1st Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to financing and operation of state and local 1.3 government; making policy, technical, administrative, 1.4 enforcement, collection, refund, and other changes to 1.5 income, franchise, property, sales and use, estate, 1.6 vehicle registration, health care provider, cigarette 1.7 and tobacco products, insurance premiums, aggregate 1.8 removal, petroleum, gambling, mortgage registry, 1.9 occupation, net proceeds, and production taxes, and 1.10 other taxes and tax-related provisions; changing 1.11 provisions relating to fiscal disparities, 1.12 tax-forfeited lands, state debt collection procedures, 1.13 sustainable forest incentives programs, and tax data 1.14 provisions; conforming provisions to certain changes 1.15 in federal law; changing powers and duties of certain 1.16 local governments and state departments or agencies; 1.17 changing tax increment financing provisions; 1.18 authorizing establishment of an International Economic 1.19 Development Zone and providing for tax incentives; 1.20 imposing a franchise fee for operation of card clubs; 1.21 regulating tax preparers; imposing requirement on 1.22 vendors that contract with state to collect sales 1.23 taxes; changing provisions relating to certificates of 1.24 title of vehicles held by motor vehicle dealers; 1.25 changing or providing for studies and reports; 1.26 providing for task force on electronic filing and 1.27 recording of real estate documents; changing and 1.28 providing penalties; providing for allocation and 1.29 transfers of funds; clarifying appropriations; 1.30 appropriating money; amending Minnesota Statutes 2002, 1.31 sections 16C.03, by adding a subdivision; 16D.10; 1.32 97A.061, subdivision 1; 144F.01, subdivision 10; 1.33 168A.02, subdivision 2; 168A.11, subdivisions 1, 2, by 1.34 adding a subdivision; 240.30, by adding a subdivision; 1.35 270.02, subdivision 3; 270.65; 270.69, subdivision 4; 1.36 270B.01, subdivision 8; 270B.12, subdivision 9; 1.37 272.01, subdivision 2; 272.02, subdivisions 1a, 7, 22, 1.38 by adding subdivisions; 272.0212, subdivisions 1, 2; 1.39 272.029, subdivisions 4, 6; 273.11, by adding a 1.40 subdivision; 273.111, subdivision 6; 273.124, 1.41 subdivision 8, by adding a subdivision; 273.1384, 1.42 subdivision 1; 273.19, subdivision 1a; 274.14; 1.43 275.065, subdivision 1a; 275.07, subdivisions 1, 4; 1.44 276.04, subdivision 2; 282.016; 282.21; 282.224; 1.45 282.301; 287.04; 289A.08, subdivision 1; 289A.12, 1.46 subdivision 3; 289A.31, subdivision 2; 289A.37, 2.1 subdivision 5; 289A.38, subdivision 6; 289A.56, by 2.2 adding a subdivision; 289A.60, subdivision 6; 290.06, 2.3 subdivision 22, by adding a subdivision; 290.0674, 2.4 subdivision 2; 290.091, subdivision 3; 290.17, by 2.5 adding a subdivision; 290.191, subdivisions 2, 3, 5, 2.6 6, 10, 11, by adding a subdivision; 290.92, 2.7 subdivisions 1, 4b; 290.9705, subdivision 1; 290A.03, 2.8 subdivision 13; 290A.07, by adding a subdivision; 2.9 290C.05; 295.50, subdivision 4; 295.582; 296A.22, by 2.10 adding a subdivision; 297A.61, subdivision 4, by 2.11 adding subdivisions; 297A.62, by adding a subdivision; 2.12 297A.67, by adding a subdivision; 297A.68, by adding 2.13 subdivisions; 297A.70, by adding a subdivision; 2.14 297A.71, by adding a subdivision; 297A.87, 2.15 subdivisions 2, 3; 297A.995, subdivision 6; 297E.01, 2.16 subdivisions 5, 7, by adding subdivisions; 297E.07; 2.17 297F.01, by adding a subdivision; 297F.09, by adding a 2.18 subdivision; 297I.01, by adding subdivisions; 297I.05, 2.19 subdivisions 4, 5, by adding a subdivision; 298.01, 2.20 subdivisions 3, 4; 298.24, subdivision 1; 325D.33, 2.21 subdivision 6; 365.43, subdivision 1; 365.431; 2.22 469.1734, subdivision 6; 469.174, subdivision 11; 2.23 469.175, subdivision 4a; 469.176, subdivision 4d; 2.24 469.1761, subdivisions 1, 3; 469.1771, subdivision 5; 2.25 469.178, subdivision 1; 469.1831, subdivision 6; 2.26 473.843, subdivision 5; 473F.02, subdivisions 2, 7; 2.27 477A.11, subdivision 4, by adding a subdivision; 2.28 477A.12, subdivisions 1, 2; 477A.14, subdivision 1; 2.29 Minnesota Statutes 2003 Supplement, sections 4A.02; 2.30 16A.152, subdivision 2; 116J.556; 168A.05, subdivision 2.31 1a; 270.06; 270.30, subdivisions 1, 5, 8; 270B.12, 2.32 subdivision 13; 272.02, subdivisions 47, 56, 65; 2.33 273.11, subdivision 1a; 274.014, subdivision 3; 2.34 275.065, subdivision 3; 276.112; 289A.02, subdivision 2.35 7; 289A.08, subdivision 16; 289A.19, subdivision 4; 2.36 289A.40, subdivision 2; 290.01, subdivisions 7, 19, 2.37 19a, 19b, 19c, 19d, 31; 290.0674, subdivision 1; 2.38 290.091, subdivision 2; 290.0921, subdivision 3; 2.39 290A.03, subdivision 15; 290C.10; 291.005, subdivision 2.40 1; 291.03, subdivision 1; 297A.668, subdivisions 1, 3, 2.41 5; 297A.669, subdivision 16; 297A.68, subdivisions 2, 2.42 5, 39; 297A.70, subdivision 8; 297F.08, subdivision 2.43 12; 297F.09, subdivisions 1, 2; 298.75, subdivision 1; 2.44 469.174, subdivision 25; 469.177, subdivision 1; 2.45 469.310, subdivision 11; 469.330, subdivision 11; 2.46 469.335; 469.337; 477A.011, subdivision 36; 477A.03, 2.47 subdivision 2b; Laws 1990, chapter 604, article 7, 2.48 section 29, subdivision 1, as amended; Laws 1998, 2.49 chapter 389, article 3, section 41; Laws 1998, chapter 2.50 389, article 3, section 42, subdivision 2, as amended; 2.51 Laws 1998, chapter 389, article 8, section 43, 2.52 subdivision 3; Laws 1998, chapter 389, article 11, 2.53 section 24, subdivisions 1, 2; Laws 2000, chapter 391, 2.54 section 1, subdivisions 1, 2, as amended; Laws 2001, 2.55 First Special Session chapter 10, article 2, section 2.56 77, as amended; Laws 2002, chapter 365, section 9; 2.57 Laws 2002, chapter 377, article 3, section 4; Laws 2.58 2003, First Special Session chapter 1, article 2, 2.59 section 123; Laws 2003, First Special Session chapter 2.60 21, article 5, section 13; Laws 2003, First Special 2.61 Session chapter 21, article 6, section 9; proposing 2.62 coding for new law in Minnesota Statutes, chapters 2.63 270; 272; 273; 290; 290C; 297F; 325F; 469; 473; 2.64 repealing Minnesota Statutes 2002, sections 273.19, 2.65 subdivision 5; 274.05; 275.15; 283.07; 297E.12, 2.66 subdivision 10; 469.176, subdivision 1a; 469.1766; 2.67 Laws 1975, chapter 287, section 5; Laws 2003, chapter 2.68 127, article 9, section 9, subdivision 4; Minnesota 2.69 Rules, parts 8093.2000; 8093.3000; 8130.0110, subpart 2.70 4; 8130.0200, subparts 5, 6; 8130.0400, subpart 9; 2.71 8130.1200, subparts 5, 6; 8130.2900; 8130.3100, 3.1 subpart 1; 8130.4000, subparts 1, 2; 8130.4200, 3.2 subpart 1; 8130.4400, subpart 3; 8130.5200; 8130.5600, 3.3 subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 5; 3.4 8130.8800, subpart 4. 3.5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 3.6 ARTICLE 1 3.7 INCOME, FRANCHISE, AND OCCUPATION TAXES 3.8 Section 1. Minnesota Statutes 2002, section 289A.08, 3.9 subdivision 1, is amended to read: 3.10 Subdivision 1. [GENERALLY; INDIVIDUALS.] (a) A taxpayer 3.11 must file a return for each taxable year the taxpayer is 3.12 required to file a return under section 6012 of the Internal 3.13 Revenue Code, except that: 3.14 (1) an individual who is not a Minnesota resident for any 3.15 part of the year is not required to file a Minnesota income tax 3.16 return if the individual's gross income derived from Minnesota 3.17 sources as determined under sections 290.081, paragraph (a), and 3.18 290.17, is less than the filing requirements for a single 3.19 individual who is a full year resident of Minnesota; and 3.20 (2) an individual who is a Minnesota resident is not 3.21 required to file a Minnesota income tax return if the 3.22 individual's gross income derived from Minnesota sources as 3.23 determined under section 290.17, less the amount of the 3.24 individual's gross income that consists of compensation paid to 3.25 members of the armed forces of the United States or United 3.26 Nations for active duty performed outside Minnesota, is less 3.27 than the filing requirements for a single individual who is a 3.28 full-year resident of Minnesota. 3.29 (b) The decedent's final income tax return, and other 3.30 income tax returns for prior years where the decedent had gross 3.31 income in excess of the minimum amount at which an individual is 3.32 required to file and did not file, must be filed by the 3.33 decedent's personal representative, if any. If there is no 3.34 personal representative, the return or returns must be filed by 3.35 the transferees, as defined in section 289A.38, subdivision 13, 3.36 who receive property of the decedent. 3.37 (c) The term "gross income," as it is used in this section, 4.1 has the same meaning given it in section 290.01, subdivision 20. 4.2 [EFFECTIVE DATE.] This section is effective for taxable 4.3 years beginning after December 31,2003. 4.4 Sec. 2. Minnesota Statutes 2003 Supplement, section 4.5 289A.08, subdivision 16, is amended to read: 4.6 Subd. 16. [TAX REFUND OR RETURN PREPARERS; ELECTRONIC 4.7 FILING; PAPER FILING FEE IMPOSED.] (a) A "tax refund or return 4.8 preparer," as defined in section 289A.60, subdivision 13, 4.9 paragraph (g), who prepared more than500100 Minnesota 4.10 individual income tax returns for the prior calendar year must 4.11 file all Minnesota individual income tax returns prepared for 4.12 the current calendar year by electronic means. "Tax refund or 4.13 return preparer" does not include (i) an organization that meets 4.14 the requirements of section 501(c)(3) of the Internal Revenue 4.15 Code or (ii) an individual hired by such an organization for the 4.16 purpose of preparing tax returns. 4.17 (b)For tax returns prepared for the tax year beginning in4.182001, the "500" in paragraph (a) is reduced to 250.4.19(c) For tax returns prepared for tax years beginning after4.20December 31, 2001, the "500" in paragraph (a) is reduced to 100.4.21(d)Paragraph (a) does not apply to a return if the 4.22 taxpayer has indicated on the return that the taxpayer did not 4.23 want the return filed by electronic means. 4.24(e)(c) For each return that is not filed electronically by 4.25 a tax refund or return preparer under this subdivision, 4.26 including returns filed under paragraph(d)(b), a paper filing 4.27 fee of $5 is imposed upon the preparer. The fee is collected 4.28 from the preparer in the same manner as income tax. The fee 4.29 does not apply to returns that the commissioner requires to be 4.30 filed in paper form. 4.31 [EFFECTIVE DATE.] This section is effective for returns 4.32 filed for tax years beginning after December 31, 2003. 4.33 Sec. 3. Minnesota Statutes 2003 Supplement, section 4.34 290.01, subdivision 7, is amended to read: 4.35 Subd. 7. [RESIDENT.] (a) The term "resident" means any 4.36 individual domiciled in Minnesota, except that an individual is 5.1 not a "resident" for the period of time that the individual is 5.2either:5.3(1) on active duty stationed outside of Minnesota while in5.4the armed forces of the United States or the United Nations; or5.5(2)a "qualified individual" as defined in section 5.6 911(d)(1) of the Internal Revenue Code, if the qualified 5.7 individual notifies the county within three months of moving out 5.8 of the country that homestead status be revoked for the 5.9 Minnesota residence of the qualified individual, and the 5.10 property is not classified as a homestead while the individual 5.11 remains a qualified individual. 5.12 (b) "Resident" also means any individual domiciled outside 5.13 the state who maintains a place of abode in the state and spends 5.14 in the aggregate more than one-half of the tax year in 5.15 Minnesota, unless: 5.16 (1) the individual or the spouse of the individual is in 5.17 the armed forces of the United States; or 5.18 (2) the individual is covered under the reciprocity 5.19 provisions in section 290.081. 5.20 For purposes of this subdivision, presence within the state 5.21 for any part of a calendar day constitutes a day spent in the 5.22 state. Individuals shall keep adequate records to substantiate 5.23 the days spent outside the state. 5.24 The term "abode" means a dwelling maintained by an 5.25 individual, whether or not owned by the individual and whether 5.26 or not occupied by the individual, and includes a dwelling place 5.27 owned or leased by the individual's spouse. 5.28 (c) Neither the commissioner nor any court shall consider 5.29 charitable contributions made by an individual within or without 5.30 the state in determining if the individual is domiciled in 5.31 Minnesota. 5.32 [EFFECTIVE DATE.] This section is effective for taxable 5.33 years beginning after December 31, 2003. 5.34 Sec. 4. Minnesota Statutes 2003 Supplement, section 5.35 290.01, subdivision 19b, is amended to read: 5.36 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 6.1 individuals, estates, and trusts, there shall be subtracted from 6.2 federal taxable income: 6.3 (1) interest income on obligations of any authority, 6.4 commission, or instrumentality of the United States to the 6.5 extent includable in taxable income for federal income tax 6.6 purposes but exempt from state income tax under the laws of the 6.7 United States; 6.8 (2) if included in federal taxable income, the amount of 6.9 any overpayment of income tax to Minnesota or to any other 6.10 state, for any previous taxable year, whether the amount is 6.11 received as a refund or as a credit to another taxable year's 6.12 income tax liability; 6.13 (3) the amount paid to others, less the amount used to 6.14 claim the credit allowed under section 290.0674, not to exceed 6.15 $1,625 for each qualifying child in grades kindergarten to 6 and 6.16 $2,500 for each qualifying child in grades 7 to 12, for tuition, 6.17 textbooks, and transportation of each qualifying child in 6.18 attending an elementary or secondary school situated in 6.19 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 6.20 wherein a resident of this state may legally fulfill the state's 6.21 compulsory attendance laws, which is not operated for profit, 6.22 and which adheres to the provisions of the Civil Rights Act of 6.23 1964 and chapter 363A. For the purposes of this clause, 6.24 "tuition" includes fees or tuition as defined in section 6.25 290.0674, subdivision 1, clause (1). As used in this clause, 6.26 "textbooks" includes books and other instructional materials and 6.27 equipment purchased or leased for use in elementary and 6.28 secondary schools in teaching only those subjects legally and 6.29 commonly taught in public elementary and secondary schools in 6.30 this state. Equipment expenses qualifying for deduction 6.31 includes expenses as defined and limited in section 290.0674, 6.32 subdivision 1, clause (3). "Textbooks" does not include 6.33 instructional books and materials used in the teaching of 6.34 religious tenets, doctrines, or worship, the purpose of which is 6.35 to instill such tenets, doctrines, or worship, nor does it 6.36 include books or materials for, or transportation to, 7.1 extracurricular activities including sporting events, musical or 7.2 dramatic events, speech activities, driver's education, or 7.3 similar programs. For purposes of the subtraction provided by 7.4 this clause, "qualifying child" has the meaning given in section 7.5 32(c)(3) of the Internal Revenue Code; 7.6 (4) income as provided under section 290.0802; 7.7 (5) to the extent included in federal adjusted gross 7.8 income, income realized on disposition of property exempt from 7.9 tax under section 290.491; 7.10 (6) to the extent included in federal taxable income, 7.11 postservice benefits for youth community service under section 7.12 124D.42 for volunteer service under United States Code, title 7.13 42, sections 12601 to 12604; 7.14 (7) to the extent not deducted in determining federal 7.15 taxable income by an individual who does not itemize deductions 7.16 for federal income tax purposes for the taxable year, an amount 7.17 equal to 50 percent of the excess of charitable contributions 7.18 allowable as a deduction for the taxable year under section 7.19 170(a) of the Internal Revenue Code over $500; 7.20 (8) for taxable years beginning before January 1, 2008, the 7.21 amount of the federal small ethanol producer credit allowed 7.22 under section 40(a)(3) of the Internal Revenue Code which is 7.23 included in gross income under section 87 of the Internal 7.24 Revenue Code; 7.25 (9) for individuals who are allowed a federal foreign tax 7.26 credit for taxes that do not qualify for a credit under section 7.27 290.06, subdivision 22, an amount equal to the carryover of 7.28 subnational foreign taxes for the taxable year, but not to 7.29 exceed the total subnational foreign taxes reported in claiming 7.30 the foreign tax credit. For purposes of this clause, "federal 7.31 foreign tax credit" means the credit allowed under section 27 of 7.32 the Internal Revenue Code, and "carryover of subnational foreign 7.33 taxes" equals the carryover allowed under section 904(c) of the 7.34 Internal Revenue Code minus national level foreign taxes to the 7.35 extent they exceed the federal foreign tax credit; 7.36 (10) in each of the five tax years immediately following 8.1 the tax year in which an addition is required under subdivision 8.2 19a, clause (7), or subdivision 19c, clause (16), an amount 8.3 equal to one-fifth of the delayed depreciation. For purposes of 8.4 this clause, "delayed depreciation" means the amount of the 8.5 addition made by the taxpayer under subdivision 19a, clause (7), 8.6 or, in the case of a corporation that converts to an "S" 8.7 corporation, the addition made under subdivision 19c, clause 8.8 (16), minus the positive value of any net operating loss under 8.9 section 172 of the Internal Revenue Code generated for the tax 8.10 year of the addition. The resulting delayed depreciation cannot 8.11 be less than zero;and8.12 (11) job opportunity building zone income as provided under 8.13 section 469.316.; 8.14 (12) the amount of compensation paid to members of the 8.15 Minnesota National Guard or other reserve components of the 8.16 United States military for active service performed in 8.17 Minnesota, excluding compensation for services performed under 8.18 the Active Guard Reserve (AGR) program. For purposes of this 8.19 clause, "active service" means (i) state active service as 8.20 defined in section 190.05, subdivision 5a, clause (1); (ii) 8.21 federally funded state active service as defined in section 8.22 190.05, subdivision 5b; or (iii) federal active service as 8.23 defined in section 190.05, subdivision 5c, but "active service" 8.24 excludes services performed exclusively for purposes of basic 8.25 combat training, advanced individual training, annual training, 8.26 and periodic inactive duty training; special training 8.27 periodically made available to reserve members; and service 8.28 performed in accordance with section 190.08, subdivision 3; 8.29 (13) the amount of compensation paid to members of the 8.30 armed forces of the United States or United Nations for active 8.31 duty performed outside Minnesota; and 8.32 (14) to the extent not deducted in computing federal 8.33 taxable income, an amount, not to exceed $10,000, equal to 8.34 qualified expenses related to a qualified donor's donation, 8.35 while living, of one or more of the qualified donor's organs to 8.36 another person for human organ transplantation. For purposes of 9.1 determining the extent to which expenses are deducted in 9.2 computing federal taxable income, travel and lodging expenses 9.3 related to an organ donation are considered deducted by an 9.4 individual in determining federal taxable income to the extent 9.5 they exceed 7.5 percent of federal adjusted gross income as 9.6 defined in section 62 of the Internal Revenue Code. For 9.7 purposes of this clause, "organ" means all or part of an 9.8 individual's liver, pancreas, kidney, intestine, lung, or bone 9.9 marrow; "human organ transplantation" means the medical 9.10 procedure by which transfer of a human organ is made from the 9.11 body of one person to the body of another person; "qualified 9.12 expenses" means unreimbursed expenses for both the individual 9.13 and the qualified donor for (i) travel, (ii) lodging, and (iii) 9.14 lost wages net of sick pay, except that such expenses may be 9.15 subtracted under this clause only once; and "qualified donor" 9.16 means the individual or the individual's dependent, as defined 9.17 in section 152 of the Internal Revenue Code. An individual may 9.18 claim the subtraction in this clause only once for each instance 9.19 of organ donation for transplantation during the taxable year in 9.20 which the human organ donation and transplantation occurs. 9.21 [EFFECTIVE DATE.] The changes to clause (10) of this 9.22 section are effective for taxable years beginning after December 9.23 31, 2002. The rest of this section is effective for taxable 9.24 years beginning after December 31, 2003. 9.25 Sec. 5. Minnesota Statutes 2003 Supplement, section 9.26 290.01, subdivision 19c, is amended to read: 9.27 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 9.28 INCOME.] For corporations, there shall be added to federal 9.29 taxable income: 9.30 (1) the amount of any deduction taken for federal income 9.31 tax purposes for income, excise, or franchise taxes based on net 9.32 income or related minimum taxes, including but not limited to 9.33 the tax imposed under section 290.0922, paid by the corporation 9.34 to Minnesota, another state, a political subdivision of another 9.35 state, the District of Columbia, or any foreign country or 9.36 possession of the United States; 10.1 (2) interest not subject to federal tax upon obligations 10.2 of: the United States, its possessions, its agencies, or its 10.3 instrumentalities; the state of Minnesota or any other state, 10.4 any of its political or governmental subdivisions, any of its 10.5 municipalities, or any of its governmental agencies or 10.6 instrumentalities; the District of Columbia; or Indian tribal 10.7 governments; 10.8 (3) exempt-interest dividends received as defined in 10.9 section 852(b)(5) of the Internal Revenue Code; 10.10 (4) the amount of any net operating loss deduction taken 10.11 for federal income tax purposes under section 172 or 832(c)(10) 10.12 of the Internal Revenue Code or operations loss deduction under 10.13 section 810 of the Internal Revenue Code; 10.14 (5) the amount of any special deductions taken for federal 10.15 income tax purposes under sections 241 to 247 of the Internal 10.16 Revenue Code; 10.17 (6) losses from the business of mining, as defined in 10.18 section 290.05, subdivision 1, clause (a), that are not subject 10.19 to Minnesota income tax; 10.20 (7) the amount of any capital losses deducted for federal 10.21 income tax purposes under sections 1211 and 1212 of the Internal 10.22 Revenue Code; 10.23 (8) the exempt foreign trade income of a foreign sales 10.24 corporation under sections 921(a) and 291 of the Internal 10.25 Revenue Code; 10.26 (9) the amount of percentage depletion deducted under 10.27 sections 611 through 614 and 291 of the Internal Revenue Code; 10.28 (10) for certified pollution control facilities placed in 10.29 service in a taxable year beginning before December 31, 1986, 10.30 and for which amortization deductions were elected under section 10.31 169 of the Internal Revenue Code of 1954, as amended through 10.32 December 31, 1985, the amount of the amortization deduction 10.33 allowed in computing federal taxable income for those 10.34 facilities; 10.35 (11) the amount of any deemed dividend from a foreign 10.36 operating corporation determined pursuant to section 290.17, 11.1 subdivision 4, paragraph (g); 11.2 (12) the amount of any environmental tax paid under section 11.3 59(a) of the Internal Revenue Code; 11.4 (13) the amount of a partner's pro rata share of net income 11.5 which does not flow through to the partner because the 11.6 partnership elected to pay the tax on the income under section 11.7 6242(a)(2) of the Internal Revenue Code; 11.8 (14) the amount of net income excluded under section 114 of 11.9 the Internal Revenue Code; 11.10 (15) any increase in subpart F income, as defined in 11.11 section 952(a) of the Internal Revenue Code, for the taxable 11.12 year when subpart F income is calculated without regard to the 11.13 provisions of section 614 of Public Law 107-147;and11.14 (16) 80 percent of the depreciation deduction allowed under 11.15 section 168(k) of the Internal Revenue Code. For purposes of 11.16 this clause, if the taxpayer has an activity that in the taxable 11.17 year generates a deduction for depreciation under section 168(k) 11.18 and the activity generates a loss for the taxable year that the 11.19 taxpayer is not allowed to claim for the taxable year, "the 11.20 depreciation allowed under section 168(k)" for the taxable year 11.21 is limited to excess of the depreciation claimed by the activity 11.22 under section 168(k) over the amount of the loss from the 11.23 activity that is not allowed in the taxable year. In succeeding 11.24 taxable years when the losses not allowed in the taxable year 11.25 are allowed, the depreciation under section 168(k) is allowed; 11.26 and 11.27 (17) the excess of deductions over income attributable to 11.28 tax-exempt property, as provided under section 290.0711. 11.29 [EFFECTIVE DATE.] This section is effective for leases and 11.30 service contracts or similar arrangements entered into after 11.31 February 5, 2004, and for taxable years beginning after December 11.32 31, 2003. 11.33 Sec. 6. Minnesota Statutes 2003 Supplement, section 11.34 290.01, subdivision 19d, is amended to read: 11.35 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 11.36 TAXABLE INCOME.] For corporations, there shall be subtracted 12.1 from federal taxable income after the increases provided in 12.2 subdivision 19c: 12.3 (1) the amount of foreign dividend gross-up added to gross 12.4 income for federal income tax purposes under section 78 of the 12.5 Internal Revenue Code; 12.6 (2) the amount of salary expense not allowed for federal 12.7 income tax purposes due to claiming the federal jobs credit 12.8 under section 51 of the Internal Revenue Code; 12.9 (3) any dividend (not including any distribution in 12.10 liquidation) paid within the taxable year by a national or state 12.11 bank to the United States, or to any instrumentality of the 12.12 United States exempt from federal income taxes, on the preferred 12.13 stock of the bank owned by the United States or the 12.14 instrumentality; 12.15 (4) amounts disallowed for intangible drilling costs due to 12.16 differences between this chapter and the Internal Revenue Code 12.17 in taxable years beginning before January 1, 1987, as follows: 12.18 (i) to the extent the disallowed costs are represented by 12.19 physical property, an amount equal to the allowance for 12.20 depreciation under Minnesota Statutes 1986, section 290.09, 12.21 subdivision 7, subject to the modifications contained in 12.22 subdivision 19e; and 12.23 (ii) to the extent the disallowed costs are not represented 12.24 by physical property, an amount equal to the allowance for cost 12.25 depletion under Minnesota Statutes 1986, section 290.09, 12.26 subdivision 8; 12.27 (5) the deduction for capital losses pursuant to sections 12.28 1211 and 1212 of the Internal Revenue Code, except that: 12.29 (i) for capital losses incurred in taxable years beginning 12.30 after December 31, 1986, capital loss carrybacks shall not be 12.31 allowed; 12.32 (ii) for capital losses incurred in taxable years beginning 12.33 after December 31, 1986, a capital loss carryover to each of the 12.34 15 taxable years succeeding the loss year shall be allowed; 12.35 (iii) for capital losses incurred in taxable years 12.36 beginning before January 1, 1987, a capital loss carryback to 13.1 each of the three taxable years preceding the loss year, subject 13.2 to the provisions of Minnesota Statutes 1986, section 290.16, 13.3 shall be allowed; and 13.4 (iv) for capital losses incurred in taxable years beginning 13.5 before January 1, 1987, a capital loss carryover to each of the 13.6 five taxable years succeeding the loss year to the extent such 13.7 loss was not used in a prior taxable year and subject to the 13.8 provisions of Minnesota Statutes 1986, section 290.16, shall be 13.9 allowed; 13.10 (6) an amount for interest and expenses relating to income 13.11 not taxable for federal income tax purposes, if (i) the income 13.12 is taxable under this chapter and (ii) the interest and expenses 13.13 were disallowed as deductions under the provisions of section 13.14 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 13.15 federal taxable income; 13.16 (7) in the case of mines, oil and gas wells, other natural 13.17 deposits, and timber for which percentage depletion was 13.18 disallowed pursuant to subdivision 19c, clause (11), a 13.19 reasonable allowance for depletion based on actual cost. In the 13.20 case of leases the deduction must be apportioned between the 13.21 lessor and lessee in accordance with rules prescribed by the 13.22 commissioner. In the case of property held in trust, the 13.23 allowable deduction must be apportioned between the income 13.24 beneficiaries and the trustee in accordance with the pertinent 13.25 provisions of the trust, or if there is no provision in the 13.26 instrument, on the basis of the trust's income allocable to 13.27 each; 13.28 (8) for certified pollution control facilities placed in 13.29 service in a taxable year beginning before December 31, 1986, 13.30 and for which amortization deductions were elected under section 13.31 169 of the Internal Revenue Code of 1954, as amended through 13.32 December 31, 1985, an amount equal to the allowance for 13.33 depreciation under Minnesota Statutes 1986, section 290.09, 13.34 subdivision 7; 13.35 (9) amounts included in federal taxable income that are due 13.36 to refunds of income, excise, or franchise taxes based on net 14.1 income or related minimum taxes paid by the corporation to 14.2 Minnesota, another state, a political subdivision of another 14.3 state, the District of Columbia, or a foreign country or 14.4 possession of the United States to the extent that the taxes 14.5 were added to federal taxable income under section 290.01, 14.6 subdivision 19c, clause (1), in a prior taxable year; 14.7 (10) 80 percent of royalties, fees, or other like income 14.8 accrued or received from a foreign operating corporation or a 14.9 foreign corporation which is part of the same unitary business 14.10 as the receiving corporation; 14.11 (11) income or gains from the business of mining as defined 14.12 in section 290.05, subdivision 1, clause (a), that are not 14.13 subject to Minnesota franchise tax; 14.14 (12) the amount of handicap access expenditures in the 14.15 taxable year which are not allowed to be deducted or capitalized 14.16 under section 44(d)(7) of the Internal Revenue Code; 14.17 (13) the amount of qualified research expenses not allowed 14.18 for federal income tax purposes under section 280C(c) of the 14.19 Internal Revenue Code, but only to the extent that the amount 14.20 exceeds the amount of the credit allowed under section 290.068; 14.21 (14) the amount of salary expenses not allowed for federal 14.22 income tax purposes due to claiming the Indian employment credit 14.23 under section 45A(a) of the Internal Revenue Code; 14.24 (15) the amount of any refund of environmental taxes paid 14.25 under section 59A of the Internal Revenue Code; 14.26 (16) for taxable years beginning before January 1, 2008, 14.27 the amount of the federal small ethanol producer credit allowed 14.28 under section 40(a)(3) of the Internal Revenue Code which is 14.29 included in gross income under section 87 of the Internal 14.30 Revenue Code; 14.31 (17) for a corporation whose foreign sales corporation, as 14.32 defined in section 922 of the Internal Revenue Code, constituted 14.33 a foreign operating corporation during any taxable year ending 14.34 before January 1, 1995, and a return was filed by August 15, 14.35 1996, claiming the deduction under section 290.21, subdivision 14.36 4, for income received from the foreign operating corporation, 15.1 an amount equal to 1.23 multiplied by the amount of income 15.2 excluded under section 114 of the Internal Revenue Code, 15.3 provided the income is not income of a foreign operating 15.4 company; 15.5 (18) any decrease in subpart F income, as defined in 15.6 section 952(a) of the Internal Revenue Code, for the taxable 15.7 year when subpart F income is calculated without regard to the 15.8 provisions of section 614 of Public Law 107-147;and15.9 (19) in each of the five tax years immediately following 15.10 the tax year in which an addition is required under subdivision 15.11 19c, clause (16), an amount equal to one-fifth of the delayed 15.12 depreciation. For purposes of this clause, "delayed 15.13 depreciation" means the amount of the addition made by the 15.14 taxpayer under subdivision 19c, clause (16). The resulting 15.15 delayed depreciation cannot be less than zero; and 15.16 (20) amounts allowed as carryover subtractions attributable 15.17 to tax-exempt property, as provided under section 290.0711. 15.18 [EFFECTIVE DATE.] This section is effective for leases and 15.19 service contracts or similar arrangements entered into after 15.20 February 5, 2004, and for taxable years beginning after December 15.21 31, 2003. 15.22 Sec. 7. Minnesota Statutes 2002, section 290.0674, 15.23 subdivision 2, is amended to read: 15.24 Subd. 2. [LIMITATIONS.] (a) For claimants with income not 15.25 greater than $33,500, the maximum credit allowed is $1,000per15.26qualifying child and $2,000 per familyfor a family with one 15.27 qualifying child and $2,000 for a family with two or more 15.28 qualifying children. No credit is allowed for education-related 15.29 expenses for claimants with income greater than $37,500. The 15.30 maximum creditperfor a family with one qualifying child is 15.31 reduced by $1 for each $4 of household income over $33,500, and 15.32 the maximum creditperfor a family with more than one 15.33 qualifying child is reduced by $2 for each $4 of household 15.34 income over $33,500, but in no case is the credit less than zero. 15.35 For purposes of this section "income" has the meaning given 15.36 in section 290.067, subdivision 2a. In the case of a married 16.1 claimant, a credit is not allowed unless a joint income tax 16.2 return is filed. 16.3 (b) For a nonresident or part-year resident, the credit 16.4 determined under subdivision 1 and the maximum credit amount in 16.5 paragraph (a) must be allocated using the percentage calculated 16.6 in section 290.06, subdivision 2c, paragraph (e). 16.7 [EFFECTIVE DATE.] This section is effective for taxable 16.8 years beginning after December 31, 2003. 16.9 Sec. 8. [290.0711] [TAX-EXEMPT PROPERTY; LIMITS ON TAX 16.10 BENEFITS.] 16.11 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 16.12 section, the following terms have the meanings given. 16.13 (b) "Tax-exempt use property" has the meaning given in 16.14 section 168(h) of the Internal Revenue Code, except the 16.15 provisions of clause (2)(C)(ii) and paragraph (3) do not apply. 16.16 If tangible property is subject to a service contract or other 16.17 similar arrangement between a taxpayer or any related person and 16.18 any tax-exempt entity, the contract or arrangement must be 16.19 treated in the same manner as if it is tax-exempt property under 16.20 this subdivision. 16.21 (c) "Taxpayer" means a corporation, subject to the 16.22 corporate franchise tax under this chapter, that is claiming the 16.23 deduction on the federal return and any member of its unitary 16.24 group. 16.25 Subd. 2. [ADDITION OF EXCESS DEDUCTIONS.] In computing 16.26 Minnesota taxable income, the taxpayer must add to federal 16.27 taxable income the excess of: 16.28 (1) the aggregate amount of deductions claimed in computing 16.29 federal taxable income with respect to tax-exempt use property; 16.30 over 16.31 (2) the aggregate amount of income includable in federal 16.32 gross income of the taxpayer for the taxable year with respect 16.33 to tax-exempt use property. 16.34 Subd. 3. [CARRYOVER SUBTRACTION.] Unless otherwise 16.35 provided in this section, any addition under subdivision 2 may 16.36 be carried to a later taxable year and claimed as a subtraction 17.1 reducing the federal taxable income of the taxpayer to the 17.2 extent that income with respect to tax-exempt use property 17.3 exceeds the amount of deductions claimed with respect to 17.4 tax-exempt properties in computing federal taxable income for 17.5 that taxable year. 17.6 Subd. 4. [SPECIAL RULES.] (a) The following rules apply to 17.7 the computation of the addition under subdivision 2. 17.8 (b) Subdivision 2 applies to deductions directly allocable 17.9 to any tax-exempt use property and to a proper share of other 17.10 deductions that are not directly allocable to tax exempt. 17.11 (c) If property of a taxpayer ceases to be tax-exempt use 17.12 property in the hands of the taxpayer, any unused carryover 17.13 under subdivision 3 with respect to the property is only 17.14 allowable as a subtraction for any taxable year to the extent of 17.15 any net income of the taxpayer that is allocable to the property 17.16 that ceased to be tax-exempt property. 17.17 (d) If during the taxable year, a taxpayer disposes of the 17.18 taxpayer's entire interest in tax-exempt use property, the 17.19 taxpayer may claim a subtraction for the lesser of: 17.20 (1) the amount of gain realized on the disposition and 17.21 includable in federal taxable income; or 17.22 (2) the amount of additions under subdivision 2 17.23 attributable to the property and not claimed in a later year 17.24 under subdivision 3. 17.25 [EFFECTIVE DATE.] This section is effective for leases and 17.26 service contracts or similar arrangements entered into after 17.27 February 5, 2004, and for taxable years beginning after December 17.28 31, 2003. 17.29 Sec. 9. Minnesota Statutes 2003 Supplement, section 17.30 290.091, subdivision 2, is amended to read: 17.31 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 17.32 this section, the following terms have the meanings given: 17.33 (a) "Alternative minimum taxable income" means the sum of 17.34 the following for the taxable year: 17.35 (1) the taxpayer's federal alternative minimum taxable 17.36 income as defined in section 55(b)(2) of the Internal Revenue 18.1 Code; 18.2 (2) the taxpayer's itemized deductions allowed in computing 18.3 federal alternative minimum taxable income, but excluding: 18.4 (i) the charitable contribution deduction under section 170 18.5 of the Internal Revenue Code; 18.6 (A) for taxable years beginning before January 1, 2004, to 18.7 the extent that the deduction exceeds 1.0 percent of adjusted 18.8 gross income, as defined; 18.9 (B) for taxable years beginning after December 31, 2003, 18.10 and before January 1, 2005, to the extent the deduction exceeds 18.11 0.2 percent of adjusted gross income; 18.12 (C) for taxable years beginning after December 31, 2004, to 18.13 the full extent of the deduction. 18.14 For purposes of this clause, "adjusted gross income" has 18.15 the meaning given in section 62 of the Internal Revenue Code; 18.16 (ii) the medical expense deduction; 18.17 (iii) the casualty, theft, and disaster loss deduction; and 18.18 (iv) the impairment-related work expenses of a disabled 18.19 person; 18.20 (3) for depletion allowances computed under section 613A(c) 18.21 of the Internal Revenue Code, with respect to each property (as 18.22 defined in section 614 of the Internal Revenue Code), to the 18.23 extent not included in federal alternative minimum taxable 18.24 income, the excess of the deduction for depletion allowable 18.25 under section 611 of the Internal Revenue Code for the taxable 18.26 year over the adjusted basis of the property at the end of the 18.27 taxable year (determined without regard to the depletion 18.28 deduction for the taxable year); 18.29 (4) to the extent not included in federal alternative 18.30 minimum taxable income, the amount of the tax preference for 18.31 intangible drilling cost under section 57(a)(2) of the Internal 18.32 Revenue Code determined without regard to subparagraph (E); 18.33 (5) to the extent not included in federal alternative 18.34 minimum taxable income, the amount of interest income as 18.35 provided by section 290.01, subdivision 19a, clause (1); and 18.36 (6) the amount of addition required by section 290.01, 19.1 subdivision 19a, clause (7); 19.2 less the sum of the amounts determined under the following: 19.3 (1) interest income as defined in section 290.01, 19.4 subdivision 19b, clause (1); 19.5 (2) an overpayment of state income tax as provided by 19.6 section 290.01, subdivision 19b, clause (2), to the extent 19.7 included in federal alternative minimum taxable income; 19.8 (3) the amount of investment interest paid or accrued 19.9 within the taxable year on indebtedness to the extent that the 19.10 amount does not exceed net investment income, as defined in 19.11 section 163(d)(4) of the Internal Revenue Code. Interest does 19.12 not include amounts deducted in computing federal adjusted gross 19.13 income; and 19.14 (4) amounts subtracted from federal taxable income as 19.15 provided by section 290.01, subdivision 19b, clauses (10)and19.16(11)to (14). 19.17 In the case of an estate or trust, alternative minimum 19.18 taxable income must be computed as provided in section 59(c) of 19.19 the Internal Revenue Code. 19.20 (b) "Investment interest" means investment interest as 19.21 defined in section 163(d)(3) of the Internal Revenue Code. 19.22 (c) "Tentative minimum tax" equals 6.4 percent of 19.23 alternative minimum taxable income after subtracting the 19.24 exemption amount determined under subdivision 3. 19.25 (d) "Regular tax" means the tax that would be imposed under 19.26 this chapter (without regard to this section and section 19.27 290.032), reduced by the sum of the nonrefundable credits 19.28 allowed under this chapter. 19.29 (e) "Net minimum tax" means the minimum tax imposed by this 19.30 section. 19.31 [EFFECTIVE DATE.] This section is effective for taxable 19.32 years beginning after December 31, 2003. 19.33 Sec. 10. Minnesota Statutes 2002, section 290.091, 19.34 subdivision 3, is amended to read: 19.35 Subd. 3. [EXEMPTION AMOUNT.] (a) For purposes of computing 19.36 the alternative minimum tax, the exemption amount is: 20.1 (1) for taxable years beginning before January 1, 2004, the 20.2 exemption determined under section 55(d) of the Internal Revenue 20.3 Code, as amended through December 31, 1992; 20.4 (2) for taxable years beginning after December 31, 2003, 20.5 and before January 1, 2005, $41,000 for married couples filing 20.6 joint returns; $20,500 for married individuals filing separate 20.7 returns, estates, and trusts; and $30,750 for unmarried 20.8 individuals; 20.9 (3) for taxable years beginning after December 31, 2004, 20.10 and before January 1, 2006, $42,000 for married couples filing 20.11 joint returns; $21,000 for married individuals filing separate 20.12 returns, estates, and trusts; and $31,500 for unmarried 20.13 individuals; 20.14 (4) for taxable years beginning after December 31, 2005, 20.15 $44,000 for married couples filing joint returns; $22,000 for 20.16 married individuals filing separate returns, estates, and 20.17 trusts; and $33,000 for unmarried individuals. 20.18 (b) The exemption amount determined under this subdivision 20.19 is subject to the phase out under section 55(d)(3) of the 20.20 Internal Revenue Code, except that alternative minimum taxable 20.21 income as determined under this section must be substituted in 20.22 the computation of the phase outunder section 55(d)(3). 20.23 (c) For taxable years beginning after December 31, 2006, 20.24 the exemption amount under paragraph (a), clause (4), must be 20.25 adjusted for inflation. The commissioner shall make the 20.26 inflation adjustments in accordance with section 1(f) of the 20.27 Internal Revenue Code except that for the purposes of this 20.28 subdivision the percentage increase must be determined from the 20.29 year starting September 1, 2005, and ending August 31, 2006, as 20.30 the base year for adjusting for inflation for the tax year 20.31 beginning after December 31, 2006. The determination of the 20.32 commissioner under this subdivision is not a rule under the 20.33 Administrative Procedure Act. 20.34 [EFFECTIVE DATE.] This section is effective for taxable 20.35 years beginning after December 31, 2003. 20.36 Sec. 11. Minnesota Statutes 2002, section 290.17, is 21.1 amended by adding a subdivision to read: 21.2 Subd. 8. [FOREIGN OPERATING CORPORATIONS; COMMISSIONER'S 21.3 AUTHORITY.] (a) This subdivision applies to a unitary business 21.4 that includes a foreign operating corporation. 21.5 (b) The commissioner may disqualify a corporation as a 21.6 foreign operating corporation, if the commissioner finds that: 21.7 (1) there was no substantial independent business purpose, 21.8 other than the reduction of tax, for establishment of the 21.9 foreign operating corporation; 21.10 (2) the income of the foreign operating corporation, on a 21.11 multiyear basis, is primarily derived from or fairly 21.12 attributable to domestic operations or sources of the unitary 21.13 business; or 21.14 (3) a significant amount of inter-company transactions 21.15 involving the foreign operating corporation lack economic 21.16 substance or do not reflect market prices. 21.17 Disqualification of a foreign operating corporation under 21.18 this paragraph applies for the taxable year and two subsequent 21.19 taxable years. 21.20 (c) The commissioner may disallow all or part of the 21.21 subtraction for royalties, fees, and like income under section 21.22 290.01, subdivision 19d, clause (10), or all or part of the 21.23 deduction for deemed dividends of the foreign operating 21.24 corporation under section 290.21, if the commissioner finds that 21.25 the income or transactions on which the deductions are based: 21.26 (1) lack economic substance or fail to reflect market 21.27 prices; or 21.28 (2) have no substantial independent business purpose other 21.29 than the reduction of tax. 21.30 (d) The amount of any tax imposed as a result of a 21.31 commissioner finding under this subdivision is increased by a 21.32 surtax of 15 percent. 21.33 [EFFECTIVE DATE.] This section is effective January 1, 21.34 2005, for all taxable years. 21.35 Sec. 12. Minnesota Statutes 2002, section 290.191, 21.36 subdivision 2, is amended to read: 22.1 Subd. 2. [APPORTIONMENT FORMULA OF GENERAL APPLICATION.] 22.2 Except for those trades or businesses required to use a 22.3 different formula under subdivision 3 or section 290.36, and for 22.4 those trades or businesses that receive permission to use some 22.5 other method under section 290.20 or under subdivision 4, a 22.6 trade or business required to apportion its net income must 22.7 apportion its income to this state on the basis of the 22.8 percentage obtained by taking the sum of: 22.9 (1) 75 percent of the percentage which the sales made 22.10 within this state in connection with the trade or business 22.11 during the tax period are of the total sales wherever made in 22.12 connection with the trade or business during the tax period; 22.13 (2) 12.5 percent of the percentage which the total tangible 22.14 property used by the taxpayer in this state in connection with 22.15 the trade or business during the tax period is of the total 22.16 tangible property, wherever located, used by the taxpayer in 22.17 connection with the trade or business during the tax period; and 22.18 (3) 12.5 percent of the percentage which the taxpayer's 22.19 total payrolls paid or incurred in this state or paid in respect 22.20 to labor performed in this state in connection with the trade or 22.21 business during the tax period are of the taxpayer's total 22.22 payrolls paid or incurred in connection with the trade or 22.23 business during the tax period. 22.24 For tax years beginning after December 31, 2004, but before 22.25 January 1, 2006, the apportionment percentage in clause (1) 22.26 shall be 78 percent and the apportionment percentages in clauses 22.27 (2) and (3) shall be 11 percent. 22.28 For tax years beginning after December 31, 2005, but before 22.29 January 1, 2007, the apportionment percentage in clause (1) 22.30 shall be 81 percent and the apportionment percentages in clauses 22.31 (2) and (3) shall be 9.5 percent. 22.32 For tax years beginning after December 31, 2006, but before 22.33 January 1, 2008, the apportionment percentage in clause (1) 22.34 shall be 84 percent and the apportionment percentages in clauses 22.35 (2) and (3) shall be 8 percent. 22.36 For tax years beginning after December 31, 2007, but before 23.1 January 1, 2009, the apportionment percentage in clause (1) 23.2 shall be 87 percent and the apportionment percentages in clauses 23.3 (2) and (3) shall be 6.5 percent. 23.4 For tax years beginning after December 31, 2008, but before 23.5 January 1, 2010, the apportionment percentage in clause (1) 23.6 shall be 90 percent and the apportionment percentages in clauses 23.7 (2) and (3) shall be 5 percent. 23.8 For tax years beginning after December 31, 2009, but before 23.9 January 1, 2011, the apportionment percentage in clause (1) 23.10 shall be 93 percent and the apportionment percentages in clauses 23.11 (2) and (3) shall be 3.5 percent. 23.12 For tax years beginning after December 31, 2010, but before 23.13 January 1, 2012, the apportionment percentage in clause (1) 23.14 shall be 96 percent and the apportionment percentages in clauses 23.15 (2) and (3) shall be 2 percent. 23.16 For tax years beginning after December 31, 2011, the 23.17 apportionment percentage in clause (1) shall be 100 percent and 23.18 the apportionment percentages in clauses (2) and (3) shall be 23.19 zero percent. 23.20 [EFFECTIVE DATE.] This section is effective the day 23.21 following final enactment. 23.22 Sec. 13. Minnesota Statutes 2002, section 290.191, 23.23 subdivision 3, is amended to read: 23.24 Subd. 3. [APPORTIONMENT FORMULA FOR FINANCIAL 23.25 INSTITUTIONS.] Except for an investment company required to 23.26 apportion its income under section 290.36, a financial 23.27 institution that is required to apportion its net income must 23.28 apportion its net income to this state on the basis of the 23.29 percentage obtained by taking the sum of: 23.30 (1) 75 percent of the percentage which the receipts from 23.31 within this state in connection with the trade or business 23.32 during the tax period are of the total receipts in connection 23.33 with the trade or business during the tax period, from wherever 23.34 derived; 23.35 (2) 12.5 percent of the percentage which the sum of the 23.36 total tangible property used by the taxpayer in this state and 24.1 the intangible property owned by the taxpayer and attributed to 24.2 this state in connection with the trade or business during the 24.3 tax period is of the sum of the total tangible property, 24.4 wherever located, used by the taxpayer and the intangible 24.5 property owned by the taxpayer and attributed to all states in 24.6 connection with the trade or business during the tax period; and 24.7 (3) 12.5 percent of the percentage which the taxpayer's 24.8 total payrolls paid or incurred in this state or paid in respect 24.9 to labor performed in this state in connection with the trade or 24.10 business during the tax period are of the taxpayer's total 24.11 payrolls paid or incurred in connection with the trade or 24.12 business during the tax period. 24.13 For tax years beginning after December 31, 2004, but before 24.14 January 1, 2006, the apportionment percentage in clause (1) 24.15 shall be 78 percent and the apportionment percentages in clauses 24.16 (2) and (3) shall be 11 percent. 24.17 For tax years beginning after December 31, 2005, but before 24.18 January 1, 2007, the apportionment percentage in clause (1) 24.19 shall be 81 percent and the apportionment percentages in clauses 24.20 (2) and (3) shall be 9.5 percent. 24.21 For tax years beginning after December 31, 2006, but before 24.22 January 1, 2008, the apportionment percentage in clause (1) 24.23 shall be 84 percent and the apportionment percentages in clauses 24.24 (2) and (3) shall be 8 percent. 24.25 For tax years beginning after December 31, 2007, but before 24.26 January 1, 2009, the apportionment percentage in clause (1) 24.27 shall be 87 percent and the apportionment percentages in clauses 24.28 (2) and (3) shall be 6.5 percent. 24.29 For tax years beginning after December 31, 2008, but before 24.30 January 1, 2010, the apportionment percentage in clause (1) 24.31 shall be 90 percent and the apportionment percentages in clauses 24.32 (2) and (3) shall be 5 percent. 24.33 For tax years beginning after December 31, 2009, but before 24.34 January 1, 2011, the apportionment percentage in clause (1) 24.35 shall be 93 percent and the apportionment percentages in clauses 24.36 (2) and (3) shall be 3.5 percent. 25.1 For tax years beginning after December 31, 2010, but before 25.2 January 1, 2012, the apportionment percentage in clause (1) 25.3 shall be 96 percent and the apportionment percentages in clauses 25.4 (2) and (3) shall be 2 percent. 25.5 For tax years beginning after December 31, 2011, the 25.6 apportionment percentage in clause (1) shall be 100 percent and 25.7 the apportionment percentages in clauses (2) and (3) shall be 25.8 zero percent. 25.9 [EFFECTIVE DATE.] This section is effective the day 25.10 following final enactment. 25.11 Sec. 14. Minnesota Statutes 2002, section 290.191, 25.12 subdivision 5, is amended to read: 25.13 Subd. 5. [DETERMINATION OF SALES FACTOR.] For purposes of 25.14 this section, the following rules apply in determining the sales 25.15 factor. 25.16 (a) The sales factor includes all sales, gross earnings, or 25.17 receipts received in the ordinary course of the business, except 25.18 that the following types of income are not included in the sales 25.19 factor: 25.20 (1) interest; 25.21 (2) dividends; 25.22 (3) sales of capital assets as defined in section 1221 of 25.23 the Internal Revenue Code; 25.24 (4) sales of property used in the trade or business, except 25.25 sales of leased property of a type which is regularly sold as 25.26 well as leased; 25.27 (5) sales of debt instruments as defined in section 25.28 1275(a)(1) of the Internal Revenue Code or sales of stock;and25.29 (6) royalties, fees, or other like income of a type which 25.30 qualify for a subtraction from federal taxable income under 25.31 section 290.01, subdivision 19(d)(11); and 25.32 (7) lease or other payments received for tax-exempt 25.33 property, as defined in and subject to section 290.0711. 25.34 (b) Sales of tangible personal property are made within 25.35 this state if the property is received by a purchaser at a point 25.36 within this state, and the taxpayer is taxable in this state, 26.1 regardless of the f.o.b. point, other conditions of the sale, or 26.2 the ultimate destination of the property. 26.3 (c) Tangible personal property delivered to a common or 26.4 contract carrier or foreign vessel for delivery to a purchaser 26.5 in another state or nation is a sale in that state or nation, 26.6 regardless of f.o.b. point or other conditions of the sale. 26.7 (d) Notwithstanding paragraphs (b) and (c), when 26.8 intoxicating liquor, wine, fermented malt beverages, cigarettes, 26.9 or tobacco products are sold to a purchaser who is licensed by a 26.10 state or political subdivision to resell this property only 26.11 within the state of ultimate destination, the sale is made in 26.12 that state. 26.13 (e) Sales made by or through a corporation that is 26.14 qualified as a domestic international sales corporation under 26.15 section 992 of the Internal Revenue Code are not considered to 26.16 have been made within this state. 26.17 (f) Sales, rents, royalties, and other income in connection 26.18 with real property is attributed to the state in which the 26.19 property is located. 26.20 (g) Receipts from the lease or rental of tangible personal 26.21 property, including finance leases and true leases, must be 26.22 attributed to this state if the property is located in this 26.23 state and to other states if the property is not located in this 26.24 state. Receipts from the lease or rental of moving property 26.25 including, but not limited to, motor vehicles, rolling stock, 26.26 aircraft, vessels, or mobile equipment are included in the 26.27 numerator of the receipts factor to the extent that the property 26.28 is used in this state. The extent of the use of moving property 26.29 is determined as follows: 26.30 (1) A motor vehicle is used wholly in the state in which it 26.31 is registered. 26.32 (2) The extent that rolling stock is used in this state is 26.33 determined by multiplying the receipts from the lease or rental 26.34 of the rolling stock by a fraction, the numerator of which is 26.35 the miles traveled within this state by the leased or rented 26.36 rolling stock and the denominator of which is the total miles 27.1 traveled by the leased or rented rolling stock. 27.2 (3) The extent that an aircraft is used in this state is 27.3 determined by multiplying the receipts from the lease or rental 27.4 of the aircraft by a fraction, the numerator of which is the 27.5 number of landings of the aircraft in this state and the 27.6 denominator of which is the total number of landings of the 27.7 aircraft. 27.8 (4) The extent that a vessel, mobile equipment, or other 27.9 mobile property is used in the state is determined by 27.10 multiplying the receipts from the lease or rental of the 27.11 property by a fraction, the numerator of which is the number of 27.12 days during the taxable year the property was in this state and 27.13 the denominator of which is the total days in the taxable year. 27.14 (h) Royalties and other income not described in paragraph 27.15 (a), clause (6), received for the use of or for the privilege of 27.16 using intangible property, including patents, know-how, 27.17 formulas, designs, processes, patterns, copyrights, trade names, 27.18 service names, franchises, licenses, contracts, customer lists, 27.19 or similar items, must be attributed to the state in which the 27.20 property is used by the purchaser. If the property is used in 27.21 more than one state, the royalties or other income must be 27.22 apportioned to this state pro rata according to the portion of 27.23 use in this state. If the portion of use in this state cannot 27.24 be determined, the royalties or other income must be excluded 27.25 from both the numerator and the denominator. Intangible 27.26 property is used in this state if the purchaser uses the 27.27 intangible property or the rights therein in the regular course 27.28 of its business operations in this state, regardless of the 27.29 location of the purchaser's customers. 27.30 (i) Sales of intangible property are made within the state 27.31 in which the property is used by the purchaser. If the property 27.32 is used in more than one state, the sales must be apportioned to 27.33 this state pro rata according to the portion of use in this 27.34 state. If the portion of use in this state cannot be 27.35 determined, the sale must be excluded from both the numerator 27.36 and the denominator of the sales factor. Intangible property is 28.1 used in this state if the purchaser used the intangible property 28.2 in the regular course of its business operations in this state. 28.3 (j) Receipts from the performance of services must be 28.4 attributed to the state where the services are received. For 28.5 the purposes of this section, receipts from the performance of 28.6 services provided to a corporation, partnership, or trust may 28.7 only be attributed to a state where it has a fixed place of 28.8 doing business. If the state where the services are received is 28.9 not readily determinable or is a state where the corporation, 28.10 partnership, or trust receiving the service does not have a 28.11 fixed place of doing business, the services shall be deemed to 28.12 be received at the location of the office of the customer from 28.13 which the services were ordered in the regular course of the 28.14 customer's trade or business. If the ordering office cannot be 28.15 determined, the services shall be deemed to be received at the 28.16 office of the customer to which the services are billed. 28.17 [EFFECTIVE DATE.] This section is effective for leases and 28.18 service contracts or similar arrangements entered into after 28.19 February 5, 2004, and for taxable years beginning after December 28.20 31, 2003. 28.21 Sec. 15. Minnesota Statutes 2002, section 290.191, 28.22 subdivision 6, is amended to read: 28.23 Subd. 6. [DETERMINATION OF RECEIPTS FACTOR FOR FINANCIAL 28.24 INSTITUTIONS.] (a) For purposes of this section, the rules in 28.25 this subdivision and subdivision 8 apply in determining the 28.26 receipts factor for financial institutions. 28.27 (b) "Receipts" for this purpose means gross income, 28.28 including net taxable gain on disposition of assets, including 28.29 securities and money market instruments, when derived from 28.30 transactions and activities in the regular course of the 28.31 taxpayer's trade or business. 28.32 (c) "Money market instruments" means federal funds sold and 28.33 securities purchased under agreements to resell, commercial 28.34 paper, banker's acceptances, and purchased certificates of 28.35 deposit and similar instruments to the extent that the 28.36 instruments are reflected as assets under generally accepted 29.1 accounting principles. 29.2 (d) "Securities" means United States Treasury securities, 29.3 obligations of United States government agencies and 29.4 corporations, obligations of state and political subdivisions, 29.5 corporate stock, bonds, and other securities, participations in 29.6 securities backed by mortgages held by United States or state 29.7 government agencies, loan-backed securities and similar 29.8 investments to the extent the investments are reflected as 29.9 assets under generally accepted accounting principles. 29.10 (e) Receipts from the lease or rental of real or tangible 29.11 personal property, including both finance leases and true 29.12 leases, must be attributed to this state if the property is 29.13 located in this state. Receipts from the lease or rental of 29.14 tangible personal property that is characteristically moving 29.15 property, including, but not limited to, motor vehicles, rolling 29.16 stock, aircraft, vessels, or mobile equipment are included in 29.17 the numerator of the receipts factor to the extent that the 29.18 property is used in this state. The extent of the use of moving 29.19 property is determined as follows: 29.20 (1) A motor vehicle is used wholly in the state in which it 29.21 is registered. 29.22 (2) The extent that rolling stock is used in this state is 29.23 determined by multiplying the receipts from the lease or rental 29.24 of the rolling stock by a fraction, the numerator of which is 29.25 the miles traveled within this state by the leased or rented 29.26 rolling stock and the denominator of which is the total miles 29.27 traveled by the leased or rented rolling stock. 29.28 (3) The extent that an aircraft is used in this state is 29.29 determined by multiplying the receipts from the lease or rental 29.30 of the aircraft by a fraction, the numerator of which is the 29.31 number of landings of the aircraft in this state and the 29.32 denominator of which is the total number of landings of the 29.33 aircraft. 29.34 (4) The extent that a vessel, mobile equipment, or other 29.35 mobile property is used in the state is determined by 29.36 multiplying the receipts from the lease or rental of property by 30.1 a fraction, the numerator of which is the number of days during 30.2 the taxable year the property was in this state and the 30.3 denominator of which is the total days in the taxable year. 30.4 (f) Interest income and other receipts from assets in the 30.5 nature of loans that are secured primarily by real estate or 30.6 tangible personal property must be attributed to this state if 30.7 the security property is located in this state under the 30.8 principles stated in paragraph (e). 30.9 (g) Interest income and other receipts from consumer loans 30.10 not secured by real or tangible personal property that are made 30.11 to residents of this state, whether at a place of business, by 30.12 traveling loan officer, by mail, by telephone or other 30.13 electronic means, must be attributed to this state. 30.14 (h) Interest income and other receipts from commercial 30.15 loans and installment obligations that are unsecured by real or 30.16 tangible personal property or secured by intangible property 30.17 must be attributed to this state if the proceeds of the loan are 30.18 to be applied in this state. If it cannot be determined where 30.19 the funds are to be applied, the income and receipts are 30.20 attributed to the state in which the office of the borrower from 30.21 which the application would be made in the regular course of 30.22 business is located. If this cannot be determined, the 30.23 transaction is disregarded in the apportionment formula. 30.24 (i) Interest income and other receipts from a participating 30.25 financial institution's portion of participation and syndication 30.26 loans must be attributed under paragraphs (e) to (h). A 30.27 participation loan is an arrangement in which a lender makes a 30.28 loan to a borrower and then sells, assigns, or otherwise 30.29 transfers all or a part of the loan to a purchasing financial 30.30 institution. A syndication loan is a loan transaction involving 30.31 multiple financial institutions in which all the lenders are 30.32 named as parties to the loan documentation, are known to the 30.33 borrower, and have privity of contract with the borrower. 30.34 (j) Interest income and other receipts including service 30.35 charges from financial institution credit card and travel and 30.36 entertainment credit card receivables and credit card holders' 31.1 fees must be attributed to the state to which the card charges 31.2 and fees are regularly billed. 31.3 (k) Merchant discount income derived from financial 31.4 institution credit card holder transactions with a merchant must 31.5 be attributed to the state in which the merchant is located. In 31.6 the case of merchants located within and outside the state, only 31.7 receipts from merchant discounts attributable to sales made from 31.8 locations within the state are attributed to this state. It is 31.9 presumed, subject to rebuttal, that the location of a merchant 31.10 is the address shown on the invoice submitted by the merchant to 31.11 the taxpayer. 31.12 (l) Receipts from the performance of fiduciary and other 31.13 services must be attributed to the state in which the services 31.14 are received. For the purposes of this section, services 31.15 provided to a corporation, partnership, or trust must be 31.16 attributed to a state where it has a fixed place of doing 31.17 business. If the state where the services are received is not 31.18 readily determinable or is a state where the corporation, 31.19 partnership, or trust does not have a fixed place of doing 31.20 business, the services shall be deemed to be received at the 31.21 location of the office of the customer from which the services 31.22 were ordered in the regular course of the customer's trade or 31.23 business. If the ordering office cannot be determined, the 31.24 services shall be deemed to be received at the office of the 31.25 customer to which the services are billed. 31.26 (m) Receipts from the issuance of travelers checks and 31.27 money orders must be attributed to the state in which the checks 31.28 and money orders are purchased. 31.29 (n) Receipts from investments of a financial institution in 31.30 securities and from money market instruments must be apportioned 31.31 to this state based on the ratio that total deposits from this 31.32 state, its residents, including any business with an office or 31.33 other place of business in this state, its political 31.34 subdivisions, agencies, and instrumentalities bear to the total 31.35 deposits from all states, their residents, their political 31.36 subdivisions, agencies, and instrumentalities. In the case of 32.1 an unregulated financial institution subject to this section, 32.2 these receipts are apportioned to this state based on the ratio 32.3 that its gross business income, excluding such receipts, earned 32.4 from sources within this state bears to gross business income, 32.5 excluding such receipts, earned from sources within all states. 32.6 For purposes of this subdivision, deposits made by this state, 32.7 its residents, its political subdivisions, agencies, and 32.8 instrumentalities must be attributed to this state, whether or 32.9 not the deposits are accepted or maintained by the taxpayer at 32.10 locations within this state. 32.11 (o) A financial institution's interest in property 32.12 described in section 290.015, subdivision 3, paragraph (b), is 32.13 included in the receipts factor in the same manner as assets in 32.14 the nature of securities or money market instruments are 32.15 included in paragraph (n). 32.16 (p) Receipts from leases, service contracts, or other 32.17 arrangements for tax-exempt property, as defined in and subject 32.18 to section 290.0711, are excluded from the receipts factor. 32.19 [EFFECTIVE DATE.] This section is effective for leases and 32.20 service contracts or similar arrangements entered into after 32.21 February 5, 2004, and for taxable years beginning after December 32.22 31, 2003. 32.23 Sec. 16. Minnesota Statutes 2002, section 290.191, 32.24 subdivision 10, is amended to read: 32.25 Subd. 10. [PROPERTY FACTOR; TANGIBLE PROPERTY.] (a) 32.26 Tangible property includes land, buildings, machinery and 32.27 equipment, inventories, and other tangible personal property 32.28 actually used by the taxpayer during the taxable year in 32.29 carrying on the business activities of the taxpayer. Tangible 32.30 property which is separately allocated under section 290.17 is 32.31 not includable in the property factor. 32.32 (b) Cash on hand or in banks, shares of stock, notes, 32.33 bonds, accounts receivable, or other evidences of indebtedness, 32.34 special privileges, franchises, and goodwill, are specifically 32.35 excluded from the property factor, except as otherwise provided 32.36 for financial institutions in subdivision 11. 33.1 (c) The value of tangible property that is owned by the 33.2 taxpayer and that is to be used in the apportionment fraction is 33.3 the original cost adjusted for any later capital additions or 33.4 improvements and partial disposition by reason of sale, 33.5 exchange, or abandonment. 33.6 (d) For purposes of computing the property factor, United 33.7 States government property that is used by the taxpayer must be 33.8 considered owned by the taxpayer. 33.9 (e) Property that is rented by the taxpayer is valued at 33.10 eight times the net annual rental. Net annual rental is the 33.11 annual rental paid by the taxpayer less any annual rental 33.12 received by the taxpayer from subrentals. If the subrents taken 33.13 into account in determining the net annual rental produce a 33.14 negative or clearly inaccurate value for any item of property, 33.15 another method that will properly reflect the value of rented 33.16 property may be required by the commissioner or requested by the 33.17 taxpayer. In no case, however, shall the value be less than an 33.18 amount which bears the same ratio to the annual rental paid by 33.19 the taxpayer for such property as the fair market value of that 33.20 portion of the property used by the taxpayer bears to the total 33.21 fair market value of the rented property. Rents paid during the 33.22 year cannot be averaged. 33.23 (f) A person filing a combined report shall use this method 33.24 of calculating the property factor for all members of the group. 33.25 (g) Tax-exempt property, as defined in and subject to 33.26 section 290.0711, is excluded from the property factor. 33.27 [EFFECTIVE DATE.] This section is effective for leases and 33.28 service contracts or similar arrangements entered into after 33.29 February 5, 2004, and for taxable years beginning after December 33.30 31, 2003. 33.31 Sec. 17. Minnesota Statutes 2002, section 290.191, 33.32 subdivision 11, is amended to read: 33.33 Subd. 11. [FINANCIAL INSTITUTIONS; PROPERTY FACTOR.] (a) 33.34 For financial institutions, the property factor includes, as 33.35 well as tangible property, intangible property as set forth in 33.36 this subdivision. 34.1 (b) Intangible personal property must be included at its 34.2 tax basis for federal income tax purposes. 34.3 (c) Goodwill must not be included in the property factor. 34.4 (d) Coin and currency located in this state must be 34.5 attributed to this state. 34.6 (e) Lease financing receivables must be attributed to this 34.7 state if and to the extent that the property is located within 34.8 this state. 34.9 (f) Assets in the nature of loans that are secured by real 34.10 or tangible personal property must be attributed to this state 34.11 if and to the extent that the security property is located 34.12 within this state. 34.13 (g) Assets in the nature of consumer loans and installment 34.14 obligations that are unsecured or secured by intangible property 34.15 must be attributed to this state if the loan was made to a 34.16 resident of this state. 34.17 (h) Assets in the nature of commercial loan and installment 34.18 obligations that are unsecured by real or tangible personal 34.19 property or secured by intangible property must be attributed to 34.20 this state if the proceeds of the loan are to be applied in this 34.21 state. If it cannot be determined where the funds are to be 34.22 applied, the assets must be attributed to the state in which 34.23 there is located the office of the borrower from which the 34.24 application would be made in the regular course of business. If 34.25 this cannot be determined, the transaction is disregarded in the 34.26 apportionment formula. 34.27 (i) A participating financial institution's portion of 34.28 participation and syndication loans must be attributed under 34.29 paragraphs (e) to (h). 34.30 (j) Financial institution credit card and travel and 34.31 entertainment credit card receivables must be attributed to the 34.32 state to which the credit card charges and fees are regularly 34.33 billed. 34.34 (k) Receivables arising from merchant discount income 34.35 derived from financial institution credit card holder 34.36 transactions with a merchant are attributed to the state in 35.1 which the merchant is located. In the case of merchants located 35.2 within and without the state, only receivables from merchant 35.3 discounts attributable to sales made from locations within the 35.4 state are attributed to this state. It is presumed, subject to 35.5 rebuttal, that the location of a merchant is the address shown 35.6 on the invoice submitted by the merchant to the taxpayer. 35.7 (l) Assets in the nature of securities and money market 35.8 instruments are apportioned to this state based upon the ratio 35.9 that total deposits from this state, its residents, its 35.10 political subdivisions, agencies and instrumentalities bear to 35.11 the total deposits from all states, their residents, their 35.12 political subdivisions, agencies and instrumentalities. In the 35.13 case of an unregulated financial institution, the assets are 35.14 apportioned to this state based upon the ratio that its gross 35.15 business income earned from sources within this state bears to 35.16 gross business income earned from sources within all states. 35.17 For purposes of this paragraph, deposits made by this state, its 35.18 residents, its political subdivisions, agencies, and 35.19 instrumentalities are attributed to this state, whether or not 35.20 the deposits are accepted or maintained by the taxpayer at 35.21 locations within this state. 35.22 (m) A financial institution's interest in any property 35.23 described in section 290.015, subdivision 3, paragraph (b), is 35.24 included in the property factor in the same manner as assets in 35.25 the nature of securities or money market instruments are 35.26 included under paragraph (1). 35.27 (n) Tax-exempt property, as defined in and subject to 35.28 section 290.0711, is excluded from the property factor. 35.29 [EFFECTIVE DATE.] This section is effective for leases and 35.30 service contracts or similar arrangements entered into after 35.31 February 5, 2004, and for taxable years beginning after December 35.32 31, 2003. 35.33 Sec. 18. Minnesota Statutes 2002, section 290.92, 35.34 subdivision 4b, is amended to read: 35.35 Subd. 4b. [WITHHOLDING BY PARTNERSHIPS.] (a) A partnership 35.36 shall deduct and withhold a tax as provided in paragraph (b) for 36.1 nonresident individual partners based on their distributive 36.2 shares of partnership income for a taxable year of the 36.3 partnership. 36.4 (b) The amount of tax withheld is determined by multiplying 36.5 the partner's distributive share allocable to Minnesota under 36.6 section 290.17, paid or credited during the taxable year by the 36.7 highest rate used to determine the income tax liability for an 36.8 individual under section 290.06, subdivision 2c, except that the 36.9 amount of tax withheld may be determined by the commissioner if 36.10 the partner submits a withholding exemption certificate under 36.11 subdivision 5. 36.12 (c) The commissioner may reduce or abate the tax withheld 36.13 under this subdivision if the partnership had reasonable cause 36.14 to believe that no tax was due under this section. 36.15 (d) Notwithstanding paragraph (a), a partnership is not 36.16 required to deduct and withhold tax for a nonresident partner if: 36.17 (1) the partner elects to have the tax due paid as part of 36.18 the partnership's composite return under section 289A.08, 36.19 subdivision 7; 36.20 (2) the partner has Minnesota assignable federal adjusted 36.21 gross income from the partnership of less than $1,000; or 36.22 (3) the partnership is liquidated or terminated, the income 36.23 was generated by a transaction related to the termination or 36.24 liquidation, and no cash or other property was distributed in 36.25 the current or prior taxable year;or36.26 (4) the distributive shares of partnership income are 36.27 attributable to: 36.28 (i) income required to be recognized because of discharge 36.29 of indebtedness; 36.30 (ii) income recognized because of a sale, exchange, or 36.31 other disposition of real estate, depreciable property, or 36.32 property described in section 179 of the Internal Revenue Code; 36.33 or 36.34 (iii) income recognized on the sale, exchange, or other 36.35 disposition of any property that has been the subject of a basis 36.36 reduction pursuant to section 108, 734, 743, 754, or 1017 of the 37.1 Internal Revenue Code 37.2 to the extent that the income does not include cash received or 37.3 receivable or, if there is cash received or receivable, to the 37.4 extent that the cash is required to be used to pay indebtedness 37.5 by the partnership or a secured debt on partnership property; or 37.6 (5) the partnership is a publicly traded partnership, as 37.7 defined in section 7704(b) of the Internal Revenue Code. 37.8 (e) For purposes of subdivision 6a, and sections 289A.09, 37.9 subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50, 37.10 289A.56, 289A.60, and 289A.63, a partnership is considered an 37.11 employer. 37.12 (f) To the extent that income is exempt from withholding 37.13 under paragraph (d), clause (4), the commissioner has a lien in 37.14 an amount up to the amount that would be required to be withheld 37.15 with respect to the income of the partner attributable to the 37.16 partnership interest, but for the application of paragraph (d), 37.17 clause (4). The lien arises under section 270.69 from the date 37.18 of assessment of the tax against the partner, and attaches to 37.19 that partner's share of the profits and any other money due or 37.20 to become due to that partner in respect of the partnership. 37.21 Notice of the lien may be sent by mail to the partnership, 37.22 without the necessity for recording the lien. The notice has 37.23 the force and effect of a levy under section 270.70, and is 37.24 enforceable against the partnership in the manner provided by 37.25 that section. Upon payment in full of the liability subsequent 37.26 to the notice of lien, the partnership must be notified that the 37.27 lien has been satisfied. 37.28 [EFFECTIVE DATE.] This section is effective for taxable 37.29 years beginning after December 31, 2003. 37.30 Sec. 19. Minnesota Statutes 2002, section 298.01, 37.31 subdivision 3, is amended to read: 37.32 Subd. 3. [OCCUPATION TAX; OTHER ORES.] Every person 37.33 engaged in the business of mining or producing ores in this 37.34 state, except iron ore or taconite concentrates, shall pay an 37.35 occupation tax to the state of Minnesota as provided in this 37.36 subdivision. The tax is determined in the same manner as the 38.1 tax imposed by section 290.02, except that sections 290.05, 38.2 subdivision 1, clause (a),and290.17, subdivision 4, and 38.3 290.191, subdivision 2, do not apply. A person subject to 38.4 occupation tax under this section shall apportion its net income 38.5 on the basis of the percentage obtained by taking the sum of: 38.6 (1) 75 percent of the percentage which the sales made 38.7 within this state in connection with the trade or business 38.8 during the tax period are of the total sales wherever made in 38.9 connection with the trade or business during the tax period; 38.10 (2) 12.5 percent of the percentage which the total tangible 38.11 property used by the taxpayer in this state in connection with 38.12 the trade or business during the tax period is of the total 38.13 tangible property, wherever located, used by the taxpayer in 38.14 connection with the trade or business during the tax period; and 38.15 (3) 12.5 percent of the percentage which the taxpayer's 38.16 total payrolls paid or incurred in this state or paid in respect 38.17 to labor performed in this state in connection with the trade or 38.18 business during the tax period are of the taxpayer's total 38.19 payrolls paid or incurred in connection with the trade or 38.20 business during the tax period. 38.21 The tax is in addition to all other taxes. 38.22 [EFFECTIVE DATE.] This section is effective for tax years 38.23 beginning after December 31, 2004. 38.24 Sec. 20. Minnesota Statutes 2002, section 298.01, 38.25 subdivision 4, is amended to read: 38.26 Subd. 4. [OCCUPATION TAX; IRON ORE; TACONITE 38.27 CONCENTRATES.] A person engaged in the business of mining or 38.28 producing of iron ore, taconite concentrates or direct reduced 38.29 ore in this state shall pay an occupation tax to the state of 38.30 Minnesota. The tax is determined in the same manner as the tax 38.31 imposed by section 290.02, except that sections 290.05, 38.32 subdivision 1, clause (a),and290.17, subdivision 4, and 38.33 290.191, subdivision 2, do not apply. A person subject to 38.34 occupation tax under this section shall apportion its net income 38.35 on the basis of the percentage obtained by taking the sum of: 38.36 (1) 75 percent of the percentage which the sales made 39.1 within this state in connection with the trade or business 39.2 during the tax period are of the total sales wherever made in 39.3 connection with the trade or business during the tax period; 39.4 (2) 12.5 percent of the percentage which the total tangible 39.5 property used by the taxpayer in this state in connection with 39.6 the trade or business during the tax period is of the total 39.7 tangible property, wherever located, used by the taxpayer in 39.8 connection with the trade or business during the tax period; and 39.9 (3) 12.5 percent of the percentage which the taxpayer's 39.10 total payrolls paid or incurred in this state or paid in respect 39.11 to labor performed in this state in connection with the trade or 39.12 business during the tax period are of the taxpayer's total 39.13 payrolls paid or incurred in connection with the trade or 39.14 business during the tax period. 39.15 The tax is in addition to all other taxes. 39.16 [EFFECTIVE DATE.] This section is effective for tax years 39.17 beginning after December 31, 2004. 39.18 Sec. 21. [REFUND PAYMENTS AUTHORIZED.] 39.19 The commissioner of revenue may allow a taxpayer to claim a 39.20 refund of Minnesota individual income tax paid on a distribution 39.21 from a qualified governmental pension plan, an individual 39.22 retirement account, a simplified employee pension, or a 39.23 qualified plan covering a self-employed person in a taxable year 39.24 beginning after December 31, 2001, and before January 1, 2004, 39.25 if the individual was unable to claim the subtraction under 39.26 Minnesota Statutes 1999 Supplement, section 290.01, subdivision 39.27 19b, clause (4), for taxable year 2000 or 2001 because the 39.28 individual was not a resident and had no Minnesota taxable 39.29 income. The amount of the refund equals the lesser of (1) the 39.30 tax on the distribution or (2) the marginal tax rate for the 39.31 taxpayer's tax year in which the distribution was received 39.32 multiplied by the subtraction under clause (4) that would have 39.33 been allowed if the taxpayer were a resident in tax year 2001. 39.34 The commissioner may process refunds under this section 39.35 separately from administration of the individual income tax in 39.36 the most efficient and lowest cost manner. 40.1 [EFFECTIVE DATE.] This section is effective the day 40.2 following final enactment. 40.3 ARTICLE 2 40.4 FEDERAL UPDATE 40.5 Section 1. Minnesota Statutes 2003 Supplement, section 40.6 289A.02, subdivision 7, is amended to read: 40.7 Subd. 7. [INTERNAL REVENUE CODE.] Unless specifically 40.8 defined otherwise, "Internal Revenue Code" means the Internal 40.9 Revenue Code of 1986, as amended throughJune 15, 2003April 10, 40.10 2004. 40.11 [EFFECTIVE DATE.] This section is effective for actions 40.12 required on or after November 11, 2003. 40.13 Sec. 2. Minnesota Statutes 2003 Supplement, section 40.14 290.01, subdivision 19, is amended to read: 40.15 Subd. 19. [NET INCOME.] The term "net income" means the 40.16 federal taxable income, as defined in section 63 of the Internal 40.17 Revenue Code of 1986, as amended through the date named in this 40.18 subdivision, incorporating any elections made by the taxpayer in 40.19 accordance with the Internal Revenue Code in determining federal 40.20 taxable income for federal income tax purposes, and with the 40.21 modifications provided in subdivisions 19a to 19f. 40.22 In the case of a regulated investment company or a fund 40.23 thereof, as defined in section 851(a) or 851(g) of the Internal 40.24 Revenue Code, federal taxable income means investment company 40.25 taxable income as defined in section 852(b)(2) of the Internal 40.26 Revenue Code, except that: 40.27 (1) the exclusion of net capital gain provided in section 40.28 852(b)(2)(A) of the Internal Revenue Code does not apply; 40.29 (2) the deduction for dividends paid under section 40.30 852(b)(2)(D) of the Internal Revenue Code must be applied by 40.31 allowing a deduction for capital gain dividends and 40.32 exempt-interest dividends as defined in sections 852(b)(3)(C) 40.33 and 852(b)(5) of the Internal Revenue Code; and 40.34 (3) the deduction for dividends paid must also be applied 40.35 in the amount of any undistributed capital gains which the 40.36 regulated investment company elects to have treated as provided 41.1 in section 852(b)(3)(D) of the Internal Revenue Code. 41.2 The net income of a real estate investment trust as defined 41.3 and limited by section 856(a), (b), and (c) of the Internal 41.4 Revenue Code means the real estate investment trust taxable 41.5 income as defined in section 857(b)(2) of the Internal Revenue 41.6 Code. 41.7 The net income of a designated settlement fund as defined 41.8 in section 468B(d) of the Internal Revenue Code means the gross 41.9 income as defined in section 468B(b) of the Internal Revenue 41.10 Code. 41.11 The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 41.12 1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 41.13 1616, 1617, 1704(l), and 1704(m) of the Small Business Job 41.14 Protection Act, Public Law 104-188, the provisions of Public Law 41.15 104-117, the provisions of sections 313(a) and (b)(1), 602(a), 41.16 913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013, 41.17 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b) 41.18 and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and 41.19 1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law 41.20 105-34, the provisions of section 6010 of the Internal Revenue 41.21 Service Restructuring and Reform Act of 1998, Public Law 41.22 105-206, the provisions of section 4003 of the Omnibus 41.23 Consolidated and Emergency Supplemental Appropriations Act, 41.24 1999, Public Law 105-277, and the provisions of section 318 of 41.25 the Consolidated Appropriation Act of 2001, Public Law 106-554, 41.26 shall become effective at the time they become effective for 41.27 federal purposes. 41.28 The Internal Revenue Code of 1986, as amended through 41.29 December 31, 1996, shall be in effect for taxable years 41.30 beginning after December 31, 1996. 41.31 The provisions of sections 202(a) and (b), 221(a), 225, 41.32 312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 41.33 (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 41.34 1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 41.35 1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 41.36 of the Taxpayer Relief Act of 1997, Public Law 105-34, the 42.1 provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002, 42.2 and 7003 of the Internal Revenue Service Restructuring and 42.3 Reform Act of 1998, Public Law 105-206, the provisions of 42.4 section 3001 of the Omnibus Consolidated and Emergency 42.5 Supplemental Appropriations Act, 1999, Public Law 105-277, the 42.6 provisions of section 3001 of the Miscellaneous Trade and 42.7 Technical Corrections Act of 1999, Public Law 106-36,andthe 42.8 provisions of section 316 of the Consolidated Appropriation Act 42.9 of 2001, Public Law 106-554, and the provision of section 101 of 42.10 the Military Family Tax Relief Act of 2003, Public Law 108-121, 42.11 shall become effective at the time they become effective for 42.12 federal purposes. 42.13 The Internal Revenue Code of 1986, as amended through 42.14 December 31, 1997, shall be in effect for taxable years 42.15 beginning after December 31, 1997. 42.16 The provisions of sections 5002, 6009, 6011, and 7001 of 42.17 the Internal Revenue Service Restructuring and Reform Act of 42.18 1998, Public Law 105-206, the provisions of section 9010 of the 42.19 Transportation Equity Act for the 21st Century, Public Law 42.20 105-178, the provisions of sections 1004, 4002, and 5301 of the 42.21 Omnibus Consolidation and Emergency Supplemental Appropriations 42.22 Act, 1999, Public Law 105-277, the provision of section 303 of 42.23 the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law 42.24 105-369, the provisions of sections 532, 534, 536, 537, and 538 42.25 of the Ticket to Work and Work Incentives Improvement Act of 42.26 1999, Public Law 106-170, the provisions of the Installment Tax 42.27 Correction Act of 2000, Public Law 106-573, and the provisions 42.28 of section 309 of the Consolidated Appropriation Act of 2001, 42.29 Public Law 106-554, shall become effective at the time they 42.30 become effective for federal purposes. 42.31 The Internal Revenue Code of 1986, as amended through 42.32 December 31, 1998, shall be in effect for taxable years 42.33 beginning after December 31, 1998. 42.34 The provisions of the FSC Repeal and Extraterritorial 42.35 Income Exclusion Act of 2000, Public Law 106-519, and the 42.36 provision of section 412 of the Job Creation and Worker 43.1 Assistance Act of 2002, Public Law 107-147, shall become 43.2 effective at the time it became effective for federal purposes. 43.3 The Internal Revenue Code of 1986, as amended through 43.4 December 31, 1999, shall be in effect for taxable years 43.5 beginning after December 31, 1999. The provisions of sections 43.6 306 and 401 of the Consolidated Appropriation Act of 2001, 43.7 Public Law 106-554, and the provision of section 632(b)(2)(A) of 43.8 the Economic Growth and Tax Relief Reconciliation Act of 2001, 43.9 Public Law 107-16, and provisions of sections 101 and 402 of the 43.10 Job Creation and Worker Assistance Act of 2002, Public Law 43.11 107-147, shall become effective at the same time it became 43.12 effective for federal purposes. 43.13 The Internal Revenue Code of 1986, as amended through 43.14 December 31, 2000, shall be in effect for taxable years 43.15 beginning after December 31, 2000. The provisions of sections 43.16 659a and 671 of the Economic Growth and Tax Relief 43.17 Reconciliation Act of 2001, Public Law 107-16, the provisions of 43.18 sections 104, 105, and 111 of the Victims of Terrorism Tax 43.19 Relief Act of 2001, Public Law 107-134,andthe provisions of 43.20 sections 201, 403, 413, and 606 of the Job Creation and Worker 43.21 Assistance Act of 2002, Public Law 107-147, and the provision of 43.22 section 102 of the Military Family Tax Relief Act of 2003, 43.23 Public Law 108-121, shall become effective at the same time it 43.24 became effective for federal purposes. 43.25 The Internal Revenue Code of 1986, as amended through March 43.26 15, 2002, shall be in effect for taxable years beginning after 43.27 December 31, 2001. 43.28 The provisions of sections 101 and 102 of the Victims of 43.29 Terrorism Tax Relief Act of 2001, Public Law 107-134, shall 43.30 become effective at the same time it becomes effective for 43.31 federal purposes. 43.32 The Internal Revenue Code of 1986, as amended through June 43.33 15, 2003, shall be in effect for taxable years beginning after 43.34 December 31, 2002. The provisions of section 201 of the Jobs 43.35 and Growth Tax Relief and Reconciliation Act of 2003,H.R. 2, if43.36it is enacted into lawPublic Law 108-27, and the provisions of 44.1 sections 103, 106, 108, 109, and 110 of the Military Family Tax 44.2 Relief Act of 2003, Public Law 108-121, are effective at the 44.3 same time it became effective for federal purposes. 44.4 The Internal Revenue Code of 1986, as amended through April 44.5 10, 2004, shall be in effect for taxable years beginning after 44.6 December 31, 2003. 44.7 Except as otherwise provided, references to the Internal 44.8 Revenue Code in subdivisions 19a to 19g mean the code in effect 44.9 for purposes of determining net income for the applicable year. 44.10 [EFFECTIVE DATE.] This section is effective the day 44.11 following final enactment. 44.12 Sec. 3. Minnesota Statutes 2003 Supplement, section 44.13 290.01, subdivision 19a, is amended to read: 44.14 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 44.15 individuals, estates, and trusts, there shall be added to 44.16 federal taxable income: 44.17 (1)(i) interest income on obligations of any state other 44.18 than Minnesota or a political or governmental subdivision, 44.19 municipality, or governmental agency or instrumentality of any 44.20 state other than Minnesota exempt from federal income taxes 44.21 under the Internal Revenue Code or any other federal statute; 44.22 and 44.23 (ii) exempt-interest dividends as defined in section 44.24 852(b)(5) of the Internal Revenue Code, except the portion of 44.25 the exempt-interest dividends derived from interest income on 44.26 obligations of the state of Minnesota or its political or 44.27 governmental subdivisions, municipalities, governmental agencies 44.28 or instrumentalities, but only if the portion of the 44.29 exempt-interest dividends from such Minnesota sources paid to 44.30 all shareholders represents 95 percent or more of the 44.31 exempt-interest dividends that are paid by the regulated 44.32 investment company as defined in section 851(a) of the Internal 44.33 Revenue Code, or the fund of the regulated investment company as 44.34 defined in section 851(g) of the Internal Revenue Code, making 44.35 the payment; and 44.36 (iii) for the purposes of items (i) and (ii), interest on 45.1 obligations of an Indian tribal government described in section 45.2 7871(c) of the Internal Revenue Code shall be treated as 45.3 interest income on obligations of the state in which the tribe 45.4 is located; 45.5 (2) the amount of income taxes paid or accrued within the 45.6 taxable year under this chapter and income taxes paid to any 45.7 other state or to any province or territory of Canada, to the 45.8 extent allowed as a deduction under section 63(d) of the 45.9 Internal Revenue Code, but the addition may not be more than the 45.10 amount by which the itemized deductions as allowed under section 45.11 63(d) of the Internal Revenue Code exceeds the amount of the 45.12 standard deduction as defined in section 63(c) of the Internal 45.13 Revenue Code. For the purpose of this paragraph, the 45.14 disallowance of itemized deductions under section 68 of the 45.15 Internal Revenue Code of 1986, income tax is the last itemized 45.16 deduction disallowed; 45.17 (3) the capital gain amount of a lump sum distribution to 45.18 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 45.19 Reform Act of 1986, Public Law 99-514, applies; 45.20 (4) the amount of income taxes paid or accrued within the 45.21 taxable year under this chapter and income taxes paid to any 45.22 other state or any province or territory of Canada, to the 45.23 extent allowed as a deduction in determining federal adjusted 45.24 gross income. For the purpose of this paragraph, income taxes 45.25 do not include the taxes imposed by sections 290.0922, 45.26 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 45.27 (5) the amount of expense, interest, or taxes disallowed 45.28 pursuant to section 290.10; 45.29 (6) the amount of a partner's pro rata share of net income 45.30 which does not flow through to the partner because the 45.31 partnership elected to pay the tax on the income under section 45.32 6242(a)(2) of the Internal Revenue Code;and45.33 (7) 80 percent of the depreciation deduction allowed under 45.34 section 168(k) of the Internal Revenue Code. For purposes of 45.35 this clause, if the taxpayer has an activity that in the taxable 45.36 year generates a deduction for depreciation under section 168(k) 46.1 and the activity generates a loss for the taxable year that the 46.2 taxpayer is not allowed to claim for the taxable year, "the 46.3 depreciation allowed under section 168(k)" for the taxable year 46.4 is limited to excess of the depreciation claimed by the activity 46.5 under section 168(k) over the amount of the loss from the 46.6 activity that is not allowed in the taxable year. In succeeding 46.7 taxable years when the losses not allowed in the taxable year 46.8 are allowed, the depreciation under section 168(k) is allowed; 46.9 and 46.10 (8) the exclusion allowed under section 139A of the 46.11 Internal Revenue Code for federal subsidies for prescription 46.12 drug plans. 46.13 [EFFECTIVE DATE.] This section is effective for taxable 46.14 years beginning after December 31, 2003. 46.15 Sec. 4. Minnesota Statutes 2003 Supplement, section 46.16 290.01, subdivision 19b, is amended to read: 46.17 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 46.18 individuals, estates, and trusts, there shall be subtracted from 46.19 federal taxable income: 46.20 (1) interest income on obligations of any authority, 46.21 commission, or instrumentality of the United States to the 46.22 extent includable in taxable income for federal income tax 46.23 purposes but exempt from state income tax under the laws of the 46.24 United States; 46.25 (2) if included in federal taxable income, the amount of 46.26 any overpayment of income tax to Minnesota or to any other 46.27 state, for any previous taxable year, whether the amount is 46.28 received as a refund or as a credit to another taxable year's 46.29 income tax liability; 46.30 (3) the amount paid to others, less the amount used to 46.31 claim the credit allowed under section 290.0674, not to exceed 46.32 $1,625 for each qualifying child in grades kindergarten to 6 and 46.33 $2,500 for each qualifying child in grades 7 to 12, for tuition, 46.34 textbooks, and transportation of each qualifying child in 46.35 attending an elementary or secondary school situated in 46.36 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 47.1 wherein a resident of this state may legally fulfill the state's 47.2 compulsory attendance laws, which is not operated for profit, 47.3 and which adheres to the provisions of the Civil Rights Act of 47.4 1964 and chapter 363A. For the purposes of this clause, 47.5 "tuition" includes fees or tuition as defined in section 47.6 290.0674, subdivision 1, clause (1). As used in this clause, 47.7 "textbooks" includes books and other instructional materials and 47.8 equipment purchased or leased for use in elementary and 47.9 secondary schools in teaching only those subjects legally and 47.10 commonly taught in public elementary and secondary schools in 47.11 this state. Equipment expenses qualifying for deduction 47.12 includes expenses as defined and limited in section 290.0674, 47.13 subdivision 1, clause (3). "Textbooks" does not include 47.14 instructional books and materials used in the teaching of 47.15 religious tenets, doctrines, or worship, the purpose of which is 47.16 to instill such tenets, doctrines, or worship, nor does it 47.17 include books or materials for, or transportation to, 47.18 extracurricular activities including sporting events, musical or 47.19 dramatic events, speech activities, driver's education, or 47.20 similar programs. For purposes of the subtraction provided by 47.21 this clause, "qualifying child" has the meaning given in section 47.22 32(c)(3) of the Internal Revenue Code; 47.23 (4) income as provided under section 290.0802; 47.24 (5) to the extent included in federal adjusted gross 47.25 income, income realized on disposition of property exempt from 47.26 tax under section 290.491; 47.27 (6) to the extent included in federal taxable income, 47.28 postservice benefits for youth community service under section 47.29 124D.42 for volunteer service under United States Code, title 47.30 42, sections 12601 to 12604; 47.31 (7) to the extent not deducted in determining federal 47.32 taxable income by an individual who does not itemize deductions 47.33 for federal income tax purposes for the taxable year, an amount 47.34 equal to 50 percent of the excess of charitable contributions 47.35 allowable as a deduction for the taxable year under section 47.36 170(a) of the Internal Revenue Code over $500; 48.1 (8) for taxable years beginning before January 1, 2008, the 48.2 amount of the federal small ethanol producer credit allowed 48.3 under section 40(a)(3) of the Internal Revenue Code which is 48.4 included in gross income under section 87 of the Internal 48.5 Revenue Code; 48.6 (9) for individuals who are allowed a federal foreign tax 48.7 credit for taxes that do not qualify for a credit under section 48.8 290.06, subdivision 22, an amount equal to the carryover of 48.9 subnational foreign taxes for the taxable year, but not to 48.10 exceed the total subnational foreign taxes reported in claiming 48.11 the foreign tax credit. For purposes of this clause, "federal 48.12 foreign tax credit" means the credit allowed under section 27 of 48.13 the Internal Revenue Code, and "carryover of subnational foreign 48.14 taxes" equals the carryover allowed under section 904(c) of the 48.15 Internal Revenue Code minus national level foreign taxes to the 48.16 extent they exceed the federal foreign tax credit; 48.17 (10) in each of the five tax years immediately following 48.18 the tax year in which an addition is required under subdivision 48.19 19a, clause (7), an amount equal to one-fifth of the delayed 48.20 depreciation. For purposes of this clause, "delayed 48.21 depreciation" means the amount of the addition made by the 48.22 taxpayer under subdivision 19a, clause (7), minus the positive 48.23 value of any net operating loss under section 172 of the 48.24 Internal Revenue Code generated for the tax year of the 48.25 addition. The resulting delayed depreciation cannot be less 48.26 than zero;and48.27 (11) job opportunity building zone income as provided under 48.28 section 469.316; and 48.29 (12) to the extent included in federal taxable income, 48.30 compensation paid to a service member as defined in United 48.31 States Code, title 10, section 101(a)(5), for military service 48.32 as defined in the Service Members Civil Relief Act, Public Law 48.33 108-189, section 101(2), performed by a nonresident. This 48.34 subtraction does not apply to "retirement income" as defined in 48.35 section 290.17, subdivision 2, paragraph (a), clause (3). 48.36 [EFFECTIVE DATE.] This section is effective for tax years 49.1 beginning after December 31, 2002. 49.2 Sec. 5. Minnesota Statutes 2003 Supplement, section 49.3 290.01, subdivision 19c, is amended to read: 49.4 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 49.5 INCOME.] For corporations, there shall be added to federal 49.6 taxable income: 49.7 (1) the amount of any deduction taken for federal income 49.8 tax purposes for income, excise, or franchise taxes based on net 49.9 income or related minimum taxes, including but not limited to 49.10 the tax imposed under section 290.0922, paid by the corporation 49.11 to Minnesota, another state, a political subdivision of another 49.12 state, the District of Columbia, or any foreign country or 49.13 possession of the United States; 49.14 (2) interest not subject to federal tax upon obligations 49.15 of: the United States, its possessions, its agencies, or its 49.16 instrumentalities; the state of Minnesota or any other state, 49.17 any of its political or governmental subdivisions, any of its 49.18 municipalities, or any of its governmental agencies or 49.19 instrumentalities; the District of Columbia; or Indian tribal 49.20 governments; 49.21 (3) exempt-interest dividends received as defined in 49.22 section 852(b)(5) of the Internal Revenue Code; 49.23 (4) the amount of any net operating loss deduction taken 49.24 for federal income tax purposes under section 172 or 832(c)(10) 49.25 of the Internal Revenue Code or operations loss deduction under 49.26 section 810 of the Internal Revenue Code; 49.27 (5) the amount of any special deductions taken for federal 49.28 income tax purposes under sections 241 to 247 of the Internal 49.29 Revenue Code; 49.30 (6) losses from the business of mining, as defined in 49.31 section 290.05, subdivision 1, clause (a), that are not subject 49.32 to Minnesota income tax; 49.33 (7) the amount of any capital losses deducted for federal 49.34 income tax purposes under sections 1211 and 1212 of the Internal 49.35 Revenue Code; 49.36 (8) the exempt foreign trade income of a foreign sales 50.1 corporation under sections 921(a) and 291 of the Internal 50.2 Revenue Code; 50.3 (9) the amount of percentage depletion deducted under 50.4 sections 611 through 614 and 291 of the Internal Revenue Code; 50.5 (10) for certified pollution control facilities placed in 50.6 service in a taxable year beginning before December 31, 1986, 50.7 and for which amortization deductions were elected under section 50.8 169 of the Internal Revenue Code of 1954, as amended through 50.9 December 31, 1985, the amount of the amortization deduction 50.10 allowed in computing federal taxable income for those 50.11 facilities; 50.12 (11) the amount of any deemed dividend from a foreign 50.13 operating corporation determined pursuant to section 290.17, 50.14 subdivision 4, paragraph (g); 50.15 (12) the amount of any environmental tax paid under section 50.16 59(a) of the Internal Revenue Code; 50.17 (13) the amount of a partner's pro rata share of net income 50.18 which does not flow through to the partner because the 50.19 partnership elected to pay the tax on the income under section 50.20 6242(a)(2) of the Internal Revenue Code; 50.21 (14) the amount of net income excluded under section 114 of 50.22 the Internal Revenue Code; 50.23 (15) any increase in subpart F income, as defined in 50.24 section 952(a) of the Internal Revenue Code, for the taxable 50.25 year when subpart F income is calculated without regard to the 50.26 provisions of section 614 of Public Law 107-147;and50.27 (16) 80 percent of the depreciation deduction allowed under 50.28 section 168(k) of the Internal Revenue Code. For purposes of 50.29 this clause, if the taxpayer has an activity that in the taxable 50.30 year generates a deduction for depreciation under section 168(k) 50.31 and the activity generates a loss for the taxable year that the 50.32 taxpayer is not allowed to claim for the taxable year, "the 50.33 depreciation allowed under section 168(k)" for the taxable year 50.34 is limited to excess of the depreciation claimed by the activity 50.35 under section 168(k) over the amount of the loss from the 50.36 activity that is not allowed in the taxable year. In succeeding 51.1 taxable years when the losses not allowed in the taxable year 51.2 are allowed, the depreciation under section 168(k) is allowed; 51.3 and 51.4 (17) the exclusion allowed under section 139A of the 51.5 Internal Revenue Code for federal subsidies for prescription 51.6 drug plans. 51.7 [EFFECTIVE DATE.] This section is effective for taxable 51.8 years beginning after December 31, 2003. 51.9 Sec. 6. Minnesota Statutes 2003 Supplement, section 51.10 290.01, subdivision 31, is amended to read: 51.11 Subd. 31. [INTERNAL REVENUE CODE.] Unless specifically 51.12 defined otherwise, "Internal Revenue Code" means the Internal 51.13 Revenue Code of 1986, as amended throughJune 15, 2003April 10, 51.14 2004. 51.15 [EFFECTIVE DATE.] This section is effective the day 51.16 following final enactment except the changes incorporated by 51.17 federal changes are effective at the same times as the changes 51.18 were effective for federal purposes. 51.19 Sec. 7. Minnesota Statutes 2003 Supplement, section 51.20 290.091, subdivision 2, is amended to read: 51.21 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 51.22 this section, the following terms have the meanings given: 51.23 (a) "Alternative minimum taxable income" means the sum of 51.24 the following for the taxable year: 51.25 (1) the taxpayer's federal alternative minimum taxable 51.26 income as defined in section 55(b)(2) of the Internal Revenue 51.27 Code; 51.28 (2) the taxpayer's itemized deductions allowed in computing 51.29 federal alternative minimum taxable income, but excluding: 51.30 (i) the charitable contribution deduction under section 170 51.31 of the Internal Revenue Code to the extent that the deduction 51.32 exceeds 1.0 percent of adjusted gross income, as defined in 51.33 section 62 of the Internal Revenue Code; 51.34 (ii) the medical expense deduction; 51.35 (iii) the casualty, theft, and disaster loss deduction; and 51.36 (iv) the impairment-related work expenses of a disabled 52.1 person; 52.2 (3) for depletion allowances computed under section 613A(c) 52.3 of the Internal Revenue Code, with respect to each property (as 52.4 defined in section 614 of the Internal Revenue Code), to the 52.5 extent not included in federal alternative minimum taxable 52.6 income, the excess of the deduction for depletion allowable 52.7 under section 611 of the Internal Revenue Code for the taxable 52.8 year over the adjusted basis of the property at the end of the 52.9 taxable year (determined without regard to the depletion 52.10 deduction for the taxable year); 52.11 (4) to the extent not included in federal alternative 52.12 minimum taxable income, the amount of the tax preference for 52.13 intangible drilling cost under section 57(a)(2) of the Internal 52.14 Revenue Code determined without regard to subparagraph (E); 52.15 (5) to the extent not included in federal alternative 52.16 minimum taxable income, the amount of interest income as 52.17 provided by section 290.01, subdivision 19a, clause (1);and52.18 (6) the amount of addition required by section 290.01, 52.19 subdivision 19a, clause (7); and 52.20 (7) the amount of addition required by section 290.01, 52.21 subdivision 19a, clause (8); 52.22 less the sum of the amounts determined under the following: 52.23 (1) interest income as defined in section 290.01, 52.24 subdivision 19b, clause (1); 52.25 (2) an overpayment of state income tax as provided by 52.26 section 290.01, subdivision 19b, clause (2), to the extent 52.27 included in federal alternative minimum taxable income; 52.28 (3) the amount of investment interest paid or accrued 52.29 within the taxable year on indebtedness to the extent that the 52.30 amount does not exceed net investment income, as defined in 52.31 section 163(d)(4) of the Internal Revenue Code. Interest does 52.32 not include amounts deducted in computing federal adjusted gross 52.33 income; and 52.34 (4) amounts subtracted from federal taxable income as 52.35 provided by section 290.01, subdivision 19b, clauses (10)and52.36(11)to (12). 53.1 In the case of an estate or trust, alternative minimum 53.2 taxable income must be computed as provided in section 59(c) of 53.3 the Internal Revenue Code. 53.4 (b) "Investment interest" means investment interest as 53.5 defined in section 163(d)(3) of the Internal Revenue Code. 53.6 (c) "Tentative minimum tax" equals 6.4 percent of 53.7 alternative minimum taxable income after subtracting the 53.8 exemption amount determined under subdivision 3. 53.9 (d) "Regular tax" means the tax that would be imposed under 53.10 this chapter (without regard to this section and section 53.11 290.032), reduced by the sum of the nonrefundable credits 53.12 allowed under this chapter. 53.13 (e) "Net minimum tax" means the minimum tax imposed by this 53.14 section. 53.15 [EFFECTIVE DATE.] This section is effective for taxable 53.16 years beginning after December 31, 2003. 53.17 Sec. 8. Minnesota Statutes 2003 Supplement, section 53.18 290.0921, subdivision 3, is amended to read: 53.19 Subd. 3. [ALTERNATIVE MINIMUM TAXABLE INCOME.] 53.20 "Alternative minimum taxable income" is Minnesota net income as 53.21 defined in section 290.01, subdivision 19, and includes the 53.22 adjustments and tax preference items in sections 56, 57, 58, and 53.23 59(d), (e), (f), and (h) of the Internal Revenue Code. If a 53.24 corporation files a separate company Minnesota tax return, the 53.25 minimum tax must be computed on a separate company basis. If a 53.26 corporation is part of a tax group filing a unitary return, the 53.27 minimum tax must be computed on a unitary basis. The following 53.28 adjustments must be made. 53.29 (1) For purposes of the depreciation adjustments under 53.30 section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 53.31 the basis for depreciable property placed in service in a 53.32 taxable year beginning before January 1, 1990, is the adjusted 53.33 basis for federal income tax purposes, including any 53.34 modification made in a taxable year under section 290.01, 53.35 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 53.36 subdivision 7, paragraph (c). 54.1 For taxable years beginning after December 31, 2000, the 54.2 amount of any remaining modification made under section 290.01, 54.3 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 54.4 subdivision 7, paragraph (c), not previously deducted is a 54.5 depreciation allowance in the first taxable year after December 54.6 31, 2000. 54.7 (2) The portion of the depreciation deduction allowed for 54.8 federal income tax purposes under section 168(k) of the Internal 54.9 Revenue Code that is required as an addition under section 54.10 290.01, subdivision 19c, clause (16), is disallowed in 54.11 determining alternative minimum taxable income. 54.12 (3) The subtraction for depreciation allowed under section 54.13 290.01, subdivision 19d, clause (19), is allowed as a 54.14 depreciation deduction in determining alternative minimum 54.15 taxable income. 54.16 (4) The alternative tax net operating loss deduction under 54.17 sections 56(a)(4) and 56(d) of the Internal Revenue Code does 54.18 not apply. 54.19 (5) The special rule for certain dividends under section 54.20 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 54.21 (6) The special rule for dividends from section 936 54.22 companies under section 56(g)(4)(C)(iii) does not apply. 54.23 (7) The tax preference for depletion under section 57(a)(1) 54.24 of the Internal Revenue Code does not apply. 54.25 (8) The tax preference for intangible drilling costs under 54.26 section 57(a)(2) of the Internal Revenue Code must be calculated 54.27 without regard to subparagraph (E) and the subtraction under 54.28 section 290.01, subdivision 19d, clause (4). 54.29 (9) The tax preference for tax exempt interest under 54.30 section 57(a)(5) of the Internal Revenue Code does not apply. 54.31 (10) The tax preference for charitable contributions of 54.32 appreciated property under section 57(a)(6) of the Internal 54.33 Revenue Code does not apply. 54.34 (11) For purposes of calculating the tax preference for 54.35 accelerated depreciation or amortization on certain property 54.36 placed in service before January 1, 1987, under section 57(a)(7) 55.1 of the Internal Revenue Code, the deduction allowable for the 55.2 taxable year is the deduction allowed under section 290.01, 55.3 subdivision 19e. 55.4 For taxable years beginning after December 31, 2000, the 55.5 amount of any remaining modification made under section 290.01, 55.6 subdivision 19e, not previously deducted is a depreciation or 55.7 amortization allowance in the first taxable year after December 55.8 31, 2004. 55.9 (12) For purposes of calculating the adjustment for 55.10 adjusted current earnings in section 56(g) of the Internal 55.11 Revenue Code, the term "alternative minimum taxable income" as 55.12 it is used in section 56(g) of the Internal Revenue Code, means 55.13 alternative minimum taxable income as defined in this 55.14 subdivision, determined without regard to the adjustment for 55.15 adjusted current earnings in section 56(g) of the Internal 55.16 Revenue Code. 55.17 (13) For purposes of determining the amount of adjusted 55.18 current earnings under section 56(g)(3) of the Internal Revenue 55.19 Code, no adjustment shall be made under section 56(g)(4) of the 55.20 Internal Revenue Code with respect to (i) the amount of foreign 55.21 dividend gross-up subtracted as provided in section 290.01, 55.22 subdivision 19d, clause (1), (ii) the amount of refunds of 55.23 income, excise, or franchise taxes subtracted as provided in 55.24 section 290.01, subdivision 19d, clause (10), or (iii) the 55.25 amount of royalties, fees or other like income subtracted as 55.26 provided in section 290.01, subdivision 19d, clause (11). 55.27 (14) Alternative minimum taxable income excludes the income 55.28 from operating in a job opportunity building zone as provided 55.29 under section 469.317. 55.30 (15) Alternative minimum taxable income excludes the income 55.31 from operating in a biotechnology and health sciences industry 55.32 zone as provided under section 469.337. 55.33 (16) The addition required under section 290.01, 55.34 subdivision 19c, clause (17), is included in determining 55.35 alternative minimum taxable income. 55.36 Items of tax preference must not be reduced below zero as a 56.1 result of the modifications in this subdivision. 56.2 [EFFECTIVE DATE.] This section is effective for taxable 56.3 years beginning after December 31, 2003. 56.4 Sec. 9. Minnesota Statutes 2003 Supplement, section 56.5 290A.03, subdivision 15, is amended to read: 56.6 Subd. 15. [INTERNAL REVENUE CODE.] "Internal Revenue Code" 56.7 means the Internal Revenue Code of 1986, as amended throughJune56.815, 2003April 10, 2004. 56.9 [EFFECTIVE DATE.] This section is effective the day 56.10 following final enactment except the changes to household income 56.11 generated by federal changes to federal adjusted gross income 56.12 are effective at the same time federal changes are effective. 56.13 Sec. 10. Minnesota Statutes 2003 Supplement, section 56.14 291.005, subdivision 1, is amended to read: 56.15 Subdivision 1. Unless the context otherwise clearly 56.16 requires, the following terms used in this chapter shall have 56.17 the following meanings: 56.18 (1) "Federal gross estate" means the gross estate of a 56.19 decedent as valued and otherwise determined for federal estate 56.20 tax purposes by federal taxing authorities pursuant to the 56.21 provisions of the Internal Revenue Code. 56.22 (2) "Minnesota gross estate" means the federal gross estate 56.23 of a decedent after (a) excluding therefrom any property 56.24 included therein which has its situs outside Minnesota, and (b) 56.25 including therein any property omitted from the federal gross 56.26 estate which is includable therein, has its situs in Minnesota, 56.27 and was not disclosed to federal taxing authorities. 56.28 (3) "Personal representative" means the executor, 56.29 administrator or other person appointed by the court to 56.30 administer and dispose of the property of the decedent. If 56.31 there is no executor, administrator or other person appointed, 56.32 qualified, and acting within this state, then any person in 56.33 actual or constructive possession of any property having a situs 56.34 in this state which is included in the federal gross estate of 56.35 the decedent shall be deemed to be a personal representative to 56.36 the extent of the property and the Minnesota estate tax due with 57.1 respect to the property. 57.2 (4) "Resident decedent" means an individual whose domicile 57.3 at the time of death was in Minnesota. 57.4 (5) "Nonresident decedent" means an individual whose 57.5 domicile at the time of death was not in Minnesota. 57.6 (6) "Situs of property" means, with respect to real 57.7 property, the state or country in which it is located; with 57.8 respect to tangible personal property, the state or country in 57.9 which it was normally kept or located at the time of the 57.10 decedent's death; and with respect to intangible personal 57.11 property, the state or country in which the decedent was 57.12 domiciled at death. 57.13 (7) "Commissioner" means the commissioner of revenue or any 57.14 person to whom the commissioner has delegated functions under 57.15 this chapter. 57.16 (8) "Internal Revenue Code" means the United States 57.17 Internal Revenue Code of 1986, as amended through December 31, 57.1820022003. 57.19 [EFFECTIVE DATE.] This section is effective for estates of 57.20 decedents dying after January 31, 2003. 57.21 ARTICLE 3 57.22 PROPERTY TAXES 57.23 Section 1. Minnesota Statutes 2002, section 97A.061, 57.24 subdivision 1, is amended to read: 57.25 Subdivision 1. [APPLICABILITY; AMOUNT.] (a) The 57.26 commissioner shall annually make a payment to each county having 57.27 public hunting areas and game refuges. Money to make the 57.28 payments is annually appropriated for that purpose from the 57.29 general fund. Except as provided in paragraph (b), this section 57.30 does not apply to state trust fund land and other state land not 57.31 purchased for game refuge or public hunting purposes. Except as 57.32 provided in paragraph (b), the payment shall be the greatest of: 57.33 (1) 35 percent of the gross receipts from all special use 57.34 permits and leases of land acquired for public hunting and game 57.35 refuges; 57.36 (2) 50 cents per acre on land purchased actually used for 58.1 public hunting or game refuges; or 58.2 (3) three-fourths of one percent of the appraised value of 58.3 purchased land actually used for public hunting and game refuges. 58.4 (b) The payment shall be 50 percent of the dollar amount 58.5 adjusted for inflation as determined under section 477A.12, 58.6 subdivision 1, paragraph (a), clause (1), multiplied by the 58.7 number of acres of land in the county that are owned by another 58.8 state agency for military purposes and designated as a game 58.9 refuge under section 97A.085. 58.10 (c) The payment must be reduced by the amount paid under 58.11 subdivision 3 for croplands managed for wild geese. 58.12(c)(d) The appraised value is the purchase price for five 58.13 years after acquisition. The appraised value shall be 58.14 determined by the county assessor every five years after 58.15 acquisition. 58.16 [EFFECTIVE DATE.] This section is effective for aids paid 58.17 in calendar year 2005 and thereafter. 58.18 Sec. 2. Minnesota Statutes 2002, section 144F.01, 58.19 subdivision 10, is amended to read: 58.20 Subd. 10. [REPORTS.] On or before March 15,20052006, and 58.21 March 15,20072008, the special taxing district shall submit a 58.22 levy and expenditure report to the commissioner of revenue and 58.23 to the chairs of the house and senate committees with 58.24 jurisdiction over taxes. Each report must include the amount of 58.25 the district's levies for taxes payable for each of the two 58.26 previous years and its actual expenditures of those revenues. 58.27 Expenditures must be reported by general service category, as 58.28 listed in subdivision 5, and include a separate category for 58.29 administrative expenses. 58.30 [EFFECTIVE DATE.] This section is effective the day 58.31 following final enactment. 58.32 Sec. 3. Minnesota Statutes 2002, section 272.02, 58.33 subdivision 22, is amended to read: 58.34 Subd. 22. [WIND ENERGY CONVERSION SYSTEMS.] All real and 58.35 personal property of a wind energy conversion system as defined 58.36 in section 272.029, subdivision 2, is exempt from property tax 59.1 except that the land on which the property is located remains 59.2 taxable. The value of the land on which the wind energy 59.3 conversion system is located shall not be increased or 59.4 decreased, but shall be valued in the same manner as similar 59.5 land that has not been improved with a wind energy conversion 59.6 system. The land shall be classified based on the most probable 59.7 use of the property if it were not improved with a wind energy 59.8 conversion system. 59.9 [EFFECTIVE DATE.] This section is effective for assessment 59.10 year 2004 and thereafter, for taxes payable in 2005 and 59.11 thereafter. 59.12 Sec. 4. Minnesota Statutes 2003 Supplement, section 59.13 272.02, subdivision 47, is amended to read: 59.14 Subd. 47. [POULTRY LITTER BIOMASS GENERATION FACILITY; 59.15 PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 59.16 attached machinery and other personal property which is part of 59.17 an electrical generating facility that meets the requirements of 59.18 this subdivision is exempt. At the time of construction, the 59.19 facility must: 59.20 (1) be designed to utilize poultry litter as a primary fuel 59.21 source; and 59.22 (2) be constructed for the purpose of generating power at 59.23 the facility that will be sold pursuant to a contract approved 59.24 by the Public Utilities Commission in accordance with the 59.25 biomass mandate imposed under section 216B.2424. 59.26 Construction of the facility must be commenced after 59.27 January 1, 2003, and before December 31,20032004. Property 59.28 eligible for this exemption does not include electric 59.29 transmission lines and interconnections or gas pipelines and 59.30 interconnections appurtenant to the property or the facility. 59.31 [EFFECTIVE DATE.] This section is effective for assessment 59.32 year 2004, taxes payable in 2005, and thereafter. 59.33 Sec. 5. Minnesota Statutes 2003 Supplement, section 59.34 272.02, subdivision 56, is amended to read: 59.35 Subd. 56. [ELECTRIC GENERATION FACILITY; PERSONAL 59.36 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 60.1 attached machinery and other personal property which is part of 60.2 a combined-cycle combustion-turbine electric generation facility 60.3 that exceeds550300 megawatts of installed capacity and that 60.4 meets the requirements of this subdivision is exempt. At the 60.5 time of construction, the facility must: 60.6 (1) be designed to utilize natural gas as a primary fuel; 60.7 (2) not be owned by a public utility as defined in section 60.8 216B.02, subdivision 4; 60.9 (3) be located within five miles of an existing natural gas 60.10 pipeline and within four miles of an existing electrical 60.11 transmission substation; 60.12 (4) be located outside the metropolitan area as defined 60.13 under section 473.121, subdivision 2; and 60.14 (5) be designed to provide energy and ancillary services 60.15 and have received a certificate of need under section 216B.243. 60.16 (b) Construction of the facility must be commenced after 60.17 January 1, 2004, and before January 1, 2007, except that 60.18 property eligible for this exemption includes any expansion of 60.19 the facility that also meets the requirements of paragraph (a), 60.20 clauses (1) to (5), without regard to the date that construction 60.21 of the expansion commences. Property eligible for this 60.22 exemption does not include electric transmission lines and 60.23 interconnections or gas pipelines and interconnections 60.24 appurtenant to the property or the facility. 60.25 [EFFECTIVE DATE.] This section is effective for assessment 60.26 year 2005, taxes payable in 2006, and thereafter. 60.27 Sec. 6. Minnesota Statutes 2002, section 272.02, is 60.28 amended by adding a subdivision to read: 60.29 Subd. 68. [ELECTRIC GENERATION FACILITY; PERSONAL 60.30 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 60.31 machinery and other personal property which is part of a 60.32 simple-cycle, combustion-turbine electric generation facility 60.33 that exceeds 300 megawatts of installed capacity and that meets 60.34 the requirements of this subdivision is exempt. At the time of 60.35 the construction, the facility must: 60.36 (1) be designed to utilize natural gas as a primary fuel; 61.1 (2) be owned by a public utility as defined in section 61.2 216B.02, subdivision 4, and be located at or interconnected with 61.3 an existing generating plant of the utility; 61.4 (3) be designed to provide peaking, emergency backup, or 61.5 contingency services; 61.6 (4) satisfy a resource need identified in an approved 61.7 integrated resource plan filed under section 216B.2422; and 61.8 (5) have received, by resolution, the approval from the 61.9 governing body of the county and the city for the exemption of 61.10 personal property under this subdivision. 61.11 Construction of the facility must be commenced after 61.12 January 1, 2004, and before January 1, 2006. Property eligible 61.13 for this exemption does not include electric transmission lines 61.14 and interconnections or gas pipelines and interconnections 61.15 appurtenant to the property or the facility. 61.16 [EFFECTIVE DATE.] This section is effective for assessment 61.17 year 2005, taxes payable in 2006, and thereafter. 61.18 Sec. 7. Minnesota Statutes 2002, section 272.02, is 61.19 amended by adding a subdivision to read: 61.20 Subd. 69. [ELECTRIC GENERATION FACILITY; PERSONAL 61.21 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 61.22 attached machinery and other personal property which is part of 61.23 a simple-cycle combustion-turbine electric generation facility 61.24 that exceeds 290 megawatts of installed capacity and that meets 61.25 the requirements of this subdivision is exempt. At the time of 61.26 construction, the facility must: 61.27 (1) be designed to utilize natural gas as a primary fuel; 61.28 (2) not be owned by a public utility as defined in section 61.29 216B.02, subdivision 4; 61.30 (3) be located within five miles of an existing natural gas 61.31 pipeline and within five miles of an existing electrical 61.32 transmission substation; 61.33 (4) be located outside the metropolitan area as defined 61.34 under section 473.121, subdivision 2; 61.35 (5) be designed to provide peaking capacity energy and 61.36 ancillary services and have satisfied all of the requirements 62.1 under section 216B.243; and 62.2 (6) have received, by resolution, the approval from the 62.3 governing body of the county, city, and school district in which 62.4 the proposed facility is to be located for the exemption of 62.5 personal property under this subdivision. 62.6 (b) Construction of the facility must be commenced after 62.7 January 1, 2005, and before January 1, 2009. Property eligible 62.8 for this exemption does not include electric transmission lines 62.9 and interconnections or gas pipelines and interconnections 62.10 appurtenant to the property or the facility. 62.11 [EFFECTIVE DATE.] This section is effective for assessment 62.12 year 2006, taxes payable in 2007, and thereafter. 62.13 Sec. 8. Minnesota Statutes 2002, section 272.02, is 62.14 amended by adding a subdivision to read: 62.15 Subd. 70. [ELECTRIC GENERATION FACILITY PERSONAL 62.16 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), and 62.17 section 453.54, subdivision 20, attached machinery and other 62.18 personal property which is part of an electric generation 62.19 facility that exceeds 150 megawatts of installed capacity and 62.20 meets the requirements of this subdivision is exempt. At the 62.21 time of construction, the facility must: 62.22 (1) be designed to utilize natural gas as a primary fuel; 62.23 (2) be owned and operated by a municipal power agency as 62.24 defined in section 453.52, subdivision 8; 62.25 (3) have received the certificate of need under section 62.26 216B.243; 62.27 (4) be located outside the metropolitan area as defined 62.28 under section 473.121, subdivision 2; and 62.29 (5) be designed to be a combined-cycle facility, although 62.30 initially the facility will be operated as a simple-cycle 62.31 combustion turbine. 62.32 (b) To qualify under this subdivision, an agreement must be 62.33 negotiated between the municipal power agency and the host city, 62.34 for a payment in lieu of property taxes to the host city. 62.35 (c) Construction of the facility must be commenced after 62.36 January 1, 2004, and before January 1, 2006. Property eligible 63.1 for this exemption does not include electric transmission lines 63.2 and interconnections or gas pipelines and interconnections 63.3 appurtenant to the property or the facility. 63.4 [EFFECTIVE DATE.] This section is effective for assessment 63.5 year 2005, taxes payable in 2006, and thereafter. 63.6 Sec. 9. Minnesota Statutes 2002, section 272.02, is 63.7 amended by adding a subdivision to read: 63.8 Subd. 71. [BIOMASS ELECTRIC GENERATION FACILITY; PERSONAL 63.9 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 63.10 attached machinery and other personal property which is a part 63.11 of an electric generation facility generating up to 30 megawatts 63.12 of installed capacity and that meets the requirements of this 63.13 subdivision is exempt. At the time of construction, the 63.14 facility must: 63.15 (1) be designed to utilize a minimum 90 percent waste 63.16 biomass as a fuel; 63.17 (2) not be owned by a public utility as defined in section 63.18 216B.02, subdivision 4; 63.19 (3) be located within a city of the first class and have 63.20 its primary location at a former garbage transfer station; and 63.21 (4) be designed to have capability to provide baseload 63.22 energy and district heating. 63.23 (b) Construction of the facility must be commenced after 63.24 January 1, 2004, and before January 1, 2008. Property eligible 63.25 for this exemption does not include electric transmission lines 63.26 and interconnections or gas pipelines and interconnections 63.27 appurtenant to the property or the facility. 63.28 [EFFECTIVE DATE.] This section is effective for assessment 63.29 year 2005, taxes payable in 2006, and thereafter. 63.30 Sec. 10. Minnesota Statutes 2002, section 272.02, is 63.31 amended by adding a subdivision to read: 63.32 Subd. 72. [ELECTRIC GENERATION FACILITY; PERSONAL 63.33 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 63.34 attached machinery and other personal property that is part of 63.35 either a simple-cycle, combustion-turbine electric generation 63.36 facility that equals or exceeds 150 megawatts of installed 64.1 capacity, or a combined-cycle, combustion-turbine electric 64.2 generation facility that equals or exceeds 225 megawatts of 64.3 installed capacity, and that in either case meets the 64.4 requirements of this subdivision, is exempt. At the time of 64.5 construction, the facility must: 64.6 (1) be designed to utilize natural gas as a primary fuel; 64.7 (2) not be owned by a public utility as defined in section 64.8 216B.02, subdivision 4; 64.9 (3) be located in a metropolitan county defined in section 64.10 473.121, subdivision 4, that has a population greater than 64.11 190,000 and less than 225,000 in the most recent federal 64.12 decennial census, within one mile of an existing natural gas 64.13 pipeline, and within one mile of an existing electrical 64.14 transmission substation; and 64.15 (4) be designed to provide energy and ancillary services 64.16 and have received a certificate of need under section 216B.243. 64.17 (b) Construction of the facility must be commenced after 64.18 January 1, 2005, and before January 1, 2008. Property eligible 64.19 for this exemption does not include electric transmission lines 64.20 and interconnections or gas pipelines and interconnections 64.21 appurtenant to the property or the facility. 64.22 [EFFECTIVE DATE.] This section is effective for assessment 64.23 year 2005, taxes payable in 2006, and thereafter. 64.24 Sec. 11. Minnesota Statutes 2002, section 272.0212, 64.25 subdivision 1, is amended to read: 64.26 Subdivision 1. [EXEMPTION.] All qualified property in a 64.27 zone is exempt to the extent and for a period up to the duration 64.28 provided by the zone designation and under sections 469.1731 to 64.29 469.1735. 64.30 [EFFECTIVE DATE.] This section is effective for development 64.31 agreements approved after the day following final enactment and 64.32 beginning for property taxes payable in 2005. 64.33 Sec. 12. Minnesota Statutes 2002, section 272.0212, 64.34 subdivision 2, is amended to read: 64.35 Subd. 2. [LIMITS ON EXEMPTION.] (a) Property in a zone is 64.36 not exempt under this section from the following: 65.1 (1) special assessments; 65.2 (2) ad valorem property taxes specifically levied for the 65.3 payment of principal and interest on debt obligations; and 65.4 (3) all taxes levied by a school district, except equalized 65.5 school levies as defined in section 273.1398, subdivision 1, 65.6 paragraph (e). 65.7 (b) The city may limit the property tax exemption to a 65.8 shorter period than the duration of the zone or to a percentage 65.9 of the property taxes payable or both. 65.10 [EFFECTIVE DATE.] This section is effective for development 65.11 agreements approved after the day following final enactment and 65.12 beginning for property taxes payable in 2005. 65.13 Sec. 13. [272.0275] [PERSONAL PROPERTY USED TO GENERATE 65.14 ELECTRICITY; EXEMPTION.] 65.15 Subdivision 1. [NEW PLANT CONSTRUCTION AFTER JANUARY 1, 65.16 2004.] For a new generating plant built and placed in service 65.17 after January 1, 2004, its personal property used to generate 65.18 electric power is exempt from property taxation, including under 65.19 section 453.54, subdivision 20, if an exemption of generation 65.20 personal property form, with an attached siting agreement, is 65.21 filed with the Department of Revenue. The form must be signed 65.22 by the utility, and the county and city or town where the 65.23 facility is proposed to be located. 65.24 Subd. 2. [EXISTING PLANT; INCREASE IN NAMEPLATE CAPACITY.] 65.25 For a plant existing or under construction on the day of final 65.26 enactment of this act, a partial exemption applies if the 65.27 nameplate capacity of the plant is increased from that existing 65.28 on the day of final enactment of this act, and if an exemption 65.29 of generation personal property form, with an attached siting 65.30 agreement is filed with the Department of Revenue. The form 65.31 must be signed by the utility, and the county and city or town 65.32 where the facility expansion is located. This partial exemption 65.33 must be computed by taking the increase in megawatts over the 65.34 total megawatt nameplate capacity after construction is 65.35 complete, multiplied by the market value of all taxable tools, 65.36 implements, and machinery of the generating plant as determined 66.1 by the commissioner of revenue. The resulting exemption is 66.2 effective beginning in the next assessment year. 66.3 Subd. 3. [DEFINITION; APPLICABILITY.] For purposes of this 66.4 section, "personal property" means tools, implements, and 66.5 machinery of the generating plant. The exemption under this 66.6 section does not apply to transformers, transmission lines, 66.7 distribution lines, or any other tools, implements, and 66.8 machinery that are part of an electric substation, wherever 66.9 located. 66.10 [EFFECTIVE DATE.] This section is effective the day 66.11 following final enactment. 66.12 Sec. 14. Minnesota Statutes 2002, section 272.029, 66.13 subdivision 4, is amended to read: 66.14 Subd. 4. [REPORTS.] (a) An owner of a wind energy 66.15 conversion system subject to tax under subdivision 3 shall file 66.16 a report with the commissioner of revenue annually on or before 66.17March 1February 1 detailing the amount of electricity in 66.18 kilowatt-hours that was produced by the wind energy conversion 66.19 system for the previous calendar year. The commissioner shall 66.20 prescribe the form of the report. The report must contain the 66.21 information required by the commissioner to determine the tax 66.22 due to each county under this section for the current year. If 66.23 an owner of a wind energy conversion system subject to taxation 66.24 under this section fails to file the report by the due date, the 66.25 commissioner of revenue shall determine the tax based upon the 66.26 nameplate capacity of the system multiplied by a capacity factor 66.27 of 40 percent. 66.28 (b) On or beforeMarch 31February 28, the commissioner of 66.29 revenue shall notify the owner of the wind energy conversion 66.30 systems of the tax due to each county for the current year and 66.31 shall certify to the county auditor of each county in which the 66.32 systems are located the tax due from each owner for the current 66.33 year. 66.34 [EFFECTIVE DATE.] This section is effective for taxes 66.35 payable in 2005 and thereafter. 66.36 Sec. 15. Minnesota Statutes 2002, section 272.029, 67.1 subdivision 6, is amended to read: 67.2 Subd. 6. [DISTRIBUTION OF REVENUES.] Revenues from the 67.3 taxes imposed under subdivision 5 must be part of the settlement 67.4 between the county treasurer and the county auditor under 67.5 section 276.09. The revenue must be distributed by the county 67.6 auditor or the county treasurer to all local taxing 67.7 jurisdictions in which the wind energy conversion system is 67.8 located, in the same proportion that each of the taxing 67.9 jurisdiction'scurrentprevious year's net tax capacity based 67.10 tax rate is to thecurrentprevious year's total local net tax 67.11 capacity based rate. 67.12 [EFFECTIVE DATE.] This section is effective for taxes 67.13 payable in 2004 and thereafter. 67.14 Sec. 16. Minnesota Statutes 2003 Supplement, section 67.15 273.11, subdivision 1a, is amended to read: 67.16 Subd. 1a. [LIMITED MARKET VALUE.] In the case of all 67.17 property classified as agricultural homestead or nonhomestead, 67.18 residential homestead or nonhomestead, timber,ornoncommercial 67.19 seasonal residential recreational, or class 1c resort property, 67.20 the assessor shall compare the value with the taxable portion of 67.21 the value determined in the preceding assessment, except that 67.22 for class 1c resort property for assessment year 2004, the 67.23 assessor shall determine the limited market value as provided in 67.24 subdivision 1b. 67.25 For assessment year 2002, the amount of the increase shall 67.26 not exceed the greater of (1) ten percent of the value in the 67.27 preceding assessment, or (2) 15 percent of the difference 67.28 between the current assessment and the preceding assessment. 67.29 For assessment year 2003, the amount of the increase shall 67.30 not exceed the greater of (1) 12 percent of the value in the 67.31 preceding assessment, or (2) 20 percent of the difference 67.32 between the current assessment and the preceding assessment. 67.33 For assessment year 2004, the amount of the increase shall 67.34 not exceed the greater of (1) 15 percent of the value in the 67.35 preceding assessment, or (2) 25 percent of the difference 67.36 between the current assessment and the preceding assessment. 68.1 For assessment year 2005, the amount of the increase shall 68.2 not exceed the greater of (1) 15 percent of the value in the 68.3 preceding assessment, or (2) 33 percent of the difference 68.4 between the current assessment and the preceding assessment. 68.5 For assessment year 2006, the amount of the increase shall 68.6 not exceed the greater of (1) 15 percent of the value in the 68.7 preceding assessment, or (2) 50 percent of the difference 68.8 between the current assessment and the preceding assessment. 68.9 This limitation shall not apply to increases in value due 68.10 to improvements. For purposes of this subdivision, the term 68.11 "assessment" means the value prior to any exclusion under 68.12 subdivision 16. 68.13 The provisions of this subdivision shall be in effect 68.14 through assessment year 2006 as provided in this subdivision. 68.15 For purposes of this subdivision and subdivision 1b, "class 68.16 1c resort property" includes the portion of the property 68.17 classified class 1a or 1b homestead, the portion of the property 68.18 classified 1c, plus any remaining portion of the resort that is 68.19 classified 4c under section 273.13, subdivision 25, paragraph 68.20 (d), clause (1). 68.21 For purposes of the assessment/sales ratio study conducted 68.22 under section 127A.48, and the computation of state aids paid 68.23 under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 68.24 477A, market values and net tax capacities determined under this 68.25 subdivision and subdivision 16, shall be used. 68.26 [EFFECTIVE DATE.] This section is effective for assessment 68.27 year 2004 through 2006, for taxes payable in 2005 through 2007. 68.28 Sec. 17. Minnesota Statutes 2002, section 273.11, is 68.29 amended by adding a subdivision to read: 68.30 Subd. 1b. [CLASS 1C RESORTS; 2004 ASSESSMENT ONLY.] For 68.31 assessment year 2004, the valuation increase on class 1c resort 68.32 property shall not exceed the greater of (1) 15 percent of the 68.33 value of its 2002 assessment, or (2) 25 percent of the 68.34 difference in value between its 2004 assessment and its 2002 68.35 assessment. The valuation increase on class 1c resort property 68.36 for the 2005 and 2006 assessment years shall be determined based 69.1 upon the schedule contained in subdivision 1a. 69.2 [EFFECTIVE DATE.] This section is effective the day 69.3 following final enactment. 69.4 Sec. 18. Minnesota Statutes 2002, section 273.111, 69.5 subdivision 6, is amended to read: 69.6 Subd. 6. [AGRICULTURAL USE.] Real property qualifying 69.7 under subdivision 3 shall be considered to be in agricultural 69.8 use provided that annually: 69.9 (1) at least 33-1/3 percent of the total family income of 69.10 the owner is derived therefrom, or the total production income 69.11 including rental from the property is$300$500 plus$10$50 per 69.12 tillable acre; and 69.13 (2) it is devoted to the production for sale of 69.14 agricultural products as defined in section 273.13, subdivision 69.15 23, paragraph (e). 69.16 Slough, wasteland, and woodland contiguous to or surrounded 69.17 by land that is entitled to valuation and tax deferment under 69.18 this section is considered to be in agricultural use if under 69.19 the same ownership and management. 69.20 [EFFECTIVE DATE.] This section is effective for assessment 69.21 year 2005, taxes payable in 2006, and thereafter. 69.22 Sec. 19. Minnesota Statutes 2002, section 273.124, is 69.23 amended by adding a subdivision to read: 69.24 Subd. 22. [RESIDENTIAL PROPERTY ALSO USED TO PROVIDE DAY 69.25 CARE.] Residential and agricultural property that is also used 69.26 to provide day care must be classified without regard to its use 69.27 in providing the day care, provided that the operator of the day 69.28 care service is occupying the property as the operator's 69.29 permanent residence. For purposes of this subdivision, "day 69.30 care" means family day care or adult family day care licensed 69.31 under section 245A.03, or provided without license under section 69.32 245A.03, subdivision 2, paragraph (a), clause (2). 69.33 [EFFECTIVE DATE.] This section is effective for assessment 69.34 year 2004 and thereafter, for taxes payable in 2005 and 69.35 thereafter. 69.36 Sec. 20. [273.1321] [VACANT COMMERCIAL INDUSTRIAL 70.1 PROPERTIES.] 70.2 Subdivision 1. [AUTHORITY.] A city may establish, by 70.3 ordinance, a program to encourage redevelopment, provide for 70.4 better utilization of commercial industrial property, and 70.5 eliminate blighting influences by revoking the eligibility of 70.6 individual commercial industrial properties to receive the 70.7 credit authorized under section 273.1398, subdivision 4. The 70.8 program may revoke eligibility only if the property has been 70.9 vacant, as defined in subdivision 3, clauses (1) to (3), for 70.10 three or more consecutive years prior to the current assessment 70.11 year, or under subdivision 3, clause (4), for five or more 70.12 consecutive years prior to the current assessment year. 70.13 Subd. 2. [MINIMUM REQUIREMENTS.] The program must provide: 70.14 (1) standards for determining whether a property is vacant; 70.15 (2) written assessment notice by the city or county to the 70.16 property owner informing the owner that the property's 70.17 eligibility will be revoked; 70.18 (3) opportunity for the property owner to appeal the 70.19 revocation at the board of equalization; 70.20 (4) timely notice to the county assessor of the property's 70.21 eligibility revocation, if the city has a city assessor and the 70.22 city assessor has revoked the property's eligibility; and 70.23 (5) any other provisions the city determines are necessary 70.24 or appropriate to the operation of the program to achieve its 70.25 purposes. 70.26 Subd. 3. [DEFINITION OF VACANT.] A program established 70.27 under this section may provide that a property is vacant if the 70.28 property is: 70.29 (1) condemned, dangerous, or having multiple building code 70.30 violations; 70.31 (2) condemned and illegally occupied; 70.32 (3) either occupied or unoccupied, during which time the 70.33 enforcement officer for the municipality has issued multiple 70.34 orders to correct nuisance conditions; or 70.35 (4) unoccupied and not utilized for a commercial or 70.36 industrial purpose. 71.1 Subd. 4. [NOTICE TO PROPERTY OWNER.] The municipality 71.2 shall give notice to the property owner requiring that any 71.3 conditions in subdivision 3, clauses (1) to (3) be remedied, and 71.4 that the property be occupied and used for a commercial or 71.5 industrial purpose for at least 180 days during the next 71.6 12-month period, or else the property may cease to be eligible 71.7 for the credit under section 273.1398, subdivision 4. 71.8 [EFFECTIVE DATE.] This section is effective for taxes 71.9 payable in 2006 and thereafter. 71.10 Sec. 21. Minnesota Statutes 2002, section 273.1384, 71.11 subdivision 1, is amended to read: 71.12 Subdivision 1. [RESIDENTIAL HOMESTEAD MARKET VALUE 71.13 CREDIT.] Each county auditor shall determine a homestead credit 71.14 for each class 1a, 1b, 1c, and 2a homestead property within the 71.15 county equal to 0.4 percent of the market value of the 71.16 property. The amount of homestead credit for a homestead may 71.17 not exceed $304 and is reduced by .09 percent of the market 71.18 value in excess of $76,000. In the case of an agricultural or 71.19 resort homestead, only the market value of the house, garage, 71.20 and immediately surrounding one acre of land is eligible in 71.21 determining the property's homestead credit. In the case of a 71.22 propertywhichthat is classified asparta partial homestead 71.23and part nonhomestead, the credit shall apply only to the71.24homestead portion of the property.because the property is not 71.25 occupied by all owners or both spouses, the credit is determined 71.26 based on the homestead portion only, except that the credit must 71.27 not exceed the credit that would be calculated if the entire 71.28 residential portion of the property was classified as homestead. 71.29 [EFFECTIVE DATE.] This section is effective for taxes 71.30 payable in 2005 and thereafter. 71.31 Sec. 22. Minnesota Statutes 2003 Supplement, section 71.32 274.014, subdivision 3, is amended to read: 71.33 Subd. 3. [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] (a) 71.34 Any city or town thatdoes notconducts local boards of appeal 71.35 and equalization meetings must provide proof to the county 71.36 assessor by December 1,20062005, and each year thereafter, 72.1 that it is in compliance with the requirements of subdivision 2,72.2and that it had. Beginning in 2006, this notice must also 72.3 verify that there was a quorum of voting members at each meeting 72.4 of the board of appeal and equalization in thepriorcurrent 72.5 year,. A city or town that does not comply with these 72.6 requirements is deemed to have transferred its board of appeal 72.7 and equalization powers to the countyunder section 274.01,72.8subdivision 3, forbeginning with the following year's 72.9 assessment and continuing unless the powers are reinstated under 72.10 paragraph (c). 72.11 (b) The county shall notify the taxpayers when the board of 72.12 appeal and equalization for a city or town has been transferred 72.13 to the county under this subdivision and, prior to the meeting 72.14 time of the county board of equalization, the county shall make 72.15 available to those taxpayers a procedure for a review of the 72.16 assessments, including, but not limited to, open book meetings. 72.17 This alternate review process shall take place in April and May. 72.18 (c) A local board whose powers are transferred to the 72.19 county under this subdivision may be reinstated by resolution of 72.20 the governing body of the city or town and upon proof of 72.21 compliance with the requirements of subdivision 2. The 72.22 resolution and proofs must be provided to the county assessor by 72.23 December 1 in order to be effective for the following year's 72.24 assessment. 72.25 Sec. 23. Minnesota Statutes 2003 Supplement, section 72.26 275.065, subdivision 3, is amended to read: 72.27 Subd. 3. [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 72.28 county auditor shall prepare and the county treasurer shall 72.29 deliver after November 10 and on or before November 24 each 72.30 year, by first class mail to each taxpayer at the address listed 72.31 on the county's current year's assessment roll, a notice of 72.32 proposed property taxes. 72.33 (b) The commissioner of revenue shall prescribe the form of 72.34 the notice. 72.35 (c) The notice must inform taxpayers that it contains the 72.36 amount of property taxes each taxing authority proposes to 73.1 collect for taxes payable the following year. In the case of a 73.2 town, or in the case of the state general tax, the final tax 73.3 amount will be its proposed tax. In the case of taxing 73.4 authorities required to hold a public meeting under subdivision 73.5 6, the notice must clearly state that each taxing authority, 73.6 including regional library districts established under section 73.7 134.201, and including the metropolitan taxing districts as 73.8 defined in paragraph (i), but excluding all other special taxing 73.9 districts and towns, will hold a public meeting to receive 73.10 public testimony on the proposed budget and proposed or final 73.11 property tax levy, or, in case of a school district, on the 73.12 current budget and proposed property tax levy. It must clearly 73.13 state the time and place of each taxing authority's meeting, a 73.14 telephone number for the taxing authority that taxpayers may 73.15 call if they have questions related to the notice, and an 73.16 address where comments will be received by mail. 73.17 (d) The notice must state for each parcel: 73.18 (1) the market value of the property as determined under 73.19 section 273.11, and used for computing property taxes payable in 73.20 the following year and for taxes payable in the current year as 73.21 each appears in the records of the county assessor on November 1 73.22 of the current year; and, in the case of residential property, 73.23 whether the property is classified as homestead or 73.24 nonhomestead. The notice must clearly inform taxpayers of the 73.25 years to which the market values apply and that the values are 73.26 final values; 73.27 (2) the items listed below, shown separately by county, 73.28 city or town, and state general tax, net of the residential and 73.29 agricultural homestead credit under section 273.1384, voter 73.30 approved school levy, other local school levy, and the sum of 73.31 the special taxing districts, and as a total of all taxing 73.32 authorities: 73.33 (i) the actual tax for taxes payable in the current year; 73.34 and 73.35 (ii) the proposed tax amount. 73.36 If the county levy under clause (2) includes an amount for 74.1 a lake improvement district as defined under sections 103B.501 74.2 to 103B.581, the amount attributable for that purpose must be 74.3 separately stated from the remaining county levy amount. 74.4 In the case of a town or the state general tax, the final 74.5 tax shall also be its proposed tax unless the town changes its 74.6 levy at a special town meeting under section 365.52. If a 74.7 school district has certified under section 126C.17, subdivision 74.8 9, that a referendum will be held in the school district at the 74.9 November general election, the county auditor must note next to 74.10 the school district's proposed amount that a referendum is 74.11 pending and that, if approved by the voters, the tax amount may 74.12 be higher than shown on the notice. In the case of the city of 74.13 Minneapolis, the levy for the Minneapolis Library Board and the 74.14 levy for Minneapolis Park and Recreation shall be listed 74.15 separately from the remaining amount of the city's levy. In the 74.16 case of the city of St. Paul, the levy for the St. Paul Library 74.17 Agency must be listed separately from the remaining amount of 74.18 the city's levy. In the case of Ramsey County, any amount 74.19 levied under section 134.07 may be listed separately from the 74.20 remaining amount of the county's levy. In the case of a parcel 74.21 where tax increment or the fiscal disparities areawide tax under 74.22 chapter 276A or 473F applies, the proposed tax levy on the 74.23 captured value or the proposed tax levy on the tax capacity 74.24 subject to the areawide tax must each be stated separately and 74.25 not included in the sum of the special taxing districts; and 74.26 (3) the increase or decrease between the total taxes 74.27 payable in the current year and the total proposed taxes, 74.28 expressed as a percentage. 74.29 For purposes of this section, the amount of the tax on 74.30 homesteads qualifying under the senior citizens' property tax 74.31 deferral program under chapter 290B is the total amount of 74.32 property tax before subtraction of the deferred property tax 74.33 amount. 74.34 (e) The notice must clearly state that the proposed or 74.35 final taxes do not include the following: 74.36 (1) special assessments; 75.1 (2) levies approved by the voters after the date the 75.2 proposed taxes are certified, including bond referenda and 75.3 school district levy referenda; 75.4 (3) a levy limit increase approved by the voters by the 75.5 first Tuesday after the first Monday in November of the levy 75.6 year as provided under section 275.73; 75.7 (4) amounts necessary to pay cleanup or other costs due to 75.8 a natural disaster occurring after the date the proposed taxes 75.9 are certified; 75.10 (5) amounts necessary to pay tort judgments against the 75.11 taxing authority that become final after the date the proposed 75.12 taxes are certified; and 75.13 (6) the contamination tax imposed on properties which 75.14 received market value reductions for contamination. 75.15 (f) Except as provided in subdivision 7, failure of the 75.16 county auditor to prepare or the county treasurer to deliver the 75.17 notice as required in this section does not invalidate the 75.18 proposed or final tax levy or the taxes payable pursuant to the 75.19 tax levy. 75.20 (g) If the notice the taxpayer receives under this section 75.21 lists the property as nonhomestead, and satisfactory 75.22 documentation is provided to the county assessor by the 75.23 applicable deadline, and the property qualifies for the 75.24 homestead classification in that assessment year, the assessor 75.25 shall reclassify the property to homestead for taxes payable in 75.26 the following year. 75.27 (h) In the case of class 4 residential property used as a 75.28 residence for lease or rental periods of 30 days or more, the 75.29 taxpayer must either: 75.30 (1) mail or deliver a copy of the notice of proposed 75.31 property taxes to each tenant, renter, or lessee; or 75.32 (2) post a copy of the notice in a conspicuous place on the 75.33 premises of the property. 75.34 The notice must be mailed or posted by the taxpayer by 75.35 November 27 or within three days of receipt of the notice, 75.36 whichever is later. A taxpayer may notify the county treasurer 76.1 of the address of the taxpayer, agent, caretaker, or manager of 76.2 the premises to which the notice must be mailed in order to 76.3 fulfill the requirements of this paragraph. 76.4 (i) For purposes of this subdivision, subdivisions 5a and 76.5 6, "metropolitan special taxing districts" means the following 76.6 taxing districts in the seven-county metropolitan area that levy 76.7 a property tax for any of the specified purposes listed below: 76.8 (1) Metropolitan Council under section 473.132, 473.167, 76.9 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 76.10 (2) Metropolitan Airports Commission under section 473.667, 76.11 473.671, or 473.672; and 76.12 (3) Metropolitan Mosquito Control Commission under section 76.13 473.711. 76.14 For purposes of this section, any levies made by the 76.15 regional rail authorities in the county of Anoka, Carver, 76.16 Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 76.17 398A shall be included with the appropriate county's levy and 76.18 shall be discussed at that county's public hearing. 76.19 [EFFECTIVE DATE.] This section is effective for notices for 76.20 property taxes levied in 2004, payable in 2005, and thereafter. 76.21 Sec. 24. Minnesota Statutes 2002, section 276.04, 76.22 subdivision 2, is amended to read: 76.23 Subd. 2. [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 76.24 shall provide for the printing of the tax statements. The 76.25 commissioner of revenue shall prescribe the form of the property 76.26 tax statement and its contents. The statement must contain a 76.27 tabulated statement of the dollar amount due to each taxing 76.28 authority and the amount of the state tax from the parcel of 76.29 real property for which a particular tax statement is prepared. 76.30 The dollar amounts attributable to the county, the state tax, 76.31 the voter approved school tax, the other local school tax, the 76.32 township or municipality, and the total of the metropolitan 76.33 special taxing districts as defined in section 275.065, 76.34 subdivision 3, paragraph (i), must be separately stated. The 76.35 amounts due all other special taxing districts, if any, may be 76.36 aggregated. If the county levy under this paragraph includes an 77.1 amount for a lake improvement district as defined under sections 77.2 103B.501 to 103B.581, the amount attributable for that purpose 77.3 must be separately stated from the remaining county levy 77.4 amount. In the case of Ramsey County, if the county levy under 77.5 this paragraph includes an amount for public library service 77.6 under section 134.07, the amount attributable for that purpose 77.7 may be separately stated from the remaining county levy amount. 77.8 The amount of the tax on homesteads qualifying under the senior 77.9 citizens' property tax deferral program under chapter 290B is 77.10 the total amount of property tax before subtraction of the 77.11 deferred property tax amount. The amount of the tax on 77.12 contamination value imposed under sections 270.91 to 270.98, if 77.13 any, must also be separately stated. The dollar amounts, 77.14 including the dollar amount of any special assessments, may be 77.15 rounded to the nearest even whole dollar. For purposes of this 77.16 section whole odd-numbered dollars may be adjusted to the next 77.17 higher even-numbered dollar. The amount of market value 77.18 excluded under section 273.11, subdivision 16, if any, must also 77.19 be listed on the tax statement. 77.20 (b) The property tax statements for manufactured homes and 77.21 sectional structures taxed as personal property shall contain 77.22 the same information that is required on the tax statements for 77.23 real property. 77.24 (c) Real and personal property tax statements must contain 77.25 the following information in the order given in this paragraph. 77.26 The information must contain the current year tax information in 77.27 the right column with the corresponding information for the 77.28 previous year in a column on the left: 77.29 (1) the property's estimated market value under section 77.30 273.11, subdivision 1; 77.31 (2) the property's taxable market value after reductions 77.32 under section 273.11, subdivisions 1a and 16; 77.33 (3) the property's gross tax, calculated by adding the 77.34 property's total property tax to the sum of the aids enumerated 77.35 in clause (4); 77.36 (4) a total of the following aids: 78.1 (i) education aids payable under chapters 122A, 123A, 123B, 78.2 124D, 125A, 126C, and 127A; 78.3 (ii) local government aids for cities, towns, and counties 78.4 under chapter 477A; 78.5 (iii) disparity reduction aid under section 273.1398; and 78.6 (iv) homestead and agricultural credit aid under section 78.7 273.1398; 78.8 (5) for homestead residential and agricultural properties, 78.9 the credits under section 273.1384; 78.10 (6) any credits received under sections 273.119; 273.123; 78.11 273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 78.12 473H.10, except that the amount of credit received under section 78.13 273.135 must be separately stated and identified as "taconite 78.14 tax relief"; and 78.15 (7) the net tax payable in the manner required in paragraph 78.16 (a). 78.17 (d) If the county uses envelopes for mailing property tax 78.18 statements and if the county agrees, a taxing district may 78.19 include a notice with the property tax statement notifying 78.20 taxpayers when the taxing district will begin its budget 78.21 deliberations for the current year, and encouraging taxpayers to 78.22 attend the hearings. If the county allows notices to be 78.23 included in the envelope containing the property tax statement, 78.24 and if more than one taxing district relative to a given 78.25 property decides to include a notice with the tax statement, the 78.26 county treasurer or auditor must coordinate the process and may 78.27 combine the information on a single announcement. 78.28 The commissioner of revenue shall certify to the county 78.29 auditor the actual or estimated aids enumerated in clause (4) 78.30 that local governments will receive in the following year. The 78.31 commissioner must certify this amount by January 1 of each year. 78.32 [EFFECTIVE DATE.] This section is effective for property 78.33 tax statements for taxes payable in 2005 and thereafter. 78.34 Sec. 25. Minnesota Statutes 2002, section 290A.03, 78.35 subdivision 13, is amended to read: 78.36 Subd. 13. [PROPERTY TAXES PAYABLE.] (a) "Initial property 79.1 taxes payable" means (i) the property taxexclusive ofpayable 79.2 on a claimant's homestead plus (ii) any fees or charges for 79.3 police or fire services included in the total amount on the 79.4 property tax statement, excluding charges related to capital 79.5 expenditures and nuisance charges under section 429.101. 79.6 (b) "Property taxes payable" means initial property taxes 79.7 payable minus 79.8 (i) special assessments, other than fees or charges for 79.9 police or fire services that are included in paragraph (a)(ii); 79.10 (ii) penalties, and; 79.11 (iii) interestpayable on a claimant's homestead after; 79.12 (iv) deductions made under sections 273.135, 273.1384, 79.13 273.1391, 273.42, subdivision 2, and any other state paid 79.14 property tax credits in any calendar year,; andafter79.15 (v) any refund claimed and allowable under section 290A.04, 79.16 subdivision 2h, that is first payable in the year that the 79.17 property tax is payable. 79.18 (c) In the case of a claimant who makes ground lease 79.19 payments, "property taxes payable" includes the amount of the 79.20 payments directly attributable to the property taxes assessed 79.21 against the parcel on which the house is located. No 79.22 apportionment or reduction of the "property taxes payable" shall 79.23 be required for the use of a portion of the claimant's homestead 79.24 for a business purpose if the claimant does not deduct any 79.25 business depreciation expenses for the use of a portion of the 79.26 homestead in the determination of federal adjusted gross 79.27 income. For homesteads which are manufactured homes as defined 79.28 in section 273.125, subdivision 8, and for homesteads which are 79.29 park trailers taxed as manufactured homes under section 168.012, 79.30 subdivision 9, "property taxes payable" shall also include 19 79.31 percent of the gross rent paid in the preceding year for the 79.32 site on which the homestead is located. When a homestead is 79.33 owned by two or more persons as joint tenants or tenants in 79.34 common, such tenants shall determine between them which tenant 79.35 may claim the property taxes payable on the homestead. If they 79.36 are unable to agree, the matter shall be referred to the 80.1 commissioner of revenue whose decision shall be final. Property 80.2 taxes are considered payable in the year prescribed by law for 80.3 payment of the taxes. 80.4 (d) In the case of a claim relating to "property taxes 80.5 payable," the claimant must have owned and occupied the 80.6 homestead on January 2 of the year in which the tax is payable 80.7 and (i) the property must have been classified as homestead 80.8 property pursuant to section 273.124, on or before December 15 80.9 of the assessment year to which the "property taxes payable" 80.10 relate; or (ii) the claimant must provide documentation from the 80.11 local assessor that application for homestead classification has 80.12 been made on or before December 15 of the year in which the 80.13 "property taxes payable" were payable and that the assessor has 80.14 approved the application. 80.15 [EFFECTIVE DATE.] This section is effective for refunds 80.16 based on property taxes payable in 2005 and following years. 80.17 Sec. 26. Minnesota Statutes 2002, section 290A.07, is 80.18 amended by adding a subdivision to read: 80.19 Subd. 5. [EARLY PAYMENT; E-FILE CLAIMS.] The commissioner 80.20 may pay a claim up to 30 days earlier than the first permitted 80.21 date under subdivision 2a or 3 if the claim was submitted by 80.22 electronic means. 80.23 [EFFECTIVE DATE.] This section is effective the day 80.24 following final enactment. 80.25 Sec. 27. Minnesota Statutes 2002, section 365.43, 80.26 subdivision 1, is amended to read: 80.27 Subdivision 1. [LEVIED AMOUNT IS SPENDING LIMITTOTAL 80.28 REVENUE DEFINED.] A town must notcontract debts orspend more 80.29 money in a year thanthe taxes levied for the yearits total 80.30 revenue without a favorable vote of a majority of the town's 80.31 electors. In this section, "total revenue" means property taxes 80.32 payable in that year as well as amounts received from all other 80.33 sources and amounts carried forward from the last year. 80.34 Sec. 28. Minnesota Statutes 2002, section 365.431, is 80.35 amended to read: 80.36 365.431 [AMOUNT VOTED AT MEETING IS TAX LIMIT.] 81.1 Except as otherwise authorized by law, the tax for town 81.2 purposes must not be more than the amount voted to be raised at 81.3 the annual town meeting. 81.4 Sec. 29. Minnesota Statutes 2002, section 477A.11, 81.5 subdivision 4, is amended to read: 81.6 Subd. 4. [OTHER NATURAL RESOURCES LAND.] "Other natural 81.7 resources land" means:81.8(1)any other land presently owned in fee title by the 81.9 state and administered by the commissioner, or any tax-forfeited 81.10 land, other than platted lots within a city or those lands 81.11 described under subdivision 3, clause (2), which is owned by the 81.12 state and administered by the commissioner or by the county in 81.13 which it is located; and81.14(2) land leased by the state from the United States of81.15America through the United States Secretary of Agriculture81.16pursuant to Title III of the Bankhead Jones Farm Tenant Act,81.17which land is commonly referred to as land utilization project81.18land that is administered by the commissioner. 81.19 [EFFECTIVE DATE.] This section is effective for aids paid 81.20 in calendar year 2005 and thereafter. 81.21 Sec. 30. Minnesota Statutes 2002, section 477A.11, is 81.22 amended by adding a subdivision to read: 81.23 Subd. 5. [LAND UTILIZATION PROJECT LAND.] "Land 81.24 utilization project land" means land that is leased by the state 81.25 from the United States through the United States Secretary of 81.26 Agriculture according to Title III of the Bankhead Jones Farm 81.27 Tenant Act and that is administered by the commissioner. 81.28 [EFFECTIVE DATE.] This section is effective for aids paid 81.29 in calendar year 2005 and thereafter. 81.30 Sec. 31. Minnesota Statutes 2002, section 477A.12, 81.31 subdivision 1, is amended to read: 81.32 Subdivision 1. [TYPES OF LAND; PAYMENTS.] (a) As an offset 81.33 for expenses incurred by counties and towns in support of 81.34 natural resources lands, the following amounts are annually 81.35 appropriated to the commissioner of natural resources from the 81.36 general fund for transfer to the commissioner of revenue. The 82.1 commissioner of revenue shall pay the transferred funds to 82.2 counties as required by sections 477A.11 to 477A.145. The 82.3 amounts are: 82.4 (1) for acquired natural resources land, $3, as adjusted 82.5 for inflation under section 477A.145, multiplied by the total 82.6 number of acres of acquired natural resources land or, at the 82.7 county's option three-fourths of one percent of the appraised 82.8 value of all acquired natural resources land in the county, 82.9 whichever is greater; 82.10 (2) 75 cents, as adjusted for inflation under section 82.11 477A.145, multiplied by the number of acres of 82.12 county-administered other natural resources land; and 82.13 (3) 75 cents, as adjusted for inflation under section 82.14 477A.145, multiplied by the total number of acres of land 82.15 utilization project land; 82.16(3)(4) 37.5 cents, as adjusted for inflation under section 82.17 477A.145, multiplied by the number of acres of 82.18 commissioner-administered other natural resources land located 82.19 in each county as of July 1 of each year prior to the payment 82.20 year. 82.21 (b) The amount determined under paragraph (a), clause (1), 82.22 is payable for land that is acquired from a private owner and 82.23 owned by the Department of Transportation for the purpose of 82.24 replacing wetland losses caused by transportation projects, but 82.25 only if the county contains more than 500 acres of such land at 82.26 the time the certification is made under subdivision 2. 82.27 [EFFECTIVE DATE.] This section is effective for aids paid 82.28 in calendar year 2005 and thereafter. 82.29 Sec. 32. Minnesota Statutes 2002, section 477A.12, 82.30 subdivision 2, is amended to read: 82.31 Subd. 2. [PROCEDURE.] Lands for which payments in lieu are 82.32 made pursuant to section 97A.061, subdivision 3, and Laws 1973, 82.33 chapter 567, shall not be eligible for payments under this 82.34 section. Each county auditor shall certify to the Department of 82.35 Natural Resources during July of each year prior to the payment 82.36 year the number of acres of county-administered other natural 83.1 resources land within the county. The Department of Natural 83.2 resources may, in addition to the certification of acreage, 83.3 require descriptive lists of land so certified. The 83.4 commissioner of natural resources shall determine and certify to 83.5 the commissioner of revenue by March 1 of the payment year: 83.6 (1) the number of acres and most recent appraised value of 83.7 acquired natural resources land within each county; 83.8 (2) the number of acres of commissioner-administered 83.9 natural resources land within each county;and83.10 (3) the number of acres of county-administered other 83.11 natural resources land within each county, based on the reports 83.12 filed by each county auditor with the commissioner of natural 83.13 resources; and 83.14 (4) the number of acres of land utilization project land 83.15 within each county. 83.16 The commissioner of transportation shall determine and 83.17 certify to the commissioner of revenue by March 1 of the payment 83.18 year the number of acres of land and the appraised value of the 83.19 land described in subdivision 1, paragraph (b), but only if it 83.20 exceeds 500 acres. 83.21 The commissioner of revenue shall determine the 83.22 distributions provided for in this section using the number of 83.23 acres and appraised values certified by the commissioner of 83.24 natural resources and the commissioner of transportation by 83.25 March 1 of the payment year. 83.26 [EFFECTIVE DATE.] This section is effective for aids paid 83.27 in calendar year 2005 and thereafter. 83.28 Sec. 33. Minnesota Statutes 2002, section 477A.14, 83.29 subdivision 1, is amended to read: 83.30 Subdivision 1. [GENERAL DISTRIBUTION.] Except as provided 83.31 in subdivision 2 or in section 97A.061, subdivision 5, 40 83.32 percent of the total payment to the county shall be deposited in 83.33 the county general revenue fund to be used to provide property 83.34 tax levy reduction. The remainder shall be distributed by the 83.35 county in the following priority: 83.36 (a) 37.5 cents, as adjusted for inflation under section 84.1 477A.145, for each acre of county-administered other natural 84.2 resources land shall be deposited in a resource development fund 84.3 to be created within the county treasury for use in resource 84.4 development, forest management, game and fish habitat 84.5 improvement, and recreational development and maintenance of 84.6 county-administered other natural resources land. Any county 84.7 receiving less than $5,000 annually for the resource development 84.8 fund may elect to deposit that amount in the county general 84.9 revenue fund; 84.10 (b) From the funds remaining, within 30 days of receipt of 84.11 the payment to the county, the county treasurer shall pay each 84.12 organized township 30 cents, as adjusted for inflation under 84.13 section 477A.145, for each acre of acquired natural resources 84.14 land and each acre of land described in section 477A.12, 84.15 subdivision 1, paragraph (b), and 7.5 cents, as adjusted for 84.16 inflation under section 477A.145, for each acre of other natural 84.17 resources land and each acre of land utilization project land 84.18 located within its boundaries. Payments for natural resources 84.19 lands not located in an organized township shall be deposited in 84.20 the county general revenue fund. Payments to counties and 84.21 townships pursuant to this paragraph shall be used to provide 84.22 property tax levy reduction, except that of the payments for 84.23 natural resources lands not located in an organized township, 84.24 the county may allocate the amount determined to be necessary 84.25 for maintenance of roads in unorganized townships. Provided 84.26 that, if the total payment to the county pursuant to section 84.27 477A.12 is not sufficient to fully fund the distribution 84.28 provided for in this clause, the amount available shall be 84.29 distributed to each township and the county general revenue fund 84.30 on a pro rata basis; and 84.31 (c) Any remaining funds shall be deposited in the county 84.32 general revenue fund. Provided that, if the distribution to the 84.33 county general revenue fund exceeds $35,000, the excess shall be 84.34 used to provide property tax levy reduction. 84.35 [EFFECTIVE DATE.] This section is effective for aids paid 84.36 in calendar year 2005 and thereafter. 85.1 Sec. 34. Laws 1998, chapter 389, article 3, section 41, is 85.2 amended to read: 85.3 Sec. 41. [SPECIAL ASSESSMENT DEFERRAL AUTHORIZED.] 85.4 Notwithstanding Minnesota Statutes, chapter 429, a city may 85.5 defer the payment of any special assessment levied against a 85.6 property qualifying under section 38 as determined by the city. 85.7 Any special assessment, the payment of which has been deferred 85.8 by the city, must be paid in full or a payment agreement may be 85.9 approved by the city if the ownership of property is transferred 85.10 to anyone or any entity. Payment or a payment agreement must be 85.11 made within 60 days of the transfer of ownership. 85.12 [EFFECTIVE DATE.] This section is effective the day 85.13 following final enactment. 85.14 Sec. 35. Laws 1998, chapter 389, article 3, section 42, 85.15 subdivision 2, as amended by Laws 2002, chapter 377, article 4, 85.16 section 24, is amended to read: 85.17 Subd. 2. [RECAPTURE.] (a) Property or any portion thereof 85.18 qualifying under section 38 is subject to additional taxes if: 85.19 (1) ownership of the property is transferred to anyone 85.20 other than the spouse or child of the current owner; 85.21 (2) the current owner or the spouse or child of the current 85.22 owner has not conveyed or entered into a contract before July 1, 85.23 2007, to convey for ownership or public easement rights, (i) a 85.24 portion of the property toaone or more nonprofitfoundation85.25 foundations orcorporation operatingcorporations; and (ii) a 85.26 portion of the property to one or more local governments; and 85.27 those entities shall separately or jointly operate the property 85.28 as an art park providing the services included in section 38, 85.29 clauses (2) to (5), and may also use some of the property for 85.30 other public purposes as determined by the local governments; or 85.31 (3) the nonprofit foundation or corporation to which a 85.32 portion of the property was transferred ceases to provide the 85.33 services included in section 38, clauses (2) to (5), earlier 85.34 than ten years following the effective date of theconveyance85.35 conveyances or of the execution of thecontractcontracts to 85.36 convey. 86.1 (b) The additional taxes are imposed at the earlier of (1) 86.2 the year following transfer of ownership to anyone other than 86.3 the spouse or child of the current owner or a nonprofit 86.4 foundation or corporation or local government operating the 86.5 property as an art park and used for other public purposes, or 86.6 (2) for taxes payable in 2008, or (3) in the event the nonprofit 86.7 foundation or corporation to which a portion of the property was 86.8 conveyed ceases to provide the required services within ten 86.9 years after the conveyance, for taxes payable in the year 86.10 following the year when it ceased to do so. 86.11 The county board, with the approval of the city council, 86.12 shall determine the amount of the additional taxes due on the 86.13 portion of property which is no longer utilized as an art park; 86.14 provided, however, that the additional taxesare equal tomust 86.15 not be greater than the difference between the taxes determined 86.16 on that portion of the property utilized as an art park under 86.17 sections 39 and 40 and the amount determined under subdivision 1 86.18 for all years that the property qualified under section 38.The86.19additional taxes must be extended against the property on the86.20tax list for the current year; provided, however, thatNo 86.21 interest or penalties may be levied on the additionaltaxes if86.22timely paidamount provided that it is paid within 30 days of 86.23 the county's notice. 86.24 [EFFECTIVE DATE.] This section is effective the day 86.25 following final enactment. 86.26 Sec. 36. [TOWNSHIP LEVY ADJUSTMENT FOR WIND ENERGY 86.27 PRODUCTION TAX; PAYABLE 2004 ONLY.] 86.28 Notwithstanding the deadlines in Minnesota Statutes, 86.29 section 275.07, towns located in Lincoln or Pipestone County are 86.30 authorized to adjust their payable 2004 levy for all or a 86.31 portion of their estimated wind energy production tax amounts 86.32 for 2004, as computed by the commissioner of revenue from 86.33 reports filed under Minnesota Statutes, section 272.029, 86.34 subdivision 4. The Lincoln and Pipestone county auditors may 86.35 adjust the payable 2004 levy certifications under Minnesota 86.36 Statutes, section 275.07, subdivision 1, based upon the towns 87.1 that have recertified their levies under this section by March 87.2 15, 2004. 87.3 [EFFECTIVE DATE.] This section is effective for taxes 87.4 levied in 2003, payable in 2004 only. 87.5 Sec. 37. [SAUK RIVER WATERSHED DISTRICT.] 87.6 Notwithstanding Minnesota Statutes, section 103D.905, 87.7 subdivision 3, the Sauk River Watershed District may annually 87.8 levy an additional amount up to $100,000 for its general fund. 87.9 [EFFECTIVE DATE.] This section is effective, without local 87.10 approval, beginning with the taxes levied in 2004, payable in 87.11 2005. 87.12 Sec. 38. [PRINSBURG; SPECIAL LEVY AUTHORITY.] 87.13 Subdivision 1. [BOARD APPROVAL.] Notwithstanding any law 87.14 to the contrary, the board of Common School District No. 815, 87.15 Prinsburg, may continue to operate as a common school district 87.16 provided that: 87.17 (1) the district adopts an annual resolution by May 1 of 87.18 each year declaring that it will be operating for the following 87.19 school year; 87.20 (2) for years subsequent to calendar year 2005, the 87.21 district's proposed budget for the following year shows that the 87.22 district will not return to statutory operating debt under 87.23 Minnesota Statutes, section 123B.81; and 87.24 (3) the district has passed a referendum under subdivision 87.25 4 authorizing levy authority for the coming school year. 87.26 Subd. 2. [DETERMINATION OF OUTSTANDING OBLIGATIONS.] Prior 87.27 to exercising the authority to levy under this section, the 87.28 boards of Common School District No. 815 and Independent School 87.29 District No. 2180, MACCRAY, must mutually agree to the amount of 87.30 the outstanding tuition owed by the Prinsburg School District to 87.31 the MACCRAY School District. If the districts cannot agree to 87.32 the amount of the tuition owed, the districts may submit all 87.33 relevant information to the commissioner of education who shall 87.34 determine the amount of the obligation owed to the MACCRAY 87.35 School District. 87.36 Subd. 3. [STATUTORY OPERATING DEBT.] For taxes payable in 88.1 2005, 2006, and 2007, Common School District No. 815, Prinsburg, 88.2 may levy the amount necessary to eliminate a deficit in the net 88.3 unappropriated balance in the operating funds of the district, 88.4 determined as of June 30, 2004, and certified and adjusted by 88.5 the commissioner. This levy may also include the amount 88.6 necessary to eliminate the estimated deficit for fiscal year 88.7 2005. 88.8 Subd. 4. [ANNUAL LEVY AUTHORITY.] (a) Common School 88.9 District No. 815, Prinsburg, may levy the amount necessary to 88.10 eliminate any projected deficit in the district's operating 88.11 budget for the preceding school year if the district's voters 88.12 approve a referendum according to the provisions of this 88.13 subdivision. 88.14 (b) The referendum shall be called by the school board. 88.15 The ballot must state that the annual levy will be the estimated 88.16 amount necessary to eliminate the previous year's estimated 88.17 operating deficit. The ballot must designate the specific 88.18 number of years, not to exceed five, for which the referendum 88.19 authorization applies. The ballot shall state substantially the 88.20 following: 88.21 "Shall the increase in the levy proposed by the Board of 88.22 Prinsburg, Common School District No. 815, be approved?" 88.23 If approved, the amount necessary to eliminate the previous 88.24 year's estimated operating deficit may be authorized for 88.25 certification for the number of years approved. 88.26 (c) The board must follow the notice provisions of 88.27 Minnesota Statutes, section 126C.17. 88.28 Subd. 5. [FISCAL YEAR 2005 ONLY.] Notwithstanding the 88.29 provisions of this section, for fiscal year 2005 only, Common 88.30 School District No. 815, Prinsburg, may continue to operate as a 88.31 common school district upon approval of a referendum under 88.32 subdivision 4. 88.33 [EFFECTIVE DATE.] This section is effective the day 88.34 following final enactment. 88.35 Sec. 39. [STUDY OF PROPERTY TAX AS A PERCENTAGE OF RENT.] 88.36 (a) The commissioner of revenue shall study the percentage 89.1 of rent that constitutes property tax used to calculate refunds 89.2 under Minnesota Statutes, chapter 290A, and provide a written 89.3 report and recommendations to the legislature, in compliance 89.4 with Minnesota Statutes, sections 3.195 and 3.197, by February 89.5 1, 2005. In preparing the study, the commissioner must conduct 89.6 a survey of rent paid and property taxes payable on samples of 89.7 rental properties in (i) the metropolitan area as defined in 89.8 Minnesota Statutes, section 473.121, subdivision 2, (ii) each 89.9 remaining county that is included in a metropolitan statistical 89.10 area as defined by the U.S. Census Bureau, and (iii) the 89.11 remaining Minnesota counties. The survey must include rental 89.12 properties classified under Minnesota Statutes, section 273.13, 89.13 subdivisions 22 and 25, paragraphs (a) and (c), and rental 89.14 property that is exempt from taxation. 89.15 (b) The study must report on: 89.16 (1) the percentage of rent constituting property tax for 89.17 the different types of property and different geographic regions 89.18 surveyed; and 89.19 (2) if rent paid in each geographic region surveyed differs 89.20 significantly between rental units subject to different 89.21 classifications and units in buildings exempt from taxation. 89.22 (c) The study must make recommendations on: 89.23 (1) if the percentage of rent constituting property taxes 89.24 specified in Minnesota Statutes, section 290A.03, subdivisions 89.25 11 and 13, should be changed to more accurately reflect the 89.26 actual percentage of rent constituting property taxes throughout 89.27 Minnesota; 89.28 (2) if the percentage of rent constituting property taxes 89.29 used to calculate refunds under Minnesota Statutes, chapter 89.30 290A, should be set at one uniform percentage for the entire 89.31 state or should vary by geographic region and type of rental 89.32 property, including an analysis of the advantages and 89.33 disadvantages of using a uniform rate or varying the rate by 89.34 region and type of property; 89.35 (3) if the percentage of rent constituting property tax 89.36 should be replaced by reporting of actual property taxes on 90.1 rental units; 90.2 (4) a method by which the commissioner could regularly 90.3 recommend to the legislature adjustments to the percentage of 90.4 rent constituting property taxes; and 90.5 (5) proposed statutory language authorizing the 90.6 commissioner to adjust the percentage based on ongoing survey 90.7 research. 90.8 ARTICLE 4 90.9 SALES AND USE AND LODGING TAXES 90.10 Section 1. Minnesota Statutes 2002, section 16C.03, is 90.11 amended by adding a subdivision to read: 90.12 Subd. 18. [CONTRACTS WITH FOREIGN VENDORS.] (a) The 90.13 commissioner and other agencies to which this section applies 90.14 and the legislative branch of government shall not contract for 90.15 goods or services from a vendor or an affiliate of the vendor 90.16 which has not registered to collect the sales and use tax 90.17 imposed under chapter 297A on its sales in Minnesota or to a 90.18 destination in Minnesota. A vendor that sells tangible personal 90.19 property or provides services subject to tax under chapter 297A 90.20 to an agency or the legislature, and each affiliate of that 90.21 vendor, is regarded as a "retailer maintaining a place of 90.22 business in this state" and is required to collect the Minnesota 90.23 sales or use tax under chapter 297A. This subdivision does not 90.24 apply to state colleges and universities, the courts, and any 90.25 agency in the judicial branch of government. For purposes of 90.26 this subdivision, the term "affiliate" means any person or 90.27 entity that is controlled by, or is under common control of, a 90.28 vendor through stock ownership or other affiliation. 90.29 (b) Beginning on or after January 1, 2005, each vendor or 90.30 affiliate of a vendor that is offered a contract to sell goods 90.31 or services subject to tax under chapter 297A to an agency or 90.32 the legislature must submit to the agency or legislature 90.33 certification that the vendor is registered to collect Minnesota 90.34 sales or use tax and acknowledging that the contract may be 90.35 declared void if the certification is false. 90.36 (c) An agency or the legislature is exempted from the 91.1 provisions of this subdivision in the event of an emergency or 91.2 when the vendor is the sole source of such goods or services. 91.3 [EFFECTIVE DATE.] This section is effective for all 91.4 contracts entered into after December 31, 2004. 91.5 Sec. 2. Minnesota Statutes 2002, section 297A.61, 91.6 subdivision 4, is amended to read: 91.7 Subd. 4. [RETAIL SALE.] (a) A "retail sale" means any 91.8 sale, lease, or rental for any purpose other than resale, 91.9 sublease, or subrent. 91.10 (b) A sale of property used by the owner only by leasing it 91.11 to others or by holding it in an effort to lease it, and put to 91.12 no use by the owner other than resale after the lease or effort 91.13 to lease, is a sale of property for resale. 91.14 (c) A sale of master computer software that is purchased 91.15 and used to make copies for sale or lease is a sale of property 91.16 for resale. 91.17 (d) A sale of building materials, supplies, and equipment 91.18 to owners, contractors, subcontractors, or builders for the 91.19 erection of buildings or the alteration, repair, or improvement 91.20 of real property is a retail sale in whatever quantity sold, 91.21 whether the sale is for purposes of resale in the form of real 91.22 property or otherwise. 91.23 (e) A sale of carpeting, linoleum, or similar floor 91.24 covering to a person who provides for installation of the floor 91.25 covering is a retail sale and not a sale for resale since a sale 91.26 of floor covering which includes installation is a contract for 91.27 the improvement of real property. 91.28 (f) A sale of shrubbery, plants, sod, trees, and similar 91.29 items to a person who provides for installation of the items is 91.30 a retail sale and not a sale for resale since a sale of 91.31 shrubbery, plants, sod, trees, and similar items that includes 91.32 installation is a contract for the improvement of real property. 91.33 (g) A sale of tangible personal property that is awarded as 91.34 prizes is a retail sale and is not considered a sale of property 91.35 for resale. 91.36 (h) A sale of tangible personal property utilized or 92.1 employed in the furnishing or providing of services under 92.2 subdivision 3, paragraph (g), clause (1), including, but not 92.3 limited to, property given as promotional items, is a retail 92.4 sale and is not considered a sale of property for resale. 92.5 (i) A sale of tangible personal property used in conducting 92.6 lawful gambling under chapter 349 or the state lottery under 92.7 chapter 349A, including, but not limited to, property given as 92.8 promotional items, is a retail sale and is not considered a sale 92.9 of property for resale. 92.10 (j) A sale of machines, equipment, or devices that are used 92.11 to furnish, provide, or dispense goods or services, including, 92.12 but not limited to, coin-operated devices, is a retail sale and 92.13 is not considered a sale of property for resale. 92.14 (k) In the case of a lease, a retail sale occurs when (1) 92.15 an obligation to make a lease payment becomes due under the 92.16 terms of the agreement or the trade practices of the lessor or 92.17 (2) in the case of a lease of a motor vehicle, as defined in 92.18 section 297B.01, subdivision 5, but excluding vehicles with a 92.19 manufacturer's gross vehicle weight rating greater than 10,000 92.20 pounds and rentals of vehicles for not more than 28 days, at the 92.21 time the least is consummated. 92.22 (l) In the case of a conditional sales contract, a retail 92.23 sale occurs upon the transfer of title or possession of the 92.24 tangible personal property. 92.25 [EFFECTIVE DATE.] This section is effective for leases 92.26 entered into after June 30, 2004. 92.27 Sec. 3. Minnesota Statutes 2002, section 297A.61, is 92.28 amended by adding a subdivision to read: 92.29 Subd. 7a. [MOTOR VEHICLE LEASE PRICE.] In the case of a 92.30 lease of a motor vehicle as provided in subdivision 4, paragraph 92.31 (k), clause (2), the tax is imposed on the total amount to be 92.32 paid by the lessee under the lease agreement and shall be 92.33 collected in full by the lessor at the time the lease is 92.34 consummated. The total amount to be paid by the lessee under 92.35 the lease agreement equals the agreed upon value of the vehicle 92.36 less manufacturer's rebates, the stated residual value of the 93.1 leased vehicle, and the total value allowed for a vehicle owned 93.2 by the lessee taken in trade by lessor, plus the price of any 93.3 taxable goods and services included in the lease and the rent 93.4 charge as provided by Code of Federal Regulations, title 12, 93.5 section 213.4. 93.6 If the total amount paid by the lessee for use of the 93.7 leased vehicle includes amounts that are not calculated at the 93.8 time the lease is executed, the tax is imposed and shall be 93.9 collected by the lessor at the time such amounts are paid by the 93.10 lessee. In the case of a lease which by its terms may be 93.11 renewed, the sales tax is due and payable on the total amount to 93.12 be paid during the initial term of the lease, and then for each 93.13 subsequent renewal period on the total amount to be paid during 93.14 the renewal period. 93.15 If a lease is canceled or rescinded on or before 90 days of 93.16 its consummation or in cases where a vehicle is returned to the 93.17 manufacturer pursuant to section 325F.665, the lessor may file a 93.18 claim for a refund of the total tax paid minus the amount of tax 93.19 due for the period the vehicle is used by the lessee. 93.20 [EFFECTIVE DATE.] This section is effective for leases 93.21 entered into after June 30, 2004. 93.22 Sec. 4. Minnesota Statutes 2002, section 297A.61, is 93.23 amended by adding a subdivision to read: 93.24 Subd. 37. [PERSONAL RAPID TRANSIT SYSTEM.] "Personal rapid 93.25 transit system" means a transportation system: 93.26 (1) of small, computer-controlled vehicles, transporting 93.27 one to three passengers on elevated guideways in a 93.28 transportation network operating on demand and nonstop directly 93.29 to any stations in the network; 93.30 (2) that provides service to the public on a regular and 93.31 continuing basis; and 93.32 (3) that is operated independent of any governmental 93.33 subsidies, other than reduced borrowing or capital costs from 93.34 the issuing of state or local bonds, direct loans, loan 93.35 guarantees, or similar financial assistance provided by a 93.36 governmental entity to finance acquisition, construction, or 94.1 improvement of the system. 94.2 [EFFECTIVE DATE.] This section is effective the day 94.3 following final enactment. 94.4 Sec. 5. Minnesota Statutes 2002, section 297A.62, is 94.5 amended by adding a subdivision to read: 94.6 Subd. 4. [LEASE OF MOTOR VEHICLES.] When the lease of a 94.7 motor vehicle as defined in section 297A.61, subdivision 4, 94.8 paragraph (k), clause (2), originates in another state, the 94.9 sales tax under subdivision 1 shall be calculated by the lessor 94.10 on the total amount that is due under the lease agreement after 94.11 the vehicle is required to be registered in Minnesota. If the 94.12 total amount to be paid by the lessee under the lease agreement 94.13 has already been subjected to tax by another state, a credit for 94.14 taxes paid in the other state shall be allowed as provided in 94.15 section 297A.80. 94.16 [EFFECTIVE DATE.] This section is effective for vehicles 94.17 registering in Minnesota after June 30, 2004. 94.18 Sec. 6. Minnesota Statutes 2002, section 297A.67, is 94.19 amended by adding a subdivision to read: 94.20 Subd. 32. [CIGARETTES.] Cigarettes upon which a tax has 94.21 been imposed under section 297F.25 are exempt. 94.22 [EFFECTIVE DATE.] This section is effective for sales and 94.23 purchases made after July 31, 2004. 94.24 Sec. 7. Minnesota Statutes 2003 Supplement, section 94.25 297A.68, subdivision 2, is amended to read: 94.26 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 94.27 (a) Materials stored, used, or consumed in industrial production 94.28 of personal property intended to be sold ultimately at retail 94.29 are exempt, whether or not the item so used becomes an 94.30 ingredient or constituent part of the property produced. 94.31 Materials that qualify for this exemption include, but are not 94.32 limited to, the following: 94.33 (1) chemicals, including chemicals used for cleaning food 94.34 processing machinery and equipment; 94.35 (2) materials, including chemicals, fuels, and electricity 94.36 purchased by persons engaged in industrial production to treat 95.1 waste generated as a result of the production process; 95.2 (3) fuels, electricity, gas, and steam used or consumed in 95.3 the production process, except that electricity, gas, or steam 95.4 used for space heating, cooling, or lighting is exempt if (i) it 95.5 is in excess of the average climate control or lighting for the 95.6 production area, and (ii) it is necessary to produce that 95.7 particular product; 95.8 (4) petroleum products and lubricants; 95.9 (5) packaging materials, including returnable containers 95.10 used in packaging food and beverage products; 95.11 (6) accessory tools, equipment, and other items that are 95.12 separate detachable units with an ordinary useful life of less 95.13 than 12 months used in producing a direct effect upon the 95.14 product; and 95.15 (7) the following materials, tools, and equipment used in 95.16 metalcasting: crucibles, thermocouple protection sheaths and 95.17 tubes, stalk tubes, refractory materials, molten metal filters 95.18 and filter boxes, degassing lances, and base blocks. 95.19 (b) This exemption does not include: 95.20 (1) machinery, equipment, implements, tools, accessories, 95.21 appliances, contrivances and furniture and fixtures, except 95.22 those listed in paragraph (a), clause (6); and 95.23 (2) petroleum and special fuels used in producing or 95.24 generating power for propelling ready-mixed concrete trucks on 95.25 the public highways of this state. 95.26 (c) Industrial production includes, but is not limited to, 95.27 research, development, design or production of any tangible 95.28 personal property, manufacturing, processing (other than by 95.29 restaurants and consumers) of agricultural products (whether 95.30 vegetable or animal), commercial fishing, refining, smelting, 95.31 reducing, brewing, distilling, printing, mining, quarrying, 95.32 lumbering, generating electricity, the production of road 95.33 building materials, and the research, development, design, or 95.34 production of computer software. Industrial production does not 95.35 include painting, cleaning, repairing or similar processing of 95.36 property except as part of the original manufacturing process. 96.1 Industrial production does not include the transportation, 96.2 transmission, or distribution of petroleum, liquefied gas, 96.3 natural gas, water, or steam, in, by, or through pipes, lines, 96.4 tanks, mains, or other means of transporting those products. 96.5 [EFFECTIVE DATE.] This section is effective for sales and 96.6 purchases made after June 30, 2004. 96.7 Sec. 8. Minnesota Statutes 2003 Supplement, section 96.8 297A.68, subdivision 5, is amended to read: 96.9 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 96.10 exempt. The tax must be imposed and collected as if the rate 96.11 under section 297A.62, subdivision 1, applied, and then refunded 96.12 in the manner provided in section 297A.75. 96.13 "Capital equipment" means machinery and equipment purchased 96.14 or leased, and used in this state by the purchaser or lessee 96.15 primarily for manufacturing, fabricating, mining, or refining 96.16 tangible personal property to be sold ultimately at retail if 96.17 the machinery and equipment are essential to the integrated 96.18 production process of manufacturing, fabricating, mining, or 96.19 refining. Capital equipment also includes machinery and 96.20 equipment used to electronically transmit results retrieved by a 96.21 customer of an on-line computerized data retrieval system. 96.22 (b) Capital equipment includes, but is not limited to: 96.23 (1) machinery and equipment used to operate, control, or 96.24 regulate the production equipment; 96.25 (2) machinery and equipment used for research and 96.26 development, design, quality control, and testing activities; 96.27 (3) environmental control devices that are used to maintain 96.28 conditions such as temperature, humidity, light, or air pressure 96.29 when those conditions are essential to and are part of the 96.30 production process; 96.31 (4) materials and supplies used to construct and install 96.32 machinery or equipment; 96.33 (5) repair and replacement parts, including accessories, 96.34 whether purchased as spare parts, repair parts, or as upgrades 96.35 or modifications to machinery or equipment; 96.36 (6) materials used for foundations that support machinery 97.1 or equipment; 97.2 (7) materials used to construct and install special purpose 97.3 buildings used in the production process; 97.4 (8) ready-mixed concrete equipment in which the ready-mixed 97.5 concrete is mixed as part of the delivery process regardless if 97.6 mounted on a chassis and leases of ready-mixed concrete trucks; 97.7 and 97.8 (9) machinery or equipment used for research, development, 97.9 design, or production of computer software. 97.10 (c) Capital equipment does not include the following: 97.11 (1) motor vehicles taxed under chapter 297B; 97.12 (2) machinery or equipment used to receive or store raw 97.13 materials; 97.14 (3) building materials, except for materials included in 97.15 paragraph (b), clauses (6) and (7); 97.16 (4) machinery or equipment used for nonproduction purposes, 97.17 including, but not limited to, the following: plant security, 97.18 fire prevention, first aid, and hospital stations; support 97.19 operations or administration; pollution control; and plant 97.20 cleaning, disposal of scrap and waste, plant communications, 97.21 space heating, cooling, lighting, or safety; 97.22 (5) farm machinery and aquaculture production equipment as 97.23 defined by section 297A.61, subdivisions 12 and 13; 97.24 (6) machinery or equipment purchased and installed by a 97.25 contractor as part of an improvement to real property;or97.26 (7) machinery or equipment used in the transportation, 97.27 transmission, or distribution of petroleum, liquefied gas, 97.28 natural gas, water, or steam, in, by, or through pipes, lines, 97.29 tanks, mains, or other means of transporting those products. 97.30 This clause does not apply to machinery and equipment used to 97.31 blend biodiesel fuel, as defined in section 239.77; or 97.32 (8) any other item that is not essential to the integrated 97.33 process of manufacturing, fabricating, mining, or refining. 97.34 (d) For purposes of this subdivision: 97.35 (1) "Equipment" means independent devices or tools separate 97.36 from machinery but essential to an integrated production 98.1 process, including computers and computer software, used in 98.2 operating, controlling, or regulating machinery and equipment; 98.3 and any subunit or assembly comprising a component of any 98.4 machinery or accessory or attachment parts of machinery, such as 98.5 tools, dies, jigs, patterns, and molds. 98.6 (2) "Fabricating" means to make, build, create, produce, or 98.7 assemble components or property to work in a new or different 98.8 manner. 98.9 (3) "Integrated production process" means a process or 98.10 series of operations through which tangible personal property is 98.11 manufactured, fabricated, mined, or refined. For purposes of 98.12 this clause, (i) manufacturing begins with the removal of raw 98.13 materials from inventory and ends when the last process prior to 98.14 loading for shipment has been completed; (ii) fabricating begins 98.15 with the removal from storage or inventory of the property to be 98.16 assembled, processed, altered, or modified and ends with the 98.17 creation or production of the new or changed product; (iii) 98.18 mining begins with the removal of overburden from the site of 98.19 the ores, minerals, stone, peat deposit, or surface materials 98.20 and ends when the last process before stockpiling is completed; 98.21 and (iv) refining begins with the removal from inventory or 98.22 storage of a natural resource and ends with the conversion of 98.23 the item to its completed form. 98.24 (4) "Machinery" means mechanical, electronic, or electrical 98.25 devices, including computers and computer software, that are 98.26 purchased or constructed to be used for the activities set forth 98.27 in paragraph (a), beginning with the removal of raw materials 98.28 from inventory through completion of the product, including 98.29 packaging of the product. 98.30 (5) "Machinery and equipment used for pollution control" 98.31 means machinery and equipment used solely to eliminate, prevent, 98.32 or reduce pollution resulting from an activity described in 98.33 paragraph (a). 98.34 (6) "Manufacturing" means an operation or series of 98.35 operations where raw materials are changed in form, composition, 98.36 or condition by machinery and equipment and which results in the 99.1 production of a new article of tangible personal property. For 99.2 purposes of this subdivision, "manufacturing" includes the 99.3 generation of electricity or steam to be sold at retail. 99.4 (7) "Mining" means the extraction of minerals, ores, stone, 99.5 or peat. 99.6 (8) "On-line data retrieval system" means a system whose 99.7 cumulation of information is equally available and accessible to 99.8 all its customers. 99.9 (9) "Primarily" means machinery and equipment used 50 99.10 percent or more of the time in an activity described in 99.11 paragraph (a). 99.12 (10) "Refining" means the process of converting a natural 99.13 resource to an intermediate or finished product, including the 99.14 treatment of water to be sold at retail. 99.15 [EFFECTIVE DATE.] This section is effective for sales and 99.16 purchases made after June 30, 2004. 99.17 Sec. 9. Minnesota Statutes 2002, section 297A.68, is 99.18 amended by adding a subdivision to read: 99.19 Subd. 40. [PERSONAL RAPID TRANSIT SYSTEM.] (a) Machinery, 99.20 equipment, and supplies purchased or leased, and used by the 99.21 purchaser or lessee in this state directly in the provision of a 99.22 personal rapid transit system as defined in section 297A.61, 99.23 subdivision 37, are exempt. Machinery, equipment, and supplies 99.24 that qualify for this exemption include, but are not limited to, 99.25 the following: 99.26 (1) vehicles, guideways, and related parts used directly in 99.27 the transit system; 99.28 (2) computers and equipment used primarily for operating, 99.29 controlling, and regulating the system; 99.30 (3) machinery, equipment, furniture, and fixtures necessary 99.31 for the functioning of system stations; 99.32 (4) machinery, equipment, implements, tools, and supplies 99.33 used to maintain vehicles, guideways, and stations; and 99.34 (5) electricity and other fuels used in the provision of 99.35 the transit service, including heating, cooling, and lighting of 99.36 system stations. 100.1 (b) This exemption does not include machinery, equipment, 100.2 and supplies used for nonproduction purposes such as operations 100.3 support and administration. 100.4 [EFFECTIVE DATE.] This section is effective for sales and 100.5 purchases made after June 30, 2004. 100.6 Sec. 10. Minnesota Statutes 2003 Supplement, section 100.7 297A.70, subdivision 8, is amended to read: 100.8 Subd. 8. [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 100.9 SYSTEM; PRODUCTS AND SERVICES.] Products and services including, 100.10 but not limited to, end user equipment used for construction, 100.11 ownership, operation, maintenance, and enhancement of the 100.12backbone system of theregionwide or statewide public safety 100.13 radio communication system established under sections 403.21 to 100.14 403.34, are exempt.For purposes of this subdivision, backbone100.15system is defined in section 403.21, subdivision 9.This 100.16 subdivision is effective for purchases, sales, storage, use, or 100.17 consumptionoccurring before August 1, 2005,in the counties of 100.18Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and100.19WashingtonBenton, Sherburne, Stearns, and Wright, and all 100.20 counties located in the west metro, east metro, and southeast 100.21 districts of the State Patrol. 100.22 [EFFECTIVE DATE.] This section is effective for sales made 100.23 beginning the day after final enactment. 100.24 Sec. 11. Minnesota Statutes 2002, section 297A.70, is 100.25 amended by adding a subdivision to read: 100.26 Subd. 17. [DONATED MEALS.] Meals that are normally sold at 100.27 retail in the ordinary business activities of the taxpayer are 100.28 exempt if the meals are donated to a nonprofit group as defined 100.29 in subdivision 4 for fund-raising purposes. 100.30 [EFFECTIVE DATE.] This section is effective for donations 100.31 made after June 30, 2004. 100.32 Sec. 12. Minnesota Statutes 2002, section 297A.71, is 100.33 amended by adding a subdivision to read: 100.34 Subd. 33. [PERSONAL RAPID TRANSIT SYSTEM.] Materials, 100.35 equipment, and supplies used in the construction, expansion, or 100.36 improvement of a personal rapid transit system as defined in 101.1 section 297A.61, subdivision 37. 101.2 [EFFECTIVE DATE.] This section is effective for sales and 101.3 purchases made after June 30, 2004. 101.4 Sec. 13. Minnesota Statutes 2002, section 297A.87, 101.5 subdivision 2, is amended to read: 101.6 Subd. 2. [SELLER'S PERMIT OR ALTERNATE STATEMENT.] (a) The 101.7 operator of an event under subdivision 1 shall obtain one of the 101.8 following from a person who wishes to do business as a seller at 101.9 the event: 101.10 (1) evidence that the person holds a valid seller's permit 101.11 under section 297A.84;or101.12 (2) a written statement that the person is not offering for 101.13 sale any item that is taxable under this chapter; or 101.14 (3) a written statement that this is the only selling event 101.15 that the person will be participating in for that calendar year, 101.16 that the person will be participating for three or fewer days, 101.17 and that the person will make less than $500 in total sales at 101.18 the event. The written statement shall include the person's 101.19 name, address, and telephone number. 101.20 (b) The operator shall require the evidence or statement as 101.21 a prerequisite to participating in the event as a seller. 101.22 [EFFECTIVE DATE.] This section is effective for selling 101.23 events occurring after June 15, 2004. 101.24 Sec. 14. Minnesota Statutes 2002, section 297A.87, 101.25 subdivision 3, is amended to read: 101.26 Subd. 3. [OCCASIONAL SALE PROVISIONSNOTAPPLICABLE UNDER 101.27 LIMITED CIRCUMSTANCES.] The isolated and occasional 101.28 saleprovisionsprovision under section 297A.67, subdivision 23, 101.29orapplies, provided that the seller only participates for three 101.30 or fewer days in one event per calendar year, makes $500 or less 101.31 in sales at the event, and provides the written statement 101.32 required in subdivision 2, paragraph (a), clause (3). The 101.33 isolated and occasional sales provision under section 297A.68, 101.34 subdivision 25,dodoes not apply to a seller at an event under 101.35 this section. 101.36 [EFFECTIVE DATE.] This section is effective for selling 102.1 events occurring after June 15, 2004. 102.2 Sec. 15. Laws 1998, chapter 389, article 8, section 43, 102.3 subdivision 3, is amended to read: 102.4 Subd. 3. [USE OF REVENUES.] Revenues received from the 102.5 taxes authorized by subdivisions 1 and 2 must be used by the 102.6 city to pay for the cost of collecting and administering the 102.7 taxes and to pay for the following projects: 102.8 (1) transportation infrastructure improvements including 102.9 both highway and airport improvements; 102.10 (2) improvements to the civic center complex; 102.11 (3) a municipal water, sewer, and storm sewer project 102.12 necessary to improve regional ground water quality; and 102.13 (4) construction of a regional recreation and sports center 102.14 andassociatedother facilities available for both community and 102.15 student use, located at or adjacent to the Rochester center. 102.16 The total amount of capital expenditures or bonds for these 102.17 projects that may be paid from the revenues raised from the 102.18 taxes authorized in this section may not exceed $71,500,000. 102.19 The total amount of capital expenditures or bonds for the 102.20 project in clause (4) that may be paid from the revenues raised 102.21 from the taxes authorized in this section may not exceed 102.22 $20,000,000. 102.23 [EFFECTIVE DATE.] This section is effective the day after 102.24 the governing body of Rochester and its chief clerical officer 102.25 timely complete their compliance with Minnesota Statutes, 102.26 section 645.021, subdivisions 2 and 3. 102.27 Sec. 16. Laws 2002, chapter 377, article 3, section 4, the 102.28 effective date, is amended to read: 102.29 [EFFECTIVE DATE.]With the exception of clause (2), item102.30(ii),This section is effective for sales and purchases made 102.31 after June 30, 2002.Clause (2), item (ii), is effective for102.32sales and purchases made after June 30, 2002, and before January102.331, 2006.102.34 [EFFECTIVE DATE.] This section is effective the day 102.35 following final enactment. 102.36 ARTICLE 5 103.1 SPECIAL TAXES 103.2 Section 1. Minnesota Statutes 2002, section 295.582, is 103.3 amended to read: 103.4 295.582 [AUTHORITY.] 103.5 (a) A hospital, surgical center, or health care provider 103.6 that is subject to a tax under section 295.52, or a pharmacy 103.7 that has paid additional expense transferred under this section 103.8 by a wholesale drug distributor, may transfer additional expense 103.9 generated by section 295.52 obligations on to all third-party 103.10 contracts for the purchase of health care services on behalf of 103.11 a patient or consumer. The additional expense transferred to 103.12 the third-party purchaser must not exceed the tax percentage 103.13 specified in section 295.52 multiplied against the gross 103.14 revenues received under the third-party contract, and the tax 103.15 percentage specified in section 295.52 multiplied against 103.16 co-payments and deductibles paid by the individual patient or 103.17 consumer. The expense must not be generated on revenues derived 103.18 from payments that are excluded from the tax under section 103.19 295.53. All third-party purchasers of health care services 103.20 including, but not limited to, third-party purchasers regulated 103.21 under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 103.22 or 79A, or under section 471.61 or 471.617, must pay the 103.23 transferred expense in addition to any payments due under 103.24 existing contracts with the hospital, surgical center, pharmacy, 103.25 or health care provider, to the extent allowed under federal 103.26 law. A third-party purchaser of health care services includes, 103.27 but is not limited to, a health carrier or community integrated 103.28 service network that pays for health care services on behalf of 103.29 patients or that reimburses, indemnifies, compensates, or 103.30 otherwise insures patients for health care services. A 103.31 third-party purchaser shall comply with this section regardless 103.32 of whether the third-party purchaser is a for-profit, 103.33 not-for-profit, or nonprofit entity or whether the health care 103.34 provider has chosen to itemize the tax on patient billings. A 103.35 wholesale drug distributor may transfer additional expense 103.36 generated by section 295.52 obligations to entities that 104.1 purchase from the wholesaler, and the entities must pay the 104.2 additional expense. Nothing in this section limits the ability 104.3 of a hospital, surgical center, pharmacy, wholesale drug 104.4 distributor, or health care provider to recover all or part of 104.5 the section 295.52 obligation by other methods, including 104.6 increasing fees or charges. If a provider elects to separately 104.7 itemize the tax on the patient's bill, a third-party purchaser 104.8 that has already incorporated the tax in its calculation of the 104.9 payment amount due to the provider may deduct the additional 104.10 itemized tax amount from the payment made to the provider. 104.11 (b) Each third-party purchaser regulated under any chapter 104.12 cited in paragraph (a) shall include with its annual renewal for 104.13 certification of authority or licensure documentation indicating 104.14 compliance with paragraph (a). 104.15 (c) Any hospital, surgical center, or health care provider 104.16 subject to a tax under section 295.52 or a pharmacy that has 104.17 paid additional expense transferred under this section by a 104.18 wholesale drug distributor may file a complaint with the 104.19 commissioner responsible for regulating the third-party 104.20 purchaser if at any time the third-party purchaser fails to 104.21 comply with paragraph (a). 104.22 (d) If the commissioner responsible for regulating the 104.23 third-party purchaser finds at any time that the third-party 104.24 purchaser has not complied with paragraph (a), the commissioner 104.25 may take enforcement action against a third-party purchaser 104.26 which is subject to the commissioner's regulatory jurisdiction 104.27 and which does not allow a hospital, surgical center, pharmacy, 104.28 or provider to pass-through the tax. The commissioner may by 104.29 order fine or censure the third-party purchaser or revoke or 104.30 suspend the certificate of authority or license of the 104.31 third-party purchaser to do business in this state if the 104.32 commissioner finds that the third-party purchaser has not 104.33 complied with this section. The third-party purchaser may 104.34 appeal the commissioner's order through a contested case hearing 104.35 in accordance with chapter 14. 104.36 [EFFECTIVE DATE.] This section is effective January 1, 105.1 2005, and applies to actions arising from services provided on 105.2 or after that date. 105.3 Sec. 2. Minnesota Statutes 2002, section 297F.01, is 105.4 amended by adding a subdivision to read: 105.5 Subd. 10a. [OUT-OF-STATE RETAILER.] "Out-of-state retailer" 105.6 means a person engaged outside of this state in the business of 105.7 selling, or offering to sell, cigarettes or tobacco products to 105.8 consumers located in this state. 105.9 Sec. 3. [297F.031] [REGISTRATION REQUIREMENT.] 105.10 Prior to making delivery sales or shipping cigarettes or 105.11 tobacco products in connection with any sales, an out-of-state 105.12 retailer shall file with the Department of Revenue a statement 105.13 setting forth the out-of-state retailer's name and trade name, 105.14 and the address of the out-of-state retailer's principal place 105.15 of business and any other place of business. 105.16 Sec. 4. Minnesota Statutes 2002, section 297F.09, is 105.17 amended by adding a subdivision to read: 105.18 Subd. 4a. [REPORTING REQUIREMENTS.] No later than the 18th 105.19 day of each calendar month, an out-of-state retailer that has 105.20 made a delivery of cigarettes or tobacco products or shipped or 105.21 delivered cigarettes or tobacco products into the state in a 105.22 delivery sale in the previous calendar month shall file with the 105.23 Department of Revenue reports in the form and in the manner 105.24 prescribed by the commissioner of revenue that provides for each 105.25 delivery sale, the name and address of the purchaser and the 105.26 brand or brands and quantity of cigarettes or tobacco products 105.27 sold. A tobacco retailer that meets the requirements of United 105.28 States Code, title 15, section 375 et seq. satisfies the 105.29 requirements of this subdivision. 105.30 Sec. 5. [297F.25] [CIGARETTE WHOLESALE TAX.] 105.31 Subdivision 1. [IMPOSITION.] A tax is imposed on the sale 105.32 of cigarettes by a cigarette distributor to a retailer or 105.33 cigarette subjobber for resale in this state. The tax is equal 105.34 to 6.5 percent of: 105.35 (1) 112 percent of the distributor's gross invoice price, 105.36 before any discounts and including the full face value of any 106.1 cigarette stamps and the fee imposed under section 297F.24, of 106.2 the cigarettes sold to a retailer; or 106.3 (2) 112 percent of the cost of the retailer, as defined in 106.4 section 325D.32, subdivision 11, and any fees imposed under 106.5 section 297F.24 of the cigarettes sold to a cigarette subjobber. 106.6 Subd. 2. [TAX COLLECTION REQUIRED.] A cigarette 106.7 distributor must collect the tax imposed under subdivision 1 106.8 from the retailer or cigarette subjobber and the tax must be 106.9 stated and charged separately. The tax collected must be 106.10 remitted to the commissioner in the manner prescribed by 106.11 subdivision 4. 106.12 Subd. 3. [PAYMENT.] Each taxpayer must remit payments of 106.13 the taxes to the commissioner on the same dates prescribed under 106.14 section 297F.09, subdivision 1, for cigarette tax returns, 106.15 including the accelerated remittance of the June liability. 106.16 Subd. 4. [RETURN.] A taxpayer must file a return with the 106.17 commissioner on the same dates prescribed under section 297F.09, 106.18 subdivision 1, for cigarette tax returns. 106.19 Subd. 5. [FORM OF RETURN.] The return must contain the 106.20 information and be in the form prescribed by the commissioner. 106.21 Subd. 6. [TAX AS DEBT.] The tax that is required to be 106.22 collected by the distributor is a debt from the retailer or 106.23 cigarette subjobber to the distributor recoverable at law in the 106.24 same manner as other debts. 106.25 Subd. 7. [ADMINISTRATION.] The audit, assessment, 106.26 interest, appeal, refund, and collection provisions applicable 106.27 to the taxes imposed under this chapter apply to taxes imposed 106.28 under this section. 106.29 Subd. 8. [DEPOSIT OF REVENUES.] Notwithstanding the 106.30 provisions of section 297F.10, the commissioner shall deposit 106.31 all revenues, including penalties and interest, derived from the 106.32 tax imposed by this section, in the general fund. 106.33 [EFFECTIVE DATE.] This section is effective for all sales 106.34 made on or after August 1, 2004. 106.35 Sec. 6. Minnesota Statutes 2002, section 297I.01, is 106.36 amended by adding a subdivision to read: 107.1 Subd. 6a. [DIRECT BUSINESS.] (a) "Direct business" means 107.2 all insurance provided by an insurance company or its agents, 107.3 and specifically includes stop-loss insurance purchased in 107.4 connection with a self-insurance plan for employee health 107.5 benefits or for other purposes, but excludes: 107.6 (1) reinsurance; and 107.7 (2) self-insurance. 107.8 (b) For purposes of this subdivision, an insurance company 107.9 includes a nonprofit health service corporation, health 107.10 maintenance organization, and community integrated service 107.11 network. 107.12 [EFFECTIVE DATE.] This section is effective for insurance 107.13 premiums received after June 30, 2004. 107.14 Sec. 7. Minnesota Statutes 2002, section 297I.05, 107.15 subdivision 4, is amended to read: 107.16 Subd. 4. [MUTUAL PROPERTY AND CASUALTY COMPANIES WITH 107.17 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 107.18 tax is imposed on mutual property and casualty companies that 107.19 had total assets greater than $5,000,000 at the end of the 107.20 calendar year but that had total assets less than $1,600,000,000 107.21 on December 31, 1989. The rate of tax is equal to: 107.22 (1)two percent of gross premiums less return premiums on107.23all direct business received by the insurer or agents of the107.24insurer in Minnesotathe tax under subdivision 14 for life 107.25 insurance, in cash or otherwise, during the year; and 107.26 (2) 1.26 percent of gross premiums less return premiums on 107.27 all other direct business received by the insurer or agents of 107.28 the insurer in Minnesota, in cash or otherwise, during the year. 107.29 [EFFECTIVE DATE.] This section is effective for premiums 107.30 received after June 30, 2004. 107.31 Sec. 8. Minnesota Statutes 2002, section 297I.05, is 107.32 amended by adding a subdivision to read: 107.33 Subd. 14. [LIFE INSURANCE.] A tax is imposed on life 107.34 insurance. The rate of tax equals a percentage of gross 107.35 premiums less return premiums on all direct business received by 107.36 the insurer or agents of the insurer in Minnesota for life 108.1 insurance, in cash or otherwise, during the year. For premiums 108.2 received after December 31, 2004, but before January 1, 2006, 108.3 the rate of tax is 1.9 percent. For premiums received after 108.4 December 31, 2005, but before January 1, 2007, the rate of tax 108.5 is 1.8 percent. For premiums received after December 31, 2006, 108.6 but before January 1, 2008, the rate of tax is 1.7 percent. For 108.7 premiums received after December 31, 2007, but before January 1, 108.8 2009, the rate of tax is 1.6 percent. For premiums received 108.9 after December 31, 2008, the rate of tax is 1.5 percent. 108.10 [EFFECTIVE DATE.] This section is effective for premiums 108.11 received after December 31, 2004. 108.12 Sec. 9. Minnesota Statutes 2003 Supplement, section 108.13 298.75, subdivision 1, is amended to read: 108.14 Subdivision 1. [DEFINITIONS.] Except as may otherwise be 108.15 provided, the following words, when used in this section, shall 108.16 have the meanings herein ascribed to them. 108.17 (1) "Aggregate material" shall mean nonmetallic natural 108.18 mineral aggregate including, but not limited to sand, silica 108.19 sand, gravel, crushed rock, limestone, granite, and borrow, but 108.20 only if the borrow is transported on a public road, street, or 108.21 highway. Aggregate material shall not include dimension stone 108.22 and dimension granite. Aggregate material must be measured or 108.23 weighed after it has been extracted from the pit, quarry, or 108.24 deposit. 108.25 (2) "Person" shall mean any individual, firm, partnership, 108.26 corporation, organization, trustee, association, or other entity. 108.27 (3) "Operator" shall mean any person engaged in the 108.28 business of removing aggregate material from the surface or 108.29 subsurface of the soil, for the purpose of sale, either directly 108.30 or indirectly, through the use of the aggregate material in a 108.31 marketable product or service; except that operator does not 108.32 include persons engaged in a transaction in which the aggregate 108.33 is moved within a project's construction limits, as defined in 108.34 the official project construction plan documents, to other 108.35 locations within that same project's construction limits. 108.36 (4) "Extraction site" shall mean a pit, quarry, or deposit 109.1 containing aggregate material and any contiguous property to the 109.2 pit, quarry, or deposit which is used by the operator for 109.3 stockpiling the aggregate material. 109.4 (5) "Importer" shall mean any person who buys aggregate 109.5 material produced from a county not listed in paragraph (6) or 109.6 another state and causes the aggregate material to be imported 109.7 into a county in this state which imposes a tax on aggregate 109.8 material. 109.9 (6) "County" shall mean the counties of Pope, Stearns, 109.10 Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 109.11 Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 109.12 Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 109.13 Sibley, Hennepin, Washington, Chisago, and Ramsey. County also 109.14 means any other county whose board has voted after a public 109.15 hearing to impose the tax under this section and has notified 109.16 the commissioner of revenue of the imposition of the tax. 109.17 (7) "Borrow" shall mean granular borrow, consisting of 109.18 durable particles of gravel and sand, crushed quarry or mine 109.19 rock, crushed gravel or stone, or any combination thereof, the 109.20 ratio of the portion passing the (#200) sieve divided by the 109.21 portion passing the (1 inch) sieve may not exceed 20 percent by 109.22 mass. 109.23 [EFFECTIVE DATE.] This section is effective for aggregate 109.24 sold, imported, transported, or used from a stockpile after June 109.25 30, 2004. 109.26 Sec. 10. [325F.781] [REQUIREMENTS; TOBACCO PRODUCT 109.27 DELIVERY SALES.] 109.28 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 109.29 section, the following terms have the meanings given, unless the 109.30 language or context clearly provides otherwise. 109.31 (b) "Consumer" means an individual who purchases, receives, 109.32 or possesses tobacco products for personal consumption and not 109.33 for resale. 109.34 (c)(1) "Delivery sale" means: 109.35 (i) a sale of tobacco products to a consumer in this state 109.36 when: 110.1 (A) the purchaser submits the order for the sale by means 110.2 of a telephonic or other method of voice transmission, the mail 110.3 or any other delivery service, or the Internet or other on-line 110.4 service; or 110.5 (B) the tobacco products are delivered by use of the mail 110.6 or other delivery service; or 110.7 (ii) a sale of tobacco products that satisfies the criteria 110.8 in clause (1), item (i), regardless of whether the seller is 110.9 located inside or outside the state. 110.10 (2) A sale of tobacco products to an individual in this 110.11 state must be treated as a sale to a consumer, unless the 110.12 individual is licensed as a distributor or retailer of tobacco 110.13 products. 110.14 (d) "Delivery service" means a person, including the United 110.15 States Postal Service, that is engaged in the commercial 110.16 delivery of letters, packages, or other containers. 110.17 (e) "Distributor" means a person, whether located inside or 110.18 outside this state, other than a retailer, who sells or 110.19 distributes tobacco products in the state. Distributor does not 110.20 include a tobacco products manufacturer, export warehouse 110.21 proprietor, or importer with a valid permit under United States 110.22 Code, title 26, section 5712 (1997), if the person sells or 110.23 distributes tobacco products in this state only to distributors 110.24 who hold valid and current licenses under the laws of a state, 110.25 or to an export warehouse proprietor or another manufacturer. 110.26 Distributor does not include a common or contract carrier that 110.27 is transporting tobacco products under a proper bill of lading 110.28 or freight bill that states the quantity, source, and 110.29 destination of tobacco products, or a person who ships tobacco 110.30 products through this state by common or contract carrier under 110.31 a bill of lading or freight bill. 110.32 (f) "Retailer" means a person, whether located inside or 110.33 outside this state, who sells or distributes tobacco products to 110.34 a consumer in this state. 110.35 (g) "Tobacco products" means: 110.36 (1) cigarettes, as defined in section 297F.01, subdivision 111.1 3; and 111.2 (2) smokeless tobacco as defined in section 325F.76. 111.3 Subd. 2. [REQUIREMENTS FOR ACCEPTING ORDER FOR DELIVERY 111.4 SALE.] (a) This subdivision applies to acceptance of an order 111.5 for a delivery sale of tobacco products. 111.6 (b) When accepting the first order for a delivery sale from 111.7 a consumer, the tobacco retailer shall obtain the following 111.8 information from the person placing the order: 111.9 (1) a copy of a valid government-issued document that 111.10 provides the person's name, current address, photograph, and 111.11 date of birth; and 111.12 (2) an original written statement signed by the person 111.13 documenting that the person: 111.14 (i) is of legal age to purchase tobacco products in the 111.15 state; 111.16 (ii) has made a choice whether to receive mailings from a 111.17 tobacco retailer; 111.18 (iii) understands that providing false information may be a 111.19 violation of law; and 111.20 (iv) understands that it is a violation of law to purchase 111.21 tobacco products for subsequent resale or for delivery to 111.22 persons who are under the legal age to purchase tobacco products. 111.23 (c) If an order is made as a result of advertisement over 111.24 the Internet, the tobacco retailer shall request the e-mail 111.25 address of the purchaser and shall receive payment by credit 111.26 card or check prior to shipping. 111.27 (d) Prior to shipping the tobacco products, the tobacco 111.28 retailer shall verify the information provided under paragraph 111.29 (b) against a commercially available database. Any such 111.30 database or databases may also include age and identity 111.31 information from other government or validated commercial 111.32 sources, if that additional information is regularly used by 111.33 government and businesses for the purpose of identity 111.34 verification and authentication, and if the additional 111.35 information is used only to supplement and not to replace the 111.36 government-issued identification data in the age and identity 112.1 verification process. 112.2 Subd. 3. [REQUIREMENTS FOR SHIPPING A DELIVERY SALE.] (a) 112.3 This subdivision applies to a tobacco retailer shipping tobacco 112.4 products pursuant to a delivery sale. 112.5 (b) The tobacco retailer shall clearly mark the outside of 112.6 the package of tobacco products to be shipped "tobacco products - 112.7 adult signature required" and to show the name of the tobacco 112.8 retailer. 112.9 (c) The tobacco retailer shall utilize a delivery service 112.10 that imposes the following requirements: 112.11 (1) an adult must sign for the delivery; and 112.12 (2) the person signing for the delivery must show valid 112.13 government-issued identification that contains a photograph of 112.14 the person signing for the delivery and indicates that the 112.15 person signing for the delivery is of legal age to purchase 112.16 tobacco products and resides at the delivery address. 112.17 (d) The retailer must provide delivery instructions that 112.18 clearly indicate the requirements of this subdivision and must 112.19 declare that state law requires compliance with the requirements. 112.20 Subd. 4. [COMMON CARRIERS.] This section may not be 112.21 construed as imposing liability upon any common carrier, or 112.22 officers or employees of the common carrier, when acting within 112.23 the scope of business of the common carrier. 112.24 Subd. 5. [REGISTRATION REQUIREMENT.] Prior to making 112.25 delivery sales or shipping tobacco products in connection with 112.26 any sales, an out-of-state retailer must meet the requirements 112.27 of section 297F.031. 112.28 Subd. 6. [COLLECTION OF TAXES.] (a) Prior to shipping any 112.29 tobacco products to a purchaser in this state, the out-of-state 112.30 retailer shall comply with all requirements of chapter 297F and 112.31 shall ensure that all state excise taxes and fees that apply to 112.32 such tobacco products have been collected and paid to the state 112.33 and that all related state excise tax stamps or other indicators 112.34 of state excise tax payment have been properly affixed to those 112.35 tobacco products. 112.36 (b) In addition to any penalties under chapter 297F, a 113.1 distributor who fails to pay any tax due according to paragraph 113.2 (a) shall pay, in addition to any other penalty, a penalty of 50 113.3 percent of the tax due but unpaid. 113.4 Subd. 7. [APPLICATION OF STATE LAWS.] All state laws that 113.5 apply to in-state tobacco product retailers shall apply to 113.6 Internet and mail-order sellers that sell into this state. 113.7 Subd. 8. [FORFEITURE.] Any tobacco product sold or 113.8 attempted to be sold in a delivery sale that does not meet the 113.9 requirements of this section is deemed to be contraband and is 113.10 subject to forfeiture in the same manner as and in accordance 113.11 with the provisions of section 297F.21. 113.12 Subd. 9. [CIVIL PENALTIES.] (a) A tobacco retailer or 113.13 distributor who violates this section or rules adopted under 113.14 this section is subject to the following fines: 113.15 (1) for the first violation, a fine of not more than 113.16 $1,000; and 113.17 (2) for the second and any subsequent violation, a fine of 113.18 not more than $5,000. 113.19 (b) A person who submits ordering information under 113.20 subdivision 2, paragraph (b), in another person's name is 113.21 subject to a fine of not more than $1,000. 113.22 Subd. 10. [ENFORCEMENT.] The attorney general may bring an 113.23 action to enforce this section and may seek injunctive relief, 113.24 including a preliminary or final injunction, and fines, 113.25 penalties, and equitable relief and may seek to prevent or 113.26 restrain actions in violation of this section by any person or 113.27 any person controlling such person. In addition, a violation of 113.28 this section is a violation of the Unlawful Trade Practices Act, 113.29 sections 325D.09 to 325D.16. 113.30 Sec. 11. [FLOOR STOCKS TAX.] 113.31 Subdivision 1. [CIGARETTES.] A floor stocks tax is imposed 113.32 on every retailer or cigarette subjobber, on the stamped 113.33 cigarettes in the retailer's or cigarette subjobber's possession 113.34 or under the retailer's or cigarette subjobber's control, at 113.35 12:01 a.m. on July 31, 2004. The tax is imposed at the 113.36 following rates: 114.1 (1) on cigarettes weighing not more than three pounds per 114.2 thousand, 13.5 mills on each cigarette; and 114.3 (2) on cigarettes weighing more than three pounds per 114.4 thousand, 27 mills on each cigarette. 114.5 Each retailer shall file a return with the commissioner, in the 114.6 form the commissioner prescribes, showing the cigarettes on hand 114.7 at 12:01 a.m. on August 1, 2004, and pay the tax due thereon by 114.8 September 1, 2004. Tax not paid by the due date bears interest 114.9 at the rate of one percent a month. 114.10 Subd. 2. [AUDIT AND ENFORCEMENT.] The tax imposed by this 114.11 section is subject to the audit, assessment, and collection 114.12 provisions applicable to the taxes imposed under Minnesota 114.13 Statutes, chapter 297F. The commissioner may require a 114.14 distributor to receive and maintain copies of floor stocks tax 114.15 returns filed by all retailers requesting a credit for returned 114.16 cigarettes. 114.17 Subd. 3. [DEPOSIT OF PROCEEDS.] Notwithstanding the 114.18 provisions of Minnesota Statutes, section 297F.10, the revenue 114.19 from the tax imposed under this section shall be deposited by 114.20 the commissioner in the general fund. 114.21 [EFFECTIVE DATE.] This section is effective the day 114.22 following final enactment. 114.23 ARTICLE 6 114.24 TAX INCREMENT FINANCING 114.25 Section 1. Minnesota Statutes 2003 Supplement, section 114.26 116J.556, is amended to read: 114.27 116J.556 [LOCAL MATCH REQUIREMENT.] 114.28(a)In order to qualify for a grant under sections 116J.551 114.29 to 116J.557, the municipality must pay for at least one-quarter 114.30 of the project costs as a local match. The municipality shall 114.31 pay an amount of the project costs equal to at least 12 percent 114.32 of the cleanup costs from the municipality's general fund, a 114.33 property tax levy for that purpose, or other unrestricted money 114.34 available to the municipality (excluding tax increments). These 114.35 unrestricted moneys may be spent for project costs, other than 114.36 cleanup costs, and qualify for the local match payment equal to 115.1 12 percent of cleanup costs. The rest of the local match may be 115.2 paid with tax increments, regional, state, or federal money 115.3 available for the redevelopment of brownfields or any other 115.4 money available to the municipality. 115.5(b) If the development authority establishes a tax115.6increment financing district or hazardous substance subdistrict115.7on the site to pay for part of the local match requirement, the115.8district or subdistrict must be decertified when an amount of115.9tax increments equal to no more than three times the costs of115.10implementing the response action plan for the site and the115.11administrative costs for the district or subdistrict have been115.12received, after deducting the amount of the state grant.115.13 [EFFECTIVE DATE.] This section is effective the day 115.14 following final enactment. 115.15 Sec. 2. Minnesota Statutes 2002, section 469.174, 115.16 subdivision 11, is amended to read: 115.17 Subd. 11. [HOUSING DISTRICT.] "Housing district" means a 115.18 type of tax increment financing district which consists of a 115.19 project, or a portion of a project, intended for occupancy, in 115.20 part, by persons or families of low and moderate income, as 115.21 defined in chapter 462A, Title II of the National Housing Act of 115.22 1934, the National Housing Act of 1959, the United States 115.23 Housing Act of 1937, as amended, Title V of the Housing Act of 115.24 1949, as amended, any other similar present or future federal, 115.25 state, or municipal legislation, or the regulations promulgated 115.26 under any of those acts. A district does not qualify as a115.27housing district under this subdivision if the fair market value115.28of the improvements which are constructed in the district for115.29commercial uses or for uses other than low and moderate income115.30housing consists of more than 20 percent of the total fair115.31market value of the planned improvements in the development plan115.32or agreement. The fair market value of the improvements may be115.33determined using the cost of construction, capitalized income,115.34or other appropriate method of estimating market value, and that 115.35 satisfies the requirements of section 469.1761. Housing project 115.36 means a project, or a portion of a project, that meets all of 116.1 the qualifications of a housing district under this subdivision, 116.2 whether or not actually established as a housing district. 116.3 [EFFECTIVE DATE.] This section is effective for districts 116.4 for which the request for certification was filed with the 116.5 county auditor after October 5, 1989, except (1) the new 116.6 language is effective for requests for certification made after 116.7 June 30, 2004, and (2) the fair market value of the improvements 116.8 which are constructed for commercial uses in a district for 116.9 which the request for certification was filed with the county 116.10 auditor after October 5, 1989, and before July 1, 2004, may not 116.11 exceed more than 20 percent of total fair market value of the 116.12 planned improvements in the development plan or agreement. 116.13 Sec. 3. Minnesota Statutes 2003 Supplement, section 116.14 469.174, subdivision 25, is amended to read: 116.15 Subd. 25. [INCREMENT.] "Increment," "tax increment," "tax 116.16 increment revenues," "revenues derived from tax increment," and 116.17 other similar terms for a district include: 116.18 (1) taxes paid by the captured net tax capacity, but 116.19 excluding any excess taxes, as computed under section 469.177; 116.20 (2) the proceeds from the sale or lease of property, 116.21 tangible or intangible, to the extent the property was purchased 116.22 by the authority with tax increments; 116.23 (3) principal and interest received on loans or other 116.24 advances made by the authority with tax increments;and116.25 (4) interest or other investment earnings on or from tax 116.26 increments; 116.27 (5) repayment or return of tax increments made to the 116.28 authority under agreements for districts for which the request 116.29 for certification was made after August 1, 1993; and 116.30 (6) the market value homestead credit paid to the authority 116.31 under section 273.1384. 116.32 [EFFECTIVE DATE.] This section is effective for tax 116.33 increment financing districts, regardless of when the request 116.34 for certification was made, including districts for which the 116.35 request for certification was made before August 1, 1979. 116.36 Sec. 4. Minnesota Statutes 2002, section 469.175, 117.1 subdivision 4a, is amended to read: 117.2 Subd. 4a. [FILING PLAN WITH STATE.] (a) The authority must 117.3 file a copy of the tax increment financing plan and amendments 117.4 to the plan with the commissioner of revenue and the state 117.5 auditor. The authority must also file a copy of the development 117.6 plan or the project plan for the project area with the 117.7 commissioner of revenue. The commissioner of revenue shall117.8provide a copy of a plan to the state auditor upon requestand 117.9 the state auditor. 117.10 (b) Filing under this subdivision must be made within 60 117.11 days after the latest of: 117.12 (1) the filing of the request for certification of the 117.13 district; 117.14 (2) approval of the plan by the municipality; or 117.15 (3) adoption of the plan by the authority. 117.16 [EFFECTIVE DATE.] This section is effective for plans filed 117.17 after July 1, 2004. 117.18 Sec. 5. Minnesota Statutes 2002, section 469.176, 117.19 subdivision 4d, is amended to read: 117.20 Subd. 4d. [HOUSING DISTRICTS.] Revenue derived from tax 117.21 increment from a housing district must be used solely to finance 117.22 the cost of housing projects as defined insectionsections 117.23 469.174, subdivision 11, and 469.1761. The cost of public 117.24 improvements directly related to the housing projects and the 117.25 allocated administrative expenses of the authority may be 117.26 included in the cost of a housing project. 117.27 [EFFECTIVE DATE.] This section is effective for all 117.28 districts to which the provisions of Minnesota Statutes, section 117.29 469.1761, applies. 117.30 Sec. 6. Minnesota Statutes 2002, section 469.1761, 117.31 subdivision 1, is amended to read: 117.32 Subdivision 1. [REQUIREMENT IMPOSED.] (a) In order for a 117.33 tax increment financing district to qualify as a housing 117.34 district,: 117.35 (1) the income limitations provided in this section must be 117.36 satisfied; and 118.1 (2) no more than 20 percent of the square footage of 118.2 buildings that receive assistance from tax increments may 118.3 consist of commercial, retail, or other nonresidential uses. 118.4 (b) The requirements imposed by this section apply to 118.5residentialproperty receiving assistance financed with tax 118.6 increments, including interest reduction, land transfers at less 118.7 than the authority's cost of acquisition, utility service or 118.8 connections, roads, parking facilities, or other subsidies. The 118.9 provisions of this section do not apply to districts located in 118.10 a targeted area as defined in section 462C.02, subdivision 9, 118.11 clause (e). 118.12 [EFFECTIVE DATE.] This section is effective for districts 118.13 for which the request for certification was made after June 30, 118.14 2004. 118.15 Sec. 7. Minnesota Statutes 2002, section 469.1761, 118.16 subdivision 3, is amended to read: 118.17 Subd. 3. [RENTAL PROPERTY.] For residential rental 118.18 property, the property must satisfy the income requirements for 118.19 a qualified residential rental project as defined in section 118.20 142(d) of the Internal Revenue Code.A property also satisfies118.21the requirements of section 142(d) if 50 percent of the118.22residential units in the project are occupied by individuals118.23whose income is 80 percent or less of area median gross income.118.24The requirements of this subdivision apply for the duration of118.25the tax increment financing district.118.26 [EFFECTIVE DATE.] This section is effective for districts 118.27 for which the request for certification was made after June 30, 118.28 2004. 118.29 Sec. 8. Minnesota Statutes 2003 Supplement, section 118.30 469.177, subdivision 1, is amended to read: 118.31 Subdivision 1. [ORIGINAL NET TAX CAPACITY.] (a) Upon or 118.32 after adoption of a tax increment financing plan, the auditor of 118.33 any county in which the district is situated shall, upon request 118.34 of the authority, certify the original net tax capacity of the 118.35 tax increment financing district and that portion of the 118.36 district overlying any subdistrict as described in the tax 119.1 increment financing plan and shall certify in each year 119.2 thereafter the amount by which the original net tax capacity has 119.3 increased or decreased as a result of a change in tax exempt 119.4 status of property within the district and any subdistrict, 119.5 reduction or enlargement of the district or changes pursuant to 119.6 subdivision 4. 119.7 (b) If the classification under section 273.13 of property 119.8 located in a district changes to a classification that has a 119.9 different assessment ratio, the original net tax capacity of 119.10 that property must be redetermined at the time when its use is 119.11 changed as if the property had originally been classified in the 119.12 same class in which it is classified after its use is changed. 119.13 (c) The amount to be added to the original net tax capacity 119.14 of the district as a result of previously tax exempt real 119.15 property within the district becoming taxable equals the net tax 119.16 capacity of the real property as most recently assessed pursuant 119.17 to section 273.18 or, if that assessment was made more than one 119.18 year prior to the date of title transfer rendering the property 119.19 taxable, the net tax capacity assessed by the assessor at the 119.20 time of the transfer. If improvements are made to tax exempt 119.21 property after certification of the district and before the 119.22 parcel becomes taxable, the assessor shall, at the request of 119.23 the authority, separately assess the estimated market value of 119.24 the improvements. If the property becomes taxable, the county 119.25 auditor shall add to original net tax capacity, the net tax 119.26 capacity of the parcel, excluding the separately assessed 119.27 improvements. If substantial taxable improvements were made to 119.28 a parcel after certification of the district and if the property 119.29 later becomes tax exempt, in whole or part, as a result of the 119.30 authority acquiring the property through foreclosure or exercise 119.31 of remedies under a lease or other revenue agreement or as a 119.32 result of tax forfeiture, the amount to be added to the original 119.33 net tax capacity of the district as a result of the property 119.34 again becoming taxable is the amount of the parcel's value that 119.35 was included in original net tax capacity when the parcel was 119.36 first certified. The amount to be added to the original net tax 120.1 capacity of the district as a result of enlargements equals the 120.2 net tax capacity of the added real property as most recently 120.3 certified by the commissioner of revenue as of the date of 120.4 modification of the tax increment financing plan pursuant to 120.5 section 469.175, subdivision 4. 120.6 (d) If the net tax capacity of a property increases because 120.7 the property no longer qualifies under the Minnesota 120.8 Agricultural Property Tax Law, section 273.111; the Minnesota 120.9 Open Space Property Tax Law, section 273.112; or the 120.10 Metropolitan Agricultural Preserves Act, chapter 473H, or 120.11 because platted, unimproved property is improved orthree years120.12passmarket value is increased after approval of the plat under 120.13 section 273.11,subdivision 1subdivision 14, 14a, or 14b, the 120.14 increase in net tax capacity must be added to the original net 120.15 tax capacity. 120.16 (e) The amount to be subtracted from the original net tax 120.17 capacity of the district as a result of previously taxable real 120.18 property within the district becoming tax exempt, or a reduction 120.19 in the geographic area of the district, shall be the amount of 120.20 original net tax capacity initially attributed to the property 120.21 becoming tax exempt or being removed from the district. If the 120.22 net tax capacity of property located within the tax increment 120.23 financing district is reduced by reason of a court-ordered 120.24 abatement, stipulation agreement, voluntary abatement made by 120.25 the assessor or auditor or by order of the commissioner of 120.26 revenue, the reduction shall be applied to the original net tax 120.27 capacity of the district when the property upon which the 120.28 abatement is made has not been improved since the date of 120.29 certification of the district and to the captured net tax 120.30 capacity of the district in each year thereafter when the 120.31 abatement relates to improvements made after the date of 120.32 certification. The county auditor may specify reasonable form 120.33 and content of the request for certification of the authority 120.34 and any modification thereof pursuant to section 469.175, 120.35 subdivision 4. 120.36 (f) If a parcel of property contained a substandard 121.1 building that was demolished or removed and if the authority 121.2 elects to treat the parcel as occupied by a substandard building 121.3 under section 469.174, subdivision 10, paragraph (b), the 121.4 auditor shall certify the original net tax capacity of the 121.5 parcel using the greater of (1) the current net tax capacity of 121.6 the parcel, or (2) the estimated market value of the parcel for 121.7 the year in which the building was demolished or removed, but 121.8 applying the class rates for the current year. 121.9 (g) For a redevelopment district qualifying under section 121.10 469.174, subdivision 10, paragraph (a), clause (4), as a 121.11 qualified disaster area, the auditor shall certify the value of 121.12 the land as the original tax capacity for any parcel in the 121.13 district that contains a building that suffered substantial 121.14 damage as a result of the disaster or emergency. 121.15 [EFFECTIVE DATE.] This section is effective for land 121.16 platted on or after August 1, 1991. 121.17 Sec. 9. Minnesota Statutes 2002, section 469.1771, 121.18 subdivision 5, is amended to read: 121.19 Subd. 5. [DISPOSITION OF PAYMENTS.] If the authority does 121.20 not have sufficient increments or other available money to make 121.21 a payment required by this section, the municipality that 121.22 approved the district must use any available money to make the 121.23 payment including the levying of property taxes. Money received 121.24 by the county auditor under this section must be distributed as 121.25 excess increments under section 469.176, subdivision 2, 121.26 paragraph(a)(c), clause (4), except that if the county auditor 121.27 receives the payment after (1) 60 days from a municipality's 121.28 receipt of the state auditor's notification under subdivision 1, 121.29 paragraph (c), of noncompliance requiring the payment, or (2) 121.30 the commencement of an action by the county attorney to compel 121.31 the payment, then no distributions may be made to the 121.32 municipality that approved the tax increment financing district. 121.33 [EFFECTIVE DATE.] This section is effective at the same 121.34 time as the amendments to Minnesota Statutes, section 469.176, 121.35 subdivision 2, by Laws 2003, chapter 127, article 10, section 11. 121.36 Sec. 10. Minnesota Statutes 2002, section 469.178, 122.1 subdivision 1, is amended to read: 122.2 Subdivision 1. [GENERALLY.] Notwithstanding any other law, 122.3 no bonds, payment for which tax increment is pledged, shall be 122.4 issued in connection with any project for which tax increment 122.5 financing has been undertaken except as authorized in this 122.6 section. The proceeds from the bonds shall be used only in 122.7 accordance with section 469.176,subdivisionsubdivisions 4 to 122.8 4l, as if the proceeds were tax increment, except that a tax 122.9 increment financing plan need not be adopted for any project for 122.10 which tax increment financing has been undertaken prior to 122.11 August 1, 1979, pursuant to laws not requiring a tax increment 122.12 financing plan. The bonds are not included for purposes of 122.13 computing the net debt of any municipality. 122.14 [EFFECTIVE DATE.] This section is effective for tax 122.15 increment financing districts for which the request for 122.16 certification was made after August 1, 1979. 122.17 Sec. 11. Minnesota Statutes 2002, section 469.1831, 122.18 subdivision 6, is amended to read: 122.19 Subd. 6. [CITIZEN PARTICIPATION REQUIRED.] (a) The 122.20 neighborhood revitalization program must be developed with the 122.21 process outlined in this subdivision. 122.22 (b) The program must include the preparation and 122.23 implementation of neighborhood action plans. The city must 122.24 organize neighborhoods to prepare and implement the neighborhood 122.25 action plans. The neighborhoods must include the participation 122.26 of, whenever possible, all populations and interests in each 122.27 neighborhood including renters, homeowners, people of color, 122.28 business owners, representatives of neighborhood institutions, 122.29 youth, and the elderly. The neighborhood action plan must be 122.30 submitted to the policy board established under paragraph (c). 122.31 The city must provide available resources, information, and 122.32 technical assistance to prepare the neighborhood action plans. 122.33 (c) Each city that develops a program must establish a 122.34 policy board whose membership includes members of the city 122.35 council, county board, school board, and citywide library and 122.36 park board where they exist appointed by the respective 123.1 governing bodies; the mayor or designee of the mayor; and a 123.2 representative from the city's house of representatives 123.3 delegation and a representative from the city's state senate 123.4 delegation appointed by the respective delegation. The policy 123.5 board may also include representatives of citywide community 123.6 organizations, neighborhood organizations, business owners, 123.7 labor, and neighborhood residents. The elected officials and 123.8 appointed members of the library board who are members of the 123.9 policy board may appoint the other members of the board. 123.10 (d) The policy board shall review, modify where 123.11 appropriate, and approve, in whole or in part, the neighborhood 123.12 action plans and forward its recommendations for final action to 123.13 the governing bodies represented on the policy board and shall 123.14 administer and implement the program as required by paragraph 123.15 (b). The governing bodies shall review, modify where 123.16 appropriate, and give final approval, in whole or in part, to 123.17 those actions over which they have programmatic jurisdiction. 123.18 (e) Except for the legislative appointees, each of the 123.19 governmental units and groups named in paragraph (c) may, by 123.20 resolution or agreement of its governing body, become a member 123.21 of the policy board. The nongovernmental organizations and 123.22 persons named in paragraph (c) shall provide members of the 123.23 policy board upon invitation by the governmental members of the 123.24 policy board. The member to represent a nongovernmental 123.25 organization shall be a member of the policy board only upon 123.26 resolution or agreement of the governing body of the member's 123.27 organization. Upon the resolution or agreement of two or more 123.28 governmental bodies or governmental boards, the policy board 123.29 shall be a joint powers board under section 471.59, except that 123.30 no power may be exercised under section 471.59, subdivision 11. 123.31 The policy board may: 123.32 (1) sue and be sued. All defenses and limitations 123.33 available to municipalities under chapter 466 and other laws, 123.34 shall apply to the policy board, its members, director, and 123.35 other staff members; 123.36 (2) hire, retain, discipline, and terminate a director to 124.1 direct its activities and accomplish its program. The director 124.2 may hire necessary staff subject to authorization by the board; 124.3 (3) enter into contracts, leases, purchases, or other 124.4 documents evidencing its undertakings. No contract, lease, or 124.5 purchase or other document may be entered into unless funds have 124.6 been appropriated or otherwise made available to the policy 124.7 board; 124.8 (4) adopt bylaws for its own governance; 124.9 (5) enter into agreements with governmental units and 124.10 governing boards, and nongovernmental organizations represented 124.11 on the policy board for services required to fulfill the policy 124.12 boards' purposes; 124.13 (6) accept gifts, donations, and appropriations from 124.14 governmental or nongovernmental sources and apply for grants 124.15 from them; 124.16 (7) review activities to determine whether the expenditure 124.17 of program money and other money is in compliance with the 124.18 neighborhood plans adopted by the policy board and approved by 124.19 the governing bodies having jurisdiction over the program, and 124.20 report its findings prior to October 1 of each year to all of 124.21 the governmental units, agencies, and nongovernmental 124.22 organizations represented on the policy board; and 124.23 (8) prepare annually an administrative budget for the 124.24 ensuing year, estimating its expenditures and estimated 124.25 revenues, and forward its proposed budget to the governmental 124.26 units and agencies and nongovernmental organizations for 124.27 appropriate action. 124.28 Sec. 12. Laws 1990, chapter 604, article 7, section 29, 124.29 subdivision 1, as amended by Laws 1991, chapter 291, article 10, 124.30 section 20, is amended to read: 124.31 Subdivision 1. [EXPENDITURE.] The city of Minneapolis and 124.32 the Minneapolis community development agency shallreserve124.33 convey, no later than April 1 of the year immediately following 124.34 the year for which the conveyance is made, $10,000,000infor 124.35 1990 and $20,000,000 for each year from 1991 to 2009 from tax 124.36 increment and other revenues generated from the Minneapolis 125.1 community development agency common project, adopted December 125.2 30, 1989, to the policy board established under Minnesota 125.3 Statutes, section 469.1831, subdivision 6, to be expended in 125.4 neighborhood revitalization anywhere within the city of 125.5 Minneapolis by the Minneapolis community development agency for 125.6 any purpose permitted by Minnesota Statutes, section 469.1831, 125.7 for any political subdivision, except that at least 52.5 percent 125.8 of the money must be expended on housing programs and related 125.9 purposes. None of these revenues shall be expended in 125.10 1990. Conveyance of money under this subdivision, as amended by 125.11 this act for 2004 and later years, does not change any 125.12 obligation of the city and the Minneapolis community development 125.13 agency that was still owing for 2003 and earlier years on the 125.14 day before the effective date of the amendments made by this act. 125.15 Sec. 13. Laws 1998, chapter 389, article 11, section 24, 125.16 subdivision 1, is amended to read: 125.17 Subdivision 1. [SPECIAL RULES.] (a) If the city elects 125.18 upon the adoption of the tax increment financing plan for the 125.19 district, the rules under this section apply to redevelopment or 125.20 soils condition tax increment financing districts established by 125.21 the city of New Brighton or a development authority of the city 125.22 in the area bounded on the north by the south boundary line of 125.23 tax increment district number 8 extended to Long Lake regional 125.24 park, on the east by interstate highway 35W, on the south by 125.25 interstate highway 694, and on the west by Long Lake regional 125.26 park. 125.27 (b) The five-year rule under Minnesota Statutes, section 125.28 469.1763, subdivision 3, is extended tonineten years for the 125.29 district. 125.30 (c) The limitations on spending increment outside of the 125.31 district under Minnesota Statutes, section 469.1763, subdivision 125.32 2, do not apply, but increments may only be expended on 125.33 improvements or activities within the area defined in paragraph 125.34 (a) and increments collected from parcels identified in 125.35 paragraph (d) may only be spent on eligible expenses within the 125.36 area consisting of those parcels, sanitary sewer relocation and 126.1 the cost of road improvements directly resulting from 126.2 development of the parcels, and for administrative expenses. 126.3 (d) The requirements for qualifying a redevelopment 126.4 district under Minnesota Statutes, section 469.174, subdivision 126.5 10, do not apply to the parcels identified as that part of 126.6 20-30-23-13-0005 lying east of Old Highway 8, 20-30-23-14-0001, 126.7 20-30-23-14-0002, 20-30-23-14-0004, 20-30-23-14-0003, 126.8 20-30-23-41-0001, 21-30-23-32-0009, 21-30-23-32-0010, 126.9 20-30-23-41-0015, 20-30-23-41-0003, 21-30-23-32-0013, 126.10 20-30-23-41-0004, 20-30-23-41-0016, 20-30-23-41-0005, 126.11 20-30-23-41-0006, 20-30-23-41-0007, 20-30-23-41-0014, 126.12 20-30-23-41-0010, and 20-30-23-44-0002. The area of each parcel 126.13 is deemed eligible for the purpose of qualifying for inclusion 126.14 in a redevelopment district. 126.15 Sec. 14. Laws 1998, chapter 389, article 11, section 24, 126.16 subdivision 2, is amended to read: 126.17 Subd. 2. [EXPIRATION.] (a) The exception from the 126.18 limitations of Minnesota Statutes, section 469.1763, subdivision 126.19 2, expires 18 years after the receipt of the first increment 126.20 from a district to which the city has elected that this section 126.21 applies. 126.22 (b) The authority to approve tax increment financing plans 126.23 to establish a tax increment financing district or districts 126.24 under this section expires on December 31, 2008. 126.25 (c) If parcels identified in subdivision 1, paragraph (d), 126.26 are released from the development agreement without being 126.27 developed and the right to develop the parcels is returned to 126.28 the city, the authority to approve tax increment financing plans 126.29 and districts under this section for those parcels is extended 126.30 for five additional years from the date the development rights 126.31 are returned to the city. 126.32 [EFFECTIVE DATE.] This section is effective upon approval 126.33 by the governing bodies of the city of New Brighton and Ramsey 126.34 County and upon compliance by the city with Minnesota Statutes, 126.35 section 645.021, subdivision 3. 126.36 Sec. 15. [EXTENSION OF TIME TO EXPEND TAX INCREMENT.] 127.1 Notwithstanding any contrary provision of law or charter, 127.2 for tax increment financing district number 3, established on 127.3 December 19, 1994, by Brooklyn Center Resolution No. 94-273, 127.4 Minnesota Statutes, section 469.1763, subdivision 3, applies to 127.5 the district by permitting a period of 13 years for commencement 127.6 of activities within the district. 127.7 [EFFECTIVE DATE.] This section is effective upon approval 127.8 by the governing body of the city of Brooklyn Center and 127.9 compliance with Minnesota Statutes, section 645.021, subdivision 127.10 3. 127.11 Sec. 16. [CITY OF ROBBINSDALE; TIF.] 127.12 The governing body of the city of Robbinsdale and its 127.13 economic development authority may treat the building located at 127.14 the corner of Regent Avenue and County Road 9 in the city of 127.15 Robbinsdale and originally constructed as the Robbinsdale High 127.16 School along with the subsequent additions to and improvements 127.17 of that building as a structurally substandard building for 127.18 purposes of Minnesota Statutes, section 469.174, subdivision 10, 127.19 without regard to the requirements of paragraph (c) of that 127.20 subdivision. 127.21 [EFFECTIVE DATE.] This section is effective upon approval 127.22 by the governing body of the city of Robbinsdale under Minnesota 127.23 Statutes, section 645.021. 127.24 Sec. 17. [WABASHA TAX INCREMENT FINANCING DISTRICT.] 127.25 Subdivision 1. [DISTRICT EXTENSION.] The governing body of 127.26 the city of Wabasha may elect to extend the duration of its 127.27 redevelopment tax increment financing district number 3 by up to 127.28 three additional years. 127.29 Subd. 2. [FIVE-YEAR RULE.] The requirements of Minnesota 127.30 Statutes, section 469.1763, subdivision 3, that activities must 127.31 be undertaken within a five-year period from the date of 127.32 certification of a tax increment financing district must be 127.33 considered to be met for the city of Wabasha redevelopment tax 127.34 increment district number 3, if the activities are undertaken 127.35 within ten years from the date of certification of the district. 127.36 Subd. 3. [NATIONAL EAGLE CENTER.] Notwithstanding the 128.1 provisions of Minnesota Statutes, section 469.176, subdivision 128.2 4l, or any other law, the city of Wabasha may spend the proceeds 128.3 of tax increment bonds issued prior to January 1, 2000, to pay 128.4 the costs of acquiring and constructing a National Eagle Center 128.5 in the city. The city of Wabasha may also use tax increment 128.6 from its tax increment districts to pay the debt service on such 128.7 bonds, or any bonds issued to refund such bonds, subject to 128.8 legal restrictions on the pooling of tax increment. These bonds 128.9 may not be treated as preexisting obligations for purposes of 128.10 Minnesota Statutes, section 469.1794. 128.11 Subd. 4. [POOLING.] Except as otherwise specifically 128.12 provided in this section, all increments from district number 3 128.13 must be spent on activities within the district and 128.14 administrative expenses. 128.15 [EFFECTIVE DATE.] Subdivision 1 is effective upon 128.16 compliance with the provisions of Minnesota Statutes, sections 128.17 469.1782, subdivision 2, and 645.021. Subdivisions 2 and 3 are 128.18 effective upon compliance by the governing body of the city of 128.19 Wabasha with the provisions of Minnesota Statutes, section 128.20 645.021. 128.21 Sec. 18. [REPEALER.] 128.22 Minnesota Statutes 2002, sections 469.176, subdivision 1a; 128.23 and 469.1766, are repealed. 128.24 [EFFECTIVE DATE.] The repeal of Minnesota Statutes, section 128.25 469.1766, is effective for districts for which the request for 128.26 certification was made after August 1, 1993. The repeal of 128.27 Minnesota Statutes, section 469.176, subdivision 1a, is 128.28 effective the day following final enactment, provided that 128.29 Minnesota Statutes, section 469.176, subdivision 1a, is 128.30 satisfied for any district to which it applies, if bonds have 128.31 been issued, property acquired, or public improvements 128.32 constructed before the end of the three-year period, regardless 128.33 of whether the action was undertaken before or after 128.34 certification of the district. 128.35 ARTICLE 7 128.36 INTERNATIONAL ECONOMIC DEVELOPMENT ZONES 129.1 Section 1. Minnesota Statutes 2002, section 272.02, is 129.2 amended by adding a subdivision to read: 129.3 Subd. 73. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 129.4 PROPERTY.] (a) Improvements to real property, and personal 129.5 property, classified under section 273.13, subdivision 24, and 129.6 located within an international economic development zone 129.7 designated under section 469.322, are exempt from ad valorem 129.8 taxes levied under chapter 275, if the occupant of the property 129.9 is a qualified business, as defined in section 469.321. 129.10 (b) The exemption applies beginning for the first 129.11 assessment year after designation of the international economic 129.12 development zone. The exemption applies to each assessment year 129.13 that begins during the duration of the international economic 129.14 development zone and to property occupied by July 1 of the 129.15 assessment year by a qualified business for the duration 129.16 permitted under section 469.324, subdivision 2. 129.17 Sec. 2. Minnesota Statutes 2002, section 290.06, is 129.18 amended by adding a subdivision to read: 129.19 Subd. 32. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE JOB 129.20 CREDIT.] A taxpayer that is a qualified business, as defined in 129.21 section 469.321, subdivision 6, is allowed a credit as 129.22 determined under section 469.325 against the tax imposed by this 129.23 chapter. 129.24 [EFFECTIVE DATE.] This section is effective the day 129.25 following final enactment. 129.26 Sec. 3. Minnesota Statutes 2002, section 290.191, is 129.27 amended by adding a subdivision to read: 129.28 Subd. 13. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 129.29 A qualified business as defined under section 469.321 may 129.30 exclude from: 129.31 (1) the numerator of its payroll factor the amount of its 129.32 international economic development zone payroll; and 129.33 (2) the numerator of its property factor the amount of its 129.34 property with a situs in the international economic development 129.35 zone. 129.36 (b) The provisions of this subdivision apply to a qualified 130.1 business for the duration provided under section 469.324. 130.2 [EFFECTIVE DATE.] This section is effective the day 130.3 following final enactment. 130.4 Sec. 4. Minnesota Statutes 2002, section 297A.68, is 130.5 amended by adding a subdivision to read: 130.6 Subd. 41. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 130.7 Purchases of tangible personal property or taxable services by a 130.8 qualified business, as defined in section 469.321, are exempt if 130.9 the property or services are primarily used or consumed in an 130.10 international economic development zone designated under section 130.11 469.322. 130.12 (b) Purchase and use of construction materials and supplies 130.13 for construction of improvements to real property in an 130.14 international economic development zone are exempt if the 130.15 improvements after completion of construction are to be used in 130.16 the conduct of a qualified business, as defined in section 130.17 469.321. This exemption applies regardless of whether the 130.18 purchases are made by the business or a contractor. 130.19 (c) The exemptions under this subdivision apply to a local 130.20 sales and use tax, regardless of whether the local tax is 130.21 imposed on sales taxable under this chapter or in another law, 130.22 ordinance, or charter provision. 130.23 (d) This subdivision applies to sales, if the purchase was 130.24 made and delivery received during the period provided under 130.25 section 469.324, subdivision 2. 130.26 [EFFECTIVE DATE.] This section is effective for sales made 130.27 on or after the day following final enactment. 130.28 Sec. 5. [469.321] [DEFINITIONS.] 130.29 Subdivision 1. [SCOPE.] For purposes of sections 469.321 130.30 to 469.327, the following terms have the meanings given. 130.31 Subd. 2. [FOREIGN TRADE ZONE.] "Foreign trade zone" means 130.32 a foreign trade zone designated pursuant to United States Code, 130.33 title 19, section 81b, for the right to use the powers provided 130.34 in United States Code, title 19, sections 81a to 81u, or a 130.35 subzone authorized by the foreign trade zone. 130.36 Subd. 3. [FOREIGN TRADE ZONE AUTHORITY.] "Foreign trade 131.1 zone authority" means the Greater Metropolitan Foreign Trade 131.2 Zone Commission number 119, a joint powers authority created by 131.3 the county of Hennepin, the cities of Minneapolis and 131.4 Bloomington, and the Metropolitan Airports Commission, under the 131.5 authority of section 469.059 or 469.101, which includes any 131.6 other political subdivisions that enter into the authority after 131.7 its creation. 131.8 Subd. 4. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE.] An 131.9 "international economic development zone" or "zone" is a zone so 131.10 designated under section 469.322. 131.11 Subd. 5. [PERSON.] "Person" includes an individual, 131.12 corporation, partnership, limited liability company, 131.13 association, or any other entity. 131.14 Subd. 6. [QUALIFIED BUSINESS.] (a) "Qualified business" 131.15 means a person carrying on a trade or business at a place of 131.16 business located within an international economic development 131.17 zone that is: 131.18 (1) engaged in the furtherance of international export or 131.19 import of goods; and 131.20 (2) certified by the foreign trade zone authority as a 131.21 trade or business that furthers the purpose of developing 131.22 international distribution capacity and capability. 131.23 (b) A person that relocates a trade or business from within 131.24 Minnesota but outside an international economic development zone 131.25 into an international economic development zone is not a 131.26 qualified business, unless the business: 131.27 (1)(i) increases full-time employment in the first full 131.28 year of operation within the international economic development 131.29 zone by at least 20 percent measured relative to the operations 131.30 that were relocated and maintains the required level of 131.31 employment for each year that tax incentives under section 131.32 469.324 are claimed; or 131.33 (ii) makes a capital investment in the property located 131.34 within a zone equal to at least ten percent of the gross 131.35 revenues of the operations that were relocated in the 131.36 immediately proceeding taxable year; and 132.1 (2) enters a binding written agreement with the foreign 132.2 trade zone authority that: 132.3 (i) pledges that the business will meet the requirements of 132.4 clause (1); 132.5 (ii) provides for repayment of all tax benefits enumerated 132.6 under section 469.324 to the business under the procedures in 132.7 section 469.326, if the requirements of clause (1) are not met 132.8 for the taxable year or for taxes payable during a year in which 132.9 the requirements were not met; and 132.10 (iii) contains any other terms the foreign trade zone 132.11 authority determines appropriate. 132.12 Clause (1) of this paragraph does not apply to a freight 132.13 forwarder. 132.14 Subd. 7. [REGIONAL DISTRIBUTION CENTER.] A "regional 132.15 distribution center" is a distribution center developed within a 132.16 foreign trade zone. The regional distribution center must have 132.17 as its primary purpose to facilitate gathering of freight for 132.18 the purpose of centralizing the functions necessary for the 132.19 shipment of freight in international commerce, including, but 132.20 not limited to, security and customs functions. 132.21 Subd. 8. [RELOCATE.] (a) "Relocate" means that a trade or 132.22 business: 132.23 (1) ceases one or more operations or functions at another 132.24 location in Minnesota and begins performing substantially the 132.25 same operations or functions at a location in an international 132.26 economic development zone; or 132.27 (2) reduces employment at another location in Minnesota 132.28 during a period starting one year before and ending one year 132.29 after it begins operations in an international economic 132.30 development zone and its employees in the international economic 132.31 development zone are engaged in the same line of business as the 132.32 employees at the location where it reduced employment. 132.33 (b) "Relocate" does not include an expansion by a business 132.34 that establishes a new facility that does not replace or 132.35 supplant an existing operation or employment, in whole or in 132.36 part. 133.1 (c) "Trade or business" includes any business entity that 133.2 is substantially similar in operation or ownership to the 133.3 business entity seeking to be a qualified business. 133.4 Subd. 9. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE PAYROLL 133.5 FACTOR.] "International economic development zone payroll 133.6 factor" or "international economic development zone payroll" is 133.7 that portion of the payroll factor under section 290.191 that 133.8 represents: 133.9 (1) wages or salaries paid to an individual for services 133.10 performed in an international economic development zone; or 133.11 (2) wages or salaries paid to individuals working from 133.12 offices within an international economic development zone, if 133.13 their employment requires them to work outside the zone and the 133.14 work is incidental to the work performed by the individual 133.15 within the zone. 133.16 Subd. 10. [FREIGHT FORWARDER.] "Freight forwarder" is a 133.17 business that, for compensation, ensures that goods produced or 133.18 sold by another business move from point of origin to point of 133.19 destination. 133.20 [EFFECTIVE DATE.] This section is effective the day 133.21 following final enactment. 133.22 Sec. 6. [469.322] [DESIGNATION OF INTERNATIONAL ECONOMIC 133.23 DEVELOPMENT ZONE.] 133.24 (a) An area designated as a foreign trade zone may be 133.25 designated by the foreign trade zone authority as an 133.26 international economic development zone if within the zone a 133.27 regional distribution center is being developed pursuant to 133.28 section 469.323. The zone must consist of contiguous area of 133.29 not less than 500 acres and not more than 1,000 acres. The 133.30 designation authority under this section is limited to one zone. 133.31 (b) In making the designation, the foreign trade zone 133.32 authority, in consultation with the Minnesota Department of 133.33 Transportation and the Metropolitan Council, shall consider 133.34 access to major transportation routes, consistency with current 133.35 state transportation and air cargo planning, adequacy of the 133.36 size of the site, access to airport facilities, present and 134.1 future capacity at the designated airport, the capability to 134.2 meet integrated present and future air cargo, security, and 134.3 inspection services, and access to other infrastructure and 134.4 financial incentives. The border of the international economic 134.5 development zone must be no more than 60 miles distant or 90 134.6 minutes drive time from the border of the Minneapolis-St. Paul 134.7 International Airport. The county in which the zone is located 134.8 must be a member of the foreign trade zone authority. 134.9 [EFFECTIVE DATE.] This section is effective the day 134.10 following final enactment. 134.11 Sec. 7. [469.323] [FOREIGN TRADE ZONE AUTHORITY POWERS.] 134.12 Subdivision 1. [DEVELOPMENT OF REGIONAL DISTRIBUTION 134.13 CENTER.] The foreign trade zone authority is responsible for 134.14 creating a development plan for the regional distribution 134.15 center. The regional distribution center must be developed with 134.16 the purpose of expanding, on a regional basis, international 134.17 distribution capacity and capability. The foreign trade zone 134.18 authority shall consult with municipalities that have indicated 134.19 to the authority an interest in locating the international 134.20 economic development zone within their boundaries, as well as 134.21 interested businesses, potential financiers, and appropriate 134.22 state and federal agencies. 134.23 Subd. 2. [PORT AUTHORITY POWERS.] The governing body of 134.24 the foreign trade zone authority may establish a port authority 134.25 that has the same powers as a port authority established under 134.26 section 469.049. If the foreign trade zone authority 134.27 establishes a port authority, the governing body of the foreign 134.28 trade zone authority may exercise all powers granted to a city 134.29 by sections 469.048 to 469.068, except it may not impose or 134.30 request imposition of a property tax levy under section 469.053 134.31 by any city. 134.32 [EFFECTIVE DATE.] This section is effective the day 134.33 following final enactment. 134.34 Sec. 8. [469.324] [TAX INCENTIVES IN INTERNATIONAL 134.35 ECONOMIC DEVELOPMENT ZONE.] 134.36 Subdivision 1. [AVAILABILITY.] Qualified businesses that 135.1 operate in an international economic development zone, 135.2 individuals who invest in a regional distribution center or 135.3 qualified businesses that operate in an international economic 135.4 development zone, and property located in an international 135.5 economic development zone qualify for: 135.6 (1) exemption from the state sales and use tax and any 135.7 local sales and use taxes on qualifying purchases as provided in 135.8 section 297A.68, subdivision 41; 135.9 (2) exemption from the property tax as provided in section 135.10 272.02, subdivision 73; 135.11 (3) the jobs credit allowed under section 469.325; 135.12 (4) the corporate franchise tax exemption under section 135.13 290.191, subdivision 13. 135.14 Subd. 2. [DURATION.] (a) Except as provided in paragraph 135.15 (b), the jobs credit described in subdivision 1, clause (3), and 135.16 the corporate franchise exemption under subdivision 1, clause 135.17 (4), is available for no more than eight consecutive taxable 135.18 years for any taxpayer. The sales and use tax exemption 135.19 described in subdivision 1, clause (1), is available for each 135.20 taxpayer that claims it for taxes otherwise payable on 135.21 transactions during a period of eight years from the date when 135.22 the first exemption is claimed by that taxpayer. The property 135.23 tax exemption described under subdivision 1, clause (2), is 135.24 available for any parcel of property for eight consecutive taxes 135.25 payable years. No incentives described in subdivision 1, 135.26 clauses (1) to (4), are available after December 31, 2020. 135.27 (b) For taxpayers that are freight forwarders, the 135.28 durations provided under paragraph (a) are reduced to four years. 135.29 Sec. 9. [469.325] [JOBS CREDIT.] 135.30 Subdivision 1. [CREDIT ALLOWED.] A qualified business is 135.31 allowed a credit against the taxes imposed under chapter 290. 135.32 The credit equals seven percent of the: 135.33 (1) lesser of: 135.34 (i) zone payroll for the taxable year, less the zone 135.35 payroll for the base year; or 135.36 (ii) total Minnesota payroll for the taxable year, less 136.1 total Minnesota payroll for the base year; minus 136.2 (2) $30,000 multiplied by the number of full-time 136.3 equivalent employees that the qualified business employs in the 136.4 international economic development zone for the taxable year, 136.5 minus the number of full-time equivalent employees the business 136.6 employed in the zone in the base year, but not less than zero. 136.7 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 136.8 the following terms have the meanings given. 136.9 (b) "Base year" means the taxable year beginning during the 136.10 calendar year prior to the calendar year in which the zone 136.11 designation took effect. 136.12 (c) "Full-time equivalent employees" means the equivalent 136.13 of annualized expected hours of work equal to 2,080 hours. 136.14 (d) "Minnesota payroll" means the wages or salaries 136.15 attributed to Minnesota under section 290.191, subdivision 12, 136.16 for the qualified business or the unitary business of which the 136.17 qualified business is a part, whichever is greater. 136.18 (e) "Zone payroll" means wages or salaries used to 136.19 determine the zone payroll factor for the qualified business, 136.20 less the amount of compensation attributable to any employee 136.21 that exceeds $100,000. 136.22 Subd. 3. [INFLATION ADJUSTMENT.] For taxable years 136.23 beginning after December 31, 2005, the dollar amounts in 136.24 subdivision 1, clause (2), and subdivision 2, paragraph (e), are 136.25 annually adjusted for inflation. The commissioner of revenue 136.26 shall adjust the amounts by the percentage determined under 136.27 section 290.06, subdivision 2d, for the taxable year. 136.28 Subd. 4. [REFUNDABLE.] If the amount of the credit exceeds 136.29 the liability for tax under chapter 290, the commissioner of 136.30 revenue shall refund the excess to the qualified business. 136.31 Subd. 5. [APPROPRIATION.] An amount sufficient to pay the 136.32 refunds authorized by this section is appropriated to the 136.33 commissioner of revenue from the general fund. 136.34 [EFFECTIVE DATE.] This section is effective for taxable 136.35 years beginning after December 31, 2004. 136.36 Sec. 10. [469.326] [REPAYMENT OF TAX BENEFITS.] 137.1 Subdivision 1. [REPAYMENT OBLIGATION.] A person must repay 137.2 the amount of the tax reduction received under section 469.324, 137.3 subdivision 1, clauses (1) and (2), or a refund received under 137.4 section 469.325, during the two years immediately before it 137.5 ceased to operate in the zone, if the person ceased to operate 137.6 its facility located within the zone or otherwise ceases to be 137.7 or is not a qualified business. 137.8 Subd. 2. [DISPOSITION OF REPAYMENT.] The repayment must be 137.9 paid to the state to the extent it represents a state tax 137.10 reduction and to the county to the extent it represents a 137.11 property tax reduction. Any amount repaid to the state must be 137.12 deposited in the general fund. Any amount repaid to the county 137.13 for the property tax exemption must be distributed to the local 137.14 governments with authority to levy taxes in the zone in the same 137.15 manner provided for distribution of payment of delinquent 137.16 property taxes. Any repayment of local sales or use taxes must 137.17 be repaid to the jurisdiction imposing the local sales or use 137.18 tax. 137.19 Subd. 3. [REPAYMENT PROCEDURES.] (a) For the repayment of 137.20 taxes imposed under chapter 290 or 297A or local taxes collected 137.21 under section 297A.99, a person must file an amended return with 137.22 the commissioner of revenue and pay any taxes required to be 137.23 repaid within 30 days after ceasing to be a qualified business. 137.24 The amount required to be repaid is determined by calculating 137.25 the tax for the period for which repayment is required without 137.26 regard to the tax reductions allowed under section 469.324. 137.27 (b) For the repayment of property taxes, the county auditor 137.28 shall prepare a tax statement for the person, applying the 137.29 applicable tax extension rates for each payable year and provide 137.30 a copy to the business. The person must pay the taxes to the 137.31 county treasurer within 30 days after receipt of the tax 137.32 statement. The taxpayer may appeal the valuation and 137.33 determination of the property tax to the tax court within 30 137.34 days after receipt of the tax statement. 137.35 (c) The provisions of chapters 270 and 289A relating to the 137.36 commissioner of revenue's authority to audit, assess, and 138.1 collect the tax and to hear appeals apply to the repayment 138.2 required under paragraph (a). The commissioner may impose civil 138.3 penalties as provided in chapter 289A, and the additional tax 138.4 and penalties are subject to interest at the rate provided in 138.5 section 270.75, from 30 days after ceasing to do business in the 138.6 zone until the date the tax is paid. 138.7 (d) If a property tax is not repaid under paragraph (b), 138.8 the county treasurer shall add the amount required to be repaid 138.9 to the property taxes assessed against the property for payment 138.10 in the year following the year in which the treasurer discovers 138.11 that the person ceased to operate in the international economic 138.12 development zone. 138.13 (e) For determining the tax required to be repaid, a tax 138.14 reduction is deemed to have been received on the date that the 138.15 tax would have been due if the person had not been entitled to 138.16 the tax reduction. 138.17 (f) The commissioner of revenue may assess the repayment of 138.18 taxes under paragraph (c) at any time within two years after the 138.19 person ceases to be a qualified business, or within any period 138.20 of limitations for the assessment of tax under section 289A.38, 138.21 whichever is later. 138.22 Subd. 4. [WAIVER AUTHORITY.] The commissioner may waive 138.23 all or part of a repayment, if the commissioner of revenue, in 138.24 consultation with the foreign trade zone authority and 138.25 appropriate officials from the state and local government units, 138.26 determines that requiring repayment of the tax is not in the 138.27 best interest of the state or local government and the business 138.28 ceased operating as a result of circumstances beyond its 138.29 control, including, but not limited to: 138.30 (1) a natural disaster; 138.31 (2) unforeseen industry trends; or 138.32 (3) loss of a major supplier or customer. 138.33 [EFFECTIVE DATE.] This section is effective the day 138.34 following final enactment. 138.35 Sec. 11. [469.327] [REPORTING REQUIREMENTS.] 138.36 Before designation of an international economic development 139.1 zone under section 469.322, the foreign trade zone authority 139.2 shall establish performance goals for the zone. These goals 139.3 must set out, at a minimum, the amount of investment, the number 139.4 of jobs, and the amount of freight handled expected to be 139.5 attained at the end of three, five, and 10 year periods by the 139.6 zone. The authority must annually report to the commissioner of 139.7 the Department of Employment and Economic Development on its 139.8 progress in attaining these goals. 139.9 [EFFECTIVE DATE.] This section is effective the day 139.10 following final enactment. 139.11 ARTICLE 8 139.12 DEPARTMENT OF REVENUE POLICY PROVISIONS 139.13 Section 1. Minnesota Statutes 2002, section 16D.10, is 139.14 amended to read: 139.15 16D.10 [CASE REVIEWER.] 139.16 Subdivision 1. [DUTIES.] The commissioner shall make a 139.17 case reviewer available to debtors. The reviewer must be 139.18 available to answer a debtor's questions concerning the 139.19 collection process and to review the collection activity taken. 139.20 If the reviewer reasonably believes that the particular action 139.21 being taken is unreasonable or unfair, the reviewer may make 139.22 recommendations to the commissioner in regard to the collection 139.23 action. 139.24 Subd. 2. [AUTHORITY TO ISSUE DEBTOR ASSISTANCE ORDER.] On 139.25 application filed by a debtor with the case reviewer, in the 139.26 form, manner, and in the time prescribed by the commissioner, 139.27 and after thorough investigation, the case reviewer may issue a 139.28 debtor assistance order if, in the determination of the case 139.29 reviewer, the manner in which the state debt collection laws are 139.30 being administered is creating or will create an unjust and 139.31 inequitable result for the debtor. Debtor assistance orders are 139.32 governed by the provisions relating to taxpayer assistance 139.33 orders under section 270.273. 139.34 Subd. 3. [TRANSFER OF DUTIES TO TAXPAYER RIGHTS ADVOCATE.] 139.35 All duties and authority of the case reviewer under subdivisions 139.36 1 and 2 are transferred to the taxpayer rights advocate. 140.1 [EFFECTIVE DATE.] This section is effective the day 140.2 following final enactment. 140.3 Sec. 2. Minnesota Statutes 2002, section 270.02, 140.4 subdivision 3, is amended to read: 140.5 Subd. 3. [POWERS, ORGANIZATION, ASSISTANTS.] Subject to 140.6 the provisions of this chapter and other applicable laws the 140.7 commissioner shall have power to organize the department with 140.8 such divisions and other agencies as the commissioner deems 140.9 necessary and to appoint one deputy commissioner, a department 140.10 secretary, directors of divisions, and such other officers, 140.11 employees, and agents as the commissioner may deem necessary to 140.12 discharge the functions of the department, define the duties of 140.13 such officers, employees, and agents, and delegate to them any 140.14 of the commissioner's powers or duties, subject to the 140.15 commissioner's control and under such conditions as the 140.16 commissioner may prescribe. Appointments to exercise delegated 140.17 power to sign documents which require the signature of the 140.18 commissioner or a delegate by law shall be by written order 140.19 filed with the secretary of state. The delegations of authority 140.20 granted by the commissioner remain in effect until revoked by 140.21 the commissioner or a successor commissioner. 140.22 [EFFECTIVE DATE.] This section is effective the day 140.23 following final enactment. 140.24 Sec. 3. Minnesota Statutes 2003 Supplement, section 140.25 270.06, is amended to read: 140.26 270.06 [POWERS AND DUTIES.] 140.27 The commissioner of revenue shall: 140.28 (1) have and exercise general supervision over the 140.29 administration of the assessment and taxation laws of the state, 140.30 over assessors, town, county, and city boards of review and 140.31 equalization, and all other assessing officers in the 140.32 performance of their duties, to the end that all assessments of 140.33 property be made relatively just and equal in compliance with 140.34 the laws of the state; 140.35 (2) confer with, advise, and give the necessary 140.36 instructions and directions to local assessors and local boards 141.1 of review throughout the state as to their duties under the laws 141.2 of the state; 141.3 (3) direct proceedings, actions, and prosecutions to be 141.4 instituted to enforce the laws relating to the liability and 141.5 punishment of public officers and officers and agents of 141.6 corporations for failure or negligence to comply with the 141.7 provisions of the laws of this state governing returns of 141.8 assessment and taxation of property, and cause complaints to be 141.9 made against local assessors, members of boards of equalization, 141.10 members of boards of review, or any other assessing or taxing 141.11 officer, to the proper authority, for their removal from office 141.12 for misconduct or negligence of duty; 141.13 (4) require county attorneys to assist in the commencement 141.14 of prosecutions in actions or proceedings for removal, 141.15 forfeiture and punishment for violation of the laws of this 141.16 state in respect to the assessment and taxation of property in 141.17 their respective districts or counties; 141.18 (5) require town, city, county, and other public officers 141.19 to report information as to the assessment of property, 141.20 collection of taxes received from licenses and other sources, 141.21 and such other information as may be needful in the work of the 141.22 Department of Revenue, in such form and upon such blanks as the 141.23 commissioner may prescribe; 141.24 (6) require individuals, copartnerships, companies, 141.25 associations, and corporations to furnish information concerning 141.26 their capital, funded or other debt, current assets and 141.27 liabilities, earnings, operating expenses, taxes, as well as all 141.28 other statements now required by law for taxation purposes; 141.29 (7) subpoena witnesses, at a time and place reasonable 141.30 under the circumstances, to appear and give testimony, and to 141.31 produce books, records, papers and documents for inspection and 141.32 copying relating to any matter which the commissioner may have 141.33 authority to investigate or determine; 141.34 (8) issue a subpoena which does not identify the person or 141.35 persons with respect to whose liability the subpoena is issued, 141.36 but only if (a) the subpoena relates to the investigation of a 142.1 particular person or ascertainable group or class of persons, 142.2 (b) there is a reasonable basis for believing that such person 142.3 or group or class of persons may fail or may have failed to 142.4 comply with any law administered by the commissioner, (c) the 142.5 information sought to be obtained from the examination of the 142.6 records (and the identity of the person or persons with respect 142.7 to whose liability the subpoena is issued) is not readily 142.8 available from other sources, (d) the subpoena is clear and 142.9 specific as to the information sought to be obtained, and (e) 142.10 the information sought to be obtained is limited solely to the 142.11 scope of the investigation. Provided further that the party 142.12 served with a subpoena which does not identify the person or 142.13 persons with respect to whose tax liability the subpoena is 142.14 issued shall have the right, within 20 days after service of the 142.15 subpoena, to petition the district court for the judicial 142.16 district in which lies the county in which that party is located 142.17 for a determination as to whether the commissioner of revenue 142.18 has complied with all the requirements in (a) to (e), and thus, 142.19 whether the subpoena is enforceable. If no such petition is 142.20 made by the party served within the time prescribed, the 142.21 subpoena shall have the force and effect of a court order; 142.22 (9) cause the deposition of witnesses residing within or 142.23 without the state, or absent therefrom, to be taken, upon notice 142.24 to the interested party, if any, in like manner that depositions 142.25 of witnesses are taken in civil actions in the district court, 142.26 in any matter which the commissioner may have authority to 142.27 investigate or determine; 142.28 (10) investigate the tax laws of other states and countries 142.29 and to formulate and submit to the legislature such legislation 142.30 as the commissioner may deem expedient to prevent evasions of 142.31 assessment and taxing laws, and secure just and equal taxation 142.32 and improvement in the system of assessment and taxation in this 142.33 state; 142.34 (11) consult and confer with the governor upon the subject 142.35 of taxation, the administration of the laws in regard thereto, 142.36 and the progress of the work of the Department of Revenue, and 143.1 furnish the governor, from time to time, such assistance and 143.2 information as the governor may require relating to tax matters; 143.3 (12) transmit to the governor, on or before the third 143.4 Monday in December of each even-numbered year, and to each 143.5 member of the legislature, on or before November 15 of each 143.6 even-numbered year, the report of the Department of Revenue for 143.7 the preceding years, showing all the taxable property in the 143.8 state and the value of the same, in tabulated form; 143.9 (13) inquire into the methods of assessment and taxation 143.10 and ascertain whether the assessors faithfully discharge their 143.11 duties, particularly as to their compliance with the laws 143.12 requiring the assessment of all property not exempt from 143.13 taxation; 143.14 (14) administer and enforce the assessment and collection 143.15 of state taxes and fees, including the use of any remedy 143.16 available to nongovernmental creditors, and, from time to time, 143.17 make, publish, and distribute rules for the administration and 143.18 enforcement of laws administered by the commissioner and state 143.19 tax laws. The rules have the force of law; 143.20 (15) prepare blank forms for the returns required by state 143.21 tax law and distribute them throughout the state, furnishing 143.22 them subject to charge on application; 143.23 (16) prescribe rules governing the qualification and 143.24 practice of agents, attorneys, or other persons representing 143.25 taxpayers before the commissioner. The rules may require that 143.26 those persons, agents, and attorneys show that they are of good 143.27 character and in good repute, have the necessary qualifications 143.28 to give taxpayers valuable services, and are otherwise competent 143.29 to advise and assist taxpayers in the presentation of their case 143.30 before being recognized as representatives of taxpayers. After 143.31 due notice and opportunity for hearing, the commissioner may 143.32 suspend and bar from further practice before the commissioner 143.33 any person, agent, or attorney who is shown to be incompetent or 143.34 disreputable, who refuses to comply with the rules, or who with 143.35 intent to defraud, willfully or knowingly deceives, misleads, or 143.36 threatens a taxpayer or prospective taxpayer, by words, 144.1 circular, letter, or by advertisement. This clause does not 144.2 curtail the rights of individuals to appear in their own behalf 144.3 or partners or corporations' officers to appear in behalf of 144.4 their respective partnerships or corporations; 144.5 (17) appoint agents as the commissioner considers necessary 144.6 to make examinations and determinations. The agents have the 144.7 rights and powers conferred on the commissioner to subpoena, 144.8 examine, and copy books, records, papers, or memoranda, subpoena 144.9 witnesses, administer oaths and affirmations, and take 144.10 testimony. In addition to administrative subpoenas of the 144.11 commissioner and the agents, upon demand of the commissioner or 144.12 an agent, the court administrator of any district court shall 144.13 issue a subpoena for the attendance of a witness or the 144.14 production of books, papers, records, or memoranda before the 144.15 agent for inspection and copying. Disobedience of a court 144.16 administrator's subpoena shall be punished by the district court 144.17 of the district in which the subpoena is issued, or in the case 144.18 of a subpoena issued by the commissioner or an agent, by the 144.19 district court of the district in which the party served with 144.20 the subpoena is located, in the same manner as contempt of the 144.21 district court; 144.22 (18) appoint and employ additional help, purchase supplies 144.23 or materials, or incur other expenditures in the enforcement of 144.24 state tax laws as considered necessary. The salaries of all 144.25 agents and employees provided for in this chapter shall be fixed 144.26 by the appointing authority, subject to the approval of the 144.27 commissioner of administration; 144.28 (19) execute and administer any agreement with the 144.29 secretary of the treasury of the United States or a 144.30 representative of another state regarding the exchange of 144.31 information and administration of the tax laws; 144.32 (20) authorize the use of unmarked motor vehicles to 144.33 conduct seizures or criminal investigations pursuant to the 144.34 commissioner's authority;and144.35 (21) exercise other powers and perform other duties 144.36 required of or imposed upon the commissioner of revenue by law; 145.1 and 145.2 (22) negotiate with other member states as to the amount of 145.3 the monetary allowance for sellers and certified service 145.4 providers who purchase certified software for sales tax 145.5 collection as described in the streamlined sales tax agreement. 145.6 [EFFECTIVE DATE.] This section is effective the day 145.7 following final enactment. 145.8 Sec. 4. [270.0611] [SUFFICIENCY OF NOTICE OF DETERMINATION 145.9 OR ACTION OF COMMISSIONER OF REVENUE.] 145.10 When a method of notification of a written determination or 145.11 action of the commissioner is not specifically provided for by 145.12 law, notice of the determination or action sent postage prepaid 145.13 by United States mail to the taxpayer or other person affected 145.14 by the determination or action at the taxpayer's or person's 145.15 last known address is sufficient. If the taxpayer or person 145.16 being notified is deceased or is under a legal disability, or if 145.17 a corporation being notified has terminated its existence, 145.18 notice to the last known address of the taxpayer, person, or 145.19 corporation is sufficient, unless the department has been 145.20 provided with a new address by a party authorized to receive 145.21 notices from the commissioner. 145.22 [EFFECTIVE DATE.] This section is effective for notices 145.23 sent on or after the day following final enactment. 145.24 Sec. 5. Minnesota Statutes 2002, section 270.69, 145.25 subdivision 4, is amended to read: 145.26 Subd. 4. [PERIOD OF LIMITATIONS.] The lien imposed by this 145.27 section shall, notwithstanding any other provision of law to the 145.28 contrary, be enforceable from the time the lien arises and for 145.29 ten years from the date of filing the notice of lien, which must 145.30 be filed by the commissioner within five years after the date of 145.31 assessment of the tax or final administrative or judicial 145.32 determination of the assessment. A notice of lien filed in one 145.33 county may be transcribed to the secretary of state or to any 145.34 other county within ten years after the date of its filing, but 145.35 the transcription shall not extend the period during which the 145.36 lien is enforceable. A notice of lien may be renewed by the 146.1 commissioner before the expiration of the ten-year period for an 146.2 additional ten years. The taxpayer must receive written notice 146.3 of the renewal. 146.4 [EFFECTIVE DATE.] This section is effective the day 146.5 following final enactment. 146.6 Sec. 6. Minnesota Statutes 2002, section 270B.01, 146.7 subdivision 8, is amended to read: 146.8 Subd. 8. [MINNESOTA TAX LAWS.] For purposes of this 146.9 chapter only, unless expressly stated otherwise, "Minnesota tax 146.10 laws" means: 146.11 (1) the taxes, refunds, and fees administered by or paid to 146.12 the commissioner under chapters 115B (except taxes imposed under 146.13 sections 115B.21 to 115B.24), 289A (except taxes imposed under 146.14 sections 298.01, 298.015, and 298.24), 290, 290A, 291, 295, 146.15 297A, and 297H, or any similar Indian tribal tax administered by 146.16 the commissioner pursuant to any tax agreement between the state 146.17 and the Indian tribal government, and includes any laws for the 146.18 assessment, collection, and enforcement of those taxes, refunds, 146.19 and fees; and 146.20 (2) section 273.1315. 146.21 [EFFECTIVE DATE.] This section is effective the day 146.22 following final enactment. 146.23 Sec. 7. Minnesota Statutes 2003 Supplement, section 146.24 270B.12, subdivision 13, is amended to read: 146.25 Subd. 13. [COUNTY ASSESSORS; CLASS 1B HOMESTEADS.] The 146.26 commissioner may disclose to a county assessor, and to the 146.27 assessor's designated agents or employees, a listing of parcels 146.28 of property qualifying for the class 1b property tax 146.29 classification under section 273.13, subdivision 22, and the 146.30 names and addresses of qualified applicants. 146.31 [EFFECTIVE DATE.] This section is effective the day 146.32 following final enactment. 146.33 Sec. 8. Minnesota Statutes 2003 Supplement, section 146.34 272.02, subdivision 65, is amended to read: 146.35 Subd. 65. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 146.36 PROPERTY.] (a) Improvements to real property, and personal 147.1 property, classified under section 273.13, subdivision 24, and 147.2 located within a biotechnology and health sciences industry zone 147.3 are exempt from ad valorem taxes levied under chapter 275, as 147.4 provided in this subdivision. 147.5 (b) For property to qualify for exemption under paragraph 147.6 (a), the occupant must be a qualified business, as defined in 147.7 section 469.330. 147.8 (c) The exemption applies beginning for the first 147.9 assessment year after designation of the biotechnology and 147.10 health sciences industry zone by the commissioner of employment 147.11 and economic development. The exemption applies to each 147.12 assessment year that begins during the duration of the 147.13 biotechnology and health sciences industry zone and to property 147.14 occupied by July 1 of the assessment year by a qualified 147.15 business. This exemption does not apply to: 147.16 (1) a levy under section 475.61 or similar levy provisions 147.17 under any other law to pay general obligation bonds; or 147.18 (2) a levy under section 126C.17, if the levy was approved 147.19 by the voters before the designation of the biotechnology and 147.20 health sciences industry zone. 147.21 (d) The exemption does not apply to taxes imposed by a 147.22 city, town, or county, unless the governing body adopts a 147.23 resolution granting the exemption. A city, town, or county may 147.24 provide a complete property tax exemption, partial property tax 147.25 exemption, or no property tax exemption to qualified businesses 147.26 in the biotechnology and health sciences industry zone. "City" 147.27 includes a statutory or home rule charter city. 147.28 (e) For property located in a tax increment financing 147.29 district, the county shall not adjust the original net tax 147.30 capacity of the district under section 469.177, subdivision 1, 147.31 paragraph (a), upon the expiration of an exemption under this 147.32 subdivision. 147.33 [EFFECTIVE DATE.] This section is effective beginning for 147.34 property taxes assessed in 2004, payable in 2005. 147.35 Sec. 9. Minnesota Statutes 2002, section 289A.12, 147.36 subdivision 3, is amended to read: 148.1 Subd. 3. [RETURNS OR REPORTS BY PARTNERSHIPS, FIDUCIARIES, 148.2 AND S CORPORATIONS.] (a) Partnerships must file a return with 148.3 the commissioner for each taxable year. The return must conform 148.4 to the requirements of section 290.311, and must include the 148.5 names and addresses of the partners entitled to a distributive 148.6 share in their taxable net income, gain, loss, or credit, and 148.7 the amount of the distributive share to which each is entitled. 148.8 A partnership required to file a return for a partnership 148.9 taxable year must furnish a copy of the information required to 148.10 be shown on the return to a person who is a partner at any time 148.11 during the taxable year, on or before the day on which the 148.12 return for the taxable year was filed. A partnership with more 148.13 than 100 partners that is required to file a federal partnership 148.14 return electronically under Code of Federal Regulations, title 148.15 26, section 301.6011-3 (2003), must also file the return due 148.16 under this section electronically. If a return required to be 148.17 filed electronically is filed on paper, the return is still 148.18 valid but a penalty of $50 for each partner over 100 partners is 148.19 imposed for failing to file electronically. The commissioner 148.20 may waive the penalty if the partnership can demonstrate that 148.21 filing the return electronically creates a hardship. 148.22 (b) The fiduciary of an estate or trust making the return 148.23 required to be filed under section 289A.08, subdivision 2, for a 148.24 taxable year must give a beneficiary who receives a distribution 148.25 from the estate or trust with respect to the taxable year or to 148.26 whom any item with respect to the taxable year is allocated, a 148.27 statement containing the information required to be shown on the 148.28 return, on or before the date on which the return was filed. 148.29 (c) An S corporation must file a return with the 148.30 commissioner for a taxable year during which an election under 148.31 section 290.9725 is in effect, stating specifically the names 148.32 and addresses of the persons owning stock in the corporation at 148.33 any time during the taxable year, the number of shares of stock 148.34 owned by a shareholder at all times during the taxable year, the 148.35 shareholder's pro rata share of each item of the corporation for 148.36 the taxable year, and other information the commissioner 149.1 requires. An S corporation required to file a return under this 149.2 paragraph for any taxable year must furnish a copy of the 149.3 information shown on the return to the person who is a 149.4 shareholder at any time during the taxable year, on or before 149.5 the day on which the return for the taxable year was filed. 149.6 (d) The partnership or S corporation return must be signed 149.7 by someone designated by the partnership or S corporation. 149.8 [EFFECTIVE DATE.] This section is effective for taxable 149.9 years beginning after December 31, 2003. 149.10 Sec. 10. Minnesota Statutes 2002, section 289A.31, 149.11 subdivision 2, is amended to read: 149.12 Subd. 2. [JOINT INCOME TAX RETURNS.] (a) If a joint income 149.13 tax return is made by a husband and wife, the liability for the 149.14 tax is joint and several. A spouse who qualifies for relief 149.15 from a liability attributable to an underpayment under section 149.16 6015(b) of the Internal Revenue Code is relieved of the state 149.17 income tax liability on the underpayment. 149.18 (b) In the case of individuals who were a husband and wife 149.19 prior to the dissolution of their marriage or their legal 149.20 separation, or prior to the death of one of the individuals, for 149.21 tax liabilities reported on a joint or combined return, the 149.22 liability of each person is limited to the proportion of the tax 149.23 due on the return that equals that person's proportion of the 149.24 total tax due if the husband and wife filed separate returns for 149.25 the taxable year. This provision is effective only when the 149.26 commissioner receives written notice of the marriage 149.27 dissolution, legal separation, or death of a spouse from the 149.28 husband or wife. No refund may be claimed by an ex-spouse, 149.29 legally separated or widowed spouse for any taxes paid more than 149.30 60 days before receipt by the commissioner of the written notice. 149.31 (c) A request for calculation of separate liability 149.32 pursuant to paragraph (b) for taxes reported on a return must be 149.33 made within six years after the due date of the return. For 149.34 calculation of separate liability for taxes assessed by the 149.35 commissioner under section 289A.35 or 289A.37, the request must 149.36 be made within six years after the date of assessment. The 150.1 commissioner is not required to calculate separate liability if 150.2 the remaining unpaid liability for which recalculation is 150.3 requested is $100 or less. 150.4 [EFFECTIVE DATE.] This section is effective for requests 150.5 for relief made on or after the day following final enactment. 150.6 Sec. 11. Minnesota Statutes 2002, section 289A.56, is 150.7 amended by adding a subdivision to read: 150.8 Subd. 7. [BIOTECHNOLOGY AND BORDER CITY ZONE 150.9 REFUNDS.] Notwithstanding subdivision 3, for refunds payable 150.10 under sections 297A.68, subdivision 38, and 469.1734, 150.11 subdivision 6, interest is computed from 90 days after the 150.12 refund claim is filed with the commissioner. 150.13 [EFFECTIVE DATE.] This section is effective for refund 150.14 claims filed on or after July 1, 2004. 150.15 Sec. 12. Minnesota Statutes 2003 Supplement, section 150.16 290.01, subdivision 19d, is amended to read: 150.17 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 150.18 TAXABLE INCOME.] For corporations, there shall be subtracted 150.19 from federal taxable income after the increases provided in 150.20 subdivision 19c: 150.21 (1) the amount of foreign dividend gross-up added to gross 150.22 income for federal income tax purposes under section 78 of the 150.23 Internal Revenue Code; 150.24 (2) the amount of salary expense not allowed for federal 150.25 income tax purposes due to claiming the federal jobs credit 150.26 under section 51 of the Internal Revenue Code; 150.27 (3) any dividend (not including any distribution in 150.28 liquidation) paid within the taxable year by a national or state 150.29 bank to the United States, or to any instrumentality of the 150.30 United States exempt from federal income taxes, on the preferred 150.31 stock of the bank owned by the United States or the 150.32 instrumentality; 150.33 (4) amounts disallowed for intangible drilling costs due to 150.34 differences between this chapter and the Internal Revenue Code 150.35 in taxable years beginning before January 1, 1987, as follows: 150.36 (i) to the extent the disallowed costs are represented by 151.1 physical property, an amount equal to the allowance for 151.2 depreciation under Minnesota Statutes 1986, section 290.09, 151.3 subdivision 7, subject to the modifications contained in 151.4 subdivision 19e; and 151.5 (ii) to the extent the disallowed costs are not 151.6 represented by physical property, an amount equal to the 151.7 allowance for cost depletion under Minnesota Statutes 1986, 151.8 section 290.09, subdivision 8; 151.9 (5) the deduction for capital losses pursuant to sections 151.10 1211 and 1212 of the Internal Revenue Code, except that: 151.11 (i) for capital losses incurred in taxable years beginning 151.12 after December 31, 1986, capital loss carrybacks shall not be 151.13 allowed; 151.14 (ii) for capital losses incurred in taxable years beginning 151.15 after December 31, 1986, a capital loss carryover to each of the 151.16 15 taxable years succeeding the loss year shall be allowed; 151.17 (iii) for capital losses incurred in taxable years 151.18 beginning before January 1, 1987, a capital loss carryback to 151.19 each of the three taxable years preceding the loss year, subject 151.20 to the provisions of Minnesota Statutes 1986, section 290.16, 151.21 shall be allowed; and 151.22 (iv) for capital losses incurred in taxable years beginning 151.23 before January 1, 1987, a capital loss carryover to each of the 151.24 five taxable years succeeding the loss year to the extent such 151.25 loss was not used in a prior taxable year and subject to the 151.26 provisions of Minnesota Statutes 1986, section 290.16, shall be 151.27 allowed; 151.28 (6) an amount for interest and expenses relating to income 151.29 not taxable for federal income tax purposes, if (i) the income 151.30 is taxable under this chapter and (ii) the interest and expenses 151.31 were disallowed as deductions under the provisions of section 151.32 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 151.33 federal taxable income; 151.34 (7) in the case of mines, oil and gas wells, other natural 151.35 deposits, and timber for which percentage depletion was 151.36 disallowed pursuant to subdivision 19c, clause (11), a 152.1 reasonable allowance for depletion based on actual cost. In the 152.2 case of leases the deduction must be apportioned between the 152.3 lessor and lessee in accordance with rules prescribed by the 152.4 commissioner. In the case of property held in trust, the 152.5 allowable deduction must be apportioned between the income 152.6 beneficiaries and the trustee in accordance with the pertinent 152.7 provisions of the trust, or if there is no provision in the 152.8 instrument, on the basis of the trust's income allocable to 152.9 each; 152.10 (8) for certified pollution control facilities placed in 152.11 service in a taxable year beginning before December 31, 1986, 152.12 and for which amortization deductions were elected under section 152.13 169 of the Internal Revenue Code of 1954, as amended through 152.14 December 31, 1985, an amount equal to the allowance for 152.15 depreciation under Minnesota Statutes 1986, section 290.09, 152.16 subdivision 7; 152.17 (9) amounts included in federal taxable income that are due 152.18 to refunds of income, excise, or franchise taxes based on net 152.19 income or related minimum taxes paid by the corporation to 152.20 Minnesota, another state, a political subdivision of another 152.21 state, the District of Columbia, or a foreign country or 152.22 possession of the United States to the extent that the taxes 152.23 were added to federal taxable income under section 290.01, 152.24 subdivision 19c, clause (1), in a prior taxable year; 152.25 (10) 80 percent of royalties, fees, or other like income 152.26 accrued or received from a foreign operating corporation or a 152.27 foreign corporation which is part of the same unitary business 152.28 as the receiving corporation; 152.29 (11) income or gains from the business of mining as defined 152.30 in section 290.05, subdivision 1, clause (a), that are not 152.31 subject to Minnesota franchise tax; 152.32 (12) the amount of handicap access expenditures in the 152.33 taxable year which are not allowed to be deducted or capitalized 152.34 under section 44(d)(7) of the Internal Revenue Code; 152.35 (13) the amount of qualified research expenses not allowed 152.36 for federal income tax purposes under section 280C(c) of the 153.1 Internal Revenue Code, but only to the extent that the amount 153.2 exceeds the amount of the credit allowed under section 153.3 290.068 or 469.339; 153.4 (14) the amount of salary expenses not allowed for federal 153.5 income tax purposes due to claiming the Indian employment credit 153.6 under section 45A(a) of the Internal Revenue Code; 153.7 (15) the amount of any refund of environmental taxes paid 153.8 under section 59A of the Internal Revenue Code; 153.9 (16) for taxable years beginning before January 1, 2008, 153.10 the amount of the federal small ethanol producer credit allowed 153.11 under section 40(a)(3) of the Internal Revenue Code which is 153.12 included in gross income under section 87 of the Internal 153.13 Revenue Code; 153.14 (17) for a corporation whose foreign sales corporation, as 153.15 defined in section 922 of the Internal Revenue Code, constituted 153.16 a foreign operating corporation during any taxable year ending 153.17 before January 1, 1995, and a return was filed by August 15, 153.18 1996, claiming the deduction under section 290.21, subdivision 153.19 4, for income received from the foreign operating corporation, 153.20 an amount equal to 1.23 multiplied by the amount of income 153.21 excluded under section 114 of the Internal Revenue Code, 153.22 provided the income is not income of a foreign operating 153.23 company; 153.24 (18) any decrease in subpart F income, as defined in 153.25 section 952(a) of the Internal Revenue Code, for the taxable 153.26 year when subpart F income is calculated without regard to the 153.27 provisions of section 614 of Public Law 107-147; and 153.28 (19) in each of the five tax years immediately following 153.29 the tax year in which an addition is required under subdivision 153.30 19c, clause (16), an amount equal to one-fifth of the delayed 153.31 depreciation. For purposes of this clause, "delayed 153.32 depreciation" means the amount of the addition made by the 153.33 taxpayer under subdivision 19c, clause (16). The resulting 153.34 delayed depreciation cannot be less than zero. 153.35 [EFFECTIVE DATE.] This section is effective for tax years 153.36 beginning after December 31, 2003. 154.1 Sec. 13. Minnesota Statutes 2002, section 290.9705, 154.2 subdivision 1, is amended to read: 154.3 Subdivision 1. [WITHHOLDING OF PAYMENTS TO OUT-OF-STATE 154.4 CONTRACTORS.] (a) In this section, "person" means a person, 154.5 corporation, or cooperative, the state of Minnesota and its 154.6 political subdivisions, and a city, county, and school district 154.7 in Minnesota. 154.8 (b) A person who in the regular course of business is 154.9 hiring, contracting, or having a contract with a nonresident 154.10 person or foreign corporation, as defined in Minnesota Statutes 154.11 1986, section 290.01, subdivision 5, to perform construction 154.12 work in Minnesota, shall deduct and withhold eight percent of 154.13every paymentcumulative calendar year payments to the 154.14 contractorif the contract exceeds or can reasonably be expected154.15to exceed $100,000which exceed $50,000. 154.16 [EFFECTIVE DATE.] This section is effective for payments 154.17 made after December 31, 2004. 154.18 Sec. 14. Minnesota Statutes 2003 Supplement, section 154.19 290C.10, is amended to read: 154.20 290C.10 [WITHDRAWAL PROCEDURES.] 154.21 An approved claimant under the sustainable forest incentive 154.22 program for a minimum of four years may notify the commissioner 154.23 of the intent to terminate enrollment. Within 90 days of 154.24 receipt of notice to terminate enrollment, the commissioner 154.25 shall inform the claimant in writing, acknowledging receipt of 154.26 this notice and indicating the effective date of termination 154.27 from the sustainable forest incentive program. Termination of 154.28 enrollment in the sustainable forest incentive program occurs on 154.29 January 1 of the fifth calendar year that begins after receipt 154.30 by the commissioner of the termination notice. After the 154.31 commissioner issues an effective date of termination, a claimant 154.32 wishing to continue the land's enrollment in the sustainable 154.33 forest incentive program beyond the termination date must apply 154.34 for enrollment as prescribed in section 290C.04. A claimant who 154.35 withdraws a parcel of land from this program may not reenroll 154.36 the parcel for a period of three years. Within 90 days after 155.1 the termination date, the commissioner shall execute and 155.2 acknowledge a document releasing the land from the covenant 155.3 required under this chapter. The document must be mailed to the 155.4 claimant and is entitled to be recorded. The commissioner may 155.5 allow early withdrawal from the Sustainable Forest Incentive Act 155.6 without penaltyin cases of condemnationwhen the state of 155.7 Minnesota, any local government unit, or any other entity which 155.8 has the right of eminent domain acquires title or possession to 155.9 the land for a public purpose notwithstanding the provisions of 155.10 this section. In the case of such acquisition, the commissioner 155.11 shall execute and acknowledge a document releasing the land 155.12 acquired by the state, local government unit, or other entity 155.13 from the covenant. All other enrolled land must remain in the 155.14 program. 155.15 [EFFECTIVE DATE.] This section is effective the day 155.16 following final enactment. 155.17 Sec. 15. Minnesota Statutes 2002, section 297A.995, 155.18 subdivision 6, is amended to read: 155.19 Subd. 6. [AGREEMENT REQUIREMENTS.] The commissioner of 155.20 revenue shall not enter into the agreement unless the agreement 155.21 requires each state to abide by the following requirements: 155.22 (a) [UNIFORM STATE RATE.] The agreement must set 155.23 restrictions to achieve more uniform state rates through the 155.24 following: 155.25 (1) limiting the number of state rates; 155.26 (2) eliminating maximums on the amount of state tax that is 155.27 due on a transaction; and 155.28 (3) eliminating thresholds on the application of state tax. 155.29 (b) [UNIFORM STANDARDS.] The agreement must establish 155.30 uniform standards for the following: 155.31 (1) the sourcing of transactions to taxing jurisdictions; 155.32 (2) the administration of exempt sales; 155.33 (3) the allowances a seller can take for bad debts; and 155.34 (4) sales and use tax returns and remittances. 155.35 (c) [UNIFORM DEFINITIONS.] The agreement must require 155.36 states to develop and adopt uniform definitions of sales and use 156.1 tax terms. The definitions must enable a state to preserve its 156.2 ability to make policy choices not inconsistent with the uniform 156.3 definitions. 156.4 (d) [CENTRAL REGISTRATION.] The agreement must provide a 156.5 central, electronic registration system that allows a seller to 156.6 register to collect and remit sales and use taxes for all 156.7 signatory states. 156.8 (e) [NO NEXUS ATTRIBUTION.] The agreement must provide 156.9 that registration with the central registration system and the 156.10 collection of sales and use taxes in the signatory states will 156.11 not be used as a factor in determining whether the seller has 156.12 nexus with a state for any tax. 156.13 (f) [LOCAL SALES AND USE TAXES.] The agreement must 156.14 provide for reduction of the burdens of complying with local 156.15 sales and use taxes through the following: 156.16 (1) restricting and eliminating variances between the state 156.17 and local tax bases; 156.18 (2) requiring states to administer any sales and use taxes 156.19 levied by local jurisdictions within the state so that sellers 156.20 collecting and remitting these taxes will not have to register 156.21 or file returns with, remit funds to, or be subject to 156.22 independent audits from local taxing jurisdictions; 156.23 (3) restricting the frequency of changes in the local sales 156.24 and use tax rates and setting effective dates for the 156.25 application of local jurisdictional boundary changes to local 156.26 sales and use taxes; and 156.27 (4) providing notice of changes in local sales and use tax 156.28 rates and of changes in the boundaries of local taxing 156.29 jurisdictions. 156.30 (g) [MONETARY ALLOWANCES.] The agreement must outline any 156.31 monetary allowances that are to be provided by the states to 156.32 sellers or certified service providers. The allowances must be 156.33 funded from the money collected by the seller or certified 156.34 service provider and must be subtracted by the seller or 156.35 certified service provider before remitting the tax collected to 156.36 the Department of Revenue. 157.1 (h) [STATE COMPLIANCE.] The agreement must require each 157.2 state to certify compliance with the terms of the agreement 157.3 prior to joining and to maintain compliance, under the laws of 157.4 the member state, with all provisions of the agreement while a 157.5 member. 157.6 (i) [CONSUMER PRIVACY.] The agreement must require each 157.7 state to adopt a uniform policy for certified service providers 157.8 that protects the privacy of consumers and maintains the 157.9 confidentiality of tax information. 157.10 (j) [ADVISORY COUNCILS.] The agreement must provide for 157.11 the appointment of an advisory council of private sector 157.12 representatives and an advisory council of nonmember state 157.13 representatives to consult with in the administration of the 157.14 agreement. 157.15 [EFFECTIVE DATE.] This section is effective the day 157.16 following final enactment. 157.17 Sec. 16. Minnesota Statutes 2002, section 469.1734, 157.18 subdivision 6, is amended to read: 157.19 Subd. 6. [SALES TAX EXEMPTION; EQUIPMENT; CONSTRUCTION 157.20 MATERIALS.] (a) The gross receipts from the sale of machinery 157.21 and equipment and repair parts are exempt from taxation under 157.22 chapter 297A, if the machinery and equipment: 157.23 (1) are used in connection with a trade or business; 157.24 (2) are placed in service in a city that is authorized to 157.25 designate a zone under section 469.1731, regardless of whether 157.26 the machinery and equipment are used in a zone; and 157.27 (3) have a useful life of 12 months or more. 157.28 (b) The gross receipts from the sale of construction 157.29 materials are exempt, if they are used to construct: 157.30 (1) a facility for use in a trade or business located in a 157.31 city that is authorized to designate a zone under section 157.32 469.1731, regardless of whether the facility is located in a 157.33 zone; or 157.34 (2) housing that is located in a zone. 157.35 The exemptions under this paragraph apply regardless of whether 157.36 the purchase is made by the owner, the user, or a contractor. 158.1 (c) A purchaser may claim an exemption under this 158.2 subdivision for tax on the purchases up to, but not exceeding: 158.3 (1) the amount of the tax credit certificates received from 158.4 the city, less 158.5 (2) any tax credit certificates used under the provisions 158.6 of subdivisions 4 and 5, and section 469.1732, subdivision 2. 158.7 (d) The tax on sales of items exempted under this 158.8 subdivision shall be imposed and collected as if the applicable 158.9 rate under section 297A.62 applied. Upon application by the 158.10 purchaser, on forms prescribed by the commissioner, a refund 158.11 equal to the tax paid shall be paid to the purchaser. The 158.12 application must include sufficient information to permit the 158.13 commissioner to verify the sales tax paid and the eligibility of 158.14 the claimant to receive the credit. No more than two 158.15 applications for refunds may be filed under this subdivision in 158.16 a calendar year. The provisions of section 289A.40 apply to the 158.17 refunds payable under this subdivision. There is annually 158.18 appropriated to the commissioner of revenue the amount required 158.19 to make the refunds, which must be deducted from the amount of 158.20 the city's allocation under section 469.169, subdivision 12, 158.21 that remains available and its limitation under section 469.1735. 158.22 The amount to be refunded shall bear interest at the rate in 158.23 section 270.76 from 90 days after the date the refund claim is 158.24 filed with the commissioner. 158.25 [EFFECTIVE DATE.] This section is effective for refund 158.26 claims filed on or after July 1, 2004. 158.27 Sec. 17. Minnesota Statutes 2003 Supplement, section 158.28 469.310, subdivision 11, is amended to read: 158.29 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 158.30 means a person carrying on a trade or business at a place of 158.31 business located within a job opportunity building zone. A 158.32 person is a qualified business only on those parcels of land for 158.33 which it has entered into a business subsidy agreement, as 158.34 required under section 469.313, with the appropriate local 158.35 government unit in which the parcels are located. 158.36 (b) A person that relocates a trade or business from 159.1 outside a job opportunity building zone into a zone is not a 159.2 qualified business, unless the business: 159.3 (1)(i) increases full-time employment in the first full 159.4 year of operation within the job opportunity building zone by at 159.5 least 20 percent measured relative to the operations that were 159.6 relocated and maintains the required level of employment for 159.7 each year the zone designation applies; or 159.8 (ii) makes a capital investment in the property located 159.9 within a zone equivalent to ten percent of the gross revenues of 159.10 operation that were relocated in the immediately preceding 159.11 taxable year; and 159.12 (2) enters a binding written agreement with the 159.13 commissioner that: 159.14 (i) pledges the business will meet the requirements of 159.15 clause (1); 159.16 (ii) provides for repayment of all tax benefits enumerated 159.17 under section 469.315 to the business under the procedures in 159.18 section 469.319, if the requirements of clause (1) are not met 159.19 for the taxable year or for taxes payable during the year in 159.20 which the requirements were not met; and 159.21 (iii) contains any other terms the commissioner determines 159.22 appropriate. 159.23 (c) A business is not a qualified business if, at its 159.24 location or locations in the zone, the business is primarily 159.25 engaged in making retail sales to purchasers who are physically 159.26 present at the business's zone location. 159.27 [EFFECTIVE DATE.] The amendment to paragraph (a) of this 159.28 section is effective retroactively from June 9, 2003. Paragraph 159.29 (c) of this section is effective the day following final 159.30 enactment and applies to any business entering a business 159.31 subsidy agreement for a job opportunity development zone after 159.32 that date. 159.33 Sec. 18. Minnesota Statutes 2003 Supplement, section 159.34 469.330, subdivision 11, is amended to read: 159.35 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 159.36 means a person carrying on a trade or business at a 160.1 biotechnology and health sciences industry facility located 160.2 within a biotechnology and health sciences industry zone. A 160.3 person is a qualified business only on those parcels of land for 160.4 which it has entered into a business subsidy agreement, as 160.5 required under section 469.333, with the appropriate local 160.6 government unit in which the parcels are located. 160.7 (b) A person that relocates a biotechnology and health 160.8 sciences industry facility from outside a biotechnology and 160.9 health sciences industry zone into a zone is not a qualified 160.10 business, unless the business: 160.11 (1)(i) increases full-time employment in the first full 160.12 year of operation within the biotechnology and health sciences 160.13 industry zone by at least 20 percent measured relative to the 160.14 operations that were relocated and maintains the required level 160.15 of employment for each year the zone designation applies; or 160.16 (ii) makes a capital investment in the property located 160.17 within a zone equivalent to ten percent of the gross revenues of 160.18 operation that were relocated in the immediately preceding 160.19 taxable year; and 160.20 (2) enters a binding written agreement with the 160.21 commissioner that: 160.22 (i) pledges the business will meet the requirements of 160.23 clause (1); 160.24 (ii) provides for repayment of all tax benefits enumerated 160.25 under section 469.336 to the business under the procedures in 160.26 section 469.340, if the requirements of clause (1) are not met; 160.27 and 160.28 (iii) contains any other terms the commissioner determines 160.29 appropriate. 160.30 [EFFECTIVE DATE.] This section is effective retroactively 160.31 from June 9, 2003. 160.32 Sec. 19. Minnesota Statutes 2003 Supplement, section 160.33 469.337, is amended to read: 160.34 469.337 [CORPORATE FRANCHISE TAX EXEMPTION.] 160.35 (a) A qualified business is exempt from taxation under 160.36 section 290.02, the alternative minimum tax under section 161.1 290.0921, and the minimum fee under section 290.0922, on the 161.2 portion of its income attributable to operations of a qualified 161.3 business within the biotechnology and health sciences industry 161.4 zone. This exemption is determined as follows: 161.5 (1) for purposes of the tax imposed under section 290.02, 161.6 by multiplying its taxable net income by its zone percentage and 161.7 subtracting the result in determining taxable income; 161.8 (2) for purposes of the alternative minimum tax under 161.9 section 290.0921, by multiplying its alternative minimum taxable 161.10 income by its zone percentage and reducing alternative minimum 161.11 taxable income by this amount; and 161.12 (3) for purposes of the minimum fee under section 290.0922, 161.13 by excluding zone property and payrollin the zonefrom the 161.14 computations of the fee. The qualified business is exempt from 161.15 the minimum fee if all of its property is located in the zone 161.16 and all of its payroll is zone payroll. 161.17 (b) No subtraction is allowed under this section in excess 161.18 of 20 percent of the sum of the corporation's biotechnology and 161.19 health sciences industry zone payroll and the adjusted basis of 161.20 the property at the time that the property is first used in the 161.21 biotechnology and health sciences industry zone by the 161.22 corporation. 161.23 (c) No reduction in tax is allowed in excess of the amount 161.24 allocated under section 469.335. 161.25 [EFFECTIVE DATE.] This section is effective for tax years 161.26 beginning after December 31, 2003. 161.27 Sec. 20. Minnesota Statutes 2002, section 473F.02, 161.28 subdivision 2, is amended to read: 161.29 Subd. 2. [AREA.] "Area" means the territory included 161.30 within the boundaries of Anoka, Carver, Dakota excluding the 161.31 city of Northfield, Hennepin, Ramsey, Scott excluding the city 161.32 of New Prague, and Washington Counties, excluding lands 161.33 constituting a major or an intermediate airport as defined under 161.34 section 473.625. 161.35 [EFFECTIVE DATE.] This section is effective for taxes 161.36 payable in 2005 and thereafter. 162.1 Sec. 21. [REPEALER.] 162.2 Laws 1975, chapter 287, section 5, and Laws 2003, chapter 162.3 127, article 9, section 9, subdivision 4, are repealed. 162.4 [EFFECTIVE DATE.] This section is effective without local 162.5 approval for taxes payable in 2005 and thereafter. 162.6 ARTICLE 9 162.7 MISCELLANEOUS 162.8 Section 1. Minnesota Statutes 2003 Supplement, section 162.9 16A.152, subdivision 2, is amended to read: 162.10 Subd. 2. [ADDITIONAL REVENUES; PRIORITY.] (a) If on the 162.11 basis of a forecast of general fund revenues and expenditures, 162.12 the commissioner of finance determines that there will be a 162.13 positive unrestricted budgetary general fund balance at the 162.14 close of the biennium, the commissioner of finance must allocate 162.15 money to the following accounts and purposes in priority order: 162.16 (1) the cash flow account established in subdivision 1 162.17 until that account reaches $350,000,000;and162.18 (2) the budget reserve account established in subdivision 162.19 1a until that account reaches $653,000,000; 162.20 (3) the amount necessary to eliminate all or a portion of 162.21 the property tax revenue recognition shift in section 123B.75, 162.22 subdivision 5; and 162.23 (4) the amount necessary to increase the aid payment 162.24 schedule for school district aids and credits payments in 162.25 section 127A.45 to not more than 90 percent. 162.26 (b) The amounts necessary to meet the requirements of this 162.27 section are appropriated from the general fund within two weeks 162.28 after the forecast is released or, in the case of transfers 162.29 under paragraph (a), clauses (3) and (4), as necessary to meet 162.30 the appropriations schedules otherwise established in statute. 162.31 (c) To the extent that a positive unrestricted budgetary 162.32 general fund balance is projected, appropriations under this 162.33 section must be made before any transfer is made under section 162.34 16A.1522. 162.35 (d) The commissioner of finance shall certify the total 162.36 dollar amount of the reductions under paragraph (a), clauses (3) 163.1 and (4), to the commissioner of education. The commissioner of 163.2 education shall increase the aid payment percentage and reduce 163.3 the property tax shift percentage by these amounts and apply 163.4 those reductions to the current fiscal year and thereafter. 163.5 [EFFECTIVE DATE.] This section is effective the day 163.6 following final enactment. 163.7 Sec. 2. Minnesota Statutes 2002, section 168A.02, 163.8 subdivision 2, is amended to read: 163.9 Subd. 2. [NO VEHICLE REGISTRATION WITHOUT TITLE.] The 163.10 department shall not register or renew the registration of a 163.11 vehicle for which a certificate of title is required unless a 163.12 certificate of title has been issued to the owneror, an 163.13 application therefor has been delivered to and approved by the 163.14 department, or the vehicle has a Minnesota certificate of title 163.15 and is being held for resale by a dealer under section 168A.11. 163.16 Sec. 3. Minnesota Statutes 2002, section 168A.11, 163.17 subdivision 1, is amended to read: 163.18 Subdivision 1. [APPLICATIONREQUIREMENTS UPON SUBSEQUENT 163.19 TRANSFER.] (a)IfA dealer who buys a vehicle and holds it for 163.20 resaleand procures the certificate of title from the owner, and163.21complies with subdivision 2 hereof, the dealerneed not apply 163.22 for a certificate of title, but. Upon transferring the vehicle 163.23 to another person, other than by the creation of a security 163.24 interest, the dealer shall promptly execute the assignment and 163.25 warranty of title by a dealer, showing the names and addresses 163.26 of the transferee and of any secured party holding a security 163.27 interest created or reserved at the time of the resale, and the 163.28 date of the security agreement in the spaces provided therefor 163.29 on the certificate of title or secure reassignment. 163.30 (b) If a dealer elects to apply for a certificate of title 163.31 on a vehicle held for resale, the dealer need not register the 163.32 vehicle but shall pay one month's registration tax. If a dealer 163.33 elects to apply for a certificate of title on a vehicle held for 163.34 resale, the department shall not place any legend on the title 163.35 that no motor vehicle sales tax was paid by the dealer, but may 163.36 indicate on the title whether the vehicle is a new or used 164.1 vehicle. 164.2 (c) With respect to motor vehicles subject to the 164.3 provisions of section 325E.15, the dealer shall also, in the 164.4 space provided therefor on the certificate of title or secure 164.5 reassignment, state the true cumulative mileage registered on 164.6 the odometer or that the exact mileage is unknown if the 164.7 odometer reading is known by the transferor to be different from 164.8 the true mileage. 164.9(c)(d) The transferee shall complete the application for 164.10 title section on the certificate of title or separate title 164.11 application form prescribed by the department. The dealer shall 164.12 mail or deliver the certificate to the registrar or deputy 164.13 registrar with the transferee's application for a new 164.14 certificate and appropriate taxes and fees, within ten business 164.15 days. 164.16 (e) With respect to vehicles sold to buyers who will remove 164.17 the vehicle from this state, the dealer shall remove any license 164.18 plates from the vehicle, issue a 31-day temporary permit 164.19 pursuant to section 168.091, and notify the registrar within 48 164.20 hours of the sale that the vehicle has been removed from this 164.21 state. The notification must be made in an electronic format 164.22 prescribed by the registrar. The dealer may contract with a 164.23 deputy registrar for the notification of sale to an out-of-state 164.24 buyer. The deputy registrar may charge a fee not to exceed $7 164.25 per transaction to provide this service. 164.26 Sec. 4. Minnesota Statutes 2002, section 168A.11, 164.27 subdivision 2, is amended to read: 164.28 Subd. 2. [PURCHASE RECEIPTNOTIFICATION ON VEHICLE HELD 164.29 FOR RESALE.]A dealer, on buying a vehicle for which the seller164.30does not present a certificate of title, shall at the time of164.31taking delivery of the vehicle execute a purchase receipt for164.32the vehicle in a format designated by the department, and164.33deliver a copy to the seller. In a format and at a time164.34prescribed by the registrar, the dealer shall notify the164.35registrar that the vehicle is being held for resale by the164.36dealer.Within 48 hours of acquiring a vehicle titled and 165.1 registered in Minnesota, a dealer shall notify the registrar 165.2 that the dealership is holding the vehicle for resale. The 165.3 notification must be made electronically as prescribed by the 165.4 registrar. The dealer may contract this service to a deputy 165.5 registrar and the registrar may charge a fee not to exceed $7 165.6 per transaction to provide this service. 165.7 Sec. 5. Minnesota Statutes 2002, section 168A.11, is 165.8 amended by adding a subdivision to read: 165.9 Subd. 4. [CENTRALIZED RECORD KEEPING.] Three or more new 165.10 motor vehicle dealers under common management or control may 165.11 designate to the department in writing a single location for 165.12 maintaining the records required by this section that are more 165.13 than 12 months old. The records must be open to inspection by a 165.14 representative of the department or a peace officer during 165.15 reasonable business hours. The location must be at the 165.16 established place of business of one of the affiliated dealers 165.17 or at a location within Minnesota not further than 25 miles from 165.18 the established place of business of one of the affiliated 165.19 dealers. 165.20 Sec. 6. Minnesota Statutes 2002, section 240.30, is 165.21 amended by adding a subdivision to read: 165.22 Subd. 11. [FRANCHISE FEE.] As a condition of operating a 165.23 card club under this section, the licensee must pay a fee to the 165.24 commission equal to five percent of the gross revenues, less any 165.25 refunds, for charges imposed under subdivision 4. Payment, 165.26 collection, and administration of the fee must be made in the 165.27 same manner and under the terms provided under section 240.15 165.28 for the tax on pari-mutuel pools. The commission shall deposit 165.29 all of the revenues from the fee in the state treasury and 165.30 amounts deposited must be credited to the general fund. The 165.31 amount of the fee under this subdivision does not reduce the 165.32 obligation to set aside revenues from the card club under 165.33 section 240.135. 165.34 [EFFECTIVE DATE.] This section is effective for charges and 165.35 revenues received after June 30, 2004. 165.36 Sec. 7. Minnesota Statutes 2003 Supplement, section 166.1 270.30, subdivision 1, is amended to read: 166.2 Subdivision 1. [SCOPE.](a)This section applies to a 166.3 person whooffers,provides, or facilitates the provision of166.4refund anticipation loans, as part of or in connection with the166.5provision oftax preparation services. 166.6(b) This section does not apply to:166.7(1) a tax preparer who provides tax preparation services166.8for fewer than six clients in a calendar year;166.9(2) the provision by a person of tax preparation services166.10to a spouse, parent, grandparent, child, or sibling; and166.11(3) the provision of services by an employee for an166.12employer.166.13 Sec. 8. Minnesota Statutes 2003 Supplement, section 166.14 270.30, subdivision 5, is amended to read: 166.15 Subd. 5. [ITEMIZED BILL REQUIRED.] A tax preparer who 166.16 provides services for a fee or other consideration must provide 166.17 an itemized statement of the charges for services, at least 166.18 separately stating the charges for: 166.19 (1) return preparation; 166.20 (2) electronic filing; and 166.21 (3) providing or facilitating a refund anticipation loan. 166.22 Sec. 9. Minnesota Statutes 2003 Supplement, section 166.23 270.30, subdivision 8, is amended to read: 166.24 Subd. 8. [EXEMPTIONS; ENFORCEMENT PROVISIONS.] The 166.25 provisions of subdivisions 3, 6, and 7 do not apply to: 166.26 (1) an attorney admitted to practice under section 481.01; 166.27 (2) a certified public accountant holding a certificate 166.28 under section 326A.04 or a person issued a permit to practice 166.29 under section 326A.05; 166.30 (3) a person designated as a registered accounting 166.31 practitioner under Minnesota Rules, part 1105.6600, or a 166.32 registered accounting practitioner firm issued a permit under 166.33 Minnesota Rules, part 1105.7100; 166.34 (4) an enrolled agent who has passed the special enrollment 166.35 examination administered by the Internal Revenue Service;and166.36 (5) any fiduciary, or the regular employees of a fiduciary, 167.1 while acting on behalf of the fiduciary estate, the testator, 167.2 trustor, grantor, or beneficiaries of them; 167.3 (6) a tax preparer who provides tax preparation services 167.4 for fewer than six clients in a calendar year; 167.5 (7) a person who provides tax preparation services to a 167.6 spouse, parent, grandparent, child, or sibling; and 167.7 (8) an employee who provides tax preparation services for 167.8 an employer. 167.9 Sec. 10. Minnesota Statutes 2003 Supplement, section 167.10 291.03, subdivision 1, is amended to read: 167.11 Subdivision 1. [TAX AMOUNT.] (a) The tax imposed shall be 167.12 an amount equal to the proportion of the maximum credit computed 167.13 under section 2011 of the Internal Revenue Code, as amended 167.14 through December 31, 2000, for state death taxes as the 167.15 Minnesota gross estate bears to the value of the federal gross 167.16 estate. The tax determined under this paragraph shall not be 167.17 greater than the federal estate tax computed under section 2001 167.18 of the Internal Revenue Code after the allowance of the federal 167.19 credits allowed under section 2010 of the Internal Revenue Code 167.20 of 1986, as amended through December 31, 2000. 167.21 (b) For the purposes of this section, the following are not 167.22 allowed in computing the tax under this chapter: 167.23 (1) expenses which are deducted for federal income tax 167.24 purposes under section 642(g) of the Internal Revenue Code as 167.25 amended through December 31,2002, are not allowable in167.26computing the tax under this chapter.2003; and 167.27 (2) state death taxes which are deducted under section 2058 167.28 of the Internal Revenue Code as amended through December 31, 167.29 2003; 167.30 (c) For qualified terminable interest property, as defined 167.31 in section 2056(b)(7) of the Internal Revenue Code, the executor 167.32 may make an election for purposes of the tax under this chapter 167.33 that is different than the amount elected for federal estate tax 167.34 purposes. The election must be made on the return for tax under 167.35 this chapter and is irrevocable. All tax under this chapter 167.36 must be determined using the qualified terminable interest 168.1 property election made on the Minnesota return. 168.2 [EFFECTIVE DATE.] This section is effective for decedents 168.3 dying after December 31, 2004. 168.4 Sec. 11. Minnesota Statutes 2002, section 298.24, 168.5 subdivision 1, is amended to read: 168.6 Subdivision 1. (a) For concentrate produced in 2001, 2002, 168.7 and 2003, there is imposed upon taconite and iron sulphides, and 168.8 upon the mining and quarrying thereof, and upon the production 168.9 of iron ore concentrate therefrom, and upon the concentrate so 168.10 produced, a tax of $2.103 per gross ton of merchantable iron ore 168.11 concentrate produced therefrom. 168.12 (b) For concentrates produced in 2004 and subsequent years, 168.13 the tax rate shall be equal to the preceding year's tax rate 168.14 plus an amount equal to the preceding year's tax rate multiplied 168.15 by the percentage increase in the implicit price deflator from 168.16 the fourth quarter of the second preceding year to the fourth 168.17 quarter of the preceding year. "Implicit price deflator" means 168.18 the implicit price deflator for the gross domestic product 168.19 prepared by the Bureau of Economic Analysis of the United States 168.20 Department of Commerce. 168.21 (c) On concentrates produced in 1997 and thereafter, an 168.22 additional tax is imposed equal to three cents per gross ton of 168.23 merchantable iron ore concentrate for each one percent that the 168.24 iron content of the product exceeds 72 percent, when dried at 168.25 212 degrees Fahrenheit. 168.26 (d) The tax shall be imposed on the average of the 168.27 production for the current year and the previous two years. The 168.28 rate of the tax imposed will be the current year's tax rate. 168.29 This clause shall not apply in the case of the closing of a 168.30 taconite facility if the property taxes on the facility would be 168.31 higher if this clause and section 298.25 were not applicable. 168.32 (e) If the tax or any part of the tax imposed by this 168.33 subdivision is held to be unconstitutional, a tax of $2.103 per 168.34 gross ton of merchantable iron ore concentrate produced shall be 168.35 imposed. 168.36 (f) Consistent with the intent of this subdivision to 169.1 impose a tax based upon the weight of merchantable iron ore 169.2 concentrate, the commissioner of revenue may indirectly 169.3 determine the weight of merchantable iron ore concentrate 169.4 included in fluxed pellets by subtracting the weight of the 169.5 limestone, dolomite, or olivine derivatives or other basic flux 169.6 additives included in the pellets from the weight of the 169.7 pellets. For purposes of this paragraph, "fluxed pellets" are 169.8 pellets produced in a process in which limestone, dolomite, 169.9 olivine, or other basic flux additives are combined with 169.10 merchantable iron ore concentrate. No subtraction from the 169.11 weight of the pellets shall be allowed for binders, mineral and 169.12 chemical additives other than basic flux additives, or moisture. 169.13 (g)(1) Notwithstanding any other provision of this 169.14 subdivision, for the first two years of a plant's commercial 169.15 production of direct reduced ore, no tax is imposed under this 169.16 section. As used in this paragraph, "commercial production" is 169.17 production of more than 50,000 tons of direct reduced ore in the 169.18 current year or in any prior year, and "direct reduced ore" is 169.19 ore that results in a product that has an iron content of at 169.20 least 75 percent. For the third year of a plant's commercial 169.21 production of direct reduced ore, the rate to be applied to 169.22 direct reduced ore is 25 percent of the rate otherwise 169.23 determined under this subdivision. For the fourth 169.24suchcommercial production year, the rate is 50 percent of the 169.25 rate otherwise determined under this subdivision; for the 169.26 fifthsuchcommercial production year, the rate is 75 percent of 169.27 the rate otherwise determined under this subdivision; and for 169.28 all subsequent commercial production years, the full rate is 169.29 imposed. 169.30 (2) Subject to clause (1), production of direct reduced ore 169.31 in this state is subject to the tax imposed by this section, but 169.32 if that production is not produced by a producer of taconite or 169.33 iron sulfides, the production of taconite or iron sulfides 169.34 consumed in the production of direct reduced iron in this state 169.35 is not subject to the tax imposed by this section on taconite or 169.36 iron sulfides. 170.1 (3) Notwithstanding any other provision of this 170.2 subdivision, no tax is imposed under this section during the 170.3 facility's noncommercial production of direct reduced ore. 170.4 [EFFECTIVE DATE.] This section is effective for direct 170.5 reduced ore produced after the date of final enactment. 170.6 Sec. 12. Minnesota Statutes 2003 Supplement, section 170.7 469.335, is amended to read: 170.8 469.335 [APPLICATION FOR TAX BENEFITS.] 170.9 (a) To claim a tax credit or exemption against a state tax 170.10 under section 469.336, clauses (2) through (5), a business must 170.11 apply to the commissioner for a tax credit certificate. As a 170.12 condition of its application, the business must agree to furnish 170.13 information to the commissioner that is sufficient to verify the 170.14 eligibility for any credits or exemptions claimed. The total 170.15 amount of the state tax credits and exemptions allowed for the 170.16 specified period may not exceed the amount of the tax credit 170.17 certificates provided by the commissioner to the business. The 170.18 commissioner must verify to the commissioner of revenue the 170.19 amount of tax exemptions or credits for which each business is 170.20 eligible. 170.21 (b) A tax credit certificate issued under this section may 170.22 specify the particular tax exemptions or credits against a state 170.23 tax that the qualified business is eligible to claim under 170.24 section 469.336, clauses (2) through (5), and the amount of each 170.25 exemption or credit allowed. 170.26 (c) The commissioner may issue$1,000,000$2,000,000 of tax 170.27 credits or exemptions in fiscal year 2004. Any tax credits or 170.28 exemptions not awarded in fiscal year 2004 may be awarded in 170.29 fiscal year 2005. 170.30 (d) A qualified business must use the tax credits or tax 170.31 exemptions granted under this section by the later of the end of 170.32 the state fiscal year or the taxpayer's tax year in which the 170.33 credits or exemptions are granted. 170.34 [EFFECTIVE DATE.] This section is effective the day 170.35 following final enactment. 170.36 Sec. 13. Laws 2000, chapter 391, section 1, subdivision 1, 171.1 is amended to read: 171.2 Subdivision 1. [TASK FORCE; MEMBERSHIP.] (a) The secretary 171.3 of state shallestablishserve as the chair of a task force of 171.4 15 members to study and make recommendations for the 171.5 establishment of a system for the electronic filing and 171.6 recording of real estate documents. Members who are appointed 171.7 under this section shall serve for a term of two years 171.8 commencing on June 30, 2004. Upon expiration of their term, 171.9 members may be reappointed for an additional year by their 171.10 appointing authority. Two county board members to be appointed 171.11 by the Association of Minnesota Counties, including one board 171.12 member from within the seven-county metropolitan area, as 171.13 designated under Minnesota Statutes, section 16E.02, shall serve 171.14 as the vice-chairs of the task force. The task force must 171.15 include: 171.16 (1)two members of the senate appointed by the subcommittee171.17on committees of the committee on rules and administration and171.18two members of the house appointed by the speaker of the house;171.19(2) representatives of county recorders and otherthree 171.20 county government officials appointed by the Association of 171.21 County Officers, including one county recorder, one county 171.22 auditor, and one county treasurer; 171.23 (2) the commissioner of administration or the designee of 171.24 the commissioner; 171.25 (3) seven members from the private sector appointed by the 171.26 chair, including representatives of: 171.27 (i) real estate attorneys, real estate agents, and public 171.28 and private land surveyors; 171.29(4) representatives of(ii) title companies, mortgage 171.30 companies, and other real estate lenders; and 171.31(5) a representative of the Minnesota historical society171.32and other state and local government archivists;171.33(6)(iii) technical and industry experts in electronic 171.34 commerce and electronic records management and preservation; and 171.35(7) representatives of federal government-sponsored171.36enterprises active in the real estate industry;172.1(8) the commissioner of revenue; and172.2(9) other members appointed by the secretary of state172.3 (4) a representative selected by the Minnesota Historical 172.4 Society. 172.5 (b) The task force may refer items to subcommittees. The 172.6 chair shall appoint the membership of a subcommittee. An 172.7 individual may be appointed to serve on a subcommittee without 172.8 serving on the task force. 172.9 (c) Any member of the task force representing a 172.10 jurisdiction or private interest receiving funding from the task 172.11 force in any way must resign from the task force and be replaced 172.12 by the member's appointing authority. 172.13 Sec. 14. Laws 2000, chapter 391, section 1, subdivision 2, 172.14 as amended by Laws 2002, chapter 365, section 5, is amended to 172.15 read: 172.16 Subd. 2. [STUDY AND RECOMMENDATIONS.] The task force shall 172.17 study and make recommendations regarding implementation of a 172.18 system for electronic filing and recording of real estate 172.19 documents and shall consider: 172.20 (1) technology and computer needs; 172.21 (2) legal issues such as authenticity, security, timing and 172.22 priority of recordings, and the relationship between electronic 172.23 and paper recording systems; 172.24 (3) cost-effectiveness of electronic recording systems; 172.25 (4) timetable and plan for implementing an electronic 172.26 recording system, considering types of documents and entities 172.27 using the system and volume of recordings; 172.28 (5) permissive versus mandatory systems; and 172.29 (6) other relevant issues identified by the task force. 172.30 The task force shall submit a report to the legislature by 172.31 January 15, 2001, outlining a proposed work plan and budget for 172.32 consideration by the legislature. By January 15, 2005, the task 172.33 force shall provide an updated report to the legislature 172.34 containing a revised work plan and budget. The task force 172.35 expires June 30,20042007. 172.36 Sec. 15. Laws 2001, First Special Session chapter 10, 173.1 article 2, section 77, the effective date, as amended by Laws 173.2 2002, chapter 365, section 7, is amended to read: 173.3 [EFFECTIVE DATE.] This section is effective only between 173.4 August 1, 2001, and June 30,20042007. 173.5 Sec. 16. Laws 2002, chapter 365, section 9, is amended to 173.6 read: 173.7 Sec. 9. [EFFECTIVE DATES AND APPLICATION.] 173.8 The amendments made by sections 3 and 4 are effective until 173.9 June 30,20042007, for documents last acknowledged ten or more 173.10 days after the date of final enactment of this act; or filed 45 173.11 days or more after the date of final enactment. Sections 6 to 8 173.12 are effective the day following final enactment. 173.13 Sec. 17. Laws 2003, First Special Session chapter 1, 173.14 article 2, section 123, is amended to read: 173.15 Sec. 123. [REAL ESTATE FILING SURCHARGE.] 173.16 All funds collected during the fiscal year ending June 30, 173.17 2007, the fiscal year ending June 30, 2006, the fiscal year 173.18 ending June 30, 2005, the fiscal year ending June 30, 2004, and 173.19 funds collected in the fiscal year ending June 30, 2003, that 173.20 carry forward into the fiscal year ending June 30, 2004, 173.21 pursuant to the additional 50-cent surcharges imposed by Laws 173.22 2001, First Special Session chapter 10, article 2, section 77, 173.23 and Laws 2002, chapter 365, as amended by this act, are 173.24 appropriated to the legislative coordinating commission for the 173.25 real estate task force established by Laws 2000, chapter 391, 173.26 for the purposes set forth in Laws 2001, First Special Session 173.27 chapter 10, article 2, sections 98 to 101. $25,000 in each 173.28 fiscal year from those funds are to be retained by the 173.29 legislative coordinating commission for the services described 173.30 in Laws 2001, First Special Session chapter 10, article 2, 173.31 section 99. 173.32 Sec. 18. [TASK FORCE TRANSITION.] 173.33 The members of the electronic real estate document task 173.34 force created in Laws 2000, chapter 391, section 1, who are 173.35 serving on the task force on the effective date of this act 173.36 shall end their service on that date unless reappointed or 174.1 designated under section 13. 174.2 Sec. 19. [GAMING MACHINES; IN-LIEU TAX; CONTRACTS.] 174.3 If a bill providing for gaming machines at a racetrack is 174.4 enacted in a 2004 regular or special session, then, 174.5 notwithstanding any other law to the contrary: 174.6 (1) from July 1, 2005, to June 30, 2007, the state lottery 174.7 must on or before the 20th day of each month transmit to the 174.8 commissioner of revenue an amount equal to at least the adjusted 174.9 gross revenue from the operation of gaming machines multiplied 174.10 by 36.7 percent; and 174.11 (2) from July 1, 2005, to June 30, 2007, contracts for the 174.12 location of gaming machines must provide for compensation to the 174.13 racetrack in an amount equal to 48.3 percent of adjusted gross 174.14 gaming machine revenue. 174.15 [EFFECTIVE DATE.] This section is effective at the same 174.16 time as any bill that provides for gaming machines at a 174.17 racetrack and is enacted in a 2004 regular or special session. 174.18 Sec. 20. [FUNDS TRANSFER.] 174.19 Subdivision 1. [BUDGET RESERVE TO CASH FLOW.] On July 2, 174.20 2004, the commissioner of finance shall transfer $350,000,000 174.21 from the general fund budget reserve account under Minnesota 174.22 Statutes, section 16A.152, subdivision 1a, to the cash flow 174.23 reserve account under Minnesota Statutes, section 16A.152, 174.24 subdivision 1. 174.25 Subd. 2. [GENERAL FUND TO BUDGET RESERVE.] On or before 174.26 July 2, 2004, the commissioner of finance shall transfer 174.27 $8,566,000 from the general fund to the budget reserve account 174.28 under Minnesota Statutes, section 16A.152, subdivision 1a. 174.29 Sec. 21. [FEDERAL FUNDS.] 174.30 The first $167,000,000 of the general fund appropriation in 174.31 fiscal year 2004 for general education aid is from general 174.32 revenue sharing with states and their local governments provided 174.33 to Minnesota in the 2003 Jobs and Growth Tax Relief 174.34 Reconciliation Act. 174.35 Sec. 22. [APPROPRIATIONS.] 174.36 Subdivision 1. [TAX COMPLIANCE INITIATIVE.] (a) $3,678,000 175.1 is appropriated to the commissioner of revenue in fiscal year 175.2 2005 for additional activities to identify and collect tax 175.3 liabilities from individuals and businesses that currently do 175.4 not pay all taxes owed. $800,000 of this amount is for 175.5 corporate compliance related to foreign operating corporations. 175.6 $120,000 of this amount is considered a onetime appropriation. 175.7 The base for this additional activity is $3,558,000 per year. 175.8 (b) This initiative is expected to result in new general 175.9 fund revenues of $16,000,000 for the biennium ending June 30, 175.10 2005, and $16,000,000 annually thereafter. 175.11 (c) The commissioner must provide written reports to the 175.12 chairs of the house Taxes and senate Taxes Committees, in 175.13 compliance with Minnesota Statutes, sections 3.195 and 3.197, by 175.14 March 1, 2005, and January 15, 2006. The reports must address 175.15 the following performance indicators: 175.16 (1) the number of corporations noncompliant with the 175.17 corporate tax system each year and the percentage and dollar 175.18 amounts of valid tax liabilities collected; 175.19 (2) the number of businesses noncompliant with the sales 175.20 and use tax system and the percentage and dollar amounts of the 175.21 valid tax liabilities collected; and 175.22 (3) the number of insurers, agents, or others that are 175.23 noncompliant with insurance tax statutes and cases resolved and 175.24 the percentage and dollar amounts of valid tax liabilities 175.25 collected. 175.26 The reports must also identify base level expenditures and 175.27 staff positions related to compliance and audit activities, 175.28 including baseline information as of January 1, 2002. The 175.29 reports must provide this information at the budget activity 175.30 level. 175.31 Subd. 2. [PROPERTY TAX REFUND STUDY.] $50,000 is 175.32 appropriated from the general fund for fiscal year 2005 to the 175.33 commissioner of revenue for the study of the percentage that 175.34 property taxes constitute of rent. This is a onetime 175.35 appropriation and is not added to the base. 175.36 Subd. 3. [INCOME AND HOME VALUE DATASET.] $50,000 is 176.1 appropriated from the general fund for fiscal year 2005 to the 176.2 commissioner of revenue to prepare a dataset linking homeowners' 176.3 incomes and the estimated market values of their homes. The 176.4 commissioner shall prepare the dataset using Minnesota tax data 176.5 gathered directly from taxpayers, counties, and sources other 176.6 than the Internal Revenue Service. This is a onetime 176.7 appropriation and is not added to the base. 176.8 Sec. 23. [EFFECTIVE DATE.] 176.9 Sections 13 to 18 are effective the day following final 176.10 enactment. 176.11 ARTICLE 10 176.12 PROPERTY TAXES TECHNICAL 176.13 Section 1. Minnesota Statutes 2003 Supplement, section 176.14 4A.02, is amended to read: 176.15 4A.02 [STATE DEMOGRAPHER.] 176.16 (a) The director shall appoint a state demographer. The 176.17 demographer must be professionally competent in demography and 176.18 must possess demonstrated ability based upon past performance. 176.19 (b) The demographer shall: 176.20 (1) continuously gather and develop demographic data 176.21 relevant to the state; 176.22 (2) design and test methods of research and data 176.23 collection; 176.24 (3) periodically prepare population projections for the 176.25 state and designated regions and periodically prepare 176.26 projections for each county or other political subdivision of 176.27 the state as necessary to carry out the purposes of this 176.28 section; 176.29 (4) review, comment on, and prepare analysis of population 176.30 estimates and projections made by state agencies, political 176.31 subdivisions, other states, federal agencies, or nongovernmental 176.32 persons, institutions, or commissions; 176.33 (5) serve as the state liaison with the United States 176.34 Bureau of the Census, coordinate state and federal demographic 176.35 activities to the fullest extent possible, and aid the 176.36 legislature in preparing a census data plan and form for each 177.1 decennial census; 177.2 (6) compile an annual study of population estimates on the 177.3 basis of county, regional, or other political or geographical 177.4 subdivisions as necessary to carry out the purposes of this 177.5 section and section 4A.03; 177.6 (7) by January 1 of each year, issue a report to the 177.7 legislature containing an analysis of the demographic 177.8 implications of the annual population study and population 177.9 projections; 177.10 (8) prepare maps for all counties in the state, all 177.11 municipalities with a population of 10,000 or more, and other 177.12 municipalities as needed for census purposes, according to scale 177.13 and detail recommended by the United States Bureau of the 177.14 Census, with the maps of cities showing precinct boundaries; 177.15 (9) prepare an estimate of population and of the number of 177.16 households for each governmental subdivision for which the 177.17 Metropolitan Council does not prepare an annual estimate, and 177.18 convey the estimates to the governing body of each political 177.19 subdivision byMayJune 1 of each year; 177.20 (10) direct, under section 414.01, subdivision 14, and 177.21 certify population and household estimates of annexed or 177.22 detached areas of municipalities or towns after being notified 177.23 of the order or letter of approval by the director; 177.24 (11) prepare, for any purpose for which a population 177.25 estimate is required by law or needed to implement a law, a 177.26 population estimate of a municipality or town whose population 177.27 is affected by action under section 379.02 or 414.01, 177.28 subdivision 14; and 177.29 (12) prepare an estimate of average household size for each 177.30 statutory or home rule charter city with a population of 2,500 177.31 or more byMayJune 1 of each year. 177.32 (c) A governing body may challenge an estimate made under 177.33 paragraph (b) by filing their specific objections in writing 177.34 with the state demographer by June1024. If the challenge does 177.35 not result in an acceptable estimateby June 24, the governing 177.36 body may have a special census conducted by the United States 178.1 Bureau of the Census. The political subdivision must notify the 178.2 state demographer by July 1 of its intent to have the special 178.3 census conducted. The political subdivision must bear all costs 178.4 of the special census. Results of the special census must be 178.5 received by the state demographer by the next April 15 to be 178.6 used in that year'sMayJune 1 estimate to the political 178.7 subdivision under paragraph (b). 178.8 (d) The state demographer shall certify the estimates of 178.9 population and number of households to the commissioner of 178.10 revenue by July 15 each year, including any estimates still 178.11 under objection. No changes in population or household 178.12 estimates made after July 15 in an aid calculation year shall be 178.13 considered in determining aids under sections 477A.011 to 178.14 477A.014. Clerical errors in certification or use of the 178.15 estimates and counts established as of July 15 in the aid 178.16 calculation year are subject to correction under section 178.17 477A.014. 178.18 [EFFECTIVE DATE.] This section is effective the day 178.19 following final enactment. 178.20 Sec. 2. Minnesota Statutes 2003 Supplement, section 178.21 168A.05, subdivision 1a, is amended to read: 178.22 Subd. 1a. [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 178.23 PAYMENT.] In the case of a manufactured home as defined in 178.24 section 327.31, subdivision 6, the department shall not issue a 178.25 certificate of title unless the application under section 178.26 168A.04 is accompanied with a statement from the county auditor 178.27 or county treasurer where the manufactured home is presently 178.28 located, stating that all manufactured home personal property 178.29 taxes levied on the unit in the name of the current owner at the 178.30 time of transfer have been paid. For this purpose, manufactured 178.31 home personal property taxes are treated as levied on January 1 178.32 of the payable year. 178.33 [EFFECTIVE DATE.] This section is effective the day 178.34 following final enactment. 178.35 Sec. 3. Minnesota Statutes 2002, section 270B.12, 178.36 subdivision 9, is amended to read: 179.1 Subd. 9. [COUNTY ASSESSORS; HOMESTEAD APPLICATION, 179.2 DETERMINATION, AND INCOME TAX STATUS.] (a) If, as a result of an 179.3 audit, the commissioner determines that a person is a Minnesota 179.4 nonresident or part-year resident for income tax purposes, the 179.5 commissioner may disclose the person's name, address, and Social 179.6 Security number to the assessor of any political subdivision in 179.7 the state, when there is reason to believe that the person may 179.8 have claimed or received homestead property tax benefits for a 179.9 corresponding assessment year in regard to property apparently 179.10 located in the assessor's jurisdiction. 179.11 (b) To the extent permitted by section 273.124, subdivision 179.12 1, paragraph (a), the Department of Revenue may verify to a 179.13 county assessor whether an individual who is requesting or 179.14 receiving a homestead classification has filed a Minnesota 179.15 income tax return as a resident for the most recent taxable year 179.16 for which the information is available. 179.17 [EFFECTIVE DATE.] This section is effective the day 179.18 following final enactment. 179.19 Sec. 4. Minnesota Statutes 2002, section 272.01, 179.20 subdivision 2, is amended to read: 179.21 Subd. 2. (a) When any real or personal property which is 179.22 exempt from ad valorem taxes, and taxes in lieu thereof, is 179.23 leased, loaned, or otherwise made available and used by a 179.24 private individual, association, or corporation in connection 179.25 with a business conducted for profit, there shall be imposed a 179.26 tax, for the privilege of so using or possessing such real or 179.27 personal property, in the same amount and to the same extent as 179.28 though the lessee or user was the owner of such property. 179.29 (b) The tax imposed by this subdivision shall not apply to: 179.30 (1) property leased or used as a concession in or relative 179.31 to the use in whole or part of a public park, market, 179.32 fairgrounds, port authority, economic development authority 179.33 established under chapter 469, municipal auditorium, municipal 179.34 parking facility, municipal museum, or municipal stadium; 179.35 (2) property of an airport owned by a city, town, county, 179.36 or group thereof which is: 180.1 (i) leased to or used by any person or entity including a 180.2 fixed base operator; and 180.3 (ii) used as a hangar for the storage or repair of aircraft 180.4 or to provide aviation goods, services, or facilities to the 180.5 airport or general public; 180.6 the exception from taxation provided in this clause does not 180.7 apply to: 180.8 (i) property located at an airport owned or operated by the 180.9 Metropolitan Airports Commission or by a city of over 50,000 180.10 population according to the most recent federal census or such a 180.11 city's airport authority; 180.12 (ii) hangars leased by a private individual, association, 180.13 or corporation in connection with a business conducted for 180.14 profit other than an aviation-related business; or 180.15 (iii) facilities leased by a private individual, 180.16 association, or corporation in connection with a business for 180.17 profit, that consists of a major jet engine repair facility 180.18 financed, in whole or part, with the proceeds of state bonds and 180.19 located in a tax increment financing district; 180.20 (3) property constituting or used as a public pedestrian 180.21 ramp or concourse in connection with a public airport;or180.22 (4) property constituting or used as a passenger check-in 180.23 area or ticket sale counter, boarding area, or luggage claim 180.24 area in connection with a public airport but not the airports 180.25 owned or operated by the Metropolitan Airports Commission or 180.26 cities of over 50,000 population or an airport authority 180.27 therein. Real estate owned by a municipality in connection with 180.28 the operation of a public airport and leased or used for 180.29 agricultural purposes is not exempt; 180.30 (5) property leased, loaned, or otherwise made available to 180.31 a private individual, corporation, or association under a 180.32 cooperative farming agreement made pursuant to section 97A.135; 180.33 or 180.34 (6) property leased, loaned, or otherwise made available to 180.35 a private individual, corporation, or association under section 180.36 272.68, subdivision 4. 181.1 (c) Taxes imposed by this subdivision are payable as in the 181.2 case of personal property taxes and shall be assessed to the 181.3 lessees or users of real or personal property in the same manner 181.4 as taxes assessed to owners of real or personal property, except 181.5 that such taxes shall not become a lien against the property. 181.6 When due, the taxes shall constitute a debt due from the lessee 181.7 or user to the state, township, city, county, and school 181.8 district for which the taxes were assessed and shall be 181.9 collected in the same manner as personal property taxes. If 181.10 property subject to the tax imposed by this subdivision is 181.11 leased or used jointly by two or more persons, each lessee or 181.12 user shall be jointly and severally liable for payment of the 181.13 tax. 181.14 (d) The tax on real property of the state or any of its 181.15 political subdivisions that is leased by a private individual, 181.16 association, or corporation and becomes taxable under this 181.17 subdivision or other provision of law must be assessed and 181.18 collected as a personal property assessment. The taxes do not 181.19 become a lien against the real property. 181.20 [EFFECTIVE DATE.] This section is effective the day 181.21 following final enactment. 181.22 Sec. 5. Minnesota Statutes 2002, section 272.02, 181.23 subdivision 1a, is amended to read: 181.24 Subd. 1a. [LIMITATIONS ON EXEMPTIONS.] The exemptions 181.25 granted by subdivision 1 are subject to the limits contained in 181.26 the other subdivisions of this section, section 272.025,or181.27273.13, subdivision 25, paragraph (c), clause (1) or (2), or181.28paragraph (d), clause (2)and all other provisions of applicable 181.29 law. 181.30 [EFFECTIVE DATE.] This section is effective the day 181.31 following final enactment. 181.32 Sec. 6. Minnesota Statutes 2002, section 272.02, 181.33 subdivision 7, is amended to read: 181.34 Subd. 7. [INSTITUTIONS OF PUBLIC CHARITY.] Institutions of 181.35 purely public charity are exemptexcept parcels of property181.36containing structures and the structures described in section182.1273.13, subdivision 25, paragraph (e), other than those that182.2qualify for exemption under subdivision 26. In determining 182.3 whether rental housing property qualifies for exemption under 182.4 this subdivision, the following are not gifts or donations to 182.5 the owner of the rental housing: 182.6 (1) rent assistance provided by the government to or on 182.7 behalf of tenants, and 182.8 (2) financing assistance or tax credits provided by the 182.9 government to the owner on condition that specific units or a 182.10 specific quantity of units be set aside for persons or families 182.11 with certain income characteristics. 182.12 [EFFECTIVE DATE.] This section is effective for taxes 182.13 payable in 2004 and thereafter. 182.14 Sec. 7. Minnesota Statutes 2002, section 272.02, is 182.15 amended by adding a subdivision to read: 182.16 Subd. 68. [PROPERTY SUBJECT TO TACONITE PRODUCTION TAX OR 182.17 NET PROCEEDS TAX.] (a) Except for mineral interests taxed under 182.18 section 273.165, and except for lands taxed under section 182.19 298.26, real and personal property described in section 298.25 182.20 is exempt to the extent the tax on taconite and iron sulphides 182.21 under section 298.24 is described in section 298.25 as being in 182.22 lieu of other taxes on such property. This exemption applies 182.23 for taxes payable in each year that the tax under section 298.24 182.24 is payable with respect to such property. 182.25 (b) Except for mineral interests taxed under section 182.26 273.165, deposits of mineral, metal, or energy resources the 182.27 mining of which is subject to taxation under section 298.015 are 182.28 exempt. This exemption applies for taxes payable in each year 182.29 that the tax under section 298.015 is payable with respect to 182.30 such property. 182.31 [EFFECTIVE DATE.] This section is effective the day 182.32 following final enactment. 182.33 Sec. 8. Minnesota Statutes 2002, section 272.02, is 182.34 amended by adding a subdivision to read: 182.35 Subd. 69. [RELIGIOUS CORPORATIONS.] Personal and real 182.36 property that a religious corporation, formed under section 183.1 317A.909, necessarily uses for a religious purpose is exempt to 183.2 the extent provided in section 317A.909, subdivision 3. 183.3 [EFFECTIVE DATE.] This section is effective the day 183.4 following final enactment. 183.5 Sec. 9. Minnesota Statutes 2002, section 272.02, is 183.6 amended by adding a subdivision to read: 183.7 Subd. 70. [CHILDREN'S HOMES.] Personal and real property 183.8 owned by a corporation formed under section 317A.907 is exempt 183.9 to the extent provided in section 317A.907, subdivision 7. 183.10 [EFFECTIVE DATE.] This section is effective the day 183.11 following final enactment. 183.12 Sec. 10. Minnesota Statutes 2002, section 272.02, is 183.13 amended by adding a subdivision to read: 183.14 Subd. 71. [HOUSING AND REDEVELOPMENT AUTHORITY AND TRIBAL 183.15 HOUSING AUTHORITY PROPERTY.] Property owned by a housing and 183.16 redevelopment authority described in chapter 469, or by a 183.17 designated housing authority described in section 469.040, 183.18 subdivision 5, is exempt to the extent provided in chapter 469. 183.19 [EFFECTIVE DATE.] This section is effective the day 183.20 following final enactment. 183.21 Sec. 11. Minnesota Statutes 2002, section 273.124, 183.22 subdivision 8, is amended to read: 183.23 Subd. 8. [HOMESTEAD OWNED BY OR LEASED TO FAMILY FARM 183.24 CORPORATION, JOINT FARM VENTURE, LIMITED LIABILITY COMPANY, OR 183.25 PARTNERSHIP.] (a) Each family farm corporation, each; each joint 183.26 family farm venture,; and each limited liability company, and183.27eachor partnershipoperatingwhich operates a family farm; is 183.28 entitled to class 1b under section 273.13, subdivision 22, 183.29 paragraph (b), or class 2a assessment for one homestead occupied 183.30 by a shareholder, member, or partner thereof who is residing on 183.31 the land, and actively engaged in farming of the land owned by 183.32 the family farm corporation, joint family farm venture, limited 183.33 liability company, or partnershipoperating a family farm. 183.34 Homestead treatment applies even if legal title to the property 183.35 is in the name of the family farm corporation, joint family farm 183.36 venture, limited liability company, or partnershipoperating the184.1family farm, and not in the name of the person residing on it. 184.2 "Family farm corporation," "family farm," and "partnership 184.3 operating a family farm" have the meanings given in section 184.4 500.24, except that the number of allowable shareholders, 184.5 members, or partners under this subdivision shall not exceed 184.6 12. "Limited liability company" has the meaning contained in 184.7 sections 322B.03, subdivision 28, and 500.24, subdivision 2, 184.8 paragraphs (l) and (m). "Joint family farm venture" means a 184.9 cooperative agreement among two or more farm enterprises 184.10 authorized to operate a family farm under section 500.24. 184.11 (b) In addition to property specified in paragraph (a), any 184.12 other residences owned by family farm corporations, joint family 184.13 farm ventures, limited liability companies, or partnerships 184.14operating a family farmdescribed in paragraph (a) which are 184.15 located on agricultural land and occupied as homesteads by its 184.16 shareholders, members, or partners who are actively engaged in 184.17 farming on behalf of that corporation, joint farm venture, 184.18 limited liability company, or partnership must also be assessed 184.19 as class 2a property or as class 1b property under section 184.20 273.13. 184.21 (c) Agricultural property that is owned by a member, 184.22 partner, or shareholder of a family farm corporation or joint 184.23 family farm venture, limited liability company operating a 184.24 family farm, or by a partnership operating a family farm and 184.25 leased to the family farm corporation, limited liability 184.26 company,orpartnershipoperating a family farm, or joint farm 184.27 venture, as defined in paragraph (a), is eligible for 184.28 classification as class 1b or class 2a under section 273.13, if 184.29 the owner is actually residing on the property, and is actually 184.30 engaged in farming the land on behalf of that corporation, joint 184.31 farm venture, limited liability company, or partnership. This 184.32 paragraph applies without regard to any legal possession rights 184.33 of the family farm corporation, joint family farm venture, 184.34 limited liability company, or partnershipoperating a family184.35farmunder the lease. 184.36 [EFFECTIVE DATE.] This section is effective the day 185.1 following final enactment. 185.2 Sec. 12. Minnesota Statutes 2002, section 273.19, 185.3 subdivision 1a, is amended to read: 185.4 Subd. 1a. For purposes of this section, a lease includes 185.5 any agreement, except a cooperative farming agreement pursuant 185.6 to section 97A.135, subdivision 3, or a lease executed pursuant 185.7 to section 272.68, subdivision 4, permitting a nonexempt person 185.8 or entity to use the property, regardless of whether the 185.9 agreement is characterized as a lease. A lease has a "term of 185.10 at least one year" if the term is for a period of less than one 185.11 year and the lease permits the parties to renew the lease 185.12 without requiring that similar terms for leasing the property 185.13 will be offered to other applicants or bidders through a 185.14 competitive bidding or other form of offer to potential lessees 185.15 or users. 185.16 [EFFECTIVE DATE.] This section is effective the day 185.17 following final enactment. 185.18 Sec. 13. Minnesota Statutes 2002, section 274.14, is 185.19 amended to read: 185.20 274.14 [LENGTH OF SESSION; RECORD.] 185.21The county board of equalization or the special board of185.22equalization appointed by it shall meet during the last ten185.23meeting days in June. For this purpose, "meeting days" are185.24defined as any day of the week excluding Saturday and Sunday.185.25 The board may meet on any ten consecutive meeting days in June, 185.26 after the second Friday in June, if. The actual meeting dates 185.27aremust be contained on the valuation notices mailed to each 185.28 property owner in the countyunderas provided in section 185.29 273.121. For this purpose, "meeting days" is defined as any day 185.30 of the week excluding Saturday and Sunday. No action taken by 185.31 the county board of review after June 30 is valid, except for 185.32 corrections permitted in sections 273.01 and 274.01. The county 185.33 auditor shall keep an accurate record of the proceedings and 185.34 orders of the board. The record must be published like other 185.35 proceedings of county commissioners. A copy of the published 185.36 record must be sent to the commissioner of revenue, with the 186.1 abstract of assessment required by section 274.16. 186.2 [EFFECTIVE DATE.] This section is effective the day 186.3 following final enactment. 186.4 Sec. 14. Minnesota Statutes 2002, section 275.065, 186.5 subdivision 1a, is amended to read: 186.6 Subd. 1a. [OVERLAPPING JURISDICTIONS.] In the case of a 186.7 taxing authority lying in two or more counties, the home county 186.8 auditor shall certify the proposed levy and the proposed local 186.9 tax rate to the other county auditor bySeptember 20October 5. 186.10 The home county auditor must estimate the levy or rate in 186.11 preparing the notices required in subdivision 3, if the other 186.12 county has not certified the appropriate information. If 186.13 requested by the home county auditor, the other county auditor 186.14 must furnish an estimate to the home county auditor. 186.15 [EFFECTIVE DATE.] This section is effective the day 186.16 following final enactment. 186.17 Sec. 15. Minnesota Statutes 2002, section 275.07, 186.18 subdivision 1, is amended to read: 186.19 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 186.20 provided under paragraph (b), the taxes voted by cities, 186.21 counties, school districts, and special districts shall be 186.22 certified by the proper authorities to the county auditor on or 186.23 before five working days after December 20 in each year. A town 186.24 must certify the levy adopted by the town board to the county 186.25 auditor by September 15 each year. If the town board modifies 186.26 the levy at a special town meeting after September 15, the town 186.27 board must recertify its levy to the county auditor on or before 186.28 five working days after December 20.The taxes certified shall186.29not be reduced by the county auditor by the aid received under186.30section 273.1398, subdivision 2, but shall be reduced by the186.31county auditor by the aid received under section 273.1398,186.32subdivision 3.If a city, town, county, school district, or 186.33 special district fails to certify its levy by that date, its 186.34 levy shall be the amount levied by it for the preceding year. 186.35 (b)(i) The taxes voted by counties under sections 103B.241, 186.36 103B.245, and 103B.251 shall be separately certified by the 187.1 county to the county auditor on or before five working days 187.2 after December 20 in each year. The taxes certified shall not 187.3 be reduced by the county auditor by the aid received under 187.4 section 273.1398, subdivisions 2 and 3. If a county fails to 187.5 certify its levy by that date, its levy shall be the amount 187.6 levied by it for the preceding year. 187.7 (ii) For purposes of the proposed property tax notice under 187.8 section 275.065 and the property tax statement under section 187.9 276.04, for the first year in which the county implements the 187.10 provisions of this paragraph, the county auditor shall reduce 187.11 the county's levy for the preceding year to reflect any amount 187.12 levied for water management purposes under clause (i) included 187.13 in the county's levy. 187.14 [EFFECTIVE DATE.] This section is effective the day 187.15 following final enactment. 187.16 Sec. 16. Minnesota Statutes 2002, section 275.07, 187.17 subdivision 4, is amended to read: 187.18 Subd. 4. [REPORT TO COMMISSIONER.] (a) On or before 187.19 October 8 of each year, the county auditor shall report to the 187.20 commissioner of revenue the proposed levy certified by local 187.21 units of government under section 275.065, subdivision 1. If 187.22 any taxing authorities have notified the county auditor that 187.23 they are in the process of negotiating an agreement for sharing, 187.24 merging, or consolidating services but that when the proposed 187.25 levy was certified under section 275.065, subdivision 1c, the 187.26 agreement was not yet finalized, the county auditor shall supply 187.27 that information to the commissioner when filing the report 187.28 under this section and shall recertify the affected levies as 187.29 soon as practical after October 10. 187.30 (b) On or before January 15 of each year, the county 187.31 auditor shall report to the commissioner of revenue the final 187.32 levy certified by local units of government under subdivision 1. 187.33 (c) The levies must be reported in the manner prescribed by 187.34 the commissioner.The reports must show a total levy and the187.35amount of each special levy.187.36 [EFFECTIVE DATE.] This section is effective the day 188.1 following final enactment. 188.2 Sec. 17. Minnesota Statutes 2003 Supplement, section 188.3 276.112, is amended to read: 188.4 276.112 [STATE PROPERTY TAXES; COUNTY TREASURER.] 188.5 On or before January 25 each year, for the period ending 188.6 December 31 of the prior year, and on or before two business 188.7 days before June2930 each year, for the period ending on the 188.8 most recent settlement day determined in section 276.09, and on 188.9 or before December 2 each year, for the period ending November 188.10 20, the county treasurer must make full settlement with the 188.11 county auditor according to sections 276.09, 276.10, and 276.111 188.12 for all receipts of state property taxes levied under section 188.13 275.025, and must transmit those receipts to the commissioner of 188.14 revenue by electronic means. 188.15 [EFFECTIVE DATE.] This section is effective the day 188.16 following final enactment. 188.17 Sec. 18. Minnesota Statutes 2002, section 282.016, is 188.18 amended to read: 188.19 282.016 [PROHIBITED PURCHASERS.] 188.20No(a) A county auditor, county treasurer, county attorney, 188.21 court administrator of the district court,orcounty assessor 188.22or, supervisor of assessments,ordeputy or clerk or an employee 188.23 of such officer,and noa commissioner for tax-forfeited lands 188.24 or an assistant to such commissionermay, must not become a 188.25 purchaser, either personally or as an agent or attorney for 188.26 another person, of the properties offered for sale under the 188.27 provisions of this chapter, either personally, or as agent or188.28attorney for any other person, except thatin the county for 188.29 which the person performs duties. A person prohibited from 188.30 purchasing property under this section must not directly or 188.31 indirectly have another person purchase it on behalf of the 188.32 prohibited purchaser for the prohibited purchaser's benefit or 188.33 gain. 188.34 (b) Notwithstanding paragraph (a), such officer, deputy, 188.35court administratorclerk, or employee or commissioner for 188.36 tax-forfeited lands or assistant to such commissioner may (1) 189.1 purchase lands owned by that official at the time the state 189.2 became the absolute owner thereof or (2) bid upon and purchase 189.3 forfeited property offered for sale under the alternate sale 189.4 procedure described in section 282.01, subdivision 7a. 189.5 [EFFECTIVE DATE.] This section is effective the day 189.6 following final enactment. 189.7 Sec. 19. Minnesota Statutes 2002, section 282.21, is 189.8 amended to read: 189.9 282.21 [FORM OF CONVEYANCE.] 189.10 When any sale has been made under sections 282.14 to 189.11 282.22, upon payment in full of the purchase price, appropriate 189.12 conveyance in fee in such form as may be prescribed by the 189.13 attorney general shall be issued by the commissioner of finance 189.14 to the purchaser or the purchaser's assigns and this conveyance 189.15 shall have the force and effect of a patent from the state. 189.16 [EFFECTIVE DATE.] This section is effective the day 189.17 following final enactment. 189.18 Sec. 20. Minnesota Statutes 2002, section 282.224, is 189.19 amended to read: 189.20 282.224 [FORM OF CONVEYANCE.] 189.21 When any sale has been made under sections 282.221 to 189.22 282.226, upon payment in full of the purchase price, appropriate 189.23 conveyance in fee, in such form as may be prescribed by the 189.24 attorney general, shall be issued by the commissioner of natural 189.25 resources to the purchaser or the purchaser's assignee, and the 189.26 conveyance shall have the force and effect of a patent from the 189.27 state. 189.28 [EFFECTIVE DATE.] This section is effective the day 189.29 following final enactment. 189.30 Sec. 21. Minnesota Statutes 2002, section 282.301, is 189.31 amended to read: 189.32 282.301 [RECEIPTS FOR PAYMENTS.] 189.33 When any sale has been made under sections 282.012 and 189.34 282.241 to 282.324, the purchaser shall receive from the county 189.35 auditor at the time of repurchase a receipt, in such form as may 189.36 be prescribed by the attorney general. When the purchase price 190.1 of a parcel of land shall be paid in full, the following facts 190.2 shall be certified by the county auditor to the commissioner of 190.3 revenue of the state of Minnesota: the description of land, the 190.4 date of sale, the name of the purchaser or the purchaser's 190.5 assignee, and the date when the final installment of the 190.6 purchase price was paid. Upon payment in full of the purchase 190.7 price, the purchaser or the assignee shall receive a quitclaim 190.8 deed from the state, to be executed by the commissioner of 190.9 revenue. The deed must be sent to the county auditor who shall 190.10 have it recorded before it is forwarded to the purchaser. 190.11 Failure to make any payment herein required shall constitute 190.12 default and upon such default and cancellation in accord with 190.13 section 282.40, the right, title and interest of the purchaser 190.14 or the purchaser's heirs, representatives, or assigns in such 190.15 parcel shall terminate. 190.16 [EFFECTIVE DATE.] This section is effective the day 190.17 following final enactment. 190.18 Sec. 22. [473.24] [POPULATION ESTIMATES.] 190.19 (a) The Metropolitan Council shall prepare an estimate of 190.20 population and of the number of households for each city and 190.21 town in the metropolitan area annually and convey the estimates 190.22 to the governing body of each city or town by June 1 each year. 190.23 In the case of a city or town that is located partly within and 190.24 partly without the metropolitan area, the Metropolitan Council 190.25 shall estimate the proportion of the total population and number 190.26 of households that reside within the area. The Metropolitan 190.27 Council may prepare an estimate of the population and of the 190.28 number of households for any other political subdivision located 190.29 in the metropolitan area. 190.30 (b) A governing body may challenge an estimate made under 190.31 this section by filing its specific objections in writing with 190.32 the Metropolitan Council by June 24. If the challenge does not 190.33 result in an acceptable estimate, the governing body may have a 190.34 special census conducted by the United States Bureau of the 190.35 Census. The political subdivision must notify the Metropolitan 190.36 Council on or before July 1 of its intent to have the special 191.1 census conducted. The political subdivision must bear all costs 191.2 of the special census. Results of the special census must be 191.3 received by the Metropolitan Council by the next April 15 to be 191.4 used in that year's June 1 estimate under this section. The 191.5 Metropolitan Council shall certify the estimates of population 191.6 and number of households to the state demographer and to the 191.7 commissioner of revenue by July 15 each year, including any 191.8 estimates still under objection. 191.9 (c) No changes in population or household estimates after 191.10 July 15 in an aid calculation year shall be considered in 191.11 determining aids under sections 477A.011 to 477A.014. Clerical 191.12 errors in certification or use of the estimates and counts 191.13 established as of July 15 in the aid calculation year are 191.14 subject to correction under section 477A.014. 191.15 [EFFECTIVE DATE.] This section is effective the day 191.16 following final enactment. 191.17 Sec. 23. Minnesota Statutes 2002, section 473F.02, 191.18 subdivision 7, is amended to read: 191.19 Subd. 7. [POPULATION.] "Population" means the most recent 191.20 estimate of the population of a municipality made by the 191.21 Metropolitan Council under section 473.24 and filed with the 191.22 commissioner of revenue as of July115 of the year in which a 191.23 municipality's distribution net tax capacity is calculated.The191.24council shall annually estimate the population of each191.25municipality as of a date which it determines and, in the case191.26of a municipality which is located partly within and partly191.27without the area, the proportion of the total which resides191.28within the area, and shall promptly thereafter file its191.29estimates with the commissioner of revenue.191.30 [EFFECTIVE DATE.] This section is effective the day 191.31 following final enactment. 191.32 Sec. 24. Minnesota Statutes 2003 Supplement, section 191.33 477A.011, subdivision 36, is amended to read: 191.34 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 191.35 provided in this subdivision, "city aid base" is zero. 191.36 (b) The city aid base for any city with a population less 192.1 than 500 is increased by $40,000 for aids payable in calendar 192.2 year 1995 and thereafter, and the maximum amount of total aid it 192.3 may receive under section 477A.013, subdivision 9, paragraph 192.4 (c), is also increased by $40,000 for aids payable in calendar 192.5 year 1995 only, provided that: 192.6 (i) the average total tax capacity rate for taxes payable 192.7 in 1995 exceeds 200 percent; 192.8 (ii) the city portion of the tax capacity rate exceeds 100 192.9 percent; and 192.10 (iii) its city aid base is less than $60 per capita. 192.11 (c) The city aid base for a city is increased by $20,000 in 192.12 1998 and thereafter and the maximum amount of total aid it may 192.13 receive under section 477A.013, subdivision 9, paragraph (c), is 192.14 also increased by $20,000 in calendar year 1998 only, provided 192.15 that: 192.16 (i) the city has a population in 1994 of 2,500 or more; 192.17 (ii) the city is located in a county, outside of the 192.18 metropolitan area, which contains a city of the first class; 192.19 (iii) the city's net tax capacity used in calculating its 192.20 1996 aid under section 477A.013 is less than $400 per capita; 192.21 and 192.22 (iv) at least four percent of the total net tax capacity, 192.23 for taxes payable in 1996, of property located in the city is 192.24 classified as railroad property. 192.25 (d) The city aid base for a city is increased by $200,000 192.26 in 1999 and thereafter and the maximum amount of total aid it 192.27 may receive under section 477A.013, subdivision 9, paragraph 192.28 (c), is also increased by $200,000 in calendar year 1999 only, 192.29 provided that: 192.30 (i) the city was incorporated as a statutory city after 192.31 December 1, 1993; 192.32 (ii) its city aid base does not exceed $5,600; and 192.33 (iii) the city had a population in 1996 of 5,000 or more. 192.34 (e) The city aid base for a city is increased by $450,000 192.35 in 1999 to 2008 and the maximum amount of total aid it may 192.36 receive under section 477A.013, subdivision 9, paragraph (c), is 193.1 also increased by $450,000 in calendar year 1999 only, provided 193.2 that: 193.3 (i) the city had a population in 1996 of at least 50,000; 193.4 (ii) its population had increased by at least 40 percent in 193.5 the ten-year period ending in 1996; and 193.6 (iii) its city's net tax capacity for aids payable in 1998 193.7 is less than $700 per capita. 193.8 (f)Beginning in 2004, the city aid base for a city is193.9equal to the sum of its city aid base in 2003 and the amount of193.10additional aid it was certified to receive under section 477A.06193.11in 2003. For 2004 only, the maximum amount of total aid a city193.12may receive under section 477A.013, subdivision 9, paragraph193.13(c), is also increased by the amount it was certified to receive193.14under section 477A.06 in 2003.193.15(g)The city aid base for a city is increased by $150,000 193.16 for aids payable in 2000 and thereafter, and the maximum amount 193.17 of total aid it may receive under section 477A.013, subdivision 193.18 9, paragraph (c), is also increased by $150,000 in calendar year 193.19 2000 only, provided that: 193.20 (1) the city has a population that is greater than 1,000 193.21 and less than 2,500; 193.22 (2) its commercial and industrial percentage for aids 193.23 payable in 1999 is greater than 45 percent; and 193.24 (3) the total market value of all commercial and industrial 193.25 property in the city for assessment year 1999 is at least 15 193.26 percent less than the total market value of all commercial and 193.27 industrial property in the city for assessment year 1998. 193.28(h)(g) The city aid base for a city is increased by 193.29 $200,000 in 2000 and thereafter, and the maximum amount of total 193.30 aid it may receive under section 477A.013, subdivision 9, 193.31 paragraph (c), is also increased by $200,000 in calendar year 193.32 2000 only, provided that: 193.33 (1) the city had a population in 1997 of 2,500 or more; 193.34 (2) the net tax capacity of the city used in calculating 193.35 its 1999 aid under section 477A.013 is less than $650 per 193.36 capita; 194.1 (3) the pre-1940 housing percentage of the city used in 194.2 calculating 1999 aid under section 477A.013 is greater than 12 194.3 percent; 194.4 (4) the 1999 local government aid of the city under section 194.5 477A.013 is less than 20 percent of the amount that the formula 194.6 aid of the city would have been if the need increase percentage 194.7 was 100 percent; and 194.8 (5) the city aid base of the city used in calculating aid 194.9 under section 477A.013 is less than $7 per capita. 194.10(i)(h) The city aid base for a city is increased by 194.11 $102,000 in 2000 and thereafter, and the maximum amount of total 194.12 aid it may receive under section 477A.013, subdivision 9, 194.13 paragraph (c), is also increased by $102,000 in calendar year 194.14 2000 only, provided that: 194.15 (1) the city has a population in 1997 of 2,000 or more; 194.16 (2) the net tax capacity of the city used in calculating 194.17 its 1999 aid under section 477A.013 is less than $455 per 194.18 capita; 194.19 (3) the net levy of the city used in calculating 1999 aid 194.20 under section 477A.013 is greater than $195 per capita; and 194.21 (4) the 1999 local government aid of the city under section 194.22 477A.013 is less than 38 percent of the amount that the formula 194.23 aid of the city would have been if the need increase percentage 194.24 was 100 percent. 194.25(j)(i) The city aid base for a city is increased by 194.26 $32,000 in 2001 and thereafter, and the maximum amount of total 194.27 aid it may receive under section 477A.013, subdivision 9, 194.28 paragraph (c), is also increased by $32,000 in calendar year 194.29 2001 only, provided that: 194.30 (1) the city has a population in 1998 that is greater than 194.31 200 but less than 500; 194.32 (2) the city's revenue need used in calculating aids 194.33 payable in 2000 was greater than $200 per capita; 194.34 (3) the city net tax capacity for the city used in 194.35 calculating aids available in 2000 was equal to or less than 194.36 $200 per capita; 195.1 (4) the city aid base of the city used in calculating aid 195.2 under section 477A.013 is less than $65 per capita; and 195.3 (5) the city's formula aid for aids payable in 2000 was 195.4 greater than zero. 195.5(k)(j) The city aid base for a city is increased by $7,200 195.6 in 2001 and thereafter, and the maximum amount of total aid it 195.7 may receive under section 477A.013, subdivision 9, paragraph 195.8 (c), is also increased by $7,200 in calendar year 2001 only, 195.9 provided that: 195.10 (1) the city had a population in 1998 that is greater than 195.11 200 but less than 500; 195.12 (2) the city's commercial industrial percentage used in 195.13 calculating aids payable in 2000 was less than ten percent; 195.14 (3) more than 25 percent of the city's population was 60 195.15 years old or older according to the 1990 census; 195.16 (4) the city aid base of the city used in calculating aid 195.17 under section 477A.013 is less than $15 per capita; and 195.18 (5) the city's formula aid for aids payable in 2000 was 195.19 greater than zero. 195.20(l)(k) The city aid base for a city is increased by 195.21 $45,000 in 2001 and thereafter and by an additional $50,000 in 195.22 calendar years 2002 to 2011, and the maximum amount of total aid 195.23 it may receive under section 477A.013, subdivision 9, paragraph 195.24 (c), is also increased by $45,000 in calendar year 2001 only, 195.25 and by $50,000 in calendar year 2002 only, provided that: 195.26 (1) the net tax capacity of the city used in calculating 195.27 its 2000 aid under section 477A.013 is less than $810 per 195.28 capita; 195.29 (2) the population of the city declined more than two 195.30 percent between 1988 and 1998; 195.31 (3) the net levy of the city used in calculating 2000 aid 195.32 under section 477A.013 is greater than $240 per capita; and 195.33 (4) the city received less than $36 per capita in aid under 195.34 section 477A.013, subdivision 9, for aids payable in 2000. 195.35(m)(l) The city aid base for a city with a population of 195.36 10,000 or more which is located outside of the seven-county 196.1 metropolitan area is increased in 2002 and thereafter, and the 196.2 maximum amount of total aid it may receive under section 196.3 477A.013, subdivision 9, paragraph (b) or (c), is also increased 196.4 in calendar year 2002 only, by an amount equal to the lesser of: 196.5 (1)(i) the total population of the city, as determined by 196.6 the United States Bureau of the Census, in the 2000 census, (ii) 196.7 minus 5,000, (iii) times 60; or 196.8 (2) $2,500,000. 196.9(n)(m) The city aid base is increased by $50,000 in 2002 196.10 and thereafter, and the maximum amount of total aid it may 196.11 receive under section 477A.013, subdivision 9, paragraph (c), is 196.12 also increased by $50,000 in calendar year 2002 only, provided 196.13 that: 196.14 (1) the city is located in the seven-county metropolitan 196.15 area; 196.16 (2) its population in 2000 is between 10,000 and 20,000; 196.17 and 196.18 (3) its commercial industrial percentage, as calculated for 196.19 city aid payable in 2001, was greater than 25 percent. 196.20(o)(n) The city aid base for a city is increased by 196.21 $150,000 in calendar years 2002 to 2011 and the maximum amount 196.22 of total aid it may receive under section 477A.013, subdivision 196.23 9, paragraph (c), is also increased by $150,000 in calendar year 196.24 2002 only, provided that: 196.25 (1) the city had a population of at least 3,000 but no more 196.26 than 4,000 in 1999; 196.27 (2) its home county is located within the seven-county 196.28 metropolitan area; 196.29 (3) its pre-1940 housing percentage is less than 15 196.30 percent; and 196.31 (4) its city net tax capacity per capita for taxes payable 196.32 in 2000 is less than $900 per capita. 196.33(p)(o) The city aid base for a city is increased by 196.34 $200,000 beginning in calendar year 2003 and the maximum amount 196.35 of total aid it may receive under section 477A.013, subdivision 196.36 9, paragraph (c), is also increased by $200,000 in calendar year 197.1 2003 only, provided that the city qualified for an increase in 197.2 homestead and agricultural credit aid under Laws 1995, chapter 197.3 264, article 8, section 18. 197.4(q)(p) The city aid base for a city is increased by 197.5 $200,000 in 2004 only and the maximum amount of total aid it may 197.6 receive under section 477A.013, subdivision 9, is also increased 197.7 by $200,000 in calendar year 2004 only, if the city is the site 197.8 of a nuclear dry cask storage facility. 197.9(r)(q) The city aid base for a city is increased by 197.10 $10,000 in 2004 and thereafter and the maximum total aid it may 197.11 receive under section 477A.013, subdivision 9, is also increased 197.12 by $10,000 in calendar year 2004 only, if the city was included 197.13 in a federal major disaster designation issued on April 1, 1998, 197.14 and its pre-1940 housing stock was decreased by more than 40 197.15 percent between 1990 and 2000. 197.16 [EFFECTIVE DATE.] This section is effective beginning with 197.17 aids payable in 2004. 197.18 Sec. 25. Minnesota Statutes 2003 Supplement, section 197.19 477A.03, subdivision 2b, is amended to read: 197.20 Subd. 2b. [COUNTIES.] (a) For aids payable in calendar 197.21 year 2005 and thereafter, the total aids paid to counties under 197.22 section 477A.0124, subdivision 3, are limited to $100,500,000. 197.23 Each calendar year, $500,000 shall be retained by the 197.24 commissioner of revenue to make reimbursements to the 197.25 commissioner of finance for payments made under section 611.27. 197.26 For calendar year 2004,the amount shall be$500,000 is 197.27 appropriated from the general fund for this purpose in addition 197.28 to the payments authorized under section 477A.0124, subdivision 197.29 1. For calendar year 2005 and subsequent years, the amount 197.30 shall be deducted from the appropriationunder this paragraph197.31 for section 477A.0124, subdivision 1. The reimbursements shall 197.32 be to defray the additional costs associated with court-ordered 197.33 counsel under section 611.27. Any retained amounts not used for 197.34 reimbursement in a year shall be included in the next 197.35 distribution of county need aid that is certified to the county 197.36 auditors for the purpose of property tax reduction for the next 198.1 taxes payable year. 198.2 (b) For aids payable in 2005 and thereafter, the total aids 198.3 under section 477A.0124, subdivision 4, are limited to 198.4 $105,000,000. The commissioner of finance shall bill the 198.5 commissioner of revenue for the cost of preparation of local 198.6 impact notes as required by section 3.987, not to exceed 198.7 $207,000 in fiscal year 2004 and thereafter. The commissioner 198.8 of education shall bill the commissioner of revenue for the cost 198.9 of preparation of local impact notes for school districts as 198.10 required by section 3.987, not to exceed $7,000 in fiscal year 198.11 2004 and thereafter. For aids payable in 2004, $214,000 is 198.12 appropriated from the general fund for this purpose. For aids 198.13 payable in 2005 and thereafter, the commissioner of revenue 198.14 shall deduct the amounts billed under this paragraph from the 198.15 appropriation under thisparagraphsection for section 198.16 477A.0124, subdivision 4. The amounts deducted are appropriated 198.17 to the commissioner of finance and the commissioner of education 198.18 for the preparation of local impact notes. 198.19 [EFFECTIVE DATE.] This section is effective for aids 198.20 payable in 2004 and thereafter. 198.21 Sec. 26. Laws 2003, First Special Session chapter 21, 198.22 article 5, section 13, is amended to read: 198.23 Sec. 13. [2004 CITY AID REDUCTIONS.] 198.24 The commissioner of revenue shall compute an aid reduction 198.25 amount for 2004 for each city as provided in this section. 198.26 The initial aid reduction amount for each city is the 198.27 amount by which the city's aid distribution under Minnesota 198.28 Statutes, section 477A.013, and related provisions payable in 198.29 2003 exceeds the city's 2004 distribution under those provisions. 198.30 The minimum aid reduction amount for a city is the amount 198.31 of its reduction in 2003 under section 12. If a city receives 198.32 an increase to its city aid base under Minnesota Statutes, 198.33 section 477A.011, subdivision 36, its minimum aid reduction is 198.34 reduced by an equal amount. 198.35 The maximum aid reduction amount for a city is an amount 198.36 equal to 14 percent of the city's total 2004 levy plus aid 199.1 revenue base, except that if the city has a city net tax 199.2 capacity for aids payable in 2004, as defined in Minnesota 199.3 Statutes, section 477A.011, subdivision 20, of $700 per capita 199.4 or less, the maximum aid reduction shall not exceed an amount 199.5 equal to 13 percent of the city's total 2004 levy plus aid 199.6 revenue base. 199.7 If the initial aid reduction amount for a city is less than 199.8 the minimum aid reduction amount for that city, the final aid 199.9 reduction amount for the city is the sum of the initial aid 199.10 reduction amount and the lesser of the amount of the city's 199.11 payable 2004 reimbursement under Minnesota Statutes, section 199.12 273.1384, or the difference between the minimum and initial aid 199.13 reduction amounts for the city, and the amount of the final aid 199.14 reduction in excess of the initial aid reduction is deducted 199.15 from the city's reimbursements pursuant to Minnesota Statutes, 199.16 section 273.1384. 199.17 If the initial aid reduction amount for a city is greater 199.18 than the maximum aid reduction amount for the city, the city 199.19 receives an additional distribution under this section equal to 199.20 the result of subtracting the maximum aid reduction amount from 199.21 the initial aid reduction amount. This distribution shall be 199.22 paid in equal installments in 2004 on the dates specified in 199.23 Minnesota Statutes, section 477A.015. The amount necessary for 199.24 these additional distributions is appropriated to the 199.25 commissioner of revenue from the general fund in fiscal year 199.26 2005. 199.27The initial aid reduction is applied to the city's199.28distribution pursuant to Minnesota Statutes, section 477A.013,199.29and any aid reduction in excess of the initial aid reduction is199.30applied to the city's reimbursements pursuant to Minnesota199.31Statutes, section 273.1384.199.32 To the extent that sufficient information is available on 199.33 each payment date in 2004, the commissioner of revenue shall pay 199.34 the reimbursements reduced under this section in equal 199.35 installments on the payment dates provided in law. 199.36 [EFFECTIVE DATE.] This section is effective for aids 200.1 payable in 2004. 200.2 Sec. 27. Laws 2003, First Special Session chapter 21, 200.3 article 6, section 9, is amended to read: 200.4 Sec. 9. [DEFINITIONS.] 200.5 (a) For purposes of sections 9 to 15, the following terms 200.6 have the meanings given them in this section. 200.7 (b) The 2003 and 2004 "levy plus aid revenue base" for a 200.8 county is the sum of that county's certified property tax levy 200.9 for taxes payable in 2003, plus the sum of the amounts the 200.10 county was certified to receive in the designated calendar year 200.11 as: 200.12 (1) homestead and agricultural credit aid under Minnesota 200.13 Statutes, section 273.1398, subdivision 2, plus any additional 200.14 aid under section 16, minus the amount calculated under section 200.15 273.1398, subdivision 4a, paragraph (b), for counties in 200.16 judicial districts one, three, six, and ten, and 25 percent of 200.17 the amount calculated under section 273.1398, subdivision 4a, 200.18 paragraph (b), for counties in judicial districts two and four; 200.19 (2) the amount of county manufactured home homestead and 200.20 agricultural credit aid computed for the county for payment in 200.21 2003 under section 273.166; 200.22 (3) criminal justice aid under Minnesota Statutes, section 200.23 477A.0121; 200.24 (4) family preservation aid under Minnesota Statutes, 200.25 section 477A.0122; 200.26 (5) taconite aids under Minnesota Statutes, sections 298.28 200.27 and 298.282, including any aid which was required to be placed 200.28 in a special fund for expenditure in the next succeeding year; 200.29 and 200.30 (6) county program aid under section 477A.0124, exclusive 200.31 of the attached machinery aid component. 200.32 [EFFECTIVE DATE.] This section is effective for aids 200.33 payable in 2004. 200.34 Sec. 28. [REPEALER.] 200.35 Minnesota Statutes 2002, sections 273.19, subdivision 5; 200.36 274.05; 275.15; and 283.07, are repealed effective the day 201.1 following final enactment. 201.2 ARTICLE 11 201.3 SALES AND USE TAXES TECHNICAL 201.4 Section 1. Minnesota Statutes 2002, section 289A.38, 201.5 subdivision 6, is amended to read: 201.6 Subd. 6. [OMISSION IN EXCESS OF 25 PERCENT.] Additional 201.7 taxes may be assessed within 6-1/2 years after the due date of 201.8 the return or the date the return was filed, whichever is later, 201.9 if: 201.10 (1) the taxpayer omits from gross income an amount properly 201.11 includable in it that is in excess of 25 percent of the amount 201.12 of gross income stated in the return; 201.13 (2) the taxpayer omits from a sales, use, or withholding 201.14 tax return an amount of taxes in excess of 25 percent of the 201.15 taxes reported in the return; or 201.16 (3) the taxpayer omits from the gross estate assets in 201.17 excess of 25 percent of the gross estate reported in the return. 201.18 [EFFECTIVE DATE.] This section is effective the day 201.19 following final enactment. 201.20 Sec. 2. Minnesota Statutes 2003 Supplement, section 201.21 289A.40, subdivision 2, is amended to read: 201.22 Subd. 2. [BAD DEBT LOSS.] If a claim relates to an 201.23 overpayment because of a failure to deduct a loss due to a bad 201.24 debt or to a security becoming worthless, the claim is 201.25 considered timely if filed within seven years from the date 201.26 prescribed for the filing of the return. A claim relating to an 201.27 overpayment of taxes under chapter 297A must be filed within 201.28 3-1/2 years from the date prescribed for filing the return, plus 201.29 any extensions granted for filing the return, but only if filed 201.30 within the extended time. The refund or credit is limited to 201.31 the amount of overpayment attributable to the loss. "Bad debt" 201.32 for purposes of this subdivision, has the same meaning as that 201.33 term is used in United States Code, title 26, section 166, 201.34 except that for a claim relating to an overpayment of taxes 201.35 under chapter 297A the following are excluded from the 201.36 calculation of bad debt: financing charges or interest; sales 202.1 or use taxes charged on the purchase price; uncollectible 202.2 amounts on property that remain in the possession of the seller 202.3 until the full purchase price is paid; expenses incurred in 202.4 attempting to collect any debt; and repossessed property. 202.5 [EFFECTIVE DATE.] For claims relating to an overpayment of 202.6 taxes under chapter 297A, this section is effective for sales 202.7 and purchases made on or after January 1, 2004; for all other 202.8 bad debts or claims, this section is effective on or after July 202.9 1, 2003. 202.10 Sec. 3. Minnesota Statutes 2003 Supplement, section 202.11 297A.668, subdivision 1, is amended to read: 202.12 Subdivision 1. [ APPLICABILITY.] The provisions of this 202.13 section apply regardless of the characterization of a product as 202.14 tangible personal property, a digital good, or a service; but do 202.15 not apply to telecommunications services,or the sales of motor 202.16 vehicles, watercraft, aircraft, modular homes, manufactured202.17homes, or mobile homes. These provisions only apply to 202.18 determine a seller's obligation to pay or collect and remit a 202.19 sales or use tax with respect to the seller's sale of a 202.20 product. These provisions do not affect the obligation of a 202.21 seller as purchaser to remit tax on the use of the product. 202.22 [EFFECTIVE DATE.] This section is effective the day 202.23 following final enactment. 202.24 Sec. 4. Minnesota Statutes 2003 Supplement, section 202.25 297A.668, subdivision 3, is amended to read: 202.26 Subd. 3. [LEASE OR RENTAL OF TANGIBLE PERSONAL PROPERTY.] 202.27 The lease or rental of tangible personal property, other than 202.28 property identified in subdivision 4 or 5, shall be sourced as 202.29 required in paragraphs (a) to (c). 202.30 (a) For a lease or rental that requires recurring periodic 202.31 payments, the first periodic payment is sourced the same as a 202.32 retail sale in accordance with the provisions of subdivision62. 202.33 Periodic payments made subsequent to the first payment are 202.34 sourced to the primary property location for each period covered 202.35 by the payment. The primary property location must be as 202.36 indicated by an address for the property provided by the lessee 203.1 that is available to the lessor from its records maintained in 203.2 the ordinary course of business, when use of this address does 203.3 not constitute bad faith. The property location must not be 203.4 altered by intermittent use at different locations, such as use 203.5 of business property that accompanies employees on business 203.6 trips and service calls. 203.7 (b) For a lease or rental that does not require recurring 203.8 periodic payments, the payment is sourced the same as a retail 203.9 sale in accordance with the provisions of subdivision 2. 203.10 (c) This subdivision does not affect the imposition or 203.11 computation of sales or use tax on leases or rentals based on a 203.12 lump sum or accelerated basis, or on the acquisition of property 203.13 for lease. 203.14 [EFFECTIVE DATE.] This section is effective for sales and 203.15 purchases made on or after January 1, 2004. 203.16 Sec. 5. Minnesota Statutes 2003 Supplement, section 203.17 297A.668, subdivision 5, is amended to read: 203.18 Subd. 5. [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 203.19 including lease or rental, of transportation equipment shall be 203.20 sourced the same as a retail sale in accordance with the 203.21 provisions of subdivision 2, notwithstanding the exclusion of 203.22 lease or rental in subdivision 2. 203.23 (b) "Transportation equipment" means any of the following: 203.24 (1) locomotives and railcars that are utilized for the 203.25 carriage of persons or property in interstate commerce;and/or203.26 (2) trucks and truck-tractors with a gross vehicle weight 203.27 rating (GVWR) of 10,001 pounds or greater, trailers, 203.28 semitrailers, or passenger buses that are: 203.29 (i) registered through the international registration plan; 203.30 and 203.31 (ii) operated under authority of a carrier authorized and 203.32 certified by the United States Department of Transportation or 203.33 another federal authority to engage in the carriage of persons 203.34 or property in interstate commerce; 203.35 (3) aircraft that are operated by air carriers authorized 203.36 and certificated by the United States Department of 204.1 Transportation or another federal or a foreign authority to 204.2 engage in the carriage of persons or property in interstate 204.3 commerce; or 204.4 (4) containers designed for use on and component parts 204.5 attached or secured on the transportation equipment described in 204.6 items (1) through (3). 204.7 [EFFECTIVE DATE.] This section is effective for sales and 204.8 purchases made on or after January 1, 2004. 204.9 Sec. 6. Minnesota Statutes 2003 Supplement, section 204.10 297A.669, subdivision 16, is amended to read: 204.11 Subd. 16. [SERVICE ADDRESS.] "Service address," for 204.12 purposes of this section, means: 204.13 (1) the location of the telecommunications equipment to 204.14 which a customer's call is charged and from which the call 204.15 originates or terminates, regardless of where the call is billed 204.16 or paid; 204.17 (2) if the location in paragraph(a)(1) is not known, 204.18 service address means the origination point of the signal of the 204.19 telecommunications services first identified by either the 204.20 seller's telecommunications system or in information received by 204.21 the seller from its service provider, where the system used to 204.22 transport the signals is not that of the seller; or 204.23 (3) if the location in paragraphs(a)(1) and(b)(2) is 204.24 not known, the service address means the location of the 204.25 customer's place of primary use. 204.26 [EFFECTIVE DATE.] This section is effective for sales and 204.27 purchases made on or after January 1, 2004. 204.28 Sec. 7. Minnesota Statutes 2003 Supplement, section 204.29 297A.68, subdivision 2, is amended to read: 204.30 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 204.31 (a) Materials stored, used, or consumed in industrial production 204.32 of personal property intended to be sold ultimately at retail 204.33 are exempt, whether or not the item so used becomes an 204.34 ingredient or constituent part of the property produced. 204.35 Materials that qualify for this exemption include, but are not 204.36 limited to, the following: 205.1 (1) chemicals, including chemicals used for cleaning food 205.2 processing machinery and equipment; 205.3 (2) materials, including chemicals, fuels, and electricity 205.4 purchased by persons engaged in industrial production to treat 205.5 waste generated as a result of the production process; 205.6 (3) fuels, electricity, gas, and steam used or consumed in 205.7 the production process, except that electricity, gas, or steam 205.8 used for space heating, cooling, or lighting is exempt if (i) it 205.9 is in excess of the average climate control or lighting for the 205.10 production area, and (ii) it is necessary to produce that 205.11 particular product; 205.12 (4) petroleum products and lubricants; 205.13 (5) packaging materials, including returnable containers 205.14 used in packaging food and beverage products; 205.15 (6) accessory tools, equipment, and other items that are 205.16 separate detachable units with an ordinary useful life of less 205.17 than 12 months used in producing a direct effect upon the 205.18 product; and 205.19 (7) the following materials, tools, and equipment used in 205.20 metalcasting: crucibles, thermocouple protection sheaths and 205.21 tubes, stalk tubes, refractory materials, molten metal filters 205.22 and filter boxes, degassing lances, and base blocks. 205.23 (b) This exemption does not include: 205.24 (1) machinery, equipment, implements, tools, accessories, 205.25 appliances, contrivances and furniture and fixtures, except 205.26 those listed in paragraph (a), clause (6); and 205.27 (2) petroleum and special fuels used in producing or 205.28 generating power for propelling ready-mixed concrete trucks on 205.29 the public highways of this state. 205.30 (c) Industrial production includes, but is not limited to, 205.31 research, development, design or production of any tangible 205.32 personal property, manufacturing, processing (other than by 205.33 restaurants and consumers) of agricultural products (whether 205.34 vegetable or animal), commercial fishing, refining, smelting, 205.35 reducing, brewing, distilling, printing, mining, quarrying, 205.36 lumbering, generating electricity, the production of road 206.1 building materials, and the research, development, design, or 206.2 production of computer software. Industrial production does not 206.3 include painting, cleaning, repairing or similar processing of 206.4 property except as part of the original manufacturing process. 206.5 Industrial production does not include the furnishing of 206.6 services listed in section 297A.61, subdivision 3, paragraph 206.7 (g), clause (6), items (i) to (vi) and (viii). 206.8 [EFFECTIVE DATE.] This section is effective the day 206.9 following final enactment. 206.10 Sec. 8. Minnesota Statutes 2003 Supplement, section 206.11 297A.68, subdivision 5, is amended to read: 206.12 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 206.13 exempt. The tax must be imposed and collected as if the rate 206.14 under section 297A.62, subdivision 1, applied, and then refunded 206.15 in the manner provided in section 297A.75. 206.16 "Capital equipment" means machinery and equipment purchased 206.17 or leased, and used in this state by the purchaser or lessee 206.18 primarily for manufacturing, fabricating, mining, or refining 206.19 tangible personal property to be sold ultimately at retail if 206.20 the machinery and equipment are essential to the integrated 206.21 production process of manufacturing, fabricating, mining, or 206.22 refining. Capital equipment also includes machinery and 206.23 equipment used primarily to electronically transmit results 206.24 retrieved by a customer of an on-line computerized data 206.25 retrieval system. 206.26 (b) Capital equipment includes, but is not limited to: 206.27 (1) machinery and equipment used to operate, control, or 206.28 regulate the production equipment; 206.29 (2) machinery and equipment used for research and 206.30 development, design, quality control, and testing activities; 206.31 (3) environmental control devices that are used to maintain 206.32 conditions such as temperature, humidity, light, or air pressure 206.33 when those conditions are essential to and are part of the 206.34 production process; 206.35 (4) materials and supplies used to construct and install 206.36 machinery or equipment; 207.1 (5) repair and replacement parts, including accessories, 207.2 whether purchased as spare parts, repair parts, or as upgrades 207.3 or modifications to machinery or equipment; 207.4 (6) materials used for foundations that support machinery 207.5 or equipment; 207.6 (7) materials used to construct and install special purpose 207.7 buildings used in the production process; 207.8 (8) ready-mixed concrete equipment in which the ready-mixed 207.9 concrete is mixed as part of the delivery process regardless if 207.10 mounted on a chassis and leases of ready-mixed concrete trucks; 207.11 and 207.12 (9) machinery or equipment used for research, development, 207.13 design, or production of computer software. 207.14 (c) Capital equipment does not include the following: 207.15 (1) motor vehicles taxed under chapter 297B; 207.16 (2) machinery or equipment used to receive or store raw 207.17 materials; 207.18 (3) building materials, except for materials included in 207.19 paragraph (b), clauses (6) and (7); 207.20 (4) machinery or equipment used for nonproduction purposes, 207.21 including, but not limited to, the following: plant security, 207.22 fire prevention, first aid, and hospital stations; support 207.23 operations or administration; pollution control; and plant 207.24 cleaning, disposal of scrap and waste, plant communications, 207.25 space heating, cooling, lighting, or safety; 207.26 (5) farm machinery and aquaculture production equipment as 207.27 defined by section 297A.61, subdivisions 12 and 13; 207.28 (6) machinery or equipment purchased and installed by a 207.29 contractor as part of an improvement to real property;or207.30 (7) machinery and equipment used by restaurants in the 207.31 furnishing, preparing, or serving of prepared foods as defined 207.32 in section 297A.61, subdivision 31; 207.33 (8) machinery and equipment used to furnish the services 207.34 listed in section 297A.61, subdivision 3, paragraph (g), clause 207.35 (6), items (i) to (vi) and (viii); or 207.36 (9) any other item that is not essential to the integrated 208.1 process of manufacturing, fabricating, mining, or refining. 208.2 (d) For purposes of this subdivision: 208.3 (1) "Equipment" means independent devices or tools separate 208.4 from machinery but essential to an integrated production 208.5 process, including computers and computer software, used in 208.6 operating, controlling, or regulating machinery and equipment; 208.7 and any subunit or assembly comprising a component of any 208.8 machinery or accessory or attachment parts of machinery, such as 208.9 tools, dies, jigs, patterns, and molds. 208.10 (2) "Fabricating" means to make, build, create, produce, or 208.11 assemble components or property to work in a new or different 208.12 manner. 208.13 (3) "Integrated production process" means a process or 208.14 series of operations through which tangible personal property is 208.15 manufactured, fabricated, mined, or refined. For purposes of 208.16 this clause, (i) manufacturing begins with the removal of raw 208.17 materials from inventory and ends when the last process prior to 208.18 loading for shipment has been completed; (ii) fabricating begins 208.19 with the removal from storage or inventory of the property to be 208.20 assembled, processed, altered, or modified and ends with the 208.21 creation or production of the new or changed product; (iii) 208.22 mining begins with the removal of overburden from the site of 208.23 the ores, minerals, stone, peat deposit, or surface materials 208.24 and ends when the last process before stockpiling is completed; 208.25 and (iv) refining begins with the removal from inventory or 208.26 storage of a natural resource and ends with the conversion of 208.27 the item to its completed form. 208.28 (4) "Machinery" means mechanical, electronic, or electrical 208.29 devices, including computers and computer software, that are 208.30 purchased or constructed to be used for the activities set forth 208.31 in paragraph (a), beginning with the removal of raw materials 208.32 from inventory through completion of the product, including 208.33 packaging of the product. 208.34 (5) "Machinery and equipment used for pollution control" 208.35 means machinery and equipment used solely to eliminate, prevent, 208.36 or reduce pollution resulting from an activity described in 209.1 paragraph (a). 209.2 (6) "Manufacturing" means an operation or series of 209.3 operations where raw materials are changed in form, composition, 209.4 or condition by machinery and equipment and which results in the 209.5 production of a new article of tangible personal property. For 209.6 purposes of this subdivision, "manufacturing" includes the 209.7 generation of electricity or steam to be sold at retail. 209.8 (7) "Mining" means the extraction of minerals, ores, stone, 209.9 or peat. 209.10 (8) "On-line data retrieval system" means a system whose 209.11 cumulation of information is equally available and accessible to 209.12 all its customers. 209.13 (9) "Primarily" means machinery and equipment used 50 209.14 percent or more of the time in an activity described in 209.15 paragraph (a). 209.16 (10) "Refining" means the process of converting a natural 209.17 resource to an intermediate or finished product, including the 209.18 treatment of water to be sold at retail. 209.19 [EFFECTIVE DATE.] This section is effective the day 209.20 following final enactment. 209.21 Sec. 9. Minnesota Statutes 2003 Supplement, section 209.22 297A.68, subdivision 39, is amended to read: 209.23 Subd. 39. [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 209.24 tangible personal property or services is exempt from tax or a 209.25 tax rate increase for a period of six months from the effective 209.26 date of the law change that results in the imposition of the tax 209.27 or the tax rate increase under this chapter if: 209.28 (1) the act imposing the tax or increasing the tax rate 209.29 does not have transitional effective date language for existing 209.30 construction contracts and construction bids; and 209.31 (2) the requirements of paragraph (b) are met. 209.32 (b) A sale is tax exempt under paragraph (a) if it meets 209.33 the requirements of either clause (1) or (2): 209.34 (1) For a construction contract: 209.35 (i) the goods or services sold must be used for the 209.36 performance of a bona fide written lump sum or fixed price 210.1 construction contract; 210.2 (ii) the contract must be entered into before the date the 210.3 goods or services become subject to the sales tax or the tax 210.4 rate was increased; 210.5 (iii) the contract must not provide for allocation of 210.6 future taxes; and 210.7 (iv) for each qualifying contract the contractor must give 210.8 the seller documentation of the contract on which an exemption 210.9 is to be claimed. 210.10 (2) For a construction bid: 210.11 (i) the goods or services sold must be used pursuant to an 210.12 obligation of a bid or bids; 210.13 (ii) the bid or bids must be submitted and accepted before 210.14 the date the goods or services became subject to the sales 210.15 tax or the tax rate was increased; 210.16 (iii) the bid or bids must not be able to be withdrawn, 210.17 modified, or changed without forfeiting a bond; and 210.18 (iv) for each qualifying bid, the contractor must give the 210.19 seller documentation of the bid on which an exemption is to be 210.20 claimed. 210.21 [EFFECTIVE DATE.] This section is effective the day 210.22 following final enactment. 210.23 Sec. 10. [REPEALER.] 210.24 Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, 210.25 subparts 5 and 6; 8130.0400, subpart 9; 8130.1200, subparts 5 210.26 and 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1 210.27 and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200; 210.28 8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 210.29 5; and 8130.8800, subpart 4, are repealed. 210.30 [EFFECTIVE DATE.] This section is effective the day 210.31 following final enactment. 210.32 ARTICLE 12 210.33 SPECIAL TAXES TECHNICAL 210.34 Section 1. Minnesota Statutes 2002, section 287.04, is 210.35 amended to read: 210.36 287.04 [EXEMPTIONS.] 211.1 The tax imposed by section 287.035 does not apply to: 211.2 (a) A decree of marriage dissolution or an instrument made 211.3 pursuant to it. 211.4 (b) A mortgage given to correct a misdescription of the 211.5 mortgaged property. 211.6 (c) A mortgage or other instrument that adds additional 211.7 security for the same debt for which mortgage registry tax has 211.8 been paid. 211.9 (d) A contract for the conveyance of any interest in real 211.10 property, including a contract for deed. 211.11 (e) A mortgage secured by real property subject to the 211.12 minerals production tax of sections 298.24 to 298.28. 211.13 (f) The principal amount of a mortgage loan made under a 211.14 low and moderate income or other affordable housing program, if 211.15 the mortgagee is a federal, state, or local government agency. 211.16 (g) Mortgages granted by fraternal benefit societies 211.17 subject to section 64B.24. 211.18 (h) A mortgage amendment or extension, as defined in 211.19 section 287.01. 211.20 (i) An agricultural mortgage if the proceeds of the loan 211.21 secured by the mortgage are used to acquire or improve real 211.22 property classified under section 273.13, subdivision 23, 211.23 paragraph (a), or (b), clause (1), (2), or (3). 211.24 (j) A mortgage on an armory building as set forth in 211.25 section 193.147. 211.26 [EFFECTIVE DATE.] This section is effective the day 211.27 following final enactment. 211.28 Sec. 2. Minnesota Statutes 2002, section 295.50, 211.29 subdivision 4, is amended to read: 211.30 Subd. 4. [HEALTH CARE PROVIDER.] (a) "Health care 211.31 provider" means: 211.32 (1) a person whose health care occupation is regulated or 211.33 required to be regulated by the state of Minnesota furnishing 211.34 any or all of the following goods or services directly to a 211.35 patient or consumer: medical, surgical, optical, visual, 211.36 dental, hearing, nursing services, drugs, laboratory, diagnostic 212.1 or therapeutic services; 212.2 (2) a person who provides goods and services not listed in 212.3 clause (1) that qualify for reimbursement under the medical 212.4 assistance program provided under chapter 256B; 212.5 (3) a staff model health plan company; 212.6 (4) an ambulance service required to be licensed; or 212.7 (5) a person who sells or repairs hearing aids and related 212.8 equipment or prescription eyewear. 212.9 (b) Health care provider does not include: 212.10 (1) hospitals; medical supplies distributors, except as 212.11 specified under paragraph (a), clause (5); nursing homes 212.12 licensed under chapter 144A or licensed in any other 212.13 jurisdiction; pharmacies; surgical centers; bus and taxicab 212.14 transportation, or any other providers of transportation 212.15 services other than ambulance services required to be licensed; 212.16 supervised living facilities for persons with mental retardation 212.17 or related conditions, licensed under Minnesota Rules, parts 212.18 4665.0100 to 4665.9900;residential care homes licensed under212.19chapter 144Bhousing with services establishments required to be 212.20 registered under chapter 144D; board and lodging establishments 212.21 providing only custodial services that are licensed under 212.22 chapter 157 and registered under section 157.17 to provide 212.23 supportive services or health supervision services; adult foster 212.24 homes as defined in Minnesota Rules, part 9555.5105; day 212.25 training and habilitation services for adults with mental 212.26 retardation and related conditions as defined in section 252.41, 212.27 subdivision 3; boarding care homes, as defined in Minnesota 212.28 Rules, part 4655.0100; and adult day care centers as defined in 212.29 Minnesota Rules, part 9555.9600; 212.30 (2) home health agencies as defined in Minnesota Rules, 212.31 part 9505.0175, subpart 15; a person providing personal care 212.32 services and supervision of personal care services as defined in 212.33 Minnesota Rules, part 9505.0335; a person providing private duty 212.34 nursing services as defined in Minnesota Rules, part 9505.0360; 212.35 and home care providers required to be licensed under chapter 212.36 144A; 213.1 (3) a person who employs health care providers solely for 213.2 the purpose of providing patient services to its employees; and 213.3 (4) an educational institution that employs health care 213.4 providers solely for the purpose of providing patient services 213.5 to its students if the institution does not receive fee for 213.6 service payments or payments for extended coverage. 213.7 [EFFECTIVE DATE.] This section is effective the day 213.8 following final enactment. 213.9 Sec. 3. Minnesota Statutes 2002, section 296A.22, is 213.10 amended by adding a subdivision to read: 213.11 Subd. 9. [ABATEMENT OF PENALTY.] (a) The commissioner may 213.12 by written order abate any penalty imposed under this section, 213.13 if in the commissioner's opinion there is reasonable cause to do 213.14 so. 213.15 (b) A request for abatement of penalty must be filed with 213.16 the commissioner within 60 days of the date the notice stating 213.17 that a penalty has been imposed was mailed to the taxpayer's 213.18 last known address. 213.19 (c) If the commissioner issues an order denying a request 213.20 for abatement of penalty, the taxpayer may file an 213.21 administrative appeal as provided in section 296A.25 or appeal 213.22 to tax court as provided in section 271.06. If the commissioner 213.23 does not issue an order on the abatement request within 60 days 213.24 from the date the request is received, the taxpayer may appeal 213.25 to tax court as provided in section 271.06. 213.26 [EFFECTIVE DATE.] This section is effective for penalties 213.27 imposed on or after the day following final enactment. 213.28 Sec. 4. Minnesota Statutes 2002, section 297E.01, 213.29 subdivision 5, is amended to read: 213.30 Subd. 5. [DISTRIBUTOR.] "Distributor" means a distributor 213.31 as defined in section 349.12, subdivision 11, or a person or 213.32 linked bingo game provider who markets, sells, or provides 213.33 gambling product to a person or entity for resale or use at the 213.34 retail level. 213.35 [EFFECTIVE DATE.] This section is effective the day 213.36 following final enactment. 214.1 Sec. 5. Minnesota Statutes 2002, section 297E.01, 214.2 subdivision 7, is amended to read: 214.3 Subd. 7. [GAMBLING PRODUCT.] "Gambling product" means 214.4 bingo hard cards, bingo paper, orsheets, or linked bingo paper 214.5 sheets; pull-tabs; tipboards; paddletickets and paddleticket 214.6 cards; raffle tickets; or any other ticket, card, board, 214.7 placard, device, or token that represents a chance, for which 214.8 consideration is paid, to win a prize. 214.9 [EFFECTIVE DATE.] This section is effective the day 214.10 following final enactment. 214.11 Sec. 6. Minnesota Statutes 2002, section 297E.01, is 214.12 amended by adding a subdivision to read: 214.13 Subd. 9a. [LINKED BINGO GAME.] "Linked bingo game" means a 214.14 bingo game played at two or more locations where licensed 214.15 organizations are authorized to conduct bingo, when there is a 214.16 common prize pool and a common selection of numbers or symbols 214.17 conducted at one location, and when the results of the selection 214.18 are transmitted to all participating locations by satellite, 214.19 telephone, or other means by a linked bingo game provider. 214.20 [EFFECTIVE DATE.] This section is effective the day 214.21 following final enactment. 214.22 Sec. 7. Minnesota Statutes 2002, section 297E.01, is 214.23 amended by adding a subdivision to read: 214.24 Subd. 9b. [LINKED BINGO GAME PROVIDER.] "Linked bingo game 214.25 provider" means any person who provides the means to link bingo 214.26 prizes in a linked bingo game, who provides linked bingo paper 214.27 sheets to the participating organizations, who provides linked 214.28 bingo prize management, and who provides the linked bingo game 214.29 system. 214.30 [EFFECTIVE DATE.] This section is effective the day 214.31 following final enactment. 214.32 Sec. 8. Minnesota Statutes 2002, section 297E.07, is 214.33 amended to read: 214.34 297E.07 [INSPECTION RIGHTS.] 214.35 At any reasonable time, without notice and without a search 214.36 warrant, the commissioner may enter a place of business of a 215.1 manufacturer, distributor,ororganization, or linked bingo game 215.2 provider; any site from which pull-tabs or tipboards or other 215.3 gambling equipment or gambling product are being manufactured, 215.4 stored, or sold; or any site at which lawful gambling is being 215.5 conducted, and inspect the premises, books, records, and other 215.6 documents required to be kept under this chapter to determine 215.7 whether or not this chapter is being fully complied with. If 215.8 the commissioner is denied free access to or is hindered or 215.9 interfered with in making an inspection of the place of 215.10 business, books, or records, the permit of the distributor may 215.11 be revoked by the commissioner, and the license of the 215.12 manufacturer, the distributor,orthe organization, or linked 215.13 bingo game provider may be revoked by the board. 215.14 [EFFECTIVE DATE.] This section is effective the day 215.15 following final enactment. 215.16 Sec. 9. Minnesota Statutes 2003 Supplement, section 215.17 297F.08, subdivision 12, is amended to read: 215.18 Subd. 12. [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 215.19 person may not transport or cause to be transported from this 215.20 state cigarettes for sale in another state without first 215.21 affixing to the cigarettes the stamp required by the state in 215.22 which the cigarettes are to be sold or paying any other excise 215.23 tax on the cigarettes imposed by the state in which the 215.24 cigarettes are to be sold. 215.25 (b) A person may not affix to cigarettes the stamp required 215.26 by another state or pay any other excise tax on the cigarettes 215.27 imposed by another state if the other state prohibits stamps 215.28 from being affixed to the cigarettes, prohibits the payment of 215.29 any other excise tax on the cigarettes, or prohibits the sale of 215.30 the cigarettes. 215.31 (c) Not later than 15 days after the end of each calendar 215.32 quarter, a person who transports or causes to be transported 215.33 from this state cigarettes for sale in another state shall 215.34 submit to the commissioner a report identifying the quantity and 215.35 style of each brand of the cigarettes transported or caused to 215.36 be transported in the preceding calendar quarter, and the name 216.1 and address of each recipient of the cigarettes. This reporting 216.2 requirement only relates to cigarettes manufactured by companies 216.3 that are not original or subsequent participating manufacturers 216.4 in the Master Settlement Agreement with other states. 216.5 (d) For purposes of this section, "person" has the meaning 216.6 given in section 297F.01, subdivision 12. Person does not 216.7 include any common or contract carrier, or public warehouse that 216.8 is not owned, in whole or in part, directly or indirectly by 216.9 such person, and does not include a manufacturer thathas216.10entered intois an original or subsequent participating 216.11 manufacturer in the Master Settlement Agreement with other 216.12 states. 216.13 [EFFECTIVE DATE.] This section is effective the day 216.14 following final enactment. 216.15 Sec. 10. Minnesota Statutes 2003 Supplement, section 216.16 297F.09, subdivision 1, is amended to read: 216.17 Subdivision 1. [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 216.18 or before the 18th day of each calendar month, a distributor 216.19 with a place of business in this state shall file a return with 216.20 the commissioner showing the quantity of cigarettes manufactured 216.21 or brought in from outside the state or purchased during the 216.22 preceding calendar month and the quantity of cigarettes sold or 216.23 otherwise disposed of in this state and outside this state 216.24 during that month. A licensed distributor outside this state 216.25 shall in like manner file a return showing the quantity of 216.26 cigarettes shipped or transported into this state during the 216.27 preceding calendar month. Returns must be made in the form and 216.28 manner prescribed by the commissioner and must contain any other 216.29 information required by the commissioner. The return must be 216.30 accompanied by a remittance for the full unpaid tax liability 216.31 shown by it.The return for the May liability and 85 percent of216.32the estimated June liability is due on the date payment of the216.33tax is due.For distributors subject to the accelerated tax 216.34 payment requirements in subdivision 10, the return for the May 216.35 liability is due two business days before June 30th of the year 216.36 and the return for the June liability is due on or before August 217.1 18th of the year. 217.2 [EFFECTIVE DATE.] This section is effective the day 217.3 following final enactment. 217.4 Sec. 11. Minnesota Statutes 2003 Supplement, section 217.5 297F.09, subdivision 2, is amended to read: 217.6 Subd. 2. [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 217.7 On or before the 18th day of each calendar month, a distributor 217.8 with a place of business in this state shall file a return with 217.9 the commissioner showing the quantity and wholesale sales price 217.10 of each tobacco product: 217.11 (1) brought, or caused to be brought, into this state for 217.12 sale; and 217.13 (2) made, manufactured, or fabricated in this state for 217.14 sale in this state, during the preceding calendar month. 217.15 Every licensed distributor outside this state shall in like 217.16 manner file a return showing the quantity and wholesale sales 217.17 price of each tobacco product shipped or transported to 217.18 retailers in this state to be sold by those retailers, during 217.19 the preceding calendar month. Returns must be made in the form 217.20 and manner prescribed by the commissioner and must contain any 217.21 other information required by the commissioner. The return must 217.22 be accompanied by a remittance for the full tax liability 217.23 shown.The return for the May liability and 85 percent of the217.24estimated June liability is due on the date payment of the tax217.25is due.For distributors subject to the accelerated tax payment 217.26 requirements in subdivision 10, the return for the May liability 217.27 is due two business days before June 30th of the year and the 217.28 return for the June liability is due on or before August 18th of 217.29 the year. 217.30 [EFFECTIVE DATE.] This section is effective the day 217.31 following final enactment. 217.32 Sec. 12. Minnesota Statutes 2002, section 297I.01, is 217.33 amended by adding a subdivision to read: 217.34 Subd. 13a. [REINSURANCE.] "Reinsurance" is insurance 217.35 whereby an insurance company, for a consideration, agrees to 217.36 indemnify another insurance company against all or part of the 218.1 loss which the latter may sustain under the policy or policies 218.2 which it has issued. 218.3 [EFFECTIVE DATE.] This section is effective the day 218.4 following final enactment. 218.5 Sec. 13. Minnesota Statutes 2002, section 297I.05, 218.6 subdivision 4, is amended to read: 218.7 Subd. 4. [MUTUALPROPERTY AND CASUALTYCOMPANIES WITH 218.8 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 218.9 tax is imposed on mutualproperty and casualtycompanies that 218.10 had total assets greater than $5,000,000 at the end of the 218.11 calendar year but that had total assets less than $1,600,000,000 218.12 on December 31, 1989. The rate of tax is equal to: 218.13 (1) two percent of gross premiums less return premiums on 218.14 all direct business received by the insurer or agents of the 218.15 insurer in Minnesota for life insurance, in cash or otherwise, 218.16 during the year; and 218.17 (2) 1.26 percent of gross premiums less return premiums on 218.18 all other direct business received by the insurer or agents of 218.19 the insurer in Minnesota, in cash or otherwise, during the year. 218.20 [EFFECTIVE DATE.] This section is effective for returns, 218.21 taxes, surcharges, and estimated payments required to be filed 218.22 or paid for tax years beginning on or after January 1, 2004. 218.23 Sec. 14. Minnesota Statutes 2002, section 297I.05, 218.24 subdivision 5, is amended to read: 218.25 Subd. 5. [HEALTH MAINTENANCE ORGANIZATIONS, NONPROFIT 218.26 HEALTH SERVICE PLAN CORPORATIONS, AND COMMUNITY INTEGRATED 218.27 SERVICE NETWORKS.] (a)Health maintenance organizations,218.28community integrated service networks, and nonprofit health care218.29service plan corporations are exempt from the tax imposed under218.30this section for premiums received in calendar years 2001 to218.312003.218.32(b) For calendar years after 2003,A tax is imposed on 218.33 health maintenance organizations, community integrated service 218.34 networks, and nonprofit health care service plan corporations. 218.35 The rate of tax is equal to one percent of gross premiums less 218.36 return premiums on all direct business received by the 219.1 organization, network, or corporation or its agents in 219.2 Minnesota, in cash or otherwise, in the calendar year. 219.3(c) In approving the premium rates as required in sections219.462L.08, subdivision 8, and 62A.65, subdivision 3, the219.5commissioners of health and commerce shall ensure that any219.6exemption from tax as described in paragraph (a) is reflected in219.7the premium rate.219.8(d)(b) The commissioner shall deposit all revenues, 219.9 including penalties and interest, collected under this chapter 219.10 from health maintenance organizations, community integrated 219.11 service networks, and nonprofit health service plan corporations 219.12 in the health care access fund. Refunds of overpayments of tax 219.13 imposed by this subdivision must be paid from the health care 219.14 access fund. There is annually appropriated from the health 219.15 care access fund to the commissioner the amount necessary to 219.16 make any refunds of the tax imposed under this subdivision. 219.17 [EFFECTIVE DATE.] This section is effective January 1, 2004. 219.18 Sec. 15. [REPEALER.] 219.19 Minnesota Statutes 2002, section 297E.12, subdivision 10, 219.20 is repealed effective the day following final enactment. 219.21 ARTICLE 13 219.22 MISCELLANEOUS TECHNICAL 219.23 Section 1. Minnesota Statutes 2002, section 270.65, is 219.24 amended to read: 219.25 270.65 [DATE OF ASSESSMENT; DEFINITION.] 219.26 For purposes of taxes administered by the commissioner, the 219.27 term "date of assessment" means the date a liability reported on 219.28 a return was entered into the records of the commissioner or the 219.29 date a return should have been filed, whichever is later; or, in 219.30 the case of taxes determined by the commissioner, "date of 219.31 assessment" means the date of the order assessing taxes or date 219.32 of the return made by the commissioner; or, in the case of an 219.33 amended return filed by the taxpayer, the assessment date is the 219.34 date additional liability reported on the return, if any, was 219.35 entered into the records of the commissioner; or, in the case of 219.36 a consent agreement signed by the taxpayer under section 270.67, 220.1 subdivision 3, the assessment date is the notice date shown on 220.2 the agreement; or, in the case of a check from a taxpayer that 220.3 is dishonored and results in an erroneous refund being given to 220.4 the taxpayer, remittance of the check is deemed to be an 220.5 assessment and the "date of assessment" is the date the check 220.6 was received by the commissioner. 220.7 [EFFECTIVE DATE.] This section is effective the day 220.8 following final enactment. 220.9 Sec. 2. Minnesota Statutes 2003 Supplement, section 220.10 289A.19, subdivision 4, is amended to read: 220.11 Subd. 4. [ESTATE TAX RETURNS.]When in the commissioner's220.12judgment good cause exists, the commissioner may extend the time220.13for filing an estate tax return for not more than six months.220.14 When an extension to file the federal estate tax return has been 220.15 granted under section 6081 of the Internal Revenue Code, the 220.16 time for filing the estate tax return is extended for that 220.17 period. If the estate requests an extension to file an estate 220.18 tax return within the time provided in section 289A.18, 220.19 subdivision 3, the commissioner shall extend the time for filing 220.20 the estate tax return for six months. 220.21 [EFFECTIVE DATE.] This section is effective for estates of 220.22 decedents dying after December 31, 2003. 220.23 Sec. 3. Minnesota Statutes 2002, section 289A.37, 220.24 subdivision 5, is amended to read: 220.25 Subd. 5. [SUFFICIENCY OF NOTICE.] An order of assessment, 220.26 sent postage prepaid by United States mail to the taxpayer at 220.27 the taxpayer's last known address, or sent by electronic mail to 220.28 the taxpayer's last known electronic mailing address as provided 220.29 for in section 325L.08, is sufficient even if the taxpayer is 220.30 deceased or is under a legal disability, or, in the case of a 220.31 corporation, has terminated its existence, unless the department 220.32 has been provided with a new address by a party authorized to 220.33 receive notices of assessment. 220.34 [EFFECTIVE DATE.] This section is effective the day 220.35 following final enactment. 220.36 Sec. 4. Minnesota Statutes 2002, section 289A.60, 221.1 subdivision 6, is amended to read: 221.2 Subd. 6. [PENALTY FOR FAILURE TO FILE, FALSE OR FRAUDULENT 221.3 RETURN, EVASION.] If a person, with intent to evade or defeat a 221.4 tax or payment of tax, fails to file a return, files a false or 221.5 fraudulent return, or attempts in any other manner to evade or 221.6 defeat a tax or payment of tax, there is imposed on the person a 221.7 penalty equal to 50 percent of the tax, less amounts paid by the 221.8 person on the basis of the false or fraudulent return, if any, 221.9 due for the period to which the return related. 221.10 [EFFECTIVE DATE.] This section is effective the day 221.11 following final enactment. 221.12 Sec. 5. Minnesota Statutes 2003 Supplement, section 221.13 290.01, subdivision 19a, is amended to read: 221.14 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 221.15 individuals, estates, and trusts, there shall be added to 221.16 federal taxable income: 221.17 (1)(i) interest income on obligations of any state other 221.18 than Minnesota or a political or governmental subdivision, 221.19 municipality, or governmental agency or instrumentality of any 221.20 state other than Minnesota exempt from federal income taxes 221.21 under the Internal Revenue Code or any other federal statute; 221.22 and 221.23 (ii) exempt-interest dividends as defined in section 221.24 852(b)(5) of the Internal Revenue Code, except the portion of 221.25 the exempt-interest dividends derived from interest income on 221.26 obligations of the state of Minnesota or its political or 221.27 governmental subdivisions, municipalities, governmental agencies 221.28 or instrumentalities, but only if the portion of the 221.29 exempt-interest dividends from such Minnesota sources paid to 221.30 all shareholders represents 95 percent or more of the 221.31 exempt-interest dividends that are paid by the regulated 221.32 investment company as defined in section 851(a) of the Internal 221.33 Revenue Code, or the fund of the regulated investment company as 221.34 defined in section 851(g) of the Internal Revenue Code, making 221.35 the payment; and 221.36 (iii) for the purposes of items (i) and (ii), interest on 222.1 obligations of an Indian tribal government described in section 222.2 7871(c) of the Internal Revenue Code shall be treated as 222.3 interest income on obligations of the state in which the tribe 222.4 is located; 222.5 (2) the amount of income taxes paid or accrued within the 222.6 taxable year under this chapter andincomethe amount of taxes 222.7 based on net income paid to any other state or to any province 222.8 or territory of Canada, to the extent allowed as a deduction 222.9 under section 63(d) of the Internal Revenue Code, but the 222.10 addition may not be more than the amount by which the itemized 222.11 deductions as allowed under section 63(d) of the Internal 222.12 Revenue Code exceeds the amount of the standard deduction as 222.13 defined in section 63(c) of the Internal Revenue Code. For the 222.14 purpose of this paragraph, the disallowance of itemized 222.15 deductions under section 68 of the Internal Revenue Code of 222.16 1986, income tax is the last itemized deduction disallowed; 222.17 (3) the capital gain amount of a lump sum distribution to 222.18 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 222.19 Reform Act of 1986, Public Law 99-514, applies; 222.20 (4) the amount of income taxes paid or accrued within the 222.21 taxable year under this chapter andincometaxes based on net 222.22 income paid to any other state or any province or territory of 222.23 Canada, to the extent allowed as a deduction in determining 222.24 federal adjusted gross income. For the purpose of this 222.25 paragraph, income taxes do not include the taxes imposed by 222.26 sections 290.0922, subdivision 1, paragraph (b), 290.9727, 222.27 290.9728, and 290.9729; 222.28 (5) the amount of expense, interest, or taxes disallowed 222.29 pursuant to section 290.10; 222.30 (6) the amount of a partner's pro rata share of net income 222.31 which does not flow through to the partner because the 222.32 partnership elected to pay the tax on the income under section 222.33 6242(a)(2) of the Internal Revenue Code; and 222.34 (7) 80 percent of the depreciation deduction allowed under 222.35 section 168(k) of the Internal Revenue Code. For purposes of 222.36 this clause, if the taxpayer has an activity that in the taxable 223.1 year generates a deduction for depreciation under section 168(k) 223.2 and the activity generates a loss for the taxable year that the 223.3 taxpayer is not allowed to claim for the taxable year, "the 223.4 depreciation allowed under section 168(k)" for the taxable year 223.5 is limited to excess of the depreciation claimed by the activity 223.6 under section 168(k) over the amount of the loss from the 223.7 activity that is not allowed in the taxable year. In succeeding 223.8 taxable years when the losses not allowed in the taxable year 223.9 are allowed, the depreciation under section 168(k) is allowed. 223.10 [EFFECTIVE DATE.] This section is effective for tax years 223.11 beginning after December 31, 2003. 223.12 Sec. 6. Minnesota Statutes 2002, section 290.06, 223.13 subdivision 22, is amended to read: 223.14 Subd. 22. [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 223.15 taxpayer who is liable for taxes based onor measured bynet 223.16 income to another state, as provided in paragraphs (b) through 223.17 (f), upon income allocated or apportioned to Minnesota, is 223.18 entitled to a credit for the tax paid to another state if the 223.19 tax is actually paid in the taxable year or a subsequent taxable 223.20 year. A taxpayer who is a resident of this state pursuant to 223.21 section 290.01, subdivision 7,clause (2)paragraph (b), and who 223.22 is subject to income tax as a resident in the state of the 223.23 individual's domicile is not allowed this credit unless the 223.24 state of domicile does not allow a similar credit. 223.25 (b) For an individual, estate, or trust, the credit is 223.26 determined by multiplying the tax payable under this chapter by 223.27 the ratio derived by dividing the income subject to tax in the 223.28 other state that is also subject to tax in Minnesota while a 223.29 resident of Minnesota by the taxpayer's federal adjusted gross 223.30 income, as defined in section 62 of the Internal Revenue Code, 223.31 modified by the addition required by section 290.01, subdivision 223.32 19a, clause (1), and the subtraction allowed by section 290.01, 223.33 subdivision 19b, clause (1), to the extent the income is 223.34 allocated or assigned to Minnesota under sections 290.081 and 223.35 290.17. 223.36 (c) If the taxpayer is an athletic team that apportions all 224.1 of its income under section 290.17, subdivision 5, the credit is 224.2 determined by multiplying the tax payable under this chapter by 224.3 the ratio derived from dividing the total net income subject to 224.4 tax in the other state by the taxpayer's Minnesota taxable 224.5 income. 224.6 (d) The credit determined under paragraph (b) or (c) shall 224.7 not exceed the amount of tax so paid to the other state on the 224.8 gross income earned within the other state subject to tax under 224.9 this chapter, nor shall the allowance of the credit reduce the 224.10 taxes paid under this chapter to an amount less than what would 224.11 be assessed if such income amount was excluded from taxable net 224.12 income. 224.13 (e) In the case of the tax assessed on a lump sum 224.14 distribution under section 290.032, the credit allowed under 224.15 paragraph (a) is the tax assessed by the other state on the lump 224.16 sum distribution that is also subject to tax under section 224.17 290.032, and shall not exceed the tax assessed under section 224.18 290.032. To the extent the total lump sum distribution defined 224.19 in section 290.032, subdivision 1, includes lump sum 224.20 distributions received in prior years or is all or in part an 224.21 annuity contract, the reduction to the tax on the lump sum 224.22 distribution allowed under section 290.032, subdivision 2, 224.23 includes tax paid to another state that is properly apportioned 224.24 to that distribution. 224.25 (f) If a Minnesota resident reported an item of income to 224.26 Minnesota and is assessed tax in such other state on that same 224.27 income after the Minnesota statute of limitations has expired, 224.28 the taxpayer shall receive a credit for that year under 224.29 paragraph (a), notwithstanding any statute of limitations to the 224.30 contrary. The claim for the credit must be submitted within one 224.31 year from the date the taxes were paid to the other state. The 224.32 taxpayer must submit sufficient proof to show entitlement to a 224.33 credit. 224.34 (g) For the purposes of this subdivision, a resident 224.35 shareholder of a corporation treated as an "S" corporation under 224.36 section 290.9725, must be considered to have paid a tax imposed 225.1 on the shareholder in an amount equal to the shareholder's pro 225.2 rata share of any net income tax paid by the S corporation to 225.3 another state. For the purposes of the preceding sentence, the 225.4 term "net income tax" means any tax imposed on or measured by a 225.5 corporation's net income. 225.6 (h) For the purposes of this subdivision, a resident 225.7 partner of an entity taxed as a partnership under the Internal 225.8 Revenue Code must be considered to have paid a tax imposed on 225.9 the partner in an amount equal to the partner's pro rata share 225.10 of any net income tax paid by the partnership to another state. 225.11 For purposes of the preceding sentence, the term "net income" 225.12 tax means any tax imposed on or measured by a partnership's net 225.13 income. 225.14 (i) For the purposes of this subdivision, "another state": 225.15 (1) includes: 225.16 (i) the District of Columbia; and 225.17 (ii) a province or territory of Canada; but 225.18 (2) excludes Puerto Rico and the several territories 225.19 organized by Congress. 225.20 (j) The limitations on the credit in paragraphs (b), (c), 225.21 and (d), are imposed on a state by state basis. 225.22 (k) For a tax imposed by a province or territory of Canada, 225.23 the tax for purposes of this subdivision is the excess of the 225.24 tax over the amount of the foreign tax credit allowed under 225.25 section 27 of the Internal Revenue Code. In determining the 225.26 amount of the foreign tax credit allowed, the net income taxes 225.27 imposed by Canada on the income are deducted first. Any 225.28 remaining amount of the allowable foreign tax credit reduces the 225.29 provincial or territorial tax that qualifies for the credit 225.30 under this subdivision. 225.31 [EFFECTIVE DATE.] This section is effective for tax years 225.32 beginning after December 31, 2003. 225.33 Sec. 7. Minnesota Statutes 2003 Supplement, section 225.34 290.0674, subdivision 1, is amended to read: 225.35 Subdivision 1. [CREDIT ALLOWED.] An individual is allowed 225.36 a credit against the tax imposed by this chapter in an amount 226.1 equal to 75 percent of the amount paid for education-related 226.2 expenses for a qualifying child in kindergarten through grade 226.3 12. For purposes of this section, "education-related expenses" 226.4 means: 226.5 (1) fees or tuition for instruction by an instructor under 226.6 section 120A.22, subdivision 10, clause (1), (2), (3), (4), or 226.7 (5), or a member of the Minnesota Music Teachers Association, 226.8 and who is not a lineal ancestor or sibling of the dependent for 226.9 instruction outside the regular school day or school year, 226.10 including tutoring, driver's education offered as part of school 226.11 curriculum, regardless of whether it is taken from a public or 226.12 private entity or summer camps, in grade or age appropriate 226.13 curricula that supplement curricula and instruction available 226.14 during the regular school year, that assists a dependent to 226.15 improve knowledge of core curriculum areas or to expand 226.16 knowledge and skills under thegraduation rule under section226.17120B.02, paragraph (e), clauses (1) to (7), (9), and (10)226.18 required academic standards under section 120B.021, subdivision 226.19 1, and the elective standard under section 120B.022, subdivision 226.20 1, clause (3), and that do not include the teaching of religious 226.21 tenets, doctrines, or worship, the purpose of which is to 226.22 instill such tenets, doctrines, or worship; 226.23 (2) expenses for textbooks, including books and other 226.24 instructional materials and equipment purchased or leased for 226.25 use in elementary and secondary schools in teaching only those 226.26 subjects legally and commonly taught in public elementary and 226.27 secondary schools in this state. "Textbooks" does not include 226.28 instructional books and materials used in the teaching of 226.29 religious tenets, doctrines, or worship, the purpose of which is 226.30 to instill such tenets, doctrines, or worship, nor does it 226.31 include books or materials for extracurricular activities 226.32 including sporting events, musical or dramatic events, speech 226.33 activities, driver's education, or similar programs; 226.34 (3) a maximum expense of $200 per family for personal 226.35 computer hardware, excluding single purpose processors, and 226.36 educational software that assists a dependent to improve 227.1 knowledge of core curriculum areas or to expand knowledge and 227.2 skills under thegraduation rule under section 120B.02required 227.3 academic standards under section 120B.021, subdivision 1, and 227.4 the elective standard under section 120B.022, subdivision 1, 227.5 clause (3), purchased for use in the taxpayer's home and not 227.6 used in a trade or business regardless of whether the computer 227.7 is required by the dependent's school; and 227.8 (4) the amount paid to others for transportation of a 227.9 qualifying child attending an elementary or secondary school 227.10 situated in Minnesota, North Dakota, South Dakota, Iowa, or 227.11 Wisconsin, wherein a resident of this state may legally fulfill 227.12 the state's compulsory attendance laws, which is not operated 227.13 for profit, and which adheres to the provisions of the Civil 227.14 Rights Act of 1964 and chapter 363A. 227.15 For purposes of this section, "qualifying child" has the 227.16 meaning given in section 32(c)(3) of the Internal Revenue Code. 227.17 [EFFECTIVE DATE.] This section is effective for tax years 227.18 beginning after December 31, 2003. 227.19 Sec. 8. Minnesota Statutes 2002, section 290.92, 227.20 subdivision 1, is amended to read: 227.21 Subdivision 1. [DEFINITIONS.] (1) [WAGES.] For purposes 227.22 of this section, the term "wages" means the same as that term is 227.23 defined in section 3401(a) and (f) of the Internal Revenue Code. 227.24 (2) [PAYROLL PERIOD.] For purposes of this section the 227.25 term "payroll period" means a period for which a payment of 227.26 wages is ordinarily made to the employee by the employee's 227.27 employer, and the term "miscellaneous payroll period" means a 227.28 payroll period other than a daily, weekly, biweekly, 227.29 semimonthly, monthly, quarterly, semiannual, or annual payroll 227.30 period. 227.31 (3) [EMPLOYEE.] For purposes of this section the term 227.32 "employee" means any resident individual performing services for 227.33 an employer, either within or without, or both within and 227.34 without the state of Minnesota, and every nonresident individual 227.35 performing services within the state of Minnesota, the 227.36 performance of which services constitute, establish, and 228.1 determine the relationship between the parties as that of 228.2 employer and employee. As used in the preceding sentence, the 228.3 term "employee" includes an officer of a corporation, and an 228.4 officer, employee, or elected official of the United States, a 228.5 state, or any political subdivision thereof, or the District of 228.6 Columbia, or any agency or instrumentality of any one or more of 228.7 the foregoing. 228.8 (4) [EMPLOYER.] For purposes of this section the term 228.9 "employer" means any person, including individuals, fiduciaries, 228.10 estates, trusts, partnerships, limited liability companies, and 228.11 corporations transacting business in or deriving any income from 228.12 sources within the state of Minnesota for whom an individual 228.13 performs or performed any service, of whatever nature, as the 228.14 employee of such person, except that if the person for whom the 228.15 individual performs or performed the services does not have 228.16legalcontrol of the payment of the wages for such services, the 228.17 term "employer," except for purposes of paragraph (1), means the 228.18 person havinglegalcontrol of the payment of such wages. As 228.19 used in the preceding sentence, the term "employer" includes any 228.20 corporation, individual, estate, trust, or organization which is 228.21 exempt from taxation under section 290.05 and further includes, 228.22 but is not limited to, officers of corporations who havelegal228.23 control, either individually or jointly with another or others, 228.24 of the payment of the wages. 228.25 (5) [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For 228.26 purposes of this section, the term "number of withholding 228.27 exemptions claimed" means the number of withholding exemptions 228.28 claimed in a withholding exemption certificate in effect under 228.29 subdivision 5, except that if no such certificate is in effect, 228.30 the number of withholding exemptions claimed shall be considered 228.31 to be zero. 228.32 [EFFECTIVE DATE.] This section is effective the day 228.33 following final enactment. 228.34 Sec. 9. Minnesota Statutes 2002, section 290C.05, is 228.35 amended to read: 228.36 290C.05 [ANNUAL CERTIFICATION.] 229.1 On or before July 1 of each year, beginning with the year 229.2 after the claimant has received an approved application, the 229.3 commissioner shall send each claimant enrolled under the 229.4 sustainable forest incentive program a certification form. The 229.5 claimant must sign the certification, attesting that the 229.6 requirements and conditions for continued enrollment in the 229.7 program are currently being met, and must return the signed 229.8 certification form to the commissioner by August 15 of that same 229.9 year.Failure toIf the claimant does not return an annual 229.10 certification form by the due dateshall result in removal of229.11the lands from the provisions of the sustainable forest229.12incentive program, and the imposition of any applicable removal229.13penalty, the provisions in section 290C.11 apply.The claimant229.14may appeal the removal and any associated penalty according to229.15the procedures and within the time allowed under this chapter.229.16 [EFFECTIVE DATE.] This section is effective the day 229.17 following final enactment. 229.18 Sec. 10. [290C.055] [LENGTH OF COVENANT.] 229.19 The covenant remains in effect for a minimum of eight 229.20 years. If land is removed from the program after it has been 229.21 enrolled for less than four years, the covenant remains in 229.22 effect for eight years from the date recorded. 229.23 In the case of land that has been enrolled for more than 229.24 four years and is removed from the program for any reason, there 229.25 is a four-year waiting period to end the covenant. The covenant 229.26 remains in effect until January 1 of the fifth calendar year 229.27 that begins after the date that: 229.28 (1) the commissioner receives notification from the 229.29 claimant that the claimant wishes to be removed from the program 229.30 under section 290C.10, or 229.31 (2) the date that land is removed from the program under 229.32 section 290C.11. 229.33 Notwithstanding the other provisions of this section, the 229.34 covenant is terminated at the same time that land is removed 229.35 from the program due to acquisition of title or possession for a 229.36 public purpose under section 290C.10. 230.1 [EFFECTIVE DATE.] This section is effective the day 230.2 following final enactment. 230.3 Sec. 11. Minnesota Statutes 2002, section 325D.33, 230.4 subdivision 6, is amended to read: 230.5 Subd. 6. [VIOLATIONS.] If the commissioner determines that 230.6 a distributor is violating any provision of this chapter, the 230.7 commissioner must give the distributor a written warning 230.8 explaining the violation and an explanation of what must be done 230.9 to comply with this chapter. Within ten days of issuance of the 230.10 warning, the distributor must notify the commissioner that the 230.11 distributor has complied with the commissioner's recommendation 230.12 or request that the commissioner set the issue for a hearing 230.13 pursuant to chapter 14. If a hearing is requested, the hearing 230.14 shall be scheduled within 20 days of the request and the 230.15 recommendation of the administrative law judge shall be issued 230.16 within five working days of the close of the hearing. The 230.17 commissioner's final determination shall be issued within five 230.18 working days of the receipt of the administrative law judge's 230.19 recommendation. If the commissioner's final determination is 230.20 adverse to the distributor and the distributor does not comply 230.21 within ten days of receipt of the commissioner's final 230.22 determination, the commissioner may order the distributor to 230.23 immediately cease the stamping of cigarettes. As soon as 230.24 practicable after the order, the commissioner must remove the 230.25 meter and any unapplied cigarette stamps from the premises of 230.26 the distributor. 230.27 If within ten days of issuance of the written warning the 230.28 distributor has not complied with the commissioner's 230.29 recommendation or requested a hearing, the commissioner may 230.30 order the distributor to immediately cease the stamping of 230.31 cigarettes and remove the meter and unapplied stamps from the 230.32 distributor's premises. 230.33If, within any 12-month period, the commissioner has issued230.34three written warnings to any distributor, even if the230.35distributor has complied within ten days, the commissioner shall230.36notify the distributor of the commissioner's intent to revoke231.1the distributor's license for a continuing course of conduct231.2contrary to this chapter. For purposes of this paragraph, a231.3written warning that was ultimately resolved by removal of the231.4warning by the commissioner is not deemed to be a warning. The231.5commissioner must notify the distributor of the date and time of231.6a hearing pursuant to chapter 14 at least 20 days before the231.7hearing is held. The hearing must provide an opportunity for231.8the distributor to show cause why the license should not be231.9revoked. If the commissioner revokes a distributor's license,231.10the commissioner shall not issue a new license to that231.11distributor for 180 days.231.12 [EFFECTIVE DATE.] This section is effective the day 231.13 following final enactment. 231.14 Sec. 12. Minnesota Statutes 2002, section 473.843, 231.15 subdivision 5, is amended to read: 231.16 Subd. 5. [PENALTIES; ENFORCEMENT.] The audit, penalty, and 231.17 enforcement provisions applicable to corporate franchise taxes 231.18 imposed under chapter 290 apply to the fees imposed under this 231.19 section. The commissioner of revenue shall administer the 231.20 provisions. 231.21 [EFFECTIVE DATE.] This section is effective the day 231.22 following final enactment. 231.23 Sec. 13. [REPEALER.] 231.24 Minnesota Rules, parts 8093.2000 and 8093.3000, are 231.25 repealed. 231.26 [EFFECTIVE DATE.] This section is effective the day 231.27 following final enactment.