SF 1568

as introduced - 79th Legislature (1995 - 1996) 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 1994, sections 272.02, 
  1.6             subdivision 1; 273.11, subdivision 5; 273.121; 273.13, 
  1.7             subdivisions 21a, 22, 23, 24, 25, 31, and 33; 
  1.8             273.1316, subdivision 1; 273.1393; 273.165, 
  1.9             subdivision 2; 275.08, subdivision 1b, and by adding a 
  1.10            subdivision; 276.04, subdivision 2; 289A.08, 
  1.11            subdivisions 1 and 6; 289A.18, subdivision 4; 290.01, 
  1.12            subdivisions 19a and 19b; 290.06, subdivision 2c, and 
  1.13            by adding subdivisions; 290.0671, subdivision 1; 
  1.14            290.91; 290.9201, subdivision 2; 290.923, subdivision 
  1.15            2; 290.97; 290.9705, subdivisions 1 and 3; 290A.03, 
  1.16            subdivision 3; 290A.04, by adding subdivisions; 
  1.17            297A.01, subdivisions 3, 6, 8, 16, and by adding 
  1.18            subdivisions; 297A.02, subdivision 1; 297A.03, 
  1.19            subdivision 1; 297A.14, subdivision 1; 297A.15, 
  1.20            subdivision 5; 297A.21, subdivision 2; 297A.22; 
  1.21            297A.24, subdivision 1; 297A.25, subdivisions 4, 9, 
  1.22            12, 42, and by adding a subdivision; 297A.44, 
  1.23            subdivision 1; 297B.01, subdivision 8; and 297B.03; 
  1.24            proposing coding for new law in Minnesota Statutes, 
  1.25            chapters 16; 273; and 275; proposing coding for new 
  1.26            law as Minnesota Statutes, chapter 290B; repealing 
  1.27            Minnesota Statutes 1994, sections 16A.152; 273.11, 
  1.28            subdivisions 1a, 16, and 18; 273.13, subdivisions 21b 
  1.29            and 32; 273.1315; 273.1317; 273.1318; 273.134; 
  1.30            273.135; 273.136; 273.138; 273.1391; 273.1392; 
  1.31            273.1398; 273.166; 273.33; 273.35; 273.36; 273.37; 
  1.32            273.371; 273.38; 273.39; 273.40; 273.41; 273.42; 
  1.33            273.425; 273.43; 275.08, subdivisions 1c and 1d; 
  1.34            290.01, subdivision 19g; 290.06, subdivision 21; 
  1.35            290.0802; 290.091; 290.092; 290.0921; 290.0922; 
  1.36            290A.03, subdivisions 9 and 10; 290A.04, subdivision 
  1.37            2i; 297A.01, subdivision 20; 297A.02, subdivisions 2 
  1.38            and 5; 297A.25, subdivisions 6, 7, 8, 10, 11, 17, 18, 
  1.39            21, 23, 26, 30, 39, 40, 41, 44, 56, 57, 58, and 59; 
  1.40            297A.256, subdivision 2; 297B.02, subdivisions 2 and 
  1.41            3; 297B.025; 477A.011, subdivisions 20, 27, 28, 29, 
  1.42            30, 31, 32, 33, 34, 35, 36, and 37; 477A.012; 
  1.43            477A.013; 477A.0132; 477A.03, subdivision 3; and 
  1.44            477A.15. 
  1.45  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  2.1                              ARTICLE 1
  2.2                            PROPERTY TAXES
  2.3      Section 1.  Minnesota Statutes 1994, section 273.11, 
  2.4   subdivision 5, is amended to read: 
  2.5      Subd. 5.  Notwithstanding any other provision of law to the 
  2.6   contrary, the limitation contained in subdivisions subdivision 1 
  2.7   and 1a shall also apply to the authority of the local board of 
  2.8   review as provided in section 274.01, the county board of 
  2.9   equalization as provided in section 274.13, the state board of 
  2.10  equalization and the commissioner of revenue as provided in 
  2.11  sections 270.11, 270.12 and 270.16. 
  2.12     Sec. 2.  Minnesota Statutes 1994, section 273.121, is 
  2.13  amended to read: 
  2.14     273.121 [VALUATION OF REAL PROPERTY, NOTICE.] 
  2.15     Any county assessor or city assessor having the powers of a 
  2.16  county assessor, valuing or classifying taxable real property 
  2.17  shall in each year notify those persons whose property is to be 
  2.18  assessed or reclassified that year if the person's address is 
  2.19  known to the assessor, otherwise the occupant of the property.  
  2.20  The notice shall be in writing and shall be sent by ordinary 
  2.21  mail at least ten days before the meeting of the local board of 
  2.22  review or equalization.  It shall contain:  (1) the market 
  2.23  value, (2) the limited market value under section 273.11, 
  2.24  subdivision 1a, (3) the qualifying amount of any improvements 
  2.25  under section 273.11, subdivision 16, (4) the market value 
  2.26  subject to taxation after subtracting the amount of any 
  2.27  qualifying improvements, (5) the new classification, (6) (3) the 
  2.28  assessor's office address, and (7) (4) the dates, places, and 
  2.29  times set for the meetings of the local board of review or 
  2.30  equalization and the county board of equalization.  If the 
  2.31  assessment roll is not complete, the notice shall be sent by 
  2.32  ordinary mail at least ten days prior to the date on which the 
  2.33  board of review has adjourned.  The assessor shall attach to the 
  2.34  assessment roll a statement that the notices required by this 
  2.35  section have been mailed.  Any assessor who is not provided 
  2.36  sufficient funds from the assessor's governing body to provide 
  3.1   such notices, may make application to the commissioner of 
  3.2   revenue to finance such notices.  The commissioner of revenue 
  3.3   shall conduct an investigation and, if satisfied that the 
  3.4   assessor does not have the necessary funds, issue a 
  3.5   certification to the commissioner of finance of the amount 
  3.6   necessary to provide such notices.  The commissioner of finance 
  3.7   shall issue a warrant for such amount and shall deduct such 
  3.8   amount from any state payment to such county or municipality.  
  3.9   The necessary funds to make such payments are hereby 
  3.10  appropriated.  Failure to receive the notice shall in no way 
  3.11  affect the validity of the assessment, the resulting tax, the 
  3.12  procedures of any board of review or equalization, or the 
  3.13  enforcement of delinquent taxes by statutory means. 
  3.14     Sec. 3.  Minnesota Statutes 1994, section 273.13, 
  3.15  subdivision 21a, is amended to read: 
  3.16     Subd. 21a.  [CLASS RATE.] In this section, wherever the 
  3.17  "class rate" of a class of property is specified without 
  3.18  qualification as to whether it is the property's "net class 
  3.19  rate" or its "gross class rate," the "net class rate" and "gross 
  3.20  class rate" of that property are the same as its "class rate, 
  3.21  there is a state property tax on that class of property, and the 
  3.22  state tax rate is the difference between the class rate and the 
  3.23  combined local tax rates of all local jurisdictions, if any, 
  3.24  levying a property tax on that property." 
  3.25     Sec. 4.  Minnesota Statutes 1994, section 273.13, 
  3.26  subdivision 22, is amended to read: 
  3.27     Subd. 22.  [CLASS 1.] (a) Except as provided in subdivision 
  3.28  23, Class 1 property includes real estate which is residential 
  3.29  and used for homestead purposes is class 1, except as provided 
  3.30  in subdivision 23, and all other property not otherwise 
  3.31  classified in this section.  The market value of class 1a 
  3.32  property that is a residential homestead must be determined 
  3.33  based upon the value of the house, garage, and land.  In the 
  3.34  case of any farm containing a dwelling, the dwelling, garage, 
  3.35  and surrounding one acre of property constitute class 1 
  3.36  property.  Class 1 property does not have a class rate.  
  4.1      The first $72,000 of market value of class 1a property has 
  4.2   a net class rate of one percent of its market value and a gross 
  4.3   class rate of 2.17 percent of its market value.  For taxes 
  4.4   payable in 1992, the market value of class 1a property that 
  4.5   exceeds $72,000 but does not exceed $115,000 has a class rate of 
  4.6   two percent of its market value; and the market value of class 
  4.7   1a property that exceeds $115,000 has a class rate of 2.5 
  4.8   percent of its market value.  For taxes payable in 1993 and 
  4.9   thereafter, the market value of class 1a property that exceeds 
  4.10  $72,000 has a class rate of two percent. 
  4.11     (b) Class 1b property includes homestead real estate or 
  4.12  homestead manufactured homes used for the purposes of a 
  4.13  homestead by 
  4.14     (1) any blind person, or the blind person and the blind 
  4.15  person's spouse; or 
  4.16     (2) any person, hereinafter referred to as "veteran," who: 
  4.17     (i) served in the active military or naval service of the 
  4.18  United States; and 
  4.19     (ii) is entitled to compensation under the laws and 
  4.20  regulations of the United States for permanent and total 
  4.21  service-connected disability due to the loss, or loss of use, by 
  4.22  reason of amputation, ankylosis, progressive muscular 
  4.23  dystrophies, or paralysis, of both lower extremities, such as to 
  4.24  preclude motion without the aid of braces, crutches, canes, or a 
  4.25  wheelchair; and 
  4.26     (iii) has acquired a special housing unit with special 
  4.27  fixtures or movable facilities made necessary by the nature of 
  4.28  the veteran's disability, or the surviving spouse of the 
  4.29  deceased veteran for as long as the surviving spouse retains the 
  4.30  special housing unit as a homestead; or 
  4.31     (3) any person who: 
  4.32     (i) is permanently and totally disabled and 
  4.33     (ii) receives 90 percent or more of total income from 
  4.34     (A) aid from any state as a result of that disability; or 
  4.35     (B) supplemental security income for the disabled; or 
  4.36     (C) workers' compensation based on a finding of total and 
  5.1   permanent disability; or 
  5.2      (D) social security disability, including the amount of a 
  5.3   disability insurance benefit which is converted to an old age 
  5.4   insurance benefit and any subsequent cost of living increases; 
  5.5   or 
  5.6      (E) aid under the federal Railroad Retirement Act of 1937, 
  5.7   United States Code Annotated, title 45, section 228b(a)5; or 
  5.8      (F) a pension from any local government retirement fund 
  5.9   located in the state of Minnesota as a result of that 
  5.10  disability; or 
  5.11     (4) any person who is permanently and totally disabled and 
  5.12  whose household income as defined in section 290A.03, 
  5.13  subdivision 5, is 150 percent or less of the federal poverty 
  5.14  level. 
  5.15     Property is classified and assessed under clause (4) only 
  5.16  if the government agency or income-providing source certifies, 
  5.17  upon the request of the homestead occupant, that the homestead 
  5.18  occupant satisfies the disability requirements of this paragraph.
  5.19     Property is classified and assessed pursuant to clause (1) 
  5.20  only if the commissioner of economic security certifies to the 
  5.21  assessor that the homestead occupant satisfies the requirements 
  5.22  of this paragraph.  
  5.23     Permanently and totally disabled for the purpose of this 
  5.24  subdivision means a condition which is permanent in nature and 
  5.25  totally incapacitates the person from working at an occupation 
  5.26  which brings the person an income.  The first $32,000 market 
  5.27  value of class 1b property has a net class rate of .45 percent 
  5.28  of its market value and a gross class rate of .87 percent of its 
  5.29  market value.  The remaining market value of class 1b property 
  5.30  has a gross or net class rate using the rates for class 1 or 
  5.31  class 2a property, whichever is appropriate, of similar market 
  5.32  value.  
  5.33     (c) Class 1c property is commercial use real property that 
  5.34  abuts a lakeshore line and is devoted to temporary and seasonal 
  5.35  residential occupancy for recreational purposes but not devoted 
  5.36  to commercial purposes for more than 250 days in the year 
  6.1   preceding the year of assessment, and that includes a portion 
  6.2   used as a homestead by the owner, which includes a dwelling 
  6.3   occupied as a homestead by a shareholder of a corporation that 
  6.4   owns the resort or a partner in a partnership that owns the 
  6.5   resort, even if the title to the homestead is held by the 
  6.6   corporation or partnership.  For purposes of this clause, 
  6.7   property is devoted to a commercial purpose on a specific day if 
  6.8   any portion of the property, excluding the portion used 
  6.9   exclusively as a homestead, is used for residential occupancy 
  6.10  and a fee is charged for residential occupancy.  Class 1c 
  6.11  property has a class rate of one percent of total market value 
  6.12  for taxes payable in 1993 and thereafter with the following 
  6.13  limitation:  the area of the property must not exceed 100 feet 
  6.14  of lakeshore footage for each cabin or campsite located on the 
  6.15  property up to a total of 800 feet and 500 feet in depth, 
  6.16  measured away from the lakeshore.  
  6.17     Sec. 5.  Minnesota Statutes 1994, section 273.13, 
  6.18  subdivision 23, is amended to read: 
  6.19     Subd. 23.  [CLASS 2.] (a) Class 2a property is agricultural 
  6.20  land including any improvements that is homesteaded.  The market 
  6.21  value of, except for the house and garage and immediately 
  6.22  surrounding one acre of land has the same class rates as, which 
  6.23  are class 1a 1 property under subdivision 22.  The value of 
  6.24  the remaining land including improvements up to $115,000 has a 
  6.25  net class rate of .45 percent of market value and a gross class 
  6.26  rate of 1.75 percent of market value.  The remaining value of 
  6.27  class 2a property over $115,000 of market value that does not 
  6.28  exceed 320 acres has a net class rate of one percent of market 
  6.29  value, and a gross class rate of 2.25 percent of market value.  
  6.30  The remaining property over the $115,000 market value in excess 
  6.31  of 320 acres has a class rate of 1.5 percent of market value, 
  6.32  and a gross class rate of 2.25 percent of market value.  Class 
  6.33  2a property does not have a class rate.  
  6.34     (b) Class 2b property is (1) real estate, rural in 
  6.35  character and used exclusively for growing trees for timber, 
  6.36  lumber, and wood and wood products; (2) real estate that is not 
  7.1   improved with a structure and is used exclusively for growing 
  7.2   trees for timber, lumber, and wood and wood products, if the 
  7.3   owner has participated or is participating in a cost-sharing 
  7.4   program for afforestation, reforestation, or timber stand 
  7.5   improvement on that particular property, administered or 
  7.6   coordinated by the commissioner of natural resources; (3) real 
  7.7   estate that is nonhomestead agricultural land; or (4) a landing 
  7.8   area or public access area of a privately owned public use 
  7.9   airport.  Class 2b property has a net class rate of 1.5 percent 
  7.10  of market value, and a gross class rate of 2.25 percent of 
  7.11  market value for taxes payable in 1996, a class rate of two 
  7.12  percent of market value for taxes payable in 1997, and no class 
  7.13  rate thereafter.  
  7.14     (c) Agricultural land as used in this section means 
  7.15  contiguous acreage of ten acres or more, primarily used during 
  7.16  the preceding year for agricultural purposes.  Agricultural use 
  7.17  may include pasture, timber, waste, unusable wild land, and land 
  7.18  included in state or federal farm programs.  "Agricultural 
  7.19  purposes" as used in this section means the raising or 
  7.20  cultivation of agricultural products.  
  7.21     (d) Real estate of less than ten acres used principally for 
  7.22  raising or cultivating agricultural products, shall be 
  7.23  considered as agricultural land, if it is not used primarily for 
  7.24  residential purposes.  
  7.25     (e) The term "agricultural products" as used in this 
  7.26  subdivision includes:  
  7.27     (1) livestock, dairy animals, dairy products, poultry and 
  7.28  poultry products, fur-bearing animals, horticultural and nursery 
  7.29  stock described in sections 18.44 to 18.61, fruit of all kinds, 
  7.30  vegetables, forage, grains, bees, and apiary products by the 
  7.31  owner; 
  7.32     (2) fish bred for sale and consumption if the fish breeding 
  7.33  occurs on land zoned for agricultural use; 
  7.34     (3) the commercial boarding of horses if the boarding is 
  7.35  done in conjunction with raising or cultivating agricultural 
  7.36  products as defined in clause (1); 
  8.1      (4) property which is owned and operated by nonprofit 
  8.2   organizations used for equestrian activities, excluding racing; 
  8.3   and 
  8.4      (5) game birds and waterfowl bred and raised for use on a 
  8.5   shooting preserve licensed under section 97A.115.  
  8.6      (f) If a parcel used for agricultural purposes is also used 
  8.7   for commercial or industrial purposes, including but not limited 
  8.8   to:  
  8.9      (1) wholesale and retail sales; 
  8.10     (2) processing of raw agricultural products or other goods; 
  8.11     (3) warehousing or storage of processed goods; and 
  8.12     (4) office facilities for the support of the activities 
  8.13  enumerated in clauses (1), (2), and (3), 
  8.14  the assessor shall classify the part of the parcel used for 
  8.15  agricultural purposes as class 1b, 2a, or 2b, whichever is 
  8.16  appropriate, and the remainder in the class appropriate to its 
  8.17  use.  The grading, sorting, and packaging of raw agricultural 
  8.18  products for first sale is considered an agricultural purpose.  
  8.19  A greenhouse or other building where horticultural or nursery 
  8.20  products are grown that is also used for the conduct of retail 
  8.21  sales must be classified as agricultural if it is primarily used 
  8.22  for the growing of horticultural or nursery products from seed, 
  8.23  cuttings, or roots and occasionally as a showroom for the retail 
  8.24  sale of those products.  Use of a greenhouse or building only 
  8.25  for the display of already grown horticultural or nursery 
  8.26  products does not qualify as an agricultural purpose.  
  8.27     The assessor shall determine and list separately on the 
  8.28  records the market value of the homestead dwelling and the one 
  8.29  acre of land on which that dwelling is located.  If any farm 
  8.30  buildings or structures are located on this homesteaded acre of 
  8.31  land, their market value shall not be included in this separate 
  8.32  determination.  
  8.33     (g) To qualify for classification under paragraph (b), 
  8.34  clause (4), a privately owned public use airport must be 
  8.35  licensed as a public airport under section 360.018.  For 
  8.36  purposes of paragraph (b), clause (4), "landing area" means that 
  9.1   part of a privately owned public use airport properly cleared, 
  9.2   regularly maintained, and made available to the public for use 
  9.3   by aircraft and includes runways, taxiways, aprons, and sites 
  9.4   upon which are situated landing or navigational aids.  A landing 
  9.5   area also includes land underlying both the primary surface and 
  9.6   the approach surfaces that comply with all of the following:  
  9.7      (i) the land is properly cleared and regularly maintained 
  9.8   for the primary purposes of the landing, taking off, and taxiing 
  9.9   of aircraft; but that portion of the land that contains 
  9.10  facilities for servicing, repair, or maintenance of aircraft is 
  9.11  not included as a landing area; 
  9.12     (ii) the land is part of the airport property; and 
  9.13     (iii) the land is not used for commercial or residential 
  9.14  purposes. 
  9.15  The land contained in a landing area under paragraph (b), clause 
  9.16  (4), must be described and certified by the commissioner of 
  9.17  transportation.  The certification is effective until it is 
  9.18  modified, or until the airport or landing area no longer meets 
  9.19  the requirements of paragraph (b), clause (4).  For purposes of 
  9.20  paragraph (b), clause (4), "public access area" means property 
  9.21  used as an aircraft parking ramp, apron, or storage hangar, or 
  9.22  an arrival and departure building in connection with the airport.
  9.23     Sec. 6.  Minnesota Statutes 1994, section 273.13, 
  9.24  subdivision 24, is amended to read: 
  9.25     Subd. 24.  [CLASS 3.] (a) Class 3a property includes: 
  9.26     (1) commercial and industrial property and utility real and 
  9.27  personal property, except class 5 property as identified in 
  9.28  subdivision 31, clause (1), is class 3a.  It has a property, 
  9.29  with the specific inclusions and exclusions described in 
  9.30  paragraph (b); 
  9.31     (2) industrial property; 
  9.32     (3) utility property, other than personal property; and 
  9.33     (4) unmined iron ore and low-grade, iron-bearing formations 
  9.34  as defined in section 273.14.  The class rate of three percent 
  9.35  of on the first $100,000 of market value of class 3a property is 
  9.36  four percent for taxes payable in 1993 and 1996 and thereafter, 
 10.1   and 5.06 percent of.  The class rate for the market value over 
 10.2   $100,000 of class 3a property is six percent for taxes payable 
 10.3   in 1996 and thereafter.  Property is eligible for the reduced 
 10.4   rate on the first $100,000 of market value if it meets the 
 10.5   requirements of paragraph (c).  The property taxes otherwise 
 10.6   payable with respect to qualifying property will be reduced as 
 10.7   provided in paragraph (e).  
 10.8      (b) Commercial property includes and excludes certain 
 10.9   property as follows: 
 10.10     (1) certain property used in maintaining resort businesses 
 10.11  is not included as commercial property even though it is used 
 10.12  commercially.  Property is not treated as commercial property if 
 10.13  it: 
 10.14     (i) is both: 
 10.15     (A) devoted to temporary and seasonal residential occupancy 
 10.16  for recreational purposes; and 
 10.17     (B) not devoted to commercial purposes for more than 250 
 10.18  days in the year preceding the year of the assessment, with 
 10.19  devotion to a commercial purpose deemed to occur on any day on 
 10.20  which property is used for residential occupancy for which a fee 
 10.21  is charged; or 
 10.22     (ii) is located within two miles of, and used exclusively 
 10.23  for recreational purposes in conjunction with, property 
 10.24  described in subclause (i), but is not devoted to commercial 
 10.25  recreational use for more than 250 days in the year preceding 
 10.26  the year of assessment. 
 10.27     The exclusion of subclause (ii) is limited to two acres, 
 10.28  but if the property is larger, two acres can qualify.  Any 
 10.29  portion of property described in either subclause (i) or (ii) 
 10.30  that is operated as a restaurant, bar, gift shop, or other 
 10.31  nonresidential facility operated on a commercial basis not 
 10.32  directly related to temporary and seasonal residential occupancy 
 10.33  for recreation purposes is commercial property.  Owners of real 
 10.34  property seeking to avoid classification as commercial property 
 10.35  under this provision must submit a declaration to the assessor 
 10.36  designating the cabins or units occupied for 250 days or less in 
 11.1   the year preceding the year of assessment by January 15 of the 
 11.2   assessment year.  The remainder of the cabins or units and a 
 11.3   proportionate share of the land on which they are located will 
 11.4   be classified as commercial property. 
 11.5      (2) Commercial property does not include real property up 
 11.6   to a maximum of one acre of land owned by a nonprofit community 
 11.7   service oriented organization, provided that the property is not 
 11.8   used for a revenue-producing activity for more than six days in 
 11.9   the calendar year preceding the year of assessment and the 
 11.10  property is not used for residential purposes on either a 
 11.11  temporary or permanent basis.  For purposes of this clause, a 
 11.12  "nonprofit community service oriented organization" means any 
 11.13  corporation, society, association, foundation, or institution 
 11.14  organized and operated exclusively for charitable, religious, 
 11.15  fraternal, civic, or educational purposes, and which is exempt 
 11.16  from federal income taxation pursuant to section 501(c)(3), 
 11.17  (10), or (19) of the Internal Revenue Code of 1986, as amended 
 11.18  through December 31, 1990.  For purposes of this clause, 
 11.19  "revenue-producing activities" shall include, but not be limited 
 11.20  to, property or that portion of the property that is used as an 
 11.21  on-sale intoxicating liquor or 3.2 percent malt liquor 
 11.22  establishment licensed under chapter 340A, a restaurant open to 
 11.23  the public, bowling alley, retail store, gambling conducted by 
 11.24  organizations licensed under chapter 349, an insurance business, 
 11.25  or office or other space leased or rented to a lessee who 
 11.26  conducts a for-profit enterprise on the premises.  Any portion 
 11.27  of the property which is used for revenue-producing activities 
 11.28  for more than six days in the calendar year preceding the year 
 11.29  of assessment shall be assessed as class 3a commercial 
 11.30  property.  The use of the property for social events open 
 11.31  exclusively to members and their guests for periods of less than 
 11.32  24 hours, when an admission is not charged nor any revenues are 
 11.33  received by the organization shall not be considered a 
 11.34  revenue-producing activity. 
 11.35     (c) In the case of state-assessed commercial, industrial, 
 11.36  and utility property owned by one person or entity, only one 
 12.1   parcel has a reduced class rate on the first $100,000 of market 
 12.2   value.  In the case of other commercial, industrial, and utility 
 12.3   property owned by one person or entity, only one parcel in each 
 12.4   county has a reduced class rate on the first $100,000 of market 
 12.5   value, except that: 
 12.6      (1) if the market value of the parcel is less than 
 12.7   $100,000, and additional parcels are owned by the same person or 
 12.8   entity in the same city or town within that county, the reduced 
 12.9   class rate shall be applied up to a combined total market value 
 12.10  of $100,000 for all parcels owned by the same person or entity 
 12.11  in the same city or town within the county; 
 12.12     (2) in the case of grain, fertilizer, and feed elevator 
 12.13  facilities, as defined in section 18C.305, subdivision 1, or 
 12.14  232.21, subdivision 8, the limitation to one parcel per owner 
 12.15  per county for the reduced class rate shall not apply, but there 
 12.16  shall be a limit of $100,000 of preferential value per site of 
 12.17  contiguous parcels owned by the same person or entity.  Only the 
 12.18  value of the elevator portion of each parcel shall qualify for 
 12.19  treatment under this clause.  For purposes of this subdivision, 
 12.20  contiguous parcels include parcels separated only by a railroad 
 12.21  or public road right-of-way; and 
 12.22     (3) in the case of property owned by a nonprofit charitable 
 12.23  organization that qualifies for tax exemption under section 
 12.24  501(c)(3) of the Internal Revenue Code of 1986, as amended 
 12.25  through December 31, 1993, if the property is used as a business 
 12.26  incubator, the limitation to one parcel per owner per county for 
 12.27  the reduced class rate shall not apply, provided that the 
 12.28  reduced rate applies only to the first $100,000 of value per 
 12.29  parcel owned by the organization.  As used in this clause, a 
 12.30  "business incubator" is a facility used for the development of 
 12.31  nonretail businesses, offering access to equipment, space, 
 12.32  services, and advice to the tenant businesses, for the purpose 
 12.33  of encouraging economic development, diversification, and job 
 12.34  creation in the area served by the organization. 
 12.35     To receive the reduced class rate on additional parcels 
 12.36  under clause (1), (2), or (3), the taxpayer must notify the 
 13.1   county assessor that the taxpayer owns more than one parcel that 
 13.2   qualifies under clause (1), (2), or (3). 
 13.3      (b) (d) Employment property defined in section 469.166, 
 13.4   during the period provided in section 469.170, shall constitute 
 13.5   class 3b 3d and has a class rate of 2.3 percent of the first 
 13.6   $50,000 of market value and 3.6 percent of the remainder, except 
 13.7   that for employment property located in a border city enterprise 
 13.8   zone designated pursuant to section 469.168, subdivision 4, 
 13.9   paragraph (c), the class rate of the first $100,000 of market 
 13.10  value and the class rate of the remainder is determined under 
 13.11  paragraph (a), unless the governing body of the city designated 
 13.12  as an enterprise zone determines that a specific parcel shall be 
 13.13  assessed pursuant to the first clause of this sentence.  The 
 13.14  governing body may provide for assessment under the first clause 
 13.15  of the preceding sentence only for property which is located in 
 13.16  an area which has been designated by the governing body for the 
 13.17  receipt of tax reductions authorized by section 469.171, 
 13.18  subdivision 1. 
 13.19     (e) Class 3a property with respect to which the effective 
 13.20  tax rate for taxes payable in 1995 was less than 3.9 percent for 
 13.21  property meeting the requirements of paragraph (c) or less than 
 13.22  5.5 percent for other class 3a property may receive a credit 
 13.23  against property taxes payable in the years 1996 through 2000.  
 13.24  The amount, if any, of the credit is equal to the product of: 
 13.25     (1) the excess, if any, of the class rate for such class 3a 
 13.26  property for the year over the greater of the effective tax rate 
 13.27  or: 
 13.28     (i) three percent in the case of property meeting the 
 13.29  requirements of paragraph (c); or 
 13.30     (ii) 4.6 percent in the case of other class 3a property; 
 13.31  multiplied by 
 13.32     (2) 100 percent for taxes payable in 1996; 80 percent for 
 13.33  taxes payable in 1997; 60 percent for taxes payable in 1998; 40 
 13.34  percent for taxes payable in 1999; and 20 percent for taxes 
 13.35  payable in 2000. 
 13.36     As used in this paragraph, "effective tax rate" means the 
 14.1   percentage determined by dividing the taxes payable by the 
 14.2   market value used to determine the taxes. 
 14.3      Sec. 7.  Minnesota Statutes 1994, section 273.13, 
 14.4   subdivision 25, is amended to read: 
 14.5      Subd. 25.  [CLASS 4.] (a) Class 4a is residential real 
 14.6   estate containing four or more units and used or held for use by 
 14.7   the owner or by the tenants or lessees of the owner as a 
 14.8   residence for rental periods of 30 days or more.  Class 4a also 
 14.9   includes hospitals licensed under sections 144.50 to 144.56, 
 14.10  other than hospitals exempt under section 272.02, and contiguous 
 14.11  property used for hospital purposes, without regard to whether 
 14.12  the property has been platted or subdivided.  Class 4a property 
 14.13  has a class rate of 3.5 percent of market value for taxes 
 14.14  payable in 1992, and 3.4 three percent of market value for taxes 
 14.15  payable in 1993 and 1996, a class rate of 2.5 percent of market 
 14.16  value for taxes payable in 1997, and no class rate thereafter. 
 14.17     (b) Class 4b includes: 
 14.18     (1) for taxes payable in 1996 and any later years in which 
 14.19  class 4a property has a class rate, residential real estate 
 14.20  described in Minnesota Statutes 1994, section 273.13, 
 14.21  subdivision 25, paragraph (c), clause (1), (2), (3), (4), or 
 14.22  (7), or (d), clause (1) or (3); 
 14.23     (2) residential real estate containing less than four 
 14.24  units, other than seasonal residential, and recreational not 
 14.25  classified under any other provision; and 
 14.26     (2) (3) manufactured home parks as defined in section 
 14.27  327.14, subdivision 3, and manufactured homes not classified 
 14.28  under any other provision; 
 14.29     (3) a dwelling, garage, and surrounding one acre of 
 14.30  property on a nonhomestead farm classified under subdivision 23, 
 14.31  paragraph (b).  
 14.32     Class 4b property has a no class rate of 2.8 percent of 
 14.33  market value for taxes payable in 1992, 2.5 percent of market 
 14.34  value for taxes payable in 1993, and 2.3 percent of market value 
 14.35  for taxes payable in 1994 and thereafter. 
 14.36     (c) Class 4c property includes: 
 15.1      (1) a structure that is:  
 15.2      (i) situated on real property that is used for housing for 
 15.3   the elderly or for low- and moderate-income families as defined 
 15.4   in Title II, as amended through December 31, 1990, of the 
 15.5   National Housing Act or the Minnesota housing finance agency law 
 15.6   of 1971, as amended, or rules promulgated by the agency and 
 15.7   financed by a direct federal loan or federally insured loan made 
 15.8   pursuant to Title II of the Act; or 
 15.9      (ii) situated on real property that is used for housing the 
 15.10  elderly or for low- and moderate-income families as defined by 
 15.11  the Minnesota housing finance agency law of 1971, as amended, or 
 15.12  rules adopted by the agency pursuant thereto and financed by a 
 15.13  loan made by the Minnesota housing finance agency pursuant to 
 15.14  the provisions of the act.  
 15.15     This clause applies only to property of a nonprofit or 
 15.16  limited dividend entity.  Property is classified as class 4c 
 15.17  under this clause for 15 years from the date of the completion 
 15.18  of the original construction or substantial rehabilitation, or 
 15.19  for the original term of the loan.  
 15.20     (2) a structure that is: 
 15.21     (i) situated upon real property that is used for housing 
 15.22  lower income families or elderly or handicapped persons, as 
 15.23  defined in section 8 of the United States Housing Act of 1937, 
 15.24  as amended; and 
 15.25     (ii) owned by an entity which has entered into a housing 
 15.26  assistance payments contract under section 8 which provides 
 15.27  assistance for 100 percent of the dwelling units in the 
 15.28  structure, other than dwelling units intended for management or 
 15.29  maintenance personnel.  Property is classified as class 4c under 
 15.30  this clause for the term of the housing assistance payments 
 15.31  contract, including all renewals, or for the term of its 
 15.32  permanent financing, whichever is shorter; and 
 15.33     (3) a qualified low-income building as defined in section 
 15.34  42(c)(2) of the Internal Revenue Code of 1986, as amended 
 15.35  through December 31, 1990, that (i) receives a low-income 
 15.36  housing credit under section 42 of the Internal Revenue Code of 
 16.1   1986, as amended through December 31, 1990; or (ii) meets the 
 16.2   requirements of that section and receives public financing, 
 16.3   except financing provided under sections 469.174 to 469.179, 
 16.4   which contains terms restricting the rents; or (iii) meets the 
 16.5   requirements of section 273.1317.  Classification pursuant to 
 16.6   this clause is limited to a term of 15 years.  The public 
 16.7   financing received must be from at least one of the following 
 16.8   sources:  government issued bonds exempt from taxes under 
 16.9   section 103 of the Internal Revenue Code of 1986, as amended 
 16.10  through December 31, 1993, the proceeds of which are used for 
 16.11  the acquisition or rehabilitation of the building; programs 
 16.12  under section 221(d)(3), 202, or 236, of Title II of the 
 16.13  National Housing Act; rental housing program funds under Section 
 16.14  8 of the United States Housing Act of 1937 or the market rate 
 16.15  family graduated payment mortgage program funds administered by 
 16.16  the Minnesota housing finance agency that are used for the 
 16.17  acquisition or rehabilitation of the building; public financing 
 16.18  provided by a local government used for the acquisition or 
 16.19  rehabilitation of the building, including grants or loans from 
 16.20  federal community development block grants, HOME block grants, 
 16.21  or residential rental bonds issued under chapter 474A; or other 
 16.22  rental housing program funds provided by the Minnesota housing 
 16.23  finance agency for the acquisition or rehabilitation of the 
 16.24  building. 
 16.25     For all properties described in clauses (1), (2), and (3) 
 16.26  and in paragraph (d), the market value determined by the 
 16.27  assessor must be based on the normal approach to value using 
 16.28  normal unrestricted rents unless the owner of the property 
 16.29  elects to have the property assessed under Laws 1991, chapter 
 16.30  291, article 1, section 55.  If the owner of the property elects 
 16.31  to have the market value determined on the basis of the actual 
 16.32  restricted rents, as provided in Laws 1991, chapter 291, article 
 16.33  1, section 55, the property will be assessed at the rate 
 16.34  provided for class 4a or class 4b property, as appropriate.  
 16.35  Properties described in clauses (1)(ii), (3), and (4) may apply 
 16.36  to the assessor for valuation under Laws 1991, chapter 291, 
 17.1   article 1, section 55.  The land on which these structures are 
 17.2   situated has the class rate given in paragraph (b) if the 
 17.3   structure contains fewer than four units, and the class rate 
 17.4   given in paragraph (a) if the structure contains four or more 
 17.5   units.  This clause applies only to the property of a nonprofit 
 17.6   or limited dividend entity.  
 17.7      (4) a parcel of land, not to exceed one acre, and its 
 17.8   improvements or a parcel of unimproved land, not to exceed one 
 17.9   acre, if it is owned by a neighborhood real estate trust and at 
 17.10  least 60 percent of the dwelling units, if any, on all land 
 17.11  owned by the trust are leased to or occupied by lower income 
 17.12  families or individuals.  This clause does not apply to any 
 17.13  portion of the land or improvements used for nonresidential 
 17.14  purposes.  For purposes of this clause, a lower income family is 
 17.15  a family with an income that does not exceed 65 percent of the 
 17.16  median family income for the area, and a lower income individual 
 17.17  is an individual whose income does not exceed 65 percent of the 
 17.18  median individual income for the area, as determined by the 
 17.19  United States Secretary of Housing and Urban Development.  For 
 17.20  purposes of this clause, "neighborhood real estate trust" means 
 17.21  an entity which is certified by the governing body of the 
 17.22  municipality in which it is located to have the following 
 17.23  characteristics: 
 17.24     (a) it is a nonprofit corporation organized under chapter 
 17.25  317A; 
 17.26     (b) it has as its principal purpose providing housing for 
 17.27  lower income families in a specific geographic community 
 17.28  designated in its articles or bylaws; 
 17.29     (c) it limits membership with voting rights to residents of 
 17.30  the designated community; and 
 17.31     (d) it has a board of directors consisting of at least 
 17.32  seven directors, 60 percent of whom are members with voting 
 17.33  rights and, to the extent feasible, 25 percent of whom are 
 17.34  elected by resident members of buildings owned by the trust; and 
 17.35     (5) except as provided in subdivision 22, paragraph (c), 
 17.36  real property devoted to temporary and seasonal residential 
 18.1   occupancy for recreation purposes, including real property 
 18.2   devoted to temporary and seasonal residential occupancy for 
 18.3   recreation purposes and not devoted to commercial purposes for 
 18.4   more than 250 days in the year preceding the year of 
 18.5   assessment.  For purposes of this clause paragraph, property is 
 18.6   devoted to a commercial purpose on a specific day if any portion 
 18.7   of the property is used for residential occupancy, and a fee is 
 18.8   charged for residential occupancy.  Class 4c also includes 
 18.9   commercial use real property used exclusively for recreational 
 18.10  purposes in conjunction with class 4c property devoted to 
 18.11  temporary and seasonal residential occupancy for recreational 
 18.12  purposes, up to a total of two acres, provided the property is 
 18.13  not devoted to commercial recreational use for more than 250 
 18.14  days in the year preceding the year of assessment and is located 
 18.15  within two miles of the class 4c property with which it is 
 18.16  used.  Class 4c property classified in this clause also includes 
 18.17  the remainder of class 1c resorts.  Owners of real property 
 18.18  devoted to temporary and seasonal residential occupancy for 
 18.19  recreation purposes and all or a portion of which was devoted to 
 18.20  commercial purposes for not more than 250 days in the year 
 18.21  preceding the year of assessment desiring classification as 
 18.22  class 1c or 4c, must submit a declaration to the assessor 
 18.23  designating the cabins or units occupied for 250 days or less in 
 18.24  the year preceding the year of assessment by January 15 of the 
 18.25  assessment year.  Those cabins or units and a proportionate 
 18.26  share of the land on which they are located will be designated 
 18.27  class 1c or 4c as otherwise provided.  The remainder of the 
 18.28  cabins or units and a proportionate share of the land on which 
 18.29  they are located will be designated as class 3a.  The first 
 18.30  $100,000 of the market value of the remainder of the cabins or 
 18.31  units and a proportionate share of the land on which they are 
 18.32  located shall have a class rate of three percent.  The owner of 
 18.33  property desiring designation as class 1c or 4c property must 
 18.34  provide guest registers or other records demonstrating that the 
 18.35  units for which class 1c or 4c designation is sought were not 
 18.36  occupied for more than 250 days in the year preceding the 
 19.1   assessment if so requested.  The portion of a property operated 
 19.2   as a (1) restaurant, (2) bar, (3) gift shop, and (4) other 
 19.3   nonresidential facility operated on a commercial basis not 
 19.4   directly related to temporary and seasonal residential occupancy 
 19.5   for recreation purposes shall not qualify for class 1c or 4c; 
 19.6      (6) real property up to a maximum of one acre of land owned 
 19.7   by a nonprofit community service oriented organization; provided 
 19.8   that the property is not used for a revenue-producing activity 
 19.9   for more than six days in the calendar year preceding the year 
 19.10  of assessment and the property is not used for residential 
 19.11  purposes on either a temporary or permanent basis.  For purposes 
 19.12  of this clause, a "nonprofit community service oriented 
 19.13  organization" means any corporation, society, association, 
 19.14  foundation, or institution organized and operated exclusively 
 19.15  for charitable, religious, fraternal, civic, or educational 
 19.16  purposes, and which is exempt from federal income taxation 
 19.17  pursuant to section 501(c)(3), (10), or (19) of the Internal 
 19.18  Revenue Code of 1986, as amended through December 31, 1990.  For 
 19.19  purposes of this clause, "revenue-producing activities" shall 
 19.20  include but not be limited to property or that portion of the 
 19.21  property that is used as an on-sale intoxicating liquor or 3.2 
 19.22  percent malt liquor establishment licensed under chapter 340A, a 
 19.23  restaurant open to the public, bowling alley, a retail store, 
 19.24  gambling conducted by organizations licensed under chapter 349, 
 19.25  an insurance business, or office or other space leased or rented 
 19.26  to a lessee who conducts a for-profit enterprise on the 
 19.27  premises.  Any portion of the property which is used for 
 19.28  revenue-producing activities for more than six days in the 
 19.29  calendar year preceding the year of assessment shall be assessed 
 19.30  as class 3a.  The use of the property for social events open 
 19.31  exclusively to members and their guests for periods of less than 
 19.32  24 hours, when an admission is not charged nor any revenues are 
 19.33  received by the organization shall not be considered a 
 19.34  revenue-producing activity; 
 19.35     (7) post-secondary student housing of not more than one 
 19.36  acre of land that is owned by a nonprofit corporation organized 
 20.1   under chapter 317A and is used exclusively by a student 
 20.2   cooperative, sorority, or fraternity for on-campus housing or 
 20.3   housing located within two miles of the border of a college 
 20.4   campus; and 
 20.5      (8) manufactured home parks as defined in section 327.14, 
 20.6   subdivision 3. 
 20.7      Class 4c property has a class rate of 2.3 2.5 percent of 
 20.8   market value, except that (i) each parcel of seasonal 
 20.9   residential recreational property not used for commercial 
 20.10  purposes under clause (5) has a class rate of 2.2 percent of 
 20.11  market value for taxes payable in 1992 1996, and a class rate 
 20.12  of 2.25 percent of market value for taxes payable in 1993 1997, 
 20.13  and no class rate thereafter, the first $72,000 of market value 
 20.14  on each parcel has a class rate of two percent and the market 
 20.15  value of each parcel that exceeds $72,000 has a class rate of 
 20.16  2.5 percent, and (ii) manufactured home parks assessed under 
 20.17  clause (8) have a class rate of two percent for taxes payable in 
 20.18  1993, 1994, and 1995 only.  
 20.19     (d) Class 4d property includes: 
 20.20     (1) a structure that is: 
 20.21     (i) situated on real property that is used for housing for 
 20.22  the elderly or for low and moderate income families as defined 
 20.23  by the Farmers Home Administration; 
 20.24     (ii) located in a municipality of less than 10,000 
 20.25  population; and 
 20.26     (iii) financed by a direct loan or insured loan from the 
 20.27  Farmers Home Administration.  Property is classified under this 
 20.28  clause for 15 years from the date of the completion of the 
 20.29  original construction or for the original term of the loan.  
 20.30     The class rates in paragraph (c), clauses (1), (2), and (3) 
 20.31  and this clause apply to the properties described in them, only 
 20.32  in proportion to occupancy of the structure by elderly or 
 20.33  handicapped persons or low and moderate income families as 
 20.34  defined in the applicable laws unless construction of the 
 20.35  structure had been commenced prior to January 1, 1984; or the 
 20.36  project had been approved by the governing body of the 
 21.1   municipality in which it is located prior to June 30, 1983; or 
 21.2   financing of the project had been approved by a federal or state 
 21.3   agency prior to June 30, 1983.  For those properties, 4c or 4d 
 21.4   classification is available only for those units meeting the 
 21.5   requirements of section 273.1318. 
 21.6      Classification under this clause is only available to 
 21.7   property of a nonprofit or limited dividend entity. 
 21.8      In the case of a structure financed or refinanced under any 
 21.9   federal or state mortgage insurance or direct loan program 
 21.10  exclusively for housing for the elderly or for housing for the 
 21.11  handicapped, a unit shall be considered occupied so long as it 
 21.12  is actually occupied by an elderly or handicapped person or, if 
 21.13  vacant, is held for rental to an elderly or handicapped person. 
 21.14     (2) For taxes payable in 1992, 1993, and 1994, only, 
 21.15  buildings and appurtenances, together with the land upon which 
 21.16  they are located, leased by the occupant under the community 
 21.17  lending model lease-purchase mortgage loan program administered 
 21.18  by the Federal National Mortgage Association, provided the 
 21.19  occupant's income is no greater than 60 percent of the county or 
 21.20  area median income, adjusted for family size and the building 
 21.21  consists of existing single family or duplex housing.  The lease 
 21.22  agreement must provide for a portion of the lease payment to be 
 21.23  escrowed as a nonrefundable down payment on the housing.  To 
 21.24  qualify under this clause, the taxpayer must apply to the county 
 21.25  assessor by May 30 of each year.  The application must be 
 21.26  accompanied by an affidavit or other proof required by the 
 21.27  assessor to determine qualification under this clause. 
 21.28     (3) Qualifying buildings and appurtenances, together with 
 21.29  the land upon which they are located, leased for a period of up 
 21.30  to five years by the occupant under a lease-purchase program 
 21.31  administered by the Minnesota housing finance agency or a 
 21.32  housing and redevelopment authority authorized under sections 
 21.33  469.001 to 469.047, provided the occupant's income is no greater 
 21.34  than 80 percent of the county or area median income, adjusted 
 21.35  for family size, and the building consists of two or less 
 21.36  dwelling units.  The lease agreement must provide for a portion 
 22.1   of the lease payment to be escrowed as a nonrefundable down 
 22.2   payment on the housing.  The administering agency shall verify 
 22.3   the occupants income eligibility and certify to the county 
 22.4   assessor that the occupant meets the income criteria under this 
 22.5   paragraph.  To qualify under this clause, the taxpayer must 
 22.6   apply to the county assessor by May 30 of each year.  For 
 22.7   purposes of this section, "qualifying buildings and 
 22.8   appurtenances" shall be defined as one or two unit residential 
 22.9   buildings which are unoccupied and have been abandoned and 
 22.10  boarded for at least six months. 
 22.11     Class 4d property has a class rate of two percent of market 
 22.12  value except that property classified under clause (3), shall 
 22.13  have the same class rate as class 1a property. 
 22.14     (e) (d) Residential rental property that would otherwise be 
 22.15  assessed as class 4 property under paragraph (a); paragraph (b), 
 22.16  clauses (1) and (3); paragraph (c), clause (1), (2), (3), or 
 22.17  (4), is assessed at the class rate applicable to it under 
 22.18  Minnesota Statutes 1988, section 273.13, class 3a property if it 
 22.19  is found to be a substandard building under section 
 22.20  273.1316.  Residential rental property that would otherwise be 
 22.21  assessed as class 4 property under paragraph (d) is assessed at 
 22.22  2.3 percent of market value if it is found to be a substandard 
 22.23  building under section 273.1316. 
 22.24     Sec. 8.  Minnesota Statutes 1994, section 273.13, 
 22.25  subdivision 31, is amended to read: 
 22.26     Subd. 31.  [CLASS 5.] (a) Class 5 property includes:  
 22.27     (1) utility personal property and tools, implements, and 
 22.28  machinery of an electric generating, transmission, or 
 22.29  distribution system or a pipeline system transporting or 
 22.30  distributing water, gas, crude oil, or petroleum products or 
 22.31  mains and pipes used in the distribution of steam or hot or 
 22.32  chilled water for heating or cooling buildings, which are 
 22.33  fixtures;. 
 22.34     (2) unmined iron ore and low-grade iron-bearing formations 
 22.35  as defined in section 273.14; and 
 22.36     (3) all other property not otherwise classified. 
 23.1      (b) Class 5 property has a class rate of 5.06 4.6 percent 
 23.2   of market value for taxes payable in 1996, 4.3 percent for taxes 
 23.3   payable in 1997, four percent for taxes payable in 1998, 3.75 
 23.4   percent for taxes payable in 1999, and 3.5 percent for taxes 
 23.5   payable in 2000 and thereafter. 
 23.6      (c) Class 5 property is taxed exclusively by the state.  
 23.7   Local property taxes are not levied against class 5 property. 
 23.8      Sec. 9.  Minnesota Statutes 1994, section 273.13, 
 23.9   subdivision 33, is amended to read: 
 23.10     Subd. 33.  [CLASSIFICATION OF UNIMPROVED PROPERTY.] (a) All 
 23.11  real property that is not improved with a structure, and is not 
 23.12  classified in class 2, must be classified according to its 
 23.13  current use in class 1. 
 23.14     (b) Real property that is not improved with a structure and 
 23.15  for which there is no identifiable current use must be 
 23.16  classified according to its highest and best use permitted under 
 23.17  the local zoning ordinance.  If the ordinance permits more than 
 23.18  one use, the land must be classified according to the highest 
 23.19  and best use permitted under the ordinance.  If no such 
 23.20  ordinance exists, the assessor shall consider the most likely 
 23.21  potential use of the unimproved land based upon the use made of 
 23.22  surrounding land or land in proximity to the unimproved land. 
 23.23     Sec. 10.  Minnesota Statutes 1994, section 273.1316, 
 23.24  subdivision 1, is amended to read: 
 23.25     Subdivision 1.  [DENIAL OF RENTAL CLASSIFICATION.] A 
 23.26  building that is classified as residential rental property under 
 23.27  section 273.13, subdivision 25, and that is determined to be 
 23.28  substandard under this section is assessed as provided in 
 23.29  section 273.13, subdivision 25, paragraph (e) (d). 
 23.30     Sec. 11.  [273.1382] [AID TO TAX INCREMENT DISTRICTS.] 
 23.31     In 1996 and subsequent years, an aid shall be paid to each 
 23.32  tax increment financing district that is equal to the difference 
 23.33  between the increment received by the district for taxes payable 
 23.34  in 1995 and the increment calculated for the district for taxes 
 23.35  payable in 1996 and thereafter. 
 23.36     Sec. 12.  Minnesota Statutes 1994, section 273.1393, is 
 24.1   amended to read: 
 24.2      273.1393 [COMPUTATION OF NET PROPERTY TAXES.] 
 24.3      Notwithstanding any other provisions to the contrary, "net" 
 24.4   property taxes are determined by subtracting the credits in the 
 24.5   order listed from the gross tax:  
 24.6      (1) disaster credit as provided in section 273.123; 
 24.7      (2) powerline credit as provided in section 273.42; 
 24.8      (3) agricultural preserves credit as provided in section 
 24.9   473H.10; 
 24.10     (4) (3) enterprise zone credit as provided in section 
 24.11  469.171; and 
 24.12     (5) disparity reduction credit; 
 24.13     (6) (4) conservation tax credit as provided in section 
 24.14  273.119; 
 24.15     (7) taconite homestead credit as provided in section 
 24.16  273.135; and 
 24.17     (8) supplemental homestead credit as provided in section 
 24.18  273.1391.  
 24.19     The combination of all property tax credits must not exceed 
 24.20  the gross tax amount.  
 24.21     Sec. 13.  Minnesota Statutes 1994, section 273.165, 
 24.22  subdivision 2, is amended to read: 
 24.23     Subd. 2.  [IRON ORE.] Unmined iron ore included in class 5 
 24.24  3, paragraph (b) (a), must be assessed with and as a part of the 
 24.25  real estate in which it is located, but its net tax capacity 
 24.26  would be as established in section 273.13, subdivision 31.  The 
 24.27  real estate in which iron ore is located, other than the ore, 
 24.28  must be classified and assessed in accordance with the 
 24.29  provisions of the appropriate classes.  In assessing any tract 
 24.30  or lot of real estate in which iron ore is known to exist, the 
 24.31  assessable net tax capacity market value of the ore exclusive of 
 24.32  the land in which it is located, and the assessable net tax 
 24.33  capacity market value of the land exclusive of the ore must be 
 24.34  determined and set down separately and the aggregate of the two 
 24.35  must be assessed against the tract or lot. 
 24.36     Sec. 14.  [275.068] [TAX INCREASES IN 1996 AND 1997; 
 25.1   REFERENDUMS REQUIRED.] 
 25.2      Subdivision 1.  [GENERALLY.] A home rule charter or 
 25.3   statutory city or a county may increase its levy above the limit 
 25.4   provided in subdivision 2 for taxes payable in 1996 or 1997, by 
 25.5   the amount approved by the voters residing in the jurisdiction 
 25.6   of the authority at a referendum called for the purpose.  The 
 25.7   referendum may be called by the governing body or shall be 
 25.8   called by the governing body upon written petition of qualified 
 25.9   voters of the jurisdiction.  The referendum shall be conducted 
 25.10  during the calendar year before the increased levy authority, if 
 25.11  approved, first becomes payable.  Only one election to approve 
 25.12  an increase may be held in a calendar year.  The referendum must 
 25.13  be held on the first Tuesday after the first Monday in 
 25.14  November.  The ballot shall state the maximum amount of the 
 25.15  increased levy and the estimated referendum tax rate as a 
 25.16  percentage of market value in the year it is to be levied.  The 
 25.17  ballot may contain a textual portion with the information 
 25.18  required in this subdivision and a question stating 
 25.19  substantially the following:  "Shall the increase in the levy 
 25.20  proposed by (petition to) the governing body of ......., be 
 25.21  approved?" 
 25.22     Subd. 2.  [LIMIT ON LEVIES.] Unless a greater levy is 
 25.23  approved by a referendum under this section, for taxes payable 
 25.24  in 1996 and 1997, the levy of a home rule charter or statutory 
 25.25  city or a county may not exceed the sum of its levy for the 
 25.26  previous year, plus the aids it received under sections 273.135, 
 25.27  273.1931, 273.138, 273.1398, 273.166, 477A.012, 477A.013, 
 25.28  477A.0132, and 477A.15, if any, the previous year. 
 25.29     Subd. 3.  [NOTICE.] The governing body shall prepare and 
 25.30  deliver by first class mail at least 15 days but no more than 30 
 25.31  days prior to the day of the referendum to each taxpayer a 
 25.32  notice of the referendum and the proposed levy increase.  The 
 25.33  governing body need not mail more than one notice to any 
 25.34  taxpayer.  For the purpose of giving mailed notice under this 
 25.35  subdivision, owners shall be those shown to be owners on the 
 25.36  records of the county auditor or, in any county where tax 
 26.1   statements are mailed by the county treasurer, on the records of 
 26.2   the county treasurer.  Every property owner whose name does not 
 26.3   appear on the records of the county auditor or the the county 
 26.4   treasurer shall be deemed to have waived this mailed notice 
 26.5   unless the owner has requested in writing that the county 
 26.6   auditor or county treasurer, as the case may be, include the 
 26.7   name on the records for this purpose.  The notice must project 
 26.8   the anticipated amount of tax increase in annual dollars and 
 26.9   annual percentage for typical residential homesteads, 
 26.10  agricultural homesteads, apartments, and commercial-industrial 
 26.11  property within the school district. 
 26.12     The notice must include the following statement:  "Passage 
 26.13  of this referendum will result in an increase in your property 
 26.14  taxes." 
 26.15     Subd. 4.  [PETITIONS.] A petition authorized by subdivision 
 26.16  1 shall be effective if signed by a number of qualified voters 
 26.17  in excess of 15 percent of the number of registered voters of 
 26.18  the jurisdiction of the taxing authority as of the day the 
 26.19  petition is filed with the governing body. 
 26.20     Subd. 5.  [APPROVAL.] The approval of 50 percent plus one 
 26.21  of those voting on the question is required to pass a referendum 
 26.22  authorized by this section.  The increased levy approved under 
 26.23  this section is effective for only one year. 
 26.24     Sec. 15.  Minnesota Statutes 1994, section 275.08, 
 26.25  subdivision 1b, is amended to read: 
 26.26     Subd. 1b.  The amounts certified under section 275.07 after 
 26.27  adjustment under section 275.07, subdivision 3, by an individual 
 26.28  local government unit, except for any amounts certified under 
 26.29  sections 124A.03, subdivision 2a, and 275.61, shall be divided 
 26.30  by the total net tax capacity market value of all taxable 
 26.31  properties within the local government unit's taxing 
 26.32  jurisdiction.  The resulting ratio, the local government's local 
 26.33  tax rate, multiplied by each property's net tax capacity market 
 26.34  value shall be each property's tax for that local government 
 26.35  unit before reduction by any credits.  
 26.36     Any amount certified to the county auditor under section 
 27.1   124A.03, subdivision 2a, or 275.61, after the dates given in 
 27.2   those sections, shall be divided by the total estimated market 
 27.3   value of all taxable properties within the taxing district.  The 
 27.4   resulting ratio, the taxing district's new referendum tax rate, 
 27.5   multiplied by each property's estimated market value shall be 
 27.6   each property's new referendum tax before reduction by any 
 27.7   credits. 
 27.8      Sec. 16.  Minnesota Statutes 1994, section 275.08, is 
 27.9   amended by adding a subdivision to read: 
 27.10     Subd. 1e.  [STATE TAX RATE.] The rate of the state tax 
 27.11  imposed on any property is equal to the difference between the 
 27.12  class rate specified under section 273.13 and the sum of the 
 27.13  local tax rates determined under this section. 
 27.14     Sec. 17.  Minnesota Statutes 1994, section 276.04, 
 27.15  subdivision 2, is amended to read: 
 27.16     Subd. 2.  [CONTENTS OF TAX STATEMENTS.] (a) The treasurer 
 27.17  shall provide for the printing of the tax statements.  The 
 27.18  commissioner of revenue shall prescribe the form of the property 
 27.19  tax statement and its contents.  The statement must contain a 
 27.20  tabulated statement of the dollar amount due to each taxing 
 27.21  authority from the parcel of real property for which a 
 27.22  particular tax statement is prepared.  The dollar amounts due 
 27.23  the state, county, township or municipality, the total of the 
 27.24  metropolitan special taxing districts as defined in section 
 27.25  275.065, subdivision 3, paragraph (i), school district excess 
 27.26  referenda levy, remaining school district levy, and the total of 
 27.27  other voter approved referenda levies based on market value 
 27.28  under section 275.61 must be separately stated.  The amounts due 
 27.29  all other special taxing districts, if any, may be aggregated.  
 27.30  For the purposes of this subdivision, "school district excess 
 27.31  referenda levy" means school district taxes for operating 
 27.32  purposes approved at referenda, including those taxes based on 
 27.33  market value.  "School district excess referenda levy" does not 
 27.34  include school district taxes for capital expenditures approved 
 27.35  at referendums or school district taxes to pay for the debt 
 27.36  service on bonds approved at referenda.  The amount of the tax 
 28.1   on contamination value imposed under sections 270.91 to 270.98, 
 28.2   if any, must also be separately stated.  The dollar amounts, 
 28.3   including the dollar amount of any special assessments, may be 
 28.4   rounded to the nearest even whole dollar.  For purposes of this 
 28.5   section whole odd-numbered dollars may be adjusted to the next 
 28.6   higher even-numbered dollar.  The amount of market value 
 28.7   excluded under section 273.11, subdivision 16, if any, must also 
 28.8   be listed on the tax statement.  The statement shall include the 
 28.9   following sentence, printed in upper case letters in boldface 
 28.10  print:  "THE STATE OF MINNESOTA DOES NOT RECEIVE ANY PROPERTY 
 28.11  TAX REVENUES.  THE STATE OF MINNESOTA REDUCES YOUR PROPERTY TAX 
 28.12  BY PAYING CREDITS AND REIMBURSEMENTS TO LOCAL UNITS OF 
 28.13  GOVERNMENT."  
 28.14     (b) The property tax statements for manufactured homes and 
 28.15  sectional structures taxed as personal property shall contain 
 28.16  the same information that is required on the tax statements for 
 28.17  real property.  
 28.18     (c) Real and personal property tax statements must contain 
 28.19  the following information in the order given in this paragraph.  
 28.20  The information must contain the current year tax information in 
 28.21  the right column with the corresponding information for the 
 28.22  previous year in a column on the left: 
 28.23     (1) the property's estimated market value under section 
 28.24  273.11, subdivision 1; 
 28.25     (2) the property's taxable market value after reductions 
 28.26  under section 273.11, subdivisions 1a and 16; 
 28.27     (3) the property's gross tax, calculated by multiplying the 
 28.28  property's gross tax capacity market value times the total local 
 28.29  tax rate and adding to the result the sum of the aids enumerated 
 28.30  in clause (3); 
 28.31     (4) a total of the following aids: 
 28.32     (i) education aids payable under chapters 124 and 124A; 
 28.33     (ii) local government aids for cities, towns, and counties 
 28.34  under chapter 477A; and 
 28.35     (iii) disparity reduction aid under section 273.1398; 
 28.36     (5) for homestead residential and agricultural properties, 
 29.1   the homestead and agricultural credit aid apportioned to the 
 29.2   property.  This amount is obtained by multiplying the total 
 29.3   local tax rate by the difference between the property's gross 
 29.4   and net tax capacities under section 273.13.  This amount must 
 29.5   be separately stated and identified as "homestead and 
 29.6   agricultural credit."  For purposes of comparison with the 
 29.7   previous year's amount for the statement for taxes payable in 
 29.8   1990, the statement must show the homestead credit for taxes 
 29.9   payable in 1989 under section 273.13, and the agricultural 
 29.10  credit under section 273.132 for taxes payable in 1989; 
 29.11     (6) (3) any credits received under sections 273.119; 
 29.12  273.123; 273.135; 273.1391; 273.1398, subdivision 4; 469.171; 
 29.13  and 473H.10, except that the amount of credit received under 
 29.14  section 273.135 must be separately stated and identified as 
 29.15  "taconite tax relief"; and 
 29.16     (7) (4) the net tax payable in the manner required in 
 29.17  paragraph (a).  
 29.18     The commissioner of revenue shall certify to the county 
 29.19  auditor the actual or estimated aids enumerated in clauses (3) 
 29.20  and (4) that local governments will receive in the following 
 29.21  year.  In the case of a county containing a city of the first 
 29.22  class, for taxes levied in 1991, and for all counties for taxes 
 29.23  levied in 1992 and thereafter, the commissioner must certify 
 29.24  this amount by September 1.  
 29.25     Sec. 18.  [INSTRUCTION TO THE REVISOR.] 
 29.26     In the 1996 and later editions of Minnesota Statutes, the 
 29.27  revisor of statutes shall change the term "net tax capacity" to 
 29.28  "market value" wherever it occurs. 
 29.29     Sec. 19.  [REPEALER.] 
 29.30     (a) Minnesota Statutes 1994, sections 273.11, subdivisions 
 29.31  1a, 16, and 18; 273.13, subdivisions 21b and 32; 273.1315; 
 29.32  273.134; 273.135; 273.136; 273.138; 273.1391; 273.1392; 
 29.33  273.1398; 273.166; 273.42; 273.425; and 275.08, subdivisions 1c 
 29.34  and 1d, are repealed. 
 29.35     (b) Minnesota Statutes 1994, sections 273.1317 and 
 29.36  273.1318, are repealed. 
 30.1      Sec. 20.  [EFFECTIVE DATE.] 
 30.2      Sections 1 to 18 and 19, paragraph (a), are effective for 
 30.3   taxes payable in 1996.  Section 19, paragraph (b), is effective 
 30.4   for taxes payable in 1998. 
 30.5                              ARTICLE 2
 30.6                        INDIVIDUAL INCOME TAX
 30.7      Section 1.  Minnesota Statutes 1994, section 289A.08, 
 30.8   subdivision 1, is amended to read: 
 30.9      Subdivision 1.  [GENERALLY; INDIVIDUALS.] (a) A taxpayer 
 30.10  must file a return for each taxable year the taxpayer (1) is 
 30.11  required to file a return under section 6012 of the Internal 
 30.12  Revenue Code, or (2) does not qualify as a dependent of another 
 30.13  person under section 152 of the Internal Revenue Code, except 
 30.14  that an individual who is not a Minnesota resident for any part 
 30.15  of the year is not required to file a Minnesota income tax 
 30.16  return if the individual's gross income derived from Minnesota 
 30.17  sources as determined under sections 290.081, paragraph (a), and 
 30.18  290.17, is less than the filing requirements under federal law 
 30.19  for a single individual who is a full year resident of Minnesota.
 30.20     (b) The decedent's final income tax return, and other 
 30.21  income tax returns for prior years where the decedent had gross 
 30.22  income in excess of the minimum amount at which an individual is 
 30.23  required to file and did not file, must be filed by the 
 30.24  decedent's personal representative, if any.  If there is no 
 30.25  personal representative, the return or returns must be filed by 
 30.26  the transferees, as defined in section 289A.38, subdivision 13, 
 30.27  who receive property of the decedent. 
 30.28     (c) The term "gross income," as it is used in this section, 
 30.29  has the same meaning given it in section 290.01, subdivision 20. 
 30.30     Sec. 2.  Minnesota Statutes 1994, section 289A.08, 
 30.31  subdivision 6, is amended to read: 
 30.32     Subd. 6.  [RETURNS OF MARRIED PERSONS.] A husband and wife 
 30.33  must file a joint Minnesota income tax return if they filed a 
 30.34  joint federal income tax return.  If the husband and wife have 
 30.35  elected to file separate federal income tax returns, they must 
 30.36  file separate or combined Minnesota income tax returns.  This 
 31.1   election to file a joint or separate return must be changed if 
 31.2   they change their election for federal purposes.  In the event 
 31.3   taxpayers desire to change their election, the change must be 
 31.4   done in the manner and on the form prescribed by the 
 31.5   commissioner.  
 31.6      The determination of whether an individual is married shall 
 31.7   be made under the provisions of section 7703 of the Internal 
 31.8   Revenue Code. 
 31.9      Sec. 3.  Minnesota Statutes 1994, section 290.01, 
 31.10  subdivision 19a, is amended to read: 
 31.11     Subd. 19a.  [ADDITIONS TO FEDERAL TAXABLE INCOME.] For 
 31.12  individuals, estates, and trusts, there shall be added to 
 31.13  federal taxable income: 
 31.14     (1)(i) interest income on obligations of any state other 
 31.15  than Minnesota or a political or governmental subdivision, 
 31.16  municipality, or governmental agency or instrumentality of any 
 31.17  state other than Minnesota exempt from federal income taxes 
 31.18  under the Internal Revenue Code or any other federal statute, 
 31.19  and 
 31.20     (ii) exempt-interest dividends as defined in section 
 31.21  852(b)(5) of the Internal Revenue Code, except the portion of 
 31.22  the exempt-interest dividends derived from interest income on 
 31.23  obligations of the state of Minnesota or its political or 
 31.24  governmental subdivisions, municipalities, governmental agencies 
 31.25  or instrumentalities, but only if the portion of the 
 31.26  exempt-interest dividends from such Minnesota sources paid to 
 31.27  all shareholders represents 95 percent or more of the 
 31.28  exempt-interest dividends that are paid by the regulated 
 31.29  investment company as defined in section 851(a) of the Internal 
 31.30  Revenue Code, or the fund of the regulated investment company as 
 31.31  defined in section 851(h) of the Internal Revenue Code, making 
 31.32  the payment; and 
 31.33     (iii) for the purposes of items (i) and (ii), interest on 
 31.34  obligations of an Indian tribal government described in section 
 31.35  7871(c) of the Internal Revenue Code shall be treated as 
 31.36  interest income on obligations of the state in which the tribe 
 32.1   is located; 
 32.2      (2) the amount of income taxes paid or accrued within the 
 32.3   taxable year under this chapter and income taxes paid to any 
 32.4   other state or to any province or territory of Canada, to the 
 32.5   extent allowed as a deduction under section 63(d) of the 
 32.6   Internal Revenue Code, but the addition may not be more than the 
 32.7   amount by which the itemized deductions as allowed under section 
 32.8   63(d) of the Internal Revenue Code exceeds the amount of the 
 32.9   standard deduction as defined in section 63(c) of the Internal 
 32.10  Revenue Code.  For the purpose of this paragraph, the 
 32.11  disallowance of itemized deductions under section 68 of the 
 32.12  Internal Revenue Code of 1986, income tax is the last itemized 
 32.13  deduction disallowed; 
 32.14     (3) the capital gain amount of a lump sum distribution to 
 32.15  which the special tax under section 1122(h)(3)(B)(ii) of the Tax 
 32.16  Reform Act of 1986, Public Law Number 99-514, applies; and 
 32.17     (4) the amount of income taxes paid or accrued within the 
 32.18  taxable year under this chapter and income taxes paid to any 
 32.19  other state or any province or territory of Canada, to the 
 32.20  extent allowed as a deduction in determining federal adjusted 
 32.21  gross income.  For the purpose of this paragraph, income taxes 
 32.22  do not include the taxes imposed by sections 290.0922, 
 32.23  subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729; 
 32.24     (5) the amount of the standard deduction provided by 
 32.25  section 63(c) of the Internal Revenue Code, or the itemized 
 32.26  deductions as defined in section 63(d) of the Internal Revenue 
 32.27  Code reduced by the amount by which the itemized deductions were 
 32.28  reduced for federal income tax return purposes pursuant to 
 32.29  section 68 of the Internal Revenue Code, in accordance with 
 32.30  whether the standard deduction or itemized deductions were 
 32.31  claimed on the federal income tax return; 
 32.32     (6) the amount of the deduction for personal exemptions 
 32.33  provided by section 151 of the Internal Revenue Code and claimed 
 32.34  on the federal income tax return; and 
 32.35     (7) the amount of any deduction or exemption of capital 
 32.36  gains allowed by the Internal Revenue Code. 
 33.1      Sec. 4.  Minnesota Statutes 1994, section 290.01, 
 33.2   subdivision 19b, is amended to read: 
 33.3      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
 33.4   individuals, estates, and trusts, there shall be subtracted from 
 33.5   federal taxable income: 
 33.6      (1) interest income on obligations of any authority, 
 33.7   commission, or instrumentality of the United States to the 
 33.8   extent includable in taxable income for federal income tax 
 33.9   purposes but exempt from state income tax under the laws of the 
 33.10  United States; 
 33.11     (2) if included in federal taxable income, the amount of 
 33.12  any overpayment of income tax to Minnesota or to any other 
 33.13  state, for any previous taxable year, whether the amount is 
 33.14  received as a refund or as a credit to another taxable year's 
 33.15  income tax liability; 
 33.16     (3) the amount paid to others not to exceed $650 for each 
 33.17  dependent in grades kindergarten to 6 and $1,000 for each 
 33.18  dependent in grades 7 to 12, for tuition, textbooks, and 
 33.19  transportation of each dependent in attending an elementary or 
 33.20  secondary school situated in Minnesota, North Dakota, South 
 33.21  Dakota, Iowa, or Wisconsin, wherein a resident of this state may 
 33.22  legally fulfill the state's compulsory attendance laws, which is 
 33.23  not operated for profit, and which adheres to the provisions of 
 33.24  the Civil Rights Act of 1964 and chapter 363.  As used in this 
 33.25  clause, "textbooks" includes books and other instructional 
 33.26  materials and equipment used in elementary and secondary schools 
 33.27  in teaching only those subjects legally and commonly taught in 
 33.28  public elementary and secondary schools in this state.  
 33.29  "Textbooks" does not include instructional books and materials 
 33.30  used in the teaching of religious tenets, doctrines, or worship, 
 33.31  the purpose of which is to instill such tenets, doctrines, or 
 33.32  worship, nor does it include books or materials for, or 
 33.33  transportation to, extracurricular activities including sporting 
 33.34  events, musical or dramatic events, speech activities, driver's 
 33.35  education, or similar programs.  In order to qualify for the 
 33.36  subtraction under this clause the taxpayer must elect to itemize 
 34.1   deductions under section 63(e) of the Internal Revenue Code; 
 34.2      (4) to the extent included in federal taxable income, 
 34.3   distributions from a qualified governmental pension plan, an 
 34.4   individual retirement account, simplified employee pension, or 
 34.5   qualified plan covering a self-employed person that represent a 
 34.6   return of contributions that were included in Minnesota gross 
 34.7   income in the taxable year for which the contributions were made 
 34.8   but were deducted or were not included in the computation of 
 34.9   federal adjusted gross income.  The distribution shall be 
 34.10  allocated first to return of contributions until the 
 34.11  contributions included in Minnesota gross income have been 
 34.12  exhausted.  This subtraction applies only to contributions made 
 34.13  in a taxable year prior to 1985; 
 34.14     (5) income as provided under section 290.0802; 
 34.15     (6) the amount of unrecovered accelerated cost recovery 
 34.16  system deductions allowed under subdivision 19g; 
 34.17     (7) (4) to the extent included in federal adjusted gross 
 34.18  income, income realized on disposition of property exempt from 
 34.19  tax under section 290.491; and 
 34.20     (8) (5) to the extent not deducted in determining federal 
 34.21  taxable income, the amount paid for health insurance of 
 34.22  self-employed individuals as determined under section 162(l) of 
 34.23  the Internal Revenue Code, except that the 25 percent limit does 
 34.24  not apply.  If the taxpayer deducted insurance payments under 
 34.25  section 213 of the Internal Revenue Code of 1986, the 
 34.26  subtraction under this clause must be reduced by the lesser of: 
 34.27     (i) the total itemized deductions allowed under section 
 34.28  63(d) of the Internal Revenue Code, less state, local, and 
 34.29  foreign income taxes deductible under section 164 of the 
 34.30  Internal Revenue Code and the standard deduction under section 
 34.31  63(c) of the Internal Revenue Code; or 
 34.32     (ii) the lesser of (A) the amount of insurance qualifying 
 34.33  as "medical care" under section 213(d) of the Internal Revenue 
 34.34  Code to the extent not deducted under section 162(1) of the 
 34.35  Internal Revenue Code or excluded from income or (B) the total 
 34.36  amount deductible for medical care under section 213(a); 
 35.1      (6) the amount of deductions of an employee in connection 
 35.2   with employment that are deductible only as itemized deductions 
 35.3   as defined in section 63(d) of the Internal Revenue Code; 
 35.4      (7) the amount of deductions for the production of income 
 35.5   that are allowable under section 212 of the Internal Revenue 
 35.6   Code but that can only be deducted as itemized deductions as 
 35.7   defined in section 63(d) of the Internal Revenue Code; and 
 35.8      (8) the amount of child support payments made during the 
 35.9   year pursuant to a temporary or final decree of dissolution or 
 35.10  legal separation. 
 35.11     Sec. 5.  Minnesota Statutes 1994, section 290.06, 
 35.12  subdivision 2c, is amended to read: 
 35.13     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
 35.14  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
 35.15  married individuals filing joint returns and surviving spouses 
 35.16  as defined in section 2(a) of the Internal Revenue Code, 
 35.17  estates, and trusts must be computed by applying to their 
 35.18  taxable net income the following schedule of rates: 
 35.19     (1) On the first $19,910 $3,000, 6 .7 percent; 
 35.20     (2) On all over $19,910 $3,000, but not 
 35.21  over $79,120 $6,000, 8 1.5 percent; 
 35.22     (3) On all over $6,000, but not over $9,000, 2.4 percent; 
 35.23     (4) On all over $9,000, but not over $15,000, 3.8 percent; 
 35.24     (5) On all over $15,000, but not over $20,000, 5 percent; 
 35.25     (6) On all over $20,000, but not over $25,000, 6 percent; 
 35.26     (7) On all over $25,000, but not over $35,000, 7 percent; 
 35.27     (8) On all over $35,000, but not over $75,000, 7.5 percent; 
 35.28  and 
 35.29     (9) On all over $79,120 $75,000, 8.5 percent. 
 35.30     Married individuals filing separate returns, estates, and 
 35.31  Trusts must compute their income tax by applying the above rates 
 35.32  to their taxable income, except that the income brackets will be 
 35.33  one-half of the above amounts.  
 35.34     (b) The income taxes imposed by this chapter upon unmarried 
 35.35  individuals must be computed by applying to taxable net income 
 35.36  the following schedule of rates: 
 36.1      (1) On the first $13,620, 6 percent; 
 36.2      (2) On all over $13,620, but not over $44,750, 8 percent; 
 36.3      (3) On all over $44,750, 8.5 percent. 
 36.4      (c) The income taxes imposed by this chapter upon unmarried 
 36.5   individuals qualifying as a head of household as defined in 
 36.6   section 2(b) of the Internal Revenue Code must be computed by 
 36.7   applying to taxable net income the following schedule of rates: 
 36.8      (1) On the first $16,770, 6 percent; 
 36.9      (2) On all over $16,770, but not over $67,390, 8 percent; 
 36.10     (3) On all over $67,390, 8.5 percent Married individuals 
 36.11  who file separate federal income tax returns shall file separate 
 36.12  Minnesota income tax returns that allocate income and deductions 
 36.13  between them in the same manner as on their federal returns.  
 36.14  Married individuals who file joint federal income tax returns 
 36.15  may file either a joint Minnesota income tax return or separate 
 36.16  Minnesota income tax returns.  All items of income, deduction, 
 36.17  and credit of married individuals filing separate Minnesota 
 36.18  income tax returns who filed a joint federal income tax return 
 36.19  that are includable in determining federal adjusted gross income 
 36.20  as defined in section 62 of the Internal Revenue Code shall be 
 36.21  reported by the individual who received, incurred, or earned 
 36.22  them, respectively. 
 36.23     (d) (c) In lieu of a tax computed according to the rates 
 36.24  set forth in this subdivision, the tax of any individual 
 36.25  taxpayer whose taxable net income for the taxable year is less 
 36.26  than an amount determined by the commissioner must be computed 
 36.27  in accordance with tables prepared and issued by the 
 36.28  commissioner of revenue based on income brackets of not more 
 36.29  than $100.  The amount of tax for each bracket shall be computed 
 36.30  at the rates set forth in this subdivision, provided that the 
 36.31  commissioner may disregard a fractional part of a dollar unless 
 36.32  it amounts to 50 cents or more, in which case it may be 
 36.33  increased to $1. 
 36.34     (e) (d) An individual who is not a Minnesota resident for 
 36.35  the entire year must compute the individual's Minnesota income 
 36.36  tax as provided in this subdivision.  After the application of 
 37.1   the nonrefundable credits provided in this chapter, the tax 
 37.2   liability must then be multiplied by a fraction in which:  
 37.3      (1) The numerator is the individual's Minnesota source 
 37.4   federal adjusted gross income as defined in section 62 of the 
 37.5   Internal Revenue Code after applying the allocation and 
 37.6   assignability provisions of section 290.081, clause (a), or 
 37.7   290.17; and 
 37.8      (2) the denominator is the individual's federal adjusted 
 37.9   gross income as defined in section 62 of the Internal Revenue 
 37.10  Code of 1986, as amended through December 31, 1993, increased by 
 37.11  the addition required for interest income from non-Minnesota 
 37.12  state and municipal bonds under section 290.01, subdivision 19a, 
 37.13  clause (1). 
 37.14     Sec. 6.  Minnesota Statutes 1994, section 290.06, is 
 37.15  amended by adding a subdivision to read: 
 37.16     Subd. 25.  [CHARITABLE CONTRIBUTIONS CREDIT.] Individuals, 
 37.17  estates, and trusts shall receive a credit against the tax due 
 37.18  under this chapter for charitable contributions qualifying for 
 37.19  federal income tax deduction under section 170 of the Internal 
 37.20  Revenue Code.  The amount of the credit is equal to eight 
 37.21  percent of the amount allowable as a federal income tax 
 37.22  deduction under section 170 of the Internal Revenue Code for the 
 37.23  taxable year.  The amount of the credit under this subdivision 
 37.24  may not exceed the taxpayer's liability under this chapter for 
 37.25  the taxable year. 
 37.26     Sec. 7.  Minnesota Statutes 1994, section 290.0671, 
 37.27  subdivision 1, is amended to read: 
 37.28     Subdivision 1.  [CREDIT ALLOWED.] An individual is allowed 
 37.29  a credit against the tax imposed by this chapter equal to 15 25 
 37.30  percent of the credit for which the individual is eligible under 
 37.31  section 32 of the Internal Revenue Code. 
 37.32     For a nonresident or part-year resident, the credit 
 37.33  determined under section 32 of the Internal Revenue Code must be 
 37.34  allocated based on the percentage calculated under section 
 37.35  290.06, subdivision 2c, paragraph (e). 
 37.36     For a person who was a resident for the entire tax year and 
 38.1   has earned income not subject to tax under this chapter, the 
 38.2   credit must be allocated based on the ratio of federal adjusted 
 38.3   gross income reduced by the earned income not subject to tax 
 38.4   under this chapter over federal adjusted gross income. 
 38.5      Sec. 8.  [REPEALER.] 
 38.6      Minnesota Statutes 1994, sections 290.01, subdivision 19g; 
 38.7   290.0802; and 290.091, are repealed. 
 38.8      Sec. 9.  [EFFECTIVE DATE.] 
 38.9      Sections 1 to 8 are effective for taxable years beginning 
 38.10  after December 31, 1995. 
 38.11                             ARTICLE 3
 38.12                        PROPERTY TAX REFUNDS
 38.13     Section 1.  Minnesota Statutes 1994, section 290A.03, 
 38.14  subdivision 3, is amended to read: 
 38.15     Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
 38.16  following:  
 38.17     (a) federal adjusted gross income as defined in the 
 38.18  Internal Revenue Code; and 
 38.19     (b) the sum of the following amounts to the extent not 
 38.20  included in clause (a):  
 38.21     (i) all nontaxable income; 
 38.22     (ii) the amount of a passive activity loss that is not 
 38.23  disallowed as a result of section 469, paragraph (i) or (m) of 
 38.24  the Internal Revenue Code and the amount of passive activity 
 38.25  loss carryover allowed under section 469(b) of the Internal 
 38.26  Revenue Code; 
 38.27     (iii) an amount equal to the total of any discharge of 
 38.28  qualified farm indebtedness of a solvent individual excluded 
 38.29  from gross income under section 108(g) of the Internal Revenue 
 38.30  Code; 
 38.31     (iv) cash public assistance and relief; 
 38.32     (v) any pension or annuity (including railroad retirement 
 38.33  benefits, all payments received under the federal Social 
 38.34  Security Act, supplemental security income, and veterans 
 38.35  benefits), which was not exclusively funded by the claimant or 
 38.36  spouse, or which was funded exclusively by the claimant or 
 39.1   spouse and which funding payments were excluded from federal 
 39.2   adjusted gross income in the years when the payments were made; 
 39.3      (vi) interest received from the federal or a state 
 39.4   government or any instrumentality or political subdivision 
 39.5   thereof; 
 39.6      (vii) workers' compensation; 
 39.7      (viii) nontaxable strike benefits; 
 39.8      (ix) the gross amounts of payments received in the nature 
 39.9   of disability income or sick pay as a result of accident, 
 39.10  sickness, or other disability, whether funded through insurance 
 39.11  or otherwise; 
 39.12     (x) a lump sum distribution under section 402(e)(3) of the 
 39.13  Internal Revenue Code; 
 39.14     (xi) contributions made by the claimant to an individual 
 39.15  retirement account, including a qualified voluntary employee 
 39.16  contribution; simplified employee pension plan; self-employed 
 39.17  retirement plan; cash or deferred arrangement plan under section 
 39.18  401(k) of the Internal Revenue Code; or deferred compensation 
 39.19  plan under section 457 of the Internal Revenue Code; and 
 39.20     (xii) nontaxable scholarship or fellowship grants.  
 39.21     In the case of an individual who files an income tax return 
 39.22  on a fiscal year basis, the term "federal adjusted gross income" 
 39.23  shall mean federal adjusted gross income reflected in the fiscal 
 39.24  year ending in the calendar year.  Federal adjusted gross income 
 39.25  shall not be reduced by the amount of a net operating loss 
 39.26  carryback or carryforward or a capital loss carryback or 
 39.27  carryforward allowed for the year.  
 39.28     (2) "Income" does not include 
 39.29     (a) amounts excluded pursuant to the Internal Revenue Code, 
 39.30  sections 101(a), 102, and 121; 
 39.31     (b) amounts of any pension or annuity which was exclusively 
 39.32  funded by the claimant or spouse and which funding payments were 
 39.33  not excluded from federal adjusted gross income in the years 
 39.34  when the payments were made; 
 39.35     (c) surplus food or other relief in kind supplied by a 
 39.36  governmental agency; 
 40.1      (d) relief granted under this chapter; or 
 40.2      (e) child support payments received under a temporary or 
 40.3   final decree of dissolution or legal separation.  
 40.4      (3) The sum of the following amounts may be subtracted from 
 40.5   income:  
 40.6      (a) for the claimant's first dependent, the exemption 
 40.7   amount multiplied by 1.4; 
 40.8      (b) for the claimant's second dependent, the exemption 
 40.9   amount multiplied by 1.3; 
 40.10     (c) for the claimant's third dependent, the exemption 
 40.11  amount multiplied by 1.2; 
 40.12     (d) for the claimant's fourth dependent, the exemption 
 40.13  amount multiplied by 1.1; and 
 40.14     (e) for the claimant's fifth dependent, the exemption 
 40.15  amount; and 
 40.16     (f) if the claimant or claimant's spouse was disabled or 
 40.17  attained the age of 65 on or before December 31 of the year for 
 40.18  which the taxes were levied or rent paid, the exemption amount.  
 40.19     For purposes of this subdivision, the "exemption amount" 
 40.20  means the exemption amount under section 151(d) of the Internal 
 40.21  Revenue Code for the taxable year for which the income is 
 40.22  reported.  
 40.23     Sec. 2.  Minnesota Statutes 1994, section 290A.04, is 
 40.24  amended by adding a subdivision to read: 
 40.25     Subd. 2j.  [CERTAIN RESORTS.] (a) Commercial use real 
 40.26  property that is occupied as a homestead by the owner of the 
 40.27  property, a shareholder of a corporation that owns the property, 
 40.28  or a partner of a partnership that owns the property, may 
 40.29  qualify for the refund provided by subdivision 2h if such 
 40.30  property: 
 40.31     (1) abuts a lakeshore line; 
 40.32     (2) is devoted to temporary and seasonal residential 
 40.33  occupancy for recreational purposes; and 
 40.34     (3) was not used for commercial purposes for more than 250 
 40.35  days in the year preceding the year of the assessment.  Use for 
 40.36  a commercial purpose is deemed to occur on any day on which any 
 41.1   portion of the property is used for residential occupancy for 
 41.2   which a fee is charged.  An owner of such property claiming a 
 41.3   property tax refund must maintain guest registers or other 
 41.4   records demonstrating that the units for which a property tax 
 41.5   refund is sought were not occupied for more than 250 days in the 
 41.6   year preceding the assessment. 
 41.7      (b) The maximum area described in paragraph (a) that 
 41.8   qualifies is 100 feet of lakeshore footage for each cabin or 
 41.9   campsite located on the property up to a total of 800 feet and 
 41.10  500 feet in depth, measured away from the lakeshore.  If the 
 41.11  property exceeds that area, only the property tax attributable 
 41.12  to the maximum area qualifies. 
 41.13     (c) If a portion of the property described in paragraph (a) 
 41.14  is operated as a restaurant, bar, gift shop, or other 
 41.15  nonresidential facility operated on a commercial basis not 
 41.16  directly related to temporary and seasonal residential occupancy 
 41.17  for recreation purposes, the property tax attributable to that 
 41.18  portion does not qualify. 
 41.19     Sec. 3.  Minnesota Statutes 1994, section 290A.04, is 
 41.20  amended by adding a subdivision to read: 
 41.21     Subd. 2k.  [TRANSITION REFUND PAID TO LOCAL 
 41.22  GOVERNMENTS.] (a) For property taxes payable in 1996 and 
 41.23  subsequent years, the commissioner of revenue shall pay to the 
 41.24  county treasurer on the dates prescribed by law for payment of 
 41.25  property taxes the portion of the property taxes described in 
 41.26  paragraph (b) for real estate that is residential and used for 
 41.27  homestead purposes, homesteaded agricultural land, or property 
 41.28  described in subdivision 2j to the extent it qualifies for the 
 41.29  benefits described in that subdivision. 
 41.30     (b) For taxes payable in 1996, the amount of the property 
 41.31  taxes paid on behalf of the property owner by the state is the 
 41.32  excess, if any, of the property taxes payable in 1996 as 
 41.33  described in paragraph (c) over the lessee of (1) the property 
 41.34  taxes payable with respect to the property in 1995 or (2) 1.5 
 41.35  percent of the market value of the property for purposes of 
 41.36  determination of taxes payable in 1996.  
 42.1      (c) The property taxes payable in 1996 for purposes of 
 42.2   paragraph (b), include: 
 42.3      (1) for all taxing jurisdictions other than school 
 42.4   districts, the lesser of (i) the taxes actually levied for 
 42.5   payment in 1996, or (ii) the taxes that would have been levied 
 42.6   for payment in 1996 if the jurisdiction had applied to its tax 
 42.7   base an effective tax rate equal to a hypothetical effective tax 
 42.8   rate for taxes payable in 1995.  The hypothetical rate is 
 42.9   computed by dividing the sum of the taxes actually levied for 
 42.10  payment in 1995 plus the state-paid property tax relief aids 
 42.11  described in paragraph (d) that were paid to the jurisdiction in 
 42.12  1995, by the estimated market value of all taxable property in 
 42.13  the jurisdiction for taxes payable in 1995; and 
 42.14     (2) for school districts, the sum of the amounts of taxes, 
 42.15  if any, levied for payment in 1996 pursuant to referendum levies 
 42.16  and capital levies approved prior to March 1, 1995. 
 42.17     (d) For purposes of paragraph (c), "property tax relief 
 42.18  aids" include the taconite homestead credit paid under section 
 42.19  273.135, supplemental homestead property tax relief paid under 
 42.20  section 273.1391, attached machinery aid paid under section 
 42.21  273.138, homestead and agricultural credit aid and disparity 
 42.22  reduction aid paid under sections 273.1398 and 273.166, and aids 
 42.23  to local governments paid under sections 477A.012, 477A.013, 
 42.24  477A.0132, and 477A.15. 
 42.25     (e) This subdivision does not apply to any portion of the 
 42.26  property taxes attributable to improvements not assessed on 
 42.27  January 2, 1995, except that property that did not qualify under 
 42.28  this subdivision for taxes payable in 1996, but that later 
 42.29  becomes a residential homestead, homesteaded agricultural land, 
 42.30  or qualifying property described in subdivision 2j, shall 
 42.31  qualify for refunds as provided in this subdivision as follows:  
 42.32  A hypothetical refund for 1996 must be determined for the 
 42.33  property based on the property's estimated market value for 
 42.34  taxes payable in the first year in which it is eligible for the 
 42.35  refund under this paragraph, and using the actual tax rates for 
 42.36  taxes payable in 1995 or 1996.  The hypothetical 1996 refund so 
 43.1   determined shall then be reduced in the same proportion, if any, 
 43.2   that actual refunds for 1996 determined under paragraph (b) have 
 43.3   been reduced for subsequent years. 
 43.4      Sec. 4.  [REPEALER.] 
 43.5      Minnesota Statutes 1994, sections 290A.03, subdivisions 9 
 43.6   and 10; and 290A.04, subdivision 2i, are repealed. 
 43.7      Sec. 5.  [EFFECTIVE DATE.] 
 43.8      Sections 1 and 4 are effective for refunds based on 
 43.9   property taxes payable in 1996 and subsequent years and rent 
 43.10  paid in 1995 and subsequent years.  Sections 2 and 3 are 
 43.11  effective for refunds based on property taxes payable in 1996 
 43.12  and subsequent years. 
 43.13                             ARTICLE 4
 43.14                  SALES TAX AND OTHER EXCISE TAXES
 43.15     Section 1.  Minnesota Statutes 1994, section 289A.18, 
 43.16  subdivision 4, is amended to read: 
 43.17     Subd. 4.  [SALES AND USE TAX RETURNS.] (a) Sales and use 
 43.18  tax returns must be filed on or before the 20th day of the month 
 43.19  following the close of the preceding reporting period, except 
 43.20  that annual use tax returns provided for under section 289A.11, 
 43.21  subdivision 1, must be filed by April 15 following the close of 
 43.22  the calendar year, in the case of individuals.  Annual use tax 
 43.23  returns of businesses, including sole proprietorships, and 
 43.24  annual sales tax returns must be filed by February 5 following 
 43.25  the close of the calendar year.  
 43.26     (b) Returns filed by retailers required to remit 
 43.27  liabilities by means of funds transfer under section 289A.20, 
 43.28  subdivision 4, paragraph (d), are due on or before the 25th day 
 43.29  of the month following the close of the preceding reporting 
 43.30  period.  The return for the May liability and 75 percent of the 
 43.31  estimated June liability is due on the date payment of the 
 43.32  estimated June liability is due, and on or before August 25 of a 
 43.33  year, the retailer must file a return showing the actual June 
 43.34  liability. 
 43.35     (c) If a retailer has an average sales and use tax 
 43.36  liability, including local sales and use taxes administered by 
 44.1   the commissioner, equal to or less than $500 per month in any 
 44.2   quarter of a calendar year, and has substantially complied with 
 44.3   the tax laws during the preceding four calendar quarters, the 
 44.4   retailer may request authorization to file and pay the taxes 
 44.5   quarterly in subsequent calendar quarters.  The authorization 
 44.6   remains in effect during the period in which the retailer's 
 44.7   quarterly returns reflect sales and use tax liabilities of less 
 44.8   than $1,500 and there is continued compliance with state tax 
 44.9   laws. 
 44.10     (d) If a retailer has an average sales and use tax 
 44.11  liability, including local sales and use taxes administered by 
 44.12  the commissioner, equal to or less than $100 per month during a 
 44.13  calendar year, and has substantially complied with the tax laws 
 44.14  during that period, the retailer may request authorization to 
 44.15  file and pay the taxes annually in subsequent years.  The 
 44.16  authorization remains in effect during the period in which the 
 44.17  retailer's annual returns reflect sales and use tax liabilities 
 44.18  of less than $1,200 and there is continued compliance with state 
 44.19  tax laws. 
 44.20     (e) The commissioner may also grant quarterly or annual 
 44.21  filing and payment authorizations to retailers if the 
 44.22  commissioner concludes that the retailers' future tax 
 44.23  liabilities will be less than the monthly totals identified in 
 44.24  paragraphs (c) and (d).  An authorization granted under this 
 44.25  paragraph is subject to the same conditions as an authorization 
 44.26  granted under paragraphs (c) and (d). 
 44.27     Sec. 2.  Minnesota Statutes 1994, section 297A.01, 
 44.28  subdivision 3, is amended to read: 
 44.29     Subd. 3.  A "sale" and a "purchase" includes, but is not 
 44.30  limited to, each of the following transactions: 
 44.31     (a) Any transfer of title or possession, or both, of 
 44.32  tangible personal property, whether absolutely or conditionally, 
 44.33  and the leasing of or the granting of a license to use or 
 44.34  consume tangible personal property other than manufactured homes 
 44.35  used for residential purposes for a continuous period of 30 days 
 44.36  or more, for a consideration in money or by exchange or barter; 
 45.1      (b) The production, fabrication, printing, or processing of 
 45.2   tangible personal property for a consideration for consumers who 
 45.3   furnish either directly or indirectly the materials used in the 
 45.4   production, fabrication, printing, or processing.  The sale of 
 45.5   work creation services, as defined in subdivision 25 in 
 45.6   connection with the creation of a work as defined in subdivision 
 45.7   21, is not a "sale"; 
 45.8      (c) The furnishing, preparing, or serving for a 
 45.9   consideration of food, meals, or drinks.  "Sale" does not 
 45.10  include: 
 45.11     (1) meals or drinks served to patients, inmates, or persons 
 45.12  residing at hospitals, sanitariums, nursing homes, senior 
 45.13  citizens homes, and correctional, detention, and detoxification 
 45.14  facilities; 
 45.15     (2) meals or drinks purchased for and served exclusively to 
 45.16  individuals who are 60 years of age or over and their spouses or 
 45.17  to the handicapped and their spouses by governmental agencies, 
 45.18  nonprofit organizations, agencies, or churches or pursuant to 
 45.19  any program funded in whole or part through 42 USCA sections 
 45.20  3001 through 3045, wherever delivered, prepared or served; or 
 45.21     (3) meals and lunches served at public and private schools, 
 45.22  universities, or colleges.  Notwithstanding section 297A.25, 
 45.23  subdivision 2, taxable food or meals include, but are not 
 45.24  limited to, the following:  
 45.25     (i) heated food or drinks; 
 45.26     (ii) sandwiches prepared by the retailer; 
 45.27     (iii) single sales of prepackaged ice cream or ice milk 
 45.28  novelties prepared by the retailer; 
 45.29     (iv) hand-prepared or dispensed ice cream or ice milk 
 45.30  products including cones, sundaes, and snow cones; 
 45.31     (v) soft drinks and other beverages prepared or served by 
 45.32  the retailer; 
 45.33     (vi) gum; 
 45.34     (vii) ice; 
 45.35     (viii) all food sold in vending machines; 
 45.36     (ix) party trays prepared by the retailers; and 
 46.1      (x) all meals and single servings of packaged snack food, 
 46.2   single cans or bottles of pop, sold in restaurants and bars; 
 46.3      (d) The granting of the privilege of admission to places of 
 46.4   amusement, recreational areas, or athletic events, except a 
 46.5   world championship football game sponsored by the national 
 46.6   football league, and the privilege of having access to and the 
 46.7   use of amusement devices, tanning facilities, reducing salons, 
 46.8   steam baths, turkish baths, health clubs, and spas or athletic 
 46.9   facilities; 
 46.10     (e) The furnishing for a consideration of lodging and 
 46.11  related services by a hotel, rooming house, tourist court, motel 
 46.12  or trailer camp and of the granting of any similar license to 
 46.13  use real property other than the renting or leasing thereof for 
 46.14  a continuous period of 30 days or more; 
 46.15     (f) The furnishing for a consideration of electricity, gas, 
 46.16  water, or steam for use or consumption within this state, or 
 46.17  local exchange telephone service, intrastate toll service, and 
 46.18  interstate toll service, if that service originates from and is 
 46.19  charged to a telephone located in this state.  Telephone service 
 46.20  includes paging services and private communication service, as 
 46.21  defined in United States Code, title 26, section 4252(d), except 
 46.22  for private communication service purchased by an agent acting 
 46.23  on behalf of the state lottery.  The furnishing for a 
 46.24  consideration of access to telephone services by a hotel to its 
 46.25  guests is a sale under this clause.  Sales by municipal 
 46.26  corporations in a proprietary capacity are included in the 
 46.27  provisions of this clause.  The furnishing of water and sewer 
 46.28  services for residential use shall not be considered a sale.  
 46.29  The sale of natural gas to be used as a fuel in vehicles 
 46.30  propelled by natural gas shall not be considered a sale for the 
 46.31  purposes of this section; 
 46.32     (g) The furnishing for a consideration of cable television 
 46.33  services, including charges for basic service, charges for 
 46.34  premium service, and any other charges for any other 
 46.35  pay-per-view, monthly, or similar television services; 
 46.36     (h) Notwithstanding section 297A.25, subdivisions 9 and 12, 
 47.1   the sales of racehorses including claiming sales and fees paid 
 47.2   for breeding racehorses or horses previously used for racing 
 47.3   shall be considered a "sale" and a "purchase."  "Racehorse" 
 47.4   means a horse that is or is intended to be used for racing and 
 47.5   whose birth has been recorded by the Jockey Club or the United 
 47.6   States Trotting Association or the American Quarter Horse 
 47.7   Association.  "Sale" does not include fees paid for breeding 
 47.8   horses that are not racehorses; 
 47.9      (i) The furnishing for a consideration of parking services, 
 47.10  whether on a contractual, hourly, or other periodic basis, 
 47.11  except for parking at a meter; 
 47.12     (j) The furnishing for a consideration of services listed 
 47.13  in this paragraph: 
 47.14     (i) laundry and dry cleaning services including cleaning, 
 47.15  pressing, repairing, altering, and storing clothes, linen 
 47.16  services and supply, cleaning and blocking hats, and carpet, 
 47.17  drapery, upholstery, and industrial cleaning.  Laundry and dry 
 47.18  cleaning services do not include services provided by coin 
 47.19  operated facilities operated by the customer; 
 47.20     (ii) motor vehicle washing, waxing, and cleaning services, 
 47.21  including services provided by coin-operated facilities operated 
 47.22  by the customer, and rustproofing, undercoating, and towing of 
 47.23  motor vehicles; 
 47.24     (iii) building and residential cleaning, maintenance, and 
 47.25  disinfecting and exterminating services; 
 47.26     (iv) services provided by detective agencies, security 
 47.27  services, burglar, fire alarm, and armored car services not 
 47.28  including services performed within the jurisdiction they serve 
 47.29  by off-duty licensed peace officers as defined in section 
 47.30  626.84, subdivision 1; 
 47.31     (v) pet grooming services; 
 47.32     (vi) lawn care, fertilizing, mowing, spraying and sprigging 
 47.33  services; garden planting and maintenance; tree, bush, and shrub 
 47.34  pruning, bracing, spraying, and surgery; tree, bush, shrub and 
 47.35  stump removal; and tree trimming for public utility lines.  
 47.36  Services performed under a construction contract for the 
 48.1   installation of shrubbery, plants, sod, trees, bushes, and 
 48.2   similar items are not taxable; 
 48.3      (vii) solid waste collection and disposal services as 
 48.4   described in section 297A.45; 
 48.5      (viii) massages, except when provided by a licensed health 
 48.6   care facility or professional or upon written referral from a 
 48.7   licensed health care facility or professional for treatment of 
 48.8   illness, injury, or disease; and 
 48.9      (ix) the furnishing for consideration of lodging, board and 
 48.10  care services for animals in kennels and other similar 
 48.11  arrangements, but excluding veterinary and horse boarding 
 48.12  services. 
 48.13  The services listed in this paragraph are taxable under section 
 48.14  297A.02 if the service is performed wholly within Minnesota or 
 48.15  if the service is performed partly within and partly without 
 48.16  Minnesota and the greater proportion of the service is performed 
 48.17  in Minnesota, based on the cost of performance.  In applying the 
 48.18  provisions of this chapter, the terms "tangible personal 
 48.19  property" and "sales at retail" include taxable services and the 
 48.20  provision of taxable services, unless specifically provided 
 48.21  otherwise.  Services performed by an employee for an employer 
 48.22  are not taxable under this paragraph.  Services performed by a 
 48.23  partnership or association for another partnership or 
 48.24  association are not taxable under this paragraph if one of the 
 48.25  entities owns or controls more than 80 percent of the voting 
 48.26  power of the equity interest in the other entity.  Services 
 48.27  performed between members of an affiliated group of corporations 
 48.28  are not taxable.  For purposes of this section, "affiliated 
 48.29  group of corporations" includes those entities that would be 
 48.30  classified as a member of an affiliated group under United 
 48.31  States Code, title 26, section 1504, and who are eligible to 
 48.32  file a consolidated tax return for federal income tax purposes 
 48.33  The furnishing for a consideration of services of any kind or 
 48.34  nature not specifically included or excluded in other paragraphs 
 48.35  of this subdivision; 
 48.36     (k) (j) A "sale" and a "purchase" includes the transfer of 
 49.1   computer software, meaning information and directions that 
 49.2   dictate the function performed by data processing equipment.  A 
 49.3   "sale" and a "purchase" does not include the design, 
 49.4   development, writing, translation, fabrication, lease, or 
 49.5   transfer for a consideration of title or possession of a custom 
 49.6   computer program; and 
 49.7      (l) (k) The granting of membership in a club, association, 
 49.8   or other organization if: 
 49.9      (1) the club, association, or other organization makes 
 49.10  available for the use of its members sports and athletic 
 49.11  facilities (without regard to whether a separate charge is 
 49.12  assessed for use of the facilities); and 
 49.13     (2) use of the sports and athletic facilities is not made 
 49.14  available to the general public on the same basis as it is made 
 49.15  available to members.  
 49.16  Granting of membership includes both one-time initiation fees 
 49.17  and periodic membership dues.  Sports and athletic facilities 
 49.18  include golf courses, tennis, racquetball, handball and squash 
 49.19  courts, basketball and volleyball facilities, running tracks, 
 49.20  exercise equipment, swimming pools, and other similar athletic 
 49.21  or sports facilities.  The provisions of this paragraph do not 
 49.22  apply to camps or other recreation facilities owned and operated 
 49.23  by an exempt organization under section 501(c)(3) of the 
 49.24  Internal Revenue Code of 1986, as amended through December 31, 
 49.25  1992, for educational and social activities for young people 
 49.26  primarily age 18 and under; and 
 49.27     (l) A "sale" and a "purchase" does not include the 
 49.28  creation, sale, lease, license, or other transfer for a 
 49.29  consideration of title or possession or any rights in or to a 
 49.30  copyright or a work as defined in subdivision 21 by the author 
 49.31  of the work to a purchaser for use in connection with a trade or 
 49.32  business, within the meaning of section 162(a) of the Internal 
 49.33  Revenue Code, of the purchaser.  
 49.34     Sec. 3.  Minnesota Statutes 1994, section 297A.01, 
 49.35  subdivision 6, is amended to read: 
 49.36     Subd. 6.  "Use" includes the exercise of any right or power 
 50.1   over tangible personal property, or tickets or admissions to 
 50.2   places of amusement or athletic events, purchased from a 
 50.3   retailer incident to the ownership of any interest in that 
 50.4   property, except that it does not include the sale of that 
 50.5   property in the regular course of business.  
 50.6      "Use" includes the consumption of printed materials which 
 50.7   are consumed in the creation of nontaxable advertising that is 
 50.8   distributed, either directly or indirectly, within Minnesota.  
 50.9      With respect to services, "use" means the consumption of 
 50.10  the benefit provided by the service, and a service is used in 
 50.11  the state or states in which its benefit is consumed. 
 50.12     Sec. 4.  Minnesota Statutes 1994, section 297A.01, 
 50.13  subdivision 8, is amended to read: 
 50.14     Subd. 8.  "Sales price" means the total consideration 
 50.15  valued in money, for a retail sale whether paid in money or 
 50.16  otherwise, excluding therefrom not reduced by any amount allowed 
 50.17  as credit for tangible personal property taken in trade for 
 50.18  resale, without deduction for the cost of the property or 
 50.19  services sold, cost of materials used, labor or service cost, 
 50.20  interest, or discount allowed after the sale is consummated, the 
 50.21  cost of transportation incurred prior to the time of sale, any 
 50.22  amount for which credit is given to the purchaser by the seller, 
 50.23  or any other expense whatsoever.  A deduction may be made for 
 50.24  charges of up to 15 percent in lieu of tips, if the 
 50.25  consideration for such charges is separately stated.  No 
 50.26  deduction shall be allowed for charges for services that are 
 50.27  part of a sale.  A deduction may also be made for interest, 
 50.28  financing, or carrying charges, charges for labor or services 
 50.29  used in installing or applying the property sold or 
 50.30  transportation charges if the transportation occurs after the 
 50.31  retail sale of the property only if the consideration for such 
 50.32  charges is separately stated.  There shall not be included in 
 50.33  "sales price" cash discounts allowed and taken on sales or the 
 50.34  amount refunded either in cash or in credit for property 
 50.35  returned by purchasers. 
 50.36     Sec. 5.  Minnesota Statutes 1994, section 297A.01, is 
 51.1   amended by adding a subdivision to read: 
 51.2      Subd. 21.  [WORK.] "Work" means an original work of 
 51.3   authorship fixed in any tangible medium of expression, now known 
 51.4   or later developed, from which it can be perceived, reproduced, 
 51.5   or otherwise communicated, either directly or with the aid of a 
 51.6   machine or device.  "Work" includes items that are the subject 
 51.7   matter of copyright as specified in the Copyright Act of 1977, 
 51.8   United States Code, title 17, section 102(a), as defined in 
 51.9   United States Code, title 17, section 101: 
 51.10     (1) literary works; 
 51.11     (2) musical works, including any accompanying words; 
 51.12     (3) dramatic works, including any accompanying music; 
 51.13     (4) pantomimes and choreographic works; 
 51.14     (5) pictorial, graphic, and sculptural works; 
 51.15     (6) motion pictures and other audiovisual works; and 
 51.16     (7) sound recordings. 
 51.17     Sec. 6.  Minnesota Statutes 1994, section 297A.01, is 
 51.18  amended by adding a subdivision to read: 
 51.19     Subd. 22.  [COPYRIGHT.] "Copyright" means the protection 
 51.20  afforded under the Copyright Act of 1976, United States Code, 
 51.21  section 101 et seq. 
 51.22     Sec. 7.  Minnesota Statutes 1994, section 297A.01, is 
 51.23  amended by adding a subdivision to read: 
 51.24     Subd. 23.  [AUTHOR.] "Author" means the creator of a work.  
 51.25  In the case of a work made for hire, the employer or other 
 51.26  person for whom the work was prepared is considered the author. 
 51.27     Sec. 8.  Minnesota Statutes 1994, section 297A.01, is 
 51.28  amended by adding a subdivision to read: 
 51.29     Subd. 24.  [WORK MADE FOR HIRE.] "Work made for hire" means:
 51.30     (1) a work prepared by an employee within the scope of the 
 51.31  employee's employment; or 
 51.32     (2) a work specially ordered or commissioned for use as a 
 51.33  contribution to a collective work, a part of a motion picture or 
 51.34  other audiovisual work, a translation, a supplementary work, a 
 51.35  compilation, an instructional text, a test, answer material for 
 51.36  a test, or an atlas, if the parties expressly agree in a written 
 52.1   instrument signed by them that the work shall be considered a 
 52.2   work made for hire.  As used in this clause, a "supplementary 
 52.3   work" is a work prepared for publication as a secondary adjunct 
 52.4   to a work by another author for the purpose of introducing, 
 52.5   concluding, illustrating, explaining, revising, commenting upon, 
 52.6   or assisting in the use of the other work, such as forewords, 
 52.7   afterwords, pictorial illustrations, maps, charts, tables, 
 52.8   editorial notes, musical arrangements, answer material for 
 52.9   tests, bibliographies, appendixes, and indexes, and an 
 52.10  "instructional text" is a literary, pictorial, or graphic work 
 52.11  prepared for publication and with the purpose of use in 
 52.12  systematic instructional activities. 
 52.13     Sec. 9.  Minnesota Statutes 1994, section 297A.01, is 
 52.14  amended by adding a subdivision to read: 
 52.15     Subd. 25.  [WORK CREATION SERVICES.] "Work creation 
 52.16  services" means services performed in the course of creation or 
 52.17  modification of a work that affects the content, including the 
 52.18  design, of the work. 
 52.19     Sec. 10.  Minnesota Statutes 1994, section 297A.01, is 
 52.20  amended by adding a subdivision to read: 
 52.21     Subd. 26.  [INTERNAL REVENUE CODE.] Unless otherwise 
 52.22  specifically provided, "Internal Revenue Code" means the 
 52.23  Internal Revenue Code of 1986, as amended through December 31, 
 52.24  1994. 
 52.25     Sec. 11.  Minnesota Statutes 1994, section 297A.02, 
 52.26  subdivision 1, is amended to read: 
 52.27     Subdivision 1.  [GENERALLY.] Except as otherwise provided 
 52.28  in this chapter, there is imposed an excise tax of 6.5 percent 
 52.29  of on the gross receipts from sales at retail made by any person 
 52.30  in this state at the following rates:  prior to October 1, 1996, 
 52.31  6.5 percent; and on or after October 1, 1996, 5.5 percent.  
 52.32     The rates in this subdivision include the local option 
 52.33  sales tax rate imposed under section 297A.021, if applicable. 
 52.34     Sec. 12.  Minnesota Statutes 1994, section 297A.03, 
 52.35  subdivision 1, is amended to read: 
 52.36     Subdivision 1.  The tax shall be stated and charged 
 53.1   separately from the sales price or charge for service insofar as 
 53.2   practicable and shall be collected by the seller from the 
 53.3   purchaser and shall be a debt from the purchaser to the seller 
 53.4   recoverable at law in the same manner as other debts.  
 53.5      Sec. 13.  Minnesota Statutes 1994, section 297A.14, 
 53.6   subdivision 1, is amended to read: 
 53.7      Subdivision 1.  [IMPOSITION.] For the privilege of using, 
 53.8   storing, distributing, or consuming in Minnesota tangible 
 53.9   personal property or taxable services purchased for use, 
 53.10  storage, distribution, or consumption in this state, a use tax 
 53.11  is imposed on every person in this state at the rate of tax 
 53.12  imposed under section 297A.02 on the sales price of sales at 
 53.13  retail of the items, unless the tax imposed by section 297A.02 
 53.14  was paid on the sales price.  
 53.15     A use tax is imposed on every person who uses, stores, 
 53.16  distributes, or consumes tangible personal property in Minnesota 
 53.17  which has been manufactured, fabricated, or assembled by the 
 53.18  person from materials, either within or without this state, at 
 53.19  the rate of tax imposed under section 297A.02 on the sales price 
 53.20  of sales at retail of the materials contained in the tangible 
 53.21  personal property, unless the tax imposed by section 297A.02 was 
 53.22  paid on the sales price. 
 53.23     Sec. 14.  Minnesota Statutes 1994, section 297A.21, 
 53.24  subdivision 2, is amended to read: 
 53.25     Subd. 2.  [DESTINATION.] The destination of a sale of 
 53.26  tangible personal property is the location to which the retailer 
 53.27  makes delivery of the property sold, or causes the property to 
 53.28  be delivered, to the purchaser of the property, or to the agent 
 53.29  or designee of the purchaser by any means of delivery, including 
 53.30  the United States Postal Service, a common carrier, or a 
 53.31  contract carrier.  The destination of a sale of services is the 
 53.32  location at which the benefits of the services will be consumed 
 53.33  by the purchaser. 
 53.34     Sec. 15.  Minnesota Statutes 1994, section 297A.22, is 
 53.35  amended to read: 
 53.36     297A.22 [PRESUMPTION OF PURPOSE OF SALE, BURDEN OF PROOF.] 
 54.1      For the purpose of the proper administration of sections 
 54.2   297A.01 to 297A.44 and to prevent evasion of the use tax and the 
 54.3   duty to collect the use tax, it shall be presumed that all 
 54.4   retail sales for delivery of tangible personal property in 
 54.5   Minnesota and all retail sales of services to purchasers located 
 54.6   in Minnesota are for storage, use, or other consumption in 
 54.7   Minnesota until the contrary is established.  The burden of 
 54.8   proving the contrary shall be upon the person who makes the sale 
 54.9   but that person may take from the purchaser an exemption 
 54.10  certificate in accordance with sections 297A.09 to 297A.13.  
 54.11     Sec. 16.  Minnesota Statutes 1994, section 297A.24, 
 54.12  subdivision 1, is amended to read: 
 54.13     Subdivision 1.  [STATE TAX.] If any article of tangible 
 54.14  personal property, any service, or any item enumerated in 
 54.15  section 297A.14 has already been subjected to a tax by any other 
 54.16  state in respect of its sale, storage, use or other consumption 
 54.17  in an amount less than the tax imposed by sections 297A.01 to 
 54.18  297A.44, then as to the person who paid the tax in such other 
 54.19  state, the provisions of section 297A.14 shall apply only at a 
 54.20  rate measured by the difference between the sum of the rates 
 54.21  imposed under sections 297A.02 and 297A.021 and the rate by 
 54.22  which the previous tax was computed.  If such tax imposed in 
 54.23  such other state was equal to or greater than the tax imposed in 
 54.24  this state, then no tax shall be due from such person under 
 54.25  section 297A.14. 
 54.26     Sec. 17.  Minnesota Statutes 1994, section 297A.25, 
 54.27  subdivision 4, is amended to read: 
 54.28     Subd. 4.  [CONSTITUTIONAL PROHIBITIONS.] The gross receipts 
 54.29  from the sale of and the storage, use or other consumption in 
 54.30  Minnesota of tangible personal property, services, tickets, or 
 54.31  admissions, electricity, gas, or local exchange telephone 
 54.32  service, which under the Constitution or laws of the United 
 54.33  States or under the Constitution of Minnesota, the state of 
 54.34  Minnesota is prohibited from taxing, are exempt.  
 54.35     Sec. 18.  Minnesota Statutes 1994, section 297A.25, 
 54.36  subdivision 9, is amended to read: 
 55.1      Subd. 9.  [MATERIALS CONSUMED IN PRODUCTION.] The gross 
 55.2   receipts from the sale of and the storage, use, or consumption 
 55.3   of all materials, including chemicals, fuels, petroleum 
 55.4   products, lubricants, packaging materials, including returnable 
 55.5   containers used in packaging food and beverage products, feeds, 
 55.6   seeds, fertilizers, electricity, gas and steam, used or consumed 
 55.7   in agricultural or industrial production of personal property, 
 55.8   including publications, intended to be sold ultimately at 
 55.9   retail, whether or not the item so used becomes an ingredient or 
 55.10  constituent part of the property produced, or used or consumed 
 55.11  in the performance of services the sale of which is not exempt 
 55.12  under subdivision 60, are exempt.  Seeds, trees, fertilizers, 
 55.13  and herbicides purchased for use by farmers in the Conservation 
 55.14  Reserve Program under United States Code, title 16, section 
 55.15  590h, the Integrated Farm Management Program under section 1627 
 55.16  of Public Law Number 101-624, the Wheat and Feed Grain Programs 
 55.17  under sections 301 to 305 and 401 to 405 of Public Law Number 
 55.18  101-624, and the conservation reserve program under sections 
 55.19  103F.505 to 103F.531, are included in this exemption.  Chemicals 
 55.20  used for cleaning food processing machinery and equipment are 
 55.21  included in this exemption.  Materials, including chemicals, 
 55.22  fuels, and electricity purchased by persons engaged in 
 55.23  agricultural or industrial production to treat waste generated 
 55.24  as a result of the production process are included in this 
 55.25  exemption.  Such production shall include, but is not limited 
 55.26  to, research, development, design or production of any tangible 
 55.27  personal property, manufacturing, processing (other than by 
 55.28  restaurants and consumers) of agricultural products whether 
 55.29  vegetable or animal, commercial fishing, refining, smelting, 
 55.30  reducing, brewing, distilling, printing, mining, quarrying, 
 55.31  lumbering, generating electricity and the production of road 
 55.32  building materials.  Such production shall not include painting, 
 55.33  cleaning, repairing or similar processing of property except as 
 55.34  part of the original manufacturing process.  Machinery, 
 55.35  equipment, implements, tools, accessories, appliances, 
 55.36  contrivances, furniture and fixtures, used in such production 
 56.1   and fuel, electricity, gas or steam used for space heating or 
 56.2   lighting, are not included within this exemption; however, 
 56.3   accessory tools, equipment and other short lived items, which 
 56.4   are separate detachable units used in producing a direct effect 
 56.5   upon the product, where such items have an ordinary useful life 
 56.6   of less than 12 months, are included within the exemption 
 56.7   provided herein.  Electricity used to make snow for outdoor use 
 56.8   for ski hills, ski slopes, or ski trails is included in this 
 56.9   exemption. 
 56.10     Sec. 19.  Minnesota Statutes 1994, section 297A.25, 
 56.11  subdivision 12, is amended to read: 
 56.12     Subd. 12.  [OCCASIONAL SALES.] (a) The gross receipts from 
 56.13  the isolated or occasional sale of tangible personal property or 
 56.14  services in Minnesota not made in the normal course of business 
 56.15  of selling that kind of property or services, and the storage, 
 56.16  use, or consumption of property or services acquired as a result 
 56.17  of such a sale are exempt.  
 56.18     (b) This exemption does not apply to sales of tangible 
 56.19  personal property primarily used in a trade or business unless 
 56.20  (1) the sale occurs in a transaction subject to or described in 
 56.21  section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 
 56.22  1031, or 1033 of the Internal Revenue Code of 1986, as amended 
 56.23  through December 31, 1990; (2) the sale is between members of a 
 56.24  controlled group as defined in section 1563(a) of the Internal 
 56.25  Revenue Code of 1986, as amended through December 31, 1990; (3) 
 56.26  the sale is a sale of farm machinery; (4) the sale is a farm 
 56.27  auction sale; (5) the sale is a sale of substantially all of the 
 56.28  assets of a trade or business; or (6) the total amount of gross 
 56.29  receipts from the sale of trade or business property made during 
 56.30  the calendar month of the sale and the preceding 11 calendar 
 56.31  months does not exceed $1,000. 
 56.32     (c) For purposes of this subdivision, the following terms 
 56.33  have the meanings given.  
 56.34     (1) A "farm auction" is a public auction conducted by a 
 56.35  licensed auctioneer if substantially all of the property sold 
 56.36  consists of property used in the trade or business of farming 
 57.1   and property not used primarily in a trade or business. 
 57.2      (2) "Trade or business" includes the assets of a separate 
 57.3   division, branch, or identifiable segment of a trade or business 
 57.4   if, before the sale, the income and expenses attributable to the 
 57.5   separate division, branch, or identifiable segment could be 
 57.6   separately ascertained from the books of account or record (the 
 57.7   lease or rental of an identifiable segment does not qualify for 
 57.8   the exemption). 
 57.9      (3) A "sale of substantially all of the assets of a trade 
 57.10  or business" must occur as a single transaction or a series of 
 57.11  related transactions occurring within the 12-month period 
 57.12  beginning on the date of the first sale of assets intended to 
 57.13  qualify for the exemption provided in paragraph (b), clause (5). 
 57.14     Sec. 20.  Minnesota Statutes 1994, section 297A.25, is 
 57.15  amended by adding a subdivision to read: 
 57.16     Subd. 60.  [SALES OF SERVICES TO BUSINESSES.] Sales of 
 57.17  services described in section 297A.01, subdivision 3, paragraph 
 57.18  (i), but not in any other paragraph thereof, to any person 
 57.19  engaged in the conduct of a trade or business within the meaning 
 57.20  of section 162(a) of the Internal Revenue Code are exempt if the 
 57.21  benefits of the services are consumed in connection with the 
 57.22  trade or business.  Nothing in this subdivision shall limit the 
 57.23  scope of section 297A.01, subdivision 3, paragraph (b).  If 
 57.24  tangible personal property and services are sold together and 
 57.25  the services would be exempt hereunder, the services are exempt 
 57.26  only if the consideration for the tangible personal property and 
 57.27  the services is separately stated. 
 57.28     Sec. 21.  Minnesota Statutes 1994, section 297A.44, 
 57.29  subdivision 1, is amended to read: 
 57.30     Subdivision 1.  (a) Except as provided in paragraphs (b), 
 57.31  (c), and (d), all revenues, including interest and penalties, 
 57.32  derived from the excise and use taxes imposed by sections 
 57.33  297A.01 to 297A.44 shall be deposited by the commissioner in the 
 57.34  state treasury and credited to the general fund.  
 57.35     (b) All excise and use taxes derived from sales and use of 
 57.36  property and services purchased for the construction and 
 58.1   operation of an agricultural resource project, from and after 
 58.2   the date on which a conditional commitment for a loan guaranty 
 58.3   for the project is made pursuant to section 41A.04, subdivision 
 58.4   3, shall be deposited in the Minnesota agricultural and economic 
 58.5   account in the special revenue fund.  The commissioner of 
 58.6   finance shall certify to the commissioner the date on which the 
 58.7   project received the conditional commitment.  The amount 
 58.8   deposited in the loan guaranty account shall be reduced by any 
 58.9   refunds and by the costs incurred by the department of revenue 
 58.10  to administer and enforce the assessment and collection of the 
 58.11  taxes.  
 58.12     (c) All revenues, including interest and penalties, derived 
 58.13  from the excise and use taxes imposed on sales and purchases 
 58.14  included in section 297A.01, subdivision 3, paragraphs (d) (e) 
 58.15  and (l) (k), clauses (1) and (2), must be deposited by the 
 58.16  commissioner in the state treasury, and credited as follows: 
 58.17     (1) first to the general obligation special tax bond debt 
 58.18  service account in each fiscal year the amount required by 
 58.19  section 16A.661, subdivision 3, paragraph (b); and 
 58.20     (2) after the requirements of clause (1) have been met, the 
 58.21  balance must be credited to the general fund. 
 58.22     (d) The revenues, including interest and penalties, derived 
 58.23  from the taxes imposed on solid waste collection services as 
 58.24  described in section 297A.45, except for the tax imposed under 
 58.25  section 297A.021, shall be deposited by the commissioner in the 
 58.26  state treasury and credited to the general fund to be used for 
 58.27  funding solid waste reduction and recycling programs. 
 58.28     Sec. 22.  Minnesota Statutes 1994, section 297B.01, 
 58.29  subdivision 8, is amended to read: 
 58.30     Subd. 8.  [PURCHASE PRICE.] "Purchase price" means the 
 58.31  total consideration valued in money for a sale, whether paid in 
 58.32  money or otherwise, provided however, that when a not reduced by 
 58.33  the value of any motor vehicle is taken in trade as a credit or 
 58.34  as part payment on a motor vehicle taxable under Laws 1971, 
 58.35  chapter 853, the credit or trade-in value allowed by the person 
 58.36  selling the motor vehicle shall be deducted from the total 
 59.1   selling price to establish the purchase price of the vehicle 
 59.2   being sold and the trade-in allowance allowed by the seller 
 59.3   shall constitute the purchase price of the motor vehicle 
 59.4   accepted as a trade-in which value may be the average value of 
 59.5   similar motor vehicles, established by standards and guides as 
 59.6   determined by the motor vehicle registrar.  The purchase price 
 59.7   in those instances where the motor vehicle is acquired by gift 
 59.8   or by any other transfer for a nominal or no monetary 
 59.9   consideration shall also include the average value of similar 
 59.10  motor vehicles, established by standards and guides as 
 59.11  determined by the motor vehicle registrar as provided above.  
 59.12  The purchase price in those instances where a motor vehicle is 
 59.13  manufactured by a person who registers it under the laws of this 
 59.14  state shall mean the manufactured cost of such motor vehicle and 
 59.15  manufactured cost shall mean the amount expended for materials, 
 59.16  labor and other properly allocable costs of manufacture, except 
 59.17  that in the absence of actual expenditures for the manufacture 
 59.18  of a part or all of the motor vehicle, manufactured costs shall 
 59.19  mean the reasonable value of the completed motor vehicle.  
 59.20     The term "purchase price" shall not include the portion of 
 59.21  the value of a motor vehicle due solely to modifications 
 59.22  necessary to make the motor vehicle handicapped accessible.  The 
 59.23  term "purchase price" shall not include the transfer of a motor 
 59.24  vehicle by way of gift between a husband and wife or parent and 
 59.25  child, nor shall it include the transfer of a motor vehicle by a 
 59.26  guardian to a ward when there is no monetary consideration and 
 59.27  the title to such vehicle was registered in the name of the 
 59.28  guardian, as guardian, only because the ward was a minor.  There 
 59.29  shall not be included in "purchase price" the amount of any tax 
 59.30  imposed by the United States upon or with respect to retail 
 59.31  sales whether imposed upon the retailer or the consumer.  
 59.32     Sec. 23.  Minnesota Statutes 1994, section 297B.03, is 
 59.33  amended to read: 
 59.34     297B.03 [EXEMPTIONS.] 
 59.35     There is specifically exempted from the provisions of this 
 59.36  chapter and from computation of the amount of tax imposed by it 
 60.1   the following:  
 60.2      (1) Purchase or use, including use under a lease purchase 
 60.3   agreement or installment sales contract made pursuant to section 
 60.4   465.71, of any motor vehicle by the United States and its 
 60.5   agencies and instrumentalities and by any person described in 
 60.6   and subject to the conditions provided in section 297A.25, 
 60.7   subdivision 18.  
 60.8      (2) Purchase or use of any motor vehicle by any person who 
 60.9   was a resident of another state at the time of the purchase and 
 60.10  who subsequently becomes a resident of Minnesota, provided the 
 60.11  purchase occurred more than 60 days prior to the date such 
 60.12  person began residing in the state of Minnesota.  
 60.13     (3) Purchase or use of any motor vehicle by any person 
 60.14  making a valid election to be taxed under the provisions of 
 60.15  section 297A.211.  
 60.16     (4) Purchase or use of any motor vehicle previously 
 60.17  registered in the state of Minnesota by any corporation or 
 60.18  partnership when such transfer constitutes a transfer within the 
 60.19  meaning of section 351 or 721 of the Internal Revenue Code of 
 60.20  1986, as amended through December 31, 1988.  
 60.21     (5) Purchase or use of any vehicle owned by a resident of 
 60.22  another state and leased to a Minnesota based private or for 
 60.23  hire carrier for regular use in the transportation of persons or 
 60.24  property in interstate commerce provided the vehicle is titled 
 60.25  in the state of the owner or secured party, and that state does 
 60.26  not impose a sales tax or sales tax on motor vehicles used in 
 60.27  interstate commerce.  
 60.28     (6) Purchase or use of a motor vehicle by a private 
 60.29  nonprofit or public educational institution for use as an 
 60.30  instructional aid in automotive training programs operated by 
 60.31  the institution.  "Automotive training programs" includes motor 
 60.32  vehicle body and mechanical repair courses but does not include 
 60.33  driver education programs.  
 60.34     (7) Purchase of a motor vehicle for use as an ambulance by 
 60.35  an ambulance service licensed under section 144.802. 
 60.36     (8) Purchase of a motor vehicle by or for a public library, 
 61.1   as defined in section 134.001, subdivision 2, as a bookmobile or 
 61.2   library delivery vehicle. 
 61.3      Sec. 24.  [REPEALER.] 
 61.4      Minnesota Statutes 1994, sections 297A.25, subdivisions 6, 
 61.5   7, 8, 10, 11, 17, 18, 21, 23, 26, 30, 39, 40, 41, 44, 56, 57, 
 61.6   and 58; 297A.256, subdivision 2; 297B.02, subdivisions 2 and 3; 
 61.7   and 297B.025, are repealed. 
 61.8      Sec. 25.  [EFFECTIVE DATE.] 
 61.9      Sections 1 to 10 and 12 to 21 are effective January 1, 1996.
 61.10  Sections 22, 23 and 24 are effective July 1, 1995. 
 61.11                             ARTICLE 5
 61.12                           BUSINESS TAXES
 61.13     Section 1.  Minnesota Statutes 1994, section 272.02, 
 61.14  subdivision 1, is amended to read: 
 61.15     Subdivision 1.  All property described in this section to 
 61.16  the extent herein limited shall be exempt from taxation: 
 61.17     (1) All public burying grounds. 
 61.18     (2) All public schoolhouses. 
 61.19     (3) All public hospitals. 
 61.20     (4) All academies, colleges, and universities, and all 
 61.21  seminaries of learning. 
 61.22     (5) All churches, church property, and houses of worship. 
 61.23     (6) Institutions of purely public charity except parcels of 
 61.24  property containing structures and the structures described in 
 61.25  section 273.13, subdivision 25, paragraph (c), clauses (1), (2), 
 61.26  and (3), or paragraph (d), other than those that qualify for 
 61.27  exemption under clause (25). 
 61.28     (7) All public property exclusively used for any public 
 61.29  purpose. 
 61.30     (8) Except for the taxable personal property enumerated 
 61.31  below, all personal property and the property described in 
 61.32  section 272.03, subdivision 1, paragraphs (c) and (d), shall be 
 61.33  exempt.  
 61.34     The following personal property shall be taxable:  
 61.35     (a) personal property which is part of an electric 
 61.36  generating, transmission, or distribution system or a pipeline 
 62.1   system transporting or distributing water, gas, crude oil, or 
 62.2   petroleum products or mains and pipes used in the distribution 
 62.3   of steam or hot or chilled water for heating or cooling 
 62.4   buildings and structures; 
 62.5      (b) railroad docks and wharves which are part of the 
 62.6   operating property of a railroad company as defined in section 
 62.7   270.80; 
 62.8      (c) (b) personal property defined in section 272.03, 
 62.9   subdivision 2, clause (3); 
 62.10     (d) (c) leasehold or other personal property interests 
 62.11  which are taxed pursuant to section 272.01, subdivision 2; 
 62.12  273.124, subdivision 7; or 273.19, subdivision 1; or any other 
 62.13  law providing the property is taxable as if the lessee or user 
 62.14  were the fee owner; 
 62.15     (e) (d) manufactured homes and sectional structures, 
 62.16  including storage sheds, decks, and similar removable 
 62.17  improvements constructed on the site of a manufactured home, 
 62.18  sectional structure, park trailer or travel trailer as provided 
 62.19  in section 273.125, subdivision 8, paragraph (f); and 
 62.20     (f) (e) flight property as defined in section 270.071.  
 62.21     (9) Personal property used primarily for the abatement and 
 62.22  control of air, water, or land pollution to the extent that it 
 62.23  is so used, and real property which is used primarily for 
 62.24  abatement and control of air, water, or land pollution as part 
 62.25  of an agricultural operation, as a part of a centralized 
 62.26  treatment and recovery facility operating under a permit issued 
 62.27  by the Minnesota pollution control agency pursuant to chapters 
 62.28  115 and 116 and Minnesota Rules, parts 7001.0500 to 7001.0730, 
 62.29  and 7045.0020 to 7045.1260, as a wastewater treatment facility 
 62.30  and for the treatment, recovery, and stabilization of metals, 
 62.31  oils, chemicals, water, sludges, or inorganic materials from 
 62.32  hazardous industrial wastes, or as part of an electric 
 62.33  generation system.  For purposes of this clause, personal 
 62.34  property includes ponderous machinery and equipment used in a 
 62.35  business or production activity that at common law is considered 
 62.36  real property. 
 63.1      Any taxpayer requesting exemption of all or a portion of 
 63.2   any real property or any equipment or device, or part thereof, 
 63.3   operated primarily for the control or abatement of air or water 
 63.4   pollution shall file an application with the commissioner of 
 63.5   revenue.  The equipment or device shall meet standards, rules, 
 63.6   or criteria prescribed by the Minnesota pollution control 
 63.7   agency, and must be installed or operated in accordance with a 
 63.8   permit or order issued by that agency.  The Minnesota pollution 
 63.9   control agency shall upon request of the commissioner furnish 
 63.10  information or advice to the commissioner.  On determining that 
 63.11  property qualifies for exemption, the commissioner shall issue 
 63.12  an order exempting the property from taxation.  The equipment or 
 63.13  device shall continue to be exempt from taxation as long as the 
 63.14  permit issued by the Minnesota pollution control agency remains 
 63.15  in effect. 
 63.16     (10) Wetlands.  For purposes of this subdivision, 
 63.17  "wetlands" means:  (i) land described in section 103G.005, 
 63.18  subdivision 18; (ii) land which is mostly under water, produces 
 63.19  little if any income, and has no use except for wildlife or 
 63.20  water conservation purposes, provided it is preserved in its 
 63.21  natural condition and drainage of it would be legal, feasible, 
 63.22  and economically practical for the production of livestock, 
 63.23  dairy animals, poultry, fruit, vegetables, forage and grains, 
 63.24  except wild rice; or (iii) land in a wetland preservation area 
 63.25  under sections 103F.612 to 103F.616.  "Wetlands" under items (i) 
 63.26  and (ii) include adjacent land which is not suitable for 
 63.27  agricultural purposes due to the presence of the wetlands, but 
 63.28  do not include woody swamps containing shrubs or trees, wet 
 63.29  meadows, meandered water, streams, rivers, and floodplains or 
 63.30  river bottoms.  Exemption of wetlands from taxation pursuant to 
 63.31  this section shall not grant the public any additional or 
 63.32  greater right of access to the wetlands or diminish any right of 
 63.33  ownership to the wetlands. 
 63.34     (11) Native prairie.  The commissioner of the department of 
 63.35  natural resources shall determine lands in the state which are 
 63.36  native prairie and shall notify the county assessor of each 
 64.1   county in which the lands are located.  Pasture land used for 
 64.2   livestock grazing purposes shall not be considered native 
 64.3   prairie for the purposes of this clause.  Upon receipt of an 
 64.4   application for the exemption provided in this clause for lands 
 64.5   for which the assessor has no determination from the 
 64.6   commissioner of natural resources, the assessor shall refer the 
 64.7   application to the commissioner of natural resources who shall 
 64.8   determine within 30 days whether the land is native prairie and 
 64.9   notify the county assessor of the decision.  Exemption of native 
 64.10  prairie pursuant to this clause shall not grant the public any 
 64.11  additional or greater right of access to the native prairie or 
 64.12  diminish any right of ownership to it. 
 64.13     (12) Property used in a continuous program to provide 
 64.14  emergency shelter for victims of domestic abuse, provided the 
 64.15  organization that owns and sponsors the shelter is exempt from 
 64.16  federal income taxation pursuant to section 501(c)(3) of the 
 64.17  Internal Revenue Code of 1986, as amended through December 31, 
 64.18  1992, notwithstanding the fact that the sponsoring organization 
 64.19  receives funding under section 8 of the United States Housing 
 64.20  Act of 1937, as amended. 
 64.21     (13) If approved by the governing body of the municipality 
 64.22  in which the property is located, property not exceeding one 
 64.23  acre which is owned and operated by any senior citizen group or 
 64.24  association of groups that in general limits membership to 
 64.25  persons age 55 or older and is organized and operated 
 64.26  exclusively for pleasure, recreation, and other nonprofit 
 64.27  purposes, no part of the net earnings of which inures to the 
 64.28  benefit of any private shareholders; provided the property is 
 64.29  used primarily as a clubhouse, meeting facility, or recreational 
 64.30  facility by the group or association and the property is not 
 64.31  used for residential purposes on either a temporary or permanent 
 64.32  basis. 
 64.33     (14) To the extent provided by section 295.44, real and 
 64.34  personal property used or to be used primarily for the 
 64.35  production of hydroelectric or hydromechanical power on a site 
 64.36  owned by the state or a local governmental unit which is 
 65.1   developed and operated pursuant to the provisions of section 
 65.2   103G.535. 
 65.3      (15) If approved by the governing body of the municipality 
 65.4   in which the property is located, and if construction is 
 65.5   commenced after June 30, 1983:  
 65.6      (a) a "direct satellite broadcasting facility" operated by 
 65.7   a corporation licensed by the federal communications commission 
 65.8   to provide direct satellite broadcasting services using direct 
 65.9   broadcast satellites operating in the 12-ghz. band; and 
 65.10     (b) a "fixed satellite regional or national program service 
 65.11  facility" operated by a corporation licensed by the federal 
 65.12  communications commission to provide fixed satellite-transmitted 
 65.13  regularly scheduled broadcasting services using satellites 
 65.14  operating in the 6-ghz. band. 
 65.15  An exemption provided by clause (15) shall apply for a period 
 65.16  not to exceed five years.  When the facility no longer qualifies 
 65.17  for exemption, it shall be placed on the assessment rolls as 
 65.18  provided in subdivision 4.  Before approving a tax exemption 
 65.19  pursuant to this paragraph, the governing body of the 
 65.20  municipality shall provide an opportunity to the members of the 
 65.21  county board of commissioners of the county in which the 
 65.22  facility is proposed to be located and the members of the school 
 65.23  board of the school district in which the facility is proposed 
 65.24  to be located to meet with the governing body.  The governing 
 65.25  body shall present to the members of those boards its estimate 
 65.26  of the fiscal impact of the proposed property tax exemption.  
 65.27  The tax exemption shall not be approved by the governing body 
 65.28  until the county board of commissioners has presented its 
 65.29  written comment on the proposal to the governing body or 30 days 
 65.30  have passed from the date of the transmittal by the governing 
 65.31  body to the board of the information on the fiscal impact, 
 65.32  whichever occurs first. 
 65.33     (16) Real and personal property owned and operated by a 
 65.34  private, nonprofit corporation exempt from federal income 
 65.35  taxation pursuant to United States Code, title 26, section 
 65.36  501(c)(3), primarily used in the generation and distribution of 
 66.1   hot water for heating buildings and structures.  
 66.2      (17) Notwithstanding section 273.19, state lands that are 
 66.3   leased from the department of natural resources under section 
 66.4   92.46. 
 66.5      (18) Electric power distribution lines and their 
 66.6   attachments and appurtenances, that are used primarily for 
 66.7   supplying electricity to farmers at retail.  
 66.8      (19) Transitional housing facilities.  "Transitional 
 66.9   housing facility" means a facility that meets the following 
 66.10  requirements.  (i) It provides temporary housing to individuals, 
 66.11  couples, or families.  (ii) It has the purpose of reuniting 
 66.12  families and enabling parents or individuals to obtain 
 66.13  self-sufficiency, advance their education, get job training, or 
 66.14  become employed in jobs that provide a living wage.  (iii) It 
 66.15  provides support services such as child care, work readiness 
 66.16  training, and career development counseling; and a 
 66.17  self-sufficiency program with periodic monitoring of each 
 66.18  resident's progress in completing the program's goals.  (iv) It 
 66.19  provides services to a resident of the facility for at least 
 66.20  three months but no longer than three years, except residents 
 66.21  enrolled in an educational or vocational institution or job 
 66.22  training program.  These residents may receive services during 
 66.23  the time they are enrolled but in no event longer than four 
 66.24  years.  (v) It is owned and operated or under lease from a unit 
 66.25  of government or governmental agency under a property 
 66.26  disposition program and operated by one or more organizations 
 66.27  exempt from federal income tax under section 501(c)(3) of the 
 66.28  Internal Revenue Code of 1986, as amended through December 31, 
 66.29  1992.  This exemption applies notwithstanding the fact that the 
 66.30  sponsoring organization receives financing by a direct federal 
 66.31  loan or federally insured loan or a loan made by the Minnesota 
 66.32  housing finance agency under the provisions of either Title II 
 66.33  of the National Housing Act or the Minnesota housing finance 
 66.34  agency law of 1971 or rules promulgated by the agency pursuant 
 66.35  to it, and notwithstanding the fact that the sponsoring 
 66.36  organization receives funding under Section 8 of the United 
 67.1   States Housing Act of 1937, as amended. 
 67.2      (20) Real and personal property, including leasehold or 
 67.3   other personal property interests, owned and operated by a 
 67.4   corporation if more than 50 percent of the total voting power of 
 67.5   the stock of the corporation is owned collectively by:  (i) the 
 67.6   board of regents of the University of Minnesota, (ii) the 
 67.7   University of Minnesota Foundation, an organization exempt from 
 67.8   federal income taxation under section 501(c)(3) of the Internal 
 67.9   Revenue Code of 1986, as amended through December 31, 1992, and 
 67.10  (iii) a corporation organized under chapter 317A, which by its 
 67.11  articles of incorporation is prohibited from providing pecuniary 
 67.12  gain to any person or entity other than the regents of the 
 67.13  University of Minnesota; which property is used primarily to 
 67.14  manage or provide goods, services, or facilities utilizing or 
 67.15  relating to large-scale advanced scientific computing resources 
 67.16  to the regents of the University of Minnesota and others. 
 67.17     (21) Wind energy conversion systems, as defined in section 
 67.18  216C.06, subdivision 12, installed after January 1, 1991, and 
 67.19  used as an electric power source. 
 67.20     (22) Containment tanks, cache basins, and that portion of 
 67.21  the structure needed for the containment facility used to 
 67.22  confine agricultural chemicals as defined in section 18D.01, 
 67.23  subdivision 3, as required by the commissioner of agriculture 
 67.24  under chapter 18B or 18C. 
 67.25     (23) Photovoltaic devices, as defined in section 216C.06, 
 67.26  subdivision 13, installed after January 1, 1992, and used to 
 67.27  produce or store electric power. 
 67.28     (24) Real and personal property owned and operated by a 
 67.29  private, nonprofit corporation exempt from federal income 
 67.30  taxation pursuant to United States Code, title 26, section 
 67.31  501(c)(3), primarily used for an ice arena or ice rink, and used 
 67.32  primarily for youth and high school programs. 
 67.33     (25) A structure that is situated on real property that is 
 67.34  used for: 
 67.35     (i) housing for the elderly or for low- and moderate-income 
 67.36  families as defined in Title II of the National Housing Act, as 
 68.1   amended through December 31, 1990, and funded by a direct 
 68.2   federal loan or federally insured loan made pursuant to Title II 
 68.3   of the act; or 
 68.4      (ii) housing lower income families or elderly or 
 68.5   handicapped persons, as defined in section 8 of the United 
 68.6   States Housing Act of 1937, as amended. 
 68.7      In order for a structure to be exempt under (i) or (ii), it 
 68.8   must also meet each of the following criteria: 
 68.9      (A) is owned by an entity which is operated as a nonprofit 
 68.10  corporation organized under chapter 317A; 
 68.11     (B) is owned by an entity which has not entered into a 
 68.12  housing assistance payments contract under section 8 of the 
 68.13  United States Housing Act of 1937, or, if the entity which owns 
 68.14  the structure has entered into a housing assistance payments 
 68.15  contract under section 8 of the United States Housing Act of 
 68.16  1937, the contract provides assistance for less than 90 percent 
 68.17  of the dwelling units in the structure, excluding dwelling units 
 68.18  intended for management or maintenance personnel; 
 68.19     (C) operates an on-site congregate dining program in which 
 68.20  participation by residents is mandatory, and provides assisted 
 68.21  living or similar social and physical support services for 
 68.22  residents; and 
 68.23     (D) was not assessed and did not pay tax under chapter 273 
 68.24  prior to the 1991 levy, while meeting the other conditions of 
 68.25  this clause. 
 68.26     An exemption under this clause remains in effect for taxes 
 68.27  levied in each year or partial year of the term of its permanent 
 68.28  financing. 
 68.29     (26) Real and personal property that is located in the 
 68.30  Superior National Forest, and owned or leased and operated by a 
 68.31  nonprofit organization that is exempt from federal income 
 68.32  taxation under section 501(c)(3) of the Internal Revenue Code of 
 68.33  1986, as amended through December 31, 1992, and primarily used 
 68.34  to provide recreational opportunities for disabled veterans and 
 68.35  their families. 
 68.36     (27) Manure pits and appurtenances, which may include 
 69.1   slatted floors and pipes, installed or operated in accordance 
 69.2   with a permit, order, or certificate of compliance issued by the 
 69.3   Minnesota pollution control agency.  The exemption shall 
 69.4   continue for as long as the permit, order, or certificate issued 
 69.5   by the Minnesota pollution control agency remains in effect. 
 69.6      (28) Notwithstanding clause (8), item (a), attached 
 69.7   machinery and other personal property which is part of a 
 69.8   facility containing a cogeneration system as described in 
 69.9   section 216B.166, subdivision 2, paragraph (a), if the 
 69.10  cogeneration system has met the following criteria:  (i) the 
 69.11  system utilizes natural gas as a primary fuel and the 
 69.12  cogenerated steam initially replaces steam generated from 
 69.13  existing thermal boilers utilizing coal; (ii) the facility 
 69.14  developer is selected as a result of a procurement process 
 69.15  ordered by the public utilities commission; and (iii) 
 69.16  construction of the facility is commenced after July 1, 1994, 
 69.17  and before July 1, 1997. 
 69.18     (29) Real property acquired by a home rule charter city, 
 69.19  statutory city, county, town, or school district under a lease 
 69.20  purchase agreement or an installment purchase contract during 
 69.21  the term of the lease purchase agreement as long as and to the 
 69.22  extent that the property is used by the city, county, town, or 
 69.23  school district and devoted to a public use and to the extent it 
 69.24  is not subleased to any private individual, entity, association, 
 69.25  or corporation in connection with a business or enterprise 
 69.26  operated for profit. 
 69.27     Sec. 2.  Minnesota Statutes 1994, section 290.91, is 
 69.28  amended to read: 
 69.29     290.91 [DESTRUCTION OF RETURNS.] 
 69.30     The commissioner of revenue is hereby authorized to destroy 
 69.31  all tax returns, required under this chapter or, chapter 290A, 
 69.32  or chapter 290B, including audit reports, orders, and 
 69.33  correspondence relating thereto, which have been on file in the 
 69.34  commissioner's office for a period to be determined by the 
 69.35  commissioner.  The commissioner may make copies of such returns, 
 69.36  orders, or correspondence by microfilm, photostat, or other 
 70.1   similar means and may immediately destroy the original documents 
 70.2   from which such copies have been made.  Such copies, when 
 70.3   certified to by the commissioner, shall be admissible in 
 70.4   evidence in the same manner and be given the same effect as the 
 70.5   original documents destroyed. 
 70.6      The commissioner may destroy correspondence and documents 
 70.7   contained in the files of the division which do not relate 
 70.8   specifically to any tax return. 
 70.9      Notwithstanding the above provisions the commissioner may, 
 70.10  utilizing such safeguards as the commissioner in the 
 70.11  commissioner's discretion deems necessary, (1) employ a 
 70.12  commercial photographer for the purpose of developing microfilm 
 70.13  of returns or other documents, or (2) employ a vendor for the 
 70.14  purpose of obtaining the vendor's services an example of which 
 70.15  is the preparation of income tax return labels. 
 70.16     Sec. 3.  Minnesota Statutes 1994, section 290.9201, 
 70.17  subdivision 2, is amended to read: 
 70.18     Subd. 2.  [TAX ON ENTERTAINMENT.] Entertainment entities 
 70.19  are subject to a tax in the amount of two four percent of the 
 70.20  total compensation received by them during the calendar year for 
 70.21  entertainment performed in Minnesota. 
 70.22     Sec. 4.  Minnesota Statutes 1994, section 290.923, 
 70.23  subdivision 2, is amended to read: 
 70.24     Subd. 2.  [COLLECTION AT SOURCE.] (a) Every person making 
 70.25  payment of royalties shall deduct and withhold upon the 
 70.26  royalties a tax as provided in this section.  
 70.27     (b) The amount of tax to be withheld shall be based upon 
 70.28  tables to be prepared and distributed by the commissioner.  The 
 70.29  tables must be computed for several permissible withholding 
 70.30  periods and shall take into account any exemptions allowed under 
 70.31  this chapter.  The amounts computed for withholding shall be 
 70.32  such that the amount withheld for any person during the person's 
 70.33  taxable year shall approximate in the aggregate as closely as 
 70.34  possible the sum of (1) the tax levied and imposed under this 
 70.35  chapter for that taxable year upon the person's income subject 
 70.36  to tax and (2) the tax imposed under chapter 290B.  
 71.1      Sec. 5.  Minnesota Statutes 1994, section 290.97, is 
 71.3   amended to read: 
 71.4      290.97 [CONTRACTS WITH STATE; WITHHOLDING.] 
 71.5      No department of the state of Minnesota, nor any political 
 71.6   or governmental subdivision of the state shall make final 
 71.7   settlement with any contractor under a contract requiring the 
 71.8   employment of employees for wages by said contractor and by 
 71.9   subcontractors until satisfactory showing is made that said the 
 71.10  contractor or subcontractor has complied with the provisions of 
 71.11  section 290.92.  A certificate by the commissioner of revenue 
 71.12  shall satisfy this requirement with respect to the contractor or 
 71.13  subcontractor.  If, at the time of final settlement, there are 
 71.14  any unpaid withholding taxes, penalties, or interest arising 
 71.15  from the government contract, the department shall issue a 
 71.16  certification to the contractor or subcontractor upon payment, 
 71.17  with certified funds, of any unpaid withholding taxes, 
 71.18  penalties, and interest.  Payment is received by the department 
 71.19  upon delivery of the certified funds to the central office 
 71.20  located in St. Paul, or any district or subdistrict office 
 71.21  located throughout the state. 
 71.22     Sec. 6.  Minnesota Statutes 1994, section 290.9705, 
 71.23  subdivision 1, is amended to read: 
 71.24     Subdivision 1.  [WITHHOLDING OF PAYMENTS TO OUT-OF-STATE 
 71.25  CONTRACTORS.] (a) In this section, "person" means a person, 
 71.26  corporation, or cooperative, the state of Minnesota and its 
 71.27  political subdivisions, and a city, county, and school district 
 71.28  in Minnesota. 
 71.29     (b) A person who in the regular course of business is 
 71.30  hiring, contracting, or having a contract with a nonresident 
 71.31  person or foreign corporation, as defined in Minnesota Statutes 
 71.32  1986, section 290.01, subdivision 5, to perform construction 
 71.33  work in Minnesota, shall deduct and withhold eight ten percent 
 71.34  of every payment to the contractor if the contract exceeds or 
 71.35  can reasonably be expected to exceed $100,000. 
 71.36     Sec. 7.  Minnesota Statutes 1994, section 290.9705, 
 71.37  subdivision 3, is amended to read: 
 72.1      Subd. 3.  [WAIVER OF WITHHOLDING.] The conditions in 
 72.2   subdivisions 1 and 2 may be waived by the commissioner if (1) 
 72.3   the contractor gives the commissioner a cash surety or a bond, 
 72.4   secured by an insurance company licensed by Minnesota, 
 72.5   conditioned that the contractor will comply with all applicable 
 72.6   provisions of this chapter, chapter 290B, and chapter 297A, or 
 72.7   (2) the contractor has done construction work in Minnesota at 
 72.8   any time during the three calendar years prior to entering the 
 72.9   contract and has fully complied with all the provisions of this 
 72.10  chapter, chapter 290B, and chapter 297A for the three prior 
 72.11  years. 
 72.12     Sec. 8.  [290B.01] [DEFINITIONS.] 
 72.13     Subdivision 1.  [WORDS AND PHRASES.] For purposes of this 
 72.14  chapter, unless the language or context clearly indicates that a 
 72.15  different meaning is intended, the words and phrases defined in 
 72.16  subdivisions 2 to 26, have the meanings given them. 
 72.17     Subd. 2.  [APPORTIONED GROSS MARGIN.] "Apportioned gross 
 72.18  margin" means the product of (1) the Minnesota apportionment 
 72.19  percentage, including all applicable factors, as determined 
 72.20  under chapter 290 for the person, or which would be determined 
 72.21  if chapter 290 applied, for the taxable year, and (2) the 
 72.22  person's gross margin for the year.  In the case of a person, 
 72.23  the entire business of which is conducted wholly within 
 72.24  Minnesota, the apportionment factor is 100 percent.  If the 
 72.25  gross margin is determined under subdivision 13, clause (2), 
 72.26  subclause (iii), for a unitary business, the apportionment 
 72.27  percentage shall be computed using the total factors of the 
 72.28  unitary business in the denominator. 
 72.29     Subd. 3.  [BUSINESS.] "Business" means any trade or 
 72.30  business with the meaning of section 162(a) of the Internal 
 72.31  Revenue Code, including activities of organizations exempt from 
 72.32  the federal income tax under the Internal Revenue Code that 
 72.33  would constitute a trade or business thereunder if they were 
 72.34  conducted by a for-profit business corporation.  "Business" does 
 72.35  not include "investment" if so determined under the standards 
 72.36  applicable to distinguishing a trade or business from investment 
 73.1   activities in the Internal Revenue Code. 
 73.2      Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 73.3   commissioner of revenue of the state of Minnesota. 
 73.4      Subd. 5.  [CORPORATION.] "Corporation" has the meaning 
 73.5   given in section 290.01, subdivision 4. 
 73.6      Subd. 6.  [DOMESTIC CORPORATION.] "Domestic," when applied 
 73.7   to a corporation, has the meaning given under section 290.01, 
 73.8   subdivision 5. 
 73.9      Subd. 7.  [FIDUCIARY.] "Fiduciary" means a guardian, 
 73.10  trustee, receiver, conservator, personal representative, or any 
 73.11  person acting in any fiduciary capacity for any person. 
 73.12     Subd. 8.  [FINANCIAL INSTITUTION.] "Financial institution," 
 73.13  "holding company," "regulated financial corporation," and 
 73.14  "business of a financial institution" have the meaning given in 
 73.15  section 290.01, subdivision 4a. 
 73.16     Subd. 9.  [FISCAL YEAR.] "Fiscal year" means an accounting 
 73.17  period of 12 months ending on the last day of any month other 
 73.18  than December.  In the case of any taxpayer who has made the 
 73.19  election provided by section 290A.08, subdivision 5, fiscal year 
 73.20  means the annual period, varying from 52 to 53 weeks, so elected.
 73.21     Subd. 10.  [FOREIGN CORPORATION.] "Foreign," when applied 
 73.22  to a corporation, means a corporation other than a domestic 
 73.23  corporation. 
 73.24     Subd. 11.  [FOREIGN OPERATING CORPORATION.] "Foreign 
 73.25  operating corporation" has the meaning given in section 290.01, 
 73.26  subdivision 6b. 
 73.27     Subd. 12.  [GROSS INCOME.] "Gross income" means the gross 
 73.28  income as defined in section 61 of the Internal Revenue Code, 
 73.29  plus any additional items of income taxable under chapter 290 
 73.30  but not taxable under the Internal Revenue Code, less any items 
 73.31  included in federal gross income but exempt from state income 
 73.32  tax under the laws of the United States. 
 73.33     Subd. 13.  [GROSS MARGIN.] "Gross margin" means: 
 73.34     (1) in the case of all sales or receipts in the ordinary 
 73.35  course of business which are included in the sales or receipts 
 73.36  factor of the apportionment formula applicable to the person 
 74.1   under chapter 290, or which would be applicable thereunder if 
 74.2   the person apportioned income, other than sales of tangible 
 74.3   property, the amount of the sales or receipts; and 
 74.4      (2) in the case of all sales of tangible property which are 
 74.5   included in the sales or receipts factor of the apportionment 
 74.6   formula applicable to the person under chapter 290, or which 
 74.7   would be applicable if the person apportioned income, the excess 
 74.8   of such sales for the taxable year over: 
 74.9      (i) in the case of sales of tangible property which is 
 74.10  purchased by the person and resold without alteration, the cost 
 74.11  of goods sold as determined for federal income tax purposes 
 74.12  under the Internal Revenue Code, except to the extent otherwise 
 74.13  provided in subclause (iii) for unitary businesses; or 
 74.14     (ii) in the case of manufacturing, construction, farming, 
 74.15  or other processing of tangible property, the direct material 
 74.16  costs, within the meaning of section 471 of the Internal Revenue 
 74.17  Code, of the tangible property sold.  "Direct material costs" 
 74.18  include the cost of those materials which become an integral 
 74.19  part of the specific product and those materials which are 
 74.20  consumed in the ordinary cost of manufacturing, construction, or 
 74.21  other processing and can be identified or associated with 
 74.22  particular units or groups of units of that product.  Direct 
 74.23  material costs do not include direct labor costs or indirect 
 74.24  production costs.  For natural resources removed from their 
 74.25  natural state by the person, direct material costs include only 
 74.26  cost depletion to the extent allowable for federal income tax 
 74.27  purposes under the Internal Revenue Code.  For crops grown by 
 74.28  the person, direct material costs include only seed, fertilizer, 
 74.29  water, and other supplies applied to the crop or the land.  For 
 74.30  animals raised by the person, direct material costs include only 
 74.31  the purchase price, if any, and to the extent not treated as a 
 74.32  direct material cost of animal by-products, feed, water, and 
 74.33  other supplies fed or applied to the animals.  For animal 
 74.34  by-products produced by animals raised by the person, direct 
 74.35  material costs include only the feed, water, and other supplies 
 74.36  fed or applied to the animals.  Purchases by one member of a 
 75.1   unitary business from another are subject to the special rule in 
 75.2   subclause (iii); 
 75.3      (iii) in the case of tangible property purchased by one 
 75.4   person in a unitary business from another member of the same 
 75.5   unitary business, the cost of that property to the purchasing 
 75.6   person is disregarded and the cost is deemed to be the cost of 
 75.7   goods sold or the direct materials cost, whichever is 
 75.8   applicable, of the first member of the unitary business to 
 75.9   acquire the property. 
 75.10     Subd. 14.  [INTERNAL REVENUE CODE.] Unless specifically 
 75.11  defined otherwise, "Internal Revenue Code" means the Internal 
 75.12  Revenue Code of 1986, as amended through December 31, 1994. 
 75.13     Subd. 15.  [LIMITED LIABILITY COMPANY.] For purposes of 
 75.14  this chapter and chapter 289A, a limited liability company that 
 75.15  is formed under either the laws of this state or under similar 
 75.16  laws of another state, and that is considered to be a 
 75.17  partnership for federal income tax purposes, is considered to be 
 75.18  a partnership and the members must be considered to be partners. 
 75.19     Subd. 16.  [MINNESOTA MINERAL ROYALTY INCOME.] "Minnesota 
 75.20  mineral royalty income" means the royalty income, as defined in 
 75.21  section 61 of the Internal Revenue Code, with respect to rights 
 75.22  to explore, mine, take out, and remove minerals from land in 
 75.23  Minnesota. 
 75.24     Subd. 17.  [MINNESOTA REAL PROPERTY RENTAL 
 75.25  INCOME.] "Minnesota real property rental income" means the 
 75.26  rental income, as defined in section 61 of the Internal Revenue 
 75.27  Code, from real property located in Minnesota. 
 75.28     Subd. 18.  [PARTNERSHIP; PARTNER.] "Partnership" and 
 75.29  "partner" have the meanings given them in section 7701(a)(2) of 
 75.30  the Internal Revenue Code. 
 75.31     Subd. 19.  [PERSON.] "Person" includes individuals, 
 75.32  fiduciaries, estates, trusts, partnerships, and corporations. 
 75.33     Subd. 20.  [PERSONAL REPRESENTATIVE.] "Personal 
 75.34  representative" includes executor, administrator, successor 
 75.35  personal representative, special administrator, and persons who 
 75.36  perform substantially the same function under the law governing 
 76.1   their status. 
 76.2      Subd. 21.  [RESIDENT.] "Resident" means any individual who 
 76.3   is a resident under section 290.01, subdivision 7. 
 76.4      Subd. 22.  [STATE OR THIS STATE.] "State" or "this state" 
 76.5   means the state of Minnesota. 
 76.6      Subd. 23.  [TAXABLE YEAR.] "Taxable year" means the period 
 76.7   for which the taxes levied by this chapter are imposed.  It 
 76.8   shall be a calendar year, a fiscal year, or, in cases where 
 76.9   returns for a fractional part of a year are permitted or 
 76.10  required, the period for which the return is made. 
 76.11     Subd. 24.  [TAXPAYER.] "Taxpayer" means a person or 
 76.12  corporation subject to a tax imposed by this chapter. 
 76.13     Subd. 25.  [TRUST.] "Trust" has the meaning provided under 
 76.14  the Internal Revenue Code. 
 76.15     Subd. 26.  [UNITARY BUSINESS.] "Unitary business" has the 
 76.16  meaning given it in section 290.17, subdivision 4. 
 76.17     Sec. 9.  [290B.02] [JURISDICTION TO TAX.] 
 76.18     Subdivision 1.  [MINNESOTA REAL PROPERTY RENTAL 
 76.19  INCOME.] Minnesota real property rental income is taxable under 
 76.20  this chapter without regard to the contacts of the owner of the 
 76.21  real property with Minnesota. 
 76.22     Subd. 2.  [MINNESOTA MINERAL ROYALTY INCOME.] Minnesota 
 76.23  mineral royalty income is taxable under this chapter without 
 76.24  regard to the contacts of the recipient of the royalty income 
 76.25  with Minnesota. 
 76.26     Subd. 3.  [GENERALLY.] Except as provided in subdivisions 1 
 76.27  and 2, which apply without regard to whether the income is in 
 76.28  connection with a business and without regard to the contacts of 
 76.29  the person with Minnesota if it is in connection with a 
 76.30  business, the provisions of section 290.015, other than 
 76.31  subdivision 3, paragraph (a), apply to determine whether a 
 76.32  person conducting a business is taxable under this chapter.  
 76.33  Section 290.015, subdivision 3, paragraph (a), does not apply to 
 76.34  this chapter. 
 76.35     Sec. 10.  [290B.03] [IMPOSITION OF TAX.] 
 76.36     Subdivision 1.  [BASE; RATE.] Except as otherwise provided 
 77.1   in this chapter, there is imposed for each taxable year a tax at 
 77.2   a rate of two percent of the sum of the Minnesota real property 
 77.3   rental income, the Minnesota mineral royalty income, and the 
 77.4   apportioned gross margin with respect to each business of each 
 77.5   person subject to tax under this chapter. 
 77.6      Subd. 2.  [CORPORATIONS.] For corporations, the tax imposed 
 77.7   by subdivision 1, is an annual franchise tax on the exercise of 
 77.8   the corporate franchise to engage in contacts with this state 
 77.9   that produce gross income attributable to sources within this 
 77.10  state. 
 77.11     Subd. 3.  [TAX AT ENTITY LEVEL.] The tax imposed by 
 77.12  subdivision 1 is due from the person owning the rental income or 
 77.13  royalty income, whether or not that person is a business, and, 
 77.14  in the case of the tax on apportioned gross margin, from the 
 77.15  owner of the business.  Entities, rather than individuals, are 
 77.16  liable for the tax, except in the case of a sole proprietorship 
 77.17  and of real property or mineral interests owned by individuals.  
 77.18  The tax is owed at the entity level even if the entity is a 
 77.19  pass-through entity for federal income tax purposes. 
 77.20     Subd. 4.  [TERMINATION OF LIABILITY AND TRANSFEREE 
 77.21  LIABILITY.] Unpaid liability for the tax imposed by subdivision 
 77.22  1, that arises from the operation of a business, terminates when 
 77.23  the business from which it arose terminates except that 
 77.24  transferees of any assets of the business which are transferred 
 77.25  to or for the benefit of an owner of the business are liable as 
 77.26  transferees.  This provision applies to businesses that are sole 
 77.27  proprietorships and requires differentiation between assets 
 77.28  related to the business and unrelated assets of its owner. 
 77.29     Sec. 11.  [290B.04] [EXEMPT PERSONS.] 
 77.30     The following persons are exempt from taxation under this 
 77.31  chapter: 
 77.32     (1) the United States of America, the state of Minnesota, 
 77.33  and any political subdivision, agency, or instrumentality of 
 77.34  either, except to the extent described in clause (4), whether 
 77.35  engaged in the discharge of governmental or proprietary 
 77.36  functions; 
 78.1      (2) insurance companies subject to tax under section 
 78.2   60A.15; 
 78.3      (3) fraternal benefit societies engaged in the insurance 
 78.4   business; 
 78.5      (4) town and farmers' mutual insurance companies and mutual 
 78.6   property and casualty insurance companies, other than those (i) 
 78.7   writing life insurance, or (ii) whose total assets on December 
 78.8   31, 1989, exceeded $1,600,000,000; 
 78.9      (5) persons subject to the MinnesotaCare tax; 
 78.10     (6) persons subject to the tax on nonresident entertainers 
 78.11  imposed by section 290.9201; and 
 78.12     (7) organizations exempt from federal income tax under 
 78.13  subchapter F of the Internal Revenue Code. 
 78.14     Sec. 12.  [290B.05] [COMPUTATION; ACCOUNTING PERIOD.] 
 78.15     Subdivision 1.  [ANNUAL ACCOUNTING PERIOD.] The tax base 
 78.16  shall be computed upon the basis of the taxpayer's annual 
 78.17  accounting period.  If a taxpayer has no annual accounting 
 78.18  period, or has one other than a fiscal year, the tax base shall 
 78.19  be computed on the basis of the calendar year.  Taxpayers shall 
 78.20  employ the same accounting period on which they report, or would 
 78.21  be required to report, their net income under the Internal 
 78.22  Revenue Code.  The commissioner shall provide by rule for the 
 78.23  determination of the accounting period for taxpayers who file a 
 78.24  combined report under section 290.34, subdivision 2, when 
 78.25  members of the group use different accounting periods for 
 78.26  federal income tax purposes.  Unless the taxpayer changes its 
 78.27  accounting period for federal purposes, the due date of the 
 78.28  return is not changed. 
 78.29     A taxpayer may change accounting periods only with the 
 78.30  consent of the commissioner.  In case of any such change, the 
 78.31  taxpayer shall pay a tax for the period not included in either 
 78.32  the taxpayer's former or newly adopted taxable year, computed 
 78.33  comparably to the provisions of section 290.32 with respect to 
 78.34  income tax. 
 78.35     Subd. 2.  [ACCOUNTING METHODS.] Except as specifically 
 78.36  provided to the contrary by this chapter, the tax base shall be 
 79.1   computed in accordance with the method of accounting regularly 
 79.2   employed in keeping the taxpayer's books.  If no such accounting 
 79.3   system has been regularly employed, or if that system employed 
 79.4   does not clearly or fairly reflect income or the tax base 
 79.5   taxable under this chapter, the computation shall be made in 
 79.6   accordance with a method that in the opinion of the commissioner 
 79.7   clearly and fairly reflects income and the tax base taxable 
 79.8   under this chapter. 
 79.9      Except as otherwise expressly provided in this chapter, a 
 79.10  taxpayer who changes the method of accounting for regularly 
 79.11  computing the taxpayer's income in keeping books shall, before 
 79.12  computing the tax base under the new method, secure the consent 
 79.13  of the commissioner. 
 79.14     Sec. 13.  [290B.06] [DISTRIBUTION OF REVENUES.] 
 79.15     All revenues derived from the taxes, interest, penalties 
 79.16  and charges under this chapter shall, notwithstanding any other 
 79.17  provisions of law, be paid into the state treasury and credited 
 79.18  to the general fund, and be distributed as follows: 
 79.19     (1) There shall, notwithstanding any other provision of the 
 79.20  law, be paid from the general fund all refunds of taxes 
 79.21  erroneously collected from taxpayers under this chapter; 
 79.22     (2) There is appropriated to the persons entitled to 
 79.23  payment under this section, from the fund or account in the 
 79.24  state treasury to which the money was credited, an amount 
 79.25  sufficient to make the refund and payment. 
 79.26     Sec. 14.  Minnesota Statutes 1994, section 297A.01, 
 79.27  subdivision 16, is amended to read: 
 79.28     Subd. 16.  [CAPITAL EQUIPMENT.] (a) Capital equipment means 
 79.29  machinery and equipment purchased or leased for use in this 
 79.30  state and used by the purchaser or lessee primarily for 
 79.31  manufacturing, fabricating, mining, or refining producing 
 79.32  tangible personal property or services to be sold ultimately at 
 79.33  retail and for electronically transmitting results retrieved by 
 79.34  a customer of an on-line computerized data retrieval system.  
 79.35     (b) Capital equipment includes all machinery and equipment 
 79.36  that is essential to the integrated production process.  Capital 
 80.1   equipment includes, but is not limited to: 
 80.2      (1) machinery and equipment used or required to operate, 
 80.3   control, or regulate the production equipment; 
 80.4      (2) machinery and equipment used for research and 
 80.5   development, design, quality control, and testing activities; 
 80.6      (3) environmental control devices that are used to maintain 
 80.7   conditions such as temperature, humidity, light, or air pressure 
 80.8   when those conditions are essential to and are part of the 
 80.9   production process; or 
 80.10     (4) materials and supplies necessary to construct and 
 80.11  install machinery or equipment; or 
 80.12     (5) repair or replacement parts, including accessories, 
 80.13  purchased for use on capital equipment and not usable with 
 80.14  respect to other property of the purchaser. 
 80.15     (c) Capital equipment does not include the following: 
 80.16     (1) repair or replacement parts, including accessories, 
 80.17  whether purchased as spare parts, repair parts, or as upgrades 
 80.18  or modifications, and whether purchased before or after the 
 80.19  machinery or equipment is placed into service.  Parts or 
 80.20  accessories are treated as capital equipment only to the extent 
 80.21  that they are a part of and are essential to the operation of 
 80.22  the machinery or equipment as initially purchased; 
 80.23     (2) motor vehicles taxed under chapter 297B; 
 80.24     (3) (2) machinery or equipment used to receive or store raw 
 80.25  materials; 
 80.26     (4) (3) building materials; 
 80.27     (5) (4) machinery or equipment used for nonproduction 
 80.28  purposes, including, but not limited to, the following:  
 80.29  machinery and equipment used for plant security, fire 
 80.30  prevention, first aid, and hospital stations; machinery and 
 80.31  equipment used in support operations or for administrative 
 80.32  purposes; machinery and equipment used solely for pollution 
 80.33  control, prevention, or abatement; and machinery and equipment 
 80.34  used in plant cleaning, disposal of scrap and waste, plant 
 80.35  communications, space heating, lighting, or safety; 
 80.36     (5) machinery or equipment used in connection with 
 81.1   facilities for the sale of tangible personal property or 
 81.2   services; 
 81.3      (6) "farm machinery" as defined by subdivision 
 81.4   15, and "aquaculture production equipment" as defined by 
 81.5   subdivision 19, and "replacement capital equipment" as defined 
 81.6   by subdivision 20; or 
 81.7      (7) office machinery or equipment other than computers even 
 81.8   if used in connection with the production of services; or 
 81.9      (8) any other item that is not essential to the integrated 
 81.10  process of manufacturing, fabricating, mining, or refining 
 81.11  producing tangible personal property or services. 
 81.12     (d) For purposes of this subdivision: 
 81.13     (1) "Equipment" means independent devices or tools separate 
 81.14  from machinery but essential to an integrated production 
 81.15  process, including computers and software, used in operating 
 81.16  machinery and equipment; and any subunit or assembly comprising 
 81.17  a component of any machinery or accessory or attachment parts of 
 81.18  machinery, such as tools, dies, jigs, patterns, and molds. 
 81.19     (2) "Fabricating" means to make, build, create, produce, or 
 81.20  assemble components or property to work in a new or different 
 81.21  manner. 
 81.22     (3) "Machinery" means mechanical, electronic, or electrical 
 81.23  devices, including computers and software, that are purchased or 
 81.24  constructed to be used for the activities set forth in paragraph 
 81.25  (a), beginning with the removal of raw materials from inventory 
 81.26  through the completion of the product, including packaging of 
 81.27  the product. 
 81.28     (4) "Manufacturing" means an operation or series of 
 81.29  operations where raw materials are changed in form, composition, 
 81.30  or condition by machinery and equipment and which results in the 
 81.31  production of a new article of tangible personal property.  For 
 81.32  purposes of this subdivision, "manufacturing" includes the 
 81.33  generation of electricity or steam to be sold at retail. 
 81.34     (5) "Mining" means the extraction of minerals, ores, stone, 
 81.35  and peat. 
 81.36     (6) "On-line data retrieval system" means a system whose 
 82.1   cumulation of information is equally available and accessible to 
 82.2   all its customers. 
 82.3      (7) (3) "Pollution control equipment" means machinery and 
 82.4   equipment used to eliminate, prevent, or reduce pollution 
 82.5   resulting from an activity described in paragraph (a). 
 82.6      (8) (4) "Primarily" means machinery and equipment used 50 
 82.7   percent or more of the time in an activity described in 
 82.8   paragraph (a). 
 82.9      (9) "Refining" means the process of converting a natural 
 82.10  resource to a product, including the treatment of water to be 
 82.11  sold at retail. 
 82.12     (e) For purposes of this subdivision the requirement that 
 82.13  the machinery or equipment "must be used by the purchaser or 
 82.14  lessee" means that the person who purchases or leases the 
 82.15  machinery or equipment must be the one who uses it for the 
 82.16  qualifying purpose.  When a contractor buys and installs 
 82.17  machinery or equipment as part of an improvement to real 
 82.18  property, only the contractor is considered the purchaser. 
 82.19     (f) Notwithstanding prior provisions of this subdivision, 
 82.20  machinery and equipment purchased or leased to replace machinery 
 82.21  and equipment used in the mining or production of taconite shall 
 82.22  qualify as capital equipment. 
 82.23     Sec. 15.  Minnesota Statutes 1994, section 297A.15, 
 82.24  subdivision 5, is amended to read: 
 82.25     Subd. 5.  [REFUND; APPROPRIATION.] Notwithstanding the 
 82.26  provisions of sections 297A.02, subdivision 5, and section 
 82.27  297A.25, subdivisions 42 and subdivision 50, the tax on sales of 
 82.28  capital equipment, replacement capital equipment, and 
 82.29  construction materials and supplies under section 297A.25, 
 82.30  subdivision 50, shall be imposed and collected as if the rates 
 82.31  under sections 297A.02, subdivision 1, and 297A.021, applied.  
 82.32  Upon application by the purchaser, on forms prescribed by the 
 82.33  commissioner, a refund equal to the reduction in the tax due as 
 82.34  a result of the application of the exemption under section 
 82.35  297A.25, subdivision 42 or 50, and the rates under sections 
 82.36  297A.02, subdivision 5, and 297A.021 shall be paid to the 
 83.1   purchaser.  In the case of building materials qualifying under 
 83.2   section 297A.25, subdivision 50, Where the tax was paid by a 
 83.3   contractor, application must be made by the owner for the sales 
 83.4   tax paid by all the contractors, subcontractors, and builders 
 83.5   for the project.  The application must include sufficient 
 83.6   information to permit the commissioner to verify the sales tax 
 83.7   paid for the project.  The application shall include information 
 83.8   necessary for the commissioner initially to verify that the 
 83.9   purchases qualified as capital equipment under section 297A.25, 
 83.10  subdivision 42, replacement capital equipment under section 
 83.11  297A.01, subdivision 20, or capital equipment or construction 
 83.12  materials and supplies under section 297A.25, subdivision 50.  
 83.13  No more than two applications for refunds may be filed under 
 83.14  this subdivision in a calendar year.  No owner may apply for a 
 83.15  refund based on the exemption under section 297A.25, subdivision 
 83.16  50, before July 1, 1993.  Unless otherwise specifically provided 
 83.17  by this subdivision, the provisions of section 289A.40 apply to 
 83.18  the refunds payable under this subdivision.  There is annually 
 83.19  appropriated to the commissioner of revenue the amount required 
 83.20  to make the refunds. 
 83.21     The amount to be refunded shall bear interest at the rate 
 83.22  in section 270.76 from the date the refund claim is filed with 
 83.23  the commissioner. 
 83.24     Sec. 16.  Minnesota Statutes 1994, section 297A.25, 
 83.25  subdivision 42, is amended to read: 
 83.26     Subd. 42.  [BUSINESS CAPITAL EQUIPMENT EXPENDITURES.] The 
 83.27  gross receipts from the sale of capital equipment, farm 
 83.28  machinery, and aquaculture production equipment are exempt.  
 83.29     Sec. 17.  [REPEALER.] 
 83.30     Minnesota Statutes 1994, sections 273.33; 273.35; 273.36; 
 83.31  273.37; 273.371; 273.38; 273.39; 273.40; 273.41; 273.42; 
 83.32  273.425; 273.43; 290.06, subdivision 21; 290.092; 290.0921; 
 83.33  290.0922; 297A.01, subdivision 20; 297A.02, subdivisions 2 and 
 83.34  5; and 297A.25, subdivision 59, are repealed. 
 83.35     Sec. 18.  [EFFECTIVE DATE.] 
 83.36     Section 1 is effective for taxes levied in 1995, payable in 
 84.1   1996, and thereafter.  Sections 2 to 17 are effective for 
 84.2   taxable periods beginning after December 31, 1995. 
 84.3                              ARTICLE 6
 84.4                       STATE BUDGET MANAGEMENT
 84.5      Section 1.  [16.151] [STATE BUDGET MANAGEMENT.] 
 84.6      Subdivision 1.  [DEFINITIONS.] (a) "Budget reserve" means a 
 84.7   restricted account in the general fund of the state treasury 
 84.8   that is intended to prevent fiscal crisis by being available for 
 84.9   use in the event that actual revenues are less than projected 
 84.10  revenues, or actual expenditures are greater than projected 
 84.11  expenditures. 
 84.12     (b) "Cash cycle need" means the amount determined from time 
 84.13  to time by the commissioner of finance that is required to be on 
 84.14  hand as of June 30 to prevent the state general fund from 
 84.15  running out of cash, resulting in a need to borrow at the low 
 84.16  point in the annual general fund cash cycle for the next fiscal 
 84.17  year. 
 84.18     (c) "Current operating budget" is composed of current 
 84.19  revenues, current expenses, and, if current revenues and current 
 84.20  expenses are not equal, a current operating budget surplus or 
 84.21  deficit. 
 84.22     (d) "Current surplus or deficit" means the difference 
 84.23  between current revenues and current expenditures, without 
 84.24  taking into account the beginning general fund balance. 
 84.25     (e) "Fiscal dividend" means the amount of fiscal surplus 
 84.26  projected to be distributed to individual income taxpayers as a 
 84.27  credit under section 290.06, subdivision 26, as determined by 
 84.28  the legislature.  The fiscal dividend shall be declared as a 
 84.29  percentage of the individual income tax otherwise due for the 
 84.30  year, and the percentage shall be set so that if individual 
 84.31  income taxes for the year are as projected, the desired amount 
 84.32  of fiscal surplus will be distributed through the credit.  The 
 84.33  credits allowable to taxpayers are not affected by variations of 
 84.34  total income tax revenues from those projected. 
 84.35     (f) "Fiscal management pool" means the general fund balance 
 84.36  as of the beginning of a biennium augmented or depleted from 
 85.1   time to time by the current operating budget surplus or deficit 
 85.2   as actual results from operations occur.  The fiscal management 
 85.3   pool is the sum of three elements:  the cash cycle need, the 
 85.4   budget reserve, and the fiscal surplus or deficit. 
 85.5      (g) "Fiscal surplus or deficit" means the difference 
 85.6   between the June 30 general fund balance and the sum of the cash 
 85.7   cycle need and the target balance of the budget reserve. 
 85.8      Subd. 2.  [CASH CYCLE NEED NOT TO BE IMPAIRED.] The 
 85.9   governor shall not propose, nor shall the legislature enact, a 
 85.10  budget which is projected to result in the cash cycle need not 
 85.11  being met as of the end of any fiscal year, unless the forecast 
 85.12  upon which the budget is based reflects a downturn, and not 
 85.13  merely slower growth, in the Minnesota economy and an economic 
 85.14  emergency is declared by the governor or joint resolution of the 
 85.15  legislature. 
 85.16     Subd. 3.  [BUDGET RESERVE.] A budget reserve is created in 
 85.17  the general fund in the state treasury.  The commissioner of 
 85.18  finance shall restrict part or all of the balance before 
 85.19  reserves in the general fund as may be necessary to fund the 
 85.20  budget reserve as provided by law from time to time.  The target 
 85.21  amount of the budget reserve is five percent of total projected 
 85.22  general fund expenditures for the biennium for which the budget 
 85.23  reserve is being measured. 
 85.24     Subd. 4.  [BUDGET RESERVE TO BE DELIBERATELY IMPAIRED ONLY 
 85.25  DURING RECESSION.] The governor shall not propose, nor shall the 
 85.26  legislature enact, a budget that is projected to decrease the 
 85.27  current balance of the budget reserve unless the forecast upon 
 85.28  which the budget is based reflects a downturn, and not merely 
 85.29  slower growth, in the Minnesota economy. 
 85.30     Subd. 5.  [CURRENT OPERATING BUDGET SURPLUS.] If there is a 
 85.31  current operating budget surplus for a fiscal year, and also a 
 85.32  fiscal deficit as of the end of the year, the surplus shall be 
 85.33  retained to the extent required to eliminate the fiscal deficit, 
 85.34  so that the cash cycle need is met and the budget reserve is 
 85.35  fully funded to the target level.  The entire amount of the 
 85.36  current operating budget surplus, if there is no fiscal deficit 
 86.1   as of the end of the year, or the excess, if any, of the current 
 86.2   operating budget surplus over the fiscal deficit if there is 
 86.3   such a deficit, shall be available for disposition as provided 
 86.4   in subdivision 7. 
 86.5      Subd. 6.  [CURRENT OPERATING BUDGET DEFICIT.] If there is a 
 86.6   current operating budget deficit for a fiscal year, it shall be 
 86.7   reduced or eliminated by any fiscal surplus as of the end of the 
 86.8   year.  If the current operating budget deficit exceeds the 
 86.9   amount of the fiscal surplus, the excess shall be reduced or 
 86.10  eliminated by a transfer from the budget reserve. 
 86.11     Subd. 7.  [DISPOSITION OF FISCAL SURPLUS.] If a fiscal 
 86.12  surplus is projected as of the end of a fiscal year after taking 
 86.13  into account the actual general fund revenues and expenditures 
 86.14  for that year, and the legislature does not appropriate all of 
 86.15  the fiscal surplus, the unappropriated amount, not to exceed 50 
 86.16  percent of the amount of the initial fiscal surplus, must be 
 86.17  distributed to individual income tax payers as a fiscal dividend 
 86.18  through credits against individual income taxes for the taxable 
 86.19  year for which the fiscal surplus was determined.  
 86.20     Subd. 8.  [REDUCTION IN BUDGET RESERVE.] (a) If the 
 86.21  commissioner determines that probable receipts for the general 
 86.22  fund will be less than anticipated, and the amount available for 
 86.23  the remainder of the biennium will be less than needed, the 
 86.24  commissioner shall, with the approval of the governor, and after 
 86.25  consulting with the legislative advisory commission, reduce the 
 86.26  amount of the budget reserve and cash flow account needed to 
 86.27  balance expenditures with revenue. 
 86.28     (b) An additional deficit shall, with the approval of the 
 86.29  governor, and after consulting with the legislative advisory 
 86.30  commission, be made up by reducing unexpended allotments of any 
 86.31  prior appropriation or transfer.  Notwithstanding any other law 
 86.32  to the contrary, the commissioner may defer or suspend prior 
 86.33  statutorily created obligations that would prevent effecting 
 86.34  those reductions. 
 86.35     (c) If the commissioner determines that probable receipts 
 86.36  for any other fund, appropriation, or item will be less than 
 87.1   anticipated, and that the amount available for the remainder of 
 87.2   the term of the appropriation or for any allotment period will 
 87.3   be less than needed, the commissioner shall notify the agency 
 87.4   concerned and then reduce the amount allotted or to be allotted 
 87.5   so as to prevent a deficit. 
 87.6      (d) In reducing allotments, the commissioner may consider 
 87.7   other sources of revenue available to recipients of state 
 87.8   appropriations and may apply allotment reductions based on all 
 87.9   sources of revenue available to them. 
 87.10     (e) In like manner, the commissioner shall reduce 
 87.11  allotments to an agency by the amount of any saving that can be 
 87.12  made over previous spending plans through a reduction in prices 
 87.13  or other cause. 
 87.14     Subd. 9.  [NOTICE TO COMMITTEES.] The commissioner shall 
 87.15  notify the committees on finance and taxes and tax laws of the 
 87.16  senate and the committees on ways and means and taxes of the 
 87.17  house of representatives of a reduction in an allotment under 
 87.18  this section.  The notice must be in writing and delivered 
 87.19  within 15 days of the commissioner's act.  The notice must 
 87.20  specify: 
 87.21     (1) the amount of the reduction in the allotment; 
 87.22     (2) the agency and programs affected; 
 87.23     (3) the amount of any payment withheld; and 
 87.24     (4) any additional information the commissioner determines 
 87.25  is appropriate. 
 87.26     Subd. 10.  [DELAY; REDUCTION.] The commissioner may delay 
 87.27  paying up to 15 percent of an appropriation to a special taxing 
 87.28  district or a system of higher education in that entity's fiscal 
 87.29  year for up to 60 days after the start of its next fiscal year.  
 87.30  The delayed amount is subject to allotment reduction under 
 87.31  subdivision 1. 
 87.32     Sec. 2.  Minnesota Statutes 1994, section 290.06, is 
 87.33  amended by adding a subdivision to read: 
 87.34     Subd. 26.  [FISCAL DIVIDEND CREDIT.] An individual shall 
 87.35  receive a credit against the tax due under this chapter in an 
 87.36  amount equal to the percentage of the tax due after reduction by 
 88.1   all other credits that is declared as a fiscal dividend pursuant 
 88.2   to section 16A.151. 
 88.3      Sec. 3.  [REPEALER.] 
 88.4      Minnesota Statutes 1994, section 16A.152, is repealed. 
 88.5      Sec. 4.  [EFFECTIVE DATE.] 
 88.6      Sections 1 to 3 are effective the day following final 
 88.7   enactment. 
 88.8                              ARTICLE 7
 88.9                          EDUCATION FINANCE
 88.10     Section 1.  [USE OF REVENUES.] 
 88.11     The revenues raised under this act are to be used as 
 88.12  follows: 
 88.13     (1) $500,000,000 is to be provided to the commissioner of 
 88.14  education to provide additional funding for K-12 education; and 
 88.15     (2) $100,000,000 is to be provided to the higher education 
 88.16  board under Minnesota Statutes, chapter 136E to provide 
 88.17  additional funding for post-secondary education. 
 88.18     Furthermore, it is the intention of the legislature that 
 88.19  this act will provide sufficient funding for K-12 education so 
 88.20  that school districts will levy property taxes only for capital 
 88.21  expenditures and as authorized by referendum. 
 88.22                             ARTICLE 8
 88.23                        LOCAL GOVERNMENT AID
 88.24     Section 1.  [STUDY OF LOCAL FINANCE.] 
 88.25     The commissioner of revenue shall perform a study on 
 88.26  comparative tax base, tax effort, and state aids in local 
 88.27  government units around the state and report the results to the 
 88.28  legislative commission on planning and fiscal policy by 
 88.29  September 1, 1995.  The study shall group units of each type in 
 88.30  appropriate categories to facilitate comparison.  Tax base and 
 88.31  state aids shall be shown on a per capita basis.  Effective tax 
 88.32  rate comparisons shall be made (taking into account the 
 88.33  transition refund program of article 3, section 3) for 
 88.34  owner-occupied homes, homestead farms, and other categories of 
 88.35  property that the commissioner deems pertinent.  The 
 88.36  commissioner may make any recommendations the commissioner deems 
 89.1   pertinent, with respect to the distribution of funds and 
 89.2   functions between the state and local governments, and 
 89.3   appropriate determinants of local need for state-raised 
 89.4   resources. 
 89.5      Sec. 2.  [REPEALER.] 
 89.6      Minnesota Statutes 1994, sections 477A.011, subdivisions 20 
 89.7   and 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, and 37; 477A.012; 
 89.8   477A.013; 477A.0132; 477A.03, subdivision 3; and 477A.15; are 
 89.9   repealed. 
 89.10     Sec. 3.  [EFFECTIVE DATE.] 
 89.11     Section 1 is effective the day following final enactment.  
 89.12  Section 2 is effective July 1, 1996. 
 89.13                             ARTICLE 9
 89.14    CITIZEN CHOICE AND GOVERNMENT SERVICE DELIVERY SYSTEM REFORM
 89.15     Section 1.  [STATEMENT OF POLICY.] 
 89.16     The legislature finds that: 
 89.17     (1) with the year 2000 fast approaching and Minnesota's 
 89.18  governance arrangements in some instances approaching 150 years 
 89.19  of age, Minnesota's citizens deserve greater opportunity to 
 89.20  change various aspects of our governance arrangements; 
 89.21     (2) it is absolutely imperative that the public sector 
 89.22  manage the process of delivery of public services so that 
 89.23  Minnesota's citizens receive much more efficient delivery of 
 89.24  public services; 
 89.25     (3) this imperative results from the combination of 
 89.26  long-term federal fiscal irresponsibility, impending federal 
 89.27  government abandonment of the most vulnerable of our citizens, 
 89.28  almost certain dumping by the federal government of major social 
 89.29  safety net programs on the states without funding adequate to 
 89.30  meet the most basic needs of our most vulnerable citizens, 
 89.31  interstate and global competition, the need to focus squarely on 
 89.32  education to provide a healthy society in both economic and 
 89.33  social terms in the future, the national failure to develop a 
 89.34  health care system that operates at reasonable cost, and 
 89.35  long-term demographic factors that make it highly likely that 
 89.36  the demand for public services will grow more quickly than the 
 90.1   economy and the tax revenues produced by economic growth; and 
 90.2      (4) the time has come to develop and consider major 
 90.3   alternatives to current practices in public service delivery. 
 90.4      Sec. 2.  [OPTION DEVELOPMENT PROCESS.] 
 90.5      The legislature seeks to develop specific options for 
 90.6   change, followed by testing of the options in the public arena 
 90.7   in various respects rather than attempting to develop options 
 90.8   out of the consensus building process that typically occurs with 
 90.9   the naming of commissions to study topics.  The legislative 
 90.10  commission on planning and fiscal policy shall let contracts for 
 90.11  proposal development in each of the areas specified in sections 
 90.12  3 to 15.  The contracts must require a report including specific 
 90.13  proposed legislation to the commission by October 15, 1995. 
 90.14     Sec. 3.  [MAKE GOVERNMENT A BUYER RATHER THAN A PROVIDER OF 
 90.15  SOME SERVICES.] 
 90.16     The legislature seeks proposals on how the government can 
 90.17  ensure that the public receives high-quality, low-cost public 
 90.18  services by means of having the government buy rather than 
 90.19  provide services. 
 90.20     Sec. 4.  [CONVERT FIXED LEVEL BENEFIT ENTITLEMENTS TO FIXED 
 90.21  APPROPRIATIONS FOR PROVISION OF BENEFITS.] 
 90.22     The legislature seeks proposals on how the government can 
 90.23  encourage greater efficiency in the provision of benefits 
 90.24  through establishing appropriation limits, either flexible or 
 90.25  absolute, on particular types of services rather than providing 
 90.26  for open-ended funding. 
 90.27     Sec. 5.  [IMPROVE MEASUREMENT OF AND REPORTING ON 
 90.28  GOVERNMENT PERFORMANCE.] 
 90.29     The legislature seeks proposals on how to improve the 
 90.30  measurement of and reporting on the performance of Minnesota 
 90.31  state and local governments, including the communication of the 
 90.32  information in understandable terms to public officials and the 
 90.33  public, including: 
 90.34     (1) definition of lines of business for governmental units 
 90.35  and measurement and reporting based on them; 
 90.36     (2) uniform accounting and reporting for cities, or at 
 91.1   least within classes of cities, to facilitate performance 
 91.2   comparison and improvement; and 
 91.3      (3) a value-for-money audit system for local governments 
 91.4   similar to the audit commission in the United Kingdom. 
 91.5      Sec. 6.  [INCREASING VALUE RECEIVED FOR SPENDING ON K-12 
 91.6   EDUCATION.] 
 91.7      The legislature seeks proposals on ways in which to 
 91.8   increase the value received per dollar spent on K-12 education, 
 91.9   including, without limitation: 
 91.10     (1) centralized purchasing of health care benefits for 
 91.11  school personnel; 
 91.12     (2) measurement and reporting on school district viability 
 91.13  with respect to curriculum, cost per student, adequacy of 
 91.14  facilities and educational results; 
 91.15     (3) school-based, as opposed to district-based, budget 
 91.16  control, with principals in charge of school programs and 
 91.17  accountable to teachers; 
 91.18     (4) getting school boards focused on policy rather than 
 91.19  administrative issues; 
 91.20     (5) emphasizing student and parent responsibilities as well 
 91.21  as rights with respect to increased educational costs caused by 
 91.22  student characteristics and behaviors; and 
 91.23     (6) focusing education funding on what happens in the 
 91.24  classroom, with social services and other functions to be funded 
 91.25  out of other sources. 
 91.26     Sec. 7.  [INCREASING VALUE RECEIVED FOR SPENDING ON HIGHER 
 91.27  EDUCATION.] 
 91.28     The legislature seeks proposals on ways in which to 
 91.29  increase the value received per dollar spent on higher 
 91.30  education, including without limitation: 
 91.31     (1) ways to save on personnel and facilities costs 
 91.32  following the merger through creative use of technology or by 
 91.33  other means; and 
 91.34     (2) income-based tuition. 
 91.35     Sec. 8.  [COST-EFFECTIVE FINANCING FOR TRANSPORTATION.] 
 91.36     The legislature seeks proposals on cost-effective, 
 92.1   noncapital intensive ways in which to provide transportation 
 92.2   services, including, without limitation: 
 92.3      (1) reducing freeway congestion through creative uses of 
 92.4   technology to manage freeway use and reduce the need for trips; 
 92.5      (2) getting more value out of dedicated transportation 
 92.6   funding by either or both reducing the portion of dedicated 
 92.7   funds flowing to county roads or increasing the share of the 
 92.8   total road system for which counties are responsible; and/or 
 92.9      (3) how to convert the metropolitan transit commission to 
 92.10  an employee-owned operating entity that sells bus service by the 
 92.11  route to cities or the metropolitan council, or both. 
 92.12     Sec. 9.  [MINIMIZING SOLID WASTE DISPOSAL COSTS.] 
 92.13     The legislature seeks proposals on how to minimize solid 
 92.14  waste disposal costs, including, without limitation, allowing 
 92.15  haulers to choose among disposal sites based on price and 
 92.16  service. 
 92.17     Sec. 10.  [BETTER CARE FOR THE ELDERLY.] 
 92.18     The legislature seeks proposals on how to both save costs 
 92.19  and provide better living conditions for Minnesota's elderly 
 92.20  through alternatives to nursing home confinement. 
 92.21     Sec. 11.  [HEALTH CARE INCENTIVES.] 
 92.22     The legislature seeks proposals on how to structure private 
 92.23  and public health care benefit programs so that citizens are 
 92.24  given an incentive to patronize low-cost, high-quality hospitals 
 92.25  and doctors. 
 92.26     Sec. 12.  [METROPOLITAN AREA DEVELOPMENT.] 
 92.27     The legislature seeks proposals on how to make most 
 92.28  effective use of existing metropolitan area infrastructure and 
 92.29  minimize the need for additional infrastructure construction, 
 92.30  including, without limitation, freezing the MUSA line and 
 92.31  encouraging more intense development and redevelopment within 
 92.32  the existing line through various means, including state funding 
 92.33  for redevelopment of the most seriously blighted or contaminated 
 92.34  real property. 
 92.35     Sec. 13.  [LOCAL GOVERNMENT CONSOLIDATIONS.] 
 92.36     The legislature seeks proposals on how to get better 
 93.1   government services for less money including: 
 93.2      (1) funding cities rather than counties to the maximum 
 93.3   feasible extent for corrections, welfare, and social services, 
 93.4   and empowering the cities to buy the services from their county, 
 93.5   some other county, or appropriate private organizations; 
 93.6      (2) enhancing city annexation power to combat flight to 
 93.7   adjoining townships that permits enjoyment of city services 
 93.8   without having to pay for them; 
 93.9      (3) mergers of adjoining local governmental units of 
 93.10  like-kind based on citizen vote; 
 93.11     (4) eliminating elective county government in the 
 93.12  metropolitan area so that the counties would be administrative 
 93.13  service providers with their chief administrators reporting to 
 93.14  the metropolitan council; and 
 93.15     (5) deciding whether the metropolitan council would be more 
 93.16  effective as an elected body. 
 93.17     Sec. 14.  [ENDING WELFARE AS WE KNOW IT BY PROVIDING 
 93.18  MEANINGFUL WORK FOR ALL.] 
 93.19     The legislature seeks proposals on how to provide every 
 93.20  Minnesota citizen with the opportunity to be productive on the 
 93.21  assumptions that the private economy will never provide jobs for 
 93.22  all, every able bodied person should expect to work as a 
 93.23  condition of receiving benefits, almost every able bodied person 
 93.24  wants to have meaningful and productive activity in which to 
 93.25  engage, and there is not enough money to employ all who would 
 93.26  like work full time at decent wages. 
 93.27     Sec. 15.  [INTERGOVERNMENTAL RELATIONS.] 
 93.28     The legislature seeks proposals on how to make Minnesota 
 93.29  government more efficient through the creation of more effective 
 93.30  intergovernmental relations, including:  
 93.31     (1) state/local relations for each type of local unit of 
 93.32  government; 
 93.33     (2) cooperative efforts among local governments; and 
 93.34     (3) moving the state and all local governments to a common 
 93.35  fiscal year.  
 93.36     Sec. 16.  [EXECUTIVE BRANCH REORGANIZATION.] 
 94.1      The legislature seeks proposals on how to make Minnesota 
 94.2   government more efficient through executive branch 
 94.3   reorganization, including without limitation:  
 94.4      (1) changes, based on technology or otherwise, to make 
 94.5   compliance with regulations and access to services easier and 
 94.6   more convenient for government's customers; 
 94.7      (2) reforms in such major administrative systems as 
 94.8   purchasing, budgeting, and personnel; 
 94.9      (3) with respect to both internal operations and dealings 
 94.10  with external customers and stakeholders:  
 94.11     (i) focus on customers, results, and value; 
 94.12     (ii) communicate; 
 94.13     (iii) design services as if the customer really matters; 
 94.14     (iv) budget strategically rather than bureaucratically; 
 94.15     (4) agency consolidations and the like; 
 94.16     (5) abolition of the office of state treasurer; and 
 94.17     (6) changing the state auditor from an elective to an 
 94.18  appointive position and integrating its functions more 
 94.19  effectively into the executive branch, as part of a broad effort 
 94.20  to create more effective state/local intergovernmental relations 
 94.21  and better measurement and reporting on the operating results of 
 94.22  government. 
 94.23     Sec. 17.  [APPROPRIATION.] 
 94.24     There is appropriated to the legislative commission on 
 94.25  planning and fiscal policy the sum of $....... for the period 
 94.26  ending ......., to be used to perform the duties imposed under 
 94.27  this article. 
 94.28     Sec. 18.  [EFFECTIVE DATE.] 
 94.29     This article is effective the day following final enactment.