HF 3805

as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act
  1.2             relating to taxation; modifying property tax class 
  1.3             rates; providing a property tax rebate; changing state 
  1.4             aid; increasing credits; reducing the general 
  1.5             education tax levy; modifying the property tax base; 
  1.6             conforming to federal tax law; allowing one-time 
  1.7             deductions for items of nonconformity to federal law 
  1.8             for prior tax years; advancing effective dates of 
  1.9             sales tax exemptions and an income tax credit; 
  1.10            repealing the accelerated payment of June sales tax; 
  1.11            providing priorities for using forecast surpluses for 
  1.12            tax reductions and reform; appropriating money; 
  1.13            amending Minnesota Statutes 1996, sections 273.112, 
  1.14            subdivision 7a; 273.1398, subdivision 2; 289A.18, 
  1.15            subdivision 4; 289A.20, subdivision 4; 289A.60, 
  1.16            subdivision 21; 290.01, subdivision 19e; 290.06, 
  1.17            subdivision 2c, and by adding a subdivision; 290.067, 
  1.18            subdivision 2a; 290.0921, subdivision 3a; 290A.03, 
  1.19            subdivision 3; 477A.0122, subdivision 6; and 477A.03, 
  1.20            subdivision 2; Minnesota Statutes 1997 Supplement, 
  1.21            sections 16A.152, subdivision 2; 124.315, subdivisions 
  1.22            4 and 5; 273.127, subdivision 3; 273.13, subdivisions 
  1.23            22, 23, 24, 25, as amended, 31, and 32; 273.1382, 
  1.24            subdivision 1; 289A.02, subdivision 7; 290.01, 
  1.25            subdivisions 19, 19a, 19b, 19c, 19g, and 31; 290.0671, 
  1.26            subdivision 1; 290.0674, subdivision 2; 290A.03, 
  1.27            subdivision 15; and 291.005, subdivision 1; Laws 1997, 
  1.28            chapter 231, article 5, section 20; and article 7, 
  1.29            section 47; proposing coding for new law in Minnesota 
  1.30            Statutes, chapters 16A; and 290; repealing Minnesota 
  1.31            Statutes 1996, sections 273.11, subdivisions 6a and 
  1.32            15; 273.124, subdivision 17; and 273.1315. 
  1.33  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.34                             ARTICLE 1 
  1.35                        PROPERTY TAX REFORM 
  1.36     Section 1.  Minnesota Statutes 1997 Supplement, section 
  1.37  124.315, subdivision 4, is amended to read: 
  1.38     Subd. 4.  [INTEGRATION LEVY.] A district may levy an amount 
  1.39  equal to 46 28 percent of the district's integration revenue as 
  2.1   defined in subdivision 3. 
  2.2      Sec. 2.  Minnesota Statutes 1997 Supplement, section 
  2.3   124.315, subdivision 5, is amended to read: 
  2.4      Subd. 5.  [INTEGRATION AID.] A district's integration aid 
  2.5   equals 54 72 percent of the district's integration revenue as 
  2.6   defined in subdivision 3. 
  2.7      Sec. 3.  Minnesota Statutes 1996, section 273.112, 
  2.8   subdivision 7a, is amended to read: 
  2.9      Subd. 7a.  Notwithstanding subdivision 7, when real 
  2.10  property ceases to qualify under subdivision 3 because of 
  2.11  failure to comply with prohibitions against discrimination on 
  2.12  the basis of sex, or because of the changes made by this 
  2.13  article, payment of additional taxes imposed under subdivision 7 
  2.14  is not required. 
  2.15     Sec. 4.  Minnesota Statutes 1997 Supplement, section 
  2.16  273.127, subdivision 3, is amended to read: 
  2.17     Subd. 3.  [CLASS 4C PROPERTIES.] For the market value of 
  2.18  properties that meet the criteria of subdivision 2, paragraph 
  2.19  (a), and which no longer qualify as a result of the eligibility 
  2.20  criteria specified in section 273.126, a class rate of 2.4 
  2.21  percent applies for taxes payable in 1999 and a class rate of 
  2.22  2.6 2.5 percent applies for taxes payable in 2000. 
  2.23     Sec. 5.  Minnesota Statutes 1997 Supplement, section 
  2.24  273.13, subdivision 22, is amended to read: 
  2.25     Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
  2.26  23, real estate which is residential and used for homestead 
  2.27  purposes is class 1.  The market value of class 1a property must 
  2.28  be determined based upon the value of the house, garage, and 
  2.29  land.  
  2.30     For taxes payable in 1998 and thereafter, The first $75,000 
  2.31  of market value of class 1a property has a net class rate of one 
  2.32  percent of its market value; and the market value of class 1a 
  2.33  property that exceeds $75,000 has a class rate of 1.85 1.7 
  2.34  percent of its market value.  
  2.35     (b) Class 1b property includes homestead real estate or 
  2.36  homestead manufactured homes used for the purposes of a 
  3.1   homestead by 
  3.2      (1) any blind person, or the blind person and the blind 
  3.3   person's spouse; or 
  3.4      (2) any person, hereinafter referred to as "veteran," who: 
  3.5      (i) served in the active military or naval service of the 
  3.6   United States; and 
  3.7      (ii) is entitled to compensation under the laws and 
  3.8   regulations of the United States for permanent and total 
  3.9   service-connected disability due to the loss, or loss of use, by 
  3.10  reason of amputation, ankylosis, progressive muscular 
  3.11  dystrophies, or paralysis, of both lower extremities, such as to 
  3.12  preclude motion without the aid of braces, crutches, canes, or a 
  3.13  wheelchair; and 
  3.14     (iii) has acquired a special housing unit with special 
  3.15  fixtures or movable facilities made necessary by the nature of 
  3.16  the veteran's disability, or the surviving spouse of the 
  3.17  deceased veteran for as long as the surviving spouse retains the 
  3.18  special housing unit as a homestead; or 
  3.19     (3) any person who: 
  3.20     (i) is permanently and totally disabled and 
  3.21     (ii) receives 90 percent or more of total income from 
  3.22     (A) aid from any state as a result of that disability; or 
  3.23     (B) supplemental security income for the disabled; or 
  3.24     (C) workers' compensation based on a finding of total and 
  3.25  permanent disability; or 
  3.26     (D) social security disability, including the amount of a 
  3.27  disability insurance benefit which is converted to an old age 
  3.28  insurance benefit and any subsequent cost of living increases; 
  3.29  or 
  3.30     (E) aid under the federal Railroad Retirement Act of 1937, 
  3.31  United States Code Annotated, title 45, section 228b(a)5; or 
  3.32     (F) a pension from any local government retirement fund 
  3.33  located in the state of Minnesota as a result of that 
  3.34  disability; or 
  3.35     (G) pension, annuity, or other income paid as a result of 
  3.36  that disability from a private pension or disability plan, 
  4.1   including employer, employee, union, and insurance plans and 
  4.2      (iii) has household income as defined in section 290A.03, 
  4.3   subdivision 5, of $50,000 or less; or 
  4.4      (4) any person who is permanently and totally disabled and 
  4.5   whose household income as defined in section 290A.03, 
  4.6   subdivision 5, is 275 percent or less of the federal poverty 
  4.7   level. 
  4.8      Property is classified and assessed under clause (4) only 
  4.9   if the government agency or income-providing source certifies, 
  4.10  upon the request of the homestead occupant, that the homestead 
  4.11  occupant satisfies the disability requirements of this paragraph.
  4.12     Property is classified and assessed pursuant to clause (1) 
  4.13  only if the commissioner of economic security certifies to the 
  4.14  assessor that the homestead occupant satisfies the requirements 
  4.15  of this paragraph.  
  4.16     Permanently and totally disabled for the purpose of this 
  4.17  subdivision means a condition which is permanent in nature and 
  4.18  totally incapacitates the person from working at an occupation 
  4.19  which brings the person an income.  The first $32,000 market 
  4.20  value of class 1b property has a net class rate of .45 percent 
  4.21  of its market value.  The remaining market value of class 1b 
  4.22  property has a net class rate using the rates for class 1 or 
  4.23  class 2a property, whichever is appropriate, of similar market 
  4.24  value.  
  4.25     (c) Class 1c property is commercial use real property that 
  4.26  abuts a lakeshore line and is devoted to temporary and seasonal 
  4.27  residential occupancy for recreational purposes but not devoted 
  4.28  to commercial purposes for more than 250 days in the year 
  4.29  preceding the year of assessment, and that includes a portion 
  4.30  used as a homestead by the owner, which includes a dwelling 
  4.31  occupied as a homestead by a shareholder of a corporation that 
  4.32  owns the resort or a partner in a partnership that owns the 
  4.33  resort, even if the title to the homestead is held by the 
  4.34  corporation or partnership.  For purposes of this clause, 
  4.35  property is devoted to a commercial purpose on a specific day if 
  4.36  any portion of the property, excluding the portion used 
  5.1   exclusively as a homestead, is used for residential occupancy 
  5.2   and a fee is charged for residential occupancy.  In order for a 
  5.3   property to be classified as class 1c, at least 40 percent of 
  5.4   the annual gross lodging receipts related to the property must 
  5.5   be from business conducted between Memorial Day weekend and 
  5.6   Labor Day weekend, and at least 60 percent of all bookings by 
  5.7   lodging guests during the year must be for periods of at least 
  5.8   two consecutive nights.  Class 1c property has a class rate of 
  5.9   one percent of total market value with the following 
  5.10  limitation:  the area of the property must not exceed 100 feet 
  5.11  of lakeshore footage for each cabin or campsite located on the 
  5.12  property up to a total of 800 feet and 500 feet in depth, 
  5.13  measured away from the lakeshore.  
  5.14     (d) Class 1d property includes structures that meet all of 
  5.15  the following criteria: 
  5.16     (1) the structure is located on property that is classified 
  5.17  as agricultural property under section 273.13, subdivision 23; 
  5.18     (2) the structure is occupied exclusively by seasonal farm 
  5.19  workers during the time when they work on that farm, and the 
  5.20  occupants are not charged rent for the privilege of occupying 
  5.21  the property, provided that use of the structure for storage of 
  5.22  farm equipment and produce does not disqualify the property from 
  5.23  classification under this paragraph; 
  5.24     (3) the structure meets all applicable health and safety 
  5.25  requirements for the appropriate season; and 
  5.26     (4) the structure is not saleable as residential property 
  5.27  because it does not comply with local ordinances relating to 
  5.28  location in relation to streets or roads. 
  5.29     The market value of class 1d property has the same class 
  5.30  rates as class 1a property under paragraph (a). 
  5.31     Sec. 6.  Minnesota Statutes 1997 Supplement, section 
  5.32  273.13, subdivision 23, is amended to read: 
  5.33     Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
  5.34  land including any improvements that is homesteaded.  The market 
  5.35  value of the house and garage and immediately surrounding one 
  5.36  acre of land has the same class rates as class 1a property under 
  6.1   subdivision 22.  The value of the remaining land including 
  6.2   improvements up to $115,000 has a net class rate of 0.4 0.35 
  6.3   percent of market value.  The remaining value of class 2a 
  6.4   property over $115,000 of market value that does not exceed 320 
  6.5   acres has a net class rate of 0.9 0.8 percent of market value.  
  6.6   The remaining property over the $115,000 market value in excess 
  6.7   of 320 acres has a class rate of 1.4 1.3 percent of market value.
  6.8      (b) Class 2b property is (1) real estate, rural in 
  6.9   character and used exclusively for growing trees for timber, 
  6.10  lumber, and wood and wood products; (2) real estate that is not 
  6.11  improved with a structure and is used exclusively for growing 
  6.12  trees for timber, lumber, and wood and wood products, if the 
  6.13  owner has participated or is participating in a cost-sharing 
  6.14  program for afforestation, reforestation, or timber stand 
  6.15  improvement on that particular property, administered or 
  6.16  coordinated by the commissioner of natural resources; (3) real 
  6.17  estate that is nonhomestead agricultural land; or (4) a landing 
  6.18  area or public access area of a privately owned public use 
  6.19  airport.  Class 2b property has a net class rate of 1.4 1.3 
  6.20  percent of market value. 
  6.21     (c) Agricultural land as used in this section means 
  6.22  contiguous acreage of ten acres or more, used during the 
  6.23  preceding year for agricultural purposes.  "Agricultural 
  6.24  purposes" as used in this section means the raising or 
  6.25  cultivation of agricultural products or enrollment in the 
  6.26  Reinvest in Minnesota program under sections 103F.501 to 
  6.27  103F.535 or the federal Conservation Reserve Program as 
  6.28  contained in Public Law Number 99-198.  Contiguous acreage on 
  6.29  the same parcel, or contiguous acreage on an immediately 
  6.30  adjacent parcel under the same ownership, may also qualify as 
  6.31  agricultural land, but only if it is pasture, timber, waste, 
  6.32  unusable wild land, or land included in state or federal farm 
  6.33  programs.  Agricultural classification for property shall be 
  6.34  determined excluding the house, garage, and immediately 
  6.35  surrounding one acre of land, and shall not be based upon the 
  6.36  market value of any residential structures on the parcel or 
  7.1   contiguous parcels under the same ownership. 
  7.2      (d) Real estate, excluding the house, garage, and 
  7.3   immediately surrounding one acre of land, of less than ten acres 
  7.4   which is exclusively and intensively used for raising or 
  7.5   cultivating agricultural products, shall be considered as 
  7.6   agricultural land.  
  7.7      Land shall be classified as agricultural even if all or a 
  7.8   portion of the agricultural use of that property is the leasing 
  7.9   to, or use by another person for agricultural purposes. 
  7.10     Classification under this subdivision is not determinative 
  7.11  for qualifying under section 273.111. 
  7.12     The property classification under this section supersedes, 
  7.13  for property tax purposes only, any locally administered 
  7.14  agricultural policies or land use restrictions that define 
  7.15  minimum or maximum farm acreage. 
  7.16     (e) The term "agricultural products" as used in this 
  7.17  subdivision includes production for sale of:  
  7.18     (1) livestock, dairy animals, dairy products, poultry and 
  7.19  poultry products, fur-bearing animals, horticultural and nursery 
  7.20  stock described in sections 18.44 to 18.61, fruit of all kinds, 
  7.21  vegetables, forage, grains, bees, and apiary products by the 
  7.22  owner; 
  7.23     (2) fish bred for sale and consumption if the fish breeding 
  7.24  occurs on land zoned for agricultural use; 
  7.25     (3) the commercial boarding of horses if the boarding is 
  7.26  done in conjunction with raising or cultivating agricultural 
  7.27  products as defined in clause (1); 
  7.28     (4) property which is owned and operated by nonprofit 
  7.29  organizations used for equestrian activities, excluding racing; 
  7.30  and 
  7.31     (5) game birds and waterfowl bred and raised for use on a 
  7.32  shooting preserve licensed under section 97A.115.  
  7.33     (f) If a parcel used for agricultural purposes is also used 
  7.34  for commercial or industrial purposes, including but not limited 
  7.35  to:  
  7.36     (1) wholesale and retail sales; 
  8.1      (2) processing of raw agricultural products or other goods; 
  8.2      (3) warehousing or storage of processed goods; and 
  8.3      (4) office facilities for the support of the activities 
  8.4   enumerated in clauses (1), (2), and (3), 
  8.5   the assessor shall classify the part of the parcel used for 
  8.6   agricultural purposes as class 1b, 2a, or 2b, whichever is 
  8.7   appropriate, and the remainder in the class appropriate to its 
  8.8   use.  The grading, sorting, and packaging of raw agricultural 
  8.9   products for first sale is considered an agricultural purpose.  
  8.10  A greenhouse or other building where horticultural or nursery 
  8.11  products are grown that is also used for the conduct of retail 
  8.12  sales must be classified as agricultural if it is primarily used 
  8.13  for the growing of horticultural or nursery products from seed, 
  8.14  cuttings, or roots and occasionally as a showroom for the retail 
  8.15  sale of those products.  Use of a greenhouse or building only 
  8.16  for the display of already grown horticultural or nursery 
  8.17  products does not qualify as an agricultural purpose.  
  8.18     The assessor shall determine and list separately on the 
  8.19  records the market value of the homestead dwelling and the one 
  8.20  acre of land on which that dwelling is located.  If any farm 
  8.21  buildings or structures are located on this homesteaded acre of 
  8.22  land, their market value shall not be included in this separate 
  8.23  determination.  
  8.24     (g) To qualify for classification under paragraph (b), 
  8.25  clause (4), a privately owned public use airport must be 
  8.26  licensed as a public airport under section 360.018.  For 
  8.27  purposes of paragraph (b), clause (4), "landing area" means that 
  8.28  part of a privately owned public use airport properly cleared, 
  8.29  regularly maintained, and made available to the public for use 
  8.30  by aircraft and includes runways, taxiways, aprons, and sites 
  8.31  upon which are situated landing or navigational aids.  A landing 
  8.32  area also includes land underlying both the primary surface and 
  8.33  the approach surfaces that comply with all of the following:  
  8.34     (i) the land is properly cleared and regularly maintained 
  8.35  for the primary purposes of the landing, taking off, and taxiing 
  8.36  of aircraft; but that portion of the land that contains 
  9.1   facilities for servicing, repair, or maintenance of aircraft is 
  9.2   not included as a landing area; 
  9.3      (ii) the land is part of the airport property; and 
  9.4      (iii) the land is not used for commercial or residential 
  9.5   purposes. 
  9.6   The land contained in a landing area under paragraph (b), clause 
  9.7   (4), must be described and certified by the commissioner of 
  9.8   transportation.  The certification is effective until it is 
  9.9   modified, or until the airport or landing area no longer meets 
  9.10  the requirements of paragraph (b), clause (4).  For purposes of 
  9.11  paragraph (b), clause (4), "public access area" means property 
  9.12  used as an aircraft parking ramp, apron, or storage hangar, or 
  9.13  an arrival and departure building in connection with the airport.
  9.14     Sec. 7.  Minnesota Statutes 1997 Supplement, section 
  9.15  273.13, subdivision 24, is amended to read: 
  9.16     Subd. 24.  [CLASS 3.] (a) Commercial and industrial 
  9.17  property and utility real and personal property, except class 5 
  9.18  property as identified in subdivision 31, clause (1), is class 
  9.19  3a.  Each parcel has a class rate of 2.7 2.5 percent of the 
  9.20  first tier of market value, and 4.0 3.5 percent of the remaining 
  9.21  market value, except that in the case of contiguous parcels of 
  9.22  commercial and industrial property owned by the same person or 
  9.23  entity, only the value equal to the first-tier value of the 
  9.24  contiguous parcels qualifies for the reduced class rate.  For 
  9.25  the purposes of this subdivision, the first tier means the first 
  9.26  $150,000 of market value.  In the case of utility property owned 
  9.27  by one person or entity, only one parcel in each county has a 
  9.28  reduced class rate on the first tier of market value. 
  9.29     For purposes of this paragraph, parcels are considered to 
  9.30  be contiguous even if they are separated from each other by a 
  9.31  road, street, vacant lot, waterway, or other similar intervening 
  9.32  type of property. 
  9.33     (b) Employment property defined in section 469.166, during 
  9.34  the period provided in section 469.170, shall constitute class 
  9.35  3b and has a class rate of 2.3 percent of the first $50,000 of 
  9.36  market value and 3.6 3.5 percent of the remainder, except that 
 10.1   for employment property located in a border city enterprise zone 
 10.2   designated pursuant to section 469.168, subdivision 4, paragraph 
 10.3   (c), the class rate of the first tier of market value and the 
 10.4   class rate of the remainder is determined under paragraph (a), 
 10.5   unless the governing body of the city designated as an 
 10.6   enterprise zone determines that a specific parcel shall be 
 10.7   assessed pursuant to the first clause of this sentence.  The 
 10.8   governing body may provide for assessment under the first clause 
 10.9   of the preceding sentence only for property which is located in 
 10.10  an area which has been designated by the governing body for the 
 10.11  receipt of tax reductions authorized by section 469.171, 
 10.12  subdivision 1. 
 10.13     (c) Structures which are (i) located on property classified 
 10.14  as class 3a, (ii) constructed under an initial building permit 
 10.15  issued after January 2, 1996, (iii) located in a transit zone as 
 10.16  defined under section 473.3915, subdivision 3, (iv) located 
 10.17  within the boundaries of a school district, and (v) not 
 10.18  primarily used for retail or transient lodging purposes, shall 
 10.19  have a class rate equal to 85 percent of the class rate of the 
 10.20  second tier of the commercial property rate under paragraph (a) 
 10.21  on any portion of the market value that does not qualify for the 
 10.22  first tier class rate under paragraph (a).  As used in item (v), 
 10.23  a structure is primarily used for retail or transient lodging 
 10.24  purposes if over 50 percent of its square footage is used for 
 10.25  those purposes.  The four percent rate A class rate equal to 85 
 10.26  percent of the class rate of the second tier of the commercial 
 10.27  property rate under paragraph (a) shall also apply to 
 10.28  improvements to existing structures that meet the requirements 
 10.29  of items (i) to (v) if the improvements are constructed under an 
 10.30  initial building permit issued after January 2, 1996, even if 
 10.31  the remainder of the structure was constructed prior to January 
 10.32  2, 1996.  For the purposes of this paragraph, a structure shall 
 10.33  be considered to be located in a transit zone if any portion of 
 10.34  the structure lies within the zone.  If any property once 
 10.35  eligible for treatment under this paragraph ceases to remain 
 10.36  eligible due to revisions in transit zone boundaries, the 
 11.1   property shall continue to receive treatment under this 
 11.2   paragraph for a period of three years. 
 11.3      Sec. 8.  Minnesota Statutes 1997 Supplement, section 
 11.4   273.13, subdivision 25, as amended by Laws 1997, Third Special 
 11.5   Session chapter 3, section 28, is amended to read: 
 11.6      Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
 11.7   estate containing four or more units and used or held for use by 
 11.8   the owner or by the tenants or lessees of the owner as a 
 11.9   residence for rental periods of 30 days or more.  Class 4a also 
 11.10  includes hospitals licensed under sections 144.50 to 144.56, 
 11.11  other than hospitals exempt under section 272.02, and contiguous 
 11.12  property used for hospital purposes, without regard to whether 
 11.13  the property has been platted or subdivided.  Class 4a property 
 11.14  in a city with a population of 5,000 or less, that is (1) 
 11.15  located outside of the metropolitan area, as defined in section 
 11.16  473.121, subdivision 2, or outside any county contiguous to the 
 11.17  metropolitan area, and (2) whose city boundary is at least 15 
 11.18  miles from the boundary of any city with a population greater 
 11.19  than 5,000 has a class rate of 2.3 2.15 percent of market value. 
 11.20  All other class 4a property has a class rate of 2.9 2.5 percent 
 11.21  of market value.  For purposes of this paragraph, population has 
 11.22  the same meaning given in section 477A.011, subdivision 3. 
 11.23     (b) Class 4b includes: 
 11.24     (1) residential real estate containing less than four units 
 11.25  that does not qualify as class 4bb, other than seasonal 
 11.26  residential, and recreational; 
 11.27     (2) manufactured homes not classified under any other 
 11.28  provision; 
 11.29     (3) a dwelling, garage, and surrounding one acre of 
 11.30  property on a nonhomestead farm classified under subdivision 23, 
 11.31  paragraph (b) containing two or three units; 
 11.32     (4) unimproved property that is classified residential as 
 11.33  determined under section 273.13, subdivision 33.  
 11.34     Class 4b property has a class rate of 2.1 1.7 percent of 
 11.35  market value.  
 11.36     (c) Class 4bb includes: 
 12.1      (1) nonhomestead residential real estate containing one 
 12.2   unit, other than seasonal residential, and recreational; and 
 12.3      (2) a single family dwelling, garage, and surrounding one 
 12.4   acre of property on a nonhomestead farm classified under 
 12.5   subdivision 23, paragraph (b). 
 12.6      Class 4bb has a class rate of 1.9 1.25 percent on the first 
 12.7   $75,000 of market value and a class rate of 2.1 1.7 percent of 
 12.8   its market value that exceeds $75,000. 
 12.9      Property that has been classified as seasonal recreational 
 12.10  residential property at any time during which it has been owned 
 12.11  by the current owner or spouse of the current owner does not 
 12.12  qualify for class 4bb. 
 12.13     (d) Class 4c property includes: 
 12.14     (1) except as provided in subdivision 22, 
 12.15  paragraph (c) (b), real property devoted to temporary and 
 12.16  seasonal residential occupancy for recreation purposes, 
 12.17  including real property devoted to temporary and seasonal 
 12.18  residential occupancy for recreation purposes and not devoted to 
 12.19  commercial purposes for more than 250 days in the year preceding 
 12.20  the year of assessment.  For purposes of this clause, property 
 12.21  is devoted to a commercial purpose on a specific day if any 
 12.22  portion of the property is used for residential occupancy, and a 
 12.23  fee is charged for residential occupancy.  In order for a 
 12.24  property to be classified as class 4c, seasonal recreational 
 12.25  residential for commercial purposes, at least 40 percent of the 
 12.26  annual gross lodging receipts related to the property must be 
 12.27  from business conducted between Memorial Day weekend and Labor 
 12.28  Day weekend and at least 60 percent of all bookings by lodging 
 12.29  guests during the year must be for periods of at least two 
 12.30  consecutive nights.  Class 4c also includes commercial use real 
 12.31  property used exclusively for recreational purposes in 
 12.32  conjunction with class 4c property devoted to temporary and 
 12.33  seasonal residential occupancy for recreational purposes, up to 
 12.34  a total of two acres, provided the property is not devoted to 
 12.35  commercial recreational use for more than 250 days in the year 
 12.36  preceding the year of assessment and is located within two miles 
 13.1   of the class 4c property with which it is used.  Class 4c 
 13.2   property classified in this clause also includes the remainder 
 13.3   of class 1c resorts.  Owners of real property devoted to 
 13.4   temporary and seasonal residential occupancy for recreation 
 13.5   purposes and all or a portion of which was devoted to commercial 
 13.6   purposes for not more than 250 days in the year preceding the 
 13.7   year of assessment desiring classification as class 1c or 4c, 
 13.8   must submit a declaration to the assessor designating the cabins 
 13.9   or units occupied for 250 days or less in the year preceding the 
 13.10  year of assessment by January 15 of the assessment year.  Those 
 13.11  cabins or units and a proportionate share of the land on which 
 13.12  they are located will be designated class 1c or 4c as otherwise 
 13.13  provided.  The remainder of the cabins or units and a 
 13.14  proportionate share of the land on which they are located will 
 13.15  be designated as class 3a.  The owner of property desiring 
 13.16  designation as class 1c or 4c property must provide guest 
 13.17  registers or other records demonstrating that the units for 
 13.18  which class 1c or 4c designation is sought were not occupied for 
 13.19  more than 250 days in the year preceding the assessment if so 
 13.20  requested.  The portion of a property operated as a (1) 
 13.21  restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 
 13.22  facility operated on a commercial basis not directly related to 
 13.23  temporary and seasonal residential occupancy for recreation 
 13.24  purposes shall not qualify for class 1c or 4c; 
 13.25     (2) qualified property used as a golf course if: 
 13.26     (i) any portion of the property is located within a county 
 13.27  that has a population of less than 50,000, or within a county 
 13.28  containing a golf course owned by a municipality, the county, or 
 13.29  a special taxing district; 
 13.30     (ii) it is open to the public on a daily fee basis.  It may 
 13.31  charge membership fees or dues, but a membership fee may not be 
 13.32  required in order to use the property for golfing, and its green 
 13.33  fees for golfing must be comparable to green fees typically 
 13.34  charged by municipal courses; and 
 13.35     (iii) it meets the requirements of section 273.112, 
 13.36  subdivision 3, paragraph (d). 
 14.1      A structure used as a clubhouse, restaurant, or place of 
 14.2   refreshment in conjunction with the golf course is classified as 
 14.3   class 3a property. 
 14.4      (3) real property up to a maximum of one acre of land owned 
 14.5   by a nonprofit community service oriented organization; provided 
 14.6   that the property is not used for a revenue-producing activity 
 14.7   for more than six days in the calendar year preceding the year 
 14.8   of assessment and the property is not used for residential 
 14.9   purposes on either a temporary or permanent basis.  For purposes 
 14.10  of this clause, a "nonprofit community service oriented 
 14.11  organization" means any corporation, society, association, 
 14.12  foundation, or institution organized and operated exclusively 
 14.13  for charitable, religious, fraternal, civic, or educational 
 14.14  purposes, and which is exempt from federal income taxation 
 14.15  pursuant to section 501(c)(3), (10), or (19) of the Internal 
 14.16  Revenue Code of 1986, as amended through December 31, 1990.  For 
 14.17  purposes of this clause, "revenue-producing activities" shall 
 14.18  include but not be limited to property or that portion of the 
 14.19  property that is used as an on-sale intoxicating liquor or 3.2 
 14.20  percent malt liquor establishment licensed under chapter 340A, a 
 14.21  restaurant open to the public, bowling alley, a retail store, 
 14.22  gambling conducted by organizations licensed under chapter 349, 
 14.23  an insurance business, or office or other space leased or rented 
 14.24  to a lessee who conducts a for-profit enterprise on the 
 14.25  premises.  Any portion of the property which is used for 
 14.26  revenue-producing activities for more than six days in the 
 14.27  calendar year preceding the year of assessment shall be assessed 
 14.28  as class 3a.  The use of the property for social events open 
 14.29  exclusively to members and their guests for periods of less than 
 14.30  24 hours, when an admission is not charged nor any revenues are 
 14.31  received by the organization shall not be considered a 
 14.32  revenue-producing activity; 
 14.33     (4) post-secondary student housing of not more than one 
 14.34  acre of land that is owned by a nonprofit corporation organized 
 14.35  under chapter 317A and is used exclusively by a student 
 14.36  cooperative, sorority, or fraternity for on-campus housing or 
 15.1   housing located within two miles of the border of a college 
 15.2   campus; and 
 15.3      (5) manufactured home parks as defined in section 327.14, 
 15.4   subdivision 3. 
 15.5      Class 4c property has a class rate of 2.1 percent of market 
 15.6   value, except that (i) for each parcel of seasonal residential 
 15.7   recreational property not used for commercial purposes the first 
 15.8   $75,000 of market value has a class rate of 1.4 1.3 percent, and 
 15.9   the market value that exceeds $75,000 has a class rate of 2.5 
 15.10  2.3 percent, and (ii) manufactured home parks assessed under 
 15.11  clause (5) have a class rate of two percent.  
 15.12     (e) Class 4d property is qualifying low-income rental 
 15.13  housing certified to the assessor by the housing finance agency 
 15.14  under sections 273.126 and 462A.071.  Class 4d includes land in 
 15.15  proportion to the total market value of the building that is 
 15.16  qualifying low-income rental housing.  For all properties 
 15.17  qualifying as class 4d, the market value determined by the 
 15.18  assessor must be based on the normal approach to value using 
 15.19  normal unrestricted rents. 
 15.20     Class 4d property has a class rate of one percent of market 
 15.21  value.  
 15.22     (f) Class 4e property consists of the residential portion 
 15.23  of any structure located within a city that was converted from 
 15.24  nonresidential use to residential use, provided that: 
 15.25     (1) the structure had formerly been used as a warehouse; 
 15.26     (2) the structure was originally constructed prior to 1940; 
 15.27     (3) the conversion was done after December 31, 1995, but 
 15.28  before January 1, 2003; and 
 15.29     (4) the conversion involved an investment of at least 
 15.30  $25,000 per residential unit. 
 15.31     Class 4e property has a class rate of 2.3 percent, provided 
 15.32  that a structure is eligible for class 4e classification only in 
 15.33  the 12 assessment years immediately following the conversion. 
 15.34     Sec. 9.  Minnesota Statutes 1997 Supplement, section 
 15.35  273.13, subdivision 31, is amended to read: 
 15.36     Subd. 31.  [CLASS 5.] Class 5 property includes:  
 16.1      (1) tools, implements, and machinery of an electric 
 16.2   generating, transmission, or distribution system or a pipeline 
 16.3   system transporting or distributing water, gas, crude oil, or 
 16.4   petroleum products or mains and pipes used in the distribution 
 16.5   of steam or hot or chilled water for heating or cooling 
 16.6   buildings, which are fixtures; 
 16.7      (2) unmined iron ore and low-grade iron-bearing formations 
 16.8   as defined in section 273.14; and 
 16.9      (3) all other property not otherwise classified. 
 16.10     Class 5 property has a class rate of 4.0 3.5 percent of 
 16.11  market value for taxes payable in 1998 1999 and thereafter. 
 16.12     Sec. 10.  Minnesota Statutes 1997 Supplement, section 
 16.13  273.13, subdivision 32, is amended to read: 
 16.14     Subd. 32.  [TARGET CLASS RATES.] (a) All classes of 
 16.15  property with a class rate of 4 four percent for taxes payable 
 16.16  in 1998 have a target class rate of 3.5 three percent.  Class 4a 
 16.17  shall have a target class rate of 2.5 two percent.  Class 4bb 
 16.18  has a target class rate of 1.25 one percent of the first $75,000 
 16.19  of market value and a target class rate of 1.85 1.5 percent of 
 16.20  the market value in excess of $75,000. 
 16.21     (b) By the fourth Tuesday in January of 1998 and at the 
 16.22  time of submission of the biennial budget under section 16A.11 
 16.23  in each biennium thereafter, the governor must recommend the 
 16.24  class rate schedule for all properties for taxes payable in 1999 
 16.25  for the schedule submitted in 1998 and for the following two 
 16.26  calendar years in each biennium thereafter.  The class rate 
 16.27  schedule must include reductions in the class rates of the 
 16.28  classes designated in paragraph (a) until such time as the 
 16.29  target class rates are reached unless the governor recommends no 
 16.30  change in the class rate schedule for all properties.  As part 
 16.31  of the recommendation, the governor shall recommend 
 16.32  appropriation of monies from the property tax reform account 
 16.33  under section 16A.1521 and include within the budget additional 
 16.34  funding for the education homestead credit, the property tax 
 16.35  refund under chapter 290A and education aids under chapters 124 
 16.36  and 124A to the extent those aids will be used to reduce 
 17.1   property tax levies.  The governor may propose alternative 
 17.2   programs to prevent the taxes of classes other than those 
 17.3   designated in paragraph (a) from increasing as a result of the 
 17.4   governor's recommended class rate schedule. 
 17.5      Sec. 11.  Minnesota Statutes 1997 Supplement, section 
 17.6   273.1382, subdivision 1, is amended to read: 
 17.7      Subdivision 1.  [EDUCATION HOMESTEAD CREDIT.] Each year, 
 17.8   beginning with property taxes payable in 1998, the respective 
 17.9   county auditors shall determine the initial tax rate for each 
 17.10  school district for the general education levy certified under 
 17.11  section 124A.23, subdivision 2 or 3.  That rate plus the school 
 17.12  district's education homestead credit tax rate adjustment under 
 17.13  section 275.08, subdivision 1e, shall be the general education 
 17.14  homestead credit local tax rate for the district.  The auditor 
 17.15  shall then determine a general education homestead credit for 
 17.16  each homestead within the county equal to 32 52 percent of the 
 17.17  general education homestead credit local tax rate times the net 
 17.18  tax capacity of the homestead for the taxes payable year.  The 
 17.19  amount of general education homestead credit for a homestead may 
 17.20  not exceed $225 $290.  In the case of an agricultural homestead, 
 17.21  only the net tax capacity of the house, garage, and surrounding 
 17.22  one acre of land shall be used in determining the property's 
 17.23  education homestead credit. 
 17.24     Sec. 12.  Minnesota Statutes 1996, section 273.1398, 
 17.25  subdivision 2, is amended to read: 
 17.26     Subd. 2.  [HOMESTEAD AND AGRICULTURAL CREDIT AID.] 
 17.27  Homestead and agricultural credit aid for each unique taxing 
 17.28  jurisdiction equals the product of (1) the homestead and 
 17.29  agricultural credit aid base, and (2) the growth adjustment 
 17.30  factor, plus the net tax capacity adjustment and the fiscal 
 17.31  disparity adjustment.  Beginning with homestead and agricultural 
 17.32  credit aid payable in 2000, each county that receives an amount 
 17.33  in calendar year 2000 under section 477A.0122 as a result of the 
 17.34  appropriation in section 477A.03, subdivision 2, paragraph (c), 
 17.35  clause (3), shall have its homestead and agricultural credit aid 
 17.36  permanently reduced by an equal amount. 
 18.1      Sec. 13.  Minnesota Statutes 1996, section 477A.0122, 
 18.2   subdivision 6, is amended to read: 
 18.3      Subd. 6.  [REPORT.] On or before March 15 of the year 
 18.4   following the year in which the distributions under this section 
 18.5   are received, each county shall file with the commissioner of 
 18.6   revenue and commissioner of human services a report on prior 
 18.7   year expenditures for out-of-home placement and family 
 18.8   preservation, including expenditures under this section.  For 
 18.9   the human services programs specified in this section, the 
 18.10  commissioner of revenue and commissioner of human services, in 
 18.11  consultation with representatives of county governments, shall 
 18.12  make a recommendation to the 1999 legislature as to which 
 18.13  current reporting requirements imposed on county governments, if 
 18.14  any, may be eliminated, replaced, or consolidated on the report 
 18.15  established by this section.  For aid payable in calendar year 
 18.16  2000 and thereafter, each county shall provide information on 
 18.17  the amount of state aid, local property tax revenue, and federal 
 18.18  aid expended by that county on the programs specified in this 
 18.19  section using the consolidated financial report recommended by 
 18.20  the commissioner of revenue and commissioner of human services 
 18.21  under this subdivision. 
 18.22     Sec. 14.  Minnesota Statutes 1996, section 477A.03, 
 18.23  subdivision 2, is amended to read: 
 18.24     Subd. 2.  [ANNUAL APPROPRIATION.] (a) A sum sufficient to 
 18.25  discharge the duties imposed by sections 477A.011 to 477A.014 is 
 18.26  annually appropriated from the general fund to the commissioner 
 18.27  of revenue.  For aids payable in 1996 and thereafter, the total 
 18.28  aids paid under sections section 477A.013, subdivision 9, and 
 18.29  477A.0122 are the amounts certified to be paid in the previous 
 18.30  year, adjusted for inflation as provided under subdivision 
 18.31  3.  Aid payments to counties under section 477A.0121 are limited 
 18.32  to $20,265,000 in 1996.  Aid payments to counties under section 
 18.33  477A.0121 are limited to $27,571,625 in 1997.  
 18.34     (b) For aid payable in 1998 and thereafter, the total aids 
 18.35  paid under section 477A.0121 are the amounts certified to be 
 18.36  paid in the previous year, adjusted for inflation as provided 
 19.1   under subdivision 3. 
 19.2      (c) For aid payable in 2000, the total aid payments under 
 19.3   section 477A.0122 are the sum of:  
 19.4      (1) the amounts certified to be paid in the previous year, 
 19.5   adjusted for inflation as provided in subdivision 3; plus 
 19.6      (2) $20,000,000; plus 
 19.7      (3) $10,000,000.  
 19.8      For aid payable in 2001 and thereafter, the total aid 
 19.9   payments under section 477A.0122 are the amounts certified to be 
 19.10  paid in the previous year, adjusted for inflation as provided in 
 19.11  subdivision 3. 
 19.12     Sec. 15.  [APPROPRIATIONS.] 
 19.13     (a) [SHIFT RECOGNITION APPROPRIATION.] In addition to any 
 19.14  amounts appropriated by other law, $3,900,000 is appropriated to 
 19.15  the commissioner of children, families, and learning in fiscal 
 19.16  year 1999 to fund early recognition of education aid. 
 19.17     (b) [EDUCATION LEVY REDUCTION APPROPRIATION.] In addition 
 19.18  to any amount appropriated by other law, $55,000,000 is 
 19.19  appropriated to the commissioner of children, families, and 
 19.20  learning in fiscal year 2000 and thereafter to fund a reduction 
 19.21  in the statewide general education property tax levy. 
 19.22     Sec. 16.  [INSTRUCTION TO REVISOR.] 
 19.23     In the next edition of the Minnesota Statutes, the revisor 
 19.24  of statutes shall correct references to class 4e properties so 
 19.25  that the statutes properly reflect the changes made to Minnesota 
 19.26  Statutes, section 273.13, by this article. 
 19.27     Sec. 17.  [REPEALER.] 
 19.28     Minnesota Statutes 1996, sections 273.11, subdivisions 6a 
 19.29  and 15; 273.124, subdivision 17; and 273.1315, are repealed. 
 19.30     Sec. 18.  [EFFECTIVE DATE.] 
 19.31     Sections 1 to 11, and 17 are effective for taxes payable in 
 19.32  1999 and thereafter.  Sections 12 and 14 are effective for aid 
 19.33  payable in 2000 and thereafter.  Sections 15 and 16 are 
 19.34  effective the day following final enactment. 
 19.35                             ARTICLE 2
 19.36                      USE OF SURPLUS REVENUES
 20.1      Section 1.  Minnesota Statutes 1997 Supplement, section 
 20.2   16A.152, subdivision 2, is amended to read: 
 20.3      Subd. 2.  [ADDITIONAL REVENUES; PRIORITY.] (a) If on the 
 20.4   basis of a forecast of general fund revenues and expenditures 
 20.5   after November 1 in an odd-numbered each year, the commissioner 
 20.6   of finance determines that there will be a positive unrestricted 
 20.7   budgetary general fund balance at the close of the biennium, the 
 20.8   commissioner of finance must allocate money as follows: 
 20.9      (a) first, to the budget reserve until the total amount in 
 20.10  the account equals $522,000,000; then. 
 20.11     (b) If the commissioner estimates that a positive 
 20.12  unrestricted budgetary balance remains after the allocation 
 20.13  under paragraph (a), the rest of the unrestricted balance must 
 20.14  be divided, based on the commissioner's best judgment, into two 
 20.15  shares: 
 20.16     (1) a structural balance resulting from changes in revenues 
 20.17  and spending that will continue on an annual or biennial basis 
 20.18  into the reasonably foreseeable future; and 
 20.19     (2) a one-time budgetary balance that is unlikely to 
 20.20  continue beyond the current fiscal year or biennium. 
 20.21     (c) An amount equal to the portion the commissioner 
 20.22  estimates is a one-time budgetary balance must be deposited in 
 20.23  the property tax rebate account under section 16A.1522. 
 20.24     (d) For a forecast in an odd-numbered year, an amount equal 
 20.25  to the portion the commissioner estimates is a structural 
 20.26  balance is allocated as follows: 
 20.27     (b) (1) 60 percent to the property tax reform account 
 20.28  established in section 16A.1521; and 
 20.29     (c) (2) 40 percent is an unrestricted balance in the 
 20.30  general fund. 
 20.31     (e) For a forecast in an even-numbered year, an amount 
 20.32  equal to the portion the commissioner estimates is a structural 
 20.33  balance is allocated to the income tax reserve account under 
 20.34  section 16A.1523. 
 20.35     (f) The amounts necessary to meet the requirements of this 
 20.36  section are appropriated from the general fund within two weeks 
 21.1   after the forecast is released. 
 21.2      Sec. 2.  [16A.1522] [PROPERTY TAX REBATE ACCOUNT.] 
 21.3      (a) A property tax rebate account is established in the 
 21.4   general fund. 
 21.5      (b) Amounts in the account are available for the payment of 
 21.6   property tax rebates under section 290.0675. 
 21.7      (c) When the amount in the account exceeds $50,000,000, the 
 21.8   commissioner shall certify the amount available to the 
 21.9   commissioner of revenue for payment of a property tax rebate 
 21.10  under section 290.0675. 
 21.11     Sec. 3.  [16A.1523] [INCOME TAX RESERVE ACCOUNT.] 
 21.12     (a) An income tax reserve account is established in the 
 21.13  general fund. 
 21.14     (b) Amounts in the account are only available for income 
 21.15  tax rate reductions under section 290.06, subdivision 2g. 
 21.16     (c) The balance in the account does not cancel and remains 
 21.17  in the account until used for individual income tax rate 
 21.18  reductions under section 290.06, subdivision 2g. 
 21.19     (d) If the commissioner determines that the balance in the 
 21.20  account will sustain a permanent reduction in income tax 
 21.21  revenues resulting from a one-tenth of a percentage point 
 21.22  reduction in each of the individual income tax rates, the 
 21.23  commissioner shall certify to the commissioner of revenue the 
 21.24  number of units of rate reduction that are sustainable.  Each 
 21.25  one-tenth percentage point reduction in the individual income 
 21.26  tax rates is a unit. 
 21.27     Sec. 4.  Minnesota Statutes 1996, section 290.06, is 
 21.28  amended by adding a subdivision to read: 
 21.29     Subd. 2g.  [CONTINGENT RATE REDUCTION.] If the commissioner 
 21.30  receives certification from the commissioner of finance that the 
 21.31  balance in the income tax reserve account under section 16A.1523 
 21.32  will sustain a permanent reduction in the rates, each of the 
 21.33  rates in subdivision 2c is reduced by one-tenth of a percentage 
 21.34  point for each unit the commissioner of finance certifies under 
 21.35  section 16A.1523.  The rate reduction takes effect for the first 
 21.36  taxable year beginning after the certification is made.  The 
 22.1   commissioner must adjust the withholding tables, if the rate 
 22.2   reduction exceeds two-tenths of a percentage point. 
 22.3      Sec. 5.  [290.0675] [PROPERTY TAX REBATE; CREDIT ALLOWED.] 
 22.4      Subdivision 1.  [CREDIT ALLOWED.] If an amount has been 
 22.5   certified to the commissioner of revenue under section 16A.1522, 
 22.6   a credit is allowed against the tax imposed under this chapter 
 22.7   to an individual for the qualified property tax paid before 
 22.8   January 1 of the current calendar year.  The amount of the 
 22.9   credit is equal to the qualified property tax multiplied by a 
 22.10  percentage determined by the commissioner of revenue.  The 
 22.11  commissioner of revenue shall determine the percentage so that 
 22.12  the sum of the credits allowed under this section equals the 
 22.13  amount available from the property tax reform account as 
 22.14  certified by the commissioner of finance under subdivision 1. 
 22.15     Subd. 2.  [DEFINITIONS.] (a) For property owned and 
 22.16  occupied by the individual during the taxable year, "qualified 
 22.17  property tax" means property taxes payable as defined in section 
 22.18  290A.03, subdivision 13, payable in the taxable year, except the 
 22.19  requirement that the taxpayer own and occupy the property on 
 22.20  January 2 of the taxable year does not apply.  The property tax 
 22.21  must be deductible under section 164 of the Internal Revenue 
 22.22  Code to qualify. 
 22.23     (b) For a renter, "qualified property tax" means the amount 
 22.24  of rent constituting property taxes under section 290A.03, 
 22.25  subdivision 11, based on rent paid in the taxable year.  If two 
 22.26  or more renters could be claimants under chapter 290A with 
 22.27  regard to the rent constituting property taxes, the rules under 
 22.28  section 290A.03, subdivision 8, paragraph (f), apply to 
 22.29  determine the amount of the credit for the individual. 
 22.30     (c) For an individual who both owned and rented principal 
 22.31  residences in the taxable year, "qualified property tax" means 
 22.32  the sum of the amounts under paragraphs (a) and (b). 
 22.33     (d) "Individual" excludes a dependent as defined in 
 22.34  sections 151 and 152 of the Internal Revenue Code, disregarding 
 22.35  section 152(b)(3). 
 22.36     Subd. 3.  [CREDIT IS REFUNDABLE.] If the amount of the 
 23.1   credit under this section exceeds the taxpayer's tax liability 
 23.2   under this chapter, the commissioner shall refund the excess. 
 23.3      Subd. 4.  [CLAIM.] To claim a credit under this section, 
 23.4   the taxpayer must attach a copy of the property tax statement 
 23.5   and certificate of rent paid, as applicable, and provide any 
 23.6   additional information the commissioner requires. 
 23.7      Subd. 5.  [SUBJECT TO OTHER PROVISIONS.] The credit under 
 23.8   this section is subject to chapter 270A and any other provision 
 23.9   applicable to refunds under this chapter. 
 23.10     Subd. 6.  [APPROPRIATION.] An amount sufficient to pay 
 23.11  refunds under this section is appropriated to the commissioner 
 23.12  from the general fund. 
 23.13     Sec. 6.  [1998 PROPERTY TAX REBATE.] 
 23.14     Subdivision 1.  [REBATE ALLOWED.] A credit is allowed 
 23.15  against the tax imposed under Minnesota Statutes, chapter 290, 
 23.16  to an individual equal to 30 percent of the qualified property 
 23.17  tax paid before January 1, 1999, for taxes assessed in 1997.  
 23.18     Subd. 2.  [HOMEOWNERS.] For property owned and occupied by 
 23.19  the individual during 1998, qualified property tax means 
 23.20  property taxes payable as defined in Minnesota Statutes, section 
 23.21  290A.03, subdivision 13, assessed in 1997 and payable in 1998, 
 23.22  except the requirement that the taxpayer own and occupy the 
 23.23  property on January 2, 1998, does not apply.  The property tax 
 23.24  must be deductible under section 164 of the Internal Revenue 
 23.25  Code to qualify. 
 23.26     Subd. 3.  [RENTERS.] For a renter, the qualified property 
 23.27  tax means the amount of rent constituting property taxes under 
 23.28  Minnesota Statutes, section 290A.03, subdivision 11, based on 
 23.29  rent paid in 1998.  If two or more renters could be claimants 
 23.30  under Minnesota Statutes, chapter 290A, with regard to the rent 
 23.31  constituting property taxes, the rules under Minnesota Statutes, 
 23.32  section 290A.03, subdivision 8, paragraph (f), apply to 
 23.33  determine the amount of the credit for the individual. 
 23.34     Subd. 4.  [COMBINED RENTER AND HOMEOWNER.] For an 
 23.35  individual who both owned and rented principal residences in 
 23.36  calendar year 1998, qualified taxes are the sum of the amounts 
 24.1   under subdivisions 2 and 3. 
 24.2      Subd. 5.  [DEFINITIONS.] (a) For purposes of this section, 
 24.3   the following terms have the meanings given. 
 24.4      (b) "Individual" excludes a dependent as defined in 
 24.5   sections 151 and 152 of the Internal Revenue Code, disregarding 
 24.6   section 152(b)(3). 
 24.7      (c) "Internal Revenue Code" means the Internal Revenue Code 
 24.8   of 1986, as amended through December 31, 1998. 
 24.9      Subd. 6.  [ADMINISTRATIVE PROVISIONS.] (a) If the amount of 
 24.10  the credit under this section exceeds the taxpayer's tax 
 24.11  liability under Minnesota Statutes, chapter 290, the 
 24.12  commissioner shall refund the excess. 
 24.13     (b) To claim a credit under this section, the taxpayer must 
 24.14  attach a copy of the property tax statement and certificate of 
 24.15  rent paid, as applicable, and provide any additional information 
 24.16  the commissioner requires. 
 24.17     (c) An amount sufficient to pay refunds under this section 
 24.18  is appropriated to the commissioner from the general fund. 
 24.19     (d) This credit applies to taxable years beginning after 
 24.20  December 31, 1997, and before January 1, 1999. 
 24.21     (e) Payment of the credit under this section is subject to 
 24.22  Minnesota Statutes, chapter 270A, and any other provision 
 24.23  applicable to refunds under Minnesota Statutes, chapter 290. 
 24.24     Subd. 7.  [NOVEMBER FORECAST ADJUSTMENT.] The rebate under 
 24.25  subdivision 1 must be increased, if the amount in the property 
 24.26  tax rebate account under section 16A.1522 after the November 
 24.27  1998 forecast exceeds $25,000,000.  The rate of the rebate is 
 24.28  increased by one percentage point for each whole amount of 
 24.29  $25,000,000 that is in the account after the November 1998 
 24.30  forecast. 
 24.31     Subd. 8.  [EFFECTIVE DATE.] This section is effective for 
 24.32  taxable years beginning after December 31, 1997, and before 
 24.33  January 1, 1999. 
 24.34     Sec. 7.  [EFFECTIVE DATE.] 
 24.35     Section 5 is effective beginning with property tax rebates 
 24.36  for taxes payable and rent paid in 1999, for taxable years 
 25.1   beginning after December 31, 1998. 
 25.2                              ARTICLE 3
 25.3                              INCOME TAX
 25.4      Section 1.  Minnesota Statutes 1997 Supplement, section 
 25.5   290.01, subdivision 19b, is amended to read: 
 25.6      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
 25.7   individuals, estates, and trusts, there shall be subtracted from 
 25.8   federal taxable income: 
 25.9      (1) interest income on obligations of any authority, 
 25.10  commission, or instrumentality of the United States to the 
 25.11  extent includable in taxable income for federal income tax 
 25.12  purposes but exempt from state income tax under the laws of the 
 25.13  United States; 
 25.14     (2) if included in federal taxable income, the amount of 
 25.15  any overpayment of income tax to Minnesota or to any other 
 25.16  state, for any previous taxable year, whether the amount is 
 25.17  received as a refund or as a credit to another taxable year's 
 25.18  income tax liability; 
 25.19     (3) the amount paid to others, less the credit allowed 
 25.20  under section 290.0674, not to exceed $1,625 for each dependent 
 25.21  in grades kindergarten to 6 and $2,500 for each dependent in 
 25.22  grades 7 to 12, for tuition, textbooks, and transportation of 
 25.23  each dependent in attending an elementary or secondary school 
 25.24  situated in Minnesota, North Dakota, South Dakota, Iowa, or 
 25.25  Wisconsin, wherein a resident of this state may legally fulfill 
 25.26  the state's compulsory attendance laws, which is not operated 
 25.27  for profit, and which adheres to the provisions of the Civil 
 25.28  Rights Act of 1964 and chapter 363.  For the purposes of this 
 25.29  clause, "tuition" includes fees or tuition as defined in section 
 25.30  290.0674, subdivision 1, clause (1).  As used in this clause, 
 25.31  "textbooks" includes books and other instructional materials and 
 25.32  equipment used in elementary and secondary schools in teaching 
 25.33  only those subjects legally and commonly taught in public 
 25.34  elementary and secondary schools in this state.  Equipment 
 25.35  expenses qualifying for deduction includes expenses as defined 
 25.36  and limited in section 290.0674, subdivision 1, clause (3).  
 26.1   "Textbooks" does not include instructional books and materials 
 26.2   used in the teaching of religious tenets, doctrines, or worship, 
 26.3   the purpose of which is to instill such tenets, doctrines, or 
 26.4   worship, nor does it include books or materials for, or 
 26.5   transportation to, extracurricular activities including sporting 
 26.6   events, musical or dramatic events, speech activities, driver's 
 26.7   education, or similar programs; 
 26.8      (4) contributions made in taxable years beginning after 
 26.9   December 31, 1981, and before January 1, 1985, to the extent 
 26.10  included in federal taxable income, distributions from a 
 26.11  qualified governmental pension plan, an individual retirement 
 26.12  account, simplified employee pension, or qualified plan covering 
 26.13  a self-employed person that represent a return of contributions 
 26.14  that were included in Minnesota gross income in the taxable year 
 26.15  for which the contributions were made but were deducted or were 
 26.16  not included in the computation of federal adjusted gross 
 26.17  income, less any amount subtracted as a distribution under this 
 26.18  subdivision or a predecessor provision in taxable years that 
 26.19  began before January 1, 1998.  The distribution shall be 
 26.20  allocated first to return of contributions until the 
 26.21  contributions included in Minnesota gross income have been 
 26.22  exhausted.  This subtraction applies only to contributions made 
 26.23  in a taxable year prior to 1985 for taxable years beginning 
 26.24  after December 31, 1997, and before January 1, 1999; 
 26.25     (5) income as provided under section 290.0802; 
 26.26     (6) the amount of unrecovered accelerated cost recovery 
 26.27  system deductions allowed under subdivision 19g; 
 26.28     (7) to the extent included in federal adjusted gross 
 26.29  income, income realized on disposition of property exempt from 
 26.30  tax under section 290.491; 
 26.31     (8) to the extent not deducted in determining federal 
 26.32  taxable income, the amount paid for health insurance of 
 26.33  self-employed individuals as determined under section 162(l) of 
 26.34  the Internal Revenue Code, except that the 25 percent limit does 
 26.35  not apply.  If the taxpayer deducted insurance payments under 
 26.36  section 213 of the Internal Revenue Code of 1986, the 
 27.1   subtraction under this clause must be reduced by the lesser of: 
 27.2      (i) the total itemized deductions allowed under section 
 27.3   63(d) of the Internal Revenue Code, less state, local, and 
 27.4   foreign income taxes deductible under section 164 of the 
 27.5   Internal Revenue Code and the standard deduction under section 
 27.6   63(c) of the Internal Revenue Code; or 
 27.7      (ii) the lesser of (A) the amount of insurance qualifying 
 27.8   as "medical care" under section 213(d) of the Internal Revenue 
 27.9   Code to the extent not deducted under section 162(1) of the 
 27.10  Internal Revenue Code or excluded from income or (B) the total 
 27.11  amount deductible for medical care under section 213(a); 
 27.12     (9) the exemption amount allowed under Laws 1995, chapter 
 27.13  255, article 3, section 2, subdivision 3; 
 27.14     (10) to the extent included in federal taxable income, 
 27.15  postservice benefits for youth community service under section 
 27.16  121.707 for volunteer service under United States Code, title 
 27.17  42, section 5011(d), as amended; and 
 27.18     (11) the amount of income or gain included in federal 
 27.19  taxable income under section 1366 of the Internal Revenue Code 
 27.20  flowing from a corporation that has a valid election in effect 
 27.21  for the taxable year under section 1362 of the Internal Revenue 
 27.22  Code which is not allowed to be an "S" corporation under section 
 27.23  290.9725. 
 27.24     Sec. 2.  Minnesota Statutes 1996, section 290.01, 
 27.25  subdivision 19e, is amended to read: 
 27.26     Subd. 19e.  [DEPRECIATION MODIFICATIONS FOR CORPORATIONS.] 
 27.27  In the case of corporations, a modification shall be made for 
 27.28  the accelerated cost recovery system.  The allowable deduction 
 27.29  for the accelerated cost recovery system is the same amount as 
 27.30  provided in section 168 of the Internal Revenue Code with the 
 27.31  following modifications.  The modifications apply to taxable 
 27.32  years beginning after December 31, 1986, and to property for 
 27.33  which deductions under the Tax Reform Act of 1986, Public Law 
 27.34  Number 99-514, are elected or apply.  The modifications in 
 27.35  paragraphs (a) and (c) do not apply to taxable years beginning 
 27.36  after December 31, 1997. 
 28.1      (a) For property placed in service after December 31, 1980, 
 28.2   and before January 1, 1987, 40 percent of the allowance pursuant 
 28.3   to section 168 of the Internal Revenue Code of 1954, as amended 
 28.4   through December 31, 1985, for 15-, 18-, or 19-year real 
 28.5   property shall not be allowed and for all other property 20 
 28.6   percent shall not be allowed.  
 28.7      (b) For property placed in service after December 31, 1987, 
 28.8   no modification shall be made. 
 28.9      (c) For property placed in service after July 31, 1986, and 
 28.10  before January 1, 1987, for which the taxpayer elects the 
 28.11  deduction pursuant to section 203 of the Tax Reform Act of 1986, 
 28.12  Public Law Number 99-514, and for property placed in service 
 28.13  after December 31, 1986, and before January 1, 1988, 15 percent 
 28.14  of the allowance pursuant to section 168 of the Internal Revenue 
 28.15  Code shall not be allowed.  
 28.16     (d) For property placed in service after December 31, 1980, 
 28.17  and before January 1, 1987, for which the taxpayer elects to use 
 28.18  the straight line method provided in section 168(b)(3), (f)(12), 
 28.19  or (j)(1) or a method provided in section 168(e)(2) of the 
 28.20  Internal Revenue Code, as amended through December 31, 1986, but 
 28.21  excluding property for which the taxpayer elects the deduction 
 28.22  pursuant to section 203 of the Tax Reform Act of 1986, Public 
 28.23  Law Number 99-514, the modifications provided in paragraph (a) 
 28.24  do not apply. 
 28.25     (e) For taxable years beginning before January 1, 1998, for 
 28.26  property subject to the modifications contained in paragraphs 
 28.27  (a) and (c) and Minnesota Statutes 1986, section 290.09, 
 28.28  subdivision 7, clause (c), the following modification shall be 
 28.29  made after the entire amount of the allowable deduction has been 
 28.30  allowed for federal tax purposes for that property under the 
 28.31  provisions of section 168 of the Internal Revenue Code.  The 
 28.32  remaining depreciable basis in those assets for Minnesota 
 28.33  purposes, including the amount of any basis reduction to reflect 
 28.34  the investment tax credit for federal purposes under sections 
 28.35  48(q) and 49(d) of the Internal Revenue Code, shall be a 
 28.36  depreciation allowance computed using the straight line method 
 29.1   over the following number of years: 
 29.2      (1) three-year property, one year; 
 29.3      (2) five-year and seven-year property, two years; 
 29.4      (3) ten-year property, five years; and 
 29.5      (4) all other property, seven years. 
 29.6      (f) For taxable years beginning after December 31, 1997, 
 29.7   the amount of any remaining modification made under paragraph 
 29.8   (a) or (c), or Minnesota Statutes 1986, section 290.09, 
 29.9   subdivision 7, clause (c), not previously deducted under 
 29.10  paragraph (e), including the amount of any basis reduction to 
 29.11  reflect the investment tax credit for federal purposes under 
 29.12  sections 48(q) and 49(d) of the Internal Revenue Code, is a 
 29.13  depreciation allowance in the first taxable year beginning after 
 29.14  December 31, 1997. 
 29.15     (g) For taxable years beginning before January 1, 1998, and 
 29.16  for property placed in service after December 31, 1987, the 
 29.17  remaining depreciable basis for Minnesota purposes that is 
 29.18  attributable to the basis reduction for federal purposes to 
 29.19  reflect the investment tax credit under sections 48(q) and 49(d) 
 29.20  of the Internal Revenue Code, shall be allowed as a deduction in 
 29.21  the first taxable year after the entire amount of the allowable 
 29.22  deduction for that property under the provisions of section 168 
 29.23  of the Internal Revenue Code, has been allowed, except that 
 29.24  where the straight line method provided in section 168(b)(3) is 
 29.25  used, the deduction provided in this clause shall be allowed in 
 29.26  the last taxable year in which an allowance for depreciation is 
 29.27  allowed for that property.  
 29.28     (g) (h) For qualified timber property for which the 
 29.29  taxpayer made an election under section 194 of the Internal 
 29.30  Revenue Code, the remaining depreciable basis for Minnesota 
 29.31  purposes is allowed as a deduction in the first taxable year 
 29.32  after the entire allowable deduction has been allowed for 
 29.33  federal tax purposes. 
 29.34     (h) (i) The basis of property to which section 168 of the 
 29.35  Internal Revenue Code applies is its basis as provided in this 
 29.36  chapter including the modifications provided in this subdivision 
 30.1   and in Minnesota Statutes 1986, section 290.09, subdivision 7, 
 30.2   paragraph (c).  The recapture tax provisions provided in 
 30.3   sections 1245 and 1250 of the Internal Revenue Code apply but 
 30.4   must be calculated using the basis provided in the preceding 
 30.5   sentence.  
 30.6      (i) (j) The basis of an asset acquired in an exchange of 
 30.7   assets, including an involuntary conversion, is the same as its 
 30.8   federal basis under the provisions of the Internal Revenue Code, 
 30.9   except that the difference in basis due to the modifications in 
 30.10  this subdivision and in Minnesota Statutes 1986, section 290.09, 
 30.11  subdivision 7, paragraph (c), is a deduction as provided in 
 30.12  paragraph (e). 
 30.13     Sec. 3.  Minnesota Statutes 1997 Supplement, section 
 30.14  290.01, subdivision 19g, is amended to read: 
 30.15     Subd. 19g.  [ACRS MODIFICATION FOR INDIVIDUALS.] (a) An 
 30.16  individual is allowed a subtraction from federal taxable income 
 30.17  for the amount of accelerated cost recovery system deductions 
 30.18  that were added to federal adjusted gross income in computing 
 30.19  Minnesota gross income for taxable year 1981, 1982, 1983, or 
 30.20  1984 and that were not deducted in a later taxable year 
 30.21  beginning before January 1, 1998.  The deduction is 
 30.22  allowed beginning in the first taxable year after the entire 
 30.23  allowable deduction for the property has been allowed under 
 30.24  federal law or the first taxable year beginning after December 
 30.25  31, 1987, whichever is later beginning after December 31, 1997.  
 30.26  The amount of the deduction is computed by deducting equals the 
 30.27  amount added to federal adjusted gross income in computing 
 30.28  Minnesota gross income, (less any: 
 30.29     (1) deduction allowed under Minnesota Statutes 1986, 
 30.30  section 290.01, subdivision 20f) in equal annual amounts over 
 30.31  five years; and 
 30.32     (2) amount deducted under this subdivision in a taxable 
 30.33  year beginning before January 1, 1998. 
 30.34  This paragraph does not apply to property that was sold or 
 30.35  exchanged in a taxable year beginning before January 1, 1999. 
 30.36     (b) In the event of a sale or exchange of the 
 31.1   property occurring during a taxable year beginning after 
 31.2   December 31, 1997, and before January 1, 1999, a deduction is 
 31.3   allowed equal to the lesser of (1) the remaining amount that 
 31.4   would be allowed as a deduction under paragraph (a) or (2) the 
 31.5   amount of capital gain recognized and the amount of cost 
 31.6   recovery deductions that were subject to recapture under 
 31.7   sections 1245 and 1250 of the Internal Revenue Code of 1986 for 
 31.8   the taxable year. 
 31.9      (c) In the case of a corporation treated as an "S" 
 31.10  corporation under section 290.9725, the amount of the 
 31.11  corporation's cost recovery allowances that have been deducted 
 31.12  in computing federal tax, but have been added to federal taxable 
 31.13  income or not deducted in computing tax under this chapter as a 
 31.14  result of the application of subdivision 19e, paragraphs (a) and 
 31.15  (c) or Minnesota Statutes 1986, section 290.09, subdivision 7, 
 31.16  is allowed as a deduction to the shareholders under the 
 31.17  provisions of paragraph (a). 
 31.18     Sec. 4.  Minnesota Statutes 1997 Supplement, section 
 31.19  290.0674, subdivision 2, is amended to read: 
 31.20     Subd. 2.  [LIMITATIONS.] (a) For claimants with income not 
 31.21  greater than $33,500, the maximum credit allowed is $1,000 per 
 31.22  child and $2,000 per family.  The maximum credit per child is 
 31.23  reduced by $1 for each $4 of income over $30,500, and the 
 31.24  maximum credit per family is reduced by $2 for each $4 of income 
 31.25  over $30,500.  No credit is allowed for education-related 
 31.26  expenses for claimants with income greater than $33,500 $34,500. 
 31.27  For purposes of this section "income" has the meaning given in 
 31.28  section 290.067, subdivision 2a.  In the case of a married 
 31.29  claimant, a credit is not allowed unless a joint income 
 31.30  tax separate return is filed, the maximum credit is $500 per 
 31.31  child and $1,000 per return. 
 31.32     (b) For a nonresident or part-year resident, the credit 
 31.33  determined under subdivision 1 and the maximum credit amount in 
 31.34  paragraph (a) must be allocated using the percentage calculated 
 31.35  in section 290.06, subdivision 2c, paragraph (e). 
 31.36     Sec. 5.  Laws 1997, chapter 231, article 5, section 20, is 
 32.1   amended to read: 
 32.2      Sec. 20.  [EFFECTIVE DATE.] 
 32.3      Sections 1, 5, 6, 11, 16, and 18 are effective the day 
 32.4   following final enactment.  
 32.5      Sections 2 to 4, and 9 are effective for taxable years 
 32.6   beginning after December 31, 1996. 
 32.7      Section 7 is effective for taxable years beginning after 
 32.8   December 31, 1998 1997. 
 32.9      Section 8 is effective for tax credit certificates issued 
 32.10  after December 31, 1996, and used in taxable years beginning 
 32.11  after December 31, 1996. 
 32.12     Section 10 is effective January 1, 1998. 
 32.13     Sections 12, 13, 15, and 19 are effective beginning for 
 32.14  property tax refunds based on rent paid after December 31, 1996. 
 32.15     Section 17 is effective April 16, 1997. 
 32.16     Sec. 6.  [EFFECTIVE DATE.] 
 32.17     Sections 1 to 3 are effective for taxable years beginning 
 32.18  after December 31, 1997, and before January 1, 1999. 
 32.19     Section 4 is effective for taxable years beginning after 
 32.20  December 31, 1997. 
 32.21     Section 5 is effective the day following final enactment. 
 32.22                             ARTICLE 4
 32.23                           FEDERAL UPDATE
 32.24     Section 1.  Minnesota Statutes 1997 Supplement, section 
 32.25  289A.02, subdivision 7, is amended to read: 
 32.26     Subd. 7.  [INTERNAL REVENUE CODE.] Unless specifically 
 32.27  defined otherwise, "Internal Revenue Code" means the Internal 
 32.28  Revenue Code of 1986, as amended through December 31, 1996, and 
 32.29  includes the provisions of section 1(a) and (b) of Public Law 
 32.30  Number 104-117 1997. 
 32.31     Sec. 2.  Minnesota Statutes 1997 Supplement, section 
 32.32  290.01, subdivision 19, is amended to read: 
 32.33     Subd. 19.  [NET INCOME.] The term "net income" means the 
 32.34  federal taxable income, as defined in section 63 of the Internal 
 32.35  Revenue Code of 1986, as amended through the date named in this 
 32.36  subdivision, incorporating any elections made by the taxpayer in 
 33.1   accordance with the Internal Revenue Code in determining federal 
 33.2   taxable income for federal income tax purposes, and with the 
 33.3   modifications provided in subdivisions 19a to 19f. 
 33.4      In the case of a regulated investment company or a fund 
 33.5   thereof, as defined in section 851(a) or 851(h) of the Internal 
 33.6   Revenue Code, federal taxable income means investment company 
 33.7   taxable income as defined in section 852(b)(2) of the Internal 
 33.8   Revenue Code, except that:  
 33.9      (1) the exclusion of net capital gain provided in section 
 33.10  852(b)(2)(A) of the Internal Revenue Code does not apply; 
 33.11     (2) the deduction for dividends paid under section 
 33.12  852(b)(2)(D) of the Internal Revenue Code must be applied by 
 33.13  allowing a deduction for capital gain dividends and 
 33.14  exempt-interest dividends as defined in sections 852(b)(3)(C) 
 33.15  and 852(b)(5) of the Internal Revenue Code; and 
 33.16     (3) the deduction for dividends paid must also be applied 
 33.17  in the amount of any undistributed capital gains which the 
 33.18  regulated investment company elects to have treated as provided 
 33.19  in section 852(b)(3)(D) of the Internal Revenue Code.  
 33.20     The net income of a real estate investment trust as defined 
 33.21  and limited by section 856(a), (b), and (c) of the Internal 
 33.22  Revenue Code means the real estate investment trust taxable 
 33.23  income as defined in section 857(b)(2) of the Internal Revenue 
 33.24  Code.  
 33.25     The net income of a designated settlement fund as defined 
 33.26  in section 468B(d) of the Internal Revenue Code means the gross 
 33.27  income as defined in section 468B(b) of the Internal Revenue 
 33.28  Code. 
 33.29     The Internal Revenue Code of 1986, as amended through 
 33.30  December 31, 1986, shall be in effect for taxable years 
 33.31  beginning after December 31, 1986.  The provisions of sections 
 33.32  10104, 10202, 10203, 10204, 10206, 10212, 10221, 10222, 10223, 
 33.33  10226, 10227, 10228, 10611, 10631, 10632, and 10711 of the 
 33.34  Omnibus Budget Reconciliation Act of 1987, Public Law Number 
 33.35  100-203, the provisions of sections 1001, 1002, 1003, 1004, 
 33.36  1005, 1006, 1008, 1009, 1010, 1011, 1011A, 1011B, 1012, 1013, 
 34.1   1014, 1015, 1018, 2004, 3041, 4009, 6007, 6026, 6032, 6137, 
 34.2   6277, and 6282 of the Technical and Miscellaneous Revenue Act of 
 34.3   1988, Public Law Number 100-647, the provisions of sections 
 34.4   7811, 7816, and 7831 of the Omnibus Budget Reconciliation Act of 
 34.5   1989, Public Law Number 101-239, and the provisions of sections 
 34.6   1305, 1704(r), and 1704(e)(1) of the Small Business Job 
 34.7   Protection Act, Public Law Number 104-188, and the provisions of 
 34.8   sections 975 and 1604(d)(2) and (e) of the Taxpayer Relief Act 
 34.9   of 1997, Public Law Number 105-34, shall be effective at the 
 34.10  time they become effective for federal income tax purposes.  
 34.11     The Internal Revenue Code of 1986, as amended through 
 34.12  December 31, 1987, shall be in effect for taxable years 
 34.13  beginning after December 31, 1987.  The provisions of sections 
 34.14  4001, 4002, 4011, 5021, 5041, 5053, 5075, 6003, 6008, 6011, 
 34.15  6030, 6031, 6033, 6057, 6064, 6066, 6079, 6130, 6176, 6180, 
 34.16  6182, 6280, and 6281 of the Technical and Miscellaneous Revenue 
 34.17  Act of 1988, Public Law Number 100-647, the provisions of 
 34.18  sections 7815 and 7821 of the Omnibus Budget Reconciliation Act 
 34.19  of 1989, Public Law Number 101-239, and the provisions of 
 34.20  section 11702 of the Revenue Reconciliation Act of 1990, Public 
 34.21  Law Number 101-508, shall become effective at the time they 
 34.22  become effective for federal tax purposes.  
 34.23     The Internal Revenue Code of 1986, as amended through 
 34.24  December 31, 1988, shall be in effect for taxable years 
 34.25  beginning after December 31, 1988.  The provisions of sections 
 34.26  7101, 7102, 7104, 7105, 7201, 7202, 7203, 7204, 7205, 7206, 
 34.27  7207, 7210, 7211, 7301, 7302, 7303, 7304, 7601, 7621, 7622, 
 34.28  7641, 7642, 7645, 7647, 7651, and 7652 of the Omnibus Budget 
 34.29  Reconciliation Act of 1989, Public Law Number 101-239, the 
 34.30  provision of section 1401 of the Financial Institutions Reform, 
 34.31  Recovery, and Enforcement Act of 1989, Public Law Number 101-73, 
 34.32  the provisions of sections 11701 and 11703 of the Revenue 
 34.33  Reconciliation Act of 1990, Public Law Number 101-508, and the 
 34.34  provisions of sections 1702(g) and 1704(f)(2)(A) and (B) of the 
 34.35  Small Business Job Protection Act, Public Law Number 104-188, 
 34.36  shall become effective at the time they become effective for 
 35.1   federal tax purposes.  
 35.2      The Internal Revenue Code of 1986, as amended through 
 35.3   December 31, 1989, shall be in effect for taxable years 
 35.4   beginning after December 31, 1989.  The provisions of sections 
 35.5   11321, 11322, 11324, 11325, 11403, 11404, 11410, and 11521 of 
 35.6   the Revenue Reconciliation Act of 1990, Public Law Number 
 35.7   101-508, and the provisions of sections 13224 and 13261 of the 
 35.8   Omnibus Budget Reconciliation Act of 1993, Public Law Number 
 35.9   103-66, shall become effective at the time they become effective 
 35.10  for federal purposes.  
 35.11     The Internal Revenue Code of 1986, as amended through 
 35.12  December 31, 1990, shall be in effect for taxable years 
 35.13  beginning after December 31, 1990. 
 35.14     The provisions of section 13431 of the Omnibus Budget 
 35.15  Reconciliation Act of 1993, Public Law Number 103-66, shall 
 35.16  become effective at the time they became effective for federal 
 35.17  purposes.  
 35.18     The Internal Revenue Code of 1986, as amended through 
 35.19  December 31, 1991, shall be in effect for taxable years 
 35.20  beginning after December 31, 1991.  
 35.21     The provisions of sections 1936 and 1937 of the 
 35.22  Comprehensive National Energy Policy Act of 1992, Public Law 
 35.23  Number 102-486, and the provisions of sections 13101, 13114, 
 35.24  13122, 13141, 13150, 13151, 13174, 13239, 13301, and 13442 of 
 35.25  the Omnibus Budget Reconciliation Act of 1993, Public Law Number 
 35.26  103-66, and the provisions of section 1604(a)(1), (2), and (3) 
 35.27  of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 
 35.28  shall become effective at the time they become effective for 
 35.29  federal purposes.  
 35.30     The Internal Revenue Code of 1986, as amended through 
 35.31  December 31, 1992, shall be in effect for taxable years 
 35.32  beginning after December 31, 1992.  
 35.33     The provisions of sections 13116, 13121, 13206, 13210, 
 35.34  13222, 13223, 13231, 13232, 13233, 13239, 13262, and 13321 of 
 35.35  the Omnibus Budget Reconciliation Act of 1993, Public Law Number 
 35.36  103-66, and the provisions of sections 1703(a), 1703(d), 
 36.1   1703(i), 1703(l), and 1703(m) of the Small Business Job 
 36.2   Protection Act, Public Law Number 104-188, and the provision of 
 36.3   section 1604(c) of the Taxpayer Relief Act of 1997, Public Law 
 36.4   Number 105-34, shall become effective at the time they become 
 36.5   effective for federal purposes. 
 36.6      The Internal Revenue Code of 1986, as amended through 
 36.7   December 31, 1993, shall be in effect for taxable years 
 36.8   beginning after December 31, 1993. 
 36.9      The provision of section 741 of Legislation to Implement 
 36.10  Uruguay Round of General Agreement on Tariffs and Trade, Public 
 36.11  Law Number 103-465, the provisions of sections 1, 2, and 3, of 
 36.12  the Self-Employed Health Insurance Act of 1995, Public Law 
 36.13  Number 104-7, the provision of section 501(b)(2) of the Health 
 36.14  Insurance Portability and Accountability Act, Public Law Number 
 36.15  104-191, and the provisions of sections 1604 and 1704(p)(1) and 
 36.16  (2) of the Small Business Job Protection Act, Public Law Number 
 36.17  104-188, and the provisions of sections 1011, 1211(b)(1), and 
 36.18  1602(f) of the Taxpayer Relief Act of 1997, Public Law Number 
 36.19  105-34, shall become effective at the time they become effective 
 36.20  for federal purposes. 
 36.21     The Internal Revenue Code of 1986, as amended through 
 36.22  December 31, 1994, shall be in effect for taxable years 
 36.23  beginning after December 31, 1994. 
 36.24     The provisions of sections 1119(a), 1120, 1121, 1202(a), 
 36.25  1444, 1449(b), 1602(a), 1610(a), 1613, and 1805 of the Small 
 36.26  Business Job Protection Act, Public Law Number 104-188, and the 
 36.27  provision of section 511 of the Health Insurance Portability and 
 36.28  Accountability Act, Public Law Number 104-191, and the 
 36.29  provisions of sections 1174 and 1601(i)(2) of the Taxpayer 
 36.30  Relief Act of 1997, Public Law Number 105-34, shall become 
 36.31  effective at the time they become effective for federal purposes.
 36.32     The Internal Revenue Code of 1986, as amended through March 
 36.33  22, 1996, is in effect for taxable years beginning after 
 36.34  December 31, 1995. 
 36.35     The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 
 36.36  1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 
 37.1   1616, 1617, 1704(l), and 1704(m) of the Small Business Job 
 37.2   Protection Act, Public Law Number 104-188, and the provisions of 
 37.3   Public Law Number 104-117, and the provisions of sections 313(a) 
 37.4   and (b)(1), 602(a), 913(b), 941, 961, 971, 1001(a) and (b), 
 37.5   1002, 1003, 1012, 1013, 1014, 1061, 1062, 1081, 1084(b), 1086, 
 37.6   1087, 1111(a), 1131(b) and (c), 1211(b), 1213, 1530(c)(2), 
 37.7   1601(f)(5) and (h), and 1604(d)(1) of the Taxpayer Relief Act of 
 37.8   1997, Public Law Number 105-34, shall become effective at the 
 37.9   time they become effective for federal purposes. 
 37.10     The Internal Revenue Code of 1986, as amended through 
 37.11  December 31, 1996, shall be in effect for taxable years 
 37.12  beginning after December 31, 1996. 
 37.13     The provisions of sections 202(a) and (b), 221(a), 225, 
 37.14  312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 
 37.15  (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 
 37.16  1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 
 37.17  1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 
 37.18  of the Taxpayer Relief Act of 1997, Public Law Number 105-34, 
 37.19  shall become effective at the time they become effective for 
 37.20  federal purposes. 
 37.21     The Internal Revenue Code of 1986, as amended through 
 37.22  December 31, 1997, shall be in effect for taxable years 
 37.23  beginning after December 31, 1997. 
 37.24     Except as otherwise provided, references to the Internal 
 37.25  Revenue Code in subdivisions 19a to 19g mean the code in effect 
 37.26  for purposes of determining net income for the applicable year. 
 37.27     Sec. 3.  Minnesota Statutes 1997 Supplement, section 
 37.28  290.01, subdivision 19a, is amended to read: 
 37.29     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
 37.30  individuals, estates, and trusts, there shall be added to 
 37.31  federal taxable income: 
 37.32     (1)(i) interest income on obligations of any state other 
 37.33  than Minnesota or a political or governmental subdivision, 
 37.34  municipality, or governmental agency or instrumentality of any 
 37.35  state other than Minnesota exempt from federal income taxes 
 37.36  under the Internal Revenue Code or any other federal statute, 
 38.1   and 
 38.2      (ii) exempt-interest dividends as defined in section 
 38.3   852(b)(5) of the Internal Revenue Code, except the portion of 
 38.4   the exempt-interest dividends derived from interest income on 
 38.5   obligations of the state of Minnesota or its political or 
 38.6   governmental subdivisions, municipalities, governmental agencies 
 38.7   or instrumentalities, but only if the portion of the 
 38.8   exempt-interest dividends from such Minnesota sources paid to 
 38.9   all shareholders represents 95 percent or more of the 
 38.10  exempt-interest dividends that are paid by the regulated 
 38.11  investment company as defined in section 851(a) of the Internal 
 38.12  Revenue Code, or the fund of the regulated investment company as 
 38.13  defined in section 851(h) of the Internal Revenue Code, making 
 38.14  the payment; and 
 38.15     (iii) for the purposes of items (i) and (ii), interest on 
 38.16  obligations of an Indian tribal government described in section 
 38.17  7871(c) of the Internal Revenue Code shall be treated as 
 38.18  interest income on obligations of the state in which the tribe 
 38.19  is located; 
 38.20     (2) the amount of income taxes paid or accrued within the 
 38.21  taxable year under this chapter and income taxes paid to any 
 38.22  other state or to any province or territory of Canada, to the 
 38.23  extent allowed as a deduction under section 63(d) of the 
 38.24  Internal Revenue Code, but the addition may not be more than the 
 38.25  amount by which the itemized deductions as allowed under section 
 38.26  63(d) of the Internal Revenue Code exceeds the amount of the 
 38.27  standard deduction as defined in section 63(c) of the Internal 
 38.28  Revenue Code.  For the purpose of this paragraph, the 
 38.29  disallowance of itemized deductions under section 68 of the 
 38.30  Internal Revenue Code of 1986, income tax is the last itemized 
 38.31  deduction disallowed; 
 38.32     (3) the capital gain amount of a lump sum distribution to 
 38.33  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
 38.34  Reform Act of 1986, Public Law Number 99-514, applies; 
 38.35     (4) the amount of income taxes paid or accrued within the 
 38.36  taxable year under this chapter and income taxes paid to any 
 39.1   other state or any province or territory of Canada, to the 
 39.2   extent allowed as a deduction in determining federal adjusted 
 39.3   gross income.  For the purpose of this paragraph, income taxes 
 39.4   do not include the taxes imposed by sections 290.0922, 
 39.5   subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
 39.6      (5) the amount of loss or expense included in federal 
 39.7   taxable income under section 1366 of the Internal Revenue Code 
 39.8   flowing from a corporation that has a valid election in effect 
 39.9   for the taxable year under section 1362 of the Internal Revenue 
 39.10  Code, but which is not allowed to be an "S" corporation under 
 39.11  section 290.9725; and 
 39.12     (6) the amount of any distributions in cash or property 
 39.13  made to a shareholder during the taxable year by a corporation 
 39.14  that has a valid election in effect for the taxable year under 
 39.15  section 1362 of the Internal Revenue Code, but which is not 
 39.16  allowed to be an "S" corporation under section 290.9725 to the 
 39.17  extent not already included in federal taxable income under 
 39.18  section 1368 of the Internal Revenue Code.; and 
 39.19     (7) the amount of a partner's pro rata share of net income 
 39.20  which does not flow through to the partner because the 
 39.21  partnership elected to pay the tax on the income under section 
 39.22  6242(a)(2) of the Internal Revenue Code. 
 39.23     Sec. 4.  Minnesota Statutes 1997 Supplement, section 
 39.24  290.01, subdivision 19c, is amended to read: 
 39.25     Subd. 19c.  [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 
 39.26  INCOME.] For corporations, there shall be added to federal 
 39.27  taxable income: 
 39.28     (1) the amount of any deduction taken for federal income 
 39.29  tax purposes for income, excise, or franchise taxes based on net 
 39.30  income or related minimum taxes paid by the corporation to 
 39.31  Minnesota, another state, a political subdivision of another 
 39.32  state, the District of Columbia, or any foreign country or 
 39.33  possession of the United States; 
 39.34     (2) interest not subject to federal tax upon obligations 
 39.35  of:  the United States, its possessions, its agencies, or its 
 39.36  instrumentalities; the state of Minnesota or any other state, 
 40.1   any of its political or governmental subdivisions, any of its 
 40.2   municipalities, or any of its governmental agencies or 
 40.3   instrumentalities; the District of Columbia; or Indian tribal 
 40.4   governments; 
 40.5      (3) exempt-interest dividends received as defined in 
 40.6   section 852(b)(5) of the Internal Revenue Code; 
 40.7      (4) the amount of any net operating loss deduction taken 
 40.8   for federal income tax purposes under section 172 or 832(c)(10) 
 40.9   of the Internal Revenue Code or operations loss deduction under 
 40.10  section 810 of the Internal Revenue Code; 
 40.11     (5) the amount of any special deductions taken for federal 
 40.12  income tax purposes under sections 241 to 247 of the Internal 
 40.13  Revenue Code; 
 40.14     (6) losses from the business of mining, as defined in 
 40.15  section 290.05, subdivision 1, clause (a), that are not subject 
 40.16  to Minnesota income tax; 
 40.17     (7) the amount of any capital losses deducted for federal 
 40.18  income tax purposes under sections 1211 and 1212 of the Internal 
 40.19  Revenue Code; 
 40.20     (8) the amount of any charitable contributions deducted for 
 40.21  federal income tax purposes under section 170 of the Internal 
 40.22  Revenue Code; 
 40.23     (9) the exempt foreign trade income of a foreign sales 
 40.24  corporation under sections 921(a) and 291 of the Internal 
 40.25  Revenue Code; 
 40.26     (10) the amount of percentage depletion deducted under 
 40.27  sections 611 through 614 and 291 of the Internal Revenue Code; 
 40.28     (11) for certified pollution control facilities placed in 
 40.29  service in a taxable year beginning before December 31, 1986, 
 40.30  and for which amortization deductions were elected under section 
 40.31  169 of the Internal Revenue Code of 1954, as amended through 
 40.32  December 31, 1985, the amount of the amortization deduction 
 40.33  allowed in computing federal taxable income for those 
 40.34  facilities; 
 40.35     (12) the amount of any deemed dividend from a foreign 
 40.36  operating corporation determined pursuant to section 290.17, 
 41.1   subdivision 4, paragraph (g); and 
 41.2      (13) the amount of any environmental tax paid under section 
 41.3   59(a) of the Internal Revenue Code.; and 
 41.4      (14) the amount of a partner's pro rata share of net income 
 41.5   which does not flow through to the partner because the 
 41.6   partnership elected to pay the tax on the income under section 
 41.7   6242(a)(2) of the Internal Revenue Code. 
 41.8      Sec. 5.  Minnesota Statutes 1997 Supplement, section 
 41.9   290.01, subdivision 31, is amended to read: 
 41.10     Subd. 31.  [INTERNAL REVENUE CODE.] Unless specifically 
 41.11  defined otherwise, "Internal Revenue Code" means the Internal 
 41.12  Revenue Code of 1986, as amended through December 31, 1996, and 
 41.13  includes the provisions of section 1(a) and (b) of Public Law 
 41.14  Number 104-117 1997. 
 41.15     Sec. 6.  Minnesota Statutes 1996, section 290.06, 
 41.16  subdivision 2c, is amended to read: 
 41.17     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
 41.18  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
 41.19  married individuals filing joint returns and surviving spouses 
 41.20  as defined in section 2(a) of the Internal Revenue Code must be 
 41.21  computed by applying to their taxable net income the following 
 41.22  schedule of rates: 
 41.23     (1) On the first $19,910, 6 percent; 
 41.24     (2) On all over $19,910, but not over $79,120, 8 percent; 
 41.25     (3) On all over $79,120, 8.5 percent. 
 41.26     Married individuals filing separate returns, estates, and 
 41.27  trusts must compute their income tax by applying the above rates 
 41.28  to their taxable income, except that the income brackets will be 
 41.29  one-half of the above amounts.  
 41.30     (b) The income taxes imposed by this chapter upon unmarried 
 41.31  individuals must be computed by applying to taxable net income 
 41.32  the following schedule of rates: 
 41.33     (1) On the first $13,620, 6 percent; 
 41.34     (2) On all over $13,620, but not over $44,750, 8 percent; 
 41.35     (3) On all over $44,750, 8.5 percent. 
 41.36     (c) The income taxes imposed by this chapter upon unmarried 
 42.1   individuals qualifying as a head of household as defined in 
 42.2   section 2(b) of the Internal Revenue Code must be computed by 
 42.3   applying to taxable net income the following schedule of rates: 
 42.4      (1) On the first $16,770, 6 percent; 
 42.5      (2) On all over $16,770, but not over $67,390, 8 percent; 
 42.6      (3) On all over $67,390, 8.5 percent. 
 42.7      (d) In lieu of a tax computed according to the rates set 
 42.8   forth in this subdivision, the tax of any individual taxpayer 
 42.9   whose taxable net income for the taxable year is less than an 
 42.10  amount determined by the commissioner must be computed in 
 42.11  accordance with tables prepared and issued by the commissioner 
 42.12  of revenue based on income brackets of not more than $100.  The 
 42.13  amount of tax for each bracket shall be computed at the rates 
 42.14  set forth in this subdivision, provided that the commissioner 
 42.15  may disregard a fractional part of a dollar unless it amounts to 
 42.16  50 cents or more, in which case it may be increased to $1. 
 42.17     (e) An individual who is not a Minnesota resident for the 
 42.18  entire year must compute the individual's Minnesota income tax 
 42.19  as provided in this subdivision.  After the application of the 
 42.20  nonrefundable credits provided in this chapter, the tax 
 42.21  liability must then be multiplied by a fraction in which:  
 42.22     (1) The numerator is the individual's Minnesota source 
 42.23  federal adjusted gross income as defined in section 62 of the 
 42.24  Internal Revenue Code increased by the addition additions 
 42.25  required for interest income from non-Minnesota state and 
 42.26  municipal bonds under section 290.01, subdivision 19a, clause 
 42.27  clauses (1) and (7), after applying the allocation and 
 42.28  assignability provisions of section 290.081, clause (a), or 
 42.29  290.17; and 
 42.30     (2) the denominator is the individual's federal adjusted 
 42.31  gross income as defined in section 62 of the Internal Revenue 
 42.32  Code of 1986, as amended through April 15, 1995, increased by 
 42.33  the addition required for interest income from non-Minnesota 
 42.34  state and municipal bonds amounts specified under section 
 42.35  290.01, subdivision 19a, clause clauses (1) and (7). 
 42.36     Sec. 7.  Minnesota Statutes 1996, section 290.067, 
 43.1   subdivision 2a, is amended to read: 
 43.2      Subd. 2a.  [INCOME.] (a) For purposes of this section, 
 43.3   "income" means the sum of the following: 
 43.4      (1) federal adjusted gross income as defined in section 62 
 43.5   of the Internal Revenue Code; and 
 43.6      (2) the sum of the following amounts to the extent not 
 43.7   included in clause (1): 
 43.8      (i) all nontaxable income; 
 43.9      (ii) the amount of a passive activity loss that is not 
 43.10  disallowed as a result of section 469, paragraph (i) or (m) of 
 43.11  the Internal Revenue Code and the amount of passive activity 
 43.12  loss carryover allowed under section 469(b) of the Internal 
 43.13  Revenue Code; 
 43.14     (iii) an amount equal to the total of any discharge of 
 43.15  qualified farm indebtedness of a solvent individual excluded 
 43.16  from gross income under section 108(g) of the Internal Revenue 
 43.17  Code; 
 43.18     (iv) cash public assistance and relief; 
 43.19     (v) any pension or annuity (including railroad retirement 
 43.20  benefits, all payments received under the federal Social 
 43.21  Security Act, supplemental security income, and veterans 
 43.22  benefits), which was not exclusively funded by the claimant or 
 43.23  spouse, or which was funded exclusively by the claimant or 
 43.24  spouse and which funding payments were excluded from federal 
 43.25  adjusted gross income in the years when the payments were made; 
 43.26     (vi) interest received from the federal or a state 
 43.27  government or any instrumentality or political subdivision 
 43.28  thereof; 
 43.29     (vii) workers' compensation; 
 43.30     (viii) nontaxable strike benefits; 
 43.31     (ix) the gross amounts of payments received in the nature 
 43.32  of disability income or sick pay as a result of accident, 
 43.33  sickness, or other disability, whether funded through insurance 
 43.34  or otherwise; 
 43.35     (x) a lump sum distribution under section 402(e)(3) of the 
 43.36  Internal Revenue Code; 
 44.1      (xi) contributions made by the claimant to an individual 
 44.2   retirement account, including a qualified voluntary employee 
 44.3   contribution; simplified employee pension plan; self-employed 
 44.4   retirement plan; cash or deferred arrangement plan under section 
 44.5   401(k) of the Internal Revenue Code; or deferred compensation 
 44.6   plan under section 457 of the Internal Revenue Code; and 
 44.7      (xii) nontaxable scholarship or fellowship grants. 
 44.8      In the case of an individual who files an income tax return 
 44.9   on a fiscal year basis, the term "federal adjusted gross income" 
 44.10  means federal adjusted gross income reflected in the fiscal year 
 44.11  ending in the next calendar year.  Federal adjusted gross income 
 44.12  may not be reduced by the amount of a net operating loss 
 44.13  carryback or carryforward or a capital loss carryback or 
 44.14  carryforward allowed for the year. 
 44.15     (b) "Income" does not include: 
 44.16     (1) amounts excluded pursuant to the Internal Revenue Code, 
 44.17  sections 101(a), and 102, and 121; 
 44.18     (2) amounts of any pension or annuity that were exclusively 
 44.19  funded by the claimant or spouse if the funding payments were 
 44.20  not excluded from federal adjusted gross income in the years 
 44.21  when the payments were made; 
 44.22     (3) surplus food or other relief in kind supplied by a 
 44.23  governmental agency; 
 44.24     (4) relief granted under chapter 290A; and 
 44.25     (5) child support payments received under a temporary or 
 44.26  final decree of dissolution or legal separation. 
 44.27     Sec. 8.  Minnesota Statutes 1997 Supplement, section 
 44.28  290.0671, subdivision 1, is amended to read: 
 44.29     Subdivision 1.  [CREDIT ALLOWED.] An individual is allowed 
 44.30  a credit against the tax imposed by this chapter equal to a 
 44.31  percentage of the credit for which the individual is eligible 
 44.32  under section 32 of the Internal Revenue Code, disregarding the 
 44.33  supplemental child credit of clause (m)[(n)].  The percentage is 
 44.34  15 for individuals without a qualifying child, and 25 for 
 44.35  individuals with at least one qualifying child.  For purposes of 
 44.36  this section, "qualifying child" has the meaning given in 
 45.1   section 32(c)(3) of the Internal Revenue Code. 
 45.2      For a nonresident or part-year resident, the credit 
 45.3   determined under section 32 of the Internal Revenue Code must be 
 45.4   allocated based on the percentage calculated under section 
 45.5   290.06, subdivision 2c, paragraph (e). 
 45.6      For a person who was a resident for the entire tax year and 
 45.7   has earned income not subject to tax under this chapter, the 
 45.8   credit must be allocated based on the ratio of federal adjusted 
 45.9   gross income reduced by the earned income not subject to tax 
 45.10  under this chapter over federal adjusted gross income. 
 45.11     Sec. 9.  Minnesota Statutes 1996, section 290.0921, 
 45.12  subdivision 3a, is amended to read: 
 45.13     Subd. 3a.  [EXEMPTIONS.] The following entities are exempt 
 45.14  from the tax imposed by this section: 
 45.15     (1) cooperatives taxable under subchapter T of the Internal 
 45.16  Revenue Code or organized under chapter 308 or a similar law of 
 45.17  another state; 
 45.18     (2) corporations subject to tax under section 60A.15, 
 45.19  subdivision 1; 
 45.20     (3) real estate investment trusts; 
 45.21     (4) regulated investment companies or a fund thereof; and 
 45.22     (5) entities having a valid election in effect under 
 45.23  section 860D(b) of the Internal Revenue Code.; and 
 45.24     (6) small corporations exempt from the federal alternative 
 45.25  minimum tax under section 55(e) of the Internal Revenue Code. 
 45.26     Sec. 10.  Minnesota Statutes 1996, section 290A.03, 
 45.27  subdivision 3, is amended to read: 
 45.28     Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
 45.29  following:  
 45.30     (a) federal adjusted gross income as defined in the 
 45.31  Internal Revenue Code; and 
 45.32     (b) the sum of the following amounts to the extent not 
 45.33  included in clause (a):  
 45.34     (i) all nontaxable income; 
 45.35     (ii) the amount of a passive activity loss that is not 
 45.36  disallowed as a result of section 469, paragraph (i) or (m) of 
 46.1   the Internal Revenue Code and the amount of passive activity 
 46.2   loss carryover allowed under section 469(b) of the Internal 
 46.3   Revenue Code; 
 46.4      (iii) an amount equal to the total of any discharge of 
 46.5   qualified farm indebtedness of a solvent individual excluded 
 46.6   from gross income under section 108(g) of the Internal Revenue 
 46.7   Code; 
 46.8      (iv) cash public assistance and relief; 
 46.9      (v) any pension or annuity (including railroad retirement 
 46.10  benefits, all payments received under the federal Social 
 46.11  Security Act, supplemental security income, and veterans 
 46.12  benefits), which was not exclusively funded by the claimant or 
 46.13  spouse, or which was funded exclusively by the claimant or 
 46.14  spouse and which funding payments were excluded from federal 
 46.15  adjusted gross income in the years when the payments were made; 
 46.16     (vi) interest received from the federal or a state 
 46.17  government or any instrumentality or political subdivision 
 46.18  thereof; 
 46.19     (vii) workers' compensation; 
 46.20     (viii) nontaxable strike benefits; 
 46.21     (ix) the gross amounts of payments received in the nature 
 46.22  of disability income or sick pay as a result of accident, 
 46.23  sickness, or other disability, whether funded through insurance 
 46.24  or otherwise; 
 46.25     (x) a lump sum distribution under section 402(e)(3) of the 
 46.26  Internal Revenue Code; 
 46.27     (xi) contributions made by the claimant to an individual 
 46.28  retirement account, including a qualified voluntary employee 
 46.29  contribution; simplified employee pension plan; self-employed 
 46.30  retirement plan; cash or deferred arrangement plan under section 
 46.31  401(k) of the Internal Revenue Code; or deferred compensation 
 46.32  plan under section 457 of the Internal Revenue Code; and 
 46.33     (xii) nontaxable scholarship or fellowship grants.  
 46.34     In the case of an individual who files an income tax return 
 46.35  on a fiscal year basis, the term "federal adjusted gross income" 
 46.36  shall mean federal adjusted gross income reflected in the fiscal 
 47.1   year ending in the calendar year.  Federal adjusted gross income 
 47.2   shall not be reduced by the amount of a net operating loss 
 47.3   carryback or carryforward or a capital loss carryback or 
 47.4   carryforward allowed for the year.  
 47.5      (2) "Income" does not include 
 47.6      (a) amounts excluded pursuant to the Internal Revenue Code, 
 47.7   sections 101(a), and 102, and 121; 
 47.8      (b) amounts of any pension or annuity which was exclusively 
 47.9   funded by the claimant or spouse and which funding payments were 
 47.10  not excluded from federal adjusted gross income in the years 
 47.11  when the payments were made; 
 47.12     (c) surplus food or other relief in kind supplied by a 
 47.13  governmental agency; 
 47.14     (d) relief granted under this chapter; or 
 47.15     (e) child support payments received under a temporary or 
 47.16  final decree of dissolution or legal separation.  
 47.17     (3) The sum of the following amounts may be subtracted from 
 47.18  income:  
 47.19     (a) for the claimant's first dependent, the exemption 
 47.20  amount multiplied by 1.4; 
 47.21     (b) for the claimant's second dependent, the exemption 
 47.22  amount multiplied by 1.3; 
 47.23     (c) for the claimant's third dependent, the exemption 
 47.24  amount multiplied by 1.2; 
 47.25     (d) for the claimant's fourth dependent, the exemption 
 47.26  amount multiplied by 1.1; 
 47.27     (e) for the claimant's fifth dependent, the exemption 
 47.28  amount; and 
 47.29     (f) if the claimant or claimant's spouse was disabled or 
 47.30  attained the age of 65 on or before December 31 of the year for 
 47.31  which the taxes were levied or rent paid, the exemption amount.  
 47.32     For purposes of this subdivision, the "exemption amount" 
 47.33  means the exemption amount under section 151(d) of the Internal 
 47.34  Revenue Code for the taxable year for which the income is 
 47.35  reported.  
 47.36     Sec. 11.  Minnesota Statutes 1997 Supplement, section 
 48.1   290A.03, subdivision 15, is amended to read: 
 48.2      Subd. 15.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
 48.3   means the Internal Revenue Code of 1986, as amended through 
 48.4   December 31, 1996 1997. 
 48.5      Sec. 12.  Minnesota Statutes 1997 Supplement, section 
 48.6   291.005, subdivision 1, is amended to read: 
 48.7      Subdivision 1.  Unless the context otherwise clearly 
 48.8   requires, the following terms used in this chapter shall have 
 48.9   the following meanings: 
 48.10     (1) "Federal gross estate" means the gross estate of a 
 48.11  decedent as valued and otherwise determined for federal estate 
 48.12  tax purposes by federal taxing authorities pursuant to the 
 48.13  provisions of the Internal Revenue Code. 
 48.14     (2) "Minnesota gross estate" means the federal gross estate 
 48.15  of a decedent after (a) excluding therefrom any property 
 48.16  included therein which has its situs outside Minnesota and (b) 
 48.17  including therein any property omitted from the federal gross 
 48.18  estate which is includable therein, has its situs in Minnesota, 
 48.19  and was not disclosed to federal taxing authorities.  
 48.20     (3) "Personal representative" means the executor, 
 48.21  administrator or other person appointed by the court to 
 48.22  administer and dispose of the property of the decedent.  If 
 48.23  there is no executor, administrator or other person appointed, 
 48.24  qualified, and acting within this state, then any person in 
 48.25  actual or constructive possession of any property having a situs 
 48.26  in this state which is included in the federal gross estate of 
 48.27  the decedent shall be deemed to be a personal representative to 
 48.28  the extent of the property and the Minnesota estate tax due with 
 48.29  respect to the property. 
 48.30     (4) "Resident decedent" means an individual whose domicile 
 48.31  at the time of death was in Minnesota. 
 48.32     (5) "Nonresident decedent" means an individual whose 
 48.33  domicile at the time of death was not in Minnesota. 
 48.34     (6) "Situs of property" means, with respect to real 
 48.35  property, the state or country in which it is located; with 
 48.36  respect to tangible personal property, the state or country in 
 49.1   which it was normally kept or located at the time of the 
 49.2   decedent's death; and with respect to intangible personal 
 49.3   property, the state or country in which the decedent was 
 49.4   domiciled at death. 
 49.5      (7) "Commissioner" means the commissioner of revenue or any 
 49.6   person to whom the commissioner has delegated functions under 
 49.7   this chapter. 
 49.8      (8) "Internal Revenue Code" means the United States 
 49.9   Internal Revenue Code of 1986, as amended through December 31, 
 49.10  1996, and includes the provisions of section 1(a)(4) of Public 
 49.11  Law Number 104-117 1997. 
 49.12     Sec. 13.  [INSTRUCTION TO REVISOR.] 
 49.13     Each place in Minnesota Statutes that refers to section 
 49.14  851(h) or 851(q) of the Internal Revenue Code, the revisor in 
 49.15  the next edition of Minnesota Statutes shall substitute "851(g)" 
 49.16  for those references. 
 49.17     Sec. 14.  [EFFECTIVE DATES.] 
 49.18     Sections 1, 3, 4, and 6 to 10 are effective for tax years 
 49.19  beginning after December 31, 1997.  Sections 5, 11, and 12 are 
 49.20  effective at the same time federal changes made by the Taxpayer 
 49.21  Relief Act of 1997, Public Law Number 105-34, which are 
 49.22  incorporated into Minnesota Statutes, chapters 290, 290A, and 
 49.23  291 by these sections, become effective for federal tax purposes.
 49.24                             ARTICLE 5
 49.25                             SALES TAX
 49.26     Section 1.  Minnesota Statutes 1996, section 289A.18, 
 49.27  subdivision 4, is amended to read: 
 49.28     Subd. 4.  [SALES AND USE TAX RETURNS.] (a) Sales and use 
 49.29  tax returns must be filed on or before the 20th day of the month 
 49.30  following the close of the preceding reporting period, except 
 49.31  that annual use tax returns provided for under section 289A.11, 
 49.32  subdivision 1, must be filed by April 15 following the close of 
 49.33  the calendar year, in the case of individuals.  Annual use tax 
 49.34  returns of businesses, including sole proprietorships, and 
 49.35  annual sales tax returns must be filed by February 5 following 
 49.36  the close of the calendar year.  
 50.1      (b) Except for the return for the June reporting period, 
 50.2   which is due on the following August 25, Returns filed by 
 50.3   retailers required to remit liabilities by means of funds 
 50.4   transfer under section 289A.20, subdivision 4, 
 50.5   paragraph (d) (c), are due on or before the 25th day of the 
 50.6   month following the close of the preceding reporting period.  
 50.7      (c) If a retailer has an average sales and use tax 
 50.8   liability, including local sales and use taxes administered by 
 50.9   the commissioner, equal to or less than $500 per month in any 
 50.10  quarter of a calendar year, and has substantially complied with 
 50.11  the tax laws during the preceding four calendar quarters, the 
 50.12  retailer may request authorization to file and pay the taxes 
 50.13  quarterly in subsequent calendar quarters.  The authorization 
 50.14  remains in effect during the period in which the retailer's 
 50.15  quarterly returns reflect sales and use tax liabilities of less 
 50.16  than $1,500 and there is continued compliance with state tax 
 50.17  laws. 
 50.18     (d) If a retailer has an average sales and use tax 
 50.19  liability, including local sales and use taxes administered by 
 50.20  the commissioner, equal to or less than $100 per month during a 
 50.21  calendar year, and has substantially complied with the tax laws 
 50.22  during that period, the retailer may request authorization to 
 50.23  file and pay the taxes annually in subsequent years.  The 
 50.24  authorization remains in effect during the period in which the 
 50.25  retailer's annual returns reflect sales and use tax liabilities 
 50.26  of less than $1,200 and there is continued compliance with state 
 50.27  tax laws. 
 50.28     (e) The commissioner may also grant quarterly or annual 
 50.29  filing and payment authorizations to retailers if the 
 50.30  commissioner concludes that the retailers' future tax 
 50.31  liabilities will be less than the monthly totals identified in 
 50.32  paragraphs (c) and (d).  An authorization granted under this 
 50.33  paragraph is subject to the same conditions as an authorization 
 50.34  granted under paragraphs (c) and (d). 
 50.35     Sec. 2.  Minnesota Statutes 1996, section 289A.20, 
 50.36  subdivision 4, is amended to read: 
 51.1      Subd. 4.  [SALES AND USE TAX.] (a) The taxes imposed by 
 51.2   chapter 297A are due and payable to the commissioner monthly on 
 51.3   or before the 20th day of the month following the month in which 
 51.4   the taxable event occurred or following another reporting period 
 51.5   as the commissioner prescribes, except that use taxes due on an 
 51.6   annual use tax return as provided under section 289A.11, 
 51.7   subdivision 1, are payable by April 15 following the close of 
 51.8   the calendar year. 
 51.9      (b) A vendor having a liability of $120,000 or more during 
 51.10  a fiscal year ending June 30 must remit the June liability for 
 51.11  the next year in the following manner: 
 51.12     (1) Two business days before June 30 of the year, the 
 51.13  vendor must remit 75 percent of the estimated June liability to 
 51.14  the commissioner.  
 51.15     (2) On or before August 14 of the year, the vendor must pay 
 51.16  any additional amount of tax not remitted in June. 
 51.17     (c) A vendor having a liability of $120,000 or more during 
 51.18  a fiscal year ending June 30 must remit all liabilities in the 
 51.19  subsequent calendar year by means of a funds transfer as defined 
 51.20  in section 336.4A-104, paragraph (a).  The funds transfer 
 51.21  payment date, as defined in section 336.4A-401, must be on or 
 51.22  before the 14th day of the month following the month in which 
 51.23  the taxable event occurred, except for 75 percent of the 
 51.24  estimated June liability, which is due two business days before 
 51.25  June 30.  The remaining amount of the June liability is due on 
 51.26  August 14.  If the date the tax is due is not a funds transfer 
 51.27  business day, as defined in section 336.4A-105, paragraph (a), 
 51.28  clause (4), the payment date must be on or before the funds 
 51.29  transfer business day next following the date the tax is due. 
 51.30     (d) (c) If the vendor required to remit by electronic funds 
 51.31  transfer as provided in paragraph (c) (b) is unable due to 
 51.32  reasonable cause to determine the actual sales and use tax due 
 51.33  on or before the due date for payment, the vendor may remit an 
 51.34  estimate of the tax owed using one of the following options: 
 51.35     (1) 100 percent of the tax reported on the previous month's 
 51.36  sales and use tax return; 
 52.1      (2) 100 percent of the tax reported on the sales and use 
 52.2   tax return for the same month in the previous calendar year; or 
 52.3      (3) 95 percent of the actual tax due. 
 52.4      Any additional amount of tax that is not remitted on or 
 52.5   before the due date for payment, must be remitted with the 
 52.6   return.  If a vendor fails to remit the actual liability or does 
 52.7   not remit using one of the estimate options by the due date for 
 52.8   payment, the vendor must remit actual liability as provided in 
 52.9   paragraph (c) (b) in all subsequent periods.  This paragraph 
 52.10  does not apply to the June sales and use tax liability. 
 52.11     Sec. 3.  Minnesota Statutes 1996, section 289A.60, 
 52.12  subdivision 21, is amended to read: 
 52.13     Subd. 21.  [PENALTY FOR FAILURE TO MAKE PAYMENT BY 
 52.14  ELECTRONIC FUNDS TRANSFER.] (a) In addition to other applicable 
 52.15  penalties imposed by this section, after notification from the 
 52.16  commissioner to the taxpayer that payments are required to be 
 52.17  made by means of electronic funds transfer under section 
 52.18  289A.20, subdivision 2, paragraph (e), or 4, paragraph (d) (c), 
 52.19  or 289A.26, subdivision 2a, and the payments are remitted by 
 52.20  some other means, there is a penalty in the amount of five 
 52.21  percent of each payment that should have been remitted 
 52.22  electronically.  The penalty can be abated under the abatement 
 52.23  procedures prescribed in section 270.07, subdivision 6, if the 
 52.24  failure to remit the payment electronically is due to reasonable 
 52.25  cause. 
 52.26     (b) The penalty under paragraph (a) does not apply if the 
 52.27  taxpayer pays by other means the amount due at least three 
 52.28  business days before the date the payment is due.  This 
 52.29  paragraph does not apply after December 31, 1997. 
 52.30     Sec. 4.  Laws 1997, chapter 231, article 7, section 47, is 
 52.31  amended to read: 
 52.32     Sec. 47.  [EFFECTIVE DATES.] 
 52.33     Section 1 is effective for refund claims filed after June 
 52.34  30, 1997. 
 52.35     Sections 2, 6, 7, 9, 13, 15, 16, 17, 18, 20, 21, 25, 31, 
 52.36  and 32 are effective for purchases, sales, storage, use, or 
 53.1   consumption occurring after June 30, 1997. 
 53.2      Section 3 is effective on July 1, 1997, or upon adoption of 
 53.3   the corresponding rules, whichever occurs earlier. 
 53.4      Section 4, paragraph (i), clause (iv), is effective for 
 53.5   purchases and sales occurring after September 30, 1987; the 
 53.6   remainder of section 4 is effective for purchases and sales 
 53.7   occurring after June 30, 1997. 
 53.8      Section 5, paragraph (h), is effective for purchases and 
 53.9   sales occurring after June 30, 1997, and paragraph (i) is 
 53.10  effective for purchases and sales occurring after December 31, 
 53.11  1992. 
 53.12     Sections 8 and 46 are effective July 1, 1998. 
 53.13     Sections 10 and 22 are effective for purchases, sales, 
 53.14  storage, use, or consumption occurring after August 31, 1996. 
 53.15     Sections 11, 12, 33, 34, and 35 are effective July 1, 1997. 
 53.16     Sections 14 and 19 are effective for purchases and sales 
 53.17  after June 30, 1999 1998. 
 53.18     Section 23 is effective January 1, 1997. 
 53.19     Section 24 is effective for purchases, sales, storage, use, 
 53.20  or consumption occurring after April 30, 1997. 
 53.21     Sections 26 and 45 are effective for purchases, sales, 
 53.22  storage, use, or consumption occurring after July 31, 1997, and 
 53.23  before August 1, 2003. 
 53.24     Section 27 is effective for purchases, sales, storage, use, 
 53.25  or consumption occurring after May 31, 1997. 
 53.26     Section 28 is effective for sales made after December 31, 
 53.27  1989, and before January 1, 1997.  The provisions of Minnesota 
 53.28  Statutes, section 289A.50, apply to refunds claimed under 
 53.29  section 28.  Refunds claimed under section 28 must be filed by 
 53.30  the later of December 31, 1997, or the time limit under 
 53.31  Minnesota Statutes, section 289A.40, subdivision 1. 
 53.32     Section 29 is effective for sales or first use after May 
 53.33  31, 1997, and before June 1, 1998. 
 53.34     Sections 30, 42, and 43 are effective the day following 
 53.35  final enactment. 
 53.36     Sections 36 to 39 are effective the day after compliance by 
 54.1   the governing body of Cook county with Minnesota Statutes, 
 54.2   section 645.021, subdivision 3. 
 54.3      Section 40 is effective for STAR funds collected after June 
 54.4   30, 1997. 
 54.5      Sec. 5.  [EFFECTIVE DATE.] 
 54.6      Sections 1 to 3 are effective January 1, 1998. 
 54.7      Section 4 is effective the day following final enactment.