HF 1782

as introduced - 87th Legislature (2011 - 2012) Posted on 01/24/2012 10:18am

A bill for an act
relating to taxation; minerals; modifying taconite production tax; dedicating a
portion of taconite production tax proceeds to certain school districts; amending
Minnesota Statutes 2010, sections 298.24, subdivision 1; 298.28, subdivision 4.

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

Section 1.

Minnesota Statutes 2010, section 298.24, subdivision 1, is amended to read:

Subdivision 1.

Imposed; calculation.

(a) For concentrate produced in deleted text begin 2001, 2002,
and 2003 deleted text end new text begin 2012 new text end , there is imposed upon taconite and iron sulphides, and upon the mining
and quarrying thereof, and upon the production of iron ore concentrate therefrom, and
upon the concentrate so produced, a tax of deleted text begin $2.103 deleted text end new text begin $2.662 new text end per gross ton of merchantable
iron ore concentrate produced therefrom. deleted text begin For concentrates produced in 2005, the tax rate
is the same rate imposed for concentrates produced in 2004. deleted text end For concentrates produced in
2009 and subsequent years, the tax is also imposed upon other iron-bearing material.

(b) For concentrates produced in deleted text begin 2006 deleted text end new text begin 2013 new text end and subsequent years, the tax rate shall
be equal to the preceding year's tax rate plus an amount equal to the preceding year's tax
rate multiplied by the percentage increase in the implicit price deflator from the fourth
quarter of the second preceding year to the fourth quarter of the preceding year. "Implicit
price deflator" means the implicit price deflator for the gross domestic product prepared by
the Bureau of Economic Analysis of the United States Department of Commerce.

(c) An additional tax is imposed equal to three cents per gross ton of merchantable
iron ore concentrate for each one percent that the iron content of the product exceeds 72
percent, when dried at 212 degrees Fahrenheit.

(d) The tax on taconite and iron sulphides shall be imposed on the average of the
production for the current year and the previous two years. The rate of the tax imposed
will be the current year's tax rate. This clause shall not apply in the case of the closing
of a taconite facility if the property taxes on the facility would be higher if this clause
and section 298.25 were not applicable. The tax on other iron-bearing material shall be
imposed on the current year production.

(e) If the tax or any part of the tax imposed by this subdivision is held to be
unconstitutional, a tax of $2.103 per gross ton of merchantable iron ore concentrate
produced shall be imposed.

(f) Consistent with the intent of this subdivision to impose a tax based upon the
weight of merchantable iron ore concentrate, the commissioner of revenue may indirectly
determine the weight of merchantable iron ore concentrate included in fluxed pellets by
subtracting the weight of the limestone, dolomite, or olivine derivatives or other basic
flux additives included in the pellets from the weight of the pellets. For purposes of this
paragraph, "fluxed pellets" are pellets produced in a process in which limestone, dolomite,
olivine, or other basic flux additives are combined with merchantable iron ore concentrate.
No subtraction from the weight of the pellets shall be allowed for binders, mineral and
chemical additives other than basic flux additives, or moisture.

(g)(1) Notwithstanding any other provision of this subdivision, for the first two years
of a plant's commercial production of direct reduced ore from ore mined in this state, no
tax is imposed under this section. As used in this paragraph, "commercial production" is
production of more than 50,000 tons of direct reduced ore in the current year or in any
prior year, "noncommercial production" is production of 50,000 tons or less of direct
reduced ore in any year, and "direct reduced ore" is ore that results in a product that has an
iron content of at least 75 percent. For the third year of a plant's commercial production of
direct reduced ore, the rate to be applied to direct reduced ore is 25 percent of the rate
otherwise determined under this subdivision. For the fourth commercial production year,
the rate is 50 percent of the rate otherwise determined under this subdivision; for the fifth
commercial production year, the rate is 75 percent of the rate otherwise determined under
this subdivision; and for all subsequent commercial production years, the full rate is
imposed.

(2) Subject to clause (1), production of direct reduced ore in this state is subject to
the tax imposed by this section, but if that production is not produced by a producer of
taconite, iron sulfides, or other iron-bearing material, the production of taconite, iron
sulfides, or other iron-bearing material, that is consumed in the production of direct
reduced iron in this state is not subject to the tax imposed by this section on taconite,
iron sulfides, or other iron-bearing material.

(3) Notwithstanding any other provision of this subdivision, no tax is imposed
on direct reduced ore under this section during the facility's noncommercial production
of direct reduced ore. The taconite or iron sulphides consumed in the noncommercial
production of direct reduced ore is subject to the tax imposed by this section on taconite
and iron sulphides. Three-year average production of direct reduced ore does not
include production of direct reduced ore in any noncommercial year. Three-year average
production for a direct reduced ore facility that has noncommercial production is the
average of the commercial production of direct reduced ore for the current year and the
previous two commercial years.

(4) This paragraph applies only to plants for which all environmental permits have
been obtained and construction has begun before July 1, 2008.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for concentrate produced in 2012
and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2010, section 298.28, subdivision 4, is amended to read:

Subd. 4.

School districts.

(a) 23.15 cents per taxable ton, plus the increase provided
in paragraph (d), less the amount that would have been computed under Minnesota
Statutes 2008, section 126C.21, subdivision 4, for the current year for that district, must be
allocated to qualifying school districts to be distributed, based upon the certification of the
commissioner of revenue, under paragraphs (b), (c), and (f).

(b)(i) 3.43 cents per taxable ton must be distributed to the school districts in which
the lands from which taconite was mined or quarried were located or within which the
concentrate was produced. The distribution must be based on the apportionment formula
prescribed in subdivision 2.

(ii) Four cents per taxable ton from each taconite facility must be distributed to
each affected school district for deposit in a fund dedicated to building maintenance
and repairs, as follows:

(1) proceeds from Keewatin Taconite or its successor are distributed to Independent
School Districts Nos. 316, Coleraine, and 319, Nashwauk-Keewatin, or their successor
districts;

(2) proceeds from the Hibbing Taconite Company or its successor are distributed to
Independent School Districts Nos. 695, Chisholm, and 701, Hibbing, or their successor
districts;

(3) proceeds from the Mittal Steel Company and Minntac or their successors are
distributed to Independent School Districts Nos. 712, Mountain Iron-Buhl, 706, Virginia,
2711, Mesabi East, and 2154, Eveleth-Gilbert, or their successor districts;

(4) proceeds from the Northshore Mining Company or its successor are distributed
to Independent School Districts Nos. 2142, St. Louis County, and 381, Lake Superior,
or their successor districts; and

(5) proceeds from United Taconite or its successor are distributed to Independent
School Districts Nos. 2142, St. Louis County, and 2154, Eveleth-Gilbert, or their
successor districts.

Revenues that are required to be distributed to more than one district shall be
apportioned according to the number of pupil units identified in section 126C.05,
subdivision 1, enrolled in the second previous year.

(c)(i) 15.72 cents per taxable ton, less any amount distributed under paragraph (e),
shall be distributed to a group of school districts comprised of those school districts which
qualify as a tax relief area under section 273.134, paragraph (b), or in which there is a
qualifying municipality as defined by section 273.134, paragraph (a), in direct proportion
to school district indexes as follows: for each school district, its pupil units determined
under section 126C.05 for the prior school year shall be multiplied by the ratio of the
average adjusted net tax capacity per pupil unit for school districts receiving aid under
this clause as calculated pursuant to chapters 122A, 126C, and 127A for the school year
ending prior to distribution to the adjusted net tax capacity per pupil unit of the district.
Each district shall receive that portion of the distribution which its index bears to the sum
of the indices for all school districts that receive the distributions.

(ii) Notwithstanding clause (i), each school district that receives a distribution
under sections 298.018; 298.23 to 298.28, exclusive of any amount received under this
clause; 298.34 to 298.39; 298.391 to 298.396; 298.405; or any law imposing a tax on
severed mineral values after reduction for any portion distributed to cities and towns
under section 126C.48, subdivision 8, paragraph (5), that is less than the amount of its
levy reduction under section 126C.48, subdivision 8, for the second year prior to the
year of the distribution shall receive a distribution equal to the difference; the amount
necessary to make this payment shall be derived from proportionate reductions in the
initial distribution to other school districts under clause (i). If there are insufficient tax
proceeds to make the distribution provided under this paragraph in any year, money must
be transferred from the taconite property tax relief account in subdivision 6, to the extent
of the shortfall in the distribution.

(d) Any school district described in paragraph (c) where a levy increase pursuant to
section 126C.17, subdivision 9, was authorized by referendum for taxes payable in 2001,
shall receive a distribution of 21.3 cents per ton. Each district shall receive $175 times the
pupil units identified in section 126C.05, subdivision 1, enrolled in the second previous
year or the 1983-1984 school year, whichever is greater, less the product of 1.8 percent
times the district's taxable net tax capacity in the second previous year.

If the total amount provided by paragraph (d) is insufficient to make the payments
herein required then the entitlement of $175 per pupil unit shall be reduced uniformly
so as not to exceed the funds available. Any amounts received by a qualifying school
district in any fiscal year pursuant to paragraph (d) shall not be applied to reduce general
education aid which the district receives pursuant to section 126C.13 or the permissible
levies of the district. Any amount remaining after the payments provided in this paragraph
shall be paid to the commissioner of Iron Range resources and rehabilitation who shall
deposit the same in the taconite environmental protection fund and the Douglas J. Johnson
economic protection trust fund as provided in subdivision 11.

Each district receiving money according to this paragraph shall reserve the lesser of
the amount received under this paragraph or $25 times the number of pupil units served
in the district. It may use the money for early childhood programs or for outcome-based
learning programs that enhance the academic quality of the district's curriculum. The
outcome-based learning programs must be approved by the commissioner of education.

(e) There shall be distributed to any school district the amount which the school
district was entitled to receive under section 298.32 in 1975.

(f) Four cents per taxable ton must be distributed to qualifying school districts
according to the distribution specified in paragraph (b), clause (ii), and two cents per
taxable ton must be distributed according to the distribution specified in paragraph
(c). These amounts are not subject to sections 126C.21, subdivision 4, and 126C.48,
subdivision 8.

new text begin (g) Twenty-five cents per taxable ton shall be distributed to school districts in the
taconite assistance area, as defined in section 273.1341, and school districts in the region 3
occupation tax area, for the purpose of the enhancement of science, math, and technology
educational opportunities for pupils in elementary and secondary school. The revenues
required to be distributed under this paragraph shall be apportioned to each eligible school
district according to the number of pupil units identified in section 126C.05, subdivision
1, enrolled in the previous year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for distributions payable in 2013
and thereafter.
new text end