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SF 1487

as introduced - 88th Legislature (2013 - 2014) Posted on 03/21/2013 09:35am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to taxes; imposing a tax on extraction and processing of fracturing sand;
modifying aggregate production tax rates; appropriating money; providing
criminal penalties; amending Minnesota Statutes 2012, section 298.75,
subdivision 2; proposing coding for new law as Minnesota Statutes, chapter 297J.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [297J.01] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin Unless otherwise defined in this chapter, or unless the
context clearly indicates otherwise, the terms used in this chapter have the meaning given
them in this section. The definitions in this section are for tax administration purposes
and apply to this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of revenue or a
person whom the commissioner has delegated functions.
new text end

new text begin Subd. 3. new text end

new text begin Extraction. new text end

new text begin "Extraction" means commercial excavation or commercial
mining of fracturing sand.
new text end

new text begin Subd. 4. new text end

new text begin Fracturing sand. new text end

new text begin "Fracturing sand" means silica sand that can be used
in hydraulic fracturing mining for the production of oil or gas due to the silica sand's
qualities of sphericity, size, and silica content.
new text end

new text begin Subd. 5. new text end

new text begin Person. new text end

new text begin "Person" means an individual, fiduciary, estate, trust, partnership,
or corporation.
new text end

new text begin Subd. 6. new text end

new text begin Ton. new text end

new text begin "Ton" means 2,000 pounds.
new text end

new text begin Subd. 7. new text end

new text begin Washing. new text end

new text begin "Washing" means treatment of fracturing sand to remove
impurities such as sand and clay and to prepare the fracturing sand for its use in hydraulic
fracturing.
new text end

new text begin Subd. 8. new text end

new text begin Year. new text end

new text begin "Year" means a calendar year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

new text begin [297J.02] TAX IMPOSED.
new text end

new text begin Subdivision 1. new text end

new text begin Extraction tax; rate. new text end

new text begin A tax is imposed on any person who extracts
fracturing sand from within the state. The rate of tax imposed is $1 per ton.
new text end

new text begin Subd. 2. new text end

new text begin Processing tax; rate. new text end

new text begin A tax is imposed on any person engaged in washing
or processing fracturing sand within the state. The rate of tax imposed is three percent of
the market value of the fracturing sand processed. Market value is determined based on
the sale price of the processed fracturing sand.
new text end

new text begin Subd. 3. new text end

new text begin Return and remittance. new text end

new text begin Taxes imposed by this section are due and
payable to the commissioner when the fracturing sand return is required to be filed.
Fracturing sand returns must be filed on a form prescribed by the commissioner. Fracturing
sand returns and taxes imposed under this section must be filed with the commissioner on
or before the 20th day of the month following the close of the previous calendar month.
new text end

new text begin Subd. 4. new text end

new text begin Proceeds of taxes. new text end

new text begin (a) All revenues collected under subdivision 1 shall be
credited to a special account in the general fund and are appropriated to the Environmental
Quality Board as defined in chapter 116C. These funds shall be used for the purpose of
environmental oversight of the fracturing sand mining industry.
new text end

new text begin (b) All revenues collected under subdivision 2 shall be credited to a special account
in the general fund and are appropriated as follows:
new text end

new text begin (1) one-third of the funds are appropriated to the commissioner of transportation to
be allocated equally to counties with active fracturing sand mines. These funds shall be
used for the maintenance of roads as established in chapter 162.
new text end

new text begin (2) one-third of the funds are appropriated to the commissioner of natural resources
to acquire land or interests in land as scientific and natural areas under section 84.033,
in the areas of the state with industrial silica sand resources likely to be mined, as
identified by the commissioner, in order to protect unique hydrological features, including
calcareous fens, springs, and trout streams; endangered or threatened species of plants or
animals; and unique geological features.
new text end

new text begin (3) one-third of the funds are appropriated to the Board of Water and Soil Resources
to acquire permanent easements that will prevent commercial fracturing sand mining
in wellhead protection areas, as defined in section 103I.005, subdivision 24, in the
areas of the state with fracturing sand resources likely to be mined, as identified by the
commissioner of natural resources. The board must consult with the commissioner of
health to prioritize the easements to be acquired.
new text end

new text begin Subd. 5. new text end

new text begin Personal debt. new text end

new text begin The tax imposed by this section, and interest and penalties
imposed with respect to it, are a personal debt of the person required to file a return from
the time the liability for it arises, irrespective of when the time for payment of the liability
occurs. The debt must, in the case of the executor or administrator of the estate of a
decedent and in the case of a fiduciary, be that of the person in the person's official or
fiduciary capacity only unless the person has voluntarily distributed the assets held in that
capacity without reserving sufficient assets to pay the tax, interest, and penalties, in which
event the person is personally liable for any deficiency.
new text end

new text begin Subd. 6. new text end

new text begin Refunds; appropriation. new text end

new text begin A person who has paid to the commissioner
an amount of tax under this chapter for a period in excess of the amount legally due
for that period, may file with the commissioner a claim for a refund of the excess. The
amount necessary to pay the refunds under this subdivision is appropriated from the
general fund to the commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

new text begin [297J.03] REGISTRATION; REPORTING; FILING REQUIREMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Registration. new text end

new text begin A person who extracts or processes fracturing sand
within the state must register with the commissioner, on a form prescribed by the
commissioner, for a fracturing sand identification number. The commissioner shall issue
the applicant a registration number. A registration number is not assignable and is valid
only for the person in whose name it is issued.
new text end

new text begin Subd. 2. new text end

new text begin Reporting. new text end

new text begin (a) A person who extracts or processes fracturing sand in this
sand must file a report showing the amount of fracturing sand extracted or processed
monthly on or before the 20th day of the month following the month in which the
fracturing sand was extracted or processed. The commissioner may inspect the premises,
books, and records, of a person subject to the fracturing sand tax during the normal
business hours of the person extracting or processing fracturing sand. A person violating
this section is guilty of a misdemeanor.
new text end

new text begin (b) A person shall keep at each place of business complete and accurate records for
that place of business, including records of fracturing sand extracted or processed in the
state. Scale records, sales records, or any other records of tons of fracturing sand extracted
or processed in this state, produced or maintained by the person extracting or processing
fracturing sand, must be retained by the person extracting or processing fracturing sand
in this state. Books, records, invoices, and other papers and documents required by this
section must be kept for a period of at least 3-1/2 years after the date of the monthly
fracturing sand report unless the commissioner of revenue authorizes, in writing, their
destruction or disposal at an earlier date.
new text end

new text begin Subd. 3. new text end

new text begin Extensions. new text end

new text begin If, in the commissioner's judgment, good cause exists, the
commissioner may extend the time for filing reports under this section and fracturing sand
returns under section 297J.02 and for paying taxes under section 297J.02 for not more
than six months.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

new text begin [297J.04] LIMITATIONS ON TIME FOR ASSESSMENT OF TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Assessment. new text end

new text begin Except as otherwise provided in this chapter, the
amount of taxes assessable must be assessed within 3-1/2 years after the date the return is
filed, whether or not the return is filed on or after the date prescribed. A return must not be
treated as filed until it is in processible form. A return is in processible form if it is filed
on a permitted form and contains sufficient data to identify the taxpayer and permit the
mathematical verification of the tax liability shown on the return. For purposes of this
section, a return filed before the last day prescribed by law for filing is considered to
be filed on the last day.
new text end

new text begin Subd. 2. new text end

new text begin False or fraudulent return. new text end

new text begin Notwithstanding subdivision 1, the tax may be
assessed at any time if a false or fraudulent return is filed or if a taxpayer fails to file a return.
new text end

new text begin Subd. 3. new text end

new text begin Omission in excess of 25 percent. new text end

new text begin Additional taxes may be assessed
within 6-1/2 years after the due date of the return or the date the return was filed,
whichever is later, if the taxpayer omits from a return taxes in excess of 25 percent of
the taxes reported in the return.
new text end

new text begin Subd. 4. new text end

new text begin Time limit on refunds. new text end

new text begin Unless otherwise provided in this chapter, a claim
for a refund of an overpayment of tax must be filed within 3-1/2 years from the date
prescribed for filing the fracturing sand tax return. Interest on refunds must be computed
at the rate specified in section 270C.405 from the date of payment to the date the refund is
paid or credited. For purposes of this subdivision, the date of payment is the later of the
date the tax was finally due or was paid.
new text end

new text begin Subd. 5. new text end

new text begin Bankruptcy; suspension of time. new text end

new text begin The time during which a tax must be
assessed or collection proceedings begun is suspended during the period from the date of a
filing of a petition in bankruptcy until 30 days after either: (1) notice to the commissioner
that the bankruptcy proceedings have been closed or dismissed; or (2) the automatic stay
has been ended or has expired, whichever occurs first. The suspension of the statute of
limitations under this subdivision applies to the person the petition in bankruptcy is filed
against, and all other persons who may also be wholly or partially liable for the tax.
new text end

new text begin Subd. 6. new text end

new text begin Extension agreement. new text end

new text begin If, before the expiration of time prescribed in
subdivisions 1 and 4 for the assessment of tax or the filing of a claim for refund, both the
commissioner and the taxpayer have consented in writing to the assessment or filing of a
claim for refund after that time, the tax may be assessed or the claim for refund filed at any
time before the expiration of the agreed upon period. The period may be extended by later
agreements in writing before the expiration of the period previously agreed upon.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
new text end

Sec. 5.

new text begin [297J.05] CIVIL PENALTIES.
new text end

new text begin Subdivision 1. new text end

new text begin Penalty for failure to pay tax. new text end

new text begin If a tax is not paid within the time
specified for payment, a penalty is added to the amount required to be shown as tax. The
penalty is five percent of the unpaid tax if the failure is for not more than 30 days, with
an additional penalty of five percent of the amount of tax remaining unpaid during each
additional 30 days or fraction of 30 days during which the failure continues, not exceeding
15 percent in the aggregate. For purposes of this subdivision, if the taxpayer has not filed
a return, the time specified for payment is the final date a return should have been filed.
new text end

new text begin Subd. 2. new text end

new text begin Penalty for failure to make and file return. new text end

new text begin If a taxpayer fails to make
and file a return within the time prescribed or an extension, a penalty is added to the tax.
The penalty is five percent of the amount of tax not paid on or before the date prescribed
for payment of the tax.
new text end

new text begin Subd. 3. new text end

new text begin Penalty for intentional disregard of law or rules. new text end

new text begin If part of an additional
assessment is due to negligence or intentional disregard of the provisions of this chapter or
rules of the commissioner of revenue (but without intent to defraud), there is added to the
tax an amount equal to ten percent of the additional assessment.
new text end

new text begin Subd. 4. new text end

new text begin Penalty for false or fraudulent return; evasion. new text end

new text begin If a person files a false
or fraudulent return, or attempts in any manner to evade or defeat a tax or payment of
tax, there is imposed on the person a penalty equal to 50 percent of the tax found due
for the period to which the return related, less amounts paid by the person on the basis
of the false or fraudulent return.
new text end

new text begin Subd. 5. new text end

new text begin Penalty for repeated failures to file returns or pay taxes. new text end

new text begin If there is a
pattern by a person of repeated failures to timely file returns or timely pay taxes, and
written notice is given that a penalty will be imposed if such failures continue, a penalty
of 25 percent of the amount of tax not timely paid as a result of each such subsequent
failure is added to the tax. The penalty can be abated under the abatement authority in
section 270C.34.
new text end

new text begin Subd. 6. new text end

new text begin Payment of penalties. new text end

new text begin The penalties imposed by this section must be
collected and paid in the same manner as taxes. These penalties are in addition to criminal
penalties imposed by this chapter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

new text begin [297J.06] CRIMINAL PENALTIES.
new text end

new text begin Subdivision 1. new text end

new text begin Penalty for failure to file or pay. new text end

new text begin (a) A person required to file a
return, report, or other document with the commissioner, who knowingly fails to file it
when required, is guilty of a gross misdemeanor. A person required to file a return, report,
or other document who willfully attempts to evade or defeat a tax by failing to file it
when required, is guilty of a felony.
new text end

new text begin (b) A person required to pay or to collect and remit a tax, who knowingly fails to
do so when required, is guilty of a gross misdemeanor. A person required to pay or to
collect and remit a tax, who willfully attempts to evade or defeat a tax law by failing to
do so when required, is guilty of a felony.
new text end

new text begin Subd. 2. new text end

new text begin False or fraudulent returns; penalties. new text end

new text begin (a) A person required to
file a return, report, or other document with the commissioner, who delivers to the
commissioner a return, report, or other document known by the person to be fraudulent
or false concerning a material matter is guilty of a felony.
new text end

new text begin (b) A person who knowingly aids or assists in, or advises in the preparation or
presentation of a return, report, or other document that is fraudulent or false concerning
a material matter, whether or not the falsity or fraud committed is with the knowledge
or consent of the person authorized or required to present the return, report, or other
document, is guilty of a felony.
new text end

new text begin Subd. 3. new text end

new text begin False information. new text end

new text begin A person is guilty of a felony if the person:
new text end

new text begin (1) is required by section 297E.05 to keep records or to make returns, and falsifies or
fails to keep the records or falsifies or fails to make the returns; or
new text end

new text begin (2) knowingly submits materially false information in any report, document, or
other communication submitted to the commissioner in connection with lawful gambling
or with this chapter.
new text end

new text begin Subd. 4. new text end

new text begin Criminal penalties. new text end

new text begin (a) Criminal penalties imposed by this section are in
addition to civil penalties imposed by this chapter.
new text end

new text begin (b) A person who violates a provision of this chapter for which another penalty is
not provided is guilty of a misdemeanor.
new text end

new text begin (c) A person who violates a provision of this chapter for which another penalty is not
provided is guilty of a gross misdemeanor if the violation occurs within five years after
a previous conviction under a provision of this chapter.
new text end

new text begin (d) A person who in any manner violates a provision of this chapter to evade a tax
imposed by this chapter, or who aids and abets the evasion of a tax, is guilty of a gross
misdemeanor.
new text end

new text begin Subd. 5. new text end

new text begin Statute of limitations. new text end

new text begin Notwithstanding other provision of the criminal
laws of this state, an indictment may be found and filed, or a complaint filed, upon a
criminal offense named in this section, in the proper court within six years after the
offense is committed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

new text begin [297J.07] INTEREST.
new text end

new text begin Subdivision 1. new text end

new text begin Rate. new text end

new text begin If an interest assessment is required under this section, interest
is computed at the rate specified in section 270C.40.
new text end

new text begin Subd. 2. new text end

new text begin Late payment. new text end

new text begin If a tax is not paid within the time specified by law for
payment, the unpaid tax bears interest from the date the tax should have been paid until
the date the tax is paid.
new text end

new text begin Subd. 3. new text end

new text begin Extensions. new text end

new text begin If an extension of time for payment has been granted, interest
must be paid from the date the payment should have been made if no extension had been
granted, until the date the tax is paid.
new text end

new text begin Subd. 4. new text end

new text begin Additional assessments. new text end

new text begin If a taxpayer is liable for additional taxes because
of a redetermination by the commissioner, or for any other reason, the additional taxes
bear interest from the time the tax should have been paid, without regard to any extension
allowed, until the date the tax is paid.
new text end

new text begin Subd. 5. new text end

new text begin Erroneous refunds. new text end

new text begin In the case of an erroneous refund, interest accrues
from the date the refund was paid unless the erroneous refund results from a mistake of
the department, then no interest or penalty is imposed unless the deficiency assessment is
not satisfied within 60 days of the order.
new text end

new text begin Subd. 6. new text end

new text begin Interest on judgments. new text end

new text begin Notwithstanding section 549.09, if judgment is
entered in favor of the commissioner with regard to any tax, the judgment bears interest
at the rate specified in section 270C.40 from the date the judgment is entered until the
date of payment.
new text end

new text begin Subd. 7. new text end

new text begin Interest on penalties. new text end

new text begin A penalty imposed under section 297J.05,
subdivision 1, 2, 3, 4, or 5, bears interest from the date the return or payment was required
to be filed or paid, including any extensions, to the date of payment of the penalty.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2012, section 298.75, subdivision 2, is amended to read:


Subd. 2.

Tax imposed.

(a) Except as provided in paragraph (e), a county that
imposes the aggregate production tax shall impose upon every operator a production tax
of deleted text begin 21.5deleted text end new text begin 43new text end cents per cubic yard or deleted text begin 15deleted text end new text begin 30new text end cents per ton of aggregate material excavated in
the county except that the county board may decide not to impose this tax if it determines
that in the previous year operators removed less than 20,000 tons or 14,000 cubic yards of
aggregate material from that county. The tax shall not be imposed on aggregate material
excavated in the county until the aggregate material is transported from the extraction site
or sold, whichever occurs first. When aggregate material is stored in a stockpile within the
state of Minnesota and a public highway, road or street is not used for transporting the
aggregate material, the tax shall not be imposed until either when the aggregate material
is sold, or when it is transported from the stockpile site, or when it is used from the
stockpile, whichever occurs first.

(b) Except as provided in paragraph (e), a county that imposes the aggregate
production tax under paragraph (a) shall impose upon every importer a production tax of
deleted text begin 21.5deleted text end new text begin 43new text end cents per cubic yard or deleted text begin 15deleted text end new text begin 30new text end cents per ton of aggregate material imported into
the county. The tax shall be imposed when the aggregate material is imported from the
extraction site or sold. When imported aggregate material is stored in a stockpile within
the state of Minnesota and a public highway, road, or street is not used for transporting
the aggregate material, the tax shall be imposed either when the aggregate material is
sold, when it is transported from the stockpile site, or when it is used from the stockpile,
whichever occurs first. The tax shall be imposed on an importer when the aggregate
material is imported into the county that imposes the tax.

(c) If the aggregate material is transported directly from the extraction site to a
waterway, railway, or another mode of transportation other than a highway, road or street,
the tax imposed by this section shall be apportioned equally between the county where the
aggregate material is extracted and the county to which the aggregate material is originally
transported. If that destination is not located in Minnesota, then the county where the
aggregate material was extracted shall receive all of the proceeds of the tax.

(d) A county, city, or town that receives revenue under this section is prohibited
from imposing any additional host community fees on aggregate production within that
county, city, or town.

(e) A county that borders two other states and that is not contiguous to a county
that imposes a tax under this section may impose the taxes under paragraphs (a) and (b)
at the rate of ten cents per cubic yard or seven cents per ton. This paragraph expires
December 31, 2014.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end