Minnesota Legislature
HF 2540
2nd Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
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; 273.13, subdivision 23; 2.34 274.014, subdivision 3; 275.065, subdivision 3; 2.35 276.112; 289A.02, subdivision 7; 289A.08, subdivision 2.36 16; 289A.19, subdivision 4; 289A.40, subdivision 2; 2.37 290.01, subdivisions 7, 19, 19a, 19b, 19c, 19d, 31; 2.38 290.06, subdivision 2c; 290.0674, subdivision 1; 2.39 290.091, subdivision 2; 290.0921, subdivision 3; 2.40 290A.03, subdivision 15; 290C.10; 291.005, subdivision 2.41 1; 291.03, subdivision 1; 297A.668, subdivisions 1, 3, 2.42 5; 297A.669, subdivision 16; 297A.68, subdivisions 2, 2.43 5, 39; 297A.70, subdivision 8; 297F.08, subdivision 2.44 12; 297F.09, subdivisions 1, 2; 298.75, subdivision 1; 2.45 469.174, subdivision 25; 469.177, subdivision 1; 2.46 469.310, subdivision 11; 469.330, subdivision 11; 2.47 469.335; 469.337; 477A.011, subdivision 36; 477A.03, 2.48 subdivision 2b; Laws 1990, chapter 604, article 7, 2.49 section 29, subdivision 1, as amended; Laws 1998, 2.50 chapter 389, article 3, section 41; Laws 1998, chapter 2.51 389, article 3, section 42, subdivision 2, as amended; 2.52 Laws 1998, chapter 389, article 8, section 43, 2.53 subdivision 3; Laws 1998, chapter 389, article 11, 2.54 section 24, subdivisions 1, 2; Laws 2000, chapter 391, 2.55 section 1, subdivisions 1, 2, as amended; Laws 2001, 2.56 First Special Session chapter 10, article 2, section 2.57 77, as amended; Laws 2002, chapter 365, section 9; 2.58 Laws 2002, chapter 377, article 3, section 4; Laws 2.59 2003, First Special Session chapter 1, article 2, 2.60 section 123; Laws 2003, First Special Session chapter 2.61 21, article 5, section 13; Laws 2003, First Special 2.62 Session chapter 21, article 6, section 9; proposing 2.63 coding for new law in Minnesota Statutes, chapters 2.64 270; 272; 273; 290; 290C; 297F; 325F; 469; 473; 2.65 repealing Minnesota Statutes 2002, sections 273.19, 2.66 subdivision 5; 274.05; 275.15; 283.07; 297E.12, 2.67 subdivision 10; 469.176, subdivision 1a; 469.1766; 2.68 Laws 1975, chapter 287, section 5; Laws 2003, chapter 2.69 127, article 9, section 9, subdivision 4; Minnesota 2.70 Rules, parts 8093.2000; 8093.3000; 8130.0110, subpart 2.71 4; 8130.0200, subparts 5, 6; 8130.0400, subpart 9; 3.1 8130.1200, subparts 5, 6; 8130.2900; 8130.3100, 3.2 subpart 1; 8130.4000, subparts 1, 2; 8130.4200, 3.3 subpart 1; 8130.4400, subpart 3; 8130.5200; 8130.5600, 3.4 subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 5; 3.5 8130.8800, subpart 4. 3.6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 3.7 ARTICLE 1 3.8 INCOME, FRANCHISE, AND OCCUPATION TAXES 3.9 Section 1. Minnesota Statutes 2002, section 289A.08, 3.10 subdivision 1, is amended to read: 3.11 Subdivision 1. [GENERALLY; INDIVIDUALS.] (a) A taxpayer 3.12 must file a return for each taxable year the taxpayer is 3.13 required to file a return under section 6012 of the Internal 3.14 Revenue Code, except that: 3.15 (1) an individual who is not a Minnesota resident for any 3.16 part of the year is not required to file a Minnesota income tax 3.17 return if the individual's gross income derived from Minnesota 3.18 sources as determined under sections 290.081, paragraph (a), and 3.19 290.17, is less than the filing requirements for a single 3.20 individual who is a full year resident of Minnesota; and 3.21 (2) an individual who is a Minnesota resident is not 3.22 required to file a Minnesota income tax return if the 3.23 individual's gross income derived from Minnesota sources as 3.24 determined under section 290.17, less the amount of the 3.25 individual's gross income that consists of compensation paid to 3.26 members of the armed forces of the United States or United 3.27 Nations for active duty performed outside Minnesota, is less 3.28 than the filing requirements for a single individual who is a 3.29 full-year resident of Minnesota. 3.30 (b) The decedent's final income tax return, and other 3.31 income tax returns for prior years where the decedent had gross 3.32 income in excess of the minimum amount at which an individual is 3.33 required to file and did not file, must be filed by the 3.34 decedent's personal representative, if any. If there is no 3.35 personal representative, the return or returns must be filed by 3.36 the transferees, as defined in section 289A.38, subdivision 13, 3.37 who receive property of the decedent. 3.38 (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 51.20 290.06, subdivision 2c, is amended to read: 51.21 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 51.22 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 51.23 married individuals filing joint returns and surviving spouses 51.24 as defined in section 2(a) of the Internal Revenue Code must be 51.25 computed by applying to their taxable net income the following 51.26 schedule of rates: 51.27 (1) On the first $25,680, 5.35 percent; 51.28 (2) On all over $25,680, but not over $102,030, 7.05 51.29 percent; 51.30 (3) On all over $102,030, 7.85 percent. 51.31 Married individuals filing separate returns, estates, and 51.32 trusts must compute their income tax by applying the above rates 51.33 to their taxable income, except that the income brackets will be 51.34 one-half of the above amounts. 51.35 (b) The income taxes imposed by this chapter upon unmarried 51.36 individuals must be computed by applying to taxable net income 52.1 the following schedule of rates: 52.2 (1) On the first $17,570, 5.35 percent; 52.3 (2) On all over $17,570, but not over $57,710, 7.05 52.4 percent; 52.5 (3) On all over $57,710, 7.85 percent. 52.6 (c) The income taxes imposed by this chapter upon unmarried 52.7 individuals qualifying as a head of household as defined in 52.8 section 2(b) of the Internal Revenue Code must be computed by 52.9 applying to taxable net income the following schedule of rates: 52.10 (1) On the first $21,630, 5.35 percent; 52.11 (2) On all over $21,630, but not over $86,910, 7.05 52.12 percent; 52.13 (3) On all over $86,910, 7.85 percent. 52.14 (d) In lieu of a tax computed according to the rates set 52.15 forth in this subdivision, the tax of any individual taxpayer 52.16 whose taxable net income for the taxable year is less than an 52.17 amount determined by the commissioner must be computed in 52.18 accordance with tables prepared and issued by the commissioner 52.19 of revenue based on income brackets of not more than $100. The 52.20 amount of tax for each bracket shall be computed at the rates 52.21 set forth in this subdivision, provided that the commissioner 52.22 may disregard a fractional part of a dollar unless it amounts to 52.23 50 cents or more, in which case it may be increased to $1. 52.24 (e) An individual who is not a Minnesota resident for the 52.25 entire year must compute the individual's Minnesota income tax 52.26 as provided in this subdivision. After the application of the 52.27 nonrefundable credits provided in this chapter, the tax 52.28 liability must then be multiplied by a fraction in which: 52.29 (1) the numerator is the individual's Minnesota source 52.30 federal adjusted gross income as defined in section 62 of the 52.31 Internal Revenue Code and increased by the additions required 52.32 under section 290.01, subdivision 19a, clauses (1), (5), and 52.33 (6), and reduced by thesubtractionsubtractions under section 52.34 290.01, subdivision 19b,clauseclauses (11) and (12), and the 52.35 Minnesota assignable portion of the subtraction for United 52.36 States government interest under section 290.01, subdivision 53.1 19b, clause (1), after applying the allocation and assignability 53.2 provisions of section 290.081, clause (a), or 290.17; and 53.3 (2) the denominator is the individual's federal adjusted 53.4 gross income as defined in section 62 of the Internal Revenue 53.5 Code of 1986, increased by the amounts specified in section 53.6 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 53.7 by the amounts specified in section 290.01, subdivision 19b, 53.8 clauses (1)and, (11), and (12). 53.9 [EFFECTIVE DATE.] This section is effective for taxable 53.10 years beginning after December 31, 2002. 53.11 Sec. 8. Minnesota Statutes 2003 Supplement, section 53.12 290.091, subdivision 2, is amended to read: 53.13 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 53.14 this section, the following terms have the meanings given: 53.15 (a) "Alternative minimum taxable income" means the sum of 53.16 the following for the taxable year: 53.17 (1) the taxpayer's federal alternative minimum taxable 53.18 income as defined in section 55(b)(2) of the Internal Revenue 53.19 Code; 53.20 (2) the taxpayer's itemized deductions allowed in computing 53.21 federal alternative minimum taxable income, but excluding: 53.22 (i) the charitable contribution deduction under section 170 53.23 of the Internal Revenue Code to the extent that the deduction 53.24 exceeds 1.0 percent of adjusted gross income, as defined in 53.25 section 62 of the Internal Revenue Code; 53.26 (ii) the medical expense deduction; 53.27 (iii) the casualty, theft, and disaster loss deduction; and 53.28 (iv) the impairment-related work expenses of a disabled 53.29 person; 53.30 (3) for depletion allowances computed under section 613A(c) 53.31 of the Internal Revenue Code, with respect to each property (as 53.32 defined in section 614 of the Internal Revenue Code), to the 53.33 extent not included in federal alternative minimum taxable 53.34 income, the excess of the deduction for depletion allowable 53.35 under section 611 of the Internal Revenue Code for the taxable 53.36 year over the adjusted basis of the property at the end of the 54.1 taxable year (determined without regard to the depletion 54.2 deduction for the taxable year); 54.3 (4) to the extent not included in federal alternative 54.4 minimum taxable income, the amount of the tax preference for 54.5 intangible drilling cost under section 57(a)(2) of the Internal 54.6 Revenue Code determined without regard to subparagraph (E); 54.7 (5) to the extent not included in federal alternative 54.8 minimum taxable income, the amount of interest income as 54.9 provided by section 290.01, subdivision 19a, clause (1);and54.10 (6) the amount of addition required by section 290.01, 54.11 subdivision 19a, clause (7); and 54.12 (7) the amount of addition required by section 290.01, 54.13 subdivision 19a, clause (8); 54.14 less the sum of the amounts determined under the following: 54.15 (1) interest income as defined in section 290.01, 54.16 subdivision 19b, clause (1); 54.17 (2) an overpayment of state income tax as provided by 54.18 section 290.01, subdivision 19b, clause (2), to the extent 54.19 included in federal alternative minimum taxable income; 54.20 (3) the amount of investment interest paid or accrued 54.21 within the taxable year on indebtedness to the extent that the 54.22 amount does not exceed net investment income, as defined in 54.23 section 163(d)(4) of the Internal Revenue Code. Interest does 54.24 not include amounts deducted in computing federal adjusted gross 54.25 income; and 54.26 (4) amounts subtracted from federal taxable income as 54.27 provided by section 290.01, subdivision 19b, clauses (10)and54.28(11)to (12). 54.29 In the case of an estate or trust, alternative minimum 54.30 taxable income must be computed as provided in section 59(c) of 54.31 the Internal Revenue Code. 54.32 (b) "Investment interest" means investment interest as 54.33 defined in section 163(d)(3) of the Internal Revenue Code. 54.34 (c) "Tentative minimum tax" equals 6.4 percent of 54.35 alternative minimum taxable income after subtracting the 54.36 exemption amount determined under subdivision 3. 55.1 (d) "Regular tax" means the tax that would be imposed under 55.2 this chapter (without regard to this section and section 55.3 290.032), reduced by the sum of the nonrefundable credits 55.4 allowed under this chapter. 55.5 (e) "Net minimum tax" means the minimum tax imposed by this 55.6 section. 55.7 [EFFECTIVE DATE.] This section is effective for taxable 55.8 years beginning after December 31, 2003. 55.9 Sec. 9. Minnesota Statutes 2003 Supplement, section 55.10 290.0921, subdivision 3, is amended to read: 55.11 Subd. 3. [ALTERNATIVE MINIMUM TAXABLE INCOME.] 55.12 "Alternative minimum taxable income" is Minnesota net income as 55.13 defined in section 290.01, subdivision 19, and includes the 55.14 adjustments and tax preference items in sections 56, 57, 58, and 55.15 59(d), (e), (f), and (h) of the Internal Revenue Code. If a 55.16 corporation files a separate company Minnesota tax return, the 55.17 minimum tax must be computed on a separate company basis. If a 55.18 corporation is part of a tax group filing a unitary return, the 55.19 minimum tax must be computed on a unitary basis. The following 55.20 adjustments must be made. 55.21 (1) For purposes of the depreciation adjustments under 55.22 section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 55.23 the basis for depreciable property placed in service in a 55.24 taxable year beginning before January 1, 1990, is the adjusted 55.25 basis for federal income tax purposes, including any 55.26 modification made in a taxable year under section 290.01, 55.27 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 55.28 subdivision 7, paragraph (c). 55.29 For taxable years beginning after December 31, 2000, the 55.30 amount of any remaining modification made under section 290.01, 55.31 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 55.32 subdivision 7, paragraph (c), not previously deducted is a 55.33 depreciation allowance in the first taxable year after December 55.34 31, 2000. 55.35 (2) The portion of the depreciation deduction allowed for 55.36 federal income tax purposes under section 168(k) of the Internal 56.1 Revenue Code that is required as an addition under section 56.2 290.01, subdivision 19c, clause (16), is disallowed in 56.3 determining alternative minimum taxable income. 56.4 (3) The subtraction for depreciation allowed under section 56.5 290.01, subdivision 19d, clause (19), is allowed as a 56.6 depreciation deduction in determining alternative minimum 56.7 taxable income. 56.8 (4) The alternative tax net operating loss deduction under 56.9 sections 56(a)(4) and 56(d) of the Internal Revenue Code does 56.10 not apply. 56.11 (5) The special rule for certain dividends under section 56.12 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 56.13 (6) The special rule for dividends from section 936 56.14 companies under section 56(g)(4)(C)(iii) does not apply. 56.15 (7) The tax preference for depletion under section 57(a)(1) 56.16 of the Internal Revenue Code does not apply. 56.17 (8) The tax preference for intangible drilling costs under 56.18 section 57(a)(2) of the Internal Revenue Code must be calculated 56.19 without regard to subparagraph (E) and the subtraction under 56.20 section 290.01, subdivision 19d, clause (4). 56.21 (9) The tax preference for tax exempt interest under 56.22 section 57(a)(5) of the Internal Revenue Code does not apply. 56.23 (10) The tax preference for charitable contributions of 56.24 appreciated property under section 57(a)(6) of the Internal 56.25 Revenue Code does not apply. 56.26 (11) For purposes of calculating the tax preference for 56.27 accelerated depreciation or amortization on certain property 56.28 placed in service before January 1, 1987, under section 57(a)(7) 56.29 of the Internal Revenue Code, the deduction allowable for the 56.30 taxable year is the deduction allowed under section 290.01, 56.31 subdivision 19e. 56.32 For taxable years beginning after December 31, 2000, the 56.33 amount of any remaining modification made under section 290.01, 56.34 subdivision 19e, not previously deducted is a depreciation or 56.35 amortization allowance in the first taxable year after December 56.36 31, 2004. 57.1 (12) For purposes of calculating the adjustment for 57.2 adjusted current earnings in section 56(g) of the Internal 57.3 Revenue Code, the term "alternative minimum taxable income" as 57.4 it is used in section 56(g) of the Internal Revenue Code, means 57.5 alternative minimum taxable income as defined in this 57.6 subdivision, determined without regard to the adjustment for 57.7 adjusted current earnings in section 56(g) of the Internal 57.8 Revenue Code. 57.9 (13) For purposes of determining the amount of adjusted 57.10 current earnings under section 56(g)(3) of the Internal Revenue 57.11 Code, no adjustment shall be made under section 56(g)(4) of the 57.12 Internal Revenue Code with respect to (i) the amount of foreign 57.13 dividend gross-up subtracted as provided in section 290.01, 57.14 subdivision 19d, clause (1), (ii) the amount of refunds of 57.15 income, excise, or franchise taxes subtracted as provided in 57.16 section 290.01, subdivision 19d, clause (10), or (iii) the 57.17 amount of royalties, fees or other like income subtracted as 57.18 provided in section 290.01, subdivision 19d, clause (11). 57.19 (14) Alternative minimum taxable income excludes the income 57.20 from operating in a job opportunity building zone as provided 57.21 under section 469.317. 57.22 (15) Alternative minimum taxable income excludes the income 57.23 from operating in a biotechnology and health sciences industry 57.24 zone as provided under section 469.337. 57.25 (16) The addition required under section 290.01, 57.26 subdivision 19c, clause (17), is included in determining 57.27 alternative minimum taxable income. 57.28 Items of tax preference must not be reduced below zero as a 57.29 result of the modifications in this subdivision. 57.30 [EFFECTIVE DATE.] This section is effective for taxable 57.31 years beginning after December 31, 2003. 57.32 Sec. 10. Minnesota Statutes 2003 Supplement, section 57.33 290A.03, subdivision 15, is amended to read: 57.34 Subd. 15. [INTERNAL REVENUE CODE.] "Internal Revenue Code" 57.35 means the Internal Revenue Code of 1986, as amended throughJune57.3615, 2003April 10, 2004. 58.1 [EFFECTIVE DATE.] This section is effective the day 58.2 following final enactment except the changes to household income 58.3 generated by federal changes to federal adjusted gross income 58.4 are effective at the same time federal changes are effective. 58.5 Sec. 11. Minnesota Statutes 2003 Supplement, section 58.6 291.005, subdivision 1, is amended to read: 58.7 Subdivision 1. Unless the context otherwise clearly 58.8 requires, the following terms used in this chapter shall have 58.9 the following meanings: 58.10 (1) "Federal gross estate" means the gross estate of a 58.11 decedent as valued and otherwise determined for federal estate 58.12 tax purposes by federal taxing authorities pursuant to the 58.13 provisions of the Internal Revenue Code. 58.14 (2) "Minnesota gross estate" means the federal gross estate 58.15 of a decedent after (a) excluding therefrom any property 58.16 included therein which has its situs outside Minnesota, and (b) 58.17 including therein any property omitted from the federal gross 58.18 estate which is includable therein, has its situs in Minnesota, 58.19 and was not disclosed to federal taxing authorities. 58.20 (3) "Personal representative" means the executor, 58.21 administrator or other person appointed by the court to 58.22 administer and dispose of the property of the decedent. If 58.23 there is no executor, administrator or other person appointed, 58.24 qualified, and acting within this state, then any person in 58.25 actual or constructive possession of any property having a situs 58.26 in this state which is included in the federal gross estate of 58.27 the decedent shall be deemed to be a personal representative to 58.28 the extent of the property and the Minnesota estate tax due with 58.29 respect to the property. 58.30 (4) "Resident decedent" means an individual whose domicile 58.31 at the time of death was in Minnesota. 58.32 (5) "Nonresident decedent" means an individual whose 58.33 domicile at the time of death was not in Minnesota. 58.34 (6) "Situs of property" means, with respect to real 58.35 property, the state or country in which it is located; with 58.36 respect to tangible personal property, the state or country in 59.1 which it was normally kept or located at the time of the 59.2 decedent's death; and with respect to intangible personal 59.3 property, the state or country in which the decedent was 59.4 domiciled at death. 59.5 (7) "Commissioner" means the commissioner of revenue or any 59.6 person to whom the commissioner has delegated functions under 59.7 this chapter. 59.8 (8) "Internal Revenue Code" means the United States 59.9 Internal Revenue Code of 1986, as amended through December 31, 59.1020022003. 59.11 [EFFECTIVE DATE.] This section is effective for estates of 59.12 decedents dying after January 31, 2003. 59.13 ARTICLE 3 59.14 PROPERTY TAXES 59.15 Section 1. Minnesota Statutes 2002, section 97A.061, 59.16 subdivision 1, is amended to read: 59.17 Subdivision 1. [APPLICABILITY; AMOUNT.] (a) The 59.18 commissioner shall annually make a payment to each county having 59.19 public hunting areas and game refuges. Money to make the 59.20 payments is annually appropriated for that purpose from the 59.21 general fund. Except as provided in paragraph (b), this section 59.22 does not apply to state trust fund land and other state land not 59.23 purchased for game refuge or public hunting purposes. Except as 59.24 provided in paragraph (b), the payment shall be the greatest of: 59.25 (1) 35 percent of the gross receipts from all special use 59.26 permits and leases of land acquired for public hunting and game 59.27 refuges; 59.28 (2) 50 cents per acre on land purchased actually used for 59.29 public hunting or game refuges; or 59.30 (3) three-fourths of one percent of the appraised value of 59.31 purchased land actually used for public hunting and game refuges. 59.32 (b) The payment shall be 50 percent of the dollar amount 59.33 adjusted for inflation as determined under section 477A.12, 59.34 subdivision 1, paragraph (a), clause (1), multiplied by the 59.35 number of acres of land in the county that are owned by another 59.36 state agency for military purposes and designated as a game 60.1 refuge under section 97A.085. 60.2 (c) The payment must be reduced by the amount paid under 60.3 subdivision 3 for croplands managed for wild geese. 60.4(c)(d) The appraised value is the purchase price for five 60.5 years after acquisition. The appraised value shall be 60.6 determined by the county assessor every five years after 60.7 acquisition. 60.8 [EFFECTIVE DATE.] This section is effective for aids paid 60.9 in calendar year 2005 and thereafter. 60.10 Sec. 2. Minnesota Statutes 2002, section 144F.01, 60.11 subdivision 10, is amended to read: 60.12 Subd. 10. [REPORTS.] On or before March 15,20052006, and 60.13 March 15,20072008, the special taxing district shall submit a 60.14 levy and expenditure report to the commissioner of revenue and 60.15 to the chairs of the house and senate committees with 60.16 jurisdiction over taxes. Each report must include the amount of 60.17 the district's levies for taxes payable for each of the two 60.18 previous years and its actual expenditures of those revenues. 60.19 Expenditures must be reported by general service category, as 60.20 listed in subdivision 5, and include a separate category for 60.21 administrative expenses. 60.22 [EFFECTIVE DATE.] This section is effective the day 60.23 following final enactment. 60.24 Sec. 3. Minnesota Statutes 2002, section 272.02, 60.25 subdivision 22, is amended to read: 60.26 Subd. 22. [WIND ENERGY CONVERSION SYSTEMS.] All real and 60.27 personal property of a wind energy conversion system as defined 60.28 in section 272.029, subdivision 2, is exempt from property tax 60.29 except that the land on which the property is located remains 60.30 taxable. The value of the land on which the wind energy 60.31 conversion system is located shall not be increased or 60.32 decreased, but shall be valued in the same manner as similar 60.33 land that has not been improved with a wind energy conversion 60.34 system. The land shall be classified based on the most probable 60.35 use of the property if it were not improved with a wind energy 60.36 conversion system. 61.1 [EFFECTIVE DATE.] This section is effective for assessment 61.2 year 2004 and thereafter, for taxes payable in 2005 and 61.3 thereafter. 61.4 Sec. 4. Minnesota Statutes 2003 Supplement, section 61.5 272.02, subdivision 47, is amended to read: 61.6 Subd. 47. [POULTRY LITTER BIOMASS GENERATION FACILITY; 61.7 PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 61.8 attached machinery and other personal property which is part of 61.9 an electrical generating facility that meets the requirements of 61.10 this subdivision is exempt. At the time of construction, the 61.11 facility must: 61.12 (1) be designed to utilize poultry litter as a primary fuel 61.13 source; and 61.14 (2) be constructed for the purpose of generating power at 61.15 the facility that will be sold pursuant to a contract approved 61.16 by the Public Utilities Commission in accordance with the 61.17 biomass mandate imposed under section 216B.2424. 61.18 Construction of the facility must be commenced after 61.19 January 1, 2003, and before December 31,20032004. Property 61.20 eligible for this exemption does not include electric 61.21 transmission lines and interconnections or gas pipelines and 61.22 interconnections appurtenant to the property or the facility. 61.23 [EFFECTIVE DATE.] This section is effective for assessment 61.24 year 2004, taxes payable in 2005, and thereafter. 61.25 Sec. 5. Minnesota Statutes 2003 Supplement, section 61.26 272.02, subdivision 56, is amended to read: 61.27 Subd. 56. [ELECTRIC GENERATION FACILITY; PERSONAL 61.28 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 61.29 attached machinery and other personal property which is part of 61.30 a combined-cycle combustion-turbine electric generation facility 61.31 that exceeds550300 megawatts of installed capacity and that 61.32 meets the requirements of this subdivision is exempt. At the 61.33 time of construction, the facility must: 61.34 (1) be designed to utilize natural gas as a primary fuel; 61.35 (2) not be owned by a public utility as defined in section 61.36 216B.02, subdivision 4; 62.1 (3) be located within five miles of an existing natural gas 62.2 pipeline and within four miles of an existing electrical 62.3 transmission substation; 62.4 (4) be located outside the metropolitan area as defined 62.5 under section 473.121, subdivision 2; and 62.6 (5) be designed to provide energy and ancillary services 62.7 and have received a certificate of need under section 216B.243. 62.8 (b) Construction of the facility must be commenced after 62.9 January 1, 2004, and before January 1, 2007, except that 62.10 property eligible for this exemption includes any expansion of 62.11 the facility that also meets the requirements of paragraph (a), 62.12 clauses (1) to (5), without regard to the date that construction 62.13 of the expansion commences. Property eligible for this 62.14 exemption does not include electric transmission lines and 62.15 interconnections or gas pipelines and interconnections 62.16 appurtenant to the property or the facility. 62.17 [EFFECTIVE DATE.] This section is effective for assessment 62.18 year 2005, taxes payable in 2006, and thereafter. 62.19 Sec. 6. Minnesota Statutes 2002, section 272.02, is 62.20 amended by adding a subdivision to read: 62.21 Subd. 68. [ELECTRIC GENERATION FACILITY; PERSONAL 62.22 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 62.23 machinery and other personal property which is part of a 62.24 simple-cycle, combustion-turbine electric generation facility 62.25 that exceeds 300 megawatts of installed capacity and that meets 62.26 the requirements of this subdivision is exempt. At the time of 62.27 the construction, the facility must: 62.28 (1) be designed to utilize natural gas as a primary fuel; 62.29 (2) be owned by a public utility as defined in section 62.30 216B.02, subdivision 4, and be located at or interconnected with 62.31 an existing generating plant of the utility; 62.32 (3) be designed to provide peaking, emergency backup, or 62.33 contingency services; 62.34 (4) satisfy a resource need identified in an approved 62.35 integrated resource plan filed under section 216B.2422; and 62.36 (5) have received, by resolution, the approval from the 63.1 governing body of the county and the city for the exemption of 63.2 personal property under this subdivision. 63.3 Construction of the facility must be commenced after 63.4 January 1, 2004, and before January 1, 2006. Property eligible 63.5 for this exemption does not include electric transmission lines 63.6 and interconnections or gas pipelines and interconnections 63.7 appurtenant to the property or the facility. 63.8 [EFFECTIVE DATE.] This section is effective for assessment 63.9 year 2005, taxes payable in 2006, and thereafter. 63.10 Sec. 7. Minnesota Statutes 2002, section 272.02, is 63.11 amended by adding a subdivision to read: 63.12 Subd. 69. [ELECTRIC GENERATION FACILITY; PERSONAL 63.13 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 63.14 attached machinery and other personal property which is part of 63.15 a simple-cycle combustion-turbine electric generation facility 63.16 that exceeds 290 megawatts of installed capacity and that meets 63.17 the requirements of this subdivision is exempt. At the time of 63.18 construction, the facility must: 63.19 (1) be designed to utilize natural gas as a primary fuel; 63.20 (2) not be owned by a public utility as defined in section 63.21 216B.02, subdivision 4; 63.22 (3) be located within five miles of an existing natural gas 63.23 pipeline and within five miles of an existing electrical 63.24 transmission substation; 63.25 (4) be located outside the metropolitan area as defined 63.26 under section 473.121, subdivision 2; 63.27 (5) be designed to provide peaking capacity energy and 63.28 ancillary services and have satisfied all of the requirements 63.29 under section 216B.243; and 63.30 (6) have received, by resolution, the approval from the 63.31 governing body of the county, city, and school district in which 63.32 the proposed facility is to be located for the exemption of 63.33 personal property under this subdivision. 63.34 (b) Construction of the facility must be commenced after 63.35 January 1, 2005, and before January 1, 2009. Property eligible 63.36 for this exemption does not include electric transmission lines 64.1 and interconnections or gas pipelines and interconnections 64.2 appurtenant to the property or the facility. 64.3 [EFFECTIVE DATE.] This section is effective for assessment 64.4 year 2006, taxes payable in 2007, and thereafter. 64.5 Sec. 8. Minnesota Statutes 2002, section 272.02, is 64.6 amended by adding a subdivision to read: 64.7 Subd. 70. [ELECTRIC GENERATION FACILITY PERSONAL 64.8 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), and 64.9 section 453.54, subdivision 20, attached machinery and other 64.10 personal property which is part of an electric generation 64.11 facility that exceeds 150 megawatts of installed capacity and 64.12 meets the requirements of this subdivision is exempt. At the 64.13 time of construction, the facility must: 64.14 (1) be designed to utilize natural gas as a primary fuel; 64.15 (2) be owned and operated by a municipal power agency as 64.16 defined in section 453.52, subdivision 8; 64.17 (3) have received the certificate of need under section 64.18 216B.243; 64.19 (4) be located outside the metropolitan area as defined 64.20 under section 473.121, subdivision 2; and 64.21 (5) be designed to be a combined-cycle facility, although 64.22 initially the facility will be operated as a simple-cycle 64.23 combustion turbine. 64.24 (b) To qualify under this subdivision, an agreement must be 64.25 negotiated between the municipal power agency and the host city, 64.26 for a payment in lieu of property taxes to the host city. 64.27 (c) Construction of the facility must be commenced after 64.28 January 1, 2004, and before January 1, 2006. Property eligible 64.29 for this exemption does not include electric transmission lines 64.30 and interconnections or gas pipelines and interconnections 64.31 appurtenant to the property or the facility. 64.32 [EFFECTIVE DATE.] This section is effective for assessment 64.33 year 2005, taxes payable in 2006, and thereafter. 64.34 Sec. 9. Minnesota Statutes 2002, section 272.02, is 64.35 amended by adding a subdivision to read: 64.36 Subd. 71. [BIOMASS ELECTRIC GENERATION FACILITY; PERSONAL 65.1 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 65.2 attached machinery and other personal property which is a part 65.3 of an electric generation facility generating up to 30 megawatts 65.4 of installed capacity and that meets the requirements of this 65.5 subdivision is exempt. At the time of construction, the 65.6 facility must: 65.7 (1) be designed to utilize a minimum 90 percent waste 65.8 biomass as a fuel; 65.9 (2) not be owned by a public utility as defined in section 65.10 216B.02, subdivision 4; 65.11 (3) be located within a city of the first class and have 65.12 its primary location at a former garbage transfer station; and 65.13 (4) be designed to have capability to provide baseload 65.14 energy and district heating. 65.15 (b) Construction of the facility must be commenced after 65.16 January 1, 2004, and before January 1, 2008. Property eligible 65.17 for this exemption does not include electric transmission lines 65.18 and interconnections or gas pipelines and interconnections 65.19 appurtenant to the property or the facility. 65.20 [EFFECTIVE DATE.] This section is effective for assessment 65.21 year 2005, taxes payable in 2006, and thereafter. 65.22 Sec. 10. Minnesota Statutes 2002, section 272.02, is 65.23 amended by adding a subdivision to read: 65.24 Subd. 72. [ELECTRIC GENERATION FACILITY; PERSONAL 65.25 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 65.26 attached machinery and other personal property that is part of 65.27 either a simple-cycle, combustion-turbine electric generation 65.28 facility that equals or exceeds 150 megawatts of installed 65.29 capacity, or a combined-cycle, combustion-turbine electric 65.30 generation facility that equals or exceeds 225 megawatts of 65.31 installed capacity, and that in either case meets the 65.32 requirements of this subdivision, is exempt. At the time of 65.33 construction, the facility must: 65.34 (1) be designed to utilize natural gas as a primary fuel; 65.35 (2) not be owned by a public utility as defined in section 65.36 216B.02, subdivision 4; 66.1 (3) be located in a metropolitan county defined in section 66.2 473.121, subdivision 4, that has a population greater than 66.3 190,000 and less than 225,000 in the most recent federal 66.4 decennial census, within one mile of an existing natural gas 66.5 pipeline, and within one mile of an existing electrical 66.6 transmission substation; and 66.7 (4) be designed to provide energy and ancillary services 66.8 and have received a certificate of need under section 216B.243. 66.9 (b) Construction of the facility must be commenced after 66.10 January 1, 2005, and before January 1, 2008. Property eligible 66.11 for this exemption does not include electric transmission lines 66.12 and interconnections or gas pipelines and interconnections 66.13 appurtenant to the property or the facility. 66.14 [EFFECTIVE DATE.] This section is effective for assessment 66.15 year 2005, taxes payable in 2006, and thereafter. 66.16 Sec. 11. Minnesota Statutes 2002, section 272.0212, 66.17 subdivision 1, is amended to read: 66.18 Subdivision 1. [EXEMPTION.] All qualified property in a 66.19 zone is exempt to the extent and for a period up to the duration 66.20 provided by the zone designation and under sections 469.1731 to 66.21 469.1735. 66.22 [EFFECTIVE DATE.] This section is effective for development 66.23 agreements approved after the day following final enactment and 66.24 beginning for property taxes payable in 2005. 66.25 Sec. 12. Minnesota Statutes 2002, section 272.0212, 66.26 subdivision 2, is amended to read: 66.27 Subd. 2. [LIMITS ON EXEMPTION.] (a) Property in a zone is 66.28 not exempt under this section from the following: 66.29 (1) special assessments; 66.30 (2) ad valorem property taxes specifically levied for the 66.31 payment of principal and interest on debt obligations; and 66.32 (3) all taxes levied by a school district, except equalized 66.33 school levies as defined in section 273.1398, subdivision 1, 66.34 paragraph (e). 66.35 (b) The city may limit the property tax exemption to a 66.36 shorter period than the duration of the zone or to a percentage 67.1 of the property taxes payable or both. 67.2 [EFFECTIVE DATE.] This section is effective for development 67.3 agreements approved after the day following final enactment and 67.4 beginning for property taxes payable in 2005. 67.5 Sec. 13. [272.0275] [PERSONAL PROPERTY USED TO GENERATE 67.6 ELECTRICITY; EXEMPTION.] 67.7 Subdivision 1. [NEW PLANT CONSTRUCTION AFTER JANUARY 1, 67.8 2004.] For a new generating plant built and placed in service 67.9 after January 1, 2004, its personal property used to generate 67.10 electric power is exempt from property taxation, including under 67.11 section 453.54, subdivision 20, if an exemption of generation 67.12 personal property form, with an attached siting agreement, is 67.13 filed with the Department of Revenue. The form must be signed 67.14 by the utility, and the county and city or town where the 67.15 facility is proposed to be located. 67.16 Subd. 2. [EXISTING PLANT; INCREASE IN NAMEPLATE CAPACITY.] 67.17 For a plant existing or under construction on the day of final 67.18 enactment of this act, a partial exemption applies if the 67.19 nameplate capacity of the plant is increased from that existing 67.20 on the day of final enactment of this act, and if an exemption 67.21 of generation personal property form, with an attached siting 67.22 agreement is filed with the Department of Revenue. The form 67.23 must be signed by the utility, and the county and city or town 67.24 where the facility expansion is located. This partial exemption 67.25 must be computed by taking the increase in megawatts over the 67.26 total megawatt nameplate capacity after construction is 67.27 complete, multiplied by the market value of all taxable tools, 67.28 implements, and machinery of the generating plant as determined 67.29 by the commissioner of revenue. The resulting exemption is 67.30 effective beginning in the next assessment year. 67.31 Subd. 3. [IN-LIEU PAYMENT; LIMITATION.] If an in-lieu 67.32 payment or service fee is negotiated between a facility exempted 67.33 under this section and the county, city, or town where the 67.34 facility is located, the payment or fee in any year may not 67.35 exceed the property tax revenue that the jurisdiction would 67.36 receive from the facility if it were not exempt. 68.1 Subd. 4. [DEFINITION; APPLICABILITY.] For purposes of this 68.2 section, "personal property" means tools, implements, and 68.3 machinery of the generating plant. The exemption under this 68.4 section does not apply to transformers, transmission lines, 68.5 distribution lines, or any other tools, implements, and 68.6 machinery that are part of an electric substation, wherever 68.7 located. 68.8 [EFFECTIVE DATE.] This section is effective the day 68.9 following final enactment. 68.10 Sec. 14. Minnesota Statutes 2002, section 272.029, 68.11 subdivision 4, is amended to read: 68.12 Subd. 4. [REPORTS.] (a) An owner of a wind energy 68.13 conversion system subject to tax under subdivision 3 shall file 68.14 a report with the commissioner of revenue annually on or before 68.15March 1February 1 detailing the amount of electricity in 68.16 kilowatt-hours that was produced by the wind energy conversion 68.17 system for the previous calendar year. The commissioner shall 68.18 prescribe the form of the report. The report must contain the 68.19 information required by the commissioner to determine the tax 68.20 due to each county under this section for the current year. If 68.21 an owner of a wind energy conversion system subject to taxation 68.22 under this section fails to file the report by the due date, the 68.23 commissioner of revenue shall determine the tax based upon the 68.24 nameplate capacity of the system multiplied by a capacity factor 68.25 of 40 percent. 68.26 (b) On or beforeMarch 31February 28, the commissioner of 68.27 revenue shall notify the owner of the wind energy conversion 68.28 systems of the tax due to each county for the current year and 68.29 shall certify to the county auditor of each county in which the 68.30 systems are located the tax due from each owner for the current 68.31 year. 68.32 [EFFECTIVE DATE.] This section is effective for taxes 68.33 payable in 2005 and thereafter. 68.34 Sec. 15. Minnesota Statutes 2002, section 272.029, 68.35 subdivision 6, is amended to read: 68.36 Subd. 6. [DISTRIBUTION OF REVENUES.] Revenues from the 69.1 taxes imposed under subdivision 5 must be part of the settlement 69.2 between the county treasurer and the county auditor under 69.3 section 276.09. The revenue must be distributed by the county 69.4 auditor or the county treasurer to all local taxing 69.5 jurisdictions in which the wind energy conversion system is 69.6 located, in the same proportion that each of the taxing 69.7 jurisdiction'scurrentprevious year's net tax capacity based 69.8 tax rate is to thecurrentprevious year's total local net tax 69.9 capacity based rate. 69.10 [EFFECTIVE DATE.] This section is effective for taxes 69.11 payable in 2004 and thereafter. 69.12 Sec. 16. Minnesota Statutes 2003 Supplement, section 69.13 273.11, subdivision 1a, is amended to read: 69.14 Subd. 1a. [LIMITED MARKET VALUE.] In the case of all 69.15 property classified as agricultural homestead or nonhomestead, 69.16 residential homestead or nonhomestead, timber,ornoncommercial 69.17 seasonal residential recreational, or class 1c resort property, 69.18 the assessor shall compare the value with the taxable portion of 69.19 the value determined in the preceding assessment, except that 69.20 for class 1c resort property for assessment year 2004, the 69.21 assessor shall determine the limited market value as provided in 69.22 subdivision 1b. 69.23 For assessment year 2002, the amount of the increase shall 69.24 not exceed the greater of (1) ten percent of the value in the 69.25 preceding assessment, or (2) 15 percent of the difference 69.26 between the current assessment and the preceding assessment. 69.27 For assessment year 2003, the amount of the increase shall 69.28 not exceed the greater of (1) 12 percent of the value in the 69.29 preceding assessment, or (2) 20 percent of the difference 69.30 between the current assessment and the preceding assessment. 69.31 For assessment year 2004, the amount of the increase shall 69.32 not exceed the greater of (1) 15 percent of the value in the 69.33 preceding assessment, or (2) 25 percent of the difference 69.34 between the current assessment and the preceding assessment. 69.35 For assessment year 2005, the amount of the increase shall 69.36 not exceed the greater of (1) 15 percent of the value in the 70.1 preceding assessment, or (2) 33 percent of the difference 70.2 between the current assessment and the preceding assessment. 70.3 For assessment year 2006, the amount of the increase shall 70.4 not exceed the greater of (1) 15 percent of the value in the 70.5 preceding assessment, or (2) 50 percent of the difference 70.6 between the current assessment and the preceding assessment. 70.7 This limitation shall not apply to increases in value due 70.8 to improvements. For purposes of this subdivision, the term 70.9 "assessment" means the value prior to any exclusion under 70.10 subdivision 16. 70.11 The provisions of this subdivision shall be in effect 70.12 through assessment year 2006 as provided in this subdivision. 70.13 For purposes of this subdivision and subdivision 1b, "class 70.14 1c resort property" includes the portion of the property 70.15 classified class 1a or 1b homestead, the portion of the property 70.16 classified 1c, plus any remaining portion of the resort that is 70.17 classified 4c under section 273.13, subdivision 25, paragraph 70.18 (d), clause (1). 70.19 For purposes of the assessment/sales ratio study conducted 70.20 under section 127A.48, and the computation of state aids paid 70.21 under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 70.22 477A, market values and net tax capacities determined under this 70.23 subdivision and subdivision 16, shall be used. 70.24 [EFFECTIVE DATE.] This section is effective for assessment 70.25 year 2004 through 2006, for taxes payable in 2005 through 2007. 70.26 Sec. 17. Minnesota Statutes 2002, section 273.11, is 70.27 amended by adding a subdivision to read: 70.28 Subd. 1b. [CLASS 1C RESORTS; 2004 ASSESSMENT ONLY.] For 70.29 assessment year 2004, the valuation increase on class 1c resort 70.30 property shall not exceed the greater of (1) 15 percent of the 70.31 value of its 2002 assessment, or (2) 25 percent of the 70.32 difference in value between its 2004 assessment and its 2002 70.33 assessment. The valuation increase on class 1c resort property 70.34 for the 2005 and 2006 assessment years shall be determined based 70.35 upon the schedule contained in subdivision 1a. 70.36 [EFFECTIVE DATE.] This section is effective the day 71.1 following final enactment. 71.2 Sec. 18. Minnesota Statutes 2002, section 273.111, 71.3 subdivision 6, is amended to read: 71.4 Subd. 6. [AGRICULTURAL USE.] Real property qualifying 71.5 under subdivision 3 shall be considered to be in agricultural 71.6 use provided that annually: 71.7 (1) at least 33-1/3 percent of the total family income of 71.8 the owner is derived therefrom, or the total production income 71.9 including rental from the property is$300$500 plus$10$50 per 71.10 tillable acre; and 71.11 (2) it is devoted to the production for sale of 71.12 agricultural products as defined in section 273.13, subdivision 71.13 23, paragraph (e). 71.14 Slough, wasteland, and woodland contiguous to or surrounded 71.15 by land that is entitled to valuation and tax deferment under 71.16 this section is considered to be in agricultural use if under 71.17 the same ownership and management. 71.18 [EFFECTIVE DATE.] This section is effective for assessment 71.19 year 2005, taxes payable in 2006, and thereafter. 71.20 Sec. 19. Minnesota Statutes 2002, section 273.124, is 71.21 amended by adding a subdivision to read: 71.22 Subd. 22. [RESIDENTIAL PROPERTY ALSO USED TO PROVIDE DAY 71.23 CARE.] Residential and agricultural property that is also used 71.24 to provide day care must be classified without regard to its use 71.25 in providing the day care, provided that the operator of the day 71.26 care service is occupying the property as the operator's 71.27 permanent residence. For purposes of this subdivision, "day 71.28 care" means family day care or adult family day care licensed 71.29 under section 245A.03, or provided without license under section 71.30 245A.03, subdivision 2, paragraph (a), clause (2). 71.31 [EFFECTIVE DATE.] This section is effective for assessment 71.32 year 2004 and thereafter, for taxes payable in 2005 and 71.33 thereafter. 71.34 Sec. 20. [273.1321] [VACANT COMMERCIAL INDUSTRIAL 71.35 PROPERTIES.] 71.36 Subdivision 1. [AUTHORITY.] A city may establish, by 72.1 ordinance, a program to encourage redevelopment, provide for 72.2 better utilization of commercial industrial property, and 72.3 eliminate blighting influences by revoking the eligibility of 72.4 individual commercial industrial properties to receive the 72.5 credit authorized under section 273.1398, subdivision 4. The 72.6 program may revoke eligibility only if the property has been 72.7 vacant, as defined in subdivision 3, clauses (1) to (3), for 72.8 three or more consecutive years prior to the current assessment 72.9 year, or under subdivision 3, clause (4), for five or more 72.10 consecutive years prior to the current assessment year. 72.11 Subd. 2. [MINIMUM REQUIREMENTS.] The program must provide: 72.12 (1) standards for determining whether a property is vacant; 72.13 (2) written assessment notice by the city or county to the 72.14 property owner informing the owner that the property's 72.15 eligibility will be revoked; 72.16 (3) opportunity for the property owner to appeal the 72.17 revocation at the board of equalization; 72.18 (4) timely notice to the county assessor of the property's 72.19 eligibility revocation, if the city has a city assessor and the 72.20 city assessor has revoked the property's eligibility; and 72.21 (5) any other provisions the city determines are necessary 72.22 or appropriate to the operation of the program to achieve its 72.23 purposes. 72.24 Subd. 3. [DEFINITION OF VACANT.] A program established 72.25 under this section may provide that a property is vacant if the 72.26 property is: 72.27 (1) condemned, dangerous, or having multiple building code 72.28 violations; 72.29 (2) condemned and illegally occupied; 72.30 (3) either occupied or unoccupied, during which time the 72.31 enforcement officer for the municipality has issued multiple 72.32 orders to correct nuisance conditions; or 72.33 (4) unoccupied and not utilized for a commercial or 72.34 industrial purpose. 72.35 Subd. 4. [NOTICE TO PROPERTY OWNER.] The municipality 72.36 shall give notice to the property owner requiring that any 73.1 conditions in subdivision 3, clauses (1) to (3) be remedied, and 73.2 that the property be occupied and used for a commercial or 73.3 industrial purpose for at least 180 days during the next 73.4 12-month period, or else the property may cease to be eligible 73.5 for the credit under section 273.1398, subdivision 4. 73.6 [EFFECTIVE DATE.] This section is effective for taxes 73.7 payable in 2006 and thereafter. 73.8 Sec. 21. Minnesota Statutes 2002, section 273.1384, 73.9 subdivision 1, is amended to read: 73.10 Subdivision 1. [RESIDENTIAL HOMESTEAD MARKET VALUE 73.11 CREDIT.] Each county auditor shall determine a homestead credit 73.12 for each class 1a, 1b, 1c, and 2a homestead property within the 73.13 county equal to 0.4 percent of the market value of the 73.14 property. The amount of homestead credit for a homestead may 73.15 not exceed $304 and is reduced by .09 percent of the market 73.16 value in excess of $76,000. In the case of an agricultural or 73.17 resort homestead, only the market value of the house, garage, 73.18 and immediately surrounding one acre of land is eligible in 73.19 determining the property's homestead credit. In the case of a 73.20 propertywhichthat is classified asparta partial homestead 73.21and part nonhomestead, the credit shall apply only to the73.22homestead portion of the property.because the property is not 73.23 occupied by all owners or both spouses, the credit is determined 73.24 based on the homestead portion only, except that the credit must 73.25 not exceed the credit that would be calculated if the entire 73.26 residential portion of the property was classified as homestead. 73.27 [EFFECTIVE DATE.] This section is effective for taxes 73.28 payable in 2005 and thereafter. 73.29 Sec. 22. Minnesota Statutes 2003 Supplement, section 73.30 274.014, subdivision 3, is amended to read: 73.31 Subd. 3. [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] (a) 73.32 Any city or town thatdoes notconducts local boards of appeal 73.33 and equalization meetings must provide proof to the county 73.34 assessor by December 1,20062005, and each year thereafter, 73.35 that it is in compliance with the requirements of subdivision 2,73.36and that it had. Beginning in 2006, this notice must also 74.1 verify that there was a quorum of voting members at each meeting 74.2 of the board of appeal and equalization in thepriorcurrent 74.3 year,. A city or town that does not comply with these 74.4 requirements is deemed to have transferred its board of appeal 74.5 and equalization powers to the countyunder section 274.01,74.6subdivision 3, forbeginning with the following year's 74.7 assessment and continuing unless the powers are reinstated under 74.8 paragraph (c). 74.9 (b) The county shall notify the taxpayers when the board of 74.10 appeal and equalization for a city or town has been transferred 74.11 to the county under this subdivision and, prior to the meeting 74.12 time of the county board of equalization, the county shall make 74.13 available to those taxpayers a procedure for a review of the 74.14 assessments, including, but not limited to, open book meetings. 74.15 This alternate review process shall take place in April and May. 74.16 (c) A local board whose powers are transferred to the 74.17 county under this subdivision may be reinstated by resolution of 74.18 the governing body of the city or town and upon proof of 74.19 compliance with the requirements of subdivision 2. The 74.20 resolution and proofs must be provided to the county assessor by 74.21 December 1 in order to be effective for the following year's 74.22 assessment. 74.23 Sec. 23. Minnesota Statutes 2003 Supplement, section 74.24 275.065, subdivision 3, is amended to read: 74.25 Subd. 3. [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 74.26 county auditor shall prepare and the county treasurer shall 74.27 deliver after November 10 and on or before November 24 each 74.28 year, by first class mail to each taxpayer at the address listed 74.29 on the county's current year's assessment roll, a notice of 74.30 proposed property taxes. 74.31 (b) The commissioner of revenue shall prescribe the form of 74.32 the notice. 74.33 (c) The notice must inform taxpayers that it contains the 74.34 amount of property taxes each taxing authority proposes to 74.35 collect for taxes payable the following year. In the case of a 74.36 town, or in the case of the state general tax, the final tax 75.1 amount will be its proposed tax. In the case of taxing 75.2 authorities required to hold a public meeting under subdivision 75.3 6, the notice must clearly state that each taxing authority, 75.4 including regional library districts established under section 75.5 134.201, and including the metropolitan taxing districts as 75.6 defined in paragraph (i), but excluding all other special taxing 75.7 districts and towns, will hold a public meeting to receive 75.8 public testimony on the proposed budget and proposed or final 75.9 property tax levy, or, in case of a school district, on the 75.10 current budget and proposed property tax levy. It must clearly 75.11 state the time and place of each taxing authority's meeting, a 75.12 telephone number for the taxing authority that taxpayers may 75.13 call if they have questions related to the notice, and an 75.14 address where comments will be received by mail. 75.15 (d) The notice must state for each parcel: 75.16 (1) the market value of the property as determined under 75.17 section 273.11, and used for computing property taxes payable in 75.18 the following year and for taxes payable in the current year as 75.19 each appears in the records of the county assessor on November 1 75.20 of the current year; and, in the case of residential property, 75.21 whether the property is classified as homestead or 75.22 nonhomestead. The notice must clearly inform taxpayers of the 75.23 years to which the market values apply and that the values are 75.24 final values; 75.25 (2) the items listed below, shown separately by county, 75.26 city or town, and state general tax, net of the residential and 75.27 agricultural homestead credit under section 273.1384, voter 75.28 approved school levy, other local school levy, and the sum of 75.29 the special taxing districts, and as a total of all taxing 75.30 authorities: 75.31 (i) the actual tax for taxes payable in the current year; 75.32 and 75.33 (ii) the proposed tax amount. 75.34 If the county levy under clause (2) includes an amount for 75.35 a lake improvement district as defined under sections 103B.501 75.36 to 103B.581, the amount attributable for that purpose must be 76.1 separately stated from the remaining county levy amount. 76.2 In the case of a town or the state general tax, the final 76.3 tax shall also be its proposed tax unless the town changes its 76.4 levy at a special town meeting under section 365.52. If a 76.5 school district has certified under section 126C.17, subdivision 76.6 9, that a referendum will be held in the school district at the 76.7 November general election, the county auditor must note next to 76.8 the school district's proposed amount that a referendum is 76.9 pending and that, if approved by the voters, the tax amount may 76.10 be higher than shown on the notice. In the case of the city of 76.11 Minneapolis, the levy for the Minneapolis Library Board and the 76.12 levy for Minneapolis Park and Recreation shall be listed 76.13 separately from the remaining amount of the city's levy. In the 76.14 case of the city of St. Paul, the levy for the St. Paul Library 76.15 Agency must be listed separately from the remaining amount of 76.16 the city's levy. In the case of Ramsey County, any amount 76.17 levied under section 134.07 may be listed separately from the 76.18 remaining amount of the county's levy. In the case of a parcel 76.19 where tax increment or the fiscal disparities areawide tax under 76.20 chapter 276A or 473F applies, the proposed tax levy on the 76.21 captured value or the proposed tax levy on the tax capacity 76.22 subject to the areawide tax must each be stated separately and 76.23 not included in the sum of the special taxing districts; and 76.24 (3) the increase or decrease between the total taxes 76.25 payable in the current year and the total proposed taxes, 76.26 expressed as a percentage. 76.27 For purposes of this section, the amount of the tax on 76.28 homesteads qualifying under the senior citizens' property tax 76.29 deferral program under chapter 290B is the total amount of 76.30 property tax before subtraction of the deferred property tax 76.31 amount. 76.32 (e) The notice must clearly state that the proposed or 76.33 final taxes do not include the following: 76.34 (1) special assessments; 76.35 (2) levies approved by the voters after the date the 76.36 proposed taxes are certified, including bond referenda and 77.1 school district levy referenda; 77.2 (3) a levy limit increase approved by the voters by the 77.3 first Tuesday after the first Monday in November of the levy 77.4 year as provided under section 275.73; 77.5 (4) amounts necessary to pay cleanup or other costs due to 77.6 a natural disaster occurring after the date the proposed taxes 77.7 are certified; 77.8 (5) amounts necessary to pay tort judgments against the 77.9 taxing authority that become final after the date the proposed 77.10 taxes are certified; and 77.11 (6) the contamination tax imposed on properties which 77.12 received market value reductions for contamination. 77.13 (f) Except as provided in subdivision 7, failure of the 77.14 county auditor to prepare or the county treasurer to deliver the 77.15 notice as required in this section does not invalidate the 77.16 proposed or final tax levy or the taxes payable pursuant to the 77.17 tax levy. 77.18 (g) If the notice the taxpayer receives under this section 77.19 lists the property as nonhomestead, and satisfactory 77.20 documentation is provided to the county assessor by the 77.21 applicable deadline, and the property qualifies for the 77.22 homestead classification in that assessment year, the assessor 77.23 shall reclassify the property to homestead for taxes payable in 77.24 the following year. 77.25 (h) In the case of class 4 residential property used as a 77.26 residence for lease or rental periods of 30 days or more, the 77.27 taxpayer must either: 77.28 (1) mail or deliver a copy of the notice of proposed 77.29 property taxes to each tenant, renter, or lessee; or 77.30 (2) post a copy of the notice in a conspicuous place on the 77.31 premises of the property. 77.32 The notice must be mailed or posted by the taxpayer by 77.33 November 27 or within three days of receipt of the notice, 77.34 whichever is later. A taxpayer may notify the county treasurer 77.35 of the address of the taxpayer, agent, caretaker, or manager of 77.36 the premises to which the notice must be mailed in order to 78.1 fulfill the requirements of this paragraph. 78.2 (i) For purposes of this subdivision, subdivisions 5a and 78.3 6, "metropolitan special taxing districts" means the following 78.4 taxing districts in the seven-county metropolitan area that levy 78.5 a property tax for any of the specified purposes listed below: 78.6 (1) Metropolitan Council under section 473.132, 473.167, 78.7 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 78.8 (2) Metropolitan Airports Commission under section 473.667, 78.9 473.671, or 473.672; and 78.10 (3) Metropolitan Mosquito Control Commission under section 78.11 473.711. 78.12 For purposes of this section, any levies made by the 78.13 regional rail authorities in the county of Anoka, Carver, 78.14 Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 78.15 398A shall be included with the appropriate county's levy and 78.16 shall be discussed at that county's public hearing. 78.17 [EFFECTIVE DATE.] This section is effective for notices for 78.18 property taxes levied in 2004, payable in 2005, and thereafter. 78.19 Sec. 24. Minnesota Statutes 2002, section 276.04, 78.20 subdivision 2, is amended to read: 78.21 Subd. 2. [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 78.22 shall provide for the printing of the tax statements. The 78.23 commissioner of revenue shall prescribe the form of the property 78.24 tax statement and its contents. The statement must contain a 78.25 tabulated statement of the dollar amount due to each taxing 78.26 authority and the amount of the state tax from the parcel of 78.27 real property for which a particular tax statement is prepared. 78.28 The dollar amounts attributable to the county, the state tax, 78.29 the voter approved school tax, the other local school tax, the 78.30 township or municipality, and the total of the metropolitan 78.31 special taxing districts as defined in section 275.065, 78.32 subdivision 3, paragraph (i), must be separately stated. The 78.33 amounts due all other special taxing districts, if any, may be 78.34 aggregated. If the county levy under this paragraph includes an 78.35 amount for a lake improvement district as defined under sections 78.36 103B.501 to 103B.581, the amount attributable for that purpose 79.1 must be separately stated from the remaining county levy 79.2 amount. In the case of Ramsey County, if the county levy under 79.3 this paragraph includes an amount for public library service 79.4 under section 134.07, the amount attributable for that purpose 79.5 may be separately stated from the remaining county levy amount. 79.6 The amount of the tax on homesteads qualifying under the senior 79.7 citizens' property tax deferral program under chapter 290B is 79.8 the total amount of property tax before subtraction of the 79.9 deferred property tax amount. The amount of the tax on 79.10 contamination value imposed under sections 270.91 to 270.98, if 79.11 any, must also be separately stated. The dollar amounts, 79.12 including the dollar amount of any special assessments, may be 79.13 rounded to the nearest even whole dollar. For purposes of this 79.14 section whole odd-numbered dollars may be adjusted to the next 79.15 higher even-numbered dollar. The amount of market value 79.16 excluded under section 273.11, subdivision 16, if any, must also 79.17 be listed on the tax statement. 79.18 (b) The property tax statements for manufactured homes and 79.19 sectional structures taxed as personal property shall contain 79.20 the same information that is required on the tax statements for 79.21 real property. 79.22 (c) Real and personal property tax statements must contain 79.23 the following information in the order given in this paragraph. 79.24 The information must contain the current year tax information in 79.25 the right column with the corresponding information for the 79.26 previous year in a column on the left: 79.27 (1) the property's estimated market value under section 79.28 273.11, subdivision 1; 79.29 (2) the property's taxable market value after reductions 79.30 under section 273.11, subdivisions 1a and 16; 79.31 (3) the property's gross tax, calculated by adding the 79.32 property's total property tax to the sum of the aids enumerated 79.33 in clause (4); 79.34 (4) a total of the following aids: 79.35 (i) education aids payable under chapters 122A, 123A, 123B, 79.36 124D, 125A, 126C, and 127A; 80.1 (ii) local government aids for cities, towns, and counties 80.2 under chapter 477A; 80.3 (iii) disparity reduction aid under section 273.1398; and 80.4 (iv) homestead and agricultural credit aid under section 80.5 273.1398; 80.6 (5) for homestead residential and agricultural properties, 80.7 the credits under section 273.1384; 80.8 (6) any credits received under sections 273.119; 273.123; 80.9 273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 80.10 473H.10, except that the amount of credit received under section 80.11 273.135 must be separately stated and identified as "taconite 80.12 tax relief"; and 80.13 (7) the net tax payable in the manner required in paragraph 80.14 (a). 80.15 (d) If the county uses envelopes for mailing property tax 80.16 statements and if the county agrees, a taxing district may 80.17 include a notice with the property tax statement notifying 80.18 taxpayers when the taxing district will begin its budget 80.19 deliberations for the current year, and encouraging taxpayers to 80.20 attend the hearings. If the county allows notices to be 80.21 included in the envelope containing the property tax statement, 80.22 and if more than one taxing district relative to a given 80.23 property decides to include a notice with the tax statement, the 80.24 county treasurer or auditor must coordinate the process and may 80.25 combine the information on a single announcement. 80.26 The commissioner of revenue shall certify to the county 80.27 auditor the actual or estimated aids enumerated in clause (4) 80.28 that local governments will receive in the following year. The 80.29 commissioner must certify this amount by January 1 of each year. 80.30 [EFFECTIVE DATE.] This section is effective for property 80.31 tax statements for taxes payable in 2005 and thereafter. 80.32 Sec. 25. Minnesota Statutes 2002, section 290A.03, 80.33 subdivision 13, is amended to read: 80.34 Subd. 13. [PROPERTY TAXES PAYABLE.] (a) "Initial property 80.35 taxes payable" means (i) the property taxexclusive ofpayable 80.36 on a claimant's homestead plus (ii) any fees or charges for 81.1 police or fire services included in the total amount on the 81.2 property tax statement, excluding charges related to capital 81.3 expenditures and nuisance charges under section 429.101. 81.4 (b) "Property taxes payable" means initial property taxes 81.5 payable minus 81.6 (i) special assessments, other than fees or charges for 81.7 police or fire services that are included in paragraph (a)(ii); 81.8 (ii) penalties, and; 81.9 (iii) interestpayable on a claimant's homestead after; 81.10 (iv) deductions made under sections 273.135, 273.1384, 81.11 273.1391, 273.42, subdivision 2, and any other state paid 81.12 property tax credits in any calendar year,; andafter81.13 (v) any refund claimed and allowable under section 290A.04, 81.14 subdivision 2h, that is first payable in the year that the 81.15 property tax is payable. 81.16 (c) In the case of a claimant who makes ground lease 81.17 payments, "property taxes payable" includes the amount of the 81.18 payments directly attributable to the property taxes assessed 81.19 against the parcel on which the house is located. No 81.20 apportionment or reduction of the "property taxes payable" shall 81.21 be required for the use of a portion of the claimant's homestead 81.22 for a business purpose if the claimant does not deduct any 81.23 business depreciation expenses for the use of a portion of the 81.24 homestead in the determination of federal adjusted gross 81.25 income. For homesteads which are manufactured homes as defined 81.26 in section 273.125, subdivision 8, and for homesteads which are 81.27 park trailers taxed as manufactured homes under section 168.012, 81.28 subdivision 9, "property taxes payable" shall also include 19 81.29 percent of the gross rent paid in the preceding year for the 81.30 site on which the homestead is located. When a homestead is 81.31 owned by two or more persons as joint tenants or tenants in 81.32 common, such tenants shall determine between them which tenant 81.33 may claim the property taxes payable on the homestead. If they 81.34 are unable to agree, the matter shall be referred to the 81.35 commissioner of revenue whose decision shall be final. Property 81.36 taxes are considered payable in the year prescribed by law for 82.1 payment of the taxes. 82.2 (d) In the case of a claim relating to "property taxes 82.3 payable," the claimant must have owned and occupied the 82.4 homestead on January 2 of the year in which the tax is payable 82.5 and (i) the property must have been classified as homestead 82.6 property pursuant to section 273.124, on or before December 15 82.7 of the assessment year to which the "property taxes payable" 82.8 relate; or (ii) the claimant must provide documentation from the 82.9 local assessor that application for homestead classification has 82.10 been made on or before December 15 of the year in which the 82.11 "property taxes payable" were payable and that the assessor has 82.12 approved the application. 82.13 [EFFECTIVE DATE.] This section is effective for refunds 82.14 based on property taxes payable in 2005 and following years. 82.15 Sec. 26. Minnesota Statutes 2002, section 290A.07, is 82.16 amended by adding a subdivision to read: 82.17 Subd. 5. [EARLY PAYMENT; E-FILE CLAIMS.] The commissioner 82.18 may pay a claim up to 30 days earlier than the first permitted 82.19 date under subdivision 2a or 3 if the claim was submitted by 82.20 electronic means. 82.21 [EFFECTIVE DATE.] This section is effective the day 82.22 following final enactment. 82.23 Sec. 27. Minnesota Statutes 2002, section 365.43, 82.24 subdivision 1, is amended to read: 82.25 Subdivision 1. [LEVIED AMOUNT IS SPENDING LIMITTOTAL 82.26 REVENUE DEFINED.] A town must notcontract debts orspend more 82.27 money in a year thanthe taxes levied for the yearits total 82.28 revenue without a favorable vote of a majority of the town's 82.29 electors. In this section, "total revenue" means property taxes 82.30 payable in that year as well as amounts received from all other 82.31 sources and amounts carried forward from the last year. 82.32 Sec. 28. Minnesota Statutes 2002, section 365.431, is 82.33 amended to read: 82.34 365.431 [AMOUNT VOTED AT MEETING IS TAX LIMIT.] 82.35 Except as otherwise authorized by law, the tax for town 82.36 purposes must not be more than the amount voted to be raised at 83.1 the annual town meeting. 83.2 Sec. 29. Minnesota Statutes 2002, section 477A.11, 83.3 subdivision 4, is amended to read: 83.4 Subd. 4. [OTHER NATURAL RESOURCES LAND.] "Other natural 83.5 resources land" means:83.6(1)any other land presently owned in fee title by the 83.7 state and administered by the commissioner, or any tax-forfeited 83.8 land, other than platted lots within a city or those lands 83.9 described under subdivision 3, clause (2), which is owned by the 83.10 state and administered by the commissioner or by the county in 83.11 which it is located; and83.12(2) land leased by the state from the United States of83.13America through the United States Secretary of Agriculture83.14pursuant to Title III of the Bankhead Jones Farm Tenant Act,83.15which land is commonly referred to as land utilization project83.16land that is administered by the commissioner. 83.17 [EFFECTIVE DATE.] This section is effective for aids paid 83.18 in calendar year 2005 and thereafter. 83.19 Sec. 30. Minnesota Statutes 2002, section 477A.11, is 83.20 amended by adding a subdivision to read: 83.21 Subd. 5. [LAND UTILIZATION PROJECT LAND.] "Land 83.22 utilization project land" means land that is leased by the state 83.23 from the United States through the United States Secretary of 83.24 Agriculture according to Title III of the Bankhead Jones Farm 83.25 Tenant Act and that is administered by the commissioner. 83.26 [EFFECTIVE DATE.] This section is effective for aids paid 83.27 in calendar year 2005 and thereafter. 83.28 Sec. 31. Minnesota Statutes 2002, section 477A.12, 83.29 subdivision 1, is amended to read: 83.30 Subdivision 1. [TYPES OF LAND; PAYMENTS.] (a) As an offset 83.31 for expenses incurred by counties and towns in support of 83.32 natural resources lands, the following amounts are annually 83.33 appropriated to the commissioner of natural resources from the 83.34 general fund for transfer to the commissioner of revenue. The 83.35 commissioner of revenue shall pay the transferred funds to 83.36 counties as required by sections 477A.11 to 477A.145. The 84.1 amounts are: 84.2 (1) for acquired natural resources land, $3, as adjusted 84.3 for inflation under section 477A.145, multiplied by the total 84.4 number of acres of acquired natural resources land or, at the 84.5 county's option three-fourths of one percent of the appraised 84.6 value of all acquired natural resources land in the county, 84.7 whichever is greater; 84.8 (2) 75 cents, as adjusted for inflation under section 84.9 477A.145, multiplied by the number of acres of 84.10 county-administered other natural resources land; and 84.11 (3) 75 cents, as adjusted for inflation under section 84.12 477A.145, multiplied by the total number of acres of land 84.13 utilization project land; 84.14(3)(4) 37.5 cents, as adjusted for inflation under section 84.15 477A.145, multiplied by the number of acres of 84.16 commissioner-administered other natural resources land located 84.17 in each county as of July 1 of each year prior to the payment 84.18 year. 84.19 (b) The amount determined under paragraph (a), clause (1), 84.20 is payable for land that is acquired from a private owner and 84.21 owned by the Department of Transportation for the purpose of 84.22 replacing wetland losses caused by transportation projects, but 84.23 only if the county contains more than 500 acres of such land at 84.24 the time the certification is made under subdivision 2. 84.25 [EFFECTIVE DATE.] This section is effective for aids paid 84.26 in calendar year 2005 and thereafter. 84.27 Sec. 32. Minnesota Statutes 2002, section 477A.12, 84.28 subdivision 2, is amended to read: 84.29 Subd. 2. [PROCEDURE.] Lands for which payments in lieu are 84.30 made pursuant to section 97A.061, subdivision 3, and Laws 1973, 84.31 chapter 567, shall not be eligible for payments under this 84.32 section. Each county auditor shall certify to the Department of 84.33 Natural Resources during July of each year prior to the payment 84.34 year the number of acres of county-administered other natural 84.35 resources land within the county. The Department of Natural 84.36 resources may, in addition to the certification of acreage, 85.1 require descriptive lists of land so certified. The 85.2 commissioner of natural resources shall determine and certify to 85.3 the commissioner of revenue by March 1 of the payment year: 85.4 (1) the number of acres and most recent appraised value of 85.5 acquired natural resources land within each county; 85.6 (2) the number of acres of commissioner-administered 85.7 natural resources land within each county;and85.8 (3) the number of acres of county-administered other 85.9 natural resources land within each county, based on the reports 85.10 filed by each county auditor with the commissioner of natural 85.11 resources; and 85.12 (4) the number of acres of land utilization project land 85.13 within each county. 85.14 The commissioner of transportation shall determine and 85.15 certify to the commissioner of revenue by March 1 of the payment 85.16 year the number of acres of land and the appraised value of the 85.17 land described in subdivision 1, paragraph (b), but only if it 85.18 exceeds 500 acres. 85.19 The commissioner of revenue shall determine the 85.20 distributions provided for in this section using the number of 85.21 acres and appraised values certified by the commissioner of 85.22 natural resources and the commissioner of transportation by 85.23 March 1 of the payment year. 85.24 [EFFECTIVE DATE.] This section is effective for aids paid 85.25 in calendar year 2005 and thereafter. 85.26 Sec. 33. Minnesota Statutes 2002, section 477A.14, 85.27 subdivision 1, is amended to read: 85.28 Subdivision 1. [GENERAL DISTRIBUTION.] Except as provided 85.29 in subdivision 2 or in section 97A.061, subdivision 5, 40 85.30 percent of the total payment to the county shall be deposited in 85.31 the county general revenue fund to be used to provide property 85.32 tax levy reduction. The remainder shall be distributed by the 85.33 county in the following priority: 85.34 (a) 37.5 cents, as adjusted for inflation under section 85.35 477A.145, for each acre of county-administered other natural 85.36 resources land shall be deposited in a resource development fund 86.1 to be created within the county treasury for use in resource 86.2 development, forest management, game and fish habitat 86.3 improvement, and recreational development and maintenance of 86.4 county-administered other natural resources land. Any county 86.5 receiving less than $5,000 annually for the resource development 86.6 fund may elect to deposit that amount in the county general 86.7 revenue fund; 86.8 (b) From the funds remaining, within 30 days of receipt of 86.9 the payment to the county, the county treasurer shall pay each 86.10 organized township 30 cents, as adjusted for inflation under 86.11 section 477A.145, for each acre of acquired natural resources 86.12 land and each acre of land described in section 477A.12, 86.13 subdivision 1, paragraph (b), and 7.5 cents, as adjusted for 86.14 inflation under section 477A.145, for each acre of other natural 86.15 resources land and each acre of land utilization project land 86.16 located within its boundaries. Payments for natural resources 86.17 lands not located in an organized township shall be deposited in 86.18 the county general revenue fund. Payments to counties and 86.19 townships pursuant to this paragraph shall be used to provide 86.20 property tax levy reduction, except that of the payments for 86.21 natural resources lands not located in an organized township, 86.22 the county may allocate the amount determined to be necessary 86.23 for maintenance of roads in unorganized townships. Provided 86.24 that, if the total payment to the county pursuant to section 86.25 477A.12 is not sufficient to fully fund the distribution 86.26 provided for in this clause, the amount available shall be 86.27 distributed to each township and the county general revenue fund 86.28 on a pro rata basis; and 86.29 (c) Any remaining funds shall be deposited in the county 86.30 general revenue fund. Provided that, if the distribution to the 86.31 county general revenue fund exceeds $35,000, the excess shall be 86.32 used to provide property tax levy reduction. 86.33 [EFFECTIVE DATE.] This section is effective for aids paid 86.34 in calendar year 2005 and thereafter. 86.35 Sec. 34. Laws 1998, chapter 389, article 3, section 41, is 86.36 amended to read: 87.1 Sec. 41. [SPECIAL ASSESSMENT DEFERRAL AUTHORIZED.] 87.2 Notwithstanding Minnesota Statutes, chapter 429, a city may 87.3 defer the payment of any special assessment levied against a 87.4 property qualifying under section 38 as determined by the city. 87.5 Any special assessment, the payment of which has been deferred 87.6 by the city, must be paid in full or a payment agreement may be 87.7 approved by the city if the ownership of property is transferred 87.8 to anyone or any entity. Payment or a payment agreement must be 87.9 made within 60 days of the transfer of ownership. 87.10 [EFFECTIVE DATE.] This section is effective the day 87.11 following final enactment. 87.12 Sec. 35. Laws 1998, chapter 389, article 3, section 42, 87.13 subdivision 2, as amended by Laws 2002, chapter 377, article 4, 87.14 section 24, is amended to read: 87.15 Subd. 2. [RECAPTURE.] (a) Property or any portion thereof 87.16 qualifying under section 38 is subject to additional taxes if: 87.17 (1) ownership of the property is transferred to anyone 87.18 other than the spouse or child of the current owner; 87.19 (2) the current owner or the spouse or child of the current 87.20 owner has not conveyed or entered into a contract before July 1, 87.21 2007, to convey for ownership or public easement rights, (i) a 87.22 portion of the property toaone or more nonprofitfoundation87.23 foundations orcorporation operatingcorporations; and (ii) a 87.24 portion of the property to one or more local governments; and 87.25 those entities shall separately or jointly operate the property 87.26 as an art park providing the services included in section 38, 87.27 clauses (2) to (5), and may also use some of the property for 87.28 other public purposes as determined by the local governments; or 87.29 (3) the nonprofit foundation or corporation to which a 87.30 portion of the property was transferred ceases to provide the 87.31 services included in section 38, clauses (2) to (5), earlier 87.32 than ten years following the effective date of theconveyance87.33 conveyances or of the execution of thecontractcontracts to 87.34 convey. 87.35 (b) The additional taxes are imposed at the earlier of (1) 87.36 the year following transfer of ownership to anyone other than 88.1 the spouse or child of the current owner or a nonprofit 88.2 foundation or corporation or local government operating the 88.3 property as an art park and used for other public purposes, or 88.4 (2) for taxes payable in 2008, or (3) in the event the nonprofit 88.5 foundation or corporation to which a portion of the property was 88.6 conveyed ceases to provide the required services within ten 88.7 years after the conveyance, for taxes payable in the year 88.8 following the year when it ceased to do so. 88.9 The county board, with the approval of the city council, 88.10 shall determine the amount of the additional taxes due on the 88.11 portion of property which is no longer utilized as an art park; 88.12 provided, however, that the additional taxesare equal tomust 88.13 not be greater than the difference between the taxes determined 88.14 on that portion of the property utilized as an art park under 88.15 sections 39 and 40 and the amount determined under subdivision 1 88.16 for all years that the property qualified under section 38.The88.17additional taxes must be extended against the property on the88.18tax list for the current year; provided, however, thatNo 88.19 interest or penalties may be levied on the additionaltaxes if88.20timely paidamount provided that it is paid within 30 days of 88.21 the county's notice. 88.22 [EFFECTIVE DATE.] This section is effective the day 88.23 following final enactment. 88.24 Sec. 36. [TOWNSHIP LEVY ADJUSTMENT FOR WIND ENERGY 88.25 PRODUCTION TAX; PAYABLE 2004 ONLY.] 88.26 Notwithstanding the deadlines in Minnesota Statutes, 88.27 section 275.07, towns located in Lincoln or Pipestone County are 88.28 authorized to adjust their payable 2004 levy for all or a 88.29 portion of their estimated wind energy production tax amounts 88.30 for 2004, as computed by the commissioner of revenue from 88.31 reports filed under Minnesota Statutes, section 272.029, 88.32 subdivision 4. The Lincoln and Pipestone county auditors may 88.33 adjust the payable 2004 levy certifications under Minnesota 88.34 Statutes, section 275.07, subdivision 1, based upon the towns 88.35 that have recertified their levies under this section by March 88.36 15, 2004. 89.1 [EFFECTIVE DATE.] This section is effective for taxes 89.2 levied in 2003, payable in 2004 only. 89.3 Sec. 37. [SAUK RIVER WATERSHED DISTRICT.] 89.4 Notwithstanding Minnesota Statutes, section 103D.905, 89.5 subdivision 3, the Sauk River Watershed District may annually 89.6 levy an additional amount up to $100,000 for its general fund. 89.7 [EFFECTIVE DATE.] This section is effective, without local 89.8 approval, beginning with the taxes levied in 2004, payable in 89.9 2005. 89.10 Sec. 38. [PRINSBURG; SPECIAL LEVY AUTHORITY.] 89.11 Subdivision 1. [BOARD APPROVAL.] Notwithstanding any law 89.12 to the contrary, the board of Common School District No. 815, 89.13 Prinsburg, may continue to operate as a common school district 89.14 provided that: 89.15 (1) the district adopts an annual resolution by May 1 of 89.16 each year declaring that it will be operating for the following 89.17 school year; 89.18 (2) for fiscal years 2006 and later, the district's 89.19 proposed budget for the following year shows that the district 89.20 will not return to statutory operating debt under Minnesota 89.21 Statutes, section 123B.81; and 89.22 (3) the district has passed a referendum under subdivision 89.23 4 authorizing levy authority for the coming school year. 89.24 Subd. 2. [DETERMINATION OF OUTSTANDING OBLIGATIONS.] Prior 89.25 to exercising the authority to levy under this section, the 89.26 boards of Common School District No. 815 and Independent School 89.27 District No. 2180, MACCRAY, must mutually agree to the amount of 89.28 the outstanding tuition owed by the Prinsburg School District to 89.29 the MACCRAY School District. If the districts cannot agree to 89.30 the amount of the tuition owed, the districts may submit all 89.31 relevant information to the commissioner of education who shall 89.32 determine the amount of the obligation owed to the MACCRAY 89.33 School District. 89.34 Subd. 3. [STATUTORY OPERATING DEBT.] For taxes payable in 89.35 2005, 2006, and 2007, Common School District No. 815, Prinsburg, 89.36 may levy the amount necessary to eliminate a deficit in the net 90.1 unappropriated balance in the operating funds of the district, 90.2 determined as of June 30, 2004, and certified and adjusted by 90.3 the commissioner. This levy may also include the amount 90.4 necessary to eliminate the estimated deficit for fiscal year 90.5 2005. 90.6 Subd. 4. [ANNUAL LEVY AUTHORITY.] (a) Common School 90.7 District No. 815, Prinsburg, may levy the amount necessary to 90.8 eliminate any projected deficit in the district's operating 90.9 budget for the preceding school year, excluding the amounts 90.10 raised by this subdivision, if the district's voters approve a 90.11 referendum according to the provisions of this subdivision. 90.12 (b) The referendum shall be called by the school board. 90.13 The ballot must state that the annual levy will be the estimated 90.14 amount necessary to eliminate the previous year's estimated 90.15 operating deficit. The ballot must designate the specific 90.16 number of years, not to exceed five, for which the referendum 90.17 authorization applies. The ballot shall state substantially the 90.18 following: 90.19 "Shall the increase in the levy proposed by the Board of 90.20 Prinsburg, Common School District No. 815, be approved?" 90.21 If approved, the amount necessary to eliminate the previous 90.22 year's estimated operating deficit may be authorized for 90.23 certification for the number of years approved. 90.24 (c) The board must follow the notice provisions of 90.25 Minnesota Statutes, section 126C.17. 90.26 (d) This levy is not subject to the property tax 90.27 recognition shift under Minnesota Statutes, sections 123B.75, 90.28 subdivision 5, and 127A.441. 90.29 Subd. 5. [FISCAL YEAR 2005 ONLY.] Notwithstanding the 90.30 provisions of this section, for fiscal year 2005 only, Common 90.31 School District No. 815, Prinsburg, may continue to operate as a 90.32 common school district upon approval of a referendum under 90.33 subdivision 4. 90.34 [EFFECTIVE DATE.] This section is effective the day 90.35 following final enactment. 90.36 Sec. 39. [STUDY OF PROPERTY TAX AS A PERCENTAGE OF RENT.] 91.1 (a) The commissioner of revenue shall study the percentage 91.2 of rent that constitutes property tax used to calculate refunds 91.3 under Minnesota Statutes, chapter 290A, and provide a written 91.4 report and recommendations to the legislature, in compliance 91.5 with Minnesota Statutes, sections 3.195 and 3.197, by February 91.6 1, 2005. In preparing the study, the commissioner must conduct 91.7 a survey of rent paid and property taxes payable on samples of 91.8 rental properties in (i) the metropolitan area as defined in 91.9 Minnesota Statutes, section 473.121, subdivision 2, (ii) each 91.10 remaining county that is included in a metropolitan statistical 91.11 area as defined by the U.S. Census Bureau, and (iii) the 91.12 remaining Minnesota counties. The survey must include rental 91.13 properties classified under Minnesota Statutes, section 273.13, 91.14 subdivisions 22 and 25, paragraphs (a) and (c), and rental 91.15 property that is exempt from taxation. 91.16 (b) The study must report on: 91.17 (1) the percentage of rent constituting property tax for 91.18 the different types of property and different geographic regions 91.19 surveyed; and 91.20 (2) if rent paid in each geographic region surveyed differs 91.21 significantly between rental units subject to different 91.22 classifications and units in buildings exempt from taxation. 91.23 (c) The study must make recommendations on: 91.24 (1) if the percentage of rent constituting property taxes 91.25 specified in Minnesota Statutes, section 290A.03, subdivisions 91.26 11 and 13, should be changed to more accurately reflect the 91.27 actual percentage of rent constituting property taxes throughout 91.28 Minnesota; 91.29 (2) if the percentage of rent constituting property taxes 91.30 used to calculate refunds under Minnesota Statutes, chapter 91.31 290A, should be set at one uniform percentage for the entire 91.32 state or should vary by geographic region and type of rental 91.33 property, including an analysis of the advantages and 91.34 disadvantages of using a uniform rate or varying the rate by 91.35 region and type of property; 91.36 (3) if the percentage of rent constituting property tax 92.1 should be replaced by reporting of actual property taxes on 92.2 rental units; 92.3 (4) a method by which the commissioner could regularly 92.4 recommend to the legislature adjustments to the percentage of 92.5 rent constituting property taxes; and 92.6 (5) proposed statutory language authorizing the 92.7 commissioner to adjust the percentage based on ongoing survey 92.8 research. 92.9 ARTICLE 4 92.10 SALES AND USE AND LODGING TAXES 92.11 Section 1. Minnesota Statutes 2002, section 16C.03, is 92.12 amended by adding a subdivision to read: 92.13 Subd. 18. [CONTRACTS WITH FOREIGN VENDORS.] (a) The 92.14 commissioner and other agencies to which this section applies 92.15 and the legislative branch of government shall not contract for 92.16 goods or services from a vendor or an affiliate of the vendor 92.17 which has not registered to collect the sales and use tax 92.18 imposed under chapter 297A on its sales in Minnesota or to a 92.19 destination in Minnesota. A vendor that sells tangible personal 92.20 property or provides services subject to tax under chapter 297A 92.21 to an agency or the legislature, and each affiliate of that 92.22 vendor, is regarded as a "retailer maintaining a place of 92.23 business in this state" and is required to collect the Minnesota 92.24 sales or use tax under chapter 297A. This subdivision does not 92.25 apply to state colleges and universities, the courts, and any 92.26 agency in the judicial branch of government. For purposes of 92.27 this subdivision, the term "affiliate" means any person or 92.28 entity that is controlled by, or is under common control of, a 92.29 vendor through stock ownership or other affiliation. 92.30 (b) Beginning on or after January 1, 2005, each vendor or 92.31 affiliate of a vendor that is offered a contract to sell goods 92.32 or services subject to tax under chapter 297A to an agency or 92.33 the legislature must submit to the agency or legislature 92.34 certification that the vendor is registered to collect Minnesota 92.35 sales or use tax and acknowledging that the contract may be 92.36 declared void if the certification is false. 93.1 (c) An agency or the legislature is exempted from the 93.2 provisions of this subdivision in the event of an emergency or 93.3 when the vendor is the sole source of such goods or services. 93.4 [EFFECTIVE DATE.] This section is effective for all 93.5 contracts entered into after December 31, 2004. 93.6 Sec. 2. Minnesota Statutes 2002, section 297A.61, 93.7 subdivision 4, is amended to read: 93.8 Subd. 4. [RETAIL SALE.] (a) A "retail sale" means any 93.9 sale, lease, or rental for any purpose other than resale, 93.10 sublease, or subrent. 93.11 (b) A sale of property used by the owner only by leasing it 93.12 to others or by holding it in an effort to lease it, and put to 93.13 no use by the owner other than resale after the lease or effort 93.14 to lease, is a sale of property for resale. 93.15 (c) A sale of master computer software that is purchased 93.16 and used to make copies for sale or lease is a sale of property 93.17 for resale. 93.18 (d) A sale of building materials, supplies, and equipment 93.19 to owners, contractors, subcontractors, or builders for the 93.20 erection of buildings or the alteration, repair, or improvement 93.21 of real property is a retail sale in whatever quantity sold, 93.22 whether the sale is for purposes of resale in the form of real 93.23 property or otherwise. 93.24 (e) A sale of carpeting, linoleum, or similar floor 93.25 covering to a person who provides for installation of the floor 93.26 covering is a retail sale and not a sale for resale since a sale 93.27 of floor covering which includes installation is a contract for 93.28 the improvement of real property. 93.29 (f) A sale of shrubbery, plants, sod, trees, and similar 93.30 items to a person who provides for installation of the items is 93.31 a retail sale and not a sale for resale since a sale of 93.32 shrubbery, plants, sod, trees, and similar items that includes 93.33 installation is a contract for the improvement of real property. 93.34 (g) A sale of tangible personal property that is awarded as 93.35 prizes is a retail sale and is not considered a sale of property 93.36 for resale. 94.1 (h) A sale of tangible personal property utilized or 94.2 employed in the furnishing or providing of services under 94.3 subdivision 3, paragraph (g), clause (1), including, but not 94.4 limited to, property given as promotional items, is a retail 94.5 sale and is not considered a sale of property for resale. 94.6 (i) A sale of tangible personal property used in conducting 94.7 lawful gambling under chapter 349 or the state lottery under 94.8 chapter 349A, including, but not limited to, property given as 94.9 promotional items, is a retail sale and is not considered a sale 94.10 of property for resale. 94.11 (j) A sale of machines, equipment, or devices that are used 94.12 to furnish, provide, or dispense goods or services, including, 94.13 but not limited to, coin-operated devices, is a retail sale and 94.14 is not considered a sale of property for resale. 94.15 (k) In the case of a lease, a retail sale occurs when (1) 94.16 an obligation to make a lease payment becomes due under the 94.17 terms of the agreement or the trade practices of the lessor or 94.18 (2) in the case of a lease of a motor vehicle, as defined in 94.19 section 297B.01, subdivision 5, but excluding vehicles with a 94.20 manufacturer's gross vehicle weight rating greater than 10,000 94.21 pounds and rentals of vehicles for not more than 28 days, at the 94.22 time the least is consummated. 94.23 (l) In the case of a conditional sales contract, a retail 94.24 sale occurs upon the transfer of title or possession of the 94.25 tangible personal property. 94.26 [EFFECTIVE DATE.] This section is effective for leases 94.27 entered into after June 30, 2004. 94.28 Sec. 3. Minnesota Statutes 2002, section 297A.61, is 94.29 amended by adding a subdivision to read: 94.30 Subd. 7a. [MOTOR VEHICLE LEASE PRICE.] In the case of a 94.31 lease of a motor vehicle as provided in subdivision 4, paragraph 94.32 (k), clause (2), the tax is imposed on the total amount to be 94.33 paid by the lessee under the lease agreement. The tax shall be 94.34 collected in full by the lessor at the time the lease is 94.35 consummated or, if the tax is included in the lease and the 94.36 lease is assigned, the tax shall be due from the original lessor 95.1 at the time the lease is assigned. The total amount to be paid 95.2 by the lessee under the lease agreement equals the agreed upon 95.3 value of the vehicle less manufacturer's rebates, the stated 95.4 residual value of the leased vehicle, and the total value 95.5 allowed for a vehicle owned by the lessee taken in trade by 95.6 lessor, plus the price of any taxable goods and services 95.7 included in the lease and the rent charge as provided by Code of 95.8 Federal Regulations, title 12, section 213.4, excluding any rent 95.9 charge related to the capitalization of the tax. 95.10 If the total amount paid by the lessee for use of the 95.11 leased vehicle includes amounts that are not calculated at the 95.12 time the lease is executed, the tax is imposed and shall be 95.13 collected by the lessor at the time such amounts are paid by the 95.14 lessee. In the case of a lease which by its terms may be 95.15 renewed, the sales tax is due and payable on the total amount to 95.16 be paid during the initial term of the lease, and then for each 95.17 subsequent renewal period on the total amount to be paid during 95.18 the renewal period. 95.19 If a lease is canceled or rescinded on or before 90 days of 95.20 its consummation or in cases where a vehicle is returned to the 95.21 manufacturer pursuant to section 325F.665, the lessor may file a 95.22 claim for a refund of the total tax paid minus the amount of tax 95.23 due for the period the vehicle is used by the lessee. 95.24 [EFFECTIVE DATE.] This section is effective for leases 95.25 entered into after June 30, 2004. 95.26 Sec. 4. Minnesota Statutes 2002, section 297A.61, is 95.27 amended by adding a subdivision to read: 95.28 Subd. 37. [PERSONAL RAPID TRANSIT SYSTEM.] "Personal rapid 95.29 transit system" means a transportation system: 95.30 (1) of small, computer-controlled vehicles, transporting 95.31 one to three passengers on elevated guideways in a 95.32 transportation network operating on demand and nonstop directly 95.33 to any stations in the network; 95.34 (2) that provides service to the public on a regular and 95.35 continuing basis; and 95.36 (3) that is operated independent of any governmental 96.1 subsidies, other than reduced borrowing or capital costs from 96.2 the issuing of state or local bonds, direct loans, loan 96.3 guarantees, or similar financial assistance provided by a 96.4 governmental entity to finance acquisition, construction, or 96.5 improvement of the system. 96.6 [EFFECTIVE DATE.] This section is effective the day 96.7 following final enactment. 96.8 Sec. 5. Minnesota Statutes 2002, section 297A.62, is 96.9 amended by adding a subdivision to read: 96.10 Subd. 4. [LEASE OF MOTOR VEHICLES.] When the lease of a 96.11 motor vehicle as defined in section 297A.61, subdivision 4, 96.12 paragraph (k), clause (2), originates in another state, the 96.13 sales tax under subdivision 1 shall be calculated by the lessor 96.14 on the total amount that is due under the lease agreement after 96.15 the vehicle is required to be registered in Minnesota. If the 96.16 total amount to be paid by the lessee under the lease agreement 96.17 has already been subjected to tax by another state, a credit for 96.18 taxes paid in the other state shall be allowed as provided in 96.19 section 297A.80. 96.20 [EFFECTIVE DATE.] This section is effective for vehicles 96.21 registering in Minnesota after June 30, 2004. 96.22 Sec. 6. Minnesota Statutes 2002, section 297A.67, is 96.23 amended by adding a subdivision to read: 96.24 Subd. 32. [CIGARETTES.] Cigarettes upon which a tax has 96.25 been imposed under section 297F.25 are exempt. 96.26 [EFFECTIVE DATE.] This section is effective for sales and 96.27 purchases made after July 31, 2004. 96.28 Sec. 7. Minnesota Statutes 2003 Supplement, section 96.29 297A.68, subdivision 2, is amended to read: 96.30 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 96.31 (a) Materials stored, used, or consumed in industrial production 96.32 of personal property intended to be sold ultimately at retail 96.33 are exempt, whether or not the item so used becomes an 96.34 ingredient or constituent part of the property produced. 96.35 Materials that qualify for this exemption include, but are not 96.36 limited to, the following: 97.1 (1) chemicals, including chemicals used for cleaning food 97.2 processing machinery and equipment; 97.3 (2) materials, including chemicals, fuels, and electricity 97.4 purchased by persons engaged in industrial production to treat 97.5 waste generated as a result of the production process; 97.6 (3) fuels, electricity, gas, and steam used or consumed in 97.7 the production process, except that electricity, gas, or steam 97.8 used for space heating, cooling, or lighting is exempt if (i) it 97.9 is in excess of the average climate control or lighting for the 97.10 production area, and (ii) it is necessary to produce that 97.11 particular product; 97.12 (4) petroleum products and lubricants; 97.13 (5) packaging materials, including returnable containers 97.14 used in packaging food and beverage products; 97.15 (6) accessory tools, equipment, and other items that are 97.16 separate detachable units with an ordinary useful life of less 97.17 than 12 months used in producing a direct effect upon the 97.18 product; and 97.19 (7) the following materials, tools, and equipment used in 97.20 metalcasting: crucibles, thermocouple protection sheaths and 97.21 tubes, stalk tubes, refractory materials, molten metal filters 97.22 and filter boxes, degassing lances, and base blocks. 97.23 (b) This exemption does not include: 97.24 (1) machinery, equipment, implements, tools, accessories, 97.25 appliances, contrivances and furniture and fixtures, except 97.26 those listed in paragraph (a), clause (6); and 97.27 (2) petroleum and special fuels used in producing or 97.28 generating power for propelling ready-mixed concrete trucks on 97.29 the public highways of this state. 97.30 (c) Industrial production includes, but is not limited to, 97.31 research, development, design or production of any tangible 97.32 personal property, manufacturing, processing (other than by 97.33 restaurants and consumers) of agricultural products (whether 97.34 vegetable or animal), commercial fishing, refining, smelting, 97.35 reducing, brewing, distilling, printing, mining, quarrying, 97.36 lumbering, generating electricity, the production of road 98.1 building materials, and the research, development, design, or 98.2 production of computer software. Industrial production does not 98.3 include painting, cleaning, repairing or similar processing of 98.4 property except as part of the original manufacturing process. 98.5 Industrial production does not include the transportation, 98.6 transmission, or distribution of petroleum, liquefied gas, 98.7 natural gas, water, or steam, in, by, or through pipes, lines, 98.8 tanks, mains, or other means of transporting those products, 98.9 except transportation, transmission, and distribution do not 98.10 include blending of petroleum or biodiesel fuel, as defined in 98.11 section 239.77. 98.12 [EFFECTIVE DATE.] This section is effective for sales and 98.13 purchases made after June 30, 2004. 98.14 Sec. 8. Minnesota Statutes 2003 Supplement, section 98.15 297A.68, subdivision 5, is amended to read: 98.16 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 98.17 exempt. The tax must be imposed and collected as if the rate 98.18 under section 297A.62, subdivision 1, applied, and then refunded 98.19 in the manner provided in section 297A.75. 98.20 "Capital equipment" means machinery and equipment purchased 98.21 or leased, and used in this state by the purchaser or lessee 98.22 primarily for manufacturing, fabricating, mining, or refining 98.23 tangible personal property to be sold ultimately at retail if 98.24 the machinery and equipment are essential to the integrated 98.25 production process of manufacturing, fabricating, mining, or 98.26 refining. Capital equipment also includes machinery and 98.27 equipment used to electronically transmit results retrieved by a 98.28 customer of an on-line computerized data retrieval system. 98.29 (b) Capital equipment includes, but is not limited to: 98.30 (1) machinery and equipment used to operate, control, or 98.31 regulate the production equipment; 98.32 (2) machinery and equipment used for research and 98.33 development, design, quality control, and testing activities; 98.34 (3) environmental control devices that are used to maintain 98.35 conditions such as temperature, humidity, light, or air pressure 98.36 when those conditions are essential to and are part of the 99.1 production process; 99.2 (4) materials and supplies used to construct and install 99.3 machinery or equipment; 99.4 (5) repair and replacement parts, including accessories, 99.5 whether purchased as spare parts, repair parts, or as upgrades 99.6 or modifications to machinery or equipment; 99.7 (6) materials used for foundations that support machinery 99.8 or equipment; 99.9 (7) materials used to construct and install special purpose 99.10 buildings used in the production process; 99.11 (8) ready-mixed concrete equipment in which the ready-mixed 99.12 concrete is mixed as part of the delivery process regardless if 99.13 mounted on a chassis and leases of ready-mixed concrete trucks; 99.14 and 99.15 (9) machinery or equipment used for research, development, 99.16 design, or production of computer software. 99.17 (c) Capital equipment does not include the following: 99.18 (1) motor vehicles taxed under chapter 297B; 99.19 (2) machinery or equipment used to receive or store raw 99.20 materials; 99.21 (3) building materials, except for materials included in 99.22 paragraph (b), clauses (6) and (7); 99.23 (4) machinery or equipment used for nonproduction purposes, 99.24 including, but not limited to, the following: plant security, 99.25 fire prevention, first aid, and hospital stations; support 99.26 operations or administration; pollution control; and plant 99.27 cleaning, disposal of scrap and waste, plant communications, 99.28 space heating, cooling, lighting, or safety; 99.29 (5) farm machinery and aquaculture production equipment as 99.30 defined by section 297A.61, subdivisions 12 and 13; 99.31 (6) machinery or equipment purchased and installed by a 99.32 contractor as part of an improvement to real property;or99.33 (7) machinery or equipment used in the transportation, 99.34 transmission, or distribution of petroleum, liquefied gas, 99.35 natural gas, water, or steam, in, by, or through pipes, lines, 99.36 tanks, mains, or other means of transporting those products. 100.1 This clause does not apply to machinery and equipment used to 100.2 blend petroleum or biodiesel fuel, as defined in section 239.77; 100.3 or 100.4 (8) any other item that is not essential to the integrated 100.5 process of manufacturing, fabricating, mining, or refining. 100.6 (d) For purposes of this subdivision: 100.7 (1) "Equipment" means independent devices or tools separate 100.8 from machinery but essential to an integrated production 100.9 process, including computers and computer software, used in 100.10 operating, controlling, or regulating machinery and equipment; 100.11 and any subunit or assembly comprising a component of any 100.12 machinery or accessory or attachment parts of machinery, such as 100.13 tools, dies, jigs, patterns, and molds. 100.14 (2) "Fabricating" means to make, build, create, produce, or 100.15 assemble components or property to work in a new or different 100.16 manner. 100.17 (3) "Integrated production process" means a process or 100.18 series of operations through which tangible personal property is 100.19 manufactured, fabricated, mined, or refined. For purposes of 100.20 this clause, (i) manufacturing begins with the removal of raw 100.21 materials from inventory and ends when the last process prior to 100.22 loading for shipment has been completed; (ii) fabricating begins 100.23 with the removal from storage or inventory of the property to be 100.24 assembled, processed, altered, or modified and ends with the 100.25 creation or production of the new or changed product; (iii) 100.26 mining begins with the removal of overburden from the site of 100.27 the ores, minerals, stone, peat deposit, or surface materials 100.28 and ends when the last process before stockpiling is completed; 100.29 and (iv) refining begins with the removal from inventory or 100.30 storage of a natural resource and ends with the conversion of 100.31 the item to its completed form. 100.32 (4) "Machinery" means mechanical, electronic, or electrical 100.33 devices, including computers and computer software, that are 100.34 purchased or constructed to be used for the activities set forth 100.35 in paragraph (a), beginning with the removal of raw materials 100.36 from inventory through completion of the product, including 101.1 packaging of the product. 101.2 (5) "Machinery and equipment used for pollution control" 101.3 means machinery and equipment used solely to eliminate, prevent, 101.4 or reduce pollution resulting from an activity described in 101.5 paragraph (a). 101.6 (6) "Manufacturing" means an operation or series of 101.7 operations where raw materials are changed in form, composition, 101.8 or condition by machinery and equipment and which results in the 101.9 production of a new article of tangible personal property. For 101.10 purposes of this subdivision, "manufacturing" includes the 101.11 generation of electricity or steam to be sold at retail. 101.12 (7) "Mining" means the extraction of minerals, ores, stone, 101.13 or peat. 101.14 (8) "On-line data retrieval system" means a system whose 101.15 cumulation of information is equally available and accessible to 101.16 all its customers. 101.17 (9) "Primarily" means machinery and equipment used 50 101.18 percent or more of the time in an activity described in 101.19 paragraph (a). 101.20 (10) "Refining" means the process of converting a natural 101.21 resource to an intermediate or finished product, including the 101.22 treatment of water to be sold at retail. 101.23 [EFFECTIVE DATE.] This section is effective for sales and 101.24 purchases made after June 30, 2004. 101.25 Sec. 9. Minnesota Statutes 2002, section 297A.68, is 101.26 amended by adding a subdivision to read: 101.27 Subd. 40. [PERSONAL RAPID TRANSIT SYSTEM.] (a) Machinery, 101.28 equipment, and supplies purchased or leased, and used by the 101.29 purchaser or lessee in this state directly in the provision of a 101.30 personal rapid transit system as defined in section 297A.61, 101.31 subdivision 37, are exempt. Machinery, equipment, and supplies 101.32 that qualify for this exemption include, but are not limited to, 101.33 the following: 101.34 (1) vehicles, guideways, and related parts used directly in 101.35 the transit system; 101.36 (2) computers and equipment used primarily for operating, 102.1 controlling, and regulating the system; 102.2 (3) machinery, equipment, furniture, and fixtures necessary 102.3 for the functioning of system stations; 102.4 (4) machinery, equipment, implements, tools, and supplies 102.5 used to maintain vehicles, guideways, and stations; and 102.6 (5) electricity and other fuels used in the provision of 102.7 the transit service, including heating, cooling, and lighting of 102.8 system stations. 102.9 (b) This exemption does not include machinery, equipment, 102.10 and supplies used for nonproduction purposes such as operations 102.11 support and administration. 102.12 [EFFECTIVE DATE.] This section is effective for sales and 102.13 purchases made after June 30, 2004. 102.14 Sec. 10. Minnesota Statutes 2003 Supplement, section 102.15 297A.70, subdivision 8, is amended to read: 102.16 Subd. 8. [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 102.17 SYSTEM; PRODUCTS AND SERVICES.] Products and services including, 102.18 but not limited to, end user equipment used for construction, 102.19 ownership, operation, maintenance, and enhancement of the 102.20backbone system of theregionwide or statewide public safety 102.21 radio communication system established under sections 403.21 to 102.22 403.34, are exempt.For purposes of this subdivision, backbone102.23system is defined in section 403.21, subdivision 9.This 102.24 subdivision is effective for purchases, sales, storage, use, or 102.25 consumptionoccurring before August 1, 2005,in the counties of 102.26Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and102.27WashingtonBenton, Sherburne, Stearns, and Wright, and all 102.28 counties located in the west metro, east metro, and southeast 102.29 districts of the State Patrol. 102.30 [EFFECTIVE DATE.] This section is effective for sales made 102.31 beginning the day after final enactment. 102.32 Sec. 11. Minnesota Statutes 2002, section 297A.70, is 102.33 amended by adding a subdivision to read: 102.34 Subd. 17. [DONATED MEALS.] Meals that are normally sold at 102.35 retail in the ordinary business activities of the taxpayer are 102.36 exempt if the meals are donated to a nonprofit group as defined 103.1 in subdivision 4 for fund-raising purposes. 103.2 [EFFECTIVE DATE.] This section is effective for donations 103.3 made after June 30, 2004. 103.4 Sec. 12. Minnesota Statutes 2002, section 297A.71, is 103.5 amended by adding a subdivision to read: 103.6 Subd. 33. [PERSONAL RAPID TRANSIT SYSTEM.] Materials, 103.7 equipment, and supplies used in the construction, expansion, or 103.8 improvement of a personal rapid transit system as defined in 103.9 section 297A.61, subdivision 37. 103.10 [EFFECTIVE DATE.] This section is effective for sales and 103.11 purchases made after June 30, 2004. 103.12 Sec. 13. Minnesota Statutes 2002, section 297A.87, 103.13 subdivision 2, is amended to read: 103.14 Subd. 2. [SELLER'S PERMIT OR ALTERNATE STATEMENT.] (a) The 103.15 operator of an event under subdivision 1 shall obtain one of the 103.16 following from a person who wishes to do business as a seller at 103.17 the event: 103.18 (1) evidence that the person holds a valid seller's permit 103.19 under section 297A.84;or103.20 (2) a written statement that the person is not offering for 103.21 sale any item that is taxable under this chapter; or 103.22 (3) a written statement that this is the only selling event 103.23 that the person will be participating in for that calendar year, 103.24 that the person will be participating for three or fewer days, 103.25 and that the person will make less than $500 in total sales at 103.26 the event. The written statement shall include the person's 103.27 name, address, and telephone number. 103.28 (b) The operator shall require the evidence or statement as 103.29 a prerequisite to participating in the event as a seller. 103.30 [EFFECTIVE DATE.] This section is effective for selling 103.31 events occurring after June 15, 2004. 103.32 Sec. 14. Minnesota Statutes 2002, section 297A.87, 103.33 subdivision 3, is amended to read: 103.34 Subd. 3. [OCCASIONAL SALE PROVISIONSNOTAPPLICABLE UNDER 103.35 LIMITED CIRCUMSTANCES.] The isolated and occasional 103.36 saleprovisionsprovision under section 297A.67, subdivision 23, 104.1orapplies, provided that the seller only participates for three 104.2 or fewer days in one event per calendar year, makes $500 or less 104.3 in sales at the event, and provides the written statement 104.4 required in subdivision 2, paragraph (a), clause (3). The 104.5 isolated and occasional sales provision under section 297A.68, 104.6 subdivision 25,dodoes not apply to a seller at an event under 104.7 this section. 104.8 [EFFECTIVE DATE.] This section is effective for selling 104.9 events occurring after June 15, 2004. 104.10 Sec. 15. Laws 1998, chapter 389, article 8, section 43, 104.11 subdivision 3, is amended to read: 104.12 Subd. 3. [USE OF REVENUES.] Revenues received from the 104.13 taxes authorized by subdivisions 1 and 2 must be used by the 104.14 city to pay for the cost of collecting and administering the 104.15 taxes and to pay for the following projects: 104.16 (1) transportation infrastructure improvements including 104.17 both highway and airport improvements; 104.18 (2) improvements to the civic center complex; 104.19 (3) a municipal water, sewer, and storm sewer project 104.20 necessary to improve regional ground water quality; and 104.21 (4) construction of a regional recreation and sports center 104.22 andassociatedother higher education facilities available for 104.23 both community and student use, located at or adjacent to the104.24Rochester center. 104.25 The total amount of capital expenditures or bonds for these 104.26 projects that may be paid from the revenues raised from the 104.27 taxes authorized in this section may not exceed $71,500,000. 104.28 The total amount of capital expenditures or bonds for the 104.29 project in clause (4) that may be paid from the revenues raised 104.30 from the taxes authorized in this section may not exceed 104.31 $20,000,000. 104.32 [EFFECTIVE DATE.] This section is effective the day after 104.33 the governing body of Rochester and its chief clerical officer 104.34 timely complete their compliance with Minnesota Statutes, 104.35 section 645.021, subdivisions 2 and 3. 104.36 Sec. 16. Laws 2002, chapter 377, article 3, section 4, the 105.1 effective date, is amended to read: 105.2 [EFFECTIVE DATE.]With the exception of clause (2), item105.3(ii),This section is effective for sales and purchases made 105.4 after June 30, 2002.Clause (2), item (ii), is effective for105.5sales and purchases made after June 30, 2002, and before January105.61, 2006.105.7 [EFFECTIVE DATE.] This section is effective the day 105.8 following final enactment. 105.9 ARTICLE 5 105.10 SPECIAL TAXES 105.11 Section 1. Minnesota Statutes 2002, section 295.582, is 105.12 amended to read: 105.13 295.582 [AUTHORITY.] 105.14 (a) A hospital, surgical center, or health care provider 105.15 that is subject to a tax under section 295.52, or a pharmacy 105.16 that has paid additional expense transferred under this section 105.17 by a wholesale drug distributor, may transfer additional expense 105.18 generated by section 295.52 obligations on to all third-party 105.19 contracts for the purchase of health care services on behalf of 105.20 a patient or consumer. The additional expense transferred to 105.21 the third-party purchaser must not exceed the tax percentage 105.22 specified in section 295.52 multiplied against the gross 105.23 revenues received under the third-party contract, and the tax 105.24 percentage specified in section 295.52 multiplied against 105.25 co-payments and deductibles paid by the individual patient or 105.26 consumer. The expense must not be generated on revenues derived 105.27 from payments that are excluded from the tax under section 105.28 295.53. All third-party purchasers of health care services 105.29 including, but not limited to, third-party purchasers regulated 105.30 under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 105.31 or 79A, or under section 471.61 or 471.617, must pay the 105.32 transferred expense in addition to any payments due under 105.33 existing contracts with the hospital, surgical center, pharmacy, 105.34 or health care provider, to the extent allowed under federal 105.35 law. A third-party purchaser of health care services includes, 105.36 but is not limited to, a health carrier or community integrated 106.1 service network that pays for health care services on behalf of 106.2 patients or that reimburses, indemnifies, compensates, or 106.3 otherwise insures patients for health care services. A 106.4 third-party purchaser shall comply with this section regardless 106.5 of whether the third-party purchaser is a for-profit, 106.6 not-for-profit, or nonprofit entity or whether the health care 106.7 provider has chosen to itemize the tax on patient billings. A 106.8 wholesale drug distributor may transfer additional expense 106.9 generated by section 295.52 obligations to entities that 106.10 purchase from the wholesaler, and the entities must pay the 106.11 additional expense. Nothing in this section limits the ability 106.12 of a hospital, surgical center, pharmacy, wholesale drug 106.13 distributor, or health care provider to recover all or part of 106.14 the section 295.52 obligation by other methods, including 106.15 increasing fees or charges. If a provider elects to separately 106.16 itemize the tax on the patient's bill, a third-party purchaser 106.17 that has already incorporated the tax in its calculation of the 106.18 payment amount due to the provider may deduct the additional 106.19 itemized tax amount from the payment made to the provider. 106.20 (b) Each third-party purchaser regulated under any chapter 106.21 cited in paragraph (a) shall include with its annual renewal for 106.22 certification of authority or licensure documentation indicating 106.23 compliance with paragraph (a). 106.24 (c) Any hospital, surgical center, or health care provider 106.25 subject to a tax under section 295.52 or a pharmacy that has 106.26 paid additional expense transferred under this section by a 106.27 wholesale drug distributor may file a complaint with the 106.28 commissioner responsible for regulating the third-party 106.29 purchaser if at any time the third-party purchaser fails to 106.30 comply with paragraph (a). 106.31 (d) If the commissioner responsible for regulating the 106.32 third-party purchaser finds at any time that the third-party 106.33 purchaser has not complied with paragraph (a), the commissioner 106.34 may take enforcement action against a third-party purchaser 106.35 which is subject to the commissioner's regulatory jurisdiction 106.36 and which does not allow a hospital, surgical center, pharmacy, 107.1 or provider to pass-through the tax. The commissioner may by 107.2 order fine or censure the third-party purchaser or revoke or 107.3 suspend the certificate of authority or license of the 107.4 third-party purchaser to do business in this state if the 107.5 commissioner finds that the third-party purchaser has not 107.6 complied with this section. The third-party purchaser may 107.7 appeal the commissioner's order through a contested case hearing 107.8 in accordance with chapter 14. 107.9 [EFFECTIVE DATE.] This section is effective January 1, 107.10 2005, and applies to actions arising from services provided on 107.11 or after that date. 107.12 Sec. 2. Minnesota Statutes 2002, section 297F.01, is 107.13 amended by adding a subdivision to read: 107.14 Subd. 10a. [OUT-OF-STATE RETAILER.] "Out-of-state retailer" 107.15 means a person engaged outside of this state in the business of 107.16 selling, or offering to sell, cigarettes or tobacco products to 107.17 consumers located in this state. 107.18 Sec. 3. [297F.031] [REGISTRATION REQUIREMENT.] 107.19 Prior to making delivery sales or shipping cigarettes or 107.20 tobacco products in connection with any sales, an out-of-state 107.21 retailer shall file with the Department of Revenue a statement 107.22 setting forth the out-of-state retailer's name and trade name, 107.23 and the address of the out-of-state retailer's principal place 107.24 of business and any other place of business. 107.25 Sec. 4. Minnesota Statutes 2002, section 297F.09, is 107.26 amended by adding a subdivision to read: 107.27 Subd. 4a. [REPORTING REQUIREMENTS.] No later than the 18th 107.28 day of each calendar month, an out-of-state retailer that has 107.29 made a delivery of cigarettes or tobacco products or shipped or 107.30 delivered cigarettes or tobacco products into the state in a 107.31 delivery sale in the previous calendar month shall file with the 107.32 Department of Revenue reports in the form and in the manner 107.33 prescribed by the commissioner of revenue that provides for each 107.34 delivery sale, the name and address of the purchaser and the 107.35 brand or brands and quantity of cigarettes or tobacco products 107.36 sold. A tobacco retailer that meets the requirements of United 108.1 States Code, title 15, section 375 et seq. satisfies the 108.2 requirements of this subdivision. 108.3 Sec. 5. [297F.25] [CIGARETTE WHOLESALE TAX.] 108.4 Subdivision 1. [IMPOSITION.] A tax is imposed on the sale 108.5 of cigarettes by a cigarette distributor to a retailer or 108.6 cigarette subjobber for resale in this state. The tax is equal 108.7 to 6.5 percent of: 108.8 (1) 112 percent of the distributor's gross invoice price, 108.9 before any discounts and including the full face value of any 108.10 cigarette stamps and the fee imposed under section 297F.24, of 108.11 the cigarettes sold to a retailer; or 108.12 (2) 112 percent of the cost of the retailer, as defined in 108.13 section 325D.32, subdivision 11, and any fees imposed under 108.14 section 297F.24 of the cigarettes sold to a cigarette subjobber. 108.15 Subd. 2. [TAX COLLECTION REQUIRED.] A cigarette 108.16 distributor must collect the tax imposed under subdivision 1 108.17 from the retailer or cigarette subjobber and the tax must be 108.18 stated and charged separately. The tax collected must be 108.19 remitted to the commissioner in the manner prescribed by 108.20 subdivision 4. 108.21 Subd. 3. [PAYMENT.] Each taxpayer must remit payments of 108.22 the taxes to the commissioner on the same dates prescribed under 108.23 section 297F.09, subdivision 1, for cigarette tax returns, 108.24 including the accelerated remittance of the June liability. 108.25 Subd. 4. [RETURN.] A taxpayer must file a return with the 108.26 commissioner on the same dates prescribed under section 297F.09, 108.27 subdivision 1, for cigarette tax returns. 108.28 Subd. 5. [FORM OF RETURN.] The return must contain the 108.29 information and be in the form prescribed by the commissioner. 108.30 Subd. 6. [TAX AS DEBT.] The tax that is required to be 108.31 collected by the distributor is a debt from the retailer or 108.32 cigarette subjobber to the distributor recoverable at law in the 108.33 same manner as other debts. 108.34 Subd. 7. [ADMINISTRATION.] The audit, assessment, 108.35 interest, appeal, refund, and collection provisions applicable 108.36 to the taxes imposed under this chapter apply to taxes imposed 109.1 under this section. 109.2 Subd. 8. [DEPOSIT OF REVENUES.] Notwithstanding the 109.3 provisions of section 297F.10, the commissioner shall deposit 109.4 all revenues, including penalties and interest, derived from the 109.5 tax imposed by this section, in the general fund. 109.6 [EFFECTIVE DATE.] This section is effective for all sales 109.7 made on or after August 1, 2004. 109.8 Sec. 6. Minnesota Statutes 2002, section 297I.01, is 109.9 amended by adding a subdivision to read: 109.10 Subd. 6a. [DIRECT BUSINESS.] (a) "Direct business" means 109.11 all insurance provided by an insurance company or its agents, 109.12 and specifically includes stop-loss insurance purchased in 109.13 connection with a self-insurance plan for employee health 109.14 benefits or for other purposes, but excludes: 109.15 (1) reinsurance; and 109.16 (2) self-insurance. 109.17 (b) For purposes of this subdivision, an insurance company 109.18 includes a nonprofit health service corporation, health 109.19 maintenance organization, and community integrated service 109.20 network. 109.21 [EFFECTIVE DATE.] This section is effective for insurance 109.22 premiums received after June 30, 2004. 109.23 Sec. 7. Minnesota Statutes 2002, section 297I.05, 109.24 subdivision 4, is amended to read: 109.25 Subd. 4. [MUTUAL PROPERTY AND CASUALTY COMPANIES WITH 109.26 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 109.27 tax is imposed on mutual property and casualty companies that 109.28 had total assets greater than $5,000,000 at the end of the 109.29 calendar year but that had total assets less than $1,600,000,000 109.30 on December 31, 1989. The rate of tax is equal to: 109.31 (1)two percent of gross premiums less return premiums on109.32all direct business received by the insurer or agents of the109.33insurer in Minnesotathe tax under subdivision 14 for life 109.34 insurance, in cash or otherwise, during the year; and 109.35 (2) 1.26 percent of gross premiums less return premiums on 109.36 all other direct business received by the insurer or agents of 110.1 the insurer in Minnesota, in cash or otherwise, during the year. 110.2 [EFFECTIVE DATE.] This section is effective for premiums 110.3 received after June 30, 2004. 110.4 Sec. 8. Minnesota Statutes 2002, section 297I.05, is 110.5 amended by adding a subdivision to read: 110.6 Subd. 14. [LIFE INSURANCE.] A tax is imposed on life 110.7 insurance. The rate of tax equals a percentage of gross 110.8 premiums less return premiums on all direct business received by 110.9 the insurer or agents of the insurer in Minnesota for life 110.10 insurance, in cash or otherwise, during the year. For premiums 110.11 received after December 31, 2004, but before January 1, 2006, 110.12 the rate of tax is 1.9 percent. For premiums received after 110.13 December 31, 2005, but before January 1, 2007, the rate of tax 110.14 is 1.8 percent. For premiums received after December 31, 2006, 110.15 but before January 1, 2008, the rate of tax is 1.7 percent. For 110.16 premiums received after December 31, 2007, but before January 1, 110.17 2009, the rate of tax is 1.6 percent. For premiums received 110.18 after December 31, 2008, the rate of tax is 1.5 percent. 110.19 [EFFECTIVE DATE.] This section is effective for premiums 110.20 received after December 31, 2004. 110.21 Sec. 9. Minnesota Statutes 2003 Supplement, section 110.22 298.75, subdivision 1, is amended to read: 110.23 Subdivision 1. [DEFINITIONS.] Except as may otherwise be 110.24 provided, the following words, when used in this section, shall 110.25 have the meanings herein ascribed to them. 110.26 (1) "Aggregate material" shall mean nonmetallic natural 110.27 mineral aggregate including, but not limited to sand, silica 110.28 sand, gravel, crushed rock, limestone, granite, and borrow, but 110.29 only if the borrow is transported on a public road, street, or 110.30 highway. Aggregate material shall not include dimension stone 110.31 and dimension granite. Aggregate material must be measured or 110.32 weighed after it has been extracted from the pit, quarry, or 110.33 deposit. 110.34 (2) "Person" shall mean any individual, firm, partnership, 110.35 corporation, organization, trustee, association, or other entity. 110.36 (3) "Operator" shall mean any person engaged in the 111.1 business of removing aggregate material from the surface or 111.2 subsurface of the soil, for the purpose of sale, either directly 111.3 or indirectly, through the use of the aggregate material in a 111.4 marketable product or service; except that operator does not 111.5 include persons engaged in a transaction in which the aggregate 111.6 is moved within a project's construction limits, as defined in 111.7 the official project construction plan documents, to other 111.8 locations within that same project's construction limits. 111.9 (4) "Extraction site" shall mean a pit, quarry, or deposit 111.10 containing aggregate material and any contiguous property to the 111.11 pit, quarry, or deposit which is used by the operator for 111.12 stockpiling the aggregate material. 111.13 (5) "Importer" shall mean any person who buys aggregate 111.14 material produced from a county not listed in paragraph (6) or 111.15 another state and causes the aggregate material to be imported 111.16 into a county in this state which imposes a tax on aggregate 111.17 material. 111.18 (6) "County" shall mean the counties of Pope, Stearns, 111.19 Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 111.20 Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 111.21 Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 111.22 Sibley, Hennepin, Washington, Chisago, and Ramsey. County also 111.23 means any other county whose board has voted after a public 111.24 hearing to impose the tax under this section and has notified 111.25 the commissioner of revenue of the imposition of the tax. 111.26 (7) "Borrow" shall mean granular borrow, consisting of 111.27 durable particles of gravel and sand, crushed quarry or mine 111.28 rock, crushed gravel or stone, or any combination thereof, the 111.29 ratio of the portion passing the (#200) sieve divided by the 111.30 portion passing the (1 inch) sieve may not exceed 20 percent by 111.31 mass. 111.32 [EFFECTIVE DATE.] This section is effective for aggregate 111.33 sold, imported, transported, or used from a stockpile after June 111.34 30, 2004. 111.35 Sec. 10. [325F.781] [REQUIREMENTS; TOBACCO PRODUCT 111.36 DELIVERY SALES.] 112.1 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 112.2 section, the following terms have the meanings given, unless the 112.3 language or context clearly provides otherwise. 112.4 (b) "Consumer" means an individual who purchases, receives, 112.5 or possesses tobacco products for personal consumption and not 112.6 for resale. 112.7 (c)(1) "Delivery sale" means: 112.8 (i) a sale of tobacco products to a consumer in this state 112.9 when: 112.10 (A) the purchaser submits the order for the sale by means 112.11 of a telephonic or other method of voice transmission, the mail 112.12 or any other delivery service, or the Internet or other on-line 112.13 service; or 112.14 (B) the tobacco products are delivered by use of the mail 112.15 or other delivery service; or 112.16 (ii) a sale of tobacco products that satisfies the criteria 112.17 in clause (1), item (i), regardless of whether the seller is 112.18 located inside or outside the state. 112.19 (2) A sale of tobacco products to an individual in this 112.20 state must be treated as a sale to a consumer, unless the 112.21 individual is licensed as a distributor or retailer of tobacco 112.22 products. 112.23 (d) "Delivery service" means a person, including the United 112.24 States Postal Service, that is engaged in the commercial 112.25 delivery of letters, packages, or other containers. 112.26 (e) "Distributor" means a person, whether located inside or 112.27 outside this state, other than a retailer, who sells or 112.28 distributes tobacco products in the state. Distributor does not 112.29 include a tobacco products manufacturer, export warehouse 112.30 proprietor, or importer with a valid permit under United States 112.31 Code, title 26, section 5712 (1997), if the person sells or 112.32 distributes tobacco products in this state only to distributors 112.33 who hold valid and current licenses under the laws of a state, 112.34 or to an export warehouse proprietor or another manufacturer. 112.35 Distributor does not include a common or contract carrier that 112.36 is transporting tobacco products under a proper bill of lading 113.1 or freight bill that states the quantity, source, and 113.2 destination of tobacco products, or a person who ships tobacco 113.3 products through this state by common or contract carrier under 113.4 a bill of lading or freight bill. 113.5 (f) "Retailer" means a person, whether located inside or 113.6 outside this state, who sells or distributes tobacco products to 113.7 a consumer in this state. 113.8 (g) "Tobacco products" means: 113.9 (1) cigarettes, as defined in section 297F.01, subdivision 113.10 3; and 113.11 (2) smokeless tobacco as defined in section 325F.76. 113.12 Subd. 2. [REQUIREMENTS FOR ACCEPTING ORDER FOR DELIVERY 113.13 SALE.] (a) This subdivision applies to acceptance of an order 113.14 for a delivery sale of tobacco products. 113.15 (b) When accepting the first order for a delivery sale from 113.16 a consumer, the tobacco retailer shall obtain the following 113.17 information from the person placing the order: 113.18 (1) a copy of a valid government-issued document that 113.19 provides the person's name, current address, photograph, and 113.20 date of birth; and 113.21 (2) an original written statement signed by the person 113.22 documenting that the person: 113.23 (i) is of legal age to purchase tobacco products in the 113.24 state; 113.25 (ii) has made a choice whether to receive mailings from a 113.26 tobacco retailer; 113.27 (iii) understands that providing false information may be a 113.28 violation of law; and 113.29 (iv) understands that it is a violation of law to purchase 113.30 tobacco products for subsequent resale or for delivery to 113.31 persons who are under the legal age to purchase tobacco products. 113.32 (c) If an order is made as a result of advertisement over 113.33 the Internet, the tobacco retailer shall request the e-mail 113.34 address of the purchaser and shall receive payment by credit 113.35 card or check prior to shipping. 113.36 (d) Prior to shipping the tobacco products, the tobacco 114.1 retailer shall verify the information provided under paragraph 114.2 (b) against a commercially available database. Any such 114.3 database or databases may also include age and identity 114.4 information from other government or validated commercial 114.5 sources, if that additional information is regularly used by 114.6 government and businesses for the purpose of identity 114.7 verification and authentication, and if the additional 114.8 information is used only to supplement and not to replace the 114.9 government-issued identification data in the age and identity 114.10 verification process. 114.11 Subd. 3. [REQUIREMENTS FOR SHIPPING A DELIVERY SALE.] (a) 114.12 This subdivision applies to a tobacco retailer shipping tobacco 114.13 products pursuant to a delivery sale. 114.14 (b) The tobacco retailer shall clearly mark the outside of 114.15 the package of tobacco products to be shipped "tobacco products - 114.16 adult signature required" and to show the name of the tobacco 114.17 retailer. 114.18 (c) The tobacco retailer shall utilize a delivery service 114.19 that imposes the following requirements: 114.20 (1) an adult must sign for the delivery; and 114.21 (2) the person signing for the delivery must show valid 114.22 government-issued identification that contains a photograph of 114.23 the person signing for the delivery and indicates that the 114.24 person signing for the delivery is of legal age to purchase 114.25 tobacco products and resides at the delivery address. 114.26 (d) The retailer must provide delivery instructions that 114.27 clearly indicate the requirements of this subdivision and must 114.28 declare that state law requires compliance with the requirements. 114.29 Subd. 4. [COMMON CARRIERS.] This section may not be 114.30 construed as imposing liability upon any common carrier, or 114.31 officers or employees of the common carrier, when acting within 114.32 the scope of business of the common carrier. 114.33 Subd. 5. [REGISTRATION REQUIREMENT.] Prior to making 114.34 delivery sales or shipping tobacco products in connection with 114.35 any sales, an out-of-state retailer must meet the requirements 114.36 of section 297F.031. 115.1 Subd. 6. [COLLECTION OF TAXES.] (a) Prior to shipping any 115.2 tobacco products to a purchaser in this state, the out-of-state 115.3 retailer shall comply with all requirements of chapter 297F and 115.4 shall ensure that all state excise taxes and fees that apply to 115.5 such tobacco products have been collected and paid to the state 115.6 and that all related state excise tax stamps or other indicators 115.7 of state excise tax payment have been properly affixed to those 115.8 tobacco products. 115.9 (b) In addition to any penalties under chapter 297F, a 115.10 distributor who fails to pay any tax due according to paragraph 115.11 (a) shall pay, in addition to any other penalty, a penalty of 50 115.12 percent of the tax due but unpaid. 115.13 Subd. 7. [APPLICATION OF STATE LAWS.] All state laws that 115.14 apply to in-state tobacco product retailers shall apply to 115.15 Internet and mail-order sellers that sell into this state. 115.16 Subd. 8. [FORFEITURE.] Any tobacco product sold or 115.17 attempted to be sold in a delivery sale that does not meet the 115.18 requirements of this section is deemed to be contraband and is 115.19 subject to forfeiture in the same manner as and in accordance 115.20 with the provisions of section 297F.21. 115.21 Subd. 9. [CIVIL PENALTIES.] (a) A tobacco retailer or 115.22 distributor who violates this section or rules adopted under 115.23 this section is subject to the following fines: 115.24 (1) for the first violation, a fine of not more than 115.25 $1,000; and 115.26 (2) for the second and any subsequent violation, a fine of 115.27 not more than $5,000. 115.28 (b) A person who submits ordering information under 115.29 subdivision 2, paragraph (b), in another person's name is 115.30 subject to a fine of not more than $1,000. 115.31 Subd. 10. [ENFORCEMENT.] The attorney general may bring an 115.32 action to enforce this section and may seek injunctive relief, 115.33 including a preliminary or final injunction, and fines, 115.34 penalties, and equitable relief and may seek to prevent or 115.35 restrain actions in violation of this section by any person or 115.36 any person controlling such person. In addition, a violation of 116.1 this section is a violation of the Unlawful Trade Practices Act, 116.2 sections 325D.09 to 325D.16. 116.3 Sec. 11. [FLOOR STOCKS TAX.] 116.4 Subdivision 1. [CIGARETTES.] A floor stocks tax is imposed 116.5 on every retailer or cigarette subjobber, on the stamped 116.6 cigarettes in the retailer's or cigarette subjobber's possession 116.7 or under the retailer's or cigarette subjobber's control, at 116.8 12:01 a.m. on July 31, 2004. The tax is imposed at the 116.9 following rates: 116.10 (1) on cigarettes weighing not more than three pounds per 116.11 thousand, 13.5 mills on each cigarette; and 116.12 (2) on cigarettes weighing more than three pounds per 116.13 thousand, 27 mills on each cigarette. 116.14 Each retailer shall file a return with the commissioner, in the 116.15 form the commissioner prescribes, showing the cigarettes on hand 116.16 at 12:01 a.m. on August 1, 2004, and pay the tax due thereon by 116.17 September 1, 2004. Tax not paid by the due date bears interest 116.18 at the rate of one percent a month. 116.19 Subd. 2. [AUDIT AND ENFORCEMENT.] The tax imposed by this 116.20 section is subject to the audit, assessment, and collection 116.21 provisions applicable to the taxes imposed under Minnesota 116.22 Statutes, chapter 297F. The commissioner may require a 116.23 distributor to receive and maintain copies of floor stocks tax 116.24 returns filed by all retailers requesting a credit for returned 116.25 cigarettes. 116.26 Subd. 3. [DEPOSIT OF PROCEEDS.] Notwithstanding the 116.27 provisions of Minnesota Statutes, section 297F.10, the revenue 116.28 from the tax imposed under this section shall be deposited by 116.29 the commissioner in the general fund. 116.30 [EFFECTIVE DATE.] This section is effective the day 116.31 following final enactment. 116.32 ARTICLE 6 116.33 TAX INCREMENT FINANCING 116.34 Section 1. Minnesota Statutes 2003 Supplement, section 116.35 116J.556, is amended to read: 116.36 116J.556 [LOCAL MATCH REQUIREMENT.] 117.1(a)In order to qualify for a grant under sections 116J.551 117.2 to 116J.557, the municipality must pay for at least one-quarter 117.3 of the project costs as a local match. The municipality shall 117.4 pay an amount of the project costs equal to at least 12 percent 117.5 of the cleanup costs from the municipality's general fund, a 117.6 property tax levy for that purpose, or other unrestricted money 117.7 available to the municipality (excluding tax increments). These 117.8 unrestricted moneys may be spent for project costs, other than 117.9 cleanup costs, and qualify for the local match payment equal to 117.10 12 percent of cleanup costs. The rest of the local match may be 117.11 paid with tax increments, regional, state, or federal money 117.12 available for the redevelopment of brownfields or any other 117.13 money available to the municipality. 117.14(b) If the development authority establishes a tax117.15increment financing district or hazardous substance subdistrict117.16on the site to pay for part of the local match requirement, the117.17district or subdistrict must be decertified when an amount of117.18tax increments equal to no more than three times the costs of117.19implementing the response action plan for the site and the117.20administrative costs for the district or subdistrict have been117.21received, after deducting the amount of the state grant.117.22 [EFFECTIVE DATE.] This section is effective the day 117.23 following final enactment. 117.24 Sec. 2. Minnesota Statutes 2002, section 469.174, 117.25 subdivision 11, is amended to read: 117.26 Subd. 11. [HOUSING DISTRICT.] "Housing district" means a 117.27 type of tax increment financing district which consists of a 117.28 project, or a portion of a project, intended for occupancy, in 117.29 part, by persons or families of low and moderate income, as 117.30 defined in chapter 462A, Title II of the National Housing Act of 117.31 1934, the National Housing Act of 1959, the United States 117.32 Housing Act of 1937, as amended, Title V of the Housing Act of 117.33 1949, as amended, any other similar present or future federal, 117.34 state, or municipal legislation, or the regulations promulgated 117.35 under any of those acts. A district does not qualify as a117.36housing district under this subdivision if the fair market value118.1of the improvements which are constructed in the district for118.2commercial uses or for uses other than low and moderate income118.3housing consists of more than 20 percent of the total fair118.4market value of the planned improvements in the development plan118.5or agreement. The fair market value of the improvements may be118.6determined using the cost of construction, capitalized income,118.7or other appropriate method of estimating market value, and that 118.8 satisfies the requirements of section 469.1761. Housing project 118.9 means a project, or a portion of a project, that meets all of 118.10 the qualifications of a housing district under this subdivision, 118.11 whether or not actually established as a housing district. 118.12 [EFFECTIVE DATE.] This section is effective for districts 118.13 for which the request for certification was filed with the 118.14 county auditor after October 5, 1989, except (1) the new 118.15 language is effective for requests for certification made after 118.16 June 30, 2004, and (2) the fair market value of the improvements 118.17 which are constructed for commercial uses in a district for 118.18 which the request for certification was filed with the county 118.19 auditor after October 5, 1989, and before July 1, 2004, may not 118.20 exceed more than 20 percent of total fair market value of the 118.21 planned improvements in the development plan or agreement. 118.22 Sec. 3. Minnesota Statutes 2003 Supplement, section 118.23 469.174, subdivision 25, is amended to read: 118.24 Subd. 25. [INCREMENT.] "Increment," "tax increment," "tax 118.25 increment revenues," "revenues derived from tax increment," and 118.26 other similar terms for a district include: 118.27 (1) taxes paid by the captured net tax capacity, but 118.28 excluding any excess taxes, as computed under section 469.177; 118.29 (2) the proceeds from the sale or lease of property, 118.30 tangible or intangible, to the extent the property was purchased 118.31 by the authority with tax increments; 118.32 (3) principal and interest received on loans or other 118.33 advances made by the authority with tax increments;and118.34 (4) interest or other investment earnings on or from tax 118.35 increments; 118.36 (5) repayment or return of tax increments made to the 119.1 authority under agreements for districts for which the request 119.2 for certification was made after August 1, 1993; and 119.3 (6) the market value homestead credit paid to the authority 119.4 under section 273.1384. 119.5 [EFFECTIVE DATE.] This section is effective for tax 119.6 increment financing districts, regardless of when the request 119.7 for certification was made, including districts for which the 119.8 request for certification was made before August 1, 1979, 119.9 provided that the amendment to clause (2) applies only to the 119.10 extent that the underlying provisions of clause (2) apply to the 119.11 district and to the sale or lease under prior law. 119.12 Sec. 4. Minnesota Statutes 2002, section 469.175, 119.13 subdivision 4a, is amended to read: 119.14 Subd. 4a. [FILING PLAN WITH STATE.] (a) The authority must 119.15 file a copy of the tax increment financing plan and amendments 119.16 to the plan with the commissioner of revenue and the state 119.17 auditor. The authority must also file a copy of the development 119.18 plan or the project plan for the project area with the 119.19 commissioner of revenue. The commissioner of revenue shall119.20provide a copy of a plan to the state auditor upon requestand 119.21 the state auditor. 119.22 (b) Filing under this subdivision must be made within 60 119.23 days after the latest of: 119.24 (1) the filing of the request for certification of the 119.25 district; 119.26 (2) approval of the plan by the municipality; or 119.27 (3) adoption of the plan by the authority. 119.28 [EFFECTIVE DATE.] This section is effective for plans filed 119.29 after July 1, 2004. 119.30 Sec. 5. Minnesota Statutes 2002, section 469.176, 119.31 subdivision 4d, is amended to read: 119.32 Subd. 4d. [HOUSING DISTRICTS.] Revenue derived from tax 119.33 increment from a housing district must be used solely to finance 119.34 the cost of housing projects as defined insectionsections 119.35 469.174, subdivision 11, and 469.1761. The cost of public 119.36 improvements directly related to the housing projects and the 120.1 allocated administrative expenses of the authority may be 120.2 included in the cost of a housing project. 120.3 [EFFECTIVE DATE.] This section is effective for all 120.4 districts to which the provisions of Minnesota Statutes, section 120.5 469.1761, applies. 120.6 Sec. 6. Minnesota Statutes 2002, section 469.1761, 120.7 subdivision 1, is amended to read: 120.8 Subdivision 1. [REQUIREMENT IMPOSED.] (a) In order for a 120.9 tax increment financing district to qualify as a housing 120.10 district,: 120.11 (1) the income limitations provided in this section must be 120.12 satisfied; and 120.13 (2) no more than 20 percent of the square footage of 120.14 buildings that receive assistance from tax increments may 120.15 consist of commercial, retail, or other nonresidential uses. 120.16 (b) The requirements imposed by this section apply to 120.17residentialproperty receiving assistance financed with tax 120.18 increments, including interest reduction, land transfers at less 120.19 than the authority's cost of acquisition, utility service or 120.20 connections, roads, parking facilities, or other subsidies. The 120.21 provisions of this section do not apply to districts located in 120.22 a targeted area as defined in section 462C.02, subdivision 9, 120.23 clause (e). 120.24 [EFFECTIVE DATE.] This section is effective for districts 120.25 for which the request for certification was made after June 30, 120.26 2004. 120.27 Sec. 7. Minnesota Statutes 2002, section 469.1761, 120.28 subdivision 3, is amended to read: 120.29 Subd. 3. [RENTAL PROPERTY.] For residential rental 120.30 property, the property must satisfy the income requirements for 120.31 a qualified residential rental project as defined in section 120.32 142(d) of the Internal Revenue Code.A property also satisfies120.33the requirements of section 142(d) if 50 percent of the120.34residential units in the project are occupied by individuals120.35whose income is 80 percent or less of area median gross income.120.36The requirements of this subdivision apply for the duration of121.1the tax increment financing district.121.2 [EFFECTIVE DATE.] This section is effective for districts 121.3 for which the request for certification was made after June 30, 121.4 2004. 121.5 Sec. 8. Minnesota Statutes 2003 Supplement, section 121.6 469.177, subdivision 1, is amended to read: 121.7 Subdivision 1. [ORIGINAL NET TAX CAPACITY.] (a) Upon or 121.8 after adoption of a tax increment financing plan, the auditor of 121.9 any county in which the district is situated shall, upon request 121.10 of the authority, certify the original net tax capacity of the 121.11 tax increment financing district and that portion of the 121.12 district overlying any subdistrict as described in the tax 121.13 increment financing plan and shall certify in each year 121.14 thereafter the amount by which the original net tax capacity has 121.15 increased or decreased as a result of a change in tax exempt 121.16 status of property within the district and any subdistrict, 121.17 reduction or enlargement of the district or changes pursuant to 121.18 subdivision 4. 121.19 (b) If the classification under section 273.13 of property 121.20 located in a district changes to a classification that has a 121.21 different assessment ratio, the original net tax capacity of 121.22 that property must be redetermined at the time when its use is 121.23 changed as if the property had originally been classified in the 121.24 same class in which it is classified after its use is changed. 121.25 (c) The amount to be added to the original net tax capacity 121.26 of the district as a result of previously tax exempt real 121.27 property within the district becoming taxable equals the net tax 121.28 capacity of the real property as most recently assessed pursuant 121.29 to section 273.18 or, if that assessment was made more than one 121.30 year prior to the date of title transfer rendering the property 121.31 taxable, the net tax capacity assessed by the assessor at the 121.32 time of the transfer. If improvements are made to tax exempt 121.33 property after certification of the district and before the 121.34 parcel becomes taxable, the assessor shall, at the request of 121.35 the authority, separately assess the estimated market value of 121.36 the improvements. If the property becomes taxable, the county 122.1 auditor shall add to original net tax capacity, the net tax 122.2 capacity of the parcel, excluding the separately assessed 122.3 improvements. If substantial taxable improvements were made to 122.4 a parcel after certification of the district and if the property 122.5 later becomes tax exempt, in whole or part, as a result of the 122.6 authority acquiring the property through foreclosure or exercise 122.7 of remedies under a lease or other revenue agreement or as a 122.8 result of tax forfeiture, the amount to be added to the original 122.9 net tax capacity of the district as a result of the property 122.10 again becoming taxable is the amount of the parcel's value that 122.11 was included in original net tax capacity when the parcel was 122.12 first certified. The amount to be added to the original net tax 122.13 capacity of the district as a result of enlargements equals the 122.14 net tax capacity of the added real property as most recently 122.15 certified by the commissioner of revenue as of the date of 122.16 modification of the tax increment financing plan pursuant to 122.17 section 469.175, subdivision 4. 122.18 (d) If the net tax capacity of a property increases because 122.19 the property no longer qualifies under the Minnesota 122.20 Agricultural Property Tax Law, section 273.111; the Minnesota 122.21 Open Space Property Tax Law, section 273.112; or the 122.22 Metropolitan Agricultural Preserves Act, chapter 473H, or 122.23 because platted, unimproved property is improved orthree years122.24passmarket value is increased after approval of the plat under 122.25 section 273.11,subdivision 1subdivision 14, 14a, or 14b, the 122.26 increase in net tax capacity must be added to the original net 122.27 tax capacity. 122.28 (e) The amount to be subtracted from the original net tax 122.29 capacity of the district as a result of previously taxable real 122.30 property within the district becoming tax exempt, or a reduction 122.31 in the geographic area of the district, shall be the amount of 122.32 original net tax capacity initially attributed to the property 122.33 becoming tax exempt or being removed from the district. If the 122.34 net tax capacity of property located within the tax increment 122.35 financing district is reduced by reason of a court-ordered 122.36 abatement, stipulation agreement, voluntary abatement made by 123.1 the assessor or auditor or by order of the commissioner of 123.2 revenue, the reduction shall be applied to the original net tax 123.3 capacity of the district when the property upon which the 123.4 abatement is made has not been improved since the date of 123.5 certification of the district and to the captured net tax 123.6 capacity of the district in each year thereafter when the 123.7 abatement relates to improvements made after the date of 123.8 certification. The county auditor may specify reasonable form 123.9 and content of the request for certification of the authority 123.10 and any modification thereof pursuant to section 469.175, 123.11 subdivision 4. 123.12 (f) If a parcel of property contained a substandard 123.13 building that was demolished or removed and if the authority 123.14 elects to treat the parcel as occupied by a substandard building 123.15 under section 469.174, subdivision 10, paragraph (b), the 123.16 auditor shall certify the original net tax capacity of the 123.17 parcel using the greater of (1) the current net tax capacity of 123.18 the parcel, or (2) the estimated market value of the parcel for 123.19 the year in which the building was demolished or removed, but 123.20 applying the class rates for the current year. 123.21 (g) For a redevelopment district qualifying under section 123.22 469.174, subdivision 10, paragraph (a), clause (4), as a 123.23 qualified disaster area, the auditor shall certify the value of 123.24 the land as the original tax capacity for any parcel in the 123.25 district that contains a building that suffered substantial 123.26 damage as a result of the disaster or emergency. 123.27 [EFFECTIVE DATE.] This section is effective for land 123.28 platted on or after August 1, 1991. 123.29 Sec. 9. Minnesota Statutes 2002, section 469.1771, 123.30 subdivision 5, is amended to read: 123.31 Subd. 5. [DISPOSITION OF PAYMENTS.] If the authority does 123.32 not have sufficient increments or other available money to make 123.33 a payment required by this section, the municipality that 123.34 approved the district must use any available money to make the 123.35 payment including the levying of property taxes. Money received 123.36 by the county auditor under this section must be distributed as 124.1 excess increments under section 469.176, subdivision 2, 124.2 paragraph(a)(c), clause (4), except that if the county auditor 124.3 receives the payment after (1) 60 days from a municipality's 124.4 receipt of the state auditor's notification under subdivision 1, 124.5 paragraph (c), of noncompliance requiring the payment, or (2) 124.6 the commencement of an action by the county attorney to compel 124.7 the payment, then no distributions may be made to the 124.8 municipality that approved the tax increment financing district. 124.9 [EFFECTIVE DATE.] This section is effective at the same 124.10 time as the amendments to Minnesota Statutes, section 469.176, 124.11 subdivision 2, by Laws 2003, chapter 127, article 10, section 11. 124.12 Sec. 10. Minnesota Statutes 2002, section 469.178, 124.13 subdivision 1, is amended to read: 124.14 Subdivision 1. [GENERALLY.] Notwithstanding any other law, 124.15 no bonds, payment for which tax increment is pledged, shall be 124.16 issued in connection with any project for which tax increment 124.17 financing has been undertaken except as authorized in this 124.18 section. The proceeds from the bonds shall be used only in 124.19 accordance with section 469.176,subdivisionsubdivisions 4 to 124.20 4l, as if the proceeds were tax increment, except that a tax 124.21 increment financing plan need not be adopted for any project for 124.22 which tax increment financing has been undertaken prior to 124.23 August 1, 1979, pursuant to laws not requiring a tax increment 124.24 financing plan. The bonds are not included for purposes of 124.25 computing the net debt of any municipality. 124.26 [EFFECTIVE DATE.] This section is effective for tax 124.27 increment financing districts for which the request for 124.28 certification was made after August 1, 1979. 124.29 Sec. 11. Minnesota Statutes 2002, section 469.1831, 124.30 subdivision 6, is amended to read: 124.31 Subd. 6. [CITIZEN PARTICIPATION REQUIRED.] (a) The 124.32 neighborhood revitalization program must be developed with the 124.33 process outlined in this subdivision. 124.34 (b) The program must include the preparation and 124.35 implementation of neighborhood action plans. The city must 124.36 organize neighborhoods to prepare and implement the neighborhood 125.1 action plans. The neighborhoods must include the participation 125.2 of, whenever possible, all populations and interests in each 125.3 neighborhood including renters, homeowners, people of color, 125.4 business owners, representatives of neighborhood institutions, 125.5 youth, and the elderly. The neighborhood action plan must be 125.6 submitted to the policy board established under paragraph (c). 125.7 The city must provide available resources, information, and 125.8 technical assistance to prepare the neighborhood action plans. 125.9 (c) Each city that develops a program must establish a 125.10 policy board whose membership includes members of the city 125.11 council, county board, school board, and citywide library and 125.12 park board where they exist appointed by the respective 125.13 governing bodies; the mayor or designee of the mayor; and a 125.14 representative from the city's house of representatives 125.15 delegation and a representative from the city's state senate 125.16 delegation appointed by the respective delegation. The policy 125.17 board may also include representatives of citywide community 125.18 organizations, neighborhood organizations, business owners, 125.19 labor, and neighborhood residents. The elected officials and 125.20 appointed members of the library board who are members of the 125.21 policy board may appoint the other members of the board. 125.22 (d) The policy board shall review, modify where 125.23 appropriate, and approve, in whole or in part, the neighborhood 125.24 action plans and forward its recommendations for final action to 125.25 the governing bodies represented on the policy board and shall 125.26 administer and implement the program as required by paragraph 125.27 (b). The governing bodies shall review, modify where 125.28 appropriate, and give final approval, in whole or in part, to 125.29 those actions over which they have programmatic jurisdiction. 125.30 (e) Except for the legislative appointees, each of the 125.31 governmental units and groups named in paragraph (c) may, by 125.32 resolution or agreement of its governing body, become a member 125.33 of the policy board. The nongovernmental organizations and 125.34 persons named in paragraph (c) shall provide members of the 125.35 policy board upon invitation by the governmental members of the 125.36 policy board. The member to represent a nongovernmental 126.1 organization shall be a member of the policy board only upon 126.2 resolution or agreement of the governing body of the member's 126.3 organization. Upon the resolution or agreement of two or more 126.4 governmental bodies or governmental boards, the policy board 126.5 shall be a joint powers board under section 471.59, except that 126.6 no power may be exercised under section 471.59, subdivision 11. 126.7 The policy board may: 126.8 (1) sue and be sued. All defenses and limitations 126.9 available to municipalities under chapter 466 and other laws, 126.10 shall apply to the policy board, its members, director, and 126.11 other staff members; 126.12 (2) hire, retain, discipline, and terminate a director to 126.13 direct its activities and accomplish its program. The director 126.14 may hire necessary staff subject to authorization by the board; 126.15 (3) enter into contracts, leases, purchases, or other 126.16 documents evidencing its undertakings. No contract, lease, or 126.17 purchase or other document may be entered into unless funds have 126.18 been appropriated or otherwise made available to the policy 126.19 board; 126.20 (4) adopt bylaws for its own governance; 126.21 (5) enter into agreements with governmental units and 126.22 governing boards, and nongovernmental organizations represented 126.23 on the policy board for services required to fulfill the policy 126.24 boards' purposes; 126.25 (6) accept gifts, donations, and appropriations from 126.26 governmental or nongovernmental sources and apply for grants 126.27 from them; 126.28 (7) review activities to determine whether the expenditure 126.29 of program money and other money is in compliance with the 126.30 neighborhood plans adopted by the policy board and approved by 126.31 the governing bodies having jurisdiction over the program, and 126.32 report its findings prior to October 1 of each year to all of 126.33 the governmental units, agencies, and nongovernmental 126.34 organizations represented on the policy board; and 126.35 (8) prepare annually an administrative budget for the 126.36 ensuing year, estimating its expenditures and estimated 127.1 revenues, and forward its proposed budget to the governmental 127.2 units and agencies and nongovernmental organizations for 127.3 appropriate action. 127.4 Sec. 12. Laws 1990, chapter 604, article 7, section 29, 127.5 subdivision 1, as amended by Laws 1991, chapter 291, article 10, 127.6 section 20, is amended to read: 127.7 Subdivision 1. [EXPENDITURE.] The city of Minneapolis and 127.8 the Minneapolis community development agency shallreserve127.9 convey, no later than April 1 of the year immediately following 127.10 the year for which the conveyance is made, $10,000,000infor 127.11 1990 and $20,000,000 for each year from 1991 to 2009 from tax 127.12 increment and other revenues generated from the Minneapolis 127.13 community development agency common project, adopted December 127.14 30, 1989, to the policy board established under Minnesota 127.15 Statutes, section 469.1831, subdivision 6, to be expended in 127.16 neighborhood revitalization anywhere within the city of 127.17 Minneapolis by the Minneapolis community development agency for 127.18 any purpose permitted by Minnesota Statutes, section 469.1831, 127.19 for any political subdivision, except that at least 52.5 percent 127.20 of the money must be expended on housing programs and related 127.21 purposes. None of these revenues shall be expended in 127.22 1990. Conveyance of money under this subdivision, as amended by 127.23 this act for 2004 and later years, does not change any 127.24 obligation of the city and the Minneapolis community development 127.25 agency that was still owing for 2003 and earlier years on the 127.26 day before the effective date of the amendments made by this act. 127.27 Sec. 13. Laws 1998, chapter 389, article 11, section 24, 127.28 subdivision 1, is amended to read: 127.29 Subdivision 1. [SPECIAL RULES.] (a) If the city elects 127.30 upon the adoption of the tax increment financing plan for the 127.31 district, the rules under this section apply to redevelopment or 127.32 soils condition tax increment financing districts established by 127.33 the city of New Brighton or a development authority of the city 127.34 in the area bounded on the north by the south boundary line of 127.35 tax increment district number 8 extended to Long Lake regional 127.36 park, on the east by interstate highway 35W, on the south by 128.1 interstate highway 694, and on the west by Long Lake regional 128.2 park. 128.3 (b) The five-year rule under Minnesota Statutes, section 128.4 469.1763, subdivision 3, is extended tonineten years for the 128.5 district. 128.6 (c) The limitations on spending increment outside of the 128.7 district under Minnesota Statutes, section 469.1763, subdivision 128.8 2, do not apply, but increments may only be expended on 128.9 improvements or activities within the area defined in paragraph 128.10 (a) and increments collected from parcels identified in 128.11 paragraph (d) may only be spent on eligible expenses within the 128.12 area consisting of those parcels, sanitary sewer relocation and 128.13 the cost of road improvements directly resulting from 128.14 development of the parcels, and for administrative expenses. 128.15 (d) The requirements for qualifying a redevelopment 128.16 district under Minnesota Statutes, section 469.174, subdivision 128.17 10, do not apply to the parcels identified as that part of 128.18 20-30-23-13-0005 lying east of Old Highway 8, 20-30-23-14-0001, 128.19 20-30-23-14-0002, 20-30-23-14-0004, 20-30-23-14-0003, 128.20 20-30-23-41-0001, 21-30-23-32-0009, 21-30-23-32-0010, 128.21 20-30-23-41-0015, 20-30-23-41-0003, 21-30-23-32-0013, 128.22 20-30-23-41-0004, 20-30-23-41-0016, 20-30-23-41-0005, 128.23 20-30-23-41-0006, 20-30-23-41-0007, 20-30-23-41-0014, 128.24 20-30-23-41-0010, and 20-30-23-44-0002. The area of each parcel 128.25 is deemed eligible for the purpose of qualifying for inclusion 128.26 in a redevelopment district. 128.27 [EFFECTIVE DATE.] This section is effective upon approval 128.28 by the governing bodies of the city of New Brighton and Ramsey 128.29 County and upon compliance by the city with Minnesota Statutes, 128.30 section 645.021, subdivision 3. 128.31 Sec. 14. Laws 1998, chapter 389, article 11, section 24, 128.32 subdivision 2, is amended to read: 128.33 Subd. 2. [EXPIRATION.] (a) The exception from the 128.34 limitations of Minnesota Statutes, section 469.1763, subdivision 128.35 2, expires 18 years after the receipt of the first increment 128.36 from a district to which the city has elected that this section 129.1 applies. 129.2 (b) The authority to approve tax increment financing plans 129.3 to establish a tax increment financing district or districts 129.4 under this section expires on December 31, 2008. 129.5 (c) If parcels identified in subdivision 1, paragraph (d), 129.6 are released from the development agreement without being 129.7 developed and the right to develop the parcels is returned to 129.8 the city, the authority to approve tax increment financing plans 129.9 and districts under this section for those parcels is extended 129.10 for five additional years from the date the development rights 129.11 are returned to the city. 129.12 [EFFECTIVE DATE.] This section is effective upon approval 129.13 by the governing bodies of the city of New Brighton and Ramsey 129.14 County and upon compliance by the city with Minnesota Statutes, 129.15 section 645.021, subdivision 3. 129.16 Sec. 15. [EXTENSION OF TIME TO EXPEND TAX INCREMENT.] 129.17 Notwithstanding any contrary provision of law or charter, 129.18 for tax increment financing district number 3, established on 129.19 December 19, 1994, by Brooklyn Center Resolution No. 94-273, 129.20 Minnesota Statutes, section 469.1763, subdivision 3, applies to 129.21 the district by permitting a period of 13 years for commencement 129.22 of activities within the district. 129.23 [EFFECTIVE DATE.] This section is effective upon approval 129.24 by the governing body of the city of Brooklyn Center and 129.25 compliance with Minnesota Statutes, section 645.021, subdivision 129.26 3. 129.27 Sec. 16. [CITY OF ROBBINSDALE; TIF.] 129.28 The governing body of the city of Robbinsdale and its 129.29 economic development authority may treat the building located at 129.30 the corner of Regent Avenue and County Road 9 in the city of 129.31 Robbinsdale and originally constructed as the Robbinsdale High 129.32 School along with the subsequent additions to and improvements 129.33 of that building as a structurally substandard building for 129.34 purposes of Minnesota Statutes, section 469.174, subdivision 10, 129.35 without regard to the requirements of paragraph (c) of that 129.36 subdivision. 130.1 [EFFECTIVE DATE.] This section is effective upon approval 130.2 by the governing body of the city of Robbinsdale under Minnesota 130.3 Statutes, section 645.021. 130.4 Sec. 17. [WABASHA TAX INCREMENT FINANCING DISTRICT.] 130.5 Subdivision 1. [DISTRICT EXTENSION.] The governing body of 130.6 the city of Wabasha may elect to extend the duration of its 130.7 redevelopment tax increment financing district number 3 by up to 130.8 three additional years. 130.9 Subd. 2. [FIVE-YEAR RULE.] The requirements of Minnesota 130.10 Statutes, section 469.1763, subdivision 3, that activities must 130.11 be undertaken within a five-year period from the date of 130.12 certification of a tax increment financing district must be 130.13 considered to be met for the city of Wabasha redevelopment tax 130.14 increment district number 3, if the activities are undertaken 130.15 within ten years from the date of certification of the district. 130.16 Subd. 3. [NATIONAL EAGLE CENTER.] Notwithstanding the 130.17 provisions of Minnesota Statutes, section 469.176, subdivision 130.18 4l, or any other law, the city of Wabasha may spend the proceeds 130.19 of tax increment bonds issued prior to January 1, 2000, to pay 130.20 the costs of acquiring and constructing a National Eagle Center 130.21 in the city. The city of Wabasha may also use tax increment 130.22 from its tax increment districts to pay the debt service on such 130.23 bonds, or any bonds issued to refund such bonds, subject to 130.24 legal restrictions on the pooling of tax increment. These bonds 130.25 may not be treated as preexisting obligations for purposes of 130.26 Minnesota Statutes, section 469.1794. 130.27 Subd. 4. [POOLING.] Except as otherwise specifically 130.28 provided in this section, all increments from district number 3 130.29 must be spent on activities within the district and 130.30 administrative expenses. 130.31 [EFFECTIVE DATE.] Subdivision 1 is effective upon 130.32 compliance with the provisions of Minnesota Statutes, sections 130.33 469.1782, subdivision 2, and 645.021. Subdivisions 2 and 3 are 130.34 effective upon compliance by the governing body of the city of 130.35 Wabasha with the provisions of Minnesota Statutes, section 130.36 645.021. 131.1 Sec. 18. [REPEALER.] 131.2 Minnesota Statutes 2002, sections 469.176, subdivision 1a; 131.3 and 469.1766, are repealed. 131.4 [EFFECTIVE DATE.] The repeal of Minnesota Statutes, section 131.5 469.1766, is effective for districts for which the request for 131.6 certification was made after August 1, 1993. The repeal of 131.7 Minnesota Statutes, section 469.176, subdivision 1a, is 131.8 effective the day following final enactment, provided that 131.9 Minnesota Statutes, section 469.176, subdivision 1a, is 131.10 satisfied for any district to which it applies, if bonds have 131.11 been issued, property acquired, or public improvements 131.12 constructed before the end of the three-year period, regardless 131.13 of whether the action was undertaken before or after 131.14 certification of the district. 131.15 ARTICLE 7 131.16 INTERNATIONAL ECONOMIC DEVELOPMENT ZONES 131.17 Section 1. Minnesota Statutes 2002, section 272.02, is 131.18 amended by adding a subdivision to read: 131.19 Subd. 73. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 131.20 PROPERTY.] (a) Improvements to real property, and personal 131.21 property, classified under section 273.13, subdivision 24, and 131.22 located within an international economic development zone 131.23 designated under section 469.322, are exempt from ad valorem 131.24 taxes levied under chapter 275, if the occupant of the property 131.25 is a qualified business, as defined in section 469.321. 131.26 (b) The exemption applies beginning for the first 131.27 assessment year after designation of the international economic 131.28 development zone. The exemption applies to each assessment year 131.29 that begins during the duration of the international economic 131.30 development zone and to property occupied by July 1 of the 131.31 assessment year by a qualified business for the duration 131.32 permitted under section 469.324, subdivision 2. 131.33 Sec. 2. Minnesota Statutes 2002, section 290.06, is 131.34 amended by adding a subdivision to read: 131.35 Subd. 32. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE JOB 131.36 CREDIT.] A taxpayer that is a qualified business, as defined in 132.1 section 469.321, subdivision 6, is allowed a credit as 132.2 determined under section 469.325 against the tax imposed by this 132.3 chapter. 132.4 [EFFECTIVE DATE.] This section is effective the day 132.5 following final enactment. 132.6 Sec. 3. Minnesota Statutes 2002, section 290.191, is 132.7 amended by adding a subdivision to read: 132.8 Subd. 13. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 132.9 A qualified business as defined under section 469.321 may 132.10 exclude from: 132.11 (1) the numerator of its payroll factor the amount of its 132.12 international economic development zone payroll; and 132.13 (2) the numerator of its property factor the amount of its 132.14 property with a situs in the international economic development 132.15 zone. 132.16 (b) The provisions of this subdivision apply to a qualified 132.17 business for the duration provided under section 469.324. 132.18 [EFFECTIVE DATE.] This section is effective the day 132.19 following final enactment. 132.20 Sec. 4. Minnesota Statutes 2002, section 297A.68, is 132.21 amended by adding a subdivision to read: 132.22 Subd. 41. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 132.23 Purchases of tangible personal property or taxable services by a 132.24 qualified business, as defined in section 469.321, are exempt if 132.25 the property or services are primarily used or consumed in an 132.26 international economic development zone designated under section 132.27 469.322. 132.28 (b) Purchase and use of construction materials and supplies 132.29 for construction of improvements to real property in an 132.30 international economic development zone are exempt if the 132.31 improvements after completion of construction are to be used in 132.32 the conduct of a qualified business, as defined in section 132.33 469.321. This exemption applies regardless of whether the 132.34 purchases are made by the business or a contractor. 132.35 (c) The exemptions under this subdivision apply to a local 132.36 sales and use tax, regardless of whether the local tax is 133.1 imposed on sales taxable under this chapter or in another law, 133.2 ordinance, or charter provision. 133.3 (d) This subdivision applies to sales, if the purchase was 133.4 made and delivery received during the period provided under 133.5 section 469.324, subdivision 2. 133.6 [EFFECTIVE DATE.] This section is effective for sales made 133.7 on or after the day following final enactment. 133.8 Sec. 5. [469.321] [DEFINITIONS.] 133.9 Subdivision 1. [SCOPE.] For purposes of sections 469.321 133.10 to 469.327, the following terms have the meanings given. 133.11 Subd. 2. [FOREIGN TRADE ZONE.] "Foreign trade zone" means 133.12 a foreign trade zone designated pursuant to United States Code, 133.13 title 19, section 81b, for the right to use the powers provided 133.14 in United States Code, title 19, sections 81a to 81u, or a 133.15 subzone authorized by the foreign trade zone. 133.16 Subd. 3. [FOREIGN TRADE ZONE AUTHORITY.] "Foreign trade 133.17 zone authority" means the Greater Metropolitan Foreign Trade 133.18 Zone Commission number 119, a joint powers authority created by 133.19 the county of Hennepin, the cities of Minneapolis and 133.20 Bloomington, and the Metropolitan Airports Commission, under the 133.21 authority of section 469.059 or 469.101, which includes any 133.22 other political subdivisions that enter into the authority after 133.23 its creation. 133.24 Subd. 4. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE.] An 133.25 "international economic development zone" or "zone" is a zone so 133.26 designated under section 469.322. 133.27 Subd. 5. [PERSON.] "Person" includes an individual, 133.28 corporation, partnership, limited liability company, 133.29 association, or any other entity. 133.30 Subd. 6. [QUALIFIED BUSINESS.] (a) "Qualified business" 133.31 means a person carrying on a trade or business at a place of 133.32 business located within an international economic development 133.33 zone that is: 133.34 (1) engaged in the furtherance of international export or 133.35 import of goods; and 133.36 (2) certified by the foreign trade zone authority as a 134.1 trade or business that furthers the purpose of developing 134.2 international distribution capacity and capability. 134.3 (b) A person that relocates a trade or business from within 134.4 Minnesota but outside an international economic development zone 134.5 into an international economic development zone is not a 134.6 qualified business, unless the business: 134.7 (1)(i) increases full-time employment in the first full 134.8 year of operation within the international economic development 134.9 zone by at least 20 percent measured relative to the operations 134.10 that were relocated and maintains the required level of 134.11 employment for each year that tax incentives under section 134.12 469.324 are claimed; or 134.13 (ii) makes a capital investment in the property located 134.14 within a zone equal to at least ten percent of the gross 134.15 revenues of the operations that were relocated in the 134.16 immediately proceeding taxable year; and 134.17 (2) enters a binding written agreement with the foreign 134.18 trade zone authority that: 134.19 (i) pledges that the business will meet the requirements of 134.20 clause (1); 134.21 (ii) provides for repayment of all tax benefits enumerated 134.22 under section 469.324 to the business under the procedures in 134.23 section 469.326, if the requirements of clause (1) are not met 134.24 for the taxable year or for taxes payable during a year in which 134.25 the requirements were not met; and 134.26 (iii) contains any other terms the foreign trade zone 134.27 authority determines appropriate. 134.28 Clause (1) of this paragraph does not apply to a freight 134.29 forwarder. 134.30 Subd. 7. [REGIONAL DISTRIBUTION CENTER.] A "regional 134.31 distribution center" is a distribution center developed within a 134.32 foreign trade zone. The regional distribution center must have 134.33 as its primary purpose to facilitate gathering of freight for 134.34 the purpose of centralizing the functions necessary for the 134.35 shipment of freight in international commerce, including, but 134.36 not limited to, security and customs functions. 135.1 Subd. 8. [RELOCATE.] (a) "Relocate" means that a trade or 135.2 business: 135.3 (1) ceases one or more operations or functions at another 135.4 location in Minnesota and begins performing substantially the 135.5 same operations or functions at a location in an international 135.6 economic development zone; or 135.7 (2) reduces employment at another location in Minnesota 135.8 during a period starting one year before and ending one year 135.9 after it begins operations in an international economic 135.10 development zone and its employees in the international economic 135.11 development zone are engaged in the same line of business as the 135.12 employees at the location where it reduced employment. 135.13 (b) "Relocate" does not include an expansion by a business 135.14 that establishes a new facility that does not replace or 135.15 supplant an existing operation or employment, in whole or in 135.16 part. 135.17 (c) "Trade or business" includes any business entity that 135.18 is substantially similar in operation or ownership to the 135.19 business entity seeking to be a qualified business. 135.20 Subd. 9. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE PAYROLL 135.21 FACTOR.] "International economic development zone payroll 135.22 factor" or "international economic development zone payroll" is 135.23 that portion of the payroll factor under section 290.191 that 135.24 represents: 135.25 (1) wages or salaries paid to an individual for services 135.26 performed in an international economic development zone; or 135.27 (2) wages or salaries paid to individuals working from 135.28 offices within an international economic development zone, if 135.29 their employment requires them to work outside the zone and the 135.30 work is incidental to the work performed by the individual 135.31 within the zone. 135.32 Subd. 10. [FREIGHT FORWARDER.] "Freight forwarder" is a 135.33 business that, for compensation, ensures that goods produced or 135.34 sold by another business move from point of origin to point of 135.35 destination. 135.36 [EFFECTIVE DATE.] This section is effective the day 136.1 following final enactment. 136.2 Sec. 6. [469.322] [DESIGNATION OF INTERNATIONAL ECONOMIC 136.3 DEVELOPMENT ZONE.] 136.4 (a) An area designated as a foreign trade zone may be 136.5 designated by the foreign trade zone authority as an 136.6 international economic development zone if within the zone a 136.7 regional distribution center is being developed pursuant to 136.8 section 469.323. The zone must consist of contiguous area of 136.9 not less than 500 acres and not more than 1,000 acres. The 136.10 designation authority under this section is limited to one zone. 136.11 (b) In making the designation, the foreign trade zone 136.12 authority, in consultation with the Minnesota Department of 136.13 Transportation and the Metropolitan Council, shall consider 136.14 access to major transportation routes, consistency with current 136.15 state transportation and air cargo planning, adequacy of the 136.16 size of the site, access to airport facilities, present and 136.17 future capacity at the designated airport, the capability to 136.18 meet integrated present and future air cargo, security, and 136.19 inspection services, and access to other infrastructure and 136.20 financial incentives. The border of the international economic 136.21 development zone must be no more than 60 miles distant or 90 136.22 minutes drive time from the border of the Minneapolis-St. Paul 136.23 International Airport. The county in which the zone is located 136.24 must be a member of the foreign trade zone authority. 136.25 [EFFECTIVE DATE.] This section is effective the day 136.26 following final enactment. 136.27 Sec. 7. [469.323] [FOREIGN TRADE ZONE AUTHORITY POWERS.] 136.28 Subdivision 1. [DEVELOPMENT OF REGIONAL DISTRIBUTION 136.29 CENTER.] The foreign trade zone authority is responsible for 136.30 creating a development plan for the regional distribution 136.31 center. The regional distribution center must be developed with 136.32 the purpose of expanding, on a regional basis, international 136.33 distribution capacity and capability. The foreign trade zone 136.34 authority shall consult with municipalities that have indicated 136.35 to the authority an interest in locating the international 136.36 economic development zone within their boundaries, as well as 137.1 interested businesses, potential financiers, and appropriate 137.2 state and federal agencies. 137.3 Subd. 2. [PORT AUTHORITY POWERS.] The governing body of 137.4 the foreign trade zone authority may establish a port authority 137.5 that has the same powers as a port authority established under 137.6 section 469.049. If the foreign trade zone authority 137.7 establishes a port authority, the governing body of the foreign 137.8 trade zone authority may exercise all powers granted to a city 137.9 by sections 469.048 to 469.068, except it may not impose or 137.10 request imposition of a property tax levy under section 469.053 137.11 by any city. 137.12 [EFFECTIVE DATE.] This section is effective the day 137.13 following final enactment. 137.14 Sec. 8. [469.324] [TAX INCENTIVES IN INTERNATIONAL 137.15 ECONOMIC DEVELOPMENT ZONE.] 137.16 Subdivision 1. [AVAILABILITY.] Qualified businesses that 137.17 operate in an international economic development zone, 137.18 individuals who invest in a regional distribution center or 137.19 qualified businesses that operate in an international economic 137.20 development zone, and property located in an international 137.21 economic development zone qualify for: 137.22 (1) exemption from the state sales and use tax and any 137.23 local sales and use taxes on qualifying purchases as provided in 137.24 section 297A.68, subdivision 41; 137.25 (2) exemption from the property tax as provided in section 137.26 272.02, subdivision 73; 137.27 (3) the jobs credit allowed under section 469.325; 137.28 (4) the corporate franchise tax exemption under section 137.29 290.191, subdivision 13. 137.30 Subd. 2. [DURATION.] (a) Except as provided in paragraph 137.31 (b), the jobs credit described in subdivision 1, clause (3), and 137.32 the corporate franchise exemption under subdivision 1, clause 137.33 (4), is available for no more than eight consecutive taxable 137.34 years for any taxpayer. The sales and use tax exemption 137.35 described in subdivision 1, clause (1), is available for each 137.36 taxpayer that claims it for taxes otherwise payable on 138.1 transactions during a period of eight years from the date when 138.2 the first exemption is claimed by that taxpayer. The property 138.3 tax exemption described under subdivision 1, clause (2), is 138.4 available for any parcel of property for eight consecutive taxes 138.5 payable years. No incentives described in subdivision 1, 138.6 clauses (1) to (4), are available after December 31, 2020. 138.7 (b) For taxpayers that are freight forwarders, the 138.8 durations provided under paragraph (a) are reduced to four years. 138.9 Sec. 9. [469.325] [JOBS CREDIT.] 138.10 Subdivision 1. [CREDIT ALLOWED.] A qualified business is 138.11 allowed a credit against the taxes imposed under chapter 290. 138.12 The credit equals seven percent of the: 138.13 (1) lesser of: 138.14 (i) zone payroll for the taxable year, less the zone 138.15 payroll for the base year; or 138.16 (ii) total Minnesota payroll for the taxable year, less 138.17 total Minnesota payroll for the base year; minus 138.18 (2) $30,000 multiplied by the number of full-time 138.19 equivalent employees that the qualified business employs in the 138.20 international economic development zone for the taxable year, 138.21 minus the number of full-time equivalent employees the business 138.22 employed in the zone in the base year, but not less than zero. 138.23 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 138.24 the following terms have the meanings given. 138.25 (b) "Base year" means the taxable year beginning during the 138.26 calendar year prior to the calendar year in which the zone 138.27 designation took effect. 138.28 (c) "Full-time equivalent employees" means the equivalent 138.29 of annualized expected hours of work equal to 2,080 hours. 138.30 (d) "Minnesota payroll" means the wages or salaries 138.31 attributed to Minnesota under section 290.191, subdivision 12, 138.32 for the qualified business or the unitary business of which the 138.33 qualified business is a part, whichever is greater. 138.34 (e) "Zone payroll" means wages or salaries used to 138.35 determine the zone payroll factor for the qualified business, 138.36 less the amount of compensation attributable to any employee 139.1 that exceeds $100,000. 139.2 Subd. 3. [INFLATION ADJUSTMENT.] For taxable years 139.3 beginning after December 31, 2005, the dollar amounts in 139.4 subdivision 1, clause (2), and subdivision 2, paragraph (e), are 139.5 annually adjusted for inflation. The commissioner of revenue 139.6 shall adjust the amounts by the percentage determined under 139.7 section 290.06, subdivision 2d, for the taxable year. 139.8 Subd. 4. [REFUNDABLE.] If the amount of the credit exceeds 139.9 the liability for tax under chapter 290, the commissioner of 139.10 revenue shall refund the excess to the qualified business. 139.11 Subd. 5. [APPROPRIATION.] An amount sufficient to pay the 139.12 refunds authorized by this section is appropriated to the 139.13 commissioner of revenue from the general fund. 139.14 [EFFECTIVE DATE.] This section is effective for taxable 139.15 years beginning after December 31, 2004. 139.16 Sec. 10. [469.326] [REPAYMENT OF TAX BENEFITS.] 139.17 Subdivision 1. [REPAYMENT OBLIGATION.] A person must repay 139.18 the amount of the tax reduction received under section 469.324, 139.19 subdivision 1, clauses (1) and (2), or a refund received under 139.20 section 469.325, during the two years immediately before it 139.21 ceased to operate in the zone, if the person ceased to operate 139.22 its facility located within the zone or otherwise ceases to be 139.23 or is not a qualified business. 139.24 Subd. 2. [DISPOSITION OF REPAYMENT.] The repayment must be 139.25 paid to the state to the extent it represents a state tax 139.26 reduction and to the county to the extent it represents a 139.27 property tax reduction. Any amount repaid to the state must be 139.28 deposited in the general fund. Any amount repaid to the county 139.29 for the property tax exemption must be distributed to the local 139.30 governments with authority to levy taxes in the zone in the same 139.31 manner provided for distribution of payment of delinquent 139.32 property taxes. Any repayment of local sales or use taxes must 139.33 be repaid to the jurisdiction imposing the local sales or use 139.34 tax. 139.35 Subd. 3. [REPAYMENT PROCEDURES.] (a) For the repayment of 139.36 taxes imposed under chapter 290 or 297A or local taxes collected 140.1 under section 297A.99, a person must file an amended return with 140.2 the commissioner of revenue and pay any taxes required to be 140.3 repaid within 30 days after ceasing to be a qualified business. 140.4 The amount required to be repaid is determined by calculating 140.5 the tax for the period for which repayment is required without 140.6 regard to the tax reductions allowed under section 469.324. 140.7 (b) For the repayment of property taxes, the county auditor 140.8 shall prepare a tax statement for the person, applying the 140.9 applicable tax extension rates for each payable year and provide 140.10 a copy to the business. The person must pay the taxes to the 140.11 county treasurer within 30 days after receipt of the tax 140.12 statement. The taxpayer may appeal the valuation and 140.13 determination of the property tax to the tax court within 30 140.14 days after receipt of the tax statement. 140.15 (c) The provisions of chapters 270 and 289A relating to the 140.16 commissioner of revenue's authority to audit, assess, and 140.17 collect the tax and to hear appeals apply to the repayment 140.18 required under paragraph (a). The commissioner may impose civil 140.19 penalties as provided in chapter 289A, and the additional tax 140.20 and penalties are subject to interest at the rate provided in 140.21 section 270.75, from 30 days after ceasing to do business in the 140.22 zone until the date the tax is paid. 140.23 (d) If a property tax is not repaid under paragraph (b), 140.24 the county treasurer shall add the amount required to be repaid 140.25 to the property taxes assessed against the property for payment 140.26 in the year following the year in which the treasurer discovers 140.27 that the person ceased to operate in the international economic 140.28 development zone. 140.29 (e) For determining the tax required to be repaid, a tax 140.30 reduction is deemed to have been received on the date that the 140.31 tax would have been due if the person had not been entitled to 140.32 the tax reduction. 140.33 (f) The commissioner of revenue may assess the repayment of 140.34 taxes under paragraph (c) at any time within two years after the 140.35 person ceases to be a qualified business, or within any period 140.36 of limitations for the assessment of tax under section 289A.38, 141.1 whichever is later. 141.2 Subd. 4. [WAIVER AUTHORITY.] The commissioner may waive 141.3 all or part of a repayment, if the commissioner of revenue, in 141.4 consultation with the foreign trade zone authority and 141.5 appropriate officials from the state and local government units, 141.6 determines that requiring repayment of the tax is not in the 141.7 best interest of the state or local government and the business 141.8 ceased operating as a result of circumstances beyond its 141.9 control, including, but not limited to: 141.10 (1) a natural disaster; 141.11 (2) unforeseen industry trends; or 141.12 (3) loss of a major supplier or customer. 141.13 [EFFECTIVE DATE.] This section is effective the day 141.14 following final enactment. 141.15 Sec. 11. [469.327] [REPORTING REQUIREMENTS.] 141.16 Before designation of an international economic development 141.17 zone under section 469.322, the foreign trade zone authority 141.18 shall establish performance goals for the zone. These goals 141.19 must set out, at a minimum, the amount of investment, the number 141.20 of jobs, and the amount of freight handled expected to be 141.21 attained at the end of three, five, and 10 year periods by the 141.22 zone. The authority must annually report to the commissioner of 141.23 the Department of Employment and Economic Development on its 141.24 progress in attaining these goals. 141.25 [EFFECTIVE DATE.] This section is effective the day 141.26 following final enactment. 141.27 ARTICLE 8 141.28 DEPARTMENT OF REVENUE POLICY PROVISIONS 141.29 Section 1. Minnesota Statutes 2002, section 16D.10, is 141.30 amended to read: 141.31 16D.10 [CASE REVIEWER.] 141.32 Subdivision 1. [DUTIES.] The commissioner shall make a 141.33 case reviewer available to debtors. The reviewer must be 141.34 available to answer a debtor's questions concerning the 141.35 collection process and to review the collection activity taken. 141.36 If the reviewer reasonably believes that the particular action 142.1 being taken is unreasonable or unfair, the reviewer may make 142.2 recommendations to the commissioner in regard to the collection 142.3 action. 142.4 Subd. 2. [AUTHORITY TO ISSUE DEBTOR ASSISTANCE ORDER.] On 142.5 application filed by a debtor with the case reviewer, in the 142.6 form, manner, and in the time prescribed by the commissioner, 142.7 and after thorough investigation, the case reviewer may issue a 142.8 debtor assistance order if, in the determination of the case 142.9 reviewer, the manner in which the state debt collection laws are 142.10 being administered is creating or will create an unjust and 142.11 inequitable result for the debtor. Debtor assistance orders are 142.12 governed by the provisions relating to taxpayer assistance 142.13 orders under section 270.273. 142.14 Subd. 3. [TRANSFER OF DUTIES TO TAXPAYER RIGHTS ADVOCATE.] 142.15 All duties and authority of the case reviewer under subdivisions 142.16 1 and 2 are transferred to the taxpayer rights advocate. 142.17 [EFFECTIVE DATE.] This section is effective the day 142.18 following final enactment. 142.19 Sec. 2. Minnesota Statutes 2002, section 270.02, 142.20 subdivision 3, is amended to read: 142.21 Subd. 3. [POWERS, ORGANIZATION, ASSISTANTS.] Subject to 142.22 the provisions of this chapter and other applicable laws the 142.23 commissioner shall have power to organize the department with 142.24 such divisions and other agencies as the commissioner deems 142.25 necessary and to appoint one deputy commissioner, a department 142.26 secretary, directors of divisions, and such other officers, 142.27 employees, and agents as the commissioner may deem necessary to 142.28 discharge the functions of the department, define the duties of 142.29 such officers, employees, and agents, and delegate to them any 142.30 of the commissioner's powers or duties, subject to the 142.31 commissioner's control and under such conditions as the 142.32 commissioner may prescribe. Appointments to exercise delegated 142.33 power to sign documents which require the signature of the 142.34 commissioner or a delegate by law shall be by written order 142.35 filed with the secretary of state. The delegations of authority 142.36 granted by the commissioner remain in effect until revoked by 143.1 the commissioner or a successor commissioner. 143.2 [EFFECTIVE DATE.] This section is effective the day 143.3 following final enactment. 143.4 Sec. 3. Minnesota Statutes 2003 Supplement, section 143.5 270.06, is amended to read: 143.6 270.06 [POWERS AND DUTIES.] 143.7 The commissioner of revenue shall: 143.8 (1) have and exercise general supervision over the 143.9 administration of the assessment and taxation laws of the state, 143.10 over assessors, town, county, and city boards of review and 143.11 equalization, and all other assessing officers in the 143.12 performance of their duties, to the end that all assessments of 143.13 property be made relatively just and equal in compliance with 143.14 the laws of the state; 143.15 (2) confer with, advise, and give the necessary 143.16 instructions and directions to local assessors and local boards 143.17 of review throughout the state as to their duties under the laws 143.18 of the state; 143.19 (3) direct proceedings, actions, and prosecutions to be 143.20 instituted to enforce the laws relating to the liability and 143.21 punishment of public officers and officers and agents of 143.22 corporations for failure or negligence to comply with the 143.23 provisions of the laws of this state governing returns of 143.24 assessment and taxation of property, and cause complaints to be 143.25 made against local assessors, members of boards of equalization, 143.26 members of boards of review, or any other assessing or taxing 143.27 officer, to the proper authority, for their removal from office 143.28 for misconduct or negligence of duty; 143.29 (4) require county attorneys to assist in the commencement 143.30 of prosecutions in actions or proceedings for removal, 143.31 forfeiture and punishment for violation of the laws of this 143.32 state in respect to the assessment and taxation of property in 143.33 their respective districts or counties; 143.34 (5) require town, city, county, and other public officers 143.35 to report information as to the assessment of property, 143.36 collection of taxes received from licenses and other sources, 144.1 and such other information as may be needful in the work of the 144.2 Department of Revenue, in such form and upon such blanks as the 144.3 commissioner may prescribe; 144.4 (6) require individuals, copartnerships, companies, 144.5 associations, and corporations to furnish information concerning 144.6 their capital, funded or other debt, current assets and 144.7 liabilities, earnings, operating expenses, taxes, as well as all 144.8 other statements now required by law for taxation purposes; 144.9 (7) subpoena witnesses, at a time and place reasonable 144.10 under the circumstances, to appear and give testimony, and to 144.11 produce books, records, papers and documents for inspection and 144.12 copying relating to any matter which the commissioner may have 144.13 authority to investigate or determine; 144.14 (8) issue a subpoena which does not identify the person or 144.15 persons with respect to whose liability the subpoena is issued, 144.16 but only if (a) the subpoena relates to the investigation of a 144.17 particular person or ascertainable group or class of persons, 144.18 (b) there is a reasonable basis for believing that such person 144.19 or group or class of persons may fail or may have failed to 144.20 comply with any law administered by the commissioner, (c) the 144.21 information sought to be obtained from the examination of the 144.22 records (and the identity of the person or persons with respect 144.23 to whose liability the subpoena is issued) is not readily 144.24 available from other sources, (d) the subpoena is clear and 144.25 specific as to the information sought to be obtained, and (e) 144.26 the information sought to be obtained is limited solely to the 144.27 scope of the investigation. Provided further that the party 144.28 served with a subpoena which does not identify the person or 144.29 persons with respect to whose tax liability the subpoena is 144.30 issued shall have the right, within 20 days after service of the 144.31 subpoena, to petition the district court for the judicial 144.32 district in which lies the county in which that party is located 144.33 for a determination as to whether the commissioner of revenue 144.34 has complied with all the requirements in (a) to (e), and thus, 144.35 whether the subpoena is enforceable. If no such petition is 144.36 made by the party served within the time prescribed, the 145.1 subpoena shall have the force and effect of a court order; 145.2 (9) cause the deposition of witnesses residing within or 145.3 without the state, or absent therefrom, to be taken, upon notice 145.4 to the interested party, if any, in like manner that depositions 145.5 of witnesses are taken in civil actions in the district court, 145.6 in any matter which the commissioner may have authority to 145.7 investigate or determine; 145.8 (10) investigate the tax laws of other states and countries 145.9 and to formulate and submit to the legislature such legislation 145.10 as the commissioner may deem expedient to prevent evasions of 145.11 assessment and taxing laws, and secure just and equal taxation 145.12 and improvement in the system of assessment and taxation in this 145.13 state; 145.14 (11) consult and confer with the governor upon the subject 145.15 of taxation, the administration of the laws in regard thereto, 145.16 and the progress of the work of the Department of Revenue, and 145.17 furnish the governor, from time to time, such assistance and 145.18 information as the governor may require relating to tax matters; 145.19 (12) transmit to the governor, on or before the third 145.20 Monday in December of each even-numbered year, and to each 145.21 member of the legislature, on or before November 15 of each 145.22 even-numbered year, the report of the Department of Revenue for 145.23 the preceding years, showing all the taxable property in the 145.24 state and the value of the same, in tabulated form; 145.25 (13) inquire into the methods of assessment and taxation 145.26 and ascertain whether the assessors faithfully discharge their 145.27 duties, particularly as to their compliance with the laws 145.28 requiring the assessment of all property not exempt from 145.29 taxation; 145.30 (14) administer and enforce the assessment and collection 145.31 of state taxes and fees, including the use of any remedy 145.32 available to nongovernmental creditors, and, from time to time, 145.33 make, publish, and distribute rules for the administration and 145.34 enforcement of laws administered by the commissioner and state 145.35 tax laws. The rules have the force of law; 145.36 (15) prepare blank forms for the returns required by state 146.1 tax law and distribute them throughout the state, furnishing 146.2 them subject to charge on application; 146.3 (16) prescribe rules governing the qualification and 146.4 practice of agents, attorneys, or other persons representing 146.5 taxpayers before the commissioner. The rules may require that 146.6 those persons, agents, and attorneys show that they are of good 146.7 character and in good repute, have the necessary qualifications 146.8 to give taxpayers valuable services, and are otherwise competent 146.9 to advise and assist taxpayers in the presentation of their case 146.10 before being recognized as representatives of taxpayers. After 146.11 due notice and opportunity for hearing, the commissioner may 146.12 suspend and bar from further practice before the commissioner 146.13 any person, agent, or attorney who is shown to be incompetent or 146.14 disreputable, who refuses to comply with the rules, or who with 146.15 intent to defraud, willfully or knowingly deceives, misleads, or 146.16 threatens a taxpayer or prospective taxpayer, by words, 146.17 circular, letter, or by advertisement. This clause does not 146.18 curtail the rights of individuals to appear in their own behalf 146.19 or partners or corporations' officers to appear in behalf of 146.20 their respective partnerships or corporations; 146.21 (17) appoint agents as the commissioner considers necessary 146.22 to make examinations and determinations. The agents have the 146.23 rights and powers conferred on the commissioner to subpoena, 146.24 examine, and copy books, records, papers, or memoranda, subpoena 146.25 witnesses, administer oaths and affirmations, and take 146.26 testimony. In addition to administrative subpoenas of the 146.27 commissioner and the agents, upon demand of the commissioner or 146.28 an agent, the court administrator of any district court shall 146.29 issue a subpoena for the attendance of a witness or the 146.30 production of books, papers, records, or memoranda before the 146.31 agent for inspection and copying. Disobedience of a court 146.32 administrator's subpoena shall be punished by the district court 146.33 of the district in which the subpoena is issued, or in the case 146.34 of a subpoena issued by the commissioner or an agent, by the 146.35 district court of the district in which the party served with 146.36 the subpoena is located, in the same manner as contempt of the 147.1 district court; 147.2 (18) appoint and employ additional help, purchase supplies 147.3 or materials, or incur other expenditures in the enforcement of 147.4 state tax laws as considered necessary. The salaries of all 147.5 agents and employees provided for in this chapter shall be fixed 147.6 by the appointing authority, subject to the approval of the 147.7 commissioner of administration; 147.8 (19) execute and administer any agreement with the 147.9 secretary of the treasury of the United States or a 147.10 representative of another state regarding the exchange of 147.11 information and administration of the tax laws; 147.12 (20) authorize the use of unmarked motor vehicles to 147.13 conduct seizures or criminal investigations pursuant to the 147.14 commissioner's authority;and147.15 (21) exercise other powers and perform other duties 147.16 required of or imposed upon the commissioner of revenue by law; 147.17 and 147.18 (22) negotiate with other member states as to the amount of 147.19 the monetary allowance for sellers and certified service 147.20 providers who purchase certified software for sales tax 147.21 collection as described in the streamlined sales tax agreement. 147.22 [EFFECTIVE DATE.] This section is effective the day 147.23 following final enactment. 147.24 Sec. 4. [270.0611] [SUFFICIENCY OF NOTICE OF DETERMINATION 147.25 OR ACTION OF COMMISSIONER OF REVENUE.] 147.26 When a method of notification of a written determination or 147.27 action of the commissioner is not specifically provided for by 147.28 law, notice of the determination or action sent postage prepaid 147.29 by United States mail to the taxpayer or other person affected 147.30 by the determination or action at the taxpayer's or person's 147.31 last known address is sufficient. If the taxpayer or person 147.32 being notified is deceased or is under a legal disability, or if 147.33 a corporation being notified has terminated its existence, 147.34 notice to the last known address of the taxpayer, person, or 147.35 corporation is sufficient, unless the department has been 147.36 provided with a new address by a party authorized to receive 148.1 notices from the commissioner. 148.2 [EFFECTIVE DATE.] This section is effective for notices 148.3 sent on or after the day following final enactment. 148.4 Sec. 5. Minnesota Statutes 2002, section 270.69, 148.5 subdivision 4, is amended to read: 148.6 Subd. 4. [PERIOD OF LIMITATIONS.] The lien imposed by this 148.7 section shall, notwithstanding any other provision of law to the 148.8 contrary, be enforceable from the time the lien arises and for 148.9 ten years from the date of filing the notice of lien, which must 148.10 be filed by the commissioner within five years after the date of 148.11 assessment of the tax or final administrative or judicial 148.12 determination of the assessment. A notice of lien filed in one 148.13 county may be transcribed to the secretary of state or to any 148.14 other county within ten years after the date of its filing, but 148.15 the transcription shall not extend the period during which the 148.16 lien is enforceable. A notice of lien may be renewed by the 148.17 commissioner before the expiration of the ten-year period for an 148.18 additional ten years. The taxpayer must receive written notice 148.19 of the renewal. 148.20 [EFFECTIVE DATE.] This section is effective the day 148.21 following final enactment. 148.22 Sec. 6. Minnesota Statutes 2002, section 270B.01, 148.23 subdivision 8, is amended to read: 148.24 Subd. 8. [MINNESOTA TAX LAWS.] For purposes of this 148.25 chapter only, unless expressly stated otherwise, "Minnesota tax 148.26 laws" means: 148.27 (1) the taxes, refunds, and fees administered by or paid to 148.28 the commissioner under chapters 115B (except taxes imposed under 148.29 sections 115B.21 to 115B.24), 289A (except taxes imposed under 148.30 sections 298.01, 298.015, and 298.24), 290, 290A, 291, 295, 148.31 297A, and 297H, or any similar Indian tribal tax administered by 148.32 the commissioner pursuant to any tax agreement between the state 148.33 and the Indian tribal government, and includes any laws for the 148.34 assessment, collection, and enforcement of those taxes, refunds, 148.35 and fees; and 148.36 (2) section 273.1315. 149.1 [EFFECTIVE DATE.] This section is effective the day 149.2 following final enactment. 149.3 Sec. 7. Minnesota Statutes 2003 Supplement, section 149.4 270B.12, subdivision 13, is amended to read: 149.5 Subd. 13. [COUNTY ASSESSORS; CLASS 1B HOMESTEADS.] The 149.6 commissioner may disclose to a county assessor, and to the 149.7 assessor's designated agents or employees, a listing of parcels 149.8 of property qualifying for the class 1b property tax 149.9 classification under section 273.13, subdivision 22, and the 149.10 names and addresses of qualified applicants. 149.11 [EFFECTIVE DATE.] This section is effective the day 149.12 following final enactment. 149.13 Sec. 8. Minnesota Statutes 2003 Supplement, section 149.14 272.02, subdivision 65, is amended to read: 149.15 Subd. 65. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 149.16 PROPERTY.] (a) Improvements to real property, and personal 149.17 property, classified under section 273.13, subdivision 24, and 149.18 located within a biotechnology and health sciences industry zone 149.19 are exempt from ad valorem taxes levied under chapter 275, as 149.20 provided in this subdivision. 149.21 (b) For property to qualify for exemption under paragraph 149.22 (a), the occupant must be a qualified business, as defined in 149.23 section 469.330. 149.24 (c) The exemption applies beginning for the first 149.25 assessment year after designation of the biotechnology and 149.26 health sciences industry zone by the commissioner of employment 149.27 and economic development. The exemption applies to each 149.28 assessment year that begins during the duration of the 149.29 biotechnology and health sciences industry zone and to property 149.30 occupied by July 1 of the assessment year by a qualified 149.31 business. This exemption does not apply to: 149.32 (1) a levy under section 475.61 or similar levy provisions 149.33 under any other law to pay general obligation bonds; or 149.34 (2) a levy under section 126C.17, if the levy was approved 149.35 by the voters before the designation of the biotechnology and 149.36 health sciences industry zone. 150.1 (d) The exemption does not apply to taxes imposed by a 150.2 city, town, or county, unless the governing body adopts a 150.3 resolution granting the exemption. A city, town, or county may 150.4 provide a complete property tax exemption, partial property tax 150.5 exemption, or no property tax exemption to qualified businesses 150.6 in the biotechnology and health sciences industry zone. "City" 150.7 includes a statutory or home rule charter city. 150.8 (e) For property located in a tax increment financing 150.9 district, the county shall not adjust the original net tax 150.10 capacity of the district under section 469.177, subdivision 1, 150.11 paragraph (a), upon the expiration of an exemption under this 150.12 subdivision. 150.13 [EFFECTIVE DATE.] This section is effective beginning for 150.14 property taxes assessed in 2004, payable in 2005. 150.15 Sec. 9. Minnesota Statutes 2002, section 289A.12, 150.16 subdivision 3, is amended to read: 150.17 Subd. 3. [RETURNS OR REPORTS BY PARTNERSHIPS, FIDUCIARIES, 150.18 AND S CORPORATIONS.] (a) Partnerships must file a return with 150.19 the commissioner for each taxable year. The return must conform 150.20 to the requirements of section 290.311, and must include the 150.21 names and addresses of the partners entitled to a distributive 150.22 share in their taxable net income, gain, loss, or credit, and 150.23 the amount of the distributive share to which each is entitled. 150.24 A partnership required to file a return for a partnership 150.25 taxable year must furnish a copy of the information required to 150.26 be shown on the return to a person who is a partner at any time 150.27 during the taxable year, on or before the day on which the 150.28 return for the taxable year was filed. A partnership with more 150.29 than 100 partners that is required to file a federal partnership 150.30 return electronically under Code of Federal Regulations, title 150.31 26, section 301.6011-3 (2003), must also file the return due 150.32 under this section electronically. If a return required to be 150.33 filed electronically is filed on paper, the return is still 150.34 valid but a penalty of $50 for each partner over 100 partners is 150.35 imposed for failing to file electronically. The commissioner 150.36 may waive the penalty if the partnership can demonstrate that 151.1 filing the return electronically creates a hardship. 151.2 (b) The fiduciary of an estate or trust making the return 151.3 required to be filed under section 289A.08, subdivision 2, for a 151.4 taxable year must give a beneficiary who receives a distribution 151.5 from the estate or trust with respect to the taxable year or to 151.6 whom any item with respect to the taxable year is allocated, a 151.7 statement containing the information required to be shown on the 151.8 return, on or before the date on which the return was filed. 151.9 (c) An S corporation must file a return with the 151.10 commissioner for a taxable year during which an election under 151.11 section 290.9725 is in effect, stating specifically the names 151.12 and addresses of the persons owning stock in the corporation at 151.13 any time during the taxable year, the number of shares of stock 151.14 owned by a shareholder at all times during the taxable year, the 151.15 shareholder's pro rata share of each item of the corporation for 151.16 the taxable year, and other information the commissioner 151.17 requires. An S corporation required to file a return under this 151.18 paragraph for any taxable year must furnish a copy of the 151.19 information shown on the return to the person who is a 151.20 shareholder at any time during the taxable year, on or before 151.21 the day on which the return for the taxable year was filed. 151.22 (d) The partnership or S corporation return must be signed 151.23 by someone designated by the partnership or S corporation. 151.24 [EFFECTIVE DATE.] This section is effective for taxable 151.25 years beginning after December 31, 2003. 151.26 Sec. 10. Minnesota Statutes 2002, section 289A.31, 151.27 subdivision 2, is amended to read: 151.28 Subd. 2. [JOINT INCOME TAX RETURNS.] (a) If a joint income 151.29 tax return is made by a husband and wife, the liability for the 151.30 tax is joint and several. A spouse who qualifies for relief 151.31 from a liability attributable to an underpayment under section 151.32 6015(b) of the Internal Revenue Code is relieved of the state 151.33 income tax liability on the underpayment. 151.34 (b) In the case of individuals who were a husband and wife 151.35 prior to the dissolution of their marriage or their legal 151.36 separation, or prior to the death of one of the individuals, for 152.1 tax liabilities reported on a joint or combined return, the 152.2 liability of each person is limited to the proportion of the tax 152.3 due on the return that equals that person's proportion of the 152.4 total tax due if the husband and wife filed separate returns for 152.5 the taxable year. This provision is effective only when the 152.6 commissioner receives written notice of the marriage 152.7 dissolution, legal separation, or death of a spouse from the 152.8 husband or wife. No refund may be claimed by an ex-spouse, 152.9 legally separated or widowed spouse for any taxes paid more than 152.10 60 days before receipt by the commissioner of the written notice. 152.11 (c) A request for calculation of separate liability 152.12 pursuant to paragraph (b) for taxes reported on a return must be 152.13 made within six years after the due date of the return. For 152.14 calculation of separate liability for taxes assessed by the 152.15 commissioner under section 289A.35 or 289A.37, the request must 152.16 be made within six years after the date of assessment. The 152.17 commissioner is not required to calculate separate liability if 152.18 the remaining unpaid liability for which recalculation is 152.19 requested is $100 or less. 152.20 [EFFECTIVE DATE.] This section is effective for requests 152.21 for relief made on or after the day following final enactment. 152.22 Sec. 11. Minnesota Statutes 2002, section 289A.56, is 152.23 amended by adding a subdivision to read: 152.24 Subd. 7. [BIOTECHNOLOGY AND BORDER CITY ZONE 152.25 REFUNDS.] Notwithstanding subdivision 3, for refunds payable 152.26 under sections 297A.68, subdivision 38, and 469.1734, 152.27 subdivision 6, interest is computed from 90 days after the 152.28 refund claim is filed with the commissioner. 152.29 [EFFECTIVE DATE.] This section is effective for refund 152.30 claims filed on or after July 1, 2004. 152.31 Sec. 12. Minnesota Statutes 2003 Supplement, section 152.32 290.01, subdivision 19d, is amended to read: 152.33 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 152.34 TAXABLE INCOME.] For corporations, there shall be subtracted 152.35 from federal taxable income after the increases provided in 152.36 subdivision 19c: 153.1 (1) the amount of foreign dividend gross-up added to gross 153.2 income for federal income tax purposes under section 78 of the 153.3 Internal Revenue Code; 153.4 (2) the amount of salary expense not allowed for federal 153.5 income tax purposes due to claiming the federal jobs credit 153.6 under section 51 of the Internal Revenue Code; 153.7 (3) any dividend (not including any distribution in 153.8 liquidation) paid within the taxable year by a national or state 153.9 bank to the United States, or to any instrumentality of the 153.10 United States exempt from federal income taxes, on the preferred 153.11 stock of the bank owned by the United States or the 153.12 instrumentality; 153.13 (4) amounts disallowed for intangible drilling costs due to 153.14 differences between this chapter and the Internal Revenue Code 153.15 in taxable years beginning before January 1, 1987, as follows: 153.16 (i) to the extent the disallowed costs are represented by 153.17 physical property, an amount equal to the allowance for 153.18 depreciation under Minnesota Statutes 1986, section 290.09, 153.19 subdivision 7, subject to the modifications contained in 153.20 subdivision 19e; and 153.21 (ii) to the extent the disallowed costs are not 153.22 represented by physical property, an amount equal to the 153.23 allowance for cost depletion under Minnesota Statutes 1986, 153.24 section 290.09, subdivision 8; 153.25 (5) the deduction for capital losses pursuant to sections 153.26 1211 and 1212 of the Internal Revenue Code, except that: 153.27 (i) for capital losses incurred in taxable years beginning 153.28 after December 31, 1986, capital loss carrybacks shall not be 153.29 allowed; 153.30 (ii) for capital losses incurred in taxable years beginning 153.31 after December 31, 1986, a capital loss carryover to each of the 153.32 15 taxable years succeeding the loss year shall be allowed; 153.33 (iii) for capital losses incurred in taxable years 153.34 beginning before January 1, 1987, a capital loss carryback to 153.35 each of the three taxable years preceding the loss year, subject 153.36 to the provisions of Minnesota Statutes 1986, section 290.16, 154.1 shall be allowed; and 154.2 (iv) for capital losses incurred in taxable years beginning 154.3 before January 1, 1987, a capital loss carryover to each of the 154.4 five taxable years succeeding the loss year to the extent such 154.5 loss was not used in a prior taxable year and subject to the 154.6 provisions of Minnesota Statutes 1986, section 290.16, shall be 154.7 allowed; 154.8 (6) an amount for interest and expenses relating to income 154.9 not taxable for federal income tax purposes, if (i) the income 154.10 is taxable under this chapter and (ii) the interest and expenses 154.11 were disallowed as deductions under the provisions of section 154.12 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 154.13 federal taxable income; 154.14 (7) in the case of mines, oil and gas wells, other natural 154.15 deposits, and timber for which percentage depletion was 154.16 disallowed pursuant to subdivision 19c, clause (11), a 154.17 reasonable allowance for depletion based on actual cost. In the 154.18 case of leases the deduction must be apportioned between the 154.19 lessor and lessee in accordance with rules prescribed by the 154.20 commissioner. In the case of property held in trust, the 154.21 allowable deduction must be apportioned between the income 154.22 beneficiaries and the trustee in accordance with the pertinent 154.23 provisions of the trust, or if there is no provision in the 154.24 instrument, on the basis of the trust's income allocable to 154.25 each; 154.26 (8) for certified pollution control facilities placed in 154.27 service in a taxable year beginning before December 31, 1986, 154.28 and for which amortization deductions were elected under section 154.29 169 of the Internal Revenue Code of 1954, as amended through 154.30 December 31, 1985, an amount equal to the allowance for 154.31 depreciation under Minnesota Statutes 1986, section 290.09, 154.32 subdivision 7; 154.33 (9) amounts included in federal taxable income that are due 154.34 to refunds of income, excise, or franchise taxes based on net 154.35 income or related minimum taxes paid by the corporation to 154.36 Minnesota, another state, a political subdivision of another 155.1 state, the District of Columbia, or a foreign country or 155.2 possession of the United States to the extent that the taxes 155.3 were added to federal taxable income under section 290.01, 155.4 subdivision 19c, clause (1), in a prior taxable year; 155.5 (10) 80 percent of royalties, fees, or other like income 155.6 accrued or received from a foreign operating corporation or a 155.7 foreign corporation which is part of the same unitary business 155.8 as the receiving corporation; 155.9 (11) income or gains from the business of mining as defined 155.10 in section 290.05, subdivision 1, clause (a), that are not 155.11 subject to Minnesota franchise tax; 155.12 (12) the amount of handicap access expenditures in the 155.13 taxable year which are not allowed to be deducted or capitalized 155.14 under section 44(d)(7) of the Internal Revenue Code; 155.15 (13) the amount of qualified research expenses not allowed 155.16 for federal income tax purposes under section 280C(c) of the 155.17 Internal Revenue Code, but only to the extent that the amount 155.18 exceeds the amount of the credit allowed under section 155.19 290.068 or 469.339; 155.20 (14) the amount of salary expenses not allowed for federal 155.21 income tax purposes due to claiming the Indian employment credit 155.22 under section 45A(a) of the Internal Revenue Code; 155.23 (15) the amount of any refund of environmental taxes paid 155.24 under section 59A of the Internal Revenue Code; 155.25 (16) for taxable years beginning before January 1, 2008, 155.26 the amount of the federal small ethanol producer credit allowed 155.27 under section 40(a)(3) of the Internal Revenue Code which is 155.28 included in gross income under section 87 of the Internal 155.29 Revenue Code; 155.30 (17) for a corporation whose foreign sales corporation, as 155.31 defined in section 922 of the Internal Revenue Code, constituted 155.32 a foreign operating corporation during any taxable year ending 155.33 before January 1, 1995, and a return was filed by August 15, 155.34 1996, claiming the deduction under section 290.21, subdivision 155.35 4, for income received from the foreign operating corporation, 155.36 an amount equal to 1.23 multiplied by the amount of income 156.1 excluded under section 114 of the Internal Revenue Code, 156.2 provided the income is not income of a foreign operating 156.3 company; 156.4 (18) any decrease in subpart F income, as defined in 156.5 section 952(a) of the Internal Revenue Code, for the taxable 156.6 year when subpart F income is calculated without regard to the 156.7 provisions of section 614 of Public Law 107-147; and 156.8 (19) in each of the five tax years immediately following 156.9 the tax year in which an addition is required under subdivision 156.10 19c, clause (16), an amount equal to one-fifth of the delayed 156.11 depreciation. For purposes of this clause, "delayed 156.12 depreciation" means the amount of the addition made by the 156.13 taxpayer under subdivision 19c, clause (16). The resulting 156.14 delayed depreciation cannot be less than zero. 156.15 [EFFECTIVE DATE.] This section is effective for tax years 156.16 beginning after December 31, 2003. 156.17 Sec. 13. Minnesota Statutes 2002, section 290.9705, 156.18 subdivision 1, is amended to read: 156.19 Subdivision 1. [WITHHOLDING OF PAYMENTS TO OUT-OF-STATE 156.20 CONTRACTORS.] (a) In this section, "person" means a person, 156.21 corporation, or cooperative, the state of Minnesota and its 156.22 political subdivisions, and a city, county, and school district 156.23 in Minnesota. 156.24 (b) A person who in the regular course of business is 156.25 hiring, contracting, or having a contract with a nonresident 156.26 person or foreign corporation, as defined in Minnesota Statutes 156.27 1986, section 290.01, subdivision 5, to perform construction 156.28 work in Minnesota, shall deduct and withhold eight percent of 156.29every paymentcumulative calendar year payments to the 156.30 contractorif the contract exceeds or can reasonably be expected156.31to exceed $100,000which exceed $50,000. 156.32 [EFFECTIVE DATE.] This section is effective for payments 156.33 made after December 31, 2004. 156.34 Sec. 14. Minnesota Statutes 2003 Supplement, section 156.35 290C.10, is amended to read: 156.36 290C.10 [WITHDRAWAL PROCEDURES.] 157.1 An approved claimant under the sustainable forest incentive 157.2 program for a minimum of four years may notify the commissioner 157.3 of the intent to terminate enrollment. Within 90 days of 157.4 receipt of notice to terminate enrollment, the commissioner 157.5 shall inform the claimant in writing, acknowledging receipt of 157.6 this notice and indicating the effective date of termination 157.7 from the sustainable forest incentive program. Termination of 157.8 enrollment in the sustainable forest incentive program occurs on 157.9 January 1 of the fifth calendar year that begins after receipt 157.10 by the commissioner of the termination notice. After the 157.11 commissioner issues an effective date of termination, a claimant 157.12 wishing to continue the land's enrollment in the sustainable 157.13 forest incentive program beyond the termination date must apply 157.14 for enrollment as prescribed in section 290C.04. A claimant who 157.15 withdraws a parcel of land from this program may not reenroll 157.16 the parcel for a period of three years. Within 90 days after 157.17 the termination date, the commissioner shall execute and 157.18 acknowledge a document releasing the land from the covenant 157.19 required under this chapter. The document must be mailed to the 157.20 claimant and is entitled to be recorded. The commissioner may 157.21 allow early withdrawal from the Sustainable Forest Incentive Act 157.22 without penaltyin cases of condemnationwhen the state of 157.23 Minnesota, any local government unit, or any other entity which 157.24 has the right of eminent domain acquires title or possession to 157.25 the land for a public purpose notwithstanding the provisions of 157.26 this section. In the case of such acquisition, the commissioner 157.27 shall execute and acknowledge a document releasing the land 157.28 acquired by the state, local government unit, or other entity 157.29 from the covenant. All other enrolled land must remain in the 157.30 program. 157.31 [EFFECTIVE DATE.] This section is effective the day 157.32 following final enactment. 157.33 Sec. 15. Minnesota Statutes 2002, section 297A.995, 157.34 subdivision 6, is amended to read: 157.35 Subd. 6. [AGREEMENT REQUIREMENTS.] The commissioner of 157.36 revenue shall not enter into the agreement unless the agreement 158.1 requires each state to abide by the following requirements: 158.2 (a) [UNIFORM STATE RATE.] The agreement must set 158.3 restrictions to achieve more uniform state rates through the 158.4 following: 158.5 (1) limiting the number of state rates; 158.6 (2) eliminating maximums on the amount of state tax that is 158.7 due on a transaction; and 158.8 (3) eliminating thresholds on the application of state tax. 158.9 (b) [UNIFORM STANDARDS.] The agreement must establish 158.10 uniform standards for the following: 158.11 (1) the sourcing of transactions to taxing jurisdictions; 158.12 (2) the administration of exempt sales; 158.13 (3) the allowances a seller can take for bad debts; and 158.14 (4) sales and use tax returns and remittances. 158.15 (c) [UNIFORM DEFINITIONS.] The agreement must require 158.16 states to develop and adopt uniform definitions of sales and use 158.17 tax terms. The definitions must enable a state to preserve its 158.18 ability to make policy choices not inconsistent with the uniform 158.19 definitions. 158.20 (d) [CENTRAL REGISTRATION.] The agreement must provide a 158.21 central, electronic registration system that allows a seller to 158.22 register to collect and remit sales and use taxes for all 158.23 signatory states. 158.24 (e) [NO NEXUS ATTRIBUTION.] The agreement must provide 158.25 that registration with the central registration system and the 158.26 collection of sales and use taxes in the signatory states will 158.27 not be used as a factor in determining whether the seller has 158.28 nexus with a state for any tax. 158.29 (f) [LOCAL SALES AND USE TAXES.] The agreement must 158.30 provide for reduction of the burdens of complying with local 158.31 sales and use taxes through the following: 158.32 (1) restricting and eliminating variances between the state 158.33 and local tax bases; 158.34 (2) requiring states to administer any sales and use taxes 158.35 levied by local jurisdictions within the state so that sellers 158.36 collecting and remitting these taxes will not have to register 159.1 or file returns with, remit funds to, or be subject to 159.2 independent audits from local taxing jurisdictions; 159.3 (3) restricting the frequency of changes in the local sales 159.4 and use tax rates and setting effective dates for the 159.5 application of local jurisdictional boundary changes to local 159.6 sales and use taxes; and 159.7 (4) providing notice of changes in local sales and use tax 159.8 rates and of changes in the boundaries of local taxing 159.9 jurisdictions. 159.10 (g) [MONETARY ALLOWANCES.] The agreement must outline any 159.11 monetary allowances that are to be provided by the states to 159.12 sellers or certified service providers. The allowances must be 159.13 funded from the money collected by the seller or certified 159.14 service provider and must be subtracted by the seller or 159.15 certified service provider before remitting the tax collected to 159.16 the Department of Revenue. 159.17 (h) [STATE COMPLIANCE.] The agreement must require each 159.18 state to certify compliance with the terms of the agreement 159.19 prior to joining and to maintain compliance, under the laws of 159.20 the member state, with all provisions of the agreement while a 159.21 member. 159.22 (i) [CONSUMER PRIVACY.] The agreement must require each 159.23 state to adopt a uniform policy for certified service providers 159.24 that protects the privacy of consumers and maintains the 159.25 confidentiality of tax information. 159.26 (j) [ADVISORY COUNCILS.] The agreement must provide for 159.27 the appointment of an advisory council of private sector 159.28 representatives and an advisory council of nonmember state 159.29 representatives to consult with in the administration of the 159.30 agreement. 159.31 [EFFECTIVE DATE.] This section is effective the day 159.32 following final enactment. 159.33 Sec. 16. Minnesota Statutes 2002, section 469.1734, 159.34 subdivision 6, is amended to read: 159.35 Subd. 6. [SALES TAX EXEMPTION; EQUIPMENT; CONSTRUCTION 159.36 MATERIALS.] (a) The gross receipts from the sale of machinery 160.1 and equipment and repair parts are exempt from taxation under 160.2 chapter 297A, if the machinery and equipment: 160.3 (1) are used in connection with a trade or business; 160.4 (2) are placed in service in a city that is authorized to 160.5 designate a zone under section 469.1731, regardless of whether 160.6 the machinery and equipment are used in a zone; and 160.7 (3) have a useful life of 12 months or more. 160.8 (b) The gross receipts from the sale of construction 160.9 materials are exempt, if they are used to construct: 160.10 (1) a facility for use in a trade or business located in a 160.11 city that is authorized to designate a zone under section 160.12 469.1731, regardless of whether the facility is located in a 160.13 zone; or 160.14 (2) housing that is located in a zone. 160.15 The exemptions under this paragraph apply regardless of whether 160.16 the purchase is made by the owner, the user, or a contractor. 160.17 (c) A purchaser may claim an exemption under this 160.18 subdivision for tax on the purchases up to, but not exceeding: 160.19 (1) the amount of the tax credit certificates received from 160.20 the city, less 160.21 (2) any tax credit certificates used under the provisions 160.22 of subdivisions 4 and 5, and section 469.1732, subdivision 2. 160.23 (d) The tax on sales of items exempted under this 160.24 subdivision shall be imposed and collected as if the applicable 160.25 rate under section 297A.62 applied. Upon application by the 160.26 purchaser, on forms prescribed by the commissioner, a refund 160.27 equal to the tax paid shall be paid to the purchaser. The 160.28 application must include sufficient information to permit the 160.29 commissioner to verify the sales tax paid and the eligibility of 160.30 the claimant to receive the credit. No more than two 160.31 applications for refunds may be filed under this subdivision in 160.32 a calendar year. The provisions of section 289A.40 apply to the 160.33 refunds payable under this subdivision. There is annually 160.34 appropriated to the commissioner of revenue the amount required 160.35 to make the refunds, which must be deducted from the amount of 160.36 the city's allocation under section 469.169, subdivision 12, 161.1 that remains available and its limitation under section 469.1735. 161.2 The amount to be refunded shall bear interest at the rate in 161.3 section 270.76 from 90 days after the date the refund claim is 161.4 filed with the commissioner. 161.5 [EFFECTIVE DATE.] This section is effective for refund 161.6 claims filed on or after July 1, 2004. 161.7 Sec. 17. Minnesota Statutes 2003 Supplement, section 161.8 469.310, subdivision 11, is amended to read: 161.9 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 161.10 means a person carrying on a trade or business at a place of 161.11 business located within a job opportunity building zone. A 161.12 person is a qualified business only on those parcels of land for 161.13 which it has entered into a business subsidy agreement, as 161.14 required under section 469.313, with the appropriate local 161.15 government unit in which the parcels are located. 161.16 (b) A person that relocates a trade or business from 161.17 outside a job opportunity building zone into a zone is not a 161.18 qualified business, unless the business: 161.19 (1)(i) increases full-time employment in the first full 161.20 year of operation within the job opportunity building zone by at 161.21 least 20 percent measured relative to the operations that were 161.22 relocated and maintains the required level of employment for 161.23 each year the zone designation applies; or 161.24 (ii) makes a capital investment in the property located 161.25 within a zone equivalent to ten percent of the gross revenues of 161.26 operation that were relocated in the immediately preceding 161.27 taxable year; and 161.28 (2) enters a binding written agreement with the 161.29 commissioner that: 161.30 (i) pledges the business will meet the requirements of 161.31 clause (1); 161.32 (ii) provides for repayment of all tax benefits enumerated 161.33 under section 469.315 to the business under the procedures in 161.34 section 469.319, if the requirements of clause (1) are not met 161.35 for the taxable year or for taxes payable during the year in 161.36 which the requirements were not met; and 162.1 (iii) contains any other terms the commissioner determines 162.2 appropriate. 162.3 (c) A business is not a qualified business if, at its 162.4 location or locations in the zone, the business is primarily 162.5 engaged in making retail sales to purchasers who are physically 162.6 present at the business's zone location. 162.7 [EFFECTIVE DATE.] The amendment to paragraph (a) of this 162.8 section is effective retroactively from June 9, 2003. Paragraph 162.9 (c) of this section is effective the day following final 162.10 enactment and applies to any business entering a business 162.11 subsidy agreement for a job opportunity development zone after 162.12 that date. 162.13 Sec. 18. Minnesota Statutes 2003 Supplement, section 162.14 469.330, subdivision 11, is amended to read: 162.15 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 162.16 means a person carrying on a trade or business at a 162.17 biotechnology and health sciences industry facility located 162.18 within a biotechnology and health sciences industry zone. A 162.19 person is a qualified business only on those parcels of land for 162.20 which it has entered into a business subsidy agreement, as 162.21 required under section 469.333, with the appropriate local 162.22 government unit in which the parcels are located. 162.23 (b) A person that relocates a biotechnology and health 162.24 sciences industry facility from outside a biotechnology and 162.25 health sciences industry zone into a zone is not a qualified 162.26 business, unless the business: 162.27 (1)(i) increases full-time employment in the first full 162.28 year of operation within the biotechnology and health sciences 162.29 industry zone by at least 20 percent measured relative to the 162.30 operations that were relocated and maintains the required level 162.31 of employment for each year the zone designation applies; or 162.32 (ii) makes a capital investment in the property located 162.33 within a zone equivalent to ten percent of the gross revenues of 162.34 operation that were relocated in the immediately preceding 162.35 taxable year; and 162.36 (2) enters a binding written agreement with the 163.1 commissioner that: 163.2 (i) pledges the business will meet the requirements of 163.3 clause (1); 163.4 (ii) provides for repayment of all tax benefits enumerated 163.5 under section 469.336 to the business under the procedures in 163.6 section 469.340, if the requirements of clause (1) are not met; 163.7 and 163.8 (iii) contains any other terms the commissioner determines 163.9 appropriate. 163.10 [EFFECTIVE DATE.] This section is effective retroactively 163.11 from June 9, 2003. 163.12 Sec. 19. Minnesota Statutes 2003 Supplement, section 163.13 469.337, is amended to read: 163.14 469.337 [CORPORATE FRANCHISE TAX EXEMPTION.] 163.15 (a) A qualified business is exempt from taxation under 163.16 section 290.02, the alternative minimum tax under section 163.17 290.0921, and the minimum fee under section 290.0922, on the 163.18 portion of its income attributable to operations of a qualified 163.19 business within the biotechnology and health sciences industry 163.20 zone. This exemption is determined as follows: 163.21 (1) for purposes of the tax imposed under section 290.02, 163.22 by multiplying its taxable net income by its zone percentage and 163.23 subtracting the result in determining taxable income; 163.24 (2) for purposes of the alternative minimum tax under 163.25 section 290.0921, by multiplying its alternative minimum taxable 163.26 income by its zone percentage and reducing alternative minimum 163.27 taxable income by this amount; and 163.28 (3) for purposes of the minimum fee under section 290.0922, 163.29 by excluding zone property and payrollin the zonefrom the 163.30 computations of the fee. The qualified business is exempt from 163.31 the minimum fee if all of its property is located in the zone 163.32 and all of its payroll is zone payroll. 163.33 (b) No subtraction is allowed under this section in excess 163.34 of 20 percent of the sum of the corporation's biotechnology and 163.35 health sciences industry zone payroll and the adjusted basis of 163.36 the property at the time that the property is first used in the 164.1 biotechnology and health sciences industry zone by the 164.2 corporation. 164.3 (c) No reduction in tax is allowed in excess of the amount 164.4 allocated under section 469.335. 164.5 [EFFECTIVE DATE.] This section is effective for tax years 164.6 beginning after December 31, 2003. 164.7 Sec. 20. Minnesota Statutes 2002, section 473F.02, 164.8 subdivision 2, is amended to read: 164.9 Subd. 2. [AREA.] "Area" means the territory included 164.10 within the boundaries of Anoka, Carver, Dakota excluding the 164.11 city of Northfield, Hennepin, Ramsey, Scott excluding the city 164.12 of New Prague, and Washington Counties, excluding lands 164.13 constituting a major or an intermediate airport as defined under 164.14 section 473.625. 164.15 [EFFECTIVE DATE.] This section is effective for taxes 164.16 payable in 2005 and thereafter. 164.17 Sec. 21. [REPEALER.] 164.18 Laws 1975, chapter 287, section 5, and Laws 2003, chapter 164.19 127, article 9, section 9, subdivision 4, are repealed. 164.20 [EFFECTIVE DATE.] This section is effective without local 164.21 approval for taxes payable in 2005 and thereafter. 164.22 ARTICLE 9 164.23 MISCELLANEOUS 164.24 Section 1. Minnesota Statutes 2003 Supplement, section 164.25 16A.152, subdivision 2, is amended to read: 164.26 Subd. 2. [ADDITIONAL REVENUES; PRIORITY.] (a) If on the 164.27 basis of a forecast of general fund revenues and expenditures, 164.28 the commissioner of finance determines that there will be a 164.29 positive unrestricted budgetary general fund balance at the 164.30 close of the biennium, the commissioner of finance must allocate 164.31 money to the following accounts and purposes in priority order: 164.32 (1) the cash flow account established in subdivision 1 164.33 until that account reaches $350,000,000;and164.34 (2) the budget reserve account established in subdivision 164.35 1a until that account reaches $653,000,000; 164.36 (3) the amount necessary to eliminate all or a portion of 165.1 the property tax revenue recognition shift in section 123B.75, 165.2 subdivision 5; and 165.3 (4) the amount necessary to increase the aid payment 165.4 schedule for school district aids and credits payments in 165.5 section 127A.45 to not more than 90 percent. 165.6 (b) The amounts necessary to meet the requirements of this 165.7 section are appropriated from the general fund within two weeks 165.8 after the forecast is released or, in the case of transfers 165.9 under paragraph (a), clauses (3) and (4), as necessary to meet 165.10 the appropriations schedules otherwise established in statute. 165.11 (c) To the extent that a positive unrestricted budgetary 165.12 general fund balance is projected, appropriations under this 165.13 section must be made before any transfer is made under section 165.14 16A.1522. 165.15 (d) The commissioner of finance shall certify the total 165.16 dollar amount of the reductions under paragraph (a), clauses (3) 165.17 and (4), to the commissioner of education. The commissioner of 165.18 education shall increase the aid payment percentage and reduce 165.19 the property tax shift percentage by these amounts and apply 165.20 those reductions to the current fiscal year and thereafter. 165.21 [EFFECTIVE DATE.] This section is effective the day 165.22 following final enactment. 165.23 Sec. 2. Minnesota Statutes 2002, section 168A.02, 165.24 subdivision 2, is amended to read: 165.25 Subd. 2. [NO VEHICLE REGISTRATION WITHOUT TITLE.] The 165.26 department shall not register or renew the registration of a 165.27 vehicle for which a certificate of title is required unless a 165.28 certificate of title has been issued to the owneror, an 165.29 application therefor has been delivered to and approved by the 165.30 department, or the vehicle has a Minnesota certificate of title 165.31 and is being held for resale by a dealer under section 168A.11. 165.32 Sec. 3. Minnesota Statutes 2002, section 168A.11, 165.33 subdivision 1, is amended to read: 165.34 Subdivision 1. [APPLICATIONREQUIREMENTS UPON SUBSEQUENT 165.35 TRANSFER.] (a)IfA dealer who buys a vehicle and holds it for 165.36 resaleand procures the certificate of title from the owner, and166.1complies with subdivision 2 hereof, the dealerneed not apply 166.2 for a certificate of title, but. Upon transferring the vehicle 166.3 to another person, other than by the creation of a security 166.4 interest, the dealer shall promptly execute the assignment and 166.5 warranty of title by a dealer, showing the names and addresses 166.6 of the transferee and of any secured party holding a security 166.7 interest created or reserved at the time of the resale, and the 166.8 date of the security agreement in the spaces provided therefor 166.9 on the certificate of title or secure reassignment. 166.10 (b) If a dealer elects to apply for a certificate of title 166.11 on a vehicle held for resale, the dealer need not register the 166.12 vehicle but shall pay one month's registration tax. If a dealer 166.13 elects to apply for a certificate of title on a vehicle held for 166.14 resale, the department shall not place any legend on the title 166.15 that no motor vehicle sales tax was paid by the dealer, but may 166.16 indicate on the title whether the vehicle is a new or used 166.17 vehicle. 166.18 (c) With respect to motor vehicles subject to the 166.19 provisions of section 325E.15, the dealer shall also, in the 166.20 space provided therefor on the certificate of title or secure 166.21 reassignment, state the true cumulative mileage registered on 166.22 the odometer or that the exact mileage is unknown if the 166.23 odometer reading is known by the transferor to be different from 166.24 the true mileage. 166.25(c)(d) The transferee shall complete the application for 166.26 title section on the certificate of title or separate title 166.27 application form prescribed by the department. The dealer shall 166.28 mail or deliver the certificate to the registrar or deputy 166.29 registrar with the transferee's application for a new 166.30 certificate and appropriate taxes and fees, within ten business 166.31 days. 166.32 (e) With respect to vehicles sold to buyers who will remove 166.33 the vehicle from this state, the dealer shall remove any license 166.34 plates from the vehicle, issue a 31-day temporary permit 166.35 pursuant to section 168.091, and notify the registrar within 48 166.36 hours of the sale that the vehicle has been removed from this 167.1 state. The notification must be made in an electronic format 167.2 prescribed by the registrar. The dealer may contract with a 167.3 deputy registrar for the notification of sale to an out-of-state 167.4 buyer. The deputy registrar may charge a fee not to exceed $7 167.5 per transaction to provide this service. 167.6 Sec. 4. Minnesota Statutes 2002, section 168A.11, 167.7 subdivision 2, is amended to read: 167.8 Subd. 2. [PURCHASE RECEIPTNOTIFICATION ON VEHICLE HELD 167.9 FOR RESALE.]A dealer, on buying a vehicle for which the seller167.10does not present a certificate of title, shall at the time of167.11taking delivery of the vehicle execute a purchase receipt for167.12the vehicle in a format designated by the department, and167.13deliver a copy to the seller. In a format and at a time167.14prescribed by the registrar, the dealer shall notify the167.15registrar that the vehicle is being held for resale by the167.16dealer.Within 48 hours of acquiring a vehicle titled and 167.17 registered in Minnesota, a dealer shall notify the registrar 167.18 that the dealership is holding the vehicle for resale. The 167.19 notification must be made electronically as prescribed by the 167.20 registrar. The dealer may contract this service to a deputy 167.21 registrar and the registrar may charge a fee not to exceed $7 167.22 per transaction to provide this service. 167.23 Sec. 5. Minnesota Statutes 2002, section 168A.11, is 167.24 amended by adding a subdivision to read: 167.25 Subd. 4. [CENTRALIZED RECORD KEEPING.] Three or more new 167.26 motor vehicle dealers under common management or control may 167.27 designate to the department in writing a single location for 167.28 maintaining the records required by this section that are more 167.29 than 12 months old. The records must be open to inspection by a 167.30 representative of the department or a peace officer during 167.31 reasonable business hours. The location must be at the 167.32 established place of business of one of the affiliated dealers 167.33 or at a location within Minnesota not further than 25 miles from 167.34 the established place of business of one of the affiliated 167.35 dealers. 167.36 Sec. 6. Minnesota Statutes 2002, section 240.30, is 168.1 amended by adding a subdivision to read: 168.2 Subd. 11. [FRANCHISE FEE.] As a condition of operating a 168.3 card club under this section, the licensee must pay a fee to the 168.4 commission equal to five percent of the gross revenues, less any 168.5 refunds, for charges imposed under subdivision 4. Payment, 168.6 collection, and administration of the fee must be made in the 168.7 same manner and under the terms provided under section 240.15 168.8 for the tax on pari-mutuel pools. The commission shall deposit 168.9 all of the revenues from the fee in the state treasury and 168.10 amounts deposited must be credited to the general fund. The 168.11 amount of the fee under this subdivision does not reduce the 168.12 obligation to set aside revenues from the card club under 168.13 section 240.135. 168.14 [EFFECTIVE DATE.] This section is effective for charges and 168.15 revenues received after June 30, 2004. 168.16 Sec. 7. Minnesota Statutes 2003 Supplement, section 168.17 270.30, subdivision 1, is amended to read: 168.18 Subdivision 1. [SCOPE.](a)This section applies to a 168.19 person whooffers,provides, or facilitates the provision of168.20refund anticipation loans, as part of or in connection with the168.21provision oftax preparation services. 168.22(b) This section does not apply to:168.23(1) a tax preparer who provides tax preparation services168.24for fewer than six clients in a calendar year;168.25(2) the provision by a person of tax preparation services168.26to a spouse, parent, grandparent, child, or sibling; and168.27(3) the provision of services by an employee for an168.28employer.168.29 Sec. 8. Minnesota Statutes 2003 Supplement, section 168.30 270.30, subdivision 5, is amended to read: 168.31 Subd. 5. [ITEMIZED BILL REQUIRED.] A tax preparer who 168.32 provides services for a fee or other consideration must provide 168.33 an itemized statement of the charges for services, at least 168.34 separately stating the charges for: 168.35 (1) return preparation; 168.36 (2) electronic filing; and 169.1 (3) providing or facilitating a refund anticipation loan. 169.2 Sec. 9. Minnesota Statutes 2003 Supplement, section 169.3 270.30, subdivision 8, is amended to read: 169.4 Subd. 8. [EXEMPTIONS; ENFORCEMENT PROVISIONS.] The 169.5 provisions of subdivisions 3, 6, and 7 do not apply to: 169.6 (1) an attorney admitted to practice under section 481.01; 169.7 (2) a certified public accountant holding a certificate 169.8 under section 326A.04 or a person issued a permit to practice 169.9 under section 326A.05; 169.10 (3) a person designated as a registered accounting 169.11 practitioner under Minnesota Rules, part 1105.6600, or a 169.12 registered accounting practitioner firm issued a permit under 169.13 Minnesota Rules, part 1105.7100; 169.14 (4) an enrolled agent who has passed the special enrollment 169.15 examination administered by the Internal Revenue Service;and169.16 (5) any fiduciary, or the regular employees of a fiduciary, 169.17 while acting on behalf of the fiduciary estate, the testator, 169.18 trustor, grantor, or beneficiaries of them; 169.19 (6) a tax preparer who provides tax preparation services 169.20 for fewer than six clients in a calendar year; 169.21 (7) a person who provides tax preparation services to a 169.22 spouse, parent, grandparent, child, or sibling; and 169.23 (8) an employee who provides tax preparation services for 169.24 an employer. 169.25 Sec. 10. Minnesota Statutes 2003 Supplement, section 169.26 291.03, subdivision 1, is amended to read: 169.27 Subdivision 1. [TAX AMOUNT.] (a) The tax imposed shall be 169.28 an amount equal to the proportion of the maximum credit computed 169.29 under section 2011 of the Internal Revenue Code, as amended 169.30 through December 31, 2000, for state death taxes as the 169.31 Minnesota gross estate bears to the value of the federal gross 169.32 estate. The tax determined under this paragraph shall not be 169.33 greater than the federal estate tax computed under section 2001 169.34 of the Internal Revenue Code after the allowance of the federal 169.35 credits allowed under section 2010 of the Internal Revenue Code 169.36 of 1986, as amended through December 31, 2000. 170.1 (b) For the purposes of this section, the following are not 170.2 allowed in computing the tax under this chapter: 170.3 (1) expenses which are deducted for federal income tax 170.4 purposes under section 642(g) of the Internal Revenue Code as 170.5 amended through December 31,2002, are not allowable in170.6computing the tax under this chapter.2003; and 170.7 (2) state death taxes which are deducted under section 2058 170.8 of the Internal Revenue Code as amended through December 31, 170.9 2003; 170.10 (c) For qualified terminable interest property, as defined 170.11 in section 2056(b)(7) of the Internal Revenue Code, the executor 170.12 may make an election for purposes of the tax under this chapter 170.13 that is different than the amount elected for federal estate tax 170.14 purposes. The election must be made on the return for tax under 170.15 this chapter and is irrevocable. All tax under this chapter 170.16 must be determined using the qualified terminable interest 170.17 property election made on the Minnesota return. 170.18 [EFFECTIVE DATE.] This section is effective for decedents 170.19 dying after December 31, 2004. 170.20 Sec. 11. Minnesota Statutes 2002, section 298.24, 170.21 subdivision 1, is amended to read: 170.22 Subdivision 1. (a) For concentrate produced in 2001, 2002, 170.23 and 2003, there is imposed upon taconite and iron sulphides, and 170.24 upon the mining and quarrying thereof, and upon the production 170.25 of iron ore concentrate therefrom, and upon the concentrate so 170.26 produced, a tax of $2.103 per gross ton of merchantable iron ore 170.27 concentrate produced therefrom. 170.28 (b) For concentrates produced in 2004 and subsequent years, 170.29 the tax rate shall be equal to the preceding year's tax rate 170.30 plus an amount equal to the preceding year's tax rate multiplied 170.31 by the percentage increase in the implicit price deflator from 170.32 the fourth quarter of the second preceding year to the fourth 170.33 quarter of the preceding year. "Implicit price deflator" means 170.34 the implicit price deflator for the gross domestic product 170.35 prepared by the Bureau of Economic Analysis of the United States 170.36 Department of Commerce. 171.1 (c) On concentrates produced in 1997 and thereafter, an 171.2 additional tax is imposed equal to three cents per gross ton of 171.3 merchantable iron ore concentrate for each one percent that the 171.4 iron content of the product exceeds 72 percent, when dried at 171.5 212 degrees Fahrenheit. 171.6 (d) The tax shall be imposed on the average of the 171.7 production for the current year and the previous two years. The 171.8 rate of the tax imposed will be the current year's tax rate. 171.9 This clause shall not apply in the case of the closing of a 171.10 taconite facility if the property taxes on the facility would be 171.11 higher if this clause and section 298.25 were not applicable. 171.12 (e) If the tax or any part of the tax imposed by this 171.13 subdivision is held to be unconstitutional, a tax of $2.103 per 171.14 gross ton of merchantable iron ore concentrate produced shall be 171.15 imposed. 171.16 (f) Consistent with the intent of this subdivision to 171.17 impose a tax based upon the weight of merchantable iron ore 171.18 concentrate, the commissioner of revenue may indirectly 171.19 determine the weight of merchantable iron ore concentrate 171.20 included in fluxed pellets by subtracting the weight of the 171.21 limestone, dolomite, or olivine derivatives or other basic flux 171.22 additives included in the pellets from the weight of the 171.23 pellets. For purposes of this paragraph, "fluxed pellets" are 171.24 pellets produced in a process in which limestone, dolomite, 171.25 olivine, or other basic flux additives are combined with 171.26 merchantable iron ore concentrate. No subtraction from the 171.27 weight of the pellets shall be allowed for binders, mineral and 171.28 chemical additives other than basic flux additives, or moisture. 171.29 (g)(1) Notwithstanding any other provision of this 171.30 subdivision, for the first two years of a plant's commercial 171.31 production of direct reduced ore, no tax is imposed under this 171.32 section. As used in this paragraph, "commercial production" is 171.33 production of more than 50,000 tons of direct reduced ore in the 171.34 current year or in any prior year, and "direct reduced ore" is 171.35 ore that results in a product that has an iron content of at 171.36 least 75 percent. For the third year of a plant's commercial 172.1 production of direct reduced ore, the rate to be applied to 172.2 direct reduced ore is 25 percent of the rate otherwise 172.3 determined under this subdivision. For the fourth 172.4suchcommercial production year, the rate is 50 percent of the 172.5 rate otherwise determined under this subdivision; for the 172.6 fifthsuchcommercial production year, the rate is 75 percent of 172.7 the rate otherwise determined under this subdivision; and for 172.8 all subsequent commercial production years, the full rate is 172.9 imposed. 172.10 (2) Subject to clause (1), production of direct reduced ore 172.11 in this state is subject to the tax imposed by this section, but 172.12 if that production is not produced by a producer of taconite or 172.13 iron sulfides, the production of taconite or iron sulfides 172.14 consumed in the production of direct reduced iron in this state 172.15 is not subject to the tax imposed by this section on taconite or 172.16 iron sulfides. 172.17 (3) Notwithstanding any other provision of this 172.18 subdivision, no tax is imposed under this section during the 172.19 facility's noncommercial production of direct reduced ore. 172.20 [EFFECTIVE DATE.] This section is effective for direct 172.21 reduced ore produced after the date of final enactment. 172.22 Sec. 12. Minnesota Statutes 2003 Supplement, section 172.23 469.335, is amended to read: 172.24 469.335 [APPLICATION FOR TAX BENEFITS.] 172.25 (a) To claim a tax credit or exemption against a state tax 172.26 under section 469.336, clauses (2) through (5), a business must 172.27 apply to the commissioner for a tax credit certificate. As a 172.28 condition of its application, the business must agree to furnish 172.29 information to the commissioner that is sufficient to verify the 172.30 eligibility for any credits or exemptions claimed. The total 172.31 amount of the state tax credits and exemptions allowed for the 172.32 specified period may not exceed the amount of the tax credit 172.33 certificates provided by the commissioner to the business. The 172.34 commissioner must verify to the commissioner of revenue the 172.35 amount of tax exemptions or credits for which each business is 172.36 eligible. 173.1 (b) A tax credit certificate issued under this section may 173.2 specify the particular tax exemptions or credits against a state 173.3 tax that the qualified business is eligible to claim under 173.4 section 469.336, clauses (2) through (5), and the amount of each 173.5 exemption or credit allowed. 173.6 (c) The commissioner may issue$1,000,000$2,000,000 of tax 173.7 credits or exemptions in fiscal year 2004. Any tax credits or 173.8 exemptions not awarded in fiscal year 2004 may be awarded in 173.9 fiscal year 2005. 173.10 (d) A qualified business must use the tax credits or tax 173.11 exemptions granted under this section by the later of the end of 173.12 the state fiscal year or the taxpayer's tax year in which the 173.13 credits or exemptions are granted. 173.14 [EFFECTIVE DATE.] This section is effective the day 173.15 following final enactment. 173.16 Sec. 13. Laws 2000, chapter 391, section 1, subdivision 1, 173.17 is amended to read: 173.18 Subdivision 1. [TASK FORCE; MEMBERSHIP.] (a) The secretary 173.19 of state shallestablishserve as the chair of a task force of 173.20 15 members to study and make recommendations for the 173.21 establishment of a system for the electronic filing and 173.22 recording of real estate documents. Members who are appointed 173.23 under this section shall serve for a term of two years 173.24 commencing on June 30, 2004. Upon expiration of their term, 173.25 members may be reappointed for an additional year by their 173.26 appointing authority. Two county board members to be appointed 173.27 by the Association of Minnesota Counties, including one board 173.28 member from within the seven-county metropolitan area, as 173.29 designated under Minnesota Statutes, section 16E.02, shall serve 173.30 as the vice-chairs of the task force. The task force must 173.31 include: 173.32 (1)two members of the senate appointed by the subcommittee173.33on committees of the committee on rules and administration and173.34two members of the house appointed by the speaker of the house;173.35(2) representatives of county recorders and otherthree 173.36 county government officials appointed by the Association of 174.1 County Officers, including one county recorder, one county 174.2 auditor, and one county treasurer; 174.3 (2) the commissioner of administration or the designee of 174.4 the commissioner; 174.5 (3) seven members from the private sector appointed by the 174.6 chair, including representatives of: 174.7 (i) real estate attorneys, real estate agents, and public 174.8 and private land surveyors; 174.9(4) representatives of(ii) title companies, mortgage 174.10 companies, and other real estate lenders; and 174.11(5) a representative of the Minnesota historical society174.12and other state and local government archivists;174.13(6)(iii) technical and industry experts in electronic 174.14 commerce and electronic records management and preservation; and 174.15(7) representatives of federal government-sponsored174.16enterprises active in the real estate industry;174.17(8) the commissioner of revenue; and174.18(9) other members appointed by the secretary of state174.19 (4) a representative selected by the Minnesota Historical 174.20 Society. 174.21 (b) The task force may refer items to subcommittees. The 174.22 chair shall appoint the membership of a subcommittee. An 174.23 individual may be appointed to serve on a subcommittee without 174.24 serving on the task force. 174.25 (c) Any member of the task force representing a 174.26 jurisdiction or private interest receiving funding from the task 174.27 force in any way must resign from the task force and be replaced 174.28 by the member's appointing authority. 174.29 Sec. 14. Laws 2000, chapter 391, section 1, subdivision 2, 174.30 as amended by Laws 2002, chapter 365, section 5, is amended to 174.31 read: 174.32 Subd. 2. [STUDY AND RECOMMENDATIONS.] The task force shall 174.33 study and make recommendations regarding implementation of a 174.34 system for electronic filing and recording of real estate 174.35 documents and shall consider: 174.36 (1) technology and computer needs; 175.1 (2) legal issues such as authenticity, security, timing and 175.2 priority of recordings, and the relationship between electronic 175.3 and paper recording systems; 175.4 (3) cost-effectiveness of electronic recording systems; 175.5 (4) timetable and plan for implementing an electronic 175.6 recording system, considering types of documents and entities 175.7 using the system and volume of recordings; 175.8 (5) permissive versus mandatory systems; and 175.9 (6) other relevant issues identified by the task force. 175.10 The task force shall submit a report to the legislature by 175.11 January 15, 2001, outlining a proposed work plan and budget for 175.12 consideration by the legislature. By January 15, 2005, the task 175.13 force shall provide an updated report to the legislature 175.14 containing a revised work plan and budget. The task force 175.15 expires June 30,20042007. 175.16 Sec. 15. Laws 2001, First Special Session chapter 10, 175.17 article 2, section 77, the effective date, as amended by Laws 175.18 2002, chapter 365, section 7, is amended to read: 175.19 [EFFECTIVE DATE.] This section is effective only between 175.20 August 1, 2001, and June 30,20042007. 175.21 Sec. 16. Laws 2002, chapter 365, section 9, is amended to 175.22 read: 175.23 Sec. 9. [EFFECTIVE DATES AND APPLICATION.] 175.24 The amendments made by sections 3 and 4 are effective until 175.25 June 30,20042007, for documents last acknowledged ten or more 175.26 days after the date of final enactment of this act; or filed 45 175.27 days or more after the date of final enactment. Sections 6 to 8 175.28 are effective the day following final enactment. 175.29 Sec. 17. Laws 2003, First Special Session chapter 1, 175.30 article 2, section 123, is amended to read: 175.31 Sec. 123. [REAL ESTATE FILING SURCHARGE.] 175.32 All funds collected during the fiscal year ending June 30, 175.33 2007, the fiscal year ending June 30, 2006, the fiscal year 175.34 ending June 30, 2005, the fiscal year ending June 30, 2004, and 175.35 funds collected in the fiscal year ending June 30, 2003, that 175.36 carry forward into the fiscal year ending June 30, 2004, 176.1 pursuant to the additional 50-cent surcharges imposed by Laws 176.2 2001, First Special Session chapter 10, article 2, section 77, 176.3 and Laws 2002, chapter 365, as amended by this act, are 176.4 appropriated to the legislative coordinating commission for the 176.5 real estate task force established by Laws 2000, chapter 391, 176.6 for the purposes set forth in Laws 2001, First Special Session 176.7 chapter 10, article 2, sections 98 to 101. $25,000 in each 176.8 fiscal year from those funds are to be retained by the 176.9 legislative coordinating commission for the services described 176.10 in Laws 2001, First Special Session chapter 10, article 2, 176.11 section 99. 176.12 Sec. 18. [TASK FORCE TRANSITION.] 176.13 The members of the electronic real estate document task 176.14 force created in Laws 2000, chapter 391, section 1, who are 176.15 serving on the task force on the effective date of this act 176.16 shall end their service on that date unless reappointed or 176.17 designated under section 13. 176.18 Sec. 19. [GAMING MACHINES; IN-LIEU TAX; CONTRACTS.] 176.19 If a bill providing for gaming machines at a racetrack is 176.20 enacted in a 2004 regular or special session, then, 176.21 notwithstanding any other law to the contrary: 176.22 (1) from July 1, 2005, to June 30, 2007, the state lottery 176.23 must on or before the 20th day of each month transmit to the 176.24 commissioner of revenue an amount equal to at least the adjusted 176.25 gross revenue from the operation of gaming machines multiplied 176.26 by 36.7 percent; and 176.27 (2) from July 1, 2005, to June 30, 2007, contracts for the 176.28 location of gaming machines must provide for compensation to the 176.29 racetrack in an amount equal to 48.3 percent of adjusted gross 176.30 gaming machine revenue. 176.31 [EFFECTIVE DATE.] This section is effective at the same 176.32 time as any bill that provides for gaming machines at a 176.33 racetrack and is enacted in a 2004 regular or special session. 176.34 Sec. 20. [FUNDS TRANSFER.] 176.35 Subdivision 1. [BUDGET RESERVE TO CASH FLOW.] On July 2, 176.36 2004, the commissioner of finance shall transfer $350,000,000 177.1 from the general fund budget reserve account under Minnesota 177.2 Statutes, section 16A.152, subdivision 1a, to the cash flow 177.3 reserve account under Minnesota Statutes, section 16A.152, 177.4 subdivision 1. 177.5 Subd. 2. [GENERAL FUND TO BUDGET RESERVE.] On or before 177.6 July 2, 2004, the commissioner of finance shall transfer 177.7 $8,566,000 from the general fund to the budget reserve account 177.8 under Minnesota Statutes, section 16A.152, subdivision 1a. 177.9 Sec. 21. [FEDERAL FUNDS.] 177.10 The first $167,000,000 of the general fund appropriation in 177.11 fiscal year 2004 for general education aid is from general 177.12 revenue sharing with states and their local governments provided 177.13 to Minnesota in the 2003 Jobs and Growth Tax Relief 177.14 Reconciliation Act. 177.15 Sec. 22. [APPROPRIATIONS.] 177.16 Subdivision 1. [TAX COMPLIANCE INITIATIVE.] (a) $3,678,000 177.17 is appropriated to the commissioner of revenue in fiscal year 177.18 2005 for additional activities to identify and collect tax 177.19 liabilities from individuals and businesses that currently do 177.20 not pay all taxes owed. $800,000 of this amount is for 177.21 corporate compliance related to foreign operating corporations. 177.22 $120,000 of this amount is considered a onetime appropriation. 177.23 The base for this additional activity is $3,558,000 per year. 177.24 (b) This initiative is expected to result in new general 177.25 fund revenues of $16,000,000 for the biennium ending June 30, 177.26 2005, and $16,000,000 annually thereafter. 177.27 (c) The commissioner must provide written reports to the 177.28 chairs of the house Taxes and senate Taxes Committees, and to 177.29 the chairs of the house and senate committees with jurisdiction 177.30 over state government finance, in compliance with Minnesota 177.31 Statutes, sections 3.195 and 3.197, by March 1, 2005, and 177.32 January 15, 2006. The reports must address the following 177.33 performance indicators: 177.34 (1) the number of corporations noncompliant with the 177.35 corporate tax system each year and the percentage and dollar 177.36 amounts of valid tax liabilities collected; 178.1 (2) the number of businesses noncompliant with the sales 178.2 and use tax system and the percentage and dollar amounts of the 178.3 valid tax liabilities collected; and 178.4 (3) the number of insurers, agents, or others that are 178.5 noncompliant with insurance tax statutes and cases resolved and 178.6 the percentage and dollar amounts of valid tax liabilities 178.7 collected. 178.8 The reports must also identify base level expenditures and 178.9 staff positions related to compliance and audit activities, 178.10 including baseline information as of January 1, 2002. The 178.11 reports must provide this information at the budget activity 178.12 level. 178.13 Subd. 2. [PROPERTY TAX REFUND STUDY.] $50,000 is 178.14 appropriated from the general fund for fiscal year 2005 to the 178.15 commissioner of revenue for the study of the percentage that 178.16 property taxes constitute of rent. This is a onetime 178.17 appropriation and is not added to the base. 178.18 Subd. 3. [INCOME AND HOME VALUE DATASET.] $50,000 is 178.19 appropriated from the general fund for fiscal year 2005 to the 178.20 commissioner of revenue to prepare a dataset linking homeowners' 178.21 incomes and the estimated market values of their homes. The 178.22 commissioner shall prepare the dataset using Minnesota tax data 178.23 gathered directly from taxpayers, counties, and sources other 178.24 than the Internal Revenue Service. This is a onetime 178.25 appropriation and is not added to the base. 178.26 Sec. 23. [EFFECTIVE DATE.] 178.27 Sections 13 to 18 are effective the day following final 178.28 enactment. 178.29 ARTICLE 10 178.30 PROPERTY TAXES TECHNICAL 178.31 Section 1. Minnesota Statutes 2003 Supplement, section 178.32 4A.02, is amended to read: 178.33 4A.02 [STATE DEMOGRAPHER.] 178.34 (a) The director shall appoint a state demographer. The 178.35 demographer must be professionally competent in demography and 178.36 must possess demonstrated ability based upon past performance. 179.1 (b) The demographer shall: 179.2 (1) continuously gather and develop demographic data 179.3 relevant to the state; 179.4 (2) design and test methods of research and data 179.5 collection; 179.6 (3) periodically prepare population projections for the 179.7 state and designated regions and periodically prepare 179.8 projections for each county or other political subdivision of 179.9 the state as necessary to carry out the purposes of this 179.10 section; 179.11 (4) review, comment on, and prepare analysis of population 179.12 estimates and projections made by state agencies, political 179.13 subdivisions, other states, federal agencies, or nongovernmental 179.14 persons, institutions, or commissions; 179.15 (5) serve as the state liaison with the United States 179.16 Bureau of the Census, coordinate state and federal demographic 179.17 activities to the fullest extent possible, and aid the 179.18 legislature in preparing a census data plan and form for each 179.19 decennial census; 179.20 (6) compile an annual study of population estimates on the 179.21 basis of county, regional, or other political or geographical 179.22 subdivisions as necessary to carry out the purposes of this 179.23 section and section 4A.03; 179.24 (7) by January 1 of each year, issue a report to the 179.25 legislature containing an analysis of the demographic 179.26 implications of the annual population study and population 179.27 projections; 179.28 (8) prepare maps for all counties in the state, all 179.29 municipalities with a population of 10,000 or more, and other 179.30 municipalities as needed for census purposes, according to scale 179.31 and detail recommended by the United States Bureau of the 179.32 Census, with the maps of cities showing precinct boundaries; 179.33 (9) prepare an estimate of population and of the number of 179.34 households for each governmental subdivision for which the 179.35 Metropolitan Council does not prepare an annual estimate, and 179.36 convey the estimates to the governing body of each political 180.1 subdivision byMayJune 1 of each year; 180.2 (10) direct, under section 414.01, subdivision 14, and 180.3 certify population and household estimates of annexed or 180.4 detached areas of municipalities or towns after being notified 180.5 of the order or letter of approval by the director; 180.6 (11) prepare, for any purpose for which a population 180.7 estimate is required by law or needed to implement a law, a 180.8 population estimate of a municipality or town whose population 180.9 is affected by action under section 379.02 or 414.01, 180.10 subdivision 14; and 180.11 (12) prepare an estimate of average household size for each 180.12 statutory or home rule charter city with a population of 2,500 180.13 or more byMayJune 1 of each year. 180.14 (c) A governing body may challenge an estimate made under 180.15 paragraph (b) by filing their specific objections in writing 180.16 with the state demographer by June1024. If the challenge does 180.17 not result in an acceptable estimateby June 24, the governing 180.18 body may have a special census conducted by the United States 180.19 Bureau of the Census. The political subdivision must notify the 180.20 state demographer by July 1 of its intent to have the special 180.21 census conducted. The political subdivision must bear all costs 180.22 of the special census. Results of the special census must be 180.23 received by the state demographer by the next April 15 to be 180.24 used in that year'sMayJune 1 estimate to the political 180.25 subdivision under paragraph (b). 180.26 (d) The state demographer shall certify the estimates of 180.27 population and number of households to the commissioner of 180.28 revenue by July 15 each year, including any estimates still 180.29 under objection. No changes in population or household 180.30 estimates made after July 15 in an aid calculation year shall be 180.31 considered in determining aids under sections 477A.011 to 180.32 477A.014. Clerical errors in certification or use of the 180.33 estimates and counts established as of July 15 in the aid 180.34 calculation year are subject to correction under section 180.35 477A.014. 180.36 [EFFECTIVE DATE.] This section is effective the day 181.1 following final enactment. 181.2 Sec. 2. Minnesota Statutes 2003 Supplement, section 181.3 168A.05, subdivision 1a, is amended to read: 181.4 Subd. 1a. [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 181.5 PAYMENT.] In the case of a manufactured home as defined in 181.6 section 327.31, subdivision 6, the department shall not issue a 181.7 certificate of title unless the application under section 181.8 168A.04 is accompanied with a statement from the county auditor 181.9 or county treasurer where the manufactured home is presently 181.10 located, stating that all manufactured home personal property 181.11 taxes levied on the unit in the name of the current owner at the 181.12 time of transfer have been paid. For this purpose, manufactured 181.13 home personal property taxes are treated as levied on January 1 181.14 of the payable year. 181.15 [EFFECTIVE DATE.] This section is effective the day 181.16 following final enactment. 181.17 Sec. 3. Minnesota Statutes 2002, section 270B.12, 181.18 subdivision 9, is amended to read: 181.19 Subd. 9. [COUNTY ASSESSORS; HOMESTEAD APPLICATION, 181.20 DETERMINATION, AND INCOME TAX STATUS.] (a) If, as a result of an 181.21 audit, the commissioner determines that a person is a Minnesota 181.22 nonresident or part-year resident for income tax purposes, the 181.23 commissioner may disclose the person's name, address, and Social 181.24 Security number to the assessor of any political subdivision in 181.25 the state, when there is reason to believe that the person may 181.26 have claimed or received homestead property tax benefits for a 181.27 corresponding assessment year in regard to property apparently 181.28 located in the assessor's jurisdiction. 181.29 (b) To the extent permitted by section 273.124, subdivision 181.30 1, paragraph (a), the Department of Revenue may verify to a 181.31 county assessor whether an individual who is requesting or 181.32 receiving a homestead classification has filed a Minnesota 181.33 income tax return as a resident for the most recent taxable year 181.34 for which the information is available. 181.35 [EFFECTIVE DATE.] This section is effective the day 181.36 following final enactment. 182.1 Sec. 4. Minnesota Statutes 2002, section 272.01, 182.2 subdivision 2, is amended to read: 182.3 Subd. 2. (a) When any real or personal property which is 182.4 exempt from ad valorem taxes, and taxes in lieu thereof, is 182.5 leased, loaned, or otherwise made available and used by a 182.6 private individual, association, or corporation in connection 182.7 with a business conducted for profit, there shall be imposed a 182.8 tax, for the privilege of so using or possessing such real or 182.9 personal property, in the same amount and to the same extent as 182.10 though the lessee or user was the owner of such property. 182.11 (b) The tax imposed by this subdivision shall not apply to: 182.12 (1) property leased or used as a concession in or relative 182.13 to the use in whole or part of a public park, market, 182.14 fairgrounds, port authority, economic development authority 182.15 established under chapter 469, municipal auditorium, municipal 182.16 parking facility, municipal museum, or municipal stadium; 182.17 (2) property of an airport owned by a city, town, county, 182.18 or group thereof which is: 182.19 (i) leased to or used by any person or entity including a 182.20 fixed base operator; and 182.21 (ii) used as a hangar for the storage or repair of aircraft 182.22 or to provide aviation goods, services, or facilities to the 182.23 airport or general public; 182.24 the exception from taxation provided in this clause does not 182.25 apply to: 182.26 (i) property located at an airport owned or operated by the 182.27 Metropolitan Airports Commission or by a city of over 50,000 182.28 population according to the most recent federal census or such a 182.29 city's airport authority; 182.30 (ii) hangars leased by a private individual, association, 182.31 or corporation in connection with a business conducted for 182.32 profit other than an aviation-related business; or 182.33 (iii) facilities leased by a private individual, 182.34 association, or corporation in connection with a business for 182.35 profit, that consists of a major jet engine repair facility 182.36 financed, in whole or part, with the proceeds of state bonds and 183.1 located in a tax increment financing district; 183.2 (3) property constituting or used as a public pedestrian 183.3 ramp or concourse in connection with a public airport;or183.4 (4) property constituting or used as a passenger check-in 183.5 area or ticket sale counter, boarding area, or luggage claim 183.6 area in connection with a public airport but not the airports 183.7 owned or operated by the Metropolitan Airports Commission or 183.8 cities of over 50,000 population or an airport authority 183.9 therein. Real estate owned by a municipality in connection with 183.10 the operation of a public airport and leased or used for 183.11 agricultural purposes is not exempt; 183.12 (5) property leased, loaned, or otherwise made available to 183.13 a private individual, corporation, or association under a 183.14 cooperative farming agreement made pursuant to section 97A.135; 183.15 or 183.16 (6) property leased, loaned, or otherwise made available to 183.17 a private individual, corporation, or association under section 183.18 272.68, subdivision 4. 183.19 (c) Taxes imposed by this subdivision are payable as in the 183.20 case of personal property taxes and shall be assessed to the 183.21 lessees or users of real or personal property in the same manner 183.22 as taxes assessed to owners of real or personal property, except 183.23 that such taxes shall not become a lien against the property. 183.24 When due, the taxes shall constitute a debt due from the lessee 183.25 or user to the state, township, city, county, and school 183.26 district for which the taxes were assessed and shall be 183.27 collected in the same manner as personal property taxes. If 183.28 property subject to the tax imposed by this subdivision is 183.29 leased or used jointly by two or more persons, each lessee or 183.30 user shall be jointly and severally liable for payment of the 183.31 tax. 183.32 (d) The tax on real property of the state or any of its 183.33 political subdivisions that is leased by a private individual, 183.34 association, or corporation and becomes taxable under this 183.35 subdivision or other provision of law must be assessed and 183.36 collected as a personal property assessment. The taxes do not 184.1 become a lien against the real property. 184.2 [EFFECTIVE DATE.] This section is effective the day 184.3 following final enactment. 184.4 Sec. 5. Minnesota Statutes 2002, section 272.02, 184.5 subdivision 1a, is amended to read: 184.6 Subd. 1a. [LIMITATIONS ON EXEMPTIONS.] The exemptions 184.7 granted by subdivision 1 are subject to the limits contained in 184.8 the other subdivisions of this section, section 272.025,or184.9273.13, subdivision 25, paragraph (c), clause (1) or (2), or184.10paragraph (d), clause (2)and all other provisions of applicable 184.11 law. 184.12 [EFFECTIVE DATE.] This section is effective the day 184.13 following final enactment. 184.14 Sec. 6. Minnesota Statutes 2002, section 272.02, 184.15 subdivision 7, is amended to read: 184.16 Subd. 7. [INSTITUTIONS OF PUBLIC CHARITY.] Institutions of 184.17 purely public charity are exemptexcept parcels of property184.18containing structures and the structures described in section184.19273.13, subdivision 25, paragraph (e), other than those that184.20qualify for exemption under subdivision 26. In determining 184.21 whether rental housing property qualifies for exemption under 184.22 this subdivision, the following are not gifts or donations to 184.23 the owner of the rental housing: 184.24 (1) rent assistance provided by the government to or on 184.25 behalf of tenants, and 184.26 (2) financing assistance or tax credits provided by the 184.27 government to the owner on condition that specific units or a 184.28 specific quantity of units be set aside for persons or families 184.29 with certain income characteristics. 184.30 [EFFECTIVE DATE.] This section is effective for taxes 184.31 payable in 2004 and thereafter. 184.32 Sec. 7. Minnesota Statutes 2002, section 272.02, is 184.33 amended by adding a subdivision to read: 184.34 Subd. 68. [PROPERTY SUBJECT TO TACONITE PRODUCTION TAX OR 184.35 NET PROCEEDS TAX.] (a) Except for mineral interests taxed under 184.36 section 273.165, and except for lands taxed under section 185.1 298.26, real and personal property described in section 298.25 185.2 is exempt to the extent the tax on taconite and iron sulphides 185.3 under section 298.24 is described in section 298.25 as being in 185.4 lieu of other taxes on such property. This exemption applies 185.5 for taxes payable in each year that the tax under section 298.24 185.6 is payable with respect to such property. 185.7 (b) Except for mineral interests taxed under section 185.8 273.165, deposits of mineral, metal, or energy resources the 185.9 mining of which is subject to taxation under section 298.015 are 185.10 exempt. This exemption applies for taxes payable in each year 185.11 that the tax under section 298.015 is payable with respect to 185.12 such property. 185.13 [EFFECTIVE DATE.] This section is effective the day 185.14 following final enactment. 185.15 Sec. 8. Minnesota Statutes 2002, section 272.02, is 185.16 amended by adding a subdivision to read: 185.17 Subd. 69. [RELIGIOUS CORPORATIONS.] Personal and real 185.18 property that a religious corporation, formed under section 185.19 317A.909, necessarily uses for a religious purpose is exempt to 185.20 the extent provided in section 317A.909, subdivision 3. 185.21 [EFFECTIVE DATE.] This section is effective the day 185.22 following final enactment. 185.23 Sec. 9. Minnesota Statutes 2002, section 272.02, is 185.24 amended by adding a subdivision to read: 185.25 Subd. 70. [CHILDREN'S HOMES.] Personal and real property 185.26 owned by a corporation formed under section 317A.907 is exempt 185.27 to the extent provided in section 317A.907, subdivision 7. 185.28 [EFFECTIVE DATE.] This section is effective the day 185.29 following final enactment. 185.30 Sec. 10. Minnesota Statutes 2002, section 272.02, is 185.31 amended by adding a subdivision to read: 185.32 Subd. 71. [HOUSING AND REDEVELOPMENT AUTHORITY AND TRIBAL 185.33 HOUSING AUTHORITY PROPERTY.] Property owned by a housing and 185.34 redevelopment authority described in chapter 469, or by a 185.35 designated housing authority described in section 469.040, 185.36 subdivision 5, is exempt to the extent provided in chapter 469. 186.1 [EFFECTIVE DATE.] This section is effective the day 186.2 following final enactment. 186.3 Sec. 11. Minnesota Statutes 2002, section 273.124, 186.4 subdivision 8, is amended to read: 186.5 Subd. 8. [HOMESTEAD OWNED BY OR LEASED TO FAMILY FARM 186.6 CORPORATION, JOINT FARM VENTURE, LIMITED LIABILITY COMPANY, OR 186.7 PARTNERSHIP.] (a) Each family farm corporation, each; each joint 186.8 family farm venture,; and each limited liability company, and186.9eachor partnershipoperatingwhich operates a family farm; is 186.10 entitled to class 1b under section 273.13, subdivision 22, 186.11 paragraph (b), or class 2a assessment for one homestead occupied 186.12 by a shareholder, member, or partner thereof who is residing on 186.13 the land, and actively engaged in farming of the land owned by 186.14 the family farm corporation, joint family farm venture, limited 186.15 liability company, or partnershipoperating a family farm. 186.16 Homestead treatment applies even if legal title to the property 186.17 is in the name of the family farm corporation, joint family farm 186.18 venture, limited liability company, or partnershipoperating the186.19family farm, and not in the name of the person residing on it. 186.20 "Family farm corporation," "family farm," and "partnership 186.21 operating a family farm" have the meanings given in section 186.22 500.24, except that the number of allowable shareholders, 186.23 members, or partners under this subdivision shall not exceed 186.24 12. "Limited liability company" has the meaning contained in 186.25 sections 322B.03, subdivision 28, and 500.24, subdivision 2, 186.26 paragraphs (l) and (m). "Joint family farm venture" means a 186.27 cooperative agreement among two or more farm enterprises 186.28 authorized to operate a family farm under section 500.24. 186.29 (b) In addition to property specified in paragraph (a), any 186.30 other residences owned by family farm corporations, joint family 186.31 farm ventures, limited liability companies, or partnerships 186.32operating a family farmdescribed in paragraph (a) which are 186.33 located on agricultural land and occupied as homesteads by its 186.34 shareholders, members, or partners who are actively engaged in 186.35 farming on behalf of that corporation, joint farm venture, 186.36 limited liability company, or partnership must also be assessed 187.1 as class 2a property or as class 1b property under section 187.2 273.13. 187.3 (c) Agricultural property that is owned by a member, 187.4 partner, or shareholder of a family farm corporation or joint 187.5 family farm venture, limited liability company operating a 187.6 family farm, or by a partnership operating a family farm and 187.7 leased to the family farm corporation, limited liability 187.8 company,orpartnershipoperating a family farm, or joint farm 187.9 venture, as defined in paragraph (a), is eligible for 187.10 classification as class 1b or class 2a under section 273.13, if 187.11 the owner is actually residing on the property, and is actually 187.12 engaged in farming the land on behalf of that corporation, joint 187.13 farm venture, limited liability company, or partnership. This 187.14 paragraph applies without regard to any legal possession rights 187.15 of the family farm corporation, joint family farm venture, 187.16 limited liability company, or partnershipoperating a family187.17farmunder the lease. 187.18 [EFFECTIVE DATE.] This section is effective the day 187.19 following final enactment. 187.20 Sec. 12. Minnesota Statutes 2002, section 273.19, 187.21 subdivision 1a, is amended to read: 187.22 Subd. 1a. For purposes of this section, a lease includes 187.23 any agreement, except a cooperative farming agreement pursuant 187.24 to section 97A.135, subdivision 3, or a lease executed pursuant 187.25 to section 272.68, subdivision 4, permitting a nonexempt person 187.26 or entity to use the property, regardless of whether the 187.27 agreement is characterized as a lease. A lease has a "term of 187.28 at least one year" if the term is for a period of less than one 187.29 year and the lease permits the parties to renew the lease 187.30 without requiring that similar terms for leasing the property 187.31 will be offered to other applicants or bidders through a 187.32 competitive bidding or other form of offer to potential lessees 187.33 or users. 187.34 [EFFECTIVE DATE.] This section is effective the day 187.35 following final enactment. 187.36 Sec. 13. Minnesota Statutes 2002, section 274.14, is 188.1 amended to read: 188.2 274.14 [LENGTH OF SESSION; RECORD.] 188.3The county board of equalization or the special board of188.4equalization appointed by it shall meet during the last ten188.5meeting days in June. For this purpose, "meeting days" are188.6defined as any day of the week excluding Saturday and Sunday.188.7 The board may meet on any ten consecutive meeting days in June, 188.8 after the second Friday in June, if. The actual meeting dates 188.9aremust be contained on the valuation notices mailed to each 188.10 property owner in the countyunderas provided in section 188.11 273.121. For this purpose, "meeting days" is defined as any day 188.12 of the week excluding Saturday and Sunday. No action taken by 188.13 the county board of review after June 30 is valid, except for 188.14 corrections permitted in sections 273.01 and 274.01. The county 188.15 auditor shall keep an accurate record of the proceedings and 188.16 orders of the board. The record must be published like other 188.17 proceedings of county commissioners. A copy of the published 188.18 record must be sent to the commissioner of revenue, with the 188.19 abstract of assessment required by section 274.16. 188.20 [EFFECTIVE DATE.] This section is effective the day 188.21 following final enactment. 188.22 Sec. 14. Minnesota Statutes 2002, section 275.065, 188.23 subdivision 1a, is amended to read: 188.24 Subd. 1a. [OVERLAPPING JURISDICTIONS.] In the case of a 188.25 taxing authority lying in two or more counties, the home county 188.26 auditor shall certify the proposed levy and the proposed local 188.27 tax rate to the other county auditor bySeptember 20October 5. 188.28 The home county auditor must estimate the levy or rate in 188.29 preparing the notices required in subdivision 3, if the other 188.30 county has not certified the appropriate information. If 188.31 requested by the home county auditor, the other county auditor 188.32 must furnish an estimate to the home county auditor. 188.33 [EFFECTIVE DATE.] This section is effective the day 188.34 following final enactment. 188.35 Sec. 15. Minnesota Statutes 2002, section 275.07, 188.36 subdivision 1, is amended to read: 189.1 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 189.2 provided under paragraph (b), the taxes voted by cities, 189.3 counties, school districts, and special districts shall be 189.4 certified by the proper authorities to the county auditor on or 189.5 before five working days after December 20 in each year. A town 189.6 must certify the levy adopted by the town board to the county 189.7 auditor by September 15 each year. If the town board modifies 189.8 the levy at a special town meeting after September 15, the town 189.9 board must recertify its levy to the county auditor on or before 189.10 five working days after December 20.The taxes certified shall189.11not be reduced by the county auditor by the aid received under189.12section 273.1398, subdivision 2, but shall be reduced by the189.13county auditor by the aid received under section 273.1398,189.14subdivision 3.If a city, town, county, school district, or 189.15 special district fails to certify its levy by that date, its 189.16 levy shall be the amount levied by it for the preceding year. 189.17 (b)(i) The taxes voted by counties under sections 103B.241, 189.18 103B.245, and 103B.251 shall be separately certified by the 189.19 county to the county auditor on or before five working days 189.20 after December 20 in each year. The taxes certified shall not 189.21 be reduced by the county auditor by the aid received under 189.22 section 273.1398, subdivisions 2 and 3. If a county fails to 189.23 certify its levy by that date, its levy shall be the amount 189.24 levied by it for the preceding year. 189.25 (ii) For purposes of the proposed property tax notice under 189.26 section 275.065 and the property tax statement under section 189.27 276.04, for the first year in which the county implements the 189.28 provisions of this paragraph, the county auditor shall reduce 189.29 the county's levy for the preceding year to reflect any amount 189.30 levied for water management purposes under clause (i) included 189.31 in the county's levy. 189.32 [EFFECTIVE DATE.] This section is effective the day 189.33 following final enactment. 189.34 Sec. 16. Minnesota Statutes 2002, section 275.07, 189.35 subdivision 4, is amended to read: 189.36 Subd. 4. [REPORT TO COMMISSIONER.] (a) On or before 190.1 October 8 of each year, the county auditor shall report to the 190.2 commissioner of revenue the proposed levy certified by local 190.3 units of government under section 275.065, subdivision 1. If 190.4 any taxing authorities have notified the county auditor that 190.5 they are in the process of negotiating an agreement for sharing, 190.6 merging, or consolidating services but that when the proposed 190.7 levy was certified under section 275.065, subdivision 1c, the 190.8 agreement was not yet finalized, the county auditor shall supply 190.9 that information to the commissioner when filing the report 190.10 under this section and shall recertify the affected levies as 190.11 soon as practical after October 10. 190.12 (b) On or before January 15 of each year, the county 190.13 auditor shall report to the commissioner of revenue the final 190.14 levy certified by local units of government under subdivision 1. 190.15 (c) The levies must be reported in the manner prescribed by 190.16 the commissioner.The reports must show a total levy and the190.17amount of each special levy.190.18 [EFFECTIVE DATE.] This section is effective the day 190.19 following final enactment. 190.20 Sec. 17. Minnesota Statutes 2003 Supplement, section 190.21 276.112, is amended to read: 190.22 276.112 [STATE PROPERTY TAXES; COUNTY TREASURER.] 190.23 On or before January 25 each year, for the period ending 190.24 December 31 of the prior year, and on or before two business 190.25 days before June2930 each year, for the period ending on the 190.26 most recent settlement day determined in section 276.09, and on 190.27 or before December 2 each year, for the period ending November 190.28 20, the county treasurer must make full settlement with the 190.29 county auditor according to sections 276.09, 276.10, and 276.111 190.30 for all receipts of state property taxes levied under section 190.31 275.025, and must transmit those receipts to the commissioner of 190.32 revenue by electronic means. 190.33 [EFFECTIVE DATE.] This section is effective the day 190.34 following final enactment. 190.35 Sec. 18. Minnesota Statutes 2002, section 282.016, is 190.36 amended to read: 191.1 282.016 [PROHIBITED PURCHASERS.] 191.2No(a) A county auditor, county treasurer, county attorney, 191.3 court administrator of the district court,orcounty assessor 191.4or, supervisor of assessments,ordeputy or clerk or an employee 191.5 of such officer,and noa commissioner for tax-forfeited lands 191.6 or an assistant to such commissionermay, must not become a 191.7 purchaser, either personally or as an agent or attorney for 191.8 another person, of the properties offered for sale under the 191.9 provisions of this chapter, either personally, or as agent or191.10attorney for any other person, except thatin the county for 191.11 which the person performs duties. A person prohibited from 191.12 purchasing property under this section must not directly or 191.13 indirectly have another person purchase it on behalf of the 191.14 prohibited purchaser for the prohibited purchaser's benefit or 191.15 gain. 191.16 (b) Notwithstanding paragraph (a), such officer, deputy, 191.17court administratorclerk, or employee or commissioner for 191.18 tax-forfeited lands or assistant to such commissioner may (1) 191.19 purchase lands owned by that official at the time the state 191.20 became the absolute owner thereof or (2) bid upon and purchase 191.21 forfeited property offered for sale under the alternate sale 191.22 procedure described in section 282.01, subdivision 7a. 191.23 [EFFECTIVE DATE.] This section is effective the day 191.24 following final enactment. 191.25 Sec. 19. Minnesota Statutes 2002, section 282.21, is 191.26 amended to read: 191.27 282.21 [FORM OF CONVEYANCE.] 191.28 When any sale has been made under sections 282.14 to 191.29 282.22, upon payment in full of the purchase price, appropriate 191.30 conveyance in fee in such form as may be prescribed by the 191.31 attorney general shall be issued by the commissioner of finance 191.32 to the purchaser or the purchaser's assigns and this conveyance 191.33 shall have the force and effect of a patent from the state. 191.34 [EFFECTIVE DATE.] This section is effective the day 191.35 following final enactment. 191.36 Sec. 20. Minnesota Statutes 2002, section 282.224, is 192.1 amended to read: 192.2 282.224 [FORM OF CONVEYANCE.] 192.3 When any sale has been made under sections 282.221 to 192.4 282.226, upon payment in full of the purchase price, appropriate 192.5 conveyance in fee, in such form as may be prescribed by the 192.6 attorney general, shall be issued by the commissioner of natural 192.7 resources to the purchaser or the purchaser's assignee, and the 192.8 conveyance shall have the force and effect of a patent from the 192.9 state. 192.10 [EFFECTIVE DATE.] This section is effective the day 192.11 following final enactment. 192.12 Sec. 21. Minnesota Statutes 2002, section 282.301, is 192.13 amended to read: 192.14 282.301 [RECEIPTS FOR PAYMENTS.] 192.15 When any sale has been made under sections 282.012 and 192.16 282.241 to 282.324, the purchaser shall receive from the county 192.17 auditor at the time of repurchase a receipt, in such form as may 192.18 be prescribed by the attorney general. When the purchase price 192.19 of a parcel of land shall be paid in full, the following facts 192.20 shall be certified by the county auditor to the commissioner of 192.21 revenue of the state of Minnesota: the description of land, the 192.22 date of sale, the name of the purchaser or the purchaser's 192.23 assignee, and the date when the final installment of the 192.24 purchase price was paid. Upon payment in full of the purchase 192.25 price, the purchaser or the assignee shall receive a quitclaim 192.26 deed from the state, to be executed by the commissioner of 192.27 revenue. The deed must be sent to the county auditor who shall 192.28 have it recorded before it is forwarded to the purchaser. 192.29 Failure to make any payment herein required shall constitute 192.30 default and upon such default and cancellation in accord with 192.31 section 282.40, the right, title and interest of the purchaser 192.32 or the purchaser's heirs, representatives, or assigns in such 192.33 parcel shall terminate. 192.34 [EFFECTIVE DATE.] This section is effective the day 192.35 following final enactment. 192.36 Sec. 22. [473.24] [POPULATION ESTIMATES.] 193.1 (a) The Metropolitan Council shall prepare an estimate of 193.2 population and of the number of households for each city and 193.3 town in the metropolitan area annually and convey the estimates 193.4 to the governing body of each city or town by June 1 each year. 193.5 In the case of a city or town that is located partly within and 193.6 partly without the metropolitan area, the Metropolitan Council 193.7 shall estimate the proportion of the total population and number 193.8 of households that reside within the area. The Metropolitan 193.9 Council may prepare an estimate of the population and of the 193.10 number of households for any other political subdivision located 193.11 in the metropolitan area. 193.12 (b) A governing body may challenge an estimate made under 193.13 this section by filing its specific objections in writing with 193.14 the Metropolitan Council by June 24. If the challenge does not 193.15 result in an acceptable estimate, the governing body may have a 193.16 special census conducted by the United States Bureau of the 193.17 Census. The political subdivision must notify the Metropolitan 193.18 Council on or before July 1 of its intent to have the special 193.19 census conducted. The political subdivision must bear all costs 193.20 of the special census. Results of the special census must be 193.21 received by the Metropolitan Council by the next April 15 to be 193.22 used in that year's June 1 estimate under this section. The 193.23 Metropolitan Council shall certify the estimates of population 193.24 and number of households to the state demographer and to the 193.25 commissioner of revenue by July 15 each year, including any 193.26 estimates still under objection. 193.27 (c) No changes in population or household estimates after 193.28 July 15 in an aid calculation year shall be considered in 193.29 determining aids under sections 477A.011 to 477A.014. Clerical 193.30 errors in certification or use of the estimates and counts 193.31 established as of July 15 in the aid calculation year are 193.32 subject to correction under section 477A.014. 193.33 [EFFECTIVE DATE.] This section is effective the day 193.34 following final enactment. 193.35 Sec. 23. Minnesota Statutes 2002, section 473F.02, 193.36 subdivision 7, is amended to read: 194.1 Subd. 7. [POPULATION.] "Population" means the most recent 194.2 estimate of the population of a municipality made by the 194.3 Metropolitan Council under section 473.24 and filed with the 194.4 commissioner of revenue as of July115 of the year in which a 194.5 municipality's distribution net tax capacity is calculated.The194.6council shall annually estimate the population of each194.7municipality as of a date which it determines and, in the case194.8of a municipality which is located partly within and partly194.9without the area, the proportion of the total which resides194.10within the area, and shall promptly thereafter file its194.11estimates with the commissioner of revenue.194.12 [EFFECTIVE DATE.] This section is effective the day 194.13 following final enactment. 194.14 Sec. 24. Minnesota Statutes 2003 Supplement, section 194.15 477A.011, subdivision 36, is amended to read: 194.16 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 194.17 provided in this subdivision, "city aid base" is zero. 194.18 (b) The city aid base for any city with a population less 194.19 than 500 is increased by $40,000 for aids payable in calendar 194.20 year 1995 and thereafter, and the maximum amount of total aid it 194.21 may receive under section 477A.013, subdivision 9, paragraph 194.22 (c), is also increased by $40,000 for aids payable in calendar 194.23 year 1995 only, provided that: 194.24 (i) the average total tax capacity rate for taxes payable 194.25 in 1995 exceeds 200 percent; 194.26 (ii) the city portion of the tax capacity rate exceeds 100 194.27 percent; and 194.28 (iii) its city aid base is less than $60 per capita. 194.29 (c) The city aid base for a city is increased by $20,000 in 194.30 1998 and thereafter and the maximum amount of total aid it may 194.31 receive under section 477A.013, subdivision 9, paragraph (c), is 194.32 also increased by $20,000 in calendar year 1998 only, provided 194.33 that: 194.34 (i) the city has a population in 1994 of 2,500 or more; 194.35 (ii) the city is located in a county, outside of the 194.36 metropolitan area, which contains a city of the first class; 195.1 (iii) the city's net tax capacity used in calculating its 195.2 1996 aid under section 477A.013 is less than $400 per capita; 195.3 and 195.4 (iv) at least four percent of the total net tax capacity, 195.5 for taxes payable in 1996, of property located in the city is 195.6 classified as railroad property. 195.7 (d) The city aid base for a city is increased by $200,000 195.8 in 1999 and thereafter and the maximum amount of total aid it 195.9 may receive under section 477A.013, subdivision 9, paragraph 195.10 (c), is also increased by $200,000 in calendar year 1999 only, 195.11 provided that: 195.12 (i) the city was incorporated as a statutory city after 195.13 December 1, 1993; 195.14 (ii) its city aid base does not exceed $5,600; and 195.15 (iii) the city had a population in 1996 of 5,000 or more. 195.16 (e) The city aid base for a city is increased by $450,000 195.17 in 1999 to 2008 and the maximum amount of total aid it may 195.18 receive under section 477A.013, subdivision 9, paragraph (c), is 195.19 also increased by $450,000 in calendar year 1999 only, provided 195.20 that: 195.21 (i) the city had a population in 1996 of at least 50,000; 195.22 (ii) its population had increased by at least 40 percent in 195.23 the ten-year period ending in 1996; and 195.24 (iii) its city's net tax capacity for aids payable in 1998 195.25 is less than $700 per capita. 195.26 (f)Beginning in 2004, the city aid base for a city is195.27equal to the sum of its city aid base in 2003 and the amount of195.28additional aid it was certified to receive under section 477A.06195.29in 2003. For 2004 only, the maximum amount of total aid a city195.30may receive under section 477A.013, subdivision 9, paragraph195.31(c), is also increased by the amount it was certified to receive195.32under section 477A.06 in 2003.195.33(g)The city aid base for a city is increased by $150,000 195.34 for aids payable in 2000 and thereafter, and the maximum amount 195.35 of total aid it may receive under section 477A.013, subdivision 195.36 9, paragraph (c), is also increased by $150,000 in calendar year 196.1 2000 only, provided that: 196.2 (1) the city has a population that is greater than 1,000 196.3 and less than 2,500; 196.4 (2) its commercial and industrial percentage for aids 196.5 payable in 1999 is greater than 45 percent; and 196.6 (3) the total market value of all commercial and industrial 196.7 property in the city for assessment year 1999 is at least 15 196.8 percent less than the total market value of all commercial and 196.9 industrial property in the city for assessment year 1998. 196.10(h)(g) The city aid base for a city is increased by 196.11 $200,000 in 2000 and thereafter, and the maximum amount of total 196.12 aid it may receive under section 477A.013, subdivision 9, 196.13 paragraph (c), is also increased by $200,000 in calendar year 196.14 2000 only, provided that: 196.15 (1) the city had a population in 1997 of 2,500 or more; 196.16 (2) the net tax capacity of the city used in calculating 196.17 its 1999 aid under section 477A.013 is less than $650 per 196.18 capita; 196.19 (3) the pre-1940 housing percentage of the city used in 196.20 calculating 1999 aid under section 477A.013 is greater than 12 196.21 percent; 196.22 (4) the 1999 local government aid of the city under section 196.23 477A.013 is less than 20 percent of the amount that the formula 196.24 aid of the city would have been if the need increase percentage 196.25 was 100 percent; and 196.26 (5) the city aid base of the city used in calculating aid 196.27 under section 477A.013 is less than $7 per capita. 196.28(i)(h) The city aid base for a city is increased by 196.29 $102,000 in 2000 and thereafter, and the maximum amount of total 196.30 aid it may receive under section 477A.013, subdivision 9, 196.31 paragraph (c), is also increased by $102,000 in calendar year 196.32 2000 only, provided that: 196.33 (1) the city has a population in 1997 of 2,000 or more; 196.34 (2) the net tax capacity of the city used in calculating 196.35 its 1999 aid under section 477A.013 is less than $455 per 196.36 capita; 197.1 (3) the net levy of the city used in calculating 1999 aid 197.2 under section 477A.013 is greater than $195 per capita; and 197.3 (4) the 1999 local government aid of the city under section 197.4 477A.013 is less than 38 percent of the amount that the formula 197.5 aid of the city would have been if the need increase percentage 197.6 was 100 percent. 197.7(j)(i) The city aid base for a city is increased by 197.8 $32,000 in 2001 and thereafter, and the maximum amount of total 197.9 aid it may receive under section 477A.013, subdivision 9, 197.10 paragraph (c), is also increased by $32,000 in calendar year 197.11 2001 only, provided that: 197.12 (1) the city has a population in 1998 that is greater than 197.13 200 but less than 500; 197.14 (2) the city's revenue need used in calculating aids 197.15 payable in 2000 was greater than $200 per capita; 197.16 (3) the city net tax capacity for the city used in 197.17 calculating aids available in 2000 was equal to or less than 197.18 $200 per capita; 197.19 (4) the city aid base of the city used in calculating aid 197.20 under section 477A.013 is less than $65 per capita; and 197.21 (5) the city's formula aid for aids payable in 2000 was 197.22 greater than zero. 197.23(k)(j) The city aid base for a city is increased by $7,200 197.24 in 2001 and thereafter, and the maximum amount of total aid it 197.25 may receive under section 477A.013, subdivision 9, paragraph 197.26 (c), is also increased by $7,200 in calendar year 2001 only, 197.27 provided that: 197.28 (1) the city had a population in 1998 that is greater than 197.29 200 but less than 500; 197.30 (2) the city's commercial industrial percentage used in 197.31 calculating aids payable in 2000 was less than ten percent; 197.32 (3) more than 25 percent of the city's population was 60 197.33 years old or older according to the 1990 census; 197.34 (4) the city aid base of the city used in calculating aid 197.35 under section 477A.013 is less than $15 per capita; and 197.36 (5) the city's formula aid for aids payable in 2000 was 198.1 greater than zero. 198.2(l)(k) The city aid base for a city is increased by 198.3 $45,000 in 2001 and thereafter and by an additional $50,000 in 198.4 calendar years 2002 to 2011, and the maximum amount of total aid 198.5 it may receive under section 477A.013, subdivision 9, paragraph 198.6 (c), is also increased by $45,000 in calendar year 2001 only, 198.7 and by $50,000 in calendar year 2002 only, provided that: 198.8 (1) the net tax capacity of the city used in calculating 198.9 its 2000 aid under section 477A.013 is less than $810 per 198.10 capita; 198.11 (2) the population of the city declined more than two 198.12 percent between 1988 and 1998; 198.13 (3) the net levy of the city used in calculating 2000 aid 198.14 under section 477A.013 is greater than $240 per capita; and 198.15 (4) the city received less than $36 per capita in aid under 198.16 section 477A.013, subdivision 9, for aids payable in 2000. 198.17(m)(l) The city aid base for a city with a population of 198.18 10,000 or more which is located outside of the seven-county 198.19 metropolitan area is increased in 2002 and thereafter, and the 198.20 maximum amount of total aid it may receive under section 198.21 477A.013, subdivision 9, paragraph (b) or (c), is also increased 198.22 in calendar year 2002 only, by an amount equal to the lesser of: 198.23 (1)(i) the total population of the city, as determined by 198.24 the United States Bureau of the Census, in the 2000 census, (ii) 198.25 minus 5,000, (iii) times 60; or 198.26 (2) $2,500,000. 198.27(n)(m) The city aid base is increased by $50,000 in 2002 198.28 and thereafter, and the maximum amount of total aid it may 198.29 receive under section 477A.013, subdivision 9, paragraph (c), is 198.30 also increased by $50,000 in calendar year 2002 only, provided 198.31 that: 198.32 (1) the city is located in the seven-county metropolitan 198.33 area; 198.34 (2) its population in 2000 is between 10,000 and 20,000; 198.35 and 198.36 (3) its commercial industrial percentage, as calculated for 199.1 city aid payable in 2001, was greater than 25 percent. 199.2(o)(n) The city aid base for a city is increased by 199.3 $150,000 in calendar years 2002 to 2011 and the maximum amount 199.4 of total aid it may receive under section 477A.013, subdivision 199.5 9, paragraph (c), is also increased by $150,000 in calendar year 199.6 2002 only, provided that: 199.7 (1) the city had a population of at least 3,000 but no more 199.8 than 4,000 in 1999; 199.9 (2) its home county is located within the seven-county 199.10 metropolitan area; 199.11 (3) its pre-1940 housing percentage is less than 15 199.12 percent; and 199.13 (4) its city net tax capacity per capita for taxes payable 199.14 in 2000 is less than $900 per capita. 199.15(p)(o) The city aid base for a city is increased by 199.16 $200,000 beginning in calendar year 2003 and the maximum amount 199.17 of total aid it may receive under section 477A.013, subdivision 199.18 9, paragraph (c), is also increased by $200,000 in calendar year 199.19 2003 only, provided that the city qualified for an increase in 199.20 homestead and agricultural credit aid under Laws 1995, chapter 199.21 264, article 8, section 18. 199.22(q)(p) The city aid base for a city is increased by 199.23 $200,000 in 2004 only and the maximum amount of total aid it may 199.24 receive under section 477A.013, subdivision 9, is also increased 199.25 by $200,000 in calendar year 2004 only, if the city is the site 199.26 of a nuclear dry cask storage facility. 199.27(r)(q) The city aid base for a city is increased by 199.28 $10,000 in 2004 and thereafter and the maximum total aid it may 199.29 receive under section 477A.013, subdivision 9, is also increased 199.30 by $10,000 in calendar year 2004 only, if the city was included 199.31 in a federal major disaster designation issued on April 1, 1998, 199.32 and its pre-1940 housing stock was decreased by more than 40 199.33 percent between 1990 and 2000. 199.34 [EFFECTIVE DATE.] This section is effective beginning with 199.35 aids payable in 2004. 199.36 Sec. 25. Minnesota Statutes 2003 Supplement, section 200.1 477A.03, subdivision 2b, is amended to read: 200.2 Subd. 2b. [COUNTIES.] (a) For aids payable in calendar 200.3 year 2005 and thereafter, the total aids paid to counties under 200.4 section 477A.0124, subdivision 3, are limited to $100,500,000. 200.5 Each calendar year, $500,000 shall be retained by the 200.6 commissioner of revenue to make reimbursements to the 200.7 commissioner of finance for payments made under section 611.27. 200.8 For calendar year 2004,the amount shall be$500,000 is 200.9 appropriated from the general fund for this purpose in addition 200.10 to the payments authorized under section 477A.0124, subdivision 200.11 1. For calendar year 2005 and subsequent years, the amount 200.12 shall be deducted from the appropriationunder this paragraph200.13 for section 477A.0124, subdivision 1. The reimbursements shall 200.14 be to defray the additional costs associated with court-ordered 200.15 counsel under section 611.27. Any retained amounts not used for 200.16 reimbursement in a year shall be included in the next 200.17 distribution of county need aid that is certified to the county 200.18 auditors for the purpose of property tax reduction for the next 200.19 taxes payable year. 200.20 (b) For aids payable in 2005 and thereafter, the total aids 200.21 under section 477A.0124, subdivision 4, are limited to 200.22 $105,000,000. The commissioner of finance shall bill the 200.23 commissioner of revenue for the cost of preparation of local 200.24 impact notes as required by section 3.987, not to exceed 200.25 $207,000 in fiscal year 2004 and thereafter. The commissioner 200.26 of education shall bill the commissioner of revenue for the cost 200.27 of preparation of local impact notes for school districts as 200.28 required by section 3.987, not to exceed $7,000 in fiscal year 200.29 2004 and thereafter. For aids payable in 2004, $214,000 is 200.30 appropriated from the general fund for this purpose. For aids 200.31 payable in 2005 and thereafter, the commissioner of revenue 200.32 shall deduct the amounts billed under this paragraph from the 200.33 appropriation under thisparagraphsection for section 200.34 477A.0124, subdivision 4. The amounts deducted are appropriated 200.35 to the commissioner of finance and the commissioner of education 200.36 for the preparation of local impact notes. 201.1 [EFFECTIVE DATE.] This section is effective for aids 201.2 payable in 2004 and thereafter. 201.3 Sec. 26. Laws 2003, First Special Session chapter 21, 201.4 article 5, section 13, is amended to read: 201.5 Sec. 13. [2004 CITY AID REDUCTIONS.] 201.6 The commissioner of revenue shall compute an aid reduction 201.7 amount for 2004 for each city as provided in this section. 201.8 The initial aid reduction amount for each city is the 201.9 amount by which the city's aid distribution under Minnesota 201.10 Statutes, section 477A.013, and related provisions payable in 201.11 2003 exceeds the city's 2004 distribution under those provisions. 201.12 The minimum aid reduction amount for a city is the amount 201.13 of its reduction in 2003 under section 12. If a city receives 201.14 an increase to its city aid base under Minnesota Statutes, 201.15 section 477A.011, subdivision 36, its minimum aid reduction is 201.16 reduced by an equal amount. 201.17 The maximum aid reduction amount for a city is an amount 201.18 equal to 14 percent of the city's total 2004 levy plus aid 201.19 revenue base, except that if the city has a city net tax 201.20 capacity for aids payable in 2004, as defined in Minnesota 201.21 Statutes, section 477A.011, subdivision 20, of $700 per capita 201.22 or less, the maximum aid reduction shall not exceed an amount 201.23 equal to 13 percent of the city's total 2004 levy plus aid 201.24 revenue base. 201.25 If the initial aid reduction amount for a city is less than 201.26 the minimum aid reduction amount for that city, the final aid 201.27 reduction amount for the city is the sum of the initial aid 201.28 reduction amount and the lesser of the amount of the city's 201.29 payable 2004 reimbursement under Minnesota Statutes, section 201.30 273.1384, or the difference between the minimum and initial aid 201.31 reduction amounts for the city, and the amount of the final aid 201.32 reduction in excess of the initial aid reduction is deducted 201.33 from the city's reimbursements pursuant to Minnesota Statutes, 201.34 section 273.1384. 201.35 If the initial aid reduction amount for a city is greater 201.36 than the maximum aid reduction amount for the city, the city 202.1 receives an additional distribution under this section equal to 202.2 the result of subtracting the maximum aid reduction amount from 202.3 the initial aid reduction amount. This distribution shall be 202.4 paid in equal installments in 2004 on the dates specified in 202.5 Minnesota Statutes, section 477A.015. The amount necessary for 202.6 these additional distributions is appropriated to the 202.7 commissioner of revenue from the general fund in fiscal year 202.8 2005. 202.9The initial aid reduction is applied to the city's202.10distribution pursuant to Minnesota Statutes, section 477A.013,202.11and any aid reduction in excess of the initial aid reduction is202.12applied to the city's reimbursements pursuant to Minnesota202.13Statutes, section 273.1384.202.14 To the extent that sufficient information is available on 202.15 each payment date in 2004, the commissioner of revenue shall pay 202.16 the reimbursements reduced under this section in equal 202.17 installments on the payment dates provided in law. 202.18 [EFFECTIVE DATE.] This section is effective for aids 202.19 payable in 2004. 202.20 Sec. 27. Laws 2003, First Special Session chapter 21, 202.21 article 6, section 9, is amended to read: 202.22 Sec. 9. [DEFINITIONS.] 202.23 (a) For purposes of sections 9 to 15, the following terms 202.24 have the meanings given them in this section. 202.25 (b) The 2003 and 2004 "levy plus aid revenue base" for a 202.26 county is the sum of that county's certified property tax levy 202.27 for taxes payable in 2003, plus the sum of the amounts the 202.28 county was certified to receive in the designated calendar year 202.29 as: 202.30 (1) homestead and agricultural credit aid under Minnesota 202.31 Statutes, section 273.1398, subdivision 2, plus any additional 202.32 aid under section 16, minus the amount calculated under section 202.33 273.1398, subdivision 4a, paragraph (b), for counties in 202.34 judicial districts one, three, six, and ten, and 25 percent of 202.35 the amount calculated under section 273.1398, subdivision 4a, 202.36 paragraph (b), for counties in judicial districts two and four; 203.1 (2) the amount of county manufactured home homestead and 203.2 agricultural credit aid computed for the county for payment in 203.3 2003 under section 273.166; 203.4 (3) criminal justice aid under Minnesota Statutes, section 203.5 477A.0121; 203.6 (4) family preservation aid under Minnesota Statutes, 203.7 section 477A.0122; 203.8 (5) taconite aids under Minnesota Statutes, sections 298.28 203.9 and 298.282, including any aid which was required to be placed 203.10 in a special fund for expenditure in the next succeeding year; 203.11 and 203.12 (6) county program aid under section 477A.0124, exclusive 203.13 of the attached machinery aid component. 203.14 [EFFECTIVE DATE.] This section is effective for aids 203.15 payable in 2004. 203.16 Sec. 28. [REPEALER.] 203.17 Minnesota Statutes 2002, sections 273.19, subdivision 5; 203.18 274.05; 275.15; and 283.07, are repealed effective the day 203.19 following final enactment. 203.20 ARTICLE 11 203.21 SALES AND USE TAXES TECHNICAL 203.22 Section 1. Minnesota Statutes 2002, section 289A.38, 203.23 subdivision 6, is amended to read: 203.24 Subd. 6. [OMISSION IN EXCESS OF 25 PERCENT.] Additional 203.25 taxes may be assessed within 6-1/2 years after the due date of 203.26 the return or the date the return was filed, whichever is later, 203.27 if: 203.28 (1) the taxpayer omits from gross income an amount properly 203.29 includable in it that is in excess of 25 percent of the amount 203.30 of gross income stated in the return; 203.31 (2) the taxpayer omits from a sales, use, or withholding 203.32 tax return an amount of taxes in excess of 25 percent of the 203.33 taxes reported in the return; or 203.34 (3) the taxpayer omits from the gross estate assets in 203.35 excess of 25 percent of the gross estate reported in the return. 203.36 [EFFECTIVE DATE.] This section is effective the day 204.1 following final enactment. 204.2 Sec. 2. Minnesota Statutes 2003 Supplement, section 204.3 289A.40, subdivision 2, is amended to read: 204.4 Subd. 2. [BAD DEBT LOSS.] If a claim relates to an 204.5 overpayment because of a failure to deduct a loss due to a bad 204.6 debt or to a security becoming worthless, the claim is 204.7 considered timely if filed within seven years from the date 204.8 prescribed for the filing of the return. A claim relating to an 204.9 overpayment of taxes under chapter 297A must be filed within 204.10 3-1/2 years from the date prescribed for filing the return, plus 204.11 any extensions granted for filing the return, but only if filed 204.12 within the extended time. The refund or credit is limited to 204.13 the amount of overpayment attributable to the loss. "Bad debt" 204.14 for purposes of this subdivision, has the same meaning as that 204.15 term is used in United States Code, title 26, section 166, 204.16 except that for a claim relating to an overpayment of taxes 204.17 under chapter 297A the following are excluded from the 204.18 calculation of bad debt: financing charges or interest; sales 204.19 or use taxes charged on the purchase price; uncollectible 204.20 amounts on property that remain in the possession of the seller 204.21 until the full purchase price is paid; expenses incurred in 204.22 attempting to collect any debt; and repossessed property. 204.23 [EFFECTIVE DATE.] For claims relating to an overpayment of 204.24 taxes under chapter 297A, this section is effective for sales 204.25 and purchases made on or after January 1, 2004; for all other 204.26 bad debts or claims, this section is effective on or after July 204.27 1, 2003. 204.28 Sec. 3. Minnesota Statutes 2003 Supplement, section 204.29 297A.668, subdivision 1, is amended to read: 204.30 Subdivision 1. [ APPLICABILITY.] The provisions of this 204.31 section apply regardless of the characterization of a product as 204.32 tangible personal property, a digital good, or a service; but do 204.33 not apply to telecommunications services,or the sales of motor 204.34 vehicles, watercraft, aircraft, modular homes, manufactured204.35homes, or mobile homes. These provisions only apply to 204.36 determine a seller's obligation to pay or collect and remit a 205.1 sales or use tax with respect to the seller's sale of a 205.2 product. These provisions do not affect the obligation of a 205.3 seller as purchaser to remit tax on the use of the product. 205.4 [EFFECTIVE DATE.] This section is effective the day 205.5 following final enactment. 205.6 Sec. 4. Minnesota Statutes 2003 Supplement, section 205.7 297A.668, subdivision 3, is amended to read: 205.8 Subd. 3. [LEASE OR RENTAL OF TANGIBLE PERSONAL PROPERTY.] 205.9 The lease or rental of tangible personal property, other than 205.10 property identified in subdivision 4 or 5, shall be sourced as 205.11 required in paragraphs (a) to (c). 205.12 (a) For a lease or rental that requires recurring periodic 205.13 payments, the first periodic payment is sourced the same as a 205.14 retail sale in accordance with the provisions of subdivision62. 205.15 Periodic payments made subsequent to the first payment are 205.16 sourced to the primary property location for each period covered 205.17 by the payment. The primary property location must be as 205.18 indicated by an address for the property provided by the lessee 205.19 that is available to the lessor from its records maintained in 205.20 the ordinary course of business, when use of this address does 205.21 not constitute bad faith. The property location must not be 205.22 altered by intermittent use at different locations, such as use 205.23 of business property that accompanies employees on business 205.24 trips and service calls. 205.25 (b) For a lease or rental that does not require recurring 205.26 periodic payments, the payment is sourced the same as a retail 205.27 sale in accordance with the provisions of subdivision 2. 205.28 (c) This subdivision does not affect the imposition or 205.29 computation of sales or use tax on leases or rentals based on a 205.30 lump sum or accelerated basis, or on the acquisition of property 205.31 for lease. 205.32 [EFFECTIVE DATE.] This section is effective for sales and 205.33 purchases made on or after January 1, 2004. 205.34 Sec. 5. Minnesota Statutes 2003 Supplement, section 205.35 297A.668, subdivision 5, is amended to read: 205.36 Subd. 5. [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 206.1 including lease or rental, of transportation equipment shall be 206.2 sourced the same as a retail sale in accordance with the 206.3 provisions of subdivision 2, notwithstanding the exclusion of 206.4 lease or rental in subdivision 2. 206.5 (b) "Transportation equipment" means any of the following: 206.6 (1) locomotives and railcars that are utilized for the 206.7 carriage of persons or property in interstate commerce;and/or206.8 (2) trucks and truck-tractors with a gross vehicle weight 206.9 rating (GVWR) of 10,001 pounds or greater, trailers, 206.10 semitrailers, or passenger buses that are: 206.11 (i) registered through the international registration plan; 206.12 and 206.13 (ii) operated under authority of a carrier authorized and 206.14 certified by the United States Department of Transportation or 206.15 another federal authority to engage in the carriage of persons 206.16 or property in interstate commerce; 206.17 (3) aircraft that are operated by air carriers authorized 206.18 and certificated by the United States Department of 206.19 Transportation or another federal or a foreign authority to 206.20 engage in the carriage of persons or property in interstate 206.21 commerce; or 206.22 (4) containers designed for use on and component parts 206.23 attached or secured on the transportation equipment described in 206.24 items (1) through (3). 206.25 [EFFECTIVE DATE.] This section is effective for sales and 206.26 purchases made on or after January 1, 2004. 206.27 Sec. 6. Minnesota Statutes 2003 Supplement, section 206.28 297A.669, subdivision 16, is amended to read: 206.29 Subd. 16. [SERVICE ADDRESS.] "Service address," for 206.30 purposes of this section, means: 206.31 (1) the location of the telecommunications equipment to 206.32 which a customer's call is charged and from which the call 206.33 originates or terminates, regardless of where the call is billed 206.34 or paid; 206.35 (2) if the location in paragraph(a)(1) is not known, 206.36 service address means the origination point of the signal of the 207.1 telecommunications services first identified by either the 207.2 seller's telecommunications system or in information received by 207.3 the seller from its service provider, where the system used to 207.4 transport the signals is not that of the seller; or 207.5 (3) if the location in paragraphs(a)(1) and(b)(2) is 207.6 not known, the service address means the location of the 207.7 customer's place of primary use. 207.8 [EFFECTIVE DATE.] This section is effective for sales and 207.9 purchases made on or after January 1, 2004. 207.10 Sec. 7. Minnesota Statutes 2003 Supplement, section 207.11 297A.68, subdivision 2, is amended to read: 207.12 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 207.13 (a) Materials stored, used, or consumed in industrial production 207.14 of personal property intended to be sold ultimately at retail 207.15 are exempt, whether or not the item so used becomes an 207.16 ingredient or constituent part of the property produced. 207.17 Materials that qualify for this exemption include, but are not 207.18 limited to, the following: 207.19 (1) chemicals, including chemicals used for cleaning food 207.20 processing machinery and equipment; 207.21 (2) materials, including chemicals, fuels, and electricity 207.22 purchased by persons engaged in industrial production to treat 207.23 waste generated as a result of the production process; 207.24 (3) fuels, electricity, gas, and steam used or consumed in 207.25 the production process, except that electricity, gas, or steam 207.26 used for space heating, cooling, or lighting is exempt if (i) it 207.27 is in excess of the average climate control or lighting for the 207.28 production area, and (ii) it is necessary to produce that 207.29 particular product; 207.30 (4) petroleum products and lubricants; 207.31 (5) packaging materials, including returnable containers 207.32 used in packaging food and beverage products; 207.33 (6) accessory tools, equipment, and other items that are 207.34 separate detachable units with an ordinary useful life of less 207.35 than 12 months used in producing a direct effect upon the 207.36 product; and 208.1 (7) the following materials, tools, and equipment used in 208.2 metalcasting: crucibles, thermocouple protection sheaths and 208.3 tubes, stalk tubes, refractory materials, molten metal filters 208.4 and filter boxes, degassing lances, and base blocks. 208.5 (b) This exemption does not include: 208.6 (1) machinery, equipment, implements, tools, accessories, 208.7 appliances, contrivances and furniture and fixtures, except 208.8 those listed in paragraph (a), clause (6); and 208.9 (2) petroleum and special fuels used in producing or 208.10 generating power for propelling ready-mixed concrete trucks on 208.11 the public highways of this state. 208.12 (c) Industrial production includes, but is not limited to, 208.13 research, development, design or production of any tangible 208.14 personal property, manufacturing, processing (other than by 208.15 restaurants and consumers) of agricultural products (whether 208.16 vegetable or animal), commercial fishing, refining, smelting, 208.17 reducing, brewing, distilling, printing, mining, quarrying, 208.18 lumbering, generating electricity, the production of road 208.19 building materials, and the research, development, design, or 208.20 production of computer software. Industrial production does not 208.21 include painting, cleaning, repairing or similar processing of 208.22 property except as part of the original manufacturing process. 208.23 Industrial production does not include the furnishing of 208.24 services listed in section 297A.61, subdivision 3, paragraph 208.25 (g), clause (6), items (i) to (vi) and (viii). 208.26 [EFFECTIVE DATE.] This section is effective the day 208.27 following final enactment. 208.28 Sec. 8. Minnesota Statutes 2003 Supplement, section 208.29 297A.68, subdivision 5, is amended to read: 208.30 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 208.31 exempt. The tax must be imposed and collected as if the rate 208.32 under section 297A.62, subdivision 1, applied, and then refunded 208.33 in the manner provided in section 297A.75. 208.34 "Capital equipment" means machinery and equipment purchased 208.35 or leased, and used in this state by the purchaser or lessee 208.36 primarily for manufacturing, fabricating, mining, or refining 209.1 tangible personal property to be sold ultimately at retail if 209.2 the machinery and equipment are essential to the integrated 209.3 production process of manufacturing, fabricating, mining, or 209.4 refining. Capital equipment also includes machinery and 209.5 equipment used primarily to electronically transmit results 209.6 retrieved by a customer of an on-line computerized data 209.7 retrieval system. 209.8 (b) Capital equipment includes, but is not limited to: 209.9 (1) machinery and equipment used to operate, control, or 209.10 regulate the production equipment; 209.11 (2) machinery and equipment used for research and 209.12 development, design, quality control, and testing activities; 209.13 (3) environmental control devices that are used to maintain 209.14 conditions such as temperature, humidity, light, or air pressure 209.15 when those conditions are essential to and are part of the 209.16 production process; 209.17 (4) materials and supplies used to construct and install 209.18 machinery or equipment; 209.19 (5) repair and replacement parts, including accessories, 209.20 whether purchased as spare parts, repair parts, or as upgrades 209.21 or modifications to machinery or equipment; 209.22 (6) materials used for foundations that support machinery 209.23 or equipment; 209.24 (7) materials used to construct and install special purpose 209.25 buildings used in the production process; 209.26 (8) ready-mixed concrete equipment in which the ready-mixed 209.27 concrete is mixed as part of the delivery process regardless if 209.28 mounted on a chassis and leases of ready-mixed concrete trucks; 209.29 and 209.30 (9) machinery or equipment used for research, development, 209.31 design, or production of computer software. 209.32 (c) Capital equipment does not include the following: 209.33 (1) motor vehicles taxed under chapter 297B; 209.34 (2) machinery or equipment used to receive or store raw 209.35 materials; 209.36 (3) building materials, except for materials included in 210.1 paragraph (b), clauses (6) and (7); 210.2 (4) machinery or equipment used for nonproduction purposes, 210.3 including, but not limited to, the following: plant security, 210.4 fire prevention, first aid, and hospital stations; support 210.5 operations or administration; pollution control; and plant 210.6 cleaning, disposal of scrap and waste, plant communications, 210.7 space heating, cooling, lighting, or safety; 210.8 (5) farm machinery and aquaculture production equipment as 210.9 defined by section 297A.61, subdivisions 12 and 13; 210.10 (6) machinery or equipment purchased and installed by a 210.11 contractor as part of an improvement to real property;or210.12 (7) machinery and equipment used by restaurants in the 210.13 furnishing, preparing, or serving of prepared foods as defined 210.14 in section 297A.61, subdivision 31; 210.15 (8) machinery and equipment used to furnish the services 210.16 listed in section 297A.61, subdivision 3, paragraph (g), clause 210.17 (6), items (i) to (vi) and (viii); or 210.18 (9) any other item that is not essential to the integrated 210.19 process of manufacturing, fabricating, mining, or refining. 210.20 (d) For purposes of this subdivision: 210.21 (1) "Equipment" means independent devices or tools separate 210.22 from machinery but essential to an integrated production 210.23 process, including computers and computer software, used in 210.24 operating, controlling, or regulating machinery and equipment; 210.25 and any subunit or assembly comprising a component of any 210.26 machinery or accessory or attachment parts of machinery, such as 210.27 tools, dies, jigs, patterns, and molds. 210.28 (2) "Fabricating" means to make, build, create, produce, or 210.29 assemble components or property to work in a new or different 210.30 manner. 210.31 (3) "Integrated production process" means a process or 210.32 series of operations through which tangible personal property is 210.33 manufactured, fabricated, mined, or refined. For purposes of 210.34 this clause, (i) manufacturing begins with the removal of raw 210.35 materials from inventory and ends when the last process prior to 210.36 loading for shipment has been completed; (ii) fabricating begins 211.1 with the removal from storage or inventory of the property to be 211.2 assembled, processed, altered, or modified and ends with the 211.3 creation or production of the new or changed product; (iii) 211.4 mining begins with the removal of overburden from the site of 211.5 the ores, minerals, stone, peat deposit, or surface materials 211.6 and ends when the last process before stockpiling is completed; 211.7 and (iv) refining begins with the removal from inventory or 211.8 storage of a natural resource and ends with the conversion of 211.9 the item to its completed form. 211.10 (4) "Machinery" means mechanical, electronic, or electrical 211.11 devices, including computers and computer software, that are 211.12 purchased or constructed to be used for the activities set forth 211.13 in paragraph (a), beginning with the removal of raw materials 211.14 from inventory through completion of the product, including 211.15 packaging of the product. 211.16 (5) "Machinery and equipment used for pollution control" 211.17 means machinery and equipment used solely to eliminate, prevent, 211.18 or reduce pollution resulting from an activity described in 211.19 paragraph (a). 211.20 (6) "Manufacturing" means an operation or series of 211.21 operations where raw materials are changed in form, composition, 211.22 or condition by machinery and equipment and which results in the 211.23 production of a new article of tangible personal property. For 211.24 purposes of this subdivision, "manufacturing" includes the 211.25 generation of electricity or steam to be sold at retail. 211.26 (7) "Mining" means the extraction of minerals, ores, stone, 211.27 or peat. 211.28 (8) "On-line data retrieval system" means a system whose 211.29 cumulation of information is equally available and accessible to 211.30 all its customers. 211.31 (9) "Primarily" means machinery and equipment used 50 211.32 percent or more of the time in an activity described in 211.33 paragraph (a). 211.34 (10) "Refining" means the process of converting a natural 211.35 resource to an intermediate or finished product, including the 211.36 treatment of water to be sold at retail. 212.1 [EFFECTIVE DATE.] This section is effective the day 212.2 following final enactment. 212.3 Sec. 9. Minnesota Statutes 2003 Supplement, section 212.4 297A.68, subdivision 39, is amended to read: 212.5 Subd. 39. [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 212.6 tangible personal property or services is exempt from tax or a 212.7 tax rate increase for a period of six months from the effective 212.8 date of the law change that results in the imposition of the tax 212.9 or the tax rate increase under this chapter if: 212.10 (1) the act imposing the tax or increasing the tax rate 212.11 does not have transitional effective date language for existing 212.12 construction contracts and construction bids; and 212.13 (2) the requirements of paragraph (b) are met. 212.14 (b) A sale is tax exempt under paragraph (a) if it meets 212.15 the requirements of either clause (1) or (2): 212.16 (1) For a construction contract: 212.17 (i) the goods or services sold must be used for the 212.18 performance of a bona fide written lump sum or fixed price 212.19 construction contract; 212.20 (ii) the contract must be entered into before the date the 212.21 goods or services become subject to the sales tax or the tax 212.22 rate was increased; 212.23 (iii) the contract must not provide for allocation of 212.24 future taxes; and 212.25 (iv) for each qualifying contract the contractor must give 212.26 the seller documentation of the contract on which an exemption 212.27 is to be claimed. 212.28 (2) For a construction bid: 212.29 (i) the goods or services sold must be used pursuant to an 212.30 obligation of a bid or bids; 212.31 (ii) the bid or bids must be submitted and accepted before 212.32 the date the goods or services became subject to the sales 212.33 tax or the tax rate was increased; 212.34 (iii) the bid or bids must not be able to be withdrawn, 212.35 modified, or changed without forfeiting a bond; and 212.36 (iv) for each qualifying bid, the contractor must give the 213.1 seller documentation of the bid on which an exemption is to be 213.2 claimed. 213.3 [EFFECTIVE DATE.] This section is effective the day 213.4 following final enactment. 213.5 Sec. 10. [REPEALER.] 213.6 Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, 213.7 subparts 5 and 6; 8130.0400, subpart 9; 8130.1200, subparts 5 213.8 and 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1 213.9 and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200; 213.10 8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 213.11 5; and 8130.8800, subpart 4, are repealed. 213.12 [EFFECTIVE DATE.] This section is effective the day 213.13 following final enactment. 213.14 ARTICLE 12 213.15 SPECIAL TAXES TECHNICAL 213.16 Section 1. Minnesota Statutes 2002, section 287.04, is 213.17 amended to read: 213.18 287.04 [EXEMPTIONS.] 213.19 The tax imposed by section 287.035 does not apply to: 213.20 (a) A decree of marriage dissolution or an instrument made 213.21 pursuant to it. 213.22 (b) A mortgage given to correct a misdescription of the 213.23 mortgaged property. 213.24 (c) A mortgage or other instrument that adds additional 213.25 security for the same debt for which mortgage registry tax has 213.26 been paid. 213.27 (d) A contract for the conveyance of any interest in real 213.28 property, including a contract for deed. 213.29 (e) A mortgage secured by real property subject to the 213.30 minerals production tax of sections 298.24 to 298.28. 213.31 (f) The principal amount of a mortgage loan made under a 213.32 low and moderate income or other affordable housing program, if 213.33 the mortgagee is a federal, state, or local government agency. 213.34 (g) Mortgages granted by fraternal benefit societies 213.35 subject to section 64B.24. 213.36 (h) A mortgage amendment or extension, as defined in 214.1 section 287.01. 214.2 (i) An agricultural mortgage if the proceeds of the loan 214.3 secured by the mortgage are used to acquire or improve real 214.4 property classified under section 273.13, subdivision 23, 214.5 paragraph (a), or (b), clause (1), (2), or (3). 214.6 (j) A mortgage on an armory building as set forth in 214.7 section 193.147. 214.8 [EFFECTIVE DATE.] This section is effective the day 214.9 following final enactment. 214.10 Sec. 2. Minnesota Statutes 2002, section 295.50, 214.11 subdivision 4, is amended to read: 214.12 Subd. 4. [HEALTH CARE PROVIDER.] (a) "Health care 214.13 provider" means: 214.14 (1) a person whose health care occupation is regulated or 214.15 required to be regulated by the state of Minnesota furnishing 214.16 any or all of the following goods or services directly to a 214.17 patient or consumer: medical, surgical, optical, visual, 214.18 dental, hearing, nursing services, drugs, laboratory, diagnostic 214.19 or therapeutic services; 214.20 (2) a person who provides goods and services not listed in 214.21 clause (1) that qualify for reimbursement under the medical 214.22 assistance program provided under chapter 256B; 214.23 (3) a staff model health plan company; 214.24 (4) an ambulance service required to be licensed; or 214.25 (5) a person who sells or repairs hearing aids and related 214.26 equipment or prescription eyewear. 214.27 (b) Health care provider does not include: 214.28 (1) hospitals; medical supplies distributors, except as 214.29 specified under paragraph (a), clause (5); nursing homes 214.30 licensed under chapter 144A or licensed in any other 214.31 jurisdiction; pharmacies; surgical centers; bus and taxicab 214.32 transportation, or any other providers of transportation 214.33 services other than ambulance services required to be licensed; 214.34 supervised living facilities for persons with mental retardation 214.35 or related conditions, licensed under Minnesota Rules, parts 214.36 4665.0100 to 4665.9900;residential care homes licensed under215.1chapter 144Bhousing with services establishments required to be 215.2 registered under chapter 144D; board and lodging establishments 215.3 providing only custodial services that are licensed under 215.4 chapter 157 and registered under section 157.17 to provide 215.5 supportive services or health supervision services; adult foster 215.6 homes as defined in Minnesota Rules, part 9555.5105; day 215.7 training and habilitation services for adults with mental 215.8 retardation and related conditions as defined in section 252.41, 215.9 subdivision 3; boarding care homes, as defined in Minnesota 215.10 Rules, part 4655.0100; and adult day care centers as defined in 215.11 Minnesota Rules, part 9555.9600; 215.12 (2) home health agencies as defined in Minnesota Rules, 215.13 part 9505.0175, subpart 15; a person providing personal care 215.14 services and supervision of personal care services as defined in 215.15 Minnesota Rules, part 9505.0335; a person providing private duty 215.16 nursing services as defined in Minnesota Rules, part 9505.0360; 215.17 and home care providers required to be licensed under chapter 215.18 144A; 215.19 (3) a person who employs health care providers solely for 215.20 the purpose of providing patient services to its employees; and 215.21 (4) an educational institution that employs health care 215.22 providers solely for the purpose of providing patient services 215.23 to its students if the institution does not receive fee for 215.24 service payments or payments for extended coverage. 215.25 [EFFECTIVE DATE.] This section is effective the day 215.26 following final enactment. 215.27 Sec. 3. Minnesota Statutes 2002, section 296A.22, is 215.28 amended by adding a subdivision to read: 215.29 Subd. 9. [ABATEMENT OF PENALTY.] (a) The commissioner may 215.30 by written order abate any penalty imposed under this section, 215.31 if in the commissioner's opinion there is reasonable cause to do 215.32 so. 215.33 (b) A request for abatement of penalty must be filed with 215.34 the commissioner within 60 days of the date the notice stating 215.35 that a penalty has been imposed was mailed to the taxpayer's 215.36 last known address. 216.1 (c) If the commissioner issues an order denying a request 216.2 for abatement of penalty, the taxpayer may file an 216.3 administrative appeal as provided in section 296A.25 or appeal 216.4 to tax court as provided in section 271.06. If the commissioner 216.5 does not issue an order on the abatement request within 60 days 216.6 from the date the request is received, the taxpayer may appeal 216.7 to tax court as provided in section 271.06. 216.8 [EFFECTIVE DATE.] This section is effective for penalties 216.9 imposed on or after the day following final enactment. 216.10 Sec. 4. Minnesota Statutes 2002, section 297E.01, 216.11 subdivision 5, is amended to read: 216.12 Subd. 5. [DISTRIBUTOR.] "Distributor" means a distributor 216.13 as defined in section 349.12, subdivision 11, or a person or 216.14 linked bingo game provider who markets, sells, or provides 216.15 gambling product to a person or entity for resale or use at the 216.16 retail level. 216.17 [EFFECTIVE DATE.] This section is effective the day 216.18 following final enactment. 216.19 Sec. 5. Minnesota Statutes 2002, section 297E.01, 216.20 subdivision 7, is amended to read: 216.21 Subd. 7. [GAMBLING PRODUCT.] "Gambling product" means 216.22 bingo hard cards, bingo paper, orsheets, or linked bingo paper 216.23 sheets; pull-tabs; tipboards; paddletickets and paddleticket 216.24 cards; raffle tickets; or any other ticket, card, board, 216.25 placard, device, or token that represents a chance, for which 216.26 consideration is paid, to win a prize. 216.27 [EFFECTIVE DATE.] This section is effective the day 216.28 following final enactment. 216.29 Sec. 6. Minnesota Statutes 2002, section 297E.01, is 216.30 amended by adding a subdivision to read: 216.31 Subd. 9a. [LINKED BINGO GAME.] "Linked bingo game" means a 216.32 bingo game played at two or more locations where licensed 216.33 organizations are authorized to conduct bingo, when there is a 216.34 common prize pool and a common selection of numbers or symbols 216.35 conducted at one location, and when the results of the selection 216.36 are transmitted to all participating locations by satellite, 217.1 telephone, or other means by a linked bingo game provider. 217.2 [EFFECTIVE DATE.] This section is effective the day 217.3 following final enactment. 217.4 Sec. 7. Minnesota Statutes 2002, section 297E.01, is 217.5 amended by adding a subdivision to read: 217.6 Subd. 9b. [LINKED BINGO GAME PROVIDER.] "Linked bingo game 217.7 provider" means any person who provides the means to link bingo 217.8 prizes in a linked bingo game, who provides linked bingo paper 217.9 sheets to the participating organizations, who provides linked 217.10 bingo prize management, and who provides the linked bingo game 217.11 system. 217.12 [EFFECTIVE DATE.] This section is effective the day 217.13 following final enactment. 217.14 Sec. 8. Minnesota Statutes 2002, section 297E.07, is 217.15 amended to read: 217.16 297E.07 [INSPECTION RIGHTS.] 217.17 At any reasonable time, without notice and without a search 217.18 warrant, the commissioner may enter a place of business of a 217.19 manufacturer, distributor,ororganization, or linked bingo game 217.20 provider; any site from which pull-tabs or tipboards or other 217.21 gambling equipment or gambling product are being manufactured, 217.22 stored, or sold; or any site at which lawful gambling is being 217.23 conducted, and inspect the premises, books, records, and other 217.24 documents required to be kept under this chapter to determine 217.25 whether or not this chapter is being fully complied with. If 217.26 the commissioner is denied free access to or is hindered or 217.27 interfered with in making an inspection of the place of 217.28 business, books, or records, the permit of the distributor may 217.29 be revoked by the commissioner, and the license of the 217.30 manufacturer, the distributor,orthe organization, or linked 217.31 bingo game provider may be revoked by the board. 217.32 [EFFECTIVE DATE.] This section is effective the day 217.33 following final enactment. 217.34 Sec. 9. Minnesota Statutes 2003 Supplement, section 217.35 297F.08, subdivision 12, is amended to read: 217.36 Subd. 12. [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 218.1 person may not transport or cause to be transported from this 218.2 state cigarettes for sale in another state without first 218.3 affixing to the cigarettes the stamp required by the state in 218.4 which the cigarettes are to be sold or paying any other excise 218.5 tax on the cigarettes imposed by the state in which the 218.6 cigarettes are to be sold. 218.7 (b) A person may not affix to cigarettes the stamp required 218.8 by another state or pay any other excise tax on the cigarettes 218.9 imposed by another state if the other state prohibits stamps 218.10 from being affixed to the cigarettes, prohibits the payment of 218.11 any other excise tax on the cigarettes, or prohibits the sale of 218.12 the cigarettes. 218.13 (c) Not later than 15 days after the end of each calendar 218.14 quarter, a person who transports or causes to be transported 218.15 from this state cigarettes for sale in another state shall 218.16 submit to the commissioner a report identifying the quantity and 218.17 style of each brand of the cigarettes transported or caused to 218.18 be transported in the preceding calendar quarter, and the name 218.19 and address of each recipient of the cigarettes. This reporting 218.20 requirement only relates to cigarettes manufactured by companies 218.21 that are not original or subsequent participating manufacturers 218.22 in the Master Settlement Agreement with other states. 218.23 (d) For purposes of this section, "person" has the meaning 218.24 given in section 297F.01, subdivision 12. Person does not 218.25 include any common or contract carrier, or public warehouse that 218.26 is not owned, in whole or in part, directly or indirectly by 218.27 such person, and does not include a manufacturer thathas218.28entered intois an original or subsequent participating 218.29 manufacturer in the Master Settlement Agreement with other 218.30 states. 218.31 [EFFECTIVE DATE.] This section is effective the day 218.32 following final enactment. 218.33 Sec. 10. Minnesota Statutes 2003 Supplement, section 218.34 297F.09, subdivision 1, is amended to read: 218.35 Subdivision 1. [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 218.36 or before the 18th day of each calendar month, a distributor 219.1 with a place of business in this state shall file a return with 219.2 the commissioner showing the quantity of cigarettes manufactured 219.3 or brought in from outside the state or purchased during the 219.4 preceding calendar month and the quantity of cigarettes sold or 219.5 otherwise disposed of in this state and outside this state 219.6 during that month. A licensed distributor outside this state 219.7 shall in like manner file a return showing the quantity of 219.8 cigarettes shipped or transported into this state during the 219.9 preceding calendar month. Returns must be made in the form and 219.10 manner prescribed by the commissioner and must contain any other 219.11 information required by the commissioner. The return must be 219.12 accompanied by a remittance for the full unpaid tax liability 219.13 shown by it.The return for the May liability and 85 percent of219.14the estimated June liability is due on the date payment of the219.15tax is due.For distributors subject to the accelerated tax 219.16 payment requirements in subdivision 10, the return for the May 219.17 liability is due two business days before June 30th of the year 219.18 and the return for the June liability is due on or before August 219.19 18th of the year. 219.20 [EFFECTIVE DATE.] This section is effective the day 219.21 following final enactment. 219.22 Sec. 11. Minnesota Statutes 2003 Supplement, section 219.23 297F.09, subdivision 2, is amended to read: 219.24 Subd. 2. [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 219.25 On or before the 18th day of each calendar month, a distributor 219.26 with a place of business in this state shall file a return with 219.27 the commissioner showing the quantity and wholesale sales price 219.28 of each tobacco product: 219.29 (1) brought, or caused to be brought, into this state for 219.30 sale; and 219.31 (2) made, manufactured, or fabricated in this state for 219.32 sale in this state, during the preceding calendar month. 219.33 Every licensed distributor outside this state shall in like 219.34 manner file a return showing the quantity and wholesale sales 219.35 price of each tobacco product shipped or transported to 219.36 retailers in this state to be sold by those retailers, during 220.1 the preceding calendar month. Returns must be made in the form 220.2 and manner prescribed by the commissioner and must contain any 220.3 other information required by the commissioner. The return must 220.4 be accompanied by a remittance for the full tax liability 220.5 shown.The return for the May liability and 85 percent of the220.6estimated June liability is due on the date payment of the tax220.7is due.For distributors subject to the accelerated tax payment 220.8 requirements in subdivision 10, the return for the May liability 220.9 is due two business days before June 30th of the year and the 220.10 return for the June liability is due on or before August 18th of 220.11 the year. 220.12 [EFFECTIVE DATE.] This section is effective the day 220.13 following final enactment. 220.14 Sec. 12. Minnesota Statutes 2002, section 297I.01, is 220.15 amended by adding a subdivision to read: 220.16 Subd. 13a. [REINSURANCE.] "Reinsurance" is insurance 220.17 whereby an insurance company, for a consideration, agrees to 220.18 indemnify another insurance company against all or part of the 220.19 loss which the latter may sustain under the policy or policies 220.20 which it has issued. 220.21 [EFFECTIVE DATE.] This section is effective the day 220.22 following final enactment. 220.23 Sec. 13. Minnesota Statutes 2002, section 297I.05, 220.24 subdivision 4, is amended to read: 220.25 Subd. 4. [MUTUALPROPERTY AND CASUALTYCOMPANIES WITH 220.26 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 220.27 tax is imposed on mutualproperty and casualtycompanies that 220.28 had total assets greater than $5,000,000 at the end of the 220.29 calendar year but that had total assets less than $1,600,000,000 220.30 on December 31, 1989. The rate of tax is equal to: 220.31 (1) two percent of gross premiums less return premiums on 220.32 all direct business received by the insurer or agents of the 220.33 insurer in Minnesota for life insurance, in cash or otherwise, 220.34 during the year; and 220.35 (2) 1.26 percent of gross premiums less return premiums on 220.36 all other direct business received by the insurer or agents of 221.1 the insurer in Minnesota, in cash or otherwise, during the year. 221.2 [EFFECTIVE DATE.] This section is effective for returns, 221.3 taxes, surcharges, and estimated payments required to be filed 221.4 or paid for tax years beginning on or after January 1, 2004. 221.5 Sec. 14. Minnesota Statutes 2002, section 297I.05, 221.6 subdivision 5, is amended to read: 221.7 Subd. 5. [HEALTH MAINTENANCE ORGANIZATIONS, NONPROFIT 221.8 HEALTH SERVICE PLAN CORPORATIONS, AND COMMUNITY INTEGRATED 221.9 SERVICE NETWORKS.] (a)Health maintenance organizations,221.10community integrated service networks, and nonprofit health care221.11service plan corporations are exempt from the tax imposed under221.12this section for premiums received in calendar years 2001 to221.132003.221.14(b) For calendar years after 2003,A tax is imposed on 221.15 health maintenance organizations, community integrated service 221.16 networks, and nonprofit health care service plan corporations. 221.17 The rate of tax is equal to one percent of gross premiums less 221.18 return premiums on all direct business received by the 221.19 organization, network, or corporation or its agents in 221.20 Minnesota, in cash or otherwise, in the calendar year. 221.21(c) In approving the premium rates as required in sections221.2262L.08, subdivision 8, and 62A.65, subdivision 3, the221.23commissioners of health and commerce shall ensure that any221.24exemption from tax as described in paragraph (a) is reflected in221.25the premium rate.221.26(d)(b) The commissioner shall deposit all revenues, 221.27 including penalties and interest, collected under this chapter 221.28 from health maintenance organizations, community integrated 221.29 service networks, and nonprofit health service plan corporations 221.30 in the health care access fund. Refunds of overpayments of tax 221.31 imposed by this subdivision must be paid from the health care 221.32 access fund. There is annually appropriated from the health 221.33 care access fund to the commissioner the amount necessary to 221.34 make any refunds of the tax imposed under this subdivision. 221.35 [EFFECTIVE DATE.] This section is effective January 1, 2004. 221.36 Sec. 15. [REPEALER.] 222.1 Minnesota Statutes 2002, section 297E.12, subdivision 10, 222.2 is repealed effective the day following final enactment. 222.3 ARTICLE 13 222.4 MISCELLANEOUS TECHNICAL 222.5 Section 1. Minnesota Statutes 2002, section 270.65, is 222.6 amended to read: 222.7 270.65 [DATE OF ASSESSMENT; DEFINITION.] 222.8 For purposes of taxes administered by the commissioner, the 222.9 term "date of assessment" means the date a liability reported on 222.10 a return was entered into the records of the commissioner or the 222.11 date a return should have been filed, whichever is later; or, in 222.12 the case of taxes determined by the commissioner, "date of 222.13 assessment" means the date of the order assessing taxes or date 222.14 of the return made by the commissioner; or, in the case of an 222.15 amended return filed by the taxpayer, the assessment date is the 222.16 date additional liability reported on the return, if any, was 222.17 entered into the records of the commissioner; or, in the case of 222.18 a consent agreement signed by the taxpayer under section 270.67, 222.19 subdivision 3, the assessment date is the notice date shown on 222.20 the agreement; or, in the case of a check from a taxpayer that 222.21 is dishonored and results in an erroneous refund being given to 222.22 the taxpayer, remittance of the check is deemed to be an 222.23 assessment and the "date of assessment" is the date the check 222.24 was received by the commissioner. 222.25 [EFFECTIVE DATE.] This section is effective the day 222.26 following final enactment. 222.27 Sec. 2. Minnesota Statutes 2003 Supplement, section 222.28 289A.19, subdivision 4, is amended to read: 222.29 Subd. 4. [ESTATE TAX RETURNS.]When in the commissioner's222.30judgment good cause exists, the commissioner may extend the time222.31for filing an estate tax return for not more than six months.222.32 When an extension to file the federal estate tax return has been 222.33 granted under section 6081 of the Internal Revenue Code, the 222.34 time for filing the estate tax return is extended for that 222.35 period. If the estate requests an extension to file an estate 222.36 tax return within the time provided in section 289A.18, 223.1 subdivision 3, the commissioner shall extend the time for filing 223.2 the estate tax return for six months. 223.3 [EFFECTIVE DATE.] This section is effective for estates of 223.4 decedents dying after December 31, 2003. 223.5 Sec. 3. Minnesota Statutes 2002, section 289A.37, 223.6 subdivision 5, is amended to read: 223.7 Subd. 5. [SUFFICIENCY OF NOTICE.] An order of assessment, 223.8 sent postage prepaid by United States mail to the taxpayer at 223.9 the taxpayer's last known address, or sent by electronic mail to 223.10 the taxpayer's last known electronic mailing address as provided 223.11 for in section 325L.08, is sufficient even if the taxpayer is 223.12 deceased or is under a legal disability, or, in the case of a 223.13 corporation, has terminated its existence, unless the department 223.14 has been provided with a new address by a party authorized to 223.15 receive notices of assessment. 223.16 [EFFECTIVE DATE.] This section is effective the day 223.17 following final enactment. 223.18 Sec. 4. Minnesota Statutes 2002, section 289A.60, 223.19 subdivision 6, is amended to read: 223.20 Subd. 6. [PENALTY FOR FAILURE TO FILE, FALSE OR FRAUDULENT 223.21 RETURN, EVASION.] If a person, with intent to evade or defeat a 223.22 tax or payment of tax, fails to file a return, files a false or 223.23 fraudulent return, or attempts in any other manner to evade or 223.24 defeat a tax or payment of tax, there is imposed on the person a 223.25 penalty equal to 50 percent of the tax, less amounts paid by the 223.26 person on the basis of the false or fraudulent return, if any, 223.27 due for the period to which the return related. 223.28 [EFFECTIVE DATE.] This section is effective the day 223.29 following final enactment. 223.30 Sec. 5. Minnesota Statutes 2003 Supplement, section 223.31 290.01, subdivision 19a, is amended to read: 223.32 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 223.33 individuals, estates, and trusts, there shall be added to 223.34 federal taxable income: 223.35 (1)(i) interest income on obligations of any state other 223.36 than Minnesota or a political or governmental subdivision, 224.1 municipality, or governmental agency or instrumentality of any 224.2 state other than Minnesota exempt from federal income taxes 224.3 under the Internal Revenue Code or any other federal statute; 224.4 and 224.5 (ii) exempt-interest dividends as defined in section 224.6 852(b)(5) of the Internal Revenue Code, except the portion of 224.7 the exempt-interest dividends derived from interest income on 224.8 obligations of the state of Minnesota or its political or 224.9 governmental subdivisions, municipalities, governmental agencies 224.10 or instrumentalities, but only if the portion of the 224.11 exempt-interest dividends from such Minnesota sources paid to 224.12 all shareholders represents 95 percent or more of the 224.13 exempt-interest dividends that are paid by the regulated 224.14 investment company as defined in section 851(a) of the Internal 224.15 Revenue Code, or the fund of the regulated investment company as 224.16 defined in section 851(g) of the Internal Revenue Code, making 224.17 the payment; and 224.18 (iii) for the purposes of items (i) and (ii), interest on 224.19 obligations of an Indian tribal government described in section 224.20 7871(c) of the Internal Revenue Code shall be treated as 224.21 interest income on obligations of the state in which the tribe 224.22 is located; 224.23 (2) the amount of income taxes paid or accrued within the 224.24 taxable year under this chapter andincomethe amount of taxes 224.25 based on net income paid to any other state or to any province 224.26 or territory of Canada, to the extent allowed as a deduction 224.27 under section 63(d) of the Internal Revenue Code, but the 224.28 addition may not be more than the amount by which the itemized 224.29 deductions as allowed under section 63(d) of the Internal 224.30 Revenue Code exceeds the amount of the standard deduction as 224.31 defined in section 63(c) of the Internal Revenue Code. For the 224.32 purpose of this paragraph, the disallowance of itemized 224.33 deductions under section 68 of the Internal Revenue Code of 224.34 1986, income tax is the last itemized deduction disallowed; 224.35 (3) the capital gain amount of a lump sum distribution to 224.36 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 225.1 Reform Act of 1986, Public Law 99-514, applies; 225.2 (4) the amount of income taxes paid or accrued within the 225.3 taxable year under this chapter andincometaxes based on net 225.4 income paid to any other state or any province or territory of 225.5 Canada, to the extent allowed as a deduction in determining 225.6 federal adjusted gross income. For the purpose of this 225.7 paragraph, income taxes do not include the taxes imposed by 225.8 sections 290.0922, subdivision 1, paragraph (b), 290.9727, 225.9 290.9728, and 290.9729; 225.10 (5) the amount of expense, interest, or taxes disallowed 225.11 pursuant to section 290.10; 225.12 (6) the amount of a partner's pro rata share of net income 225.13 which does not flow through to the partner because the 225.14 partnership elected to pay the tax on the income under section 225.15 6242(a)(2) of the Internal Revenue Code; and 225.16 (7) 80 percent of the depreciation deduction allowed under 225.17 section 168(k) of the Internal Revenue Code. For purposes of 225.18 this clause, if the taxpayer has an activity that in the taxable 225.19 year generates a deduction for depreciation under section 168(k) 225.20 and the activity generates a loss for the taxable year that the 225.21 taxpayer is not allowed to claim for the taxable year, "the 225.22 depreciation allowed under section 168(k)" for the taxable year 225.23 is limited to excess of the depreciation claimed by the activity 225.24 under section 168(k) over the amount of the loss from the 225.25 activity that is not allowed in the taxable year. In succeeding 225.26 taxable years when the losses not allowed in the taxable year 225.27 are allowed, the depreciation under section 168(k) is allowed. 225.28 [EFFECTIVE DATE.] This section is effective for tax years 225.29 beginning after December 31, 2003. 225.30 Sec. 6. Minnesota Statutes 2002, section 290.06, 225.31 subdivision 22, is amended to read: 225.32 Subd. 22. [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 225.33 taxpayer who is liable for taxes based onor measured bynet 225.34 income to another state, as provided in paragraphs (b) through 225.35 (f), upon income allocated or apportioned to Minnesota, is 225.36 entitled to a credit for the tax paid to another state if the 226.1 tax is actually paid in the taxable year or a subsequent taxable 226.2 year. A taxpayer who is a resident of this state pursuant to 226.3 section 290.01, subdivision 7,clause (2)paragraph (b), and who 226.4 is subject to income tax as a resident in the state of the 226.5 individual's domicile is not allowed this credit unless the 226.6 state of domicile does not allow a similar credit. 226.7 (b) For an individual, estate, or trust, the credit is 226.8 determined by multiplying the tax payable under this chapter by 226.9 the ratio derived by dividing the income subject to tax in the 226.10 other state that is also subject to tax in Minnesota while a 226.11 resident of Minnesota by the taxpayer's federal adjusted gross 226.12 income, as defined in section 62 of the Internal Revenue Code, 226.13 modified by the addition required by section 290.01, subdivision 226.14 19a, clause (1), and the subtraction allowed by section 290.01, 226.15 subdivision 19b, clause (1), to the extent the income is 226.16 allocated or assigned to Minnesota under sections 290.081 and 226.17 290.17. 226.18 (c) If the taxpayer is an athletic team that apportions all 226.19 of its income under section 290.17, subdivision 5, the credit is 226.20 determined by multiplying the tax payable under this chapter by 226.21 the ratio derived from dividing the total net income subject to 226.22 tax in the other state by the taxpayer's Minnesota taxable 226.23 income. 226.24 (d) The credit determined under paragraph (b) or (c) shall 226.25 not exceed the amount of tax so paid to the other state on the 226.26 gross income earned within the other state subject to tax under 226.27 this chapter, nor shall the allowance of the credit reduce the 226.28 taxes paid under this chapter to an amount less than what would 226.29 be assessed if such income amount was excluded from taxable net 226.30 income. 226.31 (e) In the case of the tax assessed on a lump sum 226.32 distribution under section 290.032, the credit allowed under 226.33 paragraph (a) is the tax assessed by the other state on the lump 226.34 sum distribution that is also subject to tax under section 226.35 290.032, and shall not exceed the tax assessed under section 226.36 290.032. To the extent the total lump sum distribution defined 227.1 in section 290.032, subdivision 1, includes lump sum 227.2 distributions received in prior years or is all or in part an 227.3 annuity contract, the reduction to the tax on the lump sum 227.4 distribution allowed under section 290.032, subdivision 2, 227.5 includes tax paid to another state that is properly apportioned 227.6 to that distribution. 227.7 (f) If a Minnesota resident reported an item of income to 227.8 Minnesota and is assessed tax in such other state on that same 227.9 income after the Minnesota statute of limitations has expired, 227.10 the taxpayer shall receive a credit for that year under 227.11 paragraph (a), notwithstanding any statute of limitations to the 227.12 contrary. The claim for the credit must be submitted within one 227.13 year from the date the taxes were paid to the other state. The 227.14 taxpayer must submit sufficient proof to show entitlement to a 227.15 credit. 227.16 (g) For the purposes of this subdivision, a resident 227.17 shareholder of a corporation treated as an "S" corporation under 227.18 section 290.9725, must be considered to have paid a tax imposed 227.19 on the shareholder in an amount equal to the shareholder's pro 227.20 rata share of any net income tax paid by the S corporation to 227.21 another state. For the purposes of the preceding sentence, the 227.22 term "net income tax" means any tax imposed on or measured by a 227.23 corporation's net income. 227.24 (h) For the purposes of this subdivision, a resident 227.25 partner of an entity taxed as a partnership under the Internal 227.26 Revenue Code must be considered to have paid a tax imposed on 227.27 the partner in an amount equal to the partner's pro rata share 227.28 of any net income tax paid by the partnership to another state. 227.29 For purposes of the preceding sentence, the term "net income" 227.30 tax means any tax imposed on or measured by a partnership's net 227.31 income. 227.32 (i) For the purposes of this subdivision, "another state": 227.33 (1) includes: 227.34 (i) the District of Columbia; and 227.35 (ii) a province or territory of Canada; but 227.36 (2) excludes Puerto Rico and the several territories 228.1 organized by Congress. 228.2 (j) The limitations on the credit in paragraphs (b), (c), 228.3 and (d), are imposed on a state by state basis. 228.4 (k) For a tax imposed by a province or territory of Canada, 228.5 the tax for purposes of this subdivision is the excess of the 228.6 tax over the amount of the foreign tax credit allowed under 228.7 section 27 of the Internal Revenue Code. In determining the 228.8 amount of the foreign tax credit allowed, the net income taxes 228.9 imposed by Canada on the income are deducted first. Any 228.10 remaining amount of the allowable foreign tax credit reduces the 228.11 provincial or territorial tax that qualifies for the credit 228.12 under this subdivision. 228.13 [EFFECTIVE DATE.] This section is effective for tax years 228.14 beginning after December 31, 2003. 228.15 Sec. 7. Minnesota Statutes 2003 Supplement, section 228.16 290.0674, subdivision 1, is amended to read: 228.17 Subdivision 1. [CREDIT ALLOWED.] An individual is allowed 228.18 a credit against the tax imposed by this chapter in an amount 228.19 equal to 75 percent of the amount paid for education-related 228.20 expenses for a qualifying child in kindergarten through grade 228.21 12. For purposes of this section, "education-related expenses" 228.22 means: 228.23 (1) fees or tuition for instruction by an instructor under 228.24 section 120A.22, subdivision 10, clause (1), (2), (3), (4), or 228.25 (5), or a member of the Minnesota Music Teachers Association, 228.26 and who is not a lineal ancestor or sibling of the dependent for 228.27 instruction outside the regular school day or school year, 228.28 including tutoring, driver's education offered as part of school 228.29 curriculum, regardless of whether it is taken from a public or 228.30 private entity or summer camps, in grade or age appropriate 228.31 curricula that supplement curricula and instruction available 228.32 during the regular school year, that assists a dependent to 228.33 improve knowledge of core curriculum areas or to expand 228.34 knowledge and skills under thegraduation rule under section228.35120B.02, paragraph (e), clauses (1) to (7), (9), and (10)228.36 required academic standards under section 120B.021, subdivision 229.1 1, and the elective standard under section 120B.022, subdivision 229.2 1, clause (3), and that do not include the teaching of religious 229.3 tenets, doctrines, or worship, the purpose of which is to 229.4 instill such tenets, doctrines, or worship; 229.5 (2) expenses for textbooks, including books and other 229.6 instructional materials and equipment purchased or leased for 229.7 use in elementary and secondary schools in teaching only those 229.8 subjects legally and commonly taught in public elementary and 229.9 secondary schools in this state. "Textbooks" does not include 229.10 instructional books and materials used in the teaching of 229.11 religious tenets, doctrines, or worship, the purpose of which is 229.12 to instill such tenets, doctrines, or worship, nor does it 229.13 include books or materials for extracurricular activities 229.14 including sporting events, musical or dramatic events, speech 229.15 activities, driver's education, or similar programs; 229.16 (3) a maximum expense of $200 per family for personal 229.17 computer hardware, excluding single purpose processors, and 229.18 educational software that assists a dependent to improve 229.19 knowledge of core curriculum areas or to expand knowledge and 229.20 skills under thegraduation rule under section 120B.02required 229.21 academic standards under section 120B.021, subdivision 1, and 229.22 the elective standard under section 120B.022, subdivision 1, 229.23 clause (3), purchased for use in the taxpayer's home and not 229.24 used in a trade or business regardless of whether the computer 229.25 is required by the dependent's school; and 229.26 (4) the amount paid to others for transportation of a 229.27 qualifying child attending an elementary or secondary school 229.28 situated in Minnesota, North Dakota, South Dakota, Iowa, or 229.29 Wisconsin, wherein a resident of this state may legally fulfill 229.30 the state's compulsory attendance laws, which is not operated 229.31 for profit, and which adheres to the provisions of the Civil 229.32 Rights Act of 1964 and chapter 363A. 229.33 For purposes of this section, "qualifying child" has the 229.34 meaning given in section 32(c)(3) of the Internal Revenue Code. 229.35 [EFFECTIVE DATE.] This section is effective for tax years 229.36 beginning after December 31, 2003. 230.1 Sec. 8. Minnesota Statutes 2002, section 290.92, 230.2 subdivision 1, is amended to read: 230.3 Subdivision 1. [DEFINITIONS.] (1) [WAGES.] For purposes 230.4 of this section, the term "wages" means the same as that term is 230.5 defined in section 3401(a) and (f) of the Internal Revenue Code. 230.6 (2) [PAYROLL PERIOD.] For purposes of this section the 230.7 term "payroll period" means a period for which a payment of 230.8 wages is ordinarily made to the employee by the employee's 230.9 employer, and the term "miscellaneous payroll period" means a 230.10 payroll period other than a daily, weekly, biweekly, 230.11 semimonthly, monthly, quarterly, semiannual, or annual payroll 230.12 period. 230.13 (3) [EMPLOYEE.] For purposes of this section the term 230.14 "employee" means any resident individual performing services for 230.15 an employer, either within or without, or both within and 230.16 without the state of Minnesota, and every nonresident individual 230.17 performing services within the state of Minnesota, the 230.18 performance of which services constitute, establish, and 230.19 determine the relationship between the parties as that of 230.20 employer and employee. As used in the preceding sentence, the 230.21 term "employee" includes an officer of a corporation, and an 230.22 officer, employee, or elected official of the United States, a 230.23 state, or any political subdivision thereof, or the District of 230.24 Columbia, or any agency or instrumentality of any one or more of 230.25 the foregoing. 230.26 (4) [EMPLOYER.] For purposes of this section the term 230.27 "employer" means any person, including individuals, fiduciaries, 230.28 estates, trusts, partnerships, limited liability companies, and 230.29 corporations transacting business in or deriving any income from 230.30 sources within the state of Minnesota for whom an individual 230.31 performs or performed any service, of whatever nature, as the 230.32 employee of such person, except that if the person for whom the 230.33 individual performs or performed the services does not have 230.34legalcontrol of the payment of the wages for such services, the 230.35 term "employer," except for purposes of paragraph (1), means the 230.36 person havinglegalcontrol of the payment of such wages. As 231.1 used in the preceding sentence, the term "employer" includes any 231.2 corporation, individual, estate, trust, or organization which is 231.3 exempt from taxation under section 290.05 and further includes, 231.4 but is not limited to, officers of corporations who havelegal231.5 control, either individually or jointly with another or others, 231.6 of the payment of the wages. 231.7 (5) [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For 231.8 purposes of this section, the term "number of withholding 231.9 exemptions claimed" means the number of withholding exemptions 231.10 claimed in a withholding exemption certificate in effect under 231.11 subdivision 5, except that if no such certificate is in effect, 231.12 the number of withholding exemptions claimed shall be considered 231.13 to be zero. 231.14 [EFFECTIVE DATE.] This section is effective the day 231.15 following final enactment. 231.16 Sec. 9. Minnesota Statutes 2002, section 290C.05, is 231.17 amended to read: 231.18 290C.05 [ANNUAL CERTIFICATION.] 231.19 On or before July 1 of each year, beginning with the year 231.20 after the claimant has received an approved application, the 231.21 commissioner shall send each claimant enrolled under the 231.22 sustainable forest incentive program a certification form. The 231.23 claimant must sign the certification, attesting that the 231.24 requirements and conditions for continued enrollment in the 231.25 program are currently being met, and must return the signed 231.26 certification form to the commissioner by August 15 of that same 231.27 year.Failure toIf the claimant does not return an annual 231.28 certification form by the due dateshall result in removal of231.29the lands from the provisions of the sustainable forest231.30incentive program, and the imposition of any applicable removal231.31penalty, the provisions in section 290C.11 apply.The claimant231.32may appeal the removal and any associated penalty according to231.33the procedures and within the time allowed under this chapter.231.34 [EFFECTIVE DATE.] This section is effective the day 231.35 following final enactment. 231.36 Sec. 10. [290C.055] [LENGTH OF COVENANT.] 232.1 The covenant remains in effect for a minimum of eight 232.2 years. If land is removed from the program after it has been 232.3 enrolled for less than four years, the covenant remains in 232.4 effect for eight years from the date recorded. 232.5 In the case of land that has been enrolled for more than 232.6 four years and is removed from the program for any reason, there 232.7 is a four-year waiting period to end the covenant. The covenant 232.8 remains in effect until January 1 of the fifth calendar year 232.9 that begins after the date that: 232.10 (1) the commissioner receives notification from the 232.11 claimant that the claimant wishes to be removed from the program 232.12 under section 290C.10, or 232.13 (2) the date that land is removed from the program under 232.14 section 290C.11. 232.15 Notwithstanding the other provisions of this section, the 232.16 covenant is terminated at the same time that land is removed 232.17 from the program due to acquisition of title or possession for a 232.18 public purpose under section 290C.10. 232.19 [EFFECTIVE DATE.] This section is effective the day 232.20 following final enactment. 232.21 Sec. 11. Minnesota Statutes 2002, section 325D.33, 232.22 subdivision 6, is amended to read: 232.23 Subd. 6. [VIOLATIONS.] If the commissioner determines that 232.24 a distributor is violating any provision of this chapter, the 232.25 commissioner must give the distributor a written warning 232.26 explaining the violation and an explanation of what must be done 232.27 to comply with this chapter. Within ten days of issuance of the 232.28 warning, the distributor must notify the commissioner that the 232.29 distributor has complied with the commissioner's recommendation 232.30 or request that the commissioner set the issue for a hearing 232.31 pursuant to chapter 14. If a hearing is requested, the hearing 232.32 shall be scheduled within 20 days of the request and the 232.33 recommendation of the administrative law judge shall be issued 232.34 within five working days of the close of the hearing. The 232.35 commissioner's final determination shall be issued within five 232.36 working days of the receipt of the administrative law judge's 233.1 recommendation. If the commissioner's final determination is 233.2 adverse to the distributor and the distributor does not comply 233.3 within ten days of receipt of the commissioner's final 233.4 determination, the commissioner may order the distributor to 233.5 immediately cease the stamping of cigarettes. As soon as 233.6 practicable after the order, the commissioner must remove the 233.7 meter and any unapplied cigarette stamps from the premises of 233.8 the distributor. 233.9 If within ten days of issuance of the written warning the 233.10 distributor has not complied with the commissioner's 233.11 recommendation or requested a hearing, the commissioner may 233.12 order the distributor to immediately cease the stamping of 233.13 cigarettes and remove the meter and unapplied stamps from the 233.14 distributor's premises. 233.15If, within any 12-month period, the commissioner has issued233.16three written warnings to any distributor, even if the233.17distributor has complied within ten days, the commissioner shall233.18notify the distributor of the commissioner's intent to revoke233.19the distributor's license for a continuing course of conduct233.20contrary to this chapter. For purposes of this paragraph, a233.21written warning that was ultimately resolved by removal of the233.22warning by the commissioner is not deemed to be a warning. The233.23commissioner must notify the distributor of the date and time of233.24a hearing pursuant to chapter 14 at least 20 days before the233.25hearing is held. The hearing must provide an opportunity for233.26the distributor to show cause why the license should not be233.27revoked. If the commissioner revokes a distributor's license,233.28the commissioner shall not issue a new license to that233.29distributor for 180 days.233.30 [EFFECTIVE DATE.] This section is effective the day 233.31 following final enactment. 233.32 Sec. 12. Minnesota Statutes 2002, section 473.843, 233.33 subdivision 5, is amended to read: 233.34 Subd. 5. [PENALTIES; ENFORCEMENT.] The audit, penalty, and 233.35 enforcement provisions applicable to corporate franchise taxes 233.36 imposed under chapter 290 apply to the fees imposed under this 234.1 section. The commissioner of revenue shall administer the 234.2 provisions. 234.3 [EFFECTIVE DATE.] This section is effective the day 234.4 following final enactment. 234.5 Sec. 13. [REPEALER.] 234.6 Minnesota Rules, parts 8093.2000 and 8093.3000, are 234.7 repealed. 234.8 [EFFECTIVE DATE.] This section is effective the day 234.9 following final enactment. 234.10 ARTICLE 14 234.11 BLUE WATERS 234.12 Section 1. Minnesota Statutes 2003 Supplement, section 234.13 273.13, subdivision 23, is amended to read: 234.14 Subd. 23. [CLASS 2.] (a) Class 2a property is agricultural 234.15 land including any improvements that is homesteaded. The market 234.16 value of the house and garage and immediately surrounding one 234.17 acre of land has the same class rates as class 1a property under 234.18 subdivision 22. The value of the remaining land including 234.19 improvements up to and including $600,000 market value has a net 234.20 class rate of 0.55 percent of market value. The remaining 234.21 property over $600,000 market value has a class rate of one 234.22 percent of market value. 234.23 (b) Class 2b property is (1) real estate, rural in 234.24 character and used exclusively for growing trees for timber, 234.25 lumber, and wood and wood products; (2) real estate that is not 234.26 improved with a structure and is used exclusively for growing 234.27 trees for timber, lumber, and wood and wood products, if the 234.28 owner has participated or is participating in a cost-sharing 234.29 program for afforestation, reforestation, or timber stand 234.30 improvement on that particular property, administered or 234.31 coordinated by the commissioner of natural resources; (3) real 234.32 estate that is nonhomestead agricultural land; or (4) a landing 234.33 area or public access area of a privately owned public use 234.34 airport. Class 2b property has a net class rate of one percent 234.35 of market value. 234.36 (c) Agricultural land as used in this section means 235.1 contiguous acreage of ten acres or more, used during the 235.2 preceding year for agricultural purposes. "Agricultural 235.3 purposes" as used in this section means the raising or 235.4 cultivation of agricultural products. "Agricultural purposes" 235.5 also includes enrollment in the Reinvest in Minnesota program 235.6 under sections 103F.501 to 103F.535 or the federal Conservation 235.7 Reserve Program as contained in Public Law 99-198 if the 235.8 property was classified as agricultural (i) under this 235.9 subdivision for the assessment year 2002 or (ii) in the year 235.10 prior to its enrollment. Contiguous acreage on the same parcel, 235.11 or contiguous acreage on an immediately adjacent parcel under 235.12 the same ownership, may also qualify as agricultural land, but 235.13 only if it is pasture, timber, waste, unusable wild land, or 235.14 land included in state or federal farm programs. Agricultural 235.15 classification for property shall be determined excluding the 235.16 house, garage, and immediately surrounding one acre of land, and 235.17 shall not be based upon the market value of any residential 235.18 structures on the parcel or contiguous parcels under the same 235.19 ownership. 235.20 (d) Real estate, excluding the house, garage, and 235.21 immediately surrounding one acre of land, of less than ten acres 235.22 which is exclusively and intensively used for raising or 235.23 cultivating agricultural products, shall be considered as 235.24 agricultural land. 235.25 Land shall be classified as agricultural even if all or a 235.26 portion of the agricultural use of that property is the leasing 235.27 to, or use by another person for agricultural purposes. 235.28 Classification under this subdivision is not determinative 235.29 for qualifying under section 273.111. 235.30 The property classification under this section supersedes, 235.31 for property tax purposes only, any locally administered 235.32 agricultural policies or land use restrictions that define 235.33 minimum or maximum farm acreage. 235.34 (e) The term "agricultural products" as used in this 235.35 subdivision includes production for sale of: 235.36 (1) livestock, dairy animals, dairy products, poultry and 236.1 poultry products, fur-bearing animals, horticultural and nursery 236.2 stock, fruit of all kinds, vegetables, forage, grains, bees, and 236.3 apiary products by the owner; 236.4 (2) fish bred for sale and consumption if the fish breeding 236.5 occurs on land zoned for agricultural use; 236.6 (3) the commercial boarding of horses if the boarding is 236.7 done in conjunction with raising or cultivating agricultural 236.8 products as defined in clause (1); 236.9 (4) property which is owned and operated by nonprofit 236.10 organizations used for equestrian activities, excluding racing; 236.11 (5) game birds and waterfowl bred and raised for use on a 236.12 shooting preserve licensed under section 97A.115; 236.13 (6) insects primarily bred to be used as food for animals; 236.14 (7) trees, grown for sale as a crop, and not sold for 236.15 timber, lumber, wood, or wood products; and 236.16 (8) maple syrup taken from trees grown by a person licensed 236.17 by the Minnesota Department of Agriculture under chapter 28A as 236.18 a food processor. 236.19 (f) If a parcel used for agricultural purposes is also used 236.20 for commercial or industrial purposes, including but not limited 236.21 to: 236.22 (1) wholesale and retail sales; 236.23 (2) processing of raw agricultural products or other goods; 236.24 (3) warehousing or storage of processed goods; and 236.25 (4) office facilities for the support of the activities 236.26 enumerated in clauses (1), (2), and (3), 236.27 the assessor shall classify the part of the parcel used for 236.28 agricultural purposes as class 1b, 2a, or 2b, whichever is 236.29 appropriate, and the remainder in the class appropriate to its 236.30 use. The grading, sorting, and packaging of raw agricultural 236.31 products for first sale is considered an agricultural purpose. 236.32 A greenhouse or other building where horticultural or nursery 236.33 products are grown that is also used for the conduct of retail 236.34 sales must be classified as agricultural if it is primarily used 236.35 for the growing of horticultural or nursery products from seed, 236.36 cuttings, or roots and occasionally as a showroom for the retail 237.1 sale of those products. Use of a greenhouse or building only 237.2 for the display of already grown horticultural or nursery 237.3 products does not qualify as an agricultural purpose. 237.4 The assessor shall determine and list separately on the 237.5 records the market value of the homestead dwelling and the one 237.6 acre of land on which that dwelling is located. If any farm 237.7 buildings or structures are located on this homesteaded acre of 237.8 land, their market value shall not be included in this separate 237.9 determination. 237.10 (g) To qualify for classification under paragraph (b), 237.11 clause (4), a privately owned public use airport must be 237.12 licensed as a public airport under section 360.018. For 237.13 purposes of paragraph (b), clause (4), "landing area" means that 237.14 part of a privately owned public use airport properly cleared, 237.15 regularly maintained, and made available to the public for use 237.16 by aircraft and includes runways, taxiways, aprons, and sites 237.17 upon which are situated landing or navigational aids. A landing 237.18 area also includes land underlying both the primary surface and 237.19 the approach surfaces that comply with all of the following: 237.20 (i) the land is properly cleared and regularly maintained 237.21 for the primary purposes of the landing, taking off, and taxiing 237.22 of aircraft; but that portion of the land that contains 237.23 facilities for servicing, repair, or maintenance of aircraft is 237.24 not included as a landing area; 237.25 (ii) the land is part of the airport property; and 237.26 (iii) the land is not used for commercial or residential 237.27 purposes. 237.28 The land contained in a landing area under paragraph (b), clause 237.29 (4), must be described and certified by the commissioner of 237.30 transportation. The certification is effective until it is 237.31 modified, or until the airport or landing area no longer meets 237.32 the requirements of paragraph (b), clause (4). For purposes of 237.33 paragraph (b), clause (4), "public access area" means property 237.34 used as an aircraft parking ramp, apron, or storage hangar, or 237.35 an arrival and departure building in connection with the airport. 237.36 (h) Class 2c property consists of any parcel or contiguous 238.1 parcels of unimproved real estate, excluding agricultural land 238.2 classified under this subdivision, that meets all the criteria 238.3 in clauses (1) to (5): 238.4 (1) the property consists of at least 200 contiguous feet 238.5 of unimproved real estate that borders a meandered lake as 238.6 defined in section 103G.005, subdivision 15, paragraph (a), 238.7 clause (3); 238.8 (2) the unimproved real estate is located within 400 feet 238.9 from the ordinary high water elevation of the public waters. 238.10 For purposes of this clause, "unimproved" means that the 238.11 property, or that portion of the property qualifying under this 238.12 paragraph, contains no structures, that there are no docks or 238.13 landings on its shoreline, and that the natural terrain and 238.14 vegetation has not been disturbed, or has been restored to 238.15 native vegetation; 238.16 (3) the property is either (i) the homestead of the owner, 238.17 the owner's spouse, or the owner or spouse's son or daughter, or 238.18 (ii) has been in possession of the owner, the owner's spouse, or 238.19 the owner's or spouse's son or daughter for a period of at least 238.20 seven years prior to application for benefits under this 238.21 section; 238.22 (4) the owner files an application with the county assessor 238.23 by July 1 for classification under this paragraph for the 238.24 subsequent assessment year; and 238.25 (5) the owner of the property signs a covenant agreement 238.26 and files the covenant with the county assessor in the county 238.27 where the property is located. The covenant agreement must 238.28 include all of the following: 238.29 (i) legal description of the area to which the covenant 238.30 applies; 238.31 (ii) name and address of the owner; 238.32 (iii) a statement that the land described in the covenant 238.33 must be kept as undeveloped land for the duration of the 238.34 covenant; 238.35 (iv) a statement that the landowner may initiate expiration 238.36 of the covenant agreement by notifying the county assessor, in 239.1 writing, with the date of expiration which must be at least 239.2 eight years from the date of the expiration notice; 239.3 (v) a statement that the covenant is binding on the owner 239.4 or owner's successor or assignee and runs with the land; and 239.5 (vi) a witnessed signature of the owner covenanting to keep 239.6 the land in its undeveloped state as it existed on the date the 239.7 covenant was signed. 239.8 Upon expiration of a covenant agreement in clause (5), the 239.9 property is subject to additional taxes. The amount of 239.10 additional taxes due on the property equals the difference 239.11 between the taxes actually levied and the taxes that would have 239.12 been imposed if the property had been valued and classified as 239.13 if class 2c did not apply. The additional taxes must be 239.14 extended against the property on the tax list for the current 239.15 year. No interest or penalties may be levied on the additional 239.16 taxes if timely paid, and the additional taxes must be levied 239.17 only with respect to the last seven years that the property was 239.18 valued and assessed under this paragraph. For purposes of this 239.19 paragraph, "timely paid" means paid (A) within 60 days after 239.20 notification from the county that the property no longer 239.21 qualifies, or (B) prior to the recording of the conveyance of 239.22 the property, whichever is earlier. 239.23 The tax imposed under this paragraph is a lien on the 239.24 property assessed to the same extent and for the same duration 239.25 as other real property taxes. The tax must be extended by the 239.26 county auditor and, when payable, be collected and distributed 239.27 in the same manner provided by law for the collection and 239.28 distribution of other property taxes. 239.29 Class 2c has a class rate of 0.8 percent of market value. 239.30 [EFFECTIVE DATE.] This section is effective for the 2005 239.31 assessment and thereafter, for taxes payable in 2006 and 239.32 thereafter.