Minnesota Legislature
HF 785
2nd Engrossment - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
1.1 A bill for an act 1.2 relating to financing and operation of government in 1.3 this state; modifying truth in taxation provisions and 1.4 adding a taxpayer satisfaction survey; changing 1.5 income, corporate franchise, withholding, estate, 1.6 property, sales and use, mortgage registry, health 1.7 care gross revenues, motor fuels, gambling, cigarette 1.8 and tobacco products, occupation, net proceeds, 1.9 production, liquor, insurance, and other taxes and 1.10 tax-related provisions; making technical, clarifying, 1.11 collection, enforcement, refund, and administrative 1.12 changes to certain taxes and tax-related provisions, 1.13 tax-forfeited lands, revenue recapture, unfair 1.14 cigarette sales, state debt collection, sustainable 1.15 forest incentive programs, and payments in lieu of 1.16 taxes; changing local government aids and credits; 1.17 providing for determination of population for certain 1.18 purposes; updating references to the Internal Revenue 1.19 Code, changing property tax exemptions, assessment, 1.20 valuation, classification, class rates, levies, 1.21 deferral, review and equalization, appeals, notices 1.22 and statements, and distribution provisions; changing 1.23 rent constituting property taxes and property tax 1.24 refunds; authorizing special taxing districts; 1.25 requiring state contracts be with vendors registered 1.26 to collect use taxes; abolishing the political 1.27 contribution refund; authorizing certain local sales 1.28 taxes; providing for compliance with streamlined sales 1.29 tax agreement; changing the taxation of liquor and 1.30 cigarettes; authorizing income tax checkoffs; 1.31 requiring registration of tax shelters and providing 1.32 for a voluntary compliance initiative; changing job 1.33 opportunity building zones, border city development 1.34 zones, biotechnology and health sciences industry zone 1.35 provisions; limiting sales tax construction exemption 1.36 in job zones to businesses paying prevailing wage; 1.37 requiring a referendum for certain subsidies to 1.38 gambling enterprises; authorizing charges for certain 1.39 emergency services; imposing a franchise fee on card 1.40 clubs; defining the term "tax"; regulating tax 1.41 preparers; suspending appropriations or aids to public 1.42 employers who prohibit certain employees from wearing 1.43 a flag on a uniform; providing for training and 1.44 conduct of assessors; prohibiting purchases of 1.45 tax-forfeited lands by certain local officials; 1.46 providing for data classification and exchange of 2.1 data; establishing a tax reform commission; providing 2.2 and imposing powers and duties on the commissioner of 2.3 revenue and other state agencies and departments and 2.4 on certain political subdivisions and certain 2.5 officials; changing and imposing penalties; requiring 2.6 reports; transferring funds; appropriating money; 2.7 amending Minnesota Statutes 2004, sections 4A.02; 2.8 16C.03, by adding a subdivision; 16D.10; 168A.05, 2.9 subdivision 1a; 190.09, subdivision 2; 240.30, by 2.10 adding a subdivision; 270.02, subdivision 3; 270.11, 2.11 subdivision 2; 270.16, subdivision 2; 270.30, 2.12 subdivisions 1, 5, 6, 8, by adding subdivisions; 2.13 270.65; 270.67, subdivision 4; 270.69, subdivision 4; 2.14 270A.03, subdivisions 5, 7; 272.01, subdivision 2; 2.15 272.02, subdivisions 1a, 7, 47, 53, 64, by adding 2.16 subdivisions; 272.0211, subdivisions 1, 2; 272.0212, 2.17 subdivisions 1, 2; 272.029, subdivisions 4, 6; 2.18 273.055; 273.0755; 273.11, subdivisions 1a, 8, by 2.19 adding a subdivision; 273.111, by adding a 2.20 subdivision; 273.123, subdivision 7; 273.124, 2.21 subdivisions 3, 6, 8, 21; 273.125, subdivision 8; 2.22 273.13, subdivisions 22, 23, 25, by adding a 2.23 subdivision; 273.1315; 273.1384, subdivision 1; 2.24 273.19, subdivision 1a; 273.372; 274.01, subdivision 2.25 1; 274.014, subdivisions 2, 3; 274.14; 275.025, 2.26 subdivision 4; 275.065, subdivisions 1c, 3, 4, 7, by 2.27 adding subdivisions; 275.07, subdivisions 1, 4; 2.28 276.04, subdivision 2; 276.112; 276A.01, subdivision 2.29 7; 282.016; 282.08; 282.15; 282.21; 282.224; 282.301; 2.30 287.04; 289A.02, subdivision 7; 289A.08, subdivisions 2.31 1, 3, 7, 13, 16; 289A.18, subdivision 1; 289A.19, 2.32 subdivision 4; 289A.20, subdivision 2; 289A.31, 2.33 subdivision 2; 289A.37, subdivision 5; 289A.38, 2.34 subdivisions 6, 7, by adding subdivisions; 289A.40, 2.35 subdivision 2, by adding subdivisions; 289A.50, 2.36 subdivisions 1, 1a; 289A.56, by adding a subdivision; 2.37 289A.60, subdivisions 2a, 4, 6, 7, 11, 13, 20, by 2.38 adding subdivisions; 290.01, subdivisions 6, 7, 7b, 2.39 19, as amended, 19a, 19b, 19c, 19d, 31; 290.032, 2.40 subdivisions 1, 2; 290.06, subdivisions 2c, 22, by 2.41 adding a subdivision; 290.067, subdivisions 1, 2a; 2.42 290.0671, subdivisions 1, 1a; 290.0672, subdivisions 2.43 1, 2; 290.0674, subdivisions 1, 2; 290.0675, 2.44 subdivision 1; 290.091, subdivisions 2, 3; 290.0922, 2.45 subdivision 2; 290.191, subdivisions 2, 3; 290.92, 2.46 subdivisions 1, 4b; 290A.03, subdivisions 3, 11, 13, 2.47 15, by adding subdivisions; 290A.07, by adding a 2.48 subdivision; 290A.19; 290B.05, subdivision 3; 290C.05; 2.49 290C.10; 291.005, subdivision 1; 291.03, subdivision 2.50 1; 295.52, subdivision 4; 295.53, subdivision 1; 2.51 295.582; 295.60, subdivision 3; 296A.22, by adding a 2.52 subdivision; 297A.61, subdivisions 3, 4, by adding a 2.53 subdivision; 297A.64, subdivision 4; 297A.668, 2.54 subdivisions 1, 5; 297A.67, subdivisions 2, 7, 9, 29, 2.55 by adding a subdivision; 297A.68, subdivisions 2, 5, 2.56 28, 35, 37, 38, 39, by adding subdivisions; 297A.70, 2.57 subdivision 10; 297A.71, subdivision 12, by adding a 2.58 subdivision; 297A.72, by adding a subdivision; 2.59 297A.75, subdivision 1; 297A.87, subdivisions 2, 3; 2.60 297A.99, subdivisions 1, 4, 9, by adding a 2.61 subdivision; 297E.01, subdivisions 5, 7, by adding 2.62 subdivisions; 297E.06, subdivision 2; 297E.07; 2.63 297F.08, subdivision 12, by adding a subdivision; 2.64 297F.09, subdivisions 1, 2; 297F.14, subdivision 4; 2.65 297G.09, by adding a subdivision; 297I.01, by adding 2.66 subdivisions; 297I.05, subdivisions 4, 5, by adding a 2.67 subdivision; 298.01, subdivisions 3, 4; 298.24, 2.68 subdivision 1; 298.75, by adding a subdivision; 2.69 325D.33, subdivision 6; 365.43, subdivision 1; 2.70 365.431; 366.011; 366.012; 373.45, subdivision 7; 2.71 469.169, by adding a subdivision; 469.1735, 3.1 subdivision 3; 469.176, subdivisions 4l, 7; 469.310, 3.2 subdivision 11, by adding a subdivision; 469.315; 3.3 469.316; 469.317; 469.319, subdivision 1, by adding a 3.4 subdivision; 469.320, subdivision 3; 469.330, 3.5 subdivision 11; 469.335; 469.337; 469.340, subdivision 3.6 1; 473.843, subdivision 5; 473F.02, subdivisions 2, 7; 3.7 477A.011, subdivisions 3, 34, 35, 36, 38; 477A.0124, 3.8 subdivisions 2, 4; 477A.013, subdivisions 8, 9, by 3.9 adding a subdivision; 477A.016; 477A.03, subdivisions 3.10 2a, 2b; 477A.11, subdivision 4, by adding a 3.11 subdivision; 477A.12, subdivisions 1, 2; 477A.14, 3.12 subdivision 1; 645.44, by adding a subdivision; Laws 3.13 1998, chapter 389, article 3, section 42, subdivision 3.14 2, as amended; Laws 1998, chapter 389, article 8, 3.15 section 43, subdivision 3; Laws 2001, First Special 3.16 Session chapter 5, article 3, section 8; Laws 2001, 3.17 First Special Session chapter 5, article 12, section 3.18 95, as amended; Laws 2002, chapter 377, article 3, 3.19 section 4; Laws 2003, chapter 127, article 5, section 3.20 27; Laws 2003, chapter 127, article 5, section 28; 3.21 Laws 2003, First Special Session chapter 21, article 3.22 5, section 13; Laws 2003, First Special Session 3.23 chapter 21, article 6, section 9; Laws 2005, chapter 3.24 43, section 1; proposing coding for new law in 3.25 Minnesota Statutes, chapters 15; 270; 272; 273; 275; 3.26 280; 289A; 290; 290C; 295; 297A; 297F; 373; 459; 473; 3.27 repealing Minnesota Statutes 2004, sections 10A.322, 3.28 subdivision 4; 16A.1522, subdivision 4; 270.85; 3.29 270.88; 272.02, subdivision 65; 273.19, subdivision 5; 3.30 273.37, subdivision 3; 274.05; 275.065, subdivisions 3.31 5a, 6, 6b, 8; 275.15; 275.61, subdivision 2; 283.07; 3.32 290.06, subdivision 23; 297E.12, subdivision 10; 3.33 469.1794, subdivision 6; 477A.08; Laws 1975, chapter 3.34 287, section 5; Laws 1998, chapter 389, article 3, 3.35 section 41; Laws 2003, chapter 127, article 9, section 3.36 9, subdivision 4; Minnesota Rules, parts 8093.2000; 3.37 8093.3000; 8130.0110, subpart 4; 8130.0200, subparts 3.38 5, 6; 8130.0400, subpart 9; 8130.1200, subparts 5, 6; 3.39 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 3.40 1, 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 3.41 8130.5200; 8130.5600, subpart 3; 8130.5800, subpart 5; 3.42 8130.7300, subpart 5; 8130.8800, subpart 4. 3.43 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 3.44 ARTICLE 1 3.45 TAXPAYER SATISFACTION SURVEY 3.46 Section 1. [275.063] [PROPOSED PROPERTY TAXES; TAXPAYER 3.47 SATISFACTION SURVEY; DEFINITIONS.] 3.48 Subdivision 1. [DEFINITIONS.] For the purposes of this 3.49 section and section 275.065, the following definitions apply. 3.50 Subd. 2. [BUDGET; COUNTIES.] For counties, "budget" means 3.51 total government fund expenditures, as defined by the state 3.52 auditor under section 375.169, less any expenditures for direct 3.53 payments to recipients or providers for the human service aids 3.54 listed below: 3.55 (1) Minnesota family investment program under chapters 256J 3.56 and 256K; 4.1 (2) medical assistance under sections 256B.041, subdivision 4.2 5, and 256B.19, subdivision 1; 4.3 (3) general assistance medical care under section 256D.03, 4.4 subdivision 6; 4.5 (4) general assistance under section 256D.03, subdivision 4.6 2; 4.7 (5) Minnesota supplemental aid under section 256D.36, 4.8 subdivision 1; 4.9 (6) preadmission screening under section 256B.0911, and 4.10 alternative care grants under section 256B.0913; 4.11 (7) general assistance medical care claims processing, 4.12 medical transportation, and related costs under section 256D.03, 4.13 subdivision 4; 4.14 (8) medical transportation and related costs under section 4.15 256B.0625, subdivisions 17 to 18a; 4.16 (9) group residential housing under section 256I.05, 4.17 subdivision 8, transferred from programs in clauses (4) and (5); 4.18 or 4.19 (10) any successor programs to those listed in clauses (1) 4.20 to (9). 4.21 Subd. 3. [BUDGET; CITIES.] For cities, "budget" means 4.22 total government fund expenditures, as defined by the state 4.23 auditor under section 471.6965, less any expenditures for 4.24 improvements or services that are specially assessed or charged 4.25 under chapter 429, 430, 435, or the provisions of any other law 4.26 or charter. 4.27 Subd. 4. [POPULATION.] "Population" of a city means the 4.28 most recent population as determined by the state demographer 4.29 under section 4A.02 or by the Metropolitan Council under section 4.30 477A.011, subdivision 3. 4.31 Subd. 5. [PROPERTY TAX LEVY SUBJECT TO APPROVAL; COUNTIES 4.32 AND CITIES.] For a county or a city, "property tax levy subject 4.33 to approval" means the jurisdiction's levy excluding any debt 4.34 levy and any levy previously approved by the voters. 4.35 Subd. 6. [DEBT LEVY.] "Debt levy" means a levy to: 4.36 (1) pay the costs of principal and interest on bonded 5.1 indebtedness; 5.2 (2) pay the costs of principal and interest on certificates 5.3 of indebtedness issued for any corporate purpose except: 5.4 (i) tax anticipation or aid anticipation certificates of 5.5 indebtedness; 5.6 (ii) certificates of indebtedness issued under sections 5.7 298.28 and 298.282; 5.8 (iii) certificates of indebtedness used to fund current 5.9 expenses; or 5.10 (iv) certificates of indebtedness used to fund an 5.11 insufficiency in tax receipts or an insufficiency in other 5.12 revenue sources. 5.13 (3) pay another city, town, county, or school district for 5.14 principal and interest on general obligation debt; or 5.15 (4) fund payments made to the Minnesota State Armory 5.16 Building Commission under section 193.145, subdivision 2, to 5.17 retire the principal and interest on armory construction bonds. 5.18 Subd. 7. [STATE PROPERTY TAX CREDITS.] "State property tax 5.19 credits" means any credits received under sections 273.119; 5.20 273.123; 273.135; 273.1384; 273.1391; 273.1398, subdivision 4; 5.21 469.171; and 473H.10. 5.22 Subd. 8. [JURISDICTION SUBJECT TO TAXPAYER SATISFACTION 5.23 SURVEY.] A "jurisdiction subject to the taxpayer satisfaction 5.24 survey" means any county or any city with a population of 500 or 5.25 greater. 5.26 [EFFECTIVE DATE.] This section is effective for taxes 5.27 payable in 2006 and subsequent years. 5.28 Sec. 2. Minnesota Statutes 2004, section 275.065, 5.29 subdivision 1c, is amended to read: 5.30 Subd. 1c. [LEVY; SHARED, MERGED, CONSOLIDATED SERVICES.] 5.31 If two or more taxing authorities are in the process of 5.32 negotiating an agreement for sharing, merging, or consolidating 5.33 services between those taxing authorities at the time the 5.34 proposed levy is to be certified under subdivision 1, each 5.35 taxing authority involved in the negotiation shall certify its 5.36 total proposed levy as provided in that subdivision, including a 6.1 notification to the county auditor of the specific service 6.2 involved in the agreement which is not yet finalized. The 6.3 affected taxing authorities may amend their proposed levies 6.4 under subdivision 1 until October101 for levy amounts relating 6.5 only to the specific service involved. 6.6 [EFFECTIVE DATE.] This section is effective for taxes 6.7 payable in 2006 and subsequent years. 6.8 Sec. 3. Minnesota Statutes 2004, section 275.065, 6.9 subdivision 3, is amended to read: 6.10 Subd. 3. [NOTICE OF PROPOSED PROPERTY TAXES.] (a) The 6.11 county auditor shall prepare and the county treasurer shall 6.12 deliver after November108 and on or before November2419 each 6.13 year, by first class mail to each taxpayer at the address listed 6.14 on the county's current year's assessment roll, a notice of 6.15 proposed property taxes. 6.16 (b) The commissioner of revenue shall prescribe the form of 6.17 the notice. The form must be in the form prescribed by the 6.18 commissioner. 6.19 (c) The notice must inform taxpayers that it contains the 6.20 amount of property taxes each taxing authority proposes to 6.21 collect for taxes payable the following year. In the case of a 6.22 town, or in the case of the state general tax, the final tax 6.23 amount will be its proposed tax unless the town changes its levy 6.24 at a special town meeting under section 365.52.In the case of6.25taxing authorities required to hold a public meeting under6.26subdivision 6, the notice must clearly state that each taxing6.27authority, including regional library districts established6.28under section 134.201, and including the metropolitan taxing6.29districts as defined in paragraph (i), but excluding all other6.30special taxing districts and towns, will hold a public meeting6.31to receive public testimony on the proposed budget and proposed6.32or final property tax levy, or, in case of a school district, on6.33the current budget and proposed property tax levy. It must6.34clearly state the time and place of each taxing authority's6.35meeting, a telephone number for the taxing authority that6.36taxpayers may call if they have questions related to the notice,7.1and an address where comments will be received by mail.7.2 (d) The notice must state for each parcel:7.3(1)the market value of the property as determined under 7.4 section 273.11, and used for computing property taxes payable in 7.5 the following year and for taxes payable in the current year as 7.6 each appears in the records of the county assessor on November 1 7.7 of the current year; and, in the case of residential property, 7.8 whether the property is classified as homestead or 7.9 nonhomestead. The notice must clearly inform taxpayers of the 7.10 years to which the market values apply and that the values are 7.11 final values;. 7.12(2)(e) Theitems listed below, shown separately bynotice 7.13 must state for each parcel, for both taxes payable in the 7.14 current year and the proposed taxes payable in the following 7.15 year each of the following tax amounts, net of state property 7.16 tax credits: county tax, city or town tax,andstategeneral7.17 tax,net of the residential and agricultural homestead credit7.18under section 273.1384,voter approved schoollevytax, 7.19 otherlocalschoollevytax,andthe sum of the tax amounts 7.20 for all special taxing districts, the sum of the tax increment 7.21 tax on captured tax capacity, if applicable, and the fiscal 7.22 disparities areawide tax under chapter 276A or 473F, if 7.23 applicable, andas athe totaloftax amount for all taxing 7.24 authorities:7.25(i) the actual tax for taxes payable in the current year;7.26and7.27(ii) the proposed tax amount. 7.28If the county levy under clause (2) includes an amount for7.29a lake improvement district as defined under sections 103B.5017.30to 103B.581, the amount attributable for that purpose must be7.31separately stated from the remaining county levy amount.7.32In the case of a town or the state general tax, the final7.33tax shall also be its proposed tax unless the town changes its7.34levy at a special town meeting under section 365.52. If a7.35school district has certified under section 126C.17, subdivision7.369, that a referendum will be held in the school district at the8.1November general election, the county auditor must note next to8.2the school district's proposed amount that a referendum is8.3pending and that, if approved by the voters, the tax amount may8.4be higher than shown on the notice. In the case of the city of8.5Minneapolis, the levy for the Minneapolis Library Board and the8.6levy for Minneapolis Park and Recreation shall be listed8.7separately from the remaining amount of the city's levy. In the8.8case of the city of St. Paul, the levy for the St. Paul Library8.9Agency must be listed separately from the remaining amount of8.10the city's levy. In the case of a parcel where tax increment or8.11the fiscal disparities areawide tax under chapter 276A or 473F8.12applies, the proposed tax levy on the captured value or the8.13proposed tax levy on the tax capacity subject to the areawide8.14tax must each be stated separately and not included in the sum8.15of the special taxing districts; and8.16(3) the increase or decrease between the total taxes8.17payable in the current year and the total proposed taxes,8.18expressed as a percentage.8.19 (f) The notice must state for each parcel the increase or 8.20 decrease between the total taxes payable in the current year and 8.21 the total proposed taxes, expressed as a percentage. 8.22 (g) The notice must state for each parcel an estimate of 8.23 any additional tax that would apply to the property under any 8.24 referenda pending at the November general election. Any amount 8.25 shown under this item should be indicated as pending the results 8.26 of referendum elections, and shall not be reflected in the total 8.27 proposed net tax amount. 8.28 (h) For purposes of this section, the amount of the tax on 8.29 homesteads qualifying under the senior citizens' property tax 8.30 deferral program under chapter 290B is the total amount of 8.31 property tax before subtraction of the deferred property tax 8.32 amount. 8.33(e)(i) The notice must clearly state that the proposed or 8.34 final taxes do not include the following: 8.35 (1) special assessments; 8.36 (2) levies approved by the voters after the date of the 9.1proposed taxes are certified, including bond referenda and9.2school district levy referendaNovember general election; 9.3 (3)a levy limit increase approved by the voters by the9.4first Tuesday after the first Monday in November of the levy9.5year as provided under section 275.73;9.6(4)amounts necessary to pay cleanup or other costs due to 9.7 a natural disaster occurring after the date the proposed taxes 9.8 are certified; 9.9(5)(4) amounts necessary to pay tort judgments against the 9.10 taxing authority that become final after the date the proposed 9.11 taxes are certified; and 9.12(6)(5) the contamination tax imposed on properties which 9.13 received market value reductions for contamination. 9.14(f)(j) Except as provided in subdivision 7, failure of the 9.15 county auditor to prepare or the county treasurer to deliver the 9.16 notice as required in this section does not invalidate the 9.17 proposed or final tax levy or the taxes payable pursuant to the 9.18 tax levy. 9.19(g) If the notice the taxpayer receives under this section9.20lists the property as nonhomestead, and satisfactory9.21documentation is provided to the county assessor by the9.22applicable deadline, and the property qualifies for the9.23homestead classification in that assessment year, the assessor9.24shall reclassify the property to homestead for taxes payable in9.25the following year.9.26(h)(k) In the case of class 4 residential property used as 9.27 a residence for lease or rental periods of 30 days or more, the 9.28 taxpayer musteither: (1)mail or deliver a copy of the notice 9.29 of proposed property taxes and the taxpayer satisfaction survey 9.30 to each tenant, renter, or lessee; or. 9.31(2) post a copy of the notice in a conspicuous place on the9.32premises of the property.9.33 The copy of the notice must be mailedor postedby the 9.34 taxpayer by November2722 or within three days of receipt of 9.35 the notice, whichever is later. A taxpayer may notify the 9.36 county treasurer of the address of the taxpayer, agent, 10.1 caretaker, or manager of the premises to which the notice must 10.2 be mailed in order to fulfill the requirements of this paragraph. 10.3(i)(l) For purposes ofthis subdivision, subdivisions 5a10.4and 6section 276.04, "metropolitan special taxing districts" 10.5 means the following taxing districts in the seven-county 10.6 metropolitan area that levy a property tax for any of the 10.7 specified purposes listed below: 10.8 (1) Metropolitan Council under section 473.132, 473.167, 10.9 473.249, 473.325, 473.446, 473.521, 473.547, or 473.834; 10.10 (2) Metropolitan Airports Commission under section 473.667, 10.11 473.671, or 473.672; and 10.12 (3) Metropolitan Mosquito Control Commission under section 10.13 473.711. 10.14 (m) For purposes of this section, any levies made by the 10.15 regional rail authorities in the county of Anoka, Carver, 10.16 Dakota, Hennepin, Ramsey, Scott, or Washington under chapter 10.17 398A shall be included with the appropriate county's levy and 10.18 shall be discussed at one of that county'spublic10.19hearingregularly scheduled board meetings. 10.20 (n) The governing body of a county, city, or school 10.21 district may, with the county auditor's consent, include 10.22 supplemental information with the statement of proposed property 10.23 taxes about the impact of state aid increases or decreases on 10.24 property tax increases or decreases and on the level of services 10.25 provided in the affected jurisdiction. This supplemental 10.26 information may include information for the following year, the 10.27 current year, and for as many consecutive preceding years as 10.28 deemed appropriate by the governing body of the county, city, or 10.29 school district. It may include only information regarding: 10.30 (1) the impact of inflation as measured by the implicit 10.31 price deflator for state and local government purchases; 10.32 (2) population growth and decline; 10.33 (3) state or federal government action; and 10.34 (4) other financial factors that affect the level of 10.35 property taxation and local services that the governing body of 10.36 the county, city, or school district may deem appropriate to 11.1 include. 11.2 The information may be presented using tables, written 11.3 narrative, and graphic representations and may contain 11.4 instruction toward further sources of information or opportunity 11.5 for comment. 11.6 The supplemental information for each jurisdiction must not 11.7 exceed one side of an 8.5 inch by 11 inch sheet of paper. 11.8 [EFFECTIVE DATE.] This section is effective for taxes 11.9 payable in 2006 and subsequent years. 11.10 Sec. 4. Minnesota Statutes 2004, section 275.065, is 11.11 amended by adding a subdivision to read: 11.12 Subd. 3b. [TAXPAYER SATISFACTION SURVEY.] (a) A taxpayer 11.13 satisfaction survey form must be attached to or enclosed with 11.14 each proposed property tax notice under subdivision 3. The form 11.15 must include a property description or a code number that allows 11.16 the property to be uniquely identified. 11.17 (b) The taxpayer satisfaction survey form shall present the 11.18 following question for each jurisdiction subject to the taxpayer 11.19 satisfaction survey: "Are you satisfied with the proposed 11.20 property tax levy for (name of jurisdiction)?" A space will be 11.21 provided for the respondent to answer "Yes" or "No" for each 11.22 jurisdiction. The form must also inform the taxpayer that if 11.23 the number of responses marked "No" exceeds the criteria 11.24 specified in subdivision 3e, a referendum will be held on the 11.25 question of the increase in the property tax levy subject to 11.26 approval unless a recertification is made under subdivision 9 11.27 reducing the levy. 11.28 (c) The mailing shall include a non-postage-paid envelope 11.29 preaddressed to the agency designated to process survey 11.30 results. A taxpayer, including a tenant, renter, or lessee who 11.31 is entitled to receive a copy of the notice and survey form 11.32 under subdivision 3, paragraph (k), may respond to the survey by 11.33 returning the completed survey form to the designated agency by 11.34 December 1. The responding taxpayer is responsible for the 11.35 postage. 11.36 [EFFECTIVE DATE.] This section is effective for taxes 12.1 payable in 2006 and subsequent years, except that two provisions 12.2 are first effective for taxes payable in 2007: the requirement 12.3 that the survey form include a property description or code 12.4 number, and the requirement that the form notify taxpayers that 12.5 the results of the survey could cause a referendum election to 12.6 be held. 12.7 Sec. 5. Minnesota Statutes 2004, section 275.065, is 12.8 amended by adding a subdivision to read: 12.9 Subd. 3c. [TAXPAYER SATISFACTION SURVEY ADDITIONAL 12.10 INFORMATION.] The taxpayer satisfaction survey form must include 12.11 the following information for the current year and for the 12.12 proposed year, and show the percentage change between the years: 12.13 (1) the county government's (i) budget and (ii) property 12.14 tax levy subject to approval; and 12.15 (2) if the property is located in a city which is a 12.16 jurisdiction subject to the taxpayer satisfaction survey, the 12.17 city government's (i) budget and (ii) property tax levy subject 12.18 to approval. 12.19 [EFFECTIVE DATE.] This section is effective for taxes 12.20 payable in 2006 and subsequent years. 12.21 Sec. 6. Minnesota Statutes 2004, section 275.065, is 12.22 amended by adding a subdivision to read: 12.23 Subd. 3d. [FORMAT OF TAXPAYER SATISFACTION SURVEY.] The 12.24 commissioner of revenue shall prescribe the format of the survey 12.25 form required under subdivisions 3b to 3f and present the form 12.26 to the chairs of the house and senate tax committees for 12.27 review. The form must be in the format prescribed by the 12.28 commissioner. 12.29 [EFFECTIVE DATE.] This section is effective for taxes 12.30 payable in 2006 and subsequent years. 12.31 Sec. 7. Minnesota Statutes 2004, section 275.065, is 12.32 amended by adding a subdivision to read: 12.33 Subd. 3e. [RESULTS OF TAXPAYER SATISFACTION SURVEY.] (a) 12.34 Each agency designated to receive taxpayer satisfaction surveys 12.35 shall verify the authenticity of each form received, to the 12.36 extent possible, and tabulate the results of the survey for each 13.1 taxing jurisdiction. If the number of survey responses 13.2 indicating dissatisfaction with the jurisdiction's proposed levy 13.3 exceeds 20 percent of the total number of proposed tax notices 13.4 distributed in the jurisdiction, and the proposed property tax 13.5 levy subject to approval exceeds the property tax levy subject 13.6 to approval for taxes payable in the current year, a referendum 13.7 must be held on the last Tuesday in January. By December 8, the 13.8 agency must announce the results of the survey for each taxing 13.9 jurisdiction, including both the number of responses indicating 13.10 that they are satisfied with the proposed levy and the number 13.11 indicating that they are not satisfied. 13.12 (b) If the county auditor determines that a single person 13.13 or entity owns more than ten percent of the parcels of property 13.14 within a jurisdiction subject to taxpayer satisfaction survey, 13.15 then the number of responses indicating dissatisfaction with the 13.16 proposed levy must exceed the percentage owed by the single 13.17 person or entity plus 20 percent of the total number of proposed 13.18 tax notices distributed in the jurisdiction in order to initiate 13.19 the referendum process described in paragraph (a). 13.20 [EFFECTIVE DATE.] This section is effective for taxes 13.21 payable in 2006 and subsequent years, except that the 13.22 requirement of an automatic referendum election is effective 13.23 beginning with taxes payable in 2007 and subsequent years. 13.24 Sec. 8. Minnesota Statutes 2004, section 275.065, is 13.25 amended by adding a subdivision to read: 13.26 Subd. 3f. [DESIGNATED AGENCY.] For taxpayer satisfaction 13.27 surveys pertaining to taxes payable in 2006, the designated 13.28 agency is the county. For taxing jurisdictions located in more 13.29 than one county, each county shall tabulate the results of the 13.30 survey for the portion of the jurisdiction in the county, and 13.31 forward the results to the jurisdiction's home county by 13.32 December 7. The home county shall make available the survey 13.33 results for the total jurisdiction. 13.34 By January 1, 2006, and each year thereafter, the 13.35 commissioner of revenue shall designate the agency or agencies 13.36 to receive and process taxpayer satisfaction surveys for taxes 14.1 payable in the following year. 14.2 [EFFECTIVE DATE.] This section is effective for taxes 14.3 payable in 2006 and subsequent years. 14.4 Sec. 9. Minnesota Statutes 2004, section 275.065, 14.5 subdivision 4, is amended to read: 14.6 Subd. 4. [COSTS.]If the reasonable cost ofThe county may 14.7 apportion the cost of the county auditor's services and the cost 14.8 of preparing and mailing the notice and survey required in this 14.9 sectionexceed the amount distributed to the county by the14.10commissioner of revenue to administer this section, the taxing14.11authority must reimburse the county for the excess cost. The14.12excess cost must be apportionedbetween taxing jurisdictions as 14.13 follows: 14.14 (1) one-third is allocated to the county; 14.15 (2) one-third is allocated to cities and towns within the 14.16 county; and 14.17 (3) one-third is allocated to school districts within the 14.18 county. 14.19 The amounts in clause (2) must be further apportioned among 14.20 the cities and towns in the proportion that the number of 14.21 parcels in the city and town bears to the number of parcels in 14.22 all the cities and towns within the county. The amount in 14.23 clause (3) must be further apportioned among the school 14.24 districts in the proportion that the number of parcels in the 14.25 school district bears to the number of parcels in all school 14.26 districts within the county. 14.27 [EFFECTIVE DATE.] This section is effective for taxes 14.28 payable in 2006 and subsequent years. 14.29 Sec. 10. Minnesota Statutes 2004, section 275.065, 14.30 subdivision 7, is amended to read: 14.31 Subd. 7. [CERTIFICATION OF COMPLIANCE.] At the time the 14.32 taxing authority certifies its tax levy under section 275.07, it 14.33 shall certify to the commissioner of revenue its compliance with 14.34 this section. The certification must contain the information 14.35 required by the commissioner of revenue to determine compliance 14.36 with this section. If the commissioner determines that the 15.1 taxing authority has failed to substantially comply with the 15.2 requirements of this section, the commissioner of revenue shall 15.3 notify the county auditor. The decision of the commissioner is 15.4 final. When fixing rates under section 275.08 for a taxing 15.5 authority that has not complied with this section, the county 15.6 auditor must use the taxing authority's previous year's levy, 15.7 plus any additional amounts necessary topay principal and15.8interest on general obligation bonds of the taxing authority for15.9which its taxing powers have been pledged if the bonds were15.10issued before 1989fund an increase in the authority's debt levy 15.11 for taxes payable in the following year. 15.12 [EFFECTIVE DATE.] This section is effective for taxes 15.13 payable in 2006 and subsequent years. 15.14 Sec. 11. Minnesota Statutes 2004, section 275.065, is 15.15 amended by adding a subdivision to read: 15.16 Subd. 9. [RECERTIFICATION OF PROPOSED LEVY.] By December 15.17 15, a jurisdiction subject to taxpayer satisfaction survey, that 15.18 has been notified under subdivision 3e that the criteria for a 15.19 referendum have been met, may elect to recertify its proposed 15.20 levy so that the proposed property tax levy subject to approval 15.21 is equal to the property tax levy subject to approval for taxes 15.22 payable in the current year. If the jurisdiction recertifies 15.23 its proposed levy to the county auditor according to the 15.24 provisions of this subdivision, the auditor must cancel the 15.25 referendum for that jurisdiction. 15.26 [EFFECTIVE DATE.] This section is effective for taxes 15.27 payable in 2007 and subsequent years. 15.28 Sec. 12. Minnesota Statutes 2004, section 275.065, is 15.29 amended by adding a subdivision to read: 15.30 Subd. 10. [LEVY APPROVAL; REFERENDUM.] (a) If the 15.31 designated agency has determined under subdivision 3e that a 15.32 referendum is required, the increase in the property tax levy 15.33 subject to approval shall not be effective until it has been 15.34 submitted to the voters at a special election to be held on the 15.35 last Tuesday in January, and a majority of votes cast on the 15.36 question of approving the levy increase are in the affirmative. 16.1 The commissioner of revenue shall prepare the form of the 16.2 question to be presented at the referendum, which must reference 16.3 only the amount of increase in the property tax levy subject to 16.4 approval. 16.5 (b) If the majority of the votes cast on the question are 16.6 in the affirmative, the proposed levy shall be certified as the 16.7 final levy. If the majority of the votes cast on the question 16.8 are in the negative, the levy shall be the property tax levy 16.9 amount subject to approval for the previous year, plus the 16.10 portion of the proposed levy that was not subject to referendum. 16.11 (c) A levy approved under this subdivision must be levied 16.12 against the net tax capacity of the jurisdiction. 16.13 [EFFECTIVE DATE.] This section is effective for taxes 16.14 payable in 2007 and subsequent years. 16.15 Sec. 13. Minnesota Statutes 2004, section 275.07, 16.16 subdivision 1, is amended to read: 16.17 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 16.18 provided under paragraph (b), the taxes voted by cities, 16.19 counties, school districts, and special districts shall be 16.20 certified by the proper authorities to the county auditor on or 16.21 beforefive working days afterDecember2028 in each year. A 16.22 jurisdiction whose levy is subject to a referendum under section 16.23 275.065, subdivision 10, shall at that time certify two levy 16.24 amounts, one if the referendum is successful, and another if the 16.25 referendum is not successful. A jurisdiction whose levy is 16.26 subject to a referendum must recertify its final levy the day 16.27 immediately following the election. A town must certify the 16.28 levy adopted by the town board to the county auditor by 16.29 September 15 each year. If the town board modifies the levy at 16.30 a special town meeting after September 15, the town board must 16.31 recertify its levy to the county auditor on or beforefive16.32working days afterDecember2028. The taxes certified shall be 16.33 reduced by the county auditor by the aid received under section 16.34 273.1398, subdivision 3. If a city, town, county, school 16.35 district, or special district fails to certify its levy by that 16.36 date, its levy shall be the amount levied by it for the 17.1 preceding year. 17.2 (b)(i) The taxes voted by counties under sections 103B.241, 17.3 103B.245, and 103B.251 shall be separately certified by the 17.4 county to the county auditor on or beforefive working days17.5afterDecember2028 in each year. The taxes certified shall 17.6 not be reduced by the county auditor by the aid received under 17.7 section 273.1398, subdivision 3. If a county fails to certify 17.8 its levy by that date, its levy shall be the amount levied by it 17.9 for the preceding year. 17.10 (ii) For purposes of the proposed property tax notice under 17.11 section 275.065 and the property tax statement under section 17.12 276.04, for the first year in which the county implements the 17.13 provisions of this paragraph, the county auditor shall reduce 17.14 the county's levy for the preceding year to reflect any amount 17.15 levied for water management purposes under clause (i) included 17.16 in the county's levy. 17.17 [EFFECTIVE DATE.] This section is effective for taxes 17.18 payable in 2007 and subsequent years. 17.19 Sec. 14. [REPEALER.] 17.20 Minnesota Statutes 2004, section 275.065, subdivisions 5a, 17.21 6, 6b, and 8, are repealed. 17.22 [EFFECTIVE DATE.] This section is effective for taxes 17.23 payable in 2006 and subsequent years. 17.24 ARTICLE 2 17.25 PROPERTY TAXES 17.26 Section 1. Minnesota Statutes 2004, section 272.02, 17.27 subdivision 47, is amended to read: 17.28 Subd. 47. [POULTRY LITTER BIOMASS GENERATION FACILITY; 17.29 PERSONAL PROPERTY.] Notwithstanding subdivision 9, clause (a), 17.30 attached machinery and other personal property which is part of 17.31 an electrical generating facility that meets the requirements of 17.32 this subdivision is exempt. At the time of construction, the 17.33 facility must: 17.34 (1) be designed to utilize poultry litter as a primary fuel 17.35 source; and 17.36 (2) be constructed for the purpose of generating power at 18.1 the facility that will be sold pursuant to a contract approved 18.2 by the Public Utilities Commission in accordance with the 18.3 biomass mandate imposed under section 216B.2424. 18.4 Construction of the facility must be commenced after 18.5 January 1, 2003, and before December 31,20032005. Property 18.6 eligible for this exemption does not include electric 18.7 transmission lines and interconnections or gas pipelines and 18.8 interconnections appurtenant to the property or the facility. 18.9 [EFFECTIVE DATE.] This section is effective for taxes 18.10 levied in 2005, payable in 2006, and thereafter. 18.11 Sec. 2. Minnesota Statutes 2004, section 272.02, 18.12 subdivision 53, is amended to read: 18.13 Subd. 53. [ELECTRIC GENERATION FACILITY; PERSONAL 18.14 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 18.15 machinery and other personal property which is part of a 3.2 18.16 megawatt run-of-the-river hydroelectric generation facility and 18.17 that meets the requirements of this subdivision is exempt. At 18.18 the time of construction, the facility must: 18.19 (1) utilize two turbine generators at a dam site existing 18.20 on March 31, 1994; 18.21 (2) be located onpublicly ownedlandandwithin 1,500 feet 18.22 of a 13.8 kilovolt distribution substation; and 18.23 (3) be eligible to receive a renewable energy production 18.24 incentive payment under section 216C.41. 18.25 Construction of the facility must be commenced after 18.26January 1, 2002December 31, 2004, and before January 1,200518.27 2007. Property eligible for this exemption does not include 18.28 electric transmission lines and interconnections or gas 18.29 pipelines and interconnections appurtenant to the property or 18.30 the facility. 18.31 [EFFECTIVE DATE.] This section is effective for taxes 18.32 levied in 2005, payable in 2006 and thereafter. 18.33 Sec. 3. Minnesota Statutes 2004, section 272.02, is 18.34 amended by adding a subdivision to read: 18.35 Subd. 68. [ELECTRIC GENERATION FACILITY PERSONAL 18.36 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), and 19.1 section 453.54, subdivision 20, attached machinery and other 19.2 personal property which is part of an electric generation 19.3 facility that exceeds 150 megawatts of installed capacity and 19.4 meets the requirements of this subdivision is exempt. At the 19.5 time of construction, the facility must: 19.6 (1) be designed to utilize natural gas as a primary fuel; 19.7 (2) be owned and operated by a municipal power agency as 19.8 defined in section 453.52, subdivision 8; 19.9 (3) have received the certificate of need under section 19.10 216B.243; 19.11 (4) be located outside the metropolitan area as defined 19.12 under section 473.121, subdivision 2; and 19.13 (5) be designed to be a combined-cycle facility, although 19.14 initially the facility will be operated as a simple-cycle 19.15 combustion turbine. 19.16 (b) To qualify under this subdivision, an agreement must be 19.17 negotiated between the municipal power agency and the host city, 19.18 for a payment in lieu of property taxes to the host city. 19.19 (c) Construction of the facility must be commenced after 19.20 January 1, 2004, and before January 1, 2006. Property eligible 19.21 for this exemption does not include electric transmission lines 19.22 and interconnections or gas pipelines and interconnections 19.23 appurtenant to the property or the facility. 19.24 [EFFECTIVE DATE.] This section is effective for assessment 19.25 year 2005, taxes payable in 2006, and thereafter. 19.26 Sec. 4. Minnesota Statutes 2004, section 272.02, is 19.27 amended by adding a subdivision to read: 19.28 Subd. 69. [ELECTRIC GENERATION FACILITY; PERSONAL 19.29 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 19.30 attached machinery and other personal property which is part of 19.31 a simple-cycle combustion-turbine electric generation facility 19.32 that exceeds 290 megawatts of installed capacity and that meets 19.33 the requirements of this subdivision is exempt. At the time of 19.34 construction, the facility must: 19.35 (1) be designed to utilize natural gas as a primary fuel; 19.36 (2) not be owned by a public utility as defined in section 20.1 216B.02, subdivision 4; 20.2 (3) be located within 15 miles of the mainline existing 20.3 interstate natural gas pipeline and within five miles of an 20.4 existing electrical transmission substation; 20.5 (4) be located outside the metropolitan area as defined 20.6 under section 473.121, subdivision 2; and 20.7 (5) be designed to provide peaking capacity energy and 20.8 ancillary services and have satisfied all of the requirements 20.9 under section 216B.243. 20.10 (b) Construction of the facility must be commenced after 20.11 January 1, 2005, and before January 1, 2009. Property eligible 20.12 for this exemption does not include electric transmission lines 20.13 and interconnections or gas pipelines and interconnections 20.14 appurtenant to the property or the facility. 20.15 [EFFECTIVE DATE.] This section is effective for assessment 20.16 year 2006, taxes payable in 2007, and thereafter. 20.17 Sec. 5. Minnesota Statutes 2004, section 272.02, is 20.18 amended by adding a subdivision to read: 20.19 Subd. 70. [ELECTRIC GENERATION FACILITY; PERSONAL 20.20 PROPERTY.] Notwithstanding subdivision 9, clause (a), attached 20.21 machinery and other personal property which is part of an 20.22 existing simple-cycle, combustion-turbine electric generation 20.23 facility that exceeds 300 megawatts of installed capacity and 20.24 that meets the requirements of this subdivision is exempt. At 20.25 the time of the construction, the facility must: 20.26 (1) be designed to utilize natural gas as a primary fuel; 20.27 (2) be owned by a public utility as defined in section 20.28 216B.02, subdivision 4, and be located at or interconnected with 20.29 an existing generating plant of the utility; 20.30 (3) be designed to provide peaking, emergency backup, or 20.31 contingency services; 20.32 (4) satisfy a resource need identified in an approved 20.33 integrated resource plan filed under section 216B.2422; and 20.34 (5) have received, by resolution, the approval from the 20.35 governing body of the county and the city for the exemption of 20.36 personal property under this subdivision. 21.1 Construction of the facility expansion must be commenced 21.2 after January 1, 2004, and before January 1, 2005. Property 21.3 eligible for this exemption does not include electric 21.4 transmission lines and interconnections or gas pipelines and 21.5 interconnections appurtenant to the property or the facility. 21.6 [EFFECTIVE DATE.] This section is effective beginning with 21.7 assessment year 2005, for taxes payable in 2006 and thereafter. 21.8 Sec. 6. Minnesota Statutes 2004, section 272.02, is 21.9 amended by adding a subdivision to read: 21.10 Subd. 71. [ELECTRIC GENERATION FACILITY; PERSONAL 21.11 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 21.12 attached machinery and other personal property which is part of 21.13 a simple-cycle combustion-turbine electric generation facility 21.14 that exceeds 150 megawatts of installed capacity and that meets 21.15 the requirements of this subdivision is exempt. At the time of 21.16 construction, the facility must: 21.17 (1) utilize natural gas as a primary fuel; 21.18 (2) be owned by an electric generation and transmission 21.19 cooperative; 21.20 (3) be located within five miles of parallel existing 21.21 12-inch and 16-inch natural gas pipelines and a 69-kilovolt 21.22 high-voltage electric transmission line; 21.23 (4) be designed to provide peaking, emergency backup, or 21.24 contingency services; 21.25 (5) have received a certificate of need under section 21.26 216B.243 demonstrating demand for its capacity; and 21.27 (6) have received by resolution the approval from the 21.28 governing body of the county and township in which the proposed 21.29 facility is to be located for the exemption of personal property 21.30 under this subdivision. 21.31 (b) Construction of the facility must be commenced after 21.32 July 1, 2005, and before January 1, 2009. Property eligible for 21.33 this exemption does not include electric transmission lines and 21.34 interconnections or gas pipelines and interconnections 21.35 appurtenant to the property or the facility. 21.36 [EFFECTIVE DATE.] This section is effective for assessment 22.1 year 2006 and thereafter, for taxes payable in 2007 and 22.2 thereafter. 22.3 Sec. 7. Minnesota Statutes 2004, section 272.02, is 22.4 amended by adding a subdivision to read: 22.5 Subd. 72. [ELECTRIC GENERATION FACILITY PERSONAL 22.6 PROPERTY.] (a) Notwithstanding subdivision 9, clause (a), 22.7 attached machinery and other personal property which is part of 22.8 either a simple-cycle, combustion-turbine electric generation 22.9 facility, or a combined-cycle, combustion-turbine electric 22.10 generation facility that does not exceed 325 megawatts of 22.11 installed capacity and that meets the requirements of this 22.12 subdivision is exempt. At the time of construction, the 22.13 facility must: 22.14 (1) utilize either a simple-cycle or a combined-cycle 22.15 combustion-turbine generator fueled by natural gas; 22.16 (2) be connected to an existing 115-kilovolt high-voltage 22.17 electric transmission line that is within two miles of the 22.18 facility; 22.19 (3) be located on an underground natural gas storage 22.20 aquifer; 22.21 (4) be designed as either a peaking or intermediate load 22.22 facility; and 22.23 (5) have received, by resolution, the approval from the 22.24 governing body of the county for the exemption of personal 22.25 property under this subdivision. 22.26 (b) Construction of the facility must be commenced after 22.27 January 1, 2006, and before January 1, 2008. Property eligible 22.28 for this exemption does not include electric transmission lines 22.29 and interconnections or gas pipelines and interconnections 22.30 appurtenant to the property or the facility. 22.31 [EFFECTIVE DATE.] This section is effective for assessment 22.32 year 2005, taxes payable in 2006, and thereafter. 22.33 Sec. 8. Minnesota Statutes 2004, section 272.0211, 22.34 subdivision 1, is amended to read: 22.35 Subdivision 1. [EFFICIENCY DETERMINATION AND 22.36 CERTIFICATION.] An owner or operator of a new or existing 23.1 electric power generation facility, excluding wind energy 23.2 conversion systems, may apply to the commissioner of revenue for 23.3 a market value exclusion on the property as provided for in this 23.4 section. This exclusion shall apply only to the market value of 23.5 the equipment of the facility, and shall not apply to the 23.6 structures and the land upon which the facility is located. The 23.7 commissioner of revenue shall prescribe the forms and procedures 23.8 for this application. Upon receiving the application, the 23.9 commissioner of revenue shall request the commissioner of 23.10 commerce to make a determination of the efficiency of the 23.11 applicant's electric power generation facility.In calculating23.12the efficiency of a facility,The commissioner of commerce shall 23.13use a definition ofcalculate efficiencywhich calculates23.14efficiency as the sum of:23.15(1) the useful electrical power output; plus23.16(2) the useful thermal energy output; plus23.17(3) the fuel energy of the useful chemical products,23.18all divided by the total energy input to the facility, expressed23.19as a percentageas the ratio of useful energy outputs to energy 23.20 inputs, expressed as a percentage, based on the performance of 23.21 the facility's equipment during normal full load operation. The 23.22 commissioner must include in this formula the energy used in any 23.23 on-site preparation of materials necessary to convert the 23.24 materials into the fuel used to generate electricity, such as a 23.25 process to gasify petroleum coke. The commissioner shall use 23.26 thehighHigher Heating Value (HHV) for all substances in the 23.27 commissioner's efficiency calculations, except for wood for fuel 23.28 in a biomass-eligible project under section 216B.2424; for these 23.29 instances, the commissioner shall adjust the heating value to 23.30 allow for energy consumed for evaporation of the moisture in the 23.31 wood. The applicant shall provide the commissioner of commerce 23.32 with whatever information the commissioner deems necessary to 23.33 make the determination. Within 30 days of the receipt of the 23.34 necessary information, the commissioner of commerce shall 23.35 certify the findings of the efficiency determination to the 23.36 commissioner of revenue and to the applicant. The commissioner 24.1 of commerce shall determine the efficiency of the facility and 24.2 certify the findings of that determination to the commissioner 24.3 of revenue every two years thereafter from the date of the 24.4 original certification. 24.5 [EFFECTIVE DATE.] This section is effective for assessment 24.6 year 2005 and thereafter, for taxes payable in 2006 and 24.7 thereafter. 24.8 Sec. 9. Minnesota Statutes 2004, section 272.0211, 24.9 subdivision 2, is amended to read: 24.10 Subd. 2. [SLIDING SCALE EXCLUSION.] Based upon the 24.11 efficiency determination provided by the commissioner of 24.12 commerce as described in subdivision 1, the commissioner of 24.13 revenue shall subtractfiveeight percent of the taxable market 24.14 value of the qualifying property for each percentage point that 24.15 the efficiency of the specific facility, as determined by the 24.16 commissioner of commerce, is above3540 percent. The reduction 24.17 in taxable market value shall be reflected in the taxable market 24.18 value of the facility beginning with the assessment year 24.19 immediately following the determination. For a facility that is 24.20 assessed by the county in which the facility is located, the 24.21 commissioner of revenue shall certify to the assessor of that 24.22 county the percentage of the taxable market value of the 24.23 facility to be excluded. 24.24 [EFFECTIVE DATE.] This section is effective for assessment 24.25 year 2005 and thereafter, for taxes payable in 2006 and 24.26 thereafter. 24.27 Sec. 10. [272.0275] [PERSONAL PROPERTY USED TO GENERATE 24.28 ELECTRICITY; EXEMPTION.] 24.29 Subdivision 1. [NEW PLANT CONSTRUCTION AFTER JANUARY 1, 24.30 2005.] For a new generating plant built and placed in service 24.31 after January 1, 2005, its personal property used to generate 24.32 electric power is exempt from property taxation, including under 24.33 section 453.54, subdivision 20, if an exemption of generation 24.34 personal property form, with an attached siting agreement, is 24.35 filed with the Department of Revenue. The form must be signed 24.36 by the utility, and the county and city or town where the 25.1 facility is proposed to be located. 25.2 Subd. 2. [EXISTING PLANT; INCREASE IN NAMEPLATE CAPACITY.] 25.3 For a plant existing or under construction on the day of final 25.4 enactment of this act, a partial exemption applies if the 25.5 nameplate capacity of the plant is increased from that existing 25.6 on the day of final enactment of this act, and if an exemption 25.7 of generation personal property form, with an attached siting 25.8 agreement is filed with the Department of Revenue. The form 25.9 must be signed by the utility, and the county and city or town 25.10 where the facility expansion is located. This partial exemption 25.11 must be computed by taking the increase in megawatts over the 25.12 total megawatt nameplate capacity after construction is 25.13 complete, multiplied by the market value of all taxable tools, 25.14 implements, and machinery of the generating plant as determined 25.15 by the commissioner of revenue. The resulting exemption is 25.16 effective beginning in the next assessment year. 25.17 Subd. 3. [IN-LIEU PAYMENT; LIMITATION.] If an in-lieu 25.18 payment or service fee is negotiated between a facility exempted 25.19 under this section and the county, city, or town where the 25.20 facility is located, the payment or fee in any year may not 25.21 exceed the property tax revenue that the jurisdiction would 25.22 receive from the facility if it were not exempt. 25.23 Subd. 4. [DEFINITION; APPLICABILITY.] For purposes of this 25.24 section, "personal property" means tools, implements, and 25.25 machinery of the generating plant. The exemption under this 25.26 section does not apply to transformers, transmission lines, 25.27 distribution lines, or any other tools, implements, and 25.28 machinery that are part of an electric substation, wherever 25.29 located. 25.30 [EFFECTIVE DATE.] This section is effective the day 25.31 following final enactment. 25.32 Sec. 11. Minnesota Statutes 2004, section 273.055, is 25.33 amended to read: 25.34 273.055 [RESOLUTION TO APPOINT ASSESSOR; TERMINATION OF 25.35 LOCAL ASSESSOR'S OFFICE.] 25.36 The election to provide for the assessment of property by 26.1 the county assessor as provided in section 273.052 shall be made 26.2 by the board of county commissioners by resolution with at least 26.3 a two-thirds majority vote. Such resolution shall be effective 26.4 at the second assessment date following the adoption of the 26.5 resolution. Notwithstanding any other provisions contained in 26.6 any other section of law or charter, the office of all township 26.7 and city assessors in such county shall be terminated 90 days 26.8 before the assessment date at which the election becomes 26.9 effective, except that if part of such taxing district is 26.10 located in a county not electing to have the county assessor 26.11 assess all property as provided in section 273.052, the office 26.12 will continue but shall apply only to such property in a 26.13 nonelecting county. 26.14 No township or city assessor in another county shall assess 26.15 any property in an electing county, but shall turn over all tax 26.16 records relating to property to the county assessor 90 days 26.17 before the assessment date at which the county's election 26.18 becomes effective. 26.19 [EFFECTIVE DATE.] This section is effective the day 26.20 following final enactment. 26.21 Sec. 12. Minnesota Statutes 2004, section 273.0755, is 26.22 amended to read: 26.23 273.0755 [TRAINING AND EDUCATION OF PROPERTY TAX 26.24 PERSONNEL.] 26.25 (a) Beginning with the four-year period starting on July 1, 26.26 2000, every person licensed by the state Board of Assessors at 26.27 the Accredited Minnesota Assessor level or higher, shall 26.28 successfully complete a week-long Minnesota laws course 26.29 sponsored by the Department of Revenue at least once in every 26.30 four-year period. An assessor need not attend the course if 26.31 they successfully pass the test for the course. 26.32 (b) The commissioner of revenue may require that each 26.33 county, and each city for which the city assessor performs the 26.34 duties of county assessor, have (i) a person on the assessor's 26.35 staff who is certified by the Department of Revenue in sales 26.36 ratio calculations, (ii) an officer or employee who is certified 27.1 by the Department of Revenue in tax calculations, and (iii) an 27.2 officer or employee who is certified by the Department of 27.3 Revenue in the proper preparation of abstracts of assessment. 27.4 The commissioner of revenue may require that each county have an 27.5 officer or employee who is certified by the Department of 27.6 Revenue in the proper preparation of abstracts of tax lists. 27.7 (c) Beginning with the four-year educational licensing 27.8 period starting on July 1, 2004, every Minnesota assessor 27.9 licensed by the State Board of Assessors must attend and 27.10 participate in a seminar that focuses on ethics, professional 27.11 conduct and the need for standardized assessment practices 27.12 developed and presented by the commissioner of revenue. This 27.13 requirement must be met at least once in every subsequent 27.14 four-year period. This requirement applies to all assessors 27.15 licensed for one year or more in the four-year period. 27.16 [EFFECTIVE DATE.] This section is effective the day 27.17 following final enactment. 27.18 Sec. 13. Minnesota Statutes 2004, section 273.11, 27.19 subdivision 1a, is amended to read: 27.20 Subd. 1a. [LIMITED MARKET VALUE.] In the case of all real 27.21 propertyclassified as agricultural homestead or nonhomestead,27.22residential homestead or nonhomestead, timber, or noncommercial27.23seasonal residential recreational, the assessor shall compare 27.24 the value with the taxable portion of the value determined in 27.25 the preceding assessment, except that for class 1c resort 27.26 property for assessment year 2005, the assessor shall determine 27.27 the limited market value as provided in subdivision 1b. 27.28For assessment year 2002, the amount of the increase shall27.29not exceed the greater of (1) ten percent of the value in the27.30preceding assessment, or (2) 15 percent of the difference27.31between the current assessment and the preceding assessment.27.32For assessment year 2003, the amount of the increase shall27.33not exceed the greater of (1) 12 percent of the value in the27.34preceding assessment, or (2) 20 percent of the difference27.35between the current assessment and the preceding assessment.27.36 For assessmentyearyears 2004, 2005, and 2006, the amount 28.1 of the increase shall not exceed the greater of (1) 15 percent 28.2 of the value in the preceding assessment, or (2) 25 percent of 28.3 the difference between the current assessment and the preceding 28.4 assessment. 28.5 For assessment year20052007, the amount of the increase 28.6 shall not exceed the greater of (1) 15 percent of the value in 28.7 the preceding assessment, or (2) 33 percent of the difference 28.8 between the current assessment and the preceding assessment. 28.9 For assessment year20062008, the amount of the increase 28.10 shall not exceed the greater of (1) 15 percent of the value in 28.11 the preceding assessment, or (2) 50 percent of the difference 28.12 between the current assessment and the preceding assessment. 28.13 This limitation shall not apply to increases in value due 28.14 to improvements. For purposes of this subdivision, the term 28.15 "assessment" means the value prior to any exclusion under 28.16 subdivision 16. 28.17 The provisions of this subdivision shall be in effect 28.18 through assessment year20062008 as provided in this 28.19 subdivision. 28.20 For purposes of the assessment/sales ratio study conducted 28.21 under section 127A.48, and the computation of state aids paid 28.22 under chapters 122A, 123A, 123B, 124D, 125A, 126C, 127A, and 28.23 477A, market values and net tax capacities determined under this 28.24 subdivision and subdivision 16, shall be used. 28.25 [EFFECTIVE DATE.] This section is effective for assessment 28.26 years 2005 through 2008, for taxes payable in 2006 through 2009. 28.27 Sec. 14. Minnesota Statutes 2004, section 273.11, is 28.28 amended by adding a subdivision to read: 28.29 Subd. 1b. [CLASS 1C RESORTS; 2005 ASSESSMENT ONLY.] For 28.30 assessment year 2005, the valuation on class 1c resort property 28.31 shall not exceed the greater of (1) 130 percent of the value of 28.32 its 2003 assessment, or (2) its value for the 2003 assessment 28.33 year plus 40 percent of the difference in value between its 2005 28.34 assessment and its 2003 assessment. The valuation increase on 28.35 class 1c resort property for assessment years 2006 and 28.36 thereafter shall be determined as provided under subdivision 1a. 29.1 [EFFECTIVE DATE.] This section is effective the day 29.2 following final enactment. 29.3 Sec. 15. Minnesota Statutes 2004, section 273.111, is 29.4 amended by adding a subdivision to read: 29.5 Subd. 86. [APPLICATIONS; DENIED BY COUNTY.] Beginning with 29.6 applications filed for the 2005 assessment year, all 29.7 applications for deferment of taxes and assessment under this 29.8 section that have been denied by the county shall be forwarded 29.9 to the commissioner of revenue by the county assessor within 30 29.10 days of denial. For the purpose of monitoring compliance with 29.11 this section, the commissioner of revenue shall compile a report 29.12 identifying all denied applications, the reason for the denial 29.13 and any commissioner action or recommendation. This report will 29.14 be annually submitted to the chairs of the house and senate tax 29.15 committees on or before February 1. 29.16 [EFFECTIVE DATE.] This section is effective for 29.17 applications filed after the day following final enactment. 29.18 Sec. 16. Minnesota Statutes 2004, section 273.123, 29.19 subdivision 7, is amended to read: 29.20 Subd. 7. [LOCAL OPTION; OTHER PROPERTY.] The owner of 29.21 homestead property not qualifying for an adjustment in valuation 29.22 pursuant to subdivisions 1 to 5 or of nonhomestead property may 29.23 receive a reduction in the amount of taxes payable on the 29.24 property for the year in which the destruction occurs and in the 29.25 following year if: 29.26 (a) 50 percent or more of the homestead dwelling or other 29.27 structure, as established by the county assessor, is 29.28 unintentionally or accidentally destroyed or contaminated by 29.29 mold and the homestead is uninhabitable or the other structure 29.30 is not usable; 29.31 (b) the owner of the property makes written application to 29.32 the county assessor as soon as practical after the damage has 29.33 occurred; and 29.34 (c) the owner of the property makes written application to 29.35 the county board. 29.36 The county board may grant a reduction in the amount of 30.1 property tax which the owner must pay on the qualifying property 30.2 in the year of destruction and in the following year. Any 30.3 reduction in the amount of tax payable which is authorized by 30.4 county board action shall be calculated based upon the number of 30.5 months that the home is uninhabitable or the other structure is 30.6 unusable. The amount of net tax due from the taxpayer shall be 30.7 multiplied by a fraction, the numerator of which is the number 30.8 of months the dwelling was occupied by that taxpayer, or the 30.9 number of months the other structure was used by the taxpayer, 30.10 and the denominator of which is 12. For purposes of this 30.11 subdivision, if a structure is occupied or used for a fraction 30.12 of a month, it is considered a month. "Net tax" is defined as 30.13 the amount of tax after the subtraction of all of the state paid 30.14 property tax credits. If application is made following payment 30.15 of all property taxes due for the year of destruction, the 30.16 amount of the reduction granted by the county board shall be 30.17 refunded to the taxpayer by the county treasurer as soon as 30.18 practical. 30.19 Any reductions or refunds approved by the county board 30.20 shall not be subject to approval by the commissioner of revenue. 30.21 The county board may levy in the following year the amount 30.22 of tax dollars lost to the county government as a result of the 30.23 reductions granted pursuant to this subdivision. 30.24 [EFFECTIVE DATE.] This section is effective for property 30.25 taxes payable in 2005 and thereafter. 30.26 Sec. 17. Minnesota Statutes 2004, section 273.125, 30.27 subdivision 8, is amended to read: 30.28 Subd. 8. [MANUFACTURED HOMES; SECTIONAL STRUCTURES.] (a) 30.29 In this section, "manufactured home" means a structure 30.30 transportable in one or more sections, which is built on a 30.31 permanent chassis, and designed to be used as a dwelling with or 30.32 without a permanent foundation when connected to the required 30.33 utilities, and contains the plumbing, heating, air conditioning, 30.34 and electrical systems in it. Manufactured home includes any 30.35 accessory structure that is an addition or supplement to the 30.36 manufactured home and, when installed, becomes a part of the 31.1 manufactured home. 31.2 (b) Except as provided in paragraph (c), a manufactured 31.3 home that meets each of the following criteria must be valued 31.4 and assessed as an improvement to real property, the appropriate 31.5 real property classification applies, and the valuation is 31.6 subject to review and the taxes payable in the manner provided 31.7 for real property: 31.8 (1) the owner of the unit holds title to the land on which 31.9 it is situated; 31.10 (2) the unit is affixed to the land by a permanent 31.11 foundation or is installed at its location in accordance with 31.12 the Manufactured Home Building Code in sections 327.31 to 31.13 327.34, and rules adopted under those sections, or is affixed to 31.14 the land like other real property in the taxing district; and 31.15 (3) the unit is connected to public utilities, has a well 31.16 and septic tank system, or is serviced by water and sewer 31.17 facilities comparable to other real property in the taxing 31.18 district. 31.19 (c) A manufactured home that meets each of the following 31.20 criteria must be assessed at the rate provided by the 31.21 appropriate real property classification but must be treated as 31.22 personal property, and the valuation is subject to review and 31.23 the taxes payable in the manner provided in this section: 31.24 (1) the owner of the unit is a lessee of the land under the 31.25 terms of a lease, or the unit is located in a manufactured home 31.26 park, campground, or resort; 31.27 (2) the unit is affixed to the land by a permanent 31.28 foundation or is installed at its location in accordance with 31.29 the Manufactured Home Building Code contained in sections 327.31 31.30 to 327.34, and the rules adopted under those sections, or is 31.31 affixed to the land like other real property in the taxing 31.32 district; and 31.33 (3) the unit is connected to public utilities, has a well 31.34 and septic tank system, or is serviced by water and sewer 31.35 facilities comparable to other real property in the taxing 31.36 district. 32.1 (d) Sectional structures must be valued and assessed as an 32.2 improvement to real property if the owner of the structure holds 32.3 title to the land on which it is located or is a qualifying 32.4 lessee of the land under section 273.19. In this paragraph 32.5 "sectional structure" means a building or structural unit that 32.6 has been in whole or substantial part manufactured or 32.7 constructed at an off-site location to be wholly or partially 32.8 assembled on-site alone or with other units and attached to a 32.9 permanent foundation. 32.10 (e) The commissioner of revenue may adopt rules under the 32.11 Administrative Procedure Act to establish additional criteria 32.12 for the classification of manufactured homes and sectional 32.13 structures under this subdivision. 32.14 (f) A storage shed, deck, or similar improvement 32.15 constructed on property that is leased or rented as a site for a 32.16 manufactured home, sectional structure, park trailer, or travel 32.17 trailer is taxable as provided in this section. In the case of 32.18 property that is leased or rented as a site for a travel 32.19 trailer, a storage shed, deck, or similar improvement on the 32.20 site that is considered personal property under this paragraph 32.21 is taxable only if its total estimated market value is over 32.22 $500. The property is taxable as personal property to the 32.23 lessee of the site if it is not owned by the owner of the site. 32.24 The property is taxable as real estate if it is owned by the 32.25 owner of the site. As a condition of permitting the owner of 32.26 the manufactured home, sectional structure, park trailer, or 32.27 travel trailer to construct improvements on the leased or rented 32.28 site, the owner of the site must obtain the permanent home 32.29 address of the lessee or user of the site. The site owner must 32.30 provide the name and address to the assessor upon request. 32.31 [EFFECTIVE DATE.] For purposes of Minnesota Statutes, 32.32 sections 272.12 and 272.121, this section is effective the day 32.33 following final enactment. For all other purposes, this section 32.34 is effective beginning with taxes payable in 2006, except that 32.35 for any property treated as real property under this section for 32.36 the 2005 assessment that will be treated as personal property 33.1 under this section for the 2006 assessment, an adjustment must 33.2 be made to the 2005 assessment roll on or before July 1, 2005, 33.3 to reflect those changes. 33.4 Sec. 18. [273.126] [CERTIFICATION OF LOW-INCOME RENTAL 33.5 PROPERTY.] 33.6 Subdivision 1. [REQUIREMENT.] Low-income rental property 33.7 is entitled to classification as class 4d under section 273.13, 33.8 subdivision 25, paragraph (e), if at least 75 percent of the 33.9 units in the rental housing property meet any of the following 33.10 qualifications: 33.11 (1) the units are subject to a housing assistance payments 33.12 contract under Section 8 of the United States Housing Act of 33.13 1937, as amended; 33.14 (2) the units are rent-restricted and income-restricted 33.15 units of a qualified low-income housing project receiving tax 33.16 credits under section 42(g) of the Internal Revenue Code of 33.17 1986, as amended; or 33.18 (3) the units are financed by the Rural Housing Service of 33.19 the United States Department of Agriculture and receive payments 33.20 under the rental assistance program pursuant to Section 521(a) 33.21 of the Housing Act of 1949, as amended. 33.22 Subd. 2. [APPLICATION.] (a) Application for certification 33.23 under this section must be filed by March 31 of the levy year, 33.24 or at a later date if the Housing Finance Agency deems 33.25 practicable. The application must be filed with the Housing 33.26 Finance Agency, on a form prescribed by the agency, and must 33.27 contain the information required by the Housing Finance Agency. 33.28 (b) Each application must include: 33.29 (1) the property tax identification number; 33.30 (2) evidence that the property meets the requirements of 33.31 subdivision 1; and 33.32 (3) a true and correct copy of the financial statement 33.33 related to the property. 33.34 (c) The Housing Finance Agency may charge an application 33.35 fee approximately equal to the costs of processing and reviewing 33.36 the applications but not to exceed $10 per unit. If imposed, 34.1 the applicant must pay the application fee to the Housing 34.2 Finance Agency. The fee must be deposited in the housing 34.3 development fund. 34.4 Subd. 3. [CERTIFICATION.] By June 1 of each levy year, the 34.5 Housing Finance Agency must certify to local assessors the 34.6 properties that are qualified under this section and the number 34.7 of units in the building that qualify. In making the 34.8 certification, the Housing Finance Agency may rely on the 34.9 application and any other supporting information that the agency 34.10 deems necessary from the property owner. 34.11 [EFFECTIVE DATE.] This section is effective for taxes 34.12 payable in 2006 and subsequent years. 34.13 Sec. 19. Minnesota Statutes 2004, section 273.13, 34.14 subdivision 22, is amended to read: 34.15 Subd. 22. [CLASS 1.] (a) Except as provided in subdivision 34.16 23 and in paragraphs (b) and (c), real estate which is 34.17 residential and used for homestead purposes is class 1a. In the 34.18 case of a duplex or triplex in which one of the units is used 34.19 for homestead purposes, the entire property is deemed to be used 34.20 for homestead purposes. The market value of class 1a property 34.21 must be determined based upon the value of the house, garage, 34.22 and land. 34.23 The first $500,000 of market value of class 1a property has 34.24 a net class rate of one percent of its market value; and the 34.25 market value of class 1a property that exceeds $500,000 has a 34.26 class rate of 1.25 percent of its market value. 34.27 (b) Class 1b property includes homestead real estate or 34.28 homestead manufactured homes used for the purposes of a 34.29 homestead by 34.30 (1) any person who is blind as defined in section 256D.35, 34.31 or the blind person and the blind person's spouse; or 34.32 (2) any person, hereinafter referred to as "veteran," who: 34.33 (i) served in the active military or naval service of the 34.34 United States; and 34.35 (ii) is entitled to compensation under the laws and 34.36 regulations of the United States for permanent and total 35.1 service-connected disability due to the loss, or loss of use, by 35.2 reason of amputation, ankylosis, progressive muscular 35.3 dystrophies, or paralysis, of both lower extremities, such as to 35.4 preclude motion without the aid of braces, crutches, canes, or a 35.5 wheelchair; and 35.6 (iii) has acquired a special housing unit with special 35.7 fixtures or movable facilities made necessary by the nature of 35.8 the veteran's disability, or the surviving spouse of the 35.9 deceased veteran for as long as the surviving spouse retains the 35.10 special housing unit as a homestead; or 35.11 (3) any person who is permanently and totally disabled. 35.12 Property is classified and assessed under clause (3) only 35.13 if the government agency or income-providing source certifies, 35.14 upon the request of the homestead occupant, that the homestead 35.15 occupant satisfies the disability requirements of this paragraph. 35.16 Property is classified and assessed pursuant to clause (1) 35.17 only if the commissioner of revenue certifies to the assessor 35.18 that the homestead occupant satisfies the requirements of this 35.19 paragraph. 35.20 Permanently and totally disabled for the purpose of this 35.21 subdivision means a condition which is permanent in nature and 35.22 totally incapacitates the person from working at an occupation 35.23 which brings the person an income. The first$32,000$50,000 35.24 market value of class 1b property has a net class rate of .45 35.25 percent of its market value. The remaining market value of 35.26 class 1b property has a class rate using the rates for class 1a 35.27 or class 2a property, whichever is appropriate, of similar 35.28 market value. 35.29 (c) Class 1c property is commercial use real property that 35.30 abuts a lakeshore line and is devoted to temporary and seasonal 35.31 residential occupancy for recreational purposes but not devoted 35.32 to commercial purposes for more than 250 days in the year 35.33 preceding the year of assessment, and that includes a portion 35.34 used as a homestead by the owner, which includes a dwelling 35.35 occupied as a homestead by a shareholder of a corporation that 35.36 owns the resort, a partner in a partnership that owns the 36.1 resort, or a member of a limited liability company that owns the 36.2 resort even if the title to the homestead is held by the 36.3 corporation, partnership, or limited liability company. For 36.4 purposes of this clause, property is devoted to a commercial 36.5 purpose on a specific day if any portion of the property, 36.6 excluding the portion used exclusively as a homestead, is used 36.7 for residential occupancy and a fee is charged for residential 36.8 occupancy. The first$500,000$300,000 of market value of class 36.9 1c property has a class rate ofone0.55 percent, and the 36.10remainingnext $1,500,000 of market value of class 1c property 36.11 has a class rate of one percent, with the following limitation:36.12the area of the property must not exceed 100 feet of lakeshore36.13footage for each cabin or campsite located on the property up to36.14a total of 800 feet and 500 feet in depth, measured away from36.15the lakeshore. Any remaining market value is class 4c 36.16 property. If any portion of the class 1c resort property is 36.17 classified as class 4c under subdivision 25, the entire property 36.18 must meet the requirements of subdivision 25, paragraph (d), 36.19 clause (1), to qualify for class 1c treatment under this 36.20 paragraph. 36.21 (d) Class 1d property includes structures that meet all of 36.22 the following criteria: 36.23 (1) the structure is located on property that is classified 36.24 as agricultural property under section 273.13, subdivision 23; 36.25 (2) the structure is occupied exclusively by seasonal farm 36.26 workers during the time when they work on that farm, and the 36.27 occupants are not charged rent for the privilege of occupying 36.28 the property, provided that use of the structure for storage of 36.29 farm equipment and produce does not disqualify the property from 36.30 classification under this paragraph; 36.31 (3) the structure meets all applicable health and safety 36.32 requirements for the appropriate season; and 36.33 (4) the structure is not salable as residential property 36.34 because it does not comply with local ordinances relating to 36.35 location in relation to streets or roads. 36.36 The market value of class 1d property has the same class 37.1 rates as class 1a property under paragraph (a). 37.2 [EFFECTIVE DATE.] This section is effective for taxes 37.3 levied in 2005, payable in 2006, and thereafter. 37.4 Sec. 20. Minnesota Statutes 2004, section 273.13, 37.5 subdivision 23, is amended to read: 37.6 Subd. 23. [CLASS 2.] (a) Class 2a property is agricultural 37.7 land including any improvements that is homesteaded. The market 37.8 value of the house and garage and immediately surrounding one 37.9 acre of land has the same class rates as class 1a property under 37.10 subdivision 22. The value of the remaining land including 37.11 improvements up toand including $600,000 market value$750,000 37.12 has a net class rate of 0.55 percent of market value. The 37.13 remainingpropertyvalue over$600,000 market value$750,000 has 37.14 a class rate of one percent of market value. 37.15 (b) Class 2b property is (1) real estate, rural in 37.16 character and used exclusively for growing trees for timber, 37.17 lumber, and wood and wood products; (2) real estate that is not 37.18 improved with a structure and is used exclusively for growing 37.19 trees for timber, lumber, and wood and wood products, if the 37.20 owner has participated or is participating in a cost-sharing 37.21 program for afforestation, reforestation, or timber stand 37.22 improvement on that particular property, administered or 37.23 coordinated by the commissioner of natural resources; (3) real 37.24 estate that is nonhomestead agricultural land; or (4) a landing 37.25 area or public access area of a privately owned public use 37.26 airport. Class 2b property has a net class rate of one percent 37.27 of market value. 37.28 (c) Agricultural land as used in this section means 37.29 contiguous acreage of ten acres or more, used during the 37.30 preceding year for agricultural purposes. "Agricultural 37.31 purposes" as used in this section means the raising or 37.32 cultivation of agricultural products. "Agricultural purposes" 37.33 also includes enrollment in the Reinvest in Minnesota program 37.34 under sections 103F.501 to 103F.535 or the federal Conservation 37.35 Reserve Program as contained in Public Law 99-198 if the 37.36 property was classified as agricultural (i) under this 38.1 subdivision for the assessment year 2002 or (ii) in the year 38.2 prior to its enrollment. Contiguous acreage on the same parcel, 38.3 or contiguous acreage on an immediately adjacent parcel under 38.4 the same ownership, may also qualify as agricultural land, but 38.5 only if it is pasture, timber, waste, unusable wild land, or 38.6 land included in state or federal farm programs. Agricultural 38.7 classification for property shall be determined excluding the 38.8 house, garage, and immediately surrounding one acre of land, and 38.9 shall not be based upon the market value of any residential 38.10 structures on the parcel or contiguous parcels under the same 38.11 ownership. 38.12 (d) Real estate, excluding the house, garage, and 38.13 immediately surrounding one acre of land, of less than ten acres 38.14 which is exclusively and intensively used for raising or 38.15 cultivating agricultural products, shall be considered as 38.16 agricultural land. 38.17 Land shall be classified as agricultural even if all or a 38.18 portion of the agricultural use of that property is the leasing 38.19 to, or use by another person for agricultural purposes. 38.20 Classification under this subdivision is not determinative 38.21 for qualifying under section 273.111. 38.22 The property classification under this section supersedes, 38.23 for property tax purposes only, any locally administered 38.24 agricultural policies or land use restrictions that define 38.25 minimum or maximum farm acreage. 38.26 (e) The term "agricultural products" as used in this 38.27 subdivision includes production for sale of: 38.28 (1) livestock, dairy animals, dairy products, poultry and 38.29 poultry products, fur-bearing animals, horticultural and nursery 38.30 stock, fruit of all kinds, vegetables, forage, grains, bees, and 38.31 apiary products by the owner; 38.32 (2) fish bred for sale and consumption if the fish breeding 38.33 occurs on land zoned for agricultural use; 38.34 (3) the commercial boarding of horses if the boarding is 38.35 done in conjunction with raising or cultivating agricultural 38.36 products as defined in clause (1); 39.1 (4) property which is owned and operated by nonprofit 39.2 organizations used for equestrian activities, excluding racing; 39.3 (5) game birds and waterfowl bred and raised for use on a 39.4 shooting preserve licensed under section 97A.115; 39.5 (6) insects primarily bred to be used as food for animals; 39.6 (7) trees, grown for sale as a crop, and not sold for 39.7 timber, lumber, wood, or wood products; and 39.8 (8) maple syrup taken from trees grown by a person licensed 39.9 by the Minnesota Department of Agriculture under chapter 28A as 39.10 a food processor. 39.11 (f) If a parcel used for agricultural purposes is also used 39.12 for commercial or industrial purposes, including but not limited 39.13 to: 39.14 (1) wholesale and retail sales; 39.15 (2) processing of raw agricultural products or other goods; 39.16 (3) warehousing or storage of processed goods; and 39.17 (4) office facilities for the support of the activities 39.18 enumerated in clauses (1), (2), and (3), 39.19 the assessor shall classify the part of the parcel used for 39.20 agricultural purposes as class 1b, 2a, or 2b, whichever is 39.21 appropriate, and the remainder in the class appropriate to its 39.22 use. The grading, sorting, and packaging of raw agricultural 39.23 products for first sale is considered an agricultural purpose. 39.24 A greenhouse or other building where horticultural or nursery 39.25 products are grown that is also used for the conduct of retail 39.26 sales must be classified as agricultural if it is primarily used 39.27 for the growing of horticultural or nursery products from seed, 39.28 cuttings, or roots and occasionally as a showroom for the retail 39.29 sale of those products. Use of a greenhouse or building only 39.30 for the display of already grown horticultural or nursery 39.31 products does not qualify as an agricultural purpose. 39.32 The assessor shall determine and list separately on the 39.33 records the market value of the homestead dwelling and the one 39.34 acre of land on which that dwelling is located. If any farm 39.35 buildings or structures are located on this homesteaded acre of 39.36 land, their market value shall not be included in this separate 40.1 determination. 40.2 (g) To qualify for classification under paragraph (b), 40.3 clause (4), a privately owned public use airport must be 40.4 licensed as a public airport under section 360.018. For 40.5 purposes of paragraph (b), clause (4), "landing area" means that 40.6 part of a privately owned public use airport properly cleared, 40.7 regularly maintained, and made available to the public for use 40.8 by aircraft and includes runways, taxiways, aprons, and sites 40.9 upon which are situated landing or navigational aids. A landing 40.10 area also includes land underlying both the primary surface and 40.11 the approach surfaces that comply with all of the following: 40.12 (i) the land is properly cleared and regularly maintained 40.13 for the primary purposes of the landing, taking off, and taxiing 40.14 of aircraft; but that portion of the land that contains 40.15 facilities for servicing, repair, or maintenance of aircraft is 40.16 not included as a landing area; 40.17 (ii) the land is part of the airport property; and 40.18 (iii) the land is not used for commercial or residential 40.19 purposes. 40.20 The land contained in a landing area under paragraph (b), clause 40.21 (4), must be described and certified by the commissioner of 40.22 transportation. The certification is effective until it is 40.23 modified, or until the airport or landing area no longer meets 40.24 the requirements of paragraph (b), clause (4). For purposes of 40.25 paragraph (b), clause (4), "public access area" means property 40.26 used as an aircraft parking ramp, apron, or storage hangar, or 40.27 an arrival and departure building in connection with the airport. 40.28 [EFFECTIVE DATE.] This section is effective for taxes 40.29 payable in 2006 and thereafter. 40.30 Sec. 21. Minnesota Statutes 2004, section 273.13, 40.31 subdivision 25, is amended to read: 40.32 Subd. 25. [CLASS 4.] (a) Class 4a is residential real 40.33 estate containing four or more units and used or held for use by 40.34 the owner or by the tenants or lessees of the owner as a 40.35 residence for rental periods of 30 days or more, excluding 40.36 property qualifying for class 4d. Class 4a also includes 41.1 hospitals licensed under sections 144.50 to 144.56, other than 41.2 hospitals exempt under section 272.02, and contiguous property 41.3 used for hospital purposes, without regard to whether the 41.4 property has been platted or subdivided. The market value of 41.5 class 4a property has a class rate of1.8 percent for taxes41.6payable in 2002, 1.5 percent for taxes payable in 2003, and1.25 41.7 percentfor taxes payable in 2004 and thereafter, except that41.8class 4a property consisting of a structure for which41.9construction commenced after June 30, 2001, has a class rate of41.101.25 percent of market value for taxes payable in 2003 and41.11subsequent years. 41.12 (b) Class 4b includes: 41.13 (1) residential real estate containing less than four units 41.14 that does not qualify as class 4bb, other than seasonal 41.15 residential recreational property; 41.16 (2) manufactured homes not classified under any other 41.17 provision; 41.18 (3) a dwelling, garage, and surrounding one acre of 41.19 property on a nonhomestead farm classified under subdivision 23, 41.20 paragraph (b) containing two or three units; and 41.21 (4) unimproved property that is classified residential as 41.22 determined under subdivision 33. 41.23 The market value of class 4b property has a class rate of 41.241.5 percent for taxes payable in 2002, and1.25 percentfor41.25taxes payable in 2003 and thereafter. 41.26 (c) Class 4bb includes: 41.27 (1) nonhomestead residential real estate containing one 41.28 unit, other than seasonal residential recreational property; and 41.29 (2) a single family dwelling, garage, and surrounding one 41.30 acre of property on a nonhomestead farm classified under 41.31 subdivision 23, paragraph (b). 41.32 Class 4bb property has the same class rates as class 1a 41.33 property under subdivision 22. 41.34 Property that has been classified as seasonal residential 41.35 recreational property at any time during which it has been owned 41.36 by the current owner or spouse of the current owner does not 42.1 qualify for class 4bb. 42.2 (d) Class 4c property includes: 42.3 (1) except as provided in subdivision 22, paragraph (c), 42.4 real property devoted to temporary and seasonal residential 42.5 occupancy for recreation purposes, including real property 42.6 devoted to temporary and seasonal residential occupancy for 42.7 recreation purposes and not devoted to commercial purposes for 42.8 more than 250 days in the year preceding the year of 42.9 assessment. For purposes of this clause, property is devoted to 42.10 a commercial purpose on a specific day if any portion of the 42.11 property is used for residential occupancy, and a fee is charged 42.12 for residential occupancy. In order for a property to be 42.13 classified as class 4c, seasonal residential recreational for 42.14 commercial purposes, at least 40 percent of the annual gross 42.15 lodging receipts related to the property must be from business 42.16 conducted during 90 consecutive days and either (i) at least 60 42.17 percent of all paid bookings by lodging guests during the year 42.18 must be for periods of at least two consecutive nights; or (ii) 42.19 at least 20 percent of the annual gross receipts must be from 42.20 charges for rental of fish houses, boats and motors, 42.21 snowmobiles, downhill or cross-country ski equipment, or charges 42.22 for marina services, launch services, and guide services, or the 42.23 sale of bait and fishing tackle. For purposes of this 42.24 determination, a paid booking of five or more nights shall be 42.25 counted as two bookings. Class 4c also includes commercial use 42.26 real property used exclusively for recreational purposes in 42.27 conjunction with class 4c property devoted to temporary and 42.28 seasonal residential occupancy for recreational purposes, up to 42.29 a total of two acres, provided the property is not devoted to 42.30 commercial recreational use for more than 250 days in the year 42.31 preceding the year of assessment and is located within two miles 42.32 of the class 4c property with which it is used. Class 4c 42.33 property classified in this clause also includes the remainder 42.34 of class 1c resorts provided that the entire property including 42.35 that portion of the property classified as class 1c also meets 42.36 the requirements for class 4c under this clause; otherwise the 43.1 entire property is classified as class 3. Owners of real 43.2 property devoted to temporary and seasonal residential occupancy 43.3 for recreation purposes and all or a portion of which was 43.4 devoted to commercial purposes for not more than 250 days in the 43.5 year preceding the year of assessment desiring classification as 43.6 class 1c or 4c, must submit a declaration to the assessor 43.7 designating the cabins or units occupied for 250 days or less in 43.8 the year preceding the year of assessment by January 15 of the 43.9 assessment year. Those cabins or units and a proportionate 43.10 share of the land on which they are located will be designated 43.11 class 1c or 4c as otherwise provided. The remainder of the 43.12 cabins or units and a proportionate share of the land on which 43.13 they are located will be designated as class 3a. The owner of 43.14 property desiring designation as class 1c or 4c property must 43.15 provide guest registers or other records demonstrating that the 43.16 units for which class 1c or 4c designation is sought were not 43.17 occupied for more than 250 days in the year preceding the 43.18 assessment if so requested. The portion of a property operated 43.19 as a (1) restaurant, (2) bar, (3) gift shop, and (4) other 43.20 nonresidential facility operated on a commercial basis not 43.21 directly related to temporary and seasonal residential occupancy 43.22 for recreation purposes shall not qualify for class 1c or 4c; 43.23 (2) qualified property used as a golf course if: 43.24 (i) it is open to the public on a daily fee basis. It may 43.25 charge membership fees or dues, but a membership fee may not be 43.26 required in order to use the property for golfing, and its green 43.27 fees for golfing must be comparable to green fees typically 43.28 charged by municipal courses; and 43.29 (ii) it meets the requirements of section 273.112, 43.30 subdivision 3, paragraph (d). 43.31 A structure used as a clubhouse, restaurant, or place of 43.32 refreshment in conjunction with the golf course is classified as 43.33 class 3a property; 43.34 (3) real property up to a maximum of one acre of land owned 43.35 by a nonprofit community service oriented organization; provided 43.36 that the property is not used for a revenue-producing activity 44.1 for more than six days in the calendar year preceding the year 44.2 of assessment and the property is not used for residential 44.3 purposes on either a temporary or permanent basis. For purposes 44.4 of this clause, a "nonprofit community service oriented 44.5 organization" means any corporation, society, association, 44.6 foundation, or institution organized and operated exclusively 44.7 for charitable, religious, fraternal, civic, or educational 44.8 purposes, and which is exempt from federal income taxation 44.9 pursuant to section 501(c)(3), (10), or (19) of the Internal 44.10 Revenue Code of 1986, as amended through December 31, 1990. For 44.11 purposes of this clause, "revenue-producing activities" shall 44.12 include but not be limited to property or that portion of the 44.13 property that is used as an on-sale intoxicating liquor or 3.2 44.14 percent malt liquor establishment licensed under chapter 340A, a 44.15 restaurant open to the public, bowling alley, a retail store, 44.16 gambling conducted by organizations licensed under chapter 349, 44.17 an insurance business, or office or other space leased or rented 44.18 to a lessee who conducts a for-profit enterprise on the 44.19 premises. Any portion of the property which is used for 44.20 revenue-producing activities for more than six days in the 44.21 calendar year preceding the year of assessment shall be assessed 44.22 as class 3a. The use of the property for social events open 44.23 exclusively to members and their guests for periods of less than 44.24 24 hours, when an admission is not charged nor any revenues are 44.25 received by the organization shall not be considered a 44.26 revenue-producing activity; 44.27 (4) postsecondary student housing of not more than one acre 44.28 of land that is owned by a nonprofit corporation organized under 44.29 chapter 317A and is used exclusively by a student cooperative, 44.30 sorority, or fraternity for on-campus housing or housing located 44.31 within two miles of the border of a college campus; 44.32 (5) manufactured home parks as defined in section 327.14, 44.33 subdivision 3; 44.34 (6) real property that is actively and exclusively devoted 44.35 to indoor fitness, health, social, recreational, and related 44.36 uses, is owned and operated by a not-for-profit corporation, and 45.1 is located within the metropolitan area as defined in section 45.2 473.121, subdivision 2; 45.3 (7) a leased or privately owned noncommercial aircraft 45.4 storage hangar not exempt under section 272.01, subdivision 2, 45.5 and the land on which it is located, provided that: 45.6 (i) the land is on an airport owned or operated by a city, 45.7 town, county, Metropolitan Airports Commission, or group 45.8 thereof; and 45.9 (ii) the land lease, or any ordinance or signed agreement 45.10 restricting the use of the leased premise, prohibits commercial 45.11 activity performed at the hangar. 45.12 If a hangar classified under this clause is sold after June 45.13 30, 2000, a bill of sale must be filed by the new owner with the 45.14 assessor of the county where the property is located within 60 45.15 days of the sale;and45.16 (8) a privately owned noncommercial aircraft storage hangar 45.17 not exempt under section 272.01, subdivision 2, and the land on 45.18 which it is located, provided that: 45.19 (i) the land abuts a public airport; and 45.20 (ii) the owner of the aircraft storage hangar provides the 45.21 assessor with a signed agreement restricting the use of the 45.22 premises, prohibiting commercial use or activity performed at 45.23 the hangar; and 45.24 (9) residential real estate, a portion of which is used by 45.25 the owner for homestead purposes, and that is also a place of 45.26 lodging, if all of the following criteria are met: 45.27 (i) rooms are provided for rent to transient guests that 45.28 generally stay for periods of 14 or fewer days; 45.29 (ii) meals are provided to persons who rent rooms, the cost 45.30 of which is incorporated in the basic room rate; 45.31 (iii) meals are not provided to the general public except 45.32 for special events on fewer than seven days in the calendar year 45.33 preceding the year of the assessment; and 45.34 (iv) the owner is the operator of the property. 45.35 The market value subject to the 4c classification under this 45.36 clause is limited to five rental units. Any rental units on the 46.1 property in excess of five, must be valued and assessed as class 46.2 3a. The portion of the property used for purposes of a 46.3 homestead by the owner must be classified as class 1a property 46.4 under subdivision 22. 46.5 Class 4c property has a class rate of 1.5 percent of market 46.6 value, except that (i) each parcel of seasonal residential 46.7 recreational property not used for commercial purposes has the 46.8 same class rates as class 4bb property, (ii) manufactured home 46.9 parks assessed under clause (5) have the same class rate as 46.10 class 4b property, (iii) commercial-use seasonal residential 46.11 recreational property has a class rate of one percent for the 46.12 first $500,000 of market value, which includes any market value 46.13 receiving the one percent rate under subdivision 22, and 1.25 46.14 percent for the remaining market value, (iv) the market value of 46.15 property described in clause (4) has a class rate of one 46.16 percent, (v) the market value of property described in clauses 46.17 (2) and (6) has a class rate of 1.25 percent, and (vi) that 46.18 portion of the market value of property in clause (8) qualifying 46.19 for class 4c property has a class rate of 1.25 percent. 46.20 (e) Class 4d property is qualifying low-income rental 46.21 housing certified to the assessor by the Housing Finance Agency 46.22 under section 273.126, subdivision 3. If only a portion of the 46.23 units in the building qualify as low-income rental housing units 46.24 as certified under section 273.126, subdivision 3, only the 46.25 proportion of qualifying units to the total number of units in 46.26 the building qualify for class 4d. The remaining portion of the 46.27 building shall be classified by the assessor based upon its 46.28 use. Class 4d also includes the same proportion of land as the 46.29 qualifying low-income rental housing units are to the total 46.30 units in the building. For all properties qualifying as class 46.31 4d, the market value determined by the assessor must be based on 46.32 the normal approach to value using normal unrestricted rents. 46.33 Class 4d property has a class rate of 1.0 percent. 46.34 [EFFECTIVE DATE.] This section is effective for taxes 46.35 payable in 2006 and subsequent years. 46.36 Sec. 22. Minnesota Statutes 2004, section 273.13, is 47.1 amended by adding a subdivision to read: 47.2 Subd. 34. [HOMESTEAD OF DISABLED VETERAN OR SURVIVING 47.3 SPOUSE.] (a) The first $200,000 of market value of property 47.4 qualifying for homestead classification under subdivision 22 or 47.5 23 is excluded in determining the property's taxable market 47.6 value if it serves as the homestead of a military veteran, as 47.7 defined in section 197.447, who has a total and permanent 47.8 service-connected disability. To qualify for exclusion under 47.9 this subdivision, the veteran must have been honorably 47.10 discharged from the United States armed forces, as indicated by 47.11 United States Government Form DD214 or other official military 47.12 discharge papers, and must be certified by the United States 47.13 Veterans Administration as having a total (100 percent) and 47.14 permanent service-connected disability. 47.15 (b) If a disabled veteran qualifying for a valuation 47.16 exclusion under paragraph (a) predeceases the veteran's spouse, 47.17 and if upon the death of the veteran the spouse holds the legal 47.18 or beneficial title to the homestead and permanently resides 47.19 there, the exclusion shall carry over to the benefit of the 47.20 veteran's spouse until such time as the spouse remarries or 47.21 sells or otherwise disposes of the property. 47.22 (c) In the case of an agricultural homestead, only the 47.23 portion of the property consisting of the house and garage and 47.24 immediately surrounding one acre of land qualifies for the 47.25 valuation exclusion under this subdivision. 47.26 (d) A property owner attempting to first qualify for a 47.27 valuation exclusion under this subdivision must apply to the 47.28 assessor by July 1 of the assessment year, except that for 47.29 assessment year 2005 application may be made until September 1, 47.30 2005. The application must be accompanied by supporting 47.31 documentation as required by the assessor. Once a property has 47.32 been accepted for a valuation exclusion under this subdivision, 47.33 the property continues to qualify until there is a change in 47.34 ownership of the property. 47.35 (e) The value of any qualifying property in excess of 47.36 $200,000 must be treated exactly the same as if the first 48.1 $200,000 in value had not been excluded, for purposes of 48.2 determining the appropriate class rate. A property qualifying 48.3 for exclusion under this subdivision shall not be eligible for 48.4 the credit under section 273.1384, subdivision 1. 48.5 [EFFECTIVE DATE.] This section is effective for assessment 48.6 year 2005 and thereafter, for taxes payable in 2006 and 48.7 thereafter. 48.8 Sec. 23. Minnesota Statutes 2004, section 274.01, 48.9 subdivision 1, is amended to read: 48.10 Subdivision 1. [ORDINARY BOARD; MEETINGS, DEADLINES, 48.11 GRIEVANCES.] (a) The town board of a town, or the council or 48.12 other governing body of a city, is the board of appeal and 48.13 equalization except (1) in cities whose charters provide for a 48.14 board of equalization or (2) in any city or town that has 48.15 transferred its local board of review power and duties to the 48.16 county board as provided in subdivision 3. The county assessor 48.17 shall fix a day and time when the board or the board of 48.18 equalization shall meet in the assessment districts of the 48.19 county. Notwithstanding any law or city charter to the 48.20 contrary, a city board of equalization shall be referred to as a 48.21 board of appeal and equalization. On or before February 15 of 48.22 each year the assessor shall give written notice of the time to 48.23 the city or town clerk. Notwithstanding the provisions of any 48.24 charter to the contrary, the meetings must be held between April 48.25 1 and May 31 each year. The clerk shall give published and 48.26 posted notice of the meeting at least ten days before the date 48.27 of the meeting. 48.28 The board shall meet at the office of the clerk to review 48.29 the assessment and classification of property in the town or 48.30 city. No changes in valuation or classification which are 48.31 intended to correct errors in judgment by the county assessor 48.32 may be made by the county assessor after the board has adjourned 48.33 in those cities or towns that hold a local board of review; 48.34 however, corrections of errors that are merely clerical in 48.35 nature or changes that extend homestead treatment to property 48.36 are permitted after adjournment until the tax extension date for 49.1 that assessment year. The changes must be fully documented and 49.2 maintained in the assessor's office and must be available for 49.3 review by any person. A copy of the changes made during this 49.4 period in those cities or towns that hold a local board of 49.5 review must be sent to the county board no later than December 49.6 31 of the assessment year. 49.7 (b) The board shall determine whether the taxable property 49.8 in the town or city has been properly placed on the list and 49.9 properly valued by the assessor. If real or personal property 49.10 has been omitted, the board shall place it on the list with its 49.11 market value, and correct the assessment so that each tract or 49.12 lot of real property, and each article, parcel, or class of 49.13 personal property, is entered on the assessment list at its 49.14 market value. No assessment of the property of any person may 49.15 be raised unless the person has been duly notified of the intent 49.16 of the board to do so. On application of any person feeling 49.17 aggrieved, the board shall review the assessment or 49.18 classification, or both, and correct it as appears just.The49.19board may not make an individual market value adjustment or49.20classification change that would benefit the property in cases49.21where the owner or other person having control over the property49.22will not permit the assessor to inspect the property and the49.23interior of any buildings or structures.49.24 (c) A local board may reduce assessments upon petition of 49.25 the taxpayer but the total reductions must not reduce the 49.26 aggregate assessment made by the county assessor by more than 49.27 one percent. If the total reductions would lower the aggregate 49.28 assessments made by the county assessor by more than one 49.29 percent, none of the adjustments may be made. The assessor 49.30 shall correct any clerical errors or double assessments 49.31 discovered by the board without regard to the one percent 49.32 limitation. 49.33 (d) A local board does not have authority to grant an 49.34 exemption or to order property removed from the tax rolls. 49.35 (e) A majority of the members may act at the meeting, and 49.36 adjourn from day to day until they finish hearing the cases 50.1 presented. The assessor shall attend, with the assessment books 50.2 and papers, and take part in the proceedings, but must not 50.3 vote. The county assessor, or an assistant delegated by the 50.4 county assessor shall attend the meetings. The board shall list 50.5 separately, on a form appended to the assessment book, all 50.6 omitted property added to the list by the board and all items of 50.7 property increased or decreased, with the market value of each 50.8 item of property, added or changed by the board, placed opposite 50.9 the item. The county assessor shall enter all changes made by 50.10 the board in the assessment book. 50.11 (f) Except as provided in subdivision 3, if a person fails 50.12 to appear in person, by counsel, or by written communication 50.13 before the board after being duly notified of the board's intent 50.14 to raise the assessment of the property, or if a person feeling 50.15 aggrieved by an assessment or classification fails to apply for 50.16 a review of the assessment or classification, the person may not 50.17 appear before the county board of appeal and equalization for a 50.18 review of the assessment or classification. This paragraph does 50.19 not apply if an assessment was made after the local board 50.20 meeting, as provided in section 273.01, or if the person can 50.21 establish not having received notice of market value at least 50.22 five days before the local board meeting. 50.23 (g) The local board must complete its work and adjourn 50.24 within 20 days from the time of convening stated in the notice 50.25 of the clerk, unless a longer period is approved by the 50.26 commissioner of revenue. No action taken after that date is 50.27 valid. All complaints about an assessment or classification 50.28 made after the meeting of the board must be heard and determined 50.29 by the county board of equalization. A nonresident may, at any 50.30 time, before the meeting of the board file written objections to 50.31 an assessment or classification with the county assessor. The 50.32 objections must be presented to the board at its meeting by the 50.33 county assessor for its consideration. 50.34 Sec. 24. Minnesota Statutes 2004, section 275.025, 50.35 subdivision 4, is amended to read: 50.36 Subd. 4. [APPORTIONMENT AND LEVY OF STATE GENERAL TAX.] 51.1 Ninety-five percent of the state general tax must bedistributed51.2among the countieslevied by applying a uniform rate toeach51.3county'sall commercial-industrial tax capacity anditsfive 51.4 percent of the state general tax must be levied by applying a 51.5 uniform rate to all seasonal residential recreational tax 51.6 capacity.Within each county, the tax must be levied by51.7applying a uniform rate against commercial-industrial tax51.8capacity and seasonal residential recreational tax capacity.On 51.9 or before October 1 each year, the commissioner of revenue shall 51.10 certifyathe preliminary state general levyraterates to each 51.11 county auditor that must be used to prepare the notices of 51.12 proposed property taxes for taxes payable in the following 51.13 year. By January 1 of each year, the commissioner shall certify 51.14 the final state general levy rate to each county auditor that 51.15 shall be used in spreading taxes. 51.16 [EFFECTIVE DATE.] This section is effective for taxes 51.17 payable in 2006 and thereafter. 51.18 Sec. 25. Minnesota Statutes 2004, section 276.04, 51.19 subdivision 2, is amended to read: 51.20 Subd. 2. [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 51.21 shall provide for the printing of the tax statements. The 51.22 commissioner of revenue shall prescribe the form of the property 51.23 tax statement and its contents. The statement must contain a 51.24 tabulated statement of the dollar amount due to each taxing 51.25 authority and the amount of the state tax from the parcel of 51.26 real property for which a particular tax statement is prepared. 51.27 The dollar amounts attributable to the county, the state tax, 51.28 the voter approved school tax, the other local school tax, the 51.29 township or municipality, and the total of the metropolitan 51.30 special taxing districts as defined in section 275.065, 51.31 subdivision 3, paragraph (i), must be separately stated. The 51.32 amounts due all other special taxing districts, if any, may be 51.33 aggregated except that any levies made by the regional rail 51.34 authorities in the county of Anoka, Carver, Dakota, Hennepin, 51.35 Ramsey, Scott, or Washington under chapter 398A shall be listed 51.36 on a separate line directly under the appropriate county's 52.1 levy. If the county levy under this paragraph includes an 52.2 amount for a lake improvement district as defined under sections 52.3 103B.501 to 103B.581, the amount attributable for that purpose 52.4 must be separately stated from the remaining county levy 52.5 amount. In the case of Ramsey County, if the county levy under 52.6 this paragraph includes an amount for public library service 52.7 under section 134.07, the amount attributable for that purpose 52.8 may be separated from the remaining county levy amount. The 52.9 amount of the tax on homesteads qualifying under the senior 52.10 citizens' property tax deferral program under chapter 290B is 52.11 the total amount of property tax before subtraction of the 52.12 deferred property tax amount. The amount of the tax on 52.13 contamination value imposed under sections 270.91 to 270.98, if 52.14 any, must also be separately stated. The dollar amounts, 52.15 including the dollar amount of any special assessments, may be 52.16 rounded to the nearest even whole dollar. For purposes of this 52.17 section whole odd-numbered dollars may be adjusted to the next 52.18 higher even-numbered dollar. The amount of market value 52.19 excluded under section 273.11, subdivision 16, if any, must also 52.20 be listed on the tax statement. 52.21 (b) The property tax statements for manufactured homes and 52.22 sectional structures taxed as personal property shall contain 52.23 the same information that is required on the tax statements for 52.24 real property. 52.25 (c) Real and personal property tax statements must contain 52.26 the following information in the order given in this paragraph. 52.27 The information must contain the current year tax information in 52.28 the right column with the corresponding information for the 52.29 previous year in a column on the left: 52.30 (1) the property's estimated market value under section 52.31 273.11, subdivision 1; 52.32 (2) the property's taxable market value after reductions 52.33 under section 273.11, subdivisions 1a and 16; 52.34 (3) the property's gross tax, calculated by adding the 52.35 property's total property tax to the sum of the aids enumerated 52.36 in clause (4); 53.1 (4) a total of the following aids: 53.2 (i) education aids payable under chapters 122A, 123A, 123B, 53.3 124D, 125A, 126C, and 127A; 53.4 (ii) local government aids for cities, towns, and counties 53.5 underchapter 477Asections 477A.011 to 477A.04; and 53.6 (iii) disparity reduction aid under section 273.1398; 53.7 (5) for homestead residential and agricultural properties, 53.8 the credits under section 273.1384; 53.9 (6) any credits received under sections 273.119; 273.123; 53.10 273.135; 273.1391; 273.1398, subdivision 4; 469.171; and 53.11 473H.10, except that the amount of credit received under section 53.12 273.135 must be separately stated and identified as "taconite 53.13 tax relief"; and 53.14 (7) the net tax payable in the manner required in paragraph 53.15 (a). 53.16 (d) If the county uses envelopes for mailing property tax 53.17 statements and if the county agrees, a taxing district may 53.18 include a notice with the property tax statement notifying 53.19 taxpayers when the taxing district will begin its budget 53.20 deliberations for the current year, and encouraging taxpayers to 53.21 attend the hearings. If the county allows notices to be 53.22 included in the envelope containing the property tax statement, 53.23 and if more than one taxing district relative to a given 53.24 property decides to include a notice with the tax statement, the 53.25 county treasurer or auditor must coordinate the process and may 53.26 combine the information on a single announcement. 53.27 The commissioner of revenue shall certify to the county 53.28 auditor the actual or estimated aids enumerated in clause (4) 53.29 that local governments will receive in the following year. The 53.30 commissioner must certify this amount by January 1 of each year. 53.31 [EFFECTIVE DATE.] This section is effective for property 53.32 tax statements for taxes payable in 2006 and thereafter. 53.33 Sec. 26. [280.44] [NOTIFICATION TO HOMESTEAD PROPERTY 53.34 OWNERS; TAX DELINQUENCY.] 53.35 In addition to other notices required under this chapter, 53.36 the county auditor shall notify all taxpayers owning homestead 54.1 property within the county whose real property taxes on that 54.2 homestead are currently delinquent and also were delinquent in 54.3 the preceding calendar year. The notification must be mailed 54.4 sometime between June 1 and August 1 in the year following the 54.5 second year that property taxes were not paid. The notification 54.6 must contain a telephone number and an e-mail address for the 54.7 county auditor's office to aid the taxpayer in contacting the 54.8 county to discuss any questions relating to the tax 54.9 delinquency. The notification must contain a list of the 54.10 various assistance programs and other options that might be 54.11 available to the taxpayer to pay the delinquent taxes including, 54.12 but not limited to, the senior citizens' property tax deferral 54.13 under chapter 290B, partial property tax payments, and a 54.14 confession of judgment under section 279.37. The notice must 54.15 inform the taxpayer of the state-paid property tax refund and 54.16 the additional property tax refund under chapter 290A which may 54.17 be available to the taxpayer once the delinquent taxes have been 54.18 satisfied. The notice must also state the number of years 54.19 before the property will forfeit if the taxes are not paid or 54.20 any installment plan initiated. For purposes of this section, 54.21 "homestead" property means property classified under section 54.22 273.13, subdivision 22 or 23, paragraph (a). 54.23 [EFFECTIVE DATE.] This section is effective for property 54.24 tax delinquencies beginning January 1, 2006, provided that for 54.25 calendar year 2006, the county auditor shall notify the owners 54.26 of each homestead property in the county that has been 54.27 delinquent for two or more years. 54.28 Sec. 27. Minnesota Statutes 2004, section 290A.03, 54.29 subdivision 11, is amended to read: 54.30 Subd. 11. [RENT CONSTITUTING PROPERTY TAXES.] "Rent 54.31 constituting property taxes" means19 percent of the gross rent54.32actually paid in cash, or its equivalent, or the portion of rent54.33 the amount of gross rent actually paid in cash, or its 54.34 equivalent, which is attributable (1) to the property tax paid 54.35 on the unit or (2) to the amount paid in lieu of property taxes, 54.36 in any calendar year by a claimant for the right of occupancy of 55.1 the claimant's Minnesota homestead in the calendar year, and 55.2 which rent constitutes the basis, in the succeeding calendar 55.3 year of a claim for relief under this chapter by the 55.4 claimant. The amount of rent attributable to property taxes 55.5 paid or payments in lieu made on the unit must be determined by 55.6 multiplying the gross rent paid by the claimant for the calendar 55.7 year for the unit by a fraction, the numerator of which is the 55.8 net tax on the property where the unit is located and the 55.9 denominator of which is the total scheduled rent. In no case 55.10 may the rent constituting property taxes exceed 50 percent of 55.11 the gross rent paid by the claimant during that calendar year. 55.12 In the case of a claimant who resides in a unit for which (1) a 55.13 rent subsidy is paid to, or for, the claimant based on the 55.14 income of the claimant or the claimant's family, or (2) a 55.15 subsidy is paid to a public housing authority that owns or 55.16 operates the claimant's rental unit, pursuant to United States 55.17 Code, title 42, section 1437c, 20 percent of gross rent actually 55.18 paid in cash or its equivalent shall be the claimant's "rent 55.19 constituting property taxes paid." For purposes of this 55.20 subdivision, "rent subsidy" does not include any housing 55.21 assistance received under the Minnesota family investment 55.22 program, general assistance, Minnesota supplemental assistance, 55.23 supplemental security income, or similar income maintenance 55.24 programs. 55.25 [EFFECTIVE DATE.] This section is effective for claims 55.26 based on rent paid in 2005 and following years. 55.27 Sec. 28. Minnesota Statutes 2004, section 290A.03, 55.28 subdivision 13, is amended to read: 55.29 Subd. 13. [PROPERTY TAXES PAYABLE.] "Property taxes 55.30 payable" means the property tax exclusive of special 55.31 assessments, penalties, and interest payable on a claimant's 55.32 homestead after deductions made under sections 273.135, 55.33 273.1384, 273.1391, 273.42, subdivision 2, and any other state 55.34 paid property tax credits in any calendar year, and after any 55.35 refund claimed and allowable under section 290A.04, subdivision 55.36 2h, that is first payable in the year that the property tax is 56.1 payable. In the case of a claimant who makes ground lease 56.2 payments, "property taxes payable" includes the amount of the 56.3 payments directly attributable to the property taxes assessed 56.4 against the parcel on which the house is located. No 56.5 apportionment or reduction of the "property taxes payable" shall 56.6 be required for the use of a portion of the claimant's homestead 56.7 for a business purpose if the claimant does not deduct any 56.8 business depreciation expenses for the use of a portion of the 56.9 homestead in the determination of federal adjusted gross 56.10 income. For homesteads which are manufactured homes as defined 56.11 in section 273.125, subdivision 8, and for homesteads which are 56.12 park trailers taxed as manufactured homes under section 168.012, 56.13 subdivision 9, "property taxes payable" shall also include1956.14percentthe amount of the gross rent paid in the preceding year 56.15 for the site on which the homestead is located, which is 56.16 attributable to the net tax paid on the site. The amount 56.17 attributable to property taxes must be determined by multiplying 56.18 the net tax on the parcel by a fraction, the numerator of which 56.19 is the gross rent paid for the calendar year for the site and 56.20 the denominator of which is the gross rent paid for the calendar 56.21 year for the parcel. When a homestead is owned by two or more 56.22 persons as joint tenants or tenants in common, such tenants 56.23 shall determine between them which tenant may claim the property 56.24 taxes payable on the homestead. If they are unable to agree, 56.25 the matter shall be referred to the commissioner of revenue 56.26 whose decision shall be final. Property taxes are considered 56.27 payable in the year prescribed by law for payment of the taxes. 56.28 In the case of a claim relating to "property taxes 56.29 payable," the claimant must have owned and occupied the 56.30 homestead on January 2 of the year in which the tax is payable 56.31 and (i) the property must have been classified as homestead 56.32 property pursuant to section 273.124, on or before December 15 56.33 of the assessment year to which the "property taxes payable" 56.34 relate; or (ii) the claimant must provide documentation from the 56.35 local assessor that application for homestead classification has 56.36 been made on or before December 15 of the year in which the 57.1 "property taxes payable" were payable and that the assessor has 57.2 approved the application. 57.3 [EFFECTIVE DATE.] This section is effective for claims 57.4 based on rent paid in 2005 and following years. 57.5 Sec. 29. Minnesota Statutes 2004, section 290A.03, is 57.6 amended by adding a subdivision to read: 57.7 Subd. 16. [TOTAL SCHEDULED RENT.] "Total scheduled rent" 57.8 means the sum of the monthly rents assigned to the residential 57.9 rental units in the property multiplied by 12. The rents must 57.10 be an arm's-length rental, including garage rents if any, but 57.11 not including charges for medical services furnished by the 57.12 landlord as a part of the rental agreement. In determining 57.13 total scheduled rent, no deduction is allowed for vacant units, 57.14 uncollected rent, or reduced cash rents in units occupied by 57.15 employees or agents of the owner. 57.16 [EFFECTIVE DATE.] This section is effective for claims 57.17 based on rent paid in 2005 and following years. 57.18 Sec. 30. Minnesota Statutes 2004, section 290A.03, is 57.19 amended by adding a subdivision to read: 57.20 Subd. 17. [NET TAX.] "Net tax" means: 57.21 (1) the property tax, exclusive of special assessments, 57.22 interest, and penalties, and after reduction for any state paid 57.23 property tax credits as required in subdivision 13 except for 57.24 the reduction under section 273.13, subdivisions 22 and 23; or 57.25 (2) the payments made in lieu of ad valorem taxes, 57.26 including payments of special assessments imposed in lieu of ad 57.27 valorem taxes, 57.28 for the calendar year in which the rent was paid. If a portion 57.29 of the property is occupied as a homestead or is used for other 57.30 than rental purposes, the net tax is the amount of tax reduced 57.31 by the percentage that the nonrental use comprises of the total 57.32 square footage of the building. If a portion of the property is 57.33 used for purposes other than for residential rental and none of 57.34 the property is occupied as a homestead, the net tax is the 57.35 amount of the tax of the parcel multiplied by a fraction, the 57.36 numerator of which is the total net tax capacity of the parcel. 58.1 If a portion of the property is used for other than rental 58.2 residential purposes, the county treasurer shall list on the 58.3 property tax statement the amount of net tax pertaining to the 58.4 rental residential portion of the property. 58.5 The amount of the net tax must not be reduced by an 58.6 abatement or a court-ordered reduction in the property tax on 58.7 the property made after the certificate of rent paid has been 58.8 provided to the renter. 58.9 [EFFECTIVE DATE.] This section is effective for claims 58.10 based on rent paid in 2005 and following years. 58.11 Sec. 31. Minnesota Statutes 2004, section 290A.07, is 58.12 amended by adding a subdivision to read: 58.13 Subd. 5. [EARLY PAYMENT; E-FILE CLAIMS.] The commissioner 58.14 may pay a claim up to 30 days earlier than the first permitted 58.15 date under subdivision 2a or 3 if the claim is submitted by 58.16 electronic means. 58.17 [EFFECTIVE DATE.] This section is effective the day 58.18 following final enactment. 58.19 Sec. 32. Minnesota Statutes 2004, section 290A.19, is 58.20 amended to read: 58.21 290A.19 [OWNER OR MANAGING AGENT TO FURNISH RENT 58.22 CERTIFICATE.] 58.23 (a) The owner or managing agent of any property for which 58.24 rent is paid for occupancy as a homestead must furnish a 58.25 certificate of rent paid to a person who is a renter on December 58.26 31, in the form prescribed by the commissioner. If the renter 58.27 moves before December 31, the owner or managing agent may give 58.28 the certificate to the renter at the time of moving, or mail the 58.29 certificate to the forwarding address if an address has been 58.30 provided by the renter. The certificate must be made available 58.31 to the renter before February 1 of the year following the year 58.32 in which the rent was paid. The owner or managing agent must 58.33 retain a duplicate of each certificate or an equivalent record 58.34 showing the same information for a period of three years. The 58.35 duplicate or other record must be made available to the 58.36 commissioner upon request. For the purposes of this section, 59.1 "owner" includes a park owner as defined under section 327C.01, 59.2 subdivision 6, and "property" includes a lot as defined under 59.3 section 327C.01, subdivision 3. 59.4 (b) If the owner or managing agent fails to provide the 59.5 renter with a certificate of rent constituting property taxes, 59.6 the commissioner shall allocate the net tax on the building to 59.7 the unit on a square footage basis or other appropriate basis as 59.8 the commissioner determines. The renter shall supply the 59.9 commissioner with a statement from the county treasurer that 59.10 gives the amount of property tax on the parcel, the address and 59.11 property tax parcel identification number of the property, and 59.12 the number of units in the building. 59.13 [EFFECTIVE DATE.] This section is effective for claims 59.14 based on rent paid in 2005 and following years. 59.15 Sec. 33. Minnesota Statutes 2004, section 365.43, 59.16 subdivision 1, is amended to read: 59.17 Subdivision 1. [LEVIED AMOUNT IS SPENDING LIMITTOTAL 59.18 REVENUE DEFINED.] A town must notcontract debts orspend more 59.19 money in a year thanthe taxes levied for the yearits total 59.20 revenue without a favorable vote of a majority of the town's 59.21 electors. In this section, "total revenue" means property taxes 59.22 payable in that year as well as amounts received from all other 59.23 sources and amounts carried forward from the last year. 59.24 Sec. 34. Minnesota Statutes 2004, section 365.431, is 59.25 amended to read: 59.26 365.431 [AMOUNT VOTED AT MEETING IS TAX LIMIT.] 59.27 Except as otherwise authorized by law, the tax for town 59.28 purposes must not be more than the amount voted to be raised at 59.29 the annual town meeting. 59.30 Sec. 35. Minnesota Statutes 2004, section 366.011, is 59.31 amended to read: 59.32 366.011 [CHARGES FOR EMERGENCY SERVICES; COLLECTION.] 59.33 A town may impose a reasonable service charge for emergency 59.34 services, including fire, rescue, medical, and related services 59.35 provided by the town or contracted for by the town. If the 59.36 service charge remains unpaid 30 days after a notice of 60.1 delinquency is sent to the recipient of the service or the 60.2 recipient's representative or estate, the town or its contractor 60.3 on behalf of the town may use any lawful means allowed to a 60.4 private party for the collection of an unsecured delinquent 60.5 debt. The town may also use the authority of section 366.012 to 60.6 collect unpaid service charges of this kind from delinquent 60.7 recipients of services who are owners of taxable real property 60.8 in thetownstate. 60.9 The powers conferred by this section are in addition and 60.10 supplemental to the powers conferred by any other law for a town 60.11 to impose a service charge or assessment for a service provided 60.12 by the town or contracted for by the town. 60.13 [EFFECTIVE DATE.] This section is effective the day 60.14 following final enactment. 60.15 Sec. 36. Minnesota Statutes 2004, section 366.012, is 60.16 amended to read: 60.17 366.012 [COLLECTION OF UNPAID SERVICE CHARGES.] 60.18 If a town is authorized to impose a service chargeon the60.19owner, lessee, or occupant of property, or any of them,for a 60.20 governmental service provided by the town, the town board may 60.21 certify to the county auditor of the county in which the 60.22 recipient of the services owns real property, on or before 60.23 October 15 for each year, any unpaid service charges which shall 60.24 then be collected together with property taxes levied against 60.25 the property. The county auditor shall remit to the town all 60.26 service charges collected by the auditor on behalf of the town. 60.27 A charge may be certified to the auditor only if, on or before 60.28 September 15, the town has given written notice to the property 60.29 owner of its intention to certify the charge to the auditor. 60.30 The service charges shall be subject to the same penalties, 60.31 interest, and other conditions provided for the collection of 60.32 property taxes. This section is in addition to other law 60.33 authorizing the collection of unpaid costs and service charges. 60.34 [EFFECTIVE DATE.] This section is effective the day 60.35 following final enactment. 60.36 Sec. 37. [373.251] [LEVY FOR NON-COUNTY-OWNED PUBLIC 61.1 NURSING HOMES.] 61.2 (a) If a county with a population of 150,000 or more, 61.3 according to the 2000 Federal Census, located outside the 61.4 metropolitan area as defined in section 473.121, subdivision 2, 61.5 owns a nursing home that is funded in whole or part with county 61.6 revenue, the county must levy an equal amount annually to be 61.7 distributed to all other nursing homes located within the county 61.8 that are owned by governmental units. 61.9 (b) The proceeds of the levy authorized by paragraph (a) 61.10 must be prorated among the government-owned nursing homes in the 61.11 proportion that the number of beds in each of the 61.12 government-owned nursing homes is to the total number of beds in 61.13 all of the government-owned nursing homes in the county. 61.14 (c) The levy authorized by paragraph (a) may be levied in 61.15 addition to all other county levies authorized by law. 61.16 [EFFECTIVE DATE.] This section is effective for taxes 61.17 levied in 2006, payable in 2007 and thereafter. 61.18 Sec. 38. [473.450] [SPECIAL TAXING DISTRICT FOR LRT.] 61.19 Subdivision 1. [CREATION.] The council shall establish a 61.20 special taxing district to pay for the cost of operating a light 61.21 rail transit line to the extent fare revenues are insufficient 61.22 to cover those costs. 61.23 Subd. 2. [AREA OF DISTRICT.] The special taxing district 61.24 consists of the area comprised of any parcel of property 61.25 located, in whole or part, within 1,000 feet of the right-of-way 61.26 for the light rail transit line and classified as class 3 61.27 property or class 4 property. 61.28 Subd. 3. [REVENUES.] (a) The revenues of the district are 61.29 the property tax increments attributable to the increase in the 61.30 net tax capacity of the district that occurs after its 61.31 certification. The tax increments must be computed in the 61.32 manner provided in this subdivision. 61.33 (b) Upon the request of the council, the county auditor 61.34 shall certify the net tax capacity of all taxable property 61.35 within the area of the special taxing district. Certification 61.36 of original net tax capacity, captured net tax capacity, and 62.1 computation of tax increment must be done following the 62.2 procedures and methods provided under section 469.177 with the 62.3 following exceptions: 62.4 (1) the current tax rate must be used, rather than the 62.5 original tax rate under section 469.177, subdivision 1a; 62.6 (2) computations of increment must be made using the option 62.7 under section 469.177, subdivision 3, paragraph (b); 62.8 (3) the county auditor shall annually adjust the original 62.9 tax capacity of the district by the average percentage change in 62.10 the tax capacity of class 3 property in the county over the 62.11 previous assessment year. 62.12 (c) The county auditor shall pay the tax increment to the 62.13 council. Revenues may only be used for the operating costs of 62.14 light rail transit. 62.15 (d) The restrictions on or requirements for tax increment 62.16 financing districts under sections 469.174 to 469.178 do not 62.17 apply to a special taxing district, except as provided in 62.18 paragraph (b) and as follows: 62.19 (1) the county may deduct its cost of administration as 62.20 permitted under section 469.176, subdivision 4h, paragraph (a); 62.21 and 62.22 (2) to the extent that revenues under this section exceed 62.23 the projected cost of light rail transit operations that exceed 62.24 fare and other revenues, the excess must be distributed as 62.25 provided under section 469.176, subdivision 2, paragraph (c), 62.26 clause (4). 62.27 Subd. 4. [TIF AND ABATEMENT.] (a) No tax increment 62.28 financing district may be created under sections 469.174 to 62.29 469.178 within the area of the special taxing district as 62.30 defined under subdivision 2. No abatement of the incremental 62.31 tax under subdivision 3 may be made under sections 469.1812 to 62.32 469.1815. 62.33 (b) Upon decertification of parcels of a tax increment 62.34 financing district that was certified before the effective date 62.35 of this section and that are located within the area defined in 62.36 subdivision 2, the council shall request certification of the 63.1 parcels to be included in the special taxing district under this 63.2 section. The auditor must certify the original net tax capacity 63.3 of the parcels based on their tax capacity for the current taxes 63.4 payable year. 63.5 [EFFECTIVE DATE.] This section is effective beginning for 63.6 property taxes payable in 2006. Subdivision 4 applies to 63.7 requests for certification of tax increment financing districts 63.8 made after the day following final enactment. 63.9 Sec. 39. Minnesota Statutes 2004, section 473F.02, 63.10 subdivision 2, is amended to read: 63.11 Subd. 2. [AREA.] "Area" means the territory included 63.12 within the boundaries of Anoka, Carver, Dakota excluding the 63.13 city of Northfield, Hennepin, Ramsey, Scott excluding the city 63.14 of New Prague, and Washington Counties, excluding lands 63.15 constituting a major or an intermediate airport as defined under 63.16 section 473.625. 63.17 [EFFECTIVE DATE.] This section is effective for taxes 63.18 payable in 2006 and subsequent years. 63.19 Sec. 40. Minnesota Statutes 2004, section 477A.11, 63.20 subdivision 4, is amended to read: 63.21 Subd. 4. [OTHER NATURAL RESOURCES LAND.] "Other natural 63.22 resources land" means:63.23(1)any other land presently owned in fee title by the 63.24 state and administered by the commissioner, or any tax-forfeited 63.25 land, other than platted lots within a city or those lands 63.26 described under subdivision 3, clause (2), which is owned by the 63.27 state and administered by the commissioner or by the county in 63.28 which it is located; and63.29(2) land leased by the state from the United States of63.30America through the United States Secretary of Agriculture63.31pursuant to Title III of the Bankhead Jones Farm Tenant Act,63.32which land is commonly referred to as land utilization project63.33land that is administered by the commissioner. 63.34 [EFFECTIVE DATE.] This section is effective for aids paid 63.35 in calendar year 2006 and thereafter. 63.36 Sec. 41. Minnesota Statutes 2004, section 477A.11, is 64.1 amended by adding a subdivision to read: 64.2 Subd. 5. [LAND UTILIZATION PROJECT LAND.] "Land 64.3 utilization project land" means land that is leased by the state 64.4 from the United States through the United States Secretary of 64.5 Agriculture according to Title III of the Bankhead Jones Farm 64.6 Tenant Act and that is administered by the commissioner. 64.7 [EFFECTIVE DATE.] This section is effective for aids paid 64.8 in calendar year 2006 and thereafter. 64.9 Sec. 42. Minnesota Statutes 2004, section 477A.12, 64.10 subdivision 1, is amended to read: 64.11 Subdivision 1. [TYPES OF LAND; PAYMENTS.] (a) As an offset 64.12 for expenses incurred by counties and towns in support of 64.13 natural resources lands, the following amounts are annually 64.14 appropriated to the commissioner of natural resources from the 64.15 general fund for transfer to the commissioner of revenue. The 64.16 commissioner of revenue shall pay the transferred funds to 64.17 counties as required by sections 477A.11 to 477A.145. The 64.18 amounts are: 64.19 (1) for acquired natural resources land, $3, as adjusted 64.20 for inflation under section 477A.145, multiplied by the total 64.21 number of acres of acquired natural resources land or, at the 64.22 county's option three-fourths of one percent of the appraised 64.23 value of all acquired natural resources land in the county, 64.24 whichever is greater; 64.25 (2) 75 cents, as adjusted for inflation under section 64.26 477A.145, multiplied by the number of acres of 64.27 county-administered other natural resources land; and 64.28 (3) 75 cents, as adjusted for inflation under section 64.29 477A.145, multiplied by the total number of acres of land 64.30 utilization project land; 64.31(3)(4) 37.5 cents, as adjusted for inflation under section 64.32 477A.145, multiplied by the number of acres of 64.33 commissioner-administered other natural resources land located 64.34 in each county as of July 1 of each year prior to the payment 64.35 year. 64.36 (b) The amount determined under paragraph (a), clause (1), 65.1 is payable for land that is acquired from a private owner and 65.2 owned by the Department of Transportation for the purpose of 65.3 replacing wetland losses caused by transportation projects, but 65.4 only if the county contains more than 500 acres of such land at 65.5 the time the certification is made under subdivision 2. 65.6 [EFFECTIVE DATE.] This section is effective for aids paid 65.7 in calendar year 2006 and thereafter. 65.8 Sec. 43. Minnesota Statutes 2004, section 477A.12, 65.9 subdivision 2, is amended to read: 65.10 Subd. 2. [PROCEDURE.] Lands for which payments in lieu are 65.11 made pursuant to section 97A.061, subdivision 3, and Laws 1973, 65.12 chapter 567, shall not be eligible for payments under this 65.13 section. Each county auditor shall certify to the Department of 65.14 Natural Resources during July of each year prior to the payment 65.15 year the number of acres of county-administered other natural 65.16 resources land within the county. The Department of Natural 65.17 resources may, in addition to the certification of acreage, 65.18 require descriptive lists of land so certified. The 65.19 commissioner of natural resources shall determine and certify to 65.20 the commissioner of revenue by March 1 of the payment year: 65.21 (1) the number of acres and most recent appraised value of 65.22 acquired natural resources land within each county; 65.23 (2) the number of acres of commissioner-administered 65.24 natural resources land within each county;and65.25 (3) the number of acres of county-administered other 65.26 natural resources land within each county, based on the reports 65.27 filed by each county auditor with the commissioner of natural 65.28 resources; and 65.29 (4) the number of acres of land utilization project land 65.30 within each county. 65.31 The commissioner of transportation shall determine and 65.32 certify to the commissioner of revenue by March 1 of the payment 65.33 year the number of acres of land and the appraised value of the 65.34 land described in subdivision 1, paragraph (b), but only if it 65.35 exceeds 500 acres. 65.36 The commissioner of revenue shall determine the 66.1 distributions provided for in this section using the number of 66.2 acres and appraised values certified by the commissioner of 66.3 natural resources and the commissioner of transportation by 66.4 March 1 of the payment year. 66.5 [EFFECTIVE DATE.] This section is effective for aids paid 66.6 in calendar year 2006 and thereafter. 66.7 Sec. 44. Minnesota Statutes 2004, section 477A.14, 66.8 subdivision 1, is amended to read: 66.9 Subdivision 1. [GENERAL DISTRIBUTION.] Except as provided 66.10 in subdivision 2 or in section 97A.061, subdivision 5, 40 66.11 percent of the total payment to the county shall be deposited in 66.12 the county general revenue fund to be used to provide property 66.13 tax levy reduction. The remainder shall be distributed by the 66.14 county in the following priority: 66.15 (a) 37.5 cents, as adjusted for inflation under section 66.16 477A.145, for each acre of county-administered other natural 66.17 resources land shall be deposited in a resource development fund 66.18 to be created within the county treasury for use in resource 66.19 development, forest management, game and fish habitat 66.20 improvement, and recreational development and maintenance of 66.21 county-administered other natural resources land. Any county 66.22 receiving less than $5,000 annually for the resource development 66.23 fund may elect to deposit that amount in the county general 66.24 revenue fund; 66.25 (b) From the funds remaining, within 30 days of receipt of 66.26 the payment to the county, the county treasurer shall pay each 66.27 organized township 30 cents, as adjusted for inflation under 66.28 section 477A.145, for each acre of acquired natural resources 66.29 land and each acre of land described in section 477A.12, 66.30 subdivision 1, paragraph (b), and 7.5 cents, as adjusted for 66.31 inflation under section 477A.145, for each acre of other natural 66.32 resources land and each acre of land utilization project land 66.33 located within its boundaries. Payments for natural resources 66.34 lands not located in an organized township shall be deposited in 66.35 the county general revenue fund. Payments to counties and 66.36 townships pursuant to this paragraph shall be used to provide 67.1 property tax levy reduction, except that of the payments for 67.2 natural resources lands not located in an organized township, 67.3 the county may allocate the amount determined to be necessary 67.4 for maintenance of roads in unorganized townships. Provided 67.5 that, if the total payment to the county pursuant to section 67.6 477A.12 is not sufficient to fully fund the distribution 67.7 provided for in this clause, the amount available shall be 67.8 distributed to each township and the county general revenue fund 67.9 on a pro rata basis; and 67.10 (c) Any remaining funds shall be deposited in the county 67.11 general revenue fund. Provided that, if the distribution to the 67.12 county general revenue fund exceeds $35,000, the excess shall be 67.13 used to provide property tax levy reduction. 67.14 [EFFECTIVE DATE.] This section is effective for aids paid 67.15 in calendar year 2006 and thereafter. 67.16 Sec. 45. Laws 1998, chapter 389, article 3, section 42, 67.17 subdivision 2, as amended by Laws 2002, chapter 377, article 4, 67.18 section 24, is amended to read: 67.19 Subd. 2. [RECAPTURE.] (a) Property or any portion thereof 67.20 qualifying under section 38 is subject to additional taxes if: 67.21 (1) ownership of the property is transferred to anyone 67.22 other than the spouse or child of the current owner; 67.23 (2) the current owner or the spouse or child of the current 67.24 owner has not conveyed or entered into a contract before July 1, 67.25 2007, to convey for ownership or public easement rights, (i) a 67.26 portion of the property toaone or more nonprofitfoundation67.27 foundations orcorporation operatingcorporations; and (ii) a 67.28 portion of the property to one or more local governments; and 67.29 those entities shall separately or jointly operate the property 67.30 as an art park providing the services included in section 38, 67.31 clauses (2) to (5), and may also use some of the property for 67.32 other public purposes as determined by the local governments; or 67.33 (3) the nonprofit foundation or corporation to which a 67.34 portion of the property was transferred ceases to provide the 67.35 services included in section 38, clauses (2) to (5), earlier 67.36 than ten years following the effective date of theconveyance68.1 conveyances or of the execution of thecontractcontracts to 68.2 convey. 68.3 (b) The additional taxes are imposed at the earlier of (1) 68.4 the year following transfer of ownership to anyone other than 68.5 the spouse or child of the current owner or a nonprofit 68.6 foundation or corporation or local government operating the 68.7 property as an art park and used for other public purposes, or 68.8 (2) for taxes payable in 2008, or (3) in the event the nonprofit 68.9 foundation or corporation to which a portion of the property was 68.10 conveyed ceases to provide the required services within ten 68.11 years after the conveyance, for taxes payable in the year 68.12 following the year when it ceased to do so. 68.13 The county board, with the approval of the city council, 68.14 shall determine the amount of the additional taxes due on the 68.15 portion of property which is no longer utilized as an art park; 68.16 provided, however, that the additional taxesare equal tomust 68.17 not be greater than the difference between the taxes determined 68.18 on that portion of the property utilized as an art park under 68.19 sections 39 and 40 and the amount determined under subdivision 1 68.20 for all years that the property qualified under section 38.The68.21additional taxes must be extended against the property on the68.22tax list for the current year; provided, however, thatNo 68.23 interest or penalties may be levied on the additionaltaxes if68.24timely paidamount provided that it is paid within 30 days of 68.25 the county's notice. 68.26 [EFFECTIVE DATE.] This section is effective March 1, 2005. 68.27 Sec. 46. Laws 2001, First Special Session chapter 5, 68.28 article 3, section 8, the effective date, is amended to read: 68.29 [EFFECTIVE DATE.] This section is effective for taxes 68.30 levied in 2002, payable in 2003, through taxes levied in200768.31 2009, payable in20082010. 68.32 Sec. 47. Laws 2005, chapter 43, section 1, the effective 68.33 date, if enacted, is amended to read: 68.34 [EFFECTIVE DATE.] This section is effective for taxes 68.35 levied in20052004, payable in20062005, and thereafter. 68.36 [EFFECTIVE DATE.] This section is effective the day 69.1 following final enactment. 69.2 Sec. 48. [REPORT; PROPOSED STANDARDIZED ASSESSMENT AND 69.3 CLASSIFICATION STANDARDS.] 69.4 Recognizing the importance of uniform and professional 69.5 property tax assessment practices, the commissioner of revenue, 69.6 in consultation with appropriate stakeholder groups shall 69.7 develop and issue a report to the chairs of the house and senate 69.8 tax committees by February 1, 2006. This report shall contain, 69.9 but not be limited to, recommendations and proposed requirements 69.10 for achieving standardized assessment and classification of 69.11 seasonal residential recreational property, residential 69.12 nonhomestead property, timber and woodland property, green acres 69.13 property, seasonal residential recreational commercial and 69.14 noncommercial property, and commercial/industrial property. 69.15 [EFFECTIVE DATE.] This section is effective the day 69.16 following final enactment. 69.17 Sec. 49. [CODE OF CONDUCT AND ETHICS; ASSESSORS.] 69.18 The commissioner of revenue is directed to develop a code 69.19 of conduct and ethics for Minnesota assessors to ensure public 69.20 confidence in property assessment. The commissioner shall 69.21 consult with representatives of the Minnesota Association of 69.22 Assessing Officers, the State Board of Assessors, and any other 69.23 groups that the commissioner deems appropriate. The code must 69.24 include language that promotes fairness and uniformity and 69.25 recommends assessment practices that do not promote the 69.26 perception of a conflict of interest. The code must be 69.27 completed and recommended to the Minnesota State Board of 69.28 Assessors for adopting by January 1, 2006. This code must be 69.29 presented as part of the course required by Minnesota Statutes, 69.30 section 273.0755, paragraph (c). 69.31 [EFFECTIVE DATE.] This section is effective the day 69.32 following final enactment. 69.33 Sec. 50. [SCHOOL DEBT SERVICE LEVIES; ALTERNATIVE TAX 69.34 BASE; PILOT PROJECT.] 69.35 Subdivision 1. [COMMISSIONER DESIGNATION.] The 69.36 commissioner of education may select up to three school 70.1 districts to participate in the pilot project under this 70.2 section. The commissioner must notify the selected school 70.3 districts by July 1, 2005. 70.4 Subd. 2. [ELECTION BY SCHOOL BOARD.] A school board 70.5 designated by the commissioner under subdivision 1 may by 70.6 resolution elect to levy the debt service for a bond issued 70.7 after July 1, 2005, and before July 1, 2007, against the 70.8 alternative net tax capacity of the district, as defined under 70.9 subdivision 6, rather than the net tax capacity of the 70.10 district. A resolution to levy against alternative net tax 70.11 capacity must be passed at an open meeting of the board, at 70.12 least 60 days prior to the referendum election. A district 70.13 electing to issue bonds with a levy against alternative net tax 70.14 capacity must notify the commissioner of that intention in 70.15 filing the proposal required by Minnesota Statutes, section 70.16 123B.71, subdivision 9. 70.17 Subd. 3. [DEBT SERVICE EQUALIZATION REVENUE.] For the 70.18 purposes of Minnesota Statutes, section 123B.53, subdivision 4, 70.19 debt service equalization revenue for a district that has issued 70.20 bonds under an election to levy against alternative net tax 70.21 capacity is the same as it would be if the levy were being made 70.22 against net tax capacity. 70.23 Subd. 4. [APPORTIONMENT OF DEBT SERVICE AID.] Equalization 70.24 aid for a district that has issued bonds under an election to 70.25 levy against alternative net tax capacity must be apportioned 70.26 between the net tax capacity debt service levy and the 70.27 alternative net tax capacity debt service levy in the same 70.28 proportions as eligible debt service revenues resulting from 70.29 bonds issued against net tax capacity are to eligible debt 70.30 service revenues resulting from bonds issued against alternative 70.31 net tax capacity. 70.32 Subd. 5. [ALTERNATIVE NET TAX CAPACITY DEBT SERVICE LEVY.] 70.33 The eligible debt service revenues resulting from bonds issued 70.34 against alternative net tax capacity, minus the debt service 70.35 equalization aid apportioned to the alternative net tax capacity 70.36 levy, must be levied against the alternative net tax capacity of 71.1 the district as defined in subdivision 6, and must be separately 71.2 certified to the county auditor under Minnesota Statutes, 71.3 section 275.07. 71.4 Subd. 6. [ALTERNATIVE NET TAX CAPACITY.] "Alternative net 71.5 tax capacity" means the net tax capacity of all taxable property 71.6 in a district, as defined in Minnesota Statutes, section 273.13, 71.7 except: 71.8 (1) the first tier of class 2a property, excluding the 71.9 portion of class 2a property consisting of the house, garage, 71.10 and surrounding one acre of land of an agricultural homestead, 71.11 has an alternative net tax capacity equal to 0.14 percent of its 71.12 taxable market value; 71.13 (2) the upper tier of class 2a property and all other class 71.14 2 property has an alternative net tax capacity equal to 0.25 71.15 percent of its taxable market value; 71.16 (3) noncommercial class 4c(1) property has an alternative 71.17 net tax capacity equal to 0.75 percent of its taxable market 71.18 value; 71.19 (4) class 4a and 4b property has an alternative net tax 71.20 capacity equal to one percent of its taxable market value; 71.21 (5) the first tier of class 3 property has an alternative 71.22 net tax capacity equal to 1.25 percent of its taxable market 71.23 value; and 71.24 (6) class 5 property and the upper tier of class 3 property 71.25 has an alternative net tax capacity equal to 1.5 percent of its 71.26 taxable market value. 71.27 [EFFECTIVE DATE.] This section is effective for taxes 71.28 payable in 2006 and thereafter. 71.29 Sec. 51. [SCHOOL PROPERTY; EXEMPTION 2005 ONLY.] 71.30 Notwithstanding Minnesota Statutes, section 272.02, 71.31 subdivision 38, paragraph (b), the following property is exempt 71.32 from taxation for assessment year 2004, for taxes payable in 71.33 2005, if it meets all the following criteria: 71.34 (1) is used to provide direct educational instruction for 71.35 grades 7 through 10; 71.36 (2) is located in a city of the first class that has a 72.1 population greater than 250,000 and less than 350,000; 72.2 (3) was purchased after July 1, 2004, by a nonprofit that 72.3 is exempt from federal income tax under section 501(c)(3) of the 72.4 Internal Revenue Code; and 72.5 (4) is leased and operated by two nonprofit corporations 72.6 organized under Minnesota Statutes, chapter 317A. 72.7 [EFFECTIVE DATE.] This section is effective the day 72.8 following final enactment. 72.9 Sec. 52. [REPEALER.] 72.10 Laws 1998, chapter 389, article 3, section 41, is repealed. 72.11 [EFFECTIVE DATE.] This section is effective the day 72.12 following final enactment. 72.13 ARTICLE 3 72.14 PROPERTY TAX AIDS AND CREDITS 72.15 Section 1. Minnesota Statutes 2004, section 4A.02, is 72.16 amended to read: 72.17 4A.02 [STATE DEMOGRAPHER.] 72.18 (a) The director shall appoint a state demographer. The 72.19 demographer must be professionally competent in demography and 72.20 must possess demonstrated ability based upon past performance. 72.21 (b) The demographer shall: 72.22 (1) continuously gather and develop demographic data 72.23 relevant to the state; 72.24 (2) design and test methods of research and data 72.25 collection; 72.26 (3) periodically prepare population projections for the 72.27 state and designated regions and periodically prepare 72.28 projections for each county or other political subdivision of 72.29 the state as necessary to carry out the purposes of this 72.30 section; 72.31 (4) review, comment on, and prepare analysis of population 72.32 estimates and projections made by state agencies, political 72.33 subdivisions, other states, federal agencies, or nongovernmental 72.34 persons, institutions, or commissions; 72.35 (5) serve as the state liaison with the United States 72.36 Bureau of the Census, coordinate state and federal demographic 73.1 activities to the fullest extent possible, and aid the 73.2 legislature in preparing a census data plan and form for each 73.3 decennial census; 73.4 (6) compile an annual study of population estimates on the 73.5 basis of county, regional, or other political or geographical 73.6 subdivisions as necessary to carry out the purposes of this 73.7 section and section 4A.03; 73.8 (7) by January 1 of each year, issue a report to the 73.9 legislature containing an analysis of the demographic 73.10 implications of the annual population study and population 73.11 projections; 73.12 (8) prepare maps for all counties in the state, all 73.13 municipalities with a population of 10,000 or more, and other 73.14 municipalities as needed for census purposes, according to scale 73.15 and detail recommended by the United States Bureau of the 73.16 Census, with the maps of cities showing precinct boundaries; 73.17 (9) prepare an estimate of population and of the number of 73.18 households for each governmental subdivision for which the 73.19 Metropolitan Council does not prepare an annual estimate, and 73.20 convey the estimates to the governing body of each political 73.21 subdivision byMayJune 1 of each year; 73.22 (10) direct, under section 414.01, subdivision 14, and 73.23 certify population and household estimates of annexed or 73.24 detached areas of municipalities or towns after being notified 73.25 of the order or letter of approval by the director; 73.26 (11) prepare, for any purpose for which a population 73.27 estimate is required by law or needed to implement a law, a 73.28 population estimate of a municipality or town whose population 73.29 is affected by action under section 379.02 or 414.01, 73.30 subdivision 14; and 73.31 (12) prepare an estimate of average household size for each 73.32 statutory or home rule charter city with a population of 2,500 73.33 or more byMayJune 1 of each year. 73.34 (c) A governing body may challenge an estimate made under 73.35 paragraph (b) by filing their specific objections in writing 73.36 with the state demographer by June1024. If the challenge does 74.1 not result in an acceptable estimateby June 24, the governing 74.2 body may have a special census conducted by the United States 74.3 Bureau of the Census. The political subdivision must notify the 74.4 state demographer by July 1 of its intent to have the special 74.5 census conducted. The political subdivision must bear all costs 74.6 of the special census. Results of the special census must be 74.7 received by the state demographer by the next April 15 to be 74.8 used in that year'sMayJune 1 estimate to the political 74.9 subdivision under paragraph (b). 74.10 (d) The state demographer shall certify the estimates of 74.11 population and household size to the commissioner of revenue by 74.12 July 15 each year, including any estimates still under objection. 74.13 [EFFECTIVE DATE.] This section is effective the day 74.14 following final enactment. 74.15 Sec. 2. Minnesota Statutes 2004, section 273.1384, 74.16 subdivision 1, is amended to read: 74.17 Subdivision 1. [RESIDENTIAL HOMESTEAD MARKET VALUE 74.18 CREDIT.] Each county auditor shall determine a homestead credit 74.19 for each class 1a, 1b, 1c, and 2a homestead property within the 74.20 county equal to 0.4 percent of the first $76,000 of market value 74.21 of the property. The amount of homestead credit for a homestead74.22may not exceed $304 and is reduced byminus .09 percent of the 74.23 market value in excess of $76,000. The credit amount may not be 74.24 less than zero. In the case of an agricultural or resort 74.25 homestead, only the market value of the house, garage, and 74.26 immediately surrounding one acre of land is eligible in 74.27 determining the property's homestead credit. In the case of a 74.28 property which is classified as part homestead and part 74.29 nonhomestead, (i) the credit shall apply only to the homestead 74.30 portion of the property., but (ii) if a portion of a property is 74.31 classified as nonhomestead solely because not all the owners 74.32 occupy the property, or solely because both spouses do not 74.33 occupy the property, the credit amount shall be initially 74.34 computed as if that nonhomestead portion were also in the 74.35 homestead class and then prorated to the owner-occupant's 74.36 percentage of ownership or prorated to one-half if both spouses 75.1 do not occupy the property. 75.2 [EFFECTIVE DATE.] This section is effective for taxes 75.3 payable in 2006 and thereafter. 75.4 Sec. 3. Minnesota Statutes 2004, section 276A.01, 75.5 subdivision 7, is amended to read: 75.6 Subd. 7. [POPULATION.] "Population" means the most recent 75.7 estimate of the population of a municipality made by the state 75.8 demographer and filed with the commissioner of revenue as of 75.9 July115 of the year in which a municipality's distribution net 75.10 tax capacity is calculated. The state demographer shall 75.11 annually estimate the population of each municipality and, in 75.12 the case of a municipality which is located partly within and 75.13 partly without the area, the proportion of the total which 75.14 resides within the area, and shall file the estimates with the 75.15 commissioner of revenue. 75.16 [EFFECTIVE DATE.] This section is effective the day 75.17 following final enactment. 75.18 Sec. 4. [473.24] [POPULATION ESTIMATES.] 75.19 (a) The Metropolitan Council shall annually prepare an 75.20 estimate of population for each county, city, and town in the 75.21 metropolitan area and an estimate of the number of households 75.22 and average household size for each city in the metropolitan 75.23 area with a population of 2,500 or more, and an estimate of 75.24 population over age 65 for each county in the metropolitan area, 75.25 and convey the estimates to the governing body of each county, 75.26 city, or town by June 1 each year. In the case of a city or 75.27 town that is located partly within and partly without the 75.28 metropolitan area, the Metropolitan Council shall estimate the 75.29 proportion of the total population and the average size of 75.30 households that reside within the area. The Metropolitan 75.31 Council may prepare an estimate of the population and of the 75.32 average household size for any other political subdivision 75.33 located in the metropolitan area. 75.34 (b) A governing body may challenge an estimate made under 75.35 this section by filing its specific objections in writing with 75.36 the Metropolitan Council by June 24. If the challenge does not 76.1 result in an acceptable estimate, the governing body may have a 76.2 special census conducted by the United States Bureau of the 76.3 Census. The political subdivision must notify the Metropolitan 76.4 Council on or before July 1 of its intent to have the special 76.5 census conducted. The political subdivision must bear all costs 76.6 of the special census. Results of the special census must be 76.7 received by the Metropolitan Council by the next April 15 to be 76.8 used in that year's June 1 estimate under this section. The 76.9 Metropolitan Council shall certify the estimates of population 76.10 and the average household size to the state demographer and to 76.11 the commissioner of revenue by July 15 each year, including any 76.12 estimates still under objection. 76.13 [EFFECTIVE DATE.] This section is effective the day 76.14 following final enactment. 76.15 Sec. 5. Minnesota Statutes 2004, section 473F.02, 76.16 subdivision 7, is amended to read: 76.17 Subd. 7. [POPULATION.] "Population" means the most recent 76.18 estimate of the population of a municipality made by the 76.19 Metropolitan Council under section 473.24 and filed with the 76.20 commissioner of revenue as of July115 of the year in which a 76.21 municipality's distribution net tax capacity is calculated.The76.22council shall annually estimate the population of each76.23municipality as of a date which it determines and, in the case76.24of a municipality which is located partly within and partly76.25without the area, the proportion of the total which resides76.26within the area, and shall promptly thereafter file its76.27estimates with the commissioner of revenue.76.28 [EFFECTIVE DATE.] This section is effective the day 76.29 following final enactment. 76.30 Sec. 6. Minnesota Statutes 2004, section 477A.011, 76.31 subdivision 3, is amended to read: 76.32 Subd. 3. [POPULATION.] "Population" means the 76.33 population estimated or established as of July115 in an aid 76.34 calculation year by the most recent federal census, by a special 76.35 census conducted under contract with the United States Bureau of 76.36 the Census, by a population estimate made by the Metropolitan 77.1 Council pursuant to section 473.24, or by a population estimate 77.2 of the state demographer made pursuant to section 4A.02, 77.3 whichever is the most recent as to the stated date of the count 77.4 or estimate for the preceding calendar year, and which has been 77.5 certified to the commissioner of revenue on or before July 15 of 77.6 the aid calculation year. The term "per capita" refers to 77.7 population as defined by this subdivision. A revision of an 77.8 estimate or count is effective for these purposes only if it is 77.9 certified to the commissioner on or before July 15 of the aid 77.10 calculation year. Clerical errors in the certification or use 77.11 of the estimates and counts established as of July 15 in the aid 77.12 calculation year are subject to correction within the time 77.13 periods allowed under section 477A.014. 77.14 [EFFECTIVE DATE.] This section is effective the day 77.15 following final enactment. 77.16 Sec. 7. Minnesota Statutes 2004, section 477A.011, 77.17 subdivision 34, is amended to read: 77.18 Subd. 34. [CITY REVENUE NEED.] (a) For a city with a 77.19 population equal to or greater than 2,500, "city revenue need" 77.20 is the sum of (1) 5.0734098 times the pre-1940 housing 77.21 percentage; plus (2) 19.141678 times the population decline 77.22 percentage; plus (3) 2504.06334 times the road accidents factor; 77.23 plus (4) 355.0547; minus (5) the metropolitan area factor; minus 77.24 (6) 49.10638 times the household size. 77.25 (b) For a city with a population less than 2,500, "city 77.26 revenue need" is the sum of (1) 2.387 times the pre-1940 housing 77.27 percentage; plus (2) 2.67591 times the commercial industrial 77.28 percentage; plus (3) 3.16042 times the population decline 77.29 percentage; plus (4) 1.206 times the transformed population; 77.30 minus (5) 62.772. 77.31 (c) For a city with a population of 2,500 or more and a 77.32 population in one of the most recently available five years that 77.33 was less than 2,500, "city revenue need" is the sum of (1) its 77.34 city revenue need calculated under paragraph (a) multiplied by 77.35 its transition factor; plus (2) its city revenue need calculated 77.36 under the formula in paragraph (b) multiplied by the difference 78.1 between one and its transition factor. For purposes of this 78.2 paragraph, a city's "transition factor" is equal to 0.2 78.3 multiplied by the number of years that the city's population 78.4 estimate has been 2,500 or more. This provision only applies 78.5 for aids payable in calendar years 2006 to 2008 to cities with a 78.6 2002 population of less than 2,500. It applies to any city for 78.7 aids payable in 2009 and thereafter. 78.8 (d) The city revenue need cannot be less than zero. 78.9(d)(e) For calendar year 2005 and subsequent years, the 78.10 city revenue need for a city, as determined in paragraphs (a) 78.11 to(c)(d), is multiplied by the ratio of the annual implicit 78.12 price deflator for government consumption expenditures and gross 78.13 investment for state and local governments as prepared by the 78.14 United States Department of Commerce, for the most recently 78.15 available year to the 2003 implicit price deflator for state and 78.16 local government purchases. 78.17 [EFFECTIVE DATE.] This section is effective beginning with 78.18 aids payable in 2006. 78.19 Sec. 8. Minnesota Statutes 2004, section 477A.011, 78.20 subdivision 35, is amended to read: 78.21 Subd. 35. [TAX EFFORT RATE.] "Tax effort rate" means the 78.22 net levy for all cities divided by the sum of the city net tax 78.23 capacity for all cities, unless the need increase percentage 78.24 determined under section 477A.013, subdivision 8, is 100 78.25 percent, in which case the tax effort rate is the rate needed so 78.26 that the total aid under section 477A.013, subdivision 9, equals 78.27 the total amount available for aid under section 477A.03, after 78.28 the subtractions in section 477A.014. For purposes of this 78.29 section, "net levy" means the city levy, after all adjustments, 78.30 used for calculating the local tax rate under section 275.08 for 78.31 taxes payable in the year prior to the aid distribution. The 78.32 fiscal disparity distribution levy under chapter 276A or 473F is 78.33 included in net levy. 78.34 [EFFECTIVE DATE.] This section is effective beginning with 78.35 aids payable in 2006. 78.36 Sec. 9. Minnesota Statutes 2004, section 477A.011, 79.1 subdivision 36, is amended to read: 79.2 Subd. 36. [CITY AID BASE.] (a) Except as otherwise 79.3 provided in this subdivision, "city aid base" is zero. 79.4 (b) The city aid base for any city with a population less 79.5 than 500 is increased by $40,000 for aids payable in calendar 79.6 year 1995 and thereafter, and the maximum amount of total aid it 79.7 may receive under section 477A.013, subdivision 9, paragraph 79.8 (c), is also increased by $40,000 for aids payable in calendar 79.9 year 1995 only, provided that: 79.10 (i) the average total tax capacity rate for taxes payable 79.11 in 1995 exceeds 200 percent; 79.12 (ii) the city portion of the tax capacity rate exceeds 100 79.13 percent; and 79.14 (iii) its city aid base is less than $60 per capita. 79.15 (c) The city aid base for a city is increased by $20,000 in 79.16 1998 and thereafter and the maximum amount of total aid it may 79.17 receive under section 477A.013, subdivision 9, paragraph (c), is 79.18 also increased by $20,000 in calendar year 1998 only, provided 79.19 that: 79.20 (i) the city has a population in 1994 of 2,500 or more; 79.21 (ii) the city is located in a county, outside of the 79.22 metropolitan area, which contains a city of the first class; 79.23 (iii) the city's net tax capacity used in calculating its 79.24 1996 aid under section 477A.013 is less than $400 per capita; 79.25 and 79.26 (iv) at least four percent of the total net tax capacity, 79.27 for taxes payable in 1996, of property located in the city is 79.28 classified as railroad property. 79.29 (d) The city aid base for a city is increased by $200,000 79.30 in 1999 and thereafter and the maximum amount of total aid it 79.31 may receive under section 477A.013, subdivision 9, paragraph 79.32 (c), is also increased by $200,000 in calendar year 1999 only, 79.33 provided that: 79.34 (i) the city was incorporated as a statutory city after 79.35 December 1, 1993; 79.36 (ii) its city aid base does not exceed $5,600; and 80.1 (iii) the city had a population in 1996 of 5,000 or more. 80.2 (e) The city aid base for a city is increased by $450,000 80.3 in 1999 to 2008 and the maximum amount of total aid it may 80.4 receive under section 477A.013, subdivision 9, paragraph (c), is 80.5 also increased by $450,000 in calendar year 1999 only, provided 80.6 that: 80.7 (i) the city had a population in 1996 of at least 50,000; 80.8 (ii) its population had increased by at least 40 percent in 80.9 the ten-year period ending in 1996; and 80.10 (iii) its city's net tax capacity for aids payable in 1998 80.11 is less than $700 per capita. 80.12 (f) Beginning in 2004, the city aid base for a city is 80.13 equal to the sum of its city aid base in 2003 and the amount of 80.14 additional aid it was certified to receive under section 477A.06 80.15 in 2003. For 2004 only, the maximum amount of total aid a city 80.16 may receive under section 477A.013, subdivision 9, paragraph 80.17 (c), is also increased by the amount it was certified to receive 80.18 under section 477A.06 in 2003. 80.19 (g) The city aid base for a city is increased by $150,000 80.20 for aids payable in 2000 and thereafter, and the maximum amount 80.21 of total aid it may receive under section 477A.013, subdivision 80.22 9, paragraph (c), is also increased by $150,000 in calendar year 80.23 2000 only, provided that: 80.24 (1) the city has a population that is greater than 1,000 80.25 and less than 2,500; 80.26 (2) its commercial and industrial percentage for aids 80.27 payable in 1999 is greater than 45 percent; and 80.28 (3) the total market value of all commercial and industrial 80.29 property in the city for assessment year 1999 is at least 15 80.30 percent less than the total market value of all commercial and 80.31 industrial property in the city for assessment year 1998. 80.32 (h) The city aid base for a city is increased by $200,000 80.33 in 2000 and thereafter, and the maximum amount of total aid it 80.34 may receive under section 477A.013, subdivision 9, paragraph 80.35 (c), is also increased by $200,000 in calendar year 2000 only, 80.36 provided that: 81.1 (1) the city had a population in 1997 of 2,500 or more; 81.2 (2) the net tax capacity of the city used in calculating 81.3 its 1999 aid under section 477A.013 is less than $650 per 81.4 capita; 81.5 (3) the pre-1940 housing percentage of the city used in 81.6 calculating 1999 aid under section 477A.013 is greater than 12 81.7 percent; 81.8 (4) the 1999 local government aid of the city under section 81.9 477A.013 is less than 20 percent of the amount that the formula 81.10 aid of the city would have been if the need increase percentage 81.11 was 100 percent; and 81.12 (5) the city aid base of the city used in calculating aid 81.13 under section 477A.013 is less than $7 per capita. 81.14 (i) The city aid base for a city is increased by $102,000 81.15 in 2000 and thereafter, and the maximum amount of total aid it 81.16 may receive under section 477A.013, subdivision 9, paragraph 81.17 (c), is also increased by $102,000 in calendar year 2000 only, 81.18 provided that: 81.19 (1) the city has a population in 1997 of 2,000 or more; 81.20 (2) the net tax capacity of the city used in calculating 81.21 its 1999 aid under section 477A.013 is less than $455 per 81.22 capita; 81.23 (3) the net levy of the city used in calculating 1999 aid 81.24 under section 477A.013 is greater than $195 per capita; and 81.25 (4) the 1999 local government aid of the city under section 81.26 477A.013 is less than 38 percent of the amount that the formula 81.27 aid of the city would have been if the need increase percentage 81.28 was 100 percent. 81.29 (j) The city aid base for a city is increased by $32,000 in 81.30 2001 and thereafter, and the maximum amount of total aid it may 81.31 receive under section 477A.013, subdivision 9, paragraph (c), is 81.32 also increased by $32,000 in calendar year 2001 only, provided 81.33 that: 81.34 (1) the city has a population in 1998 that is greater than 81.35 200 but less than 500; 81.36 (2) the city's revenue need used in calculating aids 82.1 payable in 2000 was greater than $200 per capita; 82.2 (3) the city net tax capacity for the city used in 82.3 calculating aids available in 2000 was equal to or less than 82.4 $200 per capita; 82.5 (4) the city aid base of the city used in calculating aid 82.6 under section 477A.013 is less than $65 per capita; and 82.7 (5) the city's formula aid for aids payable in 2000 was 82.8 greater than zero. 82.9 (k) The city aid base for a city is increased by $7,200 in 82.10 2001 and thereafter, and the maximum amount of total aid it may 82.11 receive under section 477A.013, subdivision 9, paragraph (c), is 82.12 also increased by $7,200 in calendar year 2001 only, provided 82.13 that: 82.14 (1) the city had a population in 1998 that is greater than 82.15 200 but less than 500; 82.16 (2) the city's commercial industrial percentage used in 82.17 calculating aids payable in 2000 was less than ten percent; 82.18 (3) more than 25 percent of the city's population was 60 82.19 years old or older according to the 1990 census; 82.20 (4) the city aid base of the city used in calculating aid 82.21 under section 477A.013 is less than $15 per capita; and 82.22 (5) the city's formula aid for aids payable in 2000 was 82.23 greater than zero. 82.24 (l) The city aid base for a city is increased by $45,000 in 82.25 2001 and thereafter and by an additional $50,000 in calendar 82.26 years 2002 to 2011, and the maximum amount of total aid it may 82.27 receive under section 477A.013, subdivision 9, paragraph (c), is 82.28 also increased by $45,000 in calendar year 2001 only, and by 82.29 $50,000 in calendar year 2002 only, provided that: 82.30 (1) the net tax capacity of the city used in calculating 82.31 its 2000 aid under section 477A.013 is less than $810 per 82.32 capita; 82.33 (2) the population of the city declined more than two 82.34 percent between 1988 and 1998; 82.35 (3) the net levy of the city used in calculating 2000 aid 82.36 under section 477A.013 is greater than $240 per capita; and 83.1 (4) the city received less than $36 per capita in aid under 83.2 section 477A.013, subdivision 9, for aids payable in 2000. 83.3 (m) The city aid base for a city with a population of 83.4 10,000 or more which is located outside of the seven-county 83.5 metropolitan area is increased in 2002 and thereafter, and the 83.6 maximum amount of total aid it may receive under section 83.7 477A.013, subdivision 9, paragraph (b) or (c), is also increased 83.8 in calendar year 2002 only, by an amount equal to the lesser of: 83.9 (1)(i) the total population of the city, as determined by 83.10 the United States Bureau of the Census, in the 2000 census, (ii) 83.11 minus 5,000, (iii) times 60; or 83.12 (2) $2,500,000. 83.13 (n) The city aid base is increased by $50,000 in 2002 and 83.14 thereafter, and the maximum amount of total aid it may receive 83.15 under section 477A.013, subdivision 9, paragraph (c), is also 83.16 increased by $50,000 in calendar year 2002 only, provided that: 83.17 (1) the city is located in the seven-county metropolitan 83.18 area; 83.19 (2) its population in 2000 is between 10,000 and 20,000; 83.20 and 83.21 (3) its commercial industrial percentage, as calculated for 83.22 city aid payable in 2001, was greater than 25 percent. 83.23 (o) The city aid base for a city is increased by $150,000 83.24 in calendar years 2002 to 2011 and the maximum amount of total 83.25 aid it may receive under section 477A.013, subdivision 9, 83.26 paragraph (c), is also increased by $150,000 in calendar year 83.27 2002 only, provided that: 83.28 (1) the city had a population of at least 3,000 but no more 83.29 than 4,000 in 1999; 83.30 (2) its home county is located within the seven-county 83.31 metropolitan area; 83.32 (3) its pre-1940 housing percentage is less than 15 83.33 percent; and 83.34 (4) its city net tax capacity per capita for taxes payable 83.35 in 2000 is less than $900 per capita. 83.36 (p) The city aid base for a city is increased by $200,000 84.1 beginning in calendar year 2003 and the maximum amount of total 84.2 aid it may receive under section 477A.013, subdivision 9, 84.3 paragraph (c), is also increased by $200,000 in calendar year 84.4 2003 only, provided that the city qualified for an increase in 84.5 homestead and agricultural credit aid under Laws 1995, chapter 84.6 264, article 8, section 18. 84.7 (q) The city aid base for a city is increased by $200,000 84.8 in 2004 only and the maximum amount of total aid it may receive 84.9 under section 477A.013, subdivision 9, is also increased by 84.10 $200,000 in calendar year 2004 only, if the city is the site of 84.11 a nuclear dry cask storage facility. 84.12 (r) The city aid base for a city is increased by $10,000 in 84.13 2004 and thereafter and the maximum total aid it may receive 84.14 under section 477A.013, subdivision 9, is also increased by 84.15 $10,000 in calendar year 2004 only, if the city was included in 84.16 a federal major disaster designation issued on April 1, 1998, 84.17 and its pre-1940 housing stock was decreased by more than 40 84.18 percent between 1990 and 2000. 84.19 (s) The city aid base for a city is increased by $25,000 in 84.20 2006 and thereafter and the maximum total aid it may receive 84.21 under section 477A.013, subdivision 9, is also increased by 84.22 $25,000 in calendar year 2006 only if the city had a population 84.23 in 2003 of at least 1,000 and has a state park for which the 84.24 city provides rescue services and which comprised at least 14 84.25 percent of the total geographic area included within the city 84.26 boundaries in 2000. 84.27 [EFFECTIVE DATE.] This section is effective for aids 84.28 payable in 2006 and thereafter. 84.29 Sec. 10. Minnesota Statutes 2004, section 477A.011, 84.30 subdivision 38, is amended to read: 84.31 Subd. 38. [HOUSEHOLD SIZE.] "Household size" means the 84.32 average number of persons per household in the jurisdiction as 84.33 most recently estimated and reported by the state 84.34 demographer and Metropolitan Council as of July115 of the aid 84.35 calculation year. A revision to an estimate or enumeration is 84.36 effective for these purposes only if it is certified to the 85.1 commissioner on or before July 15 of the aid calculation year. 85.2 Clerical errors in the certification or use of estimates and 85.3 counts established as of July 15 in the aid calculation year are 85.4 subject to correction within the time periods allowed under 85.5 section 477A.014. 85.6 [EFFECTIVE DATE.] This section is effective the day 85.7 following final enactment. 85.8 Sec. 11. Minnesota Statutes 2004, section 477A.0124, 85.9 subdivision 2, is amended to read: 85.10 Subd. 2. [DEFINITIONS.] (a) For the purposes of this 85.11 section, the following terms have the meanings given them. 85.12 (b) "County program aid" means the sum of "county need aid," 85.13 "county tax base equalization aid," and "county transition aid." 85.14 (c) "Age-adjusted population" means a county's population 85.15 multiplied by the county age index. 85.16 (d) "County age index" means the percentage of the 85.17 population over age 65 within the county divided by the 85.18 percentage of the population over age 65 within the state, 85.19 except that the age index for any county may not be greater than 85.20 1.8 nor less than 0.8. 85.21 (e) "Population over age 65" means the population over age 85.22 65 established as of July115 in an aid calculation year by the 85.23 most recent federal census, by a special census conducted under 85.24 contract with the United States Bureau of the Census, by a 85.25 population estimate made by the Metropolitan Council, or by a 85.26 population estimate of the state demographer made pursuant to 85.27 section 4A.02, whichever is the most recent as to the stated 85.28 date of the count or estimate for the preceding calendar 85.29 year and which has been certified to the commissioner of revenue 85.30 on or before July 15 of the aid calculation year. A revision to 85.31 an estimate or count is effective for these purposes only if 85.32 certified to the commissioner on or before July 15 of the aid 85.33 calculation year. Clerical errors in the certification or use 85.34 of estimates and counts established as of July 15 in the aid 85.35 calculation year are subject to correction within the time 85.36 periods allowed under section 477A.014. 86.1 (f) "Part I crimes" means the three-year average annual 86.2 number of Part I crimes reported for each county by the 86.3 Department of Public Safety for the most recent years available. 86.4 By July 1 of each year, the commissioner of public safety shall 86.5 certify to the commissioner of revenue the number of Part I 86.6 crimes reported for each county for the three most recent 86.7 calendar years available. 86.8 (g) "Households receiving food stamps" means the average 86.9 monthly number of households receiving food stamps for the three 86.10 most recent years for which data is available. By July 1 of 86.11 each year, the commissioner of human services must certify to 86.12 the commissioner of revenue the average monthly number of 86.13 households in the state and in each county that receive food 86.14 stamps, for the three most recent calendar years available. 86.15 (h) "County net tax capacity" means the net tax capacity of 86.16 the county, computed analogously to city net tax capacity under 86.17 section 477A.011, subdivision 20. 86.18 [EFFECTIVE DATE.] This section is effective the day 86.19 following final enactment. 86.20 Sec. 12. Minnesota Statutes 2004, section 477A.0124, 86.21 subdivision 4, is amended to read: 86.22 Subd. 4. [COUNTY TAX-BASE EQUALIZATION AID.] (a) For 86.2320052006 and subsequent years, the money appropriated to county 86.24 tax-base equalization aid each calendar year, after the payment 86.25 under paragraph (f), shall be apportioned among the counties 86.26 according to each county's tax-base equalization aid factor. 86.27 (b) A county's tax-base equalization aid factor is equal to 86.28 the amount by which (i) $185 times the county's population, 86.29 exceeds (ii) 9.45 percent of the county's net tax capacity. 86.30 (c) In the case of a county with a population less than 86.31 10,000, the factor determined in paragraph (b) shall be 86.32 multiplied by a factor of three. 86.33 (d) In the case of a county with a population greater than 86.34 or equal to 10,000, but less than 12,500, the factor determined 86.35 in paragraph (b) shall be multiplied by a factor of two. 86.36 (e) In the case of a county with a population greater than 87.1 500,000, the factor determined in paragraph (b) shall be 87.2 multiplied by a factor of 0.25. 87.3 (f) Before the money appropriated to county base 87.4 equalization aid is apportioned among the counties as provided 87.5 in paragraph (a), an amount up to $73,259 is allocated annually 87.6 to Anoka County and up to $59,664 is annually allocated to 87.7 Washington County for the county to pay postretirement costs of 87.8 health insurance premiums for court employees. The allocation 87.9 under this paragraph is in addition to the allocations under 87.10 paragraphs (a) to (e). 87.11 [EFFECTIVE DATE.] This section is effective for aids 87.12 payable in 2006 and thereafter. 87.13 Sec. 13. Minnesota Statutes 2004, section 477A.013, 87.14 subdivision 8, is amended to read: 87.15 Subd. 8. [CITY FORMULA AID.] In calendar year 2004 and 87.16 subsequent years, the formula aid for a city is equal to the 87.17 need increase percentage multiplied by the difference between 87.18 (1) the city's revenue need multiplied by its population, and 87.19 (2) the sum of the city's net tax capacity multiplied by the tax 87.20 effort rate, and; the taconite aids under sections 298.28 and 87.21 298.282, multiplied by the following percentages: 87.22 (i) zero percent for aids payable in 2004; 87.23 (ii) 25 percent for aids payable in 2005; 87.24 (iii) 50 percent for aids payable in 2006; 87.25 (iv) 75 percent for aids payable in 2007; and 87.26 (v) 100 percent for aids payable in 2008 and thereafter; 87.27 and 87.28 for first class cities only, the amount raised by a one-half of 87.29 one percent local sales and use tax imposed in the city in the 87.30 calendar year before the year in which the aid is being 87.31 calculated. 87.32 No city may have a formula aid amount less than zero. The need 87.33 increase percentage must be the same for all cities. 87.34 The applicable need increase percentage must be calculated 87.35 by the Department of Revenue so that the total of the aid under 87.36 subdivision 9 equals the total amount available for aid under 88.1 section 477A.03 after the subtraction under section 477A.014, 88.2 subdivisions 4 and 5. The need increase percentage may not 88.3 exceed 100 percent. 88.4 [EFFECTIVE DATE.] This section is effective beginning with 88.5 aids payable in 2006. 88.6 Sec. 14. Minnesota Statutes 2004, section 477A.013, 88.7 subdivision 9, is amended to read: 88.8 Subd. 9. [CITY AID DISTRIBUTION.] (a) In calendar year 88.9 2002 and thereafter, each city shall receive an aid distribution 88.10 equal to the sum of (1) the city formula aid under subdivision 88.11 8, and (2) its city aid base. 88.12 (b)The aid for a city in calendar year 2004 shall not88.13exceed the amount of its aid in calendar year 2003 after the88.14reductions under Laws 2003, First Special Session chapter 21,88.15article 5.88.16(c)For aids payable in 2005 and thereafter, the total aid 88.17 for any city shall not exceed the sum of (1) ten percent of the 88.18 city's net levy for the year prior to the aid distribution plus 88.19 (2) its total aid in the previous year. For aids payable in 88.2020052006 and thereafter, the total aid for any city with a 88.21 population of 2,500 or more, except for a city of the first 88.22 class located within the seven-county metropolitan area, may not 88.23 decrease from its total aid under this section in the previous 88.24 year by an amount greater than ten percent of its net levy in 88.25 the year prior to the aid distribution. 88.26(d)(c)For aids payable in 2004 only, the total aid for a88.27city with a population less than 2,500 may not be less than the88.28amount it was certified to receive in 2003 minus the greater of88.29(1) the reduction to this aid payment in 2003 under Laws 2003,88.30First Special Session chapter 21, article 5, or (2) five percent88.31of its 2003 aid amount.For aids payable in 2005 and 88.32 thereafter, the total aid for a city with a population less than 88.33 2,500 must not be less than the amount it was certified to 88.34 receive in the previous year minus five percent of its 2003 88.35 certified aid amount. 88.36 [EFFECTIVE DATE.] This section is effective beginning with 89.1 aids payable in 2006. 89.2 Sec. 15. Minnesota Statutes 2004, section 477A.013, is 89.3 amended by adding a subdivision to read: 89.4 Subd. 10. [LEVY ADJUSTMENTS FOR AID 89.5 DECREASES.] Notwithstanding any local ordinance or charter 89.6 provision, a city whose certified aid under subdivision 9 is 89.7 less than the amount it received in the previous year under the 89.8 same subdivision may increase its levy payable in the same year 89.9 as the certified aid is paid by an amount equal to the aid 89.10 decrease for that year. 89.11 [EFFECTIVE DATE.] This section is effective beginning with 89.12 property tax levies payable in 2006 and thereafter. 89.13 Sec. 16. Minnesota Statutes 2004, section 477A.03, 89.14 subdivision 2a, is amended to read: 89.15 Subd. 2a. [CITIES.] For aids payable in 2004, the total 89.16 aids paid under section 477A.013, subdivision 9, are limited to 89.17 $429,000,000. For aids payable in 2005and thereafter, the 89.18 total aids paid under section 477A.013, subdivision 9, 89.19 areincreasedlimited to $437,052,000. For aids payable in 89.20 2006, the total aids paid under section 477A.013, subdivision 9, 89.21 is limited to $419,552,000. For aids payable in 2007 and 89.22 thereafter, the total aids paid under section 477A.013, 89.23 subdivision 9, is limited to $437,052,000 provided that the 89.24 taxpayer satisfaction survey in section 275.065 is in effect for 89.25 property taxes levied in the year in which the aid is 89.26 calculated, otherwise the amount is limited to $419,552,000. 89.27 [EFFECTIVE DATE.] This section is effective beginning with 89.28 aids payable in 2006. 89.29 Sec. 17. Minnesota Statutes 2004, section 477A.03, 89.30 subdivision 2b, is amended to read: 89.31 Subd. 2b. [COUNTIES.] (a) For aids payable in calendar 89.32 year 2005 and thereafter, the total aids paid to counties under 89.33 section 477A.0124, subdivision 3, are limited to $100,500,000. 89.34 Each calendar year, $500,000 shall be retained by the 89.35 commissioner of revenue to make reimbursements to the 89.36 commissioner of finance for payments made under section 611.27. 90.1 For calendar year 2004, the amount shall be in addition to the 90.2 payments authorized under section 477A.0124, subdivision 1. For 90.3 calendar year 2005 and subsequent years, the amount shall be 90.4 deducted from the appropriation under this paragraph. The 90.5 reimbursements shall be to defray the additional costs 90.6 associated with court-ordered counsel under section 611.27. Any 90.7 retained amounts not used for reimbursement in a year shall be 90.8 included in the next distribution of county need aid that is 90.9 certified to the county auditors for the purpose of property tax 90.10 reduction for the next taxes payable year. 90.11 (b) For aids payable in 2005 andthereafter2006, the total 90.12 aids under section 477A.0124, subdivision 4, are limited to 90.13 $105,000,000. For aids payable in 2007 and thereafter, the 90.14 total aid under section 477A.0124, subdivision 4, is limited to 90.15 $105,132,923. The commissioner of finance shall bill the 90.16 commissioner of revenue for the cost of preparation of local 90.17 impact notes as required by section 3.987, not to exceed 90.18 $207,000 in fiscal year 2004 and thereafter. The commissioner 90.19 of education shall bill the commissioner of revenue for the cost 90.20 of preparation of local impact notes for school districts as 90.21 required by section 3.987, not to exceed $7,000 in fiscal year 90.22 2004 and thereafter. The commissioner of revenue shall deduct 90.23 the amounts billed under this paragraph from the appropriation 90.24 under this paragraph. The amounts deducted are appropriated to 90.25 the commissioner of finance and the commissioner of education 90.26 for the preparation of local impact notes. 90.27 [EFFECTIVE DATE.] This section is effective for aids 90.28 payable in 2007 and thereafter. 90.29 Sec. 18. Laws 2003, First Special Session chapter 21, 90.30 article 5, section 13, is amended to read: 90.31 Sec. 13. [2004 CITY AID REDUCTIONS.] 90.32 The commissioner of revenue shall compute an aid reduction 90.33 amount for 2004 for each city as provided in this section. 90.34 The initial aid reduction amount for each city is the 90.35 amount by which the city's aid distribution under Minnesota 90.36 Statutes, section 477A.013, and related provisions payable in 91.1 2003 exceeds the city's 2004 distribution under those provisions. 91.2 The minimum aid reduction amount for a city is the amount 91.3 of its reduction in 2003 under section 12. If a city receives 91.4 an increase to its city aid base under Minnesota Statutes, 91.5 section 477A.011, subdivision 36, its minimum aid reduction is 91.6 reduced by an equal amount. 91.7 The maximum aid reduction amount for a city is an amount 91.8 equal to 14 percent of the city's total 2004 levy plus aid 91.9 revenue base, except that if the city has a city net tax 91.10 capacity for aids payable in 2004, as defined in Minnesota 91.11 Statutes, section 477A.011, subdivision 20, of $700 per capita 91.12 or less, the maximum aid reduction shall not exceed an amount 91.13 equal to 13 percent of the city's total 2004 levy plus aid 91.14 revenue base. 91.15 If the initial aid reduction amount for a city is less than 91.16 the minimum aid reduction amount for that city, the final aid 91.17 reduction amount for the city is the sum of the initial aid 91.18 reduction amount and the lesser of the amount of the city's 91.19 payable 2004 reimbursement under Minnesota Statutes, section 91.20 273.1384, or the difference between the minimum and initial aid 91.21 reduction amounts for the city, and the amount of the final aid 91.22 reduction in excess of the initial aid reduction is deducted 91.23 from the city's reimbursements pursuant to Minnesota Statutes, 91.24 section 273.1384. 91.25 If the initial aid reduction amount for a city is greater 91.26 than the maximum aid reduction amount for the city, the city 91.27 receives an additional distribution under this section equal to 91.28 the result of subtracting the maximum aid reduction amount from 91.29 the initial aid reduction amount. This distribution shall be 91.30 paid in equal installments in 2004 on the dates specified in 91.31 Minnesota Statutes, section 477A.015. The amount necessary for 91.32 these additional distributions is appropriated to the 91.33 commissioner of revenue from the general fund in fiscal year 91.34 2005. 91.35The initial aid reduction is applied to the city's91.36distribution pursuant to Minnesota Statutes, section 477A.013,92.1and any aid reduction in excess of the initial aid reduction is92.2applied to the city's reimbursements pursuant to Minnesota92.3Statutes, section 273.1384.92.4 To the extent that sufficient information is available on 92.5 each payment date in 2004, the commissioner of revenue shall pay 92.6 the reimbursements reduced under this section in equal 92.7 installments on the payment dates provided in law. 92.8 [EFFECTIVE DATE.] This section is effective for aids 92.9 payable in 2004. 92.10 Sec. 19. Laws 2003, First Special Session chapter 21, 92.11 article 6, section 9, is amended to read: 92.12 Sec. 9. [DEFINITIONS.] 92.13 (a) For purposes of sections 9 to 15, the following terms 92.14 have the meanings given them in this section. 92.15 (b) The 2003 and 2004 "levy plus aid revenue base" for a 92.16 county is the sum of that county's certified property tax levy 92.17 for taxes payable in 2003, plus the sum of the amounts the 92.18 county was certified to receive in the designated calendar year 92.19 as: 92.20 (1) homestead and agricultural credit aid under Minnesota 92.21 Statutes, section 273.1398, subdivision 2, plus any additional 92.22 aid under section 16, minus the amount calculated under section 92.23 273.1398, subdivision 4a, paragraph (b), for counties in 92.24 judicial districts one, three, six, and ten, and 25 percent of 92.25 the amount calculated under section 273.1398, subdivision 4a, 92.26 paragraph (b), for counties in judicial districts two and four; 92.27 (2) the amount of county manufactured home homestead and 92.28 agricultural credit aid computed for the county for payment in 92.29 2003 under section 273.166; 92.30 (3) criminal justice aid under Minnesota Statutes, section 92.31 477A.0121; 92.32 (4) family preservation aid under Minnesota Statutes, 92.33 section 477A.0122; 92.34 (5) taconite aids under Minnesota Statutes, sections 298.28 92.35 and 298.282, including any aid which was required to be placed 92.36 in a special fund for expenditure in the next succeeding year; 93.1 and 93.2 (6) county program aid under section 477A.0124, exclusive 93.3 of the attached machinery aid component. 93.4 [EFFECTIVE DATE.] This section is effective for aids 93.5 payable in 2004. 93.6 Sec. 20. [2005 AND 2006 CITY AID PAYMENTS.] 93.7 In 2005 and 2006, market value credit reimbursements for 93.8 each city payable under Minnesota Statutes, section 273.1384, 93.9 are reduced by the dollar amount of the 2003 reduction in market 93.10 value credit reimbursements for that city due to Laws 2003, 93.11 First Special Session chapter 21, article 5, section 12. No 93.12 city's 2005 or 2006 market value credit reimbursements are 93.13 reduced to less than zero under this section. To the extent 93.14 sufficient information is available on each payment date, the 93.15 commissioner shall pay the annual 2005 and 2006 market value 93.16 credit reimbursement amounts, after reduction under this 93.17 section, to cities in equal installments on the dates specified 93.18 in Minnesota Statutes, section 273.1384. 93.19 [EFFECTIVE DATE.] This section is effective the day 93.20 following final enactment. 93.21 Sec. 21. [COURT AID ADJUSTMENT.] 93.22 For aids payable in 2005 only, the amount of court aid paid 93.23 to Anoka County under Minnesota Statutes, section 273.1398, 93.24 subdivision 4a, is increased by $36,630 for aids payable in 2005 93.25 only and the amount paid to Washington County under Minnesota 93.26 Statutes, section 273.1398, subdivision 4a, is increased by 93.27 $29,832 for aids payable in 2005 only. 93.28 [EFFECTIVE DATE.] This section is effective for aids 93.29 payable in 2005 only. 93.30 Sec. 22. [SUPREME COURT BUDGET.] 93.31 The district courts general fund appropriation is reduced 93.32 by $66,462 in fiscal year 2006 and $132,923 beginning in fiscal 93.33 year 2007 to fund the amount transferred to county tax base 93.34 equalization aid to fund the payments under Minnesota Statutes, 93.35 section 477A.0124, subdivision 4, paragraph (f), and section 20. 93.36 [EFFECTIVE DATE.] This section is effective the day 94.1 following final enactment. 94.2 ARTICLE 4 94.3 DEPARTMENT OF REVENUE PROPERTY TAXES 94.4 Section 1. Minnesota Statutes 2004, section 168A.05, 94.5 subdivision 1a, is amended to read: 94.6 Subd. 1a. [MANUFACTURED HOME; STATEMENT OF PROPERTY TAX 94.7 PAYMENT.] In the case of a manufactured home as defined in 94.8 section 327.31, subdivision 6, the department shall not issue a 94.9 certificate of title unless the application under section 94.10 168A.04 is accompanied with a statement from the county auditor 94.11 or county treasurer where the manufactured home is presently 94.12 located, stating that all manufactured home personal property 94.13 taxes levied on the unit in the name of the current owner at the 94.14 time of transfer have been paid. For this purpose, manufactured 94.15 home personal property taxes are treated as levied on January 1 94.16 of the payable year. 94.17 [EFFECTIVE DATE.] This section is effective the day 94.18 following final enactment. 94.19 Sec. 2. Minnesota Statutes 2004, section 270.11, 94.20 subdivision 2, is amended to read: 94.21 Subd. 2. [COUNTY ASSESSOR'S REPORTS OF ASSESSMENT FILED 94.22 WITH COMMISSIONER.] Each county assessor shall file by April 1 94.23 with the commissioner of revenue a copy of the abstract that 94.24 will be acted upon by the local and county boards of review. 94.25 The abstract must list the real and personal property in the 94.26 county itemized by assessment districts. The assessor of each 94.27 county in the state shall file with the commissioner, within ten 94.28 working days following final action of the local board of review 94.29 or equalization and within five days following final action of 94.30 the county board of equalization, any changes made by the local 94.31 or county board. The information must be filed in the manner 94.32 prescribed by the commissioner. It must be accompanied by a 94.33 printed or typewritten copy of the proceedings of the 94.34 appropriate board. 94.35 The final abstract of assessments after adjustments by the 94.36 State Board of Equalization and inclusion of any omitted 95.1 property shall be submitted to the commissioner of revenue on or 95.2 before September 1 of each calendar year. The final abstract 95.3 must separately report the captured tax capacity of tax 95.4 increment financing districts under section 469.177, subdivision 95.5 2, themetropolitan revenueareawide net tax capacity 95.6 contributionvaluevalues determined undersectionsections 95.7 276A.05, subdivision 1, and 473F.07, subdivision 1, and the 95.8 value subject to the power line credit under section 273.42. 95.9 [EFFECTIVE DATE.] This section is effective the day 95.10 following final enactment. 95.11 Sec. 3. Minnesota Statutes 2004, section 270.16, 95.12 subdivision 2, is amended to read: 95.13 Subd. 2. [FAILURE TO APPRAISE.] When an assessor has 95.14 failed to properly appraise at leastone-quarterone-fifth of 95.15 the parcels of property in a district or county as provided in 95.16 section 273.01, the commissioner of revenue shall appoint a 95.17 special assessor and deputy assessor as necessary and cause a 95.18 reappraisal to be made of the property due for reassessment in 95.19 accordance with law. 95.20 [EFFECTIVE DATE.] This section is effective the day 95.21 following final enactment. 95.22 Sec. 4. Minnesota Statutes 2004, section 272.01, 95.23 subdivision 2, is amended to read: 95.24 Subd. 2. (a) When any real or personal property which is 95.25 exempt from ad valorem taxes, and taxes in lieu thereof, is 95.26 leased, loaned, or otherwise made available and used by a 95.27 private individual, association, or corporation in connection 95.28 with a business conducted for profit, there shall be imposed a 95.29 tax, for the privilege of so using or possessing such real or 95.30 personal property, in the same amount and to the same extent as 95.31 though the lessee or user was the owner of such property. 95.32 (b) The tax imposed by this subdivision shall not apply to: 95.33 (1) property leased or used as a concession in or relative 95.34 to the use in whole or part of a public park, market, 95.35 fairgrounds, port authority, economic development authority 95.36 established under chapter 469, municipal auditorium, municipal 96.1 parking facility, municipal museum, or municipal stadium; 96.2 (2) property of an airport owned by a city, town, county, 96.3 or group thereof which is: 96.4 (i) leased to or used by any person or entity including a 96.5 fixed base operator; and 96.6 (ii) used as a hangar for the storage or repair of aircraft 96.7 or to provide aviation goods, services, or facilities to the 96.8 airport or general public; 96.9 the exception from taxation provided in this clause does not 96.10 apply to: 96.11 (i) property located at an airport owned or operated by the 96.12 Metropolitan Airports Commission or by a city of over 50,000 96.13 population according to the most recent federal census or such a 96.14 city's airport authority; 96.15 (ii) hangars leased by a private individual, association, 96.16 or corporation in connection with a business conducted for 96.17 profit other than an aviation-related business; or 96.18 (iii) facilities leased by a private individual, 96.19 association, or corporation in connection with a business for 96.20 profit, that consists of a major jet engine repair facility 96.21 financed, in whole or part, with the proceeds of state bonds and 96.22 located in a tax increment financing district; 96.23 (3) property constituting or used as a public pedestrian 96.24 ramp or concourse in connection with a public airport;or96.25 (4) property constituting or used as a passenger check-in 96.26 area or ticket sale counter, boarding area, or luggage claim 96.27 area in connection with a public airport but not the airports 96.28 owned or operated by the Metropolitan Airports Commission or 96.29 cities of over 50,000 population or an airport authority 96.30 therein. Real estate owned by a municipality in connection with 96.31 the operation of a public airport and leased or used for 96.32 agricultural purposes is not exempt; 96.33 (5) property leased, loaned, or otherwise made available to 96.34 a private individual, corporation, or association under a 96.35 cooperative farming agreement made pursuant to section 97A.135; 96.36 or 97.1 (6) property leased, loaned, or otherwise made available to 97.2 a private individual, corporation, or association under section 97.3 272.68, subdivision 4. 97.4 (c) Taxes imposed by this subdivision are payable as in the 97.5 case of personal property taxes and shall be assessed to the 97.6 lessees or users of real or personal property in the same manner 97.7 as taxes assessed to owners of real or personal property, except 97.8 that such taxes shall not become a lien against the property. 97.9 When due, the taxes shall constitute a debt due from the lessee 97.10 or user to the state, township, city, county, and school 97.11 district for which the taxes were assessed and shall be 97.12 collected in the same manner as personal property taxes. If 97.13 property subject to the tax imposed by this subdivision is 97.14 leased or used jointly by two or more persons, each lessee or 97.15 user shall be jointly and severally liable for payment of the 97.16 tax. 97.17 (d) The tax on real property of the state or any of its 97.18 political subdivisions that is leased by a private individual, 97.19 association, or corporation and becomes taxable under this 97.20 subdivision or other provision of law must be assessed and 97.21 collected as a personal property assessment. The taxes do not 97.22 become a lien against the real property. 97.23 [EFFECTIVE DATE.] This section is effective the day 97.24 following final enactment. 97.25 Sec. 5. Minnesota Statutes 2004, section 272.02, 97.26 subdivision 1a, is amended to read: 97.27 Subd. 1a. [LIMITATIONS ON EXEMPTIONS.] The exemptions 97.28 granted by subdivision 1 are subject to the limits contained in 97.29 the other subdivisions of this section, section 272.025,or97.30273.13, subdivision 25, paragraph (c), clause (1) or (2), or97.31paragraph (d), clause (2)and all other provisions of applicable 97.32 law. 97.33 [EFFECTIVE DATE.] This section is effective the day 97.34 following final enactment. 97.35 Sec. 6. Minnesota Statutes 2004, section 272.02, 97.36 subdivision 7, is amended to read: 98.1 Subd. 7. [INSTITUTIONS OF PUBLIC CHARITY.] Institutions of 98.2 purely public charity are exemptexcept parcels of property98.3containing structures and the structures described in section98.4273.13, subdivision 25, paragraph (e), other than those that98.5qualify for exemption under subdivision 26. In determining 98.6 whether rental housing property qualifies for exemption under 98.7 this subdivision, the following are not gifts or donations to 98.8 the owner of the rental housing: 98.9 (1) rent assistance provided by the government to or on 98.10 behalf of tenants; and 98.11 (2) financing assistance or tax credits provided by the 98.12 government to the owner on condition that specific units or a 98.13 specific quantity of units be set aside for persons or families 98.14 with certain income characteristics. 98.15 [EFFECTIVE DATE.] This section is effective for taxes 98.16 payable in 2004 and thereafter. 98.17 Sec. 7. Minnesota Statutes 2004, section 272.02, is 98.18 amended by adding a subdivision to read: 98.19 Subd. 68. [PROPERTY SUBJECT TO TACONITE PRODUCTION TAX OR 98.20 NET PROCEEDS TAX.] (a) Real and personal property described in 98.21 section 298.25 is exempt to the extent the tax on taconite and 98.22 iron sulphides under section 298.24 is described in section 98.23 298.25 as being in lieu of other taxes on such property. This 98.24 exemption applies for taxes payable in each year that the tax 98.25 under section 298.24 is payable with respect to such property. 98.26 (b) Deposits of mineral, metal, or energy resources the 98.27 mining of which is subject to taxation under section 298.015 are 98.28 exempt. This exemption applies for taxes payable in each year 98.29 that the tax under section 298.015 is payable with respect to 98.30 such property. 98.31 [EFFECTIVE DATE.] This section is effective the day 98.32 following final enactment. 98.33 Sec. 8. Minnesota Statutes 2004, section 272.02, is 98.34 amended by adding a subdivision to read: 98.35 Subd. 69. [RELIGIOUS CORPORATIONS.] Personal and real 98.36 property that a religious corporation, formed under section 99.1 317A.909, necessarily uses for a religious purpose is exempt to 99.2 the extent provided in section 317A.909, subdivision 3. 99.3 [EFFECTIVE DATE.] This section is effective the day 99.4 following final enactment. 99.5 Sec. 9. Minnesota Statutes 2004, section 272.02, is 99.6 amended by adding a subdivision to read: 99.7 Subd. 70. [CHILDREN'S HOMES.] Personal and real property 99.8 owned by a corporation formed under section 317A.907 is exempt 99.9 to the extent provided in section 317A.907, subdivision 7. 99.10 [EFFECTIVE DATE.] This section is effective the day 99.11 following final enactment. 99.12 Sec. 10. Minnesota Statutes 2004, section 272.02, is 99.13 amended by adding a subdivision to read: 99.14 Subd. 71. [HOUSING AND REDEVELOPMENT AUTHORITY AND TRIBAL 99.15 HOUSING AUTHORITY PROPERTY.] Property owned by a housing and 99.16 redevelopment authority described in chapter 469, or by a 99.17 designated housing authority described in section 469.040, 99.18 subdivision 5, is exempt to the extent provided in chapter 469. 99.19 [EFFECTIVE DATE.] This section is effective the day 99.20 following final enactment. 99.21 Sec. 11. Minnesota Statutes 2004, section 272.02, is 99.22 amended by adding a subdivision to read: 99.23 Subd. 72. [PROPERTY OF HOUSING AND REDEVELOPMENT 99.24 AUTHORITIES.] Property of projects of housing and redevelopment 99.25 authorities are exempt to the extent permitted by sections 99.26 469.042, subdivision 1, and 469.043, subdivisions 2 and 5. 99.27 [EFFECTIVE DATE.] This section is effective the day 99.28 following final enactment. 99.29 Sec. 12. Minnesota Statutes 2004, section 272.02, is 99.30 amended by adding a subdivision to read: 99.31 Subd. 73. [PROPERTY OF REGIONAL RAIL AUTHORITY.] Property 99.32 of a regional rail authority as defined in chapter 398A is 99.33 exempt to the extent permitted by section 398A.05. 99.34 [EFFECTIVE DATE.] This section is effective the day 99.35 following final enactment. 99.36 Sec. 13. Minnesota Statutes 2004, section 272.02, is 100.1 amended by adding a subdivision to read: 100.2 Subd. 74. [SPIRIT MOUNTAIN RECREATION AREA 100.3 AUTHORITY.] Property owned by the Spirit Mountain Recreation 100.4 Area Authority is exempt from taxation to the extent provided in 100.5 Laws 1973, chapter 327, section 6. 100.6 Sec. 14. Minnesota Statutes 2004, section 272.02, is 100.7 amended by adding a subdivision to read: 100.8 Subd. 75. [INSTALLED CAPACITY DEFINED.] For purposes of 100.9 this section, the term "installed capacity" means generator 100.10 nameplate capacity. 100.11 [EFFECTIVE DATE.] This section is effective the day 100.12 following final enactment. 100.13 Sec. 15. Minnesota Statutes 2004, section 272.029, 100.14 subdivision 4, is amended to read: 100.15 Subd. 4. [REPORTS.] (a) An owner of a wind energy 100.16 conversion system subject to tax under subdivision 3 shall file 100.17 a report with the commissioner of revenue annually on or before 100.18MarchFebruary 1 detailing the amount of electricity in 100.19 kilowatt-hours that was produced by the wind energy conversion 100.20 system for the previous calendar year. The commissioner shall 100.21 prescribe the form of the report. The report must contain the 100.22 information required by the commissioner to determine the tax 100.23 due to each county under this section for the current year. If 100.24 an owner of a wind energy conversion system subject to taxation 100.25 under this section fails to file the report by the due date, the 100.26 commissioner of revenue shall determine the tax based upon the 100.27 nameplate capacity of the system multiplied by a capacity factor 100.28 of 40 percent. 100.29 (b) On or beforeMarch 31February 28, the commissioner of 100.30 revenue shall notify the owner of the wind energy conversion 100.31 systems of the tax due to each county for the current year and 100.32 shall certify to the county auditor of each county in which the 100.33 systems are located the tax due from each owner for the current 100.34 year. 100.35 [EFFECTIVE DATE.] This section is effective for reports and 100.36 certifications due in 2006 and thereafter. 101.1 Sec. 16. Minnesota Statutes 2004, section 272.029, 101.2 subdivision 6, is amended to read: 101.3 Subd. 6. [DISTRIBUTION OF REVENUES.] Revenues from the 101.4 taxes imposed under subdivision 5 must be part of the settlement 101.5 between the county treasurer and the county auditor under 101.6 section 276.09. The revenue must be distributed by the county 101.7 auditor or the county treasurer toalllocal taxing 101.8 jurisdictions in which the wind energy conversion system is 101.9 located,as follows: beginning with distributions in 2006, 80 101.10 percent to counties; 14 percent to cities and townships; and six 101.11 percent to school districts; and for distributions occurring in 101.12 2004 and 2005 in the same proportion that each of the local 101.13 taxing jurisdiction's current year's net tax capacity based tax 101.14 rate is to the current year's total local net tax capacity based 101.15 rate. 101.16 [EFFECTIVE DATE.] This section is effective the day 101.17 following final enactment. 101.18 Sec. 17. Minnesota Statutes 2004, section 273.11, 101.19 subdivision 8, is amended to read: 101.20 Subd. 8. [LIMITED EQUITY COOPERATIVE APARTMENTS.] For the 101.21 purposes of this subdivision, the terms defined in this 101.22 subdivision have the meanings given them. 101.23 A "limited equity cooperative" is a corporation organized 101.24 under chapter 308A or 308B, which has as its primary purpose the 101.25 provision of housing and related services to its members which 101.26 meets one of the following criteria with respect to the income 101.27 of its members: (1) a minimum of 75 percent of members must 101.28 have incomes at or less than 90 percent of area median income, 101.29 (2) a minimum of 40 percent of members must have incomes at or 101.30 less than 60 percent of area median income, or (3) a minimum of 101.31 20 percent of members must have incomes at or less than 50 101.32 percent of area median income. For purposes of this clause, 101.33 "member income" shall mean the income of a member existing at 101.34 the time the member acquires cooperative membership, and median 101.35 income shall mean the St. Paul-Minneapolis metropolitan area 101.36 median income as determined by the United States Department of 102.1 Housing and Urban Development. It must also meet the following 102.2 requirements: 102.3 (a) The articles of incorporation set the sale price of 102.4 occupancy entitling cooperative shares or memberships at no more 102.5 than a transfer value determined as provided in the articles. 102.6 That value may not exceed the sum of the following: 102.7 (1) the consideration paid for the membership or shares by 102.8 the first occupant of the unit, as shown in the records of the 102.9 corporation; 102.10 (2) the fair market value, as shown in the records of the 102.11 corporation, of any improvements to the real property that were 102.12 installed at the sole expense of the member with the prior 102.13 approval of the board of directors; 102.14 (3) accumulated interest, or an inflation allowance not to 102.15 exceed the greater of a ten percent annual noncompounded 102.16 increase on the consideration paid for the membership or share 102.17 by the first occupant of the unit, or the amount that would have 102.18 been paid on that consideration if interest had been paid on it 102.19 at the rate of the percentage increase in the revised Consumer 102.20 Price Index for All Urban Consumers for the Minneapolis-St. Paul 102.21 metropolitan area prepared by the United States Department of 102.22 Labor, provided that the amount determined pursuant to this 102.23 clause may not exceed $500 for each year or fraction of a year 102.24 the membership or share was owned; plus 102.25 (4) real property capital contributions shown in the 102.26 records of the corporation to have been paid by the transferor 102.27 member and previous holders of the same membership, or of 102.28 separate memberships that had entitled occupancy to the unit of 102.29 the member involved. These contributions include contributions 102.30 to a corporate reserve account the use of which is restricted to 102.31 real property improvements or acquisitions, contributions to the 102.32 corporation which are used for real property improvements or 102.33 acquisitions, and the amount of principal amortized by the 102.34 corporation on its indebtedness due to the financing of real 102.35 property acquisition or improvement or the averaging of 102.36 principal paid by the corporation over the term of its real 103.1 property-related indebtedness. 103.2 (b) The articles of incorporation require that the board of 103.3 directors limit the purchase price of stock or membership 103.4 interests for new member-occupants or resident shareholders to 103.5 an amount which does not exceed the transfer value for the 103.6 membership or stock as defined in clause (a). 103.7 (c) The articles of incorporation require that the total 103.8 distribution out of capital to a member shall not exceed that 103.9 transfer value. 103.10 (d) The articles of incorporation require that upon 103.11 liquidation of the corporation any assets remaining after 103.12 retirement of corporate debts and distribution to members will 103.13 be conveyed to a charitable organization described in section 103.14 501(c)(3) of the Internal Revenue Code of 1986, as amended 103.15 through December 31, 1992, or a public agency. 103.16 A "limited equity cooperative apartment" is a dwelling unit 103.17 owned by a limited equity cooperative. 103.18 "Occupancy entitling cooperative share or membership" is 103.19 the ownership interest in a cooperative organization which 103.20 entitles the holder to an exclusive right to occupy a dwelling 103.21 unit owned or leased by the cooperative. 103.22 For purposes of taxation, the assessor shall value a unit 103.23 owned by a limited equity cooperative at the lesser of its 103.24 market value or the value determined by capitalizing the net 103.25 operating income of a comparable apartment operated on a rental 103.26 basis at the capitalization rate used in valuing comparable 103.27 buildings that are not limited equity cooperatives. If a 103.28 cooperative fails to operate in accordance with the provisions 103.29 of clauses (a) to (d), the property shall be subject to 103.30 additional property taxes in the amount of the difference 103.31 between the taxes determined in accordance with this subdivision 103.32 for the last ten years that the property had been assessed 103.33 pursuant to this subdivision and the amount that would have been 103.34 paid if the provisions of this subdivision had not applied to 103.35 it. The additional taxes, plus interest at the rate specified 103.36 in section 549.09, shall be extended against the property on the 104.1 tax list for the current year. 104.2 [EFFECTIVE DATE.] This section is effective for taxes 104.3 payable in 2004 and thereafter. 104.4 Sec. 18. Minnesota Statutes 2004, section 273.124, 104.5 subdivision 3, is amended to read: 104.6 Subd. 3. [COOPERATIVES AND CHARITABLE CORPORATIONS; 104.7 HOMESTEAD AND OTHER PROPERTY.] (a) When property is owned by a 104.8 corporation or association organized under chapter 308A or 308B, 104.9 and each person who owns a share or shares in the corporation or 104.10 association is entitled to occupy a building on the property, or 104.11 a unit within a building on the property, the corporation or 104.12 association may claim homestead treatment for each dwelling, or 104.13 for each unit in the case of a building containing several 104.14 dwelling units, or for the part of the value of the building 104.15 occupied by a shareholder. Each building or unit must be 104.16 designated by legal description or number. The net tax capacity 104.17 of each building or unit that qualifies for assessment as a 104.18 homestead under this subdivision must include not more than 104.19 one-half acre of land, if platted, nor more than 80 acres if 104.20 unplatted. The net tax capacity of the property is the sum of 104.21 the net tax capacities of each of the respective buildings or 104.22 units comprising the property, including the net tax capacity of 104.23 each unit's or building's proportionate share of the land and 104.24 any common buildings. To qualify for the treatment provided by 104.25 this subdivision, the corporation or association must be wholly 104.26 owned by persons having a right to occupy a building or unit 104.27 owned by the corporation or association. A charitable 104.28 corporation organized under the laws of Minnesota and not 104.29 otherwise exempt thereunder with no outstanding stock qualifies 104.30 for homestead treatment with respect to member residents of the 104.31 dwelling units who have purchased and hold residential 104.32 participation warrants entitling them to occupy the units. 104.33 (b) To the extent provided in paragraph (a), a cooperative 104.34 or corporation organized under chapter 308A may obtain separate 104.35 assessment and valuation, and separate property tax statements 104.36 for each residential homestead, residential nonhomestead, or for 105.1 each seasonal residential recreational building or unit not used 105.2 for commercial purposes. The appropriate class rates under 105.3 section 273.13 shall be applicable as if each building or unit 105.4 were a separate tax parcel; provided, however, that the tax 105.5 parcel which exists at the time the cooperative or corporation 105.6 makes application under this subdivision shall be a single 105.7 parcel for purposes of property taxes or the enforcement and 105.8 collection thereof, other than as provided in paragraph (a) or 105.9 this paragraph. 105.10 (c) A member of a corporation or association may initially 105.11 obtain the separate assessment and valuation and separate 105.12 property tax statements, as provided in paragraph (b), by 105.13 applying to the assessor by June 30 of the assessment year. 105.14 (d) When a building, or dwelling units within a building, 105.15 no longer qualify under paragraph (a) or (b), the current owner 105.16 must notify the assessor within 30 days. Failure to notify the 105.17 assessor within 30 days shall result in the loss of benefits 105.18 under paragraph (a) or (b) for taxes payable in the year that 105.19 the failure is discovered. For these purposes, "benefits under 105.20 paragraph (a) or (b)" means the difference in the net tax 105.21 capacity of the building or units which no longer qualify as 105.22 computed under paragraph (a) or (b) and as computed under the 105.23 otherwise applicable law, times the local tax rate applicable to 105.24 the building for that taxes payable year. Upon discovery of a 105.25 failure to notify, the assessor shall inform the auditor of the 105.26 difference in net tax capacity for the building or buildings in 105.27 which units no longer qualify, and the auditor shall calculate 105.28 the benefits under paragraph (a) or (b). Such amount, plus a 105.29 penalty equal to 100 percent of that amount, shall then be 105.30 demanded of the building's owner. The property owner may appeal 105.31 the county's determination by serving copies of a petition for 105.32 review with county officials as provided in section 278.01 and 105.33 filing a proof of service as provided in section 278.01 with the 105.34 Minnesota Tax Court within 60 days of the date of the notice 105.35 from the county. The appeal shall be governed by the Tax Court 105.36 procedures provided in chapter 271, for cases relating to the 106.1 tax laws as defined in section 271.01, subdivision 5; 106.2 disregarding sections 273.125, subdivision 5, and 278.03, but 106.3 including section 278.05, subdivision 2. If the amount of the 106.4 benefits under paragraph (a) or (b) and penalty are not paid 106.5 within 60 days, and if no appeal has been filed, the county 106.6 auditor shall certify the amount of the benefit and penalty to 106.7 the succeeding year's tax list to be collected as part of the 106.8 property taxes on the affected property. 106.9 [EFFECTIVE DATE.] This section is effective for taxes 106.10 payable in 2004 and thereafter. 106.11 Sec. 19. Minnesota Statutes 2004, section 273.124, 106.12 subdivision 6, is amended to read: 106.13 Subd. 6. [LEASEHOLD COOPERATIVES.] When one or more 106.14 dwellings or one or more buildings which each contain several 106.15 dwelling units is owned by a nonprofit corporation subject to 106.16 the provisions of chapter 317A and qualifying under section 106.17 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as 106.18 amended through December 31, 1990, or a limited partnership 106.19 which corporation or partnership operates the property in 106.20 conjunction with a cooperative association, and has received 106.21 public financing, homestead treatment may be claimed by the 106.22 cooperative association on behalf of the members of the 106.23 cooperative for each dwelling unit occupied by a member of the 106.24 cooperative. The cooperative association must provide the 106.25 assessor with the Social Security numbers of those members. To 106.26 qualify for the treatment provided by this subdivision, the 106.27 following conditions must be met: 106.28 (a) the cooperative association must be organized under 106.29 chapter 308A or 308B and all voting members of the board of 106.30 directors must be resident tenants of the cooperative and must 106.31 be elected by the resident tenants of the cooperative; 106.32 (b) the cooperative association must have a lease for 106.33 occupancy of the property for a term of at least 20 years, which 106.34 permits the cooperative association, while not in default on the 106.35 lease, to participate materially in the management of the 106.36 property, including material participation in establishing 107.1 budgets, setting rent levels, and hiring and supervising a 107.2 management agent; 107.3 (c) to the extent permitted under state or federal law, the 107.4 cooperative association must have a right under a written 107.5 agreement with the owner to purchase the property if the owner 107.6 proposes to sell it; if the cooperative association does not 107.7 purchase the property it is offered for sale, the owner may not 107.8 subsequently sell the property to another purchaser at a price 107.9 lower than the price at which it was offered for sale to the 107.10 cooperative association unless the cooperative association 107.11 approves the sale; 107.12 (d) a minimum of 40 percent of the cooperative 107.13 association's members must have incomes at or less than 60 107.14 percent of area median gross income as determined by the United 107.15 States Secretary of Housing and Urban Development under section 107.16 142(d)(2)(B) of the Internal Revenue Code of 1986, as amended 107.17 through December 31, 1991. For purposes of this clause, "member 107.18 income" means the income of a member existing at the time the 107.19 member acquires cooperative membership; 107.20 (e) if a limited partnership owns the property, it must 107.21 include as the managing general partner a nonprofit organization 107.22 operating under the provisions of chapter 317A and qualifying 107.23 under section 501(c)(3) or 501(c)(4) of the Internal Revenue 107.24 Code of 1986, as amended through December 31, 1990, and the 107.25 limited partnership agreement must provide that the managing 107.26 general partner have sufficient powers so that it materially 107.27 participates in the management and control of the limited 107.28 partnership; 107.29 (f) prior to becoming a member of a leasehold cooperative 107.30 described in this subdivision, a person must have received 107.31 notice that (1) describes leasehold cooperative property in 107.32 plain language, including but not limited to the effects of 107.33 classification under this subdivision on rents, property taxes 107.34 and tax credits or refunds, and operating expenses, and (2) 107.35 states that copies of the articles of incorporation and bylaws 107.36 of the cooperative association, the lease between the owner and 108.1 the cooperative association, a sample sublease between the 108.2 cooperative association and a tenant, and, if the owner is a 108.3 partnership, a copy of the limited partnership agreement, can be 108.4 obtained upon written request at no charge from the owner, and 108.5 the owner must send or deliver the materials within seven days 108.6 after receiving any request; 108.7 (g) if a dwelling unit of a building was occupied on the 108.8 60th day prior to the date on which the unit became leasehold 108.9 cooperative property described in this subdivision, the notice 108.10 described in paragraph (f) must have been sent by first class 108.11 mail to the occupant of the unit at least 60 days prior to the 108.12 date on which the unit became leasehold cooperative property. 108.13 For purposes of the notice under this paragraph, the copies of 108.14 the documents referred to in paragraph (f) may be in proposed 108.15 version, provided that any subsequent material alteration of 108.16 those documents made after the occupant has requested a copy 108.17 shall be disclosed to any occupant who has requested a copy of 108.18 the document. Copies of the articles of incorporation and 108.19 certificate of limited partnership shall be filed with the 108.20 secretary of state after the expiration of the 60-day period 108.21 unless the change to leasehold cooperative status does not 108.22 proceed; 108.23 (h) the county attorney of the county in which the property 108.24 is located must certify to the assessor that the property meets 108.25 the requirements of this subdivision; 108.26 (i) the public financing received must be from at least one 108.27 of the following sources: 108.28 (1) tax increment financing proceeds used for the 108.29 acquisition or rehabilitation of the building or interest rate 108.30 write-downs relating to the acquisition of the building; 108.31 (2) government issued bonds exempt from taxes under section 108.32 103 of the Internal Revenue Code of 1986, as amended through 108.33 December 31, 1991, the proceeds of which are used for the 108.34 acquisition or rehabilitation of the building; 108.35 (3) programs under section 221(d)(3), 202, or 236, of Title 108.36 II of the National Housing Act; 109.1 (4) rental housing program funds under Section 8 of the 109.2 United States Housing Act of 1937 or the market rate family 109.3 graduated payment mortgage program funds administered by the 109.4 Minnesota Housing Finance Agency that are used for the 109.5 acquisition or rehabilitation of the building; 109.6 (5) low-income housing credit under section 42 of the 109.7 Internal Revenue Code of 1986, as amended through December 31, 109.8 1991; 109.9 (6) public financing provided by a local government used 109.10 for the acquisition or rehabilitation of the building, including 109.11 grants or loans from (i) federal community development block 109.12 grants; (ii) HOME block grants; or (iii) residential rental 109.13 bonds issued under chapter 474A; or 109.14 (7) other rental housing program funds provided by the 109.15 Minnesota Housing Finance Agency for the acquisition or 109.16 rehabilitation of the building; 109.17 (j) at the time of the initial request for homestead 109.18 classification or of any transfer of ownership of the property, 109.19 the governing body of the municipality in which the property is 109.20 located must hold a public hearing and make the following 109.21 findings: 109.22 (1) that the granting of the homestead treatment of the 109.23 apartment's units will facilitate safe, clean, affordable 109.24 housing for the cooperative members that would otherwise not be 109.25 available absent the homestead designation; 109.26 (2) that the owner has presented information satisfactory 109.27 to the governing body showing that the savings garnered from the 109.28 homestead designation of the units will be used to reduce 109.29 tenant's rents or provide a level of furnishing or maintenance 109.30 not possible absent the designation; and 109.31 (3) that the requirements of paragraphs (b), (d), and (i) 109.32 have been met. 109.33 Homestead treatment must be afforded to units occupied by 109.34 members of the cooperative association and the units must be 109.35 assessed as provided in subdivision 3, provided that any unit 109.36 not so occupied shall be classified and assessed pursuant to the 110.1 appropriate class. No more than three acres of land may, for 110.2 assessment purposes, be included with each dwelling unit that 110.3 qualifies for homestead treatment under this subdivision. 110.4 When dwelling units no longer qualify under this 110.5 subdivision, the current owner must notify the assessor within 110.6 60 days. Failure to notify the assessor within 60 days shall 110.7 result in the loss of benefits under this subdivision for taxes 110.8 payable in the year that the failure is discovered. For these 110.9 purposes, "benefits under this subdivision" means the difference 110.10 in the net tax capacity of the units which no longer qualify as 110.11 computed under this subdivision and as computed under the 110.12 otherwise applicable law, times the local tax rate applicable to 110.13 the building for that taxes payable year. Upon discovery of a 110.14 failure to notify, the assessor shall inform the auditor of the 110.15 difference in net tax capacity for the building or buildings in 110.16 which units no longer qualify, and the auditor shall calculate 110.17 the benefits under this subdivision. Such amount, plus a 110.18 penalty equal to 100 percent of that amount, shall then be 110.19 demanded of the building's owner. The property owner may appeal 110.20 the county's determination by serving copies of a petition for 110.21 review with county officials as provided in section 278.01 and 110.22 filing a proof of service as provided in section 278.01 with the 110.23 Minnesota Tax Court within 60 days of the date of the notice 110.24 from the county. The appeal shall be governed by the Tax Court 110.25 procedures provided in chapter 271, for cases relating to the 110.26 tax laws as defined in section 271.01, subdivision 5; 110.27 disregarding sections 273.125, subdivision 5, and 278.03, but 110.28 including section 278.05, subdivision 2. If the amount of the 110.29 benefits under this subdivision and penalty are not paid within 110.30 60 days, and if no appeal has been filed, the county auditor 110.31 shall certify the amount of the benefit and penalty to the 110.32 succeeding year's tax list to be collected as part of the 110.33 property taxes on the affected buildings. 110.34 [EFFECTIVE DATE.] This section is effective for taxes 110.35 payable in 2004 and thereafter. 110.36 Sec. 20. Minnesota Statutes 2004, section 273.124, 111.1 subdivision 8, is amended to read: 111.2 Subd. 8. [HOMESTEAD OWNED BY OR LEASED TO FAMILY FARM 111.3 CORPORATION, JOINT FARM VENTURE, LIMITED LIABILITY COMPANY, OR 111.4 PARTNERSHIP.] (a) Each family farm corporation, each; each joint 111.5 family farm venture,; and each limited liability company, and111.6eachor partnershipoperatingwhich operates a family farm; is 111.7 entitled to class 1b under section 273.13, subdivision 22, 111.8 paragraph (b), or class 2a assessment for one homestead occupied 111.9 by a shareholder, member, or partner thereof who is residing on 111.10 the land, and actively engaged in farming of the land owned by 111.11 the family farm corporation, joint family farm venture, limited 111.12 liability company, or partnershipoperating a family farm. 111.13 Homestead treatment applies even if legal title to the property 111.14 is in the name of the family farm corporation, joint family farm 111.15 venture, limited liability company, or partnershipoperating the111.16family farm, and not in the name of the person residing on it. 111.17 "Family farm corporation," "family farm," and "partnership 111.18 operating a family farm" have the meanings given in section 111.19 500.24, except that the number of allowable shareholders, 111.20 members, or partners under this subdivision shall not exceed 111.21 12. "Limited liability company" has the meaning contained in 111.22 sections 322B.03, subdivision 28, and 500.24, subdivision 2, 111.23 paragraphs (l) and (m). "Joint family farm venture" means a 111.24 cooperative agreement among two or more farm enterprises 111.25 authorized to operate a family farm under section 500.24. 111.26 (b) In addition to property specified in paragraph (a), any 111.27 other residences owned by family farm corporations, joint family 111.28 farm ventures, limited liability companies, or partnerships 111.29operating a family farmdescribed in paragraph (a) which are 111.30 located on agricultural land and occupied as homesteads by its 111.31 shareholders, members, or partners who are actively engaged in 111.32 farming on behalf of that corporation, joint farm venture, 111.33 limited liability company, or partnership must also be assessed 111.34 as class 2a property or as class 1b property under section 111.35 273.13. 111.36 (c) Agricultural property that is owned by a member, 112.1 partner, or shareholder of a family farm corporation or joint 112.2 family farm venture, limited liability company operating a 112.3 family farm, or by a partnership operating a family farm and 112.4 leased to the family farm corporation, limited liability 112.5 company,orpartnershipoperating a family farm, or joint farm 112.6 venture, as defined in paragraph (a), is eligible for 112.7 classification as class 1b or class 2a under section 273.13, if 112.8 the owner is actually residing on the property, and is actually 112.9 engaged in farming the land on behalf of that corporation, joint 112.10 farm venture, limited liability company, or partnership. This 112.11 paragraph applies without regard to any legal possession rights 112.12 of the family farm corporation, joint family farm venture, 112.13 limited liability company, or partnershipoperating a family112.14farmunder the lease. 112.15 [EFFECTIVE DATE.] This section is effective the day 112.16 following final enactment. 112.17 Sec. 21. Minnesota Statutes 2004, section 273.124, 112.18 subdivision 21, is amended to read: 112.19 Subd. 21. [TRUST PROPERTY; HOMESTEAD.] Real property held 112.20 by a trustee under a trust is eligible for classification as 112.21 homestead property if: 112.22 (1) the grantor or surviving spouse of the grantor of the 112.23 trust occupies and uses the property as a homestead; 112.24 (2) a relative or surviving relative of the grantor who 112.25 meets the requirements of subdivision 1, paragraph (c), in the 112.26 case of residential real estate; or subdivision 1, paragraph 112.27 (d), in the case of agricultural property, occupies and uses the 112.28 property as a homestead; 112.29 (3) a family farm corporation, joint farm venture, limited 112.30 liability company, or partnership operating a family farm rents 112.31 the property held by a trustee under a trust, and the grantor, 112.32 the spouse of the grantor, or the son or daughter of the 112.33 grantor, who is also a shareholder, member, or partner of the 112.34 corporation, joint farm venture, limited liability company, or 112.35 partnership occupies and uses the property as a homestead,and112.36 or is actively farming the property on behalf of the 113.1 corporation, joint farm venture, limited liability company, or 113.2 partnership; or 113.3 (4) a person who has received homestead classification for 113.4 property taxes payable in 2000 on the basis of an unqualified 113.5 legal right under the terms of the trust agreement to occupy the 113.6 property as that person's homestead and who continues to use the 113.7 property as a homestead or a person who received the homestead 113.8 classification for taxes payable in 2005 under clause (3) who 113.9 does not qualify under clause (3) for taxes payable in 2006 or 113.10 thereafter but who continues to qualify under clause (3) as it 113.11 existed for taxes payable in 2005. 113.12 For purposes of this subdivision, "grantor" is defined as 113.13 the person creating or establishing a testamentary, inter Vivos, 113.14 revocable or irrevocable trust by written instrument or through 113.15 the exercise of a power of appointment. 113.16 [EFFECTIVE DATE.] This section is effective for taxes 113.17 payable in 2006 and thereafter. 113.18 Sec. 22. Minnesota Statutes 2004, section 273.1315, is 113.19 amended to read: 113.20 273.1315 [CERTIFICATION OF 1B PROPERTY.] 113.21 Any property owner seeking classification and assessment of 113.22 the owner's homestead as class 1b property pursuant to section 113.23 273.13, subdivision 22, paragraph (b), shall file with the 113.24 commissioner of revenue a 1b homestead declaration, on a form 113.25 prescribed by the commissioner. The declaration shall contain 113.26 the following information: 113.27 (a) the information necessary to verify that on or before 113.28 June 30 of the filing year, the property owner or the owner's 113.29 spouse satisfies the requirements of section 273.13, subdivision 113.30 22, paragraph (b), for 1b classification; and 113.31 (b) any additional information prescribed by the 113.32 commissioner. 113.33 The declaration must be filed on or before October 1 to be 113.34 effective for property taxes payable during the succeeding 113.35 calendar year. The declaration and any supplementary 113.36 information received from the property owner pursuant to this 114.1 section shall be subject to chapter 270B. If approved by the 114.2 commissioner, the declaration remains in effect until the 114.3 property no longer qualifies under section 273.13, subdivision 114.4 22, paragraph (b). Failure to notify the commissioner within 30 114.5 days that the property no longer qualifies under that paragraph 114.6 because of a sale, change in occupancy, or change in the status 114.7 or condition of an occupant shall result in the penalty provided 114.8 in section 273.124, subdivision 13, computed on the basis of the 114.9 class 1b benefits for the property, and the property shall lose 114.10 its current class 1b classification. 114.11 The commissioner shall provide to the assessor on or before 114.12 November 1 a listing of the parcels of property qualifying for 114.13 1b classification. 114.14 [EFFECTIVE DATE.] This section is effective the day 114.15 following final enactment. 114.16 Sec. 23. Minnesota Statutes 2004, section 273.19, 114.17 subdivision 1a, is amended to read: 114.18 Subd. 1a. For purposes of this section, a lease includes 114.19 any agreement, except a cooperative farming agreement pursuant 114.20 to section 97A.135, subdivision 3, or a lease executed pursuant 114.21 to section 272.68, subdivision 4, permitting a nonexempt person 114.22 or entity to use the property, regardless of whether the 114.23 agreement is characterized as a lease. A lease has a "term of 114.24 at least one year" if the term is for a period of less than one 114.25 year and the lease permits the parties to renew the lease 114.26 without requiring that similar terms for leasing the property 114.27 will be offered to other applicants or bidders through a 114.28 competitive bidding or other form of offer to potential lessees 114.29 or users. 114.30 [EFFECTIVE DATE.] This section is effective the day 114.31 following final enactment. 114.32 Sec. 24. Minnesota Statutes 2004, section 273.372, is 114.33 amended to read: 114.34 273.372 [PROCEEDINGS AND APPEALS; UTILITY OR RAILROAD 114.35 VALUATIONS.] 114.36 Subdivision 1. [SCOPE.] (a) As provided in this section, 115.1 an appeal by a utility or railroad company concerningthe115.2exemption, valuation, or classification ofproperty for which 115.3 the commissioner of revenue has provided the city or county 115.4 assessor with valuations by order, or for which the commissioner 115.5 has recommended values to the city or county assessor, must be 115.6 brought against the commissionerin Tax Court or in district115.7court of the county where the property is located, and not 115.8 against the county or taxing district where the property is 115.9 located. 115.10 (b) This section governs administrative appeals and appeals 115.11 to court of a claim that utility or railroad operating property 115.12 has been partially, unfairly, or unequally assessed, or assessed 115.13 at a valuation greater than its real or actual value, 115.14 misclassified, or that the property is exempt. This section 115.15 applies only to property described in sections 270.81, 115.16 subdivision 1, 273.33, 273.35, 273.36, and 273.37, and only with 115.17 regard to taxable net tax capacities that have been provided to 115.18 the city or county by the commissioner and which have not been 115.19 changed by city or county. If the taxable net tax capacity 115.20 being appealed is not the taxable net tax capacity established 115.21 by the commissioner, or if the appeal claims that the tax rate 115.22 applied against the parcel is incorrect, or that the tax has 115.23 been paid, this section does not apply. 115.24 Subd. 2. [CONTENTS AND FILING OF PETITION.] (a) In all 115.25 appeals to court that are required to be brought against the 115.26 commissioner under this section, the petition initiating the 115.27 appeal must be served on the commissioner and must be filed with 115.28 the Tax Court in Ramsey County, as provided in paragraph (b) or 115.29 (c). 115.30 (b) If the appeal to court is from an order of the 115.31 commissioner, it must be brought under chapter 271, except that 115.32 when the provisions of this section conflict with chapter 271, 115.33 this section prevails. In addition, the petition must include 115.34 all the parcels encompassed by that order which the petitioner 115.35 claims have been partially, unfairly, or unequally assessed, 115.36 assessed at a valuation greater than their real or actual value, 116.1 misclassified, or are exempt. For this purpose, an order of the 116.2 commissioner is either (1) a certification or notice of value by 116.3 the commissioner for property described in subdivision 1, or (2) 116.4 the final determination by the commissioner of either an 116.5 administrative appeal conference or informal administrative 116.6 appeal described in subdivision 4. 116.7 (c) If the appeal is from theexemption, valuation,116.8classification, ortax that results from implementation of the 116.9 commissioner's order, certification, or recommendation, it must 116.10 be brought under chapter 278, and the provisions in that chapter 116.11 apply, except that service shall be on the commissioner only and 116.12 not on thecountylocal officials specified in section 278.01, 116.13 subdivision 1, and if any other provision of this section 116.14 conflicts with chapter 278, this section prevails. In addition, 116.15 the petition must include either all the utility parcels or all 116.16 the railroad parcels in the state in which the petitioner claims 116.17 an interest and which the petitioner claims have been partially, 116.18 unfairly, or unequally assessed, assessed at a valuation greater 116.19 than their real or actual value, misclassified, or are 116.20 exempt.This provision applies to the property described in116.21sections 273.33, 273.35, 273.36, and 273.37, but only if the116.22appealed values have remained unchanged from those provided to116.23the city or county by the commissioner. If the exemption,116.24valuation, or classification being appealed has been changed by116.25the city or county, then the action must be brought under116.26chapter 278 in the county where the property is located and116.27proper service must be made upon the county officials as116.28specified in section 278.01, subdivision 1.116.29 Subd. 3. [NOTICE.] Upon filing of any appeal in court by a 116.30 utility company or railroad against the commissioner pursuant to 116.31 this section, the commissioner shall give notice by first class 116.32 mail to the county auditor of each countywhich would be116.33affected by the appealwhere property included in the petition 116.34 is located. 116.35 Subd. 4. [ADMINISTRATIVE APPEALS.] (a) Companies that 116.36 submit the reports under section 270.82 or 273.371 by the date 117.1 specified in that section, or by the date specified by the 117.2 commissioner in an extension, may appeal administratively to the 117.3 commissionerunder the procedures in section 270.11, subdivision117.46,prior to bringing an action inTax Court or in districtcourt 117.5, however, instituting an administrative appealby submitting a 117.6 written request with the commissionerdoes not change or117.7modifyfor a conference within ten days after the date of the 117.8 commissioner's valuation certification or notice to the company, 117.9 or by May 15, whichever is earlier. The commissioner shall 117.10 conduct the conference upon the commissioner's entire files and 117.11 records and such further information as may be offered. The 117.12 conference must be held no later than 20 days after the date of 117.13 the commissioner's valuation certification or notice to the 117.14 company, or by the date specified by the commissioner in an 117.15 extension. At a reasonable time after the conference the 117.16 commissioner shall make a final determination of the matter and 117.17 shall notify the company promptly of the determination. The 117.18 conference is not a contested case hearing. 117.19 (b) In addition to the opportunity for a conference under 117.20 paragraph (a), the commissioner shall make a more informal 117.21 procedure available to railroad and utility companies to 117.22 question values established by the commissioner through 117.23 certification or notice. The availability of the informal 117.24 procedure does not change or modify the deadline for requesting 117.25 a conference under paragraph (a), the deadline in section 271.06 117.26 for appealing an order of the commissionerin Tax Court, or the 117.27 deadline in section 278.01 forfiling a property tax claim or117.28objection in Tax Court or districtappealing property taxes in 117.29 court. 117.30 [EFFECTIVE DATE.] This section is effective September 1, 117.31 2005, and thereafter. 117.32 Sec. 25. Minnesota Statutes 2004, section 274.014, 117.33 subdivision 2, is amended to read: 117.34 Subd. 2. [APPEALS AND EQUALIZATION COURSE.]By no later117.35than January 1,Beginning in 2006, and each year thereafter, 117.36 there must be at least one member at each meeting of a local 118.1 board of appeal and equalization who has attended an appeals and 118.2 equalization course developed or approved by the commissioner 118.3 within the last four years, as certified by the commissioner. 118.4 The course may be offered in conjunction with a meeting of the 118.5 Minnesota League of Cities or the Minnesota Association of 118.6 Townships. The course content must include, but need not be 118.7 limited to, a review of the handbook developed by the 118.8 commissioner under subdivision 1. 118.9 [EFFECTIVE DATE.] This section is effective the day 118.10 following final enactment. 118.11 Sec. 26. Minnesota Statutes 2004, section 274.014, 118.12 subdivision 3, is amended to read: 118.13 Subd. 3. [PROOF OF COMPLIANCE; TRANSFER OF DUTIES.] (a) 118.14 Any city or town thatdoes notconducts local boards of appeal 118.15 and equalization meetings must provide proof to the county 118.16 assessor by December 1, 2006, and each year thereafter, that it 118.17 is in compliance with the requirements of subdivision 2, and118.18that it had. Beginning in 2006, this notice must also verify 118.19 that there was a quorum of voting members at each meeting of the 118.20 board of appeal and equalization in thepriorcurrent year,. A 118.21 city or town that does not comply with these requirements is 118.22 deemed to have transferred its board of appeal and equalization 118.23 powers to the countyunder section 274.01, subdivision 3,118.24forbeginning with the following year's assessment and 118.25 continuing unless the powers are reinstated under paragraph (c). 118.26 (b) The county shall notify the taxpayers when the board of 118.27 appeal and equalization for a city or town has been transferred 118.28 to the county under this subdivision and, prior to the meeting 118.29 time of the county board of equalization, the county shall make 118.30 available to those taxpayers a procedure for a review of the 118.31 assessments, including, but not limited to, open book meetings. 118.32 This alternate review process shall take place in April and May. 118.33 (c) A local board whose powers are transferred to the 118.34 county under this subdivision may be reinstated by resolution of 118.35 the governing body of the city or town and upon proof of 118.36 compliance with the requirements of subdivision 2. The 119.1 resolution and proofs must be provided to the county assessor by 119.2 December 1 in order to be effective for the following year's 119.3 assessment. 119.4 [EFFECTIVE DATE.] This section is effective the day 119.5 following final enactment. 119.6 Sec. 27. Minnesota Statutes 2004, section 274.14, is 119.7 amended to read: 119.8 274.14 [LENGTH OF SESSION; RECORD.] 119.9The county board of equalization or the special board of119.10equalization appointed by it shall meet during the last ten119.11meeting days in June. For this purpose, "meeting days" are119.12defined as any day of the week excluding Saturday and Sunday.119.13 The board may meet on any ten consecutive meeting days in June, 119.14 after the second Friday in June, if. The actual meeting dates 119.15aremust be contained on the valuation notices mailed to each 119.16 property owner in the countyunderas provided in section 119.17 273.121. For this purpose, "meeting days" is defined as any day 119.18 of the week excluding Saturday and Sunday. No action taken by 119.19 the county board of review after June 30 is valid, except for 119.20 corrections permitted in sections 273.01 and 274.01. The county 119.21 auditor shall keep an accurate record of the proceedings and 119.22 orders of the board. The record must be published like other 119.23 proceedings of county commissioners. A copy of the published 119.24 record must be sent to the commissioner of revenue, with the 119.25 abstract of assessment required by section 274.16. 119.26 [EFFECTIVE DATE.] This section is effective the day 119.27 following final enactment. 119.28 Sec. 28. Minnesota Statutes 2004, section 275.07, 119.29 subdivision 1, is amended to read: 119.30 Subdivision 1. [CERTIFICATION OF LEVY.] (a) Except as 119.31 provided under paragraph (b), the taxes voted by cities, 119.32 counties, school districts, and special districts shall be 119.33 certified by the proper authorities to the county auditor on or 119.34 before five working days after December 20 in each year. A town 119.35 must certify the levy adopted by the town board to the county 119.36 auditor by September 15 each year. If the town board modifies 120.1 the levy at a special town meeting after September 15, the town 120.2 board must recertify its levy to the county auditor on or before 120.3 five working days after December 20.The taxes certified shall120.4be reduced by the county auditor by the aid received under120.5section 273.1398, subdivision 3.If a city, town, county, 120.6 school district, or special district fails to certify its levy 120.7 by that date, its levy shall be the amount levied by it for the 120.8 preceding year. 120.9 (b)(i) The taxes voted by counties under sections 103B.241, 120.10 103B.245, and 103B.251 shall be separately certified by the 120.11 county to the county auditor on or before five working days 120.12 after December 20 in each year. The taxes certified shall not 120.13 be reduced by the county auditor by the aid received under 120.14 section 273.1398, subdivision 3. If a county fails to certify 120.15 its levy by that date, its levy shall be the amount levied by it 120.16 for the preceding year. 120.17 (ii) For purposes of the proposed property tax notice under 120.18 section 275.065 and the property tax statement under section 120.19 276.04, for the first year in which the county implements the 120.20 provisions of this paragraph, the county auditor shall reduce 120.21 the county's levy for the preceding year to reflect any amount 120.22 levied for water management purposes under clause (i) included 120.23 in the county's levy. 120.24 [EFFECTIVE DATE.] This section is effective the day 120.25 following final enactment. 120.26 Sec. 29. Minnesota Statutes 2004, section 275.07, 120.27 subdivision 4, is amended to read: 120.28 Subd. 4. [REPORT TO COMMISSIONER.] (a) On or before 120.29 October 8 of each year, the county auditor shall report to the 120.30 commissioner of revenue the proposed levy certified by local 120.31 units of government under section 275.065, subdivision 1. If 120.32 any taxing authorities have notified the county auditor that 120.33 they are in the process of negotiating an agreement for sharing, 120.34 merging, or consolidating services but that when the proposed 120.35 levy was certified under section 275.065, subdivision 1c, the 120.36 agreement was not yet finalized, the county auditor shall supply 121.1 that information to the commissioner when filing the report 121.2 under this section and shall recertify the affected levies as 121.3 soon as practical after October 10. 121.4 (b) On or before January 15 of each year, the county 121.5 auditor shall report to the commissioner of revenue the final 121.6 levy certified by local units of government under subdivision 1. 121.7 (c) The levies must be reported in the manner prescribed by 121.8 the commissioner.The reports must show a total levy and the121.9amount of each special levy.121.10 [EFFECTIVE DATE.] This section is effective the day 121.11 following final enactment. 121.12 Sec. 30. Minnesota Statutes 2004, section 276.112, is 121.13 amended to read: 121.14 276.112 [STATE PROPERTY TAXES; COUNTY TREASURER.] 121.15 On or before January 25 each year, for the period ending 121.16 December 31 of the prior year, and on or before June2928 each 121.17 year, for the period ending on the most recent settlement day 121.18 determined in section 276.09, and on or before December 2 each 121.19 year, for the period ending November 20, the county treasurer 121.20 must make full settlement with the county auditor according to 121.21 sections 276.09, 276.10, and 276.111 for all receipts of state 121.22 property taxes levied under section 275.025, and must transmit 121.23 those receipts to the commissioner of revenue by electronic 121.24 means. 121.25 [EFFECTIVE DATE.] This section is effective the day 121.26 following final enactment. 121.27 Sec. 31. Minnesota Statutes 2004, section 282.016, is 121.28 amended to read: 121.29 282.016 [PROHIBITED PURCHASERS.] 121.30No(a) A county auditor, county treasurer, county attorney, 121.31 court administrator of the district court,orcounty assessor 121.32or, supervisor of assessments,ordeputy or clerk or an employee 121.33 of such officer,and noa commissioner for tax-forfeited lands 121.34 or an assistant to such commissionermay, must not become a 121.35 purchaser, either personally or as an agent or attorney for 121.36 another person, of the properties offered for sale under the 122.1 provisions of this chapter, either personally, or as agent or122.2attorney for any other person, except thatin the county for 122.3 which the person performs duties. A person prohibited from 122.4 purchasing property under this section must not directly or 122.5 indirectly have another person purchase it on behalf of the 122.6 prohibited purchaser for the prohibited purchaser's benefit or 122.7 gain. 122.8 (b) Notwithstanding paragraph (a), such officer, deputy, 122.9court administratorclerk, or employee or commissioner for 122.10 tax-forfeited lands or assistant to such commissioner may (1) 122.11 purchase lands owned by that official at the time the state 122.12 became the absolute owner thereof or (2) bid upon and purchase 122.13 forfeited property offered for sale under the alternate sale 122.14 procedure described in section 282.01, subdivision 7a. 122.15 [EFFECTIVE DATE.] This section is effective the day 122.16 following final enactment. 122.17 Sec. 32. Minnesota Statutes 2004, section 282.08, is 122.18 amended to read: 122.19 282.08 [APPORTIONMENT OF PROCEEDS TO TAXING DISTRICTS.] 122.20 The net proceeds from the sale or rental of any parcel of 122.21 forfeited land, or from the sale of products from the forfeited 122.22 land, must be apportioned by the county auditor to the taxing 122.23 districts interested in the land, as follows: 122.24 (1)the amounts necessary to pay the state general tax levy122.25against the parcel for taxes payable in the year for which the122.26tax judgment was entered, and for each subsequent payable year122.27up to and including the year of forfeiture, must be apportioned122.28to the state;122.29(2)the portion required to pay any amounts included in the 122.30 appraised value under section 282.01, subdivision 3, as 122.31 representing increased value due to any public improvement made 122.32 after forfeiture of the parcel to the state, but not exceeding 122.33 the amount certified by the clerk of the municipality must be 122.34 apportioned to the municipal subdivision entitled to it; 122.35(3)(2) the portion required to pay any amount included in 122.36 the appraised value under section 282.019, subdivision 5, 123.1 representing increased value due to response actions taken after 123.2 forfeiture of the parcel to the state, but not exceeding the 123.3 amount of expenses certified by the Pollution Control Agency or 123.4 the commissioner of agriculture, must be apportioned to the 123.5 agency or the commissioner of agriculture and deposited in the 123.6 fund from which the expenses were paid; 123.7(4)(3) the portion of the remainder required to discharge 123.8 any special assessment chargeable against the parcel for 123.9 drainage or other purpose whether due or deferred at the time of 123.10 forfeiture, must be apportioned to the municipal subdivision 123.11 entitled to it; and 123.12(5)(4) any balance must be apportioned as follows: 123.13 (i) The county board may annually by resolution set aside 123.14 no more than 30 percent of the receipts remaining to be used for 123.15 timber development on tax-forfeited land and dedicated memorial 123.16 forests, to be expended under the supervision of the county 123.17 board. It must be expended only on projects approved by the 123.18 commissioner of natural resources. 123.19 (ii) The county board may annually by resolution set aside 123.20 no more than 20 percent of the receipts remaining to be used for 123.21 the acquisition and maintenance of county parks or recreational 123.22 areas as defined in sections 398.31 to 398.36, to be expended 123.23 under the supervision of the county board. 123.24 (iii) Any balance remaining must be apportioned as 123.25 follows: county, 40 percent; town or city, 20 percent; and 123.26 school district, 40 percent, provided, however, that in 123.27 unorganized territory that portion which would have accrued to 123.28 the township must be administered by the county board of 123.29 commissioners. 123.30 [EFFECTIVE DATE.] This section is effective the day 123.31 following final enactment for state general tax levy amounts 123.32 payable in 2004 and thereafter. 123.33 Sec. 33. Minnesota Statutes 2004, section 282.15, is 123.34 amended to read: 123.35 282.15 [SALES OF FORFEITED AGRICULTURAL LANDS.] 123.36 The sale shall be conducted by the auditor of the county in 124.1 which the parcels lie. The parcels shall be sold to the highest 124.2 bidder but not for less than the appraised value. The sales 124.3 shall be for cash or on the following terms: The appraised 124.4 value of all merchantable timber on agricultural lands shall be 124.5 paid for in full at the date of sale. At least 15 percent of 124.6 the purchase price of the land shall be paid in cash at the time 124.7 of purchase. The balance shall be paid in not more than 20 124.8 equal annual installments, with interest at a rate equal to the 124.9 rate in effect at the time under section 549.09 on the unpaid 124.10 balance each year. Both principal and interest are due and 124.11 payable on December 31 each year following that in which the 124.12 purchase was made. The purchaser may pay any number of 124.13 installments of principal and interest on or before their due 124.14 date. When the sale is on terms other than for cash in full, 124.15 the purchaser shall receive from the county auditor a contract 124.16 for deed, in a form prescribed by the attorney general. The 124.17 county auditor shall make a report to the commissioner of 124.18 natural resources not more than 30 days after each public sale 124.19 showing the lands sold at the sales, and submit a copy of each 124.20 contract of sale. 124.21 All lands sold pursuant to this sectionshall, on the124.22second day of January following the date of the sale,must be 124.23 restored to the tax rolls and become subject to taxation in the 124.24 same manner as they were assessed and taxed before becoming the 124.25 absolute property of the state for the assessment year 124.26 determined under section 272.02, subdivision 38, paragraph (c). 124.27 [EFFECTIVE DATE.] This section is effective for sales 124.28 occurring on or after July 1, 2005. 124.29 Sec. 34. Minnesota Statutes 2004, section 282.21, is 124.30 amended to read: 124.31 282.21 [FORM OF CONVEYANCE.] 124.32 When any sale has been made under sections 282.14 to 124.33 282.22, upon payment in full of the purchase price, appropriate 124.34 conveyance in fee in such form as may be prescribed by the 124.35 attorney general shall be issued by the commissioner of finance 124.36 to the purchaser or the purchaser's assigns and this conveyance 125.1 shall have the force and effect of a patent from the state. 125.2 [EFFECTIVE DATE.] This section is effective the day 125.3 following final enactment. 125.4 Sec. 35. Minnesota Statutes 2004, section 282.224, is 125.5 amended to read: 125.6 282.224 [FORM OF CONVEYANCE.] 125.7 When any sale has been made under sections 282.221 to 125.8 282.226, upon payment in full of the purchase price, appropriate 125.9 conveyance in fee, in such form as may be prescribed by the 125.10 attorney general, shall be issued by the commissioner of natural 125.11 resources to the purchaser or the purchaser's assignee, and the 125.12 conveyance shall have the force and effect of a patent from the 125.13 state. 125.14 [EFFECTIVE DATE.] This section is effective the day 125.15 following final enactment. 125.16 Sec. 36. Minnesota Statutes 2004, section 282.301, is 125.17 amended to read: 125.18 282.301 [RECEIPTS FOR PAYMENTS.] 125.19 When any sale has been made under sections 282.012 and 125.20 282.241 to 282.324, the purchaser shall receive from the county 125.21 auditor at the time of repurchase a receipt, in such form as may 125.22 be prescribed by the attorney general. When the purchase price 125.23 of a parcel of land shall be paid in full, the following facts 125.24 shall be certified by the county auditor to the commissioner of 125.25 revenue of the state of Minnesota: the description of land, the 125.26 date of sale, the name of the purchaser or the purchaser's 125.27 assignee, and the date when the final installment of the 125.28 purchase price was paid. Upon payment in full of the purchase 125.29 price, the purchaser or the assignee shall receive a quitclaim 125.30 deed from the state, to be executed by the commissioner of 125.31 revenue. The deed must be sent to the county auditor who shall 125.32 have it recorded before it is forwarded to the purchaser. 125.33 Failure to make any payment herein required shall constitute 125.34 default and upon such default and cancellation in accord with 125.35 section 282.40, the right, title and interest of the purchaser 125.36 or the purchaser's heirs, representatives, or assigns in such 126.1 parcel shall terminate. 126.2 [EFFECTIVE DATE.] This section is effective the day 126.3 following final enactment. 126.4 Sec. 37. Minnesota Statutes 2004, section 290B.05, 126.5 subdivision 3, is amended to read: 126.6 Subd. 3. [CALCULATION OF DEFERRED PROPERTY TAX AMOUNT.] 126.7 When final property tax amounts for the following year have been 126.8 determined, the county auditor shall calculate the "deferred 126.9 property tax amount." The deferred property tax amount is equal 126.10 to the lesser of (1) the maximum allowable deferral for the 126.11 year; or (2) the difference between (i) the total amount of 126.12 property taxes and special assessments levied upon the 126.13 qualifying homestead by all taxing jurisdictions and (ii) the 126.14 maximum property tax amount.Any special assessments levied by126.15any local unit of government must not be included in the total126.16tax used to calculate the deferred tax amount.For this purpose 126.17 "special assessments" includes any assessment, fee, or other 126.18 charge that may by law, and which does, appear on the property 126.19 tax statement for the property for collection under the laws 126.20 applicable to the enforcement of real estate taxes. Any tax 126.21 attributable to new improvements made to the property after the 126.22 initial application has been approved under section 290B.04, 126.23 subdivision 2, must be excluded when determining any subsequent 126.24 deferred property tax amount. The county auditor shall 126.25 annually, on or before April 15, certify to the commissioner of 126.26 revenue the property tax deferral amounts determined under this 126.27 subdivision by property and by owner. 126.28 [EFFECTIVE DATE.] This section is effective for amounts 126.29 deferred in 2006 and thereafter. 126.30 Sec. 38. Minnesota Statutes 2004, section 290C.05, is 126.31 amended to read: 126.32 290C.05 [ANNUAL CERTIFICATION.] 126.33 On or before July 1 of each year, beginning with the year 126.34 after the claimant has received an approved application, the 126.35 commissioner shall send each claimant enrolled under the 126.36 sustainable forest incentive program a certification form. The 127.1 claimant must sign the certification, attesting that the 127.2 requirements and conditions for continued enrollment in the 127.3 program are currently being met, and must return the signed 127.4 certification form to the commissioner by August 15 of that same 127.5 year.Failure toIf the claimant does not return an annual 127.6 certification form by the due dateshall result in removal of127.7the lands from the provisions of the sustainable forest127.8incentive program, and the imposition of any applicable removal127.9penalty, the provisions in section 290C.11 apply.The claimant127.10may appeal the removal and any associated penalty according to127.11the procedures and within the time allowed under this chapter.127.12 [EFFECTIVE DATE.] This section is effective the day 127.13 following final enactment. 127.14 Sec. 39. [290C.055] [LENGTH OF COVENANT.] 127.15 The covenant remains in effect for a minimum of eight 127.16 years. If land is removed from the program before it has been 127.17 enrolled for four years, the covenant remains in effect for 127.18 eight years from the date recorded. 127.19 If land that has been enrolled for four years or more is 127.20 removed from the program for any reason, there is a waiting 127.21 period before the covenant terminates. The covenant terminates 127.22 on January 1 of the fifth calendar year that begins after the 127.23 date that: 127.24 (1) the commissioner receives notification from the 127.25 claimant that the claimant wishes to remove the land from the 127.26 program under section 290C.10; or 127.27 (2) the date that the land is removed from the program 127.28 under section 290C.11. 127.29 Notwithstanding the other provisions of this section, the 127.30 covenant is terminated at the same time that the land is removed 127.31 from the program due to acquisition of title or possession for a 127.32 public purpose under section 290C.10. 127.33 [EFFECTIVE DATE.] This section is effective the day 127.34 following final enactment. 127.35 Sec. 40. Minnesota Statutes 2004, section 290C.10, is 127.36 amended to read: 128.1 290C.10 [WITHDRAWAL PROCEDURES.] 128.2 An approved claimant under the sustainable forest incentive 128.3 program for a minimum of four years may notify the commissioner 128.4 of the intent to terminate enrollment. Within 90 days of 128.5 receipt of notice to terminate enrollment, the commissioner 128.6 shall inform the claimant in writing, acknowledging receipt of 128.7 this notice and indicating the effective date of termination 128.8 from the sustainable forest incentive program. Termination of 128.9 enrollment in the sustainable forest incentive program occurs on 128.10 January 1 of the fifth calendar year that begins after receipt 128.11 by the commissioner of the termination notice. After the 128.12 commissioner issues an effective date of termination, a claimant 128.13 wishing to continue the land's enrollment in the sustainable 128.14 forest incentive program beyond the termination date must apply 128.15 for enrollment as prescribed in section 290C.04. A claimant who 128.16 withdraws a parcel of land from this program may not reenroll 128.17 the parcel for a period of three years. Within 90 days after 128.18 the termination date, the commissioner shall execute and 128.19 acknowledge a document releasing the land from the covenant 128.20 required under this chapter. The document must be mailed to the 128.21 claimant and is entitled to be recorded. The commissioner may 128.22 allow early withdrawal from the Sustainable Forest Incentive Act 128.23 without penaltyin cases of condemnationwhen the state of 128.24 Minnesota, any local government unit, or any other entity which 128.25 has the right of eminent domain acquires title or possession to 128.26 the land for a public purpose notwithstanding the provisions of 128.27 this section. In the case of such acquisition, the commissioner 128.28 shall execute and acknowledge a document releasing the land 128.29 acquired by the state, local government unit, or other entity 128.30 from the covenant. All other enrolled land must remain in the 128.31 program. 128.32 [EFFECTIVE DATE.] This section is effective the day 128.33 following final enactment. 128.34 Sec. 41. Minnesota Statutes 2004, section 373.45, 128.35 subdivision 7, is amended to read: 128.36 Subd. 7. [AID REDUCTION FOR REPAYMENT.] (a) Except as 129.1 provided in paragraph (b), the commissioner may reduce, by the 129.2 amount paid by the state under this section on behalf of the 129.3 county, plus the interest due on the state payments, the 129.4following aids payable to the county:129.5(1) homestead and agricultural credit aid and disparity129.6reduction aid payable under section 273.1398;129.7(2) county criminal justice aid payable under section129.8477A.0121; and129.9(3) family preservation aid payable under section 477A.0122129.10 county program aid under section 477A.0124. 129.11 The amount of any aid reduction reverts from the appropriate 129.12 account to the state general fund. 129.13 (b) If, after review of the financial situation of the 129.14 county, the authority advises the commissioner that a total 129.15 reduction of the aids would cause an undue hardship on the 129.16 county, the authority, with the approval of the commissioner, 129.17 may establish a different schedule for reduction of aids to 129.18 repay the state. The amount of aids to be reduced are decreased 129.19 by any amounts repaid to the state by the county from other 129.20 revenue sources. 129.21 [EFFECTIVE DATE.] This section is effective for aid payable 129.22 in 2005 and thereafter. 129.23 Sec. 42. Minnesota Statutes 2004, section 469.1735, 129.24 subdivision 3, is amended to read: 129.25 Subd. 3. [TRANSFER AUTHORITY FOR PROPERTY TAX.] (a) A city 129.26 may elect to use all or part of its allocation under subdivision 129.27 2 to reimburse the city or county or both for property tax 129.28 reductions under section 272.0212. To elect this option, the 129.29 city must notify the commissioner of revenue by October 1 of 129.30 each calendar year of the amount of the property tax 129.31 reductions for which it seeks reimbursements for taxes payable 129.32 during thefollowingcurrent year and the governmental units to 129.33 which the amounts will be paid. The commissioner may require 129.34 the city to provide information substantiating the amount of the 129.35 reductions granted or any other information necessary to 129.36 administer this provision. The commissioner shall pay the 130.1 reimbursements by December 26 of the taxes payable year. Any 130.2 amount transferred under this authority reduces the amount of 130.3 tax credit certificates available under subdivisions 1 and 2. 130.4 (b) The amount elected by the city under paragraph (a) is 130.5 appropriated to the commissioner of revenue from the general 130.6 fund to reimburse the city or county for tax reductions under 130.7 section 272.0212. The amount appropriated may not exceed the 130.8 maximum amounts allocated to a city under subdivision 2, 130.9 paragraph (b), less the amount of certificates issued by the 130.10 city under subdivision 1, and is available until expended. 130.11 [EFFECTIVE DATE.] This section is effective for 130.12 reimbursements of taxes payable in 2005 and thereafter. 130.13 Sec. 43. Laws 2003, chapter 127, article 5, section 27, 130.14 the effective date, is amended to read: 130.15 [EFFECTIVE DATE.] This section is effective fortaxes130.16payable in 2004 and thereafterdistributions occurring on or 130.17 after June 10, 2003. 130.18 Sec. 44. Laws 2003, chapter 127, article 5, section 28, 130.19 the effective date, is amended to read: 130.20 [EFFECTIVE DATE.] This section is effective fortaxes130.21payable in 2004 and thereafterdistributions occurring on or 130.22 after June 10, 2003. 130.23 Sec. 45. [LINCOLN AND PIPESTONE COUNTIES; TOWN LEVY 130.24 ADJUSTMENT FOR WIND ENERGY PRODUCTION TAX.] 130.25 Notwithstanding the deadlines in Minnesota Statutes, 130.26 section 275.07, towns located in Lincoln or Pipestone County are 130.27 authorized to adjust their payable 2004 levy for all or a 130.28 portion of their estimated wind energy production tax amounts 130.29 for 2004, as computed by the commissioner of revenue from 130.30 reports filed under Minnesota Statutes, section 272.029, 130.31 subdivision 4. The Lincoln and Pipestone County auditors may 130.32 adjust the payable 2004 levy certifications under Minnesota 130.33 Statutes, section 275.07, subdivision 1, based upon the towns 130.34 that have recertified their levies under this section by March 130.35 15, 2004. 130.36 [EFFECTIVE DATE.] This section is effective for taxes 131.1 payable in 2004. 131.2 Sec. 46. [REPEALER.] 131.3 (a) Minnesota Statutes 2004, sections 273.19, subdivision 131.4 5; 274.05; 275.15; 275.61, subdivision 2; and 283.07, are 131.5 repealed effective the day following final enactment. 131.6 (b) Minnesota Statutes 2004, section 469.1794, subdivision 131.7 6, is repealed effective the day following final enactment and 131.8 applies to districts for which the request for certification was 131.9 made on, before, or after August 1, 1979, and before August 1, 131.10 2001. 131.11 (c) Laws 1975, chapter 287, section 5, and Laws 2003, 131.12 chapter 127, article 9, section 9, subdivision 4, are repealed 131.13 effective without local approval for taxes payable in 2006 and 131.14 thereafter. 131.15 (d) Minnesota Statutes 2004, sections 270.85; 270.88; and 131.16 273.37, subdivision 3, are repealed effective September 1, 2005. 131.17 ARTICLE 5 131.18 INCOME, CORPORATE FRANCHISE, AND ESTATE TAXES 131.19 Section 1. Minnesota Statutes 2004, section 190.09, 131.20 subdivision 2, is amended to read: 131.21 Subd. 2. [MISSION; EFFICIENCY.] It is part of the 131.22 department's mission that within the department's resources the 131.23 adjutant general shall endeavor to: 131.24 (1) prevent the waste or unnecessary spending of public 131.25 money; 131.26 (2) use innovative fiscal and human resource practices to 131.27 manage the state's resources and operate the department as 131.28 efficiently as possible; 131.29 (3) coordinate the department's activities wherever 131.30 appropriate with the activities of other governmental agencies; 131.31 (4) use technology where appropriate to increase agency 131.32 productivity, improve customer service, increase public access 131.33 to information about government, and increase public 131.34 participation in the business of government; 131.35 (5) utilize constructive and cooperative labor-management 131.36 practices to the extent otherwise required by chapters 43A and 132.1 179A; 132.2 (6) report to the legislature on the performance of agency 132.3 operations and the accomplishment of agency goals in the 132.4 agency's biennial budget according to section 16A.10, 132.5 subdivision 1;and132.6 (7) recommend to the legislature appropriate changes in law 132.7 necessary to carry out the mission and improve the performance 132.8 of the department; and 132.9 (8) administer checkoff funds as provided in section 132.10 290.433. 132.11 [EFFECTIVE DATE.] This section is effective for taxable 132.12 years beginning after December 31, 2004. 132.13 Sec. 2. Minnesota Statutes 2004, section 289A.08, 132.14 subdivision 1, is amended to read: 132.15 Subdivision 1. [GENERALLY; INDIVIDUALS.] (a) A taxpayer 132.16 must file a return for each taxable year the taxpayer is 132.17 required to file a return under section 6012 of the Internal 132.18 Revenue Code, except that: 132.19 (1) an individual who is not a Minnesota resident for any 132.20 part of the year is not required to file a Minnesota income tax 132.21 return if the individual's gross income derived from Minnesota 132.22 sources as determined under sections 290.081, paragraph (a), and 132.23 290.17, is less than the filing requirements for a single 132.24 individual who is a full year resident of Minnesota; and 132.25 (2) an individual who is a Minnesota resident is not 132.26 required to file a Minnesota income tax return if the 132.27 individual's gross income derived from Minnesota sources as 132.28 determined under section 290.17, less the amount of the 132.29 individual's gross income that consists of compensation paid to 132.30 members of the armed forces of the United States or United 132.31 Nations for active duty performed outside Minnesota, is less 132.32 than the filing requirements for a single individual who is a 132.33 full-year resident of Minnesota. 132.34 (b) The decedent's final income tax return, and other 132.35 income tax returns for prior years where the decedent had gross 132.36 income in excess of the minimum amount at which an individual is 133.1 required to file and did not file, must be filed by the 133.2 decedent's personal representative, if any. If there is no 133.3 personal representative, the return or returns must be filed by 133.4 the transferees, as defined in section 289A.38, subdivision 13, 133.5 who receive property of the decedent. 133.6 (c) The term "gross income," as it is used in this section, 133.7 has the same meaning given it in section 290.01, subdivision 20. 133.8 [EFFECTIVE DATE.] This section is effective for taxable 133.9 years beginning after December 31, 2004. 133.10 Sec. 3. Minnesota Statutes 2004, section 289A.08, 133.11 subdivision 3, is amended to read: 133.12 Subd. 3. [CORPORATIONS.] A corporation that is subject to 133.13 the state's jurisdiction to tax under section 290.014, 133.14 subdivision 5, must file a return, except that a foreign 133.15 operating corporation as defined in section 290.01, subdivision 133.16 6b, is not required to file a return. The commissioner shall 133.17 adopt rules for the filing of one return on behalf of the 133.18 members of an affiliated group of corporations that are required 133.19 to file a combined report. All members of an affiliated group 133.20 that are required to file a combined report must file one return 133.21 on behalf of the members of the group under rules adopted by the 133.22 commissioner. If a corporation claims on a return that it has 133.23 paid tax in excess of the amount of taxes lawfully due, that 133.24 corporation must include on that return information necessary 133.25 for payment of the tax in excess of the amount lawfully due by 133.26 electronic means. 133.27 [EFFECTIVE DATE.] This section is effective for returns 133.28 filed after December 31, 2005. 133.29 Sec. 4. Minnesota Statutes 2004, section 289A.08, 133.30 subdivision 7, is amended to read: 133.31 Subd. 7. [COMPOSITE INCOME TAX RETURNS FOR NONRESIDENT 133.32 PARTNERS, SHAREHOLDERS, AND BENEFICIARIES.] (a) The commissioner 133.33 may allow a partnership with nonresident partners to file a 133.34 composite return and to pay the tax on behalf of nonresident 133.35 partners who have no other Minnesota source income. This 133.36 composite return must include the names, addresses, Social 134.1 Security numbers, income allocation, and tax liability for the 134.2 nonresident partners electing to be covered by the composite 134.3 return. 134.4 (b) The computation of a partner's tax liability must be 134.5 determined by multiplying the income allocated to that partner 134.6 by the highest rate used to determine the tax liability for 134.7 individuals under section 290.06, subdivision 2c. Nonbusiness 134.8 deductions, standard deductions, or personal exemptions are not 134.9 allowed. 134.10 (c) The partnership must submit a request to use this 134.11 composite return filing method for nonresident partners. The 134.12 requesting partnership must file a composite return in the form 134.13 prescribed by the commissioner of revenue. The filing of a 134.14 composite return is considered a request to use the composite 134.15 return filing method. 134.16 (d) The electing partner must not have any Minnesota source 134.17 income other than the income from the partnership and other 134.18 electing partnerships. If it is determined that the electing 134.19 partner has other Minnesota source income, the inclusion of the 134.20 income and tax liability for that partner under this provision 134.21 will not constitute a return to satisfy the requirements of 134.22 subdivision 1. The tax paid for the individual as part of the 134.23 composite return is allowed as a payment of the tax by the 134.24 individual on the date on which the composite return payment was 134.25 made. If the electing nonresident partner has no other 134.26 Minnesota source income, filing of the composite return is a 134.27 return for purposes of subdivision 1. 134.28 (e) This subdivision does not negate the requirement that 134.29 an individual pay estimated tax if the individual's liability 134.30 would exceed the requirements set forth in section 289A.25. A 134.31 composite estimate may, however, be filed in a manner similar to 134.32 and containing the information required under paragraph (a). 134.33 (f) If an electing partner's share of the partnership's 134.34 gross income from Minnesota sources is less than the filing 134.35 requirements for a nonresident under this subdivision, the tax 134.36 liability is zero. However, a statement showing the partner's 135.1 share of gross income must be included as part of the composite 135.2 return. 135.3 (g) The election provided in this subdivision isnotonly 135.4 available toanya partnerother thanwho has no other Minnesota 135.5 source income and who is either (1) a full-year nonresident 135.6 individualwho has no other Minnesota source incomeor (2) a 135.7 trust or estate that does not claim a deduction under either 135.8 section 651 or 661 of the Internal Revenue Code. 135.9 (h) A corporation defined in section 290.9725 and its 135.10 nonresident shareholders may make an election under this 135.11 paragraph. The provisions covering the partnership apply to the 135.12 corporation and the provisions applying to the partner apply to 135.13 the shareholder. 135.14 (i) Estates and trusts distributing current income only and 135.15 the nonresident individual beneficiaries of the estates or 135.16 trusts may make an election under this paragraph. The 135.17 provisions covering the partnership apply to the estate or 135.18 trust. The provisions applying to the partner apply to the 135.19 beneficiary. 135.20 (j) For the purposes of this subdivision, "income" means 135.21 the partner's share of federal adjusted gross income from the 135.22 partnership modified by the additions provided in section 135.23 290.01, subdivision 19a, clauses (6) and (7), and the 135.24 subtractions provided in section 290.01, subdivision 19b, clause 135.25 (11), to the extent the amount is assignable or allocable to 135.26 Minnesota under section 290.17. The subtraction allowed under 135.27 section 290.01, subdivision 19b, clause (11), is only allowed on 135.28 the composite tax computation to the extent the electing partner 135.29 would have been allowed the subtraction. 135.30 [EFFECTIVE DATE.] This section is effective for tax years 135.31 beginning after December 31, 2004. 135.32 Sec. 5. Minnesota Statutes 2004, section 289A.08, 135.33 subdivision 13, is amended to read: 135.34 Subd. 13. [LONG AND SHORT FORMS.] The commissioner shall 135.35 provide a long form individual income tax return and may provide 135.36 a short form individual income tax return. The returns shall be 136.1 in a form that is consistent with the provisions of chapter 290, 136.2 notwithstanding any other law to the contrary. The nongame 136.3 wildlife checkoff provided in section 290.431 and the dependent 136.4 care credit provided in section 290.067 must be included on the 136.5 short form. The commissioner must provide information on local 136.6 use taxes in the individual income tax instruction booklet, 136.7 including a list of the jurisdictions with local use taxes. The 136.8 commissioner must provide this information in the same section 136.9 of the booklet that provides information on the state use tax. 136.10 [EFFECTIVE DATE.] This section is effective for taxable 136.11 years beginning after December 31, 2004. 136.12 Sec. 6. Minnesota Statutes 2004, section 289A.18, 136.13 subdivision 1, is amended to read: 136.14 Subdivision 1. [INDIVIDUAL INCOME, FIDUCIARY INCOME, 136.15 CORPORATE FRANCHISE, AND ENTERTAINMENT TAXES; PARTNERSHIP AND S 136.16 CORPORATION RETURNS; INFORMATION RETURNS; MINING COMPANY 136.17 RETURNS.] The returns required to be made under sections 289A.08 136.18 and 289A.12 must be filed at the following times: 136.19 (1) returns made on the basis of the calendar year must be 136.20 filed on April 15 following the close of the calendar year, 136.21 except that returns of corporations must be filed on March 15 136.22 following the close of the calendar year; 136.23 (2) returns made on the basis of the fiscal year must be 136.24 filed on the 15th day of the fourth month following the close of 136.25 the fiscal year, except that returns of corporations must be 136.26 filed on the 15th day of the third month following the close of 136.27 the fiscal year; 136.28 (3) returns for a fractional part of a year must be filed 136.29 on the 15th day of the fourth month following the end of the 136.30 month in which falls the last day of the period for which the 136.31 return is made, except that the returns of corporations must be 136.32 filed on the 15th day of the third month following the end of 136.33 themonthtax year of the unitary group in which falls the last 136.34 day of the period for which the return is made; 136.35 (4) in the case of a final return of a decedent for a 136.36 fractional part of a year, the return must be filed on the 15th 137.1 day of the fourth month following the close of the 12-month 137.2 period that began with the first day of that fractional part of 137.3 a year; 137.4 (5) in the case of the return of a cooperative association, 137.5 returns must be filed on or before the 15th day of the ninth 137.6 month following the close of the taxable year; 137.7 (6) if a corporation has been divested from a unitary group 137.8 and files a return for a fractional part of a year in which it 137.9 was a member of a unitary business that files a combined report 137.10 under section 290.34, subdivision 2, the divested corporation's 137.11 return must be filed on the 15th day of the third month 137.12 following the close of the common accounting period that 137.13 includes the fractional year; 137.14 (7) returns of entertainment entities must be filed on 137.15 April 15 following the close of the calendar year; 137.16 (8) returns required to be filed under section 289A.08, 137.17 subdivision 4, must be filed on the 15th day of the fifth month 137.18 following the close of the taxable year; 137.19 (9) returns of mining companies must be filed on May 1 137.20 following the close of the calendar year; and 137.21 (10) returns required to be filed with the commissioner 137.22 under section 289A.12, subdivision 2, 4 to 10, or 14, must be 137.23 filed within 30 days after being demanded by the commissioner. 137.24 [EFFECTIVE DATE.] This section is effective for fractional 137.25 years closing after December 31, 2004. 137.26 Sec. 7. Minnesota Statutes 2004, section 289A.19, 137.27 subdivision 4, is amended to read: 137.28 Subd. 4. [ESTATE TAX RETURNS.]When in the commissioner's137.29judgment good cause exists, the commissioner may extend the time137.30for filing an estate tax return for not more than six months.137.31 When an extension to file the federal estate tax return has been 137.32 granted under section 6081 of the Internal Revenue Code, the 137.33 time for filing the estate tax return is extended for that 137.34 period. If the estate requests an extension to file an estate 137.35 tax return within the time provided in section 289A.18, 137.36 subdivision 3, the commissioner shall extend the time for filing 138.1 the estate tax return for six months. 138.2 [EFFECTIVE DATE.] This section is effective for estates of 138.3 decedents dying after December 31, 2004. 138.4 Sec. 8. Minnesota Statutes 2004, section 289A.20, 138.5 subdivision 2, is amended to read: 138.6 Subd. 2. [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 138.7 WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 138.8 WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 138.9 (a) A tax required to be deducted and withheld during the 138.10 quarterly period must be paid on or before the last day of the 138.11 month following the close of the quarterly period, unless an 138.12 earlier time for payment is provided. A tax required to be 138.13 deducted and withheld from compensation of an entertainer and 138.14 from a payment to an out-of-state contractor must be paid on or 138.15 before the date the return for such tax must be filed under 138.16 section 289A.18, subdivision 2. Taxes required to be deducted 138.17 and withheld by partnershipsand, S corporations, and trusts 138.18 must be paid onor before the date the return must be filed138.19under section 289A.18, subdivision 2a quarterly basis as 138.20 estimated taxes under section 289A.25 for partnerships and 138.21 trusts and under section 289A.26 for S corporations. 138.22 (b) An employer who, during the previous quarter, withheld 138.23 more than $1,500 of tax under section 290.92, subdivision 2a or 138.24 3, or 290.923, subdivision 2, must deposit tax withheld under 138.25 those sections with the commissioner within the time allowed to 138.26 deposit the employer's federal withheld employment taxes under 138.27 Code of Federal Regulations, title 26, section 31.6302-1, as 138.28 amended through December 31, 2001, without regard to the safe 138.29 harbor or de minimis rules in subparagraph (f) or the one-day 138.30 rule in subsection (c), clause (3). Taxpayers must submit a 138.31 copy of their federal notice of deposit status to the 138.32 commissioner upon request by the commissioner. 138.33 (c) The commissioner may prescribe by rule other return 138.34 periods or deposit requirements. In prescribing the reporting 138.35 period, the commissioner may classify payors according to the 138.36 amount of their tax liability and may adopt an appropriate 139.1 reporting period for the class that the commissioner judges to 139.2 be consistent with efficient tax collection. In no event will 139.3 the duration of the reporting period be more than one year. 139.4 (d) If less than the correct amount of tax is paid to the 139.5 commissioner, proper adjustments with respect to both the tax 139.6 and the amount to be deducted must be made, without interest, in 139.7 the manner and at the times the commissioner prescribes. If the 139.8 underpayment cannot be adjusted, the amount of the underpayment 139.9 will be assessed and collected in the manner and at the times 139.10 the commissioner prescribes. 139.11 (e) If the aggregate amount of the tax withheld during a 139.12 fiscal year ending June 30 under section 290.92, subdivision 2a 139.13 or 3, is equal to or exceeds the amounts established for 139.14 remitting federal withheld taxes pursuant to the regulations 139.15 promulgated under section 6302(h) of the Internal Revenue Code, 139.16 the employer must remit each required deposit for wages paid in 139.17 the subsequent calendar year by electronic means. 139.18 (f) A third-party bulk filer as defined in section 290.92, 139.19 subdivision 30, paragraph (a), clause (2), who remits 139.20 withholding deposits must remit all deposits by electronic means 139.21 as provided in paragraph (e), regardless of the aggregate amount 139.22 of tax withheld during a fiscal year for all of the employers. 139.23 [EFFECTIVE DATE.] This section is effective for tax years 139.24 beginning after December 31, 2005. 139.25 Sec. 9. Minnesota Statutes 2004, section 289A.31, 139.26 subdivision 2, is amended to read: 139.27 Subd. 2. [JOINT INCOME TAX RETURNS.] (a) If a joint income 139.28 tax return is made by a husband and wife, the liability for the 139.29 tax is joint and several. A spouse who qualifies for relief 139.30 from a liability attributable to an underpayment under section 139.31 6015(b) of the Internal Revenue Code is relieved of the state 139.32 income tax liability on the underpayment. 139.33 (b) In the case of individuals who were a husband and wife 139.34 prior to the dissolution of their marriage or their legal 139.35 separation, or prior to the death of one of the individuals, for 139.36 tax liabilities reported on a joint or combined return, the 140.1 liability of each person is limited to the proportion of the tax 140.2 due on the return that equals that person's proportion of the 140.3 total tax due if the husband and wife filed separate returns for 140.4 the taxable year. This provision is effective only when the 140.5 commissioner receives written notice of the marriage 140.6 dissolution, legal separation, or death of a spouse from the 140.7 husband or wife. No refund may be claimed by an ex-spouse, 140.8 legally separated or widowed spouse for any taxes paid more than 140.9 60 days before receipt by the commissioner of the written notice. 140.10 (c) A request for calculation of separate liability 140.11 pursuant to paragraph (b) for taxes reported on a return must be 140.12 made within six years after the due date of the return. For 140.13 calculation of separate liability for taxes assessed by the 140.14 commissioner under section 289A.35 or 289A.37, the request must 140.15 be made within six years after the date of assessment. The 140.16 commissioner is not required to calculate separate liability if 140.17 the remaining unpaid liability for which recalculation is 140.18 requested is $100 or less. 140.19 [EFFECTIVE DATE.] This section is effective for requests 140.20 for relief made on or after the day following final enactment. 140.21 Sec. 10. Minnesota Statutes 2004, section 289A.38, 140.22 subdivision 7, is amended to read: 140.23 Subd. 7. [FEDERAL TAX CHANGES.] If the amount of income, 140.24 items of tax preference, deductions, or credits for any year of 140.25 a taxpayer as reported to the Internal Revenue Service is 140.26 changed or corrected by the commissioner of Internal Revenue or 140.27 other officer of the United States or other competent authority, 140.28 or where a renegotiation of a contract or subcontract with the 140.29 United States results in a change in income, items of tax 140.30 preference, deductions, credits, or withholding tax, or, in the 140.31 case of estate tax, where there are adjustments to the taxable 140.32 estate resulting in a change to the credit for state death 140.33 taxes, the taxpayer shall report the change or correction or 140.34 renegotiation results in writing to the commissioner. The 140.35 report must be submitted within 180 days after the final 140.36 determination and must be in the form of either an amended 141.1 Minnesota estate, withholding tax, corporate franchise tax, or 141.2 income tax return conceding the accuracy of the federal 141.3 determination or a letter detailing how the federal 141.4 determination is incorrect or does not change the Minnesota 141.5 tax. An amended Minnesota income tax return must be accompanied 141.6 by an amended property tax refund return, if necessary. A 141.7 taxpayer filing an amended federal tax return must also file a 141.8 copy of the amended return with the commissioner of revenue 141.9 within 180 days after filing the amended return. 141.10 [EFFECTIVE DATE.] This section is effective the day 141.11 following final enactment. 141.12 Sec. 11. Minnesota Statutes 2004, section 289A.50, 141.13 subdivision 1a, is amended to read: 141.14 Subd. 1a. [REFUND FORM.] On or before January 1, 2000, the 141.15 commissioner of revenue shall prepare and make available to 141.16 taxpayers a form for filing claims for refund of taxes paid in 141.17 excess of the amount due.If the commissioner fails to prepare141.18a form under this subdivision by January 1, 2000, any claims for141.19refund made after January 1, 2000, and up to ten days after the141.20form is made available to taxpayers are deemed to be made in141.21compliance with the requirement of the form.The commissioner 141.22 may require corporate franchise taxpayers claiming a refund of 141.23 corporate franchise taxes paid in excess of the amount lawfully 141.24 due to include on the claim for refund or amended return 141.25 information necessary for payment of the taxes paid in excess of 141.26 taxes lawfully due by electronic means. 141.27 [EFFECTIVE DATE.] This section is effective for claims for 141.28 refund filed after December 31, 2005. 141.29 Sec. 12. Minnesota Statutes 2004, section 289A.60, 141.30 subdivision 13, is amended to read: 141.31 Subd. 13. [PENALTIES FOR TAX RETURN PREPARERS.] (a) If an 141.32 understatement of liability with respect to a return or claim 141.33 for refund is due to a reckless disregard of laws and rules or 141.34 willful attempt in any manner to understate the liability for a 141.35 tax by a person who is a tax return preparer with respect to the 141.36 return or claim, the person shall pay to the commissioner a 142.1 penalty of $500. If a part of a property tax refund claim is 142.2 excessive due to a reckless disregard or willful attempt in any 142.3 manner to overstate the claim for relief allowed under chapter 142.4 290A by a person who is a tax refund or return preparer, the 142.5 person shall pay to the commissioner a penalty of $500 with 142.6 respect to the claim. These penalties may not be assessed 142.7 against the employer of a tax return preparer unless the 142.8 employer was actively involved in the reckless disregard or 142.9 willful attempt to understate the liability for a tax or to 142.10 overstate the claim for refund. These penalties are income tax 142.11 liabilities and may be assessed at any time as provided in 142.12 section 289A.38, subdivision 5. 142.13 (b) A civil action in the name of the state of Minnesota 142.14 may be commenced to enjoin any person who is a tax return 142.15 preparer doing business in this state from further engaging in 142.16 any conduct described in paragraph (c). An action under this 142.17 paragraph must be brought by the attorney general in the 142.18 district court for the judicial district of the tax return 142.19 preparer's residence or principal place of business, or in which 142.20 the taxpayer with respect to whose tax return the action is 142.21 brought resides. The court may exercise its jurisdiction over 142.22 the action separate and apart from any other action brought by 142.23 the state of Minnesota against the tax return preparer or any 142.24 taxpayer. 142.25 (c) In an action under paragraph (b), if the court finds 142.26 that a tax return preparer has: 142.27 (1) engaged in any conduct subject to a civil penalty under 142.28 section 289A.60 or a criminal penalty under section 289A.63; 142.29 (2) misrepresented the preparer's eligibility to practice 142.30 before the Department of Revenue, or otherwise misrepresented 142.31 the preparer's experience or education as a tax return preparer; 142.32 (3) guaranteed the payment of any tax refund or the 142.33 allowance of any tax credit; or 142.34 (4) engaged in any other fraudulent or deceptive conduct 142.35 that substantially interferes with the proper administration of 142.36 state tax law, and injunctive relief is appropriate to prevent 143.1 the recurrence of that conduct, 143.2 the court may enjoin the person from further engaging in that 143.3 conduct. 143.4 (d) If the court finds that a tax return preparer has 143.5 continually or repeatedly engaged in conduct described in 143.6 paragraph (c), and that an injunction prohibiting that conduct 143.7 would not be sufficient to prevent the person's interference 143.8 with the proper administration of state tax laws, the court may 143.9 enjoin the person from acting as a tax return preparer. The 143.10 court may not enjoin the employer of a tax return preparer for 143.11 conduct described in paragraph (c) engaged in by one or more of 143.12 the employer's employees unless the employer was also actively 143.13 involved in that conduct. 143.14 (e) For purposes of this subdivision, the term 143.15 "understatement of liability" means an understatement of the net 143.16 amount payable with respect to a tax imposed by state tax law, 143.17 or an overstatement of the net amount creditable or refundable 143.18 with respect to a tax. The determination of whether or not 143.19 there is an understatement of liability must be made without 143.20 regard to any administrative or judicial action involving the 143.21 taxpayer. For purposes of this subdivision, the amount 143.22 determined for underpayment of estimated tax under either 143.23 section 289A.25 or 289A.26 is not considered an understatement 143.24 of liability. 143.25 (f) For purposes of this subdivision, the term 143.26 "overstatement of claim" means an overstatement of the net 143.27 amount refundable with respect to a claim for property tax 143.28 relief provided by chapter 290A. The determination of whether 143.29 or not there is an overstatement of a claim must be made without 143.30 regard to administrative or judicial action involving the 143.31 claimant. 143.32 (g) For purposes of this section, the term "tax refund or 143.33 return preparer" means an individual who prepares for 143.34 compensation, or who employs one or more individuals to prepare 143.35 for compensation, a return of tax, or a claim for refund of 143.36 tax. The preparation of a substantial part of a return or claim 144.1 for refund is treated as if it were the preparation of the 144.2 entire return or claim for refund. An individual is not 144.3 considered a tax return preparer merely because the individual: 144.4 (1) gives typing, reproducing, or other mechanical 144.5 assistance; 144.6 (2) prepares a return or claim for refund of the employer, 144.7 or an officer or employee of the employer, by whom the 144.8 individual is regularly and continuously employed; 144.9 (3) prepares a return or claim for refund of any person as 144.10 a fiduciary for that person; or 144.11 (4) prepares a claim for refund for a taxpayer in response 144.12 to a tax order issued to the taxpayer. 144.13 [EFFECTIVE DATE.] This section is effective for returns 144.14 filed after December 31, 2005. 144.15 Sec. 13. Minnesota Statutes 2004, section 289A.60, is 144.16 amended by adding a subdivision to read: 144.17 Subd. 26. [RESTRICTIONS ON TAXPAYERS WHO IMPROPERLY CLAIM 144.18 REFUNDABLE CREDITS.] (a) If a person claims a credit or refund 144.19 under section 290.067, 290.0671, 290.0674, or chapter 290A and 144.20 the claimed credit or refund is determined to be claimed 144.21 fraudulently or with reckless or intentional disregard of the 144.22 applicable provisions for the credit or refund, the person is 144.23 barred from claiming that credit or refund for the disallowance 144.24 period. 144.25 (b) For the purposes of paragraph (a), the "disallowance 144.26 period" is (1) ten taxable years from the taxable year the 144.27 credit or refund is claimed if the credit or refund was 144.28 fraudulently claimed; and (2) two taxable years from the taxable 144.29 year the credit or refund is claimed if the credit or refund was 144.30 not fraudulent but was claimed with reckless or intentional 144.31 disregard of the applicable provisions. 144.32 [EFFECTIVE DATE.] This section is effective for credits or 144.33 refunds claimed after December 31, 2005. 144.34 Sec. 14. Minnesota Statutes 2004, section 290.01, 144.35 subdivision 7, is amended to read: 144.36 Subd. 7. [RESIDENT.] (a) The term "resident" means any 145.1 individual domiciled in Minnesota, except that an individual is 145.2 not a "resident" for the period of time that the individual is 145.3either:145.4(1) on active duty stationed outside of Minnesota while in145.5the armed forces of the United States or the United Nations; or145.6(2)a "qualified individual" as defined in section 145.7 911(d)(1) of the Internal Revenue Code, if the qualified 145.8 individual notifies the county within three months of moving out 145.9 of the country that homestead status be revoked for the 145.10 Minnesota residence of the qualified individual, and the 145.11 property is not classified as a homestead while the individual 145.12 remains a qualified individual. 145.13 (b) "Resident" also means any individual domiciled outside 145.14 the state who maintains a place of abode in the state and spends 145.15 in the aggregate more than one-half of the tax year in 145.16 Minnesota, unless: 145.17 (1) the individual or the spouse of the individual is in 145.18 the armed forces of the United States; or 145.19 (2) the individual is covered under the reciprocity 145.20 provisions in section 290.081. 145.21 For purposes of this subdivision, presence within the state 145.22 for any part of a calendar day constitutes a day spent in the 145.23 state. Individuals shall keep adequate records to substantiate 145.24 the days spent outside the state. 145.25 The term "abode" means a dwelling maintained by an 145.26 individual, whether or not owned by the individual and whether 145.27 or not occupied by the individual, and includes a dwelling place 145.28 owned or leased by the individual's spouse. 145.29 (c) Neither the commissioner nor any court shall consider 145.30charitable contributions made by an individual within or without145.31the statethe following factors in determining if the individual 145.32 is domiciled in Minnesota: 145.33 (1) charitable contributions made by an individual within 145.34 or without the state; 145.35 (2) the jurisdiction from which an individual's 145.36 professional licenses were issued; 146.1 (3) the location of an individual's union memberships; 146.2 (4) the location of accounts or transactions with financial 146.3 institutions; 146.4 (5) the location of the place of worship at which the 146.5 individual is a member; 146.6 (6) the location of business relationships and the place 146.7 where business is transacted; 146.8 (7) the location of social, fraternal, or athletic 146.9 organizations or clubs, lodges, or country clubs, in which the 146.10 individual is a member; and 146.11 (8) statements made to an insurance company, concerning the 146.12 individual's residence and on which insurance is based. 146.13 [EFFECTIVE DATE.] This section is effective for tax years 146.14 beginning after December 31, 2004. 146.15 Sec. 15. Minnesota Statutes 2004, section 290.01, 146.16 subdivision 7b, is amended to read: 146.17 Subd. 7b. [RESIDENT TRUST.] (a) Resident trust means a 146.18 trust, except a grantor type trust, which either (1) was created 146.19 by a will of a decedent who at death was domiciled in this state 146.20 or (2) is an irrevocable trust, the grantor of which was 146.21 domiciled in this state at the time the trust became 146.22 irrevocable. For the purpose of this subdivision, a trust is 146.23 considered irrevocable to the extent the grantor is not treated 146.24 as the owner thereof under sections 671 to 678 of the Internal 146.25 Revenue Code. The term "grantor type trust" means a trust where 146.26 the income or gains of the trust are taxable to the grantor or 146.27 others treated as substantial owners under sections 671 to 678 146.28 of the Internal Revenue Code. 146.29 (b)(1) A trust, other than a grantor type trust, that 146.30 became irrevocable before January 1, 1996, or that was 146.31 administered in Minnesota before January 1, 1996, is a resident 146.32 trust only if two or more of the following conditions are 146.33 satisfied: 146.34 (i) a majority of the discretionary decisions of the 146.35 trustees relative to the investment of trust assets are made in 146.36 Minnesota; 147.1 (ii) a majority of the discretionary decisions of the 147.2 trustees relative to the distributions of trust income and 147.3 principal are made in Minnesota; 147.4 (iii) the official books and records of the trust, 147.5 consisting of the original minutes of trustee meetings and the 147.6 original trust instruments, are located in Minnesota. 147.7 (2) For purposes of this paragraph, if the trustees 147.8 delegate decisions and actions to an agent or custodian, the 147.9 actions and decisions of the agent or custodian must not be 147.10 taken into account in determining whether the trust is 147.11 administered in Minnesota, if: 147.12 (i) the delegation was permitted under the trust agreement; 147.13 (ii) the trustees retain the power to revoke the delegation 147.14 on reasonable notice; and 147.15 (iii) the trustees monitor and evaluate the performance of 147.16 the agent or custodian on a regular basis as is reasonably 147.17 determined by the trustees. 147.18 [EFFECTIVE DATE.] This section is effective the day 147.19 following final enactment. 147.20 Sec. 16. Minnesota Statutes 2004, section 290.01, 147.21 subdivision 19a, is amended to read: 147.22 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 147.23 individuals, estates, and trusts, there shall be added to 147.24 federal taxable income: 147.25 (1)(i) interest income on obligations of any state other 147.26 than Minnesota or a political or governmental subdivision, 147.27 municipality, or governmental agency or instrumentality of any 147.28 state other than Minnesota exempt from federal income taxes 147.29 under the Internal Revenue Code or any other federal statute; 147.30 and 147.31 (ii) exempt-interest dividends as defined in section 147.32 852(b)(5) of the Internal Revenue Code, except the portion of 147.33 the exempt-interest dividends derived from interest income on 147.34 obligations of the state of Minnesota or its political or 147.35 governmental subdivisions, municipalities, governmental agencies 147.36 or instrumentalities, but only if the portion of the 148.1 exempt-interest dividends from such Minnesota sources paid to 148.2 all shareholders represents 95 percent or more of the 148.3 exempt-interest dividends that are paid by the regulated 148.4 investment company as defined in section 851(a) of the Internal 148.5 Revenue Code, or the fund of the regulated investment company as 148.6 defined in section 851(g) of the Internal Revenue Code, making 148.7 the payment; and 148.8 (iii) for the purposes of items (i) and (ii), interest on 148.9 obligations of an Indian tribal government described in section 148.10 7871(c) of the Internal Revenue Code shall be treated as 148.11 interest income on obligations of the state in which the tribe 148.12 is located; 148.13 (2) the amount of income taxes paid or accrued within the 148.14 taxable year under this chapter andincomethe amount of taxes 148.15 based on net income paid to any other state or to any province 148.16 or territory of Canada, to the extent allowed as a deduction 148.17 under section 63(d) of the Internal Revenue Code, but the 148.18 addition may not be more than the amount by which the itemized 148.19 deductions as allowed under section 63(d) of the Internal 148.20 Revenue Code exceeds the amount of the standard deduction as 148.21 defined in section 63(c) of the Internal Revenue Code. For the 148.22 purpose of this paragraph, the disallowance of itemized 148.23 deductions under section 68 of the Internal Revenue Code of 148.24 1986, income tax is the last itemized deduction disallowed; 148.25 (3) the capital gain amount of a lump sum distribution to 148.26 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 148.27 Reform Act of 1986, Public Law 99-514, applies; 148.28 (4) the amount of income taxes paid or accrued within the 148.29 taxable year under this chapter andincometaxes based on net 148.30 income paid to any other state or any province or territory of 148.31 Canada, to the extent allowed as a deduction in determining 148.32 federal adjusted gross income. For the purpose of this 148.33 paragraph, income taxes do not include the taxes imposed by 148.34 sections 290.0922, subdivision 1, paragraph (b), 290.9727, 148.35 290.9728, and 290.9729; 148.36 (5) the amount of expense, interest, or taxes disallowed 149.1 pursuant to section 290.10 other than expenses or interest used 149.2 in computing net interest income for the subtraction allowed 149.3 under subdivision 19b, clause (1); 149.4 (6) the amount of a partner's pro rata share of net income 149.5 which does not flow through to the partner because the 149.6 partnership elected to pay the tax on the income under section 149.7 6242(a)(2) of the Internal Revenue Code; and 149.8 (7) 80 percent of the depreciation deduction allowed under 149.9 section 168(k) of the Internal Revenue Code. For purposes of 149.10 this clause, if the taxpayer has an activity that in the taxable 149.11 year generates a deduction for depreciation under section 168(k) 149.12 and the activity generates a loss for the taxable year that the 149.13 taxpayer is not allowed to claim for the taxable year, "the 149.14 depreciation allowed under section 168(k)" for the taxable year 149.15 is limited to excess of the depreciation claimed by the activity 149.16 under section 168(k) over the amount of the loss from the 149.17 activity that is not allowed in the taxable year. In succeeding 149.18 taxable years when the losses not allowed in the taxable year 149.19 are allowed, the depreciation under section 168(k) is allowed. 149.20 [EFFECTIVE DATE.] This section is effective for tax years 149.21 beginning after December 31, 2004. 149.22 Sec. 17. Minnesota Statutes 2004, section 290.01, 149.23 subdivision 19b, is amended to read: 149.24 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 149.25 individuals, estates, and trusts, there shall be subtracted from 149.26 federal taxable income: 149.27 (1) net interest income on obligations of any authority, 149.28 commission, or instrumentality of the United States to the 149.29 extent includable in taxable income for federal income tax 149.30 purposes but exempt from state income tax under the laws of the 149.31 United States; 149.32 (2) if included in federal taxable income, the amount of 149.33 any overpayment of income tax to Minnesota or to any other 149.34 state, for any previous taxable year, whether the amount is 149.35 received as a refund or as a credit to another taxable year's 149.36 income tax liability; 150.1 (3) the amount paid to others, less the amount used to 150.2 claim the credit allowed under section 290.0674, not to exceed 150.3 $1,625 for each qualifying child in grades kindergarten to 6 and 150.4 $2,500 for each qualifying child in grades 7 to 12, for tuition, 150.5 textbooks, and transportation of each qualifying child in 150.6 attending an elementary or secondary school situated in 150.7 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 150.8 wherein a resident of this state may legally fulfill the state's 150.9 compulsory attendance laws, which is not operated for profit, 150.10 and which adheres to the provisions of the Civil Rights Act of 150.11 1964 and chapter 363A. For the purposes of this clause, 150.12 "tuition" includes fees or tuition as defined in section 150.13 290.0674, subdivision 1, clause (1). As used in this clause, 150.14 "textbooks" includes books and other instructional materials and 150.15 equipment purchased or leased for use in elementary and 150.16 secondary schools in teaching only those subjects legally and 150.17 commonly taught in public elementary and secondary schools in 150.18 this state. Equipment expenses qualifying for deduction 150.19 includes expenses as defined and limited in section 290.0674, 150.20 subdivision 1, clause (3). "Textbooks" does not include 150.21 instructional books and materials used in the teaching of 150.22 religious tenets, doctrines, or worship, the purpose of which is 150.23 to instill such tenets, doctrines, or worship, nor does it 150.24 include books or materials for, or transportation to, 150.25 extracurricular activities including sporting events, musical or 150.26 dramatic events, speech activities, driver's education, or 150.27 similar programs. For purposes of the subtraction provided by 150.28 this clause, "qualifying child" has the meaning given in section 150.29 32(c)(3) of the Internal Revenue Code; 150.30 (4) income as provided under section 290.0802; 150.31 (5) to the extent included in federal adjusted gross 150.32 income, income realized on disposition of property exempt from 150.33 tax under section 290.491; 150.34 (6)to the extent included in federal taxable income,150.35postservice benefits for youth community service under section150.36124D.42 for volunteer service under United States Code, title151.142, sections 12601 to 12604;151.2(7)to the extent not deducted in determining federal 151.3 taxable income by an individual who does not itemize deductions 151.4 for federal income tax purposes for the taxable year, an amount 151.5 equal to 50 percent of the excess of charitable contributions 151.6 allowable as a deduction for the taxable year under section 151.7 170(a) of the Internal Revenue Code over $500 ; 151.8(8)(7) for taxable years beginning before January 1, 2008, 151.9 the amount of the federal small ethanol producer credit allowed 151.10 under section 40(a)(3) of the Internal Revenue Code which is 151.11 included in gross income under section 87 of the Internal 151.12 Revenue Code; 151.13(9)(8) for individuals who are allowed a federal foreign 151.14 tax credit for taxes that do not qualify for a credit under 151.15 section 290.06, subdivision 22, an amount equal to the carryover 151.16 of subnational foreign taxes for the taxable year, but not to 151.17 exceed the total subnational foreign taxes reported in claiming 151.18 the foreign tax credit. For purposes of this clause, "federal 151.19 foreign tax credit" means the credit allowed under section 27 of 151.20 the Internal Revenue Code, and "carryover of subnational foreign 151.21 taxes" equals the carryover allowed under section 904(c) of the 151.22 Internal Revenue Code minus national level foreign taxes to the 151.23 extent they exceed the federal foreign tax credit; 151.24(10)(9) in each of the five tax years immediately 151.25 following the tax year in which an addition is required under 151.26 subdivision 19a, clause (7), or 19c, clause (15), in the case of 151.27 a shareholder of a corporation that is an S corporation, an 151.28 amount equal to one-fifth of the delayed depreciation. For 151.29 purposes of this clause, "delayed depreciation" means the amount 151.30 of the addition made by the taxpayer under subdivision 19a, 151.31 clause (7), or subdivision 19c, clause (15), in the case of a 151.32 shareholder of an S corporation, minus the positive value of any 151.33 net operating loss under section 172 of the Internal Revenue 151.34 Code generated for the tax year of the addition. The resulting 151.35 delayed depreciation cannot be less than zero;and151.36(11)(10) job opportunity building zone income as provided 152.1 under section 469.316.; 152.2 (11) the amount of compensation paid to members of the 152.3 Minnesota National Guard or other reserve components of the 152.4 United States military for active service performed in 152.5 Minnesota, excluding compensation for services performed under 152.6 the Active Guard Reserve (AGR) program. For purposes of this 152.7 clause, "active service" means (i) state active service as 152.8 defined in section 190.05, subdivision 5a, clause (1); (ii) 152.9 federally funded state active service as defined in section 152.10 190.05, subdivision 5b; or (iii) federal active service as 152.11 defined in section 190.05, subdivision 5c, but "active service" 152.12 excludes services performed exclusively for purposes of basic 152.13 combat training, advanced individual training, annual training, 152.14 and periodic inactive duty training; special training 152.15 periodically made available to reserve members; and service 152.16 performed in accordance with section 190.08, subdivision 3; 152.17 (12) the amount of compensation paid to members of the 152.18 armed forces of the United States or United Nations for active 152.19 duty performed outside Minnesota; and 152.20 (13) to the extent not deducted in computing federal 152.21 taxable income, an amount, not to exceed $10,000, equal to 152.22 qualified expenses related to a qualified donor's donation, 152.23 while living, of one or more of the qualified donor's organs to 152.24 another person for human organ transplantation. For purposes of 152.25 determining the extent to which expenses are deducted in 152.26 computing federal taxable income, travel and lodging expenses 152.27 related to an organ donation are considered deducted by an 152.28 individual in determining federal taxable income to the extent 152.29 they exceed 7.5 percent of federal adjusted gross income as 152.30 defined in section 62 of the Internal Revenue Code. For 152.31 purposes of this clause, "organ" means all or part of an 152.32 individual's liver, pancreas, kidney, intestine, lung, or bone 152.33 marrow; "human organ transplantation" means the medical 152.34 procedure by which transfer of a human organ is made from the 152.35 body of one person to the body of another person; "qualified 152.36 expenses" means unreimbursed expenses for both the individual 153.1 and the qualified donor for (i) travel, (ii) lodging, and (iii) 153.2 lost wages net of sick pay, except that such expenses may be 153.3 subtracted under this clause only once; and "qualified donor" 153.4 means the individual or the individual's dependent, as defined 153.5 in section 152 of the Internal Revenue Code. An individual may 153.6 claim the subtraction in this clause only once for each instance 153.7 of organ donation for transplantation during the taxable year in 153.8 which the human organ donation and transplantation occurs. 153.9 [EFFECTIVE DATE.] The amendment to clause (9) is effective 153.10 retroactively for tax years beginning after December 31, 2001. 153.11 The rest of this section is effective for the tax years 153.12 beginning after December 31, 2004. 153.13 Sec. 18. Minnesota Statutes 2004, section 290.01, 153.14 subdivision 19c, is amended to read: 153.15 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 153.16 INCOME.] For corporations, there shall be added to federal 153.17 taxable income: 153.18 (1) the amount of any deduction taken for federal income 153.19 tax purposes for income, excise, or franchise taxes based on net 153.20 income or related minimum taxes, including but not limited to 153.21 the tax imposed under section 290.0922, paid by the corporation 153.22 to Minnesota, another state, a political subdivision of another 153.23 state, the District of Columbia, or any foreign country or 153.24 possession of the United States; 153.25 (2) interest not subject to federal tax upon obligations 153.26 of: the United States, its possessions, its agencies, or its 153.27 instrumentalities; the state of Minnesota or any other state, 153.28 any of its political or governmental subdivisions, any of its 153.29 municipalities, or any of its governmental agencies or 153.30 instrumentalities; the District of Columbia; or Indian tribal 153.31 governments; 153.32 (3) exempt-interest dividends received as defined in 153.33 section 852(b)(5) of the Internal Revenue Code; 153.34 (4) the amount of any net operating loss deduction taken 153.35 for federal income tax purposes under section 172 or 832(c)(10) 153.36 of the Internal Revenue Code or operations loss deduction under 154.1 section 810 of the Internal Revenue Code; 154.2 (5) the amount of any special deductions taken for federal 154.3 income tax purposes under sections 241 to 247 of the Internal 154.4 Revenue Code; 154.5 (6) losses from the business of mining, as defined in 154.6 section 290.05, subdivision 1, clause (a), that are not subject 154.7 to Minnesota income tax; 154.8 (7) the amount of any capital losses deducted for federal 154.9 income tax purposes under sections 1211 and 1212 of the Internal 154.10 Revenue Code; 154.11 (8) the exempt foreign trade income of a foreign sales 154.12 corporation under sections 921(a) and 291 of the Internal 154.13 Revenue Code; 154.14 (9) the amount of percentage depletion deducted under 154.15 sections 611 through 614 and 291 of the Internal Revenue Code; 154.16 (10) for certified pollution control facilities placed in 154.17 service in a taxable year beginning before December 31, 1986, 154.18 and for which amortization deductions were elected under section 154.19 169 of the Internal Revenue Code of 1954, as amended through 154.20 December 31, 1985, the amount of the amortization deduction 154.21 allowed in computing federal taxable income for those 154.22 facilities; 154.23 (11) the amount of any deemed dividend from a foreign 154.24 operating corporation determined pursuant to section 290.17, 154.25 subdivision 4, paragraph (g); 154.26 (12)the amount of any environmental tax paid under section154.2759(a) of the Internal Revenue Code;154.28(13)the amount of a partner's pro rata share of net income 154.29 which does not flow through to the partner because the 154.30 partnership elected to pay the tax on the income under section 154.31 6242(a)(2) of the Internal Revenue Code; 154.32(14)(13) the amount of net income excluded under section 154.33 114 of the Internal Revenue Code; 154.34(15)(14) any increase in subpart F income, as defined in 154.35 section 952(a) of the Internal Revenue Code, for the taxable 154.36 year when subpart F income is calculated without regard to the 155.1 provisions of section 614 of Public Law 107-147; and 155.2(16)(15) 80 percent of the depreciation deduction allowed 155.3 under section 168(k)(1)(A) and (k)(4)(A) of the Internal Revenue 155.4 Code. For purposes of this clause, if the taxpayer has an 155.5 activity that in the taxable year generates a deduction for 155.6 depreciation under section 168(k)(1)(A) and (k)(4)(A) and the 155.7 activity generates a loss for the taxable year that the taxpayer 155.8 is not allowed to claim for the taxable year, "the depreciation 155.9 allowed under section 168(k)(1)(A) and (k)(4)(A)" for the 155.10 taxable year is limited to excess of the depreciation claimed by 155.11 the activity under section 168(k)(1)(A) and (k)(4)(A) over the 155.12 amount of the loss from the activity that is not allowed in the 155.13 taxable year. In succeeding taxable years when the losses not 155.14 allowed in the taxable year are allowed, the depreciation under 155.15 section 168(k)(1)(A) and (k)(4)(A) is allowed. 155.16 [EFFECTIVE DATE.] This section is effective the day 155.17 following final enactment. 155.18 Sec. 19. Minnesota Statutes 2004, section 290.06, 155.19 subdivision 22, is amended to read: 155.20 Subd. 22. [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A 155.21 taxpayer who is liable for taxes based onor measured bynet 155.22 income to another state, as provided in paragraphs (b) through 155.23 (f), upon income allocated or apportioned to Minnesota, is 155.24 entitled to a credit for the tax paid to another state if the 155.25 tax is actually paid in the taxable year or a subsequent taxable 155.26 year. A taxpayer who is a resident of this state pursuant to 155.27 section 290.01, subdivision 7,clause (2)paragraph (b), and who 155.28 is subject to income tax as a resident in the state of the 155.29 individual's domicile is not allowed this credit unless the 155.30 state of domicile does not allow a similar credit. 155.31 (b) For an individual, estate, or trust, the credit is 155.32 determined by multiplying the tax payable under this chapter by 155.33 the ratio derived by dividing the income subject to tax in the 155.34 other state that is also subject to tax in Minnesota while a 155.35 resident of Minnesota by the taxpayer's federal adjusted gross 155.36 income, as defined in section 62 of the Internal Revenue Code, 156.1 modified by the addition required by section 290.01, subdivision 156.2 19a, clause (1), and the subtraction allowed by section 290.01, 156.3 subdivision 19b, clause (1), to the extent the income is 156.4 allocated or assigned to Minnesota under sections 290.081 and 156.5 290.17. 156.6 (c) If the taxpayer is an athletic team that apportions all 156.7 of its income under section 290.17, subdivision 5, the credit is 156.8 determined by multiplying the tax payable under this chapter by 156.9 the ratio derived from dividing the total net income subject to 156.10 tax in the other state by the taxpayer's Minnesota taxable 156.11 income. 156.12 (d) The credit determined under paragraph (b) or (c) shall 156.13 not exceed the amount of tax so paid to the other state on the 156.14 gross income earned within the other state subject to tax under 156.15 this chapter, nor shall the allowance of the credit reduce the 156.16 taxes paid under this chapter to an amount less than what would 156.17 be assessed if such income amount was excluded from taxable net 156.18 income. 156.19 (e) In the case of the tax assessed on a lump sum 156.20 distribution under section 290.032, the credit allowed under 156.21 paragraph (a) is the tax assessed by the other state on the lump 156.22 sum distribution that is also subject to tax under section 156.23 290.032, and shall not exceed the tax assessed under section 156.24 290.032. To the extent the total lump sum distribution defined 156.25 in section 290.032, subdivision 1, includes lump sum 156.26 distributions received in prior years or is all or in part an 156.27 annuity contract, the reduction to the tax on the lump sum 156.28 distribution allowed under section 290.032, subdivision 2, 156.29 includes tax paid to another state that is properly apportioned 156.30 to that distribution. 156.31 (f) If a Minnesota resident reported an item of income to 156.32 Minnesota and is assessed tax in such other state on that same 156.33 income after the Minnesota statute of limitations has expired, 156.34 the taxpayer shall receive a credit for that year under 156.35 paragraph (a), notwithstanding any statute of limitations to the 156.36 contrary. The claim for the credit must be submitted within one 157.1 year from the date the taxes were paid to the other state. The 157.2 taxpayer must submit sufficient proof to show entitlement to a 157.3 credit. 157.4 (g) For the purposes of this subdivision, a resident 157.5 shareholder of a corporation treated as an "S" corporation under 157.6 section 290.9725, must be considered to have paid a tax imposed 157.7 on the shareholder in an amount equal to the shareholder's pro 157.8 rata share of any net income tax paid by the S corporation to 157.9 another state. For the purposes of the preceding sentence, the 157.10 term "net income tax" means any tax imposed on or measured by a 157.11 corporation's net income. 157.12 (h) For the purposes of this subdivision, a resident 157.13 partner of an entity taxed as a partnership under the Internal 157.14 Revenue Code must be considered to have paid a tax imposed on 157.15 the partner in an amount equal to the partner's pro rata share 157.16 of any net income tax paid by the partnership to another state. 157.17 For purposes of the preceding sentence, the term "net income" 157.18 tax means any tax imposed on or measured by a partnership's net 157.19 income. 157.20 (i) For the purposes of this subdivision, "another state": 157.21 (1) includes: 157.22 (i) the District of Columbia; and 157.23 (ii) a province or territory of Canada; but 157.24 (2) excludes Puerto Rico and the several territories 157.25 organized by Congress. 157.26 (j) The limitations on the credit in paragraphs (b), (c), 157.27 and (d), are imposed on a state by state basis. 157.28 (k) For a tax imposed by a province or territory of Canada, 157.29 the tax for purposes of this subdivision is the excess of the 157.30 tax over the amount of the foreign tax credit allowed under 157.31 section 27 of the Internal Revenue Code. In determining the 157.32 amount of the foreign tax credit allowed, the net income taxes 157.33 imposed by Canada on the income are deducted first. Any 157.34 remaining amount of the allowable foreign tax credit reduces the 157.35 provincial or territorial tax that qualifies for the credit 157.36 under this subdivision. 158.1 [EFFECTIVE DATE.] This section is effective for tax years 158.2 beginning after December 31, 2004. 158.3 Sec. 20. Minnesota Statutes 2004, section 290.06, is 158.4 amended by adding a subdivision to read: 158.5 Subd. 32. [DAIRY INVESTMENT CREDIT.] (a) A dairy 158.6 investment credit is allowed against the tax computed under this 158.7 chapter equal to the credit amount in the table, based on the 158.8 amount paid or incurred by the taxpayer in the tax year and 158.9 certified by the commissioner of agriculture under paragraph 158.10 (f), for qualifying expenditures: 158.11 Amount of 158.12 qualifying expenditures Credit amount 158.13 up to $500,000 ten percent of 158.14 qualifying expenditures 158.15 over $500,000, but not $50,000, plus nine percent 158.16 more than $600,000 of the amount of qualified 158.17 expenditures in excess of 158.18 $500,000 158.19 over $600,000, but not $59,000, plus seven percent 158.20 more than $700,000 of the amount of qualified 158.21 expenditures in excess of 158.22 $600,000 158.23 over $700,000, but not $66,000, plus five percent 158.24 more than $800,000 of the amount of qualified 158.25 expenditures in excess of 158.26 $700,000 158.27 over $800,000, but not $71,000, plus three percent 158.28 more than $900,000 of the amount of qualified 158.29 expenditures in excess of 158.30 $800,000 158.31 over $900,000, but not $74,000, plus one percent 158.32 more than $1,000,000 of the amount of qualified 158.33 expenditures in excess of 158.34 $900,000 158.35 $1,000,000 or more $75,000 158.36 (b) "Qualifying expenditures," for purposes of this 158.37 subdivision, means the expenses incurred for dairy animals for 158.38 the construction or improvement of buildings or facilities, or 158.39 the acquisition of equipment, for dairy animal housing, 158.40 confinement, animal feeding, milk production, and waste 158.41 management, including, but not limited to, the following: 158.42 (1) freestall barns; 158.43 (2) fences; 158.44 (3) watering facilities; 159.1 (4) feed storage and handling equipment; 159.2 (5) milking parlors; 159.3 (6) robotic equipment; 159.4 (7) scales; 159.5 (8) milk storage and cooling facilities; 159.6 (9) bulk tanks; 159.7 (10) manure handling equipment and storage facilities; 159.8 (11) digesters; 159.9 (12) equipment used to produce energy; 159.10 (13) on-farm processing; and 159.11 (14) development of pasture other than land acquisition. 159.12 Qualifying expenditures only include amounts that are 159.13 capitalized and deducted under either section 167 or 179 of the 159.14 Internal Revenue Code in computing federal taxable income. 159.15 (c) The credit is limited to the liability for tax, as 159.16 computed under this section for the taxable year for which the 159.17 credit certificate is issued. If the amount of the credit 159.18 determined under this section for any taxable year exceeds this 159.19 limitation, the excess is a dairy investment credit carryover to 159.20 each of the 15 succeeding taxable years. The entire amount of 159.21 the excess unused credit for the taxable year is carried first 159.22 to the earliest of the taxable years to which the credit may be 159.23 carried and then to each successive year to which the credit may 159.24 be carried. The amount of the unused credit which may be added 159.25 under this paragraph shall not exceed the taxpayer's liability 159.26 for tax less the dairy investment credit for the taxable year. 159.27 (d) For a partnership or S corporation, the maximum amount 159.28 of the credit applies to the entity, not the individual partner 159.29 or shareholder. 159.30 (e) To be eligible for the dairy investment credit in this 159.31 subdivision, a taxpayer must apply to the commissioner of 159.32 agriculture for a tax credit certificate. The application must 159.33 be made on forms prescribed by the commissioner of agriculture 159.34 and must include a statement of the qualifying expenditures by 159.35 the taxpayer. 159.36 (f) The commissioner of agriculture shall certify credits 160.1 in the order the forms required under paragraph (e) are received 160.2 and approved by the commissioner of agriculture, until the 160.3 maximum credit amount for the taxable year has been reached. 160.4 The maximum credit amount is $900,000 for tax years beginning 160.5 after December 31, 2004, and before January 1, 2006; and 160.6 $1,000,000 per year for tax years beginning after December 31, 160.7 2005. 160.8 Any eligible applications for which certificates are not 160.9 issued in a tax year because the commissioner of agriculture has 160.10 issued certificates totaling the maximum credit amount for that 160.11 tax year remain eligible for a credit certificate in subsequent 160.12 tax years, in the order in which the forms were received by the 160.13 commissioner of agriculture. 160.14 [EFFECTIVE DATE.] This section is effective for assets 160.15 placed in service in taxable years beginning after December 31, 160.16 2004. 160.17 Sec. 21. Minnesota Statutes 2004, section 290.067, 160.18 subdivision 1, is amended to read: 160.19 Subdivision 1. [AMOUNT OF CREDIT.] (a) A taxpayer may take 160.20 as a credit against the tax due from the taxpayer and a spouse, 160.21 if any, under this chapter an amount equal to the dependent care 160.22 credit for which the taxpayer is eligible pursuant to the 160.23 provisions of section 21 of the Internal Revenue Code subject to 160.24 the limitations provided in subdivision 2 except that in 160.25 determining whether the child qualified as a dependent, income 160.26 received as a Minnesota family investment program grant or 160.27 allowance to or on behalf of the child must not be taken into 160.28 account in determining whether the child received more than half 160.29 of the child's support from the taxpayer, and the provisions of 160.30 section 32(b)(1)(D) of the Internal Revenue Code do not apply. 160.31 (b) If a child who has not attained the age of six years at 160.32 the close of the taxable year is cared for at a licensed family 160.33 day care home operated by the child's parent, the taxpayer is 160.34 deemed to have paid employment-related expenses. If the child 160.35 is 16 months old or younger at the close of the taxable year, 160.36 the amount of expenses deemed to have been paid equals the 161.1 maximum limit for one qualified individual under section 21(c) 161.2 and (d) of the Internal Revenue Code. If the child is older 161.3 than 16 months of age but has not attained the age of six years 161.4 at the close of the taxable year, the amount of expenses deemed 161.5 to have been paid equals the amount the licensee would charge 161.6 for the care of a child of the same age for the same number of 161.7 hours of care. 161.8 (c) If a married couple: 161.9 (1) has a child who has not attained the age of one year at 161.10 the close of the taxable year; 161.11 (2) files a joint tax return for the taxable year; and 161.12 (3) does not participate in a dependent care assistance 161.13 program as defined in section 129 of the Internal Revenue Code, 161.14 in lieu of the actual employment related expenses paid for that 161.15 child under paragraph (a) or the deemed amount under paragraph 161.16 (b), the lesser of (i) the combined earned income of the couple 161.17 or (ii) the amount of the maximum limit for one qualified 161.18 individual under section 21(c) and (d) of the Internal Revenue 161.19 Code will be deemed to be the employment related expense paid 161.20 for that child. The earned income limitation of section 21(d) 161.21 of the Internal Revenue Code shall not apply to this deemed 161.22 amount. These deemed amounts apply regardless of whether any 161.23 employment-related expenses have been paid. 161.24 (d) If the taxpayer is not required and does not file a 161.25 federal individual income tax return for the tax year, no credit 161.26 is allowed for any amount paid to any person unless: 161.27 (1) the name, address, and taxpayer identification number 161.28 of the person are included on the return claiming the credit; or 161.29 (2) if the person is an organization described in section 161.30 501(c)(3) of the Internal Revenue Code and exempt from tax under 161.31 section 501(a) of the Internal Revenue Code, the name and 161.32 address of the person are included on the return claiming the 161.33 credit. 161.34 In the case of a failure to provide the information required 161.35 under the preceding sentence, the preceding sentence does not 161.36 apply if it is shown that the taxpayer exercised due diligence 162.1 in attempting to provide the information required. 162.2 In the case of a nonresident, part-year resident, or a 162.3 person who has earned income not subject to tax under this 162.4 chapter including earned income excluded pursuant to section 162.5 290.01, subdivision 19b, clause (11), the credit determined 162.6 under section 21 of the Internal Revenue Code must be allocated 162.7 based on the ratio by which the earned income of the claimant 162.8 and the claimant's spouse from Minnesota sources bears to the 162.9 total earned income of the claimant and the claimant's spouse. 162.10 For residents of Minnesota, the subtractions for military 162.11 pay under section 290.01, subdivision 19b, clauses (11) and 162.12 (12), are not considered "earned income not subject to tax under 162.13 this chapter." 162.14 Sec. 22. Minnesota Statutes 2004, section 290.067, 162.15 subdivision 2a, is amended to read: 162.16 Subd. 2a. [INCOME.] (a) For purposes of this section, 162.17 "income" means the sum of the following: 162.18 (1) federal adjusted gross income as defined in section 62 162.19 of the Internal Revenue Code;andplus 162.20 (2) the sum of the following amounts to the extent not 162.21 included in clause (1): 162.22 (i) all nontaxable income; 162.23 (ii) the amount of a passive activity loss that is not 162.24 disallowed as a result of section 469, paragraph (i) or (m) of 162.25 the Internal Revenue Code and the amount of passive activity 162.26 loss carryover allowed under section 469(b) of the Internal 162.27 Revenue Code; 162.28 (iii) an amount equal to the total of any discharge of 162.29 qualified farm indebtedness of a solvent individual excluded 162.30 from gross income under section 108(g) of the Internal Revenue 162.31 Code; 162.32 (iv) cash public assistance and relief; 162.33 (v) any pension or annuity (including railroad retirement 162.34 benefits, all payments received under the federal Social 162.35 Security Act, supplemental security income, and veterans 162.36 benefits), which was not exclusively funded by the claimant or 163.1 spouse, or which was funded exclusively by the claimant or 163.2 spouse and which funding payments were excluded from federal 163.3 adjusted gross income in the years when the payments were made; 163.4 (vi) interest received from the federal or a state 163.5 government or any instrumentality or political subdivision 163.6 thereof; 163.7 (vii) workers' compensation; 163.8 (viii) nontaxable strike benefits; 163.9 (ix) the gross amounts of payments received in the nature 163.10 of disability income or sick pay as a result of accident, 163.11 sickness, or other disability, whether funded through insurance 163.12 or otherwise; 163.13 (x) a lump sum distribution under section 402(e)(3) of the 163.14 Internal Revenue Code; 163.15 (xi) contributions made by the claimant to an individual 163.16 retirement account, including a qualified voluntary employee 163.17 contribution; simplified employee pension plan; self-employed 163.18 retirement plan; cash or deferred arrangement plan under section 163.19 401(k) of the Internal Revenue Code; or deferred compensation 163.20 plan under section 457 of the Internal Revenue Code; and 163.21 (xii) nontaxable scholarship or fellowship grants; minus 163.22 (3) in the case of a married couple filing a joint return, 163.23 the earned income of the lesser-earning spouse, as defined in 163.24 section 290.0675, subdivision 1, paragraph (d). 163.25 In the case of an individual who files an income tax return 163.26 on a fiscal year basis, the term "federal adjusted gross income" 163.27 means federal adjusted gross income reflected in the fiscal year 163.28 ending in the next calendar year. Federal adjusted gross income 163.29 may not be reduced by the amount of a net operating loss 163.30 carryback or carryforward or a capital loss carryback or 163.31 carryforward allowed for the year. 163.32 (b) "Income" does not include: 163.33 (1) amounts excluded pursuant to the Internal Revenue Code, 163.34 sections 101(a) and 102; 163.35 (2) amounts of any pension or annuity that were exclusively 163.36 funded by the claimant or spouse if the funding payments were 164.1 not excluded from federal adjusted gross income in the years 164.2 when the payments were made; 164.3 (3) surplus food or other relief in kind supplied by a 164.4 governmental agency; 164.5 (4) relief granted under chapter 290A; 164.6 (5) child support payments received under a temporary or 164.7 final decree of dissolution or legal separation; and 164.8 (6) restitution payments received by eligible individuals 164.9 and excludable interest as defined in section 803 of the 164.10 Economic Growth and Tax Relief Reconciliation Act of 2001, 164.11 Public Law 107-16. 164.12 [EFFECTIVE DATE.] This section is effective for taxable 164.13 years beginning after December 31, 2005. 164.14 Sec. 23. Minnesota Statutes 2004, section 290.0671, 164.15 subdivision 1, is amended to read: 164.16 Subdivision 1. [CREDIT ALLOWED.] (a) An individual is 164.17 allowed a credit against the tax imposed by this chapter equal 164.18 to a percentage of earned income. To receive a credit, a 164.19 taxpayer must be eligible for a credit under section 32 of the 164.20 Internal Revenue Code. An individual who would have been 164.21 eligible for a credit under section 32 of the Internal Revenue 164.22 Code if the phaseout in section 32(b) were calculated based on 164.23 the income thresholds provided in paragraphs (b) through (d) as 164.24 adjusted in paragraphs (i) through (k) is also eligible for a 164.25 credit under this section. 164.26 (b) For individuals with no qualifying children, the credit 164.27 equals 1.9125 percent of the first $4,620 of earned income. The 164.28 credit is reduced by 1.9125 percent of earned income ormodified164.29 adjusted gross income, whichever is greater, in excess of 164.30 $5,770, but in no case is the credit less than zero. 164.31 (c) For individuals with one qualifying child, the credit 164.32 equals 8.5 percent of the first $6,920 of earned income and 8.5 164.33 percent of earned income over $12,080 but less than $13,450. 164.34 The credit is reduced by 5.73 percent of earned income or 164.35modifiedadjusted gross income, whichever is greater, in excess 164.36 of $15,080, but in no case is the credit less than zero. 165.1 (d) For individuals with two or more qualifying children, 165.2 the credit equals ten percent of the first $9,720 of earned 165.3 income and 20 percent of earned income over $14,860 but less 165.4 than $16,800. The credit is reduced by 10.3 percent of earned 165.5 income ormodifiedadjusted gross income, whichever is greater, 165.6 in excess of $17,890, but in no case is the credit less than 165.7 zero. 165.8 (e) For a nonresident or part-year resident, the credit 165.9 must be allocated based on the percentage calculated under 165.10 section 290.06, subdivision 2c, paragraph (e). 165.11 (f) For a person who was a resident for the entire tax year 165.12 and has earned income not subject to tax under this chapter, 165.13 including income excluded under section 290.01, subdivision 19b, 165.14 clause (11), the credit must be allocated based on the ratio of 165.15 federal adjusted gross income reduced by the earned income not 165.16 subject to tax under this chapter over federal adjusted gross 165.17 income. For purposes of this paragraph, the subtractions for 165.18 military pay under section 290.01, subdivision 19b, clauses (11) 165.19 and (12), are not considered "earned income not subject to tax 165.20 under this chapter." 165.21 (g) For tax years beginning after December 31, 2001, and 165.22 before December 31, 2004, the $5,770 in paragraph (b), the 165.23 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 165.24 after being adjusted for inflation under subdivision 7, are each 165.25 increased by $1,000 for married taxpayers filing joint returns. 165.26 (h) For tax years beginning after December 31, 2004, and 165.27 before December 31,20072005, the $5,770 in paragraph (b), the 165.28 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 165.29 after being adjusted for inflation under subdivision 7, are each 165.30 increased by $2,000 for married taxpayers filing joint returns. 165.31 (i) For tax years beginning after December 31, 2005, and 165.32 before December 31, 2007, the $5,770 in paragraph (b), the 165.33 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 165.34 after being adjusted for inflation under subdivision 7, are each 165.35 increased by the greater of (i) $2,000 or (ii) the earned income 165.36 of the lesser-earning spouse, for married taxpayers filing joint 166.1 returns. 166.2(i)(j) For tax years beginning after December 31, 2007, 166.3 and before December 31, 2010, the $5,770 in paragraph (b), the 166.4 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 166.5 after being adjusted for inflation under subdivision 7, are each 166.6 increased by$3,000the greater of (i) $3,000 or (ii) the earned 166.7 income of the lesser-earning spouse, for married taxpayers 166.8 filing joint returns. For tax years beginning after December 166.9 31, 2008, and before December 31, 2010, the $3,000 is adjusted 166.10 annually for inflation under subdivision 7. 166.11 (k) For tax years beginning after December 31, 2010, the 166.12 $5,770 in paragraph (b), the $15,080 in paragraph (c), and the 166.13 $17,890 in paragraph (d), after being adjusted for inflation 166.14 under subdivision 7, are each increased by the earned income of 166.15 the lesser-earning spouse, for married taxpayers filing joint 166.16 returns. 166.17(j)(l) The commissioner shall construct tables showing the 166.18 amount of the credit at various income levels and make them 166.19 available to taxpayers. The tables shall follow the schedule 166.20 contained in this subdivision, except that the commissioner may 166.21 graduate the transition between income brackets. 166.22 Sec. 24. Minnesota Statutes 2004, section 290.0671, 166.23 subdivision 1a, is amended to read: 166.24 Subd. 1a. [DEFINITIONS.] For purposes of this section, the 166.25 terms "qualifying child," and "earned income,"and "adjusted166.26gross income"have the meanings given in section 32(c) of the 166.27 Internal Revenue Code, and the term "adjusted gross income" has 166.28 the meaning given in section 62 of the Internal Revenue Code. 166.29 "Earned income of the lesser-earning spouse" has the 166.30 meaning given in section 290.0675, subdivision 1, paragraph (d). 166.31 [EFFECTIVE DATE.] This section is effective for taxable 166.32 years beginning after December 31, 2004. 166.33 Sec. 25. Minnesota Statutes 2004, section 290.0672, 166.34 subdivision 1, is amended to read: 166.35 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 166.36 section, the following terms have the meanings given. 167.1 (b) "Long-term care insurance" means a policy that: 167.2 (1) qualifies for a deduction under section 213 of the 167.3 Internal Revenue Code, disregarding the 7.5 percent income test; 167.4 or meets the requirements given in section 62A.46; or provides 167.5 similar coverage issued under the laws of another jurisdiction; 167.6 and 167.7 (2) has a lifetime long-term care benefit limit of not less 167.8 than $100,000; and 167.9 (3) has been offered in compliance with the inflation 167.10 protection requirements of section 62S.23. 167.11 (c) "Qualified beneficiary" means the taxpayer or the 167.12 taxpayer's spouse. 167.13(d) "Premiums deducted in determining federal taxable167.14income" means the lesser of (1) long-term care insurance167.15premiums that qualify as deductions under section 213 of the167.16Internal Revenue Code; and (2) the total amount deductible for167.17medical care under section 213 of the Internal Revenue Code.167.18 [EFFECTIVE DATE.] This section is effective for tax years 167.19 beginning after December 31, 2004. 167.20 Sec. 26. Minnesota Statutes 2004, section 290.0672, 167.21 subdivision 2, is amended to read: 167.22 Subd. 2. [CREDIT.] A taxpayer is allowed a credit against 167.23 the tax imposed by this chapter for long-term care insurance 167.24 policy premiums paid during the tax year. The credit for each 167.25 policy equals 25 percent of premiums paidto the extent not167.26deducted in determining federal taxable income. A taxpayer may 167.27 claim a credit for only one policy for each qualified 167.28 beneficiary. A maximum of $100 applies to each qualified 167.29 beneficiary. The maximum total credit allowed per year is $200 167.30 for married couples filing joint returns and $100 for all other 167.31 filers. For a nonresident or part-year resident, the credit 167.32 determined under this section must be allocated based on the 167.33 percentage calculated under section 290.06, subdivision 2c, 167.34 paragraph (e). 167.35 [EFFECTIVE DATE.] This section is effective for tax years 167.36 beginning after December 31, 2004. 168.1 Sec. 27. Minnesota Statutes 2004, section 290.0674, 168.2 subdivision 1, is amended to read: 168.3 Subdivision 1. [CREDIT ALLOWED.] An individual is allowed 168.4 a credit against the tax imposed by this chapter in an amount 168.5 equal to 75 percent of the amount paid for education-related 168.6 expenses for a qualifying child in kindergarten through grade 168.7 12. For purposes of this section, "education-related expenses" 168.8 means: 168.9 (1) fees or tuition for instruction by an instructor under 168.10 section 120A.22, subdivision 10, clause (1), (2), (3), (4), or 168.11 (5), or a member of the Minnesota Music Teachers Association, 168.12 and who is not a lineal ancestor or sibling of the dependent for 168.13 instruction outside the regular school day or school year, 168.14 including tutoring, driver's education offered as part of school 168.15 curriculum, regardless of whether it is taken from a public or 168.16 private entity or summer camps, in grade or age appropriate 168.17 curricula that supplement curricula and instruction available 168.18 during the regular school year, that assists a dependent to 168.19 improve knowledge of core curriculum areas or to expand 168.20 knowledge and skills under thegraduation rule under section168.21120B.02, paragraph (e), clauses (1) to (7), (9), and (10)168.22 required academic standards under section 120B.021, subdivision 168.23 1, and the elective standard under section 120B.022, subdivision 168.24 1, clause (2), and that do not include the teaching of religious 168.25 tenets, doctrines, or worship, the purpose of which is to 168.26 instill such tenets, doctrines, or worship; 168.27 (2) expenses for textbooks, including books and other 168.28 instructional materials and equipment purchased or leased for 168.29 use in elementary and secondary schools in teaching only those 168.30 subjects legally and commonly taught in public elementary and 168.31 secondary schools in this state. "Textbooks" does not include 168.32 instructional books and materials used in the teaching of 168.33 religious tenets, doctrines, or worship, the purpose of which is 168.34 to instill such tenets, doctrines, or worship, nor does it 168.35 include books or materials for extracurricular activities 168.36 including sporting events, musical or dramatic events, speech 169.1 activities, driver's education, or similar programs; 169.2 (3) a maximum expense of $200 per family for personal 169.3 computer hardware, excluding single purpose processors, and 169.4 educational software that assists a dependent to improve 169.5 knowledge of core curriculum areas or to expand knowledge and 169.6 skills under thegraduation rule under section 120B.02required 169.7 academic standards under section 120B.021, subdivision 1, and 169.8 the elective standard under section 120B.022, subdivision 1, 169.9 clause (2), purchased for use in the taxpayer's home and not 169.10 used in a trade or business regardless of whether the computer 169.11 is required by the dependent's school; and 169.12 (4) the amount paid to others for transportation of a 169.13 qualifying child attending an elementary or secondary school 169.14 situated in Minnesota, North Dakota, South Dakota, Iowa, or 169.15 Wisconsin, wherein a resident of this state may legally fulfill 169.16 the state's compulsory attendance laws, which is not operated 169.17 for profit, and which adheres to the provisions of the Civil 169.18 Rights Act of 1964 and chapter 363A. 169.19 For purposes of this section, "qualifying child" has the 169.20 meaning given in section 32(c)(3) of the Internal Revenue Code. 169.21 [EFFECTIVE DATE.] This section is effective for tax years 169.22 beginning after December 31, 2004. 169.23 Sec. 28. Minnesota Statutes 2004, section 290.0674, 169.24 subdivision 2, is amended to read: 169.25 Subd. 2. [LIMITATIONS.] (a) For taxable years beginning 169.26 after December 31, 2004, and before January 1, 2006, for 169.27 claimants with income not greater than $33,500, the maximum 169.28 credit allowed for a family is $1,000per qualifying child and169.29$2,000 per familymultiplied by the number of qualifying 169.30 children in kindergarten through grade 12 in the family.No169.31credit is allowed for education-related expenses for claimants169.32with income greater than $37,500.The maximum creditper child169.33 for families with one qualifying child in kindergarten through 169.34 grade 12 is reduced by $1 for each $4 of household income over 169.35 $33,500, and the maximum creditper familyfor families with two 169.36 or more qualifying children in kindergarten through grade 12 is 170.1 reduced by $2 for each $4 of household income over $33,500, but 170.2 in no case is the credit less than zero. 170.3 (b) For taxable years beginning after December 31, 2005, 170.4 for claimants with income not greater than the greater of (i) 170.5 $33,500 or (ii) 185 percent of the federal poverty guidelines, 170.6 the maximum credit allowed for a family is $1,000 multiplied by 170.7 the number of qualifying children in the family in grades 170.8 kindergarten through 12. The maximum credit per family is 170.9 reduced by $1 multiplied by the number of qualifying children in 170.10 the family in grades kindergarten through 12 for each $4 of 170.11 household income over the greater of (i) $33,500 or (ii) 185 170.12 percent of the federal poverty guidelines, but in no case is the 170.13 credit less than zero. 170.14 (c) For purposes of this section "income" has the meaning 170.15 given in section 290.067, subdivision 2a. In the case of a 170.16 married claimant, a credit is not allowed unless a joint income 170.17 tax return is filed. For purposes of this section "federal 170.18 poverty guidelines" means the guidelines published in the 170.19 Federal Register in the tax year for which the credit is 170.20 claimed, adjusted for family size. 170.21(b)(d) For a nonresident or part-year resident, the credit 170.22 determined under subdivision 1 and the maximum credit amount in 170.23 paragraph (a) must be allocated using the percentage calculated 170.24 in section 290.06, subdivision 2c, paragraph (e). 170.25 [EFFECTIVE DATE.] This section is effective for taxable 170.26 years beginning after December 31, 2004. 170.27 Sec. 29. Minnesota Statutes 2004, section 290.091, 170.28 subdivision 2, is amended to read: 170.29 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 170.30 this section, the following terms have the meanings given: 170.31 (a) "Alternative minimum taxable income" means the sum of 170.32 the following for the taxable year: 170.33 (1) the taxpayer's federal alternative minimum taxable 170.34 income as defined in section 55(b)(2) of the Internal Revenue 170.35 Code; 170.36 (2) the taxpayer's itemized deductions allowed in computing 171.1 federal alternative minimum taxable income, but excluding: 171.2 (i) the charitable contribution deduction under section 170 171.3 of the Internal Revenue Code: 171.4 (A) for taxable years beginning before January 1, 2006, to 171.5 the extent that the deduction exceeds 1.0 percent of adjusted 171.6 gross income, as defined; 171.7 (B) for taxable years beginning after December 31, 2005, to 171.8 the full extent of the deduction. 171.9 For purposes of this clause, "adjusted gross income" has 171.10 the meaning given in section 62 of the Internal Revenue Code; 171.11 (ii) the medical expense deduction; 171.12 (iii) the casualty, theft, and disaster loss deduction; and 171.13 (iv) the impairment-related work expenses of a disabled 171.14 person; 171.15 (3) for depletion allowances computed under section 613A(c) 171.16 of the Internal Revenue Code, with respect to each property (as 171.17 defined in section 614 of the Internal Revenue Code), to the 171.18 extent not included in federal alternative minimum taxable 171.19 income, the excess of the deduction for depletion allowable 171.20 under section 611 of the Internal Revenue Code for the taxable 171.21 year over the adjusted basis of the property at the end of the 171.22 taxable year (determined without regard to the depletion 171.23 deduction for the taxable year); 171.24 (4) to the extent not included in federal alternative 171.25 minimum taxable income, the amount of the tax preference for 171.26 intangible drilling cost under section 57(a)(2) of the Internal 171.27 Revenue Code determined without regard to subparagraph (E); 171.28 (5) to the extent not included in federal alternative 171.29 minimum taxable income, the amount of interest income as 171.30 provided by section 290.01, subdivision 19a, clause (1); and 171.31 (6) the amount of addition required by section 290.01, 171.32 subdivision 19a, clause (7); 171.33 less the sum of the amounts determined under the following: 171.34 (1) interest income as defined in section 290.01, 171.35 subdivision 19b, clause (1); 171.36 (2) an overpayment of state income tax as provided by 172.1 section 290.01, subdivision 19b, clause (2), to the extent 172.2 included in federal alternative minimum taxable income; 172.3 (3) the amount of investment interest paid or accrued 172.4 within the taxable year on indebtedness to the extent that the 172.5 amount does not exceed net investment income, as defined in 172.6 section 163(d)(4) of the Internal Revenue Code. Interest does 172.7 not include amounts deducted in computing federal adjusted gross 172.8 income; and 172.9 (4) amounts subtracted from federal taxable income as 172.10 provided by section 290.01, subdivision 19b, clauses(10) and172.11(11)(9) to (13). 172.12 In the case of an estate or trust, alternative minimum 172.13 taxable income must be computed as provided in section 59(c) of 172.14 the Internal Revenue Code. 172.15 (b) "Investment interest" means investment interest as 172.16 defined in section 163(d)(3) of the Internal Revenue Code. 172.17 (c) "Tentative minimum tax" equals 6.4 percent of 172.18 alternative minimum taxable income after subtracting the 172.19 exemption amount determined under subdivision 3. 172.20 (d) "Regular tax" means the tax that would be imposed under 172.21 this chapter (without regard to this section and section 172.22 290.032), reduced by the sum of the nonrefundable credits 172.23 allowed under this chapter. 172.24 (e) "Net minimum tax" means the minimum tax imposed by this 172.25 section. 172.26 [EFFECTIVE DATE.] This section is effective for taxable 172.27 years beginning after December 31, 2004. 172.28 Sec. 30. Minnesota Statutes 2004, section 290.091, 172.29 subdivision 3, is amended to read: 172.30 Subd. 3. [EXEMPTION AMOUNT.] (a) For purposes of computing 172.31 the alternative minimum tax, the exemption amount is: 172.32 (1) for taxable years beginning before January 1, 2005, the 172.33 exemption determined under section 55(d) of the Internal Revenue 172.34 Code, as amended through December 31, 1992; 172.35 (2) for taxable years beginning after December 31, 2004, 172.36 and before January 1, 2006, $42,000 for married couples filing 173.1 joint returns; $21,000 for married individuals filing separate 173.2 returns, estates, and trusts; and $31,500 for unmarried 173.3 individuals; 173.4 (3) for taxable years beginning after December 31, 2005, 173.5 and before January 1, 2007, $45,000 for married couples filing 173.6 joint returns; $22,500 for married individuals filing separate 173.7 returns, estates, and trusts; and $33,750 for unmarried 173.8 individuals; and 173.9 (4) for taxable years beginning after December 31, 2006, 173.10 and before January 1, 2008, $50,000 for married couples filing 173.11 joint returns; $25,000 for married individuals filing separate 173.12 returns, estates, and trusts; and $37,500 for unmarried 173.13 individuals. 173.14 (b) The exemption amount determined under this subdivision 173.15 is subject to the phase out under section 55(d)(3) of the 173.16 Internal Revenue Code, except that alternative minimum taxable 173.17 income as determined under this section must be substituted in 173.18 the computation of the phase outunder section 55(d)(3). 173.19 (c) For taxable years beginning after December 31, 2007, 173.20 the exemption amount under paragraph (a), clause (4), must be 173.21 adjusted for inflation. The commissioner shall make the 173.22 inflation adjustments in accordance with section 1(f) of the 173.23 Internal Revenue Code except that for the purposes of this 173.24 subdivision the percentage increase must be determined from the 173.25 year starting September 1, 2006, and ending August 31, 2007, as 173.26 the base year for adjusting for inflation for the tax year 173.27 beginning after December 31, 2007. The determination of the 173.28 commissioner under this subdivision is not a rule under the 173.29 Administrative Procedure Act. 173.30 [EFFECTIVE DATE.] This section is effective for taxable 173.31 years beginning after December 31, 2004. 173.32 Sec. 31. Minnesota Statutes 2004, section 290.0922, 173.33 subdivision 2, is amended to read: 173.34 Subd. 2. [EXEMPTIONS.] The following entities are exempt 173.35 from the tax imposed by this section: 173.36 (1) corporations exempt from tax under section 290.05; 174.1 (2) real estate investment trusts; 174.2 (3) regulated investment companies or a fund thereof; and 174.3 (4) entities having a valid election in effect under 174.4 section 860D(b) of the Internal Revenue Code; 174.5 (5) town and farmers' mutual insurance companies; 174.6 (6) cooperatives organized under chapter 308A or 308B that 174.7 provide housing exclusively to persons age 55 and over and are 174.8 classified as homesteads under section 273.124, subdivision 3; 174.9 and 174.10 (7) an entity, if for the taxable year all of its property 174.11 is located in a job opportunity building zone designated under 174.12 section 469.314 and all of its payroll is a job opportunity 174.13 building zone payroll under section 469.310. 174.14 Entities not specifically exempted by this subdivision are 174.15 subject to tax under this section, notwithstanding section 174.16 290.05. 174.17 [EFFECTIVE DATE.] This section is effective for tax years 174.18 beginning after December 31, 2004. 174.19 Sec. 32. Minnesota Statutes 2004, section 290.191, 174.20 subdivision 2, is amended to read: 174.21 Subd. 2. [APPORTIONMENT FORMULA OF GENERAL APPLICATION.] 174.22 (a) Except for those trades or businesses required to use a 174.23 different formula under subdivision 3 or section 290.36, and for 174.24 those trades or businesses that receive permission to use some 174.25 other method under section 290.20 or under subdivision 4, a 174.26 trade or business required to apportion its net income must 174.27 apportion its income to this state on the basis of the 174.28 percentage obtained by taking the sum of: 174.29 (1)75the percent for the sales factor under paragraph (b) 174.30 of the percentage which the sales made within this state in 174.31 connection with the trade or business during the tax period are 174.32 of the total sales wherever made in connection with the trade or 174.33 business during the tax period; 174.34 (2)12.5the percent for the property factor under 174.35 paragraph (b) of the percentage which the total tangible 174.36 property used by the taxpayer in this state in connection with 175.1 the trade or business during the tax period is of the total 175.2 tangible property, wherever located, used by the taxpayer in 175.3 connection with the trade or business during the tax period; and 175.4 (3)12.5the percent for the payroll factor under paragraph 175.5 (b) of the percentage which the taxpayer's total payrolls paid 175.6 or incurred in this state or paid in respect to labor performed 175.7 in this state in connection with the trade or business during 175.8 the tax period are of the taxpayer's total payrolls paid or 175.9 incurred in connection with the trade or business during the tax 175.10 period. 175.11 (b) For purposes of paragraph (a) and subdivision 3, the 175.12 following percentages apply for the taxable years specified: 175.13 Taxable years Sales factor Property Payroll 175.14 beginning percent factor factor 175.15 during calendar percent percent 175.16 year 175.17 2007 78 11 11 175.18 2008 95 2.5 2.5 175.19 2009 and later 100 0 0 175.20 calendar years 175.21 [EFFECTIVE DATE.] This section is effective for tax years 175.22 beginning after December 31, 2006. 175.23 Sec. 33. Minnesota Statutes 2004, section 290.191, 175.24 subdivision 3, is amended to read: 175.25 Subd. 3. [APPORTIONMENT FORMULA FOR FINANCIAL 175.26 INSTITUTIONS.] Except for an investment company required to 175.27 apportion its income under section 290.36, a financial 175.28 institution that is required to apportion its net income must 175.29 apportion its net income to this state on the basis of the 175.30 percentage obtained by taking the sum of: 175.31 (1)75the percent for the sales factor under subdivision 175.32 2, paragraph (b), of the percentage which the receipts from 175.33 within this state in connection with the trade or business 175.34 during the tax period are of the total receipts in connection 175.35 with the trade or business during the tax period, from wherever 175.36 derived; 176.1 (2)12.5the percent for the property factor under 176.2 subdivision 2, paragraph (b), of the percentage which the sum of 176.3 the total tangible property used by the taxpayer in this state 176.4 and the intangible property owned by the taxpayer and attributed 176.5 to this state in connection with the trade or business during 176.6 the tax period is of the sum of the total tangible property, 176.7 wherever located, used by the taxpayer and the intangible 176.8 property owned by the taxpayer and attributed to all states in 176.9 connection with the trade or business during the tax period; and 176.10 (3)12.5the percent for the payroll factor under 176.11 subdivision 2, paragraph (b), of the percentage which the 176.12 taxpayer's total payrolls paid or incurred in this state or paid 176.13 in respect to labor performed in this state in connection with 176.14 the trade or business during the tax period are of the 176.15 taxpayer's total payrolls paid or incurred in connection with 176.16 the trade or business during the tax period. 176.17 [EFFECTIVE DATE.] This section is effective for tax years 176.18 beginning after December 31, 2006. 176.19 Sec. 34. [290.433] [NATIONAL GUARD AND RESERVES CHECKOFF.] 176.20 Subdivision 1. [CHECKOFF ESTABLISHED.] (a) Every 176.21 individual who files an income tax return may designate on their 176.22 original return that $1 or more shall be added to the tax or 176.23 deducted from the refund that would otherwise be payable by or 176.24 to that individual and paid into a Minnesota military families 176.25 relief account established in the special revenue fund. The 176.26 commissioner of revenue shall, on the income tax return, notify 176.27 filers of their right to designate that a portion of their tax 176.28 or refund shall be paid into the Minnesota military families 176.29 relief account. Amounts so designated to be paid shall be 176.30 credited to the account as returns are processed, in as timely a 176.31 manner as practical. All interest earned on money accrued, 176.32 gifts to the program, contributions to the program, and 176.33 reimbursements of expenditures shall be credited to the 176.34 account. All money in the account is appropriated to the 176.35 adjutant general of the Department of Military Affairs for the 176.36 purpose of making grants as specified in subdivision 2. 177.1 (b) The checkoff under this section is subject to removal 177.2 from the income tax return as provided in section 290.439, 177.3 subdivision 2. 177.4 Subd. 2. [GRANTS.] (a) The adjutant general is authorized 177.5 to expend any money appropriated from the Minnesota military 177.6 families relief account in the special revenue fund for the 177.7 purpose of making grants: 177.8 (1) directly to eligible individuals; or 177.9 (2) to one or more eligible foundations for the purpose of 177.10 making grants to eligible individuals, as provided in this 177.11 section. 177.12 (b) The term, "eligible individual" includes any Minnesota 177.13 resident who is: 177.14 (1) a member of the Minnesota National Guard or other 177.15 United States armed forces reserves who has been ordered to 177.16 federal active service since September 11, 2001, and has a 177.17 financial need as a result of that service; 177.18 (2) the spouse or dependent child of a person described in 177.19 clause (1); or 177.20 (3) the surviving spouse or surviving dependent child of a 177.21 person described in clause (1). 177.22 To be an eligible individual, a person described in clause 177.23 (2) or (3) must be residing within the state of Minnesota. 177.24 (c) The term "eligible foundation" includes any 177.25 organization that: 177.26 (1) is a tax-exempt organization under section 501(c)(3) of 177.27 the Internal Revenue Code; 177.28 (2) has articles of incorporation under chapter 317A 177.29 specifying the purpose of the organization as including the 177.30 provision of financial assistance to members of the Minnesota 177.31 National Guard and other United States armed forces reserves and 177.32 their families and survivors; and 177.33 (3) agrees in writing to distribute any grant money 177.34 received from the adjutant general under this section to 177.35 eligible individuals as defined in this section and in 177.36 accordance with any written policies and rules the adjutant 178.1 general may impose as conditions of the grant to the foundation. 178.2 (d) The maximum grant awarded to an eligible individual in 178.3 a calendar year with funds from the Minnesota military families 178.4 relief account, either through an eligible institution or 178.5 directly from the adjutant general, may not exceed $2,000. 178.6 (e) The state pledges and agrees with all contributors to 178.7 the account to use the contributed funds solely for the purpose 178.8 of providing assistance to eligible individuals. 178.9 (f) The state further agrees that it will not impose 178.10 additional conditions or restrictions that will limit or 178.11 otherwise restrict the ability of the adjutant general to award 178.12 grants under this section. 178.13 (g) For purposes of this section, the term "federal active 178.14 service" has the meaning given in section 190.05, subdivision 178.15 5c, but excludes service performed exclusively for purposes of: 178.16 (1) basic combat training, advanced individual training, 178.17 annual training, and periodic inactive duty training; 178.18 (2) special training periodically made available to reserve 178.19 members; and 178.20 (3) service performed in accordance with section 190.08, 178.21 subdivision 3. 178.22 Subd. 3. [ANNUAL REPORT.] The adjutant general must report 178.23 by February 1, 2007, and each year thereafter, to the chairs and 178.24 ranking minority members of the legislative committees and 178.25 divisions with jurisdiction over military and veterans' affairs 178.26 on the number, amounts, and use of grants issued from the 178.27 Minnesota military families relief account in the previous year 178.28 and on the expenses related to administering the account. 178.29 [EFFECTIVE DATE.] This section is effective for income tax 178.30 returns for taxable years beginning after December 31, 2004. 178.31 Sec. 35. [290.434] [PUBLIC SAFETY OFFICER CHECKOFF.] 178.32 (a) Every individual who files an income tax return may 178.33 designate on their original return that $1 or more shall be 178.34 added to the tax or deducted from the refund that would 178.35 otherwise be payable by or to that individual and paid into a 178.36 public safety officer memorial and survivor account in the 179.1 special revenue fund. The commissioner of revenue shall, on the 179.2 income tax return, notify filers of their right to designate 179.3 that a portion of their tax or refund shall be paid into the 179.4 public safety officer memorial and survivor account. The sum of 179.5 the amounts so designated to be paid shall be credited to the 179.6 account. The account may be used by the commissioner of public 179.7 safety to make grants to public safety officer associations that 179.8 assist in building and preserving state memorial monuments, 179.9 assist the families of public safety officers killed in the line 179.10 of duty, award scholarships to surviving family members, and 179.11 otherwise provide services relating to public safety officers 179.12 killed in the line of duty. All interest earned on money 179.13 accrued, gifts to the program, contributions to the program, and 179.14 reimbursements of expenditures shall be credited to the 179.15 account. All money in the account is appropriated to the 179.16 commissioner of public safety for purposes of this section. 179.17 (b) The state pledges and agrees with all contributors to 179.18 the account to use the funds contributed solely for the 179.19 maintenance of public safety officer memorials and for the 179.20 benefit of survivors of Minnesota public safety officers killed 179.21 in the line of duty and further agrees that it will not impose 179.22 additional conditions or restrictions that will limit or 179.23 otherwise restrict the ability of the commissioner of public 179.24 safety, in consultation with the public safety officer memorial 179.25 and survivor account advisory council, to award grants from the 179.26 available funds in the most efficient and effective manner. 179.27 (c) The commissioner of public safety must report by 179.28 January 1, 2004, and each year thereafter to the chairs and 179.29 ranking minority members of the legislative committees and 179.30 divisions with jurisdiction over criminal justice policy and 179.31 funding on the number, amounts, and use of grants issued from 179.32 the account in the previous year. 179.33 (d) A public safety officer memorial and survivor account 179.34 advisory council is established to advise the commissioner of 179.35 public safety on the distribution of grants under this section. 179.36 The council must consist of eight members, one from each of the 180.1 following organizations: the Minnesota law enforcement memorial 180.2 association, the Minnesota police and peace officers 180.3 association, the Minnesota chiefs of police association, the 180.4 Minnesota sheriffs association, the Minnesota state fire 180.5 department association, the Minnesota state fire chiefs 180.6 association, the Minnesota ambulance association, and the 180.7 Minnesota emergency medical services association. The council 180.8 member is the executive director or president of the 180.9 organization, or that person's designee. Members must serve 180.10 without compensation. The commissioner must consider the 180.11 advisory council's recommendations before awarding grants under 180.12 this section. 180.13 (e) As used in this section, "killed in the line of duty" 180.14 and "public safety officer" have the meanings given in section 180.15 299A.41. 180.16 (f) The checkoff under this section is subject to removal 180.17 from the income tax return as provided in section 290.439, 180.18 subdivision 2. 180.19 [EFFECTIVE DATE.] This section is effective for income tax 180.20 returns for taxable years beginning after December 31, 2004. 180.21 Sec. 36. [290.435] [K-12 EDUCATION, HIGHER EDUCATION, 180.22 TRANSPORTATION, HEALTH CARE, NURSING HOME, AND CLEAN WATER 180.23 CHECKOFF.] 180.24 Subdivision 1. [CHECKOFFS.] (a) Every individual who files 180.25 an income tax return may designate on their original return that 180.26 $1 or more shall be added to the tax or deducted from the refund 180.27 that would otherwise be payable by or to that individual. 180.28 (b) The taxpayer shall designate that the added or deducted 180.29 amount shall be paid into one or more of the following accounts 180.30 and used for the stated purpose: 180.31 (1) K-12 education, for technology and/or capital 180.32 improvement grants to school districts; 180.33 (2) higher education, for state assistance to individual 180.34 students based on student need; 180.35 (3) transportation, for local road and bridge funds; 180.36 (4) health care, to provide funding for public health care 181.1 programs; 181.2 (5) nursing home assistance, for state reimbursement of 181.3 nursing home costs; or 181.4 (6) environmental clean water, for grants to cities for 181.5 wastewater treatment facilities. 181.6 (c) The taxpayer may not designate an amount less than $1 181.7 to be paid into any of the accounts. 181.8 Subd. 2. [APPROPRIATION; SPECIAL ACCOUNTS.] (a) All 181.9 amounts designated by taxpayers to be paid into the K-12 181.10 education account under subdivision 1, clause (1), must be 181.11 deposited in the state treasury and credited to a special K-12 181.12 education account. Money in the account is appropriated 181.13 annually to the commissioner of education to make onetime grants 181.14 to school districts for technology or capital improvements. 181.15 (b) All amounts designated by taxpayers to be paid into the 181.16 higher education account under subdivision 1, clause (2), must 181.17 be deposited in the state treasury and credited to a special 181.18 higher education account. Money in the account is appropriated 181.19 annually to the Minnesota Higher Education Services Office to 181.20 provide financial assistance to students, based on financial 181.21 needs, attending postsecondary educational institutions located 181.22 in and operated by this state. 181.23 (c) All amounts designated by taxpayers to be paid into the 181.24 transportation account under subdivision 1, clause (3), must be 181.25 deposited in the state treasury and credited to a special 181.26 transportation account. Money in the account is appropriated 181.27 annually to the commissioner of transportation for improvements 181.28 to local roads and bridges. 181.29 (d) All amounts designated by taxpayers to be paid into the 181.30 health care account under subdivision 1, clause (4), must be 181.31 deposited in the state treasury and credited to a special health 181.32 care account. Money in the account is appropriated annually to 181.33 the commissioner of human services to provide additional funds 181.34 for adult participation in MinnesotaCare. 181.35 (e) All amounts designated by taxpayers to be paid into the 181.36 nursing home assistance account under subdivision 1, clause (5), 182.1 must be deposited in the state treasury and credited to a 182.2 special nursing home assistance account. Money in the account 182.3 is appropriated annually to the commissioner of human services 182.4 to fund a onetime increase in state paid nursing home 182.5 reimbursement rates. 182.6 (f) All amounts designated by taxpayers to be paid into the 182.7 environmental clean water account under subdivision 1, clause 182.8 (6), must be deposited in the state treasury and credited to the 182.9 wastewater infrastructure fund, and annually appropriated to the 182.10 public facilities authority to make onetime grants to 182.11 municipalities for wastewater treatment facilities. 182.12 (g) All amounts appropriated from the special accounts 182.13 under this section are onetime appropriations and do not become 182.14 part of the base level funding for the 2006-2007 biennium. 182.15 (h) The checkoffs under this section are subject to removal 182.16 from the income tax return as provided in section 290.439, 182.17 subdivision 2. 182.18 [EFFECTIVE DATE.] This section is effective for taxable 182.19 years beginning after December 31, 2004. 182.20 Sec. 37. [290.439] [ADMINISTRATION OF CHECKOFFS.] 182.21 Subdivision 1. [FORMS.] The commissioner must provide a 182.22 separate form as part of the income tax return that lists the 182.23 nongame wildlife checkoff in section 290.432; the state election 182.24 campaign fund checkoff in section 10A.31; the National Guard and 182.25 Reserves checkoff in section 290.433; the public safety officer 182.26 checkoff in section 290.434; and the education, higher 182.27 education, transportation, health care, nursing home, and clean 182.28 water checkoffs in section 290.435. The commissioner must 182.29 provide a single line on form M-1 for entering the total amount 182.30 a taxpayer contributes to all the checkoffs listed on the 182.31 separate form. 182.32 Subd. 2. [REMOVAL OF CHECKOFFS.] The commissioner must 182.33 annually review usage of the income tax checkoffs in sections 182.34 290.433 to 290.435, and determine the number of returns making 182.35 contributions and the total amount contributed to each checkoff, 182.36 including each of the separate checkoffs provided in section 183.1 290.435. If any of the checkoffs subject to review fails, for 183.2 two consecutive tax years, to obtain contributions of at least 183.3 $100,000 from at least eight percent of all returns that make 183.4 contributions to any of the checkoffs in sections 10A.31 and 183.5 290.433 to 290.435, the commissioner must remove the checkoff 183.6 from the checkoff form and submit legislation proposing the 183.7 repeal of the checkoff to the legislature. 183.8 [EFFECTIVE DATE.] This section is effective for taxable 183.9 years beginning after December 31, 2004. 183.10 Sec. 38. Minnesota Statutes 2004, section 290.92, 183.11 subdivision 4b, is amended to read: 183.12 Subd. 4b. [WITHHOLDING BY PARTNERSHIPS.] (a) A partnership 183.13 shall deduct and withhold a tax as provided in paragraph (b) for 183.14 nonresident individual partners based on their distributive 183.15 shares of partnership income for a taxable year of the 183.16 partnership. 183.17 (b) The amount of tax withheld is determined by multiplying 183.18 the partner's distributive share allocable to Minnesota under 183.19 section 290.17, paid or credited during the taxable year by the 183.20 highest rate used to determine the income tax liability for an 183.21 individual under section 290.06, subdivision 2c, except that the 183.22 amount of tax withheld may be determined by the commissioner if 183.23 the partner submits a withholding exemption certificate under 183.24 subdivision 5. 183.25 (c) The commissioner may reduce or abate the tax withheld 183.26 under this subdivision if the partnership had reasonable cause 183.27 to believe that no tax was due under this section. 183.28 (d) Notwithstanding paragraph (a), a partnership is not 183.29 required to deduct and withhold tax for a nonresident partner if: 183.30 (1) the partner elects to have the tax due paid as part of 183.31 the partnership's composite return under section 289A.08, 183.32 subdivision 7; 183.33 (2) the partner has Minnesota assignable federal adjusted 183.34 gross income from the partnership of less than $1,000; or 183.35 (3) the partnership is liquidated or terminated, the income 183.36 was generated by a transaction related to the termination or 184.1 liquidation, and no cash or other property was distributed in 184.2 the current or prior taxable year;or184.3 (4) the distributive shares of partnership income are 184.4 attributable to: 184.5 (i) income required to be recognized because of discharge 184.6 of indebtedness; 184.7 (ii) income recognized because of a sale, exchange, or 184.8 other disposition of real estate, depreciable property, or 184.9 property described in section 179 of the Internal Revenue Code; 184.10 or 184.11 (iii) income recognized on the sale, exchange, or other 184.12 disposition of any property that has been the subject of a basis 184.13 reduction pursuant to section 108, 734, 743, 754, or 1017 of the 184.14 Internal Revenue Code 184.15 to the extent that the income does not include cash received or 184.16 receivable or, if there is cash received or receivable, to the 184.17 extent that the cash is required to be used to pay indebtedness 184.18 by the partnership or a secured debt on partnership property; or 184.19 (5) the partnership is a publicly traded partnership, as 184.20 defined in section 7704(b) of the Internal Revenue Code. 184.21 (e) For purposes of subdivision 6a, and sections 289A.09, 184.22 subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50, 184.23 289A.56, 289A.60, and 289A.63, a partnership is considered an 184.24 employer. 184.25 (f) To the extent that income is exempt from withholding 184.26 under paragraph (d), clause (4), the commissioner has a lien in 184.27 an amount up to the amount that would be required to be withheld 184.28 with respect to the income of the partner attributable to the 184.29 partnership interest, but for the application of paragraph (d), 184.30 clause (4). The lien arises under section 270.69 from the date 184.31 of assessment of the tax against the partner, and attaches to 184.32 that partner's share of the profits and any other money due or 184.33 to become due to that partner in respect of the partnership. 184.34 Notice of the lien may be sent by mail to the partnership, 184.35 without the necessity for recording the lien. The notice has 184.36 the force and effect of a levy under section 270.70, and is 185.1 enforceable against the partnership in the manner provided by 185.2 that section. Upon payment in full of the liability subsequent 185.3 to the notice of lien, the partnership must be notified that the 185.4 lien has been satisfied. 185.5 [EFFECTIVE DATE.] This section is effective for taxable 185.6 years beginning after December 31, 2004. 185.7 Sec. 39. Minnesota Statutes 2004, section 291.005, 185.8 subdivision 1, is amended to read: 185.9 Subdivision 1. [SCOPE.] Unless the context otherwise 185.10 clearly requires, the following terms used in this chapter shall 185.11 have the following meanings: 185.12 (1) "Federal gross estate" means the gross estate of a 185.13 decedent as valued and otherwise determined for federal estate 185.14 tax purposes by federal taxing authorities pursuant to the 185.15 provisions of the Internal Revenue Code. 185.16 (2) "Minnesota gross estate" means the federal gross estate 185.17 of a decedent after (a) excluding therefrom any property 185.18 included therein which has its situs outside Minnesota, and (b) 185.19 including therein any property omitted from the federal gross 185.20 estate which is includable therein, has its situs in Minnesota, 185.21 and was not disclosed to federal taxing authorities. 185.22 (3) "Personal representative" means the executor, 185.23 administrator or other person appointed by the court to 185.24 administer and dispose of the property of the decedent. If 185.25 there is no executor, administrator or other person appointed, 185.26 qualified, and acting within this state, then any person in 185.27 actual or constructive possession of any property having a situs 185.28 in this state which is included in the federal gross estate of 185.29 the decedent shall be deemed to be a personal representative to 185.30 the extent of the property and the Minnesota estate tax due with 185.31 respect to the property. 185.32 (4) "Resident decedent" means an individual whose domicile 185.33 at the time of death was in Minnesota. 185.34 (5) "Nonresident decedent" means an individual whose 185.35 domicile at the time of death was not in Minnesota. 185.36 (6) "Situs of property" means, with respect to real 186.1 property, the state or country in which it is located; with 186.2 respect to tangible personal property, the state or country in 186.3 which it was normally kept or located at the time of the 186.4 decedent's death; and with respect to intangible personal 186.5 property, the state or country in which the decedent was 186.6 domiciled at death. 186.7 (7) "Commissioner" means the commissioner of revenue or any 186.8 person to whom the commissioner has delegated functions under 186.9 this chapter. 186.10 (8) "Internal Revenue Code" means the United States 186.11 Internal Revenue Code of 1986, as amended throughDecember 31,186.122002April 15, 2005. 186.13 (9) "Minnesota adjusted taxable estate" means federal 186.14 adjusted taxable estate as defined by section 2011(b)(3) of the 186.15 Internal Revenue Code, increased by the amount of deduction for 186.16 state death taxes allowed under section 2058 of the Internal 186.17 Revenue Code. 186.18 [EFFECTIVE DATE.] This section is effective for estates of 186.19 decedents dying after December 31, 2004. 186.20 Sec. 40. Minnesota Statutes 2004, section 291.03, 186.21 subdivision 1, is amended to read: 186.22 Subdivision 1. [TAX AMOUNT.] (a) The tax imposed shall be 186.23 an amount equal to the proportion of the maximum credit for 186.24 state death taxes computed under section 2011 of the Internal 186.25 Revenue Code, as amended through December 31, 2000,for state186.26death taxesbut using Minnesota adjusted taxable estate instead 186.27 of federal adjusted taxable estate, as the Minnesota gross 186.28 estate bears to the value of the federal gross estate. The tax 186.29 determined under this paragraph shall not be greater than the 186.30federal estate taxamount computed by applying the rates and 186.31 brackets under section 2001(c) of the Internal Revenue Code 186.32after the allowance ofto the Minnesota adjusted gross estate 186.33 and subtracting the federalcreditscredit allowed under section 186.34 2010 of the Internal Revenue Code of 1986, as amended through 186.35 December 31, 2000. 186.36 (b) For the purposes of this section, expenses which are 187.1 deducted for federal income tax purposes under section 642(g) of 187.2 the Internal Revenue Code as amended through December 31, 2002, 187.3 are not allowable in computing the tax under this chapter. 187.4 (c) The executor may make a qualified terminable interest 187.5 property election, as defined in section 2056(b)(7) of the 187.6 Internal Revenue Code, for purposes of computing the marital 187.7 deduction under section 2056 of the Internal Revenue Code for 187.8 the tax under this chapter that differs from the amount elected 187.9 for federal estate tax purposes. The election may not exceed 187.10 the federal election by more than the difference between the 187.11 applicable exclusion amount under section 2010(c) of the 187.12 Internal Revenue Code and under section 2010(c) of the Internal 187.13 Revenue Code, as amended through December 31, 2000. The 187.14 election must be made on the tax return under this chapter and 187.15 is irrevocable. All tax under this chapter must be determined 187.16 using the qualified terminable interest election made on the 187.17 Minnesota return. For purposes of applying sections 2044 and 187.18 2207A of the Internal Revenue Code to the computation of the 187.19 federal and Minnesota gross estates of the surviving spouse, 187.20 amounts for which a qualified terminable interest property 187.21 election has been made under this section must be treated as 187.22 though a valid federal qualified terminable interest property 187.23 election under section 2056(b)(7) of the Internal Revenue Code 187.24 had been made. 187.25 [EFFECTIVE DATE.] This section is effective for estates of 187.26 decedents dying after December 31, 2004, except paragraph (c) 187.27 applies for estates of decedents dying after December 31, 2006. 187.28 Sec. 41. Minnesota Statutes 2004, section 298.01, 187.29 subdivision 3, is amended to read: 187.30 Subd. 3. [OCCUPATION TAX; OTHER ORES.] Every person 187.31 engaged in the business of mining or producing ores in this 187.32 state, except iron ore or taconite concentrates, shall pay an 187.33 occupation tax to the state of Minnesota as provided in this 187.34 subdivision. The tax is determined in the same manner as the 187.35 tax imposed by section 290.02, except that sections 290.05, 187.36 subdivision 1, clause (a),and290.17, subdivision 4, and 188.1 290.191, subdivision 2, do not apply. A person subject to 188.2 occupation tax under this section shall apportion its net income 188.3 on the basis of the percentage obtained by taking the sum of: 188.4 (1) 75 percent of the percentage which the sales made 188.5 within this state in connection with the trade or business 188.6 during the tax period are of the total sales wherever made in 188.7 connection with the trade or business during the tax period; 188.8 (2) 12.5 percent of the percentage which the total tangible 188.9 property used by the taxpayer in this state in connection with 188.10 the trade or business during the tax period is of the total 188.11 tangible property, wherever located, used by the taxpayer in 188.12 connection with the trade or business during the tax period; and 188.13 (3) 12.5 percent of the percentage which the taxpayer's 188.14 total payrolls paid or incurred in this state or paid in respect 188.15 to labor performed in this state in connection with the trade or 188.16 business during the tax period are of the taxpayer's total 188.17 payrolls paid or incurred in connection with the trade or 188.18 business during the tax period. 188.19 The tax is in addition to all other taxes. 188.20 [EFFECTIVE DATE.] This section is effective for tax years 188.21 beginning after December 31, 2006. 188.22 Sec. 42. Minnesota Statutes 2004, section 298.01, 188.23 subdivision 4, is amended to read: 188.24 Subd. 4. [OCCUPATION TAX; IRON ORE; TACONITE 188.25 CONCENTRATES.] A person engaged in the business of mining or 188.26 producing of iron ore, taconite concentrates or direct reduced 188.27 ore in this state shall pay an occupation tax to the state of 188.28 Minnesota. The tax is determined in the same manner as the tax 188.29 imposed by section 290.02, except that sections 290.05, 188.30 subdivision 1, clause (a),and290.17, subdivision 4, and 188.31 290.191, subdivision 2, do not apply. A person subject to 188.32 occupation tax under this section shall apportion its net income 188.33 on the basis of the percentage obtained by taking the sum of: 188.34 (1) 75 percent of the percentage which the sales made 188.35 within this state in connection with the trade or business 188.36 during the tax period are of the total sales wherever made in 189.1 connection with the trade or business during the tax period; 189.2 (2) 12.5 percent of the percentage which the total tangible 189.3 property used by the taxpayer in this state in connection with 189.4 the trade or business during the tax period is of the total 189.5 tangible property, wherever located, used by the taxpayer in 189.6 connection with the trade or business during the tax period; and 189.7 (3) 12.5 percent of the percentage which the taxpayer's 189.8 total payrolls paid or incurred in this state or paid in respect 189.9 to labor performed in this state in connection with the trade or 189.10 business during the tax period are of the taxpayer's total 189.11 payrolls paid or incurred in connection with the trade or 189.12 business during the tax period. 189.13 The tax is in addition to all other taxes. 189.14 [EFFECTIVE DATE.] This section is effective for tax years 189.15 beginning after December 31, 2006. 189.16 Sec. 43. [REPEALER.] 189.17 Minnesota Rules, parts 8093.2000; and 8093.3000, are 189.18 repealed effective the day following final enactment. 189.19 ARTICLE 6 189.20 FEDERAL UPDATE 189.21 Section 1. Minnesota Statutes 2004, section 289A.02, 189.22 subdivision 7, is amended to read: 189.23 Subd. 7. [INTERNAL REVENUE CODE.] Unless specifically 189.24 defined otherwise, "Internal Revenue Code" means the Internal 189.25 Revenue Code of 1986, as amended throughJune 15, 2003April 15, 189.26 2005. 189.27 [EFFECTIVE DATE.] This section is effective the day 189.28 following final enactment. 189.29 Sec. 2. Minnesota Statutes 2004, section 290.01, 189.30 subdivision 19, as amended by Laws 2005, chapter 1, section 1, 189.31 is amended to read: 189.32 Subd. 19. [NET INCOME.] The term "net income" means the 189.33 federal taxable income, as defined in section 63 of the Internal 189.34 Revenue Code of 1986, as amended through the date named in this 189.35 subdivision, incorporating the federal effective dates of 189.36 changes to the Internal Revenue Code and any elections made by 190.1 the taxpayer in accordance with the Internal Revenue Code in 190.2 determining federal taxable income for federal income tax 190.3 purposes, and with the modifications provided in subdivisions 190.4 19a to 19f. 190.5 In the case of a regulated investment company or a fund 190.6 thereof, as defined in section 851(a) or 851(g) of the Internal 190.7 Revenue Code, federal taxable income means investment company 190.8 taxable income as defined in section 852(b)(2) of the Internal 190.9 Revenue Code, except that: 190.10 (1) the exclusion of net capital gain provided in section 190.11 852(b)(2)(A) of the Internal Revenue Code does not apply; 190.12 (2) the deduction for dividends paid under section 190.13 852(b)(2)(D) of the Internal Revenue Code must be applied by 190.14 allowing a deduction for capital gain dividends and 190.15 exempt-interest dividends as defined in sections 852(b)(3)(C) 190.16 and 852(b)(5) of the Internal Revenue Code; and 190.17 (3) the deduction for dividends paid must also be applied 190.18 in the amount of any undistributed capital gains which the 190.19 regulated investment company elects to have treated as provided 190.20 in section 852(b)(3)(D) of the Internal Revenue Code. 190.21 The net income of a real estate investment trust as defined 190.22 and limited by section 856(a), (b), and (c) of the Internal 190.23 Revenue Code means the real estate investment trust taxable 190.24 income as defined in section 857(b)(2) of the Internal Revenue 190.25 Code. 190.26 The net income of a designated settlement fund as defined 190.27 in section 468B(d) of the Internal Revenue Code means the gross 190.28 income as defined in section 468B(b) of the Internal Revenue 190.29 Code. 190.30The provisions of sections 1113(a), 1117, 1206(a), 1313(a),190.311402(a), 1403(a), 1443, 1450, 1501(a), 1605, 1611(a), 1612,190.321616, 1617, 1704(l), and 1704(m) of the Small Business Job190.33Protection Act, Public Law 104-188, the provisions of Public Law190.34104-117, the provisions of sections 313(a) and (b)(1), 602(a),190.35913(b), 941, 961, 971, 1001(a) and (b), 1002, 1003, 1012, 1013,190.361014, 1061, 1062, 1081, 1084(b), 1086, 1087, 1111(a), 1131(b)191.1and (c), 1211(b), 1213, 1530(c)(2), 1601(f)(5) and (h), and191.21604(d)(1) of the Taxpayer Relief Act of 1997, Public Law191.3105-34, the provisions of section 6010 of the Internal Revenue191.4Service Restructuring and Reform Act of 1998, Public Law191.5105-206, the provisions of section 4003 of the Omnibus191.6Consolidated and Emergency Supplemental Appropriations Act,191.71999, Public Law 105-277, and the provisions of section 318 of191.8the Consolidated Appropriation Act of 2001, Public Law 106-554,191.9shall become effective at the time they become effective for191.10federal purposes.191.11 The Internal Revenue Code of 1986, as amended through 191.12December 31, 1996April 15, 2005, shall be in effect for taxable 191.13 years beginning after December 31, 1996. 191.14The provisions of sections 202(a) and (b), 221(a), 225,191.15312, 313, 913(a), 934, 962, 1004, 1005, 1052, 1063, 1084(a) and191.16(c), 1089, 1112, 1171, 1204, 1271(a) and (b), 1305(a), 1306,191.171307, 1308, 1309, 1501(b), 1502(b), 1504(a), 1505, 1527, 1528,191.181530, 1601(d), (e), (f), and (i) and 1602(a), (b), (c), and (e)191.19of the Taxpayer Relief Act of 1997, Public Law 105-34, the191.20provisions of sections 6004, 6005, 6012, 6013, 6015, 6016, 7002,191.21and 7003 of the Internal Revenue Service Restructuring and191.22Reform Act of 1998, Public Law 105-206, the provisions of191.23section 3001 of the Omnibus Consolidated and Emergency191.24Supplemental Appropriations Act, 1999, Public Law 105-277, the191.25provisions of section 3001 of the Miscellaneous Trade and191.26Technical Corrections Act of 1999, Public Law 106-36, and the191.27provisions of section 316 of the Consolidated Appropriation Act191.28of 2001, Public Law 106-554, shall become effective at the time191.29they become effective for federal purposes.191.30The Internal Revenue Code of 1986, as amended through191.31December 31, 1997, shall be in effect for taxable years191.32beginning after December 31, 1997.191.33The provisions of sections 5002, 6009, 6011, and 7001 of191.34the Internal Revenue Service Restructuring and Reform Act of191.351998, Public Law 105-206, the provisions of section 9010 of the191.36Transportation Equity Act for the 21st Century, Public Law192.1105-178, the provisions of sections 1004, 4002, and 5301 of the192.2Omnibus Consolidation and Emergency Supplemental Appropriations192.3Act, 1999, Public Law 105-277, the provision of section 303 of192.4the Ricky Ray Hemophilia Relief Fund Act of 1998, Public Law192.5105-369, the provisions of sections 532, 534, 536, 537, and 538192.6of the Ticket to Work and Work Incentives Improvement Act of192.71999, Public Law 106-170, the provisions of the Installment Tax192.8Correction Act of 2000, Public Law 106-573, and the provisions192.9of section 309 of the Consolidated Appropriation Act of 2001,192.10Public Law 106-554, shall become effective at the time they192.11become effective for federal purposes.192.12The Internal Revenue Code of 1986, as amended through192.13December 31, 1998, shall be in effect for taxable years192.14beginning after December 31, 1998.192.15The provisions of the FSC Repeal and Extraterritorial192.16Income Exclusion Act of 2000, Public Law 106-519, and the192.17provision of section 412 of the Job Creation and Worker192.18Assistance Act of 2002, Public Law 107-147, shall become192.19effective at the time it became effective for federal purposes.192.20The Internal Revenue Code of 1986, as amended through192.21December 31, 1999, shall be in effect for taxable years192.22beginning after December 31, 1999. The provisions of sections192.23306 and 401 of the Consolidated Appropriation Act of 2001,192.24Public Law 106-554, and the provision of section 632(b)(2)(A) of192.25the Economic Growth and Tax Relief Reconciliation Act of 2001,192.26Public Law 107-16, and provisions of sections 101 and 402 of the192.27Job Creation and Worker Assistance Act of 2002, Public Law192.28107-147, shall become effective at the same time it became192.29effective for federal purposes.192.30The Internal Revenue Code of 1986, as amended through192.31December 31, 2000, shall be in effect for taxable years192.32beginning after December 31, 2000. The provisions of sections192.33659a and 671 of the Economic Growth and Tax Relief192.34Reconciliation Act of 2001, Public Law 107-16, the provisions of192.35sections 104, 105, and 111 of the Victims of Terrorism Tax192.36Relief Act of 2001, Public Law 107-134, and the provisions of193.1sections 201, 403, 413, and 606 of the Job Creation and Worker193.2Assistance Act of 2002, Public Law 107-147, shall become193.3effective at the same time it became effective for federal193.4purposes.193.5The Internal Revenue Code of 1986, as amended through March193.615, 2002, shall be in effect for taxable years beginning after193.7December 31, 2001.193.8The provisions of sections 101 and 102 of the Victims of193.9Terrorism Tax Relief Act of 2001, Public Law 107-134, shall193.10become effective at the same time it becomes effective for193.11federal purposes.193.12The Internal Revenue Code of 1986, as amended through June193.1315, 2003, shall be in effect for taxable years beginning after193.14December 31, 2002. The provisions of section 201 of the Jobs193.15and Growth Tax Relief and Reconciliation Act of 2003, H.R. 2, if193.16it is enacted into law, are effective at the same time it became193.17effective for federal purposes. The provisions of the Act of193.18January 7, 2005, Public Law 109-1, to accelerate the income tax193.19benefits for charitable cash contributions for the relief of193.20victims of the Indian Ocean tsunami, are effective at the same193.21time it became effective for federal purposes and apply to the193.22subtraction under subdivision 19b, clause (7).193.23 Except as otherwise provided, references to the Internal 193.24 Revenue Code in subdivisions19a19 to19g19f mean the code in 193.25 effect for purposes of determining net income for the applicable 193.26 year. 193.27 [EFFECTIVE DATE.] This section is effective the day 193.28 following final enactment. 193.29 Sec. 3. Minnesota Statutes 2004, section 290.01, 193.30 subdivision 19a, is amended to read: 193.31 Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 193.32 individuals, estates, and trusts, there shall be added to 193.33 federal taxable income: 193.34 (1)(i) interest income on obligations of any state other 193.35 than Minnesota or a political or governmental subdivision, 193.36 municipality, or governmental agency or instrumentality of any 194.1 state other than Minnesota exempt from federal income taxes 194.2 under the Internal Revenue Code or any other federal statute; 194.3 and 194.4 (ii) exempt-interest dividends as defined in section 194.5 852(b)(5) of the Internal Revenue Code, except the portion of 194.6 the exempt-interest dividends derived from interest income on 194.7 obligations of the state of Minnesota or its political or 194.8 governmental subdivisions, municipalities, governmental agencies 194.9 or instrumentalities, but only if the portion of the 194.10 exempt-interest dividends from such Minnesota sources paid to 194.11 all shareholders represents 95 percent or more of the 194.12 exempt-interest dividends that are paid by the regulated 194.13 investment company as defined in section 851(a) of the Internal 194.14 Revenue Code, or the fund of the regulated investment company as 194.15 defined in section 851(g) of the Internal Revenue Code, making 194.16 the payment; and 194.17 (iii) for the purposes of items (i) and (ii), interest on 194.18 obligations of an Indian tribal government described in section 194.19 7871(c) of the Internal Revenue Code shall be treated as 194.20 interest income on obligations of the state in which the tribe 194.21 is located; 194.22 (2) the amount of income or sales and use taxes paid or 194.23 accrued within the taxable year under this chapter and income or 194.24 sales and use taxes paid to any other state or to any province 194.25 or territory of Canada, to the extent allowed as a deduction 194.26 under section 63(d) of the Internal Revenue Code, but the 194.27 addition may not be more than the amount by which the itemized 194.28 deductions as allowed under section 63(d) of the Internal 194.29 Revenue Code exceeds the amount of (i) the standard deduction as 194.30 defined in section 63(c) of the Internal Revenue Code minus (ii) 194.31 any addition required under clause (10). For the purpose of 194.32 this paragraph, the disallowance of itemized deductions under 194.33 section 68 of the Internal Revenue Code of 1986, income or sales 194.34 and use tax is the last itemized deduction disallowed; 194.35 (3) the capital gain amount of a lump sum distribution to 194.36 which the special tax under section 1122(h)(3)(B)(ii) of the Tax 195.1 Reform Act of 1986, Public Law 99-514, applies; 195.2 (4) the amount of income taxes paid or accrued within the 195.3 taxable year under this chapter and income taxes paid to any 195.4 other state or any province or territory of Canada, to the 195.5 extent allowed as a deduction in determining federal adjusted 195.6 gross income. For the purpose of this paragraph, income taxes 195.7 do not include the taxes imposed by sections 290.0922, 195.8 subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 195.9 (5) the amount of expense, interest, or taxes disallowed 195.10 pursuant to section 290.10; 195.11 (6) the amount of a partner's pro rata share of net income 195.12 which does not flow through to the partner because the 195.13 partnership elected to pay the tax on the income under section 195.14 6242(a)(2) of the Internal Revenue Code;and195.15 (7) 80 percent of the depreciation deduction allowed under 195.16 section 168(k) of the Internal Revenue Code. For purposes of 195.17 this clause, if the taxpayer has an activity that in the taxable 195.18 year generates a deduction for depreciation under section 168(k) 195.19 and the activity generates a loss for the taxable year that the 195.20 taxpayer is not allowed to claim for the taxable year, "the 195.21 depreciation allowed under section 168(k)" for the taxable year 195.22 is limited to excess of the depreciation claimed by the activity 195.23 under section 168(k) over the amount of the loss from the 195.24 activity that is not allowed in the taxable year. In succeeding 195.25 taxable years when the losses not allowed in the taxable year 195.26 are allowed, the depreciation under section 168(k) is allowed; 195.27 (8) 80 percent of the amount by which the deduction allowed 195.28 by section 179 of the Internal Revenue Code exceeds the 195.29 deduction allowable by section 179 of the Internal Revenue Code 195.30 of 1986, as amended through December 31, 2003; 195.31 (9) to the extent deducted in computing federal taxable 195.32 income, the amount of the deduction allowable under section 199 195.33 of the Internal Revenue Code; 195.34 (10) for tax years beginning after December 31, 2006, to 195.35 the extent deducted in computing federal taxable income, the 195.36 amount by which the standard deduction allowed under section 196.1 63(c) of the Internal Revenue Code exceeds the standard 196.2 deduction allowable under section 63(c) of the Internal Revenue 196.3 Code of 1986, as amended through December 31, 2003; and 196.4 (11) the exclusion allowed under section 139A of the 196.5 Internal Revenue Code for federal subsidies for prescription 196.6 drug plans. 196.7 [EFFECTIVE DATE.] This section is effective for tax years 196.8 beginning after December 31, 2004, except the changes in clause 196.9 (2) are effective for tax years beginning after December 31, 196.10 2003. 196.11 Sec. 4. Minnesota Statutes 2004, section 290.01, 196.12 subdivision 19b, is amended to read: 196.13 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 196.14 individuals, estates, and trusts, there shall be subtracted from 196.15 federal taxable income: 196.16 (1) interest income on obligations of any authority, 196.17 commission, or instrumentality of the United States to the 196.18 extent includable in taxable income for federal income tax 196.19 purposes but exempt from state income tax under the laws of the 196.20 United States; 196.21 (2) if included in federal taxable income, the amount of 196.22 any overpayment of income tax to Minnesota or to any other 196.23 state, for any previous taxable year, whether the amount is 196.24 received as a refund or as a credit to another taxable year's 196.25 income tax liability; 196.26 (3) the amount paid to others, less the amount used to 196.27 claim the credit allowed under section 290.0674, not to exceed 196.28 $1,625 for each qualifying child in grades kindergarten to 6 and 196.29 $2,500 for each qualifying child in grades 7 to 12, for tuition, 196.30 textbooks, and transportation of each qualifying child in 196.31 attending an elementary or secondary school situated in 196.32 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 196.33 wherein a resident of this state may legally fulfill the state's 196.34 compulsory attendance laws, which is not operated for profit, 196.35 and which adheres to the provisions of the Civil Rights Act of 196.36 1964 and chapter 363A. For the purposes of this clause, 197.1 "tuition" includes fees or tuition as defined in section 197.2 290.0674, subdivision 1, clause (1). As used in this clause, 197.3 "textbooks" includes books and other instructional materials and 197.4 equipment purchased or leased for use in elementary and 197.5 secondary schools in teaching only those subjects legally and 197.6 commonly taught in public elementary and secondary schools in 197.7 this state. Equipment expenses qualifying for deduction 197.8 includes expenses as defined and limited in section 290.0674, 197.9 subdivision 1, clause (3). "Textbooks" does not include 197.10 instructional books and materials used in the teaching of 197.11 religious tenets, doctrines, or worship, the purpose of which is 197.12 to instill such tenets, doctrines, or worship, nor does it 197.13 include books or materials for, or transportation to, 197.14 extracurricular activities including sporting events, musical or 197.15 dramatic events, speech activities, driver's education, or 197.16 similar programs. For purposes of the subtraction provided by 197.17 this clause, "qualifying child" has the meaning given in section 197.18 32(c)(3) of the Internal Revenue Code; 197.19 (4) income as provided under section 290.0802; 197.20 (5) to the extent included in federal adjusted gross 197.21 income, income realized on disposition of property exempt from 197.22 tax under section 290.491; 197.23 (6) to the extent included in federal taxable income, 197.24 postservice benefits for youth community service under section 197.25 124D.42 for volunteer service under United States Code, title 197.26 42, sections 12601 to 12604; 197.27 (7) to the extent not deducted in determining federal 197.28 taxable income by an individual who does not itemize deductions 197.29 for federal income tax purposes for the taxable year, an amount 197.30 equal to 50 percent of the excess of charitable contributions 197.31 over $500 allowable as a deduction for the taxable year under 197.32 section 170(a) of the Internal Revenue Codeover $500and under 197.33 the provisions of Public Law 109-1; 197.34 (8) for taxable years beginning before January 1, 2008, the 197.35 amount of the federal small ethanol producer credit allowed 197.36 under section 40(a)(3) of the Internal Revenue Code which is 198.1 included in gross income under section 87 of the Internal 198.2 Revenue Code; 198.3 (9) for individuals who are allowed a federal foreign tax 198.4 credit for taxes that do not qualify for a credit under section 198.5 290.06, subdivision 22, an amount equal to the carryover of 198.6 subnational foreign taxes for the taxable year, but not to 198.7 exceed the total subnational foreign taxes reported in claiming 198.8 the foreign tax credit. For purposes of this clause, "federal 198.9 foreign tax credit" means the credit allowed under section 27 of 198.10 the Internal Revenue Code, and "carryover of subnational foreign 198.11 taxes" equals the carryover allowed under section 904(c) of the 198.12 Internal Revenue Code minus national level foreign taxes to the 198.13 extent they exceed the federal foreign tax credit; 198.14 (10) in each of the five tax years immediately following 198.15 the tax year in which an addition is required under subdivision 198.16 19a, clause (7), an amount equal to one-fifth of the delayed 198.17 depreciation. For purposes of this clause, "delayed 198.18 depreciation" means the amount of the addition made by the 198.19 taxpayer under subdivision 19a, clause (7), minus the positive 198.20 value of any net operating loss under section 172 of the 198.21 Internal Revenue Code generated for the tax year of the 198.22 addition. The resulting delayed depreciation cannot be less 198.23 than zero;and198.24 (11) job opportunity building zone income as provided under 198.25 section 469.316.; 198.26 (12) in each of the five tax years immediately following 198.27 the tax year in which an addition is required under subdivision 198.28 19a, clause (8), or 19c, clause (17), in the case of a 198.29 shareholder of a corporation that is an S corporation, an amount 198.30 equal to one-fifth of the addition made by the taxpayer under 198.31 subdivision 19a, clause (8), or 19c, clause (17), in the case of 198.32 a shareholder of a corporation that is an S corporation, minus 198.33 the positive value of any net operating loss under section 172 198.34 of the Internal Revenue Code generated for the tax year of the 198.35 addition. If the net operating loss exceeds the addition for 198.36 the tax year, a subtraction is not allowed under this clause; 199.1 and 199.2 (13) to the extent included in federal taxable income, 199.3 compensation paid to a service member as defined in United 199.4 States Code, title 10, section 101(a)(5), for military service 199.5 as defined in the Service Member Civil Relief Act, Public Law 199.6 108-189, section 101(2). 199.7 [EFFECTIVE DATE.] This section is effective for tax years 199.8 beginning after December 31, 2004, except the change to clause 199.9 (7) is effective for tax years beginning after December 31, 2003. 199.10 Sec. 5. Minnesota Statutes 2004, section 290.01, 199.11 subdivision 19c, is amended to read: 199.12 Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE 199.13 INCOME.] For corporations, there shall be added to federal 199.14 taxable income: 199.15 (1) the amount of any deduction taken for federal income 199.16 tax purposes for income, excise, or franchise taxes based on net 199.17 income or related minimum taxes, including but not limited to 199.18 the tax imposed under section 290.0922, paid by the corporation 199.19 to Minnesota, another state, a political subdivision of another 199.20 state, the District of Columbia, or any foreign country or 199.21 possession of the United States; 199.22 (2) interest not subject to federal tax upon obligations 199.23 of: the United States, its possessions, its agencies, or its 199.24 instrumentalities; the state of Minnesota or any other state, 199.25 any of its political or governmental subdivisions, any of its 199.26 municipalities, or any of its governmental agencies or 199.27 instrumentalities; the District of Columbia; or Indian tribal 199.28 governments; 199.29 (3) exempt-interest dividends received as defined in 199.30 section 852(b)(5) of the Internal Revenue Code; 199.31 (4) the amount of any net operating loss deduction taken 199.32 for federal income tax purposes under section 172 or 832(c)(10) 199.33 of the Internal Revenue Code or operations loss deduction under 199.34 section 810 of the Internal Revenue Code; 199.35 (5) the amount of any special deductions taken for federal 199.36 income tax purposes under sections 241 to 247 of the Internal 200.1 Revenue Code; 200.2 (6) losses from the business of mining, as defined in 200.3 section 290.05, subdivision 1, clause (a), that are not subject 200.4 to Minnesota income tax; 200.5 (7) the amount of any capital losses deducted for federal 200.6 income tax purposes under sections 1211 and 1212 of the Internal 200.7 Revenue Code; 200.8 (8) the exempt foreign trade income of a foreign sales 200.9 corporation under sections 921(a) and 291 of the Internal 200.10 Revenue Code; 200.11 (9) the amount of percentage depletion deducted under 200.12 sections 611 through 614 and 291 of the Internal Revenue Code; 200.13 (10) for certified pollution control facilities placed in 200.14 service in a taxable year beginning before December 31, 1986, 200.15 and for which amortization deductions were elected under section 200.16 169 of the Internal Revenue Code of 1954, as amended through 200.17 December 31, 1985, the amount of the amortization deduction 200.18 allowed in computing federal taxable income for those 200.19 facilities; 200.20 (11) the amount of any deemed dividend from a foreign 200.21 operating corporation determined pursuant to section 290.17, 200.22 subdivision 4, paragraph (g); 200.23 (12) the amount of any environmental tax paid under section 200.24 59(a) of the Internal Revenue Code; 200.25 (13) the amount of a partner's pro rata share of net income 200.26 which does not flow through to the partner because the 200.27 partnership elected to pay the tax on the income under section 200.28 6242(a)(2) of the Internal Revenue Code; 200.29 (14) the amount of net income excluded under section 114 of 200.30 the Internal Revenue Code; 200.31 (15) any increase in subpart F income, as defined in 200.32 section 952(a) of the Internal Revenue Code, for the taxable 200.33 year when subpart F income is calculated without regard to the 200.34 provisions of section 614 of Public Law 107-147;and200.35 (16) 80 percent of the depreciation deduction allowed under 200.36 section 168(k) of the Internal Revenue Code. For purposes of 201.1 this clause, if the taxpayer has an activity that in the taxable 201.2 year generates a deduction for depreciation under section 168(k) 201.3 and the activity generates a loss for the taxable year that the 201.4 taxpayer is not allowed to claim for the taxable year, "the 201.5 depreciation allowed under section 168(k)" for the taxable year 201.6 is limited to excess of the depreciation claimed by the activity 201.7 under section 168(k) over the amount of the loss from the 201.8 activity that is not allowed in the taxable year. In succeeding 201.9 taxable years when the losses not allowed in the taxable year 201.10 are allowed, the depreciation under section 168(k) is allowed; 201.11 (17) 80 percent of the amount by which the deduction 201.12 allowed by section 179 of the Internal Revenue Code exceeds the 201.13 deduction allowable by section 179 of the Internal Revenue Code 201.14 of 1986, as amended through December 31, 2003; 201.15 (18) to the extent deducted in computing federal taxable 201.16 income, the amount of the deduction allowable under section 199 201.17 of the Internal Revenue Code; and 201.18 (19) the exclusion allowed under section 139A of the 201.19 Internal Revenue Code for federal subsidies for prescription 201.20 drug plans. 201.21 [EFFECTIVE DATE.] This section is effective for tax years 201.22 beginning after December 31, 2004. 201.23 Sec. 6. Minnesota Statutes 2004, section 290.01, 201.24 subdivision 19d, is amended to read: 201.25 Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 201.26 TAXABLE INCOME.] For corporations, there shall be subtracted 201.27 from federal taxable income after the increases provided in 201.28 subdivision 19c: 201.29 (1) the amount of foreign dividend gross-up added to gross 201.30 income for federal income tax purposes under section 78 of the 201.31 Internal Revenue Code; 201.32 (2) the amount of salary expense not allowed for federal 201.33 income tax purposes due to claiming the federal jobs credit 201.34 under section 51 of the Internal Revenue Code; 201.35 (3) any dividend (not including any distribution in 201.36 liquidation) paid within the taxable year by a national or state 202.1 bank to the United States, or to any instrumentality of the 202.2 United States exempt from federal income taxes, on the preferred 202.3 stock of the bank owned by the United States or the 202.4 instrumentality; 202.5 (4) amounts disallowed for intangible drilling costs due to 202.6 differences between this chapter and the Internal Revenue Code 202.7 in taxable years beginning before January 1, 1987, as follows: 202.8 (i) to the extent the disallowed costs are represented by 202.9 physical property, an amount equal to the allowance for 202.10 depreciation under Minnesota Statutes 1986, section 290.09, 202.11 subdivision 7, subject to the modifications contained in 202.12 subdivision 19e; and 202.13 (ii) to the extent the disallowed costs are not represented 202.14 by physical property, an amount equal to the allowance for cost 202.15 depletion under Minnesota Statutes 1986, section 290.09, 202.16 subdivision 8; 202.17 (5) the deduction for capital losses pursuant to sections 202.18 1211 and 1212 of the Internal Revenue Code, except that: 202.19 (i) for capital losses incurred in taxable years beginning 202.20 after December 31, 1986, capital loss carrybacks shall not be 202.21 allowed; 202.22 (ii) for capital losses incurred in taxable years beginning 202.23 after December 31, 1986, a capital loss carryover to each of the 202.24 15 taxable years succeeding the loss year shall be allowed; 202.25 (iii) for capital losses incurred in taxable years 202.26 beginning before January 1, 1987, a capital loss carryback to 202.27 each of the three taxable years preceding the loss year, subject 202.28 to the provisions of Minnesota Statutes 1986, section 290.16, 202.29 shall be allowed; and 202.30 (iv) for capital losses incurred in taxable years beginning 202.31 before January 1, 1987, a capital loss carryover to each of the 202.32 five taxable years succeeding the loss year to the extent such 202.33 loss was not used in a prior taxable year and subject to the 202.34 provisions of Minnesota Statutes 1986, section 290.16, shall be 202.35 allowed; 202.36 (6) an amount for interest and expenses relating to income 203.1 not taxable for federal income tax purposes, if (i) the income 203.2 is taxable under this chapter and (ii) the interest and expenses 203.3 were disallowed as deductions under the provisions of section 203.4 171(a)(2), 265 or 291 of the Internal Revenue Code in computing 203.5 federal taxable income; 203.6 (7) in the case of mines, oil and gas wells, other natural 203.7 deposits, and timber for which percentage depletion was 203.8 disallowed pursuant to subdivision 19c, clause (11), a 203.9 reasonable allowance for depletion based on actual cost. In the 203.10 case of leases the deduction must be apportioned between the 203.11 lessor and lessee in accordance with rules prescribed by the 203.12 commissioner. In the case of property held in trust, the 203.13 allowable deduction must be apportioned between the income 203.14 beneficiaries and the trustee in accordance with the pertinent 203.15 provisions of the trust, or if there is no provision in the 203.16 instrument, on the basis of the trust's income allocable to 203.17 each; 203.18 (8) for certified pollution control facilities placed in 203.19 service in a taxable year beginning before December 31, 1986, 203.20 and for which amortization deductions were elected under section 203.21 169 of the Internal Revenue Code of 1954, as amended through 203.22 December 31, 1985, an amount equal to the allowance for 203.23 depreciation under Minnesota Statutes 1986, section 290.09, 203.24 subdivision 7; 203.25 (9) amounts included in federal taxable income that are due 203.26 to refunds of income, excise, or franchise taxes based on net 203.27 income or related minimum taxes paid by the corporation to 203.28 Minnesota, another state, a political subdivision of another 203.29 state, the District of Columbia, or a foreign country or 203.30 possession of the United States to the extent that the taxes 203.31 were added to federal taxable income under section 290.01, 203.32 subdivision 19c, clause (1), in a prior taxable year; 203.33 (10) 80 percent of royalties, fees, or other like income 203.34 accrued or received from a foreign operating corporation or a 203.35 foreign corporation which is part of the same unitary business 203.36 as the receiving corporation; 204.1 (11) income or gains from the business of mining as defined 204.2 in section 290.05, subdivision 1, clause (a), that are not 204.3 subject to Minnesota franchise tax; 204.4 (12) the amount of handicap access expenditures in the 204.5 taxable year which are not allowed to be deducted or capitalized 204.6 under section 44(d)(7) of the Internal Revenue Code; 204.7 (13) the amount of qualified research expenses not allowed 204.8 for federal income tax purposes under section 280C(c) of the 204.9 Internal Revenue Code, but only to the extent that the amount 204.10 exceeds the amount of the credit allowed under section 290.068; 204.11 (14) the amount of salary expenses not allowed for federal 204.12 income tax purposes due to claiming the Indian employment credit 204.13 under section 45A(a) of the Internal Revenue Code; 204.14 (15) the amount of any refund of environmental taxes paid 204.15 under section 59A of the Internal Revenue Code; 204.16 (16) for taxable years beginning before January 1, 2008, 204.17 the amount of the federal small ethanol producer credit allowed 204.18 under section 40(a)(3) of the Internal Revenue Code which is 204.19 included in gross income under section 87 of the Internal 204.20 Revenue Code; 204.21 (17) for a corporation whose foreign sales corporation, as 204.22 defined in section 922 of the Internal Revenue Code, constituted 204.23 a foreign operating corporation during any taxable year ending 204.24 before January 1, 1995, and a return was filed by August 15, 204.25 1996, claiming the deduction under section 290.21, subdivision 204.26 4, for income received from the foreign operating corporation, 204.27 an amount equal to 1.23 multiplied by the amount of income 204.28 excluded under section 114 of the Internal Revenue Code, 204.29 provided the income is not income of a foreign operating 204.30 company; 204.31 (18) any decrease in subpart F income, as defined in 204.32 section 952(a) of the Internal Revenue Code, for the taxable 204.33 year when subpart F income is calculated without regard to the 204.34 provisions of section 614 of Public Law 107-147;and204.35 (19) in each of the five tax years immediately following 204.36 the tax year in which an addition is required under subdivision 205.1 19c, clause (16), an amount equal to one-fifth of the delayed 205.2 depreciation. For purposes of this clause, "delayed 205.3 depreciation" means the amount of the addition made by the 205.4 taxpayer under subdivision 19c, clause (16). The resulting 205.5 delayed depreciation cannot be less than zero; and 205.6 (20) in each of the five tax years immediately following 205.7 the tax year in which an addition is required under subdivision 205.8 19c, clause (17), an amount equal to one-fifth of the amount of 205.9 the addition. 205.10 [EFFECTIVE DATE.] This section is effective for tax years 205.11 beginning after December 31, 2004. 205.12 Sec. 7. Minnesota Statutes 2004, section 290.01, 205.13 subdivision 31, is amended to read: 205.14 Subd. 31. [INTERNAL REVENUE CODE.] Unless specifically 205.15 defined otherwise, "Internal Revenue Code" means the Internal 205.16 Revenue Code of 1986, as amended throughJune 15, 2003April 15, 205.17 2005. 205.18 [EFFECTIVE DATE.] This section is effective the day 205.19 following final enactment except the changes incorporated by 205.20 federal changes are effective at the same times as the changes 205.21 were effective for federal purposes. 205.22 Sec. 8. Minnesota Statutes 2004, section 290.032, 205.23 subdivision 1, is amended to read: 205.24 Subdivision 1. [IMPOSITION.] There is hereby imposed as an 205.25 addition to the annual income tax for a taxable year of a 205.26 taxpayer in the classes described in section 290.03 a tax with 205.27 respect to any distribution received by such taxpayer that is 205.28 treated as a lump sum distribution under section402(d) of the205.29Internal Revenue Code1401(c)(2) of the Small Business Job 205.30 Protection Act, Public Law 104-188 and that is subject to tax 205.31 for such taxable year under section402(d) of the Internal205.32Revenue Code1401(c)(2) of the Small Business Job Protection 205.33 Act, Public Law 104-188. 205.34 [EFFECTIVE DATE.] This section is effective for tax years 205.35 beginning after December 31, 1999. 205.36 Sec. 9. Minnesota Statutes 2004, section 290.032, 206.1 subdivision 2, is amended to read: 206.2 Subd. 2. [COMPUTATION.] The amount of tax imposed by 206.3 subdivision 1 shall be computed in the same way as the tax 206.4 imposed under section 402(d) of the Internal Revenue Code of 206.5 1986, as amended through December 31, 1995, except that the 206.6 initial separate tax shall be an amount equal to five times the 206.7 tax which would be imposed by section 290.06, subdivision 2c, if 206.8 the recipient was an unmarried individual, and the taxable net 206.9 income was an amount equal to one-fifth of the excess of 206.10 (i) the total taxable amount of the lump sum distribution 206.11 for the year, over 206.12 (ii) the minimum distribution allowance, and except that 206.13 references in section 402(d) of the Internal Revenue Code of 206.14 1986, as amended through December 31, 1995, to paragraph (1)(A) 206.15 thereof shall instead be references to subdivision 1, and the 206.16 excess, if any, of the subtraction base amount over federal 206.17 taxable income for a qualified individual as provided under 206.18 section 290.0802, subdivision 2. 206.19 [EFFECTIVE DATE.] This section is effective for tax years 206.20 beginning after December 31, 1999. 206.21 Sec. 10. Minnesota Statutes 2004, section 290.06, 206.22 subdivision 2c, is amended to read: 206.23 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 206.24 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 206.25 married individuals filing joint returns and surviving spouses 206.26 as defined in section 2(a) of the Internal Revenue Code must be 206.27 computed by applying to their taxable net income the following 206.28 schedule of rates: 206.29 (1) On the first $25,680, 5.35 percent; 206.30 (2) On all over $25,680, but not over $102,030, 7.05 206.31 percent; 206.32 (3) On all over $102,030, 7.85 percent. 206.33 Married individuals filing separate returns, estates, and 206.34 trusts must compute their income tax by applying the above rates 206.35 to their taxable income, except that the income brackets will be 206.36 one-half of the above amounts. 207.1 (b) The income taxes imposed by this chapter upon unmarried 207.2 individuals must be computed by applying to taxable net income 207.3 the following schedule of rates: 207.4 (1) On the first $17,570, 5.35 percent; 207.5 (2) On all over $17,570, but not over $57,710, 7.05 207.6 percent; 207.7 (3) On all over $57,710, 7.85 percent. 207.8 (c) The income taxes imposed by this chapter upon unmarried 207.9 individuals qualifying as a head of household as defined in 207.10 section 2(b) of the Internal Revenue Code must be computed by 207.11 applying to taxable net income the following schedule of rates: 207.12 (1) On the first $21,630, 5.35 percent; 207.13 (2) On all over $21,630, but not over $86,910, 7.05 207.14 percent; 207.15 (3) On all over $86,910, 7.85 percent. 207.16 (d) In lieu of a tax computed according to the rates set 207.17 forth in this subdivision, the tax of any individual taxpayer 207.18 whose taxable net income for the taxable year is less than an 207.19 amount determined by the commissioner must be computed in 207.20 accordance with tables prepared and issued by the commissioner 207.21 of revenue based on income brackets of not more than $100. The 207.22 amount of tax for each bracket shall be computed at the rates 207.23 set forth in this subdivision, provided that the commissioner 207.24 may disregard a fractional part of a dollar unless it amounts to 207.25 50 cents or more, in which case it may be increased to $1. 207.26 (e) An individual who is not a Minnesota resident for the 207.27 entire year must compute the individual's Minnesota income tax 207.28 as provided in this subdivision. After the application of the 207.29 nonrefundable credits provided in this chapter, the tax 207.30 liability must then be multiplied by a fraction in which: 207.31 (1) the numerator is the individual's Minnesota source 207.32 federal adjusted gross income as defined in section 62 of the 207.33 Internal Revenue Code and increased by the additions required 207.34 under section 290.01, subdivision 19a, clauses (1), (5),and207.35 (6), (7), (8), and (9), and reduced by the subtraction under 207.36 section 290.01, subdivision 19b, clause (11), and the Minnesota 208.1 assignable portion of the subtraction for United States 208.2 government interest under section 290.01, subdivision 19b, 208.3 clause (1), and the subtractions under clauses (10), (11), (12), 208.4 and (13), after applying the allocation and assignability 208.5 provisions of section 290.081, clause (a), or 290.17; and 208.6 (2) the denominator is the individual's federal adjusted 208.7 gross income as defined in section 62 of the Internal Revenue 208.8 Code of 1986, increased by the amounts specified in section 208.9 290.01, subdivision 19a, clauses (1), (5),and(6), (7), (8), 208.10 and (9), and reduced by the amounts specified in section 290.01, 208.11 subdivision 19b, clauses (1)and, (10), (11), (12), and (13). 208.12 [EFFECTIVE DATE.] This section is effective for tax years 208.13 beginning after December 31, 2004. 208.14 Sec. 11. Minnesota Statutes 2004, section 290.067, 208.15 subdivision 1, is amended to read: 208.16 Subdivision 1. [AMOUNT OF CREDIT.] (a) A taxpayer may take 208.17 as a credit against the tax due from the taxpayer and a spouse, 208.18 if any, under this chapter an amount equal to the dependent care 208.19 credit for which the taxpayer is eligible pursuant to the 208.20 provisions of section 21 of the Internal Revenue Code subject to 208.21 the limitations provided in subdivision 2 except that in 208.22 determining whether the child qualified as a dependent, income 208.23 received as a Minnesota family investment program grant or 208.24 allowance to or on behalf of the child must not be taken into 208.25 account in determining whether the child received more than half 208.26 of the child's support from the taxpayer, and the provisions of 208.27 section 32(b)(1)(D) of the Internal Revenue Code do not apply. 208.28 (b) If a child who has not attained the age of six years at 208.29 the close of the taxable year is cared for at a licensed family 208.30 day care home operated by the child's parent, the taxpayer is 208.31 deemed to have paid employment-related expenses. If the child 208.32 is 16 months old or younger at the close of the taxable year, 208.33 the amount of expenses deemed to have been paid equals the 208.34 maximum limit for one qualified individual under section 21(c) 208.35 and (d) of the Internal Revenue Code. If the child is older 208.36 than 16 months of age but has not attained the age of six years 209.1 at the close of the taxable year, the amount of expenses deemed 209.2 to have been paid equals the amount the licensee would charge 209.3 for the care of a child of the same age for the same number of 209.4 hours of care. 209.5 (c) If a married couple: 209.6 (1) has a child who has not attained the age of one year at 209.7 the close of the taxable year; 209.8 (2) files a joint tax return for the taxable year; and 209.9 (3) does not participate in a dependent care assistance 209.10 program as defined in section 129 of the Internal Revenue Code, 209.11 in lieu of the actual employment related expenses paid for that 209.12 child under paragraph (a) or the deemed amount under paragraph 209.13 (b), the lesser of (i) the combined earned income of the couple 209.14 or (ii) the amount of the maximum limit for one qualified 209.15 individual under section 21(c) and (d) of the Internal Revenue 209.16 Code will be deemed to be the employment related expense paid 209.17 for that child. The earned income limitation of section 21(d) 209.18 of the Internal Revenue Code shall not apply to this deemed 209.19 amount. These deemed amounts apply regardless of whether any 209.20 employment-related expenses have been paid. 209.21 (d) If the taxpayer is not required and does not file a 209.22 federal individual income tax return for the tax year, no credit 209.23 is allowed for any amount paid to any person unless: 209.24 (1) the name, address, and taxpayer identification number 209.25 of the person are included on the return claiming the credit; or 209.26 (2) if the person is an organization described in section 209.27 501(c)(3) of the Internal Revenue Code and exempt from tax under 209.28 section 501(a) of the Internal Revenue Code, the name and 209.29 address of the person are included on the return claiming the 209.30 credit. 209.31 In the case of a failure to provide the information required 209.32 under the preceding sentence, the preceding sentence does not 209.33 apply if it is shown that the taxpayer exercised due diligence 209.34 in attempting to provide the information required. 209.35 In the case of a nonresident, part-year resident, or a 209.36 person who has earned income not subject to tax under this 210.1 chapter including earned income excluded pursuant to section 210.2 290.01, subdivision 19b, clause (11), the credit determined 210.3 under section 21 of the Internal Revenue Code must be allocated 210.4 based on the ratio by which the earned income of the claimant 210.5 and the claimant's spouse from Minnesota sources bears to the 210.6 total earned income of the claimant and the claimant's spouse. 210.7 For residents of Minnesota, the exclusion of combat pay 210.8 under section 112 of the Internal Revenue Code is not considered 210.9 "earned income not subject to tax under this chapter." 210.10 [EFFECTIVE DATE.] This section is effective for tax years 210.11 beginning after December 31, 2003. 210.12 Sec. 12. Minnesota Statutes 2004, section 290.067, 210.13 subdivision 2a, is amended to read: 210.14 Subd. 2a. [INCOME.] (a) For purposes of this section, 210.15 "income" means the sum of the following: 210.16 (1) federal adjusted gross income as defined in section 62 210.17 of the Internal Revenue Code; and 210.18 (2) the sum of the following amounts to the extent not 210.19 included in clause (1): 210.20 (i) all nontaxable income; 210.21 (ii) the amount of a passive activity loss that is not 210.22 disallowed as a result of section 469, paragraph (i) or (m) of 210.23 the Internal Revenue Code and the amount of passive activity 210.24 loss carryover allowed under section 469(b) of the Internal 210.25 Revenue Code; 210.26 (iii) an amount equal to the total of any discharge of 210.27 qualified farm indebtedness of a solvent individual excluded 210.28 from gross income under section 108(g) of the Internal Revenue 210.29 Code; 210.30 (iv) cash public assistance and relief; 210.31 (v) any pension or annuity (including railroad retirement 210.32 benefits, all payments received under the federal Social 210.33 Security Act, supplemental security income, and veterans 210.34 benefits), which was not exclusively funded by the claimant or 210.35 spouse, or which was funded exclusively by the claimant or 210.36 spouse and which funding payments were excluded from federal 211.1 adjusted gross income in the years when the payments were made; 211.2 (vi) interest received from the federal or a state 211.3 government or any instrumentality or political subdivision 211.4 thereof; 211.5 (vii) workers' compensation; 211.6 (viii) nontaxable strike benefits; 211.7 (ix) the gross amounts of payments received in the nature 211.8 of disability income or sick pay as a result of accident, 211.9 sickness, or other disability, whether funded through insurance 211.10 or otherwise; 211.11 (x) a lump sum distribution under section 402(e)(3) of the 211.12 Internal Revenue Code of 1986, as amended through December 31, 211.13 1995; 211.14 (xi) contributions made by the claimant to an individual 211.15 retirement account, including a qualified voluntary employee 211.16 contribution; simplified employee pension plan; self-employed 211.17 retirement plan; cash or deferred arrangement plan under section 211.18 401(k) of the Internal Revenue Code; or deferred compensation 211.19 plan under section 457 of the Internal Revenue Code;and211.20 (xii) nontaxable scholarship or fellowship grants; 211.21 (xiii) the amount of deduction allowed under section 199 of 211.22 the Internal Revenue Code; and 211.23 (xiv) the amount of deduction allowed under section 220 or 211.24 223 of the Internal Revenue Code. 211.25 In the case of an individual who files an income tax return 211.26 on a fiscal year basis, the term "federal adjusted gross income" 211.27 means federal adjusted gross income reflected in the fiscal year 211.28 ending in the next calendar year. Federal adjusted gross income 211.29 may not be reduced by the amount of a net operating loss 211.30 carryback or carryforward or a capital loss carryback or 211.31 carryforward allowed for the year. 211.32 (b) "Income" does not include: 211.33 (1) amounts excluded pursuant to the Internal Revenue Code, 211.34 sections 101(a) and 102; 211.35 (2) amounts of any pension or annuity that were exclusively 211.36 funded by the claimant or spouse if the funding payments were 212.1 not excluded from federal adjusted gross income in the years 212.2 when the payments were made; 212.3 (3) surplus food or other relief in kind supplied by a 212.4 governmental agency; 212.5 (4) relief granted under chapter 290A; 212.6 (5) child support payments received under a temporary or 212.7 final decree of dissolution or legal separation; and 212.8 (6) restitution payments received by eligible individuals 212.9 and excludable interest as defined in section 803 of the 212.10 Economic Growth and Tax Relief Reconciliation Act of 2001, 212.11 Public Law 107-16. 212.12 [EFFECTIVE DATE.] This section is effective for tax years 212.13 beginning after December 31, 2003. 212.14 Sec. 13. Minnesota Statutes 2004, section 290.0671, 212.15 subdivision 1, is amended to read: 212.16 Subdivision 1. [CREDIT ALLOWED.] (a) An individual is 212.17 allowed a credit against the tax imposed by this chapter equal 212.18 to a percentage of earned income. To receive a credit, a 212.19 taxpayer must be eligible for a credit under section 32 of the 212.20 Internal Revenue Code. 212.21 (b) For individuals with no qualifying children, the credit 212.22 equals 1.9125 percent of the first $4,620 of earned income. The 212.23 credit is reduced by 1.9125 percent of earned income or modified 212.24 adjusted gross income, whichever is greater, in excess of 212.25 $5,770, but in no case is the credit less than zero. 212.26 (c) For individuals with one qualifying child, the credit 212.27 equals 8.5 percent of the first $6,920 of earned income and 8.5 212.28 percent of earned income over $12,080 but less than $13,450. 212.29 The credit is reduced by 5.73 percent of earned income or 212.30 modified adjusted gross income, whichever is greater, in excess 212.31 of $15,080, but in no case is the credit less than zero. 212.32 (d) For individuals with two or more qualifying children, 212.33 the credit equals ten percent of the first $9,720 of earned 212.34 income and 20 percent of earned income over $14,860 but less 212.35 than $16,800. The credit is reduced by 10.3 percent of earned 212.36 income or modified adjusted gross income, whichever is greater, 213.1 in excess of $17,890, but in no case is the credit less than 213.2 zero. 213.3 (e) For a nonresident or part-year resident, the credit 213.4 must be allocated based on the percentage calculated under 213.5 section 290.06, subdivision 2c, paragraph (e). 213.6 (f) For a person who was a resident for the entire tax year 213.7 and has earned income not subject to tax under this chapter, 213.8 including income excluded under section 290.01, subdivision 19b, 213.9 clause (11), the credit must be allocated based on the ratio of 213.10 federal adjusted gross income reduced by the earned income not 213.11 subject to tax under this chapter over federal adjusted gross 213.12 income. For the purposes of this paragraph, the exclusion of 213.13 combat pay under section 112 of the Internal Revenue Code is not 213.14 considered "earned income not subject to tax under this chapter." 213.15 (g) For tax years beginning after December 31, 2001, and 213.16 before December 31, 2004, the $5,770 in paragraph (b), the 213.17 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 213.18 after being adjusted for inflation under subdivision 7, are each 213.19 increased by $1,000 for married taxpayers filing joint returns. 213.20 (h) For tax years beginning after December 31, 2004, and 213.21 before December 31, 2007, the $5,770 in paragraph (b), the 213.22 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 213.23 after being adjusted for inflation under subdivision 7, are each 213.24 increased by $2,000 for married taxpayers filing joint returns. 213.25 (i) For tax years beginning after December 31, 2007, and 213.26 before December 31, 2010, the $5,770 in paragraph (b), the 213.27 $15,080 in paragraph (c), and the $17,890 in paragraph (d), 213.28 after being adjusted for inflation under subdivision 7, are each 213.29 increased by $3,000 for married taxpayers filing joint returns. 213.30 For tax years beginning after December 31, 2008, the $3,000 is 213.31 adjusted annually for inflation under subdivision 7. 213.32 (j) The commissioner shall construct tables showing the 213.33 amount of the credit at various income levels and make them 213.34 available to taxpayers. The tables shall follow the schedule 213.35 contained in this subdivision, except that the commissioner may 213.36 graduate the transition between income brackets. 214.1 [EFFECTIVE DATE.] This section is effective for tax years 214.2 beginning after December 31, 2003. 214.3 Sec. 14. Minnesota Statutes 2004, section 290.0675, 214.4 subdivision 1, is amended to read: 214.5 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 214.6 section the following terms have the meanings given. 214.7 (b) "Earned income" means the sum of the following, to the 214.8 extent included in Minnesota taxable income: 214.9 (1) earned income as defined in section 32(c)(2) of the 214.10 Internal Revenue Code; 214.11 (2) income received from a retirement pension, 214.12 profit-sharing, stock bonus, or annuity plan; and 214.13 (3) Social Security benefits as defined in section 86(d)(1) 214.14 of the Internal Revenue Code. 214.15 (c) "Taxable income" means net income as defined in section 214.16 290.01, subdivision 19. 214.17 (d) "Earned income of lesser-earning spouse" means the 214.18 earned income of the spouse with the lesser amount of earned 214.19 income as defined in paragraph (b) for the taxable year minus 214.20 the sum of (i) the amount for one exemption under section 151(d) 214.21 of the Internal Revenue Code and (ii) one-half the amount of the 214.22 standard deduction under section 63(c)(2)(A) and (4) of the 214.23 Internal Revenue Code minus one-half of any addition required 214.24 under section 290.01, subdivision 19a, clause (10). 214.25 [EFFECTIVE DATE.] This section is effective for tax years 214.26 beginning after December 31, 2004. 214.27 Sec. 15. Minnesota Statutes 2004, section 290.091, 214.28 subdivision 2, is amended to read: 214.29 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 214.30 this section, the following terms have the meanings given: 214.31 (a) "Alternative minimum taxable income" means the sum of 214.32 the following for the taxable year: 214.33 (1) the taxpayer's federal alternative minimum taxable 214.34 income as defined in section 55(b)(2) of the Internal Revenue 214.35 Code; 214.36 (2) the taxpayer's itemized deductions allowed in computing 215.1 federal alternative minimum taxable income, but excluding: 215.2 (i) the charitable contribution deduction under section 170 215.3 of the Internal Revenue Code to the extent that the deduction 215.4 exceeds 1.0 percent of adjusted gross income, as defined in 215.5 section 62 of the Internal Revenue Code; 215.6 (ii) the medical expense deduction; 215.7 (iii) the casualty, theft, and disaster loss deduction; and 215.8 (iv) the impairment-related work expenses of a disabled 215.9 person; 215.10 (3) for depletion allowances computed under section 613A(c) 215.11 of the Internal Revenue Code, with respect to each property (as 215.12 defined in section 614 of the Internal Revenue Code), to the 215.13 extent not included in federal alternative minimum taxable 215.14 income, the excess of the deduction for depletion allowable 215.15 under section 611 of the Internal Revenue Code for the taxable 215.16 year over the adjusted basis of the property at the end of the 215.17 taxable year (determined without regard to the depletion 215.18 deduction for the taxable year); 215.19 (4) to the extent not included in federal alternative 215.20 minimum taxable income, the amount of the tax preference for 215.21 intangible drilling cost under section 57(a)(2) of the Internal 215.22 Revenue Code determined without regard to subparagraph (E); 215.23 (5) to the extent not included in federal alternative 215.24 minimum taxable income, the amount of interest income as 215.25 provided by section 290.01, subdivision 19a, clause (1); and 215.26 (6) the amount of addition required by section 290.01, 215.27 subdivision 19a,clauseclauses (7), (8), and (9); 215.28 less the sum of the amounts determined under the following: 215.29 (1) interest income as defined in section 290.01, 215.30 subdivision 19b, clause (1); 215.31 (2) an overpayment of state income tax as provided by 215.32 section 290.01, subdivision 19b, clause (2), to the extent 215.33 included in federal alternative minimum taxable income; 215.34 (3) the amount of investment interest paid or accrued 215.35 within the taxable year on indebtedness to the extent that the 215.36 amount does not exceed net investment income, as defined in 216.1 section 163(d)(4) of the Internal Revenue Code. Interest does 216.2 not include amounts deducted in computing federal adjusted gross 216.3 income; and 216.4 (4) amounts subtracted from federal taxable income as 216.5 provided by section 290.01, subdivision 19b, clauses (10)and, 216.6 (11), (12), and (13). 216.7 In the case of an estate or trust, alternative minimum 216.8 taxable income must be computed as provided in section 59(c) of 216.9 the Internal Revenue Code. 216.10 (b) "Investment interest" means investment interest as 216.11 defined in section 163(d)(3) of the Internal Revenue Code. 216.12 (c) "Tentative minimum tax" equals 6.4 percent of 216.13 alternative minimum taxable income after subtracting the 216.14 exemption amount determined under subdivision 3. 216.15 (d) "Regular tax" means the tax that would be imposed under 216.16 this chapter (without regard to this section and section 216.17 290.032), reduced by the sum of the nonrefundable credits 216.18 allowed under this chapter. 216.19 (e) "Net minimum tax" means the minimum tax imposed by this 216.20 section. 216.21 [EFFECTIVE DATE.] This section is effective for tax years 216.22 beginning after December 31, 2004. 216.23 Sec. 16. Minnesota Statutes 2004, section 290A.03, 216.24 subdivision 3, is amended to read: 216.25 Subd. 3. [INCOME.] (1) "Income" means the sum of the 216.26 following: 216.27 (a) federal adjusted gross income as defined in the 216.28 Internal Revenue Code; and 216.29 (b) the sum of the following amounts to the extent not 216.30 included in clause (a): 216.31 (i) all nontaxable income; 216.32 (ii) the amount of a passive activity loss that is not 216.33 disallowed as a result of section 469, paragraph (i) or (m) of 216.34 the Internal Revenue Code and the amount of passive activity 216.35 loss carryover allowed under section 469(b) of the Internal 216.36 Revenue Code; 217.1 (iii) an amount equal to the total of any discharge of 217.2 qualified farm indebtedness of a solvent individual excluded 217.3 from gross income under section 108(g) of the Internal Revenue 217.4 Code; 217.5 (iv) cash public assistance and relief; 217.6 (v) any pension or annuity (including railroad retirement 217.7 benefits, all payments received under the federal Social 217.8 Security Act, supplemental security income, and veterans 217.9 benefits), which was not exclusively funded by the claimant or 217.10 spouse, or which was funded exclusively by the claimant or 217.11 spouse and which funding payments were excluded from federal 217.12 adjusted gross income in the years when the payments were made; 217.13 (vi) interest received from the federal or a state 217.14 government or any instrumentality or political subdivision 217.15 thereof; 217.16 (vii) workers' compensation; 217.17 (viii) nontaxable strike benefits; 217.18 (ix) the gross amounts of payments received in the nature 217.19 of disability income or sick pay as a result of accident, 217.20 sickness, or other disability, whether funded through insurance 217.21 or otherwise; 217.22 (x) a lump sum distribution under section 402(e)(3) of the 217.23 Internal Revenue Code of 1986, as amended through December 31, 217.24 1995; 217.25 (xi) contributions made by the claimant to an individual 217.26 retirement account, including a qualified voluntary employee 217.27 contribution; simplified employee pension plan; self-employed 217.28 retirement plan; cash or deferred arrangement plan under section 217.29 401(k) of the Internal Revenue Code; or deferred compensation 217.30 plan under section 457 of the Internal Revenue Code;and217.31 (xii) nontaxable scholarship or fellowship grants; 217.32 (xiii) the amount of deduction allowed under section 199 of 217.33 the Internal Revenue Code; and 217.34 (xiv) the amount of deduction allowed under section 220 or 217.35 223 of the Internal Revenue Code. 217.36 In the case of an individual who files an income tax return 218.1 on a fiscal year basis, the term "federal adjusted gross income" 218.2 shall mean federal adjusted gross income reflected in the fiscal 218.3 year ending in the calendar year. Federal adjusted gross income 218.4 shall not be reduced by the amount of a net operating loss 218.5 carryback or carryforward or a capital loss carryback or 218.6 carryforward allowed for the year. 218.7 (2) "Income" does not include: 218.8 (a) amounts excluded pursuant to the Internal Revenue Code, 218.9 sections 101(a) and 102; 218.10 (b) amounts of any pension or annuity which was exclusively 218.11 funded by the claimant or spouse and which funding payments were 218.12 not excluded from federal adjusted gross income in the years 218.13 when the payments were made; 218.14 (c) surplus food or other relief in kind supplied by a 218.15 governmental agency; 218.16 (d) relief granted under this chapter; 218.17 (e) child support payments received under a temporary or 218.18 final decree of dissolution or legal separation; or 218.19 (f) restitution payments received by eligible individuals 218.20 and excludable interest as defined in section 803 of the 218.21 Economic Growth and Tax Relief Reconciliation Act of 2001, 218.22 Public Law 107-16. 218.23 (3) The sum of the following amounts may be subtracted from 218.24 income: 218.25 (a) for the claimant's first dependent, the exemption 218.26 amount multiplied by 1.4; 218.27 (b) for the claimant's second dependent, the exemption 218.28 amount multiplied by 1.3; 218.29 (c) for the claimant's third dependent, the exemption 218.30 amount multiplied by 1.2; 218.31 (d) for the claimant's fourth dependent, the exemption 218.32 amount multiplied by 1.1; 218.33 (e) for the claimant's fifth dependent, the exemption 218.34 amount; and 218.35 (f) if the claimant or claimant's spouse was disabled or 218.36 attained the age of 65 on or before December 31 of the year for 219.1 which the taxes were levied or rent paid, the exemption amount. 219.2 For purposes of this subdivision, the "exemption amount" 219.3 means the exemption amount under section 151(d) of the Internal 219.4 Revenue Code for the taxable year for which the income is 219.5 reported. 219.6 [EFFECTIVE DATE.] This section is effective for property 219.7 tax refunds based on household income for 2004 and thereafter. 219.8 Sec. 17. Minnesota Statutes 2004, section 290A.03, 219.9 subdivision 15, is amended to read: 219.10 Subd. 15. [INTERNAL REVENUE CODE.] "Internal Revenue Code" 219.11 means the Internal Revenue Code of 1986, as amended throughJune219.1215, 2003April 15, 2005. 219.13 [EFFECTIVE DATE.] This section is effective for property 219.14 tax refunds based on property taxes payable on or after December 219.15 31, 2004, and rent paid on or after December 31, 2003. 219.16 ARTICLE 7 219.17 SALES AND USE TAXES 219.18 Section 1. Minnesota Statutes 2004, section 16C.03, is 219.19 amended by adding a subdivision to read: 219.20 Subd. 18. [CONTRACTS WITH FOREIGN VENDORS.] (a) The 219.21 commissioner and other agencies to which this section applies 219.22 and the legislative branch of government shall, subject to 219.23 paragraph (d), cancel a contract for goods or services from a 219.24 vendor or an affiliate of a vendor or suspend or debar a vendor 219.25 or an affiliate of a vendor from future contracts upon 219.26 notification from the commissioner of revenue that the vendor or 219.27 an affiliate of the vendor has not registered to collect the 219.28 sales and use tax imposed under chapter 297A on its sales in 219.29 Minnesota or to a destination in Minnesota. This subdivision 219.30 shall not apply to state colleges and universities, the courts, 219.31 and any agency in the judicial branch of government. For 219.32 purposes of this subdivision, the term "affiliate" means any 219.33 person or entity that is controlled by, or is under common 219.34 control of, a vendor through stock ownership or other 219.35 affiliation. 219.36 (b) Beginning January 1, 2006, each vendor or affiliate of 220.1 a vendor selling goods or services, subject to tax under chapter 220.2 297A, to an agency or the legislature must provide its Minnesota 220.3 sales and use tax business identification number, upon request, 220.4 to show that the vendor is registered to collect Minnesota sales 220.5 or use tax. 220.6 (c) The commissioner of revenue shall periodically provide 220.7 to the commissioner and the legislative branch a list of vendors 220.8 who have not registered to collect Minnesota sales and use tax 220.9 and who are subject to being suspended or debarred as vendors or 220.10 having their contracts canceled. 220.11 (d) The provisions of this subdivision may be waived by the 220.12 commissioner or the legislative branch when the vendor is the 220.13 single source of such goods or services, in the event of an 220.14 emergency, or when it is in the best interests of the state as 220.15 determined by the commissioner in consultation with the 220.16 commissioner of revenue. Such consultation is not a disclosure 220.17 violation under chapter 270B. 220.18 [EFFECTIVE DATE.] This section is effective for all 220.19 contracts entered into after December 31, 2005. 220.20 Sec. 2. Minnesota Statutes 2004, section 289A.38, 220.21 subdivision 6, is amended to read: 220.22 Subd. 6. [OMISSION IN EXCESS OF 25 PERCENT.] Additional 220.23 taxes may be assessed within 6-1/2 years after the due date of 220.24 the return or the date the return was filed, whichever is later, 220.25 if: 220.26 (1) the taxpayer omits from gross income an amount properly 220.27 includable in it that is in excess of 25 percent of the amount 220.28 of gross income stated in the return; 220.29 (2) the taxpayer omits from a sales, use, or withholding 220.30 tax return an amount of taxes in excess of 25 percent of the 220.31 taxes reported in the return; or 220.32 (3) the taxpayer omits from the gross estate assets in 220.33 excess of 25 percent of the gross estate reported in the return. 220.34 [EFFECTIVE DATE.] This section is effective the day 220.35 following final enactment. 220.36 Sec. 3. Minnesota Statutes 2004, section 289A.38, is 221.1 amended by adding a subdivision to read: 221.2 Subd. 15. [PURCHASER FILED REFUND CLAIMS.] If a purchaser 221.3 refund claim is filed under section 289A.50, subdivision 2a, and 221.4 the basis for the claim is that the purchaser was improperly 221.5 charged tax on an improvement to real property or on the 221.6 purchase of nontaxable services, sales or use tax may be 221.7 assessed for the cost of materials used to make the real 221.8 property improvement or to perform the nontaxable service. The 221.9 assessment may be made against the person making the improvement 221.10 to real property or the sale of nontaxable services, within the 221.11 period prescribed in subdivision 1, or within one year after the 221.12 date of the refund order, whichever is later. 221.13 [EFFECTIVE DATE.] This section is effective for purchaser 221.14 refund claims filed on or after July 1, 2005. 221.15 Sec. 4. Minnesota Statutes 2004, section 289A.40, 221.16 subdivision 2, is amended to read: 221.17 Subd. 2. [BAD DEBT LOSS.] If a claim relates to an 221.18 overpayment because of a failure to deduct a loss due to a bad 221.19 debt or to a security becoming worthless, the claim is 221.20 considered timely if filed within seven years from the date 221.21 prescribed for the filing of the return. A claim relating to an 221.22 overpayment of taxes under chapter 297A must be filed within 221.23 3-1/2 years from the date prescribed for filing the return, plus 221.24 any extensions granted for filing the return, but only if filed 221.25 within the extended time. The refund or credit is limited to 221.26 the amount of overpayment attributable to the loss. "Bad debt" 221.27 for purposes of this subdivision, has the same meaning as that 221.28 term is used in United States Code, title 26, section 166, 221.29 except that for a claim relating to an overpayment of taxes 221.30 under chapter 297A the following are excluded from the 221.31 calculation of bad debt: financing charges or interest; sales 221.32 or use taxes charged on the purchase price; uncollectible 221.33 amounts on property that remain in the possession of the seller 221.34 until the full purchase price is paid; expenses incurred in 221.35 attempting to collect any debt; and repossessed property. 221.36 [EFFECTIVE DATE.] For claims relating to an overpayment of 222.1 taxes under chapter 297A, this section is effective for sales 222.2 and purchases made on or after January 1, 2004; for all other 222.3 bad debts or claims, this section is effective on or after July 222.4 1, 2003. 222.5 Sec. 5. Minnesota Statutes 2004, section 289A.40, is 222.6 amended by adding a subdivision to read: 222.7 Subd. 4. [PURCHASER FILED REFUND CLAIMS.] A claim for 222.8 refund of taxes paid on a transaction not subject to tax under 222.9 chapter 297A, where the purchaser may apply directly to the 222.10 commissioner under section 289A.50, subdivision 2a, must be 222.11 filed within 3-1/2 years from the 20th day of the month 222.12 following the month of the invoice date for the purchase. 222.13 [EFFECTIVE DATE.] This section is effective for claims 222.14 filed on or after the day following final enactment. 222.15 Sec. 6. Minnesota Statutes 2004, section 289A.40, is 222.16 amended by adding a subdivision to read: 222.17 Subd. 5. [CAPITAL EQUIPMENT REFUND CLAIMS.] A claim for 222.18 refund for taxes paid under chapter 297A on capital equipment 222.19 must be filed within 3-1/2 years from the 20th day of the month 222.20 following the month of the invoice date for the purchase of the 222.21 capital equipment. A claim for refund for taxes imposed on 222.22 capital equipment under section 297A.63 must be filed within 222.23 3-1/2 years from the date prescribed for filing the return, or 222.24 one year from the date of an order assessing tax under section 222.25 289A.37, subdivision 1, upon payment in full of the tax, 222.26 penalties, and interest shown on the order, whichever period 222.27 expires later. 222.28 [EFFECTIVE DATE.] This section is effective for claims 222.29 filed on or after the day following final enactment. 222.30 Sec. 7. Minnesota Statutes 2004, section 297A.61, 222.31 subdivision 3, is amended to read: 222.32 Subd. 3. [SALE AND PURCHASE.] (a) "Sale" and "purchase" 222.33 include, but are not limited to, each of the transactions listed 222.34 in this subdivision. 222.35 (b) Sale and purchase include: 222.36 (1) any transfer of title or possession, or both, of 223.1 tangible personal property, whether absolutely or conditionally, 223.2 for a consideration in money or by exchange or barter; and 223.3 (2) the leasing of or the granting of a license to use or 223.4 consume, for a consideration in money or by exchange or barter, 223.5 tangible personal property, other than a manufactured home used 223.6 for residential purposes for a continuous period of 30 days or 223.7 more. 223.8 (c) Sale and purchase include the production, fabrication, 223.9 printing, or processing of tangible personal property for a 223.10 consideration for consumers who furnish either directly or 223.11 indirectly the materials used in the production, fabrication, 223.12 printing, or processing. 223.13 (d) Sale and purchase include the preparing for a 223.14 consideration of food. Notwithstanding section 297A.67, 223.15 subdivision 2, taxable food includes, but is not limited to, the 223.16 following: 223.17 (1) prepared food sold by the retailer; 223.18 (2) soft drinks; 223.19 (3) candy;and223.20 (4) dietary supplements; and 223.21 (5) all food sold through vending machines, except milk. 223.22 (e) A sale and a purchase includes the furnishing for a 223.23 consideration of electricity, gas, water, or steam for use or 223.24 consumption within this state. 223.25 (f) A sale and a purchase includes the transfer for a 223.26 consideration of prewritten computer software whether delivered 223.27 electronically, by load and leave, or otherwise. 223.28 (g) A sale and a purchase includes the furnishing for a 223.29 consideration of the following services: 223.30 (1) the privilege of admission to places of amusement, 223.31 recreational areas, or athletic events, and the making available 223.32 of amusement devices, tanning facilities, reducing salons, steam 223.33 baths, turkish baths, health clubs, and spas or athletic 223.34 facilities; 223.35 (2) lodging and related services by a hotel, rooming house, 223.36 resort, campground, motel, or trailer camp and the granting of 224.1 any similar license to use real property in a specific facility, 224.2 other than the renting or leasing of it for a continuous period 224.3 of 30 days or more under an enforceable written agreement that 224.4 may not be terminated without prior notice; 224.5 (3) nonresidential parking services, whether on a 224.6 contractual, hourly, or other periodic basis, except for parking 224.7 at a meter; 224.8 (4) the granting of membership in a club, association, or 224.9 other organization if: 224.10 (i) the club, association, or other organization makes 224.11 available for the use of its members sports and athletic 224.12 facilities, without regard to whether a separate charge is 224.13 assessed for use of the facilities; and 224.14 (ii) use of the sports and athletic facility is not made 224.15 available to the general public on the same basis as it is made 224.16 available to members. 224.17 Granting of membership means both onetime initiation fees and 224.18 periodic membership dues. Sports and athletic facilities 224.19 include golf courses; tennis, racquetball, handball, and squash 224.20 courts; basketball and volleyball facilities; running tracks; 224.21 exercise equipment; swimming pools; and other similar athletic 224.22 or sports facilities; 224.23 (5) delivery of aggregate materials and concrete block by a 224.24 third party if the delivery would be subject to the sales tax if 224.25 provided by the seller of the aggregate material or concrete 224.26 block; and 224.27 (6) services as provided in this clause: 224.28 (i) laundry and dry cleaning services including cleaning, 224.29 pressing, repairing, altering, and storing clothes, linen 224.30 services and supply, cleaning and blocking hats, and carpet, 224.31 drapery, upholstery, and industrial cleaning. Laundry and dry 224.32 cleaning services do not include services provided by coin 224.33 operated facilities operated by the customer; 224.34 (ii) motor vehicle washing, waxing, and cleaning services, 224.35 including services provided by coin operated facilities operated 224.36 by the customer, and rustproofing, undercoating, and towing of 225.1 motor vehicles; 225.2 (iii) building and residential cleaning, maintenance, and 225.3 disinfecting and exterminating services; 225.4 (iv) detective, security, burglar, fire alarm, and armored 225.5 car services; but not including services performed within the 225.6 jurisdiction they serve by off-duty licensed peace officers as 225.7 defined in section 626.84, subdivision 1, or services provided 225.8 by a nonprofit organization for monitoring and electronic 225.9 surveillance of persons placed on in-home detention pursuant to 225.10 court order or under the direction of the Minnesota Department 225.11 of Corrections; 225.12 (v) pet grooming services; 225.13 (vi) lawn care, fertilizing, mowing, spraying and sprigging 225.14 services; garden planting and maintenance; tree, bush, and shrub 225.15 pruning, bracing, spraying, and surgery; indoor plant care; 225.16 tree, bush, shrub, and stump removal, except when performed as 225.17 part of a land clearing contract as defined in section 297A.68, 225.18 subdivision 40; and tree trimming for public utility lines. 225.19 Services performed under a construction contract for the 225.20 installation of shrubbery, plants, sod, trees, bushes, and 225.21 similar items are not taxable; 225.22 (vii) massages, except when provided by a licensed health 225.23 care facility or professional or upon written referral from a 225.24 licensed health care facility or professional for treatment of 225.25 illness, injury, or disease; and 225.26 (viii) the furnishing of lodging, board, and care services 225.27 for animals in kennels and other similar arrangements, but 225.28 excluding veterinary and horse boarding services. 225.29 In applying the provisions of this chapter, the terms 225.30 "tangible personal property" and "sales at retail" include 225.31 taxable services listed in clause (6), items (i) to (vi) and 225.32 (viii), and the provision of these taxable services, unless 225.33 specifically provided otherwise. Services performed by an 225.34 employee for an employer are not taxable. Services performed by 225.35 a partnership or association for another partnership or 225.36 association are not taxable if one of the entities owns or 226.1 controls more than 80 percent of the voting power of the equity 226.2 interest in the other entity. Services performed between 226.3 members of an affiliated group of corporations are not taxable. 226.4 For purposes of the preceding sentence, "affiliated group of 226.5 corporations" includes those entities that would be classified 226.6 as members of an affiliated group under United States Code, 226.7 title 26, section 1504, and that are eligible to file a 226.8 consolidated tax return for federal income tax purposes. 226.9 (h) A sale and a purchase includes the furnishing for a 226.10 consideration of tangible personal property or taxable services 226.11 by the United States or any of its agencies or 226.12 instrumentalities, or the state of Minnesota, its agencies, 226.13 instrumentalities, or political subdivisions. 226.14 (i) A sale and a purchase includes the furnishing for a 226.15 consideration of telecommunications services, including cable 226.16 television services and direct satellite services. 226.17 Telecommunications services are taxed to the extent allowed 226.18 under federal law. 226.19 (j) A sale and a purchase includes the furnishing for a 226.20 consideration of installation if the installation charges would 226.21 be subject to the sales tax if the installation were provided by 226.22 the seller of the item being installed. 226.23 (k) A sale and a purchase includes the rental of a vehicle 226.24 by a motor vehicle dealer to a customer when (1) the vehicle is 226.25 rented by the customer for a consideration, or (2) the motor 226.26 vehicle dealer is reimbursed pursuant to a service contract as 226.27 defined in section 65B.29, subdivision 1, clause (1). 226.28 [EFFECTIVE DATE.] This section is effective the day 226.29 following final enactment except that the amendment to paragraph 226.30 (d), clause (5), is effective for sales made after June 30, 226.31 2005, and the amendment to paragraph (g), clause (6)(vi), is 226.32 effective for sales and purchases made after October 28, 2002, 226.33 but for land clearing contracts entered into after October 28, 226.34 2002, no refunds may be claimed under Minnesota Statutes, 226.35 section 289A.50, for sales taxes collected and remitted to the 226.36 state on the land clearing contracts. 227.1 Sec. 8. Minnesota Statutes 2004, section 297A.61, 227.2 subdivision 4, is amended to read: 227.3 Subd. 4. [RETAIL SALE.] (a) A "retail sale" means any 227.4 sale, lease, or rental for any purpose, other than resale, 227.5 sublease, or subrent of items by the purchaser in the normal 227.6 course of business as defined in subdivision 21. 227.7 (b) A sale of property used by the owner only by leasing it 227.8 to others or by holding it in an effort to lease it, and put to 227.9 no use by the owner other than resale after the lease or effort 227.10 to lease, is a sale of property for resale. 227.11 (c) A sale of master computer software that is purchased 227.12 and used to make copies for sale or lease is a sale of property 227.13 for resale. 227.14 (d) A sale of building materials, supplies, and equipment 227.15 to owners, contractors, subcontractors, or builders for the 227.16 erection of buildings or the alteration, repair, or improvement 227.17 of real property is a retail sale in whatever quantity sold, 227.18 whether the sale is for purposes of resale in the form of real 227.19 property or otherwise. 227.20 (e) A sale of carpeting, linoleum, or similar floor 227.21 covering to a person who provides for installation of the floor 227.22 covering is a retail sale and not a sale for resale since a sale 227.23 of floor covering which includes installation is a contract for 227.24 the improvement of real property. 227.25 (f) A sale of shrubbery, plants, sod, trees, and similar 227.26 items to a person who provides for installation of the items is 227.27 a retail sale and not a sale for resale since a sale of 227.28 shrubbery, plants, sod, trees, and similar items that includes 227.29 installation is a contract for the improvement of real property. 227.30 (g) A sale of tangible personal property that is awarded as 227.31 prizes is a retail sale and is not considered a sale of property 227.32 for resale. 227.33 (h) A sale of tangible personal property utilized or 227.34 employed in the furnishing or providing of services under 227.35 subdivision 3, paragraph (g), clause (1), including, but not 227.36 limited to, property given as promotional items, is a retail 228.1 sale and is not considered a sale of property for resale. 228.2 (i) A sale of tangible personal property used in conducting 228.3 lawful gambling under chapter 349 or the state lottery under 228.4 chapter 349A, including, but not limited to, property given as 228.5 promotional items, is a retail sale and is not considered a sale 228.6 of property for resale. 228.7 (j) A sale of machines, equipment, or devices that are used 228.8 to furnish, provide, or dispense goods or services, including, 228.9 but not limited to, coin-operated devices, is a retail sale and 228.10 is not considered a sale of property for resale. 228.11 (k) In the case of a lease, a retail sale occurs (1) when 228.12 an obligation to make a lease payment becomes due under the 228.13 terms of the agreement or the trade practices of the lessor or 228.14 (2) in the case of a lease of a motor vehicle, as defined in 228.15 section 297B.01, subdivision 5, but excluding vehicles with a 228.16 manufacturer's gross vehicle weight rating greater than 11,000 228.17 pounds and rentals of vehicles for not more than 28 days, at the 228.18 time the lease is executed. 228.19 (l) In the case of a conditional sales contract, a retail 228.20 sale occurs upon the transfer of title or possession of the 228.21 tangible personal property. 228.22 [EFFECTIVE DATE.] This section is effective the day 228.23 following final enactment, except that the amendments to 228.24 paragraph (k) are effective for leases entered into after 228.25 September 30, 2005. 228.26 Sec. 9. Minnesota Statutes 2004, section 297A.61, is 228.27 amended by adding a subdivision to read: 228.28 Subd. 37. [PERSONAL RAPID TRANSIT SYSTEM.] "Personal rapid 228.29 transit system" means a transportation system of small, 228.30 computer-controlled vehicles, transporting one to three 228.31 passengers on elevated guideways in a transportation network 228.32 operating on demand and nonstop directly to any stations in the 228.33 network. 228.34 [EFFECTIVE DATE.] This section is effective for sales and 228.35 purchases made after June 30, 2005. 228.36 Sec. 10. Minnesota Statutes 2004, section 297A.64, 229.1 subdivision 4, is amended to read: 229.2 Subd. 4. [EXEMPTIONS.] (a) The tax and the fee imposed by 229.3 this section do not apply to a lease or rental of (1) a vehicle 229.4 to be used by the lessee to provide a licensed taxi service; (2) 229.5 a hearse or limousine used in connection with a burial or 229.6 funeral service; or (3) a van designed or adapted primarily for 229.7 transporting property rather than passengers. The tax and the 229.8 fee imposed under this section do not apply when the lease or 229.9 rental of a vehicle is exempt from the tax imposed under section 229.10 297A.62, subdivision 1. 229.11 (b) The lessor may elect not to charge the fee imposed in 229.12 subdivision 2 if in the previous calendar year the lessor had no 229.13 more than 20 vehicles available for lease that would have been 229.14 subject to tax under this section, or no more than $50,000 in 229.15 gross receipts that would have been subject to tax under this 229.16 section. 229.17 [EFFECTIVE DATE.] This section is effective the day 229.18 following final enactment. 229.19 Sec. 11. Minnesota Statutes 2004, section 297A.668, 229.20 subdivision 1, is amended to read: 229.21 Subdivision 1. [ APPLICABILITY.] The provisions of this 229.22 section apply regardless of the characterization of a product as 229.23 tangible personal property, a digital good, or a service; but do 229.24 not apply to telecommunications services,or the sales of motor 229.25 vehicles, watercraft, aircraft, modular homes, manufactured229.26homes, or mobile homes. These provisions only apply to 229.27 determine a seller's obligation to pay or collect and remit a 229.28 sales or use tax with respect to the seller's sale of a 229.29 product. These provisions do not affect the obligation of a 229.30 seller as purchaser to remit tax on the use of the product. 229.31 [EFFECTIVE DATE.] This section is effective the day 229.32 following final enactment. 229.33 Sec. 12. Minnesota Statutes 2004, section 297A.668, 229.34 subdivision 5, is amended to read: 229.35 Subd. 5. [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 229.36 including lease or rental, of transportation equipment shall be 230.1 sourced the same as a retail sale in accordance with the 230.2 provisions of subdivision 2, notwithstanding the exclusion of 230.3 lease or rental in subdivision 2. 230.4 (b) "Transportation equipment" means any of the following: 230.5 (1) locomotives and railcars that are utilized for the 230.6 carriage of persons or property in interstate commerce;and/or230.7 (2) trucks and truck-tractors with a gross vehicle weight 230.8 rating (GVWR) of 10,001 pounds or greater, trailers, 230.9 semitrailers, or passenger buses that are: 230.10 (i) registered through the international registration plan; 230.11 and 230.12 (ii) operated under authority of a carrier authorized and 230.13 certified by the United States Department of Transportation or 230.14 another federal authority to engage in the carriage of persons 230.15 or property in interstate commerce; 230.16 (3) aircraft that are operated by air carriers authorized 230.17 and certificated by the United States Department of 230.18 Transportation or another federal or a foreign authority to 230.19 engage in the carriage of persons or property in interstate 230.20 commerce; or 230.21 (4) containers designed for use on and component parts 230.22 attached or secured on the transportation equipment described in 230.23 items (1) through (3). 230.24 [EFFECTIVE DATE.] This section is effective for sales and 230.25 purchases made on or after January 1, 2004. 230.26 Sec. 13. Minnesota Statutes 2004, section 297A.67, 230.27 subdivision 2, is amended to read: 230.28 Subd. 2. [FOOD AND FOOD INGREDIENTS.] Except as otherwise 230.29 provided in this subdivision, food and food ingredients are 230.30 exempt. For purposes of this subdivision, "food" and "food 230.31 ingredients" mean substances, whether in liquid, concentrated, 230.32 solid, frozen, dried, or dehydrated form, that are sold for 230.33 ingestion or chewing by humans and are consumed for their taste 230.34 or nutritional value. Food and food ingredients exempt under 230.35 this subdivision do not include candy, soft drinks, food sold 230.36 through vending machines, dietary supplements, and prepared 231.1 foods. Food and food ingredients do not include alcoholic 231.2 beverages, dietary supplements,and tobacco. For purposes of 231.3 this subdivision, "alcoholic beverages" means beverages that are 231.4 suitable for human consumption and contain one-half of one 231.5 percent or more of alcohol by volume. For purposes of this 231.6 subdivision, "tobacco" means cigarettes, cigars, chewing or pipe 231.7 tobacco, or any other item that contains tobacco. For purposes 231.8 of this subdivision, "dietary supplements" means any product, 231.9 other than tobacco, intended to supplement the diet that: 231.10 (1) contains one or more of the following dietary 231.11 ingredients: 231.12 (i) a vitamin; 231.13 (ii) a mineral; 231.14 (iii) an herb or other botanical; 231.15 (iv) an amino acid; 231.16 (v) a dietary substance for use by humans to supplement the 231.17 diet by increasing the total dietary intake; and 231.18 (vi) a concentrate, metabolite, constituent, extract, or 231.19 combination of any ingredient described in items (i) to (v); 231.20 (2) is intended for ingestion in tablet, capsule, powder, 231.21 softgel, gelcap, or liquid form, or if not intended for 231.22 ingestion in such form, is not represented as conventional food 231.23 and is not represented for use as a sole item of a meal or of 231.24 the diet; and 231.25 (3) is required to be labeled as a dietary supplement, 231.26 identifiable by the supplement facts box found on the label and 231.27 as required pursuant to Code of Federal Regulations, title 21, 231.28 section 101.36. 231.29 [EFFECTIVE DATE.] This section is effective for sales made 231.30 on or after the day following final enactment. 231.31 Sec. 14. Minnesota Statutes 2004, section 297A.67, 231.32 subdivision 7, is amended to read: 231.33 Subd. 7. [MEDICINESDRUGS; MEDICAL DEVICES.] 231.34 (a)PrescribedSales of the following drugs and medical devices 231.35 are exempt: 231.36 (1) drugsand medicine, and insulin, intendedforinternal232.1or external use, in the cure, mitigation, treatment, or232.2prevention of illness or disease inhumanbeings are exempt.232.3"Prescribed drugs and medicine" includesuse, including 232.4 over-the-counter drugsor medicine prescribed by a licensed232.5health care professional.232.6(b) Nonprescription medicines consisting principally232.7(determined by the weight of all ingredients) of analgesics that232.8are approved by the United States Food and Drug Administration232.9for internal use by human beings are exempt. For purposes of232.10this subdivision, "principally" means greater than 50 percent232.11analgesics by weight.232.12(c) Prescription glasses, hospital beds, fever232.13thermometers, reusable; 232.14 (2) single-use finger-pricking devices for the extraction 232.15 of blood, blood glucose monitoring machines,and 232.16 other single-use devices and single-use diagnostic agents used 232.17 in diagnosing, monitoring, or treating diabetes, and therapeutic232.18and; 232.19 (3) insulin and medical oxygen for human use, regardless of 232.20 whether prescribed or sold over the counter; 232.21 (4) prosthetic devicesare exempt. "Therapeutic devices"232.22means devices that are attached or applied to the human body to232.23cure, heal, or alleviate injury, illness, or disease, either232.24directly or by administering a curative agent. "Prosthetic232.25devices" means devices that replace injured, diseased, or232.26missing parts of the human body, either temporarily or232.27permanently; 232.28 (5) durable medical equipment for home use only; 232.29 (6) mobility enhancing equipment; and 232.30 (7) prescription corrective eyeglasses. 232.31 (b) For purposes of this subdivision: 232.32 (1) "Drug" means a compound, substance, or preparation, and 232.33 any component of a compound, substance, or preparation, other 232.34 than food and food ingredients, dietary supplements, or 232.35 alcoholic beverages that is: 232.36 (i) recognized in the official United States Pharmacopoeia, 233.1 official Homeopathic Pharmacopoeia of the United States, or 233.2 official National Formulary, and supplement to any of them; 233.3 (ii) intended for use in the diagnosis, cure, mitigation, 233.4 treatment, or prevention of disease; or 233.5 (iii) intended to affect the structure or any function of 233.6 the body. 233.7 (2) "Durable medical equipment" means equipment, including 233.8 repair and replacement parts, but not including mobility 233.9 enhancing equipment, that: 233.10 (i) can withstand repeated use; 233.11 (ii) is primarily and customarily used to serve a medical 233.12 purpose; 233.13 (iii) generally is not useful to a person in the absence of 233.14 illness or injury; and 233.15 (iv) is not worn in or on the body. 233.16 (3) "Mobility enhancing equipment" means equipment, 233.17 including repair and replacement parts, but not including 233.18 durable medical equipment, that: 233.19 (i) is primarily and customarily used to provide or 233.20 increase the ability to move from one place to another and that 233.21 is appropriate for use either in a home or a motor vehicle; 233.22 (ii) is not generally used by persons with normal mobility; 233.23 and 233.24 (iii) does not include any motor vehicle or equipment on a 233.25 motor vehicle normally provided by a motor vehicle manufacturer. 233.26 (4) "Over-the-counter drug" means a drug that contains a 233.27 label that identifies the product as a drug as required by Code 233.28 of Federal Regulations, title 21, section 201.66. The label 233.29 must include a "drug facts" panel or a statement of the active 233.30 ingredients with a list of those ingredients contained in the 233.31 compound, substance, or preparation. Over-the-counter drugs do 233.32 not include grooming and hygiene products, regardless of whether 233.33 they otherwise meet the definition. "Grooming and hygiene 233.34 products" are soaps, cleaning solutions, shampoo, toothpaste, 233.35 mouthwash, antiperspirants, and suntan lotions and sunscreens. 233.36 (5) "Prescribed" and "prescription" means a direction in 234.1 the form of an order, formula, or recipe issued in any form of 234.2 oral, written, electronic, or other means of transmission by a 234.3 duly licensed health care professional. 234.4 (6) "Prosthetic device" means a replacement, corrective, or 234.5 supportive device, including repair and replacement parts, worn 234.6 on or in the body to: 234.7 (i) artificially replace a missing portion of the body; 234.8 (ii) prevent or correct physical deformity or malfunction; 234.9 or 234.10 (iii) support a weak or deformed portion of the body. 234.11 Prosthetic device does not include corrective eyeglasses. 234.12 [EFFECTIVE DATE.] This section is effective for sales and 234.13 purchases made after June 30, 2005. 234.14 Sec. 15. Minnesota Statutes 2004, section 297A.67, 234.15 subdivision 9, is amended to read: 234.16 Subd. 9. [BABY PRODUCTS.](a) Products such as lotion,234.17creams, ointments, oil, powder, or shampoo, and other articles234.18designed for application to the hair or skin of babies are234.19exempt.234.20(b)Baby bottles and nipples, pacifiers, teething rings, 234.21thumb sucking preventatives,and infant syringes are exempt. 234.22 [EFFECTIVE DATE.] This section is effective for sales and 234.23 purchases made after June 30, 2005. 234.24 Sec. 16. Minnesota Statutes 2004, section 297A.67, 234.25 subdivision 29, is amended to read: 234.26 Subd. 29. [SOLAR ENERGYEFFICIENTPRODUCTS.](a) A234.27residential lighting fixture or a compact fluorescent bulb is234.28exempt if it has an energy star label.234.29(b) The following products are exempt if they have an234.30energyguide label that indicates that the product meets or234.31exceeds the standards listed below:234.32(1) an electric heat pump hot water heater with an energy234.33factor of at least 1.9;234.34(2) a natural gas water heater with an energy factor of at234.35least 0.62;234.36(3) a propane gas or fuel oil water heater with an energy235.1factor of at least 0.62;235.2(4) a natural gas furnace with an annual fuel utilization235.3efficiency greater than 92 percent; and235.4(5) a propane gas or fuel oil furnace with an annual fuel235.5utilization efficiency greater than 92 percent.235.6(c)Aphotovoltaic devicesolar energy system, as defined 235.7 in section 216C.06, subdivision 17, is exempt.For purposes of235.8this subdivision, "photovoltaic device" means a solid-state235.9electrical device, such as a solar module, that converts light235.10directly into direct current electricity of voltage-current235.11characteristics that are a function of the characteristics of235.12the light source and the materials in and design of the device.235.13A "solar module" is a photovoltaic device that produces a235.14specified power output under defined test conditions, usually235.15composed of groups of solar cells connected in series, in235.16parallel, or in series-parallel combinations.235.17(d) For purposes of this subdivision, "energy star label"235.18means the label granted to certain products that meet United235.19States Environmental Protection Agency and United States235.20Department of Energy criteria for energy efficiency. For235.21purposes of this subdivision, "energyguide label" means the235.22label that the United States Federal Trade Commissioner requires235.23manufacturers to apply to certain appliances under United States235.24Code, title 16, part 305.235.25 [EFFECTIVE DATE.] This section is effective for sales and 235.26 purchases made on or after August 1, 2005. 235.27 Sec. 17. Minnesota Statutes 2004, section 297A.67, is 235.28 amended by adding a subdivision to read: 235.29 Subd. 32. [CIGARETTES.] Cigarettes upon which a tax has 235.30 been imposed under section 297F.25 are exempt. 235.31 [EFFECTIVE DATE.] This section is effective for sales and 235.32 purchases made after July 31, 2005. 235.33 Sec. 18. Minnesota Statutes 2004, section 297A.68, 235.34 subdivision 2, is amended to read: 235.35 Subd. 2. [MATERIALS CONSUMED IN INDUSTRIAL PRODUCTION.] 235.36 (a) Materials stored, used, or consumed in industrial production 236.1 of personal property intended to be sold ultimately at retail 236.2 are exempt, whether or not the item so used becomes an 236.3 ingredient or constituent part of the property produced. 236.4 Materials that qualify for this exemption include, but are not 236.5 limited to, the following: 236.6 (1) chemicals, including chemicals used for cleaning food 236.7 processing machinery and equipment; 236.8 (2) materials, including chemicals, fuels, and electricity 236.9 purchased by persons engaged in industrial production to treat 236.10 waste generated as a result of the production process; 236.11 (3) fuels, electricity, gas, and steam used or consumed in 236.12 the production process, except that electricity, gas, or steam 236.13 used for space heating, cooling, or lighting is exempt if (i) it 236.14 is in excess of the average climate control or lighting for the 236.15 production area, and (ii) it is necessary to produce that 236.16 particular product; 236.17 (4) petroleum products and lubricants; 236.18 (5) packaging materials, including returnable containers 236.19 used in packaging food and beverage products; 236.20 (6) accessory tools, equipment, and other items that are 236.21 separate detachable units with an ordinary useful life of less 236.22 than 12 months used in producing a direct effect upon the 236.23 product; and 236.24 (7) the following materials, tools, and equipment used in 236.25 metalcasting: crucibles, thermocouple protection sheaths and 236.26 tubes, stalk tubes, refractory materials, molten metal filters 236.27 and filter boxes, degassing lances, and base blocks. 236.28 (b) This exemption does not include: 236.29 (1) machinery, equipment, implements, tools, accessories, 236.30 appliances, contrivances and furniture and fixtures, except 236.31 those listed in paragraph (a), clause (6); and 236.32 (2) petroleum and special fuels used in producing or 236.33 generating power for propelling ready-mixed concrete trucks on 236.34 the public highways of this state. 236.35 (c) Industrial production includes, but is not limited to, 236.36 research, development, design or production of any tangible 237.1 personal property, manufacturing, processing (other than by 237.2 restaurants and consumers) of agricultural products (whether 237.3 vegetable or animal), commercial fishing, refining, smelting, 237.4 reducing, brewing, distilling, printing, mining, quarrying, 237.5 lumbering, generating electricity, the production of road 237.6 building materials, and the research, development, design, or 237.7 production of computer software. Industrial production does not 237.8 include painting, cleaning, repairing or similar processing of 237.9 property except as part of the original manufacturing process. 237.10 (d) Industrial production does not include: 237.11 (1) the furnishing of services listed in section 297A.61, 237.12 subdivision 3, paragraph (g), clause (6), items (i) to (vi) and 237.13 (viii); or 237.14 (2) the transportation, transmission, or distribution of 237.15 petroleum, liquefied gas, natural gas, water, or steam, in, by, 237.16 or through pipes, lines, tanks, mains, or other means of 237.17 transporting those products. For purposes of this paragraph, 237.18 "transportation, transmission, or distribution" does not include 237.19 blending of petroleum or biodiesel fuel as defined in section 237.20 239.77. 237.21 [EFFECTIVE DATE.] This section is effective the day 237.22 following final enactment, except that the provision in 237.23 paragraph (d) is effective for sales and purchases made after 237.24 June 30, 2005. 237.25 Sec. 19. Minnesota Statutes 2004, section 297A.68, 237.26 subdivision 5, is amended to read: 237.27 Subd. 5. [CAPITAL EQUIPMENT.] (a) Capital equipment is 237.28 exempt. The tax must be imposed and collected as if the rate 237.29 under section 297A.62, subdivision 1, applied, and then refunded 237.30 in the manner provided in section 297A.75, unless: 237.31 (1) the purchaser qualifies as a small business as defined 237.32 in section 645.445, subdivision 2, paragraphs (a) to (c); 237.33 (2) the business is located in the state; and 237.34 (3) the purchaser provides an exemption certificate as 237.35 required in section 297A.72, subdivision 3. 237.36 "Capital equipment" means machinery and equipment purchased 238.1 or leased, and used in this state by the purchaser or lessee 238.2 primarily for manufacturing, fabricating, mining, or refining 238.3 tangible personal property to be sold ultimately at retail if 238.4 the machinery and equipment are essential to the integrated 238.5 production process of manufacturing, fabricating, mining, or 238.6 refining. Capital equipment also includes machinery and 238.7 equipment used primarily to electronically transmit results 238.8 retrieved by a customer of an on-line computerized data 238.9 retrieval system. 238.10 (b) Capital equipment includes, but is not limited to: 238.11 (1) machinery and equipment used to operate, control, or 238.12 regulate the production equipment; 238.13 (2) machinery and equipment used for research and 238.14 development, design, quality control, and testing activities; 238.15 (3) environmental control devices that are used to maintain 238.16 conditions such as temperature, humidity, light, or air pressure 238.17 when those conditions are essential to and are part of the 238.18 production process; 238.19 (4) materials and supplies used to construct and install 238.20 machinery or equipment; 238.21 (5) repair and replacement parts, including accessories, 238.22 whether purchased as spare parts, repair parts, or as upgrades 238.23 or modifications to machinery or equipment; 238.24 (6) materials used for foundations that support machinery 238.25 or equipment; 238.26 (7) materials used to construct and install special purpose 238.27 buildings used in the production process; 238.28 (8) ready-mixed concrete equipment in which the ready-mixed 238.29 concrete is mixed as part of the delivery process regardless if 238.30 mounted on a chassis, repair parts for ready-mixed concrete 238.31 trucks, and leases of ready-mixed concrete trucks; and 238.32 (9) machinery or equipment used for research, development, 238.33 design, or production of computer software. 238.34 (c) Capital equipment does not include the following: 238.35 (1) motor vehicles taxed under chapter 297B; 238.36 (2) machinery or equipment used to receive or store raw 239.1 materials; 239.2 (3) building materials, except for materials included in 239.3 paragraph (b), clauses (6) and (7); 239.4 (4) machinery or equipment used for nonproduction purposes, 239.5 including, but not limited to, the following: plant security, 239.6 fire prevention, first aid, and hospital stations; support 239.7 operations or administration; pollution control; and plant 239.8 cleaning, disposal of scrap and waste, plant communications, 239.9 space heating, cooling, lighting, or safety; 239.10 (5) farm machinery and aquaculture production equipment as 239.11 defined by section 297A.61, subdivisions 12 and 13; 239.12 (6) machinery or equipment purchased and installed by a 239.13 contractor as part of an improvement to real property;or239.14 (7) machinery and equipment used by restaurants in the 239.15 furnishing, preparing, or serving of prepared foods as defined 239.16 in section 297A.61, subdivision 31; 239.17 (8) machinery and equipment used to furnish the services 239.18 listed in section 297A.61, subdivision 3, paragraph (g), clause 239.19 (6), items (i) to (vi) and (viii); 239.20 (9) machinery or equipment used in the transportation, 239.21 transmission, or distribution of petroleum, liquefied gas, 239.22 natural gas, water, or steam, in, by, or through pipes, lines, 239.23 tanks, mains, or other means of transporting those products. 239.24 This clause does not apply to machinery or equipment used to 239.25 blend petroleum or biodiesel fuel as defined in section 239.77; 239.26 or 239.27 (10) any other item that is not essential to the integrated 239.28 process of manufacturing, fabricating, mining, or refining. 239.29 (d) For purposes of this subdivision: 239.30 (1) "Equipment" means independent devices or tools separate 239.31 from machinery but essential to an integrated production 239.32 process, including computers and computer software, used in 239.33 operating, controlling, or regulating machinery and equipment; 239.34 and any subunit or assembly comprising a component of any 239.35 machinery or accessory or attachment parts of machinery, such as 239.36 tools, dies, jigs, patterns, and molds. 240.1 (2) "Fabricating" means to make, build, create, produce, or 240.2 assemble components or property to work in a new or different 240.3 manner. 240.4 (3) "Integrated production process" means a process or 240.5 series of operations through which tangible personal property is 240.6 manufactured, fabricated, mined, or refined. For purposes of 240.7 this clause, (i) manufacturing begins with the removal of raw 240.8 materials from inventory and ends when the last process prior to 240.9 loading for shipment has been completed; (ii) fabricating begins 240.10 with the removal from storage or inventory of the property to be 240.11 assembled, processed, altered, or modified and ends with the 240.12 creation or production of the new or changed product; (iii) 240.13 mining begins with the removal of overburden from the site of 240.14 the ores, minerals, stone, peat deposit, or surface materials 240.15 and ends when the last process before stockpiling is completed; 240.16 and (iv) refining begins with the removal from inventory or 240.17 storage of a natural resource and ends with the conversion of 240.18 the item to its completed form. 240.19 (4) "Machinery" means mechanical, electronic, or electrical 240.20 devices, including computers and computer software, that are 240.21 purchased or constructed to be used for the activities set forth 240.22 in paragraph (a), beginning with the removal of raw materials 240.23 from inventory through completion of the product, including 240.24 packaging of the product. 240.25 (5) "Machinery and equipment used for pollution control" 240.26 means machinery and equipment used solely to eliminate, prevent, 240.27 or reduce pollution resulting from an activity described in 240.28 paragraph (a). 240.29 (6) "Manufacturing" means an operation or series of 240.30 operations where raw materials are changed in form, composition, 240.31 or condition by machinery and equipment and which results in the 240.32 production of a new article of tangible personal property. For 240.33 purposes of this subdivision, "manufacturing" includes the 240.34 generation of electricity or steam to be sold at retail. 240.35 (7) "Mining" means the extraction of minerals, ores, stone, 240.36 or peat. 241.1 (8) "On-line data retrieval system" means a system whose 241.2 cumulation of information is equally available and accessible to 241.3 all its customers. 241.4 (9) "Primarily" means machinery and equipment used 50 241.5 percent or more of the time in an activity described in 241.6 paragraph (a). 241.7 (10) "Refining" means the process of converting a natural 241.8 resource to an intermediate or finished product, including the 241.9 treatment of water to be sold at retail. 241.10 [EFFECTIVE DATE.] This section is effective the day 241.11 following final enactment, except that the second sentence in 241.12 paragraph (a) is effective for sales and purchases made after 241.13 December 31, 2005, and paragraph (c), clause (9), is effective 241.14 for sales and purchases made after June 30, 2005. 241.15 Sec. 20. Minnesota Statutes 2004, section 297A.68, 241.16 subdivision 28, is amended to read: 241.17 Subd. 28. [MEDICAL SUPPLIES.] Medical supplies purchased 241.18 by a licensed health care facility or licensed health care 241.19 professional to provide medical treatment to residents or 241.20 patients are exempt. The exemption does not apply to durable 241.21 medical equipment or components of durable medical equipment, 241.22 laboratory supplies, radiological supplies, and other items used 241.23 in providing medical services. For purposes of this 241.24 subdivision, "medical supplies" means adhesive and nonadhesive 241.25 bandages, gauze pads and strips, cotton applicators, 241.26 antiseptics,nonprescription drugs,eye solution, and other 241.27 similar supplies used directly on the resident or patient in 241.28 providing medical services. 241.29 [EFFECTIVE DATE.] This section is effective for sales and 241.30 purchases made after June 30, 2005. 241.31 Sec. 21. Minnesota Statutes 2004, section 297A.68, 241.32 subdivision 35, is amended to read: 241.33 Subd. 35. [TELECOMMUNICATIONS EQUIPMENT.] (a) 241.34 Telecommunications machinery and equipment purchased or leased 241.35 for use directly by a telecommunications service provider 241.36 primarily in the provision of telecommunications services that 242.1 are ultimately to be sold at retail are exempt, regardless of 242.2 whether purchased by the owner, a contractor, or a subcontractor. 242.3 (b) For purposes of this subdivision, "telecommunications 242.4 machinery and equipment" includes, but is not limited to: 242.5 (1) machinery, equipment, and fixtures utilized in 242.6 receiving, initiating, amplifying, processing, transmitting, 242.7 retransmitting, recording, switching, or monitoring 242.8 telecommunications services, such as computers, transformers, 242.9 amplifiers, routers, bridges, repeaters, multiplexers, and other 242.10 items performing comparable functions; 242.11 (2) machinery, equipment, and fixtures used in the 242.12 transportation of telecommunications services, radio 242.13 transmitters and receivers, satellite equipment, microwave 242.14 equipment, and other transporting media, but not wire, cable, 242.15 fiber, poles, or conduit; 242.16 (3) ancillary machinery, equipment, and fixtures that 242.17 regulate, control, protect, or enable the machinery in clauses 242.18 (1) and (2) to accomplish its intended function, such as 242.19 auxiliary power supply, test equipment, towers, heating, 242.20 ventilating, and air conditioning equipment necessary to the 242.21 operation of the telecommunications equipment; and software 242.22 necessary to the operation of the telecommunications equipment; 242.23 and 242.24 (4) repair and replacement parts, including accessories, 242.25 whether purchased as spare parts, repair parts, or as upgrades 242.26 or modifications to qualified machinery or equipment. 242.27 (c) For purposes of this subdivision, "telecommunications 242.28 services" means telecommunications services as defined in 242.29 section 297A.61, subdivision 24,paragraphparagraphs (a),only242.30 (c), and (d). 242.31 [EFFECTIVE DATE.] This section is effective the day 242.32 following final enactment. 242.33 Sec. 22. Minnesota Statutes 2004, section 297A.68, 242.34 subdivision 39, is amended to read: 242.35 Subd. 39. [PREEXISTING BIDS OR CONTRACTS.] (a) The sale of 242.36 tangible personal property or services is exempt from tax or a 243.1 tax rate increase for a period of six months from the effective 243.2 date of the law change that results in the imposition of the tax 243.3 or the tax rate increase under this chapter if: 243.4 (1) the act imposing the tax or increasing the tax rate 243.5 does not have transitional effective date language for existing 243.6 construction contracts and construction bids; and 243.7 (2) the requirements of paragraph (b) are met. 243.8 (b) A sale is tax exempt under paragraph (a) if it meets 243.9 the requirements of either clause (1) or (2): 243.10 (1) For a construction contract: 243.11 (i) the goods or services sold must be used for the 243.12 performance of a bona fide written lump sum or fixed price 243.13 construction contract; 243.14 (ii) the contract must be entered into before the date the 243.15 goods or services become subject to the sales tax or the tax 243.16 rate was increased; 243.17 (iii) the contract must not provide for allocation of 243.18 future taxes; and 243.19 (iv) for each qualifying contract the contractor must give 243.20 the seller documentation of the contract on which an exemption 243.21 is to be claimed. 243.22 (2) For a construction bid: 243.23 (i) the goods or services sold must be used pursuant to an 243.24 obligation of a bid or bids; 243.25 (ii) the bid or bids must be submitted and accepted before 243.26 the date the goods or services became subject to the sales 243.27 tax or the tax rate was increased; 243.28 (iii) the bid or bids must not be able to be withdrawn, 243.29 modified, or changed without forfeiting a bond; and 243.30 (iv) for each qualifying bid, the contractor must give the 243.31 seller documentation of the bid on which an exemption is to be 243.32 claimed. 243.33 [EFFECTIVE DATE.] This section is effective the day 243.34 following final enactment. 243.35 Sec. 23. Minnesota Statutes 2004, section 297A.68, is 243.36 amended by adding a subdivision to read: 244.1 Subd. 40. [LAND CLEARING.] Tree, bush, shrub, and stump 244.2 removal are exempt when sold to contractors or subcontractors as 244.3 part of a land clearing contract. For purposes of this 244.4 subdivision, "land clearing contract" means a contract for the 244.5 removal of trees, bushes, and shrubs, including the removal of 244.6 roots and stumps, to develop a site. This exemption does not 244.7 apply to land clearing of a portion of a site to allow for 244.8 remodeling, improvement, or expansion of an existing structure. 244.9 [EFFECTIVE DATE.] This section is effective for sales and 244.10 purchases made after October 28, 2002, but for land clearing 244.11 contracts entered into after October 28, 2002, no refunds may be 244.12 claimed under Minnesota Statutes, section 289A.50, for sales 244.13 taxes collected and remitted to the state on the land clearing 244.14 contracts. 244.15 Sec. 24. Minnesota Statutes 2004, section 297A.68, is 244.16 amended by adding a subdivision to read: 244.17 Subd. 41. [PERSONAL RAPID TRANSIT SYSTEM.] (a) Machinery, 244.18 equipment, and supplies purchased or leased, and used by the 244.19 purchaser or lessee in this state directly in the provision of a 244.20 personal rapid transit system as defined in section 297A.61, 244.21 subdivision 37, which provides service to the public on a 244.22 regular and continuing basis, are exempt, provided that the 244.23 system is operated independent of any government subsidies. 244.24 Machinery, equipment, and supplies that qualify for this 244.25 exemption include, but are not limited to, the following: 244.26 (1) vehicles, guideways, and related parts used directly in 244.27 the transit system; 244.28 (2) computers and equipment used primarily for operating, 244.29 controlling, and regulating the system; 244.30 (3) machinery, equipment, furniture, and fixtures necessary 244.31 for the functioning of system stations; 244.32 (4) machinery, equipment, implements, tools, and supplies 244.33 used to maintain vehicles, guideways, and stations; and 244.34 (5) electricity and other fuels used in the provision of 244.35 the transit service, including heating, cooling, and lighting of 244.36 system stations. 245.1 (b) This exemption does not include machinery, equipment, 245.2 and supplies used for nonproduction purposes such as operations 245.3 support and administration. 245.4 [EFFECTIVE DATE.] This section is effective for sales and 245.5 purchases made after June 30, 2005. 245.6 Sec. 25. Minnesota Statutes 2004, section 297A.70, 245.7 subdivision 10, is amended to read: 245.8 Subd. 10. [NONPROFIT TICKETS OR ADMISSIONS.] (a) Tickets 245.9 or admissions to an event are exempt if all the gross receipts 245.10 are recorded as such, in accordance with generally accepted 245.11 accounting principles, on the books of one or more organizations 245.12 whose primary mission is to provide an opportunity for citizens 245.13 of the state to participate in the creation, performance, or 245.14 appreciation of the arts, and provided that each organization is: 245.15 (1) an organization described in section 501(c)(3) of the 245.16 Internal Revenue Code in which voluntary contributions make up 245.17 at least the following percent of the organization's annual 245.18 revenue in its most recently completed 12-month fiscal year, or 245.19 in the current year if the organization has not completed a 245.20 12-month fiscal year: 245.21 (i) for sales made after July 31, 2001, and before July 1, 245.22 2002, for the organization's fiscal year completed in calendar 245.23 year 2000, three percent; 245.24 (ii) for sales made on or after July 1, 2002, and on or 245.25 before June 30, 2003, for the organization's fiscal year 245.26 completed in calendar year 2001, three percent; 245.27 (iii) for sales made on or after July 1, 2003, and on or 245.28 before June 30, 2004, for the organization's fiscal year 245.29 completed in calendar year 2002, four percent; and 245.30 (iv) for sales made in each 12-month period, beginning on 245.31 July 1, 2004, and each subsequent year, for the organization's 245.32 fiscal year completed in the preceding calendar year, five 245.33 percent; 245.34 (2) a municipal board that promotes cultural and arts 245.35 activities; or 245.36 (3) the University of Minnesota, a state college and 246.1 university, or a private nonprofit college or university 246.2 provided that the event is held at auniversity-ownedfacility 246.3 owned by the educational institution holding the event. 246.4 The exemption only applies if the entire proceeds, after 246.5 reasonable expenses, are used solely to provide opportunities 246.6 for citizens of the state to participate in the creation, 246.7 performance, or appreciation of the arts. 246.8 (b) Tickets or admissions to the premises of the Minnesota 246.9 Zoological Garden are exempt, provided that the exemption under 246.10 this paragraph does not apply to tickets or admissions to 246.11 performances or events held on the premises unless the 246.12 performance or event is sponsored and conducted exclusively by 246.13 the Minnesota Zoological Board or employees of the Minnesota 246.14 Zoological Garden. 246.15 [EFFECTIVE DATE.] This section is effective for tickets and 246.16 admissions to events held on or after July 1, 2005, but does not 246.17 apply to events for which sales of tickets or admissions were 246.18 made prior to July 1, 2005. 246.19 Sec. 26. Minnesota Statutes 2004, section 297A.71, 246.20 subdivision 12, is amended to read: 246.21 Subd. 12. [CHAIR LIFTS, RAMPS, ELEVATORS.]Chair lifts,246.22ramps, andElevators and building materials used to install or 246.23 constructthemchair lifts, ramps, and elevators are exempt, if 246.24 they are authorized by a physician and installed in or attached 246.25 to the owner's homestead. The tax must be imposed and collected 246.26 as if the rate under section 297A.62, subdivision 1, applied and 246.27 then refunded in the manner provided in section 297A.75. 246.28 [EFFECTIVE DATE.] This section is effective for sales and 246.29 purchases made after June 30, 2005. 246.30 Sec. 27. Minnesota Statutes 2004, section 297A.71, is 246.31 amended by adding a subdivision to read: 246.32 Subd. 33. [PERSONAL RAPID TRANSIT SYSTEM.] Materials, 246.33 equipment, and supplies used in the construction, expansion, or 246.34 improvement of a personal rapid transit system as defined in 246.35 section 297A.61, subdivision 37, which provides service to the 246.36 public on a regular and continuing basis, are exempt, provided 247.1 that the system is operated independent of any government 247.2 subsidies. 247.3 [EFFECTIVE DATE.] This section is effective for sales and 247.4 purchases made after June 30, 2005. 247.5 Sec. 28. Minnesota Statutes 2004, section 297A.72, is 247.6 amended by adding a subdivision to read: 247.7 Subd. 3. [EXEMPTION CERTIFICATE FOR SMALL BUSINESSES.] A 247.8 small business, as defined in section 645.455, subdivision 2, 247.9 paragraphs (a) to (c), that is located in the state may apply to 247.10 the commissioner for an exemption certificate to purchase exempt 247.11 capital equipment without paying the sales tax at the time of 247.12 the sale. The business must provide information required by the 247.13 commissioner to verify that it meets the definition of small 247.14 business in the preceding calendar year, or in the case of a new 247.15 business, that it will meet the definition in the first full 247.16 year of operations. A decision by the commissioner on whether a 247.17 business qualifies for this exemption is final. The exemption 247.18 certificate must be in the form and meet the requirements 247.19 imposed under this chapter and chapter 289A on other sales and 247.20 use tax exemption certificates, but it shall only be in effect 247.21 for two years from the date of issuance. 247.22 [EFFECTIVE DATE.] This section is effective for 247.23 applications submitted to the commissioner of revenue after July 247.24 1, 2005. 247.25 Sec. 29. Minnesota Statutes 2004, section 297A.75, 247.26 subdivision 1, is amended to read: 247.27 Subdivision 1. [TAX COLLECTED.] The tax on the gross 247.28 receipts from the sale of the following exempt items must be 247.29 imposed and collected as if the sale were taxable and the rate 247.30 under section 297A.62, subdivision 1, applied. The exempt items 247.31 include: 247.32 (1) capital equipment exempt under section 297A.68, 247.33 subdivision 5; 247.34 (2) building materials for an agricultural processing 247.35 facility exempt under section 297A.71, subdivision 13; 247.36 (3) building materials for mineral production facilities 248.1 exempt under section 297A.71, subdivision 14; 248.2 (4) building materials for correctional facilities under 248.3 section 297A.71, subdivision 3; 248.4 (5) building materials used in a residence for disabled 248.5 veterans exempt under section 297A.71, subdivision 11; 248.6 (6)chair lifts, ramps,elevators,andassociatedbuilding 248.7 materials exempt under section 297A.71, subdivision 12; 248.8 (7) building materials for the Long Lake Conservation 248.9 Center exempt under section 297A.71, subdivision 17; 248.10 (8) materials, supplies, fixtures, furnishings, and 248.11 equipment for a county law enforcement and family service center 248.12 under section 297A.71, subdivision 26; and 248.13 (9) materials and supplies for qualified low-income housing 248.14 under section 297A.71, subdivision 23. 248.15 [EFFECTIVE DATE.] This section is effective for sales and 248.16 purchases made after June 30, 2005. 248.17 Sec. 30. [297A.82] [MOTOR VEHICLE LEASES.] 248.18 Subdivision 1. [MOTOR VEHICLE LEASE PRICE; PAYMENT.] (a) 248.19 In the case of a lease of a motor vehicle as provided in section 248.20 297A.61, subdivision 4, paragraph (k), clause (2), the tax is 248.21 imposed on the total amount to be paid by the lessee under the 248.22 lease agreement. The lessor shall collect the tax in full at 248.23 the time the lease is executed or, if the tax is included in the 248.24 lease and the lease is assigned, the tax is due from the 248.25 original lessor at the time the lease is assigned. The total 248.26 amount to be paid by the lessee under the lease agreement equals 248.27 the agreed-upon value of the vehicle less manufacturer's 248.28 rebates, the stated residual value of the leased vehicle, and 248.29 the total value allowed for a vehicle owned by the lessee taken 248.30 in trade by the lessor, plus the price of any taxable goods and 248.31 services included in the lease and the rent charge as provided 248.32 by Code of Federal Regulations, title 12, section 213.4, 248.33 excluding any rent charge related to the capitalization of the 248.34 tax. 248.35 (b) If the total amount paid by the lessee for use of the 248.36 leased vehicle includes amounts that are not calculated at the 249.1 time the lease is executed, the tax is imposed and must be 249.2 collected by the lessor at the time the amounts are paid by the 249.3 lessee. In the case of a lease which by its terms may be 249.4 renewed, the sales tax is due and payable on the total amount to 249.5 be paid during the initial term of the lease, and then for each 249.6 subsequent renewal period on the total amount to be paid during 249.7 the renewal period. 249.8 (c) If a lease is canceled or rescinded on or before 90 249.9 days of its execution or if a vehicle is returned to the 249.10 manufacturer under section 325F.665, the lessor may file a claim 249.11 for a refund of the total tax paid minus the amount of tax due 249.12 for the period the vehicle is used by the lessee. 249.13 (d) If a lessee's obligation to make payments on a lease is 249.14 canceled more than 90 days after its execution, a credit is 249.15 allowed against sales tax or motor vehicles sales tax due on a 249.16 subsequent lease or purchase of a motor vehicle if that lease or 249.17 purchase is consummated within 30 days of the date the prior 249.18 lease was canceled. The amount of the credit is equal to (1) 249.19 the sales tax paid at the inception of the lease, multiplied by 249.20 (2) the ratio of the number of full months remaining in the 249.21 lease at the time of termination compared to the term of the 249.22 lease used in calculating sales tax paid at the inception of the 249.23 lease. 249.24 Subd. 2. [LEASE ORIGINATING IN ANOTHER STATE.] When the 249.25 lease of a motor vehicle as defined in section 297A.61, 249.26 subdivision 4, paragraph (k), clause (2), originates in another 249.27 state, the sales tax under subdivision 1 shall be calculated by 249.28 the lessor on the total amount that is due under the lease 249.29 agreement after the vehicle is required to be registered in 249.30 Minnesota. If the total amount to be paid by the lessee under 249.31 the lease agreement has already been subjected to tax by another 249.32 state, a credit for taxes paid in the other state is allowed as 249.33 provided in section 297A.80. 249.34 [EFFECTIVE DATE.] Subdivision 1 of this section is 249.35 effective for leases entered into after September 30, 2005. 249.36 Subdivision 2 of this section is effective for vehicles 250.1 registering in Minnesota after September 30, 2005. 250.2 Sec. 31. Minnesota Statutes 2004, section 297A.87, 250.3 subdivision 2, is amended to read: 250.4 Subd. 2. [SELLER'S PERMIT OR ALTERNATE STATEMENT.] (a) The 250.5 operator of an event under subdivision 1 shall obtain one of the 250.6 following from a person who wishes to do business as a seller at 250.7 the event: 250.8 (1) evidence that the person holds a valid seller's permit 250.9 under section 297A.84;or250.10 (2) a written statement that the person is not offering for 250.11 sale any item that is taxable under this chapter; or 250.12 (3) a written statement that this is the only selling event 250.13 that the person will be participating in for that calendar year, 250.14 that the person will be participating for three or fewer days, 250.15 and that the person will make less than $500 in total sales at 250.16 the event. The written statement shall include the person's 250.17 name, address, and telephone number. 250.18 (b) The operator shall require the evidence or statement as 250.19 a prerequisite to participating in the event as a seller. 250.20 [EFFECTIVE DATE.] This section is effective for selling 250.21 events occurring after June 15, 2005. 250.22 Sec. 32. Minnesota Statutes 2004, section 297A.87, 250.23 subdivision 3, is amended to read: 250.24 Subd. 3. [OCCASIONAL SALE PROVISIONSNOTAPPLICABLE UNDER 250.25 LIMITED CIRCUMSTANCES.] The isolated and occasional 250.26 saleprovisionsprovision under section 297A.67, subdivision 23, 250.27orapplies, provided that the seller only participates for three 250.28 or fewer days in one event per calendar year, makes $500 or less 250.29 in sales at the event, and provides the written statement 250.30 required in subdivision 2, paragraph (a), clause (3). The 250.31 isolated and occasional sales provision under section 297A.68, 250.32 subdivision 25,dodoes not apply to a seller at an event under 250.33 this section. 250.34 [EFFECTIVE DATE.] This section is effective for selling 250.35 events occurring after June 15, 2005. 250.36 Sec. 33. [297A.981] [LOCAL SALES TAXES; CERTAIN CITIES OF 251.1 THE FIRST CLASS.] 251.2 Subdivision 1. [GENERAL AUTHORITY; CERTAIN CITIES.] (a) 251.3 Notwithstanding sections 297A.99 and 477A.016, or any other 251.4 contrary provision of law, ordinance, or charter, a city of the 251.5 first class located in the seven-county metropolitan area may 251.6 impose a local sales tax of one-half of one percent on sale 251.7 transactions taxable under this chapter that occur within the 251.8 city. The tax base is the same as defined in section 297A.99, 251.9 subdivision 4. This tax is in addition to any other local sales 251.10 tax imposed under other general or special law and must not be 251.11 included when calculating sales tax limits imposed under other 251.12 law, ordinance, or charter. 251.13 Subd. 2. [USE TAX.] If the city imposes the tax authorized 251.14 in subdivision 1, a compensating use tax also applies, at the 251.15 same rate as the sales tax, on the use, storage, distribution, 251.16 or consumption of tangible personal property or taxable services. 251.17 Subd. 3. [USE OF REVENUES.] (a) Revenues received from 251.18 taxes imposed under subdivisions 1 and 2, minus the reasonable 251.19 costs of collection, may be used by the city for any purpose for 251.20 which the city is authorized to make expenditures. 251.21 Subd. 4. [COLLECTION; ENFORCEMENT; ADMINISTRATION.] A tax 251.22 imposed under this section shall be administered, collected, and 251.23 enforced by the commissioner of revenue as provided for under 251.24 section 297A.99, subdivision 9. The commissioner shall remit 251.25 the proceeds, minus refunds and the costs of collection, as 251.26 provided for in section 297A.99, subdivision 11. 251.27 Subd. 5. [LOCAL APPROVAL.] The question of imposing the 251.28 local sales tax must be submitted to the voters at a general or 251.29 a special election held for this purpose. If the majority of 251.30 the votes cast on the question are in the affirmative, the tax 251.31 shall be imposed on the first day of the next calendar quarter 251.32 beginning at least 30 days after the day of local approval. 251.33 [EFFECTIVE DATE.] This section is effective July 1, 2005. 251.34 Sec. 34. Minnesota Statutes 2004, section 297A.99, 251.35 subdivision 1, is amended to read: 251.36 Subdivision 1. [AUTHORIZATION; SCOPE.] (a) A political 252.1 subdivision of this state may impose a general sales tax if 252.2 permitted by special law or if the political subdivision enacted 252.3 and imposed the tax before the effective date of section 252.4 477A.016 and its predecessor provision, or if the tax is allowed 252.5 under section 297A.981. 252.6 (b) This section governs the imposition of a general sales 252.7 tax by the political subdivision. The provisions of this 252.8 section preempt the provisions of any special law: 252.9 (1) enacted before June 2, 1997, or 252.10 (2) enacted on or after June 2, 1997, that does not 252.11 explicitly exempt the special law provision from this section's 252.12 rules by reference. 252.13 (c) This section does not apply to or preempt a sales tax 252.14 on motor vehicles or a special excise tax on motor vehicles. 252.15 [EFFECTIVE DATE.] This section is effective for local sales 252.16 taxes for which the authorizing referendum is held after June 252.17 30, 2005. 252.18 Sec. 35. Minnesota Statutes 2004, section 297A.99, 252.19 subdivision 4, is amended to read: 252.20 Subd. 4. [TAX BASE.] (a) The tax applies to sales taxable 252.21 under this chapter that occur within the political subdivision. 252.22 (b) Taxable goods or services are subject to a political 252.23 subdivision's sales tax, if they areperformed either:252.24(1) within the political subdivision, or252.25(2) partly within and partly without the political252.26subdivision and more of the service is performed within the252.27political subdivision, based on the cost of performancesourced 252.28 to the political subdivision pursuant to section 297A.668. 252.29 [EFFECTIVE DATE.] This section is effective for sales made 252.30 on or after January 1, 2004. 252.31 Sec. 36. Minnesota Statutes 2004, section 297A.99, 252.32 subdivision 9, is amended to read: 252.33 Subd. 9. [ENFORCEMENT; COLLECTION; AND ADMINISTRATION.] 252.34 (a) The commissioner of revenue shall collect the taxes subject 252.35 to this section. The commissioner may collect the tax with the 252.36 state sales and use tax. All taxes under this section are 253.1 subject to the same penalties, interest, and enforcement 253.2 provisions as apply to the state sales and use tax. 253.3 (b) A request for a refund of state sales tax paid in 253.4 excess of the amount of tax legally due includes a request for a 253.5 refund of the political subdivision taxes paid on the goods or 253.6 services. The commissioner shall refund to the taxpayer the 253.7 full amount of the political subdivision taxes paid on exempt 253.8 sales or use. 253.9 (c) A political subdivision shall incur a legal debt to the 253.10 state for refunds of local sales taxes made by the commissioner 253.11 after a tax has terminated when the amount of the refunds 253.12 exceeds the amount of local sales taxes collected for but not 253.13 remitted to the political subdivision. The commissioner of 253.14 revenue shall deduct the amount of the debt from the next 253.15 payment scheduled to be made to the political subdivision under 253.16 section 273.1384, 273.1398, or sections 477A.011 to 477A.014. 253.17 The commissioner shall deposit the money in the state treasury 253.18 and credit it to the general fund. 253.19 [EFFECTIVE DATE.] This section is effective for all refunds 253.20 made on or after the day following final enactment. 253.21 Sec. 37. Minnesota Statutes 2004, section 297A.99, is 253.22 amended by adding a subdivision to read: 253.23 Subd. 12a. [NOTIFICATION OF USE TAX.] Any city or county 253.24 imposing a local sales and use tax, which maintains an official 253.25 web site, must display on its main home page a notice that 253.26 residents and businesses in the city or county may owe a local 253.27 use tax on purchases of goods and services made outside of the 253.28 city or county limits. The notice must provide information, 253.29 including a link to any relevant Department of Revenue Web site, 253.30 on how the taxpayer may get information and forms necessary for 253.31 calculating and paying the tax. If the city or county provides 253.32 and bills for sewer, water, garbage collection, or other public 253.33 utility services, the billing statement must also include a 253.34 notice that residents and businesses may owe a local use tax on 253.35 purchases made outside of the city or county limits and provide 253.36 information on how the taxpayer may get information and forms 254.1 necessary for calculating and paying the tax. 254.2 [EFFECTIVE DATE.] This section is effective January 1, 2006. 254.3 Sec. 38. Minnesota Statutes 2004, section 477A.016, is 254.4 amended to read: 254.5 477A.016 [NEW TAXES PROHIBITED.] 254.6 No county, city, town or other taxing authority shall 254.7 increase a present tax or impose a new tax on sales or income, 254.8 except as provided in section 297A.981. 254.9 [EFFECTIVE DATE.] This section is effective July 1, 2005. 254.10 Sec. 39. Laws 1998, chapter 389, article 8, section 43, 254.11 subdivision 3, is amended to read: 254.12 Subd. 3. [USE OF REVENUES.] Revenues received from the 254.13 taxes authorized by subdivisions 1 and 2 must be used by the 254.14 city to pay for the cost of collecting and administering the 254.15 taxes and to pay for the following projects: 254.16 (1) transportation infrastructure improvements including 254.17 both highway and airport improvements; 254.18 (2) improvements to the civic center complex; 254.19 (3) a municipal water, sewer, and storm sewer project 254.20 necessary to improve regional ground water quality; and 254.21 (4) construction of a regional recreation and sports center 254.22 andassociatedother facilities available for both community and 254.23 student use, located at or adjacent to the Rochester center. 254.24 The total amount of capital expenditures or bonds for these 254.25 projects that may be paid from the revenues raised from the 254.26 taxes authorized in this section may not exceed $71,500,000. 254.27 The total amount of capital expenditures or bonds for the 254.28 project in clause (4) that may be paid from the revenues raised 254.29 from the taxes authorized in this section may not exceed 254.30 $20,000,000. 254.31 [EFFECTIVE DATE; LOCAL APPROVAL.] This section is effective 254.32 the day after the governing body of Rochester and its chief 254.33 clerical officer timely complete their compliance with Minnesota 254.34 Statutes, section 645.021, subdivisions 2 and 3. 254.35 Sec. 40. Laws 2001, First Special Session chapter 5, 254.36 article 12, section 95, as amended by Laws 2002, chapter 377, 255.1 article 3, section 24, and Laws 2003, First Special Session 255.2 chapter 21, article 8, section 15, is amended to read: 255.3 Sec. 95. [REPEALER.] 255.4 (a) Minnesota Statutes 2000, sections 297A.61, subdivision 255.5 16; 297A.68, subdivision 21; and 297A.71, subdivision 2, are 255.6 repealed effective for sales and purchases occurring after June 255.7 30, 2001, except that the repeal of section 297A.61, subdivision 255.8 16, paragraph (d), is effective for sales and purchases 255.9 occurring after July 31, 2001. 255.10 (b) Minnesota Statutes 2000,sectionssection 297A.62, 255.11 subdivision 2,and 297A.64, subdivision 1, areis repealed 255.12 effective for sales and purchases made after December 31, 2005. 255.13 (c) Minnesota Statutes 2000, section 297A.71, subdivision 255.14 15, is repealed effective for sales and purchases made after 255.15 June 30, 2002. 255.16 (d) Minnesota Statutes 2000, section 297A.71, subdivision 255.17 16, is repealed effective for sales and purchases occurring 255.18 after December 31, 2002. 255.19 [EFFECTIVE DATE.] This section is effective the day 255.20 following final enactment. 255.21 Sec. 41. Laws 2002, chapter 377, article 3, section 4, the 255.22 effective date, is amended to read: 255.23 [EFFECTIVE DATE.]With the exception of clause (2), item255.24(ii),This section is effective for sales and purchases made 255.25 after June 30, 2002.Clause (2), item (ii), is effective for255.26sales and purchases made after June 30, 2002, and before January255.271, 2006.255.28 Sec. 42. [REPEALER.] 255.29 Minnesota Rules, parts 8130.0110, subpart 4; 8130.0200, 255.30 subparts 5 and 6; 8130.0400, subpart 9; 8130.1200, subparts 5 255.31 and 6; 8130.2900; 8130.3100, subpart 1; 8130.4000, subparts 1 255.32 and 2; 8130.4200, subpart 1; 8130.4400, subpart 3; 8130.5200; 255.33 8130.5600, subpart 3; 8130.5800, subpart 5; 8130.7300, subpart 255.34 5; and 8130.8800, subpart 4, are repealed. 255.35 [EFFECTIVE DATE.] This section is effective the day 255.36 following final enactment. 256.1 ARTICLE 8 256.2 SPECIAL TAXES AND FEES 256.3 Section 1. Minnesota Statutes 2004, section 240.30, is 256.4 amended by adding a subdivision to read: 256.5 Subd. 11. [FRANCHISE FEE.] As a condition of operating a 256.6 card club under this section, the licensee must pay a fee to the 256.7 commission equal to 15 percent of the gross revenues, less any 256.8 refunds, for charges imposed under subdivision 4. Payment, 256.9 collection, and administration of the fee must be made in the 256.10 same manner and under the terms provided under section 240.15 256.11 for the tax on pari-mutuel pools. The commission shall deposit 256.12 all of the revenues from the fee in the state treasury and 256.13 amounts deposited must be credited to the general fund. The 256.14 amount of the fee under this subdivision does not reduce the 256.15 obligation to set aside revenues from the card club under 256.16 section 240.135. 256.17 [EFFECTIVE DATE.] This section is effective for charges and 256.18 revenues received after June 30, 2005. 256.19 Sec. 2. Minnesota Statutes 2004, section 287.04, is 256.20 amended to read: 256.21 287.04 [EXEMPTIONS.] 256.22 The tax imposed by section 287.035 does not apply to: 256.23 (a) A decree of marriage dissolution or an instrument made 256.24 pursuant to it. 256.25 (b) A mortgage given to correct a misdescription of the 256.26 mortgaged property. 256.27 (c) A mortgage or other instrument that adds additional 256.28 security for the same debt for which mortgage registry tax has 256.29 been paid. 256.30 (d) A contract for the conveyance of any interest in real 256.31 property, including a contract for deed. 256.32 (e) A mortgage secured by real property subject to the 256.33 minerals production tax of sections 298.24 to 298.28. 256.34 (f) The principal amount of a mortgage loan made under a 256.35 low and moderate income or other affordable housing program, if 256.36 the mortgagee is a federal, state, or local government agency. 257.1 (g) Mortgages granted by fraternal benefit societies 257.2 subject to section 64B.24. 257.3 (h) A mortgage amendment or extension, as defined in 257.4 section 287.01. 257.5 (i) An agricultural mortgage if the proceeds of the loan 257.6 secured by the mortgage are used to acquire or improve real 257.7 property classified under section 273.13, subdivision 23, 257.8 paragraph (a), or (b), clause (1), (2), or (3). 257.9 (j) A mortgage on an armory building as set forth in 257.10 section 193.147. 257.11 [EFFECTIVE DATE.] This section is effective the day 257.12 following final enactment. 257.13 Sec. 3. Minnesota Statutes 2004, section 295.52, 257.14 subdivision 4, is amended to read: 257.15 Subd. 4. [USE TAX; PRESCRIPTION DRUGS.] (a) A person that 257.16 receives prescription drugs for resale or use in Minnesota, 257.17 other than from a wholesale drug distributor that is subject to 257.18 tax under subdivision 3, is subject to a tax equal to the price 257.19 paid to the wholesale drug distributor multiplied by the tax 257.20 percentage specified in this section. Liability for the tax is 257.21 incurred when prescription drugs are received or delivered in 257.22 Minnesota by the person. 257.23 (b) A person that receives prescription drugs for use in 257.24 Minnesota from a nonresident pharmacy required to be registered 257.25 under section 151.19 is subject to a tax equal to the price paid 257.26 by the nonresident pharmacy to the wholesale drug distributor or 257.27 the price received by the nonresident pharmacy, whichever is 257.28 lower, multiplied by the tax percentage specified in this 257.29 section. Liability for the tax is incurred when prescription 257.30 drugs are received in Minnesota by the person. 257.31 (c) A tax imposed under this subdivision does not apply to 257.32 purchases by an individual for personal use or consumption. 257.33 [EFFECTIVE DATE.] This section is effective for purchases 257.34 made after June 30, 2005. 257.35 Sec. 4. Minnesota Statutes 2004, section 295.53, 257.36 subdivision 1, is amended to read: 258.1 Subdivision 1. [EXEMPTIONS.] (a) The following payments 258.2 are excluded from the gross revenues subject to the hospital, 258.3 surgical center, or health care provider taxes under sections 258.4 295.50 to 295.59: 258.5 (1) payments received for services provided under the 258.6 Medicare program, including payments received from the 258.7 government, and organizations governed by sections 1833 and 1876 258.8 of title XVIII of the federal Social Security Act, United States 258.9 Code, title 42, section 1395, and enrollee deductibles, 258.10 coinsurance, and co-payments, whether paid by the Medicare 258.11 enrollee or by a Medicare supplemental coverage as defined in 258.12 section 62A.011, subdivision 3, clause (10), or by Medicaid 258.13 payments under title XIX of the federal Social Security Act. 258.14 Payments for services not covered by Medicare are taxable; 258.15 (2) payments received for home health care services; 258.16 (3) payments received from hospitals or surgical centers 258.17 for goods and services on which liability for tax is imposed 258.18 under section 295.52 or the source of funds for the payment is 258.19 exempt under clause (1), (7), (10), or (14); 258.20 (4) payments received from health care providers for goods 258.21 and services on which liability for tax is imposed under this 258.22 chapter or the source of funds for the payment is exempt under 258.23 clause (1), (7), (10), or (14); 258.24 (5) amounts paid for legend drugs, other than nutritional 258.25 products, to a wholesale drug distributor who is subject to tax 258.26 under section 295.52, subdivision 3, reduced by reimbursements 258.27 received for legend drugs otherwise exempt under this chapter; 258.28 (6) payments received by a health care provider or the 258.29 wholly owned subsidiary of a health care provider for care 258.30 provided outside Minnesota; 258.31 (7) payments received from the chemical dependency fund 258.32 under chapter 254B; 258.33 (8) payments received in the nature of charitable donations 258.34 that are not designated for providing patient services to a 258.35 specific individual or group; 258.36 (9) payments received for providing patient services 259.1 incurred through a formal program of health care research 259.2 conducted in conformity with federal regulations governing 259.3 research on human subjects. Payments received from patients or 259.4 from other persons paying on behalf of the patients are subject 259.5 to tax; 259.6 (10) payments received from any governmental agency for 259.7 services benefiting the public, not including payments made by 259.8 the government in its capacity as an employer or insurer or 259.9 payments made by the government for services provided under 259.10 general assistance medical care, the MinnesotaCare program, or 259.11 the medical assistance program governed by title XIX of the 259.12 federal Social Security Act, United States Code, title 42, 259.13 sections 1396 to 1396v; 259.14 (11) government payments received by the commissioner of 259.15 human services for state-operated services; 259.16 (12) payments received by a health care provider for 259.17 hearing aids and related equipment or prescription eyewear 259.18 delivered outside of Minnesota; 259.19 (13) payments received by an educational institution from 259.20 student tuition, student activity fees, health care service 259.21 fees, government appropriations, donations, or grants, and for 259.22 services identified in and provided under an individualized 259.23 education plan as defined in section 256B.0625 or Code of 259.24 Federal Regulations, chapter 34, section 300.340(a). Fee for 259.25 service payments and payments for extended coverage are taxable; 259.26and259.27 (14) payments received under the federal Employees Health 259.28 Benefits Act, United States Code, title 5, section 8909(f), as 259.29 amended by the Omnibus Reconciliation Act of 1990. Enrollee 259.30 deductibles, coinsurance, and co-payments are subject to tax; 259.31 and 259.32 (15) payments received under the federal Tricare program, 259.33 Code of Federal Regulations, title 32, section 199.17(a)(7). 259.34 Enrollee deductibles, coinsurance, and co-payments are subject 259.35 to tax. 259.36 (b) Payments received by wholesale drug distributors for 260.1 legend drugs sold directly to veterinarians or veterinary bulk 260.2 purchasing organizations are excluded from the gross revenues 260.3 subject to the wholesale drug distributor tax under sections 260.4 295.50 to 295.59. 260.5 [EFFECTIVE DATE.] The change made to paragraph (a), clause 260.6 (14), of this section is effective for enrollee deductibles, 260.7 coinsurance, and co-payments received under the federal 260.8 Employees Health Benefits Act on or after the day following 260.9 final enactment. Paragraph (a), clause (15), is effective for 260.10 gross revenues received under the federal Tricare program after 260.11 December 31, 2004. 260.12 Sec. 5. Minnesota Statutes 2004, section 295.582, is 260.13 amended to read: 260.14 295.582 [AUTHORITY.] 260.15 Subdivision 1. [TRANSFER TO THIRD-PARTY PURCHASERS.] (a) A 260.16 hospital, surgical center, or health care provider that is 260.17 subject to a tax under section 295.52, or a pharmacy that has 260.18 paid additional expense transferred under this section by a 260.19 wholesale drug distributor, may transfer additional expense 260.20 generated by section 295.52 obligations on to all third-party 260.21 contracts for the purchase of health care services on behalf of 260.22 a patient or consumer. The additional expense transferred to 260.23 the third-party purchaser must not exceed the tax percentage 260.24 specified in section 295.52 multiplied against the gross 260.25 revenues received under the third-party contract, and the tax 260.26 percentage specified in section 295.52 multiplied against 260.27 co-payments and deductibles paid by the individual patient or 260.28 consumer. A health care provider who chooses to transfer the 260.29 tax specified in section 295.52 may itemize the tax on patient 260.30 billings. The expense must not be generated on revenues derived 260.31 from payments that are excluded from the tax under section 260.32 295.53. All third-party purchasers of health care services 260.33 including, but not limited to, third-party purchasers regulated 260.34 under chapter 60A, 62A, 62C, 62D, 62H, 62N, 64B, 65A, 65B, 79, 260.35 or 79A, or under section 471.61 or 471.617, and a pharmacy 260.36 benefits manager must pay the transferred expense in addition to 261.1 any payments due under existing contracts with the hospital, 261.2 surgical center, pharmacy, or health care provider, to the 261.3 extent allowed under federal law. A third-party purchaser of 261.4 health care services includes, but is not limited to, a health 261.5 carrier or community integrated service network that pays for 261.6 health care services on behalf of patients or that reimburses, 261.7 indemnifies, compensates, or otherwise insures patients for 261.8 health care services and for purposes of this section, a 261.9 pharmacy benefits manager means an entity that performs pharmacy 261.10 benefits management. A third-party purchaser shall comply with 261.11 this section regardless of whether the third-party purchaser is 261.12 a for-profit, not-for-profit, or nonprofit entity or whether the 261.13 health care provider has chosen to itemize the tax on patient 261.14 billings. If the third-party purchaser's contract limits 261.15 provider payment to a specified amount, such as an usual and 261.16 customary fee schedule, the third-party purchaser must still pay 261.17 the tax transferred or itemized by a health care provider based 261.18 upon the contractual fee. A third-party purchaser is also 261.19 responsible for reimbursing providers for the percentage tax 261.20 levied on co-payments or deductibles paid by the insured. A 261.21 wholesale drug distributor may transfer additional expense 261.22 generated by section 295.52 obligations to entities that 261.23 purchase from the wholesaler, and the entities must pay the 261.24 additional expense. Nothing in this section limits the ability 261.25 of a hospital, surgical center, pharmacy, wholesale drug 261.26 distributor, or health care provider to recover all or part of 261.27 the section 295.52 obligation by other methods, including 261.28 increasing fees or charges. Nothing in this section prohibits a 261.29 pharmacy from passing on additional fees or charges to a 261.30 pharmacy benefits manager. 261.31 (b) Each third-party purchaser regulated under any chapter 261.32 cited in paragraph (a) shall include with its annual renewal for 261.33 certification of authority or licensure documentation indicating 261.34 compliance with paragraph (a). The documentation must include 261.35 information relating to a third-party purchaser's means for 261.36 compliance with paragraph (a) for health care providers who 262.1 itemize the tax on patient billings. 262.2 (c) Any hospital, surgical center, or health care provider 262.3 subject to a tax under section 295.52 or a pharmacy that has 262.4 paid additional expense transferred under this section by a 262.5 wholesale drug distributor may file a complaint with the 262.6 commissioner responsible for regulating the third-party 262.7 purchaser if at any time the third-party purchaser fails to 262.8 comply with paragraph (a). 262.9 (d) If the commissioner responsible for regulating the 262.10 third-party purchaser finds at any time that the third-party 262.11 purchaser has not complied with paragraph (a), the commissioner 262.12 may take enforcement action against a third-party purchaser 262.13 which is subject to the commissioner's regulatory jurisdiction 262.14 and which does not allow a hospital, surgical center, pharmacy, 262.15 or provider to pass-through the tax. The commissioner may by 262.16 order fine or censure the third-party purchaser or revoke or 262.17 suspend the certificate of authority or license of the 262.18 third-party purchaser to do business in this state if the 262.19 commissioner finds that the third-party purchaser has not 262.20 complied with this section. The third-party purchaser may 262.21 appeal the commissioner's order through a contested case hearing 262.22 in accordance with chapter 14. 262.23 Subd. 2. [WHOLESALE DRUG DISTRIBUTOR TAX; AGREEMENT.] A 262.24 contracting agreement between a health plan company or a 262.25 pharmacy benefits manager and a resident or nonresident pharmacy 262.26 registered under chapter 151, may not prohibit: 262.27 (1) a pharmacy that has paid additional expense transferred 262.28 under this section by a wholesale drug distributor from 262.29 exercising its option under this section to transfer such 262.30 additional expenses generated by the section 295.52 obligations 262.31 on to the health plan company, a pharmacy benefits manager, or a 262.32 third-party purchaser; or 262.33 (2) a pharmacy that is subject to tax under section 295.52, 262.34 subdivision 4, from exercising its option under this section to 262.35 recover all or part of the section 295.52 obligations from the 262.36 health plan company, a pharmacy benefits manager, or a 263.1 third-party purchaser by other methods, including increasing 263.2 fees or charges. 263.3 Sec. 6. Minnesota Statutes 2004, section 295.60, 263.4 subdivision 3, is amended to read: 263.5 Subd. 3. [PAYMENT.] (a) Each furrier shall make estimated 263.6 payments of the taxes for the calendar year in quarterly 263.7 installments to the commissioner by April 15, July 15, October 263.8 15, and January 15 of the following calendar year. 263.9 (b) Estimated tax payments are not required if: 263.10 (1) the tax for the current calendar year is less than 263.11 $500; or 263.12 (2) the tax for the previous calendar year is less than 263.13 $500, if the taxpayer had a tax liability and was doing business 263.14 the entire year. 263.15 (c) Underpayment of estimated installments bear interest at 263.16 the rate specified in section 270.75, from the due date of the 263.17 payment until paid or until the due date of the annual return, 263.18 whichever comes first. An underpayment of an estimated 263.19 installment is the difference between the amount paid and the 263.20 lesser of (1)90 percent of one-quarter of the tax for the263.21calendar yearthe tax for the actual gross revenues received 263.22 during the quarter, or (2) one-quarter of the total tax for the 263.23 previous calendar year if the taxpayer had a tax liability and 263.24 was doing business the entire year. 263.25 [EFFECTIVE DATE.] This section is effective for gross 263.26 revenues received after December 31, 2004. 263.27 Sec. 7. [295.75] [LIQUOR GROSS RECEIPTS TAX.] 263.28 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 263.29 section, the following terms have the meanings given. 263.30 (b) "Commissioner" means the commissioner of revenue. 263.31 (c) "Gross receipts" means the total amount received, in 263.32 money or by barter or exchange, for all liquor sales at retail 263.33 as measured by the sales price, but does not include any taxes 263.34 imposed directly on the consumer that are separately stated on 263.35 the invoice, bill of sale, or similar document given to the 263.36 purchaser. 264.1 (d) "Liquor" means: 264.2 (1) intoxicating liquor, as defined in section 340A.101, 264.3 subdivision 14; 264.4 (2) beverage containing intoxicating liquor; and 264.5 (3) 3.2 percent malt liquor, as defined in section 264.6 340A.101, subdivision 19, when sold at an on-sale or off-sale 264.7 municipal liquor store or other establishment licensed to sell 264.8 any type of intoxicating liquor. 264.9 (e) "Liquor retailer" means a retailer that sells liquor. 264.10 (f) "Retail sale" has the meaning given in section 297A.61, 264.11 subdivision 4. 264.12 Subd. 2. [GROSS RECEIPTS TAX IMPOSED.] A tax is imposed on 264.13 each liquor retailer equal to 2.5 percent of gross receipts from 264.14 retail sales in Minnesota of liquor. 264.15 Subd. 3. [USE TAX IMPOSED; CREDIT FOR TAXES PAID.] (a) A 264.16 person that receives liquor for use or storage in Minnesota, 264.17 other than from a liquor retailer that paid the tax under 264.18 subdivision 2, is subject to tax at the rate imposed under 264.19 subdivision 2. Liability for the tax is incurred when the 264.20 person has possession of the liquor in Minnesota. The tax must 264.21 be remitted to the commissioner in the same manner prescribed 264.22 for the taxes imposed under chapter 297A. 264.23 (b) A person that has paid taxes to another jurisdiction on 264.24 the same transaction and is subject to tax under this section is 264.25 entitled to a credit for the tax legally due and paid to another 264.26 jurisdiction to the extent of the lesser of (1) the tax actually 264.27 paid to the other jurisdiction, or (2) the amount of tax imposed 264.28 by Minnesota on the transaction subject to tax in the other 264.29 jurisdiction. 264.30 Subd. 4. [TAX COLLECTION REQUIRED.] A liquor retailer with 264.31 nexus in Minnesota, who is not subject to tax under subdivision 264.32 2, is required to collect the tax imposed under subdivision 3 264.33 from the purchaser of the liquor and give the purchaser a 264.34 receipt for the tax paid. The tax collected must be remitted to 264.35 the commissioner in the same manner prescribed for the taxes 264.36 imposed under chapter 297A. 265.1 Subd. 5. [TAXES PAID TO ANOTHER JURISDICTION; CREDIT.] A 265.2 liquor retailer that has paid taxes to another jurisdiction 265.3 measured by gross receipts and is subject to tax under this 265.4 section on the same gross receipts is entitled to a credit for 265.5 the tax legally due and paid to another jurisdiction to the 265.6 extent of the lesser of (1) the tax actually paid to the other 265.7 jurisdiction, or (2) the amount of tax imposed by Minnesota on 265.8 the gross receipts subject to tax in the other taxing 265.9 jurisdictions. 265.10 Subd. 6. [EXEMPTIONS.] All of the exemptions applicable to 265.11 the taxes imposed under chapter 297A are applicable to the taxes 265.12 imposed under this section. 265.13 Subd. 7. [SOURCING OF SALES.] All of the provisions of 265.14 section 297A.668 apply to the taxes imposed by this section. 265.15 Subd. 8. [PAYMENT; REPORTING.] A liquor retailer shall 265.16 report the tax on a return prescribed by the commissioner of 265.17 revenue, and shall remit the tax with the return. The return 265.18 and the tax must be filed and paid using the filing cycle and 265.19 due dates provided for taxes imposed under chapter 297A. 265.20 Subd. 9. [ADMINISTRATION.] Unless specifically provided 265.21 otherwise by this section, the audit, assessment, refund, 265.22 penalty, interest, enforcement, collection remedies, appeal, and 265.23 administrative provisions of chapters 270 and 289A that are 265.24 applicable to taxes imposed under chapter 297A apply to taxes 265.25 imposed under this section. 265.26 Subd. 10. [INTEREST ON OVERPAYMENTS.] Interest must be 265.27 paid on an overpayment refunded or credited to the taxpayer from 265.28 the date of payment of the tax until the date the refund is paid 265.29 or credited. For purposes of this subdivision, the date of 265.30 payment is the due date of the return or the date of actual 265.31 payment of the tax, whichever is later. 265.32 Subd. 11. [DEPOSIT OF REVENUES.] The commissioner shall 265.33 deposit all revenues, including penalties and interest, derived 265.34 from the tax imposed by this section in the general fund. 265.35 [EFFECTIVE DATE.] This section is effective for sales and 265.36 purchases occurring on or after January 1, 2006. 266.1 Sec. 8. Minnesota Statutes 2004, section 296A.22, is 266.2 amended by adding a subdivision to read: 266.3 Subd. 9. [ABATEMENT OF PENALTY.] (a) The commissioner may 266.4 by written order abate any penalty imposed under this section, 266.5 if in the commissioner's opinion there is reasonable cause to do 266.6 so. 266.7 (b) A request for abatement of penalty must be filed with 266.8 the commissioner within 60 days of the date the notice stating 266.9 that a penalty has been imposed was mailed to the taxpayer's 266.10 last known address. 266.11 (c) If the commissioner issues an order denying a request 266.12 for abatement of penalty, the taxpayer may file an 266.13 administrative appeal as provided in section 296A.25 or appeal 266.14 to Tax Court as provided in section 271.06. If the commissioner 266.15 does not issue an order on the abatement request within 60 days 266.16 from the date the request is received, the taxpayer may appeal 266.17 to Tax Court as provided in section 271.06. 266.18 [EFFECTIVE DATE.] This section is effective for penalties 266.19 imposed on or after the day following final enactment. 266.20 Sec. 9. Minnesota Statutes 2004, section 297E.01, 266.21 subdivision 5, is amended to read: 266.22 Subd. 5. [DISTRIBUTOR.] "Distributor" means a distributor 266.23 as defined in section 349.12, subdivision 11, or a person or 266.24 linked bingo game provider who markets, sells, or provides 266.25 gambling product to a person or entity for resale or use at the 266.26 retail level. 266.27 [EFFECTIVE DATE.] This section is effective the day 266.28 following final enactment. 266.29 Sec. 10. Minnesota Statutes 2004, section 297E.01, 266.30 subdivision 7, is amended to read: 266.31 Subd. 7. [GAMBLING PRODUCT.] "Gambling product" means 266.32 bingo hard cards, bingo paper, orsheets, or linked bingo paper 266.33 sheets; pull-tabs; tipboards; paddletickets and paddleticket 266.34 cards; raffle tickets; or any other ticket, card, board, 266.35 placard, device, or token that represents a chance, for which 266.36 consideration is paid, to win a prize. 267.1 [EFFECTIVE DATE.] This section is effective the day 267.2 following final enactment. 267.3 Sec. 11. Minnesota Statutes 2004, section 297E.01, is 267.4 amended by adding a subdivision to read: 267.5 Subd. 9a. [LINKED BINGO GAME.] "Linked bingo game" means a 267.6 bingo game played at two or more locations where licensed 267.7 organizations are authorized to conduct bingo, when there is a 267.8 common prize pool and a common selection of numbers or symbols 267.9 conducted at one location, and when the results of the selection 267.10 are transmitted to all participating locations by satellite, 267.11 telephone, or other means by a linked bingo game provider. 267.12 [EFFECTIVE DATE.] This section is effective the day 267.13 following final enactment. 267.14 Sec. 12. Minnesota Statutes 2004, section 297E.01, is 267.15 amended by adding a subdivision to read: 267.16 Subd. 9b. [LINKED BINGO GAME PROVIDER.] "Linked bingo game 267.17 provider" means any person who provides the means to link bingo 267.18 prizes in a linked bingo game, who provides linked bingo paper 267.19 sheets to the participating organizations, who provides linked 267.20 bingo prize management, and who provides the linked bingo game 267.21 system. 267.22 [EFFECTIVE DATE.] This section is effective the day 267.23 following final enactment. 267.24 Sec. 13. Minnesota Statutes 2004, section 297E.06, 267.25 subdivision 2, is amended to read: 267.26 Subd. 2. [BUSINESS RECORDS.] An organization shall 267.27 maintain records supporting the gambling activity reported to 267.28 the commissioner. Records include, but are not limited to, the 267.29 following items: 267.30 (1) all winning and unsold tickets, cards, or stubs for 267.31 pull-tab, tipboard, paddlewheel, and raffle games; 267.32 (2) all reports and statements, including checker's 267.33 records, for each bingo occasion; 267.34 (3) all cash journals and ledgers, deposit slips, register 267.35 tapes, and bank statements supporting gambling activity 267.36 receipts; 268.1 (4) all invoices that represent purchases of gambling 268.2 product; 268.3 (5) all canceled checks or copies of substitute checks as 268.4 defined in Public Law 108-100, section 3, check recorders, 268.5 journals and ledgers, vouchers, invoices, bank statements, and 268.6 other documents supporting gambling activity expenditures; and 268.7 (6) all organizational meeting minutes. 268.8 All records required to be kept by this section must be 268.9 preserved by the organization for at least 3-1/2 years and may 268.10 be inspected by the commissioner of revenue at any reasonable 268.11 time without notice or a search warrant. 268.12 [EFFECTIVE DATE.] This section is effective July 1, 2005. 268.13 Sec. 14. Minnesota Statutes 2004, section 297E.07, is 268.14 amended to read: 268.15 297E.07 [INSPECTION RIGHTS.] 268.16 At any reasonable time, without notice and without a search 268.17 warrant, the commissioner may enter a place of business of a 268.18 manufacturer, distributor,ororganization, or linked bingo game 268.19 provider; any site from which pull-tabs or tipboards or other 268.20 gambling equipment or gambling product are being manufactured, 268.21 stored, or sold; or any site at which lawful gambling is being 268.22 conducted, and inspect the premises, books, records, and other 268.23 documents required to be kept under this chapter to determine 268.24 whether or not this chapter is being fully complied with. If 268.25 the commissioner is denied free access to or is hindered or 268.26 interfered with in making an inspection of the place of 268.27 business, books, or records, the permit of the distributor may 268.28 be revoked by the commissioner, and the license of the 268.29 manufacturer, the distributor,orthe organization, or linked 268.30 bingo game provider may be revoked by the board. 268.31 [EFFECTIVE DATE.] This section is effective the day 268.32 following final enactment. 268.33 Sec. 15. Minnesota Statutes 2004, section 297F.08, 268.34 subdivision 12, is amended to read: 268.35 Subd. 12. [CIGARETTES IN INTERSTATE COMMERCE.] (a) A 268.36 person may not transport or cause to be transported from this 269.1 state cigarettes for sale in another state without first 269.2 affixing to the cigarettes the stamp required by the state in 269.3 which the cigarettes are to be sold or paying any other excise 269.4 tax on the cigarettes imposed by the state in which the 269.5 cigarettes are to be sold. 269.6 (b) A person may not affix to cigarettes the stamp required 269.7 by another state or pay any other excise tax on the cigarettes 269.8 imposed by another state if the other state prohibits stamps 269.9 from being affixed to the cigarettes, prohibits the payment of 269.10 any other excise tax on the cigarettes, or prohibits the sale of 269.11 the cigarettes. 269.12 (c) Not later than 15 days after the end of each calendar 269.13 quarter, a person who transports or causes to be transported 269.14 from this state cigarettes for sale in another state shall 269.15 submit to the commissioner a report identifying the quantity and 269.16 style of each brand of the cigarettes transported or caused to 269.17 be transported in the preceding calendar quarter, and the name 269.18 and address of each recipient of the cigarettes. This reporting 269.19 requirement only applies to cigarettes manufactured by companies 269.20 that are not original or subsequent participating manufacturers 269.21 in the Master Settlement Agreement with other states. 269.22 (d) For purposes of this section, "person" has the meaning 269.23 given in section 297F.01, subdivision 12. Person does not 269.24 include any common or contract carrier, or public warehouse that 269.25 is not owned, in whole or in part, directly or indirectly by 269.26 such person, and does not include a manufacturer thathas269.27entered intois an original or subsequent participating 269.28 manufacturer in the Master Settlement Agreement with other 269.29 states. 269.30 [EFFECTIVE DATE.] This section is effective the day 269.31 following final enactment. 269.32 Sec. 16. Minnesota Statutes 2004, section 297F.08, is 269.33 amended by adding a subdivision to read: 269.34 Subd. 13. [BOND.] The commissioner may require the 269.35 furnishing of a corporate surety bond or a certified check in an 269.36 amount suitable to guarantee payment of the tax stamps purchased 270.1 by a distributor. The bond or certified check may be required 270.2 when the commissioner determines that a distributor is (1) 270.3 delinquent in the filing of any return required under this 270.4 chapter, or (2) delinquent in the payment of any uncontested tax 270.5 liability under this chapter. The distributor shall furnish the 270.6 bond or certified check for a period of two years, after which, 270.7 if the distributor has not been delinquent in the filing of any 270.8 returns required under this chapter, or delinquent in the paying 270.9 of any tax under this chapter, a bond or certified check is no 270.10 longer required. The commissioner at any time may apply the 270.11 bond or certified check to any unpaid taxes or fees, including 270.12 interest and penalties, owed to the department by the 270.13 distributor. 270.14 [EFFECTIVE DATE.] This section is effective the day 270.15 following final enactment. 270.16 Sec. 17. Minnesota Statutes 2004, section 297F.09, 270.17 subdivision 1, is amended to read: 270.18 Subdivision 1. [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 270.19 or before the 18th day of each calendar month, a distributor 270.20 with a place of business in this state shall file a return with 270.21 the commissioner showing the quantity of cigarettes manufactured 270.22 or brought in from outside the state or purchased during the 270.23 preceding calendar month and the quantity of cigarettes sold or 270.24 otherwise disposed of in this state and outside this state 270.25 during that month. A licensed distributor outside this state 270.26 shall in like manner file a return showing the quantity of 270.27 cigarettes shipped or transported into this state during the 270.28 preceding calendar month. Returns must be made in the form and 270.29 manner prescribed by the commissioner and must contain any other 270.30 information required by the commissioner. The return must be 270.31 accompanied by a remittance for the full unpaid tax liability 270.32 shown by it.The return for the May liability and 85 percent of270.33the estimated June liability is due on the date payment of the270.34tax is due.For distributors subject to the accelerated tax 270.35 payment requirements in subdivision 10, the return for the May 270.36 liability is due two business days before June 30th of the year 271.1 and the return for the June liability is due on or before August 271.2 18th of the year. 271.3 [EFFECTIVE DATE.] This section is effective the day 271.4 following final enactment. 271.5 Sec. 18. Minnesota Statutes 2004, section 297F.09, 271.6 subdivision 2, is amended to read: 271.7 Subd. 2. [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 271.8 On or before the 18th day of each calendar month, a distributor 271.9 with a place of business in this state shall file a return with 271.10 the commissioner showing the quantity and wholesale sales price 271.11 of each tobacco product: 271.12 (1) brought, or caused to be brought, into this state for 271.13 sale; and 271.14 (2) made, manufactured, or fabricated in this state for 271.15 sale in this state, during the preceding calendar month. 271.16 Every licensed distributor outside this state shall in like 271.17 manner file a return showing the quantity and wholesale sales 271.18 price of each tobacco product shipped or transported to 271.19 retailers in this state to be sold by those retailers, during 271.20 the preceding calendar month. Returns must be made in the form 271.21 and manner prescribed by the commissioner and must contain any 271.22 other information required by the commissioner. The return must 271.23 be accompanied by a remittance for the full tax liability 271.24 shown.The return for the May liability and 85 percent of the271.25estimated June liability is due on the date payment of the tax271.26is due.For distributors subject to the accelerated tax payment 271.27 requirements in subdivision 10, the return for the May liability 271.28 is due two business days before June 30th of the year and the 271.29 return for the June liability is due on or before August 18th of 271.30 the year. 271.31 [EFFECTIVE DATE.] This section is effective the day 271.32 following final enactment. 271.33 Sec. 19. Minnesota Statutes 2004, section 297F.14, 271.34 subdivision 4, is amended to read: 271.35 Subd. 4. [BAD DEBT.]The commissioner may adopt rules271.36providing a refund of the tax paid under this chapter if the tax272.1paid qualifies as a bad debt under section 166(a) of the272.2Internal Revenue Code.For any reporting period, a taxpayer may 272.3 offset against taxes payable under this chapter the amount of 272.4 taxes previously paid under this chapter that is attributable to 272.5 a bad debt. The taxes must have been included in a transaction 272.6 the consideration for which was a debt owed to the taxpayer and 272.7 which became uncollectible, but only in proportion to the 272.8 portion of debt that became uncollectible. To qualify for 272.9 offset under this subdivision, the debt must have qualified as a 272.10 bad debt under section 166(a) of the Internal Revenue Code. The 272.11 taxpayer may claim the offset within the time period prescribed 272.12 in section 297F.17, subdivision 6. If the taxpayer is no longer 272.13 liable for taxes imposed under this chapter, the commissioner 272.14 shall refund to the taxpayer the amount of the taxes 272.15 attributable to the bad debt. Any recovery of the tax claimed 272.16 as a refund or credit must be reported to the commissioner on 272.17 the tax return for the month in which the recovery is made. If 272.18 the taxpayer is no longer required to file returns under this 272.19 chapter, the taxpayer must reimburse the commissioner for tax 272.20 recovered in the month following the recovery. 272.21 [EFFECTIVE DATE.] This section is effective for claims 272.22 filed on or after July 1, 2005. 272.23 Sec. 20. [297F.25] [CIGARETTE SALES TAX.] 272.24 Subdivision 1. [IMPOSITION.] A tax is imposed on 272.25 distributors on the sale of cigarettes by a cigarette 272.26 distributor to a retailer or cigarette subjobber for resale in 272.27 this state. The tax is equal to 6.5 percent of the weighted 272.28 average retail price. The weighted average retail price must be 272.29 expressed in cents per pack when rounded to the nearest 272.30 one-tenth of a cent. The weighted average retail price must be 272.31 determined annually, with new rates published by May 1, and 272.32 effective for sales on or after August 1. The weighted average 272.33 retail price must be established by surveying cigarette 272.34 retailers statewide in a manner and time determined by the 272.35 commissioner. The determination of the commissioner pursuant to 272.36 this subdivision is not a "rule" and is not subject to the 273.1 Administrative Procedure Act contained in chapter 14. As of 273.2 August 1, 2005, the tax is 20 cents per pack of 20 cigarettes. 273.3 For packs of cigarettes with other than 20 cigarettes, the tax 273.4 must be adjusted proportionally. 273.5 Subd. 2. [PAYMENT.] Each taxpayer must remit payments of 273.6 the taxes to the commissioner on the same dates prescribed under 273.7 section 297F.09, subdivision 1, for cigarette tax returns, 273.8 including the accelerated remittance of the June liability. 273.9 Subd. 3. [RETURN.] A taxpayer must file a return with the 273.10 commissioner on the same dates prescribed under section 297F.09, 273.11 subdivision 1, for cigarette tax returns. Notwithstanding any 273.12 other provisions of this chapter, the tax due on the return is 273.13 based upon actual stamps purchased during the reporting period. 273.14 Subd. 4. [FORM OF RETURN.] The return must contain the 273.15 information and be in the form prescribed by the commissioner. 273.16 Subd. 5. [TAX AS DEBT.] The tax that is required to be 273.17 paid by the distributor is a debt from the retailer or cigarette 273.18 subjobber to the distributor recoverable at law in the same 273.19 manner as other debts. A cigarette retailer or subjobber must 273.20 pay the tax imposed under subdivision 1 to the distributor 273.21 before the 12th day of the month following the month in which 273.22 the cigarettes were purchased from the distributor. 273.23 Subd. 6. [SALES TAX STAMP.] Payment of the tax imposed 273.24 under section 297F.05 and by this section must be evidenced by a 273.25 dual-purpose single stamp affixed to each package. 273.26 Subd. 7. [ADMINISTRATION.] The stamping, audit, 273.27 assessment, interest, penalty, appeal, refund, and collection 273.28 provisions applicable to the taxes imposed under this chapter 273.29 apply to taxes imposed under this section. 273.30 Subd. 8. [DEPOSIT OF REVENUES.] Notwithstanding the 273.31 provisions of section 297F.10, the commissioner shall deposit 273.32 all revenues, including penalties and interest, derived from the 273.33 tax imposed by this section, in the general fund. 273.34 [EFFECTIVE DATE.] This section is effective for all sales 273.35 made on or after August 1, 2005. 273.36 Sec. 21. Minnesota Statutes 2004, section 297G.09, is 274.1 amended by adding a subdivision to read: 274.2 Subd. 9. [QUARTERLY AND ANNUAL PAYMENTS AND RETURNS.] (a) 274.3 If a manufacturer, wholesaler, brewer, or importer has an 274.4 average liquor tax liability equal to or less than $500 per 274.5 month in any quarter of a calendar year, and has substantially 274.6 complied with the state tax laws during the preceding four 274.7 calendar quarters, the manufacturer, wholesaler, brewer, or 274.8 importer may request authorization to file and pay the taxes 274.9 quarterly in subsequent calendar quarters. The authorization 274.10 remains in effect during the period in which the manufacturer's, 274.11 wholesaler's, brewer's, or importer's quarterly returns reflect 274.12 liquor tax liabilities of less than $1,500 and there is 274.13 continued compliance with state tax laws. 274.14 (b) If a manufacturer, wholesaler, brewer, or importer has 274.15 an average liquor tax liability equal to or less than $100 per 274.16 month during a calendar year, and has substantially complied 274.17 with the state tax laws during that period, the manufacturer, 274.18 wholesaler, brewer, or importer may request authorization to 274.19 file and pay the taxes annually in subsequent years. The 274.20 authorization remains in effect during the period in which the 274.21 manufacturer's, wholesaler's, brewer's, or importer's annual 274.22 returns reflect liquor tax liabilities of less than $1,200 and 274.23 there is continued compliance with state tax laws. 274.24 (c) The commissioner may also grant quarterly or annual 274.25 filing and payment authorizations to manufacturers, wholesalers, 274.26 brewers, or importers if the commissioner concludes that the 274.27 manufacturer's, wholesaler's, brewer's, or importer's future tax 274.28 liabilities will be less than the monthly totals identified in 274.29 paragraphs (a) and (b). An authorization granted under this 274.30 paragraph is subject to the same conditions as an authorization 274.31 granted under paragraphs (a) and (b). 274.32 (d) The annual tax return and payments must be filed and 274.33 paid on or before the 18th day of January following the calendar 274.34 year. The quarterly returns and payments must be filed and paid 274.35 on or before April 18 for the quarter ending March 31, on or 274.36 before July 18 for the quarter ending June 30, on or before 275.1 October 18 for the quarter ending September 30, and on or before 275.2 January 18 for the quarter ending December 31. 275.3 [EFFECTIVE DATE.] This section is effective for tax returns 275.4 and payments due on or after January 1, 2006. 275.5 Sec. 22. Minnesota Statutes 2004, section 297I.01, is 275.6 amended by adding a subdivision to read: 275.7 Subd. 6a. [DIRECT BUSINESS.] (a) "Direct business" means 275.8 all insurance provided by an insurance company or its agents, 275.9 and specifically includes stop-loss insurance purchased in 275.10 connection with a self-insurance plan for employee health 275.11 benefits or for other purposes, but excludes: 275.12 (1) reinsurance in which an insurance company assumes the 275.13 liability of another insurance company; and 275.14 (2) self-insurance. 275.15 (b) For purposes of this subdivision, an insurance company 275.16 includes a nonprofit health service corporation, health 275.17 maintenance organization, and community integrated service 275.18 network. 275.19 [EFFECTIVE DATE.] This section is effective for insurance 275.20 premiums received after December 31, 2005. 275.21 Sec. 23. Minnesota Statutes 2004, section 297I.01, is 275.22 amended by adding a subdivision to read: 275.23 Subd. 13a. [REINSURANCE.] "Reinsurance" is insurance 275.24 whereby an insurance company, for a consideration, agrees to 275.25 indemnify another insurance company against all or part of the 275.26 loss which the latter may sustain under the policy or policies 275.27 which it has issued. 275.28 [EFFECTIVE DATE.] This section is effective the day 275.29 following final enactment. 275.30 Sec. 24. Minnesota Statutes 2004, section 297I.05, 275.31 subdivision 4, is amended to read: 275.32 Subd. 4. [MUTUAL PROPERTY AND CASUALTY COMPANIES WITH 275.33 TOTAL ASSETS LESS THAN $1,600,000,000 ON DECEMBER 31, 1989.] A 275.34 tax is imposed on mutual property and casualty companies that 275.35 had total assets greater than $5,000,000 at the end of the 275.36 calendar year but that had total assets less than $1,600,000,000 276.1 on December 31, 1989. The rate of tax is equal to: 276.2 (1)two percent of gross premiums less return premiums on276.3all direct business received by the insurer or agents of the276.4insurer in Minnesotathe tax under subdivision 14 for life 276.5 insurance, in cash or otherwise, during the year; and 276.6 (2) 1.26 percent of gross premiums less return premiums on 276.7 all other direct business received by the insurer or agents of 276.8 the insurer in Minnesota, in cash or otherwise, during the year. 276.9 [EFFECTIVE DATE.] This section is effective for premiums 276.10 received after December 31, 2007. 276.11 Sec. 25. Minnesota Statutes 2004, section 297I.05, 276.12 subdivision 5, is amended to read: 276.13 Subd. 5. [HEALTH MAINTENANCE ORGANIZATIONS, NONPROFIT 276.14 HEALTH SERVICE PLAN CORPORATIONS, AND COMMUNITY INTEGRATED 276.15 SERVICE NETWORKS.] (a)Health maintenance organizations,276.16community integrated service networks, and nonprofit health care276.17service plan corporations are exempt from the tax imposed under276.18this section for premiums received in calendar years 2001 to276.192003.276.20(b) For calendar years after 2003,A tax is imposed on 276.21 health maintenance organizations, community integrated service 276.22 networks, and nonprofit health care service plan corporations. 276.23 The rate of tax is equal to one percent of gross premiums less 276.24 return premiums on all direct business received by the 276.25 organization, network, or corporation or its agents in 276.26 Minnesota, in cash or otherwise, in the calendar year. 276.27(c) In approving the premium rates as required in sections276.2862L.08, subdivision 8, and 62A.65, subdivision 3, the276.29commissioners of health and commerce shall ensure that any276.30exemption from tax as described in paragraph (a) is reflected in276.31the premium rate.276.32(d)(b) The commissioner shall deposit all revenues, 276.33 including penalties and interest, collected under this chapter 276.34 from health maintenance organizations, community integrated 276.35 service networks, and nonprofit health service plan corporations 276.36 in the health care access fund. Refunds of overpayments of tax 277.1 imposed by this subdivision must be paid from the health care 277.2 access fund. There is annually appropriated from the health 277.3 care access fund to the commissioner the amount necessary to 277.4 make any refunds of the tax imposed under this subdivision. 277.5 [EFFECTIVE DATE.] This section is effective January 1, 2005. 277.6 Sec. 26. Minnesota Statutes 2004, section 297I.05, is 277.7 amended by adding a subdivision to read: 277.8 Subd. 14. [LIFE INSURANCE.] A tax is imposed on life 277.9 insurance. The rate of the tax equals 1.5 percent of gross 277.10 premiums less return premiums on all direct business received by 277.11 the insurer or agents of the insurer in Minnesota for life 277.12 insurance, in cash or otherwise, during the year. 277.13 [EFFECTIVE DATE.] This section is effective for premiums 277.14 received after December 31, 2007. 277.15 Sec. 27. Minnesota Statutes 2004, section 298.24, 277.16 subdivision 1, is amended to read: 277.17 Subdivision 1. (a) For concentrate produced in 2001, 2002, 277.18 and 2003, there is imposed upon taconite and iron sulphides, and 277.19 upon the mining and quarrying thereof, and upon the production 277.20 of iron ore concentrate therefrom, and upon the concentrate so 277.21 produced, a tax of $2.103 per gross ton of merchantable iron ore 277.22 concentrate produced therefrom. 277.23 (b) For concentrates produced in 2004 and subsequent years, 277.24 the tax rate shall be equal to the preceding year's tax rate 277.25 plus an amount equal to the preceding year's tax rate multiplied 277.26 by the percentage increase in the implicit price deflator from 277.27 the fourth quarter of the second preceding year to the fourth 277.28 quarter of the preceding year. "Implicit price deflator" means 277.29 the implicit price deflator for the gross domestic product 277.30 prepared by the Bureau of Economic Analysis of the United States 277.31 Department of Commerce. 277.32 (c) On concentrates produced in 1997 and thereafter, an 277.33 additional tax is imposed equal to three cents per gross ton of 277.34 merchantable iron ore concentrate for each one percent that the 277.35 iron content of the product exceeds 72 percent, when dried at 277.36 212 degrees Fahrenheit. 278.1 (d) The tax shall be imposed on the average of the 278.2 production for the current year and the previous two years. The 278.3 rate of the tax imposed will be the current year's tax rate. 278.4 This clause shall not apply in the case of the closing of a 278.5 taconite facility if the property taxes on the facility would be 278.6 higher if this clause and section 298.25 were not applicable. 278.7 (e) If the tax or any part of the tax imposed by this 278.8 subdivision is held to be unconstitutional, a tax of $2.103 per 278.9 gross ton of merchantable iron ore concentrate produced shall be 278.10 imposed. 278.11 (f) Consistent with the intent of this subdivision to 278.12 impose a tax based upon the weight of merchantable iron ore 278.13 concentrate, the commissioner of revenue may indirectly 278.14 determine the weight of merchantable iron ore concentrate 278.15 included in fluxed pellets by subtracting the weight of the 278.16 limestone, dolomite, or olivine derivatives or other basic flux 278.17 additives included in the pellets from the weight of the 278.18 pellets. For purposes of this paragraph, "fluxed pellets" are 278.19 pellets produced in a process in which limestone, dolomite, 278.20 olivine, or other basic flux additives are combined with 278.21 merchantable iron ore concentrate. No subtraction from the 278.22 weight of the pellets shall be allowed for binders, mineral and 278.23 chemical additives other than basic flux additives, or moisture. 278.24 (g)(1) Notwithstanding any other provision of this 278.25 subdivision, for the first two years of a plant's commercial 278.26 production of direct reduced ore, no tax is imposed under this 278.27 section. As used in this paragraph, "commercial production" is 278.28 production of more than 50,000 tons of direct reduced ore in the 278.29 current year or in any prior year, "noncommercial production" is 278.30 production of 50,000 tons or less of direct reduced ore in any 278.31 year, and "direct reduced ore" is ore that results in a product 278.32 that has an iron content of at least 75 percent. For the third 278.33 year of a plant's commercial production of direct reduced ore, 278.34 the rate to be applied to direct reduced ore is 25 percent of 278.35 the rate otherwise determined under this subdivision. For the 278.36 fourthsuchcommercial production year, the rate is 50 percent 279.1 of the rate otherwise determined under this subdivision; for the 279.2 fifthsuchcommercial production year, the rate is 75 percent of 279.3 the rate otherwise determined under this subdivision; and for 279.4 all subsequent commercial production years, the full rate is 279.5 imposed. 279.6 (2) Subject to clause (1), production of direct reduced ore 279.7 in this state is subject to the tax imposed by this section, but 279.8 if that production is not produced by a producer of taconite or 279.9 iron sulfides, the production of taconite or iron sulfides 279.10 consumed in the production of direct reduced iron in this state 279.11 is not subject to the tax imposed by this section on taconite or 279.12 iron sulfides. 279.13 (3) Notwithstanding any other provision of this 279.14 subdivision, no tax is imposed on direct reduced ore under this 279.15 section during the facility's noncommercial production of direct 279.16 reduced ore. The taconite or iron sulphides consumed in the 279.17 noncommercial production of direct reduced ore is subject to the 279.18 tax imposed by this section on taconite and iron sulphides. 279.19 [EFFECTIVE DATE.] This section is effective for direct 279.20 reduced ore produced after the day following final enactment. 279.21 Sec. 28. Minnesota Statutes 2004, section 298.75, is 279.22 amended by adding a subdivision to read: 279.23 Subd. 10. [TAX MAY BE IMPOSED, CASS COUNTY.] (a) If Cass 279.24 County does not impose a tax under this section, the town of 279.25 Sylvan in Cass County may impose the aggregate materials tax 279.26 under this section. 279.27 (b) For purposes of exercising the powers contained in this 279.28 section, the "town" is deemed to be the "county." 279.29 (c) All provisions in this section apply to the town of 279.30 Sylvan, except that in lieu of the distribution of the tax 279.31 proceeds under subdivision 7, all proceeds of the tax must be 279.32 retained by the town. 279.33 (d) If Cass County imposes an aggregate materials tax under 279.34 this section, the tax imposed by the town of Sylvan under this 279.35 subdivision is repealed on the effective date of the Cass County 279.36 tax. 280.1 [EFFECTIVE DATE.] This section is effective the day after 280.2 the governing body of the town of Sylvan and its chief clerical 280.3 officer comply with Minnesota Statutes, section 645.021, 280.4 subdivisions 2 and 3. 280.5 Sec. 29. Minnesota Statutes 2004, section 473.843, 280.6 subdivision 5, is amended to read: 280.7 Subd. 5. [PENALTIES; ENFORCEMENT.] The audit, penalty, and 280.8 enforcement provisions applicable to corporate franchise taxes 280.9 imposed under chapter 290 apply to the fees imposed under this 280.10 section. The commissioner of revenue shall administer the 280.11 provisions. 280.12 [EFFECTIVE DATE.] This section is effective the day 280.13 following final enactment. 280.14 Sec. 30. [FLOOR STOCKS TAX.] 280.15 Subdivision 1. [CIGARETTES.] A floor stocks cigarette 280.16 sales tax is imposed on every person engaged in the business in 280.17 this state as a distributor, retailer, subjobber, vendor, 280.18 manufacturer, or manufacturer's representative of cigarettes, on 280.19 the stamped cigarettes and unaffixed stamps in the person's 280.20 possession or under the person's control at 12:01 a.m. on August 280.21 1, 2005. The tax is imposed at the rate of 20 cents per pack of 280.22 20 cigarettes. For packs of cigarettes with other than 20 280.23 cigarettes, the tax shall be adjusted proportionally. 280.24 Each distributor, by August 10, 2005, shall file a return 280.25 with the commissioner, in the form the commissioner prescribes, 280.26 showing the stamped cigarettes and unaffixed stamps on hand at 280.27 12:01 a.m. on August 1, 2005, and the amount of tax due on the 280.28 cigarettes and unaffixed stamps. The tax imposed by this 280.29 section is due and payable by September 7, 2005, and after that 280.30 date bears interest at the rate of one percent a month. 280.31 Each retailer, subjobber, vendor, manufacturer, or 280.32 manufacturer's representative, by August 10, 2005, shall file a 280.33 return with the commissioner, in the form the commissioner 280.34 prescribes, showing the cigarettes on hand at 12:01 a.m. on 280.35 August 1, 2005, and the amount of tax due on the cigarettes. 280.36 The tax imposed by this section is due and payable by September 281.1 7, 2005, and after that date bears interest at the rate of one 281.2 percent a month. 281.3 Subd. 2. [AUDIT AND ENFORCEMENT.] The tax imposed by this 281.4 section is subject to the audit, assessment, penalty, and 281.5 collection provisions applicable to the taxes imposed under 281.6 Minnesota Statutes, chapter 297F. The commissioner may require 281.7 a distributor to receive and maintain copies of floor stocks tax 281.8 returns filed by all persons requesting a credit for returned 281.9 cigarettes. 281.10 Subd. 3. [DEPOSIT OF PROCEEDS.] The revenue from the tax 281.11 imposed under this section shall be deposited by the 281.12 commissioner in the state treasury and credited to the general 281.13 fund. 281.14 [EFFECTIVE DATE.] This section is effective August 1, 2005. 281.15 Sec. 31. [REPEALER.] 281.16 Minnesota Statutes 2004, section 297E.12, subdivision 10, 281.17 is repealed effective the day following final enactment. 281.18 ARTICLE 9 281.19 ECONOMIC DEVELOPMENT 281.20 Section 1. Minnesota Statutes 2004, section 272.02, 281.21 subdivision 64, is amended to read: 281.22 Subd. 64. [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 281.23 Improvements to real property, and personal property, classified 281.24 under section 273.13, subdivision 24, and located within a job 281.25 opportunity building zone, designated under section 469.314, are 281.26 exempt from ad valorem taxes levied under chapter 275. 281.27 (b) Improvements to real property, and tangible personal 281.28 property, of an agricultural production facility located within 281.29 an agricultural processing facility zone, designated under 281.30 section 469.314, is exempt from ad valorem taxes levied under 281.31 chapter 275. 281.32 (c) For property to qualify for exemption under paragraph 281.33 (a), the occupant must be a qualified business, as defined in 281.34 section 469.310. 281.35 (d) The exemption applies beginning for the first 281.36 assessment year after designation of the job opportunity 282.1 building zone by the commissioner of employment and economic 282.2 development. The exemption applies to each assessment year that 282.3 begins during the duration of the job opportunity building zone 282.4and to property. To be exempt, the property must be occupied by 282.5 July 1 of the assessment year by a qualified business that has 282.6 signed the business subsidy agreement and relocation agreement, 282.7 if required, by July 1 of the assessment year. This exemption 282.8 does not apply to: 282.9 (1) the levy under section 475.61 or similar levy 282.10 provisions under any other law to pay general obligation bonds; 282.11 or 282.12 (2) a levy under section 126C.17, if the levy was approved 282.13 by the voters before the designation of the job opportunity 282.14 building zone. 282.15 [EFFECTIVE DATE.] This section is effective for taxes 282.16 payable in 2006 and thereafter. 282.17 Sec. 2. Minnesota Statutes 2004, section 272.0212, 282.18 subdivision 1, is amended to read: 282.19 Subdivision 1. [EXEMPTION.] All qualified property in a 282.20 zone is exempt to the extent and for a period up to the duration 282.21 provided by the zone designation and under sections 469.1731 to 282.22 469.1735. 282.23 [EFFECTIVE DATE.] This section is effective for development 282.24 agreements approved after the day following final enactment and 282.25 beginning for property taxes payable in 2006. 282.26 Sec. 3. Minnesota Statutes 2004, section 272.0212, 282.27 subdivision 2, is amended to read: 282.28 Subd. 2. [LIMITS ON EXEMPTION.] (a) Property in a zone is 282.29 not exempt under this section from the following: 282.30 (1) special assessments; 282.31 (2) ad valorem property taxes specifically levied for the 282.32 payment of principal and interest on debt obligations; and 282.33 (3) all taxes levied by a school district, except school 282.34 referendum levies as defined in section 126C.17. 282.35 (b) The city may limit the property tax exemption to a 282.36 shorter period than the duration of the zone or to a percentage 283.1 of the property taxes payable or both. 283.2 [EFFECTIVE DATE.] This section is effective for development 283.3 agreements approved after the day following final enactment and 283.4 beginning for property taxes payable in 2006. 283.5 Sec. 4. Minnesota Statutes 2004, section 289A.56, is 283.6 amended by adding a subdivision to read: 283.7 Subd. 7. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 283.8 REFUNDS.] Notwithstanding subdivision 3, for refunds payable 283.9 under section 297A.68, subdivision 38, interest is computed from 283.10 90 days after the refund claim is filed with the commissioner. 283.11 [EFFECTIVE DATE.] This section is effective for refund 283.12 claims filed on or after July 1, 2005. 283.13 Sec. 5. Minnesota Statutes 2004, section 297A.68, 283.14 subdivision 37, is amended to read: 283.15 Subd. 37. [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 283.16 of tangible personal property or taxable services by a qualified 283.17 business, as defined in section 469.310, are exempt if the 283.18 property or services are primarily used or consumed in a job 283.19 opportunity building zone designated under section 469.314. For 283.20 purposes of this subdivision, aircraft that are operated under a 283.21 Federal Aviation Administration Restricted Airworthiness 283.22 Certificate according to Code of Federal Regulations, title 14, 283.23 part 21, section 21.25(b)(3), relating to aerial surveying, and 283.24 that are based, maintained, and dispatched from a job 283.25 opportunity building zone, and any aerial camera package, 283.26 including any camera, computer, and navigation device contained 283.27 in the package, that is used in the aircraft, qualify as 283.28 primarily used or consumed in a job opportunity building zone if 283.29 the imagery acquired from the aerial camera package is returned 283.30 to the job opportunity building zone for processing. 283.31 (b) Purchase and use of construction materials and supplies 283.32 for construction of improvements to real property in a job 283.33 opportunity building zone are exempt if the improvements after 283.34 completion of construction are to be used in the conduct of a 283.35 qualified business, as defined in section 469.310. This 283.36 exemption applies regardless of whether the purchases are made 284.1 by the business or a contractor. The exemption does not apply 284.2 unless the business subsidy agreement entered into pursuant to 284.3 section 469.313 requires the prevailing wage to be paid on the 284.4 construction project. 284.5 (c) The exemptions under this subdivision apply to a local 284.6 sales and use tax regardless of whether the local sales tax is 284.7 imposed on the sales taxable as defined under this chapter. 284.8 (d) This subdivision applies to sales, if the purchase was 284.9 made and delivery received during the duration of the zone. 284.10 [EFFECTIVE DATE.] The amendment to paragraph (a) is 284.11 effective for sales made after June 30, 2005. 284.12 Sec. 6. Minnesota Statutes 2004, section 297A.68, 284.13 subdivision 38, is amended to read: 284.14 Subd. 38. [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 284.15 ZONE.] (a) Purchases of tangible personal property or taxable 284.16 services by a qualified business, as defined in section 469.330, 284.17 are exempt if the property or services are primarily used or 284.18 consumed in a biotechnology and health sciences industry zone 284.19 designated under section 469.334. 284.20 (b) Purchase and use of construction materialsand, 284.21 suppliesfor, or equipment used or consumed in the construction 284.22 of improvements to real property in a biotechnology and health 284.23 sciences industry zone are exempt if the improvements after 284.24 completion of construction are to be used in the conduct of a 284.25 qualified business, as defined in section 469.330. This 284.26 exemption applies regardless of whether the purchases are made 284.27 by the business or a contractor. 284.28 (c) The exemptions under this subdivision apply to a local 284.29 sales and use tax regardless of whether the local sales tax is 284.30 imposed on the sales taxable as defined under this chapter. 284.31 (d)(1) The tax on sales of goods or services exempted under 284.32 this subdivision are imposed and collected as if the applicable 284.33 rate under section 297A.62 applied. Upon application by the 284.34 purchaser, on forms prescribed by the commissioner, a refund 284.35 equal to the tax paid must be paid to the purchaser. The 284.36 application must include sufficient information to permit the 285.1 commissioner to verify the sales tax paid and the eligibility of 285.2 the claimant to receive the credit. No more than two 285.3 applications for refunds may be filed under this subdivision in 285.4 a calendar year. The provisions of section 289A.40 apply to the 285.5 refunds payable under this subdivision. 285.6 (2) The amount required to make the refunds is annually 285.7 appropriated to the commissioner of revenue. 285.8 (3) The aggregate amount refunded to a qualified business 285.9 must not exceed the amount allocated to the qualified business 285.10 under section 469.335. 285.11 (e) This subdivision applies only to sales made during the 285.12 duration of the designation of the zone. 285.13 [EFFECTIVE DATE.] This section is effective for sales made 285.14 after December 31, 2003. 285.15 Sec. 7. Minnesota Statutes 2004, section 469.169, is 285.16 amended by adding a subdivision to read: 285.17 Subd. 17. [ADDITIONAL BORDER CITY ALLOCATIONS.] (a) In 285.18 addition to tax reductions authorized in subdivisions 7 to 16, 285.19 the commissioner shall allocate $750,000 for tax reductions to 285.20 border city enterprise zones in cities located on the western 285.21 border of the state. The commissioner shall make allocations to 285.22 zones in cities on the western border on a per capita basis. 285.23 Allocations made under this subdivision may be used for tax 285.24 reductions as provided in section 469.171, or for other offsets 285.25 of taxes imposed on or remitted by businesses located in the 285.26 enterprise zone, but only if the municipality determines that 285.27 the granting of the tax reduction or offset is necessary in 285.28 order to retain a business within or attract a business to the 285.29 zone. Any portion of the allocation provided in this paragraph 285.30 may alternatively be used for tax reductions under section 285.31 469.1732 or 469.1734. 285.32 (b) The commissioner shall allocate $750,000 for tax 285.33 reductions under section 469.1732 or 469.1734 to cities with 285.34 border city enterprise zones located on the western border of 285.35 the state. The commissioner shall allocate this amount among 285.36 the cities on a per capita basis. Any portion of the allocation 286.1 provided in this paragraph may alternatively be used for tax 286.2 reductions as provided in section 469.171. 286.3 [EFFECTIVE DATE.] This section is effective the day 286.4 following final enactment. 286.5 Sec. 8. Minnesota Statutes 2004, section 469.176, 286.6 subdivision 4l, is amended to read: 286.7 Subd. 4l. [PROHIBITED FACILITIES.] (a) No tax increment 286.8 from any district may be used for: 286.9 (1) a commons area used as a public park;or286.10 (2) a facility used for social, recreational, or conference 286.11 purposes; or 286.12 (3) a property that includes a casino or other facility 286.13 conducting class III gaming as defined in United States Code, 286.14 title 25, section 2703, regardless of whether it is conducted by 286.15 an Indian tribe or tribal business. 286.16 (b) This subdivision does not apply to a privately owned 286.17 facility for conference purposes or a parking structure. 286.18 [EFFECTIVE DATE.] This section is effective for 286.19 expenditures of increment made after June 30, 2005, regardless 286.20 of when the request for certification of the district was made. 286.21 Sec. 9. Minnesota Statutes 2004, section 469.176, 286.22 subdivision 7, is amended to read: 286.23 Subd. 7. [PARCELS NOT INCLUDABLE IN DISTRICTS.] (a) The 286.24 authority may request inclusion in a tax increment financing 286.25 district and the county auditor may certify the original tax 286.26 capacity of a parcel or a part of a parcel that qualified under 286.27 the provisions of section 273.111 or 273.112 or chapter 473H for 286.28 taxes payable in any of the five calendar years before the 286.29 filing of the request for certification only for: 286.30 (1) a district in which 85 percent or more of the planned 286.31 buildings and facilities (determined on the basis of square 286.32 footage) are a qualified manufacturing facility or a qualified 286.33 distribution facility or a combination of both; or 286.34 (2) a qualified housing district. 286.35 (b)(1) A distribution facility means buildings and other 286.36 improvements to real property that are used to conduct 287.1 activities in at least each of the following categories: 287.2 (i) to store or warehouse tangible personal property; 287.3 (ii) to take orders for shipment, mailing, or delivery; 287.4 (iii) to prepare personal property for shipment, mailing, 287.5 or delivery; and 287.6 (iv) to ship, mail, or deliver property. 287.7 (2) A manufacturing facility includes space used for 287.8 manufacturing or producing tangible personal property, including 287.9 processing resulting in the change in condition of the property, 287.10 and space necessary for and related to the manufacturing 287.11 activities. 287.12 (3) To be a qualified facility, the owner or operator of a 287.13 manufacturing or distribution facility must agree to pay and pay 287.14 90 percent or more of the employees of the facility at a rate 287.15 equal to or greater than 160 percent of the federal minimum wage 287.16 for individuals over the age of 20. 287.17 (c) The authority may not request inclusion in a tax 287.18 increment financing district and the county auditor may not 287.19 certify the original tax capacity of a parcel or a part of a 287.20 parcel that contains or is expected to contain uses, facilities, 287.21 properties, or businesses containing class III gaming, as 287.22 defined in United States Code, title 25, section 2703, 287.23 regardless of whether it is conducted by an Indian tribe or 287.24 tribal business. 287.25 [EFFECTIVE DATE.] This section is effective for parcels for 287.26 which the request for certification is made after June 30, 2005. 287.27 Sec. 10. Minnesota Statutes 2004, section 469.310, 287.28 subdivision 11, is amended to read: 287.29 Subd. 11. [QUALIFIED BUSINESS.] (a)"Qualified business"287.30meansA person carrying on a trade or business at a place of 287.31 business located within a job opportunity building zone is a 287.32 qualified business for the purposes of sections 469.310 to 287.33 469.320 according to the criteria in paragraphs (b) to (f). 287.34 (b) A person is a qualified business only on those parcels 287.35 of land for which the person has entered into a business subsidy 287.36 agreement, as required under section 469.313, with the 288.1 appropriate local government unit in which the parcels are 288.2 located. 288.3 (c) Prior to execution of the business subsidy agreement, 288.4 the local government unit must consider the following factors: 288.5 (1) how wages plus benefits compare to 110 percent of the 288.6 statewide poverty rate for a family of four; 288.7 (2) how wages compare to the regional industry average; 288.8 (3) the number of jobs that will be provided relative to 288.9 overall employment in the community; 288.10 (4) the economic outlook for the industry the business will 288.11 engage in; 288.12 (5) sales that will be generated from outside the state of 288.13 Minnesota; 288.14 (6) how the business will build on existing regional 288.15 strengths or diversify the regional economy; 288.16 (7) how the business will increase capital investment in 288.17 the zone; and 288.18 (8) any other criteria the commissioner deems necessary. 288.19(b)(d) A person that relocates a trade or business from 288.20 outside a job opportunity building zone into a zone is not a 288.21 qualified business,unless the business meets all of the 288.22 requirements of paragraphs (b) and (c) and: 288.23 (1)(i)increases full-time employment in the first full 288.24 year of operation within the job opportunity building zone byat288.25leasta minimum of five jobs or 20 percent, whichever is 288.26 greater, measured relative to the operations that were relocated 288.27 and maintains the required level of employment for each year the 288.28 zone designation applies;or288.29(ii) makes a capital investment in the property located288.30within a zone equivalent to ten percent of the gross revenues of288.31operation that were relocated in the immediately preceding288.32taxable year;and 288.33 (2) enters a binding written agreement with the 288.34 commissioner that: 288.35 (i) pledges the business will meet the requirements of 288.36 clause (1); 289.1 (ii) provides for repayment of all tax benefits enumerated 289.2 under section 469.315 to the business under the procedures in 289.3 section 469.319, if the requirements of clause (1) are not met 289.4 for the taxable year or for taxes payable during the year in 289.5 which the requirements were not met; and 289.6 (iii) contains any other terms the commissioner determines 289.7 appropriate. 289.8 (e) The commissioner may waive the requirements under 289.9 paragraph (d), clause (1), if the commissioner determines that 289.10 the qualified business will substantially achieve the factors 289.11 under this subdivision. 289.12 (f) A business is not a qualified business if, at its 289.13 location or locations in the zone, the business is primarily 289.14 engaged in making retail sales to purchasers who are physically 289.15 present at the business's zone location. 289.16 [EFFECTIVE DATE.] This section is effective the day 289.17 following final enactment and applies to any business entering a 289.18 business subsidy agreement for a job opportunity development 289.19 zone after that date, except that paragraph (b) is effective 289.20 retroactively from June 9, 2003. 289.21 Sec. 11. Minnesota Statutes 2004, section 469.310, is 289.22 amended by adding a subdivision to read: 289.23 Subd. 13. [RELOCATION PAYROLL PERCENTAGE.] "Relocation 289.24 payroll percentage" is a fraction, the numerator of which is the 289.25 zone payroll of the business for the tax year minus the payroll 289.26 from the relocated operations in the last full year of 289.27 operations prior to the relocation, and the denominator of which 289.28 is the zone payroll of the business for the tax year. The 289.29 relocation payroll percentage of a business that is not a 289.30 relocating business is 100 percent. 289.31 [EFFECTIVE DATE.] This section is effective the day 289.32 following final enactment but applies only to qualified 289.33 businesses with business subsidy agreements that are fully 289.34 executed after June 30, 2005. 289.35 Sec. 12. Minnesota Statutes 2004, section 469.315, is 289.36 amended to read: 290.1 469.315 [TAX INCENTIVES AVAILABLE IN ZONES.] 290.2 Qualified businesses that operate in a job opportunity 290.3 building zone, individuals who invest in a qualified business 290.4 that operates in a job opportunity building zone, and property 290.5 located in a job opportunity building zone qualify for: 290.6 (1) exemption from individual income taxes as provided 290.7 under section 469.316; 290.8 (2) exemption from corporate franchise taxes as provided 290.9 under section 469.317; 290.10 (3) exemption from the state sales and use tax and any 290.11 local sales and use taxes on qualifying purchases as provided in 290.12 section 297A.68, subdivision 37; 290.13 (4) exemption from the state sales tax on motor vehicles 290.14 and any local sales tax on motor vehicles as provided under 290.15 section 297B.03; 290.16 (5) exemption from the property tax as provided in section 290.17 272.02, subdivision 64; 290.18 (6) exemption from the wind energy production tax under 290.19 section 272.029, subdivision 7; and 290.20 (7) the jobs credit allowed under section 469.318. 290.21 The sales tax exemption under section 297A.68, subdivision 37, 290.22 paragraph (b), is not "financial assistance" under section 290.23 116J.871 or a "business subsidy" under section 116J.993 unless 290.24 the business subsidy agreement entered into pursuant to section 290.25 469.313 requires the payment of the prevailing wage. 290.26 [EFFECTIVE DATE.] This section is effective retroactively 290.27 from January 1, 2004. 290.28 Sec. 13. Minnesota Statutes 2004, section 469.316, is 290.29 amended to read: 290.30 469.316 [INDIVIDUAL INCOME TAX EXEMPTION.] 290.31 Subdivision 1. [APPLICATION.] An individual, estate, or 290.32 trust operating a trade or business in a job opportunity 290.33 building zone, and an individual, estate, or trust making a 290.34 qualifying investment in a qualified business operating in a job 290.35 opportunity building zone qualifies for the exemptions from 290.36 taxes imposed under chapter 290, as provided in this section. 291.1 The exemptions provided under this section apply only to the 291.2 extent that the income otherwise would be taxable under chapter 291.3 290. Subtractions under this section from federal taxable 291.4 income, alternative minimum taxable income, or any other base 291.5 subject to tax are limited to the amount that otherwise would be 291.6 included in the tax base absent the exemption under this 291.7 section. This section applies only to taxable years beginning 291.8 during the duration of the job opportunity building zone. 291.9 Subd. 2. [RENTS.] An individual, estate, or trust is 291.10 exempt from the taxes imposed under chapter 290 on net rents 291.11 derived from real or tangible personal property used by a 291.12 qualified business and located in a zone for a taxable year in 291.13 which the zone was designated a job opportunity building zone. 291.14 If tangible personal property was used both within and outside 291.15 of the zone by the qualified business, the exemption amount for 291.16 the net rental income must be multiplied by a fraction, the 291.17 numerator of which is the number of days the property was used 291.18 in the zone and the denominator of which is the total days the 291.19 property is rented by the qualified business. 291.20 Subd. 3. [BUSINESS INCOME.] An individual, estate, or 291.21 trust is exempt from the taxes imposed under chapter 290 on net 291.22 income from the operation of a qualified business in a job 291.23 opportunity building zone. If the trade or business is carried 291.24 on within and without the zone and the individual is not a 291.25 resident of Minnesota, or the taxpayer is an estate or trust, 291.26 the exemption must be apportioned based on the zone percentage 291.27 and the relocation payroll percentage for the taxable year. If 291.28 the trade or business is carried on within and without the zone 291.29 and the individual is a resident of Minnesota, the exemption 291.30 must be apportioned based on the zone percentage and the 291.31 relocation payroll percentage for the taxable year, except the 291.32 ratios under section 469.310, subdivision 7, clause (1), items 291.33 (i) and (ii), must use the denominators of the property and 291.34 payroll factors determined under section 290.191. No 291.35 subtraction is allowed under this section in excess of 20 291.36 percent of the sum of the job opportunity building zone payroll 292.1 and the adjusted basis of the property at the time that the 292.2 property is first used in the job opportunity building zone by 292.3 the business. 292.4 Subd. 4. [CAPITAL GAINS.] (a) An individual, estate, or 292.5 trust is exempt from the taxes imposed under chapter 290 on: 292.6 (1) net gain derived on a sale or exchange of real property 292.7 located in the zone and used by a qualified business. If the 292.8 property was held by the individual, estate, or trust during a 292.9 period when the zone was not designated, the gain must be 292.10 prorated based on the percentage of time, measured in calendar 292.11 days, that the real property was held by the individual, estate, 292.12 or trust during the period the zone designation was in effect to 292.13 the total period of time the real property was held by the 292.14 individual; 292.15 (2) net gain derived on a sale or exchange of tangible 292.16 personal property used by a qualified business in the zone. If 292.17 the property was held by the individual, estate, or trust during 292.18 a period when the zone was not designated, the gain must be 292.19 prorated based on the percentage of time, measured in calendar 292.20 days, that the property was held by the individual, estate, or 292.21 trust during the period the zone designation was in effect to 292.22 the total period of time the property was held by the 292.23 individual. If the tangible personal property was used outside 292.24 of the zone during the period of the zone's designation, the 292.25 exemption must be multiplied by a fraction, the numerator of 292.26 which is the number of days the property was used in the zone 292.27 during the time of the designation and the denominator of which 292.28 is the total days the property was held during the time of the 292.29 designation; and 292.30 (3) net gain derived on a sale of an ownership interest in 292.31 a qualified business operating in the job opportunity building 292.32 zone, meeting the requirements of paragraph (b). The exemption 292.33 on the gain must be multiplied by the zone percentage of the 292.34 business for the taxable year prior to the sale. 292.35 (b) A qualified business meets the requirements of 292.36 paragraph (a), clause (3), if it is a corporation, an S 293.1 corporation, or a partnership, and for the taxable year its job 293.2 opportunity building zone percentage exceeds 25 percent. For 293.3 purposes of paragraph (a), clause (3), the zone percentage must 293.4 be calculated by modifying the ratios under section 469.310, 293.5 subdivision 7, clause (1), items (i) and (ii), to use the 293.6 denominators of the property and payroll factors determined 293.7 under section 290.191. Upon the request of an individual, 293.8 estate, or trust holding an ownership interest in the entity, 293.9 the entity must certify to the owner, in writing, the job 293.10 opportunity building zone percentage needed to determine the 293.11 exemption. 293.12 [EFFECTIVE DATE.] This section is effective for tax years 293.13 beginning after December 31, 2003, except that changes in 293.14 subdivision 3 relating to the relocation payroll percentage are 293.15 effective the day following final enactment and apply only to 293.16 qualified businesses with business subsidy agreements that are 293.17 fully executed after June 30, 2005. 293.18 Sec. 14. Minnesota Statutes 2004, section 469.317, is 293.19 amended to read: 293.20 469.317 [CORPORATE FRANCHISE TAX EXEMPTION.] 293.21 (a) A qualified business is exempt from taxation under 293.22 section 290.02, the alternative minimum tax under section 293.23 290.0921, and the minimum fee under section 290.0922, on the 293.24 portion of its income attributable to operations within the 293.25 zone. This exemption is determined as follows: 293.26 (1) for purposes of the tax imposed under section 290.02, 293.27 by multiplying its taxable net income by its zone percentage and 293.28 by its relocation payroll percentage and subtracting the result 293.29 in determining taxable income; 293.30 (2) for purposes of the alternative minimum tax under 293.31 section 290.0921, by multiplying its alternative minimum taxable 293.32 income by its zone percentage and by its relocation payroll 293.33 percentage and reducing alternative minimum taxable income by 293.34 this amount; and 293.35 (3) for purposes of the minimum fee under section 290.0922, 293.36 by excluding property and payroll in the zone from the 294.1 computations of the fee or by exempting the entity under section 294.2 290.0922, subdivision 2, clause (7). 294.3 (b) No subtraction is allowed under this section in excess 294.4 of 20 percent of the sum of the corporation's job opportunity 294.5 building zone payroll and the adjusted basis of the property at 294.6 the time that the property is first used in the job opportunity 294.7 building zone by the corporation. 294.8 (c) This section applies only to taxable years beginning 294.9 during the duration of the job opportunity building zone. 294.10 [EFFECTIVE DATE.] This section is effective the day 294.11 following final enactment but applies only to qualified 294.12 businesses with business subsidy agreements that are fully 294.13 executed after June 30, 2005. 294.14 Sec. 15. Minnesota Statutes 2004, section 469.319, 294.15 subdivision 1, is amended to read: 294.16 Subdivision 1. [REPAYMENT OBLIGATION.] A business must 294.17 repay the amount of the total tax reduction listed in section 294.18 469.315 and any refund under section 469.318 in excess of tax 294.19 liability, received during the two years immediately before it 294.20 ceased to operate in the zone, if the business: 294.21 (1) received tax reductions authorized by section 469.315; 294.22 and 294.23 (2)(i) did not meet the goals specified in an agreement 294.24 entered into with the applicant that states any obligation the 294.25 qualified business must fulfill in order to be eligible for tax 294.26 benefits. The commissioner of employment and economic 294.27 development may extend for up to one year the period for meeting 294.28 any goals provided in an agreement. The applicant may extend 294.29 the period for meeting other goals by documenting in writing the 294.30 reason for the extension and attaching a copy of the document to 294.31 its next annual report to the commissioner of employment and 294.32 economic development; or 294.33 (ii) ceased to operate its facility located within the job 294.34 opportunity building zone or otherwise ceases to be or is not a 294.35 qualified business. 294.36 [EFFECTIVE DATE.] This section is effective the day 295.1 following final enactment. 295.2 Sec. 16. Minnesota Statutes 2004, section 469.319, is 295.3 amended by adding a subdivision to read: 295.4 Subd. 6. [RECONCILIATION.] Where this section is 295.5 inconsistent with section 116J.994, subdivision 3, paragraph 295.6 (e), or 6, or any other provisions of sections 116J.993 to 295.7 116J.995, this section prevails. 295.8 [EFFECTIVE DATE.] This section is effective the day 295.9 following final enactment. 295.10 Sec. 17. Minnesota Statutes 2004, section 469.320, 295.11 subdivision 3, is amended to read: 295.12 Subd. 3. [REMEDIES.] If the commissioner determines, based 295.13 on a report filed under subdivision 1 or other available 295.14 information, that a zone or subzone is failing to meet its 295.15 performance goals, the commissioner may take any actions the 295.16 commissioner determines appropriate, including modification of 295.17 the boundaries of the zone or a subzone or termination of the 295.18 zone or a subzone. Before taking any action, the commissioner 295.19 shall consult with the applicant and the affected local 295.20 government units, including notifying them of the proposed 295.21 actions to be taken.The commissioner shall publish any order295.22modifying a zone in the State Register and on the Internet.The 295.23 applicant may appeal the commissioner's order under the 295.24 contested case procedures of chapter 14. 295.25 [EFFECTIVE DATE.] This section is effective the day 295.26 following final enactment. 295.27 Sec. 18. Minnesota Statutes 2004, section 469.330, 295.28 subdivision 11, is amended to read: 295.29 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 295.30 means a person carrying on a trade or business at a 295.31 biotechnology and health sciences industry facility located 295.32 within a biotechnology and health sciences industry zone. A 295.33 person is a qualified business only on those parcels of land for 295.34 which it has entered into a business subsidy agreement, as 295.35 required under section 469.333, with the appropriate local 295.36 government unit in which the parcels are located. 296.1 (b) A person that relocates a biotechnology and health 296.2 sciences industry facility from outside a biotechnology and 296.3 health sciences industry zone into a zone is not a qualified 296.4 business, unless the business: 296.5 (1)(i) increases full-time employment in the first full 296.6 year of operation within the biotechnology and health sciences 296.7 industry zone by at least 20 percent measured relative to the 296.8 operations that were relocated and maintains the required level 296.9 of employment for each year the zone designation applies; or 296.10 (ii) makes a capital investment in the property located 296.11 within a zone equivalent to ten percent of the gross revenues of 296.12 operation that were relocated in the immediately preceding 296.13 taxable year; and 296.14 (2) enters a binding written agreement with the 296.15 commissioner that: 296.16 (i) pledges the business will meet the requirements of 296.17 clause (1); 296.18 (ii) provides for repayment of all tax benefits enumerated 296.19 under section 469.336 to the business under the procedures in 296.20 section 469.340, if the requirements of clause (1) are not met; 296.21 and 296.22 (iii) contains any other terms the commissioner determines 296.23 appropriate. 296.24 [EFFECTIVE DATE.] This section is effective retroactively 296.25 from June 9, 2003. 296.26 Sec. 19. Minnesota Statutes 2004, section 469.335, is 296.27 amended to read: 296.28 469.335 [APPLICATION FOR TAX BENEFITS.] 296.29 (a) To claim a tax credit or exemption against a state tax 296.30 under section 469.336, clauses (2) through (5), a business must 296.31 apply to the commissioner for a tax credit certificate. As a 296.32 condition of its application, the business must agree to furnish 296.33 information to the commissioner that is sufficient to verify the 296.34 eligibility for any credits or exemptions claimed. The total 296.35 amount of the state tax credits and exemptions allowed for the 296.36 specified period may not exceed the amount of the tax credit 297.1 certificates provided by the commissioner to the business. The 297.2 commissioner must verify to the commissioner of revenue the 297.3 amount of tax exemptions or credits for which each business is 297.4 eligible. 297.5 (b) A tax credit certificate issued under this section may 297.6 specify the particular tax exemptions or credits against a state 297.7 tax that the qualified business is eligible to claim under 297.8 section 469.336, clauses (2) through (5), and the amount of each 297.9 exemption or credit allowed. 297.10 (c) The commissioner may issue $1,000,000 of tax credits or 297.11 exemptions in fiscal year 2004. Any tax credits or exemptions 297.12 not awarded in fiscal year 2004 may be awarded in fiscal year 297.13 2005. Any tax credits or exemptions not awarded in fiscal year 297.14 2004 or 2005 do not cancel and may be awarded in fiscal years 297.15 2006 and 2007. 297.16 (d) A qualified business must use the tax credits or tax 297.17 exemptions granted under this section by the later of the end of 297.18 the state fiscal year or the taxpayer's tax year in which the 297.19 credits or exemptions are granted. 297.20 [EFFECTIVE DATE.] This section is effective the day 297.21 following final enactment. 297.22 Sec. 20. Minnesota Statutes 2004, section 469.337, is 297.23 amended to read: 297.24 469.337 [CORPORATE FRANCHISE TAX EXEMPTION.] 297.25 (a) A qualified business is exempt from taxation under 297.26 section 290.02, the alternative minimum tax under section 297.27 290.0921, and the minimum fee under section 290.0922, on the 297.28 portion of its income attributable to operations of a qualified 297.29 business within the biotechnology and health sciences industry 297.30 zone. This exemption is determined as follows: 297.31 (1) for purposes of the tax imposed under section 290.02, 297.32 by multiplying its taxable net income by its zone percentage and 297.33 subtracting the result in determining taxable income; 297.34 (2) for purposes of the alternative minimum tax under 297.35 section 290.0921, by multiplying its alternative minimum taxable 297.36 income by its zone percentage and reducing alternative minimum 298.1 taxable income by this amount; and 298.2 (3) for purposes of the minimum fee under section 290.0922, 298.3 by excluding zone property and payrollin the zonefrom the 298.4 computations of the fee. The qualified business is exempt from 298.5 the minimum fee if all of its property is located in the zone 298.6 and all of its payroll is zone payroll. 298.7 (b) No subtraction is allowed under this section in excess 298.8 of 20 percent of the sum of the corporation's biotechnology and 298.9 health sciences industry zone payroll and the adjusted basis of 298.10 the property at the time that the property is first used in the 298.11 biotechnology and health sciences industry zone by the 298.12 corporation. 298.13 (c) No reduction in tax is allowed in excess of the amount 298.14 allocated under section 469.335. 298.15 [EFFECTIVE DATE.] This section is effective for tax years 298.16 beginning after December 31, 2003. 298.17 Sec. 21. Minnesota Statutes 2004, section 469.340, 298.18 subdivision 1, is amended to read: 298.19 Subdivision 1. [REPAYMENT OBLIGATION.] A business must 298.20 repay the amount of the tax reduction listed in section 469.336 298.21 and any refunds under sections 469.338 and 469.339 in excess of 298.22 tax liability, received during the two years immediately before 298.23 it ceased to operate in the zone, if the business: 298.24 (1) received tax reductions authorized by section 469.336; 298.25 and 298.26 (2)(i) did not meet the goals specified in an agreement 298.27 entered into with the applicant that states any obligation the 298.28 qualified business must fulfill in order to be eligible for tax 298.29 benefits. The commissioner of employment and economic 298.30 development may extend for up to one year the period for meeting 298.31 any goals provided in an agreement. The applicant may extend 298.32 the period for meeting other goals by documenting in writing the 298.33 reason for the extension and attaching a copy of the document to 298.34 its next annual report to the commissioner of employment and 298.35 economic development; or 298.36 (ii) ceased to operate its facility located within the 299.1 biotechnology and health sciences industry zone or otherwise 299.2 ceases to be or is not a qualified business. 299.3 [EFFECTIVE DATE.] This section is effective the day 299.4 following final enactment. 299.5 Sec. 22. [FERGUS FALLS; ECONOMIC DEVELOPMENT.] 299.6 Notwithstanding the time limits in Minnesota Statutes 2004, 299.7 section 272.02, subdivision 39, the holding of property by the 299.8 city of Fergus Falls for later resale for economic development 299.9 purposes is considered a public purpose for purposes of 299.10 Minnesota Statutes, section 272.02, subdivision 8, for a period 299.11 not to exceed 15 years. The other requirements of Minnesota 299.12 Statutes, section 272.02, subdivision 39, apply to property held 299.13 by the city under this section. 299.14 [EFFECTIVE DATE.] This section is effective the day after 299.15 approval by the governing body of the city of Fergus Falls and 299.16 compliance with Minnesota Statutes, section 645.021, subdivision 299.17 3. 299.18 Sec. 23. [CITY OF TAYLORS FALLS; BORDER CITY DEVELOPMENT 299.19 ZONE.] 299.20 Subdivision 1. [AUTHORIZATION.] The governing body of the 299.21 city of Taylors Falls may designate all or any part of the city 299.22 as a border city development zone. 299.23 Subd. 2. [APPLICATION OF GENERAL LAW.] (a) Minnesota 299.24 Statutes, sections 469.1731 to 469.1735, apply to the border 299.25 city development zones designated under this section. The 299.26 governing body of the city may exercise the powers granted under 299.27 Minnesota Statutes, sections 469.1731 to 469.1735, including 299.28 powers that apply outside of the zones. 299.29 (b) The allocation under subdivision 3 for purposes of 299.30 Minnesota Statutes, section 469.1735, subdivision 2, is 299.31 appropriated to the commissioner of revenue. 299.32 Subd. 3. [ALLOCATION OF STATE TAX REDUCTIONS.] (a) The 299.33 cumulative total amount of the state portion of the tax 299.34 reductions for all years of the program under Minnesota 299.35 Statutes, sections 469.1731 to 469.1735, for the city of Taylors 299.36 Falls, is limited to $100,000. 300.1 (b) This allocation may be used for tax reductions provided 300.2 in Minnesota Statutes, section 469.1732 or 469.1734, or for 300.3 reimbursements under Minnesota Statutes, section 469.1735, 300.4 subdivision 3, but only if the governing body of the city of 300.5 Taylors Falls determines that the tax reduction or offset is 300.6 necessary to enable a business to expand within the city or to 300.7 attract a business to the city. 300.8 (c) The commissioner of revenue may waive the limit under 300.9 this subdivision using the same rules and standards provided in 300.10 Minnesota Statutes, section 469.169, subdivision 12, paragraph 300.11 (b). 300.12 [EFFECTIVE DATE; LOCAL APPROVAL.] This section is effective 300.13 upon approval by a majority of the voters of the city of Taylors 300.14 Falls voting on the question at a general election. 300.15 Sec. 24. [REVISOR'S INSTRUCTION.] 300.16 The revisor shall renumber Minnesota Statutes, section 300.17 469.310, subdivision 11, as section 469.3135, and insert the 300.18 following definition of "qualified business" in Minnesota 300.19 Statutes, section 469.310: "'Qualified business' means the 300.20 entity described in section 469.3135." 300.21 Sec. 25. [REPEALER.] 300.22 Minnesota Statutes 2004, section 272.02, subdivision 65, is 300.23 repealed effective for taxes payable in 2006 and thereafter. 300.24 Minnesota Statutes 2004, section 477A.08, is repealed effective 300.25 for aid payable in 2005 and thereafter. 300.26 ARTICLE 10 300.27 TAX SHELTERS 300.28 Section 1. [270.103] [EQUITABLE ACTIONS.] 300.29 (a) The commissioner may bring a civil action to enjoin any 300.30 person from taking action or failing to take action that is 300.31 subject to penalty under section 289A.60, subdivisions 7, 20, 300.32 20a, 26, 27, and 28. 300.33 (b) In any action under paragraph (a), the court may enjoin 300.34 the person from engaging in the conduct, if the court finds that: 300.35 (1) the person has engaged in the specified conduct; and 300.36 (2) injunctive relief is appropriate to prevent recurrence 301.1 of the conduct. 301.2 [EFFECTIVE DATE.] This section is effective the day 301.3 following final enactment. 301.4 Sec. 2. [289A.121] [TAX SHELTERS SPECIAL RULES.] 301.5 Subdivision 1. [SCOPE.] The provisions of this section 301.6 apply to a tax shelter that: 301.7 (1) is organized in this state; 301.8 (2) is doing business in this state; 301.9 (3) is deriving income from sources in this state; or 301.10 (4) has one or more investors that are Minnesota taxpayers 301.11 under chapter 290. 301.12 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 301.13 the definitions under sections 6111 and 6112 of the Internal 301.14 Revenue Code, including the regulations under those sections, 301.15 apply. 301.16 (b) The term "tax shelter" includes any reportable 301.17 transaction under subdivision 5. 301.18 Subd. 3. [REGISTRATION.] (a) Any tax shelter organizer 301.19 required to register a tax shelter under section 6111 of the 301.20 Internal Revenue Code must register the shelter with the 301.21 commissioner. 301.22 (b) A tax shelter organizer subject to this subdivision 301.23 must send a duplicate of the federal registration information, 301.24 along with any other information the commissioner requires, to 301.25 the commissioner not later than the day on which interests in 301.26 that tax shelter are first offered for sale. 301.27 (c) In addition to the requirements under paragraph (b), 301.28 any listed transactions must be registered with the commissioner 301.29 by the latest of: 301.30 (1) 60 days after entering into the transaction; 301.31 (2) 60 days after the transaction becomes a listed 301.32 transaction; or 301.33 (3) December 31, 2005. 301.34 Subd. 4. [REGISTRATION NUMBER.] (a) Any person required to 301.35 register under section 6111 of the Internal Revenue Code who 301.36 receives a tax registration number from the Secretary of the 302.1 Treasury must, within 30 days after requested by the 302.2 commissioner, file a statement of that registration number with 302.3 the commissioner. 302.4 (b) Any person who sells or otherwise transfers an interest 302.5 in a tax shelter must, in the same time and manner required 302.6 under section 6111(b) of the Internal Revenue Code, furnish to 302.7 each investor who purchases or otherwise acquires an interest in 302.8 the tax shelter the identification number assigned under federal 302.9 law to the tax shelter. 302.10 (c) Any person claiming any deduction, credit, or other tax 302.11 benefit by reason of a tax shelter must include on the return of 302.12 tax on which the deduction, credit, or other benefit is claimed 302.13 the identification number assigned under federal law to the tax 302.14 shelter. 302.15 Subd. 5. [REPORTABLE TRANSACTIONS.] (a) For each taxable 302.16 year in which a taxpayer must make a disclosure statement under 302.17 Code of Federal Regulations, title 26, section 1.6011-4, for a 302.18 reportable transaction, including a listed transaction, in which 302.19 the taxpayer participated in a taxable year for which a return 302.20 is required under chapter 290, the taxpayer must file a copy of 302.21 the disclosure with the commissioner. 302.22 (b) Any taxpayer that is a member of a unitary business 302.23 group that includes any person that must make a disclosure 302.24 statement under Code of Federal Regulations, title 26, section 302.25 1.6011-4, must file a disclosure under this subdivision. 302.26 (c) Disclosure under this subdivision is required for any 302.27 transaction entered into after December 31, 2001, that the 302.28 Internal Revenue Service determines is a listed transaction at 302.29 any time, and must be made in the manner prescribed by the 302.30 commissioner. For transactions in which the taxpayer 302.31 participated for taxable years ending before December 31, 2005, 302.32 disclosure must be made by the due date of the first return 302.33 required under chapter 290 after the enactment of this section. 302.34 With respect to transactions in which the taxpayer participated 302.35 for taxable years ending on and after December 31, 2005, 302.36 disclosure must be made in the time and manner prescribed in the 303.1 Code of Federal Regulations, title 26, section 1.6011-4(e). 303.2 (d) Notwithstanding paragraphs (a) to (c), no disclosure is 303.3 required for transactions entered into after December 31, 2001, 303.4 and before January 1, 2006, (1) if the taxpayer has filed an 303.5 amended income tax return which reverses the tax benefits of the 303.6 potential tax avoidance transaction, or (2) as a result of a 303.7 federal audit the Internal Revenue Service has determined the 303.8 tax treatment of the transaction and an amended return has been 303.9 filed to reflect the federal treatment. 303.10 Subd. 6. [ABUSIVE SHELTERS; LISTS OF INVESTORS.] (a) Any 303.11 person required to maintain a list under section 6112 of the 303.12 Internal Revenue Code with respect to a potentially abusive tax 303.13 shelter must furnish the list to the commissioner no later than 303.14 when required under federal law. The list required under this 303.15 subdivision must include the same information required with 303.16 respect to a potentially abusive tax shelter under Code of 303.17 Federal Regulations, title 26, section 301.6112-1, and any other 303.18 information the commissioner requires. 303.19 (b) For transactions entered into on or after December 31, 303.20 2001, that become listed transactions at any time, the list must 303.21 be furnished to the commissioner by the latest of: 303.22 (1) 60 days after entering into the transaction; 303.23 (2) 60 days after the transaction becomes a listed 303.24 transaction; or 303.25 (3) December 31, 2005. 303.26 [EFFECTIVE DATE.] This section is effective the day 303.27 following final enactment. 303.28 Sec. 3. Minnesota Statutes 2004, section 289A.38, is 303.29 amended by adding a subdivision to read: 303.30 Subd. 15. [REPORTABLE TRANSACTIONS.] If a taxpayer fails 303.31 to include on any return or statement for any taxable year any 303.32 information with respect to a reportable transaction, as 303.33 required by federal law and under section 289A.121, subdivision 303.34 5, the commissioner may recompute the tax, including a refund, 303.35 within six years after the return is filed with respect to the 303.36 taxable year in which the taxpayer participated in the 304.1 reportable transaction. If tax is assessable solely because of 304.2 this section, the assessable deficiency is limited to the items 304.3 that were not disclosed as required under section 289A.121, 304.4 subdivision 5. 304.5 [EFFECTIVE DATE.] This section is effective the day 304.6 following final enactment. 304.7 Sec. 4. Minnesota Statutes 2004, section 289A.60, 304.8 subdivision 4, is amended to read: 304.9 Subd. 4. [SUBSTANTIAL UNDERSTATEMENT OF LIABILITY; 304.10 PENALTY.] (a) The commissioner of revenue shall impose a penalty 304.11 for substantial understatement of any tax payable to the 304.12 commissioner, except a tax imposed under chapter 297A. 304.13 (b) There must be added to the tax an amount equal to 20 304.14 percent of the amount of any underpayment attributable to the 304.15 understatement. There is a substantial understatement of tax 304.16 for the period if the amount of the understatement for the 304.17 period exceeds the greater of: 304.18 (1) ten percent of the tax required to be shown on the 304.19 return for the period; or 304.20 (2)(a)(i) $10,000 in the case of a mining company or a 304.21 corporation, other than an S corporation as defined in section 304.22 290.9725, when the tax is imposed by chapter 290 or section 304.23 298.01 or 298.015, or 304.24(b)(ii) $5,000 in the case of any other taxpayer, and in 304.25 the case of a mining company or a corporation any tax not 304.26 imposed by chapter 290 or section 298.01 or 298.015. 304.27 (c) For a corporation, other than an S corporation, that 304.28 has been contacted by the commissioner regarding the use of a 304.29 potentially abusive tax shelter, as defined under section 304.30 289A.121, there is also a substantial understatement of tax for 304.31 any taxable year if the amount of the understatement for the 304.32 taxable year exceeds the lesser of: 304.33 (1) ten percent of the tax required to be shown on the 304.34 return for the taxable year (or, if greater, $2,500); or 304.35 (2) $5,000,000. 304.36 (d) The term "understatement" means the excess of the 305.1 amount of the tax required to be shown on the return for the 305.2 period, over the amount of the tax imposed that is shown on the 305.3 return. The amount of the understatement shall be reduced by 305.4 that part of the understatement that is attributable to the tax 305.5 treatment of any item by the taxpayer if there is or was 305.6 substantial authority for the treatment, or any item with 305.7 respect to which the relevant facts affecting the item's tax 305.8 treatment are adequately disclosed in the return or in a 305.9 statement attached to the return. The special rules in cases 305.10 involving tax shelters provided in section 6662(d)(2)(C) of the 305.11 Internal Revenue Code shall apply and shall apply to a tax 305.12 shelter the principal purpose of which is the avoidance or 305.13 evasion of state taxes. The commissioner may abate all or any 305.14 part of the addition to the tax provided by this section on a 305.15 showing by the taxpayer that there was reasonable cause for the 305.16 understatement, or part of it, and that the taxpayer acted in 305.17 good faith. The additional tax and penalty shall bear interest 305.18 at the rate specified in section 270.75 from the time the tax 305.19 should have been paid until paid. 305.20 (e) For taxpayers that have been contacted by the 305.21 commissioner regarding the use of a potentially abusive tax 305.22 shelter within the meaning of section 298A.121, the amount of 305.23 the understatement is reduced by that part of the understatement 305.24 that is attributable to the tax treatment of any item by the 305.25 taxpayer if the taxpayer had reasonable belief that the tax 305.26 treatment was more likely than not the proper treatment or if 305.27 any item with respect to which the relevant facts affecting the 305.28 item's tax treatment are adequately disclosed in the return or 305.29 in a statement attached to the return. 305.30 [EFFECTIVE DATE.] This section is effective for taxpayers 305.31 contacted by the commissioner after the day following final 305.32 enactment. 305.33 Sec. 5. Minnesota Statutes 2004, section 289A.60, 305.34 subdivision 7, is amended to read: 305.35 Subd. 7. [PENALTY FOR FRIVOLOUS RETURN.] (a) If a taxpayer 305.36 files what purports to be a tax return or a claim for refund but 306.1 which does not contain information on which the substantial 306.2 correctness of the purported return or claim for refund may be 306.3 judged or contains information that on its face shows that the 306.4 purported return or claim for refund is substantially incorrect 306.5 and the conduct is due to a position that is frivolous or a 306.6 desire that appears on the purported return or claim for refund 306.7 to delay or impede the administration of Minnesota tax laws, 306.8 then the individual shall pay a penalty of the greater of $1,000 306.9 or 25 percent of the amount of tax required to be shown on the 306.10 return. In a proceeding involving the issue of whether or not a 306.11 person is liable for this penalty, the burden of proof is on the 306.12 commissioner. 306.13 (b) If the taxpayer has been contacted by the commissioner 306.14 of revenue regarding the use of a potentially abusive tax 306.15 shelter within the meaning of section 289A.121, the penalty 306.16 under this subdivision is the greater of $5,000 or 25 percent of 306.17 the amount of tax required to be shown on the return. 306.18 [EFFECTIVE DATE.] This section is effective for returns or 306.19 claims filed after the day following final enactment. 306.20 Sec. 6. Minnesota Statutes 2004, section 289A.60, 306.21 subdivision 20, is amended to read: 306.22 Subd. 20. [PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.] 306.23 Any person who: 306.24 (1)(i) organizes or assists in the organization of a 306.25 partnership or other entity, an investment plan or arrangement, 306.26 or any other plan or arrangement, or (ii) participates in the 306.27 sale of any interest in an entity or plan or arrangement 306.28 referred to in clause (i); and 306.29 (2) makes or furnishes in connection with the organization 306.30 or sale a statement with respect to the allowability of a 306.31 deduction or credit, the excludability of income, or the 306.32 securing of any other tax benefit by reason of holding an 306.33 interest in the entity or participating in the plan or 306.34 arrangement that the person knows or has reason to know is false 306.35 or fraudulent concerning any material matter, shall pay a 306.36 penalty equal to the greater of $1,000 or2050 percent of the 307.1 gross income derived or to be derived by the person from the 307.2 activity. 307.3 The penalty imposed by this subdivision is in addition to 307.4 any other penalty provided by this section. The penalty must be 307.5 collected in the same manner as any delinquent income tax. In a 307.6 proceeding involving the issue of whether or not any person is 307.7 liable for this penalty, the burden of proof is upon the 307.8 commissioner. 307.9 [EFFECTIVE DATE.] This section is effective for 307.10 transactions entered into after the day following final 307.11 enactment. 307.12 Sec. 7. Minnesota Statutes 2004, section 289A.60, is 307.13 amended by adding a subdivision to read: 307.14 Subd. 20a. [AIDING AND ABETTING UNDERSTATING OF TAX 307.15 LIABILITY.] (a) A penalty in the amount under paragraph (b) for 307.16 each document is imposed on each person who: 307.17 (1) aids or assists in, procures, or advises with respect 307.18 to, the preparation or presentation of any portion of a return, 307.19 affidavit, claim, or other document; 307.20 (2) knows or has reason to believe that the portion of a 307.21 return, affidavit, claim, or other document will be used in 307.22 connection with any material matter arising under the Minnesota 307.23 individual income or corporate franchise tax; and 307.24 (3) knows that the portion, if so used, would result in an 307.25 understatement of the liability for tax of another person. 307.26 (b)(1) Except as provided in clause (2), the amount of the 307.27 penalty imposed by this subdivision is $1,000. 307.28 (2) If the return, affidavit, claim, or other document 307.29 relates to the tax liability of a corporation, the amount of the 307.30 penalty imposed by paragraph (a) is $10,000. 307.31 (3) If any person is subject to a penalty under paragraph 307.32 (a) for any document relating to any taxpayer for any taxable 307.33 period or taxable event, the person is not subject to a penalty 307.34 under paragraph (a) for any other document relating to the 307.35 taxpayer for the taxable period or event. 307.36 (c) For purposes of this subdivision, "procures" includes 308.1 (i) ordering or otherwise causing any other person to do an act, 308.2 and (ii) knowing of, and not attempting to prevent, 308.3 participation by any other person in an act. 308.4 (d) The penalty under this subdivision applies whether or 308.5 not the understatement is with the knowledge or consent of the 308.6 persons authorized or required to present the return, affidavit, 308.7 claim, or other document. 308.8 (e) For purposes of paragraph (a), clause (1), a person 308.9 furnishing typing, reproducing, or other mechanical assistance 308.10 with respect to a document is not treated as having aided or 308.11 assisted in the preparation of the document by reason of the 308.12 assistance. 308.13 (f)(1) Except as provided by clause (2), the penalty 308.14 imposed by this section is in addition to any other penalty 308.15 provided by law. 308.16 (2) No penalty applies under subdivision 20 to any person 308.17 for any document for which a penalty is assessed on the person 308.18 under this subdivision. 308.19 [EFFECTIVE DATE.] This section is effective for documents 308.20 prepared after the day following final enactment. 308.21 Sec. 8. Minnesota Statutes 2004, section 289A.60, is 308.22 amended by adding a subdivision to read: 308.23 Subd. 26. [TAX SHELTER PENALTIES; REGISTRATION AND 308.24 LISTING.] (a) For purposes of this subdivision, "material 308.25 advisor" has the meaning given it under Code of Federal 308.26 Regulations, title 26, section 301.6112-1(c)(2). 308.27 (b) The penalties in this subdivision apply in connection 308.28 with the use of tax shelters, as defined under section 289A.121. 308.29 (c) A person who fails to register a tax shelter, including 308.30 providing all of the required information under section 308.31 289A.121, subdivision 3, is subject to a penalty of $15,000. If 308.32 the tax shelter is a listed shelter and disclosure is not made 308.33 as required by section 289A.121, subdivision 5, a penalty 308.34 applies equal to the greater of: 308.35 (1) $100,000; 308.36 (2) 50 percent of the gross income that the organizer or 309.1 material advisor derived from that activity; or 309.2 (3) 75 percent of the gross income that the organizer or 309.3 material advisor derived from that activity if the organizer or 309.4 material advisor intentionally failed to act. 309.5 (d) Any person who fails to supply a tax shelter 309.6 registration number required under section 289A.121, subdivision 309.7 4, paragraph (b), is subject to a penalty of $100 for each 309.8 failure. Any person who fails to include a tax shelter 309.9 registration number on a return as required under section 309.10 289A.121, subdivision 4, paragraph (c), is subject to a penalty 309.11 of $250 for each failure, unless the failure was due to 309.12 reasonable cause. The penalties under this paragraph are in 309.13 addition to any penalties under paragraph (c). 309.14 (e) The person required to maintain or provide a list under 309.15 section 289A.121, subdivision 6, is subject to a penalty equal 309.16 to: 309.17 (1) for reportable transactions, $10,000 for each day after 309.18 the 20th day that the organizer or material advisor failed to 309.19 make the list available to the commissioner after written 309.20 request for that list was made; and 309.21 (2) for listed transactions, the greater of: 309.22 (i) $100,000; or 309.23 (ii) 50 percent of the gross income that the organizer or 309.24 material advisor derived from that activity. 309.25 (f) The penalty imposed by this subdivision is in addition 309.26 to any penalty imposed under this section. 309.27 [EFFECTIVE DATE.] This section is effective for taxable 309.28 years beginning after December 31, 2000. 309.29 Sec. 9. Minnesota Statutes 2004, section 289A.60, is 309.30 amended by adding a subdivision to read: 309.31 Subd. 27. [FAILURE TO REPORT; REPORTABLE TRANSACTION.] (a) 309.32 Any large entity or high net worth individual who fails to 309.33 include on any return or statement any information with respect 309.34 to a reportable transaction that is required under section 6011 309.35 of the Internal Revenue Code and under section 289A.121, to be 309.36 included with that return or statement must pay a penalty for 310.1 each omission in the amount determined under paragraph (b). 310.2 (b) The penalty is $15,000, except for a listed transaction 310.3 the penalty is $30,000. 310.4 (c) For purposes of this subdivision: 310.5 (1) "High net worth individual" means, for a transaction, 310.6 an individual whose net worth exceeds $2,000,000 immediately 310.7 before the transaction. 310.8 (2) "Large entity" means, for any taxable year, a person, 310.9 other than an individual, with gross receipts in excess of 310.10 $10,000,000 for either the taxable year in which the reportable 310.11 transaction occurs or in the preceding taxable year. Rules 310.12 similar to the rules of section 448(c)(2) and 448(c)(3) of the 310.13 Internal Revenue Code, other than section 448(c)(3)(A) of the 310.14 Internal Revenue Code, apply. 310.15 (3) "Reportable transaction" means a reportable transaction 310.16 under section 289A.121, subdivision 5. 310.17 (4) Except as provided in regulations prescribed by the 310.18 Secretary of the Treasury, the term "listed transaction" means a 310.19 reportable transaction, as defined in clause (3), that is the 310.20 same as, or substantially similar to, a transaction specifically 310.21 identified by the Secretary of the Treasury for purposes of 310.22 section 6011 of the Internal Revenue Code for federal income tax 310.23 purposes as a tax avoidance transaction. 310.24 (d) The penalty imposed by this subdivision is in addition 310.25 to any penalty imposed under this section. 310.26 [EFFECTIVE DATE.] This section is effective for taxable 310.27 years beginning after December 31, 2000. 310.28 Sec. 10. Minnesota Statutes 2004, section 289A.60, is 310.29 amended by adding a subdivision to read: 310.30 Subd. 28. [REPORTABLE TRANSACTION UNDERSTATEMENT.] (a) If 310.31 a taxpayer has a reportable transaction understatement for any 310.32 taxable year, an amount equal to 20 percent of the amount of the 310.33 understatement must be added to the tax. 310.34 (b)(1) For purposes of this subdivision, "reportable 310.35 transaction understatement" means the product of: 310.36 (i) the amount of the increase, if any, in taxable income 311.1 that results from a difference between the proper tax treatment 311.2 of an item to which this section applies and the taxpayer's 311.3 treatment of that item as shown on the taxpayer's tax return; 311.4 and 311.5 (ii) the highest rate of tax imposed on the taxpayer under 311.6 section 290.06. 311.7 (2) For purposes of clause (1)(i), any reduction of the 311.8 excess of deductions allowed for the taxable year over gross 311.9 income for that year, and any reduction in the amount of capital 311.10 losses which would, without regard to section 1211 of the 311.11 Internal Revenue Code, be allowed for that year, must be treated 311.12 as an increase in taxable income. 311.13 (c) This subdivision applies to any item that is 311.14 attributable to: 311.15 (1) any listed transaction under section 289A.121; and 311.16 (2) any reportable transaction, other than a listed 311.17 transaction, if a significant purpose of that transaction is the 311.18 avoidance or evasion of federal income tax liability. 311.19 (d) The penalty imposed by this subdivision is in addition 311.20 to any penalty imposed under this section. 311.21 [EFFECTIVE DATE.] This section is effective for taxable 311.22 years beginning after December 31, 2000. 311.23 Sec. 11. Minnesota Statutes 2004, section 289A.60, is 311.24 amended by adding a subdivision to read: 311.25 Subd. 29. [ADDITION TO TAX.] (a) If a taxpayer has been 311.26 contacted by the commissioner regarding the use of a potentially 311.27 abusive tax shelter and has a deficiency, there must be added to 311.28 the tax an amount equal to 100 percent of the interest payable 311.29 under section 270.75 for the period beginning on the last date 311.30 prescribed by law for the payment of that tax, determined 311.31 without regard to extensions, and ending on the date the notice 311.32 of proposed assessment is mailed. 311.33 (b) "Potentially abusive tax shelter" means: 311.34 (1) any tax shelter, as defined in section 6111 of the 311.35 Internal Revenue Code, for which registration is required under 311.36 section 289A.121; or 312.1 (2) any entity, investment plan or arrangement, or other 312.2 plan or arrangement which is of a type that the Secretary of the 312.3 Treasury determines by regulations as having a potential for tax 312.4 avoidance or evasion. 312.5 (c) The penalty imposed by this subdivision is in addition 312.6 to any other penalty imposed under this section and to the 312.7 interest computation for purposes of section 270.75. 312.8 [EFFECTIVE DATE.] This section is effective for notices of 312.9 proposed assessments mailed after the day following final 312.10 enactment. 312.11 Sec. 12. Minnesota Statutes 2004, section 289A.60, is 312.12 amended by adding a subdivision to read: 312.13 Subd. 30. [AUTHORITY TO ABATE TAX SHELTER PENALTIES.] (a) 312.14 Notwithstanding section 270.07, the commissioner may abate all 312.15 or any portion of any penalty imposed by subdivisions 20, 20a, 312.16 and 26 to 29 for any violation, only if all of the following 312.17 apply: 312.18 (1) the violation is for a reportable transaction, other 312.19 than a listed transaction, as defined under Code of Federal 312.20 Regulations, title 26, section 6011-4; 312.21 (2) the person on whom the penalty is imposed has a history 312.22 of complying with the requirements of this chapter and chapter 312.23 290; 312.24 (3) the violation is due to an unintentional mistake of 312.25 fact; 312.26 (4) imposing the penalty would be against equity and good 312.27 conscience; and 312.28 (5) abating the penalty would promote compliance with the 312.29 requirements of chapter 290. 312.30 (b) The exercise of authority under paragraph (a) is at the 312.31 sole discretion of the commissioner and may not be delegated. 312.32 Notwithstanding any other law or rule, a determination under 312.33 this subdivision may not be reviewed in any administrative or 312.34 judicial proceeding. 312.35 Sec. 13. Minnesota Statutes 2004, section 289A.60, is 312.36 amended by adding a subdivision to read: 313.1 Subd. 31. [INTEREST COMPUTATION.] For an amended return 313.2 filed after December 31, 2005, and before the taxpayer is 313.3 contacted by the Internal Revenue Service or the commissioner 313.4 regarding a potentially abusive tax shelter, then, for taxable 313.5 years beginning after December 31, 2001, with respect to any 313.6 understatement of tax related to using reportable transactions 313.7 as defined in section 289A.121, the taxpayer is subject to 313.8 interest at a rate of 150 percent of the applicable rate under 313.9 section 270.75. 313.10 [EFFECTIVE DATE.] This section is effective for taxable 313.11 years beginning after December 31, 2005. 313.12 Sec. 14. [VOLUNTARY COMPLIANCE INITIATIVE.] 313.13 Subdivision 1. [ESTABLISHMENT.] The commissioner of 313.14 revenue shall establish and administer a voluntary compliance 313.15 initiative for taxpayers subject to Minnesota Statutes, section 313.16 289A.60, subdivision 26, 27, or 28. 313.17 Subd. 2. [TIME PERIOD; SCOPE.] (a) The commissioner shall 313.18 conduct the voluntary compliance initiative from July 1, 2005, 313.19 to December 31, 2005, under Minnesota Statutes, section 270.07. 313.20 (b) The voluntary compliance initiative applies to tax 313.21 liabilities and penalties attributable to an abusive tax 313.22 avoidance transaction for taxable years beginning before January 313.23 1, 2005. An abusive tax avoidance transaction means a listed 313.24 transaction, a potentially abusive tax shelter, or a reportable 313.25 transaction as those terms are used in Minnesota Statutes, 313.26 section 289A.121. 313.27 Subd. 3. [ELIGIBILITY.] (a) No person may participate in 313.28 the voluntary compliance initiative, if: 313.29 (1) the taxpayer was convicted of a crime in connection 313.30 with an abusive tax avoidance transaction or transactions; 313.31 (2) a criminal complaint was filed against the taxpayer in 313.32 connection with an abusive tax avoidance transaction or 313.33 transactions; 313.34 (3) the taxpayer is the subject of a criminal investigation 313.35 in connection with an abusive tax avoidance transaction or 313.36 transactions; or 314.1 (4) the taxpayer was eligible to participate in the 314.2 Internal Revenue Service's Offshore Voluntary Compliance 314.3 Initiative, as set forth in Revenue Procedure 2003-11. 314.4 (b) A person not disqualified under paragraph (a) may 314.5 participate in the voluntary compliance initiative. 314.6 Subd. 4. [ELECTION; COMMISSIONER AUTHORITY.] (a) An 314.7 eligible taxpayer that meets the requirements of subdivision 3 314.8 with respect to any taxable year may elect to participate in the 314.9 voluntary compliance program under either subdivision 5 or 6 for 314.10 a particular tax avoidance period. The election must be made 314.11 separately for each taxable year and in the form and manner 314.12 prescribed by the commissioner, and once made is irrevocable. 314.13 (b) The commissioner of revenue may issue forms and 314.14 instructions and take other actions necessary, including the use 314.15 of agreements under Minnesota Statutes, section 270.67, to 314.16 implement the voluntary compliance initiative. 314.17 Subd. 5. [PARTICIPATION WITHOUT RIGHT OF APPEAL.] (a) A 314.18 person participating in the voluntary compliance initiative 314.19 under this subdivision waives the right to an administrative 314.20 appeal, to a claim for refund, or to file an action in district 314.21 court or tax court. The person participating must: 314.22 (1) file an amended return for each taxable year for which 314.23 the taxpayer has filed a tax return using an abusive tax 314.24 avoidance transaction to underreport the taxpayer's tax 314.25 liability for the taxable year. Each amended return must report 314.26 all income from all sources, without regard to the abusive tax 314.27 avoidance transactions; and 314.28 (2) pay taxes and interest due in full, except that the 314.29 commissioner of revenue may enter into an installment payment 314.30 agreement under Minnesota Statutes, section 270.67, before the 314.31 taxpayer files an amended return. 314.32 (b) The commissioner of revenue shall abate all penalties 314.33 imposed under Minnesota Statutes, chapter 289A, which could have 314.34 been assessed in connection with the use of an abusive tax 314.35 avoidance transaction, for each taxable year for which the 314.36 taxpayer elects to participate in the voluntary compliance 315.1 initiative under this subdivision, to the extent those penalties 315.2 are a result of underreporting of tax liabilities attributable 315.3 to the use of abusive tax avoidance transactions, for which a 315.4 participating person files an amended return in compliance with 315.5 paragraph (a). 315.6 (c) No criminal action must be brought against a taxpayer 315.7 for the taxable years reported under the voluntary compliance 315.8 initiative with respect to the issues for which a taxpayer 315.9 voluntarily complies under this chapter. 315.10 (d) A person filing an amended return under this 315.11 subdivision of the voluntary compliance initiative may not file 315.12 a claim for refund, an administrative appeal, or an action in 315.13 district court with regard to the amount of taxes or interest 315.14 paid with the amended return. Nothing in this subdivision 315.15 precludes a taxpayer from filing a claim for credit or refund 315.16 for the same taxable year in which a tax avoidance transaction 315.17 was reported if the credit or refund is not attributable to the 315.18 tax avoidance transaction. 315.19 Subd. 6. [PARTICIPATION WITH RIGHT OF APPEAL.] (a) A 315.20 person participating in the voluntary compliance initiative who 315.21 does not waive the right to an administrative appeal, a claim 315.22 for refund, or an action in district court must: 315.23 (1) file an amended return for each taxable year for which 315.24 the taxpayer has filed a tax return using an abusive tax 315.25 avoidance transaction to underreport the taxpayer's tax 315.26 liability for that taxable year. Each amended return must 315.27 report all income from all sources, without regard to the 315.28 abusive tax avoidance transactions; and 315.29 (2) pay taxes and interest due in full, except that the 315.30 commissioner of revenue may enter into an installment payment 315.31 agreement pursuant to Minnesota Statutes, section 270.67, prior 315.32 to the taxpayer filing an amended return. 315.33 (b) The commissioner of revenue shall abate all penalties 315.34 imposed under Minnesota Statutes, chapter 289A, except for the 315.35 penalty for substantial understatement of tax liability under 315.36 Minnesota Statutes, section 289A.60, subdivision 4, determined 316.1 without regard to paragraph (e) of that section, which could 316.2 have been assessed in connection with the use of an abusive tax 316.3 avoidance transaction, for each taxable year for which the 316.4 taxpayer elects to participate in the voluntary compliance 316.5 initiative under this subdivision, to the extent those penalties 316.6 apply to underreporting of tax liabilities attributable to the 316.7 use of abusive tax avoidance transactions for which a 316.8 participating person files an amended return in compliance with 316.9 paragraph (a). 316.10 (c) No criminal action must be brought against a taxpayer 316.11 for the taxable years reported under the voluntary compliance 316.12 initiative with respect to the issues for which a taxpayer 316.13 voluntarily complies under this chapter. 316.14 (d) The taxpayer may file a claim for refund, an 316.15 administrative appeal, or an action in district court only after 316.16 the earlier of the following occurs: 316.17 (1) the date the commissioner of revenue takes action on 316.18 the claim for refund for the taxable year; 316.19 (2) the later of: 316.20 (i) 180 days after the date of a final determination by the 316.21 Internal Revenue Service with respect to the transaction or 316.22 transactions to which Minnesota Statutes, chapter 290, applies; 316.23 or 316.24 (ii) four years after the date the claim for refund was 316.25 filed, or one year after full payment of all tax was made, 316.26 including penalty and interest, whichever is later. 316.27 (e)(1) The taxpayer is subject to the substantial 316.28 understatement penalty under Minnesota Statutes, section 316.29 289A.60, subdivision 4. The penalty may be assessed: 316.30 (i) when the commissioner of revenue takes action on the 316.31 claim for refund; or 316.32 (ii) when a federal determination becomes final for the 316.33 same issue, in which case the penalty must be assessed, and may 316.34 not be abated, if the penalty was assessed at the federal level. 316.35 (2) In determining the amount of the underpayment of tax, 316.36 Code of Federal Regulations, title 26, section 1.6664-2(c)(2), 317.1 relating to qualified amended returns, applies. The 317.2 underpayment is the difference between the amount of tax on the 317.3 original return and the correct amount of tax for the taxable 317.4 year. The underpayment must not be less than the amount of the 317.5 claim for refund filed by the taxpayer under paragraph (d) that 317.6 was denied. 317.7 (3) The penalty is due and payable upon notice and demand 317.8 by the commissioner of revenue. Only after the taxpayer has 317.9 paid all amounts due, including the penalty, and the claim is 317.10 denied in whole or in part, may the taxpayer file an appeal 317.11 under Minnesota Statutes, section 270.07, in conjunction with 317.12 the appeal filed under paragraph (d). 317.13 Subd. 7. [COMMISSIONER ORDERS AND PENALTIES.] After 317.14 December 31, 2005, the commissioner of revenue may issue an 317.15 order of assessment within the time period permitted under 317.16 Minnesota Statutes, section 289A.38, upon an amended return 317.17 filed under this section for an underreported amount of tax, may 317.18 impose penalties on an underreported amount of tax on an amended 317.19 return filed under this chapter, or seek initiation of a 317.20 criminal action against any person based on any underreported 317.21 amount of tax on an amended return filed under this chapter. 317.22 Subd. 8. [PENALTY RELIEF; EXCEPTION.] For purposes of this 317.23 section, if the commissioner subsequently determines that the 317.24 correct amount of Minnesota income tax was not paid for the 317.25 taxable year for a participant in the voluntary compliance 317.26 initiative, then the penalty relief under this section does not 317.27 apply to any portion of the underpayment attributable to a tax 317.28 avoidance transaction not paid to the state. 317.29 [EFFECTIVE DATE.] This section is effective the day 317.30 following final enactment. 317.31 Sec. 15. [APPROPRIATION.] 317.32 For purposes of administering the voluntary compliance 317.33 initiative and the tax shelter registration and compliance 317.34 provisions of this act, $....... is appropriated from the 317.35 general fund for fiscal year 2006 and $....... for fiscal year 317.36 2007 to the commissioner of revenue. $....... is added to the 318.1 base budget. 318.2 ARTICLE 11 318.3 MISCELLANEOUS 318.4 Section 1. [15.60] [PUBLIC SAFETY OFFICERS; AMERICAN 318.5 FLAG.] 318.6 (a) A public employer may not forbid a peace officer or 318.7 firefighter from wearing a patch or pin depicting the flag of 318.8 the United States of America on the employee's uniform, 318.9 according to customary and standard flag etiquette. However, a 318.10 public employer may limit the size of a flag patch worn on a 318.11 uniform to no more than three inches by five inches. 318.12 (b) For purposes of this section: 318.13 (1) "peace officer" has the meaning given in section 318.14 626.84, subdivision 1, paragraph (c) or (f); 318.15 (2) "firefighter" means a person as defined in section 318.16 299A.41, subdivision 4, clause (3) or (4); and 318.17 (3) "public employer" has the meaning given in section 318.18 179A.03, subdivision 15, and also includes a municipal fire 318.19 department and an independent nonprofit firefighting corporation. 318.20 (c) The commissioner of finance or the commissioner of 318.21 revenue must suspend disbursement, not to exceed $10,000, of any 318.22 state appropriation or aid to any public employer whom the 318.23 commissioner determines is not complying with paragraph (a) 318.24 until the commissioner determines that the employer is in 318.25 compliance. 318.26 Sec. 2. Minnesota Statutes 2004, section 16D.10, is 318.27 amended to read: 318.28 16D.10 [CASE REVIEWER.] 318.29 Subdivision 1. [DUTIES.] The commissioner shall make a 318.30 case reviewer available to debtors. The reviewer must be 318.31 available to answer a debtor's questions concerning the 318.32 collection process and to review the collection activity taken. 318.33 If the reviewer reasonably believes that the particular action 318.34 being taken is unreasonable or unfair, the reviewer may make 318.35 recommendations to the commissioner in regard to the collection 318.36 action. 319.1 Subd. 2. [AUTHORITY TO ISSUE DEBTOR ASSISTANCE ORDER.] On 319.2 application filed by a debtor with the case reviewer, in the 319.3 form, manner, and in the time prescribed by the commissioner, 319.4 and after thorough investigation, the case reviewer may issue a 319.5 debtor assistance order if, in the determination of the case 319.6 reviewer, the manner in which the state debt collection laws are 319.7 being administered is creating or will create an unjust and 319.8 inequitable result for the debtor. Debtor assistance orders are 319.9 governed by the provisions relating to taxpayer assistance 319.10 orders under section 270.273. 319.11 Subd. 3. [TRANSFER OF DUTIES TO TAXPAYER RIGHTS ADVOCATE.] 319.12 All duties and authority of the case reviewer under subdivisions 319.13 1 and 2 are transferred to the taxpayer rights advocate. 319.14 [EFFECTIVE DATE.] This section is effective the day 319.15 following final enactment. 319.16 Sec. 3. Minnesota Statutes 2004, section 270.02, 319.17 subdivision 3, is amended to read: 319.18 Subd. 3. [POWERS, ORGANIZATION, ASSISTANTS.] Subject to 319.19 the provisions of this chapter and other applicable laws the 319.20 commissioner shall have power to organize the department with 319.21 such divisions and other agencies as the commissioner deems 319.22 necessary and to appoint one deputy commissioner, a department 319.23 secretary, directors of divisions, and such other officers, 319.24 employees, and agents as the commissioner may deem necessary to 319.25 discharge the functions of the department, define the duties of 319.26 such officers, employees, and agents, and delegate to them any 319.27 of the commissioner's powers or duties, subject to the 319.28 commissioner's control and under such conditions as the 319.29 commissioner may prescribe. Appointments to exercise delegated 319.30 power to sign documents which require the signature of the 319.31 commissioner or a delegate by law shall be by written order 319.32 filed with the secretary of state. The delegations of authority 319.33 granted by the commissioner remain in effect until revoked by 319.34 the commissioner or a successor commissioner. 319.35 [EFFECTIVE DATE.] This section is effective the day 319.36 following final enactment. 320.1 Sec. 4. Minnesota Statutes 2004, section 270.30, 320.2 subdivision 1, is amended to read: 320.3 Subdivision 1. [SCOPE.](a)This section applies to a 320.4 person whooffers,provides, or facilitates the provision of320.5refund anticipation loans, as part of or in connection with the320.6provision oftax preparation services. 320.7(b) This section does not apply to:320.8(1) a tax preparer who provides tax preparation services320.9for fewer than six clients in a calendar year;320.10(2) the provision by a person of tax preparation services320.11to a spouse, parent, grandparent, child, or sibling; and320.12(3) the provision of services by an employee for an320.13employer.320.14 Sec. 5. Minnesota Statutes 2004, section 270.30, 320.15 subdivision 5, is amended to read: 320.16 Subd. 5. [ITEMIZED BILL REQUIRED.] A tax preparer must 320.17 provide an itemized statement of the charges for services, at 320.18 least separately stating the charges for: 320.19 (1) return preparation; and 320.20 (2)electronic filing; and320.21(3)providing or facilitating a refund anticipation loan. 320.22 Sec. 6. Minnesota Statutes 2004, section 270.30, is 320.23 amended by adding a subdivision to read: 320.24 Subd. 5a. [NONGAME WILDLIFE CHECKOFF.] A tax preparer must 320.25 give written notice of the option to contribute $1 or more to 320.26 the nongame wildlife management account in section 290.431 to 320.27 corporate clients that file an income tax return and to 320.28 individual clients who file an income tax return or property tax 320.29 refund claim form. This notification must: 320.30 (1) include information on the nongame wildlife management 320.31 account, that the contribution may be made by adding to the tax 320.32 or deducting from the refund that would otherwise be payable by 320.33 or to that individual or corporation, and that a contribution 320.34 would be paid into an account established for the management of 320.35 nongame wildlife; and 320.36 (2) be included with information sent to the client at the 321.1 same time as the preliminary worksheets or other documents used 321.2 in preparing the client's return and must include a line for 321.3 displaying contributions. 321.4 [EFFECTIVE DATE.] This section is effective for returns 321.5 prepared for taxable years beginning after December 31, 2004. 321.6 Sec. 7. Minnesota Statutes 2004, section 270.30, 321.7 subdivision 6, is amended to read: 321.8 Subd. 6. [ENFORCEMENT; PENALTIES.] The commissioner may 321.9 impose an administrative penalty of not more than $1,000 per 321.10 violation of subdivision 3, 4, or 5. The commissioner may 321.11 terminate a tax preparer's authority to transmit returns 321.12 electronically to the state, if the commissioner determines the 321.13 tax preparer engaged in a pattern and practice of violating this 321.14 section. Imposition of a penalty under this subdivision is 321.15 subject to the contested case procedure under chapter 14. The 321.16 commissioner shall collect the penalty in the same manner as the 321.17 income tax. Penalties imposed under this subdivision are public 321.18 data. 321.19 Sec. 8. Minnesota Statutes 2004, section 270.30, is 321.20 amended by adding a subdivision to read: 321.21 Subd. 6a. [EXCHANGE OF DATA; STATE BOARD OF 321.22 ACCOUNTANCY.] The State Board of Accountancy shall refer to the 321.23 commissioner complaints it receives about tax preparers who are 321.24 not subject to the jurisdiction of the State Board of 321.25 Accountancy and who are alleged to have violated the provisions 321.26 of subdivisions 3 to 5. 321.27 Sec. 9. Minnesota Statutes 2004, section 270.30, is 321.28 amended by adding a subdivision to read: 321.29 Subd. 6b. [EXCHANGE OF DATA; LAWYERS BOARD OF PROFESSIONAL 321.30 RESPONSIBILITY.] The Lawyers Board of Professional 321.31 Responsibility may refer to the commissioner complaints it 321.32 receives about tax preparers who are not subject to its 321.33 jurisdiction and who are alleged to have violated the provisions 321.34 of subdivisions 3 to 5. 321.35 Sec. 10. Minnesota Statutes 2004, section 270.30, is 321.36 amended by adding a subdivision to read: 322.1 Subd. 6c. [EXCHANGE OF DATA; COMMISSIONER.] The 322.2 commissioner shall refer complaints about tax preparers who are 322.3 alleged to have violated the provisions of subdivisions 3 to 5 322.4 to: 322.5 (1) the State Board of Accountancy, if the tax preparer is 322.6 under its jurisdiction; and 322.7 (2) the Lawyers Board of Professional Responsibility, if 322.8 the tax preparer is under its jurisdiction. 322.9 Sec. 11. Minnesota Statutes 2004, section 270.30, is 322.10 amended by adding a subdivision to read: 322.11 Subd. 6d. [DATA PRIVATE.] Information exchanged on 322.12 individuals under subdivisions 6a to 6c are private data under 322.13 section 13.02, subdivision 12, until such time as a penalty is 322.14 imposed as provided in section 326A.08 or by the Lawyers Board 322.15 of Professional Responsibility. 322.16 Sec. 12. Minnesota Statutes 2004, section 270.30, 322.17 subdivision 8, is amended to read: 322.18 Subd. 8. [EXEMPTIONS; ENFORCEMENT PROVISIONS.] (a) The 322.19 provisions ofsubdivisions 6 and 7this section, except for 322.20 subdivision 4, do not apply to: 322.21 (1) an attorney admitted to practice under section 481.01; 322.22 (2) a certified public accountantholding a certificate322.23under section 326A.04 or a person issued a permit to practice322.24under section 326A.05or other person who is subject to the 322.25 jurisdiction of the State Board of Accountancy; 322.26 (3)a person designated as a registered accounting322.27practitioner under Minnesota Rules, part 1105.6600, or a322.28registered accounting practitioner firm issued a permit under322.29Minnesota Rules, part 1105.7100;322.30(4)an enrolled agent who has passed the special enrollment 322.31 examination administered by the Internal Revenue Service;and322.32(5)(4) any fiduciary, or the regular employees of a 322.33 fiduciary, while acting on behalf of the fiduciary estate, the 322.34 testator, trustor, grantor, or beneficiaries of them; 322.35 (5) a tax preparer who provides tax preparation services 322.36 for fewer than six clients in a calendar year; 323.1 (6) tax preparation services to a spouse, parent, 323.2 grandparent, child, or sibling of the tax preparer; and 323.3 (7) the preparation by an employee of the tax return of the 323.4 employee's employer. 323.5 Sec. 13. [270.301] [PUBLICATION OF NAMES OF TAX PREPARERS 323.6 SUBJECT TO PENALTIES.] 323.7 Subdivision 1. [PUBLICATION OF LIST.] Notwithstanding any 323.8 other law, the commissioner must publish as provided in this 323.9 section a list or lists of tax preparers subject to penalties. 323.10 Subd. 2. [REQUIRED AND EXCLUDED TAX PREPARERS.] (a) 323.11 Subject to the limitations of paragraph (b), the commissioner 323.12 must publish lists of tax preparers who have been convicted 323.13 under section 289A.63. 323.14 (b) For the purposes of this section, tax preparers are not 323.15 subject to publication if: 323.16 (1) an administrative or court action contesting the 323.17 penalty has been filed or served and is unresolved at the time 323.18 when notice would be given under subdivision 3; 323.19 (2) an appeal period to contest the penalty has not 323.20 expired; or 323.21 (3) the commissioner has been notified that the tax 323.22 preparer is deceased. 323.23 Subd. 3. [NOTICE TO TAX PREPARER.] (a) At least 30 days 323.24 before publishing the name of a tax preparer subject to penalty, 323.25 the commissioner shall mail a written notice to the tax 323.26 preparer, detailing the amount and nature of each penalty and 323.27 the intended publication of the information listed in 323.28 subdivision 4 related to the penalty. The notice must be mailed 323.29 by first class and certified mail addressed to the last known 323.30 address of the tax preparer. The notice must include 323.31 information regarding the exceptions listed in subdivision 2, 323.32 paragraph (b), and must state that the tax preparer's 323.33 information will not be published if the tax preparer provides 323.34 information establishing that subdivision 2, paragraph (b), 323.35 prohibits publication of the tax preparer's name. 323.36 (b) Thirty days after the notice is mailed and if the tax 324.1 preparer has not proved to the commissioner that subdivision 2, 324.2 paragraph (b), prohibits publication, the commissioner may 324.3 publish in a list of tax preparers subject to penalty the 324.4 information about the tax preparer that is listed in subdivision 324.5 4. 324.6 Subd. 4. [FORM OF LIST.] The list may be published by any 324.7 medium or method. The list must contain the name, associated 324.8 business name or names, address or addresses, and violation or 324.9 violations for which a penalty was imposed of each tax preparer 324.10 subject to penalty. 324.11 Subd. 5. [REMOVAL FROM LIST.] The commissioner shall 324.12 remove the name of a tax preparer from the list of tax preparers 324.13 published under this section: 324.14 (1) when the commissioner determines that the name was 324.15 included on the list in error; 324.16 (2) within 90 days after the preparer has fully paid all 324.17 fines imposed, served any suspension, and demonstrated to the 324.18 satisfaction of the commissioner that the preparer has 324.19 successfully completed any remedial actions required by the 324.20 commissioner, the State Board of Accountancy, or the Lawyers 324.21 Board of Professional Responsibility; or 324.22 (3) when the commissioner has been notified that the tax 324.23 preparer is deceased. 324.24 Subd. 6. [NAMES PUBLISHED IN ERROR.] If the commissioner 324.25 publishes a name under subdivision 1 in error, the tax preparer 324.26 whose name was erroneously published has a right to request a 324.27 retraction and apology. If the tax preparer so requests, the 324.28 commissioner shall publish a retraction and apology 324.29 acknowledging that the tax preparer's name was published in 324.30 error. The retraction and apology must appear in the same 324.31 medium and the same format as the original list that contained 324.32 the name listed in error. 324.33 Subd. 7. [PAYMENT OF DAMAGES.] Actions against the 324.34 commissioner of revenue or the state of Minnesota arising out of 324.35 the implementation of this program must be brought under section 324.36 270.276. 325.1 [EFFECTIVE DATE.] The provision of this section requiring 325.2 the commissioner to publish the names of tax preparers applies 325.3 only to publishing the names of those tax preparers who commit a 325.4 crime under section 289A.63 on or after August 1, 2005. 325.5 Sec. 14. Minnesota Statutes 2004, section 270.65, is 325.6 amended to read: 325.7 270.65 [DATE OF ASSESSMENT; DEFINITION.] 325.8 For purposes of taxes administered by the commissioner, the 325.9 term "date of assessment" means the date a liability reported on 325.10 a return was entered into the records of the commissioner or the 325.11 date a return should have been filed, whichever is later; or, in 325.12 the case of taxes determined by the commissioner, "date of 325.13 assessment" means the date of the order assessing taxes or date 325.14 of the return made by the commissioner; or, in the case of an 325.15 amended return filed by the taxpayer, the assessment date is the 325.16 date additional liability reported on the return, if any, was 325.17 entered into the records of the commissioner; or, in the case of 325.18 a consent agreement signed by the taxpayer under section 270.67, 325.19 subdivision 3, the assessment date is the notice date shown on 325.20 the agreement; or, in the case of a check from a taxpayer that 325.21 is dishonored and results in an erroneous refund being given to 325.22 the taxpayer, remittance of the check is deemed to be an 325.23 assessment and the "date of assessment" is the date the check 325.24 was received by the commissioner. 325.25 [EFFECTIVE DATE.] This section is effective the day 325.26 following final enactment. 325.27 Sec. 15. Minnesota Statutes 2004, section 270.67, 325.28 subdivision 4, is amended to read: 325.29 Subd. 4. [OFFER-IN-COMPROMISE AND INSTALLMENT PAYMENT 325.30 PROGRAM.] (a) In implementing the authority provided in 325.31 subdivision 2 or in sections 8.30 and 16D.15 to accept offers of 325.32 installment payments or offers-in-compromise of tax liabilities, 325.33 the commissioner of revenue shall prescribe guidelines for 325.34 employees of the Department of Revenue to determine whether an 325.35 offer-in-compromise or an offer to make installment payments is 325.36 adequate and should be accepted to resolve a dispute. In 326.1 prescribing the guidelines, the commissioner shall develop and 326.2 publish schedules of national and local allowances designed to 326.3 provide that taxpayers entering into a compromise or payment 326.4 agreement have an adequate means to provide for basic living 326.5 expenses. The guidelines must provide that the taxpayer's 326.6 ownership interest in a motor vehicle, to the extent of the 326.7 value allowed in section 550.37, will not be considered as an 326.8 asset; in the case of an offer related to a joint tax liability 326.9 of spouses, that value of two motor vehicles must be excluded. 326.10 The guidelines must provide that employees of the department 326.11 shall determine, on the basis of the facts and circumstances of 326.12 each taxpayer, whether the use of the schedules is appropriate 326.13 and that employees must not use the schedules to the extent the 326.14 use would result in the taxpayer not having adequate means to 326.15 provide for basic living expenses. The guidelines must provide 326.16 that: 326.17 (1) an employee of the department shall not reject an 326.18 offer-in-compromise or an offer to make installment payments 326.19 from a low-income taxpayer solely on the basis of the amount of 326.20 the offer; and 326.21 (2) in the case of an offer-in-compromise which relates 326.22 only to issues of liability of the taxpayer: 326.23 (i) the offer must not be rejected solely because the 326.24 commissioner is unable to locate the taxpayer's return or return 326.25 information for verification of the liability; and 326.26 (ii) the taxpayer shall not be required to provide an 326.27 audited, reviewed, or compiled financial statement. 326.28 (b) The commissioner shall establish procedures: 326.29 (1) that require presentation of a counteroffer or a 326.30 written rejection of the offer by the commissioner if the amount 326.31 offered by the taxpayer in an offer-in-compromise or an offer to 326.32 make installment payments is not accepted by the commissioner; 326.33 (2) for an administrative review of any written rejection 326.34 of a proposed offer-in-compromise or installment agreement made 326.35 by a taxpayer under this section before the rejection is 326.36 communicated to the taxpayer; 327.1 (3) that allow a taxpayer to request reconsideration of any 327.2 written rejection of the offer or agreement to the commissioner 327.3 of revenue to determine whether the rejection is reasonable and 327.4 appropriate under the circumstances; and 327.5 (4) that provide for notification to the taxpayer when an 327.6 offer-in-compromise has been accepted, and issuance of 327.7 certificates of release of any liens imposed under section 327.8 270.69 related to the liability which is the subject of the 327.9 compromise. 327.10 (c) Each compromise proposal must be accompanied by a 327.11 nonrefundable payment of $250. If the compromise proposal is 327.12 accepted, the payment must be applied to the accepted compromise 327.13 amount. If the compromise is rejected, the payment must be 327.14 applied to the outstanding tax debts of the taxpayer pursuant to 327.15 section 270.652. In cases of financial hardship, upon 327.16 presentation of information establishing an inability to make 327.17 the $250 payment, the commissioner may waive this requirement. 327.18 [EFFECTIVE DATE.] This section is effective for offers in 327.19 compromise submitted after August 31, 2005. 327.20 Sec. 16. Minnesota Statutes 2004, section 270.69, 327.21 subdivision 4, is amended to read: 327.22 Subd. 4. [PERIOD OF LIMITATIONS.] The lien imposed by this 327.23 section shall, notwithstanding any other provision of law to the 327.24 contrary, be enforceable from the time the lien arises and for 327.25 ten years from the date of filing the notice of lien, which must 327.26 be filed by the commissioner within five years after the date of 327.27 assessment of the tax or final administrative or judicial 327.28 determination of the assessment. A notice of lien filed in one 327.29 county may be transcribed to the secretary of state or to any 327.30 other county within ten years after the date of its filing, but 327.31 the transcription shall not extend the period during which the 327.32 lien is enforceable. A notice of lien may be renewed by the 327.33 commissioner before the expiration of the ten-year period for an 327.34 additional ten years. The taxpayer must receive written notice 327.35 of the renewal. 327.36 [EFFECTIVE DATE.] This section is effective the day 328.1 following final enactment. 328.2 Sec. 17. Minnesota Statutes 2004, section 270A.03, 328.3 subdivision 5, is amended to read: 328.4 Subd. 5. [DEBT.] "Debt" means a legal obligation of a 328.5 natural person to pay a fixed and certain amount of money, which 328.6 equals or exceeds $25 and which is due and payable to a claimant 328.7 agency. The term includes criminal fines imposed under section 328.8 609.10 or 609.125, fines imposed for petty misdemeanors as 328.9 defined in section 609.02, subdivision 4a, and restitution. The 328.10 term also includes the co-payment for the appointment of a 328.11 district public defender imposed under section 611.17, paragraph 328.12 (c). A debt may arise under a contractual or statutory 328.13 obligation, a court order, or other legal obligation, but need 328.14 not have been reduced to judgment. 328.15 A debt includes any legal obligation of a current recipient 328.16 of assistance which is based on overpayment of an assistance 328.17 grant where that payment is based on a client waiver or an 328.18 administrative or judicial finding of an intentional program 328.19 violation; or where the debt is owed to a program wherein the 328.20 debtor is not a client at the time notification is provided to 328.21 initiate recovery under this chapter and the debtor is not a 328.22 current recipient of food support, transitional child care, or 328.23 transitional medical assistance. 328.24 A debt does not include any legal obligation to pay a 328.25 claimant agency for medical care, including hospitalization if 328.26 the income of the debtor at the time when the medical care was 328.27 rendered does not exceed the following amount: 328.28 (1) for an unmarried debtor, an income of $8,800 or less; 328.29 (2) for a debtor with one dependent, an income of $11,270 328.30 or less; 328.31 (3) for a debtor with two dependents, an income of $13,330 328.32 or less; 328.33 (4) for a debtor with three dependents, an income of 328.34 $15,120 or less; 328.35 (5) for a debtor with four dependents, an income of $15,950 328.36 or less; and 329.1 (6) for a debtor with five or more dependents, an income of 329.2 $16,630 or less. 329.3 The income amounts in this subdivision shall be adjusted 329.4 for inflation for debts incurred in calendar years 2001 and 329.5 thereafter. The dollar amount of each income level that applied 329.6 to debts incurred in the prior year shall be increased in the 329.7 same manner as provided in section 1(f) of the Internal Revenue 329.8 Code of 1986, as amended through December 31, 2000, except that 329.9 for the purposes of this subdivision the percentage increase 329.10 shall be determined from the year starting September 1, 1999, 329.11 and ending August 31, 2000, as the base year for adjusting for 329.12 inflation for debts incurred after December 31, 2000. 329.13 Debt also includes an agreement to pay a MinnesotaCare 329.14 premium, regardless of the dollar amount of the premium 329.15 authorized under section 256L.15, subdivision 1a. 329.16 Sec. 18. Minnesota Statutes 2004, section 270A.03, 329.17 subdivision 7, is amended to read: 329.18 Subd. 7. [REFUND.] "Refund" means an individual income tax 329.19 refundor political contribution refund, pursuant to chapter329.20290, or a property tax credit or refund, pursuant to chapter 329.21 290A, or a sustainable forest tax payment to a claimant under 329.22 chapter 290C. 329.23 For purposes of this chapter, lottery prizes, as set forth 329.24 in section 349A.08, subdivision 8, and amounts granted to 329.25 persons by the legislature on the recommendation of the joint 329.26 senate-house of representatives Subcommittee on Claims shall be 329.27 treated as refunds. 329.28 In the case of a joint property tax refund payable to 329.29 spouses under chapter 290A, the refund shall be considered as 329.30 belonging to each spouse in the proportion of the total refund 329.31 that equals each spouse's proportion of the total income 329.32 determined under section 290A.03, subdivision 3. In the case of 329.33 a joint income tax refund under chapter 289A, the refund shall 329.34 be considered as belonging to each spouse in the proportion of 329.35 the total refund that equals each spouse's proportion of the 329.36 total taxable income determined under section 290.01, 330.1 subdivision 29. The commissioner shall remit the entire refund 330.2 to the claimant agency, which shall, upon the request of the 330.3 spouse who does not owe the debt, determine the amount of the 330.4 refund belonging to that spouse and refund the amount to that 330.5 spouse. For court fines, fees, and surcharges and court-ordered 330.6 restitution under section 611A.04, subdivision 2, the notice 330.7 provided by the commissioner of revenue under section 270A.07, 330.8 subdivision 2, paragraph (b), serves as the appropriate legal 330.9 notice to the spouse who does not owe the debt. 330.10 [EFFECTIVE DATE.] This section is effective for political 330.11 contribution refund claims based on contributions made on or 330.12 after July 1, 2005. 330.13 Sec. 19. Minnesota Statutes 2004, section 289A.08, 330.14 subdivision 16, is amended to read: 330.15 Subd. 16. [TAX REFUND OR RETURN PREPARERS; ELECTRONIC 330.16 FILING; PAPER FILING FEE IMPOSED.] (a) A "tax refund or return 330.17 preparer," as defined in section 289A.60, subdivision 13, 330.18 paragraph(g)(h), who prepared more than500100 Minnesota 330.19 individual income tax returns for the prior calendar year must 330.20 file all Minnesota individual income tax returns prepared for 330.21 the current calendar year by electronic means. 330.22 (b)For tax returns prepared for the tax year beginning in330.232001, the "500" in paragraph (a) is reduced to 250.330.24(c) For tax returns prepared for tax years beginning after330.25December 31, 2001, the "500" in paragraph (a) is reduced to 100.330.26(d)Paragraph (a) does not apply to a return if the 330.27 taxpayer has indicated on the return that the taxpayer did not 330.28 want the return filed by electronic means. 330.29(e)(c) For each return that is not filed electronically by 330.30 a tax refund or return preparer under this subdivision, 330.31 including returns filed under paragraph(d)(b), a paper filing 330.32 fee of $5 is imposed upon the preparer. The fee is collected 330.33 from the preparer in the same manner as income tax. The fee 330.34 does not apply to returns that the commissioner requires to be 330.35 filed in paper form. 330.36 Sec. 20. Minnesota Statutes 2004, section 289A.37, 331.1 subdivision 5, is amended to read: 331.2 Subd. 5. [SUFFICIENCY OF NOTICE.] An order of assessment, 331.3 sent postage prepaid by United States mail to the taxpayer at 331.4 the taxpayer's last known address, or sent by electronic mail to 331.5 the taxpayer's last known electronic mailing address as provided 331.6 for in section 325L.08, is sufficient even if the taxpayer is 331.7 deceased or is under a legal disability, or, in the case of a 331.8 corporation, has terminated its existence, unless the department 331.9 has been provided with a new address by a party authorized to 331.10 receive notices of assessment. 331.11 [EFFECTIVE DATE.] This section is effective the day 331.12 following final enactment. 331.13 Sec. 21. Minnesota Statutes 2004, section 289A.50, 331.14 subdivision 1, is amended to read: 331.15 Subdivision 1. [GENERAL RIGHT TO REFUND.] (a) Subject to 331.16 the requirements of this section and section 289A.40, a taxpayer 331.17 who has paid a tax in excess of the taxes lawfully due and who 331.18 files a written claim for refund will be refunded or credited 331.19 the overpayment of the tax determined by the commissioner to be 331.20 erroneously paid. 331.21 (b) The claim must specify the name of the taxpayer, the 331.22 date when and the period for which the tax was paid, the kind of 331.23 tax paid, the amount of the tax that the taxpayer claims was 331.24 erroneously paid, the grounds on which a refund is claimed, and 331.25 other information relative to the payment and in the form 331.26 required by the commissioner. An income tax, estate tax, or 331.27 corporate franchise tax return, or amended return claiming an 331.28 overpayment constitutes a claim for refund. 331.29 (c) When, in the course of an examination, and within the 331.30 time for requesting a refund, the commissioner determines that 331.31 there has been an overpayment of tax, the commissioner shall 331.32 refund or credit the overpayment to the taxpayer and no demand 331.33 is necessary. If the overpayment exceeds $1, the amount of the 331.34 overpayment must be refunded to the taxpayer. If the amount of 331.35 the overpayment is less than $1, the commissioner is not 331.36 required to refund. In these situations, the commissioner does 332.1 not have to make written findings or serve notice by mail to the 332.2 taxpayer. 332.3 (d) If the amount allowable as a credit for withholding, 332.4 estimated taxes, or dependent care exceeds the tax against which 332.5 the credit is allowable, the amount of the excess is considered 332.6 an overpayment.The refund allowed by section 290.06,332.7subdivision 23, is also considered an overpayment.The 332.8 requirements of section 270.10, subdivision 1, do not apply to 332.9 the refunding of such an overpayment shown on the original 332.10 return filed by a taxpayer. 332.11 (e) If the entertainment tax withheld at the source exceeds 332.12 by $1 or more the taxes, penalties, and interest reported in the 332.13 return of the entertainment entity or imposed by section 332.14 290.9201, the excess must be refunded to the entertainment 332.15 entity. If the excess is less than $1, the commissioner need 332.16 not refund that amount. 332.17 (f) If the surety deposit required for a construction 332.18 contract exceeds the liability of the out-of-state contractor, 332.19 the commissioner shall refund the difference to the contractor. 332.20 (g) An action of the commissioner in refunding the amount 332.21 of the overpayment does not constitute a determination of the 332.22 correctness of the return of the taxpayer. 332.23 (h) There is appropriated from the general fund to the 332.24 commissioner of revenue the amount necessary to pay refunds 332.25 allowed under this section. 332.26 [EFFECTIVE DATE.] This section is effective for political 332.27 contribution refund claims based on contributions made on or 332.28 after July 1, 2005. 332.29 Sec. 22. Minnesota Statutes 2004, section 289A.60, 332.30 subdivision 2a, is amended to read: 332.31 Subd. 2a. [PENALTIES FOR EXTENDED DELINQUENCY.] (a) If an 332.32 individual income tax is not paid within 180 days after the date 332.33 of filing of a return or, in the case of taxes assessed by the 332.34 commissioner, within 180 days after the assessment date or, if 332.35 appealed, within 180 days after final resolution of the appeal, 332.36 an extended delinquency penalty of five percent of the tax 333.1 remaining unpaid is added to the amount due. 333.2 (b) If acorporate franchise, fiduciary income, mining333.3company, estate, partnership, S corporation, or nonresident333.4entertainertax return is not filed within 30 days after written 333.5 demand for the filing of a delinquent return, an extended 333.6 delinquency penalty of five percent of the tax not paid prior to 333.7 the demandis added to the tax,orin the case of an individual333.8income tax return, a minimum penalty of$100or the five percent333.9penaltyis imposed, whichever amount is greater. 333.10 [EFFECTIVE DATE.] This section is effective for returns 333.11 originally due on or after August 1, 2005. 333.12 Sec. 23. Minnesota Statutes 2004, section 289A.60, 333.13 subdivision 6, is amended to read: 333.14 Subd. 6. [PENALTY FOR FAILURE TO FILE, FALSE OR FRAUDULENT 333.15 RETURN, EVASION.] If a person, with intent to evade or defeat a 333.16 tax or payment of tax, fails to file a return, files a false or 333.17 fraudulent return, or attempts in any other manner to evade or 333.18 defeat a tax or payment of tax, there is imposed on the person a 333.19 penalty equal to 50 percent of the tax, less amounts paid by the 333.20 person on the basis of the false or fraudulent return, if any, 333.21 due for the period to which the return related. 333.22 [EFFECTIVE DATE.] This section is effective the day 333.23 following final enactment. 333.24 Sec. 24. Minnesota Statutes 2004, section 289A.60, 333.25 subdivision 11, is amended to read: 333.26 Subd. 11. [PENALTIES RELATING TO INFORMATION REPORTS, 333.27 WITHHOLDING.] (a) When a person required under section 289A.09, 333.28 subdivision 2, to give a statement to an employee or payee and a 333.29 duplicate statement to the commissioner, or to give a 333.30 reconciliation of the statements and quarterly returns to the 333.31 commissioner, gives a false or fraudulent statement to an 333.32 employee or payee or a false or fraudulent duplicate statement 333.33 or reconciliation of statements and quarterly returns to the 333.34 commissioner, or fails to give a statement or the reconciliation 333.35 in the manner, when due, and showing the information required by 333.36 section 289A.09, subdivision 2, or rules prescribed by the 334.1 commissioner under that section, that person is liable for a 334.2 penalty of $50 for an act or failure to act. The total amount 334.3 imposed on the delinquent person for failures during a calendar 334.4 year must not exceed $25,000. 334.5 (b) In addition to any other penalty provided by law, an 334.6 employee who gives a withholding exemption certificate or a 334.7 residency affidavit to an employer thatthe employee has reason334.8to know contains a materially incorrect statementdecreases the 334.9 amount withheld under section 290.92 and as of the time the 334.10 certificate or affidavit was given to the employer there was no 334.11 reasonable basis for the statements in the certificate or 334.12 affidavit is liable to the commissioner of revenue for a penalty 334.13 of $500 for each instance. 334.14 (c) In addition to any other penalty provided by law, an 334.15 employer who fails to submit a copy of a withholding exemption 334.16 certificate or a residency affidavit required by section 290.92, 334.17 subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the 334.18 commissioner of revenue for a penalty of $50 for each instance. 334.19 (d) An employer or payor who fails to file an application 334.20 for a withholding account number, as required by section 290.92, 334.21 subdivision 24, is liable to the commissioner for a penalty of 334.22 $100. 334.23 [EFFECTIVE DATE.] This section is effective for 334.24 certificates and affidavits given to employers after December 334.25 31, 2005. 334.26 Sec. 25. Minnesota Statutes 2004, section 289A.60, 334.27 subdivision 13, is amended to read: 334.28 Subd. 13. [PENALTIES FOR TAX RETURN PREPARERS.] (a) If an 334.29 understatement of liability with respect to a return or claim 334.30 for refund is due to a willful attempt in any manner to 334.31 understate the liability for a tax by a person who is a tax 334.32 return preparer with respect to the return or claim, the person 334.33 shall pay to the commissioner a penalty of $500. If a part of a 334.34 property tax refund claim is excessive due to a willful attempt 334.35 in any manner to overstate the claim for relief allowed under 334.36 chapter 290A by a person who is a tax refund or return preparer, 335.1 the person shall pay to the commissioner a penalty of $500 with 335.2 respect to the claim. These penalties may not be assessed 335.3 against the employer of a tax return preparer unless the 335.4 employer was actively involved in the willful attempt to 335.5 understate the liability for a tax or to overstate the claim for 335.6 refund. These penalties are income tax liabilities and may be 335.7 assessed at any time as provided in section 289A.38, subdivision 335.8 5. 335.9 (b) A civil action in the name of the state of Minnesota 335.10 may be commenced to enjoin any person who is a tax return 335.11 preparer doing business in this state from further engaging in 335.12 any conduct described in paragraph (c). An action under this 335.13 paragraph must be brought by the attorney general in the 335.14 district court for the judicial district of the tax return 335.15 preparer's residence or principal place of business, or in which 335.16 the taxpayer with respect to whose tax return the action is 335.17 brought resides. The court may exercise its jurisdiction over 335.18 the action separate and apart from any other action brought by 335.19 the state of Minnesota against the tax return preparer or any 335.20 taxpayer. 335.21 (c) In an action under paragraph (b), if the court finds 335.22 that a tax return preparer has: 335.23 (1) engaged in any conduct subject to a civil penalty under 335.24 section 289A.60 or a criminal penalty under section 289A.63; 335.25 (2) misrepresented the preparer's eligibility to practice 335.26 before the Department of Revenue, or otherwise misrepresented 335.27 the preparer's experience or education as a tax return preparer; 335.28 (3) guaranteed the payment of any tax refund or the 335.29 allowance of any tax credit; or 335.30 (4) engaged in any other fraudulent or deceptive conduct 335.31 that substantially interferes with the proper administration of 335.32 state tax law, and injunctive relief is appropriate to prevent 335.33 the recurrence of that conduct, 335.34 the court may enjoin the person from further engaging in that 335.35 conduct. 335.36 (d) If the court finds that a tax return preparer has 336.1 continually or repeatedly engaged in conduct described in 336.2 paragraph (c), and that an injunction prohibiting that conduct 336.3 would not be sufficient to prevent the person's interference 336.4 with the proper administration of state tax laws, the court may 336.5 enjoin the person from acting as a tax return preparer. The 336.6 court may not enjoin the employer of a tax return preparer for 336.7 conduct described in paragraph (c) engaged in by one or more of 336.8 the employer's employees unless the employer was also actively 336.9 involved in that conduct. 336.10 (e) The commissioner may terminate or suspend a tax 336.11 preparer's authority to transmit returns electronically to the 336.12 state, if the commissioner determines that the tax preparer has 336.13 engaged in a pattern and practice of conduct in violation of 336.14 paragraph (a) of this subdivision or has been convicted under 336.15 section 289A.63. 336.16 (f) For purposes of this subdivision, the term 336.17 "understatement of liability" means an understatement of the net 336.18 amount payable with respect to a tax imposed by state tax law, 336.19 or an overstatement of the net amount creditable or refundable 336.20 with respect to a tax. The determination of whether or not 336.21 there is an understatement of liability must be made without 336.22 regard to any administrative or judicial action involving the 336.23 taxpayer. For purposes of this subdivision, the amount 336.24 determined for underpayment of estimated tax under either 336.25 section 289A.25 or 289A.26 is not considered an understatement 336.26 of liability. 336.27(f)(g) For purposes of this subdivision, the term 336.28 "overstatement of claim" means an overstatement of the net 336.29 amount refundable with respect to a claim for property tax 336.30 relief provided by chapter 290A. The determination of whether 336.31 or not there is an overstatement of a claim must be made without 336.32 regard to administrative or judicial action involving the 336.33 claimant. 336.34(g)(h) For purposes of this section, the term "tax refund 336.35 or return preparer" means an individual who prepares for 336.36 compensation, or who employs one or more individuals to prepare 337.1 for compensation, a return of tax, or a claim for refund of 337.2 tax. The preparation of a substantial part of a return or claim 337.3 for refund is treated as if it were the preparation of the 337.4 entire return or claim for refund. An individual is not 337.5 considered a tax return preparer merely because the individual: 337.6 (1) gives typing, reproducing, or other mechanical 337.7 assistance; 337.8 (2) prepares a return or claim for refund of the employer, 337.9 or an officer or employee of the employer, by whom the 337.10 individual is regularly and continuously employed; 337.11 (3) prepares a return or claim for refund of any person as 337.12 a fiduciary for that person; or 337.13 (4) prepares a claim for refund for a taxpayer in response 337.14 to a tax order issued to the taxpayer. 337.15 Sec. 26. Minnesota Statutes 2004, section 290.01, 337.16 subdivision 6, is amended to read: 337.17 Subd. 6. [TAXPAYER.] The term "taxpayer" means any person 337.18 or corporation subject to a tax imposed by this chapter.For337.19purposes of section 290.06, subdivision 23, the term "taxpayer"337.20means an individual eligible to vote in Minnesota under section337.21201.014.337.22 [EFFECTIVE DATE.] This section is effective for political 337.23 contribution refund claims based on contributions that are made 337.24 on or after July 1, 2005. 337.25 Sec. 27. Minnesota Statutes 2004, section 290.92, 337.26 subdivision 1, is amended to read: 337.27 Subdivision 1. [DEFINITIONS.] (1) [WAGES.] For purposes 337.28 of this section, the term "wages" means the same as that term is 337.29 defined in section 3401(a) and (f) of the Internal Revenue Code. 337.30 (2) [PAYROLL PERIOD.] For purposes of this section the 337.31 term "payroll period" means a period for which a payment of 337.32 wages is ordinarily made to the employee by the employee's 337.33 employer, and the term "miscellaneous payroll period" means a 337.34 payroll period other than a daily, weekly, biweekly, 337.35 semimonthly, monthly, quarterly, semiannual, or annual payroll 337.36 period. 338.1 (3) [EMPLOYEE.] For purposes of this section the term 338.2 "employee" means any resident individual performing services for 338.3 an employer, either within or without, or both within and 338.4 without the state of Minnesota, and every nonresident individual 338.5 performing services within the state of Minnesota, the 338.6 performance of which services constitute, establish, and 338.7 determine the relationship between the parties as that of 338.8 employer and employee. As used in the preceding sentence, the 338.9 term "employee" includes an officer of a corporation, and an 338.10 officer, employee, or elected official of the United States, a 338.11 state, or any political subdivision thereof, or the District of 338.12 Columbia, or any agency or instrumentality of any one or more of 338.13 the foregoing. 338.14 (4) [EMPLOYER.] For purposes of this section the term 338.15 "employer" means any person, including individuals, fiduciaries, 338.16 estates, trusts, partnerships, limited liability companies, and 338.17 corporations transacting business in or deriving any income from 338.18 sources within the state of Minnesota for whom an individual 338.19 performs or performed any service, of whatever nature, as the 338.20 employee of such person, except that if the person for whom the 338.21 individual performs or performed the services does not have 338.22legalcontrol of the payment of the wages for such services, the 338.23 term "employer," except for purposes of paragraph (1), means the 338.24 person havinglegalcontrol of the payment of such wages. As 338.25 used in the preceding sentence, the term "employer" includes any 338.26 corporation, individual, estate, trust, or organization which is 338.27 exempt from taxation under section 290.05 and further includes, 338.28 but is not limited to, officers of corporations who havelegal338.29 control, either individually or jointly with another or others, 338.30 of the payment of the wages. 338.31 (5) [NUMBER OF WITHHOLDING EXEMPTIONS CLAIMED.] For 338.32 purposes of this section, the term "number of withholding 338.33 exemptions claimed" means the number of withholding exemptions 338.34 claimed in a withholding exemption certificate in effect under 338.35 subdivision 5, except that if no such certificate is in effect, 338.36 the number of withholding exemptions claimed shall be considered 339.1 to be zero. 339.2 [EFFECTIVE DATE.] This section is effective the day 339.3 following final enactment. 339.4 Sec. 28. Minnesota Statutes 2004, section 325D.33, 339.5 subdivision 6, is amended to read: 339.6 Subd. 6. [VIOLATIONS.] If the commissioner determines that 339.7 a distributor is violating any provision of this chapter, the 339.8 commissioner must give the distributor a written warning 339.9 explaining the violation and an explanation of what must be done 339.10 to comply with this chapter. Within ten days of issuance of the 339.11 warning, the distributor must notify the commissioner that the 339.12 distributor has complied with the commissioner's recommendation 339.13 or request that the commissioner set the issue for a hearing 339.14 pursuant to chapter 14. If a hearing is requested, the hearing 339.15 shall be scheduled within 20 days of the request and the 339.16 recommendation of the administrative law judge shall be issued 339.17 within five working days of the close of the hearing. The 339.18 commissioner's final determination shall be issued within five 339.19 working days of the receipt of the administrative law judge's 339.20 recommendation. If the commissioner's final determination is 339.21 adverse to the distributor and the distributor does not comply 339.22 within ten days of receipt of the commissioner's final 339.23 determination, the commissioner may order the distributor to 339.24 immediately cease the stamping of cigarettes. As soon as 339.25 practicable after the order, the commissioner must remove the 339.26 meter and any unapplied cigarette stamps from the premises of 339.27 the distributor. 339.28 If within ten days of issuance of the written warning the 339.29 distributor has not complied with the commissioner's 339.30 recommendation or requested a hearing, the commissioner may 339.31 order the distributor to immediately cease the stamping of 339.32 cigarettes and remove the meter and unapplied stamps from the 339.33 distributor's premises. 339.34If, within any 12-month period, the commissioner has issued339.35three written warnings to any distributor, even if the339.36distributor has complied within ten days, the commissioner shall340.1notify the distributor of the commissioner's intent to revoke340.2the distributor's license for a continuing course of conduct340.3contrary to this chapter. For purposes of this paragraph, a340.4written warning that was ultimately resolved by removal of the340.5warning by the commissioner is not deemed to be a warning. The340.6commissioner must notify the distributor of the date and time of340.7a hearing pursuant to chapter 14 at least 20 days before the340.8hearing is held. The hearing must provide an opportunity for340.9the distributor to show cause why the license should not be340.10revoked. If the commissioner revokes a distributor's license,340.11the commissioner shall not issue a new license to that340.12distributor for 180 days.340.13 [EFFECTIVE DATE.] This section is effective the day 340.14 following final enactment. 340.15 Sec. 29. [459.21] [GAMBLING SUBSIDIES; REFERENDUM 340.16 APPROVAL.] 340.17 No city or county may provide an exemption from a tax or 340.18 fee, an abatement of a tax, or fee or any other type of public 340.19 subsidy to an enterprise engaged in gambling, unless the 340.20 question of whether to provide the exemption, abatement, or 340.21 subsidy has been submitted to the voters at a special or general 340.22 election and a majority of the votes cast on the question are in 340.23 the affirmative. 340.24 For purposes of this section, the following terms have the 340.25 meanings given: 340.26 (1) "Gambling" means conducting class III gaming as defined 340.27 in United States Code, title 25, section 2703. 340.28 (2) "Public subsidy" does not include (i) construction of 340.29 public infrastructure unless the predominant use of the 340.30 infrastructure is to serve an enterprise engaged in gambling or 340.31 (ii) the use, maintenance, or reconstruction (without expansion) 340.32 of preexisting infrastructure. 340.33 [EFFECTIVE DATE.] This section is effective the day 340.34 following enactment. 340.35 Sec. 30. Minnesota Statutes 2004, section 645.44, is 340.36 amended by adding a subdivision to read: 341.1 Subd. 19. [FEE AND TAX.] (a) "Tax" means any fee, charge, 341.2 exaction, or assessment imposed by a governmental entity on an 341.3 individual, person, entity, transaction, good, service, or other 341.4 thing. It excludes a price that an individual or entity chooses 341.5 voluntarily to pay in return for receipt of goods or services 341.6 provided by the governmental entity. A government good or 341.7 service does not include access to or the authority to engage in 341.8 private market transactions with a nongovernmental party, such 341.9 as licenses to engage in a trade, profession, or business or to 341.10 improve private property. 341.11 (b) For purposes of applying the laws of this state, a 341.12 "fee," "charge," or other similar term that satisfies the 341.13 functional requirements of paragraph (a) must be treated as a 341.14 tax for all purposes, regardless of whether the statute or law 341.15 names or describes it as a tax. The provisions of this 341.16 subdivision do not preempt or supersede limitations under 341.17 statute or law that apply to fees, charges, or assessments. 341.18 [EFFECTIVE DATE.] This section is effective the day 341.19 following final enactment. 341.20 Sec. 31. [TAX REFORM COMMISSION.] 341.21 Subdivision 1. [COMMISSION ESTABLISHED.] A tax reform 341.22 action commission is established in the legislative branch to 341.23 study the Minnesota tax and revenue system and to make 341.24 recommendations to the legislature. 341.25 Subd. 2. [MEMBERSHIP.] (a) The commission consists of 15 341.26 members, appointed as follows: 341.27 (1) three members appointed by the governor, two from the 341.28 executive branch and one from private life; 341.29 (2) four members appointed by the majority leader of the 341.30 senate, two members of the senate and two from private life; 341.31 (3) two members appointed by the minority leader of the 341.32 senate, one member of the senate and one from private life; 341.33 (4) four members appointed by the speaker of the house of 341.34 representatives, two members of the house of representatives and 341.35 two from private life; and 341.36 (5) two members appointed by the minority leader of the 342.1 house of representatives, one member of the house of 342.2 representatives and one from private life. 342.3 (b) The appointing authority shall select members who are 342.4 of recognized standing and distinction and who possess 342.5 demonstrated capacity to discharge the duties of the 342.6 commission. In making appointments, the appointing authorities 342.7 shall attempt to appoint some individuals to the commission who 342.8 have special experience or knowledge in taxation, economics, and 342.9 accounting. 342.10 (c) The governor shall designate a member of the commission 342.11 as its chair who shall determine its duties and supervise its 342.12 staff. 342.13 (d) The appointing authorities shall appoint members of the 342.14 commission not more than 30 days after enactment of this 342.15 section. Members serve for the life of the commission. A 342.16 vacancy in the commission membership does not affect the power 342.17 of the remaining members to execute the duties of the 342.18 commission. A vacancy in commission membership is filled in the 342.19 same manner in which the original appointment was made. 342.20 Subd. 3. [DUTIES; REPORT.] (a) The commission shall study 342.21 and evaluate the Minnesota state and local tax and revenue 342.22 system with a goal of making long-term improvements in the 342.23 system for the citizens of the state, given standard principles 342.24 of good tax policy and the background of expected demographic 342.25 and economic changes in the state, nation, and world. The 342.26 commission's recommendations must be done on a revenue neutral 342.27 basis. In particular, the commission shall examine: 342.28 (1) the mix of state revenues between tax revenues and fees 342.29 and charges for services used or benefits received; 342.30 (2) the implications of likely demographic and economic 342.31 changes, affecting both (i) the demands for state and local 342.32 government services and (ii) taxes and other revenues; and 342.33 (3) the extent to which the existing tax system and the 342.34 commission's proposal satisfy the following basic tax policy 342.35 principles: 342.36 (i) equity or fairness, including measures based on ability 343.1 to pay, equal treatment of equals, and payment for benefits 343.2 received; 343.3 (ii) neutrality or efficiency, the extent to which the 343.4 effects on private market decisions are minimized; 343.5 (iii) revenue adequacy, the extent to which the revenues 343.6 are stable and predictable and grow with increases in income or 343.7 economic activity; 343.8 (iv) competitiveness, the extent to which negative effects 343.9 on the state's attractiveness as a location for investment, 343.10 working, and living are minimized; 343.11 (v) simplicity, the extent to which it is easy to 343.12 understand; 343.13 (vi) ease of compliance and administration, the extent to 343.14 which taxpayers can easily comply and the government can easily 343.15 administer it; and 343.16 (vii) visibility or accountability, the extent to which the 343.17 taxes or other charges are clear and apparent to their payers as 343.18 a cost of government and that the government officials imposing 343.19 the tax are accountable, through election or otherwise, to the 343.20 principal payers of the tax. 343.21 (b) The commission shall report to the legislature as 343.22 provided in this paragraph. Each report must include the 343.23 commission's evaluation of the tax or taxes, its recommendations 343.24 for reform and improvement of the tax or taxes on a revenue 343.25 neutral basis, its rationale for the proposed changes, and a 343.26 draft bill implementing the commission's recommendation for 343.27 introduction in the legislature. The reports must be submitted 343.28 by the following dates: 343.29 (1) corporate and other business taxation, including the 343.30 credit for increasing research activities, by July 1, 2007; 343.31 (2) general sales and motor vehicle sales and special 343.32 excise taxes by July 1, 2008; 343.33 (3) individual income taxation by July 1, 2009; and 343.34 (4) estate, insurance premium, MinnesotaCare, and all other 343.35 taxes not covered by clauses (1) to (3) by July 1, 2010. 343.36 Subd. 4. [PER DIEM AND EXPENSES.] Members of the 344.1 commission may be compensated and receive reimbursement for 344.2 expenses, as provided for members of advisory councils under 344.3 Minnesota Statutes, section 15.059, subdivision 3. This 344.4 subdivision does not apply to members of the legislature or 344.5 state employees. 344.6 Subd 5. [STAFF.] The commission may employ staff as it 344.7 deems appropriate to carry out its duties or use existing 344.8 legislative and executive branch staff. All staff are in the 344.9 unclassified state service. Legislative staff and the 344.10 Department of Revenue staff must provide research, bill 344.11 drafting, and other services to the commission upon its 344.12 request. The commission may contract with consultants for 344.13 research and other services and enter other contracts, as it 344.14 deems necessary or appropriate to carry out its duties. These 344.15 contracts are not subject to the requirements of Minnesota 344.16 Statutes, chapter 16C. 344.17 Subd. 6. [EXPIRATION.] The commission terminates 30 days 344.18 after transmitting its final report to the legislature under 344.19 subdivision 3, paragraph (b). 344.20 [EFFECTIVE DATE.] This section is effective the day 344.21 following final enactment. 344.22 Sec. 32. [TRANSFER.] 344.23 On July 1, 2005, the commissioner of finance shall transfer 344.24 $3,408,000 and any additional amount from the tax relief account 344.25 under Minnesota Statutes, section 16A.1522, subdivision 4, to 344.26 the general fund. 344.27 Sec. 33. [APPROPRIATION.] 344.28 (a) $125,000 in fiscal year 2006 and $125,000 in fiscal 344.29 year 2007 are appropriated from the general fund to the 344.30 commissioner of revenue to make grants to one or more nonprofit 344.31 organizations, qualifying under section 501(c)(3) of the 344.32 Internal Revenue Code of 1986, to coordinate, facilitate, 344.33 encourage, and aid in the provision of taxpayer assistance 344.34 services. This is a onetime appropriation and is not added to 344.35 the base. 344.36 (b) "Taxpayer assistance services" mean accounting and tax 345.1 preparation services provided by volunteers to low-income and 345.2 disadvantaged Minnesota residents to help them file federal and 345.3 state income tax returns and Minnesota property tax refund 345.4 claims and to provide personal representation before the 345.5 Department of Revenue and Internal Revenue Service. 345.6 Sec. 34. [REPEALER.] 345.7 (a) Minnesota Statutes 2004, section 10A.322, subdivision 345.8 4, is repealed effective July 1, 2005. 345.9 (b) Minnesota Statutes 2004, section 16A.1522, subdivision 345.10 4, is repealed effective July 2, 2005. 345.11 (c) Minnesota Statutes 2004, section 290.06, subdivision 345.12 23, is repealed effective for contributions made after June 30, 345.13 2005.