1st Unofficial Engrossment - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to financing and operation of state and local 1.3 government; making policy, technical, administrative, 1.4 enforcement, collection, refund, and other changes to 1.5 income, franchise, property, sales and use, health 1.6 care provider, cigarette and tobacco products, 1.7 insurance premiums, aggregate removal, occupation, net 1.8 proceeds, and production taxes, and other taxes and 1.9 tax-related provisions; requiring withholding; 1.10 modifying income tax rates and providing income tax 1.11 credits; modifying taxation of certain trusts; 1.12 modifying taxation of certain compensation paid to 1.13 nonresidents; providing for taxation of foreign 1.14 operating corporations; providing tax shelter and 1.15 compliance initiatives; providing an income tax 1.16 checkoff; providing a refund for transit passes; 1.17 modifying and authorizing sales tax exemptions; 1.18 providing for taxation of liquor and rented vehicles; 1.19 modifying and authorizing local government sales 1.20 taxes; modifying the homestead market value credit; 1.21 modifying certain levies; changing and providing 1.22 property tax exemptions and value exclusions; 1.23 modifying the state general levy and providing for 1.24 deposit of revenues; providing a property tax freeze; 1.25 providing for aids to local governments; providing for 1.26 an international economic development zone; conveying 1.27 certain powers and providing tax incentives in the 1.28 zone; clarifying the effect of certain statements of 1.29 taxpayer rights by commissioner of revenue; limiting 1.30 agricultural processing zone property tax exemption in 1.31 certain circumstances; defining term "tax"; extending 1.32 a petrofund fee exemption; extending fiscal disparity 1.33 computation for city of Bloomington; authorizing 1.34 distributions of tax proceeds; changing provisions 1.35 relating to fiscal disparities, education financing, 1.36 state debt collection procedures, sustainable forest 1.37 incentives programs, and business subsidy provisions; 1.38 conforming provisions to certain changes in federal 1.39 law; changing and imposing powers, duties, and 1.40 requirements on certain local governments and 1.41 authorities and state departments or agencies; 1.42 providing for issuance of obligations by local 1.43 governments, and use of the proceeds of the debt; 1.44 requiring transfer of a parking facility; changing tax 1.45 increment financing and abatement provisions, and 1.46 providing authorities to certain districts; changing 2.1 provisions relating to tax preparers and providing for 2.2 exchange of data; providing for publication of tax 2.3 preparers subject to penalties; changing provisions 2.4 relating to certificates of title of motor vehicles 2.5 and manufactured homes; changing electronic filing 2.6 provisions; prohibiting misrepresentation of 2.7 employment; imposing requirements related to JOBZ; 2.8 prohibiting state contracts with certain vendors; 2.9 providing for certain payments to certain cities and 2.10 counties; providing for studies and reports; providing 2.11 penalties; creating an education reserve account; 2.12 providing for allocation and transfers of funds; 2.13 reducing appropriations; appropriating money; amending 2.14 Minnesota Statutes 2004, sections 4A.02; 15.06, 2.15 subdivision 6; 16A.152, subdivision 2; 16C.03, by 2.16 adding a subdivision; 16D.10; 103C.331, subdivision 2.17 16; 116J.993, subdivision 3, by adding a subdivision; 2.18 116J.994, subdivisions 4, 5, 9, by adding a 2.19 subdivision; 118A.05, subdivision 5; 123B.53, 2.20 subdivisions 4, 5, by adding a subdivision; 123B.55; 2.21 123B.71, subdivision 9; 126C.01, by adding a 2.22 subdivision; 126C.17, subdivisions 6, 7, 9, by adding 2.23 subdivisions; 127A.48, by adding a subdivision; 2.24 161.1231, by adding a subdivision; 168A.05, 2.25 subdivisions 1a, 1b; 254B.02, subdivision 3; 270.0603, 2.26 subdivision 3; 270.0682, subdivision 1; 270.11, 2.27 subdivision 2; 270.16, subdivision 2; 270.30, 2.28 subdivisions 1, 5, 6, 8, by adding subdivisions; 2.29 270.65; 270.67, subdivision 4; 270.69, subdivision 4; 2.30 270A.03, subdivision 5; 272.01, subdivision 2; 272.02, 2.31 subdivisions 1a, 7, 22, 47, 53, 56, 64, by adding 2.32 subdivisions; 272.0211, subdivisions 1, 2; 272.0212, 2.33 subdivisions 1, 2; 272.029, subdivisions 4, 6; 273.11, 2.34 subdivisions 1a, 8, by adding subdivisions; 273.112, 2.35 subdivision 3; 273.123, by adding a subdivision; 2.36 273.124, subdivisions 1, 3, 6, 8, 13, 14, 21; 273.13, 2.37 subdivisions 22, 23, 25; 273.1315; 273.1384, 2.38 subdivisions 1, 3; 273.19, subdivision 1a; 273.372; 2.39 274.014, subdivisions 2, 3; 274.14; 275.025, 2.40 subdivision 1; 275.065, subdivisions 1a, 3, by adding 2.41 subdivisions; 275.066; 275.07, subdivisions 1, 4; 2.42 275.70, subdivision 5; 276.04, subdivision 2; 276.112; 2.43 276A.01, subdivision 7; 278.03, subdivision 1; 279.01, 2.44 subdivision 1, by adding a subdivision; 282.016; 2.45 282.08; 282.15; 282.21; 282.224; 282.301; 287.04; 2.46 289A.02, subdivision 7; 289A.08, subdivisions 3, 7, 2.47 16; 289A.11, subdivision 1; 289A.18, subdivisions 1, 2.48 4, by adding a subdivision; 289A.19, subdivision 4; 2.49 289A.20, subdivisions 2, 4; 289A.31, subdivision 2; 2.50 289A.37, subdivision 5; 289A.38, subdivisions 6, 7, by 2.51 adding subdivisions; 289A.39, subdivision 1; 289A.40, 2.52 subdivision 2, by adding subdivisions; 289A.50, 2.53 subdivision 1a; 289A.60, subdivisions 2a, 6, 11, 12, 2.54 13, by adding a subdivision; 290.01, subdivisions 6b, 2.55 7, 7b, 19, 19a, as amended, if enacted, 19b, 19c, 19d, 2.56 31; 290.032, subdivisions 1, 2; 290.05, subdivision 1; 2.57 290.06, subdivisions 2c, 2d, 22, 28, by adding 2.58 subdivisions; 290.067, subdivisions 1, 2a; 290.0671, 2.59 subdivision 1; 290.0674, subdivisions 1, 2; 290.0675, 2.60 subdivision 1; 290.091, subdivisions 2, 3; 290.0922, 2.61 subdivision 2; 290.10; 290.17, subdivisions 2, 4; 2.62 290.191, subdivision 1; 290.92, subdivisions 1, 4b, by 2.63 adding a subdivision; 290A.03, subdivisions 3, 15; 2.64 290A.07, by adding a subdivision; 290A.19; 290B.05, 2.65 subdivision 3; 290C.05; 290C.10; 291.005, subdivision 2.66 1; 291.03, subdivision 1; 295.50, subdivision 3, by 2.67 adding a subdivision; 295.53, subdivision 1; 295.60, 2.68 subdivision 3; 296A.09, by adding a subdivision; 2.69 296A.22, by adding a subdivision; 297A.61, 2.70 subdivisions 3, 4, by adding subdivisions; 297A.64, 2.71 subdivision 4; 297A.668, subdivisions 1, 5; 297A.67, 3.1 subdivisions 2, 6, 7, 8, 29, by adding subdivisions; 3.2 297A.68, subdivisions 2, 4, 5, 19, 28, 35, 39, by 3.3 adding subdivisions; 297A.70, subdivision 8, by adding 3.4 a subdivision; 297A.71, subdivision 12, by adding 3.5 subdivisions; 297A.75, subdivisions 1, 2, 3; 297A.83, 3.6 subdivision 1; 297A.87, subdivisions 2, 3; 297A.99, 3.7 subdivisions 4, 7; 297B.03; 297E.01, subdivisions 5, 3.8 7, by adding subdivisions; 297E.02, subdivision 4; 3.9 297E.06, subdivision 2; 297E.07; 297F.01, by adding a 3.10 subdivision; 297F.08, subdivision 12, by adding a 3.11 subdivision; 297F.09, subdivisions 1, 2, by adding a 3.12 subdivision; 297F.14, subdivision 4; 297G.09, by 3.13 adding a subdivision; 297I.01, by adding a 3.14 subdivision; 297I.05, subdivisions 4, 5, by adding a 3.15 subdivision; 298.001, by adding subdivisions; 298.01, 3.16 subdivisions 3, 3a, 4; 298.015, subdivisions 1, 2; 3.17 298.016, subdivision 4; 298.018; 298.223, subdivision 3.18 1; 298.24, subdivision 1; 298.28, subdivisions 9b, 10; 3.19 298.2961, by adding a subdivision; 298.75, 3.20 subdivisions 1, 2; 325D.33, subdivision 6; 343.11; 3.21 366.011; 366.012; 373.01, subdivision 3; 373.40, 3.22 subdivision 1; 373.45, subdivision 7; 400.04, by 3.23 adding a subdivision; 410.32; 412.301; 428A.101; 3.24 428A.21; 429.021, subdivision 1; 429.031, by adding a 3.25 subdivision; 429.051; 469.015, subdivision 4; 469.033, 3.26 subdivision 6; 469.034, subdivision 2; 469.158; 3.27 469.169, by adding a subdivision; 469.1735, 3.28 subdivision 3; 469.174, by adding a subdivision; 3.29 469.175, subdivisions 1, 2, 4, 6; 469.176, subdivision 3.30 1c, by adding subdivisions; 469.1761, by adding a 3.31 subdivision; 469.1763, subdivision 2; 469.1792; 3.32 469.310, subdivision 11; 473.39, by adding a 3.33 subdivision; 473.843, subdivisions 3, 5; 473F.02, 3.34 subdivision 7; 473F.08, subdivision 3a, by adding 3.35 subdivisions; 474A.061, subdivision 2c; 474A.131, 3.36 subdivision 1; 475.51, subdivision 4; 475.52, 3.37 subdivisions 1, 3, 4; 475.521, subdivisions 1, 2, 3, 3.38 4; 475.58, subdivision 3b; 477A.011, subdivisions 3, 3.39 34, 36, as amended, 38; 477A.0124, subdivisions 2, 4; 3.40 477A.013, subdivisions 8, 9; 477A.03, subdivisions 2a, 3.41 2b; 477A.11, subdivision 4, by adding a subdivision; 3.42 477A.12, subdivisions 1, 2; 477A.14, subdivision 1; 3.43 645.44, by adding a subdivision; Laws 1991, chapter 3.44 291, article 8, section 27, subdivision 4; Laws 1993, 3.45 chapter 375, article 9, section 46, subdivision 2, as 3.46 amended; Laws 1994, chapter 587, article 9, section 8, 3.47 subdivision 1; Laws 1994, chapter 587, article 9, 3.48 section 20, subdivision 1; Laws 1994, chapter 587, 3.49 article 9, section 20, subdivision 2; Laws 1996, 3.50 chapter 471, article 2, section 29; Laws 1998, chapter 3.51 389, article 3, section 41; Laws 1998, chapter 389, 3.52 article 3, section 42, subdivision 2, as amended; Laws 3.53 1998, chapter 389, article 8, section 43, subdivision 3.54 3; Laws 1998, chapter 389, article 8, section 43, 3.55 subdivision 4; Laws 1998, chapter 389, article 11, 3.56 section 19, subdivision 3; Laws 1999, chapter 243, 3.57 article 4, section 18, subdivision 1; Laws 1999, 3.58 chapter 243, article 4, section 18, subdivision 3; 3.59 Laws 1999, chapter 243, article 4, section 18, 3.60 subdivision 4; Laws 2001, First Special Session 3.61 chapter 5, article 3, section 8; Laws 2001, First 3.62 Special Session chapter 5, article 12, section 44, the 3.63 effective date; Laws 2001, First Special Session 3.64 chapter 5, article 12, section 67; Laws 2001, First 3.65 Special Session chapter 5, article 12, section 82, as 3.66 amended; Laws 2001, First Special Session chapter 5, 3.67 article 12, section 95; Laws 2002, chapter 377, 3.68 article 3, section 4; Laws 2002, chapter 377, article 3.69 12, section 16, subdivision 1; Laws 2003, chapter 127, 3.70 article 5, section 27; Laws 2003, chapter 127, article 3.71 5, section 28; Laws 2003, chapter 127, article 12, 4.1 section 38; Laws 2003, chapter 128, article 1, section 4.2 172; Laws 2003, First Special Session chapter 21, 4.3 article 4, section 12, subdivision 11; Laws 2003, 4.4 First Special Session chapter 21, article 5, section 4.5 13; Laws 2003, First Special Session chapter 21, 4.6 article 6, section 9; 2005 S.F. No. 467, section 1, if 4.7 enacted; proposing coding for new law in Minnesota 4.8 Statutes, chapters 103C; 174; 270; 273; 278; 289A; 4.9 290; 290C; 295; 297A; 297F; 298; 325D; 325F; 462A; 4.10 469; 473; 477A; repealing Minnesota Statutes 2004, 4.11 sections 273.19, subdivision 5; 274.05; 275.15; 4.12 275.61, subdivision 2; 283.07; 289A.26, subdivision 4.13 2a; 289A.60, subdivision 21; 295.55, subdivision 4; 4.14 295.60, subdivision 4; 297A.99, subdivision 13; 4.15 297E.12, subdivision 10; 297F.09, subdivision 7; 4.16 297G.09, subdivision 6; 297I.35, subdivision 2; 4.17 297I.85, subdivision 7; 298.01, subdivisions 3c, 3d, 4.18 4d, 4e; 298.017; 473.39, subdivision 1f; Laws 1975, 4.19 chapter 287, section 5; Laws 1994, chapter 587, 4.20 article 9, section 20, subdivision 4; Laws 2003, 4.21 chapter 127, article 9, section 9, subdivision 4; 4.22 Minnesota Rules, parts 8093.2000; 8093.3000; 4.23 8130.0110, subpart 4; 8130.0200, subparts 5, 6; 4.24 8130.0400, subpart 9; 8130.1200, subparts 5, 6; 4.25 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 4.26 1, 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 4.27 8130.5200; 8130.5600, subpart 3; 8130.5800, subpart 5; 4.28 8130.7300, subpart 5; 8130.8800, subpart 4. 4.29 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 4.30 ARTICLE 1 4.31 INCOME AND CORPORATE FRANCHISE TAXES - SF1209 4.32 Section 1. Minnesota Statutes 2004, section 289A.20, 4.33 subdivision 2, is amended to read: 4.34 Subd. 2. [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 4.35 WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 4.36 WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 4.37 (a) A tax required to be deducted and withheld during the 4.38 quarterly period must be paid on or before the last day of the 4.39 month following the close of the quarterly period, unless an 4.40 earlier time for payment is provided. A tax required to be 4.41 deducted and withheld from compensation of an entertainer and 4.42 from a payment to an out-of-state contractor must be paid on or 4.43 before the date the return for such tax must be filed under 4.44 section 289A.18, subdivision 2. Taxes required to be deducted 4.45 and withheld by partnershipsand, S corporations, and trusts 4.46 must be paid onor before the date the return must be filed4.47under section 289A.18, subdivision 2a quarterly basis as 4.48 estimated taxes under section 289A.25 for partnerships and 4.49 trusts and under section 289A.26 for S corporations. 5.1 (b) An employer who, during the previous quarter, withheld 5.2 more than $1,500 of tax under section 290.92, subdivision 2a or 5.3 3, or 290.923, subdivision 2, must deposit tax withheld under 5.4 those sections with the commissioner within the time allowed to 5.5 deposit the employer's federal withheld employment taxes under 5.6 Code of Federal Regulations, title 26, section 31.6302-1, as 5.7 amended through December 31, 2001, without regard to the safe 5.8 harbor or de minimis rules in subparagraph (f) or the one-day 5.9 rule in subsection (c), clause (3). Taxpayers must submit a 5.10 copy of their federal notice of deposit status to the 5.11 commissioner upon request by the commissioner. 5.12 (c) The commissioner may prescribe by rule other return 5.13 periods or deposit requirements. In prescribing the reporting 5.14 period, the commissioner may classify payors according to the 5.15 amount of their tax liability and may adopt an appropriate 5.16 reporting period for the class that the commissioner judges to 5.17 be consistent with efficient tax collection. In no event will 5.18 the duration of the reporting period be more than one year. 5.19 (d) If less than the correct amount of tax is paid to the 5.20 commissioner, proper adjustments with respect to both the tax 5.21 and the amount to be deducted must be made, without interest, in 5.22 the manner and at the times the commissioner prescribes. If the 5.23 underpayment cannot be adjusted, the amount of the underpayment 5.24 will be assessed and collected in the manner and at the times 5.25 the commissioner prescribes. 5.26 (e) If the aggregate amount of the tax withheld during a 5.27 fiscal year ending June 30 under section 290.92, subdivision 2a 5.28 or 3, is equal to or exceeds the amounts established for 5.29 remitting federal withheld taxes pursuant to the regulations 5.30 promulgated under section 6302(h) of the Internal Revenue Code, 5.31 the employer must remit each required deposit for wages paid in 5.32 the subsequent calendar year by electronic means. 5.33 (f) A third-party bulk filer as defined in section 290.92, 5.34 subdivision 30, paragraph (a), clause (2), who remits 5.35 withholding deposits must remit all deposits by electronic means 5.36 as provided in paragraph (e), regardless of the aggregate amount 6.1 of tax withheld during a fiscal year for all of the employers. 6.2[EFFECTIVE DATE.] This section is effective for tax years 6.3 beginning after December 31, 2005. 6.4 Sec. 2. Minnesota Statutes 2004, section 290.92, is 6.5 amended by adding a subdivision to read: 6.6 Subd. 31. [PAYMENTS TO PERSONS WHO ARE NOT EMPLOYEES; 6.7 WITHHOLDING.] Any person engaged in a trade or business who in 6.8 the course of such trade or business makes payments to an 6.9 individual, who is not an employee of the person, for work 6.10 described in industry code numbers 23 through 238990 of the 6.11 North American Industry Classification System, shall deduct from 6.12 the payment and withhold two percent of the amount as Minnesota 6.13 withholding tax when the amount paid to that individual by the 6.14 same person during the calendar year exceeds $600. For purposes 6.15 of this section, a payment to any person that is subject to 6.16 withholding under this subdivision must be treated as if the 6.17 payment was a wage paid by an employer to an employee. Every 6.18 individual who is to receive a payment that is subject to 6.19 withholding under this subdivision shall furnish the contracting 6.20 person with a statement, containing the name, address, and 6.21 Social Security account number of the person receiving the 6.22 payment. 6.23[EFFECTIVE DATE.] This section is effective for payments 6.24 made after July 31, 2005. 6.25 ARTICLE 2 6.26 FEDERAL UPDATE - SF1209 6.27 Section 1. Minnesota Statutes 2004, section 290.01, 6.28 subdivision 19, is amended to read: 6.29 Subd. 19. [NET INCOME.] The term "net income" means the 6.30 federal taxable income, as defined in section 63 of the Internal 6.31 Revenue Code of 1986, as amended through the date named in this 6.32 subdivision, incorporating any elections made by the taxpayer in 6.33 accordance with the Internal Revenue Code in determining federal 6.34 taxable income for federal income tax purposes, and with the 6.35 modifications provided in subdivisions 19a to 19f. 6.36 In the case of a regulated investment company or a fund 7.1 thereof, as defined in section 851(a) or 851(g) of the Internal 7.2 Revenue Code, federal taxable income means investment company 7.3 taxable income as defined in section 852(b)(2) of the Internal 7.4 Revenue Code, except that: 7.5 (1) the exclusion of net capital gain provided in section 7.6 852(b)(2)(A) of the Internal Revenue Code does not apply; 7.7 (2) the deduction for dividends paid under section 7.8 852(b)(2)(D) of the Internal Revenue Code must be applied by 7.9 allowing a deduction for capital gain dividends and 7.10 exempt-interest dividends as defined in sections 852(b)(3)(C) 7.11 and 852(b)(5) of the Internal Revenue Code; and 7.12 (3) the deduction for dividends paid must also be applied 7.13 in the amount of any undistributed capital gains which the 7.14 regulated investment company elects to have treated as provided 7.15 in section 852(b)(3)(D) of the Internal Revenue Code. 7.16 The net income of a real estate investment trust as defined 7.17 and limited by section 856(a), (b), and (c) of the Internal 7.18 Revenue Code means the real estate investment trust taxable 7.19 income as defined in section 857(b)(2) of the Internal Revenue 7.20 Code. 7.21 The net income of a designated settlement fund as defined 7.22 in section 468B(d) of the Internal Revenue Code means the gross 7.23 income as defined in section 468B(b) of the Internal Revenue 7.24 Code. 7.25 The provisions of sections 1113(a), 1117, 1206(a), 1313(a), 7.26 1402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612, 7.27 1616, 1617, 1704(l), and 1704(m) of the Small Business Job 7.28 Protection Act, Public Law 104-188, the provisions of Public Law 7.29 104-117, the provisions of sections 313(a) and (b)(1), 602(a), 7.30 913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013, 7.31 1014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b) 7.32 and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and 7.33 1604(d)(1) of the Taxpayer Relief Act of 1997, Public Law 7.34 105-34, the provisions of section 6010 of the Internal Revenue 7.35 Service Restructuring and Reform Act of 1998, Public Law 7.36 105-206, the provisions of section 4003 of the Omnibus 8.1 Consolidated and Emergency Supplemental Appropriations Act, 8.2 1999, Public Law 105-277, and the provisions of section 318 of 8.3 the Consolidated Appropriation Act of 2001, Public Law 106-554, 8.4 shall become effective at the time they become effective for 8.5 federal purposes. 8.6 The Internal Revenue Code of 1986, as amended through 8.7 December 31, 1996, shall be in effect for taxable years 8.8 beginning after December 31, 1996. 8.9 The provisions of sections 202(a) and (b), 221(a), 225, 8.10 312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and 8.11 (c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306, 8.12 1307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528, 8.13 1530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e) 8.14 of the Taxpayer Relief Act of 1997, Public Law 105-34, the 8.15 provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002, 8.16 and 7003 of the Internal Revenue Service Restructuring and 8.17 Reform Act of 1998, Public Law 105-206, the provisions of 8.18 section 3001 of the Omnibus Consolidated and Emergency 8.19 Supplemental Appropriations Act, 1999, Public Law 105-277, the 8.20 provisions of section 3001 of the Miscellaneous Trade and 8.21 Technical Corrections Act of 1999, Public Law 106-36, and the 8.22 provisions of section 316 of the Consolidated Appropriation Act 8.23 of 2001, Public Law 106-554, shall become effective at the time 8.24 they become effective for federal purposes. 8.25 The Internal Revenue Code of 1986, as amended through 8.26 December 31, 1997, shall be in effect for taxable years 8.27 beginning after December 31, 1997. 8.28 The provisions of sections 5002, 6009, 6011, and 7001 of 8.29 the Internal Revenue Service Restructuring and Reform Act of 8.30 1998, Public Law 105-206, the provisions of section 9010 of the 8.31 Transportation Equity Act for the 21st Century, Public Law 8.32 105-178, the provisions of sections 1004, 4002, and 5301 of the 8.33 Omnibus Consolidation and Emergency Supplemental Appropriations 8.34 Act, 1999, Public Law 105-277, the provision of section 303 of 8.35 the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law 8.36 105-369, the provisions of sections 532, 534, 536, 537, and 538 9.1 of the Ticket to Work and Work Incentives Improvement Act of 9.2 1999, Public Law 106-170, the provisions of the Installment Tax 9.3 Correction Act of 2000, Public Law 106-573, and the provisions 9.4 of section 309 of the Consolidated Appropriation Act of 2001, 9.5 Public Law 106-554, shall become effective at the time they 9.6 become effective for federal purposes. 9.7 The Internal Revenue Code of 1986, as amended through 9.8 December 31, 1998, shall be in effect for taxable years 9.9 beginning after December 31, 1998. 9.10 The provisions of the FSC Repeal and Extraterritorial 9.11 Income Exclusion Act of 2000, Public Law 106-519, and the 9.12 provision of section 412 of the Job Creation and Worker 9.13 Assistance Act of 2002, Public Law 107-147, shall become 9.14 effective at the time it became effective for federal purposes. 9.15 The Internal Revenue Code of 1986, as amended through 9.16 December 31, 1999, shall be in effect for taxable years 9.17 beginning after December 31, 1999. The provisions of sections 9.18 306 and 401 of the Consolidated Appropriation Act of 2001, 9.19 Public Law 106-554, and the provision of section 632(b)(2)(A) of 9.20 the Economic Growth and Tax Relief Reconciliation Act of 2001, 9.21 Public Law 107-16, and provisions of sections 101 and 402 of the 9.22 Job Creation and Worker Assistance Act of 2002, Public Law 9.23 107-147, shall become effective at the same time it became 9.24 effective for federal purposes. 9.25 The Internal Revenue Code of 1986, as amended through 9.26 December 31, 2000, shall be in effect for taxable years 9.27 beginning after December 31, 2000. The provisions of sections 9.28 659a and 671 of the Economic Growth and Tax Relief 9.29 Reconciliation Act of 2001, Public Law 107-16, the provisions of 9.30 sections 104, 105, and 111 of the Victims of Terrorism Tax 9.31 Relief Act of 2001, Public Law 107-134, and the provisions of 9.32 sections 201, 403, 413, and 606 of the Job Creation and Worker 9.33 Assistance Act of 2002, Public Law 107-147, shall become 9.34 effective at the same time it became effective for federal 9.35 purposes. 9.36 The Internal Revenue Code of 1986, as amended through March 10.1 15, 2002, shall be in effect for taxable years beginning after 10.2 December 31, 2001. 10.3 The provisions of sections 101 and 102 of the Victims of 10.4 Terrorism Tax Relief Act of 2001, Public Law 107-134, shall 10.5 become effective at the same time it becomes effective for 10.6 federal purposes. 10.7 The Internal Revenue Code of 1986, as amended through June 10.8 15, 2003, shall be in effect for taxable years beginning after 10.9 December 31, 2002, provided that the provisions of the American 10.10 Jobs Creation Act of 2004, Public Law 108-435, are effective at 10.11 the same time they became effective for federal income tax 10.12 purposes. The provisions of section 201 of the Jobs and Growth 10.13 Tax Relief and Reconciliation Act of 2003, H.R. 2, if it is 10.14 enacted into law, are effective at the same time it became 10.15 effective for federal purposes. 10.16 Except as otherwise provided, references to the Internal 10.17 Revenue Code in subdivisions 19a to 19g mean the code in effect 10.18 for purposes of determining net income for the applicable year. 10.19 Sec. 2. Minnesota Statutes 2004, section 290.01, 10.20 subdivision 19a, is amended to read: 10.21 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 10.22 individuals, estates, and trusts, there shall be added to 10.23 federal taxable income: 10.24 (1)(i) interest income on obligations of any state other 10.25 than Minnesota or a political or governmental subdivision, 10.26 municipality, or governmental agency or instrumentality of any 10.27 state other than Minnesota exempt from federal income taxes 10.28 under the Internal Revenue Code or any other federal statute; 10.29 and 10.30 (ii) exempt-interest dividends as defined in section 10.31 852(b)(5) of the Internal Revenue Code, except the portion of 10.32 the exempt-interest dividends derived from interest income on 10.33 obligations of the state of Minnesota or its political or 10.34 governmental subdivisions, municipalities, governmental agencies 10.35 or instrumentalities, but only if the portion of the 10.36 exempt-interest dividends from such Minnesota sources paid to 11.1 all shareholders represents 95 percent or more of the 11.2 exempt-interest dividends that are paid by the regulated 11.3 investment company as defined in section 851(a) of the Internal 11.4 Revenue Code, or the fund of the regulated investment company as 11.5 defined in section 851(g) of the Internal Revenue Code, making 11.6 the payment; and 11.7 (iii) for the purposes of items (i) and (ii), interest on 11.8 obligations of an Indian tribal government described in section 11.9 7871(c) of the Internal Revenue Code shall be treated as 11.10 interest income on obligations of the state in which the tribe 11.11 is located; 11.12 (2) the amount of income or sales and use taxes paid or 11.13 accrued within the taxable year under this chapter and income or 11.14 sales and use taxes paid to any other state or to any province 11.15 or territory of Canada, to the extent allowed as a deduction 11.16 under section 63(d) of the Internal Revenue Code of 1986, as 11.17 amended through June 15, 2003, but the addition may not be more 11.18 than the amount by which the itemized deductions as allowed 11.19 under section 63(d) of the Internal Revenue Code exceeds the 11.20 amount of the standard deduction as defined in section 63(c) of 11.21 the Internal Revenue Code. For the purpose of this paragraph, 11.22 the disallowance of itemized deductions under section 68 of the 11.23 Internal Revenue Code of 1986, income or sales and use tax is 11.24 the last itemized deduction disallowed; 11.25 (3) the capital gain amount of a lump sum distribution to 11.26 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 11.27 Reform Act of 1986, Public Law 99-514, applies; 11.28 (4) the amount of income taxes paid or accrued within the 11.29 taxable year under this chapter and income taxes paid to any 11.30 other state or any province or territory of Canada, to the 11.31 extent allowed as a deduction in determining federal adjusted 11.32 gross income. For the purpose of this paragraph, income taxes 11.33 do not include the taxes imposed by sections 290.0922, 11.34 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 11.35 (5) the amount of expense, interest, or taxes disallowed 11.36 pursuant to section 290.10; 12.1 (6) the amount of a partner's pro rata share of net income 12.2 which does not flow through to the partner because the 12.3 partnership elected to pay the tax on the income under section 12.4 6242(a)(2) of the Internal Revenue Code;and12.5 (7) 80 percent of the depreciation deduction allowed under 12.6 section 168(k) of the Internal Revenue Code. For purposes of 12.7 this clause, if the taxpayer has an activity that in the taxable 12.8 year generates a deduction for depreciation under section 168(k) 12.9 and the activity generates a loss for the taxable year that the 12.10 taxpayer is not allowed to claim for the taxable year, "the 12.11 depreciation allowed under section 168(k)" for the taxable year 12.12 is limited to excess of the depreciation claimed by the activity 12.13 under section 168(k) over the amount of the loss from the 12.14 activity that is not allowed in the taxable year. In succeeding 12.15 taxable years when the losses not allowed in the taxable year 12.16 are allowed, the depreciation under section 168(k) is allowed; 12.17 (8) 80 percent of the amount by which the deduction allowed 12.18 by section 179 of the Internal Revenue Code exceeds the 12.19 deduction allowable by section 179 of the Internal Revenue Code 12.20 of 1986, as amended through December 31, 2003; and 12.21 (9) to the extent deducted in computing federal taxable 12.22 income, the amount of the deduction allowable under section 199 12.23 of the Internal Revenue Code. 12.24[EFFECTIVE DATE.] This section is effective for tax years 12.25 beginning after December 31, 2004, except the changes in clause 12.26 (2) are effective for tax years beginning after December 31, 12.27 2003. 12.28 Sec. 3. Minnesota Statutes 2004, section 290.01, 12.29 subdivision 19b, is amended to read: 12.30 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 12.31 individuals, estates, and trusts, there shall be subtracted from 12.32 federal taxable income: 12.33 (1) interest income on obligations of any authority, 12.34 commission, or instrumentality of the United States to the 12.35 extent includable in taxable income for federal income tax 12.36 purposes but exempt from state income tax under the laws of the 13.1 United States; 13.2 (2) if included in federal taxable income, the amount of 13.3 any overpayment of income tax to Minnesota or to any other 13.4 state, for any previous taxable year, whether the amount is 13.5 received as a refund or as a credit to another taxable year's 13.6 income tax liability; 13.7 (3) the amount paid to others, less the amount used to 13.8 claim the credit allowed under section 290.0674, not to exceed 13.9 $1,625 for each qualifying child in grades kindergarten to 6 and 13.10 $2,500 for each qualifying child in grades 7 to 12, for tuition, 13.11 textbooks, and transportation of each qualifying child in 13.12 attending an elementary or secondary school situated in 13.13 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 13.14 wherein a resident of this state may legally fulfill the state's 13.15 compulsory attendance laws, which is not operated for profit, 13.16 and which adheres to the provisions of the Civil Rights Act of 13.17 1964 and chapter 363A. For the purposes of this clause, 13.18 "tuition" includes fees or tuition as defined in section 13.19 290.0674, subdivision 1, clause (1). As used in this clause, 13.20 "textbooks" includes books and other instructional materials and 13.21 equipment purchased or leased for use in elementary and 13.22 secondary schools in teaching only those subjects legally and 13.23 commonly taught in public elementary and secondary schools in 13.24 this state. Equipment expenses qualifying for deduction 13.25 includes expenses as defined and limited in section 290.0674, 13.26 subdivision 1, clause (3). "Textbooks" does not include 13.27 instructional books and materials used in the teaching of 13.28 religious tenets, doctrines, or worship, the purpose of which is 13.29 to instill such tenets, doctrines, or worship, nor does it 13.30 include books or materials for, or transportation to, 13.31 extracurricular activities including sporting events, musical or 13.32 dramatic events, speech activities, driver's education, or 13.33 similar programs. For purposes of the subtraction provided by 13.34 this clause, "qualifying child" has the meaning given in section 13.35 32(c)(3) of the Internal Revenue Code; 13.36 (4) income as provided under section 290.0802; 14.1 (5) to the extent included in federal adjusted gross 14.2 income, income realized on disposition of property exempt from 14.3 tax under section 290.491; 14.4 (6) to the extent included in federal taxable income, 14.5 postservice benefits for youth community service under section 14.6 124D.42 for volunteer service under United States Code, title 14.7 42, sections 12601 to 12604; 14.8 (7) to the extent not deducted in determining federal 14.9 taxable income by an individual who does not itemize deductions 14.10 for federal income tax purposes for the taxable year, an amount 14.11 equal to 50 percent of the excess of charitable contributions 14.12 allowable as a deduction for the taxable year under section 14.13 170(a) of the Internal Revenue Code over $500; 14.14 (8) for taxable years beginning before January 1, 2008, the 14.15 amount of the federal small ethanol producer credit allowed 14.16 under section 40(a)(3) of the Internal Revenue Code which is 14.17 included in gross income under section 87 of the Internal 14.18 Revenue Code; 14.19 (9) for individuals who are allowed a federal foreign tax 14.20 credit for taxes that do not qualify for a credit under section 14.21 290.06, subdivision 22, an amount equal to the carryover of 14.22 subnational foreign taxes for the taxable year, but not to 14.23 exceed the total subnational foreign taxes reported in claiming 14.24 the foreign tax credit. For purposes of this clause, "federal 14.25 foreign tax credit" means the credit allowed under section 27 of 14.26 the Internal Revenue Code, and "carryover of subnational foreign 14.27 taxes" equals the carryover allowed under section 904(c) of the 14.28 Internal Revenue Code minus national level foreign taxes to the 14.29 extent they exceed the federal foreign tax credit; 14.30 (10) in each of the five tax years immediately following 14.31 the tax year in which an addition is required under subdivision 14.32 19a, clause (7), an amount equal to one-fifth of the delayed 14.33 depreciation. For purposes of this clause, "delayed 14.34 depreciation" means the amount of the addition made by the 14.35 taxpayer under subdivision 19a, clause (7), minus the positive 14.36 value of any net operating loss under section 172 of the 15.1 Internal Revenue Code generated for the tax year of the 15.2 addition. The resulting delayed depreciation cannot be less 15.3 than zero;and15.4 (11) job opportunity building zone income as provided under 15.5 section 469.316; and 15.6 (12) in each of the five tax years immediately following 15.7 the tax year in which an addition is required under subdivision 15.8 19a, clause (8), or 19c, clause (17), in the case of a 15.9 shareholder of a corporation that is an S corporation, an amount 15.10 equal to one-fifth of the addition made by the taxpayer under 15.11 subdivision 19a, clause (8), or 19c, clause (17), in the case of 15.12 a shareholder of a corporation that is an S corporation, minus 15.13 the positive value of any net operating loss under section 172 15.14 of the Internal Revenue Code generated for the tax year of the 15.15 addition. If the net operating loss exceeds the addition for 15.16 the tax year, a subtraction is not allowed under this clause. 15.17[EFFECTIVE DATE.] This section is effective for tax years 15.18 beginning after December 31, 2004. 15.19 Sec. 4. Minnesota Statutes 2004, section 290.01, 15.20 subdivision 19c, is amended to read: 15.21 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 15.22 INCOME.] For corporations, there shall be added to federal 15.23 taxable income: 15.24 (1) the amount of any deduction taken for federal income 15.25 tax purposes for income, excise, or franchise taxes based on net 15.26 income or related minimum taxes, including but not limited to 15.27 the tax imposed under section 290.0922, paid by the corporation 15.28 to Minnesota, another state, a political subdivision of another 15.29 state, the District of Columbia, or any foreign country or 15.30 possession of the United States; 15.31 (2) interest not subject to federal tax upon obligations 15.32 of: the United States, its possessions, its agencies, or its 15.33 instrumentalities; the state of Minnesota or any other state, 15.34 any of its political or governmental subdivisions, any of its 15.35 municipalities, or any of its governmental agencies or 15.36 instrumentalities; the District of Columbia; or Indian tribal 16.1 governments; 16.2 (3) exempt-interest dividends received as defined in 16.3 section 852(b)(5) of the Internal Revenue Code; 16.4 (4) the amount of any net operating loss deduction taken 16.5 for federal income tax purposes under section 172 or 832(c)(10) 16.6 of the Internal Revenue Code or operations loss deduction under 16.7 section 810 of the Internal Revenue Code; 16.8 (5) the amount of any special deductions taken for federal 16.9 income tax purposes under sections 241 to 247 of the Internal 16.10 Revenue Code; 16.11 (6) losses from the business of mining, as defined in 16.12 section 290.05, subdivision 1, clause (a), that are not subject 16.13 to Minnesota income tax; 16.14 (7) the amount of any capital losses deducted for federal 16.15 income tax purposes under sections 1211 and 1212 of the Internal 16.16 Revenue Code; 16.17 (8) the exempt foreign trade income of a foreign sales 16.18 corporation under sections 921(a) and 291 of the Internal 16.19 Revenue Code; 16.20 (9) the amount of percentage depletion deducted under 16.21 sections 611 through 614 and 291 of the Internal Revenue Code; 16.22 (10) for certified pollution control facilities placed in 16.23 service in a taxable year beginning before December 31, 1986, 16.24 and for which amortization deductions were elected under section 16.25 169 of the Internal Revenue Code of 1954, as amended through 16.26 December 31, 1985, the amount of the amortization deduction 16.27 allowed in computing federal taxable income for those 16.28 facilities; 16.29 (11) the amount of any deemed dividend from a foreign 16.30 operating corporation determined pursuant to section 290.17, 16.31 subdivision 4, paragraph (g); 16.32 (12) the amount of any environmental tax paid under section 16.33 59(a) of the Internal Revenue Code; 16.34 (13) the amount of a partner's pro rata share of net income 16.35 which does not flow through to the partner because the 16.36 partnership elected to pay the tax on the income under section 17.1 6242(a)(2) of the Internal Revenue Code; 17.2 (14) the amount of net income excluded under section 114 of 17.3 the Internal Revenue Code; 17.4 (15) any increase in subpart F income, as defined in 17.5 section 952(a) of the Internal Revenue Code, for the taxable 17.6 year when subpart F income is calculated without regard to the 17.7 provisions of section 614 of Public Law 107-147;and17.8 (16) 80 percent of the depreciation deduction allowed under 17.9 section 168(k) of the Internal Revenue Code. For purposes of 17.10 this clause, if the taxpayer has an activity that in the taxable 17.11 year generates a deduction for depreciation under section 168(k) 17.12 and the activity generates a loss for the taxable year that the 17.13 taxpayer is not allowed to claim for the taxable year, "the 17.14 depreciation allowed under section 168(k)" for the taxable year 17.15 is limited to excess of the depreciation claimed by the activity 17.16 under section 168(k) over the amount of the loss from the 17.17 activity that is not allowed in the taxable year. In succeeding 17.18 taxable years when the losses not allowed in the taxable year 17.19 are allowed, the depreciation under section 168(k) is allowed; 17.20 (17) 80 percent of the amount by which the deduction 17.21 allowed by section 179 of the Internal Revenue Code exceeds the 17.22 deduction allowable by section 179 of the Internal Revenue Code 17.23 of 1986, as amended through December 31, 2003; and 17.24 (18) to the extent deducted in computing federal taxable 17.25 income, the amount of the deduction allowable under section 199 17.26 of the Internal Revenue Code. 17.27[EFFECTIVE DATE.] This section is effective for tax years 17.28 beginning after December 31, 2004. 17.29 Sec. 5. Minnesota Statutes 2004, section 290.01, 17.30 subdivision 19d, is amended to read: 17.31 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 17.32 TAXABLE INCOME.] For corporations, there shall be subtracted 17.33 from federal taxable income after the increases provided in 17.34 subdivision 19c: 17.35 (1) the amount of foreign dividend gross-up added to gross 17.36 income for federal income tax purposes under section 78 of the 18.1 Internal Revenue Code; 18.2 (2) the amount of salary expense not allowed for federal 18.3 income tax purposes due to claiming the federal jobs credit 18.4 under section 51 of the Internal Revenue Code; 18.5 (3) any dividend (not including any distribution in 18.6 liquidation) paid within the taxable year by a national or state 18.7 bank to the United States, or to any instrumentality of the 18.8 United States exempt from federal income taxes, on the preferred 18.9 stock of the bank owned by the United States or the 18.10 instrumentality; 18.11 (4) amounts disallowed for intangible drilling costs due to 18.12 differences between this chapter and the Internal Revenue Code 18.13 in taxable years beginning before January 1, 1987, as follows: 18.14 (i) to the extent the disallowed costs are represented by 18.15 physical property, an amount equal to the allowance for 18.16 depreciation under Minnesota Statutes 1986, section 290.09, 18.17 subdivision 7, subject to the modifications contained in 18.18 subdivision 19e; and 18.19 (ii) to the extent the disallowed costs are not represented 18.20 by physical property, an amount equal to the allowance for cost 18.21 depletion under Minnesota Statutes 1986, section 290.09, 18.22 subdivision 8; 18.23 (5) the deduction for capital losses pursuant to sections 18.24 1211 and 1212 of the Internal Revenue Code, except that: 18.25 (i) for capital losses incurred in taxable years beginning 18.26 after December 31, 1986, capital loss carrybacks shall not be 18.27 allowed; 18.28 (ii) for capital losses incurred in taxable years beginning 18.29 after December 31, 1986, a capital loss carryover to each of the 18.30 15 taxable years succeeding the loss year shall be allowed; 18.31 (iii) for capital losses incurred in taxable years 18.32 beginning before January 1, 1987, a capital loss carryback to 18.33 each of the three taxable years preceding the loss year, subject 18.34 to the provisions of Minnesota Statutes 1986, section 290.16, 18.35 shall be allowed; and 18.36 (iv) for capital losses incurred in taxable years beginning 19.1 before January 1, 1987, a capital loss carryover to each of the 19.2 five taxable years succeeding the loss year to the extent such 19.3 loss was not used in a prior taxable year and subject to the 19.4 provisions of Minnesota Statutes 1986, section 290.16, shall be 19.5 allowed; 19.6 (6) an amount for interest and expenses relating to income 19.7 not taxable for federal income tax purposes, if (i) the income 19.8 is taxable under this chapter and (ii) the interest and expenses 19.9 were disallowed as deductions under the provisions of section 19.10 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 19.11 federal taxable income; 19.12 (7) in the case of mines, oil and gas wells, other natural 19.13 deposits, and timber for which percentage depletion was 19.14 disallowed pursuant to subdivision 19c, clause (11), a 19.15 reasonable allowance for depletion based on actual cost. In the 19.16 case of leases the deduction must be apportioned between the 19.17 lessor and lessee in accordance with rules prescribed by the 19.18 commissioner. In the case of property held in trust, the 19.19 allowable deduction must be apportioned between the income 19.20 beneficiaries and the trustee in accordance with the pertinent 19.21 provisions of the trust, or if there is no provision in the 19.22 instrument, on the basis of the trust's income allocable to 19.23 each; 19.24 (8) for certified pollution control facilities placed in 19.25 service in a taxable year beginning before December 31, 1986, 19.26 and for which amortization deductions were elected under section 19.27 169 of the Internal Revenue Code of 1954, as amended through 19.28 December 31, 1985, an amount equal to the allowance for 19.29 depreciation under Minnesota Statutes 1986, section 290.09, 19.30 subdivision 7; 19.31 (9) amounts included in federal taxable income that are due 19.32 to refunds of income, excise, or franchise taxes based on net 19.33 income or related minimum taxes paid by the corporation to 19.34 Minnesota, another state, a political subdivision of another 19.35 state, the District of Columbia, or a foreign country or 19.36 possession of the United States to the extent that the taxes 20.1 were added to federal taxable income under section 290.01, 20.2 subdivision 19c, clause (1), in a prior taxable year; 20.3 (10) 80 percent of royalties, fees, or other like income 20.4 accrued or received from a foreign operating corporation or a 20.5 foreign corporation which is part of the same unitary business 20.6 as the receiving corporation; 20.7 (11) income or gains from the business of mining as defined 20.8 in section 290.05, subdivision 1, clause (a), that are not 20.9 subject to Minnesota franchise tax; 20.10 (12) the amount of handicap access expenditures in the 20.11 taxable year which are not allowed to be deducted or capitalized 20.12 under section 44(d)(7) of the Internal Revenue Code; 20.13 (13) the amount of qualified research expenses not allowed 20.14 for federal income tax purposes under section 280C(c) of the 20.15 Internal Revenue Code, but only to the extent that the amount 20.16 exceeds the amount of the credit allowed under section 290.068; 20.17 (14) the amount of salary expenses not allowed for federal 20.18 income tax purposes due to claiming the Indian employment credit 20.19 under section 45A(a) of the Internal Revenue Code; 20.20 (15) the amount of any refund of environmental taxes paid 20.21 under section 59A of the Internal Revenue Code; 20.22 (16) for taxable years beginning before January 1, 2008, 20.23 the amount of the federal small ethanol producer credit allowed 20.24 under section 40(a)(3) of the Internal Revenue Code which is 20.25 included in gross income under section 87 of the Internal 20.26 Revenue Code; 20.27 (17) for a corporation whose foreign sales corporation, as 20.28 defined in section 922 of the Internal Revenue Code, constituted 20.29 a foreign operating corporation during any taxable year ending 20.30 before January 1, 1995, and a return was filed by August 15, 20.31 1996, claiming the deduction under section 290.21, subdivision 20.32 4, for income received from the foreign operating corporation, 20.33 an amount equal to 1.23 multiplied by the amount of income 20.34 excluded under section 114 of the Internal Revenue Code, 20.35 provided the income is not income of a foreign operating 20.36 company; 21.1 (18) any decrease in subpart F income, as defined in 21.2 section 952(a) of the Internal Revenue Code, for the taxable 21.3 year when subpart F income is calculated without regard to the 21.4 provisions of section 614 of Public Law 107-147;and21.5 (19) in each of the five tax years immediately following 21.6 the tax year in which an addition is required under subdivision 21.7 19c, clause (16), an amount equal to one-fifth of the delayed 21.8 depreciation. For purposes of this clause, "delayed 21.9 depreciation" means the amount of the addition made by the 21.10 taxpayer under subdivision 19c, clause (16). The resulting 21.11 delayed depreciation cannot be less than zero; and 21.12 (20) in each of the five tax years immediately following 21.13 the tax year in which an addition is required under subdivision 21.14 19c, clause (17), an amount equal to one-fifth of the amount of 21.15 the addition. 21.16[EFFECTIVE DATE.] This section is effective for tax years 21.17 beginning after December 31, 2004. 21.18 Sec. 6. Minnesota Statutes 2004, section 290.01, 21.19 subdivision 31, is amended to read: 21.20 Subd. 31. [INTERNAL REVENUE CODE.] Unless specifically 21.21 defined otherwise, "Internal Revenue Code" means the Internal 21.22 Revenue Code of 1986, as amended through June 15, 2003, and as 21.23 further amended by the American Jobs Creation Act of 2004, 21.24 Public Law 108-435. 21.25[EFFECTIVE DATE.] This section is effective the day 21.26 following final enactment except the changes incorporated by 21.27 federal changes are effective at the same times as the changes 21.28 were effective for federal purposes. 21.29 Sec. 7. Minnesota Statutes 2004, section 290.06, 21.30 subdivision 2c, is amended to read: 21.31 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 21.32 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 21.33 married individuals filing joint returns and surviving spouses 21.34 as defined in section 2(a) of the Internal Revenue Code must be 21.35 computed by applying to their taxable net income the following 21.36 schedule of rates: 22.1 (1) On the first $25,680, 5.35 percent; 22.2 (2) On all over $25,680, but not over $102,030, 7.05 22.3 percent; 22.4 (3) On all over $102,030, 7.85 percent. 22.5 Married individuals filing separate returns, estates, and 22.6 trusts must compute their income tax by applying the above rates 22.7 to their taxable income, except that the income brackets will be 22.8 one-half of the above amounts. 22.9 (b) The income taxes imposed by this chapter upon unmarried 22.10 individuals must be computed by applying to taxable net income 22.11 the following schedule of rates: 22.12 (1) On the first $17,570, 5.35 percent; 22.13 (2) On all over $17,570, but not over $57,710, 7.05 22.14 percent; 22.15 (3) On all over $57,710, 7.85 percent. 22.16 (c) The income taxes imposed by this chapter upon unmarried 22.17 individuals qualifying as a head of household as defined in 22.18 section 2(b) of the Internal Revenue Code must be computed by 22.19 applying to taxable net income the following schedule of rates: 22.20 (1) On the first $21,630, 5.35 percent; 22.21 (2) On all over $21,630, but not over $86,910, 7.05 22.22 percent; 22.23 (3) On all over $86,910, 7.85 percent. 22.24 (d) In lieu of a tax computed according to the rates set 22.25 forth in this subdivision, the tax of any individual taxpayer 22.26 whose taxable net income for the taxable year is less than an 22.27 amount determined by the commissioner must be computed in 22.28 accordance with tables prepared and issued by the commissioner 22.29 of revenue based on income brackets of not more than $100. The 22.30 amount of tax for each bracket shall be computed at the rates 22.31 set forth in this subdivision, provided that the commissioner 22.32 may disregard a fractional part of a dollar unless it amounts to 22.33 50 cents or more, in which case it may be increased to $1. 22.34 (e) An individual who is not a Minnesota resident for the 22.35 entire year must compute the individual's Minnesota income tax 22.36 as provided in this subdivision. After the application of the 23.1 nonrefundable credits provided in this chapter, the tax 23.2 liability must then be multiplied by a fraction in which: 23.3 (1) the numerator is the individual's Minnesota source 23.4 federal adjusted gross income as defined in section 62 of the 23.5 Internal Revenue Code and increased by the additions required 23.6 under section 290.01, subdivision 19a, clauses (1), (5),and23.7 (6), (7), (8), and (9), and reduced by the subtraction under 23.8 section 290.01, subdivision 19b, clause (11), and the Minnesota 23.9 assignable portion of the subtraction for United States 23.10 government interest under section 290.01, subdivision 19b, 23.11 clause (1), and the subtractions under clauses (10), (11), and 23.12 (12), after applying the allocation and assignability provisions 23.13 of section 290.081, clause (a), or 290.17; and 23.14 (2) the denominator is the individual's federal adjusted 23.15 gross income as defined in section 62 of the Internal Revenue 23.16 Code of 1986, increased by the amounts specified in section 23.17 290.01, subdivision 19a, clauses (1), (5),and(6), (7), (8), 23.18 and (9), and reduced by the amounts specified in section 290.01, 23.19 subdivision 19b, clauses (1)and, (10), (11), and (12). 23.20[EFFECTIVE DATE.] This section is effective for tax years 23.21 beginning after December 31, 2004. 23.22 Sec. 8. Minnesota Statutes 2004, section 290.067, 23.23 subdivision 2a, is amended to read: 23.24 Subd. 2a. [INCOME.] (a) For purposes of this section, 23.25 "income" means the sum of the following: 23.26 (1) federal adjusted gross income as defined in section 62 23.27 of the Internal Revenue Code; and 23.28 (2) the sum of the following amounts to the extent not 23.29 included in clause (1): 23.30 (i) all nontaxable income; 23.31 (ii) the amount of a passive activity loss that is not 23.32 disallowed as a result of section 469, paragraph (i) or (m) of 23.33 the Internal Revenue Code and the amount of passive activity 23.34 loss carryover allowed under section 469(b) of the Internal 23.35 Revenue Code; 23.36 (iii) an amount equal to the total of any discharge of 24.1 qualified farm indebtedness of a solvent individual excluded 24.2 from gross income under section 108(g) of the Internal Revenue 24.3 Code; 24.4 (iv) cash public assistance and relief; 24.5 (v) any pension or annuity (including railroad retirement 24.6 benefits, all payments received under the federal Social 24.7 Security Act, supplemental security income, and veterans 24.8 benefits), which was not exclusively funded by the claimant or 24.9 spouse, or which was funded exclusively by the claimant or 24.10 spouse and which funding payments were excluded from federal 24.11 adjusted gross income in the years when the payments were made; 24.12 (vi) interest received from the federal or a state 24.13 government or any instrumentality or political subdivision 24.14 thereof; 24.15 (vii) workers' compensation; 24.16 (viii) nontaxable strike benefits; 24.17 (ix) the gross amounts of payments received in the nature 24.18 of disability income or sick pay as a result of accident, 24.19 sickness, or other disability, whether funded through insurance 24.20 or otherwise; 24.21 (x) a lump sum distribution under section 402(e)(3) of the 24.22 Internal Revenue Code of 1986, as amended through December 31, 24.23 1995; 24.24 (xi) contributions made by the claimant to an individual 24.25 retirement account, including a qualified voluntary employee 24.26 contribution; simplified employee pension plan; self-employed 24.27 retirement plan; cash or deferred arrangement plan under section 24.28 401(k) of the Internal Revenue Code; or deferred compensation 24.29 plan under section 457 of the Internal Revenue Code;and24.30 (xii) nontaxable scholarship or fellowship grants; and 24.31 (xiii) the amount of deduction allowed under section 199 of 24.32 the Internal Revenue Code. 24.33 In the case of an individual who files an income tax return 24.34 on a fiscal year basis, the term "federal adjusted gross income" 24.35 means federal adjusted gross income reflected in the fiscal year 24.36 ending in the next calendar year. Federal adjusted gross income 25.1 may not be reduced by the amount of a net operating loss 25.2 carryback or carryforward or a capital loss carryback or 25.3 carryforward allowed for the year. 25.4 (b) "Income" does not include: 25.5 (1) amounts excluded pursuant to the Internal Revenue Code, 25.6 sections 101(a) and 102; 25.7 (2) amounts of any pension or annuity that were exclusively 25.8 funded by the claimant or spouse if the funding payments were 25.9 not excluded from federal adjusted gross income in the years 25.10 when the payments were made; 25.11 (3) surplus food or other relief in kind supplied by a 25.12 governmental agency; 25.13 (4) relief granted under chapter 290A; 25.14 (5) child support payments received under a temporary or 25.15 final decree of dissolution or legal separation; and 25.16 (6) restitution payments received by eligible individuals 25.17 and excludable interest as defined in section 803 of the 25.18 Economic Growth and Tax Relief Reconciliation Act of 2001, 25.19 Public Law 107-16. 25.20[EFFECTIVE DATE.] This section is effective for tax years 25.21 beginning after December 31, 2003. 25.22 Sec. 9. Minnesota Statutes 2004, section 290.091, 25.23 subdivision 2, is amended to read: 25.24 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 25.25 this section, the following terms have the meanings given: 25.26 (a) "Alternative minimum taxable income" means the sum of 25.27 the following for the taxable year: 25.28 (1) the taxpayer's federal alternative minimum taxable 25.29 income as defined in section 55(b)(2) of the Internal Revenue 25.30 Code; 25.31 (2) the taxpayer's itemized deductions allowed in computing 25.32 federal alternative minimum taxable income, but excluding: 25.33 (i) the charitable contribution deduction under section 170 25.34 of the Internal Revenue Code to the extent that the deduction 25.35 exceeds 1.0 percent of adjusted gross income, as defined in 25.36 section 62 of the Internal Revenue Code; 26.1 (ii) the medical expense deduction; 26.2 (iii) the casualty, theft, and disaster loss deduction; and 26.3 (iv) the impairment-related work expenses of a disabled 26.4 person; 26.5 (3) for depletion allowances computed under section 613A(c) 26.6 of the Internal Revenue Code, with respect to each property (as 26.7 defined in section 614 of the Internal Revenue Code), to the 26.8 extent not included in federal alternative minimum taxable 26.9 income, the excess of the deduction for depletion allowable 26.10 under section 611 of the Internal Revenue Code for the taxable 26.11 year over the adjusted basis of the property at the end of the 26.12 taxable year (determined without regard to the depletion 26.13 deduction for the taxable year); 26.14 (4) to the extent not included in federal alternative 26.15 minimum taxable income, the amount of the tax preference for 26.16 intangible drilling cost under section 57(a)(2) of the Internal 26.17 Revenue Code determined without regard to subparagraph (E); 26.18 (5) to the extent not included in federal alternative 26.19 minimum taxable income, the amount of interest income as 26.20 provided by section 290.01, subdivision 19a, clause (1); and 26.21 (6) the amount of addition required by section 290.01, 26.22 subdivision 19a,clauseclauses (7), (8), and (9); 26.23 less the sum of the amounts determined under the following: 26.24 (1) interest income as defined in section 290.01, 26.25 subdivision 19b, clause (1); 26.26 (2) an overpayment of state income tax as provided by 26.27 section 290.01, subdivision 19b, clause (2), to the extent 26.28 included in federal alternative minimum taxable income; 26.29 (3) the amount of investment interest paid or accrued 26.30 within the taxable year on indebtedness to the extent that the 26.31 amount does not exceed net investment income, as defined in 26.32 section 163(d)(4) of the Internal Revenue Code. Interest does 26.33 not include amounts deducted in computing federal adjusted gross 26.34 income; and 26.35 (4) amounts subtracted from federal taxable income as 26.36 provided by section 290.01, subdivision 19b, clauses (10)and, 27.1 (11), and (12). 27.2 In the case of an estate or trust, alternative minimum 27.3 taxable income must be computed as provided in section 59(c) of 27.4 the Internal Revenue Code. 27.5 (b) "Investment interest" means investment interest as 27.6 defined in section 163(d)(3) of the Internal Revenue Code. 27.7 (c) "Tentative minimum tax" equals 6.4 percent of 27.8 alternative minimum taxable income after subtracting the 27.9 exemption amount determined under subdivision 3. 27.10 (d) "Regular tax" means the tax that would be imposed under 27.11 this chapter (without regard to this section and section 27.12 290.032), reduced by the sum of the nonrefundable credits 27.13 allowed under this chapter. 27.14 (e) "Net minimum tax" means the minimum tax imposed by this 27.15 section. 27.16[EFFECTIVE DATE.] This section is effective for tax years 27.17 beginning after December 31, 2004. 27.18 Sec. 10. Minnesota Statutes 2004, section 290A.03, 27.19 subdivision 3, is amended to read: 27.20 Subd. 3. [INCOME.] (1) "Income" means the sum of the 27.21 following: 27.22 (a) federal adjusted gross income as defined in the 27.23 Internal Revenue Code; and 27.24 (b) the sum of the following amounts to the extent not 27.25 included in clause (a): 27.26 (i) all nontaxable income; 27.27 (ii) the amount of a passive activity loss that is not 27.28 disallowed as a result of section 469, paragraph (i) or (m) of 27.29 the Internal Revenue Code and the amount of passive activity 27.30 loss carryover allowed under section 469(b) of the Internal 27.31 Revenue Code; 27.32 (iii) an amount equal to the total of any discharge of 27.33 qualified farm indebtedness of a solvent individual excluded 27.34 from gross income under section 108(g) of the Internal Revenue 27.35 Code; 27.36 (iv) cash public assistance and relief; 28.1 (v) any pension or annuity (including railroad retirement 28.2 benefits, all payments received under the federal Social 28.3 Security Act, supplemental security income, and veterans 28.4 benefits), which was not exclusively funded by the claimant or 28.5 spouse, or which was funded exclusively by the claimant or 28.6 spouse and which funding payments were excluded from federal 28.7 adjusted gross income in the years when the payments were made; 28.8 (vi) interest received from the federal or a state 28.9 government or any instrumentality or political subdivision 28.10 thereof; 28.11 (vii) workers' compensation; 28.12 (viii) nontaxable strike benefits; 28.13 (ix) the gross amounts of payments received in the nature 28.14 of disability income or sick pay as a result of accident, 28.15 sickness, or other disability, whether funded through insurance 28.16 or otherwise; 28.17 (x) a lump sum distribution under section 402(e)(3) of the 28.18 Internal Revenue Code of 1986, as amended through December 31, 28.19 1995; 28.20 (xi) contributions made by the claimant to an individual 28.21 retirement account, including a qualified voluntary employee 28.22 contribution; simplified employee pension plan; self-employed 28.23 retirement plan; cash or deferred arrangement plan under section 28.24 401(k) of the Internal Revenue Code; or deferred compensation 28.25 plan under section 457 of the Internal Revenue Code;and28.26 (xii) nontaxable scholarship or fellowship grants; and 28.27 (xiii) the amount of deduction allowed under section 199 of 28.28 the Internal Revenue Code. 28.29 In the case of an individual who files an income tax return 28.30 on a fiscal year basis, the term "federal adjusted gross income" 28.31 shall mean federal adjusted gross income reflected in the fiscal 28.32 year ending in the calendar year. Federal adjusted gross income 28.33 shall not be reduced by the amount of a net operating loss 28.34 carryback or carryforward or a capital loss carryback or 28.35 carryforward allowed for the year. 28.36 (2) "Income" does not include: 29.1 (a) amounts excluded pursuant to the Internal Revenue Code, 29.2 sections 101(a) and 102; 29.3 (b) amounts of any pension or annuity which was exclusively 29.4 funded by the claimant or spouse and which funding payments were 29.5 not excluded from federal adjusted gross income in the years 29.6 when the payments were made; 29.7 (c) surplus food or other relief in kind supplied by a 29.8 governmental agency; 29.9 (d) relief granted under this chapter; 29.10 (e) child support payments received under a temporary or 29.11 final decree of dissolution or legal separation; or 29.12 (f) restitution payments received by eligible individuals 29.13 and excludable interest as defined in section 803 of the 29.14 Economic Growth and Tax Relief Reconciliation Act of 2001, 29.15 Public Law 107-16. 29.16 (3) The sum of the following amounts may be subtracted from 29.17 income: 29.18 (a) for the claimant's first dependent, the exemption 29.19 amount multiplied by 1.4; 29.20 (b) for the claimant's second dependent, the exemption 29.21 amount multiplied by 1.3; 29.22 (c) for the claimant's third dependent, the exemption 29.23 amount multiplied by 1.2; 29.24 (d) for the claimant's fourth dependent, the exemption 29.25 amount multiplied by 1.1; 29.26 (e) for the claimant's fifth dependent, the exemption 29.27 amount; and 29.28 (f) if the claimant or claimant's spouse was disabled or 29.29 attained the age of 65 on or before December 31 of the year for 29.30 which the taxes were levied or rent paid, the exemption amount. 29.31 For purposes of this subdivision, the "exemption amount" 29.32 means the exemption amount under section 151(d) of the Internal 29.33 Revenue Code for the taxable year for which the income is 29.34 reported. 29.35[EFFECTIVE DATE.] This section is effective for property 29.36 tax refunds based on household income for 2004 and thereafter. 30.1 Sec. 11. Minnesota Statutes 2004, section 290A.03, 30.2 subdivision 15, is amended to read: 30.3 Subd. 15. [INTERNAL REVENUE CODE.] "Internal Revenue Code" 30.4 means the Internal Revenue Code of 1986, as amended through June 30.5 15, 2003, and as further amended by the American Jobs Creation 30.6 Act of 2004, Public Law 108-435. 30.7[EFFECTIVE DATE.] This section is effective for property 30.8 tax refunds based on property taxes payable on or after December 30.9 31, 2004, and rent paid on or after December 31, 2003. 30.10 ARTICLE 3 30.11 SALES, USE, AND SPECIAL TAXES - SF1209 30.12 Section 1. Minnesota Statutes 2004, section 16C.03, is 30.13 amended by adding a subdivision to read: 30.14 Subd. 18. [CONTRACTS WITH FOREIGN VENDORS.] (a) The 30.15 commissioner and other agencies to which this section applies 30.16 and the legislative branch of government shall, subject to 30.17 paragraph (d), cancel a contract for goods or services from a 30.18 vendor or an affiliate of a vendor or suspend or debar a vendor 30.19 or an affiliate of a vendor from future contracts upon 30.20 notification from the commissioner of revenue that the vendor or 30.21 an affiliate of the vendor has not registered to collect the 30.22 sales and use tax imposed under chapter 297A on its sales in 30.23 Minnesota or to a destination in Minnesota. This subdivision 30.24 shall not apply to state colleges and universities, the courts, 30.25 and any agency in the judicial branch of government. For 30.26 purposes of this subdivision, the term "affiliate" means any 30.27 person or entity that is controlled by, or is under common 30.28 control of, a vendor through stock ownership or other 30.29 affiliation. 30.30 (b) Beginning January 1, 2006, each vendor or affiliate of 30.31 a vendor selling goods or services, subject to tax under chapter 30.32 297A, to an agency or the legislature must provide its Minnesota 30.33 sales and use tax business identification number, upon request, 30.34 to show that the vendor is registered to collect Minnesota sales 30.35 or use tax. 30.36 (c) The commissioner of revenue shall periodically provide 31.1 to the commissioner and the legislative branch a list of vendors 31.2 who have not registered to collect Minnesota sales and use tax 31.3 and who are subject to being suspended or debarred as vendors or 31.4 having their contracts canceled. 31.5 (d) The provisions of this subdivision may be waived by the 31.6 commissioner or the legislative branch when the vendor is the 31.7 single source of such goods or services, in the event of an 31.8 emergency, or when it is in the best interests of the state as 31.9 determined by the commissioner in consultation with the 31.10 commissioner of revenue. Such consultation is not a disclosure 31.11 violation under chapter 270B. 31.12[EFFECTIVE DATE.] This section is effective for all 31.13 contracts entered into after December 31, 2005. 31.14 Sec. 2. [295.75] [LIQUOR GROSS RECEIPTS TAX.] 31.15 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 31.16 section, the following terms have the meanings given. 31.17 (b) "Commissioner" means the commissioner of revenue. 31.18 (c) "Gross receipts" means the total amount received, in 31.19 money or by barter or exchange, for all liquor sales at retail 31.20 as measured by the sales price, but does not include any taxes 31.21 imposed directly on the consumer that are separately stated on 31.22 the invoice, bill of sale, or similar document given to the 31.23 purchaser. 31.24 (d) "Liquor" means: 31.25 (1) intoxicating liquor, as defined in section 340A.101, 31.26 subdivision 14; 31.27 (2) beverage containing intoxicating liquor; and 31.28 (3) 3.2 percent malt liquor, as defined in section 31.29 340A.101, subdivision 19, when sold at an on-sale or off-sale 31.30 municipal liquor store or other establishment licensed to sell 31.31 any type of intoxicating liquor. 31.32 (e) "Liquor retailer" means a retailer that sells liquor. 31.33 (f) "Retail sale" has the meaning given in section 297A.61, 31.34 subdivision 4. 31.35 Subd. 2. [GROSS RECEIPTS TAX IMPOSED.] A tax is imposed on 31.36 each liquor retailer equal to 2.5 percent of gross receipts from 32.1 retail sales in Minnesota of liquor. 32.2 Subd. 3. [USE TAX IMPOSED; CREDIT FOR TAXES PAID.] (a) A 32.3 person that receives liquor for use or storage in Minnesota, 32.4 other than from a liquor retailer that paid the tax under 32.5 subdivision 2, is subject to tax at the rate imposed under 32.6 subdivision 2. Liability for the tax is incurred when the 32.7 person has possession of the liquor in Minnesota. The tax must 32.8 be remitted to the commissioner in the same manner prescribed 32.9 for the taxes imposed under chapter 297A. 32.10 (b) A person that has paid taxes to another jurisdiction on 32.11 the same transaction and is subject to tax under this section is 32.12 entitled to a credit for the tax legally due and paid to another 32.13 jurisdiction to the extent of the lesser of (1) the tax actually 32.14 paid to the other jurisdiction, or (2) the amount of tax imposed 32.15 by Minnesota on the transaction subject to tax in the other 32.16 jurisdiction. 32.17 Subd. 4. [TAX COLLECTION REQUIRED.] A liquor retailer with 32.18 nexus in Minnesota, who is not subject to tax under subdivision 32.19 2, is required to collect the tax imposed under subdivision 3 32.20 from the purchaser of the liquor and give the purchaser a 32.21 receipt for the tax paid. The tax collected must be remitted to 32.22 the commissioner in the same manner prescribed for the taxes 32.23 imposed under chapter 297A. 32.24 Subd. 5. [TAXES PAID TO ANOTHER JURISDICTION; CREDIT.] A 32.25 liquor retailer that has paid taxes to another jurisdiction 32.26 measured by gross receipts and is subject to tax under this 32.27 section on the same gross receipts is entitled to a credit for 32.28 the tax legally due and paid to another jurisdiction to the 32.29 extent of the lesser of (1) the tax actually paid to the other 32.30 jurisdiction, or (2) the amount of tax imposed by Minnesota on 32.31 the gross receipts subject to tax in the other taxing 32.32 jurisdictions. 32.33 Subd. 6. [EXEMPTIONS.] All of the exemptions applicable to 32.34 the taxes imposed under chapter 297A are applicable to the taxes 32.35 imposed under this section. 32.36 Subd. 7. [SOURCING OF SALES.] All of the provisions of 33.1 section 297A.668 apply to the taxes imposed by this section. 33.2 Subd. 8. [PAYMENT; REPORTING.] A liquor retailer shall 33.3 report the tax on a return prescribed by the commissioner of 33.4 revenue, and shall remit the tax with the return. The return 33.5 and the tax must be filed and paid using the filing cycle and 33.6 due dates provided for taxes imposed under chapter 297A. 33.7 Subd. 9. [ADMINISTRATION.] Unless specifically provided 33.8 otherwise by this section, the audit, assessment, refund, 33.9 penalty, interest, enforcement, collection remedies, appeal, and 33.10 administrative provisions of chapters 270 and 289A that are 33.11 applicable to taxes imposed under chapter 297A apply to taxes 33.12 imposed under this section. 33.13 Subd. 10. [INTEREST ON OVERPAYMENTS.] Interest must be 33.14 paid on an overpayment refunded or credited to the taxpayer from 33.15 the date of payment of the tax until the date the refund is paid 33.16 or credited. For purposes of this subdivision, the date of 33.17 payment is the due date of the return or the date of actual 33.18 payment of the tax, whichever is later. 33.19 Subd. 11. [DEPOSIT OF REVENUES.] The commissioner shall 33.20 deposit all revenues, including penalties and interest, derived 33.21 from the tax imposed by this section in the general fund. 33.22[EFFECTIVE DATE.] This section is effective for sales and 33.23 purchases occurring on or after January 1, 2006. 33.24 Sec. 3. Minnesota Statutes 2004, section 297A.68, 33.25 subdivision 2, is amended to read: 33.26 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 33.27 (a) Materials stored, used, or consumed in industrial production 33.28 of personal property intended to be sold ultimately at retail 33.29 are exempt, whether or not the item so used becomes an 33.30 ingredient or constituent part of the property produced. 33.31 Materials that qualify for this exemption include, but are not 33.32 limited to, the following: 33.33 (1) chemicals, including chemicals used for cleaning food 33.34 processing machinery and equipment; 33.35 (2) materials, including chemicals, fuels, and electricity 33.36 purchased by persons engaged in industrial production to treat 34.1 waste generated as a result of the production process; 34.2 (3) fuels, electricity, gas, and steam used or consumed in 34.3 the production process, except that electricity, gas, or steam 34.4 used for space heating, cooling, or lighting is exempt if (i) it 34.5 is in excess of the average climate control or lighting for the 34.6 production area, and (ii) it is necessary to produce that 34.7 particular product; 34.8 (4) petroleum products and lubricants; 34.9 (5) packaging materials, including returnable containers 34.10 used in packaging food and beverage products; 34.11 (6) accessory tools, equipment, and other items that are 34.12 separate detachable units with an ordinary useful life of less 34.13 than 12 months used in producing a direct effect upon the 34.14 product; and 34.15 (7) the following materials, tools, and equipment used in 34.16 metalcasting: crucibles, thermocouple protection sheaths and 34.17 tubes, stalk tubes, refractory materials, molten metal filters 34.18 and filter boxes, degassing lances, and base blocks. 34.19 (b) This exemption does not include: 34.20 (1) machinery, equipment, implements, tools, accessories, 34.21 appliances, contrivances and furniture and fixtures, except 34.22 those listed in paragraph (a), clause (6); and 34.23 (2) petroleum and special fuels used in producing or 34.24 generating power for propelling ready-mixed concrete trucks on 34.25 the public highways of this state. 34.26 (c) Industrial production includes, but is not limited to, 34.27 research, development, design or production of any tangible 34.28 personal property, manufacturing, processing (other than by 34.29 restaurants and consumers) of agricultural products (whether 34.30 vegetable or animal), commercial fishing, refining, smelting, 34.31 reducing, brewing, distilling, printing, mining, quarrying, 34.32 lumbering, generating electricity, the production of road 34.33 building materials, and the research, development, design, or 34.34 production of computer software. Industrial production does not 34.35 include painting, cleaning, repairing or similar processing of 34.36 property except as part of the original manufacturing process. 35.1 Industrial production does not include the transportation, 35.2 transmission, or distribution of petroleum, liquefied gas, 35.3 natural gas, water, or steam, in, by, or through pipes, lines, 35.4 tanks, mains, or other means of transporting those products. 35.5 For purposes of this paragraph, "transportation, transmission, 35.6 or distribution" does not include blending of petroleum or 35.7 biodiesel fuel as defined in section 239.77. 35.8[EFFECTIVE DATE.] This section is effective for sales and 35.9 purchases made after June 30, 2005. 35.10 Sec. 4. Minnesota Statutes 2004, section 297A.68, 35.11 subdivision 5, is amended to read: 35.12 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 35.13 exempt. The tax must be imposed and collected as if the rate 35.14 under section 297A.62, subdivision 1, applied, and then refunded 35.15 in the manner provided in section 297A.75. 35.16 "Capital equipment" means machinery and equipment purchased 35.17 or leased, and used in this state by the purchaser or lessee 35.18 primarily for manufacturing, fabricating, mining, or refining 35.19 tangible personal property to be sold ultimately at retail if 35.20 the machinery and equipment are essential to the integrated 35.21 production process of manufacturing, fabricating, mining, or 35.22 refining. Capital equipment also includes machinery and 35.23 equipment used to electronically transmit results retrieved by a 35.24 customer of an on-line computerized data retrieval system. 35.25 (b) Capital equipment includes, but is not limited to: 35.26 (1) machinery and equipment used to operate, control, or 35.27 regulate the production equipment; 35.28 (2) machinery and equipment used for research and 35.29 development, design, quality control, and testing activities; 35.30 (3) environmental control devices that are used to maintain 35.31 conditions such as temperature, humidity, light, or air pressure 35.32 when those conditions are essential to and are part of the 35.33 production process; 35.34 (4) materials and supplies used to construct and install 35.35 machinery or equipment; 35.36 (5) repair and replacement parts, including accessories, 36.1 whether purchased as spare parts, repair parts, or as upgrades 36.2 or modifications to machinery or equipment; 36.3 (6) materials used for foundations that support machinery 36.4 or equipment; 36.5 (7) materials used to construct and install special purpose 36.6 buildings used in the production process; 36.7 (8) ready-mixed concrete equipment in which the ready-mixed 36.8 concrete is mixed as part of the delivery process regardless if 36.9 mounted on a chassis and leases of ready-mixed concrete trucks; 36.10 and 36.11 (9) machinery or equipment used for research, development, 36.12 design, or production of computer software. 36.13 (c) Capital equipment does not include the following: 36.14 (1) motor vehicles taxed under chapter 297B; 36.15 (2) machinery or equipment used to receive or store raw 36.16 materials; 36.17 (3) building materials, except for materials included in 36.18 paragraph (b), clauses (6) and (7); 36.19 (4) machinery or equipment used for nonproduction purposes, 36.20 including, but not limited to, the following: plant security, 36.21 fire prevention, first aid, and hospital stations; support 36.22 operations or administration; pollution control; and plant 36.23 cleaning, disposal of scrap and waste, plant communications, 36.24 space heating, cooling, lighting, or safety; 36.25 (5) farm machinery and aquaculture production equipment as 36.26 defined by section 297A.61, subdivisions 12 and 13; 36.27 (6) machinery or equipment purchased and installed by a 36.28 contractor as part of an improvement to real property;or36.29 (7) machinery or equipment used in the transportation, 36.30 transmission, or distribution of petroleum, liquefied gas, 36.31 natural gas, water, or steam, in, by, or through pipes, lines, 36.32 tanks, mains, or other means of transporting those products. 36.33 This clause does not apply to machinery or equipment used to 36.34 blend petroleum or biodiesel fuel as defined in section 239.77; 36.35 or 36.36 (8) any other item that is not essential to the integrated 37.1 process of manufacturing, fabricating, mining, or refining. 37.2 (d) For purposes of this subdivision: 37.3 (1) "Equipment" means independent devices or tools separate 37.4 from machinery but essential to an integrated production 37.5 process, including computers and computer software, used in 37.6 operating, controlling, or regulating machinery and equipment; 37.7 and any subunit or assembly comprising a component of any 37.8 machinery or accessory or attachment parts of machinery, such as 37.9 tools, dies, jigs, patterns, and molds. 37.10 (2) "Fabricating" means to make, build, create, produce, or 37.11 assemble components or property to work in a new or different 37.12 manner. 37.13 (3) "Integrated production process" means a process or 37.14 series of operations through which tangible personal property is 37.15 manufactured, fabricated, mined, or refined. For purposes of 37.16 this clause, (i) manufacturing begins with the removal of raw 37.17 materials from inventory and ends when the last process prior to 37.18 loading for shipment has been completed; (ii) fabricating begins 37.19 with the removal from storage or inventory of the property to be 37.20 assembled, processed, altered, or modified and ends with the 37.21 creation or production of the new or changed product; (iii) 37.22 mining begins with the removal of overburden from the site of 37.23 the ores, minerals, stone, peat deposit, or surface materials 37.24 and ends when the last process before stockpiling is completed; 37.25 and (iv) refining begins with the removal from inventory or 37.26 storage of a natural resource and ends with the conversion of 37.27 the item to its completed form. 37.28 (4) "Machinery" means mechanical, electronic, or electrical 37.29 devices, including computers and computer software, that are 37.30 purchased or constructed to be used for the activities set forth 37.31 in paragraph (a), beginning with the removal of raw materials 37.32 from inventory through completion of the product, including 37.33 packaging of the product. 37.34 (5) "Machinery and equipment used for pollution control" 37.35 means machinery and equipment used solely to eliminate, prevent, 37.36 or reduce pollution resulting from an activity described in 38.1 paragraph (a). 38.2 (6) "Manufacturing" means an operation or series of 38.3 operations where raw materials are changed in form, composition, 38.4 or condition by machinery and equipment and which results in the 38.5 production of a new article of tangible personal property. For 38.6 purposes of this subdivision, "manufacturing" includes the 38.7 generation of electricity or steam to be sold at retail. 38.8 (7) "Mining" means the extraction of minerals, ores, stone, 38.9 or peat. 38.10 (8) "On-line data retrieval system" means a system whose 38.11 cumulation of information is equally available and accessible to 38.12 all its customers. 38.13 (9) "Primarily" means machinery and equipment used 50 38.14 percent or more of the time in an activity described in 38.15 paragraph (a). 38.16 (10) "Refining" means the process of converting a natural 38.17 resource to an intermediate or finished product, including the 38.18 treatment of water to be sold at retail. 38.19[EFFECTIVE DATE.] This section is effective for sales and 38.20 purchases made after June 30, 2005. 38.21 Sec. 5. Minnesota Statutes 2004, section 297I.01, is 38.22 amended by adding a subdivision to read: 38.23 Subd. 6a. [DIRECT BUSINESS.] (a) "Direct business" means 38.24 all insurance provided by an insurance company or its agents, 38.25 and specifically includes stop-loss insurance purchased in 38.26 connection with a self-insurance plan for employee health 38.27 benefits or for other purposes, but excludes: 38.28 (1) reinsurance in which an insurance company assumes the 38.29 liability of another insurance company; and 38.30 (2) self-insurance. 38.31 (b) For purposes of this subdivision, an insurance company 38.32 includes a nonprofit health service corporation, health 38.33 maintenance organization, and community integrated service 38.34 network. 38.35[EFFECTIVE DATE.] This section is effective for insurance 38.36 premiums received after December 31, 2005. 39.1 Sec. 6. Laws 2001, First Special Session chapter 5, 39.2 article 12, section 95, is amended to read: 39.3 Sec. 95. [REPEALER.] 39.4 (a) Minnesota Statutes 2000, sections 297A.61, subdivision 39.5 16; 297A.68, subdivision 21; and 297A.71, subdivisions 2 and 16, 39.6 are repealed effective for sales and purchases occurring after 39.7 June 30, 2001, except that the repeal of section 297A.61, 39.8 subdivision 16, paragraph (d), is effective for sales and 39.9 purchases occurring after July 31, 2001. 39.10 (b) Minnesota Statutes 2000,sectionssection 297A.62, 39.11 subdivision 2,and 297A.64, subdivision 1, areis repealed 39.12 effective for sales and purchases made after December 31, 2005. 39.13 (c) Minnesota Statutes 2000, section 297A.71, subdivision 39.14 15, is repealed effective for sales and purchases made after 39.15 June 30, 2002. 39.16 (d) Minnesota Statutes 2000, section 289A.60, subdivision 39.17 15, is repealed effective for liabilities after January 1, 2003. 39.18[EFFECTIVE DATE.] This section is effective the day 39.19 following final enactment. 39.20 ARTICLE 4 39.21 MISCELLANEOUS - SF1209 39.22 Section 1. Minnesota Statutes 2004, section 273.1384, 39.23 subdivision 1, is amended to read: 39.24 Subdivision 1. [RESIDENTIAL HOMESTEAD MARKET VALUE 39.25 CREDIT.] Each county auditor shall determine a homestead credit 39.26 for each class 1a, 1b, 1c, and 2a homestead property within the 39.27 county equal to 0.4 percent of the first $76,000 of market value 39.28 of the property. The amount of homestead credit for a homestead39.29may not exceed $304 and is reduced byminus .09 percent of the 39.30 market value in excess of $76,000. The credit amount may not be 39.31 less than zero. In the case of an agricultural or resort 39.32 homestead, only the market value of the house, garage, and 39.33 immediately surrounding one acre of land is eligible in 39.34 determining the property's homestead credit. In the case of a 39.35 property which is classified as part homestead and part 39.36 nonhomestead, (i) the credit shall apply only to the homestead 40.1 portion of the property., but (ii) if a portion of a property is 40.2 classified as nonhomestead solely because not all the owners 40.3 occupy the property, or solely because both spouses do not 40.4 occupy the property, the credit amount shall be initially 40.5 computed as if that nonhomestead portion were also in the 40.6 homestead class and then prorated to the owner-occupant's 40.7 percentage of ownership or prorated to one-half if both spouses 40.8 do not occupy the property. 40.9[EFFECTIVE DATE.] This section is effective for taxes 40.10 payable in 2006 and thereafter. 40.11 Sec. 2. [CITY AID PAYMENTS.] 40.12 In 2005 and 2006, market value credit reimbursements for 40.13 each city payable under Minnesota Statutes, section 273.1384, 40.14 are reduced by the dollar amount of the 2003 reduction in market 40.15 value credit reimbursements for that city due to Laws 2003, 40.16 First Special Session chapter 21, article 5, section 12. No 40.17 city's market value credit reimbursements are reduced to less 40.18 than zero under this section. To the extent sufficient 40.19 information is available on each payment date, the commissioner 40.20 shall pay the annual 2005 and 2006 market value credit 40.21 reimbursement amounts, after reduction under this section, to 40.22 cities in equal installments on the dates specified in Minnesota 40.23 Statutes, section 273.1384. 40.24[EFFECTIVE DATE.] This section is effective the day 40.25 following final enactment. 40.26 ARTICLE 5 40.27 INCOME TAX - SF1683 40.28 Section 1. Minnesota Statutes 2004, section 289A.39, 40.29 subdivision 1, is amended to read: 40.30 Subdivision 1. [EXTENSIONS FOR SERVICE MEMBERS.] (a) The 40.31 limitations of time provided by this chapter, chapter 290 40.32 relating to income taxes, chapter 271 relating to the Tax Court 40.33 for filing returns, paying taxes, claiming refunds, commencing 40.34 action thereon, appealing to the Tax Court from orders relating 40.35 to income taxes, and the filing of petitions under chapter 278 40.36 that would otherwise be dueMay 15, 1996May 1, 2004, and 41.1 appealing to the Supreme Court from decisions of the Tax Court 41.2 relating to income taxes are extended, as provided in section 41.3 7508 of the Internal Revenue Code. 41.4 (b) If a member of the National Guard or reserves is called 41.5 to active duty in the armed forces, the limitations of time 41.6 provided by this chapter and chapters 290 and 290A relating to 41.7 income taxes and claims for property tax refunds are extended by 41.8 the following period of time: 41.9 (1) in the case of an individual whose active service is in 41.10 the United States, six months; or 41.11 (2) in the case of an individual whose active service 41.12 includes service abroad, the period of initial service plus six 41.13 months. 41.14 Nothing in this paragraph reduces the time within which an 41.15 act is required or permitted under paragraph (a). 41.16 (c) If an individual entitled to the benefit of paragraph 41.17 (a) files a return during the period disregarded under paragraph 41.18 (a), interest must be paid on an overpayment or refundable 41.19 credit from the due date of the return, notwithstanding section 41.20 289A.56, subdivision 2. 41.21 (d) The provisions of this subdivision apply to the spouse 41.22 of an individual entitled to the benefits of this subdivision 41.23 with respect to a joint return filed by the spouses. 41.24[EFFECTIVE DATE.] This section is effective for taxable 41.25 years beginning after December 31, 2002, and for property taxes 41.26 payable after 2003. 41.27 Sec. 2. Minnesota Statutes 2004, section 290.01, 41.28 subdivision 7, is amended to read: 41.29 Subd. 7. [RESIDENT.] (a) The term "resident" means any 41.30 individual domiciled in Minnesota, except that an individual is 41.31 not a "resident" for the period of time that the individual is 41.32either:41.33(1) on active duty stationed outside of Minnesota while in41.34the armed forces of the United States or the United Nations; or41.35(2)a "qualified individual" as defined in section 41.36 911(d)(1) of the Internal Revenue Code, if the qualified 42.1 individual notifies the county within three months of moving out 42.2 of the country that homestead status be revoked for the 42.3 Minnesota residence of the qualified individual, and the 42.4 property is not classified as a homestead while the individual 42.5 remains a qualified individual. 42.6 (b) "Resident" also means any individual domiciled outside 42.7 the state who maintains a place of abode in the state and spends 42.8 in the aggregate more than one-half of the tax year in 42.9 Minnesota, unless: 42.10 (1) the individual or the spouse of the individual is in 42.11 the armed forces of the United States; or 42.12 (2) the individual is covered under the reciprocity 42.13 provisions in section 290.081. 42.14 For purposes of this subdivision, presence within the state 42.15 for any part of a calendar day constitutes a day spent in the 42.16 state. Individuals shall keep adequate records to substantiate 42.17 the days spent outside the state. 42.18 The term "abode" means a dwelling maintained by an 42.19 individual, whether or not owned by the individual and whether 42.20 or not occupied by the individual, and includes a dwelling place 42.21 owned or leased by the individual's spouse. 42.22 (c) Neither the commissioner nor any court shall consider 42.23 charitable contributions made by an individual within or without 42.24 the state in determining if the individual is domiciled in 42.25 Minnesota. 42.26[EFFECTIVE DATE.] This section is effective for taxable 42.27 years beginning after December 31, 2004. 42.28 Sec. 3. Minnesota Statutes 2004, section 290.01, 42.29 subdivision 19a, is amended to read: 42.30 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 42.31 individuals, estates, and trusts, there shall be added to 42.32 federal taxable income: 42.33 (1)(i) interest income on obligations of any state other 42.34 than Minnesota or a political or governmental subdivision, 42.35 municipality, or governmental agency or instrumentality of any 42.36 state other than Minnesota exempt from federal income taxes 43.1 under the Internal Revenue Code or any other federal statute; 43.2 and 43.3 (ii) exempt-interest dividends as defined in section 43.4 852(b)(5) of the Internal Revenue Code, except the portion of 43.5 the exempt-interest dividends derived from interest income on 43.6 obligations of the state of Minnesota or its political or 43.7 governmental subdivisions, municipalities, governmental agencies 43.8 or instrumentalities, but only if the portion of the 43.9 exempt-interest dividends from such Minnesota sources paid to 43.10 all shareholders represents 95 percent or more of the 43.11 exempt-interest dividends that are paid by the regulated 43.12 investment company as defined in section 851(a) of the Internal 43.13 Revenue Code, or the fund of the regulated investment company as 43.14 defined in section 851(g) of the Internal Revenue Code, making 43.15 the payment; and 43.16 (iii) for the purposes of items (i) and (ii), interest on 43.17 obligations of an Indian tribal government described in section 43.18 7871(c) of the Internal Revenue Code shall be treated as 43.19 interest income on obligations of the state in which the tribe 43.20 is located; 43.21 (2) the amount of income taxes paid or accrued within the 43.22 taxable year under this chapter and income taxes paid to any 43.23 other state or to any province or territory of Canada, to the 43.24 extent allowed as a deduction under section 63(d) of the 43.25 Internal Revenue Code, but the addition may not be more than the 43.26 amount by which the itemized deductions as allowed under section 43.27 63(d) of the Internal Revenue Code exceeds the amount of the 43.28 standard deduction as defined in section 63(c) of the Internal 43.29 Revenue Code. For the purpose of this paragraph, the 43.30 disallowance of itemized deductions under section 68 of the 43.31 Internal Revenue Code of 1986, income tax is the last itemized 43.32 deduction disallowed; 43.33 (3) the capital gain amount of a lump sum distribution to 43.34 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 43.35 Reform Act of 1986, Public Law 99-514, applies; 43.36 (4) the amount of income taxes paid or accrued within the 44.1 taxable year under this chapter and income taxes paid to any 44.2 other state or any province or territory of Canada, to the 44.3 extent allowed as a deduction in determining federal adjusted 44.4 gross income. For the purpose of this paragraph, income taxes 44.5 do not include the taxes imposed by sections 290.0922, 44.6 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 44.7 (5) the amount of expense, interest, or taxes disallowed 44.8 pursuant to section 290.10; 44.9 (6) the amount of a partner's pro rata share of net income 44.10 which does not flow through to the partner because the 44.11 partnership elected to pay the tax on the income under section 44.12 6242(a)(2) of the Internal Revenue Code;and44.13 (7) 80 percent of the depreciation deduction allowed under 44.14 section 168(k) of the Internal Revenue Code. For purposes of 44.15 this clause, if the taxpayer has an activity that in the taxable 44.16 year generates a deduction for depreciation under section 168(k) 44.17 and the activity generates a loss for the taxable year that the 44.18 taxpayer is not allowed to claim for the taxable year, "the 44.19 depreciation allowed under section 168(k)" for the taxable year 44.20 is limited to excess of the depreciation claimed by the activity 44.21 under section 168(k) over the amount of the loss from the 44.22 activity that is not allowed in the taxable year. In succeeding 44.23 taxable years when the losses not allowed in the taxable year 44.24 are allowed, the depreciation under section 168(k) is allowed; 44.25 and 44.26 (8) the amount of expenses disallowed under section 290.10, 44.27 subdivision 2. 44.28[EFFECTIVE DATE.] This section is effective for taxable 44.29 years beginning after December 31, 2004. 44.30 Sec. 4. Minnesota Statutes 2004, section 290.01, 44.31 subdivision 19b, is amended to read: 44.32 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 44.33 individuals, estates, and trusts, there shall be subtracted from 44.34 federal taxable income: 44.35 (1) interest income on obligations of any authority, 44.36 commission, or instrumentality of the United States to the 45.1 extent includable in taxable income for federal income tax 45.2 purposes but exempt from state income tax under the laws of the 45.3 United States; 45.4 (2) if included in federal taxable income, the amount of 45.5 any overpayment of income tax to Minnesota or to any other 45.6 state, for any previous taxable year, whether the amount is 45.7 received as a refund or as a credit to another taxable year's 45.8 income tax liability; 45.9 (3) the amount paid to others, less the amount used to 45.10 claim the credit allowed under section 290.0674, not to exceed 45.11 $1,625 for each qualifying child in grades kindergarten to 6 and 45.12 $2,500 for each qualifying child in grades 7 to 12, for tuition, 45.13 textbooks, and transportation of each qualifying child in 45.14 attending an elementary or secondary school situated in 45.15 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 45.16 wherein a resident of this state may legally fulfill the state's 45.17 compulsory attendance laws, which is not operated for profit, 45.18 and which adheres to the provisions of the Civil Rights Act of 45.19 1964 and chapter 363A. For the purposes of this clause, 45.20 "tuition" includes fees or tuition as defined in section 45.21 290.0674, subdivision 1, clause (1). As used in this clause, 45.22 "textbooks" includes books and other instructional materials and 45.23 equipment purchased or leased for use in elementary and 45.24 secondary schools in teaching only those subjects legally and 45.25 commonly taught in public elementary and secondary schools in 45.26 this state. Equipment expenses qualifying for deduction 45.27 includes expenses as defined and limited in section 290.0674, 45.28 subdivision 1, clause (3). "Textbooks" does not include 45.29 instructional books and materials used in the teaching of 45.30 religious tenets, doctrines, or worship, the purpose of which is 45.31 to instill such tenets, doctrines, or worship, nor does it 45.32 include books or materials for, or transportation to, 45.33 extracurricular activities including sporting events, musical or 45.34 dramatic events, speech activities, driver's education, or 45.35 similar programs. For purposes of the subtraction provided by 45.36 this clause, "qualifying child" has the meaning given in section 46.1 32(c)(3) of the Internal Revenue Code; 46.2 (4) income as provided under section 290.0802; 46.3 (5) to the extent included in federal adjusted gross 46.4 income, income realized on disposition of property exempt from 46.5 tax under section 290.491; 46.6 (6) to the extent included in federal taxable income, 46.7 postservice benefits for youth community service under section 46.8 124D.42 for volunteer service under United States Code, title 46.9 42, sections 12601 to 12604; 46.10 (7) to the extent not deducted in determining federal 46.11 taxable income by an individual who does not itemize deductions 46.12 for federal income tax purposes for the taxable year, an amount 46.13 equal to 50 percent of the excess of charitable contributions 46.14 allowable as a deduction for the taxable year under section 46.15 170(a) of the Internal Revenue Code over $500; 46.16 (8) for taxable years beginning before January 1, 2008, the 46.17 amount of the federal small ethanol producer credit allowed 46.18 under section 40(a)(3) of the Internal Revenue Code which is 46.19 included in gross income under section 87 of the Internal 46.20 Revenue Code; 46.21 (9) for individuals who are allowed a federal foreign tax 46.22 credit for taxes that do not qualify for a credit under section 46.23 290.06, subdivision 22, an amount equal to the carryover of 46.24 subnational foreign taxes for the taxable year, but not to 46.25 exceed the total subnational foreign taxes reported in claiming 46.26 the foreign tax credit. For purposes of this clause, "federal 46.27 foreign tax credit" means the credit allowed under section 27 of 46.28 the Internal Revenue Code, and "carryover of subnational foreign 46.29 taxes" equals the carryover allowed under section 904(c) of the 46.30 Internal Revenue Code minus national level foreign taxes to the 46.31 extent they exceed the federal foreign tax credit; 46.32 (10) in each of the five tax years immediately following 46.33 the tax year in which an addition is required under subdivision 46.34 19a, clause (7), an amount equal to one-fifth of the delayed 46.35 depreciation. For purposes of this clause, "delayed 46.36 depreciation" means the amount of the addition made by the 47.1 taxpayer under subdivision 19a, clause (7), minus the positive 47.2 value of any net operating loss under section 172 of the 47.3 Internal Revenue Code generated for the tax year of the 47.4 addition. The resulting delayed depreciation cannot be less 47.5 than zero;and47.6 (11) job opportunity building zone income as provided under 47.7 section 469.316; 47.8 (12) to the extent included in federal taxable income, an 47.9 amount, not to exceed $10,000, equal to an individual's 47.10 unreimbursed expenses for travel, lodging, and lost wages net of 47.11 sick pay related to the individual's donation of one or more of 47.12 the individual's organs to another person for human organ 47.13 transplantation. For purposes of determining the extent to 47.14 which expenses are included in federal taxable income, expenses 47.15 qualifying under this paragraph are the first expenses 47.16 considered in determining the medical expense deduction allowed 47.17 under section 213 of the Internal Revenue Code. For purposes of 47.18 this clause, "organ" means all or part of an individual's liver, 47.19 pancreas, kidney, intestine, lung, or bone marrow, and "human 47.20 organ transplantation" means the medical procedure by which 47.21 transfer of a human organ is made from the body of one person to 47.22 the body of another person. An individual may claim the 47.23 subtraction in this clause for each instance of organ donation 47.24 for transplantation, during the taxable year in which the 47.25 expenses or lost wages occur; 47.26 (13) the amount of compensation paid to members of the 47.27 Minnesota National Guard or other reserve components of the 47.28 United States military for active service performed in 47.29 Minnesota, excluding compensation for services performed under 47.30 the Active Guard Reserve (AGR) program. For purposes of this 47.31 clause, "active service" means (i) state active service as 47.32 defined in section 190.05, subdivision 5a, clause (1); (ii) 47.33 federally funded state active service as defined in section 47.34 190.05, subdivision 5b; or (iii) federal active service as 47.35 defined in section 190.05, subdivision 5c, but "active service" 47.36 excludes services performed exclusively for purposes of basic 48.1 combat training, advanced individual training, annual training, 48.2 and periodic inactive duty training; special training 48.3 periodically made available to reserve members; and service 48.4 performed in accordance with section 190.08, subdivision 3; and 48.5 (14) the amount of compensation paid to members of the 48.6 armed forces of the United States or United Nations for active 48.7 duty performed outside Minnesota. 48.8[EFFECTIVE DATE.] This section is effective for taxable 48.9 years beginning after December 31, 2004. 48.10 Sec. 5. Minnesota Statutes 2004, section 290.01, 48.11 subdivision 19c, is amended to read: 48.12 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 48.13 INCOME.] For corporations, there shall be added to federal 48.14 taxable income: 48.15 (1) the amount of any deduction taken for federal income 48.16 tax purposes for income, excise, or franchise taxes based on net 48.17 income or related minimum taxes, including but not limited to 48.18 the tax imposed under section 290.0922, paid by the corporation 48.19 to Minnesota, another state, a political subdivision of another 48.20 state, the District of Columbia, or any foreign country or 48.21 possession of the United States; 48.22 (2) interest not subject to federal tax upon obligations 48.23 of: the United States, its possessions, its agencies, or its 48.24 instrumentalities; the state of Minnesota or any other state, 48.25 any of its political or governmental subdivisions, any of its 48.26 municipalities, or any of its governmental agencies or 48.27 instrumentalities; the District of Columbia; or Indian tribal 48.28 governments; 48.29 (3) exempt-interest dividends received as defined in 48.30 section 852(b)(5) of the Internal Revenue Code; 48.31 (4) the amount of any net operating loss deduction taken 48.32 for federal income tax purposes under section 172 or 832(c)(10) 48.33 of the Internal Revenue Code or operations loss deduction under 48.34 section 810 of the Internal Revenue Code; 48.35 (5) the amount of any special deductions taken for federal 48.36 income tax purposes under sections 241 to 247 of the Internal 49.1 Revenue Code; 49.2 (6) losses from the business of mining, as defined in 49.3 section 290.05, subdivision 1, clause (a), that are not subject 49.4 to Minnesota income tax; 49.5 (7) the amount of any capital losses deducted for federal 49.6 income tax purposes under sections 1211 and 1212 of the Internal 49.7 Revenue Code; 49.8 (8) the exempt foreign trade income of a foreign sales 49.9 corporation under sections 921(a) and 291 of the Internal 49.10 Revenue Code; 49.11 (9) the amount of percentage depletion deducted under 49.12 sections 611 through 614 and 291 of the Internal Revenue Code; 49.13 (10) for certified pollution control facilities placed in 49.14 service in a taxable year beginning before December 31, 1986, 49.15 and for which amortization deductions were elected under section 49.16 169 of the Internal Revenue Code of 1954, as amended through 49.17 December 31, 1985, the amount of the amortization deduction 49.18 allowed in computing federal taxable income for those 49.19 facilities; 49.20 (11) the amount of any deemed dividend from a foreign 49.21 operating corporation determined pursuant to section 290.17, 49.22 subdivision 4, paragraph (g); 49.23 (12) the amount of any environmental tax paid under section 49.24 59(a) of the Internal Revenue Code; 49.25 (13) the amount of a partner's pro rata share of net income 49.26 which does not flow through to the partner because the 49.27 partnership elected to pay the tax on the income under section 49.28 6242(a)(2) of the Internal Revenue Code; 49.29 (14) the amount of net income excluded under section 114 of 49.30 the Internal Revenue Code; 49.31 (15) any increase in subpart F income, as defined in 49.32 section 952(a) of the Internal Revenue Code, for the taxable 49.33 year when subpart F income is calculated without regard to the 49.34 provisions of section 614 of Public Law 107-147;and49.35 (16) 80 percent of the depreciation deduction allowed under 49.36 section 168(k) of the Internal Revenue Code. For purposes of 50.1 this clause, if the taxpayer has an activity that in the taxable 50.2 year generates a deduction for depreciation under section 168(k) 50.3 and the activity generates a loss for the taxable year that the 50.4 taxpayer is not allowed to claim for the taxable year, "the 50.5 depreciation allowed under section 168(k)" for the taxable year 50.6 is limited to excess of the depreciation claimed by the activity 50.7 under section 168(k) over the amount of the loss from the 50.8 activity that is not allowed in the taxable year. In succeeding 50.9 taxable years when the losses not allowed in the taxable year 50.10 are allowed, the depreciation under section 168(k) is allowed; 50.11 and 50.12 (17) the amount of expenses disallowed under section 50.13 290.10, subdivision 2. 50.14[EFFECTIVE DATE.] This section is effective for taxable 50.15 years beginning after December 31, 2004. 50.16 Sec. 6. Minnesota Statutes 2004, section 290.05, 50.17 subdivision 1, is amended to read: 50.18 Subdivision 1. [EXEMPT ENTITIES.] The following 50.19 corporations, individuals, estates, trusts, and organizations 50.20 shall be exempted from taxation under this chapter, provided 50.21 that every such person or corporation claiming exemption under 50.22 this chapter, in whole or in part, must establish to the 50.23 satisfaction of the commissioner the taxable status of any 50.24 income or activity: 50.25 (a) corporations, individuals, estates, and trusts engaged 50.26 in the business of mining or producing iron ore and other ores 50.27 the mining or production of which is subject to the occupation 50.28 tax imposed by section 298.01; but if any such corporation, 50.29 individual, estate, or trust engages in any other business or 50.30 activity or has income from any property not used in such 50.31 business it shall be subject to this tax computed on the net 50.32 income from such property or such other business or activity. 50.33 Royalty shall not be considered as income from the business of 50.34 mining or producing iron ore within the meaning of this section; 50.35 (b) the United States of America, the state of Minnesota or 50.36 any political subdivision of either agencies or 51.1 instrumentalities, whether engaged in the discharge of 51.2 governmental or proprietary functions;and51.3 (c) any insurance company; and 51.4 (d) a corporation engaged in the business of operating a 51.5 personal rapid transit system, as defined in section 297A.61, 51.6 subdivision 37, in this state, independent of any government 51.7 subsidies, but if the corporation engages in any other business 51.8 or activity or has income from any property not used in the 51.9 business of operating a personal rapid transit system, it is 51.10 subject to this tax computed on the net income from the property 51.11 or business or activity. 51.12[EFFECTIVE DATE.] This section is effective for taxable 51.13 years beginning after December 31, 2008. 51.14 Sec. 7. Minnesota Statutes 2004, section 290.06, 51.15 subdivision 2c, is amended to read: 51.16 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 51.17 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 51.18 married individuals filing joint returns and surviving spouses 51.19 as defined in section 2(a) of the Internal Revenue Code must be 51.20 computed by applying to their taxable net income the following 51.21 schedule of rates: 51.22 (1) On the first $25,680, 5.35 percent; 51.23 (2) On all over $25,680, but not over $102,030, 7.05 51.24 percent; 51.25 (3) On all over $102,030,7.858.0 percent. 51.26 Married individuals filing separate returns, estates, and 51.27 trusts must compute their income tax by applying the above rates 51.28 to their taxable income, except that the income brackets will be 51.29 one-half of the above amounts. 51.30 (b) The income taxes imposed by this chapter upon unmarried 51.31 individuals must be computed by applying to taxable net income 51.32 the following schedule of rates: 51.33 (1) On the first $17,570, 5.35 percent; 51.34 (2) On all over $17,570, but not over $57,710, 7.05 51.35 percent; 51.36 (3) On all over $57,710,7.858.0 percent. 52.1 (c) The income taxes imposed by this chapter upon unmarried 52.2 individuals qualifying as a head of household as defined in 52.3 section 2(b) of the Internal Revenue Code must be computed by 52.4 applying to taxable net income the following schedule of rates: 52.5 (1) On the first $21,630, 5.35 percent; 52.6 (2) On all over $21,630, but not over $86,910, 7.05 52.7 percent; 52.8 (3) On all over $86,910,7.858.0 percent. 52.9 (d) In lieu of a tax computed according to the rates set 52.10 forth in this subdivision, the tax of any individual taxpayer 52.11 whose taxable net income for the taxable year is less than an 52.12 amount determined by the commissioner must be computed in 52.13 accordance with tables prepared and issued by the commissioner 52.14 of revenue based on income brackets of not more than $100. The 52.15 amount of tax for each bracket shall be computed at the rates 52.16 set forth in this subdivision, provided that the commissioner 52.17 may disregard a fractional part of a dollar unless it amounts to 52.18 50 cents or more, in which case it may be increased to $1. 52.19 (e) An individual who is not a Minnesota resident for the 52.20 entire year must compute the individual's Minnesota income tax 52.21 as provided in this subdivision. After the application of the 52.22 nonrefundable credits provided in this chapter, the tax 52.23 liability must then be multiplied by a fraction in which: 52.24 (1) the numerator is the individual's Minnesota source 52.25 federal adjusted gross income as defined in section 62 of the 52.26 Internal Revenue Code and increased by the additions required 52.27 under section 290.01, subdivision 19a, clauses (1), (5), and 52.28 (6), and reduced by the subtraction under section 290.01, 52.29 subdivision 19b, clause (11), and the Minnesota assignable 52.30 portion of the subtraction for United States government interest 52.31 under section 290.01, subdivision 19b, clause (1), after 52.32 applying the allocation and assignability provisions of section 52.33 290.081, clause (a), or 290.17; and 52.34 (2) the denominator is the individual's federal adjusted 52.35 gross income as defined in section 62 of the Internal Revenue 52.36 Code of 1986, increased by the amounts specified in section 53.1 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 53.2 by the amounts specified in section 290.01, subdivision 19b, 53.3 clauses (1) and (11). 53.4[EFFECTIVE DATE.] This section is effective only if 53.5 sections 13 and 14 of this article are enacted for taxable years 53.6 beginning after December 31, 2004. 53.7 Sec. 8. Minnesota Statutes 2004, section 290.06, 53.8 subdivision 28, is amended to read: 53.9 Subd. 28. [CREDITREFUNDS FOR TRANSIT PASSES.]A taxpayer53.10 (a) An employer maytake a credit against the tax due under this53.11chapterclaim a refund equal to 30 percent of the expense 53.12 incurred by thetaxpayeremployer to provide transit passes, for 53.13 use in Minnesota, to employees of the taxpayer. 53.14 (b) As used in this subdivision, the following terms have 53.15 the meanings given: 53.16 (1) "employer" means an individual or entity subject to tax 53.17 under this chapter or an entity that is exempt from taxation 53.18 under section 290.05, but excluding entities enumerated in 53.19 section 290.05, subdivision 1, paragraph (b); and 53.20 (2) "transit pass" has the meaning given in section 53.21 132(f)(5)(A) of the Internal Revenue Code. 53.22 (c) If thetaxpayeremployer purchases the transit passes 53.23 from the transit system operator, and resells them to the 53.24 employees, thecreditrefund is based on the amount of the 53.25 difference between the price paid for the passes by the employer 53.26 and the amount charged to employees. 53.27 (d) The commissioner shall prescribe the forms for and the 53.28 manner in which the refund may be claimed. The commissioner 53.29 must provide for paying refunds at least quarterly. The 53.30 commissioner may set a minimum amount of qualifying expenses 53.31 that must be incurred before a refund may be claimed. 53.32 (e) An amount sufficient to pay the refunds required by 53.33 this subdivision is appropriated to the commissioner of revenue. 53.34[EFFECTIVE DATE.] This section is effective for transit 53.35 passes purchased after December 31, 2005. 53.36 Sec. 9. Minnesota Statutes 2004, section 290.06, is 54.1 amended by adding a subdivision to read: 54.2 Subd. 32. [CARSHARING CREDIT.] (a) For purposes of this 54.3 subdivision, a "carsharing organization" means an organization 54.4 that: 54.5 (1) is described in section 501(c) of the Internal Revenue 54.6 Code; 54.7 (2) is comprised of members who purchase the use of a motor 54.8 vehicle from the organization; 54.9 (3) owns or leases a fleet of motor vehicles that are 54.10 available to members of the organization to pay for the use of a 54.11 vehicle on an hourly or per trip basis; and 54.12 (4) does not assign exclusive rights of use of specific 54.13 vehicles to individual members or allow individual members to 54.14 keep a vehicle in the member's sole possession. 54.15 (b) A taxpayer may take a credit against the tax due under 54.16 this chapter for the expenses incurred by the taxpayer to 54.17 purchase a membership and pay monthly dues to a carsharing 54.18 organization or to provide memberships and pay monthly dues to a 54.19 carsharing organization for employees of the taxpayer. The 54.20 amount of the credit is equal to the lesser of the actual cost 54.21 of the membership fee and the monthly dues, or $390. If an 54.22 employer purchases the membership or pays the monthly dues to 54.23 the nonprofit carsharing organization and resells the membership 54.24 to its employees or charges the monthly dues to its employees, 54.25 the credit allowed to the employer is the amount of the 54.26 difference between the amount paid by the employer and the 54.27 amount charged to the employee. 54.28 (c) A taxpayer who owns a parking facility that charges 54.29 customers an amount to park vehicles at the facility and 54.30 provides dedicated parking space at no charge to a nonprofit 54.31 carsharing organization to park the motor vehicles that are used 54.32 by the members of the organization on an hourly or per-trip 54.33 basis, may take a credit against the tax due under this chapter 54.34 for the value of the dedicated parking space provided to the 54.35 nonprofit carsharing organization. The value of the dedicated 54.36 parking space is equal to the lowest amount charged to customers 55.1 who pay to park at the facility calculated on an hourly, daily, 55.2 or other long-term rate that results in the lowest total cost. 55.3[EFFECTIVE DATE.] This section is effective for taxable 55.4 years beginning after December 31, 2005. 55.5 Sec. 10. Minnesota Statutes 2004, section 290.06, is 55.6 amended by adding a subdivision to read: 55.7 Subd. 33. [REGIONAL INVESTMENT CREDIT.] (a) A credit is 55.8 allowed against the tax imposed by this chapter for investment 55.9 in a qualifying regional angel investment network fund. The 55.10 credit equals 25 percent of the taxpayer's investment made in 55.11 the fund for the taxable year, but not to exceed the lesser of: 55.12 (1) the liability for tax under this chapter; or 55.13 (2) the amount of the certificate under paragraph (c) 55.14 provided to the taxpayer by the fund. The taxpayer must claim 55.15 the credit the same tax year in which the investment to the fund 55.16 is made. The credit is allowed only for investments made to a 55.17 fund that are made after the fund has been certified by the 55.18 commissioner of employment and economic development under 55.19 paragraph (c). 55.20 (b) For purposes of this subdivision, a regional angel 55.21 investment network fund means a pool investment fund that: 55.22 (1) is organized as a limited liability company and 55.23 consists of members who are accredited investors within the 55.24 meaning of Regulation D of the Securities and Exchange 55.25 Commission, Code of Federal Regulations, title 17, section 55.26 230.501(a), or consists of members that are not accredited 55.27 investors that make equity investments or investments in notes 55.28 that pay interest or other fixed amounts or any combination of 55.29 both; 55.30 (2) primarily makes equity investments in emerging and 55.31 expanding small businesses as defined by the Small Business 55.32 Administration, or cooperative associations as defined in 55.33 chapter 308B, that are located in local communities in Minnesota 55.34 outside of the metropolitan area as defined in section 473.121, 55.35 subdivision 2, and does not make investments in residential real 55.36 estate; and 56.1 (3) has no fewer than five individual investors who are not 56.2 affiliates with no single investor and affiliates of that 56.3 investor together owning a total of more than 25 percent 56.4 ownership interests outstanding in the fund. For purposes of 56.5 this subdivision, "affiliate" means a spouse, child, or sibling 56.6 of an investor or a corporation, partnership, or trust in which 56.7 an investor has a controlling equity interest or in which an 56.8 investor exercises management control. 56.9 (c) Regional angel investment network funds may apply to 56.10 the commissioner of employment and economic development for 56.11 certification as a qualifying regional angel investment network 56.12 fund. The application must be in the form and made under 56.13 procedures specified by the commissioner of employment and 56.14 economic development. The commissioner of employment and 56.15 economic development may certify up to 20 qualifying funds and 56.16 provide certificates entitling investors in the funds to credits 56.17 under this subdivision of up to $500,000 for each fund. The 56.18 commissioner of employment and economic development must not 56.19 issue a total amount of certificates for all funds of more than 56.20 $10,000,000. In awarding certificates under this paragraph, the 56.21 commissioner of employment and economic development shall 56.22 generally award them to qualified applicants in the order in 56.23 which the applications are received, but shall also seek to 56.24 certify funds that are broadly dispersed across the entire state 56.25 outside of the metropolitan area, as defined in section 473.121, 56.26 subdivision 2. The commissioner of employment and economic 56.27 development must award three certificates to a pooled investment 56.28 fund that invests in qualifying small businesses located in the 56.29 region of the state that is the focus of the fund and allocates 56.30 at least 20 percent of its investments to qualified small 56.31 businesses that meet local community needs. To be a qualifying 56.32 small business, a business must satisfy the following 56.33 requirements: 56.34 (1) 51 percent of the ownership interests in the business, 56.35 excluding any equity interest of the fund, must be held by 56.36 residents of the region; and 57.1 (2) the business must pay wages and benefits, measured on a 57.2 full-time equivalent basis, to 75 percent or more of its 57.3 employees equal to 175 percent of the federal poverty level for 57.4 a family of four. This requirement does not apply if fewer than 57.5 three pooled investment funds that would otherwise qualify under 57.6 this subdivision apply for a certificate. 57.7 (d) Each fund must provide each investor a statement 57.8 indicating the investor's share of the credit amount certified 57.9 to the fund under paragraph (c) based on the order in which 57.10 their investment is made in the fund. 57.11 (e) If the amount of the credit under this subdivision for 57.12 any taxable year exceeds the limitation under paragraph (a), 57.13 clause (1), the excess is a credit carryover to each of the 15 57.14 succeeding taxable years. The entire amount of the excess 57.15 unused credit for the taxable year must be carried first to the 57.16 earliest of the taxable years to which the credit may be carried 57.17 and then to each successive year to which the credit may be 57.18 carried. The amount of the unused credit which may be added 57.19 under this paragraph may not exceed the taxpayer's liability for 57.20 tax for the taxable year. 57.21[EFFECTIVE DATE.] This section is effective the day 57.22 following final enactment, for taxable years beginning after 57.23 December 31, 2005. It applies to investments made after the 57.24 fund has been certified by the commissioner of employment and 57.25 economic development. 57.26 Sec. 11. Minnesota Statutes 2004, section 290.0674, 57.27 subdivision 2, is amended to read: 57.28 Subd. 2. [LIMITATIONS.] (a) For claimants with income not 57.29 greater than $33,500, the maximum credit allowed is $1,000per57.30 multiplied by the number of claimant's qualifyingchild and57.31$2,000 per familychildren in grades kindergarten through grade 57.32 12. No credit is allowed for education-related expenses for 57.33 claimants with income greater than $37,500. The maximum credit 57.34 perchildclaimant is reduced by $1 for each $4 of household 57.35 income over $33,500,and the maximum credit per family is57.36reduced by $2 for each $4 of household income over $33,500,but 58.1 in no case is the credit less than zero. 58.2 For purposes of this section "income" has the meaning given 58.3 in section 290.067, subdivision 2a. In the case of a married 58.4 claimant, a credit is not allowed unless a joint income tax 58.5 return is filed. 58.6 (b) For a nonresident or part-year resident, the credit 58.7 determined under subdivision 1 and the maximum credit amount in 58.8 paragraph (a) must be allocated using the percentage calculated 58.9 in section 290.06, subdivision 2c, paragraph (e). 58.10[EFFECTIVE DATE.] This section is effective for tax years 58.11 beginning after December 31, 2005. 58.12 Sec. 12. [290.0676] [CREDIT FOR HISTORIC STRUCTURE 58.13 REHABILITATION.] 58.14 Subdivision 1. [DEFINITIONS.] (a) As used in this section, 58.15 the terms defined in this subdivision have the meanings given. 58.16 (b) "Certified historic structure" means a property located 58.17 in Minnesota and listed individually on the National Register of 58.18 Historic Places or a historic property designated by either a 58.19 certified local government or a heritage preservation commission 58.20 created under the National Historic Preservation Act of 1966 and 58.21 whose designation is approved by the state historic preservation 58.22 officer. 58.23 (c) "Eligible property" means a certified historic 58.24 structure or a structure in a certified historic district that 58.25 is offered or used for residential or business purposes. 58.26 (d) "Structure in a certified historic district" means a 58.27 structure located in Minnesota that is certified by the State 58.28 Historic Preservation Office as contributing to the historic 58.29 significance of a certified historic district listed on the 58.30 National Register of Historic Places or a local district that 58.31 has been certified by the United States Department of the 58.32 Interior. 58.33 Subd. 2. [CREDIT ALLOWED.] A taxpayer who incurs costs for 58.34 the rehabilitation of eligible property may take a credit 58.35 against the tax imposed under this chapter in an amount equal to 58.36 ten percent of the total costs of rehabilitation. Costs of 59.1 rehabilitation include, but are not limited to, qualified 59.2 rehabilitation expenditures as defined under section 47(c)(2)(A) 59.3 of the Internal Revenue Code, provided that the costs of 59.4 rehabilitation must exceed 50 percent of the total basis in the 59.5 property at the time the rehabilitation activity begins and the 59.6 rehabilitation must meet standards consistent with the standards 59.7 of the Secretary of the Interior for rehabilitation as 59.8 determined by the State Historic Preservation Office of the 59.9 Minnesota Historical Society. 59.10 Subd. 3. [CARRYBACK AND CARRYFORWARD.] If the amount of 59.11 the credit under subdivision 2 exceeds the tax liability under 59.12 this chapter for the year in which the cost is incurred, the 59.13 amount that exceeds the tax liability may be carried back to any 59.14 of the three preceding taxable years or carried forward to each 59.15 of the ten taxable years succeeding the taxable year in which 59.16 the expense was incurred. The entire amount of the credit must 59.17 be carried to the earliest taxable year to which the amount may 59.18 be carried. The unused portion of the credit must be carried to 59.19 the following taxable year. 59.20 Subd. 4. [PARTNERSHIPS; MULTIPLE OWNERS; TRANSFERS.] (a) 59.21 Credits granted to a partnership, a limited liability company 59.22 taxed as a partnership, or multiple owners of property shall be 59.23 passed through to the partners, members, or owners, 59.24 respectively, pro rata or pursuant to an executed agreement 59.25 among the partners, members, or owners documenting an alternate 59.26 distribution method. 59.27 (b) Taxpayers eligible for credits may transfer, sell, or 59.28 assign the credits in whole or part. Any assignee may use 59.29 acquired credits to offset up to 100 percent of the taxes 59.30 otherwise imposed by this chapter. The assignee shall perfect 59.31 such transfer by notifying the Department of Revenue in writing 59.32 within 30 calendar days following the effective date of the 59.33 transfer in such form and manner as shall be prescribed by the 59.34 Department of Revenue. The proceeds of any sale or assignment 59.35 of a credit shall be exempt from taxation under this chapter. 59.36 Subd. 5. [PROCESS.] To claim the credit, the taxpayer must 60.1 apply to the State Historic Preservation Office of the Minnesota 60.2 Historical Society before a historic rehabilitation project 60.3 begins. The State Historic Preservation Office shall determine 60.4 the amount of eligible rehabilitation costs and whether the 60.5 rehabilitation meets the standards of the United States 60.6 Department of the Interior. The State Historic Preservation 60.7 Office shall issue certificates verifying eligibility for and 60.8 the amount of credit. The taxpayer shall attach the certificate 60.9 to any income tax return on which the credit is claimed. The 60.10 State Historic Preservation Office of the Minnesota Historical 60.11 Society may collect fees for applications for the historic 60.12 preservation tax credit. Fees shall be set at an amount that 60.13 does not exceed the costs of administering the tax credit 60.14 program. 60.15 Subd. 6. [MORTGAGE CERTIFICATES; CREDIT FOR LENDING 60.16 INSTITUTIONS.] (a) The taxpayer may elect, in lieu of the credit 60.17 otherwise allowed under this section, to receive a historic 60.18 rehabilitation mortgage credit certificate. 60.19 (b) For purposes of this subdivision, a historic 60.20 rehabilitation mortgage credit is a certificate that is issued 60.21 to the taxpayer according to procedures prescribed by the State 60.22 Historic Preservation Office with respect to the certified 60.23 rehabilitation and which meets the requirements of this 60.24 paragraph. The face amount of the certificate must be equal to 60.25 the credit that would be allowable under subdivision 2 to the 60.26 taxpayer with respect to the rehabilitation. The certificate 60.27 may only be transferred by the taxpayer to a lending 60.28 institution, including a nondepository home mortgage lending 60.29 institution, in connection with a loan: 60.30 (1) that is secured by the building with respect to which 60.31 the credit is issued; and 60.32 (2) the proceeds of which may not be used for any purpose 60.33 other than the acquisition or rehabilitation of the building. 60.34 (c) In exchange for the certificate, the lending 60.35 institution must provide to the taxpayer an amount equal to the 60.36 face amount of the certificate discounted by the amount by which 61.1 the federal income tax liability of the lending institution is 61.2 increased due to its use of the certificate in the manner 61.3 provided in this section. That amount must be applied, as 61.4 directed by the taxpayer, in whole or in part, to reduce: 61.5 (1) the principal amount of the loan; 61.6 (2) the rate of interest on the loan; or 61.7 (3) the taxpayer's cost of purchasing the building, but 61.8 only in the case of a qualified historic home that is located in 61.9 a poverty-impacted area as designated by the State Historic 61.10 Preservation Office. 61.11 The lending institution may take as a credit against the 61.12 tax due under this chapter an amount equal to the amount 61.13 specified in the certificate. If the amount of the discount 61.14 retained by the lender exceeds the amount by which the lending 61.15 institution's federal income tax liability is increased due to 61.16 the use of a mortgage credit certificate, the excess shall be 61.17 refunded to the borrower with interest at the rate prescribed by 61.18 the State Historic Preservation Office. The lending institution 61.19 may carry forward all unused credits under this subdivision 61.20 until exhausted. Nothing in this subdivision requires a lending 61.21 institution to accept a historic rehabilitation certificate from 61.22 any person. 61.23[EFFECTIVE DATE.] This section is effective for taxable 61.24 years beginning after December 31, 2004. 61.25 Sec. 13. Minnesota Statutes 2004, section 290.091, 61.26 subdivision 2, is amended to read: 61.27 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 61.28 this section, the following terms have the meanings given: 61.29 (a) "Alternative minimum taxable income" means the sum of 61.30 the following for the taxable year: 61.31 (1) the taxpayer's federal alternative minimum taxable 61.32 income as defined in section 55(b)(2) of the Internal Revenue 61.33 Code; 61.34 (2) the taxpayer's itemized deductions allowed in computing 61.35 federal alternative minimum taxable income, but excluding: 61.36 (i) the charitable contribution deduction under section 170 62.1 of the Internal Revenue Codeto the extent that the deduction62.2exceeds 1.0 percent of adjusted gross income, as defined in62.3section 62 of the Internal Revenue Code; 62.4 (ii) the medical expense deduction; 62.5 (iii) the casualty, theft, and disaster loss deduction;and62.6 (iv) the impairment-related work expenses of a disabled 62.7 person; and 62.8 (v) the amount of the exemption allowed the taxpayer under 62.9 section 151(c) of the Internal Revenue Code; 62.10 (3) for depletion allowances computed under section 613A(c) 62.11 of the Internal Revenue Code, with respect to each property (as 62.12 defined in section 614 of the Internal Revenue Code), to the 62.13 extent not included in federal alternative minimum taxable 62.14 income, the excess of the deduction for depletion allowable 62.15 under section 611 of the Internal Revenue Code for the taxable 62.16 year over the adjusted basis of the property at the end of the 62.17 taxable year (determined without regard to the depletion 62.18 deduction for the taxable year); 62.19 (4) to the extent not included in federal alternative 62.20 minimum taxable income, the amount of the tax preference for 62.21 intangible drilling cost under section 57(a)(2) of the Internal 62.22 Revenue Code determined without regard to subparagraph (E); 62.23 (5) to the extent not included in federal alternative 62.24 minimum taxable income, the amount of interest income as 62.25 provided by section 290.01, subdivision 19a, clause (1); and 62.26 (6) the amount of addition required by section 290.01, 62.27 subdivision 19a, clause (7); 62.28 less the sum of the amounts determined under the following: 62.29 (1) interest income as defined in section 290.01, 62.30 subdivision 19b, clause (1); 62.31 (2) an overpayment of state income tax as provided by 62.32 section 290.01, subdivision 19b, clause (2), to the extent 62.33 included in federal alternative minimum taxable income; 62.34 (3) the amount of investment interest paid or accrued 62.35 within the taxable year on indebtedness to the extent that the 62.36 amount does not exceed net investment income, as defined in 63.1 section 163(d)(4) of the Internal Revenue Code. Interest does 63.2 not include amounts deducted in computing federal adjusted gross 63.3 income; and 63.4 (4) amounts subtracted from federal taxable income as 63.5 provided by section 290.01, subdivision 19b, clauses (10)and63.6(11)to (12). 63.7 In the case of an estate or trust, alternative minimum 63.8 taxable income must be computed as provided in section 59(c) of 63.9 the Internal Revenue Code. 63.10 (b) "Investment interest" means investment interest as 63.11 defined in section 163(d)(3) of the Internal Revenue Code. 63.12 (c) "Tentative minimum tax" equals 6.4 percent of 63.13 alternative minimum taxable income after subtracting the 63.14 exemption amount determined under subdivision 3. 63.15 (d) "Regular tax" means the tax that would be imposed under 63.16 this chapter (without regard to this section and section 63.17 290.032), reduced by the sum of the nonrefundable credits 63.18 allowed under this chapter. 63.19 (e) "Net minimum tax" means the minimum tax imposed by this 63.20 section. 63.21[EFFECTIVE DATE.] This section is effective only if section 63.22 7 of this article is enacted for taxable years beginning after 63.23 December 31, 2004. 63.24 Sec. 14. Minnesota Statutes 2004, section 290.091, 63.25 subdivision 3, is amended to read: 63.26 Subd. 3. [EXEMPTION AMOUNT.] (a) For purposes of computing 63.27 the alternative minimum tax, the exemption amount isthe63.28exemption determined under section 55(d) of the Internal Revenue63.29Code, as amended through December 31, 1992, except that63.30alternative minimum taxable income as determined under this63.31section must be substituted in the computation of the phase out63.32under section 55(d)(3)$66,300 for married individuals filing 63.33 joint returns; and $33,150 for married individuals filing 63.34 separate returns, single individuals, and head of household 63.35 filers. 63.36 (b) The exemption amount determined under this subdivision 64.1 is reduced by an amount equal to 25 percent of the amount by 64.2 which the alternative minimum income exceeds $248,600 for 64.3 married individuals filing joint returns; and $124,300 for 64.4 married individuals filing separate returns, single individuals, 64.5 and head of household filers. 64.6 (c) For taxable years beginning after December 31, 2006, 64.7 the exemption amounts under paragraph (a), and the income 64.8 amounts in paragraph (b), must be adjusted for inflation. The 64.9 commissioner shall make the inflation adjustments in accordance 64.10 with section 1(f) of the Internal Revenue Code except that for 64.11 the purposes of this subdivision the percentage increase must be 64.12 determined from the year starting September 1, 2005, and ending 64.13 August 31, 2006, as the base year for adjusting for inflation 64.14 for the tax year beginning after December 31, 2006. The 64.15 determination of the commissioner under this subdivision is not 64.16 a rule under the Administrative Procedure Act. 64.17[EFFECTIVE DATE.] This section is effective only if section 64.18 7 of this article is enacted for taxable years beginning after 64.19 December 31, 2004. 64.20 Sec. 15. Minnesota Statutes 2004, section 290.10, is 64.21 amended to read: 64.22 290.10 [NONDEDUCTIBLE ITEMS.] 64.23 Subdivision 1. [EXPENSES, INTEREST, AND TAXES.] Except as 64.24 provided in section 290.17, subdivision 4, paragraph (i), in 64.25 computing the net income of a taxpayer no deduction shall in any 64.26 case be allowed for expenses, interest and taxes connected with 64.27 or allocable against the production or receipt of all income not 64.28 included in the measure of the tax imposed by this chapter, 64.29 except that for corporations engaged in the business of mining 64.30 or producing iron ore, the mining of which is subject to the 64.31 occupation tax imposed by section 298.01, subdivision 4, this 64.32 shall not prevent the deduction of expenses and other items to 64.33 the extent that the expenses and other items are allowable under 64.34 this chapter and are not deductible, capitalizable, retainable 64.35 in basis, or taken into account by allowance or otherwise in 64.36 computing the occupation tax and do not exceed the amounts taken 65.1 for federal income tax purposes for that year. Occupation taxes 65.2 imposed under chapter 298, royalty taxes imposed under chapter 65.3 299, or depletion expenses may not be deducted under this clause. 65.4 Subd. 2. [FINES, PENALTIES, DAMAGES, AND EXPENSES.] (a) No 65.5 deduction from taxable income for a trade or business expense 65.6 under section 162(a) of the Internal Revenue Code shall be 65.7 allowed for any fine, penalty, damages, or expenses paid to: 65.8 (1) the government of the United States, a state, a 65.9 territory or possession of the United States, the District of 65.10 Columbia, or the Commonwealth of Puerto Rico; 65.11 (2) the government of a foreign country; or 65.12 (3) a political subdivision of, or corporation or other 65.13 entity serving as an agency or instrumentality of, any 65.14 government described in clause (1) or (2). 65.15 (b) For purposes of this subdivision, "fine, penalty, 65.16 damages, or expenses" include, but are not limited to, any 65.17 amount: 65.18 (1) paid pursuant to a conviction or a plea of guilty or 65.19 nolo contendere for any crime in a criminal proceeding; 65.20 (2) paid as a civil penalty imposed by federal, state, or 65.21 local law, including tax penalties and interest; 65.22 (3) paid in settlement of the taxpayer's actual or 65.23 potential liability for a civil or criminal fine or penalty; 65.24 (4) forfeited as collateral posted in connection with a 65.25 proceeding that could result in imposition of a fine or penalty; 65.26 or 65.27 (5) legal fees and related expenses paid or incurred in the 65.28 prosecution or civil action arising from a violation of the law 65.29 imposing the fine or civil penalty, court costs assessed against 65.30 the taxpayer, or stenographic and printing charges, compensatory 65.31 damages, punitive damages, or restitution. 65.32[EFFECTIVE DATE.] This section is effective for taxable 65.33 years beginning after December 31, 2004. 65.34 Sec. 16. [290.433] [GLOBAL WAR ON TERRORISM CHECKOFF.] 65.35 Every individual who files an income tax return or property 65.36 tax refund claim, and every corporation that files an income tax 66.1 return, may designate on their return that $1 or more shall be 66.2 added to the tax or deducted from the refund that would 66.3 otherwise be payable by or to that individual or corporation and 66.4 paid into an account to be established for the purpose of paying 66.5 bonuses to residents of this state who are veterans of the 66.6 global war on terrorism. The commissioner shall, on the income 66.7 tax returns and the property tax refund claim form, notify 66.8 filers of their right to designate that a portion of their tax 66.9 or refund shall be paid into the account for veterans of the 66.10 global war on terrorism. The amounts designated under this 66.11 section shall be annually appropriated to the commissioner of 66.12 the Department of Veterans Affairs to pay bonuses to veterans of 66.13 the global war on terrorism as determined by law. All interest 66.14 earned on money accrued shall be credited to the account by the 66.15 commissioner of finance. 66.16[EFFECTIVE DATE.] This section is effective for taxable 66.17 years beginning after December 31, 2004, and for property tax 66.18 refund claims for property taxes payable after December 31, 2004. 66.19 Sec. 17. Minnesota Statutes 2004, section 290.92, 66.20 subdivision 4b, is amended to read: 66.21 Subd. 4b. [WITHHOLDING BY PARTNERSHIPS.] (a) A partnership 66.22 shall deduct and withhold a tax as provided in paragraph (b) for 66.23 nonresident individual partners based on their distributive 66.24 shares of partnership income for a taxable year of the 66.25 partnership. 66.26 (b) The amount of tax withheld is determined by multiplying 66.27 the partner's distributive share allocable to Minnesota under 66.28 section 290.17, paid or credited during the taxable year by the 66.29 highest rate used to determine the income tax liability for an 66.30 individual under section 290.06, subdivision 2c, except that the 66.31 amount of tax withheld may be determined by the commissioner if 66.32 the partner submits a withholding exemption certificate under 66.33 subdivision 5. 66.34 (c) The commissioner may reduce or abate the tax withheld 66.35 under this subdivision if the partnership had reasonable cause 66.36 to believe that no tax was due under this section. 67.1 (d) Notwithstanding paragraph (a), a partnership is not 67.2 required to deduct and withhold tax for a nonresident partner if: 67.3 (1) the partner elects to have the tax due paid as part of 67.4 the partnership's composite return under section 289A.08, 67.5 subdivision 7; 67.6 (2) the partner has Minnesota assignable federal adjusted 67.7 gross income from the partnership of less than $1,000; or 67.8 (3) the partnership is liquidated or terminated, the income 67.9 was generated by a transaction related to the termination or 67.10 liquidation, and no cash or other property was distributed in 67.11 the current or prior taxable year;or67.12 (4) the distributive shares of partnership income are 67.13 attributable to: 67.14 (i) income required to be recognized because of discharge 67.15 of indebtedness; 67.16 (ii) income recognized because of a sale, exchange, or 67.17 other disposition of real estate, depreciable property, or 67.18 property described in section 179 of the Internal Revenue Code; 67.19 or 67.20 (iii) income recognized on the sale, exchange, or other 67.21 disposition of any property that has been the subject of a basis 67.22 reduction pursuant to section 108, 734, 743, 754, or 1017 of the 67.23 Internal Revenue Code 67.24 to the extent that the income does not include cash received or 67.25 receivable or, if there is cash received or receivable, to the 67.26 extent that the cash is required to be used to pay indebtedness 67.27 by the partnership or a secured debt on partnership property; or 67.28 (5) the partnership is a publicly traded partnership, as 67.29 defined in section 7704(b) of the Internal Revenue Code. 67.30 (e) For purposes of subdivision 6a, and sections 289A.09, 67.31 subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50, 67.32 289A.56, 289A.60, and 289A.63, a partnership is considered an 67.33 employer. 67.34 (f) To the extent that income is exempt from withholding 67.35 under paragraph (d), clause (4), the commissioner has a lien in 67.36 an amount up to the amount that would be required to be withheld 68.1 with respect to the income of the partner attributable to the 68.2 partnership interest, but for the application of paragraph (d), 68.3 clause (4). The lien arises under section 270.69 from the date 68.4 of assessment of the tax against the partner, and attaches to 68.5 that partner's share of the profits and any other money due or 68.6 to become due to that partner in respect of the partnership. 68.7 Notice of the lien may be sent by mail to the partnership, 68.8 without the necessity for recording the lien. The notice has 68.9 the force and effect of a levy under section 270.70, and is 68.10 enforceable against the partnership in the manner provided by 68.11 that section. Upon payment in full of the liability subsequent 68.12 to the notice of lien, the partnership must be notified that the 68.13 lien has been satisfied. 68.14[EFFECTIVE DATE.] This section is effective for taxable 68.15 years beginning after December 31, 2004. 68.16 Sec. 18. [DETERMINATION OF ECONOMIC IMPACT.] 68.17 The Minnesota Historical Society shall annually determine 68.18 the economic impact to the state from the rehabilitation of 68.19 eligible property for which credits are provided under section 68.20 12 and report on the impact to the committees on taxes of the 68.21 senate and house of representatives. 68.22 Sec. 19. [STUDY; CORPORATE FRANCHISE TAX.] 68.23 The commissioners of the Departments of Finance and Revenue 68.24 shall conduct a comprehensive study to identify the reasons for 68.25 the decline in corporate tax receipts. The study shall include 68.26 an analysis of the current and future effect of existing 68.27 corporate tax provisions, both independently and interactively 68.28 with other provisions; how tax provisions are changing business 68.29 practices; and the impact of outsourcing or relocation of 68.30 business operations and jobs. On or before February 1, 2006, 68.31 the commissioners shall report to the chairpersons of the house 68.32 and senate tax committees the results of the study and shall 68.33 include recommendations for changes to the tax laws that would 68.34 reduce tax incentives for businesses to outsource or relocate 68.35 business operations or jobs. 68.36 ARTICLE 6 69.1 FEDERAL UPDATE - SF1683 69.2 Section 1. Minnesota Statutes 2004, section 289A.02, 69.3 subdivision 7, is amended to read: 69.4 Subd. 7. [INTERNAL REVENUE CODE.] Unless specifically 69.5 defined otherwise, "Internal Revenue Code" means the Internal 69.6 Revenue Code of 1986, as amended throughJune 15, 2003December 69.7 31, 2004. 69.8[EFFECTIVE DATE.] This section is effective the day 69.9 following final enactment. 69.10 Sec. 2. Minnesota Statutes 2004, section 290.01, 69.11 subdivision 19, is amended to read: 69.12 Subd. 19. [NET INCOME.] The term "net income" means the 69.13 federal taxable income, as defined in section 63 of the Internal 69.14 Revenue Code of 1986, as amended through the date named in this 69.15 subdivision, incorporating the federal effective dates of 69.16 changes to the Internal Revenue Code and any elections made by 69.17 the taxpayer in accordance with the Internal Revenue Code in 69.18 determining federal taxable income for federal income tax 69.19 purposes, and with the modifications provided in subdivisions 69.20 19a to 19f. 69.21 In the case of a regulated investment company or a fund 69.22 thereof, as defined in section 851(a) or 851(g) of the Internal 69.23 Revenue Code, federal taxable income means investment company 69.24 taxable income as defined in section 852(b)(2) of the Internal 69.25 Revenue Code, except that: 69.26 (1) the exclusion of net capital gain provided in section 69.27 852(b)(2)(A) of the Internal Revenue Code does not apply; 69.28 (2) the deduction for dividends paid under section 69.29 852(b)(2)(D) of the Internal Revenue Code must be applied by 69.30 allowing a deduction for capital gain dividends and 69.31 exempt-interest dividends as defined in sections 852(b)(3)(C) 69.32 and 852(b)(5) of the Internal Revenue Code; and 69.33 (3) the deduction for dividends paid must also be applied 69.34 in the amount of any undistributed capital gains which the 69.35 regulated investment company elects to have treated as provided 69.36 in section 852(b)(3)(D) of the Internal Revenue Code. 70.1 The net income of a real estate investment trust as defined 70.2 and limited by section 856(a), (b), and (c) of the Internal 70.3 Revenue Code means the real estate investment trust taxable 70.4 income as defined in section 857(b)(2) of the Internal Revenue 70.5 Code. 70.6 The net income of a designated settlement fund as defined 70.7 in section 468B(d) of the Internal Revenue Code means the gross 70.8 income as defined in section 468B(b) of the Internal Revenue 70.9 Code. 70.10The provisions of sections 1113(a), 1117, 1206(a), 1313(a),70.111402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612,70.121616, 1617, 1704(l), and 1704(m) of the Small Business Job70.13Protection Act, Public Law 104-188, the provisions of Public Law70.14104-117, the provisions of sections 313(a) and (b)(1), 602(a),70.15913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013,70.161014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b)70.17and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and70.181604(d)(1) of the Taxpayer Relief Act of 1997, Public Law70.19105-34, the provisions of section 6010 of the Internal Revenue70.20Service Restructuring and Reform Act of 1998, Public Law70.21105-206, the provisions of section 4003 of the Omnibus70.22Consolidated and Emergency Supplemental Appropriations Act,70.231999, Public Law 105-277, and the provisions of section 318 of70.24the Consolidated Appropriation Act of 2001, Public Law 106-554,70.25shall become effective at the time they become effective for70.26federal purposes.70.27 The Internal Revenue Code of 1986, as amended through 70.28 December 31,19962004, shall be in effect for taxable years 70.29 beginning after December 31, 1996. The provisions of Public Law 70.30 109-1, shall be effective for tax years beginning after December 70.31 31, 2003. 70.32The provisions of sections 202(a) and (b), 221(a), 225,70.33312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and70.34(c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306,70.351307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528,70.361530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e)71.1of the Taxpayer Relief Act of 1997, Public Law 105-34, the71.2provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002,71.3and 7003 of the Internal Revenue Service Restructuring and71.4Reform Act of 1998, Public Law 105-206, the provisions of71.5section 3001 of the Omnibus Consolidated and Emergency71.6Supplemental Appropriations Act, 1999, Public Law 105-277, the71.7provisions of section 3001 of the Miscellaneous Trade and71.8Technical Corrections Act of 1999, Public Law 106-36, and the71.9provisions of section 316 of the Consolidated Appropriation Act71.10of 2001, Public Law 106-554, shall become effective at the time71.11they become effective for federal purposes.71.12The Internal Revenue Code of 1986, as amended through71.13December 31, 1997, shall be in effect for taxable years71.14beginning after December 31, 1997.71.15The provisions of sections 5002, 6009, 6011, and 7001 of71.16the Internal Revenue Service Restructuring and Reform Act of71.171998, Public Law 105-206, the provisions of section 9010 of the71.18Transportation Equity Act for the 21st Century, Public Law71.19105-178, the provisions of sections 1004, 4002, and 5301 of the71.20Omnibus Consolidation and Emergency Supplemental Appropriations71.21Act, 1999, Public Law 105-277, the provision of section 303 of71.22the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law71.23105-369, the provisions of sections 532, 534, 536, 537, and 53871.24of the Ticket to Work and Work Incentives Improvement Act of71.251999, Public Law 106-170, the provisions of the Installment Tax71.26Correction Act of 2000, Public Law 106-573, and the provisions71.27of section 309 of the Consolidated Appropriation Act of 2001,71.28Public Law 106-554, shall become effective at the time they71.29become effective for federal purposes.71.30The Internal Revenue Code of 1986, as amended through71.31December 31, 1998, shall be in effect for taxable years71.32beginning after December 31, 1998.71.33The provisions of the FSC Repeal and Extraterritorial71.34Income Exclusion Act of 2000, Public Law 106-519, and the71.35provision of section 412 of the Job Creation and Worker71.36Assistance Act of 2002, Public Law 107-147, shall become72.1effective at the time it became effective for federal purposes.72.2The Internal Revenue Code of 1986, as amended through72.3December 31, 1999, shall be in effect for taxable years72.4beginning after December 31, 1999. The provisions of sections72.5306 and 401 of the Consolidated Appropriation Act of 2001,72.6Public Law 106-554, and the provision of section 632(b)(2)(A) of72.7the Economic Growth and Tax Relief Reconciliation Act of 2001,72.8Public Law 107-16, and provisions of sections 101 and 402 of the72.9Job Creation and Worker Assistance Act of 2002, Public Law72.10107-147, shall become effective at the same time it became72.11effective for federal purposes.72.12The Internal Revenue Code of 1986, as amended through72.13December 31, 2000, shall be in effect for taxable years72.14beginning after December 31, 2000. The provisions of sections72.15659a and 671 of the Economic Growth and Tax Relief72.16Reconciliation Act of 2001, Public Law 107-16, the provisions of72.17sections 104, 105, and 111 of the Victims of Terrorism Tax72.18Relief Act of 2001, Public Law 107-134, and the provisions of72.19sections 201, 403, 413, and 606 of the Job Creation and Worker72.20Assistance Act of 2002, Public Law 107-147, shall become72.21effective at the same time it became effective for federal72.22purposes.72.23The Internal Revenue Code of 1986, as amended through March72.2415, 2002, shall be in effect for taxable years beginning after72.25December 31, 2001.72.26The provisions of sections 101 and 102 of the Victims of72.27Terrorism Tax Relief Act of 2001, Public Law 107-134, shall72.28become effective at the same time it becomes effective for72.29federal purposes.72.30The Internal Revenue Code of 1986, as amended through June72.3115, 2003, shall be in effect for taxable years beginning after72.32December 31, 2002. The provisions of section 201 of the Jobs72.33and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if72.34it is enacted into law, are effective at the same time it became72.35effective for federal purposes.72.36 Except as otherwise provided, references to the Internal 73.1 Revenue Code in subdivisions19a19 to19g19f mean the code in 73.2 effect for purposes of determining net income for the applicable 73.3 year. 73.4[EFFECTIVE DATE.] This section is effective the day 73.5 following final enactment. 73.6 Sec. 3. Minnesota Statutes 2004, section 290.01, 73.7 subdivision 19a, is amended to read: 73.8 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 73.9 individuals, estates, and trusts, there shall be added to 73.10 federal taxable income: 73.11 (1)(i) interest income on obligations of any state other 73.12 than Minnesota or a political or governmental subdivision, 73.13 municipality, or governmental agency or instrumentality of any 73.14 state other than Minnesota exempt from federal income taxes 73.15 under the Internal Revenue Code or any other federal statute; 73.16 and 73.17 (ii) exempt-interest dividends as defined in section 73.18 852(b)(5) of the Internal Revenue Code, except the portion of 73.19 the exempt-interest dividends derived from interest income on 73.20 obligations of the state of Minnesota or its political or 73.21 governmental subdivisions, municipalities, governmental agencies 73.22 or instrumentalities, but only if the portion of the 73.23 exempt-interest dividends from such Minnesota sources paid to 73.24 all shareholders represents 95 percent or more of the 73.25 exempt-interest dividends that are paid by the regulated 73.26 investment company as defined in section 851(a) of the Internal 73.27 Revenue Code, or the fund of the regulated investment company as 73.28 defined in section 851(g) of the Internal Revenue Code, making 73.29 the payment; and 73.30 (iii) for the purposes of items (i) and (ii), interest on 73.31 obligations of an Indian tribal government described in section 73.32 7871(c) of the Internal Revenue Code shall be treated as 73.33 interest income on obligations of the state in which the tribe 73.34 is located; 73.35 (2) the amount of income or sales and use taxes paid or 73.36 accrued within the taxable year under this chapter and income or 74.1 sales and use taxes paid to any other state or to any province 74.2 or territory of Canada, to the extent allowed as a deduction 74.3 under section 63(d) of the Internal Revenue Code, but the 74.4 addition may not be more than the amount by which the itemized 74.5 deductions as allowed under section 63(d) of the Internal 74.6 Revenue Code exceeds the amount of the standard deduction as 74.7 defined in section 63(c) of the Internal Revenue Code of 1986, 74.8 as amended through June 15, 2003. For the purpose of this 74.9 paragraph, the disallowance of itemized deductions under section 74.10 68 of the Internal Revenue Code of 1986, income or sales and use 74.11 tax is the last itemized deduction disallowed; 74.12 (3) the capital gain amount of a lump sum distribution to 74.13 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 74.14 Reform Act of 1986, Public Law 99-514, applies; 74.15 (4) the amount of income taxes paid or accrued within the 74.16 taxable year under this chapter and income taxes paid to any 74.17 other state or any province or territory of Canada, to the 74.18 extent allowed as a deduction in determining federal adjusted 74.19 gross income. For the purpose of this paragraph, income taxes 74.20 do not include the taxes imposed by sections 290.0922, 74.21 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 74.22 (5) the amount of expense, interest, or taxes disallowed 74.23 pursuant to section 290.10; 74.24 (6) the amount of a partner's pro rata share of net income 74.25 which does not flow through to the partner because the 74.26 partnership elected to pay the tax on the income under section 74.27 6242(a)(2) of the Internal Revenue Code;and74.28 (7) 80 percent of the depreciation deduction allowed under 74.29 section 168(k) of the Internal Revenue Code. For purposes of 74.30 this clause, if the taxpayer has an activity that in the taxable 74.31 year generates a deduction for depreciation under section 168(k) 74.32 and the activity generates a loss for the taxable year that the 74.33 taxpayer is not allowed to claim for the taxable year, "the 74.34 depreciation allowed under section 168(k)" for the taxable year 74.35 is limited to excess of the depreciation claimed by the activity 74.36 under section 168(k) over the amount of the loss from the 75.1 activity that is not allowed in the taxable year. In succeeding 75.2 taxable years when the losses not allowed in the taxable year 75.3 are allowed, the depreciation under section 168(k) is allowed; 75.4 (8) 80 percent of the amount by which the deduction allowed 75.5 by section 179 of the Internal Revenue Code exceeds the 75.6 deduction allowable by section 179 of the Internal Revenue Code 75.7 of 1986, as amended through December 31, 2003; 75.8 (9) to the extent deducted in computing federal taxable 75.9 income, the amount of the deduction allowable under section 199 75.10 of the Internal Revenue Code; 75.11 (10) to the extent deducted in computing federal taxable 75.12 income, the amount by which the standard deduction allowed under 75.13 section 63(c) of the Internal Revenue Code exceeds the standard 75.14 deduction allowable under section 63(c) of the Internal Revenue 75.15 Code of 1986, as amended through December 31, 2003; 75.16 (11) the exclusion allowed under section 139A of the 75.17 Internal Revenue Code for federal subsidies for prescription 75.18 drug plans; and 75.19 (12) the deduction or exclusion allowed under section 223 75.20 of the Internal Revenue Code for contributions to health savings 75.21 accounts. 75.22[EFFECTIVE DATE.] This section is effective for tax years 75.23 beginning after December 31, 2004, except the changes in clause 75.24 (2) are effective for tax years beginning after December 31, 75.25 2003. 75.26 Sec. 4. Minnesota Statutes 2004, section 290.01, 75.27 subdivision 19b, is amended to read: 75.28 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 75.29 individuals, estates, and trusts, there shall be subtracted from 75.30 federal taxable income: 75.31 (1) interest income on obligations of any authority, 75.32 commission, or instrumentality of the United States to the 75.33 extent includable in taxable income for federal income tax 75.34 purposes but exempt from state income tax under the laws of the 75.35 United States; 75.36 (2) if included in federal taxable income, the amount of 76.1 any overpayment of income tax to Minnesota or to any other 76.2 state, for any previous taxable year, whether the amount is 76.3 received as a refund or as a credit to another taxable year's 76.4 income tax liability; 76.5 (3) the amount paid to others, less the amount used to 76.6 claim the credit allowed under section 290.0674, not to exceed 76.7 $1,625 for each qualifying child in grades kindergarten to 6 and 76.8 $2,500 for each qualifying child in grades 7 to 12, for tuition, 76.9 textbooks, and transportation of each qualifying child in 76.10 attending an elementary or secondary school situated in 76.11 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 76.12 wherein a resident of this state may legally fulfill the state's 76.13 compulsory attendance laws, which is not operated for profit, 76.14 and which adheres to the provisions of the Civil Rights Act of 76.15 1964 and chapter 363A. For the purposes of this clause, 76.16 "tuition" includes fees or tuition as defined in section 76.17 290.0674, subdivision 1, clause (1). As used in this clause, 76.18 "textbooks" includes books and other instructional materials and 76.19 equipment purchased or leased for use in elementary and 76.20 secondary schools in teaching only those subjects legally and 76.21 commonly taught in public elementary and secondary schools in 76.22 this state. Equipment expenses qualifying for deduction 76.23 includes expenses as defined and limited in section 290.0674, 76.24 subdivision 1, clause (3). "Textbooks" does not include 76.25 instructional books and materials used in the teaching of 76.26 religious tenets, doctrines, or worship, the purpose of which is 76.27 to instill such tenets, doctrines, or worship, nor does it 76.28 include books or materials for, or transportation to, 76.29 extracurricular activities including sporting events, musical or 76.30 dramatic events, speech activities, driver's education, or 76.31 similar programs. For purposes of the subtraction provided by 76.32 this clause, "qualifying child" has the meaning given in section 76.33 32(c)(3) of the Internal Revenue Code; 76.34 (4) income as provided under section 290.0802; 76.35 (5) to the extent included in federal adjusted gross 76.36 income, income realized on disposition of property exempt from 77.1 tax under section 290.491; 77.2 (6) to the extent included in federal taxable income, 77.3 postservice benefits for youth community service under section 77.4 124D.42 for volunteer service under United States Code, title 77.5 42, sections 12601 to 12604; 77.6 (7) to the extent not deducted in determining federal 77.7 taxable income by an individual who does not itemize deductions 77.8 for federal income tax purposes for the taxable year, an amount 77.9 equal to 50 percent of the excess of charitable contributions 77.10 over $500 allowable as a deduction for the taxable year under 77.11 section 170(a) of the Internal Revenue Codeover $500and under 77.12 the provisions of Public Law 109-1; 77.13 (8) for taxable years beginning before January 1, 2008, the 77.14 amount of the federal small ethanol producer credit allowed 77.15 under section 40(a)(3) of the Internal Revenue Code which is 77.16 included in gross income under section 87 of the Internal 77.17 Revenue Code; 77.18 (9) for individuals who are allowed a federal foreign tax 77.19 credit for taxes that do not qualify for a credit under section 77.20 290.06, subdivision 22, an amount equal to the carryover of 77.21 subnational foreign taxes for the taxable year, but not to 77.22 exceed the total subnational foreign taxes reported in claiming 77.23 the foreign tax credit. For purposes of this clause, "federal 77.24 foreign tax credit" means the credit allowed under section 27 of 77.25 the Internal Revenue Code, and "carryover of subnational foreign 77.26 taxes" equals the carryover allowed under section 904(c) of the 77.27 Internal Revenue Code minus national level foreign taxes to the 77.28 extent they exceed the federal foreign tax credit; 77.29 (10) in each of the five tax years immediately following 77.30 the tax year in which an addition is required under subdivision 77.31 19a, clause (7), an amount equal to one-fifth of the delayed 77.32 depreciation. For purposes of this clause, "delayed 77.33 depreciation" means the amount of the addition made by the 77.34 taxpayer under subdivision 19a, clause (7), minus the positive 77.35 value of any net operating loss under section 172 of the 77.36 Internal Revenue Code generated for the tax year of the 78.1 addition. The resulting delayed depreciation cannot be less 78.2 than zero;and78.3 (11) job opportunity building zone income as provided under 78.4 section 469.316.; 78.5 (12) in each of the five tax years immediately following 78.6 the tax year in which an addition is required under subdivision 78.7 19a, clause (8), or 19c, clause (17), in the case of a 78.8 shareholder of a corporation that is an S corporation, an amount 78.9 equal to one-fifth of the addition made by the taxpayer under 78.10 subdivision 19a, clause (8), or 19c, clause (17), in the case of 78.11 a shareholder of a corporation that is an S corporation, minus 78.12 the positive value of any net operating loss under section 172 78.13 of the Internal Revenue Code generated for the tax year of the 78.14 addition. If the net operating loss exceeds the addition for 78.15 the tax year, a subtraction is not allowed under this clause; 78.16 (13) to the extent included in federal taxable income, 78.17 compensation paid to a service member as defined in United 78.18 States Code, title 10, section 101(a)(5), for military service 78.19 as defined in the Service Member Civil Relief Act, Public Law 78.20 108-189, section 101(2), and compensation paid for state active 78.21 service as defined in section 190.05, subdivision 5a, clauses 78.22 (1) and (3), or federally funded state active service as defined 78.23 in section 190.05, subdivision 5b. This subtraction does not 78.24 apply to retirement income as defined in section 290.17, 78.25 subdivision 2, paragraph (a), clause (3); and 78.26 (14) distributions from a health savings account to the 78.27 extent the distributions are for the return of amounts added 78.28 back under subdivision 19a, clause (12), but only to the extent 78.29 that the amount of the distribution would have been deductible 78.30 under section 213 of the Internal Revenue Code for that taxable 78.31 year. For the purposes of this clause, distributions are 78.32 considered to be made from contributions subject to the add-back. 78.33[EFFECTIVE DATE.] This section is effective for tax years 78.34 beginning after December 31, 2004, except the change to clause 78.35 (7) is effective for tax years beginning after December 31, 2003. 78.36 Sec. 5. Minnesota Statutes 2004, section 290.01, 79.1 subdivision 19c, is amended to read: 79.2 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 79.3 INCOME.] For corporations, there shall be added to federal 79.4 taxable income: 79.5 (1) the amount of any deduction taken for federal income 79.6 tax purposes for income, excise, or franchise taxes based on net 79.7 income or related minimum taxes, including but not limited to 79.8 the tax imposed under section 290.0922, paid by the corporation 79.9 to Minnesota, another state, a political subdivision of another 79.10 state, the District of Columbia, or any foreign country or 79.11 possession of the United States; 79.12 (2) interest not subject to federal tax upon obligations 79.13 of: the United States, its possessions, its agencies, or its 79.14 instrumentalities; the state of Minnesota or any other state, 79.15 any of its political or governmental subdivisions, any of its 79.16 municipalities, or any of its governmental agencies or 79.17 instrumentalities; the District of Columbia; or Indian tribal 79.18 governments; 79.19 (3) exempt-interest dividends received as defined in 79.20 section 852(b)(5) of the Internal Revenue Code; 79.21 (4) the amount of any net operating loss deduction taken 79.22 for federal income tax purposes under section 172 or 832(c)(10) 79.23 of the Internal Revenue Code or operations loss deduction under 79.24 section 810 of the Internal Revenue Code; 79.25 (5) the amount of any special deductions taken for federal 79.26 income tax purposes under sections 241 to 247 of the Internal 79.27 Revenue Code; 79.28 (6) losses from the business of mining, as defined in 79.29 section 290.05, subdivision 1, clause (a), that are not subject 79.30 to Minnesota income tax; 79.31 (7) the amount of any capital losses deducted for federal 79.32 income tax purposes under sections 1211 and 1212 of the Internal 79.33 Revenue Code; 79.34 (8) the exempt foreign trade income of a foreign sales 79.35 corporation under sections 921(a) and 291 of the Internal 79.36 Revenue Code; 80.1 (9) the amount of percentage depletion deducted under 80.2 sections 611 through 614 and 291 of the Internal Revenue Code; 80.3 (10) for certified pollution control facilities placed in 80.4 service in a taxable year beginning before December 31, 1986, 80.5 and for which amortization deductions were elected under section 80.6 169 of the Internal Revenue Code of 1954, as amended through 80.7 December 31, 1985, the amount of the amortization deduction 80.8 allowed in computing federal taxable income for those 80.9 facilities; 80.10 (11) the amount of any deemed dividend from a foreign 80.11 operating corporation determined pursuant to section 290.17, 80.12 subdivision 4, paragraph (g); 80.13 (12) the amount of any environmental tax paid under section 80.14 59(a) of the Internal Revenue Code; 80.15 (13) the amount of a partner's pro rata share of net income 80.16 which does not flow through to the partner because the 80.17 partnership elected to pay the tax on the income under section 80.18 6242(a)(2) of the Internal Revenue Code; 80.19 (14) the amount of net income excluded under section 114 of 80.20 the Internal Revenue Code; 80.21 (15) any increase in subpart F income, as defined in 80.22 section 952(a) of the Internal Revenue Code, for the taxable 80.23 year when subpart F income is calculated without regard to the 80.24 provisions of section 614 of Public Law 107-147;and80.25 (16) 80 percent of the depreciation deduction allowed under 80.26 section 168(k) of the Internal Revenue Code. For purposes of 80.27 this clause, if the taxpayer has an activity that in the taxable 80.28 year generates a deduction for depreciation under section 168(k) 80.29 and the activity generates a loss for the taxable year that the 80.30 taxpayer is not allowed to claim for the taxable year, "the 80.31 depreciation allowed under section 168(k)" for the taxable year 80.32 is limited to excess of the depreciation claimed by the activity 80.33 under section 168(k) over the amount of the loss from the 80.34 activity that is not allowed in the taxable year. In succeeding 80.35 taxable years when the losses not allowed in the taxable year 80.36 are allowed, the depreciation under section 168(k) is allowed; 81.1 (17) 80 percent of the amount by which the deduction 81.2 allowed by section 179 of the Internal Revenue Code exceeds the 81.3 deduction allowable by section 179 of the Internal Revenue Code 81.4 of 1986, as amended through December 31, 2003; and 81.5 (18) to the extent deducted in computing federal taxable 81.6 income, the amount of the deduction allowable under section 199 81.7 of the Internal Revenue Code. 81.8[EFFECTIVE DATE.] This section is effective for tax years 81.9 beginning after December 31, 2004. 81.10 Sec. 6. Minnesota Statutes 2004, section 290.01, 81.11 subdivision 19d, is amended to read: 81.12 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 81.13 TAXABLE INCOME.] For corporations, there shall be subtracted 81.14 from federal taxable income after the increases provided in 81.15 subdivision 19c: 81.16 (1) the amount of foreign dividend gross-up added to gross 81.17 income for federal income tax purposes under section 78 of the 81.18 Internal Revenue Code; 81.19 (2) the amount of salary expense not allowed for federal 81.20 income tax purposes due to claiming the federal jobs credit 81.21 under section 51 of the Internal Revenue Code; 81.22 (3) any dividend (not including any distribution in 81.23 liquidation) paid within the taxable year by a national or state 81.24 bank to the United States, or to any instrumentality of the 81.25 United States exempt from federal income taxes, on the preferred 81.26 stock of the bank owned by the United States or the 81.27 instrumentality; 81.28 (4) amounts disallowed for intangible drilling costs due to 81.29 differences between this chapter and the Internal Revenue Code 81.30 in taxable years beginning before January 1, 1987, as follows: 81.31 (i) to the extent the disallowed costs are represented by 81.32 physical property, an amount equal to the allowance for 81.33 depreciation under Minnesota Statutes 1986, section 290.09, 81.34 subdivision 7, subject to the modifications contained in 81.35 subdivision 19e; and 81.36 (ii) to the extent the disallowed costs are not represented 82.1 by physical property, an amount equal to the allowance for cost 82.2 depletion under Minnesota Statutes 1986, section 290.09, 82.3 subdivision 8; 82.4 (5) the deduction for capital losses pursuant to sections 82.5 1211 and 1212 of the Internal Revenue Code, except that: 82.6 (i) for capital losses incurred in taxable years beginning 82.7 after December 31, 1986, capital loss carrybacks shall not be 82.8 allowed; 82.9 (ii) for capital losses incurred in taxable years beginning 82.10 after December 31, 1986, a capital loss carryover to each of the 82.11 15 taxable years succeeding the loss year shall be allowed; 82.12 (iii) for capital losses incurred in taxable years 82.13 beginning before January 1, 1987, a capital loss carryback to 82.14 each of the three taxable years preceding the loss year, subject 82.15 to the provisions of Minnesota Statutes 1986, section 290.16, 82.16 shall be allowed; and 82.17 (iv) for capital losses incurred in taxable years beginning 82.18 before January 1, 1987, a capital loss carryover to each of the 82.19 five taxable years succeeding the loss year to the extent such 82.20 loss was not used in a prior taxable year and subject to the 82.21 provisions of Minnesota Statutes 1986, section 290.16, shall be 82.22 allowed; 82.23 (6) an amount for interest and expenses relating to income 82.24 not taxable for federal income tax purposes, if (i) the income 82.25 is taxable under this chapter and (ii) the interest and expenses 82.26 were disallowed as deductions under the provisions of section 82.27 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 82.28 federal taxable income; 82.29 (7) in the case of mines, oil and gas wells, other natural 82.30 deposits, and timber for which percentage depletion was 82.31 disallowed pursuant to subdivision 19c, clause (11), a 82.32 reasonable allowance for depletion based on actual cost. In the 82.33 case of leases the deduction must be apportioned between the 82.34 lessor and lessee in accordance with rules prescribed by the 82.35 commissioner. In the case of property held in trust, the 82.36 allowable deduction must be apportioned between the income 83.1 beneficiaries and the trustee in accordance with the pertinent 83.2 provisions of the trust, or if there is no provision in the 83.3 instrument, on the basis of the trust's income allocable to 83.4 each; 83.5 (8) for certified pollution control facilities placed in 83.6 service in a taxable year beginning before December 31, 1986, 83.7 and for which amortization deductions were elected under section 83.8 169 of the Internal Revenue Code of 1954, as amended through 83.9 December 31, 1985, an amount equal to the allowance for 83.10 depreciation under Minnesota Statutes 1986, section 290.09, 83.11 subdivision 7; 83.12 (9) amounts included in federal taxable income that are due 83.13 to refunds of income, excise, or franchise taxes based on net 83.14 income or related minimum taxes paid by the corporation to 83.15 Minnesota, another state, a political subdivision of another 83.16 state, the District of Columbia, or a foreign country or 83.17 possession of the United States to the extent that the taxes 83.18 were added to federal taxable income under section 290.01, 83.19 subdivision 19c, clause (1), in a prior taxable year; 83.20 (10) 80 percent of royalties, fees, or other like income 83.21 accrued or received from a foreign operating corporation or a 83.22 foreign corporation which is part of the same unitary business 83.23 as the receiving corporation; 83.24 (11) income or gains from the business of mining as defined 83.25 in section 290.05, subdivision 1, clause (a), that are not 83.26 subject to Minnesota franchise tax; 83.27 (12) the amount of handicap access expenditures in the 83.28 taxable year which are not allowed to be deducted or capitalized 83.29 under section 44(d)(7) of the Internal Revenue Code; 83.30 (13) the amount of qualified research expenses not allowed 83.31 for federal income tax purposes under section 280C(c) of the 83.32 Internal Revenue Code, but only to the extent that the amount 83.33 exceeds the amount of the credit allowed under section 290.068; 83.34 (14) the amount of salary expenses not allowed for federal 83.35 income tax purposes due to claiming the Indian employment credit 83.36 under section 45A(a) of the Internal Revenue Code; 84.1 (15) the amount of any refund of environmental taxes paid 84.2 under section 59A of the Internal Revenue Code; 84.3 (16) for taxable years beginning before January 1, 2008, 84.4 the amount of the federal small ethanol producer credit allowed 84.5 under section 40(a)(3) of the Internal Revenue Code which is 84.6 included in gross income under section 87 of the Internal 84.7 Revenue Code; 84.8 (17) for a corporation whose foreign sales corporation, as 84.9 defined in section 922 of the Internal Revenue Code, constituted 84.10 a foreign operating corporation during any taxable year ending 84.11 before January 1, 1995, and a return was filed by August 15, 84.12 1996, claiming the deduction under section 290.21, subdivision 84.13 4, for income received from the foreign operating corporation, 84.14 an amount equal to 1.23 multiplied by the amount of income 84.15 excluded under section 114 of the Internal Revenue Code, 84.16 provided the income is not income of a foreign operating 84.17 company; 84.18 (18) any decrease in subpart F income, as defined in 84.19 section 952(a) of the Internal Revenue Code, for the taxable 84.20 year when subpart F income is calculated without regard to the 84.21 provisions of section 614 of Public Law 107-147;and84.22 (19) in each of the five tax years immediately following 84.23 the tax year in which an addition is required under subdivision 84.24 19c, clause (16), an amount equal to one-fifth of the delayed 84.25 depreciation. For purposes of this clause, "delayed 84.26 depreciation" means the amount of the addition made by the 84.27 taxpayer under subdivision 19c, clause (16). The resulting 84.28 delayed depreciation cannot be less than zero; and 84.29 (20) in each of the five tax years immediately following 84.30 the tax year in which an addition is required under subdivision 84.31 19c, clause (17), an amount equal to one-fifth of the amount of 84.32 the addition. 84.33[EFFECTIVE DATE.] This section is effective for tax years 84.34 beginning after December 31, 2004. 84.35 Sec. 7. Minnesota Statutes 2004, section 290.01, 84.36 subdivision 31, is amended to read: 85.1 Subd. 31. [INTERNAL REVENUE CODE.] Unless specifically 85.2 defined otherwise, "Internal Revenue Code" means the Internal 85.3 Revenue Code of 1986, as amended throughJune 15, 2003December 85.4 31, 2004. 85.5[EFFECTIVE DATE.] This section is effective the day 85.6 following final enactment except the changes incorporated by 85.7 federal changes are effective at the same times as the changes 85.8 were effective for federal purposes. 85.9 Sec. 8. Minnesota Statutes 2004, section 290.032, 85.10 subdivision 1, is amended to read: 85.11 Subdivision 1. [IMPOSITION.] There is hereby imposed as an 85.12 addition to the annual income tax for a taxable year of a 85.13 taxpayer in the classes described in section 290.03 a tax with 85.14 respect to any distribution received by such taxpayer that is 85.15 treated as a lump sum distribution under section402(d) of the85.16Internal Revenue Code1401(c)(2) of the Small Business Job 85.17 Protection Act, Public Law 104-188 and that is subject to tax 85.18 for such taxable year under section402(d) of the Internal85.19Revenue Code1401(c)(2) of the Small Business Job Protection 85.20 Act, Public Law 104-188. 85.21[EFFECTIVE DATE.] This section is effective for tax years 85.22 beginning after December 31, 1999. 85.23 Sec. 9. Minnesota Statutes 2004, section 290.032, 85.24 subdivision 2, is amended to read: 85.25 Subd. 2. [COMPUTATION.] The amount of tax imposed by 85.26 subdivision 1 shall be computed in the same way as the tax 85.27 imposed under section 402(d) of the Internal Revenue Code of 85.28 1986, as amended through December 31, 1995, except that the 85.29 initial separate tax shall be an amount equal to five times the 85.30 tax which would be imposed by section 290.06, subdivision 2c, if 85.31 the recipient was an unmarried individual, and the taxable net 85.32 income was an amount equal to one-fifth of the excess of 85.33 (i) the total taxable amount of the lump sum distribution 85.34 for the year, over 85.35 (ii) the minimum distribution allowance, and except that 85.36 references in section 402(d) of the Internal Revenue Code of 86.1 1986, as amended through December 31, 1995, to paragraph (1)(A) 86.2 thereof shall instead be references to subdivision 1, and the 86.3 excess, if any, of the subtraction base amount over federal 86.4 taxable income for a qualified individual as provided under 86.5 section 290.0802, subdivision 2. 86.6[EFFECTIVE DATE.] This section is effective for tax years 86.7 beginning after December 31, 1999. 86.8 Sec. 10. Minnesota Statutes 2004, section 290.06, 86.9 subdivision 2c, is amended to read: 86.10 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 86.11 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 86.12 married individuals filing joint returns and surviving spouses 86.13 as defined in section 2(a) of the Internal Revenue Code must be 86.14 computed by applying to their taxable net income the following 86.15 schedule of rates: 86.16 (1) On the first $25,680, 5.35 percent; 86.17 (2) On all over $25,680, but not over $102,030, 7.05 86.18 percent; 86.19 (3) On all over $102,030, 7.85 percent. 86.20 Married individuals filing separate returns, estates, and 86.21 trusts must compute their income tax by applying the above rates 86.22 to their taxable income, except that the income brackets will be 86.23 one-half of the above amounts. 86.24 (b) The income taxes imposed by this chapter upon unmarried 86.25 individuals must be computed by applying to taxable net income 86.26 the following schedule of rates: 86.27 (1) On the first $17,570, 5.35 percent; 86.28 (2) On all over $17,570, but not over $57,710, 7.05 86.29 percent; 86.30 (3) On all over $57,710, 7.85 percent. 86.31 (c) The income taxes imposed by this chapter upon unmarried 86.32 individuals qualifying as a head of household as defined in 86.33 section 2(b) of the Internal Revenue Code must be computed by 86.34 applying to taxable net income the following schedule of rates: 86.35 (1) On the first $21,630, 5.35 percent; 86.36 (2) On all over $21,630, but not over $86,910, 7.05 87.1 percent; 87.2 (3) On all over $86,910, 7.85 percent. 87.3 (d) In lieu of a tax computed according to the rates set 87.4 forth in this subdivision, the tax of any individual taxpayer 87.5 whose taxable net income for the taxable year is less than an 87.6 amount determined by the commissioner must be computed in 87.7 accordance with tables prepared and issued by the commissioner 87.8 of revenue based on income brackets of not more than $100. The 87.9 amount of tax for each bracket shall be computed at the rates 87.10 set forth in this subdivision, provided that the commissioner 87.11 may disregard a fractional part of a dollar unless it amounts to 87.12 50 cents or more, in which case it may be increased to $1. 87.13 (e) An individual who is not a Minnesota resident for the 87.14 entire year must compute the individual's Minnesota income tax 87.15 as provided in this subdivision. After the application of the 87.16 nonrefundable credits provided in this chapter, the tax 87.17 liability must then be multiplied by a fraction in which: 87.18 (1) the numerator is the individual's Minnesota source 87.19 federal adjusted gross income as defined in section 62 of the 87.20 Internal Revenue Code and increased by the additions required 87.21 under section 290.01, subdivision 19a, clauses (1), (5),and87.22 (6), (7), (8), and (9), and reduced by the subtraction under 87.23 section 290.01, subdivision 19b, clause (11), and the Minnesota 87.24 assignable portion of the subtraction for United States 87.25 government interest under section 290.01, subdivision 19b, 87.26 clause (1), and the subtractions under clauses (10), (11), (12), 87.27 and (13), after applying the allocation and assignability 87.28 provisions of section 290.081, clause (a), or 290.17; and 87.29 (2) the denominator is the individual's federal adjusted 87.30 gross income as defined in section 62 of the Internal Revenue 87.31 Code of 1986, increased by the amounts specified in section 87.32 290.01, subdivision 19a, clauses (1), (5),and(6), (7), (8), 87.33 and (9), and reduced by the amounts specified in section 290.01, 87.34 subdivision 19b, clauses (1)and, (10), (11), (12), and (13). 87.35[EFFECTIVE DATE.] This section is effective for tax years 87.36 beginning after December 31, 2004. 88.1 Sec. 11. Minnesota Statutes 2004, section 290.067, 88.2 subdivision 1, is amended to read: 88.3 Subdivision 1. [AMOUNT OF CREDIT.] (a) A taxpayer may take 88.4 as a credit against the tax due from the taxpayer and a spouse, 88.5 if any, under this chapter an amount equal to the dependent care 88.6 credit for which the taxpayer is eligible pursuant to the 88.7 provisions of section 21 of the Internal Revenue Code subject to 88.8 the limitations provided in subdivision 2 except that in 88.9 determining whether the child qualified as a dependent, income 88.10 received as a Minnesota family investment program grant or 88.11 allowance to or on behalf of the child must not be taken into 88.12 account in determining whether the child received more than half 88.13 of the child's support from the taxpayer, and the provisions of 88.14 section 32(b)(1)(D) of the Internal Revenue Code do not apply. 88.15 (b) If a child who has not attained the age of six years at 88.16 the close of the taxable year is cared for at a licensed family 88.17 day care home operated by the child's parent, the taxpayer is 88.18 deemed to have paid employment-related expenses. If the child 88.19 is 16 months old or younger at the close of the taxable year, 88.20 the amount of expenses deemed to have been paid equals the 88.21 maximum limit for one qualified individual under section 21(c) 88.22 and (d) of the Internal Revenue Code. If the child is older 88.23 than 16 months of age but has not attained the age of six years 88.24 at the close of the taxable year, the amount of expenses deemed 88.25 to have been paid equals the amount the licensee would charge 88.26 for the care of a child of the same age for the same number of 88.27 hours of care. 88.28 (c) If a married couple: 88.29 (1) has a child who has not attained the age of one year at 88.30 the close of the taxable year; 88.31 (2) files a joint tax return for the taxable year; and 88.32 (3) does not participate in a dependent care assistance 88.33 program as defined in section 129 of the Internal Revenue Code, 88.34 in lieu of the actual employment related expenses paid for that 88.35 child under paragraph (a) or the deemed amount under paragraph 88.36 (b), the lesser of (i) the combined earned income of the couple 89.1 or (ii) the amount of the maximum limit for one qualified 89.2 individual under section 21(c) and (d) of the Internal Revenue 89.3 Code will be deemed to be the employment related expense paid 89.4 for that child. The earned income limitation of section 21(d) 89.5 of the Internal Revenue Code shall not apply to this deemed 89.6 amount. These deemed amounts apply regardless of whether any 89.7 employment-related expenses have been paid. 89.8 (d) If the taxpayer is not required and does not file a 89.9 federal individual income tax return for the tax year, no credit 89.10 is allowed for any amount paid to any person unless: 89.11 (1) the name, address, and taxpayer identification number 89.12 of the person are included on the return claiming the credit; or 89.13 (2) if the person is an organization described in section 89.14 501(c)(3) of the Internal Revenue Code and exempt from tax under 89.15 section 501(a) of the Internal Revenue Code, the name and 89.16 address of the person are included on the return claiming the 89.17 credit. 89.18 In the case of a failure to provide the information required 89.19 under the preceding sentence, the preceding sentence does not 89.20 apply if it is shown that the taxpayer exercised due diligence 89.21 in attempting to provide the information required. 89.22 In the case of a nonresident, part-year resident, or a 89.23 person who has earned income not subject to tax under this 89.24 chapter including earned income excluded pursuant to section 89.25 290.01, subdivision 19b, clause (11), the credit determined 89.26 under section 21 of the Internal Revenue Code must be allocated 89.27 based on the ratio by which the earned income of the claimant 89.28 and the claimant's spouse from Minnesota sources bears to the 89.29 total earned income of the claimant and the claimant's spouse. 89.30 For residents of Minnesota, the exclusion of combat pay 89.31 under section 112 of the Internal Revenue Code and the 89.32 subtraction for military pay under section 290.01, subdivision 89.33 19b, clause (13), are not considered "earned income not subject 89.34 to tax under this chapter." 89.35[EFFECTIVE DATE.] This section is effective for tax years 89.36 beginning after December 31, 2004. 90.1 Sec. 12. Minnesota Statutes 2004, section 290.067, 90.2 subdivision 2a, is amended to read: 90.3 Subd. 2a. [INCOME.] (a) For purposes of this section, 90.4 "income" means the sum of the following: 90.5 (1) federal adjusted gross income as defined in section 62 90.6 of the Internal Revenue Code; and 90.7 (2) the sum of the following amounts to the extent not 90.8 included in clause (1): 90.9 (i) all nontaxable income; 90.10 (ii) the amount of a passive activity loss that is not 90.11 disallowed as a result of section 469, paragraph (i) or (m) of 90.12 the Internal Revenue Code and the amount of passive activity 90.13 loss carryover allowed under section 469(b) of the Internal 90.14 Revenue Code; 90.15 (iii) an amount equal to the total of any discharge of 90.16 qualified farm indebtedness of a solvent individual excluded 90.17 from gross income under section 108(g) of the Internal Revenue 90.18 Code; 90.19 (iv) cash public assistance and relief; 90.20 (v) any pension or annuity (including railroad retirement 90.21 benefits, all payments received under the federal Social 90.22 Security Act, supplemental security income, and veterans 90.23 benefits), which was not exclusively funded by the claimant or 90.24 spouse, or which was funded exclusively by the claimant or 90.25 spouse and which funding payments were excluded from federal 90.26 adjusted gross income in the years when the payments were made; 90.27 (vi) interest received from the federal or a state 90.28 government or any instrumentality or political subdivision 90.29 thereof; 90.30 (vii) workers' compensation; 90.31 (viii) nontaxable strike benefits; 90.32 (ix) the gross amounts of payments received in the nature 90.33 of disability income or sick pay as a result of accident, 90.34 sickness, or other disability, whether funded through insurance 90.35 or otherwise; 90.36 (x) a lump sum distribution under section 402(e)(3) of the 91.1 Internal Revenue Code of 1986, as amended through December 31, 91.2 1995; 91.3 (xi) contributions made by the claimant to an individual 91.4 retirement account, including a qualified voluntary employee 91.5 contribution; simplified employee pension plan; self-employed 91.6 retirement plan; cash or deferred arrangement plan under section 91.7 401(k) of the Internal Revenue Code; or deferred compensation 91.8 plan under section 457 of the Internal Revenue Code;and91.9 (xii) nontaxable scholarship or fellowship grants; 91.10 (xiii) the amount of deduction allowed under section 199 of 91.11 the Internal Revenue Code; and 91.12 (xiv) the amount of deduction allowed under section 220 or 91.13 223 of the Internal Revenue Code. 91.14 In the case of an individual who files an income tax return 91.15 on a fiscal year basis, the term "federal adjusted gross income" 91.16 means federal adjusted gross income reflected in the fiscal year 91.17 ending in the next calendar year. Federal adjusted gross income 91.18 may not be reduced by the amount of a net operating loss 91.19 carryback or carryforward or a capital loss carryback or 91.20 carryforward allowed for the year. 91.21 (b) "Income" does not include: 91.22 (1) amounts excluded pursuant to the Internal Revenue Code, 91.23 sections 101(a) and 102; 91.24 (2) amounts of any pension or annuity that were exclusively 91.25 funded by the claimant or spouse if the funding payments were 91.26 not excluded from federal adjusted gross income in the years 91.27 when the payments were made; 91.28 (3) surplus food or other relief in kind supplied by a 91.29 governmental agency; 91.30 (4) relief granted under chapter 290A; 91.31 (5) child support payments received under a temporary or 91.32 final decree of dissolution or legal separation; and 91.33 (6) restitution payments received by eligible individuals 91.34 and excludable interest as defined in section 803 of the 91.35 Economic Growth and Tax Relief Reconciliation Act of 2001, 91.36 Public Law 107-16. 92.1[EFFECTIVE DATE.] This section is effective for tax years 92.2 beginning after December 31, 2003. 92.3 Sec. 13. Minnesota Statutes 2004, section 290.0671, 92.4 subdivision 1, is amended to read: 92.5 Subdivision 1. [CREDIT ALLOWED.] (a) An individual is 92.6 allowed a credit against the tax imposed by this chapter equal 92.7 to a percentage of earned income. To receive a credit, a 92.8 taxpayer must be eligible for a credit under section 32 of the 92.9 Internal Revenue Code. 92.10 (b) For individuals with no qualifying children, the credit 92.11 equals 1.9125 percent of the first $4,620 of earned income. The 92.12 credit is reduced by 1.9125 percent of earned income or modified 92.13 adjusted gross income, whichever is greater, in excess of 92.14 $5,770, but in no case is the credit less than zero. 92.15 (c) For individuals with one qualifying child, the credit 92.16 equals 8.5 percent of the first $6,920 of earned income and 8.5 92.17 percent of earned income over $12,080 but less than $13,450. 92.18 The credit is reduced by 5.73 percent of earned income or 92.19 modified adjusted gross income, whichever is greater, in excess 92.20 of $15,080, but in no case is the credit less than zero. 92.21 (d) For individuals with two or more qualifying children, 92.22 the credit equals ten percent of the first $9,720 of earned 92.23 income and 20 percent of earned income over $14,860 but less 92.24 than $16,800. The credit is reduced by 10.3 percent of earned 92.25 income or modified adjusted gross income, whichever is greater, 92.26 in excess of $17,890, but in no case is the credit less than 92.27 zero. 92.28 (e) For a nonresident or part-year resident, the credit 92.29 must be allocated based on the percentage calculated under 92.30 section 290.06, subdivision 2c, paragraph (e). 92.31 (f) For a person who was a resident for the entire tax year 92.32 and has earned income not subject to tax under this chapter, 92.33 including income excluded under section 290.01, subdivision 19b, 92.34 clause (11), the credit must be allocated based on the ratio of 92.35 federal adjusted gross income reduced by the earned income not 92.36 subject to tax under this chapter over federal adjusted gross 93.1 income. For the purposes of this paragraph, the exclusion of 93.2 combat pay under section 112 of the Internal Revenue Code and 93.3 the subtraction for military pay under section 290.01, 93.4 subdivision 19b, clause (13), are not considered "earned income 93.5 not subject to tax under this chapter." 93.6 (g) For tax years beginning after December 31, 2001, and 93.7 before December 31, 2004, the $5,770 in paragraph (b), the 93.8 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 93.9 after being adjusted for inflation under subdivision 7, are each 93.10 increased by $1,000 for married taxpayers filing joint returns. 93.11 (h) For tax years beginning after December 31, 2004, and 93.12 before December 31, 2007, the $5,770 in paragraph (b), the 93.13 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 93.14 after being adjusted for inflation under subdivision 7, are each 93.15 increased by $2,000 for married taxpayers filing joint returns. 93.16 (i) For tax years beginning after December 31, 2007, and 93.17 before December 31, 2010, the $5,770 in paragraph (b), the 93.18 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 93.19 after being adjusted for inflation under subdivision 7, are each 93.20 increased by $3,000 for married taxpayers filing joint returns. 93.21 For tax years beginning after December 31, 2008, the $3,000 is 93.22 adjusted annually for inflation under subdivision 7. 93.23 (j) The commissioner shall construct tables showing the 93.24 amount of the credit at various income levels and make them 93.25 available to taxpayers. The tables shall follow the schedule 93.26 contained in this subdivision, except that the commissioner may 93.27 graduate the transition between income brackets. 93.28[EFFECTIVE DATE.] This section is effective for tax years 93.29 beginning after December 31, 2004. 93.30 Sec. 14. Minnesota Statutes 2004, section 290.0675, 93.31 subdivision 1, is amended to read: 93.32 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 93.33 section the following terms have the meanings given. 93.34 (b) "Earned income" means the sum of the following, to the 93.35 extent included in Minnesota taxable income: 93.36 (1) earned income as defined in section 32(c)(2) of the 94.1 Internal Revenue Code; 94.2 (2) income received from a retirement pension, 94.3 profit-sharing, stock bonus, or annuity plan; and 94.4 (3) Social Security benefits as defined in section 86(d)(1) 94.5 of the Internal Revenue Code. 94.6 (c) "Taxable income" means net income as defined in section 94.7 290.01, subdivision 19. 94.8 (d) "Earned income of lesser-earning spouse" means the 94.9 earned income of the spouse with the lesser amount of earned 94.10 income as defined in paragraph (b) for the taxable year minus 94.11 the sum of (i) the amount for one exemption under section 151(d) 94.12 of the Internal Revenue Code and (ii) one-half the amount of the 94.13 standard deduction under section 63(c)(2)(A) and (4) of the 94.14 Internal Revenue Code of 1986, as amended through December 31, 94.15 2003. 94.16[EFFECTIVE DATE.] This section is effective for tax years 94.17 beginning after December 31, 2004. 94.18 Sec. 15. Minnesota Statutes 2004, section 290.091, 94.19 subdivision 2, is amended to read: 94.20 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 94.21 this section, the following terms have the meanings given: 94.22 (a) "Alternative minimum taxable income" means the sum of 94.23 the following for the taxable year: 94.24 (1) the taxpayer's federal alternative minimum taxable 94.25 income as defined in section 55(b)(2) of the Internal Revenue 94.26 Code; 94.27 (2) the taxpayer's itemized deductions allowed in computing 94.28 federal alternative minimum taxable income, but excluding: 94.29 (i) the charitable contribution deduction under section 170 94.30 of the Internal Revenue Code to the extent that the deduction 94.31 exceeds 1.0 percent of adjusted gross income, as defined in 94.32 section 62 of the Internal Revenue Code; 94.33 (ii) the medical expense deduction; 94.34 (iii) the casualty, theft, and disaster loss deduction; and 94.35 (iv) the impairment-related work expenses of a disabled 94.36 person; 95.1 (3) for depletion allowances computed under section 613A(c) 95.2 of the Internal Revenue Code, with respect to each property (as 95.3 defined in section 614 of the Internal Revenue Code), to the 95.4 extent not included in federal alternative minimum taxable 95.5 income, the excess of the deduction for depletion allowable 95.6 under section 611 of the Internal Revenue Code for the taxable 95.7 year over the adjusted basis of the property at the end of the 95.8 taxable year (determined without regard to the depletion 95.9 deduction for the taxable year); 95.10 (4) to the extent not included in federal alternative 95.11 minimum taxable income, the amount of the tax preference for 95.12 intangible drilling cost under section 57(a)(2) of the Internal 95.13 Revenue Code determined without regard to subparagraph (E); 95.14 (5) to the extent not included in federal alternative 95.15 minimum taxable income, the amount of interest income as 95.16 provided by section 290.01, subdivision 19a, clause (1); and 95.17 (6) the amount of addition required by section 290.01, 95.18 subdivision 19a,clauseclauses (7), (8), and (9); 95.19 less the sum of the amounts determined under the following: 95.20 (1) interest income as defined in section 290.01, 95.21 subdivision 19b, clause (1); 95.22 (2) an overpayment of state income tax as provided by 95.23 section 290.01, subdivision 19b, clause (2), to the extent 95.24 included in federal alternative minimum taxable income; 95.25 (3) the amount of investment interest paid or accrued 95.26 within the taxable year on indebtedness to the extent that the 95.27 amount does not exceed net investment income, as defined in 95.28 section 163(d)(4) of the Internal Revenue Code. Interest does 95.29 not include amounts deducted in computing federal adjusted gross 95.30 income; and 95.31 (4) amounts subtracted from federal taxable income as 95.32 provided by section 290.01, subdivision 19b, clauses (10)and, 95.33 (11), (12), and (13). 95.34 In the case of an estate or trust, alternative minimum 95.35 taxable income must be computed as provided in section 59(c) of 95.36 the Internal Revenue Code. 96.1 (b) "Investment interest" means investment interest as 96.2 defined in section 163(d)(3) of the Internal Revenue Code. 96.3 (c) "Tentative minimum tax" equals 6.4 percent of 96.4 alternative minimum taxable income after subtracting the 96.5 exemption amount determined under subdivision 3. 96.6 (d) "Regular tax" means the tax that would be imposed under 96.7 this chapter (without regard to this section and section 96.8 290.032), reduced by the sum of the nonrefundable credits 96.9 allowed under this chapter. 96.10 (e) "Net minimum tax" means the minimum tax imposed by this 96.11 section. 96.12[EFFECTIVE DATE.] This section is effective for tax years 96.13 beginning after December 31, 2004. 96.14 Sec. 16. Minnesota Statutes 2004, section 290A.03, 96.15 subdivision 3, is amended to read: 96.16 Subd. 3. [INCOME.] (1) "Income" means the sum of the 96.17 following: 96.18 (a) federal adjusted gross income as defined in the 96.19 Internal Revenue Code; and 96.20 (b) the sum of the following amounts to the extent not 96.21 included in clause (a): 96.22 (i) all nontaxable income; 96.23 (ii) the amount of a passive activity loss that is not 96.24 disallowed as a result of section 469, paragraph (i) or (m) of 96.25 the Internal Revenue Code and the amount of passive activity 96.26 loss carryover allowed under section 469(b) of the Internal 96.27 Revenue Code; 96.28 (iii) an amount equal to the total of any discharge of 96.29 qualified farm indebtedness of a solvent individual excluded 96.30 from gross income under section 108(g) of the Internal Revenue 96.31 Code; 96.32 (iv) cash public assistance and relief; 96.33 (v) any pension or annuity (including railroad retirement 96.34 benefits, all payments received under the federal Social 96.35 Security Act, supplemental security income, and veterans 96.36 benefits), which was not exclusively funded by the claimant or 97.1 spouse, or which was funded exclusively by the claimant or 97.2 spouse and which funding payments were excluded from federal 97.3 adjusted gross income in the years when the payments were made; 97.4 (vi) interest received from the federal or a state 97.5 government or any instrumentality or political subdivision 97.6 thereof; 97.7 (vii) workers' compensation; 97.8 (viii) nontaxable strike benefits; 97.9 (ix) the gross amounts of payments received in the nature 97.10 of disability income or sick pay as a result of accident, 97.11 sickness, or other disability, whether funded through insurance 97.12 or otherwise; 97.13 (x) a lump sum distribution under section 402(e)(3) of the 97.14 Internal Revenue Code of 1986, as amended through December 31, 97.15 1995; 97.16 (xi) contributions made by the claimant to an individual 97.17 retirement account, including a qualified voluntary employee 97.18 contribution; simplified employee pension plan; self-employed 97.19 retirement plan; cash or deferred arrangement plan under section 97.20 401(k) of the Internal Revenue Code; or deferred compensation 97.21 plan under section 457 of the Internal Revenue Code;and97.22 (xii) nontaxable scholarship or fellowship grants; 97.23 (xiii) the amount of deduction allowed under section 199 of 97.24 the Internal Revenue Code; and 97.25 (xiv) the amount of deduction allowed under section 220 or 97.26 223 of the Internal Revenue Code. 97.27 In the case of an individual who files an income tax return 97.28 on a fiscal year basis, the term "federal adjusted gross income" 97.29 shall mean federal adjusted gross income reflected in the fiscal 97.30 year ending in the calendar year. Federal adjusted gross income 97.31 shall not be reduced by the amount of a net operating loss 97.32 carryback or carryforward or a capital loss carryback or 97.33 carryforward allowed for the year. 97.34 (2) "Income" does not include: 97.35 (a) amounts excluded pursuant to the Internal Revenue Code, 97.36 sections 101(a) and 102; 98.1 (b) amounts of any pension or annuity which was exclusively 98.2 funded by the claimant or spouse and which funding payments were 98.3 not excluded from federal adjusted gross income in the years 98.4 when the payments were made; 98.5 (c) surplus food or other relief in kind supplied by a 98.6 governmental agency; 98.7 (d) relief granted under this chapter; 98.8 (e) child support payments received under a temporary or 98.9 final decree of dissolution or legal separation; or 98.10 (f) restitution payments received by eligible individuals 98.11 and excludable interest as defined in section 803 of the 98.12 Economic Growth and Tax Relief Reconciliation Act of 2001, 98.13 Public Law 107-16. 98.14 (3) The sum of the following amounts may be subtracted from 98.15 income: 98.16 (a) for the claimant's first dependent, the exemption 98.17 amount multiplied by 1.4; 98.18 (b) for the claimant's second dependent, the exemption 98.19 amount multiplied by 1.3; 98.20 (c) for the claimant's third dependent, the exemption 98.21 amount multiplied by 1.2; 98.22 (d) for the claimant's fourth dependent, the exemption 98.23 amount multiplied by 1.1; 98.24 (e) for the claimant's fifth dependent, the exemption 98.25 amount; and 98.26 (f) if the claimant or claimant's spouse was disabled or 98.27 attained the age of 65 on or before December 31 of the year for 98.28 which the taxes were levied or rent paid, the exemption amount. 98.29 For purposes of this subdivision, the "exemption amount" 98.30 means the exemption amount under section 151(d) of the Internal 98.31 Revenue Code for the taxable year for which the income is 98.32 reported. 98.33[EFFECTIVE DATE.] This section is effective for property 98.34 tax refunds based on household income for 2004 and thereafter. 98.35 Sec. 17. Minnesota Statutes 2004, section 290A.03, 98.36 subdivision 15, is amended to read: 99.1 Subd. 15. [INTERNAL REVENUE CODE.] "Internal Revenue Code" 99.2 means the Internal Revenue Code of 1986, as amended throughJune99.315, 2003December 31, 2004. 99.4[EFFECTIVE DATE.] This section is effective for property 99.5 tax refunds based on property taxes payable on or after December 99.6 31, 2004, and rent paid on or after December 31, 2003. 99.7 Sec. 18. [PREEMPTION.] 99.8 If a bill styled as S.F. No. 1209 is enacted during the 99.9 2005 legislative session, and includes federal update 99.10 provisions, the provisions of that act relating to federal 99.11 updates are repealed. 99.12 ARTICLE 7 99.13 SALES TAX - SF1683 99.14 Section 1. Minnesota Statutes 2004, section 289A.11, 99.15 subdivision 1, is amended to read: 99.16 Subdivision 1. [RETURN REQUIRED.] Except as provided in 99.17 section 289A.18,subdivisionsubdivisions 4 and 4a, for the 99.18 month in which taxes imposed by chapter 297A are payable, or for 99.19 which a return is due, a return for the preceding reporting 99.20 period must be filed with the commissioner in the form and 99.21 manner the commissioner prescribes. A person making sales at 99.22 retail at two or more places of business may file a consolidated 99.23 return subject to rules prescribed by the commissioner. In 99.24 computing the dollar amount of items on the return, the amounts 99.25 are rounded off to the nearest whole dollar, disregarding 99.26 amounts less than 50 cents and increasing amounts of 50 cents to 99.27 99 cents to the next highest dollar. 99.28Notwithstanding this subdivision, a person who is not99.29required to hold a sales tax permit under chapter 297A and who99.30makes annual purchases of less than $18,500 that are subject to99.31the use tax imposed by section 297A.63, may file an annual use99.32tax return on a form prescribed by the commissioner. If a99.33person who qualifies for an annual use tax reporting period is99.34required to obtain a sales tax permit or makes use tax purchases99.35in excess of $18,500 during the calendar year, the reporting99.36period must be considered ended at the end of the month in which100.1the permit is applied for or the purchase in excess of $18,500100.2is made and a return must be filed for the preceding reporting100.3period.100.4[EFFECTIVE DATE.] This section is effective for purchases 100.5 made on and after July 1, 2005. 100.6 Sec. 2. Minnesota Statutes 2004, section 289A.18, 100.7 subdivision 4, is amended to read: 100.8 Subd. 4. [SALES AND USE TAX RETURNS.] (a) Sales and use 100.9 tax returns must be filed on or before the 20th day of the month 100.10 following the close of the preceding reporting period, 100.11 exceptthat annual use taxreturns provided for undersection100.12289A.11, subdivision 1, must be filed by April 15 following the100.13close of the calendar yearsubdivision 4a, in the case of 100.14 individuals. Annual use tax returns of businesses, including 100.15 sole proprietorships, and annual sales tax returns must be filed 100.16 by February 5 following the close of the calendar year. 100.17 (b) Returns for the June reporting period filed by 100.18 retailers required to remit their June liability under section 100.19 289A.20, subdivision 4, paragraph (b), are due on or before 100.20 August 20. 100.21 (c) If a retailer has an average sales and use tax 100.22 liability, including local sales and use taxes administered by 100.23 the commissioner, equal to or less than $500 per month in any 100.24 quarter of a calendar year, and has substantially complied with 100.25 the tax laws during the preceding four calendar quarters, the 100.26 retailer may request authorization to file and pay the taxes 100.27 quarterly in subsequent calendar quarters. The authorization 100.28 remains in effect during the period in which the retailer's 100.29 quarterly returns reflect sales and use tax liabilities of less 100.30 than $1,500 and there is continued compliance with state tax 100.31 laws. 100.32 (d) If a retailer has an average sales and use tax 100.33 liability, including local sales and use taxes administered by 100.34 the commissioner, equal to or less than $100 per month during a 100.35 calendar year, and has substantially complied with the tax laws 100.36 during that period, the retailer may request authorization to 101.1 file and pay the taxes annually in subsequent years. The 101.2 authorization remains in effect during the period in which the 101.3 retailer's annual returns reflect sales and use tax liabilities 101.4 of less than $1,200 and there is continued compliance with state 101.5 tax laws. 101.6 (e) The commissioner may also grant quarterly or annual 101.7 filing and payment authorizations to retailers if the 101.8 commissioner concludes that the retailers' future tax 101.9 liabilities will be less than the monthly totals identified in 101.10 paragraphs (c) and (d). An authorization granted under this 101.11 paragraph is subject to the same conditions as an authorization 101.12 granted under paragraphs (c) and (d). 101.13 (f) A taxpayer who is a materials supplier may report gross 101.14 receipts either on: 101.15 (1) the cash basis as the consideration is received; or 101.16 (2) the accrual basis as sales are made. 101.17 As used in this paragraph, "materials supplier" means a person 101.18 who provides materials for the improvement of real property; who 101.19 is primarily engaged in the sale of lumber and building 101.20 materials-related products to owners, contractors, 101.21 subcontractors, repairers, or consumers; who is authorized to 101.22 file a mechanics lien upon real property and improvements under 101.23 chapter 514; and who files with the commissioner an election to 101.24 file sales and use tax returns on the basis of this paragraph. 101.25 (g) Notwithstanding paragraphs (a) to (f), a seller that is 101.26 not a Model 1, 2, or 3 seller, as those terms are used in the 101.27 Streamlined Sales and Use Tax Agreement, that does not have a 101.28 legal requirement to register in Minnesota, and that is 101.29 registered under the agreement, must file a return by February 5 101.30 following the close of the calendar year in which the seller 101.31 initially registers, and must file subsequent returns on 101.32 February 5 on an annual basis in succeeding years. 101.33 Additionally, a return must be submitted on or before the 20th 101.34 day of the month following any month by which sellers have 101.35 accumulated state and local tax funds for the state in the 101.36 amount of $1,000 or more. 102.1[EFFECTIVE DATE.] This section is effective for purchases 102.2 on and after July 1, 2005. 102.3 Sec. 3. Minnesota Statutes 2004, section 289A.18, is 102.4 amended by adding a subdivision to read: 102.5 Subd. 4a. [USE TAX RETURNS FOR INDIVIDUALS.] Individuals 102.6 who are subject to the use tax imposed under section 297A.63 may 102.7 file and pay use tax owed on purchases for personal use under 102.8 their Social Security number as follows: 102.9 (1) on the individual income tax return for the calendar 102.10 year in which the purchases are made; 102.11 (2) on the form for making payments of the individual 102.12 income tax estimated payments under section 289A.25 for the 102.13 calendar quarter in which the purchases are made; or 102.14 (3) on the individual use tax return, in the form 102.15 prescribed by the commissioner, for purchases made in a calendar 102.16 quarter, to be filed on or before the 20th day of the month 102.17 following the close of the preceding quarter. 102.18[EFFECTIVE DATE.] This section is effective for purchases 102.19 made on and after July 1, 2005, and for income tax returns 102.20 required to be filed for tax years beginning after December 31, 102.21 2004. 102.22 Sec. 4. Minnesota Statutes 2004, section 297A.61, is 102.23 amended by adding a subdivision to read: 102.24 Subd. 37. [PERSONAL RAPID TRANSIT SYSTEM.] "Personal rapid 102.25 transit system" means a transportation system of small, 102.26 computer-controlled vehicles, transporting one to three 102.27 passengers on elevated guideways in a transportation network 102.28 operating on demand and nonstop directly to any stations in the 102.29 network. The system shall provide service on a regular and 102.30 continuing basis and operate independent of any government 102.31 subsidies. 102.32[EFFECTIVE DATE.] This section is effective for sales and 102.33 purchases made after June 30, 2008. 102.34 Sec. 5. Minnesota Statutes 2004, section 297A.67, is 102.35 amended by adding a subdivision to read: 102.36 Subd. 32. [GEOTHERMAL EQUIPMENT.] The loop field 103.1 collection system and the heat pump of a geothermal heating and 103.2 cooling system is exempt. 103.3[EFFECTIVE DATE.] This section is effective for sales and 103.4 purchases occurring after June 30, 2005. 103.5 Sec. 6. Minnesota Statutes 2004, section 297A.67, is 103.6 amended by adding a subdivision to read: 103.7 Subd. 33. [BIOMASS FUEL STOVES.] Stoves designed to burn 103.8 fuel pellets made from biomass materials are exempt. 103.9[EFFECTIVE DATE.] This section is effective for sales and 103.10 purchases made after June 30, 2005. 103.11 Sec. 7. Minnesota Statutes 2004, section 297A.68, 103.12 subdivision 5, is amended to read: 103.13 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 103.14 exempt. The tax must be imposed and collected as if the rate 103.15 under section 297A.62, subdivision 1, applied, and then refunded 103.16 in the manner provided in section 297A.75. 103.17 "Capital equipment" means machinery and equipment purchased 103.18 or leased, and used in this state by the purchaser or lessee 103.19 primarily for manufacturing, fabricating, mining, or refining 103.20 tangible personal property to be sold ultimately at retail if 103.21 the machinery and equipment are essential to the integrated 103.22 production process of manufacturing, fabricating, mining, or 103.23 refining. Capital equipment also includes machinery and 103.24 equipment used to electronically transmit results retrieved by a 103.25 customer of an on-line computerized data retrieval system. 103.26 (b) Capital equipment includes, but is not limited to: 103.27 (1) machinery and equipment used to operate, control, or 103.28 regulate the production equipment; 103.29 (2) machinery and equipment used for research and 103.30 development, design, quality control, and testing activities; 103.31 (3) environmental control devices that are used to maintain 103.32 conditions such as temperature, humidity, light, or air pressure 103.33 when those conditions are essential to and are part of the 103.34 production process; 103.35 (4) materials and supplies used to construct and install 103.36 machinery or equipment; 104.1 (5) repair and replacement parts, including accessories, 104.2 whether purchased as spare parts, repair parts, or as upgrades 104.3 or modifications to machinery or equipment; 104.4 (6) materials used for foundations that support machinery 104.5 or equipment; 104.6 (7) materials used to construct and install special purpose 104.7 buildings used in the production process; 104.8 (8) ready-mixed concrete equipment in which the ready-mixed 104.9 concrete is mixed as part of the delivery process regardless if 104.10 mounted on a chassis and leases of ready-mixed concrete trucks; 104.11 and 104.12 (9) machinery or equipment used for research, development, 104.13 design, or production of computer software. 104.14 (c) Capital equipment does not include the following: 104.15 (1) motor vehicles taxed under chapter 297B; 104.16 (2) machinery or equipment used to receive or store raw 104.17 materials; 104.18 (3) building materials, except for materials included in 104.19 paragraph (b), clauses (6) and (7); 104.20 (4) machinery or equipment used for nonproduction purposes, 104.21 including, but not limited to, the following: plant security, 104.22 fire prevention, first aid, and hospital stations; support 104.23 operations or administration; pollution control; and plant 104.24 cleaning, disposal of scrap and waste, plant communications, 104.25 space heating, cooling, lighting, or safety; 104.26 (5) farm machinery and aquaculture production equipment as 104.27 defined by section 297A.61, subdivisions 12 and 13; 104.28 (6) machinery or equipment purchased and installed by a 104.29 contractor as part of an improvement to real property; or 104.30 (7) any other item that is not essential to the integrated 104.31 process of manufacturing, fabricating, mining, or refining. 104.32 (d) For purposes of this subdivision: 104.33 (1) "Equipment" means independent devices or tools separate 104.34 from machinery but essential to an integrated production 104.35 process, including computers and computer software, used in 104.36 operating, controlling, or regulating machinery and equipment; 105.1 and any subunit or assembly comprising a component of any 105.2 machinery or accessory or attachment parts of machinery, such as 105.3 tools, dies, jigs, patterns, and molds. 105.4 (2) "Fabricating" means to make, build, create, produce, or 105.5 assemble components or property to work in a new or different 105.6 manner. 105.7 (3) "Integrated production process" means a process or 105.8 series of operations through which tangible personal property is 105.9 manufactured, fabricated, mined, or refined. For purposes of 105.10 this clause, (i) manufacturing begins with the removal of raw 105.11 materials from inventory and ends when the last process prior to 105.12 loading for shipment has been completed; (ii) fabricating begins 105.13 with the removal from storage or inventory of the property to be 105.14 assembled, processed, altered, or modified and ends with the 105.15 creation or production of the new or changed product; (iii) 105.16 mining begins with the removal of overburden from the site of 105.17 the ores, minerals, stone, peat deposit, or surface materials 105.18 and ends when the last process before stockpiling is completed; 105.19 and (iv) refining begins with the removal from inventory or 105.20 storage of a natural resource and ends with the conversion of 105.21 the item to its completed form. 105.22 (4) "Machinery" means mechanical, electronic, or electrical 105.23 devices, including computers and computer software, that are 105.24 purchased or constructed to be used for the activities set forth 105.25 in paragraph (a), beginning with the removal of raw materials 105.26 from inventory through completion of the product, including 105.27 packaging of the product. 105.28 (5) "Machinery and equipment used for pollution control" 105.29 means machinery and equipment used solely to eliminate, prevent, 105.30 or reduce pollution resulting from an activity described in 105.31 paragraph (a). 105.32 (6) "Manufacturing" means an operation or series of 105.33 operations where raw materials are changed in form, composition, 105.34 or condition by machinery and equipment and which results in the 105.35 production of a new article of tangible personal property. For 105.36 purposes of this subdivision, "manufacturing" includes the 106.1 generation of electricity or steam to be sold at retail. 106.2 (7) "Mining" means the extraction of minerals, ores, stone, 106.3 or peat. 106.4 (8) "On-line data retrieval system" means a system whose 106.5 cumulation of information is equally available and accessible to 106.6 all its customers. 106.7 (9) "Primarily" means machinery and equipment used 50 106.8 percent or more of the time in an activity described in 106.9 paragraph (a). 106.10 (10) "Refining" means the process of converting a natural 106.11 resource to an intermediate or finished product, including the 106.12 treatment of water to be sold at retail. 106.13 (11) This subdivision does not apply to telecommunications 106.14 equipment as provided in subdivision 35, and does not apply to 106.15 wire, cable, fiber, poles, or conduit for telecommunications 106.16 services. 106.17[EFFECTIVE DATE.] This section is effective for purchases 106.18 made after July 31, 2005, and before July 1, 2008. 106.19 Sec. 8. Minnesota Statutes 2004, section 297A.68, 106.20 subdivision 19, is amended to read: 106.21 Subd. 19. [PETROLEUM PRODUCTS.] The following petroleum 106.22 products are exempt: 106.23 (1) products upon which a tax has been imposed and paid 106.24 under chapter 296A, and for which no refund has been or will be 106.25 allowed because the buyer used the fuel for nonhighway use; 106.26 (2) products that are used in the improvement of 106.27 agricultural land by constructing, maintaining, and repairing 106.28 drainage ditches, tile drainage systems, grass waterways, water 106.29 impoundment, and other erosion control structures; 106.30 (3) products purchased by a transit system receiving 106.31 financial assistance under section 174.24, 256B.0625, 106.32 subdivision 17, or 473.384; 106.33 (4) products purchased by an ambulance service licensed 106.34 under chapter 144E; 106.35 (5) products used in a passenger snowmobile, as defined in 106.36 section 296A.01, subdivision 39, for off-highway business use as 107.1 part of the operations of a resort as provided under section 107.2 296A.16, subdivision 2, clause (2);or107.3 (6) products purchased by a state or a political 107.4 subdivision of a state for use in motor vehicles exempt from 107.5 registration under section 168.012, subdivision 1, paragraph 107.6 (b); or 107.7 (7) products purchased for use as fuel for a commuter rail 107.8 system operating under sections 174.80 to 174.90. The tax must 107.9 be imposed and collected as if the rate under section 297A.62, 107.10 subdivision 1, applied, and then refunded in the manner provided 107.11 in section 297A.75. 107.12[EFFECTIVE DATE.] This section is effective for purchases 107.13 made after June 30, 2005, and terminates when the commissioner 107.14 of revenue determines that the cost of the exemption under this 107.15 subdivision to that point in time totals $20,000. 107.16 Sec. 9. Minnesota Statutes 2004, section 297A.68, is 107.17 amended by adding a subdivision to read: 107.18 Subd. 40. [MOVIES AND TELEVISION; INPUTS TO PRODUCTION.] 107.19 The sale of tangible personal property primarily used or 107.20 consumed directly in the preproduction, production, and 107.21 postproduction of movies and television shows that are produced 107.22 for domestic and international commercial distribution are 107.23 exempt. "Preproduction" and "production" include all the 107.24 activities related to the preparation of shooting and the 107.25 shooting of movies and television shows, including film 107.26 processing. Equipment rented for preproduction and production 107.27 activities are exempt. "Postproduction" includes all activities 107.28 related to editing and finishing of the movie or television 107.29 show. This exemption does not apply to tangible personal 107.30 property or services used primarily in administration, general 107.31 management, or marketing. Machinery and equipment purchased for 107.32 use in producing movies and television shows, fuel, electricity, 107.33 gas, or steam used for space heating and lighting, food, 107.34 lodging, and any property or service for the personal use of any 107.35 individual are not exempt under this subdivision. 107.36[EFFECTIVE DATE.] This section is effective for sales and 108.1 purchases made after June 30, 2005. 108.2 Sec. 10. Minnesota Statutes 2004, section 297A.68, is 108.3 amended by adding a subdivision to read: 108.4 Subd. 41. [PERSONAL RAPID TRANSIT SYSTEM.] (a) Machinery, 108.5 equipment, and supplies purchased or leased, and used by the 108.6 purchaser or lessee in this state directly in the provision of a 108.7 personal rapid transit system as defined in section 297A.61, 108.8 subdivision 37, are exempt. Machinery, equipment, and supplies 108.9 that qualify for this exemption include, but are not limited to, 108.10 the following: 108.11 (1) vehicles, guideways, and related parts used directly in 108.12 the transit system; 108.13 (2) computers and equipment used primarily for operating, 108.14 controlling, and regulating the system; 108.15 (3) machinery, equipment, furniture, and fixtures necessary 108.16 for the functioning of system stations; 108.17 (4) machinery, equipment, implements, tools, and supplies 108.18 used to maintain vehicles, guideways, and stations; and 108.19 (5) electricity and other fuels used in the provision of 108.20 the transit service, including heating, cooling, and lighting of 108.21 system stations. 108.22 (b) This exemption does not include machinery, equipment, 108.23 and supplies used for support and administration operations. 108.24[EFFECTIVE DATE.] This section is effective for sales and 108.25 purchases made after June 30, 2008. 108.26 Sec. 11. Minnesota Statutes 2004, section 297A.70, 108.27 subdivision 8, is amended to read: 108.28 Subd. 8. [REGIONWIDE PUBLIC SAFETY RADIO COMMUNICATION 108.29 SYSTEM; PRODUCTS AND SERVICES.] Products and services including, 108.30 but not limited to, end user equipment used for construction, 108.31 ownership, operation, maintenance, and enhancement of the 108.32 backbone system of the regionwide public safety radio 108.33 communication system established under sections 403.21 to 108.34 403.34, are exempt. For purposes of this subdivision, backbone 108.35 system is defined in section 403.21, subdivision 9. This 108.36 subdivision is effective for purchases, sales, storage, use, or 109.1 consumptionoccurring before August 1, 2005, in the counties of109.2Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and109.3Washingtonfor use in the first and second phases of the system, 109.4 as defined in section 403.21, subdivisions 3, 10, and 11, and 109.5 that portion of the third phase of the system that is located in 109.6 the southeast district of the State Patrol and the counties of 109.7 Benton, Sherburne, Stearns, and Wright. 109.8[EFFECTIVE DATE.] This section is effective for sales after 109.9 April 30, 2005, and terminates when the commissioner of revenue 109.10 determines that the cost of the exemption under this subdivision 109.11 to that point in time totals $4,800,000. 109.12 Sec. 12. Minnesota Statutes 2004, section 297A.70, is 109.13 amended by adding a subdivision to read: 109.14 Subd. 17. [DONATED MEALS.] Meals that are normally sold at 109.15 retail in the ordinary business activities of the taxpayer are 109.16 exempt if the meals are donated to a nonprofit group as defined 109.17 in subdivision 4 for fund-raising purposes. 109.18[EFFECTIVE DATE.] This section is effective for donations 109.19 made after June 30, 2005. 109.20 Sec. 13. Minnesota Statutes 2004, section 297A.71, is 109.21 amended by adding a subdivision to read: 109.22 Subd. 33. [COMMUTER RAIL MATERIAL, SUPPLIES, AND 109.23 EQUIPMENT.] Materials and supplies consumed in, and equipment 109.24 incorporated in the construction, equipment, or improvement of a 109.25 commuter rail transportation system operated under sections 109.26 174.80 and 174.90 are exempt. This exemption includes railroad 109.27 cars and engines and related equipment. 109.28[EFFECTIVE DATE.] This section is effective for purchases 109.29 made after June 30, 2005, and terminates when the commissioner 109.30 of revenue determines that the cost of the exemption for sales 109.31 to that point in time totals $8,600,000. 109.32 Sec. 14. Minnesota Statutes 2004, section 297A.71, is 109.33 amended by adding a subdivision to read: 109.34 Subd. 34. [WASTE RECOVERY FACILITY.] Materials and 109.35 supplies used or consumed in, and equipment incorporated into, 109.36 the construction, improvement, or expansion of a waste-to-energy 110.1 resource recovery facility are exempt if the facility uses 110.2 biomass or mixed municipal solid waste as a primary fuel to 110.3 generate steam or electricity. 110.4[EFFECTIVE DATE.] This section is effective for sales and 110.5 purchases made after June 30, 2005. 110.6 Sec. 15. Minnesota Statutes 2004, section 297A.71, is 110.7 amended by adding a subdivision to read: 110.8 Subd. 35. [PERSONAL RAPID TRANSIT SYSTEM.] Materials and 110.9 supplies used or consumed in, and equipment incorporated into 110.10 the construction, expansion, or improvement of a personal rapid 110.11 transit system as defined in section 297A.61, subdivision 37, 110.12 are exempt. 110.13[EFFECTIVE DATE.] This section is effective for sales and 110.14 purchases made after June 30, 2005, and terminates when the 110.15 commissioner of revenue determines that the cost of the 110.16 exemption under this subdivision to that point in time totals 110.17 $200,000. 110.18 Sec. 16. Minnesota Statutes 2004, section 297A.71, is 110.19 amended by adding a subdivision to read: 110.20 Subd. 36. [ST. MARY'S DULUTH CLINIC HEALTH 110.21 SYSTEM.] Materials and supplies used or consumed in and 110.22 equipment incorporated into the construction of the hospital 110.23 portion of the St. Mary's Duluth Clinic Health System are exempt. 110.24[EFFECTIVE DATE.] This section is effective for purchases 110.25 made on or after March 1, 2004, and on or before December 31, 110.26 2006. For purchases made on or after March 1, 2004, and before 110.27 the day following final enactment of this act, for which the 110.28 sales tax was paid, the commissioner of revenue shall refund the 110.29 tax. Except as otherwise provided in this paragraph, the 110.30 provisions of section 297A.75, subdivisions 2, 3, 4, and 5, 110.31 apply to a refund under this paragraph. The applicant must be 110.32 the owner of the St. Mary's Duluth Clinic Health System. If the 110.33 tax was paid by the contractor, subcontractor, or builder, the 110.34 contractor, subcontractor, or builder must furnish to the owner 110.35 a statement indicating the cost of the exempt items and the 110.36 taxes paid on the items. 111.1 Sec. 17. Minnesota Statutes 2004, section 297A.71, is 111.2 amended by adding a subdivision to read: 111.3 Subd. 37. [MUNICIPAL UTILITIES.] Materials and supplies 111.4 used or consumed in, and equipment incorporated into, the 111.5 construction, improvement, or expansion of electric generation 111.6 and related facilities used pursuant to a joint power purchase 111.7 agreement to meet the biomass energy mandate in section 111.8 216B.2424 are exempt if the owner or owners of the facilities 111.9 are a municipal electric utility or utilities or a joint venture 111.10 of municipal electric utilities. The tax must be imposed and 111.11 collected as if the rate under section 297A.62, subdivision 1, 111.12 applied and then refunded under section 297A.75. 111.13[EFFECTIVE DATE.] This section is effective for sales and 111.14 purchases made after January 1, 2005. 111.15 Sec. 18. Minnesota Statutes 2004, section 297A.71, is 111.16 amended by adding a subdivision to read: 111.17 Subd. 38. [CHATFIELD WASTEWATER TREATMENT 111.18 FACILITY.] Materials and supplies used in and equipment 111.19 incorporated into the construction, improvement, or expansion of 111.20 a wastewater treatment facility owned by the city of Chatfield 111.21 are exempt. This exemption is effective for purchases made 111.22 before December 31, 2007. 111.23[EFFECTIVE DATE.] This section is effective for sales and 111.24 purchases made on or after June 1, 2005. 111.25 Sec. 19. Minnesota Statutes 2004, section 297A.75, 111.26 subdivision 1, is amended to read: 111.27 Subdivision 1. [TAX COLLECTED.] The tax on the gross 111.28 receipts from the sale of the following exempt items must be 111.29 imposed and collected as if the sale were taxable and the rate 111.30 under section 297A.62, subdivision 1, applied. The exempt items 111.31 include: 111.32 (1) capital equipment exempt under section 297A.68, 111.33 subdivision 5; 111.34 (2) building materials for an agricultural processing 111.35 facility exempt under section 297A.71, subdivision 13; 111.36 (3) building materials for mineral production facilities 112.1 exempt under section 297A.71, subdivision 14; 112.2 (4) building materials for correctional facilities under 112.3 section 297A.71, subdivision 3; 112.4 (5) building materials used in a residence for disabled 112.5 veterans exempt under section 297A.71, subdivision 11; 112.6 (6) chair lifts, ramps, elevators, and associated building 112.7 materials exempt under section 297A.71, subdivision 12; 112.8 (7) building materials for the Long Lake Conservation 112.9 Center exempt under section 297A.71, subdivision 17; 112.10 (8) materials, supplies, fixtures, furnishings, and 112.11 equipment for a county law enforcement and family service center 112.12 under section 297A.71, subdivision 26;and112.13 (9) materials and supplies for qualified low-income housing 112.14 under section 297A.71, subdivision 23; 112.15 (10) fuel purchased for commuter rail systems under section 112.16 297A.68, subdivision 19, clause (7); and 112.17 (11) materials, supplies, and equipment for municipal 112.18 electric utility facilities under section 297A.71, subdivision 112.19 37. 112.20[EFFECTIVE DATE.] Clause (10) is effective for purchases 112.21 made after June 30, 2005, and clause (11) is effective for 112.22 purchases made after December 31, 2004. 112.23 Sec. 20. Minnesota Statutes 2004, section 297A.75, 112.24 subdivision 2, is amended to read: 112.25 Subd. 2. [REFUND; ELIGIBLE PERSONS.] Upon application on 112.26 forms prescribed by the commissioner, a refund equal to the tax 112.27 paid on the gross receipts of the exempt items must be paid to 112.28 the applicant. Only the following persons may apply for the 112.29 refund: 112.30 (1) for subdivision 1, clauses (1) to (3), the applicant 112.31 must be the purchaser; 112.32 (2) for subdivision 1, clauses (4), (7), and (8), the 112.33 applicant must be the governmental subdivision; 112.34 (3) for subdivision 1, clause (5), the applicant must be 112.35 the recipient of the benefits provided in United States Code, 112.36 title 38, chapter 21; 113.1 (4) for subdivision 1, clause (6), the applicant must be 113.2 the owner of the homestead property;and113.3 (5) for subdivision 1, clause (9), the owner of the 113.4 qualified low-income housing project; 113.5 (6) for subdivision 1, clause (10), the operator of the 113.6 commuter rail system; and 113.7 (7) for subdivision 1, clause (11), the applicant must be a 113.8 municipal electric utility or a joint venture of municipal 113.9 electric utilities. 113.10[EFFECTIVE DATE.] Clause (6) is effective for purchases 113.11 made after June 30, 2005. Clause (7) is effective for purchases 113.12 made after December 31, 2004. 113.13 Sec. 21. Minnesota Statutes 2004, section 297A.75, 113.14 subdivision 3, is amended to read: 113.15 Subd. 3. [APPLICATION.] (a) The application must include 113.16 sufficient information to permit the commissioner to verify the 113.17 tax paid. If the tax was paid by a contractor, subcontractor, 113.18 or builder, under subdivision 1, clause (4), (5), (6), (7), (8), 113.19or(9), or (11), the contractor, subcontractor, or builder must 113.20 furnish to the refund applicant a statement including the cost 113.21 of the exempt items and the taxes paid on the items unless 113.22 otherwise specifically provided by this subdivision. The 113.23 provisions of sections 289A.40 and 289A.50 apply to refunds 113.24 under this section. 113.25 (b) An applicant may not file more than two applications 113.26 per calendar year for refunds for taxes paid on capital 113.27 equipment exempt under section 297A.68, subdivision 5. 113.28[EFFECTIVE DATE.] This section is effective for sales and 113.29 purchases made after December 31, 2004. 113.30 Sec. 22. Minnesota Statutes 2004, section 297A.83, 113.31 subdivision 1, is amended to read: 113.32 Subdivision 1. [PERSONS APPLYING.] (a) A retailer required 113.33 to collect and remit sales taxes under section 297A.66 shall 113.34 file with the commissioner an application for a permit. 113.35 (b) A retailer making retail sales from outside this state 113.36 to a destination within this state who is not required to obtain 114.1 a permit under paragraph (a) may nevertheless voluntarily file 114.2 an application for a permit. 114.3 (c) The commissioner may require any person or class of 114.4 persons obligated to file a use tax return under section 114.5 289A.11, subdivision 3, to file an application for a permit, 114.6 except an individual allowed to file and pay use tax under 114.7 section 289A.18, subdivision 4a, is not required to obtain a 114.8 permit. 114.9[EFFECTIVE DATE.] This section is effective for purchases 114.10 on and after July 1, 2005. 114.11 Sec. 23. Minnesota Statutes 2004, section 297A.87, 114.12 subdivision 2, is amended to read: 114.13 Subd. 2. [SELLER'S PERMIT OR ALTERNATE STATEMENT.] (a) The 114.14 operator of an event under subdivision 1 shall obtain one of the 114.15 following from a person who wishes to do business as a seller at 114.16 the event: 114.17 (1) evidence that the person holds a valid seller's permit 114.18 under section 297A.84;or114.19 (2) a written statement that the person is not offering for 114.20 sale any item that is taxable under this chapter; or 114.21 (3) a written statement that this is the only selling event 114.22 that the person will be participating in for that calendar year, 114.23 that the person will be participating for three or fewer days, 114.24 and that the person will make $500 or less in total sales in the 114.25 calendar year. The written statement shall include the person's 114.26 name, address, and telephone number. 114.27 (b) The operator shall require the evidence or statement as 114.28 a prerequisite to participating in the event as a seller. 114.29[EFFECTIVE DATE.] This section is effective for selling 114.30 events occurring after June 30, 2005. 114.31 Sec. 24. Minnesota Statutes 2004, section 297A.87, 114.32 subdivision 3, is amended to read: 114.33 Subd. 3. [OCCASIONAL SALE PROVISIONSNOTAPPLICABLE UNDER 114.34 LIMITED CIRCUMSTANCES.] The isolated and occasional 114.35 saleprovisionsprovision under section 297A.67, subdivision 23, 114.36orapplies, provided that the seller only participates for three 115.1 or fewer days in one event per calendar year, makes $500 or less 115.2 in sales in the calendar year, and provides the written 115.3 statement required in subdivision 2, paragraph (a), clause (3). 115.4 The isolated and occasional sales provision under section 115.5 297A.68, subdivision 25,dodoes not apply to a seller at an 115.6 event under this section. 115.7[EFFECTIVE DATE.] This section is effective for selling 115.8 events occurring after June 30, 2005. 115.9 Sec. 25. Minnesota Statutes 2004, section 297B.03, is 115.10 amended to read: 115.11 297B.03 [EXEMPTIONS.] 115.12 There is specifically exempted from the provisions of this 115.13 chapter and from computation of the amount of tax imposed by it 115.14 the following: 115.15 (1) purchase or use, including use under a lease purchase 115.16 agreement or installment sales contract made pursuant to section 115.17 465.71, of any motor vehicle by the United States and its 115.18 agencies and instrumentalities and by any person described in 115.19 and subject to the conditions provided in section 297A.67, 115.20 subdivision 11; 115.21 (2) purchase or use of any motor vehicle by any person who 115.22 was a resident of another state or country at the time of the 115.23 purchase and who subsequently becomes a resident of Minnesota, 115.24 provided the purchase occurred more than 60 days prior to the 115.25 date such person began residing in the state of Minnesota and 115.26 the motor vehicle was registered in the person's name in the 115.27 other state or country; 115.28 (3) purchase or use of any motor vehicle by any person 115.29 making a valid election to be taxed under the provisions of 115.30 section 297A.90; 115.31 (4) purchase or use of any motor vehicle previously 115.32 registered in the state of Minnesota when such transfer 115.33 constitutes a transfer within the meaning of section 118, 331, 115.34 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 115.35 1563(a) of the Internal Revenue Code of 1986, as amended through 115.36 December 31, 1999; 116.1 (5) purchase or use of any vehicle owned by a resident of 116.2 another state and leased to a Minnesota-based private or 116.3 for-hire carrier for regular use in the transportation of 116.4 persons or property in interstate commerce provided the vehicle 116.5 is titled in the state of the owner or secured party, and that 116.6 state does not impose a sales tax or sales tax on motor vehicles 116.7 used in interstate commerce; 116.8 (6) purchase or use of a motor vehicle by a private 116.9 nonprofit or public educational institution for use as an 116.10 instructional aid in automotive training programs operated by 116.11 the institution. "Automotive training programs" includes motor 116.12 vehicle body and mechanical repair courses but does not include 116.13 driver education programs; 116.14 (7) purchase of a motor vehicle for use as an ambulance by 116.15 an ambulance service licensed under section 144E.10; 116.16 (8) purchase of a motor vehicle by or for a public library, 116.17 as defined in section 134.001, subdivision 2, as a bookmobile or 116.18 library delivery vehicle; 116.19 (9) purchase of a ready-mixed concrete truck; 116.20 (10) purchase or use of a motor vehicle by a town for use 116.21 exclusively for road maintenance, including snowplows and dump 116.22 trucks, but not including automobiles, vans, or pickup trucks; 116.23 (11) purchase or use of a motor vehicle by a corporation, 116.24 society, association, foundation, or institution organized and 116.25 operated exclusively for charitable, religious, or educational 116.26 purposes, except a public school, university, or library, but 116.27 only if the vehicle is: 116.28 (i) a truck, as defined in section 168.011, a bus, as 116.29 defined in section 168.011, or a passenger automobile, as 116.30 defined in section 168.011, if the automobile is designed and 116.31 used for carrying more than nine persons including the driver; 116.32 and 116.33 (ii) intended to be used primarily to transport tangible 116.34 personal property or individuals, other than employees, to whom 116.35 the organization provides service in performing its charitable, 116.36 religious, or educational purpose; 117.1 (12) purchase of a motor vehicle for use by a transit 117.2 provider exclusively to provide transit service is exempt if the 117.3 transit provider is either (i) receiving financial assistance or 117.4 reimbursement under section 174.24 or 473.384, or (ii) operating 117.5 under section 174.29, 473.388, or 473.405; 117.6 (13) purchase or use of a motor vehicle by a qualified 117.7 business, as defined in section 469.310, located in a job 117.8 opportunity building zone, if the motor vehicle is principally 117.9 garaged in the job opportunity building zone and is primarily 117.10 used as part of or in direct support of the person's operations 117.11 carried on in the job opportunity building zone. The exemption 117.12 under this clause applies to sales, if the purchase was made and 117.13 delivery received during the duration of the job opportunity 117.14 building zone. The exemption under this clause also applies to 117.15 any local sales and use tax; 117.16 (14) purchase or use after June 30, 2005, and before July 117.17 1, 2008, of a motor vehicle by a state agency or political 117.18 subdivision, provided that the motor vehicle has a fuel 117.19 efficiency greater than 45 miles per gallon in highway use, and 117.20 greater than 35 miles per gallon in city use, as certified by 117.21 the United States Environmental Protection Agency. 117.22[EFFECTIVE DATE.] This section is effective for sales and 117.23 transfers made after June 30, 2005, and before July 1, 2008. 117.24 Sec. 26. Laws 1991, chapter 291, article 8, section 27, 117.25 subdivision 4, is amended to read: 117.26 Subd. 4. [EXPIRATION OF TAXING AUTHORITY AND EXPENDITURE 117.27 LIMITATION.] The authority granted by subdivisions 1 and 2 to 117.28 the city to impose a sales tax and an excise tax shall expire on 117.29 the earlier of (1) December 31, 2018; (2) when the principal and 117.30 interest on any bonds or obligations issued to finance 117.31 construction of Riverfront 2000 and related facilities have been 117.32 paid; or (3) at an earlier time as the city shall, by ordinance, 117.33 determine.The total capital, administrative, and operating117.34expenditures payable from bond proceeds and revenues received117.35from the taxes authorized by subdivisions 1 and 2, excluding117.36investment earnings on bond proceeds and revenues, shall not118.1exceed $25,000,000 for Riverfront 2000 and related facilities.118.2[EFFECTIVE DATE.] This section is effective upon compliance 118.3 by the Mankato City Council with the provisions in section 43 118.4 and, if required under section 43, approval of the voters at a 118.5 general or special election. 118.6 Sec. 27. Laws 1996, chapter 471, article 2, section 29, is 118.7 amended to read: 118.8 Sec. 29. [CITY OF HERMANTOWN; SALES AND USE TAX.] 118.9 Subdivision 1. [SALES AND USE TAX AUTHORIZED.] (a) 118.10 Notwithstanding Minnesota Statutes, section 477A.016, or any 118.11 other contrary provision of law, ordinance, or city charter, the 118.12 city of Hermantown may, by ordinance, impose an additional sales 118.13 and use tax of up to one percent on salestransactions, storage, 118.14 and use taxable pursuant to Minnesota Statutes, chapter 297A, 118.15 that occur within the city. 118.16 (b) The proceeds of the first one-half of one percent of 118.17 tax imposed under this section must be usedto meet the costs of118.18 by the city for the following projects: 118.19 (1) extending a sewer interceptor line; 118.20 (2) construction of a booster pump station, reservoirs, and 118.21 related improvements to the water system; and 118.22 (3) construction of a police and fire station. 118.23 (c) Revenues received from the remaining one-half of one 118.24 percent of the tax authorized under this section must be used by 118.25 the city to pay all or part of the capital and administrative 118.26 costs of developing, acquiring, constructing, and initially 118.27 furnishing and equipping for the following projects: 118.28 (1) construction of a city hall to be connected to the 118.29 existing public safety facility; 118.30 (2) construction of a new facility or purchase of an 118.31 existing facility to be used as a public works facility; 118.32 (3) construction, signalization, and rehabilitation of 118.33 primary collector roads and commercial frontage roads, within 118.34 the city; and 118.35 (4) extension of a sewer interceptor line. 118.36 (d) Authorized expenses include, but are not limited to, 119.1 acquiring property; paying construction, administrative, and 119.2 operating expenses related to the development of the projects 119.3 listed in paragraph (c); paying debt service on bonds or other 119.4 obligations, including lease obligations, issued to finance 119.5 construction, expansion, or improvement of the projects listed 119.6 in paragraph (c); and other compatible uses, including but not 119.7 limited to, parking, lighting, and landscaping. 119.8 Subd. 2. [REFERENDUM.] (a) If the Hermantown city council 119.9 proposes to impose the sales tax authorized by this section, it 119.10 shall conduct a referendum on the issue. 119.11 (b) If the Hermantown city council initially imposes the 119.12 tax at a rate that is less than one percent and proposes 119.13 increasing the tax rate at a later date up to the full one 119.14 percent, it shall conduct a referendum on the increase. 119.15 (c) The question of imposing or increasing the tax must be 119.16 submitted to the voters at a special or general election. The 119.17 tax may not be imposed unless a majority of votes cast on the 119.18 question of imposing the tax are in the affirmative. The 119.19 commissioner of revenue shall prepare a suggested form of 119.20 question to be presented at the election. This subdivision 119.21 applies notwithstanding any city charter provision to the 119.22 contrary. 119.23 Subd. 3. [ENFORCEMENT; COLLECTION; AND ADMINISTRATION OF 119.24 TAXES.] A sales tax imposed under this section must be reported 119.25 and paid to the commissioner of revenue with the state sales 119.26 taxes, and be subject to the same penalties, interest, and 119.27 enforcement provisions. The proceeds of the tax, less refunds 119.28 and a proportionate share of the cost of collection, shall be 119.29 remitted at least quarterly to the city. The commissioner shall 119.30 deduct from the proceeds remitted an amount that equals the 119.31 indirect statewide cost as well as the direct and indirect 119.32 department costs necessary to administer, audit, and collect the 119.33 tax. The amount deducted shall be deposited in the state 119.34 general fund. 119.35 Subd. 3a. [BONDING AUTHORITY.] (a) The city may issue 119.36 general obligation bonds under Minnesota Statutes, chapter 475, 120.1 to finance the costs in subdivision 1, paragraph (c). The total 120.2 amount of bonds issued for the projects under subdivision 1, 120.3 paragraph (c), may not exceed $13,000,000 in the aggregate. An 120.4 election to approve the bonds is not required. 120.5 (b) The bonds are not included in computing any debt 120.6 limitation applicable to the city and the levy of taxes under 120.7 Minnesota Statutes, section 475.61, to pay principal of and 120.8 interest on the bonds is not subject to any levy limitation. 120.9 (c) The taxes authorized under this section may be pledged 120.10 to and used for the payment of the bonds and any bonds issued to 120.11 refund them. 120.12 Subd. 4. [TERMINATION.] The portion of the tax authorized 120.13under this sectionto finance the improvements described in 120.14 subdivision 1, paragraph (b), terminates at the later of (1) ten 120.15 years after the date of initial imposition of the tax, or (2) on 120.16 the first day of the second month next succeeding a 120.17 determination by the city council that sufficient funds have 120.18 been received from that portion of the tax dedicated to finance 120.19thethose improvementsdescribed in subdivision 1, clauses (1)120.20to (3),and to prepay or retire at maturity the principal, 120.21 interest, and premium due on any bonds issued for the 120.22 improvements. The portion of the tax authorized to finance the 120.23 improvements described in subdivision 1, paragraph (c), 120.24 terminates when the revenues raised are sufficient to finance 120.25 those improvements, up to an amount equal to $13,000,000 plus 120.26 any interest, premium, and other costs associated with the bonds 120.27 issued under subdivision 3a. The city council may terminate 120.28 this portion of the tax earlier. Any funds remaining after 120.29 completion of the improvements and retirement or redemption of 120.30 the bonds may be placed in the general fund of the city. 120.31Subd. 5. [LOCAL APPROVAL; EFFECTIVE DATE.] This section is120.32effective the day after final enactment, upon compliance with120.33Minnesota Statutes, section 645.021, subdivision 3, by the city120.34of Hermantown.120.35[EFFECTIVE DATE.] This section is effective the day after 120.36 the governing body of the city of Hermantown and its chief 121.1 clerical officer comply with Minnesota Statutes, section 121.2 645.021, subdivisions 2 and 3. 121.3 Sec. 28. Laws 1998, chapter 389, article 8, section 43, 121.4 subdivision 3, is amended to read: 121.5 Subd. 3. [USE OF REVENUES.] Revenues received from the 121.6 taxes authorized by subdivisions 1 and 2 must be used by the 121.7 city to pay for the cost of collecting and administering the 121.8 taxes and to pay for the following projects: 121.9 (1) transportation infrastructure improvements including 121.10bothregional highway and airport improvements; 121.11 (2) improvements to the civic center complex; 121.12 (3) a municipal water, sewer, and storm sewer project 121.13 necessary to improve regional ground water quality; and 121.14 (4) construction of a regional recreation and sports center 121.15 andassociatedother higher education facilities available for 121.16 both community and student use, located at or adjacent to the121.17Rochester center. 121.18 The total amount of capital expenditures or bonds for these 121.19 projects that may be paid from the revenues raised from the 121.20 taxes authorized in this section may not exceed 121.21$71,500,000$111,500,000. The total amount of capital 121.22 expenditures or bonds for the project in clause (4) that may be 121.23 paid from the revenues raised from the taxes authorized in this 121.24 section may not exceed$20,000,000$28,000,000. 121.25[EFFECTIVE DATE.] This section is effective the day 121.26 following final enactment. 121.27 Sec. 29. Laws 1998, chapter 389, article 8, section 43, 121.28 subdivision 4, is amended to read: 121.29 Subd. 4. [BONDING AUTHORITY.] (a) The city may issue bonds 121.30 under Minnesota Statutes, chapter 475, to finance the capital 121.31 expenditure and improvement projects. An election to approve 121.32 the bonds under Minnesota Statutes, section 475.58, may be held 121.33 in combination with the election to authorize imposition of the 121.34 tax under subdivision 1. Whether to permit imposition of the 121.35 tax and issuance of bonds may be posed to the voters as a single 121.36 question. The question must state that the sales tax revenues 122.1 are pledged to pay the bonds, but that the bonds are general 122.2 obligations and will be guaranteed by the city's property 122.3 taxes. No election is required for the issuance of bonds under 122.4 this subdivision, other than the election held by the city on 122.5 June 23, 1998. 122.6 The city may enter into an agreement with Olmsted County 122.7 under which the city and the county agree to jointly undertake 122.8 and finance certain roadway infrastructure improvements. The 122.9 agreement may provide that the city will make available to the 122.10 county a portion of the sales tax revenues collected pursuant to 122.11 the authority granted in this section and the bonding authority 122.12 provided in this subdivision. The county may, pursuant to the 122.13 agreement, issue its general obligation bonds in a principal 122.14 amount not exceeding the amount authorized by its agreement with 122.15 the city payable primarily from the sales tax revenues from the 122.16 city under the agreement. The county's bonds must be issued in 122.17 accordance with the provisions of Minnesota Statutes, chapter 122.18 475, except that no election is required for the issuance of the 122.19 bonds and the bonds shall not be included in the net debt of the 122.20 county. 122.21 (b) The issuance of bonds under this subdivision is not 122.22 subject to Minnesota Statutes, section 275.60. 122.23 (c) The bonds are not included in computing any debt 122.24 limitation applicable to the city, and the levy of taxes under 122.25 Minnesota Statutes, section 475.61, to pay principal of and 122.26 interest on the bonds is not subject to any levy limitation. 122.27 The aggregate principal amount of bonds, plus the aggregate of 122.28 the taxes used directly to pay eligible capital expenditures and 122.29 improvements may not exceed$71,500,000$111,500,000, plus an 122.30 amount equal to the costs related to issuance of the bonds. 122.31 (d) The taxes may be pledged to and used for the payment of 122.32 the bonds and any bonds issued to refund them, only if the bonds 122.33 and any refunding bonds are general obligations of the city. 122.34[EFFECTIVE DATE.] This section is effective the day 122.35 following final enactment. 122.36 Sec. 30. Laws 1999, chapter 243, article 4, section 18, 123.1 subdivision 1, is amended to read: 123.2 Subdivision 1. [SALES AND USE TAX.] (a) Notwithstanding 123.3 Minnesota Statutes, section297A.48, subdivision 1a,477A.016, 123.4 or any other provision of law, ordinance, or city charter, if 123.5 approved by the city voters at the first municipal general 123.6 election held after the date of final enactment of this act or 123.7 at a special election held November 2, 1999, the city of Proctor 123.8 may impose by ordinance a sales and use tax of up to one-half of 123.9 one percent for the purposes specified in subdivision 3, 123.10 paragraph (a). The provisions of Minnesota Statutes, 123.11 section297A.48297A.99, govern the imposition, administration, 123.12 collection, and enforcement of the tax authorized under this 123.13 subdivision. 123.14 (b) The city of Proctor may impose by ordinance an 123.15 additional sales and use tax of up to one-half of one percent if 123.16 approved by the city voters at a general election or at a 123.17 special election held for this purpose. The revenues received 123.18 from this additional tax must be used for the purposes specified 123.19 in subdivision 3, paragraph (b). 123.20[EFFECTIVE DATE.] This section is effective the day 123.21 following final enactment, upon compliance by the city of 123.22 Proctor with Minnesota Statutes, section 645.021, subdivision 3. 123.23 Sec. 31. Laws 1999, chapter 243, article 4, section 18, 123.24 subdivision 3, is amended to read: 123.25 Subd. 3. [USE OF REVENUES.] (a) Revenues received from 123.26 taxes authorized by subdivisions 1, paragraph (a), and 2 must be 123.27 used by the city to pay the cost of collecting the taxes and to 123.28 pay for construction and improvement of the following city 123.29 facilities: 123.30 (1) streets; and 123.31 (2) constructing and equipping the Proctor community 123.32 activity center. 123.33 Authorized expenses include, but are not limited to, 123.34 acquiring property, paying construction and operating expenses 123.35 related to the development of an authorized facility, and paying 123.36 debt service on bonds or other obligations, including lease 124.1 obligations, issued to finance the construction, expansion, or 124.2 improvement of an authorized facility. The capital expenses for 124.3 all projects authorized under this paragraph that may be paid 124.4 with these taxes is limited to $3,600,000, plus an amount equal 124.5 to the costs related to issuance of the bonds. 124.6 (b) Revenues received from taxes authorized by subdivision 124.7 1, paragraph (b), must be used by the city to pay the cost of 124.8 collecting the taxes and for construction and improvements of 124.9 city streets, public utilities, sidewalks, bikeways, and trails. 124.10[EFFECTIVE DATE.] This section is effective the day 124.11 following final enactment, upon compliance by the city of 124.12 Proctor with Minnesota Statutes, section 645.021, subdivision 3. 124.13 Sec. 32. Laws 1999, chapter 243, article 4, section 18, 124.14 subdivision 4, is amended to read: 124.15 Subd. 4. [BONDING AUTHORITY.] (a) The city may issue bonds 124.16 under Minnesota Statutes, chapter 475, to finance the capital 124.17 expenditure and improvement projects described in subdivision 124.18 3. An election to approve the bonds under Minnesota Statutes, 124.19 section 475.58, is not required. 124.20 (b) The issuance of bonds under this subdivision is not 124.21 subject to Minnesota Statutes, sections 275.60 and279.61275.61. 124.22 (c) The bonds are not included in computing any debt 124.23 limitation applicable to the city, and the levy of taxes under 124.24 Minnesota Statutes, section 475.61, to pay principal of and 124.25 interest on the bonds is not subject to any levy limitation. 124.26 (d) For projects described in subdivision 3, paragraph (a), 124.27 the aggregate principal amount of bonds, plus the aggregate of 124.28 the taxes used directly to pay eligible capital expenditures and 124.29 improvements, may not exceed $3,600,000, plus an amount equal to 124.30 the costs related to issuance of the bonds, including interest 124.31 on the bonds. For projects described in subdivision 3, 124.32 paragraph (b), the aggregate principal amount of bonds may not 124.33 exceed $7,200,000, plus an amount equal to the costs related to 124.34 issuance of the bonds, including interest on the bonds. 124.35 (e) The sales and use and excise taxes authorized in this 124.36 section may be pledged to and used for the payment of the bonds 125.1 and any bonds issued to refund them only if the bonds and any 125.2 refunding bonds are general obligations of the city. 125.3[EFFECTIVE DATE.] This section is effective the day 125.4 following final enactment, upon compliance by the city of 125.5 Proctor with Minnesota Statutes, section 645.021, subdivision 3. 125.6 Sec. 33. Laws 2001, First Special Session chapter 5, 125.7 article 12, section 67, the effective date, is amended to read: 125.8[EFFECTIVE DATE.] This section is effective for purchases 125.9 and sales made after June 30, 2001, and beforeJanuary 1, 2003125.10 July 1, 2007. 125.11[EFFECTIVE DATE.] This section is effective the day 125.12 following final enactment. 125.13 Sec. 34. Laws 2001, First Special Session chapter 5, 125.14 article 12, section 82, the effective date, as amended by Laws 125.15 2002, chapter 377, article 3, section 23, is amended to read: 125.16[EFFECTIVE DATE.] This section is effective for sales and 125.17 purchases made after December 31,20052007, or until the State 125.18 of Minnesota is found to be out of compliance with the 125.19 streamlined sales tax project only to the extent of the change 125.20 in this act and for no other reason, if that finding is made 125.21 before December 31, 2007. 125.22 Sec. 35. Laws 2002, chapter 377, article 3, section 4, the 125.23 effective date, is amended to read: 125.24[EFFECTIVE DATE.] With the exception of clause (2), item125.25(ii),This section is effective for sales and purchases made 125.26 after June 30, 2002.Clause (2), item (ii), is effective for125.27sales and purchases made after June 30, 2002, and before January125.281, 2006.125.29 Sec. 36. Laws 2002, chapter 377, article 12, section 16, 125.30 subdivision 1, is amended to read: 125.31 Subdivision 1. [NONPROFIT CORPORATION MAY BE ESTABLISHED.] 125.32 The city of Thief River Falls may incorporate or authorize the 125.33 incorporation of a nonprofit corporation to operate a community 125.34 or regional center in the city. A nonprofit corporation 125.35 incorporated under this section is exempt from payment of sales 125.36 and use tax on materials, equipment, and supplies consumed or 126.1 incorporated into the construction of the community or regional 126.2 center. The exemption under this section applies to purchases 126.3 by the nonprofit corporation, a contractor, subcontractor, or 126.4 builder. A contractor, subcontractor, or builder that does not 126.5 pay sales tax on purchases for construction of the community or 126.6 regional center shall not charge sales or use tax to the 126.7 nonprofit corporation. The nonprofit corporation may file a 126.8 claim for refund for any sales taxes paid on the construction 126.9 costs of the community or regional center, and the commissioner 126.10 of revenue shall pay the refunded amount directly to the 126.11 nonprofit corporation. 126.12[EFFECTIVE DATE.] This section is effective retroactively 126.13 for purchases made on and after July 1, 2002. 126.14 Sec. 37. [CITY OF ALBERT LEA; SALES AND USE TAX.] 126.15 Subdivision 1. [SALES AND USE TAX 126.16 AUTHORIZED.] Notwithstanding Minnesota Statutes, section 126.17 477A.016, or any other provision of law, ordinance, or city 126.18 charter, the city of Albert Lea may, by ordinance, impose a 126.19 sales and use tax of one-half of one percent for the purposes 126.20 specified in subdivision 2. The provisions of Minnesota 126.21 Statutes, section 297A.99, govern the imposition, 126.22 administration, collection, and enforcement of the tax 126.23 authorized under this subdivision. 126.24 Subd. 2. [USE OF REVENUES.] The proceeds of the tax 126.25 imposed under this section shall be used to pay for lake 126.26 improvement projects as detailed in the Shell Rock River 126.27 watershed plan. 126.28 Subd. 3. [REFERENDUM.] If the Albert Lea City Council 126.29 proposes to impose the tax authorized by this section, the 126.30 question of imposing the tax must be submitted to the voters at 126.31 the next general election. 126.32 Subd. 4. [TERMINATION OF TAXES.] The taxes imposed under 126.33 this section expire at the earlier of (1) ten years after the 126.34 taxes are first imposed, or (2) when the city council first 126.35 determines that the amount of revenues raised to pay for the 126.36 projects under subdivision 2, shall meet or exceed the sum of 127.1 $15,000,000. Any funds remaining after completion of the 127.2 projects may be placed in the general fund of the city. 127.3[EFFECTIVE DATE.] This section is effective the day after 127.4 compliance by the governing body of the city of Albert Lea with 127.5 Minnesota Statutes, section 645.021, subdivision 3. 127.6 Sec. 38. [CITY OF BAXTER; TAXES AUTHORIZED.] 127.7 Subdivision 1. [SALES AND USE TAX AUTHORIZED.] 127.8 Notwithstanding Minnesota Statutes, section 477A.016, or any 127.9 other provision of law, ordinance, or city charter, pursuant to 127.10 the approval of the voters on November 2, 2004, and pursuant to 127.11 Minnesota Statutes, section 297A.99, the city of Baxter may 127.12 impose by ordinance a sales and use tax of one-half of one 127.13 percent for the purposes specified in subdivision 3. The 127.14 provisions of Minnesota Statutes, section 297A.99, govern the 127.15 imposition, administration, collection, and enforcement of the 127.16 tax authorized under this subdivision. 127.17 Subd. 2. [EXCISE TAX AUTHORIZED.] Notwithstanding 127.18 Minnesota Statutes, section 477A.016, or any other contrary 127.19 provision of law, ordinance, or city charter, the city of Baxter 127.20 may impose by ordinance, for the purposes specified in 127.21 subdivision 3, an excise tax of up to $20 per motor vehicle, as 127.22 defined by ordinance, purchased or acquired from any person 127.23 engaged within the city in the business of selling motor 127.24 vehicles at retail. 127.25 Subd. 3. [USE OF REVENUES.] Revenues received from the 127.26 taxes authorized by subdivisions 1 and 2 must be used to pay the 127.27 cost of collecting and administering the tax and to finance the 127.28 acquisition and betterment of water and waste water facilities, 127.29 a fire substation, and the Paul Bunyan Bridge over Excelsior 127.30 Road, as approved by the voters at the referendum authorizing 127.31 the tax. Authorized costs include, but are not limited to, 127.32 acquiring property and paying construction, legal, and 127.33 engineering costs related to the projects. 127.34 Subd. 4. [BONDS.] The city of Baxter, pursuant to the 127.35 approval of the voters at the referendum authorizing the 127.36 imposition of the taxes in this section, may issue general 128.1 obligation bonds of the city, in one or more series, in the 128.2 aggregate principal amount not to exceed $15,000,000 to finance 128.3 the projects listed in subdivision 3. The debt represented by 128.4 the bonds is not included in computing any debt limitations 128.5 applicable to the city, and the levy of taxes required by 128.6 Minnesota Statutes, section 475.61, to pay the principal of and 128.7 interest on the bonds is not subject to any levy limitation or 128.8 included in computing or applying any levy limitation applicable 128.9 to the city. 128.10 Subd. 5. [TERMINATION OF TAXES.] The taxes imposed under 128.11 subdivisions 1 and 2 expire at the earlier of 12 years after the 128.12 imposition of the tax or when the city council first determines 128.13 that the amount of revenues raised from the taxes to pay for the 128.14 projects equals or exceeds $15,000,000 plus any interest on 128.15 bonds issued for the projects under subdivision 4. Any funds 128.16 remaining after expiration of the taxes and retirement of the 128.17 bonds shall be placed in a capital project fund of the city. 128.18 The taxes imposed under subdivisions 1 and 2 may expire at an 128.19 earlier time if the city so determines by ordinance. 128.20[EFFECTIVE DATE.] This section is effective the day after 128.21 compliance by the governing body of the city of Baxter with 128.22 Minnesota Statutes, section 645.021, subdivision 3. 128.23 Sec. 39. [CITY OF BEAVER BAY; TAXES AUTHORIZED.] 128.24 Subdivision 1. [SALES AND USE TAXES.] Notwithstanding 128.25 Minnesota Statutes, section 477A.016, or any other provision of 128.26 law or ordinance, if approved by the voters of the city at the 128.27 next general election held after the date of final enactment of 128.28 this act, the city of Beaver Bay may impose by ordinance a sales 128.29 and use tax at a rate of up to one percent for the purposes 128.30 specified in subdivision 2. The provisions of Minnesota 128.31 Statutes, section 297A.99, govern the imposition, 128.32 administration, collection, and enforcement of the tax 128.33 authorized under this subdivision. 128.34 Subd. 2. [USE OF REVENUES.] The revenues received from 128.35 taxes authorized by subdivision 1 must be used to pay the bonded 128.36 indebtedness on the city community building and to provide 129.1 funding for recreational facilities, the upgrading of the water 129.2 and sewer system, upgrading and replacement of fire equipment, 129.3 and improvement of streets. 129.4 Subd. 3. [TERMINATION OF TAXES.] The authority granted 129.5 under subdivision 1 to the city of Beaver Bay to impose sales 129.6 and use taxes expires when the city council determines that the 129.7 amount of revenue received to pay the costs of the projects 129.8 described in subdivision 2 shall meet or exceed $1,500,000. Any 129.9 funds remaining after completion of the projects may be placed 129.10 in the general fund of the city. The tax imposed under 129.11 subdivision 1 may expire at an earlier time if the city so 129.12 determines by ordinance. 129.13[EFFECTIVE DATE.] This section is effective the day after 129.14 the governing body of the city of Beaver Bay and its chief 129.15 clerical officer timely comply with Minnesota Statutes, section 129.16 645.021, subdivisions 2 and 3. 129.17 Sec. 40. [CITY OF BEMIDJI.] 129.18 Subdivision 1. [SALES AND USE TAX AUTHORIZED.] 129.19 Notwithstanding Minnesota Statutes, section 477A.016, or any 129.20 other provision of law, ordinance, or city charter, pursuant to 129.21 the approval of the city voters at the general election held on 129.22 November 5, 2002, the city of Bemidji may impose by ordinance a 129.23 sales and use tax of one-half of one percent for the purposes 129.24 specified in subdivision 2. The provisions of Minnesota 129.25 Statutes, section 297A.99, govern the imposition, 129.26 administration, collection, and enforcement of the tax 129.27 authorized under this subdivision. 129.28 Subd. 2. [USE OF REVENUES.] Revenues received from the tax 129.29 authorized by subdivision 1 must be used for the cost of 129.30 collecting and administering the tax and to pay all or part of 129.31 the capital or administrative costs of the acquisition, 129.32 construction, and improvement of parks and trails within the 129.33 city, as provided for in the city of Bemidji's parks, open 129.34 space, and trail system plan, adopted by the Bemidji City 129.35 Council on November 21, 2001. Authorized expenses include, but 129.36 are not limited to, acquiring property, paying construction 130.1 expenses related to the development of these facilities and 130.2 improvements, and securing and paying debt service on bonds or 130.3 other obligations issued to finance acquisition, construction, 130.4 improvement, or development of parks and trails within the city 130.5 of Bemidji. 130.6 Subd. 3. [BONDS.] Pursuant to the approval of the city 130.7 voters at the general election held on November 5, 2002, the 130.8 city of Bemidji may issue, without an additional election, 130.9 general obligation bonds of the city in an amount not to exceed 130.10 $9,826,000 to pay capital and administrative expenses for the 130.11 acquisition, construction, improvement, and development of parks 130.12 and trails as specified in subdivision 2. The debt represented 130.13 by the bonds must not be included in computing any debt 130.14 limitations applicable to the city, and the levy of taxes 130.15 required by Minnesota Statutes, section 475.61, to pay the 130.16 principal of any interest on the bonds must not be subject to 130.17 any levy limitations or be included in computing or applying any 130.18 levy limitation applicable to the city. 130.19 Subd. 4. [TERMINATION OF TAX.] The tax imposed under 130.20 subdivision 1 expires when the Bemidji City Council determines 130.21 that the amount described in subdivision 3 has been received 130.22 from the tax to finance the capital and administrative costs for 130.23 acquisition, construction, improvement, and development of parks 130.24 and trails and to repay or retire at maturity the principal, 130.25 interest, and premium due on any bonds issued for the park and 130.26 trail improvements under subdivision 3. Any funds remaining 130.27 after completion of the park and trail improvements and 130.28 retirement or redemption of the bonds may be placed in the 130.29 general fund of the city. The tax imposed under subdivision 1 130.30 may expire at an earlier time if the city so determines by 130.31 ordinance. 130.32[EFFECTIVE DATE.] This section is effective the day after 130.33 compliance by the governing body of the city of Bemidji with 130.34 Minnesota Statutes, section 645.021, subdivision 3. 130.35 Sec. 41. [CITY OF CLOQUET; TAXES AUTHORIZED.] 130.36 Subdivision 1. [SALES AND USE TAX.] Notwithstanding 131.1 Minnesota Statutes, section 477A.016, or any other provision of 131.2 law, ordinance, or city charter, if approved by the voters 131.3 pursuant to Minnesota Statutes, section 297A.99, the city of 131.4 Cloquet may impose by ordinance a sales and use tax of up to 131.5 one-half of one percent for the purpose specified in subdivision 131.6 3. The provisions of Minnesota Statutes, section 297A.99, 131.7 govern the imposition, administration, collection, and 131.8 enforcement of the tax authorized under this subdivision. 131.9 Subd. 2. [EXCISE TAX AUTHORIZED.] Notwithstanding 131.10 Minnesota Statutes, section 477A.016, or any other provision of 131.11 law, ordinance, or city charter, the city of Cloquet may impose 131.12 by ordinance, for the purposes specified in subdivision 3, an 131.13 excise tax of up to $20 per motor vehicle, as defined by 131.14 ordinance, purchased or acquired from any person engaged within 131.15 the city in the business of selling motor vehicles at retail. 131.16 Subd. 3. [USE OF REVENUES.] Revenues received from taxes 131.17 authorized by subdivisions 1 and 2 must be used by the city to 131.18 pay the cost of collecting the taxes and to pay for the 131.19 following projects: 131.20 (1) construction and implementation of riverfront task 131.21 force park improvements including Veteran's Park; 131.22 (2) extension of water and sewer lines and other 131.23 improvements to city infrastructure necessary for construction 131.24 of a city industrial park; and 131.25 (3) costs associated with the closure of the Cloquet 131.26 Municipal Landfill. 131.27 Authorized expenses include, but are not limited to, 131.28 acquiring property and paying construction expenses related to 131.29 these improvements, and paying debt service on bonds or other 131.30 obligations issued to finance acquisition and construction of 131.31 these improvements. 131.32 Subd. 4. [BONDING AUTHORITY.] (a) The city may issue bonds 131.33 under Minnesota Statutes, chapter 475, to pay capital and 131.34 administrative expenses for the improvements described in 131.35 subdivision 3 in an amount that does not exceed $7,000,000. An 131.36 election to approve the bonds under Minnesota Statutes, section 132.1 475.58, is not required. 132.2 (b) The issuance of bonds under this subdivision is not 132.3 subject to Minnesota Statutes, sections 275.60 and 275.61. 132.4 (c) The debt represented by the bonds is not included in 132.5 computing any debt limitation applicable to the city, and any 132.6 levy of taxes under Minnesota Statutes, section 475.61, to pay 132.7 principal of and interest on the bonds is not subject to any 132.8 levy limitation. 132.9 Subd. 5. [TERMINATION OF TAXES.] The taxes imposed under 132.10 subdivisions 1 and 2 expire at the earlier of (1) 14 years, or 132.11 (2) when the city council determines that sufficient funds have 132.12 been received from the taxes to finance the capital and 132.13 administrative costs of the improvements described in 132.14 subdivision 3, plus the additional amount needed to pay the 132.15 costs related to issuance of bonds under subdivision 4, 132.16 including interest on the bonds. Any funds remaining after 132.17 completion of the project and retirement or redemption of the 132.18 bonds may be placed in the general fund of the city. The taxes 132.19 imposed under subdivisions 1 and 2 may expire at an earlier time 132.20 if the city so determines by ordinance. 132.21[EFFECTIVE DATE.] This section is effective the day after 132.22 the governing body of the city of Cloquet and its chief clerical 132.23 officer timely comply with Minnesota Statutes, section 645.021, 132.24 subdivisions 2 and 3. 132.25 Sec. 42. [CITY OF CLEARWATER.] 132.26 Subdivision 1. [SALES AND USE TAX AUTHORIZED.] 132.27 Notwithstanding Minnesota Statutes, section 477A.016, or any 132.28 other provision of law, ordinance, or city charter, pursuant to 132.29 the approval of the city voters at the next general election or 132.30 at a special election held for this purpose, the city of 132.31 Clearwater may impose by ordinance a sales and use tax of 132.32 one-half of one percent for the purposes specified in 132.33 subdivision 2. The provisions of Minnesota Statutes, section 132.34 297A.99, govern the imposition, administration, collection, and 132.35 enforcement of the tax authorized under this subdivision. 132.36 Subd. 2. [USE OF REVENUES.] Revenues received from the tax 133.1 authorized by subdivision 1 must be used for the cost of 133.2 collecting and administering the tax and to pay all or part of 133.3 the capital or administrative costs of the development, 133.4 acquisition, construction, and improvement of parks, trails, 133.5 parkland, open space, and land and buildings for a regional 133.6 community and recreation center. Authorized expenses include, 133.7 but are not limited to, acquiring property, paying construction 133.8 expenses related to the development of these facilities and 133.9 improvements, and securing and paying debt service on bonds or 133.10 other obligations issued to finance acquisition, construction, 133.11 improvement, or development. 133.12 Subd. 3. [BONDS.] Pursuant to the approval of the city 133.13 voters to impose the tax authorized in subdivision 1, the city 133.14 of Clearwater may issue without an additional election general 133.15 obligation bonds of the city in an amount not to exceed 133.16 $3,000,000 to pay capital and administrative expenses for the 133.17 acquisition, construction, improvement, and development of the 133.18 projects specified in subdivision 2. The debt represented by 133.19 the bonds must not be included in computing any debt limitations 133.20 applicable to the city, and the levy of taxes required by 133.21 Minnesota Statutes, section 475.61, to pay the principal or any 133.22 interest on the bonds must not be subject to any levy 133.23 limitations or be included in computing or applying any levy 133.24 limitation applicable to the city. 133.25 Subd. 4. [TERMINATION OF TAX.] The tax imposed under 133.26 subdivision 1 expires when the Clearwater City Council 133.27 determines that the amount described in subdivision 3 has been 133.28 received from the tax to finance the capital and administrative 133.29 costs for acquisition, construction, improvement, and 133.30 development of the projects specified in subdivision 2 and to 133.31 repay or retire at maturity the principal, interest, and premium 133.32 due on any bonds issued for the projects under subdivision 3. 133.33 Any funds remaining after completion of the projects specified 133.34 in subdivision 2 and retirement or redemption of the bonds may 133.35 be placed in the general fund of the city. The tax imposed 133.36 under subdivision 1 may expire at an earlier time if the city so 134.1 determines by ordinance. 134.2[EFFECTIVE DATE.] This section is effective the day after 134.3 compliance by the governing body of the city of Clearwater with 134.4 Minnesota Statutes, section 645.021, subdivision 3. 134.5 Sec. 43. [REVERSE REFERENDUM; CHANGE IN MANKATO SALES TAX 134.6 EXPIRATION DATE.] 134.7 For the change in section 26 to be effective, the Mankato 134.8 City Council must pass a resolution stating that they intend to 134.9 implement the change in the expiration date of the local sales 134.10 tax authorized under section 26. The resolution must indicate 134.11 when the sales tax would expire under the law before any change, 134.12 and when it will expire under the authorized change in the law. 134.13 The resolution must be published for two successive weeks in the 134.14 official newspaper of the city or, if there is no official 134.15 newspaper, in a newspaper of general circulation in the city, 134.16 together with a notice fixing a date for a public hearing on the 134.17 matter. The hearing must be held at least two weeks but no more 134.18 than four weeks after the first publication of the resolution. 134.19 Following the public hearing, the city may determine to take no 134.20 further action or adopt a resolution confirming its intention to 134.21 extend the expiration date of the sales tax. That resolution 134.22 must also be published in the official newspaper of the city or, 134.23 if there is no official newspaper, in a newspaper of general 134.24 circulation in the city. If within 30 days of publication of 134.25 the resolution a petition signed by voters equal in number to at 134.26 least ten percent of the votes cast in the city in the last 134.27 general election requesting a vote on the resolution is filed 134.28 with the county, the resolution is not effective until it has 134.29 been submitted to the voters at a general or special election 134.30 and a majority of votes cast on the question of approving the 134.31 resolution are in the affirmative. The commissioner of revenue 134.32 shall prepare a suggested form of question to be presented at 134.33 the election. The notices, hearing, and any required referendum 134.34 must be held before December 31, 2005. 134.35 Notwithstanding any other law or charter provision, the 134.36 taxes imposed under Laws 1991, chapter 291, article 8, section 135.1 27, shall not expire before December 31, 2005. However, if the 135.2 city has not met the requirements in this section for adopting 135.3 the change in the effective date allowed in section 26, the tax 135.4 shall expire after December 31, 2005, as soon as is feasible 135.5 under Minnesota Statutes, section 297A.99, subdivision 12. 135.6[EFFECTIVE DATE.] This section is effective the day after 135.7 compliance by the city of Mankato with Minnesota Statutes, 135.8 section 645.021, subdivision 3. 135.9 Sec. 44. [CITY OF MEDFORD; SALES AND USE TAX.] 135.10 Subdivision 1. [SALES AND USE TAX AUTHORIZED.] 135.11 Notwithstanding Minnesota Statutes, section 477A.016, or any 135.12 other provision of law, ordinance, or city charter, the city of 135.13 Medford may, by ordinance, impose a sales and use tax of 135.14 one-half of one percent for the purposes specified in 135.15 subdivision 2. Except as otherwise specifically provided, the 135.16 provisions of Minnesota Statutes, section 297A.99, govern the 135.17 imposition, administration, collection, and enforcement of the 135.18 tax authorized under this subdivision. 135.19 Subd. 2. [USE OF REVENUES.] The proceeds of the tax 135.20 imposed under this section must be used to pay up to $5,000,000 135.21 in costs related to improving the city's wastewater system and 135.22 wastewater treatment plant. 135.23 Subd. 3. [REFERENDUM.] If the Medford City Council 135.24 proposes to impose the tax authorized by this section, the 135.25 question of imposing the tax must be submitted to the voters at 135.26 the next general election. The tax may not be imposed unless 135.27 the majority of votes cast on the question of imposing the tax 135.28 are in the affirmative. The commissioner of revenue shall 135.29 prepare a suggested form of the question to be presented at the 135.30 election. The question must state that the sales tax revenues 135.31 would be pledged to pay any bonds issued under subdivision 4 and 135.32 that these bonds are guaranteed by the city's property taxes. 135.33 Subd. 4. [BONDING AUTHORITY.] (a) The city may issue bonds 135.34 under Minnesota Statutes, chapter 475, to finance the capital 135.35 expenditure and improvement projects authorized under 135.36 subdivision 2. The total amount of bonds issued for the 136.1 projects listed in subdivision 2 may not exceed $5,000,000 in 136.2 aggregate. An election to approve the bonds, as required under 136.3 Minnesota Statutes, section 475.58, is not required. 136.4 (b) The issuance of the bonds under this subdivision is not 136.5 subject to Minnesota Statutes, sections 275.60 and 275.61. 136.6 (c) The bonds are not included in computing any debt 136.7 limitation applicable to the city, and the levy of taxes under 136.8 Minnesota Statutes, section 475.61, to pay the principal of and 136.9 interest on the bonds is not subject to any levy limitation. 136.10 (d) The taxes authorized under this section may be pledged 136.11 to and used for the payment of the bonds and any bonds issued to 136.12 refund them only if the bonds and any refunding bonds are 136.13 general obligations of the city. 136.14 Subd. 5. [TERMINATION OF TAXES.] The taxes imposed under 136.15 this section expire at the earlier of (1) 20 years after the 136.16 taxes are first imposed, or (2) when the city council first 136.17 determines that the amount of revenues raised to pay for the 136.18 projects under subdivision 2 shall meet or exceed the sum of 136.19 $5,000,000, plus an amount equal to the costs related to the 136.20 issuance of bonds under subdivision 4. Any funds remaining 136.21 after completion of the projects and retirement or redemption of 136.22 the bonds may be placed in the general funds of the city. 136.23[EFFECTIVE DATE.] This section is effective the day after 136.24 compliance with the governing body of the city of Medford with 136.25 Minnesota Statutes, section 645.021, subdivision 3. 136.26 Sec. 45. [CITY OF PARK RAPIDS.] 136.27 Subdivision 1. [SALES AND USE TAX AUTHORIZED.] 136.28 Notwithstanding Minnesota Statutes, section 477A.016, or any 136.29 other provision of law, ordinance, or city charter, pursuant to 136.30 the approval of the city voters at the next general election or 136.31 at a special election held for this purpose, the city of Park 136.32 Rapids may impose by ordinance a sales and use tax of one 136.33 percent for the purposes specified in subdivision 2. The 136.34 provisions of Minnesota Statutes, section 297A.99, govern the 136.35 imposition, administration, collection, and enforcement of the 136.36 tax authorized under this subdivision. 137.1 Subd. 2. [USE OF REVENUES.] Revenues received from the tax 137.2 authorized by subdivision 1 must be used for the cost of 137.3 collecting and administering the tax and to pay all or part of 137.4 the capital or administrative costs of the development, 137.5 acquisition, construction, and improvement of the following 137.6 projects: 137.7 (1) two-thirds of the cost of construction and operation of 137.8 a community center that may include a senior citizen center, 137.9 fitness center, swimming pool, meeting rooms, indoor track, and 137.10 racquetball, basketball, and tennis courts, provided that an 137.11 amount equal to one-third of the cost of construction is 137.12 received from private sources; 137.13 (2) capital improvement projects including, but not limited 137.14 to, installation of water, sewer, storm sewer, street 137.15 improvements, new city water tower and well, costs related to 137.16 improvements to marked trunk highway 34; and 137.17 (3) park improvements. 137.18 Authorized expenses include, but are not limited to, 137.19 acquiring property, paying construction expenses related to the 137.20 development of these facilities and improvements, and securing 137.21 and paying debt service on bonds or other obligations issued to 137.22 finance acquisition, construction, improvement, or development. 137.23 Subd. 3. [BONDS.] Pursuant to the approval of the city 137.24 voters to impose the tax authorized in subdivision 1, the city 137.25 of Park Rapids may issue without an additional election general 137.26 obligation bonds of the city to pay capital and administrative 137.27 expenses for the acquisition, construction, improvement, and 137.28 development of the projects specified in subdivision 2. The 137.29 debt represented by the bonds must not be included in computing 137.30 any debt limitations applicable to the city, and the levy of 137.31 taxes required by Minnesota Statutes, section 475.61, to pay the 137.32 principal or any interest on the bonds must not be subject to 137.33 any levy limitations or be included in computing or applying any 137.34 levy limitation applicable to the city. 137.35 Subd. 4. [TERMINATION OF TAX.] The tax imposed under 137.36 subdivision 1 expires the earlier of July 1, 2023, or when the 138.1 city council determines that sufficient revenues have been 138.2 received to retire the bonds in subdivision 3. Any funds 138.3 remaining after completion of the projects specified in 138.4 subdivision 2 and retirement or redemption of the bonds may be 138.5 placed in the general fund of the city. The tax imposed under 138.6 subdivision 1 may expire at an earlier time if the city so 138.7 determines by ordinance. 138.8[EFFECTIVE DATE.] This section is effective the day after 138.9 compliance by the governing body of the city of Park Rapids with 138.10 Minnesota Statutes, section 645.021, subdivision 3. 138.11 Sec. 46. [CITY OF PROCTOR; LODGING TAX.] 138.12 The city of Proctor may use up to ten percent of the 138.13 revenues received from the lodging tax imposed by the city under 138.14 Minnesota Statutes, section 469.190, for preservation of the 138.15 Caboose and the Baldwin Locomotive, Class M3 Mallet, Number 225, 138.16 donated to the city by the Duluth, Missabe and Iron Range 138.17 Railway Company, and the F-101F aircraft, serial number 59-0407, 138.18 donated to the city by the Department of the Air Force. 138.19[EFFECTIVE DATE.] This section is effective the day 138.20 following final enactment. 138.21 Sec. 47. [ST. CLOUD AREA CITIES; SALES AND USE TAX 138.22 AUTHORIZED.] 138.23 Subdivision 1. [SALES AND USE TAX AUTHORIZED.] (a) 138.24 Notwithstanding Minnesota Statutes, sections 297A.99, 138.25 subdivision 3, paragraph (d), and 477A.016, or any other 138.26 provision of law, ordinance, or city charter, the following 138.27 cities may, by ordinance, impose a sales and use tax of one half 138.28 of one percent for the purposes specified in subdivision 2: 138.29 (1) the city of St. Cloud, pursuant to the approval of the 138.30 city voters at the general election held on November 2, 2004: 138.31 (2) the city of St. Joseph, pursuant to the approval of the 138.32 city voters at the general election on November 2, 2004; 138.33 (3) the city of Waite Park, pursuant to the approval of the 138.34 city voters at the general election held on November 4, 2003, 138.35 and any additional approval by the voters of that city at the 138.36 next general election; 139.1 (4) the city of Sartell, pursuant to the approval of the 139.2 city voters at the general election held on November 2, 1999, 139.3 and any additional approval at the next general election; and 139.4 (5) the cities of Sauk Rapids and St. Augusta, pursuant to 139.5 the approval of the voters of that city at the next general 139.6 election. 139.7 (b) The provisions of Minnesota Statutes, section 297A.99, 139.8 except subdivision 3, paragraph (d), govern the imposition, 139.9 administration, collection, and enforcement of the tax 139.10 authorized under this subdivision. 139.11 Subd. 2. [USE OF REVENUES.] (a) Revenues received from the 139.12 tax authorized under subdivision 1 must be used for collecting 139.13 and administering the taxes and to pay all or part of the 139.14 capital and administrative costs of the acquisition, 139.15 construction, and improvement of a new regional library located 139.16 in the city of St. Cloud. Authorized expenses include, but are 139.17 not limited to, acquiring property, paying construction expenses 139.18 related to the development of the library, and securing and 139.19 paying debt service issued to finance construction or 139.20 improvement of the authorized facility. The total amount that 139.21 may be spent on this project may not exceed $30,000,000 plus any 139.22 debt service costs. 139.23 (b) If revenues collected from the taxes imposed under 139.24 subdivision 1 are greater than the amount needed to meet 139.25 obligations under paragraph (a) in any year, the surplus may be 139.26 returned to the cities in a manner agreed upon by the 139.27 participating cities under an applicable joint powers 139.28 agreement. Cities must use revenues received under this 139.29 paragraph to fund projects that have been approved by the voters 139.30 at the referendum authorizing the tax. Authorized expenses 139.31 include, but are not limited to, acquiring property, paying 139.32 construction expenses related to the development of the 139.33 authorized facility, and securing and paying debt service issued 139.34 to finance construction or improvement of the authorized 139.35 facility. 139.36 (c) Notwithstanding any provisions to the contrary 140.1 contained in a referendum authorizing the imposition of the tax, 140.2 projects that may be funded from revenues distributed under 140.3 paragraph (b) are limited to the following: 140.4 (1) the St. Cloud Regional Airport; 140.5 (2) regional transportation improvements; 140.6 (3) community and aquatics centers; 140.7 (4) regional public libraries; and 140.8 (5) acquisition and improvement of regional park land, 140.9 trails, and open space. 140.10 (d) The cities of Waite Park and Sartell may use revenues 140.11 from the tax imposed in subdivision 1 to fund the library under 140.12 paragraph (a) without additional approval by city voters; 140.13 however, each city must seek approval of its voters to fund any 140.14 other project not approved by the voters at the referendum held 140.15 on November 4, 2003, and November 2, 1999, respectively. 140.16 Subd. 3. [ALLOCATION OF SALES AND USE TAX REVENUES TO 140.17 CITIES.] Revenues collected from the taxes authorized by 140.18 subdivision 1, after paying the cost of collecting and 140.19 administering the tax, shall be allocated to cities imposing the 140.20 tax as follows: 140.21 (1) the first $900,000 of revenues collected annually, 140.22 indexed annually to the Consumer Price Index, to the city of St. 140.23 Cloud for the construction and relocation of a regional library 140.24 located in the city; and 140.25 (2) the revenues collected from the taxes imposed under 140.26 subdivision 1 that exceed the amount needed to meet the 140.27 obligations under clause (1) in any year shall be returned to 140.28 the cities pursuant to a joint powers agreement allocating sales 140.29 tax revenues among the cities. 140.30 Subd. 4. [CITY BONDING AUTHORIZED.] The city imposing a 140.31 tax under subdivision 1 may issue general obligation bonds to 140.32 pay the costs of the projects specified in subdivision 2, 140.33 pursuant to the approval of the projects by the city voters at 140.34 the election authorizing the imposition of the tax. The bonds 140.35 issued for each project are limited to the amount authorized to 140.36 be spent on the project in the referendum. The debt represented 141.1 by the bonds must not be included in computing any debt 141.2 limitations applicable to the city, and the levy of taxes 141.3 required by Minnesota Statutes, section 475.61, to pay the 141.4 principal or any interest on the bonds must not be subject to 141.5 any levy limitations or be included in computing or applying any 141.6 levy limitation applicable to the city. 141.7 Subd. 5. [TERMINATION OF TAX.] The tax imposed in a city 141.8 under subdivision 1 expires when the city council determines 141.9 that sufficient funds have been collected from the tax to retire 141.10 or redeem the bonds and obligations authorized under subdivision 141.11 2, but no later than 17 years after the date the tax is first 141.12 imposed. Any funds remaining after completion of the projects 141.13 specified in subdivision 2 and retirement or redemption of the 141.14 bonds may be placed in the general fund of the city. The tax 141.15 imposed under subdivision 1 may expire at an earlier time if the 141.16 city so determines by ordinance. 141.17[EFFECTIVE DATE.] This section is effective the day after 141.18 compliance by the governing body of the city with Minnesota 141.19 Statutes, section 645.021, subdivision 3, for sales and 141.20 purchases made on and after January 1, 2006. 141.21 Sec. 48. [SALES AND USE TAX COMPLIANCE GAP.] 141.22 The commissioner must reduce the amount of the compliance 141.23 gap in the payment of sales and use tax by 25 percent before 141.24 December 31, 2007; and must reduce the compliance gap in the 141.25 payment of sales and use tax by an additional 25 percent before 141.26 December 31, 2009. The commissioner must establish an effective 141.27 method to allow individuals who purchase taxable products or 141.28 services and have not paid the tax at the time of the purchase 141.29 to pay the tax. The commissioner must advise residents of this 141.30 state how to pay sales and use tax. 141.31[EFFECTIVE DATE.] This section is effective the day 141.32 following final enactment. 141.33 Sec. 49. [CITY OF WASECA; SALES AND USE TAX.] 141.34 Subdivision 1. [SALES AND USE TAX 141.35 AUTHORIZED.] Notwithstanding Minnesota Statutes, section 141.36 477A.016, or any other provision of law, ordinance, or city 142.1 charter, the city of Waseca may, by ordinance, impose a sales 142.2 and use tax of one-half of one percent for the purposes 142.3 specified in subdivision 2. The provisions of Minnesota 142.4 Statutes, section 297A.99, govern the imposition, 142.5 administration, collection, and enforcement of the tax 142.6 authorized under this subdivision. 142.7 Subd. 2. [USE OF REVENUES.] The proceeds of the tax 142.8 imposed under this section must be used to pay for up to 142.9 $1,820,000 in costs related to one or more of the following 142.10 capital projects as described in the referendum in subdivision 3: 142.11 (1) water quality and lake improvements; 142.12 (2) community center improvements; 142.13 (3) an industrial incubator; and 142.14 (4) downtown improvements, including a theatre and blighted 142.15 property acquisition. 142.16 Subd. 3. [REFERENDUM.] If the Waseca city council proposes 142.17 to impose the tax authorized by this section, the question of 142.18 imposing the tax must be submitted to the voters at the next 142.19 general election. The tax may not be imposed unless the 142.20 majority of votes cast on the question of imposing the tax are 142.21 in the affirmative. The specific projects to be funded by the 142.22 tax must be identified at least 90 days before the referendum is 142.23 held and included in the question presented at the election. 142.24 The question must state that the sales tax revenues would be 142.25 pledged to pay any bonds issued under subdivision 4 and that 142.26 these bonds are guaranteed by the city's property taxes. 142.27 Subd. 4. [BONDING AUTHORITY.] The city may issue bonds 142.28 under Minnesota Statutes, chapter 475, to finance the capital 142.29 expenditure and improvement projects authorized under 142.30 subdivision 2 and approved under subdivision 3. The total 142.31 amount of bonds issued for the projects approved in subdivision 142.32 3 may not exceed $1,820,000 in aggregate. An election to 142.33 approve the bonds, as required under Minnesota Statutes, section 142.34 475.58, is not required. 142.35 Subd. 5. [TERMINATION OF TAXES.] The taxes imposed under 142.36 this section expire at the earlier of (1) ten years after the 143.1 taxes are first imposed, or (2) when the city council first 143.2 determines that the amount of revenues raised is sufficient to 143.3 finance the capital projects approved under subdivision 3 and to 143.4 prepay or retire at maturity the principal, interest, and 143.5 premium due on any bonds issued under subdivision 4. Any funds 143.6 remaining after completion of the projects may be placed in the 143.7 general funds of the city. 143.8[EFFECTIVE DATE.] This section is effective the day after 143.9 compliance with the governing body of the city of Waseca with 143.10 Minnesota Statutes, section 645.021, subdivision 3. 143.11 Sec. 50. [CITY OF WILLMAR.] 143.12 Subdivision 1. [SALES AND USE TAX AUTHORIZED.] 143.13 Notwithstanding Minnesota Statutes, section 477A.016, or any 143.14 other provision of law, ordinance, or city charter, pursuant to 143.15 the approval of the city voters at the general election held on 143.16 November 2, 2004, the city of Willmar may impose by ordinance a 143.17 sales and use tax of one-half of one percent for the purposes 143.18 specified in subdivision 2. The provisions of Minnesota 143.19 Statutes, section 297A.99, govern the imposition, 143.20 administration, collection, and enforcement of the tax 143.21 authorized under this subdivision. 143.22 Subd. 2. [USE OF REVENUES.] Revenues received from the tax 143.23 authorized by subdivision 1 must be used for the cost of 143.24 collecting and administering the tax and to pay all or part of 143.25 the capital or administrative costs of the development, 143.26 acquisition, construction, and improvement of the following 143.27 projects: 143.28 (1) completion and expansion of the airport/industrial 143.29 park; 143.30 (2) hiking and biking trails; 143.31 (3) connection of the Blue Line and Civic Center buildings; 143.32 and 143.33 (4) purchase of that portion of the Willmar Regional 143.34 Treatment Center campus located west of Marked Trunk Highway 71. 143.35 Authorized expenses include, but are not limited to, 143.36 acquiring property, paying construction expenses related to the 144.1 development of these facilities and improvements, and securing 144.2 and paying debt service on bonds or other obligations issued to 144.3 finance acquisition, construction, improvement, or development 144.4 of these projects. 144.5 Subd. 3. [BONDS.] The city of Willmar may issue without an 144.6 additional election general obligation bonds of the city in an 144.7 amount not to exceed $8,000,000 to pay capital and 144.8 administrative expenses for the acquisition, construction, 144.9 improvement, and development of the projects listed in 144.10 subdivision 2. The debt represented by the bonds must not be 144.11 included in computing any debt limitations applicable to the 144.12 city, and the levy of taxes required by Minnesota Statutes, 144.13 section 475.61, to pay the principal or any interest on the 144.14 bonds, and must not be subject to any levy limitations or be 144.15 included in computing or applying any levy limitation applicable 144.16 to the city. 144.17 Subd. 4. [TERMINATION OF TAX.] The tax imposed under 144.18 subdivision 1 expires at the later of (1) seven years after the 144.19 date the tax is first imposed, or (2) when the Willmar City 144.20 Council determines that the amount described in subdivision 3 144.21 has been received from the tax to finance the capital and 144.22 administrative costs, and to repay or retire at maturity the 144.23 principal, interest, and premium due on any bonds issued under 144.24 subdivision 3. Any funds remaining after completion of the 144.25 projects listed in subdivision 2 and retirement or redemption of 144.26 the bonds may be placed in the general fund of the city. The 144.27 tax imposed under subdivision 1 may expire at an earlier time if 144.28 the city so determines by ordinance. 144.29[EFFECTIVE DATE.] This section is effective the day after 144.30 compliance by the governing body of the city of Willmar with 144.31 Minnesota Statutes, section 645.021, subdivision 3. 144.32 Sec. 51. [CITY OF WINONA; TAXES AUTHORIZED.] 144.33 Subdivision 1. [SALES AND USE TAX 144.34 AUTHORIZED.] Notwithstanding Minnesota Statutes, section 144.35 477A.016, or any other provision of law, ordinance, or city 144.36 charter, if approved by the voters pursuant to Minnesota 145.1 Statutes, section 297A.99, the city of Winona may impose by 145.2 ordinance a sales and use tax of one-half of one percent for the 145.3 purposes specified in subdivision 3. The provisions of 145.4 Minnesota Statutes, section 297A.99, govern the imposition, 145.5 administration, collection, and enforcement of the tax 145.6 authorized under this subdivision. 145.7 Subd. 2. [EXCISE TAX AUTHORIZED.] Notwithstanding 145.8 Minnesota Statutes, section 477A.016, or any other contrary 145.9 provision of law, ordinance, or city charter, the city of Winona 145.10 may impose by ordinance, for the purposes specified in 145.11 subdivision 3, an excise tax of up to $20 per motor vehicle, as 145.12 defined by ordinance, purchased or acquired from any person 145.13 engaged within the city in the business of selling motor 145.14 vehicles at retail. 145.15 Subd. 3. [USE OF REVENUES.] Revenues received from the 145.16 taxes authorized by subdivisions 1 and 2 must be used to pay all 145.17 or part of the capital costs of transportation, cultural, or 145.18 library projects located within the city, including securing or 145.19 paying debt service on bonds issued under subdivision 4, for the 145.20 transportation, cultural, or library projects and to pay the 145.21 cost of collecting and administering the tax. Authorized costs 145.22 include, but are not limited to, acquiring property and paying 145.23 construction and engineering costs related to the projects. 145.24 Subd. 4. [BONDS.] The city of Winona, if approved by 145.25 voters pursuant to Minnesota Statutes, section 297A.99, may 145.26 issue general obligation bonds of the city, in one or more 145.27 series, in the aggregate principal amount not to exceed 145.28 $20,000,000 to pay capital and administrative costs of the 145.29 transportation, cultural, or library projects. The debt 145.30 represented by the bonds is not included in computing any debt 145.31 limitations applicable to the city, and the levy of taxes 145.32 required by Minnesota Statutes, section 475.61, to pay the 145.33 principal of and interest on the bonds is not subject to any 145.34 levy limitation or included in computing or applying any levy 145.35 limitation applicable to the city. 145.36 Subd. 5. [TERMINATION OF TAXES.] The taxes imposed under 146.1 subdivisions 1 and 2 expire at the later of 15 years after the 146.2 imposition of the tax or when the Winona city council determines 146.3 that sufficient funds have been received from the taxes to 146.4 prepay or retire at maturity the principal, interest, and 146.5 premium due on any bonds issued for the projects under 146.6 subdivision 4. Any funds remaining after expiration of the 146.7 taxes and retirement of the bonds may be placed in a capital 146.8 project fund of the city. The taxes imposed under subdivisions 146.9 1 and 2 may expire at an earlier time if the city so determines 146.10 by ordinance. 146.11[EFFECTIVE DATE.] This section is effective the day after 146.12 compliance by the governing body of the city of Winona with 146.13 Minnesota Statutes, section 645.021, subdivision 3. 146.14 Sec. 52. [LODGING TAX; HUBBARD COUNTY AUTHORITY.] 146.15 Notwithstanding Minnesota Statutes, section 469.190, 146.16 subdivisions 1 and 4, Hubbard County may impose the local 146.17 lodging tax authorized in that section in all towns and 146.18 unorganized territories within the county, and no town located 146.19 in the county may impose the local lodging tax. Any local 146.20 lodging tax imposed by a town in Hubbard County prior to the 146.21 effective date of this section expires the day that a county tax 146.22 is imposed under this section. 146.23 If the county board exercises the authority under this 146.24 section, it must determine by resolution that imposition of the 146.25 tax is in the county's interest. The resolution is subject to 146.26 the notice and reverse referendum requirements that would apply 146.27 under Minnesota Statutes, section 469.190, subdivision 5, if the 146.28 county was imposing the tax in an unorganized territory. The 146.29 provisions of Minnesota Statutes, section 469.190, subdivisions 146.30 2, 3, 6, and 7, apply to a tax imposed under this section. 146.31[EFFECTIVE DATE.] This section is effective the day after 146.32 the governing body of Hubbard County and its chief clerical 146.33 officer comply with Minnesota Statutes, section 645.021, 146.34 subdivisions 2 and 3. 146.35 Sec. 53. [USE TAX ENFORCEMENT.] 146.36 The commissioner shall establish a use tax enforcement unit 147.1 within the Department of Revenue to conduct direct compliance 147.2 activities that will increase payment of use tax. The 147.3 commissioner shall inform and educate taxpayers about the 147.4 requirement to pay use tax. The commissioner shall also conduct 147.5 an information campaign targeted to higher income individuals, 147.6 attorneys, accountants, and tax preparers to advise individuals 147.7 and tax professionals of the obligation to report and pay use 147.8 tax. 147.9[EFFECTIVE DATE.] This section is effective July 1, 2005. 147.10 Sec. 54. [REPEALER.] 147.11 Minnesota Statutes 2004, section 297A.99, subdivision 13, 147.12 is repealed effective July 1, 2005. 147.13 ARTICLE 8 147.14 PROPERTY TAXES - SF1683 147.15 Section 1. Minnesota Statutes 2004, section 103C.331, 147.16 subdivision 16, is amended to read: 147.17 Subd. 16. [BUDGET.] The district board shall annually 147.18 present a budget consisting of an itemized statement of district 147.19 expenses for the ensuing calendar year to the boards of county 147.20 commissioners of the counties in which the district is located. 147.21 The county boards may levy an annual tax on all taxable real 147.22 property in the district or annually authorize district levies, 147.23 as provided in section 103C.332, for the amount that the boards 147.24 determine is necessary to meet the requirements of the 147.25 district. The amount levied shall be collected and distributed 147.26 to the district as prescribed by chapter 276. The amount may be 147.27 spent by the district board for a district purpose authorized by 147.28 law. 147.29 Sec. 2. [103C.332] [DISTRICT FUNDS AND LEVIES.] 147.30 Subdivision 1. [GENERAL FUND.] (a) A district shall create 147.31 a general fund consisting of: 147.32 (1) an ad valorem tax levy, authorized by a county board 147.33 under section 103C.331, subdivision 16, that may not exceed 147.34 0.048 percent of taxable market value, or $750,000, whichever is 147.35 less; and 147.36 (2) revenue received from the county for administration of 148.1 the district under section 103C.331, subdivision 16. 148.2 (b) The money in the fund shall be used for general 148.3 administrative expenses. The supervisors may make an annual 148.4 levy for the general fund as provided in subdivision 6. 148.5 Subd. 2. [IMPLEMENTATION AND PROJECT MATCH FUND.] A 148.6 district shall create an implementation fund to supply funds for 148.7 the implementation of the projects of the district or to match 148.8 grants from outside sources consisting of: 148.9 (1) ad valorem tax levies or fees levied or to be levied 148.10 for the implementation of projects of the district or to match 148.11 grants, authorized by the county board under section 103C.331, 148.12 subdivision 16; and 148.13 (2) revenue received from the county under section 148.14 103C.331, subdivision 16, for the implementation of projects of 148.15 the district or to match grants. 148.16 Subd. 3. [BUDGET HEARING.] (a) Before adopting a budget 148.17 when levies are authorized by the county board under section 148.18 103C.331, subdivision 16, the supervisors shall hold a public 148.19 hearing on the proposed budget. 148.20 (b) The supervisors shall publish a notice of the hearing 148.21 with a summary of the proposed budget in one or more newspapers 148.22 of general circulation in each county consisting of part of the 148.23 district. The notice and summary shall be published once each 148.24 week for two successive weeks before the hearing. The last 148.25 publication shall be at least two days before the hearing. 148.26 Subd. 4. [BUDGET ADOPTION.] On or before September 1 of 148.27 each year, the supervisors shall adopt a budget for the next 148.28 year and decide on the total amount necessary to be raised from 148.29 ad valorem tax levies to meet the district's budget. 148.30 Subd. 5. [CERTIFICATION TO AUDITOR.] After adoption of the 148.31 budget and no later than September 1, the district shall certify 148.32 to the auditor of each county within the district, the county's 148.33 share of an authorized tax, which shall be an amount bearing the 148.34 same proportion to the total levy as the net tax capacity of the 148.35 area of the county within the district bears to the net tax 148.36 capacity of the entire district. The maximum amount of a levy 149.1 may not exceed the amount provided in subdivisions 1 and 2. 149.2 Subd. 6. [LEVY.] The auditor of each county in the 149.3 district shall add the amount of an authorized levy made by the 149.4 supervisors to the other tax levies on the property of the 149.5 county within the district for collection by the county 149.6 treasurer with other taxes. The county treasurer shall make 149.7 settlement of the taxes collected with the treasurer of the 149.8 district in the same manner as other taxes are distributed to 149.9 the other political subdivisions. The levy authorized by this 149.10 section is in addition to other county taxes authorized by law. 149.11 Sec. 3. Minnesota Statutes 2004, section 123B.53, is 149.12 amended by adding a subdivision to read: 149.13 Subd. 1a. [DEBT SERVICE LEVIES; CHOICE OF TAX BASE.] A 149.14 school board may by resolution elect to levy the debt service 149.15 for a bond issued after July 1, 2005, against the referendum 149.16 market value of the district, as defined under section 126C.01, 149.17 subdivision 3, rather than the net tax capacity of the district, 149.18 except that for purposes of this subdivision, noncommercial 4c(1) 149.19 property under section 273.13 is valued at its market value. A 149.20 resolution to levy against referendum market value must be 149.21 passed at an open meeting of the board, at least 60 days prior 149.22 to the referendum election. 149.23[EFFECTIVE DATE.] This section is effective the day 149.24 following final enactment. 149.25 Sec. 4. Minnesota Statutes 2004, section 123B.53, 149.26 subdivision 4, is amended to read: 149.27 Subd. 4. [DEBT SERVICE EQUALIZATION REVENUE.] (a) The debt 149.28 service equalization revenue of a district equals the sum of the 149.29 first tier debt service equalization revenue and the second tier 149.30 debt service equalization revenue. 149.31 (b) The first tier debt service equalization revenue of a 149.32 district equals the greater of zero or the eligible debt service 149.33 revenue minus the amount raised by a levy of 15 percent times 149.34 the adjusted net tax capacity of the district minus the second 149.35 tier debt service equalization revenue of the district. 149.36 (c) The second tier debt service equalization revenue of a 150.1 district equals the greater of zero or the eligible debt service 150.2 revenue, excluding alternative facilities levies under section 150.3 123B.59, subdivision 5, minus the amount raised by a levy of 25 150.4 percent times the adjusted net tax capacity of the district. 150.5 (d) Debt service equalization revenue is determined as 150.6 provided under this subdivision regardless of whether the debt 150.7 service is being levied against net tax capacity or referendum 150.8 market value. 150.9[EFFECTIVE DATE.] This section is effective July 1, 2005. 150.10 Sec. 5. Minnesota Statutes 2004, section 123B.55, is 150.11 amended to read: 150.12 123B.55 [DEBT SERVICE LEVY.] 150.13 Subdivision 1. [LEVY AMOUNT.] A district may levy the 150.14 amounts necessary to make payments for bonds issued and for 150.15 interest on them, including the bonds and interest on them, 150.16 issued as authorized by Minnesota Statutes 1974, section 150.17 275.125, subdivision 3, clause (7)(C); and the amounts necessary 150.18 for repayment of debt service loans and capital loans, minus the 150.19 amount of debt service equalization revenue of the district. 150.20 Subd. 2. [AID APPORTIONMENT.] A district's debt service 150.21 equalization aid shall be apportioned between the net tax 150.22 capacity debt service levy and the referendum market value debt 150.23 service levy in the same proportions as eligible debt service 150.24 revenues resulting from bonds issued against net tax capacity 150.25 are to eligible debt service revenues resulting from bonds 150.26 issued against referendum market value. 150.27 Subd. 3. [NET TAX CAPACITY DEBT SERVICE LEVY.] The levy 150.28 amount determined under subdivision 1, plus the eligible debt 150.29 service revenues resulting from bonds issued against net tax 150.30 capacity, minus the debt service equalization aid apportioned to 150.31 the net tax capacity debt service levy, must be levied against 150.32 the net tax capacity of the district as determined under section 150.33 273.13 and must be included with the other net tax capacity 150.34 levies certified to the county auditor under section 275.07. 150.35 Subd. 4. [REFERENDUM MARKET VALUE DEBT SERVICE LEVY.] The 150.36 eligible debt service revenues resulting from bonds issued 151.1 against referendum market value, minus the debt service 151.2 equalization aid apportioned to the referendum market value debt 151.3 service levy, must be levied against the referendum market value 151.4 of the district as defined in section 126C.01, subdivision 3, 151.5 and must be separately certified to the county auditor under 151.6 section 275.07. 151.7[EFFECTIVE DATE.] This section is effective beginning with 151.8 taxes payable in 2006. 151.9 Sec. 6. Minnesota Statutes 2004, section 123B.71, 151.10 subdivision 9, is amended to read: 151.11 Subd. 9. [INFORMATION REQUIRED.] A school board proposing 151.12 to construct a facility described in subdivision 8 shall submit 151.13 to the commissioner a proposal containing information including 151.14 at least the following: 151.15 (1) the geographic area and population to be served, 151.16 preschool through grade 12 student enrollments for the past five 151.17 years, and student enrollment projections for the next five 151.18 years; 151.19 (2) a list of existing facilities by year constructed, 151.20 their uses, and an assessment of the extent to which alternate 151.21 facilities are available within the school district boundaries 151.22 and in adjacent school districts; 151.23 (3) a list of the specific deficiencies of the facility 151.24 that demonstrate the need for a new or renovated facility to be 151.25 provided, and a list of the specific benefits that the new or 151.26 renovated facility will provide to the students, teachers, and 151.27 community users served by the facility; 151.28 (4) the relationship of the project to any priorities 151.29 established by the school district, educational cooperatives 151.30 that provide support services, or other public bodies in the 151.31 service area; 151.32 (5) a specification of how the project will increase 151.33 community use of the facility and whether and how the project 151.34 will increase collaboration with other governmental or nonprofit 151.35 entities; 151.36 (6) a description of the project, including the 152.1 specification of site and outdoor space acreage and square 152.2 footage allocations for classrooms, laboratories, and support 152.3 spaces; estimated expenditures for the major portions of the 152.4 project; and the dates the project will begin and be completed; 152.5 (7) a specification of the source of financing the project; 152.6 the scheduled date for a bond issue or school board action; a 152.7 schedule of payments, including debt service equalization aid; 152.8 whether the debt service will be levied against net tax capacity 152.9 or referendum market value; and the effect of a bond issue on 152.10 local property taxes by the property class and valuation; 152.11 (8) an analysis of how the proposed new or remodeled 152.12 facility will affect school district operational or 152.13 administrative staffing costs, and how the district's operating 152.14 budget will cover any increased operational or administrative 152.15 staffing costs; 152.16 (9) a description of the consultation with local or state 152.17 road and transportation officials on school site access and 152.18 safety issues, and the ways that the project will address those 152.19 issues; 152.20 (10) a description of how indoor air quality issues have 152.21 been considered and a certification that the architects and 152.22 engineers designing the facility will have professional 152.23 liability insurance; 152.24 (11) as required under section 123B.72, for buildings 152.25 coming into service after July 1, 2002, a certification that the 152.26 plans and designs for the extensively renovated or new 152.27 facility's heating, ventilation, and air conditioning systems 152.28 will meet or exceed code standards; will provide for the 152.29 monitoring of outdoor airflow and total airflow of ventilation 152.30 systems; and will provide an indoor air quality filtration 152.31 system that meets ASHRAE standard 52.1; 152.32 (12) a specification of any desegregation requirements that 152.33 cannot be met by any other reasonable means; and 152.34 (13) a specification, if applicable, of how the facility 152.35 will utilize environmentally sustainable school facility design 152.36 concepts. 153.1[EFFECTIVE DATE.] This section is effective July 1, 2005. 153.2 Sec. 7. Minnesota Statutes 2004, section 126C.17, 153.3 subdivision 6, is amended to read: 153.4 Subd. 6. [REFERENDUM EQUALIZATION LEVY.] (a) For fiscal 153.5 year 2003and laterthrough 2007, a district's referendum 153.6 equalization levy equals the sum of the first tier referendum 153.7 equalization levy and the second tier referendum equalization 153.8 levy. 153.9 (b) A district's first tier referendum equalization levy 153.10 equals the district's first tier referendum equalization revenue 153.11 times the lesser of one or the ratio of the district's 153.12 referendum market value per resident marginal cost pupil unit to 153.13 $476,000. 153.14 (c) A district's second tier referendum equalization levy 153.15 equals the district's second tier referendum equalization 153.16 revenue times the lesser of one or the ratio of the district's 153.17 referendum market value per resident marginal cost pupil unit to 153.18 $270,000. 153.19 Sec. 8. Minnesota Statutes 2004, section 126C.17, is 153.20 amended by adding a subdivision to read: 153.21 Subd. 6a. [LOCAL EFFORT LEVEL.] (a) For fiscal year 2008 153.22 and later, a district's local effort level equals the sum of the 153.23 first tier referendum equalization level and the second tier 153.24 referendum local effort level. 153.25 (b) A district's first tier referendum local effort level 153.26 equals the district's first tier referendum equalization revenue 153.27 times the lesser of one or the ratio of the district's 153.28 referendum market value per resident marginal cost pupil unit to 153.29 $476,000. 153.30 (c) A district's second tier referendum local effort level 153.31 equals the district's second tier referendum equalization 153.32 revenue times the lesser of one or the ratio of the district's 153.33 referendum market value per resident marginal cost pupil unit to 153.34 $270,000. 153.35 Sec. 9. Minnesota Statutes 2004, section 126C.17, is 153.36 amended by adding a subdivision to read: 154.1 Subd. 6b. [LOCAL EFFORT REVENUE.] (a) For fiscal years 154.2 2008 and later, a school district's local effort revenue is 154.3 equal to its local effort level for that year. 154.4 (b) For referenda authorized under subdivision 9 prior to 154.5 June 30, 2006, a school district's local effort revenue must be 154.6 levied against the district's referendum market value according 154.7 to subdivision 10. 154.8 (c) For referenda authorized or renewed under subdivision 9 154.9 after June 30, 2006, that have been approved to be levied 154.10 against referendum market value, the local effort revenue must 154.11 be levied against the district's referendum market value 154.12 according to subdivision 10. 154.13 (d) For referenda authorized or renewed under subdivision 9 154.14 after June 30, 2006, that have been approved to be imposed as a 154.15 school referendum tax according to section 290.0621, the local 154.16 effort revenue must be raised as a tax against income liability 154.17 according to section 290.0621. 154.18 Sec. 10. Minnesota Statutes 2004, section 126C.17, 154.19 subdivision 7, is amended to read: 154.20 Subd. 7. [REFERENDUM EQUALIZATION AID.] (a) For fiscal 154.21 years 2005 through 2007, a district's referendum equalization 154.22 aid equals the difference between its referendum equalization 154.23 revenue and levy. For fiscal years 2008 and later, a district's 154.24 referendum equalization aid equals the difference between its 154.25 referendum equalization revenue and its local effort revenue. 154.26 (b) If a district's actual levy for first or second tier 154.27 referendum equalization revenue in fiscal years 2005 through 154.28 2007 is less than its maximum levy limit for that tier, aid 154.29 shall be proportionately reduced. If a district's actual local 154.30 effort revenue for first or second tier referendum equalization 154.31 revenue in fiscal years 2008 and later is less than its maximum 154.32 local effort revenue limit for that tier, aid shall be 154.33 proportionately reduced. 154.34 (c) Notwithstanding paragraph (a), the referendum 154.35 equalization aid for a district, where the referendum 154.36 equalization aid under paragraph (a) exceeds 90 percent of the 155.1 referendum revenue, must not exceed 18.6 percent of the formula 155.2 allowance times the district's resident marginal cost pupil 155.3 units. For fiscal years 2005 through 2007, a district's 155.4 referendum levy is increased by the amount of any reduction in 155.5 referendum aid under this paragraph. For fiscal years 2008 and 155.6 later, a district's local effort level is increased by the 155.7 amount of any reduction in referendum aid under this paragraph. 155.8 Sec. 11. Minnesota Statutes 2004, section 126C.17, 155.9 subdivision 9, is amended to read: 155.10 Subd. 9. [REFERENDUM REVENUE.] (a) The revenue authorized 155.11 by section 126C.10, subdivision 1, may be increased in the 155.12 amount approved by the voters of the district at a referendum 155.13 called for the purpose. The referendum may be called by the 155.14 board or shall be called by the board upon written petition of 155.15 qualified voters of the district. The referendum must be 155.16 conducted one or two calendar years before the increased levy 155.17 authority, if approved, first becomes payable. Only one 155.18 election to approve an increase may be held in a calendar year. 155.19 Unless the referendum is conducted by mail under paragraph (g), 155.20 the referendum must be held on the first Tuesday after the first 155.21 Monday in November. The ballot must state the maximum amount of 155.22 the increased revenue per resident marginal cost pupil unit, the155.23estimated referendum tax rate as a percentage of referendum155.24market value in the first year it is to be levied, and that the155.25revenue must be used to finance school operations. The ballot 155.26 may state a schedule, determined by the board, of increased 155.27 revenue per resident marginal cost pupil unit that differs from 155.28 year to year over the number of years for which the increased 155.29 revenue is authorized.If the ballot contains a schedule155.30showing different amounts, it must also indicate the estimated155.31referendum tax rate as a percent of referendum market value for155.32the amount specified for the first year and for the maximum155.33amount specified in the schedule.The ballot, including a 155.34 ballot on the question to revoke or reduce the increased revenue 155.35 amount under paragraph (c), must abbreviate the term "per 155.36 resident marginal cost pupil unit" as "per pupil unit." The 156.1 ballot may state that existing referendumlevytaxing authority 156.2 is expiring. In this case, if the referendum authority is based 156.3 on a property tax levy, the ballot may also compare the proposed 156.4 levy authority to the existing expiring levy authority, and 156.5 express the proposed increase as the amount, if any, over the 156.6 expiring referendum levy authority. The ballot must designate 156.7 the specific number of years, not to exceed ten, for which the 156.8 referendum authorization applies. The notice required under 156.9 section 275.60 may be modified to read, in cases of renewing 156.10 existing levies: 156.11 "BY VOTING "YES" ON THIS BALLOT QUESTION, YOU MAY BE VOTING 156.12 FOR A PROPERTY TAX INCREASE." 156.13 If the referendum is on a proposed income tax under section 156.14 290.0621, the notice must read: 156.15 "BY VOTING "YES" ON THIS BALLOT QUESTION, YOU MAY BE VOTING 156.16 FOR AN INCOME TAX INCREASE." 156.17 The ballot may contain a textual portion with the 156.18 information required in this subdivision and a question stating 156.19 substantially the following: 156.20 "Shall the increase in the revenue proposed by (petition 156.21 to) the board of ........., School District No. .., be approved?" 156.22 If approved, an amount equal to the approved revenue per 156.23 resident marginal cost pupil unit times the resident marginal 156.24 cost pupil units for the school year beginning in the year after 156.25 the levy is certified or the income tax is imposed shall be 156.26 authorized for certification for the number of years approved, 156.27 if applicable, or until revoked or reduced by the voters of the 156.28 district at a subsequent referendum. A referendum may be 156.29 conducted on the question of converting an existing referendum 156.30 property tax levy to a school referendum income tax to be 156.31 imposed under section 290.0621. 156.32 (b) The board must prepare and deliver by first class mail 156.33 at least 15 days but no more than 30 days before the day of the 156.34 referendum to each taxpayer a notice of the referendum and the 156.35 proposed revenue increase. The board need not mail more than 156.36 one notice to any taxpayer. For the purpose of giving mailed 157.1 notice under this subdivision for a referendum based on a 157.2 property tax levy, owners must be those shown to be owners on 157.3 the records of the county auditor or, in any county where tax 157.4 statements are mailed by the county treasurer, on the records of 157.5 the county treasurer. Every property owner whose name does not 157.6 appear on the records of the county auditor or the county 157.7 treasurer is deemed to have waived this mailed notice unless the 157.8 owner has requested in writing that the county auditor or county 157.9 treasurer, as the case may be, include the name on the records 157.10 for this purpose. The notice for a referendum based on a 157.11 property tax levy must project the anticipated amount of tax 157.12 increase in annual dollarsand annual percentagefor typical 157.13 residential homesteads, agricultural homesteads, apartments, and 157.14 commercial-industrial property within the school district. For 157.15 the purpose of giving mailed notice under this subdivision, for 157.16 a referendum based on an income tax under section 290.0621, 157.17 taxpayers must be those shown to be domiciled in the school 157.18 district as indicated on the space which must be provided for 157.19 this information on the Minnesota individual income tax form for 157.20 the taxable year ending before the calendar year when the 157.21 referendum is conducted. Every individual whose domicile is in 157.22 the school district whose name does not appear on the income tax 157.23 return as having a domicile in the district is deemed to have 157.24 waived this mailed notice unless the individual has requested in 157.25 writing that the county auditor or county treasurer, as the case 157.26 may be, include the individual's name on the records for this 157.27 purpose. The notice must project the anticipated amount of tax 157.28 increase in annual dollars and annual percentage for typical 157.29 family incomes within the school district. 157.30 The notice for a referendum based on a property tax levy 157.31 may state that an existing referendum levy is expiring and 157.32 project the anticipated amount of increase over the existing 157.33 referendum levy in the first year, if any, in annual dollarsand157.34annual percentagefor typical residential homesteads, 157.35 agricultural homesteads, apartments, and commercial-industrial 157.36 property within the district. 158.1 The notice must include the following statement: "Passage 158.2 of this referendum will result in an increase in your property 158.3 taxes." However, in cases of renewing existing levies, the 158.4 notice may include the following statement: "Passage of this 158.5 referendum may result in an increase in your property taxes." 158.6 The notice for a referendum based on income tax may state 158.7 that an existing income tax referendum authority is expiring and 158.8 project the anticipated amount of increase over the existing 158.9 referendum levy in the first year, if any, in annual dollars and 158.10 annual percentage for typical family incomes within the district. 158.11 The notice must include the following statement: "Passage 158.12 of this referendum will result in an increase in your personal 158.13 income taxes." However, in cases of renewing existing income 158.14 tax referendum authorities, the notice may include the following 158.15 statement: "Passage of this referendum may result in an 158.16 increase in your personal income taxes." 158.17 (c) A referendum on the question of revoking or reducing 158.18 the increased revenue amount authorized pursuant to paragraph 158.19 (a) may be called by the board and shall be called by the board 158.20 upon the written petition of qualified voters of the district. 158.21 A referendum to revoke or reduce the revenue amount must state 158.22 the amount per resident marginal cost pupil unit by which the 158.23 authority is to be reduced. Revenue authority approved by the 158.24 voters of the district pursuant to paragraph (a) must be 158.25 available to the school district at least once before it is 158.26 subject to a referendum on its revocation or reduction for 158.27 subsequent years. Only one revocation or reduction referendum 158.28 may be held to revoke or reduce referendum revenue for any 158.29 specific year and for years thereafter. 158.30 (d) A petition authorized by paragraph (a) or (c) is 158.31 effective if signed by a number of qualified voters in excess of 158.32 15 percent of the registered voters of the district on the day 158.33 the petition is filed with the board. A referendum invoked by 158.34 petition must be held on the date specified in paragraph (a). 158.35 (e) The approval of 50 percent plus one of those voting on 158.36 the question is required to pass a referendum authorized by this 159.1 subdivision. 159.2 (f) At least 15 days before the day of the referendum, the 159.3 district must submit a copy of the notice required under 159.4 paragraph (b) to the commissioner and to the county auditor of 159.5 each county in which the district is located. Within 15 days 159.6 after the results of the referendum have been certified by the 159.7 board, or in the case of a recount, the certification of the 159.8 results of the recount by the canvassing board, the district 159.9 must notify the commissioner of the results of the referendum. 159.10[EFFECTIVE DATE.] This section is effective for referenda 159.11 conducted on or after July 1, 2005. 159.12 Sec. 12. Minnesota Statutes 2004, section 168A.05, 159.13 subdivision 1b, is amended to read: 159.14 Subd. 1b. [MANUFACTURED HOME; EXEMPTION.] The provisions 159.15 of subdivision 1a shall not apply to (1) a manufactured home 159.16 which is sold or otherwise disposed of pursuant to section 159.17 504B.271 by the owner of a manufactured home park as defined in 159.18 section 327.14, subdivision 3, or (2) a manufactured home which 159.19 is sold pursuant to section 504B.265 by the owner of a 159.20 manufactured home park. The department shall not require a 159.21 manufactured home park owner to satisfy the delinquent or 159.22 current year's personal property taxes owed as condition of the 159.23 title transfer to the park owner. 159.24[EFFECTIVE DATE.] This section is effective the day 159.25 following final enactment. 159.26 Sec. 13. [174.11] [COMMISSIONER TO NOTIFY COUNTY AUDITOR 159.27 OF PROPERTY ACQUISITIONS.] 159.28 Upon acquisition of any taxable real property, the 159.29 commissioner must notify the county auditor of the county where 159.30 the property is located that the property has been acquired. 159.31 Sec. 14. Minnesota Statutes 2004, section 272.02, 159.32 subdivision 22, is amended to read: 159.33 Subd. 22. [WIND ENERGY CONVERSION SYSTEMS.] All real and 159.34 personal property of a wind energy conversion system as defined 159.35 in section 272.029, subdivision 2, is exempt from property tax 159.36 except that the land on which the property is located remains 160.1 taxable. If approved by the county where the property is 160.2 located, the value of the land on which the wind energy 160.3 conversion system is located shall not be increased or 160.4 decreased, but shall be valued in the same manner as similar 160.5 land that has not been improved with a wind energy conversion 160.6 system. The land shall be classified based on the most probable 160.7 use of the property if it were not improved with a wind energy 160.8 conversion system. 160.9[EFFECTIVE DATE.] This section is effective for assessment 160.10 year 2005 and thereafter, for taxes payable in 2006 and 160.11 thereafter. 160.12 Sec. 15. Minnesota Statutes 2004, section 272.02, 160.13 subdivision 47, is amended to read: 160.14 Subd. 47. [POULTRY LITTER BIOMASS GENERATION FACILITY; 160.15 PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 160.16 attached machinery and other personal property which is part of 160.17 an electrical generating facility that meets the requirements of 160.18 this subdivision is exempt. At the time of construction, the 160.19 facility must: 160.20 (1) be designed to utilize poultry litter as a primary fuel 160.21 source; and 160.22 (2) be constructed for the purpose of generating power at 160.23 the facility that will be sold pursuant to a contract approved 160.24 by the Public Utilities Commission in accordance with the 160.25 biomass mandate imposed under section 216B.2424. 160.26 Construction of the facility must be commenced after 160.27 January 1, 2003, and before December 31,20032005. Property 160.28 eligible for this exemption does not include electric 160.29 transmission lines and interconnections or gas pipelines and 160.30 interconnections appurtenant to the property or the facility. 160.31[EFFECTIVE DATE.] This section is effective for taxes 160.32 levied in 2005, payable in 2006, and thereafter. 160.33 Sec. 16. Minnesota Statutes 2004, section 272.02, 160.34 subdivision 56, is amended to read: 160.35 Subd. 56. [ELECTRIC GENERATION FACILITY; PERSONAL 160.36 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 161.1 attached machinery and other personal property which is part of 161.2 a combined-cycle combustion-turbine electric generation facility 161.3 that exceeds550300 megawatts of installed capacity and that 161.4 meets the requirements of this subdivision is exempt. At the 161.5 time of construction, the facility must: 161.6 (1) be designed to utilize natural gas as a primary fuel; 161.7 (2) not be owned by a public utility as defined in section 161.8 216B.02, subdivision 4; 161.9 (3) be located within five miles of an existing natural gas 161.10 pipeline and within four miles of an existing electrical 161.11 transmission substation; 161.12 (4) be located outside the metropolitan area as defined 161.13 under section 473.121, subdivision 2; and 161.14 (5) be designed to provide energy and ancillary services 161.15 and have received a certificate of need under section 216B.243. 161.16 (b) Construction of the facility must be commenced after 161.17 January 1, 2004, and before January 1, 2007, except that 161.18 property eligible for this exemption includes any expansion of 161.19 the facility that also meets the requirements of paragraph (a), 161.20 clauses (1) to (5), without regard to the date that construction 161.21 of the expansion commences. Property eligible for this 161.22 exemption does not include electric transmission lines and 161.23 interconnections or gas pipelines and interconnections 161.24 appurtenant to the property or the facility. 161.25[EFFECTIVE DATE.] This section is effective for taxes 161.26 levied in 2005, payable in 2006, and thereafter. 161.27 Sec. 17. Minnesota Statutes 2004, section 272.02, is 161.28 amended by adding a subdivision to read: 161.29 Subd. 68. [ELECTRIC GENERATION FACILITY; PERSONAL 161.30 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 161.31 attached machinery and other personal property which is part of 161.32 a simple-cycle combustion-turbine electric generation facility 161.33 that exceeds 290 megawatts of installed capacity and that meets 161.34 the requirements of this subdivision is exempt. At the time of 161.35 construction, the facility must: 161.36 (1) be designed to utilize natural gas as a primary fuel; 162.1 (2) not be owned by a public utility as defined in section 162.2 216B.02, subdivision 4; 162.3 (3) be located within five miles of an existing natural gas 162.4 pipeline and within five miles of an existing electrical 162.5 transmission substation; 162.6 (4) be located outside the metropolitan area as defined 162.7 under section 473.121, subdivision 2; 162.8 (5) be designed to provide peaking capacity energy and 162.9 ancillary services and have satisfied all of the requirements 162.10 under section 216B.243; and 162.11 (6) have received, by resolution, the approval from the 162.12 governing body of the county, city, and school district in which 162.13 the proposed facility is to be located for the exemption of 162.14 personal property under this subdivision. 162.15 (b) Construction of the facility must be commenced after 162.16 January 1, 2005, and before January 1, 2009. Property eligible 162.17 for this exemption does not include electric transmission lines 162.18 and interconnections or gas pipelines and interconnections 162.19 appurtenant to the property or the facility. 162.20[EFFECTIVE DATE.] This section is effective for assessment 162.21 year 2006, taxes payable in 2007, and thereafter. 162.22 Sec. 18. Minnesota Statutes 2004, section 272.02, is 162.23 amended by adding a subdivision to read: 162.24 Subd. 69. [ELECTRIC GENERATION FACILITY PERSONAL 162.25 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), and 162.26 section 453.54, subdivision 20, attached machinery and other 162.27 personal property which is part of an electric generation 162.28 facility that exceeds 150 megawatts of installed capacity and 162.29 meets the requirements of this subdivision is exempt. At the 162.30 time of construction, the facility must: 162.31 (1) be designed to utilize natural gas as a primary fuel; 162.32 (2) be owned and operated by a municipal power agency as 162.33 defined in section 453.52, subdivision 8; 162.34 (3) have received the certificate of need under section 162.35 216B.243; 162.36 (4) be located outside the metropolitan area as defined 163.1 under section 473.121, subdivision 2; and 163.2 (5) be designed to be a combined-cycle facility, although 163.3 initially the facility will be operated as a simple-cycle 163.4 combustion turbine. 163.5 (b) To qualify under this subdivision, an agreement must be 163.6 negotiated between the municipal power agency and the host city, 163.7 for a payment in lieu of property taxes to the host city. 163.8 (c) Construction of the facility must be commenced after 163.9 January 1, 2004, and before January 1, 2006. Property eligible 163.10 for this exemption does not include electric transmission lines 163.11 and interconnections or gas pipelines and interconnections 163.12 appurtenant to the property or the facility. 163.13[EFFECTIVE DATE.] This section is effective for assessment 163.14 year 2005, taxes payable in 2006, and thereafter. 163.15 Sec. 19. Minnesota Statutes 2004, section 272.02, is 163.16 amended by adding a subdivision to read: 163.17 Subd. 70. [BIOMASS ELECTRIC GENERATION FACILITY; PERSONAL 163.18 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 163.19 attached machinery and other personal property which is a part 163.20 of an electric generation facility, including remote boilers 163.21 that comprise part of the district heating system, generating up 163.22 to 30 megawatts of installed capacity and that meets the 163.23 requirements of this subdivision is exempt. At the time of 163.24 construction, the facility must: 163.25 (1) be designed to utilize a minimum 90 percent waste 163.26 biomass as a fuel; 163.27 (2) not be owned by a public utility as defined in section 163.28 216B.02, subdivision 4; 163.29 (3) be located within a city of the first class and have 163.30 its primary location at a former garbage transfer station; and 163.31 (4) be designed to have capability to provide baseload 163.32 energy and district heating. 163.33 (b) Construction of the facility must be commenced after 163.34 January 1, 2004, and before January 1, 2008. Property eligible 163.35 for this exemption does not include electric transmission lines 163.36 and interconnections or gas pipelines and interconnections 164.1 appurtenant to the property or the facility. 164.2[EFFECTIVE DATE.] This section is effective for assessment 164.3 year 2005, taxes payable in 2006, and thereafter. 164.4 Sec. 20. Minnesota Statutes 2004, section 272.02, is 164.5 amended by adding a subdivision to read: 164.6 Subd. 71. [ELECTRIC GENERATION FACILITY; PERSONAL 164.7 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 164.8 attached machinery and other personal property that is part of 164.9 either a simple-cycle, combustion-turbine electric generation 164.10 facility that equals or exceeds 150 megawatts of installed 164.11 capacity, or a combined-cycle, combustion-turbine electric 164.12 generation facility that equals or exceeds 225 megawatts of 164.13 installed capacity, and that in either case meets the 164.14 requirements of this subdivision, is exempt. At the time of 164.15 construction, the facility must: 164.16 (1) be designed to utilize natural gas as a primary fuel; 164.17 (2) not be owned by a public utility as defined in section 164.18 216B.02, subdivision 4; 164.19 (3) be located in a metropolitan county defined in section 164.20 473.121, subdivision 4, that has a population greater than 164.21 190,000 and less than 225,000 in the most recent federal 164.22 decennial census, within one mile of an existing natural gas 164.23 pipeline, and within one mile of an existing electrical 164.24 transmission substation; and 164.25 (4) be designed to provide energy and ancillary services 164.26 and have received a certificate of need under section 216B.243. 164.27 (b) Construction of the facility must be commenced after 164.28 January 1, 2005, and before January 1, 2008. Property eligible 164.29 for this exemption does not include electric transmission lines 164.30 and interconnections or gas pipelines and interconnections 164.31 appurtenant to the property or the facility. 164.32[EFFECTIVE DATE.] This section is effective for taxes 164.33 levied in 2005, payable in 2006, and thereafter. 164.34 Sec. 21. Minnesota Statutes 2004, section 272.02, is 164.35 amended by adding a subdivision to read: 164.36 Subd. 72. [PERSONAL RAPID TRANSIT SYSTEM.] All property 165.1 used in the operation and support of a personal rapid transit 165.2 system as defined in section 297A.61, subdivision 37, that 165.3 provides service to the public on a regular and continuing 165.4 basis, is exempt, provided that it is operated independent of 165.5 any government subsidies. 165.6[EFFECTIVE DATE.] This section is effective for taxes 165.7 levied in 2005, payable in 2006, and thereafter. 165.8 Sec. 22. Minnesota Statutes 2004, section 272.02, is 165.9 amended by adding a subdivision to read: 165.10 Subd. 73. [QUALIFIED ELDERLY LIVING FACILITY.] An elderly 165.11 living facility is exempt from taxation if it meets all of the 165.12 following requirements: 165.13 (1) the facility is located in a city of the first class 165.14 with a population of more than 350,000; 165.15 (2) the facility is owned and operated by a nonprofit 165.16 corporation organized under chapter 317A or by a limited 165.17 liability company formed under chapter 322B, the sole member of 165.18 which is a nonprofit corporation organized under chapter 317A; 165.19 (3) the facility consists of no more than 60 living units; 165.20 (4) the owner of the facility is an affiliate of entities 165.21 that own and operate assisted living and skilled nursing 165.22 facilities that: 165.23 (i) are located across a street from the facility; 165.24 (ii) are adjacent to a church that is exempt from taxation 165.25 under subdivision 6; 165.26 (iii) include a congregate dining program; and 165.27 (iv) provide assisted living or similar social and physical 165.28 support; 165.29 (5) the residents of the facility must be: 165.30 (i) at least 62 years of age; or 165.31 (ii) handicapped; and 165.32 (6) at least 20 percent of the units in the facility are 165.33 occupied by persons whose annual income does not exceed 50 165.34 percent of median family income for the area or, in the 165.35 alternative, 40 percent of the units in the facility are 165.36 occupied by persons whose annual income does not exceed 60 166.1 percent of median family income for the area. 166.2 For purposes of this subdivision, "affiliate" means any 166.3 entity directly or indirectly controlling or controlled by or 166.4 under direct or indirect common control with an entity. For 166.5 this purpose, "control" means the power to direct management and 166.6 policies through membership or ownership of voting securities. 166.7 The property is exempt under this subdivision for taxes 166.8 levied in each year or partial year of the term of the 166.9 facility's initial permanent financing or 25 years, whichever is 166.10 later. 166.11[EFFECTIVE DATE.] This section is effective for taxes 166.12 levied in 2005, payable in 2006, and thereafter. 166.13 Sec. 23. Minnesota Statutes 2004, section 272.02, is 166.14 amended by adding a subdivision to read: 166.15 Subd. 74. [ELECTRIC GENERATION FACILITY; PERSONAL 166.16 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 166.17 attached machinery and other personal property which is part of 166.18 a simple-cycle combustion-turbine electric generation facility 166.19 that exceeds 150 megawatts of installed capacity and that meets 166.20 the requirements of this subdivision is exempt. At the time of 166.21 construction, the facility must: 166.22 (1) utilize natural gas as a primary fuel; 166.23 (2) be owned by an electric generation and transmission 166.24 cooperative; 166.25 (3) be located within five miles of parallel existing 166.26 12-inch and 16-inch natural gas pipelines and a 69-kilovolt 166.27 high-voltage electric transmission line; 166.28 (4) be designed to provide peaking, emergency backup, or 166.29 contingency services; 166.30 (5) have received a certificate of need under section 166.31 216B.243 demonstrating demand for its capacity; and 166.32 (6) have received by resolution the approval from the 166.33 governing body of the county and township in which the proposed 166.34 facility is to be located for the exemption of personal property 166.35 under this subdivision. 166.36 (b) Construction of the facility must be commenced after 167.1 July 1, 2005, and before January 1, 2009. Property eligible for 167.2 this exemption does not include electric transmission lines and 167.3 interconnections or gas pipelines and interconnections 167.4 appurtenant to the property or the facility. 167.5[EFFECTIVE DATE.] This section is effective for assessment 167.6 year 2006 and thereafter, for taxes payable in 2007 and 167.7 thereafter. 167.8 Sec. 24. Minnesota Statutes 2004, section 272.02, is 167.9 amended by adding a subdivision to read: 167.10 Subd. 75. [ELECTRIC GENERATION FACILITY; PERSONAL 167.11 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 167.12 machinery and other personal property which is part of an 167.13 existing simple-cycle, combustion-turbine electric generation 167.14 facility that exceeds 300 megawatts of installed capacity and 167.15 that meets the requirements of this subdivision is exempt. At 167.16 the time of the construction, the facility must: 167.17 (1) be designed to utilize natural gas as a primary fuel; 167.18 (2) be owned by a public utility as defined in section 167.19 216B.02, subdivision 4, and be located at or interconnected with 167.20 an existing generating plant of the utility; 167.21 (3) be designed to provide peaking, emergency backup, or 167.22 contingency services; 167.23 (4) satisfy a resource need identified in an approved 167.24 integrated resource plan filed under section 216B.2422; and 167.25 (5) have received, by resolution, the approval from the 167.26 governing body of the county and the city for the exemption of 167.27 personal property under this subdivision. 167.28 Construction of the facility expansion must be commenced 167.29 after January 1, 2004, and before January 1, 2005. Property 167.30 eligible for this exemption does not include electric 167.31 transmission lines and interconnections or gas pipelines and 167.32 interconnections appurtenant to the property or the facility. 167.33[EFFECTIVE DATE.] This section is effective beginning with 167.34 assessment year 2005, for taxes payable in 2006 and thereafter. 167.35 Sec. 25. Minnesota Statutes 2004, section 272.02, is 167.36 amended by adding a subdivision to read: 168.1 Subd. 76. [ELECTRIC GENERATION FACILITY; PERSONAL 168.2 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 168.3 attached machinery and other personal property which is part of 168.4 a simple-cycle combustion-turbine electric generation facility 168.5 that exceeds 290 megawatts of installed capacity and that meets 168.6 the requirements of this subdivision is exempt. At the time of 168.7 construction, the facility must: 168.8 (1) be designed to utilize natural gas as a primary fuel; 168.9 (2) not be owned by a public utility as defined in section 168.10 216B.02, subdivision 4; 168.11 (3) be located within 15 miles of the mainline existing 168.12 interstate natural gas pipeline and within five miles of an 168.13 existing electrical transmission substation; 168.14 (4) be located outside the metropolitan area as defined 168.15 under section 473.121, subdivision 2; and 168.16 (5) be designed to provide peaking capacity energy and 168.17 ancillary services and have satisfied all of the requirements 168.18 under section 216B.243. 168.19 (b) Construction of the facility must be commenced after 168.20 January 1, 2005, and before January 1, 2009. Property eligible 168.21 for this exemption does not include electric transmission lines 168.22 and interconnections or gas pipelines and interconnections 168.23 appurtenant to the property or the facility. 168.24[EFFECTIVE DATE.] This section is effective for taxes 168.25 levied in 2006, payable in 2007, and thereafter. 168.26 Sec. 26. Minnesota Statutes 2004, section 272.029, 168.27 subdivision 4, is amended to read: 168.28 Subd. 4. [REPORTS.] (a) An owner of a wind energy 168.29 conversion system subject to tax under subdivision 3 shall file 168.30 a report with the commissioner of revenue annually on or before 168.31March 1February 1 detailing the amount of electricity in 168.32 kilowatt-hours that was produced by the wind energy conversion 168.33 system for the previous calendar year. The commissioner shall 168.34 prescribe the form of the report. The report must contain the 168.35 information required by the commissioner to determine the tax 168.36 due to each county under this section for the current year. If 169.1 an owner of a wind energy conversion system subject to taxation 169.2 under this section fails to file the report by the due date, the 169.3 commissioner of revenue shall determine the tax based upon the 169.4 nameplate capacity of the system multiplied by a capacity factor 169.5 of 40 percent. 169.6 (b) On or beforeMarch 31February 28, the commissioner of 169.7 revenue shall notify the owner of the wind energy conversion 169.8 systems of the tax due to each county for the current year and 169.9 shall certify to the county auditor of each county in which the 169.10 systems are located the tax due from each owner for the current 169.11 year. 169.12[EFFECTIVE DATE.] This section is effective for taxes 169.13 payable in 2006 and thereafter. 169.14 Sec. 27. Minnesota Statutes 2004, section 272.029, 169.15 subdivision 6, is amended to read: 169.16 Subd. 6. [DISTRIBUTION OF REVENUES.] Revenues from the 169.17 taxes imposed under subdivision 5 must be part of the settlement 169.18 between the county treasurer and the county auditor under 169.19 section 276.09. The revenue must be distributed by the county 169.20 auditor or the county treasurer to all local taxing 169.21 jurisdictions in which the wind energy conversion system is 169.22 located, in the same proportion that each of the taxing 169.23 jurisdiction'scurrentprevious year's net tax capacity based 169.24 tax rate is to thecurrentprevious year's total local net tax 169.25 capacity based rate. 169.26[EFFECTIVE DATE.] This section is effective for taxes 169.27 payable in 2005 and thereafter. 169.28 Sec. 28. Minnesota Statutes 2004, section 273.11, 169.29 subdivision 1a, is amended to read: 169.30 Subd. 1a. [LIMITED MARKET VALUE.] In the case of all 169.31 property classified as agricultural homestead or nonhomestead, 169.32 residential homestead or nonhomestead, timber,ornoncommercial 169.33 seasonal residential recreational, or class 1c resort property, 169.34 the assessor shall compare the value with the taxable portion of 169.35 the value determined in the preceding assessment except that for 169.36 class 1c resort property for assessment year 2005, the assessor 170.1 shall determine the limited market value as provided in 170.2 subdivision 1b. 170.3For assessment year 2002, the amount of the increase shall170.4not exceed the greater of (1) ten percent of the value in the170.5preceding assessment, or (2) 15 percent of the difference170.6between the current assessment and the preceding assessment.170.7For assessment year 2003, the amount of the increase shall170.8not exceed the greater of (1) 12 percent of the value in the170.9preceding assessment, or (2) 20 percent of the difference170.10between the current assessment and the preceding assessment.170.11 For assessment year 2004 and thereafter, the amount of the 170.12 increase shall not exceed the greater of (1) 15 percent of the 170.13 value in the preceding assessment, or (2) 25 percent of the 170.14 difference between the current assessment and the preceding 170.15 assessment. 170.16For assessment year 2005, the amount of the increase shall170.17not exceed the greater of (1) 15 percent of the value in the170.18preceding assessment, or (2) 33 percent of the difference170.19between the current assessment and the preceding assessment.170.20For assessment year 2006, the amount of the increase shall170.21not exceed the greater of (1) 15 percent of the value in the170.22preceding assessment, or (2) 50 percent of the difference170.23between the current assessment and the preceding assessment.170.24 This limitation shall not apply to increases in value due 170.25 to improvements. For purposes of this subdivision, the term 170.26 "assessment" means the value prior to any exclusion under 170.27 subdivision 16. 170.28The provisions of this subdivision shall be in effect170.29through assessment year 2006 as provided in this subdivision.170.30 For purposes of this subdivision and subdivision 1b, "class 170.31 1c resort property" includes the portion of the property 170.32 classified class 1a or 1b homestead, the portion of the property 170.33 classified 1c, plus any remaining portion of the resort that is 170.34 classified 4c under section 273.13, subdivision 25, paragraph 170.35 (d), clause (1). 170.36 For purposes of the assessment/sales ratio study conducted 171.1 under section 127A.48, and the computation of state aids paid 171.2 under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 171.3 477A, market values and net tax capacities determined under this 171.4 subdivision and subdivision 16, shall be used. 171.5[EFFECTIVE DATE.] This section is effective the day 171.6 following final enactment for assessment year 2005, and 171.7 thereafter. 171.8 Sec. 29. Minnesota Statutes 2004, section 273.11, is 171.9 amended by adding a subdivision to read: 171.10 Subd. 1b. [CLASS 1C RESORTS; 2005 ASSESSMENT ONLY.] For 171.11 assessment year 2005, the valuation increase on class 1c resort 171.12 property shall not exceed the greater of (1) 15 percent of the 171.13 value of its 2003 assessment, or (2) 25 percent of the 171.14 difference in value between its 2005 assessment and its 2003 171.15 assessment. The valuation increase on class 1c resort property 171.16 for the 2006 and subsequent assessment years shall be determined 171.17 based upon the schedule contained in subdivision 1a. 171.18[EFFECTIVE DATE.] This section is effective the day 171.19 following final enactment. 171.20 Sec. 30. Minnesota Statutes 2004, section 273.11, is 171.21 amended by adding a subdivision to read: 171.22 Subd. 21. [VALUATION EXCLUSION FOR SEWAGE TREATMENT SYSTEM 171.23 IMPROVEMENTS.] Owners of property classified as class 1a, 1b, 171.24 1c, 2a, 4b, 4bb, or noncommercial 4c under section 273.13 may 171.25 apply for a valuation exclusion under this subdivision, provided 171.26 that the property is located in a county which has authorized 171.27 valuation exclusions under this subdivision, and provided that 171.28 the following conditions are met: 171.29 (1) a notice of noncompliance has been issued by a licensed 171.30 compliance inspector with regard to the individual sewage 171.31 treatment system serving the property under section 115.55, 171.32 subdivision 5b; 171.33 (2) the owner of the property furnishes documentation to 171.34 the satisfaction of the assessor that the property's individual 171.35 sewage treatment system has been replaced or refurbished, 171.36 including replacement of the individual system with a community 172.1 or cluster system, between May 1, 2005, and December 31, 2007; 172.2 and 172.3 (3) a certificate of compliance has been issued for the new 172.4 or refurbished system under section 115.55, subdivision 5. 172.5 Application must be made to the assessor on a form 172.6 prescribed by the commissioner of revenue. Property meeting the 172.7 requirements of this subdivision is eligible for a valuation 172.8 exclusion equal to 50 percent of the actual costs incurred, to a 172.9 maximum exclusion of $7,500, for a period of five years, after 172.10 which the amount of the exclusion will be added to the estimated 172.11 market value of the property. The valuation exclusion 172.12 terminates upon the sale of the property. If a property owner 172.13 applies for exclusion under this subdivision between January 1 172.14 and June 30 of any year, the exclusion first applies for taxes 172.15 payable in the following year. If a property owner applies for 172.16 exclusion under this subdivision between July 1 and December 31 172.17 of any year, the exclusion first applies for taxes payable in 172.18 the second following year. 172.19[EFFECTIVE DATE.] This section is effective for taxes 172.20 payable in 2006 and subsequent years. 172.21 Sec. 31. Minnesota Statutes 2004, section 273.11, is 172.22 amended by adding a subdivision to read: 172.23 Subd. 22. [VALUATION EXCLUSION FOR LEAD HAZARD REDUCTION.] 172.24 Owners of property classified as class 1a, 1b, 1c, 2a, 4b, or 172.25 4bb under section 273.13 may apply for a valuation exclusion for 172.26 lead hazard reduction, provided that the property is located in 172.27 a city which has authorized valuation exclusions under this 172.28 subdivision. A city which authorizes valuation exclusions under 172.29 this subdivision must establish guidelines for qualifying lead 172.30 hazard reduction projects and must designate an agency within 172.31 the city to issue certificates of completion of qualifying 172.32 projects. For purposes of this subdivision, "lead hazard 172.33 reduction" has the same meaning as in section 144.9501, 172.34 subdivision 17. 172.35 The property owner must obtain a certificate from the city 172.36 stating that the project has been completed and stating the cost 173.1 incurred by the owner in completing the project. Only projects 173.2 originating after April 30, 2005, may qualify for exclusion 173.3 under this subdivision. The property owner shall apply for a 173.4 valuation exclusion to the assessor on a form prescribed by the 173.5 commissioner of revenue. 173.6 A qualifying property is eligible for a valuation exclusion 173.7 equal to 50 percent of the actual costs incurred, to a maximum 173.8 exclusion of $15,000, for a period of five years, after which 173.9 the amount of the exclusion will be added to the estimated 173.10 market value of the property. The valuation exclusion shall 173.11 terminate upon the sale of the property. If a property owner 173.12 applies for exclusion under this subdivision between January 1 173.13 and June 30 of any year, the exclusion shall first apply for 173.14 taxes payable in the following year. If a property owner 173.15 applies for exclusion under this subdivision between July 1 and 173.16 December 31 of any year, the exclusion shall first apply for 173.17 taxes payable in the second following year. 173.18[EFFECTIVE DATE.] This section is effective for taxes 173.19 payable in 2006 and subsequent years. 173.20 Sec. 32. Minnesota Statutes 2004, section 273.11, is 173.21 amended by adding a subdivision to read: 173.22 Subd. 23. [VALUATION OF ENERGY-EFFICIENT COMMERCIAL 173.23 PROPERTIES.] (a) The market value of certain energy-efficient 173.24 property classified under section 273.13, subdivision 24, that 173.25 is used for commercial purposes, is reduced as provided in this 173.26 subdivision. 173.27 (b) To be eligible for a valuation reduction under this 173.28 subdivision, property must be certified by a qualified inspector 173.29 as having been constructed in a manner that will achieve a level 173.30 of energy consumption that is at least 20 percent lower than the 173.31 standard set in the state energy code rules. The percentage 173.32 reduction in the market value of a qualifying property is 173.33 determined as follows: 173.34 percentage of energy consumption percentage of 173.35 below energy code requirement market value reduction 173.36 20-30 5 174.1 31-50 10 174.2 over 50 15 174.3 The reductions will remain in effect for the first ten 174.4 assessment years after the property has been certified as 174.5 qualifying under this subdivision. 174.6 (c) The Department of Commerce must establish a process for 174.7 determining eligibility for the valuation reduction under this 174.8 subdivision, including certification of persons who are 174.9 qualified to perform this function. 174.10 (d) To claim a valuation reduction under this subdivision, 174.11 the owner of the commercial property must obtain a certification 174.12 of the level of qualification determined under paragraph (b), 174.13 which must be prepared by a person certified as provided in 174.14 paragraph (c). The property owner must furnish this 174.15 certification to the assessor by May 1 of the assessment year in 174.16 order to qualify for the valuation reduction for taxes payable 174.17 in the following year. 174.18[EFFECTIVE DATE.] This section is effective for assessments 174.19 in 2006, taxes payable in 2007, and thereafter. 174.20 Sec. 33. [273.1115] [AGGREGATE RESOURCE PRESERVATION 174.21 PROPERTY TAX LAW.] 174.22 Subdivision 1. [REQUIREMENTS.] Real estate is entitled to 174.23 valuation under this section only if all of the following 174.24 requirements are met: 174.25 (1) the property is classified 1a, 1b, 2a, or 2b property 174.26 under section 273.13, subdivisions 22 and 23; 174.27 (2) the property is at least ten contiguous acres, when the 174.28 application is filed under subdivision 2; 174.29 (3) the owner has filed a completed application for 174.30 deferment as specified in subdivision 2 with the county assessor 174.31 in the county in which the property is located; 174.32 (4) there are no delinquent taxes on the property; and 174.33 (5) a covenant on the land restricts its use as provided in 174.34 subdivision 2, clause (4). 174.35 Subd. 2. [APPLICATION.] Application for valuation 174.36 deferment under this section must be filed by May 1 of the 175.1 assessment year. Any application filed and granted continues in 175.2 effect for subsequent years until the property no longer 175.3 qualifies, provided that supplemental affidavits under 175.4 subdivision 6 are timely filed. The application must be filed 175.5 with the assessor of the county in which the real property is 175.6 located on such form as may be prescribed by the commissioner of 175.7 revenue. The application must be executed and acknowledged in 175.8 the manner required by law to execute and acknowledge a deed and 175.9 must contain at least the following information and any other 175.10 information the commissioner deems necessary: 175.11 (1) the legal description of the area; 175.12 (2) the name and address of owner; 175.13 (3) a copy of the affidavit filed under section 273.13, 175.14 subdivision 23, paragraph (h), in the case of property 175.15 classified class 2b, clause (5); or in the case of property 175.16 classified 1a, 1b, 2a, and 2b, clauses (1) to (3), the 175.17 application must include a similar document with the same 175.18 information as contained in the affidavit under section 273.13, 175.19 subdivision 23, paragraph (h); and 175.20 (4) a statement of proof from the owner that the land 175.21 contains a restrictive covenant limiting its use for the 175.22 property's surface to that which exists on the date of the 175.23 application and limiting its future use to the preparation and 175.24 removal of the aggregate commercial deposit under its surface. 175.25 To qualify under this clause, the covenant must be binding 175.26 on the owner or the owner's successor or assignee, and run with 175.27 the land, except as provided in subdivision 4 allowing for the 175.28 cancellation of the covenant under certain conditions. 175.29 Subd. 3. [DETERMINATION OF VALUE.] Upon timely application 175.30 by the owner as provided in subdivision 2, notwithstanding 175.31 sections 272.03, subdivision 8, and 273.11, the value of any 175.32 qualifying land described in subdivision 2 must be valued as if 175.33 it were agricultural property, using a per acre valuation equal 175.34 to the current year's per acre valuation of agricultural land in 175.35 the county. The assessor shall not consider any additional 175.36 value resulting from potential alternative and future uses of 176.1 the property. The buildings located on the land shall be valued 176.2 by the assessor in the normal manner. 176.3 Subd. 4. [CANCELLATION OF COVENANT.] The covenant required 176.4 under subdivision 2 may be canceled in two ways: 176.5 (1) by the owner beginning with the next subsequent 176.6 assessment year provided that the additional taxes as determined 176.7 under subdivision 5 are paid by the owner at the time of 176.8 cancellation; and 176.9 (2) by the city or town in which the property is located 176.10 beginning with the next subsequent assessment year, if the city 176.11 council or town board: 176.12 (i) changes the conditional use of the property; 176.13 (ii) revokes the mining permit; or 176.14 (iii) changes the zoning to disallow mining. 176.15 No additional taxes are imposed on the property under this 176.16 clause. 176.17 Subd. 4a. [COUNTY TERMINATION.] Within two years of the 176.18 effective date of this section, a county may, following notice 176.19 and public hearing, terminate application of this section in the 176.20 county. The termination is effective upon adoption of a 176.21 resolution of the county board. A termination applies 176.22 prospectively and does not affect property enrolled under this 176.23 section prior to the termination date. A county may reauthorize 176.24 application of this section by a resolution of the county board 176.25 revoking the termination. 176.26 Subd. 5. [ADDITIONAL TAXES.] When real property which has 176.27 been valued and assessed under this section no longer qualifies, 176.28 the portion of the land classified under subdivision 1, clause 176.29 (1), is subject to additional taxes. The additional tax amount 176.30 is determined by: 176.31 (1) computing the difference between (i) the current year's 176.32 taxes determined in accordance with subdivision 5, and (ii) an 176.33 amount as determined by the assessor based upon the property's 176.34 current year's estimated market value of like real estate at its 176.35 highest and best use and the appropriate local tax rate; and 176.36 (2) multiplying the amount determined in clause (1) by the 177.1 number of years the land was in the program under this section. 177.2 The current year's estimated market value as determined by 177.3 the assessor must not exceed the market value that would result 177.4 if the property was sold in an arms-length transaction and must 177.5 not be greater than it would have been had the actual bona fide 177.6 sale price of the property been used in lieu of that market 177.7 value. The additional taxes must be extended against the 177.8 property on the tax list for the current year, except that 177.9 interest or penalties must not be levied on such additional 177.10 taxes if timely paid. 177.11 The additional tax under this subdivision must not be 177.12 imposed on that portion of the property which has actively been 177.13 mined and has been removed from the program based upon the 177.14 supplemental affidavits filed under subdivision 6. 177.15 Subd. 6. [SUPPLEMENTAL AFFIDAVITS; MINING ACTIVITY ON 177.16 LAND.] When any portion of the property begins to be actively 177.17 mined, the owner must file a supplemental affidavit within 60 177.18 days from the day any aggregate is removed stating the number of 177.19 acres of the property that is actively being mined. The acres 177.20 actively being mined shall be (1) valued and classified under 177.21 section 273.13, subdivision 24, in the next subsequent 177.22 assessment year, and (2) removed from the aggregate resource 177.23 preservation property tax program under this section. The 177.24 additional taxes under subdivision 5 must not be imposed on the 177.25 acres that are actively being mined and have been removed from 177.26 the program under this section. 177.27 Copies of the original affidavit and all supplemental 177.28 affidavits must be filed with the county assessor, the local 177.29 zoning administrator, and the Department of Natural Resources, 177.30 Division of Land and Minerals. A supplemental affidavit must be 177.31 filed each time a subsequent portion of the property is actively 177.32 mined, provided that the minimum acreage change is five acres, 177.33 even if the actual mining activity constitutes less than five 177.34 acres. Failure to file the affidavits timely shall result in 177.35 the property losing its valuation deferment under this section, 177.36 and additional taxes must be imposed as calculated under 178.1 subdivision 5. 178.2 Subd. 7. [LIEN.] The additional tax imposed by this 178.3 section is a lien upon the property assessed to the same extent 178.4 and for the same duration as other taxes imposed upon property 178.5 within this state and, when collected, must be distributed in 178.6 the manner provided by law for the collection and distribution 178.7 of other property taxes. 178.8 Subd. 8. [CONTINUATION OF TAX TREATMENT UPON SALE.] When 178.9 real property qualifying under subdivision 1 is sold, additional 178.10 taxes must not be extended against the property if the property 178.11 continues to qualify under subdivision 1, and the new owner 178.12 files an application with the assessor for continued deferment 178.13 within 30 days after the sale. 178.14 Subd. 9. [DEFINITIONS.] For purposes of this section, 178.15 "commercial aggregate deposit" and "actively mined" have the 178.16 meanings given them in section 273.13, subdivision 23, paragraph 178.17 (h). 178.18[EFFECTIVE DATE.] This section is effective for taxes 178.19 levied in 2005, payable in 2006, and thereafter, except that for 178.20 the 2005 assessment year, the application date under subdivision 178.21 4 shall be September 1, 2005, and subdivision 4a is effective 178.22 the day following final enactment. 178.23 Sec. 34. [273.1116] [HOMESTEAD RESORTS; VALUATION AND 178.24 DEFERMENT.] 178.25 Subdivision 1. [REQUIREMENTS.] Real property qualifying 178.26 for classification as class 1c under section 273.13, subdivision 178.27 22, paragraph (c), is entitled to valuation and tax deferment 178.28 under this section, provided that if part of a resort is not 178.29 classified as class 1c, only that portion of the value of the 178.30 property that is classified as class 1c property qualifies under 178.31 this section. 178.32 Subd. 2. [DETERMINATION OF VALUE.] Upon timely application 178.33 by the owner, as provided in subdivision 4, the value of real 178.34 property described in subdivision 1 must be determined by the 178.35 assessor solely with reference to its classification value as 178.36 class 1c property, notwithstanding sections 272.03, subdivision 179.1 8, and 273.11. The owner must furnish information on the income 179.2 generated by the property and other information required by the 179.3 assessor to determine the value of the property. The assessor 179.4 shall not consider any added values resulting from other factors. 179.5 Subd. 3. [SEPARATE DETERMINATION OF MARKET VALUE AND TAX.] 179.6 The assessor shall, however, make a separate determination of 179.7 the market value of the real estate. The assessor shall record 179.8 on the property assessment records the tax based upon the 179.9 appropriate local tax rate applicable to the property in the 179.10 taxing district. 179.11 Subd. 4. [APPLICATION.] Application for deferment of taxes 179.12 and assessment under this section must be filed by May 1 of the 179.13 year prior to the year in which the taxes are payable. The 179.14 application must be filed with the assessor of the taxing 179.15 district in which the real property is located on a form 179.16 prescribed by the commissioner of revenue. The assessor may 179.17 require proof by affidavit or otherwise that the property 179.18 qualifies under subdivision 1. An application approved by the 179.19 assessor continues in effect for subsequent years until the 179.20 property no longer qualifies under subdivision 1. 179.21 Subd. 5. [ADDITIONAL TAXES.] When real property valued and 179.22 assessed under this section no longer qualifies under 179.23 subdivision 1, the portion no longer qualifying is subject to 179.24 additional taxes, in the amount equal to the difference between 179.25 the taxes determined in accordance with subdivision 2, and the 179.26 amount determined under subdivision 3, provided, however, that 179.27 the amount determined under subdivision 3 must not be greater 179.28 than it would have been had the actual bona fide sale price of 179.29 the real property at an arms-length transaction been used in 179.30 lieu of the market value determined under subdivision 3. The 179.31 additional taxes must be extended against the property on the 179.32 tax list for the current year, except that no interest or 179.33 penalties may be levied on the additional taxes if timely paid, 179.34 and except that the additional taxes must only be levied with 179.35 respect to the last seven years that the property has been 179.36 valued and assessed under this section. 180.1 Subd. 6. [LIEN.] The tax imposed by this section is a lien 180.2 on the property assessed to the same extent and for the same 180.3 duration as other taxes imposed on property within this state. 180.4 The tax must be annually extended by the county auditor and when 180.5 payable must be collected and distributed in the manner provided 180.6 by law for the collection and distribution of other property 180.7 taxes. 180.8 Subd. 7. [SPECIAL LOCAL ASSESSMENTS.] The payment of 180.9 special local assessments levied after June 30, 2005, for 180.10 improvements made to any real property described in subdivision 180.11 2, together with the interest thereon must, on timely 180.12 application under subdivision 4, be deferred as long as the 180.13 property qualifies under subdivision 1. If special assessments 180.14 against the property have been deferred under this subdivision, 180.15 the governmental unit shall file with the county recorder in the 180.16 county in which the property is located a certificate containing 180.17 the legal description of the affected property and of the amount 180.18 deferred. When the property no longer qualifies under 180.19 subdivision 1, all deferred special assessments plus interest 180.20 are payable in equal installments spread over the time remaining 180.21 until the last maturity date of the bonds issued to finance the 180.22 improvement for which the assessments were levied. If the bonds 180.23 have matured, the deferred special assessments plus interest are 180.24 payable within 90 days. The provisions of section 429.061, 180.25 subdivision 2, apply to the collection of these installments. 180.26 Penalty must not be levied on the special assessments if timely 180.27 paid. 180.28 Subd. 8. [CONTINUATION OF TAX TREATMENT UPON SALE.] When 180.29 real property qualifying under subdivision 1 is sold, no 180.30 additional taxes or deferred special assessments plus interest 180.31 may be extended against the property if: 180.32 (1) the property continues to qualify pursuant to 180.33 subdivision 1; and 180.34 (2) the new owner files an application for continued 180.35 deferment within 30 days after the sale. 180.36 Subd. 9. [APPLICABILITY OF SPECIAL ASSESSMENT PROVISIONS.] 181.1 This section applies to special local assessments levied after 181.2 June 30, 2005, and payable in the years thereafter, but shall 181.3 not apply to any special assessments levied at any time by a 181.4 county or district court under the provisions of chapter 116A. 181.5[EFFECTIVE DATE.] This section is effective for taxes 181.6 levied in 2005, payable in 2006, and thereafter. For 181.7 applications for taxes payable in 2006 only, the application 181.8 deadline in subdivision 4 is extended to August 1, 2005. 181.9 Sec. 35. Minnesota Statutes 2004, section 273.112, 181.10 subdivision 3, is amended to read: 181.11 Subd. 3. [REQUIREMENTS.] Real estate shall be entitled to 181.12 valuation and tax deferment under this section only if it is: 181.13 (a) actively and exclusively devoted to golf, skiing, lawn 181.14 bowling, croquet, polo, or archery or firearms range 181.15 recreational use or other recreational uses carried on at the 181.16 establishment; 181.17 (b) five acres in size or more, except in the case of a 181.18 lawn bowling or croquet green or an archery or firearms range; 181.19 (c)(1) operated by private individuals or, in the case of a 181.20 lawn bowling or croquet green, by private individuals or 181.21 corporations, and open to the public; or 181.22 (2) operated by firms or corporations for the benefit of 181.23 employees or guests; or 181.24 (3) operated by private clubs having a membership of 50 or 181.25 more or open to the public, provided that the club does not 181.26 discriminate in membership requirements or selection on the 181.27 basis of sex or marital status; and 181.28 (d) made available for use in the case of real estate 181.29 devoted to golf without discrimination on the basis of sex 181.30 during the time when the facility is open to use by the public 181.31 or by members, except that use for golf may be restricted on the 181.32 basis of sex no more frequently than one, or part of one, 181.33 weekend each calendar month for each sex and no more than two, 181.34 or part of two, weekdays each week for each sex. 181.35 If a golf club membership allows use of golf course 181.36 facilities by more than one adult per membership, the use must 182.1 be equally available to all adults entitled to use of the golf 182.2 course under the membership, except that use may be restricted 182.3 on the basis of sex as permitted in this section. Memberships 182.4 that permit play during restricted times may be allowed only if 182.5 the restricted times apply to all adults using the membership. 182.6 A golf club may not offer a membership or golfing privileges to 182.7 a spouse of a member that provides greater or less access to the 182.8 golf course than is provided to that person's spouse under the 182.9 same or a separate membership in that club, except that the 182.10 terms of a membership may provide that one spouse may have no 182.11 right to use the golf course at any time while the other spouse 182.12 may have either limited or unlimited access to the golf course. 182.13 A golf club may have or create an individual membership 182.14 category which entitles a member for a reduced rate to play 182.15 during restricted hours as established by the club. The club 182.16 must have on record a written request by the member for such 182.17 membership. 182.18 A golf club that has food or beverage facilities or 182.19 services must allow equal access to those facilities and 182.20 services for both men and women members in all membership 182.21 categories at all times. Nothing in this paragraph shall be 182.22 construed to require service or access to facilities to persons 182.23 under the age of 21 years or require any act that would violate 182.24 law or ordinance regarding sale, consumption, or regulation of 182.25 alcoholic beverages. 182.26 For purposes of this subdivision and subdivision 7a, 182.27 discrimination means a pattern or course of conduct and not 182.28 linked to an isolated incident. 182.29[EFFECTIVE DATE.] This section is effective for taxes 182.30 levied in 2005, payable in 2006, and thereafter. 182.31 Sec. 36. Minnesota Statutes 2004, section 273.123, is 182.32 amended by adding a subdivision to read: 182.33 Subd. 8. [HOMESTEAD PROPERTY DAMAGED BY MOLD.] (a) The 182.34 owner of homestead property not qualifying for an adjustment in 182.35 valuation under subdivisions 1 to 5 must receive a reduction in 182.36 the amount of taxes payable on the property if all of the 183.1 following conditions are met: 183.2 (1) the owner of the property makes written application to 183.3 the county assessor for tax treatment under this subdivision; 183.4 (2) the county assessor determines that the homestead 183.5 dwelling is uninhabitable because all or part of it has been 183.6 contaminated by mold; and 183.7 (3) the owner of the property makes written application to 183.8 the county board. 183.9 (b) If all of the conditions in paragraph (a) are met, the 183.10 county board must grant a reduction in the amount of property 183.11 tax payable on the homestead dwelling. The reduction must be 183.12 made for taxes payable in the year that the assessor determines 183.13 that the requirements in paragraph (a), clause (2), have been 183.14 met and in the following year. 183.15 (c) The reduction in the amount of tax payable must be 183.16 calculated based upon the number of months that the homestead is 183.17 uninhabitable. The amount of net tax due from the taxpayer 183.18 shall be multiplied by a fraction, the numerator of which is the 183.19 number of months the dwelling was occupied by that taxpayer, and 183.20 the denominator of which is 12. For purposes of this 183.21 subdivision, if a homestead dwelling is occupied or used for a 183.22 fraction of a month, it is considered a month. "Net tax" is 183.23 defined as the amount of tax after the subtraction of all of the 183.24 state paid property tax credits. If the reduction is granted 183.25 after all property taxes due for the year have been paid, the 183.26 amount of the reduction must be refunded to the taxpayer by the 183.27 county treasurer as soon as practical. 183.28 (d) Any reductions or refunds under this section are not 183.29 subject to approval by the commissioner of revenue. 183.30 (e) A denial of a reduction or refund under this section by 183.31 the county board may be appealed to the tax court. If the 183.32 county board takes no action on the application within 60 days 183.33 after its receipt, it is considered a denial. 183.34[EFFECTIVE DATE.] This section is effective for property 183.35 taxes payable in 2005 and thereafter. 183.36 Sec. 37. Minnesota Statutes 2004, section 273.124, 184.1 subdivision 1, is amended to read: 184.2 Subdivision 1. [GENERAL RULE.] (a) Residential real estate 184.3 that is occupied and used for the purposes of a homestead by its 184.4 owner, who must be a Minnesota resident, is a residential 184.5 homestead. 184.6 Agricultural land, as defined in section 273.13, 184.7 subdivision 23, that is occupied and used as a homestead by its 184.8 owner, who must be a Minnesota resident, is an agricultural 184.9 homestead. 184.10 Dates for establishment of a homestead and homestead 184.11 treatment provided to particular types of property are as 184.12 provided in this section. 184.13 Property held by a trustee under a trust is eligible for 184.14 homestead classification if the requirements under this chapter 184.15 are satisfied. 184.16 The assessor shall require proof, as provided in 184.17 subdivision 13, of the facts upon which classification as a 184.18 homestead may be determined. Notwithstanding any other law, the 184.19 assessor may at any time require a homestead application to be 184.20 filed in order to verify that any property classified as a 184.21 homestead continues to be eligible for homestead status. 184.22 Notwithstanding any other law to the contrary, the Department of 184.23 Revenue may, upon request from an assessor, verify whether an 184.24 individual who is requesting or receiving homestead 184.25 classification has filed a Minnesota income tax return as a 184.26 resident for the most recent taxable year for which the 184.27 information is available. 184.28 When there is a name change or a transfer of homestead 184.29 property, the assessor may reclassify the property in the next 184.30 assessment unless a homestead application is filed to verify 184.31 that the property continues to qualify for homestead 184.32 classification. 184.33 (b) For purposes of this section, homestead property shall 184.34 include property which is used for purposes of the homestead but 184.35 is separated from the homestead by a road, street, lot, 184.36 waterway, or other similar intervening property. The term "used 185.1 for purposes of the homestead" shall include but not be limited 185.2 to uses for gardens, garages, or other outbuildings commonly 185.3 associated with a homestead, but shall not include vacant land 185.4 held primarily for future development. In order to receive 185.5 homestead treatment for the noncontiguous property, the owner 185.6 must use the property for the purposes of the homestead, and 185.7 must apply to the assessor, both by the deadlines given in 185.8 subdivision 9. After initial qualification for the homestead 185.9 treatment, additional applications for subsequent years are not 185.10 required. 185.11 (c) Residential real estate that is occupied and used for 185.12 purposes of a homestead by a relative of the owner is a 185.13 homestead but only to the extent of the homestead treatment that 185.14 would be provided if the related owner occupied the property. 185.15 For purposes of this paragraph and paragraph (g), "relative" 185.16 means a parent, stepparent, child, stepchild, grandparent, 185.17 grandchild, brother, sister, uncle, aunt, nephew, or niece. 185.18 This relationship may be by blood or marriage. Property that 185.19 has been classified as seasonal residential recreational 185.20 property at any time during which it has been owned by the 185.21 current owner or spouse of the current owner will not be 185.22 reclassified as a homestead unless it is occupied as a homestead 185.23 by the owner; this prohibition also applies to property that, in 185.24 the absence of this paragraph, would have been classified as 185.25 seasonal residential recreational property at the time when the 185.26 residence was constructed. Neither the related occupant nor the 185.27 owner of the property may claim a property tax refund under 185.28 chapter 290A for a homestead occupied by a relative. In the 185.29 case of a residence located on agricultural land, only the 185.30 house, garage, and immediately surrounding one acre of land 185.31 shall be classified as a homestead under this paragraph, except 185.32 as provided in paragraph (d). 185.33 (d) Agricultural property that is occupied and used for 185.34 purposes of a homestead by a relative of the owner, is a 185.35 homestead, only to the extent of the homestead treatment that 185.36 would be provided if the related owner occupied the property, 186.1 and only if all of the following criteria are met: 186.2 (1) the relative who is occupying the agricultural property 186.3 is a son, daughter, grandson, granddaughter, father, or mother 186.4 of the owner of the agricultural property or a son, daughter, 186.5 grandson, or granddaughter of the spouse of the owner of the 186.6 agricultural property; 186.7 (2) the owner of the agricultural property must be a 186.8 Minnesota resident; 186.9 (3) the owner of the agricultural property must not receive 186.10 homestead treatment on any other agricultural property in 186.11 Minnesota; and 186.12 (4) the owner of the agricultural property is limited to 186.13 only one agricultural homestead per family under this paragraph. 186.14 Neither the related occupant nor the owner of the property 186.15 may claim a property tax refund under chapter 290A for a 186.16 homestead occupied by a relative qualifying under this 186.17 paragraph. For purposes of this paragraph, "agricultural 186.18 property" means the house, garage, other farm buildings and 186.19 structures, and agricultural land. 186.20 Application must be made to the assessor by the owner of 186.21 the agricultural property to receive homestead benefits under 186.22 this paragraph. The assessor may require the necessary proof 186.23 that the requirements under this paragraph have been met. 186.24 (e) In the case of property owned by a property owner who 186.25 is married, the assessor must not deny homestead treatment in 186.26 whole or in part if only one of the spouses occupies the 186.27 property and the other spouse is absent due to: (1) marriage 186.28 dissolution proceedings, (2) legal separation, (3) employment or 186.29 self-employment in another location, or (4) other personal 186.30 circumstances causing the spouses to live separately, not 186.31 including an intent to obtain two homestead classifications for 186.32 property tax purposes. To qualify under clause (3), the 186.33 spouse's place of employment or self-employment must be at least 186.34 50 miles distant from the other spouse's place of employment, 186.35 and the homesteads must be at least 50 miles distant from each 186.36 other. Homestead treatment, in whole or in part, shall not be 187.1 denied to the owner's spouse who previously occupied the 187.2 residence with the owner if the absence of the owner is due to 187.3 one of the exceptions provided in this paragraph. 187.4 (f) The assessor must not deny homestead treatment in whole 187.5 or in part if: 187.6 (1) in the case of a property owner who is not married, the 187.7 owner is absent due to residence in a nursing home, boarding 187.8 care facility, or an elderly assisted living facility property 187.9 as defined in section 273.13, subdivision 25a, and the property 187.10 is not otherwise occupied; or 187.11 (2) in the case of a property owner who is married, the 187.12 owner or the owner's spouse or both are absent due to residence 187.13 in a nursing home, boarding care facility, or an elderly 187.14 assisted living facility property as defined in section 273.13, 187.15 subdivision 25a, and the property is not occupied or is occupied 187.16 only by the owner's spouse. 187.17 (g) If an individual is purchasing property with the intent 187.18 of claiming it as a homestead and is required by the terms of 187.19 the financing agreement to have a relative shown on the deed as 187.20 a co-owner, the assessor shall allow a full homestead 187.21 classification. This provision only applies to first-time 187.22 purchasers, whether married or single, or to a person who had 187.23 previously been married and is purchasing as a single individual 187.24 for the first time. The application for homestead benefits must 187.25 be on a form prescribed by the commissioner and must contain the 187.26 data necessary for the assessor to determine if full homestead 187.27 benefits are warranted. 187.28 (h) If residential or agricultural real estate is occupied 187.29 and used for purposes of a homestead by a child of a deceased 187.30 owner and the property is subject to jurisdiction of probate 187.31 court, the child shall receive relative homestead classification 187.32 under paragraph (c) or (d) to the same extent they would be 187.33 entitled to it if the owner was still living, until the probate 187.34 is completed. For purposes of this paragraph, "child" includes 187.35 a relationship by blood or by marriage. 187.36 (i) If a single family home, duplex, or triplex classified 188.1 as either residential homestead or agricultural homestead is 188.2 also used to provide licensed child care, the portion of the 188.3 property used for licensed child care must be classified as 188.4 homestead property. 188.5[EFFECTIVE DATE.] This section is effective in assessment 188.6 year 2005 and thereafter, for taxes payable in 2006, and 188.7 thereafter. 188.8 Sec. 38. Minnesota Statutes 2004, section 273.124, 188.9 subdivision 14, is amended to read: 188.10 Subd. 14. [AGRICULTURAL HOMESTEADS; SPECIAL PROVISIONS.] 188.11 (a) Real estate of less than ten acres that is the homestead of 188.12 its owner must be classified as class 2a under section 273.13, 188.13 subdivision 23, paragraph (a), if: 188.14 (1) the parcel on which the house is located is contiguous 188.15 on at least two sides to (i) agricultural land, (ii) land owned 188.16 or administered by the United States Fish and Wildlife Service, 188.17 or (iii) land administered by the Department of Natural 188.18 Resources on which in lieu taxes are paid under sections 477A.11 188.19 to 477A.14; 188.20 (2) its owner also owns a noncontiguous parcel of 188.21 agricultural land that is at least 20 acres; 188.22 (3) the noncontiguous land is located not farther than four 188.23 townships or cities, or a combination of townships or cities 188.24 from the homestead; and 188.25 (4) the agricultural use value of the noncontiguous land 188.26 and farm buildings is equal to at least 50 percent of the market 188.27 value of the house, garage, and one acre of land. 188.28 Homesteads initially classified as class 2a under the 188.29 provisions of this paragraph shall remain classified as class 188.30 2a, irrespective of subsequent changes in the use of adjoining 188.31 properties, as long as the homestead remains under the same 188.32 ownership, the owner owns a noncontiguous parcel of agricultural 188.33 land that is at least 20 acres, and the agricultural use value 188.34 qualifies under clause (4). Homestead classification under this 188.35 paragraph is limited to property that qualified under this 188.36 paragraph for the 1998 assessment. 189.1 (b)(i) Agricultural property consisting of at least 40 189.2 acres shall be classified as the owner's homestead, to the same 189.3 extent as other agricultural homestead property, if all of the 189.4 following criteria are met: 189.5 (1) the owner, the owner's spouse,orthe son or daughter 189.6 of the owner or owner's spouse, or the grandson or granddaughter 189.7 of the owner or the owner's spouse, is actively farming the 189.8 agricultural property, either on the person's own behalf as an 189.9 individual or on behalf of a partnership operating a family 189.10 farm, family farm corporation, joint family farm venture, or 189.11 limited liability company of which the person is a partner, 189.12 shareholder, or member; 189.13 (2) both the owner of the agricultural property and the 189.14 person who is actively farming the agricultural property under 189.15 clause (1), are Minnesota residents; 189.16 (3) neither the owner nor the spouse of the owner claims 189.17 another agricultural homestead in Minnesota; and 189.18 (4) neither the owner nor the person actively farming the 189.19 property lives farther than four townships or cities, or a 189.20 combination of four townships or cities, from the agricultural 189.21 property, except that if the owner or the owner's spouse is 189.22 required to live in employer-provided housing, the owner or 189.23 owner's spouse, whichever is actively farming the agricultural 189.24 property, may live more than four townships or cities, or 189.25 combination of four townships or cities from the agricultural 189.26 property. 189.27 The relationship under this paragraph may be either by 189.28 blood or marriage. 189.29 (ii) Real property held by a trustee under a trust is 189.30 eligible for agricultural homestead classification under this 189.31 paragraph if the qualifications in clause (i) are met, except 189.32 that "owner" means the grantor of the trust. 189.33 (iii) Property containing the residence of an owner who 189.34 owns qualified property under clause (i) shall be classified as 189.35 part of the owner's agricultural homestead, if that property is 189.36 also used for noncommercial storage or drying of agricultural 190.1 crops. 190.2 (c) Noncontiguous land shall be included as part of a 190.3 homestead under section 273.13, subdivision 23, paragraph (a), 190.4 only if the homestead is classified as class 2a and the detached 190.5 land is located in the same township or city, or not farther 190.6 than four townships or cities or combination thereof from the 190.7 homestead. Any taxpayer of these noncontiguous lands must 190.8 notify the county assessor that the noncontiguous land is part 190.9 of the taxpayer's homestead, and, if the homestead is located in 190.10 another county, the taxpayer must also notify the assessor of 190.11 the other county. 190.12 (d) Agricultural land used for purposes of a homestead and 190.13 actively farmed by a person holding a vested remainder interest 190.14 in it must be classified as a homestead under section 273.13, 190.15 subdivision 23, paragraph (a). If agricultural land is 190.16 classified class 2a, any other dwellings on the land used for 190.17 purposes of a homestead by persons holding vested remainder 190.18 interests who are actively engaged in farming the property, and 190.19 up to one acre of the land surrounding each homestead and 190.20 reasonably necessary for the use of the dwelling as a home, must 190.21 also be assessed class 2a. 190.22 (e) Agricultural land and buildings that were class 2a 190.23 homestead property under section 273.13, subdivision 23, 190.24 paragraph (a), for the 1997 assessment shall remain classified 190.25 as agricultural homesteads for subsequent assessments if: 190.26 (1) the property owner abandoned the homestead dwelling 190.27 located on the agricultural homestead as a result of the April 190.28 1997 floods; 190.29 (2) the property is located in the county of Polk, Clay, 190.30 Kittson, Marshall, Norman, or Wilkin; 190.31 (3) the agricultural land and buildings remain under the 190.32 same ownership for the current assessment year as existed for 190.33 the 1997 assessment year and continue to be used for 190.34 agricultural purposes; 190.35 (4) the dwelling occupied by the owner is located in 190.36 Minnesota and is within 30 miles of one of the parcels of 191.1 agricultural land that is owned by the taxpayer; and 191.2 (5) the owner notifies the county assessor that the 191.3 relocation was due to the 1997 floods, and the owner furnishes 191.4 the assessor any information deemed necessary by the assessor in 191.5 verifying the change in dwelling. Further notifications to the 191.6 assessor are not required if the property continues to meet all 191.7 the requirements in this paragraph and any dwellings on the 191.8 agricultural land remain uninhabited. 191.9 (f) Agricultural land and buildings that were class 2a 191.10 homestead property under section 273.13, subdivision 23, 191.11 paragraph (a), for the 1998 assessment shall remain classified 191.12 agricultural homesteads for subsequent assessments if: 191.13 (1) the property owner abandoned the homestead dwelling 191.14 located on the agricultural homestead as a result of damage 191.15 caused by a March 29, 1998, tornado; 191.16 (2) the property is located in the county of Blue Earth, 191.17 Brown, Cottonwood, LeSueur, Nicollet, Nobles, or Rice; 191.18 (3) the agricultural land and buildings remain under the 191.19 same ownership for the current assessment year as existed for 191.20 the 1998 assessment year; 191.21 (4) the dwelling occupied by the owner is located in this 191.22 state and is within 50 miles of one of the parcels of 191.23 agricultural land that is owned by the taxpayer; and 191.24 (5) the owner notifies the county assessor that the 191.25 relocation was due to a March 29, 1998, tornado, and the owner 191.26 furnishes the assessor any information deemed necessary by the 191.27 assessor in verifying the change in homestead dwelling. For 191.28 taxes payable in 1999, the owner must notify the assessor by 191.29 December 1, 1998. Further notifications to the assessor are not 191.30 required if the property continues to meet all the requirements 191.31 in this paragraph and any dwellings on the agricultural land 191.32 remain uninhabited. 191.33 (g) Agricultural property consisting of at least 40 acres 191.34 of a family farm corporation, joint family farm venture, family 191.35 farm limited liability company, or partnership operating a 191.36 family farm as described under subdivision 8 shall be classified 192.1 homestead, to the same extent as other agricultural homestead 192.2 property, if all of the following criteria are met: 192.3 (1) a shareholder, member, or partner of that entity is 192.4 actively farming the agricultural property; 192.5 (2) that shareholder, member, or partner who is actively 192.6 farming the agricultural property is a Minnesota resident; 192.7 (3) neither that shareholder, member, or partner, nor the 192.8 spouse of that shareholder, member, or partner claims another 192.9 agricultural homestead in Minnesota; and 192.10 (4) that shareholder, member, or partner does not live 192.11 farther than four townships or cities, or a combination of four 192.12 townships or cities, from the agricultural property. 192.13 Homestead treatment applies under this paragraph for 192.14 property leased to a family farm corporation, joint farm 192.15 venture, limited liability company, or partnership operating a 192.16 family farm if legal title to the property is in the name of an 192.17 individual who is a member, shareholder, or partner in the 192.18 entity. 192.19 (h) To be eligible for the special agricultural homestead 192.20 under this subdivision, an initial full application must be 192.21 submitted to the county assessor where the property is located. 192.22 Owners and the persons who are actively farming the property 192.23 shall be required to complete only a one-page abbreviated 192.24 version of the application in each subsequent year provided that 192.25 none of the following items have changed since the initial 192.26 application: 192.27 (1) the day-to-day operation, administration, and financial 192.28 risks remain the same; 192.29 (2) the owners and the persons actively farming the 192.30 property continue to live within the four townships or city 192.31 criteria and are Minnesota residents; 192.32 (3) the same operator of the agricultural property is 192.33 listed with the Farm Service Agency; 192.34 (4) a Schedule F or equivalent income tax form was filed 192.35 for the most recent year; 192.36 (5) the property's acreage is unchanged; and 193.1 (6) none of the property's acres have been enrolled in a 193.2 federal or state farm program since the initial application. 193.3 The owners and any persons who are actively farming the 193.4 property must include the appropriate Social Security numbers, 193.5 and sign and date the application. If any of the specified 193.6 information has changed since the full application was filed, 193.7 the owner must notify the assessor, and must complete a new 193.8 application to determine if the property continues to qualify 193.9 for the special agricultural homestead. The commissioner of 193.10 revenue shall prepare a standard reapplication form for use by 193.11 the assessors. 193.12[EFFECTIVE DATE.] This section is effective for assessment 193.13 year 2004 and thereafter, for taxes payable in 2005 and 193.14 thereafter. 193.15 Sec. 39. Minnesota Statutes 2004, section 273.13, 193.16 subdivision 22, is amended to read: 193.17 Subd. 22. [CLASS 1.] (a) Except as provided in subdivision 193.18 23 and in paragraphs (b) and (c), real estate which is 193.19 residential and used for homestead purposes is class 1a. In the 193.20 case of a duplex or triplex in which one of the units is used 193.21 for homestead purposes, the entire property is deemed to be used 193.22 for homestead purposes. The market value of class 1a property 193.23 must be determined based upon the value of the house, garage, 193.24 and land. 193.25 The first $500,000 of market value of class 1a property has 193.26 a net class rate of one percent of its market value; and the 193.27 market value of class 1a property that exceeds $500,000 has a 193.28 class rate of 1.25 percent of its market value. 193.29 (b) Class 1b property includes homestead real estate or 193.30 homestead manufactured homes used for the purposes of a 193.31 homestead by 193.32 (1) any person who is blind as defined in section 256D.35, 193.33 or the blind person and the blind person's spouse; or 193.34 (2) any person, hereinafter referred to as "veteran," who: 193.35 (i) served in the active military or naval service of the 193.36 United States; and 194.1 (ii) is entitled to compensation under the laws and 194.2 regulations of the United States for permanent and total 194.3 service-connected disability due to the loss, or loss of use, by 194.4 reason of amputation, ankylosis, progressive muscular 194.5 dystrophies, or paralysis, of both lower extremities, such as to 194.6 preclude motion without the aid of braces, crutches, canes, or a 194.7 wheelchair; and 194.8 (iii) has acquired a special housing unit with special 194.9 fixtures or movable facilities made necessary by the nature of 194.10 the veteran's disability, or the surviving spouse of the 194.11 deceased veteran for as long as the surviving spouse retains the 194.12 special housing unit as a homestead; or 194.13 (3) any person who is permanently and totally disabled. 194.14 Property is classified and assessed under clause (3) only 194.15 if the government agency or income-providing source certifies, 194.16 upon the request of the homestead occupant, that the homestead 194.17 occupant satisfies the disability requirements of this paragraph. 194.18 Property is classified and assessed pursuant to clause (1) 194.19 only if the commissioner of revenue certifies to the assessor 194.20 that the homestead occupant satisfies the requirements of this 194.21 paragraph. 194.22 Permanently and totally disabled for the purpose of this 194.23 subdivision means a condition which is permanent in nature and 194.24 totally incapacitates the person from working at an occupation 194.25 which brings the person an income. The first $32,000 market 194.26 value of class 1b property has a net class rate of .45 percent 194.27 of its market value. The remaining market value of class 1b 194.28 property has a class rate using the rates for class 1a or class 194.29 2a property, whichever is appropriate, of similar market value. 194.30 (c) Class 1c property is commercial use real property that 194.31 abuts a lakeshore line and is devoted to temporary and seasonal 194.32 residential occupancy for recreational purposes but not devoted 194.33 to commercial purposes for more than 250 days in the year 194.34 preceding the year of assessment, and that includes a portion 194.35 used as a homestead by the owner, which includes a dwelling 194.36 occupied as a homestead by a shareholder of a corporation that 195.1 owns the resort, a partner in a partnership that owns the 195.2 resort, or a member of a limited liability company that owns the 195.3 resort even if the title to the homestead is held by the 195.4 corporation, partnership, or limited liability company. For 195.5 purposes of this clause, property is devoted to a commercial 195.6 purpose on a specific day if any portion of the property, 195.7 excluding the portion used exclusively as a homestead, is used 195.8 for residential occupancy and a fee is charged for residential 195.9 occupancy. The first$500,000$600,000 of market value of class 195.10 1c property has a class rate ofone0.55 percent, the market 195.11 value that exceeds $600,000 but does not exceed $1,600,000 has a 195.12 class rate of one percent, and the remaining market value of 195.13class 1cthe propertyhas a class rate of one percent, with the195.14following limitation: the area of the property must not exceed195.15100 feet of lakeshore footage for each cabin or campsite located195.16on the property up to a total of 800 feet and 500 feet in depth,195.17measured away from the lakeshoreis classified as class 4c. If 195.18 any portion of the class 1c resort property is classified as 195.19 class 4c under subdivision 25, the entire property must meet the 195.20 requirements of subdivision 25, paragraph (d), clause (1), to 195.21 qualify for class 1c treatment under this paragraph. 195.22 (d) Class 1d property includes structures that meet all of 195.23 the following criteria: 195.24 (1) the structure is located on property that is classified 195.25 as agricultural property under section 273.13, subdivision 23; 195.26 (2) the structure is occupied exclusively by seasonal farm 195.27 workers during the time when they work on that farm, and the 195.28 occupants are not charged rent for the privilege of occupying 195.29 the property, provided that use of the structure for storage of 195.30 farm equipment and produce does not disqualify the property from 195.31 classification under this paragraph; 195.32 (3) the structure meets all applicable health and safety 195.33 requirements for the appropriate season; and 195.34 (4) the structure is not salable as residential property 195.35 because it does not comply with local ordinances relating to 195.36 location in relation to streets or roads. 196.1 The market value of class 1d property has the same class 196.2 rates as class 1a property under paragraph (a). 196.3[EFFECTIVE DATE.] This section is effective for taxes 196.4 levied in 2005, payable in 2006, and thereafter. 196.5 Sec. 40. Minnesota Statutes 2004, section 273.13, 196.6 subdivision 23, is amended to read: 196.7 Subd. 23. [CLASS 2.] (a) Class 2a property is agricultural 196.8 land including any improvements that is homesteaded. The market 196.9 value of the house and garage and immediately surrounding one 196.10 acre of land has the same class rates as class 1a property under 196.11 subdivision 22. The value of the remaining land including 196.12 improvements up to and including $600,000 market value has a net 196.13 class rate of 0.55 percent of market value. The remaining 196.14 property over $600,000 market value has a class rate of one 196.15 percent of market value. 196.16 (b) Class 2b property is (1) real estate, rural in 196.17 character and used exclusively for growing trees for timber, 196.18 lumber, and wood and wood products; (2) real estate that is not 196.19 improved with a structure and is used exclusively for growing 196.20 trees for timber, lumber, and wood and wood products, if the 196.21 owner has participated or is participating in a cost-sharing 196.22 program for afforestation, reforestation, or timber stand 196.23 improvement on that particular property, administered or 196.24 coordinated by the commissioner of natural resources; (3) real 196.25 estate that is nonhomestead agricultural land;or(4) a landing 196.26 area or public access area of a privately owned public use 196.27 airport; or (5) land with a commercial aggregate deposit that is 196.28 not actively being mined and is not otherwise classified as 196.29 class 2a or 2b, clauses (1) to (3). Class 2b property has a net 196.30 class rate of one percent of market value. 196.31 (c) Agricultural land as used in this section means 196.32 contiguous acreage of ten acres or more, used during the 196.33 preceding year for agricultural purposes. "Agricultural 196.34 purposes" as used in this section means the raising or 196.35 cultivation of agricultural products. "Agricultural purposes" 196.36 also includes enrollment in the Reinvest in Minnesota program 197.1 under sections 103F.501 to 103F.535 or the federal Conservation 197.2 Reserve Program as contained in Public Law 99-198 if the 197.3 property was classified as agricultural (i) under this 197.4 subdivision for the assessment year 2002 or (ii) in the year 197.5 prior to its enrollment. Contiguous acreage on the same parcel, 197.6 or contiguous acreage on an immediately adjacent parcel under 197.7 the same ownership, may also qualify as agricultural land, but 197.8 only if it is pasture, timber, waste, unusable wild land, or 197.9 land included in state or federal farm programs. Agricultural 197.10 classification for property shall be determined excluding the 197.11 house, garage, and immediately surrounding one acre of land, and 197.12 shall not be based upon the market value of any residential 197.13 structures on the parcel or contiguous parcels under the same 197.14 ownership. 197.15 (d) Real estate, excluding the house, garage, and 197.16 immediately surrounding one acre of land, of less than ten acres 197.17 which is exclusively and intensively used for raising or 197.18 cultivating agricultural products, shall be considered as 197.19 agricultural land. 197.20 Land shall be classified as agricultural even if all or a 197.21 portion of the agricultural use of that property is the leasing 197.22 to, or use by another person for agricultural purposes. 197.23 Classification under this subdivision is not determinative 197.24 for qualifying under section 273.111. 197.25 The property classification under this section supersedes, 197.26 for property tax purposes only, any locally administered 197.27 agricultural policies or land use restrictions that define 197.28 minimum or maximum farm acreage. 197.29 (e) The term "agricultural products" as used in this 197.30 subdivision includes production for sale of: 197.31 (1) livestock, dairy animals, dairy products, poultry and 197.32 poultry products, fur-bearing animals, horticultural and nursery 197.33 stock, fruit of all kinds, vegetables, forage, grains, bees, and 197.34 apiary products by the owner; 197.35 (2) fish bred for sale and consumption if the fish breeding 197.36 occurs on land zoned for agricultural use; 198.1 (3) the commercial boarding of horses if the boarding is 198.2 done in conjunction with raising or cultivating agricultural 198.3 products as defined in clause (1); 198.4 (4) property which is owned and operated by nonprofit 198.5 organizations used for equestrian activities, excluding racing; 198.6 (5) game birds and waterfowl bred and raised for use on a 198.7 shooting preserve licensed under section 97A.115; 198.8 (6) insects primarily bred to be used as food for animals; 198.9 (7) trees, grown for sale as a crop, and not sold for 198.10 timber, lumber, wood, or wood products, except that short 198.11 rotation woody crops that are cultivated using agricultural 198.12 practices on land that had previously been assessed as 198.13 agricultural land to produce timber or forest products are 198.14 agricultural products; and 198.15 (8) maple syrup taken from trees grown by a person licensed 198.16 by the Minnesota Department of Agriculture under chapter 28A as 198.17 a food processor. 198.18 (f) If a parcel used for agricultural purposes is also used 198.19 for commercial or industrial purposes, including but not limited 198.20 to: 198.21 (1) wholesale and retail sales; 198.22 (2) processing of raw agricultural products or other goods; 198.23 (3) warehousing or storage of processed goods; and 198.24 (4) office facilities for the support of the activities 198.25 enumerated in clauses (1), (2), and (3), 198.26 the assessor shall classify the part of the parcel used for 198.27 agricultural purposes as class 1b, 2a, or 2b, whichever is 198.28 appropriate, and the remainder in the class appropriate to its 198.29 use. The grading, sorting, and packaging of raw agricultural 198.30 products for first sale is considered an agricultural purpose. 198.31 A greenhouse or other building where horticultural or nursery 198.32 products are grown that is also used for the conduct of retail 198.33 sales must be classified as agricultural if it is primarily used 198.34 for the growing of horticultural or nursery products from seed, 198.35 cuttings, or roots and occasionally as a showroom for the retail 198.36 sale of those products. Use of a greenhouse or building only 199.1 for the display of already grown horticultural or nursery 199.2 products does not qualify as an agricultural purpose. 199.3 The assessor shall determine and list separately on the 199.4 records the market value of the homestead dwelling and the one 199.5 acre of land on which that dwelling is located. If any farm 199.6 buildings or structures are located on this homesteaded acre of 199.7 land, their market value shall not be included in this separate 199.8 determination. 199.9 (g) To qualify for classification under paragraph (b), 199.10 clause (4), a privately owned public use airport must be 199.11 licensed as a public airport under section 360.018. For 199.12 purposes of paragraph (b), clause (4), "landing area" means that 199.13 part of a privately owned public use airport properly cleared, 199.14 regularly maintained, and made available to the public for use 199.15 by aircraft and includes runways, taxiways, aprons, and sites 199.16 upon which are situated landing or navigational aids. A landing 199.17 area also includes land underlying both the primary surface and 199.18 the approach surfaces that comply with all of the following: 199.19 (i) the land is properly cleared and regularly maintained 199.20 for the primary purposes of the landing, taking off, and taxiing 199.21 of aircraft; but that portion of the land that contains 199.22 facilities for servicing, repair, or maintenance of aircraft is 199.23 not included as a landing area; 199.24 (ii) the land is part of the airport property; and 199.25 (iii) the land is not used for commercial or residential 199.26 purposes. 199.27 The land contained in a landing area under paragraph (b), clause 199.28 (4), must be described and certified by the commissioner of 199.29 transportation. The certification is effective until it is 199.30 modified, or until the airport or landing area no longer meets 199.31 the requirements of paragraph (b), clause (4). For purposes of 199.32 paragraph (b), clause (4), "public access area" means property 199.33 used as an aircraft parking ramp, apron, or storage hangar, or 199.34 an arrival and departure building in connection with the airport. 199.35 (h) To qualify for classification under paragraph (b), 199.36 clause (5), the property must be at least ten contiguous acres 200.1 in size and the owner of the property must record with the 200.2 county recorder of the county in which the property is located 200.3 an affidavit containing: 200.4 (1) a legal description of the property; 200.5 (2) a disclosure that the property contains a commercial 200.6 aggregate deposit that is not actively being mined; 200.7 (3) documentation that the conditional use under the county 200.8 or local zoning ordinance of this property is for mining; and 200.9 (4) documentation that a permit has been issued by the 200.10 local unit of government or the mining activity is allowed under 200.11 local ordinance. The disclosure must include a statement from a 200.12 registered professional geologist, engineer, or soil scientist 200.13 delineating the deposit and certifying that it is a commercial 200.14 aggregate deposit. 200.15 For purposes of this section and section 273.1115, 200.16 "commercial aggregate deposit" means a deposit that will yield 200.17 crushed stone or sand and gravel that is suitable for use as a 200.18 construction aggregate; and "actively mined" means the removal 200.19 of top soil and overburden in preparation for excavation or 200.20 excavation of a commercial deposit. 200.21 (i) When any portion of the property under this subdivision 200.22 or section 273.13, subdivision 22, begins to be actively mined, 200.23 the owner must file a supplemental affidavit within 60 days from 200.24 the day any aggregate is removed stating the number of acres of 200.25 the property that is actively being mined. The acres actively 200.26 being mined must be (1) valued and classified under section 200.27 273.13, subdivision 24, in the next subsequent assessment year, 200.28 and (2) removed from the aggregate resource preservation 200.29 property tax program under section 273.1115, if the land was 200.30 enrolled in that program. Copies of the original affidavit and 200.31 all supplemental affidavits must be filed with the county 200.32 assessor, the local zoning administrator, and the Department of 200.33 Natural Resources, Division of Land and Minerals. A 200.34 supplemental affidavit must be filed each time a subsequent 200.35 portion of the property is actively mined, provided that the 200.36 minimum acreage change is five acres, even if the actual mining 201.1 activity constitutes less than five acres. 201.2[EFFECTIVE DATE.] This section is effective for taxes 201.3 levied in 2005, payable in 2006, and thereafter. 201.4 Sec. 41. Minnesota Statutes 2004, section 273.13, 201.5 subdivision 25, is amended to read: 201.6 Subd. 25. [CLASS 4.] (a) Class 4a is residential real 201.7 estate containing four or more units and used or held for use by 201.8 the owner or by the tenants or lessees of the owner as a 201.9 residence for rental periods of 30 days or more. Class 4a also 201.10 includes hospitals licensed under sections 144.50 to 144.56, 201.11 other than hospitals exempt under section 272.02, and contiguous 201.12 property used for hospital purposes, without regard to whether 201.13 the property has been platted or subdivided. The market value 201.14 of class 4a property has a class rate of 1.8 percent for taxes 201.15 payable in 2002, 1.5 percent for taxes payable in 2003, and 1.25 201.16 percent for taxes payable in 2004 and thereafter, except that 201.17 class 4a property consisting of a structure for which 201.18 construction commenced after June 30, 2001, has a class rate of 201.19 1.25 percent of market value for taxes payable in 2003 and 201.20 subsequent years. 201.21 (b) Class 4b includes: 201.22 (1) residential real estate containing less than four units 201.23 that does not qualify as class 4bb, other than seasonal 201.24 residential recreational property; 201.25 (2) manufactured homes not classified under any other 201.26 provision; 201.27 (3) a dwelling, garage, and surrounding one acre of 201.28 property on a nonhomestead farm classified under subdivision 23, 201.29 paragraph (b) containing two or three units; and 201.30 (4) unimproved property that is classified residential as 201.31 determined under subdivision 33. 201.32 The market value of class 4b property has a class rate of 201.33 1.5 percent for taxes payable in 2002, and 1.25 percent for 201.34 taxes payable in 2003 and thereafter. 201.35 (c) Class 4bb includes: 201.36 (1) nonhomestead residential real estate containing one 202.1 unit, other than seasonal residential recreational property; and 202.2 (2) a single family dwelling, garage, and surrounding one 202.3 acre of property on a nonhomestead farm classified under 202.4 subdivision 23, paragraph (b). 202.5 Class 4bb property has the same class rates as class 1a 202.6 property under subdivision 22. 202.7 Property that has been classified as seasonal residential 202.8 recreational property at any time during which it has been owned 202.9 by the current owner or spouse of the current owner does not 202.10 qualify for class 4bb. 202.11 (d) Class 4c property includes: 202.12 (1) except as provided in subdivision 22, paragraph (c), 202.13 real property devoted to temporary and seasonal residential 202.14 occupancy for recreation purposes, including real property 202.15 devoted to temporary and seasonal residential occupancy for 202.16 recreation purposes and not devoted to commercial purposes for 202.17 more than 250 days in the year preceding the year of 202.18 assessment. For purposes of this clause, property is devoted to 202.19 a commercial purpose on a specific day if any portion of the 202.20 property is used for residential occupancy, and a fee is charged 202.21 for residential occupancy. In order for a property to be 202.22 classified as class 4c, seasonal residential recreational for 202.23 commercial purposes, at least 40 percent of the annual gross 202.24 lodging receipts related to the property must be from business 202.25 conducted during 90 consecutive days and either (i) at least 60 202.26 percent of all paid bookings by lodging guests during the year 202.27 must be for periods of at least two consecutive nights; or (ii) 202.28 at least 20 percent of the annual gross receipts must be from 202.29 charges for rental of fish houses, boats and motors, 202.30 snowmobiles, downhill or cross-country ski equipment, or charges 202.31 for marina services, launch services, and guide services, or the 202.32 sale of bait and fishing tackle. For purposes of this 202.33 determination, a paid booking of five or more nights shall be 202.34 counted as two bookings. Class 4c also includes commercial use 202.35 real property used exclusively for recreational purposes in 202.36 conjunction with class 4c property devoted to temporary and 203.1 seasonal residential occupancy for recreational purposes, up to 203.2 a total of two acres, provided the property is not devoted to 203.3 commercial recreational use for more than 250 days in the year 203.4 preceding the year of assessment and is located within two miles 203.5 of the class 4c property with which it is used. Class 4c 203.6 property classified in this clause also includes the remainder 203.7 of class 1c resorts provided that the entire property including 203.8 that portion of the property classified as class 1c also meets 203.9 the requirements for class 4c under this clause; otherwise the 203.10 entire property is classified as class 3. Owners of real 203.11 property devoted to temporary and seasonal residential occupancy 203.12 for recreation purposes and all or a portion of which was 203.13 devoted to commercial purposes for not more than 250 days in the 203.14 year preceding the year of assessment desiring classification as 203.15 class 1c or 4c, must submit a declaration to the assessor 203.16 designating the cabins or units occupied for 250 days or less in 203.17 the year preceding the year of assessment by January 15 of the 203.18 assessment year. Those cabins or units and a proportionate 203.19 share of the land on which they are located will be designated 203.20 class 1c or 4c as otherwise provided. The remainder of the 203.21 cabins or units and a proportionate share of the land on which 203.22 they are located will be designated as class 3a. The owner of 203.23 property desiring designation as class 1c or 4c property must 203.24 provide guest registers or other records demonstrating that the 203.25 units for which class 1c or 4c designation is sought were not 203.26 occupied for more than 250 days in the year preceding the 203.27 assessment if so requested. The portion of a property operated 203.28 as a (1) restaurant, (2) bar, (3) gift shop, and (4) other 203.29 nonresidential facility operated on a commercial basis not 203.30 directly related to temporary and seasonal residential occupancy 203.31 for recreation purposes shall not qualify for class 1c or 4c; 203.32 (2) qualified property used as a golf course if: 203.33 (i) it is open to the public on a daily fee basis. It may 203.34 charge membership fees or dues, but a membership fee may not be 203.35 required in order to use the property for golfing, and its green 203.36 fees for golfing must be comparable to green fees typically 204.1 charged by municipal courses; and 204.2 (ii) it meets the requirements of section 273.112, 204.3 subdivision 3, paragraph (d). 204.4 A structure used as a clubhouse, restaurant, or place of 204.5 refreshment in conjunction with the golf course is classified as 204.6 class 3a property; 204.7 (3) real property up to a maximum of one acre of land owned 204.8 by a nonprofit community service oriented organization; provided 204.9 that the property is not used for a revenue-producing activity 204.10 for more than six days in the calendar year preceding the year 204.11 of assessment and the property is not used for residential 204.12 purposes on either a temporary or permanent basis. For purposes 204.13 of this clause, a "nonprofit community service oriented 204.14 organization" means any corporation, society, association, 204.15 foundation, or institution organized and operated exclusively 204.16 for charitable, religious, fraternal, civic, or educational 204.17 purposes, and which is exempt from federal income taxation 204.18 pursuant to section 501(c)(3), (10), or (19) of the Internal 204.19 Revenue Code of 1986, as amended through December 31, 1990. For 204.20 purposes of this clause, "revenue-producing activities" shall 204.21 include but not be limited to property or that portion of the 204.22 property that is used as an on-sale intoxicating liquor or 3.2 204.23 percent malt liquor establishment licensed under chapter 340A, a 204.24 restaurant open to the public, bowling alley, a retail store, 204.25 gambling conducted by organizations licensed under chapter 349, 204.26 an insurance business, or office or other space leased or rented 204.27 to a lessee who conducts a for-profit enterprise on the 204.28 premises. Any portion of the property which is used for 204.29 revenue-producing activities for more than six days in the 204.30 calendar year preceding the year of assessment shall be assessed 204.31 as class 3a. The use of the property for social events open 204.32 exclusively to members and their guests for periods of less than 204.33 24 hours, when an admission is not charged nor any revenues are 204.34 received by the organization shall not be considered a 204.35 revenue-producing activity; 204.36 (4) postsecondary student housing of not more than one acre 205.1 of land that is owned by a nonprofit corporation organized under 205.2 chapter 317A and is used exclusively by a student cooperative, 205.3 sorority, or fraternity for on-campus housing or housing located 205.4 within two miles of the border of a college campus; 205.5 (5) manufactured home parks as defined in section 327.14, 205.6 subdivision 3; 205.7 (6) real property that is actively and exclusively devoted 205.8 to indoor fitness, health, social, recreational, and related 205.9 uses, is owned and operated by a not-for-profit corporation, and 205.10 is located within the metropolitan area as defined in section 205.11 473.121, subdivision 2; 205.12 (7) a leased or privately owned noncommercial aircraft 205.13 storage hangar not exempt under section 272.01, subdivision 2, 205.14 and the land on which it is located, provided that: 205.15 (i) the land is on an airport owned or operated by a city, 205.16 town, county, Metropolitan Airports Commission, or group 205.17 thereof; and 205.18 (ii) the land lease, or any ordinance or signed agreement 205.19 restricting the use of the leased premise, prohibits commercial 205.20 activity performed at the hangar. 205.21 If a hangar classified under this clause is sold after June 205.22 30, 2000, a bill of sale must be filed by the new owner with the 205.23 assessor of the county where the property is located within 60 205.24 days of the sale;and205.25 (8) a privately owned noncommercial aircraft storage hangar 205.26 not exempt under section 272.01, subdivision 2, and the land on 205.27 which it is located, provided that: 205.28 (i) the land abuts a public airport; and 205.29 (ii) the owner of the aircraft storage hangar provides the 205.30 assessor with a signed agreement restricting the use of the 205.31 premises, prohibiting commercial use or activity performed at 205.32 the hangar; and 205.33 (9) residential real estate, a portion of which is used by 205.34 the owner for homestead purposes, and that is also a place of 205.35 lodging, if all of the following criteria are met: 205.36 (i) rooms are provided for rent to transient guests that 206.1 generally stay for periods of 14 or fewer days; 206.2 (ii) meals are provided to persons who rent rooms, the cost 206.3 of which is incorporated in the basic room rate; 206.4 (iii) meals are not provided to the general public except 206.5 for special events on fewer than seven days in the calendar year 206.6 preceding the year of the assessment; and 206.7 (iv) the owner is the operator of the property. 206.8 The market value subject to the 4c classification under this 206.9 clause is limited to five rental units. Any rental units on the 206.10 property in excess of five, must be valued and assessed as class 206.11 3a. The portion of the property used for purposes of a 206.12 homestead by the owner must be classified as class 1a property 206.13 under subdivision 22. 206.14 Class 4c property has a class rate of 1.5 percent of market 206.15 value, except that (i) each parcel of seasonal residential 206.16 recreational property not used for commercial purposes has the 206.17 same class rates as class 4bb property, (ii) manufactured home 206.18 parks assessed under clause (5) have the same class rate as 206.19 class 4b property, (iii) commercial-use seasonal residential 206.20 recreational property has a class rate of one percent for the 206.21 first $500,000 of market value, which includes any market value 206.22 receiving the 0.55 or one percent rate under subdivision 22, and 206.23 1.25 percent for the remaining market value, (iv) the market 206.24 value of property described in clause (4) has a class rate of 206.25 one percent, (v) the market value of property described in 206.26 clauses (2) and (6) has a class rate of 1.25 percent, and (vi) 206.27 that portion of the market value of property in clause (8) 206.28 qualifying for class 4c property has a class rate of 1.25 206.29 percent. 206.30 (e) Class 4d property is qualifying low-income rental 206.31 housing certified to the assessor by the Housing Finance Agency 206.32 under section 273.1321. Class 4d includes land in proportion to 206.33 the total market value of the building that is qualifying 206.34 low-income rental housing. 206.35 Class 4d property has a class rate of 0.55 percent for 206.36 taxes payable in 2007 and thereafter. 207.1 Sec. 42. [273.1321] [VALUATION OF LOW-INCOME RENTAL 207.2 PROPERTY; CAPITALIZED VALUE OF NET OPERATING INCOME.] 207.3 Subdivision 1. [REQUIREMENT.] Low-income rental property 207.4 classified as class 4d under section 273.13, subdivision 25, is 207.5 entitled to valuation under this section if at least 75 percent 207.6 of the units in the rental housing property meet any of the 207.7 following qualifications: 207.8 (1) the units are subject to a housing assistance payments 207.9 contract under section 8 of the United States Housing Act of 207.10 1937, as amended; 207.11 (2) the units are rent-restricted and income-restricted 207.12 units of a qualified low-income housing project receiving tax 207.13 credits under section 42(g) of the Internal Revenue Code of 207.14 1986, as amended; 207.15 (3) the units are financed by the Rural Housing Service of 207.16 the United States Department of Agriculture and receive payments 207.17 under the rental assistance program pursuant to section 521(a) 207.18 of the Housing Act of 1949, as amended; or 207.19 (4) the units are subject to rent and income restrictions 207.20 under the terms of financial assistance provided to the rental 207.21 housing property by a federal, state, or local unit of 207.22 government as evidenced by a document recorded against the 207.23 property. 207.24 The restrictions must require assisted units to be occupied 207.25 by residents whose household income at the time of initial 207.26 occupancy does not exceed 60 percent of the greater of area or 207.27 state median income, adjusted for family size, as determined by 207.28 the United States Department of Housing and Urban Development. 207.29 The restriction must also require the rents for assisted units 207.30 to not exceed 30 percent of 60 percent of the greater of area or 207.31 state median income, adjusted for family size, as determined by 207.32 the United States Department of Housing and Urban Development. 207.33 Subd. 2. [DETERMINATION OF VALUE.] (a) The value of any 207.34 rental housing property meeting the qualifications of 207.35 subdivision 1 shall be determined, upon timely application by 207.36 the owner in the manner provided in subdivision 3, on the basis 208.1 of the restricted use of the property, notwithstanding sections 208.2 272.03, subdivision 8, and 273.11, by capitalizing the net 208.3 operating income prior to the payment of debt service. 208.4 (b) Net operating income prior to payment of debt service 208.5 must be the amounts shown in a financial statement prepared by 208.6 an independent certified public accountant or firm. The 208.7 financial statement must show the revenues, expenses, cash 208.8 flows, assets, liabilities, and net assets for the property for 208.9 which an application is made under this section. 208.10 (c) The capitalization rate applied to net operating income 208.11 shall be established jointly by the commissioner and the Housing 208.12 Finance Agency based on market data and industry standards. The 208.13 commissioner and the Housing Finance Agency shall jointly 208.14 establish separate rates based on types of rental housing 208.15 properties and their locations. 208.16 Subd. 3. [APPLICATION.] (a) Application for assessment 208.17 under this section must be filed by February 28 of the levy 208.18 year, or at a later date the Housing Finance Agency deems 208.19 practicable. The application must be filed with the Housing 208.20 Finance Agency, on a form prescribed by the agency, and must 208.21 contain the information required by the Housing Finance Agency. 208.22 (b) Each application must include: 208.23 (1) the property tax identification number; 208.24 (2) evidence that the property meets the requirements of 208.25 subdivision 1; and 208.26 (3) a true and correct copy of the financial statement 208.27 related to the property. 208.28 (c) The applicant must pay an application fee to be set by 208.29 the Housing Finance Agency. The application fee charged by the 208.30 agency must approximately equal the costs of processing and 208.31 reviewing the applications. The fee must be deposited in the 208.32 housing development fund. 208.33 Subd. 4. [CERTIFICATION.] By June 1 of each levy year, the 208.34 Housing Finance Agency must certify to local assessors the 208.35 valuation, as determined under this section, of rental 208.36 properties that apply and are qualified for valuation under this 209.1 section. In making the certification, the Housing Finance 209.2 Agency may rely on the application and supporting information 209.3 supplied by the property owner. 209.4[EFFECTIVE DATE.] This section is effective for taxes 209.5 levied in 2006, payable in 2007, and thereafter. 209.6 Sec. 43. [273.1322] [VACANT COMMERCIAL-INDUSTRIAL 209.7 PROPERTIES.] 209.8 Subdivision 1. [AUTHORITY.] A city may establish, by 209.9 ordinance, a program to encourage redevelopment, provide for 209.10 better utilization of commercial-industrial property, and 209.11 eliminate blighting influences by revoking the eligibility of 209.12 individual commercial-industrial properties to receive the 209.13 credit authorized under section 273.1398, subdivision 4. The 209.14 program may revoke eligibility only if the property has been 209.15 vacant, as defined in subdivision 3, clauses (1) to (3), for 209.16 three or more consecutive years prior to the current assessment 209.17 year, or under subdivision 3, clause (4), for five or more 209.18 consecutive years prior to the current assessment year. 209.19 Subd. 2. [MINIMUM REQUIREMENTS.] The program must provide: 209.20 (1) standards for determining whether a property is vacant; 209.21 (2) written assessment notice by the city or county to the 209.22 property owner informing the owner that the property's 209.23 eligibility will be revoked; 209.24 (3) opportunity for the property owner to appeal the 209.25 revocation at the board of equalization; 209.26 (4) timely notice to the county assessor of the property's 209.27 eligibility revocation, if the city has a city assessor and the 209.28 city assessor has revoked the property's eligibility; and 209.29 (5) any other provisions the city determines are necessary 209.30 or appropriate to the operation of the program to achieve its 209.31 purposes. 209.32 Subd. 3. [DEFINITION OF VACANT.] A program established 209.33 under this section may provide that a property is vacant if the 209.34 property is: 209.35 (1) condemned, dangerous, or having multiple building code 209.36 violations; 210.1 (2) condemned and illegally occupied; 210.2 (3) either occupied or unoccupied, during which time the 210.3 enforcement officer for the municipality has issued multiple 210.4 orders to correct nuisance conditions; or 210.5 (4) unoccupied and not utilized for a commercial or 210.6 industrial purpose. 210.7 Subd. 4. [NOTICE TO PROPERTY OWNER.] The municipality 210.8 shall give notice to the property owner requiring that any 210.9 conditions in subdivision 3, clauses (1) to (3), be remedied, 210.10 and that the property be occupied and used for a commercial or 210.11 industrial purpose for at least 180 days during the next 210.12 12-month period, or else the property may cease to be eligible 210.13 for the credit under section 273.1398, subdivision 4. 210.14[EFFECTIVE DATE.] This section is effective for taxes 210.15 payable in 2007 and thereafter. 210.16 Sec. 44. Minnesota Statutes 2004, section 273.1384, 210.17 subdivision 3, is amended to read: 210.18 Subd. 3. [CREDIT REIMBURSEMENTS.] (a) The county auditor 210.19 shall determine the tax reductions allowed under this section 210.20 within the county for each taxes payable year and shall certify 210.21 that amount to the commissioner of revenue as a part of the 210.22 abstracts of tax lists submitted by the county auditors under 210.23 section 275.29. 210.24 (b) In the case of class 1a, class lc, or class 2a 210.25 homestead property which is located within a city, the county 210.26 auditor shall determine whether the net tax on each parcel is 210.27 less than the applicable percentage of its taxable market value 210.28 provided in this paragraph for the year. For taxes payable in 210.29 2007 and 2008, if the net tax on the property is less than 0.7 210.30 percent of its taxable market value, the county auditor shall 210.31 reduce the reimbursement to the county and the city for the 210.32 credit allowed under subdivision 1 by the amount of the 210.33 difference. For taxes payable in 2009 and 2010, if the net tax 210.34 on the property is less than 0.8 percent of its taxable market 210.35 value, the county auditor shall reduce the reimbursement to the 210.36 county and the city for the credit allowed under subdivision 1 211.1 by the amount of the difference. For taxes payable in 2011 and 211.2 2012, if the net tax on the property is less than 0.9 percent of 211.3 its taxable market value, the county auditor shall reduce the 211.4 reimbursement to the county and the city for the credit allowed 211.5 under subdivision 1 by the amount of the difference. For taxes 211.6 payable in 2013 and thereafter, if the net tax on the property 211.7 is less than one percent of its taxable market value, the county 211.8 auditor shall reduce the reimbursement to the county and the 211.9 city for the credit allowed under subdivision 1 by the amount of 211.10 the difference. The market value credit reimbursement cannot be 211.11 less than zero. 211.12 (c) Any prior year adjustments shall also be certified on 211.13 the abstracts of tax lists. The commissioner shall review the 211.14 certifications for accuracy, and may make such changes as are 211.15 deemed necessary, or return the certification to the county 211.16 auditor for correction. If there is no reduction of the 211.17 reimbursements under paragraph (b), the credits under this 211.18 section must be used to proportionately reduce the net tax 211.19 capacity-based property tax payable to each local taxing 211.20 jurisdiction as provided in section 273.1393. If there is a 211.21 reduction under paragraph (b), the reimbursements paid to the 211.22 city and county must be reduced in proportion to the amount of 211.23 their levies. 211.24[EFFECTIVE DATE.] This section is effective for taxes 211.25 levied in 2006, payable in 2007, and thereafter. 211.26 Sec. 45. [273.323] [EFFECTIVE DATE FOR RULES FOR VALUATION 211.27 OF ELECTRIC AND TRANSMISSION PIPELINE UTILITY PROPERTY.] 211.28 Rules adopted by the commissioner that prescribe the method 211.29 of valuing property of electric and transmission pipeline 211.30 utilities may not take effect before the end of the regular 211.31 legislative session in the calendar year following adoption of 211.32 the rules. 211.33[EFFECTIVE DATE.] This section is effective the day 211.34 following final enactment. 211.35 Sec. 46. Minnesota Statutes 2004, section 275.065, 211.36 subdivision 3, is amended to read: 212.1 Subd. 3. [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 212.2 county auditor shall prepare and the county treasurer shall 212.3 deliver after November 10 and on or before November 24 each 212.4 year, by first class mail to each taxpayer at the address listed 212.5 on the county's current year's assessment roll, a notice of 212.6 proposed property taxes. 212.7 (b) The commissioner of revenue shall prescribe the form of 212.8 the notice. 212.9 (c) The notice must inform taxpayers that it contains the 212.10 amount of property taxes each taxing authority proposes to 212.11 collect for taxes payable the following year. In the case of a 212.12 town, or in the case of the state general tax, the final tax 212.13 amount will be its proposed tax. In the case of taxing 212.14 authorities required to hold a public meeting under subdivision 212.15 6, the notice must clearly state that each taxing authority, 212.16 including regional library districts established under section 212.17 134.201, and including the metropolitan taxing districts as 212.18 defined in paragraph (i), but excluding all other special taxing 212.19 districts and towns, will hold a public meeting to receive 212.20 public testimony on the proposed budget and proposed or final 212.21 property tax levy, or, in case of a school district, on the 212.22 current budget and proposed property tax levy. It must clearly 212.23 state the time and place of each taxing authority's meeting, a 212.24 telephone number for the taxing authority that taxpayers may 212.25 call if they have questions related to the notice, and an 212.26 address where comments will be received by mail. 212.27 (d) The notice must state for each parcel: 212.28 (1) the market value of the property as determined under 212.29 section 273.11, and used for computing property taxes payable in 212.30 the following year and for taxes payable in the current year as 212.31 each appears in the records of the county assessor on November 1 212.32 of the current year; and, in the case of residential property, 212.33 whether the property is classified as homestead or 212.34 nonhomestead. The notice must clearly inform taxpayers of the 212.35 years to which the market values apply and that the values are 212.36 final values; 213.1 (2) the items listed below, shown separately by county, 213.2 city or town, and state general tax, net of the residential and 213.3 agricultural homestead credit under section 273.1384, voter 213.4 approved school levy, other local school levy, and the sum of 213.5 the special taxing districts, and as a total of all taxing 213.6 authorities: 213.7 (i) the actual tax for taxes payable in the current year; 213.8 and 213.9 (ii) the proposed tax amount. 213.10 If the county levy under clause (2) includes an amount for 213.11 a lake improvement district as defined under sections 103B.501 213.12 to 103B.581, the amount attributable for that purpose must be 213.13 separately stated from the remaining county levy amount. 213.14 In the case of a town or the state general tax, the final 213.15 tax shall also be its proposed tax unless the town changes its 213.16 levy at a special town meeting under section 365.52. If a 213.17 school district has certified under section 126C.17, subdivision 213.18 9, that a referendum will be held in the school district at the 213.19 November general election, the county auditor must note next to 213.20 the school district's proposed amount that a referendum is 213.21 pending and that, if approved by the voters, the tax amount may 213.22 be higher than shown on the notice. In the case of the city of 213.23 Minneapolis, the levy for the Minneapolis Library Board and the 213.24 levy for Minneapolis Park and Recreation shall be listed 213.25 separately from the remaining amount of the city's levy. In the 213.26 case of the city of St. Paul, the levy for the St. Paul Library 213.27 Agency must be listed separately from the remaining amount of 213.28 the city's levy. In the case of Ramsey County, any amount 213.29 levied under section 134.07 may be listed separately from the 213.30 remaining amount of the county's levy. In the case of a parcel 213.31 where tax increment or the fiscal disparities areawide tax under 213.32 chapter 276A or 473F applies, the proposed tax levy on the 213.33 captured value or the proposed tax levy on the tax capacity 213.34 subject to the areawide tax must each be stated separately and 213.35 not included in the sum of the special taxing districts; and 213.36 (3) the increase or decrease between the total taxes 214.1 payable in the current year and the total proposed taxes, 214.2 expressed as a percentage. 214.3 For purposes of this section, the amount of the tax on 214.4 homesteads qualifying under the senior citizens' property tax 214.5 deferral program under chapter 290B is the total amount of 214.6 property tax before subtraction of the deferred property tax 214.7 amount. 214.8 (e) The notice must clearly state that the proposed or 214.9 final taxes do not include the following: 214.10 (1) special assessments; 214.11 (2) levies approved by the voters after the date the 214.12 proposed taxes are certified, including bond referenda and 214.13 school district levy referenda; 214.14 (3) a levy limit increase approved by the voters by the 214.15 first Tuesday after the first Monday in November of the levy 214.16 year as provided under section 275.73; 214.17 (4) amounts necessary to pay cleanup or other costs due to 214.18 a natural disaster occurring after the date the proposed taxes 214.19 are certified; 214.20 (5) amounts necessary to pay tort judgments against the 214.21 taxing authority that become final after the date the proposed 214.22 taxes are certified; and 214.23 (6) the contamination tax imposed on properties which 214.24 received market value reductions for contamination. 214.25 (f) Except as provided in subdivision 7, failure of the 214.26 county auditor to prepare or the county treasurer to deliver the 214.27 notice as required in this section does not invalidate the 214.28 proposed or final tax levy or the taxes payable pursuant to the 214.29 tax levy. 214.30 (g) If the notice the taxpayer receives under this section 214.31 lists the property as nonhomestead, and satisfactory 214.32 documentation is provided to the county assessor by the 214.33 applicable deadline, and the property qualifies for the 214.34 homestead classification in that assessment year, the assessor 214.35 shall reclassify the property to homestead for taxes payable in 214.36 the following year. 215.1 (h) In the case of class 4 residential property used as a 215.2 residence for lease or rental periods of 30 days or more, the 215.3 taxpayer must either: 215.4 (1) mail or deliver a copy of the notice of proposed 215.5 property taxes to each tenant, renter, or lessee; or 215.6 (2) post a copy of the notice in a conspicuous place on the 215.7 premises of the property. 215.8 The notice must be mailed or posted by the taxpayer by 215.9 November 27 or within three days of receipt of the notice, 215.10 whichever is later. A taxpayer may notify the county treasurer 215.11 of the address of the taxpayer, agent, caretaker, or manager of 215.12 the premises to which the notice must be mailed in order to 215.13 fulfill the requirements of this paragraph. 215.14 (i) For purposes of this subdivision, subdivisions 5a and 215.15 6, "metropolitan special taxing districts" means the following 215.16 taxing districts in the seven-county metropolitan area that levy 215.17 a property tax for any of the specified purposes listed below: 215.18 (1) Metropolitan Council under section 473.132, 473.167, 215.19 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 215.20 (2) Metropolitan Airports Commission under section 473.667, 215.21 473.671, or 473.672; and 215.22 (3) Metropolitan Mosquito Control Commission under section 215.23 473.711. 215.24 For purposes of this section, any levies made by the 215.25 regional rail authorities in the county of Anoka, Carver, 215.26 Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 215.27 398A shall be included with the appropriate county's levy and 215.28 shall be discussed at that county's public hearing. 215.29[EFFECTIVE DATE.] This section is effective for notices for 215.30 property taxes levied in 2005, payable in 2006, and thereafter. 215.31 Sec. 47. Minnesota Statutes 2004, section 275.065, is 215.32 amended by adding a subdivision to read: 215.33 Subd. 9. [AITKIN COUNTY AND SCHOOL DISTRICT 215.34 HEARING.] Notwithstanding any other law, Aitkin County and 215.35 Independent School District No. 1, and the city of Aitkin, or 215.36 any two of them, may hold their initial public hearing jointly. 216.1 The hearing must be held on the second Tuesday of December each 216.2 year. The advertisement required in subdivision 5a may be a 216.3 joint advertisement. The hearing is otherwise subject to the 216.4 requirements of this section. 216.5[EFFECTIVE DATE.] This section is effective for hearings 216.6 conducted in 2005 and subsequent years. 216.7 Sec. 48. Minnesota Statutes 2004, section 275.065, is 216.8 amended by adding a subdivision to read: 216.9 Subd. 10. [NOBLES COUNTY; JOINT INITIAL PUBLIC 216.10 HEARING.] Notwithstanding any other law, Nobles County, the city 216.11 of Worthington, and Independent School District No. 518, 216.12 Worthington, or any two of them, may hold their initial public 216.13 hearing jointly. The hearing must be held on the second Tuesday 216.14 of December each year. The advertisement required in 216.15 subdivision 5a may be a joint advertisement. The hearing is 216.16 otherwise subject to the requirements of this section. 216.17[EFFECTIVE DATE.] This section is effective for hearings 216.18 conducted in 2005 and subsequent years. 216.19 Sec. 49. Minnesota Statutes 2004, section 275.066, is 216.20 amended to read: 216.21 275.066 [SPECIAL TAXING DISTRICTS; DEFINITION.] 216.22 For the purposes of property taxation and property tax 216.23 state aids, the term "special taxing districts" includes the 216.24 following entities: 216.25 (1) watershed districts under chapter 103D; 216.26 (2) sanitary districts under sections 115.18 to 115.37; 216.27 (3) regional sanitary sewer districts under sections 115.61 216.28 to 115.67; 216.29 (4) regional public library districts under section 216.30 134.201; 216.31 (5) park districts under chapter 398; 216.32 (6) regional railroad authorities under chapter 398A; 216.33 (7) hospital districts under sections 447.31 to 447.38; 216.34 (8) St. Cloud Metropolitan Transit Commission under 216.35 sections 458A.01 to 458A.15; 216.36 (9) Duluth Transit Authority under sections 458A.21 to 217.1 458A.37; 217.2 (10) regional development commissions under sections 217.3 462.381 to 462.398; 217.4 (11) housing and redevelopment authorities under sections 217.5 469.001 to 469.047; 217.6 (12) port authorities under sections 469.048 to 469.068; 217.7 (13) economic development authorities under sections 217.8 469.090 to 469.1081; 217.9 (14) Metropolitan Council under sections 473.123 to 217.10 473.549; 217.11 (15) Metropolitan Airports Commission under sections 217.12 473.601 to 473.680; 217.13 (16) Metropolitan Mosquito Control Commission under 217.14 sections 473.701 to 473.716; 217.15 (17) Morrison County Rural Development Financing Authority 217.16 under Laws 1982, chapter 437, section 1; 217.17 (18) Croft Historical Park District under Laws 1984, 217.18 chapter 502, article 13, section 6; 217.19 (19) East Lake County Medical Clinic District under Laws 217.20 1989, chapter 211, sections 1 to 6; 217.21 (20) Floodwood Area Ambulance District under Laws 1993, 217.22 chapter 375, article 5, section 39; 217.23 (21) Middle Mississippi River Watershed Management 217.24 Organization under sections 103B.211 and 103B.241; 217.25 (22) emergency medical services special taxing districts 217.26 under section 144F.01; 217.27 (23) a county levying under the authority of section 217.28 103B.241, 103B.245, or 103B.251; 217.29 (24) Southern St. Louis County Special Taxing District; 217.30 Chris Jensen Nursing Home under Laws 2003, First Special Session 217.31 chapter 21, article 4, section 12;and217.32 (25) soil and water conservation districts under chapter 217.33 103C; and 217.34 (26) any other political subdivision of the state of 217.35 Minnesota, excluding counties, school districts, cities, and 217.36 towns, that has the power to adopt and certify a property tax 218.1 levy to the county auditor, as determined by the commissioner of 218.2 revenue. 218.3 Sec. 50. Minnesota Statutes 2004, section 275.70, 218.4 subdivision 5, is amended to read: 218.5 Subd. 5. [SPECIAL LEVIES.] "Special levies" means those 218.6 portions of ad valorem taxes levied by a local governmental unit 218.7 for the following purposes or in the following manner: 218.8 (1) to pay the costs of the principal and interest on 218.9 bonded indebtedness or to reimburse for the amount of liquor 218.10 store revenues used to pay the principal and interest due on 218.11 municipal liquor store bonds in the year preceding the year for 218.12 which the levy limit is calculated; 218.13 (2) to pay the costs of principal and interest on 218.14 certificates of indebtedness issued for any corporate purpose 218.15 except for the following: 218.16 (i) tax anticipation or aid anticipation certificates of 218.17 indebtedness; 218.18 (ii) certificates of indebtedness issued under sections 218.19 298.28 and 298.282; 218.20 (iii) certificates of indebtedness used to fund current 218.21 expenses or to pay the costs of extraordinary expenditures that 218.22 result from a public emergency; or 218.23 (iv) certificates of indebtedness used to fund an 218.24 insufficiency in tax receipts or an insufficiency in other 218.25 revenue sources; 218.26 (3) to provide for the bonded indebtedness portion of 218.27 payments made to another political subdivision of the state of 218.28 Minnesota; 218.29 (4) to fund payments made to the Minnesota State Armory 218.30 Building Commission under section 193.145, subdivision 2, to 218.31 retire the principal and interest on armory construction bonds; 218.32 (5) property taxes approved by voters which are levied 218.33 against the referendum market value as provided under section 218.34 275.61; 218.35 (6) to fund matching requirements needed to qualify for 218.36 federal or state grants or programs to the extent that either 219.1 (i) the matching requirement exceeds the matching requirement in 219.2 calendar year 2001, or (ii) it is a new matching requirement 219.3 that did not exist prior to 2002; 219.4 (7) to pay the expenses reasonably and necessarily incurred 219.5 in preparing for or repairing the effects of natural disaster 219.6 including the occurrence or threat of widespread or severe 219.7 damage, injury, or loss of life or property resulting from 219.8 natural causes, in accordance with standards formulated by the 219.9 Emergency Services Division of the state Department of Public 219.10 Safety, as allowed by the commissioner of revenue under section 219.11 275.74, subdivision 2; 219.12 (8) pay amounts required to correct an error in the levy 219.13 certified to the county auditor by a city or county in a levy 219.14 year, but only to the extent that when added to the preceding 219.15 year's levy it is not in excess of an applicable statutory, 219.16 special law or charter limitation, or the limitation imposed on 219.17 the governmental subdivision by sections 275.70 to 275.74 in the 219.18 preceding levy year; 219.19 (9) to pay an abatement under section 469.1815; 219.20 (10) to pay any costs attributable to increases in the 219.21 employer contribution rates under chapter 353 that are effective 219.22 after June 30, 2001; 219.23 (11) to pay the operating or maintenance costs of a county 219.24 jail as authorized in section 641.01 or 641.262, or of a 219.25 correctional facility as defined in section 241.021, subdivision 219.26 1, paragraph (f), to the extent that the county can demonstrate 219.27 to the commissioner of revenue that the amount has been included 219.28 in the county budget as a direct result of a rule, minimum 219.29 requirement, minimum standard, or directive of the Department of 219.30 Corrections, or to pay the operating or maintenance costs of a 219.31 regional jail as authorized in section 641.262. For purposes of 219.32 this clause, a district court order is not a rule, minimum 219.33 requirement, minimum standard, or directive of the Department of 219.34 Corrections. If the county utilizes this special levy, except 219.35 to pay operating or maintenance costs of a new regional jail 219.36 facility under sections 641.262 to 641.264 which will not 220.1 replace an existing jail facility, any amount levied by the 220.2 county in the previous levy year for the purposes specified 220.3 under this clause and included in the county's previous year's 220.4 levy limitation computed under section 275.71, shall be deducted 220.5 from the levy limit base under section 275.71, subdivision 2, 220.6 when determining the county's current year levy limitation. The 220.7 county shall provide the necessary information to the 220.8 commissioner of revenue for making this determination; 220.9 (12) to pay for operation of a lake improvement district, 220.10 as authorized under section 103B.555. If the county utilizes 220.11 this special levy, any amount levied by the county in the 220.12 previous levy year for the purposes specified under this clause 220.13 and included in the county's previous year's levy limitation 220.14 computed under section 275.71 shall be deducted from the levy 220.15 limit base under section 275.71, subdivision 2, when determining 220.16 the county's current year levy limitation. The county shall 220.17 provide the necessary information to the commissioner of revenue 220.18 for making this determination; 220.19 (13) to repay a state or federal loan used to fund the 220.20 direct or indirect required spending by the local government due 220.21 to a state or federal transportation project or other state or 220.22 federal capital project. This authority may only be used if the 220.23 project is not a local government initiative; 220.24 (14) to pay for court administration costs as required 220.25 under section 273.1398, subdivision 4b, less the (i) county's 220.26 share of transferred fines and fees collected by the district 220.27 courts in the county for calendar year 2001 and (ii) the aid 220.28 amount certified to be paid to the county in 2004 under section 220.29 273.1398, subdivision 4c; however, for taxes levied to pay for 220.30 these costs in the year in which the court financing is 220.31 transferred to the state, the amount under this clause is 220.32 limited to the amount of aid the county is certified to receive 220.33 under section 273.1398, subdivision 4a;and220.34 (15) to fund a police or firefighters relief association as 220.35 required under section 69.77 to the extent that the required 220.36 amount exceeds the amount levied for this purpose in 2001; and 221.1 (16) to pay for the maintenance and support of a city or 221.2 county society for the prevention of cruelty to animals under 221.3 section 343.11. If the city or county uses this special levy, 221.4 any amount levied by the city or county in the previous levy 221.5 year for the purposes specified in this clause and included in 221.6 the city's or county's previous year's levy limit computed under 221.7 section 275.71, must be deducted from the levy limit base under 221.8 section 275.71, subdivision 2, in determining the city's or 221.9 county's current year levy limit. 221.10[EFFECTIVE DATE.] This section is effective for taxes 221.11 levied in 2005, payable in 2006, and thereafter. 221.12 Sec. 51. Minnesota Statutes 2004, section 276.04, 221.13 subdivision 2, is amended to read: 221.14 Subd. 2. [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 221.15 shall provide for the printing of the tax statements. The 221.16 commissioner of revenue shall prescribe the form of the property 221.17 tax statement and its contents. The statement must contain a 221.18 tabulated statement of the dollar amount due to each taxing 221.19 authority and the amount of the state tax from the parcel of 221.20 real property for which a particular tax statement is prepared. 221.21 The dollar amounts attributable to the county, the state tax, 221.22 the voter approved school tax, the other local school tax, the 221.23 township or municipality, and the total of the metropolitan 221.24 special taxing districts as defined in section 275.065, 221.25 subdivision 3, paragraph (i), must be separately stated. The 221.26 amounts due all other special taxing districts, if any, may be 221.27 aggregated. If the county levy under this paragraph includes an 221.28 amount for a lake improvement district as defined under sections 221.29 103B.501 to 103B.581, the amount attributable for that purpose 221.30 must be separately stated from the remaining county levy 221.31 amount. In the case of Ramsey County, if the county levy under 221.32 this paragraph includes an amount for public library service 221.33 under section 134.07, the amount attributable for that purpose 221.34 may be separately stated from the remaining county levy amount. 221.35 The amount of the tax on homesteads qualifying under the senior 221.36 citizens' property tax deferral program under chapter 290B is 222.1 the total amount of property tax before subtraction of the 222.2 deferred property tax amount. The amount of the tax on 222.3 contamination value imposed under sections 270.91 to 270.98, if 222.4 any, must also be separately stated. The dollar amounts, 222.5 including the dollar amount of any special assessments, may be 222.6 rounded to the nearest even whole dollar. For purposes of this 222.7 section whole odd-numbered dollars may be adjusted to the next 222.8 higher even-numbered dollar. The amount of market value 222.9 excluded under section 273.11, subdivision 16, if any, must also 222.10 be listed on the tax statement. 222.11 (b) The property tax statements for manufactured homes and 222.12 sectional structures taxed as personal property shall contain 222.13 the same information that is required on the tax statements for 222.14 real property. 222.15 (c) Real and personal property tax statements must contain 222.16 the following information in the order given in this paragraph. 222.17 The information must contain the current year tax information in 222.18 the right column with the corresponding information for the 222.19 previous year in a column on the left: 222.20 (1) the property's estimated market value under section 222.21 273.11, subdivision 1; 222.22 (2) the property's taxable market value after reductions 222.23 under section 273.11, subdivisions 1a and 16; 222.24 (3) the property's gross tax, calculated by adding the 222.25 property's total property tax to the sum of the aids enumerated 222.26 in clause (4); 222.27 (4) a total of the following aids: 222.28 (i) education aids payable under chapters 122A, 123A, 123B, 222.29 124D, 125A, 126C, and 127A; 222.30 (ii) local government aids for cities, towns, and counties 222.31 under chapter 477A; and 222.32 (iii) disparity reduction aid under section 273.1398; 222.33 (5) for homestead residential and agricultural properties, 222.34 the credits under section 273.1384; 222.35 (6) any credits received under sections 273.119; 273.123; 222.36 273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 223.1 473H.10, except that the amount of credit received under section 223.2 273.135 must be separately stated and identified as "taconite 223.3 tax relief"; and 223.4 (7) the net tax payable in the manner required in paragraph 223.5 (a). 223.6 (d) If the county uses envelopes for mailing property tax 223.7 statements and if the county agrees, a taxing district may 223.8 include a notice with the property tax statement notifying 223.9 taxpayers when the taxing district will begin its budget 223.10 deliberations for the current year, and encouraging taxpayers to 223.11 attend the hearings. If the county allows notices to be 223.12 included in the envelope containing the property tax statement, 223.13 and if more than one taxing district relative to a given 223.14 property decides to include a notice with the tax statement, the 223.15 county treasurer or auditor must coordinate the process and may 223.16 combine the information on a single announcement. 223.17 The commissioner of revenue shall certify to the county 223.18 auditor the actual or estimated aids enumerated in clause (4) 223.19 that local governments will receive in the following year. The 223.20 commissioner must certify this amount by January 1 of each year. 223.21[EFFECTIVE DATE.] This section is effective for property 223.22 tax statements for taxes payable in 2006 and thereafter. 223.23 Sec. 52. [278.021] [PETITIONS INVOLVING LOW-INCOME RENTAL 223.24 HOUSING PROPERTY.] 223.25 Notwithstanding section 278.02, in the case of real 223.26 property that meets the definition of qualifying low-income 223.27 housing rental property established in Minnesota Statutes 2000, 223.28 section 273.126, the petition may include any and all such 223.29 parcels of real property in which the petitioner has an estate, 223.30 right, title, interest, or lien, except that all such parcels 223.31 included in the petition must be located in the same county. 223.32 Contiguous qualifying low-income rental housing property 223.33 overlapping county boundaries may be included in the same 223.34 petition. 223.35 Sec. 53. Minnesota Statutes 2004, section 278.03, 223.36 subdivision 1, is amended to read: 224.1 Subdivision 1. [REAL PROPERTY.]In the case of real224.2property,If the proceedings instituted by the filing of the 224.3 petition have not been completed before the 16th day of May next 224.4 following the filing or, in the case of class 1c property or 224.5 class 4c resort property before the 16th day of June for taxes 224.6 payable in 2006 and 2007 only, the petitioner shall pay to the 224.7 county treasurer 50 percent of the tax levied for such year 224.8 against the property involved, unless permission to continue 224.9 prosecution of the petition without such payment is obtained as 224.10 herein provided. If the proceedings instituted by the filing of 224.11 the petition have not been completed by the next October 16, or, 224.12 in the case of class 1b agricultural homestead, class 2a 224.13 agricultural homestead, and class 2b(2) agricultural 224.14 nonhomestead property, November 16, the petitioner shall pay to 224.15 the county treasurer 50 percent of the unpaid balance of the 224.16 taxes levied for the year against the property involved if the 224.17 unpaid balance is $2,000 or less and 80 percent of the unpaid 224.18 balance if the unpaid balance is over $2,000, unless permission 224.19 to continue prosecution of the petition without payment is 224.20 obtained as herein provided. The petitioner, upon ten days' 224.21 notice to the county attorney and to the county auditor, given 224.22 at least ten days prior to the 16th day of May or, in the case 224.23 of class 1c or class 4c resort property, the 16th day of June 224.24 for taxes payable in 2006 and 2007 only, or the 16th day of 224.25 October, or, in the case of class 1b agricultural homestead, 224.26 class 2a agricultural homestead, and class 2b(2) agricultural 224.27 nonhomestead property, the 16th day of November, may apply to 224.28 the court for permission to continue prosecution of the petition 224.29 without payment; and, if it is made to appear 224.30 (1) that the proposed review is to be taken in good faith; 224.31 (2) that there is probable cause to believe that the 224.32 property may be held exempt from the tax levied or that the tax 224.33 may be determined to be less than 50 percent of the amount 224.34 levied; and 224.35 (3) that it would work a hardship upon petitioner to pay 224.36 the taxes due, 225.1 the court may permit the petitioner to continue prosecution 225.2 of the petition without payment, or may fix a lesser amount to 225.3 be paid as a condition of continuing the prosecution of the 225.4 petition. 225.5 Failure to make payment of the amount required when due 225.6 shall operate automatically to dismiss the petition and all 225.7 proceedings thereunder unless the payment is waived by an order 225.8 of the court permitting the petitioner to continue prosecution 225.9 of the petition without payment. The petition shall be 225.10 automatically reinstated upon payment of the entire tax plus 225.11 interest and penalty if the payment is made within one year of 225.12 the dismissal. The county treasurer shall, upon request of the 225.13 petitioner, issue duplicate receipts for the tax payment, one of 225.14 which shall be filed by the petitioner in the proceeding. 225.15 Sec. 54. Minnesota Statutes 2004, section 279.01, 225.16 subdivision 1, is amended to read: 225.17 Subdivision 1. [DUE DATES; PENALTIES.] Except as provided 225.18 insubdivision 3 or 4this section, on May 16 or 21 days after 225.19 the postmark date on the envelope containing the property tax 225.20 statement, whichever is later, a penalty shall accrue and 225.21 thereafter be charged upon all unpaid taxes on real estate on 225.22 the current lists in the hands of the county treasurer. The 225.23 penalty shall be at a rate of two percent on homestead property 225.24 until May 31 and four percent on June 1. The penalty on 225.25 nonhomestead property shall be at a rate of four percent until 225.26 May 31 and eight percent on June 1. This penalty shall not 225.27 accrue until June 1 of each year, or 21 days after the postmark 225.28 date on the envelope containing the property tax statements, 225.29 whichever is later, on commercial use real property used for 225.30 seasonal residential recreational purposes and classified as 225.31 class 1c or 4c, and on other commercial use real property 225.32 classified as class 3a, provided that over 60 percent of the 225.33 gross income earned by the enterprise on the class 3a property 225.34 is earned during the months of May, June, July, and August. Any 225.35 property owner of such class 3a property who pays the first half 225.36 of the tax due on the property after May 15 and before June 1, 226.1 or 21 days after the postmark date on the envelope containing 226.2 the property tax statement, whichever is later, shall attach an 226.3 affidavit to the payment attesting to compliance with the income 226.4 provision of this subdivision. Thereafter, for both homestead 226.5 and nonhomestead property, on the first day of each month 226.6 beginning July 1, up to and including October 1 following, an 226.7 additional penalty of one percent for each month shall accrue 226.8 and be charged on all such unpaid taxes provided that if the due 226.9 date was extended beyond May 15 as the result of any delay in 226.10 mailing property tax statements no additional penalty shall 226.11 accrue if the tax is paid by the extended due date. If the tax 226.12 is not paid by the extended due date, then all penalties that 226.13 would have accrued if the due date had been May 15 shall be 226.14 charged. When the taxes against any tract or lot exceed $50, 226.15 one-half thereof may be paid prior to May 16 or 21 days after 226.16 the postmark date on the envelope containing the property tax 226.17 statement, whichever is later; and, if so paid, no penalty shall 226.18 attach; the remaining one-half shall be paid at any time prior 226.19 to October 16 following, without penalty; but, if not so paid, 226.20 then a penalty of two percent shall accrue thereon for homestead 226.21 property and a penalty of four percent on nonhomestead 226.22 property. Thereafter, for homestead property, on the first day 226.23 of November an additional penalty of four percent shall accrue 226.24 and on the first day of December following, an additional 226.25 penalty of two percent shall accrue and be charged on all such 226.26 unpaid taxes. Thereafter, for nonhomestead property, on the 226.27 first day of November and December following, an additional 226.28 penalty of four percent for each month shall accrue and be 226.29 charged on all such unpaid taxes. If one-half of such taxes 226.30 shall not be paid prior to May 16 or 21 days after the postmark 226.31 date on the envelope containing the property tax statement, 226.32 whichever is later, the same may be paid at any time prior to 226.33 October 16, with accrued penalties to the date of payment added, 226.34 and thereupon no penalty shall attach to the remaining one-half 226.35 until October 16 following. 226.36 This section applies to payment of personal property taxes 227.1 assessed against improvements to leased property, except as 227.2 provided by section 277.01, subdivision 3. 227.3 A county may provide by resolution that in the case of a 227.4 property owner that has multiple tracts or parcels with 227.5 aggregate taxes exceeding $50, payments may be made in 227.6 installments as provided in this subdivision. 227.7 The county treasurer may accept payments of more or less 227.8 than the exact amount of a tax installment due. If the accepted 227.9 payment is less than the amount due, payments must be applied 227.10 first to the penalty accrued for the year the payment is made. 227.11 Acceptance of partial payment of tax does not constitute a 227.12 waiver of the minimum payment required as a condition for filing 227.13 an appeal under section 278.03 or any other law, nor does it 227.14 affect the order of payment of delinquent taxes under section 227.15 280.39. 227.16 Sec. 55. Minnesota Statutes 2004, section 279.01, is 227.17 amended by adding a subdivision to read: 227.18 Subd. 5. [SEASONAL RESIDENTIAL RECREATIONAL PROPERTY USED 227.19 FOR COMMERCIAL PURPOSES.] For taxes payable in 2006 and 2007 227.20 only, in the case of class 1c property and class 4c seasonal 227.21 residential recreational property used for commercial purposes, 227.22 no penalties shall accrue to the first one-half property tax 227.23 payment as provided in this section if paid by June 15. On June 227.24 16, a penalty shall accrue and thereafter be charged upon all 227.25 unpaid taxes. On class 1c property the penalty is at a rate of 227.26 two percent until June 31, and four percent on July 1. On class 227.27 4c seasonal residential recreational property used for 227.28 commercial purposes, the penalty is four percent until June 31 227.29 and eight percent on July 1. Thereafter, for both class 1c and 227.30 class 4c seasonal residential recreational property used for 227.31 commercial purposes, on the first day of September and on the 227.32 first day of October, an additional penalty of one percent shall 227.33 accrue and be charged on unpaid taxes. The remaining one-half 227.34 property taxes must be paid and penalties accrue as provided in 227.35 subdivision 1. 227.36 Sec. 56. [290.0621] [SCHOOL REFERENDUM TAX.] 228.1 Subdivision 1. [IMPOSITION.] In addition to all other 228.2 taxes imposed by this chapter, a tax is imposed on individuals 228.3 who are domiciled on the last day of the taxable year within the 228.4 territory of a school district in which the voters approved an 228.5 income tax increase at a referendum conducted under section 228.6 126C.17, subdivision 9, for that purpose in 2006 or a subsequent 228.7 year. This tax does not apply to referendums on bond issues. 228.8 Individuals domiciled in the district on the last day of the 228.9 taxable year are subject to the tax. 228.10 Subd. 2. [RATE.] The commissioner of revenue shall 228.11 annually determine the rate of the tax imposed under this 228.12 section as a percentage of the state income tax liability of 228.13 individuals subject to the tax by each district. The school 228.14 referendum tax rate is equal to the ratio of (i) the district's 228.15 local effort revenue under section 126C.17, subdivision 6b, to 228.16 (ii) the state income tax liability of all individuals domiciled 228.17 in the district on the last day of the previous taxable year. 228.18 Subd. 3. [REVENUE DISTRIBUTION.] Revenue raised in 228.19 subdivision 1 must be placed in a special account in the general 228.20 fund. The amount necessary to make payments to school districts 228.21 under this section is annually appropriated from the general 228.22 fund to the commissioner of education and must be paid to school 228.23 districts according to section 127A.45. 228.24 Sec. 57. Minnesota Statutes 2004, section 343.11, is 228.25 amended to read: 228.26 343.11 [ACQUISITION OF PROPERTY, APPROPRIATIONS.] 228.27 Every county and district society for the prevention of 228.28 cruelty to animals may acquire, by purchase, gift, grant, or 228.29 devise, and hold, use, or convey, real estate and personal 228.30 property, and lease, mortgage, sell, or use the same in any 228.31 manner conducive to its interest, to the same extent as natural 228.32 persons. The county board of any county, or the council of any 228.33 city, in which such societies exist, may, in its discretion, 228.34 appropriate for the maintenance and support of such societies in 228.35 the transaction of the work for which they are organized, any 228.36 sums of money not otherwise appropriated, not to exceed in any 229.1 one year the sum of $4,800 or the sum of50 cents$1 per capita 229.2 based upon the county's or city's population as of the most 229.3 recent federal census, whichever is greater; provided, that no 229.4 part of the appropriation shall be expended for the payment of 229.5 the salary of any officer of the society. 229.6[EFFECTIVE DATE.] This section is effective January 1, 2006. 229.7 Sec. 58. [462A.0715] [SECTION 8, TAX CREDIT, AND RURAL 229.8 HOUSING SERVICE UNITS.] 229.9 (a) The agency may deem units as meeting the requirements 229.10 of section 273.126 and this section, if the units meet the 229.11 requirements provided in section 273.1321, subdivision 1. 229.12 (b) The agency may certify these deemed units under 229.13 subdivision 1 based on a simplified application procedure that 229.14 verifies the unit's qualifications under paragraph (a). 229.15 Sec. 59. Minnesota Statutes 2004, section 473F.08, is 229.16 amended by adding a subdivision to read: 229.17 Subd. 3c. [UNCOMPENSATED CARE REIMBURSEMENT.] (a) As used 229.18 in this subdivision, the following terms have the meanings given 229.19 in this paragraph. 229.20 (1) "Uncompensated care" means the sum of (i) the amount 229.21 that would have been charged by a facility for rendering free or 229.22 discounted care to persons who cannot afford to pay and for 229.23 which the facility did not expect payment and (ii) the amount 229.24 that had been charged by a facility for rendering care to 229.25 persons and billed to that person or a third-party payer for 229.26 which the facility expected but did not receive payment. 229.27 Uncompensated care does not include contractual write-offs. 229.28 (2) A "qualifying hospital" means a hospital in the area 229.29 that is: 229.30 (i) owned or operated by a local unit of government, or 229.31 formerly owned by a university or is a private nonprofit 229.32 hospital that leases its building from the county in which it is 229.33 located; and 229.34 (ii) has a licensed bed capacity greater than 400. 229.35 (b) A county that contains a qualifying hospital is 229.36 eligible for reimbursement of that portion of gross charges for 230.1 uncompensated care determined by multiplying the hospital's 230.2 gross charges during the base year by the percentage of 230.3 uncompensated care provided by the hospital during the base year 230.4 minus one-half of one percent of those gross charges, dividing 230.5 the result by two, and adjusting to cost by multiplying that 230.6 result by the hospital's cost-to-charge ratio during the base 230.7 year. By July 15, 2006, and each subsequent year, the county 230.8 shall notify its county auditor, as well as the administrative 230.9 auditor, of the amount of qualifying uncompensated care 230.10 provided, adjusted to cost using the hospital's cost-to-charge 230.11 ratio, during the 12-month period ending on June 30 of the 230.12 current year. 230.13 (c) The amount certified under paragraph (b) shall be 230.14 certified annually by the county auditor to the administrative 230.15 auditor as an addition to the county's areawide levy under 230.16 subdivision 5. 230.17 (d) The administrative auditor shall pay one-half of the 230.18 reimbursement to the county auditor of the county that contains 230.19 the qualifying hospital on or before June 15 and the remaining 230.20 one-half of the reimbursement on or before November 15. The 230.21 county auditor receiving the payment shall disburse the 230.22 reimbursement to the qualifying hospital within 15 days of 230.23 receipt of the reimbursement. 230.24 (e) Prior to the reporting specified in paragraph (b) 230.25 above, all qualifying hospitals that participate in this program 230.26 shall agree upon and implement a common standard for reporting 230.27 uncompensated care, and a common standard for determining 230.28 eligibility for uncompensated care for all participating 230.29 hospitals. 230.30[EFFECTIVE DATE.] This section is effective for fiscal 230.31 disparities contribution and distribution tax capacities for 230.32 taxes payable in 2007 and 2008 only. 230.33 Sec. 60. Minnesota Statutes 2004, section 473F.08, is 230.34 amended by adding a subdivision to read: 230.35 Subd. 3d. [HENNEPIN COUNTY PUBLIC DEFENDER COST 230.36 REIMBURSEMENT.] (a) Hennepin County is eligible for 231.1 reimbursement of costs incurred by the county under section 231.2 611.26, subdivision 3a, paragraph (c). By July 15, 2006, and 231.3 each subsequent year, the county shall notify the county auditor 231.4 and the administrative auditor, of the amount of that cost 231.5 incurred by the county during the 12-month period ending on June 231.6 30 of the current year. 231.7 (b) The reimbursement under this subdivision for costs 231.8 incurred during the 12-month period ending June 30, 2006, is 231.9 equal to 25 percent of those costs. The reimbursement under 231.10 this subdivision for costs incurred during the 12-month period 231.11 ending June 30, 2007, is equal to 50 percent of those costs. 231.12 (c) The amount certified under paragraph (b) shall be 231.13 certified annually by the Hennepin County auditor to the 231.14 administrative auditor as an addition to the county's areawide 231.15 levy under subdivision 5. 231.16 (d) The administrative auditor shall pay one-half of the 231.17 reimbursement to the Hennepin County auditor on or before June 231.18 15 and the remaining one-half of the reimbursement on or before 231.19 November 15. 231.20[EFFECTIVE DATE.] This section is effective for fiscal 231.21 disparities contribution and distribution tax capacities for 231.22 taxes payable in 2007 and 2008 only. 231.23 Sec. 61. Minnesota Statutes 2004, section 477A.011, 231.24 subdivision 36, is amended to read: 231.25 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 231.26 provided in this subdivision, "city aid base" is zero. 231.27 (b) The city aid base for any city with a population less 231.28 than 500 is increased by $40,000 for aids payable in calendar 231.29 year 1995 and thereafter, and the maximum amount of total aid it 231.30 may receive under section 477A.013, subdivision 9, paragraph 231.31 (c), is also increased by $40,000 for aids payable in calendar 231.32 year 1995 only, provided that: 231.33 (i) the average total tax capacity rate for taxes payable 231.34 in 1995 exceeds 200 percent; 231.35 (ii) the city portion of the tax capacity rate exceeds 100 231.36 percent; and 232.1 (iii) its city aid base is less than $60 per capita. 232.2 (c) The city aid base for a city is increased by $20,000 in 232.3 1998 and thereafter and the maximum amount of total aid it may 232.4 receive under section 477A.013, subdivision 9, paragraph (c), is 232.5 also increased by $20,000 in calendar year 1998 only, provided 232.6 that: 232.7 (i) the city has a population in 1994 of 2,500 or more; 232.8 (ii) the city is located in a county, outside of the 232.9 metropolitan area, which contains a city of the first class; 232.10 (iii) the city's net tax capacity used in calculating its 232.11 1996 aid under section 477A.013 is less than $400 per capita; 232.12 and 232.13 (iv) at least four percent of the total net tax capacity, 232.14 for taxes payable in 1996, of property located in the city is 232.15 classified as railroad property. 232.16 (d) The city aid base for a city is increased by $200,000 232.17 in 1999 and thereafter and the maximum amount of total aid it 232.18 may receive under section 477A.013, subdivision 9, paragraph 232.19 (c), is also increased by $200,000 in calendar year 1999 only, 232.20 provided that: 232.21 (i) the city was incorporated as a statutory city after 232.22 December 1, 1993; 232.23 (ii) its city aid base does not exceed $5,600; and 232.24 (iii) the city had a population in 1996 of 5,000 or more. 232.25 (e) The city aid base for a city is increased by $450,000 232.26 in 1999 to 2008 and the maximum amount of total aid it may 232.27 receive under section 477A.013, subdivision 9, paragraph (c), is 232.28 also increased by $450,000 in calendar year 1999 only, provided 232.29 that: 232.30 (i) the city had a population in 1996 of at least 50,000; 232.31 (ii) its population had increased by at least 40 percent in 232.32 the ten-year period ending in 1996; and 232.33 (iii) its city's net tax capacity for aids payable in 1998 232.34 is less than $700 per capita. 232.35 (f) Beginning in 2004, the city aid base for a city is 232.36 equal to the sum of its city aid base in 2003 and the amount of 233.1 additional aid it was certified to receive under section 477A.06 233.2 in 2003. For 2004 only, the maximum amount of total aid a city 233.3 may receive under section 477A.013, subdivision 9, paragraph 233.4 (c), is also increased by the amount it was certified to receive 233.5 under section 477A.06 in 2003. 233.6 (g) The city aid base for a city is increased by $150,000 233.7 for aids payable in 2000 and thereafter, and the maximum amount 233.8 of total aid it may receive under section 477A.013, subdivision 233.9 9, paragraph (c), is also increased by $150,000 in calendar year 233.10 2000 only, provided that: 233.11 (1) the city has a population that is greater than 1,000 233.12 and less than 2,500; 233.13 (2) its commercial and industrial percentage for aids 233.14 payable in 1999 is greater than 45 percent; and 233.15 (3) the total market value of all commercial and industrial 233.16 property in the city for assessment year 1999 is at least 15 233.17 percent less than the total market value of all commercial and 233.18 industrial property in the city for assessment year 1998. 233.19 (h) The city aid base for a city is increased by $200,000 233.20 in 2000 and thereafter, and the maximum amount of total aid it 233.21 may receive under section 477A.013, subdivision 9, paragraph 233.22 (c), is also increased by $200,000 in calendar year 2000 only, 233.23 provided that: 233.24 (1) the city had a population in 1997 of 2,500 or more; 233.25 (2) the net tax capacity of the city used in calculating 233.26 its 1999 aid under section 477A.013 is less than $650 per 233.27 capita; 233.28 (3) the pre-1940 housing percentage of the city used in 233.29 calculating 1999 aid under section 477A.013 is greater than 12 233.30 percent; 233.31 (4) the 1999 local government aid of the city under section 233.32 477A.013 is less than 20 percent of the amount that the formula 233.33 aid of the city would have been if the need increase percentage 233.34 was 100 percent; and 233.35 (5) the city aid base of the city used in calculating aid 233.36 under section 477A.013 is less than $7 per capita. 234.1 (i) The city aid base for a city is increased by $102,000 234.2 in 2000 and thereafter, and the maximum amount of total aid it 234.3 may receive under section 477A.013, subdivision 9, paragraph 234.4 (c), is also increased by $102,000 in calendar year 2000 only, 234.5 provided that: 234.6 (1) the city has a population in 1997 of 2,000 or more; 234.7 (2) the net tax capacity of the city used in calculating 234.8 its 1999 aid under section 477A.013 is less than $455 per 234.9 capita; 234.10 (3) the net levy of the city used in calculating 1999 aid 234.11 under section 477A.013 is greater than $195 per capita; and 234.12 (4) the 1999 local government aid of the city under section 234.13 477A.013 is less than 38 percent of the amount that the formula 234.14 aid of the city would have been if the need increase percentage 234.15 was 100 percent. 234.16 (j) The city aid base for a city is increased by $32,000 in 234.17 2001 and thereafter, and the maximum amount of total aid it may 234.18 receive under section 477A.013, subdivision 9, paragraph (c), is 234.19 also increased by $32,000 in calendar year 2001 only, provided 234.20 that: 234.21 (1) the city has a population in 1998 that is greater than 234.22 200 but less than 500; 234.23 (2) the city's revenue need used in calculating aids 234.24 payable in 2000 was greater than $200 per capita; 234.25 (3) the city net tax capacity for the city used in 234.26 calculating aids available in 2000 was equal to or less than 234.27 $200 per capita; 234.28 (4) the city aid base of the city used in calculating aid 234.29 under section 477A.013 is less than $65 per capita; and 234.30 (5) the city's formula aid for aids payable in 2000 was 234.31 greater than zero. 234.32 (k) The city aid base for a city is increased by $7,200 in 234.33 2001 and thereafter, and the maximum amount of total aid it may 234.34 receive under section 477A.013, subdivision 9, paragraph (c), is 234.35 also increased by $7,200 in calendar year 2001 only, provided 234.36 that: 235.1 (1) the city had a population in 1998 that is greater than 235.2 200 but less than 500; 235.3 (2) the city's commercial industrial percentage used in 235.4 calculating aids payable in 2000 was less than ten percent; 235.5 (3) more than 25 percent of the city's population was 60 235.6 years old or older according to the 1990 census; 235.7 (4) the city aid base of the city used in calculating aid 235.8 under section 477A.013 is less than $15 per capita; and 235.9 (5) the city's formula aid for aids payable in 2000 was 235.10 greater than zero. 235.11 (l) The city aid base for a city is increased by $45,000 in 235.12 2001 and thereafter and by an additional $50,000 in calendar 235.13 years 2002 to 2011, and the maximum amount of total aid it may 235.14 receive under section 477A.013, subdivision 9, paragraph (c), is 235.15 also increased by $45,000 in calendar year 2001 only, and by 235.16 $50,000 in calendar year 2002 only, provided that: 235.17 (1) the net tax capacity of the city used in calculating 235.18 its 2000 aid under section 477A.013 is less than $810 per 235.19 capita; 235.20 (2) the population of the city declined more than two 235.21 percent between 1988 and 1998; 235.22 (3) the net levy of the city used in calculating 2000 aid 235.23 under section 477A.013 is greater than $240 per capita; and 235.24 (4) the city received less than $36 per capita in aid under 235.25 section 477A.013, subdivision 9, for aids payable in 2000. 235.26 The city aid base for a city described in this paragraph is 235.27 also increased by $250,000 in calendar years 2006 to 2015, and 235.28 the maximum amount of total aid it may receive under section 235.29 477A.013, subdivision 9, paragraph (c), is also increased by 235.30 $250,000 in calendar year 2006 only. 235.31 (m) The city aid base for a city with a population of 235.32 10,000 or more which is located outside of the seven-county 235.33 metropolitan area is increased in 2002 and thereafter, and the 235.34 maximum amount of total aid it may receive under section 235.35 477A.013, subdivision 9, paragraph (b) or (c), is also increased 235.36 in calendar year 2002 only, by an amount equal to the lesser of: 236.1 (1)(i) the total population of the city, as determined by 236.2 the United States Bureau of the Census, in the 2000 census, (ii) 236.3 minus 5,000, (iii) times 60; or 236.4 (2) $2,500,000. 236.5 (n) The city aid base is increased by $50,000 in 2002 and 236.6 thereafter, and the maximum amount of total aid it may receive 236.7 under section 477A.013, subdivision 9, paragraph (c), is also 236.8 increased by $50,000 in calendar year 2002 only, provided that: 236.9 (1) the city is located in the seven-county metropolitan 236.10 area; 236.11 (2) its population in 2000 is between 10,000 and 20,000; 236.12 and 236.13 (3) its commercial industrial percentage, as calculated for 236.14 city aid payable in 2001, was greater than 25 percent. 236.15 (o) The city aid base for a city is increased by $150,000 236.16 in calendar years 2002 to 2011 and the maximum amount of total 236.17 aid it may receive under section 477A.013, subdivision 9, 236.18 paragraph (c), is also increased by $150,000 in calendar year 236.19 2002 only, provided that: 236.20 (1) the city had a population of at least 3,000 but no more 236.21 than 4,000 in 1999; 236.22 (2) its home county is located within the seven-county 236.23 metropolitan area; 236.24 (3) its pre-1940 housing percentage is less than 15 236.25 percent; and 236.26 (4) its city net tax capacity per capita for taxes payable 236.27 in 2000 is less than $900 per capita. 236.28 (p) The city aid base for a city is increased by $200,000 236.29 beginning in calendar year 2003 and the maximum amount of total 236.30 aid it may receive under section 477A.013, subdivision 9, 236.31 paragraph (c), is also increased by $200,000 in calendar year 236.32 2003 only, provided that the city qualified for an increase in 236.33 homestead and agricultural credit aid under Laws 1995, chapter 236.34 264, article 8, section 18. 236.35 (q) The city aid base for a city is increased by $200,000 236.36 in 2004 only and the maximum amount of total aid it may receive 237.1 under section 477A.013, subdivision 9, is also increased by 237.2 $200,000 in calendar year 2004 only, if the city is the site of 237.3 a nuclear dry cask storage facility. 237.4 (r) The city aid base for a city is increased by $10,000 in 237.5 2004 and thereafter and the maximum total aid it may receive 237.6 under section 477A.013, subdivision 9, is also increased by 237.7 $10,000 in calendar year 2004 only, if the city was included in 237.8 a federal major disaster designation issued on April 1, 1998, 237.9 and its pre-1940 housing stock was decreased by more than 40 237.10 percent between 1990 and 2000. 237.11 Sec. 62. Minnesota Statutes 2004, section 477A.11, 237.12 subdivision 4, is amended to read: 237.13 Subd. 4. [OTHER NATURAL RESOURCES LAND.] "Other natural 237.14 resources land" means:237.15(1)any other land presently owned in fee title by the 237.16 state and administered by the commissioner, or any tax-forfeited 237.17 land, other than platted lots within a city or those lands 237.18 described under subdivision 3, clause (2), which is owned by the 237.19 state and administered by the commissioner or by the county in 237.20 which it is located; and237.21(2) land leased by the state from the United States of237.22America through the United States Secretary of Agriculture237.23pursuant to Title III of the Bankhead Jones Farm Tenant Act,237.24which land is commonly referred to as land utilization project237.25land that is administered by the commissioner. 237.26[EFFECTIVE DATE.] This section is effective for aids 237.27 payable in 2006 and thereafter. 237.28 Sec. 63. Minnesota Statutes 2004, section 477A.11, is 237.29 amended by adding a subdivision to read: 237.30 Subd. 5. [LAND UTILIZATION PROJECT LAND.] "Land 237.31 utilization project land" means land that is leased by the state 237.32 from the United States through the United States Secretary of 237.33 Agriculture according to Title III of the Bankhead Jones Farm 237.34 Tenant Act and that is administered by the commissioner. 237.35 Sec. 64. Minnesota Statutes 2004, section 477A.12, 237.36 subdivision 1, is amended to read: 238.1 Subdivision 1. [TYPES OF LAND; PAYMENTS.] (a) As an offset 238.2 for expenses incurred by counties and towns in support of 238.3 natural resources lands, the following amounts are annually 238.4 appropriated to the commissioner of natural resources from the 238.5 general fund for transfer to the commissioner of revenue. The 238.6 commissioner of revenue shall pay the transferred funds to 238.7 counties as required by sections 477A.11 to 477A.145. The 238.8 amounts are: 238.9 (1) for acquired natural resources land, $3, as adjusted 238.10 for inflation under section 477A.145, multiplied by the total 238.11 number of acres of acquired natural resources land or, at the 238.12 county's option three-fourths of one percent of the appraised 238.13 value of all acquired natural resources land in the county, 238.14 whichever is greater; 238.15 (2) $3, as adjusted for inflation under section 477A.145, 238.16 multiplied by the total number of acres of land utilization 238.17 project land; 238.18 (3) 75 cents, as adjusted for inflation under section 238.19 477A.145, multiplied by the number of acres of 238.20 county-administered other natural resources land; and 238.21(3)(4) 37.5 cents, as adjusted for inflation under section 238.22 477A.145, multiplied by the number of acres of 238.23 commissioner-administered other natural resources land located 238.24 in each county as of July 1 of each year prior to the payment 238.25 year. 238.26 (b) The amount determined under paragraph (a), clause (1), 238.27 is payable for land that is acquired from a private owner and 238.28 owned by the Department of Transportation for the purpose of 238.29 replacing wetland losses caused by transportation projects, but 238.30 only if the county contains more than 500 acres of such land at 238.31 the time the certification is made under subdivision 2. 238.32[EFFECTIVE DATE.] This section is effective for aids 238.33 payable in 2006 and thereafter. 238.34 Sec. 65. Minnesota Statutes 2004, section 477A.12, 238.35 subdivision 2, is amended to read: 238.36 Subd. 2. [PROCEDURE.] Lands for which payments in lieu are 239.1 made pursuant to section 97A.061, subdivision 3, and Laws 1973, 239.2 chapter 567, shall not be eligible for payments under this 239.3 section. Each county auditor shall certify to the Department of 239.4 Natural Resources during July of each year prior to the payment 239.5 year the number of acres of county-administered other natural 239.6 resources land within the county. The Department of Natural 239.7 resources may, in addition to the certification of acreage, 239.8 require descriptive lists of land so certified. The 239.9 commissioner of natural resources shall determine and certify to 239.10 the commissioner of revenue by March 1 of the payment year: 239.11 (1) the number of acres and most recent appraised value of 239.12 acquired natural resources land within each county; 239.13 (2) the number of acres of commissioner-administered 239.14 natural resources land within each county;and239.15 (3) the number of acres of county-administered other 239.16 natural resources land within each county, based on the reports 239.17 filed by each county auditor with the commissioner of natural 239.18 resources; and 239.19 (4) the number of acres of land utilization project land 239.20 within each county and the net proceeds from timber sales on 239.21 land utilization project lands in each county. 239.22 The commissioner of transportation shall determine and 239.23 certify to the commissioner of revenue by March 1 of the payment 239.24 year the number of acres of land and the appraised value of the 239.25 land described in subdivision 1, paragraph (b), but only if it 239.26 exceeds 500 acres. 239.27 The commissioner of revenue shall determine the 239.28 distributions provided for in this section using the number of 239.29 acres and appraised values certified by the commissioner of 239.30 natural resources and the commissioner of transportation by 239.31 March 1 of the payment year. 239.32[EFFECTIVE DATE.] This section is effective for aids 239.33 payable in 2006 and thereafter. 239.34 Sec. 66. Minnesota Statutes 2004, section 477A.14, 239.35 subdivision 1, is amended to read: 239.36 Subdivision 1. [GENERAL DISTRIBUTION.] Except as provided 240.1 in subdivision 2 or in section 97A.061, subdivision 5, 40 240.2 percent of the total payment to the county shall be deposited in 240.3 the county general revenue fund to be used to provide property 240.4 tax levy reduction. The remainder shall be distributed by the 240.5 county in the following priority: 240.6 (a) 37.5 cents, as adjusted for inflation under section 240.7 477A.145, for each acre of county-administered other natural 240.8 resources land shall be deposited in a resource development fund 240.9 to be created within the county treasury for use in resource 240.10 development, forest management, game and fish habitat 240.11 improvement, and recreational development and maintenance of 240.12 county-administered other natural resources land. Any county 240.13 receiving less than $5,000 annually for the resource development 240.14 fund may elect to deposit that amount in the county general 240.15 revenue fund; 240.16 (b) From the funds remaining, within 30 days of receipt of 240.17 the payment to the county, the county treasurer shall pay each 240.18 organized township 30 cents, as adjusted for inflation under 240.19 section 477A.145, for each acre of acquired natural resources 240.20 land, each acre of land utilization project land, and each acre 240.21 of land described in section 477A.12, subdivision 1, paragraph 240.22 (b), and 7.5 cents, as adjusted for inflation under section 240.23 477A.145, for each acre of other natural resources land located 240.24 within its boundaries. Payments for natural resources lands not 240.25 located in an organized township shall be deposited in the 240.26 county general revenue fund. Payments to counties and townships 240.27 pursuant to this paragraph shall be used to provide property tax 240.28 levy reduction, except that of the payments for natural 240.29 resources lands not located in an organized township, the county 240.30 may allocate the amount determined to be necessary for 240.31 maintenance of roads in unorganized townships. Provided that, 240.32 if the total payment to the county pursuant to section 477A.12 240.33 is not sufficient to fully fund the distribution provided for in 240.34 this clause, the amount available shall be distributed to each 240.35 township and the county general revenue fund on a pro rata 240.36 basis; and 241.1 (c) Any remaining funds shall be deposited in the county 241.2 general revenue fund. Provided that, if the distribution to the 241.3 county general revenue fund exceeds $35,000, the excess shall be 241.4 used to provide property tax levy reduction. 241.5[EFFECTIVE DATE.] This section is effective for aids 241.6 payable in 2006 and thereafter. 241.7 Sec. 67. Laws 1998, chapter 389, article 3, section 41, is 241.8 amended to read: 241.9 Sec. 41. [SPECIAL ASSESSMENT DEFERRAL AUTHORIZED.] 241.10 Notwithstanding Minnesota Statutes, chapter 429, a city may 241.11 defer the payment of any special assessment levied against a 241.12 property qualifying under section 38 as determined by the city. 241.13 Any special assessment, the payment of which has been deferred 241.14 by the city, must be paid in full or a payment agreement may be 241.15 approved by the city if the ownership of property is transferred 241.16 to anyone or any entity. Payment or a payment agreement must be 241.17 made within 60 days of the transfer of ownership. 241.18[EFFECTIVE DATE.] This section is effective the day 241.19 following final enactment. 241.20 Sec. 68. Laws 1998, chapter 389, article 3, section 42, 241.21 subdivision 2, as amended by Laws 2002, chapter 377, article 4, 241.22 section 24, is amended to read: 241.23 Subd. 2. [RECAPTURE.] (a) Property or any portion thereof 241.24 qualifying under section 38 is subject to additional taxes if: 241.25 (1) ownership of the property is transferred to anyone 241.26 other than the spouse or child of the current owner; 241.27 (2) the current owner or the spouse or child of the current 241.28 owner has not conveyed or entered into a contract before July 1, 241.29 2007, to convey for ownership or public easement rights, (i) a 241.30 portion of the property toaone or more nonprofitfoundation241.31 foundations orcorporation operatingcorporations; and (ii) a 241.32 portion of the property to one or more local governments; and 241.33 those entities shall separately or jointly operate the property 241.34 as an art park providing the services included in section 38, 241.35 clauses (2) to (5), and may also use some of the property for 241.36 other public purposes as determined by the local governments; or 242.1 (3) the nonprofit foundation or corporation to which a 242.2 portion of the property was transferred ceases to provide the 242.3 services included in section 38, clauses (2) to (5), earlier 242.4 than ten years following the effective date of theconveyance242.5 conveyances or of the execution of thecontractcontracts to 242.6 convey. 242.7 (b) The additional taxes are imposed at the earlier of (1) 242.8 the year following transfer of ownership to anyone other than 242.9 the spouse or child of the current owner or a nonprofit 242.10 foundation or corporation or local government operating the 242.11 property as an art park and used for other public purposes, or 242.12 (2) for taxes payable in 2008, or (3) in the event the nonprofit 242.13 foundation or corporation to which a portion of the property was 242.14 conveyed ceases to provide the required services within ten 242.15 years after the conveyance, for taxes payable in the year 242.16 following the year when it ceased to do so. 242.17 The county board, with the approval of the city council, 242.18 shall determine the amount of the additional taxes due on the 242.19 portion of property which is no longer utilized as an art park; 242.20 provided, however, that the additional taxesare equal tomust 242.21 not be greater than the difference between the taxes determined 242.22 on that portion of the property utilized as an art park under 242.23 sections 39 and 40 and the amount determined under subdivision 1 242.24 for all years that the property qualified under section 38.The242.25additional taxes must be extended against the property on the242.26tax list for the current year; provided, however, thatNo 242.27 interest or penalties may be levied on the additionaltaxes if242.28timely paidamount provided that it is paid within 30 days of 242.29 the county's notice. 242.30[EFFECTIVE DATE.] This section is effective the day 242.31 following final enactment. 242.32 Sec. 69. Laws 2001, First Special Session chapter 5, 242.33 article 3, section 8, the effective date, is amended to read: 242.34[EFFECTIVE DATE.] This section is effective for taxes 242.35 levied in 2002, payable in 2003, through taxes levied in2007242.36 2009, payable in20082010. 243.1 Sec. 70. Laws 2003, chapter 127, article 12, section 38, 243.2 is amended to read: 243.3 Sec. 38. [MEMBERS MUSTAUTHORITY TO LEVY TAXESFOR243.4AUTHORITY.] 243.5(a) A member shall, at the request of the authority, levy a243.6tax in any year for the benefit of the authority.The authority 243.7 is a special taxing district as defined in Minnesota Statutes, 243.8 section 275.066, clause (13), with the power to adopt and 243.9 certify a property tax levy to the county auditor. The 243.10 authority may levy a tax in any year for the benefit of the 243.11 authority. The taxis,for each member,is a pro rata portion 243.12 of the total amount of tax requested by the authority based on 243.13 the taxable market value withinathe member's jurisdiction, but 243.14 in no event may the tax in any year exceed 0.01813 percent of 243.15 taxable market value. For purposes of this section, "taxable 243.16 market value" has the meaning as given in Minnesota Statutes, 243.17 section 273.032. 243.18(b) The treasurer of each member city or town shall, within243.1915 days after receiving the property tax settlements from the243.20county treasurer, pay to the treasurer of the authority the243.21amount collected for this purpose. The money must be used by243.22the authority for the purposes provided by sections 35 to 41.243.23[EFFECTIVE DATE.] This section is effective for taxes 243.24 levied in 2005, payable in 2006, and thereafter. 243.25 Sec. 71. Laws 2003, First Special Session chapter 21, 243.26 article 4, section 12, subdivision 11, is amended to read: 243.27 Subd. 11. [EFFECTIVE DATE; LOCAL APPROVAL.] This section 243.28 is effective the day after the governing body of St. Louis 243.29 county and its chief clerical officer timely complete their 243.30 compliance with Minnesota Statutes, section 645.021, 243.31 subdivisions 2 and 3, provided that the certificate of approval 243.32 is filed with the secretary of state before January 1, 2006. 243.33If effective before September 1, 2003, the first levy is243.34the payable 2004 levy; If effective between September 1, 2003,243.35and September 1, 2004, the first levy is the payable 2005 levy;243.36 If effectiveafter August 31, 2004,before September 1, 2005, 244.1 the first levy is the payable 2006 levy; and if effective after 244.2 August 31, 2005, the first levy is the payable 2007 levy. 244.3 Sec. 72. [PROPERTY USED FOR EDUCATIONAL INSTRUCTION.] 244.4 Notwithstanding Minnesota Statutes, section 272.02, 244.5 subdivision 38, paragraph (b), the following property is exempt 244.6 from taxation for assessment year 2004, for taxes payable in 244.7 2005, if it meets all the following criteria: 244.8 (1) is used to provide direct educational instruction for 244.9 grades 7 through 10; 244.10 (2) is located in a city of the first class that has a 244.11 population greater than 250,000 and less than 350,000; 244.12 (3) was purchased after July 1, 2004, by a nonprofit that 244.13 is exempt from federal income tax under section 501(c)(3) of the 244.14 Internal Revenue Code; and 244.15 (4) is leased and operated by two nonprofit corporations 244.16 organized under Minnesota Statutes, chapter 317A. 244.17[EFFECTIVE DATE.] This section is effective the day 244.18 following final enactment. 244.19 Sec. 73. [EDUCATION RESERVE ACCOUNT; APPROPRIATION.] 244.20 (a) There is created in the state treasury an education 244.21 reserve account as a special revenue fund for deposit of 244.22 appropriations and other receipts as provided by law. 244.23 (b) $24,961,000 is appropriated from the general fund to 244.24 the education reserve account in fiscal year 2006. Beginning 244.25 with taxes payable in 2008, the commissioner of finance shall 244.26 deposit in the education reserve account the increased amount of 244.27 the state general levy for that year over the state general levy 244.28 base amount for taxes payable in 2002, under Minnesota Statutes, 244.29 section 275.025. 244.30 (c) Each year, one-half of the annual amount will be 244.31 deposited in the education reserve account in the state fiscal 244.32 year corresponding to the first six months of the calendar year, 244.33 and the other half will be deposited in the state fiscal year 244.34 corresponding to the last six months of the calendar year. The 244.35 amounts in the education reserve account do not lapse or cancel 244.36 each year, but remain until appropriated by law for E-12 245.1 education or higher education funding. 245.2 Sec. 74. [STUDY OF POLLUTION CONTROL EXEMPTION.] 245.3 The commissioner of revenue must study the application of 245.4 the property tax exemption provided under Minnesota Statutes, 245.5 section 272.02, subdivision 10, to personal property used for 245.6 pollution control as part of an electric generation system. The 245.7 commissioner must present a recommendation to the legislature by 245.8 January 15, 2006, that would limit the exemption to property 245.9 that is directly and exclusively used for pollution control 245.10 purposes. 245.11 Sec. 75. [SAUK RIVER WATERSHED DISTRICT.] 245.12 Notwithstanding Minnesota Statutes, section 103D.905, 245.13 subdivision 3, the Sauk River Watershed District may annually 245.14 levy up to 0.01 percent of taxable market value for its 245.15 administrative fund. 245.16[EFFECTIVE DATE.] This section is effective, without local 245.17 approval, for taxes levied in 2005, payable in 2006, and 245.18 thereafter. 245.19 Sec. 76. [COMMERCIAL-INDUSTRIAL LAND VALUE TAXATION; LOCAL 245.20 OPTION.] 245.21 The governing body of any municipality that has a 245.22 population in excess of 70,000, or any municipality located in 245.23 the taconite tax relief area defined in Minnesota Statutes, 245.24 section 273.134, may by resolution adopt a system of valuing 245.25 commercial-industrial property in its jurisdiction that is based 245.26 on the value of the land, not including improvements. The 245.27 governing body may make the election under this section if it 245.28 finds that implementation of the land value system will enhance 245.29 economic development in the city. An election under this 245.30 section must be made by December 31, 2005. If any municipality 245.31 makes the election, it must notify the commissioner of revenue 245.32 of the election and the legislature must enact during the 2006 245.33 legislative session the legislation necessary to implement the 245.34 system for taxes levied in 2006, payable in 2007, and thereafter. 245.35 Sec. 77. [STUDY REQUIRED.] 245.36 By February 1, 2006, the fiscal staff of the house of 246.1 representatives and senate shall conduct a study of the 246.2 metropolitan revenue distribution program contained in Minnesota 246.3 Statutes, chapter 473F, commonly known as the fiscal disparities 246.4 program, and shall make a report by March 1, 2006, to the chairs 246.5 of the house and senate tax committees consisting of the 246.6 findings of the study and any recommendations resulting from the 246.7 study. 246.8 The study shall primarily address the question of whether 246.9 the program is achieving the purposes for which it was created. 246.10 Additionally, the study shall address the following questions: 246.11 (1) How has the program affected property tax disparities 246.12 across the Twin Cities metropolitan area? 246.13 (2) Is the formula for contributing tax base to the 246.14 areawide pool reasonable? Should certain commercial-industrial 246.15 tax base continue to be exempt from contribution to the areawide 246.16 pool, such as tax base in existence prior to 1979, tax base in 246.17 tax increment financing districts established before 1979, and 246.18 tax base located at the Minneapolis-St. Paul International 246.19 Airport? Should contribution amounts be adjusted for 246.20 differences in sales ratios between communities? 246.21 (3) Is the formula for distributing tax base from the 246.22 areawide pool reasonable? Should the formula reflect measures 246.23 of need in addition to population? Should the distribution 246.24 formula be based on tax capacity rather than market value? 246.25 (4) Does the program help promote orderly growth and 246.26 encourage environmentally sound land use? 246.27 (5) Does the program reduce competition for 246.28 commercial-industrial tax base between communities? Is reduced 246.29 competition for commercial-industrial tax base desirable? 246.30 (6) Do local governments derive sufficient tax revenues 246.31 from commercial-industrial property to cover the costs of 246.32 providing services to the property, considering the tax base 246.33 that must be contributed to the areawide pool? 246.34 (7) Could improvements be made in the administration of the 246.35 program? 246.36[EFFECTIVE DATE.] This section is effective July 1, 2005. 247.1 Sec. 78. [FEE STUDIES.] 247.2 Subdivision 1. [STATE AGENCY FEES.] The commissioner of 247.3 each state agency that imposes any fee on individuals or 247.4 businesses in this state must report to the commissioner of 247.5 revenue by January 15, 2006, on the type and amount of fees 247.6 imposed, amount and type of fee increases since January 1, 2003, 247.7 the revenues derived from each fee for each of the most recent 247.8 four fiscal years, and the use of the revenues from the fees. 247.9 The commissioner of revenue shall compile this information and 247.10 provide a comprehensive report on all state agency fees to the 247.11 finance and tax committees of the senate and the appropriations 247.12 and tax committees of the house of representatives by February 247.13 15, 2006. 247.14 Subd. 2. [SCHOOL FEES.] By January 15, 2006, the 247.15 Department of Education shall provide the house and senate 247.16 education finance divisions and tax committees with a report 247.17 that examines the total annual fees collected under Minnesota 247.18 Public School Fee Law, Minnesota Statutes, sections 123B.34 to 247.19 123B.39, in fiscal years 2002 to 2005. The report must detail 247.20 all different types of fees charged to Minnesota students under 247.21 the law. The report must report total fees statewide as well as 247.22 by school district and charter school. 247.23 Subd. 3. [CITY FEES.] Each home rule charter or statutory 247.24 city must report to the commissioner of revenue by January 15, 247.25 2006, on the type and amount of fees it imposes, amount and type 247.26 of fee increases since January 1, 2003, the revenues derived 247.27 from each fee for each of the most recent four calendar years, 247.28 and the use of the revenues from the fees. The commissioner of 247.29 revenue shall compile this information and provide a 247.30 comprehensive report on all city fees to the finance and tax 247.31 committees of the senate and the appropriations and tax 247.32 committees of the house of representatives by February 15, 2006. 247.33 ARTICLE 9 247.34 LOCAL DEVELOPMENT - SF1683 247.35 Section 1. Minnesota Statutes 2004, section 116J.993, 247.36 subdivision 3, is amended to read: 248.1 Subd. 3. [BUSINESS SUBSIDY.] "Business subsidy" or 248.2 "subsidy" means a state or local government agency grant, 248.3 contribution of personal property, real property, 248.4 infrastructure, the principal amount of a loan at rates below 248.5 those commercially available to the recipient, any reduction or 248.6 deferral of any tax or any fee, any guarantee of any payment 248.7 under any loan, lease, or other obligation, or any preferential 248.8 use of government facilities given to a business. 248.9 The following forms of financial assistance are not a 248.10 business subsidy: 248.11 (1) a business subsidy of less than $25,000; 248.12 (2) assistance that is generally available to all 248.13 businesses or to a general class of similar businesses, such as 248.14 a line of business, size, location, or similar general criteria; 248.15 (3) public improvements to buildings or lands owned by the 248.16 state or local government that serve a public purpose and do not 248.17 principally benefit a single business or defined group of 248.18 businesses at the time the improvements are made; 248.19 (4) redevelopment property polluted by contaminants as 248.20 defined in section 116J.552, subdivision 3; 248.21 (5) assistance provided for the sole purpose of renovating 248.22 old or decaying building stock or bringing it up to code and 248.23 assistance provided for designated historic preservation 248.24 districts, provided that the assistance is equal to or less than 248.25 50 percent of the total cost; 248.26 (6) assistance to provide job readiness and training 248.27 services if the sole purpose of the assistance is to provide 248.28 those services, except when such assistance is paid for by 248.29 expenditures of tax increments under section 469.176, 248.30 subdivision 4m; 248.31 (7) assistance for housing; 248.32 (8) assistance for pollution control or abatement, 248.33 including assistance for a tax increment financing hazardous 248.34 substance subdistrict as defined under section 469.174, 248.35 subdivision 23; 248.36 (9) assistance for energy conservation; 249.1 (10) tax reductions resulting from conformity with federal 249.2 tax law; 249.3 (11) workers' compensation and unemployment insurance; 249.4 (12) benefits derived from regulation; 249.5 (13) indirect benefits derived from assistance to 249.6 educational institutions; 249.7 (14) funds from bonds allocated under chapter 474A, bonds 249.8 issued to refund outstanding bonds, and bonds issued for the 249.9 benefit of an organization described in section 501(c)(3) of the 249.10 Internal Revenue Code of 1986, as amended through December 31, 249.11 1999; 249.12 (15) assistance for a collaboration between a Minnesota 249.13 higher education institution and a business; 249.14 (16) assistance for a tax increment financing soils 249.15 condition district as defined under section 469.174, subdivision 249.16 19; 249.17 (17) redevelopment when the recipient's investment in the 249.18 purchase of the site and in site preparation is 70 percent or 249.19 more of the assessor's current year's estimated market value; 249.20 (18) general changes in tax increment financing law and 249.21 other general tax law changes of a principally technical nature; 249.22 (19) federal assistance until the assistance has been 249.23 repaid to, and reinvested by, the state or local government 249.24 agency; 249.25 (20) funds from dock and wharf bonds issued by a seaway 249.26 port authority; 249.27 (21) business loans and loan guarantees of $75,000 or less; 249.28 and 249.29 (22) federal loan funds provided through the United States 249.30 Department of Commerce, Economic Development Administration. 249.31 Sec. 2. Minnesota Statutes 2004, section 116J.993, is 249.32 amended by adding a subdivision to read: 249.33 Subd. 8. [RESIDENCE.] "Residence" means the place where an 249.34 individual has established a permanent home from which the 249.35 individual has no present intention of moving. 249.36 Sec. 3. Minnesota Statutes 2004, section 116J.994, 250.1 subdivision 4, is amended to read: 250.2 Subd. 4. [WAGE AND JOB GOALS.] The subsidy agreement, in 250.3 addition to any other goals, must include: (1) goals for the 250.4 number of jobs created, which may include separate goals for the 250.5 number of part-time or full-time jobs, or, in cases where job 250.6 loss is specific and demonstrable, goals for the number of jobs 250.7 retained; (2) wage goals for any jobs created or retained; and 250.8 (3) wage goals for any jobs to be enhanced through increased 250.9 wages. After a public hearing, if the creation or retention of 250.10 jobs is determined not to be a goal, the wage and job goals may 250.11 be set at zero. The goals for the number of jobs to be created 250.12 or retained must result in job creation or retention by the 250.13 recipient within the granting jurisdiction overall. 250.14 In addition to other specific goal time frames, the wage 250.15 and job goals must contain specific goals to be attained within 250.16 two years of the benefit date. 250.17[EFFECTIVE DATE.] This section is effective August 1, 2005, 250.18 and applies to subsidy agreements entered into on or after that 250.19 date. 250.20 Sec. 4. Minnesota Statutes 2004, section 116J.994, 250.21 subdivision 5, is amended to read: 250.22 Subd. 5. [PUBLIC NOTICE AND HEARING.] (a) Before granting 250.23 a business subsidy that exceeds $500,000 for a state government 250.24 grantor and $100,000 for a local government grantor, the grantor 250.25 must provide public notice and a hearing on the subsidy. A 250.26 public hearing and notice under this subdivision is not required 250.27 if a hearing and notice on the subsidy is otherwise required by 250.28 law. 250.29 (b) Public notice of a proposed business subsidy under this 250.30 subdivision by a state government grantor, other than the Iron 250.31 Range Resources and Rehabilitation Board, must be published in 250.32 the State Register. Public notice of a proposed business 250.33 subsidy under this subdivision by a local government grantor or 250.34 the Iron Range Resources and Rehabilitation Board must be 250.35 published in a local newspaper of general circulation. The 250.36 public notice must identify the location at which information 251.1 about the business subsidy, including a summary of the terms of 251.2 the subsidy, is available. Published notice should be 251.3 sufficiently conspicuous in size and placement to distinguish 251.4 the notice from the surrounding text. The grantor must make the 251.5 information available in printed paper copies and, if possible, 251.6 on the Internet. The government agency must provide at least a 251.7 ten-day notice for the public hearing. 251.8 (c) The public notice must include the date, time, and 251.9 place of the hearing. 251.10 (d) The public hearing by a state government grantor other 251.11 than the Iron Range Resources and Rehabilitation Board must be 251.12 held in St. Paul. 251.13 (e) If more than one nonstate grantor provides a business 251.14 subsidy to the same recipient, the nonstate grantors may 251.15 designate one nonstate grantor to hold a single public hearing 251.16 regarding the business subsidies provided by all nonstate 251.17 grantors. For the purposes of this paragraph, "nonstate 251.18 grantor" includes the iron range resources and rehabilitation 251.19 board. 251.20 (f) The public notice of any public meeting about a 251.21 business subsidy agreement, including those required by this 251.22 subdivision and by subdivision 4, must include notice that a 251.23 person with residence in or the owner of taxable property in the 251.24 granting jurisdiction may file a written complaint with the 251.25 grantor if the grantor fails to comply with sections 116J.993 to 251.26 116J.995, and that no action may be filed against the grantor 251.27 for such failure to comply unless a written complaint is filed. 251.28 Sec. 5. Minnesota Statutes 2004, section 116J.994, 251.29 subdivision 9, is amended to read: 251.30 Subd. 9. [COMPILATION AND SUMMARY REPORT.] The Department 251.31 of Employment and Economic Development must publish a 251.32 compilation and summary of the results of the reports for the 251.33 previous two calendar years by December 1 of 2004 and every 251.34 other year thereafter. The reports of the government agencies 251.35 to the department and the compilation and summary report of the 251.36 department must be made available to the public. The 252.1 commissioner must make copies of all business subsidy reports 252.2 submitted by local and state granting agencies available on the 252.3 department's Web site by October 1 of the year in which they 252.4 were submitted. 252.5 The commissioner must coordinate the production of reports 252.6 so that useful comparisons across time periods and across 252.7 grantors can be made. The commissioner may add other 252.8 information to the report as the commissioner deems necessary to 252.9 evaluate business subsidies. Among the information in the 252.10 summary and compilation report, the commissioner must include: 252.11 (1) total amount of subsidies awarded in each development 252.12 region of the state; 252.13 (2) distribution of business subsidy amounts by size of the 252.14 business subsidy; 252.15 (3) distribution of business subsidy amounts by time 252.16 category; 252.17 (4) distribution of subsidies by type and by public 252.18 purpose; 252.19 (5) percent of all business subsidies that reached their 252.20 goals; 252.21 (6) percent of business subsidies that did not reach their 252.22 goals by two years from the benefit date; 252.23 (7) total dollar amount of business subsidies that did not 252.24 meet their goals after two years from the benefit date; 252.25 (8) percent of subsidies that did not meet their goals and 252.26 that did not receive repayment; 252.27 (9) list of recipients that have failed to meet the terms 252.28 of a subsidy agreement in the past five years and have not 252.29 satisfied their repayment obligations; 252.30 (10) number of part-time and full-time jobs within separate 252.31 bands of wages; and 252.32 (11) benefits paid within separate bands of wages. 252.33 Sec. 6. Minnesota Statutes 2004, section 116J.994, is 252.34 amended by adding a subdivision to read: 252.35 Subd. 11. [ENFORCEMENT.] (a) A person with residence in or 252.36 an owner of taxable property located in the jurisdiction of the 253.1 grantor may bring an action for equitable relief arising out of 253.2 the failure of the grantor to comply with sections 116J.993 to 253.3 116J.995. The court may award a prevailing party in an action 253.4 under this subdivision costs and reasonable attorney fees. 253.5 (b) Prior to bringing an action, the party must file a 253.6 written complaint with the grantor stating the alleged violation 253.7 and proposing a remedy. The grantor has up to 30 days to reply 253.8 to the complaint in writing and may take action to comply with 253.9 sections 116J.993 to 116J.995. 253.10 (c) The written complaint under this subdivision for 253.11 failure to comply with subdivisions 1 to 5, must be filed with 253.12 the grantor within 180 days after approval of the subsidy 253.13 agreement under subdivision 3, paragraph (d). An action under 253.14 this subdivision must be commenced within 30 days following 253.15 receipt of the grantor's reply, or within 180 days after 253.16 approval of the subsidy agreement under subdivision 3, paragraph 253.17 (d), whichever is later. 253.18[EFFECTIVE DATE.] This section is effective August 1, 2005, 253.19 and applies to subsidy agreements entered into on or after that 253.20 date. 253.21 Sec. 7. Minnesota Statutes 2004, section 161.1231, is 253.22 amended by adding a subdivision to read: 253.23 Subd. 11. [TRANSFER OF OWNERSHIP.] The commissioner shall, 253.24 at the earliest feasible date after receiving payment, transfer 253.25 ownership of the parking facilities to the city of Minneapolis. 253.26 The payment must be equal to the amount of state funds spent by 253.27 the commissioner for construction of the facilities. Upon 253.28 assuming ownership of the facilities, the city shall operate the 253.29 facilities in accordance with the rules adopted by the 253.30 commissioner under subdivision 2. Upon assumption of ownership, 253.31 the city shall assume the authority to collect fees for use of 253.32 the facilities under subdivision 5. The commissioner shall take 253.33 no action under this section that would result in federal 253.34 sanctions against Minnesota or require the repayment of any 253.35 state funds to the federal government. The commissioner shall 253.36 deposit all money received under this subdivision in the trunk 254.1 highway fund. 254.2[EFFECTIVE DATE.] This section is effective the day after 254.3 the governing body of the city of Minneapolis and its chief 254.4 clerical officer comply with Minnesota Statutes, section 254.5 645.021, subdivisions 2 and 3. 254.6 Sec. 8. Minnesota Statutes 2004, section 272.0212, 254.7 subdivision 1, is amended to read: 254.8 Subdivision 1. [EXEMPTION.] All qualified property in a 254.9 zone is exempt to the extent and for a period up to the duration 254.10 provided by the zone designation and under sections 469.1731 to 254.11 469.1735. 254.12[EFFECTIVE DATE.] This section is effective for development 254.13 agreements approved after the day following final enactment and 254.14 beginning for property taxes payable in 2006. 254.15 Sec. 9. Minnesota Statutes 2004, section 272.0212, 254.16 subdivision 2, is amended to read: 254.17 Subd. 2. [LIMITS ON EXEMPTION.] (a) Property in a zone is 254.18 not exempt under this section from the following: 254.19 (1) special assessments; 254.20 (2) ad valorem property taxes specifically levied for the 254.21 payment of principal and interest on debt obligations; and 254.22 (3) all taxes levied by a school district, except school 254.23 referendum levies as defined in section 126C.17. 254.24 (b) The city may limit the property tax exemption to a 254.25 shorter period than the duration of the zone or to a percentage 254.26 of the property taxes payable or both. 254.27[EFFECTIVE DATE.] This section is effective for development 254.28 agreements approved after the day following final enactment and 254.29 beginning for property taxes payable in 2006. 254.30 Sec. 10. Minnesota Statutes 2004, section 469.034, 254.31 subdivision 2, is amended to read: 254.32 Subd. 2. [GENERAL OBLIGATION REVENUE BONDS.] (a) An 254.33 authority may pledge the general obligation of the general 254.34 jurisdiction governmental unit as additional security for bonds 254.35 payable from income or revenues of the project or the 254.36 authority. The authority must find that the pledged revenues 255.1 will equal or exceed 110 percent of the principal and interest 255.2 due on the bonds for each year. The proceeds of the bonds must 255.3 be used for a qualified housing development project or 255.4 projects. The obligations must be issued and sold in the manner 255.5 and following the procedures provided by chapter 475, except the 255.6 obligations are not subject to approval by the electors and the 255.7 maturities may extend to not more than 30 years from the 255.8 estimated date of completion of the project. The authority is 255.9 the municipality for purposes of chapter 475. 255.10 (b) The principal amount of the issue must be approved by 255.11 the governing body of the general jurisdiction governmental unit 255.12 whose general obligation is pledged. Public hearings must be 255.13 held on issuance of the obligations by both the authority and 255.14 the general jurisdiction governmental unit. The hearings must 255.15 be held at least 15 days, but not more than 120 days, before the 255.16 sale of the obligations. 255.17 (c) The maximum amount of general obligation bonds that may 255.18 be issued and outstanding under this section equals the greater 255.19 of (1) one-half of one percent of the taxable market value of 255.20 the general jurisdiction governmental unit whose general 255.21 obligation which includes a tax on property is pledged, or (2) 255.22 $3,000,000. In the case of county or multicounty general 255.23 obligation bonds, the outstanding general obligation bonds of 255.24 all cities in the county or counties issued under this 255.25 subdivision must be added in calculating the limit under clause 255.26 (1). 255.27 (d) "General jurisdiction governmental unit" means the city 255.28 in which the housing development project is located. In the 255.29 case of a county or multicounty authority, the county or 255.30 counties may act as the general jurisdiction governmental unit. 255.31 In the case of a multicounty authority, the pledge of the 255.32 general obligation is a pledge of a tax on the taxable property 255.33 in each of the counties. 255.34 (e) "Qualified housing development project" means a housing 255.35 development project providing housing either for the elderly or 255.36 for individuals and families with incomes not greater than 80 256.1 percent of the median family income as estimated by the United 256.2 States Department of Housing and Urban Development for the 256.3 standard metropolitan statistical area or the nonmetropolitan 256.4 county in which the project is located, and will. The project 256.5 must be owned for the term of the bonds either by the authority 256.6for the term of the bondsor by a limited partnership or other 256.7 entity in which the authority or another entity under the sole 256.8 control of the authority is the sole general partner. The 256.9 partnership or other entity must receive either: (1) an 256.10 allocation from the Department of Finance or an entitlement 256.11 issuer of tax-exempt bonding authority for the project and a 256.12 preliminary determination by the Minnesota Housing Finance 256.13 Agency or the applicable suballocator of tax credits that the 256.14 project will qualify for four percent low-income housing tax 256.15 credits; or (2) a reservation of nine percent low-income housing 256.16 tax credits from the Minnesota Housing Finance Agency or a 256.17 suballocator of tax credits for the project. A qualified 256.18 housing development project may admit nonelderly individuals and 256.19 families with higher incomes if: 256.20 (1) three years have passed since initial occupancy; 256.21 (2) the authority finds the project is experiencing 256.22 unanticipated vacancies resulting in insufficient revenues, 256.23 because of changes in population or other unforeseen 256.24 circumstances that occurred after the initial finding of 256.25 adequate revenues; and 256.26 (3) the authority finds a tax levy or payment from general 256.27 assets of the general jurisdiction governmental unit will be 256.28 necessary to pay debt service on the bonds if higher income 256.29 individuals or families are not admitted. 256.30[EFFECTIVE DATE.] This section is effective for bonds 256.31 issued after the day following final enactment. 256.32 Sec. 11. Minnesota Statutes 2004, section 469.169, is 256.33 amended by adding a subdivision to read: 256.34 Subd. 17. [ADDITIONAL BORDER CITY ALLOCATIONS.] (a) In 256.35 addition to tax reductions authorized in subdivisions 7 to 16, 256.36 the commissioner shall allocate $750,000 for tax reductions to 257.1 border city enterprise zones in cities located on the western 257.2 border of the state. The commissioner shall make allocations to 257.3 zones in cities on the western border on a per capita basis. 257.4 Allocations made under this subdivision may be used for tax 257.5 reductions as provided in section 469.171, or for other offsets 257.6 of taxes imposed on or remitted by businesses located in the 257.7 enterprise zone, but only if the municipality determines that 257.8 the granting of the tax reduction or offset is necessary in 257.9 order to retain a business within or attract a business to the 257.10 zone. Any portion of the allocation provided in this paragraph 257.11 may alternatively be used for tax reductions under section 257.12 469.1732 or 469.1734. 257.13 (b) The commissioner shall allocate $750,000 for tax 257.14 reductions under section 469.1732 or 469.1734 to cities with 257.15 border city enterprise zones located on the western border of 257.16 the state. The commissioner shall allocate this amount among 257.17 the cities on a per capita basis. Any portion of the allocation 257.18 provided in this paragraph may alternatively be used for tax 257.19 reductions as provided in section 469.171. 257.20[EFFECTIVE DATE.] This section is effective the day 257.21 following final enactment. 257.22 Sec. 12. Minnesota Statutes 2004, section 469.174, is 257.23 amended by adding a subdivision to read: 257.24 Subd. 30. [URBAN RENEWAL AREA.] "Urban renewal area" means 257.25 a contiguous geographic area designated within a project and 257.26 within which all parcels must be eligible for inclusion in a 257.27 redevelopment, renewal and renovation, or soils condition 257.28 district or are currently located within a redevelopment, 257.29 renewal and renovation, or soils condition district certified 257.30 within ten years before or after the date of approval of the 257.31 urban renewal area by the city or county, whichever is later. 257.32 In determining eligibility for inclusion in a district, each 257.33 parcel may only be considered as a part of one district. 257.34[EFFECTIVE DATE.] This section is effective for urban 257.35 renewal areas established on or after the date of final 257.36 enactment. 258.1 Sec. 13. Minnesota Statutes 2004, section 469.175, 258.2 subdivision 1, is amended to read: 258.3 Subdivision 1. [TAX INCREMENT FINANCING PLAN.] A tax 258.4 increment financing plan shall contain: 258.5 (1) a statement of objectives of an authority for the 258.6 improvement of a project; 258.7 (2) a statement as to the development program for the 258.8 project, including the property within the project, if any, that 258.9 the authority intends to acquire; 258.10 (3) a list of any development activities that the plan 258.11 proposes to take place within the project, for which contracts 258.12 have been entered into at the time of the preparation of the 258.13 plan, including the names of the parties to the contract, the 258.14 activity governed by the contract, the cost stated in the 258.15 contract, and the expected date of completion of that activity; 258.16 (4) identification or description of the type of any other 258.17 specific development reasonably expected to take place within 258.18 the project, and the date when the development is likely to 258.19 occur; 258.20 (5) estimates of the following: 258.21 (i) cost of the project, including administrative expenses, 258.22 except that if part of the cost of the project is paid or 258.23 financed with increment from the tax increment financing 258.24 district, the tax increment financing plan for the district must 258.25 contain an estimate of the amount of the cost of the project, 258.26 including administrative expenses, that will be paid or financed 258.27 with tax increments from the district; 258.28 (ii) amount of bonded indebtedness to be incurred; 258.29 (iii) sources of revenue to finance or otherwise pay public 258.30 costs; 258.31 (iv) the most recent net tax capacity of taxable real 258.32 property within the tax increment financing district and within 258.33 any subdistrict; 258.34 (v) the estimated captured net tax capacity of the tax 258.35 increment financing district at completion; and 258.36 (vi) the duration of the tax increment financing district's 259.1 and any subdistrict's existence; 259.2 (6) statements of the authority's alternate estimates of 259.3 the impact of tax increment financing on the net tax capacities 259.4 of all taxing jurisdictions in which the tax increment financing 259.5 district is located in whole or in part. For purposes of one 259.6 statement, the authority shall assume that the estimated 259.7 captured net tax capacity would be available to the taxing 259.8 jurisdictions without creation of the district, and for purposes 259.9 of the second statement, the authority shall assume that none of 259.10 the estimated captured net tax capacity would be available to 259.11 the taxing jurisdictions without creation of the district or 259.12 subdistrict; 259.13 (7) identification and description of studies and analyses 259.14 used to make the determination set forth in subdivision 3, 259.15 clause (2);and259.16 (8) identification of all parcels to be included in the 259.17 district or any subdistrict; and 259.18 (9) identification of any job training costs intended to be 259.19 paid by use of tax increments, including the name of the 259.20 employer whose employees will be trained and the nature and cost 259.21 of the training. The plan is not required to identify the 259.22 provider of the job training. 259.23[EFFECTIVE DATE.] This section applies to districts for 259.24 which the request for certification was made after July 31, 259.25 1979, and is effective for tax increment financing plans 259.26 approved after June 30, 2005. 259.27 Sec. 14. Minnesota Statutes 2004, section 469.175, 259.28 subdivision 4, is amended to read: 259.29 Subd. 4. [MODIFICATION OF PLAN.] (a) A tax increment 259.30 financing plan may be modified by an authority. 259.31 (b) The authority may make the following modifications only 259.32 upon the notice and after the discussion, public hearing, and 259.33 findings required for approval of the original plan: 259.34 (1) any reduction or enlargement of geographic area of the 259.35 project or tax increment financing district that does not meet 259.36 the requirements of paragraph (e); 260.1 (2) increase in amount of bonded indebtedness to be 260.2 incurred; 260.3 (3) a determination to capitalize interest on the debt if 260.4 that determination was not a part of the original plan, or to 260.5 increase or decrease the amount of interest on the debt to be 260.6 capitalized; 260.7 (4) increase in the portion of the captured net tax 260.8 capacity to be retained by the authority; 260.9 (5) increase in the estimate of the cost of the project, 260.10 including administrative expenses, that will be paid or financed 260.11 with tax increment from the district;or260.12 (6) designation of additional property to be acquired by 260.13 the authority; or 260.14 (7) a decision to pay for job training for employees of a 260.15 business located in the district that was not a part of the 260.16 original plan. 260.17 (c) If an authority changes the type of district to another 260.18 type of district, this change is not a modification but requires 260.19 the authority to follow the procedure set forth in sections 260.20 469.174 to 469.179 for adoption of a new plan, including 260.21 certification of the net tax capacity of the district by the 260.22 county auditor. 260.23 (d) If a redevelopment district or a renewal and renovation 260.24 district is enlarged, the reasons and supporting facts for the 260.25 determination that the addition to the district meets the 260.26 criteria of section 469.174, subdivision 10, paragraph (a), 260.27 clauses (1) and (2), or subdivision 10a, must be documented. 260.28 (e) The requirements of paragraph (b) do not apply if (1) 260.29 the only modification is elimination of parcels from the project 260.30 or district and (2)(A) the current net tax capacity of the 260.31 parcels eliminated from the district equals or exceeds the net 260.32 tax capacity of those parcels in the district's original net tax 260.33 capacity or (B) the authority agrees that, notwithstanding 260.34 section 469.177, subdivision 1, the original net tax capacity 260.35 will be reduced by no more than the current net tax capacity of 260.36 the parcels eliminated from the district. The authority must 261.1 notify the county auditor of any modification that reduces or 261.2 enlarges the geographic area of a district or a project area. 261.3 (f) The geographic area of a tax increment financing 261.4 district may be reduced, but shall not be enlarged after five 261.5 years following the date of certification of the original net 261.6 tax capacity by the county auditor or after August 1, 1984, for 261.7 tax increment financing districts authorized prior to August 1, 261.8 1979. 261.9[EFFECTIVE DATE.] This section is effective for districts 261.10 for which the request for certification was made after July 31, 261.11 1979, and is effective for modifications made after June 30, 261.12 2005. 261.13 Sec. 15. Minnesota Statutes 2004, section 469.175, 261.14 subdivision 6, is amended to read: 261.15 Subd. 6. [ANNUAL FINANCIAL REPORTING.] (a) The state 261.16 auditor shall develop a uniform system of accounting and 261.17 financial reporting for tax increment financing districts. The 261.18 system of accounting and financial reporting shall, as nearly as 261.19 possible: 261.20 (1) provide for full disclosure of the sources and uses of 261.21 public funds in the district; 261.22 (2) permit comparison and reconciliation with the affected 261.23 local government's accounts and financial reports; 261.24 (3) permit auditing of the funds expended on behalf of a 261.25 district, including a single district that is part of a 261.26 multidistrict project or that is funded in part or whole through 261.27 the use of a development account funded with tax increments from 261.28 other districts or with other public money; 261.29 (4) be consistent with generally accepted accounting 261.30 principles. 261.31 (b) The authority must annually submit to the state auditor 261.32 a financial report in compliance with paragraph (a). Copies of 261.33 the report must also be provided to the county auditor and to 261.34 the governing body of the municipality, if the authority is not 261.35 the municipality. To the extent necessary to permit compliance 261.36 with the requirement of financial reporting, the county and any 262.1 other appropriate local government unit or private entity must 262.2 provide the necessary records or information to the authority or 262.3 the state auditor as provided by the system of accounting and 262.4 financial reporting developed pursuant to paragraph (a). The 262.5 authority must submit the annual report for a year on or before 262.6 August 1 of the next year. 262.7 (c) The annual financial report must also include the 262.8 following items: 262.9 (1) the original net tax capacity of the district and any 262.10 subdistrict under section 469.177, subdivision 1; 262.11 (2) the net tax capacity for the reporting period of the 262.12 district and any subdistrict; 262.13 (3) the captured net tax capacity of the district; 262.14 (4) any fiscal disparity deduction from the captured net 262.15 tax capacity under section 469.177, subdivision 3; 262.16 (5) the captured net tax capacity retained for tax 262.17 increment financing under section 469.177, subdivision 2, 262.18 paragraph (a), clause (1); 262.19 (6) any captured net tax capacity distributed among 262.20 affected taxing districts under section 469.177, subdivision 2, 262.21 paragraph (a), clause (2); 262.22 (7) the type of district; 262.23 (8) the date the municipality approved the tax increment 262.24 financing plan and the date of approval of any modification of 262.25 the tax increment financing plan, the approval of which requires 262.26 notice, discussion, a public hearing, and findings under 262.27 subdivision 4, paragraph (a); 262.28 (9) the date the authority first requested certification of 262.29 the original net tax capacity of the district and the date of 262.30 the request for certification regarding any parcel added to the 262.31 district; 262.32 (10) the date the county auditor first certified the 262.33 original net tax capacity of the district and the date of 262.34 certification of the original net tax capacity of any parcel 262.35 added to the district; 262.36 (11) the month and year in which the authority has received 263.1 or anticipates it will receive the first increment from the 263.2 district; 263.3 (12) the date the district must be decertified; 263.4 (13) for the reporting period and prior years of the 263.5 district, the actual amount received from, at least, the 263.6 following categories: 263.7 (i) tax increments paid by the captured net tax capacity 263.8 retained for tax increment financing under section 469.177, 263.9 subdivision 2, paragraph (a), clause (1), but excluding any 263.10 excess taxes; 263.11 (ii) tax increments that are interest or other investment 263.12 earnings on or from tax increments; 263.13 (iii) tax increments that are proceeds from the sale or 263.14 lease of property, tangible or intangible, purchased by the 263.15 authority with tax increments; 263.16 (iv) tax increments that are repayments of loans or other 263.17 advances made by the authority with tax increments; 263.18 (v) bond or loan proceeds; 263.19 (vi) special assessments; 263.20 (vii) grants; and 263.21 (viii) transfers from funds not exclusively associated with 263.22 the district; 263.23 (14) for the reporting period and for the prior years of 263.24 the district, the actual amount expended for, at least, the 263.25 following categories: 263.26 (i) acquisition of land and buildings through condemnation 263.27 or purchase; 263.28 (ii) site improvements or preparation costs; 263.29 (iii) installation of public utilities, parking facilities, 263.30 streets, roads, sidewalks, or other similar public improvements; 263.31 (iv) administrative costs, including the allocated cost of 263.32 the authority; 263.33 (v) public park facilities, facilities for social, 263.34 recreational, or conference purposes, or other similar public 263.35 improvements;and263.36 (vi) transfers to funds not exclusively associated with the 264.1 district; and 264.2 (vii) job training as permitted under section 469.176, 264.3 subdivision 4m; 264.4 (15) for properties sold to developers, the total cost of 264.5 the property to the authority and the price paid by the 264.6 developer; 264.7 (16) the amount of any payments and the value of any 264.8 in-kind benefits, such as physical improvements and the use of 264.9 building space, that are paid or financed with tax increments 264.10 and are provided to another governmental unit other than the 264.11 municipality during the reporting period; 264.12 (17) the amount of any payments for activities and 264.13 improvements located outside of the district that are paid for 264.14 or financed with tax increments; 264.15 (18) the amount of payments of principal and interest that 264.16 are made during the reporting period on any nondefeased: 264.17 (i) general obligation tax increment financing bonds; 264.18 (ii) other tax increment financing bonds; and 264.19 (iii) notes and pay-as-you-go contracts; 264.20 (19) the principal amount, at the end of the reporting 264.21 period, of any nondefeased: 264.22 (i) general obligation tax increment financing bonds; 264.23 (ii) other tax increment financing bonds; and 264.24 (iii) notes and pay-as-you-go contracts; 264.25 (20) the amount of principal and interest payments that are 264.26 due for the current calendar year on any nondefeased: 264.27 (i) general obligation tax increment financing bonds; 264.28 (ii) other tax increment financing bonds; and 264.29 (iii) notes and pay-as-you-go contracts; 264.30 (21) if the fiscal disparities contribution under chapter 264.31 276A or 473F for the district is computed under section 469.177, 264.32 subdivision 3, paragraph (a), the amount of increased property 264.33 taxes imposed on other properties in the municipality that 264.34 approved the tax increment financing plan as a result of the 264.35 fiscal disparities contribution; 264.36 (22) whether the tax increment financing plan or other 265.1 governing document permits increment revenues to be expended: 265.2 (i) to pay bonds, the proceeds of which were or may be 265.3 expended on activities outside of the district; 265.4 (ii) for deposit into a common bond fund from which money 265.5 may be expended on activities located outside of the district; 265.6 or 265.7 (iii) to otherwise finance activities located outside of 265.8 the tax increment financing district; 265.9 (23) the estimate, if any, contained in the tax increment 265.10 financing plan of the amount of the cost of the project, 265.11 including administrative expenses, that will be paid or financed 265.12 with tax increment; and 265.13 (24) any additional information the state auditor may 265.14 require. 265.15 (d) The commissioner of revenue shall prescribe the method 265.16 of calculating the increased property taxes under paragraph (c), 265.17 clause (21), and the form of the statement disclosing this 265.18 information on the annual statement under subdivision 5. 265.19 (e) The reporting requirements imposed by this subdivision 265.20 apply to districts certified before, on, and after August 1, 265.21 1979. 265.22[EFFECTIVE DATE.] This section is effective for reports 265.23 filed in 2006 and thereafter. 265.24 Sec. 16. Minnesota Statutes 2004, section 469.176, 265.25 subdivision 1c, is amended to read: 265.26 Subd. 1c. [DURATION LIMITS; PRE-1979 DISTRICTS.] (a) For 265.27 tax increment financing districts created prior to August 1, 265.28 1979, no tax increment shall be paid to the authority after 265.29 April 1, 2001, or the term of a nondefeased bond or obligation 265.30 outstanding on April 1, 1990, secured by increments from the 265.31 district or project area, whichever time is greater, provided 265.32 that in no case will a tax increment be paid to an authority 265.33 after August 1, 2009, from such a district. If a district's 265.34 termination date is extended beyond April 1, 2001, because bonds 265.35 were outstanding on April 1, 1990, with maturities extending 265.36 beyond April 1, 2001, the following restrictions apply. No 266.1 increment collected from the district may be expended after 266.2 April 1, 2001, except to pay or repay: 266.3 (1) bonds issued before April 1, 1990; 266.4 (2) bonds issued to refund the principal of the outstanding 266.5 bonds and pay associated issuance costs; 266.6 (3) administrative expenses of the district required to be 266.7 paid under section 469.176, subdivision 4h, paragraph (a); 266.8 (4) transfers of increment permitted under section 266.9 469.1763, subdivision 6;and266.10 (5) any advance or payment made by the municipality or the 266.11 authority after June 1, 2002, to pay any bonds listed in clause 266.12 (1) or (2); and 266.13 (6) amounts authorized under paragraph (d). 266.14 (b) Each year, any increments from a district subject to 266.15 this subdivision must be first applied to pay obligations listed 266.16 under paragraph (a), clauses (1) and (2), and administrative 266.17 expenses under paragraph (a), clause (3). Any remaining 266.18 increments may be used for transfers of increments permitted 266.19 under section 469.1763, subdivision 6, and to make payments 266.20 underparagraphparagraphs (a), clause (5), and (d). 266.21 (c) When sufficient money has been received to pay in full 266.22 or defease obligations under paragraph (a), clauses (1), (2), 266.23 and (5), and no spending is permitted by paragraph (d) for the 266.24 year, the tax increment project or district must be decertified. 266.25 (d) In addition to the expenditures authorized under 266.26 paragraph (a), clauses (1) to (5), a city may expend increments 266.27 from a tax increment financing district subject to this 266.28 subdivision after April 1, 2001, if all of the following 266.29 conditions are met: 266.30 (1) the captured tax capacity for all tax increment 266.31 financing districts constituted less than six percent of the 266.32 city's total tax capacity for taxes payable in 2003; and 266.33 (2) the population of the city exceeds 50,000. 266.34[EFFECTIVE DATE.] This section is effective for tax 266.35 increment financing districts for which the request for 266.36 certification was made before August 1, 1979. 267.1 Sec. 17. Minnesota Statutes 2004, section 469.176, is 267.2 amended by adding a subdivision to read: 267.3 Subd. 4m. [USE OF INCREMENTS FOR JOB 267.4 TRAINING.] Notwithstanding the limits on use of increments in 267.5 subdivision 4, 4b, 4c, or 4j, increments may be expended for job 267.6 training that is intended to result in new job growth within a 267.7 tax increment financing district. The authority may expend 267.8 increments directly for the cost of the job training or may 267.9 reimburse an employer located within the district or a 267.10 municipality in which the district is located for job training 267.11 expenditures. Increments may be expended only for job training 267.12 programs that are approved for this purpose by the local 267.13 workforce council established under section 116L.666 that has 267.14 jurisdiction over the workforce service area that includes the 267.15 tax increment financing district. For purposes of section 267.16 469.1763, increments expended under this subdivision are 267.17 considered to be expended on activities in the district. 267.18[EFFECTIVE DATE.] This section is effective for districts 267.19 for which the request for certification was made after July 31, 267.20 1979, provided that districts for which the request for 267.21 certification was made before the effective date of this act 267.22 must modify their plans to provide for this expenditure. 267.23 Sec. 18. Minnesota Statutes 2004, section 469.176, is 267.24 amended by adding a subdivision to read: 267.25 Subd. 8. [URBAN RENEWAL AREA.] (a) An authority may create 267.26 an urban renewal area only upon the notice and after the 267.27 discussion, public hearing, and findings required for approval 267.28 of the original project. In addition, the authority must obtain 267.29 written approval from the county in which the urban renewal area 267.30 is to be located. After approval by the city and county, the 267.31 authority shall notify the commissioner of revenue of the 267.32 approved urban renewal area. 267.33 (b) All provisions of sections 469.174 through 469.1799 267.34 apply except: 267.35 (1) the five-year rule under section 469.1763, subdivision 267.36 3, is extended to ten years; 268.1 (2) the limitation on spending increment outside of the 268.2 district under section 469.1763, subdivision 2, does not apply, 268.3 provided that increments may only be expended on improvements or 268.4 activities within the urban renewal area, and increments from a 268.5 soils condition district must be expended as provided under 268.6 subdivision 4b; and 268.7 (3) the local tax rate certification required under section 268.8 469.177, subdivision 1a, does not apply. 268.9[EFFECTIVE DATE.] This section is effective for urban 268.10 renewal areas established on or after the date of final 268.11 enactment. 268.12 Sec. 19. Minnesota Statutes 2004, section 469.1761, is 268.13 amended by adding a subdivision to read: 268.14 Subd. 3a. [MIXED-INCOME OCCUPANCY PROJECTS.] (a) 268.15 Notwithstanding the income requirements in subdivisions 2 and 3, 268.16 or section 469.174, subdivision 11, an authority may create 268.17 housing districts for developments that contain both 268.18 owner-occupied and residential rental units for mixed-income 268.19 occupancy. Such a district consists of a project, or a portion 268.20 of a project, intended for occupancy, in part, by persons of low 268.21 and moderate income as defined in chapter 462A, title II, of the 268.22 National Housing Act of 1934; the National Housing Act of 1959; 268.23 the United States Housing Act of 1937, as amended; title V of 268.24 the Housing Act of 1949, as amended; any other similar present 268.25 or future federal, state, or municipal legislation, or the 268.26 regulations promulgated under any of those acts, as further 268.27 specified in this section. Twenty percent of the units in the 268.28 development in the housing district must be occupied by 268.29 individuals whose family income is equal to or less than 50 268.30 percent of area median gross income, and an additional 60 268.31 percent of the units in the development in the housing district 268.32 must be occupied by individuals whose family income is equal to 268.33 or less than 115 percent of area median gross income. Twenty 268.34 percent of the units in the development in the housing district 268.35 are not required to be subject to any income limitations. 268.36 (b) For purposes of this subdivision, "family income" means 269.1 the median gross income for the area as determined under section 269.2 42 of the Internal Revenue Code of 1986, as amended. The income 269.3 requirements of this subdivision are satisfied if the sum of 269.4 qualified owner-occupied units and qualified residential rental 269.5 units equals the required total number of qualified units. 269.6 Owner-occupied units must be initially purchased and occupied by 269.7 individuals whose family income satisfies the income 269.8 requirements of this subdivision. For residential rental 269.9 property, the income requirements of this subdivision apply for 269.10 the duration of the tax increment district. 269.11 (c) The development in the housing district, but not the 269.12 project, does not qualify under this subdivision if the fair 269.13 market value of the improvements that are constructed for 269.14 commercial uses or for uses other than owner-occupied and rental 269.15 mixed-income housing consists of more than 20 percent of the 269.16 total fair market value of the planned improvements in the 269.17 development plan or agreement. The fair market value of the 269.18 improvements may be determined using the cost of construction, 269.19 capitalized income, or other appropriate method of estimating 269.20 market value. 269.21[EFFECTIVE DATE.] This section is effective for districts 269.22 for which certification is requested after July 31, 2005. 269.23 Sec. 20. Minnesota Statutes 2004, section 469.1763, 269.24 subdivision 2, is amended to read: 269.25 Subd. 2. [EXPENDITURES OUTSIDE DISTRICT.] (a) For each tax 269.26 increment financing district, an amount equal to at least 75 269.27 percent of the total revenue derived from tax increments paid by 269.28 properties in the district must be expended on activities in the 269.29 district or to pay bonds, to the extent that the proceeds of the 269.30 bonds were used to finance activities in the district or to pay, 269.31 or secure payment of, debt service on credit enhanced bonds. 269.32 For districts, other than redevelopment districts for which the 269.33 request for certification was made after June 30, 1995, the 269.34 in-district percentage for purposes of the preceding sentence is 269.35 80 percent. Not more than 25 percent of the total revenue 269.36 derived from tax increments paid by properties in the district 270.1 may be expended, through a development fund or otherwise, on 270.2 activities outside of the district but within the defined 270.3 geographic area of the project except to pay, or secure payment 270.4 of, debt service on credit enhanced bonds. For districts, other 270.5 than redevelopment districts for which the request for 270.6 certification was made after June 30, 1995, the pooling 270.7 percentage for purposes of the preceding sentence is 20 270.8 percent. The revenue derived from tax increments for the 270.9 district that are expended on costs under section 469.176, 270.10 subdivision 4h, paragraph (b), may be deducted first before 270.11 calculating the percentages that must be expended within and 270.12 without the district. 270.13 (b) In the case of a housing district, a housing project, 270.14 as defined in section 469.174, subdivision 11, is an activity in 270.15 the district. 270.16 (c) All administrative expenses are for activities outside 270.17 of the district, except that if the only expenses for activities 270.18 outside of the district under this subdivision are for the 270.19 purposes described in paragraph (d), administrative expenses 270.20 will be considered as expenditures for activities in the 270.21 district. 270.22 (d) The authority may elect, in the tax increment financing 270.23 plan for the district, to increase by up to ten percentage 270.24 points the permitted amount of expenditures for activities 270.25 located outside the geographic area of the district under 270.26 paragraph (a). As permitted by section 469.176, subdivision 4k, 270.27 the expenditures, including the permitted expenditures under 270.28 paragraph (a), need not be made within the geographic area of 270.29 the project. Expenditures that meet the requirements of this 270.30 paragraph are legally permitted expenditures of the district, 270.31 notwithstanding section 469.176, subdivisions 4b, 4c, and 4j. 270.32 To qualify for the increase under this paragraph, the 270.33 expenditures must: 270.34 (1) be used exclusively to assist housing that meets the 270.35 requirement for a qualified low-income building, as that term is 270.36 used in section 42 of the Internal Revenue Code; 271.1 (2) not exceed the qualified basis of the housing, as 271.2 defined under section 42(c) of the Internal Revenue Code, less 271.3 the amount of any credit allowed under section 42 of the 271.4 Internal Revenue Code; and 271.5 (3) be used to: 271.6 (i) acquire and prepare the site of the housing; 271.7 (ii) acquire, construct, or rehabilitate the housing; or 271.8 (iii) make public improvements directly related to the 271.9 housing. 271.10 (e) For a district created within a biotechnology and 271.11 health sciences industry zone as defined in section 469.330, 271.12 subdivision 6, tax increment derived from such a district may be 271.13 expended outside of the district but within the zone only for 271.14 expenditures required for the construction of public 271.15 infrastructure necessary to support the activities of the zone. 271.16 Sec. 21. Minnesota Statutes 2004, section 469.1792, is 271.17 amended to read: 271.18 469.1792 [SPECIAL DEFICIT AUTHORITY.] 271.19 Subdivision 1. [SCOPE.] This section applies only to an 271.20 authority with a preexisting district for which: 271.21 (1) the increments from the district were insufficient to 271.22 pay preexisting obligations as a result of the class rate 271.23 changes or the elimination of the state-determined general 271.24 education property tax levy under this act, or both;or271.25 (2)(i) the development authority has a binding contract, 271.26 entered into before August 1, 2001, with a person requiring the 271.27 authority to pay to the person an amount that may not exceed the 271.28 increment from the district or a specific development within the 271.29 district; and 271.30 (ii) the authority is unable to pay the full amount under 271.31 the contract from the pledged increments or other increments 271.32 from the district that would have been due if the class rate 271.33 changes or elimination of the state-determined general education 271.34 property tax levy or both had not been made under Laws 2001, 271.35 First Special Session chapter 5; 271.36 (3) the authority amends its tax increment financing plan 272.1 to establish an affordable housing account to which increments 272.2 are pledged; or 272.3 (4) the authority amends its tax increment financing plan 272.4 to establish a hazardous substance, pollutant, or contaminant 272.5 remediation account to which increments are pledged. 272.6 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 272.7 the following terms have the meanings given. 272.8 (b) "Affordable housing account" means an account in which 272.9 increment is deposited solely for affordable housing activities 272.10 as defined in section 469.174, subdivision 11. 272.11 (c) "Hazardous substance, pollutant, or contaminant 272.12 remediation account" means an account in which increment is 272.13 deposited solely for removal or remediation activities described 272.14 in section 469.174, subdivisions 16 to 19. 272.15 (d) "Preexisting district" means a tax increment financing 272.16 district for which the request for certification was made before 272.17 August 1, 2001. 272.18(c)(e) "Preexisting obligation" means a bond or binding 272.19 contract that: 272.20 (1)(i) was issued or approved before August 1, 2001, or was 272.21 issued pursuant to a binding contract entered into before July 272.22 1, 2001; or 272.23 (ii) was issued to refinance an obligation under item (i), 272.24 if the refinancing does not increase the present value of the 272.25 debt service; and 272.26 (2) is secured by increments from a preexisting district. 272.27 Subd. 3. [ACTIONS AUTHORIZED.] (a) An authority with a 272.28 district qualifying under this section may take either or both 272.29 of the following actions for any or all of its preexisting 272.30 districts: 272.31 (1) the authority may elect that the original local tax 272.32 rate under section 469.177, subdivision 1a, does not apply to 272.33 the district; and 272.34 (2) the authority may elect the fiscal disparities 272.35 contribution will be computed under section 469.177, subdivision 272.36 3, paragraph (a), regardless of the election that was made for 273.1 the district or if the district is an economic development 273.2 district for which the request for certification was made after 273.3 June 30, 1997. 273.4 (b) The authority may take action under this subdivision 273.5 only after the municipality approves the action, by resolution, 273.6 after notice and public hearing in the manner provided under 273.7 section 469.175, subdivision 3. To be effective for taxes 273.8 payable in the following year, the resolution must be adopted 273.9 and the county auditor must be notified of the adoption on or 273.10 before July 1. 273.11 Subd. 4. [EXPENDITURES FROM AFFORDABLE HOUSING 273.12 ACCOUNTS.] Increment from an affordable housing account may be 273.13 spent by an authority anywhere within its area of operation. 273.14 Notwithstanding the definition of a project under section 273.15 469.174, increments may be spent to assist housing that meets 273.16 the requirements under section 469.1761. The limitation imposed 273.17 by section 469.1763, subdivision 2, does not apply to any 273.18 transfers of increment to the affordable housing account to the 273.19 extent that the amount transferred to the account under this 273.20 subdivision does not exceed ten percent of the revenue derived 273.21 from tax increments paid by properties in the district in the 273.22 year. 273.23 Subd. 5. [EXPENDITURES FROM HAZARDOUS SUBSTANCE, 273.24 POLLUTANT, OR CONTAMINANT REMEDIATION ACCOUNT.] Increment from a 273.25 hazardous substance, pollutant, or contaminant remediation 273.26 account may be spent by an authority anywhere within its area of 273.27 operation. Notwithstanding the definition of a project under 273.28 section 469.174, increments may be expended to remediation and 273.29 removal activities that meet the requirements of section 273.30 469.176, subdivision 4b or 4e. The limitation imposed by 273.31 section 469.1763, subdivision 2, does not apply to any transfers 273.32 of increment to the hazardous substance, pollutant, or 273.33 contaminant remediation account to the extent that the amount 273.34 transferred to the account under this subdivision does not 273.35 exceed ten percent of the revenue derived from tax increments 273.36 paid by properties in the district in the year. 274.1[EFFECTIVE DATE.] This section is effective for actions 274.2 taken and resolutions approved after June 30, 2005. 274.3 Sec. 22. Minnesota Statutes 2004, section 469.310, 274.4 subdivision 11, is amended to read: 274.5 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 274.6 means a person carrying on a trade or business at a place of 274.7 business located within a job opportunity building zone. 274.8 (b) A person that relocates a trade or business from 274.9 outside a job opportunity building zone into a zone is not a 274.10 qualified business, unless the business: 274.11 (1)(i) increases full-time employment in the first full 274.12 year of operation within the job opportunity building zone by at 274.13 least 20 percent measured relative to the operations that were 274.14 relocated and maintains the required level of employment for 274.15 each year the zone designation applies; or 274.16 (ii) makes a capital investment in the property located 274.17 within a zone equivalent to ten percent of the gross revenues of 274.18 operation that were relocated in the immediately preceding 274.19 taxable year; and 274.20 (2) enters a binding written agreement with the 274.21 commissioner that: 274.22 (i) pledges the business will meet the requirements of 274.23 clause (1); 274.24 (ii) provides for repayment of all tax benefits enumerated 274.25 under section 469.315 to the business under the procedures in 274.26 section 469.319, if the requirements of clause (1) are not met 274.27 for the taxable year or for taxes payable during the year in 274.28 which the requirements were not met; and 274.29 (iii) contains any other terms the commissioner determines 274.30 appropriate. 274.31 (c) A business is not a qualified business if at its 274.32 location or locations in the zone, the business is primarily 274.33 engaged in making retail sales to purchasers who are physically 274.34 present at the business's zone location. 274.35[EFFECTIVE DATE.] This section is effective the day 274.36 following final enactment and applies to any business entering a 275.1 business subsidy agreement for a job opportunity development 275.2 zone after that date. 275.3 Sec. 23. Laws 1994, chapter 587, article 9, section 20, 275.4 subdivision 1, is amended to read: 275.5 Subdivision 1. [ESTABLISHMENT.] The city of Brooklyn Park 275.6 may establish an economic development tax increment financing 275.7 district in which15 percentall of the revenue generated from 275.8 tax increment in any year that is not expended pursuant to a 275.9 pledge given or encumbrance created before January 1, 2005, is 275.10 deposited in the housing development account of the authority 275.11 and expended according to the tax increment financing plan. 275.12 Sec. 24. Laws 1994, chapter 587, article 9, section 20, 275.13 subdivision 2, is amended to read: 275.14 Subd. 2. [ELIGIBLE ACTIVITIES.] The authority must 275.15 identify in the plan the housing activities that will be 275.16 assisted by the housing development account. Housing activities 275.17 may include rehabilitation, acquisition, demolition, and 275.18 financing of new or existing single family or multifamily 275.19 housing. Housing activities listed in the plan need not be 275.20 located within the district or project area but must be 275.21 activities that meet the requirements of a qualified housing 275.22 district under Minnesota Statutes, section273.1399 or469.1761, 275.23 subdivision 2, for owner-occupied housing or section 469.174, 275.24 subdivision 29, clause (1), for rental housing. 275.25 Sec. 25. Laws 1998, chapter 389, article 11, section 19, 275.26 subdivision 3, is amended to read: 275.27 Subd. 3. [DURATION OF DISTRICT.] Notwithstanding the 275.28 provisions of Minnesota Statutes, section 469.176, subdivision 275.29 1b, no tax increment may be paid to the authority or the city 275.30 after18 years from the date of receipt by the authority of the275.31first increment generated from the final phase of275.32redevelopment. In no case may increments be paid to the275.33authority after30 years from approval of the tax increment 275.34 plan."Final phase of redevelopment" means that phase of275.35redevelopment activity which completes the rehabilitation of the275.36Lake Street site.276.1[EFFECTIVE DATE.] This section is effective upon compliance 276.2 with Minnesota Statutes, sections 469.1782, subdivision 2, and 276.3 645.021, subdivision 2. 276.4 Sec. 26. [ANOKA COUNTY REGIONAL RAILROAD AUTHORITY 276.5 POWERS.] 276.6 Subdivision 1. [ECONOMIC DEVELOPMENT POWERS AND 276.7 DUTIES.] The Anoka County Regional Railroad Authority may 276.8 exercise any of the powers and duties of an economic development 276.9 authority under Minnesota Statutes, sections 469.090, 469.098, 276.10 and 469.101 to 469.106. The Anoka County Regional Railroad 276.11 Authority may exercise the powers under Minnesota Statutes, 276.12 sections 469.001 to 469.047, for the purpose of transit-oriented 276.13 development, except that the Anoka County Regional Railroad 276.14 Authority must not exercise the power to tax under Minnesota 276.15 Statutes, section 469.033, subdivision 6. In applying Minnesota 276.16 Statutes, sections 469.001 to 469.047, 469.090, 469.098, and 276.17 469.101 to 469.106, to the Anoka County Regional Railroad 276.18 Authority, the county is considered to be the city and the 276.19 county board is considered to be the city council. 276.20 Subd. 2. [RELATION TO LOCAL AUTHORITIES.] Nothing in 276.21 subdivision 1 shall change or impair the powers or duties of a 276.22 city, town, municipal housing and redevelopment authority, or 276.23 municipal economic development authority. 276.24 Subd. 3. [LOCAL APPROVAL.] If any economic development 276.25 project is constructed in the county pursuant to the 276.26 authorization in this section, the project must be approved by 276.27 the governing body of each city or town within which the project 276.28 will be constructed. 276.29[EFFECTIVE DATE.] This section is effective the day after 276.30 the governing body of the Anoka County Regional Railroad 276.31 Authority and its chief clerical officer timely complete their 276.32 compliance with Minnesota Statutes, section 645.021, 276.33 subdivisions 2 and 3. 276.34 Sec. 27. [CITY OF BEMIDJI; DURATION EXTENSION FOR TAX 276.35 ABATEMENT.] 276.36 Notwithstanding the limitation in Minnesota Statutes, 277.1 section 469.1813, subdivision 6, the city of Bemidji may extend 277.2 the duration of the tax abatement given to support development 277.3 within the fairgrounds district of the city for an additional 277.4 four years beyond the duration permitted under that section. 277.5 Sec. 28. [CITY OF BROOKLYN CENTER; EXTENSION OF TIME TO 277.6 EXPEND TAX INCREMENT.] 277.7 For tax increment financing district number 3, established 277.8 on December 19, 1994, by Brooklyn Center Resolution No. 94-273, 277.9 Minnesota Statutes, section 469.1763, subdivision 3, applies to 277.10 the district by permitting a period of 13 years for commencement 277.11 of activities within the district. 277.12[EFFECTIVE DATE.] This section is effective upon approval 277.13 by the governing body of the city of Brooklyn Center and 277.14 compliance with Minnesota Statutes, section 645.021, subdivision 277.15 3. 277.16 Sec. 29. [CITY OF BROOKLYN PARK TAX INCREMENT FINANCING 277.17 DISTRICT EXTENSION.] 277.18 Notwithstanding Minnesota Statutes, section 469.176, 277.19 subdivision 1b, or any other law to the contrary, the duration 277.20 limit that applies to the economic development tax increment 277.21 financing district established under Laws 1994, chapter 587, 277.22 article 9, section 20, is extended to December 31, 2020. 277.23 Sec. 30. [CITY OF DETROIT LAKES; REDEVELOPMENT TAX 277.24 INCREMENT FINANCING DISTRICT.] 277.25 Subdivision 1. [AUTHORIZATION.] At the election of the 277.26 governing body of the city of Detroit Lakes, upon adoption of 277.27 the tax increment financing plan for the district described in 277.28 this section, the rules provided under this section apply to 277.29 each such district. 277.30 Subd. 2. [DEFINITION.] In this section, "district" means a 277.31 redevelopment district established by the city of Detroit Lakes 277.32 or the Detroit Lakes Development Authority within the following 277.33 area: 277.34 Beginning at the intersection of Washington Avenue and the 277.35 Burlington Northern Santa Fe Railroad then east to the 277.36 intersection of Roosevelt Avenue then south to the intersection 278.1 of Highway 10/Frazee Street then west to the intersection of 278.2 Frazee Street and the alley that parallels Washington Avenue 278.3 then north to the point of beginning. 278.4 More than one district may be created under this act. 278.5 Subd. 3. [QUALIFICATION AS REDEVELOPMENT DISTRICT; SPECIAL 278.6 RULES.] The district shall be a redevelopment district under 278.7 Minnesota Statutes, section 469.174, subdivision 10. All 278.8 buildings that are removed to facilitate the Highway 10 278.9 Realignment Project are deemed to be "structurally 278.10 substandard." The three-year limit after demolition of the 278.11 buildings to request tax increment financing certification 278.12 provided in Minnesota Statutes, section 469.174, subdivision 10, 278.13 paragraph (d), clause (1), does not apply. 278.14 Subd. 4. [EXPIRATION.] The authority to approve tax 278.15 increment financing plans to establish a tax increment financing 278.16 redevelopment district subject to this section expires on 278.17 December 31, 2014. 278.18 Subd. 5. [EFFECTIVE DATE.] This section is effective upon 278.19 approval of the governing body of the city of Detroit Lakes and 278.20 compliance with Minnesota Statutes, section 645.021, subdivision 278.21 3. 278.22 Sec. 31. [CITIES OF ELGIN, EYOTA, BYRON, AND ORONOCO; TAX 278.23 INCREMENT FINANCING DISTRICTS.] 278.24 Subdivision 1. [AUTHORIZATION.] Notwithstanding the 278.25 mileage limitation in Minnesota Statutes, section 469.174, 278.26 subdivision 27, the cities of Elgin, Eyota, Byron, and Oronoco 278.27 are deemed to be small cities for purposes of Minnesota 278.28 Statutes, sections 469.174 to 469.1799, as long as they do not 278.29 exceed the population limit in that section. 278.30 Subd. 2. [LOCAL APPROVAL.] This section is effective for 278.31 each of the cities of Elgin, Eyota, Byron, and Oronoco upon 278.32 approval of that city's governing body and compliance with 278.33 Minnesota Statutes, section 645.021, subdivisions 2 and 3. 278.34 Sec. 32. [CITY OF FAIRMONT; TAX INCREMENT FINANCING 278.35 DISTRICT.] 278.36 Subdivision 1. [AUTHORITY TO REDUCE ORIGINAL VALUE.] The 279.1 city of Fairmont may elect to reduce the original tax capacity 279.2 of a previously tax-exempt parcel, consisting of property 279.3 formerly owned by the United States Post Office, in tax 279.4 increment financing district No. 20, to the value of the land. 279.5 Subd. 2. [EFFECTIVE DATE.] This section is effective upon 279.6 compliance by the city of Fairmont with the requirements of 279.7 Minnesota Statutes, section 645.021. 279.8 Sec. 33. [CITY OF FERGUS FALLS; ECONOMIC DEVELOPMENT 279.9 PROPERTY.] 279.10 The provisions of Minnesota Statutes, section 272.02, 279.11 subdivision 39, apply to property located in the city of Fergus 279.12 Falls as if the city had a population of 5,000 or less. 279.13[EFFECTIVE DATE.] This section is effective for taxes 279.14 levied in 2005, payable in 2006, and thereafter. 279.15 Sec. 34. [CITY OF RAMSEY; HOUSING TAX INCREMENT DISTRICT.] 279.16 Subdivision 1. [AUTHORIZATION.] The governing body of the 279.17 city of Ramsey may create a housing tax increment financing 279.18 district as provided in this section. The city or its economic 279.19 development authority may be the "authority" for the purposes of 279.20 Minnesota Statutes, sections 469.174 to 469.179. 279.21 Subd. 2. [DEFINITIONS.] (a) For the purposes of this 279.22 section, the terms defined in this subdivision have the meanings 279.23 given them. 279.24 (b) "Development parcel" means the property in the city of 279.25 Ramsey generally described as the easterly 4.1 acres of Outlot 279.26 AA, Ramsey Town Center Addition. 279.27 (c) "Low and moderate income persons" means: 279.28 (1) persons or families of low and moderate income, as 279.29 defined in Minnesota Statutes, chapter 462A, Title II of the 279.30 National Housing Act of 1934, the National Housing Act of 1959, 279.31 the United States Housing Act of 1937, as amended, Title V of 279.32 the Housing Act of 1949, as amended, any other similar present 279.33 or future federal, state, or municipal legislation, or the 279.34 regulations promulgated under any of those acts; 279.35 (2) disabled persons; and 279.36 (3) persons over the age of 55 years. 280.1 Subd. 3. [SPECIAL RULES.] (a) The district established 280.2 under this section is subject to the provisions of Minnesota 280.3 Statutes, sections 469.174 to 469.179, except as provided in 280.4 this subdivision. 280.5 (b) The district may consist of all or a portion of the 280.6 development parcel. 280.7 (c) The housing district shall be as described in Minnesota 280.8 Statutes, section 469.174, subdivision 11, provided that the 280.9 definition in subdivision 2, paragraph (c), applies to all 280.10 references to "low and moderate income persons" in that 280.11 provision. All improvements constructed within the district 280.12 will be considered to be made for the benefit of low and 280.13 moderate income persons. 280.14 (d) Minnesota Statutes, section 469.176, subdivision 7, 280.15 does not apply to the housing district authorized in this 280.16 section. 280.17 (e) The income limitations in Minnesota Statutes, section 280.18 469.1761, shall not apply to persons meeting the requirements of 280.19 clauses (2) and (3) of subdivision 2, paragraph (c). 280.20[EFFECTIVE DATE.] This section is effective the day 280.21 following final enactment, upon compliance with Minnesota 280.22 Statutes, section 645.021. 280.23 Sec. 35. [CITY OF RICHFIELD; TAX INCREMENT FINANCING 280.24 DISTRICT.] 280.25 Subdivision 1. [AUTHORIZATION.] The city of Richfield may 280.26 create a tax increment financing district consisting of an area 280.27 lying west of Trunk Highway 77 extending: to 16th Avenue 280.28 between Crosstown Highway 62 and 66th Street; to 17th Avenue 280.29 between 66th and 69th Streets; and to 18th Avenue between 69th 280.30 and 72nd Streets. The city or its housing and redevelopment 280.31 authority may be the authority for the purposes of Minnesota 280.32 Statutes, sections 469.174 to 469.179. 280.33 Subd. 2. [DISTRICT IS REDEVELOPMENT DISTRICT.] The 280.34 redevelopment tax increment district created pursuant to 280.35 subdivision 1, within which housing is not a compatible use due 280.36 to the presence of extraordinary low frequency noise and 281.1 vibration impacts, is deemed to be a redevelopment district and 281.2 is subject to Minnesota Statutes, sections 469.174 to 469.179, 281.3 except that: 281.4 (1) expenditures for activities as defined in Minnesota 281.5 Statutes, section 469.1763, subdivision 1, paragraph (b), 281.6 anywhere in the district are deemed to be the costs of 281.7 correcting conditions that allow the designation of 281.8 redevelopment districts pursuant to Minnesota Statutes, section 281.9 469.174, subdivision 10; and 281.10 (2) the five-year rule under Minnesota Statutes, section 281.11 469.1763, subdivision 3, does not apply. 281.12[EFFECTIVE DATE.] This section is effective upon local 281.13 approval by the city of Richfield in compliance with Minnesota 281.14 Statutes, section 645.021. 281.15 Sec. 36. [CITY OF ST. MICHAEL; TAX INCREMENT FINANCING 281.16 DISTRICT.] 281.17 Subdivision 1. [ESTABLISHMENT OF DISTRICT.] The city of St. 281.18 Michael may establish a redevelopment tax increment financing 281.19 district subject to Minnesota Statutes, sections 469.174 to 281.20 469.179, except as provided in this section. The district must 281.21 be established within an area that includes the downtown and 281.22 town center areas as designated by the city as well as all 281.23 parcels adjacent to marked Trunk Highway 241 within the city. 281.24 Subd. 2. [SPECIAL RULES.] (a) Notwithstanding the 281.25 requirements of Minnesota Statutes, section 469.174, subdivision 281.26 10, the district may be established and operated as a 281.27 redevelopment district. 281.28 (b) Notwithstanding the restrictions of Minnesota Statutes, 281.29 sections 469.176, subdivisions 4 and 4j, and 469.1763, 281.30 subdivision 2, revenues derived from tax increments from the 281.31 district created under this section may be used to meet the cost 281.32 of land acquisition, removal of buildings in the right-of-way 281.33 acquisition area, and other costs incurred by the city of St. 281.34 Michael in the expansion and improvement of marked Trunk Highway 281.35 241 within the city. 281.36 (c) Minnesota Statutes, section 469.176, subdivision 5, 282.1 does not apply to the district. 282.2[EFFECTIVE DATE.] This section is effective the day after 282.3 the governing body of the city of St. Michael complies with 282.4 Minnesota Statutes, section 645.021, subdivision 3. 282.5 Sec. 37. [ST. PAUL; HOUSING AND REDEVELOPMENT AUTHORITY.] 282.6 Subdivision 1. [HOUSING AND REDEVELOPMENT 282.7 SUBDISTRICTS.] For its tax increment financing districts 282.8 identified in subdivision 2, the Housing and Redevelopment 282.9 Authority of the city of St. Paul may establish subdistricts up 282.10 to the number set forth for each tax increment financing 282.11 district in subdivision 2. The subdistricts shall be treated as 282.12 set forth in subdivision 3, notwithstanding the provisions of 282.13 any other law to the contrary. 282.14 Subd. 2. [DIVISION INTO SUBDISTRICTS; AUTHORITY.] The tax 282.15 increment financing districts with the following Ramsey County 282.16 identification numbers may be divided into a number of 282.17 subdistricts not to exceed the number set forth as follows: No. 282.18 224/233, six subdistricts; No. 225, six subdistricts; No. 228, 282.19 three subdistricts; and No. 234, two subdistricts. 282.20 Subd. 3. [DESIGNATION OF PARCELS.] All parcels in a tax 282.21 increment financing district listed in subdivision 2 must be 282.22 assigned to a subdistrict. Each subdistrict established 282.23 pursuant to this section shall consist of those parcels in the 282.24 tax increment financing district which are designated by the 282.25 commissioners of the Housing and Redevelopment Authority of the 282.26 city of St. Paul by resolution, which parcels need not be 282.27 contiguous. For purposes of determining tax increments and the 282.28 parcels treated as paying tax increments, each subdistrict shall 282.29 be treated as a separate tax increment district. 282.30[EFFECTIVE DATE.] This section is effective the day after 282.31 the governing body of St. Paul and its chief clerical officer 282.32 comply with Minnesota Statutes, section 645.021, subdivisions 2 282.33 and 3. 282.34 Sec. 38. [WABASHA TAX INCREMENT FINANCING DISTRICT.] 282.35 Subdivision 1. [DISTRICT EXTENSION.] The governing body of 282.36 the city of Wabasha may elect to extend the duration of its 283.1 redevelopment tax increment financing district number 3 by up to 283.2 five additional years. 283.3 Subd. 2. [FIVE-YEAR RULE.] The requirements of Minnesota 283.4 Statutes, section 469.1763, subdivision 3, that activities must 283.5 be undertaken within a five-year period from the date of 283.6 certification of a tax increment financing district must be 283.7 considered to be met for the city of Wabasha redevelopment tax 283.8 increment district number 3, if the activities are undertaken 283.9 within ten years from the date of certification of the district. 283.10 Subd. 3. [NATIONAL EAGLE CENTER.] Notwithstanding the 283.11 provisions of Minnesota Statutes, section 469.176, subdivision 283.12 4l, or any other law, the city of Wabasha may spend the proceeds 283.13 of tax increment bonds issued prior to January 1, 2000, to pay 283.14 the costs of acquiring and constructing a National Eagle Center 283.15 in the city. The city of Wabasha may also use tax increment 283.16 from its tax increment districts to pay the debt service on such 283.17 bonds, or any bonds issued to refund such bonds, subject to 283.18 legal restrictions on the pooling of tax increment. 283.19[EFFECTIVE DATE.] Subdivision 1 is effective upon 283.20 compliance with the provisions of Minnesota Statutes, sections 283.21 469.1782, subdivision 2, and 645.021. Subdivisions 2 and 3 are 283.22 effective upon compliance by the governing body of the city of 283.23 Wabasha with the provisions of Minnesota Statutes, section 283.24 645.021. 283.25 Sec. 39. [WINONA; EXTENSION OF DURATION OF TAX INCREMENT 283.26 DISTRICT.] 283.27 Subdivision 1. [DURATION.] Notwithstanding the provisions 283.28 of Minnesota Statutes, section 469.176, subdivision 1b, the 283.29 duration of riverfront tax increment financing district number 283.30 2, approved by the port authority of Winona on July 15, 1980, is 283.31 extended to December 31, 2020. Any tax increment received after 283.32 December 31, 2005, must be used solely to pay capital and 283.33 administrative costs of transportation improvements related to 283.34 the Pelzer Street project. 283.35 Subd. 2. [EXCEPTION.] The provisions of Minnesota 283.36 Statutes, section 469.1782, subdivision 2, do not apply to this 284.1 section. 284.2[EFFECTIVE DATE.] This section is effective upon approval 284.3 by the governing body of the port authority of Winona and 284.4 compliance with Minnesota Statutes, section 645.021. 284.5 Sec. 40. [JOBZ EXPENDITURE LIMITATIONS; AUDITS.] 284.6 Subdivision 1. [DETERMINATION OF TAX EXPENDITURES.] By 284.7 September 1, 2005, the commissioner of revenue, with the 284.8 assistance of the commissioner of employment and economic 284.9 development, must estimate the total amount of tax expenditures 284.10 projected to have been obligated for all job opportunity 284.11 building zone projects that have been approved before June 1, 284.12 2005. If the commissioner of revenue determines that the 284.13 estimated amount of tax expenditures for fiscal years 2005-2007 284.14 exceeds $13,780,000, the commissioner of revenue must inform the 284.15 chairs of the house of representatives and senate tax committees. 284.16 Subd. 2. [AUDITS.] The Tax Increment Financing, Investment 284.17 and Finance Division of the Office of the State Auditor must 284.18 annually audit the creation and operation of all job opportunity 284.19 building zones and business subsidy agreements entered into 284.20 under Minnesota Statutes, sections 469.310 to 469.320. 284.21 Sec. 41. [REPEALER.] 284.22 Laws 1994, chapter 587, article 9, section 20, subdivision 284.23 4, is repealed. 284.24 ARTICLE 10 284.25 PUBLIC FINANCE - SF1683 284.26 Section 1. Minnesota Statutes 2004, section 118A.05, 284.27 subdivision 5, is amended to read: 284.28 Subd. 5. [GUARANTEED INVESTMENT CONTRACTS.] Agreements or 284.29 contracts for guaranteed investment contracts may be entered 284.30 into if they are issued or guaranteed by United States 284.31 commercial banks, domestic branches of foreign banks, United 284.32 States insurance companies, or their Canadian subsidiaries, or 284.33 the domestic affiliates of any of the foregoing. The credit 284.34 quality of the issuer's or guarantor's short- and long-term 284.35 unsecured debt must be rated in one of the two highest 284.36 categories by a nationally recognized rating agency. Should the 285.1 issuer's or guarantor's credit quality be downgraded below "A", 285.2 the government entity must have withdrawal rights. 285.3 Sec. 2. Minnesota Statutes 2004, section 275.70, 285.4 subdivision 5, is amended to read: 285.5 Subd. 5. [SPECIAL LEVIES.] "Special levies" means those 285.6 portions of ad valorem taxes levied by a local governmental unit 285.7 for the following purposes or in the following manner: 285.8 (1) to pay the costs of the principal and interest on 285.9 bonded indebtedness or to reimburse for the amount of liquor 285.10 store revenues used to pay the principal and interest due on 285.11 municipal liquor store bonds in the year preceding the year for 285.12 which the levy limit is calculated; 285.13 (2) to pay the costs of principal and interest on 285.14 certificates of indebtedness issued for any corporate purpose 285.15 except for the following: 285.16 (i) tax anticipation or aid anticipation certificates of 285.17 indebtedness; 285.18 (ii) certificates of indebtedness issued under sections 285.19 298.28 and 298.282; 285.20 (iii) certificates of indebtedness used to fund current 285.21 expenses or to pay the costs of extraordinary expenditures that 285.22 result from a public emergency; or 285.23 (iv) certificates of indebtedness used to fund an 285.24 insufficiency in tax receipts or an insufficiency in other 285.25 revenue sources; 285.26 (3) to provide for the bonded indebtedness portion of 285.27 payments made to another political subdivision of the state of 285.28 Minnesota; 285.29 (4) to fund payments made to the Minnesota State Armory 285.30 Building Commission under section 193.145, subdivision 2, to 285.31 retire the principal and interest on armory construction bonds; 285.32 (5) property taxes approved by voters which are levied 285.33 against the referendum market value as provided under section 285.34 275.61; 285.35 (6) to fund matching requirements needed to qualify for 285.36 federal or state grants or programs to the extent that either 286.1 (i) the matching requirement exceeds the matching requirement in 286.2 calendar year 2001, or (ii) it is a new matching requirement 286.3 that did not exist prior to 2002; 286.4 (7) to pay the expenses reasonably and necessarily incurred 286.5 in preparing for or repairing the effects of natural disaster 286.6 including the occurrence or threat of widespread or severe 286.7 damage, injury, or loss of life or property resulting from 286.8 natural causes, in accordance with standards formulated by the 286.9 Emergency Services Division of the state Department of Public 286.10 Safety, as allowed by the commissioner of revenue under section 286.11 275.74, subdivision 2; 286.12 (8) pay amounts required to correct an error in the levy 286.13 certified to the county auditor by a city or county in a levy 286.14 year, but only to the extent that when added to the preceding 286.15 year's levy it is not in excess of an applicable statutory, 286.16 special law or charter limitation, or the limitation imposed on 286.17 the governmental subdivision by sections 275.70 to 275.74 in the 286.18 preceding levy year; 286.19 (9) to pay an abatement under section 469.1815; 286.20 (10) to pay any costs attributable to increases in the 286.21 employer contribution rates under chapter 353 that are effective 286.22 after June 30, 2001; 286.23 (11) to pay the operating or maintenance costs of a county 286.24 jail as authorized in section 641.01 or 641.262, or of a 286.25 correctional facility as defined in section 241.021, subdivision 286.26 1, paragraph (f), to the extent that the county can demonstrate 286.27 to the commissioner of revenue that the amount has been included 286.28 in the county budget as a direct result of a rule, minimum 286.29 requirement, minimum standard, or directive of the Department of 286.30 Corrections, or to pay the operating or maintenance costs of a 286.31 regional jail as authorized in section 641.262. For purposes of 286.32 this clause, a district court order is not a rule, minimum 286.33 requirement, minimum standard, or directive of the Department of 286.34 Corrections. If the county utilizes this special levy, except 286.35 to pay operating or maintenance costs of a new regional jail 286.36 facility under sections 641.262 to 641.264 which will not 287.1 replace an existing jail facility, any amount levied by the 287.2 county in the previous levy year for the purposes specified 287.3 under this clause and included in the county's previous year's 287.4 levy limitation computed under section 275.71, shall be deducted 287.5 from the levy limit base under section 275.71, subdivision 2, 287.6 when determining the county's current year levy limitation. The 287.7 county shall provide the necessary information to the 287.8 commissioner of revenue for making this determination; 287.9 (12) to pay for operation of a lake improvement district, 287.10 as authorized under section 103B.555. If the county utilizes 287.11 this special levy, any amount levied by the county in the 287.12 previous levy year for the purposes specified under this clause 287.13 and included in the county's previous year's levy limitation 287.14 computed under section 275.71 shall be deducted from the levy 287.15 limit base under section 275.71, subdivision 2, when determining 287.16 the county's current year levy limitation. The county shall 287.17 provide the necessary information to the commissioner of revenue 287.18 for making this determination; 287.19 (13) to repay a state or federal loan used to fund the 287.20 direct or indirect required spending by the local government due 287.21 to a state or federal transportation project or other state or 287.22 federal capital project. This authority may only be used if the 287.23 project is not a local government initiative; 287.24 (14) to pay for court administration costs as required 287.25 under section 273.1398, subdivision 4b, less the (i) county's 287.26 share of transferred fines and fees collected by the district 287.27 courts in the county for calendar year 2001 and (ii) the aid 287.28 amount certified to be paid to the county in 2004 under section 287.29 273.1398, subdivision 4c; however, for taxes levied to pay for 287.30 these costs in the year in which the court financing is 287.31 transferred to the state, the amount under this clause is 287.32 limited to the amount of aid the county is certified to receive 287.33 under section 273.1398, subdivision 4a;and287.34 (15) to fund a police or firefighters relief association as 287.35 required under section 69.77 to the extent that the required 287.36 amount exceeds the amount levied for this purpose in 2001; and 288.1 (16) for purposes of a storm sewer improvement district, 288.2 pursuant to section 444.20. 288.3 Sec. 3. Minnesota Statutes 2004, section 373.01, 288.4 subdivision 3, is amended to read: 288.5 Subd. 3. [CAPITAL NOTES.] (a) A county board may, by 288.6 resolution and without referendum, issue capital notes subject 288.7 to the county debt limit to purchase capital equipment useful 288.8 for county purposes that has an expected useful life at least 288.9 equal to the term of the notes. The notes shall be payable in 288.10 not more thanfiveten years and shall be issued on terms and in 288.11 a manner the board determines. A tax levy shall be made for 288.12 payment of the principal and interest on the notes, in 288.13 accordance with section 475.61, as in the case of bonds. 288.14 (b) For purposes of this subdivision, "capital equipment" 288.15 means: 288.16 (1) public safety, ambulance, road construction or 288.17 maintenance, and medical equipment,; and 288.18 (2) computer hardware andoriginal operating system288.19 software, whether bundled with machinery or equipment or 288.20 unbundled, together with application development services and 288.21 training related to the use of the computer or software. The 288.22 authority to issue capital notes fororiginal operating systems288.23 computer software and related services expires on July 1,2005288.24 2007. 288.25 Sec. 4. Minnesota Statutes 2004, section 373.40, 288.26 subdivision 1, is amended to read: 288.27 Subdivision 1. [DEFINITIONS.] For purposes of this 288.28 section, the following terms have the meanings given. 288.29 (a) "Bonds" means an obligation as defined under section 288.30 475.51. 288.31 (b) "Capital improvement" means acquisition or betterment 288.32 of public lands,development rights in the form of conservation288.33easements under chapter 84C,buildings, or other improvements 288.34 within the county for the purpose of a county courthouse, 288.35 administrative building, health or social service facility, 288.36 correctional facility, jail, law enforcement center, hospital, 289.1 morgue, library, park, qualified indoor ice arena,androads and 289.2 bridges, and the acquisition of development rights in the form 289.3 of conservation easements under chapter 84C. An improvement 289.4 must have an expected useful life of five years or more to 289.5 qualify. "Capital improvement" does not include light rail 289.6 transit or any activity related to it or a recreation or sports 289.7 facility building (such as, but not limited to, a gymnasium, ice 289.8 arena, racquet sports facility, swimming pool, exercise room or 289.9 health spa), unless the building is part of an outdoor park 289.10 facility and is incidental to the primary purpose of outdoor 289.11 recreation. 289.12 (c) "Commissioner" means the commissioner of employment and 289.13 economic development. 289.14 (d) "Metropolitan county" means a county located in the 289.15 seven-county metropolitan area as defined in section 473.121 or 289.16 a county with a population of 90,000 or more. 289.17 (e) "Population" means the population established by the 289.18 most recent of the following (determined as of the date the 289.19 resolution authorizing the bonds was adopted): 289.20 (1) the federal decennial census, 289.21 (2) a special census conducted under contract by the United 289.22 States Bureau of the Census, or 289.23 (3) a population estimate made either by the Metropolitan 289.24 Council or by the state demographer under section 4A.02. 289.25 (f) "Qualified indoor ice arena" means a facility that 289.26 meets the requirements of section 373.43. 289.27 (g) "Tax capacity" means total taxable market value, but 289.28 does not include captured market value. 289.29 Sec. 5. Minnesota Statutes 2004, section 400.04, is 289.30 amended by adding a subdivision to read: 289.31 Subd. 4a. [PERFORMANCE BOND WAIVER OR 289.32 ALTERNATIVE.] Notwithstanding the requirements of section 574.26 289.33 or any other public works bond requirements for a solid waste 289.34 facilities project established under an agreement authorized 289.35 under chapter 115A or chapter 400, the county may waive the 289.36 requirement for performance bonds or accept another form of 290.1 financial guarantee in any amount acceptable to the county, if 290.2 the project is partially or fully funded by a county, and the 290.3 county is not liable for financial acceptance until performance 290.4 guarantees or other standards established under the agreement 290.5 have been satisfied. 290.6 Sec. 6. Minnesota Statutes 2004, section 410.32, is 290.7 amended to read: 290.8 410.32 [CITIES MAY ISSUE CAPITAL NOTES FOR CAPITAL 290.9 EQUIPMENT.] 290.10 (a) Notwithstanding any contrary provision of other law or 290.11 charter, a home rule charter city may, by resolution and without 290.12 public referendum, issue capital notes subject to the city debt 290.13 limit to purchase capital equipment. 290.14 (b) For purposes of this section, "capital equipment" means: 290.15 (1) public safety equipment, ambulance and other medical 290.16 equipment, road construction and maintenance equipment, and 290.17 other capital equipment; and 290.18 (2) computer hardware andoriginal operating system290.19 software,providedwhether bundled with machinery or equipment 290.20 or unbundled, together with application development services and 290.21 training related to the use of the computer or software. 290.22 (c) The equipment or softwarehasmust have an expected 290.23 useful life at least as long as the term of the notes. The 290.24 authority to issue capital notes fororiginal operating system290.25 computer software and related services expires on July 1,2005290.26 2007. 290.27 (d) The notes shall be payable in not more thanfiveten 290.28 years and be issued on terms and in the manner the city 290.29 determines. The total principal amount of the capital notes 290.30 issued in a fiscal year shall not exceed 0.03 percent of the 290.31 market value of taxable property in the city for that year. 290.32 (e) A tax levy shall be made for the payment of the 290.33 principal and interest on the notes, in accordance with section 290.34 475.61, as in the case of bonds. 290.35 (f) Notes issued under this section shall require an 290.36 affirmative vote of two-thirds of the governing body of the city. 291.1 (g) Notwithstanding a contrary provision of other law or 291.2 charter, a home rule charter city may also issue capital notes 291.3 subject to its debt limit in the manner and subject to the 291.4 limitations applicable to statutory cities pursuant to section 291.5 412.301. 291.6 Sec. 7. Minnesota Statutes 2004, section 412.301, is 291.7 amended to read: 291.8 412.301 [FINANCING PURCHASE OF CERTAIN EQUIPMENT.] 291.9 (a) The council may issue certificates of indebtedness or 291.10 capital notes subject to the city debt limits to 291.11 purchase capital equipment. 291.12 (b) For purposes of this section, "capital equipment" means: 291.13 (1) public safety equipment, ambulance and other medical 291.14 equipment, road constructionorand maintenance equipment, and 291.15 other capital equipment; and 291.16 (2) computer hardware andoriginal operating system291.17 software,providedwhether bundled with machinery or equipment 291.18 or unbundled, together with application development services and 291.19 training related to the use of the computer or software. 291.20 (c) The equipment or softwarehasmust have an expected 291.21 useful life at least as long as the terms of the certificates or 291.22 notes. The authority to issue capital notes for original 291.23 operating system software expires on July 1,20052007. 291.24 (d) Such certificates or notes shall be payable in not more 291.25 thanfiveten years and shall be issued on such terms and in 291.26 such manner as the council may determine. 291.27 (e) If the amount of the certificates or notes to be issued 291.28 to finance any such purchase exceeds 0.25 percent of the market 291.29 value of taxable property in the city, they shall not be issued 291.30 for at least ten days after publication in the official 291.31 newspaper of a council resolution determining to issue them; and 291.32 if before the end of that time, a petition asking for an 291.33 election on the proposition signed by voters equal to ten 291.34 percent of the number of voters at the last regular municipal 291.35 election is filed with the clerk, such certificates or notes 291.36 shall not be issued until the proposition of their issuance has 292.1 been approved by a majority of the votes cast on the question at 292.2 a regular or special election. 292.3 (f) A tax levy shall be made for the payment of the 292.4 principal and interest on such certificates or notes, in 292.5 accordance with section 475.61, as in the case of bonds. 292.6 Sec. 8. Minnesota Statutes 2004, section 428A.101, is 292.7 amended to read: 292.8 428A.101 [DEADLINE FOR SPECIAL SERVICEDISTRICTDISTRICTS 292.9 UNDER GENERAL LAW.] 292.10 The establishment of a new special service district after 292.11 June 30,20052009, requires enactment of a special law 292.12 authorizing the establishment of the area. 292.13 Sec. 9. Minnesota Statutes 2004, section 428A.21, is 292.14 amended to read: 292.15 428A.21 [SUNSETDEADLINE FOR HOUSING IMPROVEMENT DISTRICTS 292.16 UNDER GENERAL LAW.] 292.17NoThe establishment of a new housing improvementareas may292.18be established under sections 428A.11 to 428A.20area after June 292.19 30,2005. After June 30, 2005, a city may establish a housing292.20improvement area, provided that it receives enabling legislation292.21 2009, requires enactment of a special law authorizing the 292.22 establishment of the area. 292.23 Sec. 10. Minnesota Statutes 2004, section 429.031, is 292.24 amended by adding a subdivision to read: 292.25 Subd. 4. [IMPROVEMENTS; ORDERLY ANNEXATION.] An 292.26 improvement may be made by a municipality in an area that is the 292.27 subject of an orderly annexation agreement under section 292.28 414.0325 to which the municipality is a party. The municipality 292.29 may subsequently reimburse itself for all or any part of the 292.30 cost of such an improvement by levying assessments on the 292.31 property subject to the orderly annexation agreement, when 292.32 annexed, in the manner provided in section 429.051, but only if 292.33 the orderly annexation agreement includes a statement that the 292.34 municipality intends to do so and notice has been provided to 292.35 the property owner as provided in subdivision 1. 292.36 Sec. 11. Minnesota Statutes 2004, section 429.051, is 293.1 amended to read: 293.2 429.051 [APPORTIONMENT OF COST.] 293.3 The cost of any improvement, or any part thereof, may be 293.4 assessed upon property benefited by the improvement, based upon 293.5 the benefits received, whether or not the property abuts on the 293.6 improvement and whether or not any part of the cost of the 293.7 improvement is paid from the county state-aid highway fund, the 293.8 municipal state-aid street fund, or the trunk highway fund. The 293.9 area assessed may be less than but may not exceed the area 293.10 proposed to be assessed as stated in the notice of hearing on 293.11 the improvement, except as provided below. The municipality may 293.12 pay such portion of the cost of the improvement as the council 293.13 may determine from general ad valorem tax levies or from other 293.14 revenues or funds of the municipality available for the 293.15 purpose. The municipality may subsequently reimburse itself for 293.16 all or any of the portion of the cost ofa water, storm sewer,293.17or sanitary seweran improvement so paid by levying additional 293.18 assessments upon any properties abutting on but not previously 293.19 assessed for the improvement, on notice and hearing as provided 293.20 for the assessments initially made. To the extent that such an 293.21 improvement benefits nonabutting properties which may be served 293.22 by the improvement when one or more later extensions or 293.23 improvements are made but which are not initially assessed 293.24 therefor, the municipality may also reimburse itself by adding 293.25 all or any of the portion of the cost so paid to the assessments 293.26 levied for any of such later extensions or improvements, 293.27 provided that notice that such additional amount will be 293.28 assessed is included in the notice of hearing on the making of 293.29 such extensions or improvements. The additional assessments 293.30 herein authorized may be made whether or not the properties 293.31 assessed were included in the area described in the notice of 293.32 hearing on the making of the original improvement. 293.33 In any city of the fourth class electing to proceed under a 293.34 home rule charter as provided in this chapter, which charter 293.35 provides for a board of water commissioners and authorizes such 293.36 board to assess a water frontage tax to defray the cost of 294.1 construction of water mains, such board may assess the tax based 294.2 upon the benefits received and without regard to any charter 294.3 limitation on the amount that may be assessed for each lineal 294.4 foot of property abutting on the water main. The water frontage 294.5 tax shall be imposed according to the procedure and, except as 294.6 herein provided, subject to the limitations of the charter of 294.7 the city. 294.8 Sec. 12. Minnesota Statutes 2004, section 469.034, 294.9 subdivision 2, is amended to read: 294.10 Subd. 2. [GENERAL OBLIGATION REVENUE BONDS.] (a) An 294.11 authority may pledge the general obligation of the general 294.12 jurisdiction governmental unit as additional security for bonds 294.13 payable from income or revenues of the project or the 294.14 authority. The authority must find that the pledged revenues 294.15 will equal or exceed 110 percent of the principal and interest 294.16 due on the bonds for each year. The proceeds of the bonds must 294.17 be used for a qualified housing development project or 294.18 projects. The obligations must be issued and sold in the manner 294.19 and following the procedures provided by chapter 475, except the 294.20 obligations are not subject to approval by the electors, and the 294.21 maturities may extend to not more than3035 yearsfrom the294.22estimated date of completion of the projectfor obligations sold 294.23 to finance housing for the elderly and 40 years for other 294.24 obligations issued under this subdivision. The authority is the 294.25 municipality for purposes of chapter 475. 294.26 (b) The principal amount of the issue must be approved by 294.27 the governing body of the general jurisdiction governmental unit 294.28 whose general obligation is pledged. Public hearings must be 294.29 held on issuance of the obligations by both the authority and 294.30 the general jurisdiction governmental unit. The hearings must 294.31 be held at least 15 days, but not more than 120 days, before the 294.32 sale of the obligations. 294.33 (c) The maximum amount of general obligation bonds that may 294.34 be issued and outstanding under this section equals the greater 294.35 of (1) one-half of one percent of the taxable market value of 294.36 the general jurisdiction governmental unit whose general 295.1 obligationwhich includes a tax on propertyis pledged, or (2) 295.2 $3,000,000. In the case of county or multicounty general 295.3 obligation bonds, the outstanding general obligation bonds of 295.4 all cities in the county or counties issued under this 295.5 subdivision must be added in calculating the limit under clause 295.6 (1). 295.7 (d) "General jurisdiction governmental unit" means the city 295.8 in which the housing development project is located. In the 295.9 case of a county or multicounty authority, the county or 295.10 counties may act as the general jurisdiction governmental unit. 295.11 In the case of a multicounty authority, the pledge of the 295.12 general obligation is a pledge of a tax on the taxable property 295.13 in each of the counties. 295.14 (e) "Qualified housing development project" means a housing 295.15 development project providing housing either for the elderly or 295.16 for individuals and families with incomes not greater than 80 295.17 percent of the median family income as estimated by the United 295.18 States Department of Housing and Urban Development for the 295.19 standard metropolitan statistical area or the nonmetropolitan 295.20 county in which the project is located, and will be owned by the 295.21 authority for the term of the bonds. A qualified housing 295.22 development project may admit nonelderly individuals and 295.23 families with higher incomes if: 295.24 (1) three years have passed since initial occupancy; 295.25 (2) the authority finds the project is experiencing 295.26 unanticipated vacancies resulting in insufficient revenues, 295.27 because of changes in population or other unforeseen 295.28 circumstances that occurred after the initial finding of 295.29 adequate revenues; and 295.30 (3) the authority finds a tax levy or payment from general 295.31 assets of the general jurisdiction governmental unit will be 295.32 necessary to pay debt service on the bonds if higher income 295.33 individuals or families are not admitted. 295.34 Sec. 13. Minnesota Statutes 2004, section 469.158, is 295.35 amended to read: 295.36 469.158 [MANNER OF ISSUANCE OF BONDS; INTEREST RATE.] 296.1 Bonds authorized under sections 469.152 to 469.165 must be 296.2 issued in accordance with the provisions of chapter 475 relating 296.3 to bonds payable from income of revenue producing conveniences, 296.4 except that public sale is not required, the provisions of 296.5 sections 475.62 and 475.63 do not apply, and the bonds may 296.6 mature at the time or times, in the amount or amounts, within 30 296.7 years, or in the case of bonds issued to finance dormitories or 296.8 other types of student housing, 40 years from date of issue, and 296.9 may be sold at a price equal to the percentage of the par value 296.10 thereof, plus accrued interest, and bearing interest at the rate 296.11 or rates agreed by the contracting party, the purchaser, and the 296.12 municipality or redevelopment agency, notwithstanding any 296.13 limitation of interest rate or cost or of the amounts of annual 296.14 maturities contained in any other law. Bonds issued to refund 296.15 bonds previously issued pursuant to sections 469.152 to 469.165 296.16 may be issued in amounts determined by the municipality or 296.17 redevelopment agency notwithstanding the provisions of section 296.18 475.67, subdivision 3. 296.19 Sec. 14. Minnesota Statutes 2004, section 473.39, is 296.20 amended by adding a subdivision to read: 296.21 Subd. 1k. [OBLIGATIONS.] After July 1, 2005, in addition 296.22 to the authority in subdivisions 1a, 1b, 1c, 1d, 1e, 1g, 1h, 1i, 296.23 and 1j, the council may issue certificates of indebtedness, 296.24 bonds, or other obligations under this section in an amount not 296.25 exceeding $64,000,000 for capital expenditures as prescribed in 296.26 the council's regional transit master plan and transit capital 296.27 improvement program and for related costs, including the costs 296.28 of issuance and sale of the obligations. 296.29 Sec. 15. Minnesota Statutes 2004, section 474A.061, 296.30 subdivision 2c, is amended to read: 296.31 Subd. 2c. [PUBLIC FACILITIES POOL ALLOCATION.] From the 296.32 beginning of the calendar year and continuing for a period of 296.33 120 days, the commissioner shall reserve$3,000,000$5,000,000 296.34 of the available bonding authority from the public facilities 296.35 pool for applications for public facilities projects to be 296.36 financed by the Western Lake Superior Sanitary District. 297.1 Commencing on the second Tuesday in January and continuing on 297.2 each Monday through the last Monday in July, the commissioner 297.3 shall allocate available bonding authority from the public 297.4 facilities pool to applications for eligible public facilities 297.5 projects received on or before the Monday of the preceding 297.6 week. If there are two or more applications for public 297.7 facilities projects from the pool and there is insufficient 297.8 available bonding authority to provide allocations for all 297.9 projects in any one week, the available bonding authority shall 297.10 be awarded by lot unless otherwise agreed to by the respective 297.11 issuers. 297.12 Sec. 16. Minnesota Statutes 2004, section 474A.131, 297.13 subdivision 1, is amended to read: 297.14 Subdivision 1. [NOTICE OF ISSUE.] Each issuer that issues 297.15 bonds with an allocation received under this chapter shall 297.16 provide a notice of issue to the department on forms provided by 297.17 the department stating: 297.18 (1) the date of issuance of the bonds; 297.19 (2) the title of the issue; 297.20 (3) the principal amount of the bonds; 297.21 (4) the type of qualified bonds under federal tax law; 297.22 (5) the dollar amount of the bonds issued that were subject 297.23 to the annual volume cap; and 297.24 (6) for entitlement issuers, whether the allocation is from 297.25 current year entitlement authority or is from carryforward 297.26 authority. 297.27 For obligations that are issued as a part of a series of 297.28 obligations, a notice must be provided for each series. A 297.29 penalty of one-half of the amount of the application deposit not 297.30 to exceed $5,000 shall apply to any issue of obligations for 297.31 which a notice of issue is not provided to the department within 297.32 five business days after issuance or beforethe last Monday4:30 297.33 p.m. on the last business day in December, whichever occurs 297.34 first. Within 30 days after receipt of a notice of issue the 297.35 department shall refund a portion of the application deposit 297.36 equal to one percent of the amount of the bonding authority 298.1 actually issued if a one percent application deposit was made, 298.2 or equal to two percent of the amount of the bonding authority 298.3 actually issued if a two percent application deposit was made, 298.4 less any penalty amount. 298.5 Sec. 17. Minnesota Statutes 2004, section 475.51, 298.6 subdivision 4, is amended to read: 298.7 Subd. 4. [NET DEBT.] "Net debt" means the amount remaining 298.8 after deducting from its gross debt the amount of current 298.9 revenues which are applicable within the current fiscal year to 298.10 the payment of any debt and the aggregate of the principal of 298.11 the following: 298.12 (1) Obligations issued for improvements which are payable 298.13 wholly or partly from the proceeds of special assessments levied 298.14 upon property specially benefited thereby, including those which 298.15 are general obligations of the municipality issuing them, if the 298.16 municipality is entitled to reimbursement in whole or in part 298.17 from the proceeds of the special assessments. 298.18 (2) Warrants or orders having no definite or fixed maturity. 298.19 (3) Obligations payable wholly from the income from revenue 298.20 producing conveniences. 298.21 (4) Obligations issued to create or maintain a permanent 298.22 improvement revolving fund. 298.23 (5) Obligations issued for the acquisition, and betterment 298.24 of public waterworks systems, and public lighting, heating or 298.25 power systems, and of any combination thereof or for any other 298.26 public convenience from which a revenue is or may be derived. 298.27 (6) Debt service loans and capital loans made to a school 298.28 district under the provisions of sections 126C.68 and 126C.69. 298.29 (7) Amount of all money and the face value of all 298.30 securities held as a debt service fund for the extinguishment of 298.31 obligations other than those deductible under this subdivision. 298.32 (8) Obligations to repay loans made under section 216C.37. 298.33 (9) Obligations to repay loans made from money received 298.34 from litigation or settlement of alleged violations of federal 298.35 petroleum pricing regulations. 298.36 (10) Obligations issued to pay pension fund liabilities 299.1 under section 475.52, subdivision 6, or any charter authority. 299.2 (11) Obligations issued to pay judgments against the 299.3 municipality under section 475.52, subdivision 6, or any charter 299.4 authority. 299.5 (12) All other obligations which under the provisions of 299.6 law authorizing their issuance are not to be included in 299.7 computing the net debt of the municipality. 299.8 Sec. 18. Minnesota Statutes 2004, section 475.52, 299.9 subdivision 1, is amended to read: 299.10 Subdivision 1. [STATUTORY CITIES.] Any statutory city may 299.11 issue bonds or other obligations for the acquisition or 299.12 betterment of public buildings, means of garbage disposal, 299.13 hospitals, nursing homes, homes for the aged, schools, 299.14 libraries, museums, art galleries, parks, playgrounds, stadia, 299.15 sewers, sewage disposal plants, subways, streets, sidewalks, 299.16 warning systems; for any utility or other public convenience 299.17 from which a revenue is or may be derived; for a permanent 299.18 improvement revolving fund; for changing, controlling or 299.19 bridging streams and other waterways; for the acquisition and 299.20 betterment of bridges and roads within two miles of the 299.21 corporate limits; for the acquisition of development rights in 299.22 the form of conservation easements under chapter 84C; and for 299.23 acquisition of equipment for snow removal, street construction 299.24 and maintenance, or fire fighting. Without limitation by the 299.25 foregoing the city may issue bonds to provide money for any 299.26 authorized corporate purpose except current expenses. 299.27 Sec. 19. Minnesota Statutes 2004, section 475.52, 299.28 subdivision 3, is amended to read: 299.29 Subd. 3. [COUNTIES.] Any county may issue bonds for the 299.30 acquisition or betterment of courthouses, county administrative 299.31 buildings, health or social service facilities, correctional 299.32 facilities, law enforcement centers, jails, morgues, libraries, 299.33 parks, and hospitals, for roads and bridges within the county or 299.34 bordering thereon and for road equipment and machinery and for 299.35 ambulances and related equipment; for the acquisition of 299.36 development rights in the form of conservation easements under 300.1 chapter 84C, and for capital equipment for the administration 300.2 and conduct of elections providing the equipment is uniform 300.3 countywide, except that the power of counties to issue bonds in 300.4 connection with a library shall not exist in Hennepin County. 300.5 Sec. 20. Minnesota Statutes 2004, section 475.52, 300.6 subdivision 4, is amended to read: 300.7 Subd. 4. [TOWNS.] Any town may issue bonds for the 300.8 acquisition and betterment of town halls, town roads and 300.9 bridges, nursing homes and homes for the aged, and for 300.10 acquisition of equipment for snow removal, road construction or 300.11 maintenance, and fire fighting; for the acquisition of 300.12 development rights in the form of conservation easements under 300.13 chapter 84C; and for the acquisition and betterment of any 300.14 buildings to house and maintain town equipment. 300.15 Sec. 21. Minnesota Statutes 2004, section 475.521, 300.16 subdivision 1, is amended to read: 300.17 Subdivision 1. [DEFINITIONS.] For purposes of this 300.18 section, the following terms have the meanings given. 300.19 (a) "Bonds" mean an obligation defined under section 475.51. 300.20 (b) "Capital improvement" means acquisition or betterment 300.21 of public lands, buildings or other improvements for the purpose 300.22 of a city hall, town hall, library, public safety facility, and 300.23 public works facility. An improvement must have an expected 300.24 useful life of five years or more to qualify. Capital 300.25 improvement does not include light rail transit or any activity 300.26 related to it, or a park,library,road, bridge, administrative 300.27 building other than a city or town hall, or land for any of 300.28 those facilities. 300.29 (c)"City""Municipality" means a home rule charter or 300.30 statutory city or a town. 300.31 Sec. 22. Minnesota Statutes 2004, section 475.521, 300.32 subdivision 2, is amended to read: 300.33 Subd. 2. [ELECTION REQUIREMENT.] (a) Bonds issued by a 300.34citymunicipality to finance capital improvements under an 300.35 approved capital improvements plan are not subject to the 300.36 election requirements of section 475.58.The bonds are subject301.1to the net debt limits under section 475.53.The bonds must be 301.2 approved by an affirmative vote of three-fifths of the members 301.3 of a five-membercity councilgoverning body. In the case of 301.4 acity councilgoverning body having more or less than five 301.5 members, the bonds must be approved by a vote of at least 301.6 two-thirds of thecity councilmembers of the governing body. 301.7 (b) Before the issuance of bonds qualifying under this 301.8 section, thecitymunicipality must publish a notice of its 301.9 intention to issue the bonds and the date and time of the 301.10 hearing to obtain public comment on the matter. The notice must 301.11 be published in the official newspaper of thecitymunicipality 301.12 or in a newspaper of general circulation in thecity301.13 municipality. Additionally, the notice may be posted on the 301.14 official Web site, if any, of thecitymunicipality. The notice 301.15 must be published at least 14 but not more than 28 days before 301.16 the date of the hearing. 301.17 (c) Acitymunicipality may issue the bonds only after 301.18 obtaining the approval of a majority of the voters voting on the 301.19 question of issuing the obligations, if a petition requesting a 301.20 vote on the issuance is signed by voters equal to five percent 301.21 of the votes cast in thecitymunicipality in the last general 301.22 election and is filed with thecityclerk within 30 days after 301.23 the public hearing. The commissioner of revenue shall prepare a 301.24 suggested form of the question to be presented at the election. 301.25 Sec. 23. Minnesota Statutes 2004, section 475.521, 301.26 subdivision 3, is amended to read: 301.27 Subd. 3. [CAPITAL IMPROVEMENT PLAN.] (a) Acity301.28 municipality may adopt a capital improvement plan. The plan 301.29 must cover at least a five-year period beginning with the date 301.30 of its adoption. The plan must set forth the estimated 301.31 schedule, timing, and details of specific capital improvements 301.32 by year, together with the estimated cost, the need for the 301.33 improvement, and sources of revenue to pay for the improvement. 301.34 In preparing the capital improvement plan, thecity council301.35 governing body must consider for each project and for the 301.36 overall plan: 302.1 (1) the condition of thecity'smunicipality's existing 302.2 infrastructure, including the projected need for repair or 302.3 replacement; 302.4 (2) the likely demand for the improvement; 302.5 (3) the estimated cost of the improvement; 302.6 (4) the available public resources; 302.7 (5) the level of overlapping debt in thecitymunicipality; 302.8 (6) the relative benefits and costs of alternative uses of 302.9 the funds; 302.10 (7) operating costs of the proposed improvements; and 302.11 (8) alternatives for providing services most efficiently 302.12 through shared facilities with othercitiesmunicipalities or 302.13 local government units. 302.14 (b) The capital improvement plan and annual amendments to 302.15 it must be approved by thecity councilgoverning body after 302.16 public hearing. 302.17 Sec. 24. Minnesota Statutes 2004, section 475.521, 302.18 subdivision 4, is amended to read: 302.19 Subd. 4. [LIMITATIONS ON AMOUNT.] Acitymunicipality may 302.20 not issue bonds under this section if the maximum amount of 302.21 principal and interest to become due in any year on all the 302.22 outstanding bonds issued under this section, including the bonds 302.23 to be issued, will equal or exceed0.053670.16 percent of the 302.24 taxable market value of property in thecountymunicipality. 302.25 Calculation of the limit must be made using the taxable market 302.26 value for the taxes payable year in which the obligations are 302.27 issued and sold. In the case of a municipality with a 302.28 population of 2,500 or more, the bonds are subject to the net 302.29 debt limits under section 475.53. In the case of a shared 302.30 facility in which more than one municipality participates, upon 302.31 compliance by each participating municipality with the 302.32 requirements of subdivision 2, the limitations in this 302.33 subdivision and the net debt represented by the bonds shall be 302.34 allocated to each participating municipality in proportion to 302.35 its required financial contribution to the financing of the 302.36 shared facility, as set forth in the joint powers agreement 303.1 relating to the shared facility. This section does not limit 303.2 the authority to issue bonds under any other special or general 303.3 law. 303.4 Sec. 25. Minnesota Statutes 2004, section 475.58, 303.5 subdivision 3b, is amended to read: 303.6 Subd. 3b. [STREET RECONSTRUCTION.] (a) A municipality may, 303.7 without regard to the election requirement under subdivision 1, 303.8 issue and sell obligations for street reconstruction, if the 303.9 following conditions are met: 303.10 (1) the streets are reconstructed under a street 303.11 reconstruction plan that describes the streets to be 303.12 reconstructed, the estimated costs, and any planned 303.13 reconstruction of other streets in the municipality over the 303.14 next five years, and the plan and issuance of the obligations 303.15 has been approved by a vote of all of the members of the 303.16 governing body following a public hearing for which notice has 303.17 been published in the official newspaper at least ten days but 303.18 not more than 28 days prior to the hearing; and 303.19 (2) if a petition requesting a vote on the issuance is 303.20 signed by voters equal to five percent of the votes cast in the 303.21 last municipal general election and is filed with the municipal 303.22 clerk within 30 days of the public hearing, the municipality may 303.23 issue the bonds only after obtaining the approval of a majority 303.24 of the voters voting on the question of the issuance of the 303.25 obligations. 303.26 (b) Obligations issued under this subdivision are subject 303.27 to the debt limit of the municipality and are not excluded from 303.28 net debt under section 475.51, subdivision 4. 303.29 (c) For purposes of this subdivision, street reconstruction 303.30 includes utility replacement and relocation and other activities 303.31 incidental to the street reconstruction,butturn lanes and 303.32 other improvements having a substantial public safety function, 303.33 realignments, other modifications to intersect with state and 303.34 county roads, and the local share of state and county road 303.35 projects. 303.36 (d) Except in the case of turn lanes, safety improvements, 304.1 realignments, intersection modifications, and the local share of 304.2 state and county road projects, street reconstruction does not 304.3 include the portion of project cost allocable to widening a 304.4 street or adding curbs and gutters where none previously existed. 304.5 Sec. 26. [CITY OF ST. PAUL; RIVERCENTRE COMPLEX 304.6 OPERATION.] 304.7 Subdivision 1. [DEFINITIONS.] (a) For the purposes of this 304.8 section, the terms defined in this subdivision have the meanings 304.9 given them. 304.10 (b) "City" means the city of St. Paul, its mayor, city 304.11 council, and any other board, authority, commission, or officer 304.12 authorized by law, charter, or ordinance to exercise city powers 304.13 of the nature referred to in this section. 304.14 (c) "RiverCentre complex" means collectively the 304.15 auditorium, convention, conference and education center, arena, 304.16 and parking ramp facilities presently and commonly known as the 304.17 Roy Wilkins Auditorium, St. Paul RiverCentre, Xcel Energy 304.18 Center, and RiverCentre Parking Ramp, including all property, 304.19 real or personal, tangible or intangible, located in the city, 304.20 intended to be used as part of the RiverCentre complex or 304.21 additions to or extensions of it. 304.22 Subd. 2. [CREATION OF NONPROFIT ORGANIZATION.] As required 304.23 under Minnesota Statutes, section 465.717, and notwithstanding 304.24 any other law, city charter provision, or ordinance to the 304.25 contrary, the city of St. Paul may participate in the creation 304.26 of a nonprofit organization for the purposes provided in this 304.27 section. 304.28 Subd. 3. [GOVERNING BOARD.] (a) The mayor of the city, 304.29 subject to approval by the city council, shall appoint a 304.30 majority of the members of the governing board of the nonprofit 304.31 organization performing all or a part of the activities 304.32 necessary to carry out the purposes specified in this section. 304.33 The mayor may designate any officer or employee of the city to 304.34 serve as a member of the governing board of any nonprofit 304.35 organization. 304.36 (b) In addition to the appointments made by the mayor under 305.1 paragraph (a), the mayor shall designate three members of the 305.2 city council to serve on the governing board of the nonprofit 305.3 organization. 305.4 (c) Notwithstanding any provision contained in the articles 305.5 of incorporation and bylaws of the nonprofit organization, any 305.6 member of the governing board appointed by the mayor may be 305.7 removed only by the mayor for cause. 305.8 (d) The governing board of the nonprofit organization shall 305.9 select, subject to the approval of the mayor, a president to 305.10 serve as chief executive officer and general manager of the 305.11 nonprofit organization. 305.12 (e) The procedures in Minnesota Statutes, section 317A.255, 305.13 subdivision 1, paragraph (b), relating to director conflicts of 305.14 interest, are not required if the contract or other transaction 305.15 is between the city and the nonprofit organization. 305.16 Subd. 4. [RIVERCENTRE MANAGEMENT; AUTHORITY TO CONTRACT 305.17 WITH NONPROFIT ORGANIZATION.] The city may enter into an 305.18 agreement with the nonprofit organization created in subdivision 305.19 2 to equip, maintain, manage, and operate all or a portion of 305.20 the RiverCentre complex and to manage and operate a convention 305.21 bureau to market and promote the city as a tourist or convention 305.22 center. Except as otherwise provided in this section, the 305.23 nonprofit organization may only contract and utilize and expend 305.24 funds for these purposes under the direction of its governing 305.25 board, subject to the accounting, financial reporting, and other 305.26 conditions that the city may prescribe in a contract made under 305.27 this section between the city and the nonprofit organization. 305.28 The nonprofit organization may use the services of the office of 305.29 the city attorney and the city's purchasing department. All 305.30 activities performed to carry out these purposes are deemed to 305.31 be for a public purpose. 305.32 Subd. 5. [BONDHOLDERS' RIGHTS AND RIVERCENTRE COMPLEX TAX 305.33 EXEMPTIONS PRESERVED.] (a) The city must protect the rights of 305.34 holders of bonds issued for the RiverCentre complex, including 305.35 preserving the tax-exempt status of the bonds. 305.36 (b) The use and operation of the RiverCentre complex by the 306.1 nonprofit organization with which the city contracts under this 306.2 act is a use, lease, or occupancy for public, governmental, and 306.3 municipal purposes, and the complex is exempt from taxation by 306.4 the state or any political subdivision of the state during such 306.5 use, to the extent it would be exempt if the complex was 306.6 equipped, maintained, managed, and operated by the city. 306.7 (c) Gross receipts of tickets and admissions to events at 306.8 the RiverCentre complex sponsored by the nonprofit organization 306.9 created in this section do not qualify for the sales tax 306.10 exemption under Minnesota Statutes, section 297A.70, subdivision 306.11 10. 306.12 Subd. 6. [APPLICABLE GENERAL LAWS.] The following statutes 306.13 apply to the nonprofit organization with which the city 306.14 contracts under this section the same as they apply to the city, 306.15 to the extent practicable: 306.16 (1) Minnesota Statutes, chapter 13D, the Minnesota Open 306.17 Meeting Law; and 306.18 (2) Minnesota Statutes, chapter 13, the Government Data 306.19 Practices Act. 306.20 Subd. 7. [SUCCESSION.] The nonprofit organization with 306.21 which the city contracts under this section is the successor to 306.22 all powers, rights, assets, privileges, and interests held and 306.23 enjoyed by the RiverCentre authority on the effective date of 306.24 this section, and established by the provisions of Laws 1967, 306.25 chapter 459, sections 1, 2, 4, and 8, subdivisions 2 and 3, 306.26 clause (3), as amended; Laws 1982, chapter 523, article 25, 306.27 sections 4 and 5, as amended; Laws 1998, chapter 404, sections 306.28 81 and 82; and Minnesota Statutes, section 297A.98. On the 306.29 effective date of the contract between the city and the 306.30 nonprofit organization authorized by this section, the 306.31 RiverCentre authority ceases to exist for only so long as the 306.32 contract is in effect, and all other laws or provisions 306.33 specifically relating to the RiverCentre authority and the 306.34 RiverCentre complex that are not otherwise referenced in this 306.35 section, do not apply to the nonprofit organization. 306.36 Subd. 8. [LIABILITY.] The nonprofit organization with 307.1 which the city contracts under this section is a "municipality," 307.2 and the officers, directors, employees, and agents of the 307.3 nonprofit organization are "employees, officers, or agents," 307.4 under Minnesota Statutes, chapter 466, relating to tort 307.5 liability. The city must defend, save harmless, and indemnify 307.6 the nonprofit organization, including the nonprofit's officers, 307.7 directors, employees, and agents, against any claim or demand 307.8 arising out of the nonprofit organization's performance under 307.9 the contract. 307.10[EFFECTIVE DATE.] This section is effective the day after 307.11 the city council and the chief clerical officer of the city of 307.12 St. Paul have timely completed their compliance with Minnesota 307.13 Statutes, section 645.023, subdivisions 2 and 3. 307.14 Sec. 27. [TRANSFER OF MHFA BONDING AUTHORITY TO HESO.] 307.15 Notwithstanding Minnesota Statutes, section 474A.03, 307.16 subdivision 2a, clause (b), the Minnesota Housing Finance Agency 307.17 may enter into an agreement with the Higher Education Services 307.18 Office under which the Higher Education Services Office issues 307.19 qualified student loan bonds, up to $50,000,000 of which are 307.20 issued pursuant to bonding authority allocated to the Minnesota 307.21 Housing Finance Agency in 2004 under Minnesota Statutes, section 307.22 474A.03, subdivision 2a, clause (a). This amount is in addition 307.23 to the bonding authority otherwise allocated to the Higher 307.24 Education Services Office under Minnesota Statutes, chapter 307.25 474A. Notwithstanding Minnesota Statutes, section 474A.04, 307.26 subdivision 1a, 474A.061, or 474A.091, subdivision 2, bonding 307.27 authority carried forward by the Minnesota Housing Financing 307.28 Agency from its allocation for 2004 under Minnesota Statutes, 307.29 section 474A.03, subdivision 2a, clause (b), are exempt from the 307.30 requirement that the bonding authority be permanently issued by 307.31 December 31 of the next succeeding calendar year. 307.32 Sec. 28. [APPLICATION.] 307.33 Section 14 applies in the counties of Anoka, Carver, 307.34 Dakota, Hennepin, Ramsey, Scott, and Washington. 307.35 Sec. 29. [REPEALER.] 307.36 Minnesota Statutes 2004, section 473.39, subdivision 1f, is 308.1 repealed. 308.2 Sec. 30. [EFFECTIVE DATE.] 308.3 This article is effective the day following final enactment. 308.4 ARTICLE 11 308.5 MINERALS; AGGREGATE - SF1683 308.6 Section 1. Minnesota Statutes 2004, section 272.02, is 308.7 amended by adding a subdivision to read: 308.8 Subd. 68. [PROPERTY USED IN THE BUSINESS OF MINING SUBJECT 308.9 TO THE NET PROCEEDS TAX.] The following property used in the 308.10 business of mining subject to the net proceeds tax under section 308.11 298.015 is exempt: 308.12 (1) deposits of ores, metals, and minerals and the lands in 308.13 which they are contained; 308.14 (2) all real and personal property used in mining, 308.15 quarrying, producing, or refining ores, minerals, or metals, 308.16 including lands occupied by or used in connection with the 308.17 mining, quarrying, production, or refining facilities; and 308.18 (3) concentrate or direct reduced ore. 308.19 This exemption applies for each year that a person subject to 308.20 tax under section 298.015 uses the property for mining, 308.21 quarrying, producing, or refining ores, metals, or minerals. 308.22[EFFECTIVE DATE.] This section is effective for taxes 308.23 payable in 2006 and thereafter. 308.24 Sec. 2. Minnesota Statutes 2004, section 290.05, 308.25 subdivision 1, is amended to read: 308.26 Subdivision 1. [EXEMPT ENTITIES.] The following 308.27 corporations, individuals, estates, trusts, and organizations 308.28 shall be exempted from taxation under this chapter, provided 308.29 that every such person or corporation claiming exemption under 308.30 this chapter, in whole or in part, must establish to the 308.31 satisfaction of the commissioner the taxable status of any 308.32 income or activity: 308.33 (a) corporations, individuals, estates, and trusts engaged 308.34 in the business of mining or producing iron ore and mining, 308.35 producing, or refining other ores, metals, and minerals, the 308.36 miningor, production, or refining of which is subject to the 309.1 occupation tax imposed by section 298.01; but if any such 309.2 corporation, individual, estate, or trust engages in any other 309.3 business or activity or has income from any property not used in 309.4 such business it shall be subject to this tax computed on the 309.5 net income from such property or such other business or 309.6 activity. Royalty shall not be considered as income from the 309.7 business of mining or producing iron ore within the meaning of 309.8 this section; 309.9 (b) the United States of America, the state of Minnesota or 309.10 any political subdivision of either agencies or 309.11 instrumentalities, whether engaged in the discharge of 309.12 governmental or proprietary functions; and 309.13 (c) any insurance company. 309.14[EFFECTIVE DATE.] This section is effective for taxable 309.15 years beginning after December 31, 2004. 309.16 Sec. 3. Minnesota Statutes 2004, section 290.17, 309.17 subdivision 4, is amended to read: 309.18 Subd. 4. [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 309.19 business conducted wholly within this state or partly within and 309.20 partly without this state is part of a unitary business, the 309.21 entire income of the unitary business is subject to 309.22 apportionment pursuant to section 290.191. Notwithstanding 309.23 subdivision 2, paragraph (c), none of the income of a unitary 309.24 business is considered to be derived from any particular source 309.25 and none may be allocated to a particular place except as 309.26 provided by the applicable apportionment formula. The 309.27 provisions of this subdivision do not apply to business income 309.28 subject to subdivision 5, income of an insurance company,or309.29 income of an investment company determined under section 290.36, 309.30 or income of a mine or mineral processing facility subject to 309.31 tax under section 298.01. 309.32 (b) The term "unitary business" means business activities 309.33 or operations which result in a flow of value between them. The 309.34 term may be applied within a single legal entity or between 309.35 multiple entities and without regard to whether each entity is a 309.36 sole proprietorship, a corporation, a partnership or a trust. 310.1 (c) Unity is presumed whenever there is unity of ownership, 310.2 operation, and use, evidenced by centralized management or 310.3 executive force, centralized purchasing, advertising, 310.4 accounting, or other controlled interaction, but the absence of 310.5 these centralized activities will not necessarily evidence a 310.6 nonunitary business. Unity is also presumed when business 310.7 activities or operations are of mutual benefit, dependent upon 310.8 or contributory to one another, either individually or as a 310.9 group. 310.10 (d) Where a business operation conducted in Minnesota is 310.11 owned by a business entity that carries on business activity 310.12 outside the state different in kind from that conducted within 310.13 this state, and the other business is conducted entirely outside 310.14 the state, it is presumed that the two business operations are 310.15 unitary in nature, interrelated, connected, and interdependent 310.16 unless it can be shown to the contrary. 310.17 (e) Unity of ownership is not deemed to exist when a 310.18 corporation is involved unless that corporation is a member of a 310.19 group of two or more business entities and more than 50 percent 310.20 of the voting stock of each member of the group is directly or 310.21 indirectly owned by a common owner or by common owners, either 310.22 corporate or noncorporate, or by one or more of the member 310.23 corporations of the group. For this purpose, the term "voting 310.24 stock" shall include membership interests of mutual insurance 310.25 holding companies formed under section 60A.077. 310.26 (f) The net income and apportionment factors under section 310.27 290.191 or 290.20 of foreign corporations and other foreign 310.28 entities which are part of a unitary business shall not be 310.29 included in the net income or the apportionment factors of the 310.30 unitary business. A foreign corporation or other foreign entity 310.31 which is required to file a return under this chapter shall file 310.32 on a separate return basis. The net income and apportionment 310.33 factors under section 290.191 or 290.20 of foreign operating 310.34 corporations shall not be included in the net income or the 310.35 apportionment factors of the unitary business except as provided 310.36 in paragraph (g). 311.1 (g) The adjusted net income of a foreign operating 311.2 corporation shall be deemed to be paid as a dividend on the last 311.3 day of its taxable year to each shareholder thereof, in 311.4 proportion to each shareholder's ownership, with which such 311.5 corporation is engaged in a unitary business. Such deemed 311.6 dividend shall be treated as a dividend under section 290.21, 311.7 subdivision 4. 311.8 Dividends actually paid by a foreign operating corporation 311.9 to a corporate shareholder which is a member of the same unitary 311.10 business as the foreign operating corporation shall be 311.11 eliminated from the net income of the unitary business in 311.12 preparing a combined report for the unitary business. The 311.13 adjusted net income of a foreign operating corporation shall be 311.14 its net income adjusted as follows: 311.15 (1) any taxes paid or accrued to a foreign country, the 311.16 commonwealth of Puerto Rico, or a United States possession or 311.17 political subdivision of any of the foregoing shall be a 311.18 deduction; and 311.19 (2) the subtraction from federal taxable income for 311.20 payments received from foreign corporations or foreign operating 311.21 corporations under section 290.01, subdivision 19d, clause (10), 311.22 shall not be allowed. 311.23 If a foreign operating corporation incurs a net loss, 311.24 neither income nor deduction from that corporation shall be 311.25 included in determining the net income of the unitary business. 311.26 (h) For purposes of determining the net income of a unitary 311.27 business and the factors to be used in the apportionment of net 311.28 income pursuant to section 290.191 or 290.20, there must be 311.29 included only the income and apportionment factors of domestic 311.30 corporations or other domestic entities other than foreign 311.31 operating corporations that are determined to be part of the 311.32 unitary business pursuant to this subdivision, notwithstanding 311.33 that foreign corporations or other foreign entities might be 311.34 included in the unitary business. 311.35 (i) Deductions for expenses, interest, or taxes otherwise 311.36 allowable under this chapter that are connected with or 312.1 allocable against dividends, deemed dividends described in 312.2 paragraph (g), or royalties, fees, or other like income 312.3 described in section 290.01, subdivision 19d, clause (10), shall 312.4 not be disallowed. 312.5 (j) Each corporation or other entity, except a sole 312.6 proprietorship, that is part of a unitary business must file 312.7 combined reports as the commissioner determines. On the 312.8 reports, all intercompany transactions between entities included 312.9 pursuant to paragraph (h) must be eliminated and the entire net 312.10 income of the unitary business determined in accordance with 312.11 this subdivision is apportioned among the entities by using each 312.12 entity's Minnesota factors for apportionment purposes in the 312.13 numerators of the apportionment formula and the total factors 312.14 for apportionment purposes of all entities included pursuant to 312.15 paragraph (h) in the denominators of the apportionment formula. 312.16 (k) If a corporation has been divested from a unitary 312.17 business and is included in a combined report for a fractional 312.18 part of the common accounting period of the combined report: 312.19 (1) its income includable in the combined report is its 312.20 income incurred for that part of the year determined by 312.21 proration or separate accounting; and 312.22 (2) its sales, property, and payroll included in the 312.23 apportionment formula must be prorated or accounted for 312.24 separately. 312.25[EFFECTIVE DATE.] This section is effective for taxable 312.26 years beginning after December 31, 2004. 312.27 Sec. 4. Minnesota Statutes 2004, section 290.191, 312.28 subdivision 1, is amended to read: 312.29 Subdivision 1. [GENERAL RULE.] (a) Except as otherwise 312.30 provided in section 290.17, subdivision 5, the net income from a 312.31 trade or business carried on partly within and partly without 312.32 this state must be apportioned to this state as provided in this 312.33 section. To the extent that an entity is exempt from taxation 312.34 under this chapter as provided in section 290.05, the 312.35 apportionment factors associated with the entity's exempt 312.36 activities are excluded from the apportionment formula under 313.1 this section. 313.2 (b) For purposes of this section, "state" means a state of 313.3 the United States, the District of Columbia, the commonwealth of 313.4 Puerto Rico, or any territory or possession of the United States 313.5 or any foreign country. 313.6[EFFECTIVE DATE.] This section is effective for taxable 313.7 years beginning after December 31, 2004. 313.8 Sec. 5. Minnesota Statutes 2004, section 297A.68, 313.9 subdivision 4, is amended to read: 313.10 Subd. 4. [TACONITE, OTHER ORES, METALS, OR MINERALS; 313.11 PRODUCTION MATERIALS.] Mill liners, grinding rods, and grinding 313.12 balls that are substantially consumed in the production of 313.13 taconite or other ores, metals, or minerals are exempt when sold 313.14 to or stored, used, or consumed by persons taxed under the 313.15 in-lieu provisions of chapter 298. 313.16[EFFECTIVE DATE.] This section is effective for sales and 313.17 purchases made after June 30, 2005. 313.18 Sec. 6. Minnesota Statutes 2004, section 298.001, is 313.19 amended by adding a subdivision to read: 313.20 Subd. 9. [REFINING.] "Refining" means and is limited to 313.21 refining: 313.22 (1) of ores, metals, or mineral products, the mining, 313.23 extraction, or quarrying of which were subject to tax under 313.24 section 298.015; and 313.25 (2) carried on by the entity, or an affiliated entity, that 313.26 mined, extracted, or quarried the metal or mineral products. 313.27[EFFECTIVE DATE.] This section is effective for taxable 313.28 years beginning after December 31, 2004. 313.29 Sec. 7. Minnesota Statutes 2004, section 298.001, is 313.30 amended by adding a subdivision to read: 313.31 Subd. 10. [PRECIOUS MINERALS TAX RELIEF AREA.] The 313.32 "precious minerals tax relief area" means the area of the 313.33 following Independent School Districts: 313.34 (1) No. 166, Cook County; 313.35 (2) No. 316, Coleraine; 313.36 (3) No. 318, Grand Rapids; 314.1 (4) No. 319, Nashwauk-Keewatin; 314.2 (5) No. 381, Lake Superior; 314.3 (6) No. 695, Chisholm; 314.4 (7) No. 696, Ely; 314.5 (8) No. 701, Hibbing; 314.6 (9) No. 706, Virginia; 314.7 (10) No. 712, Mountain Iron-Buhl; 314.8 (11) No. 2711, Mesabi East; 314.9 (12) No. 2142, St. Louis County; and 314.10 (13) No. 2154, Eveleth-Gilbert. 314.11[EFFECTIVE DATE.] This section is effective for taxable 314.12 years beginning after December 31, 2004. 314.13 Sec. 8. Minnesota Statutes 2004, section 298.01, 314.14 subdivision 3, is amended to read: 314.15 Subd. 3. [OCCUPATION TAX; OTHER ORES.] Every person 314.16 engaged in the business of mining, refining, or producing ores, 314.17 metals, or minerals in this state, except iron ore or taconite 314.18 concentrates, shall pay an occupation tax to the state of 314.19 Minnesota as provided in this subdivision. For purposes of this 314.20 subdivision, mining includes the application of 314.21 hydrometallurgical processes. The tax is determined in the same 314.22 manner as the tax imposed by section 290.02, except that 314.23 sections 290.05, subdivision 1, clause (a), 290.0921, and 314.24 290.17, subdivision 4, do not apply. Except as provided in 314.25 section 290.05, subdivision 1, paragraph (a), the tax is in 314.26 addition to all other taxes. 314.27[EFFECTIVE DATE.] This section is effective for taxable 314.28 years beginning after December 31, 2004. 314.29 Sec. 9. Minnesota Statutes 2004, section 298.01, 314.30 subdivision 3a, is amended to read: 314.31 Subd. 3a. [GROSS INCOME.] (a) For purposes of determining 314.32 a person's taxable income under subdivision 3, gross income is 314.33 determined by the amount of gross proceeds from mining in this 314.34 state under section 298.016 and includes any gain or loss 314.35 recognized from the sale or disposition of assets used in the 314.36 business in this state. 315.1 (b) In applying section 290.191, subdivision 5, transfers 315.2 of ores, metals, or minerals that are subject to tax under this 315.3 chapter are deemed to be sales outside this state if the ores, 315.4 metals, or minerals are transported out of this state for 315.5 further processing or refining by the person engaged in mining 315.6 after the ores, metals, or minerals have been converted to a 315.7 marketable quality. 315.8 (c) In applying section 290.191, subdivision 5, transfers 315.9 of ores, metals, or minerals that are subject to tax under this 315.10 chapter are deemed to be sales within this state if the ores, 315.11 metals, or minerals are received by a purchaser at a point 315.12 within this state, and the taxpayer is taxable in this state, 315.13 regardless of the f.o.b. point, or other conditions of the sale, 315.14 or the ultimate destination of the property. 315.15[EFFECTIVE DATE.] This section is effective for taxable 315.16 years beginning after December 31, 2004. 315.17 Sec. 10. Minnesota Statutes 2004, section 298.01, 315.18 subdivision 4, is amended to read: 315.19 Subd. 4. [OCCUPATION TAX; IRON ORE; TACONITE 315.20 CONCENTRATES.] A person engaged in the business of mining or 315.21 producing of iron ore, taconite concentrates or direct reduced 315.22 ore in this state shall pay an occupation tax to the state of 315.23 Minnesota. The tax is determined in the same manner as the tax 315.24 imposed by section 290.02, except that sections 290.05, 315.25 subdivision 1, clause (a), 290.0921, and 290.17, subdivision 4, 315.26 do not apply. The tax is in addition to all other taxes. 315.27[EFFECTIVE DATE.] This section is effective for taxable 315.28 years beginning after December 31, 2004. 315.29 Sec. 11. Minnesota Statutes 2004, section 298.015, 315.30 subdivision 1, is amended to read: 315.31 Subdivision 1. [TAX IMPOSED.] A person engaged in the 315.32 business of mining shall pay to the state of Minnesota for 315.33 distribution as provided in section 298.018 a net proceeds tax 315.34 equal totwofour percent of the net proceeds from mining in 315.35 Minnesota. The tax applies to allmineral and energy resources315.36 ores, metals, and minerals minedor, extracted, produced, or 316.1 refined within the state of Minnesota except for sand, silica 316.2 sand, gravel, building stone, crushed rock, limestone, granite, 316.3 dimension granite, dimension stone, horticultural peat, clay, 316.4 soil, iron ore, and taconite concentrates. Except as provided 316.5 in section 272.02, subdivision 68, the tax is in addition to all 316.6 other taxes provided for by law. 316.7[EFFECTIVE DATE.] This section is effective for taxes 316.8 payable in 2006 and thereafter. 316.9 Sec. 12. Minnesota Statutes 2004, section 298.015, 316.10 subdivision 2, is amended to read: 316.11 Subd. 2. [NET PROCEEDS.] For purposes of this section, the 316.12 term "net proceeds" means the gross proceeds from mining, as 316.13 defined in section 298.016, less the same deductions allowedin316.14section 298.017for purposes of determining taxable income under 316.15 section 298.01, subdivision 3b. No other credits or deductions 316.16 shall apply to this taxexcept for those provided in section316.17298.017. 316.18[EFFECTIVE DATE.] This section is effective for taxes 316.19 payable in 2006 and thereafter. 316.20 Sec. 13. Minnesota Statutes 2004, section 298.016, 316.21 subdivision 4, is amended to read: 316.22 Subd. 4. [DEFINITIONS.] For the purposes of sections 316.23 298.015 and 298.017, the terms defined in this subdivision have 316.24 the meaning given them unless the context clearly indicates 316.25 otherwise. 316.26 (a) "Metal or mineral products" means all thosemineral and316.27energy resourcesores, metals, and minerals subject to the tax 316.28 provided in section 298.015. 316.29 (b) "Exploration" means activities designed and engaged in 316.30 to ascertain the existence, location, extent, or quality of any 316.31 deposit of metal or mineral products prior to the development of 316.32 a mining site. 316.33 (c) "Development" means activities designed and engaged in 316.34 to prepare or develop a potential mining site for mining after 316.35 the existence of metal or mineral products in commercially 316.36 marketable quantities has been disclosed including, but not 317.1 limited to, the clearing of forestation, the building of roads, 317.2 removal of overburden, or the sinking of shafts. 317.3 (d) "Research" means activities designed and engaged in to 317.4 create new or improved methods of mining, producing, processing, 317.5 beneficiating, smelting, or refining metal or mineral products. 317.6[EFFECTIVE DATE.] This section is effective for taxable 317.7 years beginning after December 31, 2005. 317.8 Sec. 14. Minnesota Statutes 2004, section 298.018, is 317.9 amended to read: 317.10 298.018 [DISTRIBUTION OF PROCEEDS.] 317.11 Subdivision 1. [WITHIN THETACONITEPRECIOUS MINERALS 317.12 ASSISTANCE AREA.] The proceeds of the tax paid under sections 317.13 298.015 to 298.017 on ores, metals, and mineralsand energy317.14resourcesmined or extracted within thetaconiteprecious 317.15 minerals assistance areadefined in section 273.1341, shall be 317.16 allocated as follows: 317.17 (1) five percent to the city or town within which the ores, 317.18 metals, or mineralsor energy resourcesare mined or extracted; 317.19 (2) ten percent to the taconite municipal aid account to be 317.20 distributedas provided in section 298.282to qualifying 317.21 municipalities, as defined in section 298.282 and located in the 317.22 precious minerals assistance area; 317.23 (3) ten percent to the school district within which the 317.24 ores, metals, or mineralsor energy resourcesare mined or 317.25 extracted; 317.26 (4)2030 percent toa group of school districts comprised317.27of those school districts wherein the mineral or energy resource317.28was mined or extracted or in which there is a qualifying317.29municipality as defined by section 273.134, paragraph (b), in317.30direct proportion to school district indexes as follows: for317.31each school district, its pupil units determined under section317.32126C.05 for the prior school year shall be multiplied by the317.33ratio of the average adjusted net tax capacity per pupil unit317.34for school districts receiving aid under this clause as317.35calculated pursuant to chapters 122A, 126C, and 127A for the317.36school year ending prior to distribution to the adjusted net tax318.1capacity per pupil unit of the district. Each district shall318.2receive that portion of the distribution which its index bears318.3to the sum of the indices for all school districts that receive318.4the distributionsthe state general fund to represent the 318.5 portion of the tax that is in lieu of the state general tax 318.6 under section 275.025; 318.7 (5) 20 percent to the county within which the ores, metals, 318.8 or mineralsor energy resourcesare mined or extracted; 318.9 (6)20 percent to St. Louis County acting as the counties'318.10fiscal agent to be distributed as provided in sections 273.134318.11to 273.136;318.12(7)five percent to the Iron Range Resources and 318.13 Rehabilitation Board for the purposes of section 298.22; 318.14(8) five(7) ten percent to the Douglas J. Johnson economic 318.15 protection trust fund; and 318.16(9) five(8) ten percent to the taconite environmental 318.17 protection fund. 318.18 The proceeds of the tax shall be distributed on July 15 318.19 each year. 318.20 Subd. 2. [OUTSIDE THETACONITEPRECIOUS MINERALS 318.21 ASSISTANCE AREA.] The proceeds of the tax paid under sections 318.22 298.015 to 298.017 on ores, metals, or mineralsand energy318.23resourcesmined or extracted outside of thetaconiteprecious 318.24 minerals assistance areadefined in section 273.1341, shall be 318.25 deposited in the general fund. 318.26 Subd. 3. [SEGREGATION OF FUNDS.] The proceeds of the tax 318.27 allocated under subdivision 1, clauses (2), (6), (7), and (8), 318.28 including any investment earnings on them, must be segregated 318.29 and separately accounted for in the respective funds or account 318.30 to which they are allocated. These amounts must only be 318.31 distributed to municipalities within the precious minerals 318.32 assistance area or used for projects located in the precious 318.33 minerals assistance area. 318.34[EFFECTIVE DATE.] This section is effective for 318.35 distribution of net proceeds tax revenues made after July 1, 318.36 2005. 319.1 Sec. 15. [298.021] [ROYALTY TAX.] 319.2 In addition to any other taxes imposed by law, a tax is 319.3 imposed on a royalty, as defined in section 290.923, subdivision 319.4 1, paid on ore, other than iron ore, taconite, iron sulphides, 319.5 or semitaconite. The tax equals 12 percent of the amount of the 319.6 royalty paid. The person paying the royalty shall withhold the 319.7 tax from the payment and remit the payment to the commissioner 319.8 at the times and under the procedures provided under section 319.9 290.923. The commissioner shall deposit proceeds in the general 319.10 fund and allocate the proceeds as provided under section 319.11 298.018, subdivision 1. 319.12[EFFECTIVE DATE.] This section is effective for royalties 319.13 paid after June 30, 2005. 319.14 Sec. 16. Minnesota Statutes 2004, section 298.223, 319.15 subdivision 1, is amended to read: 319.16 Subdivision 1. [CREATION; PURPOSES.] A fund called the 319.17 taconite environmental protection fund is created for the 319.18 purpose of reclaiming, restoring and enhancing those areas of 319.19 northeast Minnesota located within the taconite assistance area 319.20 defined in section 273.1341, that are adversely affected by the 319.21 environmentally damaging operations involved in mining taconite 319.22 and iron ore and producing iron ore concentrate and for the 319.23 purpose of promoting the economic development of northeast 319.24 Minnesota. The taconite environmental protection fund shall be 319.25 used for the following purposes: 319.26 (a) to initiate investigations into matters the Iron Range 319.27 Resources and Rehabilitation Board determines are in need of 319.28 study and which will determine the environmental problems 319.29 requiring remedial action; 319.30 (b) reclamation, restoration, or reforestation of minelands 319.31 not otherwise provided for by state law; 319.32 (c) local economic development projectsincluding319.33construction of sewer and water systems, and otherbut only if 319.34 those projects are approved by the board, and public works, 319.35 including construction of sewer and water systems located within 319.36 the taconite assistance area defined in section 273.1341; 320.1 (d) monitoring of mineral industry related health problems 320.2 among mining employees. 320.3[EFFECTIVE DATE.] This section is effective the day 320.4 following final enactment. 320.5 Sec. 17. Minnesota Statutes 2004, section 298.24, 320.6 subdivision 1, is amended to read: 320.7 Subdivision 1. (a) For concentrate produced in 2001, 2002, 320.8 and 2003, there is imposed upon taconite and iron sulphides, and 320.9 upon the mining and quarrying thereof, and upon the production 320.10 of iron ore concentrate therefrom, and upon the concentrate so 320.11 produced, a tax of $2.103 per gross ton of merchantable iron ore 320.12 concentrate produced therefrom. For concentrates produced in 320.13 2005 and 2006, the tax rate is the same rate imposed for 320.14 concentrates produced in 2004. 320.15 (b) For concentrates produced in 2004, 2007, and subsequent 320.16 years, the tax rate shall be equal to the preceding year's tax 320.17 rate plus an amount equal to the preceding year's tax rate 320.18 multiplied by the percentage increase in the implicit price 320.19 deflator from the fourth quarter of the second preceding year to 320.20 the fourth quarter of the preceding year. "Implicit price 320.21 deflator" means the implicit price deflator for the gross 320.22 domestic product prepared by the Bureau of Economic Analysis of 320.23 the United States Department of Commerce. 320.24 (c) On concentrates produced in 1997 and thereafter, an 320.25 additional tax is imposed equal to three cents per gross ton of 320.26 merchantable iron ore concentrate for each one percent that the 320.27 iron content of the product exceeds 72 percent, when dried at 320.28 212 degrees Fahrenheit. 320.29 (d) Except for taxes payable in 2006 through 2008, the tax 320.30 shall be imposed on the average of the production for the 320.31 current year and the previous two years. The rate of the tax 320.32 imposed will be the current year's tax rate. This clause shall 320.33 not apply in the case of the closing of a taconite facility if 320.34 the property taxes on the facility would be higher if this 320.35 clause and section 298.25 were not applicable. 320.36 (e) If the tax or any part of the tax imposed by this 321.1 subdivision is held to be unconstitutional, a tax of $2.103 per 321.2 gross ton of merchantable iron ore concentrate produced shall be 321.3 imposed. 321.4 (f) Consistent with the intent of this subdivision to 321.5 impose a tax based upon the weight of merchantable iron ore 321.6 concentrate, the commissioner of revenue may indirectly 321.7 determine the weight of merchantable iron ore concentrate 321.8 included in fluxed pellets by subtracting the weight of the 321.9 limestone, dolomite, or olivine derivatives or other basic flux 321.10 additives included in the pellets from the weight of the 321.11 pellets. For purposes of this paragraph, "fluxed pellets" are 321.12 pellets produced in a process in which limestone, dolomite, 321.13 olivine, or other basic flux additives are combined with 321.14 merchantable iron ore concentrate. No subtraction from the 321.15 weight of the pellets shall be allowed for binders, mineral and 321.16 chemical additives other than basic flux additives, or moisture. 321.17 (g)(1) Notwithstanding any other provision of this 321.18 subdivision, for the first two years of a plant's commercial 321.19 production of direct reduced ore, no tax is imposed under this 321.20 section. As used in this paragraph, "commercial production" is 321.21 production of more than 50,000 tons of direct reduced ore in the 321.22 current year or in any prior year, noncommercial production is 321.23 production of 50,000 tons or less of direct reduced ore in any 321.24 year, and "direct reduced ore" is ore that results in a product 321.25 that has an iron content of at least 75 percent. For the third 321.26 year of a plant's commercial production of direct reduced ore, 321.27 the rate to be applied to direct reduced ore is 25 percent of 321.28 the rate otherwise determined under this subdivision. For the 321.29 fourthsuchcommercial production year, the rate is 50 percent 321.30 of the rate otherwise determined under this subdivision; for the 321.31 fifthsuchcommercial production year, the rate is 75 percent of 321.32 the rate otherwise determined under this subdivision; and for 321.33 all subsequent commercial production years, the full rate is 321.34 imposed. 321.35 (2) Subject to clause (1), production of direct reduced ore 321.36 in this state is subject to the tax imposed by this section, but 322.1 if that production is not produced by a producer of taconite or 322.2 iron sulfides, the production of taconite or iron sulfides 322.3 consumed in the production of direct reduced iron in this state 322.4 is not subject to the tax imposed by this section on taconite or 322.5 iron sulfides. 322.6 (3) Notwithstanding any other provision of this 322.7 subdivision, no tax is imposed on direct reduced ore under this 322.8 section during the facility's noncommercial production of direct 322.9 reduced ore. The taconite or iron sulphides consumed in the 322.10 noncommercial production of direct reduced ore is subject to the 322.11 tax imposed by this section on taconite and iron sulphides. 322.12 Three-year average production of direct reduced ore does not 322.13 include production of direct reduced ore in any noncommercial 322.14 year. Three-year average production for a direct reduced ore 322.15 facility that has noncommercial production is the average of the 322.16 commercial production of direct reduced ore for the current year 322.17 and the previous two commercial years. 322.18[EFFECTIVE DATE.] This section is effective for direct 322.19 reduced ore produced after the date of final enactment. 322.20 Sec. 18. Minnesota Statutes 2004, section 298.28, 322.21 subdivision 9b, is amended to read: 322.22 Subd. 9b. [TACONITE ENVIRONMENTAL FUND.] Five cents per 322.23 tonfor distributions in 1999, 2000, 2001, 2002, and 2003must 322.24 be paid to the taconite environmental fund for use under section 322.25 298.2961, subdivision 4. 322.26[EFFECTIVE DATE.] This section is effective for 322.27 distributions in 2005 and later years. 322.28 Sec. 19. Minnesota Statutes 2004, section 298.28, 322.29 subdivision 10, is amended to read: 322.30 Subd. 10. [INCREASE.] (a) Except as provided in paragraph 322.31 (b), beginning with distributions in 2000, the amount determined 322.32 under subdivision 9 shall be increased in the same proportion as 322.33 the increase in the implicit price deflator as provided in 322.34 section 298.24, subdivision 1. Beginning with distributions in 322.35 2003, the amount determined under subdivision 6, paragraph (a), 322.36 shall be increased in the same proportion as the increase in the 323.1 implicit price deflator as provided in section 298.24, 323.2 subdivision 1. 323.3 (b) For distributions in 2005 and subsequent years, an 323.4 amount equal to the increased tax proceeds attributable to the 323.5 increase in the implicit price deflator as provided in section 323.6 298.24, subdivision 1, for taxes paid in 2005, except for the 323.7 amount of revenue increases provided in subdivision 4, paragraph 323.8 (d), is distributed to the grant and loan fund established in 323.9 section 298.2961, subdivision 4. 323.10 Sec. 20. Minnesota Statutes 2004, section 298.2961, is 323.11 amended by adding a subdivision to read: 323.12 Subd. 4. [GRANT AND LOAN FUND.] (a) A fund is established 323.13 to receive distributions under section 298.28, subdivision 9b, 323.14 and to make grants or loans as provided in this subdivision. 323.15 Any grant or loan made under this subdivision must be approved 323.16 by a majority of the members of the Iron Range Resources and 323.17 Rehabilitation Board, established under section 298.22. 323.18 (b) Distributions received in calendar year 2005 are 323.19 allocated to the city of Virginia for improvements and repairs 323.20 to the city's steam heating system. 323.21 (c) Distributions received in calendar year 2006 are 323.22 allocated to a project of the public utilities commissions of 323.23 the cities of Hibbing and Virginia to convert their electrical 323.24 generating plants to the use of biomass products, such as wood. 323.25 (d) Distributions received in calendar year 2007 must be 323.26 paid to the city of Tower to be used for the East Two Rivers 323.27 project in or near the city of Tower, including replacement of 323.28 the Marked Trunk Highway 169 bridge over East Two Rivers, 323.29 demolition of the present Marked Trunk Highway 135 bridge over 323.30 East Two Rivers, and rerouting of Marked Trunk Highway 135, 323.31 associated trunk highway construction and reconstruction, and 323.32 associated marina development. 323.33 (e) For distributions received in 2008 and later, amounts 323.34 may be allocated to joint ventures with mining companies for 323.35 reclamation of lands containing abandoned or worked out mines to 323.36 convert these lands to marketable properties for residential, 324.1 recreational, commercial, or other valuable uses. 324.2[EFFECTIVE DATE.] This section is effective the day 324.3 following final enactment. 324.4 Sec. 21. Minnesota Statutes 2004, section 298.75, 324.5 subdivision 1, is amended to read: 324.6 Subdivision 1. [DEFINITIONS.] Except as may otherwise be 324.7 provided, the following words, when used in this section, shall 324.8 have the meanings herein ascribed to them. 324.9 (1) "Aggregate material" shall mean nonmetallic natural 324.10 mineral aggregate including, but not limited to sand, silica 324.11 sand, gravel, crushed rock, limestone, granite, and borrow, but 324.12 only if the borrow is transported on a public road, street, or 324.13 highway. Aggregate material shall not include dimension stone 324.14 and dimension granite. Aggregate material must be measured or 324.15 weighed after it has been extracted from the pit, quarry, or 324.16 deposit. 324.17 (2) "Person" shall mean any individual, firm, partnership, 324.18 corporation, organization, trustee, association, or other entity. 324.19 (3) "Operator" shall mean any person engaged in the 324.20 business of removing aggregate material from the surface or 324.21 subsurface of the soil, for the purpose of sale, either directly 324.22 or indirectly, through the use of the aggregate material in a 324.23 marketable product or service; except that operator does not 324.24 include persons engaged in a transaction in which the aggregate 324.25 is moved within a project's construction limits to other 324.26 locations within that same project's construction limits. 324.27 (4) "Extraction site" shall mean a pit, quarry, or deposit 324.28 containing aggregate material and any contiguous property to the 324.29 pit, quarry, or deposit which is used by the operator for 324.30 stockpiling the aggregate material. 324.31 (5) "Importer" shall mean any person who buys aggregate 324.32 material produced from a county not listed in paragraph (6) or 324.33 another state and causes the aggregate material to be imported 324.34 into a county in this state which imposes a tax on aggregate 324.35 material. 324.36 (6) "County" shall mean the counties of Pope, Stearns, 325.1 Benton, Sherburne, Carver, Scott, Dakota, Le Sueur, Kittson, 325.2 Marshall, Pennington, Red Lake, Polk, Norman, Mahnomen, Clay, 325.3 Becker, Carlton, St. Louis, Rock, Murray, Wilkin, Big Stone, 325.4 Sibley, Hennepin, Washington, Chisago, and Ramsey. County also 325.5 means any other county whose board has voted after a public 325.6 hearing to impose the tax under this section and has notified 325.7 the commissioner of revenue of the imposition of the tax. 325.8 (7) "Borrow" shall mean granular borrow, consisting of 325.9 durable particles of gravel and sand, crushed quarry or mine 325.10 rock, crushed gravel or stone, or any combination thereof, the 325.11 ratio of the portion passing the (#200) sieve divided by the 325.12 portion passing the (1 inch) sieve may not exceed 20 percent by 325.13 mass. 325.14[EFFECTIVE DATE.] This section is effective for aggregate 325.15 sold, imported, transported, or used from a stockpile after June 325.16 30, 2005. 325.17 Sec. 22. Minnesota Statutes 2004, section 298.75, 325.18 subdivision 2, is amended to read: 325.19 Subd. 2. [TAX IMPOSED.] A county shall impose upon every 325.20 importer and operator a production tax up to ten cents per cubic 325.21 yard or up to seven cents per ton of aggregate material removed 325.22 except that the county board may decide not to impose this tax 325.23 if it determines that in the previous year operators removed 325.24 less than 20,000 tons or 14,000 cubic yards of aggregate 325.25 material from that county. A county or town may exempt an 325.26 operator from the tax if the operator has removed less than 325.27 2,500 tons or 1,750 yards from the county in the year that the 325.28 tax is due and no other aggregate operator has removed material 325.29 from the same site in the same year. The tax shall be imposed 325.30 on aggregate material produced in the county when the aggregate 325.31 material is transported from the extraction site or sold. When 325.32 aggregate material is stored in a stockpile within the state of 325.33 Minnesota and a public highway, road or street is not used for 325.34 transporting the aggregate material, the tax shall be imposed 325.35 either when the aggregate material is sold, or when it is 325.36 transported from the stockpile site, or when it is used from the 326.1 stockpile, whichever occurs first. The tax shall be imposed on 326.2 an importer when the aggregate material is imported into the 326.3 county that imposes the tax. 326.4 If the aggregate material is transported directly from the 326.5 extraction site to a waterway, railway, or another mode of 326.6 transportation other than a highway, road or street, the tax 326.7 imposed by this section shall be apportioned equally between the 326.8 county where the aggregate material is extracted and the county 326.9 to which the aggregate material is originally transported. If 326.10 that destination is not located in Minnesota, then the county 326.11 where the aggregate material was extracted shall receive all of 326.12 the proceeds of the tax. 326.13[EFFECTIVE DATE.] This section is effective the day 326.14 following final enactment. 326.15 Sec. 23. [IRON RANGE RESOURCES AND REHABILITATION 326.16 COMMISSIONER; BONDS AUTHORIZED.] 326.17 Subdivision 1. [ISSUANCE; PURPOSE.] Notwithstanding any 326.18 provision of Minnesota Statutes, chapter 298, to the contrary, 326.19 the commissioner of Iron Range resources and rehabilitation may 326.20 issue revenue bonds in a principal amount of $15,000,000 in one 326.21 or more series, and bonds to refund those bonds. The proceeds 326.22 of the bonds must be used to make grants to school districts 326.23 located in the taconite tax relief area defined in Minnesota 326.24 Statutes, section 273.134, or the taconite assistance area 326.25 defined in Minnesota Statutes, section 273.1341, to be used by 326.26 the school districts to pay for health, safety, and maintenance 326.27 improvements but only if the school district has levied the 326.28 maximum amount allowable under law for those purposes. 326.29 Subd. 2. [APPROPRIATION.] There is annually appropriated 326.30 from the distribution of taconite production tax revenues to the 326.31 taconite environmental protection fund pursuant to Minnesota 326.32 Statutes, section 298.28, subdivision 11, and to the Douglas J. 326.33 Johnson economic protection trust pursuant to Minnesota 326.34 Statutes, section 298.28, subdivisions 9 and 11, in equal 326.35 shares, an amount sufficient to pay when due the principal and 326.36 interest on the bonds issued pursuant to subdivision 1. If the 327.1 annual distribution to the Douglas J. Johnson economic 327.2 protection trust is insufficient to pay its share after 327.3 fulfilling any obligations of the trust under Minnesota 327.4 Statutes, section 298.225 or 298.293, the deficiency shall be 327.5 appropriated from the taconite environmental protection fund. 327.6 The appropriation under this subdivision terminates upon payment 327.7 or maturity of the last of the bonds issued under this section. 327.8 Subd. 3. [CREDIT ENHANCEMENT.] The bonds issued under this 327.9 section shall be "debt obligations" and the commissioner of Iron 327.10 Range resources and rehabilitation shall be a "district" for 327.11 purposes of Minnesota Statutes, section 126C.55, provided that 327.12 advances made under subdivision 2 of Minnesota Statutes, section 327.13 126C.55, shall not be subject to subdivisions 4 to 7 of 327.14 Minnesota Statutes, section 126C.55. 327.15 Sec. 24. [TRANSITION PROVISION.] 327.16 Each person with an alternative minimum tax credit on 327.17 December 31, 2004, pursuant to Minnesota Statutes 2004, section 327.18 298.01, may take that credit against occupation tax under the 327.19 provisions of Minnesota Statutes 2004, section 298.01, 327.20 subdivision 3d or 4e. 327.21[EFFECTIVE DATE.] This section is effective the day 327.22 following final enactment. 327.23 Sec. 25. [REPEALER.] 327.24 (a) Minnesota Statutes 2004, section 298.01, subdivisions 327.25 3c, 3d, 4d, and 4e, are repealed effective for taxable years 327.26 beginning after December 31, 2004. 327.27 (b) Minnesota Statutes 2004, section 298.017, is repealed 327.28 effective for taxes payable in 2006 and thereafter. 327.29 ARTICLE 12 327.30 MISCELLANEOUS - SF1683 327.31 Section 1. Minnesota Statutes 2004, section 270.30, 327.32 subdivision 1, is amended to read: 327.33 Subdivision 1. [SCOPE.](a)This section applies to a 327.34 person whooffers,provides, or facilitates the provision of327.35refund anticipation loans, as part of or in connection with the327.36provision oftax preparation services. 328.1(b) This section does not apply to:328.2(1) a tax preparer who provides tax preparation services328.3for fewer than six clients in a calendar year;328.4(2) the provision by a person of tax preparation services328.5to a spouse, parent, grandparent, child, or sibling; and328.6(3) the provision of services by an employee for an328.7employer.328.8 Sec. 2. Minnesota Statutes 2004, section 270.30, 328.9 subdivision 5, is amended to read: 328.10 Subd. 5. [ITEMIZED BILL REQUIRED.] A tax preparer who 328.11 provides services for a fee or other consideration must provide 328.12 an itemized statement of the charges for services, at least 328.13 separately stating the charges for: 328.14 (1) return preparation; and 328.15 (2)electronic filing; and328.16(3)providing or facilitating a refund anticipation loan. 328.17 Sec. 3. Minnesota Statutes 2004, section 270.30, 328.18 subdivision 6, is amended to read: 328.19 Subd. 6. [ENFORCEMENT; PENALTIES.] The commissioner may 328.20 impose an administrative penalty of not more than $1,000 per 328.21 violation of subdivision 3, 4, or 5. The commissioner may 328.22 terminate a tax preparer's authority to transmit returns 328.23 electronically to the state, if the commissioner determines the 328.24 tax preparer engaged in a pattern and practice of violating this 328.25 section. Imposition of a penalty under this subdivision is 328.26 subject to the contested case procedure under chapter 14. The 328.27 commissioner shall collect the penalty in the same manner as the 328.28 income tax. Penalties imposed under this subdivision are public 328.29 data. 328.30 Sec. 4. Minnesota Statutes 2004, section 270.30, is 328.31 amended by adding a subdivision to read: 328.32 Subd. 6a. [EXCHANGE OF DATA; STATE BOARD OF 328.33 ACCOUNTANCY.] The State Board of Accountancy shall refer to the 328.34 commissioner complaints it receives about tax preparers who are 328.35 not subject to the jurisdiction of the State Board of 328.36 Accountancy and who are alleged to have violated the provisions 329.1 of subdivisions 3 to 5. 329.2 Sec. 5. Minnesota Statutes 2004, section 270.30, is 329.3 amended by adding a subdivision to read: 329.4 Subd. 6b. [EXCHANGE OF DATA; LAWYERS BOARD OF PROFESSIONAL 329.5 RESPONSIBILITY.] The Lawyers Board of Professional 329.6 Responsibility may refer to the commissioner complaints it 329.7 receives about tax preparers who are not subject to its 329.8 jurisdiction and who are alleged to have violated the provisions 329.9 of subdivisions 3 to 5. 329.10 Sec. 6. Minnesota Statutes 2004, section 270.30, is 329.11 amended by adding a subdivision to read: 329.12 Subd. 6c. [EXCHANGE OF DATA; COMMISSIONER.] The 329.13 commissioner shall refer complaints about tax preparers who are 329.14 alleged to have violated the provisions of subdivisions 3 to 5 329.15 to: 329.16 (1) the State Board of Accountancy, if the tax preparer is 329.17 under its jurisdiction; and 329.18 (2) the Lawyers Board of Professional Responsibility, if 329.19 the tax preparer is under its jurisdiction. 329.20 Sec. 7. Minnesota Statutes 2004, section 270.30, is 329.21 amended by adding a subdivision to read: 329.22 Subd. 6d. [DATA PRIVATE.] Information exchanged on 329.23 individuals under subdivisions 6a to 6c are private data under 329.24 section 13.02, subdivision 12, until such time as a penalty is 329.25 imposed as provided in section 326A.08 or by the Lawyers Board 329.26 of Professional Responsibility. 329.27 Sec. 8. Minnesota Statutes 2004, section 270.30, 329.28 subdivision 8, is amended to read: 329.29 Subd. 8. [EXEMPTIONS; ENFORCEMENT PROVISIONS.] (a) The 329.30 provisions ofsubdivisions 6 and 7this section, except for 329.31 subdivision 4, do not apply to: 329.32 (1) an attorney admitted to practice under section 481.01; 329.33 (2) a certified public accountantholding a certificate329.34under section 326A.04 or a person issued a permit to practice329.35under section 326A.05or other person who is subject to the 329.36 jurisdiction of the State Board of Accountancy; and 330.1 (3)a person designated as a registered accounting330.2practitioner under Minnesota Rules, part 1105.6600, or a330.3registered accounting practitioner firm issued a permit under330.4Minnesota Rules, part 1105.7100;330.5(4)an enrolled agent who has passed the special enrollment 330.6 examination administered by the Internal Revenue Service; and. 330.7 (b) The provisions of this section do not apply to: 330.8(5)(1) any fiduciary, or the regular employees of a 330.9 fiduciary, while acting on behalf of the fiduciary estate, the 330.10 testator, trustor, grantor, or beneficiaries of them; 330.11 (2) a tax preparer who provides tax preparation services 330.12 for fewer than six clients in a calendar year; 330.13 (3) tax preparation services to a spouse, parent, 330.14 grandparent, child, or sibling of the tax preparer; and 330.15 (4) the preparation by an employee of the tax return of the 330.16 employee's employer. 330.17 Sec. 9. [270.301] [PUBLICATION OF NAMES OF TAX PREPARERS 330.18 SUBJECT TO PENALTIES.] 330.19 Subdivision 1. [PUBLICATION OF LIST.] Notwithstanding any 330.20 other law, the commissioner must publish as provided in this 330.21 section a list or lists of tax preparers subject to penalties. 330.22 Subd. 2. [REQUIRED AND EXCLUDED TAX PREPARERS.] (a) 330.23 Subject to the limitations of paragraphs (b) and (c), the 330.24 commissioner must publish lists of the tax preparers described 330.25 in subdivision 1. The list must include: 330.26 (1) the tax preparers who have been assessed penalties 330.27 under section 289A.60, subdivision 13, or who have been 330.28 convicted under section 289A.63; 330.29 (2) tax preparers against whom cumulative penalties of 330.30 $1,000 or more have been assessed under section 270.30, 330.31 subdivision 6; and 330.32 (3) tax preparers whose authority to transmit returns 330.33 electronically has been terminated under section 270.30, 330.34 subdivision 6, or under section 289A.60, subdivision 13. 330.35 The list may include tax preparers against whom cumulative 330.36 penalties of less than $1,000 have been assessed. 331.1 (b) For the purposes of this section, a penalty was not 331.2 assessed if: 331.3 (1) an administrative or court action contesting the 331.4 penalty has been filed or served and is unresolved at the time 331.5 when notice would be given under subdivision 3; or 331.6 (2) an appeal period to contest the penalty has not expired. 331.7 (c) Penalties are not subject to publication if: 331.8 (1) the commissioner is in the process of reviewing or 331.9 adjusting the penalty; or 331.10 (2) the commissioner has been notified that the tax 331.11 preparer is deceased. 331.12 Subd. 3. [NOTICE TO TAX PREPARER.] (a) At least 30 days 331.13 before publishing the name of a tax preparer subject to penalty, 331.14 the commissioner shall mail a written notice to the tax 331.15 preparer, detailing the amount and nature of each penalty and 331.16 the intended publication of the information listed in 331.17 subdivision 4 related to the penalty. The notice must be mailed 331.18 by first class and certified mail addressed to the last known 331.19 address of the tax preparer. The notice must include 331.20 information regarding the exceptions listed in subdivision 2 and 331.21 must state that the tax preparer's information will not be 331.22 published if the tax preparer provides information establishing 331.23 that subdivision 2 prohibits publication of the tax preparer's 331.24 name. 331.25 (b) After at least 30 days has elapsed since the notice was 331.26 mailed and the tax preparer has not proved to the commissioner 331.27 that subdivision 2 prohibits publication, the commissioner may 331.28 publish in a list of tax preparers subject to penalty the 331.29 information about the tax preparer that is listed in subdivision 331.30 4. 331.31 Subd. 4. [FORM OF LIST.] The list may be published by any 331.32 medium or method. The list must contain the name, associated 331.33 business name or names, address or addresses, and violation or 331.34 violations for which a penalty was imposed of each tax preparer 331.35 subject to administrative penalty. 331.36 Subd. 5. [REMOVAL FROM LIST.] The commissioner shall 332.1 remove the name of a tax preparer from the list of tax preparers 332.2 published under this section when: 332.3 (1) the commissioner determines that the name was included 332.4 on the list in error; 332.5 (2) 90 days have elapsed since the preparer has fully paid 332.6 all fines imposed, served any suspension, and demonstrated to 332.7 the satisfaction of the commissioner that the preparer has 332.8 successfully completed any remedial actions required by the 332.9 commissioner, the State Board of Accountancy, or the Lawyers 332.10 Board of Professional Responsibility; or 332.11 (3) the commissioner has been notified that the tax 332.12 preparer is deceased. 332.13 Subd. 6. [NAMES PUBLISHED IN ERROR.] If the commissioner 332.14 publishes a name under subdivision 1 in error, the tax preparer 332.15 whose name was erroneously published has a right to request a 332.16 retraction and apology. If the tax preparer so requests, the 332.17 commissioner shall publish a retraction and apology 332.18 acknowledging that the tax preparer's name was published in 332.19 error. The retraction and apology must appear in the same 332.20 medium and the same format as the original list that contained 332.21 the name listed in error. 332.22 Subd. 7. [PAYMENT OF DAMAGES.] Actions against the 332.23 commissioner of revenue or the state of Minnesota arising out of 332.24 the implementation of this program must be brought under section 332.25 270.276. 332.26[EFFECTIVE DATE.] The requirement of subdivision 2, 332.27 paragraph (a), clause (2), is effective for crimes committed on 332.28 or after August 1, 2005. The remainder of subdivision 2 is 332.29 effective for tax preparers engaging in conduct described in 332.30 subdivision 2, paragraph (a), clause (1) or (3), on or after 332.31 August 1, 2005. 332.32 Sec. 10. Minnesota Statutes 2004, section 270A.03, 332.33 subdivision 5, is amended to read: 332.34 Subd. 5. [DEBT.] "Debt" means a legal obligation of a 332.35 natural person to pay a fixed and certain amount of money, which 332.36 equals or exceeds $25 and which is due and payable to a claimant 333.1 agency. The term includes criminal fines imposed under section 333.2 609.10 or 609.125, fines imposed for petty misdemeanors as 333.3 defined in section 609.02, subdivision 4a, and restitution. The 333.4 term also includes the co-payment for the appointment of a 333.5 district public defender imposed under section 611.17, paragraph 333.6 (c). A debt may arise under a contractual or statutory 333.7 obligation, a court order, or other legal obligation, but need 333.8 not have been reduced to judgment. 333.9 A debt includes any legal obligation of a current recipient 333.10 of assistance which is based on overpayment of an assistance 333.11 grant where that payment is based on a client waiver or an 333.12 administrative or judicial finding of an intentional program 333.13 violation; or where the debt is owed to a program wherein the 333.14 debtor is not a client at the time notification is provided to 333.15 initiate recovery under this chapter and the debtor is not a 333.16 current recipient of food support, transitional child care, or 333.17 transitional medical assistance. 333.18 A debt does not include any legal obligation to pay a 333.19 claimant agency for medical care, including hospitalization if 333.20 the income of the debtor at the time when the medical care was 333.21 rendered does not exceed the following amount: 333.22 (1) for an unmarried debtor, an income of $8,800 or less; 333.23 (2) for a debtor with one dependent, an income of $11,270 333.24 or less; 333.25 (3) for a debtor with two dependents, an income of $13,330 333.26 or less; 333.27 (4) for a debtor with three dependents, an income of 333.28 $15,120 or less; 333.29 (5) for a debtor with four dependents, an income of $15,950 333.30 or less; and 333.31 (6) for a debtor with five or more dependents, an income of 333.32 $16,630 or less. 333.33 The income amounts in this subdivision shall be adjusted 333.34 for inflation for debts incurred in calendar years 2001 and 333.35 thereafter. The dollar amount of each income level that applied 333.36 to debts incurred in the prior year shall be increased in the 334.1 same manner as provided in section 1(f) of the Internal Revenue 334.2 Code of 1986, as amended through December 31, 2000, except that 334.3 for the purposes of this subdivision the percentage increase 334.4 shall be determined from the year starting September 1, 1999, 334.5 and ending August 31, 2000, as the base year for adjusting for 334.6 inflation for debts incurred after December 31, 2000. 334.7 Debt also includes an agreement to pay a MinnesotaCare 334.8 premium, regardless of the dollar amount of the premium 334.9 authorized under section 256L.15, subdivision 1a. 334.10 Sec. 11. Minnesota Statutes 2004, section 289A.08, 334.11 subdivision 16, is amended to read: 334.12 Subd. 16. [TAX REFUND OR RETURN PREPARERS; ELECTRONIC 334.13 FILING; PAPER FILING FEE IMPOSED.] (a) A "tax refund or return 334.14 preparer," as defined in section 289A.60, subdivision 13, 334.15 paragraph(g)(h), who prepared more than500100 Minnesota 334.16 individual income tax returns for the prior calendar year must 334.17 file all Minnesota individual income tax returns prepared for 334.18 the current calendar year by electronic means. 334.19 (b)For tax returns prepared for the tax year beginning in334.202001, the "500" in paragraph (a) is reduced to 250.334.21(c) For tax returns prepared for tax years beginning after334.22December 31, 2001, the "500" in paragraph (a) is reduced to 100.334.23(d)Paragraph (a) does not apply to a return if the 334.24 taxpayer has indicated on the return that the taxpayer did not 334.25 want the return filed by electronic means. 334.26(e)(c) For each return that is not filed electronically by 334.27 a tax refund or return preparer under this subdivision, 334.28 including returns filed under paragraph (d), a paper filing fee 334.29 of $5 is imposed upon the preparer. The fee is collected from 334.30 the preparer in the same manner as income tax. The fee does not 334.31 apply to returns that the commissioner requires to be filed in 334.32 paper form. 334.33 Sec. 12. Minnesota Statutes 2004, section 289A.60, 334.34 subdivision 13, is amended to read: 334.35 Subd. 13. [PENALTIES FOR TAX RETURN PREPARERS.] (a) If an 334.36 understatement of liability with respect to a return or claim 335.1 for refund is due to a willful attempt in any manner to 335.2 understate the liability for a tax by a person who is a tax 335.3 return preparer with respect to the return or claim, the person 335.4 shall pay to the commissioner a penalty of $500. If a part of a 335.5 property tax refund claim is excessive due to a willful attempt 335.6 in any manner to overstate the claim for relief allowed under 335.7 chapter 290A by a person who is a tax refund or return preparer, 335.8 the person shall pay to the commissioner a penalty of $500 with 335.9 respect to the claim. These penalties may not be assessed 335.10 against the employer of a tax return preparer unless the 335.11 employer was actively involved in the willful attempt to 335.12 understate the liability for a tax or to overstate the claim for 335.13 refund. These penalties are income tax liabilities and may be 335.14 assessed at any time as provided in section 289A.38, subdivision 335.15 5. 335.16 (b) A civil action in the name of the state of Minnesota 335.17 may be commenced to enjoin any person who is a tax return 335.18 preparer doing business in this state from further engaging in 335.19 any conduct described in paragraph (c). An action under this 335.20 paragraph must be brought by the attorney general in the 335.21 district court for the judicial district of the tax return 335.22 preparer's residence or principal place of business, or in which 335.23 the taxpayer with respect to whose tax return the action is 335.24 brought resides. The court may exercise its jurisdiction over 335.25 the action separate and apart from any other action brought by 335.26 the state of Minnesota against the tax return preparer or any 335.27 taxpayer. 335.28 (c) In an action under paragraph (b), if the court finds 335.29 that a tax return preparer has: 335.30 (1) engaged in any conduct subject to a civil penalty under 335.31 section 289A.60 or a criminal penalty under section 289A.63; 335.32 (2) misrepresented the preparer's eligibility to practice 335.33 before the Department of Revenue, or otherwise misrepresented 335.34 the preparer's experience or education as a tax return preparer; 335.35 (3) guaranteed the payment of any tax refund or the 335.36 allowance of any tax credit; or 336.1 (4) engaged in any other fraudulent or deceptive conduct 336.2 that substantially interferes with the proper administration of 336.3 state tax law, and injunctive relief is appropriate to prevent 336.4 the recurrence of that conduct, 336.5 the court may enjoin the person from further engaging in that 336.6 conduct. 336.7 (d) If the court finds that a tax return preparer has 336.8 continually or repeatedly engaged in conduct described in 336.9 paragraph (c), and that an injunction prohibiting that conduct 336.10 would not be sufficient to prevent the person's interference 336.11 with the proper administration of state tax laws, the court may 336.12 enjoin the person from acting as a tax return preparer. The 336.13 court may not enjoin the employer of a tax return preparer for 336.14 conduct described in paragraph (c) engaged in by one or more of 336.15 the employer's employees unless the employer was also actively 336.16 involved in that conduct. 336.17 (e) The commissioner may terminate or suspend a tax 336.18 preparer's authority to transmit returns electronically to the 336.19 state, if the commissioner determines that the tax preparer has 336.20 engaged in a pattern and practice of conduct in violation of 336.21 this subdivision or of section 289A.63. 336.22 (f) For purposes of this subdivision, the term 336.23 "understatement of liability" means an understatement of the net 336.24 amount payable with respect to a tax imposed by state tax law, 336.25 or an overstatement of the net amount creditable or refundable 336.26 with respect to a tax. The determination of whether or not 336.27 there is an understatement of liability must be made without 336.28 regard to any administrative or judicial action involving the 336.29 taxpayer. For purposes of this subdivision, the amount 336.30 determined for underpayment of estimated tax under either 336.31 section 289A.25 or 289A.26 is not considered an understatement 336.32 of liability. 336.33(f)(g) For purposes of this subdivision, the term 336.34 "overstatement of claim" means an overstatement of the net 336.35 amount refundable with respect to a claim for property tax 336.36 relief provided by chapter 290A. The determination of whether 337.1 or not there is an overstatement of a claim must be made without 337.2 regard to administrative or judicial action involving the 337.3 claimant. 337.4(g)(h) For purposes of this section, the term "tax refund 337.5 or return preparer" means an individual who prepares for 337.6 compensation, or who employs one or more individuals to prepare 337.7 for compensation, a return of tax, or a claim for refund of 337.8 tax. The preparation of a substantial part of a return or claim 337.9 for refund is treated as if it were the preparation of the 337.10 entire return or claim for refund. An individual is not 337.11 considered a tax return preparer merely because the individual: 337.12 (1) gives typing, reproducing, or other mechanical 337.13 assistance; 337.14 (2) prepares a return or claim for refund of the employer, 337.15 or an officer or employee of the employer, by whom the 337.16 individual is regularly and continuously employed; 337.17 (3) prepares a return or claim for refund of any person as 337.18 a fiduciary for that person; or 337.19 (4) prepares a claim for refund for a taxpayer in response 337.20 to a tax order issued to the taxpayer. 337.21 Sec. 13. Minnesota Statutes 2004, section 290A.07, is 337.22 amended by adding a subdivision to read: 337.23 Subd. 5. [EARLY PAYMENT; E-FILE CLAIMS.] The commissioner 337.24 may pay a claim up to 30 days earlier than the first permitted 337.25 date under subdivision 2a or 3 if the claim is submitted by 337.26 electronic means. 337.27[EFFECTIVE DATE.] This section is effective the day 337.28 following final enactment. 337.29 Sec. 14. Minnesota Statutes 2004, section 297A.61, 337.30 subdivision 4, is amended to read: 337.31 Subd. 4. [RETAIL SALE.] (a) A "retail sale" means any 337.32 sale, lease, or rental for any purpose other than resale, 337.33 sublease, or subrent. 337.34 (b) A sale of property used by the owner only by leasing it 337.35 to others or by holding it in an effort to lease it, and put to 337.36 no use by the owner other than resale after the lease or effort 338.1 to lease, is a sale of property for resale. 338.2 (c) A sale of master computer software that is purchased 338.3 and used to make copies for sale or lease is a sale of property 338.4 for resale. 338.5 (d) A sale of building materials, supplies, and equipment 338.6 to owners, contractors, subcontractors, or builders for the 338.7 erection of buildings or the alteration, repair, or improvement 338.8 of real property is a retail sale in whatever quantity sold, 338.9 whether the sale is for purposes of resale in the form of real 338.10 property or otherwise. 338.11 (e) A sale of carpeting, linoleum, or similar floor 338.12 covering to a person who provides for installation of the floor 338.13 covering is a retail sale and not a sale for resale since a sale 338.14 of floor covering which includes installation is a contract for 338.15 the improvement of real property. 338.16 (f) A sale of shrubbery, plants, sod, trees, and similar 338.17 items to a person who provides for installation of the items is 338.18 a retail sale and not a sale for resale since a sale of 338.19 shrubbery, plants, sod, trees, and similar items that includes 338.20 installation is a contract for the improvement of real property. 338.21 (g) A sale of tangible personal property that is awarded as 338.22 prizes is a retail sale and is not considered a sale of property 338.23 for resale. 338.24 (h) A sale of tangible personal property utilized or 338.25 employed in the furnishing or providing of services under 338.26 subdivision 3, paragraph (g), clause (1), including, but not 338.27 limited to, property given as promotional items, is a retail 338.28 sale and is not considered a sale of property for resale. 338.29 (i) A sale of tangible personal property used in conducting 338.30 lawful gambling under chapter 349 or the state lottery under 338.31 chapter 349A, including, but not limited to, property given as 338.32 promotional items, is a retail sale and is not considered a sale 338.33 of property for resale. 338.34 (j) A sale of machines, equipment, or devices that are used 338.35 to furnish, provide, or dispense goods or services, including, 338.36 but not limited to, coin-operated devices, is a retail sale and 339.1 is not considered a sale of property for resale. 339.2 (k) In the case of a lease, a retail sale occurs (1) when 339.3 an obligation to make a lease payment becomes due under the 339.4 terms of the agreement or the trade practices of the lessor or 339.5 (2) in the case of a lease of a motor vehicle, as defined in 339.6 section 297B.01, subdivision 5, but excluding vehicles with a 339.7 manufacturer's gross vehicle weight rating greater than 10,000 339.8 pounds and rentals of vehicles for not more than 28 days, at the 339.9 time the lease is executed. 339.10 (l) In the case of a conditional sales contract, a retail 339.11 sale occurs upon the transfer of title or possession of the 339.12 tangible personal property. 339.13[EFFECTIVE DATE.] This section is effective for leases 339.14 entered into after September 30, 2005. 339.15 Sec. 15. Minnesota Statutes 2004, section 297A.67, is 339.16 amended by adding a subdivision to read: 339.17 Subd. 32. [CIGARETTES.] Cigarettes upon which a tax has 339.18 been imposed under section 297F.25 are exempt. 339.19[EFFECTIVE DATE.] This section is effective for sales and 339.20 purchases made after July 31, 2005. 339.21 Sec. 16. [297A.825] [MOTOR VEHICLE LEASES.] 339.22 Subdivision 1. [MOTOR VEHICLE LEASE PRICE; PAYMENT.] (a) 339.23 In the case of a lease of a motor vehicle as provided in section 339.24 297A.61, subdivision 4, paragraph (k), clause (2), the tax is 339.25 imposed on the total amount to be paid by the lessee under the 339.26 lease agreement. The lessor shall collect the tax in full at 339.27 the time the lease is executed or, if the tax is included in the 339.28 lease and the lease is assigned, the tax is due from the 339.29 original lessor at the time the lease is assigned. The total 339.30 amount to be paid by the lessee under the lease agreement equals 339.31 the agreed-upon value of the vehicle less manufacturer's 339.32 rebates, the stated residual value of the leased vehicle, and 339.33 the total value allowed for a vehicle owned by the lessee taken 339.34 in trade by the lessor, plus the price of any taxable goods and 339.35 services included in the lease and the rent charge as provided 339.36 by Code of Federal Regulations, title 12, section 213.4, 340.1 excluding any rent charge related to the capitalization of the 340.2 tax. 340.3 (b) If the total amount paid by the lessee for use of the 340.4 leased vehicle includes amounts that are not calculated at the 340.5 time the lease is executed, the tax is imposed and must be 340.6 collected by the lessor at the time the amounts are paid by the 340.7 lessee. In the case of a lease which by its terms may be 340.8 renewed, the sales tax is due and payable on the total amount to 340.9 be paid during the initial term of the lease, and then for each 340.10 subsequent renewal period on the total amount to be paid during 340.11 the renewal period. 340.12 (c) If a lease is canceled or rescinded on or before 90 340.13 days of its execution or if a vehicle is returned to the 340.14 manufacturer under section 325F.665, the lessor may file a claim 340.15 for a refund of the total tax paid minus the amount of tax due 340.16 for the period the vehicle is used by the lessee. 340.17 (d) If a lessee's obligation to make payments on a lease is 340.18 canceled more than 90 days after its execution, a credit is 340.19 allowed against sales tax or motor vehicle sales tax due on a 340.20 subsequent lease or purchase of a motor vehicle if that lease or 340.21 purchase is consummated within 30 days of the date the prior 340.22 lease was canceled. The amount of the credit shall be equal to 340.23 (1) the sales tax paid at the inception of the lease, multiplied 340.24 by (2) the ratio of the number of full months remaining in the 340.25 lease at the time of termination compared to the term of the 340.26 lease used in calculating sales tax paid at the inception of the 340.27 lease. 340.28 Subd. 2. [LEASE OF MOTOR VEHICLES.] When the lease of a 340.29 motor vehicle as defined in section 297A.61, subdivision 4, 340.30 paragraph (k), clause (2), originates in another state, the 340.31 sales tax under subdivision 1 shall be calculated by the lessor 340.32 on the total amount that is due under the lease agreement after 340.33 the vehicle is required to be registered in Minnesota. If the 340.34 total amount to be paid by the lessee under the lease agreement 340.35 has already been subjected to tax by another state, a credit for 340.36 taxes paid in the other state is allowed as provided in section 341.1 297A.80. 341.2[EFFECTIVE DATE.] Subdivision 1 of this section is 341.3 effective for leases entered into after September 30, 2005. 341.4 Subdivision 2 of this section is effective for vehicles 341.5 registering in Minnesota after September 30, 2005. 341.6 Sec. 17. Minnesota Statutes 2004, section 297F.01, is 341.7 amended by adding a subdivision to read: 341.8 Subd. 10a. [OUT-OF-STATE RETAILER.] "Out-of-state retailer" 341.9 means a person engaged outside of this state in the business of 341.10 selling, or offering to sell, cigarettes or tobacco products to 341.11 consumers located in this state. 341.12[EFFECTIVE DATE.] This section is effective the day 341.13 following final enactment. 341.14 Sec. 18. [297F.031] [REGISTRATION REQUIREMENT.] 341.15 Prior to making delivery sales or shipping cigarettes or 341.16 tobacco products in connection with any sales, an out-of-state 341.17 retailer shall file with the Department of Revenue a statement 341.18 setting forth the out-of-state retailer's name, trade name, and 341.19 the address of the out-of-state retailer's principal place of 341.20 business and any other place of business. 341.21 Sec. 19. Minnesota Statutes 2004, section 297F.09, is 341.22 amended by adding a subdivision to read: 341.23 Subd. 4a. [REPORTING REQUIREMENTS.] No later than the 18th 341.24 day of each calendar month, an out-of-state retailer that has 341.25 made a delivery of cigarettes or tobacco products or shipped or 341.26 delivered cigarettes or tobacco products into the state in a 341.27 delivery sale in the previous calendar month shall file with the 341.28 Department of Revenue reports in the form and in the manner 341.29 prescribed by the commissioner of revenue that provides for each 341.30 delivery sale, the name and address of the purchaser and the 341.31 brand or brands and quantity of cigarettes or tobacco products 341.32 sold. A tobacco retailer that meets the requirements of United 341.33 States Code, title 15, section 375 et seq. satisfies the 341.34 requirements of this subdivision. 341.35 Sec. 20. Minnesota Statutes 2004, section 297F.14, 341.36 subdivision 4, is amended to read: 342.1 Subd. 4. [BAD DEBT.]The commissioner may adopt rules342.2providing a refund of the tax paid under this chapter if the tax342.3paid qualifies as a bad debt under section 166(a) of the342.4Internal Revenue Code.For any reporting period, a taxpayer may 342.5 offset against taxes payable under this chapter the amount of 342.6 taxes previously paid under this chapter that is attributable to 342.7 a bad debt. The taxes must have been included in a transaction 342.8 the consideration for which was a debt owed to the taxpayer and 342.9 which became uncollectible, but only in proportion to the 342.10 portion of debt that became uncollectible. To qualify for 342.11 offset under this subdivision, the debt must have qualified as a 342.12 bad debt under section 166(a) of the Internal Revenue Code. The 342.13 taxpayer may claim the offset within the time period prescribed 342.14 in section 297F.17, subdivision 6. If the taxpayer is no longer 342.15 liable for taxes imposed under this chapter, the commissioner 342.16 shall refund to the taxpayer the amount of the taxes 342.17 attributable to the bad debt. Any recovery of the tax claimed 342.18 as a refund or credit must be reported to the commissioner on 342.19 the tax return for the month in which the recovery is made. If 342.20 the taxpayer is no longer required to file returns under this 342.21 chapter, the taxpayer must reimburse the commissioner for tax 342.22 recovered in the month following the recovery. 342.23[EFFECTIVE DATE.] This section is effective for claims 342.24 filed on or after July 1, 2005. 342.25 Sec. 21. [297F.25] [CIGARETTE SALES TAX.] 342.26 Subdivision 1. [IMPOSITION.] A tax is imposed on 342.27 distributors on the sale of cigarettes by a cigarette 342.28 distributor to a retailer or cigarette subjobber for resale in 342.29 this state. The tax is equal to 6.5 percent of the weighted 342.30 average retail price. The weighted average retail price must be 342.31 expressed in cents per pack when rounded to the nearest 342.32 one-tenth of a cent. The weighted average retail price must be 342.33 determined annually, with new rates published by May 1, and 342.34 effective for sales on or after July 1. The weighted average 342.35 retail price must be established by surveying cigarette 342.36 retailers statewide in a manner and time determined by the 343.1 commissioner. The determination of the commissioner pursuant to 343.2 this subdivision is not a "rule" and is not subject to the 343.3 Administrative Procedure Act contained in chapter 14. As of 343.4 August 1, 2005, the tax is 21 cents per pack of 20 cigarettes. 343.5 For packs of cigarettes with other than 20 cigarettes, the tax 343.6 must be adjusted proportionally. 343.7 Subd. 2. [PAYMENT.] Each taxpayer must remit payments of 343.8 the taxes to the commissioner on the same dates prescribed under 343.9 section 297F.09, subdivision 1, for cigarette tax returns, 343.10 including the accelerated remittance of the June liability. 343.11 Subd. 3. [RETURN.] A taxpayer must file a return with the 343.12 commissioner on the same dates prescribed under section 297F.09, 343.13 subdivision 1, for cigarette tax returns. Notwithstanding any 343.14 other provisions of this chapter, the tax due on the return is 343.15 based upon actual stamps purchased during the reporting period. 343.16 Subd. 4. [FORM OF RETURN.] The return must contain the 343.17 information and be in the form prescribed by the commissioner. 343.18 Subd. 5. [TAX AS DEBT.] The tax that is required to be 343.19 paid by the distributor is a debt from the retailer or cigarette 343.20 subjobber to the distributor recoverable at law in the same 343.21 manner as other debts. A cigarette retailer or subjobber must 343.22 pay the tax imposed under subdivision 1 to the distributor 343.23 before the 12th day of the month following the month in which 343.24 the cigarettes were purchased from the distributor. 343.25 Subd. 6. [SALES TAX STAMP.] Payment of the tax imposed 343.26 under section 297F.05 and by this section must be evidenced by a 343.27 dual-purpose single stamp affixed to each package. 343.28 Subd. 7. [ADMINISTRATION.] The stamping, audit, 343.29 assessment, interest, penalty, appeal, refund, and collection 343.30 provisions applicable to the taxes imposed under this chapter 343.31 apply to taxes imposed under this section. 343.32 Subd. 8. [DEPOSIT OF REVENUES.] Notwithstanding the 343.33 provisions of section 297F.10, the commissioner shall deposit 343.34 all revenues, including penalties and interest, derived from the 343.35 tax imposed by this section, in the general fund. 343.36[EFFECTIVE DATE.] This section is effective for all sales 344.1 made on or after August 1, 2005. 344.2 Sec. 22. Minnesota Statutes 2004, section 297I.05, 344.3 subdivision 4, is amended to read: 344.4 Subd. 4. [MUTUAL PROPERTY AND CASUALTY COMPANIES WITH 344.5 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 344.6 tax is imposed on mutual insurance companies that sell both 344.7 property and casualtycompaniesinsurance that had total assets 344.8 greater than $5,000,000 at the end of the calendar year but that 344.9 had total assets less than $1,600,000,000 on December 31, 1989. 344.10 The rate of tax is equal to:344.11(1) two percent of gross premiums less return premiums on344.12all direct business received by the insurer or agents of the344.13insurer in Minnesota for life insurance, in cash or otherwise,344.14during the year; and344.15(2)1.26 percent of gross premiums less return premiums on 344.16 allotherdirect business received by the insurer or agents of 344.17 the insurer in Minnesota, in cash or otherwise, during the year, 344.18 except for life insurance as provided in subdivision 14. 344.19[EFFECTIVE DATE.] This section is effective for premiums 344.20 received after December 31, 2005. 344.21 Sec. 23. Minnesota Statutes 2004, section 297I.05, is 344.22 amended by adding a subdivision to read: 344.23 Subd. 14. [LIFE INSURANCE.] A tax is imposed on life 344.24 insurance. The rate of tax equals 1.50 percent of gross 344.25 premiums less return premiums on all direct business received by 344.26 the insurer or agents of the insurer in Minnesota for life 344.27 insurance, in cash or otherwise, during the year. 344.28[EFFECTIVE DATE.] This section is effective for premiums 344.29 received after December 31, 2005. 344.30 Sec. 24. [325D.125] [EMPLOYERS NOT TO MISREPRESENT STATUS 344.31 OF EMPLOYEES.] 344.32 Subdivision 1. [MISREPRESENTATION PROHIBITED.] No employer 344.33 shall misrepresent the nature of its employment relationship 344.34 with its employees to any federal, state, or local government 344.35 unit, to other employers or to its employees. An employer 344.36 misrepresents the nature of its employment relationship with its 345.1 employees if it makes any statement regarding the nature of the 345.2 relationship that the employer does not in good faith believe to 345.3 be true or if it fails to report individuals as employees when 345.4 legally required to do so. 345.5 Subd. 2. [EMPLOYEE COERCION PROHIBITED.] No employer shall 345.6 require or request any employee to enter into any agreement, or 345.7 sign any document, that results in misclassification of the 345.8 employee as an independent contractor or otherwise does not 345.9 accurately reflect the employment relationship with the employer. 345.10 Subd. 3. [VIOLATIONS.] Any court finding any person guilty 345.11 of violating this section shall transmit a copy of the 345.12 documentation of the finding of guilt to the commissioner of 345.13 labor and industry. The commissioner of labor and industry 345.14 shall report the finding of guilt to relevant state and federal 345.15 agencies, including at least the commissioner of commerce, the 345.16 commissioner of economic security, the commissioner of revenue, 345.17 the federal Internal Revenue Service, and the United States 345.18 Department of Labor. 345.19[EFFECTIVE DATE.] This section is effective the day 345.20 following final enactment. 345.21 Sec. 25. [325F.781] [REQUIREMENTS; TOBACCO PRODUCT 345.22 DELIVERY SALES.] 345.23 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 345.24 section, the following terms have the meanings given, unless the 345.25 language or context clearly provides otherwise. 345.26 (b) "Consumer" means an individual who purchases, receives, 345.27 or possesses tobacco products for personal consumption and not 345.28 for resale. 345.29 (c) "Delivery sale" means: 345.30 (1) a sale of tobacco products to a consumer in this state 345.31 when: 345.32 (i) the purchaser submits the order for the sale by means 345.33 of a telephonic or other method of voice transmission, the mail 345.34 or any other delivery service, or the Internet or other on-line 345.35 service; or 345.36 (ii) the tobacco products are delivered by use of the mail 346.1 or other delivery service; or 346.2 (2) a sale of tobacco products that satisfies the criteria 346.3 in clause (1), item (i), regardless of whether the seller is 346.4 located inside or outside of the state. 346.5 A sale of tobacco products to an individual in this state 346.6 must be treated as a sale to a consumer, unless the individual 346.7 is licensed as a distributor or retailer of tobacco products. 346.8 (d) "Delivery service" means a person, including the United 346.9 States Postal Service, that is engaged in the commercial 346.10 delivery of letters, packages, or other containers. 346.11 (e) "Distributor" means a person, whether located inside or 346.12 outside of this state, other than a retailer, who sells or 346.13 distributes tobacco products in the state. Distributor does not 346.14 include a tobacco products manufacturer, export warehouse 346.15 proprietor, or importer with a valid permit under United States 346.16 Code, title 26, section 5712 (1997), if the person sells or 346.17 distributes tobacco products in this state only to distributors 346.18 who hold valid and current licenses under the laws of a state, 346.19 or to an export warehouse proprietor or another manufacturer. 346.20 Distributor does not include a common or contract carrier that 346.21 is transporting tobacco products under a proper bill of lading 346.22 or freight bill that states the quantity, source, and 346.23 destination of tobacco products, or a person who ships tobacco 346.24 products through this state by common or contract carrier under 346.25 a bill of lading or freight bill. 346.26 (f) "Retailer" means a person, whether located inside or 346.27 outside this state, who sells or distributes tobacco products to 346.28 a consumer in this state. 346.29 (g) "Tobacco products" means: 346.30 (1) cigarettes, as defined in section 297F.01, subdivision 346.31 3; and 346.32 (2) smokeless tobacco as defined in section 325F.76. 346.33 Subd. 2. [REQUIREMENTS FOR ACCEPTING ORDER FOR DELIVERY 346.34 SALE.] (a) This subdivision applies to acceptance of an order 346.35 for a delivery sale of tobacco products. 346.36 (b) When accepting the first order for a delivery sale from 347.1 a consumer, the tobacco retailer shall obtain the following 347.2 information from the person placing the order: 347.3 (1) a copy of a valid government-issued document that 347.4 provides the person's name, current address, photograph, and 347.5 date of birth; and 347.6 (2) an original written statement signed by the person 347.7 documenting that the person: 347.8 (i) is of legal age to purchase tobacco products in the 347.9 state; 347.10 (ii) has made a choice whether to receive mailings from a 347.11 tobacco retailer; 347.12 (iii) understands that providing false information may be a 347.13 violation of law; and 347.14 (iv) understands that it is a violation of law to purchase 347.15 tobacco products for subsequent resale or for delivery to 347.16 persons who are under the legal age to purchase tobacco products. 347.17 (c) If an order is made as a result of advertisement over 347.18 the Internet, the tobacco retailer shall request the e-mail 347.19 address of the purchaser and shall receive payment by credit 347.20 card or check prior to shipping. 347.21 (d) Prior to shipping the tobacco products, the tobacco 347.22 retailer shall verify the information provided under paragraph 347.23 (b) against a commercially available database. Any such 347.24 database or databases may also include age and identity 347.25 information from other government or validated commercial 347.26 sources, if that additional information is regularly used by 347.27 government and businesses for the purpose of identity 347.28 verification and authentication, and if the additional 347.29 information is used only to supplement and not to replace the 347.30 government-issued identification data in the age and identity 347.31 verification process. 347.32 Subd. 3. [REQUIREMENTS FOR SHIPPING A DELIVERY SALE.] (a) 347.33 This subdivision applies to a tobacco retailer shipping tobacco 347.34 products pursuant to a delivery sale. 347.35 (b) The tobacco retailer shall clearly mark the outside of 347.36 the package of tobacco products to be shipped "tobacco products - 348.1 adult signature required" and to show the name of the tobacco 348.2 retailer. 348.3 (c) The tobacco retailer shall utilize a delivery service 348.4 that imposes the following requirements: 348.5 (1) an adult must sign for the delivery; and 348.6 (2) the person signing for the delivery must show valid 348.7 government-issued identification that contains a photograph of 348.8 the person signing for the delivery and indicates that the 348.9 person signing for the delivery is of legal age to purchase 348.10 tobacco products and resides at the delivery address. 348.11 (d) The retailer must provide delivery instructions that 348.12 clearly indicate the requirements of this subdivision and must 348.13 declare that state law requires compliance with the requirements. 348.14 (e) No criminal penalty may be imposed on a person for a 348.15 violation of this section other than a violation described in 348.16 paragraph (f) or (g). Whenever it appears to the commissioner 348.17 that any person has engaged in any act or practice constituting 348.18 a violation of this section, and the violation is not within two 348.19 years of any previous violation of this section, the 348.20 commissioner shall issue and cause to be served upon the person 348.21 an order requiring the person to cease and desist from violating 348.22 this section. The order must give reasonable notice of the 348.23 rights of the person to request a hearing and must state the 348.24 reason for the entry of the order. Unless otherwise agreed 348.25 between the parties, a hearing shall be held not later than 348.26 seven days after the request for the hearing is received by the 348.27 commissioner after which and within 20 days after the receipt of 348.28 the administrative law judge's report and subsequent exceptions 348.29 and argument, the commissioner shall issue an order vacating the 348.30 cease and desist order, modifying it, or making it permanent as 348.31 the facts require. If no hearing is requested within 30 days of 348.32 the service of the order, the order becomes final and remains in 348.33 effect until modified or vacated by the commissioner. All 348.34 hearings shall be conducted in accordance with the provisions of 348.35 chapter 14. If the person to whom a cease and desist order is 348.36 issued fails to appear at the hearing after being duly notified, 349.1 the person shall be deemed in default, and the proceeding may be 349.2 determined against the person upon consideration of the cease 349.3 and desist order, the allegations of which may be deemed to be 349.4 true. 349.5 (f) Any person who violates this section within two years 349.6 of a violation for which a cease and desist order was issued 349.7 under paragraph (e), is guilty of a misdemeanor. 349.8 (g) Any person who commits a third or subsequent violation 349.9 of this section, including a violation for which a cease and 349.10 desist order was issued under paragraph (c), within any 349.11 subsequent two-year period is guilty of a gross misdemeanor. 349.12 Subd. 4. [COMMON CARRIERS.] This section may not be 349.13 construed as imposing liability upon any common carrier, or 349.14 officers or employees of the common carrier, when acting within 349.15 the scope of business of the common carrier. 349.16 Subd. 5. [REGISTRATION REQUIREMENT.] Prior to making 349.17 delivery sales or shipping tobacco products in connection with 349.18 any sales, an out-of-state retailer must meet the requirements 349.19 of section 297F.031. 349.20 Subd. 6. [COLLECTION OF TAXES.] (a) Prior to shipping any 349.21 tobacco products to a purchaser in this state, the out-of-state 349.22 retailer shall comply with all requirements of chapter 297F and 349.23 shall ensure that all state excise taxes and fees that apply to 349.24 such tobacco products have been collected and paid to the state 349.25 and that all related state excise tax stamps or other indicators 349.26 of state excise tax payment have been properly affixed to those 349.27 tobacco products. 349.28 (b) In addition to any penalties under chapter 297F, a 349.29 distributor who fails to pay any tax due according to paragraph 349.30 (a) shall pay, in addition to any other penalty, a penalty of 50 349.31 percent of the tax due but unpaid. 349.32 Subd. 7. [APPLICATION OF STATE LAWS.] All state laws that 349.33 apply to in-state tobacco product retailers shall apply to 349.34 Internet and mail-order sellers that sell into this state. 349.35 Subd. 8. [FORFEITURE.] Any tobacco product sold or 349.36 attempted to be sold in a delivery sale that does not meet the 350.1 requirements of this section is deemed to be contraband and is 350.2 subject to forfeiture in the same manner as and in accordance 350.3 with the provisions of section 297F.21. 350.4 Subd. 9. [CIVIL PENALTIES.] A tobacco retailer or 350.5 distributor who violates this section or rules adopted under 350.6 this section is subject to the following fines: 350.7 (1) for the first violation, a fine of not more than 350.8 $1,000; and 350.9 (2) for the second and any subsequent violation, a fine of 350.10 not more than $5,000. 350.11 Subd. 10. [ENFORCEMENT.] The attorney general may bring an 350.12 action to enforce this section and may seek injunctive relief, 350.13 including a preliminary or final injunction, and fines, 350.14 penalties, and equitable relief and may seek to prevent or 350.15 restrain actions in violation of this section by any person or 350.16 any person controlling such person. In addition, a violation of 350.17 this section is a violation of the Unlawful Trade Practices Act, 350.18 sections 325D.09 to 325D.16. 350.19[EFFECTIVE DATE.] This section is effective the day 350.20 following final enactment. 350.21 Sec. 26. Minnesota Statutes 2004, section 366.011, is 350.22 amended to read: 350.23 366.011 [CHARGES FOR EMERGENCY SERVICES; COLLECTION.] 350.24 A town may impose a reasonable service charge for emergency 350.25 services, including fire, rescue, medical, and related services 350.26 provided by the town or contracted for by the town. If the 350.27 service charge remains unpaid 30 days after a notice of 350.28 delinquency is sent to the recipient of the service or the 350.29 recipient's representative or estate, the town or its contractor 350.30 on behalf of the town may use any lawful means allowed to a 350.31 private party for the collection of an unsecured delinquent 350.32 debt. The town may also use the authority of section 366.012 to 350.33 collect unpaid service charges of this kind from delinquent 350.34 recipients of services who are owners of taxable real property 350.35 in thetownstate. 350.36 The powers conferred by this section are in addition and 351.1 supplemental to the powers conferred by any other law for a town 351.2 to impose a service charge or assessment for a service provided 351.3 by the town or contracted for by the town. 351.4 Sec. 27. Minnesota Statutes 2004, section 366.012, is 351.5 amended to read: 351.6 366.012 [COLLECTION OF UNPAID SERVICE CHARGES.] 351.7 If a town is authorized to impose a service chargeon the351.8owner, lessee, or occupant of property, or any of them,for a 351.9 governmental service provided by the town, the town board may 351.10 certify to the county auditor of the county in which the 351.11 recipient of the services owns real property, on or before 351.12 October 15 for each year, any unpaid service charges which shall 351.13 then be collected together with property taxes levied against 351.14 the property. The county auditor shall remit to the town all 351.15 service charges collected by the auditor on behalf of the town. 351.16 A charge may be certified to the auditor only if, on or before 351.17 September 15, the town has given written notice to the property 351.18 owner of its intention to certify the charge to the auditor. 351.19 The service charges shall be subject to the same penalties, 351.20 interest, and other conditions provided for the collection of 351.21 property taxes. This section is in addition to other law 351.22 authorizing the collection of unpaid costs and service charges. 351.23 Sec. 28. [COMPACTS; RETALIATORY TAXES.] 351.24 The commissioner of revenue may enter into compact 351.25 agreements with other states for the purpose of eliminating 351.26 retaliatory insurance premiums tax provisions between this state 351.27 and other states. The commissioner shall report to the 351.28 chairpersons of the house and senate tax committees, on or 351.29 before February 1, 2006, on the actions the commissioner has 351.30 taken to enter into compact agreements with other states. 351.31 Sec. 29. [FLOOR STOCKS TAX.] 351.32 Subdivision 1. [CIGARETTES.] A floor stocks cigarette 351.33 sales tax is imposed on every person engaged in the business in 351.34 this state as a distributor, retailer, subjobber, vendor, 351.35 manufacturer, or manufacturer's representative of cigarettes, on 351.36 the stamped cigarettes and unaffixed stamps in the person's 352.1 possession or under the person's control at 12:01 a.m. on August 352.2 1, 2005. The tax is imposed at the rate of 21 cents per pack of 352.3 20 cigarettes. For packs of cigarettes with other than 20 352.4 cigarettes, the tax shall be adjusted proportionally. 352.5 Each distributor, by August 10, 2005, shall file a return 352.6 with the commissioner, in the form the commissioner prescribes, 352.7 showing the stamped cigarettes and unaffixed stamps on hand at 352.8 12:01 a.m. on August 1, 2005, and the amount of tax due on the 352.9 cigarettes and unaffixed stamps. The tax imposed by this 352.10 section is due and payable by September 7, 2005, and after that 352.11 date bears interest at the rate of one percent a month. 352.12 Each retailer, subjobber, vendor, manufacturer, or 352.13 manufacturer's representative, by August 10, 2005, shall file a 352.14 return with the commissioner, in the form the commissioner 352.15 prescribes, showing the cigarettes on hand at 12:01 a.m. on 352.16 August 1, 2005, and the amount of tax due on the cigarettes. 352.17 The tax imposed by this section is due and payable by September 352.18 7, 2005, and after that date bears interest at the rate of one 352.19 percent a month. 352.20 Subd. 2. [AUDIT AND ENFORCEMENT.] The tax imposed by this 352.21 section is subject to the audit, assessment, penalty, and 352.22 collection provisions applicable to the taxes imposed under 352.23 Minnesota Statutes, chapter 297F. The commissioner may require 352.24 a distributor to receive and maintain copies of floor stocks tax 352.25 returns filed by all persons requesting a credit for returned 352.26 cigarettes. 352.27 Subd. 3. [DEPOSIT OF PROCEEDS.] The revenue from the tax 352.28 imposed under this section shall be deposited by the 352.29 commissioner in the state treasury and credited to the general 352.30 fund. 352.31[EFFECTIVE DATE.] This section is effective August 1, 2005. 352.32 ARTICLE 13 352.33 DEPARTMENT OF REVENUE 352.34 INCOME, CORPORATE FRANCHISE, AND ESTATE TAXES - SF1683 352.35 Section 1. Minnesota Statutes 2004, section 289A.08, 352.36 subdivision 3, is amended to read: 353.1 Subd. 3. [CORPORATIONS.] A corporation that is subject to 353.2 the state's jurisdiction to tax under section 290.014, 353.3 subdivision 5, must file a return, except that a foreign 353.4 operating corporation as defined in section 290.01, subdivision 353.5 6b, is not required to file a return. The commissioner shall 353.6 adopt rules for the filing of one return on behalf of the 353.7 members of an affiliated group of corporations that are required 353.8 to file a combined report. All members of an affiliated group 353.9 that are required to file a combined report must file one return 353.10 on behalf of the members of the group under rules adopted by the 353.11 commissioner. If a corporation claims on a return that it has 353.12 paid tax in excess of the amount of taxes lawfully due, that 353.13 corporation may include on that return information necessary for 353.14 payment of the tax in excess of the amount lawfully due by 353.15 electronic means. 353.16[EFFECTIVE DATE.] This section is effective for returns 353.17 filed after December 31, 2005. 353.18 Sec. 2. Minnesota Statutes 2004, section 289A.08, 353.19 subdivision 7, is amended to read: 353.20 Subd. 7. [COMPOSITE INCOME TAX RETURNS FOR NONRESIDENT 353.21 PARTNERS, SHAREHOLDERS, AND BENEFICIARIES.] (a) The commissioner 353.22 may allow a partnership with nonresident partners to file a 353.23 composite return and to pay the tax on behalf of nonresident 353.24 partners who have no other Minnesota source income. This 353.25 composite return must include the names, addresses, Social 353.26 Security numbers, income allocation, and tax liability for the 353.27 nonresident partners electing to be covered by the composite 353.28 return. 353.29 (b) The computation of a partner's tax liability must be 353.30 determined by multiplying the income allocated to that partner 353.31 by the highest rate used to determine the tax liability for 353.32 individuals under section 290.06, subdivision 2c. Nonbusiness 353.33 deductions, standard deductions, or personal exemptions are not 353.34 allowed. 353.35 (c) The partnership must submit a request to use this 353.36 composite return filing method for nonresident partners. The 354.1 requesting partnership must file a composite return in the form 354.2 prescribed by the commissioner of revenue. The filing of a 354.3 composite return is considered a request to use the composite 354.4 return filing method. 354.5 (d) The electing partner must not have any Minnesota source 354.6 income other than the income from the partnership and other 354.7 electing partnerships. If it is determined that the electing 354.8 partner has other Minnesota source income, the inclusion of the 354.9 income and tax liability for that partner under this provision 354.10 will not constitute a return to satisfy the requirements of 354.11 subdivision 1. The tax paid for the individual as part of the 354.12 composite return is allowed as a payment of the tax by the 354.13 individual on the date on which the composite return payment was 354.14 made. If the electing nonresident partner has no other 354.15 Minnesota source income, filing of the composite return is a 354.16 return for purposes of subdivision 1. 354.17 (e) This subdivision does not negate the requirement that 354.18 an individual pay estimated tax if the individual's liability 354.19 would exceed the requirements set forth in section 289A.25. A 354.20 composite estimate may, however, be filed in a manner similar to 354.21 and containing the information required under paragraph (a). 354.22 (f) If an electing partner's share of the partnership's 354.23 gross income from Minnesota sources is less than the filing 354.24 requirements for a nonresident under this subdivision, the tax 354.25 liability is zero. However, a statement showing the partner's 354.26 share of gross income must be included as part of the composite 354.27 return. 354.28 (g) The election provided in this subdivision isnotonly 354.29 available toanya partnerother thanwho has no other Minnesota 354.30 source income and who is either (1) a full-year nonresident 354.31 individualwho has no other Minnesota source incomeor (2) a 354.32 trust or estate that does not claim a deduction under either 354.33 section 651 or 661 of the Internal Revenue Code. 354.34 (h) A corporation defined in section 290.9725 and its 354.35 nonresident shareholders may make an election under this 354.36 paragraph. The provisions covering the partnership apply to the 355.1 corporation and the provisions applying to the partner apply to 355.2 the shareholder. 355.3 (i) Estates and trusts distributing current income only and 355.4 the nonresident individual beneficiaries of the estates or 355.5 trusts may make an election under this paragraph. The 355.6 provisions covering the partnership apply to the estate or 355.7 trust. The provisions applying to the partner apply to the 355.8 beneficiary. 355.9 (j) For the purposes of this subdivision, "income" means 355.10 the partner's share of federal adjusted gross income from the 355.11 partnership modified by the additions provided in section 355.12 290.01, subdivision 19a, clauses (6) and (7), and the 355.13 subtractions provided in section 290.01, subdivision 19b, clause 355.14 (11), to the extent the amount is assignable or allocable to 355.15 Minnesota under section 290.17. The subtraction allowed under 355.16 section 290.01, subdivision 19b, clause (11), is only allowed on 355.17 the composite tax computation to the extent the electing partner 355.18 would have been allowed the subtraction. 355.19[EFFECTIVE DATE.] This section is effective for tax years 355.20 beginning after December 31, 2004. 355.21 Sec. 3. Minnesota Statutes 2004, section 289A.18, 355.22 subdivision 1, is amended to read: 355.23 Subdivision 1. [INDIVIDUAL INCOME, FIDUCIARY INCOME, 355.24 CORPORATE FRANCHISE, AND ENTERTAINMENT TAXES; PARTNERSHIP AND S 355.25 CORPORATION RETURNS; INFORMATION RETURNS; MINING COMPANY 355.26 RETURNS.] The returns required to be made under sections 289A.08 355.27 and 289A.12 must be filed at the following times: 355.28 (1) returns made on the basis of the calendar year must be 355.29 filed on April 15 following the close of the calendar year, 355.30 except that returns of corporations must be filed on March 15 355.31 following the close of the calendar year; 355.32 (2) returns made on the basis of the fiscal year must be 355.33 filed on the 15th day of the fourth month following the close of 355.34 the fiscal year, except that returns of corporations must be 355.35 filed on the 15th day of the third month following the close of 355.36 the fiscal year; 356.1 (3) returns for a fractional part of a year must be filed 356.2 on the 15th day of the fourth month following the end of the 356.3 month in which falls the last day of the period for which the 356.4 return is made, except that the returns of corporations must be 356.5 filed on the 15th day of the third month following the end of 356.6 themonthtax year of the unitary group in which falls the last 356.7 day of the period for which the return is made; 356.8 (4) in the case of a final return of a decedent for a 356.9 fractional part of a year, the return must be filed on the 15th 356.10 day of the fourth month following the close of the 12-month 356.11 period that began with the first day of that fractional part of 356.12 a year; 356.13 (5) in the case of the return of a cooperative association, 356.14 returns must be filed on or before the 15th day of the ninth 356.15 month following the close of the taxable year; 356.16 (6) if a corporation has been divested from a unitary group 356.17 and files a return for a fractional part of a year in which it 356.18 was a member of a unitary business that files a combined report 356.19 under section 290.34, subdivision 2, the divested corporation's 356.20 return must be filed on the 15th day of the third month 356.21 following the close of the common accounting period that 356.22 includes the fractional year; 356.23 (7) returns of entertainment entities must be filed on 356.24 April 15 following the close of the calendar year; 356.25 (8) returns required to be filed under section 289A.08, 356.26 subdivision 4, must be filed on the 15th day of the fifth month 356.27 following the close of the taxable year; 356.28 (9) returns of mining companies must be filed on May 1 356.29 following the close of the calendar year; and 356.30 (10) returns required to be filed with the commissioner 356.31 under section 289A.12, subdivision 2, 4 to 10, or 14, must be 356.32 filed within 30 days after being demanded by the commissioner. 356.33[EFFECTIVE DATE.] This section is effective for fractional 356.34 years closing after December 31, 2004. 356.35 Sec. 4. Minnesota Statutes 2004, section 289A.38, 356.36 subdivision 7, is amended to read: 357.1 Subd. 7. [FEDERAL TAX CHANGES.] If the amount of income, 357.2 items of tax preference, deductions, or credits for any year of 357.3 a taxpayer as reported to the Internal Revenue Service is 357.4 changed or corrected by the commissioner of Internal Revenue or 357.5 other officer of the United States or other competent authority, 357.6 or where a renegotiation of a contract or subcontract with the 357.7 United States results in a change in income, items of tax 357.8 preference, deductions, credits, or withholding tax, or, in the 357.9 case of estate tax, where there are adjustments to the taxable 357.10 estate resulting in a change to the credit for state death 357.11 taxes, the taxpayer shall report the change or correction or 357.12 renegotiation results in writing to the commissioner. The 357.13 report must be submitted within 180 days after the final 357.14 determination and must be in the form of either an amended 357.15 Minnesota estate, withholding tax, corporate franchise tax, or 357.16 income tax return conceding the accuracy of the federal 357.17 determination or a letter detailing how the federal 357.18 determination is incorrect or does not change the Minnesota 357.19 tax. An amended Minnesota income tax return must be accompanied 357.20 by an amended property tax refund return, if necessary. A 357.21 taxpayer filing an amended federal tax return must also file a 357.22 copy of the amended return with the commissioner of revenue 357.23 within 180 days after filing the amended return. 357.24[EFFECTIVE DATE.] This section is effective the day 357.25 following final enactment. 357.26 Sec. 5. Minnesota Statutes 2004, section 289A.50, 357.27 subdivision 1a, is amended to read: 357.28 Subd. 1a. [REFUND FORM.] On or before January 1, 2000, the 357.29 commissioner of revenue shall prepare and make available to 357.30 taxpayers a form for filing claims for refund of taxes paid in 357.31 excess of the amount due.If the commissioner fails to prepare357.32a form under this subdivision by January 1, 2000, any claims for357.33refund made after January 1, 2000, and up to ten days after the357.34form is made available to taxpayers are deemed to be made in357.35compliance with the requirement of the form.The commissioner 357.36 may request corporate franchise taxpayers claiming a refund of 358.1 corporate franchise taxes paid in excess of the amount lawfully 358.2 due to include on the claim for refund or amended return 358.3 information necessary for payment of the taxes paid in excess of 358.4 taxes lawfully due by electronic means. 358.5[EFFECTIVE DATE.] This section is effective for claims for 358.6 refund filed after December 31, 2005. 358.7 Sec. 6. Minnesota Statutes 2004, section 289A.60, 358.8 subdivision 6, is amended to read: 358.9 Subd. 6. [PENALTY FOR FALSE OR FRAUDULENT RETURN, 358.10 EVASION.] If a person files a false or fraudulent return, or 358.11 claim for refund or attempts in any manner to evade or defeat a 358.12 tax or payment of tax, there is imposed on the person a penalty 358.13 equal to the sum of (1) 50 percent of the tax, less amounts paid 358.14 by the person on the basis of the false or fraudulent return, 358.15 due for the period to which the return related and (2) 50 358.16 percent of the portion of any refund claimed that is 358.17 attributable to fraud. 358.18[EFFECTIVE DATE.] This section is effective for returns 358.19 filed after December 31, 2005. 358.20 Sec. 7. Minnesota Statutes 2004, section 289A.60, 358.21 subdivision 12, is amended to read: 358.22 Subd. 12. [PENALTIES RELATING TO PROPERTY TAX REFUNDS.] 358.23 (a)If the commissioner determines that a property tax refund358.24claim is or was excessive and was filed with fraudulent intent,358.25the claim must be disallowed in full. If the claim has been358.26paid, the amount disallowed may be recovered by assessment and358.27collection.358.28(b)If it is determined that a property tax refund claim is 358.29 excessive and was negligently prepared, ten percent of the 358.30 corrected claim must be disallowed. If the claim has been paid, 358.31 the amount disallowed must be recovered by assessment and 358.32 collection. 358.33(c)(b) An owner who without reasonable cause fails to give 358.34 a certificate of rent constituting property tax to a renter, as 358.35 required by section 290A.19, paragraph (a), is liable to the 358.36 commissioner for a penalty of $100 for each failure. 359.1(d)(c) If the owner or managing agent knowingly gives rent 359.2 certificates that report total rent constituting property taxes 359.3 in excess of the amount of actual rent constituting property 359.4 taxes paid on the rented part of a property, the owner or 359.5 managing agent is liable for a penalty equal to the greater of 359.6 (1) $100 or (2) 50 percent of the excess that is reported. An 359.7 overstatement of rent constituting property taxes is presumed to 359.8 be knowingly made if it exceeds by ten percent or more the 359.9 actual rent constituting property taxes. 359.10[EFFECTIVE DATE.] This section is effective for returns 359.11 filed after December 31, 2005. 359.12 Sec. 8. Minnesota Statutes 2004, section 290.01, 359.13 subdivision 19a, is amended to read: 359.14 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 359.15 individuals, estates, and trusts, there shall be added to 359.16 federal taxable income: 359.17 (1)(i) interest income on obligations of any state other 359.18 than Minnesota or a political or governmental subdivision, 359.19 municipality, or governmental agency or instrumentality of any 359.20 state other than Minnesota exempt from federal income taxes 359.21 under the Internal Revenue Code or any other federal statute; 359.22 and 359.23 (ii) exempt-interest dividends as defined in section 359.24 852(b)(5) of the Internal Revenue Code, except the portion of 359.25 the exempt-interest dividends derived from interest income on 359.26 obligations of the state of Minnesota or its political or 359.27 governmental subdivisions, municipalities, governmental agencies 359.28 or instrumentalities, but only if the portion of the 359.29 exempt-interest dividends from such Minnesota sources paid to 359.30 all shareholders represents 95 percent or more of the 359.31 exempt-interest dividends that are paid by the regulated 359.32 investment company as defined in section 851(a) of the Internal 359.33 Revenue Code, or the fund of the regulated investment company as 359.34 defined in section 851(g) of the Internal Revenue Code, making 359.35 the payment; and 359.36 (iii) for the purposes of items (i) and (ii), interest on 360.1 obligations of an Indian tribal government described in section 360.2 7871(c) of the Internal Revenue Code shall be treated as 360.3 interest income on obligations of the state in which the tribe 360.4 is located; 360.5 (2) the amount of income taxes paid or accrued within the 360.6 taxable year under this chapter andincomethe amount of taxes 360.7 based on net income paid to any other state or to any province 360.8 or territory of Canada, to the extent allowed as a deduction 360.9 under section 63(d) of the Internal Revenue Code, but the 360.10 addition may not be more than the amount by which the itemized 360.11 deductions as allowed under section 63(d) of the Internal 360.12 Revenue Code exceeds the amount of the standard deduction as 360.13 defined in section 63(c) of the Internal Revenue Code. For the 360.14 purpose of this paragraph, the disallowance of itemized 360.15 deductions under section 68 of the Internal Revenue Code of 360.16 1986, income tax is the last itemized deduction disallowed; 360.17 (3) the capital gain amount of a lump sum distribution to 360.18 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 360.19 Reform Act of 1986, Public Law 99-514, applies; 360.20 (4) the amount of income taxes paid or accrued within the 360.21 taxable year under this chapter andincometaxes based on net 360.22 income paid to any other state or any province or territory of 360.23 Canada, to the extent allowed as a deduction in determining 360.24 federal adjusted gross income. For the purpose of this 360.25 paragraph, income taxes do not include the taxes imposed by 360.26 sections 290.0922, subdivision 1, paragraph (b), 290.9727, 360.27 290.9728, and 290.9729; 360.28 (5) the amount of expense, interest, or taxes disallowed 360.29 pursuant to section 290.10 other than expenses or interest used 360.30 in computing net interest income for the subtraction allowed 360.31 under subdivision 19b, clause (1); 360.32 (6) the amount of a partner's pro rata share of net income 360.33 which does not flow through to the partner because the 360.34 partnership elected to pay the tax on the income under section 360.35 6242(a)(2) of the Internal Revenue Code; and 360.36 (7) 80 percent of the depreciation deduction allowed under 361.1 section 168(k) of the Internal Revenue Code. For purposes of 361.2 this clause, if the taxpayer has an activity that in the taxable 361.3 year generates a deduction for depreciation under section 168(k) 361.4 and the activity generates a loss for the taxable year that the 361.5 taxpayer is not allowed to claim for the taxable year, "the 361.6 depreciation allowed under section 168(k)" for the taxable year 361.7 is limited to excess of the depreciation claimed by the activity 361.8 under section 168(k) over the amount of the loss from the 361.9 activity that is not allowed in the taxable year. In succeeding 361.10 taxable years when the losses not allowed in the taxable year 361.11 are allowed, the depreciation under section 168(k) is allowed. 361.12[EFFECTIVE DATE.] This section is effective for tax years 361.13 beginning after December 31, 2004. 361.14 Sec. 9. Minnesota Statutes 2004, section 290.01, 361.15 subdivision 19b, is amended to read: 361.16 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 361.17 individuals, estates, and trusts, there shall be subtracted from 361.18 federal taxable income: 361.19 (1) net interest income on obligations of any authority, 361.20 commission, or instrumentality of the United States to the 361.21 extent includable in taxable income for federal income tax 361.22 purposes but exempt from state income tax under the laws of the 361.23 United States; 361.24 (2) if included in federal taxable income, the amount of 361.25 any overpayment of income tax to Minnesota or to any other 361.26 state, for any previous taxable year, whether the amount is 361.27 received as a refund or as a credit to another taxable year's 361.28 income tax liability; 361.29 (3) the amount paid to others, less the amount used to 361.30 claim the credit allowed under section 290.0674, not to exceed 361.31 $1,625 for each qualifying child in grades kindergarten to 6 and 361.32 $2,500 for each qualifying child in grades 7 to 12, for tuition, 361.33 textbooks, and transportation of each qualifying child in 361.34 attending an elementary or secondary school situated in 361.35 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 361.36 wherein a resident of this state may legally fulfill the state's 362.1 compulsory attendance laws, which is not operated for profit, 362.2 and which adheres to the provisions of the Civil Rights Act of 362.3 1964 and chapter 363A. For the purposes of this clause, 362.4 "tuition" includes fees or tuition as defined in section 362.5 290.0674, subdivision 1, clause (1). As used in this clause, 362.6 "textbooks" includes books and other instructional materials and 362.7 equipment purchased or leased for use in elementary and 362.8 secondary schools in teaching only those subjects legally and 362.9 commonly taught in public elementary and secondary schools in 362.10 this state. Equipment expenses qualifying for deduction 362.11 includes expenses as defined and limited in section 290.0674, 362.12 subdivision 1, clause (3). "Textbooks" does not include 362.13 instructional books and materials used in the teaching of 362.14 religious tenets, doctrines, or worship, the purpose of which is 362.15 to instill such tenets, doctrines, or worship, nor does it 362.16 include books or materials for, or transportation to, 362.17 extracurricular activities including sporting events, musical or 362.18 dramatic events, speech activities, driver's education, or 362.19 similar programs. For purposes of the subtraction provided by 362.20 this clause, "qualifying child" has the meaning given in section 362.21 32(c)(3) of the Internal Revenue Code; 362.22 (4) income as provided under section 290.0802; 362.23 (5) to the extent included in federal adjusted gross 362.24 income, income realized on disposition of property exempt from 362.25 tax under section 290.491; 362.26 (6)to the extent included in federal taxable income,362.27postservice benefits for youth community service under section362.28124D.42 for volunteer service under United States Code, title362.2942, sections 12601 to 12604;362.30(7)to the extent not deducted in determining federal 362.31 taxable income by an individual who does not itemize deductions 362.32 for federal income tax purposes for the taxable year, an amount 362.33 equal to 50 percent of the excess of charitable contributions 362.34 allowable as a deduction for the taxable year under section 362.35 170(a) of the Internal Revenue Code over $500; 362.36(8)(7) for taxable years beginning before January 1, 2008, 363.1 the amount of the federal small ethanol producer credit allowed 363.2 under section 40(a)(3) of the Internal Revenue Code which is 363.3 included in gross income under section 87 of the Internal 363.4 Revenue Code; 363.5(9)(8) for individuals who are allowed a federal foreign 363.6 tax credit for taxes that do not qualify for a credit under 363.7 section 290.06, subdivision 22, an amount equal to the carryover 363.8 of subnational foreign taxes for the taxable year, but not to 363.9 exceed the total subnational foreign taxes reported in claiming 363.10 the foreign tax credit. For purposes of this clause, "federal 363.11 foreign tax credit" means the credit allowed under section 27 of 363.12 the Internal Revenue Code, and "carryover of subnational foreign 363.13 taxes" equals the carryover allowed under section 904(c) of the 363.14 Internal Revenue Code minus national level foreign taxes to the 363.15 extent they exceed the federal foreign tax credit; 363.16(10)(9) in each of the five tax years immediately 363.17 following the tax year in which an addition is required under 363.18 subdivision 19a, clause (7), or 19c, clause (15), in the case of 363.19 a shareholder of a corporation that is an S corporation, an 363.20 amount equal to one-fifth of the delayed depreciation. For 363.21 purposes of this clause, "delayed depreciation" means the amount 363.22 of the addition made by the taxpayer under subdivision 19a, 363.23 clause (7), or subdivision 19c, clause (15), in the case of a 363.24 shareholder of an S corporation, minus the positive value of any 363.25 net operating loss under section 172 of the Internal Revenue 363.26 Code generated for the tax year of the addition. The resulting 363.27 delayed depreciation cannot be less than zero; and 363.28(11)(10) job opportunity building zone income as provided 363.29 under section 469.316. 363.30[EFFECTIVE DATE.] The amendment to clause (9) is effective 363.31 retroactively for tax years beginning after December 31, 2001. 363.32 The rest of this section is effective for the tax years 363.33 beginning after December 31, 2004. 363.34 Sec. 10. Minnesota Statutes 2004, section 290.01, 363.35 subdivision 19c, is amended to read: 363.36 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 364.1 INCOME.] For corporations, there shall be added to federal 364.2 taxable income: 364.3 (1) the amount of any deduction taken for federal income 364.4 tax purposes for income, excise, or franchise taxes based on net 364.5 income or related minimum taxes, including but not limited to 364.6 the tax imposed under section 290.0922, paid by the corporation 364.7 to Minnesota, another state, a political subdivision of another 364.8 state, the District of Columbia, or any foreign country or 364.9 possession of the United States; 364.10 (2) interest not subject to federal tax upon obligations 364.11 of: the United States, its possessions, its agencies, or its 364.12 instrumentalities; the state of Minnesota or any other state, 364.13 any of its political or governmental subdivisions, any of its 364.14 municipalities, or any of its governmental agencies or 364.15 instrumentalities; the District of Columbia; or Indian tribal 364.16 governments; 364.17 (3) exempt-interest dividends received as defined in 364.18 section 852(b)(5) of the Internal Revenue Code; 364.19 (4) the amount of any net operating loss deduction taken 364.20 for federal income tax purposes under section 172 or 832(c)(10) 364.21 of the Internal Revenue Code or operations loss deduction under 364.22 section 810 of the Internal Revenue Code; 364.23 (5) the amount of any special deductions taken for federal 364.24 income tax purposes under sections 241 to 247 of the Internal 364.25 Revenue Code; 364.26 (6) losses from the business of mining, as defined in 364.27 section 290.05, subdivision 1, clause (a), that are not subject 364.28 to Minnesota income tax; 364.29 (7) the amount of any capital losses deducted for federal 364.30 income tax purposes under sections 1211 and 1212 of the Internal 364.31 Revenue Code; 364.32 (8) the exempt foreign trade income of a foreign sales 364.33 corporation under sections 921(a) and 291 of the Internal 364.34 Revenue Code; 364.35 (9) the amount of percentage depletion deducted under 364.36 sections 611 through 614 and 291 of the Internal Revenue Code; 365.1 (10) for certified pollution control facilities placed in 365.2 service in a taxable year beginning before December 31, 1986, 365.3 and for which amortization deductions were elected under section 365.4 169 of the Internal Revenue Code of 1954, as amended through 365.5 December 31, 1985, the amount of the amortization deduction 365.6 allowed in computing federal taxable income for those 365.7 facilities; 365.8 (11) the amount of any deemed dividend from a foreign 365.9 operating corporation determined pursuant to section 290.17, 365.10 subdivision 4, paragraph (g); 365.11 (12)the amount of any environmental tax paid under section365.1259(a) of the Internal Revenue Code;365.13(13)the amount of a partner's pro rata share of net income 365.14 which does not flow through to the partner because the 365.15 partnership elected to pay the tax on the income under section 365.16 6242(a)(2) of the Internal Revenue Code; 365.17(14)(13) the amount of net income excluded under section 365.18 114 of the Internal Revenue Code; 365.19(15)(14) any increase in subpart F income, as defined in 365.20 section 952(a) of the Internal Revenue Code, for the taxable 365.21 year when subpart F income is calculated without regard to the 365.22 provisions of section 614 of Public Law 107-147; and 365.23(16)(15) 80 percent of the depreciation deduction allowed 365.24 under section 168(k)(1)(A) and (k)(4)(A) of the Internal Revenue 365.25 Code. For purposes of this clause, if the taxpayer has an 365.26 activity that in the taxable year generates a deduction for 365.27 depreciation under section 168(k)(1)(A) and (k)(4)(A) and the 365.28 activity generates a loss for the taxable year that the taxpayer 365.29 is not allowed to claim for the taxable year, "the depreciation 365.30 allowed under section 168(k)(1)(A) and (k)(4)(A)" for the 365.31 taxable year is limited to excess of the depreciation claimed by 365.32 the activity under section 168(k)(1)(A) and (k)(4)(A) over the 365.33 amount of the loss from the activity that is not allowed in the 365.34 taxable year. In succeeding taxable years when the losses not 365.35 allowed in the taxable year are allowed, the depreciation under 365.36 section 168(k)(1)(A) and (k)(4)(A) is allowed. 366.1[EFFECTIVE DATE.] This section is effective the day 366.2 following final enactment. 366.3 Sec. 11. Minnesota Statutes 2004, section 290.06, 366.4 subdivision 22, is amended to read: 366.5 Subd. 22. [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 366.6 taxpayer who is liable for taxes based onor measured bynet 366.7 income to another state, as provided in paragraphs (b) through 366.8 (f), upon income allocated or apportioned to Minnesota, is 366.9 entitled to a credit for the tax paid to another state if the 366.10 tax is actually paid in the taxable year or a subsequent taxable 366.11 year. A taxpayer who is a resident of this state pursuant to 366.12 section 290.01, subdivision 7,clause (2)paragraph (b), and who 366.13 is subject to income tax as a resident in the state of the 366.14 individual's domicile is not allowed this credit unless the 366.15 state of domicile does not allow a similar credit. 366.16 (b) For an individual, estate, or trust, the credit is 366.17 determined by multiplying the tax payable under this chapter by 366.18 the ratio derived by dividing the income subject to tax in the 366.19 other state that is also subject to tax in Minnesota while a 366.20 resident of Minnesota by the taxpayer's federal adjusted gross 366.21 income, as defined in section 62 of the Internal Revenue Code, 366.22 modified by the addition required by section 290.01, subdivision 366.23 19a, clause (1), and the subtraction allowed by section 290.01, 366.24 subdivision 19b, clause (1), to the extent the income is 366.25 allocated or assigned to Minnesota under sections 290.081 and 366.26 290.17. 366.27 (c) If the taxpayer is an athletic team that apportions all 366.28 of its income under section 290.17, subdivision 5, the credit is 366.29 determined by multiplying the tax payable under this chapter by 366.30 the ratio derived from dividing the total net income subject to 366.31 tax in the other state by the taxpayer's Minnesota taxable 366.32 income. 366.33 (d) The credit determined under paragraph (b) or (c) shall 366.34 not exceed the amount of tax so paid to the other state on the 366.35 gross income earned within the other state subject to tax under 366.36 this chapter, nor shall the allowance of the credit reduce the 367.1 taxes paid under this chapter to an amount less than what would 367.2 be assessed if such income amount was excluded from taxable net 367.3 income. 367.4 (e) In the case of the tax assessed on a lump sum 367.5 distribution under section 290.032, the credit allowed under 367.6 paragraph (a) is the tax assessed by the other state on the lump 367.7 sum distribution that is also subject to tax under section 367.8 290.032, and shall not exceed the tax assessed under section 367.9 290.032. To the extent the total lump sum distribution defined 367.10 in section 290.032, subdivision 1, includes lump sum 367.11 distributions received in prior years or is all or in part an 367.12 annuity contract, the reduction to the tax on the lump sum 367.13 distribution allowed under section 290.032, subdivision 2, 367.14 includes tax paid to another state that is properly apportioned 367.15 to that distribution. 367.16 (f) If a Minnesota resident reported an item of income to 367.17 Minnesota and is assessed tax in such other state on that same 367.18 income after the Minnesota statute of limitations has expired, 367.19 the taxpayer shall receive a credit for that year under 367.20 paragraph (a), notwithstanding any statute of limitations to the 367.21 contrary. The claim for the credit must be submitted within one 367.22 year from the date the taxes were paid to the other state. The 367.23 taxpayer must submit sufficient proof to show entitlement to a 367.24 credit. 367.25 (g) For the purposes of this subdivision, a resident 367.26 shareholder of a corporation treated as an "S" corporation under 367.27 section 290.9725, must be considered to have paid a tax imposed 367.28 on the shareholder in an amount equal to the shareholder's pro 367.29 rata share of any net income tax paid by the S corporation to 367.30 another state. For the purposes of the preceding sentence, the 367.31 term "net income tax" means any tax imposed on or measured by a 367.32 corporation's net income. 367.33 (h) For the purposes of this subdivision, a resident 367.34 partner of an entity taxed as a partnership under the Internal 367.35 Revenue Code must be considered to have paid a tax imposed on 367.36 the partner in an amount equal to the partner's pro rata share 368.1 of any net income tax paid by the partnership to another state. 368.2 For purposes of the preceding sentence, the term "net income" 368.3 tax means any tax imposed on or measured by a partnership's net 368.4 income. 368.5 (i) For the purposes of this subdivision, "another state": 368.6 (1) includes: 368.7 (i) the District of Columbia; and 368.8 (ii) a province or territory of Canada; but 368.9 (2) excludes Puerto Rico and the several territories 368.10 organized by Congress. 368.11 (j) The limitations on the credit in paragraphs (b), (c), 368.12 and (d), are imposed on a state by state basis. 368.13 (k) For a tax imposed by a province or territory of Canada, 368.14 the tax for purposes of this subdivision is the excess of the 368.15 tax over the amount of the foreign tax credit allowed under 368.16 section 27 of the Internal Revenue Code. In determining the 368.17 amount of the foreign tax credit allowed, the net income taxes 368.18 imposed by Canada on the income are deducted first. Any 368.19 remaining amount of the allowable foreign tax credit reduces the 368.20 provincial or territorial tax that qualifies for the credit 368.21 under this subdivision. 368.22[EFFECTIVE DATE.] This section is effective for tax years 368.23 beginning after December 31, 2004. 368.24 Sec. 12. Minnesota Statutes 2004, section 290.0674, 368.25 subdivision 1, is amended to read: 368.26 Subdivision 1. [CREDIT ALLOWED.] An individual is allowed 368.27 a credit against the tax imposed by this chapter in an amount 368.28 equal to 75 percent of the amount paid for education-related 368.29 expenses for a qualifying child in kindergarten through grade 368.30 12. For purposes of this section, "education-related expenses" 368.31 means: 368.32 (1) fees or tuition for instruction by an instructor under 368.33 section 120A.22, subdivision 10, clause (1), (2), (3), (4), or 368.34 (5), or a member of the Minnesota Music Teachers Association, 368.35 and who is not a lineal ancestor or sibling of the dependent for 368.36 instruction outside the regular school day or school year, 369.1 including tutoring, driver's education offered as part of school 369.2 curriculum, regardless of whether it is taken from a public or 369.3 private entity or summer camps, in grade or age appropriate 369.4 curricula that supplement curricula and instruction available 369.5 during the regular school year, that assists a dependent to 369.6 improve knowledge of core curriculum areas or to expand 369.7 knowledge and skills under thegraduation rule under section369.8120B.02, paragraph (e), clauses (1) to (7), (9), and (10)369.9 required academic standards under section 120B.021, subdivision 369.10 1, and the elective standard under section 120B.022, subdivision 369.11 1, clause (2), and that do not include the teaching of religious 369.12 tenets, doctrines, or worship, the purpose of which is to 369.13 instill such tenets, doctrines, or worship; 369.14 (2) expenses for textbooks, including books and other 369.15 instructional materials and equipment purchased or leased for 369.16 use in elementary and secondary schools in teaching only those 369.17 subjects legally and commonly taught in public elementary and 369.18 secondary schools in this state. "Textbooks" does not include 369.19 instructional books and materials used in the teaching of 369.20 religious tenets, doctrines, or worship, the purpose of which is 369.21 to instill such tenets, doctrines, or worship, nor does it 369.22 include books or materials for extracurricular activities 369.23 including sporting events, musical or dramatic events, speech 369.24 activities, driver's education, or similar programs; 369.25 (3) a maximum expense of $200 per family for personal 369.26 computer hardware, excluding single purpose processors, and 369.27 educational software that assists a dependent to improve 369.28 knowledge of core curriculum areas or to expand knowledge and 369.29 skills under thegraduation rule under section 120B.02required 369.30 academic standards under section 120B.021, subdivision 1, and 369.31 the elective standard under section 120B.022, subdivision 1, 369.32 clause (2), purchased for use in the taxpayer's home and not 369.33 used in a trade or business regardless of whether the computer 369.34 is required by the dependent's school; and 369.35 (4) the amount paid to others for transportation of a 369.36 qualifying child attending an elementary or secondary school 370.1 situated in Minnesota, North Dakota, South Dakota, Iowa, or 370.2 Wisconsin, wherein a resident of this state may legally fulfill 370.3 the state's compulsory attendance laws, which is not operated 370.4 for profit, and which adheres to the provisions of the Civil 370.5 Rights Act of 1964 and chapter 363A. 370.6 For purposes of this section, "qualifying child" has the 370.7 meaning given in section 32(c)(3) of the Internal Revenue Code. 370.8[EFFECTIVE DATE.] This section is effective for tax years 370.9 beginning after December 31, 2004. 370.10 Sec. 13. Minnesota Statutes 2004, section 290.0922, 370.11 subdivision 2, is amended to read: 370.12 Subd. 2. [EXEMPTIONS.] The following entities are exempt 370.13 from the tax imposed by this section: 370.14 (1) corporations exempt from tax under section 290.05; 370.15 (2) real estate investment trusts; 370.16 (3) regulated investment companies or a fund thereof; and 370.17 (4) entities having a valid election in effect under 370.18 section 860D(b) of the Internal Revenue Code; 370.19 (5) town and farmers' mutual insurance companies; 370.20 (6) cooperatives organized under chapter 308A or 308B that 370.21 provide housing exclusively to persons age 55 and over and are 370.22 classified as homesteads under section 273.124, subdivision 3; 370.23 and 370.24 (7) an entity, if for the taxable year all of its property 370.25 is located in a job opportunity building zone designated under 370.26 section 469.314 and all of its payroll is a job opportunity 370.27 building zone payroll under section 469.310. 370.28 Entities not specifically exempted by this subdivision are 370.29 subject to tax under this section, notwithstanding section 370.30 290.05. 370.31[EFFECTIVE DATE.] This section is effective for tax years 370.32 beginning after December 31, 2004. 370.33 Sec. 14. Minnesota Statutes 2004, section 291.005, 370.34 subdivision 1, is amended to read: 370.35 Subdivision 1. [SCOPE.] Unless the context otherwise 370.36 clearly requires, the following terms used in this chapter shall 371.1 have the following meanings: 371.2 (1) "Federal gross estate" means the gross estate of a 371.3 decedent as valued and otherwise determined for federal estate 371.4 tax purposes by federal taxing authorities pursuant to the 371.5 provisions of the Internal Revenue Code. 371.6 (2) "Minnesota gross estate" means the federal gross estate 371.7 of a decedent after (a) excluding therefrom any property 371.8 included therein which has its situs outside Minnesota, and (b) 371.9 including therein any property omitted from the federal gross 371.10 estate which is includable therein, has its situs in Minnesota, 371.11 and was not disclosed to federal taxing authorities. 371.12 (3) "Personal representative" means the executor, 371.13 administrator or other person appointed by the court to 371.14 administer and dispose of the property of the decedent. If 371.15 there is no executor, administrator or other person appointed, 371.16 qualified, and acting within this state, then any person in 371.17 actual or constructive possession of any property having a situs 371.18 in this state which is included in the federal gross estate of 371.19 the decedent shall be deemed to be a personal representative to 371.20 the extent of the property and the Minnesota estate tax due with 371.21 respect to the property. 371.22 (4) "Resident decedent" means an individual whose domicile 371.23 at the time of death was in Minnesota. 371.24 (5) "Nonresident decedent" means an individual whose 371.25 domicile at the time of death was not in Minnesota. 371.26 (6) "Situs of property" means, with respect to real 371.27 property, the state or country in which it is located; with 371.28 respect to tangible personal property, the state or country in 371.29 which it was normally kept or located at the time of the 371.30 decedent's death; and with respect to intangible personal 371.31 property, the state or country in which the decedent was 371.32 domiciled at death. 371.33 (7) "Commissioner" means the commissioner of revenue or any 371.34 person to whom the commissioner has delegated functions under 371.35 this chapter. 371.36 (8) "Internal Revenue Code" means the United States 372.1 Internal Revenue Code of 1986, as amended through December 31, 372.220022004. 372.3 (9) "Minnesota adjusted taxable estate" means federal 372.4 adjusted taxable estate as defined by section 2011(b)(3) of the 372.5 Internal Revenue Code, increased by the amount of deduction for 372.6 state death taxes allowed under section 2058 of the Internal 372.7 Revenue Code. 372.8[EFFECTIVE DATE.] This section is effective for estates of 372.9 decedents dying after December 31, 2004. 372.10 Sec. 15. Minnesota Statutes 2004, section 291.03, 372.11 subdivision 1, is amended to read: 372.12 Subdivision 1. [TAX AMOUNT.] The tax imposed shall be an 372.13 amount equal to the proportion of the maximum credit for state 372.14 death taxes computed under section 2011 of the Internal Revenue 372.15 Code, as amended through December 31, 2000,for state death372.16taxesbut using Minnesota adjusted taxable estate instead of 372.17 federal adjusted taxable estate, as the Minnesota gross estate 372.18 bears to the value of the federal gross estate. The tax 372.19 determined under this paragraph shall not be greater than the 372.20federal estate taxamount computed by applying the rates and 372.21 brackets under section 2001(c) of the Internal Revenue Code 372.22after the allowance ofto the Minnesota adjusted gross estate 372.23 and subtracting the federalcreditscredit allowed under section 372.24 2010 of the Internal Revenue Code of 1986, as amended through 372.25 December 31, 2000. For the purposes of this section, expenses 372.26 which are deducted for federal income tax purposes under section 372.27 642(g) of the Internal Revenue Code as amended through December 372.28 31, 2002, are not allowable in computing the tax under this 372.29 chapter. 372.30[EFFECTIVE DATE.] This section is effective for estates of 372.31 decedents dying after December 31, 2004. 372.32 Sec. 16. [REPEALER.] 372.33 Minnesota Rules, parts 8093.2000 and 8093.3000, are 372.34 repealed effective the day following final enactment. 372.35 ARTICLE 14 372.36 DEPARTMENT OF REVENUE 373.1 PROPERTY TAXES - SF1683 373.2 Section 1. Minnesota Statutes 2004, section 4A.02, is 373.3 amended to read: 373.4 4A.02 [STATE DEMOGRAPHER.] 373.5 (a) The director shall appoint a state demographer. The 373.6 demographer must be professionally competent in demography and 373.7 must possess demonstrated ability based upon past performance. 373.8 (b) The demographer shall: 373.9 (1) continuously gather and develop demographic data 373.10 relevant to the state; 373.11 (2) design and test methods of research and data 373.12 collection; 373.13 (3) periodically prepare population projections for the 373.14 state and designated regions and periodically prepare 373.15 projections for each county or other political subdivision of 373.16 the state as necessary to carry out the purposes of this 373.17 section; 373.18 (4) review, comment on, and prepare analysis of population 373.19 estimates and projections made by state agencies, political 373.20 subdivisions, other states, federal agencies, or nongovernmental 373.21 persons, institutions, or commissions; 373.22 (5) serve as the state liaison with the United States 373.23 Bureau of the Census, coordinate state and federal demographic 373.24 activities to the fullest extent possible, and aid the 373.25 legislature in preparing a census data plan and form for each 373.26 decennial census; 373.27 (6) compile an annual study of population estimates on the 373.28 basis of county, regional, or other political or geographical 373.29 subdivisions as necessary to carry out the purposes of this 373.30 section and section 4A.03; 373.31 (7) by January 1 of each year, issue a report to the 373.32 legislature containing an analysis of the demographic 373.33 implications of the annual population study and population 373.34 projections; 373.35 (8) prepare maps for all counties in the state, all 373.36 municipalities with a population of 10,000 or more, and other 374.1 municipalities as needed for census purposes, according to scale 374.2 and detail recommended by the United States Bureau of the 374.3 Census, with the maps of cities showing precinct boundaries; 374.4 (9) prepare an estimate of population and of the number of 374.5 households for each governmental subdivision for which the 374.6 Metropolitan Council does not prepare an annual estimate, and an 374.7 estimate of population over age 65 for each county for which the 374.8 Metropolitan Council does not prepare an annual estimate, and 374.9 convey the estimates to the governing body of each political 374.10 subdivision byMayJune 1 of each year; 374.11 (10) direct, under section 414.01, subdivision 14, and 374.12 certify population and household estimates of annexed or 374.13 detached areas of municipalities or towns after being notified 374.14 of the order or letter of approval by the director; 374.15 (11) prepare, for any purpose for which a population 374.16 estimate is required by law or needed to implement a law, a 374.17 population estimate of a municipality or town whose population 374.18 is affected by action under section 379.02 or 414.01, 374.19 subdivision 14; and 374.20 (12) prepare an estimate of average household size for each 374.21 statutory or home rule charter city with a population of 2,500 374.22 or more for which the Metropolitan Council does not prepare an 374.23 annual estimate, and convey the estimate to the governing body 374.24 of each affected city byMayJune 1 of each year. 374.25 (c) A governing body may challenge an estimate made under 374.26 paragraph (b) by filing their specific objections in writing 374.27 with the state demographer by June1024. If the challenge does 374.28 not result in an acceptable estimateby June 24, the governing 374.29 body may have a special census conducted by the United States 374.30 Bureau of the Census. The political subdivision must notify the 374.31 state demographer by July 1 of its intent to have the special 374.32 census conducted. The political subdivision must bear all costs 374.33 of the special census. Results of the special census must be 374.34 received by the state demographer by the next April 15 to be 374.35 used in that year'sMayJune 1 estimate to the political 374.36 subdivision under paragraph (b). 375.1 (d) The state demographer shall certify the estimates of 375.2 population and household size to the commissioner of revenue by 375.3 July 15 each year, including any estimates still under objection. 375.4[EFFECTIVE DATE.] This section is effective the day 375.5 following final enactment. 375.6 Sec. 2. Minnesota Statutes 2004, section 168A.05, 375.7 subdivision 1a, is amended to read: 375.8 Subd. 1a. [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 375.9 PAYMENT.] In the case of a manufactured home as defined in 375.10 section 327.31, subdivision 6, the department shall not issue a 375.11 certificate of title unless the application under section 375.12 168A.04 is accompanied with a statement from the county auditor 375.13 or county treasurer where the manufactured home is presently 375.14 located, stating that all manufactured home personal property 375.15 taxes levied on the unit in the name of the current owner at the 375.16 time of transfer have been paid. For this purpose, manufactured 375.17 home personal property taxes are treated as levied on January 1 375.18 of the payable year. 375.19[EFFECTIVE DATE.] This section is effective the day 375.20 following final enactment. 375.21 Sec. 3. Minnesota Statutes 2004, section 270.11, 375.22 subdivision 2, is amended to read: 375.23 Subd. 2. [COUNTY ASSESSOR'S REPORTS OF ASSESSMENT FILED 375.24 WITH COMMISSIONER.] Each county assessor shall file by April 1 375.25 with the commissioner of revenue a copy of the abstract that 375.26 will be acted upon by the local and county boards of review. 375.27 The abstract must list the real and personal property in the 375.28 county itemized by assessment districts. The assessor of each 375.29 county in the state shall file with the commissioner, within ten 375.30 working days following final action of the local board of review 375.31 or equalization and within five days following final action of 375.32 the county board of equalization, any changes made by the local 375.33 or county board. The information must be filed in the manner 375.34 prescribed by the commissioner. It must be accompanied by a 375.35 printed or typewritten copy of the proceedings of the 375.36 appropriate board. 376.1 The final abstract of assessments after adjustments by the 376.2 State Board of Equalization and inclusion of any omitted 376.3 property shall be submitted to the commissioner of revenue on or 376.4 before September 1 of each calendar year. The final abstract 376.5 must separately report the captured tax capacity of tax 376.6 increment financing districts under section 469.177, subdivision 376.7 2, themetropolitan revenueareawide net tax capacity 376.8 contributionvaluevalues determined undersectionsections 376.9 276A.05, subdivision 1, and 473F.07, subdivision 1, and the 376.10 value subject to the power line credit under section 273.42. 376.11[EFFECTIVE DATE.] This section is effective the day 376.12 following final enactment. 376.13 Sec. 4. Minnesota Statutes 2004, section 270.16, 376.14 subdivision 2, is amended to read: 376.15 Subd. 2. [FAILURE TO APPRAISE.] When an assessor has 376.16 failed to properly appraise at leastone-quarterone-fifth of 376.17 the parcels of property in a district or county as provided in 376.18 section 273.01, the commissioner of revenue shall appoint a 376.19 special assessor and deputy assessor as necessary and cause a 376.20 reappraisal to be made of the property due for reassessment in 376.21 accordance with law. 376.22[EFFECTIVE DATE.] This section is effective the day 376.23 following final enactment. 376.24 Sec. 5. Minnesota Statutes 2004, section 272.01, 376.25 subdivision 2, is amended to read: 376.26 Subd. 2. [EXEMPT PROPERTY USED BY PRIVATE ENTITY FOR 376.27 PROFIT.] (a) When any real or personal property which is exempt 376.28 from ad valorem taxes, and taxes in lieu thereof, is leased, 376.29 loaned, or otherwise made available and used by a private 376.30 individual, association, or corporation in connection with a 376.31 business conducted for profit, there shall be imposed a tax, for 376.32 the privilege of so using or possessing such real or personal 376.33 property, in the same amount and to the same extent as though 376.34 the lessee or user was the owner of such property. 376.35 (b) The tax imposed by this subdivision shall not apply to: 376.36 (1) property leased or used as a concession in or relative 377.1 to the use in whole or part of a public park, market, 377.2 fairgrounds, port authority, economic development authority 377.3 established under chapter 469, municipal auditorium, municipal 377.4 parking facility, municipal museum, or municipal stadium; 377.5 (2) property of an airport owned by a city, town, county, 377.6 or group thereof which is: 377.7 (i) leased to or used by any person or entity including a 377.8 fixed base operator; and 377.9 (ii) used as a hangar for the storage or repair of aircraft 377.10 or to provide aviation goods, services, or facilities to the 377.11 airport or general public; 377.12 the exception from taxation provided in this clause does not 377.13 apply to: 377.14 (i) property located at an airport owned or operated by the 377.15 Metropolitan Airports Commission or by a city of over 50,000 377.16 population according to the most recent federal census or such a 377.17 city's airport authority; 377.18 (ii) hangars leased by a private individual, association, 377.19 or corporation in connection with a business conducted for 377.20 profit other than an aviation-related business; or 377.21 (iii) facilities leased by a private individual, 377.22 association, or corporation in connection with a business for 377.23 profit, that consists of a major jet engine repair facility 377.24 financed, in whole or part, with the proceeds of state bonds and 377.25 located in a tax increment financing district; 377.26 (3) property constituting or used as a public pedestrian 377.27 ramp or concourse in connection with a public airport;or377.28 (4) property constituting or used as a passenger check-in 377.29 area or ticket sale counter, boarding area, or luggage claim 377.30 area in connection with a public airport but not the airports 377.31 owned or operated by the Metropolitan Airports Commission or 377.32 cities of over 50,000 population or an airport authority 377.33 therein. Real estate owned by a municipality in connection with 377.34 the operation of a public airport and leased or used for 377.35 agricultural purposes is not exempt; 377.36 (5) property leased, loaned, or otherwise made available to 378.1 a private individual, corporation, or association under a 378.2 cooperative farming agreement made pursuant to section 97A.135; 378.3 or 378.4 (6) property leased, loaned, or otherwise made available to 378.5 a private individual, corporation, or association under section 378.6 272.68, subdivision 4. 378.7 (c) Taxes imposed by this subdivision are payable as in the 378.8 case of personal property taxes and shall be assessed to the 378.9 lessees or users of real or personal property in the same manner 378.10 as taxes assessed to owners of real or personal property, except 378.11 that such taxes shall not become a lien against the property. 378.12 When due, the taxes shall constitute a debt due from the lessee 378.13 or user to the state, township, city, county, and school 378.14 district for which the taxes were assessed and shall be 378.15 collected in the same manner as personal property taxes. If 378.16 property subject to the tax imposed by this subdivision is 378.17 leased or used jointly by two or more persons, each lessee or 378.18 user shall be jointly and severally liable for payment of the 378.19 tax. 378.20 (d) The tax on real property of the state or any of its 378.21 political subdivisions that is leased by a private individual, 378.22 association, or corporation and becomes taxable under this 378.23 subdivision or other provision of law must be assessed and 378.24 collected as a personal property assessment. The taxes do not 378.25 become a lien against the real property. 378.26[EFFECTIVE DATE.] This section is effective the day 378.27 following final enactment. 378.28 Sec. 6. Minnesota Statutes 2004, section 272.02, 378.29 subdivision 1a, is amended to read: 378.30 Subd. 1a. [LIMITATIONS ON EXEMPTIONS.] The exemptions 378.31 granted by subdivision 1 are subject to the limits contained in 378.32 the other subdivisions of this section, section 272.025,or378.33273.13, subdivision 25, paragraph (c), clause (1) or (2), or378.34paragraph (d), clause (2)and all other provisions of applicable 378.35 law. 378.36[EFFECTIVE DATE.] This section is effective the day 379.1 following final enactment. 379.2 Sec. 7. Minnesota Statutes 2004, section 272.02, 379.3 subdivision 7, is amended to read: 379.4 Subd. 7. [INSTITUTIONS OF PUBLIC CHARITY.] Institutions of 379.5 purely public charity are exemptexcept parcels of property379.6containing structures and the structures described in section379.7273.13, subdivision 25, paragraph (e), other than those that379.8qualify for exemption under subdivision 26. In determining 379.9 whether rental housing property qualifies for exemption under 379.10 this subdivision, the following are not gifts or donations to 379.11 the owner of the rental housing: 379.12 (1) rent assistance provided by the government to or on 379.13 behalf of tenants, and 379.14 (2) financing assistance or tax credits provided by the 379.15 government to the owner on condition that specific units or a 379.16 specific quantity of units be set aside for persons or families 379.17 with certain income characteristics. 379.18 The items described in clauses (1) and (2) may, however, be 379.19 considered when making other determinations related to an 379.20 exemption under this subdivision, including, without limitation, 379.21 for the purpose of determining whether the recipient of housing 379.22 or housing services is required to pay in whole or in part for 379.23 the housing. 379.24[EFFECTIVE DATE.] This section is effective for taxes 379.25 payable in 2004 and thereafter. 379.26 Sec. 8. Minnesota Statutes 2004, section 272.02, is 379.27 amended by adding a subdivision to read: 379.28 Subd. 68. [PROPERTY SUBJECT TO TACONITE PRODUCTION TAX OR 379.29 NET PROCEEDS TAX.] (a) Real and personal property described in 379.30 section 298.25 is exempt to the extent the tax on taconite and 379.31 iron sulphides under section 298.24 is described in section 379.32 298.25 as being in lieu of other taxes on such property. This 379.33 exemption applies for taxes payable in each year that the tax 379.34 under section 298.24 is payable with respect to such property. 379.35 (b) Deposits of mineral, metal, or energy resources the 379.36 mining of which is subject to taxation under section 298.015 are 380.1 exempt. This exemption applies for taxes payable in each year 380.2 that the tax under section 298.015 is payable with respect to 380.3 such property. 380.4[EFFECTIVE DATE.] This section is effective the day 380.5 following final enactment. 380.6 Sec. 9. Minnesota Statutes 2004, section 272.02, is 380.7 amended by adding a subdivision to read: 380.8 Subd. 69. [RELIGIOUS CORPORATIONS.] Personal and real 380.9 property that a religious corporation, formed under section 380.10 317A.909, necessarily uses for a religious purpose is exempt to 380.11 the extent provided in section 317A.909, subdivision 3. 380.12[EFFECTIVE DATE.] This section is effective the day 380.13 following final enactment. 380.14 Sec. 10. Minnesota Statutes 2004, section 272.02, is 380.15 amended by adding a subdivision to read: 380.16 Subd. 70. [CHILDREN'S HOMES.] Personal and real property 380.17 owned by a corporation formed under section 317A.907 is exempt 380.18 to the extent provided in section 317A.907, subdivision 7. 380.19[EFFECTIVE DATE.] This section is effective the day 380.20 following final enactment. 380.21 Sec. 11. Minnesota Statutes 2004, section 272.02, is 380.22 amended by adding a subdivision to read: 380.23 Subd. 71. [HOUSING AND REDEVELOPMENT AUTHORITY AND TRIBAL 380.24 HOUSING AUTHORITY PROPERTY.] Property owned by a housing and 380.25 redevelopment authority described in chapter 469, or by a 380.26 designated housing authority described in section 469.040, 380.27 subdivision 5, is exempt to the extent provided in chapter 469. 380.28[EFFECTIVE DATE.] This section is effective the day 380.29 following final enactment. 380.30 Sec. 12. Minnesota Statutes 2004, section 272.02, is 380.31 amended by adding a subdivision to read: 380.32 Subd. 72. [PROPERTY OF HOUSING AND REDEVELOPMENT 380.33 AUTHORITIES.] Property of projects of housing and redevelopment 380.34 authorities are exempt to the extent permitted by sections 380.35 469.042, subdivision 1, and 469.043, subdivisions 2 and 5. 380.36[EFFECTIVE DATE.] This section is effective the day 381.1 following final enactment. 381.2 Sec. 13. Minnesota Statutes 2004, section 272.02, is 381.3 amended by adding a subdivision to read: 381.4 Subd. 73. [PROPERTY OF REGIONAL RAIL AUTHORITY.] Property 381.5 of a regional rail authority as defined in chapter 398A is 381.6 exempt to the extent permitted by section 398A.05. 381.7[EFFECTIVE DATE.] This section is effective the day 381.8 following final enactment. 381.9 Sec. 14. Minnesota Statutes 2004, section 272.02, is 381.10 amended by adding a subdivision to read: 381.11 Subd. 74. [SPIRIT MOUNTAIN RECREATION AREA 381.12 AUTHORITY.] Property owned by the Spirit Mountain Recreation 381.13 Area Authority is exempt from taxation to the extent provided in 381.14 Laws 1973, chapter 327, section 6. 381.15 Sec. 15. Minnesota Statutes 2004, section 272.02, is 381.16 amended by adding a subdivision to read: 381.17 Subd. 75. [INSTALLED CAPACITY DEFINED.] For purposes of 381.18 this section, the term "installed capacity" means generator 381.19 nameplate capacity. 381.20[EFFECTIVE DATE.] This section is effective the day 381.21 following final enactment. 381.22 Sec. 16. Minnesota Statutes 2004, section 272.029, 381.23 subdivision 4, is amended to read: 381.24 Subd. 4. [REPORTS.] (a) An owner of a wind energy 381.25 conversion system subject to tax under subdivision 3 shall file 381.26 a report with the commissioner of revenue annually on or before 381.27MarchFebruary 1 detailing the amount of electricity in 381.28 kilowatt-hours that was produced by the wind energy conversion 381.29 system for the previous calendar year. The commissioner shall 381.30 prescribe the form of the report. The report must contain the 381.31 information required by the commissioner to determine the tax 381.32 due to each county under this section for the current year. If 381.33 an owner of a wind energy conversion system subject to taxation 381.34 under this section fails to file the report by the due date, the 381.35 commissioner of revenue shall determine the tax based upon the 381.36 nameplate capacity of the system multiplied by a capacity factor 382.1 of 40 percent. 382.2 (b) On or beforeMarch 31February 28, the commissioner of 382.3 revenue shall notify the owner of the wind energy conversion 382.4 systems of the tax due to each county for the current year and 382.5 shall certify to the county auditor of each county in which the 382.6 systems are located the tax due from each owner for the current 382.7 year. 382.8[EFFECTIVE DATE.] This section is effective for reports and 382.9 certifications due in 2006 and thereafter. 382.10 Sec. 17. Minnesota Statutes 2004, section 272.029, 382.11 subdivision 6, is amended to read: 382.12 Subd. 6. [DISTRIBUTION OF REVENUES.] Revenues from the 382.13 taxes imposed under subdivision 5 must be part of the settlement 382.14 between the county treasurer and the county auditor under 382.15 section 276.09. The revenue must be distributed by the county 382.16 auditor or the county treasurer toalllocal taxing 382.17 jurisdictions in which the wind energy conversion system is 382.18 located,as follows: beginning with distributions in 2006, 80 382.19 percent to counties; 14 percent to cities and townships; and six 382.20 percent to school districts; and for distributions occurring in 382.21 2004 and 2005 in the same proportion that each of the local 382.22 taxing jurisdiction's current year's net tax capacity based tax 382.23 rate is to the current year's total local net tax capacity based 382.24 rate. 382.25[EFFECTIVE DATE.] This section is effective the day 382.26 following final enactment. 382.27 Sec. 18. Minnesota Statutes 2004, section 273.11, 382.28 subdivision 8, is amended to read: 382.29 Subd. 8. [LIMITED EQUITY COOPERATIVE APARTMENTS.] For the 382.30 purposes of this subdivision, the terms defined in this 382.31 subdivision have the meanings given them. 382.32 A "limited equity cooperative" is a corporation organized 382.33 under chapter 308A or 308B, which has as its primary purpose the 382.34 provision of housing and related services to its members which 382.35 meets one of the following criteria with respect to the income 382.36 of its members: (1) a minimum of 75 percent of members must 383.1 have incomes at or less than 90 percent of area median income, 383.2 (2) a minimum of 40 percent of members must have incomes at or 383.3 less than 60 percent of area median income, or (3) a minimum of 383.4 20 percent of members must have incomes at or less than 50 383.5 percent of area median income. For purposes of this clause, 383.6 "member income" shall mean the income of a member existing at 383.7 the time the member acquires cooperative membership, and median 383.8 income shall mean the St. Paul-Minneapolis metropolitan area 383.9 median income as determined by the United States Department of 383.10 Housing and Urban Development. It must also meet the following 383.11 requirements: 383.12 (a) The articles of incorporation set the sale price of 383.13 occupancy entitling cooperative shares or memberships at no more 383.14 than a transfer value determined as provided in the articles. 383.15 That value may not exceed the sum of the following: 383.16 (1) the consideration paid for the membership or shares by 383.17 the first occupant of the unit, as shown in the records of the 383.18 corporation; 383.19 (2) the fair market value, as shown in the records of the 383.20 corporation, of any improvements to the real property that were 383.21 installed at the sole expense of the member with the prior 383.22 approval of the board of directors; 383.23 (3) accumulated interest, or an inflation allowance not to 383.24 exceed the greater of a ten percent annual noncompounded 383.25 increase on the consideration paid for the membership or share 383.26 by the first occupant of the unit, or the amount that would have 383.27 been paid on that consideration if interest had been paid on it 383.28 at the rate of the percentage increase in the revised Consumer 383.29 Price Index for All Urban Consumers for the Minneapolis-St. Paul 383.30 metropolitan area prepared by the United States Department of 383.31 Labor, provided that the amount determined pursuant to this 383.32 clause may not exceed $500 for each year or fraction of a year 383.33 the membership or share was owned; plus 383.34 (4) real property capital contributions shown in the 383.35 records of the corporation to have been paid by the transferor 383.36 member and previous holders of the same membership, or of 384.1 separate memberships that had entitled occupancy to the unit of 384.2 the member involved. These contributions include contributions 384.3 to a corporate reserve account the use of which is restricted to 384.4 real property improvements or acquisitions, contributions to the 384.5 corporation which are used for real property improvements or 384.6 acquisitions, and the amount of principal amortized by the 384.7 corporation on its indebtedness due to the financing of real 384.8 property acquisition or improvement or the averaging of 384.9 principal paid by the corporation over the term of its real 384.10 property-related indebtedness. 384.11 (b) The articles of incorporation require that the board of 384.12 directors limit the purchase price of stock or membership 384.13 interests for new member-occupants or resident shareholders to 384.14 an amount which does not exceed the transfer value for the 384.15 membership or stock as defined in clause (a). 384.16 (c) The articles of incorporation require that the total 384.17 distribution out of capital to a member shall not exceed that 384.18 transfer value. 384.19 (d) The articles of incorporation require that upon 384.20 liquidation of the corporation any assets remaining after 384.21 retirement of corporate debts and distribution to members will 384.22 be conveyed to a charitable organization described in section 384.23 501(c)(3) of the Internal Revenue Code of 1986, as amended 384.24 through December 31, 1992, or a public agency. 384.25 A "limited equity cooperative apartment" is a dwelling unit 384.26 owned by a limited equity cooperative. 384.27 "Occupancy entitling cooperative share or membership" is 384.28 the ownership interest in a cooperative organization which 384.29 entitles the holder to an exclusive right to occupy a dwelling 384.30 unit owned or leased by the cooperative. 384.31 For purposes of taxation, the assessor shall value a unit 384.32 owned by a limited equity cooperative at the lesser of its 384.33 market value or the value determined by capitalizing the net 384.34 operating income of a comparable apartment operated on a rental 384.35 basis at the capitalization rate used in valuing comparable 384.36 buildings that are not limited equity cooperatives. If a 385.1 cooperative fails to operate in accordance with the provisions 385.2 of clauses (a) to (d), the property shall be subject to 385.3 additional property taxes in the amount of the difference 385.4 between the taxes determined in accordance with this subdivision 385.5 for the last ten years that the property had been assessed 385.6 pursuant to this subdivision and the amount that would have been 385.7 paid if the provisions of this subdivision had not applied to 385.8 it. The additional taxes, plus interest at the rate specified 385.9 in section 549.09, shall be extended against the property on the 385.10 tax list for the current year. 385.11[EFFECTIVE DATE.] This section is effective for taxes 385.12 payable in 2004 and thereafter. 385.13 Sec. 19. Minnesota Statutes 2004, section 273.124, 385.14 subdivision 3, is amended to read: 385.15 Subd. 3. [COOPERATIVES AND CHARITABLE CORPORATIONS; 385.16 HOMESTEAD AND OTHER PROPERTY.] (a) When property is owned by a 385.17 corporation or association organized under chapter 308A or 308B, 385.18 and each person who owns a share or shares in the corporation or 385.19 association is entitled to occupy a building on the property, or 385.20 a unit within a building on the property, the corporation or 385.21 association may claim homestead treatment for each dwelling, or 385.22 for each unit in the case of a building containing several 385.23 dwelling units, or for the part of the value of the building 385.24 occupied by a shareholder. Each building or unit must be 385.25 designated by legal description or number. The net tax capacity 385.26 of each building or unit that qualifies for assessment as a 385.27 homestead under this subdivision must include not more than 385.28 one-half acre of land, if platted, nor more than 80 acres if 385.29 unplatted. The net tax capacity of the property is the sum of 385.30 the net tax capacities of each of the respective buildings or 385.31 units comprising the property, including the net tax capacity of 385.32 each unit's or building's proportionate share of the land and 385.33 any common buildings. To qualify for the treatment provided by 385.34 this subdivision, the corporation or association must be wholly 385.35 owned by persons having a right to occupy a building or unit 385.36 owned by the corporation or association. A charitable 386.1 corporation organized under the laws of Minnesota and not 386.2 otherwise exempt thereunder with no outstanding stock qualifies 386.3 for homestead treatment with respect to member residents of the 386.4 dwelling units who have purchased and hold residential 386.5 participation warrants entitling them to occupy the units. 386.6 (b) To the extent provided in paragraph (a), a cooperative 386.7 or corporation organized under chapter 308A may obtain separate 386.8 assessment and valuation, and separate property tax statements 386.9 for each residential homestead, residential nonhomestead, or for 386.10 each seasonal residential recreational building or unit not used 386.11 for commercial purposes. The appropriate class rates under 386.12 section 273.13 shall be applicable as if each building or unit 386.13 were a separate tax parcel; provided, however, that the tax 386.14 parcel which exists at the time the cooperative or corporation 386.15 makes application under this subdivision shall be a single 386.16 parcel for purposes of property taxes or the enforcement and 386.17 collection thereof, other than as provided in paragraph (a) or 386.18 this paragraph. 386.19 (c) A member of a corporation or association may initially 386.20 obtain the separate assessment and valuation and separate 386.21 property tax statements, as provided in paragraph (b), by 386.22 applying to the assessor by June 30 of the assessment year. 386.23 (d) When a building, or dwelling units within a building, 386.24 no longer qualify under paragraph (a) or (b), the current owner 386.25 must notify the assessor within 30 days. Failure to notify the 386.26 assessor within 30 days shall result in the loss of benefits 386.27 under paragraph (a) or (b) for taxes payable in the year that 386.28 the failure is discovered. For these purposes, "benefits under 386.29 paragraph (a) or (b)" means the difference in the net tax 386.30 capacity of the building or units which no longer qualify as 386.31 computed under paragraph (a) or (b) and as computed under the 386.32 otherwise applicable law, times the local tax rate applicable to 386.33 the building for that taxes payable year. Upon discovery of a 386.34 failure to notify, the assessor shall inform the auditor of the 386.35 difference in net tax capacity for the building or buildings in 386.36 which units no longer qualify, and the auditor shall calculate 387.1 the benefits under paragraph (a) or (b). Such amount, plus a 387.2 penalty equal to 100 percent of that amount, shall then be 387.3 demanded of the building's owner. The property owner may appeal 387.4 the county's determination by serving copies of a petition for 387.5 review with county officials as provided in section 278.01 and 387.6 filing a proof of service as provided in section 278.01 with the 387.7 Minnesota Tax Court within 60 days of the date of the notice 387.8 from the county. The appeal shall be governed by the Tax Court 387.9 procedures provided in chapter 271, for cases relating to the 387.10 tax laws as defined in section 271.01, subdivision 5; 387.11 disregarding sections 273.125, subdivision 5, and 278.03, but 387.12 including section 278.05, subdivision 2. If the amount of the 387.13 benefits under paragraph (a) or (b) and penalty are not paid 387.14 within 60 days, and if no appeal has been filed, the county 387.15 auditor shall certify the amount of the benefit and penalty to 387.16 the succeeding year's tax list to be collected as part of the 387.17 property taxes on the affected property. 387.18[EFFECTIVE DATE.] This section is effective for taxes 387.19 payable in 2004 and thereafter. 387.20 Sec. 20. Minnesota Statutes 2004, section 273.124, 387.21 subdivision 6, is amended to read: 387.22 Subd. 6. [LEASEHOLD COOPERATIVES.] When one or more 387.23 dwellings or one or more buildings which each contain several 387.24 dwelling units is owned by a nonprofit corporation subject to 387.25 the provisions of chapter 317A and qualifying under section 387.26 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as 387.27 amended through December 31, 1990, or a limited partnership 387.28 which corporation or partnership operates the property in 387.29 conjunction with a cooperative association, and has received 387.30 public financing, homestead treatment may be claimed by the 387.31 cooperative association on behalf of the members of the 387.32 cooperative for each dwelling unit occupied by a member of the 387.33 cooperative. The cooperative association must provide the 387.34 assessor with the Social Security numbers of those members. To 387.35 qualify for the treatment provided by this subdivision, the 387.36 following conditions must be met: 388.1 (a) the cooperative association must be organized under 388.2 chapter 308A or 308B and all voting members of the board of 388.3 directors must be resident tenants of the cooperative and must 388.4 be elected by the resident tenants of the cooperative; 388.5 (b) the cooperative association must have a lease for 388.6 occupancy of the property for a term of at least 20 years, which 388.7 permits the cooperative association, while not in default on the 388.8 lease, to participate materially in the management of the 388.9 property, including material participation in establishing 388.10 budgets, setting rent levels, and hiring and supervising a 388.11 management agent; 388.12 (c) to the extent permitted under state or federal law, the 388.13 cooperative association must have a right under a written 388.14 agreement with the owner to purchase the property if the owner 388.15 proposes to sell it; if the cooperative association does not 388.16 purchase the property it is offered for sale, the owner may not 388.17 subsequently sell the property to another purchaser at a price 388.18 lower than the price at which it was offered for sale to the 388.19 cooperative association unless the cooperative association 388.20 approves the sale; 388.21 (d) a minimum of 40 percent of the cooperative 388.22 association's members must have incomes at or less than 60 388.23 percent of area median gross income as determined by the United 388.24 States Secretary of Housing and Urban Development under section 388.25 142(d)(2)(B) of the Internal Revenue Code of 1986, as amended 388.26 through December 31, 1991. For purposes of this clause, "member 388.27 income" means the income of a member existing at the time the 388.28 member acquires cooperative membership; 388.29 (e) if a limited partnership owns the property, it must 388.30 include as the managing general partner a nonprofit organization 388.31 operating under the provisions of chapter 317A and qualifying 388.32 under section 501(c)(3) or 501(c)(4) of the Internal Revenue 388.33 Code of 1986, as amended through December 31, 1990, and the 388.34 limited partnership agreement must provide that the managing 388.35 general partner have sufficient powers so that it materially 388.36 participates in the management and control of the limited 389.1 partnership; 389.2 (f) prior to becoming a member of a leasehold cooperative 389.3 described in this subdivision, a person must have received 389.4 notice that (1) describes leasehold cooperative property in 389.5 plain language, including but not limited to the effects of 389.6 classification under this subdivision on rents, property taxes 389.7 and tax credits or refunds, and operating expenses, and (2) 389.8 states that copies of the articles of incorporation and bylaws 389.9 of the cooperative association, the lease between the owner and 389.10 the cooperative association, a sample sublease between the 389.11 cooperative association and a tenant, and, if the owner is a 389.12 partnership, a copy of the limited partnership agreement, can be 389.13 obtained upon written request at no charge from the owner, and 389.14 the owner must send or deliver the materials within seven days 389.15 after receiving any request; 389.16 (g) if a dwelling unit of a building was occupied on the 389.17 60th day prior to the date on which the unit became leasehold 389.18 cooperative property described in this subdivision, the notice 389.19 described in paragraph (f) must have been sent by first class 389.20 mail to the occupant of the unit at least 60 days prior to the 389.21 date on which the unit became leasehold cooperative property. 389.22 For purposes of the notice under this paragraph, the copies of 389.23 the documents referred to in paragraph (f) may be in proposed 389.24 version, provided that any subsequent material alteration of 389.25 those documents made after the occupant has requested a copy 389.26 shall be disclosed to any occupant who has requested a copy of 389.27 the document. Copies of the articles of incorporation and 389.28 certificate of limited partnership shall be filed with the 389.29 secretary of state after the expiration of the 60-day period 389.30 unless the change to leasehold cooperative status does not 389.31 proceed; 389.32 (h) the county attorney of the county in which the property 389.33 is located must certify to the assessor that the property meets 389.34 the requirements of this subdivision; 389.35 (i) the public financing received must be from at least one 389.36 of the following sources: 390.1 (1) tax increment financing proceeds used for the 390.2 acquisition or rehabilitation of the building or interest rate 390.3 write-downs relating to the acquisition of the building; 390.4 (2) government issued bonds exempt from taxes under section 390.5 103 of the Internal Revenue Code of 1986, as amended through 390.6 December 31, 1991, the proceeds of which are used for the 390.7 acquisition or rehabilitation of the building; 390.8 (3) programs under section 221(d)(3), 202, or 236, of Title 390.9 II of the National Housing Act; 390.10 (4) rental housing program funds under Section 8 of the 390.11 United States Housing Act of 1937 or the market rate family 390.12 graduated payment mortgage program funds administered by the 390.13 Minnesota Housing Finance Agency that are used for the 390.14 acquisition or rehabilitation of the building; 390.15 (5) low-income housing credit under section 42 of the 390.16 Internal Revenue Code of 1986, as amended through December 31, 390.17 1991; 390.18 (6) public financing provided by a local government used 390.19 for the acquisition or rehabilitation of the building, including 390.20 grants or loans from (i) federal community development block 390.21 grants; (ii) HOME block grants; or (iii) residential rental 390.22 bonds issued under chapter 474A; or 390.23 (7) other rental housing program funds provided by the 390.24 Minnesota Housing Finance Agency for the acquisition or 390.25 rehabilitation of the building; 390.26 (j) at the time of the initial request for homestead 390.27 classification or of any transfer of ownership of the property, 390.28 the governing body of the municipality in which the property is 390.29 located must hold a public hearing and make the following 390.30 findings: 390.31 (1) that the granting of the homestead treatment of the 390.32 apartment's units will facilitate safe, clean, affordable 390.33 housing for the cooperative members that would otherwise not be 390.34 available absent the homestead designation; 390.35 (2) that the owner has presented information satisfactory 390.36 to the governing body showing that the savings garnered from the 391.1 homestead designation of the units will be used to reduce 391.2 tenant's rents or provide a level of furnishing or maintenance 391.3 not possible absent the designation; and 391.4 (3) that the requirements of paragraphs (b), (d), and (i) 391.5 have been met. 391.6 Homestead treatment must be afforded to units occupied by 391.7 members of the cooperative association and the units must be 391.8 assessed as provided in subdivision 3, provided that any unit 391.9 not so occupied shall be classified and assessed pursuant to the 391.10 appropriate class. No more than three acres of land may, for 391.11 assessment purposes, be included with each dwelling unit that 391.12 qualifies for homestead treatment under this subdivision. 391.13 When dwelling units no longer qualify under this 391.14 subdivision, the current owner must notify the assessor within 391.15 60 days. Failure to notify the assessor within 60 days shall 391.16 result in the loss of benefits under this subdivision for taxes 391.17 payable in the year that the failure is discovered. For these 391.18 purposes, "benefits under this subdivision" means the difference 391.19 in the net tax capacity of the units which no longer qualify as 391.20 computed under this subdivision and as computed under the 391.21 otherwise applicable law, times the local tax rate applicable to 391.22 the building for that taxes payable year. Upon discovery of a 391.23 failure to notify, the assessor shall inform the auditor of the 391.24 difference in net tax capacity for the building or buildings in 391.25 which units no longer qualify, and the auditor shall calculate 391.26 the benefits under this subdivision. Such amount, plus a 391.27 penalty equal to 100 percent of that amount, shall then be 391.28 demanded of the building's owner. The property owner may appeal 391.29 the county's determination by serving copies of a petition for 391.30 review with county officials as provided in section 278.01 and 391.31 filing a proof of service as provided in section 278.01 with the 391.32 Minnesota Tax Court within 60 days of the date of the notice 391.33 from the county. The appeal shall be governed by the Tax Court 391.34 procedures provided in chapter 271, for cases relating to the 391.35 tax laws as defined in section 271.01, subdivision 5; 391.36 disregarding sections 273.125, subdivision 5, and 278.03, but 392.1 including section 278.05, subdivision 2. If the amount of the 392.2 benefits under this subdivision and penalty are not paid within 392.3 60 days, and if no appeal has been filed, the county auditor 392.4 shall certify the amount of the benefit and penalty to the 392.5 succeeding year's tax list to be collected as part of the 392.6 property taxes on the affected buildings. 392.7[EFFECTIVE DATE.] This section is effective for taxes 392.8 payable in 2004 and thereafter. 392.9 Sec. 21. Minnesota Statutes 2004, section 273.124, 392.10 subdivision 8, is amended to read: 392.11 Subd. 8. [HOMESTEAD OWNED BY OR LEASED TO FAMILY FARM 392.12 CORPORATION, JOINT FARM VENTURE, LIMITED LIABILITY COMPANY, OR 392.13 PARTNERSHIP.] (a) Each family farm corporation, each; each joint 392.14 family farm venture,; and each limited liability company, and392.15eachor partnershipoperatingwhich operates a family farm; is 392.16 entitled to class 1b under section 273.13, subdivision 22, 392.17 paragraph (b), or class 2a assessment for one homestead occupied 392.18 by a shareholder, member, or partner thereof who is residing on 392.19 the land, and actively engaged in farming of the land owned by 392.20 the family farm corporation, joint family farm venture, limited 392.21 liability company, or partnershipoperating a family farm. 392.22 Homestead treatment applies even if legal title to the property 392.23 is in the name of the family farm corporation, joint family farm 392.24 venture, limited liability company, or partnershipoperating the392.25family farm, and not in the name of the person residing on it. 392.26 "Family farm corporation," "family farm," and "partnership 392.27 operating a family farm" have the meanings given in section 392.28 500.24, except that the number of allowable shareholders, 392.29 members, or partners under this subdivision shall not exceed 392.30 12. "Limited liability company" has the meaning contained in 392.31 sections 322B.03, subdivision 28, and 500.24, subdivision 2, 392.32 paragraphs (l) and (m). "Joint family farm venture" means a 392.33 cooperative agreement among two or more farm enterprises 392.34 authorized to operate a family farm under section 500.24. 392.35 (b) In addition to property specified in paragraph (a), any 392.36 other residences owned by family farm corporations, joint family 393.1 farm ventures, limited liability companies, or partnerships 393.2operating a family farmdescribed in paragraph (a) which are 393.3 located on agricultural land and occupied as homesteads by its 393.4 shareholders, members, or partners who are actively engaged in 393.5 farming on behalf of that corporation, joint farm venture, 393.6 limited liability company, or partnership must also be assessed 393.7 as class 2a property or as class 1b property under section 393.8 273.13. 393.9 (c) Agricultural property that is owned by a member, 393.10 partner, or shareholder of a family farm corporation or joint 393.11 family farm venture, limited liability company operating a 393.12 family farm, or by a partnership operating a family farm and 393.13 leased to the family farm corporation, limited liability 393.14 company,orpartnershipoperating a family farm, or joint farm 393.15 venture, as defined in paragraph (a), is eligible for 393.16 classification as class 1b or class 2a under section 273.13, if 393.17 the owner is actually residing on the property, and is actually 393.18 engaged in farming the land on behalf of that corporation, joint 393.19 farm venture, limited liability company, or partnership. This 393.20 paragraph applies without regard to any legal possession rights 393.21 of the family farm corporation, joint family farm venture, 393.22 limited liability company, or partnershipoperating a family393.23farmunder the lease. 393.24[EFFECTIVE DATE.] This section is effective the day 393.25 following final enactment. 393.26 Sec. 22. Minnesota Statutes 2004, section 273.124, 393.27 subdivision 13, is amended to read: 393.28 Subd. 13. [HOMESTEAD APPLICATION.] (a) A person who meets 393.29 the homestead requirements under subdivision 1 must file a 393.30 homestead application with the county assessor to initially 393.31 obtain homestead classification. 393.32 (b) On or before January 2, 1993, each county assessor 393.33 shall mail a homestead application to the owner of each parcel 393.34 of property within the county which was classified as homestead 393.35 for the 1992 assessment year. The format and contents of a 393.36 uniform homestead application shall be prescribed by the 394.1 commissioner of revenue. The commissioner shall consult with 394.2 the chairs of the house and senate tax committees on the 394.3 contents of the homestead application form. The application 394.4 must clearly inform the taxpayer that this application must be 394.5 signed by all owners who occupy the property or by the 394.6 qualifying relative and returned to the county assessor in order 394.7 for the property to continue receiving homestead treatment. The 394.8 envelope containing the homestead application shall clearly 394.9 identify its contents and alert the taxpayer of its necessary 394.10 immediate response. 394.11 (c) Every property owner applying for homestead 394.12 classification must furnish to the county assessor the Social 394.13 Security number of each occupant who is listed as an owner of 394.14 the property on the deed of record, the name and address of each 394.15 owner who does not occupy the property, and the name and Social 394.16 Security number of each owner's spouse who occupies the 394.17 property. The application must be signed by each owner who 394.18 occupies the property and by each owner's spouse who occupies 394.19 the property, or, in the case of property that qualifies as a 394.20 homestead under subdivision 1, paragraph (c), by the qualifying 394.21 relative. 394.22 If a property owner occupies a homestead, the property 394.23 owner's spouse may not claim another property as a homestead 394.24 unless the property owner and the property owner's spouse file 394.25 with the assessor an affidavit or other proof required by the 394.26 assessor stating that the property qualifies as a homestead 394.27 under subdivision 1, paragraph (e). 394.28 Owners or spouses occupying residences owned by their 394.29 spouses and previously occupied with the other spouse, either of 394.30 whom fail to include the other spouse's name and Social Security 394.31 number on the homestead application or provide the affidavits or 394.32 other proof requested, will be deemed to have elected to receive 394.33 only partial homestead treatment of their residence. The 394.34 remainder of the residence will be classified as nonhomestead 394.35 residential. When an owner or spouse's name and Social Security 394.36 number appear on homestead applications for two separate 395.1 residences and only one application is signed, the owner or 395.2 spouse will be deemed to have elected to homestead the residence 395.3 for which the application was signed. 395.4 The Social Security numbers or affidavits or other proofs 395.5 of the property owners and spouses are private data on 395.6 individuals as defined by section 13.02, subdivision 12, but, 395.7 notwithstanding that section, the private data may be disclosed 395.8 to the commissioner of revenue, or, for purposes of proceeding 395.9 under the Revenue Recapture Act to recover personal property 395.10 taxes owing, to the county treasurer. 395.11 (d) If residential real estate is occupied and used for 395.12 purposes of a homestead by a relative of the owner and qualifies 395.13 for a homestead under subdivision 1, paragraph (c), in order for 395.14 the property to receive homestead status, a homestead 395.15 application must be filed with the assessor. The Social 395.16 Security number of each relative occupying the property and the 395.17 Social Security number of each owner who is related to an 395.18 occupant of the property shall be required on the homestead 395.19 application filed under this subdivision. If a different 395.20 relative of the owner subsequently occupies the property, the 395.21 owner of the property must notify the assessor within 30 days of 395.22 the change in occupancy. The Social Security number of a 395.23 relative occupying the property is private data on individuals 395.24 as defined by section 13.02, subdivision 12, but may be 395.25 disclosed to the commissioner of revenue. 395.26 (e) The homestead application shall also notify the 395.27 property owners that the application filed under this section 395.28 will not be mailed annually and that if the property is granted 395.29 homestead status for the 1993 assessment, or any assessment year 395.30 thereafter, that same property shall remain classified as 395.31 homestead until the property is sold or transferred to another 395.32 person, or the owners, the spouse of the owner, or the relatives 395.33 no longer use the property as their homestead. Upon the sale or 395.34 transfer of the homestead property, a certificate of value must 395.35 be timely filed with the county auditor as provided under 395.36 section 272.115. Failure to notify the assessor within 30 days 396.1 that the property has been sold, transferred, or that the owner, 396.2 the spouse of the owner, or the relative is no longer occupying 396.3 the property as a homestead, shall result in (i) a requirement 396.4 to repay homestead benefits related to assessment dates after 396.5 the ownership or occupancy change, except for years for which a 396.6 new and valid homestead application was effective, and limited 396.7 to benefits for taxes payable in the current year and the five 396.8 prior years; (ii) the penalty provided underthis subdivision396.9 paragraph (h) for each of the same years, if applicable; and 396.10 (iii) the property will lose itscurrenthomestead status for 396.11 the current assessment year unless a new homestead application 396.12 is effective for that assessment. The provisions of section 396.13 273.02 with regard to property erroneously classified as a 396.14 homestead do not apply. The person to be notified of the 396.15 reimbursement requirement and of the penalty under the 396.16 procedures in paragraph (h) is the owner who sold or transferred 396.17 the property or whose relative is no longer occupying the 396.18 property as a homestead. 396.19 (f) If the homestead application is not returned within 30 396.20 days, the county will send a second application to the present 396.21 owners of record. The notice of proposed property taxes 396.22 prepared under section 275.065, subdivision 3, shall reflect the 396.23 property's classification. Beginning with assessment year 1993 396.24 for all properties, if a homestead application has not been 396.25 filed with the county by December 15, the assessor shall 396.26 classify the property as nonhomestead for the current assessment 396.27 year for taxes payable in the following year, provided that the 396.28 owner may be entitled to receive the homestead classification by 396.29 proper application under section 375.192. 396.30 (g) At the request of the commissioner, each county must 396.31 give the commissioner a list that includes the name and Social 396.32 Security number of each property owner and the property owner's 396.33 spouse occupying the property, or relative of a property owner, 396.34 applying for homestead classification under this subdivision. 396.35 The commissioner shall use the information provided on the lists 396.36 as appropriate under the law, including for the detection of 397.1 improper claims by owners, or relatives of owners, under chapter 397.2 290A. 397.3 (h) Ifthe commissionera city or county assessor finds 397.4 that a propertyowner may be claiming a fraudulentis receiving 397.5 homestead benefits that are not allowable under the law, 397.6 thecommissioner shall notify the appropriate counties. Within397.790 days of the notification, the county assessor shall397.8investigate to determine if the homestead classification was397.9properly claimed. If the property owner does not qualify, the397.10countyassessor shall notify the county auditor who will 397.11 determine the amount of homestead benefits that had been 397.12 improperly allowed for taxes payable in the current year and in 397.13 each of the five prior years. For the purpose of this section, 397.14 "homestead benefits" means the tax reduction resulting from the 397.15 classification as a homestead under section 273.13, the taconite 397.16 homestead credit under section 273.135, the residential 397.17 homestead and agricultural homestead credits under section 397.18 273.1384, and the supplemental homestead credit under section 397.19 273.1391. 397.20 The county auditor shall send a notice to the person who 397.21 owned the affected property at the time the homestead 397.22 application related to the improper homestead was filed, 397.23 demanding reimbursement of the homestead benefits not allowable 397.24 under the law for taxes payable in the current year and the five 397.25 prior years. The notice shall demand reimbursement of those 397.26 homestead benefits, plus a penalty equal to100either: 397.27 (i) ten percent of the homestead benefits if the owner 397.28 acted with negligent or intentional disregard of the applicable 397.29 tax laws and rules but without intent to defraud; or 397.30 (ii) 50 percent of the homestead benefits if the owner 397.31 fraudulently attempted in any manner to evade or defeat the 397.32 proper tax. 397.33 If the penalty provided in this paragraph is imposed and 397.34 the assessor becomes aware that the property is improperly 397.35 classified as a homestead for the current assessment year, the 397.36 assessor shall reclassify the property for that assessment, and 398.1 the provisions of section 273.02 with regard to property 398.2 erroneously classified as a homestead do not apply. 398.3 A penalty under this section shall be abated under section 398.4 375.192 upon a determination that the improper classification 398.5 was due to reasonable cause. The person notified may appeal the 398.6 county's determination by serving copies of a petition for 398.7 review with county officials as provided in section 278.01 and 398.8 filing proof of service as provided in section 278.01 with the 398.9 Minnesota Tax Court within 60 days of the date of the notice 398.10 from the county. Procedurally, the appeal is governed by the 398.11 provisions in chapter 271 which apply to the appeal of a 398.12 property tax assessment or levy, but without requiring any 398.13 prepayment of the amount in controversy. If the amount of 398.14 homestead benefits and penalty is not paid within 60 days, and 398.15 if no appeal has been filed, the county auditor shall certify 398.16 the amount of taxes and penalty to the county treasurer. The 398.17 county treasurer will add interest to the unpaid homestead 398.18 benefits and penalty amounts at the rate provided in section 398.19 279.03 for real property taxes becoming delinquent in the 398.20 calendar year during which the amount remains unpaid. Interest 398.21 may be assessed for the period beginning 60 days after demand 398.22 for payment was made. 398.23 If the person notified is the current owner of the 398.24 property, the treasurer may add the total amount of homestead 398.25 benefits, penalty, interest, and costs to the ad valorem taxes 398.26 otherwise payable on the property by including the amounts on 398.27 the property tax statements under section 276.04, subdivision 398.28 3. The amounts added under this paragraph to the ad valorem 398.29 taxes shall include interest accrued through December 31 of the 398.30 year preceding the taxes payable year for which the amounts are 398.31 first added. These amounts, when added to the property tax 398.32 statement, become subject to all the laws for the enforcement of 398.33 real or personal property taxes for that year, and for any 398.34 subsequent year. 398.35 If the person notified is not the current owner of the 398.36 property, the treasurer may collect the amounts due under the 399.1 Revenue Recapture Act in chapter 270A, or use any of the powers 399.2 granted in sections 277.20 and 277.21 without exclusion, to 399.3 enforce payment of the homestead benefits, penalty, interest, 399.4 and costs, as if those amounts were delinquent tax obligations 399.5 of the person who owned the property at the time the application 399.6 related to the improperly allowed homestead was filed. The 399.7 treasurer may relieve a prior owner of personal liability for 399.8 the homestead benefits, penalty, interest, and costs, and 399.9 instead extend those amounts on the tax lists against the 399.10 property as provided in this paragraph to the extent that the 399.11 current owner agrees in writing. On all demands, billings, 399.12 property tax statements, and related correspondence, the county 399.13 must list and state separately the amounts of homestead 399.14 benefits, penalty, interest and costs being demanded, billed or 399.15 assessed. 399.16 (i) Any amount of homestead benefits recovered by the 399.17 county from the property owner shall be distributed to the 399.18 county, city or town, and school district where the property is 399.19 located in the same proportion that each taxing district's levy 399.20 was to the total of the three taxing districts' levy for the 399.21 current year. Any amount recovered attributable to taconite 399.22 homestead credit shall be transmitted to the St. Louis County 399.23 auditor to be deposited in the taconite property tax relief 399.24 account. Any amount recovered that is attributable to 399.25 supplemental homestead credit is to be transmitted to the 399.26 commissioner of revenue for deposit in the general fund of the 399.27 state treasury. The total amount of penalty collected must be 399.28 deposited in the county general fund. 399.29 (j) If a property owner has applied for more than one 399.30 homestead and the county assessors cannot determine which 399.31 property should be classified as homestead, the county assessors 399.32 will refer the information to the commissioner. The 399.33 commissioner shall make the determination and notify the 399.34 counties within 60 days. 399.35 (k) In addition to lists of homestead properties, the 399.36 commissioner may ask the counties to furnish lists of all 400.1 properties and the record owners. The Social Security numbers 400.2 and federal identification numbers that are maintained by a 400.3 county or city assessor for property tax administration 400.4 purposes, and that may appear on the lists retain their 400.5 classification as private or nonpublic data; but may be viewed, 400.6 accessed, and used by the county auditor or treasurer of the 400.7 same county for the limited purpose of assisting the 400.8 commissioner in the preparation of microdata samples under 400.9 section 270.0681. 400.10 (l) On or before April 30 each year, each county must 400.11 provide the commissioner with the following data for each parcel 400.12 of homestead property by electronic means as defined in section 400.13 289A.02, subdivision 8: 400.14 (i) the property identification number assigned to the 400.15 parcel for purposes of taxes payable in the current year; 400.16 (ii) the name and Social Security number of each property 400.17 owner and property owner's spouse, as shown on the tax rolls for 400.18 the current and the prior assessment year; 400.19 (iii) the classification of the property under section 400.20 273.13 for taxes payable in the current year and in the prior 400.21 year; 400.22 (iv) an indication of whether the property was classified 400.23 as a homestead for taxes payable in the current year or for 400.24 taxes payable in the prior year because of occupancy by a 400.25 relative of the owner or by a spouse of a relative; 400.26 (v) the property taxes payable as defined in section 400.27 290A.03, subdivision 13, for the current year and the prior 400.28 year; 400.29 (vi) the market value of improvements to the property first 400.30 assessed for tax purposes for taxes payable in the current year; 400.31 (vii) the assessor's estimated market value assigned to the 400.32 property for taxes payable in the current year and the prior 400.33 year; 400.34 (viii) the taxable market value assigned to the property 400.35 for taxes payable in the current year and the prior year; 400.36 (ix) whether there are delinquent property taxes owing on 401.1 the homestead; 401.2 (x) the unique taxing district in which the property is 401.3 located; and 401.4 (xi) such other information as the commissioner decides is 401.5 necessary. 401.6 The commissioner shall use the information provided on the 401.7 lists as appropriate under the law, including for the detection 401.8 of improper claims by owners, or relatives of owners, under 401.9 chapter 290A. 401.10[EFFECTIVE DATE.] This section is generally effective July 401.11 1, 2005, and thereafter, except the changes in paragraphs (e) 401.12 and (h) are effective only for notices initially sent out under 401.13 those paragraphs on or after July 1, 2005. 401.14 Sec. 23. Minnesota Statutes 2004, section 273.124, 401.15 subdivision 21, is amended to read: 401.16 Subd. 21. [TRUST PROPERTY; HOMESTEAD.] Real property held 401.17 by a trustee under a trust is eligible for classification as 401.18 homestead property if: 401.19 (1) the grantor or surviving spouse of the grantor of the 401.20 trust occupies and uses the property as a homestead; 401.21 (2) a relative or surviving relative of the grantor who 401.22 meets the requirements of subdivision 1, paragraph (c), in the 401.23 case of residential real estate; or subdivision 1, paragraph 401.24 (d), in the case of agricultural property, occupies and uses the 401.25 property as a homestead; 401.26 (3) a family farm corporation, joint farm venture, limited 401.27 liability company, or partnership operating a family farm rents 401.28 the property held by a trustee under a trust, and the grantor, 401.29 the spouse of the grantor, or the son or daughter of the 401.30 grantor, who is also a shareholder, member, or partner of the 401.31 corporation, joint farm venture, limited liability company, or 401.32 partnership occupies and uses the property as a homestead,and401.33 or is actively farming the property on behalf of the 401.34 corporation, joint farm venture, limited liability company, or 401.35 partnership; or 401.36 (4) a person who has received homestead classification for 402.1 property taxes payable in 2000 on the basis of an unqualified 402.2 legal right under the terms of the trust agreement to occupy the 402.3 property as that person's homestead and who continues to use the 402.4 property as a homestead or a person who received the homestead 402.5 classification for taxes payable in 2005 under clause (3) who 402.6 does not qualify under clause (3) for taxes payable in 2006 or 402.7 thereafter but who continues to qualify under clause (3) as it 402.8 existed for taxes payable in 2005. 402.9 For purposes of this subdivision, "grantor" is defined as 402.10 the person creating or establishing a testamentary, inter Vivos, 402.11 revocable or irrevocable trust by written instrument or through 402.12 the exercise of a power of appointment. 402.13[EFFECTIVE DATE.] This section is effective for taxes 402.14 payable in 2006 and thereafter. 402.15 Sec. 24. Minnesota Statutes 2004, section 273.1315, is 402.16 amended to read: 402.17 273.1315 [CERTIFICATION OF 1B PROPERTY.] 402.18 Any property owner seeking classification and assessment of 402.19 the owner's homestead as class 1b property pursuant to section 402.20 273.13, subdivision 22, paragraph (b), shall file with the 402.21 commissioner of revenue a 1b homestead declaration, on a form 402.22 prescribed by the commissioner. The declaration shall contain 402.23 the following information: 402.24 (a) the information necessary to verify that on or before 402.25 June 30 of the filing year, the property owner or the owner's 402.26 spouse satisfies the requirements of section 273.13, subdivision 402.27 22, paragraph (b), for 1b classification; and 402.28 (b) any additional information prescribed by the 402.29 commissioner. 402.30 The declaration must be filed on or before October 1 to be 402.31 effective for property taxes payable during the succeeding 402.32 calendar year. The declaration and any supplementary 402.33 information received from the property owner pursuant to this 402.34 section shall be subject to chapter 270B. If approved by the 402.35 commissioner, the declaration remains in effect until the 402.36 property no longer qualifies under section 273.13, subdivision 403.1 22, paragraph (b). Failure to notify the commissioner within 30 403.2 days that the property no longer qualifies under that paragraph 403.3 because of a sale, change in occupancy, or change in the status 403.4 or condition of an occupant shall result in the penalty provided 403.5 in section 273.124, subdivision 13, computed on the basis of the 403.6 class 1b benefits for the property, and the property shall lose 403.7 its current class 1b classification. 403.8 The commissioner shall provide to the assessor on or before 403.9 November 1 a listing of the parcels of property qualifying for 403.10 1b classification. 403.11[EFFECTIVE DATE.] This section is effective the day 403.12 following final enactment. 403.13 Sec. 25. Minnesota Statutes 2004, section 273.19, 403.14 subdivision 1a, is amended to read: 403.15 Subd. 1a. [LEASE DESCRIBED.] For purposes of this section, 403.16 a lease includes any agreement, except a cooperative farming 403.17 agreement pursuant to section 97A.135, subdivision 3, or a lease 403.18 executed pursuant to section 272.68, subdivision 4, permitting a 403.19 nonexempt person or entity to use the property, regardless of 403.20 whether the agreement is characterized as a lease. A lease has 403.21 a "term of at least one year" if the term is for a period of 403.22 less than one year and the lease permits the parties to renew 403.23 the lease without requiring that similar terms for leasing the 403.24 property will be offered to other applicants or bidders through 403.25 a competitive bidding or other form of offer to potential 403.26 lessees or users. 403.27[EFFECTIVE DATE.] This section is effective the day 403.28 following final enactment. 403.29 Sec. 26. Minnesota Statutes 2004, section 273.372, is 403.30 amended to read: 403.31 273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 403.32 VALUATIONS.] 403.33An appeal by a utility or railroad company concerning the403.34exemption, valuation, or classification of property for which403.35the commissioner of revenue has provided the city or county403.36assessor with valuations by order, or for which the commissioner404.1has recommended values to the city or county assessor, must be404.2brought against the commissioner in Tax Court or in district404.3court of the county where the property is located, and not404.4against the county or taxing district where the property is404.5located.Subdivision 1. [SCOPE.] This section governs judicial 404.6 review of a claim that public utility property or railroad 404.7 operating property has been partially, unfairly, or unequally 404.8 assessed, or assessed at a valuation greater than its real or 404.9 actual value, or that the property is exempt. However, this 404.10 section applies only to property described in sections 273.33, 404.11 273.35, and 273.37, and only if the net tax capacity has not 404.12 been changed from that provided to the city or a county by the 404.13 commissioner. If the net tax capacity being appealed is not the 404.14 net tax capacity established by the commissioner through order 404.15 or recommendation, or if the petition claims that the tax levied 404.16 against the parcel is illegal, in whole or in part, or if the 404.17 petition claims the tax has been paid, the action must be 404.18 brought under chapter 278 without regard to this section in each 404.19 county where the property is located and proper service must be 404.20 made upon the local officials specified in section 278.01, 404.21 subdivision 1. 404.22 Subd. 2. [CONTENTS AND FILING OF PETITION.] In all cases 404.23 under this section, the petition must be served on the 404.24 commissioner and must be filed with the Tax Court in Ramsey 404.25 County. In all cases under this section that directly challenge 404.26 an order of the commissioner, the petition must include all the 404.27 parcels encompassed by that order which the petitioner claims 404.28 have been partially, unfairly, or unequally assessed, assessed 404.29 at a valuation greater than their real or actual value, or are 404.30 exempt. In all cases under this section not directly 404.31 challenging a commissioner's order, the petition must include 404.32 either all the utility parcels or all the railroad parcels in 404.33 the state in which the petitioner claims an interest and which 404.34 the petitioner claims have been partially, unfairly, or 404.35 unequally assessed, assessed at a valuation greater than their 404.36 real or actual value, or are exempt. 405.1 Subd. 3. [APPLICABILITY OF OTHER LAWS.] If the appeal to 405.2 courtis fromgoverned by this section directly challenges an 405.3 order of the commissioner,itthe appeal must be brought under 405.4 chapter 271, except that when the provisions of this section 405.5 conflict with chapter 271, this section prevails. Ifthean 405.6 appeal governed by this section is from theexemption,405.7valuation, classification, ortax that results from 405.8 implementation ofthea commissioner's order or recommendation, 405.9 it must be brought under the provisions of chapter 278,and the405.10provisions in that chapter apply,except that service shall be 405.11 on the commissioner only and not on thecountylocal officials 405.12 specified in section 278.01, subdivision 1, and if any other 405.13 provision of this section conflicts with chapter 278, this 405.14 section prevails. 405.15This provision applies to the property described in405.16sections 273.33, 273.35, 273.36, and 273.37, but only if the405.17appealed values have remained unchanged from those provided to405.18the city or county by the commissioner. If the exemption,405.19valuation, or classification being appealed has been changed by405.20the city or county, then the action must be brought under405.21chapter 278 in the county where the property is located and405.22proper service must be made upon the county officials as405.23specified in section 278.01, subdivision 1.405.24 Subd. 4. [NOTICE.] Upon filing of any appeal by a utility 405.25 company or railroad against the commissioner under this section, 405.26 the commissioner shall give notice by first class mail to each 405.27 county which would be affected by the appeal. 405.28 Subd. 5. [ADMINISTRATIVE APPEALS.] Companies that submit 405.29 the reports under section 270.82 or 273.371 by the date 405.30 specified in that section, or by the date specified by the 405.31 commissioner in an extension, may appeal administratively to the 405.32 commissionerunder the procedures in section 270.11, subdivision405.336, prior to bringing an action in Tax Courtor in district405.34court, however, instituting an administrative appeal with the 405.35 commissioner does not change or modify the deadline in section 405.36 271.06 for appealing an order of the commissionerin Tax Court406.1 or the deadline in section 278.01 for filing a property tax 406.2 claim or objectionin Tax Court or district court. 406.3[EFFECTIVE DATE.] This section is effective for petitions 406.4 served and filed on or after September 1, 2005. 406.5 Sec. 27. Minnesota Statutes 2004, section 274.014, 406.6 subdivision 2, is amended to read: 406.7 Subd. 2. [APPEALS AND EQUALIZATION COURSE.]By no later406.8than January 1,Beginning in 2006, and each year thereafter, 406.9 there must be at least one member at each meeting of a local 406.10 board of appeal and equalization who has attended an appeals and 406.11 equalization course developed or approved by the commissioner 406.12 within the last four years, as certified by the commissioner. 406.13 The course may be offered in conjunction with a meeting of the 406.14 Minnesota League of Cities or the Minnesota Association of 406.15 Townships. The course content must include, but need not be 406.16 limited to, a review of the handbook developed by the 406.17 commissioner under subdivision 1. 406.18[EFFECTIVE DATE.] This section is effective the day 406.19 following final enactment. 406.20 Sec. 28. Minnesota Statutes 2004, section 274.014, 406.21 subdivision 3, is amended to read: 406.22 Subd. 3. [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] (a) 406.23 Any city or town thatdoes notconducts local boards of appeal 406.24 and equalization meetings must provide proof to the county 406.25 assessor by December 1, 2006, and each year thereafter, that it 406.26 is in compliance with the requirements of subdivision 2, and406.27that it had. Beginning in 2006, this notice must also verify 406.28 that there was a quorum of voting members at each meeting of the 406.29 board of appeal and equalization in thepriorcurrent year,. A 406.30 city or town that does not comply with these requirements is 406.31 deemed to have transferred its board of appeal and equalization 406.32 powers to the countyunder section 274.01, subdivision 3,406.33forbeginning with the following year's assessment and 406.34 continuing unless the powers are reinstated under paragraph (c). 406.35 (b) The county shall notify the taxpayers when the board of 406.36 appeal and equalization for a city or town has been transferred 407.1 to the county under this subdivision and, prior to the meeting 407.2 time of the county board of equalization, the county shall make 407.3 available to those taxpayers a procedure for a review of the 407.4 assessments, including, but not limited to, open book meetings. 407.5 This alternate review process shall take place in April and May. 407.6 (c) A local board whose powers are transferred to the 407.7 county under this subdivision may be reinstated by resolution of 407.8 the governing body of the city or town and upon proof of 407.9 compliance with the requirements of subdivision 2. The 407.10 resolution and proofs must be provided to the county assessor by 407.11 December 1 in order to be effective for the following year's 407.12 assessment. 407.13[EFFECTIVE DATE.] This section is effective the day 407.14 following final enactment. 407.15 Sec. 29. Minnesota Statutes 2004, section 274.14, is 407.16 amended to read: 407.17 274.14 [LENGTH OF SESSION; RECORD.] 407.18The county board of equalization or the special board of407.19equalization appointed by it shall meet during the last ten407.20meeting days in June. For this purpose, "meeting days" are407.21defined as any day of the week excluding Saturday and Sunday.407.22 The board may meet on any ten consecutive meeting days in June, 407.23 after the second Friday in June, if. The actual meeting dates 407.24aremust be contained on the valuation notices mailed to each 407.25 property owner in the countyunderas provided in section 407.26 273.121. For this purpose, "meeting days" is defined as any day 407.27 of the week excluding Saturday and Sunday. No action taken by 407.28 the county board of review after June 30 is valid, except for 407.29 corrections permitted in sections 273.01 and 274.01. The county 407.30 auditor shall keep an accurate record of the proceedings and 407.31 orders of the board. The record must be published like other 407.32 proceedings of county commissioners. A copy of the published 407.33 record must be sent to the commissioner of revenue, with the 407.34 abstract of assessment required by section 274.16. 407.35[EFFECTIVE DATE.] This section is effective the day 407.36 following final enactment. 408.1 Sec. 30. Minnesota Statutes 2004, section 275.065, 408.2 subdivision 1a, is amended to read: 408.3 Subd. 1a. [OVERLAPPING JURISDICTIONS.] In the case of a 408.4 taxing authority lying in two or more counties, the home county 408.5 auditor shall certify the proposed levy and the proposed local 408.6 tax rate to the other county auditor bySeptember 20October 5. 408.7 The home county auditor must estimate the levy or rate in 408.8 preparing the notices required in subdivision 3, if the other 408.9 county has not certified the appropriate information. If 408.10 requested by the home county auditor, the other county auditor 408.11 must furnish an estimate to the home county auditor. 408.12[EFFECTIVE DATE.] This section is effective the day 408.13 following final enactment. 408.14 Sec. 31. Minnesota Statutes 2004, section 275.07, 408.15 subdivision 1, is amended to read: 408.16 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 408.17 provided under paragraph (b), the taxes voted by cities, 408.18 counties, school districts, and special districts shall be 408.19 certified by the proper authorities to the county auditor on or 408.20 before five working days after December 20 in each year. A town 408.21 must certify the levy adopted by the town board to the county 408.22 auditor by September 15 each year. If the town board modifies 408.23 the levy at a special town meeting after September 15, the town 408.24 board must recertify its levy to the county auditor on or before 408.25 five working days after December 20.The taxes certified shall408.26be reduced by the county auditor by the aid received under408.27section 273.1398, subdivision 3.If a city, town, county, 408.28 school district, or special district fails to certify its levy 408.29 by that date, its levy shall be the amount levied by it for the 408.30 preceding year. 408.31 (b)(i) The taxes voted by counties under sections 103B.241, 408.32 103B.245, and 103B.251 shall be separately certified by the 408.33 county to the county auditor on or before five working days 408.34 after December 20 in each year. The taxes certified shall not 408.35 be reduced by the county auditor by the aid received under 408.36 section 273.1398, subdivision 3. If a county fails to certify 409.1 its levy by that date, its levy shall be the amount levied by it 409.2 for the preceding year. 409.3 (ii) For purposes of the proposed property tax notice under 409.4 section 275.065 and the property tax statement under section 409.5 276.04, for the first year in which the county implements the 409.6 provisions of this paragraph, the county auditor shall reduce 409.7 the county's levy for the preceding year to reflect any amount 409.8 levied for water management purposes under clause (i) included 409.9 in the county's levy. 409.10[EFFECTIVE DATE.] This section is effective the day 409.11 following final enactment. 409.12 Sec. 32. Minnesota Statutes 2004, section 275.07, 409.13 subdivision 4, is amended to read: 409.14 Subd. 4. [REPORT TO COMMISSIONER.] (a) On or before 409.15 October 8 of each year, the county auditor shall report to the 409.16 commissioner of revenue the proposed levy certified by local 409.17 units of government under section 275.065, subdivision 1. If 409.18 any taxing authorities have notified the county auditor that 409.19 they are in the process of negotiating an agreement for sharing, 409.20 merging, or consolidating services but that when the proposed 409.21 levy was certified under section 275.065, subdivision 1c, the 409.22 agreement was not yet finalized, the county auditor shall supply 409.23 that information to the commissioner when filing the report 409.24 under this section and shall recertify the affected levies as 409.25 soon as practical after October 10. 409.26 (b) On or before January 15 of each year, the county 409.27 auditor shall report to the commissioner of revenue the final 409.28 levy certified by local units of government under subdivision 1. 409.29 (c) The levies must be reported in the manner prescribed by 409.30 the commissioner.The reports must show a total levy and the409.31amount of each special levy.409.32[EFFECTIVE DATE.] This section is effective the day 409.33 following final enactment. 409.34 Sec. 33. Minnesota Statutes 2004, section 276.04, 409.35 subdivision 2, is amended to read: 409.36 Subd. 2. [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 410.1 shall provide for the printing of the tax statements. The 410.2 commissioner of revenue shall prescribe the form of the property 410.3 tax statement and its contents. The statement must contain a 410.4 tabulated statement of the dollar amount due to each taxing 410.5 authority and the amount of the state tax from the parcel of 410.6 real property for which a particular tax statement is prepared. 410.7 The dollar amounts attributable to the county, the state tax, 410.8 the voter approved school tax, the other local school tax, the 410.9 township or municipality, and the total of the metropolitan 410.10 special taxing districts as defined in section 275.065, 410.11 subdivision 3, paragraph (i), must be separately stated. The 410.12 amounts due all other special taxing districts, if any, may be 410.13 aggregated. If the county levy under this paragraph includes an 410.14 amount for a lake improvement district as defined under sections 410.15 103B.501 to 103B.581, the amount attributable for that purpose 410.16 must be separately stated from the remaining county levy 410.17 amount. The amount of the tax on homesteads qualifying under 410.18 the senior citizens' property tax deferral program under chapter 410.19 290B is the total amount of property tax before subtraction of 410.20 the deferred property tax amount. The amount of the tax on 410.21 contamination value imposed under sections 270.91 to 270.98, if 410.22 any, must also be separately stated. The dollar amounts, 410.23 including the dollar amount of any special assessments, may be 410.24 rounded to the nearest even whole dollar. For purposes of this 410.25 section whole odd-numbered dollars may be adjusted to the next 410.26 higher even-numbered dollar. The amount of market value 410.27 excluded under section 273.11, subdivision 16, if any, must also 410.28 be listed on the tax statement. 410.29 (b) The property tax statements for manufactured homes and 410.30 sectional structures taxed as personal property shall contain 410.31 the same information that is required on the tax statements for 410.32 real property. 410.33 (c) Real and personal property tax statements must contain 410.34 the following information in the order given in this paragraph. 410.35 The information must contain the current year tax information in 410.36 the right column with the corresponding information for the 411.1 previous year in a column on the left: 411.2 (1) the property's estimated market value under section 411.3 273.11, subdivision 1; 411.4 (2) the property's taxable market value after reductions 411.5 under section 273.11, subdivisions 1a and 16; 411.6 (3) the property's gross tax, calculated by adding the 411.7 property's total property tax to the sum of the aids enumerated 411.8 in clause (4); 411.9 (4) a total of the following aids: 411.10 (i) education aids payable under chapters 122A, 123A, 123B, 411.11 124D, 125A, 126C, and 127A; 411.12 (ii) local government aids for cities, towns, and counties 411.13 underchapter 477Asections 477A.011 to 477A.014; and 411.14 (iii) disparity reduction aid under section 273.1398; 411.15 (5) for homestead residential and agricultural properties, 411.16 the credits under section 273.1384; 411.17 (6) any credits received under sections 273.119; 273.123; 411.18 273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 411.19 473H.10, except that the amount of credit received under section 411.20 273.135 must be separately stated and identified as "taconite 411.21 tax relief"; and 411.22 (7) the net tax payable in the manner required in paragraph 411.23 (a). 411.24 (d) If the county uses envelopes for mailing property tax 411.25 statements and if the county agrees, a taxing district may 411.26 include a notice with the property tax statement notifying 411.27 taxpayers when the taxing district will begin its budget 411.28 deliberations for the current year, and encouraging taxpayers to 411.29 attend the hearings. If the county allows notices to be 411.30 included in the envelope containing the property tax statement, 411.31 and if more than one taxing district relative to a given 411.32 property decides to include a notice with the tax statement, the 411.33 county treasurer or auditor must coordinate the process and may 411.34 combine the information on a single announcement. 411.35 The commissioner of revenue shall certify to the county 411.36 auditor the actual or estimated aids enumerated in clause (4) 412.1 that local governments will receive in the following year. The 412.2 commissioner must certify this amount by January 1 of each year. 412.3[EFFECTIVE DATE.] This section is effective the day 412.4 following final enactment. 412.5 Sec. 34. Minnesota Statutes 2004, section 276.112, is 412.6 amended to read: 412.7 276.112 [STATE PROPERTY TAXES; COUNTY TREASURER.] 412.8 On or before January 25 each year, for the period ending 412.9 December 31 of the prior year, and on or before June2928 each 412.10 year, for the period ending on the most recent settlement day 412.11 determined in section 276.09, and on or before December 2 each 412.12 year, for the period ending November 20, the county treasurer 412.13 must make full settlement with the county auditor according to 412.14 sections 276.09, 276.10, and 276.111 for all receipts of state 412.15 property taxes levied under section 275.025, and must transmit 412.16 those receipts to the commissioner of revenue by electronic 412.17 means. 412.18[EFFECTIVE DATE.] This section is effective the day 412.19 following final enactment. 412.20 Sec. 35. Minnesota Statutes 2004, section 276A.01, 412.21 subdivision 7, is amended to read: 412.22 Subd. 7. [POPULATION.] "Population" means the most recent 412.23 estimate of the population of a municipality made by the state 412.24 demographer and filed with the commissioner of revenue as of 412.25 July115 of the year in which a municipality's distribution net 412.26 tax capacity is calculated. The state demographer shall 412.27 annually estimate the population of each municipality and, in 412.28 the case of a municipality which is located partly within and 412.29 partly without the area, the proportion of the total which 412.30 resides within the area, and shall file the estimates with the 412.31 commissioner of revenue. 412.32[EFFECTIVE DATE.] This section is effective the day 412.33 following final enactment. 412.34 Sec. 36. Minnesota Statutes 2004, section 282.016, is 412.35 amended to read: 412.36 282.016 [PROHIBITED PURCHASERS.] 413.1No(a) A county auditor, county treasurer, county attorney, 413.2 court administrator of the district court,orcounty assessor 413.3or, supervisor of assessments,ordeputy or clerk or an employee 413.4 of such officer,and noa commissioner for tax-forfeited lands 413.5 or an assistant to such commissionermay, must not become a 413.6 purchaser, either personally or as an agent or attorney for 413.7 another person, of the properties offered for sale under the 413.8 provisions of this chapter, either personally, or as agent or413.9attorney for any other person, except thatin the county for 413.10 which the person performs duties. 413.11 (b) Notwithstanding paragraph (a), such officer, deputy, 413.12court administratorclerk, or employee or commissioner for 413.13 tax-forfeited lands or assistant to such commissioner may (1) 413.14 purchase lands owned by that official at the time the state 413.15 became the absolute owner thereof or (2) bid upon and purchase 413.16 forfeited property offered for sale under the alternate sale 413.17 procedure described in section 282.01, subdivision 7a. 413.18[EFFECTIVE DATE.] This section is effective the day 413.19 following final enactment. 413.20 Sec. 37. Minnesota Statutes 2004, section 282.08, is 413.21 amended to read: 413.22 282.08 [APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.] 413.23 The net proceeds from the sale or rental of any parcel of 413.24 forfeited land, or from the sale of products from the forfeited 413.25 land, must be apportioned by the county auditor to the taxing 413.26 districts interested in the land, as follows: 413.27 (1)the amounts necessary to pay the state general tax levy413.28against the parcel for taxes payable in the year for which the413.29tax judgment was entered, and for each subsequent payable year413.30up to and including the year of forfeiture, must be apportioned413.31to the state;413.32(2)the portion required to pay any amounts included in the 413.33 appraised value under section 282.01, subdivision 3, as 413.34 representing increased value due to any public improvement made 413.35 after forfeiture of the parcel to the state, but not exceeding 413.36 the amount certified by the clerk of the municipality must be 414.1 apportioned to the municipal subdivision entitled to it; 414.2(3)(2) the portion required to pay any amount included in 414.3 the appraised value under section 282.019, subdivision 5, 414.4 representing increased value due to response actions taken after 414.5 forfeiture of the parcel to the state, but not exceeding the 414.6 amount of expenses certified by the Pollution Control Agency or 414.7 the commissioner of agriculture, must be apportioned to the 414.8 agency or the commissioner of agriculture and deposited in the 414.9 fund from which the expenses were paid; 414.10(4)(3) the portion of the remainder required to discharge 414.11 any special assessment chargeable against the parcel for 414.12 drainage or other purpose whether due or deferred at the time of 414.13 forfeiture, must be apportioned to the municipal subdivision 414.14 entitled to it; and 414.15(5)(4) any balance must be apportioned as follows: 414.16 (i) The county board may annually by resolution set aside 414.17 no more than 30 percent of the receipts remaining to be used for 414.18 timber development on tax-forfeited land and dedicated memorial 414.19 forests, to be expended under the supervision of the county 414.20 board. It must be expended only on projects approved by the 414.21 commissioner of natural resources. 414.22 (ii) The county board may annually by resolution set aside 414.23 no more than 20 percent of the receipts remaining to be used for 414.24 the acquisition and maintenance of county parks or recreational 414.25 areas as defined in sections 398.31 to 398.36, to be expended 414.26 under the supervision of the county board. 414.27 (iii) Any balance remaining must be apportioned as 414.28 follows: county, 40 percent; town or city, 20 percent; and 414.29 school district, 40 percent, provided, however, that in 414.30 unorganized territory that portion which would have accrued to 414.31 the township must be administered by the county board of 414.32 commissioners. 414.33[EFFECTIVE DATE.] This section is effective the day 414.34 following final enactment for state general tax levy amounts 414.35 payable in 2004 and thereafter. 414.36 Sec. 38. Minnesota Statutes 2004, section 282.15, is 415.1 amended to read: 415.2 282.15 [SALES OF FORFEITED AGRICULTURAL LANDS.] 415.3 The sale shall be conducted by the auditor of the county in 415.4 which the parcels lie. The parcels shall be sold to the highest 415.5 bidder but not for less than the appraised value. The sales 415.6 shall be for cash or on the following terms: The appraised 415.7 value of all merchantable timber on agricultural lands shall be 415.8 paid for in full at the date of sale. At least 15 percent of 415.9 the purchase price of the land shall be paid in cash at the time 415.10 of purchase. The balance shall be paid in not more than 20 415.11 equal annual installments, with interest at a rate equal to the 415.12 rate in effect at the time under section 549.09 on the unpaid 415.13 balance each year. Both principal and interest are due and 415.14 payable on December 31 each year following that in which the 415.15 purchase was made. The purchaser may pay any number of 415.16 installments of principal and interest on or before their due 415.17 date. When the sale is on terms other than for cash in full, 415.18 the purchaser shall receive from the county auditor a contract 415.19 for deed, in a form prescribed by the attorney general. The 415.20 county auditor shall make a report to the commissioner of 415.21 natural resources not more than 30 days after each public sale 415.22 showing the lands sold at the sales, and submit a copy of each 415.23 contract of sale. 415.24 All lands sold pursuant to this sectionshall, on the415.25second day of January following the date of the sale,must be 415.26 restored to the tax rolls and become subject to taxation in the 415.27 same manner as they were assessed and taxed before becoming the 415.28 absolute property of the state for the assessment year 415.29 determined under section 272.02, subdivision 38, paragraph (c). 415.30[EFFECTIVE DATE.] This section is effective for sales 415.31 occurring on or after July 1, 2005. 415.32 Sec. 39. Minnesota Statutes 2004, section 282.21, is 415.33 amended to read: 415.34 282.21 [FORM OF CONVEYANCE.] 415.35 When any sale has been made under sections 282.14 to 415.36 282.22, upon payment in full of the purchase price, appropriate 416.1 conveyance in fee in such form as may be prescribed by the 416.2 attorney general shall be issued by the commissioner offinance416.3 natural resources to the purchaser or the purchaser's assigns 416.4 and this conveyance shall have the force and effect of a patent 416.5 from the state. 416.6[EFFECTIVE DATE.] This section is effective the day 416.7 following final enactment. 416.8 Sec. 40. Minnesota Statutes 2004, section 282.224, is 416.9 amended to read: 416.10 282.224 [FORM OF CONVEYANCE.] 416.11 When any sale has been made under sections 282.221 to 416.12 282.226, upon payment in full of the purchase price, appropriate 416.13 conveyance in fee, in such form as may be prescribed by the 416.14 attorney general, shall be issued by the commissioner of natural 416.15 resources to the purchaser or the purchaser's assignee, and the 416.16 conveyance shall have the force and effect of a patent from the 416.17 state. 416.18[EFFECTIVE DATE.] This section is effective the day 416.19 following final enactment. 416.20 Sec. 41. Minnesota Statutes 2004, section 282.301, is 416.21 amended to read: 416.22 282.301 [RECEIPTS FOR PAYMENTS.] 416.23 When any sale has been made under sections 282.012 and 416.24 282.241 to 282.324, the purchaser shall receive from the county 416.25 auditor at the time of repurchase a receipt, in such form as may 416.26 be prescribed by the attorney general. When the purchase price 416.27 of a parcel of land shall be paid in full, the following facts 416.28 shall be certified by the county auditor to the commissioner of 416.29 revenue of the state of Minnesota: the description of land, the 416.30 date of sale, the name of the purchaser or the purchaser's 416.31 assignee, and the date when the final installment of the 416.32 purchase price was paid. Upon payment in full of the purchase 416.33 price, the purchaser or the assignee shall receive a quitclaim 416.34 deed from the state, to be executed by the commissioner of 416.35 revenue. The deed must be sent to the county auditor who shall 416.36 have it recorded before it is forwarded to the purchaser. 417.1 Failure to make any payment herein required shall constitute 417.2 default and upon such default and cancellation in accord with 417.3 section 282.40, the right, title and interest of the purchaser 417.4 or the purchaser's heirs, representatives, or assigns in such 417.5 parcel shall terminate. 417.6[EFFECTIVE DATE.] This section is effective the day 417.7 following final enactment. 417.8 Sec. 42. Minnesota Statutes 2004, section 290A.19, is 417.9 amended to read: 417.10 290A.19 [OWNER OR MANAGING AGENT TO FURNISH RENT 417.11 CERTIFICATE.] 417.12 (a) The owner or managing agent of any property for which 417.13 rent is paid for occupancy as a homestead must furnish a 417.14 certificate of rent paid to a person who is a renter on December 417.15 31, in the form prescribed by the commissioner. If the renter 417.16 moves before December 31, the owner or managing agent may give 417.17 the certificate to the renter at the time of moving, or mail the 417.18 certificate to the forwarding address if an address has been 417.19 provided by the renter. The certificate must be made available 417.20 to the renter before February 1 of the year following the year 417.21 in which the rent was paid. The owner or managing agent must 417.22 retain a duplicate of each certificate or an equivalent record 417.23 showing the same information for a period of three years. The 417.24 duplicate or other record must be made available to the 417.25 commissioner upon request. For the purposes of this section, 417.26 "owner" includes a park owner as defined under section 327C.01, 417.27 subdivision 6, and "property" includes a lot as defined under 417.28 section 327C.01, subdivision 3. 417.29 (b) The commissioner may require the owner or managing 417.30 agent to file a copy of the certificate of rent paid with the 417.31 commissioner by April 15 of the year following the year in which 417.32 the rent was paid. The copy must be submitted to the 417.33 commissioner by electronic means as that term is defined in 417.34 section 289A.02, subdivision 8. This paragraph does not apply to 417.35 any owner or managing agent that is required to issue 417.36 certificates to renters of fewer than 100 units. 418.1[EFFECTIVE DATE.] This section is effective for 418.2 certificates of rent paid that are issued for rent paid after 418.3 December 31, 2005. 418.4 Sec. 43. Minnesota Statutes 2004, section 290B.05, 418.5 subdivision 3, is amended to read: 418.6 Subd. 3. [CALCULATION OF DEFERRED PROPERTY TAX AMOUNT.] 418.7 When final property tax amounts for the following year have been 418.8 determined, the county auditor shall calculate the "deferred 418.9 property tax amount." The deferred property tax amount is equal 418.10 to the lesser of (1) the maximum allowable deferral for the 418.11 year; or (2) the difference between (i) the total amount of 418.12 property taxes and special assessments levied upon the 418.13 qualifying homestead by all taxing jurisdictions and (ii) the 418.14 maximum property tax amount.Any special assessments levied by418.15any local unit of government must not be included in the total418.16tax used to calculate the deferred tax amount.For this purpose 418.17 "special assessments" includes any assessment, fee, or other 418.18 charge that may by law, and which does, appear on the property 418.19 tax statement for the property for collection under the laws 418.20 applicable to the enforcement of real estate taxes. Any tax 418.21 attributable to new improvements made to the property after the 418.22 initial application has been approved under section 290B.04, 418.23 subdivision 2, must be excluded when determining any subsequent 418.24 deferred property tax amount. The county auditor shall 418.25 annually, on or before April 15, certify to the commissioner of 418.26 revenue the property tax deferral amounts determined under this 418.27 subdivision by property and by owner. 418.28[EFFECTIVE DATE.] This section is effective for amounts 418.29 deferred in 2006 and thereafter. 418.30 Sec. 44. Minnesota Statutes 2004, section 373.45, 418.31 subdivision 7, is amended to read: 418.32 Subd. 7. [AID REDUCTION FOR REPAYMENT.] (a) Except as 418.33 provided in paragraph (b), the commissioner may reduce, by the 418.34 amount paid by the state under this section on behalf of the 418.35 county, plus the interest due on the state payments, the 418.36following aids payable to the county:419.1(1) homestead and agricultural credit aid and disparity419.2reduction aid payable under section 273.1398;419.3(2) county criminal justice aid payable under section419.4477A.0121; and419.5(3) family preservation aid payable under section 477A.0122419.6 county program aid under section 477A.0124. 419.7 The amount of any aid reduction reverts from the appropriate 419.8 account to the state general fund. 419.9 (b) If, after review of the financial situation of the 419.10 county, the authority advises the commissioner that a total 419.11 reduction of the aids would cause an undue hardship on the 419.12 county, the authority, with the approval of the commissioner, 419.13 may establish a different schedule for reduction of aids to 419.14 repay the state. The amount of aids to be reduced are decreased 419.15 by any amounts repaid to the state by the county from other 419.16 revenue sources. 419.17[EFFECTIVE DATE.] This section is effective for aid payable 419.18 in 2005 and thereafter. 419.19 Sec. 45. Minnesota Statutes 2004, section 469.1735, 419.20 subdivision 3, is amended to read: 419.21 Subd. 3. [TRANSFER AUTHORITY FOR PROPERTY TAX.] (a) A city 419.22 may elect to use all or part of its allocation under subdivision 419.23 2 to reimburse the city or county or both for property tax 419.24 reductions under section 272.0212. To elect this option, the 419.25 city must notify the commissioner of revenue by October 1 of 419.26 each calendar year of the amount of the property tax 419.27 reductions for which it seeks reimbursements for taxes payable 419.28 during thefollowingcurrent year and the governmental units to 419.29 which the amounts will be paid. The commissioner may require 419.30 the city to provide information substantiating the amount of the 419.31 reductions granted or any other information necessary to 419.32 administer this provision. The commissioner shall pay the 419.33 reimbursements by December 26 of the taxes payable year. Any 419.34 amount transferred under this authority reduces the amount of 419.35 tax credit certificates available under subdivisions 1 and 2. 419.36 (b) The amount elected by the city under paragraph (a) is 420.1 appropriated to the commissioner of revenue from the general 420.2 fund to reimburse the city or county for tax reductions under 420.3 section 272.0212. The amount appropriated may not exceed the 420.4 maximum amounts allocated to a city under subdivision 2, 420.5 paragraph (b), less the amount of certificates issued by the 420.6 city under subdivision 1, and is available until expended. 420.7[EFFECTIVE DATE.] This section is effective for 420.8 reimbursements of taxes payable in 2005 and thereafter. 420.9 Sec. 46. [473.24] [POPULATION ESTIMATES.] 420.10 (a) The Metropolitan Council shall annually prepare an 420.11 estimate of population for each county, city, and town in the 420.12 metropolitan area and an estimate of the number of households 420.13 and average household size for each city in the metropolitan 420.14 area with a population of 2,500 or more, and an estimate of 420.15 population over age 65 for each county in the metropolitan area, 420.16 and convey the estimates to the governing body of each county, 420.17 city, or town by June 1 each year. In the case of a city or 420.18 town that is located partly within and partly without the 420.19 metropolitan area, the Metropolitan Council shall estimate the 420.20 proportion of the total population and the average size of 420.21 households that reside within the area. The Metropolitan 420.22 Council may prepare an estimate of the population and of the 420.23 average household size for any other political subdivision 420.24 located in the metropolitan area. 420.25 (b) A governing body may challenge an estimate made under 420.26 this section by filing its specific objections in writing with 420.27 the Metropolitan Council by June 24. If the challenge does not 420.28 result in an acceptable estimate, the governing body may have a 420.29 special census conducted by the United States Bureau of the 420.30 Census. The political subdivision must notify the Metropolitan 420.31 Council on or before July 1 of its intent to have the special 420.32 census conducted. The political subdivision must bear all costs 420.33 of the special census. Results of the special census must be 420.34 received by the Metropolitan Council by the next April 15 to be 420.35 used in that year's June 1 estimate under this section. The 420.36 Metropolitan Council shall certify the estimates of population 421.1 and the average household size to the state demographer and to 421.2 the commissioner of revenue by July 15 each year, including any 421.3 estimates still under objection. 421.4[EFFECTIVE DATE.] This section is effective the day 421.5 following final enactment. 421.6 Sec. 47. Minnesota Statutes 2004, section 473F.02, 421.7 subdivision 7, is amended to read: 421.8 Subd. 7. [POPULATION.] "Population" means the most recent 421.9 estimate of the population of a municipality made by the 421.10 Metropolitan Council under section 473.24 and filed with the 421.11 commissioner of revenue as of July115 of the year in which a 421.12 municipality's distribution net tax capacity is calculated.The421.13council shall annually estimate the population of each421.14municipality as of a date which it determines and, in the case421.15of a municipality which is located partly within and partly421.16without the area, the proportion of the total which resides421.17within the area, and shall promptly thereafter file its421.18estimates with the commissioner of revenue.421.19[EFFECTIVE DATE.] This section is effective the day 421.20 following final enactment. 421.21 Sec. 48. Minnesota Statutes 2004, section 477A.011, 421.22 subdivision 3, is amended to read: 421.23 Subd. 3. [POPULATION.] "Population" means the 421.24 population estimated or established as of July115 in an aid 421.25 calculation year by the most recent federal census, by a special 421.26 census conducted under contract with the United States Bureau of 421.27 the Census, by a population estimate made by the Metropolitan 421.28 Council pursuant to section 473.24, or by a population estimate 421.29 of the state demographer made pursuant to section 4A.02, 421.30 whichever is the most recent as to the stated date of the count 421.31 or estimate for the preceding calendar year, and which has been 421.32 certified to the commissioner of revenue on or before July 15 of 421.33 the aid calculation year. The term "per capita" refers to 421.34 population as defined by this subdivision. A revision of an 421.35 estimate or count is effective for these purposes only if it is 421.36 certified to the commissioner on or before July 15 of the aid 422.1 calculation year. Clerical errors in the certification or use 422.2 of the estimates and counts established as of July 15 in the aid 422.3 calculation year are subject to correction within the time 422.4 periods allowed under section 477A.014. 422.5[EFFECTIVE DATE.] This section is effective the day 422.6 following final enactment. 422.7 Sec. 49. Minnesota Statutes 2004, section 477A.011, 422.8 subdivision 36, is amended to read: 422.9 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 422.10 provided in this subdivision, "city aid base" is zero. 422.11 (b) The city aid base for any city with a population less 422.12 than 500 is increased by $40,000 for aids payable in calendar 422.13 year 1995 and thereafter, and the maximum amount of total aid it 422.14 may receive under section 477A.013, subdivision 9, paragraph 422.15 (c), is also increased by $40,000 for aids payable in calendar 422.16 year 1995 only, provided that: 422.17 (i) the average total tax capacity rate for taxes payable 422.18 in 1995 exceeds 200 percent; 422.19 (ii) the city portion of the tax capacity rate exceeds 100 422.20 percent; and 422.21 (iii) its city aid base is less than $60 per capita. 422.22 (c) The city aid base for a city is increased by $20,000 in 422.23 1998 and thereafter and the maximum amount of total aid it may 422.24 receive under section 477A.013, subdivision 9, paragraph (c), is 422.25 also increased by $20,000 in calendar year 1998 only, provided 422.26 that: 422.27 (i) the city has a population in 1994 of 2,500 or more; 422.28 (ii) the city is located in a county, outside of the 422.29 metropolitan area, which contains a city of the first class; 422.30 (iii) the city's net tax capacity used in calculating its 422.31 1996 aid under section 477A.013 is less than $400 per capita; 422.32 and 422.33 (iv) at least four percent of the total net tax capacity, 422.34 for taxes payable in 1996, of property located in the city is 422.35 classified as railroad property. 422.36 (d) The city aid base for a city is increased by $200,000 423.1 in 1999 and thereafter and the maximum amount of total aid it 423.2 may receive under section 477A.013, subdivision 9, paragraph 423.3 (c), is also increased by $200,000 in calendar year 1999 only, 423.4 provided that: 423.5 (i) the city was incorporated as a statutory city after 423.6 December 1, 1993; 423.7 (ii) its city aid base does not exceed $5,600; and 423.8 (iii) the city had a population in 1996 of 5,000 or more. 423.9 (e) The city aid base for a city is increased by $450,000 423.10 in 1999 to 2008 and the maximum amount of total aid it may 423.11 receive under section 477A.013, subdivision 9, paragraph (c), is 423.12 also increased by $450,000 in calendar year 1999 only, provided 423.13 that: 423.14 (i) the city had a population in 1996 of at least 50,000; 423.15 (ii) its population had increased by at least 40 percent in 423.16 the ten-year period ending in 1996; and 423.17 (iii) its city's net tax capacity for aids payable in 1998 423.18 is less than $700 per capita. 423.19 (f)Beginning in 2004, the city aid base for a city is423.20equal to the sum of its city aid base in 2003 and the amount of423.21additional aid it was certified to receive under section 477A.06423.22in 2003. For 2004 only, the maximum amount of total aid a city423.23may receive under section 477A.013, subdivision 9, paragraph423.24(c), is also increased by the amount it was certified to receive423.25under section 477A.06 in 2003.423.26(g)The city aid base for a city is increased by $150,000 423.27 for aids payable in 2000 and thereafter, and the maximum amount 423.28 of total aid it may receive under section 477A.013, subdivision 423.29 9, paragraph (c), is also increased by $150,000 in calendar year 423.30 2000 only, provided that: 423.31 (1) the city has a population that is greater than 1,000 423.32 and less than 2,500; 423.33 (2) its commercial and industrial percentage for aids 423.34 payable in 1999 is greater than 45 percent; and 423.35 (3) the total market value of all commercial and industrial 423.36 property in the city for assessment year 1999 is at least 15 424.1 percent less than the total market value of all commercial and 424.2 industrial property in the city for assessment year 1998. 424.3(h)(g) The city aid base for a city is increased by 424.4 $200,000 in 2000 and thereafter, and the maximum amount of total 424.5 aid it may receive under section 477A.013, subdivision 9, 424.6 paragraph (c), is also increased by $200,000 in calendar year 424.7 2000 only, provided that: 424.8 (1) the city had a population in 1997 of 2,500 or more; 424.9 (2) the net tax capacity of the city used in calculating 424.10 its 1999 aid under section 477A.013 is less than $650 per 424.11 capita; 424.12 (3) the pre-1940 housing percentage of the city used in 424.13 calculating 1999 aid under section 477A.013 is greater than 12 424.14 percent; 424.15 (4) the 1999 local government aid of the city under section 424.16 477A.013 is less than 20 percent of the amount that the formula 424.17 aid of the city would have been if the need increase percentage 424.18 was 100 percent; and 424.19 (5) the city aid base of the city used in calculating aid 424.20 under section 477A.013 is less than $7 per capita. 424.21(i)(h) The city aid base for a city is increased by 424.22 $102,000 in 2000 and thereafter, and the maximum amount of total 424.23 aid it may receive under section 477A.013, subdivision 9, 424.24 paragraph (c), is also increased by $102,000 in calendar year 424.25 2000 only, provided that: 424.26 (1) the city has a population in 1997 of 2,000 or more; 424.27 (2) the net tax capacity of the city used in calculating 424.28 its 1999 aid under section 477A.013 is less than $455 per 424.29 capita; 424.30 (3) the net levy of the city used in calculating 1999 aid 424.31 under section 477A.013 is greater than $195 per capita; and 424.32 (4) the 1999 local government aid of the city under section 424.33 477A.013 is less than 38 percent of the amount that the formula 424.34 aid of the city would have been if the need increase percentage 424.35 was 100 percent. 424.36(j)(i) The city aid base for a city is increased by 425.1 $32,000 in 2001 and thereafter, and the maximum amount of total 425.2 aid it may receive under section 477A.013, subdivision 9, 425.3 paragraph (c), is also increased by $32,000 in calendar year 425.4 2001 only, provided that: 425.5 (1) the city has a population in 1998 that is greater than 425.6 200 but less than 500; 425.7 (2) the city's revenue need used in calculating aids 425.8 payable in 2000 was greater than $200 per capita; 425.9 (3) the city net tax capacity for the city used in 425.10 calculating aids available in 2000 was equal to or less than 425.11 $200 per capita; 425.12 (4) the city aid base of the city used in calculating aid 425.13 under section 477A.013 is less than $65 per capita; and 425.14 (5) the city's formula aid for aids payable in 2000 was 425.15 greater than zero. 425.16(k)(j) The city aid base for a city is increased by $7,200 425.17 in 2001 and thereafter, and the maximum amount of total aid it 425.18 may receive under section 477A.013, subdivision 9, paragraph 425.19 (c), is also increased by $7,200 in calendar year 2001 only, 425.20 provided that: 425.21 (1) the city had a population in 1998 that is greater than 425.22 200 but less than 500; 425.23 (2) the city's commercial industrial percentage used in 425.24 calculating aids payable in 2000 was less than ten percent; 425.25 (3) more than 25 percent of the city's population was 60 425.26 years old or older according to the 1990 census; 425.27 (4) the city aid base of the city used in calculating aid 425.28 under section 477A.013 is less than $15 per capita; and 425.29 (5) the city's formula aid for aids payable in 2000 was 425.30 greater than zero. 425.31(l)(k) The city aid base for a city is increased by 425.32 $45,000 in 2001 and thereafter and by an additional $50,000 in 425.33 calendar years 2002 to 2011, and the maximum amount of total aid 425.34 it may receive under section 477A.013, subdivision 9, paragraph 425.35 (c), is also increased by $45,000 in calendar year 2001 only, 425.36 and by $50,000 in calendar year 2002 only, provided that: 426.1 (1) the net tax capacity of the city used in calculating 426.2 its 2000 aid under section 477A.013 is less than $810 per 426.3 capita; 426.4 (2) the population of the city declined more than two 426.5 percent between 1988 and 1998; 426.6 (3) the net levy of the city used in calculating 2000 aid 426.7 under section 477A.013 is greater than $240 per capita; and 426.8 (4) the city received less than $36 per capita in aid under 426.9 section 477A.013, subdivision 9, for aids payable in 2000. 426.10(m)(l) The city aid base for a city with a population of 426.11 10,000 or more which is located outside of the seven-county 426.12 metropolitan area is increased in 2002 and thereafter, and the 426.13 maximum amount of total aid it may receive under section 426.14 477A.013, subdivision 9, paragraph (b) or (c), is also increased 426.15 in calendar year 2002 only, by an amount equal to the lesser of: 426.16 (1)(i) the total population of the city, as determined by 426.17 the United States Bureau of the Census, in the 2000 census, (ii) 426.18 minus 5,000, (iii) times 60; or 426.19 (2) $2,500,000. 426.20(n)(m) The city aid base is increased by $50,000 in 2002 426.21 and thereafter, and the maximum amount of total aid it may 426.22 receive under section 477A.013, subdivision 9, paragraph (c), is 426.23 also increased by $50,000 in calendar year 2002 only, provided 426.24 that: 426.25 (1) the city is located in the seven-county metropolitan 426.26 area; 426.27 (2) its population in 2000 is between 10,000 and 20,000; 426.28 and 426.29 (3) its commercial industrial percentage, as calculated for 426.30 city aid payable in 2001, was greater than 25 percent. 426.31(o)(n) The city aid base for a city is increased by 426.32 $150,000 in calendar years 2002 to 2011 and the maximum amount 426.33 of total aid it may receive under section 477A.013, subdivision 426.34 9, paragraph (c), is also increased by $150,000 in calendar year 426.35 2002 only, provided that: 426.36 (1) the city had a population of at least 3,000 but no more 427.1 than 4,000 in 1999; 427.2 (2) its home county is located within the seven-county 427.3 metropolitan area; 427.4 (3) its pre-1940 housing percentage is less than 15 427.5 percent; and 427.6 (4) its city net tax capacity per capita for taxes payable 427.7 in 2000 is less than $900 per capita. 427.8(p)(o) The city aid base for a city is increased by 427.9 $200,000 beginning in calendar year 2003 and the maximum amount 427.10 of total aid it may receive under section 477A.013, subdivision 427.11 9, paragraph (c), is also increased by $200,000 in calendar year 427.12 2003 only, provided that the city qualified for an increase in 427.13 homestead and agricultural credit aid under Laws 1995, chapter 427.14 264, article 8, section 18. 427.15(q)(p) The city aid base for a city is increased by 427.16 $200,000 in 2004 only and the maximum amount of total aid it may 427.17 receive under section 477A.013, subdivision 9, is also increased 427.18 by $200,000 in calendar year 2004 only, if the city is the site 427.19 of a nuclear dry cask storage facility. 427.20(r)(q) The city aid base for a city is increased by 427.21 $10,000 in 2004 and thereafter and the maximum total aid it may 427.22 receive under section 477A.013, subdivision 9, is also increased 427.23 by $10,000 in calendar year 2004 only, if the city was included 427.24 in a federal major disaster designation issued on April 1, 1998, 427.25 and its pre-1940 housing stock was decreased by more than 40 427.26 percent between 1990 and 2000. 427.27[EFFECTIVE DATE.] This section is effective beginning with 427.28 aids payable in 2004. 427.29 Sec. 50. Minnesota Statutes 2004, section 477A.011, 427.30 subdivision 38, is amended to read: 427.31 Subd. 38. [HOUSEHOLD SIZE.] "Household size" means the 427.32 average number of persons per household in the jurisdiction as 427.33 most recently estimated and reported by the state 427.34 demographer and Metropolitan Council as of July115 of the aid 427.35 calculation year. A revision to an estimate or enumeration is 427.36 effective for these purposes only if it is certified to the 428.1 commissioner on or before July 15 of the aid calculation year. 428.2 Clerical errors in the certification or use of estimates and 428.3 counts established as of July 15 in the aid calculation year are 428.4 subject to correction within the time periods allowed under 428.5 section 477A.014. 428.6[EFFECTIVE DATE.] This section is effective the day 428.7 following final enactment. 428.8 Sec. 51. Minnesota Statutes 2004, section 477A.0124, 428.9 subdivision 2, is amended to read: 428.10 Subd. 2. [DEFINITIONS.] (a) For the purposes of this 428.11 section, the following terms have the meanings given them. 428.12 (b) "County program aid" means the sum of "county need aid," 428.13 "county tax base equalization aid," and "county transition aid." 428.14 (c) "Age-adjusted population" means a county's population 428.15 multiplied by the county age index. 428.16 (d) "County age index" means the percentage of the 428.17 population over age 65 within the county divided by the 428.18 percentage of the population over age 65 within the state, 428.19 except that the age index for any county may not be greater than 428.20 1.8 nor less than 0.8. 428.21 (e) "Population over age 65" means the population over age 428.22 65 established as of July115 in an aid calculation year by the 428.23 most recent federal census, by a special census conducted under 428.24 contract with the United States Bureau of the Census, by a 428.25 population estimate made by the Metropolitan Council, or by a 428.26 population estimate of the state demographer made pursuant to 428.27 section 4A.02, whichever is the most recent as to the stated 428.28 date of the count or estimate for the preceding calendar 428.29 year and which has been certified to the commissioner of revenue 428.30 on or before July 15 of the aid calculation year. A revision to 428.31 an estimate or count is effective for these purposes only if 428.32 certified to the commissioner on or before July 15 of the aid 428.33 calculation year. Clerical errors in the certification or use 428.34 of estimates and counts established as of July 15 in the aid 428.35 calculation year are subject to correction within the time 428.36 periods allowed under section 477A.014. 429.1 (f) "Part I crimes" means the three-year average annual 429.2 number of Part I crimes reported for each county by the 429.3 Department of Public Safety for the most recent years available. 429.4 By July 1 of each year, the commissioner of public safety shall 429.5 certify to the commissioner of revenue the number of Part I 429.6 crimes reported for each county for the three most recent 429.7 calendar years available. 429.8 (g) "Households receiving food stamps" means the average 429.9 monthly number of households receiving food stamps for the three 429.10 most recent years for which data is available. By July 1 of 429.11 each year, the commissioner of human services must certify to 429.12 the commissioner of revenue the average monthly number of 429.13 households in the state and in each county that receive food 429.14 stamps, for the three most recent calendar years available. 429.15 (h) "County net tax capacity" means the net tax capacity of 429.16 the county, computed analogously to city net tax capacity under 429.17 section 477A.011, subdivision 20. 429.18[EFFECTIVE DATE.] This section is effective the day 429.19 following final enactment. 429.20 Sec. 52. Laws 2003, chapter 127, article 5, section 27, 429.21 the effective date, is amended to read: 429.22[EFFECTIVE DATE.] This section is effective fortaxes429.23payable in 2004 and thereafterdistributions occurring on or 429.24 after June 10, 2003. 429.25 Sec. 53. Laws 2003, chapter 127, article 5, section 28, 429.26 the effective date, is amended to read: 429.27[EFFECTIVE DATE.] This section is effective fortaxes429.28payable in 2004 and thereafterdistributions occurring on or 429.29 after June 10, 2003. 429.30 Sec. 54. Laws 2003, First Special Session chapter 21, 429.31 article 5, section 13, is amended to read: 429.32 Sec. 13. [2004 CITY AID REDUCTIONS.] 429.33 The commissioner of revenue shall compute an aid reduction 429.34 amount for 2004 for each city as provided in this section. 429.35 The initial aid reduction amount for each city is the 429.36 amount by which the city's aid distribution under Minnesota 430.1 Statutes, section 477A.013, and related provisions payable in 430.2 2003 exceeds the city's 2004 distribution under those provisions. 430.3 The minimum aid reduction amount for a city is the amount 430.4 of its reduction in 2003 under section 12. If a city receives 430.5 an increase to its city aid base under Minnesota Statutes, 430.6 section 477A.011, subdivision 36, its minimum aid reduction is 430.7 reduced by an equal amount. 430.8 The maximum aid reduction amount for a city is an amount 430.9 equal to 14 percent of the city's total 2004 levy plus aid 430.10 revenue base, except that if the city has a city net tax 430.11 capacity for aids payable in 2004, as defined in Minnesota 430.12 Statutes, section 477A.011, subdivision 20, of $700 per capita 430.13 or less, the maximum aid reduction shall not exceed an amount 430.14 equal to 13 percent of the city's total 2004 levy plus aid 430.15 revenue base. 430.16 If the initial aid reduction amount for a city is less than 430.17 the minimum aid reduction amount for that city, the final aid 430.18 reduction amount for the city is the sum of the initial aid 430.19 reduction amount and the lesser of the amount of the city's 430.20 payable 2004 reimbursement under Minnesota Statutes, section 430.21 273.1384, or the difference between the minimum and initial aid 430.22 reduction amounts for the city, and the amount of the final aid 430.23 reduction in excess of the initial aid reduction is deducted 430.24 from the city's reimbursements pursuant to Minnesota Statutes, 430.25 section 273.1384. 430.26 If the initial aid reduction amount for a city is greater 430.27 than the maximum aid reduction amount for the city, the city 430.28 receives an additional distribution under this section equal to 430.29 the result of subtracting the maximum aid reduction amount from 430.30 the initial aid reduction amount. This distribution shall be 430.31 paid in equal installments in 2004 on the dates specified in 430.32 Minnesota Statutes, section 477A.015. The amount necessary for 430.33 these additional distributions is appropriated to the 430.34 commissioner of revenue from the general fund in fiscal year 430.35 2005. 430.36The initial aid reduction is applied to the city's431.1distribution pursuant to Minnesota Statutes, section 477A.013,431.2and any aid reduction in excess of the initial aid reduction is431.3applied to the city's reimbursements pursuant to Minnesota431.4Statutes, section 273.1384.431.5 To the extent that sufficient information is available on 431.6 each payment date in 2004, the commissioner of revenue shall pay 431.7 the reimbursements reduced under this section in equal 431.8 installments on the payment dates provided in law. 431.9[EFFECTIVE DATE.] This section is effective for aids 431.10 payable in 2004. 431.11 Sec. 55. Laws 2003, First Special Session chapter 21, 431.12 article 6, section 9, is amended to read: 431.13 Sec. 9. [DEFINITIONS.] 431.14 (a) For purposes of sections 9 to 15, the following terms 431.15 have the meanings given them in this section. 431.16 (b) The 2003 and 2004 "levy plus aid revenue base" for a 431.17 county is the sum of that county's certified property tax levy 431.18 for taxes payable in 2003, plus the sum of the amounts the 431.19 county was certified to receive in the designated calendar year 431.20 as: 431.21 (1) homestead and agricultural credit aid under Minnesota 431.22 Statutes, section 273.1398, subdivision 2, plus any additional 431.23 aid under section 16, minus the amount calculated under section 431.24 273.1398, subdivision 4a, paragraph (b), for counties in 431.25 judicial districts one, three, six, and ten, and 25 percent of 431.26 the amount calculated under section 273.1398, subdivision 4a, 431.27 paragraph (b), for counties in judicial districts two and four; 431.28 (2) the amount of county manufactured home homestead and 431.29 agricultural credit aid computed for the county for payment in 431.30 2003 under section 273.166; 431.31 (3) criminal justice aid under Minnesota Statutes, section 431.32 477A.0121; 431.33 (4) family preservation aid under Minnesota Statutes, 431.34 section 477A.0122; 431.35 (5) taconite aids under Minnesota Statutes, sections 298.28 431.36 and 298.282, including any aid which was required to be placed 432.1 in a special fund for expenditure in the next succeeding year; 432.2 and 432.3 (6) county program aid under section 477A.0124, exclusive 432.4 of the attached machinery aid component. 432.5[EFFECTIVE DATE.] This section is effective for aids 432.6 payable in 2004. 432.7 Sec. 56. [LINCOLN AND PIPESTONE COUNTIES; TOWN LEVY 432.8 ADJUSTMENT FOR WIND ENERGY PRODUCTION TAX.] 432.9 Notwithstanding the deadlines in Minnesota Statutes, 432.10 section 275.07, towns located in Lincoln or Pipestone County are 432.11 authorized to adjust their payable 2004 levy for all or a 432.12 portion of their estimated wind energy production tax amounts 432.13 for 2004, as computed by the commissioner of revenue from 432.14 reports filed under Minnesota Statutes, section 272.029, 432.15 subdivision 4. The Lincoln and Pipestone County auditors may 432.16 adjust the payable 2004 levy certifications under Minnesota 432.17 Statutes, section 275.07, subdivision 1, based upon the towns 432.18 that have recertified their levies under this section by March 432.19 15, 2004. 432.20[EFFECTIVE DATE.] This section is effective for taxes 432.21 payable in 2004. 432.22 Sec. 57. [REPEALER.] 432.23 (a) Minnesota Statutes 2004, sections 273.19, subdivision 432.24 5; 274.05; 275.15; 275.61, subdivision 2; and 283.07, are 432.25 repealed effective the day following final enactment. 432.26 (b) Laws 1975, chapter 287, section 5, and Laws 2003, 432.27 chapter 127, article 9, section 9, subdivision 4, are repealed 432.28 effective without local approval for taxes payable in 2006 and 432.29 thereafter. 432.30 ARTICLE 15 432.31 DEPARTMENT OF REVENUE 432.32 SALES AND USE TAXES - SF1683 432.33 Section 1. Minnesota Statutes 2004, section 289A.38, 432.34 subdivision 6, is amended to read: 432.35 Subd. 6. [OMISSION IN EXCESS OF 25 PERCENT.] Additional 432.36 taxes may be assessed within 6-1/2 years after the due date of 433.1 the return or the date the return was filed, whichever is later, 433.2 if: 433.3 (1) the taxpayer omits from gross income an amount properly 433.4 includable in it that is in excess of 25 percent of the amount 433.5 of gross income stated in the return; 433.6 (2) the taxpayer omits from a sales, use, or withholding 433.7 tax return an amount of taxes in excess of 25 percent of the 433.8 taxes reported in the return; or 433.9 (3) the taxpayer omits from the gross estate assets in 433.10 excess of 25 percent of the gross estate reported in the return. 433.11[EFFECTIVE DATE.] This section is effective the day 433.12 following final enactment. 433.13 Sec. 2. Minnesota Statutes 2004, section 289A.38, is 433.14 amended by adding a subdivision to read: 433.15 Subd. 15. [PURCHASER FILED REFUND CLAIMS.] If a purchaser 433.16 refund claim is filed under section 289A.50, subdivision 2a, and 433.17 the basis for the claim is that the purchaser was improperly 433.18 charged tax on an improvement to real property or on the 433.19 purchase of nontaxable services, sales or use tax may be 433.20 assessed for the cost of materials used to make the real 433.21 property improvement or to perform the nontaxable service. The 433.22 assessment may be made against the person making the improvement 433.23 to real property or the sale of nontaxable services, within the 433.24 period prescribed in subdivision 1, or within one year after the 433.25 date of the refund order, whichever is later. 433.26[EFFECTIVE DATE.] This section is effective for purchaser 433.27 refund claims filed on or after July 1, 2005. 433.28 Sec. 3. Minnesota Statutes 2004, section 289A.40, 433.29 subdivision 2, is amended to read: 433.30 Subd. 2. [BAD DEBT LOSS.] If a claim relates to an 433.31 overpayment because of a failure to deduct a loss due to a bad 433.32 debt or to a security becoming worthless, the claim is 433.33 considered timely if filed within seven years from the date 433.34 prescribed for the filing of the return. A claim relating to an 433.35 overpayment of taxes under chapter 297A must be filed within 433.36 3-1/2 years from the date prescribed for filing the return, plus 434.1 any extensions granted for filing the return, but only if filed 434.2 within the extended time. The refund or credit is limited to 434.3 the amount of overpayment attributable to the loss. "Bad debt" 434.4 for purposes of this subdivision, has the same meaning as that 434.5 term is used in United States Code, title 26, section 166, 434.6 except that for a claim relating to an overpayment of taxes 434.7 under chapter 297A the following are excluded from the 434.8 calculation of bad debt: financing charges or interest; sales 434.9 or use taxes charged on the purchase price; uncollectible 434.10 amounts on property that remain in the possession of the seller 434.11 until the full purchase price is paid; expenses incurred in 434.12 attempting to collect any debt; and repossessed property. 434.13[EFFECTIVE DATE.] For claims relating to an overpayment of 434.14 taxes under chapter 297A, this section is effective for sales 434.15 and purchases made on or after January 1, 2004; for all other 434.16 bad debts or claims, this section is effective on or after July 434.17 1, 2003. 434.18 Sec. 4. Minnesota Statutes 2004, section 289A.40, is 434.19 amended by adding a subdivision to read: 434.20 Subd. 5. [PURCHASER FILED REFUND CLAIMS.] A claim for 434.21 refund of taxes paid on a transaction not subject to tax under 434.22 chapter 297A, where the purchaser may apply directly to the 434.23 commissioner under section 289A.50, subdivision 2a, must be 434.24 filed within 3-1/2 years from the 20th day of the month 434.25 following the month of the invoice date for the purchase. 434.26[EFFECTIVE DATE.] This section is effective for claims 434.27 filed on or after the day following final enactment. 434.28 Sec. 5. Minnesota Statutes 2004, section 289A.40, is 434.29 amended by adding a subdivision to read: 434.30 Subd. 6. [CAPITAL EQUIPMENT REFUND CLAIMS.] A claim for 434.31 refund for taxes paid under chapter 297A on capital equipment 434.32 must be filed within 3-1/2 years from the 20th day of the month 434.33 following the month of the invoice date for the purchase of the 434.34 capital equipment. A claim for refund for taxes imposed on 434.35 capital equipment under section 297A.63 must be filed within 434.36 3-1/2 years from the date prescribed for filing the return, or 435.1 one year from the date of an order assessing tax under section 435.2 289A.37, subdivision 1, upon payment in full of the tax, 435.3 penalties, and interest shown on the order, whichever period 435.4 expires later. 435.5[EFFECTIVE DATE.] This section is effective for claims 435.6 filed on or after the day following final enactment. 435.7 Sec. 6. Minnesota Statutes 2004, section 297A.61, 435.8 subdivision 3, is amended to read: 435.9 Subd. 3. [SALE AND PURCHASE.] (a) "Sale" and "purchase" 435.10 include, but are not limited to, each of the transactions listed 435.11 in this subdivision. 435.12 (b) Sale and purchase include: 435.13 (1) any transfer of title or possession, or both, of 435.14 tangible personal property, whether absolutely or conditionally, 435.15 for a consideration in money or by exchange or barter; and 435.16 (2) the leasing of or the granting of a license to use or 435.17 consume, for a consideration in money or by exchange or barter, 435.18 tangible personal property, other than a manufactured home used 435.19 for residential purposes for a continuous period of 30 days or 435.20 more. 435.21 (c) Sale and purchase include the production, fabrication, 435.22 printing, or processing of tangible personal property for a 435.23 consideration for consumers who furnish either directly or 435.24 indirectly the materials used in the production, fabrication, 435.25 printing, or processing. 435.26 (d) Sale and purchase include the preparing for a 435.27 consideration of food. Notwithstanding section 297A.67, 435.28 subdivision 2, taxable food includes, but is not limited to, the 435.29 following: 435.30 (1) prepared food sold by the retailer; 435.31 (2) soft drinks; 435.32 (3) candy;and435.33 (4) dietary supplements; and 435.34 (5) all food sold through vending machines. 435.35 (e) A sale and a purchase includes the furnishing for a 435.36 consideration of electricity, gas, water, or steam for use or 436.1 consumption within this state. 436.2 (f) A sale and a purchase includes the transfer for a 436.3 consideration of prewritten computer software whether delivered 436.4 electronically, by load and leave, or otherwise. 436.5 (g) A sale and a purchase includes the furnishing for a 436.6 consideration of the following services: 436.7 (1) the privilege of admission to places of amusement, 436.8 recreational areas, or athletic events, and the making available 436.9 of amusement devices, tanning facilities, reducing salons, steam 436.10 baths, turkish baths, health clubs, and spas or athletic 436.11 facilities; 436.12 (2) lodging and related services by a hotel, rooming house, 436.13 resort, campground, motel, or trailer camp and the granting of 436.14 any similar license to use real property in a specific facility, 436.15 other than the renting or leasing of it for a continuous period 436.16 of 30 days or more under an enforceable written agreement that 436.17 may not be terminated without prior notice; 436.18 (3) nonresidential parking services, whether on a 436.19 contractual, hourly, or other periodic basis, except for parking 436.20 at a meter; 436.21 (4) the granting of membership in a club, association, or 436.22 other organization if: 436.23 (i) the club, association, or other organization makes 436.24 available for the use of its members sports and athletic 436.25 facilities, without regard to whether a separate charge is 436.26 assessed for use of the facilities; and 436.27 (ii) use of the sports and athletic facility is not made 436.28 available to the general public on the same basis as it is made 436.29 available to members. 436.30 Granting of membership means both onetime initiation fees and 436.31 periodic membership dues. Sports and athletic facilities 436.32 include golf courses; tennis, racquetball, handball, and squash 436.33 courts; basketball and volleyball facilities; running tracks; 436.34 exercise equipment; swimming pools; and other similar athletic 436.35 or sports facilities; 436.36 (5) delivery of aggregate materials and concrete block by a 437.1 third party if the delivery would be subject to the sales tax if 437.2 provided by the seller of the aggregate material or concrete 437.3 block; and 437.4 (6) services as provided in this clause: 437.5 (i) laundry and dry cleaning services including cleaning, 437.6 pressing, repairing, altering, and storing clothes, linen 437.7 services and supply, cleaning and blocking hats, and carpet, 437.8 drapery, upholstery, and industrial cleaning. Laundry and dry 437.9 cleaning services do not include services provided by coin 437.10 operated facilities operated by the customer; 437.11 (ii) motor vehicle washing, waxing, and cleaning services, 437.12 including services provided by coin operated facilities operated 437.13 by the customer, and rustproofing, undercoating, and towing of 437.14 motor vehicles; 437.15 (iii) building and residential cleaning, maintenance, and 437.16 disinfecting and exterminating services; 437.17 (iv) detective, security, burglar, fire alarm, and armored 437.18 car services; but not including services performed within the 437.19 jurisdiction they serve by off-duty licensed peace officers as 437.20 defined in section 626.84, subdivision 1, or services provided 437.21 by a nonprofit organization for monitoring and electronic 437.22 surveillance of persons placed on in-home detention pursuant to 437.23 court order or under the direction of the Minnesota Department 437.24 of Corrections; 437.25 (v) pet grooming services; 437.26 (vi) lawn care, fertilizing, mowing, spraying and sprigging 437.27 services; garden planting and maintenance; tree, bush, and shrub 437.28 pruning, bracing, spraying, and surgery; indoor plant care; 437.29 tree, bush, shrub, and stump removal; and tree trimming for 437.30 public utility lines. Services performed under a construction 437.31 contract for the installation of shrubbery, plants, sod, trees, 437.32 bushes, and similar items are not taxable; 437.33 (vii) massages, except when provided by a licensed health 437.34 care facility or professional or upon written referral from a 437.35 licensed health care facility or professional for treatment of 437.36 illness, injury, or disease; and 438.1 (viii) the furnishing of lodging, board, and care services 438.2 for animals in kennels and other similar arrangements, but 438.3 excluding veterinary and horse boarding services. 438.4 In applying the provisions of this chapter, the terms 438.5 "tangible personal property" and "sales at retail" include 438.6 taxable services listed in clause (6), items (i) to (vi) and 438.7 (viii), and the provision of these taxable services, unless 438.8 specifically provided otherwise. Services performed by an 438.9 employee for an employer are not taxable. Services performed by 438.10 a partnership or association for another partnership or 438.11 association are not taxable if one of the entities owns or 438.12 controls more than 80 percent of the voting power of the equity 438.13 interest in the other entity. Services performed between 438.14 members of an affiliated group of corporations are not taxable. 438.15 For purposes of the preceding sentence, "affiliated group of 438.16 corporations" includes those entities that would be classified 438.17 as members of an affiliated group under United States Code, 438.18 title 26, section 1504, and that are eligible to file a 438.19 consolidated tax return for federal income tax purposes. 438.20 (h) A sale and a purchase includes the furnishing for a 438.21 consideration of tangible personal property or taxable services 438.22 by the United States or any of its agencies or 438.23 instrumentalities, or the state of Minnesota, its agencies, 438.24 instrumentalities, or political subdivisions. 438.25 (i) A sale and a purchase includes the furnishing for a 438.26 consideration of telecommunications services, including cable 438.27 television services and direct satellite services. 438.28 Telecommunications services are taxed to the extent allowed 438.29 under federal law. 438.30 (j) A sale and a purchase includes the furnishing for a 438.31 consideration of installation if the installation charges would 438.32 be subject to the sales tax if the installation were provided by 438.33 the seller of the item being installed. 438.34 (k) A sale and a purchase includes the rental of a vehicle 438.35 by a motor vehicle dealer to a customer when (1) the vehicle is 438.36 rented by the customer for a consideration, or (2) the motor 439.1 vehicle dealer is reimbursed pursuant to a service contract as 439.2 defined in section 65B.29, subdivision 1, clause (1). 439.3[EFFECTIVE DATE.] This section is effective the day 439.4 following final enactment. 439.5 Sec. 7. Minnesota Statutes 2004, section 297A.61, 439.6 subdivision 4, is amended to read: 439.7 Subd. 4. [RETAIL SALE.] (a) A "retail sale" means any 439.8 sale, lease, or rental for any purpose, other than resale, 439.9 sublease, or subrent of items by the purchaser in the normal 439.10 course of business as defined in subdivision 21. 439.11 (b) A sale of property used by the owner only by leasing it 439.12 to others or by holding it in an effort to lease it, and put to 439.13 no use by the owner other than resale after the lease or effort 439.14 to lease, is a sale of property for resale. 439.15 (c) A sale of master computer software that is purchased 439.16 and used to make copies for sale or lease is a sale of property 439.17 for resale. 439.18 (d) A sale of building materials, supplies, and equipment 439.19 to owners, contractors, subcontractors, or builders for the 439.20 erection of buildings or the alteration, repair, or improvement 439.21 of real property is a retail sale in whatever quantity sold, 439.22 whether the sale is for purposes of resale in the form of real 439.23 property or otherwise. 439.24 (e) A sale of carpeting, linoleum, or similar floor 439.25 covering to a person who provides for installation of the floor 439.26 covering is a retail sale and not a sale for resale since a sale 439.27 of floor covering which includes installation is a contract for 439.28 the improvement of real property. 439.29 (f) A sale of shrubbery, plants, sod, trees, and similar 439.30 items to a person who provides for installation of the items is 439.31 a retail sale and not a sale for resale since a sale of 439.32 shrubbery, plants, sod, trees, and similar items that includes 439.33 installation is a contract for the improvement of real property. 439.34 (g) A sale of tangible personal property that is awarded as 439.35 prizes is a retail sale and is not considered a sale of property 439.36 for resale. 440.1 (h) A sale of tangible personal property utilized or 440.2 employed in the furnishing or providing of services under 440.3 subdivision 3, paragraph (g), clause (1), including, but not 440.4 limited to, property given as promotional items, is a retail 440.5 sale and is not considered a sale of property for resale. 440.6 (i) A sale of tangible personal property used in conducting 440.7 lawful gambling under chapter 349 or the state lottery under 440.8 chapter 349A, including, but not limited to, property given as 440.9 promotional items, is a retail sale and is not considered a sale 440.10 of property for resale. 440.11 (j) A sale of machines, equipment, or devices that are used 440.12 to furnish, provide, or dispense goods or services, including, 440.13 but not limited to, coin-operated devices, is a retail sale and 440.14 is not considered a sale of property for resale. 440.15 (k) In the case of a lease, a retail sale occurs when an 440.16 obligation to make a lease payment becomes due under the terms 440.17 of the agreement or the trade practices of the lessor. 440.18 (l) In the case of a conditional sales contract, a retail 440.19 sale occurs upon the transfer of title or possession of the 440.20 tangible personal property. 440.21[EFFECTIVE DATE.] This section is effective the day 440.22 following final enactment. 440.23 Sec. 8. Minnesota Statutes 2004, section 297A.64, 440.24 subdivision 4, is amended to read: 440.25 Subd. 4. [EXEMPTIONS.] (a) The tax and the fee imposed by 440.26 this section do not apply to a lease or rental of (1) a vehicle 440.27 to be used by the lessee to provide a licensed taxi service; (2) 440.28 a hearse or limousine used in connection with a burial or 440.29 funeral service; or (3) a van designed or adapted primarily for 440.30 transporting property rather than passengers. The tax and the 440.31 fee imposed under this section do not apply when the lease or 440.32 rental of a vehicle is exempt from the tax imposed under section 440.33 297A.62, subdivision 1. 440.34 (b) The lessor may elect not to charge the fee imposed in 440.35 subdivision 2 if in the previous calendar year the lessor had no 440.36 more than 20 vehicles available for lease that would have been 441.1 subject to tax under this section, or no more than $50,000 in 441.2 gross receipts that would have been subject to tax under this 441.3 section. 441.4[EFFECTIVE DATE.] This section is effective the day 441.5 following final enactment. 441.6 Sec. 9. Minnesota Statutes 2004, section 297A.668, 441.7 subdivision 1, is amended to read: 441.8 Subdivision 1. [ APPLICABILITY.] The provisions of this 441.9 section apply regardless of the characterization of a product as 441.10 tangible personal property, a digital good, or a service; but do 441.11 not apply to telecommunications services,or the sales of motor 441.12 vehicles, watercraft, aircraft, modular homes, manufactured441.13homes, or mobile homes. These provisions only apply to 441.14 determine a seller's obligation to pay or collect and remit a 441.15 sales or use tax with respect to the seller's sale of a 441.16 product. These provisions do not affect the obligation of a 441.17 seller as purchaser to remit tax on the use of the product. 441.18[EFFECTIVE DATE.] This section is effective the day 441.19 following final enactment. 441.20 Sec. 10. Minnesota Statutes 2004, section 297A.668, 441.21 subdivision 5, is amended to read: 441.22 Subd. 5. [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 441.23 including lease or rental, of transportation equipment shall be 441.24 sourced the same as a retail sale in accordance with the 441.25 provisions of subdivision 2, notwithstanding the exclusion of 441.26 lease or rental in subdivision 2. 441.27 (b) "Transportation equipment" means any of the following: 441.28 (1) locomotives and railcars that are utilized for the 441.29 carriage of persons or property in interstate commerce;and/or441.30 (2) trucks and truck-tractors with a gross vehicle weight 441.31 rating (GVWR) of 10,001 pounds or greater, trailers, 441.32 semitrailers, or passenger buses that are: 441.33 (i) registered through the international registration plan; 441.34 and 441.35 (ii) operated under authority of a carrier authorized and 441.36 certified by the United States Department of Transportation or 442.1 another federal authority to engage in the carriage of persons 442.2 or property in interstate commerce; 442.3 (3) aircraft that are operated by air carriers authorized 442.4 and certificated by the United States Department of 442.5 Transportation or another federal or a foreign authority to 442.6 engage in the carriage of persons or property in interstate 442.7 commerce; or 442.8 (4) containers designed for use on and component parts 442.9 attached or secured on the transportation equipment described in 442.10 items (1) through (3). 442.11[EFFECTIVE DATE.] This section is effective for sales and 442.12 purchases made on or after January 1, 2004. 442.13 Sec. 11. Minnesota Statutes 2004, section 297A.67, 442.14 subdivision 2, is amended to read: 442.15 Subd. 2. [FOOD AND FOOD INGREDIENTS.] Except as otherwise 442.16 provided in this subdivision, food and food ingredients are 442.17 exempt. For purposes of this subdivision, "food" and "food 442.18 ingredients" mean substances, whether in liquid, concentrated, 442.19 solid, frozen, dried, or dehydrated form, that are sold for 442.20 ingestion or chewing by humans and are consumed for their taste 442.21 or nutritional value. Food and food ingredients exempt under 442.22 this subdivision do not include candy, soft drinks, food sold 442.23 through vending machines, dietary supplements, and prepared 442.24 foods. Food and food ingredients do not include alcoholic 442.25 beverages, dietary supplements,and tobacco. For purposes of 442.26 this subdivision, "alcoholic beverages" means beverages that are 442.27 suitable for human consumption and contain one-half of one 442.28 percent or more of alcohol by volume. For purposes of this 442.29 subdivision, "tobacco" means cigarettes, cigars, chewing or pipe 442.30 tobacco, or any other item that contains tobacco. For purposes 442.31 of this subdivision, "dietary supplements" means any product, 442.32 other than tobacco, intended to supplement the diet that: 442.33 (1) contains one or more of the following dietary 442.34 ingredients: 442.35 (i) a vitamin; 442.36 (ii) a mineral; 443.1 (iii) an herb or other botanical; 443.2 (iv) an amino acid; 443.3 (v) a dietary substance for use by humans to supplement the 443.4 diet by increasing the total dietary intake; and 443.5 (vi) a concentrate, metabolite, constituent, extract, or 443.6 combination of any ingredient described in items (i) to (v); 443.7 (2) is intended for ingestion in tablet, capsule, powder, 443.8 softgel, gelcap, or liquid form, or if not intended for 443.9 ingestion in such form, is not represented as conventional food 443.10 and is not represented for use as a sole item of a meal or of 443.11 the diet; and 443.12 (3) is required to be labeled as a dietary supplement, 443.13 identifiable by the supplement facts box found on the label and 443.14 as required pursuant to Code of Federal Regulations, title 21, 443.15 section 101.36. 443.16[EFFECTIVE DATE.] This section is effective for sales made 443.17 on or after the day following final enactment. 443.18 Sec. 12. Minnesota Statutes 2004, section 297A.68, 443.19 subdivision 2, is amended to read: 443.20 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 443.21 (a) Materials stored, used, or consumed in industrial production 443.22 of personal property intended to be sold ultimately at retail 443.23 are exempt, whether or not the item so used becomes an 443.24 ingredient or constituent part of the property produced. 443.25 Materials that qualify for this exemption include, but are not 443.26 limited to, the following: 443.27 (1) chemicals, including chemicals used for cleaning food 443.28 processing machinery and equipment; 443.29 (2) materials, including chemicals, fuels, and electricity 443.30 purchased by persons engaged in industrial production to treat 443.31 waste generated as a result of the production process; 443.32 (3) fuels, electricity, gas, and steam used or consumed in 443.33 the production process, except that electricity, gas, or steam 443.34 used for space heating, cooling, or lighting is exempt if (i) it 443.35 is in excess of the average climate control or lighting for the 443.36 production area, and (ii) it is necessary to produce that 444.1 particular product; 444.2 (4) petroleum products and lubricants; 444.3 (5) packaging materials, including returnable containers 444.4 used in packaging food and beverage products; 444.5 (6) accessory tools, equipment, and other items that are 444.6 separate detachable units with an ordinary useful life of less 444.7 than 12 months used in producing a direct effect upon the 444.8 product; and 444.9 (7) the following materials, tools, and equipment used in 444.10 metalcasting: crucibles, thermocouple protection sheaths and 444.11 tubes, stalk tubes, refractory materials, molten metal filters 444.12 and filter boxes, degassing lances, and base blocks. 444.13 (b) This exemption does not include: 444.14 (1) machinery, equipment, implements, tools, accessories, 444.15 appliances, contrivances and furniture and fixtures, except 444.16 those listed in paragraph (a), clause (6); and 444.17 (2) petroleum and special fuels used in producing or 444.18 generating power for propelling ready-mixed concrete trucks on 444.19 the public highways of this state. 444.20 (c) Industrial production includes, but is not limited to, 444.21 research, development, design or production of any tangible 444.22 personal property, manufacturing, processing (other than by 444.23 restaurants and consumers) of agricultural products (whether 444.24 vegetable or animal), commercial fishing, refining, smelting, 444.25 reducing, brewing, distilling, printing, mining, quarrying, 444.26 lumbering, generating electricity, the production of road 444.27 building materials, and the research, development, design, or 444.28 production of computer software. Industrial production does not 444.29 include painting, cleaning, repairing or similar processing of 444.30 property except as part of the original manufacturing process. 444.31 Industrial production does not include the furnishing of 444.32 services listed in section 297A.61, subdivision 3, paragraph 444.33 (g), clause (6), items (i) to (vi) and (viii). 444.34[EFFECTIVE DATE.] This section is effective the day 444.35 following final enactment. 444.36 Sec. 13. Minnesota Statutes 2004, section 297A.68, 445.1 subdivision 5, is amended to read: 445.2 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 445.3 exempt. The tax must be imposed and collected as if the rate 445.4 under section 297A.62, subdivision 1, applied, and then refunded 445.5 in the manner provided in section 297A.75. 445.6 "Capital equipment" means machinery and equipment purchased 445.7 or leased, and used in this state by the purchaser or lessee 445.8 primarily for manufacturing, fabricating, mining, or refining 445.9 tangible personal property to be sold ultimately at retail if 445.10 the machinery and equipment are essential to the integrated 445.11 production process of manufacturing, fabricating, mining, or 445.12 refining. Capital equipment also includes machinery and 445.13 equipment used primarily to electronically transmit results 445.14 retrieved by a customer of an on-line computerized data 445.15 retrieval system. 445.16 (b) Capital equipment includes, but is not limited to: 445.17 (1) machinery and equipment used to operate, control, or 445.18 regulate the production equipment; 445.19 (2) machinery and equipment used for research and 445.20 development, design, quality control, and testing activities; 445.21 (3) environmental control devices that are used to maintain 445.22 conditions such as temperature, humidity, light, or air pressure 445.23 when those conditions are essential to and are part of the 445.24 production process; 445.25 (4) materials and supplies used to construct and install 445.26 machinery or equipment; 445.27 (5) repair and replacement parts, including accessories, 445.28 whether purchased as spare parts, repair parts, or as upgrades 445.29 or modifications to machinery or equipment; 445.30 (6) materials used for foundations that support machinery 445.31 or equipment; 445.32 (7) materials used to construct and install special purpose 445.33 buildings used in the production process; 445.34 (8) ready-mixed concrete equipment in which the ready-mixed 445.35 concrete is mixed as part of the delivery process regardless if 445.36 mounted on a chassis, repair parts for ready-mixed concrete 446.1 trucks, and leases of ready-mixed concrete trucks; and 446.2 (9) machinery or equipment used for research, development, 446.3 design, or production of computer software. 446.4 (c) Capital equipment does not include the following: 446.5 (1) motor vehicles taxed under chapter 297B; 446.6 (2) machinery or equipment used to receive or store raw 446.7 materials; 446.8 (3) building materials, except for materials included in 446.9 paragraph (b), clauses (6) and (7); 446.10 (4) machinery or equipment used for nonproduction purposes, 446.11 including, but not limited to, the following: plant security, 446.12 fire prevention, first aid, and hospital stations; support 446.13 operations or administration; pollution control; and plant 446.14 cleaning, disposal of scrap and waste, plant communications, 446.15 space heating, cooling, lighting, or safety; 446.16 (5) farm machinery and aquaculture production equipment as 446.17 defined by section 297A.61, subdivisions 12 and 13; 446.18 (6) machinery or equipment purchased and installed by a 446.19 contractor as part of an improvement to real property;or446.20 (7) machinery and equipment used by restaurants in the 446.21 furnishing, preparing, or serving of prepared foods as defined 446.22 in section 297A.61, subdivision 31; 446.23 (8) machinery and equipment used to furnish the services 446.24 listed in section 297A.61, subdivision 3, paragraph (g), clause 446.25 (6), items (i) to (vi) and (viii); or 446.26 (9) any other item that is not essential to the integrated 446.27 process of manufacturing, fabricating, mining, or refining. 446.28 (d) For purposes of this subdivision: 446.29 (1) "Equipment" means independent devices or tools separate 446.30 from machinery but essential to an integrated production 446.31 process, including computers and computer software, used in 446.32 operating, controlling, or regulating machinery and equipment; 446.33 and any subunit or assembly comprising a component of any 446.34 machinery or accessory or attachment parts of machinery, such as 446.35 tools, dies, jigs, patterns, and molds. 446.36 (2) "Fabricating" means to make, build, create, produce, or 447.1 assemble components or property to work in a new or different 447.2 manner. 447.3 (3) "Integrated production process" means a process or 447.4 series of operations through which tangible personal property is 447.5 manufactured, fabricated, mined, or refined. For purposes of 447.6 this clause, (i) manufacturing begins with the removal of raw 447.7 materials from inventory and ends when the last process prior to 447.8 loading for shipment has been completed; (ii) fabricating begins 447.9 with the removal from storage or inventory of the property to be 447.10 assembled, processed, altered, or modified and ends with the 447.11 creation or production of the new or changed product; (iii) 447.12 mining begins with the removal of overburden from the site of 447.13 the ores, minerals, stone, peat deposit, or surface materials 447.14 and ends when the last process before stockpiling is completed; 447.15 and (iv) refining begins with the removal from inventory or 447.16 storage of a natural resource and ends with the conversion of 447.17 the item to its completed form. 447.18 (4) "Machinery" means mechanical, electronic, or electrical 447.19 devices, including computers and computer software, that are 447.20 purchased or constructed to be used for the activities set forth 447.21 in paragraph (a), beginning with the removal of raw materials 447.22 from inventory through completion of the product, including 447.23 packaging of the product. 447.24 (5) "Machinery and equipment used for pollution control" 447.25 means machinery and equipment used solely to eliminate, prevent, 447.26 or reduce pollution resulting from an activity described in 447.27 paragraph (a). 447.28 (6) "Manufacturing" means an operation or series of 447.29 operations where raw materials are changed in form, composition, 447.30 or condition by machinery and equipment and which results in the 447.31 production of a new article of tangible personal property. For 447.32 purposes of this subdivision, "manufacturing" includes the 447.33 generation of electricity or steam to be sold at retail. 447.34 (7) "Mining" means the extraction of minerals, ores, stone, 447.35 or peat. 447.36 (8) "On-line data retrieval system" means a system whose 448.1 cumulation of information is equally available and accessible to 448.2 all its customers. 448.3 (9) "Primarily" means machinery and equipment used 50 448.4 percent or more of the time in an activity described in 448.5 paragraph (a). 448.6 (10) "Refining" means the process of converting a natural 448.7 resource to an intermediate or finished product, including the 448.8 treatment of water to be sold at retail. 448.9[EFFECTIVE DATE.] This section is effective the day 448.10 following final enactment. 448.11 Sec. 14. Minnesota Statutes 2004, section 297A.68, 448.12 subdivision 35, is amended to read: 448.13 Subd. 35. [TELECOMMUNICATIONS EQUIPMENT.] (a) 448.14 Telecommunications machinery and equipment purchased or leased 448.15 for use directly by a telecommunications service provider 448.16 primarily in the provision of telecommunications services that 448.17 are ultimately to be sold at retail are exempt, regardless of 448.18 whether purchased by the owner, a contractor, or a subcontractor. 448.19 (b) For purposes of this subdivision, "telecommunications 448.20 machinery and equipment" includes, but is not limited to: 448.21 (1) machinery, equipment, and fixtures utilized in 448.22 receiving, initiating, amplifying, processing, transmitting, 448.23 retransmitting, recording, switching, or monitoring 448.24 telecommunications services, such as computers, transformers, 448.25 amplifiers, routers, bridges, repeaters, multiplexers, and other 448.26 items performing comparable functions; 448.27 (2) machinery, equipment, and fixtures used in the 448.28 transportation of telecommunications services, radio 448.29 transmitters and receivers, satellite equipment, microwave 448.30 equipment, and other transporting media, but not wire, cable, 448.31 fiber, poles, or conduit; 448.32 (3) ancillary machinery, equipment, and fixtures that 448.33 regulate, control, protect, or enable the machinery in clauses 448.34 (1) and (2) to accomplish its intended function, such as 448.35 auxiliary power supply, test equipment, towers, heating, 448.36 ventilating, and air conditioning equipment necessary to the 449.1 operation of the telecommunications equipment; and software 449.2 necessary to the operation of the telecommunications equipment; 449.3 and 449.4 (4) repair and replacement parts, including accessories, 449.5 whether purchased as spare parts, repair parts, or as upgrades 449.6 or modifications to qualified machinery or equipment. 449.7 (c) For purposes of this subdivision, "telecommunications 449.8 services" means telecommunications services as defined in 449.9 section 297A.61, subdivision 24,paragraphparagraphs (a),only449.10 (c), and (d). 449.11[EFFECTIVE DATE.] This section is effective the day 449.12 following final enactment. 449.13 Sec. 15. Minnesota Statutes 2004, section 297A.68, 449.14 subdivision 39, is amended to read: 449.15 Subd. 39. [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 449.16 tangible personal property or services is exempt from tax or a 449.17 tax rate increase for a period of six months from the effective 449.18 date of the law change that results in the imposition of the tax 449.19 or the tax rate increase under this chapter if: 449.20 (1) the act imposing the tax or increasing the tax rate 449.21 does not have transitional effective date language for existing 449.22 construction contracts and construction bids; and 449.23 (2) the requirements of paragraph (b) are met. 449.24 (b) A sale is tax exempt under paragraph (a) if it meets 449.25 the requirements of either clause (1) or (2): 449.26 (1) For a construction contract: 449.27 (i) the goods or services sold must be used for the 449.28 performance of a bona fide written lump sum or fixed price 449.29 construction contract; 449.30 (ii) the contract must be entered into before the date the 449.31 goods or services become subject to the sales tax or the tax 449.32 rate was increased; 449.33 (iii) the contract must not provide for allocation of 449.34 future taxes; and 449.35 (iv) for each qualifying contract the contractor must give 449.36 the seller documentation of the contract on which an exemption 450.1 is to be claimed. 450.2 (2) For a construction bid: 450.3 (i) the goods or services sold must be used pursuant to an 450.4 obligation of a bid or bids; 450.5 (ii) the bid or bids must be submitted and accepted before 450.6 the date the goods or services became subject to the sales 450.7 tax or the tax rate was increased; 450.8 (iii) the bid or bids must not be able to be withdrawn, 450.9 modified, or changed without forfeiting a bond; and 450.10 (iv) for each qualifying bid, the contractor must give the 450.11 seller documentation of the bid on which an exemption is to be 450.12 claimed. 450.13[EFFECTIVE DATE.] This section is effective the day 450.14 following final enactment. 450.15 Sec. 16. Minnesota Statutes 2004, section 297A.99, 450.16 subdivision 4, is amended to read: 450.17 Subd. 4. [TAX BASE.] (a) The tax applies to sales taxable 450.18 under this chapter that occur within the political subdivision. 450.19 (b) Taxable goods or services are subject to a political 450.20 subdivision's sales tax, if they areperformed either:450.21(1) within the political subdivision, or450.22(2) partly within and partly without the political450.23subdivision and more of the service is performed within the450.24political subdivision, based on the cost of performancesourced 450.25 to the political subdivision pursuant to section 297A.668. 450.26[EFFECTIVE DATE.] This section is effective for sales made 450.27 on or after January 1, 2004. 450.28 Sec. 17. Minnesota Statutes 2004, section 297A.99, 450.29 subdivision 7, is amended to read: 450.30 Subd. 7. [EXEMPTIONS.] (a) All goods or services that are 450.31 otherwise exempt from taxation under this chapter are exempt 450.32 from a political subdivision's tax. 450.33 (b) The gross receipts from the sale of tangible personal 450.34 property that meets therequirementrequirements of section 450.35 297A.68,subdivisionsubdivisions 11, 15, and 16 are exempt, 450.36 except the qualification test applies based on the boundaries of 451.1 the political subdivision instead of the state of Minnesota. 451.2 (c) All mobile transportation equipment, and parts and 451.3 accessories attached to or to be attached to the equipment are 451.4 exempt, if purchased by a holder of a motor carrier direct pay 451.5 permit under section 297A.90. 451.6[EFFECTIVE DATE.] This section is effective the day 451.7 following final enactment. 451.8 Sec. 18. [REPEALER.] 451.9 Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, 451.10 subparts 5 and 6; 8130.0400, subpart 9; 8130.1200, subparts 5 451.11 and 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1 451.12 and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200; 451.13 8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 451.14 5; and 8130.8800, subpart 4, are repealed. 451.15[EFFECTIVE DATE.] This section is effective the day 451.16 following final enactment. 451.17 ARTICLE 16 451.18 DEPARTMENT OF REVENUE 451.19 SPECIAL TAXES - SF1683 451.20 Section 1. Minnesota Statutes 2004, section 287.04, is 451.21 amended to read: 451.22 287.04 [EXEMPTIONS.] 451.23 The tax imposed by section 287.035 does not apply to: 451.24 (a) A decree of marriage dissolution or an instrument made 451.25 pursuant to it. 451.26 (b) A mortgage given to correct a misdescription of the 451.27 mortgaged property. 451.28 (c) A mortgage or other instrument that adds additional 451.29 security for the same debt for which mortgage registry tax has 451.30 been paid. 451.31 (d) A contract for the conveyance of any interest in real 451.32 property, including a contract for deed. 451.33 (e) A mortgage secured by real property subject to the 451.34 minerals production tax of sections 298.24 to 298.28. 451.35 (f) The principal amount of a mortgage loan made under a 451.36 low and moderate income or other affordable housing program, if 452.1 the mortgagee is a federal, state, or local government agency. 452.2 (g) Mortgages granted by fraternal benefit societies 452.3 subject to section 64B.24. 452.4 (h) A mortgage amendment or extension, as defined in 452.5 section 287.01. 452.6 (i) An agricultural mortgage if the proceeds of the loan 452.7 secured by the mortgage are used to acquire or improve real 452.8 property classified under section 273.13, subdivision 23, 452.9 paragraph (a), or (b), clause (1), (2), or (3). 452.10 (j) A mortgage on an armory building as set forth in 452.11 section 193.147. 452.12[EFFECTIVE DATE.] This section is effective the day 452.13 following final enactment. 452.14 Sec. 2. Minnesota Statutes 2004, section 295.50, is 452.15 amended by adding a subdivision to read: 452.16 Subd. 1a. [BLOOD COMPONENTS.] "Blood components" means the 452.17 parts of the blood that are separated from blood by physical or 452.18 mechanical means and are intended for transfusion. Blood 452.19 components do not include blood derivatives. 452.20[EFFECTIVE DATE.] This section is effective for gross 452.21 revenues received after December 31, 2004. 452.22 Sec. 3. Minnesota Statutes 2004, section 295.50, 452.23 subdivision 3, is amended to read: 452.24 Subd. 3. [GROSS REVENUES.] "Gross revenues" are total 452.25 amounts received in money or otherwise by: 452.26 (1) a hospital for patient services; 452.27 (2) a surgical center for patient services; 452.28 (3) a health care provider, other than a staff model health 452.29 carrier, for patient services; 452.30 (4) a wholesale drug distributor for sale or distribution 452.31 of legend drugs that are delivered in Minnesota by the wholesale 452.32 drug distributor, by common carrier, or by mail, unless the 452.33 legend drugs are delivered to another wholesale drug distributor 452.34 who sells legend drugs exclusively at wholesale. Legend drugs 452.35 do not include nutritional products as defined in Minnesota 452.36 Rules, part 9505.0325, and blood and blood components; and 453.1 (5) a staff model health plan company as gross premiums for 453.2 enrollees, co-payments, deductibles, coinsurance, and fees for 453.3 patient services. 453.4[EFFECTIVE DATE.] This section is effective for gross 453.5 revenues received after December 31, 2004. 453.6 Sec. 4. Minnesota Statutes 2004, section 295.53, 453.7 subdivision 1, is amended to read: 453.8 Subdivision 1. [EXEMPTIONS.] (a) The following payments 453.9 are excluded from the gross revenues subject to the hospital, 453.10 surgical center, or health care provider taxes under sections 453.11 295.50 to 295.59: 453.12 (1) payments received for services provided under the 453.13 Medicare program, including payments received from the 453.14 government, and organizations governed by sections 1833 and 1876 453.15 of title XVIII of the federal Social Security Act, United States 453.16 Code, title 42, section 1395, and enrollee deductibles, 453.17 coinsurance, and co-payments, whether paid by the Medicare 453.18 enrollee or by a Medicare supplemental coverage as defined in 453.19 section 62A.011, subdivision 3, clause (10), or by Medicaid 453.20 payments under title XIX of the federal Social Security Act. 453.21 Payments for services not covered by Medicare are taxable; 453.22 (2) payments received for home health care services; 453.23 (3) payments received from hospitals or surgical centers 453.24 for goods and services on which liability for tax is imposed 453.25 under section 295.52 or the source of funds for the payment is 453.26 exempt under clause (1), (7), (10), or (14); 453.27 (4) payments received from health care providers for goods 453.28 and services on which liability for tax is imposed under this 453.29 chapter or the source of funds for the payment is exempt under 453.30 clause (1), (7), (10), or (14); 453.31 (5) amounts paid for legend drugs, other than nutritional 453.32 products and blood and blood components, to a wholesale drug 453.33 distributor who is subject to tax under section 295.52, 453.34 subdivision 3, reduced by reimbursements received for legend 453.35 drugs otherwise exempt under this chapter; 453.36 (6) payments received by a health care provider or the 454.1 wholly owned subsidiary of a health care provider for care 454.2 provided outside Minnesota; 454.3 (7) payments received from the chemical dependency fund 454.4 under chapter 254B; 454.5 (8) payments received in the nature of charitable donations 454.6 that are not designated for providing patient services to a 454.7 specific individual or group; 454.8 (9) payments received for providing patient services 454.9 incurred through a formal program of health care research 454.10 conducted in conformity with federal regulations governing 454.11 research on human subjects. Payments received from patients or 454.12 from other persons paying on behalf of the patients are subject 454.13 to tax; 454.14 (10) payments received from any governmental agency for 454.15 services benefiting the public, not including payments made by 454.16 the government in its capacity as an employer or insurer or 454.17 payments made by the government for services provided under 454.18 general assistance medical care, the MinnesotaCare program, or 454.19 the medical assistance program governed by title XIX of the 454.20 federal Social Security Act, United States Code, title 42, 454.21 sections 1396 to 1396v; 454.22 (11) government payments received by the commissioner of 454.23 human services for state-operated services; 454.24 (12) payments received by a health care provider for 454.25 hearing aids and related equipment or prescription eyewear 454.26 delivered outside of Minnesota; 454.27 (13) payments received by an educational institution from 454.28 student tuition, student activity fees, health care service 454.29 fees, government appropriations, donations, or grants, and for 454.30 services identified in and provided under an individualized 454.31 education plan as defined in section 256B.0625 or Code of 454.32 Federal Regulations, chapter 34, section 300.340(a). Fee for 454.33 service payments and payments for extended coverage are taxable; 454.34 and 454.35 (14) payments received under the federal Employees Health 454.36 Benefits Act, United States Code, title 5, section 8909(f), as 455.1 amended by the Omnibus Reconciliation Act of 1990. Enrollee 455.2 deductibles, coinsurance, and co-payments are subject to tax. 455.3 (b) Payments received by wholesale drug distributors for 455.4 legend drugs sold directly to veterinarians or veterinary bulk 455.5 purchasing organizations are excluded from the gross revenues 455.6 subject to the wholesale drug distributor tax under sections 455.7 295.50 to 295.59. 455.8[EFFECTIVE DATE.] The change made to paragraph (a), clause 455.9 (5), of this section is effective for amounts paid for blood and 455.10 blood components after December 31, 2004. The change made to 455.11 paragraph (a), clause (14), of this section is effective for 455.12 enrollee deductibles, coinsurance, and co-payments received 455.13 under the federal Employees Health Benefits Act on or after the 455.14 day following final enactment. 455.15 Sec. 5. Minnesota Statutes 2004, section 295.60, 455.16 subdivision 3, is amended to read: 455.17 Subd. 3. [PAYMENT.] (a) Each furrier shall make estimated 455.18 payments of the taxes for the calendar year in quarterly 455.19 installments to the commissioner by April 15, July 15, October 455.20 15, and January 15 of the following calendar year. 455.21 (b) Estimated tax payments are not required if: 455.22 (1) the tax for the current calendar year is less than 455.23 $500; or 455.24 (2) the tax for the previous calendar year is less than 455.25 $500, if the taxpayer had a tax liability and was doing business 455.26 the entire year. 455.27 (c) Underpayment of estimated installments bear interest at 455.28 the rate specified in section 270.75, from the due date of the 455.29 payment until paid or until the due date of the annual return, 455.30 whichever comes first. An underpayment of an estimated 455.31 installment is the difference between the amount paid and the 455.32 lesser of (1)90 percent of one-quarter of the tax for the455.33calendar yearthe tax for the actual gross revenues received 455.34 during the quarter, or (2) one-quarter of the total tax for the 455.35 previous calendar year if the taxpayer had a tax liability and 455.36 was doing business the entire year. 456.1[EFFECTIVE DATE.] This section is effective for gross 456.2 revenues received after December 31, 2005. 456.3 Sec. 6. Minnesota Statutes 2004, section 296A.09, is 456.4 amended by adding a subdivision to read: 456.5 Subd. 6. [EXEMPTIONS.] The provisions of subdivisions 1 456.6 and 2 do not apply to aviation gasoline or jet fuel purchased by 456.7 an ambulance service licensed under chapter 144E. 456.8[EFFECTIVE DATE.] This section is effective for purchases 456.9 made on or after July 1, 2005. 456.10 Sec. 7. Minnesota Statutes 2004, section 296A.22, is 456.11 amended by adding a subdivision to read: 456.12 Subd. 9. [ABATEMENT OF PENALTY.] (a) The commissioner may 456.13 by written order abate any penalty imposed under this section, 456.14 if in the commissioner's opinion there is reasonable cause to do 456.15 so. 456.16 (b) A request for abatement of penalty must be filed with 456.17 the commissioner within 60 days of the date the notice stating 456.18 that a penalty has been imposed was mailed to the taxpayer's 456.19 last known address. 456.20 (c) If the commissioner issues an order denying a request 456.21 for abatement of penalty, the taxpayer may file an 456.22 administrative appeal as provided in section 296A.25 or appeal 456.23 to Tax Court as provided in section 271.06. If the commissioner 456.24 does not issue an order on the abatement request within 60 days 456.25 from the date the request is received, the taxpayer may appeal 456.26 to Tax Court as provided in section 271.06. 456.27[EFFECTIVE DATE.] This section is effective for penalties 456.28 imposed on or after the day following final enactment. 456.29 Sec. 8. Minnesota Statutes 2004, section 297E.01, 456.30 subdivision 5, is amended to read: 456.31 Subd. 5. [DISTRIBUTOR.] "Distributor" means a distributor 456.32 as defined in section 349.12, subdivision 11, or a person or 456.33 linked bingo game provider who markets, sells, or provides 456.34 gambling product to a person or entity for resale or use at the 456.35 retail level. 456.36[EFFECTIVE DATE.] This section is effective the day 457.1 following final enactment. 457.2 Sec. 9. Minnesota Statutes 2004, section 297E.01, 457.3 subdivision 7, is amended to read: 457.4 Subd. 7. [GAMBLING PRODUCT.] "Gambling product" means 457.5 bingo hard cards, bingo paper, orsheets, or linked bingo paper 457.6 sheets; pull-tabs; tipboards; paddletickets and paddleticket 457.7 cards; raffle tickets; or any other ticket, card, board, 457.8 placard, device, or token that represents a chance, for which 457.9 consideration is paid, to win a prize. 457.10[EFFECTIVE DATE.] This section is effective the day 457.11 following final enactment. 457.12 Sec. 10. Minnesota Statutes 2004, section 297E.01, is 457.13 amended by adding a subdivision to read: 457.14 Subd. 9a. [LINKED BINGO GAME.] "Linked bingo game" means a 457.15 bingo game played at two or more locations where licensed 457.16 organizations are authorized to conduct bingo, when there is a 457.17 common prize pool and a common selection of numbers or symbols 457.18 conducted at one location, and when the results of the selection 457.19 are transmitted to all participating locations by satellite, 457.20 telephone, or other means by a linked bingo game provider. 457.21[EFFECTIVE DATE.] This section is effective the day 457.22 following final enactment. 457.23 Sec. 11. Minnesota Statutes 2004, section 297E.01, is 457.24 amended by adding a subdivision to read: 457.25 Subd. 9b. [LINKED BINGO GAME PROVIDER.] "Linked bingo game 457.26 provider" means any person who provides the means to link bingo 457.27 prizes in a linked bingo game, who provides linked bingo paper 457.28 sheets to the participating organizations, who provides linked 457.29 bingo prize management, and who provides the linked bingo game 457.30 system. 457.31[EFFECTIVE DATE.] This section is effective the day 457.32 following final enactment. 457.33 Sec. 12. Minnesota Statutes 2004, section 297E.06, 457.34 subdivision 2, is amended to read: 457.35 Subd. 2. [BUSINESS RECORDS.] An organization shall 457.36 maintain records supporting the gambling activity reported to 458.1 the commissioner. Records include, but are not limited to, the 458.2 following items: 458.3 (1) all winning and unsold tickets, cards, or stubs for 458.4 pull-tab, tipboard, paddlewheel, and raffle games; 458.5 (2) all reports and statements, including checker's 458.6 records, for each bingo occasion; 458.7 (3) all cash journals and ledgers, deposit slips, register 458.8 tapes, and bank statements supporting gambling activity 458.9 receipts; 458.10 (4) all invoices that represent purchases of gambling 458.11 product; 458.12 (5) all canceled checks or copies of substitute checks as 458.13 defined in Public Law 108-100, section 3, check recorders, 458.14 journals and ledgers, vouchers, invoices, bank statements, and 458.15 other documents supporting gambling activity expenditures; and 458.16 (6) all organizational meeting minutes. 458.17 All records required to be kept by this section must be 458.18 preserved by the organization for at least 3-1/2 years and may 458.19 be inspected by the commissioner of revenue at any reasonable 458.20 time without notice or a search warrant. 458.21[EFFECTIVE DATE.] This section is effective July 1, 2005. 458.22 Sec. 13. Minnesota Statutes 2004, section 297E.07, is 458.23 amended to read: 458.24 297E.07 [INSPECTION RIGHTS.] 458.25 At any reasonable time, without notice and without a search 458.26 warrant, the commissioner may enter a place of business of a 458.27 manufacturer, distributor,ororganization, or linked bingo game 458.28 provider; any site from which pull-tabs or tipboards or other 458.29 gambling equipment or gambling product are being manufactured, 458.30 stored, or sold; or any site at which lawful gambling is being 458.31 conducted, and inspect the premises, books, records, and other 458.32 documents required to be kept under this chapter to determine 458.33 whether or not this chapter is being fully complied with. If 458.34 the commissioner is denied free access to or is hindered or 458.35 interfered with in making an inspection of the place of 458.36 business, books, or records, the permit of the distributor may 459.1 be revoked by the commissioner, and the license of the 459.2 manufacturer, the distributor,orthe organization, or linked 459.3 bingo game provider may be revoked by the board. 459.4[EFFECTIVE DATE.] This section is effective the day 459.5 following final enactment. 459.6 Sec. 14. Minnesota Statutes 2004, section 297F.08, 459.7 subdivision 12, is amended to read: 459.8 Subd. 12. [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 459.9 person may not transport or cause to be transported from this 459.10 state cigarettes for sale in another state without first 459.11 affixing to the cigarettes the stamp required by the state in 459.12 which the cigarettes are to be sold or paying any other excise 459.13 tax on the cigarettes imposed by the state in which the 459.14 cigarettes are to be sold. 459.15 (b) A person may not affix to cigarettes the stamp required 459.16 by another state or pay any other excise tax on the cigarettes 459.17 imposed by another state if the other state prohibits stamps 459.18 from being affixed to the cigarettes, prohibits the payment of 459.19 any other excise tax on the cigarettes, or prohibits the sale of 459.20 the cigarettes. 459.21 (c) Not later than 15 days after the end of each calendar 459.22 quarter, a person who transports or causes to be transported 459.23 from this state cigarettes for sale in another state shall 459.24 submit to the commissioner a report identifying the quantity and 459.25 style of each brand of the cigarettes transported or caused to 459.26 be transported in the preceding calendar quarter, and the name 459.27 and address of each recipient of the cigarettes. This reporting 459.28 requirement only applies to cigarettes manufactured by companies 459.29 that are not original or subsequent participating manufacturers 459.30 in the Master Settlement Agreement with other states. 459.31 (d) For purposes of this section, "person" has the meaning 459.32 given in section 297F.01, subdivision 12. Person does not 459.33 include any common or contract carrier, or public warehouse that 459.34 is not owned, in whole or in part, directly or indirectly by 459.35 such person, and does not include a manufacturer thathas459.36entered intois an original or subsequent participating 460.1 manufacturer in the Master Settlement Agreement with other 460.2 states. 460.3[EFFECTIVE DATE.] This section is effective the day 460.4 following final enactment. 460.5 Sec. 15. Minnesota Statutes 2004, section 297F.08, is 460.6 amended by adding a subdivision to read: 460.7 Subd. 13. [BOND.] The commissioner may require the 460.8 furnishing of a corporate surety bond or a certified check in an 460.9 amount suitable to guarantee payment of the tax stamps purchased 460.10 by a distributor. The bond or certified check may be required 460.11 when the commissioner determines that a distributor is (1) 460.12 delinquent in the filing of any return required under this 460.13 chapter, or (2) delinquent in the payment of any uncontested tax 460.14 liability under this chapter. The distributor shall furnish the 460.15 bond or certified check for a period of two years, after which, 460.16 if the distributor has not been delinquent in the filing of any 460.17 returns required under this chapter, or delinquent in the paying 460.18 of any tax under this chapter, a bond or certified check is no 460.19 longer required. The commissioner at any time may apply the 460.20 bond or certified check to any unpaid taxes or fees, including 460.21 interest and penalties, owed to the department by the 460.22 distributor. 460.23[EFFECTIVE DATE.] This section is effective the day 460.24 following final enactment. 460.25 Sec. 16. Minnesota Statutes 2004, section 297F.09, 460.26 subdivision 1, is amended to read: 460.27 Subdivision 1. [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 460.28 or before the 18th day of each calendar month, a distributor 460.29 with a place of business in this state shall file a return with 460.30 the commissioner showing the quantity of cigarettes manufactured 460.31 or brought in from outside the state or purchased during the 460.32 preceding calendar month and the quantity of cigarettes sold or 460.33 otherwise disposed of in this state and outside this state 460.34 during that month. A licensed distributor outside this state 460.35 shall in like manner file a return showing the quantity of 460.36 cigarettes shipped or transported into this state during the 461.1 preceding calendar month. Returns must be made in the form and 461.2 manner prescribed by the commissioner and must contain any other 461.3 information required by the commissioner. The return must be 461.4 accompanied by a remittance for the full unpaid tax liability 461.5 shown by it.The return for the May liability and 85 percent of461.6the estimated June liability is due on the date payment of the461.7tax is due.For distributors subject to the accelerated tax 461.8 payment requirements in subdivision 10, the return for the May 461.9 liability is due two business days before June 30th of the year 461.10 and the return for the June liability is due on or before August 461.11 18th of the year. 461.12[EFFECTIVE DATE.] This section is effective the day 461.13 following final enactment. 461.14 Sec. 17. Minnesota Statutes 2004, section 297F.09, 461.15 subdivision 2, is amended to read: 461.16 Subd. 2. [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 461.17 On or before the 18th day of each calendar month, a distributor 461.18 with a place of business in this state shall file a return with 461.19 the commissioner showing the quantity and wholesale sales price 461.20 of each tobacco product: 461.21 (1) brought, or caused to be brought, into this state for 461.22 sale; and 461.23 (2) made, manufactured, or fabricated in this state for 461.24 sale in this state, during the preceding calendar month. 461.25 Every licensed distributor outside this state shall in like 461.26 manner file a return showing the quantity and wholesale sales 461.27 price of each tobacco product shipped or transported to 461.28 retailers in this state to be sold by those retailers, during 461.29 the preceding calendar month. Returns must be made in the form 461.30 and manner prescribed by the commissioner and must contain any 461.31 other information required by the commissioner. The return must 461.32 be accompanied by a remittance for the full tax liability 461.33 shown.The return for the May liability and 85 percent of the461.34estimated June liability is due on the date payment of the tax461.35is due.For distributors subject to the accelerated tax payment 461.36 requirements in subdivision 10, the return for the May liability 462.1 is due two business days before June 30th of the year and the 462.2 return for the June liability is due on or before August 18th of 462.3 the year. 462.4[EFFECTIVE DATE.] This section is effective the day 462.5 following final enactment. 462.6 Sec. 18. Minnesota Statutes 2004, section 297G.09, is 462.7 amended by adding a subdivision to read: 462.8 Subd. 10. [QUARTERLY AND ANNUAL PAYMENTS AND RETURNS.] (a) 462.9 If a manufacturer, wholesaler, brewer, or importer has an 462.10 average liquor tax liability equal to or less than $500 per 462.11 month in any quarter of a calendar year, and has substantially 462.12 complied with the state tax laws during the preceding four 462.13 calendar quarters, the manufacturer, wholesaler, brewer, or 462.14 importer may request authorization to file and pay the taxes 462.15 quarterly in subsequent calendar quarters. The authorization 462.16 remains in effect during the period in which the manufacturer's, 462.17 wholesaler's, brewer's, or importer's quarterly returns reflect 462.18 liquor tax liabilities of less than $1,500 and there is 462.19 continued compliance with state tax laws. 462.20 (b) If a manufacturer, wholesaler, brewer, or importer has 462.21 an average liquor tax liability equal to or less than $100 per 462.22 month during a calendar year, and has substantially complied 462.23 with the state tax laws during that period, the manufacturer, 462.24 wholesaler, brewer, or importer may request authorization to 462.25 file and pay the taxes annually in subsequent years. The 462.26 authorization remains in effect during the period in which the 462.27 manufacturer's, wholesaler's, brewer's, or importer's annual 462.28 returns reflect liquor tax liabilities of less than $1,200 and 462.29 there is continued compliance with state tax laws. 462.30 (c) The commissioner may also grant quarterly or annual 462.31 filing and payment authorizations to manufacturers, wholesalers, 462.32 brewers, or importers if the commissioner concludes that the 462.33 manufacturer's, wholesaler's, brewer's, or importer's future tax 462.34 liabilities will be less than the monthly totals identified in 462.35 paragraphs (a) and (b). An authorization granted under this 462.36 paragraph is subject to the same conditions as an authorization 463.1 granted under paragraphs (a) and (b). 463.2 (d) The annual tax return and payments must be filed and 463.3 paid on or before the 18th day of January following the calendar 463.4 year. The quarterly returns and payments must be filed and paid 463.5 on or before April 18 for the quarter ending March 31, on or 463.6 before July 18 for the quarter ending June 30, on or before 463.7 October 18 for the quarter ending September 30, and on or before 463.8 January 18 for the quarter ending December 31. 463.9[EFFECTIVE DATE.] This section is effective for tax returns 463.10 and payments due on or after January 1, 2006. 463.11 Sec. 19. Minnesota Statutes 2004, section 297I.01, is 463.12 amended by adding a subdivision to read: 463.13 Subd. 13a. [REINSURANCE.] "Reinsurance" is insurance 463.14 whereby an insurance company, for a consideration, agrees to 463.15 indemnify another insurance company against all or part of the 463.16 loss which the latter may sustain under the policy or policies 463.17 which it has issued. 463.18[EFFECTIVE DATE.] This section is effective the day 463.19 following final enactment. 463.20 Sec. 20. Minnesota Statutes 2004, section 297I.05, 463.21 subdivision 5, is amended to read: 463.22 Subd. 5. [HEALTH MAINTENANCE ORGANIZATIONS, NONPROFIT 463.23 HEALTH SERVICE PLAN CORPORATIONS, AND COMMUNITY INTEGRATED 463.24 SERVICE NETWORKS.] (a)Health maintenance organizations,463.25community integrated service networks, and nonprofit health care463.26service plan corporations are exempt from the tax imposed under463.27this section for premiums received in calendar years 2001 to463.282003.463.29(b) For calendar years after 2003,A tax is imposed on 463.30 health maintenance organizations, community integrated service 463.31 networks, and nonprofit health care service plan corporations. 463.32 The rate of tax is equal to one percent of gross premiums less 463.33 return premiums on all direct business received by the 463.34 organization, network, or corporation or its agents in 463.35 Minnesota, in cash or otherwise, in the calendar year. 463.36(c) In approving the premium rates as required in sections464.162L.08, subdivision 8, and 62A.65, subdivision 3, the464.2commissioners of health and commerce shall ensure that any464.3exemption from tax as described in paragraph (a) is reflected in464.4the premium rate.464.5(d)(b) The commissioner shall deposit all revenues, 464.6 including penalties and interest, collected under this chapter 464.7 from health maintenance organizations, community integrated 464.8 service networks, and nonprofit health service plan corporations 464.9 in the health care access fund. Refunds of overpayments of tax 464.10 imposed by this subdivision must be paid from the health care 464.11 access fund. There is annually appropriated from the health 464.12 care access fund to the commissioner the amount necessary to 464.13 make any refunds of the tax imposed under this subdivision. 464.14[EFFECTIVE DATE.] This section is effective January 1, 2005. 464.15 Sec. 21. [REPEALER.] 464.16 Minnesota Statutes 2004, section 297E.12, subdivision 10, 464.17 is repealed effective the day following final enactment. 464.18 ARTICLE 17 464.19 DEPARTMENT OF REVENUE 464.20 ELECTRONIC PAYMENTS - SF1683 464.21 Section 1. [270.772] [MINIMUM DOLLAR REQUIREMENT FOR 464.22 ELECTRONIC PAYMENT OF TAXES AND FEES.] 464.23 (a) Except as provided in paragraph (b), payments of every 464.24 tax, fee, or surcharge administered by and payable to the 464.25 commissioner in a calendar year, including deposits and 464.26 estimated payments, must be remitted electronically if the 464.27 liability of the taxpayer or payer for the tax, fee, or 464.28 surcharge is: 464.29 (1) $20,000 or more in the preceding fiscal year ending 464.30 June 30, 2005; and 464.31 (2) $10,000 or more in the preceding fiscal year ending 464.32 June 30, 2006, and preceding fiscal years thereafter. 464.33 (b) This section does not apply to individual income, 464.34 estate, fiduciary, and airflight property taxes, and it does not 464.35 apply to any law requiring all payments for a specific type of 464.36 tax, fee, or surcharge, or from a specific group of taxpayers or 465.1 payers, to be made electronically regardless of dollar amount. 465.2 Sec. 2. Minnesota Statutes 2004, section 289A.20, 465.3 subdivision 2, is amended to read: 465.4 Subd. 2. [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 465.5 WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 465.6 WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 465.7 (a) A tax required to be deducted and withheld during the 465.8 quarterly period must be paid on or before the last day of the 465.9 month following the close of the quarterly period, unless an 465.10 earlier time for payment is provided. A tax required to be 465.11 deducted and withheld from compensation of an entertainer and 465.12 from a payment to an out-of-state contractor must be paid on or 465.13 before the date the return for such tax must be filed under 465.14 section 289A.18, subdivision 2. Taxes required to be deducted 465.15 and withheld by partnerships and S corporations must be paid on 465.16 or before the date the return must be filed under section 465.17 289A.18, subdivision 2. 465.18 (b) An employer who, during the previous quarter, withheld 465.19 more than $1,500 of tax under section 290.92, subdivision 2a or 465.20 3, or 290.923, subdivision 2, must deposit tax withheld under 465.21 those sections with the commissioner within the time allowed to 465.22 deposit the employer's federal withheld employment taxes under 465.23 Code of Federal Regulations, title 26, section 31.6302-1, as 465.24 amended through December 31, 2001, without regard to the safe 465.25 harbor or de minimis rules in subparagraph (f) or the one-day 465.26 rule in subsection (c), clause (3). Taxpayers must submit a 465.27 copy of their federal notice of deposit status to the 465.28 commissioner upon request by the commissioner. 465.29 (c) The commissioner may prescribe by rule other return 465.30 periods or deposit requirements. In prescribing the reporting 465.31 period, the commissioner may classify payors according to the 465.32 amount of their tax liability and may adopt an appropriate 465.33 reporting period for the class that the commissioner judges to 465.34 be consistent with efficient tax collection. In no event will 465.35 the duration of the reporting period be more than one year. 465.36 (d) If less than the correct amount of tax is paid to the 466.1 commissioner, proper adjustments with respect to both the tax 466.2 and the amount to be deducted must be made, without interest, in 466.3 the manner and at the times the commissioner prescribes. If the 466.4 underpayment cannot be adjusted, the amount of the underpayment 466.5 will be assessed and collected in the manner and at the times 466.6 the commissioner prescribes. 466.7 (e)If the aggregate amount of the tax withheld during a466.8fiscal year ending June 30 under section 290.92, subdivision 2a466.9or 3, is equal to or exceeds the amounts established for466.10remitting federal withheld taxes pursuant to the regulations466.11promulgated under section 6302(h) of the Internal Revenue Code,466.12the employer must remit each required deposit for wages paid in466.13the subsequent calendar year by electronic means.466.14(f)A third-party bulk filer as defined in section 290.92, 466.15 subdivision 30, paragraph (a), clause (2), who remits 466.16 withholding deposits must remit all deposits by electronic means 466.17as provided in paragraph (e), regardless of the aggregate amount 466.18 of tax withheld during a fiscal year for all of the employers. 466.19 Sec. 3. Minnesota Statutes 2004, section 289A.20, 466.20 subdivision 4, is amended to read: 466.21 Subd. 4. [SALES AND USE TAX.] (a) The taxes imposed by 466.22 chapter 297A are due and payable to the commissioner monthly on 466.23 or before the 20th day of the month following the month in which 466.24 the taxable event occurred, or following another reporting 466.25 period as the commissioner prescribes or as allowed under 466.26 section 289A.18, subdivision 4, paragraph (f) or (g), except 466.27 that use taxes due on an annual use tax return as provided under 466.28 section 289A.11, subdivision 1, are payable by April 15 466.29 following the close of the calendar year. 466.30 (b) A vendor having a liability of $120,000 or more during 466.31 a fiscal year ending June 30 must remit the June liability for 466.32 the next year in the following manner: 466.33 (1) Two business days before June 30 of the year, the 466.34 vendor must remit 85 percent of the estimated June liability to 466.35 the commissioner. 466.36 (2) On or before August 20 of the year, the vendor must pay 467.1 any additional amount of tax not remitted in June. 467.2(c) A vendor having a liability of $120,000 or more during467.3a fiscal year ending June 30 must remit all liabilities on467.4returns due for periods beginning in the subsequent calendar467.5year by electronic means on or before the 20th day of the month467.6following the month in which the taxable event occurred, or on467.7or before the 20th day of the month following the month in which467.8the sale is reported under section 289A.18, subdivision 4,467.9except for 85 percent of the estimated June liability, which is467.10due two business days before June 30. The remaining amount of467.11the June liability is due on August 20.467.12 Sec. 4. Minnesota Statutes 2004, section 297E.02, 467.13 subdivision 4, is amended to read: 467.14 Subd. 4. [PULL-TAB AND TIPBOARD TAX.] (a) A tax is imposed 467.15 on the sale of each deal of pull-tabs and tipboards sold by a 467.16 distributor. The rate of the tax is 1.7 percent of the ideal 467.17 gross of the pull-tab or tipboard deal. The sales tax imposed 467.18 by chapter 297A on the sale of the pull-tabs and tipboards by 467.19 the distributor is imposed on the retail sales price less the 467.20 tax imposed by this subdivision. The retail sale of pull-tabs 467.21 or tipboards by the organization is exempt from taxes imposed by 467.22 chapter 297A and is exempt from all local taxes and license fees 467.23 except a fee authorized under section 349.16, subdivision 8. 467.24 (b) The liability for the tax imposed by this section is 467.25 incurred when the pull-tabs and tipboards are delivered by the 467.26 distributor to the customer or to a common or contract carrier 467.27 for delivery to the customer, or when received by the customer's 467.28 authorized representative at the distributor's place of 467.29 business, regardless of the distributor's method of accounting 467.30 or the terms of the sale. 467.31 The tax imposed by this subdivision is imposed on all sales 467.32 of pull-tabs and tipboards, except the following: 467.33 (1) sales to the governing body of an Indian tribal 467.34 organization for use on an Indian reservation; 467.35 (2) sales to distributors licensed under the laws of 467.36 another state or of a province of Canada, as long as all 468.1 statutory and regulatory requirements are met in the other state 468.2 or province; 468.3 (3) sales of promotional tickets as defined in section 468.4 349.12; and 468.5 (4) pull-tabs and tipboards sold to an organization that 468.6 sells pull-tabs and tipboards under the exemption from licensing 468.7 in section 349.166, subdivision 2. A distributor shall require 468.8 an organization conducting exempt gambling to show proof of its 468.9 exempt status before making a tax-exempt sale of pull-tabs or 468.10 tipboards to the organization. A distributor shall identify, on 468.11 all reports submitted to the commissioner, all sales of 468.12 pull-tabs and tipboards that are exempt from tax under this 468.13 subdivision. 468.14 (c)A distributor having a liability of $120,000 or more468.15during a fiscal year ending June 30 must remit all liabilities468.16in the subsequent calendar year by electronic means.468.17(d)Any customer who purchases deals of pull-tabs or 468.18 tipboards from a distributor may file an annual claim for a 468.19 refund or credit of taxes paid pursuant to this subdivision for 468.20 unsold pull-tab and tipboard tickets. The claim must be filed 468.21 with the commissioner on a form prescribed by the commissioner 468.22 by March 20 of the year following the calendar year for which 468.23 the refund is claimed. The refund must be filed as part of the 468.24 customer's February monthly return. The refund or credit is 468.25 equal to 1.7 percent of the face value of the unsold pull-tab or 468.26 tipboard tickets, provided that the refund or credit will be 468.27 1.75 percent of the face value of the unsold pull-tab or 468.28 tipboard tickets for claims for a refund or credit of taxes 468.29 filed on the February 2001 monthly return. The refund claimed 468.30 will be applied as a credit against tax owing under this chapter 468.31 on the February monthly return. If the refund claimed exceeds 468.32 the tax owing on the February monthly return, that amount will 468.33 be refunded. The amount refunded will bear interest pursuant to 468.34 section 270.76 from 90 days after the claim is filed. 468.35 Sec. 5. Minnesota Statutes 2004, section 473.843, 468.36 subdivision 3, is amended to read: 469.1 Subd. 3. [PAYMENT OF FEE.] On or before the 20th day of 469.2 each month each operator shall pay the fee due under this 469.3 section for the previous month, using a form provided by the 469.4 commissioner of revenue. 469.5An operator having a fee of $120,000 or more during a469.6fiscal year ending June 30 must pay all fees in the subsequent469.7calendar year by electronic means.469.8 Sec. 6. [REPEALER.] 469.9 Minnesota Statutes 2004, sections 289A.26, subdivision 2a; 469.10 289A.60, subdivision 21; 295.55, subdivision 4; 295.60, 469.11 subdivision 4; 297F.09, subdivision 7; 297G.09, subdivision 6; 469.12 297I.35, subdivision 2; and 297I.85, subdivision 7, are repealed. 469.13 Sec. 7. [EFFECTIVE DATE.] 469.14 This article is effective for payments due in calendar year 469.15 2006, and in calendar years thereafter, based upon liabilities 469.16 incurred in the fiscal year ending June 30, 2005, and in fiscal 469.17 years thereafter. 469.18 ARTICLE 18 469.19 DEPARTMENT OF REVENUE 469.20 MISCELLANEOUS - SF1683 469.21 Section 1. Minnesota Statutes 2004, section 15.06, 469.22 subdivision 6, is amended to read: 469.23 Subd. 6. [GENERAL POWERS OF COMMISSIONERS.] Except as 469.24 otherwise expressly provided by law, a commissioner shall have 469.25 the following powers: 469.26 (1) to delegate to any subordinate employee the exercise of 469.27 specified statutory powers or duties as the commissioner may 469.28 deem advisable, subject to the commissioner's control; provided, 469.29 that every delegation shall be made by written order, filed with 469.30 the secretary of state; and further provided that only a deputy 469.31 commissioner may have all the powers or duties of the 469.32 commissioner. A commissioner who delegates the exercise of 469.33 identical powers or duties to ten or more subordinate employees, 469.34 may combine the delegation to these employees in one written 469.35 order. A delegation of authority granted by a commissioner 469.36 remains in effect until revoked by the commissioner, revoked by 470.1 a successor commissioner, or termination of the employees' 470.2 employment. A successor commissioner may continue to grant the 470.3 same delegations of authority that were granted by a previous 470.4 commissioner, by issuing a written order that is filed with the 470.5 secretary of state and lists the names of the subordinate 470.6 employees that have orders of delegations of authority, the date 470.7 the order was signed, and the date the order was filed with the 470.8 secretary of state; 470.9 (2) to appoint all subordinate employees and to prescribe 470.10 their duties; provided, that all departments and agencies shall 470.11 be subject to the provisions of chapter 43A; 470.12 (3) with the approval of the commissioner of 470.13 administration, to organize the department or agency as deemed 470.14 advisable in the interest of economy and efficiency; and 470.15 (4) to prescribe procedures for the internal management of 470.16 the department or agency to the extent that the procedures do 470.17 not directly affect the rights of or procedure available to the 470.18 public. 470.19[EFFECTIVE DATE.] This section is effective the day 470.20 following final enactment. 470.21 Sec. 2. Minnesota Statutes 2004, section 16D.10, is 470.22 amended to read: 470.23 16D.10 [CASE REVIEWER.] 470.24 Subdivision 1. [DUTIES.] The commissioner shall make a 470.25 case reviewer available to debtors. The reviewer must be 470.26 available to answer a debtor's questions concerning the 470.27 collection process and to review the collection activity taken. 470.28 If the reviewer reasonably believes that the particular action 470.29 being taken is unreasonable or unfair, the reviewer may make 470.30 recommendations to the commissioner in regard to the collection 470.31 action. 470.32 Subd. 2. [AUTHORITY TO ISSUE DEBTOR ASSISTANCE ORDER.] On 470.33 application filed by a debtor with the case reviewer, in the 470.34 form, manner, and in the time prescribed by the commissioner, 470.35 and after thorough investigation, the case reviewer may issue a 470.36 debtor assistance order if, in the determination of the case 471.1 reviewer, the manner in which the state debt collection laws are 471.2 being administered is creating or will create an unjust and 471.3 inequitable result for the debtor. Debtor assistance orders are 471.4 governed by the provisions relating to taxpayer assistance 471.5 orders under section 270.273. 471.6 Subd. 3. [TRANSFER OF DUTIES TO TAXPAYER RIGHTS ADVOCATE.] 471.7 All duties and authority of the case reviewer under subdivisions 471.8 1 and 2 are transferred to the taxpayer rights advocate. 471.9[EFFECTIVE DATE.] This section is effective the day 471.10 following final enactment. 471.11 Sec. 3. Minnesota Statutes 2004, section 270.65, is 471.12 amended to read: 471.13 270.65 [DATE OF ASSESSMENT; DEFINITION.] 471.14 For purposes of taxes administered by the commissioner, the 471.15 term "date of assessment" means the date a liability reported on 471.16 a return was entered into the records of the commissioner or the 471.17 date a return should have been filed, whichever is later; or, in 471.18 the case of taxes determined by the commissioner, "date of 471.19 assessment" means the date of the order assessing taxes or date 471.20 of the return made by the commissioner; or, in the case of an 471.21 amended return filed by the taxpayer, the assessment date is the 471.22 date additional liability reported on the return, if any, was 471.23 entered into the records of the commissioner; or, in the case of 471.24 a consent agreement signed by the taxpayer under section 270.67, 471.25 subdivision 3, the assessment date is the notice date shown on 471.26 the agreement; or, in the case of a check from a taxpayer that 471.27 is dishonored and results in an erroneous refund being given to 471.28 the taxpayer, remittance of the check is deemed to be an 471.29 assessment and the "date of assessment" is the date the check 471.30 was received by the commissioner. 471.31[EFFECTIVE DATE.] This section is effective the day 471.32 following final enactment. 471.33 Sec. 4. Minnesota Statutes 2004, section 270.67, 471.34 subdivision 4, is amended to read: 471.35 Subd. 4. [OFFER-IN-COMPROMISE AND INSTALLMENT PAYMENT 471.36 PROGRAM.] (a) In implementing the authority provided in 472.1 subdivision 2 or in sections 8.30 and 16D.15 to accept offers of 472.2 installment payments or offers-in-compromise of tax liabilities, 472.3 the commissioner of revenue shall prescribe guidelines for 472.4 employees of the Department of Revenue to determine whether an 472.5 offer-in-compromise or an offer to make installment payments is 472.6 adequate and should be accepted to resolve a dispute. In 472.7 prescribing the guidelines, the commissioner shall develop and 472.8 publish schedules of national and local allowances designed to 472.9 provide that taxpayers entering into a compromise or payment 472.10 agreement have an adequate means to provide for basic living 472.11 expenses. The guidelines must provide that the taxpayer's 472.12 ownership interest in a motor vehicle, to the extent of the 472.13 value allowed in section 550.37, will not be considered as an 472.14 asset; in the case of an offer related to a joint tax liability 472.15 of spouses, that value of two motor vehicles must be excluded. 472.16 The guidelines must provide that employees of the department 472.17 shall determine, on the basis of the facts and circumstances of 472.18 each taxpayer, whether the use of the schedules is appropriate 472.19 and that employees must not use the schedules to the extent the 472.20 use would result in the taxpayer not having adequate means to 472.21 provide for basic living expenses. The guidelines must provide 472.22 that: 472.23 (1) an employee of the department shall not reject an 472.24 offer-in-compromise or an offer to make installment payments 472.25 from a low-income taxpayer solely on the basis of the amount of 472.26 the offer; and 472.27 (2) in the case of an offer-in-compromise which relates 472.28 only to issues of liability of the taxpayer: 472.29 (i) the offer must not be rejected solely because the 472.30 commissioner is unable to locate the taxpayer's return or return 472.31 information for verification of the liability; and 472.32 (ii) the taxpayer shall not be required to provide an 472.33 audited, reviewed, or compiled financial statement. 472.34 (b) The commissioner shall establish procedures: 472.35 (1) that require presentation of a counteroffer or a 472.36 written rejection of the offer by the commissioner if the amount 473.1 offered by the taxpayer in an offer-in-compromise or an offer to 473.2 make installment payments is not accepted by the commissioner; 473.3 (2) for an administrative review of any written rejection 473.4 of a proposed offer-in-compromise or installment agreement made 473.5 by a taxpayer under this section before the rejection is 473.6 communicated to the taxpayer; 473.7 (3) that allow a taxpayer to request reconsideration of any 473.8 written rejection of the offer or agreement to the commissioner 473.9 of revenue to determine whether the rejection is reasonable and 473.10 appropriate under the circumstances; and 473.11 (4) that provide for notification to the taxpayer when an 473.12 offer-in-compromise has been accepted, and issuance of 473.13 certificates of release of any liens imposed under section 473.14 270.69 related to the liability which is the subject of the 473.15 compromise. 473.16 (c) Each compromise proposal must be accompanied by a 473.17 nonrefundable payment of $250. If the compromise proposal is 473.18 accepted, the payment must be applied to the accepted compromise 473.19 amount. If the compromise is rejected, the payment must be 473.20 applied to the outstanding tax debts of the taxpayer pursuant to 473.21 section 270.652. In cases of financial hardship, upon 473.22 presentation of information establishing an inability to make 473.23 the $250 payment, the commissioner may waive this requirement. 473.24[EFFECTIVE DATE.] This section is effective for offers in 473.25 compromise submitted after August 31, 2005. 473.26 Sec. 5. Minnesota Statutes 2004, section 270.69, 473.27 subdivision 4, is amended to read: 473.28 Subd. 4. [PERIOD OF LIMITATIONS.] The lien imposed by this 473.29 section shall, notwithstanding any other provision of law to the 473.30 contrary, be enforceable from the time the lien arises and for 473.31 ten years from the date of filing the notice of lien, which must 473.32 be filed by the commissioner within five years after the date of 473.33 assessment of the tax or final administrative or judicial 473.34 determination of the assessment. A notice of lien filed in one 473.35 county may be transcribed to the secretary of state or to any 473.36 other county within ten years after the date of its filing, but 474.1 the transcription shall not extend the period during which the 474.2 lien is enforceable. A notice of lien may be renewed by the 474.3 commissioner before the expiration of the ten-year period for an 474.4 additional ten years. The taxpayer must receive written notice 474.5 of the renewal. 474.6[EFFECTIVE DATE.] This section is effective the day 474.7 following final enactment. 474.8 Sec. 6. Minnesota Statutes 2004, section 289A.19, 474.9 subdivision 4, is amended to read: 474.10 Subd. 4. [ESTATE TAX RETURNS.]When in the commissioner's474.11judgment good cause exists, the commissioner may extend the time474.12for filing an estate tax return for not more than six months.474.13 When an extension to file the federal estate tax return has been 474.14 granted under section 6081 of the Internal Revenue Code, the 474.15 time for filing the estate tax return is extended for that 474.16 period. If the estate requests an extension to file an estate 474.17 tax return within the time provided in section 289A.18, 474.18 subdivision 3, the commissioner shall extend the time for filing 474.19 the estate tax return for six months. 474.20[EFFECTIVE DATE.] This section is effective for estates of 474.21 decedents dying after December 31, 2004. 474.22 Sec. 7. Minnesota Statutes 2004, section 289A.31, 474.23 subdivision 2, is amended to read: 474.24 Subd. 2. [JOINT INCOME TAX RETURNS.] (a) If a joint income 474.25 tax return is made by a husband and wife, the liability for the 474.26 tax is joint and several. A spouse who qualifies for relief 474.27 from a liability attributable to an underpayment under section 474.28 6015(b) of the Internal Revenue Code is relieved of the state 474.29 income tax liability on the underpayment. 474.30 (b) In the case of individuals who were a husband and wife 474.31 prior to the dissolution of their marriage or their legal 474.32 separation, or prior to the death of one of the individuals, for 474.33 tax liabilities reported on a joint or combined return, the 474.34 liability of each person is limited to the proportion of the tax 474.35 due on the return that equals that person's proportion of the 474.36 total tax due if the husband and wife filed separate returns for 475.1 the taxable year. This provision is effective only when the 475.2 commissioner receives written notice of the marriage 475.3 dissolution, legal separation, or death of a spouse from the 475.4 husband or wife. No refund may be claimed by an ex-spouse, 475.5 legally separated or widowed spouse for any taxes paid more than 475.6 60 days before receipt by the commissioner of the written notice. 475.7 (c) A request for calculation of separate liability 475.8 pursuant to paragraph (b) for taxes reported on a return must be 475.9 made within six years after the due date of the return. For 475.10 calculation of separate liability for taxes assessed by the 475.11 commissioner under section 289A.35 or 289A.37, the request must 475.12 be made within six years after the date of assessment. The 475.13 commissioner is not required to calculate separate liability if 475.14 the remaining unpaid liability for which recalculation is 475.15 requested is $100 or less. 475.16[EFFECTIVE DATE.] This section is effective for requests 475.17 for relief made on or after the day following final enactment. 475.18 Sec. 8. Minnesota Statutes 2004, section 289A.37, 475.19 subdivision 5, is amended to read: 475.20 Subd. 5. [SUFFICIENCY OF NOTICE.] An order of assessment, 475.21 sent postage prepaid by United States mail to the taxpayer at 475.22 the taxpayer's last known address, or sent by electronic mail to 475.23 the taxpayer's last known electronic mailing address as provided 475.24 for in section 325L.08, is sufficient even if the taxpayer is 475.25 deceased or is under a legal disability, or, in the case of a 475.26 corporation, has terminated its existence, unless the department 475.27 has been provided with a new address by a party authorized to 475.28 receive notices of assessment. 475.29[EFFECTIVE DATE.] This section is effective the day 475.30 following final enactment. 475.31 Sec. 9. Minnesota Statutes 2004, section 289A.60, 475.32 subdivision 2a, is amended to read: 475.33 Subd. 2a. [PENALTIES FOR EXTENDED DELINQUENCY.] (a) If an 475.34 individual income tax is not paid within 180 days after the date 475.35 of filing of a return or, in the case of taxes assessed by the 475.36 commissioner, within 180 days after the assessment date or, if 476.1 appealed, within 180 days after final resolution of the appeal, 476.2 an extended delinquency penalty of five percent of the tax 476.3 remaining unpaid is added to the amount due. 476.4 (b) If acorporate franchise, fiduciary income, mining476.5company, estate, partnership, S corporation, or nonresident476.6entertainertax return is not filed within 30 days after written 476.7 demand for the filing of a delinquent return, an extended 476.8 delinquency penalty of five percent of the tax not paid prior to 476.9 the demandis added to the tax,orin the case of an individual476.10income tax return, a minimum penalty of$100or the five percent476.11penaltyis imposed, whichever amount is greater. 476.12[EFFECTIVE DATE.] This section is effective for returns 476.13 originally due on or after August 1, 2005. 476.14 Sec. 10. Minnesota Statutes 2004, section 289A.60, 476.15 subdivision 6, is amended to read: 476.16 Subd. 6. [PENALTY FOR FAILURE TO FILE, FALSE OR FRAUDULENT 476.17 RETURN, EVASION.] If a person, with intent to evade or defeat a 476.18 tax or payment of tax, fails to file a return, files a false or 476.19 fraudulent return, or attempts in any other manner to evade or 476.20 defeat a tax or payment of tax, there is imposed on the person a 476.21 penalty equal to 50 percent of the tax, less amounts paid by the 476.22 person on the basis of the false or fraudulent return, if any, 476.23 due for the period to which the return related. 476.24[EFFECTIVE DATE.] This section is effective the day 476.25 following final enactment. 476.26 Sec. 11. Minnesota Statutes 2004, section 289A.60, 476.27 subdivision 11, is amended to read: 476.28 Subd. 11. [PENALTIES RELATING TO INFORMATION REPORTS, 476.29 WITHHOLDING.] (a) When a person required under section 289A.09, 476.30 subdivision 2, to give a statement to an employee or payee and a 476.31 duplicate statement to the commissioner, or to give a 476.32 reconciliation of the statements and quarterly returns to the 476.33 commissioner, gives a false or fraudulent statement to an 476.34 employee or payee or a false or fraudulent duplicate statement 476.35 or reconciliation of statements and quarterly returns to the 476.36 commissioner, or fails to give a statement or the reconciliation 477.1 in the manner, when due, and showing the information required by 477.2 section 289A.09, subdivision 2, or rules prescribed by the 477.3 commissioner under that section, that person is liable for a 477.4 penalty of $50 for an act or failure to act. The total amount 477.5 imposed on the delinquent person for failures during a calendar 477.6 year must not exceed $25,000. 477.7 (b) In addition to any other penalty provided by law, an 477.8 employee who gives a withholding exemption certificate or a 477.9 residency affidavit to an employer thatthe employee has reason477.10to know contains a materially incorrect statementdecreases the 477.11 amount withheld under section 290.92 and as of the time the 477.12 certificate or affidavit was given to the employer there was no 477.13 reasonable basis for the statements in the certificate or 477.14 affidavit is liable to the commissioner of revenue for a penalty 477.15 of $500 for each instance. 477.16 (c) In addition to any other penalty provided by law, an 477.17 employer who fails to submit a copy of a withholding exemption 477.18 certificate or a residency affidavit required by section 290.92, 477.19 subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the 477.20 commissioner of revenue for a penalty of $50 for each instance. 477.21 (d) An employer or payor who fails to file an application 477.22 for a withholding account number, as required by section 290.92, 477.23 subdivision 24, is liable to the commissioner for a penalty of 477.24 $100. 477.25[EFFECTIVE DATE.] This section is effective for 477.26 certificates and affidavits given to employers after December 477.27 31, 2005. 477.28 Sec. 12. Minnesota Statutes 2004, section 290.92, 477.29 subdivision 1, is amended to read: 477.30 Subdivision 1. [DEFINITIONS.] (1) [WAGES.] For purposes 477.31 of this section, the term "wages" means the same as that term is 477.32 defined in section 3401(a) and (f) of the Internal Revenue Code. 477.33 (2) [PAYROLL PERIOD.] For purposes of this section the 477.34 term "payroll period" means a period for which a payment of 477.35 wages is ordinarily made to the employee by the employee's 477.36 employer, and the term "miscellaneous payroll period" means a 478.1 payroll period other than a daily, weekly, biweekly, 478.2 semimonthly, monthly, quarterly, semiannual, or annual payroll 478.3 period. 478.4 (3) [EMPLOYEE.] For purposes of this section the term 478.5 "employee" means any resident individual performing services for 478.6 an employer, either within or without, or both within and 478.7 without the state of Minnesota, and every nonresident individual 478.8 performing services within the state of Minnesota, the 478.9 performance of which services constitute, establish, and 478.10 determine the relationship between the parties as that of 478.11 employer and employee. As used in the preceding sentence, the 478.12 term "employee" includes an officer of a corporation, and an 478.13 officer, employee, or elected official of the United States, a 478.14 state, or any political subdivision thereof, or the District of 478.15 Columbia, or any agency or instrumentality of any one or more of 478.16 the foregoing. 478.17 (4) [EMPLOYER.] For purposes of this section the term 478.18 "employer" means any person, including individuals, fiduciaries, 478.19 estates, trusts, partnerships, limited liability companies, and 478.20 corporations transacting business in or deriving any income from 478.21 sources within the state of Minnesota for whom an individual 478.22 performs or performed any service, of whatever nature, as the 478.23 employee of such person, except that if the person for whom the 478.24 individual performs or performed the services does not have 478.25legalcontrol of the payment of the wages for such services, the 478.26 term "employer," except for purposes of paragraph (1), means the 478.27 person havinglegalcontrol of the payment of such wages. As 478.28 used in the preceding sentence, the term "employer" includes any 478.29 corporation, individual, estate, trust, or organization which is 478.30 exempt from taxation under section 290.05 and further includes, 478.31 but is not limited to, officers of corporations who havelegal478.32 control, either individually or jointly with another or others, 478.33 of the payment of the wages. 478.34 (5) [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For 478.35 purposes of this section, the term "number of withholding 478.36 exemptions claimed" means the number of withholding exemptions 479.1 claimed in a withholding exemption certificate in effect under 479.2 subdivision 5, except that if no such certificate is in effect, 479.3 the number of withholding exemptions claimed shall be considered 479.4 to be zero. 479.5[EFFECTIVE DATE.] This section is effective the day 479.6 following final enactment. 479.7 Sec. 13. Minnesota Statutes 2004, section 290C.05, is 479.8 amended to read: 479.9 290C.05 [ANNUAL CERTIFICATION.] 479.10 On or before July 1 of each year, beginning with the year 479.11 after the claimant has received an approved application, the 479.12 commissioner shall send each claimant enrolled under the 479.13 sustainable forest incentive program a certification form. The 479.14 claimant must sign the certification, attesting that the 479.15 requirements and conditions for continued enrollment in the 479.16 program are currently being met, and must return the signed 479.17 certification form to the commissioner by August 15 of that same 479.18 year.Failure toIf the claimant does not return an annual 479.19 certification form by the due dateshall result in removal of479.20the lands from the provisions of the sustainable forest479.21incentive program, and the imposition of any applicable removal479.22penalty, the provisions in section 290C.11 apply.The claimant479.23may appeal the removal and any associated penalty according to479.24the procedures and within the time allowed under this chapter.479.25[EFFECTIVE DATE.] This section is effective the day 479.26 following final enactment. 479.27 Sec. 14. [290C.055] [LENGTH OF COVENANT.] 479.28 The covenant remains in effect for a minimum of eight 479.29 years. If land is removed from the program before it has been 479.30 enrolled for four years, the covenant remains in effect for 479.31 eight years from the date recorded. 479.32 If land that has been enrolled for four years or more is 479.33 removed from the program for any reason, there is a waiting 479.34 period before the covenant terminates. The covenant terminates 479.35 on January 1 of the fifth calendar year that begins after the 479.36 date that: 480.1 (1) the commissioner receives notification from the 480.2 claimant that the claimant wishes to remove the land from the 480.3 program under section 290C.10; or 480.4 (2) the date that the land is removed from the program 480.5 under section 290C.11. 480.6 Notwithstanding the other provisions of this section, the 480.7 covenant is terminated at the same time that the land is removed 480.8 from the program due to acquisition of title or possession for a 480.9 public purpose under section 290C.10. 480.10[EFFECTIVE DATE.] This section is effective the day 480.11 following final enactment. 480.12 Sec. 15. Minnesota Statutes 2004, section 290C.10, is 480.13 amended to read: 480.14 290C.10 [WITHDRAWAL PROCEDURES.] 480.15 An approved claimant under the sustainable forest incentive 480.16 program for a minimum of four years may notify the commissioner 480.17 of the intent to terminate enrollment. Within 90 days of 480.18 receipt of notice to terminate enrollment, the commissioner 480.19 shall inform the claimant in writing, acknowledging receipt of 480.20 this notice and indicating the effective date of termination 480.21 from the sustainable forest incentive program. Termination of 480.22 enrollment in the sustainable forest incentive program occurs on 480.23 January 1 of the fifth calendar year that begins after receipt 480.24 by the commissioner of the termination notice. After the 480.25 commissioner issues an effective date of termination, a claimant 480.26 wishing to continue the land's enrollment in the sustainable 480.27 forest incentive program beyond the termination date must apply 480.28 for enrollment as prescribed in section 290C.04. A claimant who 480.29 withdraws a parcel of land from this program may not reenroll 480.30 the parcel for a period of three years. Within 90 days after 480.31 the termination date, the commissioner shall execute and 480.32 acknowledge a document releasing the land from the covenant 480.33 required under this chapter. The document must be mailed to the 480.34 claimant and is entitled to be recorded. The commissioner may 480.35 allow early withdrawal from the Sustainable Forest Incentive Act 480.36 without penaltyin cases of condemnationwhen the state of 481.1 Minnesota, any local government unit, or any other entity which 481.2 has the right of eminent domain acquires title or possession to 481.3 the land for a public purpose notwithstanding the provisions of 481.4 this section. In the case of such acquisition, the commissioner 481.5 shall execute and acknowledge a document releasing the land 481.6 acquired by the state, local government unit, or other entity 481.7 from the covenant. All other enrolled land must remain in the 481.8 program. 481.9[EFFECTIVE DATE.] This section is effective the day 481.10 following final enactment. 481.11 Sec. 16. Minnesota Statutes 2004, section 325D.33, 481.12 subdivision 6, is amended to read: 481.13 Subd. 6. [VIOLATIONS.] If the commissioner determines that 481.14 a distributor is violating any provision of this chapter, the 481.15 commissioner must give the distributor a written warning 481.16 explaining the violation and an explanation of what must be done 481.17 to comply with this chapter. Within ten days of issuance of the 481.18 warning, the distributor must notify the commissioner that the 481.19 distributor has complied with the commissioner's recommendation 481.20 or request that the commissioner set the issue for a hearing 481.21 pursuant to chapter 14. If a hearing is requested, the hearing 481.22 shall be scheduled within 20 days of the request and the 481.23 recommendation of the administrative law judge shall be issued 481.24 within five working days of the close of the hearing. The 481.25 commissioner's final determination shall be issued within five 481.26 working days of the receipt of the administrative law judge's 481.27 recommendation. If the commissioner's final determination is 481.28 adverse to the distributor and the distributor does not comply 481.29 within ten days of receipt of the commissioner's final 481.30 determination, the commissioner may order the distributor to 481.31 immediately cease the stamping of cigarettes. As soon as 481.32 practicable after the order, the commissioner must remove the 481.33 meter and any unapplied cigarette stamps from the premises of 481.34 the distributor. 481.35 If within ten days of issuance of the written warning the 481.36 distributor has not complied with the commissioner's 482.1 recommendation or requested a hearing, the commissioner may 482.2 order the distributor to immediately cease the stamping of 482.3 cigarettes and remove the meter and unapplied stamps from the 482.4 distributor's premises. 482.5If, within any 12-month period, the commissioner has issued482.6three written warnings to any distributor, even if the482.7distributor has complied within ten days, the commissioner shall482.8notify the distributor of the commissioner's intent to revoke482.9the distributor's license for a continuing course of conduct482.10contrary to this chapter. For purposes of this paragraph, a482.11written warning that was ultimately resolved by removal of the482.12warning by the commissioner is not deemed to be a warning. The482.13commissioner must notify the distributor of the date and time of482.14a hearing pursuant to chapter 14 at least 20 days before the482.15hearing is held. The hearing must provide an opportunity for482.16the distributor to show cause why the license should not be482.17revoked. If the commissioner revokes a distributor's license,482.18the commissioner shall not issue a new license to that482.19distributor for 180 days.482.20[EFFECTIVE DATE.] This section is effective the day 482.21 following final enactment. 482.22 Sec. 17. Minnesota Statutes 2004, section 473.843, 482.23 subdivision 5, is amended to read: 482.24 Subd. 5. [PENALTIES; ENFORCEMENT.] The audit, penalty, and 482.25 enforcement provisions applicable to corporate franchise taxes 482.26 imposed under chapter 290 apply to the fees imposed under this 482.27 section. The commissioner of revenue shall administer the 482.28 provisions. 482.29[EFFECTIVE DATE.] This section is effective the day 482.30 following final enactment. 482.31 ARTICLE 19 482.32 INDIVIDUAL INCOME TAX - SF2206 482.33 Section 1. Minnesota Statutes 2004, section 16A.152, 482.34 subdivision 2, is amended to read: 482.35 Subd. 2. [ADDITIONAL REVENUES; PRIORITY.] (a) If on the 482.36 basis of a forecast of general fund revenues and expenditures, 483.1 the commissioner of finance determines that there will be a 483.2 positive unrestricted budgetary general fund balance at the 483.3 close of the biennium, the commissioner of finance must allocate 483.4 money to the following accounts and purposes in priority order: 483.5 (1) the cash flow account established in subdivision 1 483.6 until that account reaches $350,000,000; 483.7 (2) the budget reserve account established in subdivision 483.8 1a until that account reaches $653,000,000; 483.9 (3) the amount necessary to increase the aid payment 483.10 schedule for school district aids and credits payments in 483.11 section 127A.45 to not more than 90 percent;and483.12 (4) the amount necessary to restore all or a portion of the 483.13 net aid reductions under section 127A.441 and to reduce the 483.14 property tax revenue recognition shift under section 123B.75, 483.15 subdivision 5, paragraph (c), and Laws 2003, First Special 483.16 Session chapter 9, article 5, section 34, as amended by Laws 483.17 2003, First Special Session chapter 23, section 20, by the same 483.18 amount; 483.19 (5) the amount necessary to eliminate requirements for 483.20 accelerated payments of June tax liabilities under sections 483.21 287.12; 287.29; 289A.20, subdivision 4; 297F.09, subdivision 10, 483.22 and 297G.09, subdivision 9; 483.23 (6) the amount necessary to provide that interest is 483.24 payable on claims for refunds of the sales tax paid on exempt 483.25 capital equipment from the date the claim is filed with the 483.26 commissioner and on other exempt items as provided in Minnesota 483.27 Statutes 2002, section 297A.75, subdivision 4; and 483.28 (7) the amount necessary to make payments of local 483.29 government aids and taconite aid reimbursements in four 483.30 installments in each of the months of March, July, September, 483.31 and November as provided in Minnesota Statutes 1980, section 483.32 477A.01. 483.33 (b) The amounts necessary to meet the requirements of this 483.34 section are appropriated from the general fund within two weeks 483.35 after the forecast is released or, in the case of transfers 483.36 under paragraph (a), clauses (3) and (4), as necessary to meet 484.1 the appropriations schedules otherwise established in statute. 484.2 (c) To the extent that a positive unrestricted budgetary 484.3 general fund balance is projected, appropriations under this 484.4 section must be made before any transfer is made under section 484.5 16A.1522. 484.6 (d) The commissioner of finance shall certify the total 484.7 dollar amount of the reductions under paragraph (a), clauses (3) 484.8 and (4), to the commissioner of education. The commissioner of 484.9 education shall increase the aid payment percentage and reduce 484.10 the property tax shift percentage by these amounts and apply 484.11 those reductions to the current fiscal year and thereafter. 484.12 Sec. 2. Minnesota Statutes 2004, section 290.01, 484.13 subdivision 7b, is amended to read: 484.14 Subd. 7b. [RESIDENT TRUST.] (a) Resident trust means a 484.15 trust, except a grantor type trust, which either (1) was created 484.16 by a will of a decedent who at death was domiciled in this state 484.17 or (2) is an irrevocable trust, the grantor of which was 484.18 domiciled in this state at the time the trust became 484.19 irrevocable. For the purpose of this subdivision, a trust is 484.20 considered irrevocable to the extent the grantor is not treated 484.21 as the owner thereof under sections 671 to 678 of the Internal 484.22 Revenue Code. The term "grantor type trust" means a trust where 484.23 the income or gains of the trust are taxable to the grantor or 484.24 others treated as substantial owners under sections 671 to 678 484.25 of the Internal Revenue Code. 484.26 (b)(1) A trust, other than a grantor type trust, that 484.27 became irrevocable before January 1, 1996, or that was 484.28 administered in Minnesota before January 1, 1996, is a resident 484.29 trust only if two or more of the following conditions are 484.30 satisfied: 484.31 (i) a majority of the discretionary decisions of the 484.32 trustees relative to the investment of trust assets are made in 484.33 Minnesota; 484.34 (ii) a majority of the discretionary decisions of the 484.35 trustees relative to the distributions of trust income and 484.36 principal are made in Minnesota; 485.1 (iii) the official books and records of the trust, 485.2 consisting of the original minutes of trustee meetings and the 485.3 original trust instruments, are located in Minnesota. 485.4 (2) For purposes of this paragraph, if the trustees 485.5 delegate decisions and actions to an agent or custodian, the 485.6 actions and decisions of the agent or custodian must not be 485.7 taken into account in determining whether the trust is 485.8 administered in Minnesota, if: 485.9 (i) the delegation was permitted under the trust agreement; 485.10 (ii) the trustees retain the power to revoke the delegation 485.11 on reasonable notice; and 485.12 (iii) the trustees monitor and evaluate the performance of 485.13 the agent or custodian on a regular basis as is reasonably 485.14 determined by the trustees. 485.15[EFFECTIVE DATE.] This section is effective the day 485.16 following final enactment. 485.17 Sec. 3. Minnesota Statutes 2004, section 290.01, 485.18 subdivision 19a, as amended by 2005 S.F. No. 1683, article 2, 485.19 section 3, if enacted, is amended to read: 485.20 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 485.21 individuals, estates, and trusts, there shall be added to 485.22 federal taxable income: 485.23 (1)(i) interest income on obligations of any state other 485.24 than Minnesota or a political or governmental subdivision, 485.25 municipality, or governmental agency or instrumentality of any 485.26 state other than Minnesota exempt from federal income taxes 485.27 under the Internal Revenue Code or any other federal statute; 485.28 and 485.29 (ii) exempt-interest dividends as defined in section 485.30 852(b)(5) of the Internal Revenue Code, except the portion of 485.31 the exempt-interest dividends derived from interest income on 485.32 obligations of the state of Minnesota or its political or 485.33 governmental subdivisions, municipalities, governmental agencies 485.34 or instrumentalities, but only if the portion of the 485.35 exempt-interest dividends from such Minnesota sources paid to 485.36 all shareholders represents 95 percent or more of the 486.1 exempt-interest dividends that are paid by the regulated 486.2 investment company as defined in section 851(a) of the Internal 486.3 Revenue Code, or the fund of the regulated investment company as 486.4 defined in section 851(g) of the Internal Revenue Code, making 486.5 the payment; and 486.6 (iii) for the purposes of items (i) and (ii), interest on 486.7 obligations of an Indian tribal government described in section 486.8 7871(c) of the Internal Revenue Code shall be treated as 486.9 interest income on obligations of the state in which the tribe 486.10 is located; 486.11 (2) the amount of income or sales and use taxes paid or 486.12 accrued within the taxable year under this chapter and income or 486.13 sales and use taxes paid to any other state or to any province 486.14 or territory of Canada, to the extent allowed as a deduction 486.15 under section 63(d) of the Internal Revenue Code, but the 486.16 addition may not be more than the amount by which the itemized 486.17 deductions as allowed under section 63(d) of the Internal 486.18 Revenue Code exceeds the amount of the standard deduction as 486.19 defined in section 63(c) of the Internal Revenue Code of 1986, 486.20 as amended through June 15, 2003. For the purpose of this 486.21 paragraph, the disallowance of itemized deductions under section 486.22 68 of the Internal Revenue Code of 1986, income or sales and use 486.23 tax is the last itemized deduction disallowed; 486.24 (3) the capital gain amount of a lump sum distribution to 486.25 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 486.26 Reform Act of 1986, Public Law 99-514, applies; 486.27 (4) the amount of income taxes paid or accrued within the 486.28 taxable year under this chapter and income taxes paid to any 486.29 other state or any province or territory of Canada, to the 486.30 extent allowed as a deduction in determining federal adjusted 486.31 gross income. For the purpose of this paragraph, income taxes 486.32 do not include the taxes imposed by sections 290.0922, 486.33 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 486.34 (5) the amount of expense, interest, or taxes disallowed 486.35 pursuant to section 290.10; 486.36 (6) the amount of a partner's pro rata share of net income 487.1 which does not flow through to the partner because the 487.2 partnership elected to pay the tax on the income under section 487.3 6242(a)(2) of the Internal Revenue Code; and 487.4 (7) 80 percent of the depreciation deduction allowed under 487.5 section 168(k) of the Internal Revenue Code. For purposes of 487.6 this clause, if the taxpayer has an activity that in the taxable 487.7 year generates a deduction for depreciation under section 168(k) 487.8 and the activity generates a loss for the taxable year that the 487.9 taxpayer is not allowed to claim for the taxable year, "the 487.10 depreciation allowed under section 168(k)" for the taxable year 487.11 is limited to excess of the depreciation claimed by the activity 487.12 under section 168(k) over the amount of the loss from the 487.13 activity that is not allowed in the taxable year. In succeeding 487.14 taxable years when the losses not allowed in the taxable year 487.15 are allowed, the depreciation under section 168(k) is allowed; 487.16 (8) 80 percent of the amount by which the deduction allowed 487.17 by section 179 of the Internal Revenue Code exceeds the 487.18 deduction allowable by section 179 of the Internal Revenue Code 487.19 of 1986, as amended through December 31, 2003; 487.20 (9) to the extent deducted in computing federal taxable 487.21 income, the amount of the deduction allowable under section 199 487.22 of the Internal Revenue Code; 487.23 (10)to the extent deducted in computing federal taxable487.24income, the amount by which the standard deduction allowed under487.25section 63(c) of the Internal Revenue Code exceeds the standard487.26deduction allowable under section 63(c) of the Internal Revenue487.27Code of 1986, as amended through December 31, 2003;487.28(11)the exclusion allowed under section 139A of the 487.29 Internal Revenue Code for federal subsidies for prescription 487.30 drug plans; and 487.31(12)(11) the deduction or exclusion allowed under section 487.32 223 of the Internal Revenue Code for contributions to health 487.33 savings accounts. 487.34[EFFECTIVE DATE.] This section is effective for tax years 487.35 beginning after December 31, 2004. 487.36 Sec. 4. Minnesota Statutes 2004, section 290.06, 488.1 subdivision 2c, is amended to read: 488.2 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 488.3 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 488.4 married individuals filing joint returns and surviving spouses 488.5 as defined in section 2(a) of the Internal Revenue Code must be 488.6 computed by applying to their taxable net income the following 488.7 schedule of rates: 488.8 (1) On the first$25,680$29,070, 5.35 percent; 488.9 (2) On all over$25,680$29,070, but not 488.10 over$102,030$115,510, 7.05 percent; 488.11 (3) On all over$102,030$115,510, but not over $250,000, 488.12 7.85 percent; and 488.13 (4) On all over $250,000, 10.65 percent for taxable years 488.14 beginning after December 31, 2004, and before the fourth bracket 488.15 termination year as defined in paragraph (f). For the fourth 488.16 bracket termination year and subsequent taxable years, the 488.17 income included in this clause will be subject to the rate in 488.18 clause (3). 488.19 Married individuals filing separate returns, estates, and 488.20 trusts must compute their income tax by applying the above rates 488.21 to their taxable income, except that the income brackets will be 488.22 one-half of the above amounts. 488.23 (b) The income taxes imposed by this chapter upon unmarried 488.24 individuals must be computed by applying to taxable net income 488.25 the following schedule of rates: 488.26 (1) On the first$17,570$19,890, 5.35 percent; 488.27 (2) On all over$17,570$19,890, but not 488.28 over$57,710$65,330, 7.05 percent; 488.29 (3) On all over$57,710$65,330, but not over $166,665, 488.30 7.85 percent; and 488.31 (4) On all over $166,665, 10.65 percent for taxable years 488.32 beginning after December 31, 2004, and before the fourth bracket 488.33 termination year as defined in paragraph (f). For the fourth 488.34 bracket termination year and subsequent taxable years, the 488.35 income included in this clause will be subject to the rate in 488.36 clause (3). 489.1 (c) The income taxes imposed by this chapter upon unmarried 489.2 individuals qualifying as a head of household as defined in 489.3 section 2(b) of the Internal Revenue Code must be computed by 489.4 applying to taxable net income the following schedule of rates: 489.5 (1) On the first$21,630$24,490, 5.35 percent; 489.6 (2) On all over$21,630$24,490, but not 489.7 over$86,910$98,390, 7.05 percent; 489.8 (3) On all over$86,910$98,390, but not over $208,330, 489.9 7.85 percent; and 489.10 (4) On all over $208,330, 10.65 percent for taxable years 489.11 beginning after December 31, 2004, and before the fourth bracket 489.12 termination year as defined in paragraph (f). For the fourth 489.13 bracket termination year and subsequent taxable years, the 489.14 income included in this clause will be subject to the rate in 489.15 clause (3). 489.16 (d) In lieu of a tax computed according to the rates set 489.17 forth in this subdivision, the tax of any individual taxpayer 489.18 whose taxable net income for the taxable year is less than an 489.19 amount determined by the commissioner must be computed in 489.20 accordance with tables prepared and issued by the commissioner 489.21 of revenue based on income brackets of not more than $100. The 489.22 amount of tax for each bracket shall be computed at the rates 489.23 set forth in this subdivision, provided that the commissioner 489.24 may disregard a fractional part of a dollar unless it amounts to 489.25 50 cents or more, in which case it may be increased to $1. 489.26 (e) An individual who is not a Minnesota resident for the 489.27 entire year must compute the individual's Minnesota income tax 489.28 as provided in this subdivision. After the application of the 489.29 nonrefundable credits provided in this chapter, the tax 489.30 liability must then be multiplied by a fraction in which: 489.31 (1) the numerator is the individual's Minnesota source 489.32 federal adjusted gross income as defined in section 62 of the 489.33 Internal Revenue Code and increased by the additions required 489.34 under section 290.01, subdivision 19a, clauses (1), (5), and 489.35 (6), and reduced by the subtraction under section 290.01, 489.36 subdivision 19b, clause (11), and the Minnesota assignable 490.1 portion of the subtraction for United States government interest 490.2 under section 290.01, subdivision 19b, clause (1), after 490.3 applying the allocation and assignability provisions of section 490.4 290.081, clause (a), or 290.17; and 490.5 (2) the denominator is the individual's federal adjusted 490.6 gross income as defined in section 62 of the Internal Revenue 490.7 Code of 1986, increased by the amounts specified in section 490.8 290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 490.9 by the amounts specified in section 290.01, subdivision 19b, 490.10 clauses (1) and (11). 490.11 (f) In this subdivision, the fourth bracket termination 490.12 year is the first taxable year beginning after the commissioner 490.13 of finance has determined that there will be a positive 490.14 unrestricted budgeting general fund balance at the close of the 490.15 biennium that is sufficient to complete the allocations required 490.16 under section 16A.152, subdivision 2. 490.17[EFFECTIVE DATE.] This section is effective for taxable 490.18 years beginning after December 31, 2004. 490.19 Sec. 5. Minnesota Statutes 2004, section 290.06, 490.20 subdivision 2d, is amended to read: 490.21 Subd. 2d. [INFLATION ADJUSTMENT OF BRACKETS.] (a) For 490.22 taxable years beginning after December 31,20002005, the 490.23 minimum and maximum dollar amounts for each rate bracket for 490.24 which a tax is imposed in subdivision 2c shall be adjusted for 490.25 inflation by the percentage determined under paragraph (b). For 490.26 the purpose of making the adjustment as provided in this 490.27 subdivision all of the rate brackets provided in subdivision 2c 490.28 shall be the rate brackets as they existed for taxable years 490.29 beginning after December 31,19992004, and before January 490.30 1,20012006. The rate applicable to any rate bracket must not 490.31 be changed. The dollar amounts setting forth the tax shall be 490.32 adjusted to reflect the changes in the rate brackets. The rate 490.33 brackets as adjusted must be rounded to the nearest $10 amount. 490.34 If the rate bracket ends in $5, it must be rounded up to the 490.35 nearest $10 amount. 490.36 (b) The commissioner shall adjust the rate brackets and by 491.1 the percentage determined pursuant to the provisions of section 491.2 1(f) of the Internal Revenue Code, except that in section 491.3 1(f)(3)(B) the word "19992004" shall be substituted for the 491.4 word "1992." For20012006, the commissioner shall then 491.5 determine the percent change from the 12 months ending on August 491.6 31,19992004, to the 12 months ending on August 31,20002005, 491.7 and in each subsequent year, from the 12 months ending on August 491.8 31,19992004, to the 12 months ending on August 31 of the year 491.9 preceding the taxable year. The determination of the 491.10 commissioner pursuant to this subdivision shall not be 491.11 considered a "rule" and shall not be subject to the 491.12 Administrative Procedure Act contained in chapter 14. 491.13 No later than December 15 of each year, the commissioner 491.14 shall announce the specific percentage that will be used to 491.15 adjust the tax rate brackets. 491.16 Sec. 6. Minnesota Statutes 2004, section 290.06, is 491.17 amended by adding a subdivision to read: 491.18 Subd. 32. [DAIRY INVESTMENT CREDIT.] (a) A dairy 491.19 investment credit is allowed against the tax computed under this 491.20 chapter equal to the credit amount in the table, based on the 491.21 amount paid or incurred by the taxpayer in the tax year and 491.22 certified by the commissioner of agriculture under paragraph 491.23 (f), for qualifying expenditures: 491.24 Amount of 491.25 qualifying expenditures Credit amount 491.26 up to $500,000 ten percent of 491.27 qualifying expenditures 491.28 over $500,000, but not $50,000, plus nine percent 491.29 more than $600,000 of the amount of qualified 491.30 expenditures in excess of 491.31 $500,000 491.32 over $600,000, but not $59,000, plus seven percent 491.33 more than $700,000 of the amount of qualified 491.34 expenditures in excess of 491.35 $600,000 491.36 over $700,000, but not $66,000, plus five percent 491.37 more than $800,000 of the amount of qualified 491.38 expenditures in excess of 491.39 $700,000 491.40 over $800,000, but not $71,000, plus three percent 491.41 more than $900,000 of the amount of qualified 491.42 expenditures in excess of 491.43 $800,000 492.1 over $900,000, but not $74,000, plus one percent 492.2 more than $1,000,000 of the amount of qualified 492.3 expenditures in excess of 492.4 $900,000 492.5 $1,000,000 or more $75,000 492.6 (b) "Qualifying expenditures," for purposes of this 492.7 subdivision, means the expenses incurred for dairy animals for 492.8 the construction or improvement of buildings or facilities, or 492.9 the acquisition of equipment, for dairy animal housing, 492.10 confinement, animal feeding, milk production, and waste 492.11 management, including, but not limited to, the following: 492.12 (1) freestall barns; 492.13 (2) fences; 492.14 (3) watering facilities; 492.15 (4) feed storage and handling equipment; 492.16 (5) milking parlors; 492.17 (6) robotic equipment; 492.18 (7) scales; 492.19 (8) milk storage and cooling facilities; 492.20 (9) bulk tanks; 492.21 (10) manure handling equipment and storage facilities; 492.22 (11) digesters; 492.23 (12) equipment used to produce energy; and 492.24 (13) on-farm processing. 492.25 Qualifying expenditures only include amounts that are 492.26 capitalized and deducted under either section 167 or 179 of the 492.27 Internal Revenue Code in computing federal taxable income. 492.28 (c) The credit is limited to the liability for tax, as 492.29 computed under this section for the taxable year for which the 492.30 credit certificate is issued. If the amount of the credit 492.31 determined under this section for any taxable year exceeds this 492.32 limitation, the excess is a dairy investment credit carryover to 492.33 each of the 15 succeeding taxable years. The entire amount of 492.34 the excess unused credit for the taxable year is carried first 492.35 to the earliest of the taxable years to which the credit may be 492.36 carried and then to each successive year to which the credit may 492.37 be carried. The amount of the unused credit which may be added 493.1 under this paragraph shall not exceed the taxpayer's liability 493.2 for tax less the dairy investment credit for the taxable year. 493.3 (d) For a partnership or S corporation, the maximum amount 493.4 of the credit applies to the entity, not the individual partner 493.5 or shareholder. 493.6 (e) To be eligible for the dairy investment credit in this 493.7 subdivision, a taxpayer must apply to the commissioner of 493.8 agriculture for a tax credit certificate. The application must 493.9 be made on forms prescribed by the commissioner of agriculture 493.10 and must include a statement of the qualifying expenditures by 493.11 the taxpayer. 493.12 (f) The commissioner of agriculture shall certify credits 493.13 in the order the forms required under paragraph (e) are received 493.14 and approved by the commissioner of agriculture, until the 493.15 maximum credit amount for the taxable year has been reached. 493.16 The maximum credit amount is $900,000 for tax years beginning 493.17 after December 31, 2004, and before January 1, 2006; $2,000,000 493.18 for tax years beginning after December 31, 2005, and before 493.19 January 1, 2007; $3,500,000 for tax years beginning after 493.20 December 31, 2006, and before January 1, 2008; and $4,000,000 493.21 per year for tax years beginning after December 31, 2007. 493.22 Any eligible applications for which certificates are not 493.23 issued in a tax year because the commissioner of agriculture has 493.24 issued certificates totaling the maximum credit amount for that 493.25 tax year remain eligible for a credit certificate in subsequent 493.26 tax years, in the order in which the forms were received by the 493.27 commissioner of agriculture. 493.28[EFFECTIVE DATE.] This section is effective for assets 493.29 placed in service in taxable years beginning after December 31, 493.30 2004. 493.31 Sec. 7. Minnesota Statutes 2004, section 290.17, 493.32 subdivision 2, is amended to read: 493.33 Subd. 2. [INCOME NOT DERIVED FROM CONDUCT OF A TRADE OR 493.34 BUSINESS.] The income of a taxpayer subject to the allocation 493.35 rules that is not derived from the conduct of a trade or 493.36 business must be assigned in accordance with paragraphs (a) to 494.1 (f): 494.2 (a)(1) Subject to paragraphs (a)(2),and (a)(3),and494.3(a)(4),income from wages as defined in section 3401(a) and (f) 494.4 of the Internal Revenue Code is assigned to this state if, and 494.5 to the extent that, the work of the employee is performed within 494.6 it; all other income from such sources is treated as income from 494.7 sources without this state. 494.8 Severance pay shall be considered income from labor or 494.9 personal or professional services. 494.10 (2) In the case of an individual who is a nonresident of 494.11 Minnesota and who is an athlete or entertainer, income from 494.12 compensation for labor or personal services performed within 494.13 this state shall be determined in the following manner: 494.14 (i) The amount of income to be assigned to Minnesota for an 494.15 individual who is a nonresident salaried athletic team employee 494.16 shall be determined by using a fraction in which the denominator 494.17 contains the total number of days in which the individual is 494.18 under a duty to perform for the employer, and the numerator is 494.19 the total number of those days spent in Minnesota. For purposes 494.20 of this paragraph, off-season training activities, unless 494.21 conducted at the team's facilities as part of a team imposed 494.22 program, are not included in the total number of duty days. 494.23 Bonuses earned as a result of play during the regular season or 494.24 for participation in championship, play-off, or all-star games 494.25 must be allocated under the formula. Signing bonuses are not 494.26 subject to allocation under the formula if they are not 494.27 conditional on playing any games for the team, are payable 494.28 separately from any other compensation, and are nonrefundable; 494.29 and 494.30 (ii) The amount of income to be assigned to Minnesota for 494.31 an individual who is a nonresident, and who is an athlete or 494.32 entertainer not listed in clause (i), for that person's athletic 494.33 or entertainment performance in Minnesota shall be determined by 494.34 assigning to this state all income from performances or athletic 494.35 contests in this state. 494.36 (3) For purposes of this section, amounts received by a 495.1 nonresident as "retirement income" as defined in section (b)(1) 495.2 of the State Income Taxation of Pension Income Act, Public Law 495.3 104-95, are not considered income derived from carrying on a 495.4 trade or business or from wages or other compensation for work 495.5 an employee performed in Minnesota, and are not taxable under 495.6 this chapter. 495.7(4) Wages, otherwise assigned to this state under clause495.8(1) and not qualifying under clause (3), are not taxable under495.9this chapter if the following conditions are met:495.10(i) the recipient was not a resident of this state for any495.11part of the taxable year in which the wages were received; and495.12(ii) the wages are for work performed while the recipient495.13was a resident of this state.495.14 (b) Income or gains from tangible property located in this 495.15 state that is not employed in the business of the recipient of 495.16 the income or gains must be assigned to this state. 495.17 (c) Income or gains from intangible personal property not 495.18 employed in the business of the recipient of the income or gains 495.19 must be assigned to this state if the recipient of the income or 495.20 gains is a resident of this state or is a resident trust or 495.21 estate. 495.22 Gain on the sale of a partnership interest is allocable to 495.23 this state in the ratio of the original cost of partnership 495.24 tangible property in this state to the original cost of 495.25 partnership tangible property everywhere, determined at the time 495.26 of the sale. If more than 50 percent of the value of the 495.27 partnership's assets consists of intangibles, gain or loss from 495.28 the sale of the partnership interest is allocated to this state 495.29 in accordance with the sales factor of the partnership for its 495.30 first full tax period immediately preceding the tax period of 495.31 the partnership during which the partnership interest was sold. 495.32 Gain on the sale of goodwill or income from a covenant not 495.33 to compete that is connected with a business operating all or 495.34 partially in Minnesota is allocated to this state to the extent 495.35 that the income from the business in the year preceding the year 495.36 of sale was assignable to Minnesota under subdivision 3. 496.1 When an employer pays an employee for a covenant not to 496.2 compete, the income allocated to this state is in the ratio of 496.3 the employee's service in Minnesota in the calendar year 496.4 preceding leaving the employment of the employer over the total 496.5 services performed by the employee for the employer in that year. 496.6 (d) Income from winnings on a bet made by an individual 496.7 while in Minnesota is assigned to this state. In this 496.8 paragraph, "bet" has the meaning given in section 609.75, 496.9 subdivision 2, as limited by section 609.75, subdivision 3, 496.10 clauses (1), (2), and (3). 496.11 (e) All items of gross income not covered in paragraphs (a) 496.12 to (d) and not part of the taxpayer's income from a trade or 496.13 business shall be assigned to the taxpayer's domicile. 496.14 (f) For the purposes of this section, working as an 496.15 employee shall not be considered to be conducting a trade or 496.16 business. 496.17[EFFECTIVE DATE.] This section is effective for tax years 496.18 beginning after December 31, 2005. 496.19 ARTICLE 20 496.20 CORPORATE FRANCHISE TAX - SF2206 496.21 Section 1. Minnesota Statutes 2004, section 290.01, 496.22 subdivision 6b, is amended to read: 496.23 Subd. 6b. [FOREIGN OPERATING CORPORATION.] The term 496.24 "foreign operating corporation," when applied to a corporation, 496.25 means a domestic corporation with the following characteristics: 496.26 (1) it is part of a unitary business at least one member of 496.27 which is taxable in this state; 496.28 (2) it is not a foreign sales corporation under section 922 496.29 of the Internal Revenue Code, as amended through December 31, 496.30 1999, for the taxable year; and 496.31 (3) either (i) the average of the percentages of its 496.32 property and payrolls assigned to locationsinsideoutside the 496.33 United Statesand the District of Columbia, excluding the496.34commonwealth of Puerto Rico and possessions of the United496.35States,as determined under section 290.191 or 290.20, is2080 496.36 percent orlessgreater and it has at least $2,000,000 of 497.1 property and $1,000,000 of payroll as determined under section 497.2 290.191 or 290.20; or (ii) it has in effect a valid election 497.3 under section 936 of the Internal Revenue Code. 497.4[EFFECTIVE DATE.] This section is effective for tax years 497.5 beginning after December 31, 2004. 497.6 Sec. 2. Minnesota Statutes 2004, section 290.01, 497.7 subdivision 19d, is amended to read: 497.8 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 497.9 TAXABLE INCOME.] For corporations, there shall be subtracted 497.10 from federal taxable income after the increases provided in 497.11 subdivision 19c: 497.12 (1) the amount of foreign dividend gross-up added to gross 497.13 income for federal income tax purposes under section 78 of the 497.14 Internal Revenue Code; 497.15 (2) the amount of salary expense not allowed for federal 497.16 income tax purposes due to claiming the federal jobs credit 497.17 under section 51 of the Internal Revenue Code; 497.18 (3) any dividend (not including any distribution in 497.19 liquidation) paid within the taxable year by a national or state 497.20 bank to the United States, or to any instrumentality of the 497.21 United States exempt from federal income taxes, on the preferred 497.22 stock of the bank owned by the United States or the 497.23 instrumentality; 497.24 (4) amounts disallowed for intangible drilling costs due to 497.25 differences between this chapter and the Internal Revenue Code 497.26 in taxable years beginning before January 1, 1987, as follows: 497.27 (i) to the extent the disallowed costs are represented by 497.28 physical property, an amount equal to the allowance for 497.29 depreciation under Minnesota Statutes 1986, section 290.09, 497.30 subdivision 7, subject to the modifications contained in 497.31 subdivision 19e; and 497.32 (ii) to the extent the disallowed costs are not represented 497.33 by physical property, an amount equal to the allowance for cost 497.34 depletion under Minnesota Statutes 1986, section 290.09, 497.35 subdivision 8; 497.36 (5) the deduction for capital losses pursuant to sections 498.1 1211 and 1212 of the Internal Revenue Code, except that: 498.2 (i) for capital losses incurred in taxable years beginning 498.3 after December 31, 1986, capital loss carrybacks shall not be 498.4 allowed; 498.5 (ii) for capital losses incurred in taxable years beginning 498.6 after December 31, 1986, a capital loss carryover to each of the 498.7 15 taxable years succeeding the loss year shall be allowed; 498.8 (iii) for capital losses incurred in taxable years 498.9 beginning before January 1, 1987, a capital loss carryback to 498.10 each of the three taxable years preceding the loss year, subject 498.11 to the provisions of Minnesota Statutes 1986, section 290.16, 498.12 shall be allowed; and 498.13 (iv) for capital losses incurred in taxable years beginning 498.14 before January 1, 1987, a capital loss carryover to each of the 498.15 five taxable years succeeding the loss year to the extent such 498.16 loss was not used in a prior taxable year and subject to the 498.17 provisions of Minnesota Statutes 1986, section 290.16, shall be 498.18 allowed; 498.19 (6) an amount for interest and expenses relating to income 498.20 not taxable for federal income tax purposes, if (i) the income 498.21 is taxable under this chapter and (ii) the interest and expenses 498.22 were disallowed as deductions under the provisions of section 498.23 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 498.24 federal taxable income; 498.25 (7) in the case of mines, oil and gas wells, other natural 498.26 deposits, and timber for which percentage depletion was 498.27 disallowed pursuant to subdivision 19c, clause (11), a 498.28 reasonable allowance for depletion based on actual cost. In the 498.29 case of leases the deduction must be apportioned between the 498.30 lessor and lessee in accordance with rules prescribed by the 498.31 commissioner. In the case of property held in trust, the 498.32 allowable deduction must be apportioned between the income 498.33 beneficiaries and the trustee in accordance with the pertinent 498.34 provisions of the trust, or if there is no provision in the 498.35 instrument, on the basis of the trust's income allocable to 498.36 each; 499.1 (8) for certified pollution control facilities placed in 499.2 service in a taxable year beginning before December 31, 1986, 499.3 and for which amortization deductions were elected under section 499.4 169 of the Internal Revenue Code of 1954, as amended through 499.5 December 31, 1985, an amount equal to the allowance for 499.6 depreciation under Minnesota Statutes 1986, section 290.09, 499.7 subdivision 7; 499.8 (9) amounts included in federal taxable income that are due 499.9 to refunds of income, excise, or franchise taxes based on net 499.10 income or related minimum taxes paid by the corporation to 499.11 Minnesota, another state, a political subdivision of another 499.12 state, the District of Columbia, or a foreign country or 499.13 possession of the United States to the extent that the taxes 499.14 were added to federal taxable income under section 290.01, 499.15 subdivision 19c, clause (1), in a prior taxable year; 499.16 (10)80 percent of royalties, fees, or other like income499.17accrued or received from a foreign operating corporation or a499.18foreign corporation which is part of the same unitary business499.19as the receiving corporation;499.20(11)income or gains from the business of mining as defined 499.21 in section 290.05, subdivision 1, clause (a), that are not 499.22 subject to Minnesota franchise tax; 499.23(12)(11) the amount of handicap access expenditures in the 499.24 taxable year which are not allowed to be deducted or capitalized 499.25 under section 44(d)(7) of the Internal Revenue Code; 499.26(13)(12) the amount of qualified research expenses not 499.27 allowed for federal income tax purposes under section 280C(c) of 499.28 the Internal Revenue Code, but only to the extent that the 499.29 amount exceeds the amount of the credit allowed under section 499.30 290.068; 499.31(14)(13) the amount of salary expenses not allowed for 499.32 federal income tax purposes due to claiming the Indian 499.33 employment credit under section 45A(a) of the Internal Revenue 499.34 Code; 499.35(15)(14) the amount of any refund of environmental taxes 499.36 paid under section 59A of the Internal Revenue Code; 500.1(16)(15) for taxable years beginning before January 1, 500.2 2008, the amount of the federal small ethanol producer credit 500.3 allowed under section 40(a)(3) of the Internal Revenue Code 500.4 which is included in gross income under section 87 of the 500.5 Internal Revenue Code; 500.6(17)(16) for a corporation whose foreign sales 500.7 corporation, as defined in section 922 of the Internal Revenue 500.8 Code, constituted a foreign operating corporation during any 500.9 taxable year ending before January 1, 1995, and a return was 500.10 filed by August 15, 1996, claiming the deduction under section 500.11 290.21, subdivision 4, for income received from the foreign 500.12 operating corporation, an amount equal to 1.23 multiplied by the 500.13 amount of income excluded under section 114 of the Internal 500.14 Revenue Code, provided the income is not income of a foreign 500.15 operating company; 500.16(18)(17) any decrease in subpart F income, as defined in 500.17 section 952(a) of the Internal Revenue Code, for the taxable 500.18 year when subpart F income is calculated without regard to the 500.19 provisions of section 614 of Public Law 107-147; and 500.20(19)(18) in each of the five tax years immediately 500.21 following the tax year in which an addition is required under 500.22 subdivision 19c, clause (16), an amount equal to one-fifth of 500.23 the delayed depreciation. For purposes of this clause, "delayed 500.24 depreciation" means the amount of the addition made by the 500.25 taxpayer under subdivision 19c, clause (16). The resulting 500.26 delayed depreciation cannot be less than zero. 500.27[EFFECTIVE DATE.] This section is effective for tax years 500.28 beginning after December 31, 2004. 500.29 Sec. 3. Minnesota Statutes 2004, section 290.17, 500.30 subdivision 4, is amended to read: 500.31 Subd. 4. [UNITARY BUSINESS PRINCIPLE.] (a) If a trade or 500.32 business conducted wholly within this state or partly within and 500.33 partly without this state is part of a unitary business, the 500.34 entire income of the unitary business is subject to 500.35 apportionment pursuant to section 290.191. Notwithstanding 500.36 subdivision 2, paragraph (c), none of the income of a unitary 501.1 business is considered to be derived from any particular source 501.2 and none may be allocated to a particular place except as 501.3 provided by the applicable apportionment formula. The 501.4 provisions of this subdivision do not apply to business income 501.5 subject to subdivision 5, income of an insurance company, or 501.6 income of an investment company determined under section 290.36. 501.7 (b) The term "unitary business" means business activities 501.8 or operations which result in a flow of value between them. The 501.9 term may be applied within a single legal entity or between 501.10 multiple entities and without regard to whether each entity is a 501.11 sole proprietorship, a corporation, a partnership or a trust. 501.12 (c) Unity is presumed whenever there is unity of ownership, 501.13 operation, and use, evidenced by centralized management or 501.14 executive force, centralized purchasing, advertising, 501.15 accounting, or other controlled interaction, but the absence of 501.16 these centralized activities will not necessarily evidence a 501.17 nonunitary business. Unity is also presumed when business 501.18 activities or operations are of mutual benefit, dependent upon 501.19 or contributory to one another, either individually or as a 501.20 group. 501.21 (d) Where a business operation conducted in Minnesota is 501.22 owned by a business entity that carries on business activity 501.23 outside the state different in kind from that conducted within 501.24 this state, and the other business is conducted entirely outside 501.25 the state, it is presumed that the two business operations are 501.26 unitary in nature, interrelated, connected, and interdependent 501.27 unless it can be shown to the contrary. 501.28 (e) Unity of ownership is not deemed to exist when a 501.29 corporation is involved unless that corporation is a member of a 501.30 group of two or more business entities and more than 50 percent 501.31 of the voting stock of each member of the group is directly or 501.32 indirectly owned by a common owner or by common owners, either 501.33 corporate or noncorporate, or by one or more of the member 501.34 corporations of the group. For this purpose, the term "voting 501.35 stock" shall include membership interests of mutual insurance 501.36 holding companies formed under section 60A.077. 502.1 (f) The net income and apportionment factors under section 502.2 290.191 or 290.20 of foreign corporations and other foreign 502.3 entities which are part of a unitary business shall not be 502.4 included in the net income or the apportionment factors of the 502.5 unitary business. A foreign corporation or other foreign entity 502.6 which is required to file a return under this chapter shall file 502.7 on a separate return basis. The net income and apportionment 502.8 factors under section 290.191 or 290.20 of foreign operating 502.9 corporations shall not be included in the net income or the 502.10 apportionment factors of the unitary business except as provided 502.11 in paragraph (g). 502.12 (g) The adjusted net income of a foreign operating 502.13 corporation shall be deemed to be paid as a dividend on the last 502.14 day of its taxable year to each shareholder thereof, in 502.15 proportion to each shareholder's ownership, with which such 502.16 corporation is engaged in a unitary business. Such deemed 502.17 dividend shall be treated as a dividend under section 290.21, 502.18 subdivision 4. The dividends-received deduction must not be 502.19 allowed on dividends, interest, royalties, or capital gains 502.20 received by the foreign operating corporation included in the 502.21 deemed dividend. 502.22 Dividends actually paid by a foreign operating corporation 502.23 to a corporate shareholder which is a member of the same unitary 502.24 business as the foreign operating corporation shall be 502.25 eliminated from the net income of the unitary business in 502.26 preparing a combined report for the unitary business. The 502.27 adjusted net income of a foreign operating corporation shall be 502.28 its net income adjusted as follows: 502.29 (1) any taxes paid or accrued to a foreign country, the 502.30 commonwealth of Puerto Rico, or a United States possession or 502.31 political subdivision of any of the foregoing shall be a 502.32 deduction; and 502.33 (2) the subtraction from federal taxable income for 502.34 payments received from foreign corporations or foreign operating 502.35 corporations under section 290.01, subdivision 19d, clause (10), 502.36 shall not be allowed. 503.1 If a foreign operating corporation incurs a net loss, 503.2 neither income nor deduction from that corporation shall be 503.3 included in determining the net income of the unitary business. 503.4 (h) For purposes of determining the net income of a unitary 503.5 business and the factors to be used in the apportionment of net 503.6 income pursuant to section 290.191 or 290.20, there must be 503.7 included only the income and apportionment factors of domestic 503.8 corporations or other domestic entities other than foreign 503.9 operating corporations that are determined to be part of the 503.10 unitary business pursuant to this subdivision, notwithstanding 503.11 that foreign corporations or other foreign entities might be 503.12 included in the unitary business. 503.13 (i) Deductions for expenses, interest, or taxes otherwise 503.14 allowable under this chapter that are connected with or 503.15 allocable against dividends, deemed dividends described in 503.16 paragraph (g), or royalties, fees, or other like income 503.17 described in section 290.01, subdivision 19d, clause (10), shall 503.18 not be disallowed. 503.19 (j) Each corporation or other entity, except a sole 503.20 proprietorship, that is part of a unitary business must file 503.21 combined reports as the commissioner determines. On the 503.22 reports, all intercompany transactions between entities included 503.23 pursuant to paragraph (h) must be eliminated and the entire net 503.24 income of the unitary business determined in accordance with 503.25 this subdivision is apportioned among the entities by using each 503.26 entity's Minnesota factors for apportionment purposes in the 503.27 numerators of the apportionment formula and the total factors 503.28 for apportionment purposes of all entities included pursuant to 503.29 paragraph (h) in the denominators of the apportionment formula. 503.30 (k) If a corporation has been divested from a unitary 503.31 business and is included in a combined report for a fractional 503.32 part of the common accounting period of the combined report: 503.33 (1) its income includable in the combined report is its 503.34 income incurred for that part of the year determined by 503.35 proration or separate accounting; and 503.36 (2) its sales, property, and payroll included in the 504.1 apportionment formula must be prorated or accounted for 504.2 separately. 504.3[EFFECTIVE DATE.] This section is effective for tax years 504.4 beginning after December 31, 2004. 504.5 ARTICLE 21 504.6 SALES TAX - SF2206 504.7 Section 1. Minnesota Statutes 2004, section 297A.61, is 504.8 amended by adding a subdivision to read: 504.9 Subd. 37. [EVENT SOUVENIR CLOTHING.] "Event souvenir 504.10 clothing" is clothing that is sold at a state-subsidized 504.11 facility and that bears a name, image, or logo of the 504.12 entertainer, athlete, or team that performs at the facility. As 504.13 used in this subdivision, a "state-subsidized facility" means 504.14 the Metrodome financed under section 473.581, the basketball 504.15 arena that receives payments from the Amateur Sports Commission 504.16 under section 473.556, subdivision 16, the hockey arena that 504.17 received a loan of state funds under Laws 1998, chapter 404, 504.18 section 23, subdivision 6, and the entertainment and convention 504.19 center that received a grant under Laws 1998, chapter 404, 504.20 section 23, subdivision 9. 504.21[EFFECTIVE DATE.] This section is effective for sales after 504.22 June 30, 2005. 504.23 Sec. 2. Minnesota Statutes 2004, section 297A.67, 504.24 subdivision 6, is amended to read: 504.25 Subd. 6. [OTHER EXEMPT MEALS.] (a) Meals or drinks 504.26 purchased for and served exclusively to individuals who are 60 504.27 years of age or over and their spouses or to handicapped persons 504.28 and their spouses by governmental agencies, nonprofit 504.29 organizations, or churches, or pursuant to any program funded in 504.30 whole or in part through United States Code, title 42, sections 504.31 3001 through 3045, wherever delivered, prepared, or served, are 504.32 exempt. 504.33 (b) Meals or drinks purchased for and served exclusively to 504.34 children who are less than 14 years of age or disabled children 504.35 who are less than 16 years of age and who are attending a child 504.36 care or early childhood education program, are exempt if they 505.1 are: 505.2 (1) purchased by a nonprofit child care facility that is 505.3 exempt under section 297A.70, subdivision 4, and that primarily 505.4 serves families with income of 250 percent or less of federal 505.5 poverty guidelines; and 505.6 (2) prepared at the site of the child care facility. 505.7[EFFECTIVE DATE.] This section is effective for sales after 505.8 December 31, 1997. 505.9 Sec. 3. Minnesota Statutes 2004, section 297A.67, 505.10 subdivision 7, is amended to read: 505.11 Subd. 7. [MEDICINESDRUGS; MEDICAL DEVICES.] 505.12 (a)PrescribedSales of the following drugs and medical devices 505.13 are exempt: 505.14 (1) drugsand medicine, and insulin, intendedforinternal505.15or external use, in the cure, mitigation, treatment, or505.16prevention of illness or disease inhumanbeings are exempt.505.17"Prescribed drugs and medicine" includesuse, including 505.18 over-the-counter drugsor medicine prescribed by a licensed505.19health care professional.505.20(b) Nonprescription medicines consisting principally505.21(determined by the weight of all ingredients) of analgesics that505.22are approved by the United States Food and Drug Administration505.23for internal use by human beings are exempt. For purposes of505.24this subdivision, "principally" means greater than 50 percent505.25analgesics by weight.505.26(c) Prescription glasses, hospital beds, fever505.27thermometers, reusable; 505.28 (2) single-use finger-pricking devices for the extraction 505.29 of blood, blood glucose monitoring machines,and 505.30 other single-use devices and single-use diagnostic agents used 505.31 in diagnosing, monitoring, or treating diabetes, and therapeutic505.32and; 505.33 (3) insulin and medical oxygen for human use, regardless of 505.34 whether prescribed or sold over the counter; 505.35 (4) prosthetic devicesare exempt. "Therapeutic devices"505.36means devices that are attached or applied to the human body to506.1cure, heal, or alleviate injury, illness, or disease, either506.2directly or by administering a curative agent. "Prosthetic506.3devices" means devices that replace injured, diseased, or506.4missing parts of the human body, either temporarily or506.5permanently; 506.6 (5) durable medical equipment for home use only; 506.7 (6) mobility enhancing equipment; and 506.8 (7) prescription corrective eyeglasses. 506.9 (b) For purposes of this subdivision: 506.10 (1) "Drug" means a compound, substance, or preparation, and 506.11 any component of a compound, substance, or preparation, other 506.12 than food and food ingredients, dietary supplements, or 506.13 alcoholic beverages that is: 506.14 (i) recognized in the official United States Pharmacopoeia, 506.15 official Homeopathic Pharmacopoeia of the United States, or 506.16 official National Formulary, and supplement to any of them; 506.17 (ii) intended for use in the diagnosis, cure, mitigation, 506.18 treatment, or prevention of disease; or 506.19 (iii) intended to affect the structure or any function of 506.20 the body. 506.21 (2) "Durable medical equipment" means equipment, including 506.22 repair and replacement parts, but not including mobility 506.23 enhancing equipment, that: 506.24 (i) can withstand repeated use; 506.25 (ii) is primarily and customarily used to serve a medical 506.26 purpose; 506.27 (iii) generally is not useful to a person in the absence of 506.28 illness or injury; and 506.29 (iv) is not worn in or on the body. 506.30 (3) "Mobility enhancing equipment" means equipment, 506.31 including repair and replacement parts, but not including 506.32 durable medical equipment, that: 506.33 (i) is primarily and customarily used to provide or 506.34 increase the ability to move from one place to another and that 506.35 is appropriate for use either in a home or a motor vehicle; 506.36 (ii) is not generally used by persons with normal mobility; 507.1 and 507.2 (iii) does not include any motor vehicle or equipment on a 507.3 motor vehicle normally provided by a motor vehicle manufacturer. 507.4 (4) "Over-the-counter drug" means a drug that contains a 507.5 label that identifies the product as a drug as required by Code 507.6 of Federal Regulations, title 21, section 201.66. The label 507.7 must include a "drug facts" panel or a statement of the active 507.8 ingredients with a list of those ingredients contained in the 507.9 compound, substance, or preparation. Over-the-counter drugs do 507.10 not include grooming and hygiene products, regardless of whether 507.11 they otherwise meet the definition. "Grooming and hygiene 507.12 products" are soaps, cleaning solutions, shampoo, toothpaste, 507.13 mouthwash, antiperspirants, and suntan lotions and sunscreens. 507.14 (5) "Prescribed" and "prescription" means a direction in 507.15 the form of an order, formula, or recipe issued in any form of 507.16 oral, written, electronic, or other means of transmission by a 507.17 duly licensed health care professional. 507.18 (6) "Prosthetic device" means a replacement, corrective, or 507.19 supportive device, including repair and replacement parts, worn 507.20 on or in the body to: 507.21 (i) artificially replace a missing portion of the body; 507.22 (ii) prevent or correct physical deformity or malfunction; 507.23 or 507.24 (iii) support a weak or deformed portion of the body. 507.25 Prosthetic device does not include corrective eyeglasses. 507.26[EFFECTIVE DATE.] This section is effective for sales and 507.27 purchases made after June 30, 2005. 507.28 Sec. 4. Minnesota Statutes 2004, section 297A.67, 507.29 subdivision 8, is amended to read: 507.30 Subd. 8. [CLOTHING.] (a) Clothing is exempt. For purposes 507.31 of this subdivision, "clothing" means all human wearing apparel 507.32 suitable for general use. 507.33 (b) Clothing includes, but is not limited to, aprons, 507.34 household and shop; athletic supporters; baby receiving 507.35 blankets; bathing suits and caps; beach capes and coats; belts 507.36 and suspenders; boots; coats and jackets; costumes; children and 508.1 adult diapers, including disposable; ear muffs; footlets; formal 508.2 wear; garters and garter belts; girdles; gloves and mittens for 508.3 general use; hats and caps; hosiery; insoles for shoes; lab 508.4 coats; neckties; overshoes; pantyhose; rainwear; rubber pants; 508.5 sandals; scarves; shoes and shoe laces; slippers; sneakers; 508.6 socks and stockings; steel-toed boots; underwear; uniforms, 508.7 athletic and nonathletic; and wedding apparel. 508.8 (c) Clothing does not include the following: 508.9 (1) belt buckles sold separately; 508.10 (2) costume masks sold separately; 508.11 (3) patches and emblems sold separately; 508.12 (4) sewing equipment and supplies, including but not 508.13 limited to, knitting needles, patterns, pins, scissors, sewing 508.14 machines, sewing needles, tape measures, and thimbles; 508.15 (5) sewing materials that become part of clothing, 508.16 including but not limited to, buttons, fabric, lace, thread, 508.17 yarn, and zippers; 508.18 (6) clothing accessories or equipment; 508.19 (7) sports or recreational equipment;and508.20 (8) protective equipment; and 508.21 (9) event souvenir clothing. 508.22 Clothing also does not include apparel made from fur if a 508.23 uniform definition of "apparel made from fur" is developed by 508.24 the member states of the Streamlined Sales and Use Tax Agreement. 508.25 For purposes of this subdivision, "clothing accessories or 508.26 equipment" means incidental items worn on the person or in 508.27 conjunction with clothing. Clothing accessories and equipment 508.28 include, but are not limited to, briefcases; cosmetics; hair 508.29 notions, including barrettes, hair bows, and hairnets; handbags; 508.30 handkerchiefs; jewelry; nonprescription sunglasses; umbrellas; 508.31 wallets; watches; and wigs and hairpieces. "Sports or 508.32 recreational equipment" means items designed for human use and 508.33 worn in conjunction with an athletic or recreational activity 508.34 that are not suitable for general use. Sports and recreational 508.35 equipment includes, but is not limited to, ballet and tap shoes; 508.36 cleated or spiked athletic shoes; gloves, including, but not 509.1 limited to, baseball, bowling, boxing, hockey, and golf gloves; 509.2 goggles; hand and elbow guards; life preservers and vests; mouth 509.3 guards; roller and ice skates; shin guards; shoulder pads; ski 509.4 boots; waders; and wetsuits and fins. "Protective equipment" 509.5 means items for human wear and designed as protection of the 509.6 wearer against injury or disease or as protection against damage 509.7 or injury of other persons or property but not suitable for 509.8 general use. Protective equipment includes, but is not limited 509.9 to, breathing masks; clean room apparel and equipment; ear and 509.10 hearing protectors; face shields; finger guards; hard hats; 509.11 helmets; paint or dust respirators; protective gloves; safety 509.12 glasses and goggles; safety belts; tool belts; and welders 509.13 gloves and masks. 509.14[EFFECTIVE DATE.] This section is effective for sales after 509.15 June 30, 2005. 509.16 Sec. 5. Minnesota Statutes 2004, section 297A.67, 509.17 subdivision 29, is amended to read: 509.18 Subd. 29. [SOLAR ENERGYEFFICIENTPRODUCTS.](a) A509.19residential lighting fixture or a compact fluorescent bulb is509.20exempt if it has an energy star label.509.21(b) The following products are exempt if they have an509.22energyguide label that indicates that the product meets or509.23exceeds the standards listed below:509.24(1) an electric heat pump hot water heater with an energy509.25factor of at least 1.9;509.26(2) a natural gas water heater with an energy factor of at509.27least 0.62;509.28(3) a propane gas or fuel oil water heater with an energy509.29factor of at least 0.62;509.30(4) a natural gas furnace with an annual fuel utilization509.31efficiency greater than 92 percent; and509.32(5) a propane gas or fuel oil furnace with an annual fuel509.33utilization efficiency greater than 92 percent.509.34(c)Aphotovoltaic devicesolar energy system, as defined 509.35 in section 216C.06, subdivision 17, is exempt.For purposes of509.36this subdivision, "photovoltaic device" means a solid-state510.1electrical device, such as a solar module, that converts light510.2directly into direct current electricity of voltage-current510.3characteristics that are a function of the characteristics of510.4the light source and the materials in and design of the device.510.5A "solar module" is a photovoltaic device that produces a510.6specified power output under defined test conditions, usually510.7composed of groups of solar cells connected in series, in510.8parallel, or in series-parallel combinations.510.9(d) For purposes of this subdivision, "energy star label"510.10means the label granted to certain products that meet United510.11States Environmental Protection Agency and United States510.12Department of Energy criteria for energy efficiency. For510.13purposes of this subdivision, "energyguide label" means the510.14label that the United States Federal Trade Commissioner requires510.15manufacturers to apply to certain appliances under United States510.16Code, title 16, part 305.510.17[EFFECTIVE DATE.] This section is effective for sales and 510.18 purchases made on or after August 1, 2005. 510.19 Sec. 6. Minnesota Statutes 2004, section 297A.68, 510.20 subdivision 28, is amended to read: 510.21 Subd. 28. [MEDICAL SUPPLIES.] Medical supplies purchased 510.22 by a licensed health care facility or licensed health care 510.23 professional to provide medical treatment to residents or 510.24 patients are exempt. The exemption does not apply to durable 510.25 medical equipment or components of durable medical equipment, 510.26 laboratory supplies, radiological supplies, and other items used 510.27 in providing medical services. For purposes of this 510.28 subdivision, "medical supplies" means adhesive and nonadhesive 510.29 bandages, gauze pads and strips, cotton applicators, 510.30 antiseptics,nonprescription drugs,eye solution, and other 510.31 similar supplies used directly on the resident or patient in 510.32 providing medical services. 510.33[EFFECTIVE DATE.] This section is effective for sales and 510.34 purchases made after June 30, 2005. 510.35 Sec. 7. Minnesota Statutes 2004, section 297A.71, 510.36 subdivision 12, is amended to read: 511.1 Subd. 12. [CHAIR LIFTS, RAMPS, ELEVATORS.]Chair lifts,511.2ramps, andElevators and building materials used to install or 511.3 constructthemchair lifts, ramps, and elevators are exempt, if 511.4 they are authorized by a physician and installed in or attached 511.5 to the owner's homestead. The tax must be imposed and collected 511.6 as if the rate under section 297A.62, subdivision 1, applied and 511.7 then refunded in the manner provided in section 297A.75. 511.8[EFFECTIVE DATE.] This section is effective for sales and 511.9 purchases made after June 30, 2005. 511.10 Sec. 8. Minnesota Statutes 2004, section 297A.71, is 511.11 amended by adding a subdivision to read: 511.12 Subd. 33. [HYDROELECTRIC GENERATING FACILITY.] Materials 511.13 and supplies used or consumed in the construction of a 511.14 hydroelectric generating facility that meets the requirements of 511.15 this subdivision are exempt. To qualify for the exemption under 511.16 this subdivision, a hydroelectric generating facility must: 511.17 (1) utilize two turbine generators at a dam site existing 511.18 on March 31, 1994; 511.19 (2) be located on land within 1,500 feet of a 13.8 kilovolt 511.20 distribution circuit; and 511.21 (3) be eligible to receive a renewable energy production 511.22 incentive payment under section 216C.41. 511.23[EFFECTIVE DATE.] This section is effective for sales made 511.24 after December 31, 2004, and on or before December 31, 2007. 511.25 Sec. 9. Laws 1993, chapter 375, article 9, section 46, 511.26 subdivision 2, as amended by Laws 1997, chapter 231, article 7, 511.27 section 40, and Laws 1998, chapter 389, article 8, section 30, 511.28 and Laws 2003 First Special Session chapter 21, article 8, 511.29 section 13, is amended to read: 511.30 Subd. 2. [USE OF REVENUES.] Revenues received from the tax 511.31 authorized by subdivision 1 may only be used by the city to pay 511.32 the cost of collecting the tax, and to pay for the following 511.33 projects or to secure or pay any principal, premium, or interest 511.34 on bonds issued in accordance with subdivision 3 for the 511.35 following projects. 511.36 (a) To pay all or a portion of the capital expenses of 512.1 construction, equipment and acquisition costs for the expansion 512.2 and remodeling of the St. Paul Civic Center complex, including 512.3 the demolition of the existing arena and the construction and 512.4 equipping of a new arena. 512.5 (b) The remainder of the funds must be spent for: 512.6 (1) capital projects to further residential, cultural, 512.7 commercial, and economic development in both downtown St. Paul 512.8 and St. Paul neighborhoods ; and 512.9 (2) capital and operating expenses of cultural 512.10 organizations in the city, provided that the amount spent under 512.11 this clause must equal ten percent of the total amount spent 512.12 under this paragraph in any year. 512.13 (c) The amount apportioned under paragraph (b) shall be no 512.14 less than 60 percent of the revenues derived from the tax each 512.15 year, except to the extent that a portion of that amount is 512.16 required to pay debt service on (1) bonds issued for the 512.17 purposes of paragraph (a) prior to March 1, 1998; or (2) bonds 512.18 issued for the purposes of paragraph (a) after March 1, 1998, 512.19 but only if the city council determines that 40 percent of the 512.20 revenues derived from the tax together with other revenues 512.21 pledged to the payment of the bonds, including the proceeds of 512.22 definitive bonds, is expected to exceed the annual debt service 512.23 on the bonds. 512.24 (d) If in any year more than 40 percent of the revenue 512.25 derived from the tax authorized by subdivision 1 is used to pay 512.26 debt service on the bonds issued for the purposes of paragraph 512.27 (a) and to fund a reserve for the bonds, the amount of the debt 512.28 service payment that exceeds 40 percent of the revenue must be 512.29 determined for that year. In any year when 40 percent of the 512.30 revenue produced by the sales tax exceeds the amount required to 512.31 pay debt service on the bonds and to fund a reserve for the 512.32 bonds under paragraph (a), the amount of the excess must be made 512.33 available for capital projects to further residential, cultural, 512.34 commercial, and economic development in the neighborhoods and 512.35 downtown until the cumulative amounts determined for all years 512.36 under the preceding sentence have been made available under this 513.1 sentence. The amount made available as reimbursement in the 513.2 preceding sentence is not included in the 60 percent determined 513.3 under paragraph (c). 513.4 (e) No revenues from the tax authorized by subdivision 1 513.5 may be used to pay principal, premium, or interest on any bonds 513.6 or other obligations except the bonds issued under subdivision 3. 513.7(e)(f) By January 15 of each odd-numbered year, the mayor 513.8 and the city council must report to the legislature on the use 513.9 of sales tax revenues during the preceding two-year period. 513.10[EFFECTIVE DATE.] This section is effective the day 513.11 following final enactment. 513.12 Sec. 10. Laws 2001, First Special Session chapter 5, 513.13 article 12, section 44, the effective date, is amended to read: 513.14[EFFECTIVE DATE.] This section is effective for sales and 513.15 purchases made after July 31, 2001, and before August 1, 2005. 513.16 Sec. 11. [COUNTY OF MOWER; SALES AND USE TAX.] 513.17 Subdivision 1. [SALES AND USE TAX 513.18 AUTHORIZED.] Notwithstanding Minnesota Statutes, section 513.19 477A.016, or any other provision of law or ordinance, the county 513.20 of Mower may, by resolution, impose a sales and use tax of up to 513.21 one-half percent for the purposes specified in subdivision 2. 513.22 Except as otherwise provided in this section, the provisions of 513.23 Minnesota Statutes, section 297A.99, govern the imposition, 513.24 administration, collection, and enforcement of the tax 513.25 authorized under this subdivision. 513.26 Subd. 2. [USE OF REVENUES.] The proceeds of the tax 513.27 imposed under this section must be solely used to pay for costs 513.28 associated with a Criminal Justice Center for Mower County. 513.29 Government functions to be located in the facility for which 513.30 proceeds of the tax may be used include, but are not limited to, 513.31 jail, law enforcement, dispatch, courts, court administration, 513.32 correctional services, and county attorney. 513.33 Authorized expenses include, but are not limited to, site 513.34 acquisition, infrastructure, construction, and professional fees 513.35 related to the project. 513.36 Subd. 3. [BONDING AUTHORITY.] (a) The county may issue 514.1 bonds under Minnesota Statutes, chapter 475, to finance the 514.2 capital expenditures and improvements authorized by the 514.3 referendum under subdivision 4. An election to approve the 514.4 bonds under Minnesota Statutes, section 475.58, is not required. 514.5 (b) The bonds are not included in computing any debt limits 514.6 applicable to the county, and the levy of taxes under Minnesota 514.7 Statutes, section 475.61, to pay principal and interest on the 514.8 bonds is not subject to levy limits. 514.9 Subd. 4. [REFERENDUM.] If the county of Mower proposes to 514.10 impose the tax authorized by this section, the question of 514.11 imposing the tax must be submitted to the voters at either a 514.12 special election held before January 1, 2006, or at the next 514.13 general election. 514.14 Subd. 5. [TERMINATION OF TAXES.] The tax imposed under 514.15 this section expires when the county board first determines that 514.16 the amount of revenues raised to pay for the Criminal Justice 514.17 Center project under subdivision 2 meet or exceed approved 514.18 project costs. Any funds remaining after completion of the 514.19 projects may be placed in the general funds of the county. The 514.20 county may rescind the tax imposed under this section at an 514.21 earlier time by ordinance. 514.22[EFFECTIVE DATE.] This section is effective the day after 514.23 compliance by the governing body of the county of Mower with 514.24 Minnesota Statutes, section 645.021, subdivision 3. 514.25 Sec. 12. [CITY OF WORTHINGTON; TAXES AUTHORIZED.] 514.26 Subdivision 1. [SALES AND USE TAX.] Notwithstanding 514.27 Minnesota Statutes, section 477A.016, or any other provision of 514.28 law, ordinance, or city charter, if approved by the voters 514.29 pursuant to Minnesota Statutes, section 297A.99, at the next 514.30 general election, the city of Worthington may impose by 514.31 ordinance a sales and use tax of up to one-half of one percent 514.32 for the purpose specified in subdivision 3. Except as otherwise 514.33 provided in this section, the provisions of Minnesota Statutes, 514.34 section 297A.99, govern the imposition, administration, 514.35 collection, and enforcement of the tax authorized under this 514.36 subdivision. 515.1 Subd. 2. [EXCISE TAX AUTHORIZED.] Notwithstanding 515.2 Minnesota Statutes, section 477A.016, or any other provision of 515.3 law, ordinance, or city charter, the city of Worthington may 515.4 impose by ordinance, for the purposes specified in subdivision 515.5 3, an excise tax of up to $20 per motor vehicle, as defined by 515.6 ordinance, purchased or acquired from any person engaged within 515.7 the city in the business of selling motor vehicles at retail. 515.8 Subd. 3. [USE OF REVENUES.] Revenues received from taxes 515.9 authorized by subdivisions 1 and 2 must be used by the city to 515.10 pay the cost of collecting and administering the taxes and to 515.11 pay for the costs of a multipurpose city facility to include 515.12 meeting rooms, a swimming pool, and a senior citizen center, and 515.13 to make renovations to the Memorial Auditorium. Authorized 515.14 expenses include, but are not limited to, acquiring property and 515.15 paying construction expenses related to these improvements, and 515.16 paying debt service on bonds or other obligations issued to 515.17 finance acquisition and construction of these improvements. 515.18 Subd. 4. [BONDING AUTHORITY.] (a) If the tax authorized 515.19 under subdivision 1 is approved by the voters, the city may 515.20 issue bonds under Minnesota Statutes, chapter 475, to pay 515.21 capital and administrative expenses for the improvements 515.22 described in subdivision 3 in an amount that does not exceed 515.23 $7,800,000. An election to approve the bonds under Minnesota 515.24 Statutes, section 475.58, is not required. 515.25 (b) The debt represented by the bonds is not included in 515.26 computing any debt limitation applicable to the city, and any 515.27 levy of taxes under Minnesota Statutes, section 475.61, to pay 515.28 principal of and interest on the bonds is not subject to any 515.29 levy limitation. 515.30 Subd. 5. [TERMINATION OF TAXES.] The taxes imposed under 515.31 subdivisions 1 and 2 expire at the earlier of (1) ten years, or 515.32 (2) when the city council determines that the amount of revenue 515.33 received from the taxes to pay for the projects under 515.34 subdivision 3 equals or exceeds $7,800,000 plus the additional 515.35 amount needed to pay the costs related to issuance of bonds 515.36 under subdivision 4, including interest on the bonds. Any funds 516.1 remaining after completion of the project and retirement or 516.2 redemption of the bonds shall be placed in a capital project 516.3 fund of the city. The taxes imposed under subdivisions 1 and 2 516.4 may expire at an earlier time if the city so determines by 516.5 ordinance. 516.6[EFFECTIVE DATE.] This section is effective the day after 516.7 the governing body of the city of Worthington and its chief 516.8 clerical officer timely comply with Minnesota Statutes, section 516.9 645.021, subdivisions 2 and 3. 516.10 ARTICLE 22 516.11 PROPERTY TAX AND AIDS - SF2206 516.12 Section 1. Minnesota Statutes 2004, section 123B.53, 516.13 subdivision 5, is amended to read: 516.14 Subd. 5. [EQUALIZED DEBT SERVICE LEVY.] (a) The equalized 516.15 debt service levy of a district equals the sum of the first tier 516.16 equalized debt service levy and the second tier equalized debt 516.17 service levy. 516.18 (b) A district's first tier equalized debt service levy 516.19 equals the district's first tier debt service equalization 516.20 revenue times the lesser of one or the ratio of: 516.21 (1) the quotient derived by dividing theadjusteddebt 516.22 service net tax capacity of the district for the year before the 516.23 year the levy is certified by the adjusted pupil units in the 516.24 district for the school year ending in the year prior to the 516.25 year the levy is certified; to 516.26 (2) $3,200. 516.27 (c) A district's second tier equalized debt service levy 516.28 equals the district's second tier debt service equalization 516.29 revenue times the lesser of one or the ratio of: 516.30 (1) the quotient derived by dividing theadjusteddebt 516.31 service net tax capacity of the district for the year before the 516.32 year the levy is certified by the adjusted pupil units in the 516.33 district for the school year ending in the year prior to the 516.34 year the levy is certified; to 516.35 (2) $8,000. 516.36[EFFECTIVE DATE.] This section is effective for taxes 517.1 payable in 2006. 517.2 Sec. 2. Minnesota Statutes 2004, section 126C.01, is 517.3 amended by adding a subdivision to read: 517.4 Subd. 2a. [DEBT SERVICE NET TAX CAPACITY.] A school 517.5 district's debt service net tax capacity means the net tax 517.6 capacity of the taxable property of the district as adjusted by 517.7 the commissioner of revenue under section 127A.48, subdivision 517.8 17. The debt service net tax capacity for any given calendar 517.9 year must be used to compute the debt service levy limitations 517.10 for levies certified in the succeeding calendar year and aid for 517.11 the school year beginning in the second succeeding calendar year. 517.12[EFFECTIVE DATE.] This section is effective the day 517.13 following final enactment for computing taxes payable in 2006. 517.14 Sec. 3. Minnesota Statutes 2004, section 127A.48, is 517.15 amended by adding a subdivision to read: 517.16 Subd. 17. [DEBT SERVICE NET TAX CAPACITY.] To calculate 517.17 each district's debt service net tax capacity, the commissioner 517.18 of revenue must recompute the amounts in this section using an 517.19 alternative sales ratio comparing the sales price to the 517.20 estimated market value of the property. 517.21[EFFECTIVE DATE.] This section is effective the day 517.22 following final enactment for computing taxes payable in 2006. 517.23 Sec. 4. Minnesota Statutes 2004, section 254B.02, 517.24 subdivision 3, is amended to read: 517.25 Subd. 3. [RESERVE ACCOUNT.] The commissioner shall 517.26 allocate money from the reserve account to counties that, during 517.27 the current fiscal year, have met or exceeded the base level of 517.28 expenditures for eligible chemical dependency services from 517.29 local money. The commissioner shall establish the base level 517.30 for fiscal year 1988 as the amount of local money used for 517.31 eligible services in calendar year 1986. In later years, the 517.32 base level must be increased in the same proportion as state 517.33 appropriations to implement Laws 1986, chapter 394, sections 8 517.34 to 20, are increased, except the base level shall not exceed 55 517.35 percent of the county allocation provided in subdivision 1 for 517.36 fiscal year 2006; 50 percent in fiscal year 2007; 45 percent in 518.1 fiscal year 2008; and 40 percent in fiscal year 2009. 518.2 Thereafter the maximum base level shall decrease by five percent 518.3 each year until the maximum county match is 15 percent. The 518.4 base level must be decreased if the fund balance from which 518.5 allocations are made under section 254B.02, subdivision 1, is 518.6 decreased in later years. The local match rate for the reserve 518.7 account is the same rate as applied to the initial allocation. 518.8 Reserve account payments must not be included when calculating 518.9 the county adjustments made according to subdivision 2. For 518.10 counties providing medical assistance or general assistance 518.11 medical care through managed care plans on January 1, 1996, the 518.12 base year is fiscal year 1995. For counties beginning provision 518.13 of managed care after January 1, 1996, the base year is the most 518.14 recent fiscal year before enrollment in managed care begins. 518.15 For counties providing managed care, the base level will be 518.16 increased or decreased in proportion to changes in the fund 518.17 balance from which allocations are made under subdivision 2, but 518.18 will be additionally increased or decreased in proportion to the 518.19 change in county adjusted population made in subdivision 1, 518.20 paragraphs (b) and (c). Effective July 1, 2001, at the end of 518.21 each biennium, any funds deposited in the reserve account funds 518.22 in excess of those needed to meet obligations incurred under 518.23 this section and sections 254B.06 and 254B.09 shall cancel to 518.24 the general fund. 518.25 Sec. 5. Minnesota Statutes 2004, section 272.02, 518.26 subdivision 53, is amended to read: 518.27 Subd. 53. [ELECTRIC GENERATION FACILITY; PERSONAL 518.28 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 518.29 machinery and other personal property which is part of a 3.2 518.30 megawatt run-of-the-river hydroelectric generation facility and 518.31 that meets the requirements of this subdivision is exempt. At 518.32 the time of construction, the facility must: 518.33 (1) utilize two turbine generators at a dam site existing 518.34 on March 31, 1994; 518.35 (2) be located onpublicly ownedlandandwithin 1,500 feet 518.36 of a 13.8 kilovolt distribution substation; and 519.1 (3) be eligible to receive a renewable energy production 519.2 incentive payment under section 216C.41. 519.3 Construction of the facility must be commenced after 519.4January 1, 2002December 31, 2004, and before January 1,2005519.5 2007. Property eligible for this exemption does not include 519.6 electric transmission lines and interconnections or gas 519.7 pipelines and interconnections appurtenant to the property or 519.8 the facility. 519.9[EFFECTIVE DATE.] This section is effective for taxes 519.10 levied in 2005, payable in 2006, and thereafter. 519.11 Sec. 6. Minnesota Statutes 2004, section 272.02, is 519.12 amended by adding a subdivision to read: 519.13 Subd. 68. [ELECTRIC GENERATION FACILITY PERSONAL 519.14 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 519.15 attached machinery and other personal property which is part of 519.16 either a simple-cycle, combustion-turbine electric generation 519.17 facility, or a combined-cycle, combustion-turbine electric 519.18 generation facility that does not exceed 325 megawatts of 519.19 installed capacity and that meets the requirements of this 519.20 subdivision is exempt. At the time of construction, the 519.21 facility must: 519.22 (1) utilize either a simple-cycle or a combined-cycle 519.23 combustion-turbine generator fueled by natural gas; 519.24 (2) be connected to an existing 115-kilovolt high-voltage 519.25 electric transmission line that is within two miles of the 519.26 facility; 519.27 (3) be located on an underground natural gas storage 519.28 aquifer; 519.29 (4) be designed as either a peaking or intermediate load 519.30 facility; and 519.31 (5) have received, by resolution, the approval from the 519.32 governing body of the county for the exemption of personal 519.33 property under this subdivision. 519.34 (b) Construction of the facility must be commenced after 519.35 January 1, 2006, and before January 1, 2008. Property eligible 519.36 for this exemption does not include electric transmission lines 520.1 and interconnections or gas pipelines and interconnections 520.2 appurtenant to the property or the facility. 520.3[EFFECTIVE DATE.] This section is effective for assessment 520.4 year 2005, taxes payable in 2006, and thereafter. 520.5 Sec. 7. Minnesota Statutes 2004, section 272.0211, 520.6 subdivision 1, is amended to read: 520.7 Subdivision 1. [EFFICIENCY DETERMINATION AND 520.8 CERTIFICATION.] An owner or operator of a new or existing 520.9 electric power generation facility, excluding wind energy 520.10 conversion systems, may apply to the commissioner of revenue for 520.11 a market value exclusion on the property as provided for in this 520.12 section. This exclusion shall apply only to the market value of 520.13 the equipment of the facility, and shall not apply to the 520.14 structures and the land upon which the facility is located. The 520.15 commissioner of revenue shall prescribe the forms and procedures 520.16 for this application. Upon receiving the application, the 520.17 commissioner of revenue shall request the commissioner of 520.18 commerce to make a determination of the efficiency of the 520.19 applicant's electric power generation facility.In calculating520.20the efficiency of a facility,The commissioner of commerce shall 520.21use a definition ofcalculate efficiencywhich calculates520.22efficiency as the sum of:520.23(1) the useful electrical power output; plus520.24(2) the useful thermal energy output; plus520.25(3) the fuel energy of the useful chemical products,520.26all divided by the total energy input to the facility, expressed520.27as a percentageas the ratio of useful energy outputs to energy 520.28 inputs, expressed as a percentage, based on the performance of 520.29 the facility's equipment during normal full load operation. The 520.30 commissioner must include in this formula the energy used in any 520.31 on-site preparation of materials necessary to convert the 520.32 materials into the fuel used to generate electricity, such as a 520.33 process to gasify petroleum coke. The commissioner shall use 520.34 thehigh heating valueHigher Heating Value (HHV) for all 520.35 substances in the commissioner's efficiency calculations, except 520.36 for wood for fuel in a biomass-eligible project under section 521.1 216B.2424; for these instances, the commissioner shall adjust 521.2 the heating value to allow for energy consumed for evaporation 521.3 of the moisture in the wood. The applicant shall provide the 521.4 commissioner of commerce with whatever information the 521.5 commissioner deems necessary to make the determination. Within 521.6 30 days of the receipt of the necessary information, the 521.7 commissioner of commerce shall certify the findings of the 521.8 efficiency determination to the commissioner of revenue and to 521.9 the applicant.The commissioner of commerce shall determine the521.10efficiency of the facility and certify the findings of that521.11determination to the commissioner of revenue every two years521.12thereafter from the date of the original certification.521.13[EFFECTIVE DATE.] This section is effective for assessment 521.14 year 2005 and thereafter, for taxes payable in 2006 and 521.15 thereafter. 521.16 Sec. 8. Minnesota Statutes 2004, section 272.0211, 521.17 subdivision 2, is amended to read: 521.18 Subd. 2. [SLIDING SCALE EXCLUSION.] Based upon the 521.19 efficiency determination provided by the commissioner of 521.20 commerce as described in subdivision 1, the commissioner of 521.21 revenue shall subtractfiveeight percent of the taxable market 521.22 value of the qualifying property for each percentage point that 521.23 the efficiency of the specific facility, as determined by the 521.24 commissioner of commerce, is above3540 percent. The reduction 521.25 in taxable market value shall be reflected in the taxable market 521.26 value of the facility beginning with the assessment year 521.27 immediately following the determination. For a facility that is 521.28 assessed by the county in which the facility is located, the 521.29 commissioner of revenue shall certify to the assessor of that 521.30 county the percentage of the taxable market value of the 521.31 facility to be excluded. 521.32[EFFECTIVE DATE.] This section is effective for assessment 521.33 year 2005 and thereafter, for taxes payable in 2006 and 521.34 thereafter. 521.35 Sec. 9. Minnesota Statutes 2004, section 273.11, 521.36 subdivision 1a, is amended to read: 522.1 Subd. 1a. [LIMITED MARKET VALUE.] In the case of all 522.2 property classified as agricultural homestead or nonhomestead, 522.3 residential homestead or nonhomestead, timber, or noncommercial 522.4 seasonal residential recreational, the assessor shall compare 522.5 the value with the taxable portion of the value determined in 522.6 the preceding assessment. 522.7 For assessment year 2002, the amount of the increase shall 522.8 not exceed the greater of (1) ten percent of the value in the 522.9 preceding assessment, or (2) 15 percent of the difference 522.10 between the current assessment and the preceding assessment. 522.11 For assessment year 2003, the amount of the increase shall 522.12 not exceed the greater of (1) 12 percent of the value in the 522.13 preceding assessment, or (2) 20 percent of the difference 522.14 between the current assessment and the preceding assessment. 522.15 For assessment year 2004, the amount of the increase shall 522.16 not exceed the greater of (1) 15 percent of the value in the 522.17 preceding assessment, or (2) 25 percent of the difference 522.18 between the current assessment and the preceding assessment. 522.19 For assessment year 2005, the amount of the increase shall 522.20 not exceed the greater of (1) 15 percent of the value in the 522.21 preceding assessment, or (2) 33 percent of the difference 522.22 between the current assessment and the preceding assessment. 522.23 For assessment year 2006, the amount of the increase shall 522.24 not exceed the greater of (1) 15 percent of the value in the 522.25 preceding assessment, or (2) 50 percent of the difference 522.26 between the current assessment and the preceding assessment. 522.27 This limitation shall not apply to increases in value due 522.28 to improvements. For purposes of this subdivision, the term 522.29 "assessment" means the value prior to any exclusion under 522.30 subdivision 16. 522.31 The provisions of this subdivision shall be in effect 522.32 through assessment year 2006 as provided in this subdivision. 522.33 For purposes of the assessment/sales ratio study conducted 522.34 under section 127A.48, and the computation of state aids paid 522.35 under chapters 122A, 123A, 123B, excluding section 123B.53, 522.36 124D, 125A, 126C, 127A, and 477A, market values and net tax 523.1 capacities determined under this subdivision and subdivision 16, 523.2 shall be used. 523.3[EFFECTIVE DATE.] This section is effective the day 523.4 following final enactment for computing taxes payable in 2006. 523.5 Sec. 10. Minnesota Statutes 2004, section 275.025, 523.6 subdivision 1, is amended to read: 523.7 Subdivision 1. [LEVY AMOUNT.] (a) The state general levy 523.8 is levied against commercial-industrial property and seasonal 523.9 residential recreational property, as defined in this section. 523.10 The state general levy base amount is $592,000,000 for taxes 523.11 payable in 2002. For taxes payable in subsequent years on 523.12 seasonal residential recreational property, the levy base amount 523.13 is increased each year by multiplying the levy base amount 523.14 for that class of property for the prior year by the sum of one 523.15 plus the rate of increase, if any, in the implicit price 523.16 deflator for government consumption expenditures and gross 523.17 investment for state and local governments prepared by the 523.18 Bureau of Economic Analysts of the United States Department of 523.19 Commerce for the 12-month period ending March 31 of the year 523.20 prior to the year the taxes are payable. For taxes payable in 523.21 2006 and subsequent years on commercial-industrial property, the 523.22 tax is imposed under this subdivision at the rate of the tax 523.23 imposed under this subdivision for taxes payable in 2002. The 523.24 tax under this section is not treated as a local tax rate under 523.25 section 469.177 and is not the levy of a governmental unit under 523.26 chapters 276A and 473F. 523.27 (b) Beginning with taxes payable in 2008, and in each year 523.28 thereafter, the commissioner of finance shall deposit in the 523.29 education reserve account established in 2005 S.F. No. 1683, 523.30 article 4, section 73, if enacted, the increased amount of the 523.31 state general levy for that year over the state general levy 523.32 base amount for taxes payable in 2002. 523.33 (c) The commissioner shall increase or decrease the 523.34 preliminary or final rate for a year as necessary to account for 523.35 errors and tax base changes that affected a preliminary or final 523.36 rate for either of the two preceding years. Adjustments are 524.1 allowed to the extent that the necessary information is 524.2 available to the commissioner at the time the rates for a year 524.3 must be certified, and for the following reasons: 524.4 (1) an erroneous report of taxable value by a local 524.5 official; 524.6 (2) an erroneous calculation by the commissioner; and 524.7 (3) an increase or decrease in taxable value for 524.8 commercial-industrial or seasonal residential recreational 524.9 property reported on the abstracts of tax lists submitted under 524.10 section 275.29 that was not reported on the abstracts of 524.11 assessment submitted under section 270.11, subdivision 2, for 524.12 the same year. 524.13 The commissioner may, but need not, make adjustments if the 524.14 total difference in the tax levied for the year would be less 524.15 than $100,000. 524.16[EFFECTIVE DATE.] This section is effective for taxes 524.17 payable in 2006 and subsequent years. 524.18 Sec. 11. Minnesota Statutes 2004, section 275.065, 524.19 subdivision 3, is amended to read: 524.20 Subd. 3. [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 524.21 county auditor shall prepare and the county treasurer shall 524.22 deliver after November 10 and on or before November 24 each 524.23 year, by first class mail to each taxpayer at the address listed 524.24 on the county's current year's assessment roll, a notice of 524.25 proposed property taxes. 524.26 (b) The commissioner of revenue shall prescribe the form of 524.27 the notice. 524.28 (c) The notice must inform taxpayers that it contains the 524.29 amount of property taxes each taxing authority proposes to 524.30 collect for taxes payable the following year. In the case of a 524.31 town, or in the case of the state general tax, the final tax 524.32 amount will be its proposed tax. In the case of taxing 524.33 authorities required to hold a public meeting under subdivision 524.34 6, the notice must clearly state that each taxing authority, 524.35 including regional library districts established under section 524.36 134.201, and including the metropolitan taxing districts as 525.1 defined in paragraph (i), but excluding all other special taxing 525.2 districts and towns, will hold a public meeting to receive 525.3 public testimony on the proposed budget and proposed or final 525.4 property tax levy, or, in case of a school district, on the 525.5 current budget and proposed property tax levy. It must clearly 525.6 state the time and place of each taxing authority's meeting, a 525.7 telephone number for the taxing authority that taxpayers may 525.8 call if they have questions related to the notice, and an 525.9 address where comments will be received by mail. 525.10 (d) The notice must state for each parcel: 525.11 (1) the market value of the property as determined under 525.12 section 273.11, and used for computing property taxes payable in 525.13 the following year and for taxes payable in the current year as 525.14 each appears in the records of the county assessor on November 1 525.15 of the current year; and, in the case of residential property, 525.16 whether the property is classified as homestead or 525.17 nonhomestead. The notice must clearly inform taxpayers of the 525.18 years to which the market values apply and that the values are 525.19 final values; 525.20 (2) the items listed below, shown separately by county, 525.21 city or town, and state general tax, net of the residential and 525.22 agricultural homestead credit under section 273.1384, voter 525.23 approved school levy, other local school levy, and the sum of 525.24 the special taxing districts, and as a total of all taxing 525.25 authorities: 525.26 (i) the actual tax for taxes payable in the current year; 525.27 and 525.28 (ii) the proposed tax amount. 525.29 If the county levy under clause (2) includes an amount for 525.30 a lake improvement district as defined under sections 103B.501 525.31 to 103B.581, the amount attributable for that purpose must be 525.32 separately stated from the remaining county levy amount. 525.33 In the case of a town or the state general tax, the final 525.34 tax shall also be its proposed tax unless the town changes its 525.35 levy at a special town meeting under section 365.52. If a 525.36 school district has certified under section 126C.17, subdivision 526.1 9, that a referendum will be held in the school district at the 526.2 November general election, the county auditor must note next to 526.3 the school district's proposed amount that a referendum is 526.4 pending and that, if approved by the voters, the tax amount may 526.5 be higher than shown on the notice. In the case of the city of 526.6 Minneapolis, the levy for the Minneapolis Library Board and the 526.7 levy for Minneapolis Park and Recreation shall be listed 526.8 separately from the remaining amount of the city's levy. In the 526.9 case of the city of St. Paul, the levy for the St. Paul Library 526.10 Agency must be listed separately from the remaining amount of 526.11 the city's levy. In the case of a parcel where tax increment or 526.12 the fiscal disparities areawide tax under chapter 276A or 473F 526.13 applies, the proposed tax levy on the captured value or the 526.14 proposed tax levy on the tax capacity subject to the areawide 526.15 tax must each be stated separately and not included in the sum 526.16 of the special taxing districts; and 526.17 (3) the increase or decrease between the total taxes 526.18 payable in the current year and the total proposed taxes, 526.19 expressed as a percentage. 526.20 For purposes of this section, the amount of the tax on 526.21 homesteads qualifying under the senior citizens' property tax 526.22 deferral program under chapter 290B is the total amount of 526.23 property tax before subtraction of the deferred property tax 526.24 amount. 526.25 (e) The notice must clearly state that the proposed or 526.26 final taxes do not include the following: 526.27 (1) special assessments; 526.28 (2) levies approved by the voters after the date the 526.29 proposed taxes are certified, including bond referenda and 526.30 school district levy referenda; 526.31 (3) a levy limit increase approved by the voters by the 526.32 first Tuesday after the first Monday in November of the levy 526.33 year as provided under section 275.73; 526.34 (4) amounts necessary to pay cleanup or other costs due to 526.35 a natural disaster occurring after the date the proposed taxes 526.36 are certified; 527.1 (5) amounts necessary to pay tort judgments against the 527.2 taxing authority that become final after the date the proposed 527.3 taxes are certified; and 527.4 (6) the contamination tax imposed on properties which 527.5 received market value reductions for contamination. 527.6 (f) Except as provided in subdivision 7, failure of the 527.7 county auditor to prepare or the county treasurer to deliver the 527.8 notice as required in this section does not invalidate the 527.9 proposed or final tax levy or the taxes payable pursuant to the 527.10 tax levy. 527.11 (g) If the notice the taxpayer receives under this section 527.12 lists the property as nonhomestead, and satisfactory 527.13 documentation is provided to the county assessor by the 527.14 applicable deadline, and the property qualifies for the 527.15 homestead classification in that assessment year, the assessor 527.16 shall reclassify the property to homestead for taxes payable in 527.17 the following year. 527.18 (h) In the case of class 4 residential property used as a 527.19 residence for lease or rental periods of 30 days or more, the 527.20 taxpayer must either: 527.21 (1) mail or deliver a copy of the notice of proposed 527.22 property taxes to each tenant, renter, or lessee; or 527.23 (2) post a copy of the notice in a conspicuous place on the 527.24 premises of the property. 527.25 The notice must be mailed or posted by the taxpayer by 527.26 November 27 or within three days of receipt of the notice, 527.27 whichever is later. A taxpayer may notify the county treasurer 527.28 of the address of the taxpayer, agent, caretaker, or manager of 527.29 the premises to which the notice must be mailed in order to 527.30 fulfill the requirements of this paragraph. 527.31 (i) For purposes of this subdivision, subdivisions 5a and 527.32 6, "metropolitan special taxing districts" means the following 527.33 taxing districts in the seven-county metropolitan area that levy 527.34 a property tax for any of the specified purposes listed below: 527.35 (1) Metropolitan Council under section 473.132, 473.167, 527.36 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 528.1 (2) Metropolitan Airports Commission under section 473.667, 528.2 473.671, or 473.672; and 528.3 (3) Metropolitan Mosquito Control Commission under section 528.4 473.711. 528.5 For purposes of this section, any levies made by the 528.6 regional rail authorities in the county of Anoka, Carver, 528.7 Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 528.8 398A shall be included with the appropriate county's levy and 528.9 shall be discussed at that county's public hearing. 528.10 (j) The governing body of a county, city, or school 528.11 district may, with the consent of the county auditor, include 528.12 supplemental information with the statement of proposed property 528.13 taxes about the impact of state aid increases or decreases on 528.14 property tax increases or decreases and on the level of services 528.15 provided in the affected jurisdiction. This supplemental 528.16 information may include information for the following year, the 528.17 current year, and for as many consecutive preceding years as 528.18 deemed appropriate by the governing body of the county, city, or 528.19 school district. It may include only information regarding: 528.20 (1) the impact of inflation as measured by the implicit 528.21 price deflator for state and local government purchases; 528.22 (2) population growth and decline; 528.23 (3) state or federal government action; and 528.24 (4) other financial factors that affect the level of 528.25 property taxation and local services that the governing body of 528.26 the county, city, or school district may deem appropriate to 528.27 include. 528.28 The information may be presented using tables, written 528.29 narrative, and graphic representations and may contain 528.30 instruction toward further sources of information or opportunity 528.31 for comment. 528.32 Sec. 12. Minnesota Statutes 2004, section 469.033, 528.33 subdivision 6, is amended to read: 528.34 Subd. 6. [OPERATION AREA AS TAXING DISTRICT, SPECIAL TAX.] 528.35 All of the territory included within the area of operation of 528.36 any authority shall constitute a taxing district for the purpose 529.1 of levying and collecting special benefit taxes as provided in 529.2 this subdivision. All of the taxable property, both real and 529.3 personal, within that taxing district shall be deemed to be 529.4 benefited by projects to the extent of the special taxes levied 529.5 under this subdivision. Subject to the consent by resolution of 529.6 the governing body of the city in and for which it was created, 529.7 an authority may levy a tax upon all taxable property within 529.8 that taxing district. The tax shall be extended, spread, and 529.9 included with and as a part of the general taxes for state, 529.10 county, and municipal purposes by the county auditor, to be 529.11 collected and enforced therewith, together with the penalty, 529.12 interest, and costs. As the tax, including any penalties, 529.13 interest, and costs, is collected by the county treasurer it 529.14 shall be accumulated and kept in a separate fund to be known as 529.15 the "housing and redevelopment project fund." The money in the 529.16 fund shall be turned over to the authority at the same time and 529.17 in the same manner that the tax collections for the city are 529.18 turned over to the city, and shall be expended only for the 529.19 purposes of sections 469.001 to 469.047. It shall be paid out 529.20 upon vouchers signed by the chair of the authority or an 529.21 authorized representative. The amount of the levy shall be an 529.22 amount approved by the governing body of the city, but shall not 529.23 exceed 0.0144 percent of taxable market value for the current 529.24 levy year, notwithstanding section 273.032. The authority shall 529.25 each year formulate and file a budget in accordance with the 529.26 budget procedure of the city in the same manner as required of 529.27 executive departments of the city or, if no budgets are required 529.28 to be filed, by August 1. The amount of the tax levy for the 529.29 following year shall be based on that budget. 529.30 Sec. 13. Minnesota Statutes 2004, section 473F.08, 529.31 subdivision 3a, is amended to read: 529.32 Subd. 3a. [BLOOMINGTON COMPUTATION.] Beginning in 1987 and 529.33 each subsequent year through 1998, the city of Bloomington shall 529.34 determine the interest payments for that year for the bonds 529.35 which have been sold for the highway improvements pursuant to 529.36 Laws 1986, chapter 391, section 2, paragraph (g). Effective for 530.1 property taxes payable in 1988 through property taxes payable in 530.2 1999, after the Hennepin County auditor has computed the 530.3 areawide portion of the levy for the city of Bloomington 530.4 pursuant to subdivision 3, clause (a), the auditor shall 530.5 annually add a dollar amount to the city of Bloomington's 530.6 areawide portion of the levy equal to the amount which has been 530.7 certified to the auditor by the city of Bloomington for the 530.8 interest payments for that year for the bonds which were sold 530.9 for highway improvements. The total areawide portion of the 530.10 levy for the city of Bloomington including the additional amount 530.11 for interest repayment certified pursuant to this subdivision 530.12 shall be certified by the Hennepin County auditor to the 530.13 administrative auditor pursuant to subdivision 5. The Hennepin 530.14 County auditor shall distribute to the city of Bloomington the 530.15 additional areawide portion of the levy computed pursuant to 530.16 this subdivision at the same time that payments are made to the 530.17 other counties pursuant to subdivision 7a. For property taxes 530.18 payable from the year20062014 through20152023, the Hennepin 530.19 County auditor shall adjust Bloomington's contribution to the 530.20 areawide gross tax capacity upward each year by a value equal to 530.21 ten percent of the total additional areawide levy distributed to 530.22 Bloomington under this subdivision from 1988 to 1999, divided by 530.23 the areawide tax rate for taxes payable in the previous year. 530.24[EFFECTIVE DATE.] This section is effective the day 530.25 following final enactment. 530.26 Sec. 14. Minnesota Statutes 2004, section 477A.011, 530.27 subdivision 34, is amended to read: 530.28 Subd. 34. [CITY REVENUE NEED.] (a) For a city with a 530.29 population equal to or greater than 2,500, "city revenue need" 530.30 is the sum of (1) 5.0734098 times the pre-1940 housing 530.31 percentage; plus (2) 19.141678 times the population decline 530.32 percentage; plus (3) 2504.06334 times the road accidents factor; 530.33 plus (4) 355.0547; minus (5) the metropolitan area factor; minus 530.34 (6) 49.10638 times the household size. 530.35 (b) For a city with a population less than 2,500, "city 530.36 revenue need" is the sum of (1) 2.387 times the pre-1940 housing 531.1 percentage; plus (2) 2.67591 times the commercial industrial 531.2 percentage; plus (3) 3.16042 times the population decline 531.3 percentage; plus (4) 1.206 times the transformed population; 531.4 minus (5) 62.772. 531.5 (c) The city revenue need cannot be less than zero. 531.6 (d) For calendar year 2005 and subsequent years, the city 531.7 revenue need for a city, as determined in paragraphs (a) to (c), 531.8 is multiplied by the ratio of theannualmost recently available 531.9 first quarter implicit price deflator for government consumption 531.10 expenditures and gross investment for state and local 531.11 governments as prepared by the United States Department of 531.12 Commerce,for the most recently available yearto the2003first 531.13 quarter 2002 implicit price deflator for state and local 531.14 government purchases. 531.15 (e) For a city with a population of 2,500 or more and a 531.16 population in one of the most recently available five years that 531.17 was less than 2,500, "city revenue need" is the sum of (1) its 531.18 city revenue need calculated under paragraph (a) multiplied by 531.19 its transition factor; plus (2) its city revenue need calculated 531.20 under the formula in paragraph (b) multiplied by the difference 531.21 between one and its transition factor. For purposes of this 531.22 paragraph, a city's "transition factor" is equal to 0.2 531.23 multiplied by the number of years that the city's population 531.24 estimate has been 2,500 or more. This provision only applies 531.25 for aids payable in calendar years 2006 to 2008 to cities with a 531.26 2002 population of less than 2,500. It applies to any city for 531.27 aids payable in 2009 and thereafter. 531.28[EFFECTIVE DATE.] This section is effective for aids 531.29 payable in 2006 and thereafter. 531.30 Sec. 15. Minnesota Statutes 2004, section 477A.011, 531.31 subdivision 36, as amended by Laws 2005, chapter 38, section 1, 531.32 is amended to read: 531.33 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 531.34 provided in this subdivision, "city aid base" is zero. 531.35 (b) The city aid base for any city with a population less 531.36 than 500 is increased by $40,000 for aids payable in calendar 532.1 year 1995 and thereafter, and the maximum amount of total aid it 532.2 may receive under section 477A.013, subdivision 9, paragraph 532.3 (c), is also increased by $40,000 for aids payable in calendar 532.4 year 1995 only, provided that: 532.5 (i) the average total tax capacity rate for taxes payable 532.6 in 1995 exceeds 200 percent; 532.7 (ii) the city portion of the tax capacity rate exceeds 100 532.8 percent; and 532.9 (iii) its city aid base is less than $60 per capita. 532.10 (c) The city aid base for a city is increased by $20,000 in 532.11 1998 and thereafter and the maximum amount of total aid it may 532.12 receive under section 477A.013, subdivision 9, paragraph (c), is 532.13 also increased by $20,000 in calendar year 1998 only, provided 532.14 that: 532.15 (i) the city has a population in 1994 of 2,500 or more; 532.16 (ii) the city is located in a county, outside of the 532.17 metropolitan area, which contains a city of the first class; 532.18 (iii) the city's net tax capacity used in calculating its 532.19 1996 aid under section 477A.013 is less than $400 per capita; 532.20 and 532.21 (iv) at least four percent of the total net tax capacity, 532.22 for taxes payable in 1996, of property located in the city is 532.23 classified as railroad property. 532.24 (d) The city aid base for a city is increased by $200,000 532.25 in 1999 and thereafter and the maximum amount of total aid it 532.26 may receive under section 477A.013, subdivision 9, paragraph 532.27 (c), is also increased by $200,000 in calendar year 1999 only, 532.28 provided that: 532.29 (i) the city was incorporated as a statutory city after 532.30 December 1, 1993; 532.31 (ii) its city aid base does not exceed $5,600; and 532.32 (iii) the city had a population in 1996 of 5,000 or more. 532.33 (e) The city aid base for a city is increased by $450,000 532.34 in 1999 to 2008 and the maximum amount of total aid it may 532.35 receive under section 477A.013, subdivision 9, paragraph (c), is 532.36 also increased by $450,000 in calendar year 1999 only, provided 533.1 that: 533.2 (i) the city had a population in 1996 of at least 50,000; 533.3 (ii) its population had increased by at least 40 percent in 533.4 the ten-year period ending in 1996; and 533.5 (iii) its city's net tax capacity for aids payable in 1998 533.6 is less than $700 per capita. 533.7 (f) The city aid base for a city is increased by $150,000 533.8 for aids payable in 2000 and thereafter, and the maximum amount 533.9 of total aid it may receive under section 477A.013, subdivision 533.10 9, paragraph (c), is also increased by $150,000 in calendar year 533.11 2000 only, provided that: 533.12 (1) the city has a population that is greater than 1,000 533.13 and less than 2,500; 533.14 (2) its commercial and industrial percentage for aids 533.15 payable in 1999 is greater than 45 percent; and 533.16 (3) the total market value of all commercial and industrial 533.17 property in the city for assessment year 1999 is at least 15 533.18 percent less than the total market value of all commercial and 533.19 industrial property in the city for assessment year 1998. 533.20 (g) The city aid base for a city is increased by $200,000 533.21 in 2000 and thereafter, and the maximum amount of total aid it 533.22 may receive under section 477A.013, subdivision 9, paragraph 533.23 (c), is also increased by $200,000 in calendar year 2000 only, 533.24 provided that: 533.25 (1) the city had a population in 1997 of 2,500 or more; 533.26 (2) the net tax capacity of the city used in calculating 533.27 its 1999 aid under section 477A.013 is less than $650 per 533.28 capita; 533.29 (3) the pre-1940 housing percentage of the city used in 533.30 calculating 1999 aid under section 477A.013 is greater than 12 533.31 percent; 533.32 (4) the 1999 local government aid of the city under section 533.33 477A.013 is less than 20 percent of the amount that the formula 533.34 aid of the city would have been if the need increase percentage 533.35 was 100 percent; and 533.36 (5) the city aid base of the city used in calculating aid 534.1 under section 477A.013 is less than $7 per capita. 534.2 (h) The city aid base for a city is increased by $102,000 534.3 in 2000 and thereafter, and the maximum amount of total aid it 534.4 may receive under section 477A.013, subdivision 9, paragraph 534.5 (c), is also increased by $102,000 in calendar year 2000 only, 534.6 provided that: 534.7 (1) the city has a population in 1997 of 2,000 or more; 534.8 (2) the net tax capacity of the city used in calculating 534.9 its 1999 aid under section 477A.013 is less than $455 per 534.10 capita; 534.11 (3) the net levy of the city used in calculating 1999 aid 534.12 under section 477A.013 is greater than $195 per capita; and 534.13 (4) the 1999 local government aid of the city under section 534.14 477A.013 is less than 38 percent of the amount that the formula 534.15 aid of the city would have been if the need increase percentage 534.16 was 100 percent. 534.17 (i) The city aid base for a city is increased by $32,000 in 534.18 2001 and thereafter, and the maximum amount of total aid it may 534.19 receive under section 477A.013, subdivision 9, paragraph (c), is 534.20 also increased by $32,000 in calendar year 2001 only, provided 534.21 that: 534.22 (1) the city has a population in 1998 that is greater than 534.23 200 but less than 500; 534.24 (2) the city's revenue need used in calculating aids 534.25 payable in 2000 was greater than $200 per capita; 534.26 (3) the city net tax capacity for the city used in 534.27 calculating aids available in 2000 was equal to or less than 534.28 $200 per capita; 534.29 (4) the city aid base of the city used in calculating aid 534.30 under section 477A.013 is less than $65 per capita; and 534.31 (5) the city's formula aid for aids payable in 2000 was 534.32 greater than zero. 534.33 (j) The city aid base for a city is increased by $7,200 in 534.34 2001 and thereafter, and the maximum amount of total aid it may 534.35 receive under section 477A.013, subdivision 9, paragraph (c), is 534.36 also increased by $7,200 in calendar year 2001 only, provided 535.1 that: 535.2 (1) the city had a population in 1998 that is greater than 535.3 200 but less than 500; 535.4 (2) the city's commercial industrial percentage used in 535.5 calculating aids payable in 2000 was less than ten percent; 535.6 (3) more than 25 percent of the city's population was 60 535.7 years old or older according to the 1990 census; 535.8 (4) the city aid base of the city used in calculating aid 535.9 under section 477A.013 is less than $15 per capita; and 535.10 (5) the city's formula aid for aids payable in 2000 was 535.11 greater than zero. 535.12 (k) The city aid base for a city is increased by $45,000 in 535.13 2001 and thereafter and by an additional $50,000 in calendar 535.14 years 2002 to 2011, and the maximum amount of total aid it may 535.15 receive under section 477A.013, subdivision 9, paragraph (c), is 535.16 also increased by $45,000 in calendar year 2001 only, and by 535.17 $50,000 in calendar year 2002 only, provided that: 535.18 (1) the net tax capacity of the city used in calculating 535.19 its 2000 aid under section 477A.013 is less than $810 per 535.20 capita; 535.21 (2) the population of the city declined more than two 535.22 percent between 1988 and 1998; 535.23 (3) the net levy of the city used in calculating 2000 aid 535.24 under section 477A.013 is greater than $240 per capita; and 535.25 (4) the city received less than $36 per capita in aid under 535.26 section 477A.013, subdivision 9, for aids payable in 2000. 535.27 The city aid base for a city described in this paragraph is also 535.28 increased by $250,000 in calendar year 2006 and the maximum 535.29 amount of total aid it may receive under section 477A.013, 535.30 subdivision 9, paragraph (c), is also increased by $250,000 in 535.31 calendar year 2006 only. 535.32 (l) The city aid base for a city with a population of 535.33 10,000 or more which is located outside of the seven-county 535.34 metropolitan area is increased in 2002 and thereafter, and the 535.35 maximum amount of total aid it may receive under section 535.36 477A.013, subdivision 9, paragraph (b) or (c), is also increased 536.1 in calendar year 2002 only, by an amount equal to the lesser of: 536.2 (1)(i) the total population of the city,as determined by536.3the United States Bureau of the Census, in the 2000 census,(ii) 536.4 minus 5,000, (iii) times 60; or 536.5 (2) $2,500,000. 536.6 (m) The city aid base is increased by $50,000 in 2002 and 536.7 thereafter, and the maximum amount of total aid it may receive 536.8 under section 477A.013, subdivision 9, paragraph (c), is also 536.9 increased by $50,000 in calendar year 2002 only, provided that: 536.10 (1) the city is located in the seven-county metropolitan 536.11 area; 536.12 (2) its population in 2000 is between 10,000 and 20,000; 536.13 and 536.14 (3) its commercial industrial percentage, as calculated for 536.15 city aid payable in 2001, was greater than 25 percent. 536.16 (n) The city aid base for a city is increased by $150,000 536.17 in calendar years 2002 to 2011 and the maximum amount of total 536.18 aid it may receive under section 477A.013, subdivision 9, 536.19 paragraph (c), is also increased by $150,000 in calendar year 536.20 2002 only, provided that: 536.21 (1) the city had a population of at least 3,000 but no more 536.22 than 4,000 in 1999; 536.23 (2) its home county is located within the seven-county 536.24 metropolitan area; 536.25 (3) its pre-1940 housing percentage is less than 15 536.26 percent; and 536.27 (4) its city net tax capacity per capita for taxes payable 536.28 in 2000 is less than $900 per capita. 536.29 (o) The city aid base for a city is increased by $200,000 536.30 beginning in calendar year 2003 and the maximum amount of total 536.31 aid it may receive under section 477A.013, subdivision 9, 536.32 paragraph (c), is also increased by $200,000 in calendar year 536.33 2003 only, provided that the city qualified for an increase in 536.34 homestead and agricultural credit aid under Laws 1995, chapter 536.35 264, article 8, section 18. 536.36 (p) The city aid base for a city is increased by $200,000 537.1 in 2004 only and the maximum amount of total aid it may receive 537.2 under section 477A.013, subdivision 9, is also increased by 537.3 $200,000 in calendar year 2004 only, if the city is the site of 537.4 a nuclear dry cask storage facility. 537.5 (q) The city aid base for a city is increased by $10,000 in 537.6 2004 and thereafter and the maximum total aid it may receive 537.7 under section 477A.013, subdivision 9, is also increased by 537.8 $10,000 in calendar year 2004 only, if the city was included in 537.9 a federal major disaster designation issued on April 1, 1998, 537.10 and its pre-1940 housing stock was decreased by more than 40 537.11 percent between 1990 and 2000. 537.12 (r) The city aid base for a city is increased by $25,000 in 537.13 2006 only and the maximum total aid it may receive under section 537.14 477A.013, subdivision 9, is also increased by $25,000 in 2006 537.15 only, if the city (1) received no aid under section 477A.013 in 537.16 2004; (2) had a population in 2002 greater than 20,000 and less 537.17 than 50,000; and (3) had an adjusted net tax capacity of less 537.18 than $750 per capita for aids payable in 2004. 537.19 (s) The city aid base for a city is increased by $500,000 537.20 in calendar year 2006 and thereafter, and the maximum amount of 537.21 total aid the city may receive under section 477A.013, 537.22 subdivision 9, paragraph (c), is also increased by $500,000 in 537.23 calendar year 2006 only, provided that: 537.24 (1) the city is located outside of the seven-county 537.25 metropolitan area; 537.26 (2) the city's 2000 population is between 10,000 and 537.27 20,000; 537.28 (3) the net levy of the city used in calculating 2005 aid 537.29 under section 477A.013 is greater than $350 per capita; and 537.30 (4) the city's commercial industrial percentage under 537.31 subdivision 32, for aids payable in 2005, was at least 20 537.32 percent. 537.33 (t) The city aid base for a city is increased by $25,000 in 537.34 2006 only and the maximum total aid it may receive under section 537.35 477A.013, subdivision 9, is also increased by $25,000 in 537.36 calendar year 2006 only if the city had a population in 2003 of 538.1 at least 1,000 and has a state park for which the city provides 538.2 rescue services and which comprised at least 14 percent of the 538.3 total geographic area included within the city boundaries in 538.4 2000. 538.5[EFFECTIVE DATE.] This section is effective beginning with 538.6 aids payable in 2006, except that the striking of paragraph (f) 538.7 is effective beginning with aids payable in 2004. 538.8 Sec. 16. Minnesota Statutes 2004, section 477A.0124, 538.9 subdivision 4, is amended to read: 538.10 Subd. 4. [COUNTY TAX-BASE EQUALIZATION AID.] (a) For 538.1120052006 and subsequent years, the money appropriated to county 538.12 tax-base equalization aid each calendar year, after the payment 538.13 under paragraph (f), shall be apportioned among the counties 538.14 according to each county's tax-base equalization aid factor. 538.15 (b) A county's tax-base equalization aid factor is equal to 538.16 the amount by which (i) $185 times the county's population, 538.17 exceeds (ii) 9.45 percent of the county's net tax capacity. 538.18 (c) In the case of a county with a population less than 538.19 10,000, the factor determined in paragraph (b) shall be 538.20 multiplied by a factor of three. 538.21 (d) In the case of a county with a population greater than 538.22 or equal to 10,000, but less than 12,500, the factor determined 538.23 in paragraph (b) shall be multiplied by a factor of two. 538.24 (e) In the case of a county with a population greater than 538.25 500,000, the factor determined in paragraph (b) shall be 538.26 multiplied by a factor of 0.25. 538.27 (f) Before the money appropriated to county base 538.28 equalization aid is apportioned among the counties as provided 538.29 in paragraph (a), an amount up to $73,259 is allocated annually 538.30 to Anoka County and up to $59,664 is annually allocated to 538.31 Washington County for the county to pay postretirement costs of 538.32 health insurance premiums for court employees. The allocation 538.33 under this paragraph is in addition to the allocations under 538.34 paragraphs (a) to (e). 538.35[EFFECTIVE DATE.] This section is effective for aids 538.36 payable in 2006 and thereafter. 539.1 Sec. 17. Minnesota Statutes 2004, section 477A.013, 539.2 subdivision 8, is amended to read: 539.3 Subd. 8. [CITY FORMULA AID.] In calendar year 2004 and 539.4 subsequent years, the formula aid for a city is equal to the 539.5 need increase percentage multiplied by the difference between 539.6 (1) the city's revenue need multiplied by its population, and 539.7 (2)the sum ofthe city's net tax capacity multiplied by the tax 539.8 effort rate, and the taconite aids under sections 298.28 and539.9298.282, multiplied by the following percentages:539.10(i) zero percent for aids payable in 2004;539.11(ii) 25 percent for aids payable in 2005;539.12(iii) 50 percent for aids payable in 2006;539.13(iv) 75 percent for aids payable in 2007; and539.14(v) 100 percent for aids payable in 2008 and thereafter. 539.15 No city may have a formula aid amount less than zero. The need 539.16 increase percentage must be the same for all cities. 539.17 The applicable need increase percentage must be calculated 539.18 by the Department of Revenue so that the total of the aid under 539.19 subdivision 9 equals the total amount available for aid under 539.20 section 477A.03 after the subtraction under section 477A.014, 539.21 subdivisions 4 and 5. 539.22[EFFECTIVE DATE.] This section is effective for aids 539.23 payable in 2006 and thereafter. 539.24 Sec. 18. Minnesota Statutes 2004, section 477A.013, 539.25 subdivision 9, is amended to read: 539.26 Subd. 9. [CITY AID DISTRIBUTION.] (a) In calendar year 539.27 2002 and thereafter, each city shall receive an aid distribution 539.28 equal to the sum of (1) the city formula aid under subdivision 539.29 8, and (2) its city aid base. 539.30 (b)The aid for a city in calendar year 2004 shall not539.31exceed the amount of its aid in calendar year 2003 after the539.32reductions under Laws 2003, First Special Session chapter 21,539.33article 5.539.34(c)For aids payable in 2005 and thereafter, the total aid 539.35 for any city shall not exceed the sum of (1)ten50 percent of 539.36 the city's net levy for the year prior to the aid distribution 540.1 plus (2) its total aid in the previous year. For aids payable 540.2 in 2005 and thereafter, the total aid for any city with a 540.3 population of 2,500 or more may not decrease from its total aid 540.4 under this section in the previous year by an amount greater 540.5 than ten percent of its net levy in the year prior to the aid 540.6 distribution. 540.7(d)(c)For aids payable in 2004 only, the total aid for a540.8city with a population less than 2,500 may not be less than the540.9amount it was certified to receive in 2003 minus the greater of540.10(1) the reduction to this aid payment in 2003 under Laws 2003,540.11First Special Session chapter 21, article 5, or (2) five percent540.12of its 2003 aid amount.For aids payable in 2005 and 540.13 thereafter, the total aid for a city with a population less than 540.14 2,500 must not be less than the amount it was certified to 540.15 receive in the previous year minus five percent of its 2003 540.16 certified aid amount. 540.17 (d) For aids payable in 2006 only, the total aid for a city 540.18 with a population less than 1,000 must not be less than 105 540.19 percent of the amount it was certified to receive in 2005. 540.20[EFFECTIVE DATE.] This section is effective for aids 540.21 payable in 2006 and thereafter. 540.22 Sec. 19. [477A.0133] [COUNTY CRIMINAL JUSTICE AID.] 540.23 Subdivision 1. [PURPOSE.] County criminal justice aid is 540.24 provided for the sole purpose of reducing the reliance of county 540.25 criminal justice and corrections programs and associated costs 540.26 on local property taxes. 540.27 County criminal justice aids must be used to pay expenses 540.28 associated with criminal justice activities, specifically 540.29 probation and supervised release caseload reductions, chemical 540.30 dependency treatment, mental health programs, and assistance to 540.31 crime victims. 540.32 Subd. 2. [DEFINITIONS.] For the purposes of this section, 540.33 the following definitions apply: 540.34 (1) "population" means the population according to the most 540.35 recent federal census, or according to the state demographer's 540.36 most recent estimate if it has been issued subsequent to the 541.1 most recent federal census; and 541.2 (2) "Part I crimes" means the three-year average annual 541.3 number of Part I crimes reported for each county by the 541.4 Department of Public Safety for the most recent years 541.5 available. By July 1 of each year, the commissioner of public 541.6 safety shall certify to the commissioner of revenue the number 541.7 of Part I crimes reported for each county for the three most 541.8 recent calendar years available. 541.9 Subd. 3. [FORMULA.] Each calendar year, the commissioner 541.10 of revenue shall distribute county criminal justice aid to each 541.11 county in an amount determined according to the following 541.12 formula: 541.13 (1) one-half shall be distributed to each county in the 541.14 same proportion that the county's population is to the 541.15 population of all counties in the state; and 541.16 (2) one-half shall be distributed to each county in the 541.17 same proportion that the county's Part I crimes are to the total 541.18 Part I crimes for all counties in the state. 541.19 Subd. 4. [PAYMENT DATES.] The aid amounts for each 541.20 calendar year shall be paid as provided in section 477A.015. 541.21 Subd. 5. [REPORT.] By March 15 of each year following the 541.22 year in which criminal justice aids are received, each county 541.23 must file a report with the commissioner of revenue describing 541.24 how criminal justice aids were spent, and demonstrating that 541.25 they were used for criminal justice purposes. 541.26 Subd. 6. [ANNUAL APPROPRIATION.] Aid payments to counties 541.27 under this section are limited to $15,000,000 in 2006 and 2007 541.28 only. 541.29 Sec. 20. Minnesota Statutes 2004, section 477A.03, 541.30 subdivision 2a, is amended to read: 541.31 Subd. 2a. [CITIES.]For aids payable in 2004, the total541.32aids paid under section 477A.013, subdivision 9, are limited to541.33$429,000,000.For aids payable in2005 and thereafter2006, the 541.34 total aids paid under section 477A.013, subdivision 9, are 541.35 increased to$437,052,000$523,052,000. For aids payable in 541.36 2007 and subsequent years, the total aids paid under section 542.1 477A.013, subdivision 9, are increased by one plus the 542.2 percentage increase in the implicit price deflator for 542.3 government consumption expenditures and gross investment for 542.4 state and local governments prepared by the Bureau of Economic 542.5 Analysis of the United States Department of Commerce for the 542.6 12-month period ending March 31 of the previous year. The 542.7 percentage increase used in this subdivision shall be no less 542.8 than 2.5 percent and no greater than 5.0 percent. The total 542.9 aids paid under section 477A.013, subdivision 9, shall not 542.10 exceed the amount required for the need increase percentage to 542.11 equal one. It is the intention of the legislature that the 542.12 increased aid provided to cities be used to pay for public 542.13 safety functions. 542.14[EFFECTIVE DATE.] This section is effective for aids 542.15 payable in 2006 and thereafter. 542.16 Sec. 21. Minnesota Statutes 2004, section 477A.03, 542.17 subdivision 2b, is amended to read: 542.18 Subd. 2b. [COUNTIES.] (a) For aids payable in calendar 542.19 year 2005 and thereafter, the total aids paid to counties under 542.20 section 477A.0124, subdivision 3, are limited to $100,500,000. 542.21 Each calendar year, $500,000 shall be retained by the 542.22 commissioner of revenue to make reimbursements to the 542.23 commissioner of finance for payments made under section 611.27. 542.24 For calendar year 2004, the amount shall be in addition to the 542.25 payments authorized under section 477A.0124, subdivision 1. For 542.26 calendar year 2005 and subsequent years, the amount shall be 542.27 deducted from the appropriation under this paragraph. The 542.28 reimbursements shall be to defray the additional costs 542.29 associated with court-ordered counsel under section 611.27. Any 542.30 retained amounts not used for reimbursement in a year shall be 542.31 included in the next distribution of county need aid that is 542.32 certified to the county auditors for the purpose of property tax 542.33 reduction for the next taxes payable year. 542.34 (b) For aids payable in 2005 andthereafter2006, the total 542.35 aids under section 477A.0124, subdivision 4, are limited to 542.36 $105,000,000. For aids payable in 2007 and thereafter, the 543.1 total aid under section 477A.0124, subdivision 4, is limited to 543.2 $105,132,923. The commissioner of finance shall bill the 543.3 commissioner of revenue for the cost of preparation of local 543.4 impact notes as required by section 3.987, not to exceed 543.5 $207,000 in fiscal year 2004 and thereafter. The commissioner 543.6 of education shall bill the commissioner of revenue for the cost 543.7 of preparation of local impact notes for school districts as 543.8 required by section 3.987, not to exceed $7,000 in fiscal year 543.9 2004 and thereafter. The commissioner of revenue shall deduct 543.10 the amounts billed under this paragraph from the appropriation 543.11 under this paragraph. The amounts deducted are appropriated to 543.12 the commissioner of finance and the commissioner of education 543.13 for the preparation of local impact notes. 543.14[EFFECTIVE DATE.] This section is effective for aids 543.15 payable in 2007 and thereafter. 543.16 Sec. 22. Laws 1994, chapter 587, article 9, section 8, 543.17 subdivision 1, is amended to read: 543.18 Subdivision 1. [TAX LEVIES.] Notwithstanding Minnesota 543.19 Statutes, section 471.24, each of the following cities or towns 543.20 is authorized to levy a tax and make an appropriation not to 543.21 exceed$15,000$25,000 annually to the Lakeview Cemetery 543.22 Association, operated by the town of Iron Range, for cemetery 543.23 purposes: the city of Coleraine, the city of Bovey, and each 543.24 town which is a member of the cemetery association. 543.25[EFFECTIVE DATE.] This section is effective for taxes 543.26 levied in 2005, payable in 2006, and thereafter. 543.27 Sec. 23. 2005 S.F. No. 467, section 1, the effective date, 543.28 if enacted, is amended to read: 543.29[EFFECTIVE DATE.] This section is effective for taxes 543.30 levied in20052004, payable in20062005, and thereafter. 543.31 Sec. 24. [COURT AID ADJUSTMENT.] 543.32 For aids payable in 2005 only, the amount of court aid paid 543.33 to Anoka County under Minnesota Statutes, section 273.1398, 543.34 subdivision 4, is increased by $36,630 for aids payable in 2005 543.35 only and the amount paid to Washington County under Minnesota 543.36 Statutes, section 273.1398, subdivision 4, is increased by 544.1 $29,832 for aids payable in 2005 only. 544.2[EFFECTIVE DATE.] This section is effective for aids 544.3 payable in 2005 only. 544.4 Sec. 25. [SUPREME COURT BUDGET.] 544.5 The district courts general fund appropriation is reduced 544.6 by $66,462 in fiscal year 2006 and $132,923 beginning in fiscal 544.7 year 2007 to fund the amount transferred to county tax base 544.8 equalization aid to fund the payments under Minnesota Statutes, 544.9 section 477A.0124, subdivision 4, paragraph (f), and section 20. 544.10[EFFECTIVE DATE.] This section is effective the day 544.11 following final enactment. 544.12 Sec. 26. [CROW WING COUNTY SEWER DISTRICT; PILOT PROJECT.] 544.13 Subdivision 1. [POWERS.] In addition to the powers granted 544.14 in Minnesota Statutes, chapter 116A, the county board for Crow 544.15 Wing County, by resolution, may grant the following powers to a 544.16 sewer district created by the county board under Minnesota 544.17 Statutes, chapter 116A: 544.18 (1) provide that an authorized representative of the 544.19 district, after presentation of credentials, may enter at 544.20 reasonable times any premise to inspect or maintain an 544.21 individual sewage treatment system, as defined in Minnesota 544.22 Statutes, section 115.55, subdivision 1, paragraph (g); 544.23 (2) include areas of the county within the sewer district 544.24 that are not contiguous and establish different systems for 544.25 wastewater treatment in specific areas of the county; 544.26 (3) provide that each special service area that is managed 544.27 by the sewer system or combination thereof constitutes a system 544.28 under Minnesota Statutes, chapter 116A; 544.29 (4) delegate to the sewer district, by resolution, all or a 544.30 portion of its administrative and enforcement obligations with 544.31 respect to individual sewage treatment systems under Minnesota 544.32 Statutes, chapter 115, and rules adopted by the Pollution 544.33 Control Agency; 544.34 (5) modify any individual sewage treatment system to 544.35 provide reasonable access to it for inspection and maintenance; 544.36 and 545.1 (6) neither the approval nor the waiver of the county 545.2 board, nor confirmation by order of the district court, shall be 545.3 required for the sewer commission to exercise the powers set 545.4 forth in Minnesota Statutes, section 116A.24. 545.5 Subd. 2. [REPORT.] If the Crow Wing County Board exercises 545.6 the additional powers granted under subdivision 1, the county 545.7 shall provide a report by January 15, 2009, to the senate and 545.8 house committees with jurisdiction over environmental policy and 545.9 taxes on the establishment and operation of the sewer district. 545.10 The report must include: 545.11 (1) a description of the implementation of the additional 545.12 powers granted under subdivision 1; 545.13 (2) available information on the effectiveness of the 545.14 additional powers to control pollution in the county; and 545.15 (3) any recommendations for changes to Minnesota Statutes, 545.16 chapter 116A, to broaden the authority for sewer districts to 545.17 include any of the additional powers granted under subdivision 1. 545.18[EFFECTIVE DATE.] This section is effective the day 545.19 following compliance with Minnesota Statutes, section 645.021, 545.20 subdivision 2. 545.21 Sec. 27. [DEVELOPMENT AUTHORIZED.] 545.22 Dakota County Regional Railroad Authority may exercise the 545.23 powers conferred by Minnesota Statutes, section 398A.04, to 545.24 plan, establish, acquire, develop, construct, purchase, enlarge, 545.25 extend, improve, maintain, equip, operate, regulate, and protect 545.26 a bus rapid transit system located within the Cedar Avenue 545.27 transitway corridor within Dakota County. The authority may 545.28 levy for this purpose under Minnesota Statutes, section 398A.04, 545.29 subdivision 8, to the extent the levy authority under that 545.30 subdivision is not required to be used for that levy year for 545.31 railroad purposes. 545.32[EFFECTIVE DATE.] Pursuant to Minnesota Statutes, section 545.33 645.023, subdivision 1, paragraph (a), this section is effective 545.34 without local approval the day following final enactment. 545.35 Sec. 28. [CITY OF WHITE BEAR LAKE.] 545.36 Subdivision 1. [PAYMENT REQUIRED.] The commissioner of 546.1 revenue must make payments of $52,482 on each of July 20, 2005, 546.2 and December 26, 2005, to the city of White Bear Lake. 546.3 Subd. 2. [APPROPRIATION.] $104,964 is appropriated from 546.4 the general fund to the commissioner of revenue to make the 546.5 payments required in this section. 546.6 Sec. 29. [APPROPRIATION.] 546.7 $1,287,000 in fiscal year 2006 and $1,933,000 in fiscal 546.8 year 2007 is appropriated from the general fund to the 546.9 commissioner of human services for the consolidated chemical 546.10 dependency treatment fund. 546.11 ARTICLE 23 546.12 INTERNATIONAL ECONOMIC DEVELOPMENT ZONE - SF2206 546.13 Section 1. Minnesota Statutes 2004, section 272.02, is 546.14 amended by adding a subdivision to read: 546.15 Subd. 69. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 546.16 PROPERTY.] (a) Improvements to real property, and personal 546.17 property, classified under section 273.13, subdivision 24, and 546.18 located within an international economic development zone 546.19 designated under section 469.322, are exempt from ad valorem 546.20 taxes levied under chapter 275, if the occupant of the property 546.21 is a qualified business, as defined in section 469.321. 546.22 (b) The exemption applies beginning for the first 546.23 assessment year after designation of the international economic 546.24 development zone. The exemption applies to each assessment year 546.25 that begins during the duration of the international economic 546.26 development zone and to property occupied by July 1 of the 546.27 assessment year by a qualified business. This exemption does 546.28 not apply to: 546.29 (1) the levy under section 475.61 or similar levy 546.30 provisions under any other law to pay general obligation bonds; 546.31 or 546.32 (2) a levy under section 126C.17, if the levy was approved 546.33 by the voters before the designation of the zone. 546.34[EFFECTIVE DATE.] This section is effective beginning for 546.35 property taxes assessed in 2006, payable in 2007. 546.36 Sec. 2. Minnesota Statutes 2004, section 290.06, is 547.1 amended by adding a subdivision to read: 547.2 Subd. 33. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE JOB 547.3 CREDIT.] A taxpayer that is a qualified business, as defined in 547.4 section 469.321, subdivision 6, is allowed a credit as 547.5 determined under section 469.327 against the tax imposed by this 547.6 chapter. 547.7[EFFECTIVE DATE.] This section is effective for taxable 547.8 years beginning after December 31, 2005. 547.9 Sec. 3. Minnesota Statutes 2004, section 297A.68, is 547.10 amended by adding a subdivision to read: 547.11 Subd. 40. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 547.12 Purchases of tangible personal property or taxable services by a 547.13 qualified business, as defined in section 469.321, are exempt if 547.14 the property or services are primarily used or consumed in an 547.15 international economic development zone designated under section 547.16 469.322. 547.17 (b) Purchase and use of construction materials and supplies 547.18 for construction of improvements to real property in an 547.19 international economic development zone are exempt if the 547.20 improvements after completion of construction are to be used in 547.21 the conduct of a qualified business, as defined in section 547.22 469.321. This exemption applies regardless of whether the 547.23 purchases are made by the business or a contractor. 547.24 (c) The exemptions under this subdivision apply to a local 547.25 sales and use tax, regardless of whether the local tax is 547.26 imposed on sales taxable under this chapter or in another law, 547.27 ordinance, or charter provision. 547.28 (d) This subdivision applies to sales, if the purchase was 547.29 made and delivery received during the period provided under 547.30 section 469.324, subdivision 2. 547.31[EFFECTIVE DATE.] This section is effective for sales made 547.32 after December 31, 2005. 547.33 Sec. 4. [469.321] [DEFINITIONS.] 547.34 Subdivision 1. [SCOPE.] For purposes of sections 469.321 547.35 to 469.326, the following terms have the meanings given. 547.36 Subd. 2. [FOREIGN TRADE ZONE.] "Foreign trade zone" means 548.1 a foreign trade zone designated pursuant to United States Code, 548.2 title 19, section 81b, for the right to use the powers provided 548.3 in United States Code, title 19, sections 81a to 81u, or a 548.4 subzone authorized by the foreign trade zone. 548.5 Subd. 3. [FOREIGN TRADE ZONE AUTHORITY.] "Foreign trade 548.6 zone authority" means the Greater Metropolitan Foreign Trade 548.7 Zone Commission number 119, a joint powers authority created by 548.8 the county of Hennepin, the cities of Minneapolis and 548.9 Bloomington, and the Metropolitan Airports Commission, under the 548.10 authority of section 469.059, 469.101, or 471.59, which includes 548.11 any other political subdivisions that enter into the authority 548.12 after its creation. 548.13 Subd. 4. [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE.] An 548.14 "international economic development zone" or "zone" is a zone so 548.15 designated under section 469.322. 548.16 Subd. 5. [PERSON.] "Person" includes an individual, 548.17 corporation, partnership, limited liability company, 548.18 association, or any other entity. 548.19 Subd. 6. [QUALIFIED BUSINESS.] (a) "Qualified business" 548.20 means a person carrying on a trade or business at a place of 548.21 business located within an international economic development 548.22 zone that is: 548.23 (1) engaged in the furtherance of international export or 548.24 import of goods; and 548.25 (2) certified by the foreign trade zone authority as a 548.26 trade or business that furthers the purpose of developing 548.27 international distribution capacity and capability. 548.28 (b) A person that relocates a trade or business from within 548.29 Minnesota but outside an international economic development zone 548.30 into an international economic development zone is not a 548.31 qualified business, unless the business: 548.32 (1)(i) increases full-time employment in the first full 548.33 year of operation within the international economic development 548.34 zone by at least 20 percent measured relative to the operations 548.35 that were relocated and maintains the required level of 548.36 employment for each year that tax incentives under section 549.1 469.324 are claimed; or 549.2 (ii) makes a capital investment in the property located 549.3 within a zone equal to at least ten percent of the gross 549.4 revenues of the operations that were relocated in the 549.5 immediately proceeding taxable year; and 549.6 (2) enters a binding written agreement with the foreign 549.7 trade zone authority that: 549.8 (i) pledges that the business will meet the requirements of 549.9 clause (1); 549.10 (ii) provides for repayment of all tax benefits enumerated 549.11 under section 469.324 to the business under the procedures in 549.12 section 469.328, if the requirements of clause (1) are not met 549.13 for the taxable year or for taxes payable during a year in which 549.14 the requirements were not met; and 549.15 (iii) contains any other terms the foreign trade zone 549.16 authority determines appropriate. 549.17 Clause (1) of this paragraph does not apply to a freight 549.18 forwarder. 549.19 (c) A qualified business must pay each employee total 549.20 compensation, including benefits not mandated by law, that on an 549.21 annualized basis is equal to at least 110 percent of the federal 549.22 poverty guidelines for a family of four. 549.23 Subd. 7. [REGIONAL DISTRIBUTION CENTER.] A "regional 549.24 distribution center" is a distribution center developed within a 549.25 foreign trade zone. The regional distribution center must have 549.26 as its primary purpose to facilitate gathering of freight for 549.27 the purpose of centralizing the functions necessary for the 549.28 shipment of freight in international commerce, including, but 549.29 not limited to, security and customs functions. 549.30 Subd. 8. [RELOCATE.] (a) "Relocate" means that a trade or 549.31 business: 549.32 (1) ceases one or more operations or functions at another 549.33 location in Minnesota and begins performing substantially the 549.34 same operations or functions at a location in an international 549.35 economic development zone; or 549.36 (2) reduces employment at another location in Minnesota 550.1 during a period starting one year before and ending one year 550.2 after it begins operations in an international economic 550.3 development zone and its employees in the international economic 550.4 development zone are engaged in the same line of business as the 550.5 employees at the location where it reduced employment. 550.6 (b) "Relocate" does not include an expansion by a business 550.7 that establishes a new facility that does not replace or 550.8 supplant an existing operation or employment, in whole or in 550.9 part. 550.10 (c) "Trade or business" includes any business entity that 550.11 is substantially similar in operation or ownership to the 550.12 business entity seeking to be a qualified business under this 550.13 section. 550.14 Subd. 9. [FREIGHT FORWARDER.] "Freight forwarder" is a 550.15 business that, for compensation, ensures that goods produced or 550.16 sold by another business move from point of origin to point of 550.17 destination. 550.18[EFFECTIVE DATE.] This section is effective the day 550.19 following final enactment. 550.20 Sec. 5. [469.322] [DESIGNATION OF INTERNATIONAL ECONOMIC 550.21 DEVELOPMENT ZONE.] 550.22 (a) An area designated as a foreign trade zone may be 550.23 designated by the foreign trade zone authority as an 550.24 international economic development zone if within the zone a 550.25 regional distribution center is being developed pursuant to 550.26 section 469.323. The zone must be not less than 500 acres and 550.27 not more than 1,000 acres in size. 550.28 (b) In making the designation, the foreign trade zone 550.29 authority, in consultation with the Minnesota Department of 550.30 Transportation and the Metropolitan Council, shall consider 550.31 access to major transportation routes, consistency with current 550.32 state transportation and air cargo planning, adequacy of the 550.33 size of the site, access to airport facilities, present and 550.34 future capacity at the designated airport, the capability to 550.35 meet integrated present and future air cargo, security, and 550.36 inspection services, and access to other infrastructure and 551.1 financial incentives. The border of the international economic 551.2 development zone must be no more than 60 miles distant or 90 551.3 minutes drive time from the border of the Minneapolis-St. Paul 551.4 International Airport. The county in which the zone is located 551.5 must be a member of the foreign trade zone authority. 551.6[EFFECTIVE DATE.] This section is effective the day 551.7 following final enactment. 551.8 Sec. 6. [469.323] [FOREIGN TRADE ZONE AUTHORITY POWERS.] 551.9 Subdivision 1. [DEVELOPMENT OF REGIONAL DISTRIBUTION 551.10 CENTER.] The foreign trade zone authority is responsible for 551.11 creating a development plan for the regional distribution 551.12 center. The regional distribution center must be developed with 551.13 the purpose of expanding, on a regional basis, international 551.14 distribution capacity and capability. The foreign trade zone 551.15 authority shall consult with municipalities that have indicated 551.16 to the authority an interest in locating the international 551.17 economic development zone within their boundaries and a 551.18 willingness to establish a tax increment financing district 551.19 coterminous with the boundaries of the zone, as well as 551.20 interested businesses, potential financiers, and appropriate 551.21 state and federal agencies. 551.22 Subd. 2. [BUSINESS PLAN.] Before designation of an 551.23 international economic development zone under section 469.322, 551.24 the governing body of the foreign trade zone authority shall 551.25 prepare a business plan. The plan must include an analysis of 551.26 the economic feasibility of the regional distribution center 551.27 once it becomes operational and of the operations of freight 551.28 forwarders and other businesses that choose to locate within the 551.29 boundaries of the zone. The analysis must provide profitability 551.30 models that: 551.31 (1) include the benefits of the incentives; 551.32 (2) estimate the amount of time needed to achieve 551.33 profitability; and 551.34 (3) analyze the length of time incentives will be necessary 551.35 to the economic viability of the regional distribution center. 551.36 If the governing body of the foreign trade authority 552.1 determines that the models do not establish the economic 552.2 feasibility of the project, the regional distribution center 552.3 does not meet the development requirements of this section and 552.4 section 469.322. 552.5 Subd. 3. [PORT AUTHORITY POWERS.] The governing body of 552.6 the foreign trade zone authority may establish a port authority 552.7 that has the same powers as a port authority established under 552.8 section 469.049. If the foreign trade zone authority 552.9 establishes a port authority, the governing body of the foreign 552.10 trade zone authority may exercise all powers granted to a city 552.11 by sections 469.048 to 469.068 within the area of the 552.12 international economic development zone, except it may not 552.13 impose or request imposition of a property tax levy under 552.14 section 469.053 by any city. 552.15 Subd. 4. [BUSINESS SUBSIDY LAW.] Tax exemptions, job 552.16 credits, and tax increment financing provided under this section 552.17 are business subsidies for the purpose of sections 116J.993 to 552.18 116J.995. 552.19[EFFECTIVE DATE.] This section is effective the day 552.20 following final enactment. 552.21 Sec. 7. [469.324] [TAX INCENTIVES IN INTERNATIONAL 552.22 ECONOMIC DEVELOPMENT ZONE.] 552.23 Subdivision 1. [AVAILABILITY.] Qualified businesses that 552.24 operate in an international economic development zone, 552.25 individuals who invest in a regional distribution center, or 552.26 qualified businesses that operate in an international economic 552.27 development zone qualify for: 552.28 (1) exemption from the property tax as provided in section 552.29 272.02, subdivision 69; 552.30 (2) exemption from the state sales and use tax and any 552.31 local sales and use taxes on qualifying purchases as provided in 552.32 section 297A.68, subdivision 40; 552.33 (3) the jobs credit allowed under section 469.327; and 552.34 (4) tax increment financing as provided in this chapter. 552.35 Subd. 2. [DURATION.] (a) Except as provided in paragraph 552.36 (b), the tax incentives described in subdivision 1, clauses (1) 553.1 and (3), are available for no more than 12 consecutive taxable 553.2 years for any taxpayer that claims them. The tax incentives 553.3 described in subdivision 1, clause (2), are available for each 553.4 taxpayer that claims them for taxes otherwise payable on 553.5 transactions during a period of 12 years from the date when the 553.6 first exemption is claimed by that taxpayer under each 553.7 exemption. No exemptions described in subdivision 1, clauses 553.8 (1) to (4), are available after December 31, 2020. 553.9 (b) For taxpayers that are freight forwarders, the 553.10 durations provided under paragraph (a) are reduced to six years. 553.11 Subd. 3. [QUALIFICATION.] To receive the tax incentives 553.12 under this section, a qualified business must, by December 31 of 553.13 each year, certify to the commissioner of revenue the percentage 553.14 of its business activity within the zone that constitutes 553.15 international business activity for the year, measured by value 553.16 or volume of activity. If the percentage is less than 100 553.17 percent, the amount of the tax benefits provided under sections 553.18 290.06, subdivision 33, and 469.327 are reduced in proportion to 553.19 the percentage of business activity that is not international 553.20 business activity. The commissioner of revenue may audit the 553.21 business activities of a qualifying business to determine its 553.22 eligibility for tax benefits under this section. 553.23 Sec. 8. [469.325] [JOBS CREDIT.] 553.24 Subdivision 1. [CREDIT ALLOWED.] A qualified business is 553.25 allowed a credit against the taxes imposed under chapter 290. 553.26 The credit equals seven percent of the: 553.27 (1) lesser of: 553.28 (i) zone payroll for the taxable year, less the zone 553.29 payroll for the base year; or 553.30 (ii) total Minnesota payroll for the taxable year, less 553.31 total Minnesota payroll for the base year; minus 553.32 (2) $30,000 multiplied by the number of full-time 553.33 equivalent employees that the qualified business employs in the 553.34 international economic development zone for the taxable year, 553.35 minus the number of full-time equivalent employees the business 553.36 employed in the zone in the base year, but not less than zero. 554.1 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 554.2 the following terms have the meanings given. 554.3 (b) "Base year" means the taxable year beginning during the 554.4 calendar year prior to the calendar year in which the zone 554.5 designation took effect. 554.6 (c) "Full-time equivalent employees" means the equivalent 554.7 of annualized expected hours of work equal to 2,080 hours. 554.8 (d) "Minnesota payroll" means the wages or salaries 554.9 attributed to Minnesota under section 290.191, subdivision 12, 554.10 for the qualified business or the unitary business of which the 554.11 qualified business is a part, whichever is greater. 554.12 (e) "Zone payroll" means wages or salaries used to 554.13 determine the zone payroll factor for the qualified business, 554.14 less the amount of compensation attributable to any employee 554.15 that exceeds $70,000. 554.16 Subd. 3. [INFLATION ADJUSTMENT.] For taxable years 554.17 beginning after December 31, 2006, the dollar amounts in 554.18 subdivision 1, clause (2), and subdivision 2, paragraph (e), are 554.19 annually adjusted for inflation. The commissioner of revenue 554.20 shall adjust the amounts by the percentage determined under 554.21 section 290.06, subdivision 2d, for the taxable year. 554.22 Subd. 4. [REFUNDABLE.] If the amount of the credit exceeds 554.23 the liability for tax under chapter 290, the commissioner of 554.24 revenue shall refund the excess to the qualified business. 554.25 Subd. 5. [APPROPRIATION.] An amount sufficient to pay the 554.26 refunds authorized by this section is appropriated to the 554.27 commissioner of revenue from the general fund. 554.28[EFFECTIVE DATE.] This section is effective for taxable 554.29 years beginning after December 31, 2005. 554.30 Sec. 9. [469.326] [REPAYMENT OF TAX BENEFITS.] 554.31 Subdivision 1. [REPAYMENT OBLIGATION.] A person must repay 554.32 the amount of the tax reduction received under section 469.324, 554.33 subdivision 1, clauses (2) and (3), and refund received under 554.34 section 469.327, during the two years immediately before it 554.35 ceased to operate in the zone, if the person ceased to operate 554.36 its facility located within the zone or otherwise ceases to be 555.1 or is not a qualified business. 555.2 Subd. 2. [DISPOSITION OF REPAYMENT.] The repayment must be 555.3 paid to the state to the extent it represents a state tax 555.4 reduction. Any amount repaid to the state must be deposited in 555.5 the general fund. Any repayment of local sales or use taxes 555.6 must be repaid to the jurisdiction imposing the local sales or 555.7 use tax. 555.8 Subd. 3. [REPAYMENT PROCEDURES.] (a) For the repayment of 555.9 taxes imposed under chapter 290 or 297A or local taxes collected 555.10 pursuant to section 297A.99, a person must file an amended 555.11 return with the commissioner of revenue and pay any taxes 555.12 required to be repaid within 30 days after ceasing to be a 555.13 qualified business. The amount required to be repaid is 555.14 determined by calculating the tax for the period for which 555.15 repayment is required without regard to the tax reductions 555.16 allowed under section 469.324. 555.17 (b) The provisions of chapters 270 and 289A relating to the 555.18 commissioner of revenue's authority to audit, assess, and 555.19 collect the tax and to hear appeals are applicable to the 555.20 repayment required under paragraph (a). The commissioner may 555.21 impose civil penalties as provided in chapter 289A, and the 555.22 additional tax and penalties are subject to interest at the rate 555.23 provided in section 270.75, from 30 days after ceasing to do 555.24 business in the zone until the date the tax is paid. 555.25 (c) For determining the tax required to be repaid, a tax 555.26 reduction is deemed to have been received on the date that the 555.27 tax would have been due if the person had not been entitled to 555.28 the tax reduction. 555.29 (d) The commissioner of revenue may assess the repayment of 555.30 taxes under paragraph (b) at any time within two years after the 555.31 person ceases to be a qualified business, or within any period 555.32 of limitations for the assessment of tax under section 289A.38, 555.33 whichever is later. 555.34[EFFECTIVE DATE.] This section is effective the day 555.35 following final enactment. 555.36 Sec. 10. [469.327] [ADDITIONAL BENEFITS CONTINGENT ON JOBZ 556.1 DETERMINATIONS.] 556.2 Notwithstanding section 469.312, subdivision 3, the 556.3 governor may designate the international economic development 556.4 zone as a job opportunity building zone if the governor reports 556.5 to the tax committees of the senate and the house of 556.6 representatives the following information: 556.7 (1) the estimated cost of providing the additional tax 556.8 incentives provided under sections 469.310 to 469.320 to the 556.9 international economic development zone; and 556.10 (2) the estimated cost of tax expenditures projected to 556.11 have been obligated for all job opportunity building zone 556.12 projects that have been approved before June 1, 2005. 556.13 Sec. 11. [DEPARTMENT OF EMPLOYMENT AND ECONOMIC 556.14 DEVELOPMENT STUDY; INTERNATIONAL AIR FREIGHT.] 556.15 The commissioner of employment and economic development 556.16 must study and analyze the issue of whether the state would 556.17 benefit from more than one international economic development 556.18 zone as defined in Minnesota Statutes, section 469.321. The 556.19 commissioner shall solicit input on the issue from businesses, 556.20 communities, and economic development organizations. The 556.21 commissioner must report the results of the study and analysis 556.22 to the committees of the legislature having jurisdiction over 556.23 economic development issues by December 1, 2005, along with any 556.24 legislative recommendations. 556.25 ARTICLE 24 556.26 MISCELLANEOUS - SF2206 556.27 Section 1. Minnesota Statutes 2004, section 270.0603, 556.28 subdivision 3, is amended to read: 556.29 Subd. 3. [DISTRIBUTION.] The appropriate statement 556.30 prepared in accordance with subdivisions 1 and 2 must be 556.31 distributed by the commissioner to all taxpayers contacted with 556.32 respect to the determination or collection of a tax, other than 556.33 the providing of tax forms. Failure to receive the statement 556.34 does not invalidate the determination or collection action, nor 556.35 does it affect, modify, or alter any statutory time limits 556.36 applicable to the determination or collection action, including 557.1 the time limit for filing a claim for refund. 557.2[EFFECTIVE DATE.] This section is effective the day 557.3 following final enactment, except that for claims for refund, it 557.4 is effective for claims filed after August 31, 2005. 557.5 Sec. 2. Minnesota Statutes 2004, section 270.0682, 557.6 subdivision 1, is amended to read: 557.7 Subdivision 1. [BIENNIAL REPORT.] The commissioner of 557.8 revenue shall report to the legislature by March 1 of each 557.9 odd-numbered year on the overall incidence ofthe income tax,557.10sales and excise taxes, and property taxtaxes as defined in 557.11 section 645.44, subdivision 19. The report shall present 557.12 information on the distribution of the tax burden (1) for the 557.13 overall income distribution, using a systemwide incidence 557.14 measure such as the Suits index or other appropriate measures of 557.15 equality and inequality, (2) by income classes, including at a 557.16 minimum deciles of the income distribution, and (3) by other 557.17 appropriate taxpayer characteristics. 557.18 Sec. 3. Minnesota Statutes 2004, section 272.02, 557.19 subdivision 64, is amended to read: 557.20 Subd. 64. [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 557.21 Improvements to real property, and personal property, classified 557.22 under section 273.13, subdivision 24, and located within a job 557.23 opportunity building zone, designated under section 469.314, are 557.24 exempt from ad valorem taxes levied under chapter 275. 557.25 (b) Improvements to real property, and tangible personal 557.26 property, of an agricultural production facility located within 557.27 an agricultural processing facility zone, designated under 557.28 section 469.314, is exempt from ad valorem taxes levied under 557.29 chapter 275. 557.30 (c) For property to qualify for exemption under paragraph 557.31 (a), the occupant must be a qualified business, as defined in 557.32 section 469.310. 557.33 (d) The exemption applies beginning for the first 557.34 assessment year after designation of the job opportunity 557.35 building zone by the commissioner of employment and economic 557.36 development. The exemption applies to each assessment year that 558.1 begins during the duration of the job opportunity building zone 558.2 and to property occupied by July 1 of the assessment year by a 558.3 qualified business. This exemption does not apply to: 558.4 (1) the levy under section 475.61 or similar levy 558.5 provisions under any other law to pay general obligation bonds; 558.6 or 558.7 (2) a levy under section 126C.17, if the levy was approved 558.8 by the voters before the designation of the job opportunity 558.9 building zone. 558.10 (e) This subdivision does not apply to captured net tax 558.11 capacity in a tax increment financing district to the extent 558.12 necessary to meet the debt repayment obligations of the 558.13 authority if the property is also located within an agricultural 558.14 processing zone. 558.15[EFFECTIVE DATE.] This section is effective for taxes 558.16 payable in 2005 and thereafter. 558.17 Sec. 4. Minnesota Statutes 2004, section 429.021, 558.18 subdivision 1, is amended to read: 558.19 Subdivision 1. [IMPROVEMENTS AUTHORIZED.] The council of a 558.20 municipality shall have power to make the following improvements: 558.21 (1) To acquire, open, and widen any street, and to improve 558.22 the same by constructing, reconstructing, and maintaining 558.23 sidewalks, pavement, gutters, curbs, and vehicle parking strips 558.24 of any material, or by grading, graveling, oiling, or otherwise 558.25 improving the same, including the beautification thereof and 558.26 including storm sewers or other street drainage and connections 558.27 from sewer, water, or similar mains to curb lines. 558.28 (2) To acquire, develop, construct, reconstruct, extend, 558.29 and maintain storm and sanitary sewers and systems, including 558.30 outlets, holding areas and ponds, treatment plants, pumps, lift 558.31 stations, service connections, and other appurtenances of a 558.32 sewer system, within and without the corporate limits. 558.33 (3) To construct, reconstruct, extend, and maintain steam 558.34 heating mains. 558.35 (4) To install, replace, extend, and maintain street lights 558.36 and street lighting systems and special lighting systems. 559.1 (5) To acquire, improve, construct, reconstruct, extend, 559.2 and maintain water works systems, including mains, valves, 559.3 hydrants, service connections, wells, pumps, reservoirs, tanks, 559.4 treatment plants, and other appurtenances of a water works 559.5 system, within and without the corporate limits. 559.6 (6) To acquire, improve and equip parks, open space areas, 559.7 playgrounds, and recreational facilities within or without the 559.8 corporate limits. 559.9 (7) To plant trees on streets and provide for their 559.10 trimming, care, and removal. 559.11 (8) To abate nuisances and to drain swamps, marshes, and 559.12 ponds on public or private property and to fill the same. 559.13 (9) To construct, reconstruct, extend, and maintain dikes 559.14 and other flood control works. 559.15 (10) To construct, reconstruct, extend, and maintain 559.16 retaining walls and area walls. 559.17 (11) To acquire, construct, reconstruct, improve, alter, 559.18 extend, operate, maintain, and promote a pedestrian skyway 559.19 system. Such improvement may be made upon a petition pursuant 559.20 to section 429.031, subdivision 3. 559.21 (12) To acquire, construct, reconstruct, extend, operate, 559.22 maintain, and promote underground pedestrian concourses. 559.23 (13) To acquire, construct, improve, alter, extend, 559.24 operate, maintain, and promote public malls, plazas or 559.25 courtyards. 559.26 (14) To construct, reconstruct, extend, and maintain 559.27 district heating systems. 559.28 (15) To construct, reconstruct, alter, extend, operate, 559.29 maintain, and promote fire protection systems in existing 559.30 buildings, but only upon a petition pursuant to section 429.031, 559.31 subdivision 3. 559.32 (16) To acquire, construct, reconstruct, improve, alter, 559.33 extend, and maintain highway sound barriers. 559.34 (17) To improve, construct, reconstruct, extend, and 559.35 maintain gas and electric distribution facilities owned by a 559.36 municipal gas or electric utility. 560.1 (18) To purchase, install, and maintain signs, posts, and 560.2 other markers for addressing related to the operation of 560.3 enhanced 911 telephone service. 560.4 (19) To improve, construct, extend, and maintain facilities 560.5 for Internet access and other communications purposes, if the 560.6 council finds that: 560.7 (i) the facilities are necessary to make available Internet 560.8 access or other communications services that are not and will 560.9 not be available through other providers or the private market 560.10 in the reasonably foreseeable future; and 560.11 (ii) the service to be provided by the facilities will not 560.12 compete with service provided by private entities. 560.13 (20) To assess affected property owners for all or a 560.14 portion of the costs agreed to with an electric utility, 560.15 telecommunications carrier, or cable system operator to bury or 560.16 alter a new or existing distribution system within the public 560.17 right-of-way that exceeds the utility's design and construction 560.18 standards, or those set by law, tariff, or franchise, but only 560.19 upon petition under section 429.031, subdivision 3. 560.20 Sec. 5. Minnesota Statutes 2004, section 469.015, 560.21 subdivision 4, is amended to read: 560.22 Subd. 4. [EXCEPTIONS.] (a) An authority need not require 560.23 competitive bidding in the following circumstances: 560.24 (1) in the case of a contract for the acquisition of a 560.25 low-rent housing project: 560.26 (i) for which financial assistance is provided by the 560.27 federal government; 560.28 (ii) which does not require any direct loan or grant of 560.29 money from the municipality as a condition of the federal 560.30 financial assistance; and 560.31 (iii) for which the contract provides for the construction 560.32 of the project upon land that is either owned by the authority 560.33 for redevelopment purposes or not owned by the authority at the 560.34 time of the contract but the contract provides for the 560.35 conveyance or lease to the authority of the project or 560.36 improvements upon completion of construction; 561.1 (2) with respect to a structured parking facility: 561.2 (i) constructed in conjunction with, and directly above or 561.3 below, a development; and 561.4 (ii) financed with the proceeds of tax increment or parking 561.5 ramp general obligation or revenue bonds;and561.6 (3) until August 1, 2009, with respect to a facility built 561.7 for the purpose of facilitating the operation of public transit 561.8 or encouraging its use: 561.9 (i) constructed in conjunction with, and directly above or 561.10 below, a development; and 561.11 (ii) financed with the proceeds of parking ramp general 561.12 obligation or revenue bonds or with at least 60 percent of the 561.13 construction cost being financed with funding provided by the 561.14 federal government; and 561.15 (4) in the case of any building in which at least 75 561.16 percent of the usable square footage constitutes a housing 561.17 development project if: 561.18 (i) the project is financed with the proceeds of bonds 561.19 issued under section 469.034 or from nongovernmental sources; 561.20 (ii) the project is either located on land that is owned or 561.21 is being acquired by the authority only for development 561.22 purposes, or is not owned by the authority at the time the 561.23 contract is entered into but the contract provides for 561.24 conveyance or lease to the authority of the project or 561.25 improvements upon completion of construction; and 561.26 (iii) the authority finds and determines that elimination 561.27 of the public bidding requirements is necessary in order for the 561.28 housing development project to be economical and feasible. 561.29 (b) An authority need not require a performance bond for 561.30 the following projects: 561.31 (1) a contract described in paragraph (a), clause (1); 561.32 (2) a construction change order for a housing project in 561.33 which 30 percent of the construction has been completed; 561.34 (3) a construction contract for a single-family housing 561.35 project in which the authority acts as the general construction 561.36 contractor; or 562.1 (4) a services or materials contract for a housing project. 562.2 For purposes of this paragraph, "services or materials 562.3 contract" does not include construction contracts. 562.4 Sec. 6. Minnesota Statutes 2004, section 469.175, 562.5 subdivision 2, is amended to read: 562.6 Subd. 2. [CONSULTATIONS; COMMENT AND FILING.] (a) Before 562.7 formation of a tax increment financing district, the authority 562.8 shall provide the county auditor and clerk of the school board 562.9 with the proposed tax increment financing plan for the district 562.10 and the authority's estimate of the fiscal and economic 562.11 implications of the proposed tax increment financing district. 562.12 The authority must provide the proposed tax increment financing 562.13 plan and the information on the fiscal and economic implications 562.14 of the plan to the county auditor and the clerk of the school 562.15 district board at least 30 days before the public hearing 562.16 required by subdivision 3. The information on the fiscal and 562.17 economic implications may be included in or as part of the tax 562.18 increment financing plan. The county auditor and clerk of the 562.19 school board shall provide copies to the members of the boards, 562.20 as directed by their respective boards. The 30-day requirement 562.21 is waived if the boards of the county and school district submit 562.22 written comments on the proposal and any modification of the 562.23 proposal to the authority after receipt of the information. 562.24 (b) For purposes of this subdivision, "fiscal and economic 562.25 implications of the proposed tax increment financing district" 562.26 includes: 562.27 (1) an estimate of the total amount of tax increment that 562.28 will be generated over the life of the district; 562.29 (2) a description of the probable impact of the district on 562.30 city-provided services such as police and fire protection, 562.31 public infrastructure, and borrowing costs attributable to the 562.32 district; 562.33 (3) the estimated amount of tax increments over the life of 562.34 the district that would be attributable to school district 562.35 levies, assuming the school district's share of the total local 562.36 tax rate for all taxing jurisdictions remained the same; 563.1 (4) the estimated amount of tax increments over the life of 563.2 the district that would be attributable to county levies, 563.3 assuming the county's share of the total local tax rate for all 563.4 taxing jurisdictions remained the same; and 563.5 (5) any additional information requested by the county or 563.6 the school district that would enable it to determine additional 563.7 costs that will accrue to it due to the development proposed for 563.8 the district. 563.9[EFFECTIVE DATE.] This section is effective for all 563.10 districts for which certification is requested after December 563.11 31, 2005. 563.12 Sec. 7. Minnesota Statutes 2004, section 645.44, is 563.13 amended by adding a subdivision to read: 563.14 Subd. 19. [FEE AND TAX.] (a) "Tax" means any fee, charge, 563.15 surcharge, or assessment imposed by a governmental entity on an 563.16 individual, person, entity, transaction, good, service, or other 563.17 thing. It excludes: 563.18 (1) a price that an individual or entity chooses 563.19 voluntarily to pay in return for receipt of goods or services 563.20 provided by the governmental entity; and 563.21 (2) a fine or penalty imposed for violation of a state or 563.22 local law or ordinance. 563.23 A government good or service does not include access to or the 563.24 authority to engage in private market transactions with a 563.25 nongovernmental party, such as licenses to engage in a trade, 563.26 profession, or business or to improve private property. 563.27 (b) For purposes of applying the laws of this state, a 563.28 "fee," "charge," or other similar term that satisfies the 563.29 functional requirements of paragraph (a) must be treated as a 563.30 tax for all purposes, regardless of whether the statute or law 563.31 names or describes it as a tax. The provisions of this 563.32 subdivision do not preempt or supersede limitations under law 563.33 that apply to fees, charges, or assessments. 563.34 (c) This subdivision is not intended to extend or limit the 563.35 application of article 4, section 18, of the Constitution of 563.36 Minnesota. 564.1[EFFECTIVE DATE.] This section is effective the day 564.2 following final enactment. 564.3 Sec. 8. Laws 2003, chapter 128, article 1, section 172, is 564.4 amended to read: 564.5 Sec. 172. [TEMPORARY PETROFUND FEE EXEMPTION FOR MINNESOTA 564.6 COMMERCIAL AIRLINES.] 564.7 (a) A commercial airline providing regularly scheduled jet 564.8 service and with its corporate headquarters in Minnesota is 564.9 exempt from the fee established in Minnesota Statutes, section 564.10 115C.08, subdivision 3, until July 1,20052007, provided the 564.11 airline develops a plan approved by the commissioner of commerce 564.12 demonstrating that the savings from this exemption will go 564.13 towards minimizing job losses in Minnesota, and to support the 564.14 airline's efforts to avoid filing for federal bankruptcy 564.15 protections. 564.16 (b) A commercial airline exempted from the fee is 564.17 ineligible to receive reimbursement under Minnesota Statutes, 564.18 chapter 115C, until July 1,20052007. A commercial airline 564.19 that has a release during the fee exemption period is ineligible 564.20 to receive reimbursement under Minnesota Statutes, chapter 115C, 564.21 for the costs incurred in response to that release. 564.22 Sec. 9. [CITY OF ROSEMOUNT; TAX INCREMENT FINANCING.] 564.23 The city of Rosemount or a development authority of the 564.24 city may spend increment from its Downtown - Brockway Tax 564.25 Increment Financing (TIF) District to acquire parcels of 564.26 property that the Department of Transportation or Dakota County 564.27 acquired in connection with the realignment of marked Trunk 564.28 Highway 3, notwithstanding the limits under Minnesota Statutes, 564.29 section 469.1763, on the amount of increments that may be spent 564.30 outside of the district or Minnesota Statutes, section 469.176, 564.31 subdivision 4j, on the purposes for which increments may be 564.32 spent. 564.33[EFFECTIVE DATE.] This section is effective upon local 564.34 approval by the governing body of the city of Rosemount under 564.35 Minnesota Statutes, section 645.021. 564.36 Sec. 10. [APPROPRIATION.] 565.1 (a) $125,000 in fiscal year 2006, $125,000 in fiscal year 565.2 2007, and $200,000 in each fiscal year thereafter, are 565.3 appropriated from the general fund to the commissioner of 565.4 revenue to make grants to one or more nonprofit organizations, 565.5 qualifying under section 501(c)(3) of the Internal Revenue Code 565.6 of 1986, to coordinate, facilitate, encourage, and aid in the 565.7 provision of taxpayer assistance services. 565.8 (b) "Taxpayer assistance services" mean accounting and tax 565.9 preparation services provided by volunteers to low-income and 565.10 disadvantaged Minnesota residents to help them file federal and 565.11 state income tax returns and Minnesota property tax refund 565.12 claims and to provide personal representation before the 565.13 Department of Revenue and Internal Revenue Service. 565.14 Sec. 11. [APPROPRIATION.] 565.15 $320,000 is appropriated from the general fund in fiscal 565.16 year 2006 only to the commissioner of employment and economic 565.17 development to be distributed to the city of Duluth to be used 565.18 by the city for grants to enterprises related to environmental 565.19 cleanup of Lake Superior and long-term community health care. 565.20 Sec. 12. [APPROPRIATION.] 565.21 The following amounts are appropriated from the general 565.22 fund to the commissioner of finance for transfer to the clean 565.23 water legacy account in the environmental fund: 565.24 (1) $31,500,000 in fiscal year 2006; 565.25 (2) $3,000,000 in fiscal year 2007; and 565.26 (3) $40,000,000 in fiscal year 2008 and $80,000,000 in 565.27 fiscal year 2009 and subsequent years, but only after at least 565.28 50 percent of the Minnesota Total Maximum Daily Loads (TMDLs) 565.29 have been established and approved by the Environmental 565.30 Protection Agency under the federal Clean Water Act. 565.31 Sec. 13. [APPROPRIATION; AID PAYMENT SHIFTS.] 565.32 In fiscal year 2008, $25,000,000 is appropriated from the 565.33 general fund to the commissioner of finance to be used to buy 565.34 back the aid payment shift provided in Minnesota Statutes, 565.35 section 16A.152, subdivision 2, clause (3). 565.36 Sec. 14. [DEFERRED MAINTENANCE AID.] 566.1 For fiscal years 2006 and 2007 only, a district's deferred 566.2 maintenance aid is equal to $13.25 multiplied times its adjusted 566.3 average daily membership for that year. Aid received under this 566.4 section must be used for deferred maintenance, to make 566.5 accessibility improvements, or to make fire, safety, or health 566.6 repairs. 566.7 Sec. 15. [APPROPRIATIONS.] 566.8 Subdivision 1. [DEPARTMENT OF EDUCATION.] The sums 566.9 indicated in this section are appropriated from the general fund 566.10 to the Department of Education for the fiscal years designated. 566.11 Subd. 2. [DEFERRED MAINTENANCE AID.] For deferred 566.12 maintenance revenue under section 14, $10,574,000 in fiscal year 566.13 2006 and $10,416,000 in fiscal year 2007. 566.14 Sec. 16. [APPROPRIATION.] 566.15 $2,000,000 is appropriated from the general fund on a 566.16 onetime basis to the Higher Education Services Office. The 566.17 appropriation must be deposited into the Rochester higher 566.18 education development account. With the approval of the Higher 566.19 Education Services Office, money in this account may be used to 566.20 provide initial funding for academic program development for 566.21 upperclass and graduate students. This appropriation is 566.22 intended to be expended when matched by tax-deductible 566.23 contributions from individuals and corporate taxpayers. 566.24 ARTICLE 25 566.25 TAX SHELTER AND VOLUNTARY COMPLIANCE INITIATIVES - SF2206 566.26 Section 1. [289A.121] [REGISTRATION OF TAX SHELTERS.] 566.27 Subdivision 1. [DEFINITIONS.] For the purposes of this 566.28 section, the following terms have the meanings given. 566.29 (a) "Abusive tax avoidance transaction" means a Minnesota 566.30 tax shelter or a reportable transaction. 566.31 (b) "Material advisor" has the meaning given in section 566.32 111(b)(1) of the Internal Revenue Code, and must be interpreted 566.33 in accordance with any regulations or rulings adopted or issued 566.34 by the Internal Revenue Service that govern that section. 566.35 (c) "Minnesota tax shelter" means a transaction which is 566.36 not a reportable transaction, which substantially reduces a tax 567.1 imposed under chapter 290 and has one or more of the following 567.2 characteristics: 567.3 (1) it is offered to the taxpayer under conditions of 567.4 confidentiality, as that term is defined in Treas. Reg. section 567.5 1.6011-4(3)(ii), and for which the taxpayer has paid a fee; 567.6 (2) the terms of the transaction offer the taxpayer or a 567.7 related party the right to a full or partial refund of fees if 567.8 all or part of the intended tax consequences of the transaction 567.9 are not realized, or if fees are contingent upon the taxpayer 567.10 realizing tax benefits; 567.11 (3) it is a transaction or a series of related transactions 567.12 that result in a corporation or a partnership with only 567.13 corporate partners claiming a reduction in net income in excess 567.14 of $10,000,000 in any combination of tax years; 567.15 (4) it is a transaction or a series of related transactions 567.16 that result in an individual, a partnership with one or more 567.17 noncorporate partners, S corporation, or trust claiming a 567.18 reduction in net income in excess of $4,000,000 in any 567.19 combination of taxable years, whether or not any losses flow 567.20 through to one or more shareholders or beneficiaries; or 567.21 (5) it is a transaction or series of related transactions, 567.22 identified as a Minnesota tax shelter in a rule promulgated by 567.23 the commissioner of revenue, entered into after the date the 567.24 rule becomes effective. 567.25 (d) "Reportable transaction" has the meaning given in 567.26 Treas. Reg. section 1.6011-4 between February 29, 2000, and 567.27 January 1, 2006. 567.28 Subd. 2. [REPORTS BY MATERIAL ADVISORS.] (a) On the first 567.29 day that a material advisor sells a Minnesota tax shelter or 567.30 reportable transaction, the material advisor must file with the 567.31 commissioner a copy of any federal tax shelter registration 567.32 information relating to reportable transactions if that 567.33 registration is applicable to any person subject to taxation 567.34 under chapter 290. 567.35 (b) On or before April 15, 2006, material advisors must 567.36 report to the commissioner all federal tax shelters used by a 568.1 person subject to tax under chapter 290 that the material 568.2 advisor offered for sale between February 28, 2000, and January 568.3 1, 2006, which were reportable transactions. 568.4 (c) On or before April 15, 2006, material advisors must 568.5 report to the commissioner all Minnesota tax shelters that the 568.6 material advisor offered for sale between February 28, 2000, and 568.7 January 1, 2006, if the transactions would have had to be 568.8 disclosed under subdivision 3 had it been in effect at that time. 568.9 (d) In addition to the requirements set forth in paragraphs 568.10 (a), (b), and (c), a material advisor must report to the 568.11 commissioner any transactions entered into on or after April 15, 568.12 2006, that become listed as reportable transactions or a 568.13 Minnesota tax shelter. 568.14 Subd. 3. [MAINTAINING PARTICIPANT LISTS.] Any person 568.15 organizing or selling Minnesota tax shelters or reportable 568.16 transactions must maintain a list of participants that are 568.17 subject to a tax imposed by chapter 290. 568.18 Subd. 4. [REPORTING.] All persons, including material 568.19 advisors who organize or sell Minnesota tax shelters or 568.20 reportable transactions, must provide the following information 568.21 to the commissioner within 20 days from receiving a written 568.22 request from the commissioner to provide the information: 568.23 (1) legal name of the taxpayer; 568.24 (2) Minnesota tax identification number; 568.25 (3) federal tax identification number; and 568.26 (4) description of the Minnesota tax shelter or reportable 568.27 transaction. 568.28 Subd. 5. [DISCLOSURE STATEMENTS BY TAXPAYERS.] Every 568.29 person subject to taxation under chapter 290 who has 568.30 participated in a reportable transaction or a Minnesota tax 568.31 shelter which resulted in a tax decrease must file a disclosure 568.32 statement on a form prescribed by the commissioner. The form 568.33 must be filed with the tax return. 568.34 Sec. 2. Minnesota Statutes 2004, section 289A.38, is 568.35 amended by adding a subdivision to read: 568.36 Subd. 15. [VOLUNTARY COMPLIANCE 569.1 INITIATIVE.] Notwithstanding other limitations in the 569.2 subdivision, an amount of tax related to a reportable 569.3 transaction or a Minnesota tax shelter that is not reported in 569.4 the voluntary compliance initiative described in section 4 may 569.5 be assessed within eight and one-half years after the date the 569.6 return is filed. 569.7 Sec. 3. Minnesota Statutes 2004, section 289A.60, is 569.8 amended by adding a subdivision to read: 569.9 Subd. 26. [PENALTY FOR FAILURE TO REPORT A TAX 569.10 SHELTER.] (a) A penalty of $15,000 is imposed on a person who 569.11 fails to register a tax shelter as required under section 569.12 289A.121 on or before the date prescribed. 569.13 (b) A penalty of $10,000 is imposed on a person who fails 569.14 to report to the commissioner a Minnesota tax shelter or a 569.15 reportable transaction within 20 days of the date prescribed 569.16 under section 289A.121. For each day after the 20th day that 569.17 the person organizing or selling the Minnesota tax shelter or 569.18 reportable transaction failed to make the information required 569.19 in section 289A.121, subdivision 2, available to the 569.20 commissioner after the commissioner made a written request for 569.21 the list, an additional $10,000 penalty is imposed on that 569.22 person. 569.23 (c) A penalty is imposed on a person who fails to make a 569.24 report required by section 289A.121, subdivision 2, on or before 569.25 the date prescribed. The penalty is the greater of: 569.26 (1) $100,000; or 569.27 (2) 50 percent of the gross income that the person derived 569.28 from the activity. 569.29 (d) A penalty is imposed on a person who intentionally 569.30 disregards the requirement to maintain and provide information 569.31 required in section 289A.121. The penalty is the greater of: 569.32 (1) $100,000; or 569.33 (2) 75 percent of the gross income that the person derived 569.34 from the activity. 569.35 (e) A penalty of $15,000 is imposed on a person who fails 569.36 to provide a list required under section 289A.121, subdivision 570.1 4, which does not contain all the information required in that 570.2 section. 570.3 Sec. 4. [TAX SHELTER VOLUNTARY COMPLIANCE INITIATIVE.] 570.4 Subdivision 1. [COMMISSIONER TO INITIATE.] The 570.5 commissioner of revenue shall develop and administer a Minnesota 570.6 tax shelter voluntary compliance initiative for taxpayers 570.7 subject to Minnesota Statutes, section 289A.60, subdivision 26, 570.8 as provided in this chapter. 570.9 Subd. 2. [TERM; APPLICATION.] The Minnesota tax shelter 570.10 voluntary compliance initiative shall be conducted from July 1, 570.11 2005, to December 31, 2005, pursuant to Minnesota Statutes, 570.12 section 270.07. The Minnesota tax shelter voluntary compliance 570.13 initiative shall apply to tax liabilities and penalties 570.14 attributable to Minnesota tax shelters and reportable 570.15 transactions for tax years beginning before January 1, 2005. An 570.16 abusive tax avoidance transaction means a Minnesota tax shelter 570.17 or a reportable transaction as defined in Minnesota Statutes, 570.18 section 289A.121, subdivision 1. 570.19 Subd. 3. [IMPLEMENTATION.] The commissioner of revenue may 570.20 issue forms and instructions and take other actions necessary, 570.21 including the use of agreements pursuant to Minnesota Statutes, 570.22 section 270.67, to implement the Minnesota tax shelter voluntary 570.23 compliance initiative. 570.24 Subd. 4. [PERSONS NOT ELIGIBLE TO PARTICIPATE.] (a) Any 570.25 person is not eligible for participation in the Minnesota tax 570.26 shelter voluntary compliance initiative, if: 570.27 (1) the taxpayer was convicted of a crime in connection 570.28 with an abusive tax avoidance transaction or transactions; 570.29 (2) a criminal complaint was filed against the taxpayer in 570.30 connection with an abusive tax avoidance transaction or 570.31 transactions; 570.32 (3) the taxpayer is the subject of a criminal investigation 570.33 in connection with an abusive tax avoidance transaction or 570.34 transactions; or 570.35 (4) the taxpayer was eligible to participate in the 570.36 Internal Revenue Service's Offshore Voluntary Compliance 571.1 Initiative, as set forth in Revenue Procedure 2003-11. 571.2 Subd. 5. [ELIGIBLE PARTICIPANTS.] (a) Any person who is 571.3 not ineligible to participate in the Minnesota tax shelter 571.4 voluntary compliance initiative under subdivision 4, is eligible 571.5 to participate in the Minnesota tax shelter voluntary compliance 571.6 initiative. 571.7 (b) A person participating in the Minnesota tax shelter 571.8 voluntary compliance initiative waiving the right to an 571.9 administrative appeal, a claim for refund, or an action in 571.10 district court must do both of the following: 571.11 (1) the participating person must file an amended return 571.12 for each taxable year for which the taxpayer has filed a tax 571.13 return using an abusive tax avoidance transaction to underreport 571.14 the taxpayer's tax liability for that tax year. Each amended 571.15 return shall report all income from all sources, without regard 571.16 to the abusive tax avoidance transaction; and 571.17 (2) the participating person must pay taxes and interest 571.18 due in full, except that the commissioner of revenue may enter 571.19 into an installment payment agreement pursuant to Minnesota 571.20 Statutes, section 270.67, prior to taxpayer filing an amended 571.21 return. 571.22 (c) The commissioner of revenue shall abate all penalties 571.23 imposed under Minnesota Statutes, chapter 289A, which could have 571.24 been assessed in connection with the use of an abusive tax 571.25 avoidance transaction, for each taxable year for which the 571.26 taxpayer elects to participate in the Minnesota tax shelter 571.27 voluntary compliance initiative, to the extent those penalties 571.28 are a result of underreporting of tax liabilities attributable 571.29 to the use of abusive tax avoidance transactions, for which a 571.30 participating person files an amended return in compliance with 571.31 paragraph (b). 571.32 (d) No criminal action shall be brought against a taxpayer 571.33 for the taxable years reported under the Minnesota tax shelter 571.34 voluntary compliance initiative with respect to the issues for 571.35 which a taxpayer voluntarily complies under this chapter. 571.36 (e) A person filing an amended return under this paragraph 572.1 of the Minnesota tax shelter voluntary compliance initiative may 572.2 not file a claim for refund, an administrative appeal, or an 572.3 action in district court in regard to the amount of taxes or 572.4 interest paid with the amended return. 572.5 (f) A person participating in the Minnesota tax shelter 572.6 voluntary compliance initiative not waiving the right to an 572.7 administrative appeal, a claim for refund, or an action in 572.8 district court must do both of the following: 572.9 (1) the participating person must file an amended return 572.10 for each taxable year for which the taxpayer has filed a tax 572.11 return using an abusive tax avoidance transaction to underreport 572.12 the taxpayer's tax liability for that tax year. Each amended 572.13 return shall report all income from all sources, without regard 572.14 to the abusive tax avoidance transactions; and 572.15 (2) the participating person must pay taxes and interest 572.16 due in full, except that the commissioner of revenue may enter 572.17 into an installment payment agreement pursuant to Minnesota 572.18 Statutes, section 270.67, prior to taxpayer filing an amended 572.19 return. 572.20 (g) The commissioner of revenue shall abate all penalties 572.21 imposed under Minnesota Statutes, chapter 289A, except for the 572.22 penalty for intentional disregard of law or rules imposed under 572.23 Minnesota Statutes, section 289A.60, subdivision 5, which could 572.24 have been assessed in connection with the use of an abusive tax 572.25 avoidance transaction, for each taxable year for which the 572.26 taxpayer elects to participate in the Minnesota tax shelter 572.27 voluntary compliance initiative, to the extent those penalties 572.28 are a result of underreporting of tax liabilities attributable 572.29 to the use of abusive tax avoidance transactions, for which a 572.30 participating person files an amended return in compliance with 572.31 paragraph (b). 572.32 (h) No criminal action shall be brought against a taxpayer 572.33 for the taxable years reported under the Minnesota tax shelter 572.34 voluntary compliance initiative with respect to the issues for 572.35 which a taxpayer voluntarily complies under this chapter. 572.36 Sec. 5. [COMMISSIONER ORDERS AND PENALTIES.] 573.1 After December 31, 2005, the commissioner of revenue may 573.2 issue an order of assessment within the time period permitted 573.3 under Minnesota Statutes, section 289A.38, upon an amended 573.4 return filed under this chapter for an underreported amount of 573.5 tax, may impose penalties on an underreported amount of tax on 573.6 an amended return filed under this chapter, or initiate a 573.7 criminal action against any person based on any underreported 573.8 amount of tax on an amended return filed under this chapter. 573.9 A penalty is imposed upon any person who: 573.10 (1) is not ineligible to file an amended return pursuant to 573.11 this chapter; 573.12 (2) has engaged in abusive tax shelter transactions; and 573.13 (3) fails to voluntarily amend their tax returns for each 573.14 taxable year for which an amended return may be filed and the 573.15 person underreported income attributable to an abusive tax 573.16 shelter transaction. 573.17 The penalty is equal to 200 percent of the underreported tax 573.18 that is attributable to the abusive tax shelter transaction. 573.19 ARTICLE 26 573.20 PROPERTY TAX FREEZE - SF2206 573.21 Section 1. [CITATION.] 573.22 This article may be cited as the "Truth and Fairness in 573.23 Taxation Act" (TAFTA) or the "State/Local Fiscal Relations: 573.24 Truth in Taxation Act." 573.25 Sec. 2. [STATEMENT OF PURPOSE.] 573.26 The legislature finds that the state of Minnesota is 573.27 continuing to experience a persistent budget deficit and that 573.28 reductions in state spending have resulted in increased burdens 573.29 on school districts, counties, cities, and other units of local 573.30 government. In order to maintain stability in state and local 573.31 fiscal relations, the purpose of this act is to prevent property 573.32 tax rate increases and to illuminate the impact of reductions in 573.33 revenue to school districts, counties, cities, and other units 573.34 of local government. 573.35 Sec. 3. [BENEFIT RATIO FOR RURAL SERVICE DISTRICTS.] 573.36 Notwithstanding Minnesota Statutes, section 272.67, 574.1 subdivision 6, the benefit ratio used for apportioning levies to 574.2 a rural service district for taxes payable in 2006 and any 574.3 subsequent year prior to the freeze termination year must not be 574.4 greater than that in effect for taxes payable in 2005. 574.5 Sec. 4. [PROHIBITION AGAINST INCURRING NEW DEBT.] 574.6 Subdivision 1. [ACTIONS PROHIBITED.] After May 31, 2006, 574.7 no municipality as defined in Minnesota Statutes, section 574.8 475.51, or any special taxing district as defined in Minnesota 574.9 Statutes, section 275.066, may sell obligations, certificates of 574.10 indebtedness, or capital notes under Minnesota Statutes, section 574.11 412.301, chapter 475, or any other law authorizing obligations, 574.12 certificates of indebtedness, capital notes, or other debt 574.13 instruments, or enter into installment purchase contracts or 574.14 lease purchase agreements under Minnesota Statutes, section 574.15 465.71, or any other law authorizing installment purchase 574.16 contracts or lease purchase agreements, if issuing those debt 574.17 instruments or entering into those contracts would require a 574.18 levy first becoming payable in 2007 or any subsequent year prior 574.19 to the freeze termination year. 574.20 Subd. 2. [EXCEPTIONS.] This prohibition does not apply to: 574.21 (1) refunding bonds sold to refund bonds originally sold 574.22 before June 1, 2006; 574.23 (2) obligations for which the amount of the levy first 574.24 becoming due in 2007 would not exceed the amount by which the 574.25 municipality's total debt service levy for taxes payable in 2007 574.26 prior to issuance of those obligations is less than the 574.27 municipality's total debt service levy for taxes payable in 574.28 2006; or 574.29 (3) obligations with respect to which the municipality 574.30 makes a finding at the time of the issuance of the obligations 574.31 that no levy will be required for taxes payable in 2007 or any 574.32 subsequent year prior to the freeze termination year or to pay 574.33 the debt service on the obligations because sufficient funds are 574.34 available from nonproperty tax sources to pay the debt service. 574.35 As used in clauses (2) and (3), "obligations" includes 574.36 certificates of indebtedness, capital notes, or other debt 575.1 instruments or installment purchase contracts or lease purchase 575.2 agreements. 575.3 Subd. 3. [DATE WHEN BONDS ARE DEEMED SOLD.] For purposes 575.4 of this section, bonds will be deemed to have been sold before 575.5 June 1, 2006, if: 575.6 (1) an agreement has been entered into between the 575.7 municipality and a purchaser or underwriter for the sale of the 575.8 bonds by that date; 575.9 (2) the issuing municipality is a party to a contract or 575.10 letter of understanding entered into before June 1, 2006, with 575.11 the federal government or the state government that requires the 575.12 municipality to pay for a project, and the project will be 575.13 funded with the proceeds of the bonds; or 575.14 (3) the proceeds of the bonds will be used to fund a 575.15 project or acquisition with respect to which the municipality 575.16 has entered into a contract with a builder or supplier before 575.17 June 1, 2006. 575.18 Sec. 5. [LEVY LIMITATION FOR TAXES PAYABLE IN 2007 AND 575.19 SUBSEQUENT YEARS.] 575.20 Subdivision 1. [PROPOSED LEVY.] Notwithstanding any other 575.21 law to the contrary, for purposes of the certification required 575.22 by Minnesota Statutes, section 275.065, subdivision 1, in 2006 575.23 and any subsequent year prior to the freeze termination year, no 575.24 taxing authority, other than a school district, shall certify to 575.25 the county auditor a proposed property tax levy or, in the case 575.26 of a township, a final property tax levy, greater than the levy 575.27 certified to the county auditor pursuant to Minnesota Statutes, 575.28 section 275.07, subdivision 1, in the prior year, except as 575.29 provided in this section. 575.30 Subd. 2. [FINAL LEVY.] Notwithstanding any other law to 575.31 the contrary, for purposes of the certification required by 575.32 Minnesota Statutes, section 275.07, subdivision 1, in 2006 and 575.33 any subsequent year prior to the freeze termination year, no 575.34 taxing authority, other than a school district, shall certify to 575.35 the county auditor a property tax levy greater than the amount 575.36 certified to the county auditor pursuant to Minnesota Statutes, 576.1 section 275.07, subdivision 1, in the prior year, except as 576.2 provided in this section. 576.3 Subd. 3. [DEBT SERVICE EXCEPTION.] If a levy for taxes 576.4 payable in 2007 or any subsequent year prior to the freeze 576.5 termination year, for debt service on obligations, certificates 576.6 of indebtedness, capital notes, or other debt instruments sold 576.7 prior to June 1, 2006, or to make payments on installment 576.8 purchase contracts or lease purchase agreements entered into 576.9 prior to June 1, 2006, exceeds the levy a taxing authority 576.10 certified pursuant to Minnesota Statutes, section 275.07, 576.11 subdivision 1, for taxes payable in 2006 for the same purpose, 576.12 the excess may be levied notwithstanding the limitations of 576.13 subdivisions 1 and 2. 576.14 Subd. 4. [ANNEXATION EXCEPTION.] The city tax rate for 576.15 taxes payable in 2007 or any subsequent year prior to the freeze 576.16 termination year on any property annexed under Minnesota 576.17 Statutes, chapter 414, may not be increased over the city or 576.18 township tax rate in effect on the property for taxes payable in 576.19 2006, notwithstanding any law, municipal board order, or 576.20 ordinance to the contrary. The limit on the annexing city's 576.21 levy under subdivisions 1 and 2 may be increased in excess of 576.22 that limit by an amount equal to the net tax capacity of the 576.23 property annexed times the city or township tax rate in effect 576.24 on that property for taxes payable in 2006. The levy limit of 576.25 the city or township from which the property was annexed shall 576.26 be reduced by the same amount. 576.27 Subd. 5. [SCHOOL DISTRICT EXCEPTIONS.] (a) For taxes 576.28 payable in 2007 and subsequent years prior to the freeze 576.29 termination year, no school district shall certify to the county 576.30 auditor a property tax levy that exceeds the maximum levy that 576.31 may be imposed by that district under 2005 S.F. No. 2267, if 576.32 enacted, except as provided in paragraph (b). 576.33 (b) A school district that is in statutory operating debt 576.34 under Minnesota Statutes, section 123B.81, and has an approved 576.35 plan under Minnesota Statutes, section 123B.83, that includes an 576.36 increase to its referendum allowance under Minnesota Statutes, 577.1 section 126C.17, is exempt from the levy freeze on referenda 577.2 according to this section. 577.3 Sec. 6. [FREEZE ON LOCAL MATCH REQUIREMENTS.] 577.4 Notwithstanding any other law to the contrary, the local 577.5 funding or local match required from any city, town, or county 577.6 for any state grant or program shall not be increased for 577.7 calendar year 2007 or any subsequent year prior to the freeze 577.8 termination year above the dollar amount of the local funding or 577.9 local match required for the same grant or program in 2006, 577.10 regardless of the level of state funding provided. Any local 577.11 match or local funding requirement that first becomes effective 577.12 after December 31, 2006, for new or changed state grants or 577.13 programs shall not be effective until the freeze has been 577.14 terminated for that taxing jurisdiction under section 14. 577.15 Nothing in this section shall affect the eligibility of a city, 577.16 town, or county for the receipt of state grants or program funds 577.17 in 2007 or any subsequent year prior to the freeze termination 577.18 year, or reduce the amount of state funding a city, town, or 577.19 county would otherwise receive in 2007 or any subsequent year 577.20 prior to the freeze termination year if the local match 577.21 requirements of the state grant or program were met in 2006. 577.22 Sec. 7. [SUSPENSION OF SALARY AND BUDGET APPEAL 577.23 AUTHORIZATION.] 577.24 After March 1, 2006, no county sheriff may exercise the 577.25 authority granted under Minnesota Statutes, section 387.20, 577.26 subdivision 7, and no county attorney may exercise the authority 577.27 granted under Minnesota Statutes, section 388.18, subdivision 6, 577.28 to the extent that the salary or budget increase sought in the 577.29 appeal would result in an increase in county expenditures in 577.30 calendar year 2007 or any subsequent year prior to the freeze 577.31 termination year. 577.32 Sec. 8. [SUSPENSION OF PUBLICATION AND HEARING 577.33 REQUIREMENTS.] 577.34 A local taxing authority is not required to comply with the 577.35 public advertisement notice of Minnesota Statutes, section 577.36 275.065, subdivision 5a, or the public hearing requirement of 578.1 Minnesota Statutes, section 275.065, subdivision 6, with respect 578.2 to taxes payable in 2007 and any subsequent year prior to the 578.3 freeze termination year. 578.4 Sec. 9. [TAX RATE FREEZE; REDUCTION OF LEVY.] 578.5 If in the course of determining local tax rates for taxes 578.6 payable in 2007 or any subsequent year prior to the freeze 578.7 termination year after reductions for disparity reduction aid 578.8 under Minnesota Statutes, section 275.08, subdivisions 1c and 578.9 1d, the county auditor finds the local tax rate exceeds that in 578.10 effect for taxes payable in 2006, the county auditor shall 578.11 reduce the local government's levy so that the local tax rate 578.12 does not exceed that in effect for taxes payable in 2006, 578.13 adjusted as provided in section 5. 578.14 Sec. 10. [PENSION LIABILITIES.] 578.15 Notwithstanding any other law or charter provision to the 578.16 contrary, no levy for taxes payable in 2007 or any subsequent 578.17 year prior to the freeze termination year for a local police and 578.18 fire relief association for the purpose of amortizing an 578.19 unfunded pension liability may exceed the levy for that purpose 578.20 for taxes payable in 2006. 578.21 Sec. 11. [DUTIES OF TOWNSHIP BOARD OF SUPERVISORS.] 578.22 Notwithstanding Minnesota Statutes, section 365.10, in 2006 578.23 the township board of supervisors shall adjust the levy and in 578.24 any subsequent year prior to the freeze termination year, the 578.25 township board of supervisors may adjust the expenditures of a 578.26 township below the level authorized by the electors to adjust 578.27 for any reduction in the previously authorized levy of the 578.28 township pursuant to section 5. 578.29 Sec. 12. [PROHIBITION ON NEW OR INCREASED FEES.] 578.30 After March 1, 2006, no municipality as defined in 578.31 Minnesota Statutes, section 475.51, or special taxing district 578.32 as defined in Minnesota Statutes, section 275.066, and no 578.33 executive branch state agency may impose a new fee or increase 578.34 the rate or amount of an existing fee. As used in this section, 578.35 a fee is any charge for goods, services, regulations, or 578.36 licensure, and includes charges for admission to or for use of 579.1 public facilities. 579.2 Sec. 13. [SAVINGS CLAUSE.] 579.3 Notwithstanding any provision in this article, nothing in 579.4 this article constitutes an impairment of any obligations, 579.5 certificates of indebtedness, capital notes, or other debt 579.6 instruments, including installment purchase contracts or lease 579.7 purchase agreements, issued before the date of final enactment 579.8 of this act, by a municipality as defined in Minnesota Statutes, 579.9 section 469.174, subdivision 6; a school district; or a special 579.10 taxing district as defined in Minnesota Statutes, section 579.11 275.066. 579.12 Sec. 14. [EFFECTIVE DATE; TERMINATION.] 579.13 (a) This article is effective the day following final 579.14 enactment and applies to taxes payable in 2007 and subsequent 579.15 years prior to the termination date provided in paragraph (b), 579.16 (c), (d), or (e) for the taxing jurisdiction described in each 579.17 of those paragraphs. 579.18 (b) For cities and towns, the termination date is the taxes 579.19 payable year that is the calendar year when local government 579.20 aids payable to cities under Minnesota Statutes, section 579.21 477A.013, are sufficient to fully fund the formula without any 579.22 reduction due to the limitation in Minnesota Statutes, section 579.23 477A.03. 579.24 (c) For counties, the termination date is the taxes payable 579.25 year when the total amount to be paid to all counties under 579.26 Minnesota Statutes, section 477A.0124, exceeds the amount paid 579.27 to all counties under Minnesota Statutes 2002, sections 273.138; 579.28 273.1398, subdivision 2, minus the amount certified under 579.29 Minnesota Statutes, section 273.1398, subdivision 4a, paragraph 579.30 (b), for counties in Judicial Districts One, Three, Six, and 579.31 Ten, and by 25 percent of the amount certified under Minnesota 579.32 Statutes, section 273.1398, subdivision 4a, paragraph (b), for 579.33 counties located in Judicial Districts Two and Four; 273.166; 579.34 477A.0121; and 477A.0122, increased by the rate of increase in 579.35 the annual implicit price deflator for government consumption 579.36 expenditures from 2003 to the current year. 580.1 (d) For school districts, the termination date is the taxes 580.2 payable year that is the year in which the state provides a real 580.3 state aid inflationary increase to the basic formula allowance 580.4 under Minnesota Statutes, section 126C.10, subdivision 2, over 580.5 the amount paid in the prior year. 580.6 (e) For special taxing districts, the termination date is 580.7 the 2009 taxes payable year.