HF 2433

as introduced - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; providing for the apportionment 
  1.3             of income from the lease or rental of certain moving 
  1.4             property; providing a property tax refund for small 
  1.5             manufacturing businesses; providing for the reduction 
  1.6             and exemption of replacement capital equipment from 
  1.7             the sales and use tax; repealing provisions providing 
  1.8             for the property tax refund on the property tax 
  1.9             statement; appropriating money; amending Minnesota 
  1.10            Statutes 1994, sections 297A.01, subdivision 16; and 
  1.11            297A.02, subdivision 5; Minnesota Statutes 1995 
  1.12            Supplement, sections 290.191, subdivisions 5 and 6; 
  1.13            and 290A.04, subdivision 2h; proposing coding for new 
  1.14            law in Minnesota Statutes, chapter 290A; repealing 
  1.15            Minnesota Statutes 1994, section 297A.01, subdivision 
  1.16            20; Minnesota Statutes 1995 Supplement, sections 
  1.17            270B.12, subdivision 11; 276.012; 290A.055; and 
  1.18            290A.26; Laws 1995, chapter 264, article 4. 
  1.19  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.20     Section 1.  Minnesota Statutes 1995 Supplement, section 
  1.21  290.191, subdivision 5, is amended to read: 
  1.22     Subd. 5.  [DETERMINATION OF SALES FACTOR.] For purposes of 
  1.23  this section, the following rules apply in determining the sales 
  1.24  factor.  
  1.25     (a) The sales factor includes all sales, gross earnings, or 
  1.26  receipts received in the ordinary course of the business, except 
  1.27  that the following types of income are not included in the sales 
  1.28  factor: 
  1.29     (1) interest; 
  1.30     (2) dividends; 
  1.31     (3) sales of capital assets as defined in section 1221 of 
  1.32  the Internal Revenue Code; 
  2.1      (4) sales of property used in the trade or business, except 
  2.2   sales of leased property of a type which is regularly sold as 
  2.3   well as leased; 
  2.4      (5) sales of debt instruments as defined in section 
  2.5   1275(a)(1) of the Internal Revenue Code or sales of stock; and 
  2.6      (6) royalties, fees, or other like income of a type which 
  2.7   qualify for a subtraction from federal taxable income under 
  2.8   section 290.01, subdivision 19(d)(11).  
  2.9      (b) Sales of tangible personal property are made within 
  2.10  this state if the property is received by a purchaser at a point 
  2.11  within this state, and the taxpayer is taxable in this state, 
  2.12  regardless of the f.o.b. point, other conditions of the sale, or 
  2.13  the ultimate destination of the property. 
  2.14     (c) Tangible personal property delivered to a common or 
  2.15  contract carrier or foreign vessel for delivery to a purchaser 
  2.16  in another state or nation is a sale in that state or nation, 
  2.17  regardless of f.o.b. point or other conditions of the sale.  
  2.18     (d) Notwithstanding paragraphs (b) and (c), when 
  2.19  intoxicating liquor, wine, fermented malt beverages, cigarettes, 
  2.20  or tobacco products are sold to a purchaser who is licensed by a 
  2.21  state or political subdivision to resell this property only 
  2.22  within the state of ultimate destination, the sale is made in 
  2.23  that state.  
  2.24     (e) Sales made by or through a corporation that is 
  2.25  qualified as a domestic international sales corporation under 
  2.26  section 992 of the Internal Revenue Code are not considered to 
  2.27  have been made within this state.  
  2.28     (f) Sales, rents, royalties, and other income in connection 
  2.29  with real property is attributed to the state in which the 
  2.30  property is located.  
  2.31     (g) Receipts from the lease or rental of tangible personal 
  2.32  property, including finance leases and true leases, must be 
  2.33  attributed to this state if the property is located in this 
  2.34  state and to other states if the property is not located in this 
  2.35  state.  Receipts from the lease or rental of moving property 
  2.36  including, but not limited to, motor vehicles, rolling stock, 
  3.1   aircraft, vessels, or mobile equipment is located in this state 
  3.2   if are included in the numerator of the receipts factor to the 
  3.3   extent that the property is used in this state.  The extent of 
  3.4   the use of moving property is determined as follows: 
  3.5      (1) the operation of the property is entirely within this 
  3.6   state; or A motor vehicle is used wholly in the state in which 
  3.7   it is registered.  
  3.8      (2) the operation of the property is in two or more states 
  3.9   and the principal base of operations from which the property is 
  3.10  sent out is in this state.  The extent that rolling stock is 
  3.11  used in this state is determined by multiplying the receipts 
  3.12  from the lease or rental of the rolling stock by a fraction, the 
  3.13  numerator of which is the miles traveled within this state by 
  3.14  the leased or rented rolling stock and the denominator of which 
  3.15  is the total miles traveled by the leased or rented rolling 
  3.16  stock. 
  3.17     (3) The extent that an aircraft is used in this state is 
  3.18  determined by multiplying the receipts from the lease or rental 
  3.19  of the aircraft by a fraction, the numerator of which is the 
  3.20  number of landings of the aircraft in this state and the 
  3.21  denominator of which is the total number of landings of the 
  3.22  aircraft. 
  3.23     (4) The extent that a vessel, mobile equipment, or other 
  3.24  mobile property is used in the state is determined by 
  3.25  multiplying the receipts from the lease or rental of the 
  3.26  property by a fraction, the numerator of which is the number of 
  3.27  days during the taxable year the property was in this state and 
  3.28  the denominator of which is the total days in the taxable year.  
  3.29     (h) Royalties and other income not described in paragraph 
  3.30  (a), clause (6), received for the use of or for the privilege of 
  3.31  using intangible property, including patents, know-how, 
  3.32  formulas, designs, processes, patterns, copyrights, trade names, 
  3.33  service names, franchises, licenses, contracts, customer lists, 
  3.34  or similar items, must be attributed to the state in which the 
  3.35  property is used by the purchaser.  If the property is used in 
  3.36  more than one state, the royalties or other income must be 
  4.1   apportioned to this state pro rata according to the portion of 
  4.2   use in this state.  If the portion of use in this state cannot 
  4.3   be determined, the royalties or other income must be excluded 
  4.4   from both the numerator and the denominator.  Intangible 
  4.5   property is used in this state if the purchaser uses the 
  4.6   intangible property or the rights therein in the regular course 
  4.7   of its business operations in this state, regardless of the 
  4.8   location of the purchaser's customers. 
  4.9      (i) Sales of intangible property are made within the state 
  4.10  in which the property is used by the purchaser.  If the property 
  4.11  is used in more than one state, the sales must be apportioned to 
  4.12  this state pro rata according to the portion of use in this 
  4.13  state.  If the portion of use in this state cannot be 
  4.14  determined, the sale must be excluded from both the numerator 
  4.15  and the denominator of the sales factor.  Intangible property is 
  4.16  used in this state if the purchaser used the intangible property 
  4.17  in the regular course of its business operations in this state. 
  4.18     (j) Receipts from the performance of services must be 
  4.19  attributed to the state where the services are received.  For 
  4.20  the purposes of this section, receipts from the performance of 
  4.21  services provided to a corporation, partnership, or trust may 
  4.22  only be attributed to a state where it has a fixed place of 
  4.23  doing business.  If the state where the services are received is 
  4.24  not readily determinable or is a state where the corporation, 
  4.25  partnership, or trust receiving the service does not have a 
  4.26  fixed place of doing business, the services shall be deemed to 
  4.27  be received at the location of the office of the customer from 
  4.28  which the services were ordered in the regular course of the 
  4.29  customer's trade or business.  If the ordering office cannot be 
  4.30  determined, the services shall be deemed to be received at the 
  4.31  office of the customer to which the services are billed.  
  4.32     Sec. 2.  Minnesota Statutes 1995 Supplement, section 
  4.33  290.191, subdivision 6, is amended to read: 
  4.34     Subd. 6.  [DETERMINATION OF RECEIPTS FACTOR FOR FINANCIAL 
  4.35  INSTITUTIONS.] (a) For purposes of this section, the rules in 
  4.36  this subdivision and subdivision 8 apply in determining the 
  5.1   receipts factor for financial institutions.  
  5.2      (b) "Receipts" for this purpose means gross income, 
  5.3   including net taxable gain on disposition of assets, including 
  5.4   securities and money market instruments, when derived from 
  5.5   transactions and activities in the regular course of the 
  5.6   taxpayer's trade or business.  
  5.7      (c) "Money market instruments" means federal funds sold and 
  5.8   securities purchased under agreements to resell, commercial 
  5.9   paper, banker's acceptances, and purchased certificates of 
  5.10  deposit and similar instruments to the extent that the 
  5.11  instruments are reflected as assets under generally accepted 
  5.12  accounting principles.  
  5.13     (d) "Securities" means United States Treasury securities, 
  5.14  obligations of United States government agencies and 
  5.15  corporations, obligations of state and political subdivisions, 
  5.16  corporate stock, bonds, and other securities, participations in 
  5.17  securities backed by mortgages held by United States or state 
  5.18  government agencies, loan-backed securities and similar 
  5.19  investments to the extent the investments are reflected as 
  5.20  assets under generally accepted accounting principles.  
  5.21     (e) Receipts from the lease or rental of real or tangible 
  5.22  personal property, including both finance leases and true 
  5.23  leases, must be attributed to this state if the property is 
  5.24  located in this state.  Receipts from the lease or rental of 
  5.25  tangible personal property that is characteristically moving 
  5.26  property, such as including, but not limited to, motor vehicles, 
  5.27  rolling stock, aircraft, vessels, or mobile equipment, and the 
  5.28  like, is considered to be located in a state if are included in 
  5.29  the numerator of the receipts factor to the extent that the 
  5.30  property is used in this state.  The extent of the use of moving 
  5.31  property is determined as follows: 
  5.32     (1) the operation of the property is entirely within the 
  5.33  state; or A motor vehicle is used wholly in the state in which 
  5.34  it is registered. 
  5.35     (2) the operation of the property is in two or more states, 
  5.36  but the principal base of operations from which the property is 
  6.1   sent out is in the state.  The extent that rolling stock is used 
  6.2   in this state is determined by multiplying the receipts from the 
  6.3   lease or rental of the rolling stock by a fraction, the 
  6.4   numerator of which is the miles traveled within this state by 
  6.5   the leased or rented rolling stock and the denominator of which 
  6.6   is the total miles traveled by the leased or rented rolling 
  6.7   stock. 
  6.8      (3) The extent that an aircraft is used in this state is 
  6.9   determined by multiplying the receipts from the lease or rental 
  6.10  of the aircraft by a fraction, the numerator of which is the 
  6.11  number of landings of the aircraft in this state and the 
  6.12  denominator of which is the total number of landings of the 
  6.13  aircraft. 
  6.14     (4) The extent that a vessel, mobile equipment, or other 
  6.15  mobile property is used in the state is determined by 
  6.16  multiplying the receipts from the lease or rental of property by 
  6.17  a fraction, the numerator of which is the number of days during 
  6.18  the taxable year the property was in this state and the 
  6.19  denominator of which is the total days in the taxable year. 
  6.20     (f) Interest income and other receipts from assets in the 
  6.21  nature of loans that are secured primarily by real estate or 
  6.22  tangible personal property must be attributed to this state if 
  6.23  the security property is located in this state under the 
  6.24  principles stated in paragraph (e).  
  6.25     (g) Interest income and other receipts from consumer loans 
  6.26  not secured by real or tangible personal property that are made 
  6.27  to residents of this state, whether at a place of business, by 
  6.28  traveling loan officer, by mail, by telephone or other 
  6.29  electronic means, must be attributed to this state.  
  6.30     (h) Interest income and other receipts from commercial 
  6.31  loans and installment obligations that are unsecured by real or 
  6.32  tangible personal property or secured by intangible property 
  6.33  must be attributed to this state if the proceeds of the loan are 
  6.34  to be applied in this state.  If it cannot be determined where 
  6.35  the funds are to be applied, the income and receipts are 
  6.36  attributed to the state in which the office of the borrower from 
  7.1   which the application would be made in the regular course of 
  7.2   business is located.  If this cannot be determined, the 
  7.3   transaction is disregarded in the apportionment formula. 
  7.4      (i) Interest income and other receipts from a participating 
  7.5   financial institution's portion of participation and syndication 
  7.6   loans must be attributed under paragraphs (e) to (h).  A 
  7.7   participation loan is an arrangement in which a lender makes a 
  7.8   loan to a borrower and then sells, assigns, or otherwise 
  7.9   transfers all or a part of the loan to a purchasing financial 
  7.10  institution.  A syndication loan is a loan transaction involving 
  7.11  multiple financial institutions in which all the lenders are 
  7.12  named as parties to the loan documentation, are known to the 
  7.13  borrower, and have privity of contract with the borrower.  
  7.14     (j) Interest income and other receipts including service 
  7.15  charges from financial institution credit card and travel and 
  7.16  entertainment credit card receivables and credit card holders' 
  7.17  fees must be attributed to the state to which the card charges 
  7.18  and fees are regularly billed.  
  7.19     (k) Merchant discount income derived from financial 
  7.20  institution credit card holder transactions with a merchant must 
  7.21  be attributed to the state in which the merchant is located.  In 
  7.22  the case of merchants located within and outside the state, only 
  7.23  receipts from merchant discounts attributable to sales made from 
  7.24  locations within the state are attributed to this state.  It is 
  7.25  presumed, subject to rebuttal, that the location of a merchant 
  7.26  is the address shown on the invoice submitted by the merchant to 
  7.27  the taxpayer. 
  7.28     (l) Receipts from the performance of fiduciary and other 
  7.29  services must be attributed to the state in which the services 
  7.30  are received.  For the purposes of this section, services 
  7.31  provided to a corporation, partnership, or trust must be 
  7.32  attributed to a state where it has a fixed place of doing 
  7.33  business.  If the state where the services are received is not 
  7.34  readily determinable or is a state where the corporation, 
  7.35  partnership, or trust does not have a fixed place of doing 
  7.36  business, the services shall be deemed to be received at the 
  8.1   location of the office of the customer from which the services 
  8.2   were ordered in the regular course of the customer's trade or 
  8.3   business.  If the ordering office cannot be determined, the 
  8.4   services shall be deemed to be received at the office of the 
  8.5   customer to which the services are billed.  
  8.6      (m) Receipts from the issuance of travelers checks and 
  8.7   money orders must be attributed to the state in which the checks 
  8.8   and money orders are purchased.  
  8.9      (n) Receipts from investments of a financial institution in 
  8.10  securities and from money market instruments must be apportioned 
  8.11  to this state based on the ratio that total deposits from this 
  8.12  state, its residents, including any business with an office or 
  8.13  other place of business in this state, its political 
  8.14  subdivisions, agencies, and instrumentalities bear to the total 
  8.15  deposits from all states, their residents, their political 
  8.16  subdivisions, agencies, and instrumentalities.  In the case of 
  8.17  an unregulated financial institution subject to this section, 
  8.18  these receipts are apportioned to this state based on the ratio 
  8.19  that its gross business income, excluding such receipts, earned 
  8.20  from sources within this state bears to gross business income, 
  8.21  excluding such receipts, earned from sources within all states.  
  8.22  For purposes of this subdivision, deposits made by this state, 
  8.23  its residents, its political subdivisions, agencies, and 
  8.24  instrumentalities must be attributed to this state, whether or 
  8.25  not the deposits are accepted or maintained by the taxpayer at 
  8.26  locations within this state. 
  8.27     (o) A financial institution's interest in property 
  8.28  described in section 290.015, subdivision 3, paragraph (b), is 
  8.29  included in the receipts factor in the same manner as assets in 
  8.30  the nature of securities or money market instruments are 
  8.31  included in paragraph (n).  
  8.32     Sec. 3.  Minnesota Statutes 1995 Supplement, section 
  8.33  290A.04, subdivision 2h, is amended to read: 
  8.34     Subd. 2h.  (a) If the gross property taxes payable on a 
  8.35  homestead increase more than 12 percent over the net property 
  8.36  taxes payable in the prior year on the same property that is 
  9.1   owned and occupied by the same owner on January 2 of both years, 
  9.2   and the amount of that increase is $100 or more for taxes 
  9.3   payable in 1995 and 1996, a claimant who is a homeowner shall be 
  9.4   allowed an additional refund equal to 60 percent of the amount 
  9.5   of the increase over the greater of 12 percent of the prior 
  9.6   year's net property taxes payable or $100 for taxes payable in 
  9.7   1995 and 1996.  This subdivision shall not apply to any increase 
  9.8   in the gross property taxes payable attributable to improvements 
  9.9   made to the homestead after the assessment date for the prior 
  9.10  year's taxes.  This subdivision shall not apply to any increase 
  9.11  in the gross property taxes payable attributable to the 
  9.12  termination of valuation exclusions under section 273.11, 
  9.13  subdivision 16. 
  9.14     The maximum refund allowed under this subdivision is $1,000.
  9.15     (b) For purposes of this subdivision, the following terms 
  9.16  have the meanings given: 
  9.17     (1) "Net property taxes payable" means property taxes 
  9.18  payable minus refund amounts for which the claimant qualifies 
  9.19  pursuant to subdivision 2 and this subdivision.  
  9.20     (2) "Gross property taxes" means net property taxes payable 
  9.21  determined without regard to the refund allowed under this 
  9.22  subdivision. 
  9.23     (c) In addition to the other proofs required by this 
  9.24  chapter, each claimant under this subdivision shall file with 
  9.25  the property tax refund return a copy of the property tax 
  9.26  statement for taxes payable in the preceding year or other 
  9.27  documents required by the commissioner. 
  9.28     (d) On or before December 1, 1995, the commissioner shall 
  9.29  estimate the cost of making the payments provided by this 
  9.30  subdivision for taxes payable in 1996.  Notwithstanding the open 
  9.31  appropriation provision of section 290A.23, if the estimated 
  9.32  total refund claims for taxes payable in 1996 exceed $5,500,000, 
  9.33  the commissioner shall first reduce the 60 percent refund rate 
  9.34  enough, but to no lower a rate than 50 percent, so that the 
  9.35  estimated total refund claims do not exceed $5,500,000.  If the 
  9.36  commissioner estimates that total claims will exceed $5,500,000 
 10.1   at a 50 percent refund rate, the commissioner shall also reduce 
 10.2   the $1,000 maximum refund amount by enough so that total 
 10.3   estimated refund claims do not exceed $5,500,000. 
 10.4      The determinations of the revised thresholds by the 
 10.5   commissioner are not rules subject to chapter 14.  
 10.6      (e) Upon request, the appropriate county official shall 
 10.7   make available the names and addresses of the property taxpayers 
 10.8   who may be eligible for the additional property tax refund under 
 10.9   this section.  The information shall be provided on a magnetic 
 10.10  computer disk.  The county may recover its costs by charging the 
 10.11  person requesting the information the reasonable cost for 
 10.12  preparing the data.  The information may not be used for any 
 10.13  purpose other than for notifying the homeowner of potential 
 10.14  eligibility and assisting the homeowner, without charge, in 
 10.15  preparing a refund claim. 
 10.16     Sec. 4.  [290A.50] [PROPERTY TAX REFUND FOR SMALL 
 10.17  MANUFACTURING BUSINESSES.] 
 10.18     Subdivision 1.  [DEFINITIONS.] (a) "Eligible claimant" 
 10.19  means a manufacturing business, as defined in Division D of the 
 10.20  Standard Industrial Classification Manual published by the 
 10.21  United States executive office of the President, Office of 
 10.22  Management and Budget, having 100 or fewer total employees, and 
 10.23  located within a city containing an empowerment zone or 
 10.24  enterprise community as designated pursuant to Public Law Number 
 10.25  103-66. 
 10.26     (b) "Eligible property" means the real estate occupied and 
 10.27  used by an eligible claimant.  If an eligible claimant occupies 
 10.28  less than all of a tax parcel, only the portion of that parcel 
 10.29  occupied by the claimant is eligible.  If an eligible claimant 
 10.30  occupies more than one tax parcel, the portion of each tax 
 10.31  parcel occupied by the claimant is eligible property. 
 10.32     (c) "Eligible property market value" means the assessor's 
 10.33  estimated market value of the eligible property.  If an eligible 
 10.34  claimant occupies less than a full tax parcel, eligible property 
 10.35  market value for that parcel means:  (1) the assessor's 
 10.36  estimated market value for the portion of the parcel occupied by 
 11.1   the eligible claimant; or (2) the amount determined by 
 11.2   multiplying the assessor's estimated market value for the full 
 11.3   parcel by a fraction, the numerator of which is the total square 
 11.4   feet of land and building floor space occupied by the claimant 
 11.5   and the denominator of which is the total square feet of land 
 11.6   and building floor space contained in the parcel. 
 11.7      (d) "Eligible tax" means the net property tax payable on 
 11.8   the eligible market value. 
 11.9      (e) "Net property tax payable" means the property tax 
 11.10  payable on the eligible property market value, after any 
 11.11  reductions by abatement, court decision, or otherwise; less (1) 
 11.12  special assessments, penalties, and interest payable with 
 11.13  respect to the property, and (2) any state-paid credits other 
 11.14  than the refund provided in this section.  The taxes are 
 11.15  considered payable in the year prescribed by law for payment of 
 11.16  the taxes. 
 11.17     Subd. 2.  [FILING OF CLAIM.] (a) A claim for refund under 
 11.18  this section must be filed with the commissioner of revenue on 
 11.19  or after January 1 and before June 1 of the year following the 
 11.20  year in which the property taxes were payable.  Each eligible 
 11.21  firm may only file one claim for refund under this section in 
 11.22  regard to each property taxes payable year. 
 11.23     (b) Claims made under this section must be in the form and 
 11.24  contain the information required by the commissioner of 
 11.25  revenue.  The commissioner's determinations in this regard are 
 11.26  deemed not to be rules.  In addition to any other information 
 11.27  which may be required by the commissioner of revenue, each claim 
 11.28  must show the Minnesota taxpayer identification number of the 
 11.29  claimant, and the complete county-assigned parcel identification 
 11.30  number for all tax parcels upon which the refund claim is based. 
 11.31     (c) If the eligible property consists of more than one tax 
 11.32  parcel, the claimant must submit a single claim for each 
 11.33  property taxes payable year, but the claim may be for all tax 
 11.34  parcels included within the eligible property. 
 11.35     Subd. 3.  [CALCULATION OF REFUND AMOUNT.] The refund amount 
 11.36  under this section for each eligible claimant is equal to 70 
 12.1   percent of the amount by which the eligible tax payable in the 
 12.2   previous calendar year exceeds the product of 0.038 times the 
 12.3   eligible property market value for taxes payable in the previous 
 12.4   year, up to a maximum of $3,000 for each claim.  If the amount 
 12.5   appropriated for the refunds payable under this section is 
 12.6   insufficient to pay the refund amounts calculated under this 
 12.7   subdivision for payment in that calendar year, the commissioner 
 12.8   of revenue shall proportionately reduce each claimant's allowed 
 12.9   refund so that the sum of all refund amounts allowed by the 
 12.10  commissioner under this section equals no more than 100 percent, 
 12.11  and no less than 99 percent, of the amount appropriated for that 
 12.12  payment year. 
 12.13     Subd. 4.  [PAYMENT OF CLAIMS.] Allowable claims filed under 
 12.14  this section must be paid by the commissioner of revenue on or 
 12.15  before October 15 of each filing year.  If the initial refund 
 12.16  amounts were proportionately reduced under subdivision 3, the 
 12.17  commissioner must attach an explanation of the reduction process 
 12.18  and results to each refund payment. 
 12.19     Subd. 5.  [ADMINISTRATION.] (a) Sections 289A.60, 
 12.20  subdivisions 12, paragraphs (a), (b), and (d), and 13; 289A.63, 
 12.21  subdivision 2; 289A.65; 290A.11; and 290A.15 apply to claims 
 12.22  filed or allowed under this section.  The commissioner of 
 12.23  revenue has the powers granted in those sections to administer 
 12.24  the refund under this section. 
 12.25     (b) If an eligible claimant ceases business operations 
 12.26  prior to receiving a refund for which timely application was 
 12.27  made, the right to the refund shall lapse.  If the commissioner 
 12.28  cannot locate a claimant within one year from the date an 
 12.29  original warrant was issued to that claimant, the right to the 
 12.30  refund shall lapse.  In such cases, the warrant amount shall be 
 12.31  deposited in the general fund of the state treasury. 
 12.32     (c) The commissioner of revenue must make available the 
 12.33  forms and instructions for claimants which the commissioner 
 12.34  deems necessary for the proper administration of this section. 
 12.35     (d) Whenever a claimant is owed a property tax refund under 
 12.36  this section, the unpaid refund bears interest at the rate 
 13.1   provided in section 270.76, starting with October 15 of the 
 13.2   filing year, and until the date that the refund warrant is 
 13.3   issued. 
 13.4      Subd. 6.  [APPROPRIATION.] $2,000,000 is annually 
 13.5   appropriated beginning fiscal year 1997 from the general fund to 
 13.6   the commissioner of revenue to pay the refunds required by this 
 13.7   section in regard to claims filed in calendar year 1996 and 
 13.8   thereafter. 
 13.9      Sec. 5.  Minnesota Statutes 1994, section 297A.01, 
 13.10  subdivision 16, is amended to read: 
 13.11     Subd. 16.  [CAPITAL EQUIPMENT.] (a) Capital equipment means 
 13.12  machinery and equipment purchased or leased for use in this 
 13.13  state and used by the purchaser or lessee primarily for 
 13.14  manufacturing, fabricating, mining, or refining tangible 
 13.15  personal property to be sold ultimately at retail and for 
 13.16  electronically transmitting results retrieved by a customer of 
 13.17  an on-line computerized data retrieval system.  
 13.18     (b) Capital equipment includes all machinery and equipment 
 13.19  that is essential to the integrated production process.  Capital 
 13.20  equipment includes, but is not limited to: 
 13.21     (1) machinery and equipment used or required to operate, 
 13.22  control, or regulate the production equipment; 
 13.23     (2) machinery and equipment used for research and 
 13.24  development, design, quality control, and testing activities; 
 13.25     (3) environmental control devices that are used to maintain 
 13.26  conditions such as temperature, humidity, light, or air pressure 
 13.27  when those conditions are essential to and are part of the 
 13.28  production process; or 
 13.29     (4) materials and supplies necessary to construct and 
 13.30  install machinery or equipment; 
 13.31     (5) repair and replacement parts, including accessories, 
 13.32  whether purchased as spare parts, repair parts, or as upgrades 
 13.33  or modifications to machinery or equipment; 
 13.34     (6) materials used for foundations that support machinery 
 13.35  or equipment; or 
 13.36     (7) materials used to construct and install special purpose 
 14.1   buildings used in the production process. 
 14.2      (c) Capital equipment does not include the following: 
 14.3      (1) repair or replacement parts, including accessories, 
 14.4   whether purchased as spare parts, repair parts, or as upgrades 
 14.5   or modifications, and whether purchased before or after the 
 14.6   machinery or equipment is placed into service.  Parts or 
 14.7   accessories are treated as capital equipment only to the extent 
 14.8   that they are a part of and are essential to the operation of 
 14.9   the machinery or equipment as initially purchased; 
 14.10     (2) motor vehicles taxed under chapter 297B; 
 14.11     (3) (2) machinery or equipment used to receive or store raw 
 14.12  materials; 
 14.13     (4) (3) building materials; 
 14.14     (5) (4) machinery or equipment used for nonproduction 
 14.15  purposes, including, but not limited to, the following:  
 14.16  machinery and equipment used for plant security, fire 
 14.17  prevention, first aid, and hospital stations; machinery and 
 14.18  equipment used in support operations or for administrative 
 14.19  purposes; machinery and equipment used solely for pollution 
 14.20  control, prevention, or abatement; and machinery and equipment 
 14.21  used in plant cleaning, disposal of scrap and waste, plant 
 14.22  communications, space heating, lighting, or safety; 
 14.23     (6) (5) "farm machinery" as defined by subdivision 15, and 
 14.24  "aquaculture production equipment" as defined by subdivision 19, 
 14.25  and "replacement capital equipment" as defined by subdivision 
 14.26  20; or 
 14.27     (7) (6) any other item that is not essential to the 
 14.28  integrated process of manufacturing, fabricating, mining, or 
 14.29  refining. 
 14.30     (d) For purposes of this subdivision: 
 14.31     (1) "Equipment" means independent devices or tools separate 
 14.32  from machinery but essential to an integrated production 
 14.33  process, including computers and software, used in operating, 
 14.34  controlling, or regulating machinery and equipment; and any 
 14.35  subunit or assembly comprising a component of any machinery or 
 14.36  accessory or attachment parts of machinery, such as tools, dies, 
 15.1   jigs, patterns, and molds. 
 15.2      (2) "Fabricating" means to make, build, create, produce, or 
 15.3   assemble components or property to work in a new or different 
 15.4   manner. 
 15.5      (3) "Machinery" means mechanical, electronic, or electrical 
 15.6   devices, including computers and software, that are purchased or 
 15.7   constructed to be used for the activities set forth in paragraph 
 15.8   (a), beginning with the removal of raw materials from inventory 
 15.9   through the completion of the product, including packaging of 
 15.10  the product. 
 15.11     (4) "Manufacturing" means an operation or series of 
 15.12  operations where raw materials are changed in form, composition, 
 15.13  or condition by machinery and equipment and which results in the 
 15.14  production of a new article of tangible personal property.  For 
 15.15  purposes of this subdivision, "manufacturing" includes the 
 15.16  generation of electricity or steam to be sold at retail. 
 15.17     (5) "Mining" means the extraction of minerals, ores, stone, 
 15.18  and peat. 
 15.19     (6) "On-line data retrieval system" means a system whose 
 15.20  cumulation of information is equally available and accessible to 
 15.21  all its customers. 
 15.22     (7) "Pollution control equipment" means machinery and 
 15.23  equipment used to eliminate, prevent, or reduce pollution 
 15.24  resulting from an activity described in paragraph (a). 
 15.25     (8) "Primarily" means machinery and equipment used 50 
 15.26  percent or more of the time in an activity described in 
 15.27  paragraph (a). 
 15.28     (9) "Refining" means the process of converting a natural 
 15.29  resource to a product, including the treatment of water to be 
 15.30  sold at retail. 
 15.31     (e) For purposes of this subdivision the requirement that 
 15.32  the machinery or equipment "must be used by the purchaser or 
 15.33  lessee" means that the person who purchases or leases the 
 15.34  machinery or equipment must be the one who uses it for the 
 15.35  qualifying purpose.  When a contractor buys and installs 
 15.36  machinery or equipment as part of an improvement to real 
 16.1   property, only the contractor is considered the purchaser. 
 16.2      (f) Notwithstanding prior provisions of this subdivision, 
 16.3   machinery and equipment purchased or leased to replace machinery 
 16.4   and equipment used in the mining or production of taconite shall 
 16.5   qualify as capital equipment. 
 16.6      Sec. 6.  Minnesota Statutes 1994, section 297A.02, 
 16.7   subdivision 5, is amended to read: 
 16.8      Subd. 5.  [REPLACEMENT CAPITAL EQUIPMENT.] Notwithstanding 
 16.9   the provisions of subdivision 1, the rate of excise tax imposed 
 16.10  upon retail sales of replacement capital equipment is: 
 16.11     for purchases after June 30, 1994, and prior to July 1, 
 16.12  1995, 5.0 percent, 
 16.13     for purchases after June 30, 1995, and prior to July 1, 
 16.14  1996, 4.0 percent, 
 16.15     for purchases after June 30, 1996, and prior to July 1, 
 16.16  1997, 3.8 3.0 percent, 
 16.17     for purchases after June 30, 1997, and prior to July 1, 
 16.18  1998, 2.9 1.5 percent, and 
 16.19     for purchases after June 30, 1998, 2.0 percent exempt. 
 16.20     This subdivision shall cease to be operative on July 1, 
 16.21  2001, or on July 1 of the earliest year thereafter, if the total 
 16.22  employment in the manufacturing sector in this state, as 
 16.23  determined by the commissioner of economic security on the 
 16.24  preceding January 1, does not exceed by 4,500 the total 
 16.25  employment in the manufacturing sector in the state on January 
 16.26  1, 1994. 
 16.27     Sec. 7.  [REPEALER.] 
 16.28     (a) Minnesota Statutes 1995 Supplement, sections 270B.12, 
 16.29  subdivision 11; 276.012; 290A.055; 290A.26; and Laws 1995, 
 16.30  chapter 264, article 4, are repealed.  Notwithstanding Minnesota 
 16.31  Statutes, section 645.34, the sections of statutes amended by 
 16.32  the repealed Laws 1995, chapter 264, article 4, remain in effect.
 16.33     (b) Minnesota Statutes 1994, section 297A.01, subdivision 
 16.34  20, is repealed. 
 16.35     Sec. 8.  [EFFECTIVE DATES.] 
 16.36     Sections 1 and 2 are effective for tax years beginning 
 17.1   after December 31, 1995.  Section 3 is effective for property 
 17.2   tax refund claims filed in 1997 based on property taxes payable 
 17.3   in 1997, and thereafter.  Section 4 is effective for refund 
 17.4   claims filed in 1996, based on property taxes payable in 1995, 
 17.5   and thereafter.  Sections 5 and 7, paragraph (b), are effective 
 17.6   for sales and purchases made after June 30, 1998.  Section 6 is 
 17.7   effective for sales and purchases made after June 30, 1996.  
 17.8   Section 7, paragraph (a), is effective the day following final 
 17.9   enactment.