HF 3519

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; making technical, policy, and clarifying changes to taxes
and tax-related provisions; conforming to streamlined sales tax provisions;
changing the taconite production tax; providing for administration of certain
fees, aids, tax titles, and tax sales; amending Minnesota Statutes 2004, sections
273.1384, subdivision 2; 273.1398, subdivision 3; 281.23, subdivision 9;
290.17, subdivision 1; 295.50, subdivision 4; 295.53, subdivision 3; 297A.61,
subdivisions 12, 17, by adding subdivisions; 297A.63; 297A.668, subdivision
6; 297A.669, subdivision 11; 297A.67, subdivisions 4, 5, 14, 25, 27; 297A.68,
subdivision 3; 297A.70, subdivisions 2, 4, 7, 13, 14, 15; 297A.94; 297A.99,
subdivision 7; 297F.01, by adding a subdivision; 297G.01, subdivision 7, by
adding a subdivision; 298.223, subdivision 3; 298.225, subdivision 2; 298.227;
298.28, as amended; 298.285; 477A.014, subdivision 1; Minnesota Statutes 2005
Supplement, sections 115B.49, subdivision 4; 270C.01, subdivision 4; 270C.304;
270C.33, subdivision 4; 270C.57, subdivision 3; 270C.67, subdivision 1, by
adding a subdivision; 271.12; 273.13, subdivisions 22, 25; 273.1384, subdivision
1; 284.07; 289A.121, subdivision 5; 297A.61, subdivision 3; 297A.67,
subdivision 6; 297A.68, subdivisions 2, 5, 37, 38, 40, 41; 297A.72, subdivision
2; 297A.75, subdivisions 1, 2, 3; 297A.815, subdivision 1; 298.24, subdivision 1;
Laws 1990, chapter 604, article 8, section 13, subdivision 4; Laws 1996, chapter
412, article 5, sections 20, subdivision 2; 21, subdivision 3; 22, subdivision 2;
Laws 1998, chapter 398, article 4, section 17, subdivision 2; Laws 2000, chapter
489, article 5, sections 24, subdivision 3; 25, subdivision 3; 26, subdivision
3; Laws 2005, chapter 152, article 1, section 39, subdivision 2; proposing
coding for new law in Minnesota Statutes, chapter 287; repealing Minnesota
Statutes 2004, sections 297A.68, subdivisions 15, 18; 298.28, subdivision 11a;
Minnesota Rules, parts 8130.0400, subpart 3; 8130.4800, subparts 1, 3, 4, 5, 6,
7, 8; 8130.5100; 8130.5400; 8130.5800, subpart 6.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

PROPERTY TAXES AND AIDS

Section 1.

Minnesota Statutes 2005 Supplement, section 273.13, subdivision 22,
is amended to read:

Subd. 22.

Class 1.

(a) Except as provided in subdivision 23 and in paragraphs (b)
and (c), real estate which is residential and used for homestead purposes is class 1a. In the
case of a duplex or triplex in which one of the units is used for homestead purposes, the
entire property is deemed to be used for homestead purposes. The market value of class 1a
property must be determined based upon the value of the house, garage, and land.

The first $500,000 of market value of class 1a property has a net class rate of
one percent of its market value; and the market value of class 1a property that exceeds
$500,000 has a class rate of 1.25 percent of its market value.

(b) Class 1b property includes homestead real estate or homestead manufactured
homes used for the purposes of a homestead by

(1) any person who is blind as defined in section 256D.35, or the blind person and
the blind person's spouse; or

(2) any person, hereinafter referred to as "veteran," who:

(i) served in the active military or naval service of the United States; and

(ii) is entitled to compensation under the laws and regulations of the United States
for permanent and total service-connected disability due to the loss, or loss of use, by
reason of amputation, ankylosis, progressive muscular dystrophies, or paralysis, of both
lower extremities, such as to preclude motion without the aid of braces, crutches, canes, or
a wheelchair; and

(iii) has acquired a special housing unit with special fixtures or movable facilities
made necessary by the nature of the veteran's disability, or the surviving spouse of the
deceased veteran for as long as the surviving spouse retains the special housing unit
as a homestead; or

(3) any person who is permanently and totally disabled.

Property is classified and assessed under clause (3) only if the government agency or
income-providing source certifies, upon the request of the homestead occupant, that the
homestead occupant satisfies the disability requirements of this paragraph.

Property is classified and assessed pursuant to clause (1) only if the commissioner of
revenue certifies to the assessor that the homestead occupant satisfies the requirements of
this paragraph.

Permanently and totally disabled for the purpose of this subdivision means a
condition which is permanent in nature and totally incapacitates the person from working
at an occupation which brings the person an income. The first $32,000 market value of
class 1b property has a net class rate of .45 percent of its market value. The remaining
market value of class 1b property has a class rate using the rates for class 1a or class 2a
property, whichever is appropriate, of similar market value.

(c) Class 1c property is commercial use real property that abuts a lakeshore line and
is devoted to temporary and seasonal residential occupancy for recreational purposes but
not devoted to commercial purposes for more than 250 days in the year preceding the
year of assessment, and that includes a portion used as a homestead by the owner, which
includes a dwelling occupied as a homestead by a shareholder of a corporation that owns
the resort, a partner in a partnership that owns the resort, or a member of a limited liability
company that owns the resort even if the title to the homestead is held by the corporation,
partnership, or limited liability company. For purposes of this clause, property is devoted
to a commercial purpose on a specific day if any portion of the property, excluding the
portion used exclusively as a homestead, is used for residential occupancy and a fee
is charged for residential occupancy. The portion of the property used as a homestead
deleted text begin by the owner has the same class rates as deleted text end new text begin is new text end class 1a property under paragraph (a). The
remainder of the property is classified as follows: the first $500,000 of market value is tier
I, the next $1,700,000 of market value is tier II, and any remaining market value is tier III.
The class rates for class 1c are: tier I, 0.55 percent; tier II, 1.0 percent; and tier III, 1.25
percent. If a class 1c resort property has any market value in tier III, the entire property
must meet the requirements of subdivision 25, paragraph (d), clause (1), to qualify for
class 1c treatment under this paragraph.

(d) Class 1d property includes structures that meet all of the following criteria:

(1) the structure is located on property that is classified as agricultural property under
section 273.13, subdivision 23;

(2) the structure is occupied exclusively by seasonal farm workers during the time
when they work on that farm, and the occupants are not charged rent for the privilege of
occupying the property, provided that use of the structure for storage of farm equipment
and produce does not disqualify the property from classification under this paragraph;

(3) the structure meets all applicable health and safety requirements for the
appropriate season; and

(4) the structure is not salable as residential property because it does not comply
with local ordinances relating to location in relation to streets or roads.

The market value of class 1d property has the same class rates as class 1a property
under paragraph (a).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
thereafter.
new text end

Sec. 2.

Minnesota Statutes 2005 Supplement, section 273.13, subdivision 25, is
amended to read:

Subd. 25.

Class 4.

(a) Class 4a is residential real estate containing four or more
units and used or held for use by the owner or by the tenants or lessees of the owner
as a residence for rental periods of 30 days or more, excluding property qualifying for
class 4d. Class 4a also includes hospitals licensed under sections 144.50 to 144.56, other
than hospitals exempt under section 272.02, and contiguous property used for hospital
purposes, without regard to whether the property has been platted or subdivided. The
market value of class 4a property has a class rate of 1.25 percent.

(b) Class 4b includes:

(1) residential real estate containing less than four units that does not qualify as class
4bb, other than seasonal residential recreational property;

(2) manufactured homes not classified under any other provision;

(3) a dwelling, garage, and surrounding one acre of property on a nonhomestead
farm classified under subdivision 23, paragraph (b) containing two or three units; and

(4) unimproved property that is classified residential as determined under subdivision
33.

The market value of class 4b property has a class rate of 1.25 percent.

(c) Class 4bb includes:

(1) nonhomestead residential real estate containing one unit, other than seasonal
residential recreational property; and

(2) a single family dwelling, garage, and surrounding one acre of property on a
nonhomestead farm classified under subdivision 23, paragraph (b).

Class 4bb property has the same class rates as class 1a property under subdivision 22.

Property that has been classified as seasonal residential recreational property at
any time during which it has been owned by the current owner or spouse of the current
owner does not qualify for class 4bb.

(d) Class 4c property includes:

(1) except as provided in subdivision 22, paragraph (c), real property devoted to
temporary and seasonal residential occupancy for recreation purposes, including real
property devoted to temporary and seasonal residential occupancy for recreation purposes
and not devoted to commercial purposes for more than 250 days in the year preceding
the year of assessment. For purposes of this clause, property is devoted to a commercial
purpose on a specific day if any portion of the property is used for residential occupancy,
and a fee is charged for residential occupancy. In order for a property to be classified as
class 4c, seasonal residential recreational for commercial purposes, at least 40 percent of
the annual gross lodging receipts related to the property must be from business conducted
during 90 consecutive days and either (i) at least 60 percent of all paid bookings by lodging
guests during the year must be for periods of at least two consecutive nights; or (ii) at least
20 percent of the annual gross receipts must be from charges for rental of fish houses,
boats and motors, snowmobiles, downhill or cross-country ski equipment, or charges for
marina services, launch services, and guide services, or the sale of bait and fishing tackle.
For purposes of this determination, a paid booking of five or more nights shall be counted
as two bookings. Class 4c also includes commercial use real property used exclusively
for recreational purposes in conjunction with class 4c property devoted to temporary
and seasonal residential occupancy for recreational purposes, up to a total of two acres,
provided the property is not devoted to commercial recreational use for more than 250
days in the year preceding the year of assessment and is located within two miles of the
class 4c property with which it is used. Owners of real property devoted to temporary and
seasonal residential occupancy for recreation purposes and all or a portion of which was
devoted to commercial purposes for not more than 250 days in the year preceding the year
of assessment desiring classification as class 1c or 4c, must submit a declaration to the
assessor designating the cabins or units occupied for 250 days or less in the year preceding
the year of assessment by January 15 of the assessment year. Those cabins or units and a
proportionate share of the land on which they are located will be designated class 1c or 4c
as otherwise provided. The remainder of the cabins or units and a proportionate share of
the land on which they are located will be designated as class 3a. The owner of property
desiring designation as class 1c or 4c property must provide guest registers or other
records demonstrating that the units for which class 1c or 4c designation is sought were
not occupied for more than 250 days in the year preceding the assessment if so requested.
The portion of a property operated as a (1) restaurant, (2) bar, (3) gift shop, and (4) other
nonresidential facility operated on a commercial basis not directly related to temporary and
seasonal residential occupancy for recreation purposes shall not qualify for class 1c or 4c;

(2) qualified property used as a golf course if:

(i) it is open to the public on a daily fee basis. It may charge membership fees or
dues, but a membership fee may not be required in order to use the property for golfing,
and its green fees for golfing must be comparable to green fees typically charged by
municipal courses; and

(ii) it meets the requirements of section 273.112, subdivision 3, paragraph (d).

A structure used as a clubhouse, restaurant, or place of refreshment in conjunction
with the golf course is classified as class 3a property;

(3) real property up to a maximum of one acre of land owned by a nonprofit
community service oriented organization; provided that the property is not used for a
revenue-producing activity for more than six days in the calendar year preceding the year
of assessment and the property is not used for residential purposes on either a temporary
or permanent basis. For purposes of this clause, a "nonprofit community service oriented
organization" means any corporation, society, association, foundation, or institution
organized and operated exclusively for charitable, religious, fraternal, civic, or educational
purposes, and which is exempt from federal income taxation pursuant to section 501(c)(3),
(10), or (19) of the Internal Revenue Code of 1986, as amended through December 31,
1990. For purposes of this clause, "revenue-producing activities" shall include but not be
limited to property or that portion of the property that is used as an on-sale intoxicating
liquor or 3.2 percent malt liquor establishment licensed under chapter 340A, a restaurant
open to the public, bowling alley, a retail store, gambling conducted by organizations
licensed under chapter 349, an insurance business, or office or other space leased or
rented to a lessee who conducts a for-profit enterprise on the premises. Any portion of
the property which is used for revenue-producing activities for more than six days in the
calendar year preceding the year of assessment shall be assessed as class 3a. The use of
the property for social events open exclusively to members and their guests for periods of
less than 24 hours, when an admission is not charged nor any revenues are received by the
organization shall not be considered a revenue-producing activity;

(4) postsecondary student housing of not more than one acre of land that is owned by
a nonprofit corporation organized under chapter 317A and is used exclusively by a student
cooperative, sorority, or fraternity for on-campus housing or housing located within two
miles of the border of a college campus;

(5) manufactured home parks as defined in section 327.14, subdivision 3;

(6) real property that is actively and exclusively devoted to indoor fitness, health,
social, recreational, and related uses, is owned and operated by a not-for-profit corporation,
and is located within the metropolitan area as defined in section 473.121, subdivision 2;

(7) a leased or privately owned noncommercial aircraft storage hangar not exempt
under section 272.01, subdivision 2, and the land on which it is located, provided that:

(i) the land is on an airport owned or operated by a city, town, county, Metropolitan
Airports Commission, or group thereof; and

(ii) the land lease, or any ordinance or signed agreement restricting the use of the
leased premise, prohibits commercial activity performed at the hangar.

If a hangar classified under this clause is sold after June 30, 2000, a bill of sale must
be filed by the new owner with the assessor of the county where the property is located
within 60 days of the sale;

(8) a privately owned noncommercial aircraft storage hangar not exempt under
section 272.01, subdivision 2, and the land on which it is located, provided that:

(i) the land abuts a public airport; and

(ii) the owner of the aircraft storage hangar provides the assessor with a signed
agreement restricting the use of the premises, prohibiting commercial use or activity
performed at the hangar; and

(9) residential real estate, a portion of which is used by the owner for homestead
purposes, and that is also a place of lodging, if all of the following criteria are met:

(i) rooms are provided for rent to transient guests that generally stay for periods
of 14 or fewer days;

(ii) meals are provided to persons who rent rooms, the cost of which is incorporated
in the basic room rate;

(iii) meals are not provided to the general public except for special events on fewer
than seven days in the calendar year preceding the year of the assessment; and

(iv) the owner is the operator of the property.

The market value subject to the 4c classification under this clause is limited to five rental
units. Any rental units on the property in excess of five, must be valued and assessed as
class 3a. The portion of the property used for purposes of a homestead by the owner must
be classified as class 1a property under subdivision 22.

Class 4c property has a class rate of 1.5 percent of market value, except that (i) each
parcel of seasonal residential recreational property not used for commercial purposes has
the same class rates as class 4bb property, (ii) manufactured home parks assessed under
clause (5) have the same class rate as class 4b property, (iii) commercial-use seasonal
residential recreational property has a class rate of one percent for the first $500,000
of market value, deleted text begin which includes any market value receiving the one percent rate under
subdivision 22, deleted text end and 1.25 percent for the remaining market value, (iv) the market value
of property described in clause (4) has a class rate of one percent, (v) the market value
of property described in clauses (2) and (6) has a class rate of 1.25 percent, and (vi) that
portion of the market value of property in clause (9) qualifying for class 4c property
has a class rate of 1.25 percent.

(e) Class 4d property is qualifying low-income rental housing certified to the assessor
by the Housing Finance Agency under section 273.128, subdivision 3. If only a portion
of the units in the building qualify as low-income rental housing units as certified under
section 273.128, subdivision 3, only the proportion of qualifying units to the total number
of units in the building qualify for class 4d. The remaining portion of the building shall be
classified by the assessor based upon its use. Class 4d also includes the same proportion of
land as the qualifying low-income rental housing units are to the total units in the building.
For all properties qualifying as class 4d, the market value determined by the assessor must
be based on the normal approach to value using normal unrestricted rents.

Class 4d property has a class rate of 0.75 percent.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
subsequent years.
new text end

Sec. 3.

Minnesota Statutes 2005 Supplement, section 273.1384, subdivision 1, is
amended to read:

Subdivision 1.

Residential homestead market value credit.

Each county auditor
shall determine a homestead credit for each class 1a, 1b, deleted text begin 1c, deleted text end and 2a homestead property
within the county equal to 0.4 percent of the first $76,000 of market value of the property
minus .09 percent of the market value in excess of $76,000. The credit amount may not
be less than zero. In the case of an agricultural or resort homestead, only the market
value of the house, garage, and immediately surrounding one acre of land is eligible
in determining the property's homestead credit. In the case of a property deleted text begin which deleted text end new text begin that new text end is
classified as part homestead and part nonhomestead, (i) the credit shall apply only to
the homestead portion of the property, but (ii) if a portion of a property is classified as
nonhomestead solely because not all the owners occupy the property, new text begin not all the owners
have qualifying relatives occupying the property, new text end or solely because deleted text begin both deleted text end new text begin not all the new text end spouses
deleted text begin do not deleted text end new text begin of owners new text end occupy the property, the credit amount shall be initially computed as
if that nonhomestead portion were also in the homestead class and then prorated to the
owner-occupant's percentage of ownership deleted text begin or prorated to one-half if both spouses do not
occupy the property deleted text end . new text begin For the purpose of this section, when an owner-occupant's spouse
does not occupy the property, the percentage of ownership for the owner-occupant spouse
is one-half of the couple's ownership percentage.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 4.

Minnesota Statutes 2004, section 273.1384, subdivision 2, is amended to read:

Subd. 2.

Agricultural homestead market value credit.

Property classified
as class 2a agricultural homestead is eligible for an agricultural credit. new text begin The credit is
computed using the property's agricultural credit market value, defined for this purpose
as the property's class 2a market value excluding the market value of the house, garage,
and immediately surrounding one acre of land. new text end The credit is equal to 0.3 percent of the
first $115,000 of the property's new text begin agricultural credit new text end market value deleted text begin . The credit under this
subdivision is limited to $345 for each homestead. The credit is reduced by deleted text end new text begin minus new text end .05
percent of the new text begin property's agricultural credit new text end market value in excess of $115,000, subject to
a maximum reduction of $115. new text begin In the case of property that is classified in part as class 2a
agricultural homestead and in part as class 2b nonhomestead farm land solely because not
all the owners occupy or farm the property, not all the owners have qualifying relatives
occupying or farming the property, or solely because not all the spouses of owners occupy
the property, the credit must be initially computed as if that nonhomestead agricultural
land was also classified as class 2a agricultural homestead and then prorated to the
owner-occupant's percentage of ownership.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 5.

Minnesota Statutes 2004, section 273.1398, subdivision 3, is amended to read:

Subd. 3.

Disparity reduction aid.

deleted text begin For taxes payable in 2003 and subsequent years, deleted text end
The amount of disparity aid certified for each taxing district within each unique taxing
jurisdiction for taxes payable in the prior year shall be multiplied by the ratio of (1) the
jurisdiction's tax capacity using the class rates for taxes payable in the year for which aid
is being computed, to (2) its tax capacity using the class rates for taxes payable in the year
prior to that for which aid is being computed, both based upon market values for taxes
payable in the year prior to that for which aid is being computed. deleted text begin For the purposes of this
aid determination, disparity reduction aid certified for taxes payable in the prior year for
a taxing entity other than a town or school district is deemed to be county government
disparity reduction aid. The amount of disparity aid certified to each taxing jurisdiction
shall be reduced by any reductions required in the current year or permanent reductions
required in previous years under section 477A.0132. deleted text end new text begin If the commissioner determines that
insufficient information is available to reasonably and timely calculate the numerator
in this ratio for the first taxes payable year that a class rate change or new class rate is
effective, the commissioner shall omit the effects of that class rate change or new class
rate when calculating this ratio for aid payable in that taxes payable year. For aid payable
in the year following a year for which such omission was made, the commissioner shall
use in the denominator for the class that was changed or created, the tax capacity for taxes
payable two years prior to that in which the aid is payable, based on market values for
taxes payable in the year prior to that for which aid is being computed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2006 and
thereafter.
new text end

Sec. 6.

Minnesota Statutes 2004, section 281.23, subdivision 9, is amended to read:

Subd. 9.

Certificate.

After the time for redemption of any lands shall have expired
after notice given, as provided in subdivisions 2, 3, 5, and 6, the county auditor shall
execute a certificate describing the lands, specifying the tax judgment sale at which the
same were bid in for the state, and stating that the time for redemption thereof has expired
after notice given as provided by law and that absolute title thereto has vested in the
state of Minnesota. Such certificate shall be recorded in the office of the county recorder
deleted text begin and thereafter filed in the office of the county auditor deleted text end , except that in case of registered
land such certificate shall be deleted text begin filed deleted text end new text begin recorded new text end in the office of the registrar of titles deleted text begin and a
duplicate filed in the office of the county auditor deleted text end . Such certificate and the record thereof
shall be prima facie evidence of the facts therein stated, but failure to execute or record or
file such certificate shall not affect the validity of any proceedings hereunder respecting
such lands or the title of the state thereto.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2005 Supplement, section 284.07, is amended to read:

284.07 COUNTY AUDITOR'S CERTIFICATE TO BE PRIMA FACIE
EVIDENCE.

The county auditor's certificate of forfeiture deleted text begin filed deleted text end new text begin recorded by the county auditor
new text end as provided by section 281.23, subdivision 9, and acts supplemental thereto, or by any
other law hereafter enacted providing for the recording of such a certificate or a certified
copy of such certificate or of the record thereof, shall, for all purposes, be prima facie
evidence that all requirements of the law respecting the taxation and forfeiture of the
lands therein described were complied with, and that at the date of the certificate absolute
title to such lands had vested in the state by reason of forfeiture for delinquent taxes, as
set forth in the certificate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2004, section 477A.014, subdivision 1, is amended to read:

Subdivision 1.

Calculations and payments.

The commissioner of revenue shall
make all necessary calculations and make payments pursuant to sections 477A.013,
477A.0132, and 477A.03 directly to the affected taxing authorities annually. In addition,
the commissioner shall notify the authorities of their aid amounts, as well as the
computational factors used in making the calculations for their authority, and those
statewide total figures that are pertinent, before August 1 of the year preceding the aid
distribution year. For the purposes of this subdivision, aid is determined for a city or town
based on its city or town status as of June 30 of the year preceding the aid distribution year.
If the effective date for a municipal incorporation, consolidation, annexation, detachment,
dissolution, or township organization is on or before June 30 of the year preceding the aid
distribution year, such change in boundaries or form of government shall be recognized
for aid determinations for the aid distribution year new text begin provided that reliable information
or estimates for all the necessary adjustments are certified by the responsible authority
to the commissioner by July 15 of the aid calculation year new text end . If the effective date for a
municipal incorporation, consolidation, annexation, detachment, dissolution, or township
organization is after June 30 of the year preceding the aid distribution year, such change in
boundaries or form of government shall not be recognized for aid determinations until the
following year. new text begin Revisions to estimates or data used in recognizing boundary changes are
not effective for these aid determination purposes unless certified to the commissioner by
July 15 of the aid calculation year. Clerical errors in the certification or use of estimates
and data established as of July 15 in the aid calculation year are subject to correction
within the time periods allowed under subdivision 3.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aid payable in 2006 and thereafter.
new text end

ARTICLE 2

SALES AND USE TAXES

Section 1.

Minnesota Statutes 2005 Supplement, section 297A.61, subdivision 3,
is amended to read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited
to, each of the transactions listed in this subdivision.

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration
in money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

deleted text begin (d) Sale and purchase include the preparing for a consideration of food.
Notwithstanding section deleted text begin 297A.67, subdivision 2 deleted text end , taxable food includes, but is not limited
to, the following:
deleted text end

deleted text begin (1) prepared food sold by the retailer;
deleted text end

deleted text begin (2) soft drinks;
deleted text end

deleted text begin (3) candy;
deleted text end

deleted text begin (4) dietary supplements; and
deleted text end

deleted text begin (5) all food sold through vending machines.
deleted text end

deleted text begin (e) deleted text end new text begin (d) new text end A sale and a purchase includes the furnishing for a consideration of electricity,
gas, water, or steam for use or consumption within this state.

deleted text begin (f) deleted text end new text begin (e) new text end A sale and a purchase includes the transfer for a consideration of prewritten
computer software whether delivered electronically, by load and leave, or otherwise.

deleted text begin (g) deleted text end new text begin (f) new text end A sale and a purchase includes the furnishing for a consideration of the
following services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, and the making available of amusement devices, tanning facilities, reducing
salons, steam baths, turkish baths, health clubs, and spas or athletic facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground,
motel, or trailer camp and the granting of any similar license to use real property in a
specific facility, other than the renting or leasing of it for a continuous period of 30 days
or more under an enforceable written agreement that may not be terminated without
prior notice;

(3) nonresidential parking services, whether on a contractual, hourly, or other
periodic basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its
members sports and athletic facilities, without regard to whether a separate charge is
assessed for use of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public
on the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership
dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
swimming pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials and concrete block by a third party if the delivery
would be subject to the sales tax if provided by the seller of the aggregate material or
concrete block; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services
provided by coin operated facilities operated by the customer, and rustproofing,
undercoating, and towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting and
exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not
including services performed within the jurisdiction they serve by off-duty licensed peace
officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
organization for monitoring and electronic surveillance of persons placed on in-home
detention pursuant to court order or under the direction of the Minnesota Department
of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
public utility lines. Services performed under a construction contract for the installation of
shrubbery, plants, sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or
professional or upon written referral from a licensed health care facility or professional for
treatment of illness, injury, or disease; and

(viii) the furnishing of lodging, board, and care services for animals in kennels and
other similar arrangements, but excluding veterinary and horse boarding services.

In applying the provisions of this chapter, the terms "tangible personal property"
and " deleted text begin sales at deleted text end retail new text begin sale new text end " include taxable services listed in clause (6), items (i) to (vi) and
(viii), and the provision of these taxable services, unless specifically provided otherwise.
Services performed by an employee for an employer are not taxable. Services performed
by a partnership or association for another partnership or association are not taxable if one
of the entities owns or controls more than 80 percent of the voting power of the equity
interest in the other entity. Services performed between members of an affiliated group of
corporations are not taxable. For purposes of the preceding sentence, "affiliated group
of corporations" deleted text begin includes deleted text end new text begin means new text end those entities that would be classified as members of an
affiliated group new text begin as defined new text end under United States Code, title 26, section 1504, deleted text begin and that are
eligible to file a consolidated tax return for federal income tax purposes deleted text end new text begin disregarding
the exclusions in section 1504(b) new text end .

deleted text begin (h) deleted text end new text begin (g) new text end A sale and a purchase includes the furnishing for a consideration of tangible
personal property or taxable services by the United States or any of its agencies or
instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
subdivisions.

deleted text begin (i) deleted text end new text begin (h) new text end A sale and a purchase includes the furnishing for a consideration of
telecommunications services, including cable television services and direct satellite
services. Telecommunications services are taxed to the extent allowed under federal law.

deleted text begin (j) deleted text end new text begin (i) new text end A sale and a purchase includes the furnishing for a consideration of installation
if the installation charges would be subject to the sales tax if the installation were provided
by the seller of the item being installed.

deleted text begin (k) deleted text end new text begin (j) new text end A sale and a purchase includes the rental of a vehicle by a motor vehicle
dealer to a customer when (1) the vehicle is rented by the customer for a consideration,
or (2) the motor vehicle dealer is reimbursed pursuant to a service contract as defined in
section 65B.29, subdivision 1, clause (1).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2004, section 297A.61, subdivision 12, is amended to read:

Subd. 12.

Farm machinery.

(a) "Farm machinery" means new or used machinery,
equipment, implements, accessories, and contrivances used directly and principally in
agricultural production new text begin of tangible personal property intended to be sold ultimately at
retail new text end including, but not limited to:

(1) machinery for the preparation, seeding, or cultivation of soil for growing
agricultural crops;

(2) barn cleaners, milking systems, grain dryers, feeding systems including
stationary feed bunks, and similar installations, whether or not the equipment is installed
by the seller and becomes part of the real property; and

(3) irrigation equipment sold for exclusively agricultural use, including pumps, pipe
fittings, valves, sprinklers, and other equipment necessary to the operation of an irrigation
system when sold as part of an irrigation system, whether or not the equipment is installed
by the seller and becomes part of the real property.

(b) Farm machinery does not include:

(1) repair or replacement parts;

(2) tools, shop equipment, grain bins, fencing material, communication equipment,
and other farm supplies;

(3) motor vehicles taxed under chapter 297B;

(4) snowmobiles or snow blowers;

(5) lawn mowers except those used in the production of sod for sale, or garden-type
tractors or garden tillers; or

(6) machinery, equipment, implements, accessories, and contrivances used directly in
the production of horses not raised for slaughter, fur-bearing animals, or research animals.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2004, section 297A.61, is amended by adding a subdivision
to read:

new text begin Subd. 16a. new text end

new text begin Computer. new text end

new text begin "Computer" means an electronic device that accepts
information in digital or similar form and manipulates it for a result based on a sequence
of instructions.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2004, section 297A.61, is amended by adding a subdivision
to read:

new text begin Subd. 16b. new text end

new text begin Electronic. new text end

new text begin "Electronic" means relating to technology having electrical,
digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2004, section 297A.61, is amended by adding a subdivision
to read:

new text begin Subd. 16c. new text end

new text begin Computer software. new text end

new text begin "Computer software" means a set of coded
instructions designed to cause a computer or automatic data processing equipment to
perform a task.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2004, section 297A.61, subdivision 17, is amended to read:

Subd. 17.

Prewritten computer software.

"Prewritten computer software" means
computer software, including prewritten upgrades, that is not designed and developed by
the author or other creator to the specifications of a specific purchaser. The combining
of two or more "prewritten computer software" programs or prewritten portions of the
programs does not cause the combination to be other than "prewritten computer software."
"Prewritten computer software" includes software designed and developed by the author
or other creator to the specifications of a specific purchaser when it is sold to a person
other than the new text begin specific new text end purchaser. If a person modifies or enhances computer software
of which the person is not the author or creator, the person is deemed to be the author
or creator only of such person's modifications or enhancements. "Prewritten computer
software" or a prewritten portion of it that is modified or enhanced to any degree, if the
modification or enhancement is designed and developed to the specifications of a specific
purchaser, remains "prewritten computer software"; provided, however, that if there is a
reasonable, separately stated charge or an invoice or other statement of the price given to
the purchaser for such modification or enhancement, the modification or enhancement
does not constitute "prewritten computer software." deleted text begin For purposes of this subdivision:
deleted text end

deleted text begin (1) "computer" means an electronic device that accepts information in digital or
similar form and manipulates it for a result based on a sequence of instructions;
deleted text end

deleted text begin (2) "electronic" means relating to technology having electrical, digital, magnetic,
wireless, optical, electromagnetic, or similar capabilities; and
deleted text end

deleted text begin (3) "computer software" means a set of coded instructions designed to cause a
"computer" or automatic data processing equipment to perform a task.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2004, section 297A.61, is amended by adding a subdivision
to read:

new text begin Subd. 37. new text end

new text begin Logging equipment. new text end

new text begin (a) "Logging equipment" means new or used
machinery, equipment, implements, accessories, and contrivances used directly and
principally in the commercial cutting or removal or both of timber or other solid wood
forest products, including, but not limited to:
new text end

new text begin (1) machinery used for bucking, bunching, debarking, delimbing, felling, forwarding,
loading, piling, skidding, topping, and yarding operations performed on timber; and
new text end

new text begin (2) chain saws.
new text end

new text begin (b) Logging equipment does not include:
new text end

new text begin (1) repair or replacement parts;
new text end

new text begin (2) tools, shop equipment, communication equipment, and other logging supplies;
new text end

new text begin (3) motor vehicles taxed under chapter 297B;
new text end

new text begin (4) snowmobiles, snow blowers, or recreational all-terrain vehicles; or
new text end

new text begin (5) machinery, equipment, implements, accessories, and contrivances used in the
creation of other commercial wood products for sale to others, including, but not limited
to, milling, planing, carving, wood chipping, or paper manufacturing.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2004, section 297A.63, is amended to read:

297A.63 USE TAXES IMPOSED; RATES.

Subdivision 1.

Use of tangible personal property or taxable services.

(a) For the
privilege of using, storing, distributing, or consuming in Minnesota tangible personal
property or taxable services purchased for use, storage, distribution, or consumption in
this state, a use tax is imposed on a person in Minnesota. The tax is imposed on the deleted text begin sales deleted text end
new text begin purchase new text end price of retail sales of the tangible personal property or taxable services at the
rate of tax imposed under section 297A.62. new text begin A person that purchases property from a
Minnesota retailer and returns the tangible personal property to a point within Minnesota,
except in the course of interstate commerce, after it was delivered outside of Minnesota,
is subject to the use tax. new text end

(b) No tax is imposed under paragraph (a) if the tax imposed by section 297A.62
was paid on the sales price of the tangible personal property or taxable services.

(c) No tax is imposed under paragraph (a) if the purchase meets the requirements for
exemption under section 297A.67, subdivision 21.

Subd. 2.

Use of tangible personal property made from materials.

(a) A use tax
is imposed on a person who manufactures, fabricates, or assembles tangible personal
property from materials, either within or outside this state and who uses, stores, distributes,
or consumes the tangible personal property in Minnesota. The tax is imposed on the deleted text begin sales deleted text end
new text begin purchase new text end price of retail sales of the materials contained in the tangible personal property at
the rate of tax imposed under section 297A.62.

(b) No tax is imposed under paragraph (a) if the tax imposed by section 297A.62
was paid on the sales price of materials contained in the tangible personal property.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 9.

Minnesota Statutes 2004, section 297A.668, subdivision 6, is amended to read:

Subd. 6.

Multiple points of use.

(a) Notwithstanding the provisions of subdivisions
2 to 5, a business purchaser that is not a holder of a direct pay permit that knows at the
time of its purchase of a digital good, computer software delivered electronically, or a
service that the digital good, computer software delivered electronically, or service will
be concurrently available for use in more than one deleted text begin taxing deleted text end jurisdiction shall deliver to
the seller in conjunction with its purchase a multiple points of use exemption certificate
disclosing this fact.

(b) Upon receipt of the multiple points of use exemption certificate, the seller is
relieved of the obligation to collect, pay, or remit the applicable tax and the purchaser is
obligated to collect, pay, or remit the applicable tax on a direct pay basis.

(c) A purchaser delivering the multiple points of use exemption certificate may use
any reasonable, but consistent and uniform, method of apportionment that is supported by
the purchaser's business records as they exist at the time of the consummation of the sale.

(d) The multiple points of use exemption certificate remains in effect for all future
sales by the seller to the purchaser until it is revoked in writing, except as to the subsequent
sale's specific apportionment that is governed by the principle of paragraph (c) and the
facts existing at the time of the sale.

(e) A holder of a direct pay permit is not required to deliver a multiple points or use
exemption certificate to the seller. A direct pay permit holder shall follow the provisions
of paragraph (c) in apportioning the tax due on a digital good, computer software delivered
electronically, or a service that will be concurrently available for use in more than one
deleted text begin taxing deleted text end jurisdiction.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 10.

Minnesota Statutes 2004, section 297A.669, subdivision 11, is amended to
read:

Subd. 11.

Mobile telecommunications service.

"Mobile telecommunications
service," for purposes of this section, means the same as that term is defined in Section
deleted text begin 124(1) deleted text end new text begin 124(7) new text end of Public Law 106-252 (Mobile Telecommunications Sourcing Act).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2004, section 297A.67, subdivision 4, is amended to read:

Subd. 4.

Exempt meals at residential facilities.

deleted text begin Meals or deleted text end new text begin Prepared food, candy,
and soft new text end drinks served to patients, inmates, or persons residing at hospitals, sanitariums,
nursing homes, senior citizen homes, and correctional, detention, and detoxification
facilities are exempt. new text begin Food sold through vending machines is not exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 12.

Minnesota Statutes 2004, section 297A.67, subdivision 5, is amended to read:

Subd. 5.

Exempt meals at schools.

deleted text begin Meals and lunches deleted text end new text begin Prepared food, candy,
and soft drinks new text end served at public and private elementary, middle, or secondary schools as
defined in section 120A.05 are exempt. deleted text begin Meals and lunches deleted text end new text begin Prepared food, candy, and soft
drinks new text end served to students at a college, university, or private career school under a board
contract are exempt. deleted text begin For purposes of this subdivision, "meals and lunches" does not
include sales from vending machines. deleted text end new text begin Food sold through vending machines is not exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 13.

Minnesota Statutes 2005 Supplement, section 297A.67, subdivision 6, is
amended to read:

Subd. 6.

Other exempt meals.

(a) deleted text begin Meals or deleted text end new text begin Prepared food, candy, and soft new text end drinks
purchased for and served exclusively to individuals who are 60 years of age or over and
their spouses or to handicapped persons and their spouses by governmental agencies,
nonprofit organizations, or churches, or pursuant to any program funded in whole or in
part through United States Code, title 42, sections 3001 through 3045, wherever delivered,
prepared, or served, are exempt. new text begin Food sold through vending machines is not exempt.
new text end

(b) deleted text begin Meals or deleted text end new text begin Prepared food, candy, and soft new text end drinks purchased for and served
exclusively to children who are less than 14 years of age or disabled children who are less
than 16 years of age and who are attending a child care or early childhood education
program, are exempt if they are:

(1) purchased by a nonprofit child care facility that is exempt under section 297A.70,
subdivision 4, and that primarily serves families with income of 250 percent or less of
federal poverty guidelines; and

(2) prepared at the site of the child care facility.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 14.

Minnesota Statutes 2004, section 297A.67, subdivision 14, is amended to read:

Subd. 14.

deleted text begin Personal deleted text end Computers prescribed for use by school.

deleted text begin Personal deleted text end Computers
and related computer software sold by a school, college, university, or private career
school to students who are enrolled at the institutions are exempt if:

(1) the use of the deleted text begin personal deleted text end computer, or of a substantially similar model of computer,
and the related computer software is prescribed by the institution in conjunction with a
course of study; and

(2) each student of the institution, or of a unit of the institution in which the student
is enrolled, is required by the institution to have such a deleted text begin personal deleted text end computer and related
software as a condition of enrollment.

For the purposes of this subdivision, "school" and "private career school" have the
meanings given in subdivision 13.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 15.

Minnesota Statutes 2004, section 297A.67, subdivision 25, is amended to read:

Subd. 25.

Maintenance of cemetery grounds.

Lawn care and related services used
in the maintenance of cemetery grounds are exempt. For purposes of this subdivision,
"lawn care and related services" means the services listed in section 297A.61, subdivision
3, paragraph deleted text begin (g) deleted text end new text begin (f) new text end , clause (6), item (vi), and "cemetery" means a cemetery for human
burial.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 16.

Minnesota Statutes 2004, section 297A.67, subdivision 27, is amended to read:

Subd. 27.

Sewing materials.

Sewing materials are exempt. For purposes of this
subdivision "sewing materials" mean fabric, thread, zippers, interfacing, buttons, trim,
and other items that are usually directly incorporated into the construction of clothing, new text begin as
defined in subdivision 8, new text end regardless of whether it is actually used for making clothing.
It does not include batting, foam, or fabric specifically manufactured for arts and craft
projects, or other materials for craft projects.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 17.

Minnesota Statutes 2005 Supplement, section 297A.68, subdivision 2, is
amended to read:

Subd. 2.

Materials consumed in industrial production.

(a) Materials stored, used,
or consumed in industrial production of personal property intended to be sold ultimately at
retail are exempt, whether or not the item so used becomes an ingredient or constituent
part of the property produced. Materials that qualify for this exemption include, but
are not limited to, the following:

(1) chemicals, including chemicals used for cleaning food processing machinery
and equipment;

(2) materials, including chemicals, fuels, and electricity purchased by persons
engaged in industrial production to treat waste generated as a result of the production
process;

(3) fuels, electricity, gas, and steam used or consumed in the production process,
except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt
if (i) it is in excess of the average climate control or lighting for the production area, and
(ii) it is necessary to produce that particular product;

(4) petroleum products and lubricants;

(5) packaging materials, including returnable containers used in packaging food
and beverage products;

(6) accessory tools, equipment, and other items that are separate detachable units
with an ordinary useful life of less than 12 months used in producing a direct effect upon
the product; and

(7) the following materials, tools, and equipment used in metalcasting: crucibles,
thermocouple protection sheaths and tubes, stalk tubes, refractory materials, molten metal
filters and filter boxes, degassing lances, and base blocks.

(b) This exemption does not include:

(1) machinery, equipment, implements, tools, accessories, appliances, contrivances
and furniture and fixtures, except those listed in paragraph (a), clause (6); and

(2) petroleum and special fuels used in producing or generating power for propelling
ready-mixed concrete trucks on the public highways of this state.

(c) Industrial production includes, but is not limited to, research, development,
design or production of any tangible personal property, manufacturing, processing (other
than by restaurants and consumers) of agricultural products (whether vegetable or animal),
commercial fishing, refining, smelting, reducing, brewing, distilling, printing, mining,
quarrying, lumbering, generating electricity, the production of road building materials,
and the research, development, design, or production of computer software. Industrial
production does not include painting, cleaning, repairing or similar processing of property
except as part of the original manufacturing process.

(d) Industrial production does not include:

(1) the furnishing of services listed in section 297A.61, subdivision 3, paragraph
deleted text begin (g) deleted text end new text begin (f) new text end , clause (6), items (i) to (vi) and (viii); or

(2) the transportation, transmission, or distribution of petroleum, liquefied gas,
natural gas, water, or steam, in, by, or through pipes, lines, tanks, mains, or other means of
transporting those products. For purposes of this paragraph, "transportation, transmission,
or distribution" does not include blending of petroleum or biodiesel fuel as defined
in section 239.77.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 18.

Minnesota Statutes 2004, section 297A.68, subdivision 3, is amended to read:

Subd. 3.

Materials used in providing certain taxable services.

(a) Materials
stored, used, or consumed in providing a taxable service listed in section 297A.61,
subdivision 3, paragraph deleted text begin (g) deleted text end new text begin (f) new text end , clause (6), intended to be sold ultimately at retail are
exempt.

(b) This exemption includes, but is not limited to:

(1) chemicals, lubricants, packaging materials, seeds, trees, fertilizers, and
herbicides, if these items are used or consumed in providing the taxable service;

(2) chemicals used to treat waste generated as a result of providing the taxable
service;

(3) accessory tools, equipment, and other items that are separate detachable units
used in providing the service and that have an ordinary useful life of less than 12 months;
and

(4) fuel, electricity, gas, and steam used or consumed in the production process,
except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt
if (i) it is in excess of average climate control or lighting, and (ii) it is necessary to
produce that particular service.

(c) This exemption does not include machinery, equipment, implements, tools,
accessories, appliances, contrivances, furniture, and fixtures used in providing the taxable
service.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 19.

Minnesota Statutes 2005 Supplement, section 297A.68, subdivision 5, is
amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is exempt. The tax must be
imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and
then refunded in the manner provided in section 297A.75.

"Capital equipment" means machinery and equipment purchased or leased, and used
in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
or refining tangible personal property to be sold ultimately at retail if the machinery and
equipment are essential to the integrated production process of manufacturing, fabricating,
mining, or refining. Capital equipment also includes machinery and equipment used
primarily to electronically transmit results retrieved by a customer of an on-line
computerized data retrieval system.

(b) Capital equipment includes, but is not limited to:

(1) machinery and equipment used to operate, control, or regulate the production
equipment;

(2) machinery and equipment used for research and development, design, quality
control, and testing activities;

(3) environmental control devices that are used to maintain conditions such as
temperature, humidity, light, or air pressure when those conditions are essential to and are
part of the production process;

(4) materials and supplies used to construct and install machinery or equipment;

(5) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to machinery or equipment;

(6) materials used for foundations that support machinery or equipment;

(7) materials used to construct and install special purpose buildings used in the
production process;

(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
as part of the delivery process regardless if mounted on a chassis, repair parts for
ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and

(9) machinery or equipment used for research, development, design, or production
of computer software.

(c) Capital equipment does not include the following:

(1) motor vehicles taxed under chapter 297B;

(2) machinery or equipment used to receive or store raw materials;

(3) building materials, except for materials included in paragraph (b), clauses (6)
and (7);

(4) machinery or equipment used for nonproduction purposes, including, but not
limited to, the following: plant security, fire prevention, first aid, and hospital stations;
support operations or administration; pollution control; and plant cleaning, disposal of
scrap and waste, plant communications, space heating, cooling, lighting, or safety;

(5) farm machinery and aquaculture production equipment as defined by section
297A.61, subdivisions 12 and 13;

(6) machinery or equipment purchased and installed by a contractor as part of an
improvement to real property;

(7) machinery and equipment used by restaurants in the furnishing, preparing, or
serving of prepared foods as defined in section 297A.61, subdivision 31;

(8) machinery and equipment used to furnish the services listed in section 297A.61,
subdivision 3, paragraph deleted text begin (g) deleted text end new text begin (f) new text end , clause (6), items (i) to (vi) and (viii);

(9) machinery or equipment used in the transportation, transmission, or distribution
of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
tanks, mains, or other means of transporting those products. This clause does not apply to
machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
239.77; or

(10) any other item that is not essential to the integrated process of manufacturing,
fabricating, mining, or refining.

(d) For purposes of this subdivision:

(1) "Equipment" means independent devices or tools separate from machinery but
essential to an integrated production process, including computers and computer software,
used in operating, controlling, or regulating machinery and equipment; and any subunit or
assembly comprising a component of any machinery or accessory or attachment parts of
machinery, such as tools, dies, jigs, patterns, and molds.

(2) "Fabricating" means to make, build, create, produce, or assemble components or
property to work in a new or different manner.

(3) "Integrated production process" means a process or series of operations through
which tangible personal property is manufactured, fabricated, mined, or refined. For
purposes of this clause, (i) manufacturing begins with the removal of raw materials
from inventory and ends when the last process prior to loading for shipment has been
completed; (ii) fabricating begins with the removal from storage or inventory of the
property to be assembled, processed, altered, or modified and ends with the creation
or production of the new or changed product; (iii) mining begins with the removal of
overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
ends when the last process before stockpiling is completed; and (iv) refining begins with
the removal from inventory or storage of a natural resource and ends with the conversion
of the item to its completed form.

(4) "Machinery" means mechanical, electronic, or electrical devices, including
computers and computer software, that are purchased or constructed to be used for the
activities set forth in paragraph (a), beginning with the removal of raw materials from
inventory through completion of the product, including packaging of the product.

(5) "Machinery and equipment used for pollution control" means machinery and
equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
described in paragraph (a).

(6) "Manufacturing" means an operation or series of operations where raw materials
are changed in form, composition, or condition by machinery and equipment and which
results in the production of a new article of tangible personal property. For purposes of
this subdivision, "manufacturing" includes the generation of electricity or steam to be
sold at retail.

(7) "Mining" means the extraction of minerals, ores, stone, or peat.

(8) "On-line data retrieval system" means a system whose cumulation of information
is equally available and accessible to all its customers.

(9) "Primarily" means machinery and equipment used 50 percent or more of the time
in an activity described in paragraph (a).

(10) "Refining" means the process of converting a natural resource to an intermediate
or finished product, including the treatment of water to be sold at retail.

(11) This subdivision does not apply to telecommunications equipment as
provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
for telecommunications services.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 20.

Minnesota Statutes 2005 Supplement, section 297A.68, subdivision 37,
is amended to read:

Subd. 37.

Job opportunity building zones.

(a) Purchases of tangible personal
property or taxable services by a qualified business, as defined in section 469.310, are
exempt if the property or services are primarily used or consumed in a job opportunity
building zone designated under section 469.314. For purposes of this subdivision, an aerial
camera package, including any camera, computer, and navigation device contained in the
package, that is used in an aircraft that is operated under a Federal Aviation Administration
Restricted Airworthiness Certificate according to Code of Federal Regulations, title 14,
part 21, section 21.25(b)(3), relating to aerial surveying, and that is based, maintained, and
dispatched from a job opportunity building zone, qualifies as primarily used or consumed
in a job opportunity building zone if the imagery acquired from the aerial camera package
is returned to the job opportunity building zone for processing. The exemption for an
aerial camera package is limited deleted text begin to deleted text end deleted text begin $50,000 in taxes deleted text end new text begin as provided in this subdivision new text end and
the tax must be imposed and collected as if the rate under section 297A.62, subdivision 1,
applied and then refunded in the manner provided in section 297A.75. new text begin The total amount
of the aerial camera package exemption refunded for all taxpayers for all fiscal years is
limited to $50,000 in taxes.
new text end

(b) Purchase and use of construction materials deleted text begin , deleted text end new text begin and new text end supplies deleted text begin , or equipment deleted text end used or
consumed in new text begin , and equipment incorporated into, new text end the construction of improvements to
real property in a job opportunity building zone are exempt if the improvements after
completion of construction are to be used in the conduct of a qualified business, as defined
in section 469.310. This exemption applies regardless of whether the purchases are made
by the business or a contractor.

(c) The exemptions under this subdivision apply to a local sales and use tax
regardless of whether the local sales tax is imposed on the sales taxable as defined under
this chapter.

(d) This subdivision applies to sales, if the purchase was made and delivery received
during the duration of the zone.

(e) Notwithstanding the restriction in paragraph (a), which requires items purchased
to be primarily used or consumed in the zone, purchases by a qualified business that is
an electrical cooperative located in Meeker County of equipment and materials used for
the generation, transmission, and distribution of electrical energy are exempt under this
subdivision, except that:

(1) the exemption for materials and equipment used or consumed outside the zone
must not exceed $200,000 in taxes new text begin for all taxpayers for all fiscal years new text end ; and

(2) no sales and use tax exemption is allowed for equipment purchased for resale.

For purposes of this paragraph, the tax must be imposed and collected as if the rate
under section 297A.62, subdivision 1, applied and then refunded in the manner provided
in section 297A.75.

new text begin EFFECTIVE DATE. new text end

new text begin Paragraphs (a) and (e) are effective for sales and purchases
made on or after August 1, 2005. Paragraph (b) is effective for sales and purchases made
on or after January 1, 2004.
new text end

Sec. 21.

Minnesota Statutes 2005 Supplement, section 297A.68, subdivision 38,
is amended to read:

Subd. 38.

Biotechnology and health sciences industry zone.

(a) Purchases of
tangible personal property or taxable services by a qualified business, as defined in section
469.330, are exempt if the property or services are primarily used or consumed in a
biotechnology and health sciences industry zone designated under section 469.334.

(b) Purchase and use of construction materials deleted text begin , deleted text end new text begin and new text end supplies deleted text begin , or equipment deleted text end used
or consumed in new text begin , and equipment incorporated into, new text end the construction of improvements
to real property in a biotechnology and health sciences industry zone are exempt if the
improvements after completion of construction are to be used in the conduct of a qualified
business, as defined in section 469.330. This exemption applies regardless of whether the
purchases are made by the business or a contractor.

(c) The exemptions under this subdivision apply to a local sales and use tax
regardless of whether the local sales tax is imposed on the sales taxable as defined under
this chapter.

(d)(1) The tax on sales of goods or services exempted under this subdivision are
imposed and collected as if the applicable rate under section 297A.62 applied. Upon
application by the purchaser, on forms prescribed by the commissioner, a refund equal
to the tax paid must be paid to the purchaser. The application must include sufficient
information to permit the commissioner to verify the sales tax paid and the eligibility of
the claimant to receive the credit. No more than two applications for refunds may be filed
under this subdivision in a calendar year. The provisions of section 289A.40 apply to
the refunds payable under this subdivision.

(2) The amount required to make the refunds is annually appropriated to the
commissioner of revenue.

(3) The aggregate amount refunded to a qualified business must not exceed the
amount allocated to the qualified business under section 469.335.

(e) This subdivision applies only to sales made during the duration of the designation
of the zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on
or after January 1, 2004.
new text end

Sec. 22.

Minnesota Statutes 2005 Supplement, section 297A.68, subdivision 40,
is amended to read:

Subd. 40.

Land clearing.

Tree, bush, shrub, and stump removal are exempt when
sold deleted text begin to contractors or subcontractors deleted text end as part of a land clearing contract. For purposes of
this subdivision, "land clearing contract" means a contract for the removal of trees, bushes,
and shrubs, including the removal of roots and stumps, to develop a site. new text begin For purposes of
this subdivision, developing a site includes the construction and maintenance of public
roads, trails, and fire breaks. new text end This exemption does not apply to land clearing of a portion
of a site to allow for remodeling, improvement, or expansion of an existing structure.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
October 28, 2002, but for land clearing contracts entered into after October 28, 2002,
and before July 15, 2005, no refunds may be claimed under Minnesota Statutes, section
289A.50, for sales taxes collected and remitted to the state on land clearing contracts.
new text end

Sec. 23.

Minnesota Statutes 2005 Supplement, section 297A.68, subdivision 41,
is amended to read:

Subd. 41.

International economic development zones.

(a) Purchases of tangible
personal property or taxable services by a qualified business, as defined in section 469.321,
are exempt if the property or services are primarily used or consumed in the international
economic development zone designated under section 469.322. new text begin This exemption applies
only if the purchase is made and delivery received after the business signs the business
subsidy agreement required under chapter 469. For such purchases made during the
duration of the zone but on or before June 30, 2007, the tax must be imposed and collected
as if the rate under section 297A.62, subdivision 1, applies, and then refunded in the
manner provided in section 297A.75 beginning July 1, 2007. The taxpayer must attach to
the claim for refund sufficient information for the commissioner to be able to determine
that the purchases are exempt.
new text end

(b) Purchase and use of construction materials, supplies, and equipment incorporated
into the construction of improvements to real property in the international economic
development zone are exempt if the improvements after completion of construction are to
be used as a regional distribution center as defined in section 469.321 or otherwise used in
the conduct of freight forwarding activities of a qualified business as defined in section
469.321. new text begin For such purchases made on or before June 30, 2007, or for such purchases made
to improve real property to be occupied by a business that has not signed a business
subsidy agreement at the time of the purchase, the tax must be imposed and collected as if
the rate under section 297A.62, subdivision 1, applies, and then refunded in the manner
provided in section 297A.75 beginning July 1, 2007. The taxpayer must attach to the
claim for refund sufficient information for the commissioner to be able to determine that
the improvements are being occupied by a business that has signed a business subsidy
agreement. new text end This exemption applies regardless of whether the purchases are made by the
business or a contractor.

(c) The exemptions under this subdivision apply to a local sales and use tax,
regardless of whether the local tax is imposed on sales taxable under this chapter or in
another law, ordinance, or charter provision.

deleted text begin (d) The exemption in paragraph (a) applies to sales during the duration of the zone
and after June 30, 2007, if the purchase was made and delivery received after the business
signs the business subsidy agreement required under chapter 469.
deleted text end

deleted text begin (e) For purchases made for improvements to real property to be occupied by a
business that has not signed a business subsidy agreement at the time of the purchase, the
tax must be imposed and collected as if the rate under section deleted text begin 297A.62, subdivision 1 deleted text end ,
applied, and then refunded in the manner provided in section beginning in fiscal
year 2008. The taxpayer must attach to the claim for refund information sufficient for
the commissioner to be able to determine that the improvements are being occupied by
a business that has signed a business subsidy agreement.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 24.

Minnesota Statutes 2004, section 297A.70, subdivision 2, is amended to read:

Subd. 2.

Sales to government.

(a) All sales, except those listed in paragraph (b),
to the following governments and political subdivisions, or to the listed agencies or
instrumentalities of governments and political subdivisions, are exempt:

(1) the United States and its agencies and instrumentalities;

(2) school districts, the University of Minnesota, state universities, community
colleges, technical colleges, state academies, the Perpich Minnesota Center for Arts
Education, and an instrumentality of a political subdivision that is accredited as an
optional/special function school by the North Central Association of Colleges and Schools;

(3) hospitals and nursing homes owned and operated by political subdivisions of
the state of tangible personal property and taxable services used at or by hospitals and
nursing homes;

(4) the Metropolitan Council, for its purchases of vehicles and repair parts to equip
operations provided for in section 473.4051;

(5) other states or political subdivisions of other states, if the sale would be exempt
from taxation if it occurred in that state; and

(6) sales to public libraries, public library systems, multicounty, multitype library
systems as defined in section 134.001, county law libraries under chapter 134A, state
agency libraries, the state library under section 480.09, and the Legislative Reference
Library.

(b) This exemption does not apply to the sales of the following products and services:

(1) building, construction, or reconstruction materials purchased by a contractor
or a subcontractor as a part of a lump-sum contract or similar type of contract with a
guaranteed maximum price covering both labor and materials for use in the construction,
alteration, or repair of a building or facility;

(2) construction materials purchased by tax exempt entities or their contractors to
be used in constructing buildings or facilities which will not be used principally by the
tax exempt entities;

(3) the leasing of a motor vehicle as defined in section 297B.01, subdivision 5,
except for leases entered into by the United States or its agencies or instrumentalities; or

(4) deleted text begin meals and deleted text end lodging as defined under section 297A.61, subdivision 3, deleted text begin paragraphs
(d) and (g) deleted text end new text begin paragraph (f) new text end , clause (2), new text begin and prepared food, candy, and soft drinks, new text end except for
deleted text begin meals and deleted text end lodging new text begin , prepared food, candy, and soft drinks new text end purchased directly by the United
States or its agencies or instrumentalities.

(c) As used in this subdivision, "school districts" means public school entities and
districts of every kind and nature organized under the laws of the state of Minnesota, and
any instrumentality of a school district, as defined in section 471.59.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 25.

Minnesota Statutes 2004, section 297A.70, subdivision 4, is amended to read:

Subd. 4.

Sales to nonprofit groups.

(a) All sales, except those listed in paragraph
(b), to the following "nonprofit organizations" are exempt:

(1) a corporation, society, association, foundation, or institution organized and
operated exclusively for charitable, religious, or educational purposes if the item
purchased is used in the performance of charitable, religious, or educational functions; and

(2) any senior citizen group or association of groups that:

(i) in general limits membership to persons who are either age 55 or older, or
physically disabled; and

(ii) is organized and operated exclusively for pleasure, recreation, and other
nonprofit purposes, no part of the net earnings of which inures to the benefit of any private
shareholders.

For purposes of this subdivision, charitable purpose includes the maintenance of a
cemetery owned by a religious organization.

(b) This exemption does not apply to the following sales:

(1) building, construction, or reconstruction materials purchased by a contractor
or a subcontractor as a part of a lump-sum contract or similar type of contract with a
guaranteed maximum price covering both labor and materials for use in the construction,
alteration, or repair of a building or facility;

(2) construction materials purchased by tax-exempt entities or their contractors to
be used in constructing buildings or facilities that will not be used principally by the
tax-exempt entities; and

(3) deleted text begin meals and deleted text end lodging as defined under section 297A.61, subdivision 3, deleted text begin paragraphs
(d) and (g) deleted text end new text begin paragraph (f) new text end , clause (2) new text begin , and prepared food, candy, and soft drinks new text end ; and

(4) leasing of a motor vehicle as defined in section 297B.01, subdivision 5, except as
provided in paragraph (c).

(c) This exemption applies to the leasing of a motor vehicle as defined in section
297B.01, subdivision 5, only if the vehicle is:

(1) a truck, as defined in section 168.011, a bus, as defined in section 168.011, or a
passenger automobile, as defined in section 168.011, if the automobile is designed and
used for carrying more than nine persons including the driver; and

(2) intended to be used primarily to transport tangible personal property or
individuals, other than employees, to whom the organization provides service in
performing its charitable, religious, or educational purpose.

(d) A limited liability company also qualifies for exemption under this subdivision if
(1) it consists of a sole member that would qualify for the exemption, and (2) the items
purchased qualify for the exemption.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 26.

Minnesota Statutes 2004, section 297A.70, subdivision 7, is amended to read:

Subd. 7.

Hospitals and outpatient surgical centers.

(a) Sales, except for those
listed in paragraph (c), to a hospital are exempt, if the items purchased are used in
providing hospital services. For purposes of this subdivision, "hospital" means a hospital
organized and operated for charitable purposes within the meaning of section 501(c)(3) of
the Internal Revenue Code, and licensed under chapter 144 or by any other jurisdiction,
and "hospital services" are services authorized or required to be performed by a "hospital"
under chapter 144.

(b) Sales, except for those listed in paragraph (c), to an outpatient surgical center
are exempt, if the items purchased are used in providing outpatient surgical services. For
purposes of this subdivision, "outpatient surgical center" means an outpatient surgical
center organized and operated for charitable purposes within the meaning of section
501(c)(3) of the Internal Revenue Code, and licensed under chapter 144 or by any other
jurisdiction. For the purposes of this subdivision, "outpatient surgical services" means:
(1) services authorized or required to be performed by an outpatient surgical center under
chapter 144; and (2) urgent care. For purposes of this subdivision, "urgent care" means
health services furnished to a person whose medical condition is sufficiently acute to
require treatment unavailable through, or inappropriate to be provided by, a clinic or
physician's office, but not so acute as to require treatment in a hospital emergency room.

(c) This exemption does not apply to the following products and services:

(1) purchases made by a clinic, physician's office, or any other medical facility not
operating as a hospital or outpatient surgical center, even though the clinic, office, or
facility may be owned and operated by a hospital or outpatient surgical center;

(2) sales under section 297A.61, subdivision 3, deleted text begin paragraphs (d) and (g) deleted text end new text begin paragraph
(f) new text end , clause (2) new text begin , and prepared food, candy, and soft drinks new text end ;

(3) building and construction materials used in constructing buildings or facilities
that will not be used principally by the hospital or outpatient surgical center;

(4) building, construction, or reconstruction materials purchased by a contractor
or a subcontractor as a part of a lump-sum contract or similar type of contract with a
guaranteed maximum price covering both labor and materials for use in the construction,
alteration, or repair of a hospital or outpatient surgical center; or

(5) the leasing of a motor vehicle as defined in section 297B.01, subdivision 5.

(d) A limited liability company also qualifies for exemption under this subdivision if
(1) it consists of a sole member that would qualify for the exemption, and (2) the items
purchased qualify for the exemption.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 27.

Minnesota Statutes 2004, section 297A.70, subdivision 13, is amended to read:

Subd. 13.

Fund-raising sales by or for nonprofit groups.

(a) The following
sales by the specified organizations for fund-raising purposes are exempt, subject to the
limitations listed in paragraph (b):

(1) all sales made by an organization that exists solely for the purpose of providing
educational or social activities for young people primarily age 18 and under;

(2) all sales made by an organization that is a senior citizen group or association of
groups if (i) in general it limits membership to persons age 55 or older; (ii) it is organized
and operated exclusively for pleasure, recreation, and other nonprofit purposes; and (iii)
no part of its net earnings inures to the benefit of any private shareholders;

(3) the sale or use of tickets or admissions to a golf tournament held in Minnesota if
the beneficiary of the tournament's net proceeds qualifies as a tax-exempt organization
under section 501(c)(3) of the Internal Revenue Code; and

(4) sales of deleted text begin gum, deleted text end candy deleted text begin , and candy products deleted text end sold for fund-raising purposes by a
nonprofit organization that provides educational and social activities primarily for young
people age 18 and under.

(b) The exemptions listed in paragraph (a) are limited in the following manner:

(1) the exemption under paragraph (a), clauses (1) and (2), applies only if the gross
annual receipts of the organization from fund-raising do not exceed $10,000; and

(2) the exemption under paragraph (a), clause (1), does not apply if the sales are
derived from admission charges or from activities for which the money must be deposited
with the school district treasurer under section 123B.49, subdivision 2, or be recorded in
the same manner as other revenues or expenditures of the school district under section
123B.49, subdivision 4.

(c) Sales of tangible personal property are exempt if the entire proceeds, less the
necessary expenses for obtaining the property, will be contributed to a registered combined
charitable organization described in section 309.501, to be used exclusively for charitable,
religious, or educational purposes, and the registered combined charitable organization
has given its written permission for the sale. Sales that occur over a period of more than
24 days per year are not exempt under this paragraph.

(d) For purposes of this subdivision, a club, association, or other organization of
elementary or secondary school students organized for the purpose of carrying on sports,
educational, or other extracurricular activities is a separate organization from the school
district or school for purposes of applying the $10,000 limit.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 28.

Minnesota Statutes 2004, section 297A.70, subdivision 14, is amended to read:

Subd. 14.

Fund-raising events sponsored by nonprofit groups.

(a) Sales of
tangible personal property at, and admission charges for fund-raising events sponsored
by, a nonprofit organization are exempt if:

(1) all gross receipts are recorded as such, in accordance with generally accepted
accounting practices, on the books of the nonprofit organization; and

(2) the entire proceeds, less the necessary expenses for the event, will be used
solely and exclusively for charitable, religious, or educational purposes. Exempt sales
include the sale of deleted text begin food, meals, and drinks deleted text end new text begin prepared food, candy, and soft drinks new text end at the
fund-raising event.

(b) This exemption is limited in the following manner:

(1) it does not apply to admission charges for events involving bingo or other
gambling activities or to charges for use of amusement devices involving bingo or other
gambling activities;

(2) all gross receipts are taxable if the profits are not used solely and exclusively for
charitable, religious, or educational purposes;

(3) it does not apply unless the organization keeps a separate accounting record,
including receipts and disbursements from each fund-raising event that documents all
deductions from gross receipts with receipts and other records;

(4) it does not apply to any sale made by or in the name of a nonprofit corporation as
the active or passive agent of a person that is not a nonprofit corporation;

(5) all gross receipts are taxable if fund-raising events exceed 24 days per year;

(6) it does not apply to fund-raising events conducted on premises leased for more
than five days but less than 30 days; and

(7) it does not apply if the risk of the event is not borne by the nonprofit organization
and the benefit to the nonprofit organization is less than the total amount of the state and
local tax revenues foregone by this exemption.

(c) For purposes of this subdivision, a "nonprofit organization" means any unit of
government, corporation, society, association, foundation, or institution organized and
operated for charitable, religious, educational, civic, fraternal, and senior citizens' or
veterans' purposes, no part of the net earnings of which inures to the benefit of a private
individual.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 29.

Minnesota Statutes 2004, section 297A.70, subdivision 15, is amended to read:

Subd. 15.

Statewide amateur athletic games.

Notwithstanding section 297A.61,
subdivision 3, or any other provision of this chapter, the gross receipts from the following
sales made to or by a nonprofit corporation designated by the Minnesota Amateur Sports
Commission to conduct a series of statewide amateur athletic games and related events,
workshops, and clinics are exempt:

(1) sales of tangible personal property to or the storage, use, or other consumption of
tangible personal property by the nonprofit corporation; and

(2) sales of tangible personal property, admission charges, and sales of deleted text begin food,
meals, and drinks deleted text end new text begin prepared food, candy, and soft drinks new text end by the nonprofit corporation at
fund-raising events, athletic events, or athletic facilities.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 30.

Minnesota Statutes 2005 Supplement, section 297A.72, subdivision 2, is
amended to read:

Subd. 2.

Content and form of exemption certificate.

An exemption certificate
must be substantially in the form prescribed by the commissioner and:

(1) be signed by the purchaser or meet the requirements of section 270C.304;

(2) bear the name and address of the purchaser; new text begin and
new text end

(3) indicate the sales tax account number, if any, issued to the purchaser deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (4) indicate the general character of the property sold by the purchaser in the regular
course of business or the activities carried on by the organization; and
deleted text end

deleted text begin (5) identify the property purchased.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 31.

Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 1, is
amended to read:

Subdivision 1.

Tax collected.

The tax on the gross receipts from the sale of the
following exempt items must be imposed and collected as if the sale were taxable and the
rate under section 297A.62, subdivision 1, applied. The exempt items include:

(1) capital equipment exempt under section 297A.68, subdivision 5;

(2) building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13;

(3) building materials for mineral production facilities exempt under section
297A.71, subdivision 14;

(4) building materials for correctional facilities under section 297A.71, subdivision
3;

(5) building materials used in a residence for disabled veterans exempt under section
297A.71, subdivision 11;

(6) elevators and building materials exempt under section 297A.71, subdivision 12;

(7) building materials for the Long Lake Conservation Center exempt under section
297A.71, subdivision 17;

(8) materials, supplies, fixtures, furnishings, and equipment for a county law
enforcement and family service center under section 297A.71, subdivision 26;

(9) materials and supplies for qualified low-income housing under section 297A.71,
subdivision 23; deleted text begin and
deleted text end

(10) materials, supplies, and equipment for municipal electric utility facilities under
section 297A.71, subdivision 35 deleted text begin . deleted text end new text begin ;
new text end

new text begin (11) equipment and materials used for the generation, transmission, and distribution
of electrical energy and an aerial camera package exempt under section 297A.68,
subdivision 37; and
new text end

new text begin (12) tangible personal property and taxable services and construction materials,
supplies, and equipment exempt under section 297A.68, subdivision 41.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 32.

Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 2, is
amended to read:

Subd. 2.

Refund; eligible persons.

Upon application on forms prescribed by the
commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
must be paid to the applicant. Only the following persons may apply for the refund:

(1) for subdivision 1, clauses (1) to (3), the applicant must be the purchaser;

(2) for subdivision 1, clauses (4), (7), and (8), the applicant must be the governmental
subdivision;

(3) for subdivision 1, clause (5), the applicant must be the recipient of the benefits
provided in United States Code, title 38, chapter 21;

(4) for subdivision 1, clause (6), the applicant must be the owner of the homestead
property;

(5) for subdivision 1, clause (9), the owner of the qualified low-income housing
project; deleted text begin and
deleted text end

(6) for subdivision 1, clause (10), the applicant must be a municipal electric utility or
a joint venture of municipal electric utilities deleted text begin . deleted text end new text begin ; and
new text end

new text begin (7) for subdivision 1, clauses (11) and (12), the owner of the qualifying business.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 33.

Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 3, is
amended to read:

Subd. 3.

Application.

(a) The application must include sufficient information
to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
subcontractor, or builder, under subdivision 1, clause (4), (5), (6), (7), (8), (9), deleted text begin or deleted text end (10),
new text begin (11), or (12), new text end the contractor, subcontractor, or builder must furnish to the refund applicant
a statement including the cost of the exempt items and the taxes paid on the items unless
otherwise specifically provided by this subdivision. The provisions of sections 289A.40
and 289A.50 apply to refunds under this section.

(b) An applicant may not file more than two applications per calendar year for
refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 34.

Minnesota Statutes 2005 Supplement, section 297A.815, subdivision 1,
is amended to read:

Subdivision 1.

Motor vehicle lease price; payment.

(a) In the case of a lease of a
motor vehicle as provided in section 297A.61, subdivision 4, paragraph (k), clause (2), the
tax is imposed on the total amount to be paid by the lessee under the lease agreement. The
lessor shall collect the tax in full at the time the lease is executed or, if the tax is included
in the lease and the lease is assigned, the tax is due from the original lessor at the time the
lease is assigned. The total amount to be paid by the lessee under the lease agreement
equals the agreed-upon value of the vehicle less manufacturer's rebates, the stated residual
value of the leased vehicle, and the total value allowed for a vehicle owned by the lessee
taken in trade by the lessor, plus the price of any taxable goods and services included in
the lease and the rent charge as provided by Code of Federal Regulations, title 12, section
213.4, excluding any rent charge related to the capitalization of the tax.

(b) If the total amount paid by the lessee for use of the leased vehicle includes
amounts that are not calculated at the time the lease is executed, the tax is imposed and
must be collected by the lessor at the time the amounts are paid by the lessee. In the case
of a lease which by its terms may be renewed, the sales tax is due and payable on the
total amount to be paid during the initial term of the lease, and then for each subsequent
renewal period on the total amount to be paid during the renewal period.

(c) If a lease is canceled or rescinded on or before 90 days of its execution or if a
vehicle is returned to the manufacturer under section 325F.665, the lessor may file a claim
for a refund of the total tax paid minus the amount of tax due for the period the vehicle is
used by the lessee.

(d) If a lessee's obligation to make payments on a lease is canceled more than 90
days after its execution, a credit is allowed against sales tax or motor vehicles sales tax
due on a subsequent lease or purchase of a motor vehicle if that lease or purchase is
consummated within 30 days of the date the prior lease was canceled. The amount of the
credit is equal to (1) the sales tax paid at the inception of the lease, multiplied by (2)
the ratio of the number of full months remaining in the lease at the time of termination
compared to the term of the lease used in calculating sales tax paid at the inception of the
lease. new text begin The credit or any part of it cannot be assigned or transferred to another person.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for leases entered into after
September 30, 2005.
new text end

Sec. 35.

Minnesota Statutes 2004, section 297A.94, is amended to read:

297A.94 DEPOSIT OF REVENUES.

(a) Except as provided in this section, the commissioner shall deposit the revenues,
including interest and penalties, derived from the taxes imposed by this chapter in the state
treasury and credit them to the general fund.

(b) The commissioner shall deposit taxes in the Minnesota agricultural and economic
account in the special revenue fund if:

(1) the taxes are derived from sales and use of property and services purchased for
the construction and operation of an agricultural resource project; and

(2) the purchase was made on or after the date on which a conditional commitment
was made for a loan guaranty for the project under section 41A.04, subdivision 3.

The commissioner of finance shall certify to the commissioner the date on which the
project received the conditional commitment. The amount deposited in the loan guaranty
account must be reduced by any refunds and by the costs incurred by the Department of
Revenue to administer and enforce the assessment and collection of the taxes.

(c) The commissioner shall deposit the revenues, including interest and penalties,
derived from the taxes imposed on sales and purchases included in section 297A.61,
subdivision 3, paragraph deleted text begin (g) deleted text end new text begin (f) new text end , clauses (1) and (4), in the state treasury, and credit them
as follows:

(1) first to the general obligation special tax bond debt service account in each fiscal
year the amount required by section 16A.661, subdivision 3, paragraph (b); and

(2) after the requirements of clause (1) have been met, the balance to the general
fund.

(d) The commissioner shall deposit the revenues, including interest and penalties,
collected under section 297A.64, subdivision 5, in the state treasury and credit them to the
general fund. By July 15 of each year the commissioner shall transfer to the highway user
tax distribution fund an amount equal to the excess fees collected under section 297A.64,
subdivision 5, for the previous calendar year.

(e) For fiscal year 2001, 97 percent; for fiscal years 2002 and 2003, 87 percent; and
for fiscal year 2004 and thereafter, 72.43 percent of the revenues, including interest and
penalties, transmitted to the commissioner under section 297A.65, must be deposited by
the commissioner in the state treasury as follows:

(1) 50 percent of the receipts must be deposited in the heritage enhancement account
in the game and fish fund, and may be spent only on activities that improve, enhance, or
protect fish and wildlife resources, including conservation, restoration, and enhancement
of land, water, and other natural resources of the state;

(2) 22.5 percent of the receipts must be deposited in the natural resources fund, and
may be spent only for state parks and trails;

(3) 22.5 percent of the receipts must be deposited in the natural resources fund, and
may be spent only on metropolitan park and trail grants;

(4) three percent of the receipts must be deposited in the natural resources fund, and
may be spent only on local trail grants; and

(5) two percent of the receipts must be deposited in the natural resources fund,
and may be spent only for the Minnesota Zoological Garden, the Como Park Zoo and
Conservatory, and the Duluth Zoo.

(f) The revenue dedicated under paragraph (e) may not be used as a substitute
for traditional sources of funding for the purposes specified, but the dedicated revenue
shall supplement traditional sources of funding for those purposes. Land acquired with
money deposited in the game and fish fund under paragraph (e) must be open to public
hunting and fishing during the open season, except that in aquatic management areas or
on lands where angling easements have been acquired, fishing may be prohibited during
certain times of the year and hunting may be prohibited. At least 87 percent of the money
deposited in the game and fish fund for improvement, enhancement, or protection of fish
and wildlife resources under paragraph (e) must be allocated for field operations.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 36.

Minnesota Statutes 2004, section 297A.99, subdivision 7, is amended to read:

Subd. 7.

Exemptions.

(a) All goods or services that are otherwise exempt from
taxation under this chapter are exempt from a political subdivision's tax.

(b) deleted text begin The gross receipts from the sale of tangible personal property that meets the
requirement of section 297A.68, subdivision 15, are exempt, except the qualification
test applies based on the boundaries of the political subdivision instead of the state
of Minnesota. deleted text end

deleted text begin (c) deleted text end All mobile transportation equipment, and parts and accessories attached to or
to be attached to the equipment are exempt, if purchased by a holder of a motor carrier
direct pay permit under section 297A.90.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 37. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2004, section 297A.68, subdivisions 15 and 18, new text end new text begin are repealed.
new text end

new text begin (b) new text end new text begin Minnesota Rules, parts 8130.0400, subpart 3; 8130.4800, subparts 1, 3, 4, 5, 6, 7,
and 8; 8130.5100; 8130.5400; and 8130.5800, subpart 6, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

ARTICLE 3

SPECIAL TAXES AND FEES

Section 1.

Minnesota Statutes 2005 Supplement, section 115B.49, subdivision 4, is
amended to read:

Subd. 4.

Registration; fees.

(a) The owner or operator of a dry cleaning facility
shall register on or before October 1 of each year with the commissioner of revenue in
a manner prescribed by the commissioner of revenue and pay a registration fee for the
facility. The amount of the fee is:

(1) $500, for facilities with a full-time equivalence of fewer than five;

(2) $1,000, for facilities with a full-time equivalence of five to ten; and

(3) $1,500, for facilities with a full-time equivalence of more than ten.

new text begin The registration fee must be paid on or before October 18 or the owner or operator
of a dry cleaning facility may elect to pay the fee in equal installments. Installment
payments must be paid on or before October 18, on or before January 18, on or before
April 18, and on or before June 18. All payments made after October 18 bear interest
at the rate specified in section 270C.40.
new text end

(b) A person who sells dry cleaning solvents for use by dry cleaning facilities in the
state shall collect and remit to the commissioner of revenue in a manner prescribed by the
commissioner of revenue, on or before the 20th day of the month following the month in
which the sales of dry cleaning solvents are made, a fee of:

(1) $3.50 for each gallon of perchloroethylene sold for use by dry cleaning facilities
in the state;

(2) 70 cents for each gallon of hydrocarbon-based dry cleaning solvent sold for use
by dry cleaning facilities in the state; and

(3) 35 cents for each gallon of other nonaqueous solvents sold for use by dry
cleaning facilities in the state.

(c) The audit, assessment, appeal, collection, enforcement, and administrative
provisions of chapters 270C and 289A apply to the fee imposed by this subdivision.
To enforce this subdivision, the commissioner of revenue may grant extensions to file
returns and pay fees, impose penalties and interest on the annual registration fee under
paragraph (a) and the monthly fee under paragraph (b), and abate penalties and interest in
the manner provided in chapters 270C and 289A. The penalties and interest imposed on
taxes under chapter 297A apply to the fees imposed under this subdivision. Disclosure
of data collected by the commissioner of revenue under this subdivision is governed by
chapter 270B.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for returns and payments due on
or after October 1, 2006.
new text end

Sec. 2.

new text begin [287.222] TRANSFER TO OBTAIN FINANCING.
new text end

new text begin The deed tax is $1.65 on a deed or other instrument that transfers real property if
the transfer is (1) to a person who is a builder or contractor, (2) intended to be temporary,
and (3) done solely to enable the builder or contractor to obtain financing to build an
improvement on the conveyed property under a contract for improvement with the grantor
that calls for the conveyed property to be reconveyed to the grantor upon completion of
and payment for the improvement. The deed tax is $1.65 on a deed or other instrument
that transfers the real property back from the builder or contractor to the grantor.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for deeds both executed and recorded
on or after July 1, 2006.
new text end

Sec. 3.

Minnesota Statutes 2004, section 295.50, subdivision 4, is amended to read:

Subd. 4.

Health care provider.

(a) "Health care provider" means:

(1) a person whose health care occupation is regulated or required to be regulated by
the state of Minnesota furnishing any or all of the following goods or services directly to a
patient or consumer: medical, surgical, optical, visual, dental, hearing, nursing services,
drugs, laboratory, diagnostic or therapeutic services;

(2) a person who provides goods and services not listed in clause (1) that qualify for
reimbursement under the medical assistance program provided under chapter 256B;

(3) a staff model health plan company;

(4) an ambulance service required to be licensed; or

(5) a person who sells or repairs hearing aids and related equipment or prescription
eyewear.

(b) Health care provider does not include:

(1) hospitals; medical supplies distributors, except as specified under paragraph
(a), clause (5); nursing homes licensed under chapter 144A or licensed in any other
jurisdiction; pharmacies; surgical centers; bus and taxicab transportation, or any other
providers of transportation services other than ambulance services required to be licensed;
supervised living facilities for persons with mental retardation or related conditions,
licensed under Minnesota Rules, parts 4665.0100 to 4665.9900; deleted text begin residential care homes
licensed under chapter 144B; deleted text end new text begin housing with services establishments required to be
registered under chapter 144D; new text end board and lodging establishments providing only custodial
services that are licensed under chapter 157 and registered under section 157.17 to
provide supportive services or health supervision services; adult foster homes as defined
in Minnesota Rules, part 9555.5105; day training and habilitation services for adults
with mental retardation and related conditions as defined in section 252.41, subdivision
3; boarding care homes, as defined in Minnesota Rules, part 4655.0100; and adult day
care centers as defined in Minnesota Rules, part 9555.9600;

(2) home health agencies as defined in Minnesota Rules, part 9505.0175, subpart
15; a person providing personal care services and supervision of personal care services
as defined in Minnesota Rules, part 9505.0335; a person providing private duty nursing
services as defined in Minnesota Rules, part 9505.0360; and home care providers required
to be licensed under chapter 144A;

(3) a person who employs health care providers solely for the purpose of providing
patient services to its employees; and

(4) an educational institution that employs health care providers solely for the
purpose of providing patient services to its students if the institution does not receive fee
for service payments or payments for extended coverage.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2004, section 295.53, subdivision 3, is amended to read:

Subd. 3.

Separate statement of tax.

A hospital, surgical center, deleted text begin or deleted text end health care
provider new text begin , or wholesale drug distributor new text end must not state the tax obligation under section
295.52 in a deceptive or misleading manner. It must not separately state tax obligations
on bills provided to patients, consumers, or other payers when the amount received for
the services or goods is not subject to tax.

Pharmacies that separately state the tax obligations on bills provided to consumers
or to other payers who purchase legend drugs may state the tax obligation as the wholesale
price of the legend drugs multiplied by the tax percentage specified in section 295.52.
Pharmacies must not state the tax obligation based on the retail price.

Whenever the commissioner determines that a person has engaged in any act or
practice constituting a violation of this subdivision, the commissioner may bring an action
in the name of the state in the district court of the appropriate county to enjoin the act
or practice and to enforce compliance with this subdivision, or the commissioner may
refer the matter to the attorney general or the county attorney of the appropriate county.
Upon a proper showing, a permanent or temporary injunction, restraining order, or other
appropriate relief must be granted.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2004, section 297F.01, is amended by adding a subdivision
to read:

new text begin Subd. 22a. new text end

new text begin Weighted average retail price. new text end

new text begin "Weighted average retail price" means
(1) the average retail price per pack of 20 cigarettes, with the average price weighted by
the number of packs sold at each price, (2) reduced by the sales tax included in the retail
price, and (3) adjusted for the expected inflation from the time of the survey to the average
of the 12 months that the sales tax will be imposed. The commissioner shall make the
inflation adjustment in accordance with the Consumer Price Index for all urban consumers
inflation indicator as published in the most recent state budget forecast. The inflation
factor for the calendar year in which the new tax rate takes effect must be used.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective April 30, 2006.
new text end

Sec. 6.

Minnesota Statutes 2004, section 297G.01, subdivision 7, is amended to read:

Subd. 7.

Distilled spirits.

"Distilled spirits" deleted text begin is deleted text end new text begin means: new text end

new text begin (1) new text end intoxicating liquors, including ethyl alcohol, hydrated oxide of ethyl, spirits of
wine, whiskey, rum, brandy, gin, and other distilled spirits, including all dilutions and
mixtures, for nonindustrial use deleted text begin . deleted text end new text begin ;
new text end

new text begin (2) any beverage that would be classified as a flavored malt beverage except that the
alcohol contribution from flavors and other nonbeverage materials exceeds 49 percent
of the alcohol content of the product; or
new text end

new text begin (3) any beverage that would be classified as a flavored malt beverage except that the
beverage contains more than six percent alcohol by volume, and more than 1.5 percent
of the volume of the finished product consists of alcohol derived from flavors and other
nonbeverage ingredients that contain alcohol.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2006.
new text end

Sec. 7.

Minnesota Statutes 2004, section 297G.01, is amended by adding a subdivision
to read:

new text begin Subd. 8a. new text end

new text begin Flavored malt beverage. new text end

new text begin (a) "Flavored malt beverage" means a
fermented malt beverage that:
new text end

new text begin (1) contains six percent or less alcohol by volume and derives at least 51 percent of
its alcohol content by volume from the fermentation of grain, as long as not more than 49
percent of the beverage's overall alcohol content is obtained from flavors and other added
nonbeverage ingredients containing alcohol; or
new text end

new text begin (2) contains more than six percent alcohol by volume that derives not more than 1.5
percent of its overall alcohol content by volume from flavors and other added nonbeverage
ingredients containing alcohol.
new text end

new text begin (b) Flavored malt beverage does not include cider or an alcoholic beverage obtained
primarily by fermentation of rice, such as sake.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2006.
new text end

ARTICLE 4

TACONITE PRODUCTION TAX

Section 1.

Minnesota Statutes 2004, section 298.223, subdivision 3, is amended to read:

Subd. 3.

Appropriation.

There is hereby annually appropriated to the commissioner
of Iron Range resources and rehabilitation such funds as are necessary to carry out the
projects approved and such funds as are necessary for administration of this section.
Annual administrative costs, not including detailed engineering expenses for the projects,
shall not exceed five percent of the amount annually expended from the fund.

Funds for the purposes of this section are provided by section 298.28, subdivision
deleted text begin 11 deleted text end new text begin 9c new text end , relating to the taconite environmental protection fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for distributions payable pursuant to
Minnesota Statutes, section 298.28, subdivision 9c, in 2007 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2004, section 298.225, subdivision 2, is amended to read:

Subd. 2.

Funding guaranteed distribution level.

The money necessary for
funding the difference between the initial distribution made pursuant to section 298.28
and the amount guaranteed in subdivision 1 is appropriated deleted text begin in equal proportions deleted text end from the
initial current year distributions to deleted text begin the taconite environmental protection fund and to deleted text end the
Douglas J. Johnson economic protection trust pursuant to section 298.28. If the initial
distributions to deleted text begin the taconite environmental protection fund and deleted text end the Douglas J. Johnson
economic protection trust are insufficient to fund the difference, the commissioner of Iron
Range resources and rehabilitation shall make the payments of any remaining difference
from the deleted text begin corpus of the taconite environmental protection fund and the deleted text end corpus of the
Douglas J. Johnson economic protection trust fund deleted text begin in equal proportions deleted text end as directed by the
commissioner of revenue.

If a taconite producer ceases beneficiation operations permanently and is required
by a special law to make bond payments for a school district, the Douglas J. Johnson
economic protection trust fund shall assume the payments of the taconite producer if
the producer ceases to make the needed payments. The commissioner of Iron Range
resources and rehabilitation shall make these school bond payments from the corpus of
the Douglas J. Johnson economic protection trust fund in the amounts certified by the
commissioner of revenue.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes and distributions payable in
2007 and thereafter.
new text end

Sec. 3.

Minnesota Statutes 2004, section 298.227, is amended to read:

298.227 TACONITE ECONOMIC DEVELOPMENT FUND.

An amount equal to that distributed pursuant to each taconite producer's taxable
production and qualifying sales under section 298.28, subdivision 9a, shall be held by
the Iron Range Resources and Rehabilitation Board in a separate taconite economic
development fund for each taconite and direct reduced ore producer. Money from the
fund for each producer shall be released by the commissioner after review by a joint
committee consisting of an equal number of representatives of the salaried employees and
the nonsalaried production and maintenance employees of that producer. The District 11
director of the United States Steelworkers of America, on advice of each local employee
president, shall select the employee members. In nonorganized operations, the employee
committee shall be elected by the nonsalaried production and maintenance employees.
The review must be completed no later than six months after the producer presents a
proposal for expenditure of the funds to the committee. The funds held pursuant to this
section may be released only for acquisition of equipment and facilities for the producer
or for research and development in Minnesota on new mining, or taconite, iron, or steel
production technology, but only if the producer provides a matching expenditure to be
used for the same purpose of at least 50 percent of the distribution based on 14.7 cents per
new text begin taxable new text end ton beginning with distributions in 2002. If a taconite production facility is sold
after operations at the facility had ceased, any money remaining in the fund for the former
producer may be released to the purchaser of the facility on the terms otherwise applicable
to the former producer under this section. If a producer fails to provide matching funds
for a proposed expenditure within six months after the commissioner approves release
of the funds, the funds are available for release to another producer in proportion to the
distribution provided and under the conditions of this section. Any portion of the fund
which is not released by the commissioner within two years of its deposit in the fund shall
be divided between the taconite environmental protection fund created in section 298.223
and the Douglas J. Johnson economic protection trust fund created in section 298.292 for
placement in their respective special accounts. Two-thirds of the unreleased funds shall be
distributed to the taconite environmental protection fund and one-third to the Douglas J.
Johnson economic protection trust fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes and distributions payable in
2007 and thereafter.
new text end

Sec. 4.

Minnesota Statutes 2005 Supplement, section 298.24, subdivision 1, is
amended to read:

Subdivision 1.

Imposed; calculation.

(a) For concentrate produced in deleted text begin 2001, 2002,
and 2003 deleted text end new text begin 2005 new text end , there is imposed upon taconite and iron sulphides, and upon the mining
and quarrying thereof, and upon the production of iron ore concentrate therefrom, and
upon the concentrate so produced, a tax of deleted text begin $2.103 deleted text end new text begin $2.137 new text end per gross ton of merchantable
iron ore concentrate produced therefrom. deleted text begin For concentrates produced in 2005, the tax rate
is the same rate imposed for concentrates produced in 2004.
deleted text end

(b) For concentrates produced in 2006 and subsequent years, the tax rate shall be
equal to the preceding year's tax rate plus an amount equal to the preceding year's tax rate
multiplied by the percentage increase in the implicit price deflator from the fourth quarter
of the second preceding year to the fourth quarter of the preceding year. "Implicit price
deflator" means the implicit price deflator for the gross domestic product prepared by the
Bureau of Economic Analysis of the United States Department of Commerce.

(c) On concentrates produced in 1997 and thereafter, an additional tax is imposed
equal to three cents per gross ton of merchantable iron ore concentrate for each one
percent that the iron content of the product exceeds 72 percent, when dried at 212 degrees
Fahrenheit.

(d) deleted text begin The tax shall be imposed on the average of the production for the current year
and the previous two years. The rate of the tax imposed will be the current year's tax
rate. This clause deleted text end new text begin The taxes imposed by this subdivision and the exemption from taxes
that is allowed in section 298.25 new text end shall not apply in the case of the closing of a taconite
facility if the property taxes on the facility would be higher if this deleted text begin clause deleted text end new text begin subdivision new text end
and section 298.25 were not applicable.

(e) If the tax or any part of the tax imposed by this subdivision is held to be
unconstitutional, a tax of deleted text begin $2.103 deleted text end new text begin $2.137 new text end per gross ton of merchantable iron ore concentrate
produced shall be imposed.

(f) Consistent with the intent of this subdivision to impose a tax based upon the
weight of merchantable iron ore concentrate, the commissioner of revenue may indirectly
determine the weight of merchantable iron ore concentrate included in fluxed pellets by
subtracting the weight of the limestone, dolomite, or olivine derivatives or other basic
flux additives included in the pellets from the weight of the pellets. For purposes of this
paragraph, "fluxed pellets" are pellets produced in a process in which limestone, dolomite,
olivine, or other basic flux additives are combined with merchantable iron ore concentrate.
No subtraction from the weight of the pellets shall be allowed for binders, mineral and
chemical additives other than basic flux additives, or moisture.

(g)(1) Notwithstanding any other provision of this subdivision, for the first two years
of a plant's commercial production of direct reduced ore, no tax is imposed under this
section. As used in this paragraph, "commercial production" is production of more than
50,000 tons of direct reduced ore in the current year or in any prior year, "noncommercial
production" is production of 50,000 tons or less of direct reduced ore in any year, and
"direct reduced ore" is ore that results in a product that has an iron content of at least 75
percent. For the third year of a plant's commercial production of direct reduced ore, the
rate to be applied to direct reduced ore is 25 percent of the rate otherwise determined
under this subdivision. For the fourth commercial production year, the rate is 50 percent of
the rate otherwise determined under this subdivision; for the fifth commercial production
year, the rate is 75 percent of the rate otherwise determined under this subdivision; and for
all subsequent commercial production years, the full rate is imposed.

(2) Subject to clause (1), production of direct reduced ore in this state is subject to
the tax imposed by this section, but if that production is not produced by a producer
of taconite or iron sulfides, the production of taconite or iron sulfides consumed in the
production of direct reduced iron in this state is not subject to the tax imposed by this
section on taconite or iron sulfides.

(3) Notwithstanding any other provision of this subdivision, no tax is imposed on
direct reduced ore under this section during the facility's noncommercial production
of direct reduced ore. The taconite or iron sulphides consumed in the noncommercial
production of direct reduced ore is subject to the tax imposed by this section on taconite
and iron sulphides. deleted text begin Three-year average production of direct reduced ore does not
include production of direct reduced ore in any noncommercial year. Three-year average
production for a direct reduced ore facility that has noncommercial production is the
average of the commercial production of direct reduced ore for the current year and the
previous two commercial years.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin The change to paragraph (a) is effective for taxes payable in
2006. The rest of this section is effective for taxes payable in 2007 and thereafter.
new text end

Sec. 5.

Minnesota Statutes 2004, section 298.28, as amended by Laws 2005, First
Special Session chapter 1, article 4, sections 89 and 90, is amended to read:

298.28 DIVISION AND DISTRIBUTION OF PROCEEDS.

Subdivision 1.

Distribution.

new text begin (a) new text end The proceeds of the taxes collected under
section 298.24, except the tax collected under section 298.24, subdivision 2, shall, upon
certification of the commissioner of revenue, be allocated under subdivisions 2 to 12.

new text begin (b) Except for the distribution in subdivision 9a, the allocations and distributions
in this section shall be calculated using "distribution tonnage." "Distribution tonnage"
means the average of:
new text end

new text begin (1) the taxable gross tons of merchantable iron ore concentrate for the tax year; and
new text end

new text begin (2) the taxable gross tons of merchantable iron ore concentrate for the previous
two years.
new text end

new text begin (c) The allocations and distributions in this section are subject to the provisions
of section 298.225.
new text end

Subd. 2.

City or town where quarried or produced.

(a) 4.5 cents per deleted text begin gross deleted text end ton
deleted text begin of merchantable iron ore concentrate, hereinafter referred to as "taxable ton," deleted text end must be
allocated to the city or town in the county in which the lands from which taconite was
mined or quarried were located or within which the concentrate was produced. If the
mining, quarrying, and concentration, or different steps in either thereof are carried on in
more than one taxing district, the commissioner shall apportion equitably the proceeds of
the part of the tax going to cities and towns among such subdivisions upon the basis of
attributing 40 percent of the proceeds of the tax to the operation of mining or quarrying the
taconite, and the remainder to the concentrating plant and to the processes of concentration,
and with respect to each thereof giving due consideration to the relative extent of such
operations performed in each such taxing district. The commissioner's order making such
apportionment shall be subject to review by the Tax Court at the instance of any of the
interested taxing districts, in the same manner as other orders of the commissioner.

(b) Four cents per deleted text begin taxable deleted text end ton shall be allocated to cities and organized townships
affected by mining because their boundaries are within three miles of a taconite mine pit
that has been actively mined in at least one of the prior three years. If a city or town is
located near more than one mine meeting these criteria, the city or town is eligible to
receive aid calculated from only the mine producing the largest taxable tonnage. When
more than one municipality qualifies for aid based on one company's production, the aid
must be apportioned among the municipalities in proportion to their populations. Of the
amounts distributed under this paragraph to each municipality, one-half must be used for
infrastructure improvement projects, and one-half must be used for projects in which two
or more municipalities cooperate. Each municipality that receives a distribution under this
paragraph must report annually to the Iron Range Resources and Rehabilitation Board and
the commissioner of Iron Range resources and rehabilitation on the projects involving
cooperation with other municipalities.

Subd. 3.

MS 1984 [Renumbered 298.23 subd 14]

Subd. 3.

Cities; towns.

(a) 12.5 cents per deleted text begin taxable deleted text end ton, less any amount distributed
under subdivision 8, and paragraph (b), must be allocated to the taconite municipal aid
account to be distributed as provided in section 298.282.

(b) An amount must be allocated to towns or cities that is annually certified by
the county auditor of a county containing a taconite tax relief area as defined in section
273.134, paragraph (b), within which there is (1) an organized township if, as of January
2, 1982, more than 75 percent of the assessed valuation of the township consists of iron
ore or (2) a city if, as of January 2, 1980, more than 75 percent of the assessed valuation
of the city consists of iron ore.

(c) The amount allocated under paragraph (b) will be the portion of a township's or
city's certified levy equal to the proportion of (1) the difference between 50 percent of
January 2, 1982, assessed value in the case of a township and 50 percent of the January 2,
1980, assessed value in the case of a city and its current assessed value to (2) the sum of
its current assessed value plus the difference determined in (1), provided that the amount
distributed shall not exceed $55 per capita in the case of a township or $75 per capita in
the case of a city. For purposes of this limitation, population will be determined according
to the 1980 decennial census conducted by the United States Bureau of the Census. If the
current assessed value of the township exceeds 50 percent of the township's January 2,
1982, assessed value, or if the current assessed value of the city exceeds 50 percent of the
city's January 2, 1980, assessed value, this paragraph shall not apply. For purposes of this
paragraph, "assessed value," when used in reference to years other than 1980 or 1982,
means the appropriate net tax capacities multiplied by 10.2.

Subd. 4.

School districts.

(a) 17.15 cents per deleted text begin taxable deleted text end ton plus the increase provided
in paragraph (d) must be allocated to qualifying school districts to be distributed, based
upon the certification of the commissioner of revenue, under paragraphs (b) and (c),
except as otherwise provided in paragraph (f).

(b) 3.43 cents per deleted text begin taxable deleted text end ton must be distributed to the school districts in which
the lands from which taconite was mined or quarried were located or within which the
concentrate was produced. The distribution must be based on the apportionment formula
prescribed in subdivision 2.

(c)(i) 13.72 cents per deleted text begin taxable deleted text end ton, less any amount distributed under paragraph (e),
shall be distributed to a group of school districts comprised of those school districts which
qualify as a tax relief area under section 273.134, paragraph (b), or in which there is a
qualifying municipality as defined by section 273.134, paragraph (a), in direct proportion
to school district indexes as follows: for each school district, its pupil units determined
under section 126C.05 for the prior school year shall be multiplied by the ratio of the
average adjusted net tax capacity per pupil unit for school districts receiving aid under
this clause as calculated pursuant to chapters 122A, 126C, and 127A for the school year
ending prior to distribution to the adjusted net tax capacity per pupil unit of the district.
Each district shall receive that portion of the distribution which its index bears to the sum
of the indices for all school districts that receive the distributions.

(ii) Notwithstanding clause (i), each school district that receives a distribution
under sections 298.018; 298.23 to 298.28, exclusive of any amount received under this
clause; 298.34 to 298.39; 298.391 to 298.396; 298.405; or any law imposing a tax on
severed mineral values after reduction for any portion distributed to cities and towns under
section 126C.48, subdivision 8, paragraph (5), that is less than the amount of its levy
reduction under section 126C.48, subdivision 8, for the second year prior to the year of the
distribution shall receive a distribution equal to the difference; the amount necessary to
make this payment shall be derived from proportionate reductions in the initial distribution
to other school districts under clause (i).

(d) Any school district described in paragraph (c) where a levy increase pursuant to
section 126C.17, subdivision 9, was authorized by referendum for taxes payable in 2001,
shall receive a distribution of 21.3 cents per ton. Each district shall receive $175 times the
pupil units identified in section 126C.05, subdivision 1, enrolled in the second previous
year or the 1983-1984 school year, whichever is greater, less the product of 1.8 percent
times the district's taxable net tax capacity in the second previous year.

If the total amount provided by paragraph (d) is insufficient to make the payments
herein required then the entitlement of $175 per pupil unit shall be reduced uniformly
so as not to exceed the funds available. Any amounts received by a qualifying school
district in any fiscal year pursuant to paragraph (d) shall not be applied to reduce general
education aid which the district receives pursuant to section 126C.13 or the permissible
levies of the district. Any amount remaining after the payments provided in this paragraph
shall be paid to the commissioner of Iron Range resources and rehabilitation who shall
deposit the same in deleted text begin the taconite environmental protection fund and deleted text end the Douglas J. Johnson
economic protection trust fund as provided in subdivision 11.

Each district receiving money according to this paragraph shall reserve the lesser of
the amount received under this paragraph or $25 times the number of pupil units served
in the district. It may use the money for early childhood programs or for outcome-based
learning programs that enhance the academic quality of the district's curriculum. The
outcome-based learning programs must be approved by the commissioner of education.

(e) There shall be distributed to any school district the amount which the school
district was entitled to receive under section 298.32 in 1975.

(f) Effective for the distribution in 2003 only, five percent of the distributions to
school districts under paragraphs (b), (c), and (e); subdivision 6, paragraph (c); subdivision
11; and section 298.225, shall be distributed to the general fund. The remainder less any
portion distributed to cities and towns under section 126C.48, subdivision 8, paragraph
(5), shall be distributed to the Douglas J. Johnson economic protection trust fund created
in section 298.292. Fifty percent of the amount distributed to the Douglas J. Johnson
economic protection trust fund shall be made available for expenditure under section
298.293 as governed by section 298.296. Effective in 2003 only, 100 percent of the
distributions to school districts under section 477A.15 less any portion distributed to
cities and towns under section 126C.48, subdivision 8, paragraph (5), shall be distributed
to the general fund.

Subd. 5.

Counties.

(a) 26.05 cents per deleted text begin taxable deleted text end ton is allocated to counties to be
distributed, based upon certification by the commissioner of revenue, under paragraphs
(b) to (d).

(b) 20.525 cents per deleted text begin taxable deleted text end ton shall be distributed to the county in which the
taconite is mined or quarried or in which the concentrate is produced, less any amount
which is to be distributed pursuant to paragraph (c). The apportionment formula prescribed
in subdivision 2 is the basis for the distribution.

(c) If an electric power plant owned by and providing the primary source of power
for a taxpayer mining and concentrating taconite is located in a county other than the
county in which the mining and the concentrating processes are conducted, one cent per
deleted text begin taxable deleted text end ton of the tax distributed to the counties pursuant to paragraph (b) and imposed
on and collected from such taxpayer shall be paid to the county in which the power plant
is located.

(d) 5.525 cents per deleted text begin taxable deleted text end ton shall be paid to the county from which the taconite
was mined, quarried or concentrated to be deposited in the county road and bridge fund.
If the mining, quarrying and concentrating, or separate steps in any of those processes
are carried on in more than one county, the commissioner shall follow the apportionment
formula prescribed in subdivision 2.

Subd. 6.

Property tax relief.

(a) In 2002 and thereafter, 33.9 cents per deleted text begin taxable deleted text end ton,
less any amount required to be distributed under paragraphs (b) and (c), must be allocated
to St. Louis County acting as the counties' fiscal agent, to be distributed as provided
in sections 273.134 to 273.136.

(b) If an electric power plant owned by and providing the primary source of power
for a taxpayer mining and concentrating taconite is located in a county other than the
county in which the mining and the concentrating processes are conducted, .1875 cent per
deleted text begin taxable deleted text end ton of the tax imposed and collected from such taxpayer shall be paid to the county.

(c) If an electric power plant owned by and providing the primary source of power
for a taxpayer mining and concentrating taconite is located in a school district other than
a school district in which the mining and concentrating processes are conducted, .4541
cent per deleted text begin taxable deleted text end ton of the tax imposed and collected from the taxpayer shall be paid to
the school district.

Subd. 7.

Iron Range Resources and Rehabilitation Board.

For the 1998
distribution, 6.5 cents per deleted text begin taxable deleted text end ton shall be paid to the Iron Range Resources and
Rehabilitation Board for the purposes of section 298.22. That amount shall be increased
in 1999 and subsequent years in the same proportion as the increase in the implicit price
deflator as provided in section 298.24, subdivision 1. The amount distributed pursuant
to this subdivision shall be expended within or for the benefit of the taconite assistance
area defined in section 273.1341. No part of the fund provided in this subdivision may be
used to provide loans for the operation of private business unless the loan is approved by
the governor.

Subd. 8.

Range Association of Municipalities and Schools.

.20 cent per deleted text begin taxable deleted text end
ton shall be paid to the Range Association of Municipalities and Schools, for the purpose of
providing an areawide approach to problems which demand coordinated and cooperative
actions and which are common to those areas of northeast Minnesota affected by
operations involved in mining iron ore and taconite and producing concentrate therefrom,
and for the purpose of promoting the general welfare and economic development of the
cities, towns and school districts within the iron range area of northeast Minnesota.

Subd. 9.

Douglas J. Johnson economic protection trust fund.

In 1999, 3.35 cents
per deleted text begin taxable deleted text end ton shall be paid to the Douglas J. Johnson economic protection trust fund.

Subd. 9a.

Taconite economic development fund.

(a) 30.1 cents per new text begin taxable new text end ton for
distributions in 2002 and thereafter must be paid to the taconite economic development
fund. No distribution shall be made under this paragraph in 2004 or any subsequent year
in which total industry production falls below 30 million tons. Distribution shall only be
made to a taconite producer's fund under section 298.227 if the producer timely pays its
tax under section 298.24 by the dates provided under section 298.27, or pursuant to the
due dates provided by an administrative agreement with the commissioner.

(b) An amount equal to 50 percent of the tax under section 298.24 for concentrate
sold in the form of pellet chips and fines not exceeding 5/16 inch in size and not including
crushed pellets shall be paid to the taconite economic development fund. The amount
paid shall not exceed $700,000 annually for all companies. If the initial amount to be
paid to the fund exceeds this amount, each company's payment shall be prorated so the
total does not exceed $700,000.

Subd. 9b.

Taconite environmental new text begin protection new text end fund.

Five cents per ton must
be paid to the taconite environmental new text begin protection new text end fund for use under section 298.2961,
subdivision 4.

new text begin Subd. 9c. new text end

new text begin Taconite environmental protection fund. new text end

new text begin Twenty-five cents per ton for
distributions in 2007 and thereafter must be paid to the taconite environmental protection
fund.
new text end

Subd. 10.

Increase.

(a) Except as provided in paragraph (b), beginning with
distributions in 2000, the amount determined under subdivision 9 shall be increased in
the same proportion as the increase in the implicit price deflator as provided in section
298.24, subdivision 1. Beginning with distributions in 2003, the amount determined under
subdivision 6, paragraph (a), shall be increased in the same proportion as the increase in
the implicit price deflator as provided in section 298.24, subdivision 1.

(b) For distributions in 2005 and subsequent years, an amount equal to the increased
tax proceeds attributable to the increase in the implicit price deflator as provided in
section 298.24, subdivision 1, for taxes paid in 2005, except for the amount of revenue
increases provided in subdivision 4, paragraph (d), is distributed to the grant and loan fund
established in section 298.2961, subdivision 4.

Subd. 11.

Remainder.

(a) The proceeds of the tax imposed by section 298.24 which
remain after the distributions and payments in subdivisions 2 to 10a, as certified by the
commissioner of revenue, and paragraphs (b), (c), (d), and (e) have been made, together
with interest earned on all money deleted text begin distributed deleted text end new text begin available for distribution new text end under this section
prior to new text begin its new text end distribution, shall be deleted text begin divided between the taconite environmental protection
fund created in section 298.223 and the Douglas J. Johnson economic protection trust fund
created in section 298.292 as follows: Two-thirds to the taconite environmental protection
fund and one-third deleted text end new text begin distributed new text end to the Douglas J. Johnson economic protection trust fund.
deleted text begin The proceeds shall be placed in the respective special accounts. deleted text end

(b) There shall be distributed to each city, town, and county the amount that it
received under section 294.26 in calendar year 1977; provided, however, that the amount
distributed in 1981 to the unorganized territory number 2 of Lake County and the town
of Beaver Bay based on the between-terminal trackage of Erie Mining Company will be
distributed in 1982 and subsequent years to the unorganized territory number 2 of Lake
County and the towns of Beaver Bay and Stony River based on the miles of track of Erie
Mining Company in each taxing district.

(c) There shall be distributed to the Iron Range Resources and Rehabilitation Board
the amounts it received in 1977 under section 298.22. The amount distributed under
this paragraph shall be expended within or for the benefit of the taconite assistance area
defined in section 273.1341.

(d) There shall be distributed to each school district 62 percent of the amount that it
received under section 294.26 in calendar year 1977.

deleted text begin (e) In 2003 only, $100,000 must be distributed to a township located in a taconite
tax relief area as defined in section deleted text begin 273.134, paragraph (a) deleted text end , that received $119,259 of
homestead and agricultural credit aid and $182,014 in local government aid in 2001.
deleted text end

deleted text begin Subd. 11a. deleted text end

deleted text begin Prorated distributions. deleted text end

deleted text begin For production years 1994 through 1999,
distributions under this section that are based on a number of cents per ton explicitly
provided in this section shall be reduced on a pro rata basis to reflect the reduction in tax
proceeds as a result of the tax rate reduction applied to direct reduced ore under section
deleted text begin 298.24, subdivision 1 deleted text end , paragraph (f).
deleted text end

Subd. 12.

Estimates.

On or before October 10 of each calendar year each producer
of taconite or iron sulphides subject to taxation under section 298.24 (hereinafter called
"taxpayer") shall file with the commissioner of revenue an estimate of the amount of tax
which would be payable by such taxpayer under said law for such calendar year; provided
such estimate shall be in an amount not less than the amount due on the mining and
production of concentrates up to September 30 of said year plus the amount becoming due
because of probable production between September 30 and December 31 of said year,
less any credit allowable as provided in subdivision 13. The commissioner of revenue
shall annually on or before October 10 report an estimated distribution amount to each
taxing district and the officers with whom such report is so filed shall use the amount so
indicated as being distributable to each taxing district in computing the permissible tax
levy of such county or city in the year in which such estimate is made, and payable in the
next ensuing calendar year, except that one cent per deleted text begin taxable deleted text end ton of the amount distributed
under subdivision 5, paragraph (d), shall not be deducted in calculating the permissible
levy. In any calendar year in which a general property tax levy has been made, if the
taxes distributable to any such county or city are greater than the amount estimated by
the commissioner to be paid to any such county or city in such year, the excess of such
distribution shall be held in a special fund by the county or city and shall not be expended
until the succeeding calendar year, and shall be included in computing the permissible
levies of such county or city payable in such year. If the amounts distributable to any
such county or city after final determination by the commissioner of revenue under this
section are less than the amounts by which a taxing district's levies were reduced pursuant
to this section, such county or city may issue certificates of indebtedness in the amount
of the shortage, and may include in its next tax levy an amount sufficient to pay such
certificates of indebtedness and interest thereon, or, if no certificates were issued, an
amount equal to such shortage.

Subd. 13.

Deduction for credits; payment.

In determining the distributions and
payments of the proceeds of the tax collected under section 298.24, the commissioner
of revenue shall deduct the amount of any credits authorized under section 298.24,
subdivision 3, against the tax imposed under subdivision 1 of said section, from
the amount which would otherwise have been paid to the Iron Range Resources and
Rehabilitation Board for credit to the Douglas J. Johnson economic protection trust fund.

Subd. 14.

[Repealed, 1987 c 268 art 9 s 43]

Subd. 15.

Distribution of delayed payments.

Notwithstanding any other provision
of this section or any other law, if payment of taxes collected under section 298.24 is
delayed past the due date because the taxpayer is a debtor in a pending bankruptcy
proceeding, the amount paid shall be distributed as follows when received:

(1) 50 percent to St. Louis County acting as the counties' fiscal agent, to be
distributed as provided in sections 273.134 to 273.136;

(2) 25 percent to the Douglas J. Johnson economic protection trust fund; and

(3) 25 percent to the taconite environmental protection fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes and distributions payable in
2007 and thereafter.
new text end

Sec. 6.

Minnesota Statutes 2004, section 298.285, is amended to read:

298.285 STATE AID AMOUNT; APPROPRIATION.

The commissioner of revenue shall determine a state aid amount equal to a tax of
deleted text begin 33 cents per taxable ton of iron ore concentrates for production your 2001 and deleted text end 22 cents per
deleted text begin taxable deleted text end ton of iron ore concentrates deleted text begin for production years 2002 and thereafter deleted text end . new text begin The state
aid provided for in this section shall be calculated using "distribution tonnage," which is
defined in section 298.28, subdivision 1. new text end There is appropriated from the general fund to
the commissioner an amount equal to the state aid determined under this section. It must
be distributed under section 298.28, as if the aid were production tax revenues.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 7.

Laws 1990, chapter 604, article 8, section 13, subdivision 4, is amended to read:

Subd. 4. Appropriation. There is annually appropriated from the distribution of
taconite production tax revenues to the deleted text begin taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the northeast Minnesota deleted text end new text begin
Douglas J. Johnson new text end economic protection trust new text begin fund new text end pursuant to new text begin Minnesota Statutes, new text end section
298.28, subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due 80
percent of the principal and interest on the bonds issued under subdivision 1 and 100
percent of the principal and interest on the bonds issued under subdivision 2. If the annual
distribution to the deleted text begin northeast Minnesota deleted text end new text begin Douglas J. Johnson new text end economic protection trust new text begin fund
new text end is insufficient to pay its share after fulfilling any obligations of the trust under Minnesota
Statutes, section 298.225 or 298.293, the deficiency shall be appropriated from the deleted text begin taconite
environmental protection deleted text end new text begin corpus of the Douglas J. Johnson economic protection trust new text end fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 8.

Laws 1996, chapter 412, article 5, section 20, subdivision 2, is amended to read:

Subd. 2. Appropriation. There is annually appropriated from the distribution of
taconite production tax revenues to the deleted text begin taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the northeast Minnesota deleted text end new text begin
Douglas J. Johnson new text end economic protection trust new text begin fund new text end pursuant to new text begin Minnesota Statutes, new text end section
298.28, subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due 80
percent of the principal and interest on the bonds issued pursuant to subdivision 1. If the
annual distribution to the deleted text begin northeast Minnesota deleted text end new text begin Douglas J. Johnson new text end economic protection
trust new text begin fund new text end is insufficient to pay its share after fulfilling any obligations of the trust under
new text begin Minnesota Statutes, new text end section 298.225 or 298.293, the deficiency shall be appropriated
from the deleted text begin taconite environmental protection deleted text end new text begin corpus of the Douglas J. Johnson economic
protection trust new text end fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 9.

Laws 1996, chapter 412, article 5, section 21, subdivision 3, is amended to read:

Subd. 3. Appropriation. There is annually appropriated from the distribution of
taconite production tax revenues to the deleted text begin taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the northeast Minnesota deleted text end new text begin
Douglas J. Johnson new text end economic protection trust new text begin fund new text end pursuant to Minnesota Statutes, section
298.28, subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due 70
percent of the principal and interest on the bonds issued under subdivision 1. If the annual
distribution to the deleted text begin northeast Minnesota deleted text end new text begin Douglas J. Johnson new text end economic protection trust new text begin fund
new text end is insufficient to pay its share after fulfilling any obligations of the trust under Minnesota
Statutes, section 298.225 or 298.293, the deficiency shall be appropriated from the deleted text begin taconite
environmental protection deleted text end new text begin corpus of the Douglas J. Johnson economic protection trust new text end fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 10.

Laws 1996, chapter 412, article 5, section 22, subdivision 2, is amended to
read:

Subd. 2. Appropriation. There is annually appropriated from the distribution of
taconite production tax revenues to the deleted text begin taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the northeast Minnesota deleted text end new text begin
Douglas J. Johnson new text end economic protection trust new text begin fund new text end pursuant to Minnesota Statutes, section
298.28, subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due 80
percent of the principal and interest on the bonds issued pursuant to subdivision 1. If the
annual distribution to the deleted text begin northeast Minnesota deleted text end new text begin Douglas J. Johnson new text end economic protection
trust new text begin fund new text end is insufficient to pay its share after fulfilling any obligations of the trust under
Minnesota Statutes, section 298.225 or 298.293, the deficiency shall be appropriated
from the deleted text begin taconite environmental protection deleted text end new text begin corpus of the Douglas J. Johnson economic
protection trust new text end fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 11.

Laws 1998, chapter 398, article 4, section 17, subdivision 2, is amended to
read:

Subd. 2. Appropriation. There is annually appropriated from the distribution of
taconite production tax revenues to the deleted text begin taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the northeast Minnesota deleted text end new text begin
Douglas J. Johnson new text end economic protection trust new text begin fund new text end pursuant to Minnesota Statutes, section
298.28, subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due 80
percent of the principal and interest on the bonds issued pursuant to subdivision 1. If the
annual distribution to the deleted text begin northeast Minnesota deleted text end new text begin Douglas J. Johnson new text end economic protection
trust new text begin fund new text end is insufficient to pay its share after fulfilling any obligations of the trust under
Minnesota Statutes, section 298.225 or 298.293, the deficiency shall be appropriated
from the deleted text begin taconite environmental protection deleted text end new text begin corpus of the Douglas J. Johnson economic
protection trust new text end fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 12.

Laws 2000, chapter 489, article 5, section 24, subdivision 3, is amended to
read:

Subd. 3. Appropriation. There is annually appropriated from the distribution of
taconite production tax revenues to the deleted text begin taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the northeast Minnesota deleted text end new text begin
Douglas J. Johnson new text end economic protection trust new text begin fund new text end pursuant to Minnesota Statutes, section
298.28, subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due 80
percent of the principal and interest on the bonds issued under subdivision 1. If the annual
distribution to the deleted text begin northeast Minnesota deleted text end new text begin Douglas J. Johnson new text end economic protection trust new text begin fund
new text end is insufficient to pay its share after fulfilling any obligations of the trust under Minnesota
Statutes, section 298.225 or 298.293, the deficiency shall be appropriated from the deleted text begin taconite
environmental protection deleted text end new text begin corpus of the Douglas J. Johnson economic protection trust new text end fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 13.

Laws 2000, chapter 489, article 5, section 25, subdivision 3, is amended to
read:

Subd. 3. Appropriation. There is annually appropriated from the distribution of
taconite production tax revenues to the deleted text begin taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the northeast Minnesota deleted text end new text begin
Douglas J. Johnson new text end economic protection trust new text begin fund new text end pursuant to Minnesota Statutes, section
298.28, subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due 80
percent of the principal and interest on the bonds issued under subdivision 1. If the annual
distribution to the deleted text begin northeast Minnesota deleted text end new text begin Douglas J. Johnson new text end economic protection trust new text begin fund
new text end is insufficient to pay its share after fulfilling any obligations of the trust under Minnesota
Statutes, section 298.225 or 298.293, the deficiency shall be appropriated from the deleted text begin taconite
environmental protection deleted text end new text begin corpus of the Douglas J. Johnson economic protection trust new text end fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 14.

Laws 2000, chapter 489, article 5, section 26, subdivision 3, is amended to
read:

Subd. 3. Appropriation. There is annually appropriated from the distribution of
taconite production tax revenues to the deleted text begin taconite environmental protection fund pursuant
to Minnesota Statutes, section 298.28, subdivision 11, and to the northeast Minnesota deleted text end new text begin
Douglas J. Johnson new text end economic protection trust new text begin fund new text end pursuant to Minnesota Statutes, section
298.28, subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due 80
percent of the principal and interest on the bonds issued under subdivision 1. If the annual
distribution to the deleted text begin northeast Minnesota deleted text end new text begin Douglas J. Johnson new text end economic protection trust new text begin fund
new text end is insufficient to pay its share after fulfilling any obligations of the trust under Minnesota
Statutes, section 298.225 or 298.293, the deficiency shall be appropriated from the deleted text begin taconite
environmental protection deleted text end new text begin corpus of the Douglas J. Johnson economic protection trust new text end fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 15.

Laws 2005, chapter 152, article 1, section 39, subdivision 2, is amended to
read:

Subd. 2. Appropriation. There is annually appropriated from the distribution
of taconite production tax revenues to the deleted text begin taconite environmental protection fund
pursuant to Minnesota Statutes, section 298.28, subdivision 11, and to the deleted text end Douglas J.
Johnson economic protection trust new text begin fund new text end pursuant to Minnesota Statutes, section 298.28,
subdivisions 9 and 11, deleted text begin in equal shares, deleted text end an amount sufficient to pay when due the principal
and interest on the bonds issued pursuant to subdivision 1. If the annual distribution to
the Douglas J. Johnson economic protection trust new text begin fund new text end is insufficient to pay its share
after fulfilling any obligations of the trust under Minnesota Statutes, section 298.225 or
298.293, the deficiency is appropriated from the deleted text begin taconite environmental protection deleted text end new text begin corpus
of the Douglas J. Johnson economic protection trust new text end fund. The appropriation under this
subdivision terminates upon payment or maturity of the last of the bonds issued under
this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes payable in 2007 and
thereafter.
new text end

Sec. 16. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2004, section 298.28, subdivision 11a, new text end new text begin is repealed.
new text end

ARTICLE 5

MISCELLANEOUS

Section 1.

Minnesota Statutes 2005 Supplement, section 270C.01, subdivision 4, is
amended to read:

Subd. 4.

Electronic means; electronically.

"Electronic means" and "electronically"
mean a method that is electronic, as defined in section 325L.02, paragraph (e), and that
is prescribed by the commissioner. new text begin Electronic means includes the use of a touch-tone
telephone to transmit return information in a manner prescribed by the commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2005 Supplement, section 270C.304, is amended to read:

270C.304 ELECTRONICALLY FILED RETURNS; SIGNATURES.

For purposes of a law administered by the commissioner, the name of the taxpayer,
the name of the taxpayer's authorized agent, or the taxpayer's identification number,
will constitute a signature when transmitted as part of the return information on returns
filed by electronic means by the taxpayer or at the taxpayer's direction. deleted text begin "Electronic
means" includes, but is not limited to, the use of a touch-tone telephone to transmit return
information in a manner prescribed by the commissioner.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2005 Supplement, section 270C.33, subdivision 4, is
amended to read:

Subd. 4.

Orders of assessment.

(a) The commissioner may issue an order of
assessment in any of the following circumstances:

(1) the commissioner determines that the correct amount of tax is different than that
assessed on a return filed with the commissioner;

(2) no return has been filed and the commissioner determines the amount of tax
that should have been assessed;

(3) the commissioner determines that the correct amount of a refundable credit
is different than the amount claimed by a taxpayer. For purposes of this subdivision,
"refundable credit" means a refund benefit or credit due a person that is unrelated to the
person's liability for a tax. "Refundable credit" does not include estimated tax payments
or withholding taxes. An assessment for an overpayment of a refundable credit may be
collected in the same manner as a tax collected by the commissioner; deleted text begin and
deleted text end

(4) the commissioner determines the correct amount of a tax that the taxpayer is not
required to assess by a return filed with the commissioner deleted text begin . deleted text end new text begin ; and
new text end

new text begin (5) the commissioner determines that a penalty other than a penalty for late payment
of tax, late filing of a return, or failure to pay tax by electronic means should be imposed,
and the penalty is not included on an order of assessment made under clauses (1) to (4).
new text end

(b) An order of assessment must be in writing.

(c) An order of assessment must be signed by the commissioner or a delegate, or
have their facsimile signature, if the change in tax, excluding penalties and interest,
exceeds $1,000.

(d) An order of assessment is final when made but, as applicable, is reviewable
administratively under section 270C.35, or appealable to Tax Court under chapter 271.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2005 Supplement, section 270C.57, subdivision 3, is
amended to read:

Subd. 3.

Assessment new text begin ; new text end abatement; review.

The commissioner may assess liability
new text begin against a successor business new text end under this section within the time prescribed for collecting
the underlying sales and withholding taxes, interest, and penalties. The assessment is
presumed to be valid, and the burden is upon the successor to show it is incorrect or
invalid. An order assessing successor liability is reviewable administratively under section
270C.35 and is appealable to Tax Court under chapter 271. The commissioner may abate
an assessment if the successor's failure to give the notice required under this section is due
to reasonable cause. The procedural and appeal provisions under section 270C.34 apply
to abatement requests under this subdivision. Collection remedies available against the
transferring business are available against the successor from the date of assessment of
successor liability.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2005 Supplement, section 270C.67, subdivision 1, is
amended to read:

Subdivision 1.

Authority.

If any tax payable to the commissioner or to the
department is not paid when due, such tax may be collected by the commissioner within
five years after the date of assessment of the tax, or if a lien has been filed, during the
period the lien is enforceable, or if the tax judgment has been filed, within the statutory
period of enforcement of a valid tax judgment, by a levy upon all property and rights
to property, including any property in the possession of law enforcement officials, of
the person liable for the payment or collection of such tax deleted text begin (except that which is exempt
from execution pursuant to section 550.37) deleted text end or property on which there is a lien provided
in section 270C.63. For this purpose, "tax" includes any penalty, interest, and costs,
properly payable.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2005 Supplement, section 270C.67, is amended by adding a
subdivision to read:

new text begin Subd. 1a. new text end

new text begin Exempt property. new text end

new text begin A levy under this section is not enforceable against:
new text end

new text begin (1) a purchaser with respect to tangible personal property purchased at retail in
the ordinary course of the seller's trade or business, unless at the time of purchase the
purchaser intends the purchase to or knows the purchase will hinder, evade, or defeat
the collection of a tax; or
new text end

new text begin (2) the personal property listed as exempt in sections 550.37, 550.38, and 550.39.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2005 Supplement, section 271.12, is amended to read:

271.12 WHEN ORDER EFFECTIVE.

No order for refundment by the commissioner of revenue, the appropriate unit of
government, or the Tax Court shall take effect until the time for appeal therefrom or
review thereof by all parties entitled thereto has expired. Otherwise every order of the
commissioner, the appropriate unit of government, or the Tax Court shall take effect
immediately upon the filing thereof, and no appeal therefrom or review thereof shall
stay the execution thereof or extend the time for payment of any tax or other obligation
unless otherwise expressly provided by law; provided, that in case an order which has
been acted upon, in whole or in part, shall thereafter be set aside or modified upon appeal,
the determination upon appeal or review shall supersede the order appealed from and be
binding upon all parties affected thereby, and such adjustments as may be necessary
to give effect thereto shall be made accordingly; and provided further, the Tax Court
may enjoin enforcement of the order of the commissioner being appealed. If it be finally
determined upon such appeal or review that any person is entitled to refundment of any
amount which has been paid for a tax or other obligation, such amount, unless otherwise
provided by law, shall be paid to the person by the commissioner of finance, or other
proper officer, out of funds derived from taxes of the same kind, if available for the
purpose, or out of other available funds, if any, with interest at the rate specified in section
270C.405 from the date of payment of the tax, unless a different rate new text begin or date of accrual
new text end of interest is otherwise provided by law, in which case such other rate new text begin or date of accrual
new text end shall apply, upon certification by the commissioner of revenue, the appropriate unit of
government, the Tax Court or the Supreme Court.

If, within 120 days after a decision of the Tax Court becomes final, the commissioner
does not refund the overpayment determined by the court, together with interest, on
motion by the taxpayer, the Tax Court shall have jurisdiction to order the refund of
the overpayment and interest, and to award reasonable litigation costs for bringing the
motion. If any tax, assessment, or other obligation be increased upon such appeal or
review, the increase shall be added to the original amount, and may be enforced and
collected therewith.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2005 Supplement, section 289A.121, subdivision 5, is
amended to read:

Subd. 5.

Reportable transactions.

(a) For each taxable year in which a taxpayer
must make a return or a statement under Code of Federal Regulations, title 26, section
1.6011-4, for a reportable transaction, including a listed transaction, in which the taxpayer
participated in a taxable year for which a return is required under chapter 290, the taxpayer
must file a copy of the disclosure with the commissioner.

(b) Any taxpayer that is a member of a unitary business group that includes any
person that must make a disclosure statement under Code of Federal Regulations, title 26,
section 1.6011-4, must file a disclosure under this subdivision.

(c) Disclosure under this subdivision is required for any transaction entered into after
December 31, 2001, that the Internal Revenue Service determines is a listed transaction
at any time, and must be made in the manner prescribed by the commissioner. For
transactions in which the taxpayer participated for taxable years ending before December
31, 2005, disclosure must be made by the new text begin extended new text end due date of the first return required
under chapter 290 that occurs 60 days or more after July 14, 2005. With respect to
transactions in which the taxpayer participated for taxable years ending on and after
December 31, 2005, disclosure must be made in the time and manner prescribed in Code
of Federal Regulations, title 26, section 1.6011-4(e).

(d) Notwithstanding paragraphs (a) to (c), no disclosure is required for transactions
entered into after December 31, 2001, and before January 1, 2006, if (1) the taxpayer
has filed an amended income tax return which reverses the tax benefits of the tax
shelter transaction, or (2) as a result of a federal audit the Internal Revenue Service has
determined the tax treatment of the transaction and an amended return has been filed
to reflect the federal treatment.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for disclosures of reportable
transactions in which the taxpayer participated for taxable years ending before December
31, 2005.
new text end

Sec. 9.

Minnesota Statutes 2004, section 290.17, subdivision 1, is amended to read:

Subdivision 1.

Scope of allocation rules.

(a) The income of resident individuals
is not subject to allocation outside this state. The allocation rules apply to nonresident
individuals, estates, trusts, nonresident partners of partnerships, nonresident shareholders
of corporations treated as "S" corporations under section 290.9725, and all corporations
not having such an election in effect. If a partnership or corporation would not otherwise
be subject to the allocation rules, but conducts a trade or business that is part of a
unitary business involving another legal entity that is subject to the allocation rules, the
partnership or corporation is subject to the allocation rules.

(b) Expenses, losses, and other deductions (referred to collectively in this paragraph
as "deductions") must be allocated along with the item or class of gross income to which
they are definitely related for purposes of assignment under this section or apportionment
under section 290.191, 290.20, or 290.36. Deductions deleted text begin not deleted text end definitely related to any item
deleted text begin or class deleted text end of gross income deleted text begin are deleted text end assigned new text begin under subdivision 2, paragraph (e), are assigned new text end to
the taxpayer's domicile.

(c) In the case of an individual who is a resident for only part of a taxable year,
the individual's income, gains, losses, and deductions from the distributive share of a
partnership, S corporation, trust, or estate are not subject to allocation outside this state
to the extent of the distributive share multiplied by a ratio, the numerator of which is
the number of days the individual was a resident of this state during the tax year of the
partnership, S corporation, trust, or estate, and the denominator of which is the number of
days in the taxable year of the partnership, S corporation, trust, or estate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end