SF 818

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

  1.1                          A bill for an act 
  1.2             relating to taxation; modifying the taxation of 
  1.3             property used for low-income rental housing; 
  1.4             appropriating money; amending Minnesota Statutes 1996, 
  1.5             sections 273.124, by adding a subdivision; 273.13, 
  1.6             subdivision 25; 290A.03, subdivision 11; and 469.040, 
  1.7             subdivision 3; proposing coding for new law in 
  1.8             Minnesota Statutes, chapters 273; and 462A; repealing 
  1.9             Minnesota Statutes 1996, sections 273.1317; and 
  1.10            273.1318. 
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12     Section 1.  Minnesota Statutes 1996, section 273.124, is 
  1.13  amended by adding a subdivision to read: 
  1.14     Subd. 19.  [LEASE-PURCHASE PROGRAM.] Qualifying buildings 
  1.15  and appurtenances, together with the land on which they are 
  1.16  located, are classified as homesteads, if the following 
  1.17  qualifications are met: 
  1.18     (1) the property is leased for up to a five-year period by 
  1.19  the occupant under a lease-purchase program administered by the 
  1.20  Minnesota housing finance agency or a housing and redevelopment 
  1.21  authority under sections 469.001 to 469.047; 
  1.22     (2) the occupant's income is no greater than 80 percent of 
  1.23  the county or area median income, adjusted for family size; 
  1.24     (3) the building consists of one or two dwelling units; 
  1.25     (4) the lease agreement provides that part of the lease 
  1.26  payment is escrowed as a nonrefundable down payment on the 
  1.27  housing; 
  1.28     (5) the administering agency verifies the occupant's income 
  2.1   eligibility and certifies to the county assessor that the 
  2.2   occupant meets the income standards; and 
  2.3      (6) the property owner applies to the county assessor by 
  2.4   May 30 of each year. 
  2.5      For purposes of this subdivision, "qualifying buildings and 
  2.6   appurtenances" means a one or two unit residential building 
  2.7   which was unoccupied, abandoned, and boarded for at least six 
  2.8   months.  
  2.9      Sec. 2.  [273.126] [QUALIFYING LOW-INCOME RENTAL HOUSING.] 
  2.10     Subdivision 1.  [QUALIFYING RULES.] The market value of a 
  2.11  rental housing unit qualifies for assessment under class 4d if: 
  2.12     (1) it is occupied by individuals meeting the income limits 
  2.13  under subdivision 2; 
  2.14     (2) a rent restriction agreement under subdivision 3 
  2.15  applies; 
  2.16     (3) the unit meets the minimum housing quality standards 
  2.17  under subdivision 4; and 
  2.18     (4) the Minnesota housing finance agency certifies to the 
  2.19  local assessor that the unit qualifies. 
  2.20     Subd. 2.  [INCOME LIMITS.] (a) In order to qualify under 
  2.21  class 4d, a unit must be occupied by an individual or 
  2.22  individuals whose income is at or below 60 percent of the median 
  2.23  area gross income.  If the resident's income met the requirement 
  2.24  when the resident first occupied the unit, the income of the 
  2.25  resident continues to qualify unless the income exceeds 85 
  2.26  percent of the median area gross income. 
  2.27     (b) For purposes of this section, "median area gross income"
  2.28  means the greater of (1) the median gross income for the area 
  2.29  determined under section 42 of the Internal Revenue Code of 
  2.30  1986, as amended through December 31, 1996, or (2) the median 
  2.31  gross income for the state.  The median gross income must be 
  2.32  adjusted for family size. 
  2.33     (c) The owner or manager of the property may comply with 
  2.34  this subdivision by obtaining written statements from the 
  2.35  residents, at least annually, that their incomes are at or below 
  2.36  the limit.  
  3.1      Subd. 3.  [RENT RESTRICTIONS.] (a) In order to qualify 
  3.2   under class 4d, a unit must be subject to a rent restriction 
  3.3   agreement with the housing finance agency for a period of at 
  3.4   least five years.  The agreement must be in effect and apply to 
  3.5   the rents to be charged for the year in which the property taxes 
  3.6   are payable.  The agreement must provide that the restrictions 
  3.7   apply to each year of the period, regardless of whether the unit 
  3.8   is occupied by an individual with qualifying income or whether 
  3.9   class 4d applies.  The rent restriction agreement must provide 
  3.10  for rents for the unit to be no higher than the rents permitted 
  3.11  under section 42 of the Internal Revenue Code of 1986, as 
  3.12  amended through December 31, 1996.  The definition of median 
  3.13  gross income specified in this section applies. 
  3.14     (b) Notwithstanding the maximum rent levels permitted, any 
  3.15  unit qualifying under class 4d must be made available to a 
  3.16  family with a section 8 certificate. 
  3.17     (c) If the owner or manager does not comply with the rent 
  3.18  restriction agreement, the provisions of subdivision 5 apply.  
  3.19  The additional taxes for purposes of subdivision 5 for a 
  3.20  violation are the lesser of (1) increased taxes under 
  3.21  subdivision 4 for any year of the period in which class 4 
  3.22  applied or (2) 150 percent of the rent charged in excess of the 
  3.23  rent restriction agreement. 
  3.24     Subd. 4.  [MINIMUM HOUSING STANDARDS.] In order to qualify 
  3.25  under class 4d, a unit must be certified by the housing finance 
  3.26  agency to meet the minimum housing standards established under 
  3.27  section 462A.071. 
  3.28     Subd. 5.  [ADDITIONAL TAXES.] Notwithstanding the 
  3.29  provisions of section 273.01, 274.01, or any other law, if the 
  3.30  assessor determines that the provisions of this section have not 
  3.31  been met for any period during which a unit was classified under 
  3.32  class 4d, an additional tax is imposed.  The additional tax 
  3.33  equals the tax which would have been imposed if the property had 
  3.34  not been classified under class 4d, and the tax actually 
  3.35  imposed, during the period of noncompliance.  The additional tax 
  3.36  must be extended against the property on the tax list for the 
  4.1   current year.  No interest or penalties may be levied on 
  4.2   additional taxes if timely paid.  The tax imposed by this 
  4.3   subdivision is a lien upon the property assessed to the same 
  4.4   extent and for the same duration as other taxes imposed on the 
  4.5   property. 
  4.6      Sec. 3.  Minnesota Statutes 1996, section 273.13, 
  4.7   subdivision 25, is amended to read: 
  4.8      Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
  4.9   estate containing four or more units and used or held for use by 
  4.10  the owner or by the tenants or lessees of the owner as a 
  4.11  residence for rental periods of 30 days or more.  Class 4a also 
  4.12  includes hospitals licensed under sections 144.50 to 144.56, 
  4.13  other than hospitals exempt under section 272.02, and contiguous 
  4.14  property used for hospital purposes, without regard to whether 
  4.15  the property has been platted or subdivided.  Class 4a property 
  4.16  in a city with a population of 5,000 or less, that is (1) 
  4.17  located outside of the metropolitan area, as defined in section 
  4.18  473.121, subdivision 2, or outside any county contiguous to the 
  4.19  metropolitan area, and (2) whose city boundary is at least 15 
  4.20  miles from the boundary of any city with a population greater 
  4.21  than 5,000 has a class rate of 2.3 percent of market value for 
  4.22  taxes payable in 1996 and thereafter.  All other class 4a 
  4.23  property has a class rate of 3.4 percent of market value for 
  4.24  taxes payable in 1996 and thereafter.  For purposes of this 
  4.25  paragraph, population has the same meaning given in section 
  4.26  477A.011, subdivision 3. 
  4.27     (b) Class 4b includes: 
  4.28     (1) residential real estate containing less than four 
  4.29  units, other than seasonal residential, and recreational; 
  4.30     (2) manufactured homes not classified under any other 
  4.31  provision; 
  4.32     (3) a dwelling, garage, and surrounding one acre of 
  4.33  property on a nonhomestead farm classified under subdivision 23, 
  4.34  paragraph (b).  
  4.35     Class 4b property has a class rate of 2.8 percent of market 
  4.36  value for taxes payable in 1992, 2.5 percent of market value for 
  5.1   taxes payable in 1993, and 2.3 percent of market value for taxes 
  5.2   payable in 1994 and thereafter. 
  5.3      (c) Class 4c property includes: 
  5.4      (1) a structure that is:  
  5.5      (i) situated on real property that is used for housing for 
  5.6   the elderly or for low- and moderate-income families as defined 
  5.7   in Title II, as amended through December 31, 1990, of the 
  5.8   National Housing Act or the Minnesota housing finance agency law 
  5.9   of 1971, as amended, or rules promulgated by the agency and 
  5.10  financed by a direct federal loan or federally insured loan made 
  5.11  pursuant to Title II of the Act; or 
  5.12     (ii) situated on real property that is used for housing the 
  5.13  elderly or for low- and moderate-income families as defined by 
  5.14  the Minnesota housing finance agency law of 1971, as amended, or 
  5.15  rules adopted by the agency pursuant thereto and financed by a 
  5.16  loan made by the Minnesota housing finance agency pursuant to 
  5.17  the provisions of the act.  
  5.18     This clause applies only to property of a nonprofit or 
  5.19  limited dividend entity.  Property is classified as class 4c 
  5.20  under this clause for 15 years from the date of the completion 
  5.21  of the original construction or substantial rehabilitation, or 
  5.22  for the original term of the loan.  
  5.23     (2) a structure that is: 
  5.24     (i) situated upon real property that is used for housing 
  5.25  lower income families or elderly or handicapped persons, as 
  5.26  defined in section 8 of the United States Housing Act of 1937, 
  5.27  as amended; and 
  5.28     (ii) owned by an entity which has entered into a housing 
  5.29  assistance payments contract under section 8 which provides 
  5.30  assistance for 100 percent of the dwelling units in the 
  5.31  structure, other than dwelling units intended for management or 
  5.32  maintenance personnel.  Property is classified as class 4c under 
  5.33  this clause for the term of the housing assistance payments 
  5.34  contract, including all renewals, or for the term of its 
  5.35  permanent financing, whichever is shorter; and 
  5.36     (3) a qualified low-income building as defined in section 
  6.1   42(c)(2) of the Internal Revenue Code of 1986, as amended 
  6.2   through December 31, 1990, that (i) receives a low-income 
  6.3   housing credit under section 42 of the Internal Revenue Code of 
  6.4   1986, as amended through December 31, 1990; or (ii) meets the 
  6.5   requirements of that section and receives public financing, 
  6.6   except financing provided under sections 469.174 to 469.179, 
  6.7   which contains terms restricting the rents; or (iii) meets the 
  6.8   requirements of section 273.1317.  Classification pursuant to 
  6.9   this clause is limited to a term of 15 years.  The public 
  6.10  financing received must be from at least one of the following 
  6.11  sources:  government issued bonds exempt from taxes under 
  6.12  section 103 of the Internal Revenue Code of 1986, as amended 
  6.13  through December 31, 1993, the proceeds of which are used for 
  6.14  the acquisition or rehabilitation of the building; programs 
  6.15  under section 221(d)(3), 202, or 236, of Title II of the 
  6.16  National Housing Act; rental housing program funds under Section 
  6.17  8 of the United States Housing Act of 1937 or the market rate 
  6.18  family graduated payment mortgage program funds administered by 
  6.19  the Minnesota housing finance agency that are used for the 
  6.20  acquisition or rehabilitation of the building; public financing 
  6.21  provided by a local government used for the acquisition or 
  6.22  rehabilitation of the building, including grants or loans from 
  6.23  federal community development block grants, HOME block grants, 
  6.24  or residential rental bonds issued under chapter 474A; or other 
  6.25  rental housing program funds provided by the Minnesota housing 
  6.26  finance agency for the acquisition or rehabilitation of the 
  6.27  building. 
  6.28     For all properties described in clauses (1), (2), and (3) 
  6.29  and in paragraph (d), the market value determined by the 
  6.30  assessor must be based on the normal approach to value using 
  6.31  normal unrestricted rents unless the owner of the property 
  6.32  elects to have the property assessed under Laws 1991, chapter 
  6.33  291, article 1, section 55.  If the owner of the property elects 
  6.34  to have the market value determined on the basis of the actual 
  6.35  restricted rents, as provided in Laws 1991, chapter 291, article 
  6.36  1, section 55, the property will be assessed at the rate 
  7.1   provided for class 4a or class 4b property, as appropriate.  
  7.2   Properties described in clauses (1)(ii), (3), and (4) may apply 
  7.3   to the assessor for valuation under Laws 1991, chapter 291, 
  7.4   article 1, section 55.  The land on which these structures are 
  7.5   situated has the class rate given in paragraph (b) if the 
  7.6   structure contains fewer than four units, and the class rate 
  7.7   given in paragraph (a) if the structure contains four or more 
  7.8   units.  This clause applies only to the property of a nonprofit 
  7.9   or limited dividend entity.  
  7.10     (4) a parcel of land, not to exceed one acre, and its 
  7.11  improvements or a parcel of unimproved land, not to exceed one 
  7.12  acre, if it is owned by a neighborhood real estate trust and at 
  7.13  least 60 percent of the dwelling units, if any, on all land 
  7.14  owned by the trust are leased to or occupied by lower income 
  7.15  families or individuals.  This clause does not apply to any 
  7.16  portion of the land or improvements used for nonresidential 
  7.17  purposes.  For purposes of this clause, a lower income family is 
  7.18  a family with an income that does not exceed 65 percent of the 
  7.19  median family income for the area, and a lower income individual 
  7.20  is an individual whose income does not exceed 65 percent of the 
  7.21  median individual income for the area, as determined by the 
  7.22  United States Secretary of Housing and Urban Development.  For 
  7.23  purposes of this clause, "neighborhood real estate trust" means 
  7.24  an entity which is certified by the governing body of the 
  7.25  municipality in which it is located to have the following 
  7.26  characteristics: 
  7.27     (a) it is a nonprofit corporation organized under chapter 
  7.28  317A; 
  7.29     (b) it has as its principal purpose providing housing for 
  7.30  lower income families in a specific geographic community 
  7.31  designated in its articles or bylaws; 
  7.32     (c) it limits membership with voting rights to residents of 
  7.33  the designated community; and 
  7.34     (d) it has a board of directors consisting of at least 
  7.35  seven directors, 60 percent of whom are members with voting 
  7.36  rights and, to the extent feasible, 25 percent of whom are 
  8.1   elected by resident members of buildings owned by the trust; and 
  8.2      (5) (1) except as provided in subdivision 22, paragraph 
  8.3   (c), real property devoted to temporary and seasonal residential 
  8.4   occupancy for recreation purposes, including real property 
  8.5   devoted to temporary and seasonal residential occupancy for 
  8.6   recreation purposes and not devoted to commercial purposes for 
  8.7   more than 250 days in the year preceding the year of 
  8.8   assessment.  For purposes of this clause, property is devoted to 
  8.9   a commercial purpose on a specific day if any portion of the 
  8.10  property is used for residential occupancy, and a fee is charged 
  8.11  for residential occupancy.  Class 4c also includes commercial 
  8.12  use real property used exclusively for recreational purposes in 
  8.13  conjunction with class 4c property devoted to temporary and 
  8.14  seasonal residential occupancy for recreational purposes, up to 
  8.15  a total of two acres, provided the property is not devoted to 
  8.16  commercial recreational use for more than 250 days in the year 
  8.17  preceding the year of assessment and is located within two miles 
  8.18  of the class 4c property with which it is used.  Class 4c 
  8.19  property classified in this clause also includes the remainder 
  8.20  of class 1c resorts.  Owners of real property devoted to 
  8.21  temporary and seasonal residential occupancy for recreation 
  8.22  purposes and all or a portion of which was devoted to commercial 
  8.23  purposes for not more than 250 days in the year preceding the 
  8.24  year of assessment desiring classification as class 1c or 4c, 
  8.25  must submit a declaration to the assessor designating the cabins 
  8.26  or units occupied for 250 days or less in the year preceding the 
  8.27  year of assessment by January 15 of the assessment year.  Those 
  8.28  cabins or units and a proportionate share of the land on which 
  8.29  they are located will be designated class 1c or 4c as otherwise 
  8.30  provided.  The remainder of the cabins or units and a 
  8.31  proportionate share of the land on which they are located will 
  8.32  be designated as class 3a.  The first $100,000 of the market 
  8.33  value of the remainder of the cabins or units and a 
  8.34  proportionate share of the land on which they are located shall 
  8.35  have a class rate of three percent.  The owner of property 
  8.36  desiring designation as class 1c or 4c property must provide 
  9.1   guest registers or other records demonstrating that the units 
  9.2   for which class 1c or 4c designation is sought were not occupied 
  9.3   for more than 250 days in the year preceding the assessment if 
  9.4   so requested.  The portion of a property operated as a (1) 
  9.5   restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 
  9.6   facility operated on a commercial basis not directly related to 
  9.7   temporary and seasonal residential occupancy for recreation 
  9.8   purposes shall not qualify for class 1c or 4c; 
  9.9      (6) (2) real property up to a maximum of one acre of land 
  9.10  owned by a nonprofit community service oriented organization; 
  9.11  provided that the property is not used for a revenue-producing 
  9.12  activity for more than six days in the calendar year preceding 
  9.13  the year of assessment and the property is not used for 
  9.14  residential purposes on either a temporary or permanent basis.  
  9.15  For purposes of this clause, a "nonprofit community service 
  9.16  oriented organization" means any corporation, society, 
  9.17  association, foundation, or institution organized and operated 
  9.18  exclusively for charitable, religious, fraternal, civic, or 
  9.19  educational purposes, and which is exempt from federal income 
  9.20  taxation pursuant to section 501(c)(3), (10), or (19) of the 
  9.21  Internal Revenue Code of 1986, as amended through December 31, 
  9.22  1990.  For purposes of this clause, "revenue-producing 
  9.23  activities" shall include but not be limited to property or that 
  9.24  portion of the property that is used as an on-sale intoxicating 
  9.25  liquor or 3.2 percent malt liquor establishment licensed under 
  9.26  chapter 340A, a restaurant open to the public, bowling alley, a 
  9.27  retail store, gambling conducted by organizations licensed under 
  9.28  chapter 349, an insurance business, or office or other space 
  9.29  leased or rented to a lessee who conducts a for-profit 
  9.30  enterprise on the premises.  Any portion of the property which 
  9.31  is used for revenue-producing activities for more than six days 
  9.32  in the calendar year preceding the year of assessment shall be 
  9.33  assessed as class 3a.  The use of the property for social events 
  9.34  open exclusively to members and their guests for periods of less 
  9.35  than 24 hours, when an admission is not charged nor any revenues 
  9.36  are received by the organization shall not be considered a 
 10.1   revenue-producing activity; 
 10.2      (7) (3) post-secondary student housing of not more than one 
 10.3   acre of land that is owned by a nonprofit corporation organized 
 10.4   under chapter 317A and is used exclusively by a student 
 10.5   cooperative, sorority, or fraternity for on-campus housing or 
 10.6   housing located within two miles of the border of a college 
 10.7   campus; and 
 10.8      (8) (4) manufactured home parks as defined in section 
 10.9   327.14, subdivision 3. 
 10.10     Class 4c property has a class rate of 2.3 percent of market 
 10.11  value, except that (i) for each parcel of seasonal residential 
 10.12  recreational property not used for commercial purposes under 
 10.13  clause (5) (1) the first $72,000 of market value on each parcel 
 10.14  has a class rate of 1.75 percent for taxes payable in 1997 and 
 10.15  1.5 percent for taxes payable in 1998 and thereafter, and the 
 10.16  market value of each parcel that exceeds $72,000 has a class 
 10.17  rate of 2.5 percent, and (ii) manufactured home parks assessed 
 10.18  under clause (8) (4) have a class rate of two percent for taxes 
 10.19  payable in 1996, and thereafter.  
 10.20     (d) Class 4d property includes: 
 10.21     (1) a structure that is: 
 10.22     (i) situated on real property that is used for housing for 
 10.23  the elderly or for low and moderate income families as defined 
 10.24  by the Farmers Home Administration; 
 10.25     (ii) located in a municipality of less than 10,000 
 10.26  population; and 
 10.27     (iii) financed by a direct loan or insured loan from the 
 10.28  Farmers Home Administration.  Property is classified under this 
 10.29  clause for 15 years from the date of the completion of the 
 10.30  original construction or for the original term of the loan.  
 10.31     The class rates in paragraph (c), clauses (1), (2), and (3) 
 10.32  and this clause apply to the properties described in them, only 
 10.33  in proportion to occupancy of the structure by elderly or 
 10.34  handicapped persons or low and moderate income families as 
 10.35  defined in the applicable laws unless construction of the 
 10.36  structure had been commenced prior to January 1, 1984; or the 
 11.1   project had been approved by the governing body of the 
 11.2   municipality in which it is located prior to June 30, 1983; or 
 11.3   financing of the project had been approved by a federal or state 
 11.4   agency prior to June 30, 1983.  For those properties, 4c or 4d 
 11.5   classification is available only for those units meeting the 
 11.6   requirements of section 273.1318. 
 11.7      Classification under this clause is only available to 
 11.8   property of a nonprofit or limited dividend entity. 
 11.9      In the case of a structure financed or refinanced under any 
 11.10  federal or state mortgage insurance or direct loan program 
 11.11  exclusively for housing for the elderly or for housing for the 
 11.12  handicapped, a unit shall be considered occupied so long as it 
 11.13  is actually occupied by an elderly or handicapped person or, if 
 11.14  vacant, is held for rental to an elderly or handicapped person. 
 11.15     (2) For taxes payable in 1992, 1993, and 1994, only, 
 11.16  buildings and appurtenances, together with the land upon which 
 11.17  they are located, leased by the occupant under the community 
 11.18  lending model lease-purchase mortgage loan program administered 
 11.19  by the Federal National Mortgage Association, provided the 
 11.20  occupant's income is no greater than 60 percent of the county or 
 11.21  area median income, adjusted for family size and the building 
 11.22  consists of existing single family or duplex housing.  The lease 
 11.23  agreement must provide for a portion of the lease payment to be 
 11.24  escrowed as a nonrefundable down payment on the housing.  To 
 11.25  qualify under this clause, the taxpayer must apply to the county 
 11.26  assessor by May 30 of each year.  The application must be 
 11.27  accompanied by an affidavit or other proof required by the 
 11.28  assessor to determine qualification under this clause. 
 11.29     (3) Qualifying buildings and appurtenances, together with 
 11.30  the land upon which they are located, leased for a period of up 
 11.31  to five years by the occupant under a lease-purchase program 
 11.32  administered by the Minnesota housing finance agency or a 
 11.33  housing and redevelopment authority authorized under sections 
 11.34  469.001 to 469.047, provided the occupant's income is no greater 
 11.35  than 80 percent of the county or area median income, adjusted 
 11.36  for family size, and the building consists of two or less 
 12.1   dwelling units.  The lease agreement must provide for a portion 
 12.2   of the lease payment to be escrowed as a nonrefundable down 
 12.3   payment on the housing.  The administering agency shall verify 
 12.4   the occupants income eligibility and certify to the county 
 12.5   assessor that the occupant meets the income criteria under this 
 12.6   paragraph.  To qualify under this clause, the taxpayer must 
 12.7   apply to the county assessor by May 30 of each year.  For 
 12.8   purposes of this section, "qualifying buildings and 
 12.9   appurtenances" shall be defined as one or two unit residential 
 12.10  buildings which are unoccupied and have been abandoned and 
 12.11  boarded for at least six months is qualifying low-income rental 
 12.12  housing certified to the assessor by the housing finance agency 
 12.13  under sections 273.126 and 462A.071.  Class 4d includes land in 
 12.14  proportion to the total market value of the building that is 
 12.15  qualifying low-income rental housing.  For all properties 
 12.16  qualifying as class 4d, the market value determined by the 
 12.17  assessor must be based on the normal approach to value using 
 12.18  normal unrestricted rents. 
 12.19     Class 4d property has a class rate of two one percent of 
 12.20  market value except that property classified under clause (3), 
 12.21  shall have the same class rate as class 1a property. 
 12.22     (e) Residential rental property that would otherwise be 
 12.23  assessed as class 4 property under paragraph (a); paragraph (b), 
 12.24  clauses (1) and (3); paragraph (c), clause (1), (2), (3), or 
 12.25  (4), is assessed at the class rate applicable to it under 
 12.26  Minnesota Statutes 1988, section 273.13, if it is found to be a 
 12.27  substandard building under section 273.1316.  Residential rental 
 12.28  property that would otherwise be assessed as class 4 property 
 12.29  under paragraph (d) is assessed at 2.3 percent of market value 
 12.30  if it is found to be a substandard building under section 
 12.31  273.1316. 
 12.32     (f) Class 4e property consists of the residential portion 
 12.33  of any structure located within a city that was converted from 
 12.34  nonresidential use to residential use, provided that: 
 12.35     (1) the structure had formerly been used as a warehouse; 
 12.36     (2) the structure was originally constructed prior to 1940; 
 13.1      (3) the conversion was done after December 31, 1995, but 
 13.2   before January 1, 2003; and 
 13.3      (4) the conversion involved an investment of at least 
 13.4   $25,000 per residential unit. 
 13.5      Class 4e property has a class rate of 2.3 percent, provided 
 13.6   that a structure is eligible for class 4e classification only in 
 13.7   the 12 assessment years immediately following the conversion. 
 13.8      Sec. 4.  Minnesota Statutes 1996, section 290A.03, 
 13.9   subdivision 11, is amended to read: 
 13.10     Subd. 11.  [RENT CONSTITUTING PROPERTY TAXES.] "Rent 
 13.11  constituting property taxes" means the amount of gross rent 
 13.12  actually paid in cash, or its equivalent, which is attributable 
 13.13  (a) to the property tax paid on the unit or (b) to the amount 
 13.14  paid in lieu of property taxes, in any calendar year by a 
 13.15  claimant for the right of occupancy of the claimant's Minnesota 
 13.16  homestead in the calendar year, and which rent constitutes the 
 13.17  basis, in the succeeding calendar year of a claim for relief 
 13.18  under this chapter by the claimant.  The amount of rent 
 13.19  attributable to property taxes paid or payments in lieu made on 
 13.20  the unit shall be determined by multiplying the gross rent paid 
 13.21  by the claimant for the calendar year for the unit by a 
 13.22  fraction, the numerator of which is the net tax on the property 
 13.23  where the unit is located and the denominator of which is the 
 13.24  total scheduled rent.  In no case may the rent constituting 
 13.25  property taxes exceed 50 percent of the gross rent paid by the 
 13.26  claimant during that calendar year.  In the case of If a 
 13.27  claimant who resides in (1) a unit classified as class 4d under 
 13.28  section 273.13, (2) a unit for which (1) a rent subsidy is paid 
 13.29  to, or for, the claimant based on the income of the claimant or 
 13.30  the claimant's family, or (2) (3) a unit for which a subsidy is 
 13.31  paid to a public housing authority that owns or operates the 
 13.32  claimant's rental unit, pursuant to United States Code, title 
 13.33  42, section 1437c, 20 percent of gross rent actually paid in 
 13.34  cash or its equivalent shall be is the claimant's "rent 
 13.35  constituting property taxes paid."  For purposes of this 
 13.36  subdivision, "rent subsidy" does not include any housing 
 14.1   assistance received under aid to families with dependent 
 14.2   children, general assistance, Minnesota supplemental assistance, 
 14.3   supplemental security income, or similar income maintenance 
 14.4   programs. 
 14.5      Sec. 5.  [462A.071] [CERTIFICATION OF HOUSING QUALIFYING 
 14.6   FOR REDUCED PROPERTY TAX RATE.] 
 14.7      Subdivision 1.  [CERTIFICATION.] By June 30 of each year, 
 14.8   the agency must certify to local assessors the units of 
 14.9   low-income rental properties that qualify for class 4d under 
 14.10  sections 273.126 and 273.13.  In making these certifications, 
 14.11  the agency may rely on the application and supporting 
 14.12  information supplied by the property owner as to compliance with 
 14.13  the income limits under subdivision 2 and satisfaction of the 
 14.14  minimum housing quality standards under subdivision 4. 
 14.15     Subd. 2.  [APPLICATION.] (a) In order to qualify for 
 14.16  certification under subdivision 1, the owner or manager of the 
 14.17  property must annually apply to the agency.  The application 
 14.18  must be in the form prescribed by the agency, contain the 
 14.19  information required by the agency, and be submitted by the date 
 14.20  and time specified by the agency. 
 14.21     (b) Each application must include: 
 14.22     (1) the property tax identification number; 
 14.23     (2) the number, type, and size of units the applicant seeks 
 14.24  to qualify as low-income housing under class 4d; 
 14.25     (3) the number, type, and size of units in the property for 
 14.26  which the applicant is not seeking qualification, if any; 
 14.27     (4) a certification that the property has been inspected by 
 14.28  a qualified inspector within the past three years and meets the 
 14.29  minimum housing quality standards or is exempt from the 
 14.30  inspection requirement under subdivision 4; 
 14.31     (5) information documenting compliance with the income 
 14.32  limits; 
 14.33     (6) an executed agreement to restrict rents meeting the 
 14.34  requirements specified by the agency or executed leases for the 
 14.35  units for which qualification as low-income housing as class 4d 
 14.36  under section 273.13 is sought and the rent schedule; and 
 15.1      (7) any additional information the agency deems appropriate 
 15.2   to require. 
 15.3      (c) The applicant must pay a per-unit application fee to be 
 15.4   set by the agency.  The application fee charged by the agency 
 15.5   must approximately equal the costs of processing and reviewing 
 15.6   the applications.  The fee must be deposited in the general fund.
 15.7      Subd. 3.  [AGREEMENT TO RESTRICT RENTS.] The agency may 
 15.8   prescribe one or more standard form agreements to restrict rents 
 15.9   that meet the requirements of section 273.126, subdivision 3.  
 15.10  The agency may require applicants to execute a rent restriction 
 15.11  agreement in this form as a condition of entering an agreement 
 15.12  to restrict rents. 
 15.13     Subd. 4.  [MINIMUM HOUSING QUALITY STANDARDS.] (a) To 
 15.14  qualify for taxation as class 4d property under section 273.13, 
 15.15  a unit must meet the housing maintenance code of the local unit 
 15.16  of government in which the unit is located, if such a code has 
 15.17  been adopted, or the housing quality standards adopted by the 
 15.18  United States Department of Housing and Urban Development. 
 15.19     (b) In order to meet the minimum housing quality standards, 
 15.20  a building must be inspected by an independent designated 
 15.21  inspector at least once every three years.  The inspector must 
 15.22  certify that the building complies with the minimum standards.  
 15.23  The property owner must pay the cost of the inspection. 
 15.24     (c) The agency may exempt from the inspection requirement 
 15.25  housing units that are financed by a governmental entity and 
 15.26  subject to regular inspection or other compliance checks with 
 15.27  regard to minimum housing quality.  
 15.28     Written certification must be supplied, however, showing 
 15.29  that these exempt units have been inspected within the last 
 15.30  three years and comply with the requirements under the public 
 15.31  financing or local requirements. 
 15.32     Subd. 5.  [HOUSING INSPECTORS.] (a) Housing inspections 
 15.33  required by this section may be conducted by any persons 
 15.34  employed by or under contract with a state agency or a local 
 15.35  unit of government to conduct property inspections in connection 
 15.36  with a state or federal housing program or by persons charged by 
 16.1   the governing body of a political subdivision with the 
 16.2   responsibility of enforcing provisions of local housing law, 
 16.3   building, or housing maintenance code.  The inspector must be 
 16.4   independent of the owner or manager of the inspected property. 
 16.5      (b) The agency must maintain a list of persons eligible to 
 16.6   conduct housing inspections under this section. 
 16.7      (c) The agency may provide housing inspection services 
 16.8   under this section and may set and charge appropriate fees for 
 16.9   the services.  The fees are deposited in the general fund. 
 16.10     Sec. 6.  Minnesota Statutes 1996, section 469.040, 
 16.11  subdivision 3, is amended to read: 
 16.12     Subd. 3.  [STATEMENT FILED WITH ASSESSOR; PERCENTAGE TAX ON 
 16.13  RENTALS.] Notwithstanding the provisions of subdivision 1, after 
 16.14  a housing project or a housing development project carried on 
 16.15  under sections 469.016 to 469.026 has become occupied, in whole 
 16.16  or in part, an authority shall file with the assessor, on or 
 16.17  before April 15 of each year, a statement of the aggregate 
 16.18  shelter rentals of that project collected during the preceding 
 16.19  calendar year.  Unless a greater amount has been agreed upon 
 16.20  between the authority and the governing body or bodies for which 
 16.21  the authority was created, in whose jurisdiction the project is 
 16.22  located, five percent of the aggregate shelter rentals shall be 
 16.23  charged to the authority as a service charge for the services 
 16.24  and facilities to be furnished with respect to that project.  
 16.25  The service charge shall be collected from the authority in the 
 16.26  manner provided by law for the assessment and collection of 
 16.27  taxes.  The amount so collected shall be distributed to the 
 16.28  several taxing bodies in the same proportion as the tax rate of 
 16.29  each bears to the total tax rate of those taxing bodies.  The 
 16.30  governing body or bodies for which the authority has been 
 16.31  created, in whose jurisdiction the project is located, may agree 
 16.32  with the authority for the payment of a service charge for a 
 16.33  housing project or a housing development project in an amount 
 16.34  greater than five percent of the aggregate annual shelter 
 16.35  rentals of any project, upon the basis of shelter rentals or 
 16.36  upon another basis agreed upon.  The service charge may not 
 17.1   exceed the amount which would be payable in taxes were the 
 17.2   property not exempt.  If such an agreement is made, the service 
 17.3   charge so agreed upon shall be collected and distributed in the 
 17.4   manner above provided.  If the project has become occupied, or 
 17.5   if the land upon which the project is to be constructed has been 
 17.6   acquired, the agreement shall specify the location of the 
 17.7   project for which the agreement is made.  "Shelter rental" means 
 17.8   the total rentals of a housing project exclusive of any charge 
 17.9   for utilities and special services such as heat, water, 
 17.10  electricity, gas, sewage disposal, or garbage removal.  "Service 
 17.11  charge" means payment in lieu of taxes.  The records of each 
 17.12  housing project shall be open to inspection by the proper 
 17.13  assessing officer. 
 17.14     Sec. 7.  [TRANSITION CLASS RATES.] 
 17.15     Subdivision 1.  [APPLICATION.] (a) The class rates under 
 17.16  this section apply for property taxes payable in 1999 to 2003 
 17.17  for the market value of properties 
 17.18     (1)(i) which were classified as class 4c or class 4d for 
 17.19  taxes payable in 1998, or 
 17.20     (ii) which are constructed or substantially rehabilitated 
 17.21  during calendar year 1997 and would qualify as class 4c or class 
 17.22  4d for taxes payable in 1999, and 
 17.23     (2) which do not qualify as class 4d property as a result 
 17.24  of the amendments in this act to Minnesota Statutes, section 
 17.25  273.13, subdivision 25. 
 17.26     (b) To qualify for the class rates under this section, the 
 17.27  building's owner must annually certify to the assessor in 
 17.28  writing that the property, building, or unit continues to 
 17.29  qualify under the laws in effect and applicable to its 
 17.30  classification for taxes payable in 1998. 
 17.31     (c) A property no longer qualifies under this section: 
 17.32     (1) if it is transferred or sold; or 
 17.33     (2) if loans, that have a principal amount equal to more 
 17.34  than 25 percent of the property's market value and that are 
 17.35  secured by the property, are refinanced. 
 17.36     Subd. 2.  [CLASS 4C PROPERTIES.] For the market value of 
 18.1   properties that were classified as class 4c for taxes payable in 
 18.2   1998 and which no longer qualify as a result of the amendments 
 18.3   to Minnesota Statutes, section 273.13, subdivision 25, the 
 18.4   following class rates apply: 
 18.5      (1) for taxes payable in 1999, a class rate of 2.5 percent; 
 18.6      (2) for taxes payable in 2000, a class rate of 2.8 percent; 
 18.7      (3) for taxes payable in 2001, a class rate of 3.1 percent; 
 18.8      (4) for taxes payable in 2002, a class rate of 3.4 percent. 
 18.9      Subd. 3.  [CLASS 4D PROPERTIES.] For the market value of 
 18.10  properties that were classified as class 4d for taxes payable in 
 18.11  1998 and which no longer qualify as a result of the amendments 
 18.12  to Minnesota Statutes, section 273.13, subdivision 25, the 
 18.13  following class rates apply: 
 18.14     (1) for taxes payable in 1999, a class rate of 2.2 percent; 
 18.15     (2) for taxes payable in 2000, a class rate of 2.5 percent; 
 18.16     (3) for taxes payable in 2001, a class rate of 2.8 percent; 
 18.17     (4) for taxes payable in 2002, a class rate of 3.1 percent; 
 18.18     (5) for taxes payable in 2003, a class rate of 3.4 percent. 
 18.19     Sec. 8.  [APPROPRIATIONS.] 
 18.20     $450,000 is appropriated for fiscal years 1997 and 1998 
 18.21  from the general fund to the housing finance agency for purposes 
 18.22  of administering the certification of qualifying low-income 
 18.23  residential properties for property taxation under class 4d. 
 18.24     Sec. 9.  [REPEALER.] 
 18.25     Minnesota Statutes 1996, sections 273.1317; and 273.1318, 
 18.26  are repealed. 
 18.27     Sec. 10.  [EFFECTIVE DATE.] 
 18.28     Sections 1 to 3 and 9, are effective for property taxes 
 18.29  payable in 1999 and thereafter.  Section 4 is effective 
 18.30  beginning for rents based on property taxes payable in 1999.