1.1                          A bill for an act 
  1.2             relating to taxation; making technical and 
  1.3             administrative changes and corrections; amending 
  1.4             Minnesota Statutes 1996, sections 60A.15, subdivision 
  1.5             2a; 60E.04, subdivision 4; 69.021, subdivision 2; 
  1.6             270.07, subdivision 3; 272.02, subdivision 4; 272.04, 
  1.7             subdivision 1; 273.032; 273.124, subdivisions 1 and 
  1.8             13; 273.1392; 273.1398, subdivision 1; 275.011, 
  1.9             subdivision 1; 275.065, subdivision 3; 275.295, 
  1.10            subdivision 3; 276A.01, subdivision 7; 277.21, 
  1.11            subdivision 3; 287.22; 289A.01; 289A.08, subdivision 
  1.12            11; 289A.09, subdivision 2; 289A.10, subdivision 1; 
  1.13            289A.11, subdivision 1; 289A.18, subdivision 2; 
  1.14            289A.19, subdivisions 1, 2, 3, and 4; 289A.35; 
  1.15            289A.38, subdivision 7; 289A.65, subdivision 1; 
  1.16            290.01, subdivisions 2 and 4a; 290.06, subdivision 22; 
  1.17            290.17, subdivision 2; 290.92, subdivision 24; 
  1.18            290A.04, subdivision 6; 295.50, subdivisions 3, 4, 7, 
  1.19            13, and by adding a subdivision; 295.51, subdivision 
  1.20            1; 295.52, subdivision 1b; 295.53, subdivisions 1, 3, 
  1.21            and 5; 295.54, subdivision 1; 295.582; 297A.01, 
  1.22            subdivision 1; 297A.09; 297A.12; 297A.14, subdivision 
  1.23            4; 297A.22; 297A.23; 297A.25, subdivisions 1, 2, 3, 6, 
  1.24            8, 9, 11, 16, 17, 18, 19, 20, 21, 23, 26, 27, 28, 29, 
  1.25            30, 34, 35, 38, 39, 40, 41, 42, 43, 46, 49, 51, 52, 
  1.26            53, 57, and 61; 297A.256, subdivision 1; 297A.44, 
  1.27            subdivision 1; 297B.03; 297B.035, subdivision 3; 
  1.28            297B.11; 299F.21, subdivision 2; 414.033, subdivisions 
  1.29            7 and 12; 469.177, subdivision 9; 473.388, subdivision 
  1.30            7; and 473F.02, subdivision 7. 
  1.31  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.32                             ARTICLE 1
  1.33                       INCOME AND WITHHOLDING
  1.34     Section 1.  Minnesota Statutes 1996, section 270.07, 
  1.35  subdivision 3, is amended to read: 
  1.36     Subd. 3.  [ADDITIONAL POWERS OF COMMISSIONER.] 
  1.37  Notwithstanding any other provision of law the commissioner of 
  1.38  revenue may, 
  2.1      (a) based upon the administrative costs of processing, 
  2.2   determine minimum standards for the determination of additional 
  2.3   tax for which an order shall be issued, and 
  2.4      (b) based upon collection costs as compared to the amount 
  2.5   of tax involved, determine minimum standards of collection, and 
  2.6      (c) based upon the administrative costs of processing, 
  2.7   determine the minimum amount of refunds for which an order shall 
  2.8   be issued and refund made where no claim therefor has been 
  2.9   filed, and 
  2.10     (d) cancel any amounts below these minimum standards 
  2.11  determined under (a) and (b) hereof, and 
  2.12     (e) based upon the inability of a taxpayer to pay a 
  2.13  delinquent tax liability, abate the liability if the taxpayer 
  2.14  agrees to perform uncompensated public service work for a state 
  2.15  agency, a political subdivision or public corporation of this 
  2.16  state, or a nonprofit educational, medical, or social service 
  2.17  agency.  The department of corrections shall administer the work 
  2.18  program.  No benefits under chapter 176 or 268 shall be 
  2.19  available, but a claim authorized under section 3.739 may be 
  2.20  made by the taxpayer.  The state may not enter into any 
  2.21  agreement that has the purpose of or results in the displacement 
  2.22  of public employees by a delinquent taxpayer under this 
  2.23  section.  The state must certify to the appropriate bargaining 
  2.24  agent or employees, as applicable, that the work performed by a 
  2.25  delinquent taxpayer will not result in the displacement of 
  2.26  currently employed workers or layoff from a substantially 
  2.27  equivalent position, including partial displacement such as 
  2.28  reduction in hours of nonovertime work, wages, or other 
  2.29  employment benefits.  The program authorized under this 
  2.30  paragraph terminates June 30, 1998. 
  2.31     Sec. 2.  Minnesota Statutes 1996, section 289A.01, is 
  2.32  amended to read: 
  2.33     289A.01 [APPLICATION OF CHAPTER.] 
  2.34     This chapter applies to taxes laws administered by or paid 
  2.35  to the commissioner under chapters 290, 290A, 291, and 297A, and 
  2.36  sections 298.01 and 298.015. 
  3.1      Sec. 3.  Minnesota Statutes 1996, section 289A.08, 
  3.2   subdivision 11, is amended to read: 
  3.3      Subd. 11.  [INFORMATION INCLUDED IN INCOME TAX RETURN.] The 
  3.4   return must state the name of the taxpayer, or taxpayers, if the 
  3.5   return is a joint return, and the address of the taxpayer in the 
  3.6   same name or names and same address as the taxpayer has used in 
  3.7   making the taxpayer's income tax return to the United States, 
  3.8   and must state the social security number of the taxpayer, or 
  3.9   taxpayers, if a social security number has been issued by the 
  3.10  United States with respect to the taxpayers, and must state the 
  3.11  amount of the taxable income of the taxpayer as it appears on 
  3.12  the federal return for the taxable year to which the Minnesota 
  3.13  state return applies.  The taxpayer must attach to the 
  3.14  taxpayer's Minnesota state income tax return a copy of the 
  3.15  federal income tax return that the taxpayer has filed or is 
  3.16  about to file for the period, unless the taxpayer is eligible to 
  3.17  telefile the federal return and does file the Minnesota return 
  3.18  by telefiling. 
  3.19     Sec. 4.  Minnesota Statutes 1996, section 289A.09, 
  3.20  subdivision 2, is amended to read: 
  3.21     Subd. 2.  [WITHHOLDING STATEMENT TO EMPLOYEE OR PAYEE AND 
  3.22  TO COMMISSIONER.] (a) A person required to deduct and withhold 
  3.23  from an employee a tax under section 290.92, subdivision 2a or 
  3.24  3, or 290.923, subdivision 2, or who would have been required to 
  3.25  deduct and withhold a tax under section 290.92, subdivision 2a 
  3.26  or 3, or persons required to withhold tax under section 290.923, 
  3.27  subdivision 2, determined without regard to section 290.92, 
  3.28  subdivision 19, if the employee or payee had claimed no more 
  3.29  than one withholding exemption, or who paid wages or made 
  3.30  payments not subject to withholding under section 290.92, 
  3.31  subdivision 2a or 3, or 290.923, subdivision 2, to an employee 
  3.32  or person receiving royalty payments in excess of $600, or who 
  3.33  has entered into a voluntary withholding agreement with a payee 
  3.34  under section 290.92, subdivision 20, must give every employee 
  3.35  or person receiving royalty payments in respect to the 
  3.36  remuneration paid by the person to the employee or person 
  4.1   receiving royalty payments during the calendar year, on or 
  4.2   before January 31 of the succeeding year, or, if employment is 
  4.3   terminated before the close of the calendar year, within 30 days 
  4.4   after the date of receipt of a written request from the employee 
  4.5   if the 30-day period ends before January 31, a written statement 
  4.6   showing the following: 
  4.7      (1) name of the person; 
  4.8      (2) the name of the employee or payee and the employee's or 
  4.9   payee's social security account number; 
  4.10     (3) the total amount of wages as that term is defined in 
  4.11  section 290.92, subdivision 1, paragraph (1); the total amount 
  4.12  of remuneration subject to withholding under section 290.92, 
  4.13  subdivision 20; the amount of sick pay as required under section 
  4.14  6051(f) of the Internal Revenue Code; and the amount of 
  4.15  royalties subject to withholding under section 290.923, 
  4.16  subdivision 2; and 
  4.17     (4) the total amount deducted and withheld as tax under 
  4.18  section 290.92, subdivision 2a or 3, or 290.923, subdivision 2. 
  4.19     (b) The statement required to be furnished by this 
  4.20  paragraph with respect to any remuneration must be furnished at 
  4.21  those times, must contain the information required, and must be 
  4.22  in the form the commissioner prescribes. 
  4.23     (c) The commissioner may prescribe rules providing for 
  4.24  reasonable extensions of time, not in excess of 30 days, to 
  4.25  employers or payers required to give the statements to their 
  4.26  employees or payees under this subdivision. 
  4.27     (d) A duplicate of any statement made under this 
  4.28  subdivision and in accordance with rules prescribed by the 
  4.29  commissioner, along with a reconciliation in the form the 
  4.30  commissioner prescribes of the statements for the calendar year, 
  4.31  including a reconciliation of the quarterly returns required to 
  4.32  be filed under subdivision 1, must be filed with the 
  4.33  commissioner on or before February 28 of the year after the 
  4.34  payments were made.  
  4.35     (e) If an employer cancels the employer's Minnesota 
  4.36  withholding account number required by section 290.92, 
  5.1   subdivision 24, the information required by paragraph (d), must 
  5.2   be filed with the commissioner within 30 days of the end of the 
  5.3   quarter in which the employer cancels its account number. 
  5.4      (f) The employer must submit the statements required to be 
  5.5   sent to the commissioner on magnetic media, if the magnetic 
  5.6   media was required to satisfy the federal reporting requirements 
  5.7   of section 6011(e) of the Internal Revenue Code and the 
  5.8   regulations issued under it. 
  5.9      Sec. 5.  Minnesota Statutes 1996, section 289A.10, 
  5.10  subdivision 1, is amended to read: 
  5.11     Subdivision 1.  [RETURN REQUIRED.] In the case of a 
  5.12  decedent who has an interest in property with a situs in 
  5.13  Minnesota, the personal representative must submit a Minnesota 
  5.14  estate tax return to the commissioner, on a form prescribed by 
  5.15  the commissioner, in instances in which a federal estate tax 
  5.16  return is required to be filed. 
  5.17     The return must be accompanied by a federal estate tax 
  5.18  return, a schedule of the assets in the estate at their date of 
  5.19  death values, and must contain a computation of the Minnesota 
  5.20  estate tax due.  The return must be signed by the personal 
  5.21  representative. 
  5.22     Sec. 6.  Minnesota Statutes 1996, section 289A.18, 
  5.23  subdivision 2, is amended to read: 
  5.24     Subd. 2.  [WITHHOLDING RETURNS, ENTERTAINER WITHHOLDING 
  5.25  RETURNS, RETURNS FOR WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE 
  5.26  CONTRACTORS, AND WITHHOLDING RETURNS FROM PARTNERSHIPS AND S 
  5.27  CORPORATIONS.] Withholding returns for the first, second, and 
  5.28  third quarters are due on or before the last day of the month 
  5.29  following the close of the quarterly period.  However, if the 
  5.30  return shows timely deposits in full payment of the taxes due 
  5.31  for that period, the returns for the first, second, and third 
  5.32  quarters may be filed on or before the tenth day of the second 
  5.33  calendar month following the period and.  The return for the 
  5.34  fourth quarter may must be filed on or before the 28th day of 
  5.35  the second calendar month following the period.  An employer, in 
  5.36  preparing a quarterly return, may take credit for monthly 
  6.1   deposits previously made for that quarter.  Entertainer 
  6.2   withholding tax returns are due within 30 days after each 
  6.3   performance.  Returns for withholding from payments to 
  6.4   out-of-state contractors are due within 30 days after the 
  6.5   payment to the contractor.  Returns for withholding by 
  6.6   partnerships are due on or before the due date specified for 
  6.7   filing partnership returns.  Returns for withholding by S 
  6.8   corporations are due on or before the due date specified for 
  6.9   filing corporate franchise tax returns. 
  6.10     Sec. 7.  Minnesota Statutes 1996, section 289A.19, 
  6.11  subdivision 1, is amended to read: 
  6.12     Subdivision 1.  [FIDUCIARY INCOME, ENTERTAINMENT TAX, AND 
  6.13  INFORMATION RETURNS.] When, in the commissioner's judgment, good 
  6.14  cause exists, the commissioner may extend the time for 
  6.15  filing fiduciary income tax returns, entertainment tax returns, 
  6.16  and information returns for not more than six months.  If an 
  6.17  extension to file the federal fiduciary income tax return or 
  6.18  information return has been granted under section 6081 of the 
  6.19  Internal Revenue Code, the time for filing the state return is 
  6.20  extended for that period.  The commissioner may require the 
  6.21  taxpayer to file a tentative return when the regularly required 
  6.22  return is due, and to pay a tax on the basis of the tentative 
  6.23  return at the times required for the payment of taxes on the 
  6.24  basis of the regularly required return from the taxpayer.  
  6.25     Sec. 8.  Minnesota Statutes 1996, section 289A.19, 
  6.26  subdivision 2, is amended to read: 
  6.27     Subd. 2.  [CORPORATE FRANCHISE AND MINING COMPANY TAXES.] 
  6.28  The commissioner may grant Corporations or mining companies 
  6.29  shall receive an extension of up to seven months for filing the 
  6.30  return of a corporation subject to tax under chapter 290 or a 
  6.31  mining company for filing the return of a mining company subject 
  6.32  to tax under sections 298.01 and 298.015 if:  
  6.33     (1) the corporation or mining company files a tentative 
  6.34  return when the regularly required return is due; 
  6.35     (2) the corporation or mining company pays the tax on the 
  6.36  basis of the tentative return and at least 90 percent of the 
  7.1   amount of tax, determined without regard to any prepayment of 
  7.2   tax, shown on the tentative return, or the amount of tax paid on 
  7.3   or before the regular due date of the return, is at least 90 
  7.4   percent of the amount shown on the corporation's or mining 
  7.5   company's regularly required return; 
  7.6      (3) (2) the balance due shown on the regularly required 
  7.7   return is paid on or before the extended due date of the return; 
  7.8   and 
  7.9      (4) (3) interest on any balance due is paid at the rate 
  7.10  specified in section 270.75 from the regular due date of the 
  7.11  return until the tax is paid. 
  7.12     Sec. 9.  Minnesota Statutes 1996, section 289A.19, 
  7.13  subdivision 3, is amended to read: 
  7.14     Subd. 3.  [WITHHOLDING RETURNS.] The commissioner shall 
  7.15  grant an automatic extension of 60 days to file a withholding 
  7.16  tax return with the commissioner provided all the withholding 
  7.17  taxes have been paid by the date prescribed by section 289A.20, 
  7.18  subdivision 2.  In any case where good cause exists, the 
  7.19  commissioner may grant an extension of time of not more than 60 
  7.20  days for filing a withholding return.  
  7.21     Sec. 10.  Minnesota Statutes 1996, section 289A.19, 
  7.22  subdivision 4, is amended to read: 
  7.23     Subd. 4.  [ESTATE TAX RETURNS.] Where good cause exists, 
  7.24  the commissioner may extend the time for filing an estate tax 
  7.25  return for not more than six months.  When an extension to file 
  7.26  the federal estate tax return has been granted under section 
  7.27  6081 of the Internal Revenue Code, the time for filing the 
  7.28  estate tax return is extended for that period.  
  7.29     Sec. 11.  Minnesota Statutes 1996, section 289A.38, 
  7.30  subdivision 7, is amended to read: 
  7.31     Subd. 7.  [FEDERAL TAX CHANGES.] If the amount of income, 
  7.32  items of tax preference, deductions, or credits for any year of 
  7.33  a taxpayer as reported to the Internal Revenue Service is 
  7.34  changed or corrected by the commissioner of Internal Revenue or 
  7.35  other officer of the United States or other competent authority, 
  7.36  or where a renegotiation of a contract or subcontract with the 
  8.1   United States results in a change in income, items of tax 
  8.2   preference, deductions, or credits, or withholding tax, or, in 
  8.3   the case of estate tax, where there are adjustments to the 
  8.4   taxable estate resulting in a change to the credit for state 
  8.5   death taxes, the taxpayer shall report the change or correction 
  8.6   or renegotiation results in writing to the commissioner.  The 
  8.7   report must be submitted within 180 days after the final 
  8.8   determination and must be in the form of either an amended 
  8.9   Minnesota return conceding the accuracy of the federal 
  8.10  determination or a letter detailing how the federal 
  8.11  determination is incorrect or does not change the Minnesota 
  8.12  tax.  A taxpayer filing an amended federal tax return must also 
  8.13  file a copy of the amended return with the commissioner of 
  8.14  revenue within 180 days after filing the amended return. 
  8.15     Sec. 12.  Minnesota Statutes 1996, section 289A.65, 
  8.16  subdivision 1, is amended to read: 
  8.17     Subdivision 1.  [TAXPAYER RIGHT TO RECONSIDERATION.] A 
  8.18  taxpayer may obtain reconsideration by the commissioner of an 
  8.19  order assessing tax, a denial of a request for abatement of 
  8.20  penalty or interest, or a denial of a claim for refund by filing 
  8.21  an administrative appeal under subdivision 4.  A taxpayer cannot 
  8.22  obtain reconsideration under this section if the action taken by 
  8.23  the commissioner is the outcome of an administrative appeal. 
  8.24     Sec. 13.  Minnesota Statutes 1996, section 290.01, 
  8.25  subdivision 2, is amended to read: 
  8.26     Subd. 2.  [PERSON.] The term "person" includes individuals, 
  8.27  fiduciaries, estates, and trusts, and partnerships not included 
  8.28  in the definition of corporations and may, where the context 
  8.29  requires, include corporations as herein defined. 
  8.30     Sec. 14.  Minnesota Statutes 1996, section 290.01, 
  8.31  subdivision 4a, is amended to read: 
  8.32     Subd. 4a.  [FINANCIAL INSTITUTION.] (a) "Financial 
  8.33  institution" means: 
  8.34     (1) a holding company; 
  8.35     (2) any regulated financial corporation; or 
  8.36     (3) any other corporation organized under the laws of the 
  9.1   United States or organized under the laws of this state or any 
  9.2   other state or country that is carrying on the business of a 
  9.3   financial institution. 
  9.4      (b) "Holding company" means any corporation registered 
  9.5   under the Federal Bank Holding Company Act of 1956, as amended, 
  9.6   or registered as a savings and loan holding company under the 
  9.7   Federal National Housing Act, as amended, or a federal savings 
  9.8   bank holding company. 
  9.9      (c) "Regulated financial corporation" means an institution, 
  9.10  the deposits or accounts of which are insured under the Federal 
  9.11  Deposit Insurance Act or by the Federal Savings and Loan 
  9.12  Insurance Corporation, any institution which is a member of a 
  9.13  Federal Home Loan Bank, any other bank or thrift institution 
  9.14  incorporated or organized under the laws of any state or any 
  9.15  foreign country which is engaged in the business of receiving 
  9.16  deposits, any corporation organized under the provisions of 
  9.17  United States Code, title 12, sections 611 to 631 (Edge Act 
  9.18  Corporations), and any agency of a foreign depository as defined 
  9.19  in United States Code, title 12, section 3101. 
  9.20     (d) "Business of a financial institution" means: 
  9.21     (1) the business that any corporation organized under the 
  9.22  authority of the United States or organized under the laws of 
  9.23  this state or any other state or country does or has authority 
  9.24  to do which is substantially similar to the business which a 
  9.25  corporation may be created to do under chapters 46 to 55 or any 
  9.26  business which a corporation is authorized to do by those laws; 
  9.27  or 
  9.28     (2) the business that any corporation organized under the 
  9.29  authority of the United States or organized under the laws of 
  9.30  this state or any other state or country does or has authority 
  9.31  to do if the corporation derives more than 50 percent of its 
  9.32  gross income from lending activities (including discounting 
  9.33  obligations) in substantial competition with the businesses 
  9.34  described in clause (1).  For purposes of this clause, the 
  9.35  computation of the gross income of a corporation does not 
  9.36  include income from nonrecurring, extraordinary items. 
 10.1      Sec. 15.  Minnesota Statutes 1996, section 290.06, 
 10.2   subdivision 22, is amended to read: 
 10.3      Subd. 22.  [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 
 10.4   taxpayer who is liable for taxes on or measured by net income to 
 10.5   another state or province or territory of Canada, as provided in 
 10.6   paragraphs (b) through (f), upon income allocated or apportioned 
 10.7   to Minnesota, is entitled to a credit for the tax paid to 
 10.8   another state or province or territory of Canada if the tax is 
 10.9   actually paid in the taxable year or a subsequent taxable year.  
 10.10  A taxpayer who is a resident of this state pursuant to section 
 10.11  290.01, subdivision 7, clause (2), and who is subject to income 
 10.12  tax as a resident in the state of the individual's domicile is 
 10.13  not allowed this credit unless the state of domicile does not 
 10.14  allow a similar credit. 
 10.15     (b) For an individual, estate, or trust, the credit is 
 10.16  determined by multiplying the tax payable under this chapter by 
 10.17  the ratio derived by dividing the income subject to tax in the 
 10.18  other state or province or territory of Canada that is also 
 10.19  subject to tax in Minnesota while a resident of Minnesota by the 
 10.20  taxpayer's federal adjusted gross income, as defined in section 
 10.21  62 of the Internal Revenue Code, modified by the addition 
 10.22  required by section 290.01, subdivision 19a, clause (1), and the 
 10.23  subtraction allowed by section 290.01, subdivision 19b, clause 
 10.24  (1), to the extent the income is allocated or assigned to 
 10.25  Minnesota under sections 290.081 and 290.17.  
 10.26     (c) If the taxpayer is an athletic team that apportions all 
 10.27  of its income under section 290.17, subdivision 5, paragraph 
 10.28  (c), the credit is determined by multiplying the tax payable 
 10.29  under this chapter by the ratio derived from dividing the total 
 10.30  net income subject to tax in the other state or province or 
 10.31  territory of Canada by the taxpayer's Minnesota taxable income. 
 10.32     (d) The credit determined under paragraph (b) or (c) shall 
 10.33  not exceed the amount of tax so paid to the other state or 
 10.34  province or territory of Canada on the gross income earned 
 10.35  within the other state or province or territory of Canada 
 10.36  subject to tax under this chapter, nor shall the allowance of 
 11.1   the credit reduce the taxes paid under this chapter to an amount 
 11.2   less than what would be assessed if such income amount was 
 11.3   excluded from taxable net income. 
 11.4      (e) In the case of the tax assessed on a lump sum 
 11.5   distribution under section 290.032, the credit allowed under 
 11.6   paragraph (a) is the tax assessed by the other state or province 
 11.7   or territory of Canada on the lump sum distribution that is also 
 11.8   subject to tax under section 290.032, and shall not exceed the 
 11.9   tax assessed under section 290.032.  To the extent the total 
 11.10  lump sum distribution defined in section 290.032, subdivision 1, 
 11.11  includes lump sum distributions received in prior years or is 
 11.12  all or in part an annuity contract, the reduction to the tax on 
 11.13  the lump sum distribution allowed under section 290.032, 
 11.14  subdivision 2, includes tax paid to another state that is 
 11.15  properly apportioned to that distribution. 
 11.16     (f) If a Minnesota resident reported an item of income to 
 11.17  Minnesota and is assessed tax in such other state or province or 
 11.18  territory of Canada on that same income after the Minnesota 
 11.19  statute of limitations has expired, the taxpayer shall receive a 
 11.20  credit for that year under paragraph (a), notwithstanding any 
 11.21  statute of limitations to the contrary.  The claim for the 
 11.22  credit must be submitted within one year from the date the taxes 
 11.23  were paid to the other state or province or territory of 
 11.24  Canada.  The taxpayer must submit sufficient proof to show 
 11.25  entitlement to a credit. 
 11.26     (g) For the purposes of this subdivision, a resident 
 11.27  shareholder of a corporation having a valid election in effect 
 11.28  under section 1362 of the Internal Revenue Code must be 
 11.29  considered to have paid a tax imposed on the shareholder in an 
 11.30  amount equal to the shareholder's pro rata share of any net 
 11.31  income tax paid by the S corporation to another state.  For the 
 11.32  purposes of the preceding sentence, the term "net income tax" 
 11.33  means any tax imposed on or measured by a corporation's net 
 11.34  income. 
 11.35     (h) For the purposes of this subdivision, a resident member 
 11.36  partner of a limited liability company an entity taxed as a 
 12.1   partnership under the Internal Revenue Code must be considered 
 12.2   to have paid a tax imposed on the member partner in an amount 
 12.3   equal to the member's partner's pro rata share of any net income 
 12.4   tax paid by the limited liability company partnership to a 
 12.5   another state that does not measure the income of the member of 
 12.6   the limited liability company by reference to the income of the 
 12.7   limited liability company.  For purposes of the preceding 
 12.8   sentence, the term "net income" tax means any tax imposed on or 
 12.9   measured by a limited liability company's partnership's net 
 12.10  income. 
 12.11     (i) For the purposes of this subdivision, "another state" 
 12.12  includes the District of Columbia, but does not include Puerto 
 12.13  Rico or the several territories organized by Congress. 
 12.14     (j) The limitations on the credit in paragraphs (b), (c), 
 12.15  and (d), are imposed on a state by state basis. 
 12.16     Sec. 16.  Minnesota Statutes 1996, section 290.17, 
 12.17  subdivision 2, is amended to read: 
 12.18     Subd. 2.  [INCOME NOT DERIVED FROM CONDUCT OF A TRADE OR 
 12.19  BUSINESS.] The income of a taxpayer subject to the allocation 
 12.20  rules that is not derived from the conduct of a trade or 
 12.21  business must be assigned in accordance with paragraphs (a) to 
 12.22  (f):  
 12.23     (a)(1) Subject to paragraphs (a)(2) and (a)(3), income from 
 12.24  labor or personal or professional services is assigned to this 
 12.25  state if, and to the extent that, the labor or services are 
 12.26  performed within it; all other income from such sources is 
 12.27  treated as income from sources without this state.  
 12.28     Severance pay shall be considered income from labor or 
 12.29  personal or professional services. 
 12.30     (2) In the case of an individual who is a nonresident of 
 12.31  Minnesota and who is an athlete or entertainer, income from 
 12.32  compensation for labor or personal services performed within 
 12.33  this state shall be determined in the following manner:  
 12.34     (i) The amount of income to be assigned to Minnesota for an 
 12.35  individual who is a nonresident salaried athletic team employee 
 12.36  shall be determined by using a fraction in which the denominator 
 13.1   contains the total number of days in which the individual is 
 13.2   under a duty to perform for the employer, and the numerator is 
 13.3   the total number of those days spent in Minnesota; and 
 13.4      (ii) The amount of income to be assigned to Minnesota for 
 13.5   an individual who is a nonresident, and who is an athlete or 
 13.6   entertainer not listed in clause (i), for that person's athletic 
 13.7   or entertainment performance in Minnesota shall be determined by 
 13.8   assigning to this state all income from performances or athletic 
 13.9   contests in this state.  
 13.10     (3) For purposes of this section, amounts received by a 
 13.11  nonresident from the United States, its agencies or 
 13.12  instrumentalities, the Federal Reserve Bank, the state of 
 13.13  Minnesota or any of its political or governmental subdivisions, 
 13.14  or a Minnesota volunteer firefighters' relief association, by 
 13.15  way of payment as a pension, public employee retirement benefit, 
 13.16  or any combination of these, or as a retirement or survivor's 
 13.17  benefit made from a plan qualifying under section 401, 403, 408, 
 13.18  or 409, or as defined in section 403(b) or 457 of the Internal 
 13.19  Revenue Code, are not considered income derived from carrying on 
 13.20  a trade or business or from performing personal or professional 
 13.21  services in Minnesota, and are not taxable under this chapter.  
 13.22     (b) Income or gains from tangible property located in this 
 13.23  state that is not employed in the business of the recipient of 
 13.24  the income or gains must be assigned to this state. 
 13.25     (c) Income or gains from intangible personal property not 
 13.26  employed in the business of the recipient of the income or gains 
 13.27  must be assigned to this state if the recipient of the income or 
 13.28  gains is a resident of this state or is a resident trust or 
 13.29  estate.  
 13.30     Gain on the sale of a partnership interest is allocable to 
 13.31  this state in the ratio of the original cost of partnership 
 13.32  tangible property in this state to the original cost of 
 13.33  partnership tangible property everywhere, determined at the time 
 13.34  of the sale.  If more than 50 percent of the value of the 
 13.35  partnership's assets consists of intangibles, gain or loss from 
 13.36  the sale of the partnership interest is allocated to this state 
 14.1   in accordance with the sales factor of the partnership for its 
 14.2   first full tax period immediately preceding the tax period of 
 14.3   the partnership during which the partnership interest was sold. 
 14.4      Gain on the sale of goodwill or income from a covenant not 
 14.5   to compete that is connected with a business operating all or 
 14.6   partially in Minnesota is allocated to this state to the extent 
 14.7   that the income from the business in the year preceding the year 
 14.8   of sale was assignable to Minnesota under subdivision 3.  
 14.9      When an employer pays an employee for a covenant not to 
 14.10  compete, the income allocated to this state is in the ratio of 
 14.11  the employee's service in Minnesota in the calendar year 
 14.12  preceding leaving the employment of the employer over the total 
 14.13  services performed by the employee for the employer in that year.
 14.14     (d) Income from the operation of a farm shall be assigned 
 14.15  to this state if the farm is located within this state and to 
 14.16  other states only if the farm is not located in this state.  
 14.17     (e) Income from winnings on Minnesota pari-mutuel betting 
 14.18  tickets, the Minnesota state lottery, and lawful gambling as 
 14.19  defined in section 349.12, subdivision 24, conducted within the 
 14.20  boundaries of the state of Minnesota shall be assigned to this 
 14.21  state.  
 14.22     (f) (e) All items of gross income not covered in paragraphs 
 14.23  (a) to (e) (d) and not part of the taxpayer's income from a 
 14.24  trade or business shall be assigned to the taxpayer's domicile. 
 14.25     Sec. 17.  Minnesota Statutes 1996, section 290.92, 
 14.26  subdivision 24, is amended to read: 
 14.27     Subd. 24.  [APPLICATION FOR ACCOUNT NUMBER.] An employer, 
 14.28  or person withholding tax under section 290.923, desiring to 
 14.29  engage in business in Minnesota shall file with the commissioner 
 14.30  an application for a withholding account number on or before the 
 14.31  due date of the first payment required to be made under 
 14.32  subdivision 6 date the employer is required to withhold 
 14.33  Minnesota taxes under this section.  An application for an 
 14.34  account number must be made upon a form prescribed by the 
 14.35  commissioner.  It must give the name of the employer or payor, 
 14.36  the location of the place or places of business, the names, 
 15.1   addresses and social security numbers of the owners or partners, 
 15.2   or if the employer or payor is a corporation of the officers, or 
 15.3   if the employer or payor is a trust of the trustees, and other 
 15.4   information the commissioner may require.  The application must 
 15.5   be filed by the owner if the employer or payor is a natural 
 15.6   person; by a member or partner if the employer or payor is an 
 15.7   association or partnership; by a trustee if the employer or 
 15.8   payor be a trust, or by a person authorized to sign the 
 15.9   application if the employer or payor is a corporation. 
 15.10     No fee shall be charged for the application. 
 15.11     The account number is not assignable. 
 15.12     Sec. 18.  Minnesota Statutes 1996, section 290A.04, 
 15.13  subdivision 6, is amended to read: 
 15.14     Subd. 6.  [INFLATION ADJUSTMENT.] Beginning for property 
 15.15  tax refunds payable in calendar year 1996, the commissioner 
 15.16  shall annually adjust the dollar amounts of the income 
 15.17  thresholds and the maximum refunds under subdivisions 2 and 2a 
 15.18  for inflation.  The commissioner shall make the inflation 
 15.19  adjustments in accordance with section 290.06, subdivision 2d, 
 15.20  except that for purposes of this subdivision the percentage 
 15.21  increase shall be determined from the year ending on August 31 
 15.22  June 30, 1994, to the year ending on August 31 June 30 of the 
 15.23  year preceding that in which the refund is payable.  The 
 15.24  commissioner shall use the appropriate percentage increase to 
 15.25  annually adjust the income thresholds and maximum refunds under 
 15.26  subdivisions 2 and 2a for inflation without regard to whether or 
 15.27  not the income tax brackets are adjusted for inflation in that 
 15.28  year.  The commissioner shall round the thresholds and the 
 15.29  maximum amounts, as adjusted to the nearest $10 amount.  If the 
 15.30  amount ends in $5, the commissioner shall round it up to the 
 15.31  next $10 amount.  
 15.32     The commissioner shall annually announce the adjusted 
 15.33  refund schedule at the same time provided under section 290.06.  
 15.34  The determination of the commissioner under this subdivision is 
 15.35  not a rule under the administrative procedure act. 
 15.36     Sec. 19.  [EFFECTIVE DATE.] 
 16.1      Section 2 is effective the day following final enactment.  
 16.2   Section 3 is effective for taxable years beginning after 
 16.3   December 31, 1995.  Sections 5 and 10 are effective for estates 
 16.4   of decedents dying after the date of final enactment.  Sections 
 16.5   6 and 7 are effective for returns due after December 31, 1996.  
 16.6   Section 9 is effective for returns due after July 30, 1997.  
 16.7   Section 11 is effective for federal changes beginning after the 
 16.8   date of final enactment.  Section 12 is effective for actions of 
 16.9   the commissioner after the date of final enactment.  Sections 13 
 16.10  to 16 are effective for taxable years beginning after December 
 16.11  31, 1996.  Section 17 is effective for wages paid after December 
 16.12  31, 1997.  Section 18 is effective for property tax refunds 
 16.13  based on rents paid in 1997 and property taxes payable in 1998 
 16.14  and thereafter. 
 16.15                             ARTICLE 2
 16.16                      SALES AND SPECIAL TAXES
 16.17     Section 1.  Minnesota Statutes 1996, section 60A.15, 
 16.18  subdivision 2a, is amended to read: 
 16.19     Subd. 2a.  [PROCEDURE FOR FILING AND ADJUSTMENT OF 
 16.20  STATEMENTS AND TAXES.] (a) Every insurer required to pay a 
 16.21  premium tax in this state shall make and file a statement of 
 16.22  estimated premium taxes for the period covered by the 
 16.23  installment tax payment.  Such statement shall be in the form 
 16.24  prescribed by the commissioner of revenue. 
 16.25     (b) On or before March 1, annually every insurer subject to 
 16.26  taxation under this section shall make an annual return for the 
 16.27  preceding calendar year setting forth such information as the 
 16.28  commissioner of revenue may reasonably require on forms 
 16.29  prescribed by the commissioner. 
 16.30     (c) On March 1, the insurer shall pay any additional amount 
 16.31  due for the preceding calendar year; if there has been an 
 16.32  overpayment, such overpayment may be credited without interest 
 16.33  on the estimated tax due April 15 1. 
 16.34     (d) If unpaid by this date, penalties as provided in 
 16.35  section 289A.60, subdivision 1, as it relates to withholding and 
 16.36  sales or use taxes, shall be imposed.  
 17.1      Sec. 2.  Minnesota Statutes 1996, section 60E.04, 
 17.2   subdivision 4, is amended to read: 
 17.3      Subd. 4.  [TAXATION.] (a) Each risk retention group is 
 17.4   liable for the payment of premium taxes and taxes on premiums of 
 17.5   direct business for risks resident or located within this state, 
 17.6   and shall report to the commissioner of revenue the net premiums 
 17.7   written for risks resident or located within this state.  The 
 17.8   risk retention group shall be subject to taxation, and any 
 17.9   applicable taxation-related fines and penalties, on the same 
 17.10  basis as a foreign admitted insurer. 
 17.11     (b) To the extent licensed agents or brokers are utilized 
 17.12  pursuant to section 60E.12, they shall report to the 
 17.13  commissioner of revenue the premiums for direct business for 
 17.14  risks resident or located within this state which the licensees 
 17.15  have placed with or on behalf of a risk retention group not 
 17.16  chartered in this state. 
 17.17     (c) To the extent that insurance agents or brokers are 
 17.18  utilized pursuant to section 60E.12, each agent or broker shall 
 17.19  keep a complete and separate record of all policies procured 
 17.20  from each risk retention group, which shall be open to 
 17.21  examination by the commissioner, as provided in section 
 17.22  60A.031 and by the commissioner of revenue.  These records 
 17.23  shall, for each policy and each kind of insurance provided, 
 17.24  include the following: 
 17.25     (1) the limit of liability; 
 17.26     (2) the time period covered; 
 17.27     (3) the effective date; 
 17.28     (4) the name of the risk retention group which issued the 
 17.29  policy; 
 17.30     (5) the gross premium charged; and 
 17.31     (6) the amount of return premiums, if any. 
 17.32     Sec. 3.  Minnesota Statutes 1996, section 69.021, 
 17.33  subdivision 2, is amended to read: 
 17.34     Subd. 2.  [REPORT OF PREMIUMS.] Each insurer, including 
 17.35  township and farmers mutual insurers where applicable, shall 
 17.36  return to the commissioner with its annual financial statement 
 18.1   the reports described in subdivision 1 certified by its 
 18.2   secretary and president or chief financial officer.  The 
 18.3   Minnesota Firetown Premium Report shall contain a true and 
 18.4   accurate statement of the total premium for all gross direct 
 18.5   fire, lightning, sprinkler leakage, and extended coverage 
 18.6   insurance of all domestic mutual insurers and the total premiums 
 18.7   for all gross direct fire, lightning, sprinkler leakage and 
 18.8   extended coverage insurance of all other insurers, less return 
 18.9   premiums and dividends received by them on that business written 
 18.10  or done during the preceding calendar year upon property located 
 18.11  within the state or brought into the state for temporary use.  
 18.12  The fire and extended coverage portion of multiperil and 
 18.13  multiple peril package premiums and all other combination 
 18.14  premiums shall be determined by applying percentages determined 
 18.15  by the commissioner or by rating bureaus recognized by the 
 18.16  commissioner.  The Minnesota Aid to Police Premium Report shall 
 18.17  contain a true and accurate statement of the total premiums, 
 18.18  less return premiums and dividends, on all direct business 
 18.19  received by such insurer in this state, or by its agents for it, 
 18.20  in cash or otherwise, during the preceding calendar year, with 
 18.21  reference to insurance written for perils described in section 
 18.22  69.011, subdivision 1, clause (f).  
 18.23     Sec. 4.  Minnesota Statutes 1996, section 289A.11, 
 18.24  subdivision 1, is amended to read: 
 18.25     Subdivision 1.  [RETURN REQUIRED.] Except as provided in 
 18.26  section 289A.18, subdivision 4, for the month in which taxes 
 18.27  imposed by sections 297A.01 to 297A.44 chapter 297A are payable, 
 18.28  or for which a return is due, a return for the preceding 
 18.29  reporting period must be filed with the commissioner in the form 
 18.30  and manner the commissioner prescribes.  A person making sales 
 18.31  at retail at two or more places of business may file a 
 18.32  consolidated return subject to rules prescribed by the 
 18.33  commissioner.  In computing the dollar amount of items on the 
 18.34  return, the amounts are rounded off to the nearest whole dollar, 
 18.35  disregarding amounts less than 50 cents and increasing amounts 
 18.36  of 50 cents to 99 cents to the next highest dollar. 
 19.1      Notwithstanding this subdivision, a person who is not 
 19.2   required to hold a sales tax permit under chapter 297A and who 
 19.3   makes annual purchases of less than $18,500 that are subject to 
 19.4   the use tax imposed by section 297A.14, may file an annual use 
 19.5   tax return on a form prescribed by the commissioner.  If a 
 19.6   person who qualifies for an annual use tax reporting period is 
 19.7   required to obtain a sales tax permit or makes use tax purchases 
 19.8   in excess of $18,500 during the calendar year, the reporting 
 19.9   period must be considered ended at the end of the month in which 
 19.10  the permit is applied for or the purchase in excess of $18,500 
 19.11  is made and a return must be filed for the preceding reporting 
 19.12  period. 
 19.13     Sec. 5.  Minnesota Statutes 1996, section 289A.35, is 
 19.14  amended to read: 
 19.15     289A.35 [ASSESSMENTS.] 
 19.16     The commissioner shall make determinations, corrections, 
 19.17  and assessments with respect to state taxes, including interest, 
 19.18  additions to taxes, and assessable penalties.  The commissioner 
 19.19  may audit and adjust the taxpayer's computation of federal 
 19.20  taxable income, items of federal tax preferences, or federal 
 19.21  credit amounts to make them conform with the provisions of 
 19.22  chapter 290 or section 298.01.  If a taxpayer fails to file a 
 19.23  required return, the commissioner, from information in the 
 19.24  commissioner's possession or obtainable by the commissioner, may 
 19.25  make a return for the taxpayer.  The return will be prima facie 
 19.26  correct and valid.  If a return has been filed, the commissioner 
 19.27  shall examine the return and make any audit or investigation 
 19.28  that is considered necessary.  The commissioner may use 
 19.29  statistical or other sampling techniques consistent with 
 19.30  generally accepted accounting principles auditing standards in 
 19.31  examining returns or records and making assessments. 
 19.32     Sec. 6.  Minnesota Statutes 1996, section 297A.01, 
 19.33  subdivision 1, is amended to read: 
 19.34     Subdivision 1.  The following words, terms, and phrases 
 19.35  when used in sections 297A.01 to 297A.44 this chapter shall have 
 19.36  the meanings ascribed to them in this section except where the 
 20.1   context clearly indicates a different meaning. 
 20.2      Sec. 7.  Minnesota Statutes 1996, section 297A.09, is 
 20.3   amended to read: 
 20.4      297A.09 [PRESUMPTION OF TAX; BURDEN OF PROOF.] 
 20.5      For the purpose of the proper administration of sections 
 20.6   297A.01 to 297A.44 this chapter and to prevent evasion of the 
 20.7   tax, it shall be presumed that all gross receipts are subject to 
 20.8   the tax until the contrary is established.  The burden of 
 20.9   proving that a sale is not a sale at retail is upon the person 
 20.10  who makes the sale, but that person may take from the purchaser 
 20.11  an exemption certificate to the effect that the property 
 20.12  purchased is for resale or that the sale is otherwise exempt 
 20.13  from the application of the tax imposed by sections 297A.01 to 
 20.14  297A.44.  
 20.15     Sec. 8.  Minnesota Statutes 1996, section 297A.12, is 
 20.16  amended to read: 
 20.17     297A.12 [IMPROPER USE OF SUBJECT OF PURCHASE OBTAINED WITH 
 20.18  EXEMPTION CERTIFICATE.] 
 20.19     If a purchaser who gives an exemption certificate makes any 
 20.20  use of the subject of the purchase other than for a purpose 
 20.21  exempted by sections 297A.01 to 297A.44 under this chapter, such 
 20.22  use shall be deemed a retail sale by the purchaser as of the 
 20.23  time of first use by the purchaser, and the sales price to the 
 20.24  purchaser shall be deemed the gross receipts from such retail 
 20.25  sale.  If the sole nonexempt use is rental while holding for 
 20.26  sale, the purchaser shall include in the purchaser's gross 
 20.27  receipts the amount of the rental charged.  Upon subsequent sale 
 20.28  of such property, the seller shall include the entire amount of 
 20.29  gross receipts received therefrom without deduction of amounts 
 20.30  previously received as rentals.  
 20.31     Sec. 9.  Minnesota Statutes 1996, section 297A.14, 
 20.32  subdivision 4, is amended to read: 
 20.33     Subd. 4.  [DE MINIMIS EXEMPTION.] Purchases subject to use 
 20.34  tax under this section are exempt if (1) the purchase is made by 
 20.35  an individual for personal use, and (2) the total purchases that 
 20.36  are subject to the use tax do not exceed $770 in the calendar 
 21.1   year.  For purposes of this subdivision, "personal use" includes 
 21.2   purchases for gifts.  If an individual makes purchases, which 
 21.3   are subject to use tax, of more than $770 in the calendar year 
 21.4   the individual must pay the use tax on the entire amount.  This 
 21.5   exemption does not apply to purchases made from retailers who 
 21.6   are required or registered to collect taxes under this chapter. 
 21.7      Sec. 10.  Minnesota Statutes 1996, section 297A.22, is 
 21.8   amended to read: 
 21.9      297A.22 [PRESUMPTION OF PURPOSE OF SALE, BURDEN OF PROOF.] 
 21.10     For the purpose of the proper administration of sections 
 21.11  297A.01 to 297A.44 and to prevent evasion of the use tax and the 
 21.12  duty to collect the use tax, it shall be presumed that all 
 21.13  retail sales for delivery in Minnesota are for storage, use or 
 21.14  other consumption in Minnesota until the contrary is 
 21.15  established.  The burden of proving the contrary shall be upon 
 21.16  The person retailer who makes the sale but that person may take 
 21.17  from the purchaser an exemption certificate in accordance with 
 21.18  sections 297A.09 to 297A.13.  
 21.19     Sec. 11.  Minnesota Statutes 1996, section 297A.23, is 
 21.20  amended to read: 
 21.21     297A.23 [PROPERTY BROUGHT TO STATE; PRESUMPTION; BURDEN OF 
 21.22  PROOF.] 
 21.23     Any purchaser of tangible personal property or any items 
 21.24  enumerated in section 297A.14 which are shipped or brought to 
 21.25  Minnesota by the purchaser after July 31, 1967, shall have the 
 21.26  burden of proving that the same were not purchased from a 
 21.27  retailer for storage, use or consumption in Minnesota.  
 21.28     Sec. 12.  Minnesota Statutes 1996, section 297A.25, 
 21.29  subdivision 1, is amended to read: 
 21.30     Subdivision 1.  [SCOPE.] The items contained in this 
 21.31  section are specifically exempted from the taxes imposed by 
 21.32  sections 297A.01 to 297A.44 this chapter. 
 21.33     Sec. 13.  Minnesota Statutes 1996, section 297A.25, 
 21.34  subdivision 2, is amended to read: 
 21.35     Subd. 2.  [FOOD PRODUCTS.] The gross receipts from the sale 
 21.36  of and storage, use, or consumption of food products including 
 22.1   but not limited to cereal and cereal products, butter, cheese, 
 22.2   milk and milk products, oleomargarine, meat and meat products, 
 22.3   fish and fish products, eggs and egg products, vegetables and 
 22.4   vegetable products, fruit and fruit products, spices and salt, 
 22.5   sugar and sugar products, coffee and coffee substitutes, tea, 
 22.6   cocoa and cocoa products, and food products which are not 
 22.7   taxable pursuant to section 297A.01, subdivision 3, clause (c) 
 22.8   are exempt.  This exemption does not include the following:  
 22.9      (1) candy and candy products, except when sold for 
 22.10  fundraising purposes by a nonprofit organization that provides 
 22.11  educational and social activities for young people primarily 
 22.12  aged 18 and under; 
 22.13     (2) carbonated beverages, beverages commonly referred to as 
 22.14  soft drinks containing less than 15 percent fruit juice, or 
 22.15  bottled water other than noncarbonated and noneffervescent 
 22.16  bottled water sold in individual containers of one-half gallon 
 22.17  or more in size. 
 22.18     Sec. 14.  Minnesota Statutes 1996, section 297A.25, 
 22.19  subdivision 3, is amended to read: 
 22.20     Subd. 3.  [MEDICINES; MEDICAL DEVICES.] The gross receipts 
 22.21  from the sale of and storage, use, or consumption of prescribed 
 22.22  drugs, prescribed medicine and insulin, intended for use, 
 22.23  internal or external, in the cure, mitigation, treatment or 
 22.24  prevention of illness or disease in human beings are exempt, 
 22.25  together with prescription glasses, fever thermometers, 
 22.26  therapeutic, and prosthetic devices.  "Prescribed drugs" or 
 22.27  "prescribed medicine" includes over-the-counter drugs or 
 22.28  medicine prescribed by a licensed physician.  "Therapeutic 
 22.29  devices" includes reusable finger pricking devices for the 
 22.30  extraction of blood, blood glucose monitoring machines, and 
 22.31  other diagnostic agents used in diagnosing, monitoring, or 
 22.32  treating diabetes.  Nonprescription analgesics consisting 
 22.33  principally (determined by the weight of all ingredients) of 
 22.34  acetaminophen, acetylsalicylic acid, ibuprofen, or a combination 
 22.35  thereof are exempt. 
 22.36     Sec. 15.  Minnesota Statutes 1996, section 297A.25, 
 23.1   subdivision 6, is amended to read: 
 23.2      Subd. 6.  [PACKING MATERIALS.] The gross receipts from the 
 23.3   sale of and storage, use, or consumption of packing materials 
 23.4   used to pack and ship household goods, the ultimate destination 
 23.5   of which is outside the state of Minnesota and which are not 
 23.6   thereafter returned to a point within Minnesota, except in the 
 23.7   course of interstate commerce, are exempt.  
 23.8      Sec. 16.  Minnesota Statutes 1996, section 297A.25, 
 23.9   subdivision 8, is amended to read: 
 23.10     Subd. 8.  [CLOTHING.] The gross receipts from the sale 
 23.11  of and storage, use, or consumption of clothing and wearing 
 23.12  apparel are exempt, except the following: 
 23.13     (1) all articles commonly or commercially known as jewelry, 
 23.14  whether real or imitation; pearls, precious and semiprecious 
 23.15  stones, and imitations thereof; articles made of, or ornamented, 
 23.16  mounted or fitted with precious metals or imitations thereof; 
 23.17  watches; clocks; cases and movements for watches and clocks; 
 23.18  gold, gold-plated, silver, or sterling flatware or hollowware 
 23.19  and silver-plated hollowware; opera glasses; lorgnettes; marine 
 23.20  glasses; field glasses and binoculars; 
 23.21     (2) articles made of fur on the hide or pelt, and articles 
 23.22  of which such fur is the component material or chief value, but 
 23.23  only if such value is more than three times the value of the 
 23.24  next most valuable component material; 
 23.25     (3) perfume, essences, extracts, toilet waters, cosmetics, 
 23.26  petroleum jellies, hair oils, pomades, hair dressings, hair 
 23.27  restoratives, hair dyes, aromatic cachous and toilet powders.  
 23.28  The tax imposed by this chapter shall not apply to lotion, oil, 
 23.29  powder, or other articles intended to be used or applied only in 
 23.30  the case of babies; 
 23.31     (4) trunks, valises, traveling bags, suitcases, satchels, 
 23.32  overnight bags, hat boxes for use by travelers, beach bags, 
 23.33  bathing suit bags, brief cases made of leather or imitation 
 23.34  leather, salespeople's sample and display cases, purses, 
 23.35  handbags, pocketbooks, wallets, billfolds, card, pass, and key 
 23.36  cases and toilet cases. 
 24.1      Sec. 17.  Minnesota Statutes 1996, section 297A.25, 
 24.2   subdivision 9, is amended to read: 
 24.3      Subd. 9.  [MATERIALS CONSUMED IN PRODUCTION.] The gross 
 24.4   receipts from the sale of and the storage, use, or consumption 
 24.5   of all materials, including chemicals, fuels, petroleum 
 24.6   products, lubricants, packaging materials, including returnable 
 24.7   containers used in packaging food and beverage products, feeds, 
 24.8   seeds, fertilizers, electricity, gas and steam, used or consumed 
 24.9   in agricultural or industrial production of personal property 
 24.10  intended to be sold ultimately at retail, whether or not the 
 24.11  item so used becomes an ingredient or constituent part of the 
 24.12  property produced are exempt.  Seeds, trees, fertilizers, and 
 24.13  herbicides purchased for use by farmers in the Conservation 
 24.14  Reserve Program under United States Code, title 16, section 
 24.15  590h, as amended through December 31, 1991, the Integrated Farm 
 24.16  Management Program under section 1627 of Public Law Number 
 24.17  101-624, the Wheat and Feed Grain Programs under sections 301 to 
 24.18  305 and 401 to 405 of Public Law Number 101-624, and the 
 24.19  conservation reserve program under sections 103F.505 to 
 24.20  103F.531, are included in this exemption.  Sales to a 
 24.21  veterinarian of materials used or consumed in the care, 
 24.22  medication, and treatment of horses and agricultural production 
 24.23  animals and horses used in agricultural production are exempt 
 24.24  under this subdivision.  Chemicals used for cleaning food 
 24.25  processing machinery and equipment are included in this 
 24.26  exemption.  Materials, including chemicals, fuels, and 
 24.27  electricity purchased by persons engaged in agricultural or 
 24.28  industrial production to treat waste generated as a result of 
 24.29  the production process are included in this exemption.  Such 
 24.30  production shall include, but is not limited to, research, 
 24.31  development, design or production of any tangible personal 
 24.32  property, manufacturing, processing (other than by restaurants 
 24.33  and consumers) of agricultural products whether vegetable or 
 24.34  animal, commercial fishing, refining, smelting, reducing, 
 24.35  brewing, distilling, printing, mining, quarrying, lumbering, 
 24.36  generating electricity and the production of road building 
 25.1   materials.  Such production shall not include painting, 
 25.2   cleaning, repairing or similar processing of property except as 
 25.3   part of the original manufacturing process.  Machinery, 
 25.4   equipment, implements, tools, accessories, appliances, 
 25.5   contrivances, furniture and fixtures, used in such production 
 25.6   and fuel, electricity, gas or steam used for space heating or 
 25.7   lighting, are not included within this exemption; however, 
 25.8   accessory tools, equipment and other short lived items, which 
 25.9   are separate detachable units used in producing a direct effect 
 25.10  upon the product, where such items have an ordinary useful life 
 25.11  of less than 12 months, are included within the exemption 
 25.12  provided herein.  Electricity used to make snow for outdoor use 
 25.13  for ski hills, ski slopes, or ski trails is included in this 
 25.14  exemption. 
 25.15     Sec. 18.  Minnesota Statutes 1996, section 297A.25, 
 25.16  subdivision 11, is amended to read: 
 25.17     Subd. 11.  [SALES TO GOVERNMENT.] The gross receipts from 
 25.18  all sales, including sales in which title is retained by a 
 25.19  seller or a vendor or is assigned to a third party under an 
 25.20  installment sale or lease purchase agreement under section 
 25.21  465.71, of tangible personal property to, and all storage, use 
 25.22  or consumption of such property by, the United States and its 
 25.23  agencies and instrumentalities, the University of Minnesota, 
 25.24  state universities, community colleges, technical colleges, 
 25.25  state academies, the Lola and Rudy Perpich Minnesota center for 
 25.26  arts education, and school districts are exempt. 
 25.27     As used in this subdivision, "school districts" means 
 25.28  public school entities and districts of every kind and nature 
 25.29  organized under the laws of the state of Minnesota, including, 
 25.30  without limitation, school districts, intermediate school 
 25.31  districts, education districts, service cooperatives, secondary 
 25.32  vocational cooperative centers, special education cooperatives, 
 25.33  joint purchasing cooperatives, telecommunication cooperatives, 
 25.34  regional management information centers, and any instrumentality 
 25.35  of a school district, as defined in section 471.59. 
 25.36     Sales exempted by this subdivision include sales under 
 26.1   section 297A.01, subdivision 3, paragraph (f), but do not 
 26.2   include sales under section 297A.01, subdivision 3, paragraph 
 26.3   (j) (i), clause (vii).  
 26.4      Sales to hospitals and nursing homes owned and operated by 
 26.5   political subdivisions of the state are exempt under this 
 26.6   subdivision.  
 26.7      The sales to and exclusively for the use of libraries of 
 26.8   books, periodicals, audio-visual materials and equipment, 
 26.9   photocopiers for use by the public, and all cataloguing and 
 26.10  circulation equipment, and cataloguing and circulation software 
 26.11  for library use are exempt under this subdivision.  For purposes 
 26.12  of this paragraph "libraries" means libraries as defined in 
 26.13  section 134.001, county law libraries under chapter 134A, the 
 26.14  state library under section 480.09, and the legislative 
 26.15  reference library. 
 26.16     Sales of supplies and equipment used in the operation of an 
 26.17  ambulance service owned and operated by a political subdivision 
 26.18  of the state are exempt under this subdivision provided that the 
 26.19  supplies and equipment are used in the course of providing 
 26.20  medical care.  Sales to a political subdivision of repair and 
 26.21  replacement parts for emergency rescue vehicles and fire trucks 
 26.22  and apparatus are exempt under this subdivision.  
 26.23     Sales to a political subdivision of machinery and 
 26.24  equipment, except for motor vehicles, used directly for mixed 
 26.25  municipal solid waste management services at a solid waste 
 26.26  disposal facility as defined in section 115A.03, subdivision 10, 
 26.27  are exempt under this subdivision.  
 26.28     Sales to political subdivisions of chore and homemaking 
 26.29  services to be provided to elderly or disabled individuals are 
 26.30  exempt. 
 26.31     Sales of telephone services to the department of 
 26.32  administration that are used to provide telecommunications 
 26.33  services through the intertechnologies revolving fund are exempt 
 26.34  under this subdivision. 
 26.35     This exemption shall not apply to building, construction or 
 26.36  reconstruction materials purchased by a contractor or a 
 27.1   subcontractor as a part of a lump-sum contract or similar type 
 27.2   of contract with a guaranteed maximum price covering both labor 
 27.3   and materials for use in the construction, alteration, or repair 
 27.4   of a building or facility.  This exemption does not apply to 
 27.5   construction materials purchased by tax exempt entities or their 
 27.6   contractors to be used in constructing buildings or facilities 
 27.7   which will not be used principally by the tax exempt entities. 
 27.8      This exemption does not apply to the leasing of a motor 
 27.9   vehicle as defined in section 297B.01, subdivision 5, except for 
 27.10  leases entered into by the United States or its agencies or 
 27.11  instrumentalities.  
 27.12     The tax imposed on sales to political subdivisions of the 
 27.13  state under this section applies to all political subdivisions 
 27.14  other than those explicitly exempted under this subdivision, 
 27.15  notwithstanding section 115A.69, subdivision 6, 116A.25, 
 27.16  360.035, 458A.09, 458A.30, 458D.23, 469.101, subdivision 2, 
 27.17  469.127, 473.448, 473.545, or 473.608 or any other law to the 
 27.18  contrary enacted before 1992. 
 27.19     Sales exempted by this subdivision include sales made to 
 27.20  other states or political subdivisions of other states, if the 
 27.21  sale would be exempt from taxation if it occurred in that state, 
 27.22  but do not include sales under section 297A.01, subdivision 3, 
 27.23  paragraphs (c) and (e). 
 27.24     Sec. 19.  Minnesota Statutes 1996, section 297A.25, 
 27.25  subdivision 16, is amended to read: 
 27.26     Subd. 16.  [SALES TO NONPROFIT GROUPS.] The gross receipts 
 27.27  from the sale of tangible personal property to, and the storage, 
 27.28  use or other consumption of such property by, any corporation, 
 27.29  society, association, foundation, or institution organized and 
 27.30  operated exclusively for charitable, religious, or educational 
 27.31  purposes if the property purchased is to be used in the 
 27.32  performance of charitable, religious, or educational functions, 
 27.33  or any senior citizen group or association of groups that in 
 27.34  general limits membership to persons who are either (1) age 55 
 27.35  or older, or (2) physically disabled, and is organized and 
 27.36  operated exclusively for pleasure, recreation, and other 
 28.1   nonprofit purposes, no part of the net earnings of which inures 
 28.2   to the benefit of any private shareholders, are exempt.  For 
 28.3   purposes of this subdivision, charitable purpose includes the 
 28.4   maintenance of a cemetery owned by a religious organization.  
 28.5   Sales exempted by this subdivision include sales pursuant to 
 28.6   section 297A.01, subdivision 3, paragraphs (d) and (f), but do 
 28.7   not include sales under section 297A.01, subdivision 3, 
 28.8   paragraph (j) (i), clause (vii).  This exemption shall not apply 
 28.9   to building, construction, or reconstruction materials purchased 
 28.10  by a contractor or a subcontractor as a part of a lump-sum 
 28.11  contract or similar type of contract with a guaranteed maximum 
 28.12  price covering both labor and materials for use in the 
 28.13  construction, alteration, or repair of a building or facility.  
 28.14  This exemption does not apply to construction materials 
 28.15  purchased by tax exempt entities or their contractors to be used 
 28.16  in constructing buildings or facilities which will not be used 
 28.17  principally by the tax exempt entities.  This exemption does not 
 28.18  apply to the leasing of a motor vehicle as defined in section 
 28.19  297B.01, subdivision 5. 
 28.20     Sec. 20.  Minnesota Statutes 1996, section 297A.25, 
 28.21  subdivision 17, is amended to read: 
 28.22     Subd. 17.  [CASKETS; VAULTS.] The gross receipts from the 
 28.23  sale of and storage, use, or consumption of caskets and burial 
 28.24  vaults are exempt.  
 28.25     Sec. 21.  Minnesota Statutes 1996, section 297A.25, 
 28.26  subdivision 18, is amended to read: 
 28.27     Subd. 18.  [AUTOMOBILES; DISABLED VETERANS.] The gross 
 28.28  receipts from the sale of and storage, use, or consumption of an 
 28.29  automobile or other conveyance are exempt if the purchaser is 
 28.30  assisted by a grant from the United States in accordance with 
 28.31  United States Code, title 38, section 1901 3901, as 
 28.32  amended through August 6, 1991. 
 28.33     Sec. 22.  Minnesota Statutes 1996, section 297A.25, 
 28.34  subdivision 19, is amended to read: 
 28.35     Subd. 19.  [AIRCRAFT.] The gross receipts from the sale 
 28.36  to and the storage, use, or consumption by a licensed aircraft 
 29.1   dealer of an aircraft for which a commercial use permit has been 
 29.2   issued pursuant to section 360.654 is exempt, if the aircraft is 
 29.3   resold while the permit is in effect. 
 29.4      Sec. 23.  Minnesota Statutes 1996, section 297A.25, 
 29.5   subdivision 20, is amended to read: 
 29.6      Subd. 20.  [BUILDING MATERIALS; DISABLED VETERANS.] The 
 29.7   gross receipts from the sale of and the storage, use, or 
 29.8   consumption of building materials to be used in the construction 
 29.9   or remodeling of a residence are exempt when the construction or 
 29.10  remodeling is financed in whole or in part by the United States 
 29.11  in accordance with United States Code, title 38, sections 801 to 
 29.12  805 2101 to 2105, as amended through August 6, 1991.  This 
 29.13  exemption shall not be effective at time of sale of the 
 29.14  materials to contractors, subcontractors, builders or owners, 
 29.15  but shall be applicable only upon a claim for refund to the 
 29.16  commissioner of revenue filed by recipients of the benefits 
 29.17  provided in United States Code, title 38, chapter 21, as amended 
 29.18  through August 6, 1991.  The commissioner shall provide by rule 
 29.19  for the refund of taxes paid on sales exempt in accordance with 
 29.20  this subdivision. 
 29.21     Sec. 24.  Minnesota Statutes 1996, section 297A.25, 
 29.22  subdivision 21, is amended to read: 
 29.23     Subd. 21.  [TEXTBOOKS.] The gross receipts from the sale of 
 29.24  and storage, use, or consumption of textbooks which are 
 29.25  prescribed for use in conjunction with a course of study in a 
 29.26  public or private school, college, university and business or 
 29.27  trade school to students who are regularly enrolled at such 
 29.28  institutions are exempt.  For purposes of this subdivision a 
 29.29  "public school" is defined as one that furnishes course of 
 29.30  study, enrollment and staff that meets standards of the state 
 29.31  board of education and a "private school" is one which under the 
 29.32  standards of the state board of education, provides an education 
 29.33  substantially equivalent to that furnished at a public school.  
 29.34  "Business and trade schools" shall mean such schools licensed 
 29.35  pursuant to section 141.25. 
 29.36     Sec. 25.  Minnesota Statutes 1996, section 297A.25, 
 30.1   subdivision 23, is amended to read: 
 30.2      Subd. 23.  [RESIDENTIAL HEATING FUELS.] The gross receipts 
 30.3   from the sale of and the storage, use, or consumption of 
 30.4   residential heating fuels are exempt in the following manner: 
 30.5      (1) all fuel oil, coal, wood, steam, hot water, propane 
 30.6   gas, and L.P. gas sold to residential customers for residential 
 30.7   use; 
 30.8      (2) natural gas sold for residential use to customers who 
 30.9   are metered and billed as residential users and who use natural 
 30.10  gas for their primary source of residential heat, for the 
 30.11  billing months of November, December, January, February, March 
 30.12  and April; 
 30.13     (3) electricity sold for residential use to customers who 
 30.14  are metered and billed as residential users and who use 
 30.15  electricity for their primary source of residential heat, for 
 30.16  the billing months of November, December, January, February, 
 30.17  March and April. 
 30.18     Sec. 26.  Minnesota Statutes 1996, section 297A.25, 
 30.19  subdivision 26, is amended to read: 
 30.20     Subd. 26.  [FEMININE HYGIENE PRODUCTS.] The gross receipts 
 30.21  from the sale of and storage, use, or consumption of sanitary 
 30.22  napkins, tampons, or similar items used for feminine hygiene, 
 30.23  are exempt.  
 30.24     Sec. 27.  Minnesota Statutes 1996, section 297A.25, 
 30.25  subdivision 27, is amended to read: 
 30.26     Subd. 27.  [MANUFACTURED HOMES.] The gross receipts from 
 30.27  the sale of and the storage, use, or consumption of a 
 30.28  manufactured home, as defined in section 327.31, subdivision 6, 
 30.29  to be used by the purchaser for residential purposes are exempt, 
 30.30  unless the sale is the first retail sale of the manufactured 
 30.31  home in this state. 
 30.32     Sec. 28.  Minnesota Statutes 1996, section 297A.25, 
 30.33  subdivision 28, is amended to read: 
 30.34     Subd. 28.  [WASTE PROCESSING EQUIPMENT.] The gross receipts 
 30.35  from the sale of and storage, use, or consumption of equipment 
 30.36  used for processing solid or hazardous waste at a resource 
 31.1   recovery facility, as defined in section 115A.03, subdivision 
 31.2   28, are exempt, including pollution control equipment at a 
 31.3   resource recovery facility that burns refuse-derived fuel or 
 31.4   mixed municipal solid waste as its primary fuel. 
 31.5      Sec. 29.  Minnesota Statutes 1996, section 297A.25, 
 31.6   subdivision 29, is amended to read: 
 31.7      Subd. 29.  [FARM MACHINERY REPAIR PARTS.] The gross 
 31.8   receipts from the sale of and the storage, use, or consumption 
 31.9   of repair and replacement parts, except tires, used for 
 31.10  maintenance or repair of farm machinery are exempt, if the part 
 31.11  replaces a farm machinery part assigned a specific or generic 
 31.12  part number by the manufacturer of the farm machinery.  
 31.13     Sec. 30.  Minnesota Statutes 1996, section 297A.25, 
 31.14  subdivision 30, is amended to read: 
 31.15     Subd. 30. [SCHOOL TICKETS OR ADMISSIONS.] The gross 
 31.16  receipts from sales and use of tickets or admissions to regular 
 31.17  season school games, events, and activities are exempt.  For 
 31.18  purposes of this subdivision, "school" has the meaning given it 
 31.19  in section 120.101, subdivision 4.  
 31.20     Sec. 31.  Minnesota Statutes 1996, section 297A.25, 
 31.21  subdivision 34, is amended to read: 
 31.22     Subd. 34.  [MOTOR VEHICLES.] The gross receipts from the 
 31.23  sale or use of any motor vehicle taxable under the provisions of 
 31.24  the sales tax on motor vehicles laws of Minnesota shall be 
 31.25  exempt from taxation under this chapter.  Notwithstanding 
 31.26  subdivision 11, the exemption provided under this subdivision 
 31.27  remains in effect for motor vehicles purchased or leased by 
 31.28  political subdivisions of the state if the vehicles are not 
 31.29  subject to taxation under chapter 297B exempt from registration 
 31.30  under section 168.012, subdivision 1, paragraph (b). 
 31.31     Sec. 32.  Minnesota Statutes 1996, section 297A.25, 
 31.32  subdivision 35, is amended to read: 
 31.33     Subd. 35.  [FOOD STAMPS.] The gross receipts from the 
 31.34  sale and the storage, use, or consumption of tangible personal 
 31.35  property purchased with food stamps, coupons, or vouchers issued 
 31.36  by the federal government under the Food Stamp Program are 
 32.1   exempt.  This exemption also applies to food purchased under the 
 32.2   Special Supplemental Food Program for Women, Infants, and 
 32.3   Children.  The exemption provided by this subdivision is 
 32.4   effective and applies only to the extent required by federal law.
 32.5      Sec. 33.  Minnesota Statutes 1996, section 297A.25, 
 32.6   subdivision 38, is amended to read: 
 32.7      Subd. 38.  [USED MOTOR OILS.] The gross receipts from the 
 32.8   sale of and the storage, use, or consumption of used motor oils 
 32.9   are exempt. 
 32.10     Sec. 34.  Minnesota Statutes 1996, section 297A.25, 
 32.11  subdivision 39, is amended to read: 
 32.12     Subd. 39.  [CROSS-COUNTRY SKI PASSES.] The gross receipts 
 32.13  from the sale and use of cross-country ski passes issued under 
 32.14  sections 85.40 to 85.43 are exempt. 
 32.15     Sec. 35.  Minnesota Statutes 1996, section 297A.25, 
 32.16  subdivision 40, is amended to read: 
 32.17     Subd. 40.  [STATE FAIR ADMISSIONS.] The gross receipts from 
 32.18  the sale and use of tickets to the premises of or events 
 32.19  sponsored by the state agricultural society and conducted on the 
 32.20  state fairgrounds during the period of the annual state fair are 
 32.21  exempt, provided that: 
 32.22     (1) the tax foregone under this subdivision is used 
 32.23  exclusively for the purpose of making capital improvements to 
 32.24  state-owned buildings and facilities on the state fairgrounds; 
 32.25  and 
 32.26     (2) the tax foregone under this subdivision is matched in 
 32.27  equal amount by proceeds from special assessments levied against 
 32.28  commercial exhibits, concessions and rentals, and from other 
 32.29  special user fees specifically designated for capital 
 32.30  improvements. 
 32.31     Sec. 36.  Minnesota Statutes 1996, section 297A.25, 
 32.32  subdivision 41, is amended to read: 
 32.33     Subd. 41.  [BULLET-PROOF VESTS.] The gross receipts from 
 32.34  the sale of and storage, use, or consumption of bullet-resistant 
 32.35  soft body armor that is flexible, concealable, and custom-fitted 
 32.36  to provide the wearer with ballistic and trauma protection are 
 33.1   exempt if purchased by a law enforcement agency of the state or 
 33.2   a political subdivision of the state, or a licensed peace 
 33.3   officer, as defined in section 626.84, subdivision 1.  The 
 33.4   bullet-resistant soft body armor must meet or exceed the 
 33.5   requirements of standard 0101.01 of the National Institute of 
 33.6   Law Enforcement and Criminal Justice in effect on December 30, 
 33.7   1986, or meet or exceed the requirements of the standard except 
 33.8   wet armor conditioning. 
 33.9      Sec. 37.  Minnesota Statutes 1996, section 297A.25, 
 33.10  subdivision 42, is amended to read: 
 33.11     Subd. 42.  [CAPITAL EQUIPMENT.] The gross receipts from the 
 33.12  sale of and storage, use, or consumption of capital equipment 
 33.13  are exempt.  
 33.14     Sec. 38.  Minnesota Statutes 1996, section 297A.25, 
 33.15  subdivision 43, is amended to read: 
 33.16     Subd. 43.  [CHAIR LIFTS, RAMPS, ELEVATORS.] The gross 
 33.17  receipts from the sale of and storage, use, or consumption of 
 33.18  chair lifts, ramps, and elevators and building materials used to 
 33.19  install or construct them are exempt, if they are authorized by 
 33.20  a physician and installed in or attached to the owner's 
 33.21  homestead. 
 33.22     Sec. 39.  Minnesota Statutes 1996, section 297A.25, 
 33.23  subdivision 46, is amended to read: 
 33.24     Subd. 46.  [SACRAMENTAL WINE.] The gross receipts from the 
 33.25  sale of and storage, use, or consumption of wine for sacramental 
 33.26  purposes in religious ceremonies, as described in section 
 33.27  340A.316, if the wine is purchased from a nonprofit religious 
 33.28  organization meeting the requirements of subdivision 16 or from 
 33.29  the holder of a sacramental wine license as provided in section 
 33.30  340A.316 are exempt. 
 33.31     Sec. 40.  Minnesota Statutes 1996, section 297A.25, 
 33.32  subdivision 49, is amended to read: 
 33.33     Subd. 49.  [AIR COOLING EQUIPMENT.] The gross receipts from 
 33.34  the sale of and storage, use, or consumption of equipment used 
 33.35  for air cooling are exempt, if the equipment is purchased for 
 33.36  conversion or replacement of an existing groundwater based 
 34.1   once-through cooling system as required under section 103G.271, 
 34.2   subdivision 5. 
 34.3      Sec. 41.  Minnesota Statutes 1996, section 297A.25, 
 34.4   subdivision 51, is amended to read: 
 34.5      Subd. 51.  [AUTOMATIC FIRE-SAFETY SPRINKLER SYSTEMS.] The 
 34.6   gross receipts from the sale of and storage, use, or consumption 
 34.7   of automatic fire-safety sprinkler systems described in section 
 34.8   273.11, subdivision 6a, are exempt. 
 34.9      Sec. 42.  Minnesota Statutes 1996, section 297A.25, 
 34.10  subdivision 52, is amended to read: 
 34.11     Subd. 52.  [PARTS AND ACCESSORIES USED TO MAKE A MOTOR 
 34.12  VEHICLE HANDICAPPED ACCESSIBLE.] The gross receipts from the 
 34.13  sale of and storage, use, or consumption of parts and 
 34.14  accessories that are used solely to modify a motor vehicle to 
 34.15  make it handicapped accessible are exempt.  Labor charges for 
 34.16  modifying a motor vehicle to make it handicapped accessible are 
 34.17  included in this exemption. 
 34.18     Sec. 43.  Minnesota Statutes 1996, section 297A.25, 
 34.19  subdivision 53, is amended to read: 
 34.20     Subd. 53.  [SPECIAL TOOLING.] The gross receipts from the 
 34.21  sale of and storage, use, or consumption of special tooling are 
 34.22  exempt. 
 34.23     Sec. 44.  Minnesota Statutes 1996, section 297A.25, 
 34.24  subdivision 57, is amended to read: 
 34.25     Subd. 57.  [HORSES; RELATED MATERIALS.] (a) The gross 
 34.26  receipts from the sale of and storage or use of horses, 
 34.27  including racehorses, are exempt. 
 34.28     (b) Sales of and storage, use, or consumption of all 
 34.29  materials, including feed and bedding, used or consumed in the 
 34.30  breeding, raising, owning, boarding, and keeping of horses, are 
 34.31  exempt.  Machinery, equipment, implements, tools, appliances, 
 34.32  furniture, and fixtures, used in the breeding, raising, owning, 
 34.33  boarding, and keeping of horses, are not included within this 
 34.34  exemption. 
 34.35     Sec. 45.  Minnesota Statutes 1996, section 297A.25, 
 34.36  subdivision 61, is amended to read: 
 35.1      Subd. 61.  [CONSTRUCTION MATERIALS FOR INDOOR ICE ARENAS.] 
 35.2   The gross receipts from the sale of and storage, use, or 
 35.3   consumption of construction materials and supplies are exempt if:
 35.4      (1) the materials and supplies are to be used in 
 35.5   constructing an indoor ice arena intended to be used 
 35.6   predominantly for youth athletic activities; and 
 35.7      (2) the construction project is financed in whole or in 
 35.8   part from a grant under sections 240A.09 and 240A.10 or the 
 35.9   proceeds of obligations issued under section 373.43 or 475.58, 
 35.10  subdivision 3.  
 35.11     This exemption applies regardless of whether the purchases 
 35.12  are made by the owner of the facility or a contractor. 
 35.13     Sec. 46.  Minnesota Statutes 1996, section 297A.256, 
 35.14  subdivision 1, is amended to read: 
 35.15     Subdivision 1.  [FUNDRAISING SALES BY NONPROFIT GROUPS.] 
 35.16  Notwithstanding the provisions of this chapter, the following 
 35.17  sales made by a "nonprofit organization" are exempt from the 
 35.18  sales and use tax. 
 35.19     (a)(1) All sales made by an organization for fundraising 
 35.20  purposes if that organization exists solely for the purpose of 
 35.21  providing educational or social activities for young people 
 35.22  primarily age 18 and under.  This exemption shall apply only if 
 35.23  the gross annual sales receipts of the organization from 
 35.24  fundraising do not exceed $10,000. 
 35.25     (2) A club, association, or other organization of 
 35.26  elementary or secondary school students organized for the 
 35.27  purpose of carrying on sports, educational, or other 
 35.28  extracurricular activities is a separate organization from the 
 35.29  school district or school for purposes of applying the $10,000 
 35.30  limit.  This paragraph does not apply if the sales are derived 
 35.31  from admission charges or from activities for which the money 
 35.32  must be deposited with the school district treasurer under 
 35.33  section 123.38, subdivision 2, or be recorded in the same manner 
 35.34  as other revenues or expenditures of the school district under 
 35.35  section 123.38, subdivision 2b. 
 35.36     (b) All sales made by an organization for fundraising 
 36.1   purposes if that organization is a senior citizen group or 
 36.2   association of groups that in general limits membership to 
 36.3   persons age 55 or older and is organized and operated 
 36.4   exclusively for pleasure, recreation and other nonprofit 
 36.5   purposes and no part of the net earnings inure to the benefit of 
 36.6   any private shareholders.  This exemption shall apply only if 
 36.7   the gross annual sales receipts of the organization from 
 36.8   fundraising do not exceed $10,000. 
 36.9      (c) The gross receipts from the sales of tangible personal 
 36.10  property at, admission charges for, and sales of food, meals, or 
 36.11  drinks at fundraising events sponsored by a nonprofit 
 36.12  organization when the entire proceeds, except for the necessary 
 36.13  expenses therewith, will be used solely and exclusively for 
 36.14  charitable, religious, or educational purposes.  This exemption 
 36.15  does not apply to admission charges for events involving bingo 
 36.16  or other gambling activities or to charges for use of amusement 
 36.17  devices involving bingo or other gambling activities.  For 
 36.18  purposes of this paragraph, a "nonprofit organization" means any 
 36.19  unit of government, corporation, society, association, 
 36.20  foundation, or institution organized and operated for 
 36.21  charitable, religious, educational, civic, fraternal, senior 
 36.22  citizens' or veterans' purposes, no part of the net earnings of 
 36.23  which inures to the benefit of a private individual. 
 36.24     If the profits are not used solely and exclusively for 
 36.25  charitable, religious, or educational purposes, the entire gross 
 36.26  receipts are subject to tax. 
 36.27     Each nonprofit organization shall keep a separate 
 36.28  accounting record, including receipts and disbursements from 
 36.29  each fundraising event.  All deductions from gross receipts must 
 36.30  be documented with receipts and other records.  If records are 
 36.31  not maintained as required, the entire gross receipts are 
 36.32  subject to tax. 
 36.33     The exemption provided by this paragraph does not apply to 
 36.34  any sale made by or in the name of a nonprofit corporation as 
 36.35  the active or passive agent of a person that is not a nonprofit 
 36.36  corporation. 
 37.1      The exemption for fundraising events under this paragraph 
 37.2   is limited to no more than 24 days a year.  Fundraising events 
 37.3   conducted on premises leased for more than four days but less 
 37.4   than 30 days do not qualify for this exemption. 
 37.5      (d) The gross receipts from the sale or use of tickets or 
 37.6   admissions to a golf tournament held in Minnesota are exempt if 
 37.7   the beneficiary of the tournament's net proceeds qualifies as a 
 37.8   tax-exempt organization under section 501(c)(3) of the Internal 
 37.9   Revenue Code, as amended through December 31, 1994, including a 
 37.10  tournament conducted on premises leased or occupied for more 
 37.11  than four days. 
 37.12     Sec. 47.  Minnesota Statutes 1996, section 297A.44, 
 37.13  subdivision 1, is amended to read: 
 37.14     Subdivision 1.  (a) Except as provided in paragraphs (b), 
 37.15  (c), and (d), all revenues, including interest and penalties, 
 37.16  derived from the excise and use taxes imposed by sections 
 37.17  297A.01 to 297A.44 shall be deposited by the commissioner in the 
 37.18  state treasury and credited to the general fund.  
 37.19     (b) All excise and use taxes derived from sales and use of 
 37.20  property and services purchased for the construction and 
 37.21  operation of an agricultural resource project, from and after 
 37.22  the date on which a conditional commitment for a loan guaranty 
 37.23  for the project is made pursuant to section 41A.04, subdivision 
 37.24  3, shall be deposited in the Minnesota agricultural and economic 
 37.25  account in the special revenue fund.  The commissioner of 
 37.26  finance shall certify to the commissioner the date on which the 
 37.27  project received the conditional commitment.  The amount 
 37.28  deposited in the loan guaranty account shall be reduced by any 
 37.29  refunds and by the costs incurred by the department of revenue 
 37.30  to administer and enforce the assessment and collection of the 
 37.31  taxes.  
 37.32     (c) All revenues, including interest and penalties, derived 
 37.33  from the excise and use taxes imposed on sales and purchases 
 37.34  included in section 297A.01, subdivision 3, paragraphs (d) and 
 37.35  (l) (k), clauses (1) and (2), must be deposited by the 
 37.36  commissioner in the state treasury, and credited as follows: 
 38.1      (1) first to the general obligation special tax bond debt 
 38.2   service account in each fiscal year the amount required by 
 38.3   section 16A.661, subdivision 3, paragraph (b); and 
 38.4      (2) after the requirements of clause (1) have been met, the 
 38.5   balance must be credited to the general fund. 
 38.6      (d) The revenues, including interest and penalties, derived 
 38.7   from the taxes imposed on solid waste collection services as 
 38.8   described in section 297A.45, shall be deposited by the 
 38.9   commissioner in the state treasury and credited to the general 
 38.10  fund to be used for funding solid waste reduction and recycling 
 38.11  programs. 
 38.12     Sec. 48.  Minnesota Statutes 1996, section 297B.03, is 
 38.13  amended to read: 
 38.14     297B.03 [EXEMPTIONS.] 
 38.15     There is specifically exempted from the provisions of this 
 38.16  chapter and from computation of the amount of tax imposed by it 
 38.17  the following:  
 38.18     (1) Purchase or use, including use under a lease purchase 
 38.19  agreement or installment sales contract made pursuant to section 
 38.20  465.71, of any motor vehicle by the United States and its 
 38.21  agencies and instrumentalities and by any person described in 
 38.22  and subject to the conditions provided in section 297A.25, 
 38.23  subdivision 18.  
 38.24     (2) Purchase or use of any motor vehicle by any person who 
 38.25  was a resident of another state at the time of the purchase and 
 38.26  who subsequently becomes a resident of Minnesota, provided the 
 38.27  purchase occurred more than 60 days prior to the date such 
 38.28  person began residing in the state of Minnesota.  
 38.29     (3) Purchase or use of any motor vehicle by any person 
 38.30  making a valid election to be taxed under the provisions of 
 38.31  section 297A.211.  
 38.32     (4) Purchase or use of any motor vehicle previously 
 38.33  registered in the state of Minnesota by any corporation or 
 38.34  partnership when such transfer constitutes a transfer within the 
 38.35  meaning of section 351 or 721 of the Internal Revenue Code of 
 38.36  1986, as amended through December 31, 1988.  
 39.1      (5) Purchase or use of any vehicle owned by a resident of 
 39.2   another state and leased to a Minnesota based private or for 
 39.3   hire carrier for regular use in the transportation of persons or 
 39.4   property in interstate commerce provided the vehicle is titled 
 39.5   in the state of the owner or secured party, and that state does 
 39.6   not impose a sales tax or sales tax on motor vehicles used in 
 39.7   interstate commerce.  
 39.8      (6) Purchase or use of a motor vehicle by a private 
 39.9   nonprofit or public educational institution for use as an 
 39.10  instructional aid in automotive training programs operated by 
 39.11  the institution.  "Automotive training programs" includes motor 
 39.12  vehicle body and mechanical repair courses but does not include 
 39.13  driver education programs.  
 39.14     (7) Purchase of a motor vehicle for use as an ambulance by 
 39.15  an ambulance service licensed under section 144.802. 
 39.16     (8) Purchase of a motor vehicle by or for a public library, 
 39.17  as defined in section 134.001, subdivision 2, as a bookmobile or 
 39.18  library delivery vehicle. 
 39.19     Sec. 49.  Minnesota Statutes 1996, section 297B.035, 
 39.20  subdivision 3, is amended to read: 
 39.21     Subd. 3.  [SALES IN VIOLATION OF LICENSING REQUIREMENTS.] 
 39.22  Motor vehicles sold by a new motor vehicle dealer in 
 39.23  contravention of section 168.27, subdivision 10, clause (1)(b) 
 39.24  shall not be considered to have been acquired or purchased for 
 39.25  resale in the ordinary or regular course of business for the 
 39.26  purposes of this chapter, and the dealer shall be required to 
 39.27  pay the excise tax due on the purchase of those vehicles.  The 
 39.28  sale by a lessor of a new motor vehicle under lease within 120 
 39.29  days of the commencement of the lease is deemed a sale in 
 39.30  contravention of section 168.27, subdivision 10, clause (1)(b) 
 39.31  unless the lessor holds a valid contract or franchise with the 
 39.32  manufacturer or distributor of the vehicle.  Notwithstanding 
 39.33  section 297B.11, the rights of a dealer to appeal any amounts 
 39.34  owed by the dealer under this subdivision are governed 
 39.35  exclusively by the hearing procedure under section 168.27, 
 39.36  subdivision 13. 
 40.1      Sec. 50.  Minnesota Statutes 1996, section 297B.11, is 
 40.2   amended to read: 
 40.3      297B.11 [REGISTRAR AS AGENT OF COMMISSIONER OF REVENUE; 
 40.4   POWERS.] 
 40.5      The state commissioner of revenue is charged with the 
 40.6   administration of the sales tax on motor vehicles.  The 
 40.7   commissioner may prescribe all rules not inconsistent with the 
 40.8   provisions of this chapter, necessary and advisable for the 
 40.9   proper and efficient administration of the law.  The collection 
 40.10  of this sales tax on motor vehicles shall be carried out by the 
 40.11  motor vehicle registrar who shall act as the agent of the 
 40.12  commissioner and who shall be subject to all rules not 
 40.13  inconsistent with the provisions of this chapter, that may be 
 40.14  prescribed by the commissioner.  
 40.15     The provisions of chapters 289A and 297A relating to the 
 40.16  commissioner's authority to audit, assess, and collect the tax, 
 40.17  and to issue refunds and to hear appeals, are applicable to the 
 40.18  sales tax on motor vehicles.  The commissioner may impose civil 
 40.19  penalties as provided in chapters 289A and 297A, and the 
 40.20  additional tax and penalties are subject to interest at the rate 
 40.21  provided in section 270.75.  
 40.22     Sec. 51.  Minnesota Statutes 1996, section 299F.21, 
 40.23  subdivision 2, is amended to read: 
 40.24     Subd. 2.  [ANNUAL RETURNS.] (a) Every insurer required to 
 40.25  pay a tax under this section shall make and file a statement of 
 40.26  estimated taxes for the period covered by the installment tax 
 40.27  payment.  The statement shall be in the form prescribed by the 
 40.28  commissioner of revenue.  
 40.29     (b) On or before March 1, annually every insurer subject to 
 40.30  taxation under this section shall make an annual return for the 
 40.31  preceding calendar year setting forth information the 
 40.32  commissioner of revenue may reasonably require on forms 
 40.33  prescribed by the commissioner.  
 40.34     (c) On March 1, the insurer shall pay any additional amount 
 40.35  due for the preceding calendar year; if there has been an 
 40.36  overpayment, the overpayment may be credited without interest on 
 41.1   the estimated tax due April 15 1.  
 41.2      (d) If unpaid by this date, penalties as provided in 
 41.3   section 289A.60, subdivision 1, as related to withholding and 
 41.4   sales or use taxes, shall be imposed. 
 41.5      Sec. 52.  [EFFECTIVE DATE.] 
 41.6      Sections 1 to 51 are effective July 1, 1997. 
 41.7                              ARTICLE 3
 41.8                            PROPERTY TAXES
 41.9      Section 1.  Minnesota Statutes 1996, section 272.02, 
 41.10  subdivision 4, is amended to read: 
 41.11     Subd. 4.  [CONVERSION TO EXEMPT OR TAXABLE USES.] (a) Any 
 41.12  property exempt from taxation on January 2 of any year which, 
 41.13  due to sale or other reason, loses its exemption prior to July 1 
 41.14  of any year, shall be placed on the current assessment rolls for 
 41.15  that year. 
 41.16     The valuation shall be determined with respect to its value 
 41.17  on January 2 of such year.  The classification shall be based 
 41.18  upon the use to which the property was put by the purchaser, or 
 41.19  in the event the purchaser has not utilized the property by July 
 41.20  1, the intended use of the property, determined by the county 
 41.21  assessor, based upon all relevant facts. 
 41.22     (b) Property subject to tax on January 2 that is acquired 
 41.23  by a governmental entity, institution of purely public charity, 
 41.24  church, or educational institution before July 1 of the year is 
 41.25  exempt for that assessment year if the property is to be used 
 41.26  for an exempt purpose under subdivision 1, clauses (1) to (7).  
 41.27     (c) Property which forfeits to the state for nonpayment of 
 41.28  real estate taxes on or before December 31 in an assessment 
 41.29  year, shall be removed from the assessment rolls for that 
 41.30  assessment year.  Forfeited property that is repurchased, or 
 41.31  sold at a public or private sale, on or before December 31 of an 
 41.32  assessment year shall be placed on the assessment rolls for that 
 41.33  year's assessment. 
 41.34     Sec. 2.  Minnesota Statutes 1996, section 272.04, 
 41.35  subdivision 1, is amended to read: 
 41.36     Subdivision 1.  When any mineral, gas, coal, oil, or other 
 42.1   similar interests in real estate are owned separately and apart 
 42.2   from and independently of the rights and interests owned in the 
 42.3   surface of such real estate, such mineral, gas, coal, oil, or 
 42.4   other similar interests may be assessed and taxed separately 
 42.5   from such surface rights and interests in such real estate, 
 42.6   including but not limited to the taxation provided in section 
 42.7   273.165, subdivision 1, and may be sold for taxes in the same 
 42.8   manner and with the same effect as other interests in real 
 42.9   estate are sold for taxes.  All laws for the enforcement of 
 42.10  taxes on real estate apply to such interest. 
 42.11     Sec. 3.  Minnesota Statutes 1996, section 273.032, is 
 42.12  amended to read: 
 42.13     273.032 [MARKET VALUE DEFINITION.] 
 42.14     For the purpose of determining any property tax levy 
 42.15  limitation based on market value, any net debt limit based on 
 42.16  market value, any limit on the issuance of bonds, certificates 
 42.17  of indebtedness, or capital notes based on market value, any 
 42.18  qualification to receive state aid based on market value, or any 
 42.19  state aid amount based on market value, the terms "market 
 42.20  value," "taxable market value," and "market valuation," whether 
 42.21  equalized or unequalized, mean the total taxable market value of 
 42.22  property within the local unit of government before any 
 42.23  adjustments for tax increment, fiscal disparity, or powerline 
 42.24  credit, or wind energy values, but after the limited market 
 42.25  adjustments under section 273.11, subdivision 1a, and after the 
 42.26  market value exclusions of certain improvements to homestead 
 42.27  property under section 273.11, subdivision 16.  Unless otherwise 
 42.28  provided, "market value," "taxable market value," and "market 
 42.29  valuation" refer to the taxable market value for the previous 
 42.30  assessment year. 
 42.31     Sec. 4.  Minnesota Statutes 1996, section 273.124, 
 42.32  subdivision 1, is amended to read: 
 42.33     Subdivision 1.  [GENERAL RULE.] (a) Residential real estate 
 42.34  that is occupied and used for the purposes of a homestead by its 
 42.35  owner, who must be a Minnesota resident, is a residential 
 42.36  homestead.  
 43.1      Agricultural land, as defined in section 273.13, 
 43.2   subdivision 23, that is occupied and used as a homestead by its 
 43.3   owner, who must be a Minnesota resident, is an agricultural 
 43.4   homestead. 
 43.5      Dates for establishment of a homestead and homestead 
 43.6   treatment provided to particular types of property are as 
 43.7   provided in this section.  
 43.8      Property of a trustee, beneficiary, or grantor of a trust 
 43.9   is not disqualified from receiving homestead benefits if the 
 43.10  homestead requirements under this chapter are satisfied. 
 43.11     The assessor shall require proof, as provided in 
 43.12  subdivision 13, of the facts upon which classification as a 
 43.13  homestead may be determined.  Notwithstanding any other law, the 
 43.14  assessor may at any time require a homestead application to be 
 43.15  filed in order to verify that any property classified as a 
 43.16  homestead continues to be eligible for homestead status.  
 43.17  Notwithstanding any other law to the contrary, the department of 
 43.18  revenue may, upon request from an assessor, verify whether an 
 43.19  individual who is requesting or receiving homestead 
 43.20  classification has filed a Minnesota income tax return as a 
 43.21  resident for the most recent taxable year for which the 
 43.22  information is available. 
 43.23     When there is a name change or a transfer of homestead 
 43.24  property, the assessor may reclassify the property in the next 
 43.25  assessment unless a homestead application is filed to verify 
 43.26  that the property continues to qualify for homestead 
 43.27  classification. 
 43.28     (b) For purposes of this section, homestead property shall 
 43.29  include property which is used for purposes of the homestead but 
 43.30  is separated from the homestead by a road, street, lot, 
 43.31  waterway, or other similar intervening property.  The term "used 
 43.32  for purposes of the homestead" shall include but not be limited 
 43.33  to uses for gardens, garages, or other outbuildings commonly 
 43.34  associated with a homestead, but shall not include vacant land 
 43.35  held primarily for future development.  In order to receive 
 43.36  homestead treatment for the noncontiguous property, the owner 
 44.1   shall must use the property for the purposes of the homestead, 
 44.2   and must apply for it to the assessor, both by July 1 of the 
 44.3   year when the treatment is initially sought the deadlines given 
 44.4   in subdivision 9.  After initial qualification for the homestead 
 44.5   treatment, additional applications for subsequent years are not 
 44.6   required. 
 44.7      (c) Residential real estate that is occupied and used for 
 44.8   purposes of a homestead by a relative of the owner is a 
 44.9   homestead but only to the extent of the homestead treatment that 
 44.10  would be provided if the related owner occupied the property.  
 44.11  For purposes of this paragraph and paragraph (f), "relative" 
 44.12  means a parent, stepparent, child, stepchild, grandparent, 
 44.13  grandchild, brother, sister, uncle, or aunt.  This relationship 
 44.14  may be by blood or marriage.  Property that has been classified 
 44.15  as seasonal recreational residential property at any time during 
 44.16  which it has been owned by the current owner or spouse of the 
 44.17  current owner will not be reclassified as a homestead unless it 
 44.18  is occupied as a homestead by the owner; this prohibition also 
 44.19  applies to property that, in the absence of this paragraph, 
 44.20  would have been classified as seasonal recreational residential 
 44.21  property at the time when the residence was constructed.  
 44.22  Neither the related occupant nor the owner of the property may 
 44.23  claim a property tax refund under chapter 290A for a homestead 
 44.24  occupied by a relative.  In the case of a residence located on 
 44.25  agricultural land, only the house, garage, and immediately 
 44.26  surrounding one acre of land shall be classified as a homestead 
 44.27  under this paragraph, except as provided in paragraph (d). 
 44.28     (d) Agricultural property that is occupied and used for 
 44.29  purposes of a homestead by a relative of the owner, is a 
 44.30  homestead, only to the extent of the homestead treatment that 
 44.31  would be provided if the related owner occupied the property, 
 44.32  and only if all of the following criteria are met: 
 44.33     (1) the relative who is occupying the agricultural property 
 44.34  is a son, daughter, father, or mother of the owner of the 
 44.35  agricultural property or a son or daughter of the spouse of the 
 44.36  owner of the agricultural property, 
 45.1      (2) the owner of the agricultural property must be a 
 45.2   Minnesota resident, 
 45.3      (3) the owner of the agricultural property must not receive 
 45.4   homestead treatment on any other agricultural property in 
 45.5   Minnesota, and 
 45.6      (4) the owner of the agricultural property is limited to 
 45.7   only one agricultural homestead per family under this paragraph. 
 45.8      Neither the related occupant nor the owner of the property 
 45.9   may claim a property tax refund under chapter 290A for a 
 45.10  homestead occupied by a relative qualifying under this 
 45.11  paragraph.  For purposes of this paragraph, "agricultural 
 45.12  property" means the house, garage, other farm buildings and 
 45.13  structures, and agricultural land. 
 45.14     Application must be made to the assessor by the owner of 
 45.15  the agricultural property to receive homestead benefits under 
 45.16  this paragraph.  The assessor may require the necessary proof 
 45.17  that the requirements under this paragraph have been met. 
 45.18     (e) In the case of property owned by a property owner who 
 45.19  is married, the assessor must not deny homestead treatment in 
 45.20  whole or in part if only one of the spouses occupies the 
 45.21  property and the other spouse is absent due to:  (1) marriage 
 45.22  dissolution proceedings, (2) legal separation, (3) employment or 
 45.23  self-employment in another location, (4) residence in a nursing 
 45.24  home or boarding care facility, or (5) other personal 
 45.25  circumstances causing the spouses to live separately, not 
 45.26  including an intent to obtain two homestead classifications for 
 45.27  property tax purposes.  To qualify under clause (3), the 
 45.28  spouse's place of employment or self-employment must be at least 
 45.29  50 miles distant from the other spouse's place of employment, 
 45.30  and the homesteads must be at least 50 miles distant from each 
 45.31  other.  Homestead treatment, in whole or in part, shall not be 
 45.32  denied to the owner's spouse who previously occupied the 
 45.33  residence with the owner if the absence of the owner is due to 
 45.34  one of the exceptions provided in this paragraph. 
 45.35     (f) If an individual is purchasing property with the intent 
 45.36  of claiming it as a homestead and is required by the terms of 
 46.1   the financing agreement to have a relative shown on the deed as 
 46.2   a coowner, the assessor shall allow a full homestead 
 46.3   classification.  This provision only applies to first-time 
 46.4   purchasers, whether married or single, or to a person who had 
 46.5   previously been married and is purchasing as a single individual 
 46.6   for the first time.  The application for homestead benefits must 
 46.7   be on a form prescribed by the commissioner and must contain the 
 46.8   data necessary for the assessor to determine if full homestead 
 46.9   benefits are warranted. 
 46.10     Sec. 5.  Minnesota Statutes 1996, section 273.124, 
 46.11  subdivision 13, is amended to read: 
 46.12     Subd. 13.  [HOMESTEAD APPLICATION.] (a) A person who meets 
 46.13  the homestead requirements under subdivision 1 must file a 
 46.14  homestead application with the county assessor to initially 
 46.15  obtain homestead classification. 
 46.16     (b) On or before January 2, 1993, each county assessor 
 46.17  shall mail a homestead application to the owner of each parcel 
 46.18  of property within the county which was classified as homestead 
 46.19  for the 1992 assessment year.  The format and contents of a 
 46.20  uniform homestead application shall be prescribed by the 
 46.21  commissioner of revenue.  The commissioner shall consult with 
 46.22  the chairs of the house and senate tax committees on the 
 46.23  contents of the homestead application form.  The application 
 46.24  must clearly inform the taxpayer that this application must be 
 46.25  signed by all owners who occupy the property or by the 
 46.26  qualifying relative and returned to the county assessor in order 
 46.27  for the property to continue receiving homestead treatment.  The 
 46.28  envelope containing the homestead application shall clearly 
 46.29  identify its contents and alert the taxpayer of its necessary 
 46.30  immediate response. 
 46.31     (c) Every property owner applying for homestead 
 46.32  classification must furnish to the county assessor the social 
 46.33  security number of each occupant who is listed as an owner of 
 46.34  the property on the deed of record, the name and address of each 
 46.35  owner who does not occupy the property, and the name and social 
 46.36  security number of each owner's spouse who occupies the 
 47.1   property.  The application must be signed by each owner who 
 47.2   occupies the property and by each owner's spouse who occupies 
 47.3   the property, or, in the case of property that qualifies as a 
 47.4   homestead under subdivision 1, paragraph (c), by the qualifying 
 47.5   relative. 
 47.6      If a property owner occupies a homestead, the property 
 47.7   owner's spouse may not claim another property as a homestead 
 47.8   unless the property owner and the property owner's spouse file 
 47.9   with the assessor an affidavit or other proof required by the 
 47.10  assessor stating that the property qualifies as a homestead 
 47.11  under subdivision 1, paragraph (e). 
 47.12     Owners or spouses occupying residences owned by their 
 47.13  spouses and previously occupied with the other spouse, either of 
 47.14  whom fail to include the other spouse's name and social security 
 47.15  number on the homestead application or provide the affidavits or 
 47.16  other proof requested, will be deemed to have elected to receive 
 47.17  only partial homestead treatment of their residence.  The 
 47.18  remainder of the residence will be classified as nonhomestead 
 47.19  residential.  When an owner or spouse's name and social security 
 47.20  number appear on homestead applications for two separate 
 47.21  residences and only one application is signed, the owner or 
 47.22  spouse will be deemed to have elected to homestead the residence 
 47.23  for which the application was signed. 
 47.24     The social security numbers or affidavits or other proofs 
 47.25  of the property owners and spouses are private data on 
 47.26  individuals as defined by section 13.02, subdivision 12, but, 
 47.27  notwithstanding that section, the private data may be disclosed 
 47.28  to the commissioner of revenue, or, for purposes of proceeding 
 47.29  under the revenue recapture act to recover personal property 
 47.30  taxes owing, to the county treasurer. 
 47.31     (d) If residential real estate is occupied and used for 
 47.32  purposes of a homestead by a relative of the owner and qualifies 
 47.33  for a homestead under subdivision 1, paragraph (c), in order for 
 47.34  the property to receive homestead status, a homestead 
 47.35  application must be filed with the assessor.  The social 
 47.36  security number of each relative occupying the property and the 
 48.1   social security number of each owner who is related to an 
 48.2   occupant of the property shall be required on the homestead 
 48.3   application filed under this subdivision.  If a different 
 48.4   relative of the owner subsequently occupies the property, the 
 48.5   owner of the property must notify the assessor within 30 days of 
 48.6   the change in occupancy.  The social security number of a 
 48.7   relative occupying the property is private data on individuals 
 48.8   as defined by section 13.02, subdivision 12, but may be 
 48.9   disclosed to the commissioner of revenue.  
 48.10     (e) The homestead application shall also notify the 
 48.11  property owners that the application filed under this section 
 48.12  will not be mailed annually and that if the property is granted 
 48.13  homestead status for the 1993 assessment, or any assessment year 
 48.14  thereafter, that same property shall remain classified as 
 48.15  homestead until the property is sold or transferred to another 
 48.16  person, or the owners, the spouse of the owner, or the relatives 
 48.17  no longer use the property as their homestead.  Upon the sale or 
 48.18  transfer of the homestead property, a certificate of value must 
 48.19  be timely filed with the county auditor as provided under 
 48.20  section 272.115.  Failure to notify the assessor within 30 days 
 48.21  that the property has been sold, transferred, or that the owner, 
 48.22  the spouse of the owner, or the relative is no longer occupying 
 48.23  the property as a homestead, shall result in the penalty 
 48.24  provided under this subdivision and the property will lose its 
 48.25  current homestead status. 
 48.26     (f) If the homestead application is not returned within 30 
 48.27  days, the county will send a second application to the present 
 48.28  owners of record.  The notice of proposed property taxes 
 48.29  prepared under section 275.065, subdivision 3, shall reflect the 
 48.30  property's classification.  Beginning with assessment year 1993 
 48.31  for all properties, if a homestead application has not been 
 48.32  filed with the county by December 15, the assessor shall 
 48.33  classify the property as nonhomestead for the current assessment 
 48.34  year for taxes payable in the following year, provided that the 
 48.35  owner may be entitled to receive the homestead classification by 
 48.36  proper application under section 375.192. 
 49.1      (g) At the request of the commissioner, each county must 
 49.2   give the commissioner a list that includes the name and social 
 49.3   security number of each property owner and the property owner's 
 49.4   spouse occupying the property, or relative of a property owner, 
 49.5   applying for homestead classification under this subdivision.  
 49.6   The commissioner shall use the information provided on the lists 
 49.7   as appropriate under the law, including for the detection of 
 49.8   improper claims by owners, or relatives of owners, under chapter 
 49.9   290A.  
 49.10     (h) If the commissioner finds that a property owner may be 
 49.11  claiming a fraudulent homestead, the commissioner shall notify 
 49.12  the appropriate counties.  Within 90 days of the notification, 
 49.13  the county assessor shall investigate to determine if the 
 49.14  homestead classification was properly claimed.  If the property 
 49.15  owner does not qualify, the county assessor shall notify the 
 49.16  county auditor who will determine the amount of homestead 
 49.17  benefits that had been improperly allowed.  For the purpose of 
 49.18  this section, "homestead benefits" means the tax reduction 
 49.19  resulting from the classification as a homestead under section 
 49.20  273.13, the taconite homestead credit under section 273.135, and 
 49.21  the supplemental homestead credit under section 273.1391. 
 49.22     The county auditor shall send a notice to the person who 
 49.23  owned the affected property at the time the homestead 
 49.24  application related to the improper homestead was filed, 
 49.25  demanding reimbursement of the homestead benefits plus a penalty 
 49.26  equal to 100 percent of the homestead benefits.  The person 
 49.27  notified may appeal the county's determination by serving copies 
 49.28  of a petition for review with county officials as provided in 
 49.29  section 278.01 and filing proof of service as provided in 
 49.30  section 278.01 with the Minnesota tax court within 60 days of 
 49.31  the date of the notice from the county.  Procedurally, the 
 49.32  appeal is governed by the provisions in chapter 271 which apply 
 49.33  to the appeal of a property tax assessment or levy, but without 
 49.34  requiring any prepayment of the amount in controversy.  If the 
 49.35  amount of homestead benefits and penalty is not paid within 60 
 49.36  days, and if no appeal has been filed, the county auditor shall 
 50.1   certify the amount of taxes and penalty to the county 
 50.2   treasurer.  The county treasurer will add interest to the unpaid 
 50.3   homestead benefits and penalty amounts at the rate provided for 
 50.4   delinquent personal property taxes in section 279.03 for real 
 50.5   property taxes becoming delinquent in the calendar year during 
 50.6   which the amount remains unpaid.  Interest may be assessed for 
 50.7   the period beginning 60 days after demand for payment was 
 50.8   made until payment. 
 50.9      If the person notified is the current owner of the 
 50.10  property, the treasurer may add the total amount of benefits, 
 50.11  penalty, interest, and costs to the real estate ad valorem taxes 
 50.12  otherwise payable on the property in the following year by 
 50.13  including the amounts on the property tax statements under 
 50.14  section 276.04, subdivision 3.  The amounts added under this 
 50.15  paragraph to the ad valorem taxes shall include interest accrued 
 50.16  through December 31 of the year preceding the taxes payable year 
 50.17  for which the amounts are first added.  These amounts, when 
 50.18  added to the property tax statement, become subject to all the 
 50.19  laws for the enforcement of real or personal property taxes for 
 50.20  that year, and for any subsequent year. 
 50.21     If the person notified is not the current owner of the 
 50.22  property, the treasurer may collect the amounts due under the 
 50.23  revenue recapture act in chapter 270A, or use any of the powers 
 50.24  granted in sections 277.20 and 277.21 without exclusion, to 
 50.25  enforce payment of the benefits, penalty, interest, and costs, 
 50.26  as if those amounts were delinquent tax obligations of the 
 50.27  person who owned the property at the time the application 
 50.28  related to the improperly allowed homestead was filed.  The 
 50.29  treasurer may relieve a prior owner of personal liability for 
 50.30  the benefits, penalty, interest, and costs, and instead extend 
 50.31  those amounts on the tax lists against the property for taxes 
 50.32  payable in the following year as provided in this paragraph to 
 50.33  the extent that the current owner agrees in writing.  On all 
 50.34  demands, billings, property tax statements, and related 
 50.35  correspondence, the county must list and state separately the 
 50.36  amounts of homestead benefits, penalty, interest and costs being 
 51.1   demanded, billed or assessed. 
 51.2      (i) Any amount of homestead benefits recovered by the 
 51.3   county from the property owner shall be distributed to the 
 51.4   county, city or town, and school district where the property is 
 51.5   located in the same proportion that each taxing district's levy 
 51.6   was to the total of the three taxing districts' levy for the 
 51.7   current year.  Any amount recovered attributable to taconite 
 51.8   homestead credit shall be transmitted to the St. Louis county 
 51.9   auditor to be deposited in the taconite property tax relief 
 51.10  account.  Any amount recovered that is attributable to 
 51.11  supplemental homestead credit is to be transmitted to the 
 51.12  commissioner of revenue for deposit in the general fund of the 
 51.13  state treasury.  The total amount of penalty collected must be 
 51.14  deposited in the county general fund. 
 51.15     (j) If a property owner has applied for more than one 
 51.16  homestead and the county assessors cannot determine which 
 51.17  property should be classified as homestead, the county assessors 
 51.18  will refer the information to the commissioner.  The 
 51.19  commissioner shall make the determination and notify the 
 51.20  counties within 60 days. 
 51.21     (k) In addition to lists of homestead properties, the 
 51.22  commissioner may ask the counties to furnish lists of all 
 51.23  properties and the record owners. 
 51.24     Sec. 6.  Minnesota Statutes 1996, section 273.1392, is 
 51.25  amended to read: 
 51.26     273.1392 [PAYMENT; SCHOOL DISTRICTS.] 
 51.27     The amounts of conservation tax credits under section 
 51.28  273.119; disaster or emergency reimbursement under section 
 51.29  273.123; attached machinery aid under section 273.138; homestead 
 51.30  credit under section 273.13; aids and credits under section 
 51.31  273.1398; wetlands reimbursement under section 275.295; 
 51.32  enterprise zone property credit payments under section 469.171; 
 51.33  and metropolitan agricultural preserve reduction under section 
 51.34  473H.10 for school districts, shall be certified to the 
 51.35  department of children, families, and learning by the department 
 51.36  of revenue.  The amounts so certified shall be paid according to 
 52.1   section 124.195, subdivisions 6 and 10. 
 52.2      Sec. 7.  Minnesota Statutes 1996, section 273.1398, 
 52.3   subdivision 1, is amended to read: 
 52.4      Subdivision 1.  [DEFINITIONS.] (a) In this section, the 
 52.5   terms defined in this subdivision have the meanings given them. 
 52.6      (b) "Unique taxing jurisdiction" means the geographic area 
 52.7   subject to the same set of local tax rates. 
 52.8      (c) "Previous net tax capacity" means the product of the 
 52.9   appropriate net class rates for the year previous to the year in 
 52.10  which the aid is payable, and estimated market values for the 
 52.11  assessment two years prior to that in which aid is payable.  
 52.12  "Total previous net tax capacity" means the previous net tax 
 52.13  capacities for all property within the unique taxing 
 52.14  jurisdiction.  The total previous net tax capacity shall be 
 52.15  reduced by the sum of (1) the unique taxing jurisdiction's 
 52.16  previous net tax capacity of commercial-industrial property as 
 52.17  defined in section 473F.02, subdivision 3, or 276A.02, 
 52.18  subdivision 3, multiplied by the ratio determined pursuant to 
 52.19  section 473F.08, subdivision 6, or 276A.06, subdivision 7, for 
 52.20  the municipality, as defined in section 473F.02, subdivision 8, 
 52.21  or 276A.06, subdivision 7, in which the unique taxing 
 52.22  jurisdiction is located, (2) the previous net tax capacity of 
 52.23  the captured value of tax increment financing districts as 
 52.24  defined in section 469.177, subdivision 2, and (3) the previous 
 52.25  net tax capacity of transmission lines deducted from a local 
 52.26  government's total net tax capacity under section 273.425.  
 52.27  Previous net tax capacity cannot be less than zero. 
 52.28     (d) "Equalized market values" are market values that have 
 52.29  been equalized by dividing the assessor's estimated market value 
 52.30  for the second year prior to that in which the aid is payable by 
 52.31  the assessment sales ratios determined by class in the 
 52.32  assessment sales ratio study conducted by the department of 
 52.33  revenue pursuant to section 124.2131 in the second year prior to 
 52.34  that in which the aid is payable.  The equalized market values 
 52.35  shall equal the unequalized market values divided by the 
 52.36  assessment sales ratio. 
 53.1      (e) "Equalized school levies" means the amounts levied for: 
 53.2      (1) general education under section 124A.23, subdivision 2; 
 53.3      (2) supplemental revenue under section 124A.22, subdivision 
 53.4   8a; 
 53.5      (3) transition revenue under section 124A.22, subdivision 
 53.6   13c; 
 53.7      (4) basic transportation under section 124.226, subdivision 
 53.8   1; and 
 53.9      (5) referendum revenue under section 124A.03. 
 53.10     (f) "Current local tax rate" means the quotient derived by 
 53.11  dividing the taxes levied within a unique taxing jurisdiction 
 53.12  for taxes payable in the year prior to that for which aids are 
 53.13  being calculated by the total previous net tax capacity of the 
 53.14  unique taxing jurisdiction.  
 53.15     (g) For purposes of calculating and allocating homestead 
 53.16  and agricultural credit aid authorized pursuant to subdivision 2 
 53.17  and the disparity reduction aid authorized in subdivision 3, 
 53.18  "gross taxes levied on all properties," "gross taxes," or "taxes 
 53.19  levied" means the total net tax capacity based taxes levied on 
 53.20  all properties except that levied on the captured value of tax 
 53.21  increment districts as defined in section 469.177, subdivision 
 53.22  2, and that levied on the portion of commercial industrial 
 53.23  properties' assessed value or gross tax capacity, as defined in 
 53.24  section 473F.02, subdivision 3, subject to the areawide tax as 
 53.25  provided in section 473F.08, subdivision 6, in a unique taxing 
 53.26  jurisdiction.  "Gross taxes" are before any reduction for 
 53.27  disparity reduction aid but "taxes levied" are after any 
 53.28  reduction for disparity reduction aid.  Gross taxes levied or 
 53.29  taxes levied cannot be less than zero.  
 53.30     "Taxes levied" excludes equalized school levies. 
 53.31     (h) "Household adjustment factor" means the number of 
 53.32  households for the second most recent year preceding that in 
 53.33  which the aids are payable, for the year most recently 
 53.34  determined as of July 1 in the aid calculation year, divided by 
 53.35  the number of households for the third most recent year 
 53.36  immediately preceding the year for which the number of 
 54.1   households has most recently been determined as of July 1.  The 
 54.2   household adjustment factor cannot be less than one.  
 54.3      (i) "Growth adjustment factor" means the household 
 54.4   adjustment factor in the case of counties.  In the case of 
 54.5   cities, towns, school districts, and special taxing districts, 
 54.6   the growth adjustment factor equals one.  The growth adjustment 
 54.7   factor cannot be less than one.  
 54.8      (j) "Homestead and agricultural credit base" means the 
 54.9   previous year's certified homestead and agricultural credit aid 
 54.10  determined under subdivision 2 less any permanent aid reduction 
 54.11  in the previous year to homestead and agricultural credit aid.  
 54.12     (k) "Net tax capacity adjustment" means (1) the tax base 
 54.13  differential defined in subdivision 1a, multiplied by (2) the 
 54.14  unique taxing jurisdiction's current local tax rate.  The net 
 54.15  tax capacity adjustment cannot be less than zero. 
 54.16     (l) "Fiscal disparity adjustment" means a taxing 
 54.17  jurisdiction's fiscal disparity distribution levy under section 
 54.18  473F.08, subdivision 3, clause (a), or 276A.06, subdivision 3, 
 54.19  clause (a), for taxes payable in the year prior to that for 
 54.20  which aids are being calculated, multiplied by the ratio of the 
 54.21  tax base differential percent referenced in subdivision 1a for 
 54.22  the highest class rate for class 3 property for taxes payable in 
 54.23  the year prior to that for which aids are being calculated to 
 54.24  the highest class rate for class 3 property for taxes payable in 
 54.25  the second prior year to that for which aids are being 
 54.26  calculated.  In the case of school districts, the fiscal 
 54.27  disparity distribution levy shall exclude that part of the levy 
 54.28  attributable to equalized school levies. 
 54.29     Sec. 8.  Minnesota Statutes 1996, section 275.011, 
 54.30  subdivision 1, is amended to read: 
 54.31     Subdivision 1.  The property tax levied for any purpose 
 54.32  under a special law that is not codified in Minnesota Statutes 
 54.33  or a city charter provision and that is subject to a mill rate 
 54.34  limitation imposed by the special law or city charter provision, 
 54.35  excluding levies subject to mill rate limitations that use 
 54.36  adjusted assessed values determined by the commissioner of 
 55.1   revenue under section 124.2131, must not exceed the following 
 55.2   amount for the years specified: 
 55.3      (a) for taxes payable in 1988, the product of the 
 55.4   applicable mill rate limitation imposed by special law or city 
 55.5   charter provision multiplied by the total assessed valuation of 
 55.6   all taxable property subject to the tax as adjusted by the 
 55.7   provisions of Minnesota Statutes 1986, sections 272.64; 273.13, 
 55.8   subdivision 7a; and 275.49; 
 55.9      (b) for taxes payable in 1989, the product of (1) the 
 55.10  property tax levy limitation for the taxes payable year 1988 
 55.11  determined under clause (a) multiplied by (2) an index for 
 55.12  market valuation changes equal to the assessment year 1988 total 
 55.13  market valuation of all taxable property subject to the tax 
 55.14  divided by the assessment year 1987 total market valuation of 
 55.15  all taxable property subject to the tax; and 
 55.16     (c) for taxes payable in 1990 and subsequent years, the 
 55.17  product of (1) the property tax levy limitation for the previous 
 55.18  year determined pursuant to this subdivision multiplied by (2) 
 55.19  an index for market valuation changes equal to the total market 
 55.20  valuation of all taxable property subject to the tax for the 
 55.21  current assessment year divided by the total market valuation of 
 55.22  all taxable property subject to the tax for the previous 
 55.23  assessment year. 
 55.24     For the purpose of determining the property tax levy 
 55.25  limitation for the taxes payable year 1988 and subsequent years 
 55.26  under this subdivision, "total market valuation" means the total 
 55.27  market valuation of all taxable property subject to the tax 
 55.28  without valuation adjustments for fiscal disparities (chapter 
 55.29  chapters 276A and 473F), tax increment financing (sections 
 55.30  469.174 to 469.179), and high voltage transmission 
 55.31  lines powerline credit (section 273.425), or wind energy 
 55.32  (sections 276.20 to 276.21) values. 
 55.33     Sec. 9.  Minnesota Statutes 1996, section 275.065, 
 55.34  subdivision 3, is amended to read: 
 55.35     Subd. 3.  [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 
 55.36  county auditor shall prepare and the county treasurer shall 
 56.1   deliver after November 10 and on or before November 24 each 
 56.2   year, by first class mail to each taxpayer at the address listed 
 56.3   on the county's current year's assessment roll, a notice of 
 56.4   proposed property taxes and, in the case of a town, final 
 56.5   property taxes.  
 56.6      (b) The commissioner of revenue shall prescribe the form of 
 56.7   the notice. 
 56.8      (c) The notice must inform taxpayers that it contains the 
 56.9   amount of property taxes each taxing authority other than a town 
 56.10  proposes to collect for taxes payable the following year and, 
 56.11  for a town, the amount of its final levy.  It must clearly state 
 56.12  that each taxing authority, including regional library districts 
 56.13  established under section 134.201, and including the 
 56.14  metropolitan taxing districts as defined in paragraph (i), but 
 56.15  excluding all other special taxing districts and towns, will 
 56.16  hold a public meeting to receive public testimony on the 
 56.17  proposed budget and proposed or final property tax levy, or, in 
 56.18  case of a school district, on the current budget and proposed 
 56.19  property tax levy.  It must clearly state the time and place of 
 56.20  each taxing authority's meeting and an address where comments 
 56.21  will be received by mail.  
 56.22     (d) The notice must state for each parcel: 
 56.23     (1) the market value of the property as determined under 
 56.24  section 273.11, and used for computing property taxes payable in 
 56.25  the following year and for taxes payable in the current year as 
 56.26  each appears in the records of the county assessor on November 1 
 56.27  of the current year; and, in the case of residential property, 
 56.28  whether the property is classified as homestead or 
 56.29  nonhomestead.  The notice must clearly inform taxpayers of the 
 56.30  years to which the market values apply and that the values are 
 56.31  final values; 
 56.32     (2) by county, city or town, school district excess 
 56.33  referenda levy, remaining school district levy, regional library 
 56.34  district, if in existence, the total of the metropolitan special 
 56.35  taxing districts as defined in paragraph (i) and the sum of the 
 56.36  remaining special taxing districts, and as a total of the taxing 
 57.1   authorities, including all special taxing districts, the 
 57.2   proposed or, for a town, final net tax on the property for taxes 
 57.3   payable the following year and the actual tax for taxes payable 
 57.4   the current year.  If a school district has certified under 
 57.5   section 124A.03, subdivision 2, that a referendum will be held 
 57.6   in the school district at the November general election, the 
 57.7   county auditor must note next to the school district's proposed 
 57.8   amount that a referendum is pending and that, if approved by the 
 57.9   voters, the tax amount may be higher than shown on the notice.  
 57.10  For the purposes of this subdivision, "school district excess 
 57.11  referenda levy" means school district taxes for operating 
 57.12  purposes approved at referendums, including those taxes based on 
 57.13  net tax capacity as well as those based on market value.  
 57.14  "School district excess referenda levy" does not include school 
 57.15  district taxes for capital expenditures approved at referendums 
 57.16  or school district taxes to pay for the debt service on bonds 
 57.17  approved at referenda.  In the case of the city of Minneapolis, 
 57.18  the levy for the Minneapolis library board and the levy for 
 57.19  Minneapolis park and recreation shall be listed separately from 
 57.20  the remaining amount of the city's levy.  In the case of a 
 57.21  parcel where tax increment or the fiscal disparities areawide 
 57.22  tax under chapter 276A or 473F applies, the proposed tax levy on 
 57.23  the captured value or the proposed tax levy on the tax capacity 
 57.24  subject to the areawide tax must each be stated separately and 
 57.25  not included in the sum of the special taxing districts; and 
 57.26     (3) the increase or decrease in the amounts in clause (2) 
 57.27  from taxes payable in the current year to proposed or, for a 
 57.28  town, final taxes payable the following year, expressed as a 
 57.29  dollar amount and as a percentage. 
 57.30     (e) The notice must clearly state that the proposed or 
 57.31  final taxes do not include the following: 
 57.32     (1) special assessments; 
 57.33     (2) levies approved by the voters after the date the 
 57.34  proposed taxes are certified, including bond referenda, school 
 57.35  district levy referenda, and levy limit increase referenda; 
 57.36     (3) amounts necessary to pay cleanup or other costs due to 
 58.1   a natural disaster occurring after the date the proposed taxes 
 58.2   are certified; 
 58.3      (4) amounts necessary to pay tort judgments against the 
 58.4   taxing authority that become final after the date the proposed 
 58.5   taxes are certified; and 
 58.6      (5) the contamination tax imposed on properties which 
 58.7   received market value reductions for contamination. 
 58.8      (f) Except as provided in subdivision 7, failure of the 
 58.9   county auditor to prepare or the county treasurer to deliver the 
 58.10  notice as required in this section does not invalidate the 
 58.11  proposed or final tax levy or the taxes payable pursuant to the 
 58.12  tax levy. 
 58.13     (g) If the notice the taxpayer receives under this section 
 58.14  lists the property as nonhomestead, and the homeowner provides 
 58.15  satisfactory documentation is provided to the county assessor 
 58.16  that by the applicable deadline, and the property is owned and 
 58.17  used as the owner's qualifies for the homestead classification 
 58.18  in that assessment year, the assessor shall reclassify the 
 58.19  property to homestead for taxes payable in the following year. 
 58.20     (h) In the case of class 4 residential property used as a 
 58.21  residence for lease or rental periods of 30 days or more, the 
 58.22  taxpayer must either: 
 58.23     (1) mail or deliver a copy of the notice of proposed 
 58.24  property taxes to each tenant, renter, or lessee; or 
 58.25     (2) post a copy of the notice in a conspicuous place on the 
 58.26  premises of the property.  
 58.27     The notice must be mailed or posted by the taxpayer by 
 58.28  November 27 or within three days of receipt of the notice, 
 58.29  whichever is later.  A taxpayer may notify the county treasurer 
 58.30  of the address of the taxpayer, agent, caretaker, or manager of 
 58.31  the premises to which the notice must be mailed in order to 
 58.32  fulfill the requirements of this paragraph. 
 58.33     (i) For purposes of this subdivision, subdivisions 5a and 
 58.34  6, "metropolitan special taxing districts" means the following 
 58.35  taxing districts in the seven-county metropolitan area that levy 
 58.36  a property tax for any of the specified purposes listed below: 
 59.1      (1) metropolitan council under section 473.132, 473.167, 
 59.2   473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 
 59.3      (2) metropolitan airports commission under section 473.667, 
 59.4   473.671, or 473.672; and 
 59.5      (3) metropolitan mosquito control commission under section 
 59.6   473.711. 
 59.7      For purposes of this section, any levies made by the 
 59.8   regional rail authorities in the county of Anoka, Carver, 
 59.9   Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 
 59.10  398A shall be included with the appropriate county's levy and 
 59.11  shall be discussed at that county's public hearing. 
 59.12     (j) For taxes levied in 1996, payable in 1997 only, in the 
 59.13  case of a statutory or home rule charter city or town that 
 59.14  exercises the local levy option provided in section 473.388, 
 59.15  subdivision 7, the notice of its proposed taxes may include a 
 59.16  statement of the amount by which its proposed tax increase for 
 59.17  taxes payable in 1997 is attributable to its exercise of that 
 59.18  option, together with a statement that the levy of the 
 59.19  metropolitan council was decreased by a similar amount because 
 59.20  of the exercise of that option. 
 59.21     Sec. 10.  Minnesota Statutes 1996, section 275.295, 
 59.22  subdivision 3, is amended to read: 
 59.23     Subd. 3.  [APPROPRIATION.] There is appropriated from the 
 59.24  general fund to the commissioner of revenue the amount necessary 
 59.25  to make the payments required in subdivision 2.  There is 
 59.26  appropriated from the general fund to the commissioner of 
 59.27  children, families, and learning the amount necessary to make 
 59.28  the payments determined under subdivisions 1 and 2 for school 
 59.29  districts. 
 59.30     Sec. 11.  Minnesota Statutes 1996, section 276A.01, 
 59.31  subdivision 7, is amended to read: 
 59.32     Subd. 7.  [POPULATION.] "Population" means the most recent 
 59.33  estimate of the population of a municipality made by the state 
 59.34  demographer and filed with the commissioner of revenue as of 
 59.35  July 1 of the year in which a municipality's distribution net 
 59.36  tax capacity is calculated.  The state demographer shall 
 60.1   annually estimate the population of each municipality and, in 
 60.2   the case of a municipality which is located partly within and 
 60.3   partly without the area, the proportion of the total which 
 60.4   resides within the area, and shall file the estimates with the 
 60.5   commissioner of revenue. 
 60.6      Sec. 12.  Minnesota Statutes 1996, section 277.21, 
 60.7   subdivision 3, is amended to read: 
 60.8      Subd. 3.  [MANNER OF EXECUTION AND SALE.] In making the 
 60.9   execution of the levy and in collecting the taxes due in a 
 60.10  manner consistent with the provisions of this chapter, the 
 60.11  county treasurer has all of the powers in chapter 550 and in any 
 60.12  other law, and the powers given to the commissioner of revenue 
 60.13  in sections 270.7001, 270.7002, and 290.92, subdivision 23, for 
 60.14  purposes of effecting an execution against property in this 
 60.15  state.  The sale of property levied upon, and the time and 
 60.16  manner of redemption therefrom, must be consistent with 
 60.17  authority granted to the commissioner of revenue to collect 
 60.18  state taxes under sections 270.70 to 270.709.  The seal of the 
 60.19  court, subscribed by the court administrator, as provided in 
 60.20  section 550.04, is not required.  The levy for collection of 
 60.21  taxes may be made, whether or not a legal action for collection 
 60.22  of the taxes has been commenced.  
 60.23     Sec. 13.  Minnesota Statutes 1996, section 287.22, is 
 60.24  amended to read: 
 60.25     287.22 [EXCEPTIONS.] 
 60.26     The tax imposed by section 287.21 shall not apply to: 
 60.27     A.  Any executory contract for the sale of land under which 
 60.28  the vendee is entitled to or does take possession thereof, or 
 60.29  any assignment or cancellation thereof.  
 60.30     B.  Any mortgage or any assignment, extension, partial 
 60.31  release, or satisfaction thereof.  
 60.32     C.  Any will.  
 60.33     D.  Any plat.  
 60.34     E.  Any lease.  
 60.35     F.  Any deed, instrument, or writing in which the United 
 60.36  States or any agency or instrumentality thereof is the grantor, 
 61.1   assignor, transferor, conveyor, grantee or assignee. 
 61.2      G.  Deeds for cemetery lots.  
 61.3      H.  Deeds of distribution by personal representatives.  
 61.4      I.  Deeds to or from coowners partitioning undivided 
 61.5   interests in the same piece of property. 
 61.6      J.  Any deed or other instrument of conveyance issued 
 61.7   pursuant to a land exchange under section 92.121 and related 
 61.8   laws.  
 61.9      K.  A referee's or sheriff's certificate of sale in a 
 61.10  mortgage or lien foreclosure sale. 
 61.11     L.  A referee's or sheriff's certificate of redemption from 
 61.12  a mortgage or lien foreclosure sale issued to the redeeming 
 61.13  mortgagor or lienee. 
 61.14     M.  Any deed, instrument, or writing which grants, creates, 
 61.15  modifies, or cancels an easement. 
 61.16     Sec. 14.  Minnesota Statutes 1996, section 414.033, 
 61.17  subdivision 7, is amended to read: 
 61.18     Subd. 7.  [FILING; EFFECTIVE DATE; COPY, LEVIES.] Any 
 61.19  annexation ordinance provided for in this section must be filed 
 61.20  with the board, the township, the county auditor and the 
 61.21  secretary of state and is final on the date the ordinance is 
 61.22  approved by the board.  A copy of the annexation ordinance must 
 61.23  be delivered immediately by the governing body of the 
 61.24  municipality to the appropriate county auditor or auditors.  For 
 61.25  the purposes of taxation, if the annexation becomes effective on 
 61.26  or before August 1 of a levy year, the municipality may levy on 
 61.27  the annexed area beginning with that same levy year.  If the 
 61.28  annexation becomes effective after August 1 of a levy year, the 
 61.29  town may continue to levy on the annexed area for that levy 
 61.30  year, and the municipality may not levy on the annexed area 
 61.31  until the following levy year. 
 61.32     Sec. 15.  Minnesota Statutes 1996, section 414.033, 
 61.33  subdivision 12, is amended to read: 
 61.34     Subd. 12.  [PROPERTY TAXES.] When a municipality annexes 
 61.35  land under subdivision 2, clause (2), (3), or (4), or 
 61.36  subdivision 2a, property taxes payable on the annexed land shall 
 62.1   continue to be paid to the affected town or towns for the year 
 62.2   in which the annexation becomes effective.  If the annexation 
 62.3   becomes effective on or before August 1 of a levy year, the 
 62.4   municipality may levy on the annexed area beginning with that 
 62.5   same levy year.  If the annexation becomes effective after 
 62.6   August 1 of a levy year, the town may continue to levy on the 
 62.7   annexed area for that levy year, and the municipality may not 
 62.8   levy on the annexed area until the following levy year.  In the 
 62.9   first year following the year when the municipality could first 
 62.10  levy on the annexed area under this subdivision, and thereafter, 
 62.11  property taxes on the annexed land shall be paid to the 
 62.12  municipality.  In the first year following the year the land was 
 62.13  annexed municipality could first levy on the annexed area, the 
 62.14  municipality shall make a cash payment to the affected town or 
 62.15  towns in an amount equal to 90 percent of the property taxes 
 62.16  paid in the year the land was annexed distributed to the town in 
 62.17  regard to the annexed area in the last year the property taxes 
 62.18  from the annexed area were payable to the town; in the second 
 62.19  year, an amount equal to 70 percent of the property taxes paid 
 62.20  in the year the land was annexed; in the third year, an amount 
 62.21  equal to 50 percent of the property taxes paid in the year the 
 62.22  land was annexed; in the fourth year, an amount equal to 30 
 62.23  percent of the property taxes paid in the year the land was 
 62.24  annexed; and in the fifth year, an amount equal to ten 
 62.25  percent of the property taxes paid in the year the land was 
 62.26  annexed.  The municipality and the affected township may agree 
 62.27  to a different payment. 
 62.28     Sec. 16.  Minnesota Statutes 1996, section 469.177, 
 62.29  subdivision 9, is amended to read: 
 62.30     Subd. 9.  [DISTRIBUTIONS OF EXCESS TAXES ON CAPTURED NET 
 62.31  TAX CAPACITY.] (a) If the amount of tax paid on captured net tax 
 62.32  capacity exceeds the amount of tax increment, the county auditor 
 62.33  shall distribute the excess to the municipality, county, and 
 62.34  school district as follows:  each governmental unit's share of 
 62.35  the excess equals 
 62.36     (1) the total amount of the excess for the tax increment 
 63.1   financing district, multiplied by 
 63.2      (2) a fraction, the numerator of which is the current local 
 63.3   tax rate of the governmental unit less the governmental unit's 
 63.4   local tax rate for the year the original local tax rate for the 
 63.5   district was certified (in no case may this amount be less than 
 63.6   zero) and the denominator of which is the sum of the numerators 
 63.7   for the municipality, county, and school district. 
 63.8   If the entire increase in the local tax rate is attributable to 
 63.9   a taxing district, other than the municipality, county, or 
 63.10  school district, then the excess must be distributed to the 
 63.11  municipality, county, and school district in proportion to their 
 63.12  respective local tax rates. 
 63.13     The school district's tax rate must be divided into the 
 63.14  portion of the tax rate attributable (1) to state equalized 
 63.15  levies, and (2) unequalized levies.  As used in this 
 63.16  subdivision, "equalized levies" means the sum of the maximum 
 63.17  amounts that may be levied for:  (i) general education under 
 63.18  section 124A.23, subdivision 2; (ii) supplemental revenue under 
 63.19  section 124A.22, subdivision 8a; (iii) capital expenditure 
 63.20  facilities revenue under section 124.243, subdivision 3; (iv) 
 63.21  capital expenditure equipment revenue under section 124.244, 
 63.22  subdivision 2; and (v) basic transportation under section 
 63.23  124.226, subdivision 1. "equalized school levies" which are 
 63.24  defined in section 273.1398, subdivision 1, for aids payable in 
 63.25  the year following the year in which the excess taxes on 
 63.26  captured net tax capacity are due and payable.  Unequalized 
 63.27  levies mean the rest of the school district's levies.  The 
 63.28  calculations under clause (2) must determine the amount of 
 63.29  excess taxes attributable to each portion of the school 
 63.30  district's tax rate.  If one of the portions of the change in 
 63.31  the school district tax rate is less than zero and the combined 
 63.32  change is greater than zero, the combined rate must be used and 
 63.33  all the school district's share of excess taxes allocated to 
 63.34  that portion of the tax rate. 
 63.35     (b) The amounts distributed shall be deducted in computing 
 63.36  the levy limits of the taxing district for the succeeding 
 64.1   taxable year.  In the case of a school district, only the 
 64.2   proportion of the excess taxes attributable to unequalized 
 64.3   levies that are subject to a fixed dollar amount levy limit 
 64.4   shall be deducted from the levy limit. 
 64.5      (c) In the case of distributions to a school district that 
 64.6   are attributable to state equalized levies, the county auditor 
 64.7   shall report amounts distributed to the commissioner of 
 64.8   children, families, and learning in the same manner as provided 
 64.9   for excess increments under section 469.176, subdivision 2, and 
 64.10  the distribution shall be deducted from the school district's 
 64.11  state aid payments. 
 64.12     Sec. 17.  Minnesota Statutes 1996, section 473.388, 
 64.13  subdivision 7, is amended to read: 
 64.14     Subd. 7.  [LOCAL LEVY OPTION.] (a) A statutory or home rule 
 64.15  charter city or town that is eligible for assistance under this 
 64.16  section, in lieu of receiving the assistance, may levy a tax for 
 64.17  payment of the operating and capital expenditures for transit 
 64.18  and other related activities and to provide for payment of 
 64.19  obligations issued by the municipality for such purposes, 
 64.20  provided that the tax must be sufficient to maintain the level 
 64.21  of transit service provided in the municipality in the previous 
 64.22  year. 
 64.23     (b) The transit tax revenues derived by the municipality 
 64.24  may not exceed: 
 64.25     (1) for the first transit levy year and any subsequent 
 64.26  transit levy year immediately following a year in which the 
 64.27  municipality declines to make the levy, the maximum available 
 64.28  local transit funds for the municipality for taxes payable in 
 64.29  the current year under section 473.446, calculated as if the 
 64.30  percentage of transit tax revenues for the municipality were 88 
 64.31  percent instead of 90 percent, and multiplied by the 
 64.32  municipality's market value adjustment ratio; and 
 64.33     (2) for taxes levied in any year that immediately follows a 
 64.34  year in which the municipality elects to levy under this 
 64.35  subdivision, the maximum transit tax that the municipality may 
 64.36  have levied in the previous year under this subdivision, 
 65.1   multiplied by the municipality's market value adjustment ratio. 
 65.2      The commissioner of revenue shall certify the 
 65.3   municipality's levy limitation under this subdivision to the 
 65.4   municipality by June 1 of the levy year.  The tax must be 
 65.5   accumulated and kept in a separate fund to be known as the 
 65.6   "replacement transit fund." 
 65.7      (c) To enable the municipality to receive revenues 
 65.8   described in clauses (2) and (3) of the definition of "tax 
 65.9   revenues" in subdivision 4, that would otherwise be lost if the 
 65.10  municipality's transit tax levy was not treated as a successor 
 65.11  levy to that made by the council under section 473.446: 
 65.12     (1) in the first transit levy year and any subsequent 
 65.13  transit levy year immediately following a year in which the 
 65.14  municipality declined to make the levy, 88 percent of the 
 65.15  council's nondebt spread levy for the current taxes payable year 
 65.16  shall be treated as levied by the municipality, and not the 
 65.17  council, for purposes of section 473F.08, subdivision 3, for the 
 65.18  purpose of determining its local tax rate for the preceding 
 65.19  year; and 
 65.20     (2) 88 percent of the revenues described in clause (3) of 
 65.21  the definition of "tax revenues" in subdivision 4, payable in 
 65.22  the first transit levy year, or payable in any subsequent 
 65.23  transit levy year following a year in which a municipality 
 65.24  declined to make the levy, shall be permanently transferred from 
 65.25  the council to the municipality.  If a municipality levies a tax 
 65.26  under this subdivision in one year, but declines to levy in a 
 65.27  subsequent year, the aid transferred under this clause shall be 
 65.28  transferred back to the council. 
 65.29     (d) Any transit taxes levied under this subdivision are not 
 65.30  subject to, or counted towards, any limit hereafter imposed by 
 65.31  law on the levy of taxes upon taxable property within any 
 65.32  municipality unless the law specifically includes the transit 
 65.33  tax. 
 65.34     (e) This subdivision is consistent with the transit 
 65.35  redesign plan.  Eligible municipalities opting to levy the 
 65.36  transit tax under this subdivision shall continue to meet the 
 66.1   regional performance standards established by the council. 
 66.2      (f) Within the designated Americans with Disabilities Act 
 66.3   area, metro mobility remains the obligation of the state. 
 66.4      (g) For purposes of this subdivision, "transit levy year" 
 66.5   is any year in which the municipality elects to levy under this 
 66.6   subdivision. 
 66.7      (h) A municipality may not levy taxes under this 
 66.8   subdivision in any year unless it notifies the council and the 
 66.9   commissioner of revenue of its intent to levy before July 1 of 
 66.10  the levy year.  The notification must include the amount of the 
 66.11  municipality's proposed transit tax for the current levy 
 66.12  year.  After June 30 in the levy year, a municipality's decision 
 66.13  to levy or not levy taxes under this subdivision is irrevocable 
 66.14  for that levy year. 
 66.15     Sec. 18.  Minnesota Statutes 1996, section 473F.02, 
 66.16  subdivision 7, is amended to read: 
 66.17     Subd. 7.  [POPULATION.] "Population" means the most recent 
 66.18  estimate of the population of a municipality made by the 
 66.19  metropolitan council and filed with the commissioner of 
 66.20  revenue as of July 1 of the year in which a municipality's 
 66.21  distribution net tax capacity is calculated.  The council shall 
 66.22  annually estimate the population of each municipality as of a 
 66.23  date which it determines and, in the case of a municipality 
 66.24  which is located partly within and partly without the area, the 
 66.25  proportion of the total which resides within the area, and shall 
 66.26  promptly thereafter file its estimates with the commissioner of 
 66.27  revenue. 
 66.28     Sec. 19.  [EFFECTIVE DATE.] 
 66.29     Sections 1, 2, 4 to 7, 9 to 13, and 16 to 18 are effective 
 66.30  the day following final enactment.  Sections 3 and 8 are 
 66.31  effective for determinations made in regard to taxes payable in 
 66.32  1996 and thereafter.  Sections 14 and 15 are effective beginning 
 66.33  with annexations that become effective in 1996 and thereafter. 
 66.34                             ARTICLE 4
 66.35                           MINNESOTACARE
 66.36     Section 1.  Minnesota Statutes 1996, section 295.50, 
 67.1   subdivision 3, is amended to read: 
 67.2      Subd. 3.  [GROSS REVENUES.] "Gross revenues" are total 
 67.3   amounts received in money or otherwise by: 
 67.4      (1) a hospital for patient services; 
 67.5      (2) a surgical center for patient services; 
 67.6      (3) a health care provider, other than a staff model health 
 67.7   carrier, for patient services; 
 67.8      (4) a wholesale drug distributor for sale or distribution 
 67.9   of legend drugs that are delivered:  (i) to a in Minnesota 
 67.10  resident by a wholesale drug distributor who is a nonresident 
 67.11  pharmacy directly, by common carrier, or by mail; or (ii) in 
 67.12  Minnesota by the wholesale drug distributor, by common carrier, 
 67.13  or by mail, unless the legend drugs are delivered to another 
 67.14  wholesale drug distributor who sells legend drugs exclusively at 
 67.15  wholesale.  Legend drugs do not include nutritional products as 
 67.16  defined in Minnesota Rules, part 9505.0325; 
 67.17     (5) a staff model health plan company as gross premiums for 
 67.18  enrollees, copayments, deductibles, coinsurance, and fees for 
 67.19  patient services covered under its contracts with groups and 
 67.20  enrollees; and 
 67.21     (6) a pharmacy medical supplies distributor for sale, rent, 
 67.22  lease, or repair of medical supplies, appliances, and equipment. 
 67.23     Sec. 2.  Minnesota Statutes 1996, section 295.50, 
 67.24  subdivision 4, is amended to read: 
 67.25     Subd. 4.  [HEALTH CARE PROVIDER.] (a) "Health care 
 67.26  provider" means: 
 67.27     (1) a person whose health care occupation is required to be 
 67.28  licensed or registered by the state of Minnesota furnishing any 
 67.29  or all of the following goods or services directly to a patient 
 67.30  or consumer:  medical, surgical, optical, visual, dental, 
 67.31  hearing, nursing services, drugs, medical supplies, medical 
 67.32  appliances, laboratory, diagnostic or therapeutic services, or 
 67.33  any goods and services not listed above that qualify for 
 67.34  reimbursement under the medical assistance program provided 
 67.35  under chapter 256B.  For purposes of this clause, "directly to a 
 67.36  patient or consumer" includes goods and services provided in 
 68.1   connection with independent medical examinations under section 
 68.2   65B.56 or other examinations for purposes of litigation or 
 68.3   insurance claims; 
 68.4      (2) a staff model health plan company; or 
 68.5      (3) an ambulance service required to be licensed. 
 68.6      (b) Health care provider does not include 
 68.7   hospitals, medical supplies distributors, nursing homes licensed 
 68.8   under chapter 144A or licensed in any other jurisdiction, 
 68.9   pharmacies, surgical centers, bus and taxicab transportation, or 
 68.10  any other providers of transportation services other than 
 68.11  ambulance services required to be licensed, supervised living 
 68.12  facilities for persons with mental retardation or related 
 68.13  conditions, licensed under Minnesota Rules, parts 4665.0100 to 
 68.14  4665.9900, residential care homes licensed under chapter 144B, 
 68.15  board and lodging establishments providing only custodial 
 68.16  services that are licensed under chapter 157 and registered 
 68.17  under section 157.17 to provide supportive services or health 
 68.18  supervision services, adult foster homes as defined in Minnesota 
 68.19  Rules, part 9555.5105, day training and habilitation services 
 68.20  for adults with mental retardation and related conditions as 
 68.21  defined in section 252.41, subdivision 3, and boarding care 
 68.22  homes, as defined in Minnesota Rules, part 4655.0100. 
 68.23     Sec. 3.  Minnesota Statutes 1996, section 295.50, 
 68.24  subdivision 7, is amended to read: 
 68.25     Subd. 7.  [HOSPITAL.] "Hospital" means a hospital licensed 
 68.26  under chapter 144, or a hospital licensed by any other state or 
 68.27  province or territory of Canada jurisdiction. 
 68.28     Sec. 4.  Minnesota Statutes 1996, section 295.50, is 
 68.29  amended by adding a subdivision to read: 
 68.30     Subd. 7a.  [MEDICAL SUPPLIES DISTRIBUTOR.] A medical 
 68.31  supplies distributor is a person who sells, rents, leases, or 
 68.32  repairs medical supplies, appliances, and equipment. 
 68.33     Sec. 5.  Minnesota Statutes 1996, section 295.50, 
 68.34  subdivision 13, is amended to read: 
 68.35     Subd. 13.  [SURGICAL CENTER.] "Surgical center" is an 
 68.36  outpatient surgical center as defined in Minnesota Rules, 
 69.1   chapter 4675 or a similar facility located in any other state or 
 69.2   province or territory of Canada jurisdiction. 
 69.3      Sec. 6.  Minnesota Statutes 1996, section 295.51, 
 69.4   subdivision 1, is amended to read: 
 69.5      Subdivision 1.  [BUSINESS TRANSACTIONS IN MINNESOTA.] A 
 69.6   hospital, surgical center, pharmacy medical supplies 
 69.7   distributor, or health care provider is subject to tax under 
 69.8   sections 295.50 to 295.59 if it is "transacting business in 
 69.9   Minnesota."  A hospital, surgical center, pharmacy medical 
 69.10  supplies distributor, or health care provider is transacting 
 69.11  business in Minnesota if it maintains contacts with or presence 
 69.12  in the state of Minnesota sufficient to permit taxation of gross 
 69.13  revenues received for patient services under the United States 
 69.14  Constitution. 
 69.15     Sec. 7.  Minnesota Statutes 1996, section 295.52, 
 69.16  subdivision 1b, is amended to read: 
 69.17     Subd. 1b.  [PHARMACY MEDICAL SUPPLIES DISTRIBUTOR TAX.] A 
 69.18  tax is imposed on each pharmacy medical supplies distributor 
 69.19  equal to two percent of its gross revenues. 
 69.20     Sec. 8.  Minnesota Statutes 1996, section 295.53, 
 69.21  subdivision 1, is amended to read: 
 69.22     Subdivision 1.  [EXEMPTIONS.] (a) The following payments 
 69.23  are excluded from the gross revenues subject to the hospital, 
 69.24  surgical center, or health care provider taxes under sections 
 69.25  295.50 to 295.57: 
 69.26     (1) payments received for services provided under the 
 69.27  Medicare program, including payments received from the 
 69.28  government, and organizations governed by sections 1833 and 1876 
 69.29  of title XVIII of the federal Social Security Act, United States 
 69.30  Code, title 42, section 1395, and enrollee deductibles, 
 69.31  coinsurance, and copayments, whether paid by the Medicare 
 69.32  enrollee or by a Medicare supplemental coverage as defined in 
 69.33  section 62A.011, subdivision 3, clause (10).  Payments for 
 69.34  services not covered by Medicare are taxable; 
 69.35     (2) medical assistance payments including payments received 
 69.36  directly from the government or from a prepaid plan; 
 70.1      (3) payments received for home health care services; 
 70.2      (4) payments received from hospitals or surgical centers 
 70.3   for goods and services on which liability for tax is imposed 
 70.4   under section 295.52 or the source of funds for the payment is 
 70.5   exempt under clause (1), (2), (7), (8), or (10); 
 70.6      (5) payments received from health care providers for goods 
 70.7   and services on which liability for tax is imposed under this 
 70.8   chapter or the source of funds for the payment is exempt under 
 70.9   clause (1), (2), (7), (8), or (10); 
 70.10     (6) amounts paid for legend drugs, other than nutritional 
 70.11  products, to a wholesale drug distributor who is subject to tax 
 70.12  under section 295.52, subdivision 3, reduced by reimbursements 
 70.13  received for legend drugs under clauses (1), (2), (7), and (8); 
 70.14     (7) payments received under the general assistance medical 
 70.15  care program including payments received directly from the 
 70.16  government or from a prepaid plan; 
 70.17     (8) payments received for providing services under the 
 70.18  MinnesotaCare program including payments received directly from 
 70.19  the government or from a prepaid plan and enrollee deductibles, 
 70.20  coinsurance, and copayments.  For purposes of this clause, 
 70.21  coinsurance means the portion of payment that the enrollee is 
 70.22  required to pay for the covered service; 
 70.23     (9) payments received by a health care provider or the 
 70.24  wholly owned subsidiary of a health care provider for care 
 70.25  provided outside Minnesota to a patient who is not domiciled in 
 70.26  Minnesota; 
 70.27     (10) payments received from the chemical dependency fund 
 70.28  under chapter 254B; 
 70.29     (11) payments received in the nature of charitable 
 70.30  donations that are not designated for providing patient services 
 70.31  to a specific individual or group; 
 70.32     (12) payments received for providing patient services 
 70.33  incurred through a formal program of health care research 
 70.34  conducted in conformity with federal regulations governing 
 70.35  research on human subjects.  Payments received from patients or 
 70.36  from other persons paying on behalf of the patients are subject 
 71.1   to tax; 
 71.2      (13) payments received from any governmental agency for 
 71.3   services benefiting the public, not including payments made by 
 71.4   the government in its capacity as an employer or insurer; 
 71.5      (14) payments received for services provided by community 
 71.6   residential mental health facilities licensed under Minnesota 
 71.7   Rules, parts 9520.0500 to 9520.0690, community support programs 
 71.8   and family community support programs approved under Minnesota 
 71.9   Rules, parts 9535.1700 to 9535.1760, and community mental health 
 71.10  centers as defined in section 245.62, subdivision 2; 
 71.11     (15) government payments received by a regional treatment 
 71.12  center; 
 71.13     (16) payments received for hospice care services; 
 71.14     (17) payments received by a health care provider for 
 71.15  medical supplies, appliances, and equipment delivered outside of 
 71.16  Minnesota; 
 71.17     (18) payments received by a post-secondary educational 
 71.18  institution from student tuition, student activity fees, health 
 71.19  care service fees, government appropriations, donations, or 
 71.20  grants.  Fee for service payments and payments for extended 
 71.21  coverage are taxable; and 
 71.22     (19) payments received for services provided by:  assisted 
 71.23  living programs and congregate housing programs. 
 71.24     (b) Payments received by wholesale drug distributors for 
 71.25  prescription legend drugs sold directly to veterinarians or 
 71.26  veterinary bulk purchasing organizations are excluded from the 
 71.27  gross revenues subject to the wholesale drug distributor tax 
 71.28  under sections 295.50 to 295.59. 
 71.29     Sec. 9.  Minnesota Statutes 1996, section 295.53, 
 71.30  subdivision 3, is amended to read: 
 71.31     Subd. 3.  [SEPARATE STATEMENT OF TAX.] A hospital, surgical 
 71.32  center, pharmacy medical supplies distributor, or health care 
 71.33  provider must not state the tax obligation under section 295.52 
 71.34  in a deceptive or misleading manner.  It must not separately 
 71.35  state tax obligations on bills provided to patients, consumers, 
 71.36  or other payers when the amount received for the services or 
 72.1   goods is not subject to tax.  
 72.2      Pharmacies that separately state the tax obligations on 
 72.3   bills provided to consumers or to other payers who purchase 
 72.4   legend drugs may state the tax obligation as two percent of the 
 72.5   wholesale price of the legend drugs.  Pharmacies must not state 
 72.6   the tax obligation as two percent of the retail price.  
 72.7      Whenever the commissioner determines that a person has 
 72.8   engaged in any act or practice constituting a violation of this 
 72.9   subdivision, the commissioner may bring an action in the name of 
 72.10  the state in the district court of the appropriate county to 
 72.11  enjoin the act or practice and to enforce compliance with this 
 72.12  subdivision, or the commissioner may refer the matter to the 
 72.13  attorney general or the county attorney of the appropriate 
 72.14  county.  Upon a proper showing, a permanent or temporary 
 72.15  injunction, restraining order, or other appropriate relief must 
 72.16  be granted.  
 72.17     Sec. 10.  Minnesota Statutes 1996, section 295.53, 
 72.18  subdivision 5, is amended to read: 
 72.19     Subd. 5.  [EXEMPTIONS FOR PHARMACIES MEDICAL SUPPLIES 
 72.20  DISTRIBUTORS.] (a) Pharmacies Medical supplies distributors may 
 72.21  exclude from their gross revenues subject to tax payments for 
 72.22  medical supplies, appliances, and devices equipment that are 
 72.23  exempt under subdivision 1, clauses (1), (2), (4), (5), (7), 
 72.24  (8), and (13). 
 72.25     (b) Pharmacies Medical supplies distributors may exclude 
 72.26  from their gross revenues subject to tax payments received for 
 72.27  medical supplies, appliances, and equipment delivered outside of 
 72.28  Minnesota. 
 72.29     Sec. 11.  Minnesota Statutes 1996, section 295.54, 
 72.30  subdivision 1, is amended to read: 
 72.31     Subdivision 1.  [TAXES PAID TO ANOTHER STATE.] A hospital, 
 72.32  surgical center, pharmacy medical supplies distributor, or 
 72.33  health care provider that has paid taxes to another state or 
 72.34  province or territory of Canada jurisdiction measured by gross 
 72.35  revenues and is subject to tax under sections 295.52 to 295.59 
 72.36  on the same gross revenues is entitled to a credit for the tax 
 73.1   legally due and paid to another state or province or territory 
 73.2   of Canada jurisdiction to the extent of the lesser of (1) the 
 73.3   tax actually paid to the other state or province or territory of 
 73.4   Canada jurisdiction, or (2) the amount of tax imposed by 
 73.5   Minnesota on the gross revenues subject to tax in the other 
 73.6   taxing jurisdictions. 
 73.7      Sec. 12.  Minnesota Statutes 1996, section 295.582, is 
 73.8   amended to read: 
 73.9      295.582 [AUTHORITY.] 
 73.10     (a) A hospital, surgical center, pharmacy medical supplies 
 73.11  distributor, or health care provider that is subject to a tax 
 73.12  under section 295.52, or a pharmacy that has paid additional 
 73.13  expense transferred under this section by a wholesale drug 
 73.14  distributor, may transfer additional expense generated by 
 73.15  section 295.52 obligations on to all third-party contracts for 
 73.16  the purchase of health care services on behalf of a patient or 
 73.17  consumer.  The additional expense transferred to the third-party 
 73.18  purchaser must not exceed two percent of the gross revenues 
 73.19  received under the third-party contract, and two percent of 
 73.20  copayments and deductibles paid by the individual patient or 
 73.21  consumer.  The expense must not be generated on revenues derived 
 73.22  from payments that are excluded from the tax under section 
 73.23  295.53.  All third-party purchasers of health care services 
 73.24  including, but not limited to, third-party purchasers regulated 
 73.25  under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 
 73.26  or 79A, or under section 471.61 or 471.617, must pay the 
 73.27  transferred expense in addition to any payments due under 
 73.28  existing contracts with the hospital, surgical center, pharmacy 
 73.29  medical supplies distributor, or health care provider, to the 
 73.30  extent allowed under federal law.  A third-party purchaser of 
 73.31  health care services includes, but is not limited to, a health 
 73.32  carrier, integrated service network, or community integrated 
 73.33  service network that pays for health care services on behalf of 
 73.34  patients or that reimburses, indemnifies, compensates, or 
 73.35  otherwise insures patients for health care services.  A 
 73.36  third-party purchaser shall comply with this section regardless 
 74.1   of whether the third-party purchaser is a for-profit, 
 74.2   not-for-profit, or nonprofit entity.  A wholesale drug 
 74.3   distributor may transfer additional expense generated by section 
 74.4   295.52 obligations to entities that purchase from the 
 74.5   wholesaler, and the entities must pay the additional expense.  
 74.6   Nothing in this section limits the ability of a hospital, 
 74.7   surgical center, pharmacy medical supplies distributor, 
 74.8   wholesale drug distributor, or health care provider to recover 
 74.9   all or part of the section 295.52 obligation by other methods, 
 74.10  including increasing fees or charges. 
 74.11     (b) Each third-party purchaser regulated under any chapter 
 74.12  cited in paragraph (a) shall include with its annual renewal for 
 74.13  certification of authority or licensure documentation indicating 
 74.14  compliance with paragraph (a).  If the commissioner responsible 
 74.15  for regulating the third-party purchaser finds at any time that 
 74.16  the third-party purchaser has not complied with paragraph (a), 
 74.17  the commissioner may by order fine or censure the third-party 
 74.18  purchaser or revoke or suspend the certificate of authority or 
 74.19  license of the third-party purchaser to do business in this 
 74.20  state.  The third-party purchaser may appeal the commissioner's 
 74.21  order through a contested case hearing in accordance with 
 74.22  chapter 14. 
 74.23     Sec. 13.  [EFFECTIVE DATE.] 
 74.24     Sections 1 to 12 are effective the day following final 
 74.25  enactment.