HF 1815

as introduced - 90th Legislature (2017 - 2018) Posted on 02/27/2017 02:03pm

A bill for an act
relating to taxation; property; eliminating the personal property tax on electric
generation systems; instituting a new valuation method; authorizing replacement
aid; repealing exemptions; requiring a report; amending Minnesota Statutes 2016,
sections 216B.1621, subdivision 2; 216B.164, subdivision 2a; 216B.2424,
subdivision 5; 272.02, subdivisions 9, 10; 272.025, subdivision 1; 273.13,
subdivision 24; 273.1325, subdivision 1; 273.37, subdivision 1; proposing coding
for new law in Minnesota Statutes, chapters 273; 477A; repealing Minnesota
Statutes 2016, sections 272.02, subdivisions 24, 29, 33, 44, 45, 47, 52, 54, 55, 56,
68, 69, 70, 71, 84, 89, 92, 93, 96, 99; 272.0211.

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

Section 1.

Minnesota Statutes 2016, section 216B.1621, subdivision 2, is amended to read:

Subd. 2.

Commission approval.

(a) The commission shall approve an agreement under
this section upon finding that:

deleted text begin (1) the proposed electric service power generation facility could reasonably be expected
to qualify for a market value exclusion under section 272.0211;
deleted text end

deleted text begin (2) deleted text end new text begin (1) new text end the public utility has a contractual option to purchase electric power from the
proposed facility; and

deleted text begin (3) deleted text end new text begin (2) new text end the public utility can use the output from the proposed facility to meet its future
need for power as demonstrated in the most recent resource plan filed with and approved
by the commission under section 216B.2422.

(b) Sections 216B.03, 216B.05, 216B.06, 216B.07, 216B.16, 216B.162, and 216B.23
do not apply to an agreement under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 2.

Minnesota Statutes 2016, section 216B.164, subdivision 2a, is amended to read:

Subd. 2a.

Definitions.

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

(b) "Aggregated meter" means a meter located on the premises of a customer's owned
or leased property that is contiguous with property containing the customer's designated
meter.

(c) "Capacity" means the number of megawatts alternating current (AC) at the point of
interconnection between a distributed generation facility and a utility's electric system.

(d) "Cogeneration" means a combined process whereby electrical and useful thermal
energy are produced simultaneously.

(e) "Contiguous property" means property owned or leased by the customer sharing a
common border, without regard to interruptions in contiguity caused by easements, public
thoroughfares, transportation rights-of-way, or utility rights-of-way.

(f) "Customer" means the person who is named on the utility electric bill for the premises.

(g) "Designated meter" means a meter that is physically attached to the customer's facility
that the customer-generator designates as the first meter to which net metered credits are
to be applied as the primary meter for billing purposes when the customer is serviced by
more than one meter.

(h) "Distributed generation" means a facility that:

(1) has a capacity of ten megawatts or less;

(2) is interconnected with a utility's distribution system, over which the commission has
jurisdiction; and

(3) generates electricity from natural gas, renewable fuel, or a similarly clean fuel, and
may include waste heat, cogeneration, or fuel cell technology.

(i) "High-efficiency distributed generation" means a distributed energy facility that has
a minimum efficiency of 40 percent, as calculated under new text begin Minnesota Statutes 2014, new text end section
272.0211, subdivision 1.

(j) "Net metered facility" means an electric generation facility constructed for the purpose
of offsetting energy use through the use of renewable energy or high-efficiency distributed
generation sources.

(k) "Renewable energy" has the meaning given in section 216B.2411, subdivision 2.

(l) "Standby charge" means a charge imposed by an electric utility upon a distributed
generation facility for the recovery of costs for the provision of standby services, as provided
for in a utility's tariffs approved by the commission, necessary to make electricity service
available to the distributed generation facility.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 3.

Minnesota Statutes 2016, section 216B.2424, subdivision 5, is amended to read:

Subd. 5.

Mandate.

(a) A public utility, as defined in section 216B.02, subdivision 4,
that operates a nuclear-powered electric generating plant within this state must construct
and operate, purchase, or contract to construct and operate (1) by December 31, 1998, 50
megawatts of electric energy installed capacity generated by farm-grown closed-loop biomass
scheduled to be operational by December 31, 2001; and (2) by December 31, 1998, an
additional 75 megawatts of installed capacity so generated scheduled to be operational by
December 31, 2002.

(b) Of the 125 megawatts of biomass electricity installed capacity required under this
subdivision, no more than 55 megawatts of this capacity may be provided by a facility that
uses poultry litter as its primary fuel source and any such facility:

(1) need not use biomass that complies with the definition in subdivision 1;

(2) must enter into a contract with the public utility for such capacity, that has an average
purchase price per megawatt hour over the life of the contract that is equal to or less than
the average purchase price per megawatt hour over the life of the contract in contracts
approved by the Public Utilities Commission before April 1, 2000, to satisfy the mandate
of this section, and file that contract with the Public Utilities Commission prior to September
1, 2000; and

(3) must schedule such capacity to be operational by December 31, 2002.

(c) Of the total 125 megawatts of biomass electric energy installed capacity required
under this section, no more than 75 megawatts may be provided by a single project.

(d) Of the 75 megawatts of biomass electric energy installed capacity required under
paragraph (a), clause (2), no more than 33 megawatts of this capacity may be provided by
a St. Paul district heating and cooling system cogeneration facility utilizing waste wood as
a primary fuel source. The St. Paul district heating and cooling system cogeneration facility
need not use biomass that complies with the definition in subdivision 1.

(e) The public utility must accept and consider on an equal basis with other biomass
proposals:

(1) a proposal to satisfy the requirements of this section that includes a project that
exceeds the megawatt capacity requirements of either paragraph (a), clause (1) or (2), and
that proposes to sell the excess capacity to the public utility or to other purchasers; and

(2) a proposal for a new facility to satisfy more than ten but not more than 20 megawatts
of the electrical generation requirements by a small business-sponsored independent power
producer facility to be located within the northern quarter of the state, which means the area
located north of Constitutional Route No. 8 as described in section 161.114, subdivision 2,
and that utilizes biomass residue wood, sawdust, bark, chipped wood, or brush to generate
electricity. A facility described in this clause is not required to utilize biomass complying
with the definition in subdivision 1, but must be under construction by December 31, 2005.

(f) If a public utility files a contract with the commission for electric energy installed
capacity that uses poultry litter as its primary fuel source, the commission must do a
preliminary review of the contract to determine if it meets the purchase price criteria provided
in paragraph (b), clause (2). The commission shall perform its review and advise the parties
of its determination within 30 days of filing of such a contract by a public utility. A public
utility may submit by September 1, 2000, a revised contract to address the commission's
preliminary determination.

(g) The commission shall finally approve, modify, or disapprove no later than July 1,
2001, all contracts submitted by a public utility as of September 1, 2000, to meet the mandate
set forth in this subdivision.

(h) If a public utility subject to this section exercises an option to increase the generating
capacity of a project in a contract approved by the commission prior to April 25, 2000, to
satisfy the mandate in this subdivision, the public utility must notify the commission by
September 1, 2000, that it has exercised the option and include in the notice the amount of
additional megawatts to be generated under the option exercised. Any review by the
commission of the project after exercise of such an option shall be based on the same criteria
used to review the existing contract.

deleted text begin (i) A facility specified in this subdivision qualifies for exemption from property taxation
under section 272.02, subdivision 45.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 4.

Minnesota Statutes 2016, section 272.02, subdivision 9, is amended to read:

Subd. 9.

Personal property; exceptions.

Except for the taxable personal property
enumerated below, all personal property and the property described in section 272.03,
subdivision 1, paragraphs (c) and (d), shall be exempt.

The following personal property shall be taxable:

(a) personal property which is part of deleted text begin an electric deleted text end deleted text begin generating, transmission, or deleted text end deleted text begin distribution
system or deleted text end a pipeline system transporting or distributing water, gas, crude oil, or petroleum
products or mains and pipes used in the distribution of steam or hot or chilled water for
heating or cooling buildings and structures;

(b) railroad docks and wharves which are part of the operating property of a railroad
company as defined in section 270.80;

(c) personal property defined in section 272.03, subdivision 2, clause (3);

(d) leasehold or other personal property interests which are taxed pursuant to section
272.01, subdivision 2; 273.124, subdivision 7; or 273.19, subdivision 1; or any other law
providing the property is taxable as if the lessee or user were the fee owner;

(e) manufactured homes and sectional structures, including storage sheds, decks, and
similar removable improvements constructed on the site of a manufactured home, sectional
structure, park trailer or travel trailer as provided in section 273.125, subdivision 8, paragraph
(f); and

(f) flight property as defined in section 270.071.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 5.

Minnesota Statutes 2016, section 272.02, subdivision 10, is amended to read:

Subd. 10.

Personal property used for pollution control.

Personal property used
primarily for the abatement and control of air, water, or land pollution is exempt to the
extent that it is so used, and real property is exempt if it is used primarily for abatement and
control of air, water, or land pollution as part of an agricultural operation, as a part of a
centralized treatment and recovery facility operating under a permit issued by the Minnesota
Pollution Control Agency pursuant to chapters 115 and 116 and Minnesota Rules, parts
7001.0500 to 7001.0730, and 7045.0020 to 7045.1030, as a wastewater treatment facility
and for the treatment, recovery, and stabilization of metals, oils, chemicals, water, sludges,
or inorganic materials from hazardous industrial wastes deleted text begin , or as part of an electric generation
system deleted text end . For purposes of this subdivision, personal property includes ponderous machinery
and equipment used in a business or production activity that at common law is considered
real property. new text begin The real or personal property of an electric generation, transmission,
distribution, and substation system is not eligible for an exemption under this section.
new text end

Any taxpayer requesting exemption of all or a portion of any real property or any
equipment or device, or part thereof, operated primarily for the control or abatement of air,
water, or land pollution shall file an application with the commissioner of revenue. deleted text begin The
commissioner shall develop an electronic means to notify interested parties when electric
power generation facilities have filed an application. deleted text end The Minnesota Pollution Control
Agency shall upon request of the commissioner furnish information and advice to the
commissioner.

The information and advice furnished by the Minnesota Pollution Control Agency must
include statements as to whether the equipment, device, or real property meets a standard,
rule, criteria, guideline, policy, or order of the Minnesota Pollution Control Agency, and
whether the equipment, device, or real property is installed or operated in accordance with
it. On determining that property qualifies for exemption, the commissioner shall issue an
order exempting the property from taxation. The commissioner shall develop an electronic
means to notify interested parties when the commissioner has issued an order exempting
property from taxation under this subdivision. The equipment, device, or real property shall
continue to be exempt from taxation as long as the order issued by the commissioner remains
in effect.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 6.

Minnesota Statutes 2016, section 272.025, subdivision 1, is amended to read:

Subdivision 1.

Statement of exemption.

(a) Except in the case of property owned by
the state of Minnesota or any political subdivision thereof, and property exempt from taxation
under section 272.02, subdivisions 9, 10, 13, 15, 18, 20, and 22 to 25, and at the times
provided in subdivision 3, a taxpayer claiming an exemption from taxation on property
described in section 272.02, subdivisions 2 to deleted text begin 33 deleted text end new text begin 32 new text end , must file a statement of exemption
with the assessor of the assessment district in which the property is located.

(b) A taxpayer claiming an exemption from taxation on property described in section
272.02, subdivision 10, must file a statement of exemption with the commissioner of revenue,
on or before February 15 of each year for which the taxpayer claims an exemption.

(c) In case of sickness, absence or other disability or for good cause, the assessor or the
commissioner may extend the time for filing the statement of exemption for a period not to
exceed 60 days.

(d) The commissioner of revenue shall prescribe the form and contents of the statement
of exemption.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2017.
new text end

Sec. 7.

new text begin [273.129] ELECTRIC GENERATION MACHINERY, TRANSMISSION,
DISTRIBUTION, AND SUBSTATION; VALUATION.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms having
the meanings given.
new text end

new text begin (b) "Biomass generating system" means a device used to produce energy by the direct
combustion of carbon-based organisms.
new text end

new text begin (c) "Coal generating system" means a device whose primary purpose is the production
of electricity derived from the direct combustion of coal to produce steam.
new text end

new text begin (d) "Electric generation machinery" means all personal property of an electric generation
system used for the purpose of generating electricity, excluding municipal utilities, solar
energy generating systems, and wind energy conversion systems.
new text end

new text begin (e) "Electric transmission line" means an exterior or underground line that transmits
high-voltage electricity with a capacity of at least 65 kilovolts or any electric line owned
by a utility that only operates in wholesale sales. Electric transmission line does not mean
any exterior or electric line owned or operated by a municipal utility.
new text end

new text begin (f) "Electric distribution line" means an exterior or underground line that transmits energy
that operates at a voltage less than 65 kilovolts, excluding any line owned or operated by a
municipal utility or a rural electric distribution cooperative.
new text end

new text begin (g) "Electric substation" means an assembly of equipment in an electric power system
through which electric energy is passed for transmission or transformation.
new text end

new text begin (h) "Electric transmission line rate" equals voltage, in kilovolts, multiplied by .......
new text end

new text begin (i) "Generation capacity rate" means the rate per kilowatt of nameplate capacity as
follows:
new text end

new text begin (1) $0 for hydroelectric generating systems;
new text end

new text begin (2) $5 for machinery used to generate electricity from biomass, natural gas, or nuclear
fuel generation systems; and
new text end

new text begin (3) $10 for machinery used to generate electricity from a coal or oil generation system
or any other fossil fuel.
new text end

new text begin (j) "Generation rate" means the rate per kilowatt-hour as follows:
new text end

new text begin (1) $0.05 for hydroelectric generating systems;
new text end

new text begin (2) $0.0525 for machinery used to generate electricity from biomass, natural gas, or
nuclear fuel generation systems; and
new text end

new text begin (3) $0.055 for machinery used to generate electricity from a coal or oil generation system
or any other fossil fuel.
new text end

new text begin (k) "Hydroelectric generating system" means a device whose primary purpose is the
production of electricity derived from flowing water.
new text end

new text begin (l) "Nameplate capacity" means the maximum rated output of a generator, prime mover,
or other electric power production equipment under specific conditions designated by the
manufacturer.
new text end

new text begin (m) "Natural gas generating system" means a device whose primary purpose is the
production of electricity derived from natural gas.
new text end

new text begin (n) "Nuclear fuel generating system" means a device whose primary purpose is the
production of electricity generated by the use of the thermal energy released from the fission
of nuclear fuel in a reactor.
new text end

new text begin (o) "Oil generating system" means a device whose primary purpose is the production of
electricity derived by direct combustion of oil to produce steam.
new text end

new text begin (p) "Primary fuel source" means the fuel source that is dominantly used by a facility in
the production of electricity.
new text end

new text begin (q) "Spent fuel" means fuel that has been irradiated in a nuclear reactor to the point
where it is no longer useful in sustaining a nuclear reaction.
new text end

new text begin (r) "Spent fuel tax base" means $150,000,000 per facility plus $100,000 per ton, or
fraction thereof, of spent fuel stored at a nuclear generating facility, or at any other site
elsewhere within the state. The value of spent fuel stored at a site other than at a nuclear
generating facility shall be apportioned to the jurisdiction where the spent fuel is stored.
new text end

new text begin Subd. 2. new text end

new text begin Rates; adjustment. new text end

new text begin The rates as provided in subdivision 1, paragraphs (h), (i),
and (j), and the factors in subdivision 3, paragraphs (d) and (e), shall be increased annually
by an amount equal to the percentage change, if any, in the gross domestic product for
nonresidential investment for the current year as compared to the previous year, as reported
on Table 1.1.1 by the United States Bureau of Economic Analysis. A rate change pursuant
to this section is effective for the following taxes payable year.
new text end

new text begin Subd. 3. new text end

new text begin Electric generation tax base. new text end

new text begin (a) The commissioner shall annually calculate
the electric generation tax base under this section. An electric generating system with a
capacity of one megawatt or less as determined under subdivision 4 is exempt from this
section. The commissioner shall calculate the electric generation tax base of the facility
using the applicable capacity and generation rates for each generator based on the electric
generation system's primary fuel source.
new text end

new text begin (b) The electric generation tax base for property described in subdivision 1, paragraph
(d), is equal to the sum of: (1) its nameplate capacity multiplied by its generation capacity
rate; (2) the average of its electric energy production as reported to the commissioner of
revenue for the immediately preceding five years, multiplied by its generation rate; and (3)
its spent fuel tax base. For an electric generator that has been operational for less than the
immediately preceding five years, the average of its electric energy production is the average
of its electric energy production for the time period since the facility commenced operation.
new text end

new text begin (c) The electric transmission line tax base for property described in subdivision 1,
paragraph (e), is equal to the number of miles of electric transmission lines located within
the taxing jurisdiction, multiplied by the electric transmission line rate.
new text end

new text begin (d) The electric substation tax base for property described in subdivision 1, paragraph
(g), is equal to the sum of the capacity of a substation, measured in megavolt-amperes,
multiplied by .......
new text end

new text begin (e) The electric distribution line tax base for property described in subdivision 1,
paragraph (f), is equal to the number of customers in the taxing jurisdiction that receives
an electric distribution, multiplied by .......
new text end

new text begin Subd. 4. new text end

new text begin Electric generating systems; size. new text end

new text begin The total capacity of an electric generating
system, pursuant to this section, shall be determined by combining all generators of each
fuel type within each facility, based on the information reported to the commissioner of
revenue as required under subdivision 5.
new text end

new text begin Subd. 5. new text end

new text begin Generating systems; reports. new text end

new text begin (a) An owner of an electric generating system,
transmission and distribution lines, or electric substations subject to taxation under this
section must file a report with the commissioner of revenue annually on or before January
15 detailing, if applicable: (1) the amount of electricity produced by each generator in the
previous calendar year as reported to the United States Energy Information Administration;
(2) the location, length, and capacity of all transmission and distribution lines; and (3) the
location and capacity of all electric substations, including individual transformers. The
commissioner shall prescribe the form of the report, and the report must contain the
information required by the commissioner to determine the tax base under this section. The
commissioner may, for good cause, extend the time for filing the report as required under
this section. The extension may not exceed 15 days.
new text end

new text begin (b) If an owner of an electric generating system fails to file the report by the due date,
the commissioner of revenue shall determine the tax base upon the sum of: (1) the nameplate
capacity of the system's generators multiplied by the generation capacity rate for the
generator's primary fuel source; (2) a production of 100 percent of annual capacity of the
facility multiplied by the generation rate for the primary fuel source; and (3) the greater of
the spent fuel tax base from the prior year multiplied by two, or the amount as reported by
the United States Energy Information Administration, multiplied by two.
new text end

new text begin (c) If an owner of an electric transmission or distribution line, or an electric substation,
fails to file the report by the due date, the commissioner of revenue shall determine the tax
based upon the prior year's tax base multiplied by two.
new text end

new text begin Subd. 6. new text end

new text begin Notification to the counties. new text end

new text begin The commissioner of revenue shall annually, on
or before March 31, notify the county auditor of the county where the electric generating,
transmission, distribution, and substation system is located of: (1) the electric generation
tax base; and (2) the electric generation tax base multiplied by two percent to be added to
the jurisdiction's net tax capacity base.
new text end

new text begin Subd. 7. new text end

new text begin Omitted or undervalued property. new text end

new text begin If an electric generation, transmission,
distribution, and substation system is omitted in the determination of the tax base and thereby
escapes taxation, or if the system is discovered to have been undervalued, or, if the capacity
or production has been underreported, the commissioner of revenue shall determine the tax
base for the year or years omitted. The commissioner of revenue shall, on or before March
31, notify the county auditor of the county where the electric generation transmission,
distribution, and substation system is located of the omitted or underreported tax base, and
the county auditor shall extend against the owner arrearage of taxes properly due. The
authority of the commissioner of revenue to determine the tax base under this section is
limited to the immediately preceding five years.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 8.

Minnesota Statutes 2016, section 273.13, subdivision 24, is amended to read:

Subd. 24.

Class 3.

Commercial and industrial property and utility real and personal
property is class 3a.

(1) Except as otherwise provided, each parcel of commercial, industrial, or utility real
property has a classification rate of 1.5 percent of the first tier of market value, and 2.0
percent of the remaining market value. In the case of contiguous parcels of property owned
by the same person or entity, only the value equal to the first-tier value of the contiguous
parcels qualifies for the reduced classification rate, except that contiguous parcels owned
by the same person or entity shall be eligible for the first-tier value classification rate on
each separate business operated by the owner of the property, provided the business is
housed in a separate structure. For the purposes of this subdivision, the first tier means the
first $150,000 of market value. Real property owned in fee by a utility for transmission line
right-of-way shall be classified at the classification rate for the higher tier.

For purposes of this subdivision, parcels are considered to be contiguous even if they
are separated from each other by a road, street, waterway, or other similar intervening type
of property. Connections between parcels that consist of power lines or pipelines do not
cause the parcels to be contiguous. Property owners who have contiguous parcels of property
that constitute separate businesses that may qualify for the first-tier classification rate shall
notify the assessor by July 1, for treatment beginning in the following taxes payable year.

(2) All personal property that is: deleted text begin (i) part of an electric generation, transmission deleted text end deleted text begin , or
distribution system; or (ii) deleted text end new text begin (i) new text end part of a pipeline system transporting or distributing water,
gas, crude oil, or petroleum products; and deleted text begin (iii) deleted text end new text begin (ii) new text end not described in clause (3), and all railroad
operating property has a classification rate as provided under clause (1) for the first tier of
market value and the remaining market value. In the case of multiple parcels in one county
that are owned by one person or entity, only one first tier amount is eligible for the reduced
rate.

(3) The entire market value of personal property that is: deleted text begin (i) tools, implements, and
machinery of an electric generation, transmission deleted text end deleted text begin , or distribution system; (ii) deleted text end new text begin (i) new text end tools,
implements, and machinery of a pipeline system transporting or distributing water, gas,
crude oil, or petroleum products; or deleted text begin (iii) deleted text end new text begin (ii) new text end the mains and pipes used in the distribution of
steam or hot or chilled water for heating or cooling buildings, has a classification rate as
provided under clause (1) for the remaining market value in excess of the first tier.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 9.

Minnesota Statutes 2016, section 273.1325, subdivision 1, is amended to read:

Subdivision 1.

Computation.

The Department of Revenue must annually conduct an
assessment/sales ratio study of the taxable property in each county, city, town, and school
district in accordance with the procedures in subdivisions 2 and 3. Based upon the results
of this assessment/sales ratio study, the Department of Revenue must determine an equalized
net tax capacity for the various classes of taxable property in each taxing district new text begin , plus the
value established under section 273.129 new text end , the aggregate of which is designated as the adjusted
net tax capacity. The adjusted net tax capacity must be reduced by the captured tax capacity
of tax increment districts under section 469.177, subdivision 2, fiscal disparities contribution
tax capacities under sections 276A.06 and 473F.08, and the tax capacity of transmission
lines required to be subtracted from the local tax base under section 273.425; and increased
by fiscal disparities distribution tax capacities under sections 276A.06 and 473F.08. The
adjusted net tax capacities shall be determined using the net tax capacity percentages in
effect for the assessment year following the assessment year of the study. The Department
of Revenue must make whatever estimates are necessary to account for changes in the
classification system. The Department of Revenue may incur the expense necessary to make
the determinations. The commissioner of revenue may reimburse any county or governmental
official for requested services performed in ascertaining the adjusted net tax capacity. On
or before March 15 annually, the Department of Revenue shall file with the chair of the Tax
Committee of the house of representatives and the chair of the Committee on Taxes and
Tax laws of the senate a report of adjusted net tax capacities for school districts. On or
before June 30 annually, the Department of Revenue shall file its final report on the adjusted
net tax capacities for school districts established by the previous year's assessments and the
current year's net tax capacity percentages with the commissioner of education and each
county auditor for those school districts for which the auditor has the responsibility for
determination of local tax rates. A copy of the report so filed shall be mailed to the clerk of
each school district involved and to the county assessor or supervisor of assessments of the
county or counties in which each school district is located.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 10.

Minnesota Statutes 2016, section 273.37, subdivision 1, is amended to read:

Subdivision 1.

Listing and assessment where situated.

new text begin (a) new text end Personal property of electric
light and power companies, and other individuals and partnerships supplying electric light
and power, having a fixed situs outside of the corporate limits of cities shall be listed and
assessed in the district where situated, except as otherwise provided.

new text begin (b) Notwithstanding any other law to the contrary, the nonoperating property, and
operating real property that is part of an electric generation system, shall be listed and
assessed by the local or county assessor.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2018.
new text end

Sec. 11.

new text begin [477A.23] ELECTRIC GENERATION, TRANSMISSION, DISTRIBUTION,
AND SUBSTATION REPLACEMENT AID.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (b) "Electric distribution line" means an exterior or underground line that transmits
energy that operates at a voltage less than 65 kilovolts, excluding any line owned or operated
by a municipal utility, or a rural electric distribution cooperative.
new text end

new text begin (c) "Electric substation" means an assembly of equipment in an electric power system
through which electric energy is passed for transmission, transformation, or distribution.
new text end

new text begin (d) "Electric transmission line" means an exterior or underground line that transmits
high-voltage electricity with a capacity of at least 65 kilovolts or any electric line owned
by a utility that only operates in wholesale sales. Electric transmission line does not mean
any exterior or electric line owned or operated by a municipal utility.
new text end

new text begin (e) "Local unit" means a home rule charter or statutory city, county, or town.
new text end

new text begin Subd. 2. new text end

new text begin Aid eligibility; payment. new text end

new text begin (a) For aids payable in 2019 only, replacement aid
under this section equals: (1) the net tax capacity of all personal property of all electric
generation, transmission and distribution lines, and substation systems as determined for
assessment year 2018 multiplied by the payable 2019 local tax rate; minus (2) the net tax
capacity in 2017 of all electric generation, transmission or distribution lines, and substation
systems as determined under section 273.129, multiplied by the payable 2018 local tax rate.
The aid payment may not be less than zero.
new text end

new text begin (b) For aids payable in 2020 and thereafter, if the electric generation, transmission,
distribution, and substation tax base is: (1) reduced by more than ten percent as compared
to the previous year; and (2) the reduction is more than 0.5 percent of a local unit's total tax
base, aid shall equal the difference between the prior assessment year multiplied by the
current year local tax rate and the assessment two years prior multiplied by the prior year
local tax rate.
new text end

new text begin (c) If paragraph (b) does not apply, aid shall be equal to (1) 95 percent of the prior year's
aid; minus (2) the difference between the current year's tax base from the prior year's tax
base. Aid shall cease if aid is certified to be less than 0.05 percent of the current assessment
year multiplied by the local tax rate.
new text end

new text begin (d) The commissioner shall compute the amount of replacement aid payable to each
local unit under this section. On or before August 1 of each year, the commissioner shall
certify the amount of replacement aid computed for aids payable in the following year for
each recipient local unit. The commissioner shall pay replacement aid to local units annually
at the time provided for the second installment of local government aid under section
477A.015.
new text end

new text begin (e) The commissioner may require counties and owners of electric generation facilities,
transmission and distribution lines, and substations to provide any documentation necessary
to administer this section.
new text end

new text begin Subd. 3. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to pay transition aid under this section
is annually appropriated to the commissioner of revenue from the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with aids payable in 2019.
new text end

Sec. 12. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2016, sections 272.02, subdivisions 24, 29, 33, 44, 45, 47, 52, 54,
55, 56, 68, 69, 70, 71, 84, 89, 92, 93, 96, and 99; and 272.0211, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2017.
new text end

APPENDIX

Repealed Minnesota Statutes: 17-3337

272.02 EXEMPT PROPERTY.

Subd. 24.

Solar energy generating systems.

Personal property consisting of solar energy generating systems, as defined in section 272.0295, is exempt. If the real property upon which a solar energy generating system is located is used primarily for solar energy production subject to the production tax under section 272.0295, the real property shall be classified as class 3a. If the real property upon which a solar energy generating system is located is not used primarily for solar energy production subject to the production tax under section 272.0295, the real property shall be classified without regard to the system.

Subd. 29.

Cogeneration systems; certain property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of a facility containing a cogeneration system as described in section 216B.166, subdivision 2, paragraph (a), is exempt if the cogeneration system has met the following criteria: (i) the system utilizes natural gas as a primary fuel and the cogenerated steam initially replaces steam generated from existing thermal boilers utilizing coal; (ii) the facility developer is selected as a result of a procurement process ordered by the Public Utilities Commission; and (iii) construction of the facility is commenced after July 1, 1994, and before July 1, 1997.

Subd. 33.

Electric generation facility personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of a simple-cycle combustion-turbine electric generation facility that exceeds 250 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(i) not be owned by a public utility as defined in section 216B.02, subdivision 4;

(ii) utilize natural gas as a primary fuel;

(iii) be located within 20 miles of the intersection of an existing 42-inch (outside diameter) natural gas pipeline and a 345-kilovolt high-voltage electric transmission line; and

(iv) be designed to provide peaking, emergency backup, or contingency services, and have received a certificate of need pursuant to section 216B.243 demonstrating demand for its capacity.

Construction of the facility must be commenced after July 1, 1999, and before July 1, 2003. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 44.

Electric generation facility personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of a simple-cycle combustion-turbine electric generation facility that exceeds 250 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(1) utilize natural gas as a primary fuel;

(2) be located within 20 miles of parallel existing 16-inch and 12-inch (outside diameter) natural gas pipelines and a 345-kilovolt high-voltage electric transmission line; and

(3) be designed to provide peaking, emergency backup, or contingency services, and have received a certificate of need under section 216B.243 demonstrating demand for its capacity.

Construction of the facility must be commenced after January 1, 2000, and before January 1, 2004. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 45.

Biomass electrical generation facility; personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of an electrical generating facility that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(1) be designed to utilize biomass as established in section 216B.2424 as a primary fuel source; and

(2) be constructed for the purpose of generating power at the facility that will be sold pursuant to a contract approved by the Public Utilities Commission in accordance with the biomass mandate imposed under section 216B.2424.

Construction of the facility must be commenced after January 1, 2000, and before December 31, 2005. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or facility.

Subd. 47.

Poultry litter biomass generation facility; personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of an electrical generating facility that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(1) be designed to utilize poultry litter as a primary fuel source; and

(2) be constructed for the purpose of generating power at the facility that will be sold pursuant to a contract approved by the Public Utilities Commission in accordance with the biomass mandate imposed under section 216B.2424.

Construction of the facility must be commenced after January 1, 2003, and before December 31, 2005. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 52.

Electric generation facility; personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of a simple-cycle combustion-turbine electric generation facility of more than 40 megawatts and less than 50 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(1) utilize natural gas as a primary fuel;

(2) be located within two miles of parallel existing 36-inch natural gas pipelines and an existing 115-kilovolt high-voltage electric transmission line;

(3) be designed to provide peaking, emergency backup, or contingency services; and

(4) satisfy a resource deficiency identified in an approved integrated resource plan filed under section 216B.2422.

Construction of the facility must be commenced after January 1, 2001, and before January 1, 2005. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 54.

Small biomass electric generation facility; personal property.

(a) Subject to paragraph (b), notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of an electrical generating facility that meets the requirements of this subdivision is exempt. At the time of construction the facility must:

(1) have a generation capacity of less than 25 megawatts;

(2) provide process heating needs in addition to electrical generation; and

(3) utilize agricultural by-products from the malting process and other biomass fuels as its primary fuel source.

Construction of the facility must be commenced after January 1, 2002, and before January 1, 2008. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or facility.

(b) The exemption under this subdivision is contingent on approval by the governing bodies of the municipality and county in which the electric generation facility is located.

Subd. 55.

Electric generation facility; personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of an electric generating facility that meets the requirements of this subdivision is exempt. At the time of construction, the facility must (i) be eligible to be designated as an innovative energy project under section 216B.1694, except that, notwithstanding anything to the contrary in section 216B.1694, a project may include gas-fired generating facilities that are adaptable for subsequent incorporation into a facility that uses coal as a primary fuel, provided that this exception applies only to the eligibility for exemption under this section, (ii) be within a tax relief area as defined in section 273.134, (iii) have access to existing railroad infrastructure within less than three miles, (iv) have received by resolution approval from the governing body of the county and township or city in which the proposed facility is to be located for the exemption of personal property under this subdivision, and (v) be designed to host at least 500 megawatts of electrical generation.

Construction of the first 100 megawatts of the facility must be commenced after January 1, 2006, and before January 1, 2012. Construction of up to an additional 750 megawatts of generation must be commenced before January 1, 2015. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility. To qualify for an exemption under this subdivision, the owner of the electric generation facility must have an agreement with the host county, township or city, and school district, for payment in lieu of personal property taxes to the host county, township or city, and school district.

Subd. 56.

Electric generation facility; personal property.

(a) Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of a combined-cycle combustion-turbine electric generation facility that exceeds 300 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

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

(2) not be owned by a public utility as defined in section 216B.02, subdivision 4;

(3) be located within five miles of an existing natural gas pipeline and within four miles of an existing electrical transmission substation;

(4) be located outside the metropolitan area as defined under section 473.121, subdivision 2; and

(5) be designed to provide energy and ancillary services and have received a certificate of need under section 216B.243.

(b) Construction of the facility must be commenced after January 1, 2004, and before January 1, 2007, except that property eligible for this exemption includes any expansion of the facility that also meets the requirements of paragraph (a), clauses (1) to (5), without regard to the date that construction of the expansion commences. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 68.

Electric generation facility; personal property.

(a) Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of a simple-cycle combustion-turbine electric generation facility that exceeds 290 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

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

(2) not be owned by a public utility as defined in section 216B.02, subdivision 4;

(3) be located within 15 miles of an existing natural gas pipeline and within five miles of an existing electrical transmission substation;

(4) be located outside the metropolitan area as defined under section 473.121, subdivision 2;

(5) be designed to provide peaking capacity energy and ancillary services and have satisfied all of the requirements under section 216B.243; and

(6) have received, by resolution, the approval from the governing body of the county, city, and school district in which the proposed facility is to be located for the exemption of personal property under this subdivision.

(b) Construction of the facility must be commenced after January 1, 2005, and before January 1, 2009. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 69.

Electric generation facility personal property.

(a) Notwithstanding subdivision 9, clause (a), and section 453.54, subdivision 20, attached machinery and other personal property which is part of an electric generation facility that exceeds 150 megawatts of installed capacity and meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

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

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

(3) have received the certificate of need under section 216B.243;

(4) be located outside the metropolitan area as defined under section 473.121, subdivision 2; and

(5) be designed to be a combined-cycle facility, although initially the facility will be operated as a simple-cycle combustion turbine.

(b) To qualify under this subdivision, an agreement must be negotiated between the municipal power agency and the host city, for a payment in lieu of property taxes to the host city.

(c) Construction of the facility must be commenced after January 1, 2004, and before January 1, 2006. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 70.

Electric generation facility; personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of an existing simple-cycle, combustion-turbine electric generation facility that exceeds 300 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of the construction, the facility must:

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

(2) be owned by a public utility as defined in section 216B.02, subdivision 4, and be located at or interconnected with an existing generating plant of the utility;

(3) be designed to provide peaking, emergency backup, or contingency services;

(4) satisfy a resource need identified in an approved integrated resource plan filed under section 216B.2422; and

(5) have received, by resolution, the approval from the governing body of the county and the city for the exemption of personal property under this subdivision.

Construction of the facility expansion must be commenced after January 1, 2004, and before January 1, 2005. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 71.

Electric generation facility; personal property.

(a) Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of a simple-cycle combustion-turbine electric generation facility that exceeds 150 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(1) utilize natural gas as a primary fuel;

(2) be owned by an electric generation and transmission cooperative;

(3) be located within five miles of parallel existing 12-inch and 16-inch natural gas pipelines and a 69-kilovolt high-voltage electric transmission line;

(4) be designed to provide peaking, emergency backup, or contingency services;

(5) have received a certificate of need under section 216B.243 demonstrating demand for its capacity; and

(6) have received by resolution the approval from the governing body of the county and township in which the proposed facility is to be located for the exemption of personal property under this subdivision.

(b) Construction of the facility must be commenced after July 1, 2005, and before January 1, 2009. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 84.

Electric generation facility; personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property which is part of a 10.3 megawatt run-of-the-river hydroelectric generation facility and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(1) utilize between 12 and 16 turbine generators at a dam site existing on March 31, 1994;

(2) be located on land within 3,000 feet of a 13.8 kilovolt distribution substation; and

(3) be eligible to receive a renewable energy production incentive payment under section 216C.41.

Construction of the facility must be commenced after April 30, 2006, and before January 1, 2011. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 89.

Electric generation facility; personal property.

(a) Notwithstanding subdivision 9, paragraph (a), attached machinery and other personal property which is part of a simple-cycle combustion-turbine electric generation facility that exceeds 150 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(1) utilize natural gas as a primary fuel;

(2) be owned by an electric generation and transmission cooperative;

(3) be located within one mile of an existing 16-inch natural gas pipeline and a 69-kilovolt and a 230-kilovolt high-voltage electric transmission line;

(4) be designed to provide peaking, emergency backup, or contingency services;

(5) have received a certificate of need under section 216B.243 demonstrating demand for its capacity; and

(6) have received by resolution the approval from the governing bodies of the county and the city in which the proposed facility is to be located for the exemption of personal property under this subdivision.

(b) Construction of the facility must be commenced after January 1, 2008, and before January 1, 2012. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 92.

Electric generation facility; personal property.

(a) Notwithstanding subdivision 9, clause (a), attached machinery and other personal property that is part of an electric generation facility that exceeds 150 megawatts of installed capacity, does not exceed 780 megawatts of summer capacity, and meets the requirements of this subdivision is exempt. At the start of construction, the facility must:

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

(2) be owned by an entity other than a public utility as defined in section 216B.02, subdivision 4;

(3) be located within five miles of two or more interstate natural gas pipelines;

(4) be located within one mile of an existing electrical transmission substation with operating alternating current voltages of 115 kV, 345 kV, and 500 kV;

(5) be designed to provide electrical capacity, energy, and ancillary services;

(6) have satisfied all of the requirements under section 216B.243;

(7) have executed an interconnection agreement with the Midwest Independent System Operator that does not require the acquisition of more than one mile of new electric transmission right-of-way within the county where the facility is located, and does not provide for any other new routes or corridors for future electric transmission lines in the county where the facility is located;

(8) be located in a county with an essential services and transmission services ordinance;

(9) have signed a development agreement with the county board in the county in which the facility is located. The development agreement must be adopted by a two-thirds vote of the county board, and must contain provisions ensuring:

(i) the facility is designed to use effluent from a wastewater treatment facility as its preferred water source if it includes any combined-cycle units, and will not seek an exemption from legislative approval under section 103G.265, subdivision 3, paragraph (b); and

(ii) all processed wastewater discharge will be colocated with the outfall of a wastewater treatment facility;

(10) have signed a development agreement with the township board in the township in which the facility is located containing provisions ensuring that noise and visual impacts of the facility are mitigated. The development agreement must be adopted by a two-thirds vote of the township board; and

(11) have an agreement with the host county, township, and school district for payment in lieu of personal property taxes to the host county, township, and school district for a total amount not to exceed $600,000 per year for the operating life of the facility. Any amount distributed to the school district is not subject to the deductions under section 126C.21.

(b) Construction of the facility must begin after March 1, 2010, and before March 1, 2014. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the facility.

Subd. 93.

Electric generation facility; personal property.

Notwithstanding subdivision 9, clause (a), attached machinery and other personal property that is part of a simple-cycle electric generation facility of more than 40 megawatts and less than 125 megawatts of installed capacity and that meets the requirements of this subdivision is exempt. At the time of construction, the facility must:

(1) utilize natural gas as a primary fuel;

(2) be located within two miles of parallel existing 36-inch natural gas pipelines and an existing 115-kilovolt high-voltage electric transmission line;

(3) be designed to provide peaking, emergency backup, or contingency services;

(4) satisfy a resource deficiency identified in an approved integrated resource plan filed under section 216B.2422; and

(5) have an agreement with the host county, township, and school district for payment in lieu of personal property taxes to the host county, township, and school district for the operating life of the facility. Any amount distributed to the school district is not subject to the deductions under section 126C.21.

Construction of the facility must be commenced after January 1, 2015, and before January 1, 2019. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

Subd. 96.

Electric generation facility; personal property.

(a) Notwithstanding subdivision 9, clause (a), and section 453.54, subdivision 20, attached machinery and other personal property that is part of a multiple reciprocating engine electric generation facility that adds more than 20 and less than 30 megawatts of installed capacity at a site where there is presently more than ten megawatts and fewer than 15 megawatts of installed capacity and that meets the requirements of this subdivision is exempt from taxation and from payments in lieu of taxation. At the time of construction, the facility must:

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

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

(3) be located within one mile of an existing natural gas pipeline;

(4) be designed to have black start capability and to furnish emergency backup power service to the city in which it is located;

(5) satisfy a resource deficiency identified in an approved integrated resource plan filed under section 216B.2422; and

(6) have received, by resolution, the approval of the governing bodies of the city and county in which it is located for the exemption of personal property provided by this subdivision.

(b) Construction of the facility must be commenced after December 31, 2011, and before January 1, 2015. Property eligible for this exemption does not include (i) electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility; or (ii) property located on the site on July 20, 2011.

Subd. 99.

Electric generation facility; personal property.

(a) Notwithstanding subdivision 9, clause (a), and section 453.54, subdivision 20, attached machinery and other personal property which is part of an electric generation facility that exceeds five megawatts of installed capacity and meets the requirements of this subdivision is exempt. At the time of construction, the facility must be:

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

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

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

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

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

(b) Construction of the facility must be commenced after June 1, 2013, and before June 1, 2017. Property eligible for this exemption does not include electric transmission lines and interconnections or gas pipelines and interconnections appurtenant to the property or the facility.

272.0211 SLIDING SCALE MARKET VALUE EXCLUSION FOR ELECTRIC POWER GENERATION EFFICIENCY.

Subdivision 1.

Efficiency determination and certification.

An owner or operator of a new or existing electric power generation facility, excluding wind energy conversion systems, may apply to the commissioner of revenue for a market value exclusion on the property as provided for in this section. This exclusion shall apply only to the market value of the equipment of the facility, and shall not apply to the structures and the land upon which the facility is located. The commissioner of revenue shall prescribe the forms and procedures for this application. Upon receiving the application, the commissioner of revenue shall: (1) request the commissioner of commerce to make a determination of the efficiency of the applicant's electric power generation facility; and (2) shall develop an electronic means to notify interested parties when electric power generation facilities have filed an application. The commissioner of commerce shall calculate efficiency as the ratio of useful energy outputs to energy inputs, expressed as a percentage, based on the performance of the facility's equipment during normal full load operation. The commissioner must include in this formula the energy used in any on-site preparation of materials necessary to convert the materials into the fuel used to generate electricity, such as a process to gasify petroleum coke. The commissioner shall use the Higher Heating Value (HHV) for all substances in the commissioner's efficiency calculations, except for wood for fuel in a biomass-eligible project under section 216B.2424; for these instances, the commissioner shall adjust the heating value to allow for energy consumed for evaporation of the moisture in the wood. The applicant shall provide the commissioner of commerce with whatever information the commissioner deems necessary to make the determination. Within 30 days of the receipt of the necessary information, the commissioner of commerce shall certify the findings of the efficiency determination to the commissioner of revenue and to the applicant. The commissioner of commerce shall determine the efficiency of the facility and certify the findings of that determination to the commissioner of revenue every two years thereafter from the date of the original certification.

Subd. 2.

Sliding scale exclusion.

Based upon the efficiency determination provided by the commissioner of commerce as described in subdivision 1, the commissioner of revenue shall subtract eight percent of the taxable market value of the qualifying property for each percentage point that the efficiency of the specific facility, as determined by the commissioner of commerce, is above 40 percent. The reduction in taxable market value shall be reflected in the taxable market value of the facility beginning with the assessment year immediately following the determination. The commissioner shall develop an electronic means to notify interested parties of the qualifying facilities and their respective exclusion percentages after the efficiency determination is made by the Department of Commerce. For a facility that is assessed by the county in which the facility is located, the commissioner of revenue shall certify to the assessor of that county the percentage of the taxable market value of the facility to be excluded.

Subd. 3.

Revocation.

(a) The commissioner of revenue shall revoke the market value reduction under this section, if:

(1) the applicant exercises its right under federal law to require an electric utility to purchase power generated by the facility; and

(2) the electric utility notifies the commissioner that the applicant has exercised its right to require purchase of power.

The revocation is effective beginning the first assessment year after notification of the commissioner.

(b) For purposes of this subdivision, the following terms mean:

(1) "Federal law" is the federal Public Utility Regulatory Policies Act, United States Code, title 16, section 824a-3, and regulations promulgated under that section, including Code of Federal Regulations, title 18, sections 929.303 and 929.304.

(2) "Electric utility" means an electric utility as defined in federal law described in clause (1).

Subd. 4.

Eligibility.

An owner or operator of a new or existing electric power generation facility who offers electric power generated by the facility for sale is eligible for an exclusion under this section only if:

(1) the owner or operator has received a certificate of need under section 216B.243, if required under that section;

(2) the public utilities commission finds that an agreement exists or a good faith offer has been made to sell the majority of the net power generated by the facility to an electric utility which has a demonstrated need for the power. A right of first refusal satisfies the good faith offer requirement. The commission shall have 90 days from the date the commission receives notice of the application under subdivision 1 to make this determination;

(3) the electric utility has agreed in advance not to offer the electric power for resale to a retail customer located outside of the utility's assigned service area, or, if the utility is a generation and transmission cooperative electric association, the assigned service area of its members, unless otherwise permitted by law; and

(4) for any facility that was not certified as eligible for an exclusion under subdivision 2 for property taxes payable in 2015, the facility must be converted from coal to an alternative fuel and must have a nameplate capacity prior to conversion of less than 75 megawatts.

For the purposes of this subdivision, "electric utility" means an entity whose primary business function is to operate, maintain, or control equipment or facilities for providing electric service at retail or wholesale, and includes distribution cooperative electric associations, generation and transmission cooperative electric associations, municipal utilities, and public utilities as defined in section 216B.02, subdivision 4.