as introduced - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am
Engrossments | ||
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Introduction | Posted on 08/14/1998 |
1.1 A bill for an act 1.2 relating to taxation; providing a comprehensive reform 1.3 of state and local taxes and budgeting; providing 1.4 penalties; requiring studies; appropriating money; 1.5 amending Minnesota Statutes 1994, sections 272.02, 1.6 subdivision 1; 273.11, subdivision 5; 273.121; 273.13, 1.7 subdivisions 21a, 22, 23, 24, 25, 31, and 33; 1.8 273.1316, subdivision 1; 273.1393; 273.165, 1.9 subdivision 2; 275.08, subdivision 1b, and by adding a 1.10 subdivision; 276.04, subdivision 2; 289A.08, 1.11 subdivisions 1 and 6; 289A.18, subdivision 4; 290.01, 1.12 subdivisions 19a and 19b; 290.06, subdivision 2c, and 1.13 by adding subdivisions; 290.0671, subdivision 1; 1.14 290.91; 290.9201, subdivision 2; 290.923, subdivision 1.15 2; 290.97; 290.9705, subdivisions 1 and 3; 290A.03, 1.16 subdivision 3; 290A.04, by adding subdivisions; 1.17 297A.01, subdivisions 3, 6, 8, 16, and by adding 1.18 subdivisions; 297A.02, subdivision 1; 297A.03, 1.19 subdivision 1; 297A.14, subdivision 1; 297A.15, 1.20 subdivision 5; 297A.21, subdivision 2; 297A.22; 1.21 297A.24, subdivision 1; 297A.25, subdivisions 4, 9, 1.22 12, 42, and by adding a subdivision; 297A.44, 1.23 subdivision 1; 297B.01, subdivision 8; and 297B.03; 1.24 proposing coding for new law in Minnesota Statutes, 1.25 chapters 16; 273; and 275; proposing coding for new 1.26 law as Minnesota Statutes, chapter 290B; repealing 1.27 Minnesota Statutes 1994, sections 16A.152; 273.11, 1.28 subdivisions 1a, 16, and 18; 273.13, subdivisions 21b 1.29 and 32; 273.1315; 273.1317; 273.1318; 273.134; 1.30 273.135; 273.136; 273.138; 273.1391; 273.1392; 1.31 273.1398; 273.166; 273.33; 273.35; 273.36; 273.37; 1.32 273.371; 273.38; 273.39; 273.40; 273.41; 273.42; 1.33 273.425; 273.43; 275.08, subdivisions 1c and 1d; 1.34 290.01, subdivision 19g; 290.06, subdivision 21; 1.35 290.0802; 290.091; 290.092; 290.0921; 290.0922; 1.36 290A.03, subdivisions 9 and 10; 290A.04, subdivision 1.37 2i; 297A.01, subdivision 20; 297A.02, subdivisions 2 1.38 and 5; 297A.25, subdivisions 6, 7, 8, 10, 11, 17, 18, 1.39 21, 23, 26, 30, 39, 40, 41, 44, 56, 57, 58, and 59; 1.40 297A.256, subdivision 2; 297B.02, subdivisions 2 and 1.41 3; 297B.025; 477A.011, subdivisions 20, 27, 28, 29, 1.42 30, 31, 32, 33, 34, 35, 36, and 37; 477A.012; 1.43 477A.013; 477A.0132; 477A.03, subdivision 3; and 1.44 477A.15. 1.45 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 2.1 ARTICLE 1 2.2 PROPERTY TAXES 2.3 Section 1. Minnesota Statutes 1994, section 273.11, 2.4 subdivision 5, is amended to read: 2.5 Subd. 5. Notwithstanding any other provision of law to the 2.6 contrary, the limitation contained insubdivisionssubdivision 1 2.7and 1ashall also apply to the authority of the local board of 2.8 review as provided in section 274.01, the county board of 2.9 equalization as provided in section 274.13, the state board of 2.10 equalization and the commissioner of revenue as provided in 2.11 sections 270.11, 270.12 and 270.16. 2.12 Sec. 2. Minnesota Statutes 1994, section 273.121, is 2.13 amended to read: 2.14 273.121 [VALUATION OF REAL PROPERTY, NOTICE.] 2.15 Any county assessor or city assessor having the powers of a 2.16 county assessor, valuing or classifying taxable real property 2.17 shall in each year notify those persons whose property is to be 2.18 assessed or reclassified that year if the person's address is 2.19 known to the assessor, otherwise the occupant of the property. 2.20 The notice shall be in writing and shall be sent by ordinary 2.21 mail at least ten days before the meeting of the local board of 2.22 review or equalization. It shall contain: (1) the market 2.23 value, (2)the limited market value under section 273.11,2.24subdivision 1a, (3) the qualifying amount of any improvements2.25under section 273.11, subdivision 16, (4) the market value2.26subject to taxation after subtracting the amount of any2.27qualifying improvements, (5)the new classification,(6)(3) the 2.28 assessor's office address, and(7)(4) the dates, places, and 2.29 times set for the meetings of the local board of review or 2.30 equalization and the county board of equalization. If the 2.31 assessment roll is not complete, the notice shall be sent by 2.32 ordinary mail at least ten days prior to the date on which the 2.33 board of review has adjourned. The assessor shall attach to the 2.34 assessment roll a statement that the notices required by this 2.35 section have been mailed. Any assessor who is not provided 2.36 sufficient funds from the assessor's governing body to provide 3.1 such notices, may make application to the commissioner of 3.2 revenue to finance such notices. The commissioner of revenue 3.3 shall conduct an investigation and, if satisfied that the 3.4 assessor does not have the necessary funds, issue a 3.5 certification to the commissioner of finance of the amount 3.6 necessary to provide such notices. The commissioner of finance 3.7 shall issue a warrant for such amount and shall deduct such 3.8 amount from any state payment to such county or municipality. 3.9 The necessary funds to make such payments are hereby 3.10 appropriated. Failure to receive the notice shall in no way 3.11 affect the validity of the assessment, the resulting tax, the 3.12 procedures of any board of review or equalization, or the 3.13 enforcement of delinquent taxes by statutory means. 3.14 Sec. 3. Minnesota Statutes 1994, section 273.13, 3.15 subdivision 21a, is amended to read: 3.16 Subd. 21a. [CLASS RATE.] In this section, wherever the 3.17 "class rate" of a class of property is specifiedwithout3.18qualification as to whether it is the property's "net class3.19rate" or its "gross class rate," the "net class rate" and "gross3.20class rate" of that property are the same as its "class rate, 3.21 there is a state property tax on that class of property, and the 3.22 state tax rate is the difference between the class rate and the 3.23 combined local tax rates of all local jurisdictions, if any, 3.24 levying a property tax on that property."3.25 Sec. 4. Minnesota Statutes 1994, section 273.13, 3.26 subdivision 22, is amended to read: 3.27 Subd. 22. [CLASS 1.](a) Except as provided in subdivision3.2823,Class 1 property includes real estate which is residential 3.29 and used for homestead purposesis class 1, except as provided 3.30 in subdivision 23, and all other property not otherwise 3.31 classified in this section. The market value of class 1a 3.32 property that is a residential homestead must be determined 3.33 based upon the value of the house, garage, and land. In the 3.34 case of any farm containing a dwelling, the dwelling, garage, 3.35 and surrounding one acre of property constitute class 1 3.36 property. Class 1 property does not have a class rate. 4.1The first $72,000 of market value of class 1a property has4.2a net class rate of one percent of its market value and a gross4.3class rate of 2.17 percent of its market value. For taxes4.4payable in 1992, the market value of class 1a property that4.5exceeds $72,000 but does not exceed $115,000 has a class rate of4.6two percent of its market value; and the market value of class4.71a property that exceeds $115,000 has a class rate of 2.54.8percent of its market value. For taxes payable in 1993 and4.9thereafter, the market value of class 1a property that exceeds4.10$72,000 has a class rate of two percent.4.11(b) Class 1b property includes homestead real estate or4.12homestead manufactured homes used for the purposes of a4.13homestead by4.14(1) any blind person, or the blind person and the blind4.15person's spouse; or4.16(2) any person, hereinafter referred to as "veteran," who:4.17(i) served in the active military or naval service of the4.18United States; and4.19(ii) is entitled to compensation under the laws and4.20regulations of the United States for permanent and total4.21service-connected disability due to the loss, or loss of use, by4.22reason of amputation, ankylosis, progressive muscular4.23dystrophies, or paralysis, of both lower extremities, such as to4.24preclude motion without the aid of braces, crutches, canes, or a4.25wheelchair; and4.26(iii) has acquired a special housing unit with special4.27fixtures or movable facilities made necessary by the nature of4.28the veteran's disability, or the surviving spouse of the4.29deceased veteran for as long as the surviving spouse retains the4.30special housing unit as a homestead; or4.31(3) any person who:4.32(i) is permanently and totally disabled and4.33(ii) receives 90 percent or more of total income from4.34(A) aid from any state as a result of that disability; or4.35(B) supplemental security income for the disabled; or4.36(C) workers' compensation based on a finding of total and5.1permanent disability; or5.2(D) social security disability, including the amount of a5.3disability insurance benefit which is converted to an old age5.4insurance benefit and any subsequent cost of living increases;5.5or5.6(E) aid under the federal Railroad Retirement Act of 1937,5.7United States Code Annotated, title 45, section 228b(a)5; or5.8(F) a pension from any local government retirement fund5.9located in the state of Minnesota as a result of that5.10disability; or5.11(4) any person who is permanently and totally disabled and5.12whose household income as defined in section 290A.03,5.13subdivision 5, is 150 percent or less of the federal poverty5.14level.5.15Property is classified and assessed under clause (4) only5.16if the government agency or income-providing source certifies,5.17upon the request of the homestead occupant, that the homestead5.18occupant satisfies the disability requirements of this paragraph.5.19Property is classified and assessed pursuant to clause (1)5.20only if the commissioner of economic security certifies to the5.21assessor that the homestead occupant satisfies the requirements5.22of this paragraph.5.23Permanently and totally disabled for the purpose of this5.24subdivision means a condition which is permanent in nature and5.25totally incapacitates the person from working at an occupation5.26which brings the person an income. The first $32,000 market5.27value of class 1b property has a net class rate of .45 percent5.28of its market value and a gross class rate of .87 percent of its5.29market value. The remaining market value of class 1b property5.30has a gross or net class rate using the rates for class 1 or5.31class 2a property, whichever is appropriate, of similar market5.32value.5.33(c) Class 1c property is commercial use real property that5.34abuts a lakeshore line and is devoted to temporary and seasonal5.35residential occupancy for recreational purposes but not devoted5.36to commercial purposes for more than 250 days in the year6.1preceding the year of assessment, and that includes a portion6.2used as a homestead by the owner, which includes a dwelling6.3occupied as a homestead by a shareholder of a corporation that6.4owns the resort or a partner in a partnership that owns the6.5resort, even if the title to the homestead is held by the6.6corporation or partnership. For purposes of this clause,6.7property is devoted to a commercial purpose on a specific day if6.8any portion of the property, excluding the portion used6.9exclusively as a homestead, is used for residential occupancy6.10and a fee is charged for residential occupancy. Class 1c6.11property has a class rate of one percent of total market value6.12for taxes payable in 1993 and thereafter with the following6.13limitation: the area of the property must not exceed 100 feet6.14of lakeshore footage for each cabin or campsite located on the6.15property up to a total of 800 feet and 500 feet in depth,6.16measured away from the lakeshore.6.17 Sec. 5. Minnesota Statutes 1994, section 273.13, 6.18 subdivision 23, is amended to read: 6.19 Subd. 23. [CLASS 2.] (a) Class 2a property is agricultural 6.20 land including any improvements that is homesteaded. The market6.21value of, except for the house and garage and immediately 6.22 surrounding one acre of landhas the same class rates as, which 6.23 are class1a1 propertyunder subdivision 22.The value of6.24the remaining land including improvements up to $115,000 has a6.25net class rate of .45 percent of market value and a gross class6.26rate of 1.75 percent of market value. The remaining value of6.27class 2a property over $115,000 of market value that does not6.28exceed 320 acres has a net class rate of one percent of market6.29value, and a gross class rate of 2.25 percent of market value.6.30The remaining property over the $115,000 market value in excess6.31of 320 acres has a class rate of 1.5 percent of market value,6.32and a gross class rate of 2.25 percent of market value.Class 6.33 2a property does not have a class rate. 6.34 (b) Class 2b property is (1) real estate, rural in 6.35 character and used exclusively for growing trees for timber, 6.36 lumber, and wood and wood products; (2) real estate that is not 7.1 improved with a structure and is used exclusively for growing 7.2 trees for timber, lumber, and wood and wood products, if the 7.3 owner has participated or is participating in a cost-sharing 7.4 program for afforestation, reforestation, or timber stand 7.5 improvement on that particular property, administered or 7.6 coordinated by the commissioner of natural resources; (3) real 7.7 estate that is nonhomestead agricultural land; or (4) a landing 7.8 area or public access area of a privately owned public use 7.9 airport. Class 2b property has anetclass rate of1.5 percent7.10of market value, and a gross class rate of2.25 percent of 7.11 market value for taxes payable in 1996, a class rate of two 7.12 percent of market value for taxes payable in 1997, and no class 7.13 rate thereafter. 7.14 (c) Agricultural land as used in this section means 7.15 contiguous acreage of ten acres or more, primarily used during 7.16 the preceding year for agricultural purposes. Agricultural use 7.17 may include pasture, timber, waste, unusable wild land, and land 7.18 included in state or federal farm programs. "Agricultural 7.19 purposes" as used in this section means the raising or 7.20 cultivation of agricultural products. 7.21 (d) Real estate of less than ten acres used principally for 7.22 raising or cultivating agricultural products, shall be 7.23 considered as agricultural land, if it is not used primarily for 7.24 residential purposes. 7.25 (e) The term "agricultural products" as used in this 7.26 subdivision includes: 7.27 (1) livestock, dairy animals, dairy products, poultry and 7.28 poultry products, fur-bearing animals, horticultural and nursery 7.29 stock described in sections 18.44 to 18.61, fruit of all kinds, 7.30 vegetables, forage, grains, bees, and apiary products by the 7.31 owner; 7.32 (2) fish bred for sale and consumption if the fish breeding 7.33 occurs on land zoned for agricultural use; 7.34 (3) the commercial boarding of horses if the boarding is 7.35 done in conjunction with raising or cultivating agricultural 7.36 products as defined in clause (1); 8.1 (4) property which is owned and operated by nonprofit 8.2 organizations used for equestrian activities, excluding racing; 8.3 and 8.4 (5) game birds and waterfowl bred and raised for use on a 8.5 shooting preserve licensed under section 97A.115. 8.6 (f) If a parcel used for agricultural purposes is also used 8.7 for commercial or industrial purposes, including but not limited 8.8 to: 8.9 (1) wholesale and retail sales; 8.10 (2) processing of raw agricultural products or other goods; 8.11 (3) warehousing or storage of processed goods; and 8.12 (4) office facilities for the support of the activities 8.13 enumerated in clauses (1), (2), and (3), 8.14 the assessor shall classify the part of the parcel used for 8.15 agricultural purposes as class 1b, 2a, or 2b, whichever is 8.16 appropriate, and the remainder in the class appropriate to its 8.17 use. The grading, sorting, and packaging of raw agricultural 8.18 products for first sale is considered an agricultural purpose. 8.19 A greenhouse or other building where horticultural or nursery 8.20 products are grown that is also used for the conduct of retail 8.21 sales must be classified as agricultural if it is primarily used 8.22 for the growing of horticultural or nursery products from seed, 8.23 cuttings, or roots and occasionally as a showroom for the retail 8.24 sale of those products. Use of a greenhouse or building only 8.25 for the display of already grown horticultural or nursery 8.26 products does not qualify as an agricultural purpose. 8.27 The assessor shall determine and list separately on the 8.28 records the market value of the homestead dwelling and the one 8.29 acre of land on which that dwelling is located. If any farm 8.30 buildings or structures are located on this homesteaded acre of 8.31 land, their market value shall not be included in this separate 8.32 determination. 8.33 (g) To qualify for classification under paragraph (b), 8.34 clause (4), a privately owned public use airport must be 8.35 licensed as a public airport under section 360.018. For 8.36 purposes of paragraph (b), clause (4), "landing area" means that 9.1 part of a privately owned public use airport properly cleared, 9.2 regularly maintained, and made available to the public for use 9.3 by aircraft and includes runways, taxiways, aprons, and sites 9.4 upon which are situated landing or navigational aids. A landing 9.5 area also includes land underlying both the primary surface and 9.6 the approach surfaces that comply with all of the following: 9.7 (i) the land is properly cleared and regularly maintained 9.8 for the primary purposes of the landing, taking off, and taxiing 9.9 of aircraft; but that portion of the land that contains 9.10 facilities for servicing, repair, or maintenance of aircraft is 9.11 not included as a landing area; 9.12 (ii) the land is part of the airport property; and 9.13 (iii) the land is not used for commercial or residential 9.14 purposes. 9.15 The land contained in a landing area under paragraph (b), clause 9.16 (4), must be described and certified by the commissioner of 9.17 transportation. The certification is effective until it is 9.18 modified, or until the airport or landing area no longer meets 9.19 the requirements of paragraph (b), clause (4). For purposes of 9.20 paragraph (b), clause (4), "public access area" means property 9.21 used as an aircraft parking ramp, apron, or storage hangar, or 9.22 an arrival and departure building in connection with the airport. 9.23 Sec. 6. Minnesota Statutes 1994, section 273.13, 9.24 subdivision 24, is amended to read: 9.25 Subd. 24. [CLASS 3.] (a) Class 3a property includes: 9.26 (1) commercialand industrial property and utility real and9.27personal property, except class 5 property as identified in9.28subdivision 31, clause (1), is class 3a. It has aproperty, 9.29 with the specific inclusions and exclusions described in 9.30 paragraph (b); 9.31 (2) industrial property; 9.32 (3) utility property, other than personal property; and 9.33 (4) unmined iron ore and low-grade, iron-bearing formations 9.34 as defined in section 273.14. The class rateof three percent9.35ofon the first $100,000 of market value of class 3a property is 9.36 four percent for taxes payable in1993 and1996 and thereafter,10.1and 5.06 percent of. The class rate for the market value over 10.2 $100,000 of class 3a property is six percent for taxes payable 10.3 in 1996 and thereafter. Property is eligible for the reduced 10.4 rate on the first $100,000 of market value if it meets the 10.5 requirements of paragraph (c). The property taxes otherwise 10.6 payable with respect to qualifying property will be reduced as 10.7 provided in paragraph (e). 10.8 (b) Commercial property includes and excludes certain 10.9 property as follows: 10.10 (1) certain property used in maintaining resort businesses 10.11 is not included as commercial property even though it is used 10.12 commercially. Property is not treated as commercial property if 10.13 it: 10.14 (i) is both: 10.15 (A) devoted to temporary and seasonal residential occupancy 10.16 for recreational purposes; and 10.17 (B) not devoted to commercial purposes for more than 250 10.18 days in the year preceding the year of the assessment, with 10.19 devotion to a commercial purpose deemed to occur on any day on 10.20 which property is used for residential occupancy for which a fee 10.21 is charged; or 10.22 (ii) is located within two miles of, and used exclusively 10.23 for recreational purposes in conjunction with, property 10.24 described in subclause (i), but is not devoted to commercial 10.25 recreational use for more than 250 days in the year preceding 10.26 the year of assessment. 10.27 The exclusion of subclause (ii) is limited to two acres, 10.28 but if the property is larger, two acres can qualify. Any 10.29 portion of property described in either subclause (i) or (ii) 10.30 that is operated as a restaurant, bar, gift shop, or other 10.31 nonresidential facility operated on a commercial basis not 10.32 directly related to temporary and seasonal residential occupancy 10.33 for recreation purposes is commercial property. Owners of real 10.34 property seeking to avoid classification as commercial property 10.35 under this provision must submit a declaration to the assessor 10.36 designating the cabins or units occupied for 250 days or less in 11.1 the year preceding the year of assessment by January 15 of the 11.2 assessment year. The remainder of the cabins or units and a 11.3 proportionate share of the land on which they are located will 11.4 be classified as commercial property. 11.5 (2) Commercial property does not include real property up 11.6 to a maximum of one acre of land owned by a nonprofit community 11.7 service oriented organization, provided that the property is not 11.8 used for a revenue-producing activity for more than six days in 11.9 the calendar year preceding the year of assessment and the 11.10 property is not used for residential purposes on either a 11.11 temporary or permanent basis. For purposes of this clause, a 11.12 "nonprofit community service oriented organization" means any 11.13 corporation, society, association, foundation, or institution 11.14 organized and operated exclusively for charitable, religious, 11.15 fraternal, civic, or educational purposes, and which is exempt 11.16 from federal income taxation pursuant to section 501(c)(3), 11.17 (10), or (19) of the Internal Revenue Code of 1986, as amended 11.18 through December 31, 1990. For purposes of this clause, 11.19 "revenue-producing activities" shall include, but not be limited 11.20 to, property or that portion of the property that is used as an 11.21 on-sale intoxicating liquor or 3.2 percent malt liquor 11.22 establishment licensed under chapter 340A, a restaurant open to 11.23 the public, bowling alley, retail store, gambling conducted by 11.24 organizations licensed under chapter 349, an insurance business, 11.25 or office or other space leased or rented to a lessee who 11.26 conducts a for-profit enterprise on the premises. Any portion 11.27 of the property which is used for revenue-producing activities 11.28 for more than six days in the calendar year preceding the year 11.29 of assessment shall be assessed as class 3a commercial 11.30 property. The use of the property for social events open 11.31 exclusively to members and their guests for periods of less than 11.32 24 hours, when an admission is not charged nor any revenues are 11.33 received by the organization shall not be considered a 11.34 revenue-producing activity. 11.35 (c) In the case of state-assessed commercial, industrial, 11.36 and utility property owned by one person or entity, only one 12.1 parcel has a reduced class rate on the first $100,000 of market 12.2 value. In the case of other commercial, industrial, and utility 12.3 property owned by one person or entity, only one parcel in each 12.4 county has a reduced class rate on the first $100,000 of market 12.5 value, except that: 12.6 (1) if the market value of the parcel is less than 12.7 $100,000, and additional parcels are owned by the same person or 12.8 entity in the same city or town within that county, the reduced 12.9 class rate shall be applied up to a combined total market value 12.10 of $100,000 for all parcels owned by the same person or entity 12.11 in the same city or town within the county; 12.12 (2) in the case of grain, fertilizer, and feed elevator 12.13 facilities, as defined in section 18C.305, subdivision 1, or 12.14 232.21, subdivision 8, the limitation to one parcel per owner 12.15 per county for the reduced class rate shall not apply, but there 12.16 shall be a limit of $100,000 of preferential value per site of 12.17 contiguous parcels owned by the same person or entity. Only the 12.18 value of the elevator portion of each parcel shall qualify for 12.19 treatment under this clause. For purposes of this subdivision, 12.20 contiguous parcels include parcels separated only by a railroad 12.21 or public road right-of-way; and 12.22 (3) in the case of property owned by a nonprofit charitable 12.23 organization that qualifies for tax exemption under section 12.24 501(c)(3) of the Internal Revenue Code of 1986, as amended 12.25 through December 31, 1993, if the property is used as a business 12.26 incubator, the limitation to one parcel per owner per county for 12.27 the reduced class rate shall not apply, provided that the 12.28 reduced rate applies only to the first $100,000 of value per 12.29 parcel owned by the organization. As used in this clause, a 12.30 "business incubator" is a facility used for the development of 12.31 nonretail businesses, offering access to equipment, space, 12.32 services, and advice to the tenant businesses, for the purpose 12.33 of encouraging economic development, diversification, and job 12.34 creation in the area served by the organization. 12.35 To receive the reduced class rate on additional parcels 12.36 under clause (1), (2), or (3), the taxpayer must notify the 13.1 county assessor that the taxpayer owns more than one parcel that 13.2 qualifies under clause (1), (2), or (3). 13.3(b)(d) Employment property defined in section 469.166, 13.4 during the period provided in section 469.170, shall constitute 13.5 class3b3d and has a class rate of 2.3 percent of the first 13.6 $50,000 of market value and 3.6 percent of the remainder, except 13.7 that for employment property located in a border city enterprise 13.8 zone designated pursuant to section 469.168, subdivision 4, 13.9 paragraph (c), the class rate of the first $100,000 of market 13.10 value and the class rate of the remainder is determined under 13.11 paragraph (a), unless the governing body of the city designated 13.12 as an enterprise zone determines that a specific parcel shall be 13.13 assessed pursuant to the first clause of this sentence. The 13.14 governing body may provide for assessment under the first clause 13.15 of the preceding sentence only for property which is located in 13.16 an area which has been designated by the governing body for the 13.17 receipt of tax reductions authorized by section 469.171, 13.18 subdivision 1. 13.19 (e) Class 3a property with respect to which the effective 13.20 tax rate for taxes payable in 1995 was less than 3.9 percent for 13.21 property meeting the requirements of paragraph (c) or less than 13.22 5.5 percent for other class 3a property may receive a credit 13.23 against property taxes payable in the years 1996 through 2000. 13.24 The amount, if any, of the credit is equal to the product of: 13.25 (1) the excess, if any, of the class rate for such class 3a 13.26 property for the year over the greater of the effective tax rate 13.27 or: 13.28 (i) three percent in the case of property meeting the 13.29 requirements of paragraph (c); or 13.30 (ii) 4.6 percent in the case of other class 3a property; 13.31 multiplied by 13.32 (2) 100 percent for taxes payable in 1996; 80 percent for 13.33 taxes payable in 1997; 60 percent for taxes payable in 1998; 40 13.34 percent for taxes payable in 1999; and 20 percent for taxes 13.35 payable in 2000. 13.36 As used in this paragraph, "effective tax rate" means the 14.1 percentage determined by dividing the taxes payable by the 14.2 market value used to determine the taxes. 14.3 Sec. 7. Minnesota Statutes 1994, section 273.13, 14.4 subdivision 25, is amended to read: 14.5 Subd. 25. [CLASS 4.] (a) Class 4a is residential real 14.6 estate containing four or more units and used or held for use by 14.7 the owner or by the tenants or lessees of the owner as a 14.8 residence for rental periods of 30 days or more. Class 4a also 14.9 includes hospitals licensed under sections 144.50 to 144.56, 14.10 other than hospitals exempt under section 272.02, and contiguous 14.11 property used for hospital purposes, without regard to whether 14.12 the property has been platted or subdivided. Class 4a property 14.13 has a class rate of3.5 percent of market value for taxes14.14payable in 1992, and 3.4three percent of market value for taxes 14.15 payable in1993 and1996, a class rate of 2.5 percent of market 14.16 value for taxes payable in 1997, and no class rate thereafter. 14.17 (b) Class 4b includes: 14.18 (1) for taxes payable in 1996 and any later years in which 14.19 class 4a property has a class rate, residential real estate 14.20 described in Minnesota Statutes 1994, section 273.13, 14.21 subdivision 25, paragraph (c), clause (1), (2), (3), (4), or 14.22 (7), or (d), clause (1) or (3); 14.23 (2) residential real estatecontaining less than four14.24units, other than seasonal residential, and recreationalnot 14.25 classified under any other provision; and 14.26(2)(3) manufactured home parks as defined in section 14.27 327.14, subdivision 3, and manufactured homes not classified 14.28 under any other provision;14.29(3) a dwelling, garage, and surrounding one acre of14.30property on a nonhomestead farm classified under subdivision 23,14.31paragraph (b). 14.32 Class 4b property hasano class rateof 2.8 percent of14.33market value for taxes payable in 1992, 2.5 percent of market14.34value for taxes payable in 1993, and 2.3 percent of market value14.35for taxes payable in 1994 and thereafter. 14.36 (c) Class 4c property includes:15.1(1) a structure that is:15.2(i) situated on real property that is used for housing for15.3the elderly or for low- and moderate-income families as defined15.4in Title II, as amended through December 31, 1990, of the15.5National Housing Act or the Minnesota housing finance agency law15.6of 1971, as amended, or rules promulgated by the agency and15.7financed by a direct federal loan or federally insured loan made15.8pursuant to Title II of the Act; or15.9(ii) situated on real property that is used for housing the15.10elderly or for low- and moderate-income families as defined by15.11the Minnesota housing finance agency law of 1971, as amended, or15.12rules adopted by the agency pursuant thereto and financed by a15.13loan made by the Minnesota housing finance agency pursuant to15.14the provisions of the act.15.15This clause applies only to property of a nonprofit or15.16limited dividend entity. Property is classified as class 4c15.17under this clause for 15 years from the date of the completion15.18of the original construction or substantial rehabilitation, or15.19for the original term of the loan.15.20(2) a structure that is:15.21(i) situated upon real property that is used for housing15.22lower income families or elderly or handicapped persons, as15.23defined in section 8 of the United States Housing Act of 1937,15.24as amended; and15.25(ii) owned by an entity which has entered into a housing15.26assistance payments contract under section 8 which provides15.27assistance for 100 percent of the dwelling units in the15.28structure, other than dwelling units intended for management or15.29maintenance personnel. Property is classified as class 4c under15.30this clause for the term of the housing assistance payments15.31contract, including all renewals, or for the term of its15.32permanent financing, whichever is shorter; and15.33(3) a qualified low-income building as defined in section15.3442(c)(2) of the Internal Revenue Code of 1986, as amended15.35through December 31, 1990, that (i) receives a low-income15.36housing credit under section 42 of the Internal Revenue Code of16.11986, as amended through December 31, 1990; or (ii) meets the16.2requirements of that section and receives public financing,16.3except financing provided under sections 469.174 to 469.179,16.4which contains terms restricting the rents; or (iii) meets the16.5requirements of section 273.1317. Classification pursuant to16.6this clause is limited to a term of 15 years. The public16.7financing received must be from at least one of the following16.8sources: government issued bonds exempt from taxes under16.9section 103 of the Internal Revenue Code of 1986, as amended16.10through December 31, 1993, the proceeds of which are used for16.11the acquisition or rehabilitation of the building; programs16.12under section 221(d)(3), 202, or 236, of Title II of the16.13National Housing Act; rental housing program funds under Section16.148 of the United States Housing Act of 1937 or the market rate16.15family graduated payment mortgage program funds administered by16.16the Minnesota housing finance agency that are used for the16.17acquisition or rehabilitation of the building; public financing16.18provided by a local government used for the acquisition or16.19rehabilitation of the building, including grants or loans from16.20federal community development block grants, HOME block grants,16.21or residential rental bonds issued under chapter 474A; or other16.22rental housing program funds provided by the Minnesota housing16.23finance agency for the acquisition or rehabilitation of the16.24building.16.25For all properties described in clauses (1), (2), and (3)16.26and in paragraph (d), the market value determined by the16.27assessor must be based on the normal approach to value using16.28normal unrestricted rents unless the owner of the property16.29elects to have the property assessed under Laws 1991, chapter16.30291, article 1, section 55. If the owner of the property elects16.31to have the market value determined on the basis of the actual16.32restricted rents, as provided in Laws 1991, chapter 291, article16.331, section 55, the property will be assessed at the rate16.34provided for class 4a or class 4b property, as appropriate.16.35Properties described in clauses (1)(ii), (3), and (4) may apply16.36to the assessor for valuation under Laws 1991, chapter 291,17.1article 1, section 55. The land on which these structures are17.2situated has the class rate given in paragraph (b) if the17.3structure contains fewer than four units, and the class rate17.4given in paragraph (a) if the structure contains four or more17.5units. This clause applies only to the property of a nonprofit17.6or limited dividend entity.17.7(4) a parcel of land, not to exceed one acre, and its17.8improvements or a parcel of unimproved land, not to exceed one17.9acre, if it is owned by a neighborhood real estate trust and at17.10least 60 percent of the dwelling units, if any, on all land17.11owned by the trust are leased to or occupied by lower income17.12families or individuals. This clause does not apply to any17.13portion of the land or improvements used for nonresidential17.14purposes. For purposes of this clause, a lower income family is17.15a family with an income that does not exceed 65 percent of the17.16median family income for the area, and a lower income individual17.17is an individual whose income does not exceed 65 percent of the17.18median individual income for the area, as determined by the17.19United States Secretary of Housing and Urban Development. For17.20purposes of this clause, "neighborhood real estate trust" means17.21an entity which is certified by the governing body of the17.22municipality in which it is located to have the following17.23characteristics:17.24(a) it is a nonprofit corporation organized under chapter17.25317A;17.26(b) it has as its principal purpose providing housing for17.27lower income families in a specific geographic community17.28designated in its articles or bylaws;17.29(c) it limits membership with voting rights to residents of17.30the designated community; and17.31(d) it has a board of directors consisting of at least17.32seven directors, 60 percent of whom are members with voting17.33rights and, to the extent feasible, 25 percent of whom are17.34elected by resident members of buildings owned by the trust; and17.35(5) except as provided in subdivision 22, paragraph (c),17.36 real property devoted to temporary and seasonal residential 18.1 occupancy for recreation purposes, including real property 18.2 devoted to temporary and seasonal residential occupancy for 18.3 recreation purposes and not devoted to commercial purposes for 18.4 more than 250 days in the year preceding the year of 18.5 assessment. For purposes of thisclauseparagraph, property is 18.6 devoted to a commercial purpose on a specific day if any portion 18.7 of the property is used for residential occupancy, and a fee is 18.8 charged for residential occupancy.Class 4c also includes18.9commercial use real property used exclusively for recreational18.10purposes in conjunction with class 4c property devoted to18.11temporary and seasonal residential occupancy for recreational18.12purposes, up to a total of two acres, provided the property is18.13not devoted to commercial recreational use for more than 25018.14days in the year preceding the year of assessment and is located18.15within two miles of the class 4c property with which it is18.16used. Class 4c property classified in this clause also includes18.17the remainder of class 1c resorts. Owners of real property18.18devoted to temporary and seasonal residential occupancy for18.19recreation purposes and all or a portion of which was devoted to18.20commercial purposes for not more than 250 days in the year18.21preceding the year of assessment desiring classification as18.22class 1c or 4c, must submit a declaration to the assessor18.23designating the cabins or units occupied for 250 days or less in18.24the year preceding the year of assessment by January 15 of the18.25assessment year. Those cabins or units and a proportionate18.26share of the land on which they are located will be designated18.27class 1c or 4c as otherwise provided. The remainder of the18.28cabins or units and a proportionate share of the land on which18.29they are located will be designated as class 3a. The first18.30$100,000 of the market value of the remainder of the cabins or18.31units and a proportionate share of the land on which they are18.32located shall have a class rate of three percent. The owner of18.33property desiring designation as class 1c or 4c property must18.34provide guest registers or other records demonstrating that the18.35units for which class 1c or 4c designation is sought were not18.36occupied for more than 250 days in the year preceding the19.1assessment if so requested. The portion of a property operated19.2as a (1) restaurant, (2) bar, (3) gift shop, and (4) other19.3nonresidential facility operated on a commercial basis not19.4directly related to temporary and seasonal residential occupancy19.5for recreation purposes shall not qualify for class 1c or 4c;19.6(6) real property up to a maximum of one acre of land owned19.7by a nonprofit community service oriented organization; provided19.8that the property is not used for a revenue-producing activity19.9for more than six days in the calendar year preceding the year19.10of assessment and the property is not used for residential19.11purposes on either a temporary or permanent basis. For purposes19.12of this clause, a "nonprofit community service oriented19.13organization" means any corporation, society, association,19.14foundation, or institution organized and operated exclusively19.15for charitable, religious, fraternal, civic, or educational19.16purposes, and which is exempt from federal income taxation19.17pursuant to section 501(c)(3), (10), or (19) of the Internal19.18Revenue Code of 1986, as amended through December 31, 1990. For19.19purposes of this clause, "revenue-producing activities" shall19.20include but not be limited to property or that portion of the19.21property that is used as an on-sale intoxicating liquor or 3.219.22percent malt liquor establishment licensed under chapter 340A, a19.23restaurant open to the public, bowling alley, a retail store,19.24gambling conducted by organizations licensed under chapter 349,19.25an insurance business, or office or other space leased or rented19.26to a lessee who conducts a for-profit enterprise on the19.27premises. Any portion of the property which is used for19.28revenue-producing activities for more than six days in the19.29calendar year preceding the year of assessment shall be assessed19.30as class 3a. The use of the property for social events open19.31exclusively to members and their guests for periods of less than19.3224 hours, when an admission is not charged nor any revenues are19.33received by the organization shall not be considered a19.34revenue-producing activity;19.35(7) post-secondary student housing of not more than one19.36acre of land that is owned by a nonprofit corporation organized20.1under chapter 317A and is used exclusively by a student20.2cooperative, sorority, or fraternity for on-campus housing or20.3housing located within two miles of the border of a college20.4campus; and20.5(8) manufactured home parks as defined in section 327.14,20.6subdivision 3.20.7 Class 4c property has a class rate of2.32.5 percent of 20.8 market value, except that (i) each parcel of seasonal20.9residential recreational property not used for commercial20.10purposes under clause (5) has a class rate of 2.2 percent of20.11market valuefor taxes payable in19921996,anda class rate 20.12 of 2.25 percent of market value for taxes payable in19931997, 20.13 and no class rate thereafter, the first $72,000 of market value20.14on each parcel has a class rate of two percent and the market20.15value of each parcel that exceeds $72,000 has a class rate of20.162.5 percent, and (ii) manufactured home parks assessed under20.17clause (8) have a class rate of two percent for taxes payable in20.181993, 1994, and 1995 only. 20.19(d) Class 4d property includes:20.20(1) a structure that is:20.21(i) situated on real property that is used for housing for20.22the elderly or for low and moderate income families as defined20.23by the Farmers Home Administration;20.24(ii) located in a municipality of less than 10,00020.25population; and20.26(iii) financed by a direct loan or insured loan from the20.27Farmers Home Administration. Property is classified under this20.28clause for 15 years from the date of the completion of the20.29original construction or for the original term of the loan.20.30The class rates in paragraph (c), clauses (1), (2), and (3)20.31and this clause apply to the properties described in them, only20.32in proportion to occupancy of the structure by elderly or20.33handicapped persons or low and moderate income families as20.34defined in the applicable laws unless construction of the20.35structure had been commenced prior to January 1, 1984; or the20.36project had been approved by the governing body of the21.1municipality in which it is located prior to June 30, 1983; or21.2financing of the project had been approved by a federal or state21.3agency prior to June 30, 1983. For those properties, 4c or 4d21.4classification is available only for those units meeting the21.5requirements of section 273.1318.21.6Classification under this clause is only available to21.7property of a nonprofit or limited dividend entity.21.8In the case of a structure financed or refinanced under any21.9federal or state mortgage insurance or direct loan program21.10exclusively for housing for the elderly or for housing for the21.11handicapped, a unit shall be considered occupied so long as it21.12is actually occupied by an elderly or handicapped person or, if21.13vacant, is held for rental to an elderly or handicapped person.21.14(2) For taxes payable in 1992, 1993, and 1994, only,21.15buildings and appurtenances, together with the land upon which21.16they are located, leased by the occupant under the community21.17lending model lease-purchase mortgage loan program administered21.18by the Federal National Mortgage Association, provided the21.19occupant's income is no greater than 60 percent of the county or21.20area median income, adjusted for family size and the building21.21consists of existing single family or duplex housing. The lease21.22agreement must provide for a portion of the lease payment to be21.23escrowed as a nonrefundable down payment on the housing. To21.24qualify under this clause, the taxpayer must apply to the county21.25assessor by May 30 of each year. The application must be21.26accompanied by an affidavit or other proof required by the21.27assessor to determine qualification under this clause.21.28(3) Qualifying buildings and appurtenances, together with21.29the land upon which they are located, leased for a period of up21.30to five years by the occupant under a lease-purchase program21.31administered by the Minnesota housing finance agency or a21.32housing and redevelopment authority authorized under sections21.33469.001 to 469.047, provided the occupant's income is no greater21.34than 80 percent of the county or area median income, adjusted21.35for family size, and the building consists of two or less21.36dwelling units. The lease agreement must provide for a portion22.1of the lease payment to be escrowed as a nonrefundable down22.2payment on the housing. The administering agency shall verify22.3the occupants income eligibility and certify to the county22.4assessor that the occupant meets the income criteria under this22.5paragraph. To qualify under this clause, the taxpayer must22.6apply to the county assessor by May 30 of each year. For22.7purposes of this section, "qualifying buildings and22.8appurtenances" shall be defined as one or two unit residential22.9buildings which are unoccupied and have been abandoned and22.10boarded for at least six months.22.11Class 4d property has a class rate of two percent of market22.12value except that property classified under clause (3), shall22.13have the same class rate as class 1a property.22.14(e)(d) Residential rental property that would otherwise be 22.15 assessed as class 4 propertyunder paragraph (a); paragraph (b),22.16clauses (1) and (3); paragraph (c), clause (1), (2), (3), or22.17(4),is assessed at the class rate applicable toit under22.18Minnesota Statutes 1988, section 273.13,class 3a property if it 22.19 is found to be a substandard building under section 22.20 273.1316.Residential rental property that would otherwise be22.21assessed as class 4 property under paragraph (d) is assessed at22.222.3 percent of market value if it is found to be a substandard22.23building under section 273.1316.22.24 Sec. 8. Minnesota Statutes 1994, section 273.13, 22.25 subdivision 31, is amended to read: 22.26 Subd. 31. [CLASS 5.] (a) Class 5 property includes:22.27(1)utility personal property and tools, implements, and 22.28 machinery of an electric generating, transmission, or 22.29 distribution system or a pipeline system transporting or 22.30 distributing water, gas, crude oil, or petroleum products or 22.31 mains and pipes used in the distribution of steam or hot or 22.32 chilled water for heating or cooling buildings, which are 22.33 fixtures;. 22.34(2) unmined iron ore and low-grade iron-bearing formations22.35as defined in section 273.14; and22.36(3) all other property not otherwise classified.23.1 (b) Class 5 property has a class rate of5.064.6 percent 23.2 of market value for taxes payable in 1996, 4.3 percent for taxes 23.3 payable in 1997, four percent for taxes payable in 1998, 3.75 23.4 percent for taxes payable in 1999, and 3.5 percent for taxes 23.5 payable in 2000 and thereafter. 23.6 (c) Class 5 property is taxed exclusively by the state. 23.7 Local property taxes are not levied against class 5 property. 23.8 Sec. 9. Minnesota Statutes 1994, section 273.13, 23.9 subdivision 33, is amended to read: 23.10 Subd. 33. [CLASSIFICATION OF UNIMPROVED PROPERTY.](a)All 23.11 real property that is not improved with a structure, and is not 23.12 classified in class 2, must be classifiedaccording to its23.13current usein class 1. 23.14(b) Real property that is not improved with a structure and23.15for which there is no identifiable current use must be23.16classified according to its highest and best use permitted under23.17the local zoning ordinance. If the ordinance permits more than23.18one use, the land must be classified according to the highest23.19and best use permitted under the ordinance. If no such23.20ordinance exists, the assessor shall consider the most likely23.21potential use of the unimproved land based upon the use made of23.22surrounding land or land in proximity to the unimproved land.23.23 Sec. 10. Minnesota Statutes 1994, section 273.1316, 23.24 subdivision 1, is amended to read: 23.25 Subdivision 1. [DENIAL OF RENTAL CLASSIFICATION.] A 23.26 building that is classified as residential rental property under 23.27 section 273.13, subdivision 25, and that is determined to be 23.28 substandard under this section is assessed as provided in 23.29 section 273.13, subdivision 25, paragraph(e)(d). 23.30 Sec. 11. [273.1382] [AID TO TAX INCREMENT DISTRICTS.] 23.31 In 1996 and subsequent years, an aid shall be paid to each 23.32 tax increment financing district that is equal to the difference 23.33 between the increment received by the district for taxes payable 23.34 in 1995 and the increment calculated for the district for taxes 23.35 payable in 1996 and thereafter. 23.36 Sec. 12. Minnesota Statutes 1994, section 273.1393, is 24.1 amended to read: 24.2 273.1393 [COMPUTATION OF NET PROPERTY TAXES.] 24.3 Notwithstanding any other provisions to the contrary, "net" 24.4 property taxes are determined by subtracting the credits in the 24.5 order listed from the gross tax: 24.6 (1) disaster credit as provided in section 273.123; 24.7 (2)powerline credit as provided in section 273.42;24.8(3)agricultural preserves credit as provided in section 24.9 473H.10; 24.10(4)(3) enterprise zone credit as provided in section 24.11 469.171; and 24.12(5) disparity reduction credit;24.13(6)(4) conservation tax credit as provided in section 24.14 273.119;24.15(7) taconite homestead credit as provided in section24.16273.135; and24.17(8) supplemental homestead credit as provided in section24.18273.1391. 24.19 The combination of all property tax credits must not exceed 24.20 the gross tax amount. 24.21 Sec. 13. Minnesota Statutes 1994, section 273.165, 24.22 subdivision 2, is amended to read: 24.23 Subd. 2. [IRON ORE.] Unmined iron ore included in class524.24 3, paragraph(b)(a), must be assessed with and as a part of the 24.25 real estate in which it is located, but its net tax capacity24.26would be as established in section 273.13, subdivision 31. The 24.27 real estate in which iron ore is located, other than the ore, 24.28 must be classified and assessed in accordance with the 24.29 provisions of the appropriate classes. In assessing any tract 24.30 or lot of real estate in which iron ore is known to exist, the 24.31 assessablenet tax capacitymarket value of the ore exclusive of 24.32 the land in which it is located, and the assessablenet tax24.33capacitymarket value of the land exclusive of the ore must be 24.34 determined and set down separately and the aggregate of the two 24.35 must be assessed against the tract or lot. 24.36 Sec. 14. [275.068] [TAX INCREASES IN 1996 AND 1997; 25.1 REFERENDUMS REQUIRED.] 25.2 Subdivision 1. [GENERALLY.] A home rule charter or 25.3 statutory city or a county may increase its levy above the limit 25.4 provided in subdivision 2 for taxes payable in 1996 or 1997, by 25.5 the amount approved by the voters residing in the jurisdiction 25.6 of the authority at a referendum called for the purpose. The 25.7 referendum may be called by the governing body or shall be 25.8 called by the governing body upon written petition of qualified 25.9 voters of the jurisdiction. The referendum shall be conducted 25.10 during the calendar year before the increased levy authority, if 25.11 approved, first becomes payable. Only one election to approve 25.12 an increase may be held in a calendar year. The referendum must 25.13 be held on the first Tuesday after the first Monday in 25.14 November. The ballot shall state the maximum amount of the 25.15 increased levy and the estimated referendum tax rate as a 25.16 percentage of market value in the year it is to be levied. The 25.17 ballot may contain a textual portion with the information 25.18 required in this subdivision and a question stating 25.19 substantially the following: "Shall the increase in the levy 25.20 proposed by (petition to) the governing body of ......., be 25.21 approved?" 25.22 Subd. 2. [LIMIT ON LEVIES.] Unless a greater levy is 25.23 approved by a referendum under this section, for taxes payable 25.24 in 1996 and 1997, the levy of a home rule charter or statutory 25.25 city or a county may not exceed the sum of its levy for the 25.26 previous year, plus the aids it received under sections 273.135, 25.27 273.1931, 273.138, 273.1398, 273.166, 477A.012, 477A.013, 25.28 477A.0132, and 477A.15, if any, the previous year. 25.29 Subd. 3. [NOTICE.] The governing body shall prepare and 25.30 deliver by first class mail at least 15 days but no more than 30 25.31 days prior to the day of the referendum to each taxpayer a 25.32 notice of the referendum and the proposed levy increase. The 25.33 governing body need not mail more than one notice to any 25.34 taxpayer. For the purpose of giving mailed notice under this 25.35 subdivision, owners shall be those shown to be owners on the 25.36 records of the county auditor or, in any county where tax 26.1 statements are mailed by the county treasurer, on the records of 26.2 the county treasurer. Every property owner whose name does not 26.3 appear on the records of the county auditor or the the county 26.4 treasurer shall be deemed to have waived this mailed notice 26.5 unless the owner has requested in writing that the county 26.6 auditor or county treasurer, as the case may be, include the 26.7 name on the records for this purpose. The notice must project 26.8 the anticipated amount of tax increase in annual dollars and 26.9 annual percentage for typical residential homesteads, 26.10 agricultural homesteads, apartments, and commercial-industrial 26.11 property within the school district. 26.12 The notice must include the following statement: "Passage 26.13 of this referendum will result in an increase in your property 26.14 taxes." 26.15 Subd. 4. [PETITIONS.] A petition authorized by subdivision 26.16 1 shall be effective if signed by a number of qualified voters 26.17 in excess of 15 percent of the number of registered voters of 26.18 the jurisdiction of the taxing authority as of the day the 26.19 petition is filed with the governing body. 26.20 Subd. 5. [APPROVAL.] The approval of 50 percent plus one 26.21 of those voting on the question is required to pass a referendum 26.22 authorized by this section. The increased levy approved under 26.23 this section is effective for only one year. 26.24 Sec. 15. Minnesota Statutes 1994, section 275.08, 26.25 subdivision 1b, is amended to read: 26.26 Subd. 1b. The amounts certified under section 275.07 after 26.27 adjustment under section 275.07, subdivision 3, by an individual 26.28 local government unit, except for any amounts certified under 26.29 sections 124A.03, subdivision 2a, and 275.61, shall be divided 26.30 by the totalnet tax capacitymarket value of all taxable 26.31 properties within the local government unit's taxing 26.32 jurisdiction. The resulting ratio, the local government's local 26.33 tax rate, multiplied by each property'snet tax capacitymarket 26.34 value shall be each property's tax for that local government 26.35 unit before reduction by any credits. 26.36 Any amount certified to the county auditor under section 27.1 124A.03, subdivision 2a, or 275.61, after the dates given in 27.2 those sections, shall be divided by the total estimated market 27.3 value of all taxable properties within the taxing district. The 27.4 resulting ratio, the taxing district's new referendum tax rate, 27.5 multiplied by each property's estimated market value shall be 27.6 each property's new referendum tax before reduction by any 27.7 credits. 27.8 Sec. 16. Minnesota Statutes 1994, section 275.08, is 27.9 amended by adding a subdivision to read: 27.10 Subd. 1e. [STATE TAX RATE.] The rate of the state tax 27.11 imposed on any property is equal to the difference between the 27.12 class rate specified under section 273.13 and the sum of the 27.13 local tax rates determined under this section. 27.14 Sec. 17. Minnesota Statutes 1994, section 276.04, 27.15 subdivision 2, is amended to read: 27.16 Subd. 2. [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 27.17 shall provide for the printing of the tax statements. The 27.18 commissioner of revenue shall prescribe the form of the property 27.19 tax statement and its contents. The statement must contain a 27.20 tabulated statement of the dollar amount due to each taxing 27.21 authority from the parcel of real property for which a 27.22 particular tax statement is prepared. The dollar amounts due 27.23 the state, county, township or municipality, the total of the 27.24 metropolitan special taxing districts as defined in section 27.25 275.065, subdivision 3, paragraph (i), school district excess 27.26 referenda levy, remaining school district levy, and the total of 27.27 other voter approved referenda levies based on market value 27.28 under section 275.61 must be separately stated. The amounts due 27.29 all other special taxing districts, if any, may be aggregated. 27.30 For the purposes of this subdivision, "school district excess 27.31 referenda levy" means school district taxes for operating 27.32 purposes approved at referenda, including those taxes based on 27.33 market value. "School district excess referenda levy" does not 27.34 include school district taxes for capital expenditures approved 27.35 at referendums or school district taxes to pay for the debt 27.36 service on bonds approved at referenda. The amount of the tax 28.1 on contamination value imposed under sections 270.91 to 270.98, 28.2 if any, must also be separately stated. The dollar amounts, 28.3 including the dollar amount of any special assessments, may be 28.4 rounded to the nearest even whole dollar. For purposes of this 28.5 section whole odd-numbered dollars may be adjusted to the next 28.6 higher even-numbered dollar.The amount of market value28.7excluded under section 273.11, subdivision 16, if any, must also28.8be listed on the tax statement. The statement shall include the28.9following sentence, printed in upper case letters in boldface28.10print: "THE STATE OF MINNESOTA DOES NOT RECEIVE ANY PROPERTY28.11TAX REVENUES. THE STATE OF MINNESOTA REDUCES YOUR PROPERTY TAX28.12BY PAYING CREDITS AND REIMBURSEMENTS TO LOCAL UNITS OF28.13GOVERNMENT."28.14 (b) The property tax statements for manufactured homes and 28.15 sectional structures taxed as personal property shall contain 28.16 the same information that is required on the tax statements for 28.17 real property. 28.18 (c) Real and personal property tax statements must contain 28.19 the following information in the order given in this paragraph. 28.20 The information must contain the current year tax information in 28.21 the right column with the corresponding information for the 28.22 previous year in a column on the left: 28.23 (1) the property's estimated market value under section 28.24 273.11, subdivision 1; 28.25 (2)the property's taxable market value after reductions28.26under section 273.11, subdivisions 1a and 16;28.27(3)the property's gross tax, calculated by multiplying the 28.28 property'sgross tax capacitymarket value times the totallocal28.29 tax rateand adding to the result the sum of the aids enumerated28.30in clause (3); 28.31(4) a total of the following aids:28.32(i) education aids payable under chapters 124 and 124A;28.33(ii) local government aids for cities, towns, and counties28.34under chapter 477A; and28.35(iii) disparity reduction aid under section 273.1398;28.36(5) for homestead residential and agricultural properties,29.1the homestead and agricultural credit aid apportioned to the29.2property. This amount is obtained by multiplying the total29.3local tax rate by the difference between the property's gross29.4and net tax capacities under section 273.13. This amount must29.5be separately stated and identified as "homestead and29.6agricultural credit." For purposes of comparison with the29.7previous year's amount for the statement for taxes payable in29.81990, the statement must show the homestead credit for taxes29.9payable in 1989 under section 273.13, and the agricultural29.10credit under section 273.132 for taxes payable in 1989;29.11(6)(3) any credits received under sections 273.119; 29.12 273.123;273.135; 273.1391;273.1398, subdivision 4; 469.171; 29.13 and 473H.10, except that the amount of credit received under29.14section 273.135 must be separately stated and identified as29.15"taconite tax relief"; and 29.16(7)(4) the net tax payable in the manner required in 29.17 paragraph (a). 29.18The commissioner of revenue shall certify to the county29.19auditor the actual or estimated aids enumerated in clauses (3)29.20and (4) that local governments will receive in the following29.21year. In the case of a county containing a city of the first29.22class, for taxes levied in 1991, and for all counties for taxes29.23levied in 1992 and thereafter, the commissioner must certify29.24this amount by September 1.29.25 Sec. 18. [INSTRUCTION TO THE REVISOR.] 29.26 In the 1996 and later editions of Minnesota Statutes, the 29.27 revisor of statutes shall change the term "net tax capacity" to 29.28 "market value" wherever it occurs. 29.29 Sec. 19. [REPEALER.] 29.30 (a) Minnesota Statutes 1994, sections 273.11, subdivisions 29.31 1a, 16, and 18; 273.13, subdivisions 21b and 32; 273.1315; 29.32 273.134; 273.135; 273.136; 273.138; 273.1391; 273.1392; 29.33 273.1398; 273.166; 273.42; 273.425; and 275.08, subdivisions 1c 29.34 and 1d, are repealed. 29.35 (b) Minnesota Statutes 1994, sections 273.1317 and 29.36 273.1318, are repealed. 30.1 Sec. 20. [EFFECTIVE DATE.] 30.2 Sections 1 to 18 and 19, paragraph (a), are effective for 30.3 taxes payable in 1996. Section 19, paragraph (b), is effective 30.4 for taxes payable in 1998. 30.5 ARTICLE 2 30.6 INDIVIDUAL INCOME TAX 30.7 Section 1. Minnesota Statutes 1994, section 289A.08, 30.8 subdivision 1, is amended to read: 30.9 Subdivision 1. [GENERALLY; INDIVIDUALS.] (a) A taxpayer 30.10 must file a return for each taxable year the taxpayer (1) is 30.11 required to file a return under section 6012 of the Internal 30.12 Revenue Code, or (2) does not qualify as a dependent of another 30.13 person under section 152 of the Internal Revenue Code, except 30.14 that an individual who is not a Minnesota resident for any part 30.15 of the year is not required to file a Minnesota income tax 30.16 return if the individual's gross income derived from Minnesota 30.17 sources as determined under sections 290.081, paragraph (a), and 30.18 290.17, is less than the filing requirements under federal law 30.19 for a single individualwho is a full year resident of Minnesota. 30.20 (b) The decedent's final income tax return, and other 30.21 income tax returns for prior years where the decedent had gross 30.22 income in excess of the minimum amount at which an individual is 30.23 required to file and did not file, must be filed by the 30.24 decedent's personal representative, if any. If there is no 30.25 personal representative, the return or returns must be filed by 30.26 the transferees, as defined in section 289A.38, subdivision 13, 30.27 who receive property of the decedent. 30.28 (c) The term "gross income," as it is used in this section, 30.29 has the same meaning given it in section 290.01, subdivision 20. 30.30 Sec. 2. Minnesota Statutes 1994, section 289A.08, 30.31 subdivision 6, is amended to read: 30.32 Subd. 6. [RETURNS OF MARRIED PERSONS.] A husband and wife 30.33 must filea joint Minnesota income tax return if they filed a30.34joint federal income tax return. If the husband and wife have30.35elected to file separate federal income tax returns, they must30.36fileseparate or combined Minnesota income tax returns.This31.1election to file a joint or separate return must be changed if31.2they change their election for federal purposes. In the event31.3taxpayers desire to change their election, the change must be31.4done in the manner and on the form prescribed by the31.5commissioner.31.6 The determination of whether an individual is married shall 31.7 be made under the provisions of section 7703 of the Internal 31.8 Revenue Code. 31.9 Sec. 3. Minnesota Statutes 1994, section 290.01, 31.10 subdivision 19a, is amended to read: 31.11 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 31.12 individuals, estates, and trusts, there shall be added to 31.13 federal taxable income: 31.14 (1)(i) interest income on obligations of any state other 31.15 than Minnesota or a political or governmental subdivision, 31.16 municipality, or governmental agency or instrumentality of any 31.17 state other than Minnesota exempt from federal income taxes 31.18 under the Internal Revenue Code or any other federal statute, 31.19 and 31.20 (ii) exempt-interest dividends as defined in section 31.21 852(b)(5) of the Internal Revenue Code, except the portion of 31.22 the exempt-interest dividends derived from interest income on 31.23 obligations of the state of Minnesota or its political or 31.24 governmental subdivisions, municipalities, governmental agencies 31.25 or instrumentalities, but only if the portion of the 31.26 exempt-interest dividends from such Minnesota sources paid to 31.27 all shareholders represents 95 percent or more of the 31.28 exempt-interest dividends that are paid by the regulated 31.29 investment company as defined in section 851(a) of the Internal 31.30 Revenue Code, or the fund of the regulated investment company as 31.31 defined in section 851(h) of the Internal Revenue Code, making 31.32 the payment; and 31.33 (iii) for the purposes of items (i) and (ii), interest on 31.34 obligations of an Indian tribal government described in section 31.35 7871(c) of the Internal Revenue Code shall be treated as 31.36 interest income on obligations of the state in which the tribe 32.1 is located; 32.2 (2) the amount of income taxes paid or accrued within the 32.3 taxable year under this chapter and income taxes paid to any 32.4 other state or to any province or territory of Canada, to the 32.5 extent allowed as a deduction under section 63(d) of the 32.6 Internal Revenue Code, but the addition may not be more than the 32.7 amount by which the itemized deductions as allowed under section 32.8 63(d) of the Internal Revenue Code exceeds the amount of the 32.9 standard deduction as defined in section 63(c) of the Internal 32.10 Revenue Code. For the purpose of this paragraph, the 32.11 disallowance of itemized deductions under section 68 of the 32.12 Internal Revenue Code of 1986, income tax is the last itemized 32.13 deduction disallowed; 32.14 (3) the capital gain amount of a lump sum distribution to 32.15 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 32.16 Reform Act of 1986, Public Law Number 99-514, applies;and32.17 (4) the amount of income taxes paid or accrued within the 32.18 taxable year under this chapter and income taxes paid to any 32.19 other state or any province or territory of Canada, to the 32.20 extent allowed as a deduction in determining federal adjusted 32.21 gross income. For the purpose of this paragraph, income taxes 32.22 do not include the taxes imposed by sections 290.0922, 32.23 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 32.24 (5) the amount of the standard deduction provided by 32.25 section 63(c) of the Internal Revenue Code, or the itemized 32.26 deductions as defined in section 63(d) of the Internal Revenue 32.27 Code reduced by the amount by which the itemized deductions were 32.28 reduced for federal income tax return purposes pursuant to 32.29 section 68 of the Internal Revenue Code, in accordance with 32.30 whether the standard deduction or itemized deductions were 32.31 claimed on the federal income tax return; 32.32 (6) the amount of the deduction for personal exemptions 32.33 provided by section 151 of the Internal Revenue Code and claimed 32.34 on the federal income tax return; and 32.35 (7) the amount of any deduction or exemption of capital 32.36 gains allowed by the Internal Revenue Code. 33.1 Sec. 4. Minnesota Statutes 1994, section 290.01, 33.2 subdivision 19b, is amended to read: 33.3 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 33.4 individuals, estates, and trusts, there shall be subtracted from 33.5 federal taxable income: 33.6 (1) interest income on obligations of any authority, 33.7 commission, or instrumentality of the United States to the 33.8 extent includable in taxable income for federal income tax 33.9 purposes but exempt from state income tax under the laws of the 33.10 United States; 33.11 (2) if included in federal taxable income, the amount of 33.12 any overpayment of income tax to Minnesota or to any other 33.13 state, for any previous taxable year, whether the amount is 33.14 received as a refund or as a credit to another taxable year's 33.15 income tax liability; 33.16 (3)the amount paid to others not to exceed $650 for each33.17dependent in grades kindergarten to 6 and $1,000 for each33.18dependent in grades 7 to 12, for tuition, textbooks, and33.19transportation of each dependent in attending an elementary or33.20secondary school situated in Minnesota, North Dakota, South33.21Dakota, Iowa, or Wisconsin, wherein a resident of this state may33.22legally fulfill the state's compulsory attendance laws, which is33.23not operated for profit, and which adheres to the provisions of33.24the Civil Rights Act of 1964 and chapter 363. As used in this33.25clause, "textbooks" includes books and other instructional33.26materials and equipment used in elementary and secondary schools33.27in teaching only those subjects legally and commonly taught in33.28public elementary and secondary schools in this state.33.29"Textbooks" does not include instructional books and materials33.30used in the teaching of religious tenets, doctrines, or worship,33.31the purpose of which is to instill such tenets, doctrines, or33.32worship, nor does it include books or materials for, or33.33transportation to, extracurricular activities including sporting33.34events, musical or dramatic events, speech activities, driver's33.35education, or similar programs. In order to qualify for the33.36subtraction under this clause the taxpayer must elect to itemize34.1deductions under section 63(e) of the Internal Revenue Code;34.2(4)to the extent included in federal taxable income, 34.3 distributions from a qualified governmental pension plan, an 34.4 individual retirement account, simplified employee pension, or 34.5 qualified plan covering a self-employed person that represent a 34.6 return of contributions that were included in Minnesota gross 34.7 income in the taxable year for which the contributions were made 34.8 but were deducted or were not included in the computation of 34.9 federal adjusted gross income. The distribution shall be 34.10 allocated first to return of contributions until the 34.11 contributions included in Minnesota gross income have been 34.12 exhausted. This subtraction applies only to contributions made 34.13 in a taxable year prior to 1985; 34.14(5) income as provided under section 290.0802;34.15(6) the amount of unrecovered accelerated cost recovery34.16system deductions allowed under subdivision 19g;34.17(7)(4) to the extent included in federal adjusted gross 34.18 income, income realized on disposition of property exempt from 34.19 tax under section 290.491;and34.20(8)(5) to the extent not deducted in determining federal 34.21 taxable income, the amount paid for health insurance of 34.22 self-employed individuals as determined under section 162(l) of 34.23 the Internal Revenue Code, except that the 25 percent limit does 34.24 not apply. If the taxpayer deducted insurance payments under 34.25 section 213 of the Internal Revenue Code of 1986, the 34.26 subtraction under this clause must be reduced by the lesser of: 34.27 (i) the total itemized deductions allowed under section 34.28 63(d) of the Internal Revenue Code, less state, local, and 34.29 foreign income taxes deductible under section 164 of the 34.30 Internal Revenue Code and the standard deduction under section 34.31 63(c) of the Internal Revenue Code; or 34.32 (ii) the lesser of (A) the amount of insurance qualifying 34.33 as "medical care" under section 213(d) of the Internal Revenue 34.34 Code to the extent not deducted under section 162(1) of the 34.35 Internal Revenue Code or excluded from income or (B) the total 34.36 amount deductible for medical care under section 213(a); 35.1 (6) the amount of deductions of an employee in connection 35.2 with employment that are deductible only as itemized deductions 35.3 as defined in section 63(d) of the Internal Revenue Code; 35.4 (7) the amount of deductions for the production of income 35.5 that are allowable under section 212 of the Internal Revenue 35.6 Code but that can only be deducted as itemized deductions as 35.7 defined in section 63(d) of the Internal Revenue Code; and 35.8 (8) the amount of child support payments made during the 35.9 year pursuant to a temporary or final decree of dissolution or 35.10 legal separation. 35.11 Sec. 5. Minnesota Statutes 1994, section 290.06, 35.12 subdivision 2c, is amended to read: 35.13 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 35.14 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 35.15marriedindividualsfiling joint returns and surviving spouses35.16as defined in section 2(a) of the Internal Revenue Code, 35.17 estates, and trusts must be computed by applying to their 35.18 taxable net income the following schedule of rates: 35.19 (1) On the first$19,910$3,000,6.7 percent; 35.20 (2) On all over$19,910$3,000, but not 35.21 over$79,120$6,000,81.5 percent; 35.22 (3) On all over $6,000, but not over $9,000, 2.4 percent; 35.23 (4) On all over $9,000, but not over $15,000, 3.8 percent; 35.24 (5) On all over $15,000, but not over $20,000, 5 percent; 35.25 (6) On all over $20,000, but not over $25,000, 6 percent; 35.26 (7) On all over $25,000, but not over $35,000, 7 percent; 35.27 (8) On all over $35,000, but not over $75,000, 7.5 percent; 35.28 and 35.29 (9) On all over$79,120$75,000, 8.5 percent. 35.30Married individuals filing separate returns, estates, and35.31 Trusts must compute their income tax by applying the above rates 35.32 to their taxable income, except that the income brackets will be 35.33 one-half of the above amounts. 35.34 (b)The income taxes imposed by this chapter upon unmarried35.35individuals must be computed by applying to taxable net income35.36the following schedule of rates:36.1(1) On the first $13,620, 6 percent;36.2(2) On all over $13,620, but not over $44,750, 8 percent;36.3(3) On all over $44,750, 8.5 percent.36.4(c) The income taxes imposed by this chapter upon unmarried36.5individuals qualifying as a head of household as defined in36.6section 2(b) of the Internal Revenue Code must be computed by36.7applying to taxable net income the following schedule of rates:36.8(1) On the first $16,770, 6 percent;36.9(2) On all over $16,770, but not over $67,390, 8 percent;36.10(3) On all over $67,390, 8.5 percentMarried individuals 36.11 who file separate federal income tax returns shall file separate 36.12 Minnesota income tax returns that allocate income and deductions 36.13 between them in the same manner as on their federal returns. 36.14 Married individuals who file joint federal income tax returns 36.15 may file either a joint Minnesota income tax return or separate 36.16 Minnesota income tax returns. All items of income, deduction, 36.17 and credit of married individuals filing separate Minnesota 36.18 income tax returns who filed a joint federal income tax return 36.19 that are includable in determining federal adjusted gross income 36.20 as defined in section 62 of the Internal Revenue Code shall be 36.21 reported by the individual who received, incurred, or earned 36.22 them, respectively. 36.23(d)(c) In lieu of a tax computed according to the rates 36.24 set forth in this subdivision, the tax of any individual 36.25 taxpayer whose taxable net income for the taxable year is less 36.26 than an amount determined by the commissioner must be computed 36.27 in accordance with tables prepared and issued by the 36.28 commissioner of revenue based on income brackets of not more 36.29 than $100. The amount of tax for each bracket shall be computed 36.30 at the rates set forth in this subdivision, provided that the 36.31 commissioner may disregard a fractional part of a dollar unless 36.32 it amounts to 50 cents or more, in which case it may be 36.33 increased to $1. 36.34(e)(d) An individual who is not a Minnesota resident for 36.35 the entire year must compute the individual's Minnesota income 36.36 tax as provided in this subdivision. After the application of 37.1 the nonrefundable credits provided in this chapter, the tax 37.2 liability must then be multiplied by a fraction in which: 37.3 (1) The numerator is the individual's Minnesota source 37.4 federal adjusted gross income as defined in section 62 of the 37.5 Internal Revenue Code after applying the allocation and 37.6 assignability provisions of section 290.081, clause (a), or 37.7 290.17; and 37.8 (2) the denominator is the individual's federal adjusted 37.9 gross income as defined in section 62 of the Internal Revenue 37.10 Code of 1986, as amended through December 31, 1993, increased by 37.11 the addition required for interest income from non-Minnesota 37.12 state and municipal bonds under section 290.01, subdivision 19a, 37.13 clause (1). 37.14 Sec. 6. Minnesota Statutes 1994, section 290.06, is 37.15 amended by adding a subdivision to read: 37.16 Subd. 25. [CHARITABLE CONTRIBUTIONS CREDIT.] Individuals, 37.17 estates, and trusts shall receive a credit against the tax due 37.18 under this chapter for charitable contributions qualifying for 37.19 federal income tax deduction under section 170 of the Internal 37.20 Revenue Code. The amount of the credit is equal to eight 37.21 percent of the amount allowable as a federal income tax 37.22 deduction under section 170 of the Internal Revenue Code for the 37.23 taxable year. The amount of the credit under this subdivision 37.24 may not exceed the taxpayer's liability under this chapter for 37.25 the taxable year. 37.26 Sec. 7. Minnesota Statutes 1994, section 290.0671, 37.27 subdivision 1, is amended to read: 37.28 Subdivision 1. [CREDIT ALLOWED.] An individual is allowed 37.29 a credit against the tax imposed by this chapter equal to1525 37.30 percent of the credit for which the individual is eligible under 37.31 section 32 of the Internal Revenue Code. 37.32 For a nonresident or part-year resident, the credit 37.33 determined under section 32 of the Internal Revenue Code must be 37.34 allocated based on the percentage calculated under section 37.35 290.06, subdivision 2c, paragraph (e). 37.36 For a person who was a resident for the entire tax year and 38.1 has earned income not subject to tax under this chapter, the 38.2 credit must be allocated based on the ratio of federal adjusted 38.3 gross income reduced by the earned income not subject to tax 38.4 under this chapter over federal adjusted gross income. 38.5 Sec. 8. [REPEALER.] 38.6 Minnesota Statutes 1994, sections 290.01, subdivision 19g; 38.7 290.0802; and 290.091, are repealed. 38.8 Sec. 9. [EFFECTIVE DATE.] 38.9 Sections 1 to 8 are effective for taxable years beginning 38.10 after December 31, 1995. 38.11 ARTICLE 3 38.12 PROPERTY TAX REFUNDS 38.13 Section 1. Minnesota Statutes 1994, section 290A.03, 38.14 subdivision 3, is amended to read: 38.15 Subd. 3. [INCOME.] (1) "Income" means the sum of the 38.16 following: 38.17 (a) federal adjusted gross income as defined in the 38.18 Internal Revenue Code; and 38.19 (b) the sum of the following amounts to the extent not 38.20 included in clause (a): 38.21 (i) all nontaxable income; 38.22 (ii) the amount of a passive activity loss that is not 38.23 disallowed as a result of section 469, paragraph (i) or (m) of 38.24 the Internal Revenue Code and the amount of passive activity 38.25 loss carryover allowed under section 469(b) of the Internal 38.26 Revenue Code; 38.27 (iii) an amount equal to the total of any discharge of 38.28 qualified farm indebtedness of a solvent individual excluded 38.29 from gross income under section 108(g) of the Internal Revenue 38.30 Code; 38.31 (iv) cash public assistance and relief; 38.32 (v) any pension or annuity (including railroad retirement 38.33 benefits, all payments received under the federal Social 38.34 Security Act, supplemental security income, and veterans 38.35 benefits), which was not exclusively funded by the claimant or 38.36 spouse, or which was funded exclusively by the claimant or 39.1 spouse and which funding payments were excluded from federal 39.2 adjusted gross income in the years when the payments were made; 39.3 (vi) interest received from the federal or a state 39.4 government or any instrumentality or political subdivision 39.5 thereof; 39.6 (vii) workers' compensation; 39.7 (viii) nontaxable strike benefits; 39.8 (ix) the gross amounts of payments received in the nature 39.9 of disability income or sick pay as a result of accident, 39.10 sickness, or other disability, whether funded through insurance 39.11 or otherwise; 39.12 (x) a lump sum distribution under section 402(e)(3) of the 39.13 Internal Revenue Code; 39.14 (xi) contributions made by the claimant to an individual 39.15 retirement account, including a qualified voluntary employee 39.16 contribution; simplified employee pension plan; self-employed 39.17 retirement plan; cash or deferred arrangement plan under section 39.18 401(k) of the Internal Revenue Code; or deferred compensation 39.19 plan under section 457 of the Internal Revenue Code; and 39.20 (xii) nontaxable scholarship or fellowship grants. 39.21 In the case of an individual who files an income tax return 39.22 on a fiscal year basis, the term "federal adjusted gross income" 39.23 shall mean federal adjusted gross income reflected in the fiscal 39.24 year ending in the calendar year. Federal adjusted gross income 39.25 shall not be reduced by the amount of a net operating loss 39.26 carryback or carryforward or a capital loss carryback or 39.27 carryforward allowed for the year. 39.28 (2) "Income" does not include 39.29 (a) amounts excluded pursuant to the Internal Revenue Code, 39.30 sections 101(a), 102, and 121; 39.31 (b) amounts of any pension or annuity which was exclusively 39.32 funded by the claimant or spouse and which funding payments were 39.33 not excluded from federal adjusted gross income in the years 39.34 when the payments were made; 39.35 (c) surplus food or other relief in kind supplied by a 39.36 governmental agency; 40.1 (d) relief granted under this chapter; or 40.2 (e) child support payments received under a temporary or 40.3 final decree of dissolution or legal separation. 40.4 (3) The sum of the following amounts may be subtracted from 40.5 income: 40.6 (a) for the claimant's first dependent, the exemption 40.7 amount multiplied by 1.4; 40.8 (b) for the claimant's second dependent, the exemption 40.9 amount multiplied by 1.3; 40.10 (c) for the claimant's third dependent, the exemption 40.11 amount multiplied by 1.2; 40.12 (d) for the claimant's fourth dependent, the exemption 40.13 amount multiplied by 1.1; and 40.14 (e) for the claimant's fifth dependent, the exemption 40.15 amount; and40.16(f) if the claimant or claimant's spouse was disabled or40.17attained the age of 65 on or before December 31 of the year for40.18which the taxes were levied or rent paid, the exemption amount. 40.19 For purposes of this subdivision, the "exemption amount" 40.20 means the exemption amount under section 151(d) of the Internal 40.21 Revenue Code for the taxable year for which the income is 40.22 reported. 40.23 Sec. 2. Minnesota Statutes 1994, section 290A.04, is 40.24 amended by adding a subdivision to read: 40.25 Subd. 2j. [CERTAIN RESORTS.] (a) Commercial use real 40.26 property that is occupied as a homestead by the owner of the 40.27 property, a shareholder of a corporation that owns the property, 40.28 or a partner of a partnership that owns the property, may 40.29 qualify for the refund provided by subdivision 2h if such 40.30 property: 40.31 (1) abuts a lakeshore line; 40.32 (2) is devoted to temporary and seasonal residential 40.33 occupancy for recreational purposes; and 40.34 (3) was not used for commercial purposes for more than 250 40.35 days in the year preceding the year of the assessment. Use for 40.36 a commercial purpose is deemed to occur on any day on which any 41.1 portion of the property is used for residential occupancy for 41.2 which a fee is charged. An owner of such property claiming a 41.3 property tax refund must maintain guest registers or other 41.4 records demonstrating that the units for which a property tax 41.5 refund is sought were not occupied for more than 250 days in the 41.6 year preceding the assessment. 41.7 (b) The maximum area described in paragraph (a) that 41.8 qualifies is 100 feet of lakeshore footage for each cabin or 41.9 campsite located on the property up to a total of 800 feet and 41.10 500 feet in depth, measured away from the lakeshore. If the 41.11 property exceeds that area, only the property tax attributable 41.12 to the maximum area qualifies. 41.13 (c) If a portion of the property described in paragraph (a) 41.14 is operated as a restaurant, bar, gift shop, or other 41.15 nonresidential facility operated on a commercial basis not 41.16 directly related to temporary and seasonal residential occupancy 41.17 for recreation purposes, the property tax attributable to that 41.18 portion does not qualify. 41.19 Sec. 3. Minnesota Statutes 1994, section 290A.04, is 41.20 amended by adding a subdivision to read: 41.21 Subd. 2k. [TRANSITION REFUND PAID TO LOCAL 41.22 GOVERNMENTS.] (a) For property taxes payable in 1996 and 41.23 subsequent years, the commissioner of revenue shall pay to the 41.24 county treasurer on the dates prescribed by law for payment of 41.25 property taxes the portion of the property taxes described in 41.26 paragraph (b) for real estate that is residential and used for 41.27 homestead purposes, homesteaded agricultural land, or property 41.28 described in subdivision 2j to the extent it qualifies for the 41.29 benefits described in that subdivision. 41.30 (b) For taxes payable in 1996, the amount of the property 41.31 taxes paid on behalf of the property owner by the state is the 41.32 excess, if any, of the property taxes payable in 1996 as 41.33 described in paragraph (c) over the lessee of (1) the property 41.34 taxes payable with respect to the property in 1995 or (2) 1.5 41.35 percent of the market value of the property for purposes of 41.36 determination of taxes payable in 1996. 42.1 (c) The property taxes payable in 1996 for purposes of 42.2 paragraph (b), include: 42.3 (1) for all taxing jurisdictions other than school 42.4 districts, the lesser of (i) the taxes actually levied for 42.5 payment in 1996, or (ii) the taxes that would have been levied 42.6 for payment in 1996 if the jurisdiction had applied to its tax 42.7 base an effective tax rate equal to a hypothetical effective tax 42.8 rate for taxes payable in 1995. The hypothetical rate is 42.9 computed by dividing the sum of the taxes actually levied for 42.10 payment in 1995 plus the state-paid property tax relief aids 42.11 described in paragraph (d) that were paid to the jurisdiction in 42.12 1995, by the estimated market value of all taxable property in 42.13 the jurisdiction for taxes payable in 1995; and 42.14 (2) for school districts, the sum of the amounts of taxes, 42.15 if any, levied for payment in 1996 pursuant to referendum levies 42.16 and capital levies approved prior to March 1, 1995. 42.17 (d) For purposes of paragraph (c), "property tax relief 42.18 aids" include the taconite homestead credit paid under section 42.19 273.135, supplemental homestead property tax relief paid under 42.20 section 273.1391, attached machinery aid paid under section 42.21 273.138, homestead and agricultural credit aid and disparity 42.22 reduction aid paid under sections 273.1398 and 273.166, and aids 42.23 to local governments paid under sections 477A.012, 477A.013, 42.24 477A.0132, and 477A.15. 42.25 (e) This subdivision does not apply to any portion of the 42.26 property taxes attributable to improvements not assessed on 42.27 January 2, 1995, except that property that did not qualify under 42.28 this subdivision for taxes payable in 1996, but that later 42.29 becomes a residential homestead, homesteaded agricultural land, 42.30 or qualifying property described in subdivision 2j, shall 42.31 qualify for refunds as provided in this subdivision as follows: 42.32 A hypothetical refund for 1996 must be determined for the 42.33 property based on the property's estimated market value for 42.34 taxes payable in the first year in which it is eligible for the 42.35 refund under this paragraph, and using the actual tax rates for 42.36 taxes payable in 1995 or 1996. The hypothetical 1996 refund so 43.1 determined shall then be reduced in the same proportion, if any, 43.2 that actual refunds for 1996 determined under paragraph (b) have 43.3 been reduced for subsequent years. 43.4 Sec. 4. [REPEALER.] 43.5 Minnesota Statutes 1994, sections 290A.03, subdivisions 9 43.6 and 10; and 290A.04, subdivision 2i, are repealed. 43.7 Sec. 5. [EFFECTIVE DATE.] 43.8 Sections 1 and 4 are effective for refunds based on 43.9 property taxes payable in 1996 and subsequent years and rent 43.10 paid in 1995 and subsequent years. Sections 2 and 3 are 43.11 effective for refunds based on property taxes payable in 1996 43.12 and subsequent years. 43.13 ARTICLE 4 43.14 SALES TAX AND OTHER EXCISE TAXES 43.15 Section 1. Minnesota Statutes 1994, section 289A.18, 43.16 subdivision 4, is amended to read: 43.17 Subd. 4. [SALES AND USE TAX RETURNS.] (a) Sales and use 43.18 tax returns must be filed on or before the 20th day of the month 43.19 following the close of the preceding reporting period, except 43.20 that annual use tax returns provided for under section 289A.11, 43.21 subdivision 1, must be filed by April 15 following the close of 43.22 the calendar year, in the case of individuals. Annual use tax 43.23 returns of businesses, including sole proprietorships, and 43.24 annual sales tax returns must be filed by February 5 following 43.25 the close of the calendar year. 43.26 (b) Returns filed by retailers required to remit 43.27 liabilities by means of funds transfer under section 289A.20, 43.28 subdivision 4, paragraph (d), are due on or before the 25th day 43.29 of the month following the close of the preceding reporting 43.30 period.The return for the May liability and 75 percent of the43.31estimated June liability is due on the date payment of the43.32estimated June liability is due, and on or before August 25 of a43.33year, the retailer must file a return showing the actual June43.34liability.43.35 (c) If a retailer has an average sales and use tax 43.36 liability, including local sales and use taxes administered by 44.1 the commissioner, equal to or less than $500 per month in any 44.2 quarter of a calendar year, and has substantially complied with 44.3 the tax laws during the preceding four calendar quarters, the 44.4 retailer may request authorization to file and pay the taxes 44.5 quarterly in subsequent calendar quarters. The authorization 44.6 remains in effect during the period in which the retailer's 44.7 quarterly returns reflect sales and use tax liabilities of less 44.8 than $1,500 and there is continued compliance with state tax 44.9 laws. 44.10 (d) If a retailer has an average sales and use tax 44.11 liability, including local sales and use taxes administered by 44.12 the commissioner, equal to or less than $100 per month during a 44.13 calendar year, and has substantially complied with the tax laws 44.14 during that period, the retailer may request authorization to 44.15 file and pay the taxes annually in subsequent years. The 44.16 authorization remains in effect during the period in which the 44.17 retailer's annual returns reflect sales and use tax liabilities 44.18 of less than $1,200 and there is continued compliance with state 44.19 tax laws. 44.20 (e) The commissioner may also grant quarterly or annual 44.21 filing and payment authorizations to retailers if the 44.22 commissioner concludes that the retailers' future tax 44.23 liabilities will be less than the monthly totals identified in 44.24 paragraphs (c) and (d). An authorization granted under this 44.25 paragraph is subject to the same conditions as an authorization 44.26 granted under paragraphs (c) and (d). 44.27 Sec. 2. Minnesota Statutes 1994, section 297A.01, 44.28 subdivision 3, is amended to read: 44.29 Subd. 3. A "sale" and a "purchase" includes, but is not 44.30 limited to, each of the following transactions: 44.31 (a) Any transfer of title or possession, or both, of 44.32 tangible personal property, whether absolutely or conditionally, 44.33 and the leasing of or the granting of a license to use or 44.34 consume tangible personal property other than manufactured homes 44.35 used for residential purposes for a continuous period of 30 days 44.36 or more, for a consideration in money or by exchange or barter; 45.1 (b) The production, fabrication, printing, or processing of 45.2 tangible personal property for a consideration for consumers who 45.3 furnish either directly or indirectly the materials used in the 45.4 production, fabrication, printing, or processing. The sale of 45.5 work creation services, as defined in subdivision 25 in 45.6 connection with the creation of a work as defined in subdivision 45.7 21, is not a "sale"; 45.8 (c) The furnishing, preparing, or serving for a 45.9 consideration of food, meals, or drinks. "Sale" does not 45.10 include: 45.11 (1) meals or drinks served to patients, inmates, or persons 45.12 residing at hospitals, sanitariums, nursing homes, senior 45.13 citizens homes, and correctional, detention, and detoxification 45.14 facilities; 45.15 (2) meals or drinks purchased for and served exclusively to 45.16 individuals who are 60 years of age or over and their spouses or 45.17 to the handicapped and their spouses by governmental agencies, 45.18 nonprofit organizations, agencies, or churches or pursuant to 45.19 any program funded in whole or part through 42 USCA sections 45.20 3001 through 3045, wherever delivered, prepared or served; or 45.21 (3) meals and lunches served at public and private schools, 45.22 universities, or colleges. Notwithstanding section 297A.25, 45.23 subdivision 2, taxable food or meals include, but are not 45.24 limited to, the following: 45.25 (i) heated food or drinks; 45.26 (ii) sandwiches prepared by the retailer; 45.27 (iii) single sales of prepackaged ice cream or ice milk 45.28 novelties prepared by the retailer; 45.29 (iv) hand-prepared or dispensed ice cream or ice milk 45.30 products including cones, sundaes, and snow cones; 45.31 (v) soft drinks and other beverages prepared or served by 45.32 the retailer; 45.33 (vi) gum; 45.34 (vii) ice; 45.35 (viii) all food sold in vending machines; 45.36 (ix) party trays prepared by the retailers; and 46.1 (x) all meals and single servings of packaged snack food, 46.2 single cans or bottles of pop, sold in restaurants and bars; 46.3 (d) The granting of the privilege of admission to places of 46.4 amusement, recreational areas, or athletic events, except a 46.5 world championship football game sponsored by the national 46.6 football league, and the privilege of having access to and the 46.7 use of amusement devices, tanning facilities, reducing salons, 46.8 steam baths, turkish baths, health clubs, and spas or athletic 46.9 facilities; 46.10 (e) The furnishing for a consideration of lodging and 46.11 related services by a hotel, rooming house, tourist court, motel 46.12 or trailer camp and of the granting of any similar license to 46.13 use real property other than the renting or leasing thereof for 46.14 a continuous period of 30 days or more; 46.15 (f) The furnishing for a consideration of electricity, gas, 46.16 water, or steam for use or consumption within this state, or 46.17 local exchange telephone service, intrastate toll service, and 46.18 interstate toll service, if that service originates from and is 46.19 charged to a telephone located in this state. Telephone service 46.20 includes paging services and private communication service, as 46.21 defined in United States Code, title 26, section 4252(d), except 46.22 for private communication service purchased by an agent acting 46.23 on behalf of the state lottery. The furnishing for a 46.24 consideration of access to telephone services by a hotel to its 46.25 guests is a sale under this clause. Sales by municipal 46.26 corporations in a proprietary capacity are included in the 46.27 provisions of this clause. The furnishing of water and sewer 46.28 services for residential use shall not be considered a sale. 46.29 The sale of natural gas to be used as a fuel in vehicles 46.30 propelled by natural gas shall not be considered a sale for the 46.31 purposes of this section; 46.32 (g) The furnishing for a consideration of cable television 46.33 services, including charges for basic service, charges for 46.34 premium service, and any other charges for any other 46.35 pay-per-view, monthly, or similar television services; 46.36 (h) Notwithstanding section 297A.25, subdivisions 9 and 12, 47.1 the sales of racehorses including claiming sales and fees paid 47.2 for breeding racehorses or horses previously used for racing 47.3 shall be considered a "sale" and a "purchase." "Racehorse" 47.4 means a horse that is or is intended to be used for racing and 47.5 whose birth has been recorded by the Jockey Club or the United 47.6 States Trotting Association or the American Quarter Horse 47.7 Association. "Sale" does not include fees paid for breeding 47.8 horses that are not racehorses; 47.9 (i)The furnishing for a consideration of parking services,47.10whether on a contractual, hourly, or other periodic basis,47.11except for parking at a meter;47.12(j) The furnishing for a consideration of services listed47.13in this paragraph:47.14(i) laundry and dry cleaning services including cleaning,47.15pressing, repairing, altering, and storing clothes, linen47.16services and supply, cleaning and blocking hats, and carpet,47.17drapery, upholstery, and industrial cleaning. Laundry and dry47.18cleaning services do not include services provided by coin47.19operated facilities operated by the customer;47.20(ii) motor vehicle washing, waxing, and cleaning services,47.21including services provided by coin-operated facilities operated47.22by the customer, and rustproofing, undercoating, and towing of47.23motor vehicles;47.24(iii) building and residential cleaning, maintenance, and47.25disinfecting and exterminating services;47.26(iv) services provided by detective agencies, security47.27services, burglar, fire alarm, and armored car services not47.28including services performed within the jurisdiction they serve47.29by off-duty licensed peace officers as defined in section47.30626.84, subdivision 1;47.31(v) pet grooming services;47.32(vi) lawn care, fertilizing, mowing, spraying and sprigging47.33services; garden planting and maintenance; tree, bush, and shrub47.34pruning, bracing, spraying, and surgery; tree, bush, shrub and47.35stump removal; and tree trimming for public utility lines.47.36Services performed under a construction contract for the48.1installation of shrubbery, plants, sod, trees, bushes, and48.2similar items are not taxable;48.3(vii) solid waste collection and disposal services as48.4described in section 297A.45;48.5(viii) massages, except when provided by a licensed health48.6care facility or professional or upon written referral from a48.7licensed health care facility or professional for treatment of48.8illness, injury, or disease; and48.9(ix) the furnishing for consideration of lodging, board and48.10care services for animals in kennels and other similar48.11arrangements, but excluding veterinary and horse boarding48.12services.48.13The services listed in this paragraph are taxable under section48.14297A.02 if the service is performed wholly within Minnesota or48.15if the service is performed partly within and partly without48.16Minnesota and the greater proportion of the service is performed48.17in Minnesota, based on the cost of performance. In applying the48.18provisions of this chapter, the terms "tangible personal48.19property" and "sales at retail" include taxable services and the48.20provision of taxable services, unless specifically provided48.21otherwise. Services performed by an employee for an employer48.22are not taxable under this paragraph. Services performed by a48.23partnership or association for another partnership or48.24association are not taxable under this paragraph if one of the48.25entities owns or controls more than 80 percent of the voting48.26power of the equity interest in the other entity. Services48.27performed between members of an affiliated group of corporations48.28are not taxable. For purposes of this section, "affiliated48.29group of corporations" includes those entities that would be48.30classified as a member of an affiliated group under United48.31States Code, title 26, section 1504, and who are eligible to48.32file a consolidated tax return for federal income tax purposes48.33 The furnishing for a consideration of services of any kind or 48.34 nature not specifically included or excluded in other paragraphs 48.35 of this subdivision; 48.36(k)(j) A "sale" and a "purchase" includes the transfer of 49.1 computer software, meaning information and directions that 49.2 dictate the function performed by data processing equipment. A 49.3 "sale" and a "purchase" does not include the design, 49.4 development, writing, translation, fabrication, lease, or 49.5 transfer for a consideration of title or possession of a custom 49.6 computer program;and49.7(l)(k) The granting of membership in a club, association, 49.8 or other organization if: 49.9 (1) the club, association, or other organization makes 49.10 available for the use of its members sports and athletic 49.11 facilities (without regard to whether a separate charge is 49.12 assessed for use of the facilities); and 49.13 (2) use of the sports and athletic facilities is not made 49.14 available to the general public on the same basis as it is made 49.15 available to members. 49.16 Granting of membership includes both one-time initiation fees 49.17 and periodic membership dues. Sports and athletic facilities 49.18 include golf courses, tennis, racquetball, handball and squash 49.19 courts, basketball and volleyball facilities, running tracks, 49.20 exercise equipment, swimming pools, and other similar athletic 49.21 or sports facilities. The provisions of this paragraph do not 49.22 apply to camps or other recreation facilities owned and operated 49.23 by an exempt organization under section 501(c)(3) of the 49.24 Internal Revenue Code of 1986, as amended through December 31, 49.25 1992, for educational and social activities for young people 49.26 primarily age 18 and under; and 49.27 (l) A "sale" and a "purchase" does not include the 49.28 creation, sale, lease, license, or other transfer for a 49.29 consideration of title or possession or any rights in or to a 49.30 copyright or a work as defined in subdivision 21 by the author 49.31 of the work to a purchaser for use in connection with a trade or 49.32 business, within the meaning of section 162(a) of the Internal 49.33 Revenue Code, of the purchaser. 49.34 Sec. 3. Minnesota Statutes 1994, section 297A.01, 49.35 subdivision 6, is amended to read: 49.36 Subd. 6. "Use" includes the exercise of any right or power 50.1 over tangible personal property, or tickets or admissions to 50.2 places of amusement or athletic events, purchased from a 50.3 retailer incident to the ownership of any interest in that 50.4 property, except that it does not include the sale of that 50.5 property in the regular course of business. 50.6 "Use" includes the consumption of printed materials which 50.7 are consumed in the creation of nontaxable advertising that is 50.8 distributed, either directly or indirectly, within Minnesota. 50.9 With respect to services, "use" means the consumption of 50.10 the benefit provided by the service, and a service is used in 50.11 the state or states in which its benefit is consumed. 50.12 Sec. 4. Minnesota Statutes 1994, section 297A.01, 50.13 subdivision 8, is amended to read: 50.14 Subd. 8. "Sales price" means the total consideration 50.15 valued in money, for a retail sale whether paid in money or 50.16 otherwise,excluding therefromnot reduced by any amount allowed 50.17 as credit for tangible personal property taken in trade for 50.18 resale, without deduction for the cost of the property or 50.19 services sold, cost of materials used, labor or service cost, 50.20 interest, or discount allowed after the sale is consummated, the 50.21 cost of transportationincurred prior to the time of sale, any 50.22 amount for which credit is given to the purchaser by the seller, 50.23 or any other expense whatsoever. A deduction may be made for 50.24 charges of up to 15 percent in lieu of tips, if the 50.25 consideration for such charges is separately stated. No 50.26 deduction shall be allowed for charges for services that are 50.27 part of a sale. A deduction may also be made for interest, 50.28 financing, or carrying charges,charges for labor or services50.29used in installing or applying the property sold or50.30transportation charges if the transportation occurs after the50.31retail sale of the propertyonly if the consideration for such 50.32 charges is separately stated. There shall not be included in 50.33 "sales price" cash discounts allowed and taken on sales or the 50.34 amount refunded either in cash or in credit for property 50.35 returned by purchasers. 50.36 Sec. 5. Minnesota Statutes 1994, section 297A.01, is 51.1 amended by adding a subdivision to read: 51.2 Subd. 21. [WORK.] "Work" means an original work of 51.3 authorship fixed in any tangible medium of expression, now known 51.4 or later developed, from which it can be perceived, reproduced, 51.5 or otherwise communicated, either directly or with the aid of a 51.6 machine or device. "Work" includes items that are the subject 51.7 matter of copyright as specified in the Copyright Act of 1977, 51.8 United States Code, title 17, section 102(a), as defined in 51.9 United States Code, title 17, section 101: 51.10 (1) literary works; 51.11 (2) musical works, including any accompanying words; 51.12 (3) dramatic works, including any accompanying music; 51.13 (4) pantomimes and choreographic works; 51.14 (5) pictorial, graphic, and sculptural works; 51.15 (6) motion pictures and other audiovisual works; and 51.16 (7) sound recordings. 51.17 Sec. 6. Minnesota Statutes 1994, section 297A.01, is 51.18 amended by adding a subdivision to read: 51.19 Subd. 22. [COPYRIGHT.] "Copyright" means the protection 51.20 afforded under the Copyright Act of 1976, United States Code, 51.21 section 101 et seq. 51.22 Sec. 7. Minnesota Statutes 1994, section 297A.01, is 51.23 amended by adding a subdivision to read: 51.24 Subd. 23. [AUTHOR.] "Author" means the creator of a work. 51.25 In the case of a work made for hire, the employer or other 51.26 person for whom the work was prepared is considered the author. 51.27 Sec. 8. Minnesota Statutes 1994, section 297A.01, is 51.28 amended by adding a subdivision to read: 51.29 Subd. 24. [WORK MADE FOR HIRE.] "Work made for hire" means: 51.30 (1) a work prepared by an employee within the scope of the 51.31 employee's employment; or 51.32 (2) a work specially ordered or commissioned for use as a 51.33 contribution to a collective work, a part of a motion picture or 51.34 other audiovisual work, a translation, a supplementary work, a 51.35 compilation, an instructional text, a test, answer material for 51.36 a test, or an atlas, if the parties expressly agree in a written 52.1 instrument signed by them that the work shall be considered a 52.2 work made for hire. As used in this clause, a "supplementary 52.3 work" is a work prepared for publication as a secondary adjunct 52.4 to a work by another author for the purpose of introducing, 52.5 concluding, illustrating, explaining, revising, commenting upon, 52.6 or assisting in the use of the other work, such as forewords, 52.7 afterwords, pictorial illustrations, maps, charts, tables, 52.8 editorial notes, musical arrangements, answer material for 52.9 tests, bibliographies, appendixes, and indexes, and an 52.10 "instructional text" is a literary, pictorial, or graphic work 52.11 prepared for publication and with the purpose of use in 52.12 systematic instructional activities. 52.13 Sec. 9. Minnesota Statutes 1994, section 297A.01, is 52.14 amended by adding a subdivision to read: 52.15 Subd. 25. [WORK CREATION SERVICES.] "Work creation 52.16 services" means services performed in the course of creation or 52.17 modification of a work that affects the content, including the 52.18 design, of the work. 52.19 Sec. 10. Minnesota Statutes 1994, section 297A.01, is 52.20 amended by adding a subdivision to read: 52.21 Subd. 26. [INTERNAL REVENUE CODE.] Unless otherwise 52.22 specifically provided, "Internal Revenue Code" means the 52.23 Internal Revenue Code of 1986, as amended through December 31, 52.24 1994. 52.25 Sec. 11. Minnesota Statutes 1994, section 297A.02, 52.26 subdivision 1, is amended to read: 52.27 Subdivision 1. [GENERALLY.] Except as otherwise provided 52.28 in this chapter, there is imposed an excise taxof 6.5 percent52.29ofon the gross receipts from sales at retail made by any person 52.30 in this state at the following rates: prior to October 1, 1996, 52.31 6.5 percent; and on or after October 1, 1996, 5.5 percent. 52.32 The rates in this subdivision include the local option 52.33 sales tax rate imposed under section 297A.021, if applicable. 52.34 Sec. 12. Minnesota Statutes 1994, section 297A.03, 52.35 subdivision 1, is amended to read: 52.36 Subdivision 1. The tax shall be stated and charged 53.1 separately from the sales priceor charge for serviceinsofar as 53.2 practicable and shall be collected by the seller from the 53.3 purchaser and shall be a debt from the purchaser to the seller 53.4 recoverable at law in the same manner as other debts. 53.5 Sec. 13. Minnesota Statutes 1994, section 297A.14, 53.6 subdivision 1, is amended to read: 53.7 Subdivision 1. [IMPOSITION.] For the privilege of using, 53.8 storing, distributing, or consuming in Minnesota tangible 53.9 personal property ortaxableservices purchased for use, 53.10 storage, distribution, or consumption in this state, a use tax 53.11 is imposed on every person in this state at the rate of tax 53.12 imposed under section 297A.02 on the sales price of sales at 53.13 retail of the items, unless the tax imposed by section 297A.02 53.14 was paid on the sales price. 53.15 A use tax is imposed on every person who uses, stores, 53.16 distributes, or consumes tangible personal property in Minnesota 53.17 which has been manufactured, fabricated, or assembled by the 53.18 person from materials, either within or without this state, at 53.19 the rate of tax imposed under section 297A.02 on the sales price 53.20 of sales at retail of the materials contained in the tangible 53.21 personal property, unless the tax imposed by section 297A.02 was 53.22 paid on the sales price. 53.23 Sec. 14. Minnesota Statutes 1994, section 297A.21, 53.24 subdivision 2, is amended to read: 53.25 Subd. 2. [DESTINATION.] The destination of a sale of 53.26 tangible personal property is the location to which the retailer 53.27 makes delivery of the property sold, or causes the property to 53.28 be delivered, to the purchaser of the property, or to the agent 53.29 or designee of the purchaser by any means of delivery, including 53.30 the United States Postal Service, a common carrier, or a 53.31 contract carrier. The destination of a sale of services is the 53.32 location at which the benefits of the services will be consumed 53.33 by the purchaser. 53.34 Sec. 15. Minnesota Statutes 1994, section 297A.22, is 53.35 amended to read: 53.36 297A.22 [PRESUMPTION OF PURPOSE OF SALE, BURDEN OF PROOF.] 54.1 For the purpose of the proper administration of sections 54.2 297A.01 to 297A.44 and to prevent evasion of the use tax and the 54.3 duty to collect the use tax, it shall be presumed that all 54.4 retail sales for delivery of tangible personal property in 54.5 Minnesota and all retail sales of services to purchasers located 54.6 in Minnesota are for storage, use, or other consumption in 54.7 Minnesota until the contrary is established. The burden of 54.8 proving the contrary shall be upon the person who makes the sale 54.9 but that person may take from the purchaser an exemption 54.10 certificate in accordance with sections 297A.09 to 297A.13. 54.11 Sec. 16. Minnesota Statutes 1994, section 297A.24, 54.12 subdivision 1, is amended to read: 54.13 Subdivision 1. [STATE TAX.] If any article of tangible 54.14 personal property, any service, or any item enumerated in 54.15 section 297A.14 has already been subjected to a tax by any other 54.16 state in respect of its sale, storage, use or other consumption 54.17 in an amount less than the tax imposed by sections 297A.01 to 54.18 297A.44, then as to the person who paid the tax in such other 54.19 state, the provisions of section 297A.14 shall apply only at a 54.20 rate measured by the difference between the sum of the rates 54.21 imposed under sections 297A.02 and 297A.021 and the rate by 54.22 which the previous tax was computed. If such tax imposed in 54.23 such other state was equal to or greater than the tax imposed in 54.24 this state, then no tax shall be due from such person under 54.25 section 297A.14. 54.26 Sec. 17. Minnesota Statutes 1994, section 297A.25, 54.27 subdivision 4, is amended to read: 54.28 Subd. 4. [CONSTITUTIONAL PROHIBITIONS.] The gross receipts 54.29 from the sale of and the storage, use or other consumption in 54.30 Minnesota of tangible personal property, services, tickets, or 54.31 admissions, electricity, gas, or local exchange telephone 54.32 service, which under the Constitution or laws of the United 54.33 States or under the Constitution of Minnesota, the state of 54.34 Minnesota is prohibited from taxing, are exempt. 54.35 Sec. 18. Minnesota Statutes 1994, section 297A.25, 54.36 subdivision 9, is amended to read: 55.1 Subd. 9. [MATERIALS CONSUMED IN PRODUCTION.] The gross 55.2 receipts from the sale of and the storage, use, or consumption 55.3 of all materials, including chemicals, fuels, petroleum 55.4 products, lubricants, packaging materials, including returnable 55.5 containers used in packaging food and beverage products, feeds, 55.6 seeds, fertilizers, electricity, gas and steam, used or consumed 55.7 in agricultural or industrial production of personal property, 55.8 including publications, intended to be sold ultimately at 55.9 retail, whether or not the item so used becomes an ingredient or 55.10 constituent part of the property produced, or used or consumed 55.11 in the performance of services the sale of which is not exempt 55.12 under subdivision 60, are exempt. Seeds, trees, fertilizers, 55.13 and herbicides purchased for use by farmers in the Conservation 55.14 Reserve Program under United States Code, title 16, section 55.15 590h, the Integrated Farm Management Program under section 1627 55.16 of Public Law Number 101-624, the Wheat and Feed Grain Programs 55.17 under sections 301 to 305 and 401 to 405 of Public Law Number 55.18 101-624, and the conservation reserve program under sections 55.19 103F.505 to 103F.531, are included in this exemption. Chemicals 55.20 used for cleaning food processing machinery and equipment are 55.21 included in this exemption. Materials, including chemicals, 55.22 fuels, and electricity purchased by persons engaged in 55.23 agricultural or industrial production to treat waste generated 55.24 as a result of the production process are included in this 55.25 exemption. Such production shall include, but is not limited 55.26 to, research, development, design or production of any tangible 55.27 personal property, manufacturing, processing (other than by 55.28 restaurants and consumers) of agricultural products whether 55.29 vegetable or animal, commercial fishing, refining, smelting, 55.30 reducing, brewing, distilling, printing, mining, quarrying, 55.31 lumbering, generating electricity and the production of road 55.32 building materials. Such production shall not include painting, 55.33 cleaning, repairing or similar processing of property except as 55.34 part of the original manufacturing process. Machinery, 55.35 equipment, implements, tools, accessories, appliances, 55.36 contrivances, furniture and fixtures, used in such production 56.1 and fuel, electricity, gas or steam used for space heating or 56.2 lighting, are not included within this exemption; however, 56.3 accessory tools, equipment and other short lived items, which 56.4 are separate detachable units used in producing a direct effect 56.5 upon the product, where such items have an ordinary useful life 56.6 of less than 12 months, are included within the exemption 56.7 provided herein. Electricity used to make snow for outdoor use 56.8 for ski hills, ski slopes, or ski trails is included in this 56.9 exemption. 56.10 Sec. 19. Minnesota Statutes 1994, section 297A.25, 56.11 subdivision 12, is amended to read: 56.12 Subd. 12. [OCCASIONAL SALES.] (a) The gross receipts from 56.13 the isolated or occasional sale of tangible personal property or 56.14 services in Minnesota not made in the normal course of business 56.15 of selling that kind of property or services, and the storage, 56.16 use, or consumption of property or services acquired as a result 56.17 of such a sale are exempt. 56.18 (b) This exemption does not apply to sales of tangible 56.19 personal property primarily used in a trade or business unless 56.20 (1) the sale occurs in a transaction subject to or described in 56.21 section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 56.22 1031, or 1033 of the Internal Revenue Codeof 1986, as amended56.23through December 31, 1990; (2) the sale is between members of a 56.24 controlled group as defined in section 1563(a) of the Internal 56.25 Revenue Codeof 1986, as amended through December 31, 1990; (3) 56.26 the sale is a sale of farm machinery; (4) the sale is a farm 56.27 auction sale; (5) the sale is a sale of substantially all of the 56.28 assets of a trade or business; or (6) the total amount of gross 56.29 receipts from the sale of trade or business property made during 56.30 the calendar month of the sale and the preceding 11 calendar 56.31 months does not exceed $1,000. 56.32 (c) For purposes of this subdivision, the following terms 56.33 have the meanings given. 56.34 (1) A "farm auction" is a public auction conducted by a 56.35 licensed auctioneer if substantially all of the property sold 56.36 consists of property used in the trade or business of farming 57.1 and property not used primarily in a trade or business. 57.2 (2) "Trade or business" includes the assets of a separate 57.3 division, branch, or identifiable segment of a trade or business 57.4 if, before the sale, the income and expenses attributable to the 57.5 separate division, branch, or identifiable segment could be 57.6 separately ascertained from the books of account or record (the 57.7 lease or rental of an identifiable segment does not qualify for 57.8 the exemption). 57.9 (3) A "sale of substantially all of the assets of a trade 57.10 or business" must occur as a single transaction or a series of 57.11 related transactions occurring within the 12-month period 57.12 beginning on the date of the first sale of assets intended to 57.13 qualify for the exemption provided in paragraph (b), clause (5). 57.14 Sec. 20. Minnesota Statutes 1994, section 297A.25, is 57.15 amended by adding a subdivision to read: 57.16 Subd. 60. [SALES OF SERVICES TO BUSINESSES.] Sales of 57.17 services described in section 297A.01, subdivision 3, paragraph 57.18 (i), but not in any other paragraph thereof, to any person 57.19 engaged in the conduct of a trade or business within the meaning 57.20 of section 162(a) of the Internal Revenue Code are exempt if the 57.21 benefits of the services are consumed in connection with the 57.22 trade or business. Nothing in this subdivision shall limit the 57.23 scope of section 297A.01, subdivision 3, paragraph (b). If 57.24 tangible personal property and services are sold together and 57.25 the services would be exempt hereunder, the services are exempt 57.26 only if the consideration for the tangible personal property and 57.27 the services is separately stated. 57.28 Sec. 21. Minnesota Statutes 1994, section 297A.44, 57.29 subdivision 1, is amended to read: 57.30 Subdivision 1. (a) Except as provided in paragraphs (b), 57.31 (c), and (d), all revenues, including interest and penalties, 57.32 derived from the excise and use taxes imposed by sections 57.33 297A.01 to 297A.44 shall be deposited by the commissioner in the 57.34 state treasury and credited to the general fund. 57.35 (b) All excise and use taxes derived from sales and use of 57.36 property and services purchased for the construction and 58.1 operation of an agricultural resource project, from and after 58.2 the date on which a conditional commitment for a loan guaranty 58.3 for the project is made pursuant to section 41A.04, subdivision 58.4 3, shall be deposited in the Minnesota agricultural and economic 58.5 account in the special revenue fund. The commissioner of 58.6 finance shall certify to the commissioner the date on which the 58.7 project received the conditional commitment. The amount 58.8 deposited in the loan guaranty account shall be reduced by any 58.9 refunds and by the costs incurred by the department of revenue 58.10 to administer and enforce the assessment and collection of the 58.11 taxes. 58.12 (c) All revenues, including interest and penalties, derived 58.13 from the excise and use taxes imposed on sales and purchases 58.14 included in section 297A.01, subdivision 3, paragraphs(d)(e) 58.15 and(l)(k), clauses (1) and (2), must be deposited by the 58.16 commissioner in the state treasury, and credited as follows: 58.17 (1) first to the general obligation special tax bond debt 58.18 service account in each fiscal year the amount required by 58.19 section 16A.661, subdivision 3, paragraph (b); and 58.20 (2) after the requirements of clause (1) have been met, the 58.21 balance must be credited to the general fund. 58.22 (d) The revenues, including interest and penalties, derived 58.23 from the taxes imposed on solid waste collection services as 58.24 described in section 297A.45, except for the tax imposed under 58.25 section 297A.021, shall be deposited by the commissioner in the 58.26 state treasury and credited to the general fund to be used for 58.27 funding solid waste reduction and recycling programs. 58.28 Sec. 22. Minnesota Statutes 1994, section 297B.01, 58.29 subdivision 8, is amended to read: 58.30 Subd. 8. [PURCHASE PRICE.] "Purchase price" means the 58.31 total consideration valued in money for a sale, whether paid in 58.32 money or otherwise,provided however, that when anot reduced by 58.33 the value of any motor vehicleistaken in trade as a credit or 58.34 as part payment on a motor vehicle taxable under Laws 1971, 58.35 chapter 853,the credit or trade-in value allowed by the person58.36selling the motor vehicle shall be deducted from the total59.1selling price to establish the purchase price of the vehicle59.2being sold and the trade-in allowance allowed by the seller59.3shall constitute the purchase price of the motor vehicle59.4accepted as a trade-inwhich value may be the average value of 59.5 similar motor vehicles, established by standards and guides as 59.6 determined by the motor vehicle registrar. The purchase price 59.7 in those instances where the motor vehicle is acquired by gift 59.8 or by any other transfer for a nominal or no monetary 59.9 consideration shall also include the average value of similar 59.10 motor vehicles, establishedby standards and guides as59.11determined by the motor vehicle registraras provided above. 59.12 The purchase price in those instances where a motor vehicle is 59.13 manufactured by a person who registers it under the laws of this 59.14 state shall mean the manufactured cost of such motor vehicle and 59.15 manufactured cost shall mean the amount expended for materials, 59.16 labor and other properly allocable costs of manufacture, except 59.17 that in the absence of actual expenditures for the manufacture 59.18 of a part or all of the motor vehicle, manufactured costs shall 59.19 mean the reasonable value of the completed motor vehicle. 59.20 The term "purchase price" shall not include the portion of 59.21 the value of a motor vehicle due solely to modifications 59.22 necessary to make the motor vehicle handicapped accessible. The 59.23 term "purchase price" shall not include the transfer of a motor 59.24 vehicle by way of gift between a husband and wife or parent and 59.25 child, nor shall it include the transfer of a motor vehicle by a 59.26 guardian to a ward when there is no monetary consideration and 59.27 the title to such vehicle was registered in the name of the 59.28 guardian, as guardian, only because the ward was a minor. There 59.29 shall not be included in "purchase price" the amount of any tax 59.30 imposed by the United States upon or with respect to retail 59.31 sales whether imposed upon the retailer or the consumer. 59.32 Sec. 23. Minnesota Statutes 1994, section 297B.03, is 59.33 amended to read: 59.34 297B.03 [EXEMPTIONS.] 59.35 There is specifically exempted from the provisions of this 59.36 chapter and from computation of the amount of tax imposed by it 60.1 the following: 60.2 (1) Purchase or use, including use under a lease purchase 60.3 agreement or installment sales contract made pursuant to section 60.4 465.71, of any motor vehicle by the United States and its 60.5 agencies and instrumentalities and by any person described in 60.6 and subject to the conditions provided in section 297A.25, 60.7 subdivision 18. 60.8 (2) Purchase or use of any motor vehicle by any person who 60.9 was a resident of another state at the time of the purchase and 60.10 who subsequently becomes a resident of Minnesota, provided the 60.11 purchase occurred more than 60 days prior to the date such 60.12 person began residing in the state of Minnesota. 60.13 (3) Purchase or use of any motor vehicle by any person 60.14 making a valid election to be taxed under the provisions of 60.15 section 297A.211. 60.16 (4) Purchase or use of any motor vehicle previously 60.17 registered in the state of Minnesota by any corporation or 60.18 partnership when such transfer constitutes a transfer within the 60.19 meaning of section 351 or 721 of the Internal Revenue Code of 60.20 1986, as amended through December 31, 1988. 60.21 (5) Purchase or use of any vehicle owned by a resident of 60.22 another state and leased to a Minnesota based private or for 60.23 hire carrier for regular use in the transportation of persons or 60.24 property in interstate commerce provided the vehicle is titled 60.25 in the state of the owner or secured party, and that state does 60.26 not impose a sales tax or sales tax on motor vehicles used in 60.27 interstate commerce. 60.28(6) Purchase or use of a motor vehicle by a private60.29nonprofit or public educational institution for use as an60.30instructional aid in automotive training programs operated by60.31the institution. "Automotive training programs" includes motor60.32vehicle body and mechanical repair courses but does not include60.33driver education programs.60.34(7) Purchase of a motor vehicle for use as an ambulance by60.35an ambulance service licensed under section 144.802.60.36(8) Purchase of a motor vehicle by or for a public library,61.1as defined in section 134.001, subdivision 2, as a bookmobile or61.2library delivery vehicle.61.3 Sec. 24. [REPEALER.] 61.4 Minnesota Statutes 1994, sections 297A.25, subdivisions 6, 61.5 7, 8, 10, 11, 17, 18, 21, 23, 26, 30, 39, 40, 41, 44, 56, 57, 61.6 and 58; 297A.256, subdivision 2; 297B.02, subdivisions 2 and 3; 61.7 and 297B.025, are repealed. 61.8 Sec. 25. [EFFECTIVE DATE.] 61.9 Sections 1 to 10 and 12 to 21 are effective January 1, 1996. 61.10 Sections 22, 23 and 24 are effective July 1, 1995. 61.11 ARTICLE 5 61.12 BUSINESS TAXES 61.13 Section 1. Minnesota Statutes 1994, section 272.02, 61.14 subdivision 1, is amended to read: 61.15 Subdivision 1. All property described in this section to 61.16 the extent herein limited shall be exempt from taxation: 61.17 (1) All public burying grounds. 61.18 (2) All public schoolhouses. 61.19 (3) All public hospitals. 61.20 (4) All academies, colleges, and universities, and all 61.21 seminaries of learning. 61.22 (5) All churches, church property, and houses of worship. 61.23 (6) Institutions of purely public charity except parcels of 61.24 property containing structures and the structures described in 61.25 section 273.13, subdivision 25, paragraph (c), clauses (1), (2), 61.26 and (3), or paragraph (d), other than those that qualify for 61.27 exemption under clause (25). 61.28 (7) All public property exclusively used for any public 61.29 purpose. 61.30 (8) Except for the taxable personal property enumerated 61.31 below, all personal property and the property described in 61.32 section 272.03, subdivision 1, paragraphs (c) and (d), shall be 61.33 exempt. 61.34 The following personal property shall be taxable: 61.35 (a)personal property which is part of an electric61.36generating, transmission, or distribution system or a pipeline62.1system transporting or distributing water, gas, crude oil, or62.2petroleum products or mains and pipes used in the distribution62.3of steam or hot or chilled water for heating or cooling62.4buildings and structures;62.5(b)railroad docks and wharves which are part of the 62.6 operating property of a railroad company as defined in section 62.7 270.80; 62.8(c)(b) personal property defined in section 272.03, 62.9 subdivision 2, clause (3); 62.10(d)(c) leasehold or other personal property interests 62.11 which are taxed pursuant to section 272.01, subdivision 2; 62.12 273.124, subdivision 7; or 273.19, subdivision 1; or any other 62.13 law providing the property is taxable as if the lessee or user 62.14 were the fee owner; 62.15(e)(d) manufactured homes and sectional structures, 62.16 including storage sheds, decks, and similar removable 62.17 improvements constructed on the site of a manufactured home, 62.18 sectional structure, park trailer or travel trailer as provided 62.19 in section 273.125, subdivision 8, paragraph (f); and 62.20(f)(e) flight property as defined in section 270.071. 62.21 (9) Personal property used primarily for the abatement and 62.22 control of air, water, or land pollution to the extent that it 62.23 is so used, and real property which is used primarily for 62.24 abatement and control of air, water, or land pollution as part 62.25 of an agricultural operation, as a part of a centralized 62.26 treatment and recovery facility operating under a permit issued 62.27 by the Minnesota pollution control agency pursuant to chapters 62.28 115 and 116 and Minnesota Rules, parts 7001.0500 to 7001.0730, 62.29 and 7045.0020 to 7045.1260, as a wastewater treatment facility 62.30 and for the treatment, recovery, and stabilization of metals, 62.31 oils, chemicals, water, sludges, or inorganic materials from 62.32 hazardous industrial wastes, or as part of an electric 62.33 generation system. For purposes of this clause, personal 62.34 property includes ponderous machinery and equipment used in a 62.35 business or production activity that at common law is considered 62.36 real property. 63.1 Any taxpayer requesting exemption of all or a portion of 63.2 any real property or any equipment or device, or part thereof, 63.3 operated primarily for the control or abatement of air or water 63.4 pollution shall file an application with the commissioner of 63.5 revenue. The equipment or device shall meet standards, rules, 63.6 or criteria prescribed by the Minnesota pollution control 63.7 agency, and must be installed or operated in accordance with a 63.8 permit or order issued by that agency. The Minnesota pollution 63.9 control agency shall upon request of the commissioner furnish 63.10 information or advice to the commissioner. On determining that 63.11 property qualifies for exemption, the commissioner shall issue 63.12 an order exempting the property from taxation. The equipment or 63.13 device shall continue to be exempt from taxation as long as the 63.14 permit issued by the Minnesota pollution control agency remains 63.15 in effect. 63.16 (10) Wetlands. For purposes of this subdivision, 63.17 "wetlands" means: (i) land described in section 103G.005, 63.18 subdivision 18; (ii) land which is mostly under water, produces 63.19 little if any income, and has no use except for wildlife or 63.20 water conservation purposes, provided it is preserved in its 63.21 natural condition and drainage of it would be legal, feasible, 63.22 and economically practical for the production of livestock, 63.23 dairy animals, poultry, fruit, vegetables, forage and grains, 63.24 except wild rice; or (iii) land in a wetland preservation area 63.25 under sections 103F.612 to 103F.616. "Wetlands" under items (i) 63.26 and (ii) include adjacent land which is not suitable for 63.27 agricultural purposes due to the presence of the wetlands, but 63.28 do not include woody swamps containing shrubs or trees, wet 63.29 meadows, meandered water, streams, rivers, and floodplains or 63.30 river bottoms. Exemption of wetlands from taxation pursuant to 63.31 this section shall not grant the public any additional or 63.32 greater right of access to the wetlands or diminish any right of 63.33 ownership to the wetlands. 63.34 (11) Native prairie. The commissioner of the department of 63.35 natural resources shall determine lands in the state which are 63.36 native prairie and shall notify the county assessor of each 64.1 county in which the lands are located. Pasture land used for 64.2 livestock grazing purposes shall not be considered native 64.3 prairie for the purposes of this clause. Upon receipt of an 64.4 application for the exemption provided in this clause for lands 64.5 for which the assessor has no determination from the 64.6 commissioner of natural resources, the assessor shall refer the 64.7 application to the commissioner of natural resources who shall 64.8 determine within 30 days whether the land is native prairie and 64.9 notify the county assessor of the decision. Exemption of native 64.10 prairie pursuant to this clause shall not grant the public any 64.11 additional or greater right of access to the native prairie or 64.12 diminish any right of ownership to it. 64.13 (12) Property used in a continuous program to provide 64.14 emergency shelter for victims of domestic abuse, provided the 64.15 organization that owns and sponsors the shelter is exempt from 64.16 federal income taxation pursuant to section 501(c)(3) of the 64.17 Internal Revenue Code of 1986, as amended through December 31, 64.18 1992, notwithstanding the fact that the sponsoring organization 64.19 receives funding under section 8 of the United States Housing 64.20 Act of 1937, as amended. 64.21 (13) If approved by the governing body of the municipality 64.22 in which the property is located, property not exceeding one 64.23 acre which is owned and operated by any senior citizen group or 64.24 association of groups that in general limits membership to 64.25 persons age 55 or older and is organized and operated 64.26 exclusively for pleasure, recreation, and other nonprofit 64.27 purposes, no part of the net earnings of which inures to the 64.28 benefit of any private shareholders; provided the property is 64.29 used primarily as a clubhouse, meeting facility, or recreational 64.30 facility by the group or association and the property is not 64.31 used for residential purposes on either a temporary or permanent 64.32 basis. 64.33 (14) To the extent provided by section 295.44, real and 64.34 personal property used or to be used primarily for the 64.35 production of hydroelectric or hydromechanical power on a site 64.36 owned by the state or a local governmental unit which is 65.1 developed and operated pursuant to the provisions of section 65.2 103G.535. 65.3 (15) If approved by the governing body of the municipality 65.4 in which the property is located, and if construction is 65.5 commenced after June 30, 1983: 65.6 (a) a "direct satellite broadcasting facility" operated by 65.7 a corporation licensed by the federal communications commission 65.8 to provide direct satellite broadcasting services using direct 65.9 broadcast satellites operating in the 12-ghz. band; and 65.10 (b) a "fixed satellite regional or national program service 65.11 facility" operated by a corporation licensed by the federal 65.12 communications commission to provide fixed satellite-transmitted 65.13 regularly scheduled broadcasting services using satellites 65.14 operating in the 6-ghz. band. 65.15 An exemption provided by clause (15) shall apply for a period 65.16 not to exceed five years. When the facility no longer qualifies 65.17 for exemption, it shall be placed on the assessment rolls as 65.18 provided in subdivision 4. Before approving a tax exemption 65.19 pursuant to this paragraph, the governing body of the 65.20 municipality shall provide an opportunity to the members of the 65.21 county board of commissioners of the county in which the 65.22 facility is proposed to be located and the members of the school 65.23 board of the school district in which the facility is proposed 65.24 to be located to meet with the governing body. The governing 65.25 body shall present to the members of those boards its estimate 65.26 of the fiscal impact of the proposed property tax exemption. 65.27 The tax exemption shall not be approved by the governing body 65.28 until the county board of commissioners has presented its 65.29 written comment on the proposal to the governing body or 30 days 65.30 have passed from the date of the transmittal by the governing 65.31 body to the board of the information on the fiscal impact, 65.32 whichever occurs first. 65.33 (16) Real and personal property owned and operated by a 65.34 private, nonprofit corporation exempt from federal income 65.35 taxation pursuant to United States Code, title 26, section 65.36 501(c)(3), primarily used in the generation and distribution of 66.1 hot water for heating buildings and structures. 66.2 (17) Notwithstanding section 273.19, state lands that are 66.3 leased from the department of natural resources under section 66.4 92.46. 66.5 (18) Electric power distribution lines and their 66.6 attachments and appurtenances, that are used primarily for 66.7 supplying electricity to farmers at retail. 66.8 (19) Transitional housing facilities. "Transitional 66.9 housing facility" means a facility that meets the following 66.10 requirements. (i) It provides temporary housing to individuals, 66.11 couples, or families. (ii) It has the purpose of reuniting 66.12 families and enabling parents or individuals to obtain 66.13 self-sufficiency, advance their education, get job training, or 66.14 become employed in jobs that provide a living wage. (iii) It 66.15 provides support services such as child care, work readiness 66.16 training, and career development counseling; and a 66.17 self-sufficiency program with periodic monitoring of each 66.18 resident's progress in completing the program's goals. (iv) It 66.19 provides services to a resident of the facility for at least 66.20 three months but no longer than three years, except residents 66.21 enrolled in an educational or vocational institution or job 66.22 training program. These residents may receive services during 66.23 the time they are enrolled but in no event longer than four 66.24 years. (v) It is owned and operated or under lease from a unit 66.25 of government or governmental agency under a property 66.26 disposition program and operated by one or more organizations 66.27 exempt from federal income tax under section 501(c)(3) of the 66.28 Internal Revenue Code of 1986, as amended through December 31, 66.29 1992. This exemption applies notwithstanding the fact that the 66.30 sponsoring organization receives financing by a direct federal 66.31 loan or federally insured loan or a loan made by the Minnesota 66.32 housing finance agency under the provisions of either Title II 66.33 of the National Housing Act or the Minnesota housing finance 66.34 agency law of 1971 or rules promulgated by the agency pursuant 66.35 to it, and notwithstanding the fact that the sponsoring 66.36 organization receives funding under Section 8 of the United 67.1 States Housing Act of 1937, as amended. 67.2 (20) Real and personal property, including leasehold or 67.3 other personal property interests, owned and operated by a 67.4 corporation if more than 50 percent of the total voting power of 67.5 the stock of the corporation is owned collectively by: (i) the 67.6 board of regents of the University of Minnesota, (ii) the 67.7 University of Minnesota Foundation, an organization exempt from 67.8 federal income taxation under section 501(c)(3) of the Internal 67.9 Revenue Code of 1986, as amended through December 31, 1992, and 67.10 (iii) a corporation organized under chapter 317A, which by its 67.11 articles of incorporation is prohibited from providing pecuniary 67.12 gain to any person or entity other than the regents of the 67.13 University of Minnesota; which property is used primarily to 67.14 manage or provide goods, services, or facilities utilizing or 67.15 relating to large-scale advanced scientific computing resources 67.16 to the regents of the University of Minnesota and others. 67.17 (21) Wind energy conversion systems, as defined in section 67.18 216C.06, subdivision 12, installed after January 1, 1991, and 67.19 used as an electric power source. 67.20 (22) Containment tanks, cache basins, and that portion of 67.21 the structure needed for the containment facility used to 67.22 confine agricultural chemicals as defined in section 18D.01, 67.23 subdivision 3, as required by the commissioner of agriculture 67.24 under chapter 18B or 18C. 67.25 (23) Photovoltaic devices, as defined in section 216C.06, 67.26 subdivision 13, installed after January 1, 1992, and used to 67.27 produce or store electric power. 67.28 (24) Real and personal property owned and operated by a 67.29 private, nonprofit corporation exempt from federal income 67.30 taxation pursuant to United States Code, title 26, section 67.31 501(c)(3), primarily used for an ice arena or ice rink, and used 67.32 primarily for youth and high school programs. 67.33 (25) A structure that is situated on real property that is 67.34 used for: 67.35 (i) housing for the elderly or for low- and moderate-income 67.36 families as defined in Title II of the National Housing Act, as 68.1 amended through December 31, 1990, and funded by a direct 68.2 federal loan or federally insured loan made pursuant to Title II 68.3 of the act; or 68.4 (ii) housing lower income families or elderly or 68.5 handicapped persons, as defined in section 8 of the United 68.6 States Housing Act of 1937, as amended. 68.7 In order for a structure to be exempt under (i) or (ii), it 68.8 must also meet each of the following criteria: 68.9 (A) is owned by an entity which is operated as a nonprofit 68.10 corporation organized under chapter 317A; 68.11 (B) is owned by an entity which has not entered into a 68.12 housing assistance payments contract under section 8 of the 68.13 United States Housing Act of 1937, or, if the entity which owns 68.14 the structure has entered into a housing assistance payments 68.15 contract under section 8 of the United States Housing Act of 68.16 1937, the contract provides assistance for less than 90 percent 68.17 of the dwelling units in the structure, excluding dwelling units 68.18 intended for management or maintenance personnel; 68.19 (C) operates an on-site congregate dining program in which 68.20 participation by residents is mandatory, and provides assisted 68.21 living or similar social and physical support services for 68.22 residents; and 68.23 (D) was not assessed and did not pay tax under chapter 273 68.24 prior to the 1991 levy, while meeting the other conditions of 68.25 this clause. 68.26 An exemption under this clause remains in effect for taxes 68.27 levied in each year or partial year of the term of its permanent 68.28 financing. 68.29 (26) Real and personal property that is located in the 68.30 Superior National Forest, and owned or leased and operated by a 68.31 nonprofit organization that is exempt from federal income 68.32 taxation under section 501(c)(3) of the Internal Revenue Code of 68.33 1986, as amended through December 31, 1992, and primarily used 68.34 to provide recreational opportunities for disabled veterans and 68.35 their families. 68.36 (27) Manure pits and appurtenances, which may include 69.1 slatted floors and pipes, installed or operated in accordance 69.2 with a permit, order, or certificate of compliance issued by the 69.3 Minnesota pollution control agency. The exemption shall 69.4 continue for as long as the permit, order, or certificate issued 69.5 by the Minnesota pollution control agency remains in effect. 69.6 (28) Notwithstanding clause (8), item (a), attached 69.7 machinery and other personal property which is part of a 69.8 facility containing a cogeneration system as described in 69.9 section 216B.166, subdivision 2, paragraph (a), if the 69.10 cogeneration system has met the following criteria: (i) the 69.11 system utilizes natural gas as a primary fuel and the 69.12 cogenerated steam initially replaces steam generated from 69.13 existing thermal boilers utilizing coal; (ii) the facility 69.14 developer is selected as a result of a procurement process 69.15 ordered by the public utilities commission; and (iii) 69.16 construction of the facility is commenced after July 1, 1994, 69.17 and before July 1, 1997. 69.18 (29) Real property acquired by a home rule charter city, 69.19 statutory city, county, town, or school district under a lease 69.20 purchase agreement or an installment purchase contract during 69.21 the term of the lease purchase agreement as long as and to the 69.22 extent that the property is used by the city, county, town, or 69.23 school district and devoted to a public use and to the extent it 69.24 is not subleased to any private individual, entity, association, 69.25 or corporation in connection with a business or enterprise 69.26 operated for profit. 69.27 Sec. 2. Minnesota Statutes 1994, section 290.91, is 69.28 amended to read: 69.29 290.91 [DESTRUCTION OF RETURNS.] 69.30 The commissioner of revenue is hereby authorized to destroy 69.31 all tax returns, required under this chapteror, chapter 290A, 69.32 or chapter 290B, including audit reports, orders, and 69.33 correspondence relating thereto, which have been on file in the 69.34 commissioner's office for a period to be determined by the 69.35 commissioner. The commissioner may make copies of such returns, 69.36 orders, or correspondence by microfilm, photostat, or other 70.1 similar means and may immediately destroy the original documents 70.2 from which such copies have been made. Such copies, when 70.3 certified to by the commissioner, shall be admissible in 70.4 evidence in the same manner and be given the same effect as the 70.5 original documents destroyed. 70.6 The commissioner may destroy correspondence and documents 70.7 contained in the files of the division which do not relate 70.8 specifically to any tax return. 70.9 Notwithstanding the above provisions the commissioner may, 70.10 utilizing such safeguards as the commissioner in the 70.11 commissioner's discretion deems necessary, (1) employ a 70.12 commercial photographer for the purpose of developing microfilm 70.13 of returns or other documents, or (2) employ a vendor for the 70.14 purpose of obtaining the vendor's services an example of which 70.15 is the preparation of income tax return labels. 70.16 Sec. 3. Minnesota Statutes 1994, section 290.9201, 70.17 subdivision 2, is amended to read: 70.18 Subd. 2. [TAX ON ENTERTAINMENT.] Entertainment entities 70.19 are subject to a tax in the amount oftwofour percent of the 70.20 total compensation received by them during the calendar year for 70.21 entertainment performed in Minnesota. 70.22 Sec. 4. Minnesota Statutes 1994, section 290.923, 70.23 subdivision 2, is amended to read: 70.24 Subd. 2. [COLLECTION AT SOURCE.] (a) Every person making 70.25 payment of royalties shall deduct and withhold upon the 70.26 royalties a tax as provided in this section. 70.27 (b) The amount of tax to be withheld shall be based upon 70.28 tables to be prepared and distributed by the commissioner. The 70.29 tables must be computed for several permissible withholding 70.30 periods and shall take into account any exemptions allowed under 70.31 this chapter. The amounts computed for withholding shall be 70.32 such that the amount withheld for any person during the person's 70.33 taxable year shall approximate in the aggregate as closely as 70.34 possible the sum of (1) the tax levied and imposed under this 70.35 chapter for that taxable year upon the person's income subject 70.36 to tax and (2) the tax imposed under chapter 290B. 71.1 Sec. 5. Minnesota Statutes 1994, section 290.97, is 71.3 amended to read: 71.4 290.97 [CONTRACTS WITH STATE; WITHHOLDING.] 71.5 No department of the state of Minnesota, nor any political 71.6 or governmental subdivision of the state shall make final 71.7 settlement with any contractor under a contract requiring the 71.8 employment of employees for wages by said contractor and by 71.9 subcontractors until satisfactory showing is made thatsaidthe 71.10 contractor or subcontractor has complied with the provisions of 71.11 section 290.92. A certificate by the commissioner of revenue 71.12 shall satisfy this requirement with respect to the contractor or 71.13 subcontractor. If, at the time of final settlement, there are 71.14 any unpaid withholding taxes, penalties, or interest arising 71.15 from the government contract, the department shall issue a 71.16 certification to the contractor or subcontractor upon payment, 71.17 with certified funds, of any unpaid withholding taxes, 71.18 penalties, and interest. Payment is received by the department 71.19 upon delivery of the certified funds to the central office 71.20 located in St. Paul, or any district or subdistrict office 71.21 located throughout the state. 71.22 Sec. 6. Minnesota Statutes 1994, section 290.9705, 71.23 subdivision 1, is amended to read: 71.24 Subdivision 1. [WITHHOLDING OF PAYMENTS TO OUT-OF-STATE 71.25 CONTRACTORS.] (a) In this section, "person" means a person, 71.26 corporation, or cooperative, the state of Minnesota and its 71.27 political subdivisions, and a city, county, and school district 71.28 in Minnesota. 71.29 (b) A person who in the regular course of business is 71.30 hiring, contracting, or having a contract with a nonresident 71.31 person or foreign corporation, as defined in Minnesota Statutes 71.32 1986, section 290.01, subdivision 5, to perform construction 71.33 work in Minnesota, shall deduct and withholdeightten percent 71.34 of every payment to the contractor if the contract exceeds or 71.35 can reasonably be expected to exceed $100,000. 71.36 Sec. 7. Minnesota Statutes 1994, section 290.9705, 71.37 subdivision 3, is amended to read: 72.1 Subd. 3. [WAIVER OF WITHHOLDING.] The conditions in 72.2 subdivisions 1 and 2 may be waived by the commissioner if (1) 72.3 the contractor gives the commissioner a cash surety or a bond, 72.4 secured by an insurance company licensed by Minnesota, 72.5 conditioned that the contractor will comply with all applicable 72.6 provisions of this chapter, chapter 290B, and chapter 297A, or 72.7 (2) the contractor has done construction work in Minnesota at 72.8 any time during the three calendar years prior to entering the 72.9 contract and has fully complied with all the provisions of this 72.10 chapter, chapter 290B, and chapter 297A for the three prior 72.11 years. 72.12 Sec. 8. [290B.01] [DEFINITIONS.] 72.13 Subdivision 1. [WORDS AND PHRASES.] For purposes of this 72.14 chapter, unless the language or context clearly indicates that a 72.15 different meaning is intended, the words and phrases defined in 72.16 subdivisions 2 to 26, have the meanings given them. 72.17 Subd. 2. [APPORTIONED GROSS MARGIN.] "Apportioned gross 72.18 margin" means the product of (1) the Minnesota apportionment 72.19 percentage, including all applicable factors, as determined 72.20 under chapter 290 for the person, or which would be determined 72.21 if chapter 290 applied, for the taxable year, and (2) the 72.22 person's gross margin for the year. In the case of a person, 72.23 the entire business of which is conducted wholly within 72.24 Minnesota, the apportionment factor is 100 percent. If the 72.25 gross margin is determined under subdivision 13, clause (2), 72.26 subclause (iii), for a unitary business, the apportionment 72.27 percentage shall be computed using the total factors of the 72.28 unitary business in the denominator. 72.29 Subd. 3. [BUSINESS.] "Business" means any trade or 72.30 business with the meaning of section 162(a) of the Internal 72.31 Revenue Code, including activities of organizations exempt from 72.32 the federal income tax under the Internal Revenue Code that 72.33 would constitute a trade or business thereunder if they were 72.34 conducted by a for-profit business corporation. "Business" does 72.35 not include "investment" if so determined under the standards 72.36 applicable to distinguishing a trade or business from investment 73.1 activities in the Internal Revenue Code. 73.2 Subd. 4. [COMMISSIONER.] "Commissioner" means the 73.3 commissioner of revenue of the state of Minnesota. 73.4 Subd. 5. [CORPORATION.] "Corporation" has the meaning 73.5 given in section 290.01, subdivision 4. 73.6 Subd. 6. [DOMESTIC CORPORATION.] "Domestic," when applied 73.7 to a corporation, has the meaning given under section 290.01, 73.8 subdivision 5. 73.9 Subd. 7. [FIDUCIARY.] "Fiduciary" means a guardian, 73.10 trustee, receiver, conservator, personal representative, or any 73.11 person acting in any fiduciary capacity for any person. 73.12 Subd. 8. [FINANCIAL INSTITUTION.] "Financial institution," 73.13 "holding company," "regulated financial corporation," and 73.14 "business of a financial institution" have the meaning given in 73.15 section 290.01, subdivision 4a. 73.16 Subd. 9. [FISCAL YEAR.] "Fiscal year" means an accounting 73.17 period of 12 months ending on the last day of any month other 73.18 than December. In the case of any taxpayer who has made the 73.19 election provided by section 290A.08, subdivision 5, fiscal year 73.20 means the annual period, varying from 52 to 53 weeks, so elected. 73.21 Subd. 10. [FOREIGN CORPORATION.] "Foreign," when applied 73.22 to a corporation, means a corporation other than a domestic 73.23 corporation. 73.24 Subd. 11. [FOREIGN OPERATING CORPORATION.] "Foreign 73.25 operating corporation" has the meaning given in section 290.01, 73.26 subdivision 6b. 73.27 Subd. 12. [GROSS INCOME.] "Gross income" means the gross 73.28 income as defined in section 61 of the Internal Revenue Code, 73.29 plus any additional items of income taxable under chapter 290 73.30 but not taxable under the Internal Revenue Code, less any items 73.31 included in federal gross income but exempt from state income 73.32 tax under the laws of the United States. 73.33 Subd. 13. [GROSS MARGIN.] "Gross margin" means: 73.34 (1) in the case of all sales or receipts in the ordinary 73.35 course of business which are included in the sales or receipts 73.36 factor of the apportionment formula applicable to the person 74.1 under chapter 290, or which would be applicable thereunder if 74.2 the person apportioned income, other than sales of tangible 74.3 property, the amount of the sales or receipts; and 74.4 (2) in the case of all sales of tangible property which are 74.5 included in the sales or receipts factor of the apportionment 74.6 formula applicable to the person under chapter 290, or which 74.7 would be applicable if the person apportioned income, the excess 74.8 of such sales for the taxable year over: 74.9 (i) in the case of sales of tangible property which is 74.10 purchased by the person and resold without alteration, the cost 74.11 of goods sold as determined for federal income tax purposes 74.12 under the Internal Revenue Code, except to the extent otherwise 74.13 provided in subclause (iii) for unitary businesses; or 74.14 (ii) in the case of manufacturing, construction, farming, 74.15 or other processing of tangible property, the direct material 74.16 costs, within the meaning of section 471 of the Internal Revenue 74.17 Code, of the tangible property sold. "Direct material costs" 74.18 include the cost of those materials which become an integral 74.19 part of the specific product and those materials which are 74.20 consumed in the ordinary cost of manufacturing, construction, or 74.21 other processing and can be identified or associated with 74.22 particular units or groups of units of that product. Direct 74.23 material costs do not include direct labor costs or indirect 74.24 production costs. For natural resources removed from their 74.25 natural state by the person, direct material costs include only 74.26 cost depletion to the extent allowable for federal income tax 74.27 purposes under the Internal Revenue Code. For crops grown by 74.28 the person, direct material costs include only seed, fertilizer, 74.29 water, and other supplies applied to the crop or the land. For 74.30 animals raised by the person, direct material costs include only 74.31 the purchase price, if any, and to the extent not treated as a 74.32 direct material cost of animal by-products, feed, water, and 74.33 other supplies fed or applied to the animals. For animal 74.34 by-products produced by animals raised by the person, direct 74.35 material costs include only the feed, water, and other supplies 74.36 fed or applied to the animals. Purchases by one member of a 75.1 unitary business from another are subject to the special rule in 75.2 subclause (iii); 75.3 (iii) in the case of tangible property purchased by one 75.4 person in a unitary business from another member of the same 75.5 unitary business, the cost of that property to the purchasing 75.6 person is disregarded and the cost is deemed to be the cost of 75.7 goods sold or the direct materials cost, whichever is 75.8 applicable, of the first member of the unitary business to 75.9 acquire the property. 75.10 Subd. 14. [INTERNAL REVENUE CODE.] Unless specifically 75.11 defined otherwise, "Internal Revenue Code" means the Internal 75.12 Revenue Code of 1986, as amended through December 31, 1994. 75.13 Subd. 15. [LIMITED LIABILITY COMPANY.] For purposes of 75.14 this chapter and chapter 289A, a limited liability company that 75.15 is formed under either the laws of this state or under similar 75.16 laws of another state, and that is considered to be a 75.17 partnership for federal income tax purposes, is considered to be 75.18 a partnership and the members must be considered to be partners. 75.19 Subd. 16. [MINNESOTA MINERAL ROYALTY INCOME.] "Minnesota 75.20 mineral royalty income" means the royalty income, as defined in 75.21 section 61 of the Internal Revenue Code, with respect to rights 75.22 to explore, mine, take out, and remove minerals from land in 75.23 Minnesota. 75.24 Subd. 17. [MINNESOTA REAL PROPERTY RENTAL 75.25 INCOME.] "Minnesota real property rental income" means the 75.26 rental income, as defined in section 61 of the Internal Revenue 75.27 Code, from real property located in Minnesota. 75.28 Subd. 18. [PARTNERSHIP; PARTNER.] "Partnership" and 75.29 "partner" have the meanings given them in section 7701(a)(2) of 75.30 the Internal Revenue Code. 75.31 Subd. 19. [PERSON.] "Person" includes individuals, 75.32 fiduciaries, estates, trusts, partnerships, and corporations. 75.33 Subd. 20. [PERSONAL REPRESENTATIVE.] "Personal 75.34 representative" includes executor, administrator, successor 75.35 personal representative, special administrator, and persons who 75.36 perform substantially the same function under the law governing 76.1 their status. 76.2 Subd. 21. [RESIDENT.] "Resident" means any individual who 76.3 is a resident under section 290.01, subdivision 7. 76.4 Subd. 22. [STATE OR THIS STATE.] "State" or "this state" 76.5 means the state of Minnesota. 76.6 Subd. 23. [TAXABLE YEAR.] "Taxable year" means the period 76.7 for which the taxes levied by this chapter are imposed. It 76.8 shall be a calendar year, a fiscal year, or, in cases where 76.9 returns for a fractional part of a year are permitted or 76.10 required, the period for which the return is made. 76.11 Subd. 24. [TAXPAYER.] "Taxpayer" means a person or 76.12 corporation subject to a tax imposed by this chapter. 76.13 Subd. 25. [TRUST.] "Trust" has the meaning provided under 76.14 the Internal Revenue Code. 76.15 Subd. 26. [UNITARY BUSINESS.] "Unitary business" has the 76.16 meaning given it in section 290.17, subdivision 4. 76.17 Sec. 9. [290B.02] [JURISDICTION TO TAX.] 76.18 Subdivision 1. [MINNESOTA REAL PROPERTY RENTAL 76.19 INCOME.] Minnesota real property rental income is taxable under 76.20 this chapter without regard to the contacts of the owner of the 76.21 real property with Minnesota. 76.22 Subd. 2. [MINNESOTA MINERAL ROYALTY INCOME.] Minnesota 76.23 mineral royalty income is taxable under this chapter without 76.24 regard to the contacts of the recipient of the royalty income 76.25 with Minnesota. 76.26 Subd. 3. [GENERALLY.] Except as provided in subdivisions 1 76.27 and 2, which apply without regard to whether the income is in 76.28 connection with a business and without regard to the contacts of 76.29 the person with Minnesota if it is in connection with a 76.30 business, the provisions of section 290.015, other than 76.31 subdivision 3, paragraph (a), apply to determine whether a 76.32 person conducting a business is taxable under this chapter. 76.33 Section 290.015, subdivision 3, paragraph (a), does not apply to 76.34 this chapter. 76.35 Sec. 10. [290B.03] [IMPOSITION OF TAX.] 76.36 Subdivision 1. [BASE; RATE.] Except as otherwise provided 77.1 in this chapter, there is imposed for each taxable year a tax at 77.2 a rate of two percent of the sum of the Minnesota real property 77.3 rental income, the Minnesota mineral royalty income, and the 77.4 apportioned gross margin with respect to each business of each 77.5 person subject to tax under this chapter. 77.6 Subd. 2. [CORPORATIONS.] For corporations, the tax imposed 77.7 by subdivision 1, is an annual franchise tax on the exercise of 77.8 the corporate franchise to engage in contacts with this state 77.9 that produce gross income attributable to sources within this 77.10 state. 77.11 Subd. 3. [TAX AT ENTITY LEVEL.] The tax imposed by 77.12 subdivision 1 is due from the person owning the rental income or 77.13 royalty income, whether or not that person is a business, and, 77.14 in the case of the tax on apportioned gross margin, from the 77.15 owner of the business. Entities, rather than individuals, are 77.16 liable for the tax, except in the case of a sole proprietorship 77.17 and of real property or mineral interests owned by individuals. 77.18 The tax is owed at the entity level even if the entity is a 77.19 pass-through entity for federal income tax purposes. 77.20 Subd. 4. [TERMINATION OF LIABILITY AND TRANSFEREE 77.21 LIABILITY.] Unpaid liability for the tax imposed by subdivision 77.22 1, that arises from the operation of a business, terminates when 77.23 the business from which it arose terminates except that 77.24 transferees of any assets of the business which are transferred 77.25 to or for the benefit of an owner of the business are liable as 77.26 transferees. This provision applies to businesses that are sole 77.27 proprietorships and requires differentiation between assets 77.28 related to the business and unrelated assets of its owner. 77.29 Sec. 11. [290B.04] [EXEMPT PERSONS.] 77.30 The following persons are exempt from taxation under this 77.31 chapter: 77.32 (1) the United States of America, the state of Minnesota, 77.33 and any political subdivision, agency, or instrumentality of 77.34 either, except to the extent described in clause (4), whether 77.35 engaged in the discharge of governmental or proprietary 77.36 functions; 78.1 (2) insurance companies subject to tax under section 78.2 60A.15; 78.3 (3) fraternal benefit societies engaged in the insurance 78.4 business; 78.5 (4) town and farmers' mutual insurance companies and mutual 78.6 property and casualty insurance companies, other than those (i) 78.7 writing life insurance, or (ii) whose total assets on December 78.8 31, 1989, exceeded $1,600,000,000; 78.9 (5) persons subject to the MinnesotaCare tax; 78.10 (6) persons subject to the tax on nonresident entertainers 78.11 imposed by section 290.9201; and 78.12 (7) organizations exempt from federal income tax under 78.13 subchapter F of the Internal Revenue Code. 78.14 Sec. 12. [290B.05] [COMPUTATION; ACCOUNTING PERIOD.] 78.15 Subdivision 1. [ANNUAL ACCOUNTING PERIOD.] The tax base 78.16 shall be computed upon the basis of the taxpayer's annual 78.17 accounting period. If a taxpayer has no annual accounting 78.18 period, or has one other than a fiscal year, the tax base shall 78.19 be computed on the basis of the calendar year. Taxpayers shall 78.20 employ the same accounting period on which they report, or would 78.21 be required to report, their net income under the Internal 78.22 Revenue Code. The commissioner shall provide by rule for the 78.23 determination of the accounting period for taxpayers who file a 78.24 combined report under section 290.34, subdivision 2, when 78.25 members of the group use different accounting periods for 78.26 federal income tax purposes. Unless the taxpayer changes its 78.27 accounting period for federal purposes, the due date of the 78.28 return is not changed. 78.29 A taxpayer may change accounting periods only with the 78.30 consent of the commissioner. In case of any such change, the 78.31 taxpayer shall pay a tax for the period not included in either 78.32 the taxpayer's former or newly adopted taxable year, computed 78.33 comparably to the provisions of section 290.32 with respect to 78.34 income tax. 78.35 Subd. 2. [ACCOUNTING METHODS.] Except as specifically 78.36 provided to the contrary by this chapter, the tax base shall be 79.1 computed in accordance with the method of accounting regularly 79.2 employed in keeping the taxpayer's books. If no such accounting 79.3 system has been regularly employed, or if that system employed 79.4 does not clearly or fairly reflect income or the tax base 79.5 taxable under this chapter, the computation shall be made in 79.6 accordance with a method that in the opinion of the commissioner 79.7 clearly and fairly reflects income and the tax base taxable 79.8 under this chapter. 79.9 Except as otherwise expressly provided in this chapter, a 79.10 taxpayer who changes the method of accounting for regularly 79.11 computing the taxpayer's income in keeping books shall, before 79.12 computing the tax base under the new method, secure the consent 79.13 of the commissioner. 79.14 Sec. 13. [290B.06] [DISTRIBUTION OF REVENUES.] 79.15 All revenues derived from the taxes, interest, penalties 79.16 and charges under this chapter shall, notwithstanding any other 79.17 provisions of law, be paid into the state treasury and credited 79.18 to the general fund, and be distributed as follows: 79.19 (1) There shall, notwithstanding any other provision of the 79.20 law, be paid from the general fund all refunds of taxes 79.21 erroneously collected from taxpayers under this chapter; 79.22 (2) There is appropriated to the persons entitled to 79.23 payment under this section, from the fund or account in the 79.24 state treasury to which the money was credited, an amount 79.25 sufficient to make the refund and payment. 79.26 Sec. 14. Minnesota Statutes 1994, section 297A.01, 79.27 subdivision 16, is amended to read: 79.28 Subd. 16. [CAPITAL EQUIPMENT.] (a) Capital equipment means 79.29 machinery and equipment purchased or leased for use in this 79.30 state and used by the purchaser or lessee primarily for 79.31manufacturing, fabricating, mining, or refiningproducing 79.32 tangible personal property or services to be sold ultimately at 79.33 retailand for electronically transmitting results retrieved by79.34a customer of an on-line computerized data retrieval system. 79.35 (b) Capital equipment includes all machinery and equipment 79.36 that is essential to the integrated production process. Capital 80.1 equipment includes, but is not limited to: 80.2 (1) machinery and equipment used or required to operate, 80.3 control, or regulate the production equipment; 80.4 (2) machinery and equipment used for research and 80.5 development, design, quality control, and testing activities; 80.6 (3) environmental control devices that are used to maintain 80.7 conditions such as temperature, humidity, light, or air pressure 80.8 when those conditions are essential to and are part of the 80.9 production process;or80.10 (4) materials and supplies necessary to construct and 80.11 install machinery or equipment; or 80.12 (5) repair or replacement parts, including accessories, 80.13 purchased for use on capital equipment and not usable with 80.14 respect to other property of the purchaser. 80.15 (c) Capital equipment does not include the following: 80.16 (1)repair or replacement parts, including accessories,80.17whether purchased as spare parts, repair parts, or as upgrades80.18or modifications, and whether purchased before or after the80.19machinery or equipment is placed into service. Parts or80.20accessories are treated as capital equipment only to the extent80.21that they are a part of and are essential to the operation of80.22the machinery or equipment as initially purchased;80.23(2)motor vehicles taxed under chapter 297B; 80.24(3)(2) machinery or equipment used to receive or store raw 80.25 materials; 80.26(4)(3) building materials; 80.27(5)(4) machinery or equipment used for nonproduction 80.28 purposes, including, but not limited to, the following: 80.29 machinery and equipment used for plant security, fire 80.30 prevention, first aid, and hospital stations; machinery and 80.31 equipment used in support operations or for administrative 80.32 purposes; machinery and equipment used solely for pollution 80.33 control, prevention, or abatement; and machinery and equipment 80.34 used in plant cleaning, disposal of scrap and waste, plant 80.35 communications, space heating, lighting, or safety; 80.36 (5) machinery or equipment used in connection with 81.1 facilities for the sale of tangible personal property or 81.2 services; 81.3 (6) "farm machinery" as defined by subdivision 81.4 15, and "aquaculture production equipment" as defined by 81.5 subdivision 19, and "replacement capital equipment" as defined81.6by subdivision 20;or81.7 (7) office machinery or equipment other than computers even 81.8 if used in connection with the production of services; or 81.9 (8) any other item that is not essential to the integrated 81.10 process ofmanufacturing, fabricating, mining, or refining81.11 producing tangible personal property or services. 81.12 (d) For purposes of this subdivision: 81.13 (1) "Equipment" means independent devices or tools separate 81.14 from machinery but essential to an integrated production 81.15 process, including computers and software, used in operating 81.16 machinery and equipment; and any subunit or assembly comprising 81.17 a component of any machinery or accessory or attachment parts of 81.18 machinery, such as tools, dies, jigs, patterns, and molds. 81.19 (2)"Fabricating" means to make, build, create, produce, or81.20assemble components or property to work in a new or different81.21manner.81.22(3)"Machinery" means mechanical, electronic, or electrical 81.23 devices, including computers and software, that are purchased or 81.24 constructed to be used for the activities set forth in paragraph 81.25 (a), beginning with the removal of raw materials from inventory 81.26 through the completion of the product, including packaging of 81.27 the product. 81.28(4) "Manufacturing" means an operation or series of81.29operations where raw materials are changed in form, composition,81.30or condition by machinery and equipment and which results in the81.31production of a new article of tangible personal property. For81.32purposes of this subdivision, "manufacturing" includes the81.33generation of electricity or steam to be sold at retail.81.34(5) "Mining" means the extraction of minerals, ores, stone,81.35and peat.81.36(6) "On-line data retrieval system" means a system whose82.1cumulation of information is equally available and accessible to82.2all its customers.82.3(7)(3) "Pollution control equipment" means machinery and 82.4 equipment used to eliminate, prevent, or reduce pollution 82.5 resulting from an activity described in paragraph (a). 82.6(8)(4) "Primarily" means machinery and equipment used 50 82.7 percent or more of the time in an activity described in 82.8 paragraph (a). 82.9(9) "Refining" means the process of converting a natural82.10resource to a product, including the treatment of water to be82.11sold at retail.82.12 (e) For purposes of this subdivision the requirement that 82.13 the machinery or equipment "must be used by the purchaser or 82.14 lessee" means that the person who purchases or leases the 82.15 machinery or equipment must be the one who uses it for the 82.16 qualifying purpose. When a contractor buys and installs 82.17 machinery or equipment as part of an improvement to real 82.18 property, only the contractor is considered the purchaser. 82.19(f) Notwithstanding prior provisions of this subdivision,82.20machinery and equipment purchased or leased to replace machinery82.21and equipment used in the mining or production of taconite shall82.22qualify as capital equipment.82.23 Sec. 15. Minnesota Statutes 1994, section 297A.15, 82.24 subdivision 5, is amended to read: 82.25 Subd. 5. [REFUND; APPROPRIATION.] Notwithstanding the 82.26 provisions ofsections 297A.02, subdivision 5, andsection 82.27 297A.25,subdivisions 42 andsubdivision 50, the tax on sales of 82.28capital equipment, replacement capital equipment, and82.29 construction materials and supplies under section 297A.25, 82.30 subdivision 50, shall be imposed and collected as if the rates 82.31 under sections 297A.02, subdivision 1, and 297A.021, applied. 82.32 Upon application by the purchaser, on forms prescribed by the 82.33 commissioner, a refund equal to the reduction in the tax due as 82.34 a result of the application of the exemption under section 82.35 297A.25, subdivision42 or50,and the rates under sections82.36297A.02, subdivision 5, and 297A.021shall be paid to the 83.1 purchaser.In the case of building materials qualifying under83.2section 297A.25, subdivision 50,Where the tax was paid by a 83.3 contractor, application must be made by the owner for the sales 83.4 tax paid by all the contractors, subcontractors, and builders 83.5 for the project. The application must include sufficient 83.6 information to permit the commissioner to verify the sales tax 83.7 paid for the project. The application shall include information 83.8 necessary for the commissioner initially to verify that the 83.9 purchases qualified ascapital equipment under section 297A.25,83.10subdivision 42, replacement capital equipment under section83.11297A.01, subdivision 20, or capital equipment orconstruction 83.12 materials and supplies under section 297A.25, subdivision 50. 83.13 No more than two applications for refunds may be filed under 83.14 this subdivision in a calendar year. No owner may apply for a 83.15 refund based on the exemption under section 297A.25, subdivision 83.16 50, before July 1, 1993. Unless otherwise specifically provided 83.17 by this subdivision, the provisions of section 289A.40 apply to 83.18 the refunds payable under this subdivision. There is annually 83.19 appropriated to the commissioner of revenue the amount required 83.20 to make the refunds. 83.21 The amount to be refunded shall bear interest at the rate 83.22 in section 270.76 from the date the refund claim is filed with 83.23 the commissioner. 83.24 Sec. 16. Minnesota Statutes 1994, section 297A.25, 83.25 subdivision 42, is amended to read: 83.26 Subd. 42. [BUSINESS CAPITALEQUIPMENTEXPENDITURES.] The 83.27 gross receipts from the sale of capital equipment, farm 83.28 machinery, and aquaculture production equipment are exempt. 83.29 Sec. 17. [REPEALER.] 83.30 Minnesota Statutes 1994, sections 273.33; 273.35; 273.36; 83.31 273.37; 273.371; 273.38; 273.39; 273.40; 273.41; 273.42; 83.32 273.425; 273.43; 290.06, subdivision 21; 290.092; 290.0921; 83.33 290.0922; 297A.01, subdivision 20; 297A.02, subdivisions 2 and 83.34 5; and 297A.25, subdivision 59, are repealed. 83.35 Sec. 18. [EFFECTIVE DATE.] 83.36 Section 1 is effective for taxes levied in 1995, payable in 84.1 1996, and thereafter. Sections 2 to 17 are effective for 84.2 taxable periods beginning after December 31, 1995. 84.3 ARTICLE 6 84.4 STATE BUDGET MANAGEMENT 84.5 Section 1. [16.151] [STATE BUDGET MANAGEMENT.] 84.6 Subdivision 1. [DEFINITIONS.] (a) "Budget reserve" means a 84.7 restricted account in the general fund of the state treasury 84.8 that is intended to prevent fiscal crisis by being available for 84.9 use in the event that actual revenues are less than projected 84.10 revenues, or actual expenditures are greater than projected 84.11 expenditures. 84.12 (b) "Cash cycle need" means the amount determined from time 84.13 to time by the commissioner of finance that is required to be on 84.14 hand as of June 30 to prevent the state general fund from 84.15 running out of cash, resulting in a need to borrow at the low 84.16 point in the annual general fund cash cycle for the next fiscal 84.17 year. 84.18 (c) "Current operating budget" is composed of current 84.19 revenues, current expenses, and, if current revenues and current 84.20 expenses are not equal, a current operating budget surplus or 84.21 deficit. 84.22 (d) "Current surplus or deficit" means the difference 84.23 between current revenues and current expenditures, without 84.24 taking into account the beginning general fund balance. 84.25 (e) "Fiscal dividend" means the amount of fiscal surplus 84.26 projected to be distributed to individual income taxpayers as a 84.27 credit under section 290.06, subdivision 26, as determined by 84.28 the legislature. The fiscal dividend shall be declared as a 84.29 percentage of the individual income tax otherwise due for the 84.30 year, and the percentage shall be set so that if individual 84.31 income taxes for the year are as projected, the desired amount 84.32 of fiscal surplus will be distributed through the credit. The 84.33 credits allowable to taxpayers are not affected by variations of 84.34 total income tax revenues from those projected. 84.35 (f) "Fiscal management pool" means the general fund balance 84.36 as of the beginning of a biennium augmented or depleted from 85.1 time to time by the current operating budget surplus or deficit 85.2 as actual results from operations occur. The fiscal management 85.3 pool is the sum of three elements: the cash cycle need, the 85.4 budget reserve, and the fiscal surplus or deficit. 85.5 (g) "Fiscal surplus or deficit" means the difference 85.6 between the June 30 general fund balance and the sum of the cash 85.7 cycle need and the target balance of the budget reserve. 85.8 Subd. 2. [CASH CYCLE NEED NOT TO BE IMPAIRED.] The 85.9 governor shall not propose, nor shall the legislature enact, a 85.10 budget which is projected to result in the cash cycle need not 85.11 being met as of the end of any fiscal year, unless the forecast 85.12 upon which the budget is based reflects a downturn, and not 85.13 merely slower growth, in the Minnesota economy and an economic 85.14 emergency is declared by the governor or joint resolution of the 85.15 legislature. 85.16 Subd. 3. [BUDGET RESERVE.] A budget reserve is created in 85.17 the general fund in the state treasury. The commissioner of 85.18 finance shall restrict part or all of the balance before 85.19 reserves in the general fund as may be necessary to fund the 85.20 budget reserve as provided by law from time to time. The target 85.21 amount of the budget reserve is five percent of total projected 85.22 general fund expenditures for the biennium for which the budget 85.23 reserve is being measured. 85.24 Subd. 4. [BUDGET RESERVE TO BE DELIBERATELY IMPAIRED ONLY 85.25 DURING RECESSION.] The governor shall not propose, nor shall the 85.26 legislature enact, a budget that is projected to decrease the 85.27 current balance of the budget reserve unless the forecast upon 85.28 which the budget is based reflects a downturn, and not merely 85.29 slower growth, in the Minnesota economy. 85.30 Subd. 5. [CURRENT OPERATING BUDGET SURPLUS.] If there is a 85.31 current operating budget surplus for a fiscal year, and also a 85.32 fiscal deficit as of the end of the year, the surplus shall be 85.33 retained to the extent required to eliminate the fiscal deficit, 85.34 so that the cash cycle need is met and the budget reserve is 85.35 fully funded to the target level. The entire amount of the 85.36 current operating budget surplus, if there is no fiscal deficit 86.1 as of the end of the year, or the excess, if any, of the current 86.2 operating budget surplus over the fiscal deficit if there is 86.3 such a deficit, shall be available for disposition as provided 86.4 in subdivision 7. 86.5 Subd. 6. [CURRENT OPERATING BUDGET DEFICIT.] If there is a 86.6 current operating budget deficit for a fiscal year, it shall be 86.7 reduced or eliminated by any fiscal surplus as of the end of the 86.8 year. If the current operating budget deficit exceeds the 86.9 amount of the fiscal surplus, the excess shall be reduced or 86.10 eliminated by a transfer from the budget reserve. 86.11 Subd. 7. [DISPOSITION OF FISCAL SURPLUS.] If a fiscal 86.12 surplus is projected as of the end of a fiscal year after taking 86.13 into account the actual general fund revenues and expenditures 86.14 for that year, and the legislature does not appropriate all of 86.15 the fiscal surplus, the unappropriated amount, not to exceed 50 86.16 percent of the amount of the initial fiscal surplus, must be 86.17 distributed to individual income tax payers as a fiscal dividend 86.18 through credits against individual income taxes for the taxable 86.19 year for which the fiscal surplus was determined. 86.20 Subd. 8. [REDUCTION IN BUDGET RESERVE.] (a) If the 86.21 commissioner determines that probable receipts for the general 86.22 fund will be less than anticipated, and the amount available for 86.23 the remainder of the biennium will be less than needed, the 86.24 commissioner shall, with the approval of the governor, and after 86.25 consulting with the legislative advisory commission, reduce the 86.26 amount of the budget reserve and cash flow account needed to 86.27 balance expenditures with revenue. 86.28 (b) An additional deficit shall, with the approval of the 86.29 governor, and after consulting with the legislative advisory 86.30 commission, be made up by reducing unexpended allotments of any 86.31 prior appropriation or transfer. Notwithstanding any other law 86.32 to the contrary, the commissioner may defer or suspend prior 86.33 statutorily created obligations that would prevent effecting 86.34 those reductions. 86.35 (c) If the commissioner determines that probable receipts 86.36 for any other fund, appropriation, or item will be less than 87.1 anticipated, and that the amount available for the remainder of 87.2 the term of the appropriation or for any allotment period will 87.3 be less than needed, the commissioner shall notify the agency 87.4 concerned and then reduce the amount allotted or to be allotted 87.5 so as to prevent a deficit. 87.6 (d) In reducing allotments, the commissioner may consider 87.7 other sources of revenue available to recipients of state 87.8 appropriations and may apply allotment reductions based on all 87.9 sources of revenue available to them. 87.10 (e) In like manner, the commissioner shall reduce 87.11 allotments to an agency by the amount of any saving that can be 87.12 made over previous spending plans through a reduction in prices 87.13 or other cause. 87.14 Subd. 9. [NOTICE TO COMMITTEES.] The commissioner shall 87.15 notify the committees on finance and taxes and tax laws of the 87.16 senate and the committees on ways and means and taxes of the 87.17 house of representatives of a reduction in an allotment under 87.18 this section. The notice must be in writing and delivered 87.19 within 15 days of the commissioner's act. The notice must 87.20 specify: 87.21 (1) the amount of the reduction in the allotment; 87.22 (2) the agency and programs affected; 87.23 (3) the amount of any payment withheld; and 87.24 (4) any additional information the commissioner determines 87.25 is appropriate. 87.26 Subd. 10. [DELAY; REDUCTION.] The commissioner may delay 87.27 paying up to 15 percent of an appropriation to a special taxing 87.28 district or a system of higher education in that entity's fiscal 87.29 year for up to 60 days after the start of its next fiscal year. 87.30 The delayed amount is subject to allotment reduction under 87.31 subdivision 1. 87.32 Sec. 2. Minnesota Statutes 1994, section 290.06, is 87.33 amended by adding a subdivision to read: 87.34 Subd. 26. [FISCAL DIVIDEND CREDIT.] An individual shall 87.35 receive a credit against the tax due under this chapter in an 87.36 amount equal to the percentage of the tax due after reduction by 88.1 all other credits that is declared as a fiscal dividend pursuant 88.2 to section 16A.151. 88.3 Sec. 3. [REPEALER.] 88.4 Minnesota Statutes 1994, section 16A.152, is repealed. 88.5 Sec. 4. [EFFECTIVE DATE.] 88.6 Sections 1 to 3 are effective the day following final 88.7 enactment. 88.8 ARTICLE 7 88.9 EDUCATION FINANCE 88.10 Section 1. [USE OF REVENUES.] 88.11 The revenues raised under this act are to be used as 88.12 follows: 88.13 (1) $500,000,000 is to be provided to the commissioner of 88.14 education to provide additional funding for K-12 education; and 88.15 (2) $100,000,000 is to be provided to the higher education 88.16 board under Minnesota Statutes, chapter 136E to provide 88.17 additional funding for post-secondary education. 88.18 Furthermore, it is the intention of the legislature that 88.19 this act will provide sufficient funding for K-12 education so 88.20 that school districts will levy property taxes only for capital 88.21 expenditures and as authorized by referendum. 88.22 ARTICLE 8 88.23 LOCAL GOVERNMENT AID 88.24 Section 1. [STUDY OF LOCAL FINANCE.] 88.25 The commissioner of revenue shall perform a study on 88.26 comparative tax base, tax effort, and state aids in local 88.27 government units around the state and report the results to the 88.28 legislative commission on planning and fiscal policy by 88.29 September 1, 1995. The study shall group units of each type in 88.30 appropriate categories to facilitate comparison. Tax base and 88.31 state aids shall be shown on a per capita basis. Effective tax 88.32 rate comparisons shall be made (taking into account the 88.33 transition refund program of article 3, section 3) for 88.34 owner-occupied homes, homestead farms, and other categories of 88.35 property that the commissioner deems pertinent. The 88.36 commissioner may make any recommendations the commissioner deems 89.1 pertinent, with respect to the distribution of funds and 89.2 functions between the state and local governments, and 89.3 appropriate determinants of local need for state-raised 89.4 resources. 89.5 Sec. 2. [REPEALER.] 89.6 Minnesota Statutes 1994, sections 477A.011, subdivisions 20 89.7 and 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, and 37; 477A.012; 89.8 477A.013; 477A.0132; 477A.03, subdivision 3; and 477A.15; are 89.9 repealed. 89.10 Sec. 3. [EFFECTIVE DATE.] 89.11 Section 1 is effective the day following final enactment. 89.12 Section 2 is effective July 1, 1996. 89.13 ARTICLE 9 89.14 CITIZEN CHOICE AND GOVERNMENT SERVICE DELIVERY SYSTEM REFORM 89.15 Section 1. [STATEMENT OF POLICY.] 89.16 The legislature finds that: 89.17 (1) with the year 2000 fast approaching and Minnesota's 89.18 governance arrangements in some instances approaching 150 years 89.19 of age, Minnesota's citizens deserve greater opportunity to 89.20 change various aspects of our governance arrangements; 89.21 (2) it is absolutely imperative that the public sector 89.22 manage the process of delivery of public services so that 89.23 Minnesota's citizens receive much more efficient delivery of 89.24 public services; 89.25 (3) this imperative results from the combination of 89.26 long-term federal fiscal irresponsibility, impending federal 89.27 government abandonment of the most vulnerable of our citizens, 89.28 almost certain dumping by the federal government of major social 89.29 safety net programs on the states without funding adequate to 89.30 meet the most basic needs of our most vulnerable citizens, 89.31 interstate and global competition, the need to focus squarely on 89.32 education to provide a healthy society in both economic and 89.33 social terms in the future, the national failure to develop a 89.34 health care system that operates at reasonable cost, and 89.35 long-term demographic factors that make it highly likely that 89.36 the demand for public services will grow more quickly than the 90.1 economy and the tax revenues produced by economic growth; and 90.2 (4) the time has come to develop and consider major 90.3 alternatives to current practices in public service delivery. 90.4 Sec. 2. [OPTION DEVELOPMENT PROCESS.] 90.5 The legislature seeks to develop specific options for 90.6 change, followed by testing of the options in the public arena 90.7 in various respects rather than attempting to develop options 90.8 out of the consensus building process that typically occurs with 90.9 the naming of commissions to study topics. The legislative 90.10 commission on planning and fiscal policy shall let contracts for 90.11 proposal development in each of the areas specified in sections 90.12 3 to 15. The contracts must require a report including specific 90.13 proposed legislation to the commission by October 15, 1995. 90.14 Sec. 3. [MAKE GOVERNMENT A BUYER RATHER THAN A PROVIDER OF 90.15 SOME SERVICES.] 90.16 The legislature seeks proposals on how the government can 90.17 ensure that the public receives high-quality, low-cost public 90.18 services by means of having the government buy rather than 90.19 provide services. 90.20 Sec. 4. [CONVERT FIXED LEVEL BENEFIT ENTITLEMENTS TO FIXED 90.21 APPROPRIATIONS FOR PROVISION OF BENEFITS.] 90.22 The legislature seeks proposals on how the government can 90.23 encourage greater efficiency in the provision of benefits 90.24 through establishing appropriation limits, either flexible or 90.25 absolute, on particular types of services rather than providing 90.26 for open-ended funding. 90.27 Sec. 5. [IMPROVE MEASUREMENT OF AND REPORTING ON 90.28 GOVERNMENT PERFORMANCE.] 90.29 The legislature seeks proposals on how to improve the 90.30 measurement of and reporting on the performance of Minnesota 90.31 state and local governments, including the communication of the 90.32 information in understandable terms to public officials and the 90.33 public, including: 90.34 (1) definition of lines of business for governmental units 90.35 and measurement and reporting based on them; 90.36 (2) uniform accounting and reporting for cities, or at 91.1 least within classes of cities, to facilitate performance 91.2 comparison and improvement; and 91.3 (3) a value-for-money audit system for local governments 91.4 similar to the audit commission in the United Kingdom. 91.5 Sec. 6. [INCREASING VALUE RECEIVED FOR SPENDING ON K-12 91.6 EDUCATION.] 91.7 The legislature seeks proposals on ways in which to 91.8 increase the value received per dollar spent on K-12 education, 91.9 including, without limitation: 91.10 (1) centralized purchasing of health care benefits for 91.11 school personnel; 91.12 (2) measurement and reporting on school district viability 91.13 with respect to curriculum, cost per student, adequacy of 91.14 facilities and educational results; 91.15 (3) school-based, as opposed to district-based, budget 91.16 control, with principals in charge of school programs and 91.17 accountable to teachers; 91.18 (4) getting school boards focused on policy rather than 91.19 administrative issues; 91.20 (5) emphasizing student and parent responsibilities as well 91.21 as rights with respect to increased educational costs caused by 91.22 student characteristics and behaviors; and 91.23 (6) focusing education funding on what happens in the 91.24 classroom, with social services and other functions to be funded 91.25 out of other sources. 91.26 Sec. 7. [INCREASING VALUE RECEIVED FOR SPENDING ON HIGHER 91.27 EDUCATION.] 91.28 The legislature seeks proposals on ways in which to 91.29 increase the value received per dollar spent on higher 91.30 education, including without limitation: 91.31 (1) ways to save on personnel and facilities costs 91.32 following the merger through creative use of technology or by 91.33 other means; and 91.34 (2) income-based tuition. 91.35 Sec. 8. [COST-EFFECTIVE FINANCING FOR TRANSPORTATION.] 91.36 The legislature seeks proposals on cost-effective, 92.1 noncapital intensive ways in which to provide transportation 92.2 services, including, without limitation: 92.3 (1) reducing freeway congestion through creative uses of 92.4 technology to manage freeway use and reduce the need for trips; 92.5 (2) getting more value out of dedicated transportation 92.6 funding by either or both reducing the portion of dedicated 92.7 funds flowing to county roads or increasing the share of the 92.8 total road system for which counties are responsible; and/or 92.9 (3) how to convert the metropolitan transit commission to 92.10 an employee-owned operating entity that sells bus service by the 92.11 route to cities or the metropolitan council, or both. 92.12 Sec. 9. [MINIMIZING SOLID WASTE DISPOSAL COSTS.] 92.13 The legislature seeks proposals on how to minimize solid 92.14 waste disposal costs, including, without limitation, allowing 92.15 haulers to choose among disposal sites based on price and 92.16 service. 92.17 Sec. 10. [BETTER CARE FOR THE ELDERLY.] 92.18 The legislature seeks proposals on how to both save costs 92.19 and provide better living conditions for Minnesota's elderly 92.20 through alternatives to nursing home confinement. 92.21 Sec. 11. [HEALTH CARE INCENTIVES.] 92.22 The legislature seeks proposals on how to structure private 92.23 and public health care benefit programs so that citizens are 92.24 given an incentive to patronize low-cost, high-quality hospitals 92.25 and doctors. 92.26 Sec. 12. [METROPOLITAN AREA DEVELOPMENT.] 92.27 The legislature seeks proposals on how to make most 92.28 effective use of existing metropolitan area infrastructure and 92.29 minimize the need for additional infrastructure construction, 92.30 including, without limitation, freezing the MUSA line and 92.31 encouraging more intense development and redevelopment within 92.32 the existing line through various means, including state funding 92.33 for redevelopment of the most seriously blighted or contaminated 92.34 real property. 92.35 Sec. 13. [LOCAL GOVERNMENT CONSOLIDATIONS.] 92.36 The legislature seeks proposals on how to get better 93.1 government services for less money including: 93.2 (1) funding cities rather than counties to the maximum 93.3 feasible extent for corrections, welfare, and social services, 93.4 and empowering the cities to buy the services from their county, 93.5 some other county, or appropriate private organizations; 93.6 (2) enhancing city annexation power to combat flight to 93.7 adjoining townships that permits enjoyment of city services 93.8 without having to pay for them; 93.9 (3) mergers of adjoining local governmental units of 93.10 like-kind based on citizen vote; 93.11 (4) eliminating elective county government in the 93.12 metropolitan area so that the counties would be administrative 93.13 service providers with their chief administrators reporting to 93.14 the metropolitan council; and 93.15 (5) deciding whether the metropolitan council would be more 93.16 effective as an elected body. 93.17 Sec. 14. [ENDING WELFARE AS WE KNOW IT BY PROVIDING 93.18 MEANINGFUL WORK FOR ALL.] 93.19 The legislature seeks proposals on how to provide every 93.20 Minnesota citizen with the opportunity to be productive on the 93.21 assumptions that the private economy will never provide jobs for 93.22 all, every able bodied person should expect to work as a 93.23 condition of receiving benefits, almost every able bodied person 93.24 wants to have meaningful and productive activity in which to 93.25 engage, and there is not enough money to employ all who would 93.26 like work full time at decent wages. 93.27 Sec. 15. [INTERGOVERNMENTAL RELATIONS.] 93.28 The legislature seeks proposals on how to make Minnesota 93.29 government more efficient through the creation of more effective 93.30 intergovernmental relations, including: 93.31 (1) state/local relations for each type of local unit of 93.32 government; 93.33 (2) cooperative efforts among local governments; and 93.34 (3) moving the state and all local governments to a common 93.35 fiscal year. 93.36 Sec. 16. [EXECUTIVE BRANCH REORGANIZATION.] 94.1 The legislature seeks proposals on how to make Minnesota 94.2 government more efficient through executive branch 94.3 reorganization, including without limitation: 94.4 (1) changes, based on technology or otherwise, to make 94.5 compliance with regulations and access to services easier and 94.6 more convenient for government's customers; 94.7 (2) reforms in such major administrative systems as 94.8 purchasing, budgeting, and personnel; 94.9 (3) with respect to both internal operations and dealings 94.10 with external customers and stakeholders: 94.11 (i) focus on customers, results, and value; 94.12 (ii) communicate; 94.13 (iii) design services as if the customer really matters; 94.14 (iv) budget strategically rather than bureaucratically; 94.15 (4) agency consolidations and the like; 94.16 (5) abolition of the office of state treasurer; and 94.17 (6) changing the state auditor from an elective to an 94.18 appointive position and integrating its functions more 94.19 effectively into the executive branch, as part of a broad effort 94.20 to create more effective state/local intergovernmental relations 94.21 and better measurement and reporting on the operating results of 94.22 government. 94.23 Sec. 17. [APPROPRIATION.] 94.24 There is appropriated to the legislative commission on 94.25 planning and fiscal policy the sum of $....... for the period 94.26 ending ......., to be used to perform the duties imposed under 94.27 this article. 94.28 Sec. 18. [EFFECTIVE DATE.] 94.29 This article is effective the day following final enactment.