SF 1100

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; providing a comprehensive reform 
  1.3             of state and local taxes and budgeting; providing 
  1.4             penalties; requiring studies; appropriating money; 
  1.5             amending Minnesota Statutes 1996, sections 124A.035, 
  1.6             subdivision 4; 124A.22, subdivision 8b; 124A.23, 
  1.7             subdivision 4; 124A.26, subdivision 3; 124A.292, 
  1.8             subdivision 4; 124A.71, subdivision 4; 124A.72, 
  1.9             subdivision 4; 272.02, subdivision 1; 273.11, 
  1.10            subdivision 5; 273.121; 273.13, subdivisions 21a, 22, 
  1.11            23, 24, 25, and 31; 273.1316, subdivision 1; 273.1393; 
  1.12            273.165, subdivision 2; 275.01; 275.02; 275.07, 
  1.13            subdivision 1; 275.08, subdivisions 1, 1b, and by 
  1.14            adding a subdivision; 276.04, subdivision 2; 289A.01; 
  1.15            289A.08, subdivisions 1, 6, and by adding a 
  1.16            subdivision; 289A.18, subdivision 4, and by adding a 
  1.17            subdivision; 289A.19, by adding a subdivision; 
  1.18            289A.20, subdivision 1; 289A.30, subdivision 1; 
  1.19            289A.31, by adding a subdivision; 290.01, subdivisions 
  1.20            19a, 19b, and 19d; 290.06, subdivision 2c, and by 
  1.21            adding subdivisions; 290.0671, subdivision 1; 290.91; 
  1.22            290.9201, subdivision 2; 290.923, subdivision 2; 
  1.23            290.97; 290.9705, subdivisions 1 and 3; 290A.03, 
  1.24            subdivision 3; 290A.04, by adding subdivisions; 
  1.25            290A.07, subdivision 1; 297.07, subdivision 1; 297.35, 
  1.26            subdivision 1; 297A.01, subdivisions 3, 6, 8, and 16; 
  1.27            297A.02, subdivision 1; 297A.03, subdivision 1; 
  1.28            297A.14, subdivision 1; 297A.21, subdivision 2; 
  1.29            297A.22; 297A.24, subdivision 1; 297A.25, subdivisions 
  1.30            4, 9, 12, and by adding subdivisions; 297B.01, 
  1.31            subdivision 8, and by adding a subdivision; 297B.03; 
  1.32            297C.03, subdivision 1; 297C.04; 469.176, subdivisions 
  1.33            1, 1a, and 1c; 469.177, subdivision 8; 469.178, by 
  1.34            adding a subdivision; 469.1781; 469.179, by adding a 
  1.35            subdivision; 469.1811, subdivision 2, and by adding a 
  1.36            subdivision; 477A.011, subdivision 36; 477A.013, 
  1.37            subdivisions 1, 8, and 9; 477A.03, subdivision 2; 
  1.38            477A.05; proposing coding for new law in Minnesota 
  1.39            Statutes, chapters 16A; 275; 289A; 469; and 477A; 
  1.40            proposing coding for new law as Minnesota Statutes, 
  1.41            chapters 276B; and 290B; repealing Minnesota Statutes 
  1.42            1996, sections 16A.152; 124.155; 124A.02, subdivisions 
  1.43            3b, 8, and 10; 124A.03, subdivision 2a; 124A.0311; 
  1.44            124A.22, subdivision 8a; 124A.23, subdivisions 1, 2, 
  1.45            and 3; 124A.24; 124A.26, subdivision 2; 124A.292, 
  1.46            subdivision 3; 124A.71, subdivision 3; 124A.72, 
  2.1             subdivision 3; 273.11, subdivisions 1a, 16, and 18; 
  2.2             273.13, subdivisions 21b, 32, and 33; 273.1315; 
  2.3             273.1317; 273.1318; 273.134; 273.135; 273.136; 
  2.4             273.138; 273.1391; 273.1392; 273.1398; 273.1399; 
  2.5             273.166; 273.33; 273.35; 273.36; 273.37; 273.371; 
  2.6             273.38; 273.39; 273.40; 273.41; 273.42; 273.425; 
  2.7             273.43; 275.08, subdivisions 1c and 1d; 290.01, 
  2.8             subdivision 19g; 290.0802; 290.091; 290.0921; 
  2.9             290.0922; 290.21, subdivision 4; 290A.03, subdivisions 
  2.10            9 and 10; 290A.07, subdivisions 2a and 3; 297A.01, 
  2.11            subdivision 20; 297A.02, subdivisions 2 and 5; 
  2.12            297A.15, subdivision 5; 297A.25, subdivisions 6, 7, 8, 
  2.13            10, 11, 17, 18, 21, 23, 26, 30, 39, 40, 41, 44, 56, 
  2.14            57, 58, and 59; 297A.256, subdivision 2; 297B.02, 
  2.15            subdivisions 2 and 3; 297B.025; 297C.05, subdivision 
  2.16            2; 298.01, subdivisions 3c, 3d, 4d, and 4e; 469.149; 
  2.17            469.166; 469.167; 469.168; 469.169; 469.170; 469.171; 
  2.18            469.172; 469.173; 469.175, subdivisions 1, 1a, 2, 2a, 
  2.19            3, 4, 7, and 8; 469.176, subdivision 4h; 469.1762; 
  2.20            469.177, subdivisions 1, 1a, 3, 4, 6, and 8; 469.1782; 
  2.21            477A.011, subdivisions 28 and 37; and 477A.0132. 
  2.22  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  2.23                             ARTICLE 1
  2.24                           PROPERTY TAXES
  2.25     Section 1.  Minnesota Statutes 1996, section 272.02, 
  2.26  subdivision 1, is amended to read: 
  2.27     Subdivision 1.  All property described in this section to 
  2.28  the extent herein limited shall be exempt from taxation: 
  2.29     (1) All public burying grounds. 
  2.30     (2) All public schoolhouses. 
  2.31     (3) All public hospitals. 
  2.32     (4) All academies, colleges, and universities, and all 
  2.33  seminaries of learning. 
  2.34     (5) All churches, church property, and houses of worship. 
  2.35     (6) Institutions of purely public charity except parcels of 
  2.36  property containing structures and the structures described in 
  2.37  section 273.13, subdivision 25, paragraph (c), clauses (1), (2), 
  2.38  and (3), or paragraph (d), other than those that qualify for 
  2.39  exemption under clause (25). 
  2.40     (7) All public property exclusively used for any public 
  2.41  purpose. 
  2.42     (8) Except for the taxable personal property enumerated 
  2.43  below, all personal property and the property described in 
  2.44  section 272.03, subdivision 1, paragraphs (c) and (d), shall be 
  2.45  exempt.  
  2.46     The following personal property shall be taxable:  
  3.1      (a) personal property which is part of an electric 
  3.2   generating, transmission, or distribution system or a pipeline 
  3.3   system transporting or distributing water, gas, crude oil, or 
  3.4   petroleum products or mains and pipes used in the distribution 
  3.5   of steam or hot or chilled water for heating or cooling 
  3.6   buildings and structures; 
  3.7      (b) railroad docks and wharves which are part of the 
  3.8   operating property of a railroad company as defined in section 
  3.9   270.80; 
  3.10     (c) (b) personal property defined in section 272.03, 
  3.11  subdivision 2, clause (3); 
  3.12     (d) (c) leasehold or other personal property interests 
  3.13  which are taxed pursuant to section 272.01, subdivision 2; 
  3.14  273.124, subdivision 7; or 273.19, subdivision 1; or any other 
  3.15  law providing the property is taxable as if the lessee or user 
  3.16  were the fee owner; 
  3.17     (e) (d) manufactured homes and sectional structures, 
  3.18  including storage sheds, decks, and similar removable 
  3.19  improvements constructed on the site of a manufactured home, 
  3.20  sectional structure, park trailer or travel trailer as provided 
  3.21  in section 273.125, subdivision 8, paragraph (f); and 
  3.22     (f) (e) flight property as defined in section 270.071.  
  3.23     (9) Personal property used primarily for the abatement and 
  3.24  control of air, water, or land pollution to the extent that it 
  3.25  is so used, and real property which is used primarily for 
  3.26  abatement and control of air, water, or land pollution as part 
  3.27  of an agricultural operation, as a part of a centralized 
  3.28  treatment and recovery facility operating under a permit issued 
  3.29  by the Minnesota pollution control agency pursuant to chapters 
  3.30  115 and 116 and Minnesota Rules, parts 7001.0500 to 7001.0730, 
  3.31  and 7045.0020 to 7045.1260, as a wastewater treatment facility 
  3.32  and for the treatment, recovery, and stabilization of metals, 
  3.33  oils, chemicals, water, sludges, or inorganic materials from 
  3.34  hazardous industrial wastes, or as part of an electric 
  3.35  generation system.  For purposes of this clause, personal 
  3.36  property includes ponderous machinery and equipment used in a 
  4.1   business or production activity that at common law is considered 
  4.2   real property. 
  4.3      Any taxpayer requesting exemption of all or a portion of 
  4.4   any real property or any equipment or device, or part thereof, 
  4.5   operated primarily for the control or abatement of air or water 
  4.6   pollution shall file an application with the commissioner of 
  4.7   revenue.  The equipment or device shall meet standards, rules, 
  4.8   or criteria prescribed by the Minnesota pollution control 
  4.9   agency, and must be installed or operated in accordance with a 
  4.10  permit or order issued by that agency.  The Minnesota pollution 
  4.11  control agency shall upon request of the commissioner furnish 
  4.12  information or advice to the commissioner.  On determining that 
  4.13  property qualifies for exemption, the commissioner shall issue 
  4.14  an order exempting the property from taxation.  The equipment or 
  4.15  device shall continue to be exempt from taxation as long as the 
  4.16  permit issued by the Minnesota pollution control agency remains 
  4.17  in effect. 
  4.18     (10) Wetlands.  For purposes of this subdivision, 
  4.19  "wetlands" means:  (i) land described in section 103G.005, 
  4.20  subdivision 15a; (ii) land which is mostly under water, produces 
  4.21  little if any income, and has no use except for wildlife or 
  4.22  water conservation purposes, provided it is preserved in its 
  4.23  natural condition and drainage of it would be legal, feasible, 
  4.24  and economically practical for the production of livestock, 
  4.25  dairy animals, poultry, fruit, vegetables, forage and grains, 
  4.26  except wild rice; or (iii) land in a wetland preservation area 
  4.27  under sections 103F.612 to 103F.616.  "Wetlands" under items (i) 
  4.28  and (ii) include adjacent land which is not suitable for 
  4.29  agricultural purposes due to the presence of the wetlands, but 
  4.30  do not include woody swamps containing shrubs or trees, wet 
  4.31  meadows, meandered water, streams, rivers, and floodplains or 
  4.32  river bottoms.  Exemption of wetlands from taxation pursuant to 
  4.33  this section shall not grant the public any additional or 
  4.34  greater right of access to the wetlands or diminish any right of 
  4.35  ownership to the wetlands. 
  4.36     (11) Native prairie.  The commissioner of the department of
  5.1   natural resources shall determine lands in the state which are 
  5.2   native prairie and shall notify the county assessor of each 
  5.3   county in which the lands are located.  Pasture land used for 
  5.4   livestock grazing purposes shall not be considered native 
  5.5   prairie for the purposes of this clause.  Upon receipt of an 
  5.6   application for the exemption provided in this clause for lands 
  5.7   for which the assessor has no determination from the 
  5.8   commissioner of natural resources, the assessor shall refer the 
  5.9   application to the commissioner of natural resources who shall 
  5.10  determine within 30 days whether the land is native prairie and 
  5.11  notify the county assessor of the decision.  Exemption of native 
  5.12  prairie pursuant to this clause shall not grant the public any 
  5.13  additional or greater right of access to the native prairie or 
  5.14  diminish any right of ownership to it. 
  5.15     (12) Property used in a continuous program to provide 
  5.16  emergency shelter for victims of domestic abuse, provided the 
  5.17  organization that owns and sponsors the shelter is exempt from 
  5.18  federal income taxation pursuant to section 501(c)(3) of the 
  5.19  Internal Revenue Code of 1986, as amended through December 31, 
  5.20  1992, notwithstanding the fact that the sponsoring organization 
  5.21  receives funding under section 8 of the United States Housing 
  5.22  Act of 1937, as amended. 
  5.23     (13) If approved by the governing body of the municipality 
  5.24  in which the property is located, property not exceeding one 
  5.25  acre which is owned and operated by any senior citizen group or 
  5.26  association of groups that in general limits membership to 
  5.27  persons age 55 or older and is organized and operated 
  5.28  exclusively for pleasure, recreation, and other nonprofit 
  5.29  purposes, no part of the net earnings of which inures to the 
  5.30  benefit of any private shareholders; provided the property is 
  5.31  used primarily as a clubhouse, meeting facility, or recreational 
  5.32  facility by the group or association and the property is not 
  5.33  used for residential purposes on either a temporary or permanent 
  5.34  basis. 
  5.35     (14) To the extent provided by section 295.44, real and 
  5.36  personal property used or to be used primarily for the 
  6.1   production of hydroelectric or hydromechanical power on a site 
  6.2   owned by the state or a local governmental unit which is 
  6.3   developed and operated pursuant to the provisions of section 
  6.4   103G.535. 
  6.5      (15) If approved by the governing body of the municipality 
  6.6   in which the property is located, and if construction is 
  6.7   commenced after June 30, 1983:  
  6.8      (a) a "direct satellite broadcasting facility" operated by 
  6.9   a corporation licensed by the federal communications commission 
  6.10  to provide direct satellite broadcasting services using direct 
  6.11  broadcast satellites operating in the 12-ghz. band; and 
  6.12     (b) a "fixed satellite regional or national program service 
  6.13  facility" operated by a corporation licensed by the federal 
  6.14  communications commission to provide fixed satellite-transmitted 
  6.15  regularly scheduled broadcasting services using satellites 
  6.16  operating in the 6-ghz. band. 
  6.17  An exemption provided by clause (15) shall apply for a period 
  6.18  not to exceed five years.  When the facility no longer qualifies 
  6.19  for exemption, it shall be placed on the assessment rolls as 
  6.20  provided in subdivision 4.  Before approving a tax exemption 
  6.21  pursuant to this paragraph, the governing body of the 
  6.22  municipality shall provide an opportunity to the members of the 
  6.23  county board of commissioners of the county in which the 
  6.24  facility is proposed to be located and the members of the school 
  6.25  board of the school district in which the facility is proposed 
  6.26  to be located to meet with the governing body.  The governing 
  6.27  body shall present to the members of those boards its estimate 
  6.28  of the fiscal impact of the proposed property tax exemption.  
  6.29  The tax exemption shall not be approved by the governing body 
  6.30  until the county board of commissioners has presented its 
  6.31  written comment on the proposal to the governing body or 30 days 
  6.32  have passed from the date of the transmittal by the governing 
  6.33  body to the board of the information on the fiscal impact, 
  6.34  whichever occurs first. 
  6.35     (16) Real and personal property owned and operated by a 
  6.36  private, nonprofit corporation exempt from federal income 
  7.1   taxation pursuant to United States Code, title 26, section 
  7.2   501(c)(3), primarily used in the generation and distribution of 
  7.3   hot water for heating buildings and structures.  
  7.4      (17) Notwithstanding section 273.19, state lands that are 
  7.5   leased from the department of natural resources under section 
  7.6   92.46. 
  7.7      (18) Electric power distribution lines and their 
  7.8   attachments and appurtenances, that are used primarily for 
  7.9   supplying electricity to farmers at retail.  
  7.10     (19) Transitional housing facilities.  "Transitional 
  7.11  housing facility" means a facility that meets the following 
  7.12  requirements.  (i) It provides temporary housing to individuals, 
  7.13  couples, or families.  (ii) It has the purpose of reuniting 
  7.14  families and enabling parents or individuals to obtain 
  7.15  self-sufficiency, advance their education, get job training, or 
  7.16  become employed in jobs that provide a living wage.  (iii) It 
  7.17  provides support services such as child care, work readiness 
  7.18  training, and career development counseling; and a 
  7.19  self-sufficiency program with periodic monitoring of each 
  7.20  resident's progress in completing the program's goals.  (iv) It 
  7.21  provides services to a resident of the facility for at least 
  7.22  three months but no longer than three years, except residents 
  7.23  enrolled in an educational or vocational institution or job 
  7.24  training program.  These residents may receive services during 
  7.25  the time they are enrolled but in no event longer than four 
  7.26  years.  (v) It is owned and operated or under lease from a unit 
  7.27  of government or governmental agency under a property 
  7.28  disposition program and operated by one or more organizations 
  7.29  exempt from federal income tax under section 501(c)(3) of the 
  7.30  Internal Revenue Code of 1986, as amended through December 31, 
  7.31  1992.  This exemption applies notwithstanding the fact that the 
  7.32  sponsoring organization receives financing by a direct federal 
  7.33  loan or federally insured loan or a loan made by the Minnesota 
  7.34  housing finance agency under the provisions of either Title II 
  7.35  of the National Housing Act or the Minnesota housing finance 
  7.36  agency law of 1971 or rules promulgated by the agency pursuant 
  8.1   to it, and notwithstanding the fact that the sponsoring 
  8.2   organization receives funding under Section 8 of the United 
  8.3   States Housing Act of 1937, as amended. 
  8.4      (20) Real and personal property, including leasehold or 
  8.5   other personal property interests, owned and operated by a 
  8.6   corporation if more than 50 percent of the total voting power of 
  8.7   the stock of the corporation is owned collectively by:  (i) the 
  8.8   board of regents of the University of Minnesota, (ii) the 
  8.9   University of Minnesota Foundation, an organization exempt from 
  8.10  federal income taxation under section 501(c)(3) of the Internal 
  8.11  Revenue Code of 1986, as amended through December 31, 1992, and 
  8.12  (iii) a corporation organized under chapter 317A, which by its 
  8.13  articles of incorporation is prohibited from providing pecuniary 
  8.14  gain to any person or entity other than the regents of the 
  8.15  University of Minnesota; which property is used primarily to 
  8.16  manage or provide goods, services, or facilities utilizing or 
  8.17  relating to large-scale advanced scientific computing resources 
  8.18  to the regents of the University of Minnesota and others. 
  8.19     (21)(a) Wind energy conversion systems, as defined in 
  8.20  section 216C.06, subdivision 12, installed after January 1, 
  8.21  1991, and before January 2, 1995, and used as an electric power 
  8.22  source, are exempt. 
  8.23     (b) Wind energy conversion systems, as defined in section 
  8.24  216C.06, subdivision 12, installed after January 1, 1995, 
  8.25  including the foundation or support pad, which are (i) used as 
  8.26  an electric power source; (ii) located within one county and 
  8.27  owned by the same owner; and (iii) produce two megawatts or less 
  8.28  of electricity as measured by nameplate ratings, are exempt. 
  8.29     (c) Wind energy conversion systems, as defined in section 
  8.30  216C.06, subdivision 12, installed after January 1, 1995, and 
  8.31  used as an electric power source but not exempt under item (b), 
  8.32  are treated as follows:  (i) the foundation and support pad are 
  8.33  taxable; (ii) the associated supporting and protective 
  8.34  structures are exempt for the first five assessment years after 
  8.35  they have been constructed, and thereafter, 30 percent of the 
  8.36  market value of the associated supporting and protective 
  9.1   structures are taxable; and (iii) the turbines, blades, 
  9.2   transformers, and its related equipment, are exempt. 
  9.3      (22) Containment tanks, cache basins, and that portion of 
  9.4   the structure needed for the containment facility used to 
  9.5   confine agricultural chemicals as defined in section 18D.01, 
  9.6   subdivision 3, as required by the commissioner of agriculture 
  9.7   under chapter 18B or 18C. 
  9.8      (23) Photovoltaic devices, as defined in section 216C.06, 
  9.9   subdivision 13, installed after January 1, 1992, and used to 
  9.10  produce or store electric power. 
  9.11     (24) Real and personal property owned and operated by a 
  9.12  private, nonprofit corporation exempt from federal income 
  9.13  taxation pursuant to United States Code, title 26, section 
  9.14  501(c)(3), primarily used for an ice arena or ice rink, and used 
  9.15  primarily for youth and high school programs. 
  9.16     (25) A structure that is situated on real property that is 
  9.17  used for: 
  9.18     (i) housing for the elderly or for low- and moderate-income 
  9.19  families as defined in Title II of the National Housing Act, as 
  9.20  amended through December 31, 1990, and funded by a direct 
  9.21  federal loan or federally insured loan made pursuant to Title II 
  9.22  of the act; or 
  9.23     (ii) housing lower income families or elderly or 
  9.24  handicapped persons, as defined in Section 8 of the United 
  9.25  States Housing Act of 1937, as amended. 
  9.26     In order for a structure to be exempt under (i) or (ii), it 
  9.27  must also meet each of the following criteria: 
  9.28     (A) is owned by an entity which is operated as a nonprofit 
  9.29  corporation organized under chapter 317A; 
  9.30     (B) is owned by an entity which has not entered into a 
  9.31  housing assistance payments contract under Section 8 of the 
  9.32  United States Housing Act of 1937, or, if the entity which owns 
  9.33  the structure has entered into a housing assistance payments 
  9.34  contract under Section 8 of the United States Housing Act of 
  9.35  1937, the contract provides assistance for less than 90 percent 
  9.36  of the dwelling units in the structure, excluding dwelling units 
 10.1   intended for management or maintenance personnel; 
 10.2      (C) operates an on-site congregate dining program in which 
 10.3   participation by residents is mandatory, and provides assisted 
 10.4   living or similar social and physical support services for 
 10.5   residents; and 
 10.6      (D) was not assessed and did not pay tax under chapter 273 
 10.7   prior to the 1991 levy, while meeting the other conditions of 
 10.8   this clause. 
 10.9      An exemption under this clause remains in effect for taxes 
 10.10  levied in each year or partial year of the term of its permanent 
 10.11  financing. 
 10.12     (26) Real and personal property that is located in the 
 10.13  Superior National Forest, and owned or leased and operated by a 
 10.14  nonprofit organization that is exempt from federal income 
 10.15  taxation under section 501(c)(3) of the Internal Revenue Code of 
 10.16  1986, as amended through December 31, 1992, and primarily used 
 10.17  to provide recreational opportunities for disabled veterans and 
 10.18  their families. 
 10.19     (27) Manure pits and appurtenances, which may include 
 10.20  slatted floors and pipes, installed or operated in accordance 
 10.21  with a permit, order, or certificate of compliance issued by the 
 10.22  Minnesota pollution control agency.  The exemption shall 
 10.23  continue for as long as the permit, order, or certificate issued 
 10.24  by the Minnesota pollution control agency remains in effect. 
 10.25     (28) Notwithstanding clause (8), item (a), attached 
 10.26  machinery and other personal property which is part of a 
 10.27  facility containing a cogeneration system as described in 
 10.28  section 216B.166, subdivision 2, paragraph (a), if the 
 10.29  cogeneration system has met the following criteria:  (i) the 
 10.30  system utilizes natural gas as a primary fuel and the 
 10.31  cogenerated steam initially replaces steam generated from 
 10.32  existing thermal boilers utilizing coal; (ii) the facility 
 10.33  developer is selected as a result of a procurement process 
 10.34  ordered by the public utilities commission; and (iii) 
 10.35  construction of the facility is commenced after July 1, 1994, 
 10.36  and before July 1, 1997. 
 11.1      (29) Real property acquired by a home rule charter city, 
 11.2   statutory city, county, town, or school district under a lease 
 11.3   purchase agreement or an installment purchase contract during 
 11.4   the term of the lease purchase agreement as long as and to the 
 11.5   extent that the property is used by the city, county, town, or 
 11.6   school district and devoted to a public use and to the extent it 
 11.7   is not subleased to any private individual, entity, association, 
 11.8   or corporation in connection with a business or enterprise 
 11.9   operated for profit. 
 11.10     Sec. 2.  Minnesota Statutes 1996, section 273.11, 
 11.11  subdivision 5, is amended to read: 
 11.12     Subd. 5.  Notwithstanding any other provision of law to the 
 11.13  contrary, the limitation contained in subdivisions subdivision 1 
 11.14  and 1a shall also apply to the authority of the local board of 
 11.15  review as provided in section 274.01, the county board of 
 11.16  equalization as provided in section 274.13, the state board of 
 11.17  equalization and the commissioner of revenue as provided in 
 11.18  sections 270.11, 270.12, and 270.16. 
 11.19     Sec. 3.  Minnesota Statutes 1996, section 273.121, is 
 11.20  amended to read: 
 11.21     273.121 [VALUATION OF REAL PROPERTY, NOTICE.] 
 11.22     Any county assessor or city assessor having the powers of a 
 11.23  county assessor, valuing or classifying taxable real property 
 11.24  shall in each year notify those persons whose property is to be 
 11.25  assessed or reclassified that year if the person's address is 
 11.26  known to the assessor, otherwise the occupant of the property.  
 11.27  The notice shall be in writing and shall be sent by ordinary 
 11.28  mail at least ten days before the meeting of the local board of 
 11.29  review or equalization.  It shall contain:  (1) the market 
 11.30  value, (2) the limited market value under section 273.11, 
 11.31  subdivision 1a, (3) the qualifying amount of any improvements 
 11.32  under section 273.11, subdivision 16, (4) the market value 
 11.33  subject to taxation after subtracting the amount of any 
 11.34  qualifying improvements, (5) the new classification, (6) a note 
 11.35  that if the property is homestead and at least 35 years old, 
 11.36  improvements made to the property may be eligible for a 
 12.1   valuation exclusion under section 273.11, subdivision 16, (7) (3)
 12.2   the assessor's office address, and (8) (4) the dates, places, 
 12.3   and times set for the meetings of the local board of review or 
 12.4   equalization and the county board of equalization.  If the 
 12.5   assessment roll is not complete, the notice shall be sent by 
 12.6   ordinary mail at least ten days prior to the date on which the 
 12.7   board of review has adjourned.  The assessor shall attach to the 
 12.8   assessment roll a statement that the notices required by this 
 12.9   section have been mailed.  Any assessor who is not provided 
 12.10  sufficient funds from the assessor's governing body to provide 
 12.11  such notices, may make application to the commissioner of 
 12.12  revenue to finance such notices.  The commissioner of revenue 
 12.13  shall conduct an investigation and, if satisfied that the 
 12.14  assessor does not have the necessary funds, issue a 
 12.15  certification to the commissioner of finance of the amount 
 12.16  necessary to provide such notices.  The commissioner of finance 
 12.17  shall issue a warrant for such amount and shall deduct such 
 12.18  amount from any state payment to such county or municipality.  
 12.19  The necessary funds to make such payments are hereby 
 12.20  appropriated.  Failure to receive the notice shall in no way 
 12.21  affect the validity of the assessment, the resulting tax, the 
 12.22  procedures of any board of review or equalization, or the 
 12.23  enforcement of delinquent taxes by statutory means. 
 12.24     Sec. 4.  Minnesota Statutes 1996, section 273.13, 
 12.25  subdivision 21a, is amended to read: 
 12.26     Subd. 21a.  [CLASS RATE.] In this section, wherever the 
 12.27  "class rate" of a class of property is specified without 
 12.28  qualification as to whether it is the property's "net class 
 12.29  rate" or its "gross class rate," the "net class rate" and "gross 
 12.30  class rate" of that property are the same as its "class rate.", 
 12.31  there is a state property tax on that class of property, and the 
 12.32  state tax rate is the difference between the class rate and the 
 12.33  combined local tax rates of all local jurisdictions, if any, 
 12.34  levying a property tax on that property. 
 12.35     Sec. 5.  Minnesota Statutes 1996, section 273.13, 
 12.36  subdivision 22, is amended to read: 
 13.1      Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
 13.2   23, Class 1 property includes real estate which is residential 
 13.3   and used for homestead purposes is class 1, except as provided 
 13.4   in subdivision 23, and all other property not otherwise 
 13.5   classified in this section.  The market value of class 1a 
 13.6   property that is a residential homestead must be determined 
 13.7   based upon the value of the house, garage, and land.  In the 
 13.8   case of any farm containing a dwelling, the dwelling, garage, 
 13.9   and surrounding one acre of property constitute class 1 
 13.10  property.  Class 1 property does not have a class rate. 
 13.11     The first $72,000 of market value of class 1a property has 
 13.12  a net class rate of one percent of its market value and a gross 
 13.13  class rate of 2.17 percent of its market value.  For taxes 
 13.14  payable in 1992, the market value of class 1a property that 
 13.15  exceeds $72,000 but does not exceed $115,000 has a class rate of 
 13.16  two percent of its market value; and the market value of class 
 13.17  1a property that exceeds $115,000 has a class rate of 2.5 
 13.18  percent of its market value.  For taxes payable in 1993 and 
 13.19  thereafter, the market value of class 1a property that exceeds 
 13.20  $72,000 has a class rate of two percent. 
 13.21     (b) Class 1b property includes homestead real estate or 
 13.22  homestead manufactured homes used for the purposes of a 
 13.23  homestead by 
 13.24     (1) any blind person, or the blind person and the blind 
 13.25  person's spouse; or 
 13.26     (2) any person, hereinafter referred to as "veteran," who: 
 13.27     (i) served in the active military or naval service of the 
 13.28  United States; and 
 13.29     (ii) is entitled to compensation under the laws and 
 13.30  regulations of the United States for permanent and total 
 13.31  service-connected disability due to the loss, or loss of use, by 
 13.32  reason of amputation, ankylosis, progressive muscular 
 13.33  dystrophies, or paralysis, of both lower extremities, such as to 
 13.34  preclude motion without the aid of braces, crutches, canes, or a 
 13.35  wheelchair; and 
 13.36     (iii) has acquired a special housing unit with special 
 14.1   fixtures or movable facilities made necessary by the nature of 
 14.2   the veteran's disability, or the surviving spouse of the 
 14.3   deceased veteran for as long as the surviving spouse retains the 
 14.4   special housing unit as a homestead; or 
 14.5      (3) any person who: 
 14.6      (i) is permanently and totally disabled and 
 14.7      (ii) receives 90 percent or more of total income from 
 14.8      (A) aid from any state as a result of that disability; or 
 14.9      (B) supplemental security income for the disabled; or 
 14.10     (C) workers' compensation based on a finding of total and 
 14.11  permanent disability; or 
 14.12     (D) social security disability, including the amount of a 
 14.13  disability insurance benefit which is converted to an old age 
 14.14  insurance benefit and any subsequent cost of living increases; 
 14.15  or 
 14.16     (E) aid under the federal Railroad Retirement Act of 1937, 
 14.17  United States Code Annotated, title 45, section 228b(a)5; or 
 14.18     (F) a pension from any local government retirement fund 
 14.19  located in the state of Minnesota as a result of that 
 14.20  disability; or 
 14.21     (G) pension, annuity, or other income paid as a result of 
 14.22  that disability from a private pension or disability plan, 
 14.23  including employer, employee, union, and insurance plans and 
 14.24     (iii) has household income as defined in section 290A.03, 
 14.25  subdivision 5, of $50,000 or less; or 
 14.26     (4) any person who is permanently and totally disabled and 
 14.27  whose household income as defined in section 290A.03, 
 14.28  subdivision 5, is 150 percent or less of the federal poverty 
 14.29  level. 
 14.30     Property is classified and assessed under clause (4) only 
 14.31  if the government agency or income-providing source certifies, 
 14.32  upon the request of the homestead occupant, that the homestead 
 14.33  occupant satisfies the disability requirements of this paragraph.
 14.34     Property is classified and assessed pursuant to clause (1) 
 14.35  only if the commissioner of economic security certifies to the 
 14.36  assessor that the homestead occupant satisfies the requirements 
 15.1   of this paragraph.  
 15.2      Permanently and totally disabled for the purpose of this 
 15.3   subdivision means a condition which is permanent in nature and 
 15.4   totally incapacitates the person from working at an occupation 
 15.5   which brings the person an income.  The first $32,000 market 
 15.6   value of class 1b property has a net class rate of .45 percent 
 15.7   of its market value and a gross class rate of .87 percent of its 
 15.8   market value.  The remaining market value of class 1b property 
 15.9   has a gross or net class rate using the rates for class 1 or 
 15.10  class 2a property, whichever is appropriate, of similar market 
 15.11  value.  
 15.12     (c) Class 1c property is commercial use real property that 
 15.13  abuts a lakeshore line and is devoted to temporary and seasonal 
 15.14  residential occupancy for recreational purposes but not devoted 
 15.15  to commercial purposes for more than 250 days in the year 
 15.16  preceding the year of assessment, and that includes a portion 
 15.17  used as a homestead by the owner, which includes a dwelling 
 15.18  occupied as a homestead by a shareholder of a corporation that 
 15.19  owns the resort or a partner in a partnership that owns the 
 15.20  resort, even if the title to the homestead is held by the 
 15.21  corporation or partnership.  For purposes of this clause, 
 15.22  property is devoted to a commercial purpose on a specific day if 
 15.23  any portion of the property, excluding the portion used 
 15.24  exclusively as a homestead, is used for residential occupancy 
 15.25  and a fee is charged for residential occupancy.  Class 1c 
 15.26  property has a class rate of one percent of total market value 
 15.27  for taxes payable in 1993 and thereafter with the following 
 15.28  limitation:  the area of the property must not exceed 100 feet 
 15.29  of lakeshore footage for each cabin or campsite located on the 
 15.30  property up to a total of 800 feet and 500 feet in depth, 
 15.31  measured away from the lakeshore.  
 15.32     Sec. 6.  Minnesota Statutes 1996, section 273.13, 
 15.33  subdivision 23, is amended to read: 
 15.34     Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
 15.35  land including any improvements that is homesteaded.  The market 
 15.36  value of, except for the house and garage and immediately 
 16.1   surrounding one acre of land has the same class rates as, which 
 16.2   are class 1a 1 property under subdivision 22.  The value of 
 16.3   the remaining land including improvements up to $115,000 has a 
 16.4   net class rate of .45 percent of market value and a gross class 
 16.5   rate of 1.75 percent of market value.  The remaining value of 
 16.6   class 2a property over $115,000 of market value that does not 
 16.7   exceed 320 acres has a net class rate of one percent of market 
 16.8   value, and a gross class rate of 2.25 percent of market value.  
 16.9   The remaining property over the $115,000 market value in excess 
 16.10  of 320 acres has a class rate of 1.5 percent of market value, 
 16.11  and a gross class rate of 2.25 percent of market value.  Class 
 16.12  2a property does not have a class rate.  Class 2a property is 
 16.13  exempt from all levies of school districts and from general 
 16.14  property taxes except those taxes levied in connection with 
 16.15  roads or watersheds. 
 16.16     (b) Class 2b property is (1) real estate, rural in 
 16.17  character and used exclusively for growing trees for timber, 
 16.18  lumber, and wood and wood products; (2) real estate that is not 
 16.19  improved with a structure and is used exclusively for growing 
 16.20  trees for timber, lumber, and wood and wood products, if the 
 16.21  owner has participated or is participating in a cost-sharing 
 16.22  program for afforestation, reforestation, or timber stand 
 16.23  improvement on that particular property, administered or 
 16.24  coordinated by the commissioner of natural resources; (3) real 
 16.25  estate that is nonhomestead agricultural land; or (4) a landing 
 16.26  area or public access area of a privately owned public use 
 16.27  airport.  Class 2b property has a net class rate of 1.5 percent 
 16.28  of market value, and a gross class rate of 2.25 percent of 
 16.29  market value for taxes payable in 1998, a class rate of two 
 16.30  percent of market value for taxes payable in 1999, and no class 
 16.31  rate thereafter.  Class 2b property is exempt from all levies of 
 16.32  school districts and from general property taxes except those 
 16.33  taxes levied in connection with roads or watersheds. 
 16.34     (c) Class 2c property is real estate that is not improved 
 16.35  with a structure; is either not located within a city or located 
 16.36  within a city but zoned as open space; and is not class 2a or 
 17.1   class 2b property.  Class 2c property has a class rate of four 
 17.2   percent of market value for taxes payable in 1998, three percent 
 17.3   for taxes payable in 1999, and no class rate thereafter.  Class 
 17.4   2c property is exempt from all levies of school districts and 
 17.5   from general property taxes except those taxes levied in 
 17.6   connection with roads or watersheds.  
 17.7      (d) Agricultural land as used in this section means 
 17.8   contiguous acreage of ten acres or more, primarily used during 
 17.9   the preceding year for agricultural purposes.  Agricultural use 
 17.10  may include pasture, timber, waste, unusable wild land, and land 
 17.11  included in state or federal farm or conservation programs.  
 17.12  "Agricultural purposes" as used in this section means the 
 17.13  raising or cultivation of agricultural products.  Land enrolled 
 17.14  in the Reinvest in Minnesota program under sections 103F.505 to 
 17.15  103F.531 or the federal Conservation Reserve Program as 
 17.16  contained in Public Law Number 99-198, and consisting of a 
 17.17  minimum of ten contiguous acres, shall be classified as 
 17.18  agricultural.  Agricultural classification for property shall be 
 17.19  determined with respect to the use of the whole parcel, and not 
 17.20  based upon the market value of any residential structures on the 
 17.21  parcel or contiguous parcels under the same ownership. 
 17.22     (d) (e) Real estate of less than ten acres used principally 
 17.23  for raising or cultivating agricultural products, shall be 
 17.24  considered as agricultural land, if it is not used primarily for 
 17.25  residential purposes.  
 17.26     (e) (f) The term "agricultural products" as used in this 
 17.27  subdivision includes:  
 17.28     (1) livestock, dairy animals, dairy products, poultry and 
 17.29  poultry products, fur-bearing animals, horticultural and nursery 
 17.30  stock described in sections 18.44 to 18.61, fruit of all kinds, 
 17.31  vegetables, forage, grains, bees, and apiary products by the 
 17.32  owner; 
 17.33     (2) fish bred for sale and consumption if the fish breeding 
 17.34  occurs on land zoned for agricultural use; 
 17.35     (3) the commercial boarding of horses if the boarding is 
 17.36  done in conjunction with raising or cultivating agricultural 
 18.1   products as defined in clause (1); 
 18.2      (4) property which is owned and operated by nonprofit 
 18.3   organizations used for equestrian activities, excluding racing; 
 18.4   and 
 18.5      (5) game birds and waterfowl bred and raised for use on a 
 18.6   shooting preserve licensed under section 97A.115.  
 18.7      (f) (g) If a parcel used for agricultural purposes is also 
 18.8   used for commercial or industrial purposes, including but not 
 18.9   limited to:  
 18.10     (1) wholesale and retail sales; 
 18.11     (2) processing of raw agricultural products or other goods; 
 18.12     (3) warehousing or storage of processed goods; and 
 18.13     (4) office facilities for the support of the activities 
 18.14  enumerated in clauses (1), (2), and (3), 
 18.15  the assessor shall classify the part of the parcel used for 
 18.16  agricultural purposes as class 1b, 2a, or 2b, whichever is 
 18.17  appropriate, and the remainder in the class appropriate to its 
 18.18  use.  The grading, sorting, and packaging of raw agricultural 
 18.19  products for first sale is considered an agricultural purpose.  
 18.20  A greenhouse or other building where horticultural or nursery 
 18.21  products are grown that is also used for the conduct of retail 
 18.22  sales must be classified as agricultural if it is primarily used 
 18.23  for the growing of horticultural or nursery products from seed, 
 18.24  cuttings, or roots and occasionally as a showroom for the retail 
 18.25  sale of those products.  Use of a greenhouse or building only 
 18.26  for the display of already grown horticultural or nursery 
 18.27  products does not qualify as an agricultural purpose.  
 18.28     The assessor shall determine and list separately on the 
 18.29  records the market value of the homestead dwelling and the one 
 18.30  acre of land on which that dwelling is located.  If any farm 
 18.31  buildings or structures are located on this homesteaded acre of 
 18.32  land, their market value shall not be included in this separate 
 18.33  determination.  
 18.34     (g) (h) To qualify for classification under paragraph (b), 
 18.35  clause (4), a privately owned public use airport must be 
 18.36  licensed as a public airport under section 360.018.  For 
 19.1   purposes of paragraph (b), clause (4), "landing area" means that 
 19.2   part of a privately owned public use airport properly cleared, 
 19.3   regularly maintained, and made available to the public for use 
 19.4   by aircraft and includes runways, taxiways, aprons, and sites 
 19.5   upon which are situated landing or navigational aids.  A landing 
 19.6   area also includes land underlying both the primary surface and 
 19.7   the approach surfaces that comply with all of the following:  
 19.8      (i) the land is properly cleared and regularly maintained 
 19.9   for the primary purposes of the landing, taking off, and taxiing 
 19.10  of aircraft; but that portion of the land that contains 
 19.11  facilities for servicing, repair, or maintenance of aircraft is 
 19.12  not included as a landing area; 
 19.13     (ii) the land is part of the airport property; and 
 19.14     (iii) the land is not used for commercial or residential 
 19.15  purposes. 
 19.16  The land contained in a landing area under paragraph (b), clause 
 19.17  (4), must be described and certified by the commissioner of 
 19.18  transportation.  The certification is effective until it is 
 19.19  modified, or until the airport or landing area no longer meets 
 19.20  the requirements of paragraph (b), clause (4).  For purposes of 
 19.21  paragraph (b), clause (4), "public access area" means property 
 19.22  used as an aircraft parking ramp, apron, or storage hangar, or 
 19.23  an arrival and departure building in connection with the airport.
 19.24     Sec. 7.  Minnesota Statutes 1996, section 273.13, 
 19.25  subdivision 24, is amended to read: 
 19.26     Subd. 24.  [CLASS 3.] (a) Class 3a property includes: 
 19.27     (1) commercial and industrial property and utility real and 
 19.28  personal property, except class 5 property as identified in 
 19.29  subdivision 31, clause (1), is class 3a.  It has a property with 
 19.30  the specific inclusions and exclusions described in paragraph 
 19.31  (b); 
 19.32     (2) industrial property; 
 19.33     (3) utility property, other than personal property; and 
 19.34     (4) unmined iron ore and low-grade, iron-bearing formations 
 19.35  as defined in section 273.14.  The class rate of three percent 
 19.36  of on the first $100,000 of market value of class 3a property is 
 20.1   four percent for taxes payable in 1993 1998, 3.5 percent for 
 20.2   taxes payable in 1999, and three percent for taxes payable in 
 20.3   2000 and thereafter, and 5.06 percent of.  The class rate for 
 20.4   the market value over $100,000. of class 3a property is five 
 20.5   percent for taxes payable in 1998, four percent for taxes 
 20.6   payable in 1999, and three percent for taxes payable in 2000 and 
 20.7   thereafter.  Property is eligible for the reduced rate on the 
 20.8   first $100,000 of market value if it meets the requirements of 
 20.9   paragraph (c).  The property taxes otherwise payable with 
 20.10  respect to qualifying property will be reduced as provided in 
 20.11  paragraph (e). 
 20.12     (b) Commercial property includes and excludes certain 
 20.13  property as follows: 
 20.14     (1) Certain property used in maintaining resort businesses 
 20.15  is not included as commercial property even though it is used 
 20.16  commercially.  Property is not treated as commercial property if 
 20.17  it: 
 20.18     (i) is both: 
 20.19     (A) devoted to temporary and seasonal residential occupancy 
 20.20  for recreational purposes; and 
 20.21     (B) not devoted to commercial purposes for more than 250 
 20.22  days in the year preceding the year of the assessment, with 
 20.23  devotion to a commercial purpose deemed to occur on any day on 
 20.24  which property is used for residential occupancy for which a fee 
 20.25  is charged; or 
 20.26     (ii) is located within two miles of, and used exclusively 
 20.27  for recreational purposes in conjunction with, property 
 20.28  described in item (i), but is not devoted to commercial 
 20.29  recreation use for more than 250 days in the year preceding the 
 20.30  year of assessment. 
 20.31     The exclusion of item (ii) is limited to two acres, but if 
 20.32  the property is larger, two acres can qualify.  Any portion of 
 20.33  property described in either item (i) or (ii) that is operated 
 20.34  as a restaurant, bar, gift shop, or other nonresidential 
 20.35  facility operated on a commercial basis not directly related to 
 20.36  temporary and seasonal residential occupancy for recreation 
 21.1   purposes is commercial property.  Owners of real property 
 21.2   seeking to avoid classification as commercial property under 
 21.3   this provision must submit a declaration to the assessor 
 21.4   designating the cabins or units occupied for 250 days or less in 
 21.5   the year preceding the year of assessment by January 15 of the 
 21.6   assessment year.  The remainder of the cabins or units and a 
 21.7   proportionate share of the land on which they are located will 
 21.8   be classified as commercial property. 
 21.9      (2) Commercial property does not include real property up 
 21.10  to a maximum of one acre of land owned by a nonprofit community 
 21.11  service oriented organization, provided that the property is not 
 21.12  used for a revenue-producing activity for more than six days in 
 21.13  the calendar year preceding the year of assessment and the 
 21.14  property is not used for residential purposes on either a 
 21.15  temporary or permanent basis.  For purposes of this clause, a 
 21.16  "nonprofit community service oriented organization" means any 
 21.17  corporation, society, association, foundation, or institution 
 21.18  organized and operated exclusively for charitable, religious, 
 21.19  fraternal, civic, or educational purposes, and which is exempt 
 21.20  from federal income taxation pursuant to section 501(c) (3), 
 21.21  (10), or (19) of the Internal Revenue Code of 1986, as amended 
 21.22  through December 31, 1996.  For purposes of this clause, 
 21.23  "revenue-producing activities" includes, but is not limited to, 
 21.24  property or that portion of the property that is used as an 
 21.25  on-sale intoxicating liquor or 3.2 percent malt liquor 
 21.26  establishment licensed under chapter 349, an insurance business, 
 21.27  or office or other space leased or rented to a lessee who 
 21.28  conducts a for-profit enterprise on the premises.  Any portion 
 21.29  of the property which is used for revenue-producing activities 
 21.30  for more than six days in the calendar year preceding the year 
 21.31  of assessment is assessed as class 3a commercial property.  The 
 21.32  use of the property for social events open exclusively to 
 21.33  members and their guests for periods of less than 24 hours shall 
 21.34  not be considered a revenue-producing activity when an admission 
 21.35  is not charged nor are any revenues received by the organization.
 21.36     (c) In the case of state-assessed commercial, industrial, 
 22.1   and utility property owned by one person or entity, only one 
 22.2   parcel has a reduced class rate on the first $100,000 of market 
 22.3   value.  In the case of other commercial, industrial, and utility 
 22.4   property owned by one person or entity, only one parcel in each 
 22.5   county has a reduced class rate on the first $100,000 of market 
 22.6   value, except that: 
 22.7      (1) if the market value of the parcel is less than 
 22.8   $100,000, and additional parcels are owned by the same person or 
 22.9   entity in the same city or town within that county, the reduced 
 22.10  class rate shall be applied up to a combined total market value 
 22.11  of $100,000 for all parcels owned by the same person or entity 
 22.12  in the same city or town within the county; 
 22.13     (2) in the case of grain, fertilizer, and feed elevator 
 22.14  facilities, as defined in section 18C.305, subdivision 1, or 
 22.15  232.21, subdivision 8, the limitation to one parcel per owner 
 22.16  per county for the reduced class rate shall not apply, but there 
 22.17  shall be a limit of $100,000 of preferential value per site of 
 22.18  contiguous parcels owned by the same person or entity.  Only the 
 22.19  value of the elevator portion of each parcel shall qualify for 
 22.20  treatment under this clause.  For purposes of this subdivision, 
 22.21  contiguous parcels include parcels separated only by a railroad 
 22.22  or public road right-of-way; and 
 22.23     (3) in the case of property owned by a nonprofit charitable 
 22.24  organization that qualifies for tax exemption under section 
 22.25  501(c)(3) of the Internal Revenue Code of 1986, as amended 
 22.26  through December 31, 1993, if the property is used as a business 
 22.27  incubator, the limitation to one parcel per owner per county for 
 22.28  the reduced class rate shall not apply, provided that the 
 22.29  reduced rate applies only to the first $100,000 of value per 
 22.30  parcel owned by the organization.  As used in this clause, a 
 22.31  "business incubator" is a facility used for the development of 
 22.32  nonretail businesses, offering access to equipment, space, 
 22.33  services, and advice to the tenant businesses, for the purpose 
 22.34  of encouraging economic development, diversification, and job 
 22.35  creation in the area served by the organization. 
 22.36     To receive the reduced class rate on additional parcels 
 23.1   under clause (1), (2), or (3), the taxpayer must notify the 
 23.2   county assessor that the taxpayer owns more than one parcel that 
 23.3   qualifies under clause (1), (2), or (3). 
 23.4      (b) (d) Employment property defined in section 469.166, 
 23.5   during the period provided in section 469.170, shall constitute 
 23.6   class 3b 3d and has a class rate of 2.3 percent of the first 
 23.7   $50,000 of market value and 3.6 percent of the remainder, except 
 23.8   that for employment property located in a border city enterprise 
 23.9   zone designated pursuant to section 469.168, subdivision 4, 
 23.10  paragraph (c), the class rate of the first $100,000 of market 
 23.11  value and the class rate of the remainder is determined under 
 23.12  paragraph (a), unless the governing body of the city designated 
 23.13  as an enterprise zone determines that a specific parcel shall be 
 23.14  assessed pursuant to the first clause of this sentence.  The 
 23.15  governing body may provide for assessment under the first clause 
 23.16  of the preceding sentence only for property which is located in 
 23.17  an area which has been designated by the governing body for the 
 23.18  receipt of tax reductions authorized by section 469.171, 
 23.19  subdivision 1. 
 23.20     (c) Structures which are (i) located on property classified 
 23.21  as class 3a, (ii) constructed under an initial building permit 
 23.22  issued after January 2, 1996, (iii) located in a transit zone as 
 23.23  defined under section 473.3915, subdivision 3, (iv) located 
 23.24  within the boundaries of a school district, and (v) not 
 23.25  primarily used for retail or transient lodging purposes, shall 
 23.26  have a class rate of four percent on that portion of the market 
 23.27  value in excess of $100,000 and any market value under $100,000 
 23.28  that does not qualify for the three percent class rate under 
 23.29  paragraph (a).  As used in item (v), a structure is primarily 
 23.30  used for retail or transient lodging purposes if over 50 percent 
 23.31  of its square footage is used for those purposes.  The four 
 23.32  percent rate shall also apply to improvements to existing 
 23.33  structures that meet the requirements of items (i) to (v) if the 
 23.34  improvements are constructed under an initial building permit 
 23.35  issued after January 2, 1996, even if the remainder of the 
 23.36  structure was constructed prior to January 2, 1996.  For the 
 24.1   purposes of this paragraph, a structure shall be considered to 
 24.2   be located in a transit zone if any portion of the structure 
 24.3   lies within the zone.  If any property once eligible for 
 24.4   treatment under this paragraph ceases to remain eligible due to 
 24.5   revisions in transit zone boundaries, the property shall 
 24.6   continue to receive treatment under this paragraph for a period 
 24.7   of three years. 
 24.8      (e) Class 3a property with respect to which the effective 
 24.9   tax rate for taxes payable in 1997 was less than four percent 
 24.10  for property meeting the requirements of paragraph (c), or less 
 24.11  than five percent for other class 3a property, may receive a 
 24.12  credit against property taxes payable in the years 1998 through 
 24.13  2000.  The amount, if any, of the credit is equal to the product 
 24.14  of: 
 24.15     (1) the excess, if any, of the class rate for such class 3a 
 24.16  property for the year over the greater of: 
 24.17     (i) the effective tax rate for such property for taxes 
 24.18  payable in 1997; or 
 24.19     (ii) three percent in the case of property meeting the 
 24.20  requirements of paragraph (c), or 4.6 percent in the case of 
 24.21  other class 3a property; and 
 24.22     (2) 100 percent for taxes payable in 1998; 60 percent for 
 24.23  taxes payable in 1999; and 20 percent for taxes payable in 2000. 
 24.24     As used in this paragraph, "effective tax rate" means the 
 24.25  percentage determined by dividing the taxes payable by the 
 24.26  market value used to determine the taxes. 
 24.27     Sec. 8.  Minnesota Statutes 1996, section 273.13, 
 24.28  subdivision 25, is amended to read: 
 24.29     Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
 24.30  estate containing four or more units and used or held for use by 
 24.31  the owner or by the tenants or lessees of the owner as a 
 24.32  residence for rental periods of 30 days or more.  Class 4a also 
 24.33  includes hospitals licensed under sections 144.50 to 144.56, 
 24.34  other than hospitals exempt under section 272.02, and contiguous 
 24.35  property used for hospital purposes, without regard to whether 
 24.36  the property has been platted or subdivided.  Class 4a property 
 25.1   in a city with a population of 5,000 or less, that is (1) 
 25.2   located outside of the metropolitan area, as defined in section 
 25.3   473.121, subdivision 2, or outside any county contiguous to the 
 25.4   metropolitan area, and (2) whose city boundary is at least 15 
 25.5   miles from the boundary of any city with a population greater 
 25.6   than 5,000 has a class rate of 2.3 percent of market value for 
 25.7   taxes payable in 1996, 1997, 1998, and 1999 and no class rate 
 25.8   thereafter.  All other class 4a property has a class rate of 3.4 
 25.9   percent of market value for taxes payable in 1996 and 1997, a 
 25.10  class rate of three percent of market value for taxes payable in 
 25.11  1998, a class rate of 2.5 percent of market value for taxes 
 25.12  payable in 1999, and no class rate thereafter.  For purposes of 
 25.13  this paragraph, population has the same meaning given in section 
 25.14  477A.011, subdivision 3. 
 25.15     (b) Class 4b includes: 
 25.16     (1) for taxes payable in 1998 and any later years in which 
 25.17  class 4a property has a class rate, residential real estate 
 25.18  described in Minnesota Statutes 1996, section 273.13, 
 25.19  subdivision 25, paragraph (c), clause (1), (2), (3), (4), or 
 25.20  (7), or (d), clause (1) or (3); 
 25.21     (2) residential real estate containing less than four 
 25.22  units, other than seasonal residential, and recreational not 
 25.23  classified under any other provision; and 
 25.24     (2) (3) manufactured home parks as defined in section 
 25.25  327.14, subdivision 3, and manufactured homes not classified 
 25.26  under any other provision;. 
 25.27     (3) a dwelling, garage, and surrounding one acre of 
 25.28  property on a nonhomestead farm classified under subdivision 23, 
 25.29  paragraph (b).  
 25.30     Class 4b property has a no class rate of 2.8 percent of 
 25.31  market value for taxes payable in 1992, 2.5 percent of market 
 25.32  value for taxes payable in 1993, and 2.3 percent of market value 
 25.33  for taxes payable in 1994 and thereafter. 
 25.34     (c) Class 4c property includes: 
 25.35     (1) a structure that is:  
 25.36     (i) situated on real property that is used for housing for 
 26.1   the elderly or for low- and moderate-income families as defined 
 26.2   in Title II, as amended through December 31, 1990, of the 
 26.3   National Housing Act or the Minnesota housing finance agency law 
 26.4   of 1971, as amended, or rules promulgated by the agency and 
 26.5   financed by a direct federal loan or federally insured loan made 
 26.6   pursuant to Title II of the Act; or 
 26.7      (ii) situated on real property that is used for housing the 
 26.8   elderly or for low- and moderate-income families as defined by 
 26.9   the Minnesota housing finance agency law of 1971, as amended, or 
 26.10  rules adopted by the agency pursuant thereto and financed by a 
 26.11  loan made by the Minnesota housing finance agency pursuant to 
 26.12  the provisions of the act.  
 26.13     This clause applies only to property of a nonprofit or 
 26.14  limited dividend entity.  Property is classified as class 4c 
 26.15  under this clause for 15 years from the date of the completion 
 26.16  of the original construction or substantial rehabilitation, or 
 26.17  for the original term of the loan.  
 26.18     (2) a structure that is: 
 26.19     (i) situated upon real property that is used for housing 
 26.20  lower income families or elderly or handicapped persons, as 
 26.21  defined in section 8 of the United States Housing Act of 1937, 
 26.22  as amended; and 
 26.23     (ii) owned by an entity which has entered into a housing 
 26.24  assistance payments contract under section 8 which provides 
 26.25  assistance for 100 percent of the dwelling units in the 
 26.26  structure, other than dwelling units intended for management or 
 26.27  maintenance personnel.  Property is classified as class 4c under 
 26.28  this clause for the term of the housing assistance payments 
 26.29  contract, including all renewals, or for the term of its 
 26.30  permanent financing, whichever is shorter; and 
 26.31     (3) a qualified low-income building as defined in section 
 26.32  42(c)(2) of the Internal Revenue Code of 1986, as amended 
 26.33  through December 31, 1990, that (i) receives a low-income 
 26.34  housing credit under section 42 of the Internal Revenue Code of 
 26.35  1986, as amended through December 31, 1990; or (ii) meets the 
 26.36  requirements of that section and receives public financing, 
 27.1   except financing provided under sections 469.174 to 469.179, 
 27.2   which contains terms restricting the rents; or (iii) meets the 
 27.3   requirements of section 273.1317.  Classification pursuant to 
 27.4   this clause is limited to a term of 15 years.  The public 
 27.5   financing received must be from at least one of the following 
 27.6   sources:  government issued bonds exempt from taxes under 
 27.7   section 103 of the Internal Revenue Code of 1986, as amended 
 27.8   through December 31, 1993, the proceeds of which are used for 
 27.9   the acquisition or rehabilitation of the building; programs 
 27.10  under section 221(d)(3), 202, or 236, of Title II of the 
 27.11  National Housing Act; rental housing program funds under Section 
 27.12  8 of the United States Housing Act of 1937 or the market rate 
 27.13  family graduated payment mortgage program funds administered by 
 27.14  the Minnesota housing finance agency that are used for the 
 27.15  acquisition or rehabilitation of the building; public financing 
 27.16  provided by a local government used for the acquisition or 
 27.17  rehabilitation of the building, including grants or loans from 
 27.18  federal community development block grants, HOME block grants, 
 27.19  or residential rental bonds issued under chapter 474A; or other 
 27.20  rental housing program funds provided by the Minnesota housing 
 27.21  finance agency for the acquisition or rehabilitation of the 
 27.22  building. 
 27.23     For all properties described in clauses (1), (2), and (3) 
 27.24  and in paragraph (d), the market value determined by the 
 27.25  assessor must be based on the normal approach to value using 
 27.26  normal unrestricted rents unless the owner of the property 
 27.27  elects to have the property assessed under Laws 1991, chapter 
 27.28  291, article 1, section 55.  If the owner of the property elects 
 27.29  to have the market value determined on the basis of the actual 
 27.30  restricted rents, as provided in Laws 1991, chapter 291, article 
 27.31  1, section 55, the property will be assessed at the rate 
 27.32  provided for class 4a or class 4b property, as appropriate.  
 27.33  Properties described in clauses (1)(ii), (3), and (4) may apply 
 27.34  to the assessor for valuation under Laws 1991, chapter 291, 
 27.35  article 1, section 55.  The land on which these structures are 
 27.36  situated has the class rate given in paragraph (b) if the 
 28.1   structure contains fewer than four units, and the class rate 
 28.2   given in paragraph (a) if the structure contains four or more 
 28.3   units.  This clause applies only to the property of a nonprofit 
 28.4   or limited dividend entity.  
 28.5      (4) a parcel of land, not to exceed one acre, and its 
 28.6   improvements or a parcel of unimproved land, not to exceed one 
 28.7   acre, if it is owned by a neighborhood real estate trust and at 
 28.8   least 60 percent of the dwelling units, if any, on all land 
 28.9   owned by the trust are leased to or occupied by lower income 
 28.10  families or individuals.  This clause does not apply to any 
 28.11  portion of the land or improvements used for nonresidential 
 28.12  purposes.  For purposes of this clause, a lower income family is 
 28.13  a family with an income that does not exceed 65 percent of the 
 28.14  median family income for the area, and a lower income individual 
 28.15  is an individual whose income does not exceed 65 percent of the 
 28.16  median individual income for the area, as determined by the 
 28.17  United States Secretary of Housing and Urban Development.  For 
 28.18  purposes of this clause, "neighborhood real estate trust" means 
 28.19  an entity which is certified by the governing body of the 
 28.20  municipality in which it is located to have the following 
 28.21  characteristics: 
 28.22     (a) it is a nonprofit corporation organized under chapter 
 28.23  317A; 
 28.24     (b) it has as its principal purpose providing housing for 
 28.25  lower income families in a specific geographic community 
 28.26  designated in its articles or bylaws; 
 28.27     (c) it limits membership with voting rights to residents of 
 28.28  the designated community; and 
 28.29     (d) it has a board of directors consisting of at least 
 28.30  seven directors, 60 percent of whom are members with voting 
 28.31  rights and, to the extent feasible, 25 percent of whom are 
 28.32  elected by resident members of buildings owned by the trust; and 
 28.33     (5) except as provided in subdivision 22, paragraph (c), 
 28.34  real property devoted to temporary and seasonal residential 
 28.35  occupancy for recreation purposes, including real property 
 28.36  devoted to temporary and seasonal residential occupancy for 
 29.1   recreation purposes and not devoted to commercial purposes for 
 29.2   more than 250 days in the year preceding the year of 
 29.3   assessment.  For purposes of this clause, property is devoted to 
 29.4   a commercial purpose on a specific day if any portion of the 
 29.5   property is used for residential occupancy, and a fee is charged 
 29.6   for residential occupancy.  Class 4c also includes commercial 
 29.7   use real property used exclusively for recreational purposes in 
 29.8   conjunction with class 4c property devoted to temporary and 
 29.9   seasonal residential occupancy for recreational purposes, up to 
 29.10  a total of two acres, provided the property is not devoted to 
 29.11  commercial recreational use for more than 250 days in the year 
 29.12  preceding the year of assessment and is located within two miles 
 29.13  of the class 4c property with which it is used.  Class 4c 
 29.14  property classified in this clause also includes the remainder 
 29.15  of class 1c resorts.  Owners of real property devoted to 
 29.16  temporary and seasonal residential occupancy for recreation 
 29.17  purposes and all or a portion of which was devoted to commercial 
 29.18  purposes for not more than 250 days in the year preceding the 
 29.19  year of assessment desiring classification as class 1c or 4c, 
 29.20  must submit a declaration to the assessor designating the cabins 
 29.21  or units occupied for 250 days or less in the year preceding the 
 29.22  year of assessment by January 15 of the assessment year.  Those 
 29.23  cabins or units and a proportionate share of the land on which 
 29.24  they are located will be designated class 1c or 4c as otherwise 
 29.25  provided.  The remainder of the cabins or units and a 
 29.26  proportionate share of the land on which they are located will 
 29.27  be designated as class 3a.  The first $100,000 of the market 
 29.28  value of the remainder of the cabins or units and a 
 29.29  proportionate share of the land on which they are located shall 
 29.30  have a class rate of three percent.  The owner of property 
 29.31  desiring designation as class 1c or 4c property must provide 
 29.32  guest registers or other records demonstrating that the units 
 29.33  for which class 1c or 4c designation is sought were not occupied 
 29.34  for more than 250 days in the year preceding the assessment if 
 29.35  so requested.  The portion of a property operated as a (1) 
 29.36  restaurant, (2) bar, (3) gift shop, and (4) other nonresidential 
 30.1   facility operated on a commercial basis not directly related to 
 30.2   temporary and seasonal residential occupancy for recreation 
 30.3   purposes shall not qualify for class 1c or 4c; 
 30.4      (6) real property up to a maximum of one acre of land owned 
 30.5   by a nonprofit community service oriented organization; provided 
 30.6   that the property is not used for a revenue-producing activity 
 30.7   for more than six days in the calendar year preceding the year 
 30.8   of assessment and the property is not used for residential 
 30.9   purposes on either a temporary or permanent basis.  For purposes 
 30.10  of this clause, a "nonprofit community service oriented 
 30.11  organization" means any corporation, society, association, 
 30.12  foundation, or institution organized and operated exclusively 
 30.13  for charitable, religious, fraternal, civic, or educational 
 30.14  purposes, and which is exempt from federal income taxation 
 30.15  pursuant to section 501(c)(3), (10), or (19) of the Internal 
 30.16  Revenue Code of 1986, as amended through December 31, 1990.  For 
 30.17  purposes of this clause, "revenue-producing activities" shall 
 30.18  include but not be limited to property or that portion of the 
 30.19  property that is used as an on-sale intoxicating liquor or 3.2 
 30.20  percent malt liquor establishment licensed under chapter 340A, a 
 30.21  restaurant open to the public, bowling alley, a retail store, 
 30.22  gambling conducted by organizations licensed under chapter 349, 
 30.23  an insurance business, or office or other space leased or rented 
 30.24  to a lessee who conducts a for-profit enterprise on the 
 30.25  premises.  Any portion of the property which is used for 
 30.26  revenue-producing activities for more than six days in the 
 30.27  calendar year preceding the year of assessment shall be assessed 
 30.28  as class 3a.  The use of the property for social events open 
 30.29  exclusively to members and their guests for periods of less than 
 30.30  24 hours, when an admission is not charged nor any revenues are 
 30.31  received by the organization shall not be considered a 
 30.32  revenue-producing activity; 
 30.33     (7) post-secondary student housing of not more than one 
 30.34  acre of land that is owned by a nonprofit corporation organized 
 30.35  under chapter 317A and is used exclusively by a student 
 30.36  cooperative, sorority, or fraternity for on-campus housing or 
 31.1   housing located within two miles of the border of a college 
 31.2   campus; and 
 31.3      (8) manufactured home parks as defined in section 327.14, 
 31.4   subdivision 3. 
 31.5      Class 4c property has a class rate of 2.3 percent of market 
 31.6   value, except that (i) for each parcel of seasonal residential 
 31.7   recreational property not used for commercial purposes under 
 31.8   clause (5) the first $72,000 of market value on each parcel has 
 31.9   a class rate of 1.75 percent for taxes payable in 1997 and 1.5 
 31.10  percent for taxes payable in 1998 and thereafter, and the market 
 31.11  value of each parcel that exceeds $72,000 has a class rate of 
 31.12  2.5 percent, and (ii) manufactured home parks assessed under 
 31.13  clause (8) have a class rate of two percent for taxes payable in 
 31.14  1996, and thereafter.  
 31.15     (d) Class 4d property includes: 
 31.16     (1) a structure that is: 
 31.17     (i) situated on real property that is used for housing for 
 31.18  the elderly or for low and moderate income families as defined 
 31.19  by the Farmers Home Administration; 
 31.20     (ii) located in a municipality of less than 10,000 
 31.21  population; and 
 31.22     (iii) financed by a direct loan or insured loan from the 
 31.23  Farmers Home Administration.  Property is classified under this 
 31.24  clause for 15 years from the date of the completion of the 
 31.25  original construction or for the original term of the loan.  
 31.26     The class rates in paragraph (c), clauses (1), (2), and (3) 
 31.27  and this clause apply to the properties described in them, only 
 31.28  in proportion to occupancy of the structure by elderly or 
 31.29  handicapped persons or low and moderate income families as 
 31.30  defined in the applicable laws unless construction of the 
 31.31  structure had been commenced prior to January 1, 1984; or the 
 31.32  project had been approved by the governing body of the 
 31.33  municipality in which it is located prior to June 30, 1983; or 
 31.34  financing of the project had been approved by a federal or state 
 31.35  agency prior to June 30, 1983.  For those properties, 4c or 4d 
 31.36  classification is available only for those units meeting the 
 32.1   requirements of section 273.1318. 
 32.2      Classification under this clause is only available to 
 32.3   property of a nonprofit or limited dividend entity. 
 32.4      In the case of a structure financed or refinanced under any 
 32.5   federal or state mortgage insurance or direct loan program 
 32.6   exclusively for housing for the elderly or for housing for the 
 32.7   handicapped, a unit shall be considered occupied so long as it 
 32.8   is actually occupied by an elderly or handicapped person or, if 
 32.9   vacant, is held for rental to an elderly or handicapped person. 
 32.10     (2) For taxes payable in 1992, 1993, and 1994, only, 
 32.11  buildings and appurtenances, together with the land upon which 
 32.12  they are located, leased by the occupant under the community 
 32.13  lending model lease-purchase mortgage loan program administered 
 32.14  by the Federal National Mortgage Association, provided the 
 32.15  occupant's income is no greater than 60 percent of the county or 
 32.16  area median income, adjusted for family size and the building 
 32.17  consists of existing single family or duplex housing.  The lease 
 32.18  agreement must provide for a portion of the lease payment to be 
 32.19  escrowed as a nonrefundable down payment on the housing.  To 
 32.20  qualify under this clause, the taxpayer must apply to the county 
 32.21  assessor by May 30 of each year.  The application must be 
 32.22  accompanied by an affidavit or other proof required by the 
 32.23  assessor to determine qualification under this clause. 
 32.24     (3) Qualifying buildings and appurtenances, together with 
 32.25  the land upon which they are located, leased for a period of up 
 32.26  to five years by the occupant under a lease-purchase program 
 32.27  administered by the Minnesota housing finance agency or a 
 32.28  housing and redevelopment authority authorized under sections 
 32.29  469.001 to 469.047, provided the occupant's income is no greater 
 32.30  than 80 percent of the county or area median income, adjusted 
 32.31  for family size, and the building consists of two or less 
 32.32  dwelling units.  The lease agreement must provide for a portion 
 32.33  of the lease payment to be escrowed as a nonrefundable down 
 32.34  payment on the housing.  The administering agency shall verify 
 32.35  the occupants income eligibility and certify to the county 
 32.36  assessor that the occupant meets the income criteria under this 
 33.1   paragraph.  To qualify under this clause, the taxpayer must 
 33.2   apply to the county assessor by May 30 of each year.  For 
 33.3   purposes of this section, "qualifying buildings and 
 33.4   appurtenances" shall be defined as one or two unit residential 
 33.5   buildings which are unoccupied and have been abandoned and 
 33.6   boarded for at least six months. 
 33.7      Class 4d property has a class rate of two percent of market 
 33.8   value except that property classified under clause (3), shall 
 33.9   have the same class rate as class 1a property. 
 33.10     (e) (c) Residential rental property that would otherwise be 
 33.11  assessed as class 4 property under paragraph (a); paragraph (b), 
 33.12  clauses (1) and (3); paragraph (c), clause (1), (2), (3), or 
 33.13  (4), is assessed at the class rate applicable to it under 
 33.14  Minnesota Statutes 1988, section 273.13, class 3a property if it 
 33.15  is found to be a substandard building under section 
 33.16  273.1316.  Residential rental property that would otherwise be 
 33.17  assessed as class 4 property under paragraph (d) is assessed at 
 33.18  2.3 percent of market value if it is found to be a substandard 
 33.19  building under section 273.1316. 
 33.20     (f) Class 4e property consists of the residential portion 
 33.21  of any structure located within a city that was converted from 
 33.22  nonresidential use to residential use, provided that: 
 33.23     (1) the structure had formerly been used as a warehouse; 
 33.24     (2) the structure was originally constructed prior to 1940; 
 33.25     (3) the conversion was done after December 31, 1995, but 
 33.26  before January 1, 2003; and 
 33.27     (4) the conversion involved an investment of at least 
 33.28  $25,000 per residential unit. 
 33.29     Class 4e property has a class rate of 2.3 percent, provided 
 33.30  that a structure is eligible for class 4e classification only in 
 33.31  the 12 assessment years immediately following the conversion. 
 33.32     Sec. 9.  Minnesota Statutes 1996, section 273.13, 
 33.33  subdivision 31, is amended to read: 
 33.34     Subd. 31.  [CLASS 5.] (a) Class 5 property includes:  
 33.35     (1) utility personal property and tools, implements, and 
 33.36  machinery of an electric generating, transmission, or 
 34.1   distribution system or a pipeline system transporting or 
 34.2   distributing water, gas, crude oil, or petroleum products or 
 34.3   mains and pipes used in the distribution of steam or hot or 
 34.4   chilled water for heating or cooling buildings, which are 
 34.5   fixtures;. 
 34.6      (2) unmined iron ore and low-grade iron-bearing formations 
 34.7   as defined in section 273.14; and 
 34.8      (3) all other property not otherwise classified. 
 34.9      (b) Class 5 property has a class rate of 5.06 four percent 
 34.10  of market value for taxes payable in 1998, two percent for taxes 
 34.11  payable in 1999, and no class rate thereafter. 
 34.12     (c) Class 5 property is taxed exclusively by the state.  
 34.13  Local property taxes are not levied against class 5 property.  
 34.14  For taxes payable after 1999, class 5 property shall be exempt 
 34.15  from tax. 
 34.16     Sec. 10.  Minnesota Statutes 1996, section 273.1316, 
 34.17  subdivision 1, is amended to read: 
 34.18     Subdivision 1.  [DENIAL OF RENTAL CLASSIFICATION.] A 
 34.19  building that is classified as residential rental property under 
 34.20  section 273.13, subdivision 25, and that is determined to be 
 34.21  substandard under this section is assessed as provided in 
 34.22  section 273.13, subdivision 25, paragraph (e) (c). 
 34.23     Sec. 11.  Minnesota Statutes 1996, section 273.1393, is 
 34.24  amended to read: 
 34.25     273.1393 [COMPUTATION OF NET PROPERTY TAXES.] 
 34.26     Notwithstanding any other provisions to the contrary, "net" 
 34.27  property taxes are determined by subtracting the credits in the 
 34.28  order listed disaster credit as provided in section 273.123 from 
 34.29  the gross tax:.  
 34.30     (1) disaster credit as provided in section 273.123; 
 34.31     (2) powerline credit as provided in section 273.42; 
 34.32     (3) agricultural preserves credit as provided in section 
 34.33  473H.10; 
 34.34     (4) enterprise zone credit as provided in section 469.171; 
 34.35     (5) disparity reduction credit; 
 34.36     (6) conservation tax credit as provided in section 273.119; 
 35.1      (7) taconite homestead credit as provided in section 
 35.2   273.135; and 
 35.3      (8) supplemental homestead credit as provided in section 
 35.4   273.1391.  
 35.5      The combination of all property tax credits must not exceed 
 35.6   the gross tax amount.  
 35.7      Sec. 12.  Minnesota Statutes 1996, section 273.165, 
 35.8   subdivision 2, is amended to read: 
 35.9      Subd. 2.  [IRON ORE.] Unmined iron ore included in class 5 
 35.10  3, under section 273.13, subdivision 24, paragraph (b) (a), must 
 35.11  be assessed with and as a part of the real estate in which it is 
 35.12  located, but its net tax capacity would be as established in 
 35.13  section 273.13, subdivision 31.  The real estate in which iron 
 35.14  ore is located, other than the ore, must be classified and 
 35.15  assessed in accordance with the provisions of the appropriate 
 35.16  classes.  In assessing any tract or lot of real estate in which 
 35.17  iron ore is known to exist, the assessable net tax capacity 
 35.18  market value of the ore exclusive of the land in which it is 
 35.19  located, and the assessable net tax capacity market value of the 
 35.20  land exclusive of the ore must be determined and set down 
 35.21  separately and the aggregate of the two must be assessed against 
 35.22  the tract or lot. 
 35.23     Sec. 13.  Minnesota Statutes 1996, section 275.01, is 
 35.24  amended to read: 
 35.25     275.01 [LEVY IN SPECIFIC AMOUNTS.] 
 35.26     All taxes shall be levied or voted in specific amounts and 
 35.27  the rates percent shall be determined from the amount of 
 35.28  property as equalized by the state board of equalization each 
 35.29  year, except such general taxes as may be definitely fixed by 
 35.30  law.  The amounts of taxes levied shall be divided into two 
 35.31  categories, the amount relating to (1) roads, including land 
 35.32  acquisition, construction, maintenance and financing, or 
 35.33  watersheds, and (2) the amount relating to all other purposes. 
 35.34     Sec. 14.  Minnesota Statutes 1996, section 275.02, is 
 35.35  amended to read: 
 35.36     275.02 [STATE LEVY, EXCEPTIONS; CERTIFICATION OF TAX RATE.] 
 36.1      Subdivision 1.  [GENERAL LEVY.] The state general levy tax 
 36.2   shall be levied on all taxable property in the state.  The rate 
 36.3   of the tax shall be certified by the state auditor to each 
 36.4   county auditor on or before November 15 annually. 
 36.5      Subd. 2.  [LEVY FOR MINNESOTA REAL PROPERTY REDEVELOPMENT 
 36.6   FUND.] The state levy for the Minnesota real property 
 36.7   redevelopment fund shall be ... percent of market value on all 
 36.8   taxable property in the state except class 2 property. 
 36.9      Subd. 3.  [STATE PICK UP TAXES.] For each class of property 
 36.10  having a class rate under section 273.13, the state tax for each 
 36.11  parcel of such property shall be the excess of the class rate 
 36.12  over the combined tax rate of all other taxing jurisdictions 
 36.13  levying a tax on that class of property, and all property in the 
 36.14  state in a class having a class rate shall have the same 
 36.15  combined state and local tax rate. 
 36.16     Sec. 15.  [275.068] [TAX INCREASES IN 1996 AND 1997; 
 36.17  REFERENDA REQUIRED.] 
 36.18     Subdivision 1.  [GENERALLY.] A home rule charter or 
 36.19  statutory city or a county may increase its levy above the limit 
 36.20  provided in subdivision 2 for taxes payable in 1998 or 1999, by 
 36.21  the amount approved by the voters residing in the jurisdiction 
 36.22  of the authority at a referendum called for that purpose.  The 
 36.23  referendum may be called by the governing body or shall be 
 36.24  called by the governing body upon written petition of qualified 
 36.25  voters of the jurisdiction.  The referendum shall be conducted 
 36.26  during the calendar year before the increased levy authority, if 
 36.27  approved, first becomes payable.  Only one election to approve 
 36.28  an increase may be held in a calendar year.  The referendum must 
 36.29  be held on the first Tuesday after the first Monday in 
 36.30  November.  The ballot shall state the maximum amount of the 
 36.31  increased levy and the estimated referendum tax rate as a 
 36.32  percentage of market value in the year it is to be levied.  The 
 36.33  ballot may contain a textual portion with the information 
 36.34  required in this subdivision and a question stating 
 36.35  substantially the following: "Shall the increase in the levy 
 36.36  proposed by (petition to) the governing body of ......., be 
 37.1   approved?" 
 37.2      Subd. 2.  [LIMIT ON LEVIES.] Unless a greater levy is 
 37.3   approved by a referendum under this section, for taxes payable 
 37.4   in 1998 and 1999, the levy of a home rule charter or statutory 
 37.5   city or a county may not exceed the amount determined by the 
 37.6   commissioner of revenue based on the hypothetical circumstances 
 37.7   defined below.  The defined circumstances for 1998 are that the 
 37.8   1998 operating budget for the city or county exceed the 1997 
 37.9   budget by three percent, after reducing the 1997 budget for 
 37.10  items taken over by the state and increasing the 1997 budget for 
 37.11  items transferred by the state to cities or counties; other 
 37.12  funding sources adjusted for federal law changes increase by 
 37.13  three percent; and state aids for 1998 are as projected based on 
 37.14  this act; with the gap between the 1998 operating budget and the 
 37.15  sum of other revenue sources and state aids to be filled by the 
 37.16  property tax.  The defined circumstances for 1999 are determined 
 37.17  in the same manner. 
 37.18     Subd. 3.  [NOTIFICATION OF LIMIT.] The commissioner of 
 37.19  revenue shall notify local governmental units of the limit on 
 37.20  levies prescribed by subdivision 2 by September 1 of 1997 and 
 37.21  1998. 
 37.22     Subd. 4.  [NOTICE.] The governing body shall prepare and 
 37.23  deliver by first class mail at least 15 days but no more than 30 
 37.24  days prior to the day of the referendum to each taxpayer a 
 37.25  notice of the referendum and the proposed levy increase.  the 
 37.26  governing body need not mail more than one notice to any 
 37.27  taxpayer.  For the purpose of giving mailed notice under this 
 37.28  subdivision, owners shall be those shown to be owners on the 
 37.29  records of the county auditor or, in any county where tax 
 37.30  statements are mailed by the county treasurer, on the records of 
 37.31  the county treasurer.  Every property owner whose name does not 
 37.32  appear on the records of the county auditor or the county 
 37.33  treasurer shall be deemed to have waived this mailed notice 
 37.34  unless the owner has requested in writing that the county 
 37.35  auditor or county treasurer, as the case may be, include the 
 37.36  name on the records for this purpose.  The notice must project 
 38.1   the anticipated amount of tax increase in annual dollars and 
 38.2   annual percentage for typical residential homesteads, 
 38.3   agricultural homesteads, apartments, and commercial-industrial 
 38.4   property within the jurisdiction.  The notice must include the 
 38.5   following statement:  "Passage of this referendum will result in 
 38.6   an increase in your property taxes."  
 38.7      Subd. 5.  [PETITIONS.] A petition authorized by subdivision 
 38.8   1 is effective if signed by a number of qualified voters in 
 38.9   excess of 15 percent of the number of registered voters of the 
 38.10  jurisdiction of the taxing authority as of the day the petition 
 38.11  is filed with the governing body. 
 38.12     Subd. 6.  [APPROVAL.] The approval of 50 percent plus one 
 38.13  of those voting on the question is required to pass a referendum 
 38.14  authorized by this section.  The increased levy approved under 
 38.15  this section is effective for only one year. 
 38.16     Sec. 16.  Minnesota Statutes 1996, section 275.07, 
 38.17  subdivision 1, is amended to read: 
 38.18     Subdivision 1.  The taxes voted by cities, counties, school 
 38.19  districts, and special districts shall be certified in the 
 38.20  categories specified in section 275.01 by the proper authorities 
 38.21  to the county auditor on or before five working days after 
 38.22  December 20 in each year.  A town must certify the levy adopted 
 38.23  by the town board in the categories specified in section 275.01 
 38.24  to the county auditor by September 15 each year.  If the town 
 38.25  board modifies the levy at a special town meeting after 
 38.26  September 15, the town board must recertify its levy to the 
 38.27  county auditor on or before five working days after December 
 38.28  20.  The taxes certified shall not be reduced by the county 
 38.29  auditor by the aid received under section 273.1398, subdivision 
 38.30  2, but shall be reduced by the county auditor by the aid 
 38.31  received under section 273.1398, subdivision 3.  If a city, 
 38.32  town, county, school district, or special district fails to 
 38.33  certify its levy by that date, its levy shall be the amount 
 38.34  levied by it for the preceding year. 
 38.35     Sec. 17.  Minnesota Statutes 1996, section 275.08, 
 38.36  subdivision 1, is amended to read: 
 39.1      Subdivision 1.  [GENERALLY.] The rate percent of all taxes, 
 39.2   except the state tax and taxes the rate of which may be fixed by 
 39.3   law, shall be calculated and fixed by the county auditor 
 39.4   according to the limitations in this chapter hereinafter 
 39.5   prescribed; provided, that if any county, city, town, or school 
 39.6   district shall return a greater amount than the prescribed rates 
 39.7   will raise, the auditor shall extend only such amount of tax as 
 39.8   the limited rate will produce.  For taxes payable in 1998 and 
 39.9   subsequent years, the rate percents for property taxes shall be 
 39.10  calculated separately for those taxes relating to roads and 
 39.11  watersheds, those taxes relating to all other purposes except 
 39.12  school district referenda, and those taxes relating to school 
 39.13  district referenda.  Property in classes 2a, 2b, and 2c shall be 
 39.14  subject to tax for only those taxes relating to roads and 
 39.15  watersheds.  All other taxable property shall be subject to 
 39.16  taxes relating to roads and watersheds and to taxes relating to 
 39.17  all other purposes.  
 39.18     Sec. 18.  Minnesota Statutes 1996, section 275.08, 
 39.19  subdivision 1b, is amended to read: 
 39.20     Subd. 1b.  [COMPUTATION OF TAX RATES.] The amounts 
 39.21  certified to be levied against net tax capacity under section 
 39.22  275.07 with respect to roads or watersheds by an individual 
 39.23  local government unit shall be divided by the total net tax 
 39.24  capacity market value of all taxable properties within the local 
 39.25  government unit's taxing jurisdiction.  The resulting ratio, is 
 39.26  the local government's local agricultural and open space tax 
 39.27  rate,.  The amounts certified to be levied under section 275.07 
 39.28  with respect to any purposes other than roads or watersheds by 
 39.29  an individual local government unit shall be divided by the 
 39.30  total market value of all taxable properties except those in 
 39.31  class 2a, 2b, or 2c within the local government unit's taxing 
 39.32  jurisdiction.  The sum of the resulting ratio and the local 
 39.33  government's local agricultural and open space tax rate is the 
 39.34  local government's general local tax rate. 
 39.35     For all properties other than those in class 2a, 2b, or 2c, 
 39.36  the local government's general local tax rate multiplied by each 
 40.1   property's net tax capacity market value shall be each 
 40.2   property's net tax capacity tax for that local government unit 
 40.3   before reduction by any credits.  For properties in class 2a, 
 40.4   2b, or 2c, the local government's agricultural and open space 
 40.5   tax rate multiplied by each property's market value shall be 
 40.6   each property's tax for that local government unit before 
 40.7   reduction by any credits. 
 40.8      Any amount certified to the county auditor to be levied 
 40.9   against market value shall be divided by the total referendum 
 40.10  market value of all taxable properties within the taxing 
 40.11  district.  The resulting ratio, the taxing district's new 
 40.12  referendum tax rate, multiplied by each property's referendum 
 40.13  market value shall be each property's new referendum tax before 
 40.14  reduction by any credits.  For the purposes of this subdivision, 
 40.15  "referendum market value" means the market value as defined in 
 40.16  section 124A.02, subdivision 3b. 
 40.17     Sec. 19.  Minnesota Statutes 1996, section 275.08, is 
 40.18  amended by adding a subdivision to read: 
 40.19     Subd. 1e.  [STATE TAX RATE.] The rate of the state tax 
 40.20  imposed on any property is equal to the sum of (1) the 
 40.21  difference between the class rate specified under section 273.13 
 40.22  and the sum of the local tax rates determined under this 
 40.23  section, and (2) the rate levied pursuant to section 275.02, 
 40.24  subdivision 2. 
 40.25     Sec. 20.  Minnesota Statutes 1996, section 276.04, 
 40.26  subdivision 2, is amended to read: 
 40.27     Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
 40.28  shall provide for the printing of the tax statements.  The 
 40.29  commissioner of revenue shall prescribe the form of the property 
 40.30  tax statement and its contents.  The statement must contain a 
 40.31  tabulated statement of the dollar amount due to each taxing 
 40.32  authority from the parcel of real property for which a 
 40.33  particular tax statement is prepared.  The dollar amounts due 
 40.34  the county, township or municipality, the total of the 
 40.35  metropolitan special taxing districts as defined in section 
 40.36  275.065, subdivision 3, paragraph (i), school district excess 
 41.1   referenda levy, remaining school district levy, and the total of 
 41.2   other voter approved referenda levies based on market value 
 41.3   under section 275.61 must be separately stated.  The amounts due 
 41.4   all other special taxing districts, if any, may be aggregated.  
 41.5   For the purposes of this subdivision, "school district excess 
 41.6   referenda levy" means school district taxes for operating 
 41.7   purposes approved at referenda, including those taxes based on 
 41.8   net tax capacity as well as those based on market value.  
 41.9   "School district excess referenda levy" does not include school 
 41.10  district taxes for capital expenditures approved at referendums 
 41.11  or school district taxes to pay for the debt service on bonds 
 41.12  approved at referenda.  The amount of the tax on contamination 
 41.13  value imposed under sections 270.91 to 270.98, if any, must also 
 41.14  be separately stated.  The dollar amounts, including the dollar 
 41.15  amount of any special assessments, may be rounded to the nearest 
 41.16  even whole dollar.  For purposes of this section whole 
 41.17  odd-numbered dollars may be adjusted to the next higher 
 41.18  even-numbered dollar.  The amount of market value excluded under 
 41.19  section 273.11, subdivision 16, if any, must also be listed on 
 41.20  the tax statement.  The statement shall include the following 
 41.21  sentence, printed in upper case letters in boldface print:  "THE 
 41.22  STATE OF MINNESOTA DOES NOT RECEIVE ANY PROPERTY TAX REVENUES.  
 41.23  THE STATE OF MINNESOTA REDUCES YOUR PROPERTY TAX BY PAYING 
 41.24  CREDITS AND REIMBURSEMENTS TO LOCAL UNITS OF GOVERNMENT."  
 41.25     (b) The property tax statements for manufactured homes and 
 41.26  sectional structures taxed as personal property shall contain 
 41.27  the same information that is required on the tax statements for 
 41.28  real property.  
 41.29     (c) Real and personal property tax statements must contain 
 41.30  the following information in the order given in this paragraph.  
 41.31  The information must contain the current year tax information in 
 41.32  the right column with the corresponding information for the 
 41.33  previous year in a column on the left: 
 41.34     (1) the property's estimated market value under section 
 41.35  273.11, subdivision 1; 
 41.36     (2) the property's taxable market value after reductions 
 42.1   under section 273.11, subdivisions 1a and 16; 
 42.2      (3) the property's gross tax, calculated by multiplying the 
 42.3   property's gross tax capacity market value times the total local 
 42.4   tax rate and adding to the result the sum of the aids enumerated 
 42.5   in clause (4); 
 42.6      (4) a total of the following aids: 
 42.7      (i) education aids payable under chapters 124 and 124A; 
 42.8      (ii) local government aids for cities, towns, and counties 
 42.9   under chapter 477A; and 
 42.10     (iii) disparity reduction aid under section 273.1398; 
 42.11     (5) for homestead residential and agricultural properties, 
 42.12  the homestead and agricultural credit aid apportioned to the 
 42.13  property.  This amount is obtained by multiplying the total 
 42.14  local tax rate by the difference between the property's gross 
 42.15  and net tax capacities under section 273.13.  This amount must 
 42.16  be separately stated and identified as "homestead and 
 42.17  agricultural credit."  For purposes of comparison with the 
 42.18  previous year's amount for the statement for taxes payable in 
 42.19  1990, the statement must show the homestead credit for taxes 
 42.20  payable in 1989 under section 273.13, and the agricultural 
 42.21  credit under section 273.132 for taxes payable in 1989; 
 42.22     (6) (3) any credits credit received under sections 
 42.23  273.119; section 273.123; 273.135; 273.1391; 273.1398, 
 42.24  subdivision 4; 469.171; and 473H.10, except that the amount of 
 42.25  credit received under section 273.135 must be separately stated 
 42.26  and identified as "taconite tax relief"; and 
 42.27     (7) (4) the net tax payable in the manner required in 
 42.28  paragraph (a). 
 42.29     (d) If the county uses envelopes for mailing property tax 
 42.30  statements and if the county agrees, a taxing district may 
 42.31  include a notice with the property tax statement notifying 
 42.32  taxpayers when the taxing district will begin its budget 
 42.33  deliberations for the current year, and encouraging taxpayers to 
 42.34  attend the hearings.  If the county allows notices to be 
 42.35  included in the envelope containing the property tax statement, 
 42.36  and if more than one taxing district relative to a given 
 43.1   property decides to include a notice with the tax statement, the 
 43.2   county treasurer or auditor must coordinate the process and may 
 43.3   combine the information on a single announcement.  
 43.4      The commissioner of revenue shall certify to the county 
 43.5   auditor the actual or estimated aids enumerated in clauses (3) 
 43.6   and (4) that local governments will receive in the following 
 43.7   year.  In the case of a county containing a city of the first 
 43.8   class, for taxes levied in 1991, and for all counties for taxes 
 43.9   levied in 1992 and thereafter, the commissioner must certify 
 43.10  this amount by September 1.  
 43.11     Sec. 21.  [276B.01] [STATEMENT OF POLICY.] 
 43.12     The legislature finds that: 
 43.13     (1) land has a unique place as both an essential part of 
 43.14  the ecosystem that is necessary for life itself and an economic 
 43.15  commodity; 
 43.16     (2) taxation relates directly to the economic sphere, but 
 43.17  can indirectly influence the ecological sphere by its impact on 
 43.18  the extent of the commodification of land; 
 43.19     (3) it is an important public policy to encourage the 
 43.20  preservation of farmland as farmland, and of forests, open 
 43.21  space, wetlands, lakes, and streams; 
 43.22     (4) agricultural land and land managed for the production 
 43.23  of trees are unique in that they allow land to function 
 43.24  substantially as a resource for nonhuman aspects of the 
 43.25  ecosystem as well as an economic commodity; 
 43.26     (5) the value for other uses of agricultural land, timber 
 43.27  land, and undeveloped land frequently increases dramatically as 
 43.28  a result of urbanization and the construction of roads or other 
 43.29  infrastructure by government; 
 43.30     (6) the loss of agricultural land and open space through 
 43.31  development is a serious loss to the collective well being of 
 43.32  Minnesota citizens that should not be subsidized or 
 43.33  overstimulated by laws or governmental policies; 
 43.34     (7) these concerns support both a reduced rate of taxation 
 43.35  on agricultural land, timber land, and undeveloped land, and a 
 43.36  property tax on the sale of such land for use in other purposes; 
 44.1   and 
 44.2      (8) these concerns support a tax on the loss of open space 
 44.3   and agricultural land at the time of conversion of such land to 
 44.4   other uses. 
 44.5      Sec. 22.  [276B.02] [PROPERTY TAX UPON SALE OR EXCHANGE OF 
 44.6   AGRICULTURAL OR UNDEVELOPED LAND.] 
 44.7      Subdivision 1.  [IMPOSITION OF TAX.] There is imposed a 
 44.8   property tax on real property in class 2a, 2b, or 2c that is 
 44.9   sold or exchanged with the intent on the part of the transferee 
 44.10  to use the property for some purpose that would result in it no 
 44.11  longer being in class 2a, 2b, or 2c equal to .. percent of the 
 44.12  excess of the total value of the property without regard to this 
 44.13  tax over the greater of (1) the transferor's basis in the 
 44.14  property for purposes of chapter 290, (2) the market value of 
 44.15  the property as agricultural or timber land, or (3) the market 
 44.16  value of the property for general property tax purposes for 
 44.17  property taxes payable in the year of the sale or exchange. 
 44.18     Subd. 2.  [DETERMINATION OF TRANSFEREE'S INTENT.] The 
 44.19  transferee's intent shall be noted on the certificate of value 
 44.20  filed pursuant to section 272.115.  A declared intent to use the 
 44.21  property for a purpose that would result in its continuation in 
 44.22  class 2a, 2b, or 2c is subject to challenge by the county 
 44.23  assessor or the commissioner of revenue at any time within 3-1/2 
 44.24  years after the filing of the certificate of value.  Proof that 
 44.25  the transferee paid substantially more than the fair market 
 44.26  value for the property as agricultural or timber land shall 
 44.27  constitute proof that the intent was to use the property for a 
 44.28  purpose that would result in it no longer being in class 2a, 2b, 
 44.29  or 2c. 
 44.30     Subd. 3.  [TAX LIEN ON REAL ESTATE.] The tax imposed by 
 44.31  subdivision 1 shall constitute a lien on the real property under 
 44.32  section 272.31. 
 44.33     Subd. 4.  [PAYMENT OF TAX.] The transferee shall either pay 
 44.34  the tax in cash upon filing of the certificate of value or pay 
 44.35  the tax in proportion to the payments made to the transferor for 
 44.36  the property.  If the transferee elects to defer payment of the 
 45.1   tax, the tax shall bear interest at the rate specified in 
 45.2   section 270.75.  In the case of an exchange for an interest in a 
 45.3   partnership, corporation, or other entity, with respect to which 
 45.4   the entity transferee elects to defer payment of the tax, the 
 45.5   entity transferee shall pay the tax in amounts equal to the 
 45.6   distributions made to the transferor until the tax is paid in 
 45.7   full, and also in amounts equal to the proportion of cash or 
 45.8   other proceeds received by the transferor for a subsequent 
 45.9   transfer of interest in the entity divided by the selling price 
 45.10  to the transferor for the transferor's interest in the entity. 
 45.11     Sec. 23.  [276B.03] [PROPERTY TAX UPON DEVELOPMENT OF 
 45.12  AGRICULTURAL OR UNDEVELOPED LAND.] 
 45.13     Subdivision 1.  [IMPOSITION OF TAX.] There is imposed a 
 45.14  property tax on real property at the time of the first 
 45.15  development of that property.  Development for purposes of 
 45.16  agriculture shall not constitute development unless the property 
 45.17  was previously forested, a wetland, or adjacent to a lake or 
 45.18  stream.  The tax is imposed at the applicable number of dollars 
 45.19  per acre determined according to subdivision 2. 
 45.20     Subd. 2.  [RATES OF TAX.] The tax imposed by subdivision 1 
 45.21  shall be at the following rates: 
 45.22     (1) for conversion of previously untilled land to 
 45.23  agricultural use; $....... per acre; 
 45.24     (2) for conversion of agricultural land to commercial or 
 45.25  industrial use; within a city, $....... per acre, outside a 
 45.26  city, $....... per acre; 
 45.27     (3) for conversion of agricultural or vacant land to 
 45.28  residential use; within a city, $....... per acre if developed 
 45.29  so as to conserve open space or $....... per acre if developed 
 45.30  without regard to conservation of open space, outside a city, 
 45.31  $....... per acre if developed so as to conserve open space or 
 45.32  $....... per acre if developed without regard to conservation of 
 45.33  open space. 
 45.34     Subd. 3.  [TAX LIEN ON REAL ESTATE.] The tax imposed by 
 45.35  subdivision 1 shall constitute a lien on the real property under 
 45.36  section 272.31. 
 46.1      Subd. 4.  [PAYMENT OF TAX.] The tax imposed by subdivision 
 46.2   1 shall be paid upon the filing of a plat with respect to the 
 46.3   property, except that if the tax exceeds $....... per acre, it 
 46.4   may be paid in installments, with ten percent due upon filing of 
 46.5   the plat and the remaining 90 percent due on the same schedule 
 46.6   that applies to payments for the improvements. 
 46.7      Sec. 24.  [276B.04] [PAYMENT OF TAX.] 
 46.8      The taxes imposed by sections 22 and 23 shall be paid to 
 46.9   the commissioner of revenue at the times specified in those 
 46.10  sections. 
 46.11     Sec. 25.  [276B.05] [DEDICATION OF PROCEEDS.] 
 46.12     (a) All taxes paid according to sections 22 and 23 and all 
 46.13  interest and penalties in connection with them that are derived 
 46.14  from property located outside the Minneapolis and St. Paul 
 46.15  standard metropolitan statistical area shall be deposited by the 
 46.16  commissioner of revenue in the Minnesota real property 
 46.17  redevelopment fund established under section 469.40.  
 46.18     (b) All taxes paid according to sections 22 and 23 and all 
 46.19  interest and penalties in connection with them that are derived 
 46.20  from property located within the Minneapolis and St. Paul 
 46.21  standard metropolitan statistical area shall be used to match 
 46.22  grants from the metropolitan livable communities fund for 
 46.23  housing development in inner city neighborhoods. 
 46.24     Sec. 26.  [INSTRUCTION TO THE REVISOR.] 
 46.25     In the 1998 and later editions of Minnesota Statutes, the 
 46.26  revisor of statutes shall change the term "net tax capacity" to 
 46.27  "market value" wherever it occurs. 
 46.28     Sec. 27.  [REPEALER.] 
 46.29     (a) Minnesota Statutes 1996, sections 273.11, subdivisions 
 46.30  1a, 16, and 18; 273.13, subdivisions 21b, 32, and 33; 273.1315; 
 46.31  273.134; 273.135; 273.136; 273.138; 273.1391; 273.1392; 
 46.32  273.1398; 273.166; 273.33; 273.35; 273.36; 273.37; 273.371; 
 46.33  273.38; 273.39; 273.40; 273.41; 273.42; 273.425; 273.43; and 
 46.34  275.08, subdivisions 1c and 1d, are repealed. 
 46.35     (b) Minnesota Statutes 1996, sections 273.1317; and 
 46.36  273.1318, are repealed. 
 47.1      Sec. 28.  [EFFECTIVE DATE.] 
 47.2      Sections 2 to 26 and 27, paragraph (a), are effective for 
 47.3   taxes payable in 1998.  Sections 1 and 27, paragraph (b), are 
 47.4   effective for taxes payable in 2000. 
 47.5                              ARTICLE 2
 47.6                              INCOME TAX
 47.7      Section 1.  Minnesota Statutes 1996, section 289A.08, 
 47.8   subdivision 1, is amended to read: 
 47.9      Subdivision 1.  [GENERALLY; INDIVIDUALS.] (a) A taxpayer 
 47.10  must file a return for each taxable year the taxpayer (1) is 
 47.11  required to file a return under section 6012 of the Internal 
 47.12  Revenue Code, or (2) does not qualify as a dependent of another 
 47.13  person under section 152 of the Internal Revenue Code, except 
 47.14  that an individual who is not a Minnesota resident for any part 
 47.15  of the year is not required to file a Minnesota income tax 
 47.16  return if the individual's gross income derived from Minnesota 
 47.17  sources as determined under sections 290.081, paragraph (a), and 
 47.18  290.17, is less than the filing requirements under federal law 
 47.19  for a single individual who is a full year resident of Minnesota.
 47.20     (b) The decedent's final income tax return, and other 
 47.21  income tax returns for prior years where the decedent had gross 
 47.22  income in excess of the minimum amount at which an individual is 
 47.23  required to file and did not file, must be filed by the 
 47.24  decedent's personal representative, if any.  If there is no 
 47.25  personal representative, the return or returns must be filed by 
 47.26  the transferees, as defined in section 289A.38, subdivision 13, 
 47.27  who receive property of the decedent. 
 47.28     (c) The term "gross income," as it is used in this section, 
 47.29  has the same meaning given it in section 290.01, subdivision 20. 
 47.30     Sec. 2.  Minnesota Statutes 1996, section 289A.08, 
 47.31  subdivision 6, is amended to read: 
 47.32     Subd. 6.  [RETURNS OF MARRIED PERSONS.] A husband and wife 
 47.33  must file a joint Minnesota income tax return if they filed a 
 47.34  joint federal income tax return.  If the husband and wife have 
 47.35  elected to file separate federal income tax returns, they must 
 47.36  file separate or combined Minnesota income tax returns.  This 
 48.1   election to file a joint or separate return must be changed if 
 48.2   they change their election for federal purposes.  In the event 
 48.3   taxpayers desire to change their election, the change must be 
 48.4   done in the manner and on the form prescribed by the 
 48.5   commissioner.  
 48.6      The determination of whether an individual is married shall 
 48.7   be made under the provisions of section 7703 of the Internal 
 48.8   Revenue Code. 
 48.9      Sec. 3.  Minnesota Statutes 1996, section 290.01, 
 48.10  subdivision 19a, is amended to read: 
 48.11     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
 48.12  individuals, estates, and trusts, there shall be added to 
 48.13  federal taxable income: 
 48.14     (1)(i) interest income on obligations of any state other 
 48.15  than Minnesota or a political or governmental subdivision, 
 48.16  municipality, or governmental agency or instrumentality of any 
 48.17  state other than Minnesota exempt from federal income taxes 
 48.18  under the Internal Revenue Code or any other federal statute, 
 48.19  and 
 48.20     (ii) exempt-interest dividends as defined in section 
 48.21  852(b)(5) of the Internal Revenue Code, except the portion of 
 48.22  the exempt-interest dividends derived from interest income on 
 48.23  obligations of the state of Minnesota or its political or 
 48.24  governmental subdivisions, municipalities, governmental agencies 
 48.25  or instrumentalities, but only if the portion of the 
 48.26  exempt-interest dividends from such Minnesota sources paid to 
 48.27  all shareholders represents 95 percent or more of the 
 48.28  exempt-interest dividends that are paid by the regulated 
 48.29  investment company as defined in section 851(a) of the Internal 
 48.30  Revenue Code, or the fund of the regulated investment company as 
 48.31  defined in section 851(h) of the Internal Revenue Code, making 
 48.32  the payment; and 
 48.33     (iii) for the purposes of items (i) and (ii), interest on 
 48.34  obligations of an Indian tribal government described in section 
 48.35  7871(c) of the Internal Revenue Code shall be treated as 
 48.36  interest income on obligations of the state in which the tribe 
 49.1   is located; 
 49.2      (2) the amount of income taxes paid or accrued within the 
 49.3   taxable year under this chapter and income taxes paid to any 
 49.4   other state or to any province or territory of Canada, to the 
 49.5   extent allowed as a deduction under section 63(d) of the 
 49.6   Internal Revenue Code, but the addition may not be more than the 
 49.7   amount by which the itemized deductions as allowed under section 
 49.8   63(d) of the Internal Revenue Code exceeds the amount of the 
 49.9   standard deduction as defined in section 63(c) of the Internal 
 49.10  Revenue Code.  For the purpose of this paragraph, the 
 49.11  disallowance of itemized deductions under section 68 of the 
 49.12  Internal Revenue Code of 1986, income tax is the last itemized 
 49.13  deduction disallowed; 
 49.14     (3) the capital gain amount of a lump sum distribution to 
 49.15  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
 49.16  Reform Act of 1986, Public Law Number 99-514, applies; and 
 49.17     (4) the amount of income taxes paid or accrued within the 
 49.18  taxable year under this chapter and income taxes paid to any 
 49.19  other state or any province or territory of Canada, to the 
 49.20  extent allowed as a deduction in determining federal adjusted 
 49.21  gross income.  For the purpose of this paragraph, income taxes 
 49.22  do not include the taxes imposed by sections 290.0922, 
 49.23  subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729.; 
 49.24     (5) the amount of the standard deduction provided by 
 49.25  section 63(c) of the Internal Revenue Code, or the itemized 
 49.26  deductions as defined in section 63(d) of the Internal Revenue 
 49.27  Code reduced by the amount by which the itemized deductions were 
 49.28  reduced for federal income tax return purposes according to 
 49.29  section 68 of the Internal Revenue Code, in accordance with 
 49.30  whether the standard deduction or itemized deductions were 
 49.31  claimed on the federal income tax return; 
 49.32     (6) the amount of the deduction for personal exemptions 
 49.33  provided by section 151 of the Internal Revenue Code and claimed 
 49.34  on the federal income tax return; and 
 49.35     (7) the amount of any deduction or exemption of capital 
 49.36  gains allowed by the Internal Revenue Code. 
 50.1      Sec. 4.  Minnesota Statutes 1996, section 290.01, 
 50.2   subdivision 19b, is amended to read: 
 50.3      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
 50.4   individuals, estates, and trusts, there shall be subtracted from 
 50.5   federal taxable income: 
 50.6      (1) interest income on obligations of any authority, 
 50.7   commission, or instrumentality of the United States to the 
 50.8   extent includable in taxable income for federal income tax 
 50.9   purposes but exempt from state income tax under the laws of the 
 50.10  United States; 
 50.11     (2) if included in federal taxable income, the amount of 
 50.12  any overpayment of income tax to Minnesota or to any other 
 50.13  state, for any previous taxable year, whether the amount is 
 50.14  received as a refund or as a credit to another taxable year's 
 50.15  income tax liability; 
 50.16     (3) the amount paid to others not to exceed $650 for each 
 50.17  dependent in grades kindergarten to 6 and $1,000 for each 
 50.18  dependent in grades 7 to 12, for tuition, textbooks, and 
 50.19  transportation of each dependent in attending an elementary or 
 50.20  secondary school situated in Minnesota, North Dakota, South 
 50.21  Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
 50.22  legally fulfill the state's compulsory attendance laws, which is 
 50.23  not operated for profit, and which adheres to the provisions of 
 50.24  the Civil Rights Act of 1964 and chapter 363.  As used in this 
 50.25  clause, "textbooks" includes books and other instructional 
 50.26  materials and equipment used in elementary and secondary schools 
 50.27  in teaching only those subjects legally and commonly taught in 
 50.28  public elementary and secondary schools in this state.  
 50.29  "Textbooks" does not include instructional books and materials 
 50.30  used in the teaching of religious tenets, doctrines, or worship, 
 50.31  the purpose of which is to instill such tenets, doctrines, or 
 50.32  worship, nor does it include books or materials for, or 
 50.33  transportation to, extracurricular activities including sporting 
 50.34  events, musical or dramatic events, speech activities, driver's 
 50.35  education, or similar programs.  In order to qualify for the 
 50.36  subtraction under this clause the taxpayer must elect to itemize 
 51.1   deductions under section 63(e) of the Internal Revenue Code; 
 51.2      (4) to the extent included in federal taxable income, 
 51.3   distributions from a qualified governmental pension plan, an 
 51.4   individual retirement account, simplified employee pension, or 
 51.5   qualified plan covering a self-employed person that represent a 
 51.6   return of contributions that were included in Minnesota gross 
 51.7   income in the taxable year for which the contributions were made 
 51.8   but were deducted or were not included in the computation of 
 51.9   federal adjusted gross income.  The distribution shall be 
 51.10  allocated first to return of contributions until the 
 51.11  contributions included in Minnesota gross income have been 
 51.12  exhausted.  This subtraction applies only to contributions made 
 51.13  in a taxable year prior to 1985; 
 51.14     (5) income as provided under section 290.0802; 
 51.15     (6) the amount of unrecovered accelerated cost recovery 
 51.16  system deductions allowed under subdivision 19g; 
 51.17     (7) (4) to the extent included in federal adjusted gross 
 51.18  income, income realized on disposition of property exempt from 
 51.19  tax under section 290.491; 
 51.20     (8) (5) to the extent not deducted in determining federal 
 51.21  taxable income, the amount paid for health insurance of 
 51.22  self-employed individuals as determined under section 162(l) of 
 51.23  the Internal Revenue Code, except that the 25 percent limit does 
 51.24  not apply.  If the taxpayer deducted insurance payments under 
 51.25  section 213 of the Internal Revenue Code of 1986, the 
 51.26  subtraction under this clause must be reduced by the lesser of: 
 51.27     (i) the total itemized deductions allowed under section 
 51.28  63(d) of the Internal Revenue Code, less state, local, and 
 51.29  foreign income taxes deductible under section 164 of the 
 51.30  Internal Revenue Code and the standard deduction under section 
 51.31  63(c) of the Internal Revenue Code; or 
 51.32     (ii) the lesser of (A) the amount of insurance qualifying 
 51.33  as "medical care" under section 213(d) of the Internal Revenue 
 51.34  Code to the extent not deducted under section 162(1) of the 
 51.35  Internal Revenue Code or excluded from income or (B) the total 
 51.36  amount deductible for medical care under section 213(a); and 
 52.1      (9) (6) the exemption amount allowed under Laws 1995, 
 52.2   chapter 255, article 3, section 2, subdivision 3.; 
 52.3      (7) the amount of deductions of an employee in connection 
 52.4   with employment that are deductible only as itemized deductions 
 52.5   as defined in section 63(d) of the Internal Revenue Code; 
 52.6      (8) the amount of deductions for the production of income 
 52.7   that are allowable under section 212 of the Internal Revenue 
 52.8   Code but that can only be deducted as itemized deductions as 
 52.9   defined in section 63(d) of the Internal Revenue Code; and 
 52.10     (9) the amount of child support payments made during the 
 52.11  year pursuant to a temporary or final decree of dissolution or 
 52.12  legal separation. 
 52.13     Sec. 5.  Minnesota Statutes 1996, section 290.01, 
 52.14  subdivision 19d, is amended to read: 
 52.15     Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
 52.16  TAXABLE INCOME.] For corporations, there shall be subtracted 
 52.17  from federal taxable income after the increases provided in 
 52.18  subdivision 19c:  
 52.19     (1) the amount of foreign dividend gross-up added to gross 
 52.20  income for federal income tax purposes under section 78 of the 
 52.21  Internal Revenue Code; 
 52.22     (2) the amount of salary expense not allowed for federal 
 52.23  income tax purposes due to claiming the federal jobs credit 
 52.24  under section 51 of the Internal Revenue Code; 
 52.25     (3) any dividend (not including any distribution in 
 52.26  liquidation) paid within the taxable year by a national or state 
 52.27  bank to the United States, or to any instrumentality of the 
 52.28  United States exempt from federal income taxes, on the preferred 
 52.29  stock of the bank owned by the United States or the 
 52.30  instrumentality; 
 52.31     (4) amounts disallowed for intangible drilling costs due to 
 52.32  differences between this chapter and the Internal Revenue Code 
 52.33  in taxable years beginning before January 1, 1987, as follows: 
 52.34     (i) to the extent the disallowed costs are represented by 
 52.35  physical property, an amount equal to the allowance for 
 52.36  depreciation under Minnesota Statutes 1986, section 290.09, 
 53.1   subdivision 7, subject to the modifications contained in 
 53.2   subdivision 19e; and 
 53.3      (ii) to the extent the disallowed costs are not represented 
 53.4   by physical property, an amount equal to the allowance for cost 
 53.5   depletion under Minnesota Statutes 1986, section 290.09, 
 53.6   subdivision 8; 
 53.7      (5) the deduction for capital losses pursuant to sections 
 53.8   1211 and 1212 of the Internal Revenue Code, except that: 
 53.9      (i) for capital losses incurred in taxable years beginning 
 53.10  after December 31, 1986, capital loss carrybacks shall not be 
 53.11  allowed; 
 53.12     (ii) for capital losses incurred in taxable years beginning 
 53.13  after December 31, 1986, a capital loss carryover to each of the 
 53.14  15 taxable years succeeding the loss year shall be allowed; 
 53.15     (iii) for capital losses incurred in taxable years 
 53.16  beginning before January 1, 1987, a capital loss carryback to 
 53.17  each of the three taxable years preceding the loss year, subject 
 53.18  to the provisions of Minnesota Statutes 1986, section 290.16, 
 53.19  shall be allowed; and 
 53.20     (iv) for capital losses incurred in taxable years beginning 
 53.21  before January 1, 1987, a capital loss carryover to each of the 
 53.22  five taxable years succeeding the loss year to the extent such 
 53.23  loss was not used in a prior taxable year and subject to the 
 53.24  provisions of Minnesota Statutes 1986, section 290.16, shall be 
 53.25  allowed; 
 53.26     (6) an amount for interest and expenses relating to income 
 53.27  not taxable for federal income tax purposes, if (i) the income 
 53.28  is taxable under this chapter and (ii) the interest and expenses 
 53.29  were disallowed as deductions under the provisions of section 
 53.30  171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
 53.31  federal taxable income; 
 53.32     (7) in the case of mines, oil and gas wells, other natural 
 53.33  deposits, and timber for which percentage depletion was 
 53.34  disallowed pursuant to subdivision 19c, clause (11), a 
 53.35  reasonable allowance for depletion based on actual cost.  In the 
 53.36  case of leases the deduction must be apportioned between the 
 54.1   lessor and lessee in accordance with rules prescribed by the 
 54.2   commissioner.  In the case of property held in trust, the 
 54.3   allowable deduction must be apportioned between the income 
 54.4   beneficiaries and the trustee in accordance with the pertinent 
 54.5   provisions of the trust, or if there is no provision in the 
 54.6   instrument, on the basis of the trust's income allocable to 
 54.7   each; 
 54.8      (8) for certified pollution control facilities placed in 
 54.9   service in a taxable year beginning before December 31, 1986, 
 54.10  and for which amortization deductions were elected under section 
 54.11  169 of the Internal Revenue Code of 1954, as amended through 
 54.12  December 31, 1985, an amount equal to the allowance for 
 54.13  depreciation under Minnesota Statutes 1986, section 290.09, 
 54.14  subdivision 7; 
 54.15     (9) the amount included in federal taxable income 
 54.16  attributable to the credits provided in Minnesota Statutes 1986, 
 54.17  section 273.1314, subdivision 9, or Minnesota Statutes, section 
 54.18  469.171, subdivision 6; 
 54.19     (10) amounts included in federal taxable income that are 
 54.20  due to refunds of income, excise, or franchise taxes based on 
 54.21  net income or related minimum taxes paid by the corporation to 
 54.22  Minnesota, another state, a political subdivision of another 
 54.23  state, the District of Columbia, or a foreign country or 
 54.24  possession of the United States to the extent that the taxes 
 54.25  were added to federal taxable income under section 290.01, 
 54.26  subdivision 19c, clause (1), in a prior taxable year; 
 54.27     (11) the following percentage of royalties, fees, or other 
 54.28  like income accrued or received from a foreign operating 
 54.29  corporation or a foreign corporation which is part of the same 
 54.30  unitary business as the receiving corporation: 
 54.31        Taxable Year 
 54.32        Beginning After .......... Percentage 
 54.33        December 31, 1988 ........ 50 percent 
 54.34        December 31, 1990 ........ 80 percent;    
 54.35     (12) income or gains from the business of mining as defined 
 54.36  in section 290.05, subdivision 1, clause (a), that are not 
 55.1   subject to Minnesota franchise tax; 
 55.2      (13) the amount of handicap access expenditures in the 
 55.3   taxable year which are not allowed to be deducted or capitalized 
 55.4   under section 44(d)(7) of the Internal Revenue Code; 
 55.5      (14) the amount of qualified research expenses not allowed 
 55.6   for federal income tax purposes under section 280C(c) of the 
 55.7   Internal Revenue Code, but only to the extent that the amount 
 55.8   exceeds the amount of the credit allowed under section 290.068; 
 55.9   and 
 55.10     (15) the amount of salary expenses not allowed for federal 
 55.11  income tax purposes due to claiming the Indian employment credit 
 55.12  under section 45A(a) of the Internal Revenue Code; and 
 55.13     (16) the amount of dividends as defined under section 316 
 55.14  of the Internal Revenue Code paid by the corporation. 
 55.15     Sec. 6.  Minnesota Statutes 1996, section 290.06, 
 55.16  subdivision 2c, is amended to read: 
 55.17     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
 55.18  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
 55.19  married individuals filing joint returns and surviving spouses 
 55.20  as defined in section 2(a) of the Internal Revenue Code, 
 55.21  estates, and trusts must be computed by applying to their 
 55.22  taxable net income the following schedule of rates: 
 55.23     (1) On the first $19,910 $3,000, 6 0.7 percent; 
 55.24     (2) On all over $19,910 $3,000, but not 
 55.25  over $79,120 $6,000, 8 1.5 percent; 
 55.26     (3) On all over $6,000, but not over $9,000, 2.4 percent; 
 55.27     (4) On all over $9,000, but not over $15,000, 3.8 percent; 
 55.28     (5) On all over $15,000, but not over $20,000, 5 percent; 
 55.29     (6) On all over $20,000, but not over $25,000, 6 percent; 
 55.30     (7) On all over $25,000, but not over $35,000, 7 percent; 
 55.31     (8) On all over $35,000, but not over $75,000, 7.5 percent; 
 55.32  and 
 55.33     (9) On all over $79,120 $75,000, 8.5 percent. 
 55.34     Married individuals filing separate returns, estates, and 
 55.35  Trusts must compute their income tax by applying the above rates 
 55.36  to their taxable income, except that the income brackets will be 
 56.1   one-half of the above amounts.  
 56.2      (b) The income taxes imposed by this chapter upon unmarried 
 56.3   individuals must be computed by applying to taxable net income 
 56.4   the following schedule of rates: 
 56.5      (1) On the first $13,620, 6 percent; 
 56.6      (2) On all over $13,620, but not over $44,750, 8 percent; 
 56.7      (3) On all over $44,750, 8.5 percent. 
 56.8      (c) The income taxes imposed by this chapter upon unmarried 
 56.9   individuals qualifying as a head of household as defined in 
 56.10  section 2(b) of the Internal Revenue Code must be computed by 
 56.11  applying to taxable net income the following schedule of rates: 
 56.12     (1) On the first $16,770, 6 percent; 
 56.13     (2) On all over $16,770, but not over $67,390, 8 percent; 
 56.14     (3) On all over $67,390, 8.5 percent. 
 56.15     (b) Married individuals who file separate federal income 
 56.16  tax returns shall file separate Minnesota income tax returns 
 56.17  that allocate income and deductions between them in the same 
 56.18  manner as on their federal returns.  Married individuals who 
 56.19  file joint federal income tax returns may file either a joint 
 56.20  Minnesota income tax return or separate Minnesota income tax 
 56.21  returns.  All items of income, deduction, and credit of married 
 56.22  individuals filing separate Minnesota income tax returns who 
 56.23  filed a joint federal income tax return that are includable in 
 56.24  determining federal adjusted gross income as defined in section 
 56.25  62 of the Internal Revenue Code shall be reported by the 
 56.26  individual who received, incurred, or earned them, respectively. 
 56.27     (d) (c) In lieu of a tax computed according to the rates 
 56.28  set forth in this subdivision, the tax of any individual 
 56.29  taxpayer whose taxable net income for the taxable year is less 
 56.30  than an amount determined by the commissioner must be computed 
 56.31  in accordance with tables prepared and issued by the 
 56.32  commissioner of revenue based on income brackets of not more 
 56.33  than $100.  The amount of tax for each bracket shall be computed 
 56.34  at the rates set forth in this subdivision, provided that the 
 56.35  commissioner may disregard a fractional part of a dollar unless 
 56.36  it amounts to 50 cents or more, in which case it may be 
 57.1   increased to $1. 
 57.2      (e) (d) An individual who is not a Minnesota resident for 
 57.3   the entire year must compute the individual's Minnesota income 
 57.4   tax as provided in this subdivision.  After the application of 
 57.5   the nonrefundable credits provided in this chapter, the tax 
 57.6   liability must then be multiplied by a fraction in which:  
 57.7      (1) The numerator is the individual's Minnesota source 
 57.8   federal adjusted gross income as defined in section 62 of the 
 57.9   Internal Revenue Code increased by the addition required for 
 57.10  interest income from non-Minnesota state and municipal bonds 
 57.11  under section 290.01, subdivision 19a, clause (1), after 
 57.12  applying the allocation and assignability provisions of section 
 57.13  290.081, clause (a), or 290.17; and 
 57.14     (2) the denominator is the individual's federal adjusted 
 57.15  gross income as defined in section 62 of the Internal Revenue 
 57.16  Code of 1986, as amended through April 15, 1995, increased by 
 57.17  the addition required for interest income from non-Minnesota 
 57.18  state and municipal bonds under section 290.01, subdivision 19a, 
 57.19  clause (1). 
 57.20     Sec. 7.  Minnesota Statutes 1996, section 290.06, is 
 57.21  amended by adding a subdivision to read: 
 57.22     Subd. 25.  [CHARITABLE CONTRIBUTIONS CREDIT.] Individuals, 
 57.23  estates, and trusts shall receive a credit against the tax due 
 57.24  under this chapter for charitable contributions qualifying for 
 57.25  federal income tax deductions under section 170 of the Internal 
 57.26  Revenue Code.  The amount of the credit is equal to eight 
 57.27  percent of the amount allowable as a federal income tax 
 57.28  deduction under section 170 of the Internal Revenue Code for the 
 57.29  taxable year.  The amount of the credit under this subdivision 
 57.30  may not exceed the taxpayer's liability under this chapter for 
 57.31  the taxable year. 
 57.32     Sec. 8.  Minnesota Statutes 1996, section 290.0671, 
 57.33  subdivision 1, is amended to read: 
 57.34     Subdivision 1.  [CREDIT ALLOWED.] An individual is allowed 
 57.35  a credit against the tax imposed by this chapter equal to 15 25 
 57.36  percent of the credit for which the individual is eligible under 
 58.1   section 32 of the Internal Revenue Code. 
 58.2      For a nonresident or part-year resident, the credit 
 58.3   determined under section 32 of the Internal Revenue Code must be 
 58.4   allocated based on the percentage calculated under section 
 58.5   290.06, subdivision 2c, paragraph (e). 
 58.6      For a person who was a resident for the entire tax year and 
 58.7   has earned income not subject to tax under this chapter, the 
 58.8   credit must be allocated based on the ratio of federal adjusted 
 58.9   gross income reduced by the earned income not subject to tax 
 58.10  under this chapter over federal adjusted gross income. 
 58.11     Sec. 9.  [REPEALER.] 
 58.12     Minnesota Statutes 1996, sections 290.01, subdivision 19g; 
 58.13  290.0802; 290.091; 290.0921; 290.0922; and 290.21, subdivision 
 58.14  4, are repealed. 
 58.15     Sec. 10.  [EFFECTIVE DATE.] 
 58.16     Sections 1 to 9 are effective for taxable years beginning 
 58.17  after December 31, 1997. 
 58.18                             ARTICLE 3
 58.19                        PROPERTY TAX REFUNDS
 58.20     Section 1.  Minnesota Statutes 1996, section 290A.03, 
 58.21  subdivision 3, is amended to read: 
 58.22     Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
 58.23  following:  
 58.24     (a) federal adjusted gross income as defined in the 
 58.25  Internal Revenue Code; and 
 58.26     (b) the sum of the following amounts to the extent not 
 58.27  included in clause (a):  
 58.28     (i) all nontaxable income; 
 58.29     (ii) the amount of a passive activity loss that is not 
 58.30  disallowed as a result of section 469, paragraph (i) or (m) of 
 58.31  the Internal Revenue Code and the amount of passive activity 
 58.32  loss carryover allowed under section 469(b) of the Internal 
 58.33  Revenue Code; 
 58.34     (iii) an amount equal to the total of any discharge of 
 58.35  qualified farm indebtedness of a solvent individual excluded 
 58.36  from gross income under section 108(g) of the Internal Revenue 
 59.1   Code; 
 59.2      (iv) cash public assistance and relief; 
 59.3      (v) any pension or annuity (including railroad retirement 
 59.4   benefits, all payments received under the federal Social 
 59.5   Security Act, supplemental security income, and veterans 
 59.6   benefits), which was not exclusively funded by the claimant or 
 59.7   spouse, or which was funded exclusively by the claimant or 
 59.8   spouse and which funding payments were excluded from federal 
 59.9   adjusted gross income in the years when the payments were made; 
 59.10     (vi) interest received from the federal or a state 
 59.11  government or any instrumentality or political subdivision 
 59.12  thereof; 
 59.13     (vii) workers' compensation; 
 59.14     (viii) nontaxable strike benefits; 
 59.15     (ix) the gross amounts of payments received in the nature 
 59.16  of disability income or sick pay as a result of accident, 
 59.17  sickness, or other disability, whether funded through insurance 
 59.18  or otherwise; 
 59.19     (x) a lump sum distribution under section 402(e)(3) of the 
 59.20  Internal Revenue Code; 
 59.21     (xi) contributions made by the claimant to an individual 
 59.22  retirement account, including a qualified voluntary employee 
 59.23  contribution; simplified employee pension plan; self-employed 
 59.24  retirement plan; cash or deferred arrangement plan under section 
 59.25  401(k) of the Internal Revenue Code; or deferred compensation 
 59.26  plan under section 457 of the Internal Revenue Code; and 
 59.27     (xii) nontaxable scholarship or fellowship grants.  
 59.28     In the case of an individual who files an income tax return 
 59.29  on a fiscal year basis, the term "federal adjusted gross income" 
 59.30  shall mean federal adjusted gross income reflected in the fiscal 
 59.31  year ending in the calendar year.  Federal adjusted gross income 
 59.32  shall not be reduced by the amount of a net operating loss 
 59.33  carryback or carryforward or a capital loss carryback or 
 59.34  carryforward allowed for the year.  
 59.35     (2) "Income" does not include 
 59.36     (a) amounts excluded pursuant to the Internal Revenue Code, 
 60.1   sections 101(a), 102, and 121; 
 60.2      (b) amounts of any pension or annuity which was exclusively 
 60.3   funded by the claimant or spouse and which funding payments were 
 60.4   not excluded from federal adjusted gross income in the years 
 60.5   when the payments were made; 
 60.6      (c) surplus food or other relief in kind supplied by a 
 60.7   governmental agency; 
 60.8      (d) relief granted under this chapter; or 
 60.9      (e) child support payments received under a temporary or 
 60.10  final decree of dissolution or legal separation.  
 60.11     (3) The sum of the following amounts may be subtracted from 
 60.12  income:  
 60.13     (a) for the claimant's first dependent, the exemption 
 60.14  amount multiplied by 1.4; 
 60.15     (b) for the claimant's second dependent, the exemption 
 60.16  amount multiplied by 1.3; 
 60.17     (c) for the claimant's third dependent, the exemption 
 60.18  amount multiplied by 1.2; 
 60.19     (d) for the claimant's fourth dependent, the exemption 
 60.20  amount multiplied by 1.1; and 
 60.21     (e) for the claimant's fifth dependent, the exemption 
 60.22  amount; and. 
 60.23     (f) if the claimant or claimant's spouse was disabled or 
 60.24  attained the age of 65 on or before December 31 of the year for 
 60.25  which the taxes were levied or rent paid, the exemption amount.  
 60.26     For purposes of this subdivision, the "exemption amount" 
 60.27  means the exemption amount under section 151(d) of the Internal 
 60.28  Revenue Code for the taxable year for which the income is 
 60.29  reported.  
 60.30     Sec. 2.  Minnesota Statutes 1996, section 290A.04, is 
 60.31  amended by adding a subdivision to read: 
 60.32     Subd. 2j.  [CERTAIN RESORTS.] (a) Commercial use real 
 60.33  property that is occupied as a homestead by the owner of the 
 60.34  property, a shareholder of a corporation that owns the property, 
 60.35  or a partner of a partnership that owns the property, may 
 60.36  qualify for the refund provided by subdivision 2h if such 
 61.1   property: 
 61.2      (1) abuts a lakeshore line; 
 61.3      (2) is devoted to temporary and seasonal residential 
 61.4   occupancy for recreational purposes; and 
 61.5      (3) was not used for commercial purposes for more than 250 
 61.6   days in the year preceding the year of the assessment.  Use for 
 61.7   a commercial purpose is deemed to occur on any day on which any 
 61.8   portion of the property is used for residential occupancy for 
 61.9   which a fee is charged.  An owner of such property claiming a 
 61.10  property tax refund must maintain guest registers or other 
 61.11  records demonstrating that the units for which a property tax 
 61.12  refund is sought were not occupied for more than 250 days in the 
 61.13  year preceding the assessment. 
 61.14     (b) The maximum area described in paragraph (a) that 
 61.15  qualifies is 100 feet of lakeshore footage for each cabin or 
 61.16  campsite located on the property up to a total of 800 feet and 
 61.17  500 feet in depth, measured away from the lakeshore.  If the 
 61.18  property exceeds that area, only the property tax attributable 
 61.19  to the maximum area qualifies. 
 61.20     (c) If a portion of the property described in paragraph (a) 
 61.21  is operated as a restaurant, bar, gift shop, or other 
 61.22  nonresidential facility operated on a commercial basis not 
 61.23  directly related to temporary and seasonal residential occupancy 
 61.24  for recreation purposes, the property tax attributable to that 
 61.25  portion does not qualify. 
 61.26     Sec. 3.  Minnesota Statutes 1996, section 290A.04, is 
 61.27  amended by adding a subdivision to read: 
 61.28     Subd. 2k.  [TRANSITION REFUND PAID TO LOCAL 
 61.29  GOVERNMENTS.] (a) For property taxes payable in 1998 and 
 61.30  subsequent years, the commissioner of revenue shall pay to the 
 61.31  county treasurer, on the dates prescribed by law for payment of 
 61.32  property taxes, the portion of the property taxes described in 
 61.33  paragraph (b) for real estate that is residential and used for 
 61.34  homestead purposes, homesteaded agricultural land, or property 
 61.35  described in subdivision 2j to the extent it qualifies for the 
 61.36  benefits described in that subdivision. 
 62.1      (b) For taxes payable in 1998, the amount of the property 
 62.2   taxes paid on behalf of the property owner by the state is the 
 62.3   excess, if any, of the property taxes payable in 1998 as 
 62.4   described in paragraph (c) over the lesser of (1) 95 percent of 
 62.5   the property taxes payable with respect to the property in 1997 
 62.6   or (2) 1.5 percent of the market value of the property for 
 62.7   purposes of determination of taxes payable in 1998.  
 62.8      (c) The property taxes payable in 1998 for purposes of 
 62.9   paragraph (b), include: 
 62.10     (1) for all taxing jurisdictions other than school 
 62.11  districts, the lesser of (i) the taxes actually levied for 
 62.12  payment in 1998, or (ii) the taxes that would have been levied 
 62.13  for payment in 1998 if the jurisdiction had applied to its tax 
 62.14  base an effective tax rate equal to a hypothetical effective tax 
 62.15  rate for taxes payable in 1997.  The hypothetical rate is 
 62.16  computed by dividing the sum of the taxes actually levied for 
 62.17  payment in 1997 plus the state-paid property tax relief aids 
 62.18  described in paragraph (d) that were paid to the jurisdiction in 
 62.19  1997, by the estimated market value of all taxable property in 
 62.20  the jurisdiction for taxes payable in 1997; and 
 62.21     (2) for school districts, the sum of the amounts of taxes, 
 62.22  if any, levied for payment in 1998 pursuant to referendum levies 
 62.23  and capital levies approved prior to March 1, 1997. 
 62.24     (d) For purposes of paragraph (c), "property tax relief 
 62.25  aids" include the taconite homestead credit paid under section 
 62.26  273.135, supplemental homestead property tax relief paid under 
 62.27  section 273.1391, attached machinery aid paid under section 
 62.28  273.138, homestead and agricultural credit aid and disparity 
 62.29  reduction aid paid under sections 273.1398 and 273.166, and the 
 62.30  city aid base determined under section 477A.013. 
 62.31     (e) This subdivision does not apply to any portion of the 
 62.32  property taxes attributable to improvements not assessed on 
 62.33  January 2, 1997, except that property that did not qualify under 
 62.34  this subdivision for taxes payable in 1998, but that later 
 62.35  becomes a residential homestead, homesteaded agricultural land, 
 62.36  or qualifying property described in subdivision 2j, shall 
 63.1   qualify for refunds as provided in this subdivision.  A 
 63.2   hypothetical refund for 1998 must be determined for the property 
 63.3   based on the property's estimated market value for taxes payable 
 63.4   in the first year in which it is eligible for the refund under 
 63.5   this paragraph, and using the actual tax rates for taxes payable 
 63.6   in 1997 or 1998.  The hypothetical 1998 refund so determined 
 63.7   shall then be reduced in the same proportion, if any, that 
 63.8   actual refunds for 1998 determined under paragraph (b) have been 
 63.9   reduced for subsequent years. 
 63.10     Sec. 4.  Minnesota Statutes 1996, section 290A.07, 
 63.11  subdivision 1, is amended to read: 
 63.12     Subdivision 1.  Allowable claims filed pursuant to the 
 63.13  provisions of this chapter shall be paid by the commissioner 
 63.14  from the general fund.  Claims payable to renters and homeowners 
 63.15  shall be paid within a reasonable time following receipt thereof.
 63.16  Transition refunds pursuant to section 290A.04, subdivision 2k, 
 63.17  shall be paid to the county treasurer on the dates prescribed by 
 63.18  law for the payment of property taxes. 
 63.19     Sec. 5.  [REPEALER.] 
 63.20     Minnesota Statutes 1996, sections 290A.03, subdivisions 9 
 63.21  and 10; and 290A.07, subdivisions 2a and 3, are repealed. 
 63.22     Sec. 6.  [EFFECTIVE DATE.] 
 63.23     Sections 1, 4, and 5 are effective for refunds based on 
 63.24  property taxes payable in 1998 and subsequent years and rent 
 63.25  paid in 1997 and subsequent years.  Sections 2 and 3 are 
 63.26  effective for refunds based on property taxes payable in 1998 
 63.27  and subsequent years. 
 63.28                             ARTICLE 4
 63.29                 SALES AND MOTOR VEHICLE SALES TAX
 63.30     Section 1.  Minnesota Statutes 1996, section 289A.18, 
 63.31  subdivision 4, is amended to read: 
 63.32     Subd. 4.  [SALES AND USE TAX RETURNS.] (a) Sales and use 
 63.33  tax returns must be filed on or before the 20th day of the month 
 63.34  following the close of the preceding reporting period, except 
 63.35  that annual use tax returns provided for under section 289A.11, 
 63.36  subdivision 1, must be filed by April 15 following the close of 
 64.1   the calendar year, in the case of individuals.  Annual use tax 
 64.2   returns of businesses, including sole proprietorships, and 
 64.3   annual sales tax returns must be filed by February 5 following 
 64.4   the close of the calendar year.  
 64.5      (b) Except for the return for the June reporting period, 
 64.6   which is due on the following August 25, Returns filed by 
 64.7   retailers required to remit liabilities by means of funds 
 64.8   transfer under section 289A.20, subdivision 4, paragraph (d), 
 64.9   are due on or before the 25th day of the month following the 
 64.10  close of the preceding reporting period.  
 64.11     (c) If a retailer has an average sales and use tax 
 64.12  liability, including local sales and use taxes administered by 
 64.13  the commissioner, equal to or less than $500 per month in any 
 64.14  quarter of a calendar year, and has substantially complied with 
 64.15  the tax laws during the preceding four calendar quarters, the 
 64.16  retailer may request authorization to file and pay the taxes 
 64.17  quarterly in subsequent calendar quarters.  The authorization 
 64.18  remains in effect during the period in which the retailer's 
 64.19  quarterly returns reflect sales and use tax liabilities of less 
 64.20  than $1,500 and there is continued compliance with state tax 
 64.21  laws. 
 64.22     (d) If a retailer has an average sales and use tax 
 64.23  liability, including local sales and use taxes administered by 
 64.24  the commissioner, equal to or less than $100 per month during a 
 64.25  calendar year, and has substantially complied with the tax laws 
 64.26  during that period, the retailer may request authorization to 
 64.27  file and pay the taxes annually in subsequent years.  The 
 64.28  authorization remains in effect during the period in which the 
 64.29  retailer's annual returns reflect sales and use tax liabilities 
 64.30  of less than $1,200 and there is continued compliance with state 
 64.31  tax laws. 
 64.32     (e) The commissioner may also grant quarterly or annual 
 64.33  filing and payment authorizations to retailers if the 
 64.34  commissioner concludes that the retailers' future tax 
 64.35  liabilities will be less than the monthly totals identified in 
 64.36  paragraphs (c) and (d).  An authorization granted under this 
 65.1   paragraph is subject to the same conditions as an authorization 
 65.2   granted under paragraphs (c) and (d). 
 65.3      Sec. 2.  Minnesota Statutes 1996, section 297A.01, 
 65.4   subdivision 3, is amended to read: 
 65.5      Subd. 3.  A "sale" and a "purchase" includes, but is not 
 65.6   limited to, each of the following transactions: 
 65.7      (a) Any transfer of title or possession, or both, of 
 65.8   tangible personal property, whether absolutely or conditionally, 
 65.9   and the leasing of or the granting of a license to use or 
 65.10  consume tangible personal property other than manufactured homes 
 65.11  used for residential purposes for a continuous period of 30 days 
 65.12  or more, for a consideration in money or by exchange or barter; 
 65.13     (b) The production, fabrication, printing, or processing of 
 65.14  tangible personal property for a consideration for consumers who 
 65.15  furnish either directly or indirectly the materials used in the 
 65.16  production, fabrication, printing, or processing; 
 65.17     (c) The furnishing, preparing, or serving for a 
 65.18  consideration of food, meals, or drinks.  "Sale" does not 
 65.19  include: 
 65.20     (1) meals or drinks served to patients, inmates, or persons 
 65.21  residing at hospitals, sanitariums, nursing homes, senior 
 65.22  citizens homes, and correctional, detention, and detoxification 
 65.23  facilities; 
 65.24     (2) meals or drinks purchased for and served exclusively to 
 65.25  individuals who are 60 years of age or over and their spouses or 
 65.26  to the handicapped and their spouses by governmental agencies, 
 65.27  nonprofit organizations, agencies, or churches or pursuant to 
 65.28  any program funded in whole or part through 42 USCA sections 
 65.29  3001 through 3045, wherever delivered, prepared or served; or 
 65.30     (3) meals and lunches served at public and private schools, 
 65.31  universities, or colleges. 
 65.32  Notwithstanding section 297A.25, subdivision 2, taxable food or 
 65.33  meals include, but are not limited to, the following:  
 65.34     (i) heated food or drinks; 
 65.35     (ii) sandwiches prepared by the retailer; 
 65.36     (iii) single sales of prepackaged ice cream or ice milk 
 66.1   novelties prepared by the retailer; 
 66.2      (iv) hand-prepared or dispensed ice cream or ice milk 
 66.3   products including cones, sundaes, and snow cones; 
 66.4      (v) soft drinks and other beverages prepared or served by 
 66.5   the retailer; 
 66.6      (vi) gum; 
 66.7      (vii) ice; 
 66.8      (viii) all food sold in vending machines; 
 66.9      (ix) party trays prepared by the retailers; and 
 66.10     (x) all meals and single servings of packaged snack food, 
 66.11  single cans or bottles of pop, sold in restaurants and bars; 
 66.12     (d) The granting of the privilege of admission to places of 
 66.13  amusement, recreational areas, or athletic events, except a 
 66.14  world championship football game sponsored by the national 
 66.15  football league, and the privilege of having access to and the 
 66.16  use of amusement devices, tanning facilities, reducing salons, 
 66.17  steam baths, turkish baths, health clubs, and spas or athletic 
 66.18  facilities; 
 66.19     (e) The furnishing for a consideration of lodging and 
 66.20  related services by a hotel, rooming house, tourist court, motel 
 66.21  or trailer camp and of the granting of any similar license to 
 66.22  use real property other than the renting or leasing thereof for 
 66.23  a continuous period of 30 days or more; 
 66.24     (f) The furnishing for a consideration of electricity, gas, 
 66.25  water, or steam for use or consumption within this state, or 
 66.26  local exchange telephone service, intrastate toll service, and 
 66.27  interstate toll service, if that service originates from and is 
 66.28  charged to a telephone located in this state.  Telephone service 
 66.29  includes paging services and private communication service, as 
 66.30  defined in United States Code, title 26, section 4252(d), except 
 66.31  for private communication service purchased by an agent acting 
 66.32  on behalf of the state lottery.  The furnishing for a 
 66.33  consideration of access to telephone services by a hotel to its 
 66.34  guests is a sale under this clause.  Sales by municipal 
 66.35  corporations in a proprietary capacity are included in the 
 66.36  provisions of this clause.  The furnishing of water and sewer 
 67.1   services for residential use shall not be considered a sale.  
 67.2   The sale of natural gas to be used as a fuel in vehicles 
 67.3   propelled by natural gas shall not be considered a sale for the 
 67.4   purposes of this section; 
 67.5      (g) The furnishing for a consideration of cable television 
 67.6   services, including charges for basic service, charges for 
 67.7   premium service, and any other charges for any other 
 67.8   pay-per-view, monthly, or similar television services; 
 67.9      (h) The furnishing for a consideration of parking services, 
 67.10  whether on a contractual, hourly, or other periodic basis, 
 67.11  except for parking at a meter; 
 67.12     (i) The furnishing for a consideration of services listed 
 67.13  in this paragraph: 
 67.14     (i) laundry and dry cleaning services including cleaning, 
 67.15  pressing, repairing, altering, and storing clothes, linen 
 67.16  services and supply, cleaning and blocking hats, and carpet, 
 67.17  drapery, upholstery, and industrial cleaning.  Laundry and dry 
 67.18  cleaning services do not include services provided by coin 
 67.19  operated facilities operated by the customer; 
 67.20     (ii) motor vehicle washing, waxing, and cleaning services, 
 67.21  including services provided by coin-operated facilities operated 
 67.22  by the customer, and rustproofing, undercoating, and towing of 
 67.23  motor vehicles; 
 67.24     (iii) building and residential cleaning, maintenance, and 
 67.25  disinfecting and exterminating services; 
 67.26     (iv) detective services, security services, burglar, fire 
 67.27  alarm, and armored car services not including services performed 
 67.28  within the jurisdiction they serve by off-duty licensed peace 
 67.29  officers as defined in section 626.84, subdivision 1; 
 67.30     (v) pet grooming services; 
 67.31     (vi) lawn care, fertilizing, mowing, spraying and sprigging 
 67.32  services; garden planting and maintenance; tree, bush, and shrub 
 67.33  pruning, bracing, spraying, and surgery; tree, bush, shrub and 
 67.34  stump removal; and tree trimming for public utility lines.  
 67.35  Services performed under a construction contract for the 
 67.36  installation of shrubbery, plants, sod, trees, bushes, and 
 68.1   similar items are not taxable; 
 68.2      (vii) mixed municipal solid waste management services as 
 68.3   described in section 297A.45; 
 68.4      (viii) massages, except when provided by a licensed health 
 68.5   care facility or professional or upon written referral from a 
 68.6   licensed health care facility or professional for treatment of 
 68.7   illness, injury, or disease; and 
 68.8      (ix) the furnishing for consideration of lodging, board and 
 68.9   care services for animals in kennels and other similar 
 68.10  arrangements, but excluding veterinary and horse boarding 
 68.11  services. 
 68.12  The services listed in this paragraph are taxable under section 
 68.13  297A.02 if the service is performed wholly within Minnesota or 
 68.14  if the service is performed partly within and partly without 
 68.15  Minnesota and the greater proportion of the service is performed 
 68.16  in Minnesota, based on the cost of performance.  In applying the 
 68.17  provisions of this chapter, the terms "tangible personal 
 68.18  property" and "sales at retail" include taxable services and the 
 68.19  provision of taxable services, unless specifically provided 
 68.20  otherwise.  Services performed by an employee for an employer 
 68.21  are not taxable under this paragraph.  Services performed by a 
 68.22  partnership or association for another partnership or 
 68.23  association are not taxable under this paragraph if one of the 
 68.24  entities owns or controls more than 80 percent of the voting 
 68.25  power of the equity interest in the other entity.  Services 
 68.26  performed between members of an affiliated group of corporations 
 68.27  are not taxable.  For purposes of this section, "affiliated 
 68.28  group of corporations" includes those entities that would be 
 68.29  classified as a member of an affiliated group under United 
 68.30  States Code, title 26, section 1504, and who are eligible to 
 68.31  file a consolidated tax return for federal income tax purposes; 
 68.32     (h) The furnishing for a consideration of services of any 
 68.33  kind or nature not specifically included or excluded in other 
 68.34  paragraphs of this subdivision; 
 68.35     (j) (i) A "sale" and a "purchase" includes the transfer of 
 68.36  computer software, meaning information and directions that 
 69.1   dictate the function performed by data processing equipment.  A 
 69.2   "sale" and a "purchase" does not include the design, 
 69.3   development, writing, translation, fabrication, lease, or 
 69.4   transfer for a consideration of title or possession of a custom 
 69.5   computer program; and 
 69.6      (k) (j) The granting of membership in a club, association, 
 69.7   or other organization if: 
 69.8      (1) the club, association, or other organization makes 
 69.9   available for the use of its members sports and athletic 
 69.10  facilities (without regard to whether a separate charge is 
 69.11  assessed for use of the facilities); and 
 69.12     (2) use of the sports and athletic facilities is not made 
 69.13  available to the general public on the same basis as it is made 
 69.14  available to members.  
 69.15  Granting of membership includes both one-time initiation fees 
 69.16  and periodic membership dues.  Sports and athletic facilities 
 69.17  include golf courses, tennis, racquetball, handball and squash 
 69.18  courts, basketball and volleyball facilities, running tracks, 
 69.19  exercise equipment, swimming pools, and other similar athletic 
 69.20  or sports facilities.  The provisions of this paragraph do not 
 69.21  apply to camps or other recreation facilities owned and operated 
 69.22  by an exempt organization under section 501(c)(3) of the 
 69.23  Internal Revenue Code of 1986, as amended through December 31, 
 69.24  1992, for educational and social activities for young people 
 69.25  primarily age 18 and under.  
 69.26     Sec. 3.  Minnesota Statutes 1996, section 297A.01, 
 69.27  subdivision 6, is amended to read: 
 69.28     Subd. 6.  "Use" includes the exercise of any right or power 
 69.29  over tangible personal property, or tickets or admissions to 
 69.30  places of amusement or athletic events, purchased from a 
 69.31  retailer incident to the ownership of any interest in that 
 69.32  property, except that it does not include the sale of that 
 69.33  property in the regular course of business.  
 69.34     "Use" includes the consumption of printed materials which 
 69.35  are consumed in the creation of nontaxable advertising that is 
 69.36  distributed, either directly or indirectly, within Minnesota.  
 70.1      With respect to services, "use" means the consumption of 
 70.2   the benefit provided by the service, and a service is used in 
 70.3   the state or states in which its benefit is consumed. 
 70.4      Sec. 4.  Minnesota Statutes 1996, section 297A.01, 
 70.5   subdivision 8, is amended to read: 
 70.6      Subd. 8.  "Sales price" means the total consideration 
 70.7   valued in money, for a retail sale whether paid in money or 
 70.8   otherwise, excluding therefrom not reduced by any amount allowed 
 70.9   as credit for tangible personal property taken in trade for 
 70.10  resale, without deduction for the cost of the property or 
 70.11  services sold, cost of materials used, labor or service cost, 
 70.12  interest, or discount allowed after the sale is consummated, the 
 70.13  cost of transportation incurred prior to the time of sale, any 
 70.14  amount for which credit is given to the purchaser by the seller, 
 70.15  or any other expense whatsoever.  A deduction may be made for 
 70.16  charges of up to 15 percent in lieu of tips, if the 
 70.17  consideration for such charges is separately stated.  No 
 70.18  deduction shall be allowed for charges for services that are 
 70.19  part of a sale.  A deduction may also be made for interest, 
 70.20  financing, or carrying charges, charges for labor or services 
 70.21  used in installing or applying the property sold or 
 70.22  transportation charges if the transportation occurs after the 
 70.23  retail sale of the property only if the consideration for such 
 70.24  charges is separately stated.  There shall not be included in 
 70.25  "sales price" cash discounts allowed and taken on sales or the 
 70.26  amount refunded either in cash or in credit for property 
 70.27  returned by purchasers. 
 70.28     Sec. 5.  Minnesota Statutes 1996, section 297A.01, 
 70.29  subdivision 16, is amended to read: 
 70.30     Subd. 16.  [CAPITAL EQUIPMENT.] (a) Capital equipment means 
 70.31  machinery and equipment purchased or leased for use in this 
 70.32  state and used by the purchaser or lessee primarily for 
 70.33  manufacturing, fabricating, mining, or refining producing 
 70.34  tangible personal property or services to be sold ultimately at 
 70.35  retail and for electronically transmitting results retrieved by 
 70.36  a customer of an on-line computerized data retrieval system.  
 71.1      (b) Capital equipment includes all machinery and equipment 
 71.2   that is essential to the integrated production process.  Capital 
 71.3   equipment includes, but is not limited to: 
 71.4      (1) machinery and equipment used or required to operate, 
 71.5   control, or regulate the production equipment; 
 71.6      (2) machinery and equipment used for research and 
 71.7   development, design, quality control, and testing activities; 
 71.8      (3) environmental control devices that are used to maintain 
 71.9   conditions such as temperature, humidity, light, or air pressure 
 71.10  when those conditions are essential to and are part of the 
 71.11  production process; or 
 71.12     (4) materials and supplies necessary to construct and 
 71.13  install machinery or equipment; 
 71.14     (5) repair or replacement parts, including accessories, 
 71.15  purchased for use on capital equipment and not usable with 
 71.16  respect to other property of the purchaser; 
 71.17     (6) "farm machinery" as defined by subdivision 15; and 
 71.18     (7) "aquaculture production equipment" as defined by 
 71.19  subdivision 19. 
 71.20     (c) Capital equipment does not include the following: 
 71.21     (1) repair or replacement parts, including accessories, 
 71.22  whether purchased as spare parts, repair parts, or as upgrades 
 71.23  or modifications, and whether purchased before or after the 
 71.24  machinery or equipment is placed into service.  Parts or 
 71.25  accessories are treated as capital equipment only to the extent 
 71.26  that they are a part of and are essential to the operation of 
 71.27  the machinery or equipment as initially purchased; 
 71.28     (2) motor vehicles taxed under chapter 297B; 
 71.29     (3) (2) machinery or equipment used to receive or store raw 
 71.30  materials; 
 71.31     (4) (3) building materials; 
 71.32     (5) (4) machinery or equipment used for nonproduction 
 71.33  purposes, including, but not limited to, the following:  
 71.34  machinery and equipment used for plant security, fire 
 71.35  prevention, first aid, and hospital stations; machinery and 
 71.36  equipment used in support operations or for administrative 
 72.1   purposes; machinery and equipment used solely for pollution 
 72.2   control, prevention, or abatement; and machinery and equipment 
 72.3   used in plant cleaning, disposal of scrap and waste, plant 
 72.4   communications, space heating, lighting, or safety; 
 72.5      (5) machinery or equipment used in connection with 
 72.6   facilities for the sale of tangible personal property or 
 72.7   services; 
 72.8      (6) "farm machinery" as defined by subdivision 15, 
 72.9   "aquaculture production equipment" as defined by subdivision 19, 
 72.10  and "replacement capital equipment" as defined by subdivision 20 
 72.11  office machinery or equipment other than computers even if used 
 72.12  in connection with the production of services; or 
 72.13     (7) any other item that is not essential to the integrated 
 72.14  process of manufacturing, fabricating, mining, or refining 
 72.15  producing tangible personal property or services. 
 72.16     (d) For purposes of this subdivision: 
 72.17     (1) "Equipment" means independent devices or tools separate 
 72.18  from machinery but essential to an integrated production 
 72.19  process, including computers and software, used in operating 
 72.20  machinery and equipment; and any subunit or assembly comprising 
 72.21  a component of any machinery or accessory or attachment parts of 
 72.22  machinery, such as tools, dies, jigs, patterns, and molds. 
 72.23     (2) "Fabricating" means to make, build, create, produce, or 
 72.24  assemble components or property to work in a new or different 
 72.25  manner. 
 72.26     (3) "Machinery" means mechanical, electronic, or electrical 
 72.27  devices, including computers and software, that are purchased or 
 72.28  constructed to be used for the activities set forth in paragraph 
 72.29  (a), beginning with the removal of raw materials from inventory 
 72.30  through the completion of the product, including packaging of 
 72.31  the product. 
 72.32     (4) "Manufacturing" means an operation or series of 
 72.33  operations where raw materials are changed in form, composition, 
 72.34  or condition by machinery and equipment and which results in the 
 72.35  production of a new article of tangible personal property.  For 
 72.36  purposes of this subdivision, "manufacturing" includes the 
 73.1   generation of electricity or steam to be sold at retail. 
 73.2      (5) "Mining" means the extraction of minerals, ores, stone, 
 73.3   and peat. 
 73.4      (6) "On-line data retrieval system" means a system whose 
 73.5   cumulation of information is equally available and accessible to 
 73.6   all its customers. 
 73.7      (7) (3) "Pollution control equipment" means machinery and 
 73.8   equipment used to eliminate, prevent, or reduce pollution 
 73.9   resulting from an activity described in paragraph (a). 
 73.10     (8) (4) "Primarily" means machinery and equipment used 50 
 73.11  percent or more of the time in an activity described in 
 73.12  paragraph (a). 
 73.13     (9) "Refining" means the process of converting a natural 
 73.14  resource to a product, including the treatment of water to be 
 73.15  sold at retail. 
 73.16     (e) For purposes of this subdivision the requirement that 
 73.17  the machinery or equipment "must be used by the purchaser or 
 73.18  lessee" means that the person who purchases or leases the 
 73.19  machinery or equipment must be the one who uses it for the 
 73.20  qualifying purpose.  When a contractor buys and installs 
 73.21  machinery or equipment as part of an improvement to real 
 73.22  property, only the contractor is considered the purchaser. 
 73.23     (f) Notwithstanding prior provisions of this subdivision, 
 73.24  machinery and equipment purchased or leased to replace machinery 
 73.25  and equipment used in the mining or production of taconite shall 
 73.26  qualify as capital equipment. 
 73.27     Sec. 6.  Minnesota Statutes 1996, section 297A.02, 
 73.28  subdivision 1, is amended to read: 
 73.29     Subdivision 1.  [GENERALLY.] Except as otherwise provided 
 73.30  in this chapter, there is imposed an excise tax of 6.5 percent 
 73.31  of on the gross receipts from sales at retail made by any person 
 73.32  in this state at the following rates:  prior to October 1, 1998, 
 73.33  six percent; and on or after October 1, 1998, 5.5 percent. 
 73.34     Sec. 7.  Minnesota Statutes 1996, section 297A.03, 
 73.35  subdivision 1, is amended to read: 
 73.36     Subdivision 1.  The tax shall be stated and charged 
 74.1   separately from the sales price or charge for service insofar as 
 74.2   practicable and shall be collected by the seller from the 
 74.3   purchaser and shall be a debt from the purchaser to the seller 
 74.4   recoverable at law in the same manner as other debts.  
 74.5      Sec. 8.  Minnesota Statutes 1996, section 297A.14, 
 74.6   subdivision 1, is amended to read: 
 74.7      Subdivision 1.  [IMPOSITION.] For the privilege of using, 
 74.8   storing, distributing, or consuming in Minnesota tangible 
 74.9   personal property or taxable services purchased for use, 
 74.10  storage, distribution, or consumption in this state, a use tax 
 74.11  is imposed on every person in this state at the rate of tax 
 74.12  imposed under section 297A.02 on the sales price of sales at 
 74.13  retail of the items, unless the tax imposed by section 297A.02 
 74.14  was paid on the sales price.  
 74.15     A use tax is imposed on every person who uses, stores, 
 74.16  distributes, or consumes tangible personal property in Minnesota 
 74.17  which has been manufactured, fabricated, or assembled by the 
 74.18  person from materials, either within or without this state, at 
 74.19  the rate of tax imposed under section 297A.02 on the sales price 
 74.20  of sales at retail of the materials contained in the tangible 
 74.21  personal property, unless the tax imposed by section 297A.02 was 
 74.22  paid on the sales price. 
 74.23     Sec. 9.  Minnesota Statutes 1996, section 297A.21, 
 74.24  subdivision 2, is amended to read: 
 74.25     Subd. 2.  [DESTINATION.] The destination of a sale of 
 74.26  tangible personal property is the location to which the retailer 
 74.27  makes delivery of the property sold, or causes the property to 
 74.28  be delivered, to the purchaser of the property, or to the agent 
 74.29  or designee of the purchaser by any means of delivery, including 
 74.30  the United States Postal Service, a common carrier, or a 
 74.31  contract carrier.  The destination of a sale of services is the 
 74.32  location at which the benefits of the services will be consumed 
 74.33  by the purchaser. 
 74.34     Sec. 10.  Minnesota Statutes 1996, section 297A.22, is 
 74.35  amended to read: 
 74.36     297A.22 [PRESUMPTION OF PURPOSE OF SALE, BURDEN OF PROOF.] 
 75.1      For the purpose of the proper administration of sections 
 75.2   297A.01 to 297A.44 and to prevent evasion of the use tax and the 
 75.3   duty to collect the use tax, it shall be presumed that all 
 75.4   retail sales for delivery of tangible personal property in 
 75.5   Minnesota and all retail sales of services to purchasers located 
 75.6   in Minnesota are for storage, use, or other consumption in 
 75.7   Minnesota until the contrary is established.  The burden of 
 75.8   proving the contrary shall be upon the person who makes the sale 
 75.9   but that person may take from the purchaser an exemption 
 75.10  certificate in accordance with sections 297A.09 to 297A.13.  
 75.11     Sec. 11.  Minnesota Statutes 1996, section 297A.24, 
 75.12  subdivision 1, is amended to read: 
 75.13     Subdivision 1.  [STATE TAX.] If any article of tangible 
 75.14  personal property, any service, or any item enumerated in 
 75.15  section 297A.14 has already been subjected to a tax by any other 
 75.16  state in respect of its sale, storage, use or other consumption 
 75.17  in an amount less than the tax imposed by sections 297A.01 to 
 75.18  297A.44, then as to the person who paid the tax in such other 
 75.19  state, the provisions of section 297A.14 shall apply only at a 
 75.20  rate measured by the difference between the rate imposed under 
 75.21  section 297A.02 and the rate by which the previous tax was 
 75.22  computed.  If such tax imposed in such other state was equal to 
 75.23  or greater than the tax imposed in this state, then no tax shall 
 75.24  be due from such person under section 297A.14. 
 75.25     Sec. 12.  Minnesota Statutes 1996, section 297A.25, 
 75.26  subdivision 4, is amended to read: 
 75.27     Subd. 4.  [CONSTITUTIONAL PROHIBITIONS.] The gross receipts 
 75.28  from the sale of and the storage, use or other consumption in 
 75.29  Minnesota of tangible personal property, services, tickets, or 
 75.30  admissions, electricity, gas, or local exchange telephone 
 75.31  service, which under the Constitution or laws of the United 
 75.32  States or under the Constitution of Minnesota, the state of 
 75.33  Minnesota is prohibited from taxing, are exempt.  
 75.34     Sec. 13.  Minnesota Statutes 1996, section 297A.25, 
 75.35  subdivision 9, is amended to read: 
 75.36     Subd. 9.  [MATERIALS CONSUMED IN PRODUCTION.] The gross 
 76.1   receipts from the sale of and the storage, use, or consumption 
 76.2   of all materials, including chemicals, fuels, petroleum 
 76.3   products, lubricants, packaging materials, including returnable 
 76.4   containers used in packaging food and beverage products, feeds, 
 76.5   seeds, fertilizers, electricity, gas and steam, used or consumed 
 76.6   in agricultural or industrial production of personal property, 
 76.7   including publications, intended to be sold ultimately at 
 76.8   retail, whether or not the item so used becomes an ingredient or 
 76.9   constituent part of the property produced, or used or consumed 
 76.10  in the performance of services the sale of which is not exempt 
 76.11  under subdivision 63, are exempt.  Seeds, trees, fertilizers, 
 76.12  and herbicides purchased for use by farmers in the Conservation 
 76.13  Reserve Program under United States Code, title 16, section 
 76.14  590h, the Integrated Farm Management Program under section 1627 
 76.15  of Public Law Number 101-624, the Wheat and Feed Grain Programs 
 76.16  under sections 301 to 305 and 401 to 405 of Public Law Number 
 76.17  101-624, and the conservation reserve program under sections 
 76.18  103F.505 to 103F.531, are included in this exemption.  Sales to 
 76.19  a veterinarian of materials used or consumed in the care, 
 76.20  medication, and treatment of agricultural production animals and 
 76.21  horses used in agricultural production are exempt under this 
 76.22  subdivision.  Chemicals used for cleaning food processing 
 76.23  machinery and equipment are included in this exemption.  
 76.24  Materials, including chemicals, fuels, and electricity purchased 
 76.25  by persons engaged in agricultural or industrial production to 
 76.26  treat waste generated as a result of the production process are 
 76.27  included in this exemption.  Such production shall include, but 
 76.28  is not limited to, research, development, design or production 
 76.29  of any tangible personal property, manufacturing, processing 
 76.30  (other than by restaurants and consumers) of agricultural 
 76.31  products whether vegetable or animal, commercial fishing, 
 76.32  refining, smelting, reducing, brewing, distilling, printing, 
 76.33  mining, quarrying, lumbering, generating electricity and the 
 76.34  production of road building materials.  Such production shall 
 76.35  not include painting, cleaning, repairing or similar processing 
 76.36  of property except as part of the original manufacturing 
 77.1   process.  Machinery, equipment, implements, tools, accessories, 
 77.2   appliances, contrivances, furniture and fixtures, used in such 
 77.3   production and fuel, electricity, gas or steam used for space 
 77.4   heating or lighting, are not included within this exemption; 
 77.5   however, accessory tools, equipment and other short lived items, 
 77.6   which are separate detachable units used in producing a direct 
 77.7   effect upon the product, where such items have an ordinary 
 77.8   useful life of less than 12 months, are included within the 
 77.9   exemption provided herein.  Electricity used to make snow for 
 77.10  outdoor use for ski hills, ski slopes, or ski trails is included 
 77.11  in this exemption. 
 77.12     Sec. 14.  Minnesota Statutes 1996, section 297A.25, 
 77.13  subdivision 12, is amended to read: 
 77.14     Subd. 12.  [OCCASIONAL SALES.] (a) The gross receipts from 
 77.15  the isolated or occasional sale of tangible personal property or 
 77.16  services in Minnesota not made in the normal course of business 
 77.17  of selling that kind of property or services, and the storage, 
 77.18  use, or consumption of property or services acquired as a result 
 77.19  of such a sale are exempt.  
 77.20     (b) This exemption does not apply to sales of tangible 
 77.21  personal property primarily used in a trade or business unless 
 77.22  (1) the sale occurs in a transaction subject to or described in 
 77.23  section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 
 77.24  1031, or 1033 of the Internal Revenue Code of 1986, as amended 
 77.25  through December 31, 1990; (2) the sale is between members of a 
 77.26  controlled group as defined in section 1563(a) of the Internal 
 77.27  Revenue Code of 1986, as amended through December 31, 1990; (3) 
 77.28  the sale is a sale of farm machinery; (4) the sale is a farm 
 77.29  auction sale; (5) the sale is a sale of substantially all of the 
 77.30  assets of a trade or business; or (6) the total amount of gross 
 77.31  receipts from the sale of trade or business property made during 
 77.32  the calendar month of the sale and the preceding 11 calendar 
 77.33  months does not exceed $1,000. 
 77.34     (c) For purposes of this subdivision, the following terms 
 77.35  have the meanings given.  
 77.36     (1) A "farm auction" is a public auction conducted by a 
 78.1   licensed auctioneer if substantially all of the property sold 
 78.2   consists of property used in the trade or business of farming 
 78.3   and property not used primarily in a trade or business. 
 78.4      (2) "Trade or business" includes the assets of a separate 
 78.5   division, branch, or identifiable segment of a trade or business 
 78.6   if, before the sale, the income and expenses attributable to the 
 78.7   separate division, branch, or identifiable segment could be 
 78.8   separately ascertained from the books of account or record (the 
 78.9   lease or rental of an identifiable segment does not qualify for 
 78.10  the exemption). 
 78.11     (3) A "sale of substantially all of the assets of a trade 
 78.12  or business" must occur as a single transaction or a series of 
 78.13  related transactions occurring within the 12-month period 
 78.14  beginning on the date of the first sale of assets intended to 
 78.15  qualify for the exemption provided in paragraph (b), clause (5). 
 78.16     Sec. 15.  Minnesota Statutes 1996, section 297A.25, is 
 78.17  amended by adding a subdivision to read: 
 78.18     Subd. 62.  [CONSTRUCTION MATERIALS; CERTAIN TAX INCREMENT 
 78.19  FINANCING DISTRICTS.] Construction materials and supplies are 
 78.20  exempt from the tax imposed under this chapter if the materials 
 78.21  and supplies are used or consumed in constructing real property 
 78.22  in a redevelopment district as defined in section 469.174, 
 78.23  subdivision 10; a renewal and renovation district as defined in 
 78.24  section 469.174, subdivision 10a; a housing district as defined 
 78.25  in section 469.174, subdivision 11; a mined underground space 
 78.26  development district as defined in section 469.174, subdivision 
 78.27  13; a designated hazardous substance site as defined in section 
 78.28  469.174, subdivision 16; or a soils condition district as 
 78.29  defined in section 469.174, subdivision 19. 
 78.30     Sec. 16.  Minnesota Statutes 1996, section 297A.25, is 
 78.31  amended by adding a subdivision to read: 
 78.32     Subd. 63.  [SALES OF SERVICES TO BUSINESSES.] Sales of 
 78.33  services described in section 297A.01, subdivision 3, paragraph 
 78.34  (i), but not in any other paragraph of subdivision 3, to any 
 78.35  person engaged in the conduct of a trade or business within the 
 78.36  meaning of section 162(a) of the Internal Revenue Code are 
 79.1   exempt if the benefits of the services are consumed in 
 79.2   connection with the trade or business.  Nothing in this 
 79.3   subdivision shall limit the scope of section 297A.01, 
 79.4   subdivision 3, paragraph (b).  If tangible personal property and 
 79.5   services are sold together and the services would be exempt 
 79.6   under this subdivision, the services are exempt only if the 
 79.7   consideration for the tangible personal property and the 
 79.8   services is separately stated. 
 79.9      Sec. 17.  Minnesota Statutes 1996, section 297A.25, is 
 79.10  amended by adding a subdivision to read: 
 79.11     Subd. 64.  [SALES OF CERTAIN HEALTH CARE SERVICES.] Sales 
 79.12  of services subject to license by licensed health care 
 79.13  providers, including doctors, hospitals, clinics, and nursing 
 79.14  homes, are exempt. 
 79.15     Sec. 18.  Minnesota Statutes 1996, section 297B.01, 
 79.16  subdivision 8, is amended to read: 
 79.17     Subd. 8.  [PURCHASE PRICE.] "Purchase price" means the 
 79.18  total consideration valued in money for a sale, whether paid in 
 79.19  money or otherwise.  The purchase price excludes the amount of a 
 79.20  manufacturer's rebate paid or payable to the purchaser.  If a 
 79.21  The purchase price is not reduced by the value of any motor 
 79.22  vehicle is taken in trade as a credit or as part payment on a 
 79.23  motor vehicle taxable under this chapter, the credit or trade-in 
 79.24  value allowed by the person selling the motor vehicle shall be 
 79.25  deducted from the total selling price to establish the purchase 
 79.26  price of the vehicle being sold and the trade-in allowance 
 79.27  allowed by the seller shall constitute the purchase price of the 
 79.28  motor vehicle accepted as a trade-in which value may be the 
 79.29  average value of similar motor vehicles, established by 
 79.30  standards and guides as determined by the motor vehicle 
 79.31  registrar.  The purchase price in those instances where the 
 79.32  motor vehicle is acquired by gift or by any other transfer for a 
 79.33  nominal or no monetary consideration shall also include the 
 79.34  average value of similar motor vehicles, established by 
 79.35  standards and guides as determined by the motor vehicle 
 79.36  registrar as provided in this subdivision.  The purchase price 
 80.1   in those instances where a motor vehicle is manufactured by a 
 80.2   person who registers it under the laws of this state shall mean 
 80.3   the manufactured cost of such motor vehicle and manufactured 
 80.4   cost shall mean the amount expended for materials, labor and 
 80.5   other properly allocable costs of manufacture, except that in 
 80.6   the absence of actual expenditures for the manufacture of a part 
 80.7   or all of the motor vehicle, manufactured costs shall mean the 
 80.8   reasonable value of the completed motor vehicle.  
 80.9      The term "purchase price" shall not include the portion of 
 80.10  the value of a motor vehicle due solely to modifications 
 80.11  necessary to make the motor vehicle handicapped accessible.  The 
 80.12  term "purchase price" shall not include the transfer of a motor 
 80.13  vehicle by way of gift between a husband and wife or parent and 
 80.14  child, nor shall it include the transfer of a motor vehicle by a 
 80.15  guardian to a ward when there is no monetary consideration and 
 80.16  the title to such vehicle was registered in the name of the 
 80.17  guardian, as guardian, only because the ward was a minor.  There 
 80.18  shall not be included in "purchase price" the amount of any tax 
 80.19  imposed by the United States upon or with respect to retail 
 80.20  sales whether imposed upon the retailer or the consumer.  
 80.21     The term "purchase price" shall not include the transfer of 
 80.22  a motor vehicle as a gift between a foster parent and foster 
 80.23  child.  For purposes of this subdivision, a foster relationship 
 80.24  exists, regardless of the age of the child, if (1) a foster 
 80.25  parent's home is or was licensed as a foster family home under 
 80.26  Minnesota Rules, parts 9545.0010 to 9545.0260, and (2) the 
 80.27  county verifies that the child was a state ward or in permanent 
 80.28  foster care. 
 80.29     Sec. 19.  Minnesota Statutes 1996, section 297B.01, is 
 80.30  amended by adding a subdivision to read: 
 80.31     Subd. 10.  [INTERNAL REVENUE CODE.] Unless otherwise 
 80.32  specifically provided, for purposes of this chapter, "Internal 
 80.33  Revenue Code" means the Internal Revenue Code of 1986, as 
 80.34  amended through December 31, 1996. 
 80.35     Sec. 20.  Minnesota Statutes 1996, section 297B.03, is 
 80.36  amended to read: 
 81.1      297B.03 [EXEMPTIONS.] 
 81.2      There is specifically exempted from the provisions of this 
 81.3   chapter and from computation of the amount of tax imposed by it 
 81.4   the following:  
 81.5      (1) Purchase or use, including use under a lease purchase 
 81.6   agreement or installment sales contract made pursuant to section 
 81.7   465.71, of any motor vehicle by the United States and its 
 81.8   agencies and instrumentalities and by any person described in 
 81.9   and subject to the conditions provided in section 297A.25, 
 81.10  subdivision 18.  
 81.11     (2) Purchase or use of any motor vehicle by any person who 
 81.12  was a resident of another state at the time of the purchase and 
 81.13  who subsequently becomes a resident of Minnesota, provided the 
 81.14  purchase occurred more than 60 days prior to the date such 
 81.15  person began residing in the state of Minnesota.  
 81.16     (3) Purchase or use of any motor vehicle by any person 
 81.17  making a valid election to be taxed under the provisions of 
 81.18  section 297A.211.  
 81.19     (4) Purchase or use of any motor vehicle previously 
 81.20  registered in the state of Minnesota by any corporation or 
 81.21  partnership when such transfer constitutes a transfer within the 
 81.22  meaning of section 351 or 721 of the Internal Revenue Code of 
 81.23  1986, as amended through December 31, 1988.  
 81.24     (5) Purchase or use of any vehicle owned by a resident of 
 81.25  another state and leased to a Minnesota based private or for 
 81.26  hire carrier for regular use in the transportation of persons or 
 81.27  property in interstate commerce provided the vehicle is titled 
 81.28  in the state of the owner or secured party, and that state does 
 81.29  not impose a sales tax or sales tax on motor vehicles used in 
 81.30  interstate commerce.  
 81.31     (6) Purchase or use of a motor vehicle by a private 
 81.32  nonprofit or public educational institution for use as an 
 81.33  instructional aid in automotive training programs operated by 
 81.34  the institution.  "Automotive training programs" includes motor 
 81.35  vehicle body and mechanical repair courses but does not include 
 81.36  driver education programs.  
 82.1      (7) Purchase of a motor vehicle for use as an ambulance by 
 82.2   an ambulance service licensed under section 144.802. 
 82.3      (8) Purchase of a motor vehicle by or for a public library, 
 82.4   as defined in section 134.001, subdivision 2, as a bookmobile or 
 82.5   library delivery vehicle. 
 82.6      Sec. 21.  [REPEALER.] 
 82.7      Minnesota Statutes 1996, sections 297A.01, subdivision 20; 
 82.8   297A.02, subdivisions 2 and 5; 297A.15, subdivision 5; 297A.25, 
 82.9   subdivisions 6, 7, 8, 10, 11, 17, 18, 21, 23, 26, 30, 39, 40, 
 82.10  41, 44, 56, 57, 58, and 59; 297A.256, subdivision 2; 297B.02, 
 82.11  subdivisions 2 and 3; and 297B.025, are repealed. 
 82.12     Sec. 22.  [EFFECTIVE DATE.] 
 82.13     Sections 1 to 17 are effective January 1, 1998.  Sections 
 82.14  18, 20, and 21 are effective July 1, 1997. 
 82.15                             ARTICLE 5
 82.16       BUSINESS ACTIVITIES AND AGRICULTURAL PRODUCTION TAXES
 82.17     Section 1.  Minnesota Statutes 1996, section 289A.01, is 
 82.18  amended to read: 
 82.19     289A.01 [APPLICATION OF CHAPTER.] 
 82.20     This chapter applies to taxes administered by or paid to 
 82.21  the commissioner under chapters 290, 290A, 290B, 291, and 297A, 
 82.22  and sections 298.01 and 298.015. 
 82.23     Sec. 2.  Minnesota Statutes 1996, section 289A.08, is 
 82.24  amended by adding a subdivision to read: 
 82.25     Subd. 16.  [BUSINESS ACTIVITIES TAX RETURNS.] A taxpayer 
 82.26  subject to the business activities tax under chapter 290B must 
 82.27  file an annual return. 
 82.28     Sec. 3.  Minnesota Statutes 1996, section 289A.18, is 
 82.29  amended by adding a subdivision to read: 
 82.30     Subd. 6.  [BUSINESS ACTIVITIES TAX RETURNS.] Business 
 82.31  activities tax returns made on the basis of the calendar year 
 82.32  must be filed on March 15 following the close of the calendar 
 82.33  year.  Business activities tax returns made on the basis of a 
 82.34  fiscal year must be filed on the 15th day of the third month 
 82.35  following the close of the fiscal year. 
 82.36     Sec. 4.  Minnesota Statutes 1996, section 289A.19, is 
 83.1   amended by adding a subdivision to read: 
 83.2      Subd. 7.  [BUSINESS ACTIVITIES TAX RETURNS.] Where good 
 83.3   cause exists, the commissioner may grant an extension for up to 
 83.4   seven months for filing a business activities tax return.  The 
 83.5   commissioner shall grant an extension to any corporation which 
 83.6   is granted an extension for filing its corporate franchise tax 
 83.7   return under subdivision 2, and to any individual whose 
 83.8   individual income tax return filing due date is extended as a 
 83.9   result of an extension of the individual's federal income tax 
 83.10  return filing date. 
 83.11     Sec. 5.  Minnesota Statutes 1996, section 289A.20, 
 83.12  subdivision 1, is amended to read: 
 83.13     Subdivision 1.  [INDIVIDUAL INCOME, FIDUCIARY INCOME, 
 83.14  MINING COMPANY, CORPORATE FRANCHISE, BUSINESS ACTIVITIES, AND 
 83.15  ENTERTAINMENT TAXES.] (a) Individual income, fiduciary, mining 
 83.16  company, and corporate franchise, and business activities taxes 
 83.17  must be paid to the commissioner on or before the date the 
 83.18  return must be filed under section 289A.18, subdivision 1, or 
 83.19  the extended due date as provided in section 289A.19, unless an 
 83.20  earlier date for payment is provided.  
 83.21     Notwithstanding any other law, a taxpayer whose unpaid 
 83.22  liability for income or corporate franchise taxes, as reflected 
 83.23  upon the return, is $1 or less need not pay the tax.  
 83.24     (b) Entertainment taxes must be paid on or before the date 
 83.25  the return must be filed under section 289A.18, subdivision 1. 
 83.26     Sec. 6.  [289A.27] [ESTIMATED BUSINESS ACTIVITIES TAX.] 
 83.27     Subdivision 1.  [MINIMUM LIABILITY.] A person subject to 
 83.28  business activities tax under chapter 290B must make payment of 
 83.29  estimated tax for the taxable year if the person's business 
 83.30  activity tax liability for the taxable year can reasonably be 
 83.31  expected to exceed $500. 
 83.32     Subd. 2.  [SOLE PROPRIETORS.] Sole proprietors are required 
 83.33  to make the estimated tax payment required under subdivision 1 
 83.34  in four equal installments on or before April 15, June 15, 
 83.35  September 15, and January 15 of the following year.  The 
 83.36  provisions of section 289A.25 shall apply to the estimated 
 84.1   business activities tax of sole proprietors. 
 84.2      Subd. 3.  [OTHER TAXPAYERS.] Taxpayers other than sole 
 84.3   proprietors are required to make the estimated tax payment 
 84.4   required under subdivision 1 in four equal installments on or 
 84.5   before the 15th day of the third, sixth, ninth, and 12th month 
 84.6   of the taxable year.  The provisions of section 289A.26 shall 
 84.7   apply to the estimated business activities tax of taxpayers 
 84.8   other than sole proprietors. 
 84.9      Sec. 7.  Minnesota Statutes 1996, section 289A.30, 
 84.10  subdivision 1, is amended to read: 
 84.11     Subdivision 1.  [FIDUCIARY INCOME, CORPORATE FRANCHISE, 
 84.12  BUSINESS ACTIVITIES TAX.] Where good cause exists, the 
 84.13  commissioner may extend the time for payment of the amount 
 84.14  determined as a fiduciary income tax or, corporate franchise tax 
 84.15  , or business activities tax by the taxpayer, or an amount 
 84.16  determined as a deficiency, for a period of not more than six 
 84.17  months from the date prescribed for the payment of the tax. 
 84.18     Sec. 8.  Minnesota Statutes 1996, section 289A.31, is 
 84.19  amended by adding a subdivision to read: 
 84.20     Subd. 8.  [BUSINESS ACTIVITIES TAX.] (a) The business 
 84.21  activities tax imposed by section 290B.03 is due from the person 
 84.22  owning the rental income or royalty income, whether or not that 
 84.23  person is a business, and, in the case of the tax on apportioned 
 84.24  gross margin, from the owner of the business.  Entities, rather 
 84.25  than individuals, are liable for the tax, except in the case of 
 84.26  a sole proprietorship and of real property or mineral interests 
 84.27  owned by individuals.  The tax is owed at the entity level even 
 84.28  if the entity is a pass-through entity for federal income tax 
 84.29  purposes. 
 84.30     (b) Unpaid liability for the business activities tax 
 84.31  imposed by section 290B.03, that arises from the operation of a 
 84.32  business, terminates when the business from which it arose 
 84.33  terminates except that transferees of any assets of the business 
 84.34  which are transferred to or for the benefit of an owner of the 
 84.35  business are liable as transferees.  This provision applies to 
 84.36  businesses that are sole proprietorships and requires 
 85.1   differentiation between assets related to the business and 
 85.2   unrelated assets of its owner. 
 85.3      Sec. 9.  Minnesota Statutes 1996, section 290.91, is 
 85.4   amended to read: 
 85.5      290.91 [DESTRUCTION OF RETURNS.] 
 85.6      The commissioner of revenue is hereby authorized to destroy 
 85.7   all tax returns, required under this chapter or, chapter 290A, 
 85.8   or chapter 290B, including audit reports, orders, and 
 85.9   correspondence relating thereto, which have been on file in the 
 85.10  commissioner's office for a period to be determined by the 
 85.11  commissioner.  The commissioner may make copies of such returns, 
 85.12  orders, or correspondence by microfilm, photostat, or other 
 85.13  similar means and may immediately destroy the original documents 
 85.14  from which such copies have been made.  Such copies, when 
 85.15  certified to by the commissioner, shall be admissible in 
 85.16  evidence in the same manner and be given the same effect as the 
 85.17  original documents destroyed. 
 85.18     The commissioner may destroy correspondence and documents 
 85.19  contained in the files of the division which do not relate 
 85.20  specifically to any tax return. 
 85.21     Notwithstanding the above provisions the commissioner may, 
 85.22  utilizing such safeguards as the commissioner in the 
 85.23  commissioner's discretion deems necessary, (1) employ a 
 85.24  commercial photographer for the purpose of developing microfilm 
 85.25  of returns or other documents, or (2) employ a vendor for the 
 85.26  purpose of obtaining the vendor's services an example of which 
 85.27  is the preparation of income tax return labels. 
 85.28     Sec. 10.  Minnesota Statutes 1996, section 290.9201, 
 85.29  subdivision 2, is amended to read: 
 85.30     Subd. 2.  [TAX ON ENTERTAINMENT.] Entertainment entities 
 85.31  are subject to a tax in the amount of two three percent of the 
 85.32  total compensation received by them during the calendar year for 
 85.33  entertainment performed in Minnesota. 
 85.34     Sec. 11.  Minnesota Statutes 1996, section 290.923, 
 85.35  subdivision 2, is amended to read: 
 85.36     Subd. 2.  [COLLECTION AT SOURCE.] (a) Every person making 
 86.1   payment of royalties shall deduct and withhold upon the 
 86.2   royalties a tax as provided in this section.  
 86.3      (b) The amount of tax to be withheld shall be based upon 
 86.4   tables to be prepared and distributed by the commissioner.  The 
 86.5   tables must be computed for several permissible withholding 
 86.6   periods and shall take into account any exemptions allowed under 
 86.7   this chapter.  The amounts computed for withholding shall be 
 86.8   such that the amount withheld for any person during the person's 
 86.9   taxable year shall approximate in the aggregate as closely as 
 86.10  possible the sum of (1) the tax levied and imposed under this 
 86.11  chapter for that taxable year upon the person's income subject 
 86.12  to tax and (2) the tax imposed under chapter 290B.  
 86.13     Sec. 12.  Minnesota Statutes 1996, section 290.97, is 
 86.14  amended to read: 
 86.15     290.97 [CONTRACTS WITH STATE; WITHHOLDING.] 
 86.16     No department of the state of Minnesota, nor any political 
 86.17  or governmental subdivision of the state shall make final 
 86.18  settlement with any contractor under a contract requiring the 
 86.19  employment of employees for wages by said contractor and by 
 86.20  subcontractors until satisfactory showing is made that said the 
 86.21  contractor or subcontractor has complied with the provisions of 
 86.22  section 290.92.  A certificate by the commissioner of revenue 
 86.23  shall satisfy this requirement with respect to the contractor or 
 86.24  subcontractor.  If, at the time of final settlement, there are 
 86.25  any unpaid withholding taxes, penalties, or interest arising 
 86.26  from the government contract, the department shall issue a 
 86.27  certification to the contractor or subcontractor upon payment, 
 86.28  with certified funds, of any unpaid withholding taxes, 
 86.29  penalties, and interest.  Payment is received by the department 
 86.30  upon delivery of the certified funds to the central office 
 86.31  located in St. Paul, or any district or subdistrict office 
 86.32  located throughout the state. 
 86.33     Sec. 13.  Minnesota Statutes 1996, section 290.9705, 
 86.34  subdivision 1, is amended to read: 
 86.35     Subdivision 1.  [WITHHOLDING OF PAYMENTS TO OUT-OF-STATE 
 86.36  CONTRACTORS.] (a) In this section, "person" means a person, 
 87.1   corporation, or cooperative, the state of Minnesota and its 
 87.2   political subdivisions, and a city, county, and school district 
 87.3   in Minnesota. 
 87.4      (b) A person who in the regular course of business is 
 87.5   hiring, contracting, or having a contract with a nonresident 
 87.6   person or foreign corporation, as defined in Minnesota Statutes 
 87.7   1986, section 290.01, subdivision 5, to perform construction 
 87.8   work in Minnesota, shall deduct and withhold eight nine percent 
 87.9   of every payment to the contractor if the contract exceeds or 
 87.10  can reasonably be expected to exceed $100,000. 
 87.11     Sec. 14.  Minnesota Statutes 1996, section 290.9705, 
 87.12  subdivision 3, is amended to read: 
 87.13     Subd. 3.  [WAIVER OF WITHHOLDING.] The conditions in 
 87.14  subdivisions 1 and 2 may be waived by the commissioner if (1) 
 87.15  the contractor gives the commissioner a cash surety or a bond, 
 87.16  secured by an insurance company licensed by Minnesota, 
 87.17  conditioned that the contractor will comply with all applicable 
 87.18  provisions of this chapter, chapter 290B, and chapter 297A, or 
 87.19  (2) the contractor has done construction work in Minnesota at 
 87.20  any time during the three calendar years prior to entering the 
 87.21  contract and has fully complied with all the provisions of this 
 87.22  chapter, chapter 290B, and chapter 297A for the three prior 
 87.23  years. 
 87.24     Sec. 15.  [290B.01] [DEFINITIONS.] 
 87.25     Subdivision 1.  [WORDS AND PHRASES.] For purposes of this 
 87.26  chapter, unless the language or context clearly indicates that a 
 87.27  different meaning is intended, the words and phrases defined in 
 87.28  subdivisions 2 to 27, have the meanings given them. 
 87.29     Subd. 2.  [APPORTIONED GROSS MARGIN.] "Apportioned gross 
 87.30  margin" means the product of (1) the Minnesota apportionment 
 87.31  percentage, including all applicable factors, as determined 
 87.32  under chapter 290 for the person, or which would be determined 
 87.33  if chapter 290 applied, for the taxable year, and (2) the 
 87.34  person's gross margin for the year.  In the case of a person, 
 87.35  the entire business of which is conducted wholly within 
 87.36  Minnesota, the apportionment factor is 100 percent.  If the 
 88.1   gross margin is determined under subdivision 13, clause (2), 
 88.2   item (iii), for a unitary business, the apportionment percentage 
 88.3   shall be computed using the total factors of the unitary 
 88.4   business in the denominator. 
 88.5      Subd. 3.  [BUSINESS.] "Business" means any trade or 
 88.6   business within the meaning of section 162(a) of the Internal 
 88.7   Revenue Code, including activities of organizations exempt from 
 88.8   the federal income tax under the Internal Revenue Code that 
 88.9   would constitute a trade or business thereunder if they were 
 88.10  conducted by a for-profit business corporation.  Business does 
 88.11  not include investment if so determined under the standards 
 88.12  applicable to distinguishing a trade or business from investment 
 88.13  activities in the Internal Revenue Code. 
 88.14     Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 88.15  commissioner of revenue. 
 88.16     Subd. 5.  [CORPORATION.] "Corporation" has the meaning 
 88.17  given in section 290.01, subdivision 4. 
 88.18     Subd. 6.  [DOMESTIC CORPORATION.] "Domestic," when applied 
 88.19  to a corporation, has the meaning given in section 290.01, 
 88.20  subdivision 5. 
 88.21     Subd. 7.  [FIDUCIARY.] "Fiduciary" means a guardian, 
 88.22  trustee, receiver, conservator, personal representative, or any 
 88.23  person acting in any fiduciary capacity for any person. 
 88.24     Subd. 8.  [FINANCIAL INSTITUTION.] "Financial institution," 
 88.25  "holding company," "regulated financial corporation," and 
 88.26  "business of a financial institution" have the meaning given in 
 88.27  section 290.01, subdivision 4a. 
 88.28     Subd. 9.  [FISCAL YEAR.] "Fiscal year" means an accounting 
 88.29  period of 12 months ending on the last day of any month other 
 88.30  than December.  In the case of a taxpayer who has made the 
 88.31  election provided by section 289A.08, subdivision 5, fiscal year 
 88.32  means the annual period, varying from 52 to 53 weeks, so elected.
 88.33     Subd. 10.  [FOREIGN CORPORATION.] "Foreign," when applied 
 88.34  to a corporation, means a corporation other than a domestic 
 88.35  corporation. 
 88.36     Subd. 11.  [FOREIGN OPERATING CORPORATION.] "Foreign 
 89.1   operating corporation" has the meaning given in section 290.01, 
 89.2   subdivision 6b. 
 89.3      Subd. 12.  [GROSS INCOME.] "Gross income" means the gross 
 89.4   income as defined in section 61 of the Internal Revenue Code, 
 89.5   plus any additional items of income taxable under chapter 290 
 89.6   but not taxable under the Internal Revenue Code, less any items 
 89.7   included in federal gross income but exempt from state income 
 89.8   tax under the laws of the United States. 
 89.9      Subd. 13.  [GROSS MARGIN.] "Gross margin" means: 
 89.10     (1) in the case of all sales or receipts in the ordinary 
 89.11  course of business which are included in the sales or receipts 
 89.12  factor of the apportionment formula applicable to the person 
 89.13  under chapter 290, or which would be applicable under chapter 
 89.14  290 if the person apportioned income, other than sales of 
 89.15  tangible property, the amount of the sales or receipts; and 
 89.16     (2) in the case of all sales of tangible property which are 
 89.17  included in the sales or receipts factor of the apportionment 
 89.18  formula applicable to the person under chapter 290, or which 
 89.19  would be applicable if the person apportioned income, the excess 
 89.20  of such sales for the taxable year over: 
 89.21     (i) in the case of sales of tangible property which is 
 89.22  purchased by the person and resold without alteration, the cost 
 89.23  of goods sold as determined for federal income tax purposes 
 89.24  under the Internal Revenue Code, except to the extent otherwise 
 89.25  provided in item (iii) for unitary businesses; or 
 89.26     (ii) in the case of manufacturing, construction, farming, 
 89.27  or other processing of tangible property, the direct material 
 89.28  costs, within the meaning of section 471 of the Internal Revenue 
 89.29  Code, of the tangible property sold.  Direct material costs 
 89.30  include the cost of those materials which become an integral 
 89.31  part of the specific product and those materials which are 
 89.32  consumed in the ordinary cost of manufacturing, constructing, or 
 89.33  other processing and can be identified or associated with 
 89.34  particular units or groups of units of that product.  Direct 
 89.35  material costs do not include direct labor costs or indirect 
 89.36  production costs.  For natural resources removed from their 
 90.1   natural state by the person, direct material costs include only 
 90.2   cost depletion to the extent allowable for federal income tax 
 90.3   purposes under the Internal Revenue Code.  For crops grown by 
 90.4   the person, direct material costs include only seed, fertilizer, 
 90.5   water, and other supplies applied to the crop or the land.  For 
 90.6   animals raised by the person, direct material costs include only 
 90.7   the purchase price, if any, and to the extent not treated as a 
 90.8   direct material cost of animal by-products, feed, water, and 
 90.9   other supplies fed or applied to the animals.  For animal 
 90.10  by-products produced by animals raised by the person, direct 
 90.11  material costs include only the feed, water, and other supplies 
 90.12  fed or applied to the animals.  Purchases by one member of a 
 90.13  unitary business from another are subject to the special rule in 
 90.14  item (iii); 
 90.15     (iii) in the case of tangible property purchased by one 
 90.16  person in a unitary business from another member of the same 
 90.17  unitary business, the cost of that property to the purchasing 
 90.18  person is disregarded and the cost is deemed to be the cost of 
 90.19  goods sold or the direct materials cost, whichever is 
 90.20  applicable, of the first member of the unitary business to 
 90.21  acquire the property. 
 90.22     Subd. 14.  [INTERNAL REVENUE CODE.] Unless specifically 
 90.23  defined otherwise, "Internal Revenue Code" means the Internal 
 90.24  Revenue Code of 1986, as amended through December 31, 1996. 
 90.25     Subd. 15.  [LIMITED LIABILITY COMPANY.] For purposes of 
 90.26  this chapter and chapter 289A, a limited liability company that 
 90.27  is formed under either the laws of this state or under similar 
 90.28  laws of another state, and that is considered to be a 
 90.29  partnership for federal income tax purposes, is considered to be 
 90.30  a partnership and the members must be considered to be partners. 
 90.31     Subd. 16.  [MINNESOTA AGRICULTURAL PRODUCTION GROSS 
 90.32  MARGIN.] "Minnesota agricultural production gross margin" means 
 90.33  the gross margin, as defined in subdivision 13, from the sale of 
 90.34  agricultural products as defined in section 273.13, subdivision 
 90.35  23, paragraphs (e) and (f), produced on agricultural land as 
 90.36  defined in section 273.13, subdivision 23.  If the producer of 
 91.1   an agricultural product subjects the product to processing that 
 91.2   converts the product from a raw agricultural product of a type 
 91.3   generally sold by farmers into a processed product prior to 
 91.4   sale, the gross margin shall be computed by using a market sales 
 91.5   price for the raw agricultural product at the time that the 
 91.6   further processing commenced. 
 91.7      Subd. 17.  [MINNESOTA MINERAL ROYALTY INCOME.] "Minnesota 
 91.8   mineral royalty income" means the royalty income, as defined in 
 91.9   section 61 of the Internal Revenue Code, with respect to rights 
 91.10  to explore, mine, take out, and remove minerals from land in 
 91.11  Minnesota. 
 91.12     Subd. 18.  [MINNESOTA REAL PROPERTY RENTAL 
 91.13  INCOME.] "Minnesota real property rental income" means the 
 91.14  rental income, as defined in section 61 of the Internal Revenue 
 91.15  Code, from real property located in Minnesota. 
 91.16     Subd. 19.  [PARTNERSHIP; PARTNER.] "Partnership" and 
 91.17  "partner" have the meanings given them in section 7701(a)(2) of 
 91.18  the Internal Revenue Code. 
 91.19     Subd. 20.  [PERSON.] "Person" includes individuals, 
 91.20  fiduciaries, estates, trusts, partnerships, and corporations. 
 91.21     Subd. 21.  [PERSONAL REPRESENTATIVE.] "Personal 
 91.22  representative" includes executor, administrator, successor 
 91.23  personal representative, special administrator, and persons who 
 91.24  perform substantially the same function under the law governing 
 91.25  their status. 
 91.26     Subd. 22.  [RESIDENT.] "Resident" means any individual who 
 91.27  is a resident under section 290.01, subdivision 7. 
 91.28     Subd. 23.  [STATE; THIS STATE.] "State" or "this state" 
 91.29  means the state of Minnesota. 
 91.30     Subd. 24.  [TAXABLE YEAR.] "Taxable year" means the period 
 91.31  for which the taxes levied by this chapter are imposed.  It 
 91.32  shall be a calendar year, a fiscal year, or, in cases where 
 91.33  returns for a fractional part of a year are permitted or 
 91.34  required, the period for which the return is made. 
 91.35     Subd. 25.  [TAXPAYER.] "Taxpayer" means a person or 
 91.36  corporation subject to a tax imposed by this chapter. 
 92.1      Subd. 26.  [TRUST.] "Trust" has the meaning provided under 
 92.2   the Internal Revenue Code. 
 92.3      Subd. 27.  [UNITARY BUSINESS.] "Unitary business" has the 
 92.4   meaning given in section 290.17, subdivision 4. 
 92.5      Sec. 16.  [290B.02] [JURISDICTION TO TAX.] 
 92.6      Subdivision 1.  [MINNESOTA REAL PROPERTY RENTAL 
 92.7   INCOME.] Minnesota real property rental income is taxable under 
 92.8   this chapter without regard to the contacts of the owner of the 
 92.9   real property with Minnesota. 
 92.10     Subd. 2.  [MINNESOTA MINERAL ROYALTY INCOME.] Minnesota 
 92.11  mineral royalty income is taxable under this chapter without 
 92.12  regard to the contacts of the recipient of the royalty income 
 92.13  with Minnesota. 
 92.14     Subd. 3.  [MINNESOTA AGRICULTURAL PRODUCTION GROSS MARGIN.] 
 92.15  Minnesota agricultural production gross margin is subject to the 
 92.16  agricultural production tax under this chapter without regard to 
 92.17  the contacts of the recipient of the gross margin with Minnesota.
 92.18     Subd. 4.  [GENERALLY.] Except as provided in subdivisions 1 
 92.19  to 3, which apply without regard to whether the income is in 
 92.20  connection with a business and without regard to the contacts of 
 92.21  the person with Minnesota if it is in connection with a 
 92.22  business, the provisions of section 290.015, other than 
 92.23  subdivision 3, paragraph (a), apply to determine whether a 
 92.24  person conducting a business is taxable under this chapter.  
 92.25  Section 290.015, subdivision 3, paragraph (a), does not apply to 
 92.26  this chapter. 
 92.27     Sec. 17.  [290B.03] [IMPOSITION OF BUSINESS ACTIVITIES 
 92.28  TAX.] 
 92.29     Except as otherwise provided in this chapter, there is 
 92.30  imposed for each taxable year a tax at a rate of one percent of 
 92.31  the sum of the Minnesota real property rental income, the 
 92.32  Minnesota mineral royalty income, and the apportioned gross 
 92.33  margin with respect to each business of each person subject to 
 92.34  tax under this chapter.  Persons subject to the agricultural 
 92.35  production tax imposed by section 290B.04 shall not be subject 
 92.36  to the business activities tax with respect to their 
 93.1   agricultural production gross margin. 
 93.2      Sec. 18.  [290B.04] [IMPOSITION OF AGRICULTURAL PRODUCTION 
 93.3   TAX.] 
 93.4      There is imposed for each taxable year a tax of one percent 
 93.5   of Minnesota agricultural production gross margin. 
 93.6      Sec. 19.  [290B.05] [EXEMPT PERSONS.] 
 93.7      The following persons are exempt from the business 
 93.8   activities tax under this chapter: 
 93.9      (1) the United States of America, the state of Minnesota, 
 93.10  and any political subdivision, agency, or instrumentality of 
 93.11  either, except to the extent described in clause (4), whether 
 93.12  engaged in the discharge of governmental or proprietary 
 93.13  functions; 
 93.14     (2) insurance companies subject to tax under section 
 93.15  60A.15; 
 93.16     (3) fraternal benefit societies engaged in the insurance 
 93.17  business; 
 93.18     (4) town and farmers' mutual insurance companies and mutual 
 93.19  property and casualty insurance companies, other than those (i) 
 93.20  writing life insurance, or (ii) whose total assets on December 
 93.21  31, 1989, exceeded $1,600,000,000; 
 93.22     (5) persons subject to the MinnesotaCare tax; 
 93.23     (6) persons subject to the tax on nonresident entertainers 
 93.24  imposed by section 290.9201; and 
 93.25     (7) organizations exempt from federal income tax under 
 93.26  subchapter F of the Internal Revenue Code. 
 93.27     Sec. 20.  [290B.06] [COMPUTATION; ACCOUNTING PERIOD.] 
 93.28     Subdivision 1.  [ANNUAL ACCOUNTING PERIOD.] The tax base 
 93.29  shall be computed on the basis of the taxpayer's annual 
 93.30  accounting period.  If a taxpayer has no annual accounting 
 93.31  period, or has one other than a fiscal year, the tax base shall 
 93.32  be computed on the basis of the calendar year.  Taxpayers shall 
 93.33  employ the same accounting period on which they report, or would 
 93.34  be required to report, their net income under the Internal 
 93.35  Revenue Code.  The commissioner shall provide by rule for the 
 93.36  determination of the accounting period for taxpayers who file a 
 94.1   combined report under section 290.34, subdivision 2, when 
 94.2   members of the group use different accounting periods for 
 94.3   federal income tax purposes.  Unless the taxpayer changes its 
 94.4   accounting period for federal purposes, the due date of the 
 94.5   return is not changed. 
 94.6      A taxpayer may change accounting periods only with the 
 94.7   consent of the commissioner.  In case of any such change, the 
 94.8   taxpayer shall pay a tax for the period not included in either 
 94.9   the taxpayer's former or newly adopted taxable year, computed 
 94.10  comparably to the provisions of section 290.32 with respect to 
 94.11  income tax. 
 94.12     Subd. 2.  [ACCOUNTING METHODS.] Except as specifically 
 94.13  provided to the contrary by this chapter, the tax base shall be 
 94.14  computed in accordance with the method of accounting regularly 
 94.15  employed in keeping the taxpayer's books.  If no such accounting 
 94.16  system has been regularly employed, or if that system employed 
 94.17  does not clearly or fairly reflect income or the tax base 
 94.18  taxable under this chapter, the computation shall be made in 
 94.19  accordance with a method that in the opinion of the commissioner 
 94.20  clearly and fairly reflects income and the tax base taxable 
 94.21  under this chapter. 
 94.22     Except as otherwise expressly provided in this chapter, a 
 94.23  taxpayer who changes the method of accounting for regularly 
 94.24  computing the taxpayer's income in keeping books shall, before 
 94.25  computing the tax base under the new method, secure the consent 
 94.26  of the commissioner. 
 94.27     Sec. 21.  [290B.07] [AGRICULTURAL PRODUCTION TAX REVENUES 
 94.28  AND ADMINISTRATION.] 
 94.29     The agricultural production tax imposed by section 290B.04 
 94.30  shall be paid to the commissioner of revenue but promptly paid 
 94.31  over by the state to the county treasurer for the county in 
 94.32  which the land from which the production arose is located and 
 94.33  credited to the county general fund.  The commissioner of 
 94.34  revenue shall prescribe standard forms and rules for 
 94.35  administration of the agricultural production tax throughout the 
 94.36  state.  Returns and payments of the agricultural production tax 
 95.1   shall be made as with the business activity tax except that no 
 95.2   estimated payments shall be required.  The agricultural 
 95.3   production tax shall be governed by the general administrative 
 95.4   provisions of chapter 289A.  There is hereby appropriated from 
 95.5   the general fund of each county to the county treasurer the 
 95.6   amount necessary to make refunds as provided in section 289A.50. 
 95.7      All revenues derived from the business activity tax imposed 
 95.8   by section 290B.03 and all interest and penalties shall, 
 95.9   notwithstanding any other provisions of law, be paid into the 
 95.10  state treasury and credited to the general fund, and be 
 95.11  distributed as follows: 
 95.12     (1) there shall, notwithstanding any other provision of the 
 95.13  law, be paid from the general fund all refunds of taxes 
 95.14  erroneously collected from taxpayers under this chapter; 
 95.15     (2) there is appropriated to the persons entitled to 
 95.16  payment under this section, from the fund or account in the 
 95.17  state treasury to which the money was credited, an amount 
 95.18  sufficient to make the refund and payment. 
 95.19     Sec. 22.  [EFFECTIVE DATE.] 
 95.20     Sections 1 to 21 are effective for taxable periods 
 95.21  beginning after December 31, 1997. 
 95.22                             ARTICLE 6
 95.23                        MISCELLANEOUS TAXES
 95.24     Section 1.  Minnesota Statutes 1996, section 297.07, 
 95.25  subdivision 1, is amended to read: 
 95.26     Subdivision 1.  [MONTHLY RETURN FILED WITH COMMISSIONER.] 
 95.27  On or before the 18th day of each calendar month every 
 95.28  distributor with a place of business in this state shall file a 
 95.29  return with the commissioner showing the quantity of cigarettes 
 95.30  manufactured or brought in from without the state or purchased 
 95.31  during the preceding calendar month and the quantity of 
 95.32  cigarettes sold or otherwise disposed of in this state and 
 95.33  outside this state during that month.  Every licensed 
 95.34  distributor outside this state shall in like manner file a 
 95.35  return showing the quantity of cigarettes shipped or transported 
 95.36  into this state during the preceding calendar month.  Returns 
 96.1   shall be made upon forms furnished and prescribed by the 
 96.2   commissioner and shall contain such other information as the 
 96.3   commissioner may require.  The return shall be accompanied by a 
 96.4   remittance for the full unpaid tax liability shown by it.  The 
 96.5   return for the May liability and 75 percent of the estimated 
 96.6   June liability is due on the date payment of the tax is due. 
 96.7      Sec. 2.  Minnesota Statutes 1996, section 297.35, 
 96.8   subdivision 1, is amended to read: 
 96.9      Subdivision 1.  On or before the 18th day of each calendar 
 96.10  month every distributor with a place of business in this state 
 96.11  shall file a return with the commissioner showing the quantity 
 96.12  and wholesale sales price of each tobacco product (1) brought, 
 96.13  or caused to be brought, into this state for sale; and (2) made, 
 96.14  manufactured, or fabricated in this state for sale in this 
 96.15  state, during the preceding calendar month.  Every licensed 
 96.16  distributor outside this state shall in like manner file a 
 96.17  return showing the quantity and wholesale sales price of each 
 96.18  tobacco product shipped or transported to retailers in this 
 96.19  state to be sold by those retailers, during the preceding 
 96.20  calendar month.  Returns shall be made upon forms furnished and 
 96.21  prescribed by the commissioner and shall contain such other 
 96.22  information as the commissioner may require.  Each return shall 
 96.23  be accompanied by a remittance for the full tax liability shown 
 96.24  therein, less 1.5 percent of such liability as compensation to 
 96.25  reimburse the distributor for expenses incurred in the 
 96.26  administration of sections 297.31 to 297.39.  The return for the 
 96.27  May liability and 75 percent of the estimated June liability is 
 96.28  due on the date payment of the tax is due. 
 96.29     A distributor having a liability of $120,000 or more during 
 96.30  a fiscal year ending June 30 must remit all liabilities in the 
 96.31  subsequent calendar year by means of a funds transfer as defined 
 96.32  in section 336.4A-104, paragraph (a).  The funds transfer 
 96.33  payment date, as defined in section 336.4A-401, must be on or 
 96.34  before the date the tax is due.  If the date the tax is due is 
 96.35  not a funds transfer business day, as defined in section 
 96.36  336.4A-105, paragraph (a), clause (4), the payment date must be 
 97.1   on or before the funds transfer business day next following the 
 97.2   date the tax is due. 
 97.3      Sec. 3.  Minnesota Statutes 1996, section 297C.03, 
 97.4   subdivision 1, is amended to read: 
 97.5      Subdivision 1.  [MANNER AND TIME OF PAYMENT; FAILURE TO 
 97.6   PAY.] The tax on wines and distilled spirits on which the excise 
 97.7   tax has not been previously paid must be paid to the 
 97.8   commissioner by persons liable for the tax on or before the 18th 
 97.9   day of the month following the month in which the first sale is 
 97.10  made in this state by a licensed manufacturer or wholesaler.  
 97.11  Every person liable for the tax on wines or distilled spirits 
 97.12  imposed by section 297C.02 must file with the commissioner on or 
 97.13  before the 18th day of the month following first sale in this 
 97.14  state by a licensed manufacturer or wholesaler a return in the 
 97.15  form prescribed by the commissioner, and must keep records and 
 97.16  render reports required by the commissioner.  The commissioner 
 97.17  may certify to the commissioner of public safety any failure to 
 97.18  pay taxes when due as a violation of a statute relating to the 
 97.19  sale of intoxicating liquor for possible revocation or 
 97.20  suspension of license.  The return for the May liability and 75 
 97.21  percent of the estimated June liability is due on the date 
 97.22  payment of the tax is due.  
 97.23     A person liable for an excise tax of $120,000 or more 
 97.24  during a fiscal year ending June 30 must remit all excise tax 
 97.25  liabilities in the subsequent calendar year by means of a funds 
 97.26  transfer as defined in section 336.4A-104, paragraph (a).  The 
 97.27  funds transfer payment date, as defined in section 336.4A-401, 
 97.28  must be on or before the date the excise tax is due.  If the 
 97.29  date the excise tax is due is not a funds transfer business day, 
 97.30  as defined in section 336.4A-105, paragraph (a), clause (4), the 
 97.31  payment date must be on or before the funds transfer business 
 97.32  day next following the date the excise tax is due. 
 97.33     Sec. 4.  Minnesota Statutes 1996, section 297C.04, is 
 97.34  amended to read: 
 97.35     297C.04 [PAYMENT OF TAX; MALT LIQUOR.] 
 97.36     The commissioner may by rule provide a reporting method for 
 98.1   paying and collecting the excise tax on fermented malt 
 98.2   beverages.  The tax is imposed upon the first sale or 
 98.3   importation made in this state by a licensed brewer or 
 98.4   importer.  The rules must require reports to be filed with and 
 98.5   the excise tax to be paid to the commissioner on or before the 
 98.6   18th day of the month following the month in which the 
 98.7   importation into or the first sale is made in this state, 
 98.8   whichever first occurs.  The rules must also require payments in 
 98.9   June of 1987 and subsequent years according to the provisions of 
 98.10  section 297C.05, subdivision 2.  
 98.11     A distributor who has title to or possession of fermented 
 98.12  malt beverages upon which the excise tax has not been paid and 
 98.13  who knows that the tax has not been paid, shall file a return 
 98.14  with the commissioner on or before the 18th day of the month 
 98.15  following the month in which the distributor obtains title or 
 98.16  possession of the fermented malt beverages.  The return must be 
 98.17  made on a form furnished and prescribed by the commissioner, and 
 98.18  must contain all information that the commissioner requires.  
 98.19  The return must be accompanied by a remittance for the full 
 98.20  unpaid liability shown on it.  The return for the May liability 
 98.21  and 75 percent of the estimated June liability is due on the 
 98.22  date payment of the tax is due. 
 98.23     A licensed brewer, importer, or distributor having an 
 98.24  excise tax liability of $120,000 or more during a fiscal year 
 98.25  ending June 30 must remit all excise tax liabilities in the 
 98.26  subsequent calendar year by means of a funds transfer as defined 
 98.27  in section 336.4A-104, paragraph (a).  The funds transfer 
 98.28  payment date, as defined in section 336.4A-401, must be on or 
 98.29  before the date the excise tax is due.  If the date the excise 
 98.30  tax is due is not a funds transfer business day, as defined in 
 98.31  section 336.4A-105, paragraph (a), clause (4), the payment date 
 98.32  must be on or before the funds transfer business day next 
 98.33  following the date the excise tax is due. 
 98.34     Sec. 5.  [REPEALER.] 
 98.35     Minnesota Statutes 1996, sections 297C.05, subdivision 2; 
 98.36  and 298.01, subdivisions 3c, 3d, 4d, and 4e, are repealed. 
 99.1                              ARTICLE 7
 99.2                       STATE BUDGET MANAGEMENT
 99.3      Section 1.  [16A.151] [STATE BUDGET MANAGEMENT.] 
 99.4      Subdivision 1.  [DEFINITIONS.] (a) "Budget reserve" means a 
 99.5   restricted account in the general fund of the state treasury 
 99.6   that is intended to prevent fiscal crisis by being available for 
 99.7   use in the event that actual revenues are less than projected 
 99.8   revenues, or actual expenditures are greater than projected 
 99.9   expenditures, or both. 
 99.10     (b) "Cash cycle need" means the amount determined from time 
 99.11  to time by the commissioner of finance that is required to be on 
 99.12  hand as of June 30 to prevent the state general fund from 
 99.13  running out of cash, resulting in a need to borrow at the low 
 99.14  point in the annual general fund cash cycle for the next fiscal 
 99.15  year. 
 99.16     (c) "Current operating budget" is composed of current 
 99.17  revenues, current expenses, and, if current revenues and current 
 99.18  expenses are not equal, a current operating budget surplus or 
 99.19  deficit. 
 99.20     (d) "Current surplus or deficit" means the difference 
 99.21  between current revenues and current expenditures, without 
 99.22  taking into account the beginning general fund balance. 
 99.23     (e) "Fiscal dividend" means the amount of fiscal surplus 
 99.24  projected to be distributed to individual income tax payers as a 
 99.25  credit under section 290.06, subdivision 26, as determined by 
 99.26  the legislature.  The fiscal dividend shall be declared as a 
 99.27  percentage of the individual income tax otherwise due for the 
 99.28  year, and the percentage shall be set so that if individual 
 99.29  income taxes for the year are as projected, the desired amount 
 99.30  of fiscal surplus will be distributed through the credit.  The 
 99.31  credits allowable to taxpayers are not affected by variations of 
 99.32  total income tax revenues from those projected. 
 99.33     (f) "Fiscal management pool" means the general fund balance 
 99.34  as of the beginning of a biennium, augmented or depleted from 
 99.35  time to time by the current operating budget surplus or deficit 
 99.36  as actual results from operations occur.  The fiscal management 
100.1   pool is the sum of three elements:  the cash cycle need, the 
100.2   budget reserve, and the fiscal surplus or deficit. 
100.3      (g) "Fiscal surplus or deficit" means the difference 
100.4   between the June 30 general fund balance and the sum of the cash 
100.5   cycle need and the target balance of the budget reserve. 
100.6      Subd. 2.  [CASH CYCLE NEED NOT TO BE IMPAIRED.] The 
100.7   governor shall not propose, nor shall the legislature enact, a 
100.8   budget which is projected to result in the cash cycle need not 
100.9   being met as of the end of any fiscal year, unless the forecast 
100.10  upon which the budget is based reflects a downturn, and not 
100.11  merely slower growth, in the Minnesota economy, and an economic 
100.12  emergency is declared by the governor or joint resolution of the 
100.13  legislature. 
100.14     Subd. 3.  [BUDGET RESERVE.] A budget reserve is created in 
100.15  the general fund in the state treasury.  The commissioner of 
100.16  finance shall restrict part or all of the balance before 
100.17  reserves in the general fund as may be necessary to fund the 
100.18  budget reserve as provided by law from time to time.  The target 
100.19  amount of the budget reserve is five percent of total projected 
100.20  general fund expenditures for the biennium for which the budget 
100.21  reserve is being measured. 
100.22     Subd. 4.  [BUDGET RESERVE TO BE DELIBERATELY IMPAIRED ONLY 
100.23  DURING RECESSION.] The governor shall not propose, nor shall the 
100.24  legislature enact, a budget that is projected to decrease the 
100.25  current balance of the budget reserve unless the forecast upon 
100.26  which the budget is based reflects a downturn, and not merely 
100.27  slower growth, in the Minnesota economy. 
100.28     Subd. 5.  [CURRENT OPERATING BUDGET SURPLUS.] If there is a 
100.29  current operating budget surplus for a fiscal year, and also a 
100.30  fiscal deficit as of the end of the year, the surplus shall be 
100.31  retained to the extent required to eliminate the fiscal deficit, 
100.32  so that the cash cycle need is met and the budget reserve is 
100.33  fully funded to the target level.  The entire amount of the 
100.34  current operating budget surplus, if there is no fiscal deficit 
100.35  as of the end of the year, or the excess, if any, of the current 
100.36  operating budget surplus over the fiscal deficit if there is 
101.1   such a deficit, shall be available for disposition as provided 
101.2   in subdivision 7. 
101.3      Subd. 6.  [CURRENT OPERATING BUDGET DEFICIT.] If there is a 
101.4   current operating budget deficit for a fiscal year, it shall be 
101.5   reduced or eliminated by any fiscal surplus as of the end of the 
101.6   year.  If the current operating budget deficit exceeds the 
101.7   amount of the fiscal surplus, the excess shall be reduced or 
101.8   eliminated by a transfer from the budget reserve. 
101.9      Subd. 7.  [DISPOSITION OF FISCAL SURPLUS.] If a fiscal 
101.10  surplus is projected as of the end of a fiscal year after taking 
101.11  into account the actual general fund revenues and expenditures 
101.12  for that year, and the legislature does not appropriate all of 
101.13  the fiscal surplus, the unappropriated amount, not to exceed 50 
101.14  percent of the amount of the initial fiscal surplus, must be 
101.15  distributed to individual income tax payers as a fiscal dividend 
101.16  through credits against individual income taxes for the taxable 
101.17  year for which the fiscal surplus was determined.  
101.18     Subd. 8.  [REDUCTION IN BUDGET RESERVE.] (a) If the 
101.19  commissioner determines that probable receipts for the general 
101.20  fund will be less than anticipated, and the amount available for 
101.21  the remainder of the biennium will be less than needed, the 
101.22  commissioner shall, with the approval of the governor, and after 
101.23  consulting with the legislative advisory commission, reduce the 
101.24  amount of the budget reserve needed to balance expenditures with 
101.25  revenue. 
101.26     (b) An additional deficit shall, with the approval of the 
101.27  governor, and after consulting with the legislative advisory 
101.28  commission, be made up by reducing unexpended allotments of any 
101.29  prior appropriation or transfer.  Notwithstanding any other law 
101.30  to the contrary, the commissioner may defer or suspend prior 
101.31  statutorily created obligations that would prevent effecting 
101.32  those reductions. 
101.33     (c) If the commissioner determines that probable receipts 
101.34  for any other fund, appropriation, or item will be less than 
101.35  anticipated, and that the amount available for the remainder of 
101.36  the term of the appropriation or for any allotment period will 
102.1   be less than needed, the commissioner shall notify the agency 
102.2   concerned and then reduce the amount allotted or to be allotted 
102.3   so as to prevent a deficit. 
102.4      (d) In reducing allotments, the commissioner may consider 
102.5   other sources of revenue available to recipients of state 
102.6   appropriations and may apply allotment reductions based on all 
102.7   sources of revenue available to them. 
102.8      (e) In like manner, the commissioner shall reduce 
102.9   allotments to an agency by the amount of any saving that can be 
102.10  made over previous spending plans through a reduction in prices 
102.11  or other cause. 
102.12     Subd. 9.  [NOTICE TO COMMITTEES.] The commissioner shall 
102.13  notify the committees on finance and taxes and tax laws of the 
102.14  senate and the committees on ways and means and taxes of the 
102.15  house of representatives of a reduction in an allotment under 
102.16  this section.  The notice must be in writing and delivered 
102.17  within 15 days of the commissioner's act.  The notice must 
102.18  specify: 
102.19     (1) the amount of the reduction in the allotment; 
102.20     (2) the agency and programs affected; 
102.21     (3) the amount of any payment withheld; and 
102.22     (4) any additional information the commissioner determines 
102.23  is appropriate. 
102.24     Subd. 10.  [DELAY; REDUCTION.] The commissioner may delay 
102.25  paying up to 15 percent of an appropriation to a special taxing 
102.26  district or a system of higher education in that entity's fiscal 
102.27  year for up to 60 days after the start of its next fiscal year.  
102.28  The delayed amount is subject to allotment reduction under 
102.29  subdivision 8. 
102.30     Sec. 2.  Minnesota Statutes 1996, section 290.06, is 
102.31  amended by adding a subdivision to read: 
102.32     Subd. 26.  [FISCAL DIVIDEND CREDIT.] An individual shall 
102.33  receive a credit against the tax due under this chapter in an 
102.34  amount equal to the percentage of the tax due after reduction by 
102.35  all other credits that is declared as a fiscal dividend pursuant 
102.36  to section 16A.151. 
103.1      Sec. 3.  [REPEALER.] 
103.2      Minnesota Statutes 1996, section 16A.152, is repealed. 
103.3      Sec. 4.  [EFFECTIVE DATE.] 
103.4      Sections 1 to 3 are effective the day following final 
103.5   enactment. 
103.6                              ARTICLE 8
103.7                          EDUCATION FINANCE
103.8      Section 1.  [PROPERTY TAX LEVY RECOGNITION SHIFT REVERSAL.] 
103.9      There is appropriated from the general fund the amount 
103.10  required to reduce the property tax levy recognition percent 
103.11  under Minnesota Statutes, section 121.904, subdivision 4a, to 
103.12  zero. 
103.13     Sec. 2.  Minnesota Statutes 1996, section 124A.035, 
103.14  subdivision 4, is amended to read: 
103.15     Subd. 4.  [COUNTY APPORTIONMENT DEDUCTION.] Each year the 
103.16  amount of money apportioned to a school district for that year 
103.17  pursuant to section 124.10, subdivision 2, excluding any 
103.18  district where the general education levy is determined 
103.19  according to section 124A.23, subdivision 3, shall be deducted 
103.20  from the general education aid earned by that district for the 
103.21  same year or from aid earned from other state sources.  
103.22     Sec. 3.  Minnesota Statutes 1996, section 124A.22, 
103.23  subdivision 8b, is amended to read: 
103.24     Subd. 8b.  [SUPPLEMENTAL AID.] A district's supplemental 
103.25  aid equals its supplemental revenue minus its supplemental levy 
103.26  times the ratio of the actual amount levied to the permitted 
103.27  levy. 
103.28     Sec. 4.  Minnesota Statutes 1996, section 124A.23, 
103.29  subdivision 4, is amended to read: 
103.30     Subd. 4.  [GENERAL EDUCATION AID.] A district's general 
103.31  education aid is the sum of the following amounts:  
103.32     (1) the product of (i) the difference between the general 
103.33  education revenue, excluding transition revenue and supplemental 
103.34  revenue, and the general education levy, times (ii) the ratio of 
103.35  the actual amount levied to the permitted levy; 
103.36     (2) transition aid according to section 124A.22, 
104.1   subdivision 13e; 
104.2      (3) supplemental aid according to section 124.214, 
104.3   subdivision 2; 
104.4      (4) shared time aid according to section 124A.02, 
104.5   subdivision 21; and 
104.6      (5) referendum aid according to section 124A.03. 
104.7      Sec. 5.  Minnesota Statutes 1996, section 124A.26, 
104.8   subdivision 3, is amended to read: 
104.9      Subd. 3.  [AID REDUCTION.] A district's general education 
104.10  aid shall be reduced by an amount equal to the difference 
104.11  between the revenue reduction and the levy reduction. 
104.12     Sec. 6.  Minnesota Statutes 1996, section 124A.292, 
104.13  subdivision 4, is amended to read: 
104.14     Subd. 4.  [STAFF DEVELOPMENT AID.] A district's aid equals 
104.15  its revenue minus its levy times the ratio of the actual amount 
104.16  levied to the permitted levy. 
104.17     Sec. 7.  Minnesota Statutes 1996, section 124A.71, 
104.18  subdivision 4, is amended to read: 
104.19     Subd. 4.  [AID.] Elective instructional aid is equal to 
104.20  elective instructional revenue minus elective instructional 
104.21  levy.  If a district levies less than the authorized amount, the 
104.22  aid shall be reduced proportionately. 
104.23     Sec. 8.  Minnesota Statutes 1996, section 124A.72, 
104.24  subdivision 4, is amended to read: 
104.25     Subd. 4.  [AID.] Local discretionary aid is equal to local 
104.26  discretionary revenue minus local discretionary levy.  If a 
104.27  district levies less than the authorized amount, the aid shall 
104.28  be reduced proportionately. 
104.29     Sec. 9.  [USE OF REVENUES.] 
104.30     The revenues raised under this act are to be used as 
104.31  follows: 
104.32     (1) $500,000,000 is to be provided to the commissioner of 
104.33  education to provide additional funding for K-12 education; and 
104.34     (2) $100,000,000 is to be provided to the higher education 
104.35  board under Minnesota Statutes, chapter 136E, to provide 
104.36  additional funding for post-secondary education. 
105.1      Furthermore, it is the intention of the legislature that 
105.2   this act will provide sufficient funding for K-12 education so 
105.3   that school districts will levy property taxes only for capital 
105.4   expenditures and as authorized by referendum. 
105.5      Sec. 10.  [REPEALER.] 
105.6      Minnesota Statutes 1996, sections 124.155; 124A.02, 
105.7   subdivisions 3b, 8, and 10; 124A.03, subdivision 2a; 124A.0311; 
105.8   124A.22, subdivision 8a; 124A.23, subdivisions 1, 2, and 3; 
105.9   124A.24; 124A.26, subdivision 2; 124A.292, subdivision 3; 
105.10  124A.71, subdivision 3; and 124A.72, subdivision 3, are repealed.
105.11     Sec. 11.  [EFFECTIVE DATE.] 
105.12     Section 1 is effective the day following final enactment.  
105.13  Sections 2 to 10 are effective July 1, 1997. 
105.14                             ARTICLE 9
105.15                        ECONOMIC DEVELOPMENT
105.16     Section 1.  Minnesota Statutes 1996, section 469.176, 
105.17  subdivision 1, is amended to read: 
105.18     Subdivision 1.  [DURATION OF TAX INCREMENT FINANCING 
105.19  DISTRICTS.] (a) Subject to the limitations contained in 
105.20  subdivisions 1a to 1f, any tax increment financing district as 
105.21  to which bonds are outstanding, payment for which the tax 
105.22  increment and other revenues have been pledged, shall remain in 
105.23  existence at least as long as the bonds continue to be 
105.24  outstanding.  The municipality may, at the time of approval of 
105.25  the initial tax increment financing plan, provide for a shorter 
105.26  maximum duration limit than specified in subdivisions 1a to 1f.  
105.27  The specified limit applies in place of the otherwise applicable 
105.28  limit.  
105.29     (b) The tax increment pledged to the payment of the bonds 
105.30  and interest thereon may be discharged and the tax increment 
105.31  financing district may shall be terminated if sufficient funds 
105.32  have been irrevocably deposited in the debt service fund or 
105.33  other escrow account held in trust for all outstanding bonds to 
105.34  provide for the payment of the bonds at maturity or date of 
105.35  redemption and interest thereon to the maturity or redemption 
105.36  date.  
106.1      (c) For bonds issued pursuant to section 469.178, 
106.2   subdivisions 2 and 3, the full faith and credit and any taxing 
106.3   powers of the municipality or authority are pledged to the 
106.4   payment of the bonds until the principal of and interest on the 
106.5   bonds has been paid in full.  
106.6      Sec. 2.  Minnesota Statutes 1996, section 469.176, 
106.7   subdivision 1a, is amended to read: 
106.8      Subd. 1a.  [DURATION LIMIT; THREE-YEAR ACTIVITY RULE.] No 
106.9   tax increment shall be paid to an authority for a tax increment 
106.10  financing district after three years from the date of 
106.11  certification of the original net tax capacity of the taxable 
106.12  real property in the district by the county auditor, unless 
106.13  within the three-year period and prior to March 1, 1997, (1) 
106.14  bonds have been issued in aid of the project containing the 
106.15  district pursuant to section 469.178, or any other law, except 
106.16  revenue bonds issued pursuant to sections 469.152 to 469.165, or 
106.17  (2) the authority has acquired property within the district, or 
106.18  (3) the authority has constructed or caused to be constructed 
106.19  public improvements within the district. 
106.20     Sec. 3.  Minnesota Statutes 1996, section 469.176, 
106.21  subdivision 1c, is amended to read: 
106.22     Subd. 1c.  [DURATION LIMITS; PRE-1979 DISTRICTS.] For tax 
106.23  increment financing districts created prior to August 1, 1979, 
106.24  no tax increment shall be paid to the authority after April 1, 
106.25  2001, or the term of a nondefeased bond or obligation 
106.26  outstanding on April 1, 1990, secured by increments from the 
106.27  district or project area, whichever time is greater, provided 
106.28  that in no case will a tax increment be paid to an authority 
106.29  after August 1, 2009, from such a district.  If a district's 
106.30  termination date is extended beyond April 1, 2001, because bonds 
106.31  were outstanding on April 1, 1990, with maturities extending 
106.32  beyond April 1, 2001, the following restrictions apply.  No 
106.33  increment collected from the district may be expended after 
106.34  April 1, 2001, except to pay or defease (i) bonds issued before 
106.35  April 1, 1990, or (ii) bonds issued prior to March 1, 1997, to 
106.36  refund the principal of the outstanding bonds and pay associated 
107.1   issuance costs, provided the average maturity of the refunding 
107.2   bonds does not exceed the bonds refunded. 
107.3      Sec. 4.  Minnesota Statutes 1996, section 469.177, 
107.4   subdivision 8, is amended to read: 
107.5      Subd. 8.  [ASSESSMENT AGREEMENTS.] Prior to March 1, 1997, 
107.6   an authority may enter into a written assessment agreement with 
107.7   any person establishing a minimum market value of land, existing 
107.8   improvements, or improvements to be constructed in a district, 
107.9   if the property is owned or will be owned by the person.  The 
107.10  minimum market value established by an assessment agreement may 
107.11  be fixed, or increase or decrease in later years from the 
107.12  initial minimum market value.  If an agreement is fully executed 
107.13  before July 1 of an assessment year, the market value as 
107.14  provided under the agreement must be used by the county or local 
107.15  assessor as the taxable market value of the property for that 
107.16  assessment.  Agreements executed on or after July 1 of an 
107.17  assessment year become effective for assessment purposes in the 
107.18  following assessment year.  An assessment agreement terminates 
107.19  on the earliest of the date on which conditions in the 
107.20  assessment agreement for termination are satisfied, the 
107.21  termination date specified in the agreement, or the date when 
107.22  tax increment is no longer paid to the authority under section 
107.23  469.176, subdivision 1.  The assessment agreement shall be 
107.24  presented to the county assessor, or city assessor having the 
107.25  powers of the county assessor, of the jurisdiction in which the 
107.26  tax increment financing district and the property that is the 
107.27  subject of the agreement is located.  The assessor shall review 
107.28  the plans and specifications for the improvements to be 
107.29  constructed, review the market value previously assigned to the 
107.30  land upon which the improvements are to be constructed and, so 
107.31  long as the minimum market value contained in the assessment 
107.32  agreement appears, in the judgment of the assessor, to be a 
107.33  reasonable estimate, shall execute the following certification 
107.34  upon the agreement:  
107.35       The undersigned assessor, being legally responsible 
107.36       for the assessment of the above described property, 
108.1        certifies that the market values assigned to 
108.2        the land and improvements are reasonable.
108.3      The assessment agreement shall be filed for record and 
108.4   recorded in the office of the county recorder or the registrar 
108.5   of titles of each county where the real estate or any part 
108.6   thereof is situated.  After the agreement becomes effective for 
108.7   assessment purposes, the assessor shall value the property under 
108.8   section 273.11, except that the market value assigned shall not 
108.9   be less than the minimum market value established by the 
108.10  assessment agreement.  The assessor may assign a market value to 
108.11  the property in excess of the minimum market value established 
108.12  by the assessment agreement.  The owner of the property may 
108.13  seek, through the exercise of administrative and legal remedies, 
108.14  a reduction in market value for property tax purposes, but no 
108.15  city assessor, county assessor, county auditor, board of review, 
108.16  board of equalization, commissioner of revenue, or court of this 
108.17  state shall grant a reduction of the market value below the 
108.18  minimum market value established by the assessment agreement 
108.19  during the term of the agreement filed of record regardless of 
108.20  actual market values which may result from incomplete 
108.21  construction of improvements, destruction, or diminution by any 
108.22  cause, insured or uninsured, except in the case of acquisition 
108.23  or reacquisition of the property by a public entity.  Recording 
108.24  an assessment agreement constitutes notice of the agreement to 
108.25  anyone who acquires any interest in the land or improvements 
108.26  that is subject to the assessment agreement, and the agreement 
108.27  is binding upon them.  
108.28     An assessment agreement may be modified or terminated by 
108.29  mutual consent of the current parties to the agreement.  
108.30  Modification or termination of an assessment agreement must be 
108.31  approved by the governing body of the municipality.  If the 
108.32  estimated market value for the property for the most recently 
108.33  available assessment is less than the minimum market value 
108.34  established by the assessment agreement for that or any later 
108.35  year and if bond counsel does not conclude that termination of 
108.36  the agreement is necessary to preserve the tax exempt status of 
109.1   outstanding bonds or refunding bonds to be issued, the 
109.2   modification or termination of the assessment agreement also 
109.3   must be approved by the governing bodies of the county and the 
109.4   school district.  A document modifying or terminating an 
109.5   agreement, including records of the municipality, county, and 
109.6   school district approval, must be filed for record.  The 
109.7   assessor's review and certification is not required if the 
109.8   document terminates an agreement.  A change to an agreement not 
109.9   fully executed before July 1 of an assessment year is not 
109.10  effective for assessment purposes for that assessment year.  If 
109.11  an assessment agreement has been modified or prematurely 
109.12  terminated, a person may seek a reduction in market value or tax 
109.13  through the exercise of any administrative or legal remedy.  The 
109.14  remedy may not provide for reduction of the market value below 
109.15  the minimum provided under a modified assessment agreement that 
109.16  remains in effect.  In no event may a reduction be sought for a 
109.17  year other than the current taxes payable year. 
109.18     Sec. 5.  Minnesota Statutes 1996, section 469.178, is 
109.19  amended by adding a subdivision to read: 
109.20     Subd. 7.  [BONDS ISSUED AFTER MARCH 1, 1997.] After March 
109.21  1, 1997, bonds may be issued under this section only to finance 
109.22  obligations incurred prior to March 1, 1997.  No expenditures in 
109.23  tax increment financing districts after February 28, 1997, shall 
109.24  be financed by bonds issued after March 1, 1997. 
109.25     Sec. 6.  Minnesota Statutes 1996, section 469.1781, is 
109.26  amended to read: 
109.27     469.1781 [REQUIRED EXPENDITURES FOR NEIGHBORHOOD 
109.28  REVITALIZATION.] 
109.29     (a) The provisions of this section apply to a city of the 
109.30  first class if the following conditions are met: 
109.31     (1) the city refunded bonds and revenues, derived from 
109.32  increment from a district for which certification was requested 
109.33  before August 1, 1979, were pledged to pay the bonds; 
109.34     (2) the refunding bonds were issued after April 1, 1988, 
109.35  and before April 1, 1990; 
109.36     (3) the refunded bonds' obligations were due and payable in 
110.1   full by the calendar year 2002 and the refunding bonds' 
110.2   obligations are payable, in whole or part, during the calendar 
110.3   years 2001 through 2009; and 
110.4      (4) the city had in place during 1989 an ordinance 
110.5   providing for excess increments to be distributed under section 
110.6   469.176, subdivision 2, paragraph (a), clause (4), and the city 
110.7   modified the ordinance to eliminate all or part of the 
110.8   distributions of excess increments. 
110.9      (b) For calendar years 1990 through 2001, in each year the 
110.10  city must expend for a neighborhood revitalization program, as 
110.11  established under section 469.1831, and for repayment of bonds 
110.12  issued in connection with tax increment financing districts in 
110.13  combination an amount of revenues derived from tax increments 
110.14  equal to at least: 
110.15     (1) the amount of the additional principal and interest 
110.16  payments that would have been due for the year on the refunded 
110.17  bonds, if the bonds had not been refunded; and 
110.18     (2) the amount of money which would have been distributed 
110.19  as excess increments under the city ordinance had it not been 
110.20  modified. 
110.21     Sec. 7.  Minnesota Statutes 1996, section 469.179, is 
110.22  amended by adding a subdivision to read: 
110.23     Subd. 4.  [POST-FEBRUARY 28, 1997, CHANGES.] After February 
110.24  28, 1997, no new projects shall be initiated and any existing 
110.25  projects for which expenditures on land acquisition or clearing 
110.26  have not been made by February 28, 1997, shall be terminated.  
110.27  Existing projects for which such expenditures had been made by 
110.28  February 28, 1997, may continue to operate under sections 
110.29  469.174 to 469.178, as amended. 
110.30     Sec. 8.  [469.1791] [PAYMENT FOR PRIVATE BENEFITS, POOLING 
110.31  OF DISTRICTS AND STATE AID TO PREVENT DEFAULT.] 
110.32     Subdivision 1.  [STATEMENT OF PURPOSE.] This act shifts the 
110.33  emphasis of business taxation away from the real property tax to 
110.34  other taxes and away from cities to the state government.  
110.35  Making such a major change without other adjustments on tax 
110.36  increment financing programs could result in the inability of 
111.1   existing tax increment financing districts to meet the debt 
111.2   service obligations already incurred because existing levels of 
111.3   business real property value will in the future produce less 
111.4   property tax revenue than they have in the past.  The practical 
111.5   effect of tax increment financing in some instances has been to 
111.6   have businesses acquire real property with payments denominated 
111.7   as tax payments.  The legislature intends that businesses that 
111.8   have participated in tax increment financing programs have the 
111.9   option of completing payment for real property acquired by them 
111.10  through either a one-time payment to the tax increment financing 
111.11  authority or continuation of property tax payments at the level 
111.12  payable in 1997, adjusted for future market value changes, for 
111.13  the scheduled duration of the tax increment financing district 
111.14  as of March 1, 1997.  The legislature also intends to facilitate 
111.15  pooling of tax increment financing districts and to provide 
111.16  state aid to prevent default in bonds issued under section 
111.17  469.178 as a result of this act.  
111.18     Subd. 2.  [COMPLETION OF PAYMENT FOR REAL PROPERTY 
111.19  TRANSFERS.] The authority for each tax increment financing 
111.20  district in which there have occurred or are scheduled to occur 
111.21  pursuant to contracts in existence transfers of real property at 
111.22  less than fair market value by the authority or other 
111.23  governmental entity to the owner of the property the tax 
111.24  increment of which is being used to fund operations of the tax 
111.25  increment financing district shall advise the property owner on 
111.26  or before September 1, 1997, that it has the option provided in 
111.27  this section.  That option shall be to complete payment for the 
111.28  property by a one-time payment to the authority made at any time 
111.29  on or before January 2, 1998, and have future taxes on the 
111.30  property be determined in accordance with the generally 
111.31  applicable laws and procedures, or to continue paying property 
111.32  tax on the property at the dollar level applicable in 1997 for 
111.33  the scheduled duration of the tax increment financing district, 
111.34  subject to decrease if the market value of the property 
111.35  decreases, but not subject to increase if the market value of 
111.36  the property increases.  For purposes of this section, the 
112.1   purchase price of the property shall be deemed to have been its 
112.2   fair market value at the time of its transfer, the deferred 
112.3   payment portion of the price shall be deemed to have been the 
112.4   excess of that fair market value over the amount paid for the 
112.5   property, and the owner shall be deemed to have paid for the 
112.6   fraction of the deferred payment portion equal to the number of 
112.7   months from transfer of the property through December 31, 1997, 
112.8   divided by the number of months from transfer of the property to 
112.9   the end of the scheduled duration of the tax increment financing 
112.10  district as of March 1, 1997. 
112.11     Subd. 3.  [POOLING OF DISTRICTS.] Beginning July 1, 1997, 
112.12  any authority may pool the tax increment from all of its 
112.13  districts to better enable it to meet its tax increment bond 
112.14  obligations.  An authority seeking state aid to meet those 
112.15  obligations shall pool its districts.  Such pooling shall not 
112.16  affect the schedule for termination of tax increment financing 
112.17  districts. 
112.18     Subd. 4.  [STATE AID TO PREVENT DEFAULT.] A tax increment 
112.19  financing district authority may apply for state aid to enable 
112.20  it to meet its bonding obligations incurred pursuant to section 
112.21  469.178 prior to March 1, 1997, if this act would otherwise 
112.22  result in default on such obligations.  The commissioner of 
112.23  finance shall determine the extent to which aid is required, and 
112.24  the rules by which tax increment financing districts in need of 
112.25  the aid shall operate.  There is hereby appropriated from the 
112.26  Minnesota real property redevelopment fund up to $....... per 
112.27  year to pay the aid. 
112.28     Sec. 9.  Minnesota Statutes 1996, section 469.1811, 
112.29  subdivision 2, is amended to read: 
112.30     Subd. 2.  [CITY MAY EXEMPT.] The governing body of a home 
112.31  rule or statutory city may, by resolution adopted prior to March 
112.32  1, 1997, by resolution exempt qualifying property from property 
112.33  taxation.  The exemption may include the entire market value of 
112.34  the qualifying property as determined by the assessor, including 
112.35  the land and any improvements existing at the time the exemption 
112.36  is granted, any increases in the value of the land and 
113.1   improvements during the duration of the exemption, and the value 
113.2   of any improvements constructed or attached during the exemption 
113.3   period.  The property tax exemption granted by the city may not 
113.4   exceed a ten-year period beginning with taxes payable the year 
113.5   following the year the exemption is granted.  At the expiration 
113.6   of the exemption period, the facility shall be assessed and pay 
113.7   property taxes as otherwise provided by law. 
113.8      Sec. 10.  Minnesota Statutes 1996, section 469.1811, is 
113.9   amended by adding a subdivision to read: 
113.10     Subd. 5.  [DISCONTINUANCE.] This section may not be used to 
113.11  grant new exemptions after March 1, 1997.  Any previously 
113.12  granted exemptions shall continue to be administered under this 
113.13  section until they expire or are revoked under this section. 
113.14     Sec. 11.  [469.40] [MINNESOTA REAL PROPERTY REDEVELOPMENT 
113.15  FUND.] 
113.16     Subdivision 1.  [CREATION OF FUND.] There is hereby created 
113.17  the Minnesota real property redevelopment fund to encourage the 
113.18  redevelopment of previously developed real property and reduce 
113.19  the need for development of previously undeveloped real 
113.20  property.  The Minnesota real property redevelopment fund shall 
113.21  be administered by the commissioner of economic development. 
113.22     Subd. 2.  [FUNDING.] The Minnesota real property 
113.23  redevelopment fund shall be funded by appropriations and by the 
113.24  revenues from the taxes imposed by sections 275.02, subdivision 
113.25  2; 276B.02, subdivision 1; and 276B.03, subdivision 1. 
113.26     Subd. 3.  [OPERATION.] The Minnesota real property 
113.27  redevelopment fund shall make interest-free loans to cities on a 
113.28  matching basis with city provided funding to facilitate 
113.29  redevelopment of previously developed real property having 
113.30  certain characteristics.  These loans shall be repaid over 
113.31  periods of up to ten years. 
113.32     Subd. 4.  [QUALIFYING PROPERTY.] Qualifying property shall 
113.33  consist of those properties within redevelopment districts 
113.34  designated by the governing body of a municipality as meeting 
113.35  the criteria for one or more of a redevelopment district as 
113.36  defined in section 469.174, subdivision 10; a renewal and 
114.1   renovation district as defined in section 469.174, subdivision 
114.2   10a; a housing district as defined in section 469.174, 
114.3   subdivision 11; a mined underground space development district 
114.4   as defined in section 469.174, subdivision 13; a designated 
114.5   hazardous substance site as defined in section 469.174, 
114.6   subdivision 16; a soils condition district as defined in section 
114.7   469.174, subdivision 19; or a hazardous substance subdistrict, 
114.8   as defined in section 469.174, subdivision 23. 
114.9      Subd. 5.  [PROCEDURE.] Municipalities seeking loans from 
114.10  the Minnesota real property redevelopment fund shall apply to 
114.11  the commissioner, who shall publish application deadlines and 
114.12  procedures for determining the loans to be granted from time to 
114.13  time.  Criteria to be used in allocating funds shall include the 
114.14  extent of match proposed by the municipality, the seriousness of 
114.15  the problems with low value previously developed property within 
114.16  the municipality and the district, and the likely economic and 
114.17  environmental effectiveness of the proposed redevelopment effort.
114.18     Sec. 12.  [REPEALER.] 
114.19     Minnesota Statutes 1996, sections 469.149; 469.166; 
114.20  469.167; 469.168; 469.169; 469.170; 469.171; 469.172; 469.173; 
114.21  469.175, subdivisions 1, 1a, 2, 2a, 3, 4, 7, and 8; 469.176, 
114.22  subdivision 4h; 469.1762; 469.177, subdivisions 1, 1a, 3, 4, 6, 
114.23  and 8; and 469.1782, are repealed. 
114.24     Sec. 13.  [EFFECTIVE DATE.] 
114.25     Sections 1 to 12 are effective the day following final 
114.26  enactment. 
114.27                             ARTICLE 10
114.28                        LOCAL GOVERNMENT AID
114.29     Section 1.  Minnesota Statutes 1996, section 477A.011, 
114.30  subdivision 36, is amended to read: 
114.31     Subd. 36.  [CITY AID BASE.] (a) Except as provided in 
114.32  paragraphs (b) and (c), "city aid base" means, for each city, 
114.33  the sum of the local government aid and equalization aid it was 
114.34  originally certified to receive in calendar year 1993 under 
114.35  Minnesota Statutes 1992, section 477A.013, subdivisions 3 and 5, 
114.36  and the amount of disparity reduction aid it received in 
115.1   calendar year 1993 under Minnesota Statutes 1992, section 
115.2   273.1398, subdivision 3. 
115.3      (b) For aids payable in 1996 and thereafter, a city that in 
115.4   1992 or 1993 transferred an amount from governmental funds to 
115.5   its sewer and water fund, which amount exceeded its net levy for 
115.6   taxes payable in the year in which the transfer occurred, has a 
115.7   "city aid base" equal to the sum of (i) its city aid base, as 
115.8   calculated under paragraph (a), and (ii) one-half of the 
115.9   difference between its city aid distribution under section 
115.10  477A.013, subdivision 9, for aids payable in 1995 and its city 
115.11  aid base for aids payable in 1995. 
115.12     (c) The city aid base for any city with a population less 
115.13  than 500 is increased by $40,000 for aids payable in calendar 
115.14  year 1995 and thereafter, and the maximum amount of total aid it 
115.15  may receive under section 477A.013, subdivision 9, paragraph 
115.16  (c), is also increased by $40,000 for aids payable in calendar 
115.17  year 1995 only, provided that: 
115.18     (i) the average total tax capacity rate for taxes payable 
115.19  in 1995 exceeds 200 percent; 
115.20     (ii) the city portion of the tax capacity rate exceeds 100 
115.21  percent; and 
115.22     (iii) its city aid base is less than $60 per capita.  
115.23     "City aid base" means, for each city, 25 percent of the 
115.24  hypothetical increase in the payable 1998 property taxes of 
115.25  owner-occupied homes in the city over the actual 1997 property 
115.26  taxes of such homes which would receive the hypothetical 
115.27  increase under the circumstances described in this subdivision, 
115.28  as calculated by the commissioner of revenue.  The described 
115.29  circumstances are that actual 1997 taxes are to be compared with 
115.30  hypothetical 1998 taxes on the assumptions that the expenditure 
115.31  budget, all revenue sources except property taxes and state 
115.32  aids, and the estimated market value of all property of each 
115.33  local government are the same in 1998 as in 1997; that all 
115.34  changes in the property tax system and local aids made in laws 
115.35  enacted in 1997 are taken into account; and that the city 
115.36  receives the city formula aid as defined in section 477A.013, 
116.1   subdivision 8. 
116.2      Sec. 2.  Minnesota Statutes 1996, section 477A.013, 
116.3   subdivision 1, is amended to read: 
116.4      Subdivision 1.  [TOWNS.] In 1994 1998 each town that had 
116.5   levied for taxes payable in the prior year a local tax rate of 
116.6   at least .008 shall receive a distribution equal to the amount 
116.7   it received in 1993 under this section before any nonpermanent 
116.8   reductions made under section 477A.0132.  In 1995 each town that 
116.9   had levied for taxes payable in 1993 a local tax rate of at 
116.10  least .008 shall receive a distribution equal to 102 percent of 
116.11  the amount it received in 1994 under this section before any 
116.12  increases or reductions under sections 16A.711, subdivision 5, 
116.13  and 477A.0132.  In 1996 and subsequent years each town that had 
116.14  levied for taxes payable in 1993 a local tax rate of at least 
116.15  .008 shall receive a distribution equal to the amount it 
116.16  received in the previous year under this section, adjusted for 
116.17  inflation as provided under section 477A.03, subdivision 3. 25 
116.18  percent of the hypothetical increase in the payable 1998 
116.19  property taxes of owner occupied homes and agricultural land in 
116.20  the town over the actual 1997 property taxes of such property 
116.21  which would receive the hypothetical increase under the 
116.22  circumstances described in this subdivision, as calculated by 
116.23  the commissioner of revenue.  The described circumstances are 
116.24  that actual 1997 taxes are to be compared with hypothetical 1998 
116.25  taxes on the assumptions that the expenditure budget, all 
116.26  revenue sources except property taxes and state aids, and the 
116.27  estimated market value of all property of each local government 
116.28  are the same in 1998 as in 1997; and that all changes in the 
116.29  property tax system and local aids made in laws enacted in 1997 
116.30  are taken into account. 
116.31     Sec. 3.  Minnesota Statutes 1996, section 477A.013, 
116.32  subdivision 8, is amended to read: 
116.33     Subd. 8.  [CITY FORMULA AID.] In calendar year 1994 and 
116.34  subsequent years, the formula aid for a city is equal to the 
116.35  need increase percentage multiplied by the difference between 
116.36  (1) the city's revenue need multiplied by its population, and 
117.1   (2) the city's net tax capacity multiplied by the tax effort 
117.2   rate.  No city may have a formula aid amount less than zero.  
117.3   The need increase percentage must be the same for all cities.  
117.4      Notwithstanding the prior sentence, in 1995 only, the need 
117.5   increase percentage for a city shall be twice the need increase 
117.6   percentage applicable to other cities if:  
117.7      (1) the city, in 1992 or 1993, transferred an amount from 
117.8   governmental funds to their sewer and water fund, and 
117.9      (2) the amount transferred exceeded their net levy for 
117.10  taxes payable in the year in which the transfer occurred. 
117.11     The applicable need increase percentage or percentages must 
117.12  be calculated by the department of revenue so that the total of 
117.13  the aid under subdivision 9 equals the total amount available 
117.14  for aid under section 477A.03.  
117.15     Sec. 4.  Minnesota Statutes 1996, section 477A.013, 
117.16  subdivision 9, is amended to read: 
117.17     Subd. 9.  [CITY AID DISTRIBUTION.] (a) In calendar year 
117.18  1994 and thereafter, each city shall receive an aid distribution 
117.19  equal to the sum of (1) the city formula aid under subdivision 
117.20  8, and (2) its city aid base. 
117.21     (b) The percentage increase for a first class city in 
117.22  calendar year 1995 and thereafter shall not exceed the 
117.23  percentage increase in the sum of the aid to all cities under 
117.24  this section in the current calendar year compared to the sum of 
117.25  the aid to all cities in the previous year. 
117.26     (c) The total aid for any city, except a first class city, 
117.27  shall not exceed the sum of (1) ten percent of the city's net 
117.28  levy for the year prior to the aid distribution plus (2) its 
117.29  total aid in the previous year before any increases or decreases 
117.30  under sections 16A.711, subdivision 5, and 477A.0132. 
117.31     (d) Notwithstanding paragraph (c), in 1995 only, for cities 
117.32  which in 1992 or 1993 transferred an amount from governmental 
117.33  funds to their sewer and water fund in an amount greater than 
117.34  their net levy for taxes payable in the year in which the 
117.35  transfer occurred, the total aid shall not exceed the sum of (1) 
117.36  20 percent of the city's net levy for the year prior to the aid 
118.1   distribution plus (2) its total aid in the previous year before 
118.2   any increases or decreases under sections 16A.711, subdivision 
118.3   5, and 477A.0132. 
118.4      Sec. 5.  Minnesota Statutes 1996, section 477A.03, 
118.5   subdivision 2, is amended to read: 
118.6      Subd. 2.  [ANNUAL APPROPRIATION.] A sum sufficient to 
118.7   discharge the duties imposed by sections 477A.011 to 477A.014 is 
118.8   annually appropriated from the general fund to the commissioner 
118.9   of revenue.  For aids payable in 1996 and thereafter, the total 
118.10  aids paid under sections 477A.013, subdivision 9, and 477A.0122 
118.11  are the amounts certified to be paid in the previous year, 
118.12  adjusted for inflation as provided under subdivision 3.  Aid 
118.13  payments to counties under section 477A.0121 are limited to 
118.14  $20,265,000 in 1996.  Aid payments to counties under section 
118.15  477A.0121 are limited to $27,571,625 in 1997.  For aid payable 
118.16  in 1998 and thereafter, the total aids paid under section 
118.17  477A.0121 are the amounts certified to be paid in the previous 
118.18  year, adjusted for inflation as provided under subdivision 3. 
118.19     Sec. 6.  Minnesota Statutes 1996, section 477A.05, is 
118.20  amended to read: 
118.21     477A.05 [LOCAL PERFORMANCE AID.] 
118.22     Subdivision 1.  [QUALIFICATION.] By May 15, 1996, and March 
118.23  31 25 of each year thereafter, the commissioner shall send a 
118.24  local performance aid qualification form to each county and, 
118.25  city, and school district in the state.  Jurisdictions that are 
118.26  eligible to receive the aid must return the completed form by 
118.27  June 30 in order to receive aid in the following calendar year.  
118.28  For each determinator specified in subdivision 2, the form shall 
118.29  have a space for the jurisdiction to indicate that it has 
118.30  satisfied the conditions of the determinator.  For counties, the 
118.31  form must be signed by the chair of the county board.  For 
118.32  cities, the form must be signed by the mayor, if the city has a 
118.33  mayor, and a member the chair of the city council.  For school 
118.34  districts, the form must be signed by the chair of the school 
118.35  board.  Applications may be filed jointly by jurisdictions 
118.36  planning to spend the aid jointly. 
119.1      Subd. 2.  [ELIGIBILITY DETERMINATOR.] For calendar year 
119.2   1997 1998 and subsequent calendar years, a jurisdiction is 
119.3   eligible to receive local performance aid if the jurisdiction 
119.4   affirms that it will spend the aid on programs for which it has 
119.5   developed a system of performance measures for the services 
119.6   provided by the jurisdiction, and that these measures are will 
119.7   allow for the measurement of continuous improvement and will be 
119.8   regularly compiled and presented to the county or school board 
119.9   or the city council at least once a year.  The jurisdiction must 
119.10  identify the program or programs that are to be funded with the 
119.11  aid.  A jurisdiction is also eligible for aid under this 
119.12  determinator if it affirms that it is in the process of 
119.13  developing and implementing a system of performance measures for 
119.14  the program or programs for which the aid is being sought; 
119.15  however, eligibility based upon being in the process of 
119.16  development may not be used for more than two consecutive 
119.17  years aid amounts under this section may not be spent on the 
119.18  program or programs until the performance measurement system has 
119.19  been instituted, unless the aid is being used to establish the 
119.20  performance measurement system. 
119.21     Subd. 3.  [DETERMINATION OF AID AMOUNT.] The commissioner 
119.22  shall sum the populations of all jurisdictions that have met the 
119.23  condition specified in subdivision 2.  The commissioner shall 
119.24  determine a per capita aid amount by dividing the aggregate aid 
119.25  available under subdivision 5 by the sum of the populations for 
119.26  all qualifying jurisdictions, separately for counties and, 
119.27  cities, and school districts.  Each jurisdiction shall then be 
119.28  eligible for aid equal to the jurisdictions's population times 
119.29  the per capita aid amount.  For purposes of this subdivision, 
119.30  population means the most recent population established under 
119.31  section 275.14 or 477A.011, subdivision 3, in the year in which 
119.32  the aid is determined. 
119.33     Subd. 4.  [NOTIFICATION AND PAYMENT.] Jurisdictions shall 
119.34  be notified of their aid under this section at the same time as 
119.35  the notification for aid under section 477A.014, subdivision 1.  
119.36  Payments of aid under this section shall be made on the dates 
120.1   prescribed in section 477A.015. 
120.2      Subd. 5.  [APPROPRIATION.] For payments to counties under 
120.3   this section, there is The following amounts are annually 
120.4   appropriated from the general fund to the commissioner of 
120.5   revenue an amount equal to the sum of $558,625 plus the amount 
120.6   by which county aids were reduced under Laws 1996, chapter 471, 
120.7   article 3, section 49, adjusted for inflation as provided under 
120.8   section 477A.03, subdivision 3. for payments to cities under 
120.9   this section, there is annually appropriated from the general 
120.10  fund to the commissioner of revenue an amount equal to the sum 
120.11  of $441,735 plus the amount by which city aids were reduced 
120.12  under Laws 1996, chapter 471, article 3, section 49,: 
120.13  $16,000,000 for counties, $13,000,000 for cities, and $6,000,000 
120.14  for school districts.  For payments in 1999 and subsequent 
120.15  years, the appropriated amounts are adjusted for inflation as 
120.16  provided under section 477A.03, subdivision 3. 
120.17     Sec. 7.  [477A.06] [DISTRIBUTION OF REVENUE FROM TAX ON 
120.18  MINNESOTA REAL PROPERTY RENTAL INCOME.] 
120.19     The commissioner of revenue shall distribute on a monthly 
120.20  basis the tax revenues received from the tax imposed by article 
120.21  5, section 17, to the extent that such revenues are attributed 
120.22  to the tax on Minnesota real property rental income as follows: 
120.23     (1) tax revenues derived from property located within a 
120.24  city shall be distributed to that city; and 
120.25     (2) tax revenues derived from property not located within a 
120.26  city shall be distributed to the county within which the 
120.27  property is located. 
120.28     A sum sufficient to discharge the duties imposed by this 
120.29  section is annually appropriated from the general fund to the 
120.30  commissioner of revenue. 
120.31     Sec. 8.  [477A.07] [DISTRIBUTION OF REVENUE FROM 
120.32  AGRICULTURAL PRODUCTION TAX.] 
120.33     The commissioner of revenue shall distribute on a monthly 
120.34  basis the tax revenues received from the tax imposed by article 
120.35  5, section 18, to the county treasurers, with each county 
120.36  receiving the amount attributable to agricultural production on 
121.1   land within that county.  A sum sufficient to discharge the 
121.2   duties imposed by this section is annually appropriated from the 
121.3   general fund to the commissioner of revenue. 
121.4      Sec. 9.  [REPEALER.] 
121.5      Minnesota Statutes 1996, sections 273.1398; 273.1399; 
121.6   477A.011, subdivisions 28 and 37; and 477A.0132, are repealed. 
121.7      Sec. 10.  [EFFECTIVE DATE.] 
121.8      Sections 1 to 9 are effective for aids and taxes payable in 
121.9   1998.