided. The remainder of the cabins or units and a 334.32 proportionate share of the land on which they are located will 334.33 be designated as class 3a. The owner of property desiring 334.34 designation as class 1c or 4c property must provide guest 334.35 registers or other records demonstrating that the units for 334.36 which class 1c or 4c designation is sought were not occupied for 335.1 more than 250 days in the year preceding the assessment if so 335.2 requested. The portion of a property operated as a (1) 335.3 restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 335.4 facility operated on a commercial basis not directly related to 335.5 temporary and seasonal residential occupancy for recreation 335.6 purposes shall not qualify for class 1c or 4c; 335.7 (2) qualified property used as a golf course if: 335.8 (i) it is open to the public on a daily fee basis. It may 335.9 charge membership fees or dues, but a membership fee may not be 335.10 required in order to use the property for golfing, and its green 335.11 fees for golfing must be comparable to green fees typically 335.12 charged by municipal courses; and 335.13 (ii) it meets the requirements of section 273.112, 335.14 subdivision 3, paragraph (d). 335.15 A structure used as a clubhouse, restaurant, or place of 335.16 refreshment in conjunction with the golf course is classified as 335.17 class 3a property; 335.18 (3) real property up to a maximum of one acre of land owned 335.19 by a nonprofit community service oriented organization; provided 335.20 that the property is not used for a revenue-producing activity 335.21 for more than six days in the calendar year preceding the year 335.22 of assessment and the property is not used for residential 335.23 purposes on either a temporary or permanent basis. For purposes 335.24 of this clause, a "nonprofit community service oriented 335.25 organization" means any corporation, society, association, 335.26 foundation, or institution organized and operated exclusively 335.27 for charitable, religious, fraternal, civic, or educational 335.28 purposes, and which is exempt from federal income taxation 335.29 pursuant to section 501(c)(3), (10), or (19) of the Internal 335.30 Revenue Code of 1986, as amended through December 31, 1990. For 335.31 purposes of this clause, "revenue-producing activities" shall 335.32 include but not be limited to property or that portion of the 335.33 property that is used as an on-sale intoxicating liquor or 3.2 335.34 percent malt liquor establishment licensed under chapter 340A, a 335.35 restaurant open to the public, bowling alley, a retail store, 335.36 gambling conducted by organizations licensed under chapter 349, 336.1 an insurance business, or office or other space leased or rented 336.2 to a lessee who conducts a for-profit enterprise on the 336.3 premises. Any portion of the property which is used for 336.4 revenue-producing activities for more than six days in the 336.5 calendar year preceding the year of assessment shall be assessed 336.6 as class 3a. The use of the property for social events open 336.7 exclusively to members and their guests for periods of less than 336.8 24 hours, when an admission is not charged nor any revenues are 336.9 received by the organization shall not be considered a 336.10 revenue-producing activity; 336.11 (4) post-secondary student housing of not more than one 336.12 acre of land that is owned by a nonprofit corporation organized 336.13 under chapter 317A and is used exclusively by a student 336.14 cooperative, sorority, or fraternity for on-campus housing or 336.15 housing located within two miles of the border of a college 336.16 campus; 336.17 (5) manufactured home parks as defined in section 327.14, 336.18 subdivision 3; 336.19 (6) real property that is actively and exclusively devoted 336.20 to indoor fitness, health, social, recreational, and related 336.21 uses, is owned and operated by a not-for-profit corporation, and 336.22 is located within the metropolitan area as defined in section 336.23 473.121, subdivision 2; 336.24 (7) a leased or privately owned noncommercial aircraft 336.25 storage hangar not exempt under section 272.01, subdivision 2, 336.26 and the land on which it is located, provided that: 336.27 (i) the land is on an airport owned or operated by a city, 336.28 town, county, metropolitan airports commission, or group 336.29 thereof; and 336.30 (ii) the land lease, or any ordinance or signed agreement 336.31 restricting the use of the leased premise, prohibits commercial 336.32 activity performed at the hangar. 336.33 If a hangar classified under this clause is sold after June 336.34 30, 2000, a bill of sale must be filed by the new owner with the 336.35 assessor of the county where the property is located within 60 336.36 days of the sale; and 337.1 (8) residential real estate, a portion of which is used by 337.2 the owner for homestead purposes, and that is also a place of 337.3 lodging, if all of the following criteria are met: 337.4 (i) rooms are provided for rent to transient guests that 337.5 generally stay for periods of 14 or fewer days; 337.6 (ii) meals are provided to persons who rent rooms, the cost 337.7 of which is incorporated in the basic room rate; 337.8 (iii) meals are not provided to the general public except 337.9 for special events on fewer than seven days in the calendar year 337.10 preceding the year of the assessment; and 337.11 (iv) the owner is the operator of the property. 337.12 The market value subject to the 4c classification under this 337.13 clause is limited to five rental units. Any rental units on the 337.14 property in excess of five, must be valued and assessed as class 337.15 3a. The portion of the property used for purposes of a 337.16 homestead by the owner must be classified as class 1a property 337.17 under subdivision 22. 337.18 Class 4c property has a class rate of 1.5 percent of market 337.19 value, except that (i) each parcel of seasonal residential 337.20 recreational property not used for commercial purposes has the 337.21 same class rates as class 4bb property, (ii) manufactured home 337.22 parks assessed under clause (5) have the same class rate as 337.23 class 4b property, (iii) commercial-use seasonal residential 337.24 recreational property has a class rate of one percent for the 337.25 first $500,000 of market value, which includes any market value 337.26 receiving the one percent rate under subdivision 22, and 1.25 337.27 percent for the remaining market value, (iv) the market value of 337.28 property described in clause (4) has a class rate of one 337.29 percent, (v) the market value of property described in clauses 337.30 (2) and (6) has a class rate of 1.25 percent, and (vi) that 337.31 portion of the market value of property in clause (8) qualifying 337.32 for class 4c property has a class rate of 1.25 percent. 337.33 (e) Class 4d property is qualifying low-income rental 337.34 housing certified to the assessor by the housing finance agency 337.35 under sections 273.126 and 462A.071. Class 4d includes land in 337.36 proportion to the total market value of the building that is 338.1 qualifying low-income rental housing. For all properties 338.2 qualifying as class 4d, the market value determined by the 338.3 assessor must be based on the normal approach to value using 338.4 normal unrestricted rents. 338.5 Class 4d property has a class rate of 0.9 percent for taxes 338.6 payable in 2002, and one percent for taxes payable in 2003 and 338.7 1.25 percent for taxes payable in 2004 and thereafter. 338.8 [EFFECTIVE DATE.] This section is effective the day 338.9 following final enactment. 338.10 Sec. 18. Minnesota Statutes 2002, section 273.1398, 338.11 subdivision 4b, is amended to read: 338.12 Subd. 4b. [COURT EXPENDITURES; MAINTENANCE OF EFFORT.] (a) 338.13 Until the costs of court administration as defined under section 338.14 480.183, subdivision 3, in a county have been transferred to the 338.15 state, each county in a judicial district transferring court 338.16 administration costs to state funding after July 1, 2001, shall 338.17 budget for the funding of these costs an amount at least equal 338.18 to the certified budget amount for calendar year 2001, increased 338.19 by six percent for each year from 2001 to 2003 and by eight 338.20 percent from 2004 to the year of the transfer. The county shall 338.21 budget, fund, and authorize expenditures not less than the 338.22 amount calculated under this paragraphplus the temporary aid338.23amount under subdivision 4c for maintenance of effort of338.24administrative costs. 338.25 (b) By July 15, 2001, the court shall certify to each 338.26 county in the judicial district its cost of court administration 338.27 as defined under section 480.183, subdivision 3, based on 2001 338.28 budgets. In making that determination, the court shall exclude 338.29 the budget costs of the county for the following categories: 338.30 (1) rent; 338.31 (2) examiner of titles; 338.32 (3) civil court appointed attorneys for civil matters; 338.33 (4) hospitalization costs; and 338.34 (5) cost of maintaining vital statistics. 338.35 The amount of funding provided by a county for courts that 338.36 is increased by the maintenance of effort requirement may not be 339.1 used by a county to pay the costs described in clauses (1) to 339.2 (5). 339.3 [EFFECTIVE DATE.] This section is effective the day 339.4 following final enactment. 339.5 Sec. 19. Minnesota Statutes 2002, section 273.372, is 339.6 amended to read: 339.7 273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 339.8 VALUATIONS.] 339.9 An appeal by a utility or railroad company concerning the 339.10 exemption, valuation, or classificationonof property for which 339.11 the commissioner of revenue has provided the city or county 339.12 assessor withcommissioner's ordersvaluations by order, or for 339.13 which the commissioner has recommended values to the city or 339.14 county assessor, must be brought against the commissioner in tax 339.15 court or in district court of the county where the property is 339.16 located, and not against the county or taxing district where the 339.17 property is located. If the appeal toacourt isoffrom an 339.18 order of the commissioner, it must be brought under chapter 339.19 271. If the appeal is from the exemption, valuation, 339.20 classification, or tax that results from implementation of the 339.21 commissioner's order or recommendation, it must be brought under 339.22 chapter 278, and theproceduresprovisions in that chapter 339.23 apply, except that service shall be on the commissioner only and 339.24 not on the county officials specified in section 278.01, 339.25 subdivision 1. This provision applies to the propertycontained339.26underdescribed in sections 273.33, 273.35, 273.36, and 273.37, 339.27 but only if the appealed values have remained unchanged from 339.28 those provided to the city or county by the commissioner. If 339.29 the exemption, valuation, or classification being appealed has 339.30 been changed by the city or county, then the action must be 339.31 brought under chapter 278 in the county where the property is 339.32 located and proper service must be made upon the county 339.33 officials as specified in section 278.01, subdivision 1. 339.34 Upon filing of any appeal by a utility company or railroad 339.35 against the commissioner, the commissioner shall give notice by 339.36 first class mail to each county which would be affected by the 340.1 appeal. 340.2 Companies that submit the reports under section 270.82 or 340.3 273.371 by the date specified in that section, or by the date 340.4 specified by the commissioner in an extension, may appeal 340.5 administratively to the commissioner under the procedures in 340.6 section 270.11, subdivision 6, prior to bringing an action in 340.7 tax court or in district court, however, instituting an 340.8 administrative appeal with the commissioner does not change or 340.9 modify the deadline in section 271.06 for appealing an order of 340.10 the commissioner in tax court or the deadline in section 278.01 340.11 forbringing an actionfiling a property tax claim or objection 340.12 in tax court or district court. 340.13 [EFFECTIVE DATE.] This section is effective the day 340.14 following final enactment. 340.15 Sec. 20. Minnesota Statutes 2002, section 273.42, 340.16 subdivision 2, is amended to read: 340.17 Subd. 2. Owners of land that is an agricultural or 340.18 nonagricultural homestead, nonhomestead agricultural land, 340.19 rental residential property, and both commercial and 340.20 noncommercial seasonal residential recreational property, as 340.21 those terms are defined in section 273.13 listed on records of 340.22 the county auditor or county treasurer over which runs a high 340.23 voltage transmission lineas defined in section 116C.52,340.24subdivision 3with a capacity of 200 kilovolts or more, except a 340.25 high voltage transmission line the construction of which was 340.26 commenced prior to July 1, 1974, shall receive a property tax 340.27 credit in an amount determined by multiplying a fraction, the 340.28 numerator of which is the length of high voltage transmission 340.29 line which runs over that parcel and the denominator of which is 340.30 the total length of that particular line running over all 340.31 property within the city or township by ten percent of the 340.32 transmission line tax revenue derived from the tax on that 340.33 portion of the line within the city or township pursuant to 340.34 section 273.36. In the case of property owners in unorganized 340.35 townships, the property tax credit shall be determined by 340.36 multiplying a fraction, the numerator of which is the length of 341.1 the qualifying high voltage transmission line which runs over 341.2 the parcel and the denominator of which is the total length of 341.3 the qualifying high voltage transmission line running over all 341.4 property within all the unorganized townships within the county, 341.5 by the total utility property tax credit fund amount available 341.6 within the county for that year pursuant to subdivision 1. 341.7 Where a right-of-way width is shared by more than one property 341.8 owner, the numerator shall be adjusted by multiplying the length 341.9 of line on the parcel by the proportion of the total width on 341.10 the parcel owned by that property owner. The amount of credit 341.11 for which the property qualifies shall not exceed 20 percent of 341.12 the total gross tax on the parcel prior to deduction of the 341.13 state paid agricultural credit and the state paid homestead 341.14 credit, provided that, if the property containing the 341.15 right-of-way is included in a parcel which exceeds 40 acres, the 341.16 total gross tax on the parcel shall be multiplied by a fraction, 341.17 the numerator of which is the sum of the number of acres in each 341.18 quarter-quarter section or portion thereof which contains a 341.19 right-of-way and the denominator of which is the total number of 341.20 acres in the parcel set forth on the tax statement, and the 341.21 maximum credit shall be 20 percent of the product of that 341.22 computation, prior to deduction of those credits. The auditor 341.23 of the county in which the affected parcel is located shall 341.24 calculate the amount of the credit due for each parcel and 341.25 transmit that information to the county treasurer. The county 341.26 auditor, in computing the credit received pursuant to section 341.27 273.135, shall reduce the gross tax by the amount of the credit 341.28 received pursuant to this section, unless the amount of the 341.29 credit would be less than $10. 341.30 If, after the county auditor has computed the credit to 341.31 those qualifying property owners in unorganized townships, there 341.32 is money remaining in the utility property tax credit fund, then 341.33 that excess amount in the fund shall be returned to the general 341.34 school fund of the county. 341.35 [EFFECTIVE DATE.] This section is effective the day 341.36 following final enactment. 342.1 Sec. 21. Minnesota Statutes 2002, section 274.01, 342.2 subdivision 1, is amended to read: 342.3 Subdivision 1. [ORDINARY BOARD; MEETINGS, DEADLINES, 342.4 GRIEVANCES.] (a) The town board of a town, or the council or 342.5 other governing body of a city, is the board of appeal and 342.6 equalization except (1) in cities whose charters provide for a 342.7 board of equalization or (2) in any city or town that has 342.8 transferred its local board of review power and duties to the 342.9 county board as provided in subdivision 3. The county assessor 342.10 shall fix a day and time when the board or the board of 342.11 equalization shall meet in the assessment districts of the 342.12 county. Notwithstanding any law or city charter to the 342.13 contrary, a city board of equalization shall be referred to as a 342.14 board of appeal and equalization. On or before February 15 of 342.15 each year the assessor shall give written notice of the time to 342.16 the city or town clerk. Notwithstanding the provisions of any 342.17 charter to the contrary, the meetings must be held between April 342.18 1 and May 31 each year. The clerk shall give published and 342.19 posted notice of the meeting at least ten days before the date 342.20 of the meeting. 342.21 The board shall meet at the office of the clerk to review 342.22 the assessment and classification of property in the town or 342.23 city. No changes in valuation or classification which are 342.24 intended to correct errors in judgment by the county assessor 342.25 may be made by the county assessor after the board has adjourned 342.26 in those cities or towns that hold a local board of review; 342.27 however, corrections of errors that are merely clerical in 342.28 nature or changes that extend homestead treatment to property 342.29 are permitted after adjournment until the tax extension date for 342.30 that assessment year. The changes must be fully documented and 342.31 maintained in the assessor's office and must be available for 342.32 review by any person. A copy of the changes made during this 342.33 period in those cities or towns that hold a local board of 342.34 review must be sent to the county board no later than December 342.35 31 of the assessment year. 342.36 (b) The board shall determine whether the taxable property 343.1 in the town or city has been properly placed on the list and 343.2 properly valued by the assessor. If real or personal property 343.3 has been omitted, the board shall place it on the list with its 343.4 market value, and correct the assessment so that each tract or 343.5 lot of real property, and each article, parcel, or class of 343.6 personal property, is entered on the assessment list at its 343.7 market value. No assessment of the property of any person may 343.8 be raised unless the person has been duly notified of the intent 343.9 of the board to do so. On application of any person feeling 343.10 aggrieved, the board shall review the assessment or 343.11 classification, or both, and correct it as appears just. The 343.12 board may not make an individual market value adjustment or 343.13 classification change that would benefit the property in cases 343.14 where the owner or other person having control over the property 343.15 will not permit the assessor to inspect the property and the 343.16 interior of any buildings or structures. 343.17 (c) A local board may reduce assessments upon petition of 343.18 the taxpayer but the total reductions must not reduce the 343.19 aggregate assessment made by the county assessor by more than 343.20 one percent. If the total reductions would lower the aggregate 343.21 assessments made by the county assessor by more than one 343.22 percent, none of the adjustments may be made. The assessor 343.23 shall correct any clerical errors or double assessments 343.24 discovered by the board without regard to the one percent 343.25 limitation. 343.26 (d) A local board does not have authority to grant an 343.27 exemption or to order property removed from the tax rolls. 343.28 (e) A majority of the members may act at the meeting, and 343.29 adjourn from day to day until they finish hearing the cases 343.30 presented. The assessor shall attend, with the assessment books 343.31 and papers, and take part in the proceedings, but must not 343.32 vote. The county assessor, or an assistant delegated by the 343.33 county assessor shall attend the meetings. The board shall list 343.34 separately, on a form appended to the assessment book, all 343.35 omitted property added to the list by the board and all items of 343.36 property increased or decreased, with the market value of each 344.1 item of property, added or changed by the board, placed opposite 344.2 the item. The county assessor shall enter all changes made by 344.3 the board in the assessment book. 344.4(e)(f) Except as provided in subdivision 3, if a person 344.5 fails to appear in person, by counsel, or by written 344.6 communication before the board after being duly notified of the 344.7 board's intent to raise the assessment of the property, or if a 344.8 person feeling aggrieved by an assessment or classification 344.9 fails to apply for a review of the assessment or classification, 344.10 the person may not appear before the county board of appeal and 344.11 equalization for a review of the assessment or classification. 344.12 This paragraph does not apply if an assessment was made after 344.13 the local board meeting, as provided in section 273.01, or if 344.14 the person can establish not having received notice of market 344.15 value at least five days before the local board meeting. 344.16(f)(g) The local board must complete its work and adjourn 344.17 within 20 days from the time of convening stated in the notice 344.18 of the clerk, unless a longer period is approved by the 344.19 commissioner of revenue. No action taken after that date is 344.20 valid. All complaints about an assessment or classification 344.21 made after the meeting of the board must be heard and determined 344.22 by the county board of equalization. A nonresident may, at any 344.23 time, before the meeting of the board file written objections to 344.24 an assessment or classification with the county assessor. The 344.25 objections must be presented to the board at its meeting by the 344.26 county assessor for its consideration. 344.27 [EFFECTIVE DATE.] This section is effective the day 344.28 following final enactment. 344.29 Sec. 22. Minnesota Statutes 2002, section 274.13, 344.30 subdivision 1, is amended to read: 344.31 Subdivision 1. [MEMBERS; MEETINGS; RULES FOR EQUALIZING 344.32 ASSESSMENTS.] The county commissioners, or a majority of them, 344.33 with the county auditor, or, if the auditor cannot be present, 344.34 the deputy county auditor, or, if there is no deputy, the court 344.35 administrator of the district court, shall form a board for the 344.36 equalization of the assessment of the property of the county, 345.1 including the property of all cities whose charters provide for 345.2 a board of equalization. This board shall be referred to as the 345.3 county board of appeal and equalization. The board shall meet 345.4 annually, on the date specified in section 274.14, at the office 345.5 of the auditor. Each member shall take an oath to fairly and 345.6 impartially perform duties as a member. The board shall examine 345.7 and compare the returns of the assessment of property of the 345.8 towns or districts, and equalize them so that each tract or lot 345.9 of real property and each article or class of personal property 345.10 is entered on the assessment list at its market value, subject 345.11 to the following rules: 345.12 (1) The board shall raise the valuation of each tract or 345.13 lot of real property which in its opinion is returned below its 345.14 market value to the sum believed to be its market value. The 345.15 board must first give notice of intention to raise the valuation 345.16 to the person in whose name it is assessed, if the person is a 345.17 resident of the county. The notice must fix a time and place 345.18 for a hearing. 345.19 (2) The board shall reduce the valuation of each tract or 345.20 lot which in its opinion is returned above its market value to 345.21 the sum believed to be its market value. 345.22 (3) The board shall raise the valuation of each class of 345.23 personal property which in its opinion is returned below its 345.24 market value to the sum believed to be its market value. It 345.25 shall raise the aggregate value of the personal property of 345.26 individuals, firms, or corporations, when it believes that the 345.27 aggregate valuation, as returned, is less than the market value 345.28 of the taxable personal property possessed by the individuals, 345.29 firms, or corporations, to the sum it believes to be the market 345.30 value. The board must first give notice to the persons of 345.31 intention to do so. The notice must set a time and place for a 345.32 hearing. 345.33 (4) The board shall reduce the valuation of each class of 345.34 personal property that is returned above its market value to the 345.35 sum it believes to be its market value. Upon complaint of a 345.36 party aggrieved, the board shall reduce the aggregate valuation 346.1 of the individual's personal property, or of any class of 346.2 personal property for which the individual is assessed, which in 346.3 its opinion has been assessed at too large a sum, to the sum it 346.4 believes was the market value of the individual's personal 346.5 property of that class. 346.6 (5) The board must not reduce the aggregate value of all 346.7 the property of its county, as submitted to the county board of 346.8 equalization, with the additions made by the auditor under this 346.9 chapter, by more than one percent of its whole valuation. The 346.10 board may raise the aggregate valuation of real property, and of 346.11 each class of personal property, of the county, or of any town 346.12 or district of the county, when it believes it is below the 346.13 market value of the property, or class of property, to the 346.14 aggregate amount it believes to be its market value. 346.15 (6) The board shall change the classification of any 346.16 property which in its opinion is not properly classified. 346.17 (7) The board does not have the authority to grant an 346.18 exemption or to order property removed from the tax rolls. 346.19 [EFFECTIVE DATE.] This section is effective the day 346.20 following final enactment. 346.21 Sec. 23. Minnesota Statutes 2002, section 275.025, 346.22 subdivision 1, is amended to read: 346.23 Subdivision 1. [LEVY AMOUNT.] The state general levy is 346.24 levied against commercial-industrial property and 346.25 seasonal residential recreational property, as defined in this 346.26 section. The state general levy base amount is $592,000,000 for 346.27 taxes payable in 2002. For taxes payable in subsequent years, 346.28 the levy base amount is increased each year by multiplying the 346.29 levy base amount for the prior year by the sum of one plus the 346.30 rate of increase, if any, in the implicit price deflator for 346.31 government consumption expenditures and gross investment for 346.32 state and local governments prepared by the Bureau of Economic 346.33 Analysts of the United States Department of Commerce for the 346.34 12-month period ending March 31 of the year prior to the year 346.35 the taxes are payable. The tax under this section is not 346.36 treated as a local tax rate under section 469.177 and is not the 347.1 levy of a governmental unit under chapters 276A and 473F. 347.2 Beginning in fiscal year 2004, and in each year thereafter, the 347.3 commissioner of finance shall deposit in an education reserve 347.4 account, which account is hereby established, the increased 347.5 amount of the state general levy received for deposit in the 347.6 general fund for that year over the amount of the state general 347.7 levy received for deposit in the general fund in fiscal year 347.8 2003. The amounts in the education reserve account do not lapse 347.9 or cancel each year, but remain until appropriated by law for 347.10 education aid or higher education funding. 347.11 [EFFECTIVE DATE.] This section is effective for taxes 347.12 payable in 2004 and thereafter, except that the change from 347.13 "seasonal recreational property" to "seasonal residential 347.14 recreational property" is effective the day following final 347.15 enactment. 347.16 Sec. 24. Minnesota Statutes 2002, section 275.025, 347.17 subdivision 3, is amended to read: 347.18 Subd. 3. [SEASONAL RESIDENTIAL RECREATIONAL TAX CAPACITY.] 347.19 For the purposes of this section, "seasonal residential 347.20 recreational tax capacity" means the tax capacity of all class 347.21 4c(1) property under section 273.13, subdivision 25, except that 347.22 the first $76,000 of market value of each noncommercial class 347.23 4c(1) property has a tax capacity for this purpose equal to 40 347.24 percent of its tax capacity under section 273.13. 347.25 [EFFECTIVE DATE.] This section is effective the day 347.26 following final enactment. 347.27 Sec. 25. Minnesota Statutes 2002, section 275.025, 347.28 subdivision 4, is amended to read: 347.29 Subd. 4. [APPORTIONMENT AND LEVY OF STATE GENERAL TAX.] 347.30 The state general tax must be distributed among the counties by 347.31 applying a uniform rate to each county's commercial-industrial 347.32 tax capacity and its seasonal residential recreational tax 347.33 capacity. Within each county, the tax must be levied by 347.34 applying a uniform rate against commercial-industrial tax 347.35 capacity and seasonal residential recreational tax capacity.By347.36November 1On or before October 10 each year, the commissioner 348.1 of revenue shall certifythea preliminary state general levy 348.2 rate to each county auditor that must be used to prepare the 348.3 notices of proposed property taxes for taxes payable in the 348.4 following year. By January 1 of each year, the commissioner 348.5 shall certify the final state general levy rate to each county 348.6 auditor that shall be used in spreading taxes. 348.7 [EFFECTIVE DATE.] This section is effective for taxes 348.8 payable in 2004 and thereafter, except that the change from 348.9 "seasonal recreational tax capacity" to "seasonal residential 348.10 recreational tax capacity" is effective the day following final 348.11 enactment. 348.12 Sec. 26. Minnesota Statutes 2002, section 276.10, is 348.13 amended to read: 348.14 276.10 [APPORTIONMENT AND DISTRIBUTION OF FUNDS.] 348.15 On the settlement day determined in section 276.09 for each 348.16 year, the county auditor and county treasurer shall distribute 348.17 all undistributed funds in the treasury. The funds must be 348.18 apportioned as provided by law, and credited to thestate,town, 348.19 city, school district, special district and each county fund. 348.20 Within 20 days after the distribution is completed, the county 348.21 auditor shall report to the state auditor in the form prescribed 348.22 by the state auditor. The county auditor shall issue a warrant 348.23 for the payment of money in the county treasury to the credit of 348.24 thestate,town, city, school district, or special districts on 348.25 application of the persons entitled to receive the payment. The 348.26 county auditor may apply the local tax rate from the year before 348.27 the year of distribution when apportioning and distributing 348.28 delinquent tax proceeds, if the composition of the previous 348.29 year's local tax rate between taxing districts is not 348.30 significantly different from the local tax rate that existed for 348.31 the year of the delinquency. 348.32 [EFFECTIVE DATE.] This section is effective for taxes 348.33 payable in 2004 and thereafter. 348.34 Sec. 27. Minnesota Statutes 2002, section 276.11, 348.35 subdivision 1, is amended to read: 348.36 Subdivision 1. [GENERALLY.] As soon as practical after the 349.1 settlement day determined in section 276.09, the county 349.2 treasurer shall pay tothe state treasurer orthe treasurer of a 349.3 town, city, school district, or special district, on the warrant 349.4 of the county auditor, all receipts of taxes levied by the 349.5 taxing district and deliver up all orders and other evidences of 349.6 indebtedness of the taxing district, taking triplicate receipts 349.7 for them. The treasurer shall file one of the receipts with the 349.8 county auditor, and shall return one by mail on the day of its 349.9 receipt to the clerk of the town, city, school district, or 349.10 special district to which payment was made. The clerk shall 349.11 keep the receipt in the clerk's office. Upon written request of 349.12 the taxing district, to the extent practicable, the county 349.13 treasurer shall make partial payments of amounts collected 349.14 periodically in advance of the next settlement and 349.15 distribution. A statement prepared by the county treasurer must 349.16 accompany each payment. It must state the years for which taxes 349.17 included in the payment were collected and, for each year, the 349.18 amount of the taxes and any penalties on the tax. Upon written 349.19 request of a taxing district, except school districts, the 349.20 county treasurer shall pay at least 70 percent of the estimated 349.21 collection within 30 days after the settlement date determined 349.22 in section 276.09. Within seven business days after the due 349.23 date, or 28 calendar days after the postmark date on the 349.24 envelopes containing real or personal property tax statements, 349.25 whichever is latest, the county treasurer shall pay to the 349.26 treasurer of the school districts 50 percent of the estimated 349.27 collections arising from taxes levied by and belonging to the 349.28 school district, unless the school district elects to receive 50 349.29 percent of the estimated collections arising from taxes levied 349.30 by and belonging to the school district after making a 349.31 proportionate reduction to reflect any loss in collections as 349.32 the result of any delay in mailing tax statements. In that 349.33 case, 50 percent of those adjusted, estimated collections shall 349.34 be paid by the county treasurer to the treasurer of the school 349.35 district within seven business days of the due date. The 349.36 remaining 50 percent of the estimated collections must be paid 350.1 to the treasurer of the school district within the next seven 350.2 business days of the later of the dates in the preceding 350.3 sentence, unless the school district elects to receive the 350.4 remainder of its estimated collections after a proportionate 350.5 reduction has been made to reflect any loss in collections as 350.6 the result of any delay in mailing tax statements. In that 350.7 case, the remaining 50 percent of those adjusted, estimated 350.8 collections shall be paid by the county treasurer to the 350.9 treasurer of the school district within 14 days of the due 350.10 date. The treasurer shall pay the balance of the amounts 350.11 collectedto the state before June 30, orto a municipal 350.12 corporation or other body within 60 days after the settlement 350.13 date determined in section 276.09. After 45 days interest at an 350.14 annual rate of eight percent accrues and must be paid to the 350.15 taxing district. Interest must be paid upon appropriation from 350.16 the general revenue fund of the county. If not paid, it may be 350.17 recovered by the taxing district, in a civil action. 350.18 [EFFECTIVE DATE.] This section is effective for taxes 350.19 payable in 2004 and thereafter. 350.20 Sec. 28. [276.112] [STATE PROPERTY TAXES; COUNTY 350.21 TREASURER.] 350.22 On or before January 25 each year, for the period ending 350.23 December 31 of the prior year, on or before June 29 each year, 350.24 for the period ending on the most recent settlement day 350.25 determined in section 276.09, and on or before December 2 of 350.26 each year, for the period ending November 20, the county 350.27 treasurer must make full settlement with the county auditor 350.28 according to sections 276.09, 276.10, and 276.111 for all 350.29 receipts of state property taxes levied under section 275.025, 350.30 and must transmit those receipts to the commissioner of revenue 350.31 by electronic means. 350.32 [EFFECTIVE DATE.] This section is effective the day 350.33 following final enactment. 350.34 Sec. 29. Minnesota Statutes 2002, section 277.20, 350.35 subdivision 2, is amended to read: 350.36 Subd. 2. [FILING OF LIEN FOR ENFORCEABILITY.] The lien 351.1 imposed by subdivision 1 is not enforceable against any 351.2 purchaser, mortgagee, pledgee, holder of a Uniform Commercial 351.3 Code security interest, mechanic's lienor, or judgment lien 351.4 creditor until a notice of lien has been filed by the county 351.5 treasurer in the office of the county recorder of the county in 351.6 which the property is situated, or, in the case of personal 351.7 propertybelonging to an individual who is not a resident of351.8this state, or that is a corporation, partnership, or other351.9organization, in the office of the secretary of state. Priority 351.10 of a lien created under Laws 1991, chapter 291, article 15, 351.11 shall be determined in accordance with the provisions of section 351.12 507.34. Liens filed in the office of the county recorder shall 351.13 be filed with the state tax liens filed pursuant to section 351.14 270.69, and the index shall indicate the name of the county for 351.15 which the lien was filed. If the land is registered, the notice 351.16 of lien shall be filed in the office of the registrar of titles 351.17 of the county in which the property is registered. 351.18 Notwithstanding any other law to the contrary, the county 351.19 treasurer is exempt from the payment of fees when the lien is 351.20 offered for filing or recording; the fee for filing or recording 351.21 the lien must be paid at the time the release of lien is offered 351.22 for filing or recording. Notwithstanding any law to the 351.23 contrary, the fee for filing or recording the lien or the 351.24 release of lien is $15. 351.25 [EFFECTIVE DATE.] This section is effective for liens filed 351.26 on or after the day following final enactment. 351.27 Sec. 30. Minnesota Statutes 2002, section 279.06, 351.28 subdivision 1, is amended to read: 351.29 Subdivision 1. [LIST AND NOTICE.] Within five days after 351.30 the filing of such list, the court administrator shall return a 351.31 copy thereof to the county auditor, with a notice prepared and 351.32 signed by the court administrator, and attached thereto, which 351.33 may be substantially in the following form: 351.34 State of Minnesota ) 351.35 ) ss. 351.36 County of ............... ) 352.1 District Court 352.2 .......... Judicial District. 352.3 The state of Minnesota, to all persons, companies, or 352.4 corporations who have or claim any estate, right, title, or 352.5 interest in, claim to, or lien upon, any of the several parcels 352.6 of land described in the list hereto attached: 352.7 The list of taxes and penalties on real property for the 352.8 county of ............................... remaining delinquent 352.9 on the first Monday in January, ......., has been filed in the 352.10 office of the court administrator of the district court of said 352.11 county, of which that hereto attached is a copy. Therefore, 352.12 you, and each of you, are hereby required to file in the office 352.13 of said court administrator, on or before the 20th day after the 352.14 publication of this notice and list, your answer, in writing, 352.15 setting forth any objection or defense you may have to the 352.16 taxes, or any part thereof, upon any parcel of land described in 352.17 the list, in, to, or on which you have or claim any estate, 352.18 right, title, interest, claim, or lien, and, in default thereof, 352.19 judgment will be entered against such parcel of land for the 352.20 taxes on such list appearing against it, and for all penalties, 352.21 interest, and costs. Based upon said judgment, the land shall 352.22 be sold to the state of Minnesota on the second Monday in May, 352.23 ....... The period of redemption for all lands sold to the 352.24 state at a tax judgment sale shall be three years from the date 352.25 of sale to the state of Minnesota if the land is within an 352.26 incorporated area unless it is: 352.27 (a) nonagricultural homesteaded land as defined in section 352.28 273.13, subdivision 22; 352.29 (b) homesteaded agricultural land as defined in section 352.30 273.13, subdivision 23, paragraph (a); 352.31 (c) seasonal residential recreational land as defined in 352.32 section 273.13, subdivisions 22, paragraph (c), and 25, 352.33 paragraph(c)(d), clause(5)(1), in which event the period of 352.34 redemption is five years from the date of sale to the state of 352.35 Minnesota; 352.36 (d) abandoned property and pursuant to section 281.173 a 353.1 court order has been entered shortening the redemption period to 353.2 five weeks; or 353.3 (e) vacant property as described under section 281.174, 353.4 subdivision 2, and for which a court order is entered shortening 353.5 the redemption period under section 281.174. 353.6 The period of redemption for all other lands sold to the 353.7 state at a tax judgment sale shall be five years from the date 353.8 of sale. 353.9 Inquiries as to the proceedings set forth above can be made 353.10 to the county auditor of ..... county whose address is ..... . 353.11 (Signed) ............................................., 353.12 Court Administrator of the District Court of the County 353.13 of .................................................... 353.14 (Here insert list.) 353.15 The list referred to in the notice shall be substantially 353.16 in the following form: 353.17 List of real property for the county of 353.18 ......................., on which taxes remain delinquent on the 353.19 first Monday in January, .......: 353.20 Town of (Fairfield), 353.21 Township (40), Range (20), 353.22 Names (and 353.23 Current Filed 353.24 Addresses) for 353.25 the Taxpayers 353.26 and Fee Owners 353.27 and in Addition 353.28 Those Parties 353.29 Who Have Filed 353.30 Their Addresses Tax 353.31 Pursuant to Subdivision of Parcel Total Tax 353.32 section 276.041 Section Section Number and Penalty 353.33 $ cts. 353.34 John Jones S.E. 1/4 of S.W. 1/4 10 23101 2.20 353.35 (825 Fremont 353.36 Fairfield, MN 354.1 55000) 354.2 Bruce Smith That part of N.E. 1/4 354.3 (2059 Hand of S.W. 1/4 desc. as 354.4 Fairfield, follows: Beg. at the 354.5 MN 55000) S.E. corner of said 354.6 and N.E. 1/4 of S.W. 1/4; 354.7 Fairfield thence N. along the E. 354.8 State Bank line of said N.E. 1/4 354.9 (100 Main of S.W. 1/4 a distance 354.10 Street of 600 ft.; thence W. 354.11 Fairfield, parallel with the S. 354.12 MN 55000) line of said N.E. 1/4 354.13 of S.W. 1/4 a distance 354.14 of 600 ft.; thence S. 354.15 parallel with said E. 354.16 line a distance of 600 354.17 ft. to S. line of said 354.18 N.E. 1/4 of S.W. 1/4; 354.19 thence E. along said S. 354.20 line a distance of 600 354.21 ft. to the point of 354.22 beg. ............... 21 33211 3.15 354.23 As to platted property, the form of heading shall conform 354.24 to circumstances and be substantially in the following form: 354.25 City of (Smithtown) 354.26 Brown's Addition, or Subdivision 354.27 Names (and 354.28 Current Filed 354.29 Addresses) for 354.30 the Taxpayers 354.31 and Fee Owners 354.32 and in Addition 354.33 Those Parties 354.34 Who have Filed 354.35 Their Addresses Tax 354.36 Pursuant to Parcel Total Tax 355.1 section 276.041 Lot Block Number and Penalty 355.2 $ cts. 355.3 John Jones 15 9 58243 2.20 355.4 (825 Fremont 355.5 Fairfield, 355.6 MN 55000) 355.7 Bruce Smith 16 9 58244 3.15 355.8 (2059 Hand 355.9 Fairfield, 355.10 MN 55000) 355.11 and 355.12 Fairfield 355.13 State Bank 355.14 (100 Main Street 355.15 Fairfield, 355.16 MN 55000) 355.17 The names, descriptions, and figures employed in 355.18 parentheses in the above forms are merely for purposes of 355.19 illustration. 355.20 The name of the town, township, range or city, and addition 355.21 or subdivision, as the case may be, shall be repeated at the 355.22 head of each column of the printed lists as brought forward from 355.23 the preceding column. 355.24 Errors in the list shall not be deemed to be a material 355.25 defect to affect the validity of the judgment and sale. 355.26 [EFFECTIVE DATE.] This section is effective the day 355.27 following final enactment. 355.28 Sec. 31. Minnesota Statutes 2002, section 281.17, is 355.29 amended to read: 355.30 281.17 [PERIOD FOR REDEMPTION.] 355.31 Except for properties for which the period of redemption 355.32 has been limited under sections 281.173 and 281.174, the 355.33 following periods for redemption apply. 355.34 The period of redemption for all lands sold to the state at 355.35 a tax judgment sale shall be three years from the date of sale 355.36 to the state of Minnesota if the land is within an incorporated 356.1 area unless it is: (a) nonagricultural homesteaded land as 356.2 defined in section 273.13, subdivision 22; (b) homesteaded 356.3 agricultural land as defined in section 273.13, subdivision 23, 356.4 paragraph (a); or (c) seasonal residential recreational land as 356.5 defined in section 273.13, subdivision 22, paragraph (c), or 25, 356.6 paragraph (d), clause (1), for which the period of redemption is 356.7 five years from the date of sale to the state of Minnesota. 356.8 The period of redemption for homesteaded lands as defined 356.9 in section 273.13, subdivision 22, located in a targeted 356.10 neighborhood as defined in Laws 1987, chapter 386, article 6, 356.11 section 4, and sold to the state at a tax judgment sale is three 356.12 years from the date of sale. The period of redemption for all 356.13 lands located in a targeted neighborhood as defined in Laws 356.14 1987, chapter 386, article 6, section 4, except (1) homesteaded 356.15 lands as defined in section 273.13, subdivision 22, and (2) for 356.16 periods of redemption beginning after June 30, 1991, but before 356.17 July 1, 1996, lands located in the Loring Park targeted 356.18 neighborhood on which a notice of lis pendens has been served, 356.19 and sold to the state at a tax judgment sale is one year from 356.20 the date of sale. 356.21 The period of redemption for all real property constituting 356.22 a mixed municipal solid waste disposal facility that is a 356.23 qualified facility under section 115B.39, subdivision 1, is one 356.24 year from the date of the sale to the state of Minnesota. 356.25 The period of redemption for all other lands sold to the 356.26 state at a tax judgment sale shall be five years from the date 356.27 of sale, except that the period of redemption for nonhomesteaded 356.28 agricultural land as defined in section 273.13, subdivision 23, 356.29 paragraph (b), shall be two years from the date of sale if at 356.30 that time that property is owned by a person who owns one or 356.31 more parcels of property on which taxes are delinquent, and the 356.32 delinquent taxes are more than 25 percent of the prior year's 356.33 school district levy. 356.34 [EFFECTIVE DATE.] This section is effective the day 356.35 following final enactment. 356.36 Sec. 32. Minnesota Statutes 2002, section 282.01, 357.1 subdivision 7a, is amended to read: 357.2 Subd. 7a. [CITY SALES; ALTERNATE PROCEDURES.] Land located 357.3 in a home rule charter or statutory city, or in a town which 357.4 cannot be improved because of noncompliance with local 357.5 ordinances regarding minimum area, shape, frontage or access may 357.6 be sold by the county auditor pursuant to this subdivision if 357.7 the auditor determines that a nonpublic sale will encourage the 357.8 approval of sale of the land by the city or town and promote its 357.9 return to the tax rolls. If the physical characteristics of the 357.10 land indicate that its highest and best use will be achieved by 357.11 combining it with an adjoining parcel and the city or town has 357.12 not adopted a local ordinance governing minimum area, shape, 357.13 frontage, or access, the land may also be sold pursuant to this 357.14 subdivision. If the property consists of an undivided interest 357.15 in land or land and improvements, the property may also be sold 357.16 to the other owners under this subdivision. The sale of land 357.17 pursuant to this subdivision shall be subject to any conditions 357.18 imposed by the county board pursuant to section 282.03. The 357.19 governing body of the city or town may recommend to the county 357.20 board conditions to be imposed on the sale. The county auditor 357.21 may restrict the sale to owners of lands adjoining the land to 357.22 be sold. The county auditor shall conduct the sale by sealed 357.23 bid or may select another means of sale. The land shall be sold 357.24 to the highest bidder but in no event shall the land be sold for 357.25 less than its appraised value. All owners of land adjoining the 357.26 land to be sold shall be given a written notice at least 30 days 357.27 prior to the sale. 357.28 This subdivision shall be liberally construed to encourage 357.29 the sale and utilization of tax-forfeited land, to eliminate 357.30 nuisances and dangerous conditions and to increase compliance 357.31 with land use ordinances. 357.32 [EFFECTIVE DATE.] This section is effective for sales 357.33 occurring on or after the day following final enactment. 357.34 Sec. 33. Minnesota Statutes 2002, section 282.08, is 357.35 amended to read: 357.36 282.08 [APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.] 358.1 The net proceeds from the sale or rental of any parcel of 358.2 forfeited land, or from the sale of products from the forfeited 358.3 land, must be apportioned by the county auditor to the taxing 358.4 districts interested in the land, as follows: 358.5 (1) the amounts necessary to pay the state general tax levy 358.6 against the parcel for taxes payable in the year for which the 358.7 tax judgment was entered, and for each subsequent payable year 358.8 up to and including the year of forfeiture, must be apportioned 358.9 to the state; 358.10 (2) the portion required to pay any amounts included in the 358.11 appraised value under section 282.01, subdivision 3, as 358.12 representing increased value due to any public improvement made 358.13 after forfeiture of the parcel to the state, but not exceeding 358.14 the amount certified by the clerk of the municipality must be 358.15 apportioned to the municipal subdivision entitled to it; 358.16(2)(3) the portion required to pay any amount included in 358.17 the appraised value under section 282.019, subdivision 5, 358.18 representing increased value due to response actions taken after 358.19 forfeiture of the parcel to the state, but not exceeding the 358.20 amount of expenses certified by the pollution control agency or 358.21 the commissioner of agriculture, must be apportioned to the 358.22 agency or the commissioner of agriculture and deposited in the 358.23 fund from which the expenses were paid; 358.24(3)(4) the portion of the remainder required to discharge 358.25 any special assessment chargeable against the parcel for 358.26 drainage or other purpose whether due or deferred at the time of 358.27 forfeiture, must be apportioned to the municipal subdivision 358.28 entitled to it; and 358.29(4)(5) any balance must be apportioned as follows: 358.30 (i) The county board may annually by resolution set aside 358.31 no more than 30 percent of the receipts remaining to be used for 358.32 timber development on tax-forfeited land and dedicated memorial 358.33 forests, to be expended under the supervision of the county 358.34 board. It must be expended only on projects approved by the 358.35 commissioner of natural resources. 358.36 (ii) The county board may annually by resolution set aside 359.1 no more than 20 percent of the receipts remaining to be used for 359.2 the acquisition and maintenance of county parks or recreational 359.3 areas as defined in sections 398.31 to 398.36, to be expended 359.4 under the supervision of the county board. 359.5 (iii) Any balance remaining must be apportioned as 359.6 follows: county, 40 percent; town or city, 20 percent; and 359.7 school district, 40 percent, provided, however, that in 359.8 unorganized territory that portion which would have accrued to 359.9 the township must be administered by the county board of 359.10 commissioners. 359.11 [EFFECTIVE DATE.] This section is effective for taxes 359.12 payable in 2004 and thereafter. 359.13 Sec. 34. Minnesota Statutes 2002, section 290C.02, 359.14 subdivision 3, is amended to read: 359.15 Subd. 3. [CLAIMANT.] "Claimant" means a person, as that 359.16 term is defined in section 290.01, subdivision 2, who owns 359.17 forest land in Minnesota and files an application authorized by 359.18 the Sustainable Forest Incentive Act. For purposes of section 359.19 290C.11, claimant also includes any person bound by the covenant 359.20 required in section 290C.04. No more than one claimant is 359.21 entitled to a payment under this chapter with respect to any 359.22 tract, parcel, or piece of land enrolled under this chapter that 359.23 has been assigned the same parcel identification number. When 359.24 enrolled forest land is owned by two or more persons, the owners 359.25 must determine between them which person may claim the payments 359.26 provided under sections 290C.01 to 290C.11. 359.27 [EFFECTIVE DATE.] This section is effective the day 359.28 following final enactment. 359.29 Sec. 35. Minnesota Statutes 2002, section 290C.02, 359.30 subdivision 7, is amended to read: 359.31 Subd. 7. [FOREST MANAGEMENT PLAN.] "Forest management 359.32 plan" means a written document providing a framework for 359.33 site-specific healthy, productive, and sustainable forest 359.34 resources. A forest management plan must include at least the 359.35 following: (i) owner-specific forest management goals for the 359.36propertyland; (ii) a reliable field inventory of the individual 360.1 forest cover types, their age, and density; (iii) a description 360.2 of the soil type and quality; (iv) an aerial photo and/or map of 360.3 the vegetation and other natural features of thepropertyland 360.4 clearly indicating the boundaries of thepropertyland and of 360.5 the forest land; (v) the proposed future conditions of the 360.6propertyland; (vi) prescriptions to meet proposed future 360.7 conditions of thepropertyland; (vii) a recommended timetable 360.8 for implementing the prescribed activities; and (viii) a legal 360.9 description of theparcelsland encompassing the parcels 360.10 included in the plan. All management activities prescribed in a 360.11 plan must be in accordance with the recommended timber 360.12 harvesting and forest management guidelines. The commissioner 360.13 of natural resources shall provide a framework for plan content 360.14 and updating and revising plans. 360.15 [EFFECTIVE DATE.] This section is effective the day 360.16 following final enactment. 360.17 Sec. 36. Minnesota Statutes 2002, section 290C.03, is 360.18 amended to read: 360.19 290C.03 [ELIGIBILITY REQUIREMENTS.] 360.20 (a)PropertyLand may be enrolled in the sustainable forest 360.21 incentive program under this chapter if all of the following 360.22 conditions are met: 360.23 (1)propertythe land consists of at least 20 contiguous 360.24 acres and at least 50 percent of the land must meet the 360.25 definition of forest land in section 88.01, subdivision 7, 360.26 during the enrollment; 360.27 (2) a forest management plan for thepropertyland must be 360.28 prepared by an approved plan writer and implemented during the 360.29 period in which the land is enrolled; 360.30 (3) timber harvesting and forest management guidelines must 360.31 be used in conjunction with any timber harvesting or forest 360.32 management activities conducted on the land during the period in 360.33 which the land is enrolled; 360.34 (4) thepropertyland must be enrolled for a minimum of 360.35 eight years; 360.36 (5) there are no delinquent property taxes on theproperty361.1 land; and 361.2 (6) claimants enrolling more than 1,920 acres in the 361.3 sustainable forest incentive program must allow year-round, 361.4 nonmotorized access to fish and wildlife resources on enrolled 361.5 land except within one-fourth mile of a permanent dwelling or 361.6 during periods of high fire hazard as determined by the 361.7 commissioner of natural resources. 361.8 (b) Claimants required to allow access under paragraph (a), 361.9 clause (6), do not by that action: 361.10 (1) extend any assurance that the land is safe for any 361.11 purpose; 361.12 (2) confer upon the person the legal status of an invitee 361.13 or licensee to whom a duty of care is owed; or 361.14 (3) assume responsibility for or incur liability for any 361.15 injury to the person or property caused by an act or omission of 361.16 the person. 361.17 [EFFECTIVE DATE.] This section is effective the day 361.18 following final enactment. 361.19 Sec. 37. Minnesota Statutes 2002, section 290C.07, is 361.20 amended to read: 361.21 290C.07 [CALCULATION OF INCENTIVE PAYMENT.] 361.22 An approved claimant under the sustainable forest incentive 361.23 program is eligible to receive an annual payment. The payment 361.24 shall equal the greater of: 361.25 (1) the difference between the property tax that would be 361.26 paid on thepropertyland using the previous year's statewide 361.27 average total township tax rate and the class rate for class 2b 361.28 timberland under section 273.13, subdivision 23, paragraph (b), 361.29 if thepropertyland were valued at (i) the average statewide 361.30 timberland market value per acre calculated under section 361.31 290C.06, and (ii) the average statewide timberland current use 361.32 value per acre calculated under section 290C.02, subdivision 5; 361.33 (2) two-thirds of the property tax amount determined by 361.34 using the previous year's statewide average total township tax 361.35 rate, the estimated market value per acre as calculated in 361.36 section 290C.06, and the class rate for 2b timberland under 362.1 section 273.13, subdivision 23, paragraph (b); or 362.2 (3) $1.50 per acre for each acre enrolled in the 362.3 sustainable forest incentive program. 362.4 [EFFECTIVE DATE.] This section is effective the day 362.5 following final enactment. 362.6 Sec. 38. Minnesota Statutes 2002, section 290C.09, is 362.7 amended to read: 362.8 290C.09 [REMOVAL FOR PROPERTY TAX DELINQUENCY.] 362.9 The commissioner shall immediately remove anypropertyland 362.10 enrolled in the sustainable forest incentive program for which 362.11 taxes are determined to be delinquent as provided in chapter 279 362.12 and shall notify the claimant of such action. Lands terminated 362.13 from the sustainable forest incentive program under this section 362.14 are not entitled to any payments provided in this chapter and 362.15 are subject to removal penalties prescribed in section 290C.11. 362.16 The claimant has 60 days from the receipt of notice from the 362.17 commissioner under this section to pay the delinquent taxes. If 362.18 the delinquent taxes are paid within this 60-day period, the 362.19 lands shall be reinstated in the program as if they had not been 362.20 withdrawn and without the payment of a penalty. 362.21 [EFFECTIVE DATE.] This section is effective the day 362.22 following final enactment. 362.23 Sec. 39. Minnesota Statutes 2002, section 290C.10, is 362.24 amended to read: 362.25 290C.10 [WITHDRAWAL PROCEDURES.] 362.26 An approved claimant under the sustainable forest incentive 362.27 program for a minimum of four years may notify the commissioner 362.28 of the intent to terminate enrollment. Within 90 days of 362.29 receipt of notice to terminate enrollment, the commissioner 362.30 shall inform the claimant in writing, acknowledging receipt of 362.31 this notice and indicating the effective date of termination 362.32 from the sustainable forest incentive program. Termination of 362.33 enrollment in the sustainable forest incentive program occurs on 362.34 January 1 of the fifth calendar year that begins after receipt 362.35 by the commissioner of the termination notice. After the 362.36 commissioner issues an effective date of termination, a claimant 363.1 wishing to continue theproperty'sland's enrollment in the 363.2 sustainable forest incentive program beyond the termination date 363.3 must apply for enrollment as prescribed in section 290C.04. A 363.4 claimant who withdraws a parcel of land from this program may 363.5 not reenroll the parcel for a period of three years. Within 90 363.6 days after the termination date, the commissioner shall execute 363.7 and acknowledge a document releasing the land from the covenant 363.8 required under this chapter. The document must be mailed to the 363.9 claimant and is entitled to be recorded. The commissioner may 363.10 allow early withdrawal from the Sustainable Forest Incentive Act 363.11 without penalty in cases of condemnation for a public purpose 363.12 notwithstanding the provisions of this section. 363.13 [EFFECTIVE DATE.] This section is effective the day 363.14 following final enactment. 363.15 Sec. 40. Minnesota Statutes 2002, section 290C.11, is 363.16 amended to read: 363.17 290C.11 [PENALTIES FOR REMOVAL.] 363.18 (a) If the commissioner determines thatpropertyland 363.19 enrolled in the sustainable forest incentive program is in 363.20 violation of the conditions for enrollment as specified in 363.21 section 290C.03, the commissioner shall notify the claimant of 363.22 the intent to remove all enrolled land from the sustainable 363.23 forest incentive program. The claimant has 60 days to appeal 363.24 this determination. The appeal must be made in writing to the 363.25 commissioner, who shall, within 60 days, notify the claimant as 363.26 to the outcome of the appeal. Within 60 days after the 363.27 commissioner denies an appeal, or within 120 days after the 363.28 commissioner received a written appeal if the commissioner has 363.29 not made a determination in that time, the owner may appeal to 363.30 tax court under chapter 271 as if the appeal is from an order of 363.31 the commissioner. 363.32 (b) If the commissioner determines thepropertyland is to 363.33 be removed from the sustainable forest incentive program, the 363.34 claimant is liable for payment to the commissioner in the amount 363.35 equal to the payments received under this chapter for the 363.36 previous four-year period, plus interest. The claimant has 90 364.1 days to satisfy the payment for removal of land from the 364.2 sustainable forest incentive program under this section. If the 364.3 penalty is not paid within the 90-day period under this 364.4 paragraph, the commissioner shall certify the amount to the 364.5 county auditor for collection as a part of the general ad 364.6 valorem real property taxes on the land in the following taxes 364.7 payable year. 364.8 [EFFECTIVE DATE.] This section is effective the day 364.9 following final enactment. 364.10 Sec. 41. [290C.12] [DEATH OF CLAIMANT.] 364.11 Within one year after the death of the claimant, the 364.12 claimant's heir, devisee, or estate must either: 364.13 (1) notify the commissioner of election to terminate 364.14 enrollment in the sustainable forest incentive program; or 364.15 (2) make an application under this chapter to continue 364.16 enrollment of the land in the program. 364.17 Upon notification under clause (1), the commissioner shall 364.18 terminate the enrollment and issue a document releasing the land 364.19 from the covenant as provided in section 290C.04, paragraph 364.20 (c). Penalties under section 290C.11 shall not apply. If the 364.21 application under clause (2) is approved, the land is enrolled 364.22 in the program without a break. If the commissioner does not 364.23 receive notification within one year after the date of death, 364.24 enrollment in the program shall be terminated and penalties 364.25 under section 290C.11 shall not apply. 364.26 [EFFECTIVE DATE.] This section is effective the day 364.27 following final enactment, except in the case of claimants dying 364.28 prior to the day following final enactment, heirs, devisees, or 364.29 estates may make the election either six months after the 364.30 effective date of this provision or one year after the death of 364.31 the claimant, whichever is later. 364.32 Sec. 42. Minnesota Statutes 2002, section 469.1792, 364.33 subdivision 3, is amended to read: 364.34 Subd. 3. [ACTIONS AUTHORIZED.] (a) An authority with a 364.35 district qualifying under this section may take either or both 364.36 of the following actions for any or all of its preexisting 365.1 districts: 365.2 (1) the authority may elect that the original local tax 365.3 rate under section 469.177, subdivision 1a, does not apply to 365.4 the district; and 365.5 (2) the authority may elect the fiscal disparities 365.6 contribution will be computed under section 469.177, subdivision 365.7 3, paragraph (a), regardless of the election that was made for 365.8 the district. 365.9 (b) The authority may take action under this subdivision 365.10 only after the municipality approves the action, by resolution, 365.11 after notice and public hearing in the manner provided under 365.12 section 469.175, subdivision 2. To be effective for taxes 365.13 payable in the following year, the resolution must be adopted 365.14 and the county auditor must be notified of the adoption on or 365.15 before July 1. 365.16 [EFFECTIVE DATE.] This section is effective for taxes 365.17 payable in 2004 and thereafter. 365.18 Sec. 43. Minnesota Statutes 2002, section 473F.07, 365.19 subdivision 4, is amended to read: 365.20 Subd. 4. [DISTRIBUTION NET TAX CAPACITY.] The 365.21 administrative auditor shall determine the proportion which the 365.22 index of each municipality bears to the sum of the indices of 365.23 all municipalities and shall then multiply this proportion in 365.24 the case of each municipality, by the areawide net tax capacity,365.25provided that if the distribution net tax capacity for a365.26municipality is less than 95 percent of the municipality's365.27previous year distribution net tax capacity, and more than ten365.28percent of the municipality's fiscal capacity consists of365.29manufactured home property, the municipality's distribution net365.30tax capacity will be increased to 95 percent of the previous365.31year net tax capacity and the distribution net tax capacity of365.32other municipalities in the area will be proportionately reduced. 365.33 [EFFECTIVE DATE.] This section is effective for taxes 365.34 payable in 2004 and subsequent years. 365.35 Sec. 44. Minnesota Statutes 2002, section 515B.1-116, is 365.36 amended to read: 366.1 515B.1-116 [RECORDING.] 366.2 (a) A declaration, bylaws, any amendment to a declaration 366.3 or bylaws, and any other instrument affecting a common interest 366.4 community shall be entitled to be recorded. In those counties 366.5 which have a tract index, the county recorder shall enter the 366.6 declaration in the tract index for each unit affected. The 366.7 registrar of titles shall file the declaration in accordance 366.8 with section 508.351 or 508A.351. 366.9 (b) The recording officer shall upon request promptly 366.10 assign a number (CIC number) to a common interest community to 366.11 be formed or to a common interest community resulting from the 366.12 merger of two or more common interest communities. 366.13 (c) Documents recorded pursuant to this chapter shall in 366.14 the case of registered land be filed, and references to the 366.15 recording of documents shall mean filed in the case of 366.16 registered land. 366.17 (d) Subject to any specific requirements of this chapter, 366.18 if a recorded document relating to a common interest community 366.19 purports to require a certain vote or signatures approving any 366.20 restatement or amendment of the document by a certain number or 366.21 percentage of unit owners or secured parties, and if the 366.22 amendment or restatement is to be recorded pursuant to this 366.23 chapter, an affidavit of the president or secretary of the 366.24 association stating that the required vote or signatures have 366.25 been obtained shall be attached to the document to be recorded 366.26 and shall constitute prima facie evidence of the representations 366.27 contained therein. 366.28 (e) If a common interest community is located on registered 366.29 land, the recording fee for any document affecting two or more 366.30 units shall be the then-current fee for registering the document 366.31 on the certificates of title for the first ten affected 366.32 certificates and one-third of the then-current fee for each 366.33 additional affected certificate. This provision shall not apply 366.34 to recording fees for deeds of conveyance, with the exception of 366.35 deeds given pursuant to sections 515B.2-119 and 515B.3-112. 366.36 (f) Except as permitted under this subsection, a recording 367.1 officer shall not file or record a declaration creating a new 367.2 common interest community, unless the county treasurer has 367.3 certified that the property taxes payable in the current year 367.4 for the real estate included in the proposed common interest 367.5 community have been paid. This certification is in addition to 367.6 the certification for delinquent taxes required by section 367.7 272.12. In the case of preexisting common interest communities, 367.8 the recording officer shall accept, file, and record the 367.9 following instruments, without requiring a certification as to 367.10 the current or delinquent taxes on any of the units in the 367.11 common interest community: (i) a declaration subjecting the 367.12 common interest community to this chapter; (ii) a declaration 367.13 changing the form of a common interest community pursuant to 367.14 section 515B.2-123; or (iii) an amendment to or restatement of 367.15 the declaration, bylaws, or CIC plat. In order forthe367.16instrumentsan instrument to be accepted and recorded under the 367.17 preceding sentence, theassessor must certify or otherwise367.18inform the recording officer that, for taxes payable in the367.19current year, the assessor has allocated taxable values to each367.20unit or has separately assessed each unitinstrument must not 367.21 create or change unit or common area boundaries. 367.22 [EFFECTIVE DATE.] This section is effective for deeds or 367.23 instruments accepted for recording or registration on or after 367.24 July 1, 2003. 367.25 Sec. 45. Laws 2001, First Special Session chapter 5, 367.26 article 3, section 61, the effective date, is amended to read: 367.27 [EFFECTIVE DATE.] This section is effective August 1, 2001, 367.28 for deeds issued on or after August 1, 2001. This section is 367.29 effective August 1, 2006, for deeds issued before August 1, 2001. 367.30 Sec. 46. Laws 2001, First Special Session chapter 5, 367.31 article 3, section 63, the effective date, is amended to read: 367.32 [EFFECTIVE DATE.] This section is effective August 1, 2001, 367.33 for deeds issued on or after August 1, 2001. This section is 367.34 effective August 1, 2006, for deeds issued before August 1, 2001. 367.35 Sec. 47. Laws 2002, chapter 377, article 6, section 4, the 367.36 effective date, is amended to read: 368.1 [EFFECTIVE DATE.] This section is effectivefor aids368.2payable in 2004May 16, 2002, and thereafter. 368.3 Sec. 48. [PRE-1940 HOUSING PERCENTAGE.] 368.4 For the purposes of determining local government aid 368.5 payment amounts for aids payable in 2003, the "pre-1940 housing 368.6 percentage" factor shall be based upon the 1990 federal census, 368.7 notwithstanding Minnesota Statutes 2002, section 477A.011, 368.8 subdivision 30. 368.9 [EFFECTIVE DATE.] This section is effective for aids 368.10 payable in 2003 only. 368.11 Sec. 49. [REPEALER.] 368.12 (a) Minnesota Statutes 2002, section 274.04, is repealed. 368.13 (b) Minnesota Statutes 2002, section 477A.065, is repealed 368.14 effective for aid payable in 2004 and thereafter. 368.15 (c) Minnesota Rules, parts 8106.0100, subparts 11, 15, and 368.16 16; and 8106.0200, are repealed effective the day following 368.17 final enactment. 368.18 ARTICLE 15 368.19 DEPARTMENT SALES AND USE TAX INITIATIVES 368.20 Section 1. Minnesota Statutes 2002, section 289A.50, 368.21 subdivision 2a, is amended to read: 368.22 Subd. 2a. [REFUND OF SALES TAX TO PURCHASERS.] (a) If a 368.23 vendor has collected from a purchaser a tax on a transaction 368.24 that is not subject to the tax imposed by chapter 297A, the 368.25 purchaser may apply directly to the commissioner for a refund 368.26 under this section if: 368.27(a)(1) the purchaser is currently registered or was 368.28 registered during the period of the claim, to collect and remit 368.29 the sales tax or to remit the use tax; and 368.30 (2) either 368.31(b)(i) the amount of the refund to be applied for exceeds 368.32 $500, or 368.33 (ii) the amount of the refund to be applied for does not 368.34 exceed $500, but the purchaser also applies for a capital 368.35 equipment claim at the same time, and the total of the two 368.36 refunds exceeds $500. 369.1 (b) The purchaser may not file more than two applications 369.2 for refund under this subdivision in a calendar year. 369.3 [EFFECTIVE DATE.] This section is effective for claims 369.4 filed on or after the day following final enactment. 369.5 Sec. 2. Minnesota Statutes 2002, section 289A.60, is 369.6 amended by adding a subdivision to read: 369.7 Subd. 25. [PENALTY FOR FAILURE TO PROPERLY COMPLETE SALES 369.8 TAX RETURN.] A person who fails to report local sales tax on a 369.9 sales tax return or who fails to report local sales tax on 369.10 separate tax lines on the sales tax return is subject to a 369.11 penalty of five percent of the amount of tax not properly 369.12 reported on the return. A person who files a consolidated tax 369.13 return but fails to report location information is subject to a 369.14 $500 penalty for each return not containing location 369.15 information. In addition, the commissioner may revoke the 369.16 privilege for a taxpayer to file consolidated returns and may 369.17 require the taxpayer to separately register each location and to 369.18 file a tax return for each location. 369.19 [EFFECTIVE DATE.] This section is effective for returns 369.20 filed after June 30, 2003. 369.21 Sec. 3. Minnesota Statutes 2002, section 297A.61, 369.22 subdivision 3, is amended to read: 369.23 Subd. 3. [SALE AND PURCHASE.] (a) "Sale" and "purchase" 369.24 include, but are not limited to, each of the transactions listed 369.25 in this subdivision. 369.26 (b) Sale and purchase include: 369.27 (1) any transfer of title or possession, or both, of 369.28 tangible personal property, whether absolutely or conditionally, 369.29 for a consideration in money or by exchange or barter; and 369.30 (2) the leasing of or the granting of a license to use or 369.31 consume, for a consideration in money or by exchange or barter, 369.32 tangible personal property, other than a manufactured home used 369.33 for residential purposes for a continuous period of 30 days or 369.34 more. 369.35 (c) Sale and purchase include the production, fabrication, 369.36 printing, or processing of tangible personal property for a 370.1 consideration for consumers who furnish either directly or 370.2 indirectly the materials used in the production, fabrication, 370.3 printing, or processing. 370.4 (d) Sale and purchase include the preparing for a 370.5 consideration of food. Notwithstanding section 297A.67, 370.6 subdivision 2, taxable food includes, but is not limited to, the 370.7 following: 370.8 (1) prepared food sold by the retailer; 370.9 (2) soft drinks; 370.10 (3) candy; and 370.11 (4) all food sold through vending machines. 370.12 (e) A sale and a purchase includes the furnishing for a 370.13 consideration of electricity, gas, water, or steam for use or 370.14 consumption within this state. 370.15 (f) A sale and a purchase includes the transfer for a 370.16 consideration of computer software. 370.17 (g) A sale and a purchase includes the furnishing for a 370.18 consideration of the following services: 370.19 (1) the privilege of admission to places of amusement, 370.20 recreational areas, or athletic events, and the making available 370.21 of amusement devices, tanning facilities, reducing salons, steam 370.22 baths, turkish baths, health clubs, and spas or athletic 370.23 facilities; 370.24 (2) lodging and related services by a hotel, rooming house, 370.25 resort, campground, motel, or trailer camp and the granting of 370.26 any similar license to use real property other than the renting 370.27 or leasing of it for a continuous period of 30 days or more; 370.28 (3) nonresidential parking services, whether on a 370.29 contractual, hourly, or other periodic basis, except for parking 370.30 at a meter; 370.31 (4) the granting of membership in a club, association, or 370.32 other organization if: 370.33 (i) the club, association, or other organization makes 370.34 available for the use of its members sports and athletic 370.35 facilities, without regard to whether a separate charge is 370.36 assessed for use of the facilities; and 371.1 (ii) use of the sports and athletic facility is not made 371.2 available to the general public on the same basis as it is made 371.3 available to members. 371.4 Granting of membership means both onetime initiation fees and 371.5 periodic membership dues. Sports and athletic facilities 371.6 include golf courses; tennis, racquetball, handball, and squash 371.7 courts; basketball and volleyball facilities; running tracks; 371.8 exercise equipment; swimming pools; and other similar athletic 371.9 or sports facilities; 371.10 (5) delivery of aggregate materials and concrete block by a 371.11 third party if the delivery would be subject to the sales tax if 371.12 provided by the seller of the aggregate material or concrete 371.13 block; and 371.14 (6) services as provided in this clause: 371.15 (i) laundry and dry cleaning services including cleaning, 371.16 pressing, repairing, altering, and storing clothes, linen 371.17 services and supply, cleaning and blocking hats, and carpet, 371.18 drapery, upholstery, and industrial cleaning. Laundry and dry 371.19 cleaning services do not include services provided by coin 371.20 operated facilities operated by the customer; 371.21 (ii) motor vehicle washing, waxing, and cleaning services, 371.22 including services provided by coin operated facilities operated 371.23 by the customer, and rustproofing, undercoating, and towing of 371.24 motor vehicles; 371.25 (iii) building and residential cleaning, maintenance, and 371.26 disinfecting and exterminating services; 371.27 (iv) detective, security, burglar, fire alarm, and armored 371.28 car services; but not including services performed within the 371.29 jurisdiction they serve by off-duty licensed peace officers as 371.30 defined in section 626.84, subdivision 1, or services provided 371.31 by a nonprofit organization for monitoring and electronic 371.32 surveillance of persons placed on in-home detention pursuant to 371.33 court order or under the direction of the Minnesota department 371.34 of corrections; 371.35 (v) pet grooming services; 371.36 (vi) lawn care, fertilizing, mowing, spraying and sprigging 372.1 services; garden planting and maintenance; tree, bush, and shrub 372.2 pruning, bracing, spraying, and surgery; indoor plant care; 372.3 tree, bush, shrub, and stump removal; and tree trimming for 372.4 public utility lines. Services performed under a construction 372.5 contract for the installation of shrubbery, plants, sod, trees, 372.6 bushes, and similar items are not taxable; 372.7 (vii) massages, except when provided by a licensed health 372.8 care facility or professional or upon written referral from a 372.9 licensed health care facility or professional for treatment of 372.10 illness, injury, or disease; and 372.11 (viii) the furnishing of lodging, board, and care services 372.12 for animals in kennels and other similar arrangements, but 372.13 excluding veterinary and horse boarding services. 372.14 In applying the provisions of this chapter, the terms 372.15 "tangible personal property" and "sales at retail" include 372.16 taxable services listed in clause (6), items (i) to (vi) and 372.17 (viii) and the provision of these taxable services, unless 372.18 specifically provided otherwise. Services performed by an 372.19 employee for an employer are not taxable. Services performed by 372.20 a partnership or association for another partnership or 372.21 association are not taxable if one of the entities owns or 372.22 controls more than 80 percent of the voting power of the equity 372.23 interest in the other entity. Services performed between 372.24 members of an affiliated group of corporations are not taxable. 372.25 For purposes ofthis sectionthe preceding sentence, "affiliated 372.26 group of corporations" includes those entities that would be 372.27 classified as members of an affiliated group under United States 372.28 Code, title 26, section 1504, and that are eligible to file a 372.29 consolidated tax return for federal income tax purposes. 372.30 (h) A sale and a purchase includes the furnishing for a 372.31 consideration of tangible personal property or taxable services 372.32 by the United States or any of its agencies or 372.33 instrumentalities, or the state of Minnesota, its agencies, 372.34 instrumentalities, or political subdivisions. 372.35 (i) A sale and a purchase includes the furnishing for a 372.36 consideration of telecommunications services, including cable 373.1 television services and direct satellite services. 373.2 Telecommunications services are taxed to the extent allowed 373.3 under federal law if those services: 373.4 (1) either (i) originate and terminate in this state; or 373.5 (ii) originate in this state and terminate outside the state and 373.6 the service is charged to atelephone numbertelecommunications 373.7 customer located in this state or to the account of any 373.8 transmission instrument in this state; or (iii) originate 373.9 outside this state and terminate in this state and the service 373.10 is charged to atelephone numbertelecommunications customer 373.11 located in this state or to the account of any transmission 373.12 instrument in this state; or 373.13 (2) are rendered by providing a private communications 373.14 service for which the customer has one or more locations within 373.15 Minnesota connected to the service and the service is charged to 373.16 atelephone numbertelecommunications customer located in this 373.17 state or to the account of any transmission instrument in this 373.18 state. 373.19 All charges for mobile telecommunications services, as 373.20 defined in United States Code, title 4, section 124, are deemed 373.21 to be provided by the customer's home service provider and 373.22 sourced to the customer's place of primary use and are subject 373.23 to tax based upon the customer's place of primary use in 373.24 accordance with the Mobile Telecommunications Sourcing Act, 373.25 United States Code, title 4, sections 116 to 126. All other 373.26 definitions and provisions of the Mobile Telecommunications 373.27 Sourcing Act as provided in United States Code, title 4, are 373.28 hereby adopted. 373.29 (j) A sale and a purchase includes the furnishing for a 373.30 consideration of installation if the installation charges would 373.31 be subject to the sales tax if the installation were provided by 373.32 the seller of the item being installed. 373.33 [EFFECTIVE DATE.] This section is effective the day 373.34 following final enactment. 373.35 Sec. 4. Minnesota Statutes 2002, section 297A.61, 373.36 subdivision 12, is amended to read: 374.1 Subd. 12. [FARM MACHINERY.] (a) "Farm machinery" means new 374.2 or used machinery, equipment, implements, accessories, and 374.3 contrivances used directly and principally intheagricultural 374.4 productionfor sale, but not including the processing, of374.5livestock, dairy animals, dairy products, poultry and poultry374.6products, fruits, vegetables, trees and shrubs, plants, forage,374.7grains, and bees and apiary products.374.8(b) Farm machinery includesincluding, but not limited to: 374.9 (1) machinery for the preparation, seeding, or cultivation 374.10 of soil for growing agricultural cropsand sod, for the374.11harvesting and threshing of agricultural products, or for the374.12harvesting or mowing of sod; 374.13 (2) barn cleaners, milking systems, grain dryers, feeding 374.14 systems including stationary feed bunks, and similar 374.15 installations, whether or not the equipment is installed by the 374.16 seller and becomes part of the real property; and 374.17 (3) irrigation equipment sold for exclusively agricultural 374.18 use, including pumps, pipe fittings, valves, sprinklers, and 374.19 other equipment necessary to the operation of an irrigation 374.20 system when sold as part of an irrigation system, whether or not 374.21 the equipment is installed by the seller and becomes part of the 374.22 real property;. 374.23(4) logging equipment, including chain saws used for374.24commercial logging;374.25(5) fencing used for the containment of farmed cervidae, as374.26defined in section 17.451, subdivision 2;374.27(6) primary and backup generator units used to generate374.28electricity for the purpose of operating farm machinery, as374.29defined in this subdivision, or providing light or space heating374.30necessary for the production of livestock, dairy animals, dairy374.31products, or poultry and poultry products;374.32(7) aquaculture production equipment as defined in374.33subdivision 13; and374.34(8) equipment used for maple syrup harvesting.374.35(c)(b) Farm machinery does not include: 374.36 (1) repair or replacement parts; 375.1 (2) tools, shop equipment, grain bins, fencing material 375.2except fencing material covered by paragraph (b), clause (5), 375.3 communication equipment, and other farm supplies; 375.4 (3) motor vehicles taxed under chapter 297B; 375.5 (4) snowmobiles or snow blowers;or375.6 (5) lawn mowers except those used in the production of sod 375.7 for sale, or garden-type tractors or garden tillers; or 375.8 (6) machinery, equipment, implements, accessories, and 375.9 contrivances used directly in the production of horses not 375.10 raised for slaughter, fur-bearing animals, or research animals. 375.11 [EFFECTIVE DATE.] This section is effective for sales and 375.12 purchases made after June 30, 2003. 375.13 Sec. 5. Minnesota Statutes 2002, section 297A.61, 375.14 subdivision 34, is amended to read: 375.15 Subd. 34. [FOOD SOLD THROUGH VENDING MACHINES.] "Food sold 375.16 through vending machines" means food dispensed from a machine or 375.17 othermechanicaldevice that accepts payment including honor 375.18 payments. 375.19 [EFFECTIVE DATE.] This section is effective for sales and 375.20 purchases made on or after the day following final enactment. 375.21 Sec. 6. Minnesota Statutes 2002, section 297A.61, is 375.22 amended by adding a subdivision to read: 375.23 Subd. 35. [AGRICULTURAL PRODUCTION.] "Agricultural 375.24 production" includes, but is not limited to, horticulture, 375.25 silviculture, floriculture, maple syrup harvesting, and the 375.26 raising of pets, livestock as defined in section 17A.03, 375.27 subdivision 5, poultry, dairy and poultry products, bees and 375.28 apiary products, agricultural crops, sod, fur-bearing animals, 375.29 research animals, and horses. 375.30 [EFFECTIVE DATE.] This section is effective for sales and 375.31 purchases made after June 30, 2003. 375.32 Sec. 7. Minnesota Statutes 2002, section 297A.665, is 375.33 amended to read: 375.34 297A.665 [PRESUMPTION OF TAX; BURDEN OF PROOF.] 375.35 (a) For the purpose of the proper administration of this 375.36 chapter and to prevent evasion of the tax, until the contrary is 376.1 established, it is presumed that: 376.2 (1) all gross receipts are subject to the tax; and 376.3 (2) all retail sales for delivery in Minnesota are for 376.4 storage, use, or other consumption in Minnesota. 376.5 (b) The burden of proving that a sale is not a taxable 376.6 retail sale is on the seller. However, the seller may take from 376.7 the purchaser at the time of the saleana fully completed 376.8 exemption certificateclaiming that the property purchased is376.9for resale or that the sale is otherwise exempt from the tax376.10imposed by this chapterwhich conclusively relieves the seller 376.11 from collecting and remitting the tax. This relief from 376.12 liability does not apply to a seller who fraudulently fails to 376.13 collect the tax or solicits purchasers to participate in the 376.14 unlawful claim of an exemption. If a seller claiming that 376.15 certain sales are exempt, who doesis notpossessin possession 376.16 of the required exemption certificates, must acquire the376.17certificateswithin 60 days after receiving written notice from 376.18 the commissioner that the certificates are required, deductions 376.19 claimed by the seller that required delivery of the certificates 376.20 must be disallowed. If the certificates arenot376.21obtaineddelivered to the commissioner within the 60-day period, 376.22 thesales are considered taxable sales under this376.23chapter.commissioner may verify the reason or basis for the 376.24 exemption claimed in the certificates before allowing any 376.25 deductions. A deduction must not be granted on the basis of 376.26 certificates delivered to the commissioner after the 60-day 376.27 period. 376.28 (c) A purchaser of tangible personal property or any items 376.29 listed in section 297A.63 that are shipped or brought to 376.30 Minnesota by the purchaser has the burden of proving that the 376.31 property was not purchased from a retailer for storage, use, or 376.32 consumption in Minnesota. 376.33 [EFFECTIVE DATE.] This section is effective for exemption 376.34 certificates received for sales occurring after June 30, 2003. 376.35 Sec. 8. Minnesota Statutes 2002, section 297A.67, 376.36 subdivision 2, is amended to read: 377.1 Subd. 2. [FOOD AND FOOD INGREDIENTS.] Food and food 377.2 ingredients are exempt. For purposes of this subdivision, 377.3 "food" and "food ingredients" mean substances, whether in 377.4 liquid, concentrated, solid, frozen, dried, or dehydrated form, 377.5 that are sold for ingestion or chewing by humans and are 377.6 consumed for their taste or nutritional value. Food and food 377.7 ingredients exempt under this subdivision do not include candy, 377.8 soft drinks, food sold through vending machines, and prepared 377.9 foods. Food and food ingredients do not include alcoholic 377.10 beverages, dietary supplements, and tobacco. For purposes of 377.11 this subdivision, "alcoholic beverages" means beverages that are 377.12 suitable for human consumption and contain one-half of one 377.13 percent or more of alcohol by volume. For purposes of this 377.14 subdivision, "tobacco" means cigarettes, cigars, chewing or pipe 377.15 tobacco, or any other item that contains tobacco. For purposes 377.16 of this subdivision, "dietary supplements" means any product, 377.17 other than tobacco, intended to supplement the diet that: 377.18 (1) contains one or more of the following dietary 377.19 ingredients: 377.20 (i) a vitamin; 377.21 (ii) a mineral; 377.22 (iii) an herb or other botanical; 377.23 (iv) an amino acid; 377.24 (v) a dietary substance for use by humans to supplement the 377.25 diet by increasing the total dietary intake; and 377.26 (vi) a concentrate, metabolite, constituent, extract, or 377.27 combination of any ingredient described in items (i) to (v); 377.28 (2) is intended for ingestion in tablet, capsule, powder, 377.29 softgel, gelcap, or liquid form, or if not intended for 377.30 ingestion in such form, is not represented as conventional food 377.31 and is not represented for use as a sole item of a meal or of 377.32 the diet; and 377.33 (3) is required to be labeled as a dietary supplement, 377.34 identifiable by the supplement facts box found on the label and 377.35 as required pursuant to Code of Federal Regulations, title 21, 377.36 section 101.36. 378.1 [EFFECTIVE DATE.] This section is effective the day 378.2 following final enactment. 378.3 Sec. 9. Minnesota Statutes 2002, section 297A.68, 378.4 subdivision 5, is amended to read: 378.5 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 378.6 exempt. The tax must be imposed and collected as if the rate 378.7 under section 297A.62, subdivision 1, applied, and then refunded 378.8 in the manner provided in section 297A.75. 378.9 "Capital equipment" means machinery and equipment purchased 378.10 or leased, and used in this state by the purchaser or lessee 378.11 primarily for manufacturing, fabricating, mining, or refining 378.12 tangible personal property to be sold ultimately at retail if 378.13 the machinery and equipment are essential to the integrated 378.14 production process of manufacturing, fabricating, mining, or 378.15 refining. Capital equipment also includes machinery and 378.16 equipment used to electronically transmit results retrieved by a 378.17 customer of an online computerized data retrieval system. 378.18 (b) Capital equipment includes, but is not limited to: 378.19 (1) machinery and equipment used to operate, control, or 378.20 regulate the production equipment; 378.21 (2) machinery and equipment used for research and 378.22 development, design, quality control, and testing activities; 378.23 (3) environmental control devices that are used to maintain 378.24 conditions such as temperature, humidity, light, or air pressure 378.25 when those conditions are essential to and are part of the 378.26 production process; 378.27 (4) materials and supplies used to construct and install 378.28 machinery or equipment; 378.29 (5) repair and replacement parts, including accessories, 378.30 whether purchased as spare parts, repair parts, or as upgrades 378.31 or modifications to machinery or equipment; 378.32 (6) materials used for foundations that support machinery 378.33 or equipment; 378.34 (7) materials used to construct and install special purpose 378.35 buildings used in the production process; and 378.36 (8) ready-mixed concretetrucksequipment in which the 379.1 ready-mixed concrete is mixed as part of the delivery 379.2 process regardless if mounted on a chassis and leases of 379.3 ready-mixed concrete trucks. 379.4 (c) Capital equipment does not include the following: 379.5 (1) motor vehicles taxed under chapter 297B; 379.6 (2) machinery or equipment used to receive or store raw 379.7 materials; 379.8 (3) building materials, except for materials included in 379.9 paragraph (b), clauses (6) and (7); 379.10 (4) machinery or equipment used for nonproduction purposes, 379.11 including, but not limited to, the following: plant security, 379.12 fire prevention, first aid, and hospital stations; support 379.13 operations or administration; pollution control; and plant 379.14 cleaning, disposal of scrap and waste, plant communications, 379.15 space heating, cooling, lighting, or safety; 379.16 (5) farm machinery and aquaculture production equipment as 379.17 defined by section 297A.61, subdivisions 12 and 13; 379.18 (6) machinery or equipment purchased and installed by a 379.19 contractor as part of an improvement to real property; or 379.20 (7) any other item that is not essential to the integrated 379.21 process of manufacturing, fabricating, mining, or refining. 379.22 (d) For purposes of this subdivision: 379.23 (1) "Equipment" means independent devices or tools separate 379.24 from machinery but essential to an integrated production 379.25 process, including computers and computer software, used in 379.26 operating, controlling, or regulating machinery and equipment; 379.27 and any subunit or assembly comprising a component of any 379.28 machinery or accessory or attachment parts of machinery, such as 379.29 tools, dies, jigs, patterns, and molds. 379.30 (2) "Fabricating" means to make, build, create, produce, or 379.31 assemble components or property to work in a new or different 379.32 manner. 379.33 (3) "Integrated production process" means a process or 379.34 series of operations through which tangible personal property is 379.35 manufactured, fabricated, mined, or refined. For purposes of 379.36 this clause, (i) manufacturing begins with the removal of raw 380.1 materials from inventory and ends when the last process prior to 380.2 loading for shipment has been completed; (ii) fabricating begins 380.3 with the removal from storage or inventory of the property to be 380.4 assembled, processed, altered, or modified and ends with the 380.5 creation or production of the new or changed product; (iii) 380.6 mining begins with the removal of overburden from the site of 380.7 the ores, minerals, stone, peat deposit, or surface materials 380.8 and ends when the last process before stockpiling is completed; 380.9 and (iv) refining begins with the removal from inventory or 380.10 storage of a natural resource and ends with the conversion of 380.11 the item to its completed form. 380.12 (4) "Machinery" means mechanical, electronic, or electrical 380.13 devices, including computers and computer software, that are 380.14 purchased or constructed to be used for the activities set forth 380.15 in paragraph (a), beginning with the removal of raw materials 380.16 from inventory through completion of the product, including 380.17 packaging of the product. 380.18(4)(5) "Machinery and equipment used for pollution control" 380.19 means machinery and equipment used solely to eliminate, prevent, 380.20 or reduce pollution resulting from an activity described in 380.21 paragraph (a). 380.22(5)(6) "Manufacturing" means an operation or series of 380.23 operations where raw materials are changed in form, composition, 380.24 or condition by machinery and equipment and which results in the 380.25 production of a new article of tangible personal property. For 380.26 purposes of this subdivision, "manufacturing" includes the 380.27 generation of electricity or steam to be sold at retail. 380.28(6)(7) "Mining" means the extraction of minerals, ores, 380.29 stone, or peat. 380.30(7)(8) "Online data retrieval system" means a system whose 380.31 cumulation of information is equally available and accessible to 380.32 all its customers. 380.33(8)(9) "Primarily" means machinery and equipment used 50 380.34 percent or more of the time in an activity described in 380.35 paragraph (a). 380.36(9)(10) "Refining" means the process of converting a 381.1 natural resource toaan intermediate or finished product, 381.2 including the treatment of water to be sold at retail. 381.3 [EFFECTIVE DATE.] This section is effective for sales and 381.4 purchases made after December 31, 2003. 381.5 Sec. 10. Minnesota Statutes 2002, section 297A.68, is 381.6 amended by adding a subdivision to read: 381.7 Subd. 39. [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 381.8 tangible personal property or services is exempt from tax for a 381.9 period of six months from the effective date of the law change 381.10 that results in the imposition of the tax under this chapter if: 381.11 (1) the act imposing the tax does not have transitional 381.12 effective date language for existing construction contracts and 381.13 construction bids; and 381.14 (2) the requirements of paragraph (b) are met. 381.15 (b) A sale is tax exempt under paragraph (a) if it meets 381.16 the requirements of either clause (1) or (2): 381.17 (1) For a construction contract: 381.18 (i) the goods or services sold must be used for the 381.19 performance of a bona fide written lump sum or fixed price 381.20 construction contract; 381.21 (ii) the contract must be entered into before the date the 381.22 goods or services become subject to the sales tax; 381.23 (iii) the contract must not provide for allocation of 381.24 future taxes; and 381.25 (iv) for each qualifying contract the contractor must give 381.26 the seller documentation of the contract on which an exemption 381.27 is to be claimed. 381.28 (2) For a bid: 381.29 (i) the goods or services sold must be used pursuant to an 381.30 obligation of a bid or bids; 381.31 (ii) the bid or bids must be submitted and accepted before 381.32 the date the goods or services became subject to the sales tax; 381.33 (iii) the bid or bids must not be able to be withdrawn, 381.34 modified, or changed without forfeiting a bond; and 381.35 (iv) for each qualifying bid, the contractor must give the 381.36 seller documentation of the bid on which an exemption is to be 382.1 claimed. 382.2 [EFFECTIVE DATE.] This section is effective the day 382.3 following final enactment. 382.4 Sec. 11. Minnesota Statutes 2002, section 297A.69, 382.5 subdivision 2, is amended to read: 382.6 Subd. 2. [MATERIALS CONSUMED IN AGRICULTURAL PRODUCTION.] 382.7(a)Materials stored, used, or consumed in agricultural 382.8 production of personal property intended to be sold ultimately 382.9 at retail are exempt, whether or not the item becomes an 382.10 ingredient or constituent part of the property produced. 382.11 Materials that qualify for this exemption include, but are not 382.12 limited to, the following: 382.13 (1) feeds, seeds, trees, fertilizers, and herbicides, 382.14 including when purchased for use by farmers in a federal or 382.15 state farm or conservation program; 382.16 (2) materials sold to a veterinarian to be used or consumed 382.17 in the care, medication, and treatment of agricultural 382.18 production animals and horses; 382.19 (3) chemicals, including chemicals used for cleaning food 382.20 processing machinery and equipment; 382.21 (4) materials, including chemicals, fuels, and electricity 382.22 purchased by persons engaged in agricultural production to treat 382.23 waste generated as a result of the production process; 382.24 (5) fuels, electricity, gas, and steam used or consumed in 382.25 the production process, except that electricity, gas, or steam 382.26 used for space heating, cooling, or lighting is exempt if (i) it 382.27 is in excess of the average climate control or lighting for the 382.28 production area, and (ii) it is necessary to produce that 382.29 particular product; 382.30 (6) petroleum products and lubricants; 382.31 (7) packaging materials, including returnable containers 382.32 used in packaging food and beverage products; and 382.33 (8) accessory tools and equipment that are separate 382.34 detachable units with an ordinary useful life of less than 12 382.35 months used in producing a direct effect upon the product. 382.36 Machinery, equipment, implements, tools, accessories, 383.1 appliances, contrivances, and furniture and fixtures, except 383.2 those listed in this clause are not included within this 383.3 exemption. 383.4(b) For purposes of this subdivision, "agricultural383.5production" includes, but is not limited to, horticulture,383.6floriculture, maple syrup harvesting, and the raising of pets,383.7fur-bearing animals, research animals, horses, farmed cervidae383.8as defined in section 17.451, subdivision 2, llamas as defined383.9in section 17.455, subdivision 2, and ratitae as defined in383.10section 17.453, subdivision 3.383.11 [EFFECTIVE DATE.] This section is effective for sales and 383.12 purchases made after December 31, 2003. 383.13 Sec. 12. Minnesota Statutes 2002, section 297A.69, 383.14 subdivision 3, is amended to read: 383.15 Subd. 3. [FARM MACHINERYREPAIR AND REPLACEMENT PARTS.] 383.16 Repair and replacement parts, except tires, used for maintenance 383.17 or repair of farm machinery, logging equipment, and aquaculture 383.18 production equipment are exempt, if the part replaces afarm383.19 machinery part assigned a specific or generic part number by the 383.20 manufacturer of thefarmmachinery. 383.21 [EFFECTIVE DATE.] This section is effective for sales and 383.22 purchases made after June 30, 2003. 383.23 Sec. 13. Minnesota Statutes 2002, section 297A.69, 383.24 subdivision 4, is amended to read: 383.25 Subd. 4. [FARMMACHINERY, EQUIPMENT, AND FENCING.] The 383.26 following machinery, equipment, and fencing is exempt: 383.27 (1) farm machineryis exempt.; 383.28 (2) logging equipment, including chain saws used for 383.29 commercial logging; 383.30 (3) fencing used for the containment of farmed cervidae, as 383.31 defined in section 17.451, subdivision 2; 383.32 (4) primary and backup generator units used to generate 383.33 electricity for the purpose of operating farm machinery, 383.34 aquacultural production equipment, or logging equipment, or 383.35 providing light or space heating necessary for the production of 383.36 livestock, dairy animals, dairy products, or poultry and poultry 384.1 products; and 384.2 (5) aquaculture production equipment. 384.3 [EFFECTIVE DATE.] This section is effective for sales and 384.4 purchases made after June 30, 2003. 384.5 Sec. 14. Minnesota Statutes 2002, section 297B.025, 384.6 subdivision 1, is amended to read: 384.7 Subdivision 1. [NONCOLLECTOR VEHICLE.] Purchase or use of 384.8 a passenger automobile as defined in section 168.011, 384.9 subdivision 7, shall be taxed pursuant to section 297B.02, 384.10 subdivision 2, if the passenger automobileis(1) is in the 384.11 tenth or subsequent year of vehicle life, and (2)is not an384.12above-market automobile as designated by the registrar of motor384.13vehiclesdoes not have a resale value of $3,000 or more, as 384.14 determined using nationally recognized sources of information on 384.15 automobile resale values, as designated by the registrar of 384.16 motor vehicles. 384.17The registrar of motor vehicles shall prepare, and384.18distribute to all deputy motor vehicle registrars by July 15,384.191985, a listing by make, model, and year of above-market384.20automobiles. Except as provided by subdivision 2, the registrar384.21must include in the list all automobiles with a resale value of384.22$3,000 or more, as determined using nationally recognized384.23sources of information on automobile resale values. The384.24registrar shall revise the list by February 1 of each year. The384.25initial list and all subsequent revisions must include only384.26those automobiles which are in the tenth or subsequent year of384.27vehicle life.384.28 [EFFECTIVE DATE.] This section is effective for vehicles 384.29 purchased after June 30, 2003. 384.30 Sec. 15. Minnesota Statutes 2002, section 297B.025, 384.31 subdivision 2, is amended to read: 384.32 Subd. 2. [COLLECTOR VEHICLE.] A passenger automobile that 384.33 is registered under section 168.10, subdivision 1a, 1b, 1c, 1d, 384.34 or 1h, or a fire truck registered under section 168.10, 384.35 subdivision 1c, shall be taxed under section 297B.02, 384.36 subdivision 3, and the registrar shall not designate as an385.1above-market automobile a passenger automobile or a fire truck385.2registered under those subdivisions. If the vehicle is 385.3 subsequently registered in another class not under section 385.4 168.10, subdivision 1a, 1b, 1c, 1d, or 1h, within one year of 385.5 the date of registration under those subdivisions, it shall be 385.6 subject to the full excise tax imposed under subdivision 1. 385.7 [EFFECTIVE DATE.] This section is effective for vehicles 385.8 purchased after December 31, 2003. 385.9 Sec. 16. Minnesota Statutes 2002, section 297B.035, 385.10 subdivision 1, is amended to read: 385.11 Subdivision 1. [ORDINARY COURSE OF BUSINESS.] Except as 385.12 provided in this section, motor vehicles purchased for resale in 385.13 the ordinary course of businessor usedby any motor vehicle 385.14 dealer, as defined in section 168.011, subdivision 21, who is 385.15 licensed under section 168.27, subdivision 2 or 3, which bear 385.16 dealer plates as authorized by section 168.27, subdivision 16, 385.17 shall be exempt from the provisions of this chapter. 385.18 [EFFECTIVE DATE.] This section is effective the day 385.19 following final enactment. 385.20 Sec. 17. [REPEALER.] 385.21 (a) Minnesota Statutes 2002, section 297A.72, subdivision 385.22 1, is repealed effective for exemption certificates received for 385.23 sales occurring after June 30, 2003. 385.24 (b) Minnesota Statutes 2002, section 297A.97, is repealed 385.25 effective for sales and purchases occurring after December 31, 385.26 2003. 385.27 (c) Minnesota Rules, parts 8130.0800, subparts 5 and 12; 385.28 8130.1300; 8130.1600, subpart 5; 8130.1700, subparts 3 and 4; 385.29 8130.4800, subpart 2; 8130.7500, subpart 5; 8130.8000; and 385.30 8130.8300, are repealed effective the day following final 385.31 enactment. 385.32 ARTICLE 16 385.33 DEPARTMENT SPECIAL TAXES INITIATIVES 385.34 Section 1. Minnesota Statutes 2002, section 115B.24, 385.35 subdivision 8, is amended to read: 385.36 Subd. 8. [PENALTIES; ENFORCEMENT.] The audit, penalty and 386.1 enforcement provisions applicable to corporate franchise taxes 386.2 imposed under chapter 290 apply to the taxes imposed under 386.3 section 115B.22 and those provisions shall be administered by 386.4 the commissioner. 386.5 [EFFECTIVE DATE.] This section is effective the day 386.6 following final enactment. 386.7 Sec. 2. Minnesota Statutes 2002, section 295.50, 386.8 subdivision 9b, is amended to read: 386.9 Subd. 9b. [PATIENT SERVICES.] (a) "Patient services" means 386.10 inpatient and outpatient services and other goods and services 386.11 provided by hospitals, surgical centers, or health care 386.12 providers. They include the following health care goods and 386.13 services provided to a patient or consumer: 386.14 (1) bed and board; 386.15 (2) nursing services and other related services; 386.16 (3) use of hospitals, surgical centers, or health care 386.17 provider facilities; 386.18 (4) medical social services; 386.19 (5) drugs, biologicals, supplies, appliances, and 386.20 equipment; 386.21 (6) other diagnostic or therapeutic items or services; 386.22 (7) medical or surgical services; 386.23 (8) items and services furnished to ambulatory patients not 386.24 requiring emergency care; 386.25 (9) emergency services; and 386.26 (10) covered services listed in section 256B.0625 and in 386.27 Minnesota Rules, parts 9505.0170 to 9505.0475. 386.28 (b) "Patient services" does not include: 386.29 (1) services provided to nursing homes licensed under 386.30 chapter 144A;and386.31 (2) examinations for purposes of utilization reviews, 386.32 insurance claims or eligibility, litigation, and employment, 386.33 including reviews of medical records for those purposes; 386.34 (3) services provided by community residential mental 386.35 health facilities licensed under Minnesota Rules, parts 386.36 9520.0500 to 9520.0690; 387.1 (4) services provided by community support programs and 387.2 family community support programs approved under Minnesota 387.3 Rules, parts 9535.1700 to 9535.1760; 387.4 (5) services provided by community mental health centers as 387.5 defined in section 245.62, subdivision 2; 387.6 (6) services provided by assisted living programs and 387.7 congregate housing programs; and 387.8 (7) hospice care services. 387.9 [EFFECTIVE DATE.] This section is effective for gross 387.10 revenues received after December 31, 2002. 387.11 Sec. 3. Minnesota Statutes 2002, section 295.53, 387.12 subdivision 1, is amended to read: 387.13 Subdivision 1. [EXEMPTIONS.] (a) The following payments 387.14 are excluded from the gross revenues subject to the hospital, 387.15 surgical center, or health care provider taxes under sections 387.16 295.50 to295.57295.59: 387.17 (1) payments received for services provided under the 387.18 Medicare program, including payments received from the 387.19 government, and organizations governed by sections 1833 and 1876 387.20 of title XVIII of the federal Social Security Act, United States 387.21 Code, title 42, section 1395, and enrollee deductibles, 387.22 coinsurance, and copayments, whether paid by the Medicare 387.23 enrollee or by a Medicare supplemental coverage as defined in 387.24 section 62A.011, subdivision 3, clause (10). Payments for 387.25 services not covered by Medicare are taxable; 387.26 (2) medical assistance payments including payments received 387.27 directly from the government or from a prepaid plan; 387.28 (3) payments received for home health care services; 387.29 (4) payments received from hospitals or surgical centers 387.30 for goods and services on which liability for tax is imposed 387.31 under section 295.52 or the source of funds for the payment is 387.32 exempt under clause (1), (2), (7), (8), (10), (13), 387.33 or(20)(17); 387.34 (5) payments received from health care providers for goods 387.35 and services on which liability for tax is imposed under this 387.36 chapter or the source of funds for the payment is exempt under 388.1 clause (1), (2), (7), (8), (10), (13), or(20)(17); 388.2 (6) amounts paid for legend drugs, other than nutritional 388.3 products, to a wholesale drug distributor who is subject to tax 388.4 under section 295.52, subdivision 3, reduced by reimbursements 388.5 received for legend drugs otherwise exempt under this chapter; 388.6 (7) payments received under the general assistance medical 388.7 care program including payments received directly from the 388.8 government or from a prepaid plan; 388.9 (8) payments received for providing services under the 388.10 MinnesotaCare program including payments received directly from 388.11 the government or from a prepaid plan and enrollee deductibles, 388.12 coinsurance, and copayments. For purposes of this clause, 388.13 coinsurance means the portion of payment that the enrollee is 388.14 required to pay for the covered service; 388.15 (9) payments received by a health care provider or the 388.16 wholly owned subsidiary of a health care provider for care 388.17 provided outside Minnesota; 388.18 (10) payments received from the chemical dependency fund 388.19 under chapter 254B; 388.20 (11) payments received in the nature of charitable 388.21 donations that are not designated for providing patient services 388.22 to a specific individual or group; 388.23 (12) payments received for providing patient services 388.24 incurred through a formal program of health care research 388.25 conducted in conformity with federal regulations governing 388.26 research on human subjects. Payments received from patients or 388.27 from other persons paying on behalf of the patients are subject 388.28 to tax; 388.29 (13) payments received from any governmental agency for 388.30 services benefiting the public, not including payments made by 388.31 the government in its capacity as an employer or insurer; 388.32(14) payments received for services provided by community388.33residential mental health facilities licensed under Minnesota388.34Rules, parts 9520.0500 to 9520.0690, community support programs388.35and family community support programs approved under Minnesota388.36Rules, parts 9535.1700 to 9535.1760, and community mental health389.1centers as defined in section 245.62, subdivision 2;389.2(15)(14) government payments received by a regional 389.3 treatment center; 389.4(16) payments received for hospice care services;389.5(17)(15) payments received by a health care provider for 389.6 hearing aids and related equipment or prescription eyewear 389.7 delivered outside of Minnesota; 389.8(18)(16) payments received by an educational institution 389.9 from student tuition, student activity fees, health care service 389.10 fees, government appropriations, donations, or grants. Fee for 389.11 service payments and payments for extended coverage are taxable; 389.12 and 389.13(19) payments received for services provided by: assisted389.14living programs and congregate housing programs; and389.15(20)(17) payments received under the federal Employees 389.16 Health Benefits Act, United States Code, title 5, section 389.17 8909(f), as amended by the Omnibus Reconciliation Act of 1990. 389.18 (b) Payments received by wholesale drug distributors for 389.19 legend drugs sold directly to veterinarians or veterinary bulk 389.20 purchasing organizations are excluded from the gross revenues 389.21 subject to the wholesale drug distributor tax under sections 389.22 295.50 to 295.59. 389.23 [EFFECTIVE DATE.] This section is effective for gross 389.24 revenues received after December 31, 2002. 389.25 Sec. 4. Minnesota Statutes 2002, section 297F.01, 389.26 subdivision 21a, is amended to read: 389.27 Subd. 21a. [UNLICENSED SELLER.] "Unlicensed seller" means 389.28 anyone who is not licensed under section 297F.03or 461.12to 389.29 sell the particular product to the purchaser or possessor of the 389.30 product. 389.31 [EFFECTIVE DATE.] This section is effective July 1, 2003. 389.32 Sec. 5. Minnesota Statutes 2002, section 297F.01, 389.33 subdivision 23, is amended to read: 389.34 Subd. 23. [WHOLESALE SALES PRICE.] "Wholesale sales price" 389.35 means theestablishedprice stated on the price list in effect 389.36 at the time of sale for which a manufacturer or person sells a 390.1 tobacco product to a distributor, exclusive of any discount, 390.2 promotional offer, or other reduction. For purposes of this 390.3 subdivision, "price list" means the manufacturer's price at 390.4 which tobacco products are made available for sale to all 390.5 distributors on an ongoing basis. 390.6 [EFFECTIVE DATE.] This section is effective July 1, 2003. 390.7 Sec. 6. Minnesota Statutes 2002, section 297F.06, 390.8 subdivision 4, is amended to read: 390.9 Subd. 4. [TOBACCO PRODUCTS USE TAX.] The tobacco products 390.10 use tax does not apply to the possession, use, or storage of 390.11 tobacco productsin quantities of:that have an aggregate cost 390.12 in any calendar month to the consumer of $100 or less. 390.13(1) not more than 50 cigars;390.14(2) not more than ten ounces snuff or snuff powder;390.15(3) not more than one pound smoking or chewing tobacco or390.16any other tobacco product in the possession of any one consumer.390.17 [EFFECTIVE DATE.] This section is effective July 1, 2003. 390.18 Sec. 7. Minnesota Statutes 2002, section 297F.20, 390.19 subdivision 1, is amended to read: 390.20 Subdivision 1. [PENALTIES FOR FAILURE TO FILE OR PAY.] (a) 390.21 A person or consumer required to file a return, report, or other 390.22 document with the commissioner who fails to do so is guilty of a 390.23 misdemeanor. 390.24 (b) A person or consumer required to pay or to collect and 390.25 remit a tax under this chapter, who fails to do so when 390.26 required, is guilty of a misdemeanor. 390.27 [EFFECTIVE DATE.] This section is effective for acts 390.28 committed on or after July 1, 2003. 390.29 Sec. 8. Minnesota Statutes 2002, section 297F.20, 390.30 subdivision 2, is amended to read: 390.31 Subd. 2. [PENALTIES FOR KNOWING FAILURE TO FILE OR PAY.] 390.32 (a) A person or consumer required to file a return, report, or 390.33 other document with the commissioner, who knowingly, rather than 390.34 accidentally, inadvertently, or negligently, fails to file it 390.35 when required, is guilty of a gross misdemeanor. 390.36 (b) A person or consumer required to pay or to collect and 391.1 remit a tax under this chapter, who knowingly, rather than 391.2 accidentally, inadvertently, or negligently, fails to file it 391.3 when required, is guilty of a gross misdemeanor. 391.4 [EFFECTIVE DATE.] This section is effective for acts 391.5 committed on or after July 1, 2003. 391.6 Sec. 9. Minnesota Statutes 2002, section 297F.20, 391.7 subdivision 3, is amended to read: 391.8 Subd. 3. [FALSE OR FRAUDULENT RETURNS; PENALTIES.] (a) A 391.9 person or consumer who files with the commissioner a return, 391.10 report, or other document, or who maintains or provides invoices 391.11 subject to review by the commissioner under this chapter, known 391.12 by the person or consumer to be fraudulent or false concerning a 391.13 material matter, is guilty of a felony. 391.14 (b) A person or consumer who knowingly aids or assists in, 391.15 or advises in the preparation or presentation of a return, 391.16 report, invoice, or other document that is fraudulent or false 391.17 concerning a material matter, whether or not the falsity or 391.18 fraud is committed with the knowledge or consent of the 391.19 person or consumer authorized or required to present the return, 391.20 report, invoice, or other document, is guilty of a felony. 391.21 [EFFECTIVE DATE.] This section is effective for acts 391.22 committed on or after July 1, 2003. 391.23 Sec. 10. Minnesota Statutes 2002, section 297F.20, 391.24 subdivision 6, is amended to read: 391.25 Subd. 6. [UNSTAMPED CIGARETTES; UNTAXED TOBACCO PRODUCTS.] 391.26 (a) A person, other than a licensed distributor or a consumer, 391.27 who possesses, receives, or transportsmore than 200 butfewer 391.28 than 5,000 unstamped cigarettes, or up to$100$350 worth of 391.29 untaxed tobacco products is guilty of a misdemeanor. 391.30 (b) A person, other than a licensed distributor or a 391.31 consumer, who possesses, receives, or transports 5,000 or more, 391.32 but fewer than 20,001 unstamped cigarettes, orup to $500more 391.33 than $350 but less than $1,400 worth of untaxed tobacco products 391.34 is guilty of a gross misdemeanor. 391.35 (c) A person, other than a licensed distributor or a 391.36 consumer, who possesses, receives, or transports more than 392.1 20,000 unstamped cigarettes, or$500$1,400 or more worth of 392.2 untaxed tobacco products is guilty of a felony. 392.3 (d) For purposes of this subdivision, an individual in 392.4 possession of more than 4,999 unstamped cigarettes, or more than 392.5 $350 worth of untaxed tobacco products, is presumed not to be a 392.6 consumer. 392.7 [EFFECTIVE DATE.] This section is effective for acts 392.8 committed on or after July 1, 2003. 392.9 Sec. 11. Minnesota Statutes 2002, section 297F.20, 392.10 subdivision 9, is amended to read: 392.11 Subd. 9. [PURCHASES FROM UNLICENSED SELLERS.] (a) No 392.12 retailer or subjobber shall purchase cigarettes or tobacco 392.13 products from any person who is not licensed under section 392.14 297F.03 as a licensed distributor or subjobber. 392.15 (b) A retailer,or subjobber, or consumerwho purchases 392.16 from an unlicensed sellermore than 200 butfewer than 5,000 392.17 cigarettes or up to$100$350 worth of tobacco products is 392.18 guilty of a misdemeanor. 392.19(b)(c) A retailer,or subjobber, or consumerwho 392.20 purchases from an unlicensed seller 5,000 or more, but fewer 392.21 than 20,001 cigarettes orup to $500more than $350 but less 392.22 than $1,400 worth ofuntaxedtobacco products is guilty of a 392.23 gross misdemeanor. 392.24(c)(d) A retailer,or subjobber, or consumerwho 392.25 purchases from an unlicensed seller more than 20,000 cigarettes 392.26 or$500$1,400 or more worth of tobacco products is guilty of a 392.27 felony. 392.28 [EFFECTIVE DATE.] This section is effective for acts 392.29 committed on or after July 1, 2003. 392.30 Sec. 12. Minnesota Statutes 2002, section 297I.01, 392.31 subdivision 9, is amended to read: 392.32 Subd. 9. [GROSS PREMIUMS.] "Gross premiums" means total 392.33 premiums paid by policyholders and applicants of policies, 392.34 whether received in the form of money or other valuable 392.35 consideration, on property, persons, lives, interests and other 392.36 risks located, resident, or to be performed in this state, but 393.1 excluding consideration and premiums for reinsurance assumed 393.2 from other insurance companies. The term "gross premiums" 393.3 includes the total consideration paid to bail bond agents for 393.4 bail bonds. For title insurance companies, "gross premiums" 393.5 means the charge for title insurance made by a title insurance 393.6 company or its agents according to the company's rate filing 393.7 approved by the commissioner of commerce without a deduction for 393.8 commissions paid to or retained by the agent. Gross premiums of 393.9 a title insurance company does not include any other charge or 393.10 fee for abstracting, searching, or examining the title, or 393.11 escrow, closing, or other related services. The term "gross 393.12 premiums" includes any workers' compensation special 393.13 compensation fund premium surcharge pursuant to section 176.129. 393.14 [EFFECTIVE DATE.] This section is effective the day 393.15 following final enactment. 393.16 Sec. 13. Minnesota Statutes 2002, section 297I.20, is 393.17 amended to read: 393.18 297I.20 [GUARANTY ASSOCIATION ASSESSMENT OFFSETOFFSETS 393.19 AGAINST PREMIUM TAXES.] 393.20 Subdivision 1. [GUARANTY ASSOCIATION ASSESSMENT OFFSETS.] 393.21 (a) An insurance company may offset against its premium tax 393.22 liability to this state any amount paid for assessments made for 393.23 insolvencies which occur after July 31, 1994, under sections 393.24 60C.01 to 60C.22; and any amount paid for assessments made after 393.25 July 31, 1994, under Minnesota Statutes 1992, sections 61B.01 to 393.26 61B.16, or under sections 61B.18 to 61B.32 as follows: 393.27 (1) Each such assessment shall give rise to an amount of 393.28 offset equal to 20 percent of the amount of the assessment for 393.29 each of the five calendar years following the year in which the 393.30 assessment was paid. 393.31 (2) The amount of offset initially determined for each 393.32 taxable year is the sum of the amounts determined under clause 393.33 (1) for that taxable year. 393.34 (b)(1) Each year the commissioner shall compare total 393.35 guaranty association assessments levied over the preceding five 393.36 calendar years to the sum of all premium tax and corporate 394.1 franchise tax revenues collected from insurance companies, 394.2 without reduction for any guaranty association assessment offset 394.3 in the preceding calendar year, referred to in this subdivision 394.4 as "preceding year insurance tax revenues." 394.5 (2) If total guaranty association assessments levied over 394.6 the preceding five years exceed the preceding year insurance tax 394.7 revenues, insurance companies must be allowed only a 394.8 proportionate part of the premium tax offset calculated under 394.9 paragraph (a) for the current calendar year. 394.10 (3) The proportionate part of the premium tax offset 394.11 allowed in the current calendar year is determined by 394.12 multiplying the amount calculated under paragraph (a) by a 394.13 fraction. The numerator of the fraction equals the preceding 394.14 year insurance tax revenues, and its denominator equals total 394.15 guaranty association assessments levied over the preceding 394.16 five-year period. 394.17 (4) The proportionate part of the premium tax offset that 394.18 is not allowed must be carried forward to subsequent tax years 394.19 and added to the amount of premium tax offset calculated under 394.20 paragraph (a) prior to application of the limitation imposed by 394.21 this paragraph. 394.22 (5) Any amount carried forward from prior years must be 394.23 allowed before allowance of the offset for the current year 394.24 calculated under paragraph (a). 394.25 (6) The premium tax offset limitation must be calculated 394.26 separately for (i) insurance companies subject to assessment 394.27 under sections 60C.01 to 60C.22, and (ii) insurance companies 394.28 subject to assessment under Minnesota Statutes 1992, sections 394.29 61B.01 to 61B.16, or 61B.18 to 61B.32. 394.30 (7) When the premium tax offset is limited by this 394.31 provision, the commissioner shall notify affected insurance 394.32 companies on a timely basis for purposes of completing premium 394.33 and corporate franchise tax returns. 394.34 (8) The guaranty associations created under sections 60C.01 394.35 to 60C.22, Minnesota Statutes 1992, sections 61B.01 to 61B.16, 394.36 and 61B.18 to 61B.32, shall provide the commissioner with the 395.1 necessary information on guaranty association assessments. 395.2 (c)(1) If the offset determined by the application of 395.3 paragraphs (a) and (b) exceeds the insurance company's premium 395.4 tax liability under this section prior to allowance of the 395.5 credit for premium taxes, then the insurance company may carry 395.6 forward the excess, referred to in this subdivision as the 395.7 "carryforward credit" to subsequent taxable years. 395.8 (2) The carryforward credit is allowed as an offset against 395.9 premium tax liability for the first succeeding year to the 395.10 extent that the premium tax liability for that year exceeds the 395.11 amount of the allowable offset for the year determined under 395.12 paragraphs (a) and (b). 395.13 (3) The carryforward credit must be reduced, but not below 395.14 zero, by the amount of the carryforward credit allowed as an 395.15 offset against the premium tax under this paragraph. The 395.16 remainder, if any, of the carryforward credit must be carried 395.17 forward to succeeding taxable years until the entire 395.18 carryforward credit has been credited against the insurance 395.19 company's liability for premium tax under this chapter if 395.20 applicable for that taxable year. 395.21 (d) When an insurer has offset against taxes its payment of 395.22 an assessment of the Minnesota life and health guaranty 395.23 association, and the association pays the insurer a refund with 395.24 respect to the assessment under Minnesota Statutes 1992, section 395.25 61B.07, subdivision 6, or 61B.24, subdivision 6, then the refund 395.26 reduces the insurer's carryforward credit under paragraph (c). 395.27 If the refund exceeds the amount of the carryforward credit, the 395.28 excess amount must be repaid to the state by the insurers to the 395.29 extent of the offset in the manner the commissioner requires. 395.30 Subd. 2. [JOINT UNDERWRITING ASSOCIATION OFFSET.] An 395.31 assessment made pursuant to section 62I.06, subdivision 6, shall 395.32 be deductible by the member from past or future premium taxes 395.33 due the state. 395.34 [EFFECTIVE DATE.] This section is effective the day 395.35 following final enactment. 395.36 Sec. 14. [REVISOR'S INSTRUCTION.] 396.1 In the next edition of Minnesota Rules, the revisor shall 396.2 delete any references to the sections repealed in section 15, 396.3 paragraph (a). 396.4 Sec. 15. [REPEALER.] 396.5 (a) Minnesota Statutes 2002, sections 294.01; 294.02; 396.6 294.021; 294.03; 294.06; 294.07; 294.08; 294.09; 294.10; 294.11; 396.7 and 294.12, are repealed effective the day following final 396.8 enactment. 396.9 (b) Minnesota Rules, parts 8125.1000; 8125.1300, subpart 1; 396.10 and 8125.1400, are repealed effective the day following final 396.11 enactment. 396.12 ARTICLE 17 396.13 DEPARTMENT COLLECTIONS AND COMPLIANCE INITIATIVES 396.14 Section 1. [270.278] [PENALTY FOR FILING CERTAIN DOCUMENTS 396.15 AGAINST DEPARTMENT OF REVENUE EMPLOYEES.] 396.16 Subdivision 1. [DEFINITIONS.] (a) "Recording office" means 396.17 a county recorder, registrar of titles, or secretary of state in 396.18 this state or another state. 396.19 (b) "Filing party" means the person or persons requesting 396.20 or causing another person to request that the recording office 396.21 accept documents or instruments for recording or filing. 396.22 Subd. 2. [INVALID DOCUMENTS NAMING THE COMMISSIONER OR 396.23 DEPARTMENT OF REVENUE EMPLOYEES.] Filing a document, including a 396.24 nonconsensual common law lien under section 514.99, that 396.25 purports to create a claim against the commissioner of revenue 396.26 or an employee of the department of revenue based on performance 396.27 or nonperformance of duties by the commissioner or employee is 396.28 invalid unless accompanied by a specific order from a court of 396.29 competent jurisdiction authorizing the filing of the document or 396.30 unless a specific statute authorizes the filing of the document. 396.31 Subd. 3. [CIVIL PENALTY.] If a filing party causes a 396.32 document described in subdivision 2 to be recorded in a 396.33 recording office, the commissioner may assess a penalty against 396.34 the filing party of $1,000 per document filed, payable to the 396.35 general fund. An order assessing a penalty under this section 396.36 is reviewable administratively under section 289A.65 and is 397.1 appealable to tax court under chapter 271. The penalty is 397.2 collected and paid in the same manner as income tax. The 397.3 penalty is in addition to any other remedy available to the 397.4 commissioner of revenue or to an employee of the department of 397.5 revenue against whom the document has been filed. 397.6 [EFFECTIVE DATE.] This section is effective for documents 397.7 filed on or after July 1, 2003. 397.8 Sec. 2. Minnesota Statutes 2002, section 270.69, is 397.9 amended by adding a subdivision to read: 397.10 Subd. 16. [ATTACHMENT TO PROCEEDS OF PROPERTY.] Any lien 397.11 imposed under this section attaches to the proceeds of property 397.12 with the same priority that the lien has with respect to the 397.13 property itself. "Proceeds of property" means proceeds from the 397.14 sale, lease, license, exchange, or other disposition of the 397.15 property, including insurance proceeds arising from the loss or 397.16 destruction of the property. 397.17 [EFFECTIVE DATE.] This section is effective for all liens, 397.18 whether imposed prior to, on, or after the day following final 397.19 enactment. 397.20 Sec. 3. Minnesota Statutes 2002, section 270.701, 397.21 subdivision 2, is amended to read: 397.22 Subd. 2. [NOTICE OF SALE.] The commissioner shall as soon 397.23 as practicable after the seizure of the property give notice of 397.24 sale of the property to the owner, in the manner of service 397.25 prescribed in subdivision 1. In the case of personal property, 397.26 the notice shall be served at least 10 days prior to the sale. 397.27 In the case of real property, the notice shall be served at 397.28 least four weeks prior to the sale. The commissioner shall also 397.29 cause public notice of each sale to be made. In the case of 397.30 personal property, notice shall be posted at least 10 days prior 397.31 to the sale at the county courthouse for the county where the 397.32 seizure is made, and in not less than two other public 397.33 places. For purposes of this requirement, the Internet is a 397.34 public place for posting the information. In the case of real 397.35 property, six weeks' published notice shall be given prior to 397.36 the sale, in a newspaper published or generally circulated in 398.1 the county. The notice of sale provided in this subdivision 398.2 shall specify the property to be sold, and the time, place, 398.3 manner and conditions of the sale. Whenever levy is made 398.4 without regard to the 30-day period provided in section 270.70, 398.5 subdivision 2, public notice of sale of the property seized 398.6 shall not be made within the 30-day period unless section 398.7 270.702 (relating to sale of perishable goods) is applicable. 398.8 [EFFECTIVE DATE.] This section is effective for notices of 398.9 sales posted on or after the day following final enactment. 398.10 Sec. 4. Minnesota Statutes 2002, section 270.701, is 398.11 amended by adding a subdivision to read: 398.12 Subd. 7. [SALE OF SEIZED SECURITIES.] (a) At the time of 398.13 levy on securities, the commissioner shall provide notice to the 398.14 taxpayer that the securities may be sold after ten days from the 398.15 date of seizure. 398.16 (b) If the commissioner levies upon nonexempt publicly 398.17 traded securities and the value of the securities is less than 398.18 or equal to the total obligation for which the levy is done, 398.19 after ten days the person who possesses or controls the 398.20 securities shall liquidate the securities in a commercially 398.21 reasonable manner. After liquidation, the person shall transfer 398.22 the proceeds to the commissioner, less any applicable 398.23 commissions or fees, or both, which are charged in the normal 398.24 course of business. 398.25 (c) If the commissioner levies upon nonexempt publicly 398.26 traded securities and the value of the securities exceeds the 398.27 total amount of the levy, the owner of the securities may, 398.28 within seven days after receipt of the department's notice of 398.29 levy given pursuant to subdivision 1, instruct the person who 398.30 possesses or controls the securities which securities are to be 398.31 sold to satisfy the obligation. If the owner does not provide 398.32 instructions for liquidation, the person who possesses or 398.33 controls the securities shall liquidate the securities in an 398.34 amount sufficient to pay the obligation, plus any applicable 398.35 commissions or fees, or both, which are charged in the normal 398.36 course of business, beginning with the nonexempt securities 399.1 purchased most recently. After liquidation, the person who 399.2 possesses or controls the securities shall transfer to the 399.3 commissioner the amount of money needed to satisfy the levy. 399.4 [EFFECTIVE DATE.] This section is effective for sales of 399.5 securities seized on or after the day following final enactment. 399.6 Sec. 5. Minnesota Statutes 2002, section 270.72, 399.7 subdivision 2, is amended to read: 399.8 Subd. 2. [DEFINITIONS.] For purposes of this section, the 399.9 following terms have the meanings given. 399.10 (a) "Taxes"aremean all taxes payable to the commissioner 399.11 including penalties and interest due on the taxes. 399.12 (b) "Delinquent taxes" do not include a tax liability if 399.13 (i) an administrative or court action which contests the amount 399.14 or validity of the liability has been filed or served, (ii) the 399.15 appeal period to contest the tax liability has not expired, or 399.16 (iii) the applicant has entered into a payment agreement and is 399.17 current with the payments. 399.18 (c) "Applicant" means an individual if the license is 399.19 issued to or in the name of an individual or the corporation or 399.20 partnership if the license is issued to or in the name of a 399.21 corporation or partnership. "Applicant" also means an officer 399.22 of a corporation, a member of a partnership, or an individual 399.23 who is liable for delinquent taxes, either for the entity for 399.24 which the license is at issue or for another entity for which 399.25 the liability was incurred, or personally as a licensee. In the 399.26 case of a license transfer, "applicant" also means both the 399.27 transferor and the transferee of the license. "Applicant" also 399.28 means any holder of a license. 399.29 (d) "License"includesmeans any permit, registration, 399.30 certification, or other form of approval authorized by statute 399.31 or rule to be issued by the state or a political subdivision of 399.32 the state as a condition of doing business or conducting a 399.33 trade, profession, or occupation in Minnesota, specifically 399.34 including, but not limited to, a contract for space rental at 399.35 the Minnesota state fair and authorization to operate 399.36 concessions or rides at county and local fairs, festivals, or 400.1 events. 400.2 (e) "Licensing authority" includes the Minnesota state fair 400.3 board and county and local boards or governing bodies. 400.4 [EFFECTIVE DATE.] This section is effective the day 400.5 following final enactment. 400.6 Sec. 6. Minnesota Statutes 2002, section 270A.03, 400.7 subdivision 2, is amended to read: 400.8 Subd. 2. [CLAIMANT AGENCY.] "Claimant agency" means any 400.9 state agency, as defined by section 14.02, subdivision 2, the 400.10 regents of the University of Minnesota, any district court of 400.11 the state, any county, any statutory or home rule charter city 400.12 presenting a claim for a municipal hospital or a public library 400.13 or a municipal ambulance service, a hospital district, a private 400.14 nonprofit hospital that leases its building from the county in 400.15 which it is located, any public agency responsible for child 400.16 support enforcement, any public agency responsible for the 400.17 collection of court-ordered restitution, and any public agency 400.18 established by general or special law that is responsible for 400.19 the administration of a low-income housing program, and the 400.20 Minnesota collection enterprise as defined in section 16D.02, 400.21 subdivision 8, for the purpose of collecting the costs imposed 400.22 under section 16D.11. 400.23 [EFFECTIVE DATE.] This section is effective the day 400.24 following final enactment. 400.25 Sec. 7. Minnesota Statutes 2002, section 289A.31, 400.26 subdivision 3, is amended to read: 400.27 Subd. 3. [TRANSFEREES AND FIDUCIARIES.] The amounts of the 400.28 following liabilities are, except as otherwise provided in 400.29 section 289A.38, subdivision 13, assessed, collected, and paid 400.30 in the same manner and subject to the same provisions and 400.31 limitations as a deficiency in a tax imposed by chapter 290, 400.32 including any provisions of law for the collection of taxes: 400.33 (1) the liability, at law or in equity, of a transferee of 400.34 property of a taxpayer for tax or overpayment of a refund, 400.35 including interest, additional amounts, and additions to the tax 400.36 or overpayment provided by law, imposed upon the taxpayer by 401.1 chapter 290 or provided for in chapter 290A; and 401.2 (2) the liability of a fiduciary under subdivision 4 for 401.3 the payment of tax from the estate of the taxpayer. The 401.4 liability may reflect the amount of tax shown on the return or 401.5 any deficiency in tax. 401.6 [EFFECTIVE DATE.] This section is effective for refunds 401.7 paid on or after the day following final enactment. 401.8 Sec. 8. Minnesota Statutes 2002, section 289A.31, 401.9 subdivision 4, is amended to read: 401.10 Subd. 4. [TAX AS A PERSONAL DEBT OF A FIDUCIARY.]TheA 401.11 tax imposed by chapter 290 and an overpayment of a refund 401.12 provided for in chapter 290A, and interest and penalties, is a 401.13 personal debt of the taxpayer from the time the liability 401.14 arises, regardless of when the time for discharging the 401.15 liability by payment occurs. The debt is, in the case of the 401.16 personal representative of the estate of a decedent and in the 401.17 case of any fiduciary, that of the individual in the 401.18 individual's official or fiduciary capacity only, unless the 401.19 individual has voluntarily distributed the assets held in that 401.20 capacity without reserving sufficient assets to pay the tax, 401.21 interest, and penalties, in which event the individual is 401.22 personally liable for the deficiency. 401.23 [EFFECTIVE DATE.] This section is effective for taxes 401.24 imposed and property tax refunds claimed on or after the day 401.25 following final enactment. 401.26 Sec. 9. Minnesota Statutes 2002, section 289A.36, 401.27 subdivision 7, is amended to read: 401.28 Subd. 7. [APPLICATION TO COURT FOR ENFORCEMENT OF 401.29 SUBPOENA.] (a) Disobedience of subpoenas issued under this 401.30 section shall be punished by the district court of the district 401.31 in which the party served with the subpoena is located, in the 401.32 same manner as contempt of the district court. 401.33 (b) Disobedience of a subpoena issued under subdivision 9 401.34 shall be punished by the district court for Ramsey County in the 401.35 same manner as contempt of the district court. In addition to 401.36 contempt remedies, the court may issue any order the court deems 402.1 reasonably necessary to enforce compliance with the subpoena. 402.2 [EFFECTIVE DATE.] This section is effective the day 402.3 following final enactment. 402.4 Sec. 10. Minnesota Statutes 2002, section 289A.36, is 402.5 amended by adding a subdivision to read: 402.6 Subd. 9. [ACCESS TO RECORDS IN CONNECTION WITH EXAMINATION 402.7 OF BUSINESSES LOCATED OUTSIDE THE STATE.] (a) In order to 402.8 determine whether a business located outside the state of 402.9 Minnesota is required to file a return under this chapter, the 402.10 commissioner may examine the relevant records and files of the 402.11 business. 402.12 (b) To the full extent permitted by the Minnesota and 402.13 United States constitutions, the commissioner may compel 402.14 production of those relevant records and files by subpoena. The 402.15 subpoena may be served on the secretary of state along with the 402.16 address to which service of the subpoena is to be sent and a fee 402.17 of $50. The secretary of state shall forward a copy of the 402.18 subpoena to the business using the procedures for service of 402.19 process in section 5.25, subdivision 6. 402.20 (c) The commissioner shall pay the reasonable cost of 402.21 producing records subject to subpoena under this subdivision if: 402.22 (1) the subpoenaed party cannot produce the records without 402.23 undue burden; and 402.24 (2) the examination made pursuant to paragraph (a) shows 402.25 that the subpoenaed party is not required to file a return under 402.26 this chapter. 402.27 [EFFECTIVE DATE.] This section is effective the day 402.28 following final enactment. 402.29 Sec. 11. Minnesota Statutes 2002, section 289A.36, is 402.30 amended by adding a subdivision to read: 402.31 Subd. 10. [PENALTY.] In addition to sanctions imposed 402.32 under subdivision 7, a penalty of $250 per day is imposed on any 402.33 business that is in violation of a court order to comply with a 402.34 subpoena that is seeking information necessary for the 402.35 commissioner to be able to determine whether the business is 402.36 required to file a return or pay a tax. The maximum penalty is 403.1 $25,000. Upon the request of the commissioner, the court shall 403.2 determine the amount of the penalty and enter it as a judgment 403.3 in favor of the commissioner. The penalty is not payable until 403.4 the judgment is entered. 403.5 [EFFECTIVE DATE.] This section is effective for violations 403.6 of court orders to enforce subpoenas issued on or after the day 403.7 following final enactment. 403.8 Sec. 12. Minnesota Statutes 2002, section 297A.85, is 403.9 amended to read: 403.10 297A.85 [CANCELLATION OF PERMITS.] 403.11 The commissioner may cancel a permit if one of the 403.12 following conditions occurs: 403.13 (1) the permit holder has not filed a sales or use tax 403.14 return for at least one year; 403.15 (2) the permit holder has not reported any sales or use tax 403.16 liability on the permit holder's returns for at least two years; 403.17or403.18 (3) the permit holder requests cancellation of the permit; 403.19 or 403.20 (4) the permit is subject to cancellation pursuant to 403.21 section 297A.86, subdivision 2, paragraph (a). 403.22 [EFFECTIVE DATE.] This section is effective for 403.23 cancellations of permits done on or after the day following 403.24 final enactment. 403.25 Sec. 13. [REPEALER.] 403.26 Minnesota Statutes 2002, section 270.691, subdivision 8, is 403.27 repealed effective the day following final enactment. 403.28 ARTICLE 18 403.29 BLUE WATERS 403.30 Section 1. Minnesota Statutes 2002, section 273.13, 403.31 subdivision 23, is amended to read: 403.32 Subd. 23. [CLASS 2.] (a) Class 2a property is agricultural 403.33 land including any improvements that is homesteaded. The market 403.34 value of the house and garage and immediately surrounding one 403.35 acre of land has the same class rates as class 1a property under 403.36 subdivision 22. The value of the remaining land including 404.1 improvements up to and including $600,000 market value has a net 404.2 class rate of 0.55 percent of market value. The remaining 404.3 property over $600,000 market value has a class rate of one 404.4 percent of market value. 404.5 (b) Class 2b property is (1) real estate, rural in 404.6 character and used exclusively for growing trees for timber, 404.7 lumber, and wood and wood products; (2) real estate that is not 404.8 improved with a structure and is used exclusively for growing 404.9 trees for timber, lumber, and wood and wood products, if the 404.10 owner has participated or is participating in a cost-sharing 404.11 program for afforestation, reforestation, or timber stand 404.12 improvement on that particular property, administered or 404.13 coordinated by the commissioner of natural resources; (3) real 404.14 estate that is nonhomestead agricultural land; or (4) a landing 404.15 area or public access area of a privately owned public use 404.16 airport. Class 2b property has a net class rate of one percent 404.17 of market value. 404.18 (c) Agricultural land as used in this section means 404.19 contiguous acreage of ten acres or more, used during the 404.20 preceding year for agricultural purposes. "Agricultural 404.21 purposes" as used in this section means the raising or 404.22 cultivation of agricultural products or enrollment in the 404.23 Reinvest in Minnesota program under sections 103F.501 to 404.24 103F.535 or the federal Conservation Reserve Program as 404.25 contained in Public Law Number 99-198. Contiguous acreage on 404.26 the same parcel, or contiguous acreage on an immediately 404.27 adjacent parcel under the same ownership, may also qualify as 404.28 agricultural land, but only if it is pasture, timber, waste, 404.29 unusable wild land, or land included in state or federal farm 404.30 programs. Agricultural classification for property shall be 404.31 determined excluding the house, garage, and immediately 404.32 surrounding one acre of land, and shall not be based upon the 404.33 market value of any residential structures on the parcel or 404.34 contiguous parcels under the same ownership. 404.35 (d) Real estate, excluding the house, garage, and 404.36 immediately surrounding one acre of land, of less than ten acres 405.1 which is exclusively and intensively used for raising or 405.2 cultivating agricultural products, shall be considered as 405.3 agricultural land. 405.4 Land shall be classified as agricultural even if all or a 405.5 portion of the agricultural use of that property is the leasing 405.6 to, or use by another person for agricultural purposes. 405.7 Classification under this subdivision is not determinative 405.8 for qualifying under section 273.111. 405.9 The property classification under this section supersedes, 405.10 for property tax purposes only, any locally administered 405.11 agricultural policies or land use restrictions that define 405.12 minimum or maximum farm acreage. 405.13 (e) The term "agricultural products" as used in this 405.14 subdivision includes production for sale of: 405.15 (1) livestock, dairy animals, dairy products, poultry and 405.16 poultry products, fur-bearing animals, horticultural and nursery 405.17 stock described in sections 18.44 to 18.61, fruit of all kinds, 405.18 vegetables, forage, grains, bees, and apiary products by the 405.19 owner; 405.20 (2) fish bred for sale and consumption if the fish breeding 405.21 occurs on land zoned for agricultural use; 405.22 (3) the commercial boarding of horses if the boarding is 405.23 done in conjunction with raising or cultivating agricultural 405.24 products as defined in clause (1); 405.25 (4) property which is owned and operated by nonprofit 405.26 organizations used for equestrian activities, excluding racing; 405.27 (5) game birds and waterfowl bred and raised for use on a 405.28 shooting preserve licensed under section 97A.115; 405.29 (6) insects primarily bred to be used as food for animals; 405.30 (7) trees, grown for sale as a crop, and not sold for 405.31 timber, lumber, wood, or wood products; and 405.32 (8) maple syrup taken from trees grown by a person licensed 405.33 by the Minnesota department of agriculture under chapter 28A as 405.34 a food processor. 405.35 (f) If a parcel used for agricultural purposes is also used 405.36 for commercial or industrial purposes, including but not limited 406.1 to: 406.2 (1) wholesale and retail sales; 406.3 (2) processing of raw agricultural products or other goods; 406.4 (3) warehousing or storage of processed goods; and 406.5 (4) office facilities for the support of the activities 406.6 enumerated in clauses (1), (2), and (3), 406.7 the assessor shall classify the part of the parcel used for 406.8 agricultural purposes as class 1b, 2a, or 2b, whichever is 406.9 appropriate, and the remainder in the class appropriate to its 406.10 use. The grading, sorting, and packaging of raw agricultural 406.11 products for first sale is considered an agricultural purpose. 406.12 A greenhouse or other building where horticultural or nursery 406.13 products are grown that is also used for the conduct of retail 406.14 sales must be classified as agricultural if it is primarily used 406.15 for the growing of horticultural or nursery products from seed, 406.16 cuttings, or roots and occasionally as a showroom for the retail 406.17 sale of those products. Use of a greenhouse or building only 406.18 for the display of already grown horticultural or nursery 406.19 products does not qualify as an agricultural purpose. 406.20 The assessor shall determine and list separately on the 406.21 records the market value of the homestead dwelling and the one 406.22 acre of land on which that dwelling is located. If any farm 406.23 buildings or structures are located on this homesteaded acre of 406.24 land, their market value shall not be included in this separate 406.25 determination. 406.26 (g) To qualify for classification under paragraph (b), 406.27 clause (4), a privately owned public use airport must be 406.28 licensed as a public airport under section 360.018. For 406.29 purposes of paragraph (b), clause (4), "landing area" means that 406.30 part of a privately owned public use airport properly cleared, 406.31 regularly maintained, and made available to the public for use 406.32 by aircraft and includes runways, taxiways, aprons, and sites 406.33 upon which are situated landing or navigational aids. A landing 406.34 area also includes land underlying both the primary surface and 406.35 the approach surfaces that comply with all of the following: 406.36 (i) the land is properly cleared and regularly maintained 407.1 for the primary purposes of the landing, taking off, and taxiing 407.2 of aircraft; but that portion of the land that contains 407.3 facilities for servicing, repair, or maintenance of aircraft is 407.4 not included as a landing area; 407.5 (ii) the land is part of the airport property; and 407.6 (iii) the land is not used for commercial or residential 407.7 purposes. 407.8 The land contained in a landing area under paragraph (b), clause 407.9 (4), must be described and certified by the commissioner of 407.10 transportation. The certification is effective until it is 407.11 modified, or until the airport or landing area no longer meets 407.12 the requirements of paragraph (b), clause (4). For purposes of 407.13 paragraph (b), clause (4), "public access area" means property 407.14 used as an aircraft parking ramp, apron, or storage hangar, or 407.15 an arrival and departure building in connection with the airport. 407.16 (h) Class 2c property consists of any parcel or contiguous 407.17 parcels of unimproved real estate, excluding agricultural land 407.18 classified under this subdivision, that meets all the criteria 407.19 in clauses (1) to (5): 407.20 (1) the property consists of at least 200 contiguous feet 407.21 of unimproved real estate that borders a meandered lake as 407.22 defined in section 103G.005, subdivision 15, paragraph (a), 407.23 clause (3); 407.24 (2) the unimproved real estate is located within 400 feet 407.25 from the ordinary high water elevation of the public waters. 407.26 For purposes of this clause, "unimproved" means that the 407.27 property, or that portion of the property qualifying under this 407.28 paragraph, contains no structures, that there are no docks or 407.29 landings on its shoreline, and that the natural terrain and 407.30 vegetation has not been disturbed, or has been restored to 407.31 native vegetation; 407.32 (3) the property is either (i) the homestead of the owner, 407.33 the owner's spouse, or the owner or spouse's son or daughter, or 407.34 (ii) has been in possession of the owner, the owner's spouse, or 407.35 the owner's or spouse's son or daughter for a period of at least 407.36 seven years prior to application for benefits under this 408.1 section; 408.2 (4) the owner files an application with the county assessor 408.3 by July 1 for classification under this paragraph for the 408.4 subsequent assessment year; and 408.5 (5) the owner of the property signs a covenant agreement 408.6 and files the covenant with the county assessor in the county 408.7 where the property is located. The covenant agreement must 408.8 include all of the following: 408.9 (i) legal description of the area to which the covenant 408.10 applies; 408.11 (ii) name and address of the owner; 408.12